Document:

Exhibit 10.1

 

PRESS RELEASE

 

Magic Continues Growth Streak with Record
Q3 2013 Non-GAAP Operating Income of $6.0 Million, an Increase of 31% Year over Year; Revenues for Q3 2013 Grew 9% Year over
Year to $35.6 Million

 

Non-GAAP operating income for the first
nine months increased 17% to a record $15.9 million; Revenues for the first nine months increased 14% year over year to $103.8 million

 

Or Yehuda, Israel, November 6, 2013 – Magic
Software Enterprises Ltd. (NASDAQ and TASE: MGIC), a
global provider of mobile and cloud-enabled application
and business integration platforms,
announced today its financial results for the third quarter and first nine months of 2013.

 

 

Financial Highlights for
the Third Quarter Ended September 30, 2013

 

		·	Revenues for the third quarter increased 9% year over year to $35.6 million from $32.6 million.

 

		·	Non-GAAP operating income for the third quarter increased 31% to $6.0 million, compared to
$4.6 million in the same period last year; Operating income increased 21% to $5.0 million, compared to $4.1 million
in the same period last year.

 

		·	Non-GAAP net income for the third quarter increased 23% to $5.5 million, compared to $4.5 million
in the same period last year; Net income increased 2% to $4.2 million (or $0.11 per fully diluted share) compared to $4.1 million
(or $0.11 per fully diluted share) in the same period last year. The increase in net income was negatively impacted by tax expenses
recorded with respect to utilization of deferred tax assets. In accordance with U.S. generally accepted accounting principles,
the Company records deferred tax expenses on utilization of carry-forward tax losses.

 

Financial Highlights for
the Nine-Month Period Ended September 30, 2013

 

		·	Revenues for the first nine months of 2013 increased 14% to $103.8 million compared to $90.7 million
in the same period last year.

 

		·	Non-GAAP operating income for the first nine months of 2013 increased 17% to $15.9 million
compared to $13.6 million in the same period last year; Operating income for the first nine months of 2013 increased 13% to
$13.7 million compared to $12.2 million in the same period last year.

 

		·	Non-GAAP net income for the first nine months of 2013 increased 3% to $13.5 million compared
to $13.1 million in the same period last year; Net income for the first nine months of 2013 decreased 6% to $11.2 million
(or $0.30 per fully diluted share), compared to $11.9 million (or $0.32 per fully diluted share) in the same period last year.
The decrease in net income was mainly attributable to tax expenses recorded with respect to utilization of deferred tax assets.

 

		·	Operating cash flow for the first nine months of 2013 totaled $13.1 million.

 

		·	Total cash, cash equivalents and short-term investments as of September 30, 2013, amounted
to $39.2 million, with no debt. 

 

    	 

    	 

    

 

Comments of Management

 

Guy Bernstein, Chief Executive Officer
of Magic Software Enterprises, said, “We are pleased to report another record quarter
with strong year-over-year growth across all areas of our business and all regions. We are seeing great interest in the recent
enhancements we have made to enrich our enterprise mobility, integration and services offerings. We are committed to maximizing
our opportunities by continuing to strengthen our positions in these growth markets now and in the years to come.”

 

 

Non-GAAP Financial Measures

 

This release includes non-GAAP operating
income, net income, basic and diluted earnings per share and other non-GAAP financial measures. These non-GAAP measures exclude
the following items:

 

		·	Amortization of purchased intangible assets

 

		·	In-process research and development capitalization and amortization

 

		·	Equity-based compensation expense

 

		·	Unwinding of discount in connection with liabilities due to acquisitions

 

		·	Related tax effects of the above items

 

Magic Software’s management believes
that the presentation of non-GAAP measures provides useful information to investors and management regarding financial and business
trends relating to the Company’s financial condition and results of operations as well as the net amount of cash generated
by its business operations after taking into account capital spending required to maintain or expand the business.

 

 

 

These non-GAAP financial measures are not
in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP financial
measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting
rules or principles. Magic Software believes that non-GAAP financial measures have limitations in that they do not reflect all
of the amounts associated with Magic Software’s results of operations as determined in accordance with GAAP and that these
measures should only be used to evaluate Magic Software’s results of operations in conjunction with the corresponding GAAP
measures.

 

Refer to the Reconciliation of Selected
Financial Metrics from GAAP to Non-GAAP tables below.

 

About Magic Software Enterprises

 

Magic Software Enterprises Ltd. (NASDAQ
and TASE: MGIC) is a global provider of mobile and cloud-enabled application and business integration platforms.

 

For more information, visit www.magicsoftware.com.

 

    	 

    	 

    

 

 

Press Contact:

 

Tania Amar, VP Global Marketing

Magic Software Enterprises

Tel: +972 (0)3 538 9300

tania@magicsoftware.com

 

Except for the historical information contained herein, the
matters discussed in this news release include forward-looking statements that may involve a number of risks and uncertainties.
Actual results may vary significantly based upon a number of factors including, but not limited to, risks in product and technology
development, market acceptance of new products and continuing product conditions, both here and abroad, release and sales of new
products by strategic resellers and customers, and other risk factors detailed in the Company's most recent annual report and other
filings with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and
the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information,
future events or otherwise.

 

Magic is a registered trademark of Magic
Software Enterprises Ltd. All other product and company names mentioned herein are for identification purposes only and are the
property of, and might be trademarks of, their respective owners.

 

    	 

    	 

    

 

 

MAGIC SOFTWARE ENTERPRISES LTD.

CONSOLIDATED STATEMENTS OF INCOME

U.S. dollars in thousands (except per share data)

               

 

	 	 	Three months ended	 	 	Nine months ended	 
	 	 	September 30,	 	 	September 30,	 
	 	 	2013	 	 	2012	 	 	2013	 	 	2012	 
	 	 	Unaudited	 	 	Unaudited	 
	Revenues	 	 	35,596	 	 	 	32,578	 	 	 	103,766	 	 	 	90,650	 
	Cost of Revenues	 	 	20,733	 	 	 	19,583	 	 	 	61,588	 	 	 	52,601	 
	Gross profit	 	 	14,863	 	 	 	12,995	 	 	 	42,178	 	 	 	38,049	 
	Research and development, net	 	 	979	 	 	 	892	 	 	 	2,781	 	 	 	2,134	 
	Selling, marketing and general and	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	    administrative expenses	 	 	8,914	 	 	 	7,981	 	 	 	25,719	 	 	 	23,765	 
	Total operating costs and expenses	 	 	9,893	 	 	 	8,873	 	 	 	28,500	 	 	 	25,899	 
	Operating income	 	 	4,970	 	 	 	4,122	 	 	 	13,678	 	 	 	12,150	 
	Financial expenses (income), net	 	 	(74	)	 	 	15	 	 	 	(594	)	 	 	(183	)
	Other income, net	 	 	-	 	 	 	69	 	 	 	-	 	 	 	136	 
	Income before taxes on income	 	 	4,896	 	 	 	4,206	 	 	 	13,084	 	 	 	12,103	 
	Taxes on income (benefit), net	 	 	357	 	 	 	(25	)	 	 	1,134	 	 	 	42	 
	Net income	 	 	4,539	 	 	 	4,231	 	 	 	11,950	 	 	 	12,061	 
	Change in redeemable non-controlling interests	 	 	(208	)	 	 	-	 	 	 	(401	)	 	 	-	 
	Net income attributable to non-controlling interests	 	 	(142	)	 	 	(116	)	 	 	(359	)	 	 	(131	)
	Net income attributable to Magic's shareholders	 	 	4,189	 	 	 	4,115	 	 	 	11,190	 	 	 	11,930	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Basic	 	 	0.11	 	 	 	0.11	 	 	 	0.30	 	 	 	0.33	 
	Diluted	 	 	0.11	 	 	 	0.11	 	 	 	0.30	 	 	 	0.32	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Weighted average number of shares used in	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	     computing net earnings per share	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	        Basic	 	 	36,877	 	 	 	36,541	 	 	 	36,753	 	 	 	36,485	 
	 	 	 	 	 	 	 	.	 	 	 	 	 	 	 	 	 
	        Diluted	 	 	37,405	 	 	 	37,062	 	 	 	37,240	 	 	 	37,129	 

 

 

    	 

    	 

    

 

MAGIC SOFTWARE ENTERPRISES LTD.

RECONCILIATION BETWEEN GAAP AND NON-GAAP

STATEMENTS OF INCOME FOR COMPARATIVE PURPOSES

U.S. dollars in thousands (except per share data)  

 

	 	 	Three months ended	 	 	Nine months ended	 
	 	 	September 30,	 	 	September 30,	 
	 	 	2013	 	 	2012	 	 	2013	 	 	2012	 
	 	 	Unaudited	 	 	Unaudited	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	GAAP operating income	 	 	4,970	 	 	 	4,122	 	 	 	13,678	 	 	 	12,150	 
	Amortization of capitalized software and other intangible assets	 	 	1,982	 	 	 	1,418	 	 	 	5,510	 	 	 	4,311	 
	Capitalization of software development	 	 	(1,066	)	 	 	(1,131	)	 	 	(3,566	)	 	 	(3,344	)
	Stock-based compensation	 	 	70	 	 	 	143	 	 	 	255	 	 	 	440	 
	Total adjustments to GAAP	 	 	986	 	 	 	430	 	 	 	2,199	 	 	 	1,407	 
	Non-GAAP operating income	 	 	5,956	 	 	 	4,552	 	 	 	15,877	 	 	 	13,557	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	GAAP net income	 	 	4,189	 	 	 	4,115	 	 	 	11,190	 	 	 	11,930	 
	Adjustments to GAAP as above	 	 	986	 	 	 	430	 	 	 	2,199	 	 	 	1,407	 
	Unwinding of discount in connection with liabilities due to acquisitions	 	 	50	 	 	 	-	 	 	 	265	 	 	 	-	 
	Amortization expenses attributed to redeemable non-controlling interests	 	 	(55	)	 	 	-	 	 	 	(115	)	 	 	-	 
	Deferred taxes on the above items	 	 	334	 	 	 	(62	)	 	 	(3	)	 	 	(219	)
	Total adjustments to GAAP	 	 	1,315	 	 	 	368	 	 	 	2,346	 	 	 	1,188	 
	Non-GAAP net income	 	 	5,504	 	 	 	4,483	 	 	 	13,536	 	 	 	13,118	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Non-GAAP basic net earnings per share	 	 	0.15	 	 	 	0.12	 	 	 	0.37	 	 	 	0.36	 
	Weighted average number of shares used in	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	   computing basic net earnings per share	 	 	36,877	 	 	 	36,541	 	 	 	36,753	 	 	 	36,485	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Non-GAAP diluted net earnings per share	 	 	0.15	 	 	 	0.12	 	 	 	0.36	 	 	 	0.35	 
	Weighted average number of shares used in	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	   computing diluted net earnings per share	 	 	37,437	 	 	 	37,129	 	 	 	37,287	 	 	 	37,234	 

 

    	 

    	 

    

 

MAGIC SOFTWARE ENTERPRISES LTD.

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

       

 

	 	 	September 30,	 	 	December 31,	 
	 	 	2013	 	 	2012	 
	 	 	Unaudited	 	 	 	 
	 	 	 	 	 	 	 	 	 
	ASSETS	 	 	 	 	 	 	 	 
	CURRENT ASSETS:	 	 	 	 	 	 	 	 
	     Cash and cash equivalents	 	 	38,300	 	 	 	37,744	 
	     Available-for-sale marketable securities	 	 	861	 	 	 	890	 
	     Trade receivables, net	 	 	30,595	 	 	 	28,367	 
	     Other accounts receivable and  prepaid expenses	 	 	6,258	 	 	 	6,696	 
	Total current assets	 	 	76,014	 	 	 	73,697	 
	 	 	 	 	 	 	 	 	 
	LONG-TERM RECEIVABLES:	 	 	 	 	 	 	 	 
	    Severance pay fund	 	 	410	 	 	 	351	 
	    Other long-term receivables	 	 	3,381	 	 	 	2,287	 
	Total long-term receivables	 	 	3,791	 	 	 	2,638	 
	 	 	 	 	 	 	 	 	 
	PROPERTY AND EQUIPMENT, NET	 	 	1,889	 	 	 	1,898	 
	IDENTIFIABLE INTANGIBLE ASSETS AND	 	 	 	 	 	 	 	 
	    GOODWILL, NET	 	 	79,516	 	 	 	74,721	 
	 	 	 	 	 	 	 	 	 
	TOTAL ASSETS	 	 	161,210	 	 	 	152,954	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	LIABILITIES AND EQUITY	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	CURRENT LIABILITIES:	 	 	 	 	 	 	 	 
	     Trade payables	 	 	3,597	 	 	 	4,722	 
	     Accrued expenses and other accounts payable	 	 	17,526	 	 	 	17,188	 
	     Deferred tax liabilities	 	 	2,857	 	 	 	3,422	 
	     Deferred revenues	 	 	7,447	 	 	 	4,160	 
	Total current liabilities	 	 	31,427	 	 	 	29,492	 
	 	 	 	 	 	 	 	 	 
	NON CURRENT LIABILITIES:	 	 	 	 	 	 	 	 
	     Long term liabilities	 	 	1,874	 	 	 	750	 
	     Liability due to acquisition activities	 	 	1,389	 	 	 	1,192	 
	     Accrued severance pay	 	 	1,271	 	 	 	1,245	 
	Total non-current liabilities	 	 	4,534	 	 	 	3,187	 
	 	 	 	 	 	 	 	 	 
	Redeemable non- controlling interest	 	 	2,344	 	 	 	1,914	 
	 	 	 	 	 	 	 	 	 
	EQUITY:	 	 	 	 	 	 	 	 
	   Magic Shareholders' equity	 	 	121,971	 	 	 	117,786	 
	   Non-controlling interests	 	 	934	 	 	 	575	 
	Total equity	 	 	122,905	 	 	 	118,361	 
	 	 	 	 	 	 	 	 	 
	TOTAL LIABILITIES AND EQUITY	 	 	161,210	 	 	 	152,954Exhibit 4.2

 

Form of Representatives’
Warrant Agreement

 

THE REGISTERED
HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT
EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE
OR HYPOTHECATE THIS PURCHASE WARRANT FOR A PERIOD OF ONE HUNDRED EIGHTY DAYS FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW) TO ANYONE
OTHER THAN (I) [AEGIS CAPITAL CORP.][FELTL AND COMPANY, INC.] OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING,
OR (II) A BONA FIDE OFFICER OR PARTNER OF [AEGIS CAPITAL CORP.][FELTL AND COMPANY, INC.] OR OF ANY SUCH UNDERWRITER OR SELECTED
DEALER.

 

THIS PURCHASE
WARRANT IS NOT EXERCISABLE PRIOR TO [________________] [DATE THAT IS ONE YEAR FROM THE EFFECTIVE DATE OF THE OFFERING].
VOID AFTER 5:00 P.M., EASTERN TIME, [___________________] [DATE THAT IS FIVE YEARS FROM THE EFFECTIVE DATE OF THE OFFERING].

 

COMMON STOCK PURCHASE WARRANT

 

For the Purchase of [_____] Shares
of Common Stock

of

xG Technology, Inc.

 

1.   
       Purchase Warrant. THIS CERTIFIES THAT, in consideration of funds duly
paid by or on behalf of [Aegis Capital Corp.][Feltl and Company, Inc.] (“Holder”), as registered owner of
this Purchase Warrant, to xG Technology, Inc., a Delaware corporation (the “Company”), Holder is entitled,
at any time or from time to time from [________________] [DATE THAT IS ONE YEAR FROM THE EFFECTIVE DATE OF THE
OFFERING] (the “Commencement Date”), and at or before 5:00 p.m., Eastern time, [____________] [DATE
THAT IS FIVE YEARS FROM THE EFFECTIVE DATE OF THE OFFERING] (the ”Expiration Date”), but not
thereafter, to subscribe for, purchase and receive, in whole or in part, up to [____] shares of common stock of the
Company, par value $0.00001 per share (the “Shares”), subject to adjustment as provided in Section 6
hereof. If the Expiration Date is a day on which banking institutions are authorized by law to close, then this Purchase
Warrant may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. During the
period ending on the Expiration Date, the Company agrees not to take any action that would terminate this Purchase Warrant.
This Purchase Warrant is initially exercisable at $[•] per Share; provided, however, that upon the
occurrence of any of the events specified in Section 6 hereof, the rights granted by this Purchase Warrant, including the
exercise price per Share and the number of Shares to be received upon such exercise, shall be adjusted as therein specified.
The term “Exercise Price” shall mean the initial exercise price or the adjusted exercise price, depending
on the context.

 

    	1

    	 

    

 

2.   
       Exercise.

 

2.1           Exercise
Form. In order to exercise this Purchase Warrant, the exercise form attached hereto must be duly executed and completed and
delivered to the Company, together with this Purchase Warrant and payment of the Exercise Price for the Shares being purchased
payable in cash by wire transfer of immediately available funds to an account designated by the Company or by certified check or
official bank check. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time,
on the Expiration Date, this Purchase Warrant shall become and be void without further force or effect, and all rights represented
hereby shall cease and expire.

 

2.2           Cashless
Exercise.  If at any time after the Commencement Date there is no effective registration statement registering, or no
current prospectus available for, the resale of the Shares by the Holder, then in lieu of exercising this Purchase Warrant by payment
of cash or check payable to the order of the Company pursuant to Section 2.1 above, Holder may elect to receive the number of Shares
equal to the value of this Purchase Warrant (or the portion thereof being exercised), by surrender of this Purchase Warrant to
the Company, together with the exercise form attached hereto, in which event the issue to Holder, Shares in accordance with
the following formula:

 

	X	=	Y(A-B)	 
	A	 
	Where,	 	 	 
	 	X	=	The number of Shares to be issued to Holder;
	 	Y	=	The number of Shares for which the Purchase Warrant is being exercised;
	 	A	=	The fair market value of one Share; and
	 	B	=	The Exercise Price.
	 	 	 	 	 	 	 	 	 

For purposes
of this Section 2.2, the fair market value of a Share is defined as follows:

 

		(i)	if the Company’s common stock is traded on a securities exchange, the value shall be deemed
to be the closing price on such exchange prior to the exercise form being submitted in connection with the exercise of the Purchase
Warrant; or

 

		(ii)	if the Company’s common stock is actively traded over-the-counter,
the value shall be deemed to be the closing bid prior to the exercise form being submitted in connection with the exercise of the
Purchase Warrant; if there is no active public market, the value shall be the fair market value thereof, as determined in good
faith by the Company’s Board of Directors.

 

2.3           Legend.
Each certificate for the securities purchased under this Purchase Warrant shall bear a legend as follows unless such securities
have been registered under the Securities Act of 1933, as amended (the “Act”):

 

“The
securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the “Act”),
or applicable state law. Neither the securities nor any interest therein may be offered for sale, sold or otherwise transferred
except pursuant to an effective registration statement under the Securities Act, or pursuant to an exemption from registration
under the Securities Act and applicable state law which, in the opinion of counsel to the Company, is available.”

 

    	2

    	 

    

 

3.        
  Transfer.

 

3.1           General
Restrictions. The registered Holder of this Purchase Warrant agrees by his, her or its acceptance hereof, that such Holder
will not: (a) sell, transfer, assign, pledge or hypothecate this Purchase Warrant for a period of one hundred eighty (180) days
following the Effective Date to anyone other than: (i) [Aegis Capital Corp. (“Aegis”)][Feltl and Company, Inc.
(“Feltl”)] or an underwriter or a selected dealer participating in the Offering, or (ii) a bona fide officer
or partner of [Aegis Capital Corp.] [Feltl and Company, Inc.] or of any such underwriter or selected dealer, in each case in accordance
with FINRA Conduct Rule 5110(g)(1), or (b) cause this Purchase Warrant or the securities issuable hereunder to be the subject of
any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of this Purchase
Warrant or the securities hereunder, except as provided for in FINRA Rule 5110(g)(2). On and after 180 days after the Effective
Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws. In order to make
any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto duly executed and completed,
together with the Purchase Warrant and payment of all transfer taxes, if any, payable in connection therewith. The Company shall
within five (5) Business Days transfer this Purchase Warrant on the books of the Company and shall execute and deliver a new Purchase
Warrant or Purchase Warrants of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate
number of Shares purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.

 

3.2           Restrictions
Imposed by the Securities Act. The securities evidenced by this Purchase Warrant shall not be transferred unless and until:
(i) the Company has received the opinion of counsel for the Holder that the securities may be transferred pursuant to an exemption
from registration under the Securities Act and applicable state securities laws, the availability of which is established to the
reasonable satisfaction of the Company (the Company hereby agreeing that the opinion of Reed Smith LLP shall be deemed satisfactory
evidence of the availability of an exemption), or (ii) a registration statement or a post-effective amendment to the Registration
Statement relating to the offer and sale of such securities has been filed by the Company and declared effective by the U.S. Securities
and Exchange Commission (the ”Commission”) and compliance with applicable state securities law has been
established.

 

4.      
    Registration Rights.

 

4.1          Demand
Registration.

 

4.1.1           Grant
of Right. The Company, upon written demand (a “Demand Notice”) of the Holder(s) of at least 51% of the Purchase
Warrants and/or the underlying Shares (“Majority Holders”), agrees to register, on one occasion, all or any portion
of the Shares underlying the Purchase Warrants (collectively, the “Registrable Securities”). On such occasion,
the Company will file a registration statement with the Commission covering the Registrable Securities within sixty (60) days after
receipt of a Demand Notice and use its reasonable best efforts to have the registration statement declared effective promptly thereafter,
subject to compliance with review by the Commission; provided, however, that the Company shall not be required to
comply with a Demand Notice if the Company has filed a registration statement with respect to which the Holder is entitled to piggyback
registration rights pursuant to Section 4.2 hereof and either: (i) the Holder has elected to participate in the offering covered
by such registration statement or (ii) if such registration statement relates to an underwritten primary offering of securities
of the Company, until the offering covered by such registration statement has been withdrawn or until thirty (30) days after such
offering is consummated. The demand for registration may be made at any time during a period of four (4) years beginning on the
Commencement Date. The Company covenants and agrees to give written notice of its receipt of any Demand Notice by any Holder(s)
to all other registered Holders of the Purchase Warrants and/or the Registrable Securities within ten (10) days after the date
of the receipt of any such Demand Notice.

 

    	3

    	 

    

 

4.1.2           Terms.
The Company shall bear all fees and expenses attendant to the registration of the Registrable Securities pursuant to Section 4.1.1,
but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to
represent them in connection with the sale of the Registrable Securities. The Company agrees to use its reasonable best efforts
to cause the filing required herein to become effective promptly and to qualify or register the Registrable Securities in such
States as are reasonably requested by the Holder(s); provided, however, that in no event shall the Company be required
to register the Registrable Securities in a State in which such registration would cause: (i) the Company to be obligated to register
or license to do business in such State or submit to general service of process in such State, or (ii) the principal shareholders
of the Company to be obligated to escrow their shares of capital stock of the Company. The Company shall cause any registration
statement filed pursuant to the demand right granted under Section 4.1.1 to remain effective for a period of at least twelve (12)
consecutive months after the date that the Holders of the Registrable Securities covered by such registration statement are first
given the opportunity to sell all of such securities. The Holders shall only use the prospectuses provided by the Company to sell
the shares covered by such registration statement, and will immediately cease to use any prospectus furnished by the Company if
the Company advises the Holder that such prospectus may no longer be used due to a material misstatement or omission. Notwithstanding
the provisions of this Section 4.1.2, the Holder shall be entitled to a demand registration under this Section 4.1.2 on only one
(1) occasion and such demand registration right shall terminate on the fifth anniversary of the effectiveness of the registration
statement in accordance with FINRA Rule 5110(f)(2)(H)(iv).

 

4.2       
   “Piggy-Back” Registration.

 

4.2.1           Grant
of Right. In addition to the demand right of registration described in Section 4.1 hereof, the Holder shall have the right,
for a period of no more than seven (7) years from the date of effectiveness of the registration statement in accordance with FINRA
Rule 5110(f)(2)(H)(v), to include the Registrable Securities as part of any other registration of securities filed by the Company
(other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to Form
S-8 or any equivalent form); provided, however, that if, solely in connection with any primary underwritten public
offering for the account of the Company, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation
on the number of shares of Common Stock which may be included in the Registration Statement because, in such underwriter(s)’
judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall
be obligated to include in such Registration Statement only such limited portion of the Registrable Securities with respect to
which the Holder requested inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of Registrable Securities
shall be made pro rata among the Holders seeking to include Registrable Securities in proportion to the number of Registrable Securities
sought to be included by such Holders; provided, however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities
in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities.

 

    	4

    	 

    

 

4.2.2           Terms.
The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 4.2.1 hereof,
but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to
represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company
shall furnish the then Holders of outstanding Registrable Securities with not less than thirty (30) days written notice prior to
the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration
statement filed by the Company until such time as all of the Registrable Securities have been sold by the Holder. The holders of
the Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice within
ten (10) days of the receipt of the Company’s notice of its intention to file a registration statement. Except as otherwise
provided in this Purchase Warrant, there shall be no limit on the number of times the Holder may request registration under this
Section 4.2.2; provided, however, that such registration rights shall terminate on the sixth anniversary of the Commencement
Date.

 

4.3     
     General Terms.

 

4.3.1           Indemnification.
The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder
and each person, if any, who controls such Holders within the meaning of Section 15 of the Securities Act or Section 20 (a) of
the Securities Exchange Act of 1934, as amended (“Exchange Act”), against all loss, claim, damage, expense or
liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise,
arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which
the Company has agreed to indemnify the Underwriters contained in Section 5.1 of the Underwriting Agreement between the Underwriters
and the Company, dated as of $[•], 2013. The Holder(s) of the Registrable Securities to be sold pursuant to such registration
statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, against all loss, claim,
damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may become subject under the Securities Act, the Exchange Act
or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for
specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section
5.2 of the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company.

 

4.3.2           Exercise
of Purchase Warrants. Nothing contained in this Purchase Warrant shall be construed as requiring the Holder(s) to exercise
their Purchase Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.

 

4.3.3           Documents
Delivered to Holders. The Company shall furnish to each Holder participating in any of the foregoing offerings and to each
underwriter of any such offering, if any, a signed counterpart, addressed to such Holder or underwriter, of: (i) an opinion of
counsel to the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten
public offering, an opinion dated the date of the closing under any underwriting agreement related thereto), and (ii) a “cold
comfort” letter dated the effective date of such registration statement (and, if such registration includes an underwritten
public offering, a letter dated the date of the closing under the underwriting agreement) signed by the independent registered
public accounting firm which has issued a report on the Company’s financial statements included in such registration statement,
in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein)
and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements,
as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in
underwritten public offerings of securities. The Company shall also deliver promptly to each Holder participating in the offering
requesting the correspondence and memoranda described below and to the managing underwriter, if any, copies of all correspondence
between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or
its staff with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary
to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties
and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent
and at such reasonable times as any such Holder shall reasonably request.

 

    	5

    	 

    

 

4.3.4   
        Underwriting Agreement. The Company shall enter into an underwriting
agreement with the managing underwriter(s), if any, selected by any Holders whose Registrable Securities are being registered
pursuant to this Section 4, which managing underwriter shall be reasonably satisfactory to the Company. Such agreement shall
be reasonably satisfactory in form and substance to the Company, each Holder and such managing underwriters, and shall
contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in
agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement relating
to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and
for the benefit of such Holders. Such Holders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters except as they may relate to such Holders, their Shares and their intended
methods of distribution.

 

4.3.5           Documents
to be Delivered by Holder(s). Each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company
a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.

 

4.3.6    
      Damages. Should the registration or the effectiveness thereof required by
Sections 4.1 and 4.2 hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the
Holder(s) shall, in addition to any other legal or other relief available to the Holder(s), be entitled to obtain specific
performance or other equitable (including injunctive) relief against the threatened breach of such provisions or the
continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or
other security.

 

5.         
 New Purchase Warrants to be Issued.

 

5.1           Partial
Exercise or Transfer. Subject to the restrictions in Section 3 hereof, this Purchase Warrant may be exercised or assigned in
whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Warrant for cancellation,
together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax
if exercised pursuant to Section 2.1 hereto, the Company shall cause to be delivered to the Holder without charge a new Purchase
Warrant of like tenor to this Purchase Warrant in the name of the Holder evidencing the right of the Holder to purchase the number
of Shares purchasable hereunder as to which this Purchase Warrant has not been exercised or assigned.

 

5.2           Lost
Certificate. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this
Purchase Warrant and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver
a new Purchase Warrant of like tenor and date. Any such new Purchase Warrant executed and delivered as a result of such loss, theft,
mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.

 

    	6

    	 

    

 

6.    
      Adjustments.

 

6.1           Adjustments
to Exercise Price and Number of Securities. The Exercise Price and the number of Shares underlying the Purchase Warrant shall
be subject to adjustment from time to time as hereinafter set forth:

 

6.1.1           Share
Dividends; Split Ups. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding
Shares is increased by a stock dividend payable in Shares or by a split up of Shares or other similar event, then, on the effective
day thereof, the number of Shares purchasable hereunder shall be increased in proportion to such increase in outstanding Shares,
and the Exercise Price shall be proportionately decreased.

 

6.1.2           Aggregation
of Shares. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is decreased
by a consolidation, combination or reclassification of Shares or other similar event, then, on the effective date thereof, the
number of Shares purchasable hereunder shall be decreased in proportion to such decrease in outstanding Shares, and the Exercise
Price shall be proportionately increased.

 

6.1.3           Replacement
of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding Shares other than
a change covered by Section 6.1.1 or 6.1.2 hereof or that solely affects the par value of such Shares, or in the case of any share
reconstruction or amalgamation or consolidation of the Company with or into another corporation (other than a consolidation or
share reconstruction or amalgamation in which the Company is the continuing corporation and that does not result in any reclassification
or reorganization of the outstanding Shares), or in the case of any sale or conveyance to another corporation or entity of the
property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder
of this Purchase Warrant shall have the right thereafter (until the expiration of the right of exercise of this Purchase Warrant)
to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the
kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization,
share reconstruction or amalgamation, or consolidation, or upon a dissolution following any such sale or transfer, by a Holder
of the number of Shares of the Company obtainable upon exercise of this Purchase Warrant immediately prior to such event; and if
any reclassification also results in a change in Shares covered by Section 6.1.1 or 6.1.2, then such adjustment shall be made pursuant
to Sections 6.1.1, 6.1.2 and this Section 6.1.3. The provisions of this Section 6.1.3 shall similarly apply to successive reclassifications,
reorganizations, share reconstructions or amalgamations, or consolidations, sales or other transfers.

 

6.1.4           Changes
in Form of Purchase Warrant. This form of Purchase Warrant need not be changed because of any change pursuant to this Section 6.1,
and Purchase Warrants issued after such change may state the same Exercise Price and the same number of Shares as are stated in
the Purchase Warrants initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance of new Purchase
Warrants reflecting a required or permissive change shall not be deemed to waive any rights to an adjustment occurring after the
Commencement Date or the computation thereof.

 

    	7

    	 

    

 

6.2           Substitute
Purchase Warrant. In case of any consolidation of the Company with, or share reconstruction or amalgamation of the Company
with or into, another corporation (other than a consolidation or share reconstruction or amalgamation which does not result in
any reclassification or change of the outstanding Shares), the corporation formed by such consolidation or share reconstruction
or amalgamation shall execute and deliver to the Holder a supplemental Purchase Warrant providing that the holder of each Purchase
Warrant then outstanding or to be outstanding shall have the right thereafter (until the stated expiration of such Purchase Warrant)
to receive, upon exercise of such Purchase Warrant, the kind and amount of shares of stock and other securities and property receivable
upon such consolidation or share reconstruction or amalgamation, by a holder of the number of Shares of the Company for which such
Purchase Warrant might have been exercised immediately prior to such consolidation, share reconstruction or amalgamation, sale
or transfer. Such supplemental Purchase Warrant shall provide for adjustments which shall be identical to the adjustments provided
for in this Section 6. The above provision of this Section shall similarly apply to successive consolidations or share reconstructions
or amalgamations.

 

6.3           Elimination
of Fractional Interests. The Company shall not be required to issue certificates representing fractions of Shares upon the
exercise of the Purchase Warrant, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being
the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up or down, as the case may
be, to the nearest whole number of Shares or other securities, properties or rights.

 

7.
            Reservation and Listing. The Company shall at all
times reserve and keep available out of its authorized Shares, solely for the purpose of issuance upon exercise of the
Purchase Warrants, such number of Shares or other securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Purchase Warrants and payment of the Exercise Price
therefor, in accordance with the terms hereby, all Shares and other securities issuable upon such exercise shall be duly and
validly issued, fully paid and non-assessable and not subject to preemptive rights of any shareholder. The Company further
covenants and agrees that upon exercise of the Purchase Warrants and payment of the exercise price therefor, all Shares and
other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not
subject to preemptive rights of any shareholder. As long as the Purchase Warrants shall be outstanding, the Company shall use
its commercially reasonable efforts to cause all Shares issuable upon exercise of the Purchase Warrants to be listed (subject
to official notice of issuance) on all national securities exchanges (or, if applicable, on the OTC Bulletin Board or any
successor trading market) on which the Shares issued to the public in the Offering may then be listed and/or quoted.

 

8.       
   Certain Notice Requirements.

 

8.1           Holder’s
Right to Receive Notice. Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to
receive notice as a shareholder for the election of directors or any other matter, or as having any rights whatsoever as a shareholder
of the Company. If, however, at any time prior to the expiration of the Purchase Warrants and their exercise, any of the events
described in Section 8.2 shall occur, then, in one or more of said events, the Company shall give written notice of such event
at least fifteen days prior to the date fixed as a record date or the date of closing the transfer books for the determination
of the shareholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of
the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder
a copy of each notice given to the other shareholders of the Company at the same time and in the same manner that such notice is
given to the shareholders.

 

    	8

    	 

    

 

8.2           Events
Requiring Notice. The Company shall be required to give the notice described in this Section 8 upon one or more of the following
events: (i) if the Company shall take a record of the holders of its Shares for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings,
as indicated by the accounting treatment of such dividend or distribution on the books of the Company, (ii) the Company shall offer
to all the holders of its Shares any additional shares of capital stock of the Company or securities convertible into or exchangeable
for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution, liquidation
or winding up of the Company (other than in connection with a consolidation or share reconstruction or amalgamation) or a sale
of all or substantially all of its property, assets and business shall be proposed.

 

8.3           Notice
of Change in Exercise Price. The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to
Section 6 hereof, send notice to the Holders of such event and change (“Price Notice”). The Price Notice shall
describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the
Company’s Chief Financial Officer.

 

8.4           Transmittal
of Notices. All notices, requests, consents and other communications under this Purchase Warrant shall be in writing and shall
be deemed to have been duly made when hand delivered, or mailed by express mail or private courier service: (i) if to the registered
Holder of the Purchase Warrant, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company,
to following address or to such other address as the Company may designate by notice to the Holders:

 

If to the Holder:

 

Aegis Capital Corp.

810 Seventh Avenue, 11th Floor

New York, New York 10019

Attn: Mr. David Bocchi, Managing Director of Investment Banking

Fax No.: (212) 813-1047

 

Feltl and Company, Inc.

2100 LaSalle Plaza

800 LaSalle Ave

Minneapolis, Minnesota 55402

Attn: Chris Pravecek, Director of Investment Banking

Fax: (612) 492-8899

 

with a copy (which shall not constitute notice) to:

 

Reed Smith LLP

599 Lexington Avenue

New York, NY 10022

Attn: Yvan-Claude Pierre, Esq.

Fax No.:  212-521-5450

 

If to the Company:

 

xG Technology, Inc.

240 S. Pineapple Avenue, Suite 701

Sarasota, FL 34236

Attention: Roger G. Branton

Fax No: (941) 954-8595

 

    	9

    	 

    

 

with a copy (which shall not constitute notice) to:

 

Robinson Brog Leinwand Greene Genovese & Gluck P.C.

875 Third Avenue — 9th Floor

New York, New York 10022

Attention: David E. Danovitch

Fax No: (212) 956-2164

 

9.      
    Miscellaneous.

 

9.1           Amendments.
The Company and [Aegis][Feltl] may from time to time supplement or amend this Purchase Warrant without the approval of any of the
Holders in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent
with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder that the
Company and [Aegis][Feltl] may deem necessary or desirable and that the Company and [Aegis][Feltl] deem shall not adversely affect
the interest of the Holders. All other modifications or amendments shall require the written consent of and be signed by the party
against whom enforcement of the modification or amendment is sought.

 

9.2           Headings.
The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Purchase Warrant.

 

9.3.          Entire
Agreement. This Purchase Warrant (together with the other agreements and documents being delivered pursuant to or in connection
with this Purchase Warrant) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and
supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.

 

9.4           Binding
Effect. This Purchase Warrant shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and
their permitted assignees, respective successors, legal representatives and assigns, and no other person shall have or be construed
to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Warrant or any provisions
herein contained.

 

9.5           Governing
Law; Submission to Jurisdiction; Trial by Jury. This Purchase Warrant shall be governed by and construed and enforced in accordance
with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees
that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Warrant shall be brought
and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District
of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any
objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served
upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address set forth in Section 8 hereof. Such mailing shall be deemed personal service and shall
be legal and binding upon the Company in any action, proceeding or claim. The Company and the Holder agree that the prevailing
party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees
and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on
its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and the Holder hereby
irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated hereby.

 

    	10

    	 

    

 

9.6           Waiver,
etc. The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Warrant shall not
be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Warrant or
any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase
Warrant. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Warrant shall be
effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver
is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any
other or subsequent breach, non-compliance or non-fulfillment.

 

9.7           Execution
in Counterparts. This Purchase Warrant may be executed in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and
the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and
delivered to each of the other parties hereto. Such counterparts may be delivered by facsimile transmission or other electronic
transmission.

 

9.8           Exchange
Agreement. As a condition of the Holder’s receipt and acceptance of this Purchase Warrant, Holder agrees that, at any
time prior to the complete exercise of this Purchase Warrant by Holder, if the Company and [Aegis][Feltl] enter into an agreement
(“Exchange Agreement”) pursuant to which they agree that all outstanding Purchase Warrants will be exchanged
for securities or cash or a combination of both, then Holder shall agree to such exchange and become a party to the Exchange Agreement.

 

[Signature Page Follows]

 

    	11

    	 

    

 

IN WITNESS WHEREOF, the Company
has caused this Purchase Warrant to be signed by its duly authorized officer as of the ____ day of _______, 2013.

 

	XG TECHNOLOGIES, INC.
	 	 
	By:	 
	 	Name: 
	 	Title: 

 

    	12

    	 

    

 

 

[Form to be used to exercise
Purchase Warrant]

 

Date: __________,
20___

 

The undersigned
hereby elects irrevocably to exercise the Purchase Warrant for ______ shares of common stock, par value $0.00001 per share (the
“Shares”), of xG Technologies, Inc., a Delaware corporation (the “Company”), and hereby makes
payment of $____ (at the rate of $____ per Share) in payment of the Exercise Price pursuant thereto. Please issue the Shares as
to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase
Warrant representing the number of Shares for which this Purchase Warrant has not been exercised.

 

or

 

The undersigned
hereby elects irrevocably to convert its right to purchase ___ Shares of the Company under the Purchase Warrant for ______ Shares,
as determined in accordance with the following formula:

 

	 	X	=	Y(A-B)	 
	A	 
	Where,	 	 	 
	 	X	=	The number of Shares to be issued to Holder;
	 	Y	=	The number of Shares for which the Purchase Warrant is being exercised;
	 	A	=	The fair market value of one Share which is equal to $_____; and
	 	B	=	The Exercise Price which is equal to $______ per share
	 	 	 	 	 	 	 

The undersigned
agrees and acknowledges that the calculation set forth above is subject to confirmation by the Company and any disagreement with
respect to the calculation shall be resolved by the Company in its sole discretion.

 

Please issue
the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a
new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been converted.

 

Signature
______________________________________

 

Signature
Guaranteed _____________________________

 

    	13

    	 

    

INSTRUCTIONS FOR REGISTRATION
OF SECURITIES

 

Name: _____________________________________

(Print in
Block Letters)

 

Address: ___________________________________

 

__________________________________

 

__________________________________

 

NOTICE: The
signature to this form must correspond with the name as written upon the face of the Purchase Warrant without alteration or enlargement
or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.

 

    	14

    	 

    

 

[Form to be used to assign
Purchase Warrant]

 

ASSIGNMENT

 

(To be executed by the registered
Holder to effect a transfer of the within Purchase Warrant):

 

FOR VALUE RECEIVED, __________________
does hereby sell, assign and transfer unto the right to purchase shares of common stock, par value $0.00001 per share, of xG Technologies,
Inc., a Delaware corporation (the “Company”), evidenced by the Purchase Warrant and does hereby authorize the
Company to transfer such right on the books of the Company.

 

Dated: __________, 20__

 

Signature ____________________________________

 

Signature Guaranteed ___________________________

 

NOTICE: The signature to this form must correspond
with the name as written upon the face of the within Purchase Warrant without alteration or enlargement or any change whatsoever,
and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered
national securities exchange.

 

    	15

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