Exhibit 4.1


 


 





 


NEITHER THIS SECURITY
NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.


 


Original Issue Date: June 11, 2015


 


Purchase Amount: $[_______]


Principal Amount: $[_______][1]


 


 


8%
Original Issue Discount CONVERTIBLE NOTE


DUE
December 11, 2015


 


THIS 8% ORIGINAL ISSUE
DISCOUNT CONVERTIBLE NOTE is one of a series of duly authorized and validly issued 8% Original Issue Discount Convertible Notes
of xG Technology, Inc. (the “Company”), having its principal place of business at 240 S. Pineapple Avenue,
Suite 701, Sarasota, FL, 34236, designated as its 8% Original Issue Discount Convertible Note due December 11, 2015 (the “Note”
and, collectively with the other Notes of such series, the “Notes”).


 


FOR VALUE RECEIVED,
the Company promises to pay to [_________] or its registered assigns (the “Holder”), or shall have paid pursuant
to the terms hereunder, the principal sum of $[_______] on December 11, 2015 (the “Maturity Date”) or such
earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. If the Note
is not repaid by the Company by the Maturity Date, the Maturity Date shall be automatically extended in accordance with the Extension
Period (as defined herein). This Note is subject to the following additional provisions:


 





 



 1 10%
OID


 






    	 



    	 



    

 


 


Section 1. Definitions.
For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:


 


“Alternate
Consideration” shall have the meaning set forth in Section 5(e).


 


“Alternative
Conversion Price” means 85% of the lowest closing price of the Common Stock in the twenty (20) Trading Days prior to
the Conversion Date.


 


“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant Subsidiary thereof commences a case or
other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency
or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is
commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within sixty
(60) days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any
order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary
thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged
or stayed within sixty (60) calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes
a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its
creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the
foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.


 


“Beneficial
Ownership Limitation” shall have the meaning set forth in Section 4(d).


 


“Buy-In”
shall have the meaning set forth in Section 4(c)(v).


 


“Change
of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof
by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise)
of in excess of 33% of the voting securities of the Company (other than by means of conversion or exercise of the Notes and the
Securities issued together with the Notes), (b) the Company merges into or consolidates with any other Person, or any Person merges
into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately
prior to such transaction own less than 66% of the aggregate voting power of the Company or the successor entity of such transaction,
(c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company
immediately prior to such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after
the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board
of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original
Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board
of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the
execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events
set forth in clauses (a) through (d) above.


 






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“Company”
shall have the meaning set forth in the preamble hereto.


 


“Conversion”
shall have the meaning ascribed to such term in Section 4.


 


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


 


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


 


“Conversion
Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.


 


“Conversion
Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the
terms hereof.


 


“DTC”
means the Depository Trust Company.


 


“DTC/FAST
Program” means the DTC’s Fast Automated Securities Transfer Program.


 


“DWAC
Eligible” means that (a) the Common Stock is eligible at DTC for full services pursuant to DTC’s Operational Arrangements,
(b) the Company has been approved (without revocation) by the DTC’s underwriting department, (c) the Transfer Agent is approved
as an agent in the DTC/FAST Program, and (d) the Transfer Agent does not have a policy prohibiting or limiting delivery of the
Conversion Shares via Deposit/Withdrawal at Custodian.


 






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“Equity
Conditions” means each of the following conditions: (a) the Company shall have duly honored all conversions and redemptions
scheduled to occur or occurring, including conversions pursuant to one or more Notices of Conversion of the Holder, if any, (b)
the Company shall have paid all liquidated damages and other amounts owing to the Holder in respect of this Note, (c) on each
day during the Equity Conditions Measuring Period, either (i) there is an effective registration statement pursuant to which the
Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Common Stock issuable pursuant to the
Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable
future) or (ii) all of the Conversion Shares issuable pursuant to the Transaction Documents (and shares issuable in lieu of cash
payments of interest) may be resold pursuant to Rule 144 without volume or manner-of-sale restrictions as determined by the counsel
to the Company as set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the
Holder, (d) on each day during the Equity Conditions Measuring Period, the Common Stock is trading on a Trading Market and all
of the shares of Common Stock issuable pursuant to the Transaction Documents are listed or quoted for trading on such Trading
Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted
for the foreseeable future), (e) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common
Stock for the issuance of all of the shares of Common Stock then issuable pursuant to the Transaction Documents, (f) on each day
during the Equity Conditions Measuring Period, there is no existing Event of Default and no existing event which, with the passage
of time or the giving of notice, would constitute an Event of Default, (g) the issuance of the shares of Common Stock in question
to the Holder would not violate the limitations set forth in Section 4(d) herein, (h) on each day during the Equity Conditions
Measuring Period, there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control
Transaction that has not been consummated, (i) the applicable Holder is not in possession of any information provided by the Company
that constitutes, or may constitute, material non-public information, (j) the Company has timely filed (or obtained extensions
in respect thereof and filed within the applicable grace period) all reports other than Current Reports on Form 8-K required to
be filed by the Company after the date hereof pursuant to the Exchange Act, (k) on any date that the Company desires to make a
payment of interest and/or principal, the average daily dollar volume of the Company’s Common Stock for the previous twenty
(20) Trading Days must be greater than $50,000, and (l) on each day during the Equity Conditions Measuring Period, the Company’s
shares of Common Stock must be DWAC Eligible and not subject to a “DTC chill”.


 


"Equity
Conditions Measuring Period" means each day during the period beginning twenty (20) Trading Days prior to the applicable
date of determination and ending on and including the applicable date of determination or, if applicable, such shorter period
beginning on the Original Issue Date and ending on and including the applicable date of determination.


 


“Event
of Default” shall have the meaning set forth in Section 6(a).


 


“Excess
Shares” shall have the meaning set forth in Section 4(d).


 


“Extension
Period” means, if the Note is not repaid by the Company by the Maturity Date, the automatic extension of the Maturity Date
for an additional three (3) months until March 11, 2016, which extension, for the avoidance of doubt, shall not be considered
an Event of Default.


 






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“Fundamental
Transaction” shall have the meaning set forth in Section 5(e).


 


“Holder”
shall have the meaning set forth in the preamble hereto.


 


“Late
Fees” shall have the meaning set forth in Section 2(c).


 


“Maturity
Date” shall have the meaning set forth in the preamble hereto.


 


“New
York Courts” shall have the meaning set forth in Section 7(d).


 


“Note”
shall have the meaning set forth in the preamble hereto.


 


“Note
Register” shall have the meaning set forth in Section 2(b).


 


“Notice
of Conversion” shall have the meaning set forth in Section 4(a).


 


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


 


“Public
Offering” means any underwritten public offering of at least $7,000,000 of securities of the Company pursuant to a registration
statement on Form S-1 or Form S-3. 


 


“Purchase
Agreement” means the Securities Purchase Agreement, dated as of June 11, 2015 between the Company and the original Holder,
as amended, modified or supplemented from time to time in accordance with its terms.


 


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


 


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


 


“Significant
Subsidiary” means “significant subsidiary,” as such term is defined in Rule 1-02(w) of Regulation S-X.


 


“Successor
Entity” shall have the meaning set forth in Section 5(e).


 


 Section 2. Interest.


 


a) Payment
of Interest in Cash or Kind. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Note at the rate of 8% per annum. All interest payments hereunder will be payable in cash, or subject
to the Equity Conditions being satisfied, in Common Stock or a combination of cash and Common Stock in the Holder’s discretion.
Accrued and unpaid interest shall be due and payable on each Conversion Date and on the Maturity Date, or as otherwise set forth
herein.


 






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b) Interest
Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and
shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all
accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest hereunder
will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers
of this Note (the “Note Register”).


 


c) Late
Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the
lesser of 18% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue
daily from the date such interest is due hereunder through and including the date of actual payment in full.


 


d) Prepayment.


 


i. Optional
Prepayment. At any time upon three (3) days written notice to the Holder, the Company may prepay any portion of the principal
amount of the Note and any accrued and unpaid interest. If the Company exercises its right to prepay the Note, the Company shall
make payment to the Holder of an amount in cash equal to the sum of the then outstanding principal amount of the Note and interest
multiplied by 125% if such prepayment is made within sixty (60) days after the Closing Date; thereafter, if the Company exercises
its right to prepay the Note, the Company shall make payment to the Holder of an amount in cash equal to the sum of the then outstanding
principal amount of the Note and interest multiplied by 135%. The Holder may continue to convert the Note from the date notice
of the prepayment is given until the date of the prepayment.


 


ii. Mandatory
Prepayment. Within one (1) Business Day after the closing of the Public Offering, the Company shall make payment to the Holder
of an amount in cash equal to (x) the sum of the then outstanding principal amount of the Note and interest multiplied by 125%,
if the closing of the Public Offering occurs within sixty (60) days after the Closing Date or (y) the sum of the then outstanding
principal amount of the Note and interest multiplied by 135%, if the closing of the Public Offering occurs after sixty (60) days
following the Closing Date.


 






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Section 3. Registration
of Transfers and Exchanges.


 


a) Different
Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations,
as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.


 


b) Investment
Representations. This Note has been issued subject to certain investment representations of the original Holder set forth
in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal
and state securities laws and regulations.


 


c) Reliance
on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company
may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such
agent shall be affected by notice to the contrary.


 


Section 4. Conversion.


 


a) Voluntary
Conversion. From the date hereof until this Note is no longer outstanding, this Note shall be convertible, in whole or in
part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations
set forth in Section 4(d) hereof). The Holder shall effect conversions by delivering to the Company a Notice of Conversion,
the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein
the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion
Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such
Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. To effect conversions hereunder,
the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note,
plus all accrued and unpaid interest thereon, has been so converted. Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Note in an amount equal to the applicable conversion. The Holder and the Company shall maintain
a Conversion Schedule showing the principal amount(s) converted and the date of such conversion(s). The Company may deliver an
objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion. In the event of any
dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The
Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the
amount stated on the face hereof.


 






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b) Conversion
Price. The conversion price in effect on any Conversion Date shall be equal to $0.50, subject to adjustment as provided herein
(the “Conversion Price”). However, during the Extension Period, the Conversion Price shall be the lesser of
(i) $0.50, subject to adjustment as provided herein, and (ii) the Alternative Conversion Price. Notwithstanding anything herein
to the contrary, at any time after the occurrence of any Event of Default the Holder may require the Company to, at such Holder’s
option and otherwise in accordance with the provisions for conversion herein, convert all or any part of this Note into Common
Stock at the Alternative Conversion Price. All such foregoing determinations will be appropriately adjusted for any stock dividend,
stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common
Stock during such measuring period. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event
of Default pursuant to Section 6 hereof and the Holder shall have the right to pursue all remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of
any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable
law.


 


		c)	Mechanics of Conversion.



 


i. Conversion
Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion hereunder
shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted and
any accrued and unpaid interest to be converted by (y) the Conversion Price.


i. 


 


ii. Delivery
of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery
Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing
the Conversion Shares which, on or after the date on which such Conversion Shares are eligible to be sold under Rule 144 without
the need for current public information and the Company has received an opinion of counsel to such effect reasonably acceptable
to the Company (which opinion the Company will be responsible for obtaining) shall be free of restrictive legends and trading
restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares
being acquired upon the conversion of this Note, and (B) a bank check in the amount of accrued and unpaid interest to be paid
in cash (if the Company has elected or is required to pay any accrued interest in cash). All certificate or certificates required
to be delivered by the Company under this Section 4(c) shall be delivered electronically through DTC or another established clearing
corporation performing similar functions. If the Conversion Date is prior to the date on which such Conversion Shares are eligible
to be sold under Rule 144 without the need for current public information the Conversion Shares shall bear a restrictive legend
in the following form, as appropriate:


 






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“NEITHER THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE
HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”


 


Notwithstanding the foregoing,
commencing on such date that the Conversion Shares are eligible for sale under Rule 144 subject to current public information
requirements, the Company, upon request of the Holder, shall obtain a legal opinion to allow for such sales under Rule 144.


 


iii. Failure
to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to
or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to
the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event
the Company shall promptly return to the Holder any original Note delivered to the Company and the Holder shall promptly return
to the Company the Common Stock certificates issued to such Holder pursuant to the rescinded Notice of Conversion.


 


iv. Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion
of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the
Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or
alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law
by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder
of this Note shall elect to convert any or all of the outstanding principal or interest amount hereof, the Company may not refuse
conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation
of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining
conversion of all or part of this Note shall have been sought and obtained, and the Company posts a surety bond for the benefit
of the Holder in the amount of 150% of the outstanding principal amount of this Note, which is subject to the injunction, which
bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which
shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion
Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder
such certificate or certificates pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall pay to the Holder,
in cash, as liquidated damages and not as a penalty, $1,000 per Trading Day for each Trading Day after such Share Delivery Date
until such certificates are delivered or Holder rescinds such conversion. Nothing herein shall limit a Holder’s right to
pursue actual damages or declare an Event of Default pursuant to Section 6 hereof for the Company’s failure to deliver Conversion
Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of
any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable
law.


 






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v. Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder,
if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant
to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open
market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in
addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total
purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual
sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions)
and (B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount
of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares
of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 4(c)(ii).
For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence,
the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely
deliver certificates representing shares of Common Stock upon conversion of this Note as required pursuant to the terms hereof.


 






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vi. Reservation
of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock a number of shares of Common Stock at least equal to 200% of the Required Minimum
(as defined in the Purchase Agreement) for the sole purpose of
issuance upon conversion of this Note and payment of interest on this Note, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Notes), not less
than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase
Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding
principal amount of this Note and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall
be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable. 


 


vii. Fractional
Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As
to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at
its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by
the Conversion Price or round up to the next whole share.


 






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viii. Transfer
Taxes and Expenses. The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without
charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this
Note so converted and the Company shall not be required to issue or deliver such certificates unless or until the Person or Persons
requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day processing of
any Notice of Conversion.


 


		d)	Holder’s Conversion Limitations.
                                         The Company shall not effect any conversion of principal and/or interest of this Note,
                                         and a Holder shall not have the right to convert any principal and/or interest of this
                                         Note, to the extent that after giving effect to the conversion set forth on the applicable
                                         Notice of Conversion, the Holder (together with the Holder’s Affiliates (as defined
                                         in the Purchase Agreement), and any Persons acting as a group together with the Holder
                                         or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial
                                         Ownership Limitation (as defined below).  For purposes of the foregoing sentence,
                                         the number of shares of Common Stock beneficially owned by the Holder and its Affiliates
                                         shall include the number of shares of Common Stock issuable upon conversion of this Note
                                         with respect to which such determination is being made, but shall exclude the number
                                         of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted
                                         principal amount of this Note beneficially owned by the Holder or any of its Affiliates
                                         and (ii) exercise or conversion of the unexercised or unconverted portion of any other
                                         securities of the Company subject to a limitation on conversion or exercise analogous
                                         to the limitation contained herein (including, without limitation, any other Notes or
                                         warrants of the Company) beneficially owned by the Holder or any of its Affiliates. 
                                         Except as set forth in the preceding sentence, for purposes of this Section 4(d), beneficial
                                         ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and
                                         the rules and regulations promulgated thereunder. In addition, a determination as to
                                         any group status as contemplated above shall be determined in accordance with Section
                                         13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes
                                         of this Section 4(d), in determining the number of outstanding shares of Common Stock,
                                         the Holder may rely on the number of outstanding shares of Common Stock as stated in
                                         the most recent of the following: (i) the Company’s most recent periodic or annual
                                         report filed with the Commission, as the case may be, (ii) a more recent public announcement
                                         by the Company, or (iii) a more recent written notice by the Company or the Company’s
                                         transfer agent setting forth the number of shares of Common Stock outstanding. 
                                         Upon the written or oral request of a Holder, the Company shall within two (2) Trading
                                         Days confirm orally and in writing to the Holder the number of shares of Common Stock
                                         then outstanding.  In any case, the number of outstanding shares of Common Stock
                                         shall be determined after giving effect to the conversion or exercise of securities of
                                         the Company, including this Note, by the Holder or its Affiliates since the date as of
                                         which such number of outstanding shares of Common Stock was reported. In the event that
                                         the issuance of shares of Common Stock to the Holder upon conversion of this Note results
                                         in the Holder and its Affiliates being deemed to beneficially own, in the aggregate,
                                         more than the Beneficial Ownership Limitation (as determined under Section 13(d) of the
                                         Exchange Act), the number of shares of Common Stock so issued by which the Holder's and
                                         its Affiliates’ aggregate beneficial ownership exceeds the Beneficial Ownership
                                         Limitation (the "Excess Shares") shall be deemed null and void and shall
                                         be cancelled ab initio, and the Holder shall not have the power to vote or to transfer
                                         the Excess Shares. The “Beneficial Ownership Limitation” shall be
                                         4.99% of the number of shares of the Common Stock outstanding immediately after giving
                                         effect to the issuance of shares of Common Stock issuable upon conversion of this Note
                                         held by the Holder. The Holder, upon delivery of a written notice to the Company, may
                                         from time to time increase (with such increase not effective until the 61st day after
                                         delivery of such notice) or decrease the Beneficial Ownership Limitation provision to
                                         any other percentage not in excess of 9.99%; provided that (i) any such increase of the
                                         Beneficial Ownership Limitation will not be effective until the 61st day after such notice
                                         is delivered to the Company and (ii) any such increase or decrease will apply only to
                                         the Holder and its Affiliates and not to any other holder of Notes that is not an Affiliate
                                         of the Holder. The Beneficial Ownership Limitation provisions of this paragraph shall
                                         be construed and implemented in a manner otherwise than in strict conformity with the
                                         terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may
                                         be defective or inconsistent with the intended Beneficial Ownership Limitation contained
                                         herein or to make changes or supplements necessary or desirable to properly give effect
                                         to such limitation. The limitations contained in this paragraph shall apply to a successor
                                         holder of this Note.



 






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Section 5. Certain
Adjustments.


 


		a)	Stock Dividends and Stock Splits.
                                         If the Company, at any time while this Note is outstanding: (i) pays a stock dividend
                                         or otherwise makes a distribution or distributions payable in shares of Common Stock
                                         on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt,
                                         shall not include any shares of Common Stock issued by the Company upon conversion of,
                                         or payment of interest on, the Notes), (ii) subdivides outstanding shares of Common Stock
                                         into a larger number of shares, (iii) combines (including by way of a reverse stock split)
                                         outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in
                                         the event of a reclassification of shares of the Common Stock, any shares of capital
                                         stock of the Company, then the Conversion Price shall be multiplied by a fraction of
                                         which the numerator shall be the number of shares of Common Stock (excluding any treasury
                                         shares of the Company) outstanding immediately before such event, and of which the denominator
                                         shall be the number of shares of Common Stock outstanding immediately after such event.
                                         Any adjustment made pursuant to this Section shall become effective immediately after
                                         the record date for the determination of stockholders entitled to receive such dividend
                                         or distribution and shall become effective immediately after the effective date in the
                                         case of a subdivision, combination or reclassification.



 






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		b)	Intentionally Omitted.



 


		c)	Subsequent Rights Offerings.
                                         In addition to any adjustments pursuant to Section 5(a) above, if at any time the Company
                                         grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants,
                                         securities or other property pro rata to the record holders of any class of shares of
                                         Common Stock (the “Purchase Rights”), then the Holder will be entitled
                                         to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase
                                         Rights which the Holder could have acquired if the Holder had held the number of shares
                                         of Common Stock acquirable upon complete conversion of this Note (without regard to any
                                         limitations on exercise hereof, including without limitation, the Beneficial Ownership
                                         Limitation) immediately before the date on which a record is taken for the grant, issuance
                                         or sale of such Purchase Rights, or, if no such record is taken, the date as of which
                                         the record holders of shares of Common Stock are to be determined for the grant, issue
                                         or sale of such Purchase Rights (provided, however, to the extent that the Holder’s
                                         right to participate in any such Purchase Right would result in the Holder exceeding
                                         the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate
                                         in such Purchase Right to such extent (or beneficial ownership of such shares of Common
                                         Stock as a result of such Purchase Right to such extent) and such Purchase Right to such
                                         extent shall be held in abeyance for the Holder until such time, if ever, as its right
                                         thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).



 


		d)	Intentionally Omitted.



 


		e)	Fundamental Transaction. If,
                                         at any time while this Note is outstanding, (i) the Company, directly or indirectly,
                                         in one or more related transactions effects any merger or consolidation of the Company
                                         with or into another Person, (ii) the Company, directly or indirectly, effects any sale,
                                         lease, license, assignment, transfer, conveyance or other disposition of all or substantially
                                         all of its assets in one or a series of related transactions, (iii) any, direct or indirect,
                                         purchase offer, tender offer or exchange offer (whether by the Company or another Person)
                                         is completed pursuant to which holders of Common Stock are permitted to sell, tender
                                         or exchange their shares for other securities, cash or property and has been accepted
                                         by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly
                                         or indirectly, in one or more related transactions effects any reclassification, reorganization
                                         or recapitalization of the Common Stock or any compulsory share exchange pursuant to
                                         which the Common Stock is effectively converted into or exchanged for other securities,
                                         cash or property, (v) the Company, directly or indirectly, in one or more related transactions
                                         consummates a stock or share purchase agreement or other business combination (including,
                                         without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement)
                                         with another Person whereby such other Person acquires more than 50% of the outstanding
                                         shares of Common Stock (not including any shares of Common Stock held by the other Person
                                         or other Persons making or party to, or associated or affiliated with the other Persons
                                         making or party to, such stock or share purchase agreement or other business combination)
                                         (each a “Fundamental Transaction”), then, upon any subsequent conversion
                                         of this Note, the Holder shall have the right to receive, for each Conversion Share that
                                         would have been issuable upon such conversion immediately prior to the occurrence of
                                         such Fundamental Transaction (without regard to any limitation in Section 4(d) on the
                                         conversion of this Note), the number of shares of Common Stock of the successor or acquiring
                                         corporation or of the Company, if it is the surviving corporation, and any additional
                                         consideration (the “Alternate Consideration”) receivable as a result
                                         of such Fundamental Transaction by a holder of the number of shares of Common Stock for
                                         which this Note is convertible immediately prior to such Fundamental Transaction (without
                                         regard to any limitation in Section 4(d) on the conversion of this Note). For purposes
                                         of any such conversion, the determination of the Conversion Price shall be appropriately
                                         adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration
                                         issuable in respect of one (1) share of Common Stock in such Fundamental Transaction,
                                         and the Company shall apportion the Conversion Price among the Alternate Consideration
                                         in a reasonable manner reflecting the relative value of any different components of the
                                         Alternate Consideration. If holders of Common Stock are given any choice as to the securities,
                                         cash or property to be received in a Fundamental Transaction, then the Holder shall be
                                         given the same choice as to the Alternate Consideration it receives upon any conversion
                                         of this Note following such Fundamental Transaction. The Company shall cause any successor
                                         entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor
                                         Entity”) to assume in writing all of the obligations of the Company under this
                                         Note and the other Transaction Documents (as defined in the Purchase Agreement) in accordance
                                         with the provisions of this Section 5(e) pursuant to written agreements in form and substance
                                         reasonably satisfactory to the Holder and approved by the Holder (without unreasonable
                                         delay) prior to such Fundamental Transaction and shall, at the option of the holder of
                                         this Note, deliver to the Holder in exchange for this Note a security of the Successor
                                         Entity evidenced by a written instrument substantially similar in form and substance
                                         to this Note which is convertible for a corresponding number of shares of capital stock
                                         of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock
                                         acquirable and receivable upon conversion of this Note (without regard to any limitations
                                         on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion
                                         price which applies the conversion price hereunder to such shares of capital stock (but
                                         taking into account the relative value of the shares of Common Stock pursuant to such
                                         Fundamental Transaction and the value of such shares of capital stock, such number of
                                         shares of capital stock and such conversion price being for the purpose of protecting
                                         the economic value of this Note immediately prior to the consummation of such Fundamental
                                         Transaction), and which is reasonably satisfactory in form and substance to the Holder.
                                         Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed
                                         to, and be substituted for (so that from and after the date of such Fundamental Transaction,
                                         the provisions of this Note and the other Transaction Documents referring to the “Company”
                                         shall refer instead to the Successor Entity), and may exercise every right and power
                                         of the Company and shall assume all of the obligations of the Company under this Note
                                         and the other Transaction Documents with the same effect as if such Successor Entity
                                         had been named as the Company herein.



 






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		f)	Calculations. All calculations
                                         under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share,
                                         as the case may be. For purposes of this Section 5, the number of shares of Common Stock
                                         deemed to be issued and outstanding as of a given date shall be the sum of the number
                                         of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.



 


		g)	Notice to the Holder.



 


i. Adjustment
to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall
promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.


 


ii. Notice
to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C)
the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address
as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date
as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect
the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled
to convert this Note during the 20-day period commencing on the date of such notice through the effective date of the event triggering
such notice except as may otherwise be expressly set forth herein.


 






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 Section 6. Events of
Default.


 


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


 


i. any
default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing to
a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or
by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above,
is not cured within three (3) Trading Days; provided that, in the case of any default in the payment of amounts due and payable
on the Maturity Date, if the Maturity Date is extended during the Extension Period, this Section 6(a)(i) shall only apply after
the termination of the Extension Period;


 






    	16



    	 



    

 


ii. the
Company shall fail to observe or perform any other material covenant or material agreement contained in the Notes (other than
a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed
in clause (xi) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) five (5) Trading Days
after notice of such failure sent by the Holder or by any other Holder to the Company and (B) ten (10) Trading Days after the
Company has become or should have become aware of such failure;


 


iii. a
default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument)
shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which
the Company or any Subsidiary is obligated (and not covered by clause (vi) below);


 


iv. any
representation or warranty made in this Note, any other Transaction Document, any written statement pursuant hereto or thereto
or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or
incorrect in any material respect as of the date when made or deemed made;


 


v. the
Company or any Significant Subsidiary shall be subject to a Bankruptcy Event;


 


vi. the
Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced,
any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation
greater than $100,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness
becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;


 


vii. the
Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume
listing or quotation for trading thereon within five (5) Trading Days or the transfer of shares of Common Stock through the Depository
Trust Company System is no longer available or “chilled”;


 





viii. the
Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of
all or in excess of 33% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute
a Change of Control Transaction);


 






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ix. the
Company shall fail for any reason to deliver certificates to a Holder on or prior to the third (3rd) Trading Day after a Conversion
Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement,
of the Company’s intention to not honor requests for conversions of any Notes in accordance with the terms hereof;


 


x. the
Company fails to file with the Commission any required reports under Section 13 or 15(d) of the Exchange Act such that it is not
in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable);


 


xi. if
the Company or any Significant Subsidiary shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian
or liquidator of it or any of its properties, (ii) admit in writing its inability to pay its debts as they mature, (iii) make
a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent or be the subject of an order for
relief under Title 11 of the United States Code or any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution
or liquidation law or statute of any other jurisdiction or foreign country, (v) file a voluntary petition in bankruptcy, or a
petition or an answer seeking reorganization or an arrangement with creditors or to take advantage or any bankruptcy, reorganization,
insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of
a petition filed against it in any proceeding under any such law, or (vi) take or permit to be taken any action in furtherance
of or for the purpose of effecting any of the foregoing;


 


xii. if
any order, judgment or decree shall be entered, without the application, approval or consent of the Company or any Significant
Subsidiary, by any court of competent jurisdiction, approving a petition seeking liquidation or reorganization of the Company
or any Significant Subsidiary, or appointing a receiver, trustee, custodian or liquidator of the Company or any Significant Subsidiary,
or of all or any substantial part of its assets, and such order, judgment or decree shall continue unstayed and in effect for
any period of sixty (60) days;


 


xiii. the
occurrence of any levy upon or seizure or attachment of, or any uninsured loss of or damage to, any property of the Company or
any Subsidiary having an aggregate fair value or repair cost (as the case may be) in excess of $100,000 individually or in the
aggregate, and any such levy, seizure or attachment shall not be set aside, bonded or discharged within thirty (30) days after
the date thereof;


 


xiv. the
Company shall fail to maintain sufficient reserved shares of Common Stock pursuant to Section 4(c)(vi) of this Note or Section
4.10 of the Purchase Agreement; or


 






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xv. any
monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their
respective property or other assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of forty-five (45) calendar days;


 


b) Remedies
Upon Event of Default. If any Event of Default occurs, then the outstanding principal amount of this Note, plus accrued but
unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become,
at the Holder’s election, immediately due and payable in cash. After the occurrence of any Event of Default that results
in the eventual acceleration of this Note, the interest rate on this Note shall accrue at an additional interest rate equal to
the lesser of 2% per month (24% per annum) or the maximum rate permitted under applicable law. Upon the payment in full of all
amounts due to the Holder following an Event of Default, the Holder shall promptly surrender this Note to or as directed by the
Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any
presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration
may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder
of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 6(b). No such rescission or
annulment shall affect any subsequent Event of Default or impair any right consequent thereon.


 


 Section 7. Miscellaneous.


 


a) Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth above, or such other facsimile number or address as the Company
may specify for such purposes by notice to the Holder delivered in accordance with this Section 7(a). Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile,
or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number or address of the
Holder appearing on the books of the Company, or if no such facsimile number or address appears on the books of the Company, at
the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 12:00 p.m. (New York
City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later
than 12:00 p.m. (New York City time) on any Trading Day, (iii) the second (2nd) Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required
to be given.


 






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b) Absolute
Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this
Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the
Company. This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.


 


c) Lost
or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange
and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed
Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence
of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.


 


d) Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by
and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of
conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense
of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting
in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction
Documents), 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 such New York Courts, or such New York Courts are improper or inconvenient venue for
such proceeding. 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 via registered or certified mail or overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to it under this Note 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 other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this
Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of
this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’
fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.


 






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e) Amendment;
Waiver. The written consent of the Holder and each other holder of a Note shall be required for any change or amendment or
waiver of any provision to the Notes.


 


f) Failure
or Indulgence not Waiver. No failure or delay on the part of the Holder 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.


 


g) Severability.
If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.
If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury,
the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under
applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would
prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and
the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants
that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder,
but will suffer and permit the execution of every such as though no such law has been enacted.


 


h) Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief.  The remedies provided in this Note shall be cumulative
and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s
right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note.  The
Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof)
shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Holder 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 Holder shall be entitled, in addition to all other available
remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic
loss and without any bond or other security being required. The Company shall provide all information and documentation to the
Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions
of this Note.


 






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i) Payment
of Collection, Enforcement and Other Costs. If (i) this Note is placed in the hands of an attorney for collection or enforcement
or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this
Note or to enforce the provisions of this Note or (ii) there occurs any bankruptcy, reorganization, receivership of the Company
or other proceedings affecting Company creditors' rights and involving a claim under this Note, then the Company shall pay the
reasonable and documented out-of-pocket costs incurred by the Holder for such collection, enforcement or action or in connection
with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys' fees and disbursements.


 


j) Next
Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.


 


k) Headings.
The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit
or affect any of the provisions hereof.


 


*********************


 


(Signature Pages Follow)


 




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IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated. 





 


	 	xG TECHNOLOGY, INC.
	 	 
	 	 
	 	By: 	 	 
	 	 	Name: Roger G. Branton

Title: Chief Financial Officer
	 	 	 
	 	Facsimile No. for delivery of Notices: (941) 954-8595
	 	 	 



 


 




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ANNEX
A


 


 NOTICE OF CONVERSION


 


 


The
undersigned hereby elects to convert principal under the 8% Original Issue Discount Convertible Note due December 11, 2015 of
xG Technology, Inc. (the “Company”), into shares
of common stock of the Company (the “Common Stock”) according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay
all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested
by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes,
if any.


 


After giving effect
to the conversion provided for in this Notice of Conversion, the undersigned (together with its Affiliates) will beneficially
own no more than ___________________ shares of Common Stock.


 


The undersigned agrees
to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the
aforesaid shares of Common Stock.


 


Conversion calculations: 


Date to Effect Conversion:


 


Principal Amount of Note to be Converted:


 


Payment of Interest in Common
Stock __ yes __ no


If yes, $_____ of Interest Accrued
on Account of Conversion at Issue.


 


Number of shares of Common Stock
to be issued:


 


 


Signature:


 


Name:


 


Delivery Instructions:


 


 







    	 



    	 



    

Schedule 1


 


 CONVERSION SCHEDULE


 


This 8% Original Issue Discount Convertible
Note due on December 11, 2015 in the original principal amount of $[____] is issued by xG Technology, Inc. This Conversion Schedule
reflects conversions made under Section 4 of the above referenced Note.


 


Dated:


 





	
        Date of 

Conversion

(or for first entry, 

Original Issue Date)
	Amount of

 Conversion	
        Aggregate 

Principal 

Amount 

Remaining 

Subsequent
        to 

Conversion

        (or original 

Principal Amount)
	Company Attest