Document:

Ex 10.5

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”)
is made on this 31st day of August, 2011, between xG Technology, Inc.(“Company”), having a principal place of
business at Sarasota, Florida, and John C. Coleman (“Executive”), who currently maintains a residence in Florida
at 2011 N. Ocean Blvd, Ft. Lauderdale, Fl. 33305.

 

RECITALS 

 

WHEREAS, Company is a validly existing
corporation duly organized under the laws of Delaware;

 

WHEREAS, Executive currently serves as
Company’s Chief Executive Officer, and has served in that position since December 1, 2010 (“Effective Date”);

 

WHEREAS, Company desires to obtain the
benefit of continued services of Executive and Executive desires to continue to render services to Company; and

 

WHEREAS, Company and Executive each have
determined that it would be to the advantage and best interest of Company and Executive to enter into this Agreement to memorialize
the terms under which Executive would continue to render services to Company;

 

NOW, THEREFORE, in consideration
of the mutual promises and covenants herein contained, Company and Executive agree that the following terms and conditions shall
apply to Executive’s employment:

 

1. Term. Company hereby agrees to
employ Executive and Executive hereby accepts employment with Company for the period commencing with the Effective Date and terminating
on the three (3) year anniversary of the Effective Date unless earlier terminated in accordance with the provisions hereof; provided,
however, that Executive’s employment term shall be automatically extended for an additional three (3) year period following
the three (3) year anniversary of the Effective Date unless Company gives Executive written notice that Executive’s employment
term will not be extended not less than ninety (90) days before the three (3) year anniversary of the Effective Date (the “Term”).

 

2. Duties. Executive shall continue
to be employed as the Chief Executive Officer of Company, and shall perform the usual and customary duties of such office. Executive
shall report directly to the Board of the Company, with George Schmitt as the primary point of contact, and shall have general
supervision, direction, and control of the business, officers, and employees of Company. All officers and employees of Company
shall report directly or indirectly to Executive. Executive shall have full latitude to hire, discharge, discipline, and promote,
and compensate Company employees, and shall have full managerial authority over Company, subject to such directions and control
as Company’s Chairman and/or Board of Directors (“Board”) may specify from time to time. The duties of Executive
may be changed from time to time by the mutual consent of Executive and Company without resulting in a rescission of this Agreement.
Notwithstanding any such change from the duties originally assigned and specified above, or hereafter assigned, the employment
of Executive shall be construed as continuing under this Agreement as modified; provided, however, that any adverse change or diminution
of Executive’s title, position, or reporting responsibilities imposed by Company without Executive’s consent shall
entitle Executive to terminate this Agreement with Good Reason as set forth in Section 7(d) herein.

 

3. Business Activities. Executive
shall devote substantially all of his business time to the business of Company during the Term of this Agreement, which time shall
include time spent in Company’s Florida office, Executive’s home office in Virginia and on business travel. Notwithstanding
the foregoing, however, Executive may continue to affiliate with the companies listed in the schedule attached as Exhibit A to
this Agreement for the sole purpose of maintaining his National Security Clearance (JPAS/Top Secret). Executive shall notify the
Company as soon as practicable after his National Security clearance is terminated, whereupon Company may withdraw its permission
by written notice to Executive.

 

    	 

    	 

    

 

4. Compensation and Benefits

 

(a) Base Salary. In consideration
for Executive’s services hereunder, during the Term Company shall pay or cause to be paid as base salary to Executive an
amount of not less than two hundred and fifty thousand dollars ($250,000.00) per year, prorated for any partial years of service.
Said base salary shall be payable in conformity with Company’s normal payroll periods and practices. The Board in its discretion
may increase Executive’s base salary annually based on the performance of Executive and Company in the previous year. Increases
in base salary shall be effective not later than the beginning of the Fiscal Year for which the increase is granted. For purposes
of this Agreement, the term “Fiscal Year” shall mean the period beginning on January 1 and ending on December 31 during
the Term of this Agreement.

 

(b) Incentive Compensation. In addition,
Company shall pay to Executive for each of the Fiscal Years during the Term of this Agreement an annual incentive compensation
award not to exceed two (2) times Executive’s base salary. Company shall award Executive annual incentive compensation in
an amount commensurate with the performance of Executive and Company in the previous Fiscal Year as set forth in the schedule attached
as Exhibit B to this Agreement. Company shall pay Executive his annual incentive compensation no later than ninety days from the
end of the Fiscal Year for which the incentive compensation is awarded. Company at its discretion may pay Executive his annual
incentive compensation in cash or in Company shares. If paid in shares, the conversion formula will utilize a price for Company
shares equal to the lower of the average price in the Fiscal Year for which the award is determined and the price prevailing at
the time the Company decides to pay Executive his annual incentive compensation in Company shares. In the event of a sale, merger,
consolidation, reorganization or transfer of assets in which Company is not the surviving entity (a “Transaction”),
the equity incentive compensation to be granted pursuant to this Section 4(b) after the date of the Transaction may be granted
in accordance herewith in the form of securities of the surviving entity or parent thereof, as applicable. Subject to the restrictions
set forth in Section 7(i) of this Agreement or otherwise imposed by law, Executive may defer receipt of all or a portion of any
incentive based compensation awarded under this Section 4(b) in order to avoid negative tax consequences or for any other reason
allowed by law.

 

(c) Options. On June 16, 2010, Company
granted Executive 500,000 options to purchase Company shares (Schedule D), and on March 8, 2010, Company granted Executive 50,000
options to purchase Company shares (Schedule E). In the event of a termination under Section 7 of this agreement, all such options
granted on June 16, 2010 and March 8, 210 shall become immediately vested and exercisable. Executive shall be eligible to receive
an additional grant of option shares in an amount of 1,000,000 shares. Executive shall be bound by the terms of the Option Agreement
dated April 14, 2011, evidencing such grant (attached as Schedule C), except as follows:

 

In the event of a termination
under Section 7 of this agreement, the options granted under the Option Agreement dated April 14, 2011 shall remain fully and freely
exercisable during the lesser of (x) ten years from the date such options are granted to Executive if Executive is still then employed
by Company, or (y) the longer of one year from the date of termination of Executive in accordance with the provisions hereof or,
if termination is under Section 7(d) below, three years from the date of termination. With respect to any option shares whose term
for exercise is extended pursuant to this paragraph, the exercise price shall be $.25 per share.

 

(d) Additional Benefits. Executive
shall be entitled to participate in all programs, rights, and benefits for which Executive is otherwise entitled under any bonus
plan, incentive plan, participation plan, extra compensation plan, pension plan, profit sharing plan, savings plan, life, medical,
dental, other health care, disability, or other insurance plan or policy or other plan or benefit Company may provide for senior
executives or for employees of Company generally, from time to time, in effect during the Term. For the avoidance of doubt, the
rights granted or afforded to Executive under any such plans or policies shall not be less than the most favorable rights and highest
amounts granted to employees of similar or lower position with Company and on terms at least as favorable, and, for the purposes
of such plan or policy, Executive shall receive credit for the entire period of his employment with Company (including his employment
with Company prior to the execution of this Agreement). To the extent that anything contained in any such plans or policies is
in conflict or inconsistent with anything stated in this Agreement, the terms of this Agreement shall control and supersede any
contrary language.

 

    	 

    	 

    

 

(e) Excise Tax Adjustments. Executive
and Company acknowledge that certain business transactions, including a change of control, may become subject to the application
of section 280G of the Internal Revenue Code and the possible imposition on the Executive of the excise tax under section 4999.
Executive and Company agree to use reasonable methods to mitigate or eliminate the impact of section 280G, so long as such methods
do not reduce the value of the compensation and benefits Executive would otherwise be entitled to receive under this agreement
by more than 10% .

 

5. Business Expense Reimbursement.
Executive shall be entitled to reimbursement by Company for any ordinary and necessary business expenses incurred by Executive
in the performance of Executive’s duties and in acting for Company during the Term; provided, however, that for reimbursements:

 

(a) Each such expenditure
is of a nature qualifying it as a proper deduction on the federal and state income tax returns of Company as a business expense
and not as deductible compensation to Executive; and

 

(b) Executive furnishes
to Company adequate records, including receipts for any expenditures greater than twenty-five dollars ($25.00), and other documentary
evidence required by Company policy and federal and state statutes and regulations issued by the appropriate taxing authority for
the substantiation of such expenditures as deductible business expenses of Company and not as deductible compensation to Executive.

 

In addition, Executive
shall receive a living allowance of three thousand dollars ($ 3,000) per month. Executive may submit all or portion of the living
allowance as a reimbursement if it qualifies under 3(a) and 3(b) above.

 

6. Office Space and Administrative Support.
During the Term of this Agreement, Company shall provide Executive with office space and administrative support in Company’s
Florida offices.

 

7. Termination. This Agreement shall
be terminated only as provided in this Section 7:

 

(a) Disability. In the event that
during the Term of this Agreement Executive qualifies for permanent disability benefits under Company’s long term disability
plan (the “LTD Plan”), or if Executive does not participate in the LTD Plan, would have qualified for permanent disability
benefits under Company’s LTD Plan had Executive been a participant of the LTD Plan (a “Disability”), Executive’s
full time employment hereunder may be terminated, by written Notice of Termination (as that term is defined in Section 7(f) herein)
from Company to Executive. Upon termination by Company due to Executive’s Disability under this Section 7(a), Executive shall
be entitled to: (i) his base salary for the entire period up to and including the Termination Date (as that term is defined in
Section 7(f) herein); (ii) any unpaid incentive based compensation as described in Section 4(b) of this Agreement for the year
prior to the Fiscal Year in which the Termination Date occurs; (iii) a prorated share of the incentive based compensation described
in Section 4(b) for the Fiscal Year in which the Termination Date occurs; and (iv) reimbursement of any unreimbursed expenses incurred
by Executive pursuant to Section 5 of this Agreement. In addition, one-third (1/3) of Executive’s total options granted under
Section 4(c) of this Agreement shall immediately and fully vest upon the Termination Date; provided, however, that if more than
two-thirds (2/3) of Executive’s options have already vested pursuant to the terms of Section 4(c) prior to the date Executive’s
employment is terminated under this Section 7(a), then all remaining options granted to Executive under Section 4(c) shall immediately
and fully vest upon the Termination Date. The determination of Disability shall be made only after sixty (60) days’ notice
to Executive and only if Executive has not returned to performance of his duties prior to the expiration of the sixty (60) day
notice period.

 

    	 

    	 

    

 

(b) Death. In the event that Executive
shall die during the Term of this Agreement, this Agreement shall automatically terminate; provided, however, that the termination
of the Agreement shall not affect Executive’s entitlement to all benefits in which he has become vested or which are otherwise
payable in respect of periods ending prior to his termination. Upon termination due to Executive’s death, Executive or his
estate shall be entitled to: (i) his base salary for the entire period up to and including the date of Executive’s death;
(ii) any unpaid incentive based compensation as described in Section 4(b) of this Agreement for the year prior to the Fiscal Year
in which Executive’s death occurs; (iii) a prorated share of the incentive based compensation described in Section 4(b) for
the Fiscal Year in which Executive’s death occurs; and (iv) reimbursement of any unreimbursed expenses incurred by Executive
pursuant to Section 5 of this Agreement. In addition, one-third (1/3) of Executive’s total options under Section 4(c) of
this Agreement shall immediately and fully vest upon Executive’s death; provided, however, that if more than two-thirds (2/3)
of Executive’s options have already vested pursuant to the terms of Section 4(c) prior to Executive’s death, then all
remaining options granted to Executive under Section 4(c) shall immediately and fully vest upon Executive’s death.

 

(c) Termination for Cause. Company
may terminate Executive’s employment under this Agreement for “Cause” by written Notice of Termination. A termination
for Cause is a termination by reason of:

(i) Executive’s conviction by a court
of competent jurisdiction for a felony involving dishonesty or moral turpitude; provided, however, that any convictions solely
on the basis of vicarious liability shall not give Company the right to terminate Executive for Cause; (ii) proven acts of fraud
or dishonesty committed by Executive which result in material injury to Company; (iii) a material breach of this Agreement (other
than as a result of incapacity due to death or Disability) which is committed by Executive in bad faith and, if capable of cure,
which is not remedied within thirty (30) days of Executive’s receipt of a notice to cure such breach; or (iv) a failure by
Executive to comply with written directives issued by the Board which is not remedied within thirty (30) days of Executive’s
receipt of a notice to cure such failure. In the event of a termination for Cause pursuant to this Section 7(c), Executive shall
be entitled to receive (a) his base salary for the entire period up to and including the Termination Date; (b) reimbursement of
any unreimbursed expenses incurred by Executive pursuant to Section 5 of this Agreement; and (c) any unpaid incentive based compensation
as described in Section 4(b) of this Agreement for the year prior to the Fiscal Year in which the Termination Date occurs. If Executive
is convicted of a felony involving dishonesty or moral turpitude, Company’s obligations under Sections 4(a), 4(b) and 4(c)
of this Agreement (other than the obligation to pay any unpaid incentive based compensation as described in Section 4(b) of this
Agreement for the year prior to the Fiscal Year in which the Termination Date occurs) shall be automatically suspended; provided,
however, that if the conviction is overturned on appeal, then Executive shall be reinstated to his employment under this Agreement.
When the felony conviction has become final and non-appealable, all of Company’s obligations hereunder may be terminated
by Company as provided in this Section 7(c); provided, however, that the termination of Executive’s employment pursuant to
this Section 7(c) shall not affect Executive’s ownership of Company shares, and shall not affect Executive’s entitlement
to all benefits he has accrued and all rights in which he has become vested (including the right to exercise all vested options
granted under Section 4(c) of this Agreement) or which are otherwise payable in respect of periods ending prior to termination
of his employment.

 

    	 

    	 

    

 

(d) Termination Without Cause or by
Executive with Good Reason. If during the Term of this Agreement Executive’s employment shall be terminated by Company
without Cause (as that term is defined in Section 7(c) of this Agreement) or terminated by Executive with Good Reason (as that
term is defined in this Section 7(d)), then Executive shall be entitled to: (i) his base salary for the entire period up to and
including the Termination Date; (ii) any unpaid incentive based compensation as described in Section 4(b) of this Agreement for
the year prior to the Fiscal Year in which the Termination Date occurs; (iii) incentive based compensation for the Fiscal Year
in which the Termination Date occurs in an amount equal to or greater than Executive’s total annual base salary under Section
4(a) of this Agreement as of the Fiscal Year in which the Termination Date occurs; and (iv) reimbursement of any unreimbursed expenses
incurred by Executive pursuant to Section 5 of this Agreement. In addition, Executive shall receive severance payments equal to
Executive’s total annual base salary under Section 4(a) of this Agreement as of the Fiscal Year in which the Termination
Date occurs, to be paid over the course of one year in conformity with Company’s normal payroll periods and practices. If
Executive’s employment is terminated pursuant to this Section 7(d) (either by Company without Cause or by Executive for Good
Reason), all unvested options granted under Section 4(c) of this Agreement and any other equity grants held by Executive shall
become immediately and fully vested. For purposes of this Agreement, Executive will have “Good Reason” to terminate
this Agreement if Company (or any resulting or surviving entity in the event of a Change of Control as defined in Section 4(c)
of this Agreement) (a) materially breaches this Agreement and, if subject to cure, fails to remedy any such breaches within thirty
(30) days of receipt of a notice to cure; (b) removes Executive from his seat on Company’s Board; (c) takes any action which
results in a diminution or adverse change in Executive’s title, position, or reporting responsibilities as of the Effective
Date without Executive’s consent; or (c) in the event of a Change of Control as defined in Section 4(c) of this Agreement,
fails to assume Company’s duties and obligations under this Agreement.

 

(e) Voluntary Resignation. Except
for a termination for Good Reason as provided in Section 7(d), in the event that Executive resigns voluntarily during the Term
of this Agreement, Executive shall be entitled to receive (a) his base salary for the entire period up to and including the date
of Executive’s voluntary resignation; (b) reimbursement of any unreimbursed expenses incurred by Executive pursuant to Section
5 of this Agreement; and (c) any unpaid incentive based compensation as described in Section 4(b) of this Agreement for the year
prior to the Fiscal Year in which Executive voluntarily resigns.

 

(f) Notice of Termination. Any purported
termination by Company or by Executive shall be communicated by a written notice of termination (the “Notice of Termination”)
to the other party hereto which indicates the specific termination provision in this Agreement, if any, relied upon and which sets
forth in reasonable detail the facts and circumstances, if any, claimed to provide a basis for termination of Executive’s
employment under the provision so indicated. For purposes of this Agreement, and except as expressly provided otherwise herein,
no termination shall be effective without such Notice of Termination. The “Termination Date” shall mean the date specified
in the Notice of Termination, which shall be not less than thirty (30) and not more than sixty (60) days from the date of the Notice
of Termination.

 

(g) Disputes. In the event of a
dispute concerning the validity of a purported termination which is maintained in good faith, the Termination Date shall mean the
date the dispute is finally resolved, and Company will continue to provide Executive with the compensation and benefits provided
for under this Agreement until the dispute is finally resolved, without any obligation by Executive to repay any of such amounts
to Company notwithstanding the final outcome of the dispute. Payments required to be made under this Section 7(g) shall not be
offset against or reduce any other amounts due under this Agreement. Executive shall be required to render services to Company
during the period in which the dispute concerning the termination is being resolved, unless Company fails to provide Executive
with a reasonable opportunity to perform his duties under this Agreement during such period.

 

(h) Restriction on Timing of Distributions.
The intent of the Parties is that payments and benefits under this Agreement comply with Internal Revenue Code Section 409A and
the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum
extent permitted, this Agreement shall be interpreted to be in compliance therewith. If Executive notifies Company that Executive
believes that any provision of this Agreement (or any award of compensation, including equity compensation or benefits) would cause
him to incur any additional tax or interest under Code Section 409A and Company concurs, or Company independently makes such determination,
Company shall use reasonable efforts to reform such provision to the extent possible to comply with Code Section 409A; provided
that such modification shall, to the maximum extent practicable, maintain the original intent and economic benefit to the Parties
of the applicable provision without violating the provisions of Code Section 409A.

 

    	 

    	 

    

 

(i) Retention of Accrued Benefits and
Vested Rights. The termination or resignation of Executive’s employment for any reason under this Section 7 shall not
affect Executive’s ownership of Company shares, and shall not affect Executive’s entitlement to all benefits he has
accrued and all rights in which he has become vested (including the right to exercise all vested options granted under Section
4(c) of this Agreement) or which are otherwise payable in respect of periods ending prior to his termination of employment.

 

8. Non-Compete and Non-Solicitation.
Except as provided in Section 3 of this Agreement, during the Term of this Agreement, and during any period in which Executive
receives severance payments pursuant to Section 7(d) of this Agreement, Executive shall not engage in, or encourage other employees
or former employees of Company to engage in, any business or activity that directly competes with the business of Company, and
shall not solicit, hire as an employee or consultant or become a partner with any employee or former employee of Company.

 

9. Indemnity, Advancement and Insurance.
To the fullest extent permitted by applicable law, Company (or in the event of a Transaction as defined in Section 4(b), the surviving
or resulting entity or transferee) shall indemnify Executive and hold him harmless for any acts or decisions made by him in good
faith while performing services for Company, and shall advance to Executive all fees and costs associated with the defense of any
action or proceeding for which he has tendered an appropriate indemnification demand. Company further agrees that it will provide
Executive with a minimum of ten million dollars ($10,000,000.00) of directors’ and officers’ insurance coverage in
connection with the performance of his duties under this Agreement, but Executive’s right to indemnity and advancement shall
not be dependent or contingent upon the availability of insurance coverage.

 

10. No Obligation to Mitigate. Executive
shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise
and, except as otherwise expressly provided under this Agreement, no payment hereunder shall be offset or reduced by the amount
of any compensation or benefits provided to Executive in any subsequent employment or business venture.

 

11. Miscellaneous.

 

(a) Succession; Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective executors, administrators,
successors and assigns. The parties agree that the obligations and duties of Executive are personal and are not assignable.

 

(b) Notice. Any notice, request,
demand or other communication required or permitted hereunder shall be deemed to be properly given when personally served in writing
or by facsimile, when deposited in the United States mail, postage prepaid, or when communicated to a public telegraph company
for transmittal, addressed to the party at the address appearing at the beginning of this Agreement. Either party may change its
address by written notice in accordance with this Section 11(b).

 

(c) Entire Agreement; Modification.
Except as otherwise provided herein, this Agreement contains the entire agreement of the parties and supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect to the employment of Executive by Company. This
Agreement may not be modified or amended by oral agreement, but only by an agreement in writing entered into between Company and
Executive.

 

(d) Waiver. Any waiver of a breach
of any provision hereof shall not operate as or be construed as a waiver of any subsequent breach of the same provision or any
other provision of this Agreement.

 

(e) Severability. Should any provisions
of this Agreement for any reason be declared invalid, void, or unenforceable by a court of competent jurisdiction, the validity
and binding effect of any remaining portion shall not be affected, and the remaining portions of this Agreement shall remain in
full force and effect as if this Agreement had been executed without the inclusion of said provision.

 

    	 

    	 

    

 

(f) Interpretation. If any claim
is made by any party hereto relating to any conflict, omission or ambiguity of this Agreement, no presumption or burden of proof
or persuasion shall be implied by reason of the fact that this Agreement was prepared by or at the request of any particular party
hereto or such party’s counsel.

 

(g) Counterparts. This Agreement
may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute
one and the same instrument.

 

IN WITNESS WHEREOF, the parties
hereto have executed this Agreement as of the day and year first above written.

 

EMPLOYER: 

	By:	/s/ George F. Schmitt	 
	Name: 	George F. Schmitt 	 
	Title:	 	 

 

	EXECUTIVE: 	/s/ John C. Coleman	 
	 	 	 
	 	John C. Coleman	 

    	 

    	 

    

 

Exhibit A

1. Paul Cibuzar Consulting Company LLCSTRICTLY PRIVATE & CONFIDENTIAL

 

Ex 10.6

LOAN FACILITY

 

LOAN FACILITY dated and effective as of
February 7, 2011, among xG Technology, Inc., a Delaware corporation (the “Borrower”) and MB Technology Holdings, LLC
(the “Lender”).

 

BACKGROUND

 

Lender
has established for Borrower a certain credit facility, in the nature of a ten million US dollar ($10,000,000) line of credit (“Loan”),
as evidenced by Borrower’s Promissory Note – Line of Credit, dated and effective as of February 7, 2011 in the available
principal amount of ten million US dollars ($10,000,000) (said Promissory Note – Line of Credit, together with any and all
renewals, replacements, amendments or substitutions thereof or therefor, being hereinafter referred to as the “Note”).

 

Lender
and Borrower have previously entered into various loan agreements, loan facilities, promissory notes and security agreements (the
Original Shareholder Loans, as defined below) and it is the intention of the parties that part of the Loan shall be used by Borrower
in repaying in full its indebtedness to Lender under such Original Shareholder Loans. 

 

NOW, THEREFORE, in consideration of the
Loan and for other good and valuable consideration and intending to be legally bound, Borrower hereby agrees with Lender as follows:

 

SECTION 1. Granting of Loans. Lender
hereby agrees to make available on an uncommitted basis at the discretion of Lender from time to time, until the Maturity Date,
the Advances requested by the Borrower hereunder, or pursuant to the Note; provided however, that (a) in no event shall the Advances
exceed the Borrowing Limit and (b) Lender has no obligation to lend Borrower any amounts hereunder and the decision to lend such
money lies in the sole and absolute discretion of Lender. In consideration for the making of such Loan, the Borrower hereby agrees
to grant Lender a security interest in the Assets pursuant to the terms and conditions set forth in that certain Security Agreement,
dated as of February 7, 2011 and effective as of February 7, 2011 between the Borrower and the Lender. All payments of the Loan
and Advances made hereunder shall be made in accordance with the provisions of the Note and shall mature on the Maturity Date.

 

SECTION 2. Representations and Warranties.
Borrower represents and warrants to Lender as follows:

 

		(a)	Power and Authority. Borrower has the right and
power and is duly authorized and empowered to enter into, execute, deliver and perform this Loan Facility and each of the Related
Agreements to which it is a party. The execution, delivery and performance of this Loan Facility and all Related Agreements has
been duly authorized by all necessary corporate action and does not (i) require any consent or approval of the shareholders of
Borrower; (ii) contravene the charter, articles of incorporation, memorandum and articles of association, limited liability agreement
or by-laws of Borrower; (iii) violate, or cause Borrower to be in default under any provision of any Law, rule, regulations, order,
writ, judgment, injunction, decree, determination or award in effect having applicability to Borrower; or (iv) result in a breach
of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which
Borrower is a party or by which it or its properties may be bound or affected.

 

    	1

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

		(b)	Legally Enforceable Agreements. This Loan Facility
and each Related Agreement is a legal, valid and binding obligation of Borrower, as applicable, and is enforceable against Borrower,
as applicable, in accordance with its terms, except as may be affected by (i) the effect of bankruptcy, insolvency, reorganization,
moratorium, arrangement, fraudulent conveyance, receivership and other laws now or hereafter in effect affecting the enforcement
of creditors’ rights or (ii) the enforceability of equitable remedies or the application of equitable principles (whether
considered in an action at law or equity).

 

		(c)	Assets.  All of Borrower’s Assets are free
and clear of any and all liens, security interest, mortgages and other encumbrances, restrictions and charges, except as listed
on Exhibit “B” attached hereto.

 

		(d)	Consents. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or regulatory body is required for the execution, delivery
or performance by Borrower of this Loan Facility or any Related Agreement.

 

		(e)	Outstanding Litigation. Except as set forth in
Exhibit "C" attached hereto, there are no suits in law or equity or proceedings before any governmental instrumentality
or agency against Borrower now pending, nor is there to the knowledge of Borrower threatened or likely any litigation nor any
proceedings against or affecting Borrower, the outcome of which might materially and adversely affect the Assets or operations
of Borrower, or its financial condition or business.

 

		(f)	Adverse Change. Except as set forth in Exhibit
"D" attached hereto, there has been no material adverse change in the financial condition, business, operation or Assets
of the Borrower from the date hereof.

 

		(g)	Compliance With Applicable Laws. Borrower and
its respective business and operations are in compliance with all applicable Laws.

 

    	2

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

SECTION 3. Covenants. Borrower agrees
with and covenants to Lender as follows:

 

		(a)	From and after the date of this Agreement, Borrower will
not incur any Indebtedness of any nature whatsoever, other than (i) the indebtedness to Lender as evidence by this Loan Facility
in favor of Lender, (ii) current trade indebtedness incurred in the ordinary course of business and (iii) purchase money indebtedness
for equipment in favor of the vendor or financier thereof limited to the cost of such equipment.

 

		(b)	Within ninety (90) days after the close of each fiscal
year and each fiscal quarter, Borrower shall provide Lender with Borrower's financial statements prepared in accordance with IFRS,
said annual financial statements to be audited without a disclaimer of an, or an adverse or qualified, opinion, by the independent
certified public accounting firm regularly retained by Borrower, and said quarterly financial statements to be certified by Borrower’s
chief financial officer.

 

		(c)	Borrower, at its own expense, shall maintain adequate
property, liability and other insurance during the term of the Loan in such amounts against such risks as shall be adequate for
the nature of Borrower's business as now or hereafter conducted.

 

		(d)	Borrower shall operate its businesses in accordance with
current practices and shall not sell, assign or otherwise dispose of or transfer any of its Assets, other than sales of inventory
in the ordinary course of business and other than as set forth in Exhibit "D" hereto.

 

		(e)	Borrower will not permit, create or suffer to exist any
lien, security interest or other encumbrance on any of its Assets, other than (i) existing liens as set forth on Exhibit "B"
hereto; (ii) purchase money lines on equipment securing purchase money indebtedness permitted by Section 3(a) hereof; (iii) liens
relating to judgments to the extent permitted by Section 4(h) hereof; (iv) liens for taxes or assessments either (x) not delinquent
or (y) contested in good faith by appropriate proceedings for which an adequate reserve has been made in accordance with IFRS;
(v) liens incurred or pledges and deposits in connection with workmen's compensation, unemployment compensation and other social
security benefits, or securing the performance bids, tenders, leases, contracts, progress payments, surety, appeal and performance
bonds and other obligations of like nature, incurred in the ordinary course of business; (vi) liens imposed by law incurred in
good faith in the ordinary course of business; (vii) pledges of or liens on raw materials or on manufactured products as security
for drafts or bills of exchange in connection with the importation of such raw materials or manufactured products in the ordinary
course of business; (viii) liens encumbering property under construction arising from progress or partial payments by a customer
of Borrower relating to such property or assets; (x) liens incurred by Borrower in the ordinary course of business in favor of
suppliers who retain title to goods supplied by them until such goods are paid for; and (xi) liens of leases existing on the date
of this Agreement.

 

    	3

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

SECTION 4. Events of Default. The
occurrence of each of the following events shall constitute an “Event of Default”:

 

		(a)	Borrower fails to pay to Lender within thirty (30) business
days when due any payment payable hereunder or under any Related Agreement. However, Lender may extend, at its sole discretion,
Borrower’s due date so long as interest continues to accrue and such event will not be considered an Event of Default.

 

		(b)	Borrower fails to observe or perform any other Obligation,
agreement or covenant to be observed or performed by them hereunder or under any Related Agreement, and such failure is not cured
within thirty (30) business days after written notice given by Lender to Borrower specifying such failure.

 

		(c)	Any financial statement, representation, warranty, statement
or certificate made or furnished by Borrower to Lender in connection with this Loan Agreement, or an inducement to Lender to enter
into this Loan Agreement, or in any other instrument or document to be delivered hereunder to Lender, is materially false, incorrect,
or incomplete when made.

 

		(d)	Borrower becomes insolvent or generally fails to pay,
or admits its inability to pay, debts as they become due or makes a general assignment for the benefit of any of its creditors.

 

		(e)	Borrower applies for, consents to, or acquiesces in the
appointment of, a trustee, receiver, administrator, administrative receiver or other custodian for Borrower or any of the property
of Borrower, or, in the absence of such application, consent or acquiescence, a trustee, receiver, administrator, administrative
receiver or other custodian is appointed for Borrower or for a substantial part of the property of Borrower and is not discharged
within sixty (60) days.

 

		(f)	Any bankruptcy, reorganization, liquidation, dissolution
or other case and proceeding under any bankruptcy or insolvency law is commenced in respect of Borrower, and if such case or proceeding
is not commenced by Borrower, it is consented to or acquiesced in by Borrower or remains for sixty (60) days un-dismissed.

 

		(g)	Borrower discontinues its business operations or materially
changes the nature of its business.

 

		(h)	Borrower shall suffer final judgment(s) for the payment
of money aggregating in excess of $50,000 for Borrower collectively and shall not discharge, satisfy or stay the same within thirty
(30) business days.

 

		(i)	The occurrence of an Event of Default under any Related
Agreement, including without limitation under the Promissory Note.

 

    	4

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

		(j)	The occurrence of any event of default under any present
or future indebtedness or obligations between Borrower and third parties, which indebtedness or obligations exceed in the aggregate
$50,000.

 

SECTION 5. Remedies. Upon the occurrence
of an Event of Default, then in addition to all rights and remedies of Lender set forth in this Agreement, any Related Agreement
or pursuant to applicable law, the Lender may (i) immediately suspend or terminate all or any portion of Lender’s obligation
to make additional Advances under the Note, (ii) exercise its rights to foreclose on any of the Assets as set forth in the Security
Agreement, and/or (iii) declare the entire principal balance of the obligations due hereunder, plus accrued unpaid interest thereon,
as well as any and all other charges provided for in this Loan Facility or any other monies due under any other instrument document
or agreement between Lender and Borrower, immediately due and payable, without further notice or demand by Lender.

 

SECTION 6. Miscellaneous.

 

		(a)	Upon repayment in full of all indebtedness of the Borrower
to Lender under the Original Shareholder Loans, such Original Shareholder Loans shall immediately terminate and become null and
void as if never entered into between the parties.

 

		(b)	Borrower shall upon demand pay to Lender any and all
reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, which Lender
may incur in connection with the exercise or enforcement of any of the rights of Lender hereunder and/or under any Related Agreement.

 

		(c)	This Loan Facility shall be governed by and construed
in accordance with the substantive laws of the State of Florida. Borrower irrevocably agrees to service of process by certified
mail, return receipt requested to the addresses of Borrower as set forth herein.

 

		(d)	Lender shall have the right, through no more than two
representatives or agents at any one time and, prior to the declaration of an Event of Default, no more than one time in any three
month period (with no limitation, however, after the declaration of an Event of Default), during reasonable business hours, upon
thirty (30) business days prior notice, to audit and conduct examinations of Borrower's books and records and accounts receivable,
and Borrower shall be liable to pay Lender all reasonable costs and expenses incurred by Lender in connection therewith, but not
to exceed $2,500 per audit.

 

		(e)	No amendment or waiver of any provision of this Loan
Facility or any Related Agreement or consent to any departure by Borrower herefrom shall in any event be effective unless the
same shall be in writing and signed by Lender, and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.

 

    	5

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

		(f)	All notices required or permitted hereby shall be in
writing and shall be effective when sent either by telecopy, fax or e-mail, recognized overnight courier, registered return receipt
mail or hand delivered, in each case addressed as follows:

 

	 	 	If to Lender:
	 	 	 
	 	 	MB Technology Holdings, LLC
	 	 	240 S. Pineapple Ave.
	 	 	Suite 701
	 	 	Sarasota, FL 34236
	 	 	 
	 	 	If to Borrower:
	 	 	 
	 	 	xG Technology, Inc.
	 	 	7771 W. Oakland Park Boulevard
	 	 	Suite 231
	 	 	Sunrise, FL 33351

 

			For purposes of this Agreement and any of the Related Agreements, notices shall be deemed to
                                                                                be given (i) if delivered in person, when delivered, (ii) if delivered by telecopy, fax or e-mail on the date of
                                                                                transmission, (iii) if delivered by overnight courier, one business day after delivery to the courier or (iv) if delivered by
                                                                                U.S. mail, three (3) business days after deposit, with postage prepaid.

 

		(g)	This Agreement shall be binding upon the parties and
their respective successors and assigns. Lender may assign the Loan and all of its rights thereunder and under this Agreement
and all Related Agreements, provided that no such assignment will, without Borrower's prior written consent, be to a person or
entity who Lender has actual knowledge is actively engaged in a business which is in competition with that of the Borrower. Borrower
may not assign any of its rights or obligations under this agreement or any Related Agreement without the prior written consent
of Lender, which may be withheld in its sole discretion.

 

		(h)	No failure or delay on the part of the Lender to exercise, nor any partial exercise of, any power,
right or privilege hereunder or under any Related Agreement shall impair such power, right or privilege or be construed to be a
waiver of any Event of Default. All rights and remedies existing hereunder or any other Related Agreement are cumulative to and
not exclusive of any rights or remedies otherwise available.

 

		(i)	The invalidity, illegality, or unenforceability in
any jurisdiction of any provision under this Agreement or any Related Agreement shall not affect or impair the remaining provisions
in this Agreement or any Related Agreement.

 

    	6

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

		(j)	This Agreement may be executed via manual telecopy,
in multiple counterparts and all such counterparts shall collectively constitute an original agreement. No party hereto will raise
the use of a facsimile machine or pdf attachment to e-mail to deliver a signature to this Agreement or the fact that any signature
was transmitted or communicated through the use of facsimile machine or pdf attachment to e-mail as a defense to the formation
or enforceability of this Agreement and each party forever waives any such defense.

 

		(k)	All references to dollars or “$” in this
Agreement or any Related Agreement shall refer to U.S. Dollars.

 

		(l)	From time to time, as and when requested by any party
hereto any other party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and
shall take, or cause to be taken, all such further actions as the requesting party may reasonably deem necessary or desirable
to evidence and effectuate the transactions contemplated by this Agreement. Furthermore, Borrower hereby authorizes Lender to
take all such actions that may be necessary to perfect Lender’s security interest in the Assets, including, but not limited
to, the filing of any UCC financing statements against the Assets.

 

		(m)	Any legal action, suit or proceeding arising out of
or relating to this Agreement, any Related Agreement or the transactions contemplated hereby shall be instituted exclusively in
the courts of the State of Florida, located in Broward County or, provided subject matter jurisdiction exists, in the United States
Federal Court for the Southern District of Florida, and each party hereto agrees not to assert as a defense in any such action,
suit or proceeding, any claim that it is not subject personally to the jurisdiction of such courts, that its property is exempt
or immune from attachment or execution, that the action, suit or proceeding is brought in an inconvenient forum, that the venue
of the action, suit or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by
such court. Each party further irrevocably submits to the exclusive jurisdiction of such courts in any such action, suit or proceeding,
and waives a trial by jury.

 

SECTION 7. Definitions. For purposes
hereof, the following terms shall have the following meanings:

 

		(a)	“Advances” shall have the meaning ascribed
to such term in the Note.

 

		(b)	“Assets” shall mean any and all of the
assets and properties of the Borrower, real or personal, tangible or intangible, and whether now owned or hereafter acquired.

 

		(c)	“Borrowing Limit” shall have the meaning
ascribed to such term in the Note.

 

    	7

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

		(d)	“Event of Default” shall mean any of the
events specified in Section 4 hereof.

 

		(e)	“IFRS” shall mean International Financial
Reporting Standards, consistently applied.

 

		(f)	“Indebtedness” shall mean all items of
indebtedness, obligations or liabilities, due or to become due, liquidated or unliquidated, direct or contingent, joint or several,
of any nature whatsoever and out of whatever transaction arising, including, without limitation:

 

			(i)          all indebtedness guaranteed, directly
or indirectly, in any manner, or endorsed (other than for collection deposit in the ordinary course of business) or discounted
with recourse;

 

			(ii)         all indebtedness in effect guaranteed,
directly or indirectly, through agreements, contingent or otherwise to (1) purchase such indebtedness, (2) purchase, sell or lease
(as lessee or lessor) property, products, materials or supplies, or to purchase or sell services, primarily for the purpose of
enabling any debtor to make payment of such indebtedness against loss, or (3) supply funds to or in any manner invest in any debtor;

 

			(iii)        all indebtedness secured by (or for which
the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance upon property owned or acquired subject to such mortgage, deed of
trust, pledge, lien, security interest, charge or encumbrance, whether or not the liabilities secured thereby have been assumed;
and

 

			(iv)        all indebtedness incurred as the lessee of
goods or services under leases that, in accordance with IFRS, as applicable, should be reflected on the lessee’s balance
sheet.

 

		(g)	“Laws” shall mean all ordinances, statutes,
rules, regulations, orders, injunctions, writs or decrees of any government or political subdivision or agency thereof or any
court or similar entity established by any thereof.

 

		(h)	“Maturity Date” shall have the meaning
ascribed to such term in the Note.

 

		(i)	“Original Shareholder Loans” shall mean
the Loan Agreement dated and effective as of July 6, 2010 (as amended), the Loan Facility dated and effective as of October 8,
2010 (as amended), the Amended and Restated Promissory Note - Line of Credit effective as of July 6, 2010, the Amended and Restated
Promissory Note - Line of Credit effective as of October 8, 2010, the Security Agreement dated as of December 22, 2010 and effective
as of July 6, 2010 and the Security Agreement dated as of December 22, 2010 and effective as of October 8, 2010, all between the
Lender and Borrower.

 

    	8

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

		(j)	“Related Agreements” shall mean each of
the agreements and documents specified in Exhibit “A” attached hereto, the terms of each of which are incorporated
herein by reference.

 

IN WITNESS WHEREOF, the parties have caused
this Loan Facility to be duly executed and delivered by its officers thereunto duly authorized as of the date first written above.

 

	BORROWER	 	 	LENDER	 
	 	 	 	 	 
	By:	/s/ James Woodyatt	 	By:	/s/ George F. Schmitt
	Name:	James Woodyatt	 	Name:	George F. Schmitt
	Title	Director	 	Title	CEO
	 	 	 	 	 
	Attest:	Roger G. Branton	 	Attest:	Roger G. Branton

 

    	9

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

EXHIBIT "A"

 

Related Agreements

 

Promissory Note – Line of Credit,
dated as of February 7, 2011 and effective as of February 7, 2011, between the Borrower and Lender.

 

Security Agreement, dated as of February
7, 2011 and effective as of February 7, 2011, between the Borrower and Lender.

 

    	10

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

PROMISSORY NOTE - LINE OF CREDIT 

 

	$10,000,000 U.S. Dollars	Effective as February 7, 2011

 

FOR VALUE RECEIVED,
intending to be legally bound, xG Technology, Inc., a Delaware corporation (“Borrower”), with offices at 240
S. Pineapple Avenue, Suite 701, Sarasota, Florida, promises to pay to the order of MB Technology Holdings, LLC (the “Lender”)
and its successors and assigns, at 240 S. Pineapple Avenue, Suite 701, Sarasota, Florida or such other place or places as the holder
of this Note (this “Note”) from time to time may designate in writing, the principal amount of all Advances
(as defined below) in the manner set forth in Section 2 below, together with the interest in like lawful money at the interest
rate set forth in Section 3 below and any fees due hereunder.

 

1.          Advances.
From time to time, Borrower shall be entitled to borrow (each an “Advance” and collectively the “Advances”)
from Lender a principal amount or amounts to the extent that the sum of all principal amounts advanced to Borrower hereunder does
not, at any time, exceed Ten Million Dollars ($10,000,000) (subject to increase by prior written agreement of the Lender at its
entire discretion) less any amount that Lender is required to pay for shares in the Common Stock of the Borrower (“Shares”)
pursuant to any mandatory take-over offer that Lender may be required to make under Borrower’s Amended and Restated Certificate
of Incorporation in connection with its Conversion Right set out under Section 4 below to the holders of all of the Shares not
held by Lender (the “Borrowing Limit”). Lender shall make such requested Advance, so long as (i) the Borrowing
Limit would not be so exceeded and (ii) there has not occurred an Event of Default (as such term is defined in that certain Loan
Facility, dated as of February 7, 2011 (the “Loan Agreement”)) or an event which, with notice or lapse of time
or both, would constitute an Event of Default; provided further that Lender has no obligation to lend Borrower any amounts
hereunder and the decision to lend such money lies in the sole and absolute discretion of Lender. The Advances shall be reflected
on the “Schedule of Advances” attached to this Note, as such schedule may be amended from time to time, provided however
that in the event that any Advance is not reflected on the “Schedule of Advances” attached hereto, the books and records
of the Lender shall constitute evidence of any Advances made hereunder.

 

2.          Payments.
Unless accelerated pursuant to the terms hereof, no payments shall be required under this Note until the earlier of (a) the eighteen
(18) month anniversary of the date first set forth on the top of this Note, (b) on demand, two (2) days following Lender’s
written notice to Borrower, or (c) the occurrence of an Event of Default (the “Maturity Date”), at which time
the entire principal balance of this Note, together with any and all accrued unpaid interest thereon, shall be due and payable
in full. Except as otherwise required by law or by other provisions of this Note, payments received by Lender hereunder shall
be applied first against expenses and indemnities, next against interest accrued under this Note, and next in reduction of the
outstanding principal balance of this Note. Borrower shall pay all amounts owing under this Note in full when due without set-off,
counterclaim, deduction or withholding for any reason whatsoever.

 

    	11

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

3.          Interest
Rate. The unpaid principal amount for the time being outstanding under this Note shall bear interest at a rate equal to
eight percent (8%) per annum compounded monthly (the “Base Rate”). Interest shall be computed on the basis of
the actual number of days elapsed and a year of 360 days. The interest shall accrue monthly and shall be added to the principal.
Upon the occurrence and during the continuance of an Event of Default the principal amount of this Note shall bear interest at
a rate equal to the Base Rate plus two percent (2%).

 

4.          Conversion
Right. This Note shall be convertible, at Lender’s sole option at any time prior to the Maturity Date, into new Shares
-

 

(a)          at
$0.25 per new Share, provided that shareholders not affiliated or acting in concert with Lender 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 after the date upon which this Note is effective
or, failing which

 

(b)          at
$0.10 per new Share, subject to Lender 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.

 

5.           Options.
Borrower will grant to Lender 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 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. The options shall be exercisable for a five year period following grant.

 

6.          Acceleration
Upon Event of Default. The entire unpaid principal balance of and all interest accrued under this Note shall become due
and payable immediately upon the occurrence of any of an Event of Default without notice or demand.

 

7.          Maximum
Interest Rate. Notwithstanding anything in this Note to the contrary, if the interest rate set forth in Section 3 of this
Note exceeds the maximum rate of interest permitted by law during any period of this Note, the interest rate shall be an amount
equal to the maximum interest rate permitted by law during such period of this Note. For purposes of this Note, the maximum rate
permitted by law shall mean the maximum rate of interest that may be contracted for, charged, taken, reserved or received under
the laws of the State of Florida or applicable federal law (whichever permits the higher rate) after taking into account, to the
extent required by applicable law, any and all relevant payments or charges.

 

    	12

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

8.          Governing
Law. This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida without
regard to its conflict of laws provisions.

 

9.          Collection
Expense. Borrower agrees to pay, in addition to all the sums payable hereunder, the Lender’s reasonable expenses
of collection, including without limitation, court fees and reasonable attorneys’ fees and disbursements, whether or not
suit is brought and through all appeals.

 

10.         Prepayment;
Facility Fee. Borrower may at any time upon two (2) days' prior written notice to Lender, prepay the entire unpaid principal
amount of this Note, or any part thereof, provided that interest accrued on the principal being prepaid shall be payable together
with the principal so prepaid. In the event that Borrower prepays this note in full prior to the Maturity Date, Borrower shall
be required to pay Lender (a) a minimum of one year’s worth of interest. Furthermore, at the time of repayment, whether
or not such repayment occurs prior to the Maturity Date, Borrower is required to pay a facility fee equal to two percent (2%)
of the Borrowing Limit.

 

11.         Security.
This Note is executed in conjunction with the Loan Agreement and that certain Security Agreement, dated as of the date hereof
by and between the Borrower and the Lender (the “Security Agreement”) and is secured by the liens and security
interests created thereunder with respect to the collateral set forth therein.

 

12.         Waiver
of Defenses. The Borrower, expressly waives demand and presentment for payment, notice of nonpayment, protest, notice
of protest, notice of dishonor, notice of intent to accelerate the maturity hereof, notice of the acceleration of the maturity
hereof, bringing of suit and diligence in taking any action to collect amounts called for hereunder and in the handling of securities
at any time existing in connection herewith; Borrower is directly and primarily liable for the payment of all sums owing and to
be owing hereon, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any
amount called for hereunder or in connection with any right, lien, interest or property at any and all times had or existing as
security for any amount called for hereunder.

 

    	13

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

 

13.         Miscellaneous.
Time shall be of the essence with respect to the terms of this Note. Any notice required to be given to Borrower shall be delivered
to the last address provided to the Lender by the Borrower (or, if none, to Borrower’s address as it appears on the signature
page of this Note). Any notice shall be deemed to have been duly given when delivered in accordance with the Loan Agreement. All
of the terms of this Note shall inure to the benefit of Lender and its successors and assigns and shall be binding upon Borrower
and its successors and assigns. Lender may assign this Note and any of its rights hereunder, under the Loan Agreement or under
the Security Agreement, provided that no such assignment will, without Borrower’s prior written consent, be to a person
or entity who Lender has actual knowledge is actively engaged in a business that is in competition with that of Borrower. Borrower
may not assign this Note, or any of its rights or obligations hereunder without the prior written consent of Lender, which may
be withheld in its sole discretion. This Note may be executed via manual telecopy, in multiple counterparts and all such counterparts
shall collectively constitute an original Note. No party hereto will raise the use of a facsimile machine or pdf attachment to
email to deliver a signature to this Note or the fact that any signature was transmitted or communicated through the use of facsimile
machine or pdf attachment to email as a defense to the formation or enforceability of this Note and each party forever waives
any such defense. The provisions of this Note are severable and the invalidity or unenforceability of any provision hereof shall
not alter or impair the remaining provisions of this Note. Any failure of Lender to exercise any right under this Note shall not
be construed as a waiver to exercise the same or any other right hereunder. All references to dollar amounts in this Note shall
be deemed references to U.S. Dollars. In the event of any conflict between this Note and the Loan Agreement or the Security Agreement,
the Loan Agreement shall control.

 

IN WITNESS WHEREOF,
the undersigned hereby executes this Promissory Note - Line of Credit as of the date first above written.

 

xG Technology, Inc.

 

	 	By:	/s/ James Woodyatt
	 	Name:	James Woodyatt
	 	Title	Director
	 	Address:	7771 W. Oakland Park Boulevard
	 	 	Suite 231
	 	 	Sunrise, FL  33351

 

Accepted by:

 

MB Technology Holdings, LLC

 

	By:	/s/ George F. Schmitt
	Name:	George F. Schmitt
	Title	CEO

 

    	14

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

Schedule of Advances

 

	Date of Advance	 	Principal Amount of 
 Advance	 	Unpaid Principal Amount of 
 All Advances
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

 

    	15

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

SECURITY
AGREEMENT

 

THIS SECURITY AGREEMENT
is dated and effective as of February 7, 2011 by xG Technology, Inc., a Delaware corporation (the “Debtor”),
in favor of MB Technology Holdings, LLC, a Delaware limited liability company (the “Secured Party”).

 

RECITALS:

 

A.           Pursuant
to that certain Loan Facility, dated as of February 7, 2011, between the Debtor and the Secured Party (the “Loan Agreement”)
and that Promissory Note - Line of Credit, effective as of February 7, 2011, made by the Debtor in favor of the Secured Party (the
“Note”), Debtor has agreed to borrow from the Secured Party the principal amount of up to Ten Million Dollars
($10,000,000) and the Secured Party has agreed to loan to Debtor the principal amount of up to Ten Million Dollars ($10,000,000).

 

B.           In
order to induce the Secured Party to loan funds to the Debtor, and as security for the repayment of the Debtor’s indebtedness,
liabilities and obligations from time to time owed under the Note, the Debtor has agreed to hereby grant the Secured Party a continuing
security interest in all of the assets of the Debtor, wherever located and now owned or hereafter acquired.

 

ARTICLE 1

GRANT OF SECURITY INTEREST

 

1.1           Grant
of Security Interest. To secure the payment of (i) the Debtor’s obligations under the terms of the Note and the Loan
Agreement, and (ii) all costs and expenses paid or incurred by the Secured Party in the exercise, preservation or enforcement of
any of the rights, powers or remedies of the Secured Party, or in the enforcement of the obligations of Debtor, under the terms
of this Agreement or the Note or the Loan Agreement (collectively, the “Indebtedness”), the Debtor grants the
Secured Party a security interest in the following personal property of the Debtor, wherever located and whether now owned or hereafter
acquired (collectively, the “Collateral”):

 

		(a)	accounts, including health care insurance receivables;

		(b)	chattel paper;

		(c)	inventory;

		(d)	equipment;

		(e)	instruments, including promissory notes;

		(f)	investment property;

		(g)	documents;

		(h)	deposit accounts;

		(i)	letter of credit rights;

  

    	16

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

  

		(j)	general intangibles, including payment intangibles;

		(k)	supporting obligations;

		(l)	Intellectual Property Collateral; and

		(m)	to the extent not listed above as original Collateral, proceeds and products of the foregoing.

  

For purposes of the
foregoing, the term “Intellectual Property Collateral” shall mean all right, title and interest of the Debtor
in and to any intellectual property rights and any tangible embodiments thereof, including, without limitation, any of the following
anywhere in the world: (i) all copyright rights, copyright applications, copyright registrations and like protections in each work
or authorship and derivative work thereof, whether published or unpublished, whether registered or unregistered, and whether or
not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held, (ii) all patents, patent applications,
invention rights, industrial design rights and like protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same, (iii) any trademark, service mark, domain name, trade dress,
product design, packaging design or configuration or other source indicia rights, whether registered or not, applications to register
and registrations of the same and like protections, all common law rights and the entire goodwill of the business of the Debtor
connected with and symbolized by such trademarks, (iv) all amendments, renewals and extensions of any of the foregoing property
described in clauses (i), (ii) and (iii), (v) any and all trade secrets, and any and all intellectual property rights in computer
software and computer software products now or hereafter existing, created, acquired or held, (vi) any and all design rights which
may be available to the Debtor now or hereafter existing, created, acquired or held, (vii) any and all claims for damages by way
of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for
and collect such damages for said use or infringement of the intellectual property rights identified above, (viii) all license
or other rights to use any of the copyright, patents or trademarks or service mark, and all license fees and royalties arising
from such use to the extent permitted by such license or rights, (ix) any indemnity or warranty payable in respect of any of the
foregoing property or interests, and (x) all agreements, permits, waivers or consents relating to the licensing, development, use
or disclosure of any of the foregoing to which the Debtor is now or hereafter a party or beneficiary, including, without limitation,
the agreements identified on Exhibit C attached hereto (collectively, the “IP Agreements”).

 

ARTICLE 2

REPRESENTATIONS AND WARRANTIES

 

The Debtor represents
and warrants to the Secured Party as follows:

 

2.1           Authority.
The Debtor has the right and power and is duly authorized and empowered to enter into, execute, deliver and perform its obligations
under this Agreement.

 

    	17

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

2.2           Ownership;
No Other Liens. The Debtor’s rights in or the power to transfer the Collateral and its title to the Collateral are free
and clear of all liens, security interests or encumbrances other than those disclosed in Exhibit A attached hereto.

 

2.3           Location
of Business; Identification Number. Exhibit B attached hereto sets forth (i) the address of the Debtor’s
chief executive office (the “Chief Executive Office State”); (ii) the state of incorporation of the Debtor (the
“Incorporation State”); (iii) the Federal Employer Identification Number of the Debtor and (iv) the Organizational
ID Number of the Debtor in the Incorporation State (the “Organizational ID”). The exact legal name of the Debtor
is as set forth above the signature of its representative at the end of this Agreement.

 

2.4           Intellectual
Property. Exhibit C attached hereto sets forth a list of all Intellectual Property Collateral owned by Debtor
as well as the jurisdiction of registration of any such Intellectual Property Collateral. With respect to itself and its Intellectual
Property Collateral, the Debtor further represents and warrants that:

 

(i)          Except
as described on Exhibit C, the operation of the Debtor’s business and the Debtor’s use of the Intellectual
Property Collateral in connection therewith does not infringe, misappropriate, or dilute the intellectual property rights of any
third party.

 

(ii)         Except
as described on Exhibit C, (A) the Debtor is the exclusive owner of all right, title and interest in and to the Intellectual
Property Collateral purported to be owned by the Debtor, and (B) the Debtor has the right to use all Intellectual Property Collateral
subject only to the terms of the IP Agreements identified on Exhibit C, and applicable law or regulation.

 

(iii)        The
Intellectual Property Collateral set forth on Exhibit C hereto includes all of the patents, patent applications,
domain names, trademark registrations and applications, copyright registrations and applications and IP Agreements owned by the
Debtor and necessary for the conduct of the Debtor’s business as it is currently conducted and as it is currently contemplated
to be conducted in the future.

 

(iv)        The
patents, copyrights registrations and trademark registrations forming part of the Intellectual Property Collateral are subsisting
and have not been adjudged invalid or unenforceable in whole or part. The Debtor is not aware of any uses of any item of owned
and registered Intellectual Property Collateral that could reasonably be expected to lead to such item becoming invalid or unenforceable.

 

(v)         The
Debtor has made or performed all filings, recordings and other acts and has paid all required fees and taxes necessary to maintain
and protect its interest in each registration owned by the Debtor for each item of owned and registered Intellectual Property Collateral
in full force and effect and has made all filings necessary to date maintain the pendency of and to diligently prosecute the pending
applications for Intellectual Property Collateral. The Debtor has used proper statutory notice in connection with its use of each
such patent, registered trademark and copyright forming part of the Intellectual Property Collateral.

 

    	18

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

(vi)        No
claim, action, suit, investigation, litigation or proceeding is pending or has been asserted or threatened against the
Debtor (A) based upon or challenging or seeking to deny or restrict the Debtor’s rights in or use of any of the
Intellectual Property Collateral, (B) alleging that the Debtor’s rights in or use of the Intellectual Property
Collateral or that any services provided by, processes used by, or products manufactured or sold by, the Debtor infringe,
misappropriate, dilute, misuse or otherwise violate any patent, trademark, copyright or any other proprietary right of any
third party, or (C) alleging that the Intellectual Property Collateral is being licensed or sublicensed in material violation
or contravention of the terms of any license or other agreement to which the Debtor is a party. No Person is engaging in any
activity that infringes, misappropriates, dilutes, misuses or otherwise violates the Intellectual Property Collateral or the
Debtor’s rights in or use thereof. The Debtor has not granted any license, release, covenant not to sue, non-assertion
assurance, or other right to any third party with respect to any part of the Intellectual Property Collateral. The
consummation of the transactions contemplated by the Loan Agreement and the Note will not result in the termination or
impairment of any of the Intellectual Property Collateral.

 

(vii)       With
respect to each IP Agreement (and assuming the due authorization of and execution by any third parties thereto): (A) such IP Agreement
is valid and binding and in full force and effect; (B) such IP Agreement will not cease to be valid and binding and in full force
and effect on terms identical to those currently in effect as a result of the rights and interest granted herein, nor will the
grant of such rights and interest constitute a breach or default under such IP Agreement or otherwise give any party thereto a
right to terminate such IP Agreement; (C) the Debtor has not received any notice of termination or cancellation under such IP Agreement;
(D) the Debtor has not received any notice of a breach or default under such IP Agreement, which breach or default has not been
cured and (E) neither the Debtor nor any other party to such IP Agreement is in breach or default thereof in any material respect,
and no event has occurred that, with notice or lapse of time or both, would constitute such a breach or default by the Debtor or
any other party thereto or permit termination, modification or acceleration under such IP Agreement by any other party thereto
or by the Debtor.

 

(viii)      (A)
none of the trade secrets of the Debtor has been used, divulged or disclosed without authorization or legal compulsion or has been
misappropriated to the detriment of the Debtor for the benefit of any third party other than the Debtor; (B) no employee, independent
contractor or agent of the Debtor has misappropriated any trade secrets of any third party in the course of the performance of
his or her duties as an employee, independent contractor or agent of the Debtor; and (C) no employee, independent contractor or
agent of the Debtor is in material default or breach of any term of any employment agreement, non-disclosure agreement, assignment
of inventions agreement or similar agreement or contract with the Debtor relating in any way to the protection, ownership, development,
use or transfer of the Debtor’s Intellectual Property Collateral.

 

    	19

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

(ix)         No
Intellectual Property Collateral is subject to any outstanding consent, settlement, decree, order, injunction, judgment or ruling
restricting the use of any such Intellectual Property Collateral.

 

2.5           Continuing
Security Interest. The Debtor represents that it intends and understands that the security interest in the Collateral granted
hereby shall be a continuing security interest to secure payment of all Indebtedness. Notice of the continuing nature of this security
interest shall not be required to be stated on the face of any document representing any such Indebtedness, nor need such Indebtedness
otherwise be identified as being secured hereby.

 

ARTICLE 3

COVENANTS, AGREEMENTS, AND RIGHTS OF PARTIES

 

3.1           Secured
Party’s Right to Perform. The Secured Party may, but shall have no obligation to: discharge taxes, liens, security interests
or other encumbrances at any time levied or placed upon the Collateral; pay for the maintenance and preservation of the Collateral;
obtain and/or pay for insurance on the Collateral; and cause to be performed for and on behalf of the Debtor any obligations of
the Debtor hereunder which the Debtor has failed or refused to perform. The Debtor shall reimburse the Secured Party upon demand
for all payments made and all expenses incurred by the Secured Party pursuant to this Paragraph 3.1, with interest, from the date
paid or incurred by the Secured Party, at the highest rate permitted by law. Any amount realized by the Secured Party with respect
to the Collateral shall be applied on a pro rata basis towards the Debtor’s obligations to the Secured Party under the respective
Note.

 

3.2           Possession
of Third Party. Where any Collateral is in the possession of a third party, the Debtor will join with the Secured Party in
notifying the third party of the Secured Party’s security interest and obtaining an acknowledgment from the third party that
is holding such Collateral for the benefit of the Secured Party.

 

3.3           Control
Agreement. At the request of the Secured Party, the Debtor will cooperate with the Secured Party in obtaining a control agreement
in form and substance satisfactory to the Secured Party with respect to Collateral consisting of (i) deposit accounts; (ii) investment
property; (iii) letter of credit rights; and (iv) electronic chattel paper.

 

3.4           Chattel
Paper. The Debtor will not create any chattel paper without placing a legend on the chattel paper acceptable to the Secured
Party indicating that the Secured Party has a security interest therein.

 

3.5           Corporate
Changes. Until the Indebtedness is paid in full, the Debtor agrees that it will not change its Incorporation State or corporate
name without providing the Secured Party with 30-days’ prior written notice.

 

    	20

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

3.6           Adverse
Claims. The Debtor will promptly notify the Secured Party in writing, upon the Debtor’s learning thereof, of the taking
of any action by any party to levy upon, repossess or attach any Collateral.

 

3.7           Disposition;
Release. The Debtor may sell or transfer the Collateral to the extent such transfers consist of (a) sales of inventory in the
ordinary course of business, or (b) isolated sales or other dispositions of obsolete equipment, to the extent such equipment is
replaced by equipment of comparable value (each a “Permitted Disposition”). The Secured Party hereby covenants
that, at Debtors’ request, it will release its lien on any and all Collateral that is the subject of a Permitted Disposition.

 

3.8           Maintenance
of Intellectual Property Collateral. (i) With respect to each item of Intellectual Property Collateral, the Debtor agrees to
take, at its expense, all commercially reasonable steps, including, without limitation, in the U.S. Patent and Trademark Office,
the U.S. Copyright Office and any other U.S. or foreign governmental authority, to (A) maintain its registrations for such Intellectual
Property Collateral that is or becomes registered in full force and effect, and (B) pursue the prosecution and maintenance of each
such material patent, trademark, or copyright registration or application now pending in the United States and in each other appropriate
jurisdiction relating to such material Intellectual Property Collateral now or hereafter included in such Intellectual Property
Collateral of the Debtor, including, without limitation, the payment of required fees and taxes, the filing of responses to office
actions issued by the U.S. Patent and Trademark Office, the U.S. Copyright Office or other applicable U.S. or foreign governmental
authorities, the filing of applications for renewal or extension, the filing of affidavits under Sections 8, 9 and 15 of the U.S.
Trademark Act, the filing of divisional, continuation, continuation-in-part, reissue and renewal applications or extensions, the
payment of maintenance fees and the participation in interference, reexamination, opposition, cancellation, infringement and misappropriation
proceedings. The Debtor shall not, without the written consent of the Secured Party, discontinue use of or otherwise abandon any
Intellectual Property Collateral, or abandon any right to file an application for patent, trademark, or copyright.

 

(ii)         The
Debtor agrees promptly to notify the Secured Party if the Debtor becomes aware (A) that any item of Intellectual Property Collateral
may have become abandoned, placed in the public domain, invalid or unenforceable, or of any adverse determination or development
regarding the Debtor’s ownership of any Intellectual Property Collateral or its right to register the same or to keep and
maintain and enforce the same, or (B) of any adverse determination or the institution of any proceeding (including, without limitation,
the institution of any proceeding in the U.S. Patent and Trademark Office or any other U.S. or foreign office or any court) regarding
any item of Intellectual Property Collateral.

 

(iii)        In
the event that the Debtor becomes aware that any item of Intellectual Property Collateral is being infringed or misappropriated
by a third party, the Debtor shall promptly notify the Secured Party and shall take such actions, at its expense, as is necessary
to protect or enforce such Intellectual Property Collateral, including, without limitation, suing for infringement or misappropriation
and seeking an injunction against continued infringement or misappropriation.

 

    	21

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

(iv)        The
Debtor shall use proper statutory notice in connection with its use of each item of its registered Intellectual Property Collateral.
The Debtor shall not do or permit any act or knowingly omit to do any act whereby any of its owned and registered Intellectual
Property Collateral may lapse or become invalid or unenforceable or placed in the public domain.

 

(v)         The
Debtor shall take all steps to preserve and protect each item of its Intellectual Property Collateral, including, without limitation,
maintaining the quality of any and all products or services used or provided in connection with any of the Trademarks.

 

(vi)        The
Debtor agrees that this Agreement shall be recorded with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any
other governmental authorities as desired by the Secured Party and/or as necessary to give notice of and/or perfect the security
interest hereunder in such Intellectual Property Collateral.

 

(vii)       The
Debtor agrees that should it obtain an ownership interest in any item of the type forming part of the Intellectual Property Collateral
that is not on the date hereof a part of the Intellectual Property Collateral (“After-Acquired Intellectual Property”)
(i) the provisions of this Agreement shall automatically apply thereto, and (ii) any such After-Acquired Intellectual Property
and, in the case of trademarks, the goodwill symbolized thereby, shall automatically become part of the Intellectual Property Collateral
subject to the terms and conditions of this Agreement with respect thereto. At the end of each fiscal quarter of the Debtor, the
Debtor shall give prompt written notice to the Secured Party identifying the registered or applied for registration of After-Acquired
Intellectual Property, and the Debtor shall execute and deliver to the Secured Party with such written notice, or otherwise authenticate,
a supplement to this Agreement covering such registered or applied for After-Acquired Intellectual Property, which supplement the
Secured Party may record with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other governmental authorities
desired by the Secured Party and/or as necessary to perfect the security interest hereunder in such registered or applied for After-Acquired
Intellectual Property.

 

ARTICLE 4

EVENTS OF DEFAULT; REMEDIES UPON DEFAULT

 

4.1           Default
and Remedies. Upon the occurrence of an “Event of Default” as defined in the Loan Agreement, Secured Party shall
have the remedies provided in this Agreement.

 

    	22

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

Remedies Generally. Upon the occurrence
of an Event of Default, the Secured Party shall have all the rights and remedies of a secured party under the Florida Uniform Commercial
Code (“UCC”) and any other applicable laws, together with all rights and remedies provided for in this Security
Agreement. In addition thereto, upon the occurrence of an Event of Default, the Secured Party may require the Debtor to assemble
the Collateral and any proceeds thereof and deliver same to the Secured Party at a place to be designated by the Secured Party
which is reasonably convenient to both parties. The Debtor agrees that the Secured Party shall have the right to peacefully retake
any of the Collateral without judicial hearing prior to such retaking, including the right to enter upon the Debtor’s premises
for such purpose. The Secured Party has no obligation to clean up or otherwise prepare the Collateral for sale. All rights and
remedies of the Secured Party shall be cumulative and may be exercised from time to time. The Secured Party shall not be required
to make any demand upon, or pursue or exhaust any of its rights or remedies against the Debtor or any other obligor, guarantor,
pledgor or any other person with respect to the payment of the Indebtedness or to pursue or exhaust any of its rights or remedies
with respect to any Collateral therefor or any direct or indirect guarantee thereof. The Secured Party shall not be required to
marshal the Collateral or any guarantee of the Indebtedness or to resort to the Collateral or any such guarantee in any particular
order, and all of its rights hereunder or under the Loan Agreement or the Note shall be cumulative. To the extent it may lawfully
do so, the Debtor absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert
against the Secured Party, any valuation, stay, appraisement, extension, redemption or similar laws and any and all rights or defenses
it may have as a surety now or hereafter existing which, but for this provision, might be applicable to the sale of any Collateral
made under the judgment, order or decree of any court, or privately under the power of sale conferred by this Agreement, or otherwise.

 

4.2           Disposition
of Collateral; Deficiency. The Secured Party may dispose of the Collateral and proceeds in any commercially reasonable manner
and the Debtor shall be liable for any deficiency. If the Secured Party sells any of the Collateral upon credit, the Debtor will
be credited only with payments actually made by the purchaser, received by the Secured Party and applied to the Indebtedness as
provided below. In the event the purchaser fails to pay for the Collateral, the Secured Party may resell the Collateral and the
Debtor shall be credited with the proceeds of the sale.

 

4.3           Payment
of Expenses. The Debtor shall pay the Secured Party on demand all expenses, including reasonable attorneys’ fees and
legal expenses paid or incurred by the Secured Party in protecting and enforcing the rights of and obligations to the Secured Party
under any provision of this Agreement, including its right to take possession of the Collateral and proceeds thereof from the custody
of the Debtor or any trustee or receiver in bankruptcy or any other person. All such expenses shall become part of the Indebtedness
and shall bear interest from the date paid or incurred by the Secured Party at the highest rate permitted by law.

 

4.4           Notice
of Sale. Any notice required to be given by the Secured Party to the Debtor with respect to the sale or other disposition of
the Collateral shall be deemed reasonable if mailed, in the manner set forth in the Loan Agreement, at least seven (7) days before
the time of such sale or other disposition.

 

4.5           Additional
Undertakings Relating To Disposition of Intellectual Property Collateral. In the event of any sale, use or other disposition
of any of the Intellectual Property Collateral of the Debtor, the goodwill symbolized by any trademarks subject to such sale or
other disposition shall be included therein, and the Debtor shall supply to the Secured Party or its designee the Debtor’s
know-how and expertise relating to such Intellectual Property Collateral, and documents and things relating to any Intellectual
Property Collateral subject to such sale or other disposition, and the Debtor’s customer lists and other records and documents
relating to such Intellectual Property Collateral and to the manufacture, distribution, advertising and sale of products and services
of the Debtor that relate to such Intellectual Property Collateral.

 

    	23

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

4.6           Power
of Attorney. The Debtor hereby appoints Secured Party, its nominee, or any other person whom the Secured Party may designate
the Debtor’s attorney-in-fact, with full power and authority effective upon the occurrence of any Event of Default to ask,
demand, collect, receive, receipt for, sue for, compound and give acquittance for any and all sums or properties which may be or
become due, payable or distributable in respect of the Collateral or any part thereof, with full power to settle, adjust or compromise
any claim in respect of the Collateral as fully as the Debtor could itself do, to endorse or sign the Debtor’s name on any
assignments, stock powers or other instruments of transfer and on any checks, notes, acceptances, money orders, drafts, and any
other forms of payment or security in respect of the Collateral that may come into the Secured Party’s possession and on
all documents of satisfaction, discharge or receipt required or requested in connection therewith, and, in its reasonable discretion,
to file any claim or take any other action or proceeding, either in its own name or in the name of the Debtor, or otherwise, which
the Secured Party deems necessary to collect or otherwise realize upon all or any part of the Collateral, or effect a transfer
thereof, or which may be necessary to protect and preserve the right, title, and interest of the Secured Party in and to such Collateral
and the security intended to be afforded hereby. The Debtor hereby ratifies and approves all acts of any such attorney-in-fact
and agrees that neither Secured Party nor any such attorney-in-fact will be liable for any such acts or omissions nor for any error
of judgment or mistake of fact or law other than such person’s gross negligence or willful misconduct, as finally determined
by a court of competent jurisdiction. The Secured Party may file one or more financing statements disclosing its security interest
in all or any part of the Collateral, and any amendments or supplements thereto, on behalf of the Debtor without notice thereof
to the Debtor. The foregoing powers of attorney, being coupled with an interest, are irrevocable until the Maturity Date (as such
term is defined in the Amended and Restated Promissory Note- Line of Credit, dated as of the date hereof).

 

4.7           Use
of Collateral; License to Intellectual Property Collateral. Until the Secured Party is able to effect a sale, lease, or other
disposition of the Collateral, and so long as an Event of Default shall have occurred and be continuing, the Secured Party shall
have the right to hold or use the Collateral, or any part thereof, to the extent that it deems appropriate for the purpose of preserving
the Collateral or its value or for any other purpose deemed appropriate by the Secured Party. The Secured Party shall have no obligation
to the Debtor to maintain or preserve the rights of the Debtor as against third parties with respect to the Collateral while the
Collateral is in the possession of the Secured Party. So long as an Event of Default shall have occurred and be continuing, the
Secured Party may, if it so elects, seek the appointment of a receiver or keeper to take possession of the Collateral and to enforce
any of the Secured Party’s remedies, with respect to such appointment. the Secured Party shall apply the net proceeds of
any such collection, recovery, receipt, appropriation, realization or sale to the Indebtedness (i) first, to cover its costs and
expenses, (ii) second, to pay any and all interest that is due and owing to the Secured Party under the Loan Agreement and the
Note, (iii) third, to pay any and all principal that is due and owing to the Secured Party under the Loan Agreement and the Note,
and (iv) finally, the Secured Party shall account for the surplus, if any, to the Debtor. To the maximum extent permitted by applicable
law, the Debtor waives all claims, damages, and demands against the Secured Party arising out of the repossession, retention or
sale of the Collateral except such as arise out of the gross negligence or willful misconduct of the Secured Party, as finally
determined by a court of competent jurisdiction.

 

    	24

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

For the sole purpose
of enabling the Secured Party to exercise rights and remedies hereunder (including, without limitation, in order to take possession
of, hold, preserve, process, assemble, use, operate, or cause to be used or operated, prepare for sale, market for sale, sell or
otherwise dispose of the Collateral) at such time as the Secured Party shall be lawfully entitled to exercise such rights and remedies,
and so long as an Event of Default has occurred and is continuing, the Debtor hereby grants to the Secured Party, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other compensation to the Debtor) to use, license or sublicense
to third parties any and all of the Intellectual Property Collateral now owned or hereafter acquired by the Debtor, and wherever
the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or
stored and to all computer software used for the compilation or printout thereof.

 

4.8           Limitation
on the Secured Party’s Duty In Respect of the Collateral. The Secured Party shall use reasonable care with respect to
the Collateral in its possession or under its control. The Secured Party shall not have any other duty as to any of the Collateral
in its possession or control or in the possession or control of any agent or nominee of the Secured Party, or any income thereon
or as to the preservation of rights against prior parties or any other rights pertaining thereto.

 

4.9           Reinstatement.
This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against the
Debtor for liquidation or reorganization, should the Debtor become insolvent or make an assignment for the benefit of any creditor
or creditors or should a receiver or trustee be appointed for all or any significant part of the Debtor’s assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time payment of the Indebtedness, or any part thereof,
is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the
Indebtedness, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though
such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored
or returned, the Indebtedness shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.

 

    	25

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

ARTICLE 5

MISCELLANEOUS

 

5.1           Financing
Statements. The Debtor authorizes the Secured Party to file one or more financing statements and continuation statements, in
form satisfactory to the Secured Party, in all public offices, wherever filing is deemed by the Secured Party to be necessary or
desirable. Such financing statements may describe the Collateral as consisting of all assets of the Debtor. The Debtor shall pay
the cost of all such filings.

 

5.2           Manner
of Notice. All notices to the Debtor and the Secured Party shall be deemed to be effectively given when delivered in accordance
with the Loan Agreement.

 

5.3           No
Waiver. No delay on the part of the Secured Party in the exercise of any right or remedy shall operate as a waiver thereof
and no single or partial exercise by the Secured Party of any right or remedy shall preclude other or further exercise thereof
or the exercise of any other right or remedy.

 

5.4           Definitions;
Applicable Law. All terms used herein, unless otherwise defined or the context otherwise requires, shall have the meanings
given to them by the Loan Agreement, or, if not defined in the Loan Agreement, shall have the meanings given to them by the UCC,
which, together with other applicable laws of the state of Florida, shall govern this Agreement and the interpretation thereof.

 

5.5           Captions.
The captions to the various Paragraphs hereof have been inserted for convenience only and shall not be deemed a part of this Agreement.

 

5.6           Binding
Effect. This Agreement shall be binding upon and inure to the benefit of the Secured Party and the Debtor and their respective
successors and assigns, including all persons who become bound as a Debtor under this Agreement.

 

5.7           Entire
Agreement; Amendment. This Agreement, together with the Loan Agreement and the Note, sets forth the entire agreement of the
parties as to the subject matter hereof and may not be amended except in writing and executed by the parties hereto. In the event
of any conflict between this Agreement and the Loan Agreement, this Agreement shall prevail.

 

5.8           Severability.
In the event any provision hereof is in conflict with any statute or rule of law in the state of Florida or is otherwise unenforceable
for any reason whatsoever, then such provision shall be deemed severable from or enforceable to the maximum extent permitted by
law, as the case may be, and the same shall not invalidate any other provisions hereof.

 

5.9           Counterparts.
This Agreement may be executed via manual telecopy, in multiple counterparts and all such counterparts shall collectively constitute
an original agreement. No party hereto will raise the use of a facsimile machine or pdf attachment to email to deliver a signature
to this Agreement or the fact that any signature was transmitted or communicated through the use of facsimile machine or pdf attachment
to email as a defense to the formation or enforceability of this Note and each party forever waives any such defense.

 

*****

 

    	26

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

IN WITNESS WHEREOF,
the Debtor has executed this Security Agreement as of the day and year first above written.

 

	 	xG Technology, Inc.
	 	By:	/s/ James Woodyatt
	 	Name:	James Woodyatt
	 	Title	Director

 

Agreed and Accepted By:

 

MB Technology Holdings, LLC

 

	By:	/s/ George F. Schmitt
	Name:	George F. Schmitt
	Title	CEO

 

    	27

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

EXHIBIT A

Existing Liens and Financing Statements

 

Security Agreement dated as of December
22, 2010 and effective as of July 6, 2010 between the Debtor and Secured Party

 

Security Agreement dated as of December
22, 2010 and effective as of October 8, 2010 between the Debtor and Secured Party

 

UCC Financing Statement filed by the Debtor
with the Delaware Secretary of State on December 23, 2010

 

    	28

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

EXHIBIT B

 

Chief Executive Office, State of Organization,
FEIN, Organizational ID

 

	Chief Executive Office:	7771 W. Oakland Park Boulevard, Suite 231, Sunrise, FL 33351
	 	 
	State of Organization:	Delaware

 

	Federal Employer Identification Number:	20-585-6795

 

	Organizational ID:	3562449

 

    	29

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

EXHIBIT C

 

Intellectual Property Collateral

 

[To be completed]

 

EXHIBIT "B"

 

Security Agreement dated as of December
22, 2010 and effective as of July 6, 2010 between the Borrower and Lender

 

Security Agreement dated as of December
22, 2010 and effective as of October 8, 2010 between the Borrower and Lender

 

UCC Financing Statement filed by the Debtor
with the Delaware Secretary of State on December 23, 2010

 

    	30

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

EXHIBIT "C"

 

Schedule of Litigation

 

1.          xG
Technology, Inc. v. Spartan Mullen ET CIE, S.A. et al

 

    	31

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

EXHIBIT "D"

 

NONE

 

    	32

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

To:

xG Technology, Inc.

240 S. Pineapple Avenue, Suite 701

Sarasota, FL 34236

 

NOTICE OF CONVERSION

 

The undersigned hereby
elects to convert all of the Advances, amounting in aggregate to $10,000,000 in principal amount, made under the Promissory Note
– Line Of Credit issued by xG TECHNOLOGY, INC.          (the “Issuer”)
in favor of MB TECHNOLOGY HOLDINGS, LCC and effective as of February 7, 2011 into shares of $0.01 each in the Common Stock of the
Issuer (each a “Share”) according to the conditions set forth in such Note, as of the date written below.

 

	Effective Date of Conversion:	June 22, 2011

 

Conversion Price: $0.25 per Share

 

Shares To Be Delivered: Forty Million (40,000,000)

 

Address for Registration Of Shares: 240 S. Pineapple Avenue,
Suite 701, Sarasota, FL 34236

 

	Signature:	/s/ Roger G. Branton
	 	 
	Print Name:	Roger G. Branton

 

For and on behalf of MB TECHNOLOGY HOLDINGS, LLC.

 

    	33

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

LOAN FACILITY

 

LOAN FACILITY dated and effective as of
May 19, 2011, among xG Technology, Inc., a Delaware corporation (the “Borrower”) and MB Technology Holdings,
LLC (the “Lender”).

 

BACKGROUND

 

Lender has established for Borrower a certain
credit facility, in the nature of a fifteen million US dollar ($15,000,000) line of credit (“Loan”), as evidenced by
Borrower’s Promissory Note – Line of Credit, dated and effective as of May 19, 2011 in the available principal
amount of fifteen million US dollars ($15,000,000) (said Promissory Note – Line of Credit, together with any and all renewals,
replacements, amendments or substitutions thereof or therefor, being hereinafter referred to as the “Note”).

 

NOW, THEREFORE, in consideration of the
Loan and for other good and valuable consideration and intending to be legally bound, Borrower hereby agrees with Lender as follows:

 

SECTION 1. Granting of Loans. Lender
hereby agrees to make available on an uncommitted basis at the discretion of Lender from time to time, until the Maturity Date,
the Advances requested by the Borrower hereunder, or pursuant to the Note; provided however, that (a) in no event shall the Advances
exceed the Borrowing Limit and (b) Lender has no obligation to lend Borrower any amounts hereunder and the decision to lend such
money lies in the sole and absolute discretion of Lender. In consideration for the making of such Loan, the Borrower hereby agrees
to grant Lender a security interest in the Assets pursuant to the terms and conditions set forth in that certain Security Agreement,
dated as of May 19, 2011 and effective as of May 19, 2011 between the Borrower and the Lender. All payments of the
Loan and Advances made hereunder shall be made in accordance with the provisions of the Note and shall mature on the Maturity Date.

 

SECTION 2. Representations and Warranties.
Borrower represents and warrants to Lender as follows:

 

		(a)	Power and Authority. Borrower has the right
and power and is duly authorized and empowered to enter into, execute, deliver and perform this Loan Facility and each of the
Related Agreements to which it is a party. The execution, delivery and performance of this Loan Facility and all Related Agreements
has been duly authorized by all necessary corporate action and does not (i) require any consent or approval of the shareholders
of Borrower; (ii) contravene the charter, articles of incorporation, memorandum and articles of association, limited liability
agreement or by-laws of Borrower; (iii) violate, or cause Borrower to be in default under any provision of any Law, rule, regulations,
order, writ, judgment, injunction, decree, determination or award in effect having applicability to Borrower; or (iv) result in
a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument
to which Borrower is a party or by which it or its properties may be bound or affected.

 

    	34

    	 

    

  

STRICTLY PRIVATE & CONVIDENTIAL

 

		(b)	Legally Enforceable Agreements. This Loan Facility
and each Related Agreement is a legal, valid and binding obligation of Borrower, as applicable, and is enforceable against Borrower,
as applicable, in accordance with its terms, except as may be affected by (i) the effect of bankruptcy, insolvency, reorganization,
moratorium, arrangement, fraudulent conveyance, receivership and other laws now or hereafter in effect affecting the enforcement
of creditors’ rights or (ii) the enforceability of equitable remedies or the application of equitable principles (whether
considered in an action at law or equity).

 

		(c)	Assets.  All of Borrower’s Assets are
free and clear of any and all liens, security interest, mortgages and other encumbrances, restrictions and charges, except as
listed on Exhibit “B” attached hereto.

 

		(d)	Consents. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or regulatory body is required for the execution, delivery
or performance by Borrower of this Loan Facility or any Related Agreement.

 

		(e)	Outstanding Litigation. Except as set forth
in Exhibit "C" attached hereto, there are no suits in law or equity or proceedings before any governmental instrumentality
or agency against Borrower now pending, nor is there to the knowledge of Borrower threatened or likely any litigation nor any
proceedings against or affecting Borrower, the outcome of which might materially and adversely affect the Assets or operations
of Borrower, or its financial condition or business.

 

		(f)	Adverse Change. Except as set forth in Exhibit
"D" attached hereto, there has been no material adverse change in the financial condition, business, operation or Assets
of the Borrower from the date hereof.

 

		(g)	Compliance With Applicable Laws. Borrower and
its respective business and operations are in compliance with all applicable Laws.

 

    	35

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

SECTION 3. Covenants. Borrower agrees
with and covenants to Lender as follows:

 

		(a)	From and after the date of this Agreement, Borrower
will not incur any Indebtedness of any nature whatsoever, other than (i) the indebtedness to Lender

 

			as evidenced by this Loan Facility in favor of Lender, (ii) current trade indebtedness
                                                                              incurred in the ordinary course of business and (iii) purchase money indebtedness for equipment in favor of the vendor or
                                                                              financier thereof limited to the cost of such equipment.

 

		(b)	Within ninety (90) days after the close of each fiscal
year and each fiscal quarter, Borrower shall provide Lender with Borrower's financial statements prepared in accordance with IFRS,
said annual financial statements to be audited without a disclaimer of an, or an adverse or qualified, opinion, by the independent
certified public accounting firm regularly retained by Borrower, and said quarterly financial statements to be certified by Borrower’s
chief financial officer.

 

		(c)	Borrower, at its own expense, shall maintain adequate
property, liability and other insurance during the term of the Loan in such amounts against such risks as shall be adequate for
the nature of Borrower's business as now or hereafter conducted.

 

		(d)	Borrower shall operate its businesses in accordance
with current practices and shall not sell, assign or otherwise dispose of or transfer any of its Assets, other than sales of inventory
in the ordinary course of business and other than as set forth in Exhibit "D" hereto.

 

		(e)	Borrower will not permit, create or suffer to exist
any lien, security interest or other encumbrance on any of its Assets, other than (i) existing liens as set forth on Exhibit "B"
hereto; (ii) purchase money lines on equipment securing purchase money indebtedness permitted by Section 3(a) hereof; (iii) liens
relating to judgments to the extent permitted by Section 4(h) hereof; (iv) liens for taxes or assessments either (x) not delinquent
or (y) contested in good faith by appropriate proceedings for which an adequate reserve has been made in accordance with IFRS;
(v) liens incurred or pledges and deposits in connection with workmen's compensation, unemployment compensation and other social
security benefits, or securing the performance bids, tenders, leases, contracts, progress payments, surety, appeal and performance
bonds and other obligations of like nature, incurred in the ordinary course of business; (vi) liens imposed by law incurred in
good faith in the ordinary course of business; (vii) pledges of or liens on raw materials or on manufactured products as security
for drafts or bills of exchange in connection with the importation of such raw materials or manufactured products in the ordinary
course of business; (viii) liens encumbering property under construction arising from progress or partial payments by a customer
of Borrower relating to such property or assets; (x) liens incurred by Borrower in the ordinary course of business in favor of
suppliers who retain title to goods supplied by them until such goods are paid for; and (xi) liens of leases existing on the date
of this Agreement.

 

    	36

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

SECTION 4. Events of Default. The
occurrence of each of the following events shall constitute an “Event of Default”:

 

		(a)	Borrower fails to pay to Lender within thirty (30)
business days when due any payment payable hereunder or under any Related Agreement. However, Lender may extend, at its sole discretion,
Borrower’s due date so long as interest continues to accrue and such event will not be considered an Event of Default.

 

		(b)	Borrower fails to observe or perform any other obligation,
agreement or covenant to be observed or performed by them hereunder or under any Related Agreement, and such failure is not cured
within thirty (30) business days after written notice given by Lender to Borrower specifying such failure.

 

		(c)	Any financial statement, representation, warranty,
statement or certificate made or furnished by Borrower to Lender in connection with this Loan Agreement, or an inducement to Lender
to enter into this Loan Agreement, or in any other instrument or document to be delivered hereunder to Lender, is materially false,
incorrect, or incomplete when made.

 

		(d)	Borrower becomes insolvent or generally fails to pay,
or admits its inability to pay, debts as they become due or makes a general assignment for the benefit of any of its creditors.

 

		(e)	Borrower applies for, consents to, or acquiesces in
the appointment of, a trustee, receiver, administrator, administrative receiver or other custodian for Borrower or any of the
property of Borrower, or, in the absence of such application, consent or acquiescence, a trustee, receiver, administrator, administrative
receiver or other custodian is appointed for Borrower or for a substantial part of the property of Borrower and is not discharged
within sixty (60) days.

 

		(f)	Any bankruptcy, reorganization, liquidation, dissolution
or other case and proceeding under any bankruptcy or insolvency law is commenced in respect of Borrower, and if such case or proceeding
is not commenced by Borrower, it is consented to or acquiesced in by Borrower or remains for sixty (60) days un-dismissed.

 

		(g)	Borrower discontinues its business operations or materially
changes the nature of its business.

 

		(h)	Borrower shall suffer final judgment(s) for the payment
of money aggregating in excess of $50,000 for Borrower collectively and shall not discharge, satisfy or stay the same within thirty
(30) business days.

 

    	37

    	 

    
 

STRICTLY PRIVATE & CONVIDENTIAL

 

		(i)	The occurrence of an Event of Default under any Related
Agreement, including without limitation under the Promissory Note.

 

		(j)	The occurrence of any event of default under any present
or future indebtedness or obligations between Borrower and third parties, which indebtedness or obligations exceed in the aggregate
$50,000.

 

SECTION 5. Remedies. Upon the occurrence
of an Event of Default, then in addition to all rights and remedies of Lender set forth in this Agreement, any Related Agreement
or pursuant to applicable law, the Lender may (i) immediately suspend or terminate all or any portion of Lender’s obligation
to make additional Advances under the Note, (ii) exercise its rights to foreclose on any of the Assets as set forth in the Security
Agreement, and/or (iii) declare the entire principal balance of the obligations due hereunder, plus accrued unpaid interest thereon,
as well as any and all other charges provided for in this Loan Facility or any other monies due under any other instrument document
or agreement between Lender and Borrower, immediately due and payable, without further notice or demand by Lender.

 

SECTION 6. Miscellaneous.

 

		(c)	Borrower shall upon demand pay to Lender any and all
reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, which Lender
may incur in connection with the exercise or enforcement of any of the rights of Lender hereunder and/or under any Related Agreement.

 

		(b)	This Loan Facility shall be governed by and construed
in accordance with the substantive laws of the State of Florida. Borrower irrevocably agrees to service of process by certified
mail, return receipt requested to the address of Borrower as set forth herein.

 

		(c)	Lender shall have the right, through no more than
two representatives or agents at any one time and, prior to the declaration of an Event of Default, no more than one time in any
three month period (with no limitation, however, after the declaration of an Event of Default), during reasonable business hours,
upon thirty (30) business days prior notice, to audit and conduct examinations of Borrower's books and records and accounts receivable,
and Borrower shall be liable to pay Lender all reasonable costs and expenses incurred by Lender in connection therewith, but not
to exceed $2,500 per audit.

 

		(d)	No amendment or waiver of any provision of this Loan
Facility or any Related Agreement or consent to any departure by Borrower herefrom shall in any event be effective unless the
same shall be in writing and signed by Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose
for which given.

 

    	38

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

			

 

		(e)	All notices required or permitted hereby shall be
in writing and shall be effective when sent either by telecopy, fax or e-mail, recognized overnight courier, registered return
receipt mail or hand delivered, in each case addressed as follows:

 

	 	 	If to Lender:
	 	 	 
	 	 	MB Technology Holdings, LLC
	 	 	240 S. Pineapple Ave.
	 	 	Suite 701
	 	 	Sarasota, FL 34236
	 	 	 
	 	 	If to Borrower:
	 	 	 
	 	 	xG Technology, Inc.
	 	 	7771 W. Oakland Park Boulevard
	 	 	Suite 231
	 	 	Sunrise, FL 33351

 

			For purposes of this Agreement and any of the Related Agreements, notices shall be deemed to be
given (i) if delivered in person, when delivered, (ii) if delivered by telecopy, fax or e-mail on the date of transmission, (iii)
if delivered by overnight courier, one business day after delivery to the courier or (iv) if delivered by U.S. mail, three (3)
business days after deposit, with postage prepaid.

 

		(f)	This Agreement shall be binding upon the parties and
their respective successors and assigns. Lender may assign the Loan and all of its rights thereunder and under this Agreement
and all Related Agreements, provided that no such assignment will, without Borrower's prior written consent, be to a person or
entity who Lender has actual knowledge is actively engaged in a business which is in competition with that of the Borrower. Borrower
may not assign any of its rights or obligations under this agreement or any Related Agreement without the prior written consent
of Lender, which may be withheld in its sole discretion.

 

		(g)	No failure or delay on the part of the Lender to exercise,
nor any partial exercise of, any power, right or privilege hereunder or under any Related Agreement shall impair such power, right
or privilege or be construed to be a waiver of any Event of Default. All rights and remedies existing hereunder or any other Related
Agreement are cumulative to and not exclusive of any rights or remedies otherwise available.

 

    	39

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

		(h)	The invalidity, illegality, or unenforceability in
any jurisdiction of any provision under this Agreement or any Related Agreement shall not affect or impair the remaining provisions
in this Agreement or any Related Agreement.

 

		(i)	This Agreement may be executed via manual telecopy, in multiple counterparts and all such counterparts
shall collectively constitute an original agreement. No party hereto will raise the use of a facsimile machine or pdf attachment
to e-mail to deliver a signature to this Agreement or the fact that any signature was transmitted or communicated through the use
of facsimile machine or pdf attachment to e-mail as a defense to the formation or enforceability of this Agreement and each party
forever waives any such defense.

 

		(j)	All references to dollars or “$” in this Agreement or any Related Agreement shall refer
to U.S. Dollars.

 

		(k)	From time to time, as and when requested by any party
hereto any other party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and
shall take, or cause to be taken, all such further actions as the requesting party may reasonably deem necessary or desirable
to evidence and effectuate the transactions contemplated by this Agreement. Furthermore, Borrower hereby authorizes Lender to
take all such actions that may be necessary to perfect Lender’s security interest in the Assets, including, but not limited
to, the filing of any UCC financing statements against the Assets.

 

		(l)	Any legal action, suit or proceeding arising out of
or relating to this Agreement, any Related Agreement or the transactions contemplated hereby shall be instituted exclusively in
the courts of the State of Florida, located in Broward County or, provided subject matter jurisdiction exists, in the United States
Federal Court for the Southern District of Florida, and each party hereto agrees not to assert as a defense in any such action,
suit or proceeding, any claim that it is not subject personally to the jurisdiction of such courts, that its property is exempt
or immune from attachment or execution, that the action, suit or proceeding is brought in an inconvenient forum, that the venue
of the action, suit or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by
such court. Each party further irrevocably submits to the exclusive jurisdiction of such courts in any such action, suit or proceeding,
and waives a trial by jury.

 

SECTION 7. Definitions. For purposes
hereof, the following terms shall have the following meanings:

 

		(e)	“Advances” shall have the meaning ascribed
to such term in the Note.

 

    	40

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

		(f)	“Assets” shall mean any and all of the
assets and properties of the Borrower, real or personal, tangible or intangible, and whether now owned or hereafter acquired.

 

		(g)	“Borrowing Limit” shall have the meaning
ascribed to such term in the Note.

 

		(h)	“Event of Default” shall mean any of the
events specified in Section 4 hereof.

 

		(e)	“IFRS” shall mean International Financial
Reporting Standards, consistently applied.

 

		(f)	“Indebtedness” shall mean all items of
indebtedness, obligations or liabilities, due or to become due, liquidated or unliquidated, direct or contingent, joint or several,
of any nature whatsoever and out of whatever transaction arising, including, without limitation:

 

			(i)          all indebtedness guaranteed, directly
or indirectly, in any manner, or endorsed (other than for collection deposit in the ordinary course of business) or discounted
with recourse;

 

			(ii)         all indebtedness in effect guaranteed,
directly or indirectly, through agreements, contingent or otherwise to (1) purchase such indebtedness, (2) purchase, sell or lease
(as lessee or lessor) property, products, materials or supplies, or to purchase or sell services, primarily for the purpose of
enabling any debtor to make payment of such indebtedness against loss, or (3) supply funds to or in any manner invest in any debtor;

 

			(iii)        all indebtedness secured by (or for which
the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance upon property owned or acquired subject to such mortgage, deed of
trust, pledge, lien, security interest, charge or encumbrance, whether or not the liabilities secured thereby have been assumed;
and

 

			(iv)        all indebtedness incurred as the lessee of
goods or services under leases that, in accordance with IFRS, as applicable, should be reflected on the lessee’s balance
sheet.

 

		(g)	“Laws” shall mean all ordinances, statutes,
rules, regulations, orders, injunctions, writs or decrees of any government or political subdivision or agency thereof or any
court or similar entity established by any thereof.

 

		(h)	“Maturity Date” shall have the meaning
ascribed to such term in the Note.

 

    	41

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

		(i)	“Related Agreements” shall mean each of
the agreements and documents specified in Exhibit “A” attached hereto, the terms of each of which are incorporated
herein by reference.

 

IN WITNESS WHEREOF, the parties have caused
this Loan Facility to be duly executed and delivered by its officers thereunto duly authorized as of the date first written above.

 

	BORROWER	 	 	LENDER	 
	 	 	 	 	 
	By: 	/s/: John C. Coleman	 	By: 	/s/: George F. Schmitt
	 	 	 	 	 
	Name: 	John C. Coleman	 	Name: 	George F. Schmitt
	 	 	 	 	 
	Title: 	CEO	 	Title: 	CEO
	 	 	 	 	 
	Attest: 	/s/: Roger G. Branton	 	Attest: 	/s/: Roger G. Branton

  

    	42

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

EXHIBIT "A"

 

Related Agreements

 

Promissory Note – Line of Credit,
dated as of May 19, 2011 and effective as of May 19, 2011, between the Borrower and Lender.

 

Security Agreement, dated as of May 19,
2011 and effective as of May 19, 2011, between the Borrower and Lender.

 

    	43

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

PROMISSORY NOTE - LINE OF CREDIT 

 

	$15,000,000 U.S. Dollars	Effective as of May 19, 2011

 

FOR VALUE RECEIVED, intending to be legally
bound, xG Technology, Inc., a Delaware corporation (“Borrower”), with offices at 7771 W. Oakland Park Boulevard, Suite
231, Sunrise, FL  33351, promises to pay to the order of MB Technology Holdings, LLC (the “Lender”) and its successors
and assigns, at 240 S. Pineapple Avenue, Suite 701, Sarasota, Florida or such other place or places as the holder of this Note
(this “Note”) from time to time may designate in writing, the principal amount of all Advances (as defined below)
in the manner set forth in Section 2 below, together with the interest in like lawful money at the interest rate set forth
in Section 3 below and any fees due hereunder.

 

14.         Advances.
From time to time, Borrower shall be entitled to borrow (each an “Advance” and collectively the “Advances”)
from Lender a principal amount or amounts to the extent that the sum of all principal amounts advanced to Borrower hereunder does
not, at any time, exceed Fifteen Million Dollars ($15,000,000) (subject to increase by prior written agreement of the Lender at
its entire discretion) (the “Borrowing Limit”). Lender shall make such requested Advance, so long as (i) the
Borrowing Limit would not be so exceeded and (ii) there has not occurred an Event of Default (as such term is defined in that
certain Loan Facility, dated as of May 19, 2011 (the “Loan Agreement”)) or an event which, with notice or lapse
of time or both, would constitute an Event of Default; provided further that Lender has no obligation to lend Borrower
any amounts hereunder and the decision to lend such money lies in the sole and absolute discretion of Lender. The Advances shall
be reflected on the “Schedule of Advances” attached to this Note, as such schedule may be amended from time to time,
provided however that in the event that any Advance is not reflected on the “Schedule of Advances” attached hereto,
the books and records of the Lender shall constitute evidence of any Advances made hereunder.

 

15.         Payments.
Unless accelerated pursuant to the terms hereof, no payments of any principal amount shall be required under this Note until the
earlier of (a) the fifth (5th) year anniversary of the date first set forth on the top of this Note (subject to extension by agreement
in writing between the Borrower and Lender), (b) on demand, two (2) days following Lender’s written notice to Borrower,
or (c) the occurrence of an Event of Default (the “Maturity Date”), at which time the entire principal balance
of this Note, together with any and all accrued unpaid interest thereon, shall be due and payable in full. Except as otherwise
required by law or by other provisions of this Note, payments received by Lender hereunder shall be applied first against expenses
and indemnities, next against interest accrued under this Note, and next in reduction of the outstanding principal balance of
this Note. Borrower shall pay all amounts owing under this Note in full when due without set-off, counterclaim, deduction or withholding
for any reason whatsoever.

 

 

    	44

    	 

    

  

STRICTLY PRIVATE & CONVIDENTIAL

  

16.         Interest
Rate. The unpaid principal amount for the time being outstanding under this Note shall bear interest at a rate equal to
eight percent (8%) per annum (the “Base Rate”). Interest on the unpaid principal balance of this Note shall
be due and payable commencing on the six month anniversary of the issue date of this Note and shall be payable each six month
anniversary thereafter until the Maturity Date. Interest shall be computed on the basis of the actual number of days elapsed and
a year of 365 days. The interest charged shall be non-compounding interest, and accrued interest shall not be added to principal.
Upon the occurrence and during the continuance of an Event of Default the principal amount of this Note shall bear interest at
a rate equal to the Base Rate plus two percent (2%). Interest may be payable by the Borrower at its option either in cash or in
shares of $0.01 each in the Common Stock of the Borrower (“Shares”). In the event that the interest is paid in Shares,
the price per Share for purposes of such payment shall be equal to the average of the closing price per Share for the five trading
days prior to the date on which such interest is payable.

 

17.         Conversion
Right. This Note shall be convertible (in whole or in part), at Lender’s sole option, at any time prior to the Maturity
Date, into new Shares at $0.75 per new Share, subject to, conditional upon and only with effect from, the publication of the Company’s
2010 annual results and the Company otherwise not being in a close period for the purposes of the AIM Rules for Companies and
subject further to such grant and exercise of such conversion right not triggering the mandatory take-over provisions in the Company’s
Amended and Restated Certificate of Incorporation.

 

18.         Acceleration
Upon Event of Default. The entire unpaid principal balance of and all interest accrued under this Note shall become due
and payable immediately upon the occurrence of any Event of Default, without notice or demand.

 

19.         Maximum
Interest Rate. Notwithstanding anything in this Note to the contrary, if the interest rate set forth in Section 3 of this
Note exceeds the maximum rate of interest permitted by law during any period of this Note, the interest rate shall be an amount
equal to the maximum interest rate permitted by law during such period of this Note. For purposes of this Note, the maximum rate
permitted by law shall mean the maximum rate of interest that may be contracted for, charged, taken, reserved or received under
the laws of the State of Florida or applicable federal law (whichever permits the higher rate) after taking into account, to the
extent required by applicable law, any and all relevant payments or charges.

 

20.         Governing
Law. This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of Florida without
regard to its conflict of laws provisions.

  

21.         Collection
Expense. Borrower agrees to pay, in addition to all the sums payable hereunder, the Lender’s reasonable expenses
of collection, including without limitation, court fees and reasonable attorneys’ fees and disbursements, whether or not
suit is brought and through all appeals.

  

22.         Prepayment;
Facility Fee. Borrower may at any time upon two (2) days' prior written notice to Lender, prepay the entire unpaid principal
amount of this Note, or any part thereof, provided that interest accrued on the principal being prepaid shall be payable together
with the principal so prepaid. Furthermore, at the time of repayment, whether or not such repayment occurs prior to the Maturity
Date, Borrower is required to pay a facility fee equal to two percent (2%) of the Borrowing Limit.

 

    	45

    	 

    

 

STRICTLY PRIVATE &
CONVIDENTIAL

 

23.         Security.
This Note is executed in conjunction with the Loan Agreement and that certain Security Agreement, dated as of the date
hereof by and between the Borrower and the Lender (the “Security Agreement”) and is secured by the liens and
security interests created thereunder with respect to the collateral set forth therein.

  

24.         Waiver
of Defenses. The Borrower, expressly waives demand and presentment for payment, notice of nonpayment, protest, notice
of protest, notice of dishonor, notice of intent to accelerate the maturity hereof, notice of the acceleration of the maturity
hereof, bringing of suit and diligence in taking any action to collect amounts called for hereunder and in the handling of securities
at any time existing in connection herewith; Borrower is directly and primarily liable for the payment of all sums owing and to
be owing hereon, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any
amount called for hereunder or in connection with any right, lien, interest or property at any and all times had or existing as
security for any amount called for hereunder.

  

25.         Miscellaneous.
Time shall be of the essence with respect to the terms of this Note. Any notice required to be given to Borrower shall
be delivered to the last address provided to the Lender by the Borrower (or, if none, to Borrower’s address as it appears
on the signature page of this Note). Any notice shall be deemed to have been duly given when delivered in accordance with the
Loan Agreement. All of the terms of this Note shall inure to the benefit of Lender and its successors and assigns and shall be
binding upon Borrower and its successors and assigns. Lender may assign this Note and any of its rights hereunder, under the Loan
Agreement or under the Security Agreement, provided that no such assignment will, without Borrower’s prior written consent,
be to a person or entity who Lender has actual knowledge is actively engaged in a business that is in competition with that of
Borrower. Borrower may not assign this Note, or any of its rights or obligations hereunder without the prior written consent of
Lender, which may be withheld in its sole discretion. This Note may be executed via manual telecopy, in multiple counterparts
and all such counterparts shall collectively constitute an original Note. No party hereto will raise the use of a facsimile machine
or pdf attachment to email to deliver a signature to this Note or the fact that any signature was transmitted or communicated
through the use of facsimile machine or pdf attachment to email as a defense to the formation or enforceability of this Note and
each party forever waives any such defense. The provisions of this Note are severable and the invalidity or unenforceability of
any provision hereof shall not alter or impair the remaining provisions of this Note. Any failure of Lender to exercise any right
under this Note shall not be construed as a waiver to exercise the same or any other right hereunder. All references to dollar
amounts in this Note shall be deemed references to U.S. Dollars. In the event of any conflict between this Note and the Loan Agreement
or the Security Agreement, the Loan Agreement shall control.

  

IN WITNESS WHEREOF, the undersigned hereby executes this Promissory
Note - Line of Credit as of the date first above written.

 

    	46

    	 

    

 

STRICTLY PRIVATE &
CONVIDENTIAL

 

	 	xG Technology, Inc.
	 	 	 
	 	By:	/s/ John C. Coleman
	 	Name:	John C. Coleman
	 	Title	CEO
	 	Address:  	
        7771 W. Oakland Park Boulevard

        Suite 231

        Sunrise, FL  33351

 

Accepted by:

 

MB Technology Holdings, LLC

 

	By:	/s/ George F. Schmitt
	Name:	George F. Schmitt
	Title	CEO

  

    	47

    	 

    

 

 STRICTLY PRIVATE &
CONVIDENTIAL

 

Schedule of Advances

 

	Date of Advance	 	
        Principal Amount of 

        Advance
	 	
        Unpaid Principal Amount of

        All Advances

	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

 

    	48

    	 

    

 

STRICTLY PRIVATE &
CONVIDENTIAL 

 

SECURITY
AGREEMENT

 

THIS SECURITY AGREEMENT
is dated and effective as of May 19, 2011 by xG Technology, Inc., a Delaware corporation (the “Debtor”), in
favor of MB Technology Holdings, LLC, a Delaware limited liability company (the “Secured Party”).

 

RECITALS:

 

A.           Pursuant
to that certain Loan Facility, dated as of May 19, 2011, between the Debtor and the Secured Party (the “Loan Agreement”)
and that Promissory Note - Line of Credit, effective as of May 19, 2011, made by the Debtor in favor of the Secured Party (the
“Note”), Debtor has agreed to borrow from the Secured Party the principal amount of up to Fifteen Million Dollars
($15,000,000) and the Secured Party has agreed to loan to Debtor the principal amount of up to Fifteen Million Dollars ($15,000,000).

 

B.           In
order to induce the Secured Party to loan funds to the Debtor, and as security for the repayment of the Debtor’s indebtedness,
liabilities and obligations from time to time owed under the Note, the Debtor has agreed to hereby grant the Secured Party a continuing
security interest in all of the assets of the Debtor, wherever located and now owned or hereafter acquired.

 

ARTICLE 6

GRANT OF SECURITY INTEREST

 

6.1           Grant
of Security Interest. To secure the payment of (i) the Debtor’s obligations under the terms of the Note and the Loan
Agreement, and (ii) all costs and expenses paid or incurred by the Secured Party in the exercise, preservation or enforcement of
any of the rights, powers or remedies of the Secured Party, or in the enforcement of the obligations of Debtor, under the terms
of this Agreement or the Note or the Loan Agreement (collectively, the “Indebtedness”), the Debtor grants the
Secured Party a security interest in the following personal property of the Debtor, wherever located and whether now owned or hereafter
acquired (collectively, the “Collateral”):

 

		(n)	accounts, including health care insurance receivables;

		(o)	chattel paper;

		(p)	inventory;

		(q)	equipment;

		(r)	instruments, including promissory notes;

		(s)	investment property;

		(t)	documents;

		(u)	deposit accounts;

		(v)	letter of credit rights;

		(w)	general intangibles, including payment intangibles;

 

 

 

 

    	49

    	 

    

 

STRICTLY PRIVATE &
CONVIDENTIAL

  

		(x)	supporting obligations;

		(y)	Intellectual Property Collateral; and

		(z)	to the extent not listed above as original Collateral, proceeds and products of the foregoing.

   

For purposes of the
foregoing, the term “Intellectual Property Collateral” shall mean all right, title and interest of the Debtor
in and to any intellectual property rights and any tangible embodiments thereof, including, without limitation, any of the following
anywhere in the world: (i) all copyright rights, copyright applications, copyright registrations and like protections in each work
or authorship and derivative work thereof, whether published or unpublished, whether registered or unregistered, and whether or
not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held, (ii) all patents, patent applications,
invention rights, industrial design rights and like protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same, (iii) any trademark, service mark, domain name, trade dress,
product design, packaging design or configuration or other source indicia rights, whether registered or not, applications to register
and registrations of the same and like protections, all common law rights and the entire goodwill of the business of the Debtor
connected with and symbolized by such trademarks, (iv) all amendments, renewals and extensions of any of the foregoing property
described in clauses (i), (ii) and (iii), (v) any and all trade secrets, and any and all intellectual property rights in computer
software and computer software products now or hereafter existing, created, acquired or held, (vi) any and all design rights which
may be available to the Debtor now or hereafter existing, created, acquired or held, (vii) any and all claims for damages by way
of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for
and collect such damages for said use or infringement of the intellectual property rights identified above, (viii) all license
or other rights to use any of the copyright, patents or trademarks or service marks, and all license fees and royalties arising
from such use to the extent permitted by such license or rights, (ix) any indemnity or warranty payable in respect of any of the
foregoing property or interests, and (x) all agreements, permits, waivers or consents relating to the licensing, development, use
or disclosure of any of the foregoing to which the Debtor is now or hereafter a party or beneficiary, including, without limitation,
the agreements identified on Exhibit C attached hereto (collectively, the “IP Agreements”).

 

ARTICLE 7

REPRESENTATIONS AND WARRANTIES

 

The Debtor represents
and warrants to the Secured Party as follows:

 

7.1           Authority.
The Debtor has the right and power and is duly authorized and empowered to enter into, execute, deliver and perform its obligations
under this Agreement.

 

7.2           Ownership;
No Other Liens. The Debtor’s rights in or the power to transfer the Collateral and its title to the Collateral are free
and clear of all liens, security interests or encumbrances other than those disclosed in Exhibit A attached hereto.

 

    	50

    	 

    

 

STRICTLY PRIVATE &
CONVIDENTIAL

 

7.3           Location
of Business; Identification Number. Exhibit B attached hereto sets forth (i) the address of the Debtor’s
chief executive office (the “Chief Executive Office State”); (ii) the state of incorporation of the Debtor (the
“Incorporation State”); (iii) the Federal Employer Identification Number of the Debtor and (iv) the Organizational
ID Number of the Debtor in the Incorporation State (the “Organizational ID”). The exact legal name of the Debtor
is as set forth above the signature of its representative at the end of this Agreement.

 

7.4           Intellectual
Property. Exhibit C attached hereto sets forth a list of all Intellectual Property Collateral owned by Debtor
as well as the jurisdiction of registration of any such Intellectual Property Collateral. With respect to itself and its Intellectual
Property Collateral, the Debtor further represents and warrants that:

 

(i)          Except
as described on Exhibit C, the operation of the Debtor’s business and the Debtor’s use of the Intellectual
Property Collateral in connection therewith does not infringe, misappropriate, or dilute the intellectual property rights of any
third party.

 

(ii)         Except
as described on Exhibit C, (A) the Debtor is the exclusive owner of all right, title and interest in and to the Intellectual
Property Collateral purported to be owned by the Debtor, and (B) the Debtor has the right to use all Intellectual Property Collateral
subject only to the terms of the IP Agreements identified on Exhibit C, and applicable law or regulation.

 

(iii)        The
Intellectual Property Collateral set forth on Exhibit C hereto includes all of the patents, patent applications,
domain names, trademark registrations and applications, copyright registrations and applications and IP Agreements owned by the
Debtor and necessary for the conduct of the Debtor’s business as it is currently conducted and as it is currently contemplated
to be conducted in the future.

 

(iv)        The
patents, copyrights registrations and trademark registrations forming part of the Intellectual Property Collateral are subsisting
and have not been adjudged invalid or unenforceable in whole or part. The Debtor is not aware of any uses of any item of owned
and registered Intellectual Property Collateral that could reasonably be expected to lead to such item becoming invalid or unenforceable.

 

(v)         The
Debtor has made or performed all filings, recordings and other acts and has paid all required fees and taxes necessary to maintain
and protect its interest in each registration owned by the Debtor for each item of owned and registered Intellectual Property Collateral
in full force and effect and has made all filings necessary to date maintain the pendency of and to diligently prosecute the pending
applications for Intellectual Property Collateral. The Debtor has used proper statutory notice in connection with its use of each
such patent, registered trademark and copyright forming part of the Intellectual Property Collateral.

 

    	51

    	 

    

 

 

STRICTLY PRIVATE & CONVIDENTIAL

 

(vi)        No
claim, action, suit, investigation, litigation or proceeding is pending or has been asserted or threatened against the Debtor (A)
based upon or challenging or seeking to deny or restrict the Debtor’s rights in or use of any of the Intellectual Property
Collateral, (B) alleging that the Debtor’s rights in or use of the Intellectual Property Collateral or that any services
provided by, processes used by, or products manufactured or sold by, the Debtor infringe, misappropriate, dilute, misuse or otherwise
violate any patent, trademark, copyright or any other proprietary right of any third party, or (C) alleging that the Intellectual
Property Collateral is being licensed or sublicensed in material violation or contravention of the terms of any license or other
agreement to which the Debtor is a party. No Person is engaging in any activity that infringes, misappropriates, dilutes, misuses
or otherwise violates the Intellectual Property Collateral or the Debtor’s rights in or use thereof. The Debtor has not granted
any license, release, covenant not to sue, non-assertion assurance, or other right to any third party with respect to any part
of the Intellectual Property Collateral. The consummation of the transactions contemplated by the Loan Agreement and the Note will
not result in the termination or impairment of any of the Intellectual Property Collateral.

 

(vii)       With
respect to each IP Agreement (and assuming the due authorization of and execution by any third parties thereto): (A) such IP Agreement
is valid and binding and in full force and effect; (B) such IP Agreement will not cease to be valid and binding and in full force
and effect on terms identical to those currently in effect as a result of the rights and interest granted herein, nor will the
grant of such rights and interest constitute a breach or default under such IP Agreement or otherwise give any party thereto a
right to terminate such IP Agreement; (C) the Debtor has not received any notice of termination or cancellation under such IP Agreement;
(D) the Debtor has not received any notice of a breach or default under such IP Agreement, which breach or default has not been
cured and (E) neither the Debtor nor any other party to such IP Agreement is in breach or default thereof in any material respect,
and no event has occurred that, with notice or lapse of time or both, would constitute such a breach or default by the Debtor or
any other party thereto or permit termination, modification or acceleration under such IP Agreement by any other party thereto
or by the Debtor.

 

(viii)      (A)
none of the trade secrets of the Debtor has been used, divulged or disclosed without authorization or legal compulsion or has been
misappropriated to the detriment of the Debtor for the benefit of any third party other than the Debtor; (B) no employee, independent
contractor or agent of the Debtor has misappropriated any trade secrets of any third party in the course of the performance of
his or her duties as an employee, independent contractor or agent of the Debtor; and (C) no employee, independent contractor or
agent of the Debtor is in material default or breach of any term of any employment agreement, non-disclosure agreement, assignment
of inventions agreement or similar agreement or contract with the Debtor relating in any way to the protection, ownership, development,
use or transfer of the Debtor’s Intellectual Property Collateral.

  

(ix)         No
Intellectual Property Collateral is subject to any outstanding consent, settlement, decree, order, injunction, judgment or ruling
restricting the use of any such Intellectual Property Collateral.

 

7.5           Continuing
Security Interest. The Debtor represents that it intends and understands that the security interest in the Collateral granted
hereby shall be a continuing security interest to secure payment of all Indebtedness. Notice of the continuing nature of this security
interest shall not be required to be stated on the face of any document representing any such Indebtedness, nor need such Indebtedness
otherwise be identified as being secured hereby.

 

    	52

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

ARTICLE 8

COVENANTS, AGREEMENTS, AND RIGHTS OF PARTIES

       
 

8.1           Secured
Party’s Right to Perform. The Secured Party may, but shall have no obligation to: discharge taxes, liens, security interests
or other encumbrances at any time levied or placed upon the Collateral; pay for the maintenance and preservation of the Collateral;
obtain and/or pay for insurance on the Collateral; and cause to be performed for and on behalf of the Debtor any obligations of
the Debtor hereunder which the Debtor has failed or refused to perform. The Debtor shall reimburse the Secured Party upon demand
for all payments made and all expenses incurred by the Secured Party pursuant to this Paragraph 3.1, with interest, from the date
paid or incurred by the Secured Party, at the highest rate permitted by law. Any amount realized by the Secured Party with respect
to the Collateral shall be applied on a pro rata basis towards the Debtor’s obligations to the Secured Party under the Note.

 

8.2           Possession
of Third Party. Where any Collateral is in the possession of a third party, the Debtor will join with the Secured Party in
notifying the third party of the Secured Party’s security interest and obtaining an acknowledgment from the third party that
is holding such Collateral for the benefit of the Secured Party.

 

8.3           Control
Agreement. At the request of the Secured Party, the Debtor will cooperate with the Secured Party in obtaining a control agreement
in form and substance satisfactory to the Secured Party with respect to Collateral consisting of (i) deposit accounts; (ii) investment
property; (iii) letter of credit rights; and (iv) electronic chattel paper.

 

8.4           Chattel
Paper. The Debtor will not create any chattel paper without placing a legend on the chattel paper acceptable to the Secured
Party indicating that the Secured Party has a security interest therein.

 

8.5           Corporate
Changes. Until the Indebtedness is paid in full, the Debtor agrees that it will not change its Incorporation State or corporate
name without providing the Secured Party with 30 days’ prior written notice.

 

8.6           Adverse
Claims. The Debtor will promptly notify the Secured Party in writing, upon the Debtor’s learning thereof, of the taking
of any action by any party to levy upon, repossess or attach any Collateral.

 

8.7           Disposition;
Release. The Debtor may sell or transfer the Collateral to the extent such transfers consist of (a) sales of inventory in the
ordinary course of business, or (b) isolated sales or other dispositions of obsolete equipment, to the extent such equipment is
replaced by equipment of comparable value (each a “Permitted Disposition”). The Secured Party hereby covenants
that, at Debtors’ request, it will release its lien on any and all Collateral that is the subject of a Permitted Disposition.

 

    	53

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

8.8           Maintenance
of Intellectual Property Collateral. (i) With respect to each item of Intellectual Property Collateral, the Debtor agrees to
take, at its expense, all commercially reasonable steps, including, without limitation, in the U.S. Patent and Trademark Office,
the U.S. Copyright Office and any other U.S. or foreign governmental authority, to (A) maintain its registrations for such Intellectual
Property Collateral that is or becomes registered in full force and effect, and (B) pursue the prosecution and maintenance of each
such material patent, trademark, or copyright registration or application now pending in the United States and in each other appropriate
jurisdiction relating to such material Intellectual Property Collateral now or hereafter included in such Intellectual Property
Collateral of the Debtor, including, without limitation, the payment of required fees and taxes, the filing of responses to office
actions issued by the U.S. Patent and Trademark Office, the U.S. Copyright Office or other applicable U.S. or foreign governmental
authorities, the filing of applications for renewal or extension, the filing of affidavits under Sections 8, 9 and 15 of the U.S.
Trademark Act, the filing of divisional, continuation, continuation-in-part, reissue and renewal applications or extensions, the
payment of maintenance fees and the participation in interference, reexamination, opposition, cancellation, infringement and misappropriation
proceedings. The Debtor shall not, without the written consent of the Secured Party, discontinue use of or otherwise abandon any
Intellectual Property Collateral, or abandon any right to file an application for patent, trademark, or copyright.

 

(ii)         The
Debtor agrees promptly to notify the Secured Party if the Debtor becomes aware (A) that any item of Intellectual Property Collateral
may have become abandoned, placed in the public domain, invalid or unenforceable, or of any adverse determination or development
regarding the Debtor’s ownership of any Intellectual Property Collateral or its right to register the same or to keep and
maintain and enforce the same, or (B) of any adverse determination or the institution of any proceeding (including, without limitation,
the institution of any proceeding in the U.S. Patent and Trademark Office or any other U.S. or foreign office or any court) regarding
any item of Intellectual Property Collateral.

 

(iii)        In
the event that the Debtor becomes aware that any item of Intellectual Property Collateral is being infringed or misappropriated
by a third party, the Debtor shall promptly notify the Secured Party and shall take such actions, at its expense, as is necessary
to protect or enforce such Intellectual Property Collateral, including, without limitation, suing for infringement or misappropriation
and seeking an injunction against continued infringement or misappropriation.

 

(iv)        The
Debtor shall use proper statutory notice in connection with its use of each item of its registered Intellectual Property Collateral.
The Debtor shall not do or permit any act or knowingly omit to do any act whereby any of its owned and registered Intellectual
Property Collateral may lapse or become invalid or unenforceable or placed in the public domain.

 

(v)         The
Debtor shall take all steps to preserve and protect each item of its Intellectual Property Collateral, including, without limitation,
maintaining the quality of any and all products or services used or provided in connection with any of the Trademarks.

 

    	54

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

(vi)        The
Debtor agrees that this Agreement shall be recorded with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any
other governmental authorities as desired by the Secured Party and/or as necessary to give notice of and/or perfect the security
interest hereunder in such Intellectual Property Collateral.

 

(vii)       The
Debtor agrees that should it obtain an ownership interest in any item of the type forming part of the Intellectual Property Collateral
that is not on the date hereof a part of the Intellectual Property Collateral (“After-Acquired Intellectual Property”)
(i) the provisions of this Agreement shall automatically apply thereto, and (ii) any such After-Acquired Intellectual Property
and, in the case of trademarks, the goodwill symbolized thereby, shall automatically become part of the Intellectual Property Collateral
subject to the terms and conditions of this Agreement with respect thereto. At the end of each fiscal quarter of the Debtor, the
Debtor shall give prompt written notice to the Secured Party identifying the registered or applied for registration of After-Acquired
Intellectual Property, and the Debtor shall execute and deliver to the Secured Party with such written notice, or otherwise authenticate,
a supplement to this Agreement covering such registered or applied for After-Acquired Intellectual Property, which supplement the
Secured Party may record with the U.S. Patent and Trademark Office, the U.S. Copyright Office and any other governmental authorities
desired by the Secured Party and/or as necessary to perfect the security interest hereunder in such registered or applied for After-Acquired
Intellectual Property.

 

ARTICLE 9

EVENTS OF DEFAULT; REMEDIES UPON DEFAULT

 

9.1           Default
and Remedies. Upon the occurrence of an “Event of Default” as defined in the Loan Agreement, Secured Party shall
have the remedies provided in this Agreement.

Remedies Generally.
Upon the occurrence of an Event of Default, the Secured Party shall have all the rights and remedies of a secured party under the
Florida Uniform Commercial Code (“UCC”) and any other applicable laws, together with all rights and remedies
provided for in this Security Agreement. In addition thereto, upon the occurrence of an Event of Default, the Secured Party may
require the Debtor to assemble the Collateral and any proceeds thereof and deliver same to the Secured Party at a place to be designated
by the Secured Party which is reasonably convenient to both parties. The Debtor agrees that the Secured Party shall have the right
to peacefully retake any of the Collateral without judicial hearing prior to such retaking, including the right to enter upon the
Debtor’s premises for such purpose. The Secured Party has no obligation to clean up or otherwise prepare the Collateral for
sale. All rights and remedies of the Secured Party shall be cumulative and may be exercised from time to time. The Secured Party
shall not be required to make any demand upon, or pursue or exhaust any of its rights or remedies against the Debtor or any other
obligor, guarantor, pledgor or any other person with respect to the payment of the Indebtedness or to pursue or exhaust any of
its rights or remedies with respect to any Collateral therefor or any direct or indirect guarantee thereof. The Secured Party shall
not be required to marshal the Collateral or any guarantee of the Indebtedness or to resort to the Collateral or any such guarantee
in any particular order, and all of its rights hereunder or under the Loan Agreement or the Note shall be cumulative. To the extent
it may lawfully do so, the Debtor absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants
not to assert against the Secured Party, any valuation, stay, appraisement, extension, redemption or similar laws and any and all
rights or defenses it may have as a surety now or hereafter existing which, but for this provision, might be applicable to the
sale of any Collateral made under the judgment, order or decree of any court, or privately under the power of sale conferred by
this Agreement, or otherwise.

 

    	55

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

9.2           Disposition
of Collateral; Deficiency. The Secured Party may dispose of the Collateral and proceeds in any commercially reasonable manner
and the Debtor shall be liable for any deficiency. If the Secured Party sells any of the Collateral upon credit, the Debtor will
be credited only with payments actually made by the purchaser, received by the Secured Party and applied to the Indebtedness as
provided below. In the event the purchaser fails to pay for the Collateral, the Secured Party may resell the Collateral and the
Debtor shall be credited with the proceeds of the sale.

 

9.3           Payment
of Expenses. The Debtor shall pay the Secured Party on demand all expenses, including reasonable attorneys’ fees and
legal expenses paid or incurred by the Secured Party in protecting and enforcing the rights of and obligations to the Secured Party
under any provision of this Agreement, including its right to take possession of the Collateral and proceeds thereof from the custody
of the Debtor or any trustee or receiver in bankruptcy or any other person. All such expenses shall become part of the Indebtedness
and shall bear interest from the date paid or incurred by the Secured Party at the highest rate permitted by law.

 

9.4           Notice
of Sale. Any notice required to be given by the Secured Party to the Debtor with respect to the sale or other disposition of
the Collateral shall be deemed reasonable if mailed, in the manner set forth in the Loan Agreement, at least seven (7) days before
the time of such sale or other disposition.

 

9.5           Additional
Undertakings Relating To Disposition of Intellectual Property Collateral. In the event of any sale, use or other disposition
of any of the Intellectual Property Collateral of the Debtor, the goodwill symbolized by any trademarks subject to such sale or
other disposition shall be included therein, and the Debtor shall supply to the Secured Party or its designee the Debtor’s
know-how and expertise relating to such Intellectual Property Collateral, and documents and things relating to any Intellectual
Property Collateral subject to such sale or other disposition, and the Debtor’s customer lists and other records and documents
relating to such Intellectual Property Collateral and to the manufacture, distribution, advertising and sale of products and services
of the Debtor that relate to such Intellectual Property Collateral.

 

    	56

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

9.6           Power
of Attorney. The Debtor hereby appoints Secured Party, its nominee, or any other person whom the Secured Party may designate
the Debtor’s attorney-in-fact, with full power and authority effective upon the occurrence of any Event of Default to ask,
demand, collect, receive, receipt for, sue for, compound and give acquittance for any and all sums or properties which may be or
become due, payable or distributable in respect of the Collateral or any part thereof, with full power to settle, adjust or compromise
any claim in respect of the Collateral as fully as the Debtor could itself do, to endorse or sign the Debtor’s name on any
assignments, stock powers or other instruments of transfer and on any checks, notes, acceptances, money orders, drafts, and any
other forms of payment or security in respect of the Collateral that may come into the Secured Party’s possession and on
all documents of satisfaction, discharge or receipt required or requested in connection therewith, and, in its reasonable discretion,
to file any claim or take any other action or proceeding, either in its own name or in the name of the Debtor, or otherwise, which
the Secured Party deems necessary to collect or otherwise realize upon all or any part of the Collateral, or effect a transfer
thereof, or which may be necessary to protect and preserve the right, title, and interest of the Secured Party in and to such Collateral
and the security intended to be afforded hereby. The Debtor hereby ratifies and approves all acts of any such attorney-in-fact
and agrees that neither Secured Party nor any such attorney-in-fact will be liable for any such acts or omissions nor for any error
of judgment or mistake of fact or law other than such person’s gross negligence or willful misconduct, as finally determined
by a court of competent jurisdiction. The Secured Party may file one or more financing statements disclosing its security interest
in all or any part of the Collateral, and any amendments or supplements thereto, on behalf of the Debtor without notice thereof
to the Debtor. The foregoing powers of attorney, being coupled with an interest, are irrevocable until the Maturity Date (as such
term is defined in the Promissory Note- Line of Credit, dated as of the date hereof).

 

9.7           Use
of Collateral; License to Intellectual Property Collateral. Until the Secured Party is able to effect a sale, lease, or other
disposition of the Collateral, and so long as an Event of Default shall have occurred and be continuing, the Secured Party shall
have the right to hold or use the Collateral, or any part thereof, to the extent that it deems appropriate for the purpose of preserving
the Collateral or its value or for any other purpose deemed appropriate by the Secured Party. The Secured Party shall have no obligation
to the Debtor to maintain or preserve the rights of the Debtor as against third parties with respect to the Collateral while the
Collateral is in the possession of the Secured Party. So long as an Event of Default shall have occurred and be continuing, the
Secured Party may, if it so elects, seek the appointment of a receiver or keeper to take possession of the Collateral and to enforce
any of the Secured Party’s remedies, with respect to such appointment. the Secured Party shall apply the net proceeds of
any such collection, recovery, receipt, appropriation, realization or sale to the Indebtedness (i) first, to cover its costs and
expenses, (ii) second, to pay any and all interest that is due and owing to the Secured Party under the Loan Agreement and the
Note, (iii) third, to pay any and all principal that is due and owing to the Secured Party under the Loan Agreement and the Note,
and (iv) finally, the Secured Party shall account for the surplus, if any, to the Debtor. To the maximum extent permitted by applicable
law, the Debtor waives all claims, damages, and demands against the Secured Party arising out of the repossession, retention or
sale of the Collateral except such as arise out of the gross negligence or willful misconduct of the Secured Party, as finally
determined by a court of competent jurisdiction.

 

    	57

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

For the sole purpose
of enabling the Secured Party to exercise rights and remedies hereunder (including, without limitation, in order to take possession
of, hold, preserve, process, assemble, use, operate, or cause to be used or operated, prepare for sale, market for sale, sell or
otherwise dispose of the Collateral) at such time as the Secured Party shall be lawfully entitled to exercise such rights and remedies,
and so long as an Event of Default has occurred and is continuing, the Debtor hereby grants to the Secured Party, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other compensation to the Debtor) to use, license or sublicense
to third parties any and all of the Intellectual Property Collateral now owned or hereafter acquired by the Debtor, and wherever
the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or
stored and to all computer software used for the compilation or printout thereof.

 

4.8           Limitation
on the Secured Party’s Duty In Respect of the Collateral. The Secured Party shall use reasonable care with respect to
the Collateral in its possession or under its control. The Secured Party shall not have any other duty as to any of the Collateral
in its possession or control or in the possession or control of any agent or nominee of the Secured Party, or any income thereon
or as to the preservation of rights against prior parties or any other rights pertaining thereto.

 

4.9           Reinstatement.
This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against the
Debtor for liquidation or reorganization, should the Debtor become insolvent or make an assignment for the benefit of any creditor
or creditors or should a receiver or trustee be appointed for all or any significant part of the Debtor’s assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time payment of the Indebtedness, or any part thereof,
is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the
Indebtedness, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though
such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored
or returned, the Indebtedness shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored
or returned.

 

    	58

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

ARTICLE 10

MISCELLANEOUS

 

10.1         Financing
Statements. The Debtor authorizes the Secured Party to file one or more financing statements and continuation statements, in
form satisfactory to the Secured Party, in all public offices, wherever filing is deemed by the Secured Party to be necessary or
desirable. Such financing statements may describe the Collateral as consisting of all assets of the Debtor. The Debtor shall pay
the cost of all such filings.

 

10.2         Manner
of Notice. All notices to the Debtor and the Secured Party shall be deemed to be effectively given when delivered in accordance
with the Loan Agreement.

 

10.3         No
Waiver. No delay on the part of the Secured Party in the exercise of any right or remedy shall operate as a waiver thereof
and no single or partial exercise by the Secured Party of any right or remedy shall preclude other or further exercise thereof
or the exercise of any other right or remedy.

 

10.4         Definitions;
Applicable Law. All terms used herein, unless otherwise defined or the context otherwise requires, shall have the meanings
given to them by the Loan Agreement, or, if not defined in the Loan Agreement, shall have the meanings given to them by the UCC,
which, together with other applicable laws of the state of Florida, shall govern this Agreement and the interpretation thereof.

 

10.5         Captions.
The captions to the various paragraphs hereof have been inserted for convenience only and shall not be deemed a part of this Agreement.

 

10.6         Binding
Effect. This Agreement shall be binding upon and inure to the benefit of the Secured Party and the Debtor and their respective
successors and assigns, including all persons who become bound as a Debtor under this Agreement.

 

10.7         Entire
Agreement; Amendment. This Agreement, together with the Loan Agreement and the Note, sets forth the entire agreement of the
parties as to the subject matter hereof and may not be amended except in writing and executed by the parties hereto. In the event
of any conflict between this Agreement and the Loan Agreement, this Agreement shall prevail.

 

10.8         Severability.
In the event any provision hereof is in conflict with any statute or rule of law in the state of Florida or is otherwise unenforceable
for any reason whatsoever, then such provision shall be deemed severable from or enforceable to the maximum extent permitted by
law, as the case may be, and the same shall not invalidate any other provisions hereof.

 

10.9         Counterparts.
This Agreement may be executed via manual telecopy, in multiple counterparts and all such counterparts shall collectively constitute
an original agreement. No party hereto will raise the use of a facsimile machine or pdf attachment to email to deliver a signature
to this Agreement or the fact that any signature was transmitted or communicated through the use of facsimile machine or pdf attachment
to email as a defense to the formation or enforceability of this Agreement and each party forever waives any such defense.

 

*****

 

    	59

    	 

    

 

STRICTLY PRIVATE & CONVIDENTIAL

 

IN WITNESS WHEREOF,
the Debtor has executed this Security Agreement as of the day and year first above written.

 

 

	 	xG Technology, Inc.
	 	 	 
	 	By:	/s/ John C. Coleman
	 	Name:	John C. Coleman
	 	Title	CEO

 

Agreed and Accepted By:

 

MB Technology Holdings, LLC

 

	By:	/s/ George F. Schmitt	 
	Name:	George F. Schmitt	 
	Title	CEO	 

 

    	60

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

EXHIBIT A

Existing Liens and Financing Statements

 

Security Agreement dated as of February
7, 2011 and effective as of February 7, 2011 between the Debtor and Secured Party

  

Security Agreement dated as of February
7, 2011 and effective as of February 7, 2011 between the Debtor and Secured Party

 

UCC Financing Statement filed by the Debtor
with the Delaware Secretary of State on February 7, 2011

 

    	61

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

EXHIBIT B

 

Chief Executive Office, State of Organization,
FEIN, Organizational ID

 

	Chief Executive Office:	7771 W. Oakland Park Boulevard, Suite 231, Sunrise, FL  33351
	 	 
	State of Organization:	Delaware

 

	Federal Employer Identification Number:	20-585-6795

 

	Organizational ID:	3562449

 

    	62

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

EXHIBIT C

 

Intellectual Property Collateral

 

    	63

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

EXHIBIT "B"

 

 

Security Agreement dated as of February
7, 2011 and effective as of February 7, 2011 between the Borrower and Lender

 

Security Agreement dated as of February
7, 2011 and effective as of February 7, 2011 between the Borrower and Lender

 

UCC Financing Statement filed by the Debtor
with the Delaware Secretary of State on February 7, 2011

 

    	64

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

EXHIBIT "C"

 

Schedule of Litigation

 

NONE

  

    	65

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

EXHIBIT "D"

  

NONE

 

    	66

    	 

    

 

STRICTLY PRIVATE & CONFIDENTIAL

 

To:

 

xG Technology, Inc.

240 S. Pineapple Avenue, Suite 701

Sarasota, FL 34236

 

 NOTICE OF CONVERSION

 

The undersigned hereby
irrevocably elects to convert all of the Advances, amounting in aggregate to $15,000,000 in principal amount, made under the Promissory
Note - Line Of Credit issued by xG TECHNOLOGY, INC. (the “Issuer”) in favor of MB TECHNOLOGY HOLDINGS, LLC and effective
as of May 19, 2011 into shares of $0.01 each in the Common Stock of the Issuer (each a “Share”), according to the conditions
set forth in such Note, as of the date written below subject to the extent that the Company for the time being has sufficient authorized
capital.

 

Effective Date of Conversion:Immediately upon, and with
effect from, the Issuer having published its 2012 annual results and otherwise not being in a close period for the purposes of
the AIM Rules for Companies

 

	Conversion Price:	$0.38 per Share

 

Shares To Be Delivered:        Forty-four Million, Four Hundred
and Seventy-three Thousand, Six Hundred and Eighty Four (44,473,684)

 

Address For Registration Of Shares: 240 S. Pineapple Avenue,
Suite 70, Sarasota, FL 34236

 

Delivery Address For Share Certificate:      240 S. Pineapple
Avenue, Suite 70, Sarasota, FL 34236

 

	Signature:	/s/ Roger G. Branton
	 
	Print Name:	Roger G. Branton

 

Effective as of January 16, 2013

 

For and on behalf of MB TECHNOLOGY HOLDINGS, LLC

 

	Address:	240 S. Pineapple Avenue, Suite 70, Sarasota, FL 34236

 

    	67

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00214-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00214-of-00352.parquet"}]]