ex10-3.htm


    Exhibit
      10.3

     

    THIS
      WARRANT AND ANY SHARES OF COMMON STOCK ISSUED UPON EXERCISE HEREOF HAVE NOT
      BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
      FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
      DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE AFFECTED WITHOUT AN
      EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL THAT
      SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED.

     

    


     

    XA,
      INC.

     

    WARRANT
      TO
      PURCHASE

     

    200,000
      SHARES

     

    OF
      COMMON STOCK

     

    (SUBJECT
      TO
      ADJUSTMENT)

     

    (Void
      after December 21, 2012)

     

    


     

    Bridge
      Warrant No:
      1                                 December
      21, 2007

     

    


     

    This
      certifies that for value, Sands Brothers Venture Capital III LLC, or registered
      assigns (the ”Holder”),
      is
      entitled, subject to the terms set forth below, at any time from and after
      December 21, 2007 (the “Original Issuance
      Date”) and before 5:00 p.m., Eastern Time, on December 21,
      2012 (the “Expiration
      Date”), to purchase from XA, Inc., a
      Nevada corporation
      (the “Company”),
      Two
      Hundred Thousand (200,000)
shares (subject to
      adjustment as described herein), of common stock, par
      value $0.001 per share, of the Company (the “Common
      Stock”), upon surrender hereof, at the principal office of the
      Company referred to below, with a duly executed subscription form in the form
      attached hereto as Exhibit A
      and simultaneous payment therefor in lawful, immediately available money of
      the
      United States or otherwise as hereinafter provided, at an initial exercise
      price
      per share of $0.30 (the “Purchase
      Price”).  The Purchase Price is subject to further
      adjustment as provided in Section
      4
      below.  The term “Common
      Stock”
shall include, unless the context otherwise requires, the stock
      and other
      securities and property at the time receivable upon the exercise of this
      Warrant.  The term “Warrant,”
as
      used herein, shall mean this Warrant and any other Warrants delivered in
      substitution or exchange therefor as provided herein.

    


    This
      Warrant is being issued by the Company together with an 11% Senior Secured
      Convertible Promissory Note in the amount of $200,000 (the “Note”)
      pursuant to the terms and conditions set forth in the Securities Purchase
      Agreement dated the date hereof by and between the
      Holder and the Company (the “SPA”),
      in
      connection with the sale by the Company of $600,000 in aggregate principal
      amount of Notes (the “Second
      Follow On
      Notes”).


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    1.           Exercise.
      This
      Warrant may be exercised at any time or from time to time from and after the
      Original Issuance Date and before 5:00 p.m., Eastern Time, on December ___,
      2012, unless such Warrant is terminated pursuant to Section
      6,
      below, on any business day, for the full number of shares of Common Stock called
      for hereby, by surrendering it at the principal office of the Company, at 875
      North Michigan Avenue, Suite 2626, Chicago, IL 60611, with the subscription
      form
      duly executed, together with payment in an amount equal to (a) the number
      of shares of Common Stock called for on the face of this Warrant, multiplied
      (b) by the Purchase Price. Payment of the Purchase Price may be made at
      Holder’s choosing either: (1) by payment in immediately available funds; or (2)
      in lieu of any cash payment, if this Warrant is exercised on a date when a
      Registration Statement (as defined in the Registration Rights Agreement),
      covering the resale of the shares of Common Stock issuable upon exercise of
      this
      Warrant has not been declared effective by the Securities and Exchange
      Commission (the “Commission”),
      or is no longer in effect, and the Fair Market Value (as defined below) is
      equal
      to or greater than the Purchase Price, in exchange for the number of shares
      of
      Common Stock equal to the product of (x) the number of shares to which the
      Warrants are being exercised multiplied by (y) a fraction, the numerator of
      which is the Purchase Price and the denominator of which is the Fair Market
      Value (as defined below). This Warrant may be exercised for less than the full
      number of shares of Common Stock at the time called for hereby, except that
      the
      number of shares receivable upon the exercise of this Warrant as a whole, and
      the sum payable upon the exercise of this Warrant as a whole, shall be
      proportionately reduced. Upon a partial exercise of this Warrant in accordance
      with the terms hereof, this Warrant shall be surrendered, and a new Warrant
      of
      the same tenor and for the purchase of the number of such shares not purchased
      upon such exercise shall be issued by the Company to Holder without any charge
      therefor. A Warrant shall be deemed to have been exercised immediately prior
      to
      the close of business on the date of its surrender for exercise as provided
      above, and the person entitled to receive the shares of Common Stock issuable
      upon such exercise shall be treated for all purposes as the holder of such
      shares of record as of the close of business on such date. Within two (2)
      business days after such date, the Company shall issue and deliver to the person
      or persons entitled to receive the same a certificate or certificates for the
      number of full shares of Common Stock issuable upon such exercise, together
      with
      cash, in lieu of any fraction of a share, equal to such fraction of the then
      Fair Market Value on the date of exercise of one full share of Common
      Stock.

     

    “Fair
      Market
      Value” shall mean, as of any date: (i) if shares of the
      Common Stock are listed on a national securities exchange, the average of the
      closing prices as reported for composite transactions during the ten (10)
      consecutive trading days preceding the trading day immediately prior to such
      date or, if no sale occurred on a trading day, then the mean between the closing
      bid and asked prices on such exchange on such trading day; (ii) if shares
      of the Common Stock are not so listed but are traded on the NASDAQ National
      Market (“NNM”),
      the
      average of the closing prices as reported on the NNM during the ten (10)
      consecutive trading days preceding the trading day immediately prior to such
      date or, if no sale occurred on a trading day, then the mean between the highest
      bid and lowest asked prices as of the close of business on such trading day,
      as
      reported on the NNM; or if applicable, the Nasdaq Capital Market (“NCM”),
      (iii)
      if not then included for quotation on the NNM or the NCM, the average of the
      highest reported bid and lowest reported asked prices as reported by the OTC
      Bulletin Board of the National Quotation Bureau, as the case may be; or
      (iv) if the shares of the Common Stock are not then publicly traded, the
      fair market price of the Common Stock as determined in good faith by the
      independent members of the Board of Directors of the Company and the Holders
      of
      all Warrants.

     


    
      
        
        

      

      
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    2.           Shares
      Fully Paid; Payment
      of Taxes. All shares of Common Stock issued upon the exercise of this
      Warrant shall be validly issued, fully paid and non-assessable, and the Company
      shall pay all taxes and other governmental charges (other than income taxes
      to
      the holder) that may be imposed in respect of the issue or delivery
      thereof.

     

    3.           Transfer
      and
      Exchange.  (a) Neither this Warrant nor the Common Stock to be
      issued upon exercise hereof (the “Warrant
      Shares”) have been registered under the Act or any state
      securities laws (“Blue
      Sky
      Laws”). This Warrant has been acquired for investment purposes and
      not with a view to distribution or resale and may not be sold or otherwise
      transferred without:  (i) an effective registration statement for such
      Warrant under the Act and such applicable Blue Sky Laws; or (ii) an opinion
      of
      counsel reasonably satisfactory to the Company that registration is not required
      under the Act or under any applicable Blue Sky Laws.

     

    (b)           Upon
      compliance with applicable federal and state securities laws as set forth in
      Section
      3(a),
      above, this Warrant and all rights hereunder are transferable, in whole or
      in
      part, on the books of the Company maintained for such purpose at its Principal
      Office by the Holder in person or by duly authorized attorney, upon surrender
      of
      this Warrant together with a completed and executed assignment form in the
      form
      attached hereto as Exhibit B,
      and payment of any necessary transfer tax or other governmental charge imposed
      upon such transfer. Upon any partial transfer, the Company will issue and
      deliver to the assignee a new Warrant with respect to the shares of Common
      Stock
      for which it is exercisable that have been transferred, and will deliver to
      the
      Holder a new Warrant or Warrants with respect to the shares of Common Stock
      not
      so transferred. A Warrant may be transferred only by the procedure set forth
      herein. No transfer shall be effective until such transfer is recorded on the
      books of the Company, provided that such transfer is recorded promptly by the
      Company, and until such transfer on such books, the Company shall treat the
      registered Holder hereof as the owner of the Warrant for all
      purposes.

     

    (c)           This
      Warrant is exchangeable at the Principal Office for two or more new Warrants,
      each in the form of this Warrant, to purchase the same aggregate number of
      shares of Common Stock, each new Warrant to represent the right to purchase
      such
      number of shares as the Holder shall designate at the time of such exchange,
      but
      which shall not exceed the total number of shares for which this Warrant may
      be
      from time to time exercisable.

     

    (d)           Transfer
      of the Warrant Shares issued upon the exercise of this Warrant shall be
      restricted in the same manner and to the same extent as the Warrant, and the
      certificates representing such Warrant Shares shall bear substantially the
      following legend, until such Warrant Shares have been registered under the
      Act
      or may be removed as otherwise permitted under the Act:

     

    “THE
      SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE
      STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION
      STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE
      BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) IN THE OPINION OF COUNSEL
      SATISFACTORY TO THE COMPANY, REGISTRATION UNDER THE ACT OR SUCH APPLICABLE
      STATE
      SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
      TRANSFER.”

     

    (e)           The
      Holder and the Company agree to execute such other documents and instruments
      as
      counsel to the Company deems necessary to effect the compliance of the issuance
      of this Warrant and any Warrant Shares issued upon exercise hereof with
      applicable federal and state securities laws, including compliance with
      applicable exemptions from the registration requirements of such
      laws.

     

    
      
        
        

      

      
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    4.           Anti-Dilution
      Provisions. The Purchase Price in effect at any time and the number and
      kind of securities issuable upon conversion of this Warrant shall be subject
      to
      adjustment from time to time upon the happening of certain events as
      follows:

     

    A.           Adjustment
      for Stock Splits
      and Combinations. If the Company at any time or from time to time on or
      after the date of Warrant issuance (the “Original
      Issuance
      Date”) effects a subdivision of the outstanding Common Stock, the
      Purchase Price then in effect immediately before that subdivision shall be
      proportionately decreased, and conversely, if the Company at any time or from
      time to time on or after the Original Issuance Date combines the outstanding
      shares of Common Stock into a smaller number of shares, the Purchase Price
      then
      in effect immediately before the combination shall be proportionately increased.
      Any adjustment under this Section
      4(A) shall become effective at the close of business on the
      date the subdivision or combination becomes effective.

     

    B.           Adjustment
      for Certain
      Dividends and Distributions. If the Company at any time or from time to
      time on or after the Original Issuance Date makes or fixes a record date for
      the
      determination of holders of Common Stock entitled to receive, a dividend or
      other distribution payable in additional shares of Common Stock, then and in
      each such event the Purchase Price then in effect shall be decreased as of
      the
      time of such issuance or, in the event such record date is fixed, as of the
      close of business on such record date, by multiplying the Purchase Price then
      in
      effect by a fraction (1) the numerator of which is the total number of shares
      of
      Common Stock issued and outstanding immediately prior to the time of such
      issuance or the close of business on such record date and (2) the denominator
      of
      which shall be the total number of shares of Common Stock issued and outstanding
      immediately prior to the time of such issuance or the close of business on
      such
      record date plus the number of shares of Common Stock issuable in payment of
      such dividend or distribution; provided, however,
      that if such
      record date is fixed and such dividend is not fully paid or if such distribution
      is not fully made on the date fixed therefor, the Purchase Price shall be
      recomputed accordingly as of the close of business on such record date and
      thereafter the Purchase Price shall be adjusted pursuant to this Section 4(B)
      as of the time of actual payment of such dividends or
      distributions.

     


    
      
        
        

      

      
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    C.           Adjustments
      for Other
      Dividends and Distributions. In the event the Company at any time or from
      time to time on or after the Original Issuance Date makes, or fixes a record
      date for the determination of holders of Common Stock entitled to receive,
      a
      dividend or other distribution payable in securities of the Company other than
      shares of Common Stock, then and in each such event provision shall be made
      so
      that the Holders of Warrants shall receive upon exercise thereof, in addition
      to
      the number of shares of Common Stock receivable thereupon, the amount of
      securities of the Company which they would have received had their Warrants
      been
      exercised into Common Stock on the date of such event and had they thereafter,
      during the period from the date of such event to and including the conversion
      date, retained such securities receivable by them as aforesaid during such
      period, subject to all other adjustments called for during such period under
      this Section
      4 with
      respect to the rights of the Holders of the Warrants.

     

    D.           Adjustment
      for
      Reclassification, Exchange and Substitution. In the event that at any
      time or from time to time on or after the Original Issuance Date, the Common
      Stock issuable upon the exercise of the Warrants is changed into the same or
      a
      different number of shares of any class or classes of stock, whether by
      recapitalization, reclassification or otherwise (other than a subdivision or
      combination of shares or stock dividend or a reorganization, merger,
      consolidation or sale of assets, provided for elsewhere in this Section 4),
      then and in any such event each Holder of Warrants shall have the right
      thereafter to exercise such Warrant to receive the kind and amount of stock
      and
      other securities and property receivable upon such recapitalization,
      reclassification or other change, by holders of the maximum number of shares
      of
      Common Stock for which such Warrants could have been exercised immediately
      prior
      to such recapitalization, reclassification or change, all subject to further
      adjustment as provided herein.

     

    E.            Recapitalization,
      Reorganization, Reclassification, Consolidation, Merger or
      Sale.

     

    (i)  In
      case the Company
      after the Original Issuance Date shall do any of the following (each, a "Triggering
      Event"): (a) consolidate or merge with or into any other
      individual or entity (“Person”)and
      the Company shall not be the continuing or surviving corporation of such
      consolidation or merger, or (b) permit any other Person to consolidate with
      or
      merge into the Company and the Company shall be the continuing or surviving
      Person but, in connection with such consolidation or merger, any common or
      preferred stock (“Capital
      Stock”) of the Company shall be changed into or exchanged for
      Securities of any other Person or cash or any other property, or (c) transfer
      all or substantially all of its properties or assets to any other Person, or
      (d)
      effect a capital reorganization or reclassification of its Capital Stock, then,
      and in the case of each such Triggering Event, proper provision shall be made
      to
      the Exercise Price and the number of shares of Warrant Shares that may be
      purchased upon exercise of this Warrant so that, upon the basis and the terms
      and in the manner provided in this Warrant, the Holder of this Warrant shall
      be
      entitled upon the exercise hereof at any time after the consummation of such
      Triggering Event, to the extent this Warrant is not exercised prior to such
      Triggering Event, to receive at the Exercise Price as adjusted to take into
      account the consummation of such Triggering Event, in lieu of the Common Stock
      issuable upon such exercise of this Warrant prior to such Triggering Event,
      the
      Securities, cash and property to which such Holder would have been entitled
      upon
      the consummation of such Triggering Event if such Holder had exercised the
      rights represented by this Warrant immediately prior thereto (including the
      right of a shareholder to elect the type of consideration it will receive upon
      a
      Triggering Event), subject to adjustments (subsequent
      to such corporate action) as nearly equivalent as possible to the adjustments
      provided for elsewhere in this Section
      4, and
      the Exercise Price shall be adjusted to equal the product of (A) the closing
      price of the common stock of the continuing or surviving corporation as a result
      of such Triggering Event as of the date immediately preceding the date of the
      consummation of such Triggering Event multiplied by (B) the quotient of (i)
      the
      Exercise Price divided by (ii) the per share Fair Market Value of the Common
      Stock as of the date immediately preceding the Original Issuance Date; provided, however,
      the Holder
      at its option may elect to receive an amount in cash equal to the lesser of
      (a)
      the value of this Warrant calculated in accordance with the Black-Scholes
      formula; and (b) $1.00 (subject to adjustment in the event the Company affects
      a
      stock split) per Warrant Share.  Immediately upon the occurrence of a
      Triggering Event, the Company shall notify the Holder in writing of such
      Triggering Event and provide the calculations in determining the number of
      shares of Warrant Shares issuable upon exercise of the new warrant and the
      adjusted Exercise Price.  Upon the Holder’s request, the continuing or
      surviving corporation as a result of such Triggering Event shall issue to the
      Holder a new warrant of like tenor evidencing the right to purchase the adjusted
      number of shares of Warrant Shares and the adjusted Exercise Price pursuant
      to
      the terms and provisions of this Section
      4(E)(i).  Notwithstanding the foregoing to the contrary,
      this Section
      4(E)(i) shall only apply if the surviving entity pursuant to any
      such Triggering Event is a company that has a class of equity securities
      registered pursuant to the Securities Exchange Act of 1934, as amended, and
      its
      common stock is listed or quoted on a national securities exchange, national
      automated quotation system or the OTC Bulletin Board.  In the event
      that the surviving entity pursuant to any such Triggering Event is not a public
      company that is registered pursuant to the Securities Exchange Act of 1934,
      as
      amended, or its common stock is not listed or quoted on a national securities
      exchange, national automated quotation system or the OTC Bulletin Board, then
      the Holder shall have the right to demand that the Company pay to the Holder
      an
      amount in cash equal to the value of this Warrant calculated in accordance
      with
      the Black-Scholes formula.

    


    (ii)           In
      the event that the Holder has elected not to exercise this Warrant prior to
      the
      consummation of a Triggering Event and has also elected not to receive an amount
      in cash equal to the value of this Warrant calculated in accordance with the
      Black-Scholes formula pursuant to the provisions of Section
      4(E)(i) above (and subject to the limit described in Section
      4(E)(i), above), so long as the surviving entity pursuant to any
      Triggering Event is a company that has a class of equity securities registered
      pursuant to the Securities Exchange Act of 1934, as amended, and its common
      stock is listed or quoted on a national securities exchange, national automated
      quotation system or the OTC Bulletin Board, the surviving entity and/or each
      Person (other than the Company) which may be required to deliver any Securities,
      cash or property upon the exercise of this Warrant as provided herein shall
      assume, by written instrument delivered to, and reasonably satisfactory to,
      the
      Holder of this Warrant, (A) the obligations of the Company under this Warrant
      (and if the Company shall survive the consummation of such Triggering Event,
      such assumption shall be in addition to, and shall not release the Company
      from,
      any continuing obligations of the Company under this Warrant) and (B) the
      obligation to deliver to such Holder such Securities, cash or property as,
      in
      accordance with the foregoing provisions of this subsection
      (ii), such Holder shall be entitled to receive, and the surviving
      entity and/or each such Person shall have similarly delivered to such Holder
      an
      opinion of counsel for the surviving entity and/or each such Person, which
      counsel shall be reasonably satisfactory to such Holder, or in the alternative,
      a written acknowledgement executed by the President or Chief Financial Officer
      of the Company, stating that this Warrant shall thereafter continue in full
      force and effect and the terms hereof (including, without limitation, all of
      the
      provisions of this subsection
      (ii)) shall be applicable to the Securities, cash or property
      which the surviving entity and/or each such Person may be required to deliver
      upon any exercise of this Warrant or the exercise of any rights pursuant
      hereto.


    
      
        
        

      

      
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    F.           Sale
      of Shares Below
      Purchase Price:

     

    (1)                 
      If at any time or from time to time following the Original Issuance Date, the
      Company issues or sells, or is deemed by the express provisions of this Section 4(F)
      to have issued or sold, Additional Shares of Common Stock (as hereinafter
      defined), other than as a dividend or other distribution on any class of stock
      and other than upon a subdivision or combination of shares of Common Stock,
      in
      either case as provided in Section 4(A)
      above, for an Effective Price (as hereinafter defined) less than the then
      existing Purchase Price, then and in each such case the then existing Purchase
      Price shall be reduced, as of the opening of business on the date of such issue
      or sale, to a price equal to the Effective Price for such Additional Shares
      of
      Common Stock.

     

    (2)                 For
      the purpose of making any adjustment required under Section 4(F),
      the consideration received by the Company for any issue or sale of securities
      shall (I) to the extent it consists of cash be computed at the amount of
      cash received by the Company, (II) to the extent it consists of property
      other than cash, be computed at the fair value of that property as determined
      in
      good faith by the board of directors of the Company (the “Board”),
      (III) if Additional Shares of Common Stock, Convertible Securities (as
      hereinafter defined) or rights or options to purchase either Additional Shares
      of Common Stock or Convertible Securities are issued or sold together with
      other
      stock or securities or other assets of the Company for a consideration which
      covers both, be computed as the portion of the consideration so received that
      may be reasonably determined in good faith by the Board to be allocable to
      such
      Additional Shares of Common Stock, Convertible Securities or rights or options,
      and (IV) be computed after reduction for all expenses payable by the
      Company in connection with such issue or sale.

     

    (3)                 For
      the purpose of the adjustment required under Section 4(F),
      if the Company issues or sells any rights, warrants or options for the purchase
      of, or stock or other securities convertible into or exchangeable for,
      Additional Shares of Common Stock (such convertible or exchangeable stock or
      securities being hereinafter referred to as “Convertible
      Securities”) and if the Effective Price of such Additional Shares
      of Common Stock is less than the Purchase Price then in effect, then in each
      case the Company shall be deemed to have issued at the time of the issuance
      of
      such rights, warrants, options or Convertible Securities the maximum number
      of
      Additional Shares of Common Stock issuable upon exercise, conversion or exchange
      thereof and to have received as consideration for the issuance of such shares
      an
      amount equal to the total amount of the consideration, if any, received by
      the
      Company for the issuance of such rights, warrants, options or Convertible
      Securities, plus, in the case of such rights, warrants or options, the minimum
      amounts of consideration, if any, payable to the Company upon the exercise
      of
      such rights, warrants or options, plus, in the case of Convertible Securities,
      the minimum amounts of consideration, if any, payable to the Company (other
      than
      by cancellation of liabilities or obligations evidenced by such Convertible
      Securities) upon the conversion
      or exchange thereof. No further adjustment of the Purchase Price, adjusted
      upon
      the issuance of such rights, warrants, options or Convertible Securities, shall
      be made as a result of the actual issuance of Additional Shares of Common Stock
      on the exercise of any such rights, warrants or options or the conversion or
      exchange of any such Convertible Securities. If any such rights or options
      or
      the conversion or exchange privilege represented by any such Convertible
      Securities shall expire without having been exercised, the Purchase Price
      adjusted upon the issuance of such rights, warrants, options or Convertible
      Securities shall be readjusted to the Purchase Price which would have been
      in
      effect had an adjustment been made on the basis that the only Additional Shares
      of Common Stock so issued were the Additional Shares of Common Stock, if any,
      actually issued or sold on the exercise of such rights, warrants, or options
      or
      rights of conversion or exchange of such Convertible Securities, and such
      Additional Shares of Common Stock, if any, were issued or sold for the
      consideration actually received by the Company upon such exercise, plus the
      consideration, if any, actually received by the Company for the granting of
      all
      such rights, warrants, or options, whether or not exercised, plus the
      consideration received for issuing or selling the Convertible Securities
      actually converted or exchanged, plus the consideration, if any, actually
      received by the Company (other than by cancellation of liabilities or
      obligations evidenced by such Convertible Securities) on the conversion or
      exchange of such Convertible Securities.

     


    
      
        
        

      

      
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    (4)                 For
      the purpose of the adjustment required under Section 4(F),
      if the Company issues or sells, or is deemed by the express provisions of this
      Section 4 to
      have issued or sold, any rights or options for the purchase of Convertible
      Securities and if the Effective Price of the Additional Shares of Common Stock
      underlying such Convertible Securities is less than the Purchase Price then
      in
      effect, then in each such case the Company shall be deemed to have issued at
      the
      time of the issuance of such rights or options the maximum number of Additional
      Shares of Common Stock issuable upon conversion or exchange of the total amount
      of Convertible Securities covered by such rights or options and to have received
      as consideration for the issuance of such Additional Shares of Common Stock
      an
      amount equal to the amount of consideration, if any, received by the Company
      for
      the issuance of such rights, warrants or options, plus the minimum amounts
      of
      consideration, if any, payable to the Company upon the exercise of such rights,
      warrants or options, plus the minimum amount of consideration, if any, payable
      to the Company (other than by cancellation of liabilities or obligations
      evidenced by such Convertible Securities) upon the conversion or exchange of
      such Convertible Securities. No further adjustment of the Purchase Price,
      adjusted upon the issuance of such rights, warrants or options, shall be made
      as
      a result of the actual issuance of the Convertible Securities upon the exercise
      of such rights, warrants or options or upon the actual issuance of Additional
      Shares of Common Stock upon the conversion or exchange of such Convertible
      Securities. The provisions of paragraph (3) above for the readjustment of
      the Purchase Price upon the expiration of rights, warrants or options or the
      rights of conversion or exchange of Convertible Securities shall apply mutatismutandis
      to the
      rights, warrants options and Convertible Securities referred to in this
      paragraph (4).

     

    (5)                        “Additional
      Shares of Common
      Stock” shall mean all shares of Common Stock (or any debt or
      equity securities convertible or exercisable into Common Stock) issued by the
      Company on or after the Original Issuance Date, whether or not subsequently
      reacquired or retired by the Company, other than (I) the Warrant Shares,
      (II) the shares of Common
      Stock issuable upon conversion of the Note,  (III) shares of
      Common Stock issuable upon exercise of warrants, options and convertible
      securities outstanding as of the Original Issuance Date (provided that the
      terms
      of such warrants, options and convertible securities are not modified after
      the
      Original Issuance Date to adjust the exercise price), and (IV) shares of
      Common Stock issued pursuant to any event for which adjustment is made to the
      Purchase Price under Section 4
      hereof or to the exercise price under the anti-dilution provisions of any
      securities outstanding as of the Original Issuance Date (including the Notes.
      The “Effective
      Price” of Additional Shares of Common Stock shall mean the
      quotient determined by dividing the total number of Additional Shares of Common
      Stock issued or sold, or deemed to have been issued or sold by the Company
      under
      this Section 4F,
      into the aggregate consideration received, or deemed to have been received,
      by
      the Company for such issue under this Section 4F,
      for such Additional Shares of Common Stock.

     

    (6)                 Other
      than a reduction pursuant to its applicable anti-dilution provisions, any
      reduction in the conversion price of any Convertible Security, whether
      outstanding on the Original Issuance Date or thereafter, or the price of any
      option, warrant or right to purchase Common Stock or any Convertible Security
      (whether such option, warrant or right is outstanding on the Original Issuance
      Date or thereafter), to an Effective Price less than the current Purchase Price,
      shall be deemed to be an issuance of such Convertible Security and all such
      options, warrants or rights at such Effective Price, and the provisions of
Sections 4(F)(3),
      (4)
      and (5)
      shall
      apply thereto mutatismutandis.

     

    (7)                 Any
      time an adjustment is made to the Purchase Price pursuant to Section
      4(F),
      a corresponding proportionate change shall be made to the number of shares
      of
      Common Stock issuable upon conversion of this Warrant.

     

    G.           No
      Adjustments in Certain
      Circumstances. No adjustment in the Purchase Price shall be required
      unless such adjustment would require an increase or decrease of at least one
      ($0.01) cent in such price; provided, however,
      that any
      adjustments which by reason of this Section 4(G)
      are not required to be made shall be carried forward and taken into account
      in
      any subsequent adjustment required to be made hereunder. All calculations under
      this Section 4(G)
      shall be made to the nearest cent or to the nearest one-hundredth of a share,
      as
      the case may be.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    5.           Notices
      of Record
      Date. In case:

     

    A.           the
      Company shall take a record of the holders of its Common Stock (or other stock
      or securities at the time receivable upon the exercise of the Warrants) for
      the
      purpose of entitling them to receive any dividend or other distribution, or
      any
      right to subscribe for or purchase any shares of stock of any class or any
      other
      securities, or to receive any other right, or

     

    B.           of
      any capital reorganization of the Company, any reclassification of the capital
      stock of the Company, any consolidation or merger of the Company with or into
      another corporation, or any conveyance of all or substantially all of the assets
      of the Company to another corporation, or

     

    C.           of
      any voluntary dissolution, liquidation or winding-up of the Company; then,
      and
      in each such case, the Company will mail or cause to be mailed to each holder
      of
      a Warrant at the
      time
      outstanding a notice specifying, as the case may be, (a) the date on which
      a record is to be taken for the purpose of such dividend, distribution or right,
      and stating the amount and character of such dividend, distribution or right,
      or
      (b) the date on which such reorganization, reclassification, consolidation,
      merger, conveyance, dissolution, liquidation or winding-up is expected to take
      place, and the time, if any is to be fixed, as of which the holders of record
      of
      Common Stock (or such stock or securities at the time receivable upon the
      exercise of the Warrants) shall be entitled to exchange their shares of Common
      Stock (or such other stock or securities) for securities or other property
      deliverable upon such reorganization, reclassification, consolidation, merger,
      conveyance, dissolution, liquidation or winding-up, such notice shall be mailed
      at least ten (10) days prior to the date therein specified.

     

    6.           [Intentionally
      removed.]

     

    7.           Loss
      or Mutilation.
      Upon receipt by the Company of evidence satisfactory to it (in the exercise
      of
      reasonable discretion) of the ownership of and the loss, theft, destruction
      or
      mutilation of any Warrant and (in the case of loss, theft or destruction) of
      indemnity satisfactory to it (in the exercise of reasonable discretion), and
      (in
      the case of mutilation) upon surrender and cancellation thereof, the Company
      will execute and deliver in lieu thereof a new Warrant of like
      tenor.

     

    8.           Reservation
      of Common
      Stock. The Company shall at all times reserve and keep available for
      issue upon the exercise of Warrants such number of its authorized but unissued
      shares of Common Stock as will be sufficient to permit the exercise in full
      of
      all outstanding Warrants. All of the shares of Commons Stock issuable upon
      the
      exercise of the rights represented by this Warrant will, upon issuance and
      receipt of the Purchase Price therefor, be fully paid and nonassessable, and
      free from all preemptive rights, rights of first refusal or first offer, taxes,
      liens and charges of whatever nature, with respect to the issuance
      thereof.

     

    9.           Registration
      Rights
      Agreement. The Holder of this Warrant is entitled to have a portion of
      the Warrant Shares registered for resale under the Act, pursuant to and in
      accordance with the Registration Rights Agreement dated as of the date hereof
      by
      and between the Holder and the Company.

     

    10.           No
      Rights as Stockholder
      Conferred by Warrants.  The Warrant shall not entitle the
      Holder hereof to any of the rights, either at law or in equity, of a stockholder
      of the Company. The Holder shall, upon the exercise thereof, not be entitled
      to
      any dividend that may have accrued or which may previously have been paid with
      respect to shares of stock issuable upon the exercise of the Warrant, except
      as
      may otherwise be provided in Section
      4
      hereof.

     

    11.           Notices.
      All notices
      and other communications from the Company to the Holder of this Warrant shall
      be
      mailed by first class, registered or certified mail, postage prepaid, and/or
      a
      nationally recognized overnight courier service to the address furnished to
      the
      Company in writing by the Holder.

     

    12.           Change;
      Modifications;
      Waiver. No terms of this Warrant may be amended, waived or modified
      except by the express written consent of the Company and the holders of not
      less
      than 50.1% of the shares of Common Stock then issuable under outstanding
      Warrants issued in connection
      with the Company’s August, September, and October 2006 warrants, and June 2007
      warrants; provided, however,
      that no such
      amendment or waiver shall reduce the Warrant Share Number, increase the Purchase
      Price, shorten the period during which this Warrant may be exercised or modify
      any provision of this Section
      12
      without the consent of the Holder of this Warrant.  Notwithstanding
      the foregoing sentence, the Purchase Price will be subject to adjustment in
      the
      event of a forward or reverse stock split.  No consideration shall be
      offered or paid to any person to amend or consent to a waiver or modification
      of
      any provision of this Warrant unless the same consideration is also offered
      to
      all holders of the Warrants.

     


    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    


     

    13.           Endorsement
      of
      Warrants.  The Warrant when presented or surrendered for
      exchange, transfer or registration shall be accompanied (if so required by
      the
      Company) by an assignment in the form attached hereto as Exhibit
      B or
      such other written instrument of transfer, in form satisfactory to the Company,
      duly executed by the registered Holder or by his duly authorized
      attorney.

     

    14.           Agreement
      of Warrant
      Holders.  The Holder, and to the extent that portions of this
      Warrant are assigned and there is more than one Holder of warrants exercisable
      for the Warrant Shares, every holder of a Warrant, by accepting the same,
      consents and agrees with the Company and with all other Warrant holders
      that:  (a) the Warrants are transferable only as permitted by Section
      3
      above; (b) the Warrants are transferable only on the registry books of the
      Company as herein provided; and (c) the Company may deem and treat the person
      in
      whose name the Warrant certificate is registered as the absolute owner thereof
      and of the Warrants evidenced thereby for all purposes whatsoever, and the
      Company shall not be affected by any notice to the contrary.

     

    15.           Payment
      of Taxes. The
      Company will pay all stamp, transfer and other similar taxes payable in
      connection with the original issuance of this Warrant and the shares of Common
      Stock issuable upon exercise thereof, provided, however, that the Company shall
      not be required to (i) pay any such tax which may be payable in respect of
      any
      transfer involving the transfer and delivery of this Warrant or the issuance
      or
      delivery of certificates for shares of Common Stock issuable upon exercise
      thereof in a name other than that of the registered Holder of this Warrant
      or
      (ii) issue or deliver any certificate for shares of Common Stock upon the
      exercise of this Warrant until any such tax required to be paid under clause
      (i)
      shall have been paid, all such tax being payable by the holder of this Warrant
      at the time of surrender.

     

    16.           Ownership
      Cap and Exercise
      Restriction.  Notwithstanding anything to the contrary set
      forth in this Warrant, at no time may a Holder of this Warrant exercise this
      Warrant if the number of shares of Common Stock to be issued pursuant to such
      exercise would exceed, when aggregated with all other shares of Common Stock
      owned by such Holder at such time, the number of shares of Common Stock which
      would result in such Holder beneficially owning (as determined in accordance
      with Section 13(d) of the Exchange Act and the rules  thereunder) in
      excess of 9.9% of the then issued and outstanding shares of Common Stock; provided, however,
      that upon a
      holder of this Warrant providing the Company with sixty-one (61) days notice
      (pursuant to Section
      13
      hereof) (the "Waiver
      Notice") that such Holder would like to waive this Section
      7 with
      regard to any or all shares of Common Stock issuable upon exercise of this
      Warrant, this Section
      7 will
      be of no force or effect with regard to all or a portion of the Warrant
      referenced in the Waiver Notice; provided, further,
      that this
      provision shall be of no further force or effect during the sixty-one (61)
      days
      immediately preceding the expiration of the term of this Warrant.  The
      Company agrees that this Section 16 of the Warrant shall replace and supersede
      the Section 16 provided in the Follow On Warrants (as defined in the SPA) by
      and
      between the Holder and the Company, and shall apply equally to the Prior
      Warrants by and between the Holder and the Company.

    


    17.           Fractional
      Interest.  The Company shall not be required to issue
      fractional shares of Common Stock on the exercise of this Warrant. If more
      than
      one Warrant shall be presented for exercise at the same time by the Holder,
      the
      number of full shares of Common Stock which shall be issuable upon such exercise
      shall be computed on the basis of the aggregate number of shares of Common
      Stock
      acquirable on exercise of the Warrants so presented. If any fraction of a share
      of Common Stock would, except for the provisions of this Section
      17, be
      issuable on the exercise of any Warrant (or specified portion thereof), the
      Company shall pay an amount in cash calculated by it to be equal to the Purchase
      Price per share multiplied by such fraction computed to the nearest whole cent.
      The Holder by his acceptance of this Warrant expressly waives any and all rights
      to receive any fraction of a share of Common Stock or a stock certificate
      representing a fraction of a share of Common Stock.

     

    18.           Entire
      Agreement.  This Warrant constitutes the full and entire
      understanding and agreement among the parties with regard to the subject matter
      hereof and no party shall be liable or bound to any other party in any manner
      by
      any representations, warranties, covenants or agreements except as specifically
      set forth herein.

     

    19.           Successors
      and
      Assigns.  All covenants and provisions of this Warrant by or
      for the benefit of the Company or the Holder of this Warrant shall bind and
      inure to the benefit of their respective successors, permitted assigns, heirs
      and personal representatives.

     

    20.           Termination.  This
      Warrant shall terminate at 5:00 p.m., Eastern Time, on the Expiration Date
      or
      upon such earlier date on which all of this Warrant has been exercised (the
      “Termination
      Date”).

     

    21.           Headings.
      The
      headings in this Warrant are for purposes of convenience in reference only,
      and
      shall not be deemed to constitute a part hereof.

     

    22.           Governing
      Law, Etc.
      This Agreement shall be governed by and construed exclusively in accordance
      with
      the internal laws of the State of New York without regard to the conflicts
      of
      laws principles thereof. The parties hereto hereby irrevocably agree that any
      suit or proceeding arising directly and/or indirectly pursuant to or under
      this
      Agreement, shall be brought solely in a federal or state court located in the
      City, County and State of New York. By its execution hereof, the parties hereby
      covenant and irrevocably submit to the in personam
      jurisdiction
      of the federal and state courts located in the City, County and State of New
      York and agree that any process in any such action may be served upon any of
      them personally, or by certified mail or registered mail upon them or their
      agent, return receipt requested, with the same full force and effect as if
      personally served upon them in New York City. The parties hereto waive any
      claim
      that any such jurisdiction is not a convenient forum for any such suit or
      proceeding and any defense or lack of inpersonam
      jurisdiction
      with respect thereto. In the event of any such action or proceeding, the party
      prevailing therein shall be entitled to payment from the other party hereto
      of
      all of its reasonable legal fees and expenses.

     

    Remainder
      of Page Intentionally Left
      Blank

     


    
      
        
        

      

      
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    WARRANT
      SIGNATURE
      PAGE

     

    


     

    


     

    Dated:
      December 21, 2007

     

    


    XA,
      INC.

    


    


    By:          /s/
      Joseph
      Wagner     

    Name:
      Joseph Wagner

    Title:
      President  &
CEO

    


     

    


     

    
 

     

    200,000
      Shares

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    


     

    EXHIBIT
      A

     

    SUBSCRIPTION
      FORM

     

    (To
      be
      executed only upon exercise of Warrant)

     

    


     

    The
      undersigned registered owner of this Warrant irrevocably exercises this Warrant
      and purchases _______ shares of the Common Stock of XA, Inc., purchasable with
      this Warrant, and herewith makes payment therefor (either in cash or pursuant
      to
      the cashless exercise provisions set forth in Section
      1 of
      the Warrant), all at the price and on the terms and conditions specified in
      this
      Warrant.

     

    Dated:                                                                

    


    


    


    


    (Signature
      of Registered Owner

    


    


    


    (Street
      Address)

    


    


    


    (City
      /
      State / Zip Code)

    


    



    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    


    EXHIBIT
      B

     

    FORM
      OF
      ASSIGNMENT

     

    


     

    FOR
      VALUE RECEIVED the
      undersigned registered owner of this Warrant hereby sells, assigns and transfers
      unto the Assignee named below all of the rights of the undersigned under the
      within Warrant, with respect to the number of shares of Common Stock set forth
      below:

     

     

    Name
      of
      Assignee                                                                Address                                           Number
      of
      Shares

     

     

     

     

    


    and
      does
      hereby irrevocably constitute and appoint __________________________ Attorney
      to
      make such transfer on the books of XA, Inc., maintained for the purpose, with
      full power of substitution in the premises.

     

    Dated:                                                                

     

    


     

    


    (Signature)

    


    


    


    (Witness)

    


    


    The
      undersigned Assignee of the Warrant
      hereby makes to XA, Inc., as of the date hereof, with respect to the Assignee,
      all of the representations and warranties made by the Holder, and the
      undersigned Assignee agrees to be bound by all the terms and conditions of
      the
      Warrant and the XA, Inc. Registration Rights Agreement, dated as of ______
      __,
      2006, by and between XA, Inc. and the Holder.

    


    


    Dated:                                                                

    


    


    


    


    (Signature)

    


    



    
      
        
        

      

      
        12