EMPLOYMENT AGREEMENT

This Agreement is made effective as of the 24th day of August, 2007 (the
“Effective Date”), by and between DigitalFX International, Inc. a Florida
corporation, with its principal place of business located at 3035 East Patrick
Lane, Suite 9, Las Vegas, NV 89120 (the “Company”), and Mickey Elfenbein an
individual residing at 7038 Balsam Lane N, Maple Grove, MN 55369 (the
“Employee”).

WHEREAS, Company has made an offer of employment to the Employee, and the
Employee has accepted such offer of employment on the terms and conditions set
forth herein; and
 
WHEREAS, the parties desire to fix their respective rights and responsibilities
as set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants, terms
and conditions hereinafter set forth, and for other good and valuable
consideration receipt of which is specifically acknowledged, the parties hereto
hereby agree as follows:
 
Section 1. EMPLOYMENT
 
The Company hereby employs the Employee, and the Employee hereby accepts
employment, as Chief Operating Officer of the Company. Employee shall commence
service as the Chief Operating Officer of the Company on September 17, 2007.
 
Section 2. THE EMPLOYEE’S DUTIES
 
The Employee’s duties shall include, without limitation, those customarily
associated with the position of Chief Operating Officer. In performance of his
duties, Employee shall report to the Chief Executive Officer. Such duties shall
include but not be limited to include all responsibility and authority of the
Company parent and subsidiary operations, marketing, personnel, business
development, financial affairs, supervision of the business affairs of companies
in which the Company has invested, and preparation of budgets to be approved by
the Chief Executive Officer and the Board of Directors and the performance
against those budgets.
 
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Section 3. COMPENSATION AND BENEFITS
 
In consideration for all services rendered by the Employee to the Company,
Company hereby agrees to pay compensation to the Employee as follows:
 
a. During the term of this Agreement, the Company shall pay to the Employee, in
accordance with the normal payroll practices of the Company, but no less
frequently than twice each month, a base pay (“Base Salary”) of no less than Two
Hundred Thousand Dollars ($200,000) per annum for a period commencing on the
Effective Date and continuing until six months following the Effective Date (the
“First Increase Date”); and no less than Two Hundred Fifty Thousand Dollars
$250,000 per annum for the remainder of the Term of this Agreement. Increases of
the Base Salary shall be reviewed annually and, if granted, shall be effective
on the anniversary of the First Increase Date. In any event Employee shall be
entitled to increases equal to double the CPI for the prior year. The Company
shall make deductions and withholding from the amount payable to Employee as may
be required by federal, state or local law.
 
b. During the term of this Agreement, the Employee shall receive three (3) weeks
(fifteen (15) business days) of paid vacation each year or such greater
vacation, and such sick leave, life insurance, major medical and hospitalization
insurance and such other benefits, if any, as may, from time to time, be
provided by the Company to its Senior employees, in accordance with the
Company’s plans, programs and policies. Executive shall take proper account of
the Company’s needs when taking vacation. Upon expiration or termination of this
Agreement, for any reason, the Company shall pay to the Employee in a lump sum
the cash value of all accrued but unused vacation at the Employee’s then
existing rate of Base Salary.
 
c. In addition to the foregoing, contemporaneously with this Agreement, Employee
will be granted an option to purchase 300,000 shares of the Company’s common
stock, exercisable at a price of $3.80 per share in the form of the Stock Option
Agreement attached as Exhibit A. Such option shall commence vesting on September
17, 2007 (the “Vesting Commencement Date”) and shall vest 33.4% upon the first
anniversary of the Vesting Commencement Date, and 33.3% on each of the second
and third anniversary of the Vesting Commencement Date. In the event of a Change
in Control of the Company (as defined in the DigitalFX International, Inc. 2006
Stock Incentive Plan as in effect on the Effective Date of this Agreement (the
“Plan”) any issued and unvested options shall immediately vest, notwithstanding
anything to the contrary contained in Exhibit A or the Plan. In the event the
Employee’s employment hereunder is terminated for any reason other than for
Cause or upon the expiration of the Term of this Agreement, the Employee’s
option shall vest with respect to an additional 50,000 shares of the Company’s
common stock.
 
d. Employee’s participation in the Company’s bonus pool with respect to each
fiscal year shall be determined at the discretion of the Company’s Board of
Directors. Employee shall present his recommendations with respect to the amount
of the bonus pool to the Chief Executive Officer and the Board of Directors.
 
e. Company’s insurance coverage shall include insurance as may be reasonably
expected to be included but not be limited to:
1.    Directors and Officers coverage as currently in effect.
2.    Cyber Insurance as currently in effect, if any.
3.    Employment Practices Liability Insurance, as currently in effect, if any.
In the event any of the above coverages are not in effect, Employee shall have
the authority to procure them.

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Section 4.  EXPENSES
 
The Company shall reimburse the Employee for reasonable and necessary expenses
incurred in the ordinary course of conducting Company’s business, upon
submission of appropriate vouchers and receipts and approval thereof in
accordance with Company policy. In addition, Company shall pay you a
non-accountable amount to cover additional expenses, equal to $750.00 per month.
 
Section 5. DURATION AND TERMINATION
 
a. Unless terminated earlier pursuant to Section 5(b) hereof, the Employee’s
initial term of employment under this Agreement shall commence on the Effective
Date and shall continue for a period of three years (the “Initial Term”).
Employee’s employment under this Agreement shall thereafter automatically renew
for successive one-year periods (a “Renewal Period”), unless either party shall
give notice in writing to the other, no later than one hundred twenty days (120)
days prior to the end of the Initial Term or the then current Renewal Period, if
any, that such notifying party wishes to allow the Term of this Agreement to
expire upon the end of the Initial Term or the then current Renewal Period, as
applicable. The Initial Term plus any Renewal Periods shall be referred to
herein, collectively, as the “Term”.
 
b. Notwithstanding the provisions of Section 5(a) above, the Employee’s
employment hereunder shall terminate on the earliest of the following dates:
 
(1) The date of death of the Employee;
 
(2) The date on which the Company shall have given the Employee written notice
of the termination of his employment by reason of his physical or mental
incapacity or disability on a permanent basis. For purposes of the Agreement the
Employee shall be deemed to be physically or mentally incapacitated or disabled
on a permanent basis if he is unable to materially and/or substantially perform
his duties, with or without reasonable accommodations, hereunder for a period
exceeding six (6) consecutive months or for a period of nine (9) months in any
twelve (12) consecutive month period;
 
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(3) Immediately upon the date the Company gives the Employee written notice of
the termination of his employment for “Cause”. For purposes of the Agreement,
“Cause” shall mean (i) the conviction of the Employee of a felony involving a
sentence of incarceration for a period of time exceeding 30 days; (ii) the
conviction of an act by the Employee constituting fraud, embezzlement or other
material financial dishonesty against the Company which constitutes a felony
under the laws of the United States or the State of Nevada; (iii) willful
failure by Employee to comply with a reasonable written direction, instruction
or requirement of the Board of Directors or the CEO of the Company which
failure, refusal or neglect, if curable, is not fully and completely cured to
the reasonable satisfaction of the Company upon thirty (30) days’ prior written
notice to Employee; or (iv) breach of the confidentiality and non-competition
agreement attached hereto as Exhibit B.   
 
(4) Thirty (30) days after the date on which the Company shall have given the
Employee written notice of the termination of his employment, other than upon
the expiration of this Agreement. 
 
(5) Thirty (30) days after the date on which the Employee shall have given the
Company written notice of the termination of his employment.

Notwithstanding the foregoing, in the event the Employee does not commence
providing services as the Chief Operating Officer of the Company on September
17, 2007, this Agreement and the option granted concurrently shall be null, void
and of no further force and effect.
 
Section 6. PAYMENTS AND OTHER RIGHTS UPON TERMINATION
 
a. Death or Disability. If the Employee’s employment is terminated due to death
or disability pursuant to Sections 5(b)(1) or (2) hereof, the Employee (or in
the event of death, his estate or beneficiaries) shall be entitled to the Base
Salary earned through the date of the Employee’s death, or the date of the
Employee’s termination for disability pursuant to Section 5(b)(2) hereof, as the
case may be; and accrued vacation and other employment benefits through the date
of termination of employment.
 
b. Termination of Employment for Cause or by Employee (other than a Constructive
Termination). If the Company terminates the Employee’s employment for Cause
pursuant Section 5(b)(3) or if the Employee terminates his employment for any
reason other than Constructive Termination (as defined in Section 6(d) below),
the Employee shall be entitled only to the Base Salary through the date of the
Employee’s termination for “Cause” pursuant to Section 5(b)(3) hereof and
accrued vacation and other employment benefits through the date of termination
of his employment and any other benefits legally required to be paid to the
Employee.
 
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c. Termination of Employment by the Company for Reasons Other Than Death,
Disability or Cause. If, during the term of this Agreement, the Company
terminates the Employee’s employment pursuant to Section 5(b)(4) or if there
occurs a Constructive Termination of Employee (as defined in Section 6(d)
below), Employee shall be entitled to receive, and Company shall pay with the
notice of termination, the Base Salary earned through the date of the Employee’s
termination and accrued vacation and other employment benefits through the date
of termination of employment. In addition, the Company shall pay to the Employee
an amount equal to Employee’s then current base salary for a period equal to
twelve (12) months (the “Severance Pay Period”), payable in accordance with the
Company’s customary payroll practices. In addition, Company shall continue for
the Employee’s benefit, for the Severance Pay Period at the Company’s expense,
all major medical, hospitalization and health benefits, covering the Employee
and Employee’s family immediately prior to his employment termination, or if
earlier, until the date that the Employee commences other employment pursuant to
which the Employee receives comparable major medical, hospitalization and health
benefits.
 
d. In the event that Employee terminates his employment hereunder as a result of
the Company: (i) relocating and requiring Employee to work at another location
twenty (20) miles or more from the current location of the Company, or (ii) the
Company shall have reduced Employee’s Base Salary in effect at that time, (iii)
the Company shall have materially reduced Employee’s responsibilities, the
Company shall be deemed to have constructively terminated Employee’s employment
(“Constructive Termination”). Employee shall provide the Company written notice
of such action, and shall only be entitled terminate his employment for
Constructive Termination if the Company fails to cure such action within 30 days
of such notice.

e. In the event that the Employee’s employment hereunder terminates upon the
expiration of this Agreement at the end of the Initial Term or any Renewal Term
(the “Expiration”), the Employee shall be entitled only to the Base Salary and
bonus, if any, through the date of the Expiration hereof, and accrued vacation
and other employment benefits through the date of termination of his employment
and any other benefits legally required to be paid to the Employee.
 
f.  Notwithstanding anything to the contrary contained in this Agreement, the
Stock Option Agreement, or the Company’s 2006 Stock Incentive Plan, as amended
from time to time, the Employee or Employee’s Estate shall have a minimum of six
(6) months from the date that Employee’s employment is terminated (for any
reason by either party, other than termination for Cause by the Company, in
which event the options may terminate earlier) to exercise any vested but
unexercised stock options.
 
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Section 7. RELOCATION

It is understood that Employee will relocate from his current residence to Las
Vegas, NV. In connection with such relocation Company shall pay to Employee an
amount of up to $55,000 (the “Moving Allowance”), to be applied to costs
(“Moving Expenses”) related to such move including without limitation the
following:
a.    All costs relating to the sale of Employee’s current residence such as
closing costs, and realtors fees.
b.    All closing costs relating to the Purchase by Employee of a residence in
Las Vegas.
c.    The costs relating to packing, transporting, unpacking, and temporary
storage of Employees household if required.
d.    Temporary family lodging if required.
e.    Up to three trips to Las Vegas for Employee’s spouse and daughter for the
purpose of locating a residence.
f.    The cost associated with transporting Employee’s family from Minnesota to
Las Vegas.
g.    Temporary living accommodations for Employee in Las Vegas as may be
required.
h.    A reasonable number of airline trips for Employee between Las Vegas and
Minnesota until Employee’s family relocates to Las Vegas.
The first $27,500 of the Moving Allowance shall be paid to Employee upon the
Effective Date; and an amount up to the balance of the Moving Allowance shall be
paid to Employee upon earlier of (i) submission of documentation with respect to
a scheduled closing of the purchase of a house in the Las Vegas metropolitan
area, which purchase would require funding of the down payment by Employee from
the Moving Allowance, or (ii) submission of appropriate vouchers and receipts
for other Moving Expenses and approval thereof by Company. Employee agrees that,
in the event that Employee terminates his employment hereunder other than as a
result of Constructive Termination, Death or Disability, then Employee shall
reimburse Company for any amount paid to Employee as part of the Moving
Allowance; provided that this reimbursement obligation shall be prorated over
the first two years of the Initial Term, down to $0 on the second anniversary of
the Effective Date.
 
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Section 8. INDEMNIFICATION
 
Company and its affiliates, parent, subsidiaries, successors, and assigns, shall
indemnify and hold Employee harmless from and against all claims, lawsuits,
damages, attorney’s fees, court costs, expenses, awards, and losses
(collectively, “Damages”) arising out of or in connection with Employee’s
performance of his duties under this Agreement, to the fullest extent
permissible under Nevada law. This Section shall survive the termination or
expiration of this Agreement for any reason.
 
Section 9. GOVERNING LAW, DISPUTE RESOLUTION
 
THE PROVISIONS OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEVADA, WITHOUT REGARD
TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. Any controversy or dispute between
any of the parties to the Agreement arising out of any of the terms, provisions,
or conditions of the Agreement shall be submitted to arbitration in CLARK
COUNTY, Nevada, or another location agreed to by the parties. The arbitration
shall be heard before a retired Judge of the Clark County Superior Court, or
from other judicial jurisdiction agreed to by the parties. The arbitration shall
be held before a single arbitrator and shall be binding with no right of appeal.
In the event that either party initiates arbitration pursuant to the
section, each party shall pay one-half of the fees and costs of the arbitration.
The prevailing party shall have the right, at the discretion of the arbitrator,
to recover its share of the arbitration fees and costs. The arbitration shall be
conducted pursuant to the Judicial Arbitration Rules of Court. The parties shall
agree to the appointment of the arbitrator within ten business days after the
request for arbitration is received. If the parties are unable to agree, either
party may seek the appointment of an arbitrator from the Clark County Superior
Court. The parties shall be entitled to reasonable discovery, including the
production of documents and other items, provided, that the arbitrator may limit
discovery in connection with a dispute as appropriate to achieve the prompt and
efficient disposition of the dispute while giving full regard to the legitimate
needs of the parties for discovery; provided, however, that in no event shall
such discovery process exceed a period of 60 days, unless the arbitrator extends
such period for good cause. The decision of the arbitrator may be entered for
judgment in any appropriate court in Clark County, Nevada.
 
Section 10. ENTIRE AGREEMENT
 
The Agreement supersedes and cancels any and all prior agreements between the
parties hereto, express or implied, relating to the subject matter hereof. The
Agreement sets forth the entire agreement between the parties hereto. It may not
be changed, altered, modified or amended except in a writing signed by both
parties.
 
Section 11. NON-WAIVER
 
The failure or refusal of either party to insist upon the strict performance of
any provision of the Agreement or to exercise any right in any one or more
instances or circumstances shall not be construed as a waiver or relinquishment
of such provision or right.
 
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Section 12. ASSIGNMENT/NON-ASSIGNMENT
 
Any transfer or assignment of the Agreement and/or rights hereunder by Company
shall be subject to Employee’s prior written consent; provided that the Company
shall be permitted to assign this Agreement without Employee’s consent to any
corporation that is the surviving corporation in a merger with Company, or any
purchaser of all or substantially all of the assets or equity of the Company, .
The Employee shall have no right to assign any of the rights, nor to delegate
any of the duties, created by the Agreement, and any assignment or attempted
assignment of the Employee’s rights, and any delegation or attempted delegation
of the Employee’s duties, shall be null and void. In all other respects, the
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, beneficiaries, personal representatives,
successors, officers and directors.
Section 13. SEVERABILITY
 
If any paragraph, term or provision of the Agreement shall be held or determined
to be unenforceable, the balance of the Agreement shall nevertheless continue in
full force and effect unaffected by such holding or determination to the fullest
extent permitted by law as though such paragraph, term or provision had been
written in such a manner and to such an extent as to be enforceable under the
circumstances.
 
Section 14. NOTICE
 
All notices hereunder shall be in writing. Notices may be delivered personally,
or by certified mail return receipt requested, postage prepaid, to the addresses
set forth on the first page hereof. Either party may designate a new address for
purposes of the Agreement by notice to the other party in accordance with the
paragraph.
 
IN WITNESS WHEREOF, the parties have set their signatures hereto as of the date
first written above.
 
 

 

DIGITALFX INTERNATIONAL, INC.  MICKEY ELFENBEIN         By: /s/ Craig
Ellins             /s/ Mickey Elfenbein            
Craig Ellins,
Chief Executive Officer
 

 
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