Security Agreement with Paul M. Higbee (effective June 11, 2007)

Exhibit
    10.28

    SECURITY
      AGREEMENT

     

    THIS
      SECURITY AGREEMENT
      (the
“Security
      Agreement”)
      effective as of the 11th day of June 2007 by and among XA, Inc., a Nevada
      Corporation (“XA”),
      The
      Experiential Agency, Inc., XA Scenes, Inc., XA Interactive, Inc., and Fiori
      XA,
      Inc. (collectively the with XA, the “Debtor”)
      and
      Paul M. Higbee (the “Secured
      Party”).

     

    W I T N E S S E T H

     

    WHEREAS,
      pursuant
      to a Securities Purchase Agreement, dated as of the date hereof, as may be
      amended or supplemented from time to time (the “SPA”),
      the
      Debtor is selling to the Secured Party an 11% Senior Secured Convertible
      Promissory Note, in the principal amount of $200,000, which is part of $500,000
      in 11% Senior Secured Convertible Promissory Note financing (the “Follow
      On Notes”),
      which
      is in addition to an aggregate of $2,700,000 in 11% Senior Secured Convertible
      Promissory Notes previously sold by the Debtor to certain parties (the
“Prior
      Purchasers”)
      in
      August, September and October 2006 (the “Prior
      Notes”)
      and
      along with the Follow On Notes, each, a “Note”:
      and
      collectively, the “Notes”)
      sold
      to certain parties (collectively with the “Prior
      Purchasers,”
the
      “Purchasers”);
      

     

    WHEREAS,
      this
      Security Agreement executed this 3rd day of July 2007, replaces and supersedes
      the prior Security Agreement entered into between the Secured Party and the
      Company dated on or around June 11, 2007; and

     

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

     

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

     

    SECTION
      1. Definitions.
      

     

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

     

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

    
      
         

        


        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     


    
      
         

        


        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    “Permitted
      Senior Indebtedness”
shall
      mean the prior first priority security interest of LaSalle Bank National
      Association (“LaSalle”), and/or any other bank or institutional lending source
      which shall replace and/or supersede the LaSalle loan and debt ; provided,
      however,
      that in
      no case shall the aggregate amount of such Permitted Senior Indebtedness exceed
      seven hundred and fifty thousand dollars ($750,000).

     

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

     

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

     

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

     

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

     

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


    
      
         

        


        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    SECTION
      2. Grant
      of Security Interest.
      

     

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

     

    
      	
              (a)

               

            	
              Accounts;

               

            


    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      	
              (b)

               

            	
              Inventory;

               

            
	
              (c)

               

            	
              Computer
                Software;

               

            
	
              (d)

               

            	
              General
                Intangibles;

               

            
	
              (e)

               

            	
              Documents;

               

            
	
              (f)

               

            	
              Instruments;

               

            
	
              (g)

               

            	
              Equipment;

               

            
	
              (h)

               

            	
              Fixtures;

               

            
	
              (i)

               

            	
              Contracts;

               

            
	
              (j)

               

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

               

            
	
              (k)

               

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

               

            
	
              (l)

               

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

               

            
	
              (m)

               

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

               

            


    

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

     

    SECTION
      3. Security
      for Obligations.
      

     

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

     

     

     


    
      
         

        


        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    SECTION 4. Debtor
      Remains Liable.
      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

     

     


    
      
         

        


        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    SECTION
      6. Further
      Assurances; Covenants.
      

     

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

     

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

     

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

     

     

     


    
      
         

        


        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

    SECTION
      7. Transfers
      and Other Liens.
      

     

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

     

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

     

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

    
    


    
      
         

        


        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      SECTION
        8. Events
        of Default; Remedies

       

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

    

     

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

     


    
      
         

        


        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    
      	
              (a)

               

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

               

            
	
              (b)

               

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

               

            
	
              (c)

               

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

               

            
	
              (d)

               

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

               

            
	
              (e)

               

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

               

            


    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
      	
              (f)

               

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

               

               

            
	
              (g)

               

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

               

            
	
              (h)

               

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

               

            


    

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

     

    SECTION
      11. Expenses.
      

     

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

     

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

     

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

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    SECTION
      13. Notices.
      

     

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

    


    SECTION
      14. Waivers,
      Non-Exclusive Remedies. 

     

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

     

    SECTION
      15. Successors
      and Assigns. 

     

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

     

    SECTION
      16. Severability. 

     

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

     

    SECTION
      17. Changes
      in Writing.

     

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

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    SECTION
      18. Applicable
      Law, Etc.

     

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

     

    SECTION
      19. Actions
      by Secured Party;
      Distributions.
      

     

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

     

    SECTION
      20. Headings.
      

     

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

     

    SECTION
      21. Execution.
      

     

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    SECTION
      22. Waiver
      of Jury Trial.

     

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

     

    SECTION
      23. Amendment
      and Restatement. 

    


    This
      Security Agreement amends, restates, replaces and supersedes in its entirety
      that certain Security Agreement entered into on or about June 11, 2007, executed
      by the Company and the Secured Party relating to the subject matter hereof.
      

    


     

    Signature
      Page Follows

     


    
      
         

        


        
        

      

      
        14

        
          

        

      

      
        
        

      

    


    WITNESS
      the due
      execution hereof by the respective duly authorized officers of the 

     

    undersigned
      on July 3, 2007, as of the effective day first above written.

     

    
      	 	
              DEBTORS:

            
	 	 
	 	
              XA,
                Inc.

            
	 	 
	 	 
	 	
              By:
                /s/ Joseph Wagner

            
	 	
              Name:
                Joseph
                Wagner

            
	 	
              Title:
                President and CEO

            
	 	 
	 	
              XA
                Scenes, Inc.

            
	 	 
	 	 
	 	
              By:
                 /s/ Joseph Wagner

            
	 	
              Name:
                Joseph
                Wagner

            
	 	
              Title:
                President and CEO

            
	 	 
	 	
              The
                Experiential Agency, Inc.

            
	 	 
	 	 
	 	
              By:
                /s/ Darren Andereck

            
	 	
              Name:
                Darren
                Andereck

            
	 	
              Title:
                President 

            
	 	 
	 	
              XA
                Interactive, Inc.

            
	 	 
	 	 
	 	
              By:
                /s/ Joseph Wagner

            
	 	
              Name:
                Joseph
                Wagner

            
	 	
              Title:
                President and CEO

            
	 	 
	 	
              Fiori
                XA, Inc.

            
	 	 
	 	 
	 	
              By:
                /s/ Darren Andereck

            
	 	
              Darren
                Andereck

            
	 	
              President

            
	 	 
	
              SECURED
                PARTY:

            	 
	 	 
	
              Paul
                M. Higbee

               

              /s/
                Paul M. Higbee

               

            	 


    

    


     

     

    


     

    


     


    
      
        
           

        

        
        

      

      
        15

        
          

        

      

      
        
        

        
        

      

    



    SCHEDULE
      I TO SECURITY AGREEMENT

     

    


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

    


     

    Locations
      of Equipment and Inventory:

     

    ●
       Chicago,
      Illinois - Event decor, furniture and fixtures

     

    
      	 	
              ○

            	
              Office
                - John Hancock Center, 875 North Michigan Avenue, Suite 2626, Chicago,
                Illinois 60611 

              -
                The Experiential Agency, Inc.

            


    

     

    
      	 	
              ○

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

            


    

     

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

    1435
      51st
      Street

    North
      Bergen, NJ - The Experiential Agency, Inc.

    


     

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

     

    
      	 	
              ○

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

              -
                XA Scenes, Inc.

            


    

    


    ● Los
      Angeles, California (office equipment)

    


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

    The
      Experiential Agency, Inc.

    


    Location
      of Books and Records and Chief Executive Officer:

     

    ●
       John
      Hancock Center, 875 North Michigan Avenue, Suite 2626, Chicago, Illinois
      60611

     -
      The Experiential Agency, Inc.

     

    
      
        
        

      

      
        16