Continuing Strong Demand in xMax Sees High Interest Levels in Convertible Preferred Equity and xG Accepts $120m.

LONDON -- xG Technology Inc. (AIM:XGT), the Florida based communications technology business, announces that it has received and accepted agreements to subscribe for $120m worth of convertible preferred equity securities ("Convertible Preferred Equity"). The initial level of non-binding interest received at the time of xG's admission to AIM, on 20 November, was $63m. The additional interest has come from a variety of financial institutions. While the demand substantially exceeded the $120m that were accepted, the Company chose to limit it to this amount and also to only those institutions who previously expressed interest.

All the agreements to subscribe are now binding, except for a cancellation provision up until the expiration of 28 days after the installation of the first base station network together with delivery of working handsets (the beginning of the Contract Period as defined below), unless previously waived. Unless cancelled, the subscribers will be required to pay for the Convertible Preferred Equity immediately at the end of the 28 day period (or at such earlier date as such provision is waived). Once the funding has been received, the Company will issue certificates evidencing the Convertible Preferred Equity.

At the election of the investors and subject to certain targets being achieved by the Company, the Convertible Preferred Equity will convert into Common Stock based on a valuation of US$700 million. Should such targets not be achieved, the investor can opt to not convert or in certain situations may convert at a $350 million valuation. Prior to any conversion, the Convertible Preferred Equity would not be considered as debt on the Company's balance sheet but treated as equity. Further terms of the Convertible Preferred Equity are set out in an appendix to this announcement.

The issue of the Convertible Preferred Equity on a non pre-emptive basis will require the approval of the existing shareholders through a special written resolution. It is intended that such approval will be obtained prior to the beginning of the Contract Period and will be announced in due course.

xG Technology owns and intends to commercially exploit the intellectual property rights to xG Flash Signal, an innovative Radio Frequency modulation and encoding technology.

Rick Mooers, Chairman & CEO of xG Technology Inc. stated: "At the time of our admission to AIM I stated that a number of parties had expressed a keen interest in seeking exposure to xG Technology prior to our US mobile VoIP network roll-out in Q2 2007. I am therefore extremely encouraged to see that in a very short space of time the support for this has now doubled from the level we initially set out to achieve. An issue of Convertible Preferred Equity allows potential investors to gain direct exposure to the Company whilst mitigating short-term risks. As xG needs no extra financing at present, this method offers a creative, flexible solution for all parties."

xG is a registered trade mark of xG Technology, Inc. under US Trade Mark Registration Number 3039835. xMax is a trademark of xG Technology, Inc.