Unassociated Document


    NOTE
      PURCHASE AGREEMENT

    


    AGREEMENT
      (this
“Agreement”),
      dated
      as of October 15, 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”),
      Richard H. Kall (the “ New
      Investor”)
      and
      __________________________________________ (the “Selling
      Investor”).

     

    WHEREAS:

     

    A. The
      Company the Selling Investor and certain other investors (the “Other
      Investors”
and
      collectively with the New Investor and the Selling Investor, the “Investors”)
      are
      parties to that certain Securities Purchase Agreement, dated as of November
      29,
      2007 (the “Original
      Securities Purchase Agreement”)
      and
      that certain Amendment and Exchange Agreement dated as of March 24, 2008 (the
      “Amendment
      and Exchange Agreement”).

     

    B. The
      Company, the New Investor and the Selling Investor desire to enter into this
      Agreement, pursuant to which, among other things, (i) the New Investor will
      purchase from the Selling Investor, and the Selling Investor will sell, assign
      and transfer to the New Investor, (A)
      $_____________ of the aggregate unpaid principal amount of the Note held by
      the
      Selling Investor (the “Purchased
      Principal Amount”)
      and (B) such number of Warrants and Common Shares heretofore issued by the
      Company to the Selling Investor set forth opposite the Selling Investor’s name
      in columns 4 and 6 on the Securities Schedule attached hereto (collectively,
      the
“Purchased
      Warrants and Shares”);
      and (ii) the Selling Investor and the New Investor shall forbear, for a period
      of 30 days from the Closing Date, from seeking to enforce any rights that each
      may have as a result of the Event of Default that occurred with respect to
      Company’s failure to satisfy one or more Financial Covenants for the Fiscal
      Quarter ended June 30, 2008.

     

    C. Capitalized
      terms used herein and not otherwise defined herein shall have the respective
      meanings ascribed to them in the Original Securities Purchase Agreement, the
      Amendment and Exchange Agreement or any other Transaction Document, as
      applicable.

     

    NOW,
      THEREFORE,
      in consideration of the foregoing recitals and the mutual promises hereinafter
      set forth, the Company, the New Investor and the Other Investors hereby agree
      as
      follows:

     

    
      	 	
              1.

            	
              SALE
                AND TRANSFER OF THE PURCHASED PRINCIPAL AMOUNT AND THE PURCHASED
                WARRANTS
                AND SHARES.

            


    

     

    
      	 	
              (a)

            	
              At
                the Closing:

            


    

     

    (i) the
      Selling Investor shall sell, assign and transfer to the New Investor, and the
      New Investor shall purchase from the Selling Investor the Purchased Principal
      Amount and the Purchased Warrants and Shares (the “Sale”).
      The Sale shall be consummated, as follows:

     

    (1) The
      New Investor shall pay $___________ (the “Purchase
      Price”)
      to the Selling Investor by payment of such amount by wire transfer of
      immediately available funds to an account maintained by the Selling Investor,
      such account to be designated by the Selling Investor by written notice to
      the
      New Investor not later than two business days prior to the Closing
      Date

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (2) the
      Selling Investor shall deliver its Note to the Company for cancellation, and
      the
      Company, pursuant to Section 18(a) of such Note, shall issue and deliver to
      the
      Selling Investor and the New Investor Notes which shall be in the principal
      amount set forth opposite their names in columns (1) and (2) on the Securities
      Schedule attached hereto;

     

    (3) the
      Selling Investor shall deliver its Warrant to the Company for cancellation,
      and
      the Company, pursuant to section 7(a) of such Warrant, shall issue and deliver
      to the Selling Investor and the New Investor Warrants which shall be exercisable
      to acquire that number of Warrant Shares set forth opposite their names in
      columns (3) and (4) of the Securities Schedule attached hereto; and

     

    (4) the
      Selling Investor shall deliver or cause to be delivered to the Company for
      cancellation the Common Shares held by it, and the Company shall issue or cause
      its transfer agent to issue to the Selling Investor and the New Investor such
      number of Common Shares as is set forth opposite their names in columns (5)
      and
      (6) of the Securities Schedule attached hereto.

     

    (b) Closing
      Date.
      The date and time of the Closing (the “Closing
      Date”)
      shall be 10:00 a.m., New York Time, on October 15, 2008, or such other time
      and
      date as is mutually agreed to by the Company and the Investors. 

     

    
      	 	
              2.

            	
              AGREEMENTS
                TO FORBEAR

            


    

     

    (a) In
      consideration for the New Investor’s payment of the Purchase Price, and the
      Selling Investor’s agreement to sell and transfer the above-mentioned portion of
      its Note, Warrant and Shares to the New Investor, the New Investor and the
      Selling Investor hereby covenant and agree that, for a period of 30 days from
      the Closing Date (the “First
      Forbearance Period”),
      each of them shall forbear from taking, or causing any other Person to take,
      any
      action to enforce any rights that either of them may have, individually or
      together with the Other Investors, as a result of the Event of Default that
      occurred with respect to Company’s failure to satisfy one or more Financial
      Covenants for the Fiscal Quarter ended June 30, 2008.

     

    (b) In
      the event that, on or before the last day of the First Forbearance Period,
      the
      Selling Investor and the Other Investors receive payment in the aggregate amount
      of $250,000, which such amount shall be applied pro rata in payment of the
      Company’s obligations under the Notes held by the Selling Investor and the Other
      Investors, each of the New Investor and the Selling Investor further covenants
      and agrees that, for a period of 30 days from the end of the First Forbearance
      Period (the “Second
      Forbearance Period”),
      each of them shall forbear from taking, or causing any other Person to take,
      any
      action to enforce any rights that either of them may have, individually or
      together with the Other Investors, as a result of the Event of Default that
      occurred with respect to Company’s failure to satisfy one or more Financial
      Covenants for the Fiscal Quarter ended June 30, 2008 or any Event of Default
      that may occur with respect to the Company’s failure to satisfy one or more
      Financial Covenants for the Fiscal Quarter ending September 30,
      2008.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (c) In
      the event that, on or before the last day of the Second Forbearance Period,
      the
      Selling Investor and the Other Investors receive payment in the aggregate amount
      of $250,000, which such amount shall be applied pro rata in payment of the
      Company’s obligations under the Notes held by the Selling Investor and the Other
      Investors, each of the New Investor and the Selling Investor further covenants
      and agrees that, for a period of 30 days from the end of the Second Forbearance
      Period, each of them shall forbear from taking, or causing any other Person
      to
      take, any action to enforce any rights that either of them may have,
      individually or together with the Other Investors, as a result of the Event
      of
      Default that occurred with respect to Company’s failure to satisfy one or more
      Financial Covenants for the Fiscal Quarter ended June 30, 2008 or any Event
      of
      Default that may occur with respect to the Company’s failure to satisfy one or
      more Financial Covenants for the Fiscal Quarter ending September 30,
      2008.

     

    (d) For
      the avoidance of doubt, the Company, the Selling Investor and the New Investor
      agree that the agreement of the Selling Investor and the New Investor to forbear
      hereunder shall not toll the application of the default interest rate to which
      they are entitled under the Notes.

     

    
      	 	
              3.

            	
              RIGHTS
                OF THE NEW INVESTOR UNDER THE REGISTRATION RIGHTS
                AGREEMENT.

            


    

     

    (a) The
      Company hereby agrees to prepare and file a post-effective amendment to the
      Registration Statement on SEC Form S-3 (Commission File No. 333-150191), or
      it
      shall prepare and file a new Registration Statement on an appropriate SEC form,
      reflecting the changes made, as a result of the transactions contemplated by
      this Agreement, to the ownership by the New Investor and the Selling Investor
      of
      the Common Shares, the Convertible Shares issuable upon conversion of the Notes
      and the Warrant Shares issuable upon exercise of the Warrants that are currently
      held by the Selling Investor. All costs associated with the preparation and
      filing of such post-effective amendment or new registration statement shall
      be
      borne by the Company.

     

    
      	 	
              4.

            	
              AMENDMENTS
                TO TRANSACTION DOCUMENTS.

            


    

     

    (a) Reaffirmation.
      The Company hereby confirms and agrees that, except as otherwise expressly
      provided herein:

     

    (i) the
      Original Securities Purchase Agreement, as amended by the Amendment and Exchange
      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 Original
      Securities Purchase Agreement to “this Agreement,” “hereto,” “hereof,”
“hereunder” or words of like import referring to the Original Securities
      Purchase Agreement shall mean the Original Securities Purchase Agreement, as
      amended by the Amendment and Exchange Agreement, after taking into account
      the
      transactions contemplated herein and hereby, (ii) all references in the other
      Transaction Documents to the “Original Securities Purchase Agreement” “thereto,”
“thereof,” “thereunder” or words of like import referring to the Original
      Securities Purchase Agreement, shall mean the Original Securities Purchase
      Agreement, as amended by the Amendment and Exchange Agreement, after taking
      into
      account the transactions contemplated herein and hereby, 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, after taking into account the transactions contemplated herein and
      hereby. REFERENCES TO NOTES AND WARRANTS IN ALL TRANSACTION DOCUMENTS MEANS
      NOTES AND WARRANTS AFTER TAKING INTO CONSIDERATION THE TRANSACTIONS CONTEMPLATED
      HEREIN AND HEREBY;

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (ii) to
      the extent that the Original Securities Purchase Agreement, as amended by the
      Amendment and Exchange Agreement, after taking into account the transactions
      contemplated herein and hereby, 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 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 held by all Investors after taking into
      account the transactions contemplated herein and hereby, 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

     

    (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.

     

    
      	 	
              5.

            	
              REPRESENTATIONS
                AND WARRANTIES

            


    

     

    (a) Selling
      Investor’s Bring Down.
      The Selling Investor hereby represents and warrants to the Company and the
      New
      Investor with respect to itself only as set forth in Section 2 of the Original
      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.

     

    (b) No
      Event of Default.
      The Company represents and warrants to the Selling Investor and the New Investor
      that after giving effect to the terms of this Agreement and the Other
      Agreements, no Event of Default (as defined in the Note) shall have occurred
      and
      be continuing as of the date hereof, except for the Event of Default or Events
      of Default which have occurred or may occur by reason of one or more of
      Financial Covenant Failures with respect to the Company’s Fiscal Quarter ended
      June 30, 2008 and the Company’s Fiscal Quarter ending on September 30, 2008, as
      the case may be.

     

    (c) Investor
      Status.
      As of the date hereof and during the preceding three-month period, 

     

    (i) the
      Selling Investor, together with any other Person with whom the Selling Investor
      must aggregate sales under Rule 144, (A) does not beneficially own, and has
      not
      beneficially owned, in excess of 10% of the Common Stock, (B) has not appointed
      any member to the board of directors of the Company or (C) has not participated
      in the management or daily operations of the Company; and

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (ii) the
      New Investor, together with any other Person with whom the New Investor must
      aggregate sales under Rule 144, has beneficially owned in excess of 10% of
      the
      Common Stock, but has not (A) appointed any member to the board of directors
      of
      the Company or (B) participated in the management or daily operations of the
      Company.

     

    (d) Shell
      Company Status.
      The Company has complied with all of the requirements set forth in Rule
      144(i)(2).

     

    (e) New
      Investor Representations and Warranties.
      The New Investor represents and warrants to the Selling Investor and to the
      Company as follows:

     

    (i) Enforceability.
      This Agreement, when executed and delivered by the New Investor, will constitute
      a valid and legally binding obligation of the New Investor, enforceable against
      the New Investor in accordance with its terms, except (a) as limited by
      applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
      conveyance, and any other laws of general application affecting enforcement
      of
      creditors’ rights generally, or (b) as limited by laws relating to the
      availability of specific performance, injunctive relief, or other equitable
      remedies.

     

    (ii) Investment
      Experience; Access to Information.
      The New Investor (a) either alone or together with his representatives, but
      without reliance upon the Selling Investor, has such knowledge and experience
      in
      financial and business matters as to be capable of evaluating the merits and
      risks of this investment and make an informed decision to so invest, and has
      so
      evaluated the risks and merits of such investment, (b) has the ability to bear
      the economic risks of this investment and can afford a complete loss of such
      investment, (c) understands the terms of and risks associated with the
      acquisition of the Purchased Principal Amount and the Purchased Warrants and
      Shares, including, without limitation, a lack of liquidity, price transparency
      or pricing availability and risks associated with the industry in which the
      Company operates, (d) has had the opportunity to review such disclosure
      regarding the Company, its business, its financial condition and its prospects
      as the New Investor has determined to be necessary in connection with the
      purchase of the Purchased Principal Amount and the Purchased Warrants and
      Shares, including, without limitation, the Company’s Annual Report on Form 10-K
      (or substantially equivalent form) for its most recently completed fiscal year,
      the Company's Quarterly Reports on Form 10-Q (or substantially equivalent form)
      for the fiscal quarters since the end of such completed fiscal year, and the
      Company’s Current Reports on Form 8-K (or substantially equivalent form) since
      the end of such completed fiscal year, each as amended, and (e) has had an
      opportunity to ask such questions and make such inquiries concerning the
      Company, its business, its financial condition and its prospects as the New
      Investor has deemed appropriate in connection with such purchase and to receive
      satisfactory answers to such questions and inquiries. The New Investor
      acknowledges that the Selling Investor has not given the New Investor any
      investment advice, credit information or opinion on whether the purchase of
      the
      Notes, Common Shares and Warrants is prudent.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (iii) No
      Conflicts; Advice.
      Neither the execution and delivery of this Agreement, nor the consummation
      of
      the transactions contemplated hereby, does or will violate any constitution,
      statute, regulation, rule, injunction, judgment, order, decree, ruling, charge
      or other restriction of any government, governmental agency, or court to which
      the New Investor is subject, or conflict with, violate or constitute a default
      under any agreement, credit facility, debt or other instrument or understanding
      to which the New Investor is a party. The New Investor has consulted such legal,
      tax and investment advisors as it, in its sole discretion, has deemed necessary
      or appropriate in connection with its purchase of the Notes, Common Shares
      and
      Warrants.

     

    (iv) No
      Litigation.
      There is no action, suit, proceeding, judgment, claim or investigation pending,
      or to the knowledge of the New Investor, threatened against the New Investor
      which could reasonably be expected in any manner to challenge or seek to
      prevent, enjoin, alter or materially delay any of the transactions contemplated
      by this Agreement.

     

    (v) Consents.
      No authorization, consent, approval or other order of, or declaration to or
      filing with, any governmental agency or body or other Person is required for
      the
      valid authorization, execution, delivery and performance by the New Investor
      of
      this Agreement and the consummation of the transactions contemplated
      hereby.

     

    (vi) New
      Investor Status.
      At the time the New Investor was offered the Purchased Principal Amount and
      the
      Purchased Warrants and Shares, it was, at the date hereof it is, and at the
      Closing it will be, an “accredited investor” as defined in Rule 501(a) under the
      Securities Act. The New Investor is not, and is not required to be registered
      as, a broker-dealer under Section 15 of the Securities Exchange Act of 1934,
      as
      amended.

     

    (vii) General
      Solicitation.
      The New Investor is not purchasing the Purchased Principal Amount and the
      Purchased Warrants and Shares as a result of any advertisement, article, notice
      or other communication regarding such securities published in any newspaper,
      magazine or similar media or broadcast over television or radio or presented
      at
      any seminar or any other general solicitation or general
      advertisement.

     

    
      	 	
              6.

            	
              CERTAIN
                COVENANTS AND AGREEMENTS.

            


    

     

    (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 7 and 8 of this
      Agreement.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (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) (including all attachments, the “New
      Investor 8-K Filing”).
      Neither the Company, its Subsidiaries nor the Selling Investor or the New
      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 Selling Investor
      or
      the New Investor, to make any press release or other public disclosure with
      respect to such transactions (i) in substantial conformity with the New Investor
      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 Selling
      Investor and the New Investor shall be consulted by the Company in connection
      with any such press release or other public disclosure prior to its release).
      From and after the filing of the New Investor 8-K Filing with the SEC, the
      Selling 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 New Investor 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 Selling Investor with any material, nonpublic
      information regarding the Company or any of its Subsidiaries from and after
      the
      filing of the New Investor 8-K Filing with the SEC without the express written
      consent of the Selling Investor. If the Selling 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 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 Selling 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 Selling 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, without the prior written consent of the Selling
      Investor, neither the Company nor any of its Subsidiaries or affiliates shall
      disclose the name of the Selling Investor in any filing (other than as is
      required by applicable law or regulations), announcement, release or
      otherwise.

     

    (c) The
      Company acknowledges that, to the extent that any of the shares of Common Stock
      held by the Selling Investor were not registered for sale or other disposition
      by the Selling Investor under the above-mentioned registration statement, the
      Selling Investor has held such shares for a period in excess of six months.
      Accordingly, the Company covenants and agrees that it shall (i) issue such
      instructions to its transfer agent as shall be necessary to cause the
      certificates for the shares of Common Stock to be issued to the Selling Investor
      and the New Investor, as provided in columns (5) and (6) of the Securities
      Schedule attached hereto to be issued without any restrictive legend appearing
      thereon and without any stop transfer notations being placed in the records
      of
      the transfer agent with respect thereto; and (ii) deliver or cause to be
      delivered such opinions of counsel as its transfer agent may require in order
      to
      accomplish the foregoing.

     

    
      	 	
              7.

            	
              CONDITIONS
                TO COMPANY’S OBLIGATIONS
                HEREUNDER.

            


    

     

    The
      obligations of the Company to the Selling Investor and the New 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
      Selling Investor and the New Investor with prior written notice
      thereof:

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (a) The
      Selling Investor and the New Investor shall have executed this Agreement and
      delivered the same to the Company.

     

    (b) The
      Selling Investor shall have delivered to the Company its Note and Warrant for
      cancellation.

     

    (c) The
      representations and warranties of the Selling Investor and the New 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 Selling Investor and the
      New
      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 Selling Investor and the New
      Investor at or prior to the Closing Date.

     

    
      	 	
              8.

            	
              CONDITIONS
                TO THE INVESTORS’ OBLIGATIONS HEREUNDER.

            


    

     

    The
      obligations of the Selling Investor and the New Investor hereunder are subject
      to the satisfaction of each of the following conditions, provided that these
      conditions are for the Selling Investor’s and the New Investor’s sole benefit
      and may be waived by the Selling Investor and the New Investor (with respect
      to
      their respective obligations only) at any time in their sole discretion by
      providing the Company with prior written notice thereof:

     

    (a) The
      Company, the Selling Investor and the New Investor each shall have executed
      this
      Agreement and delivered the same to the other parties hereto.

     

    (b) The
      Company shall have executed and delivered to the Selling Investor and the New
      Investor the Notes, the Common Shares and the Warrants being issued to the
      Selling Investor and the New Investor, respectively, at the
      Closing.

     

    (c) The
      representations and warranties of the Selling Investor and the New 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 Selling Investor and the
      New
      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 Selling Investor and the New
      Investor at or prior to the Closing Date.

     

    (d) The
      Company, the Selling Investor and the New Investor shall have delivered to
      the
      Company’s transfer agent Irrevocable Transfer Agent Instructions in the form of
Exhibit
      A
      attached hereto.

     

    (e) 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 Investors 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 Investors in the form attached
      hereto as Exhibit
      B.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (f) Each
      of the Other Investors shall have (i) executed agreements identical to this
      Agreement (the “Other
      Agreements”)
      (other than proportional changes in the numbers reflecting the different dollar
      amount of each such Other Investor’s Note, the number of Common Shares being
      issued to each such Other Investor and the number of Warrant Shares underlying
      each such Other Investor’s Warrant), (ii) satisfied or waived all conditions to
      the closings contemplated by such Other Agreements and (iii) surrendered their
      respective Notes, Common Shares and Warrants for Notes, Common Shares and
      Warrants provided for by such Other Agreements.

     

    (g) The
      Company shall have delivered to the New Investor and the Selling Investor such
      other documents relating to the transactions contemplated by this Agreement
      as
      the New Investor, the Selling Investor and their respective counsel may
      reasonably request.

     

    
      	 	
              9.

            	
              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, the New Investor’s or the Selling
      Investor’s failure to satisfy the conditions set forth in Sections 7 and 8
      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. 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.

     

    
      	 	
              10.

            	
              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.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (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.

     

    (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.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (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, the Selling Investor and the New 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 Other 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

              


      

    

    

      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

                


        

      

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

    

    If
      to any Selling 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.

              


      

      


      If
        to the New Investor: 

       

      Mr.
        Richard H. Kall

      9000
        Players Club Drive

      Las
        Vegas, Nevada 89134

      Email:
        riichard@vmdirect.com

       

      with
        a copy (for informational purposes only) to:

       

      Arent
        Fox, LLP

      1675
        Broadway

      New
        York, New York 10019

      


      
        	 	
                Telephone:

              	
                (212)484-3900

              


      

      
        	 	
                Facsimile:

              	
                (212)
                  484-3990

              


      

      
        	 	
                Attention:

              	
                Steven
                  D. Dreyer, 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). Each of the Selling Investor and the
      New
      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.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (k) Survival.
      Unless this Agreement is terminated under Section 9, the representations and
      warranties of the Company and the Investors contained herein and the agreements
      and covenants set forth herein shall survive the Closing.

     

    (l) Remedies.
      The Selling Investor, the New 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 Investors. The Company therefore agrees
      that the Investors 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) Independent
      Nature of Investor’s Obligations and Rights.
      The obligations of the Selling Investor and New Investor under any Transaction
      Document (including this Agreement) are several and not joint with the
      obligations of any Other Investor, and the Selling Investor and New 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 Selling Investor
      or the New Investor pursuant hereto, shall be deemed to constitute the Selling
      Investor, the New Investor and the Other Investors as a partnership, an
      association, a joint venture or any other kind of entity, or create a
      presumption that the 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 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 Selling Investor and New Investor
      each confirms that such Investor has independently participated in the
      negotiation of the transactions contemplated hereby with the advice of its
      own
      counsel and advisors. Each such 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]

    


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF,
      the Investors 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 Note Purchase
      Agreement]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


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

     

    
       

      
        	 	 	 
	 	
                SELLING
                  INVESTOR:

              
	 	 	 
	 	
                
                  [______________________]

                

              
	 	 	
                 

                 

              
	
              	By:  	
              
	 	
                

                Name:
                  

              
	 	
                Title:
                  

              


      

    

     

    [Signature
      Page to Note Purchase Agreement]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

    
       

      
        	 	 	 
	 	
                
                  NEW
                    INVESTOR:

                

              
	 	 	
                 

                 

              
	
              	 	
              
	 	
                

                
                  Richard
                    H. Kall

                

              


      

    

     

    [Signature
      Page to Note Purchase Agreement]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    SECURITIES
      SCHEDULE

    


    Note
      Purchase Agreement Between

    


    [Selling
      Investor]

    


    and

    


    Richard
      H. Kall

    


    


    
      	
              Principal
                Amount of Note to be Issued to

            	
              Number
                of Common Shares Issuable Under Warrants to be

              Issued
                to

            	
              Common
                Shares to be Issued to

            
	
              (1)

            	
              (2)

            	
              (3)

            	
              (4)

            	
              (5)

            	
              (6)

            
	
              Selling
                Investor

            	
              New
                Investor

            	
              Selling
                Investor

            	
              New
                Investor

            	
              Selling
                Investor

            	
              New
                Investor

            
	 	 	 	 	 	 


    

    


    Selling
      Investor’s Address and Facsimile Number:

    


    ____________________.

    ____________________.

    ____________________.

    Attn:
       

    Facsimile
      No.