Document:

Exhibit 10.1

                                    XA, INC.

                          SECURITIES PURCHASE AGREEMENT

        Dated October 26, 2006, to be effective as of September 26, 2006

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     THIS  SECURITIES  PURCHASE AGREEMENT, dated as of this 26th day of October,
2006,  to  be effective as of September 26, 2006 (this "AGREEMENT"), between XA,
                                                        ---------
INC.,   a  Nevada   corporation   (the  "COMPANY"),   and  Chris  G.  Andersen,
                                  -------
Ltd.  (the  "PURCHASER")  is meant to replace and supersede the prior Securities
             ---------
Purchaser  Agreement entered into between the parties, which was dated September
26,  2006.

                              W I T N E S S E T H:

     WHEREAS,  the  Company  has  previously  entered into a Securities Purchase
Agreement  on  August  8,  2006  (the  "PRIOR  CLOSING"  and the "PRIOR PURCHASE
                                        --------------            --------------
AGREEMENT"),  whereby  it  sold an aggregate of $1,250,000 in 11% Senior Secured
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Convertible  Promissory  Notes  (the  "PRIOR  NOTES")  and  175,000  warrants to
                                       -------------
purchase shares of its common stock at an exercise price of $1.10 per share (the
"PRIOR  WARRANTS"),  to five entities (the "PRIOR PURCHASERS") which Prior Notes
 ---------------                            ----------------
were  secured  by  a  Security  Agreement  (the "PRIOR SECURITY AGREEMENT"). The
                                                 ------------------------
shares  of  common  stock  which  the  Prior Notes were convertible into and the
shares  of  common  stock  which the Prior Warrants were convertible into and an
aggregate  of  1,000,000  additional  warrants  previously issued exercisable at
$0.30  per  share,(collectively  the  "PRIOR  UNDERLYING  SHARES"), were granted
                                       -------------------------
registration  rights  pursuant  to  a  Registration Rights Agreement (the "PRIOR
                                                                           -----
REGISTRATION  AGREEMENT");
-----------------------

     WHEREAS,  the  Company desires to issue to the Purchaser, and the Purchaser
desires  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
          ------------
          Purchaser,  and  the Purchaser 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  $100,000  (the  "NOTES")  and  (ii) warrants (a
                                                  -----
          "WARRANT"  and  collectively  the  "WARRANTS")  to  purchase  fifteen
           -------                            --------
          thousand (15,000) 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 the Purchaser shall be set forth on
          Schedule  1.1  hereto.
          -------------

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          2.   PURCHASE  PRICE.

               2.1  Purchase  Price.  The  aggregate  purchase  price  of  the
                    ---------------
          Securities  to be purchased pursuant to Section 1.1 shall be $100,000,
          (the  "PURCHASE  PRICE").
                 ---------------

               2.2  Payment of the Purchase Price. At the Closing (as defined in
                    -----------------------------
          Section  3.1  hereof),  the  Purchaser shall pay the Purchase Price by
          ------------
          wire  transfer  of immediately available funds or by such other method
          as  may  be reasonably acceptable to the Company and the Purchaser, to
          such  account  of the Company as shall have been designated in advance
          to  the  Purchaser  by the Company. The Company at its sole discretion
          may  pay  qualified  Broker Dealers a selling concession of 10% and an
          unaccountable  expense  allowance  of 3% of gross proceeds received in
          connection  with  this  Offering.

          3.  CLOSING.

               3.1  Closing  Date.  The  closing of the sale and purchase of the
                    -------------
          Securities (the "CLOSING") has previously taken place on September 30,
                           -------
          2006.  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 Purchaser, acknowledging that the Purchaser 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:

               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  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
               ---

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               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.  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 in good standing (if applicable) in
               each  other jurisdiction in which it owns or leases property of a

<PAGE>

               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
          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.
                    ----------------

                    (a)  The Waiver of Rights Agreement (the "WAIVER AGREEMENT")
                                                              ----------------
               entered  into as of July 17, 2006, effective as of June 30, 2006,

<PAGE>

               and  extended  via email on August 3, 2006, to August 9, 2006, 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
               Schedule  4.7(a).

                    (b)  The  Waiver  of  Rights  Agreement  (the "SECOND WAIVER
                                                                   -------------
               AGREEMENT")  entered  into as of September 13, 2006, by 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  Second  Waiver Agreement. The executed
               Second  Waiver  Agreement is attached hereto as Schedule 4.78(b).

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

<PAGE>

          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 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

<PAGE>

               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;

                    (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;

<PAGE>

                    (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

                    (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.

<PAGE>

               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 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, or otherwise disclosed
                                           -------------
          in  the  Company's  Securities  and  Exchange  Commission  filings (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

<PAGE>

               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.

               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

<PAGE>

          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  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.

<PAGE>

               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, 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.

               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 and the Prior Registration Agreement, 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.

<PAGE>

               4.29  Disclosure;  Survival.  There is no fact which has not been
                     ---------------------
          disclosed  to  the  Purchaser  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 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 and/or any such liens,
          encumbrances and security interests which arose in connection with the
          Prior  Security  Agreement. 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.

<PAGE>

          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).

               4.35 Solvency. Based on the financial condition of the Company as
                    --------
          of  the  Closing  Date  (after  giving  effect  to  the  transactions
          contemplated  herein  and in the other Transaction Documents), (i) the
          Company's  fair  saleable  value of its assets exceeds the amount that
          will be required to be paid on or in respect of the Company's existing
          debts  and  other liabilities (including known contingent liabilities)
          as  they  mature;  (ii)  the  Company's  assets  do  not  constitute
          unreasonably  small  capital  to carry on its business for the current
          fiscal year as now conducted and as proposed to be conducted including
          its  capital  needs  taking  into  account  the  particular  capital
          requirements  of  the business conducted by the Company, and projected
          capital  requirements  and capital availability thereof; and (iii) the
          current  cash  flow  of  the  Company,  together with the proceeds the
          Company  would  receive, were it to liquidate all of its assets, after
          taking  into  account  all  anticipated  uses  of  the  cash, would be
          sufficient  to  pay all amounts on or in respect of its debt when such
          amounts  are required to be paid. The Company does not intend to incur
          debts beyond its ability to pay such debts as they mature (taking into
          account  the timing and amounts of cash to be payable on or in respect
          to  its  debt).

          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  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.

<PAGE>

               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 (i) until such date as the Registration Statement
          is  declared effective by the Commission, and (ii) during such portion
          of  the Mandatory Conversion Period (as defined in the Note) until the
          Purchaser  has  delivered  its  Optional  Conversion Election Form (as
          defined  in  the  Note).

          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 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.

<PAGE>

               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.

                    (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.

<PAGE>

                    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  Co-Investment  Rights.  Each Purchaser hereby shall have the
                    ---------------------
          right  of  first  refusal  (which right shall be shared with the Prior
          Purchasers)  to  invest  (in  such amounts that all of such Purchasers
          (including the Prior Purchasers and other Purchasers who invest during
          the offering to which this Agreement is a part) 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.

               6.7  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  an aggregate of $2,500,000 in additional identical

<PAGE>

          promissory notes (of which $1,250,000 in notes were previously sold in
          August  2006)  to  the  Notes  following  the  Closing  of  the Bridge
          Financing  (as  defined in the Note) 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.

               6.8  Board Representation. The Company, effective on the Closing,
                    --------------------
          hereby  grants  Purchaser, which right shall be shared with all of the
          Purchasers  (including  the  Prior Purchasers and other Purchasers who
          invest  during  the  offering  to which this Agreement is a part), the
          right  to  appoint  one Director, or if it so elects, a Board Advisory
          Seat (with both the Prior Purchasers and current Purchaser electing as
          a  group,  one  Director  or  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  Purchaser  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.

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

<PAGE>

               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  Purchaser  agrees 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 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 the Purchaser's right to collect other
          damages  and/or  remedies.

<PAGE>

               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 Purchaser 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 $1,012,434 as of the date hereof
          with  the  balance  to  be  utilized  for  working  capital.

               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 Purchaser pursuant to this
          Agreement under applicable securities or "Blue Sky" laws of the states
          of the United States, and shall provide 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
                    --------------------------
          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
          Purchaser:

                    (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

<PAGE>

               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 June 30, 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  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 Purchaser shall
                         ----------------------------------
               have received from Company counsel, in a form satisfactory to the
               Purchaser  and  its  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
               Purchaser.

                    (i) Closing Documents Provided By Company. The Purchaser (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;

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

<PAGE>

                         (vi)  this  Agreement  duly  executed  by  the Company;

                         (vii)  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;

                         (viii)  Legal  Opinion;

                         (ix)  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)  such  other documents as the Purchaser 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 Purchaser 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  Purchaser 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.

<PAGE>

                         (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  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 September 26, 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.
                ----------------

<PAGE>

               "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.

               "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  Warrants
               ----------
               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.

<PAGE>

               "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.

               "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  Purchaser,  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

<PAGE>

          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.

               "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 Purchaser 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

<PAGE>

          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  "Purchaser."

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

<PAGE>

               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  (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  Purchaser:

     _____________________________
     _____________________________
     _____________________________
     _____________________________
     Telephone:  ______________

     With  a  copy  to:

     _____________________________
     _____________________________
     _____________________________
     _____________________________
     Telephone: ______________

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

               9.11  Severability. If any provision of this Agreement is invalid
                     ------------
          or  unenforceable,  the  balance  of  this  Agreement  shall remain in
          effect.

<PAGE>

               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  Purchaser  (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
                                         -----------------------------------
                                             Joseph  Wagner
                                             Chief  Executive  Officer

<PAGE>

           PURCHASER'S SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT

By:/s/ G. Chris Andersen
   -----------------------------------
     Name:
     Title:

1050 Fifth Ave. 8-F New York NY 10028
--------------------------------------
Address

212-842-1540
--------------------------------------
Facsimile Number

$100,000
-------------------------------------
Amount Invested

<PAGE>

                                  SCHEDULE 1.1
                                  ------------
                                    PURCHASER

             NAME AND ADDRESS     PRINCIPAL NOTE       WARRANT SHARES
            OF EACH PURCHASER     AMOUNT PURCHASED     TO BE RECEIVED
            -----------------     ----------------     --------------

            G. Chris Andersen        $100,000              15,000
           1050 Fifth Ave. 8-F
            New York, NY 10028

<PAGE>Exhibit 10.2

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

                                    XA, INC.

                 11% SENIOR SECURED CONVERTIBLE PROMISSORY NOTE

Bridge  Note  No.:  ___                                      October 26,  2006

     FOR  VALUE  RECEIVED, XA, Inc., a Nevada corporation (collectively with all
of  its  Subsidiaries,  as defined in the SPA (as defined below), the "COMPANY")
                                                                       -------
with  its  principal  executive office at 875 North Michigan Avenue, Suite 2626,
Chicago,  IL 60611, promises to pay to the order of G. Chris Andersen (the
"PAYEE" or the "HOLDER OF THIS NOTE") or registered assigns on the earlier of
 -----         --------------------
(i) December 26, 2007; or (ii) if so elected by the Payee, upon consummation by
the Company of a merger, combination or sale of substantially all of its assets
or the purchase by a single entity or person or group of affiliated entities or
persons of more than fifty (50%) percent of the voting stock of the Company (the
"MATURITY  DATE"),  the principal amount of ONE HUNDRED THOUSAND ($100,000) (the
 --------------
"PRINCIPAL  AMOUNT") in such coin or currency of the United States of America as
 -----------------
at  the  time  of  payment  shall  be legal tender for the payment of public and
private  debts.  Interest  on  this  Note  shall  accrue on the Principal Amount
outstanding  from  time  to time at a rate per annum computed in accordance with
Section  3  hereof  and  shall  be payable on the Maturity Date, or earlier upon
conversion  of  this  Note in accordance with the provisions of Section 6 hereof
                                                                ---------
(or  as  may  otherwise  be provided in this Note). Nothing in item (ii) of this
paragraph  shall  be  construed as the consent by the holder of this Note to any
action otherwise prohibited by the terms of this Note or as a waiver of any such
prohibition.

This  Note  replaces  and  supersedes  the  prior 11% Senior Secured Convertible
Promissory  Note  entered  into  between  the  Payee and the Company dated as of
September  26,  2006.

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

<PAGE>

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

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

     This Note and other identical Notes in the aggregate principal amount of up
to $1,500,000 (the "NOTES") are issued to the Payee in connection with a private
                    -----
placement  (the "BRIDGE FINANCING") by the Company of its of Notes  and Warrants
                 ----------------
(the  "INVESTMENT WARRANTS") through Laidlaw & Company (UK) Ltd. ("LAIDLAW"), as
       -------------------                                         -------
non-exclusive  placement  agent,  pursuant  and  in accordance with a Securities
Purchase Agreement dated the date hereof by and among the Company, the Payee and
all  other  purchasers  of  Notes  (the  "SPA"),  a  copy  of which agreement is
                                          ---
available  for inspection at the Company's principal office. Notwithstanding any
provision to the contrary contained herein, this Note is subject and entitled to
certain  terms,  conditions,  covenants and agreements contained in the SPA. Any
transferee  of  this  Note, by its acceptance hereof, assumes the obligations of
the  Payee in the SPA with respect to the conditions and procedures for transfer
of  this  Note.  Reference  to  the  SPA shall in no way impair the absolute and
unconditional  obligation  of  the  Company  to  pay  both  principal hereof and
interest  hereon  as  provided  herein.

     1.     No  Prepayment.  This  Note may not be prepaid prior to the Maturity
            --------------
Date  (except  as  otherwise  provided  by  Section  6,  herein).

     2.     Investment  Warrants. In consideration for the loan evidenced by the
            --------------------
Notes, the Company shall issue to the holders of the Notes  five-year Investment
Warrants  to  purchase  in  the aggregate 225,000 shares of the Company's common
stock,  $.001  par  value per share (the "COMMON STOCK") at an exercise price of
                                          ------------
$1.10  per share. The Holder of this Note may at any time that this Note remains
outstanding present this Note to the Company in payment of the exercise price of
all  or  any  portion  of  the Investment Warrants.   The Holder of this Note is
purchasing  $100,000  in Notes (which represents a portion of the full amount of
the  Notes  being  offered)  and  is  being  issued  15,000 five-year Investment
Warrants  in  connection  with  such  investment.

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

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

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

<PAGE>

          C.  Maximum  Rate.  In the event that it is determined that, under the
              --------------
     laws  relating  to  usury  applicable  to  the  Company or the indebtedness
     evidenced  by this Note ("APPLICABLE USURY LAWS"), the interest charges and
                               ---------------------
     fees  payable  by  the Company in connection herewith or in connection with
     any  other  document  or  instrument  executed  and delivered in connection
     herewith  cause  the effective interest rate applicable to the indebtedness
     evidenced  by  this  Note  to  exceed  the maximum rate allowed by law (the
     "MAXIMUM RATE"), then such interest shall be recalculated for the period in
      ------------
     question  and  any  excess  over the Maximum Rate paid with respect to such
     period  shall  be  credited,  without  further  agreement or notice, to the
     Principal  Amount  outstanding  hereunder  to  reduce  said balance by such
     amount  with  the  same  force  and  effect  as  though  the  Company  had
     specifically  designated  such extra sums to be so applied to principal and
     the  Payee  had  agreed  to  accept such extra payment(s) as a premium-free
     prepayment.  All  such deemed prepayments shall be applied to the principal
     balance  payable  at  maturity.  In  no event shall any agreed-to or actual
     exaction  as  consideration  for  this  Note  exceed  the limits imposed or
     provided  by Applicable Usury Laws in the jurisdiction in which the Company
     is  resident  applicable to the use or detention of money or to forbearance
     in  seeking  its  collection  in  the  jurisdiction in which the Company is
     resident.

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

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

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

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

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

<PAGE>

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

               (v)  Books  and  Records. The Company will at all times keep true
                    -------------------
          and correct books, records and accounts reflecting all of its business
          affairs  and  transactions  in  accordance  with  GAAP. Such books and
          records  shall  be open at reasonable times and upon reasonable notice
          to the inspection of the Payee or its agents, subject to the execution
          by  such  persons  of  a  reasonable  non-disclosure  agreement;

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

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

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

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

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

               (viii)  Security Interests. The Company shall perform any and all
                       ------------------
          acts and execute any and all documents (including, without limitation,
          the execution, amendment or supplementation of any financing statement
          and  continuation  statement)  for  filing under the provisions of the
          Uniform  Commercial  Code  (the  "UCC"), and the rules and regulations
                                            ---
          thereunder, or any other statute, rule or regulation of any applicable
          jurisdiction  which  are necessary (and/or advisable at the request of
          the  Holders  or  its  counsel)  in  order to maintain in favor of the
          holders of the Notes, a valid and perfected lien on the Collateral (as
          defined  in  the  Security  Agreement),  subject  only  to  the  Prior
          Purchasers'  (as  defined  in  the  SPA)  and the prior first priority
          security  interest  of  LaSalle  Bank  National  Association  liens.

<PAGE>

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

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

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

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

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

          (b)  finished  goods  inventories.

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

               (iv)  Indebtedness. The Company will not hereafter create, incur,
                     ------------
          assume or suffer to exist, contingently or otherwise, any indebtedness
          (other  than  (i)  indebtedness  incurred  in  the  Company's historic
          business  and  in  the  ordinary course of the Company's business, and
          (ii) up to $1,500,00 aggregate principal amount of promissory notes on
          the terms and conditions substantially identical to the Notes, the net
          proceeds  of  which will be used to repay the Company's outstanding 6%
          Convertible Notes issued to certain investors pursuant to Subscription
          Agreements  dated  as  of June 30, 2004 (the "PARI NOTES"), which Pari
                                                        ----------
          Notes  are  pari  passu  to  the  Notes),  which  is  not  expressly
          subordinated  in  right  of  payment  and  otherwise  to  the  Notes.

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

<PAGE>

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

          (b)  Liens  of  carriers,  warehousemen,  mechanics,  materialman  and
     landlords  incurred in the ordinary course of business for sums not overdue
     or  being  contested in good faith by appropriate proceedings and for which
     adequate  reserves in accordance with GAAP shall have been set aside on its
     books;

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

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

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

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

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

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

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

<PAGE>

               (vii)  Guaranteed  Indebtedness.  The  Company  shall not create,
                      ------------------------
          incur,  assume  and/or permit to exist any Guaranteed Indebtedness (as
          defined  below) to any bank, lender, or any other person in connection
          with  any  credit facilities extended by such creditors to the Company
          and/or  any  of  its  Subsidiaries  (as defined in the SPA), and/or in
          connection  with  any  other  contracts  or  agreements.  "GUARANTEED
          INDEBTEDNESS"  shall  mean  as  to  any person, any obligation of such
          person  guaranteeing,  providing  comfort  or otherwise supporting any
          indebtedness, lease, dividend, or other obligation of any other person
          in  any manner, including any obligation or arrangement of such person
          to (1) purchase or repurchase any such primary obligation, (2) advance
          or  supply funds for the purchase or payment of any primary obligation
          or  to  maintain  working  capital  or  otherwise  to maintain working
          solvency  or  any  balance  sheet  condition;  (3)  purchase property,
          securities or services primarily for the purpose of assuring the owner
          of  any  such obligation of the ability of the Company to make payment
          of  such  obligation;  (4) protect the beneficiary of such arrangement
          from  loss;  or (5) indemnify the own of such obligation against loss.

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

               (v)  Cross-Default. The Company shall default in the payment when
                    -------------
          due  (including  any  applicable  grace  period) of any amount payable

<PAGE>

          under any other obligation of the Company for money borrowed in excess
          of  $50,000  ,  which  default  shall  continue  uncured for three (3)
          business  days;

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

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

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

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

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

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

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

<PAGE>

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

<PAGE>

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

          A.  [Intentionally  removed].
              -----------------------

          B.  Optional  Conversion.
              --------------------

               (i) Notwithstanding anything to the contrary contained in Section
          6  hereof or elsewhere, the Holder, at its sole option, shall have the
          right  to  convert  from time to time, any and/or all of the Principal
          Amount  and  all accrued, but unpaid Interest on this Note into shares
          of  Common  Stock  (the  "CONVERSION SHARES"), at the Conversion Price
                                    -----------------
          (the  "OPTIONAL CONVERSION RIGHT") by submitting a written notice (the
                 -------------------------
          "OPTIONAL CONVERSION ELECTION FORM"), in the form of EXHIBIT A annexed
           ---------------------------------
          hereto,  electing  to  exercise  its  optional  conversion rights (the
          "OPTIONAL  CONVERSION").  However,  if the Company completes a private
           --------------------
          offering  of  its  equity securities in which (i) the Company receives
          gross proceeds of no less than three million ($3,000,000) dollars from
          the  sale  of  such equity securities, and (ii) the effective purchase
          price  of  the Common Stock sold (the conversion price and/or exercise
          price  if  Common Stock is not sold directly) in the Qualified Private
          Offering  is  $1.50  (subject to stock splits or other events) or more
          per  share  of  Common stock (a "QUALIFIED PRIVATE OFFERING"), and the
                                           --------------------------
          Securities  and  Exchange  Commission (the "SEC") declares effective a
                                                      ---
          registration  statement  covering  the resale of the Conversion Shares
          and  the shares of Common Stock issuable upon exercise of the Warrants
          (the  "UNDERLYING SHARES"), such Optional Conversion Right shall cease
                 -----------------
          to exist and be forfeited by Holder, if within thirty (30) days of the
          date  the  SEC  declares  the  registration  statement  effective (the
          "Mandatory  Conversion  Period"), the Company has not received a valid
          Optional  Conversion  Election Form from Holder in connection with the
          Conversion  Shares  .

               (ii)  If  the  Holder  fails  to exercise its Optional Conversion
          Right  prior to the expiration of thirty (30) days following the later
          of  (a)  effectiveness  of  a  registration  statement registering the
          Underlying  Shares  and  (b)  the  funding  of  the  Qualified Private
          Offering:

                    (a)  Such  Optional  Conversion  Right  shall  be  waived by
               Holder,  and  this  Note  shall  no  longer  be  subject  to  any
               conversion  rights;

                    (b)  Holder  shall  forfeit  any  right  to the Warrants (as
               defined  in the SPA), and such Warrants shall expire immediately;
               and

                    (c)  The Company shall have ten (10) business days following
               the  expiration  of  the 10 Days to repay the Principal Amount of
               the  Note along with any accrued and unpaid interest on the Note.

          C. Conversion Price. The number of Conversion Shares to be issued upon
             ----------------
     conversion  of  the Principal Amount and/or Interest shall be determined by
     dividing  the  Conversion  Amount  (as  defined  below)  by  the applicable
     Conversion Price (as defined in below). The term "CONVERSION AMOUNT" means,
                                                       -----------------
     with  respect  to any conversion of this Note, the sum of (i) the Principal
     Amount, and (ii) accrued but unpaid Interest through the date of conversion
     that  the holder is electing to so convert. The "CONVERSION PRICE" shall be
                                                      ----------------
     (subject  to anti-dilution adjustments as provided in this Note) the lesser
     of  (i)  $0.75,  (ii)  fifty  (50%) percent of the effective per share sale

<PAGE>

     price  of  the  Common Stock (the conversion price and/or exercise price if
     Common  Stock  is not sold directly) in any Qualified Private Offering, and
     (iii)  fifty  (50%)  percent  of  the effective per share sale price of the
     Common Stock (the conversion price and/or exercise price if Common Stock is
     not  sold  directly)  in  any  financing  (other  than  a Qualified Private
     Offering);  provided, however, that Conversion Price shall not be less than
     the  $0.30 per share (subject to anti-dilution adjustments provided in this
     Note).

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

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

               (ii)  Delivery  of  Common Stock Upon Conversion. Upon receipt by
                     ------------------------------------------
          the  Company of this Note (or any affidavit of lost Note) and provided
          the Holder has converted this Note in accordance with the requirements
          of  Section  6  of  this  Note, the Company shall issue and deliver or
              ----------
          cause  to  be  issued and delivered to or upon the order of the Holder
          certificates  for the Conversion Shares no later than two (2) business
          days  after  such  receipt  (the  "DEADLINE").
                                             --------

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

          "THE  SECURITIES  REPRESENTED  BY  THIS  CERTIFICATE  HAVE  NOT  BEEN
          REGISTERED  UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED.  THE
          SECURITIES  MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
          AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT,
          OR  AN  OPINION  OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR

<PAGE>

          OPINIONS  OF  COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS
          NOT  REQUIRED  UNDER  SAID  ACT  UNLESS  SOLD  PURSUANT TO RULE 144 OR
          REGULATION  S  UNDER  SAID  ACT."

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

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

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

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

          B.  Adjustment for Certain Dividends and Distributions. If the Company
              --------------------------------------------------
     at  any  time  or  from time to time on or after the Original Issuance Date
     makes  or  fixes  a  record date for the determination of holders of Common

<PAGE>

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

          C. Adjustments for Other Dividends and Distributions. In the event the
             -------------------------------------------------
     Company  at any time or from time to time on or after the Original Issuance
     Date  makes,  or  fixes  a  record date for the determination of holders of
     Common  Stock entitled to receive, a dividend or other distribution payable
     in securities of the Company other than shares of Common Stock, then and in
     each  such event provision shall be made so that the Holders of Notes shall
     receive  upon  conversion  thereof,  in addition to the number of shares of
     Common  Stock receivable thereupon, the amount of securities of the Company
     which  they  would have received had their Notes been converted into Common
     Stock  on the date of such event and had they thereafter, during the period
     from  the date of such event to and including the conversion date, retained
     such securities receivable by them as aforesaid during such period, subject
     to all other adjustments called for during such period under this Section 7
     with  respect  to  the  rights  of  the  Holders  of  the  Notes.

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

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

               (i)  If  at  any time or from time to time following the Original
          Issuance  Date,  the  Company  issues  or  sells,  or is deemed by the
          express  provisions  of  this  Section  7F  to  have  issued  or sold,
                                         -----------
          Additional Shares of Common Stock (as hereinafter defined), other than
          as  a  dividend  or other distribution on any class of stock and other

<PAGE>

          than  upon  a subdivision or combination of shares of Common Stock, in
          either  case  as  provided in Section 7A above, for an Effective Price
          (as hereinafter defined) less than the then existing Conversion Price,
          then and in each such case the then existing Conversion Price shall be
          reduced,  as  of  the opening of business on the date of such issue or
          sale,  to  a  price  equal  to the Effective Price for such Additional
          Shares  of  Common  Stock.

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

               (iii)  For  the  purpose of the adjustment required under Section
                                                                         -------
          7F, if the Company issues or sells any rights, warrants or options for
          --
          the  purchase  of,  or  stock  or other securities convertible into or
          exchangeable  for, Additional Shares of Common Stock (such convertible
          or  exchangeable  stock or securities being hereinafter referred to as
          "CONVERTIBLE  SECURITIES")  and  if  the  Effective  Price  of  such
           -----------------------
          Additional  Shares  of  Common Stock is less than the Conversion Price
          then  in effect, then in each case the Company shall be deemed to have
          issued  at  the time of the issuance of such rights, warrants, options
          or  Convertible  Securities the maximum number of Additional Shares of
          Common  Stock  issuable  upon exercise, conversion or exchange thereof
          and  to have received as consideration for the issuance of such shares
          an  amount  equal  to  the  total amount of the consideration, if any,
          received  by  the  Company  for the issuance of such rights, warrants,
          options  or  Convertible Securities, plus, in the case of such rights,
          warrants  or  options,  the  minimum amounts of consideration, if any,
          payable  to  the Company upon the exercise of such rights, warrants or
          options,  plus,  in  the  case  of Convertible Securities, the minimum
          amounts  of  consideration, if any, payable to the Company (other than
          by  cancellation  of  liabilities  or  obligations  evidenced  by such
          Convertible  Securities)  upon  the conversion or exchange thereof. No
          further adjustment of the Conversion Price, adjusted upon the issuance
          of  such rights, warrants, options or Convertible Securities, shall be
          made as a result of the actual issuance of Additional Shares of Common
          Stock  on  the exercise of any such rights, warrants or options or the
          conversion or exchange of any such Convertible Securities. If any such
          rights  or options or the conversion or exchange privilege represented
          by  any  such  Convertible Securities shall expire without having been
          exercised,  the  Conversion  Price  adjusted upon the issuance of such
          rights,  warrants,  options  or  Convertible  Securities  shall  be
          readjusted to the Conversion Price which would have been in effect had
          an  adjustment  been made on the basis that the only Additional Shares
          of  Common Stock so issued were the Additional Shares of Common Stock,

<PAGE>

          if  any,  actually  issued  or  sold  on  the exercise of such rights,
          warrants,  or  options  or  rights  of  conversion or exchange of such
          Convertible Securities, and such Additional Shares of Common Stock, if
          any,  were  issued  or sold for the consideration actually received by
          the  Company  upon  such  exercise,  plus  the  consideration, if any,
          actually  received by the Company for the granting of all such rights,
          warrants, or options, whether or not exercised, plus the consideration
          received  for  issuing  or selling the Convertible Securities actually
          converted  or  exchanged,  plus  the  consideration,  if any, actually
          received  by the Company (other than by cancellation of liabilities or
          obligations  evidenced  by  such  Convertible  Securities)  on  the
          conversion  or  exchange  of  such  Convertible  Securities.

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

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

<PAGE>

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

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

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

     8.     Amendments.  This Note may not be  modified or amended in any manner
            ----------
except  in  writing  executed  by  the  Company  and  the  Holder  of this Note.

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

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

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

<PAGE>

     9.     Ownership  Cap  and Certain Conversion Restriction.  Notwithstanding
anything to the contrary set forth in Section 3 of this Note, at no time may the
Holder  convert  all or a portion of this Note if the number of shares of Common
Stock  to  be  issued  pursuant to such conversion would exceed, when aggregated
with  all  other  shares  of  Common Stock owned by the Holder at such time, the
number  of  shares of Common Stock which would result in the Holder beneficially
owning  (as  determined in accordance with Section 13(d) of the Exchange Act and
the  rules  thereunder) more than 9.9% of all of the Common Stock outstanding at
such  time;  provided,  however,  that  upon the Holder providing the Maker with
sixty-one  (61)  days  notice  (pursuant  to  Section  4.1  hereof) (the "Waiver
Notice") that the Holder would like to waive this Section 3.4 with regard to any
or  all  shares  of  Common  Stock  issuable  upon conversion of this Note, this
Section 3.4 will be of no force or effect with regard to all or a portion of the
Note  referenced  in  the  Waiver  Notice.

     10.     Miscellaneous.
             -------------

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

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

                                        XA,  INC.

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

$100,000

<PAGE>

                                                                       EXHIBIT A

                        Optional Conversion Election Form
                        ---------------------------------

                               ____________, 2006

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

     Re:     Optional Conversion of Promissory Note
Gentlemen:

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

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

                                   Very truly yours,

                                   ___________________________
                                   Name:

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

______________________________________________
     Name

______________________________________________
     Address

______________________________________________
     Social Security No. of Shareholder

<PAGE>

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