ex10-10.htm


    
       

      Exhibit
        10.10

      SECURITY
        AGREEMENT

       

      THIS
        SECURITY AGREEMENT (the
“Security
        Agreement”) is dated as of the ____ day of December 2007 by and among XA,
        Inc., a Nevada Corporation (“XA”),
        The Experiential Agency, Inc., XA Scenes, Inc., XA Interactive, Inc., and
        Fiori
        XA, Inc. (collectively the with XA, the “Debtor”)
        and Vision Opportunity Master Fund, Ltd.(the “Secured
        Party”).

       

      WITNESSETH

       

      WHEREAS,
        pursuant to a
        Securities Purchase Agreement, dated as of the date hereof, as may be amended
        or
        supplemented from time to time (the “SPA”),
        the Debtor is selling to the Secured Party 11% Senior Secured Convertible
        Promissory Notes, in the principal amount of $200,000 in 11% Senior Secured
        Convertible Promissory Note are being sold on the date hereof, (the “Second
        Follow On Notes”), which is in addition to an aggregate of $3,150,000 in
        11% Senior Secured Convertible Promissory Notes previously sold by the Debtor
        to
        certain parties (the “Prior
        Purchasers”) in August, September and October 2006 and June 2007 (the
“Prior
        Notes”) and along with the Follow On Notes, each, a “Note”:
        and collectively, the “Notes”)
        sold to certain parties (the “Purchasers”);
        and

       

      
        WHEREAS,
          Debtor has agreed,
          pursuant to the terms and conditions of the SPA, in connection with the
          Financing described therein, to secure the repayment of the Note, as more
          specifically provided herein;

         

        NOW,
          THEREFORE, in
          consideration of the foregoing, Debtor and the Secured Party agree as
          follows:

         

        SECTION
          1.                                
Definitions.

         

        1.1 
Certain
          Defined Terms.
The following
          terms, as used herein, have the meanings set forth
          below:

         

        “Accounts”
          means all “accounts” (as defined in the UCC) now owned or hereafter created or
          acquired by Debtor including all of the following now owned or hereafter
          created
          or acquired by Debtor: (a) accounts receivable, contracts, contract rights,
          book debts, notes, drafts and other obligations or indebtedness owing to
          Debtor
          arising from the sale, lease or exchange of goods or other property or
          the
          performance of services; (b) Debtor’s rights in, to and under all purchase
          orders for goods, services or other property; (c) Debtor’s rights to any
          goods, services or other property represented by any of the foregoing (including
          returned or repossessed goods and unpaid sellers’ rights of rescission,
          repletion, reclamation and rights to stoppage in transit); (d) monies due
          to or to become due to Debtor under all contracts for the sale, lease or
          exchange of goods or other property or the performance of services (whether
          or
          not yet earned by performance on the part of Debtor); and (e) Proceeds of
          any of the foregoing and all collateral security and guaranties of any
          kind
          given by any Person with respect to any of the foregoing.

         

        
          
            
            

          

          
            -1-

            
              

            

          

          
            
            

          

        

        “Collateral”
          has the meaning assigned to that term in Section 2.

         

        “Computer
          Software”
or
“Software”
          means a computer program and any supporting information provided in connection
          with a transaction relating to the program.

         

        “Contracts”
          means all contracts and agreements (as defined in the UCC).

         

        “Copyrights”
          means collectively all of the following now owned or hereafter created
          or
          acquired by Debtor: (a) all literary works, derivative works, works for
          hire, compositions, compilations of all or some of the foregoing, whether
          published or unpublished, all registrations or recordings thereof, and
          all
          applications in connection therewith including registrations, recordings
          and
          applications in the Copyright Office of the United States, or any other
          country;
          (b) all reissues, extensions or renewals thereof; (c) all income,
          royalties, damages and payments now or hereafter due or payable under any
          of the
          foregoing or with respect to any of the foregoing including damages or
          payments
          for past or future infringements of any of the foregoing; (d) the right to
          sue for past, present and future infringements or any of the foregoing;
          and
          (e) all rights corresponding to any of the foregoing throughout the
          world.

         

        “Debtor”
          has the meaning assigned to that term in the introduction to this Security
          Agreement.

         

        “Documents”
          means all “documents” (as defined in the UCC) or other receipts covering,
          evidencing or representing goods now owned or hereafter acquired by
          Debtor.

         

        “Equipment”
          means all “equipment” (as defined in the UCC) now owned or hereafter acquired by
          Debtor including all machinery, motor vehicles, trucks, trailers, vessels,
          aircraft and rolling stock and all parts thereof and all additions and
          accessions thereto and replacements therefor.

         

      

       

      
        “Event
          of
          Default” has the meaning assigned to that term in Section 8(a).

         

        “Fixtures”
          means all of the following now owned or hereafter acquired by Debtor: plant
          fixtures; business fixtures; other fixtures and storage office facilities,
          wherever located; and all additions and accessions thereto and replacements
          therefor.

         

        “General
          Intangibles” means all “general intangibles” (as defined in the UCC) now
          owned or hereafter acquired by Debtor including all right, title and interest
          of
          Debtor in and to: (a) all Software of the Debtor, including all source code
          and object code thereto; (b) all agreements, leases, licenses and contracts
          to which Debtor is or may become a party; (c) all obligations or
          indebtedness owing to Debtor (other than Accounts) from whatever source
          arising;
          (d) all tax refunds; (e) Intellectual Property; and (f) all trade
          secrets and other confidential information relating to the business of
          Debtor.

         

        
          
            
            

          

          
            -2-

            
              

            

          

          
            
            

          

        

        “Instruments”
          means all “instruments” “chattel paper” or “letters of credit” (each as defined
          in the UCC) including promissory notes, drafts, bills of exchange and trade
          acceptances, now owned or hereafter acquired by Debtor.

         

        “Intellectual
          Property” means collectively all of the following: Copyrights, Copyright
          Licenses, Patents, Trademarks and Trademark Licenses.

         

         “Inventory”
          means all “inventory” (as defined in the UCC), now owned or hereafter acquired
          by Debtor, wherever located including finished goods, raw materials, work
          in
          process and other materials and supplies (including packaging and shipping
          materials) used or consumed in the manufacture or production thereof and
          goods
          which are returned to or repossessed by Debtor.

         

        “Permitted
          Senior Indebtedness” shall mean the prior first priority security
          interest of LaSalle Bank National Association (“LaSalle”), and/or any other bank
          or institutional lending source which shall replace and/or supersede the
          LaSalle
          loan and debt ; provided,
          however, that in no case shall the aggregate amount of such Permitted
          Senior Indebtedness exceed eight hundred and seventy-five thousand dollars
          ($875,000).

         

        “Proceeds”
          means all proceeds of, and all other profits, rentals or receipts, in whatever
          form, arising from the collection, sale, lease, exchange, assignment, licensing
          or other disposition of, or realization upon, any Collateral including
          all
          claims of Debtor against third parties for loss of, damage to or destruction
          of,
          or for proceeds payable under, or unearned premiums with respect to, policies
          of
          insurance with respect to any Collateral, and any condemnation or requisition
          payments with respect to any Collateral, in each case whether now existing
          or
          hereafter arising.

         

        “Secured
          Obligations” has the meaning assigned to that term in Section 3.

         

        “Security
          Agreement” means this Security Agreement as it may be amended,
          supplemented or otherwise modified from time to time.

         

        “Security
          Interests” means the security interest granted pursuant to Section 2,
          as well as all other security interests created or assigned as additional
          security for the Secured Obligations pursuant to the provisions of this
          Security
          Agreement.

         

        “Subsidiaries”
          has the meaning assigned to that term in the introduction to this Security
          Agreement.

         

        “Trademarks”
          means collectively all of the following now owned or hereafter created
          or
          acquired by Debtor: (a) all trademarks, trade names, corporate names,
          company names, business names, fictitious business names, trade styles,
          service
          marks, logos, domain names and domain name registrations, other business
          identifiers, prints and labels on which any of the foregoinghave
          appeared or appear, all registrations and recordings thereof (to the extent
          Debtor can register such corporate, company or business name as a trademark),
          and all applications in connection therewith including registrations, recordings
          and applications in the Trademark Office or in any similar office or agency
          of
          the United States, any State thereof or any other country or any political
          subdivision thereof; (b) all reissues, extensions or renewals thereof;
          (c) all income, royalties, damages and payments now or hereafter due or
          payable under any of the foregoing or with respect to any of the foregoing
          including damages or payments for past or future infringements of any of
          the
          foregoing; (d) the right to sue for past, present and future infringements
          of any of the foregoing; (e) all rights corresponding to any of the
          foregoing throughout the world; and (f) all goodwill associated with and
          symbolized by any of the foregoing.

         

        
          
            
            

          

          
            -3-

            
              

            

          

          
            
            

          

        

         “UCC”
          means the Uniform Commercial Code as in effect on the date hereof in the
          State
          of Illinois, Nevada, California, New Jersey and New York or such state
          as
          property and/or fixtures may be located, as the case may be, as amended
          from
          time to time, and any successor statute; provided that
          if by
          reason of mandatory provisions of law, the perfection or the effect of
          perfection or non-perfection of the Security Interest in any Collateral
          is
          governed by the Uniform Commercial Code as in effect on or after the date
          hereof
          in any other jurisdiction, “UCC” means the Uniform
          Commercial Code as in effect in such other jurisdiction for purposes of
          the
          provision hereof relating to such perfection or effect of perfection or
          non-perfection.

         

        1.2           
          Other
          Definition Provisions. References to “Sections”
          “subsections,”
          “Exhibits”
          and “Schedules”
          shall be to Sections, subsections, Exhibits and Schedules, respectively, of
          this Security Agreement unless otherwise specifically provided. References
          to
          the words “including,” “includes” and “include” shall be deemed to be followed
          by the words “without limitation;” and the term “or” has, except where otherwise
          indicated, the inclusive meaning represented by the phrase “and/or.” Any of the
          terms defined in subsection 1.1 may, unless the context otherwise requires,
          be used in the singular or the plural depending on the reference. All references
          to statutes and related regulations shall include any amendments of same
          and any
          successor statutes and regulations.

         

      

       

      
        SECTION
          2.  Grant of
          Security Interest.

         

        In
          order
          to secure the payment and performance of the Secured Obligations in accordance
          with the terms thereof, except as otherwise specifically provided in this
          Security Agreement, the Debtor hereby grants to the Secured Party, a continuing
          first priority security interest and lien in and to all right, title and
          interest of Debtor in the following property, whether now owned or existing
          or
          hereafter acquired or arising and regardless of where located, which first
          priority security interest shall be pari passu to the first priority security
          interest of the Purchasers and the other purchasers who invest during the
          offering to which this Security Agreement is a part), and subject only
          to the
          Permitted Senior Indebtedness (all being collectively referred to as the
“Collateral”).

         

        
          
            
            

          

          
            -4-

            
              

            

          

          
            
            

          

        

        (a)           
          Accounts;

         

        (b)           
          Inventory;

         

        (c)           
          Computer Software;

         

        (d)           
          General Intangibles;

         

        (e)           
          Documents;

         

        (f)           
          Instruments;

         

        (g)           
          Equipment;

         

        (h)           
          Fixtures;

         

        (i)           
          Contracts;

         

        (j)           
          All deposit accounts of Debtor maintained with any bank or financial
          institution;

         

        (k)           
          All books, records, ledger cards, files, correspondence, computer programs,
          tapes, disks and related data processing software that at any time evidence
          or
          contain information relating to any of the property described in subparts (a) -
          (j) above or are otherwise necessary or helpful in the collection thereof
          or realization thereon;

         

        (l)           
          any and all other assets of the Debtor, whether currently held or hereafter
          acquired; and

         

        (m)           
          Proceeds of all or any of the property described in subparts (a) -
          (l) above.

         

        Notwithstanding
          the foregoing, so long as no Event of Default has occurred and is continuing,
          Debtor shall have the exclusive, non-transferable right and license to
          use the
          Collateral and the exclusive right to sell, transfer, convey, rent, lease,
          and
          grant to third parties licenses and sublicenses with respect to the Collateral,
          provided that any such sale, transfer, conveyance, rental, lease, license
          or
          sublicense is effected in the Debtor’s ordinary course of
          business.  In the event that the Debtor sells any of its inventory in
          the ordinary course of business, such shall be transferred without any
          liens
          under the terms of this Security Agreement.

         

        SECTION
          3.  Security for
          Obligations.

         

        This
          Security Agreement secures the
          payment and performance of all obligations, liabilities, duties and covenants
          of
          Debtor to the Secured Party with respect to the Notes, plus any and all
          accrued
          (and accruing) but unpaid interest on all such indebtedness (all such debts,
          obligations and liabilities of Debtor being collectively called the “Secured
          Obligations”).

         

        
          
            
            

          

          
            -5-

            
              

            

          

          
            
            

          

        

        SECTION
          4.  Debtor
          Remains Liable.

         

        Anything
          herein to the contrary
          notwithstanding: (a) Debtor shall remain liable under the contracts and
          agreements included in the Collateral to the extent set forth therein to
          perform
          all of its duties and obligations thereunder to the same extent as if this
          Security Agreement had not been executed; (b) the exercise by the Secured
          Party of any of the rights hereunder shall not release Debtor from any
          of its
          duties or obligations under the contracts and agreements included in the
          Collateral; and (c) the Secured Party shall not have any obligation or
          liability under the contracts and agreements included in the Collateral
          by
          reason of this Security Agreement, nor shall the Secured Party be obligated
          to
          perform any of the obligations or duties of Debtor thereunder or to take
          any
          action to collect or enforce any claim for payment assigned
          hereunder.

         

        SECTION
          5.  Representations
          and Warranties.
          Debtor represents and warrants as follows:

         

        5.1.           
          Binding
          Obligation; Authorization. This Security Agreement and the Note are
          legally valid and binding obligations of Debtor, enforceable against it
          in
          accordance with their terms, except as limited by applicable bankruptcy,
          insolvency, reorganization, moratorium and other laws of general application
          affecting enforcement of creditors’ rights generally. The execution, delivery
          and performance of this Security Agreement and the Note by the Debtor has
          been
          duly approved by the Board of Directors of the Debtor and all other actions
          required to authorize and effect the granting of the Security Interests
          and the
          issuance of the Note has been duly taken and approved by the
          Debtor.

         

      

       

      
        5.2.           
          Location
          of Equipment and Inventory. All of the Equipment and Inventory is located
          at the places specified on Schedule I.

         

        5.3.           
          Ownership
          of Collateral; Outstanding Loans. The Company owns the Collateral free
          and clear of any liens, security interests, charges or other encumbrances
          (collectively, “Liens”).
          No financing statement or other form of Lien notice covering all or any
          part of
          the Collateral is on file in any recording office, except for those in
          favor of
          the Secured Party.

         

        5.4.           
          Office
          Locations; Fictitious Names. The chief
          place of
          business, the chief executive office and the office where Debtor keeps
          its books
          and records are located at the places specified on Schedule I.

         

        5.5.           
          Perfection.
This
          Security Agreement
          creates a valid and perfected security interest in the Collateral, securing
          the
          payment of the Secured Obligations, and all filings and other actions necessary
          or desirable to perfect and protect such security interest have been duly
          taken
          (or will be taken immediately after the Closing , as defined in the SPA,
          by the
          Debtor at the request of the Secured Party); provided, nothing
          herein constitutes a representation as to actions that must be taken, if
          any, to
          perfect a security interest in any item of Equipment, the ownership of
          which is
          evidenced by a certificate of title.

         

        
          
            
            

          

          
            -6-

            
              

            

          

          
            
            

          

        

        5.6.           
          Governmental
          Authorizations.
No authorization,
          approval or other action by, and no notice to or filing
          with, any governmental authority or regulatory body is required either
          (a) for the grant by Debtor of the Security Interests granted hereby or for
          the execution, delivery or performance of this Security Agreement and/or
          the
          Note by Debtor or (b) for the perfection of or the exercise by the Secured
          Party of its rights and remedies hereunder (except as may have been taken
          by or
          at the direction of Debtor or the Secured Party).

         

        5.7.           
          Accurate
          Information. All information heretofore, herein or hereafter supplied to
          the Secured Party by or on behalf of Debtor with respect to the Collateral
          is
          and will be accurate and complete in all material respects.

         

        SECTION
          6.  Further
          Assurances; Covenants.

         

        6.1.           
          Other
          Documents and Actions. Debtor will, from time to time, at its expense,
          immediately execute and deliver all further instruments and documents and
          take
          all further action that may be necessary or desirable, or that the Secured
          Party
          may request, in order to perfect and protect any security interest granted
          or
          purported to be granted hereby or to enable the Secured Party to exercise
          and
          enforce their rights and remedies hereunder with respect to any Collateral.
          Without limiting the generality of the foregoing, Debtor will immediately
          upon
          request of the Secured Party: (a) execute and file such financing or
          continuation statements, or amendments thereto, and such other instruments
          or
          notices, as may be necessary or desirable, or as the Secured Party may
          request,
          in order to perfect and preserve the security interests granted or purported
          to
          be granted hereby (in such jurisdictions and with such officers as the
          Secured
          Party so request); (b) upon demand by the Secured Party exhibit the
          Collateral to allow inspection of the Collateral by the Secured Party or
          persons
          designated by the Secured Party; and (c) upon the Secured Party’s request,
          appear in and defend any action or proceeding that may affect Debtor’s title to
          or the Secured Party’s security interest in the Collateral.

         

        6.2.           
          Business
          Locations. Debtor will keep the Collateral at the locations specified on
          Schedule I
          hereto.

         

        6.3.           
          Insurance.
At
          its sole expense, the
          Debtor shall insure the Collateral at all times for the full insurable
          value
          thereof against casualty and theft and against such other risks, in such
          form
          and with such insurers, as may be satisfactory to the Secured Party from
          time to
          time. In addition, each such policy shall (i) name the Secured Party as
          mortgagee and loss payee as its interest may appear and name the Secured
          Party
          as an additional insured relating to liability risks, (ii) provide that no
          act of omission or commission or misrepresentation or breach of warranty
          by the
          Debtor shall affect the Secured Party’s rights thereunder, (iii) provide
          that the Secured Party shall not be liable for any premiums or other amounts
          and
          (iv) upon the agreement of the insurer, at the Debtor’s request, provide
          that the insurer shall give the Secured Party not less than twenty (20)
          days’
prior written notice of cancellation or lapse. If the Debtor shall fail
          at any
          time to maintain such insurance, the Secured Party may obtain such insurance
          coverage and the Debtor agrees to reimburse the Secured Party therefor
          on demand
          with interest thereon at the rate specified in theNote.
          The
          Debtor shall notify the Secured Party promptly if any loss or casualty
          relating
          to the Collateral occurs.

         

        
          
            
            

          

          
            -7-

            
              

            

          

          
            
            

          

        

        6.4.           
          Taxes
          and
          Claims. Debtor will pay promptly when due all property and other taxes,
          assessments and governmental charges or levies imposed upon, and all claims
          against, the Collateral (including claims for labor, materials and supplies),
          except to the extent the validity thereof is being contested in good
          faith.

         

        6.5.           
          Use
          of Collateral. Debtor will not use or permit any Collateral to be used
          unlawfully or in violation of any provision of this Security Agreement
          or any
          applicable statute, regulation or ordinance or any policy of insurance
          covering
          any of the Collateral.

         

        6.6.           
          Condition
          of Collateral. The Debtor shall maintain the Collateral in good condition
          and operate the Collateral with reasonable care and caution and the Debtor
          hereby indemnifies and holds the Secured Party harmless from any and all
          loss,
          damage and liability suffered, incurred or asserted by or against the Secured
          Party as a result of the use and operation of the Collateral.

         

        6.7.           
          Records
          Relating to Collateral. The Debtor will keep its records concerning the
          Collateral at its address designated on Schedule
          I hereof or at such other place or places of which the Secured Party
          shall have been notified in writing upon no less than ten (10) days’ advance
          written notice. The Debtor (a) will hold and preserve such records and
          will
          permit representatives of the Secured Party at any time during normal business
          hours without disrupting the Debtor’s business to examine, inspect and to make
          abstracts from such records and (b) will furnish to the Secured Party such
          information and reports regarding the Collateral as the Secured Party may
          from
          time to time request.

         

        6.8.           
          Other
          Information. Debtor will, promptly upon request, provide to the Secured
          Party all information and evidence they may reasonably request concerning
          the
          Collateral, and in particular the Accounts, to enable the Secured Party
          to
          enforce the provisions of this Security Agreement.

         

        SECTION
          7.  Transfers and
          Other Liens.

         

        Except
          in
          the ordinary course of business, Debtor shall not:

         

        (a)           
          Sell, assign (by operation of law or otherwise) or otherwise dispose of,
          or
          grant any option with respect to, any of the Collateral; or

         

        (b)           
          Create or suffer to exist any Liens with respect to any of the Collateral
          to
          secure indebtedness of any Person except for (i) the Security Interests
          created
          by this Security Agreement, (ii) any Liens and/or security interests existing
          prior to the date of this Security Agreement; (iii) any security interests
          that
          are junior and subordinate to the Security Interestscreated
          by this Security Agreement, and (iv) any purchase money security interests
          required in connection with Debtor’s purchase or lease of
          Equipment.

         

        
          
            
            

          

          
            -8-

            
              

            

          

          
            
            

          

        

        SECTION
          8.  Events of
          Default; Remedies

         

        (a)           
          Each of the following events shall be an “Event
          of
          Default” (i) the non-payment of any of the Secured Obligations;
          (ii) the failure of the Debtor to observe or perform any other term,
          provision or condition of the Transaction Documents (as defined in the
          SPA), or
          this Security Agreement, after receipt of notice from the Secured Party
          of such
          failure to observe or perform and the failure of the Debtor to cure such
          non-performance or non-observance within fifteen (15) days after receipt
          thereof; (iii) dissolution or termination of existence of, or the
          suspension or termination of operations of the Debtor; (iv) the inability
          of the Debtor, or the Debtor’s admission that it is unable, to pay its debts as
          they become due or any petition in bankruptcy is filed by or against the
          Debtor,
          or any proceeding in bankruptcy, or under any other laws of any jurisdiction
          relating to the relief of debtors is commenced against the Debtor for the
          relief
          or readjustment of any indebtedness of the Debtor, either through
          reorganization, composition, extension or otherwise, (v) the appointment of
          a receiver of any property of the Debtor, (vi) the making by the Debtor of
          any assignment for the benefit of creditors or the taking advantage of
          any
          insolvency law; (vii) any seizure, vesting, or intervention by or under
          authority of a government, by which the management of the Debtor is displaced
          or
          its authority in the conduct of its business is curtailed; (viii) any
          representation or warranty contained the Note or this Security Agreement,
          shall
          prove to be materially false when made; or (ix) if an event of default
          shall
          occur for whatever reason under the any of the Notes.

         

        (b)           
          If any Event of Default shall have occurred and be continuing, the Secured
          Party
          may exercise in respect of the Collateral, in addition to all other rights
          and
          remedies provided for herein or otherwise available to them, all the right
          and
          remedies of a secured party on default under the UCC (whether or not the
          UCC
          applies to the affected Collateral) and also may: (a) require Debtor to,
          and Debtor hereby agrees that it will, at its expense and upon request
          of the
          Secured Party forthwith, assemble all or part of the Collateral as directed
          by
          the Secured Party and make it available to the Secured Party at a place
          to be
          designated by the Secured Party  which is reasonably convenient to the
          Debtor; (b) without notice or demand or legal process, enter upon any
          premises of Debtor and take possession of the Collateral; and (c) without
          notice except as specified below, sell the Collateral or any part thereof
          in one
          or more parcels at public or private sale, at such time or times, for cash,
          on
          credit or for future delivery, and at such price or prices and upon such
          other
          terms as the Secured Party may deem commercially reasonable. Debtor agrees
          that,
          to the extent notice of sale shall be required by law, at least two (2)
          days’
notice to Debtor of the time and place of any public sale or the time after
          which any private sale is to be made shall constitute reasonable notification.
          At any sale of the Collateral, if permitted by law, the Secured Party may
          bid
          (which bid may be, in whole or in part, in the form of cancellation of
          indebtedness) for the purchase of the Collateral or any portion thereof
          for the
          account of the Secured Party. The Secured Party shall not be obligated
          to make
          any sale of Collateral regardless of notice of sale having been given.
          The
          Secured Party may adjourn any public or private sale from time to time
          by
          announcement at the time and place fixed therefor, and such sale
          may,without
          further notice, be made at the time and place to which it was so adjourned.
          To
          the extent permitted by law, Debtor hereby specifically waives all rights
          of
          redemption, stay or appraisal which it has or may have under any law now
          existing or hereafter enacted. All cash proceeds received by the Secured
          Party
          resulting from the disposition of or collection from the Collateral may
          be held
          by the Secured Party as collateral for the Secured Obligations and/or then
          or at
          any time thereafter applied in payment of all or any of the Secured Obligations
          in such order as the Secured Party shall elect. The balance of such cash
          proceeds held by the Secured Party and remaining after payment in full
          of the
          Secured Obligations shall be paid over to the Debtor or to the person who
          may be
          lawfully entitled to such balance. The remedies provided in this Security
          Agreement are cumulative and not exclusive of any other remedies provided
          by law
          including, without limitation, any rights of setoff available to the Secured
          Party.

         

        
          
            
            

          

          
            -9-

            
              

            

          

          
            
            

          

        

        SECTION
          9.  Limitation on
          Duty of the Secured Party with Respect to Collateral.

         

        Beyond
          the safe custody thereof, the Secured Party shall have no duty with respect
          to
          any Collateral in their possession or control (or in the possession or
          control
          of the Secured Party or bailee) or with respect to any income thereon or
          the
          preservation of rights against prior parties or any other rights pertaining
          thereto. The Secured Party shall be deemed to have exercised reasonable
          care in
          the custody and preservation of the Collateral in their possession if the
          Collateral is accorded treatment substantially equal to that which they
          accord
          their own property. The Secured Party shall not be liable or responsible
          for any
          loss or damage to any of the Collateral, or for any diminution in the value
          thereof, by reason of the act or omission of any warehouseman, carrier,
          forwarding agency, consignee or other agent or bailee selected by the Secured
          Party in good faith.

         

        SECTION
          10.  Secured
          Party Appointed Attorney-In-Fact.

         

        Debtor
          hereby irrevocably appoints the Secured Party as Debtor’s attorney-in-fact, with
          full authority in the place and stead of Debtor and in the name of Debtor
          to
          take any action and to execute any instrument that the Secured Party may
          deem
          necessary and/or advisable as follows:

         

        (a)           
          to obtain and adjust insurance required to be paid to the Secured Party
          if
          Debtor has not done so in the ordinary course of its business;

         

        (b)           
          to ask, demand, collect, sue for, recover, compound, receive and give receipts
          for moneys due and to become due under or in respect of any of the Collateral
          upon the occurrence of an Event of Default;

         

        (c)           
          to receive, endorse, and collect any drafts or other instruments, documents
          and
          chattel paper, in connection with clauses (a) and (b) above upon the
          occurrence of an Event of Default;

         

        (d)           
          to file any claims or take any action or institute any proceedings that
          the
          Secured Party may deem necessary or desirable for the collection of any
          of the
          Collateral or otherwise toenforce
          the rights of the Secured Party with respect to any of the Collateral if
          Debtor
          has not done so in the ordinary course of its business;

         

        
          
            
            

          

          
            -10-

            
              

            

          

          
            
            

          

        

        (e)           
          to pay or discharge taxes or liens, levied or placed upon or threatened
          against
          the Collateral, the legality or validity thereof and the amounts necessary
          to
          discharge the same to be determined by the Secured Party in its sole discretion,
          and such payments made by the Secured Party to become obligations of Debtor
          to
          the Secured Party, due and payable immediately without demand if Debtor
          has not
          done so in the ordinary course of its business;

         

        (f)           
          to sign and endorse any invoices, freight or express bills, bills of lading,
          storage or warehouse receipts, assignments, verifications and notices in
          connection with Accounts and other documents relating to the Collateral
          upon the
          occurrence of an Event of Default;

         

        (g)           
          generally to sell, transfer, pledge, make any agreement with respect to
          or
          otherwise deal with any of the Collateral as fully and completely as though
          the
          Secured Party were the absolute owner thereof for all purposes, and to
          do, at
          the Secured Party’s option and Debtor’s expense, at any time or from time to
          time, all acts and things that the Secured Party deems necessary to protect,
          preserve or realize on the Collateral upon the occurrence of an Event of
          Default; and

         

        (h)           
          to accomplish the purposes of this Security Agreement if Debtor has not
          done so
          in the ordinary course of its business.

         

        Neither
          the Secured Party nor any person designated by the Secured Party shall
          be liable
          for any acts or omissions or for any error of judgment or mistake of fact
          or
          law. This power, being coupled with an interest, is irrevocable so long
          as this
          Security Agreement shall remain in force.

         

        SECTION
          11.  Expenses.

         

        Debtor
          shall pay all insurance expenses and all expenses of protecting, storing,
          warehousing, appraising, insuring, handling, maintaining and shipping the
          Collateral, all costs, fees and expenses of perfecting, and maintaining
          the
          Security Interest, any and all excise, property, sales and use taxes imposed
          by
          any state, federal or local authority on any of the Collateral, or with
          respect
          to periodic appraisals and inspections of the Collateral, or with respect
          to the
          sale or other disposition thereof. If Debtor fails to promptly pay any
          portion
          of the above expenses when due or to perform any other obligation of Debtor
          under this Security Agreement, the Secured Party may, at their option,
          but shall
          not be required to, pay or perform the same and charge Debtor’s account for all
          costs and expenses incurred therefor, and Debtor agrees to reimburse the
          Secured
          Party therefor on demand. All sums so paid or incurred by the Secured Party
          for
          any of the foregoing, any and all other sums for which Debtor may become
          liable
          hereunder and all costs and expenses (including reasonable and documented
          attorneys’ fees, legal expenses and court costs) incurred by the Secured Party
          in enforcing or protecting the Security Interests or any of  their
          rights or remedies under this Security Agreement, the Notes, theWarrants
          and/or other Transaction Documents shall be payable on demand, shall constitute
          Secured Obligations and shall be secured by the Collateral.

         

      

       

      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

        

      

      
        SECTION
          12.  Termination
          of Security Interests; Release of Collateral.

         

        Upon
          payment in full of all Secured Obligations, including the aggregate principal
          amount of the Notes, including all Interest, the Security Interests shall
          immediately terminate and all rights to the Collateral shall revert to
          Debtor
          automatically and without the need for further action to be taken on the
          part of
          the Debtor or the Secured Party. Upon such termination of the Security
          Interests
          or release of any Collateral, the Secured Party will, at the expense of
          Debtor,
          execute and deliver to Debtor such documents as Debtor shall reasonably
          request
          to evidence the termination of the Security Interests or the release of
          such
          Collateral, as the case may be.

         

        SECTION
          13.  Notices.

         

        All
          notices, requests, demands and other communications provided for hereunder
          shall
          be in writing and directed to the applicable party at the addresses set
          forth on
          the signature page hereof or, as to each party, at such other address as
          shall
          be designated by such party in a written notice to the other parties complying
          as to delivery with the terms of this Section. Notice to the Secured Party
          on
          terms designated in this Section
          13 shall be deemed proper notice the Secured Party. All such notices,
          requests, demands and other communication shall be deemed given upon the
          earlier
          to occur of (i) the third day following deposit thereof with the United
          States
          Postal Service for mailing via certified or registered mail, return receipt
          requested, or (ii) the actual receipt by the party to whom such notice
          is
          directed.

        


        SECTION
          14.  Waivers,
          Non-Exclusive Remedies.

         

        No
          failure on the part of the Secured Party to exercise, and no delay in exercising
          and no course of dealing with respect to, any right under the Note or this
          Security Agreement shall operate as a waiver thereof; nor shall any single
          or
          partial exercise by the Secured Party of any right under the Note or this
          Security Agreement preclude any other or further exercise thereof or the
          exercise of any other right. The rights in this Security Agreement and/or
          the
          Note are cumulative and are not exclusive of any other remedies provided
          by
          law.

         

        SECTION
          15.  Successors
          and Assigns.

         

        This
          Security Agreement is for the benefit of the Secured Party and each of
          its
          successors and assigns, and in no event shall the Debtor without the prior
          express written consent of the Secured Party, assign all or any portion
          of the
          Secured Obligations, the rights hereunder, or the Note.  This Security
          Agreement shall be binding on Debtor and its successors and all permitted
          assigns.

         

        SECTION
          16.  Severability.

         

        If
          any
          provisions hereof are invalid or unenforceable in any jurisdiction, the
          other
          provisions hereof shall remain in full force and effect in such jurisdiction
          and
          shall be liberally construed in favor of the Secured Party.

         

        
          
            
            

          

          
            -12-

            
              

            

          

          
            
            

          

        

        SECTION
          17.  Changes in
          Writing.

         

        No
          amendment, modification, termination or waiver of any provision of this
          Security
          Agreement or consent to any departure by Debtor therefrom, shall in any
          event be
          effective without the written concurrence of the Secured Party, and the
          Debtor.

         

        SECTION
          18.  Applicable
          Law, Etc.

         

        This
          Security Agreement will be governed
          by and construed exclusively under the laws of the State of New York as
          applied to agreements among New York residents entered into and to be
          performed entirely within New York.  Each of the parties hereto
          (1) agree that any legal suit, action or proceeding arising out of or
          relating to this Agreement will be instituted exclusively in New York State
          Supreme Court, County of New York, or in the United States District Court
          for the Southern District of New York, (2) waive any objection which
          the Company may have now or hereafter to the venue of any such suit, action
          or
          proceeding, and (3) irrevocably consent to the jurisdiction of the
          New York State Supreme Court, County of New York, and the United
          States District Court for the Southern District of New York in any such
          suit, action or proceeding.  Each of the parties hereto further agrees
          to accept and acknowledge service of any and all process which may be served
          in
          any such suit, action or proceeding in the New York State Supreme Court,
          County of New York, or in the United States District Court for the Southern
          District of New York and agree that service of process upon it mailed by
          certified mail to its address will be deemed in every respect effective
          service
          of process upon it, in any such suit, action or proceeding.

         

      

       

      
        SECTION
          19.  Actions
          by Secured Party; Distributions.

         

        Unless
          otherwise specifically provided herein, wherever this Security Agreement
          provides for actions to be taken by the Secured Party, or any determination
          to
          be made by the Secured Party, the actions of those Holders representing,
          in the
          aggregate, more than 50% of the outstanding Notes shall represent the actions
          or
          agreement of the Secured Party.  In addition, whenever the Secured
          Party is entitled to the distribution of monies, Collateral or any other
          property, pursuant to the terms of this Security Agreement, such monies,
          Collateral and/or other property shall be distributed to the Secured Party,
          on a
          pro-rata basis, based on the outstanding principal amounts under the
          Note.

         

        
          
            
            

          

          
            -13-

            
              

            

          

          
            
            

          

        

        


         

        SECTION
          20.    Headings.

         

        Section and
          subsection headings in this Security Agreement are included herein for
          convenience of reference only and shall not constitute a part of this Security
          Agreement for any other purpose or be given any substantive effect.

         

        SECTION
          21.  Execution.

         

        This
          Agreement may be executed simultaneously in two or more counterparts, each
          of
          which shall be deemed an original but all of which together shall constitute
          one
          and the same instrument.

         

        SECTION
          22.  Waiver of
          Jury Trial.

         

        DEBTOR
          AND SECURED PARTY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
          OF ANY
          CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS SECURITY AGREEMENT.
          DEBTOR AND SECURED PARTY ALSO WAIVE ANY BOND OR INDEMNITY OR SECURITY UPON
          SUCH
          BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF DEBTOR OR THE SECURED
          PARTY HERETO. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING
          OF ANY
          AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
          SUBJECT
          MATTER OF THIS TRANSACTION INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH
          OF
          DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. DEBTOR AND
          SECURED
          PARTY ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO
          A
          BUSINESS RELATIONSHIP THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING
          INTO THIS SECURITY AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE
          WAIVER
          IN THEIR RELATED FUTURE DEALINGS. DEBTOR AND SECURED PARTY FURTHER WARRANT
          AND
          REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND
          EACH
          KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
          WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT
          BE
          MODIFIED EITHER ORALLY OR IN WRITING AND THE WAIVER SHALL APPLY TO ANY
          SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SECURITY
          AGREEMENT. IN THE EVENT OF LITIGATION. THIS SECURITY AGREEMENT MAY BE FILED
          AS A
          WRITTEN CONSENT TO A TRIAL BY THE COURT.

         

        Signature
          Page Follows

         

        


        
          
            
            

          

          
            -14-

            
              

            

          

          
            
            

          

        

         

        WITNESS
          the due execution
          hereof by the respective duly authorized officers of theundersigned
          as of the day first above written.

         

        
          	 	
                  DEBTORS:

                
	 	 
	 	
                  XA,
                    Inc.

                
	 	 
	 	 
	 	
                  By:/s/
                    Joseph
                    Wagner

                
	 	
                  Name:  Joseph
                    Wagner

                
	 	
                  Title:  President
                    and CEO

                
	 	 
	 	
                  XA
                    Scenes, Inc.

                
	 	 
	 	 
	 	
                  
                    By:/s/
                      Joseph
                      Wagner

                  

                
	 	
                  Name:  Joseph
                    Wagner

                
	 	
                  Title:  President
                    and CEO

                
	 	 
	 	
                  The
                    Experiential Agency, Inc.

                
	 	 
	 	 
	 	
                  By:
                    /s/ Darren Andereck

                
	 	
                  Name:  Darren
                    Andereck

                
	 	
                  Title:  President

                
	 	 
	 	
                  XA
                    Interactive, Inc.

                
	 	 
	 	 
	 	
                  
                    By:/s/
                      Joseph
                      Wagner

                  

                
	 	
                  Name:  Joseph
                    Wagner

                
	 	
                  Title:  President
                    and CEO

                
	 	 
	 	
                  Fiori
                    XA, Inc.

                
	 	 
	 	 
	 	
                  By:
                    /s/ Darren Andereck

                
	 	
                  Darren
                    Andereck

                
	 	
                  President

                


        

      

    

     

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    
      SECURED
        PARTY:

      


      


      


      Vision
        Opportunity Master Fund, Ltd.

      


      By:/s/
        Adam
        Benowitz

      Name:
        Adam Benowitz

      Title:
        Director

    

     

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    
      SCHEDULE
        I TO SECURITY
        AGREEMENT

       

      


      Locations
        of Equipment, Inventory, Books and Records, Chief Executive Officer

      


       

      Locations
        of Equipment and
        Inventory:

       

      
        	
                ●

              	
                Chicago,
                  Illinois - Event decor,
                  furniture and fixtures

              


      

       

      
        	
                 

              	
                ○

              	
                Office
                  - John Hancock Center, 875 North Michigan Avenue, Suite 2626, Chicago,
                  Illinois 60611 - The Experiential Agency, Inc.


              


      

       

      
        	
                 

              	
                ○

              	
                Design
                  Center - 3524 North Halsted, Chicago, IL 60657 - Fiori, XA, Inc.
                  

              


      

       

      
        	
                ●

              	
                Bergen,
                  New Jersey (warehouse) -
                  Event decor, furniture and
                  fixtures

              


      

      1435
        51st Street

      North
        Bergen, NJ - The Experiential
        Agency, Inc.

      


       

      
        	
                ●

              	
                New
                  York, New York and Manhattan,
                  New York - (office space and warehouse),-  Event decor,
                  furniture and fixtures

              


      

       

      
        	
                 

              	
                ○

              	
                New
                  York Office and venue - 636
                  West 28th Street, Floor 9, New York, NY 10001 - XA Scenes,
                  Inc.

              


      

      


      ●           
        Los Angeles, California (office equipment)

      


      ○           
        110 S. Fairfax, Suite 210, Los Angeles, CA  90036

      The
        Experiential Agency, Inc.

      


      Location
        of Books and
        Records and Chief Executive Officer:

       

      
        	
                ●

              	
                John
                  Hancock Center, 875 North Michigan Avenue, Suite 2626, Chicago,
                  Illinois
                  60611 - The Experiential Agency, Inc.


              


      

       

      


    

    
      
        
        

      

      
        -17-