AMENDMENT AND EXCHANGE AGREEMENT
 
AMENDMENT AND EXCHANGE AGREEMENT (this "Agreement"), dated as of March 24, 2008,
by and among DigitalFX International, Inc., a Florida corporation, with
headquarters located at 3035 East Patrick Lane, Suite 9, Las Vegas, NV 89120
(the "Company"), and [Portside Growth and Opportunity Fund] [Highbridge
International LLC] [Iroquois Master Fund, Ltd.] (the "Investor").
 
WHEREAS:
 
A.  The Company, the Investor and certain other investors (the "Other
Investors", and collectively with the Investor, the "Investors") are parties to
that certain Securities Purchase Agreement, dated as of November 29, 2007 (the
"Existing Securities Purchase Agreement"), pursuant to which, among other
things, the Investors purchased from the Company (i) senior secured convertible
notes (the "Existing Notes"), which are convertible into shares of the Company's
common stock, par value $0.001 per share (the "Common Stock") (the Existing
Notes as converted, the "Existing Conversion Shares"), in accordance with the
terms thereof and (ii) warrants (the "Existing Warrants"), which are exercisable
into shares of Common Stock (the "Existing Warrant Shares").
 
B.  In connection with the execution and delivery of the Existing Securities
Purchase Agreement, the Company obtained certain irrevocable transferable
letters of credit (each a "Letter of Credit") from Wells Fargo Bank, N.A. in the
aggregate amount of $2,000,000 (the "Initial LC Amount") for the benefit of the
Investors.
 
C.   In connection with the execution and delivery of the Existing Securities
Purchase Agreement, the Company and the Investors entered into that certain
Registration Rights Agreement, dated November 30, 2007 (the "Registration Rights
Agreement"), by and among the Company and the Investors, pursuant to which the
Company agreed to provide certain registration rights with respect to the
Registrable Securities (as defined in the Registration Rights Agreement) under
the Securities Act of 1933, as amended (the "1933 Act"), and the rules and
regulations promulgated thereunder, and applicable state securities laws.
 
D.  The Company and the Investor desire to enter into this Agreement, pursuant
to which, among other things, (i) at the Company's direction, the Investor shall
irrevocably instruct Wells Fargo Bank, N.A. to redeem in cash from such Investor
an amount equal to such Investor's pro rata portion of the Initial LC Amount
(such Investor's "LC Reduction Amount"), as set forth opposite such Investor's
name in column (3) on the Securities Schedule attached hereto, (ii) the Company
shall redeem in cash from each Investor an amount equal to such Investor's pro
rata portion of $2,000,000 (such Investor's "Redemption Payment Amount"), as set
forth opposite such Investor's name in column (4) on the Securities Schedule
attached hereto, (iii) the Company shall amend and restate all of such
Investor's Existing Notes for (A) notes in the form attached hereto as Exhibit A
(the "Notes") with a principal amount set forth opposite the Investor's name in
column (5) on the Securities Schedule attached hereto, which shall be
convertible into Common Stock (the "Conversion Shares") and (B) that aggregate
number of shares of Common Stock, set forth opposite such Investor's name in
column (6) on the Securities Schedule attached hereto (collectively, the "Common
Shares") (which aggregate amount for all Investors shall be 1,000,000 Common
Shares); (iv) the Company shall amend and restate all of such Investor's
Existing Warrants for warrants in the form attached hereto as Exhibit B (the
"Warrants") which shall be exercisable to acquire that number of shares of
Common Stock set forth opposite the Investor's name in column (7) on the
Securities Schedule attached hereto (the "Warrant Shares"); and (v) the Company
shall pay to the Investor, in cash, the interest payable under such Investor's
Existing Notes through the Closing Date (the "2008 Interest Payment") in the
amount set forth opposite the Investor's name in column (8) of the Securities
Schedule.
 

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E.  The amendment and restatement of the Existing Notes for the Notes and the
Common Shares and the amendment and restatement of the Existing Warrants for the
Warrants is being made in reliance upon the exemption from registration provided
by Section 3(a)(9) of the 1933 Act.
 
F.  Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings ascribed to them in the Existing Securities Purchase
Agreement.
 
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the Company and the Investor hereby agree as
follows:
 

 
1.
AMENDMENT AND RESTATEMENT OF EXISTING NOTES; ISSUANCE OF COMMON SHARES;
AMENDMENT AND RESTATEMENT OF EXISTING WARRANTS; LETTER OF CREDIT; INTEREST
PAYMENT.

 
(a)  Letter of Credit; Interest Payment. Subject to satisfaction (or waiver) of
the conditions set forth in Sections 5 and 6 below, at the closing contemplated
by this Agreement (the "Closing"), at the direction of the Company, the Investor
shall irrevocably instruct Wells Fargo Bank, N.A. to redeem in cash from such
Investor an amount equal to the Investor's LC Reduction Amount, as set forth
opposite such Investor's name in column (3) on the Securities Schedule attached
hereto; the Company shall redeem in cash from each Investor an amount equal to
the Investor's Redemption Payment Amount, as set forth opposite such Investor's
name in column (4) on the Securities Schedule attached hereto; and the Company
shall pay to each Investor an amount in cash equal to the Investor's 2008
Interest Payment, as set forth opposite such Investor's name in column (8) on
the Securities Schedule attached hereto.
 
(b)  Amendment and Restatement of Existing Note and Existing Warrants. Subject
to satisfaction (or waiver) of the conditions set forth in Sections 5 and 6
below, at the Closing, the Investor shall surrender to the Company its Existing
Note and its Existing Warrants and the Company shall issue and deliver to the
Investor (I) a Note in the principal amount set forth opposite the Investor's
name in column (5) of the Securities Schedule attached hereto with a principal
amount reflecting the Investor's LC Reduction Amount and (II) the number of
Common Shares as is set forth opposite the Investor's name in column (6) on the
Securities Schedule; and the Warrants to acquire that number of Warrant Shares
as is set forth opposite the Investor's name in column (7) on the Securities
Schedule attached hereto; and
 
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(c)  Closing Date. The date and time of the Closing (the "Closing Date") shall
be 10:00 a.m., New York Time, on the Business Day immediately following the date
hereof, subject to notification of satisfaction (or waiver) of the conditions to
the Closing set forth in Sections 5 and 6 below (or such other time and date as
is mutually agreed to by the Company and the Investor). The Closing shall occur
on the Closing Date at the offices of Schulte Roth & Zabel LLP, 919 Third
Avenue, New York, New York 10022.
 
(d)  Release of Letter of Credit Funds. At the direction of the Company, the
Investor shall irrevocably instruct Wells Fargo Bank, N.A. to redeem in cash
from such Investor an amount equal to the Investor's LC Reduction Amount, as set
forth opposite such Investor's name in column (3) on the Securities Schedule
attached hereto, which the Company and the Investor agree shall be considered a
Holder Optional Redemption payment for purposes of the Investor's Letter of
Credit. On the date hereof, at the direction of the Company, the Investor shall
deliver to Wells Fargo Bank, N.A. a demand letter, in the form attached to the
Investor's Letter of Credit, requesting release of such LC Reduction Amount by
wire transfer of immediately available funds to the Investor.
 

 
2.
AMENDMENTS TO TRANSACTION DOCUMENTS.

 
(a)  Reaffirmation. The Company hereby confirms and agrees that, except as
otherwise expressly provided herein:
 
(i)  the Existing Securities Purchase Agreement and each other Transaction
Document is, and shall continue to be, in full force and effect and is hereby
ratified and confirmed in all respects, except that on and after the Closing
Date (i) all references in the Existing Securities Purchase Agreement to "this
Agreement", "hereto", "hereof", "hereunder" or words of like import referring to
the Securities Purchase Agreement shall mean the Existing Securities Purchase
Agreement as amended by this Agreement, (ii) all references in the other
Transaction Documents to the "Securities Purchase Agreement", "thereto",
"thereof", "thereunder" or words of like import referring to the Securities
Purchase Agreement shall mean the Existing Securities Purchase Agreement as
amended by this Agreement, and (iii) all references in the other Transaction
Documents to the "Registration Rights Agreement", "thereto", "thereof",
"thereunder" or words of like import referring to the Registration Rights
Agreement shall mean the Registration Rights Agreement as amended by this
Agreement. REFERENCES TO NOTES AND WARRANTS IN ALL TRANSACTION DOCUMENTS MEANS
NOTES AND WARRANTS UNDER THIS AGREEMENT;
 
(ii) to the extent that the Securities Purchase Agreement or any other
Transaction Document purports to assign or pledge to the Collateral Agent for
the Buyers and the holders of the Securities, or to grant to the Collateral
Agent a security interest in or lien on, any collateral as security for the
obligations of the Company from time to time existing in respect of the Existing
Notes and any other existing Transaction Document, such pledge, assignment
and/or grant of the security interest or lien is hereby ratified and confirmed
in all respects, and shall apply with respect to the obligations under the Notes
and no additional filing is required to be made in order to maintain the
perfection of the security interest in, or lien, on such collateral; and
 
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(iii) the execution, delivery and effectiveness of this Agreement shall not
operate as an amendment of any right, power or remedy of the Collateral Agent or
the Investors under any Transaction Document, nor constitute an amendment of any
provision of any Transaction Document.
 
(b)  Amendment to Transaction Documents. Each of the Transaction Documents is
hereby amended as follows:
 
(i) All references to "Notes" shall be amended to mean the Notes as defined in
this Agreement.
 
(ii) All references to "Conversion Shares" shall be amended to mean the
Conversion Shares as defined in this Agreement.
 
(iii) All references to "Warrants" shall be amended to mean the Warrants as
defined in this Agreement.
 
(iv) All references to "Warrant Shares" shall be amended to mean the Warrant
Shares as defined in this Agreement.
 
(v) The defined term "Transaction Documents" is hereby amended to include this
Agreement.
 
(vi) The defined term "Securities" is hereby amended to include the Common
Shares.
 
(vii) All references to "Lock-Up Agreement" shall be amended to mean the Lock-Up
Agreement as defined in this Agreement.
 
(viii) All references to "Eligible Market" shall be amended to include the OTC
Bulletin Board.
 
(c)  Amendment to Registration Rights Agreement. 
 
(i) The defined term "Required Registration Amount" shall be amended and
restated in its entirety as follows:
 
""Required Registration Amount" for the Registration Statement means (i) the sum
of (x) the aggregate of the maximum number of Conversion Shares issued and
issuable pursuant to the Notes at the then applicable Conversion Price as of the
Trading Day (as defined in the Notes) immediately preceding the applicable date
of determination; (y) the number of Warrant Shares issued and issuable pursuant
to the Warrants as of the Trading Day immediately preceding the applicable date
of determination, all subject to adjustment as provided in Section 2(e) (without
regard to any limitations on conversion of the Notes or exercise of the
Warrants); and (z) the aggregate number of Common Shares issued pursuant to each
of the Amendment and Exchange Agreements, dated as of March 24, 2008, by and
between the Company and each of the Buyers or (ii) such other amount as may be
required by the staff of the SEC pursuant to Rule 415 with any cutback applied
among the Investors pro rata: (A) first, to any Common Shares and Conversion
Shares being registered under such Registration Statement on a 3:2 basis
(meaning for every three (3) Common Shares cutback, two (2) Conversion Shares
will be cutback) until all such Common Shares and Conversion Shares are cutback;
(B) second, to any Conversion Shares being registered under such Registration
Statement until all such Conversion Shares are cutback; (C) third, to any
Warrant Shares being registered under such Registration Statement until all such
Warrant Shares are cutback; and (D) thereafter, to all other Registrable
Securities."
 
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(ii) The defined term "Effectiveness Deadline" shall be amended and restated in
its entirety as follows:
 
""Effectiveness Deadline" means (A) if the Registration Statement is the
Company's registration statement on Form S-3 (File No. 333-148033) filed with
the SEC on December 12, 2007 (the "Existing Registration Statement"), the date
which is sixty (60) calendar days after the earlier of (i) the date the Company
files its Annual Report on Form 10-KSB for the year ended December 31, 2007 (the
"2007 10-K") and (ii) the last date the Company could have timely filed its 2007
10-K; or (B) if the Company withdraws the Existing Registration Statement, the
earlier of the date which is (i) in the event that the Registration Statement is
not subject to a full review by the SEC, one-hundred and twenty (120) calendar
days after March 26, 2008 (the "Amendment Closing Date") or (ii) in the event
that the Registration Statement is subject to a full review by the SEC,
one-hundred and fifty (150) calendar days after the Amendment Closing Date."
 
(iii) Section 2(f) is hereby deleted in its entirety.
 
(iv) The defined term "Cutback Note Amount" is hereby deleted in its entirety.
 
(d)  Amendment to Securities Purchase Agreement.
 
(i) The Securities Purchase Agreement is hereby amended by adding the following
to the end of Section 4(k):
 
"For so long as any Notes or Warrants remain outstanding, the Company shall not,
in any manner, enter into or effect any Dilutive Issuances (as defined in the
Notes) if the effect of such Dilutive Issuance is to cause the Company to be
required to, but for the Share Cap, issue upon conversion of any Note or
exercise of any Warrant any shares of Common Stock in excess of that number of
shares of Common Stock which the Company may issue upon conversion of the Notes
and exercise of the Warrants without exceeding the Share Cap (as defined in the
Notes)."
 

 
3.
REPRESENTATIONS AND WARRANTIES

 
(a)  Investor Bring Down. The Investor hereby represents and warrants to the
Company with respect to itself only as set forth in Section 2 of the Existing
Securities Purchase Agreement as if such representations and warranties were
made as of the date hereof and set forth in their entirety in this Agreement.
Such representations and warranties to the transactions thereunder and the
securities issued thereby are hereby deemed for purposes of this Agreement to be
references to the transactions hereunder and the issuance of the securities
hereby.
 
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(b)  Company Bring Down. The Company represents and warrants to the Investor as
set forth in Section 3 of the Existing Securities Purchase Agreement, as if such
representations and warranties were made as of the date hereof and set forth in
their entirety in this Agreement. Such representations and warranties to the
transactions thereunder and the securities issued thereby are hereby deemed for
purposes of this Agreement to be references to the transactions hereunder and
the issuance of the securities hereby, references therein to "Closing Date"
being deemed references to the Closing Date as defined in Section 1(b) above,
and references to "the date hereof" being deemed references to the date of this
Agreement.
 
(c)  No Event of Default. The Company represents and warrants to the Investor
that after giving effect to the terms of this Agreement and the Other Agreements
(as defined below), no Event of Default (as defined in the Notes) shall have
occurred and be continuing as of the date hereof.
 
(d)  Holding Period. For the purposes of Rule 144, the Company acknowledges that
the holding period of (i) the Notes (including the corresponding Conversion
Shares) may be tacked onto the holding period of the Existing Notes; (ii) the
Common Shares may be tacked onto the holding period of the Existing Notes; and
(iii) the Warrants (including the corresponding Warrant Shares) may be tacked
onto the holding period of the Existing Warrants (in the case of Cashless
Exercise (as defined in the Warrants)), and the Company agrees not to take a
position contrary to this Section 3(d). The Company agrees to take all actions,
including, without limitation, the issuance by its legal counsel of any
necessary legal opinions, necessary to issue to the Investor Conversion Shares,
the Common Shares and Warrant Shares (so long as such Warrants are exercised by
way of a Cashless Exercise) that are freely tradable on an Eligible Market
without restriction and not containing any restrictive legend without the need
for any action by the Investor; provided, however, that to the extent the
representation and warranty of the Investor in Section 3(e) of this Agreement
does not continue to be accurate on the date of such issuance and during the
preceding three-month period (except for purposes of this proviso, references in
Section 3(e) to "the date hereof" shall be deemed to be references to "the date
of such issuance"), the trading of such shares shall be subject to compliance
with Rule 144.
 
(e)  Investor Status. As of the date hereof and during the preceding three-month
period, such Investor, together with any other person with whom such Investor
must aggregate sales under Rule 144, does not, and has not, (i) beneficially
owned in excess of 10% of the Common Stock, (ii) appointed any member to the
board of directors of the Company or (iii) participated in the management or
daily operations of the Company.
 
(f)  Shell Company Status. The Company has complied with all of the requirements
set forth in Rule 144(i)(2).
 
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4.
CERTAIN COVENANTS AND AGREEMENTS; WAIVER

 
(a)  Best Efforts. Each party shall use its best efforts timely to satisfy each
of the conditions to be satisfied by it as provided in Sections 5 and 6 of this
Agreement.
 
(b)  Disclosure of Transactions and Other Material Information. On or before
8:30 a.m., New York City time, on the first Business Day following the date of
this Agreement, the Company shall issue a press release and file a Current
Report on Form 8-K, which the Collateral Agent shall have approved prior to its
release and filing, describing the terms of the transactions contemplated by
this Agreement in the form required by the 1934 Act and attaching the material
Transaction Documents not previously filed (including, without limitation, this
Agreement, the form of the Notes (and the schedules thereto); the form of the
Warrants; the Lock-Up Agreement and the New Lock-Up Agreements (as defined
below)) (including all attachments, the "8-K Filing"). From and after the filing
of the 8-K Filing with the SEC, the Investor shall not be in possession of any
material, nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees or agents,
that is not disclosed in the 8-K Filing. The Company shall not, and shall cause
each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents, not to, provide the Investor with any material,
nonpublic information regarding the Company or any of its Subsidiaries from and
after the filing of the 8-K Filing with the SEC without the express written
consent of the Investor. If the Investor has, or believes it has, received any
such material, nonpublic information regarding the Company or any of its
Subsidiaries, it shall provide the Company with written notice thereof. The
Company shall, within five (5) Trading Days (as defined in the Notes) of receipt
of such notice, make public disclosure of such material, nonpublic information.
In the event of a breach of the foregoing covenant by the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees
and agents, in addition to any other remedy provided herein or in the
Transaction Documents, the Investor shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of such material, nonpublic information without the prior approval by the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. The Investor shall not have any liability to the
Company, its Subsidiaries, or any of its or their respective officers,
directors, employees, stockholders or agents for any such disclosure. Subject to
the foregoing, neither the Company, its Subsidiaries nor the Investor shall
issue any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of the Investor, to make any press release
or other public disclosure with respect to such transactions (i) in substantial
conformity with the 8-K Filing and contemporaneously therewith and (ii) as is
required by applicable law and regulations (provided that in the case of clause
(i) the Investor shall be consulted by the Company in connection with any such
press release or other public disclosure prior to its release). Without the
prior written consent of the Investor, neither the Company nor any of its
Subsidiaries or affiliates shall disclose the name of the Investor in any filing
(other than as is required by applicable law or regulations), announcement,
release or otherwise.
 
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(c)  Fees and Expenses. [INSERT IN PORTSIDE AGREEMENT ONLY: The Company shall
reimburse the Investor, in the maximum aggregate amount of $20,000 for its legal
and due diligence fees and expenses in connection with the preparation and
negotiation of this Agreement and transactions contemplated thereby by paying
any such amount to Schulte Roth & Zabel LLP (the "Investor Counsel Expense").
The Investor Counsel Expense shall be paid by the Company whether or not the
transactions contemplated by this Agreement are consummated.] Except as
otherwise set forth in this Agreement, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.
 
(d)  Certain Trading Limitations. During the thirty (30) Trading Day period
ending on the one (1) year anniversary of the Closing Date (the "Lock-Up
Period"), the Investor covenants that neither it nor any of its Trading
Affiliates (as defined in the Existing Securities Purchase Agreement) shall
directly or indirectly, nor shall any Person acting on behalf of or pursuant to
any understanding with such Investor or Trading Affiliate, effect or agree to
effect any transactions in the securities of the Company. Notwithstanding the
foregoing, for avoidance of doubt, nothing contained herein shall preclude any
actions, with respect to the identification of the availability of, or securing
of, available shares to borrow in order to effect short sales or similar
transactions in the future.
 
(e)  Company Lock-Up. During the Lock-Up Period, the Company shall not directly
or indirectly, nor shall any Person acting on behalf of or pursuant to any
understanding with the Company, effect or agree to effect any transactions in
the securities of the Company nor shall the Company announce any agreement to
effect any transaction in the securities of the Company.
 
(f)  New Lock-Up. The Company shall not amend or waive any provision of any of
the New Lock-Up Agreements except to extend the term of the lock-up period.
 
(g)  Common Shares. The Company and the Investor agree that the provisions of
the Existing Securities Purchase Agreement concerning the Conversion Shares and
the Warrant Shares shall apply to the Common Shares issued hereunder including,
without limitation, that the certificates or other instruments representing the
Common Shares shall be subject to Section 2(g) of the Existing Securities
Purchase Agreement. If the Company shall fail for any reason or for no reason to
issue to the Investor unlegended certificates or issue Common Shares to such
Investor by electronic delivery at the applicable balance account at DTC within
three (3) Trading Days after the receipt of documents necessary for the removal
of the legend set forth in Section 2(g) of the Existing Securities Purchase
Agreement (the "Removal Date"), then in addition to all other remedies available
to the Investor, if on or after the Trading Day immediately following such three
(3) Trading Day period, the Investor purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Investor of such Common Shares that the Investor anticipated receiving without
legend from the Company (a "Buy-In"), then the Company shall, within three (3)
Business Days after the Investor's request and in the Investor's discretion,
either (i) pay cash to the Investor in an amount equal to the Investor's total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the Company's
obligation to deliver such unlegended Common Shares shall terminate, or (ii)
promptly honor its obligation to deliver to the Investor such unlegended shares
of Common Stock as provided above and pay cash to the Investor in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Common Stock, times (B) the Closing Bid Price (as defined in
the Warrants) on the Removal Date.
 
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(h)  Sale of Common Shares. So long as the Notes are outstanding, the Investor
shall not sell a number of Common Shares exceeding more than two-thirds (2/3) of
the number of Conversion Shares previously issued, or required to have been
issued, to the Investor upon conversion of the Investor's Notes.
 
(i)  Public Information. At any time during the period commencing on the six (6)
month anniversary of the Closing Date (as defined in the Existing Securities
Purchase Agreement) and ending at such time that all of the Securities can be
sold without the requirement to be in compliance with Rule 144(c)(1) and
otherwise without restriction or limitation pursuant to Rule 144, including Rule
144(i), if a registration statement is not available for the resale of all of
the Securities and the Company shall fail for any reason to satisfy the current
public information requirement under Rule 144 (a "Public Information Failure")
then, as partial relief for the damages to any holder of Securities by reason of
any such delay in or reduction of its ability to sell the Securities (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each such holder an amount in cash equal to
one and one-half percent (1.5%) of the aggregate Purchase Price of such holder's
Securities on the day of a Public Information Failure and on every thirtieth day
(pro rated for periods totaling less than thirty days) thereafter until the
earlier of (i) the date such Public Information Failure is cured and (ii) such
time that such public information is no longer required pursuant to Rule 144.
The payments to which a holder shall be entitled pursuant to this Section 4(i)
are referred to herein as "Public Information Failure Payments." Public
Information Failure Payments shall be paid on the earlier of (I) the last day of
the calendar month during which such Public Information Failure Payments are
incurred and (II) the third Business Day after the event or failure giving rise
to the Public Information Failure Payments is cured. In the event the Company
fails to make Public Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at the rate of 1.5% per
month (prorated for partial months) until paid in full.
 
(j)  Withdrawal of Existing Registration Statement. On or before 9:30 a.m., New
York City time, on the third Business Day following the date of this Agreement,
the Company shall withdraw the Existing Registration Statement or file an
amendment to the Existing Registration Statement to update the disclosure to
reflect this Agreement, the Notes and the Warrants.
 
(k)  Waiver of Registration Delay Payments. For purposes of clarity, Investor
hereby agrees and acknowledges that by its execution of this Agreement Investor
does hereby irrevocably waive any and all Registration Delay Payments that may
be due and payable in connection with the Existing Registration Statement.
 
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5.
CONDITIONS TO COMPANY'S OBLIGATIONS HEREUNDER.

 
The obligations of the Company to the Investor hereunder are subject to the
satisfaction of each of the following conditions, provided that these conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion by providing the Investor with prior written notice
thereof:

(a)  The Investor shall have executed this Agreement and delivered the same to
the Company.
 
(b)  The Investor shall have delivered to the Company the Investor's Existing
Note and Existing Warrants for cancellation.
 
(c)  The representations and warranties of the Investor shall be true and
correct in all material respects (except for those representations and
warranties that are qualified by materiality or Material Adverse Effect, which
shall be true and correct in all respects) as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct as
of such specified date) and the Investor shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Investor at or prior to the Closing Date.
 

 
6.
CONDITIONS TO INVESTOR'S OBLIGATIONS HEREUNDER.

 
The obligations of the Investor hereunder are subject to the satisfaction of
each of the following conditions, provided that these conditions are for the
Investor's sole benefit and may be waived by the Investor at any time in its
sole discretion by providing the Company with prior written notice thereof:

(a)  The Company shall have delivered to the Investor its Redemption Payment
Amount and 2008 Interest Payment (plus, in the case of Portside Growth and
Opportunity Fund, the amounts due pursuant to Section 4(c) hereof) and Wells
Fargo Bank, N.A. shall have delivered to the Investor its LC Reduction Amount.
 
(b)  The Company shall have executed this Agreement and delivered the same to
the Investor.
 
(c)  The Company shall have executed and delivered to the Investor the Notes,
the Common Shares and the Warrants being issued to such Investor at the Closing.
 
(d)  Each of the Other Investors shall have (i) executed agreements identical to
this Agreement (the "Other Agreements") (other than proportional changes (the
"Proportionate Changes") in the numbers reflecting the different dollar amount
of such Investor's Notes, the number of Common Shares being issued to such
Investor and the number of Warrant Shares underlying such Investor's Warrants
and Section 4(c)), (ii) satisfied or waived all conditions to the closings
contemplated by such agreements and (iii) surrendered their Existing Notes and
Existing Warrants for the new Notes, the Common Shares and the Warrants (other
than the Proportionate Changes).
 
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(e)  The Company shall have delivered to the Company's transfer agent, with a
copy to the Investors, Irrevocable Transfer Agent Instructions in the form of
Exhibit C attached hereto.
 
(f)  The Investor shall have received the opinion of Stubbs Alderton & Markiles,
LLP, the Company's outside counsel, dated as of the Closing Date, in
substantially the form of Exhibit Dattached hereto.
 
(g)  The Company shall have delivered to such Investor a certificate (or a fax
or pdf copy of such certificate) evidencing the formation and good standing of
the Company and each of its Subsidiaries in such entity's jurisdiction of
formation issued by the Secretary of State (or comparable office) of such
jurisdiction, as of a date within 10 days of the Closing Date.
 
(h)  The Company shall have delivered to such Investor a certificate (or a fax
or pdf copy of such certificate) evidencing the Company's qualification as a
foreign corporation and good standing issued by the Secretary of State (or
comparable office or a bring-down certificate from Corporation Service Company)
of each jurisdiction in which the Company conducts business and is required to
so qualify, as of a date within 10 days of the Closing Date.
 
(i)  The Company shall have delivered to the Investor a certified copy of the
Articles of Incorporation of the Company as certified by the Secretary of State
of the State of Florida (or a fax or pdf copy of such certificate) within ten
(10) days of the Closing Date.
 
(j)  The Company shall have delivered to the Investor a certificate, executed by
the Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions approving the transactions contemplated hereby as adopted by the
Board in a form reasonably acceptable to the Investor, (ii) the Articles of
Incorporation and (iii) the Bylaws, each as in effect as of the Closing, in the
form attached hereto as Exhibit E.
 
(k)  The representations and warranties of the Company hereunder shall be true
and correct in all material respects (except for those representations and
warranties that are qualified by materiality or Material Adverse Effect, which
shall be true and correct in all respects) as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct as
of such specified date) and the Company shall have performed, satisfied and
complied in all respects with the covenants, agreements and conditions required
by this Agreement and the other Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to the Closing Date and after giving
effect to the terms of this Agreement and the Other Agreements, no default or
Event of Default shall have occurred and be continuing as of the Closing Date.
The Investor shall have received a certificate, executed by the Chief Executive
Officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by the Investor in
the form attached hereto as Exhibit F.
 
(l)  The Company and VM Investors LLC shall have entered into an amended and
restated Lock-Up Agreement in the form attached hereto as Exhibit G (the
"Lock-Up Agreement").
 
11

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(m)  Each of the Company's and VM Investors LLC's directors, executive officers
and affiliates shall have entered into a lock-up agreement in the form attached
hereto as Exhibit H (the "New Lock-Up Agreements").
 
(n)  Each Subsidiary of the Company that has entered into a Guaranty on or prior
to the date hereof in accordance with the terms of the Security Documents shall
have executed and delivered to the Investor an acknowledgement and ratification
agreement in the form attached hereto as Exhibit I.
 
(o)  The Common Stock (I) shall be designated for quotation or listed on the
Principal Market and (II) shall not have been suspended, as of the Closing Date,
by the SEC or the Principal Market from trading on the Principal Market nor
shall suspension by the SEC or the Principal Market have been threatened, as of
the Closing Date, either (A) in writing by the SEC or the Principal Market or
(B) by falling below the minimum listing maintenance requirements of the
Principal Market.
 
(p)  The Company shall have obtained all governmental, regulatory or third party
consents and approvals, if any, necessary for the sale of the Securities.
 
(q)  The Company shall have delivered to the Investor such other documents
relating to the transactions contemplated by this Agreement as the Investor or
its counsel may reasonably request.
 

 
7.
TERMINATION.

 
In the event that the Closing does not occur on or before five (5) Business Days
from the date hereof, due to the Company's or the Investor's failure to satisfy
the conditions set forth in Sections 5 and 6 hereof (and the nonbreaching
party's failure to waive such unsatisfied conditions(s)), the nonbreaching party
shall have the option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of any party to
any other party [INSERT IN PORTSIDE AGREEMENT ONLY:; provided, however, if this
Agreement is terminated pursuant to this Section 7, the Company shall remain
obligated to reimburse the Investor for the expenses described in Section 4(c)
above]. Upon such termination, the terms hereof shall be null and void and the
parties shall continue to comply with all terms and conditions of the
Transaction Documents, as in effect prior to the execution of this Agreement.

 
8.
MISCELLANEOUS.

 
(a)  Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
 
(b)  Headings. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
 
12

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(c)  Severability. If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).
 
(d)  Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
 
(e)  No Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
 
(f)  Further Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
 
13

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(g)  No Strict Construction. 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.
 
(h)  Entire Agreement; Effect on Prior Agreements; Amendments. Except for the
Transaction Documents in effect prior to this Agreement (to the extent any such
Transaction Document is not amended by this Agreement), this Agreement
supersedes all other prior oral or written agreements between the Investor, the
Company, their affiliates and Persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Investor. No provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought. No
consideration shall be offered or paid to any Person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents, holders of Notes or holders of the Warrants, as the case
may be. The Company has not, directly or indirectly, made any agreements with
any of the Investors relating to the terms or conditions of the transactions
contemplated by the Transaction Documents, including through any agreement that
is not identical to this Agreement, except as set forth in the Transaction
Documents. In the event that the Company enters into any such agreement with
more favorable terms than those set forth in this Agreement and the documents
contemplated hereby, the Investor shall be granted the benefit of such more
beneficial terms.
 
(i)  Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
 
If to the Company:
 
 
DigitalFX International, Inc.
3035 East Patrick Lane, Suite 9
Las Vegas, Nevada 89120

Telephone:   (702) 938-9300 Facsimile:   (702) 939-1115 Attention:   Mickey
Elfenbein

 
 
 
 
14

--------------------------------------------------------------------------------

 
Copy to:
 
Stubbs Alderton & Markiles, LLP
15260 Ventura Boulevard
20th Floor
Sherman Oaks, California 91403
Telephone: 
 (818) 444-4500 Facsimile:   (818) 444-6303 Attention:   Gregory Akselrud

 
 

If to the Investor, to its address and facsimile number set forth in the
Securities Schedule attached hereto,
 
with a copy (for informational purposes only) to:
 
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022

Telephone:   (212) 756-2000 Facsimile:   (212) 593-5955 Attention:   Eleazer N.
Klein, Esq.

 
 
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
 
(j)  Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes or the Warrants. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Investor, including by way of a Fundamental Transaction
(unless the Company is in compliance with the applicable provisions governing
Fundamental Transactions set forth in the Notes and the Warrants). The Investor
may assign some or all of its rights hereunder without the consent of the
Company, in which event such assignee shall be deemed to be an Investor
hereunder with respect to such assigned rights.
 
(k)  Survival. Unless this Agreement is terminated under Section 7, the
representations and warranties of the Company and the Investor contained herein
and the agreements and covenants set forth herein shall survive the Closing.
 
15

--------------------------------------------------------------------------------

 
(l)  Remedies. The Investor and each holder of the Securities shall have all
rights and remedies set forth in the Transaction Documents and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under this Agreement, any remedy at law
may prove to be inadequate relief to the Investor. The Company therefore agrees
that the Investor shall be entitled to seek temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages and
without posting a bond or other security.
 
(m)  Indemnification. In consideration of the Investor's execution and delivery
of the Transaction Documents, acquiring the Securities thereunder and entering
into this Agreement and in addition to all of the Company's other obligations
under the Transaction Documents, the Company shall defend, protect, indemnify
and hold harmless the Investor and each other holder of the Securities and all
of their stockholders, partners, members, officers, directors, employees and
direct or indirect investors and any of the foregoing Persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby or
(c) any cause of action, suit or claim brought or made against such Indemnitee
by a third party (including for these purposes a derivative action brought on
behalf of the Company) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, (iii) any
disclosure made by the Investor pursuant to Section 4(c), or (iv) the status of
the Investor or holder of the Securities as an investor in the Company pursuant
to the transactions contemplated by the Transaction Documents. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 8(m)
shall be the same as those set forth in Section 6 of the Registration Rights
Agreement.
 
16

--------------------------------------------------------------------------------

 
(n)  Independent Nature of Investor's Obligations and Rights. The obligations of
the Investor under any Transaction Document (including this Agreement) are
several and not joint with the obligations of any Other Investor, and the
Investor shall not be responsible in any way for the performance of the
obligations of any Other Investor under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken by
the Investor pursuant hereto, shall be deemed to constitute the Investor and
Other Investors as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Investor and Other Investors
are in any way acting in concert or as a group, and the Company will not assert
any such claim with respect to the obligations or the transactions contemplated
by the Transaction Documents and the Company acknowledges that the Investor and
Other Investors are not acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. The
Company acknowledges and the Investor confirms that the Investor has
independently participated in the negotiation of the transactions contemplated
hereby with the advice of its own counsel and advisors. The Investor shall be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of any other
Transaction Documents, and it shall not be necessary for any Other Investor to
be joined as an additional party in any proceeding for such purpose.
 

 
[Signature Page Follows]
 
17

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IN WITNESS WHEREOF, the Investor and the Company have caused their respective
signature page to this Agreement to be duly executed as of the date first
written above.
 

        COMPANY:       DIGITALFX INTERNATIONAL, INC.      
   
   
    By:      

--------------------------------------------------------------------------------

Name: Craig Ellins   Title: Chief Executive Officer

 

[Signature Page to Amendment and Exchange Agreement]
18

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the Investor and the Company have caused their respective
signature page to this Agreement to be duly executed as of the date first
written above.
 

       
INVESTOR:
     
[ ________________]
     
   
   
    By:      

--------------------------------------------------------------------------------

Name:   Title:

 

[Signature Page to Amendment and Exchange Agreement]
19

--------------------------------------------------------------------------------

 

(1)
 
(2)
 
(3)
 
(4)
 
(5)
 
(6)
 
(7)
 
(8)
 
(9)
 
Investor
 
Address and
Facsimile Number
 
LC Reduction Amount
 
Redemption Payment Amount
 
Aggregate
Principal
Amount of Amended and Restated
Notes
 
Number of Common Shares
 
Number of
Amended and Restated Warrant Shares
 
2008 Interest Payment
 
Legal Representative's
Address and Facsimile Number
                                     
Portside Growth & Opportunity Fund
   

c/o Ramius Capital Group, L.L.C.
599 Lexington Avenue,
20th Floor
New York, NY 10022
Attention: Jeffrey Smith
   Owen Littman
Facsimile: (212) 201-4802
   (212) 845-7995
Telephone: (212) 845-7955
 (212) 201-4841
Residence: Cayman Islands
 

$

1,428,571.43
 

$

1,428,571.43
 

$

2,142,857
   

714,286
   

535,715
 

$

89,583.33
   
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention: Eleazer Klein, Esq.
Facsimile: (212) 593-5955
Telephone: (212) 756-2376
 
Highbridge International LLC
   

c/o Highbridge Capital Management, LLC
9 West 57th St, 27th Floor
New York, NY 10019
Attn: Ari J. Storch /
Adam J. Chill
Tel: 212-287-4720
Fax: 212-751-0755
Residence: Cayman Islands
 

$

428,571.43
 

$

428,571.43
 

$

642,857
   

214,286
   

160,715
 

$

26,875.00
       
Iroquois Master Fund, Ltd.
   
641 Lexington Avenue
26th Floor
New York, New York 10022
Attention: Joshua Silverman
Facsimile: (212) 207-3452
Telephone: (212) 974-3070
Residence: Cayman Islands
 

$

142,857.14
 

$

142,857.14
 

$

214,286
   

71,428
   

53,572
 

$

8,958.33
       

 
20

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