Exhibit 10.4



THIS  NOTE,  THE  SHARES  OF  COMMON STOCK AND/OR OTHER SECURITIES ISSUABLE UPON
CONVERSION  OF  THIS  NOTE  (THE "SECURITIES") HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES  ONLY  AND  MAY  NOT  BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT
UNDER  THE  SECURITIES  ACT  OF  1933,  AS AMENDED (THE "ACT") SHALL HAVE BECOME
EFFECTIVE  WITH  RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF
COUNSEL  REASONABLY  SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION
UNDER  THE  ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS
IN  VIOLATION  OF  ANY  APPLICABLE  STATE  SECURITIES LAWS. THIS LEGEND SHALL BE
ENDORSED  UPON  ANY  NOTE  ISSUED  IN  EXCHANGE FOR THIS NOTE AND ANY SECURITIES
ISSUABLE  UPON  CONVERSION  OF  THIS  NOTE.


                                    XA, INC.

                 11% SENIOR SECURED CONVERTIBLE PROMISSORY NOTE


Bridge  Note  No.:  3                                            August 8,  2006



     FOR  VALUE  RECEIVED, XA, INC., a Nevada corporation (collectively with all
of  its  Subsidiaries,  as defined in the SPA (as defined below), the "COMPANY")
                                                                       -------
with  its  principal  executive office at 875 North Michigan Avenue, Suite 2626,
Chicago,  IL  60611,  promises  to  pay  to  the order of SANDS BROTHERS VENTURE
CAPTIAL III LLC (the "PAYEE" or the "HOLDER OF THIS NOTE") or registered assigns
                                     -------------------
on the earlier of (i) November 8, 2007; or (ii) if so elected by the Payee, upon
consummation  by  the  Company of a merger, combination or sale of substantially
all  of  its  assets  or  the  purchase by a single entity or person or group of
affiliated  entities  or  persons of more than fifty (50%) percent of the voting
stock  of  the  Company  (the  "MATURITY  DATE"),  the principal amount of SEVEN
                           -     -------------
HUNDRED SEVENTY-FIVE THOUSAND ($775,000) (the "PRINCIPAL AMOUNT") in such coin
                                                ----------------
or  currency  of the United States of America as at the time of payment shall be
legal  tender for the payment of public and private debts. Interest on this Note
shall accrue on the Principal Amount outstanding from time to time at a rate per
annum   computed   in   accordance   with   Section   3  hereof  and  shall  be
                                             ---------
payable on the Maturity Date,  or  earlier  upon  conversion  of  this  Note  in
accordance  with  the  provisions  of  Section 6 hereof (or as may otherwise be
                                       ---------
provided in this Note).  Nothing  in  item  (ii)  of  this  paragraph  shall be
construed  as  the consent  by the  holder  of this Note to any action otherwise
prohibited by the terms of this Note or as a waiver of  any  such  prohibition.

     This  Note  is  secured  by a Security Agreement dated the date hereof (the
"SECURITY  AGREEMENT")  of  the  Company  in  favor  of  the Payee and all other
 --------  ---------
Noteholders  covering  certain  collateral  (the  "COLLATERAL"),  all  as  more
                                                   ----------
particularly  described  and  provided  therein, and is entitled to the benefits
thereof.  The  Security  Agreement,  the  Uniform  Commercial  Code  financing
statements  in  connection  with  the  Security  Agreement and any and all other
documents  executed  and  delivered  by the Company to the Payee under which the
Payee  is granted liens on assets of the Company are collectively referred to as
the  "SECURITY  DOCUMENTS."
      -------------------

     Each  payment  by  the  Company pursuant to this Note shall be made without
set-off  or  counterclaim  and  in  immediately  available  funds.

<PAGE>

     The  Company  (i) waives presentment, demand, protest or notice of any kind
in  connection  with  this  Note  and  (ii)  agrees, in the event of an Event of
Default,  to  pay  to the holder of this Note, on demand, all costs and expenses
(including  reasonable  legal fees and expenses) incurred in connection with the
enforcement  and  collection  of  this  Note.

     This Note and other identical Notes in the aggregate principal amount of up
to $1,250,000 (the "NOTES") are issued to the Payee in connection with a private
                    -----
placement  (the "BRIDGE FINANCING") by the Company of its of Notes  and Warrants
                 ----------------
(the  "INVESTMENT WARRANTS") through Laidlaw & Company (UK) Ltd. ("LAIDLAW"), as
       -------------------                                         -------
non-exclusive  placement  agent,  pursuant  and  in accordance with a Securities
Purchase Agreement dated the date hereof by and among the Company, the Payee and
all  other  purchasers  of  Notes  (the  "SPA"),  a  copy  of which agreement is
                                          ---
available  for inspection at the Company's principal office. Notwithstanding any
provision to the contrary contained herein, this Note is subject and entitled to
certain  terms,  conditions,  covenants and agreements contained in the SPA. Any
transferee  of  this  Note, by its acceptance hereof, assumes the obligations of
the  Payee in the SPA with respect to the conditions and procedures for transfer
of  this  Note.  Reference  to  the  SPA shall in no way impair the absolute and
unconditional  obligation  of  the  Company  to  pay  both  principal hereof and
interest  hereon  as  provided  herein.

     1.  No Prepayment. This Note may not be prepaid prior to the Maturity Date.
         -------------

     2.  Investment  Warrants.  In  consideration  for the loan evidenced by the
         --------------------
Notes,  the Company shall issue to the holders of the Notes five-year Investment
Warrants  to  purchase  in  the aggregate 175,000 shares of the Company's common
stock,  $.001  par  value per share (the "COMMON STOCK") at an exercise price of
                                          -------------
$1.10  per share. The Holder of this Note may at any time that this Note remains
outstanding present this Note to the Company in payment of the exercise price of
all  or  any  portion  of  the  Investment  Warrants.

     3.  Computation  of  Interest.
         -------------------------

          A.  Base  Interest  Rate.  Subject to Subsections 3B and 3C below, the
              --------------------              ---------------------
     outstanding  Principal  Amount  shall  bear  interest at the rate of eleven
     (11%)  percent  per  annum.

          B.  Penalty  Interest.  In  the  event  the  Note is not repaid on the
              -----------------
     Maturity  Date,  the  rate  of  interest applicable to the unpaid Principal
     Amount  shall be adjusted to eighteen (18%) percent per annum from the date
     of  default  until repayment; provided, that in no event shall the interest
     rate  exceed  the  Maximum  Rate  provided  in  Section  3C  below.
                                                     -----------

          C.  Maximum  Rate.  In the event that it is determined that, under the
              -------------
     laws  relating  to  usury  applicable  to  the  Company or the indebtedness
     evidenced  by this Note ("APPLICABLE USURY LAWS"), the interest charges and
                               ---------------------
     fees  payable  by  the Company in connection herewith or in connection with
     any  other  document  or  instrument  executed  and delivered in connection
     herewith  cause  the effective interest rate applicable to the indebtedness
     evidenced  by  this  Note  to  exceed  the maximum rate allowed by law (the
     "MAXIMUM RATE"), then such interest shall be recalculated for the period in
      ------------
     question  and  any  excess  over the Maximum Rate paid with respect to such

<PAGE>

     period  shall  be  credited,  without  further  agreement or notice, to the
     Principal  Amount  outstanding  hereunder  to  reduce  said balance by such
     amount  with  the  same  force  and  effect  as  though  the  Company  had
     specifically  designated  such extra sums to be so applied to principal and
     the  Payee  had  agreed  to  accept such extra payment(s) as a premium-free
     prepayment.  All  such deemed prepayments shall be applied to the principal
     balance  payable  at  maturity.  In  no event shall any agreed-to or actual
     exaction  as  consideration  for  this  Note  exceed  the limits imposed or
     provided  by Applicable Usury Laws in the jurisdiction in which the Company
     is  resident  applicable to the use or detention of money or to forbearance
     in  seeking  its  collection  in  the  jurisdiction in which the Company is
     resident.

     4.  Covenants  of  Company.  For  the  purposes of this Section 4, the term
         ----------------------
"Company"  shall  include  all  of  the  Subsidiaries  (as  defined in the SPA).

          A.  Affirmative  Covenants.  The Company covenants and agrees that, so
              ----------------------
     long as this Note shall be outstanding, it will perform the obligations set
     forth  in  this  Section  4A,  unless  it  has otherwise obtained the prior
                      -----------
     written  consent  of  Laidlaw:

               (i) Taxes and Levies. The Company will promptly pay and discharge
                   ----------------
          all  taxes,  assessments,  and  governmental charges or levies imposed
          upon  the  Company  or upon its income and profits, or upon any of its
          property,  before  the  same  shall  become delinquent, as well as all
          claims  for  labor,  materials  and  supplies  which, if unpaid, might
          become  a  lien  or  charge  upon such properties or any part thereof;
          provided,  however,  that the Company shall not be required to pay and
          --------   -------
          discharge  any  such tax, assessment, charge, levy or claim so long as
          the  validity  thereof shall be contested in good faith by appropriate
          proceedings  and  the  Company  shall  set aside on its books adequate
          reserves  in  accordance with generally accepted accounting principles
          ("GAAP")  with  respect  to  any such tax, assessment, charge, levy or
           ------
          claim  so  contested;

               (ii) Maintenance of Existence. The Company will do or cause to be
                    ------------------------
          done  all  things  reasonably  necessary  to preserve and keep in full
          force  and  effect  its corporate existence, rights and franchises and
          comply  with  all  laws  applicable  to  the Company, except where the
          failure  to comply could not reasonably be expected to have a material
          adverse  effect  on  the  Company;

               (iii)  Maintenance  of  Property.  The  Company will at all times
                      -------------------------
          maintain,  preserve,  protect  and  keep such property material to the
          conduct  of  its business in good repair, working order and condition,
          and  from  time to time make all needful and proper repairs, renewals,
          replacements  and improvements thereto as shall be reasonably required
          in  the  conduct  of  its  business;

               (iv) Insurance. The Company will, to the extent necessary for the
                    ---------
          operation  of  its  business,  keep  adequately insured by financially
          sound  reputable insurers, all property of a character usually insured
          by  similar  corporations and carry such other insurance as is usually
          carried  by  similar  corporations;

               (v)  Books  and  Records. The Company will at all times keep true
                    -------------------
          and correct books, records and accounts reflecting all of its business
          affairs  and  transactions  in  accordance  with  GAAP. Such books and

<PAGE>

          records  shall  be open at reasonable times and upon reasonable notice
          to the inspection of the Payee or its agents, subject to the execution
          by  such  persons  of  a  reasonable  non-disclosure  agreement;

               (vi)  Underlying  Securities. The Company agrees to keep reserved
                     ----------------------
          such  number  of shares of Common Stock as will permit full conversion
          of  the Notes at any time or from time to time at the Conversion Price
          (as  defined  herein);

               (vii)  Notice  of  Certain  Events.  The Company will give prompt
                      ---------------------------
          written  notice (with a description in reasonable detail) to the Payee
          of:

          (a)  the  occurrence  of any Event of Default (as defined in Section 5
                                                                       ---------
     hereof),  or  any  event  which,  with the giving of notice or the lapse of
     time,  would  constitute  an Event of Default, or an event of default under
     any  document or instrument evidencing or governing any indebtedness of the
     Company  and  the  delivery of any notice effecting the acceleration of any
     such  indebtedness;  and

          (b)  the  occurrence  of  any  litigation, arbitration or governmental
     investigation  or proceeding not previously disclosed by the Company to the
     Payee  in  writing  which  has  been instituted or, to the knowledge of the
     Company,  is  threatened,  against  the  Company  or  to  which  any of its
     properties,  assets  or revenues is subject which, if adversely determined,
     would  reasonably  be  expected  to  have  a material adverse effect on the
     Company;

          (c)  any  material  adverse  development  which  shall  occur  in  any
     litigation,  arbitration  or  governmental  investigation  or  proceeding
     previously  disclosed  by  the  Company  to  the  Payee;  and

               (viii)  Security Interests. The Company shall perform any and all
                       ------------------
          acts and execute any and all documents (including, without limitation,
          the execution, amendment or supplementation of any financing statement
          and  continuation  statement)  for  filing under the provisions of the
          Uniform  Commercial  Code  (the  "UCC"), and the rules and regulations
                                            ---
          thereunder, or any other statute, rule or regulation of any applicable
          jurisdiction  which  are necessary (and/or advisable at the request of
          the  Holders  or  its  counsel)  in  order to maintain in favor of the
          holders of the Notes, a valid and perfected lien on the Collateral (as
          defined  in  the  Security  Agreement),  subject  to  no  other liens.

               (ix)  Access.  The Company will grant holders of this Note access
                     ------
          to  Company  facilities and personnel during normal business hours and
          with  reasonable advance notification. The Company will deliver to the
          Holders  annual,  quarterly  financial  statements and copies of other
          financial  and other documents and/or information reasonably requested
          by  the  Holder.

<PAGE>

          B.  Negative Covenants. The Company covenants and agrees that, so long
              ------------------
     as  this  Note  shall  be  outstanding, it will perform the obligations set
     forth in this Section 4B unless it has otherwise obtained the prior written
                   ----------
     consent  of  all  Holders:

               (i)  Liquidation,  Dissolution. The Company will not liquidate or
                    -------------------------
          dissolve,  consolidate  with,  or  merge  into  or  with,  any  other
          corporation  or  other entity, except that any wholly-owned subsidiary
          may merge with another wholly-owned subsidiary or with the Company (so
          long  as  the  Company is the surviving entity and no Event of Default
          shall  occur  as  a  result  thereof).

               (ii)  Sales of Assets. The Company will not sell, transfer, lease
                     ---------------
          or  otherwise  dispose  of, or grant options, warrants or other rights
          with respect to, all or a substantial part of its properties or assets
          (an  "ASSET  TRANSACTION") to any person or entity, provided that this
                ------------------                            -------- ----
          clause  (ii)  shall  not restrict any disposition made in the ordinary
          course  of  business  and  consisting  of:

          (a)  capital  goods  that  are  obsolete  or  have no remaining useful
               life;  or

          (b)  finished  goods  inventories.

               (iii)  Redemptions. The Company will not redeem or repurchase any
                      -----------
          outstanding  securities  of  the  Company;

               (iv)  Indebtedness. The Company will not hereafter create, incur,
                     ------------
          assume or suffer to exist, contingently or otherwise, any indebtedness
          (other  than  (i)  indebtedness  incurred  in  the  Company's historic
          business  and  in  the  ordinary course of the Company's business, and
          (ii) up to $1,250,00 aggregate principal amount of promissory notes on
          the terms and conditions substantially identical to the Notes, the net
          proceeds  of  which will be used to repay the Company's outstanding 6%
          Convertible Notes issued to certain investors pursuant to Subscription
          Agreements  dated  as  of June 30, 2004 (the "PARI NOTES"), which Pari
                                                        ----------
          Notes  are  pari  passu  to  the  Notes),  which  is  not  expressly
          subordinated  in  right  of  payment  and  otherwise  to  the  Notes.

               (v)  Negative Pledge. Except for the Pari Notes, the Company will
                    ---------------
          not  hereafter  create, incur, assume or suffer to exist any mortgage,
          pledge,  hypothecation,  assignment,  security  interest, encumbrance,
          lien  (statutory  or  other),  preference,  priority or other security
          agreement or preferential arrangement of any kind or nature whatsoever
          (including any conditional sale or other title retention agreement and
          any  financing  lease)  (each,  a  "LIEN")  upon  any of its property,
                                              ----
          revenues  or  assets, whether now owned or hereafter acquired, except:

          (a)  Liens  for  taxes,  assessments  or other governmental charges or
     levies  not at the time delinquent or thereafter payable without penalty or
     being  contested  in  good  faith  by appropriate proceedings and for which
     adequate  reserves in accordance with GAAP shall have been set aside on its
     books;

          (b)  Liens  of  carriers,  warehousemen,  mechanics,  materialman  and
     landlords  incurred in the ordinary course of business for sums not overdue

<PAGE>

     or  being  contested in good faith by appropriate proceedings and for which
     adequate  reserves in accordance with GAAP shall have been set aside on its
     books;

          (c)  Liens  (other  than  Liens  arising under the Employee Retirement
     Income  Security Act of 1974, as amended, or Section 412(n) of the Internal
     Revenue  Code  of  1986,  as  amended)  incurred  in the ordinary course of
     business  in  connection with workers' compensation, unemployment insurance
     or  other  forms  of  governmental  insurance  or  benefits,  or  to secure
     performance  of tenders, statutory obligations, leases and contracts (other
     than for borrowed money) entered into in the ordinary course of business or
     to  secure  obligations  on  surety  or  appeal  bonds;

          (d)  judgment  Liens in existence less than thirty (30) days after the
     entry  thereof  or  with  respect  to  which  execution  has  been  stayed;

          (e)  Liens  in the nature of zoning restrictions, easements and rights
     or  restrictions  of  record  on  the  use  of  real  property which do not
     materially  detract  from  its  value  or  impair  its  use;

          (f)  Liens  arising  by  operation  of  law  in  favor of the owner or
     sublessor  of  leased  premises  and  confined  to  the  property  rented;

          (g)  Liens  arising  from  any  litigation  or proceeds which is being
     contested in good faith by appropriate proceedings, provided, however, that
     no  execution  or  levy  has  been  made;  and

          (h)  Liens  which  secure  indebtedness  permitted by Section 4B(vii).

               (vi)  Investments.  The Company will not purchase, own, invest in
                     -----------
          or  otherwise  acquire,  directly  or  indirectly,  any stock or other
          securities  or  make  or  permit  to  exist  any investment or capital
          contribution or acquire any interest whatsoever in any other person or
          entity  or  permit  to  exist  any loans or advances for such purposes
          except  for  investments in direct obligations of the United States of
          America  or  any  agency thereof, obligations guaranteed by the United
          States  of America and certificates of deposit or other obligations of
          any  bank  or  trust  company  organized  under the laws of the United
          States or any state thereof and having capital and surplus of at least
          $500,000,000; provided, however, that nothing contained in this clause
          (vi)  shall  preclude  the  Company  from  making acquisitions for the
          purpose  of  expanding  its  business.

               (vii)  Guaranteed  Indebtedness.  The  Company  shall not create,
                      ------------------------
          incur,  assume  and/or permit to exist any Guaranteed Indebtedness (as
          defined  below) to any bank, lender, or any other person in connection
          with  any  credit facilities extended by such creditors to the Company
          and/or  any  of  its  Subsidiaries  (as defined in the SPA), and/or in
          connection  with  any  other  contracts  or  agreements.  "GUARANTEED
          INDEBTEDNESS"  shall  mean  as  to  any person, any obligation of such
          person  guaranteeing,  providing  comfort  or otherwise supporting any
          indebtedness, lease, dividend, or other obligation of any other person
          in  any manner, including any obligation or arrangement of such person
          to (1) purchase or repurchase any such primary obligation, (2) advance

<PAGE>

          or  supply funds for the purchase or payment of any primary obligation
          or  to  maintain  working  capital  or  otherwise  to maintain working
          solvency  or  any  balance  sheet  condition;  (3)  purchase property,
          securities  or services primarly for the purpose of assuring the owner
          of any such obligation of the abilty of the Company to make payment of
          such  obligation; (4) protect the beneficiary of such arrangement from
          loss;  or  (5)  indemnify  the  own  of  such obligation against loss.

               (viii)  Transactions  with  Affiliates.  Other  than  as  may  be
                       ------------------------------
          expressly  permitted  in  the  SPA,  the  Company  will  not repay any
          indebtedness  or  enter  into  any  transaction,  including,  without
          limitation, the purchase, sale, lease or exchange of property, real or
          personal,  the  purchase  or  sale  of  any security, the borrowing or
          lending of any money, or the rendering of any service, with any person
          or  entity  affiliated with the Company (including officers, directors
          and  shareholders  owning  three (3%) percent or more of the Company's
          outstanding  capital  stock).

               (ix)  Dividends.  The Company will not accrue, declare or pay any
                     ---------
          cash  dividends or distributions, whether accrued or otherwise, on its
          outstanding  capital  stock,  provided,  however,  that nothing herein
          contained  shall  prevent  the Company from effecting a stock split or
          declaring  or  paying  any dividend consisting solely of shares of any
          class of Common Stock to the holders of shares of such class of Common
          Stock,  provided  that  (i)  such  stock  split  or  stock dividend is
          effected  equally  across  all  classes  of  Common Stock and (ii) the
          holder  of  the  Note participates in such events as if the holder had
          converted  the Note immediately prior to such event into the number of
          shares  of  Common  Stock he would be entitled to receive if he had so
          converted;

               (x)  The  Company  will  not  make  any  create any direct and/or
          indirect  subsidiaries.

               (xi)  Other than expressly permitted in the SPA, or pursuant to a
          Qualified  Private  Offering  (as  defined  in  Section 6A below), the
          Company  shall  not  issue  any  additional  securities

               (xii)  Other  than as expressly permitted in the SPA, the Company
          shall  not  provide and/or pay any cash bonus or other compensation to
          any of its employees, officers, directors and/or consultants in excess
          of  what  is  expressly  permitted  in  their  respective  employment
          agreements (or if no agreements are in place, other than what has been
          historically  paid);

     5.  Events  of  Default.
         -------------------

          A.  The term "Event of Default" shall mean any of the events set forth
                        ----------------
     in  this  Section  5A:

               (i)  Non-Payment of Obligations. The Company shall default in the
                    --------------------------
          payment  of the principal or accrued interest on this Note when and as
          the  same  shall  become  due  and payable, whether by acceleration or
          otherwise  (and  solely  with  respect  to a default in the payment of
          accrued interest on this Note, such default is continuing for five (5)
          days).

<PAGE>

               (ii)  Non-Performance of Affirmative Covenants. The Company shall
                     ----------------------------------------
          default  in the due observance or performance of any material covenant
          set forth in Section 4A, which default shall continue uncured for five
          (5)  business  days.

               (iii)  Non-Performance  of  Negative Covenants. The Company shall
                      ---------------------------------------
          default in the due observance or performance of any covenant set forth
          in  Section  4B,  which  default  shall  continue  uncured for two (2)
          business  days.


               (iv)  Bankruptcy,  Insolvency,  etc.  The  Company  shall:
                     -----------------------------

          (a)  generally  fail  or  be  unable  to  pay, or admit in writing its
     inability  to  pay,  its  debts  as  they  become  due;

          (b)  apply  for,  consent  to,  or  acquiesce in, the appointment of a
     trustee,  receiver,  sequestrator or other custodian for the Company or any
     of its property, or make a general assignment for the benefit of creditors;

          (c)  in  the  absence  of  such  application, consent or acquiesce in,
     permit  or  suffer  to  exist  the  appointment  of  a  trustee,  receiver,
     sequestrator  or  other  custodian  for  the Company or for any part of its
     property, and such trustee, receiver, sequestrator or other custodian shall
     not  be  discharged  within  thirty  (30)  days;

          (d)  permit  or  suffer  to  exist the commencement of any bankruptcy,
     reorganization,  debt  arrangement  or  other  case or proceeding under any
     bankruptcy or insolvency law, or any dissolution, winding up or liquidation
     proceeding,  in  respect of the Company, and, if such case or proceeding is
     not commenced by the Company or converted to a voluntary case, such case or
     proceeding  shall  be consented to or acquiesced in by the Company or shall
     result  in  the entry of an order for relief or shall remain for sixty (60)
     days  undismissed;  or

          (e)  take  any corporate action authorizing, or in furtherance of, any
     of  the  foregoing;

               (v)  Cross-Default. The Company shall default in the payment when
                    -------------
          due  (including  any  applicable  grace  period) of any amount payable
          under any other obligation of the Company for money borrowed in excess
          of  $50,000  ,  which  default  shall  continue  uncured for three (3)
          business  days;

               (vi)  Cross-Acceleration.  Any indebtedness for borrowed money of
                     ------------------
          the  Company  or  any  subsidiary  in  an  aggregate  principal amount
          exceeding $50,000 (1) shall be duly declared to be or shall become due
          and  payable  prior to the stated maturity thereof or (2) shall not be
          paid  as  and  when  the  same  becomes  due and payable including any
          applicable  grace  period;

<PAGE>

               (vii)  Judgments.  A  judgment which, with other such outstanding
                      ---------
          judgments  against  the  Company and its subsidiaries (in each case to
          the extent not covered by insurance), exceeds an aggregate of $50,000,
          shall  be  rendered  against the Company or any subsidiary and, within
          twenty  (20)  days  after  entry thereof, such judgment shall not have
          been  vacated,  discharged or otherwise satisfied or execution thereof
          stayed  pending  appeal,  or,  within  thirty  (30)  days  after  the
          expiration  of  any  such  stay,  such  judgment  shall  not have been
          discharged  or  otherwise  satisfied;  and

               (viii)  Transaction  Documents.  The  Company  shall  violate any
                       ----------------------
          material  representation,  warranty, covenant, agreement or obligation
          set  forth in the SPA, the Security Documents, the Registration Rights
          Agreement  dated  as  of  the date hereof among the Company, Payee and
          other  purchasers  of the Notes (the "REGISTRATION RIGHTS AGREEMENT"),
          and/or  the Investment Warrant and such default is continuing for five
          (5)  days;

               (ix)  Security  Agreement. If an event of default shall occur for
                     -------------------
          any  reason  under  the  Security  Agreement;  and

               (x)  Security  Documents. If any Security Document shall cease to
                    -------------------
          be in full force and effect, or shall cease to give the holder of this
          Note  and  the  other  holders  of Notes the liens, rights, powers and
          privileges  purported  to  be  created  thereby  (including,  without
          limitation, in all cases, a first priority perfected security interest
          in,  and  lien  on,  all of the Collateral (as defined in the Security
          Agreement)  subject  thereto),  superior to and prior to the rights of
          all  third persons and subject to no other liens (except to the extent
          expressly  permitted  herein  or  in  the  Security  Agreement), which
          default  shall  continue  uncured  for  two  (2)  business  days.

          B.  Action if Bankruptcy. If any Event of Default described in clauses
              -------------------
     (v)(a)  through  (d)  of  Section 5A shall occur, the outstanding Principal
                               ----------
     Amount of this Note and all other obligations hereunder shall automatically
     be  and  become  immediately  due  and  payable,  without notice or demand.

          C.  Action  if  Other Event of Default. If any Event of Default (other
              ----------------------------------
     than  any  Event  of  Default  described  in  clauses (v)(a) through (d) of
     Section  5A)  shall occur for any reason, whether voluntary or involuntary,
     and be continuing, the Holders may, upon notice to the Company, declare all
     or  any  portion  of the outstanding Principal Amount of the Notes together
     with  interest  accrued  thereon to be due and payable and any or all other
     obligations  hereunder  to  be  due  and payable, whereupon the full unpaid
     Principal  Amount  (or  any  portion  thereof  so  demanded),  such accrued
     interest  and any and all other such obligations which shall be so declared
     due  and  payable  shall be and become immediately due and payable, without
     further  notice,  demand,  or  presentment.

          D.  Remedies.  In  case  any  Event  of  Default  shall  occur  and be
              --------
     continuing,  the  Payee  may proceed to protect and enforce its rights by a
     proceeding  seeking  the  specific performance of any covenant or agreement
     contained  in  this  Note or in aid of the exercise of any power granted in
     this  Note or may proceed to enforce the payment of this Note or to enforce
     any  other  legal  or  equitable  rights  as  such  holder shall determine.

<PAGE>

     6.  Conversions.
         -----------

          A.  Mandatory Conversion. This Note, along will all other Notes issued
              --------------------
     in  the  Bridge  Financing, will automatically be converted (the "MANDATORY
                                                                       ---------
     CONVERSION")  into  shares of Common Stock (the "CONVERSION SHARES") at the
     ----------                                       -----------------
     Conversion  Price  (as  hereinafter  defined).  If  the Company completes a
     private offering of its equity securities in which (i) the Company receives
     gross  proceeds of no less than three million ($3,000,000) dollars from the
     sale  of  such  equity securities, and (ii) the effective purchase price of
     the Common Stock sold (the conversion price and/or exercise price if Common
     Stock  is  not  sold  directly)  in the Qualified Private Offering is $1.50
     (subject to stock splits or other events) or more per share of Common stock
     (a  "QUALIFIED PRIVATE OFFERING"). Such Mandatory Conversion shall occur on
          --------------------------
     the  date  the  Securities  and  Exchange  Commission  (the "SEC") declares
                                                                  ---
     effective  a  registration  statement covering the resale of the Conversion
     Shares  and  the  shares  of  Common  Stock  issuable  upon exercise of the
     Warrants  (the  "UNDERLYING  SHARES").
                      ------------------

          B.  Optional  Conversion.  Notwithstanding  anything  to  the contrary
              --------------------
     contained in Section 6 hereof or elsewhere, the Holder, at its sole option,
     shall  have  the  right to convert from time to time, any and/or all of the
     Principal  Amount  and  all  accrued,  but  unpaid Interest into Conversion
     Shares,  at  the  Conversion  Price  by  submitting  a  written notice (the
     "OPTIONAL  CONVERSION  ELECTION  FORM"),  in  the form of EXHIBIT A annexed
      ------------------------------------                     ---------
     hereto,  electing to exercise its optional conversion rights (the "OPTIONAL
                                                                        --------
     CONVERSION").
     ----------

          C. Conversion Price. The number of Conversion Shares to be issued upon
             ----------------
     conversion  of  the Principal Amount and/or Interest shall be determined by
     dividing  the  Conversion  Amount  (as  defined  below)  by  the applicable
     Conversion Price (as defined in below). The term "CONVERSION AMOUNT" means,
                                                       -----------------
     with  respect  to any conversion of this Note, the sum of (i) the Principal
     Amount, and (ii) accrued but unpaid Interest through the date of conversion
     that  the  holder  is  electing  to  so convert (or that is being converted
     pursuant to Mandatory Conversion). The "CONVERSION PRICE" shall be (subject
                                             ----------------
     to  anti-dilution  adjustments as provided in this Note ) the lesser of (i)
     $0.75,  and  (ii) fifty (50%) percent of the effective per share sale price
     of  the  Common Stock (the conversion price and/or exercise price if Common
     Stock  is  not  sold directly) in any Qualified Private Offering; provided,
                                                                       --------
     however,  that  Conversion  Price  shall  not  be  less  than the $0.30 per
     -------
     share.(subject  to  anti-dilution  adjustments  provided  in  this  Note).

          D.  Conversion  Mechanics.
              ---------------------

               (i)  Surrender  of Note Upon Conversion. Notwithstanding anything
                    ----------------------------------
          to  the  contrary  set  forth  herein, upon conversion of this Note in
          accordance  with the terms of Section 6 of this Note, the Holder shall
                                        ---------
          be  required  to  physically  surrender this Note (or any affidavit of
          lost  Note)  to  the Company in order to receive the Conversion Shares
          due  upon  conversion  of  this  Note  by  the  Company.

               (ii)  Delivery  of  Common Stock Upon Conversion. Upon receipt by
                     ------------------------------------------
          the  Company of this Note (or any affidavit of lost Note) and provided
          the Holder has converted this Note in accordance with the requirements

<PAGE>

          of  Section  6  of  this  Note, the Company shall issue and deliver or
              ----------
          cause  to  be  issued and delivered to or upon the order of the Holder
          certificates  for the Conversion Shares no later than two (2) business
          days  after  such  receipt  (the  "DEADLINE").
                                             --------

          E.  Concerning  the  Shares.  Conversion  Shares  may  not  be sold or
              -----------------------
     transferred  unless  (i)  such  shares  are  sold  pursuant to an effective
     registration  statement  under  the Act or (ii) the Company or its transfer
     agent  shall  have been furnished with an opinion of counsel (which opinion
     shall  be in form, substance and scope customary for opinions of counsel in
     comparable  transactions)  to  the  effect  that  the  shares to be sold or
     transferred  may  be sold or transferred pursuant to an exemption from such
     registration  or (iii) such shares are sold or transferred pursuant to Rule
     144  under  the  Act (or a successor rule) ("RULE 144") or (iv) such shares
                                                  --------
     are  transferred  to  an "affiliate" (as defined in Rule 144) of the Holder
     who agrees to sell or otherwise transfer the shares only in accordance with
     this  Note  and who is an accredited investor. Except as otherwise provided
     in  the  SPA, until such time as the Conversion Shares have been registered
     under  the  Act  as  contemplated  by  the Registration Rights Agreement or
     otherwise  may  be  sold pursuant to Rule 144 without any restriction as to
     the  number  of  securities  as  of  a  particular  date  that  can then be
     immediately  sold, each certificate for Conversion Shares that has not been
     so  included  in  an  effective registration statement or that has not been
     sold  pursuant  to an effective registration statement or an exemption that
     permits  removal  of  the  legend, shall bear a legend substantially in the
     following  form,  as  appropriate:

               "THE  SECURITIES  REPRESENTED  BY  THIS  CERTIFICATE  HAVE
                NOT  BEEN  REGISTERED  UNDER  THE SECURITIES ACT OF 1933, AS
                AMENDED.  THE  SECURITIES  MAY  NOT  BE SOLD, TRANSFERRED OR
                ASSIGNED  IN  THE  ABSENCE  OF  AN  EFFECTIVE  REGISTRATION
                STATEMENT  FOR  THE SECURITIES UNDER SAID ACT, OR AN OPINION
                OF  COUNSEL  IN  FORM,  SUBSTANCE  AND  SCOPE  CUSTOMARY FOR
                OPINIONS  OF  COUNSEL  IN  COMPARABLE  TRANSACTIONS,  THAT
                REGISTRATION  IS  NOT  REQUIRED  UNDER  SAID ACT UNLESS SOLD
                PURSUANT  TO  RULE  144  OR  REGULATION  S  UNDER SAID ACT."

          The  legend  set  forth  above  shall be removed and the Company shall
     issue  to the Holder a new certificate therefor free of any transfer legend
     if  (i) the Company or its transfer agent shall have received an opinion of
     counsel,  in form, substance and scope customary for opinions of counsel in
     comparable  transactions,  to  the effect that a public sale or transfer of
     such Common Stock may be made without registration under the Securities Act
     and  the  shares  are so sold or transferred, (ii) such Holder provides the
     Company  or  its  transfer  agent  with  reasonable  assurances  that  the
     Conversion  Shares can be sold pursuant to Rule 144 or Rule 144(k) or (iii)
     if  the  Conversion  Shares  are  registered  for resale under an effective
     registration statement filed under the Act Nothing in this Note shall limit
     the  Company's  obligation under the Registration Rights Agreement. Failure
     to delivery certificates with the legend for Conversion Shares shall result
     in  certain  payments  to  the  Holder  as  set  forth  in  the  SPA.

          F.  Status  as Shareholder. Upon submission of this Note by the Holder
              ----------------------
     and  the  satisfaction  of the Conversion Conditions by the Holder, (i) the
     shares  covered  thereby  shall  be  deemed  Conversion Shares and (ii) the
     Holder's  rights  as  a  Holder  of  this  Note  shall cease and terminate,
     excepting  only the right to receive certificates for the Conversion Shares

<PAGE>

     and  to  any  remedies  provided herein or otherwise available at law or in
     equity  to  such Holder because of a failure by the Borrower to comply with
     the  terms of this Note. Notwithstanding the foregoing, if a Holder has not
     received  certificates  for all Conversion Shares prior to the second (2nd)
     business  day  after  the  expiration  of  the Deadline with respect to any
     reason,  then (unless the Holder otherwise elects to retain its status as a
     holder  of  Common  Stock  by  so  notifying the Borrower) the Holder shall
     regain  the  rights of a Holder of this Note and the Company shall, as soon
     as  practicable, return such unconverted Note to the Holder or, if the Note
     has  not  been surrendered, adjust its records to reflect that such portion
     of  this Note has not been converted. In all cases, the Holder shall retain
     all  of  its  rights and remedies for the Company's failure to convert this
     Note.

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

          A. Adjustment for Stock Splits and Combinations. If the Company at any
             --------------------------------------------
     time or from time to time on or after the date of the issuance of this Note
     (the  "ORIGINAL  ISSUANCE  DATE")  effects a subdivision of the outstanding
            ------------------------
     Common  Stock,  the Conversion Price then in effect immediately before that
     subdivision  shall  be  proportionately  decreased,  and conversely, if the
     Company  at any time or from time to time on or after the Original Issuance
     Date  combines the outstanding shares of Common Stock into a smaller number
     of  shares,  the  Conversion  Price  then  in effect immediately before the
     combination  shall  be proportionately increased. Any adjustment under this
     Section  7A shall become effective at the close of business on the date the
     subdivision  or  combination  becomes  effective.

          B.  Adjustment for Certain Dividends and Distributions. If the Company
              --------------------------------------------------
     at  any  time  or  from time to time on or after the Original Issuance Date
     makes  or  fixes  a  record date for the determination of holders of Common
     Stock  entitled  to  receive,  a  dividend or other distribution payable in
     additional  shares  of  Common  Stock,  then  and  in  each  such event the
     Conversion  Price  then in effect shall be decreased as of the time of such
     issuance  or,  in  the  event such record date is fixed, as of the close of
     business  on  such record date, by multiplying the Conversion Price then in
     effect  by  a  fraction  (1)  the numerator of which is the total number of
     shares of Common Stock issued and outstanding immediately prior to the time
     of  such  issuance or the close of business on such record date and (2) the
     denominator  of  which  shall be the total number of shares of Common Stock
     issued  and  outstanding  immediately prior to the time of such issuance or
     the  close  of  business  on  such record date plus the number of shares of
     Common  Stock  issuable  in  payment  of  such  dividend  or  distribution;
     provided,  however,  that if such record date is fixed and such dividend is
     --------   -------
     not  fully paid or if such distribution is not fully made on the date fixed
     therefor,  the  Conversion  Price shall be recomputed accordingly as of the
     close  of  business on such record date and thereafter the Conversion Price
     shall  be  adjusted  pursuant  to  this Section 7B as of the time of actual
                                             ----------
     payment  of  such  dividends  or  distributions.

          C. Adjustments for Other Dividends and Distributions. In the event the
             -------------------------------------------------
     Company  at any time or from time to time on or after the Original Issuance
     Date  makes,  or  fixes  a  record date for the determination of holders of
     Common  Stock entitled to receive, a dividend or other distribution payable
     in securities of the Company other than shares of Common Stock, then and in

<PAGE>

     each  such event provision shall be made so that the Holders of Notes shall
     receive  upon  conversion  thereof,  in addition to the number of shares of
     Common  Stock receivable thereupon, the amount of securities of the Company
     which  they  would have received had their Notes been converted into Common
     Stock  on the date of such event and had they thereafter, during the period
     from  the date of such event to and including the conversion date, retained
     such securities receivable by them as aforesaid during such period, subject
     to all other adjustments called for during such period under this Section 7
                                                                       ---------
     with  respect  to  the  rights  of  the  Holders  of  the  Notes.

          D.  Adjustment for Reclassification, Exchange and Substitution. In the
              ----------------------------------------------------------
     event  that  at  any  time  or  from  time to time on or after the Original
     Issuance  Date,  the Common Stock issuable upon the conversion of the Notes
     is  changed  into  the same or a different number of shares of any class or
     classes  of  stock,  whether  by  recapitalization,  reclassification  or
     otherwise  (other  than  a  subdivision  or  combination of shares or stock
     dividend  or  a  reorganization,  merger,  consolidation or sale of assets,
     provided  for elsewhere in this Section 7), then and in any such event each
                                     ---------
     Holder  of  Notes  shall have the right thereafter to convert such Notes to
     receive  the  kind  and  amount  of stock and other securities and property
     receivable upon such recapitalization, reclassification or other change, by
     holders  of  the  maximum  number  of shares of Common Stock for which such
     Notes could have been converted immediately prior to such recapitalization,
     reclassification  or  change, all subject to further adjustment as provided
     herein.

          E.  Reorganizations, Mergers, Consolidations or Sales of Assets. If at
              -----------------------------------------------------------
     any  time or from time to time on or after the Original Issuance Date there
     is  a  capital  reorganization  of  the  Common  Stock  (other  than  a
     recapitalization, subdivision, combination, reclassification or exchange of
     shares  provided  for  elsewhere  in  this  Section  7)  or  a  merger  or
                                                 ----------
     consolidation  of the Company with or into another corporation, or the sale
     of  all  or substantially all of the Company's properties and assets to any
     other person, then, as a part of such reorganization, merger, consolidation
     or  sale,  provision  shall  be made so that the Holders of the Notes shall
     thereafter  be  entitled to receive upon conversion of the Notes the number
     of shares of stock or other securities or property to which a holder of the
     number  of  shares  of  Common Stock deliverable upon conversion would have
     been  entitled  on  such  capital reorganization, merger, consolidation, or
     sale.  In  any  such  case,  appropriate  adjustment  shall  be made in the
     application  of the provisions of this Section 7 with respect to the rights
                                            ---------
     of the Holders of the Notes after the reorganization, merger, consolidation
     or  sale  to  the  end  that  the  provisions  of this Section 7 (including
                                                            ---------
     adjustment  of the Conversion Price then in effect and the number of shares
     to be received upon conversion of the Notes) shall be applicable after that
     event  and  be  as  nearly  equivalent  as  may  be  practicable.

          F.  Sale  of  Shares  Below  Conversion  Price:
              ------------------------------------------

               (i)  If  at  any time or from time to time following the Original
          Issuance  Date,  the  Company  issues  or  sells,  or is deemed by the
          express  provisions  of  this  Section  7F  to  have  issued  or sold,
                                         -----------
          Additional Shares of Common Stock (as hereinafter defined), other than
          as  a  dividend  or other distribution on any class of stock and other
          than  upon  a subdivision or combination of shares of Common Stock, in
          either  case  as  provided in Section 7A above, for an Effective Price
                                        ----------
          (as hereinafter defined) less than the then existing Conversion Price,
          then and in each such case the then existing Conversion Price shall be
          reduced,  as  of  the opening of business on the date of such issue or
          sale,  to  a  price  equal  to the Effective Price for such Additional
          Shares  of  Common  Stock.

<PAGE>

               (ii)  For  the  purpose  of  making any adjustment required under
          Section 7F, the consideration received by the Company for any issue or
          sale  of  securities  shall  (I)  to the extent it consists of cash be
          computed  at  the  amount of cash received by the Company, (II) to the
          extent  it  consists  of  property other than cash, be computed at the
          fair  value  of that property as determined in good faith by the board
          of  directors of the Company (the "BOARD"), (III) if Additional Shares
                                             -----
          of  Common  Stock,  Convertible Securities (as hereinafter defined) or
          rights or options to purchase either Additional Shares of Common Stock
          or Convertible Securities are issued or sold together with other stock
          or securities or other assets of the Company for a consideration which
          covers  both,  be  computed  as  the  portion  of the consideration so
          received  that may be reasonably determined in good faith by the Board
          to be allocable to such Additional Shares of Common Stock, Convertible
          Securities  or rights or options, and (IV) be computed after reduction
          for  all expenses payable by the Company in connection with such issue
          or  sale.

               (iii)  For  the  purpose of the adjustment required under Section
                                                                         -------
          7F, if the Company issues or sells any rights, warrants or options for
          --
          the  purchase  of,  or  stock  or other securities convertible into or
          exchangeable  for, Additional Shares of Common Stock (such convertible
          or  exchangeable  stock or securities being hereinafter referred to as
          "CONVERTIBLE  SECURITIES")  and  if  the  Effective  Price  of  such
           -----------------------
          Additional  Shares  of  Common Stock is less than the Conversion Price
          then  in effect, then in each case the Company shall be deemed to have
          issued  at  the time of the issuance of such rights, warrants, options
          or  Convertible  Securities the maximum number of Additional Shares of
          Common  Stock  issuable  upon exercise, conversion or exchange thereof
          and  to have received as consideration for the issuance of such shares
          an  amount  equal  to  the  total amount of the consideration, if any,
          received  by  the  Company  for the issuance of such rights, warrants,
          options  or  Convertible Securities, plus, in the case of such rights,
          warrants  or  options,  the  minimum amounts of consideration, if any,
          payable  to  the Company upon the exercise of such rights, warrants or
          options,  plus,  in  the  case  of Convertible Securities, the minimum
          amounts  of  consideration, if any, payable to the Company (other than
          by  cancellation  of  liabilities  or  obligations  evidenced  by such
          Convertible  Securities)  upon  the conversion or exchange thereof. No
          further adjustment of the Conversion Price, adjusted upon the issuance
          of  such rights, warrants, options or Convertible Securities, shall be
          made as a result of the actual issuance of Additional Shares of Common
          Stock  on  the exercise of any such rights, warrants or options or the
          conversion or exchange of any such Convertible Securities. If any such
          rights  or options or the conversion or exchange privilege represented
          by  any  such  Convertible Securities shall expire without having been
          exercised,  the  Conversion  Price  adjusted upon the issuance of such
          rights,  warrants,  options  or  Convertible  Securities  shall  be
          readjusted to the Conversion Price which would have been in effect had
          an  adjustment  been made on the basis that the only Additional Shares
          of  Common Stock so issued were the Additional Shares of Common Stock,
          if  any,  actually  issued  or  sold  on  the exercise of such rights,
          warrants,  or  options  or  rights  of  conversion or exchange of such
          Convertible Securities, and such Additional Shares of Common Stock, if
          any,  were  issued  or sold for the consideration actually received by
          the  Company  upon  such  exercise,  plus  the  consideration, if any,
          actually  received by the Company for the granting of all such rights,
          warrants, or options, whether or not exercised, plus the consideration
          received  for  issuing  or selling the Convertible Securities actually
          converted  or  exchanged,  plus  the  consideration,  if any, actually
          received  by the Company (other than by cancellation of liabilities or
          obligations  evidenced  by  such  Convertible  Securities)  on  the
          conversion  or  exchange  of  such  Convertible  Securities.

<PAGE>

               (iv) For the purpose of the adjustment required under Section 7F,
                                                                     ----------
          if the Company issues or sells, or is deemed by the express provisions
          of  this  Section  7 to have issued or sold, any rights or options for
                    ----------
          the  purchase  of Convertible Securities and if the Effective Price of
          the  Additional  Shares  of  Common  Stock underlying such Convertible
          Securities  is  less than the Conversion Price then in effect, then in
          each  such case the Company shall be deemed to have issued at the time
          of  the  issuance  of  such  rights  or  options the maximum number of
          Additional Shares of Common Stock issuable upon conversion or exchange
          of  the  total amount of Convertible Securities covered by such rights
          or  options  and to have received as consideration for the issuance of
          such  Additional  Shares of Common Stock an amount equal to the amount
          of  consideration, if any, received by the Company for the issuance of
          such  rights,  warrants  or  options,  plus  the  minimum  amounts  of
          consideration,  if  any,  payable  to the Company upon the exercise of
          such  rights,  warrants  or  options,  plus  the  minimum  amount  of
          consideration,  if  any,  payable  to  the  Company  (other  than  by
          cancellation  of  liabilities  or  obligations  evidenced  by  such
          Convertible  Securities)  upon  the  conversion  or  exchange  of such
          Convertible Securities. No further adjustment of the Conversion Price,
          adjusted  upon the issuance of such rights, warrants or options, shall
          be  made  as  a  result  of  the  actual  issuance  of the Convertible
          Securities  upon  the  exercise of such rights, warrants or options or
          upon the actual issuance of Additional Shares of Common Stock upon the
          conversion  or exchange of such Convertible Securities. The provisions
          of  paragraph (iii) above for the readjustment of the Conversion Price
          upon  the  expiration  of rights, warrants or options or the rights of
          conversion  or  exchange of Convertible Securities shall apply mutatis
                                                                         -------
          mutandis  to  the  rights, warrants options and Convertible Securities
          --------
          referred  to  in  this  paragraph  (iv).

               (v)  "ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of
                     ---------------------------------
          Common  Stock  issued by the Company on or after the Original Issuance
          Date,  whether  or  not  subsequently  reacquired  or  retired  by the
          Company,  other  than (I) the Underlying Shares, (II) shares of Common
          Stock  issuable  upon  exercise  of  warrants, options and convertible
          securities outstanding as of the Original Issuance Date (provided that
          the terms of such warrants, options and convertible securities are not
          modified  after  the  Original  Issuance  Date  to adjust the exercise
          price),  (III) shares of Common Stock issued pursuant to any event for
          which  adjustment  is  made  to  the  Conversion Price under Section 7
                                                                       ---------
          hereof  or to the exercise price under the anti-dilution provisions of
          any securities outstanding as of the Original Issuance Date (including
          the  Investment  Warrants),  (IV)  up  to  250,000  shares  issued for
          professional  services, provided that such issuance is approved by the
          Board,  (V)  up  to  25,000  shares issued to Chris Spencer as per the
          terms  of  his  consulting  agreement, or (VI) up to 666,667 shares of
          Common  Stock  issuable  to  Mastodon  Ventures,  Inc.  pursuant  to a
          warrant.  The  "EFFECTIVE  PRICE" of Additional Shares of Common Stock
                          ----------------
          shall  mean  the  quotient  determined by dividing the total number of
          Additional  Shares  of  Common Stock issued or sold, or deemed to have
          been  issued  or  sold  by the Company under this Section 7F, into the
                                                            ----------
          aggregate  consideration received, or deemed to have been received, by
          the  Company for such issue under this Section 7F, for such Additional
                                                 ----------
          Shares  of  Common  Stock.

               (vi)  Other  than  a  reduction  pursuant  to  its  applicable
          anti-dilution provisions, any reduction in the conversion price of any
          Convertible  Security,  whether  outstanding  on the Original Issuance
          Date  or  thereafter,  or the price of any option, warrant or right to
          purchase  Common  Stock  or  any  Convertible  Security  (whether such
          option,  warrant or right is outstanding on the Original Issuance Date
          or thereafter), to an Effective Price less than the current Conversion
          Price,  shall be deemed to be an issuance of such Convertible Security
          and  all such options, warrants or rights at such Effective Price, and
          the  provisions  of Section 7F (iii), (iv) and (v) shall apply thereto
                              ---------------   ----     ---
          mutatis  mutandis.
          -------  --------

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

          G.  No  Adjustments  in  Certain  Circumstances.  No adjustment in the
              -------------------------------------------
     Conversion  Price shall be required unless such adjustment would require an
     increase or decrease of at least five ($0.01) cent in such price; provided,
                                                                       ---------
     however,  that  any  adjustments which by reason of this Section 7G are not
     -------                                                  ----------
     required  to be made shall be carried forward and taken into account in any
     subsequent adjustment required to be made hereunder. All calculations under
     this  Section  7G  shall  be  made  to  the  nearest cent or to the nearest
           -----------
     one-hundredth  of  a  share,  as  the  case  may  be.

     8.  Amendments  and  Waivers.
         ------------------------

          A.  The  provisions  of  this  Note  may from time to time be amended,
     modified or waived, if such amendment, modification or waiver is in writing
     and  consented  to  by  the  Company and the holders of not less than fifty
     (50%)  percent  in  Principal Amount of the Notes (the "REQUIRED HOLDERS");
                                                             ----------------
     provided,  however,  that  no  such amendment, modification or waiver which
     --------   -------
     would:

               (i)  modify  this  Section 9A, change the definition of "Required
          Holders"  or  extend  the  Maturity  Date,  or

               (ii)  reduce  the  Principal  Amount  payable  hereunder

     shall  be  made without the consent of the holder of each Note so affected.

          B.  No  failure  or  delay  on the part of the Payee in exercising any
     power or right under this Note shall operate as a waiver thereof, nor shall
     any  single  or  partial  exercise  of any such power or right preclude any
     other  or  further  exercise  thereof or the exercise of any other power or
     right.  No  notice to or demand on the Company in any case shall entitle it
     to  any  notice  or  demand in similar or other circumstances. No waiver or
     approval  by  the  Payee  shall,  except as may be otherwise stated in such
     waiver  or approval, be applicable to subsequent transactions. No waiver or
     approval  hereunder  shall  require  any  similar  or  dissimilar waiver or
     approval  thereafter  to  be  granted  hereunder.

          C.  To  the extent that the Company makes a payment or payments to the
     Payee,  and  such  payment or payments or any part thereof are subsequently
     for  any  reason  invalidated,  set aside and/or required to be repaid to a
     trustee,  receiver  or  any  other party under any bankruptcy law, state or
     federal  law,  common  law  or  equitable cause, then to the extent of such
     recovery,  the  obligation  or  part  thereof  originally  intended  to  be
     satisfied,  and  all  rights  and  remedies  therefor, shall be revived and
     continued  in full force and effect as if such payment had not been made or
     such  enforcement  or  setoff  had  not  occurred.

<PAGE>

          D.  After  any  waiver,  amendment  or  supplement  under this section
     becomes  effective,  the  Company  shall mail to the holders of the Notes a
     copy  thereof.


     9.  Miscellaneous.
         -------------

          A.  Parties in Interest. All covenants, agreements and undertakings in
              -------------------
     this Note binding upon the Company or the Payee shall bind and inure to the
     benefit  of  the  successors  and  permitted assigns of the Company and the
     Payee,  respectively,  whether  so  expressed  or  not.

          B.  Governing  Law.  This  Note  shall  be  governed  by and construed
              --------------
     exclusively  in  accordance  with the laws of the State of New York without
     regard  to  the  conflicts  of  laws principles thereof. The parties hereto
     hereby agree that any suit or proceeding arising directly and/or indirectly
     pursuant  to  or  under  this  instrument  or  the  consummation  of  the
     transactions  contemplated  hereby, 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 agrees 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 and documented
     counsel  fees  and  disbursements  in  an  amount  judicially  determined.

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

          D.  Notice  of  Certain  Transactions.  In  case  at  any  time:
              ---------------------------------

               (i)  The  Company  shall  declare  any  dividend  upon,  or other
          distribution  in  respect  of,  its  Common  Stock;  or

               (ii)  The  Company shall offer for subscription to the holders of
          its  Common  Stock  any additional shares of stock of any class or any
          other  securities  convertible  into  shares of stock or any rights to
          subscribe  thereto;  or

               (iii)  There  shall  be  any  capital  reorganization  or
          reclassification of the capital stock of the Company, or a sale of all
          or  substantially all of the assets of the Company, or a consolidation
          or merger of the Company with another corporation (other than a merger
          with  a  subsidiary  in  which  merger  the  Company is the continuing
          corporation  and  which  does  not result in any reclassification); or

<PAGE>

               (iv)  There  shall  be  a  voluntary  or involuntary dissolution;
          liquidation  or  winding-up  of  the  Company;

     then,  in  any  one  or  more  of said cases, the Company shall cause to be
mailed to the Payee at the earliest practicable time (and, in any event not less
than  twenty  (20)  days before any record date or other date set for definitive
action),  written  notice  of  the  date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution or subscription
rights  or such reorganization, reclassification, sale, consolidation, merger or
dissolution,  liquidation  or  winding-up  shall take place, as the case may be.
Such notice shall also set forth such facts as shall indicate the effect of such
action  (to  the  extent such effect may be known at the date of such notice) on
the  Conversion  Price  and the kind and amount of the shares of stock and other
securities  and  property  deliverable  upon  the  conversion of this Note. Such
notice  shall  also specify the date as of which the holders of the Common Stock
of  record  shall  participate  in  said  dividend, distribution or subscription
rights  or  shall  be  entitled to exchange their Common Stock for securities or
other  property  deliverable  upon  such reorganization, reclassification, sale,
consolidation, merger or dissolution, liquidation or winding-up, as the case may
be.

Nothing  herein  shall be construed as the consent of the holder of this Note to
any  action otherwise prohibited by the terms of this Note or as a waiver of any
such  prohibition.

          E.  Reservation  of  Shares.  The Company covenants and agrees that it
              -----------------------
     will  at  all times have authorized and reserved, solely for the purpose of
     such  possible  conversion,  out  of  its authorized but unissued shares, a
     sufficient number of shares of its Common Stock to provide for the exercise
     in  full  of  the  conversion  rights  contained  in  this  Note.

          F.  Validity  of Stock. All shares of Common Stock which may be issued
              ------------------
     upon  conversion  of  this  Note  will,  upon  issuance  by  the Company in
     accordance  with  the  terms of this Note, be validly issued, free from all
     taxes  and  liens  with  respect  to the issuance thereof (other than those
     created  by  the  holders), free from all pre-emptive or similar rights and
     fully  paid  and  non-assessable.

          G.  Cash  Payments.  No  fractional  shares  (or  scrip  representing
              --------------
     fractional  shares) of Common Stock shall be issued upon conversion of this
     Note.  In  the  event  that the conversion of this Note would result in the
     issuance  of  a  fractional  share of Common Stock, the Company shall pay a
     cash adjustment in lieu of such fractional share to the holder of this Note
     based  upon  the  Conversion  Price.

          H.  Stamp  Taxes, etc. The Company shall pay all documentary, stamp or
              -----------------
     other  transactional  taxes  attributable  to  the  issuance or delivery of
     shares  of  Common  Stock, upon conversion of this Note; provided, however,
                                                              --------  -------
     that  the  Company  shall  not  be  required  to pay any taxes which may be
     payable  in respect of any transfer involved in the issuance or delivery of
     any  certificate for such shares in a name other than that of the holder of
     this  Note,  and  the Company shall not be required to issue or deliver any
     such  certificate  unless  and  until  the  person  requesting the issuance
     thereof shall have paid to the Company the amount of such tax or shall have
     established  to  the  Company's  satisfaction  that such tax has been paid.

<PAGE>

          I.  Waiver  of Jury Trial. THE PAYEE AND THE COMPANY HEREBY KNOWINGLY,
              ---------------------
     VOLUNTARILY  AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY
     JURY  IN  RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER,
     OR  IN  CONNECTION  WITH,  THIS  NOTE  OR  ANY OTHER DOCUMENT OR INSTRUMENT
     EXECUTED  AND  DELIVERED  IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT,
     COURSE  OF  DEALING,  STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF
     THE  PAYEE  OR THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
     PAYEE'S  PURCHASING  THIS  NOTE.

          J.  Registration Rights Agreement. The holder of this Note is entitled
              -----------------------------
     to have the Conversion Shares registered for resale under the Act, pursuant
     to  and  in  accordance  with  the  Registration  Rights  Agreement.



                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


<PAGE>

     IN  WITNESS  WHEREOF, this Note has been executed and delivered on the date
specified  above  by  the  duly  authorized  representative  of  the  Company.



                                    XA,  INC.



                                    By: /s/ Joseph Wagner
                                       -----------------------------
                                       Name:  Joseph  Wagner
                                       Title:  President  &  CEO























<PAGE>

                                                                       EXHIBIT A

                        Optional Conversion Election Form


                                                                      ,  2006
                                                        -------------

XA,  Inc.
875  North  Michigan  Avenue,  Suite  2626
Chicago,  IL  60611

     Re:     Optional  Conversion  of  Promissory  Note

Gentlemen:

     You  are  hereby  notified  that,  pursuant  to,  and  upon  the  terms and
conditions  of  that  certain  Senior Secured Convertible Promissory Note of XA,
Inc.  (the "COMPANY"), in the principal amount of $_______________ (the "NOTE"),
held  by me, I hereby elect to exercise my right of Optional Conversion (as such
term  in  defined  in  the  Note),  effective  as  of  the date of this writing.

     Please  provide  me  with  all  applicable  instructions  for  the Optional
Conversion  of  the  Note, and issue certificate(s) for the applicable shares of
the Company's Common Stock issuable upon the Optional Conversion, in the name of
the  person  provided  below.


                                   Very  truly  yours,


                                   --------------------------------
                                   Name:


Please  issue  certificate(s)  for  Common  Stock  as  follows:


----------------------------------------------
     Name


----------------------------------------------
     Address


----------------------------------------------
     Social  Security  No.  of  Shareholder

<PAGE>