Document:

Exhibit 10.3

FRANKLIN BANK CORP.
 RESTRICTED STOCK AGREEMENT

          This      Restricted
Stock  Agreement  (“Agreement”),  entered  into  on  the  ____  day of
___________,  2006 (the “Effective Date”),  which is the date on which
the Grant  described  below was  approved  by the  Compensation  Committee  (the
“Committee”)  of the Board of  Directors  of Franklin  Bank Corp.,  is
between Franklin Bank Corp., a Delaware  corporation (the  “Company”),
and ____________________, (the “Employee”).

          WHEREAS,   to  carry
out the purposes of the Franklin Bank Corp.  2006 Long-Term  Incentive Plan (the
“Plan”),  shares of  restricted  Common  Stock (as defined  below) are
hereby  granted  to the  Employee  in  accordance  with  this  Restricted  Stock
Agreement; and

          WHEREAS, the Company
and Employee agree as follows:

          1.          Award
of Common Stock.   The Company hereby grants (the “Grant”) to
Employee  ________ shares (the  “Shares”)  of common stock,  $0.01 par
value, of the Company (“Common Stock”),  which shall be subject to the
restrictions  on   transferability   set  forth  in  Section  2(d)  herein  (the
“Restrictions”)    and   to   the    other    provisions    of    this
Agreement.

          2.          Restricted
Period.

                       (a)          For
a period of ____________  (___) years and ___________  (____) days commencing on
the  Effective  Date (the  “Restricted  Period”),  the Shares shall be
subject  to  the   Restrictions   and  any  other   restrictions  as  set  forth
herein.   The  Restrictions  shall  expire  as to  all  of  the  Shares  on
_________________.   The Shares which are subject to the Restrictions shall
hereinafter be referred to as  “Restricted  Shares.”   The Shares
which are no longer subject to the  Restrictions  as set forth in paragraphs (f)
or  (g)  below  shall   hereinafter   be   referred  to  as   “Transferable
Shares.”

                       (b)          The
Company shall effect the issuance of the Shares out of  authorized  but unissued
shares of Common Stock or out of treasury  shares of Common Stock and shall also
effect the issuance of a certificate or certificates for the Shares.   Each
certificate  issued for Restricted Shares to the Employee shall be registered in
Employee’s  name and shall be either  deposited  with the  Secretary of the
Company or its  designee in an escrow  account or held by the  Secretary  of the
Company,  at the  election of the Company,  together  with stock powers or other
instruments of transfer  appropriately  endorsed in blank by Employee  (Employee
hereby agreeing to execute such stock powers or other instruments of transfer as
requested by the  Company).   Such certificate or certificates shall remain
in such escrow account or with the Secretary of the Company until the earlier to
occur of (i) the termination of the Restricted  Period or (ii) the expiration of
the Restrictions as set forth in paragraphs (f) or (g) below.  Certificates
representing  the  Restricted  Shares shall bear a legend in  substantially  the
following form:

-1-

	
  
 
  	
  

          THE  TRANSFERABILITY
OF THIS  CERTIFICATE AND THE SHARES OF STOCK  REPRESENTED  HEREBY ARE SUBJECT TO
THE TERMS AND CONDITIONS (INCLUDING  FORFEITURE) OF THE FRANKLIN BANK CORP. 2006
LONG-TERM INCENTIVE PLAN AND AN AWARD  AGREEMENT.   COPIES OF SUCH PLAN AND
AGREEMENT  ARE ON FILE AT THE OFFICES OF  FRANKLIN  BANK  CORP.,  9800  RICHMOND
AVENUE, SUITE 680, HOUSTON, TEXAS 77042.
 

The Company may place appropriate stop transfer instructions with respect to the
Restricted  Shares  with the  transfer  agent for the Common  Stock.   Upon
Restricted  Shares becoming  Transferable  Shares,  the Company shall effect, in
exchange  for  the  legended  certificates,  the  issuance  and  delivery  of  a
certificate or  certificates  for such Shares to the Employee free of the legend
set forth above.

                       (c)          The
Employee shall,  during the Restricted Period, have all of the other rights of a
stockholder with respect to the Shares including,  but not limited to, the right
to receive dividends,  if any, as may be declared on such Restricted Shares from
time to time,  and the right to vote (in  person or by  proxy)  such  Restricted
Shares at any meeting of stockholders of the Company.

                       (d)          The
Restricted  Shares  and the right to vote the  Restricted  Shares and to receive
dividends thereon, may not be sold, assigned,  transferred,  exchanged, pledged,
hypothecated,  or otherwise encumbered and no such sale,  assignment,  transfer,
exchange,  pledge,  hypothecation,  or  encumbrance,  whether made or created by
voluntary act of Employee or any agent of Employee or by operation of law, shall
be  recognized  by, or be binding upon, or shall in any manner affect the rights
of,  the  Company or any agent or any  custodian  holding  certificates  for the
Restricted  Shares during the Restricted  Period,  unless the Restrictions  have
then expired  pursuant to the provisions of paragraphs  (f) or (g)  below. 
This provision shall not prohibit  Employee from granting  revocable  proxies in
customary form to vote the Shares.

                       (e)          If
the status of employment (hereinafter referred to as  “employment”) of
Employee  with the  Company or its  Affiliates  (as defined in Section 6 herein)
shall terminate, prior to the expiration of the Restricted Period for any reason
other than the death, Disability,  or Normal Retirement of Employee, or upon the
occurrence of a Change of Control (which events are governed by Sections 2(f) or
2(g) hereof),  then, in that event,  any  Restricted  Shares  outstanding  shall
thereupon  be  forfeited  by Employee  to the  Company,  without  payment of any
consideration or further  consideration by the Company, and neither the Employee
not any successors,  heirs,  assigns or legal  representatives of Employee shall
thereafter  have any  further  rights or interest  in the  Restricted  Shares or
certificates  therefor, and Employee’s name shall thereupon be deleted from
the list of the  Company’s  stockholders  with  respect  to the  Restricted
Shares.  

                       (f)          If
the employment of Employee with the Company or its Affiliates shall terminate by
reason of  death,  Disability  or Normal  Retirement,  any  Restrictions  on the
Restricted Shares shall be deemed to have expired as to the Restricted Shares as
of the date of any such occurrence,  and the Restricted  Shares shall thereby be
Transferable  Shares.    For  purposes  of  this  Agreement,   “Normal
Retirement”  shall mean retirement from active  employment with the Company
at or  after  the  age of 65 or  such  other  age as may be  established  by the
Committee.  

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                       (g)          Upon
the occurrence of a Change of Control, any Restrictions on the Restricted Shares
set forth in this Agreement shall be deemed to have expired,  and the Restricted
Shares shall thereby be Transferable Shares.  

                       (h)          If
the  employment  of  Employee  with the  Company  shall  terminate  prior to the
expiration of the Restricted Period, and there exists a dispute between Employee
and the Company as to the  satisfaction  of the conditions to the release of the
Shares from the Restrictions hereunder or the terms and conditions of the Grant,
the Shares shall remain subject to the Restrictions until the resolution of such
dispute,  regardless of any  intervening  expiration of the  Restricted  Period,
except that any dividends that may be payable to the holders of record of Common
Stock  as of a date  during  the  period  from  termination  of  Employee’s
employment to the resolution of such dispute shall:

	
  
 
  	
  

              (i)          to
the extent to which such  dividends  would have been  payable to Employee on the
Shares,  be held by the Company as part of its general funds,  and shall be paid
to or for the account of Employee  only upon,  and in the event of, a resolution
of such dispute in a manner favorable to Employee, and
 
	
  
 
  	
  
 
  
	
  
 
  	
  

              (ii)         be
canceled  upon,  and in the event of, a  resolution  of such dispute in a manner
unfavorable to Employee.
 

          3.          Taxes. 
To the extent that the receipt of the Restricted Shares, Transferable Shares, or
the lapse of any Restrictions results in income to Employee for federal or state
income tax purposes,  Employee  shall deliver to the Company at the time of such
receipt or lapse, as the case may be, such amount of money or, if the Company so
determines,  shares of  unrestricted  Common Stock as the Company may require to
meet its obligation under  applicable tax laws or regulations,  and, if Employee
fails to do so, the Company is  authorized  to withhold  from any cash or Common
Stock remuneration then or thereafter payable to Employee any tax required to be
withheld by reasons of such resulting compensation income.  Employee agrees
to notify the Company promptly of any tax election made by Employee with respect
to the Shares.

          4.          Changes
in Capital Structure.   If the outstanding shares of Common Stock shall
at any time be changed or  exchanged  or  augmented by  declaration  of a stock
dividend,   stock  split,   combination   of  shares,   merger,   consolidation,
recapitalization  or similar  event,  the Shares,  being  outstanding  shares of
Common  Stock,  shall be  treated  in the same  manner as all other  issued  and
outstanding shares.  Any cash, property or securities into which the Shares
are so changed or exchanged or so augmenting  the Shares or so issued in respect
of the Shares  shall be subject to the  Restrictions  in the same  manner as the
Shares.

          5.          Compliance
with Securities Laws.

                       (a)          If
a registration  statement  under the Securities Act of 1933, as amended,  is not
effective  with respect to the Shares,  Employee (i)  represents and warrants to
the Company  that  Employee is  acquiring  the Shares for his own  account,  for
investment,  and without a view to any sale or distribution thereof in violation
of any federal or state  securities laws, and (ii) understands that the Grant of
the Shares to Employee has not been registered under the Securities Act of 1933,
as amended,  or the  securities  laws of any state,  and,  accordingly,  that in
addition to the other restrictions  placed on the Shares by this Agreement,  the
Shares may not be offered,  sold,  assigned,  transferred,  exchanged,  pledged,
hypothecated  or  otherwise   encumbered  in  absence  of  either  an  effective
registration  statement  under  the  Securities  Act of 1933,  as  amended,  and
applicable  state  securities laws or an opinion of counsel  satisfactory to the
Company that such registration is not required.

-3-

                       (b)          If
a registration  statement  under the Securities Act of 1933, as amended,  is not
effective  with  respect to the Shares,  Employee  agrees that the  certificates
representing   the  Shares   (whether  the  Shares  are  Restricted   Shares  or
Transferable  Shares) may bear any legend required by law or which the Committee
deems appropriate to reflect any restrictions on transfer.

                       (c)          Upon
the execution of this Agreement and receipt of any  certificates  for the Shares
pursuant to this Agreement,  Employee (or Employee’s  legal  representative
upon  Employee’s  death or  disability)  will  make  and  enter  into  such
additional written representations, warranties and agreements as the Company may
reasonably  request in order to comply with  applicable  securities laws or with
this Agreement or the Plan.

          6.          Employment
Relationship.   Employee shall be considered to be in the employment of
the  Company  as  long  as he  remains  as an  employee  of the  Company  or its
Affiliates.   Any  questions  as to  whether  and  when  there  has  been a
termination  of such  employment,  and the cause of such  termination,  shall be
determined by the Company,  with the advice of the employing  corporation (if an
Affiliate  of the  Company),  and  the  Company’s  determination  shall  be
final.  For purposes of this Agreement,  “Affiliates”  shall mean
any  “parent  corporation”  of the  Company  and any  “subsidiary
corporation”  of the Company within the meaning of Sections 424(e) and (f),
respectively,  of the Internal Revenue Code of 1986, as  amended.   Nothing
contained  herein shall be construed as  conferring  upon  Employee the right to
continue in the employ of the Company, nor shall anything herein be construed or
interpreseted to limit the  “employment at will”  relationship between
Employee and the Company.

          7.          Binding
Effect.  The terms and conditions hereof shall be binding upon, and inure to
the benefit of, all  successors  of  Employee,  including,  without  limitation,
Employee’s estate and the executors,  administrators,  or trustees thereof,
heirs and legatees, and any receiver,  trustee in bankruptcy,  or representative
of creditors of  Employee.   This Agreement shall be binding upon and inure
to the benefit of any successors to the Company.

          8.          Notice. 
All notices, requests, demands and other communications given under or by reason
of this  Agreement  shall be in writing and shall be deemed given when delivered
in person or when mailed, by certified mail (return receipt requested),  postage
prepaid,  addressed as follows (or to such other  address as a party may specify
by notice pursuant to this provision):

	
  
 
  	
  
(a)
  	
  
To the Company:
  	
  
 
  
	
  
 
  	
  
 
  	
  
Franklin Bank Corp.
  
	
   
 	
   
 	
  9800 Richmond Avenue, Suite 680
  
	
  
 
  	
  
 
  	
  
Houston, Texas 77042
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
To the Employee:
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  

  	
  
 
  
	
   
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  

  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  

  	
  
 
  

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          9.          Resolution
of  Disputes.   As a  condition  to the  granting  of the  Shares,  the
Employee,  his  or  her  legal  representatives,  heirs,  successors  and  other
transferees  agree that any dispute or  disagreement  which may arise  hereunder
shall be determined by the Committee in its sole  discretion  and judgment,  and
that any such  determination any interpretation by the Committee of the terms of
this  Agreement  shall be final and shall be  binding  and  conclusive,  for all
purposes, upon the Company,  Employee, his or her legal representatives,  heirs,
successors and other transferees.   

          10.          Entire
Agreement and  Amendments.  This Agreement  contains the entire agreement of
the parties  relating to the matters  contained  herein and supersedes all prior
agreements and understandings, oral or written, between the parties with respect
to the subject  matter  hereof.   This  Agreement may be changed only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.

          11.          Separability. 
If  any  provision  of  the  Agreement  is  rendered  or  declared   illegal  or
unenforceable by reason of any existing or subsequently  enacted  legislation or
by the decision of any  arbitrator  or by decree of a court of last resort,  the
parties  shall  promptly  meet and  negotiate  substitute  provisions  for those
rendered or declared illegal or unenforceable to preserve the original intent of
this Agreement to the extent legally possible,  but all other provisions of this
Agreement shall remain in full force and effect.

          12.          Agreement
Subject to  Plan.   This  Agreement is subject to the  Plan.   The
terms and provisions of the Plan (including any subsequent  amendments  thereto)
are hereby  incorporated  herein by reference  thereto.   In the event of a
conflict between any term or provision  contained herein and a term or provision
of the Plan,  the  applicable  terms and  provisions of the Plan will govern and
prevail.  All definitions of words and terms contained in the Plan shall be
applicable to this Agreement.

          13.          Governing
Law.  The execution, validity,  interpretation, and performance of this
Agreement  shall be governed by, and construed in accordance  with,  the laws of
the State of  Delaware  without  reference  to  principles  of conflict of laws,
except to the extent preempted by federal law.

          IN  WITNESS WHEREOF,
the Company has caused this Agreement to be duly executed by one of its officers
thereunto duly authorized,  and Employee has executed this Agreement,  all as of
the day and year first above written.

	
  
 
  	
  
FRANKLIN BANK CORP.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
By:
  	
  
 
  
	
  
 
  	
  
 
  	
  

  
	
  
 
  	
  
 
  	
  
Authorized Officer
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  
	
   
  	
  EMPLOYEE
  
	
   
  	
   
  
	
   
  	
   
  
	
   
  	
  

  
	
   
  	
  Name:
  	
   
  

-5-Exhibit 10.1

                                    XA, INC.

                          SECURITIES PURCHASE AGREEMENT

                               As of August 8, 2006

<PAGE>

     THIS  SECURITIES  PURCHASE AGREEMENT, dated as of this 8th day of August,
2006 (this "AGREEMENT"), between XA, INC., a Nevada corporation (the "COMPANY"),
            ---------
and  Sands  Brothers Venture Capital LLC, Sands Brothers Venture Capital II LLC,
Sands  Brothers  Venture  Capital III LLC, Sands Brothers Venture Capital IV LLC
and  Katie & Adam Bridge Partners, L.P. (each a "PURCHASER" and collectively the
                                                 ---------
"PURCHASERS").
 ----------

                              W I T N E S S E T H:

     WHEREAS, the Company desires to issue to the Purchasers, and the Purchasers
desire  to  purchase  from  the Company, the Securities (as such term is defined
below)  as  set  forth  below  (the  "OFFERING");  and
                                      --------

     WHEREAS,  certain  capitalized  terms used in this Agreement are defined in
Section  9.1  hereof;
------------

     NOW,  THEREFORE,  in consideration of the promises and mutual covenants and
agreements  hereinafter  contained,  and for good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree  as  follows:

     1.  SALE  AND  PURCHASE  OF  SECURITIES.

          1.1  Sale  and  Purchase  of  Securities.  Subject  to  the  terms and
               -----------------------------------
     conditions  of  this  Agreement, on the Closing Date (as defined in Section
                                                                         -------
     3.1  hereof),  the Company shall issue, sell and deliver to the Purchasers,
     ---
     and  the  Purchasers shall purchase from the Company for the Purchase Price
     (as  defined  in  Section  2.1  hereof) (i) 11% Senior Subordinated Secured
                       ------------
     Convertible  Promissory  Notes  in  the  aggregate  principal  amount  of
     $1,250,000  (a  "NOTE"  and  collectively the "NOTES") and (ii) warrants (a
                                                    -----
     "WARRANT"  and collectively the "WARRANTS") to purchase One Hundred Seventy
      -------                         --------
     Five  Thousand  (175,000)  shares  (subject  to  adjustment  as  described
     therein),  of  the Company's common stock, par value $0.001 per share at an
     exercise price of $1.10. (the "COMMON STOCK"). The Notes and Warrants shall
                                    ------------
     hereinafter  sometimes be collectively referred to as the "SECURITIES." The
                                                                ----------
     names,  addresses  and  principal  amount  of  Notes purchased and Warrants
     received  by  each  Purchaser  shall  be  set forth on Schedule 1.1 hereto.
                                                            ------------

     2.  PURCHASE  PRICE.

          2.1  Purchase Price. The aggregate purchase price of the Securities to
               --------------
     be  purchased  pursuant  to Section 1.1 shall be $1,250,000, (the "PURCHASE
     PRICE").                    -----------                            --------
     -----

          2.2  Payment  of  the  Purchase  Price.  At the Closing (as defined in
               ---------------------------------
     Section  3.1 hereof), the Purchasers shall pay the Purchase Price (less all
     ------------
     fees  and  expenses  owed  to  Laidlaw & Company (UK) Ltd. ("LAIDLAW"), the
                                                                  --------
     placement  agent  of the Offering and its counsel) and actual expenses), by
     wire transfer of immediately available funds or by such other method as may
     be reasonably acceptable to the Company and the Purchasers, to such account
     of  the  Company as shall have been designated in advance to the Purchasers
     by  the  Company.

<PAGE>

     3.  CLOSING.

          3.1  Closing  Date.  The  closing  of  the  sale  and  purchase of the
               -------------
     Securities  (the "CLOSING") shall take place on August 8, 2006, or at such
                       -------
     other  time,  date  or  place  as  the  parties  hereto may mutually agree;
     provided,  that  all  conditions to the Closing set forth in this Agreement
     have  been  satisfied or waived by such date. The date on which the Closing
     is  held  is  referred  to  in this Agreement as the "CLOSING DATE." At the
                                                           ------------
     Closing  (i) the Company shall deliver, or cause to be delivered, the Notes
     and  Warrants, each executed by the Company and (ii) the documents referred
     to  in  Section  8  hereof.
             ----------

     4.  REPRESENTATIONS  AND  WARRANTIES  OF  THE  COMPANY.  The Company hereby
represents,  covenants  and warrants as of the date hereof and as of the Closing
Date  to  the Purchasers, acknowledging that the Purchasers are relying upon the
accuracy and completeness of the representations and warranties set forth herein
to,  among  other  things,  ensure  that  registration  under  Section  5 of the
Securities  Act  is  not  required in connection with the sale of the Securities
hereby,  as  follows:

          4.1  Organization  and  Good  Standing;  Capitalization.
               --------------------------------------------------

          (a)  The  Company  (and  each  Subsidiary)  is duly organized, validly
     existing and in good standing under the laws of the state of Nevada and has
     the  corporate power and authority to own, lease and operate its properties
     and  assets  and  to  carry  on  its business as now conducted and as it is
     proposed to be conducted. The Company is duly qualified or authorized to do
     business as a foreign corporation and is in good standing under the laws of
     each  jurisdiction in which the conduct of its business or the ownership of
     its  properties  or  assets  requires  such qualification or authorization.

          (b)  All  the  outstanding shares of capital stock of the Company have
     been  duly  authorized,  and  are  validly  issued,  fully  paid  and
     non-assessable.  Except  as  disclosed  on  Schedule 4.1(b) (i) there is no
                                                 --------------
     option,  warrant,  call,  right,  commitment  or  other  agreement  of  any
     character  to which the Company is a party, (ii) there are no securities of
     the  Company outstanding which upon conversion or exchange, and (iii) there
     are  no  share  appreciation  rights,  or  other  similar  rights  based on
     securities  of the Company which, in the case of clause (i), (ii) or (iii),
     would  require  the  issuance, sale or transfer of any additional shares of
     capital stock or other equity securities of the Company or other securities
     convertible into, exchangeable for or evidencing the right to subscribe for
     or  purchase share capital or other equity securities of the Company. Other
     than as contemplated by this Agreement or Transaction Documents (as defined
     in  Section  4.2),  the  Company is not a party to, nor is it aware of, any
         ------------
     voting  trust  or  other  voting,  stockholders  or  similar agreement with
     respect  to  any  of  the  securities  of  the  Company or of any agreement
     relating  to  the issuance, sale, redemption, transfer or other disposition
     of  the  shares  of  capital  stock  on  other  securities  of the Company.

          4.2  Authorization  of  Agreement; Enforceability. The Company has all
               --------------------------------------------
     requisite  corporate  power  and  authority  to  execute  and  deliver this
     Agreement  and  each other agreement, document, instrument and certificate,
     including,  but  not  limited  to, Waiver Agreements, the Bank Consent, the
     Notes,  Warrants,  Registration Rights Agreement and Security Agreement, to
     be  executed  by  the  Company  in  connection with the consummation of the
     transactions contemplated by this Agreement (collectively, the "TRANSACTION
                                                                     -----------
     DOCUMENTS"), and to perform fully its obligations hereunder and thereunder.
     ---------

<PAGE>

     The  execution,  delivery  and performance by the Company of this Agreement
     and  the  Transaction  Documents have been duly authorized by all necessary
     corporate  action  on  the  part  of the Company and its stockholders. This
     Agreement  and each of the Transaction Documents have been duly and validly
     executed  and delivered by the Company and, assuming the due authorization,
     execution and delivery thereof by the Purchaser, this Agreement and each of
     the  Transaction  Documents  constitutes  the  legal,  valid  and  binding
     obligations  of  the Company, enforceable against the Company in accordance
     with  its  respective  terms, subject to applicable bankruptcy, insolvency,
     reorganization, moratorium and similar laws affecting creditors' rights and
     remedies generally and subject, as to enforceability, to general principles
     of  equity  (regardless of whether enforcement is sought in a proceeding at
     law  or  in  equity).

          4.3  No  Conflicts.  The  execution,  delivery  and performance of the
               -------------
     Transaction Documents by the Company and the consummation by the Company of
     the  transactions  contemplated  thereby,  do not and will not (i) conflict
     with  or  violate  any  provision  of the Company's and/or any Subsidiary's
     Articles  of  Incorporation  or  by-laws and any and all amendments thereto
     (collectively, the "INTERNAL DOCUMENTS"), (ii) conflict with, or constitute
                         ------------------
     a  default  (or  an  event  that with notice or lapse of time or both would
     become  a  default)  under,  or  give  to others any rights of termination,
     amendment,  acceleration  or cancellation (with or without notice, lapse of
     time  or both) of, any agreement, credit facility, debt or other instrument
     (evidencing  a  Company  or  Subsidiary  debt  or  otherwise),  or  other
     understanding to which the Company or any Subsidiary is a party or by which
     any  property  or  asset  of  the  Company  or  any  Subsidiary is bound or
     affected,  or  (iii)  result  in  a violation of any law, rule, regulation,
     order,  judgment,  injunction,  decree or other restriction of any court or
     governmental  authority  to  which  the  Company or a Subsidiary is subject
     (including  federal and state securities laws and regulations), or by which
     any  property or asset of the Company or a Subsidiary is bound or affected.

          4.4  Subsidiaries,  Joint  Ventures,  Partnerships,  Etc.
               ---------------------------------------------------

          (a)  As  of  the  Closing  (i)  The Experiential Agency, Inc., (ii) XA
     Scenes,  Inc.,  (iii)  XA  Interactive,  Inc.,  and  (iv)  Fiori  XA,  Inc.
     (collectively the "SUBSIDIARIES") are the only subsidiaries of the Company.
                        ------------
     Each  Subsidiary is wholly owned by the Company, is duly organized, validly
     existing  and  in  good  standing under the laws of the jurisdiction of its
     incorporation  with corporate power and corporate authority under such laws
     to  own,  lease  and  operate  its  properties  and conduct its business as
     currently  conducted;  and  is  duly  qualified  to  transact business as a
     foreign  corporation  and is in good standing (if applicable) in each other
     jurisdiction  in which it owns or leases property of a nature, or transacts
     business of a type, that would make such qualification necessary other than
     such  qualifications  which  the  failure  to  have would not reasonably be
     expected  to  have  a  Material  Adverse  Effect.

          (b)  Neither  the Company nor its Subsidiaries is a party to any joint
     venture,  partnership  or  similar  arrangement  or  agreement.

          4.5  Consents  of Third Parties. None of the execution and delivery by
               --------------------------
     the  Company  of  this  Agreement  and  the  Transaction  Documents,  the

<PAGE>

     consummation  of  the  transactions  contemplated  hereby  or  thereby,  or
     compliance by the Company with any of the provisions hereof or thereof will
     (a)  conflict  with,  or  result  in  the  breach  of, any provision of the
     Certificate  of Incorporation or Bylaws of the Company (or any Subsidiary),
     (b)  conflict  with,  violate,  result  in the breach or termination of, or
     constitute  a  default  or  give  rise  to  any  right  of  termination  or
     acceleration  or  right to increase the obligations or otherwise modify the
     terms  thereof  under  any  Permit  or  Order  to which the Company (or any
     Subsidiary)  is  a  party  or  any  Contract  to  which  the Company or its
     Subsidiaries  is  bound or by which the Company or any of its properties or
     assets is bound, other than such conflicts, violations, breaches, defaults,
     termination  or accelerations that would not reasonably be expected to have
     a Material Adverse Effect, (c) constitute a violation of any Law applicable
     to  the  Company  (or  any Subsidiary) or (d) result in the creation of any
     Lien  upon  the properties or assets of the Company (or any Subsidiary). No
     consent,  waiver,  approval,  Order,  Permit  or  authorization  of,  or
     declaration  or filing with, or notification to, any Person or Governmental
     Body  is  required  on  the  part of the Company and/or its Subsidiaries in
     connection  with  the  execution and delivery of this Agreement, and/or the
     Transaction  Documents,  or  the  compliance by the Company with any of the
     provisions  hereof  or  thereof.

          4.6  Authorization  of  Securities.
               -----------------------------

          (a)  On  the  Closing  Date,  the  issuance, sale, and delivery of the
     Securities  to  be  purchased  pursuant  to Section 1.1 will have been duly
                                                 -----------
     authorized  by all requisite action of the Company, and, when issued, sold,
     delivered  and  paid  for in accordance with this Agreement, the Securities
     will  be  validly  issued  and  outstanding,  with  no  personal  liability
     attaching  to  the  ownership  thereof.

          (b)  On  the  Closing Date, the issuance and delivery of the shares of
     Common  Stock to be delivered upon conversion of the Notes (the "CONVERSION
                                                                      ----------
     SHARES")  and  upon  exercise  of  the  Warrants  (the "WARRANT SHARES") in
     ------                                                  --------------
     accordance  with the terms thereof (collectively, the Conversion Shares and
     the  Warrants  Shares,  the  "UNDERLYING  SHARES")  will  have  been  duly
                                   ------------------
     authorized  by  all  requisite  action  of the Company and, when issued and
     delivered  in  accordance  with the terms of the Securities, the Underlying
     Shares  will  be  validly  issued  and  outstanding,  fully  paid  and
     non-assessable,  with  no  personal  liability  attaching  to the ownership
     thereof,  and  not subject to preemptive or any other similar rights of the
     stockholders  of  the  Company  or  others.

          4.7  Certain  Waivers.  The  Waiver  of  Rights Agreement (the "WAIVER
               ----------------                                           ------
     AGREEMENT") entered into as of July 17, 2006, effective as of June 30, 2006
     ---------
     (the  "EFFECTIVE  DATE"),  by Alpha Capital Aktiengesellschaft, Stonestreet
            ---------------
     Limited  Partnership,  Whalehaven  Funds  Limited,  Greenwich  Growth  Fund
     Limited  and  Genesis  Microcap  Inc.  (each  a  "PRIOR  NOTE CREDITOR" and
                                                       --------------------
     collectively the "PRIOR NOTE CREDITORS") in favor of the Company is a valid
                       --------------------
     and  binding  agreement, duly executed, enforceable against the Company and
     each  Note  Creditor  in accordance with its terms and is in full force and
     effect.  To the best of the Company's knowledge, no action has been brought
     or  is  contemplated  to  be brought changing the enforcement of the Waiver
     Agreement.  The  executed Waiver Agreement is attached hereto as EXHIBIT E.

          4.8  Capitalization.  Schedule  4.8  hereto  sets  forth in detail all
               --------------   -------------
     outstanding securities of the Company (including the terms, the holders and

<PAGE>

     the  amounts  thereof).  Other than as disclosed in Schedule 4.8, (i) there
                                                         ------------
     are  no  outstanding  securities  of the Company or any of its Subsidiaries
     which  contain any preemptive, redemption or similar provisions, nor is any
     holder  of  securities  of  the  Company  or  any  Subsidiary  entitled  to
     preemptive  or similar rights arising out of any agreement or understanding
     with  the  Company  or  any  Subsidiary by virtue of any of the Transaction
     Documents,  and  there  are  no  contracts,  commitments, understandings or
     arrangements  by  which  the  Company  or any of its Subsidiaries is or may
     become  bound  to  redeem  a  security  of  the  Company  or  any  of  its
     Subsidiaries;  (ii) the Company does not have any stock appreciation rights
     or  "phantom  stock"  plans or agreements or any similar plan or agreement;
     and  (iii)  there  are  no  outstanding options, warrants, script rights to
     subscribe to, calls or commitments of any character whatsoever relating to,
     or  securities,  except  as  a  result  of  the  purchase  and  sale of the
     Transaction  Securities,  or  rights  or  obligations  convertible  into or
     exchangeable  for,  or  giving  any  Person  any  right to subscribe for or
     acquire,  any  shares  of  Common  Stock,  or  contracts,  commitments,
     understandings,  or  arrangements by which the Company or any Subsidiary is
     or  may  become  bound  to  issue  additional  shares  of  Common Stock, or
     secur-ities  or  rights  convertible  or exchangeable into shares of Common
     Stock.

          4.9  SEC  Reports;  Financial  Statements.  The  Company has filed all
               ------------------------------------
     reports  required  to  be  filed  by  it  under  the Securities Act and the
     Exchange  Act,  including pursuant to Section 13(a) or Section 15(d) of the
     Exchange  Act,  for  the  one  (1)  year preceding the date hereof (or such
     shorter  period  as  the Company was required by law to file such material)
     (the  foregoing  materials,  including  the  exhibits  thereto,  being
     collectively  referred  to  herein  as  the  "SEC  REPORTS").  As  of their
                                                   ------------
     respective  dates,  the  SEC Reports complied in all material respects with
     the  requirements  of the Securities Act and the Exchange Act and the rules
     and  regulations  of  the Commission promulgated thereunder, as applicable,
     and  none of the SEC Reports, when filed, contained any untrue statement of
     a  material  fact or omitted to state a material fact required to be stated
     therein  or  necessary in order to make the statements therein, in light of
     the  circumstances under which they were made, not misleading. All material
     agreements  to  which  the  Company  is a party or to which the property or
     assets  of  the  Company are subject have been filed as exhibits to the SEC
     Reports  to  the  extent  required. The financial statements of the Company
     included in the SEC Reports comply in all material respects with applicable
     accounting  requirements  and  the  rules and regulations of the Commission
     with  respect  thereto  as  in effect at the time of filing. Such financial
     statements  have  been  prepared  in  accordance  with  generally  accepted
     accounting  principles  applied  on  a  consistent basis during the periods
     involved  ("GAAP"),  except as may be otherwise specified in such financial
                 ----
     statements  or  the  notes  thereto  and  except  that  unaudited financial
     statements  may  not  contain  all  footnotes  required by GAAP, and fairly
     present  in all material respects the financial position of the Company and
     its  consolidated  subsidiaries  as  of  and  for the dates thereof and the
     results  of  operations and cash flows for the periods then ended, subject,
     in  the case of unaudited statements, to normal, immaterial, year-end audit
     adjustments.  Additionally, since the adoption of the Sarbanes-Oxley Act of
     2002  (the  "NEW ACT") and to the extent that the Company is subject to the
                  -------
     New  Act,  the Company has complied in all material respects with the laws,
     rules  and  regulation  under  the  New  Act.

          4.10  Material Changes. Since December 31, 2005, (i) there has been no
                ----------------
     event,  occurrence  or development that has had or that could reasonably be
     expected  to  result in a Material Adverse Effect, (ii) the Company has not

<PAGE>

     incurred  any material liabilities (contingent or otherwise) other than (A)
     trade  payables  and  accrued  expenses  incurred in the ordinary course of
     business  consistent with past practice and (B) liabilities not required to
     be  reflected  in  the  Company's  financial statements pursuant to GAAP or
     required  to  be  disclosed  in filings made with the Commission, (iii) the
     Company  has  not  altered  its method of accounting or the identity of its
     auditors, (iv) the Company has not declared or made payment or distribution
     of any dividend or distribution of cash or other property to its holders of
     Common  Stock  or purchased, redeemed or made any agreements to purchase or
     redeem  any  shares of its capital stock and (v) the Company has not issued
     any  equity  securities  to  any  officer,  director  or  Affiliate, except
     pursuant  to  existing  Company  stock  option  plans.

          4.11  No  Undisclosed  Liabilities. Other than as disclosed in the SEC
                ----------------------------
     Reports,  neither  the  Company  nor  its  Subsidiaries has any liabilities
     (whether  accrued, absolute, contingent or otherwise, and whether due or to
     become  due or asserted or unasserted), except (a) liabilities provided for
     in  the  Financial  Statements (other than liabilities which, in accordance
     with  GAAP,  need  not be disclosed), (b) liabilities disclosed on Schedule
                                                                        --------
     4.11 hereto and (c) liabilities incurred in the ordinary course of business
     ----
     which  do  not  materially  exceed  historic  levels.

          4.12  Absence  of  Certain  Developments.  In  the  ordinary course of
                ----------------------------------
     business  or  in  the  context  of  the  Transactions  contemplated in this
     Agreement  and  the  Transaction  Documents:

          (a)  there  has not been any Material Adverse Change nor has any event
     occurred  which  could  result  in  any  Material  Adverse  Change;

          (b) there has not been any declaration, setting a record date, setting
     aside  or authorizing the payment of, any dividend or other distribution in
     respect  of  any shares of capital stock of the Company or its Subsidiaries
     or  any  repurchase,  redemption or other acquisition by the Company or its
     Subsidiaries,  of  any  of the outstanding shares of capital stock or other
     securities  of,  or  other  ownership  interest  in,  the  Company  or  its
     Subsidiaries;

          (c)  there has not been any transfer, issue, sale or other disposition
     by  the  Company  of any shares of capital stock or other securities of the
     Company  or  its  Subsidiaries  or any grant of options, warrants, calls or
     other  rights to purchase or otherwise acquire shares of such capital stock
     or  such  other  securities;

          (d)  neither  the Company nor its Subsidiaries has (i) awarded or paid
     any  bonuses  to  employees or representatives of the Company, (ii) entered
     into any employment, deferred compensation, severance or similar agreements
     (nor  amended  any  such  agreement),  other than in the ordinary course of
     business;

          (e)  neither  the  Company  nor  its  Subsidiaries has made any loans,
     advances  (other  than advances to officers and employees of the Company or
     its  Subsidiaries  which  advances  are  made  in  the  ordinary  course of
     business),  or  capital  contributions to, or investments in, any Person or
     paid  any  fees  or expenses to any Affiliate of the Company other than its
     Subsidiaries;

<PAGE>

          (f)  neither  the  Company  nor  its  Subsidiaries  has transferred or
     granted  any rights under any Contracts or licenses, used by the Company in
     its  business;

          (g) there has not been any damage, destruction or loss, whether or not
     covered by insurance, with respect to the property or assets of the Company
     or  its Subsidiaries having a replacement cost of more than $10,000 for any
     single  loss  or  $20,000  for  all  such  losses;

          (h) neither the Company nor its Subsidiaries has mortgaged, pledged or
     subjected  to  any  Lien  any  of  its assets, or acquired any assets for a
     purchase  price  in  excess  of $10,000 in the aggregate or sold, assigned,
     transferred,  conveyed,  leased  or otherwise disposed of any assets of the
     Company  or  its  Subsidiaries for a sale price in excess of $10,000 in the
     aggregate  except  for  assets  acquired  or  sold,  assigned, transferred,
     conveyed,  leased  or  otherwise  disposed  of  in  the  ordinary course of
     business;

          (i)  neither  the  Company  nor  its  Subsidiaries  has  canceled  or
     compromised  any  debt  or  claim,  or  amended,  canceled,  terminated,
     relinquished,  waived  or  released  any  Contract  or right, except in the
     ordinary  course  of  business  consistent  with  past  practice and which,
     individually  or  in the aggregate, would not be material to the Company or
     its  Subsidiaries;

          (j)  neither  the  Company  nor  its Subsidiaries has made any binding
     commitment  to  make  any  capital  expenditures  or  capital  additions or
     betterments  in excess of $20,000 individually or $50,000 in the aggregate;

          (k)  neither  the Company nor its Subsidiaries has incurred any debts,
     obligations  or  liabilities,  whether due or to become due, except current
     liabilities  incurred  in  the  ordinary  course of business, none of which
     current  liabilities  (individually  or in the aggregate) could result in a
     Material  Adverse  Change;

          (l)  neither  the  Company  nor  its Subsidiaries has entered into any
     transaction  other  than  in the ordinary course of business except for (in
     the  case  of  the  Company)  this  Agreement;

          (m) neither the Company nor its Subsidiaries has encountered any labor
     difficulties  or  labor  union  organizing  activities;

          (n)  neither  the  Company nor its Subsidiaries has made any change in
     the  accounting  principles,  methods  or  practices  followed  by  it  or
     depreciation  or  amortization  policies  or  rates  theretofore  adopted;

          (o)  neither  the  Company  nor  its Subsidiaries has disclosed to any
     Person  any  material  trade secrets except for disclosures made to Persons
     subject  to  valid  and  enforceable  confidentiality  agreements;

          (p)  neither  the  Company  nor  its  Subsidiaries  has  suffered  or
     experienced  any  change  in the relationship or course of dealings between
     the Company and/or its Subsidiaries and any of their suppliers or customers
     which  supply  goods  or  services  to  the  Company or its Subsidiaries or
     purchase  goods  or  services from the Company and or its Subsidiaries; and

<PAGE>

          (q)  neither the Company nor its Subsidiaries has made any payment to,
     or  received  any  payment  from, or made or received any investment in, or
     entered  into  any transaction or series of related transactions (including
     without  limitation,  the  purchase,  sale,  exchange  or  lease of assets,
     property  or  services,  or  the  making  of  a loan or guarantee) with any
     Affiliate  in each case, in excess of $10,000 or its equivalent (other than
     any  transactions between or among the Company and its Subsidiaries) (each,
     an  "AFFILIATE  TRANSACTION").
          ----------------------

          4.13  Taxes.  The  Company  and  its  Subsidiaries  have filed all Tax
                -----
     returns (including statements of estimated Taxes owed) and reports required
     to  be filed within the applicable periods (subject to extensions) for such
     filings  and  have  paid all Taxes required to be paid, and has established
     adequate  reserves  (net  of  estimated  Tax payments already made) for the
     payment  of  all  Taxes  payable in respect of the period subsequent to the
     last  periods  covered  by  such  returns.  No deficiencies for any Tax are
     currently  assessed  against the Company or any Subsidiary. There is no Tax
     Lien,  whether  imposed  by  any  federal, state or local taxing authority,
     outstanding  against  the  assets, properties or business of the Company or
     its  Subsidiaries other than Liens for Taxes which are not yet due. Neither
     the  Company nor its Subsidiaries has executed any waiver of the statute of
     limitations  on  the  assessment  or  collection of any Tax or governmental
     charge.  The  Company and its Subsidiaries have properly charged, collected
     and  paid  all  applicable  stamp, sales, use and other similar Taxes on or
     before  the  Closing  Date.

          4.14  Real  Property.  The  Company  currently  has (i) leased certain
                --------------
     locations  for  office  space  and  all material leases, and (ii) owns real
     property,  all  of which leases and real property are listed (including the
     terms  of  such  leases)  on  Schedule  4.14.
                                   --------------

          4.15  Tangible  Personal  Property;  Assets.  All  material  items  of
                -------------------------------------
     personal  property  and  assets  owned  or  leased  by  the Company and its
     Subsidiaries  are  in  good  operating  condition,  normal  wear  and  tear
     excepted.

          4.16  Intangible  Property.  The  Company and its Subsidiaries own, or
                --------------------
     possess  adequate  rights  or  licenses to use all trademarks, trade names,
     service  marks,  service mark registrations, service names, patents, patent
     rights,  copyrights,  inventions,  licenses,  approvals,  governmental
     authorizations,  trade  secrets  and  rights  necessary  to  conduct  their
     respective  businesses as now conducted, the lack of which could reasonably
     be  expected  to  have  a  Material  Adverse  Effect.  The  Company and its
     Subsidiaries  do  not have any knowledge of any infringement by the Company
     or  its  Subsidiaries  of  trademarks,  trade  name rights, patents, patent
     rights,  copyrights,  inventions,  licenses,  service names, service marks,
     service  mark  registrations,  trade  secrets  or  other  similar rights of
     others, or of any such development of similar or identical trade secrets or
     technical information by others and no claim, action or proceeding has been
     made or brought against, or to the Company's knowledge, has been threatened
     against,  the  Company or its Subsidiaries regarding trademarks, trade name
     rights,  patents,  patent rights, inventions, copyrights, licenses, service
     names,  service  marks,  service mark registrations, trade secrets or other
     infringement,  except  where such infringement, claim, action or proceeding
     would  not  reasonably  be  expected  to have either individually or in the
     aggregate  a  Material  Adverse  Effect.  None

<PAGE>

     of  the  Company's  employees,  officers,  or  consultants  are  obligated
     under  any  contract  (including licenses, covenants, or commitments of any
     nature) or other agreement, or subject to any judgment, decree, or order of
     any  court  or  administrative agency, that would interfere with the use of
     such employee's, officer's, or consultant's commercially reasonable efforts
     to  promote  the  interests  of the Company or that would conflict with the
     Company's  business as conducted. Neither the execution nor delivery of the
     Transaction Documents, nor the carrying on of the Company's business by the
     employees  of the Company, nor the conduct of the Company's business, will,
     to  the  Company's  knowledge,  conflict  with or result in a breach of the
     terms,  conditions,  or  provisions  of, or constitute a default under, any
     contract,  covenant,  or  instrument  under  which  any  of such employees,
     officers  or  consultants  are  now  obligated.

          4.17  Material  Contracts.
                -------------------

          Other  than as set forth on Schedule 4.17, (a) neither the Company nor
                                      -------------
     its  Subsidiaries  nor  any  of  their respective properties or assets is a
     party  to  or  bound by any (i) Contract not made in the ordinary course of
     business,  or  involving  a  commitment  or  payment  by the Company or any
     Subsidiary  in  excess  of  $10,000  or, in the Company's belief, otherwise
     material  to the business of the Company or its Subsidiaries, (ii) Contract
     among  members or granting a right of first refusal or for a partnership or
     a  joint  venture  or  for  the acquisition, sale or lease of any assets or
     share  capital of the Company or any other Person or involving a sharing of
     profits,  (iii)  mortgage,  pledge,  conditional  sales  contract, security
     agreement,  factoring  agreement  or other similar Contract with respect to
     any  real or tangible personal property of the Company or its Subsidiaries,
     (iv)  loan  agreement,  credit  agreement,  promissory  note,  guarantee,
     subordination  agreement,  letter  of  credit  or any other similar type of
     Contract,  (v)  Contract  with  any  Governmental Body outside the ordinary
     course of business, (vi) Contract with respect to the discharge, storage or
     removal  of hazardous materials or (vii) binding commitment or agreement to
     enter  into  any  of  the  foregoing.

          (b)  (i)  Each  of  the Contracts listed on Schedule 4.17 is valid and
                                                      -------------
     enforceable  against the Company or its Subsidiaries in accordance with its
     terms,  subject  to  applicable  bankruptcy,  insolvency,  reorganization,
     moratorium  and  similar  laws  affecting  creditors'  rights  and remedies
     generally  and  subject,  as  to  enforceability,  to general principles of
     equity  (regardless of whether enforcement is sought in a proceeding at law
     or  in  equity),  and  there  is  no  default  under any Contract listed on
     Schedule  4.17  by  the  Company  or  any  of  its  Subsidiaries or, to the
     --------------
     knowledge  of  the  Company, by any other party thereto, which is likely to
     have  a  Material  Adverse  Effect, and no event has occurred that with the
     lapse of time or the giving of notice or both would constitute a default by
     the  Company  thereunder which is likely to have a Material Adverse Effect.

               (ii)  No  previous  or  current  party  to any Contract has given
          written  notice  to the Company or any Subsidiary of, or made a claim,
          verbal  or  written,  with respect to any breach or default thereunder
          and  the  Company  has  no  knowledge  of  any notice of or claim with
          respect  to  any  such  breach  or  default other than such notices or
          claims  with  respect to any such breaches or defaults that would not,
          either  individually  or  in  the aggregate, be reasonably expected to
          have  a  Material  Adverse  Effect.

          (c)  With  respect  to the Contracts listed on Schedule 4.17 that were
                                                         -------------
     assigned  to  the Company or any Subsidiary by a third party, all necessary
     consents  to  such  assignment  have been obtained other than such contents
     which  the  failure  to  obtain  would not be reasonably expected to have a
     Material  Adverse  Effect.

<PAGE>

          4.18  Employee Benefits. Except as set forth on Schedule 4.18, neither
                -----------------                         -------------
     the  Company  nor  any  of  its  Subsidiaries  has in effect any employment
     agreements,  consulting  agreements,  deferred  compensation,  pension  or
     retirement  agreements  or arrangements, bonus, incentive or profit-sharing
     plans  or  arrangements,  or  labor  or  collective  bargaining agreements,
     written  or oral. The Company and its Subsidiaries are in compliance in all
     material  respects  with all applicable Laws relating to labor, employment,
     fair  employment  practices,  terms and conditions of employment, and wages
     and  hours.

          4.19  Employees.
                ---------

          (a)  No  key  executive  Employee,  group of Employees nor independent
     contractors  of  the Company or its Subsidiaries has any plans to terminate
     his  or  her  employment  or  relationship  as  an  Employee or independent
     contractor  with  the  Company  or  its  Subsidiaries.

          (b)  To the best of the Company's knowledge, no key executive Employee
     or  any  other Employee of the Company or its Subsidiaries is a party to or
     is  otherwise  bound  by  any  agreement or arrangement (including, without
     limitation,  confidentiality  agreements,  non-competition  agreements,
     licenses,  covenants,  or  commitments  of  any  nature), or subject to any
     judgment,  decree,  or  Order  of  any court or Governmental Body, (i) that
     would  conflict  with  such employee's obligation diligently to promote and
     further  the interest of the Company or its Subsidiaries or (ii) that would
     conflict with the Company's (or its Subsidiaries) business as now conducted
     or  as  proposed  to  be  conducted.

          (c)  Schedule  4.19(c)  sets forth a list of each of the key executive
               ----------------
     Employees  of  the  Company  who  have  entered  into  an employment and/or
     confidentiality  agreement  with  the  Company.

          4.20 Litigation. Other than is set forth on Schedule 4.20, there is no
               ----------                             -------------
     action,  suit,  inquiry,  notice  of violation, proceeding or investigation
     pending  or,  to the knowledge of the Company, currently threatened against
     or  affecting  the  Company,  any  Subsidiary  or  any  of their respective
     properties  before  or  by  any  court,  arbitrator,  governmental  or
     administrative  agency and/or regulatory authority (federal, state, county,
     local  or foreign), (collectively, an "ACTION") which does and/or could (i)
                                            ------
     adversely affects or challenges the legality, validity or enforceability of
     any  of  the  Transaction Documents and/or the Transaction Securities or to
     consummate  the  transactions contemplated hereby or thereby or (ii) could,
     if  there  were  an unfavorable decision, have or reasonably be expected to
     result  in,  either  individually  or  in the aggregate, a Material Adverse
     Effect.  The  Commission  has  not  issued  any  stop  order or other order
     suspending  the  effectiveness  of  any registration statement filed by the
     Company or any Subsidiary under the Exchange Act or the Securities Act. The
     foregoing  includes, without limitation, actions, pending or threatened (or
     any basis therefor known to the Company), involving the prior employment of
     any  of the Company's employees, their use in connection with the Company's
     business  of  any information or techniques allegedly proprietary to any of
     their  former  employers,  or  their  obligations under any agreements with
     prior employers. The Company is not a party or subject to the provisions of
     any order, writ, injunction, judgment, or decree of any court or government
     agency  or  instrumentality.

          4.21  Compliance  with  Laws;  Permits.  Neither  the  Company nor any
                --------------------------------
     Subsidiary  (i)  is  in  default under or in violation of (and no event has

<PAGE>

     occurred  that  has  not  been waived that, with notice or lapse of time or
     both,  would  result  in a default by the Company or any Subsidiary under),
     nor has the Company or any Subsidiary received notice of a claim that it is
     in  default  under  or that it is in violation of, any indenture, mortgage,
     decree,  lease, license, loan or credit agreement or any other agreement or
     instrument  to  which it is a party or by which it or any of its properties
     is  bound  (whether or not such default or violation has been waived), (ii)
     is in violation of any order of any court, arbitrator or governmental body,
     or  (iii) is or has been in violation of any statute, rule or regulation of
     any  governmental  authority,  including  without  limitation  all foreign,
     federal,  state  and  local  laws applicable to its business, except in the
     case  of  clauses  (i),  (ii)  and  (iii) as would not result in a Material
     Adverse  Effect.  Neither  the  Company  nor  any  of  the Subsidiaries has
     received  any written notice of any violation of or noncompliance with, any
     federal,  state,  local or foreign laws, ordinances, regulations and orders
     (including, without limitation, those relating to environmental protection,
     occupational  safety  and health, federal securities laws, equal employment
     opportunity, consumer protection, credit reporting, "truth-in-lending", and
     warranties  and  trade  practices)  applicable  to  its  business or to the
     business  of any Subsidiary, the violation of, or noncompliance with, which
     would  have a materially adverse effect on either the Company's business or
     operations, or that of any Subsidiary, and the Company knows of no facts or
     set of circumstances which would give rise to such a notice. The execution,
     delivery, and performance of the Transaction Documents and the consummation
     of  the  transactions  contemplated  thereby  will  not  result in any such
     violation or be in conflict with or constitute, with or without the passage
     of  time  and  giving of notice, either a default under any such provision,
     instrument,  judgment,  order,  writ, decree or contract, or an event which
     results in the creation of any lien, charge, or encumbrance upon any assets
     of  the  Company  or the suspension, revocation, impairment, forfeiture, or
     nonrenewal  of  any  material  permit,  license, authorization, or approval
     applicable to the Company, its business or operations, or any of its assets
     or  properties,  except  as  would  not  reasonably  be  expected to have a
     Material  Adverse  Effect.

          4.22  Environmental  and  Safety  Laws.  Neither  the  Company nor its
                --------------------------------
     Subsidiaries  are  in  violation  of  any  applicable  Laws relating to the
     environment  or  occupational  health  and  safety  where the failure to so
     comply  could  have  a Material Adverse Effect and no material expenditures
     are  or  will  be  required in order to comply with any such existing Laws.

          4.23 Investment Company Act. The Company is not, nor is it directly or
               ----------------------
     indirectly  controlled  by  or  acting  on behalf of, any Person that is an
     investment  company  within  the  meaning  of the Investment Company Act of
     1940,  as  amended.

          4.24  Financial  Advisors.  Except  for Laidlaw and Mastodon Ventures,
                -------------------
     Inc.  ("MASTODON")  no  agent, broker, investment banker, finder, financial
             --------
     advisor  or other Person is or will be entitled to any broker's or finder's
     fee  or  any  other commission or similar fee from the Company, directly or
     indirectly,  in  connection  with  the  transactions  contemplated  by this
     Agreement  or any Transaction Document and no Person is entitled to any fee
     or  commission or like payment from the Company in respect thereof based in
     any  way on agreements, arrangements or understandings made by or on behalf
     of  the  Company.

<PAGE>

          4.25  Condition  of  Properties. All facilities, machinery, equipment,
                -------------------------
     fixtures,  vehicles  and  other  properties  owned,  leased  or used by the
     Company  and  its  Subsidiaries are in good operating condition and repair,
     are  reasonably  fit  and  usable for the purposes for which they are being
     used,  are  adequate  and  sufficient  for the Company and its Subsidiaries
     respective  businesses  and  conform  in  all  material  respects  with all
     applicable  Laws.

          4.26  Pending Changes. The Company has no knowledge of any development
                ---------------
     which  might  reasonably be expected to result in a material adverse affect
     on  the  operations  or  financial  condition  of  the  Company  or  its
     Subsidiaries.

          4.27  Securities  Laws.  The  Company  has  complied  in  all material
                ----------------
     respects  with  all  applicable  U.S.  federal and state securities laws in
     connection with (i) all offers, issuances and sales of its securities prior
     to the date hereof and (ii) the offer, issuance and sale of the Securities.
     All  sales and issuances of currently outstanding securities by the Company
     have  been  to  accredited  investors  within  the  meaning  of Rule 501 of
     Regulation  D  under  the Securities Act. Prior to the Closing, neither the
     Company  nor  anyone  acting  on  its  behalf  has sold, offered to sell or
     solicited offers to buy the Securities or similar securities to, or solicit
     offers  with  respect  thereto  from,  or  entered  into  any  preliminary
     conversations  or  negotiations relating thereto with, any Person, so as to
     bring  the  issuance  and  sale  of  the  Securities under the registration
     provisions  of  the  Securities  Act, and applicable state securities laws.
     Neither  the  Company  nor  any Person acting on its behalf has offered the
     Securities  to  any  Person  by  means of general or public solicitation or
     general  or  public  advertising,  such  as  by  newspaper  or  magazine
     advertisements,  by  broadcast  media,  or  at any seminar or meeting whose
     attendees  were  solicited  by  such  means.

          4.28  Registration  Rights.  Except  for  any rights granted under the
                --------------------
     Transaction  Documents,  no  Person has demand or other rights to cause the
     Company  to  file  any  registration  statement  under  the  Securities Act
     relating  to  any  securities of the Company or any right to participate in
     any  such  registration  statement.

          4.29  Disclosure;  Survival.  There  is  no  fact  which  has not been
                ---------------------
     disclosed  to  the  Purchasers of which the Company has knowledge and which
     has  had or could reasonably be anticipated to result in a Material Adverse
     Change.  All  representations and warranties set forth in this Agreement or
     in  any  of  the  Transaction  Documents  or  in any writing or certificate
     delivered in connection with this Agreement shall survive the execution and
     delivery  of  this  Agreement  and  the  consummation  of  the transactions
     contemplated  hereby  for a period of two (2) years (the "SURVIVAL PERIOD")
                                                               ---------------
     and  shall  not be affected by any examination made for or on behalf of the
     Purchaser,  the  knowledge  of  the  Purchaser,  or  the  acceptance by the
     Purchaser  of  any  certificate  or  opinion.

          4.30  No  General Solicitation. Neither the Company, its Subsidiaries,
                ------------------------
     any  of their affiliates nor any person acting on their behalf, has engaged
     in  any  form  of  general  solicitation or general advertising (within the
     meaning  of  Regulation  D under the Securities Act) in connection with the
     offer  or  sale  of  the  Notes  and  the  Warrants.

          4.31  Insurance.  The  Company  has  in full force and effect fire and
                ---------
     casualty  insurance  policies, with extended coverage, sufficient in amount
     (subject  to  reasonable  deductibles)  to  allow  it to replace any of its

<PAGE>

     properties  that  might  be  damaged  or  destroyed,  and  the  Company has
     insurance  against  other  hazards,  risks,  and liabilities to persons and
     property to the extent and in the manner customary for companies in similar
     businesses  similarly  situated.

          4.32  Regulatory Permits. The Company and the Subsidiaries possess all
                ------------------
     licenses,  certificates,  authorizations  and  permits  issued  by  the
     appropriate  federal,  state,  local  or  foreign  regulatory  authorities
     necessary  to conduct their respective businesses, except where the failure
     to  possess such permits would not have or reasonably be expected to result
     in  a  Material  Adverse  Effect  ("MATERIAL PERMITS"), and believes it can
                                         ----------------
     obtain,  without  undue  burden  or  expense, any similar authority for the
     conduct of its business as planned to be conducted, and neither the Company
     nor  any  Subsidiary has received any notice of proceedings relating to the
     revocation  or  modification  of  any  Material  Permit.

          4.33  Title  to Property and Assets. The Company (and each Subsidiary)
                -----------------------------
     owns its property and assets free and clear of all mortgages, liens, loans,
     pledges,  security  interests,  claims,  equitable  interests, charges, and
     encumbrances,  except  such  encumbrances  and  liens  which  arise  in the
     ordinary course of business and do not materially impair the Company's (and
     each  Subsidiary's)  ownership  or  use  of  such  property or assets. With
     respect  to  the  property  and  assets  it  leases,  the Company (and each
     Subsidiary)  is in compliance with such leases and, to its knowledge, holds
     a  valid  leasehold  interest  free  of any liens, claims, or encumbrances.

          4.34 Foreign Assets Control Legislation. Neither the sale of the Notes
               ----------------------------------
     nor  the  Warrants  by  the  Company  hereunder nor its use of the proceeds
     thereof  will violate the Trading with the Enemy Act, as amended, or any of
     the  foreign  assets  control  regulations  of  the  United States Treasury
     Department  (31  CFR,  Subtitle  B,  Chapter V, as amended) or any enabling
     legislation  or  executive  order  relating  thereto.  Without limiting the
     foregoing,  neither the Company nor any of its Subsidiaries (a) is a person
     whose  property  or interests in property are blocked pursuant to Section 1
     of  Executive  Order  13224  of  September  23,  2001 Blocking Property and
     Prohibiting  Transactions  With  Persons Who Commit, Threaten to Commit, or
     Support  Terrorism  (66  Fed.  Reg.  49079  (2001))  or  (b) engages in any
     dealings or transactions, or be otherwise associated, with any such person.
     The Company and its Subsidiaries are in compliance with the USA Patriot Act
     of  2001  (signed  into  law  October  26,  2001).

     5.  REPRESENTATIONS  AND WARRANTIES OF THE PURCHASER. Each Purchaser hereby
represents  and warrants as of the date hereof and as of the Closing Date to the
Company,  acknowledging  that  the  Company  is  relying  upon  the accuracy and
completeness  of  the  representations and warranties set forth herein to, among
other  things, ensure that registration under Section 5 of the Securities Act is
not  required  in  connection with the sale of the Securities hereby, as follows

          5.1  Organization;  Authority.  The  Purchaser  is  an  entity  duly
               ------------------------
     organized,  validly  existing  and  in  good standing under the laws of the
     jurisdiction  of  its  organization  with  full right, corporate or limited
     liability  company  power and authority to enter into and to consummate the
     transactions  contemplated  by  the  Transaction Documents and otherwise to
     carry  out  its  obligations  thereunder.  The  execution,  delivery  and
     performance  by  such  Purchaser  of  the transactions contemplated by this

<PAGE>

     Agreement  has  been  duly authorized by all necessary corporate or similar
     action on the part of such Purchaser. Each Transaction Document to which it
     is  a party has been duly executed by such Purchaser, and when delivered by
     such  Purchaser  in  accordance  with the terms hereof, will constitute the
     valid and legally binding obligation of such Purchaser, enforceable against
     it  in  accordance  with  its  terms,  except  (i) as limited by applicable
     bankruptcy,  insolvency,  reorganization,  moratorium,  and  other  laws of
     general  application  affecting  enforcement of creditors' rights generally
     and  (ii)  as  limited  by  laws  relating  to the availability of specific
     performance,  injunctive  relief,  or  other  equitable  remedies.

          5.2  Investment  Intent.  The Purchaser represents and warrants to the
               ------------------
     Company  that  it is (a) an "accredited investor" as defined in Rule 501 of
     Regulation  D  of  the  Securities  Act;  and  (b)  acquiring the Purchased
     Securities  to be purchased by it pursuant to this Agreement for investment
     and  not  with  a  view  to  the  distribution  thereof.

          5.3 Investment Purposes. (a) The Purchaser is acquiring the Securities
              -------------------
     for  investment  purposes  only, for its own account, and not as nominee or
     agent  for  any  other  Person,  and  not  with a view to, or for resale in
     connection  with,  any  distribution  thereof  within  the  meaning  of the
     Securities  Act,  (b)  it  understands and acknowledges that the Securities
     have  not  been registered under the Securities Act or any other securities
     laws,  (c)  it  is  not  an  "affiliate"  (as defined in Rule 144 under the
     Securities Act) of the Company, (d) it has such knowledge and experience in
     financial  and  business  matters as to be capable of evaluating the merits
     and  risks  of  its investment, (e) each is an "accredited investor" within
     the  meaning  of Rule 501 of Regulation D under the Securities Act, (f) the
     Company  has  made  available to it the opportunity to ask questions and to
     receive answers, and to obtain information necessary to evaluate the merits
     and  risks  of  this  investment,  and  (g)  the  Purchaser  understands,
     acknowledges  and agrees that the Securities have not been registered under
     (and  that  the Company has no present intention to register the Securities
     under)  the Securities Act or applicable state securities laws, and may not
     be sold or otherwise transferred by the Purchaser to a United States person
     unless  the  Securities  have  been registered under the Securities Act and
     applicable  U.S.  state  securities  laws  or  are sold or transferred in a
     transaction  exempt  therefrom.

          5.4 Short Selling. The Purchaser hereby represents to the Company that
              -------------
     the Purchaser will not make or maintain a "short" position in the Company's
     securities  until  such  date  as  the  Registration  Statement is declared
     effective  by  the  Commission.

     6.  FURTHER  AGREEMENTS  OF  THE  PARTIES.

          6.1  Reserved  Shares.  For so long as the Securities are outstanding,
               ----------------
     the  Company  shall  reserve that number of shares of Common Stock issuable
     upon  conversion  of  the  Notes and exercise of the Warrants, which shares
     shall  not  be  subject  to  any  preemptive  or  other  similar  rights.

          6.2 Access to Information. The Purchaser and its representatives shall
              ---------------------
     be  entitled,  upon  reasonable  notice,  to make such investigation of the
     properties,  business and operations of the Company and such examination of
     the  books, records and financial condition of the Company as it reasonably
     requests  to  make  extracts  and  copies  of  such books and records, upon
     reasonable notice during regular business hours. Any such investigation and
     examination  shall  be  conducted  during  regular business hours and under
     reasonable  circumstances  without material interference with the Company's
     normal  business  operations, and the Company and its representatives shall
     cooperate  fully  therein.  No  investigation  by  a  Purchaser  or  its

<PAGE>

     Representatives prior to or after the date of this Agreement shall diminish
     or  obviate any of the representations, warranties, covenants or agreements
     of the Company contained in this Agreement or the Transaction Documents. In
     order  for  Purchaser  to  have  full  opportunity  to  make such physical,
     business,  accounting  and  legal review, examination of the affairs of the
     Company and investigation as may be reasonably requested, the Company shall
     cause  its  Representatives  to cooperate fully with the Representatives of
     the  Purchaser  in  connection  with  such  review  and  examination.

          6.3 Confidentiality. Except as may be required by applicable Law or as
              ---------------
     otherwise  agreed  among  the  parties  hereto,  neither  the  Company, the
     Purchaser  nor  any  of its Affiliates shall at any time divulge, disclose,
     disseminate,  announce  or release any information to any Person concerning
     this  Agreement,  the  Transaction Documents, the transactions contemplated
     hereby  or  thereby, any trade secrets or other confidential information of
     the  Company  or  the  Purchaser, without first obtaining the prior written
     consent  of  the  other  parties  hereto.

          6.4  Other Actions. The Company and the Purchaser agree to execute and
               -------------
     deliver  such  other  documents  and  take  such other actions as the other
     parties  may  reasonably request for the purpose of carrying out the intent
     of  this  Agreement  and  the  Transaction  Documents.

          6.5  Indemnification.  The  Company  shall indemnify and hold harmless
               ---------------
     each  Purchaser,  the  officers, directors, agents and employees of each of
     them,  each  Person  who controls any such Purchaser (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 (as defined below) actions to enforce
     the  provisions of this Section 6.5) (collectively, "LOSSES"), as incurred,
                             -----------                  ------
     to  the  extent  arising  out  of  or  relating  to  (i)  any  material
     misrepresentation  or  breach of any representation or warranty made by the
     Company  in  the Transaction Documents, or, (ii) any material breach of any
     covenant,  agreement  or  obligation  of  the  Company  contained  in  the
     Transaction  Documents, or (iii) any cause of action, suit or claim brought
     or made against such Indemnified Party and arising out of or resulting from
     the  execution,  delivery,  performance  or  enforcement of the Transaction
     Documents  executed  pursuant  hereto by any of the Indemnified Parties. If
     the  indemnification provided for in this Section 6.5 is held by a court of
                                               -----------
     competent  jurisdiction  to  be  unavailable  to  an Indemnified Party with
     respect  to  any Losses, then the Indemnifying Party (as defined below), in
     lieu  of indemnifying such Indemnified Party hereunder, shall contribute to
     the  amount paid or payable by such Indemnified Party as a result of Losses
     in  such  proportion as is appropriate to reflect the relative fault of the
     Indemnifying  Party  on  the  one  hand and of the Indemnified Party on the
     other  in  connection  with  the actions or omissions that resulted in such
     Losses  as well as any other relevant equitable considerations. The Company
     shall notify the Purchaser 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.

<PAGE>

          (b) 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
      ------------------
     other  party  (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,  however,  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 and adversely 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.

          The indemnification obligations under this Section 6.5 are in addition
                                                     -----------
     to  any  indemnification or similar obligations under any other Transaction
     Document.

          (d)  The  provisions of this Section 6.5 shall survive the termination
                                       -----------
     of  this  Agreement  for  a  period  of  three  (3)  years.

          (e) All payments to be made to Purchaser pursuant to this Section 6.5,
                                                                    -----------
     shall  be  paid  no  later  than  five  (5) business days after request for
     payment  is  sent  to  the  Company.

          6.6  Certain Stock Option and Employment Contract Amendments. Prior to
               -------------------------------------------------------
     and as a condition to the Closing, the Company shall amend (i) the employee
     stock  options dated June 19, 2006 granted to Joseph Wagner and Jean Wilson
     to  purchase  in  the  aggregate  1,200,000 shares of Common Stock (the "JJ
                                                                             ---
     OPTIONS")  to:  (1)  increase the JJ Options to 1,500,000 in the aggregate;
     -------
     (2)  increase the exercise price of the JJ Options from $0.38 to $0.75, and
     (3)  provide  that  the JJ Options will vest as follows: (A) 500,000 shares

<PAGE>

     twelve  (12)  months  from  the  date the Commission declares effective the
     registration  statement  covering  the resale of the Underlying Shares (the
     "EFFECTIVE  DATE");  (B)  500,000  shares  twenty-four (24) months from the
      ---------------
     Effective  Date,  and  (C)  500,000  Shares thirty-six (36) months from the
     Effective Date, and (ii) the JJ Employment Agreements (the "JJ AGREEMENTS")
                                                                 -------------
     to  include  standard  and  customary  accelerated  vesting  and  severance
     payments  in  the  event  of the sale of the Company or a hostile change of
     control  event,  on  such terms acceptable to the Purchasers. Such executed
     amended JJ Option and amended JJ Agreements are attached hereto as Schedule
                                                                        --------
     6.6.
     ---

          6.7  Placement  Agent.  Laidlaw  shall  act as non-exclusive placement
               ----------------
     agent  in the Offering and shall receive (i) a ten (10%) percent commission
     of  the  gross  proceeds  received  from the sale of the Securities; (ii) a
     three  (3%)  percent  non-accountable fee on the gross proceeds raised from
     the  sale of the Securities; and (iii) a 5-year warrant to purchase fifteen
     (15%)  percent  of  all Underlying Shares at an exercise price of $1.10 per
     share,  which  may  be exercised on a cashless basis until such time as the
     Underlying  Shares  have  been registered. Laidlaw at Closing shall receive
     $30,000 for its legal fees and reimbursement for actual expenses. Laidlaw's
     counsel also shall assist the Company in its Blue Sky filings in connection
     with  the  Offering and the Company shall pay to such legal counsel no more
     than $5,000 in legal fees, plus all state filing fees and related costs and
     expenses

          6.9  Co-Investment  Rights. Each Purchaser hereby shall have the right
               ---------------------
     of first refusal to invest (in such amounts that Purchasers shall so elect)
     in  any  and all future financings ("FUTURE FINANCINGS") of the Company for
                                          -----------------
     thirty-six  (36)  months  from  the date of this Agreement on the identical
     terms  offered to other Investors. The Company shall provide each Purchaser
     with  (i)  express prior written notice of a Future Financing, and (ii) all
     required  documentation  requested  by  the Purchaser related to any Future
     Financing  all no later than ten (10) business days prior to the final date
     of the offering period (or other applicable investment period) for any such
     Future  Financings.  Such  Co-Investment  rights  shall  continue even if a
     Purchaser  elects  not  to  invest  in  one  or  more  Future  Financing.

          6.10  Elimination  of  the Preferred Stock. The Company agrees that it
                ------------------------------------
     shall  retire  all  of its Series A Preferred Stock (the "SUPER PREFERRED")
                                                               ---------------
     for  $1.00  in  the aggregate, upon the earlier to occur of (i) the sale of
     $1,250,000  in additional identical promissory notes to the Notes following
     the  Closing  of the Bridge Financing and/or other securities, to repay the
     remaining 6% Convertible Notes (the "6% NOTES") currently held by the Prior
                                          --------
     Note Creditors, and (ii) upon any default of the Notes or other outstanding
     debt/securities.

          6.11  Board  Representation.  The  Company,  effective on the Closing,
                ---------------------
     hereby  grants  Purchaser  the  right  to appoint one Director, or if it so
     elects,  a  Board  Advisory  Seat,  and  to receive all financial and other
     information provided to board members and to observe at all board meetings.
     The  Purchaser  nominee shall be immediately included and maintained in the
     Company's  Director  and Officer insurance coverage. In the event Purchaser
     exercises  its  right to appoint a board member, the Company shall nominate
     an  additional  board member so that the total number of board members will
     be  five  (5).  The  Company  shall  provide to the Purchasers and any then
     designated  observer,  concurrently  with,  and  by  the  same  method  of,
     transmission  to the Board or any committee thereof, any notice of meeting,
     agenda  and  other  materials.

          6.12 Bank Consent. The Company, prior to the Closing Date shall obtain
               ------------
     the  express  written  consent  and/or  necessary waivers from LaSalle Bank

<PAGE>

     Nation  Association  (the  "BANK")  and  any other person, so as to approve
                                 -----
     and/or  waive,  as  the  case may be (i) this Agreement; (ii) the Notes and
     Warrants;  (iii) the second Bridge Financing; (iv) any defaults or event of
     default  that  may  have  or  will  have  occurred;  and (v) all other such
     Transaction  Documents  as  may  be  deemed necessary (the "BANK CONSENT").
                                                                 ------------

     7.  OTHER  OBLIGATIONS  OF  THE  PARTIES.

          7.1 Public Announcements. The Company hereby agrees not to, and not to
              --------------------
     permit  its Subsidiaries to, issue any press release, or otherwise make any
     public  statements  (collectively,  "PRESS  RELEASES")  with respect to the
                                          ---------------
     transactions  contemplated  hereby without the prior written consent of the
     Purchaser, except as may be required by law. Furthermore, where the Company
     desires  to issue any such Press Release, the parties agree to cooperate in
     good  faith  in  order  to  prepare  such  Press  Release  in such form and
     substance  as  is  agreeable  to  both  parties.

          7.2  Furnishing  Information. Each of the parties hereto will, as soon
               -----------------------
     as  practicable  after  reasonable  request  therefor,  furnish  all  the
     information  concerning  it  required  for  inclusion  in  any statement or
     application  made  by any of them to any governmental or regulatory body in
     connection  with  the  transactions  contemplated  by  this  Agreement.

          7.3  Transfer  Restrictions.
               ----------------------

          (a)  The  Underlying Shares may only be disposed of in compliance with
     state  and  federal securities laws. In connection with any transfer of the
     Underlying  Shares  other  than  pursuant  to  an  effective  registration
     statement,  or  in  connection  with  a  pledge, as contemplated in Section
                                                                         -------
     7.3(b) hereof, the Company may require the transferor thereof to provide to
     -----
     the  Company an opinion of counsel selected by the transferor, the form and
     substance of which opinion shall be reasonably satisfactory to the Company,
     to  the  effect  that  such  transfer does not require registration of such
     transferred  Underlying  Shares under the Securities Act. As a condition of
     transfer,  any  such  transferee  shall agree in writing to be bound by the
     terms of this Agreement and shall have the rights of a Purchaser under this
     Agreement  and  the  Registration  Rights  Agreement.

          (b)  The Purchasers agree to the imprinting, so long as is required by
     this  Section  7.3(b),  of  a legend on any of the Underlying Shares in the
           --------------
     following  form:

                THESE  SECURITIES  HAVE  NOT  BEEN  REGISTERED WITH THE
                SECURITIES  AND  EXCHANGE  COMMISSION OR THE SECURITIES
                COMMISSION  OF  ANY STATE IN RELIANCE UPON AN EXEMPTION
                FROM  REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
                AMENDED  (THE  "SECURITIES ACT"), AND, ACCORDINGLY, MAY
                                --------------
                NOT  BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
                REGISTRATION  STATEMENT  UNDER  THE  SECURITIES  ACT OR
                PURSUANT  TO  AN  AVAILABLE  EXEMPTION  FROM,  OR  IN A
                TRANSACTION  NOT  SUBJECT  TO  THE  REGISTRATION
                REQUIREMENTS  OF  THE  SECURITIES ACT AND IN ACCORDANCE
                WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A

<PAGE>

                LEGAL  OPINION  OF  COUNSEL  TO  THE TRANSFEROR TO SUCH
                EFFECT,  THE  SUBSTANCE  OF  WHICH  SHALL BE REASONABLY
                ACCEPTABLE  TO  THE  COMPANY.

          (c)  Certificates  evidencing  the Underlying Shares shall not contain
     any legend (including the legend set forth in Section 7.3(b) (i) Subsequent
                                                   -------------
     to  the  date  the  Commission  declares effective a registration statement
     covering  the  resale  of the Underlying Shares, (ii) following any sale of
     the  Underlying  Shares  pursuant  to Rule 144, or (iii) if such Underlying
     Shares  are eligible for sale under Rule 144(k). The Company agrees that at
     such  time  as such legend is no longer required under and pursuant to this
     Section  7.3(c),  it will, no later than two (2) Trading Days following the
     --------------
     delivery by a Purchaser to the Company or the Company's transfer agent of a
     Note for conversion, a Warrant for exercise, a restricted stock certificate
     or  a  lost securities affidavit, if any, of such securities are lost, , as
     the  case  may  be,  deliver  to  such Purchaser a certificate representing
     Underlying  Shares that is free from all restrictive and other legends (the
     "DEADLINE").  The  Company may not make any notation on its records or give
      --------
     instructions  to  any  transfer  agent  of  the  Company  that  enlarge the
     restrictions  on  transfer  set  forth  in  this  Section.

          7.4  Underlying  Share  Delivery  Damages.  In  the  event  that  a
               ------------------------------------
     non-legended  certificate  for  Underlying  Shares  is  not  received  by a
     Purchaser  by  the  Deadline,  as partial compensation to the Purchaser for
     such  loss  as  a  result of such delivery delay, the Company shall pay (as
     liquidated damages and not a penalty) to the Purchaser for late issuance of
     the Underlying Shares an amount of $100 per business day after the Deadline
     for each $10,000 of principal amount of the Note being converted, and/or or
     $10,000 of market value (based upon the then stock price of the Company) of
     Underlying  Shares  of  the Warrant being exercised for as the case may be,
     which  are  not  timely delivered. The penalties in this Section 7.4 are in
                                                              -----------
     addition  to  any  shall  not  limit  any  other  penalty provisions in the
     Transaction  Documents  and  shall  not limit a Purchasers right to collect
     other  damages  and/or  remedies.

          7.5 Integration. The Company shall not sell, offer for sale or solicit
              -----------
     offers to buy or otherwise negotiate in respect of any security (as defined
     in Section 2 of the Securities Act) that would be integrated with the offer
     or  sale  of  any  of  the  Securities  in  a manner that would require the
     registration  under the Securities Act of the sale of the Securities to the
     Purchasers  or  that  would  be  integrated  with  the offer or sale of the
     Securities for purposes of the rules and regulations of any Trading Market.

          7.6  Use of Proceeds. The Company covenants and agrees that all of the
               ---------------
     net  proceeds  that  it  receives  from  the sale of the Notes and Warrants
     pursuant to this Agreement, shall be used solely to repay and/or retire the
     6%  Notes  currently  held  by  the  Prior  Note Creditors in the aggregate
     principal  amount  of  $2,032,500  as  of  the  date  hereof.

          7.7  Form D and Blue Sky. The Company shall file a Form D with respect
               -------------------
     to  the  Securities as required under Regulation D under the Securities Act
     and,  upon  written  request,  provide  a  copy  thereof  to each Purchaser
     promptly  after  such  filing. The Company shall, on or before the Closing,
     take  such action as the Company shall reasonably determine is necessary in
     order  to  obtain an exemption for or to qualify any Securities for sale to
     the  Purchasers  pursuant  to this Agreement under applicable securities or
     "Blue  Sky"  laws  of  the  states  of the United States, and shall provide

<PAGE>

     evidence  of  any  such action so taken to the Purchaser on or prior to the
     Closing.  The  Company  shall  make all filings and reports relating to the
     offer  and  sale  of the Securities required under applicable securities or
     "Blue  Sky"  laws of the states of the United States following the Closing.

          7.8  Reservation  of  Common Stock. As of the date hereof, the Company
               -----------------------------
     has  reserved  and the Company shall continue to reserve and keep available
     at  all  times, free of preemptive rights, a sufficient number of shares of
     Common  Stock  for  the  purpose  of  enabling  the  Company  to  issue the
     Conversion  Shares  and  the  Warrant  Shares.

          7.9  Securities  Laws Disclosure. The Company shall, by the end of the
               ----------------------------
     business  on  the  fourth (4th) Business Day following the Closing, issue a
     press  release  or  file  a  Current  Report  on  Form  8-K, disclosing the
     transactions contemplated hereby and make such other filings and notices in
     the  manner  and  time  required  by  the  Commission.

     8.  CONDITIONS  TO  CLOSING.

          8.1  Conditions of Obligations of the Purchaser. The obligation of the
               ------------------------------------------
     Purchaser  to  purchase  and  pay  for  the  Securities  is  subject to the
     fulfillment  prior  to  or on the Closing Date of the following conditions,
     any  of  which  may  be  waived  in  whole  or  in  part by the Purchasers:

          (a) Representations, Warranties and Covenants. The representations and
              -----------------------------------------
     warranties of the Company under this Agreement shall be deemed to have been
     made  again  on  the  Closing  Date  (other  than those representations and
     warranties made expressly as of a date prior to the Closing Date) and shall
     then be true and correct. The Company shall represent to the Purchaser that
     all  of  the  information  contained  herein  does  not  contain any untrue
     statement  of  a  material fact, or contain any omission of a material fact
     relating  to  such  information  that  is  necessary  in  order to make the
     information,  in  light of the circumstances under which the information is
     provided,  not  misleading.

          (b)  Compliance  with  Agreement. The Company shall have performed and
               ---------------------------
     complied  with  all  covenants,  agreements and conditions required by this
     Agreement  to be performed or complied with by the Company on or before the
     Closing  Date.

          (c)  Approvals.  The Company shall have obtained any and all consents,
               ---------
     waivers,  approvals  or authorizations, with or by any Governmental Body or
     any other Person required for the valid execution of this Agreement and the
     transactions  contemplated  hereby.

          (d) No Injunction. No Governmental Body or any other Person shall have
              -------------
     issued  an  Order  which shall then be in effect restraining or prohibiting
     the  completion of the transactions contemplated hereby, nor shall any such
     Order  be  threatened  or  pending.

          (e)  No Material Adverse Change. Since March 31, 2006, there shall not
               --------------------------
     have  been  a  Material  Adverse  Change.

          (f)  Certificate  of  Officer. The Company shall have delivered to the
               ------------------------
     Purchaser  a  certificate  dated  the  Closing  Date, executed by its Chief

<PAGE>

     Executive  Officer and Chief Financial Officer, certifying the satisfaction
     of  the  conditions  specified  in paragraphs (a), (b), (c), (d) and (e) of
     this  Section  8.1.
           ------------

          (g)  Opinion  of  the  Company's  Counsel.  The  Purchasers shall have
               ------------------------------------
     received  from  Company  counsel,  in a form satisfactory to Purchasers and
     their  counsel,  an  opinion  dated  the  Closing  Date.

          (h)  Certificate  of  Incorporation  and  By-Laws.  The Certificate of
               --------------------------------------------
     Incorporation,  as  amended,  and  the  By-Laws, shall be in full force and
     effect  as  of  the Closing under the laws of the State of Nevada and shall
     not  have  been  further  amended  or  modified.  A  certified  copy of the
     Certificate  of  Incorporation, as so amended, shall have been delivered to
     counsel  for  the  Purchasers.

               (i)  Closing  Documents  Provided  By Company. The Purchasers (or
                    ----------------------------------------
          such  other  person  as  referred  to  herein) shall have received the
          following:

               (i)  a  Note  in  favor  of  each Purchaser, duly executed by the
          Company, entitling the Purchaser to payment in the amount as stated in
          Schedule  1.1  herein;
          -------------

               (ii) a Warrant in the name of the Purchaser, duly executed by the
          Company,  entitling  the  Purchaser to purchase such amount of Warrant
          Shares  as  stated  in  Schedule  1.1  herein;
                                  -------------

               (iii)  the  Registration  Rights  Agreement  duly executed by the
          Company;

               (iv)  the Security Agreement duly executed by the Company and all
          documents  necessary  to  perfect the security interest of Purchasers;

               (v)  this  Agreement  duly  executed  by  the  Company;

               (vi)  Secretary's  Certificate in a form reasonably acceptable to
          Purchaser,  with  good  standing  certificates of the Company and each
          Subsidiary  as  of  a  recent  date;

               (vii)  Legal  Opinion;

               (viii)  Copy  of  the  Bank Consent for the Company to enter into
          this  new debt and all necessary waivers of Bank covenants prohibiting
          such  action;

               (ix)  Copy  of  the  executed  amended  JJ  Option and amended JJ
          Agreement;

               (x)  the  executed  Waiver  Agreement.

               (xi)  a  five (5) year Warrant in the name of the Purchaser, duly
          executed  by  the Company, entitling the Purchaser to purchase 333,333
          shares  of  Common  Stock  at an exercise price of $.30 per share (the
          "VENTURE  WARRANT").
           ----------------

               (xii)  a  five  (5)  year  Warrant  in the name of Mastodon, duly
          executed  by  the  Company, entitling the Mastodon to purchase 666,667

<PAGE>

          shares  of  Common  Stock  at an exercise price of $.30 per share (the
          "MASTODON  WARRANT").
           -----------------

               (xiii)Executed  10b-5  Letters  from  each  executive Officer and
          Director  of  the  Company.

               (xiv) such other documents as Purchasers and/or its legal counsel
          may  request  and/or  deem necessary (including, but not limited to, a
          Good  Standing  Certificate of recent date from the Secretary of State
          of  the  State  of  incorporation).

          8.2  Conditions  of Company's Obligations. The Company's obligation to
               ------------------------------------
     issue  and  sell  the  Securities  to the Purchasers on the Closing Date is
     subject to the fulfillment prior to or on the Closing Date of the following
     conditions,  any of which may be waived in whole or in part by the Company:

          (a) Representations and Warranties. The representations and warranties
              ------------------------------
     of  the  Purchaser  under  this Agreement shall be deemed to have been made
     again  on  the  Closing  Date  and  shall  then  be true and correct in all
     material  respects.

          (b) Compliance with Agreement. The Purchasers shall have performed and
              -------------------------
     complied  with  all agreements and conditions required by this Agreement to
     be  performed  or complied with by such Purchaser on or before the Closing.

          (c) Approvals. The Purchaser shall have obtained any and all consents,
              ---------
     waivers,  approvals, Permits or authorizations, with or by any Governmental
     Body or any other Person required for the valid execution of this Agreement
     and  the transactions contemplated hereby including, but not limited to the
     approval  by.

          (d)  Payment  of Purchase Price. The Purchaser shall have delivered to
               --------------------------
     the  Company  the  Purchase  Price  specified  in  Section 2.1 hereof (less
     commissions  and  all  fees  and  expenses  of  Purchaser  counsel).

          (e) No Injunction. No Governmental Body or any other Person shall have
              -------------
     issued  an  Order  which shall then be in effect restraining or prohibiting
     the  completion  of the transactions contemplated hereby including, but not
     limited  to,  the,  Acquisition  nor  shall any such Order be threatened or
     pending.

          (f)  Closing  Documents  Provided By Purchaser. The Company shall have
               -----------------------------------------
     received  the  following:

               (i)  this  Agreement  duly  executed  by  the  Purchaser;

               (ii)  the  Registration  Rights  Agreement  duly  executed by the
          Purchaser.

               (iii)  the  Security  Agreement  executed  by  the  Purchaser

          8.3  Post  Closing  Obligations.  Following  the  Closing  Date:
               --------------------------

               (i)  the Company shall file all necessary documents in accordance

<PAGE>

          with  their  obligations  under  the  Security  Agreement;

               (ii)  Purchaser  Counsel  shall  file  all  post closing Blue Sky
          filings  in  the  necessary  jurisdictions.

     9.  MISCELLANEOUS.

          9.1  Certain  Definitions.
               --------------------

          "ACTION" shall have the meaning ascribed to such term in Section 4.20.
           ------

          "AFFILIATE" of any Person means any Person that directly or indirectly
           ---------
     controls,  or  is  under control with, or is controlled by, such Person. As
     used  in  this  definition,  "CONTROL"  (including  with  its  correlative
     meanings,  "CONTROLLED  BY"  and  "UNDER  CONTROL  WITH")  shall  mean  the
                 --------------         --------------------
     possession,  directly  or  indirectly,  of the power to direct or cause the
     direction  of  the  management  or  policies  of  a Person (whether through
     ownership  of  securities  or  partnership or other ownership interests, by
     contract  or  otherwise).

          "BUSINESS DAY" means any day except Saturday, Sunday and any day which
           ------------
     shall  be a federal legal holiday or a day on which banking institutions in
     the  State  of  New  York  are  authorized  or  required  by  law  or other
     governmental  action  to  close.

          "CLOSING"  means the closing of the purchase and sale of the Notes and
           -------
     the Warrants pursuant to Section 3.1 on August 8, 2006, or such other date
                               ----------
     as  mutually  agreed  to  by  the  parties.

          "CLOSING  DATE"  means  the  date  of  the  Closing.
           -------------

          "CODE"  means  the  Internal Revenue Code of 1986, as amended, and the
          -----
     rules  and  regulations  promulgated  thereunder.

          "COMMISSION"  means  the  Securities  and  Exchange  Commission.
           ----------

          "COMMON  STOCK" means the shares of common stock, par value $0.001 per
           -------------
     share,  of  the  Company.

          "COMPANY  COUNSEL"  means  David  M.  Loev,  Esq.
           ----------------

          "CONTRACT" means any contract, agreement, indenture, note, bond, loan,
           --------
     instrument,  lease,  conditional  sales  contract,  mortgage,  license,
     franchise,  insurance policy, commitment or other arrangement or agreement,
     whether  written  or  oral.

          "CONVERSION  SHARES"  means  all  shares of Common Stock issuable upon
           ------------------
     conversion  of  the  Notes.

<PAGE>

          "EMPLOYEE"  means  any  current  employee,  office  consultant, agent,
           --------
     officer  or  director  of  the  Company.

          "EXCHANGE  ACT" means the Securities Exchange Act of 1934, as amended.
           -------------

          "EXHIBITS"  shall mean the following exhibits attached hereto and made
           --------
     a  part  of  this  Agreement:

          Exhibit  A  -  Registration  Rights  Agreement
          Exhibit  B  -  Form  of  Warrant
          Exhibit  C  -  Form  of  Note
          Exhibit  D  -  Security  Agreement

          "GOVERNMENTAL BODY" means any government or governmental or regulatory
           -----------------
     body  thereof,  or  political  subdivision thereof, whether federal, state,
     local  or  foreign, or any agency, instrumentality or authority thereof, or
     any  court  or  arbitrator  (public  or  private).

          "LAW"  means any federal, state, local or foreign law (including law),
           ---
     statute,  code,  ordinance,  rule,  regulation  or  other  requirement  or
     guideline.

          "LEGAL  PROCEEDING"  means  any  judicial,  administrative or arbitral
           -----------------
     actions,  suits,  proceedings  (public  or private), claims or governmental
     proceedings.

          "LIEN"  means  any  mortgage,  pledge, security interest, encumbrance,
           ----
     lien  or charge of any kind, including, without limitation, any conditional
     sale  or  other  title retention agreement, any lease in the nature thereof
     and  the  filing  of or agreement to give any financing statement under the
     Uniform Commercial Code (or similar laws) of any jurisdiction and including
     any  lien  or  charge  arising  by  statute  or  other  law.

          "MATERIAL  ADVERSE  CHANGE"  means  any material adverse change in the
           -------------------------
     business, assets, liabilities, prospects, properties, results of operations
     or  condition (financial or otherwise) of the Company and its Subsidiaries,
     taken  as  a  whole.

          "MATERIAL  ADVERSE  EFFECT"  means any event, circumstance, condition,
           -------------------------
     fact, effect, or other matter which has had or could reasonably be expected
     to have a material adverse effect (i) on the business, assets, liabilities,
     prospects,  properties,  results  of  operations or condition (financial or
     otherwise)  of the Company and its Subsidiaries taken as a whole or (ii) on
     the ability of the Company or its Subsidiaries to perform on a timely basis
     any  material  obligation  under  this  Agreement  or  to  consummate  the
     transactions  contemplated  hereby.

          "NOTES"  shall  have the meaning ascribed to such term in Section 1.1.
           -----

          "ORDER"  means  any order, injunction, judgment, decree, ruling, writ,
           -----
     assessment  or  arbitration  award.

          "PERMITS"  means  any  approvals,  authorizations, consents, licenses,
           -------
     permits  or  certificates  by  or  of  any  Governmental  Body.

<PAGE>

          "PERSON"  means  any individual, corporation, partnership, firm, joint
           ------
     venture,  association,  joint-stock  company,  trust,  unincorporated
     organization,  Governmental  Body  or  other  entity.

          "REGISTRATION  STATEMENT"  means  a registration statement meeting the
           -----------------------
     requirements  set  forth in the Registration Rights Agreement and covering,
     among  other  items,  the resale by the Purchaser of the Underlying Shares.

          "REGISTRATION  RIGHTS  AGREEMENT"  means  the  Registration  Rights
           -------------------------------
     Agreement,  dated  as  of the date of this Agreement, among the Company and
     the  Purchasers,  in  the  form  of  EXHIBIT  A  hereto.
                                          ----------

          "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.

          "SEC  REPORTS" shall have the meaning ascribed to such term in Section
           ------------                                                  -------
     4.9.
     ----

          "SECURITIES  ACT" means the Securities Act of 1933, as amended, or any
           ---------------
     similar  federal  statute,  and the rules and regulations of the Securities
     and  Exchange  Commission thereunder, all as the same shall be in effect at
     the  time.

          "SUBSIDIARY"  shall  have the meaning ascribed to such term in Section
           ----------                                                    -------
     4.4.
     ----

          "TAXES"  means  any  federal,  state,  local  or foreign income, gross
           -----
     receipts,  license,  payroll,  employment,  excise,  severance,  stamp,
     occupation, premium, windfall profits, environmental (including taxes under
     Section  59A  of  the  Code),  customs  duties,  share  capital, franchise,
     profits,  withholding,  social  security  (or  similar),  unemployment,
     disability,  real  property,  personal  property,  sales,  use,  transfer,
     registration,  value-added,  alternative  or  add-on minimum, estimated, or
     other  tax  of  any  kind  whatsoever,  including any interest, penalty, or
     addition  thereto,  whether  disputed  or  not.

          "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.

<PAGE>

          "VENTURE  WARRANTS" means the Common Stock purchase warrants issued to
           -----------------
     the  Sands  Brothers  Venture  Capital  Funds,  as  per terms of Financing.

          "WARRANT  SHARES"  means  all  shares  of  Common  Stock issuable upon
           ---------------
     exercise  of  the  Warrants.

          "WARRANTS"  shall  have  the  meaning ascribed to such term in Section
           --------                                                      -------
     1.1.
     ----

          9.2  Further  Assurances.  The  Company  and  the  Purchasers agree to
               -------------------
     execute  and deliver such other documents or agreements as may be necessary
     or  desirable for the implementation of this Agreement and the consummation
     of  the  transactions  contemplated  hereby.

          9.3  Entire  Agreement;  Amendments  and  Waivers.  This  Agreement
               --------------------------------------------
     (including  the  schedules  and  exhibits  hereto)  represents  the  entire
     understanding  and  agreement  among the parties hereto with respect to the
     subject  matter hereof and can be amended, supplemented or changed, and any
     provision  hereof can be waived, only by written instrument making specific
     reference  to  this Agreement signed by the parties hereto. No action taken
     pursuant to this Agreement, including without limitation, any investigation
     by or on behalf of any party, shall be deemed to constitute a waiver by the
     party  taking  such action of compliance with any representation, warranty,
     covenant or agreement contained herein. The waiver by any party hereto of a
     breach of any provision of this Agreement shall not operate or be construed
     as  a  further  or  continuing  waiver of such breach or as a waiver of any
     other  or  subsequent  breach.  No  failure  on  the  part  of any party to
     exercise,  and no delay in exercising, any right, power or remedy hereunder
     shall operate as a waiver thereof, nor shall any single or partial exercise
     of  such right, power or remedy by such party preclude any other or further
     exercise  thereof  or the exercise of any other right, power or remedy. All
     remedies  hereunder  are  cumulative  and  are  not  exclusive of any other
     remedies  provided  by  law.

          9.4 Construction. The headings herein are for convenience only, do not
              ------------
     constitute  a  part  of  this Agreement and shall not be deemed to limit or
     affect  any  of  the provisions hereof. The language used in this Agreement
     will  be  deemed  to be the language chosen by the parties to express their
     mutual  intent, and no rules of strict construction will be applied against
     any  party.

          9.5  Successors  and Assigns. This Agreement shall be binding upon and
               -----------------------
     inure  to  the  benefit  of  the parties and their successors and permitted
     assigns.  The  Company  may  not  assign  this  Agreement  or any rights or
     obligations  hereunder without the prior written consent of each Purchaser.
     Any  Purchaser,  however,  may  assign  any or all of its Securities and/or
     rights  under any of the Transaction Documents to any Person, provided such
     transferee  agrees  in writing to be bound, with respect to the transferred
     Securities  and  otherwise,  by  the  provisions  hereof  that apply to the
     "Purchasers."

          9.6  No  Third-Party Beneficiaries. This Agreement is intended for the
               -----------------------------
     benefit of the parties hereto and their respective successors and permitted

<PAGE>

     assigns  and  is  not  for  the benefit of, nor may any provision hereof be
     enforced  by,  any  other  Person.

          9.7  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 all of its
     reasonable  legal  fees  and  expenses.

          9.8  Headings;  Interpretive  Matters.  The  section  headings of this
               --------------------------------
     Agreement  are for reference purposes only and are to be given no effect in
     the  construction or interpretation of this Agreement. No provision of this
     Agreement  will  be interpreted in favor of, or against, any of the parties
     hereto  by  reason  of  the  extent  to which any such party or its counsel
     participated  in  the  drafting thereof or by reason of the extent to which
     any  such provision is inconsistent with any prior draft hereof or thereof.

          9.9  Confidentiality.  Each party hereto covenants and agrees to treat
               ---------------
     any  non-public  information  provided  to it by the Company concerning the
     business  and  finances  of  the  Company  ("CORPORATE  INFORMATION")  as
                                                  ----------------------
     confidential  and  agrees further that it will not use, exploit, reproduce,
     disclose  or  provide  Corporate Information to any third-party (other than
     any  agents  of  the  parties  who  are  bound  by  substantially  similar
     obligations of confidentiality) on its own behalf or otherwise, except with
     the  consent  of  the  Company  or as required by law, legal process or any
     federal  or  state regulatory body having jurisdiction over such party. The
     provisions  of  this  Section 9.9 shall not apply to any information which:
                           -----------

          (a)  was  within  the public domain prior to the time of disclosure of
     Corporate Information to the receiving party or which comes into the public
     domain other than as a result of a breach by the party of this Section 9.9;
                                                                    -----------

          (b)  was rightfully acquired by the receiving party from a third party
     without,  to  the  knowledge of the receiving party, any restriction or any
     obligation  of  confidentiality;  or

          (c) was independently developed by the receiving party without any use
     or  reference  to  the  Corporate  Information.

          The  provisions  of  this Section 9.9 shall survive the termination of
                                    -----------
     this Agreement, either in whole or as to any party, for a period of two (2)
     years.

          9.10  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 (a) the next Business
     Day,  if  sent  by U.S. nationally recognized overnight courier service, or
<PAGE>

     (b)  upon actual receipt by the party to whom such notice is required to be
     given. The address for such notices and communications to the Company shall
     be  as  set forth below and for each Purchaser shall be as set forth on the
     signature  pages  attached  hereto.

     If  to  the  Company:

     XA,  Inc.
     875  North  Michigan  Avenue,  Suite  2626,
     Chicago,  IL  60611
     Attention:  Joseph  Wagner,  President
     Telephone:  312-397-9100

     With  a  copy  to:

     David  M.  Loev
     Attorney  at  Law
     2777  Allen  Parkway,  Suite  1000
     Houston,  Texas  77019
     Telephone:  713-524-4110

     If  to  the  Purchasers

     Sands  Brothers  Venture  Capital  Fund,  LLC
     90  Park  Avenue,  31st  Floor
     New  York,  NY  10016
     Attention:  Scott  Baily
     Telephone:  212-697-5200

     With  a  copy  to:

     Gusrae  Kaplan,  Bruno  &  Nusbaum  PLLC
     120  Wall  Street
     New  York,  New  York  10005
     Attention:  Lawrence  G.  Nusbaum,  Esq.
     Telephone:  212-269-1400

     If  to  Mastodon:

     Mastodon  Ventures,  Inc.
     800 Brazos Street, Suite 1010
     Austin,  TX  78701
     Attention:  Robert  S.  Hersch
     Telephone:  512-236-0925

     All  notices  are  effective  upon  receipt  or  upon  refusal  if properly
     delivered.

          9.11  Severability.  If  any provision of this Agreement is invalid or
                ------------

<PAGE>

     unenforceable,  the  balance  of  this  Agreement  shall  remain in effect.

          9.12  Binding Effect; Assignment. This Agreement shall be binding upon
                --------------------------
     and  insure  to  the benefit of the parties and their respective successors
     and  permitted assigns. No assignment of this Agreement or of any rights or
     obligations  hereunder  may  be  made  by the Company or the Purchasers (by
     operation  of  law  or  otherwise) without the prior written consent of the
     other  parties  hereto  and  any  attempted assignment without the required
     consents  shall  be  void.

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

          9.14  Incorporation  by  Reference;  Breach of Security Agreement. Any
                -----------------------------------------------------------
     default  and/or  breach  of  the  Security  Agreement shall be considered a
     breach  and/or  default  of  this  Agreement. All covenants, agreements and
     obligations  of  the  Company  in the Security Agreement shall be expressly
     incorporated  by  reference  herein  as  if  made directly herein and shall
     survive  termination  of  this  Agreement.

            [The rest of this page has been intentionally left blank]

<PAGE>

     IN  WITNESS  WHEREOF,  the parties hereto have executed or have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as  of  the  date  first  written  above.

XA,  INC.

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

<PAGE>

           PURCHASER'S SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT

 Sands Brothers Venture Capital LLC
--------------------------------------

By: /s/ Scott A. Baily
    ----------------------------------
     Name: Scott A. Baily
     Title: COO

90 Park Ave. 31st Fl. Ny, Ny 10016
--------------------------------------
Address
212-953-4978
--------------------------------------
Facsimile Number

Amount Invested $25,000

Sands Brothers Venture Captial II LLC
-------------------------------------

By: /s/ Scott A. Baily
    ---------------------------------
    Name: Scott Baily
    Title: COO

90 Park Ave. 31st Fl. Ny, Ny 10016
-------------------------------------
Address

212-953-4978
-------------------------------------
Facsimile Number

Amount Invested $100,000

Sands Brothers Venture Capital III LLC
-------------------------------------

By: /s/ Scott A. Baily
    ---------------------------------
    Name: Scott A. Baily
    Title: COO

90 Park Ave. 31st Fl. Ny, NY 10016
-------------------------------------

212-953-4978
-------------------------------------
Facsimile Number

Amount Invested $775,000

Sands Brothers Venture Capital IV LLC
-------------------------------------

By: /s/ Scott A. Baily
    ---------------------------------
    Name: Scott A. Baily
    Title: COO

90 Park Ave. 31st Fl. Ny, NY 10016
-------------------------------------

212-953-4978
-------------------------------------
Facsimile Number

Amount Invested $250,000

Katie & Adam Bridge Partners, L.P.
-------------------------------------

By: /s/ Steven Sands
    ---------------------------------
    Name: Steven Sands
    Title: Member Manager

90 Park Ave. 31st Fl. Ny, NY 10016
-------------------------------------

212-953-4978
-------------------------------------
Facsimile Number

Amount Invested $100,000

<PAGE>

                                  SCHEDULE 1.1
                                  ------------

                                   PURCHASERS

             NAME AND ADDRESS                PRINCIPAL NOTE       WARRANT SHARES
             OF EACH PURCHASER              AMOUNT PURCHASED      TO BE RECEIVED
             -----------------             ----------------       --------------
   1. Sands Brothers Venture Capital LLC        $25,000              3,500

   2. Sands Brothers Venture Capital II LLC    $100,000             14,000

   3. Sands Brothers Venture Capital III LLC   $775,000            108,500

   4. Sands Brothers Venture Capital IV LLC    $250,000             35,000

   5. Katie & Adam Bridge Partners, L.P.       $100,000             14,000

<PAGE>

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