NEITHER
THIS WARRANT NOR THE WARRANT SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES
LAWS.  NEITHER THIS WARRANT NOR THE SHARES OF WARRANT STOCK ISSUABLE
UPON EXERCISE HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE SECURITIES ACT.


       

      CHANCELLOR
GROUP, INC.

       

      Common Stock Purchase
Warrant

       

      (Expiring
on December 31, 2014)


       

      This is
to certify that, for value received and subject to the conditions herein set
forth,  Koala Pictures Proprietary Ltd. (the "Warrantholder") is
entitled to purchase, at a price per share of Two Cents ($0.02) per share,
Two Million Five Hundred
Thousand (2,500,000) shares of common stock, par value $0.001 per share
(the "Common Stock"), of Chancellor Group Inc., a Nevada corporation (the
"Company"), subject to adjustment as provided below (such shares purchasable
upon exercise of this Warrant are herein called the "Warrant
Stock").  The amount per share specified above, as adjusted from time
to time pursuant to the provisions hereinafter set forth, is herein called the
"Purchase Price."  This Warrant will be immediately exercisable and
may be exercised anytime after its issuance.   In the event of a
exercise of this Warrant, the Warrantholder shall surrender this Warrant to the
Company with payment of the Purchase Price, together with a notice of exercise
(the date of such surrender being herein referred to as the “Date of Exercise”),
in which event the Company shall issue to the Warrantholder the number of shares
of Warrant Stock.


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      1.           By
acceptance of this Warrant, the Warrantholder agrees, for itself and all
subsequent holders, that prior to making any disposition of this Warrant or any
shares of Warrant Stock, the Warrantholder shall give written notice to the
Company describing briefly the manner in which any such proposed disposition is
to be made; and no such disposition shall be made unless and until (i) the
Company has received an opinion of counsel satisfactory to it to the effect that
no registration under the Securities Act of 1933, as amended (the "Act"), is
required with respect to such disposition; or (ii) a registration statement with
respect to the Warrant or the Warrant Stock has been filed by the Company and
declared effective by the Securities and Exchange Commission (the
"Commission").


       

      2.           (a)  If
outstanding shares of the Company's Common Stock shall be subdivided into a
greater number of shares thereof or a dividend in Common Stock shall be paid in
respect of Common Stock, the Purchase Price in effect immediately prior to such
subdivision or at the record date of such dividend shall simultaneously with the
effectiveness of such subdivision or immediately after the record date of such
dividend be proportionately reduced and conversely, if outstanding shares of
Common Stock shall be combined into a smaller number of shares thereof, the
Purchase Price in effect immediately prior to such combination shall,
simultaneously with the effectiveness of such combination, be proportionately
increased.  When any adjustment is required to be made in the Purchase
Price, the number of shares of Common Stock purchasable upon the exercise of
this Warrant shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable pursuant to the exercise of this Warrant
immediately prior to such adjustment multiplied by the Purchase Price in effect
immediately prior to such adjustment, by (ii) the Purchase Price in effect
immediately after such adjustment.


      
        
           


        

        
          2

          
            

          

        

        
           


        

      


      (b)  If
there shall occur any capital reorganization or reclassification of the
Company's Common Stock (other than a change in par value or a subdivision or
combination as provided for in subparagraph (a) above), or any consolidation or
merger of the Company with or into another corporation, or in the case of any
sale, transfer or other disposition to another person, corporation or other
entity of all or substantially all the property, assets, business and good will
of the Company as an entirety, then, as part of any such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition, as
the case may be, lawful provision shall be made so that the registered owner of
this Warrant shall have the right thereafter to receive upon the exercise hereof
the kind and amount of shares of stock or other securities or property which
said registered owner would have been entitled to receive if, immediately prior
to any such reorganization, reclassification, consolidation, merger, sale,
transfer or other disposition, as the case may be, said registered owner had
held the number of shares of Common Stock which were then purchasable upon the
exercise of this Warrant.  In any such case, appropriate adjustment
(as determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth herein with respect to the rights and
interests thereafter of the registered owner of this Warrant such that the
provisions set forth herein (including provisions with respect to adjustment of
the Purchase Price) shall thereafter be applicable, as nearly as is reasonably
practicable, in relation to any shares of stock or other securities or property
thereafter deliverable upon the exercise of this Warrant.


      
        
           


        

        
          3

          
            

          

        

        
           


        

      


      (c)  In
case the Company shall declare a dividend upon shares of Common Stock payable
otherwise than out of earnings or earned surplus and otherwise than in shares of
Common Stock or in stock or obligations directly or indirectly convertible into
or exchangeable for Common Stock, the Warrantholder shall, upon exercise of this
Warrant in whole or in part, be entitled to purchase, in addition to the number
of shares of Common Stock deliverable upon such exercise against payment of the
Purchase Price therefor, but without further consideration, the cash, stock or
other securities or property which the holder of Warrant would have received as
dividends (otherwise than out of such earnings or earned surplus and otherwise
than in shares of Common Stock or in such convertible or exchangeable stock or
obligations), if continuously since the date set forth above such holder (i) had
been the holder of record of the number of shares of Common Stock deliverable
upon such exercise and (ii) had retained all dividends in stock or other
securities (other than shares of Common Stock or such convertible or
exchangeable stock or obligations) paid or payable in respect of said number of
shares of Common Stock or in respect of any such stock or other securities so
paid or payable as such dividends.  For purposes of this subparagraph
(c), a dividend payable otherwise than in cash shall be considered to be payable
out of earnings or earned surplus and shall be charged in an amount equal to the
fair value of such dividend as determined by the Board of Directors of the
Company.

       

      (d)  In
case at any time:

       

      (i)  the
Company shall pay any cash or stock dividend upon its Common Stock or make any
distribution to the holders of its Common Stock; or

       

      (ii)  the
Company shall offer for subscription pro rata to the holders of its Common Stock
any additional shares of stock of any class or any other rights;
or


      
        
           


        

        
          4

          
            

          

        

        
           


        

      

       

      (iii)  the
Company shall effect any capital reorganization or any reclassification of or
change in the outstanding capital stock of the Company (other than a stock
split, a change in par value, or a change resulting solely from a subdivision or
combination of outstanding shares of Common Stock), or any consolidation or
merger, or any sale, transfer or other disposition of all or substantially all
its property, assets, business and good will as an entirety, or the liquidation,
dissolution or winding up of the Company; or

       

                     (iv)  the
Company shall declare a dividend upon shares of its Common Stock payable
otherwise than out of earnings or earned surplus or otherwise than in shares of
Common Stock or any stock or obligations directly or indirectly convertible into
or exchangeable for Common Stock; then, in
any such case, the Company shall cause at least fifteen (15) days' prior notice
thereof to be furnished to the Warrantholder at the address of such holder shown
on the books of the Company.  Such notice shall also specify the date
on which the books of the Company shall close, or a record be taken, for such
stock dividend, distribution or subscription rights, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution, winding up, or dividend, as the case may
be, shall take place, and the date of participation therein by the holders of
Common Stock if any such date is to be fixed, and shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the rights of the Warrantholder.

       

      (e)  When any adjustment is
required to be made in the Purchase Price, the Company shall promptly mail to
the Warrantholder a certificate setting forth the Purchase Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.  Such certificate shall also set forth the kind and amount
of stock or other securities or property into which this Warrant shall be
exercisable following the occurrence of any of the events specified in
subparagraphs (b) or (c) above.


      
        
           


        

        
          5

          
            

          

        

        
           


        

      

       

      (f)  The Company shall not be
required upon the exercise of this Warrant to issue any fractional shares, but
shall make any adjustment therefor on the basis of the mean between the closing
low bid and closing high asked prices on the over-the-counter market as reported
by the National Association of Securities Dealers Automated Quotations System or
the closing market price on a national securities exchange on the trading day
immediately prior to exercise, whichever is applicable or, if neither is
applicable, then on the basis of the market value of any such fractional
interest as shall be reasonably determined by the Company.

       

      (g)  The
Company will, within 120 days after the end of each of its fiscal years, mail to
the registered holder of this Warrant at the address of such holder shown on the
books of the Company a certificate (if the Company has engaged independent
public accountants, such certificate shall be prepared by such independent
public accountants) (i) specifying the Purchase Price in effect as of the
end of such fiscal year and the number of shares of Common Stock, or the kind
and amount of any securities or property other than Common Stock purchasable by
the holder of this Warrant and (ii) setting forth in reasonable detail the
facts requiring any adjustments made during such fiscal year.

       

      3.           The
Company agrees that (i) a number of shares of Common Stock and other securities
and property sufficient to provide for the exercise of this Warrant upon the
basis hereinbefore set forth shall at all times during the term of Warrant be
reserved for the exercise hereof, and (ii) during the term of this Warrant, it
will keep current in filing any forms and other materials required to be filed
with the Commission pursuant to the Act and the Securities Exchange Act of 1934,
as amended.


      
        
           


        

        
          6

          
            

          

        

        
           


        

      


      4.           (a)
Exercise of the purchase rights represented by this Warrant may be made at any
time or times on or after the closing of the offering, and before the close of
business on the Termination Date by the surrender of this Warrant and the Notice
of Exercise Form or Notice of Cashless Exercise Form annexed hereto duly
executed, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered Warrantholder
hereof at the address of such Warrantholder appearing on the books of the
Company) and upon payment of the Exercise Price of the Warrant Stock as provided
herein the Warrantholder shall be entitled to receive a certificate for the
number of Warrant Stock so purchased.  Certificates for the shares of
Warrant Stock purchased hereunder shall be delivered to the Warrantholder hereof
within twenty (20) trading days after the date on which this Warrant shall have
been exercised as aforesaid.  This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed to have been
issued, and the Warrantholder or any other person so designated to be named
therein shall be deemed to have become a Warrantholder of record of such shares
of Warrant Stock for all purposes, as of the date the Warrant has been exercised
by payment to the Company of the Exercise Price and all taxes required to be
paid by the Warrantholder, if any, pursuant to Section 4 prior to the issuance
of such shares of Warrant Stock, have been paid.


      
        
           


        

        
          7

          
            

          

        

        
           


        

      

       

      (b)           Payment
may be made either (i) in cash or by certified or official bank check payable to
the order of the Company equal to the applicable aggregate Exercise Price, (ii)
by delivery of the Warrant, or shares of Common Stock and/or shares of Warrant
Stock receivable upon exercise of the Warrant in accordance with Section 3(c)
below, or (iii) by a combination of any of the foregoing methods, for the number
of shares of Warrant Stock specified in such Exercise Notice (as such exercise
number shall be adjusted to reflect any adjustment in the total number of shares
Warrant Stock issuable to the Warrantholder per the terms of this Warrant) and
the Warrantholder shall thereupon be entitled to receive the number of duly
authorized, validly issued, fully-paid and non-assessable shares of Common Stock
determined as provided herein.

       

      (c)           Notwithstanding
any provisions herein to the contrary, if the Fair Market Value of one share of
Common Stock is greater than the Exercise Price (at the date of calculation as
set forth below), in lieu of exercising this Warrant for cash, the Warrantholder
may elect to receive shares equal to the value (as determined below) of this
Warrant (or the portion thereof being exercised) by surrender of this Warrant at
the principal office of the Company together with the properly endorsed Notice
of Cashless Exercise Form in which event the Company shall issue to the
Warrantholder a number of shares of Warrant Stock computed using the following
formula:

       

      
        
          
            	
                    X=Y(

                  	
                    A-B)

                  
	
                    (

                  	
                    A)

                  


          

        

      

       

      
        
          
            
              
                
                  
                    
                      	
                              Where:

                            
	 
	
                              X
      =

                            	
                              the
      number of shares of Warrant Stock to be issued to the Warrantholder on
      such exercise

                            
	 	 
	
                              Y
      =

                            	
                              the
      number of shares of Warrant Stock purchasable under the Warrant or, if
      only a portion of the Warrant is being exercised, the portion of the
      Warrant being exercised (at the date of such
  calculation)

                            
	 	 
	
                              A
      =

                            	
                              the
      Fair Market Value of one share of the Company's Common Stock (at the date
      of such calculation)

                            
	 	 
	
                              B
      =

                            	
                              Exercise
      Price (as adjusted to the date of such
  calculation)

                            


                    

                  

                

              

            

          

        

      


      
        
           


        

        
          8

          
            

          

        

        
           


        

      

       

      (d)           “Fair
Market Value” shall mean the average 4:00 PM Eastern Standard Time closing bid
price of the Company’s Common Stock as quoted on the Nasdaq OTC:BB, Pink Sheets
or other national market or exchange as reflected on the Bloomberg quotation
system (“Closing Bid”) on the three (3) trading days immediately following the
date of receipt of the Notice of Cashless Exercise Form.

       

      (e)           Notwithstanding
anything herein to the contrary, each certificate for Warrant Stock issued
hereunder shall bear a legend reading substantially as follows (unless the
Company receives an opinion of counsel satisfactory to it that such a legend is
not required in order to assure compliance with the Act).


       

      THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE.  THESE SHARES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SHARES OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SHARES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH
SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND FROM REGISTRATION OR
QUALIFICATION REQUIREMENTS OF APPLICABLE STATE SECURITIES LAWS.

       

      5.           All
shares of Common Stock or other securities delivered upon the exercise of this
Warrant shall be validly issued, fully paid and nonassessable and the Company
will pay all taxes, if any, in respect of the issuance thereof upon exercise of
this Warrant.


      
        
           


        

        
          9

          
            

          

        

        
           


        

      

       

      6.           (a)  Subject
to the provisions of Paragraph 1 hereof, this Warrant and all rights hereunder
are transferable on the books of the Company, upon surrender of this Warrant,
with the form of assignment attached hereto duly executed by the registered
holder hereof or by his attorney duly authorized in writing, to the Company at
its principal office hereinabove referred to, and thereupon there shall be
issued in the name of the transferee or transferees, in exchange for this
Warrant, a new warrant or warrants or like tenor and date, representing in the
aggregate the right to subscribe for and purchase the number of shares which may
be subscribed for and purchased hereunder.

       

      (b)  If this Warrant shall be
lost, stolen, mutilated or destroyed, the Company, on such terms as to indemnify
or otherwise as it may in its discretion reasonably impose, shall issue a new
warrant of like denomination, tenor and date as this Warrant so lost, stolen,
mutilated or destroyed.  Any such new warrant shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed warrant shall be at any time enforceable by
anyone.

       

      (c)  The Company may deem and
treat the registered holder of this Warrant as the absolute owner of this
Warrant for all purposes and shall not be affected by any notice to the
contrary.

       

      (d)  This Warrant, including
all the rights and obligations granted to the Warrantholder hereunder, shall be
specifically enforceable against the Company by the Warrantholder, in addition
to and not by way of substitution for, any other remedies available to the
Warrantholder, at law or in equity.


      
        
           


        

        
          10

          
            

          

        

        
           


        

      

       

      (e)  This Warrant, in all
events, shall be wholly void and of no effect after December 31,
2014.


       

      7.           The
Warrantholder shall not, by virtue of ownership of this Warrant, be entitled to
any rights whatsoever of a shareholder of the Company, but shall, upon written
request to the Company, be entitled to receive quarterly or annual reports, or
any other reports to shareholders of the Company.


       

      IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly
authorized officer as of August   , 2009, as a replacement
Warrant for a warrant originally issued to Warrantholder as of July 10, 2006,
expiring December 31, 2009, covering the same number of shares of Warrant Stock
and exercisable at the same Purchase Price.

       

      
        
          
            
              
                	
                        CHANCELLOR
      GROUP, INC.

                      
	 
      	 
      
	
                        By:

                      	 
      
	
                        Chairman

                      


              

            

          

        

      


      
        
           


        

        
          11

          
            

          

        

        
           


        

      


      NOTICE OF
EXERCISE


       

      To:           Chancellor
Group, Inc.

       

      The
undersigned hereby elects to purchase ________ shares of Common Stock (the
“Warrant Stock”), of Chancellor Group, Inc. pursuant to the terms of the
attached Warrant, and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.

       

      Please
issue a certificate or certificates representing said shares of Warrant Stock in
the name of the undersigned or in such other name as is specified
below:


       

      
        
          
            
              
                
                  	
                           

                        
	
                          (Name)

                        
	
                           

                        
	
                          (Address)

                        
	
                           

                        
	
                           

                        
	
                          Social
      Security or Tax Identification
Number

                        


                

              

            

          

        

      

      


       

      
        
          
            	
                    Dated:

                  	 
      


          

        

      

       

      
        
          
            
              
                	
                         

                      
	
                        Signature

                      
	
                         

                      
	
                        Print
      Name

                      


              

            

          

        

      

       

      
        
           


        

        
           


          
            

          

        

        
           


        

      


      NOTICE OF
CASHLESS EXERCISE

       

      To:           Chancellor
Group, Inc.

       

      (1)           The
undersigned hereby elects to purchase the number of shares of Common Stock (the
“Warrant Stock”), of Chancellor Group, Inc. as are purchasable pursuant to the
terms the formula set forth in Section 4 of the attached Warrant, and makes
payment therefore in full by surrender and delivery of this
Warrant.

       

      (2)           Please
issue a certificate or certificates representing said shares of Warrant Stock in
the name of the undersigned or in such other name as is specified
below:


       

      
        
          
            
              
                
                  
                    	
                             

                          
	
                            (Name)

                          
	
                             

                          
	
                            (Address)

                          
	 
	
                             

                          
	
                            Social
      Security or Tax Identification
Number

                          


                  

                

              

            

          

        

      

       

      
        
          
            	
                    Dated:
      

                  	 
      


          

        

      

       

      
        
          
            
              
                	
                         

                      
	
                        Signature

                      
	
                         

                      
	
                        Print
      Name

                      


              

            

          

        

      


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      ASSIGNMENT
FORM

       

      (To
assign the foregoing warrant, execute

      this form
and supply required information.

      Do not
use this form to exercise the warrant.)


       

      FOR VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to
_______________________________________________________________

       

      whose
address is
________________________________________________________________


       

      ______________________________________________________________________________

       

      
        	
                Dated:
      

              	 
      


      

       

      
        
          
            
              
                
                  
                    	
                            Holder's
      Signature:

                          
	 
      
	
                            Holder's
      Address:

                          
	 
      
	 
	 
      


                  

                

              

            

          

        

      

       

      Signature
Guaranteed:

       

      NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.