ex10-4.htm

Exhibit
    10.4

    REGISTRATION
      RIGHTS
      AGREEMENT

     

     

    This
      Registration Rights Agreement (this “Agreement”)
      is
      made and entered into as of December 21, 2007, by and among XA, Inc., a Nevada
      corporation (the “Company”),
      the
      Holder of the Notes and Warrants issued by the Company pursuant to a Securities
      Purchase Agreement, dated as of the date hereof, by and among the Investor
      and
      the Company (the “SPA”),
      and
      Mastodon Ventures, Inc., and its permitted assigns (“Mastodon”).

     

    The
      Underlying Shares held by the Investor (and any Holder that is a permitted
      assignee of the Investor) shall have the registration rights as set forth
      herein.

     

    The
      Company and the Investor hereby agree as follows (for the avoidance of doubt,
      the Investors other than the Investor (each as defined herein) are subject
      to
      other Registration Rights Agreements):

     

    1.           Definitions.  Capitalized
      terms used and not otherwise defined herein that are defined in the SPA shall
      have the meanings given such terms in the SPA. As used in this Agreement, the
      following terms shall have the following meanings:

     

    “Additional
      Effectiveness
      Date” shall
      have the meaning
      set forth in Section 2(b).

     

    “Additional
      Filing
      Date” shall have the meaning set forth in Section 2(b).

     

    “Additional
      Notice” shall have the meaning set forth in Section 2(b).

     

    “Additional
      Registration
      Statement” shall mean any Registration Statement necessary to
      register shares of the Registrable Securities which at any time after the
      Initial Effectiveness Date and for any reason are not covered by an effective
      Registration Statement.

     

    “Closing
      Date”
shall mean December 21, 2007 (or such earlier date as the parties
      may
      agree).

     

    “Commission”
      means the United States Securities and Exchange Commission.

     

    “Common
      Stock”
means the Company’s common stock par value $0.001 per share.

     

    “Conversion
      Shares” means
      all shares of
      Common Stock issuable upon conversion of the Notes.

     

    “Effectiveness
      Period” shall mean from the date hereof until the earlier to occur
      of the date when all Registrable Securities covered by a Registration Statement
      either (a) have been sold pursuant to a Registration Statement or an exemption
      from the registration requirements of the Securities Act, and (b) pursuant
      to a
      written opinion of Company counsel acceptable to the Company’s transfer agent
      and the legal counsel for the Holders, may be sold pursuant to Rule
      144(k).

     

    “Exchange
      Act”
means the Securities Exchange Act of 1934, as amended.

     

    “Holder”
or
      “Holders”
means
      the holder or holders, as the case may be, from time to time of Registrable
      Securities (including any permitted assignee).

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    “Indemnified
      Party” shall have the meaning set forth in Section 5.

     

    “Indemnifying
      Party” shall have the meaning set forth in Section 5.

     

    “Investor”
      shall mean Sands Brothers Venture Capital III LLC.

     

    “Investors”
shall
      mean,
      collectively, (i) the Investor, and (ii) the other investors in the offering
      the
      Notes and Warrants issued pursuant to the Purchase Agreements.

     

    “Losses”
shall
      have the meaning set forth in Section 5(a).

     

    “Initial
      Effectiveness
      Date” means, with respect to the Initial Registration Statement
      required to be filed pursuant to Section 2(a) of this
      Agreement.

     

    “Initial
      Filing
      Date” shall have the meaning set forth in Section 2(a).

     

    “Initial
      Registration
      Date” shall mean the date that is one hundred and eighty (180)
      days from the date hereof; provided that, in the event
      that a Private Offering has been consummated during such 180 day period, such
      date shall refer to the date of the closing of such Private
      Offering.

     

    “Initial
      Registration
      Statement” shall have the meaning set forth in Section 2(a).

     

    “Notes”
means
      all of the Senior Secured Convertible Promissory Notes issued pursuant the
      Purchase Agreements between the Company and the applicable
      Investors.

     

    “Pari
      Passu Registration
      Rights Holders” shall have the meaning set forth in Section 2(f).

     

    “Person”
shall
      mean an individual or corporation, partnership, trust, incorporated or
      unincorporated association, joint venture, limited liability company, joint
      stock company, government (or an agency or subdivision thereof) or other entity
      of any kind.

     

    “Prior
      Closings” shall mean the August 8, 2006, September 26, 2006, and
      October 23, 2006 closing of the sale of an aggregate of $2,700,000 in 11% Senior
      Subordinated Secured Convertible Promissory Notes by the Company and the June
      2007 closing of the sale of an aggregate of $450,000 in 11% Senior Subordinated
      Secured Convertible Promissory Notes by the Company.

     

    “Private
      Offering” shall mean a private placement of the Company’s
      securities in which the Company receives gross proceeds of no less than three
      million dollars ($3,000,000).

     

    “Private
      Offering
      Investors” shall mean each of the purchasers of securities of the
      Company in a Private Offering.

     

    “Proceeding”
      means an action, claim, suit, investigation or proceeding (including, without
      limitation, an investigation or partial proceeding, such as a deposition),
      whether commenced or threatened.

     


    
      
        
        

      

      
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    “Prospectus”
      means the prospectus included in the Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by any prospectus supplement, with respect to the terms of the offering of
      any
      portion of the Conversion Registrable Securities or Exchange Registrable
      Securities covered by the Registration Statement, and all other amendments
      and
      supplements to the Prospectus, including post-effective amendments, and all
      material incorporated by reference or deemed to be incorporated by reference
      in
      such Prospectus.

     

    “Purchase
      Agreements” shall mean those certain Securities Purchase
      Agreements, dated on or around the date hereof (including the SPA).

     

    “Registrable
      Securities” means (i) the Underlying Shares, in each
      case, held by the Investor (and any Holder that is a permitted assignee of
      the Investor), and (ii) the shares of Common Stock underlying all of the
      securities held by Mastodon.

     

    “Registration
      Statement” means any registration statement required to be filed
      hereunder (which, at the Company’s option, may be an existing registration
      statement of the Company previously filed with the Commission, but not declared
      effective), including (in each case) the Prospectus, amendments and supplements
      to the registration statement or Prospectus, including pre- and post-effective
      amendments, all exhibits thereto, and all material incorporated by reference
      or
      deemed to be incorporated by reference in the registration
      statement.

     

    “Rule
      144”
means Rule 144 promulgated by the Commission pursuant to the
      Securities Act, as
      such Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

     

    “Rule 415”
      means Rule 415 promulgated by the Commission pursuant to the Securities
      Act, as such Rule may be amended from time to time, or any similar
      Rule or regulation hereafter adopted by the Commission having substantially
      the same effect as such Rule.

     

    “Rule 424”
      means Rule 424 promulgated by the Commission pursuant to the Securities
      Act, as such Rule may be amended from time to time, or any similar
      Rule or regulation hereafter adopted by the Commission having substantially
      the same effect as such Rule.

     

    “Securities
      Act” means the Securities Act of 1933, as amended.

     

    “Trading
      Day”
means (a) a day on which the Common Stock is traded on a Trading Market,
      or
      (b) if the Common Stock is not quoted on a Trading Market, a day on which
      the Common Stock is quoted in the over-the-counter market as reported by the
      National Quotation Bureau Incorporated (or any similar organization or agency
      succeeding to its functions of reporting price); provided, that in the event
      that the Common Stock is not listed or quoted as set forth in (a), and
      (b) hereof, then Trading Day shall mean a Business Day;

     

    “Trading
      Market” means the following markets or exchanges on which the
      Common Stock is listed or quoted for trading on the date in question: the OTC
      Bulletin Board, the American Stock Exchange, the New York Stock Exchange, the
      Nasdaq National Market or the Nasdaq SmallCap Market.

     


    
      
        
        

      

      
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    “Underlying
      Shares” means
      collectively, all
      Conversion Shares and the Warrant Shares.

     

    “Warrant
      Shares” means
      all shares of
      Common Stock issuable upon exercise of the Warrants.

     

    “Warrants”
      means the Common Stock purchase warrants issued pursuant to the Purchase
      Agreements between the Company and the applicable Investors.

     

    2.           Registration.

     

               (a)           Initial
      Registration.  No later than forty-five (45) days from the
      Initial Registration Date (the “Initial
      Filing
      Date”) the Company shall file with the Commission a Registration
      Statement (the “Initial
      Registration
      Statement”), covering the resale of all of the Registrable
      Securities for an offering to be made on a continuous basis pursuant to Rule
      415.  The Initial Registration Statement required hereunder shall be
      on Form S-1, Form SB-2 or Form S-3 (except if the Company is not then eligible
      to register for resale the Registrable Securities on Form S-1, Form SB-2 or
      Form
      S-3, in which case the Initial Registration Statement shall be on another
      appropriate form in accordance herewith).  The Initial Registration
      Statement required hereunder shall contain the Plan of Distribution, attached
      hereto as Annex
      A (which may be modified to respond to comments, if any, received by
      the
      Commission). The Company shall cause the Initial Registration Statement to
      become effective, no later than ninety (90) days after the Initial Filing Date
      (the “Initial
      Effectiveness
      Date”) and remain effective as provided herein. The Company shall
      use its best efforts to cause the Initial Registration Statement to be declared
      effective under the Securities Act and shall use its best efforts to keep the
      Initial Registration Statement continuously effective under the Securities
      Act
      until the expiration of the Effectiveness Period.

     

    (b)           Additional
      Registration.

     

    (i)  If
      at any time and for
      any reason, an Additional Registration Statement is required to be filed because
      at such time the actual number of shares of Registrable Securities exceeds
      the number of shares of Registrable Securities remaining under the Initial
      Registration Statement, the Company shall have thirty (30) days to file such
      Additional Registration Statement, and the Company shall use its best efforts
      to
      cause such Additional Registration Statement to be declared effective by the
      Commission as soon as possible, but in no event later than ninety (90) days
      after filing (the “Additional
      Effectiveness
      Date”).

     

    (ii)  Notwithstanding
      anything to the contrary set forth in this Section 2, in the
      event that the Commission does not permit the Company to register all of the
      Registrable Securities in the Initial Registration Statement because of the
      Commission’s application of Rule 415, the Company shall use its best efforts to
      file Additional Registration Statements to register the Registrable Securities
      that were not registered in the Initial Registration Statement as promptly
      as
      possible and in a manner permitted by the Commission.  For purposes of
      this Section
      2(b)(ii), “Additional
      Filing
      Date” means with respect to each Additional Registration Statement
      filed pursuant hereto, the later of (i) sixty (60) days following the sale
      of
      substantially all of the Registrable Securities included in the Initial
      Registration Statement or any Additional Registration Statement and (ii) six
      (6)
      months following the effective date of the Initial Registration Statement or
      any
      Additional Registration Statement, as applicable, or such earlier date as
      permitted by the Commission.

     


    
      
        
        

      

      
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    (iii)  Each
      Additional
      Registration Statement required under this Section 2(b) shall
      contain the Plan of Distribution, attached hereto as Annex A (which may
      be
      modified to respond to comments, if any, received by the
      Commission).  The Company shall keep the Additional Registration
      Statement continuously effective under the Securities Act until the expiration
      of the Effectiveness Period.

     

    (c)           Filing
      Default
      Damages.  If an Initial Registration Statement or Additional
      Registration Statement (as the case may be) is not filed on or prior to the
      Additional Filing Date or Initial Filing Date (as the case may be), then the
      Company shall pay to the Holders of the Registrable Securities, for each thirty
      (30) day period (or pro rata portion thereof) of such failure and until the
      date
      an Initial Registration Statement or Additional Registration Statement (as
      the
      case may be) is filed and/or the Registrable Securities may be sold pursuant
      to
      Rule 144 or Rule 144(k), as the case may be, as partial liquidated damages
      and
      not as a penalty, an amount in cash equal to two (2%) percent of the aggregate
      gross proceeds paid by the Holders for  the Notes. If the Company
      fails to pay any partial liquidated damages pursuant to this Section 2 in full
      within five (5) days of the date payable, the Company shall pay interest thereon
      at a rate of 18% per annum (or such lesser maximum amount that is permitted
      to
      be paid by applicable law) to the Holders, accruing daily from the date such
      partial liquidated damages are due until such amounts, plus all such interest
      thereon, are paid in full.

     

               (d)           Effectiveness,
      Etc. Default
      Damages.  If an Initial Registration Statement or
      Additional Registration Statement (as the case may be) is not declared effective
      by the Commission on or prior to the Initial Effectiveness Date or the
      Additional Effectiveness Date (as the case may be), or the Commission
      declared any such Registration Statement effective, but the Holders of
      Registrable Securities cannot sell such Registrable Securities thereunder,
      for
      any reason or no reason, then the Company shall pay to the Holder, for each
      thirty (30) day period until the Registration Statement is declared effective
      (or the Holders of Registrable Securities can sell thereunder, as the case
      may
      be), an amount in cash equal to two (2%) percent of the aggregate gross proceeds
      paid by the Holders for the Notes in the Financing. Notwithstanding
      anything to the contrary set forth herein, in the event the Commission does
      not
      permit all of the Registrable Securities to be included in the Initial
      Registration Statement (or any subsequent Additional Registration Statements)
      because of its application of Rule 415, no liquidated damages shall be payable
      pursuant to this Section 2(d) shall be
      payable by the Company to the extent that such delay shall be attributable
      to
      the Commission’s application of Rule 415.

     

    (e)           Piggyback
      Registrations.  If, at any time following the date hereof,
      there is not an effective Registration Statement covering the Registrable
      Securities and the Company shall determine to prepare and file with the
      Commission a registration statement relating to an offering for its own account
      or the account of others under the Securities Act of any of its equity
      securities, other than on Form S-4 or Form S-8 (each as promulgated under the
      Securities Act) or their then equivalents relating to equity securities to
      be
      issued solely in connection with any acquisition of any entity or business
      or
      equity securities issuable in connection with stock option or other employee
      benefit plans, then the Company shall send to each Holder a written notice
      of
      such determination at least twenty (20) days prior to the filing of any such
      registration statement and shall automatically include in such registration
      statement all Registrable Securities; provided, however,
      that (i) if,
      at any time after giving written notice of is intention to register any
      securities and prior to the effective date of the registration statement filed
      in connection with such registration, the Company determines for any reason
      not
      to proceed with such registration, the Company
      will be relieved of its obligation to register any Registrable Securities in
      connection with such registration, and (ii) in case of a determination by the
      Company to delay registration of its securities, the Company will be permitted
      to delay the registration of Registrable Securities for the same period as
      the
      delay in registering such other securities.

     


    
      
        
        

      

      
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    (f)           Ranking
      of Registration
      Rights.  For the avoidance of doubt, the registration rights
      relating to (i) the Underlying Shares and the Prior Underlying Shares, (ii)
      those shares of Common Stock underlying the securities held by (x) the Private
      Offering Investors (if any) and (y) Mastodon (collectively, the “Pari
      Passu Registrable
      Securities”), shall rank pari passu to
      each
      other, to the extent that the Company has granted registration rights applicable
      to such securities (the holders of such securities, from time to time,
      the “Pari
      Passu Registration
      Rights Holders”).  In the event that the Commission does
      not permit all of the Pari Passu Registrable Securities to be included in the
      Initial Registration Statement or any subsequent Additional Registration
      Statements because of its application of Rule 415, the Pari Passu Registration
      Rights Holders shall allocate amongst themselves the shares of Common Stock
      that
      are permitted to be so registered, pro rata, in accordance with
      the total number of Pari Passu Registrable Securities held by each such
      holder, as a percentage of the aggregate shares held by all such holders.
 However, neither the Company nor any of its other security holders (other
      than the Pari Passu Registration Rights Holders) may include securities of
      the
      Company in the Initial Registration Statement or any Additional Registration
      Statements, and the Company shall not after the date hereof enter into any
      agreement providing such right to any of its security holders (except to the
      Private Offering Investors), unless the right so granted is subject in all
      respects to the prior rights in full of the Pari Passu Registration Rights
      Holders set forth herein, and is not otherwise in conflict with such
      rights.

    


    3.           Registration
      Procedures.  In connection
      with the Company’s registration obligations hereunder, and during the
      Effectiveness Period, the Company shall:

     

               (a)           Not
      less than five (5) business days prior to the filing of the Registration
      Statement or any related Prospectus or any amendment or supplement thereto,
      the
      Company shall furnish to Holders, a draft of the Registration Statement, or
      any
      related Prospectus or any amendment or supplement thereto.

     

               (b)           (i)
      Prepare and file with the Commission such amendments, including post-effective
      amendments, to the Registration Statement and the Prospectus used in connection
      therewith as may be necessary to keep the Registration Statement continuously
      effective as to the applicable Registrable Securities for the Effectiveness
      Period; (ii) cause the related Prospectus to be amended or supplemented by
      any
      required Prospectus supplement, and as so supplemented or amended to be filed
      pursuant to Rule 424; and (iii) respond to any comments received from the
      Commission with respect to the Registration Statement or any amendment
      thereto.

     

               (c)           Notify
      as promptly as reasonably possible, but no later than three (3) business days,
      each Holder of Registrable Securities included in the Registration Statement:
      (i) (A) when a Prospectus or any Prospectus supplement or post-effective
      amendment to the Registration Statement has been filed; (B) when the Commission
      notifies the Company whether there will be a “review” of the Registration
      Statement and whenever the Commission comments in writing on the Registration
      Statement; and (C) when the Registration Statement or any post-effective
      amendment has become effective; (ii) of any request by the Commission or any
      other Federal or state governmental authority during the period of effectiveness
      of the Registration Statement for amendments or supplements to the Registration
      Statement or Prospectus or for additional information;
      (iii) of the issuance by the Commission or any other federal or state
      governmental authority of any stop order suspending the effectiveness of the
      Registration Statement covering any or all of the Registrable Securities or
      the
      initiation of any Proceedings for that purpose; (iv) of the receipt by the
      Company of any notification with respect to the suspension of the qualification
      or exemption from qualification of any of the Registrable Securities for sale
      in
      any jurisdiction, or the initiation of any Proceeding for such purpose; and
      (v)
      of the occurrence of any event or passage of time that makes the financial
      statements included in the Registration Statement ineligible for inclusion
      therein or any statement made in the Registration Statement or Prospectus or
      any
      document incorporated or deemed to be incorporated therein by reference untrue
      in any material respect or that requires any revisions to the Registration
      Statement, Prospectus or other documents so that, in the case of the
      Registration Statement or the Prospectus, as the case may be, it will not
      contain any untrue statement of a material fact or omit to state any material
      fact required to be stated therein or necessary to make the statements therein,
      in light of the circumstances under which they were made, not
      misleading.

     


    
      
        
        

      

      
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               (d)           Use
      its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
      of (i) any order suspending the effectiveness of the Registration Statement,
      or
      (ii) any suspension of the qualification (or exemption from qualification)
      of
      any of the Registrable Securities for sale in any jurisdiction, at the earliest
      practicable moment.

     

               (e)           Promptly
      deliver to each Holder no later than three (3) business days after the
      Effectiveness Date, without charge, two (2) copies of the Prospectus or
      Prospectuses (including each form of prospectus) and each amendment or
      supplement thereto (and, upon the request of the Holder such additional copies
      as such Persons may reasonably request in connection with resales by the Holder
      of Registrable Securities). The Company hereby consents to the use of such
      Prospectus and each amendment or supplement thereto by the Holder in connection
      with the offering and sale of the Registrable Securities covered by such
      Prospectus and any amendment or supplement thereto, except after the giving
      of
      any notice pursuant to Section 3.

     

               (f)           Prior
      to any resale of Registrable Securities by a Holder, use its best efforts to
      register or qualify or cooperate with the selling Holders in connection with
      the
      registration or qualification (or exemption from the registration or
      qualification) of such Registrable Securities for the resale by the Holder
      under
      the securities or Blue Sky laws of such jurisdictions within the United States
      as any Holder reasonably requests in writing, to keep such registration or
      qualification (or exemption therefrom) effective during the Effectiveness Period
      and to do any and all other acts or things reasonably necessary to enable the
      disposition in such jurisdictions of the Registrable Securities covered by
      the
      Registration Statement; provided, however,
      that the
      Company shall not be required to qualify generally to do business in any
      jurisdiction where it is not then so qualified, subject the Company to any
      material tax in any such jurisdiction where it is not then so subject or file
      a
      general consent to service of process in any such jurisdiction.

     

               (g)           Upon
      the occurrence of any event contemplated by Section 3(c)(v),
      as promptly as
      reasonably possible, prepare a supplement or amendment, including a
      post-effective amendment, to the Registration Statement or a supplement to
      the
      related Prospectus or any document incorporated or deemed to be incorporated
      therein by reference, and file any other required document so that, as
      thereafter delivered, neither the Registration Statement nor such Prospectus
      will contain an untrue statement of a material fact or omit to state a material
      fact required to be stated therein or necessary to make the statements therein,
      in light of the circumstances under which they were made, not
      misleading.

     


    
      
        
        

      

      
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               (h)           Use
      its best efforts to comply with all applicable rules and regulations of the
      Commission relating to the registration of the Registrable Securities pursuant
      to the Registration Statement or otherwise.

     

               (i)           The
      Company agrees that the Selling Shareholder Questionnaire attached hereto as
      Exhibit
A
      satisfies
      all of the information required to be provided by each Holder in connection
      with
      the Registration Statement.  The Company shall not be required to
      include any Holder that does not complete, date and execute a Selling
      Shareholder Questionnaire.

     

               (j)           The
      Company shall either (a) cause all the Registrable Securities covered by a
      Registration Statement to be listed on each securities exchange on which
      securities of the same class or series issued by the Company are then listed,
      if
      any, if the listing of such Registrable Securities is then permitted under
      the
      rules of such exchange, or (b) secure designation and quotation of all the
      Registrable Securities covered by the Registration Statement on the Nasdaq
      National Market or the Nasdaq SmallCap Market, or, (c) if the Company is
      unsuccessful in satisfying the preceding clauses (a) or (b), the Company
      shall secure the inclusion for quotation all the Registrable Securities covered
      by the Registration Statement on The American Stock Exchange, Inc. or if it
      is unable to do so, on the NASD Bulletin Board and, without limiting the
      generality of the foregoing, to arrange for at least two (2) market makers
      to
      register with the National Association of Securities Dealers, Inc. (“NASD”)
      as such
      with respect to such Registrable Securities. The Company shall pay all fees
      and
      expenses in connection with satisfying its obligation under this Section 3(j).

     

               (k)           The
      Company covenants that it shall file the reports required to be filed by it
      under the Securities Act and the Exchange Act and the rules and regulations
      adopted by the SEC thereunder so long as the Holder owns any Registrable
      Securitiess; provided, however,
      the Company
      may delay any such filing but only pursuant to Rule 12b-25 under the
      Exchange Act, and the Company shall take such further reasonable action as
      the
      Holder may reasonably request (including, without limitation, promptly obtaining
      any required legal opinions from Company counsel necessary to effect the sale
      of
      Registrable Securities under Rule 144 and paying the related fees and
      expenses of such counsel), all to the extent required from time to time to
      enable such Holder to sell Registrable Securities without registration under
      the
      Securities Act within the limitation of the exemptions provided by
      (a) Rule 144 under the Securities Act, as such Rule may be
      amended from time to time, or (b) any similar rule or regulation hereafter
      adopted by the Commission. Upon the request of any Holder of Registrable
      Securities, the Company will deliver to such Holder a written statement as
      to
      whether it has complied with such requirements.

     

    4.           Registration
      Expenses.  All
      fees and
      expenses incident to the performance of or compliance with this Agreement by
      the
      Company shall be borne by the Company whether or not any Registrable Securities
      are sold pursuant to the Registration Statement, other than fees and expenses
      of
      counsel or any other advisor retained by the Holders and discounts and
      commissions with respect to the sale of any Registrable Securities by the
      Holders. The fees and expenses referred to in the foregoing sentence shall
      include, without limitation, (i) all registration and filing fees (including,
      without limitation, fees and expenses (A) with respect to filings required
      to be
      made with the Trading Market on which the Common Stock is then listed for
      trading, and (B) in compliance with applicable state securities or Blue Sky
      laws), (ii) printing expenses (including, without limitation, expenses of
      printing certificates for Registrable Securities and of printing prospectuses
      if
      the printing of prospectuses is reasonably requested by the holders of a
      majority of the Registrable Securities included in the Registration Statement),
      (iii) messenger, telephone and delivery
      expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities
      Act liability insurance, if the Company so desires such insurance, (vi) fees
      and
      disbursements in the amount of $20,000 to counsel to the Investor, Sadis &
Goldberg LLP; and (vii) fees and expenses of all other Persons retained by
      the
      Company in connection with the consummation of the transactions contemplated
      by
      this Agreement.

     


    
      
        
        

      

      
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    5.           Indemnification.

     

               (a)           Indemnification
      by the
      Company. The Company shall, notwithstanding any termination of this
      Agreement, indemnify and hold harmless the Holder, the officers, directors,
      agents and employees of it, each Person who controls the Holder (within the
      meaning of Section 15 of the Securities Act or Section 20 of the
      Exchange Act) and the officers, directors, agents and employees of each such
      controlling Person, to the fullest extent permitted by applicable law, from
      and
      against any and all losses, claims, damages, liabilities, costs (including,
      without limitation, reasonable attorneys’ fees) and expenses (including the cost
      (including without limitation, reasonable attorneys’ fees) and expenses relating
      to an Indemnified Party’s actions to enforce the provisions of this Section 5)
      (collectively, “Losses”),
      as
      incurred, to the extent arising out of or relating to any untrue or alleged
      untrue statement of a material fact contained in the Registration Statement,
      any
      Prospectus or any form of prospectus or in any amendment or supplement thereto
      or in any preliminary prospectus, or arising out of or relating to any
      omission or alleged omission of a material fact required to be stated therein
      or
      necessary to make the statements therein (in the case of any Prospectus or
      form
      of prospectus or supplement thereto, in light of the circumstances under which
      they were made) not misleading, except to the extent, but only to the extent,
      that (1) such untrue statements or omissions are based solely upon information
      regarding such Holder furnished (or in the case of an omission, not furnished)
      in writing to the Company by or on behalf of such Holder expressly for use
      therein, or to the extent that such information relates to such Holder or such
      Holder’s proposed method of distribution of Registrable Securities and was
      reviewed and expressly approved in writing by such Holder expressly for use
      in
      the Registration Statement, such Prospectus or such form of Prospectus or in
      any
      amendment or supplement thereto (it being understood that the Holder has
      approved Annex A hereto for this purpose), (2) in the case of an occurrence
      of an event of the type specified in Section 3(c)(ii)-(v),
      the use by such Holder of an outdated or defective Prospectus after the Company
      has notified such Holder in writing that the Prospectus is outdated or defective
      and prior to the receipt by such Holder of notice that such event is no longer
      applicable, or (3) the failure of the Holder to deliver a prospectus prior
      to
      the confirmation of a sale.  The Company shall notify the Holders
      promptly of the institution, threat or assertion of any Proceeding of which
      the
      Company is aware in connection with the transactions contemplated by this
      Agreement.

     

               (b)           Indemnification
      by
      Holder. The Holder shall indemnify and hold harmless the Company, its
      directors, officers, agents and employees, each Person who controls the Company
      (within the meaning of Section 15 of the Securities Act and Section 20
      of the Exchange Act), and the directors, officers, agents or employees of such
      controlling Persons, to the fullest extent permitted by applicable law, from
      and
      against all Losses, as incurred, to the extent arising out of or based upon:
      (x)
      the Holder’s failure to comply with the prospectus delivery requirements of the
      Securities Act or (y) any untrue or alleged untrue statement of a material
      fact
      contained in any Registration Statement, any Prospectus, or any form of
      prospectus, or in any amendment or supplement thereto or in any preliminary
      prospectus, or arising out of or relating to any omission or alleged omission
      of
      a material fact required to be stated therein or necessary to make the
statements
      therein not misleading (i) to the extent, but only to the extent, that such
      untrue statement or omission is contained in any information so furnished (or
      in
      the case of an omission, not furnished) in writing by or on behalf of such
      Holder to the Company specifically for inclusion in the Registration Statement
      or such Prospectus or (ii) to the extent that (1) such untrue statements or
      omissions are based solely upon information regarding such Holder furnished
      (or
      in the case of an omission, not furnished) in writing to the Company by or
      on
      behalf of such Holder expressly for use therein, or to the extent that such
      information relates to such Holder or such Holder’s proposed method of
      distribution of Registrable Securities, such Prospectus or such form of
      Prospectus or in any amendment or supplement thereto, or (2) in the case of
      an
      occurrence of an event of the type specified in Section 3(c)(ii)-(v),
      the use by such Holder of an outdated or defective Prospectus after the Company
      has notified such Holder in writing that the Prospectus is outdated or defective
      and prior to the receipt by such Holder of notice that such event is no longer
      applicable, or (3) the failure of the Holder to deliver a Prospectus prior
      to
      the confirmation of a sale. In no event shall the liability of any selling
      Holder hereunder be greater in amount than the dollar amount of the subscription
      amount paid by the Holder in the SPA (or other purchase agreement to which
      the
      Holder acquired securities convertible or exercisable into the Registrable
      Securities).

     

               (c)           Conduct
      of Indemnification
      Proceedings. If any Proceeding shall be brought or asserted against any
      Person entitled to indemnity hereunder (an “Indemnified
      Party”), such Indemnified Party shall promptly notify the Person
      from whom indemnity is sought (the “Indemnifying
      Party”) in writing, and the Indemnifying Party shall have the
      right to assume the defense thereof, including the employment of counsel
      reasonably satisfactory to the Indemnified Party and the payment of all fees
      and
      expenses incurred in connection with defense thereof; provided that the
      failure of any Indemnified Party to give such notice shall not relieve the
      Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
      except (and only) to the extent that such failure shall have materially
      prejudiced the Indemnifying Party.

     

     

    An
      Indemnified Party shall have the right to employ separate counsel in any such
      Proceeding and to participate in the defense thereof, but the fees and expenses
      of such counsel shall be at the expense of such Indemnified Party or Parties
      unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
      expenses; (2) the Indemnifying Party shall have failed promptly to assume the
      defense of such Proceeding and to employ counsel reasonably satisfactory to
      such
      Indemnified Party in any such Proceeding; or (3) the named parties to any such
      Proceeding (including any impleaded parties) include both such Indemnified
      Party
      and the Indemnifying Party, and such Indemnified Party shall have been
      advised by counsel that a conflict of interest is likely to exist if the same
      counsel were to represent such Indemnified Party and the Indemnifying Party
      (in
      which case, if such Indemnified Party notifies the Indemnifying Party in writing
      that it elects to employ separate counsel at the expense of the Indemnifying
      Party, the Indemnifying Party shall not have the right to assume the defense
      thereof and the reasonable fees and expenses of one separate counsel for all
      Indemnified Parties in any matters related on a factual basis shall be at the
      expense of the Indemnifying Party). The Indemnifying Party shall not be liable
      for any settlement of any such Proceeding affected without its written consent,
      which consent shall not be unreasonably withheld. No Indemnifying Party shall,
      without the prior written consent of the Indemnified Party, effect any
      settlement of any pending Proceeding in respect of which any Indemnified Party
      is a party, unless such settlement includes an unconditional release of such
      Indemnified Party from all liability on claims that are the subject matter
      of
      such Proceeding.

     


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    


     

    All
      reasonable fees and expenses of the Indemnified Party (including reasonable
      fees
      and expenses to the extent incurred in connection with investigating or
      preparing to defend such Proceeding in a manner not inconsistent with this
      Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
      Trading Days of written notice thereof to the Indemnifying Party; provided that the
      Indemnified Party shall promptly reimburse the Indemnifying Party for that
      portion of such fees and expenses applicable to such actions for which such
      Indemnified Party is not entitled to indemnification hereunder, determined
      based
      upon the relative faults of the parties.

     

               (d)           Contribution.
      If a
      claim for indemnification under Section 5(a) or
Section
      5(b) is
      unavailable to an Indemnified Party (by reason of public policy or otherwise),
      then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
      shall contribute to the amount paid or payable by such Indemnified Party as
      a
      result of such Losses, in such proportion as is appropriate to reflect the
      relative fault of the Indemnifying Party and Indemnified Party in connection
      with the actions, statements or omissions that resulted in such Losses as well
      as any other relevant equitable considerations. The relative fault of such
      Indemnifying Party and Indemnified Party shall be determined by reference to,
      among other things, whether any action in question, including any untrue or
      alleged untrue statement of a material fact or omission or alleged omission
      of a
      material fact, has been taken or made by, or relates to information supplied
      by,
      such Indemnifying Party or Indemnified Party, and the parties’’ relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      action, statement or omission. The amount paid or payable by a party as a result
      of any Losses shall be deemed to include, subject to the limitations set forth
      in Section 5(c),
      any reasonable attorneys’ or other reasonable fees or expenses incurred by such
      party in connection with any Proceeding to the extent such party would have
      been
      indemnified for such fees or expenses if the indemnification provided for in
      this Section was available to such party in accordance with its
      terms.

     

    (e)           Rule
      144.  As long as any Holder owns any Notes, Warrants or
      Registrable Securities, the Company covenants to timely file (or obtain
      extensions in respect thereof and file within the applicable grace period)
      all
      reports required to be filed by the Company after the date hereof pursuant
      to
      Section 13(a) or 15(d) of the Exchange Act.  As long as any Holder
      owns any Notes, Warrants or Registrable Securities, if the Company is not
      required to file reports pursuant to Section 13(a) or 15(d) of the Exchange
      Act,
      it will prepare and furnish to the Holders and make publicly available in
      accordance with Rule 144(c) promulgated under the Securities Act annual and
      quarterly financial statements, together with a discussion and analysis of
      such
      financial statements in form and substance substantially similar to those that
      would otherwise be required to be included in reports required by Section 13(a)
      or 15(d) of the Exchange Act, as well as any other information required thereby,
      in the time period that such filings would have been required to have been
      made
      under the Exchange Act.  The Company further covenants that it will
      take such further action as any Holder may reasonably request, all to the extent
      required from time to time to enable such person to sell Conversion Shares
      and
      Warrant Shares without registration under the Securities Act within the
      limitation of the exemptions provided by Rule 144 promulgated under the
      Securities Act, including providing any legal opinions relating to such sale
      pursuant to Rule 144, if such person is deemed by the Company’s counsel to be in
      compliance with the rules and regulations set forth in Rule 144.  Upon
      the request of any Holder, the Company shall deliver to such Holder a written
      certification of a duly authorized officer as to whether it has complied with
      such requirements.


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    6.           Miscellaneous.

     

               (a)           Compliance.
      The
      Holder covenants and agrees that it will comply with the prospectus delivery
      requirements of the Securities Act as applicable to it in connection with sales
      of Registrable Securities pursuant to the Registration Statement.

     

              
      (b)           Amendments and
      Waivers. The provisions of this Agreement, including the provisions of
      this sentence, may not be amended, modified or supplemented, and waivers or
      consents to departures from the provisions hereof may not be given, unless
      the
      same shall be in writing and signed by the Company and each Holder of the then
      outstanding Registrable Securities.  No consideration shall be offered
      or paid to any Holders of the Registrable Securities to amend or consent to
      a
      waiver or modification of any provision of any of the Transaction Documents
      unless the same consideration also is offered to all of the parties to the
      Transaction Documents or Holders of the Registrable Securities, as the case
      may
      be.  The Company has not, directly or indirectly, made any agreements
      with any Investors relating to the terms or conditions of the transactions
      contemplated by the Transaction Documents except as set forth in the Transaction
      Documents.  Without limiting the foregoing, the Company confirms that,
      except as set forth in this Agreement, no Purchaser has made any commitment
      or
      promise or has any other obligation to provide any financing to the Company
      or
      otherwise.

     

               (c)           Notices.
      Any and all
      notices or other communications or deliveries required or permitted to be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (i) the Trading Day following the date of delivery to the
      courier service, if sent by nationally recognized overnight courier service,
      (ii) the third Trading Day following the date of mailing, if sent by
      first-class, registered or certified mail, postage prepaid, (iii) the Trading
      Day following transmission by electronic mail with receipt confirmed or
      acknowledged, or (iv) upon actual receipt by the party to whom such notice
      is
      required to be given.  The address for such notices and communications
      shall be delivered and addressed as set forth in the SPA (or other purchase
      agreement to which the Holder acquired securities convertible or exercisable
      into the Registrable Securities) or to such other address as shall be designated
      in writing from time to time by a party hereto.

     

               (d)           Successors
      and Assigns.
      This
      Agreement shall inure to the benefit of and be binding upon the successors
      and
      permitted assigns of each of the parties and shall inure to the benefit of
      the
      Holder.

     

               (e)           Execution
      and
      Counterparts. This Agreement may be executed in any number of
      counterparts, each of which when so executed shall be deemed to be an original
      and, all of which taken together shall constitute one and the same Agreement.
      In
      the event that any signature is delivered by facsimile transmission, such
      signature shall create a valid binding obligation of the party executing (or
      on
      whose behalf such signature is executed) the same with the same force and effect
      as if such facsimile signature were the original thereof.

     

               (f)           Governing
      Law. 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
      in personam
      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 its reasonable counsel fees and
      disbursements.

     


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    


     

               (g)           Severability.
      If any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their commercially reasonable
      efforts to find and employ an alternative means to achieve the same or
      substantially the same result as that contemplated by such term, provision,
      covenant or restriction. It is hereby stipulated and declared to be the
      intention of the parties that they would have executed the remaining terms,
      provisions, covenants and restrictions without including any of such that may
      be
      hereafter declared invalid, illegal, void or unenforceable.

     

               (h)           Headings.
      The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    (i)           Independent
      Nature of
      Investors. The Company acknowledges that the obligations of each Investor
      under the Transaction Documents are several and not joint with the obligations
      of any other Investor, and no Investor shall be responsible in any way for
      the
      performance of the obligations of any other Investor under the Transaction
      Documents. The Company acknowledges that the decision of each Investor to
      purchase securities pursuant to the SPA (or other purchase agreement to which
      the Holder acquired securities convertible or exercisable into the Registrable
      Securities) has been made by such Investor independently of any other Investor
      and independently of any information, materials, statements or opinions as
      to
      the business, affairs, operations, assets, properties, liabilities, results
      of
      operations, condition (financial or otherwise) or prospects of the Company
      or of
      its subsidiaries which may have made or given by any other Investor or by any
      agent or employee of any other Investor, and no Investor or any of its agents
      or
      employees shall have any liability to any Investor (or any other person)
      relating to or arising from any such information, materials, statements or
      opinions. The Company acknowledges that nothing contained herein, or in any
      Transaction Document, and no action taken by any Investor pursuant hereto or
      thereto (including, but not limited to, the (i) inclusion of a Investor in
      a
      Registration Statement and (ii) review by, and consent to, such Registration
      Statement by a Investor) shall be deemed to constitute the Investors as a
      partnership, an association, a joint venture or any other kind of entity, or
      create a presumption that the Investors are in any way acting in concert or
      as a
      group with respect to such obligations or the transactions contemplated by
      the
      Transaction Documents. The Company acknowledges that each Investor shall be
      entitled to independently protect and enforce its rights, including without
      limitation, the rights arising out of this Agreement or out of the other
      Transaction Documents, and it shall not be necessary for any other Investor
      to
      be joined as an additional party in any proceeding for such purpose. The Company
      acknowledges that for reasons of administrative convenience only, the
      Transaction Documents have been prepared by counsel for one of the Investors
      and
      such counsel does not represent all of the Investors. The Company acknowledges
      that it has elected to provide all Investors with the same terms and Transaction
      Documents for the convenience of the Company and not because it was required
      or
requested
      to do so by the Investors. The Company acknowledges that such procedure with
      respect to the Transaction Documents in no way creates a presumption that the
      Investors are in any way acting in concert or as a group with respect to the
      Transaction Documents or the transactions contemplated hereby or
      thereby.

     

    (j)           This
      Agreement Supersedes
      All Prior Agreements Between Parties.  Each of the Company and
      the Investor agree that this Agreement supersedes in its entirety all of the
      terms and provisions of any prior agreements between such parties concerning
      the
      registration rights and the like pertaining to the Underlying
      Shares.  Each of the Company and Mastodon agree that this Agreement
      supersedes in its entirety all of the terms and provisions of any prior
      agreements between such parties concerning the registration rights and the
      like
      pertaining to the shares of Common Stock underlying any securities currently
      held by Mastodon.

    


    


    


    [Remainder
      of page intentionally
      left blank]


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    


     

    IN
      WITNESS WHEREOF, the
      parties have executed this Registration Rights Agreement as of the date first
      written above.

     

     

    


     

    XA,
      INC.

     

    


    By:
/s/
      Joseph
      Wagner   

    Name:  Joseph
      Wagner

    Title:  President

    


    


    


    
      	
               

            	
              Other
                Signature Pages
                Follow

            


    

    


    


    

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      



    OTHER
      SIGNATURE PAGES TO
      REGISTRATION RIGHTS AGREEMENT

    


    
      	 
	
               

              Sands
                Brothers Venture Capital
                III LLC

               

              By:  /s/
                Scott
                Baily                                                              

                   Name:
                Scott
                Baily                                                                

                   Title:
                COO                                                            

                   Address: 90
                Park Ave. 31st Fl, New York, NY
                10016                                                                          

                   Facsimile
                Number:  212-953-4978                                                                         

               

            
	 
	 


    

    


    


    



    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    


    


     

    ANNEX
      A

     

    Plan
      of
      Distribution

    


    


    The
      Selling Stockholders and any of their pledgees, assignees and
      successors-in-interest may, from time to time, sell any or all of their shares
      of Common Stock on any stock exchange, market or trading facility on which
      the
      shares are traded or in private transactions. These sales may be at fixed or
      negotiated prices. The Selling Stockholders may use any one or more of the
      following methods when selling shares:

     

    
      	
                      ·

            	
               ordinary
                brokerage transactions and transactions in which the broker/dealer
                solicits purchasers;

            
	
                      ·

            	
               block
                trades in which the broker/dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            
	
                      ·
                

            	
               purchases
                by a broker/dealer as principal and resale by the broker/dealer for
                its
                account;

            
	
                      ·

            	
               an
                exchange distribution in accordance with the Rules of the applicable
                exchange;

            
	
                      ·

            	
               privately
                negotiated transactions;

            
	
                      ·

            	
               settlement
                of short sales;

            
	
                      ·

            	
               broker/dealers
                may agree with the Selling Stockholders to sell a specified number
                of such
                shares at a stipulated price per share;

            
	
                      ·

            	
               a
                combination of any such methods of sale; and

            
	
                      ·

            	
               any
                other method permitted pursuant to applicable
                law.

            


    

     

    The
      Selling Stockholders may also sell shares under Rule 144 under the
      Securities Act, if available, rather than under this prospectus.

     

    Broker/dealers
      engaged by the Selling Stockholders may arrange for other brokers/dealers to
      participate in sales. Broker/dealers may receive commissions from the Selling
      Stockholders (or, if any broker/dealer acts as agent for the purchaser of
      shares, from the purchaser) in amounts to be negotiated. The Selling
      Stockholders do not expect these commissions to exceed what is customary in
      the
      types of transactions involved.

     

    The
      Selling Stockholders may from time to time pledge or grant a security interest
      in some or all of the shares of common stock owned by them and, if they default
      in the performance of their secured obligations, the pledgees or secured parties
      may offer and sell the shares of common stock from time to time under this
      prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
      or other applicable provision of the Securities Act of 1933 amending the list
      of
      Selling Stockholders to include the pledgee, transferee or other successors
      in
      interest as Selling Stockholders under this prospectus.

     

    The
      Selling Stockholders and any broker/dealers or agents that are involved in
      selling the shares may be deemed to be “underwriters” within the meaning of the
      Securities Act in connection with such sales. In such event, any commissions
      received by such broker/dealers or agents
      and any profit on the resale of the shares purchased by them may be deemed
      to be
      underwriting commissions under the Securities Act. The Selling Stockholders
      have
      informed the Company that it does not have any agreement or understanding,
      directly or indirectly, with any person to distribute the Common
      Stock.

     

    The
      Company is required to pay all fees and expenses incident to the registration
      of
      the shares. The Company has agreed to indemnify the Selling Stockholders against
      certain losses, claims, damages and liabilities, including liabilities under
      the
      Securities Act.

     


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    


     

    EXHIBIT
      A

     

    SELLING
      STOCKHOLDER
      QUESTIONNAIRE

    XA,
      Inc.

    875
      North
      Michigan Avenue, Suite 2626

    Chicago,
      Illinois 60611

    


    Ladies
      and Gentlemen:

     

    I
      acknowledge that I am a holder of securities of XA, Inc. (the “Company”).  I
      understand that I will be named as a selling stockholder in the prospectus
      that
      forms a part of the registration statement on Form S-1 (or other applicable
      form) that the Company will file with the Securities and Exchange Commission
      to
      register under the Securities Act of 1933, as amended, the securities I expect
      to sell. The Company will use the information that I provide in this
      Questionnaire to ensure the accuracy of the registration statement and the
      prospectus.

     

    
      	 	
              Please
                answer every
                question.

              If
                the answer to any question
                is “none”
                or “not applicable,”
                please so
                state.

            	 


    

    


    1. 
Name.  Type
      or print your name exactly as it should appear in the Registration
      Statement.

    


    ______________________________________________

    


    
      2. 
        Manner
        of
        Ownership of Shares:

    

     

    


      Individual
      _______     Community Property
      ________    Tenants in Common _______

    


      Joint
      Tenants with Rights
      of Survivorship ________       Corporate
      ________

    


      Partnership
      ______         Trust
      ________     Other
      ___________________________

    


    


    
      3. 
Contact
        Information. Provide
        the address,
        telephone number and fax number where you can be reached during business
        hours.

    

     

    Address:                                                                                                                                

     

    Phone:                                                                                                                                

     

    Fax:                 

     

    
      4. 
Relationship
        with the
        Company. Describe
        the nature of
        any position, office or other material relationship you have had with the
        Company during the past three years.

    

     

    


     

    


    5. 
Organizational
      Structure.  Please
      indicate
      or (if applicable) describe how you are organized.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    
      	
              (a)
                Are you a natural person?

              (if
                so, please mark the box and skip to
                Question 5)

               

            	
              [ 
                ]Yes  [  ]No

            
	
              (b)
                Are you a reporting company under the 1934 Act?

              (if
                so, please mark the box and skip to
                Question 5)

               

            	
              [ 
                ]Yes  [  ]No

            
	
              (c)
                Are you a majority-owned
                subsidiary of a reporting company under the 1934 Act?

              (if
                so, please mark the box and skip to
                Question 5)

               

            	
              [ 
                ]Yes  [  ]No

            
	
              (d)
                Are you a registered investment fund under the 1940 Act?

              (if
                so, please mark the box and skip to
                Question 5)

            	
              [ 
                ]Yes  [  ]No

            


    

    


    If
      you
      have answered ““no”” to all of the foregoing questions, please describe: (i) the
      exact legal description of your entity (e.g., corporation, partnership, limited
      liability company, etc.); (ii) whether the legal entity so described is managed
      by another entity and the exact legal description of such entity (repeat this
      step until the last entity described is managed by a person or persons, each
      of
      whom is described in any one of (a) through (d) above), (iii) the names of
      each
      person or persons having voting and investment control over the Company’’s
      securities that the entity owns (e.g., director(s), general partner(s), managing
      member(s), etc.).

     

    Legal
      Description of
      Entity:                         

     

                                 

    Name
      of Entity(ies) Managing Such
      Entity (if
      any):                                                                                     

     

    


    Name
      of Entity(ies) Managing such
      Entity(ies) (if
      any):                                                                                     

     

    


    ·           Name(s)
      of Natural Persons Having Voting or Investment

     

    Control
      Over the Shares Held by such
      Entity(ies):                                                                           

     

    


     

    


    
      6. 
Ownership
        of the Company’s
        Securities.  This question covers your beneficial
        ownership of the Company’s securities.  Please consult the Appendix A to this
        Questionnaire for information as to the meaning of “beneficial
        ownership.”  State the number of shares of the Company’s common stock
        that you beneficially owned as of the date this Questionnaire is
        signed:

    

     

    


    
      	
              No.
                of Shares of
                Stock

            	 


    

     

    
      7. 
Acquisition
        of
        Shares.  Please
        describe
        below the manner in which you acquired your shares of Common Stock of the
        Company including, but not limited to, the date, the name and address of
        the
        seller(s), the purchase price and pursuant to which documents (the “Acquisition
        Documents”).  Please forward such documents used to
        acquire your shares as provided below.

    

     

    
      8. 
Plan
        of
        Distribution.  I have reviewed the proposed “Plan of
        Distribution” attached to this Registration Rights Agreement as Annex
        A, and
        agree that the statements contained therein reflect my intended method(s)
        of
        distribution or, to the extent these statements are inaccurate or incomplete,
        I
        have communicated in writing to one of the parties listed above my signature
        to
        any changes to the proposed “Plan of Distribution” that are required to make
        these statements accurate and complete.   ̈(Please
        check the box if you have
        made any changes to Appendix B)

    

     


    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

     

    
      9. 
Reliance
        on
        Responses. I acknowledge and agree that the Company and its legal
        counsel shall be entitled to rely on my responses in this Questionnaire in
        all
        matters pertaining to the registration statement and the sale of any shares
        of
        common stock of the Company pursuant to the registration
        statement.

    

     

    
      10. 
NASD.  The
        National Association of Securities Dealers, Inc. (“NASD”)
        may
        request, in connection with their review of the Registration Statement and
        Prospectus under the Securities Act of 1933, as amended, that the Company
        inform
        them of the names of all persons who purchased securities from the Company,
        together with any affiliations with the NASD of such purchasers. In order
        to aid
        the Company in responding to such request, the undersigned furnishes the
        following information:

    

    


    PART
      A: DETERMINATION OF RESTRICTED
      PERSON STATUS:

     

    Please
      check all appropriate
      categories.

     

    The
      undersigned is:

    


    
       ___ (i) a
        broker-dealer;

       

      
      

      ___
        (ii)
 an
        officer, director, general partner, associated person1
        or employee of a broker-dealer (other than a
        limited business broker-dealer)2;

       

      
      

    

    
      ___
        (iii)
 an
        agent
        of a broker-dealer (other than a limited business broker-dealer) that is
        engaged
        in the investment banking or securities business;

    

    


    
      ___
        (iv)an
        immediate family member3
        of a person described in (ii) or (iii) above.
        Under certain circumstances, if the undersigned checks this category, he/she/it
        may be able to participate in New Issue investments.  The Company may
        request additional information in order to determine the eligibility of the undersigned
        under
        this Restricted Person category;

    

    


    
      ___
        (v)  a
        finder
        or any person acting in a fiduciary capacity to a managing underwriter,
        including, but not limited to, attorneys, accountants and financial
        consultants;

    

    


    
      ___
        (vi) a
        person
        who has authority to buy or sell securities for a bank, savings and loan
        institution, insurance company, investment company, investment advisor or
        collective investment account4
        (including a private investment vehicle such
        as a hedge fund or an offshore fund);

    

    


    
      ___
        (vii)an
        immediate family member of a person described in (v) or (vi) above who materially
        supports5,
        or receives material support from, the
        undersigned;

    

     

    1  A
      person “associated with” a broker-dealer includes any natural person engaged in
      the investment banking or securities business who is directly or indirectly
      controlling or controlled by a broker-dealer, any partner, director, officer
      or
      sole proprietor of a broker-dealer.

      
      2 
        A limited
        business broker-dealer is any broker-dealer whose authorization to engage
        in the
        securities business is limited solely to the purchase and sale of investment
        company/variable contracts securities and direct participation program
        securities.

    

      
      3  The
        term "Immediate family" includes the investor’s: (i) parents, (ii) mother-in-law
        or father-in-law. (iii) husband or wife, (iv) brother or sister, (v)
        brother-in-law or sister-in-law, (vi) son-in-law or daughter-in-law, (vii)
        children, and (viii) any other person who is supported, directly or indirectly,
        to a material extent by an officer, director, general partner, employee,
        agent
        of a broker-dealer or person associated with a broker-dealer.

    

      
      4  A
        "collective investment account" is any hedge fund, investment corporation,
        or
        any other collective investment vehicle that is engaged primarily in the
        purchase and/or sale of securities. investment clubs (groups of individuals
        who
        pool their money to invest in stock or other securities and who are collectively
        responsible for making investment decisions) and family investment vehicles
        (legal entities that are beneficially owned solely by immediate family members
        (as defined above)) are not considered
        collective investment accounts.

    


    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    


    
    

    


    
      ___
        (viii)a
        person
        listed or required to be listed in Schedule A, B or C of a Form BD (other
        than
        with respect to a limited business broker-dealer), except persons whose listing
        on Schedule A, B or C is related to a person identified by an ownership code
        of
        less than 10% on Schedule A;

    

    


    
      ___
        (ix)a
        person
        that (A) directly or indirectly owns 10% or more of a public reporting company
        listed, or required to be listed, in Schedule A of a Form BD or (B) directly
        or
        indirectly owns 25% or more of a public reporting company listed, or required
        to
        be listed in Schedule B of a Form BD, in each case (A) or (B), other than
        a
        reporting company that is listed on a national securities exchange or is
        traded
        on the Nasdaq National Market, or other than with respect to a limited business
        broker/dealer;

    

    


    
      ___
        (x)an
        immediate family member of a person described in (viii) or (ix)
        above.  Under certain circumstances, if the undersigned places a check
        next to this category, he/she/it  may be able to participate in New
        Issue investments.  The Company may request additional information in
        order to determine the eligibility of the undersigned under this Restricted
        Person category;

    

    


    
      ___
        (xi)any
        entity (including a corporation, partnership, limited liability company,
        trust
        or other entity) in which any person or persons listed in (i)-(x) above has
        a
        beneficial interest6;
        or

    

    


    
      ___None
        of
        the above categories apply and the undersigned is eligible to participate
        in New
        Issue securities.

    

    


    PART
      B:  DETERMINATION OF
      EXEMPTED ENTITY STATUS:

     

    The
      undersigned  is:

     

    
      ____
        (i)  a
        publicly-traded entity (other than a broker-dealer or an affiliate of a
        broker-dealer, where such broker-dealer is authorized to engage in the public
        offering of New Issues either as a selling group member or underwriter) that
        is
        listed on a national securities exchange or traded on the Nasdaq National
        Market
        or is a foreign issuer whose securities meet the quantitative designation
        criteria for listing on a national securities exchange or trading on the
        Nasdaq
        National Market;

    

    


    
      ____
        (ii)an
        investment company registered under the Investment Company Act of 1940, as
        amended;

    

    


    
      ____
        (iii)a
        corporation, partnership, limited liability company, trust or any other entity
        (including a private investment vehicle such as a hedge fund or an offshore
        fund, or a broker-dealer organized as an investment partnership)
        and

    

    


    
      	
               

            	
              (A)

            	
              the
                beneficial interests of Restricted Persons do not exceed in the aggregate
                10% of such entity; or

            


    

    
      	
               

            	
              (B)

            	
              such
                entity limits participation by Restricted Persons to not more than
                10% of
                the profits and losses of New
                Issues;

            


    

     

    
      ____ (iv) 
        an
        investment company organized under the laws of a foreign jurisdiction
        and

    

    

      

    

      
      5  The
        term “material” support” means directly or indirectly providing more than 25% of
        a person’s income in the prior calendar year or living in the same household
        with a member of one’s Immediate family.

    

      
      6The
        term
‘beneficial interest” means any economic interest such as the right to share in
        gains or losses. The receipt of a management or performance based fee for
        operating a collective investment account, or other fee for acting in a
        fiduciary capacity, is not considered
        a
        beneficial interest in the account; however, if such fee is subsequently
        invested into the account (as a deferred fee arrangement or otherwise), it
        is
        considered a beneficial interest in that account.

    


    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    


    (A)          the
      investment company is listed on a foreign exchange or authorized for sale to
      the
      public by a foreign regulatory authority; and

    (B)           no
      person owning more than 5% of the shares of the investment company is a
      Restricted Person;

    


    
      ____
        (v)
        (A)an
        employee benefits plan under the U.S. Employee Retirement Income Security
        Act of
        1974, as amended, that is qualified under Section 401(a) of the Internal
        Revenue
        Code of 1986, as amended (the “Code”)
        and
        such plan is not sponsored solely by a broker-dealer, (B) a state or municipal
        government benefits plan that is subject to state and/or municipal regulation
        or
        (C) a church plan under Section 414(e) of the Code;

    

    


    ____(vi) 
      a tax exempt charitable organization under Section 501(3) of the
      Code;

    


    
      ____(vii)a
        common
        trust fund or similar fund as described in Section 3(a)(12)(A)(iii) of the
        Securities Exchange Act of 1934, as amended, and the Company

    

    


    (A)           has
      investments from 1,000 or more accounts, and

    (B)           does
      not limit beneficial interests in the Company principally to trust accounts
      of
      Restricted Persons; or

    


    ____
      (viii) an insurance company general, separate or investment account,
      and

     

    (A)           the
      account is funded by premiums from 1,000 or more policyholders, or, if a general
      account, the insurance company has 1,000 or more policyholders, and

    
      (B)           
        the
        insurance company does not limit the policyholders whose premiums are used
        to
        fund the account principally to Restricted Persons, or, if a general account,
        the insurance company does not limit its policyholders principally to Restricted
        Persons.

    

    


    Please
      acknowledge that your answers to the foregoing questions are true and correct
      to
      the best of your information and belief by signing and dating this Questionnaire
      where indicated below.  Please return the completed executed
      questionnaire via
      fax to The
      Loev Law Firm, PC at (713)
      524-4122as
      soon as
      possible.

     

    If
      at any
      time you discover that your answer to any question was inaccurate, or if any
      event occurring after your completion hereof would require a change in your
      answer to any questions, please immediately contact The Loev Law Firm, PC at
      (713) 524-4110.

    


     

    


     

    Date:                                         
       ,
      2007

    (Print
      name of selling
      stockholder)

     

    By:           

    (Signature)

     

    Name:                                                                           

    (Print
      name)

     

    Title:                                                                           


    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    


    APPENDIX
      A

    
      	
              1.

            	
              Definition
                of “Beneficial
                Ownership”

            


    

    


    
      	
               

            	
              (a)

            	
              A
                “Beneficial Owner” of a security includes any person who, directly or
                indirectly, through any contract, arrangement, understanding, relationship
                or otherwise has or shares:

            


    

    


    
      	
               

            	
              (1)

            	
              Voting
                power which includes the power to vote, or to direct the voting of,
                such
                security; and/or

            


    

    
      	
               

            	
              (2)

            	
              Investment
                power which includes the power to dispose, or direct the disposition
                of,
                such security.

            


    

    


    Please
      note that either voting power
      or investment
      power, or both,
      is sufficient for you to be considered the beneficial owner of
      shares.

     

    
      	
               

            	
              (b)

            	
              Any
                person who, directly or indirectly, creates or uses a trust, proxy,
                power
                of attorney, pooling arrangement or any other contract, arrangement
                or
                device with the purpose or effect of divesting such person of beneficial
                ownership of a security or preventing the vesting of such beneficial
                ownership as part of a plan or scheme to evade the reporting requirements
                of the federal securities acts shall be deemed to be the beneficial
                owner
                of such security.

               

            


    

    
      	
            	
              (c)

            	
              Notwithstanding
                the provisions of paragraph (a), a person is deemed to be the “beneficial
                owner” of a security, if that person has the right to acquire beneficial
                ownership of such security within 60 days, including but not limited
                to
                any right to acquire:  (A) through the exercise of any
                option, warrant or right; (B) through the conversion of a security;
                (C) pursuant to the power to revoke a trust, discretionary account or
                similar arrangement; or (D) pursuant to the automatic termination of
                a trust, discretionary account or similar arrangement; provided,
                however,
                any person who acquires a security or power specified in paragraphs
                (A),
                (B) or (C) above, with the purpose or effect of changing or influencing
                the control of the issuer, or in connection with or as a participant
                in
                any transaction having such purpose or effect, immediately upon such
                acquisition shall be deemed to be the beneficial owner of the securities
                which may be acquired through the exercise or conversion of such
                security
                or power.

            


    

    


    


    


    


    


     


    
      
        
        

      

      
        21