Document:

ex10-3.htm

    Exhibit
      10.3

     

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

     

    

     

    XA,
      INC.

     

    WARRANT
      TO
      PURCHASE

     

    200,000
      SHARES

     

    OF
      COMMON STOCK

     

    (SUBJECT
      TO
      ADJUSTMENT)

     

    (Void
      after December 21, 2012)

     

    

     

    Bridge
      Warrant No:
      1                                 December
      21, 2007

     

    

     

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

    

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

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

    

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

    
      
        
        

      

      
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    F.           Sale
      of Shares Below
      Purchase Price:

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    5.           Notices
      of Record
      Date. In case:

     

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

     

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

     

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

     

    6.           [Intentionally
      removed.]

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

    

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

     

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

     

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

     

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

     

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

     

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

     

    Remainder
      of Page Intentionally Left
      Blank

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    WARRANT
      SIGNATURE
      PAGE

     

    

     

    

     

    Dated:
      December 21, 2007

     

    

    XA,
      INC.

    

    

    By:          /s/
      Joseph
      Wagner     

    Name:
      Joseph Wagner

    Title:
      President  &
CEO

    

     

    

     

    
 

     

    200,000
      Shares

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

     

    EXHIBIT
      A

     

    SUBSCRIPTION
      FORM

     

    (To
      be
      executed only upon exercise of Warrant)

     

    

     

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

     

    Dated:                                                                

    

    

    

    

    (Signature
      of Registered Owner

    

    

    

    (Street
      Address)

    

    

    

    (City
      /
      State / Zip Code)

    

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

     

    FORM
      OF
      ASSIGNMENT

     

    

     

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

     

     

    Name
      of
      Assignee                                                                Address                                           Number
      of
      Shares

     

     

     

     

    

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

     

    Dated:                                                                

     

    

     

    

    (Signature)

    

    

    

    (Witness)

    

    

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

    

    

    Dated:                                                                

    

    

    

    

    (Signature)

    

    

    
      
        
        

      

      
        12ex10-4.htm

Exhibit
    10.4

    REGISTRATION
      RIGHTS
      AGREEMENT

     

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    2.           Registration.

     

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

     

    (b)           Additional
      Registration.

     

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

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

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

    

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    5.           Indemnification.

     

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

     

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

     

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

     

     

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

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

    
      
        
        

      

      
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    6.           Miscellaneous.

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

    

    

    

    [Remainder
      of page intentionally
      left blank]

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

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

     

     

    

     

    XA,
      INC.

     

    

    By:
/s/
      Joseph
      Wagner   

    Name:  Joseph
      Wagner

    Title:  President

    

    

    

    
      	
               

            	
              Other
                Signature Pages
                Follow

            

    

    

    

    

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

    OTHER
      SIGNATURE PAGES TO
      REGISTRATION RIGHTS AGREEMENT

    

    
      	 
	
               

              Sands
                Brothers Venture Capital
                III LLC

               

              By:  /s/
                Scott
                Baily                                                              

                   Name:
                Scott
                Baily                                                                

                   Title:
                COO                                                            

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

                   Facsimile
                Number:  212-953-4978                                                                         

               

            
	 
	 

    

    

    

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

     

    ANNEX
      A

     

    Plan
      of
      Distribution

    

    

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

     

    
      	
                      ·

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

            
	
                      ·

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

            
	
                      ·
                

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

            
	
                      ·

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

            
	
                      ·

            	
               privately
                negotiated transactions;

            
	
                      ·

            	
               settlement
                of short sales;

            
	
                      ·

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

            
	
                      ·

            	
               a
                combination of any such methods of sale; and

            
	
                      ·

            	
               any
                other method permitted pursuant to applicable
                law.

            

    

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    SELLING
      STOCKHOLDER
      QUESTIONNAIRE

    XA,
      Inc.

    875
      North
      Michigan Avenue, Suite 2626

    Chicago,
      Illinois 60611

    

    Ladies
      and Gentlemen:

     

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

     

    
      	 	
              Please
                answer every
                question.

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

            	 

    

    

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

    

    ______________________________________________

    

    
      2. 
        Manner
        of
        Ownership of Shares:

    

     

    

      Individual
      _______     Community Property
      ________    Tenants in Common _______

    

      Joint
      Tenants with Rights
      of Survivorship ________       Corporate
      ________

    

      Partnership
      ______         Trust
      ________     Other
      ___________________________

    

    

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

    

     

    Address:                                                                                                                                

     

    Phone:                                                                                                                                

     

    Fax:                 

     

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

    

     

    

     

    

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    
      	
              (a)
                Are you a natural person?

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

               

            	
              [ 
                ]Yes  [  ]No

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

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

               

            	
              [ 
                ]Yes  [  ]No

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

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

               

            	
              [ 
                ]Yes  [  ]No

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

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

            	
              [ 
                ]Yes  [  ]No

            

    

    

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

     

    Legal
      Description of
      Entity:                         

     

                                 

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

     

    

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

     

    

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

     

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

     

    

     

    

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

    

     

    

    
      	
              No.
                of Shares of
                Stock

            	 

    

     

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

    

     

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

    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

     

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

    

     

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

    

    

    PART
      A: DETERMINATION OF RESTRICTED
      PERSON STATUS:

     

    Please
      check all appropriate
      categories.

     

    The
      undersigned is:

    

    
       ___ (i) a
        broker-dealer;

       

      
      

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

       

      
      

    

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

    

    

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

    

    

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

    

    

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

    

    

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

    

     

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

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

    

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

    

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

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    
    

    

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

    

    

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

    

    

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

    

    

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

    

    

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

    

    

    PART
      B:  DETERMINATION OF
      EXEMPTED ENTITY STATUS:

     

    The
      undersigned  is:

     

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

    

    

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

    

    

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

    

    

    
      	
               

            	
              (A)

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

            

    

    
      	
               

            	
              (B)

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

            

    

     

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

    

    

      

    

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

    

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

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

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

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

    

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

    

    

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

    

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

    

    

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

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

    

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

     

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

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

    

    

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

     

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

    

     

    

     

    Date:                                         
       ,
      2007

    (Print
      name of selling
      stockholder)

     

    By:           

    (Signature)

     

    Name:                                                                           

    (Print
      name)

     

    Title:                                                                           

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    APPENDIX
      A

    
      	
              1.

            	
              Definition
                of “Beneficial
                Ownership”

            

    

    

    
      	
               

            	
              (a)

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

            

    

    

    
      	
               

            	
              (1)

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

            

    

    
      	
               

            	
              (2)

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

            

    

    

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

     

    
      	
               

            	
              (b)

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

               

            

    

    
      	
            	
              (c)

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

            

    

    

    

    

    

    

     

    
      
        
        

      

      
        21

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