CLOSING ESCROW AGREEMENT

 

THIS CLOSING ESCROW AGREEMENT

, dated as of the 27th day of September, 2004 (sometimes hereinafter referred to
as this "Escrow Agreement" or this "Agreement"), is by and among XFORMITY, INC.,
a Texas corporation ("XFM"), XML - GLOBAL TECHNOLOGIES, INC., a Colorado
corporation ("XML") and CLIFFORD L. NEUMAN, P.C.  (the "Escrow Agent").

W I T N E S S E T H:

WHEREAS

, XFM and XML are parties to that certain Agreement and Plan of Merger, dated
August 13, 2004 (the "Merger Agreement") (all initial capitalized terms used
herein shall have the meaning assigned to them in the Merger Agreement unless
otherwise defined herein);

WHEREAS

, pursuant to the terms of the Merger Agreement, XML has agreed to acquire XFM
for the the consideration specified therein, consisting of an aggregate of
71,791,936 shares of XML common stock, $.0001 par value (the "XML Common Stock")
and XML warrants exercisable to purchase, in the aggregate, 23,478,000 shares of
XML Common Stock (the "XML Warrants") (hereafter the XML Common Stock and XML
Warrants shall collectively be referred to as the "XML Securities");

WHEREAS

, Section 5.6 of the Merger Agreement requires that all of the XML Securities be
delivered into escrow at the Closing for the purpose of securing the obligation
of XFM under Section 4.1 of the Merger Agreement to deliver within 45 days
following the Closing Date of the Agreement audited financial statements
together with the report of independent public accountant of XFM ("XFM Financial
Statements") and pro forma financial information ("XFM Pro Formas") in
accordance with the requirements of Items 2 and 7 of Form 8-K under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and Item 310 of
Regulation SB under the Securities Act of 1933, as amended (the "Securities
Act"), which XML Securities will be held in escrow in accordance with the terms
hereof and for securing its obligations with respect to undisclosed liabilities
as set forth in Sections 4.2 and 5.6 of the Merger Agreement.

WHEREAS

, the Escrow Agent has agreed to act as escrow agent pursuant to the terms
hereof.

NOW, THEREFORE

, in consideration of the mutual obligations and covenants hereafter set forth,
XFM, XML and the Escrow Agent hereby covenant and agree as follows:

1.       Designation of Escrow Agent

.

       XFM and XML hereby designate and appoint the Escrow Agent as escrow agent
to serve in accordance with the terms of this Escrow Agreement during the Escrow
Period. The Escrow Agent hereby accepts such appointment and agrees to perform
the duties set forth herein.

2.        Delivery of XML Securities to Escrow

.

       The parties hereby acknowledge and agree that, on the Closing Date, the
parties shall deliver the following to the Escrow Agent ("Escrow Documents"):

       a.       XFM shall deliver to the Escrow Agent:

   

1.

Certificates representing 100% of the issued and outstanding shares of common
stock of XFM ("XFM Stock"), duly endorsed in favor of XML by each of the record
holders thereof ("XFM Shareholders");

   

2.

Subscription agreements executed by each XFM Shareholder; and

   

3.

Certificate of Merger to be filed with the Texas Secretary of State

       b.       XML shall deliver to the Escrow Agent:

   

1.

Certificates representing he XML Common Stock, registered in the names of the
XFM Shareholders, pro rata;

   

2.

Certificates representing the XML Warrants, registered in the names of the XFM
Shareholders, pro rata; and

   

3.

Articles of Merger to be filed with the Secretary of State of Colorado.

       The XML Securities shall be held in escrow and distributed in accordance
with the terms and provisions of this Escrow Agreement.

3.       Effect of Escrow.

       Notwithstanding the delivery of the Escrow Documents to the Escrow Agent
in accordance with Section 2 of this Escrow Agreement, XFM and XML agree that
the merger and the other transactions provided for or contemplated in the Merger
Agreement shall be deemed closed and consummated for all purposes, subject only
to the conditions subsequent contained in Section 4.1 of the Merger Agreement
and the requirements of Section 5(b) of this Escrow Agreement.

4.       Title to XML Securities and XFM Stock

       The Escrow Agent shall have no discretion whatsoever with respect to the
management, disposition or investment of the XML Securities and is not a trustee
or fiduciary to XFM, or XML or the XFM Shareholders. The Escrow Agent shall hold
the Escrow Documents in accordance with this Agreement until such time as this
Escrow terminates in accordance with the provisions of this Escrow Agreement:

       (a)       The XML Securities, shall be and remain the exclusive property
of the XFM Shareholders and XFM Shareholders shall possess and exercise all
rights of beneficial ownership with respect to such shares including, without
limitation, the right to vote such shares on all matters presented to the
shareholders of XML and the right to participate in any and all dividends,
recapitalizations and distributions undertaken, declared and paid by XML with
respect to the Shares. The delivery of the XML Securities pursuant to the terms
of this Agreement to the Escrow Agent shall in no way be deemed or construed to
be a transfer by XFM Shareholders of any right, title or interest in and to the
XML Securities to any other party, except to the extent provided for and subject
to the terms and conditions of this Agreement. Notwithstanding the foregoing,
until the XML Securities are distributed and released from escrow or this Escrow
Agreement is otherwise terminated in accordance with its terms, XFM Shareholders
may not sell, transfer, assign or encumber the XML Securities

       (b)       The XFM Stock shall be held by the Escrow Agent for the benefit
of XML for the sole purpose of being cancelled and retired in accordance with
the provisions of Section 5.1(c) of the Merger Agreement in the event this
Escrow Agreement is terminated in accordance with the provisions of Section 5(b)
below, or returned to the XFM Shareholders if this Escrow Agreement is
terminated pursuant to the provisions of Section 5(c) below, subject in either
case to reduction as set forth in Section 5(d) below.

5.       Release of Escrow Documents and Termination of Escrow.

       (a)       The Escrow Agent shall disburse Escrow Documents in accordance
with the joint written instructions of XML and XFM given at any time. Without
limiting the generality of the foregoing, XML and XFM may deliver a joint
written instruction (reasonably satisfactory to the Escrow Agent) directing the
Escrow Agent to make one or more deliveries of the Escrow Documents.

       (b)       In accordance with the Merger Agreement:

   

1.

within 45 days following the Closing Date, XFM has undertaken to cause to be
prepared and delivered to XML the XFM Financial Statements, together with report
of independent public accountant, and the XFM Pro Formas that conform, in all
material respects, to the requirements of Form 8-K under the Exchange Act and
Item 310 of Regulation SB under the Securities Act; and

   

2.

there has been filed with the Securities and Exchange Commission a Form 8-K
containing the XFM Financial Statements and XFM Pro Formas in accordance with
the requirements of Form 8-K under the Exchange Act.

Upon the satisfaction of the conditions set forth in Sections 5(b)(1) and (2)
above, XML shall promptly prepare, execute and deliver to the Escrow Agent a
written certification that the foregoing conditions of the Merger Agreement have
been satisfied. Upon receipt of the XML certification, the Escrow Agent shall:

   

(i)

release the XML Securities from escrow and deliver them to XFM, subject to
Section 5(d) below, as designated by XFM.

   

(ii)

deliver the Subscription Agreements of the XFM Shareholders to XML; and

   

(iii)

deliver the certificates representing the XFM Stock to XML for .

Upon the completion of the disbursements described in this Section 5(b), this
Escrow Agreement shall terminate.

       (c)       In the event the Escrow Agent has not received the XML
certification provided for in Section 5(b) above within 75 days of the Closing
Date, the Escrow Agent shall:

   

(i)

deliver the certificates representing the XFM Stock to XFM;

   

(ii)

deliver the Subscription Agreements of the XFM Shareholders to XFM; and

   

(iii)

deliver the XML Securities to XML.

       (d)       In the event that XML or any of its permitted assigns, and
their respective officers, directors, employees, owners, agents or permitted
successors-in-interest (collectively, the "XML Indemnified Parties") shall have
incurred a claim under Section 4.2 of 5.6 with respect to liabilities of XFM,
XML shall give written notice to XFM and the Escrow Agent of such claim in the
form attached hereto as Exhibit A (the "Notice of Claim"), directing the release
from escrow of the amount of the Escrow Shares having a Market Value equal to
the amount of the claim. For the purposes of this Escrow Agreement, Market Value
shall mean the average closing bid price of the XML Common Stock on the
Over-the-Counter Market as quoted on the OTC Electronic Bulletin Board for the
thirty (30) trading days immediately prior to the Closing Date, as published in
Bloomberg, L.P.

              (i) If XFM objects to the requested release from escrow, XFM
shall, within 14 days after the receipt of the Notice of Indemnification,
deliver to the Escrow Agent a notice of objection substantially in the form
attached hereto as Exhibit B (the "XFM Notice of Objection"), together with
proof that a copy thereof has been provided to XML in accordance with Section
16, which specifies the total amount of Escrow Shares that XFM objects to
releasing (the "Disputed Amount"). If the Escrow Agent receives the XFM Notice
of Objection within said 14 days, the Escrow Agent shall release to XML the
amount of Escrow Shares requested by XML in the Notice of Indemnification minus
the Disputed Amount, which amount may be all Escrow Shares, and shall continue
to hold the Disputed Amount in accordance with the terms hereof. If the Escrow
Agent does not receive the XFM Notice of Objection within said 14 days, the
Escrow Agent shall release and deliver to XML the amount of Escrow Shares
requested in the Notice of Indemnification.

              (ii) In the event that XFM files a XFM Notice of Objection in the
manner and within the time period prescribed herein, the Escrow Agent shall
retain the subject portion of the Escrow Shares, which portion may include all
the Escrow Shares, until otherwise directed by either (a) a joint written
instruction (reasonably satisfactory to the Escrow Agent) from XML and XFM or
(b) a copy of a final and non-appealable arbitration award or judgment.

              (iii) For the purposes of this Section 5(d) the number of shares
to be released in satisfaction of a claim shall be determined by the Market
Value, as defined herein, of the Escrow Shares calculated on the date the Notice
Claim is delivered to the Escrow Agent and XFM.

Upon the completion of the disbursements described in Section 5(c), this Escrow
Agreement shall terminate.

6.       Escrow Period

.

       The term of this Agreement shall commence on the date hereof and
terminate as described in Section 5 herein. The period during which this Escrow
Agreement shall be effective is herein referred to as the "Escrow Period."

7.       Effect of Termination Pursuant to Paragraph 5(c).

       In the event this Escrow Agreement is terminated pursuant to the
provisions of Section 5(c) above, such termination shall be deemed to constitute
the failure of a condition subsequent to the consummation of the merger and
other transactions provided for in the Merger Agreement. In such event, the
merger and all other transactions and agreements contained or provided for in
the Merger Agreement shall be deemed rescinded, ab initio, for all purposes.
Without limiting the generality of the foregoing, upon such termination:

       1.       All rights, obligations and undertakings of the parties under
the Merger Agreement and ancillary instruments, agreements and undertakings
contained therein shall be deemed terminated.

       2.       Each person who was elected or appointed as a director or
executive officer of XML shall be deemed to have automatically resigned any and
all positions with XML assumed, appointed or elected by virtue of the Merger
Agreement.

       3.       Any and all debts, obligations, loans, extensions of credit or
other payments made by XML to XFM or made on behalf of XFM to third parties
between the Closing Date of the Merger Agreement and the termination date of
this Escrow Agreement shall be deemed to have been advances and extensions of
credit under the Credit Agreement between XML and XFM dated as of April 30, 2004
and shall be deemed to be subject to the General Security Agreement created
thereunder.

8.        Escrow Agent

.

       (a)       The duties and responsibilities of the Escrow Agent shall be
limited to those expressly set forth in this Agreement. No implied duties of the
Escrow Agent shall be read into this Agreement and the Escrow Agent shall not be
subject to, or obliged to recognize any other agreement between, or direction or
instruction of, any or all the parties hereto even though reference thereto may
be made herein.

       (b)       In the event all or any part of the XML Securities shall be
attached, garnished or levied upon pursuant to any court order, or the delivery
thereof shall be stayed or enjoined by a court order, or any other order,
judgment or decree shall be made or entered by any court affecting the XML
Securities, or any part thereof, or any act of the Escrow Agent, the Escrow
Agent is hereby expressly authorized to obey and comply with all final writs,
orders, judgments or decrees so entered or issued by any court; and, if the
Escrow Agent obeys or complies with such writ, order, judgment or decree, it
shall not be liable to XFM or XML or to any other person by reason of such
compliance.

       (c)       The Escrow Agent shall not be liable to anyone for any damages,
losses or expenses incurred as a result of any act or omission of the Escrow
Agent. The Escrow Agent shall not incur any such liability with respect to (i)
any action taken or omitted in good faith upon the advice of counsel for the
Escrow Agent given with respect to any question relating to the duties and
responsibilities of the Escrow Agent under this Agreement or (ii) any action
taken or omitted in reliance upon any instrument, including any written notice
or instruction provided for herein, not only as to its due execution by an
authorized person as to the validity and effectiveness of such instrument, but
also as to the truth and accuracy of any information contained therein that the
Escrow Agent shall in good faith believe to be genuine, to have been signed by a
proper person or persons and to conform to the provisions of this Agreement.

       (d)       The Escrow Agent shall not be responsible for the sufficiency
or accuracy, or the form, execution, validity or genuineness, of documents
received hereunder, or for any description therein, nor shall it be responsible
or liable in any respect on account of the identity, authority or rights of any
person executing or delivering or purporting to execute or deliver any such
document or this Agreement, or on account of or by reason of forgeries, false
representations, or the exercise of its discretion in any particular manner, nor
shall the Escrow Agent be liable for any mistake of fact or of law or any error
of judgment, or for any act or omission, except as a result of its gross
negligence or willful malfeasance. The Escrow Agent is not authorized and shall
not disclose the name, address, or security positions of the parties or the
securities held hereunder in response to requests concerning shareholder
communications under Section 14 of the Exchange Act, the rules and regulations
thereunder, and any similar statute, regulation, or rule in effect from time to
time. Under no circumstances shall the Escrow Agent be liable for any general or
consequential damages or damages caused, in whole or in part, by the action or
inaction of XFM or XML or any of their respective agents or employees. The
Escrow Agent shall not be liable for any damage, loss, liability, or delay
caused by accidents, strikes, fire, flood, war, riot, equipment breakdown,
electrical or mechanical failure, acts of God or any cause which is reasonably
unavoidable or beyond its reasonable control.

       (e)       The Escrow Agent may consult with legal counsel of its own
choosing and shall be fully protected in acting or refraining from acting in
good faith and in accordance with the opinion of such counsel.

       (f)       In the event of a dispute between the parties hereto sufficient
in the discretion of the Escrow Agent to justify its doing so, the Escrow Agent
shall be entitled to tender the XML Securities into the registry or custody of
any court of competent jurisdiction, to initiate such legal proceedings as it
deems appropriate, and thereupon to be discharged from all further duties and
liabilities under this Agreement. Any such legal action may be brought in any
such court as the Escrow Agent shall determine to have jurisdiction over the XML
Securities. The filing of any such legal proceedings shall not deprive the
Escrow Agent of its compensation hereunder earned prior to such filing.

       (g)       The Escrow Agent shall be under no duty to take any legal
action in connection with this Agreement or towards its enforcement, or to
appear in, prosecute or defend any action or legal proceeding that would result
in or might cause it to incur any costs, expenses, losses or liability, unless
and until it shall be indemnified with respect thereto in accordance with
Section 8 of this Agreement.

       (h)       Any other controversy or claim arising out of or relating to
this Agreement, or the breach of the same, shall be settled through consultation
and negotiation in good faith and a spirit of mutual cooperation. However, if
those attempts fail, each of the parties agrees that any dispute or controversy
arising out of or in connection with this Agreement or any alleged breach hereof
shall be settled by arbitration in Chicago, Illinois, pursuant to the Commercial
Arbitration Rules of the AAA. If XFM and XML cannot jointly select a single
arbitrator to determine the matter, one arbitrator shall be chosen by each of
XFM and XML (or, if a party fails to make a choice, by the AAA on behalf of such
party) and the two arbitrators so chosen will select a third (or, if they fail
to make a choice, by the AAA). The decision of the single arbitrator jointly
selected by XFM and XML, or, if three arbitrators are selected, the decision of
any two of them will be final and binding upon the parties and the judgment of a
court of competent jurisdiction may be entered thereon. The arbitrator or
arbitrators shall award the costs and expenses of the arbitration, including
reasonable attorneys' fees, disbursements, arbitration expenses, arbitrators'
fees and the administrative fee of the AAA, to the prevailing party as shall be
determined by the arbitrator or arbitrators.

9.       The Escrow Agent's Fees.

       All fees and expenses of the Escrow Agent shall be as set forth on
Exhibit A attached hereto and incorporated herein and shall be paid by XML.

10.       Indemnification of the Escrow Agent

.

       XML and XFM each agrees, jointly and severally, to indemnify the Escrow
Agent and hold it harmless against any losses, claims, damages, liabilities
and/or expenses, including reasonable costs of investigation and fees and
expenses of independent counsel and disbursements (collectively, the "Escrow
Agent Losses") which may be imposed upon the Escrow Agent or incurred by it in
connection with the performance of its duties hereunder, including any
litigation arising from this Escrow Agreement or involving its subject matter,
except for Escrow Agent Losses incurred by the Escrow Agent resulting from its
own gross negligence or willful misconduct. In so agreeing to indemnify and hold
harmless the Escrow Agent, as among themselves, XFM on the one hand, and XML on
the other, intend hereby to share equally (50% to XFM and 50% to XML) all
amounts required to be paid pursuant to this Section 10. This indemnification
shall survive the termination or the resignation or removal of the Escrow Agent.

11.       Resignation of the Escrow Agent

.

       It is understood that the Escrow Agent reserves the right to resign as
Escrow Agent at any time by giving written notice of its resignation, specifying
the effective date thereof, to XFM and XML. Within thirty (30) days after
receiving the aforesaid notice, XFM and XML shall appoint a successor Escrow
Agent to which the Escrow Agent may distribute the property then held hereunder,
less its fees, costs and expenses (including counsel fees and expenses) which
may remain unpaid at that time. If a successor Escrow Agent has not been
appointed and has not accepted such appointment by the end of such thirty (30)
day period, the Escrow Agent may apply to a court of competent jurisdiction for
the appointment of a successor Escrow Agent and the fees, costs and expenses
(including reasonable counsel fees and expenses) which it incurs in connection
with such a proceeding shall be paid by XFM.

12.       Amendment.

       This Escrow Agreement may be amended by and upon written notice to the
Escrow Agent at any time given jointly by XML and XFM, but the duties or powers
or responsibilities of the Escrow Agent may not be increased without its
consent. However, any successor to the business of Escrow Agent whether by
reorganization or otherwise, will act with like effect as though originally
named.

13.        Termination

.

       This Escrow Agreement may be terminated at any time upon ten (10)
calendar days' notice by an instrument executed by XML and XFM and delivered to
the Escrow Agent. This Escrow Agreement shall thereupon terminate on the date
specified in such notice or, if no date is specified, on the tenth business day
following receipt thereof by the Escrow Agent. Such notice shall specify the
disposition by the Escrow Agent of the Escrow Documents. This Escrow Agreement
shall also terminate on the date that the Escrow Documents have been released
according to the terms hereof.

14.       Certain Corporate Matters

.

       XFM hereby appoints the following persons to serve as authorized
signatories of XFM hereunder and to give any instruction contemplated hereby.
The signature set forth opposite each person's name is his genuine signature.

 

Name

Signature

 

Sheldon Drobny

/s/ Sheldon Drobny                         

XML hereby appoints the following persons to serve as authorized signatories of
XML hereunder and to give any instruction contemplated hereby. The signature set
forth opposite each person's name is his genuine signature.

 

Name

Signature

 

Mark Haugejorde

/s/ Mark Haugejorde                      

Each of the XFM and XML may add additional authorized signatories, or revoke the
authority of the above signatories, by notice to the other and to the Escrow
Agent

15.       Miscellaneous

.

       (a)       This Escrow Agreement is binding upon, and shall inure to the
benefit of, and be enforceable by the respective beneficiaries, representatives,
successors and assigns of the parties hereto.

       (b)       Other than the Merger Agreement, this Escrow Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof. Nothing herein shall limit or affect the rights of the parties under the
Merger Agreement.

       (c)       This Escrow Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado..

       (d)       This Escrow Agreement, and any of the notices issued pursuant
hereto, may be executed simultaneously in one or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.

       (e)       Article headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Escrow Agreement.

16.        Notices

.

       All notices provided for hereunder shall be in writing and shall be
deemed to be given: (a) when delivered to the individual, or to an officer of
the company, to which the notice is directed; or (b) three days after the same
has been deposited in the United States mail sent Certified or Registered mail
with Return Receipt Requested, postage prepaid and addressed as provided in this
Section; or (c) when delivered by an overnight delivery service (including
Federal Express or United States Express Mail) with receipt acknowledged and
with all charges prepaid by the sender addressed as provided in this Section.
Notices shall be directed as follows:

       if to XFM:

       XFormity, Inc.
       14333 Proton Drive
       Dallas, Texas 75244

      Fax (703) 430-2142

       Attention: Mark Haugejorde, President

       With copy to:

       Matt Hutchins, Esq.
       Andrews Kurth, LLP
       1717 Main Street
       Suite 3700
       Dallas Texas 75201
       Fax: (214) 659-4401

       if to XML:

       XML - Global Technologies, Inc.
       3000 North Dundee Road, Suite 105
       Northbrook, Illinois 60062

       Attention: Sheldon Drobny, President

       if to the Escrow Agent:

       Clifford L. Neuman, P.C.
       1507 Pine Street
       Boulder, Colorado  80302

If the date on which any action, calculation or notice required or permitted to
be taken, made or given hereunder is other than a business day, then such
action, calculation or notice, as the case may be, may be taken, made or given
on the next succeeding business day.

       IN WITNESS WHEREOF

, this Escrow Agreement has been duly executed and delivered by the duly
authorized officers of XFM, XML and the Escrow Agent, on the date first above
written.

       XFM:

       XFORMITY, INC.

       By:/s/ Mark Haugejorde                      
            Name: Mark Haugejorde
            Title: President

       XML:

       XML - GLOBAL TECHNOLOGIES, INC.

       By:/s/ Sheldon Drobny                         
            Name: Sheldon Drobny
            Title: President

       ESCROW AGENT:

       By: /s/ Clifford L. Neuman                      
            Name:  Clifford L. Neuman, P.C.
            Title:  Escrow Agent