Unassociated Document


    REGISTRATION
      RIGHTS AGREEMENT

     

    REGISTRATION
      RIGHTS AGREEMENT
      (this
      "Agreement"),
      dated
      as of November 30, 2007, by and among DigitalFX International, Inc., a Florida
      corporation, with headquarters located at 3035
      East
      Patrick Lane Suite 9 Las
      Vegas,
      NV 89120 (the
      "Company"),
      and
      the undersigned buyers (each, a "Buyer",
      and
      collectively, the "Buyers").

     

    WHEREAS:

     

    A. In
      connection with the Securities Purchase Agreement by and among the parties,
      dated November 29, 2007 (the "Securities
      Purchase Agreement"),
      the
      Company has agreed, upon the terms and subject to the conditions set forth
      in
      the Securities Purchase Agreement, to issue and sell to each Buyer (i) senior
      secured convertible notes of the Company (the "Notes"),
      which
      will, among other things, be convertible into shares of the Company's common
      stock, $0.001 par value per share (the "Common
      Stock",
      as
      converted, the "Conversion
      Shares")
      in
      accordance with the terms of the Notes, and (ii) warrants (the "Warrants"),
      which
      will be exercisable to purchase shares of Common Stock (as exercised
      collectively, the "Warrant
      Shares").

     

    B. To
      induce
      the Buyers to execute and deliver the Securities Purchase Agreement, the Company
      has agreed to provide certain registration rights under the Securities Act
      of
      1933, as amended, and the rules and regulations thereunder, or any similar
      successor statute (collectively, the "1933
      Act"),
      and
      applicable state securities laws.

     

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and each of the Buyers hereby agree as
      follows:

     

    1. Definitions.
      

     

    Capitalized
      terms used herein and not otherwise defined herein shall have the respective
      meanings set forth in the Securities Purchase Agreement. As used in this
      Agreement, the following terms shall have the following meanings:

     

    a. "Business
      Day"
      means
      any day other than Saturday, Sunday or any other day on which commercial banks
      in the City of New York are authorized or required by law to remain
      closed.

     

    b. "Closing
      Date"
      shall
      have the meaning set forth in the Securities Purchase Agreement.

     

    c. "Cutback
      Note Amount"
      the
      principal amount of Notes cut back pursuant to clause (A) of the definition
      of
      Required Registration Amount.

     

    d. "Cutback
      Shares"
      means
      any of the Required Registration Amount (without regard to clause (ii) in the
      definition thereof) of Registrable Securities not included in the Registration
      Statement as a result of a limitation on the maximum number of shares of Common
      Stock of the Company permitted to be registered by the staff of the SEC pursuant
      to Rule 415.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    e. "Effective
      Date"
      means
      the date the Registration Statement has been declared effective by the
      SEC.

     

    f. "Effectiveness
      Deadline"
      means
      the earlier of the date which is (i) in the event that the Registration
      Statement is not subject to a full review by the SEC, ninety (90) calendar
      days
      after the Closing Date or (ii) in the event that the Registration Statement
      is
      subject to a full review by the SEC, one-hundred and twenty (120) calendar
      days
      after the Closing Date.

     

    g. "Filing
      Deadline"
      means
      the date thirty (30) calendar days after the Closing Date.

     

    h. "Investor"
      means a
      Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights
      as a holder of Registrable Securities under this Agreement and who agrees to
      become bound by the provisions of this Agreement in accordance with Section
      9
      and any transferee or assignee thereof to whom a transferee or assignee assigns
      its rights as a holder of Registrable Securities under this Agreement and who
      agrees to become bound by the provisions of this Agreement in accordance with
      Section 9.

     

    i. "Person"
      means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization and a government or any
      department or agency thereof.

     

    j. "register,"
      "registered,"
      and
      "registration"
      refer
      to a registration effected by preparing and filing one or more Registration
      Statements (as defined below) in compliance with the 1933 Act and pursuant
      to
      Rule 415 and the declaration or ordering of effectiveness of such Registration
      Statement(s) by the SEC.

     

    k. "Registrable
      Securities"
      means
      (x)  the Conversion Shares issued or issuable upon conversion of the Notes,
      (y) the Warrant Shares issued or issuable upon exercise of the Warrants and
      (z) any shares of capital stock of the Company issued or issuable with respect
      to the Conversion Shares, the Notes, the Warrant Shares and the Warrants as
      a
      result of any stock split, stock dividend, recapitalization, exchange or similar
      event or otherwise, without regard to any limitations on conversions of the
      Notes or exercises of the Warrants.

     

    l. "Registration
      Statement"
      means a
      registration statement or registration statements of the Company filed under
      the
      1933 Act covering the Registrable Securities.

     

    m. "Required
      Holders"
      means
      Investors that hold at least a majority of the Registrable
      Securities.

     

    n. "Required
      Registration Amount"
      for the
      Registration Statement means (i) 130% of the sum of (x) the aggregate of the
      maximum number of Conversion Shares issued and issuable pursuant to the Notes
      at
      the then applicable Conversion Price as of the Trading Day (as defined in the
      Notes) immediately preceding the applicable date of determination and (y) the
      number of Warrant Shares issued and issuable pursuant to the Warrants as of
      the
      Trading Day immediately preceding the applicable date of determination, all
      subject to adjustment as provided in Section 2(e) (without regard to any
      limitations on conversion of the Notes or exercise of the Warrants) or (ii)
      such
      other amount as may be required by the staff of the SEC pursuant to Rule 415
      with any cutback applied among the Investors pro rata: (A) first, to any
      Conversion Shares being registered under such Registration Statement until
      such
      number of Conversion Shares issuable upon conversion of $2 million in principal
      amount of the Notes are cutback; (B) second, to any Warrant Shares being
      registered under such Registration Statement until all such Warrant Shares
      are
      cutback; and (C) thereafter, to all other Registrable Securities.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    o. "Rule
      415"
      means
      Rule 415 promulgated under the 1933 Act or any successor rule providing for
      offering securities on a continuous or delayed basis.

     

    p. "SEC"
      means
      the United States Securities and Exchange Commission.

     

    2. Registration.

     

    a. Mandatory
      Registration.
      The
      Company shall prepare, and, as soon as practicable but in no event later than
      the Filing Deadline, file with the SEC the Registration Statement on Form S-3
      covering the resale of at least the number of shares of Common Stock equal
      to
      the Required Registration Amount determined as of date the Registration
      Statement is initially filed with the SEC. In the event that Form S-3 is
      unavailable for such a registration, the Company shall use such other form
      as is
      available for such a registration on another appropriate form reasonably
      acceptable to the Required Holders, subject to the provisions of Section 2(d).
      The Registration Statement shall contain (except if otherwise directed by the
      Required Holders) the "Selling
      Stockholders"
      and
      "Plan
      of Distribution"
      sections for the Investors in substantially the form attached hereto as
Exhibit
      B.
      The
      Company shall use its best efforts to have the Registration Statement declared
      effective by the SEC as soon as practicable, but in no event later than the
      Effectiveness Deadline. By 9:30 am on the Business Day following the Effective
      Date, the Company shall file with the SEC in accordance with Rule 424 under
      the
      1933 Act the final prospectus to be used in connection with sales pursuant
      to
      such Registration Statement. Notwithstanding anything herein to the contrary,
      the Company has no obligation hereunder to include Cutback Shares, if any,
      on
      any Registration Statement.

     

    b. Allocation
      of Registrable Securities.
      The
      initial number of Registrable Securities included in any Registration Statement
      and any increase or decrease in the number of Registrable Securities included
      therein shall be allocated pro rata among the Investors based on the number
      of
      Registrable Securities held by each Investor at the time the Registration
      Statement covering such initial number of Registrable Securities or increase
      or
      decrease thereof is declared effective by the SEC. In the event that an Investor
      sells or otherwise transfers any of such Investor's Registrable Securities,
      each
      transferee shall be allocated a pro rata portion of the then remaining number
      of
      Registrable Securities included in such Registration Statement for such
      transferor. Any shares of Common Stock included in a Registration Statement
      and
      which remain allocated to any Person which ceases to hold any Registrable
      Securities covered by such Registration Statement shall be allocated to the
      remaining Investors, pro rata based on the number of Registrable Securities
      then
      held by such Investors which are covered by such Registration Statement. In
      no
      event shall the Company include any securities other than Registrable Securities
      on any Registration Statement without the prior written consent of the Required
      Holders. 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    c. Legal
      Counsel.
      Subject
      to Section 5 hereof, the Required Holders shall have the right to select one
      legal counsel to review and oversee any registration pursuant to this Section
      2
      ("Legal
      Counsel"),
      which
      shall be Schulte Roth & Zabel LLP or such other counsel as thereafter
      designated by the Required Holders with the consent of the Company, which
      consent shall not be unreasonably withheld or delayed. The Company and Legal
      Counsel shall reasonably cooperate with each other in performing the Company's
      obligations under this Agreement.

     

    d. Ineligibility
      for Form S-3.
      In the
      event that Form S-3 is not available for the registration of the resale of
      Registrable Securities hereunder, the Company shall (i) register the resale
      of
      the Registrable Securities on another appropriate form reasonably acceptable
      to
      the Required Holders and (ii) undertake to register the Registrable Securities
      on Form S-3 as soon as such form is available, provided that the Company shall
      maintain the effectiveness of the Registration Statement then in effect until
      such time as a Registration Statement on Form S-3 covering the Registrable
      Securities has been declared effective by the SEC.

     

    e. Sufficient
      Number of Shares Registered.
      In the
      event the number of shares available under a Registration Statement filed
      pursuant to Section 2(a) is insufficient to cover the Required Registration
      Amount or an Investor's allocated portion of such Registrable Securities
      pursuant to Section 2(b), the Company shall amend the applicable Registration
      Statement, or file a new Registration Statement (on the short form available
      therefor, if applicable), or both, so as to cover at least the Required
      Registration Amount as of the Trading Day immediately preceding the date of
      the
      filing of such amendment or new Registration Statement, in each case, as soon
      as
      practicable, but in any event not later than fifteen (15) days after the
      necessity therefor arises. The Company shall use its reasonable best efforts
      to
      cause such amendment and/or new Registration Statement to become effective
      as
      soon as practicable following the filing thereof. For purposes of the foregoing
      provision, the number of shares available under a Registration Statement shall
      be deemed "insufficient to cover the Required Registration Amount" if at any
      time the number of shares of Common Stock available for resale under the
      Registration Statement is less than the product determined by multiplying (i)
      the Required Registration Amount as of such time by (ii) 0.90. The calculation
      set forth in the foregoing sentence shall be made without regard to any
      limitations on the conversion of the Notes or the exercise of the Warrants
      and
      such calculation shall assume that the Notes are then convertible into shares
      of
      Common Stock at the then prevailing Conversion Rate (as defined in the Notes)
      and that the Warrants are then exercisable for shares of Common Stock at the
      then prevailing Exercise Price (as defined in the Warrants).

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    f. Effect
      of Failure to File and Obtain and Maintain Effectiveness of Registration
      Statement.
      If (i)
      a Registration Statement covering all of the Registrable Securities required
      to
      be covered thereby and required to be filed by the Company pursuant to this
      Agreement is (A) not filed with the SEC on or before the Filing Deadline (a
      "Filing
      Failure")
      or (B)
      not declared effective by the SEC on or before the Effectiveness Deadline (an
      "Effectiveness
      Failure")
      or
      (ii) on any day during the Registration Period, and after the Effective Date,
      sales of all of the Registrable Securities required to be included on such
      Registration Statement cannot be made (other than during an Allowable Grace
      Period (as defined in Section 3(r)) pursuant to such Registration Statement
      (including, without limitation, because of a failure to keep such Registration
      Statement effective, to disclose such information as is necessary for sales
      to
      be made pursuant to such Registration Statement or to register a sufficient
      number of shares of Common Stock) (a "Maintenance
      Failure")
      then,
      as partial relief for the damages to any Investor by reason of any such delay
      in
      or reduction of its ability to sell the underlying shares of Common Stock (which
      remedy shall not be exclusive of any other remedies available at law or in
      equity), the Company shall pay to each Investor relating to such Registration
      Statement an amount in cash equal to (A) one percent (1.0%) of the aggregate
      Purchase Price (as such term is defined in the Securities Purchase Agreement)
      of
      such Investor's Registrable Securities included in such Registration Statement
      on each of the following dates: (i) the day of a Filing Failure and on every
      thirtieth day (pro rated for periods totaling less than thirty (30) days)
      thereafter until the date such Filing Failure is cured; (ii) the day of an
      Effectiveness Failure and on every thirtieth day (pro rated for periods totaling
      less than thirty (30) days) thereafter until the date such Effectiveness Failure
      is cured; and (iii) the initial day of a Maintenance Failure and on every
      thirtieth day (pro rated for periods totaling less than thirty (30) days)
      thereafter until the date such Maintenance Failure is cured. The payments to
      which an Investor shall be entitled pursuant to this Section 2(f) are referred
      to herein as "Registration
      Delay Payments."
      Registration Delay Payments shall be paid on the earlier of (I) the last day
      of
      the calendar month during which such Registration Delay Payments are incurred
      and (II) the third Business Day after the event or failure giving rise to the
      Registration Delay Payments is cured. In the event the Company fails to make
      Registration Delay Payments in a timely manner, such Registration Delay Payments
      shall bear interest at the rate of one and one-half percent (1.5%) per month
      (prorated for partial months) until paid in full. Notwithstanding anything
      herein to the contrary, no Registration Delay Payments shall accrue with respect
      to Cutback Shares, if any.

     

    g. Neither
      the Company nor any Subsidiary (as defined in the Securities Purchase Agreement)
      nor affiliate thereof shall identify any Buyer as an underwriter in any public
      disclosure or filing with the SEC or any Principal Market (as defined in the
      Securities Purchase Agreement) or any Trading Market (as defined in the
      Securities Purchase Agreement) and any Buyer being deemed an underwriter by
      the
      SEC shall not relieve the Company of any obligations it has under this Agreement
      or any other Transaction Document (as defined in the Securities Purchase
      Agreement) provided, however, that the foregoing shall not prohibit the Company
      from including the disclosure found in the "Plan of Distribution" section
      attached hereto as Exhibit B in the Registration Statement.

     

    3. Related
      Obligations.

     

    At
      such
      time as the Company is obligated to file a Registration Statement with the
      SEC
      pursuant to Section 2(a), 2(d) or 2(e), the Company will use its reasonable
      best
      efforts to effect the registration of the Registrable Securities in accordance
      with the intended method of disposition thereof and, pursuant thereto, the
      Company shall have the following obligations:

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    a. The
      Company shall submit to the SEC, within two (2) Business Days after the Company
      learns that no review of a particular Registration Statement will be made by
      the
      staff of the SEC or that the staff has no further comments on a particular
      Registration Statement, as the case may be, a request for acceleration of
      effectiveness of such Registration Statement to a time and date not later than
      48 hours after the submission of such request. The
      Company shall keep each Registration Statement effective pursuant to Rule 415
      at
      all times until the earlier of (i) the date as of which the Investors may sell
      all of the Registrable Securities covered by such Registration Statement without
      restriction pursuant to Rule 144(k) (or any successor thereto) promulgated
      under
      the 1933 Act or (ii) the date on which the Investors shall have sold all of
      the
      Registrable Securities covered by such Registration Statement (the "Registration
      Period").
      The
      Company shall ensure that each Registration Statement (including any amendments
      or supplements thereto and prospectuses contained therein) shall not contain
      any
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein, or necessary to make the statements therein (in the case
      of
      prospectuses, in the light of the circumstances in which they were made) not
      misleading.

     

    b. The
      Company shall prepare and file with the SEC such amendments (including
      post-effective amendments) and supplements to a Registration Statement and
      the
      prospectus used in connection with such Registration Statement, which prospectus
      is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
      be
      necessary to keep such Registration Statement effective at all times during
      the
      Registration Period, and, during such period, comply with the provisions of
      the
      1933 Act with respect to the disposition of all Registrable Securities of the
      Company covered by such Registration Statement until such time as all of such
      Registrable Securities shall have been disposed of in accordance with the
      intended methods of disposition by the seller or sellers thereof as set forth
      in
      such Registration Statement. In the case of amendments and supplements to a
      Registration Statement which are required to be filed pursuant to this Agreement
      (including pursuant to this Section 3(b)) by reason of the Company filing a
      report on Form 10-Q, Form 10-K or any analogous report under the Securities
      Exchange Act of 1934, as amended (the "1934
      Act"),
      the
      Company shall have incorporated such report by reference into such Registration
      Statement, if applicable, or shall file such amendments or supplements with
      the
      SEC within one (1) Business Day of the day on which the 1934 Act report is
      filed
      which created the requirement for the Company to amend or supplement such
      Registration Statement.

     

    c. The
      Company shall (A) permit Legal Counsel to review and comment upon (i) a
      Registration Statement at least five (5) Business Days prior to its filing
      with
      the SEC and (ii) all amendments and supplements to all Registration Statements
      (except for Annual Reports on Form 10-K and Reports on Form 10-Q and any similar
      or successor reports) within a reasonable number of days prior to their filing
      with the SEC, and (B) not file any Registration Statement or amendment or
      supplement thereto in a form to which Legal Counsel reasonably and timely
      objects. The Company shall not submit a request for acceleration of the
      effectiveness of a Registration Statement or any amendment or supplement thereto
      without the prior approval of Legal Counsel, which consent shall not be
      unreasonably withheld or delayed. The Company shall furnish to Legal Counsel,
      without charge, (i) copies of any correspondence from the SEC or the staff
      of
      the SEC to the Company or its representatives relating to any Registration
      Statement, (ii) promptly after the same is prepared and filed with the SEC,
      one
      copy of any Registration Statement and any amendment(s) thereto, including
      financial statements and schedules, all documents incorporated therein by
      reference, if requested by an Investor, and all exhibits (unless such
      Registration Statement is available on EDGAR) and (iii) upon the effectiveness
      of any Registration Statement, one copy of the prospectus included in such
      Registration Statement and all amendments and supplements thereto. The Company
      shall reasonably cooperate with Legal Counsel in performing the Company's
      obligations pursuant to this Section 3. 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    d. The
      Company shall furnish to each Investor whose Registrable Securities are included
      in any Registration Statement, without charge, (i) promptly after the same
      is
      prepared and filed with the SEC, at least one copy of such Registration
      Statement and any amendment(s) thereto, including financial statements and
      schedules, all documents incorporated therein by reference, if requested by
      an
      Investor, all exhibits and each preliminary prospectus (unless such Registration
      Statement is available on EDGAR), (ii) upon the effectiveness of any
      Registration Statement, ten (10) copies of the prospectus included in such
      Registration Statement and all amendments and supplements thereto (unless such
      amendments and supplements are available on EDGAR) and (iii) such other
      documents, including copies of the foregoing (regardless of whether such
      documents are available upon EDGAR) and any preliminary or final prospectus,
      as
      such Investor may reasonably request from time to time in order to facilitate
      the disposition of the Registrable Securities owned by such
      Investor.

     

    e. The
      Company shall use its reasonable best efforts to (i) register and qualify,
      unless an exemption from registration and qualification applies, the resale
      by
      Investors of the Registrable Securities covered by a Registration Statement
      under such other securities or "blue sky" laws of all applicable jurisdictions
      in the United States, (ii) prepare and file in those jurisdictions, such
      amendments (including post-effective amendments) and supplements to such
      registrations and qualifications as may be necessary to maintain the
      effectiveness thereof during the Registration Period, (iii) take such other
      actions as may be reasonably necessary to maintain such registrations and
      qualifications in effect at all times during the Registration Period, and (iv)
      take all other actions reasonably necessary or advisable to qualify the
      Registrable Securities for sale in such jurisdictions; provided,
      however,
      that
      the Company shall not be required in connection therewith or as a condition
      thereto to (x) qualify to do business in any jurisdiction where it would not
      otherwise be required to qualify but for this Section 3(e), (y) subject itself
      to general taxation in any such jurisdiction, or (z) file a general consent
      to
      service of process in any such jurisdiction. The Company shall promptly notify
      Legal Counsel and each Investor who holds Registrable Securities of the receipt
      by the Company of any notification with respect to the suspension of the
      registration or qualification of any of the Registrable Securities for sale
      under the securities or "blue sky" laws of any jurisdiction in the United States
      or its receipt of notice of the initiation or threatening of any proceeding
      for
      such purpose.

     

    f. The
      Company shall notify Legal Counsel and each Investor in writing of the happening
      of any event, as promptly as practicable after becoming aware of such event,
      as
      a result of which the prospectus included in a Registration Statement, as then
      in effect, includes an untrue statement of a material fact or omission to state
      a material fact required to be stated therein or necessary to make the
      statements therein, in the light of the circumstances under which they were
      made, not misleading (provided that in no event shall such notice contain any
      material, nonpublic information), and, subject to Section 3(r), promptly prepare
      a supplement or amendment to such Registration Statement to correct such untrue
      statement or omission, and deliver ten (10) copies of such supplement or
      amendment to Legal Counsel and each Investor (or such other number of copies
      as
      Legal Counsel or such Investor may reasonably request) (unless such supplements
      or amendments are available on EDGAR). The Company shall also promptly notify
      Legal Counsel and each Investor in writing (i) when a prospectus or any
      prospectus supplement or post-effective amendment has been filed, and when
      a
      Registration Statement or any post-effective amendment has become effective
      (notification of such effectiveness shall be delivered to Legal Counsel and
      each
      Investor by facsimile no later than the second (2nd)
      Business Day after such effectiveness and by overnight mail), (ii) of any
      request by the SEC for amendments or supplements to a Registration Statement
      or
      related prospectus or related information, and (iii) of the Company's reasonable
      determination that a post-effective amendment to a Registration Statement would
      be appropriate.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    g. The
      Company shall use its reasonable best efforts to prevent the issuance of any
      stop order or other suspension of effectiveness of a Registration Statement,
      or
      the suspension of the qualification of any of the Registrable Securities for
      sale in any jurisdiction and, if such an order or suspension is issued, to
      obtain the withdrawal of such order or suspension at the earliest possible
      moment and to notify Legal Counsel and each Investor who holds Registrable
      Securities being sold of the issuance of such order and the resolution thereof
      or its receipt of notice of the initiation or threat of any proceeding for
      such
      purpose.

     

    h. If
      any
      Investor is required under applicable securities law to be described in the
      Registration Statement as an underwriter, at the reasonable request of such
      Investor, the Company shall furnish to such Investor, on the date of the
      effectiveness of the Registration Statement and thereafter from time to time
      on
      such dates as an Investor may reasonably request (i) a letter, dated such date,
      from the Company's independent certified public accountants in form and
      substance as is customarily given by independent certified public accountants
      to
      underwriters in an underwritten public offering, addressed to the Investors,
      and
      (ii) an opinion, dated as of such date, of counsel representing the Company
      for
      purposes of such Registration Statement, in form, scope and substance as is
      customarily given in an underwritten public offering, addressed to the
      Investors.

     

    i. If,
      after
      the execution of this Agreement, an Investor believes that it could reasonably
      be deemed to be an underwriter of Registrable Securities, upon the request
      of
      such Investor, the Company shall make available for inspection by (i) any
      Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents
      retained by the Investors (collectively, the "Inspectors"),
      all
      pertinent financial and other records, and pertinent corporate documents and
      properties of the Company (collectively, the "Records"),
      as
      shall be reasonably deemed necessary by each Inspector, and cause the Company's
      officers, directors and employees to supply all information which any Inspector
      may reasonably request; provided, however, that each Inspector shall agree
      to
      hold in strict confidence and shall not make any disclosure (except to an
      Investor) or use of any Record or other information which the Company determines
      in good faith to be confidential, and of which determination the Inspectors
      are
      so notified, unless (a) the disclosure of such Records is necessary to avoid
      or
      correct a misstatement or omission in any Registration Statement or is otherwise
      required under the 1933 Act, (b) the release of such Records is ordered pursuant
      to a final, non-appealable subpoena or order from a court or government body
      of
      competent jurisdiction, or (c) the information in such Records has been made
      generally available to the public other than by disclosure in violation of
      this
      or any other Transaction Document. Each Investor agrees that it shall, upon
      learning that disclosure of such Records is sought in or by a court or
      governmental body of competent jurisdiction or through other means, give prompt
      notice to the Company and allow the Company, at its expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, the Records deemed confidential. Nothing herein (or in any other
      confidentiality agreement between the Company and any Investor) shall be deemed
      to limit the Investors' ability to sell Registrable Securities in a manner
      which
      is otherwise consistent with applicable laws and regulations.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    j. The
      Company shall hold in confidence and not make any disclosure of information
      concerning an Investor provided to the Company unless (i) disclosure of such
      information is necessary to comply with federal or state securities laws, (ii)
      the disclosure of such information is necessary to avoid or correct a
      misstatement or omission in any Registration Statement, (iii) the release of
      such information is ordered pursuant to a subpoena or other final,
      non-appealable order from a court or governmental body of competent jurisdiction
      or (iv) such information has been made generally available to the public other
      than by disclosure in violation of this Agreement, any other agreement to which
      the Company is a party, or, to the Company's knowledge, any other agreement.
      The
      Company agrees that it shall, upon learning that disclosure of such information
      concerning an Investor is sought in or by a court or governmental body of
      competent jurisdiction or through other means, give prompt written notice to
      such Investor and allow such Investor, at the Investor's expense, to undertake
      appropriate action to prevent disclosure of, or to obtain a protective order
      for, such information.

     

    k. The
      Company shall use its reasonable best efforts either to (i) cause all of the
      Registrable Securities covered by a Registration Statement to be listed on
      each
      securities exchange on which securities of the same class or series issued
      by
      the Company are then listed, if any, if the listing of such Registrable
      Securities is then permitted under the rules of such exchange, or (ii) secure
      designation and quotation of all of the Registrable Securities covered by a
      Registration Statement on the American Stock Exchange or (iii) if, despite
      the
      Company's reasonable best efforts to satisfy, the preceding clauses (i) and
      (ii)
      the Company is unsuccessful in satisfying the preceding clauses (i) and (ii),
      to
      secure the inclusion for quotation on the The New York Stock Exchange, The
      NASDAQ Capital Market or The NASDAQ Global Market for such Registrable
      Securities and, without limiting the generality of the foregoing, to use its
      best efforts to arrange for at least two market makers to register with the
      Financial Industry Regulatory Authority (the "FINRA")
      as
      such with respect to such Registrable Securities. The Company shall pay all
      fees
      and expenses in connection with satisfying its obligation under this Section
      3(k).

     

    l. The
      Company shall cooperate with the Investors who hold Registrable Securities
      being
      offered and, to the extent applicable, facilitate the timely preparation and
      delivery of certificates (not bearing any restrictive legend) representing
      the
      Registrable Securities to be offered pursuant to a Registration Statement and
      enable such certificates to be in such denominations or amounts, as the case
      may
      be, as the Investors may reasonably request and registered in such names as
      the
      Investors may request.

     

    m. If
      requested by an Investor, the Company shall (i) as soon as practicable
      incorporate in a prospectus supplement or post-effective amendment such
      information as an Investor reasonably requests to be included therein relating
      to the sale and distribution of Registrable Securities, including, without
      limitation, information with respect to the number of Registrable Securities
      being offered or sold, the purchase price being paid therefor and any other
      terms of the offering of the Registrable Securities to be sold in such offering;
      (ii) as soon as practicable make all required filings of such prospectus
      supplement or post-effective amendment after being notified of the matters
      to be
      incorporated in such prospectus supplement or post-effective amendment; and
      (iii) as soon as practicable, supplement or make amendments to any Registration
      Statement if reasonably requested by an Investor holding any Registrable
      Securities.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    n. The
      Company shall use its reasonable best efforts to cause the Registrable
      Securities covered by a Registration Statement to be registered with or approved
      by such other governmental agencies or authorities as may be necessary to
      consummate the disposition of such Registrable Securities.

     

    o. The
      Company shall make generally available to its security holders as soon as
      practical, but not later than ninety (90) days after the close of the period
      covered thereby, an earnings statement (in form complying with, and in the
      manner provided by, the provisions of Rule 158 under the 1933 Act) covering
      a
      twelve-month period beginning not later than the first day of the Company's
      fiscal quarter next following the effective date of a Registration Statement.
      

     

    p. The
      Company shall otherwise use its reasonable best efforts to comply with all
      applicable rules and regulations of the SEC in connection with any registration
      hereunder.

     

    q. Within
      two (2) Business Days after a Registration Statement which covers Registrable
      Securities is ordered effective by the SEC, the Company shall deliver, and
      shall
      cause legal counsel for the Company (which may be the General Counsel of the
      Company) to deliver, to the transfer agent for such Registrable Securities
      (with
      copies to the Investors whose Registrable Securities are included in such
      Registration Statement) confirmation that such Registration Statement has been
      declared effective by the SEC in the form attached hereto as Exhibit
      A.

     

    r. Notwithstanding
      anything to the contrary herein, at any time after the Effective Date, the
      Company may delay the disclosure of material, non-public information concerning
      the Company the disclosure of which at the time is not, in the good faith
      opinion of the Board of Directors of the Company, in the best interest of the
      Company or otherwise required (a "Grace
      Period");
      provided, that the Company shall promptly (i) notify the Investors in writing
      of
      the existence of material, non-public information giving rise to a Grace Period
      (provided that in each notice the Company will not disclose the content of
      such
      material, non-public information to the Investors) and the date on which the
      Grace Period will begin, and (ii) notify the Investors in writing of the date
      on
      which the Grace Period ends; and, provided further, that no Grace Period shall
      exceed five (5) consecutive Trading Days and during any three hundred sixty
      five
      (365) day period such Grace Periods shall not exceed an aggregate of twenty
      (20)
      Trading Days and the first day of any Grace Period must be at least five (5)
      Trading Days after the last day of any prior Grace Period (each, an
      "Allowable
      Grace Period").
      For
      purposes of determining the length of a Grace Period above, the Grace Period
      shall begin on and include the date the Investors receive the notice referred
      to
      in clause (i) and shall end on and include the later of the date the Investors
      receive the notice referred to in clause (ii) and the date referred to in such
      notice. The provisions of Section 3(g) hereof shall not be applicable during
      the
      period of any Allowable Grace Period. Upon expiration of the Grace Period,
      the
      Company shall again be bound by the first sentence of Section 3(f) with respect
      to the information giving rise thereto unless such material, non-public
      information is no longer applicable. Notwithstanding anything to the contrary,
      the Company shall cause its transfer agent to deliver unlegended shares of
      Common Stock to a transferee of an Investor in accordance with the terms of
      the
      Securities Purchase Agreement in connection with any sale of Registrable
      Securities with respect to which an Investor has entered into a contract for
      sale, and delivered a copy of the prospectus included as part of the applicable
      Registration Statement (unless an exemption from such prospectus delivery
      requirement exists), prior to the Investor's receipt of the notice of a Grace
      Period and for which the Investor has not yet settled. For the avoidance of
      doubt, no portion of this Section 3(r) shall require, or be deemed to require,
      disclosure to the Investors of material, non-public information concerning
      the
      Company.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    4. Obligations
      of the Investors.

     

    a. At
      least
      five (5) Business Days prior to the first anticipated filing date of a
      Registration Statement, the Company shall notify each Investor in writing of
      the
      information the Company requires from each such Investor if such Investor elects
      to have any of such Investor's Registrable Securities included in such
      Registration Statement. It shall be a condition precedent to the obligations
      of
      the Company to complete the registration pursuant to this Agreement with respect
      to the Registrable Securities of a particular Investor that such Investor shall
      furnish to the Company such information regarding itself, the Registrable
      Securities held by it and the intended method of disposition of the Registrable
      Securities held by it as shall be reasonably required to effect the
      effectiveness of the registration of such Registrable Securities and shall
      execute such documents in connection with such registration as the Company
      may
      reasonably request. 

     

    b. Each
      Investor, by such Investor's acceptance of the Registrable Securities, agrees
      to
      cooperate with the Company as reasonably requested by the Company in connection
      with the preparation and filing of any Registration Statement hereunder, unless
      such Investor has notified the Company in writing of such Investor's election
      to
      exclude all of such Investor's Registrable Securities from such Registration
      Statement.

     

    c. Each
      Investor agrees that, upon receipt of any notice from the Company of the
      happening of any event of the kind described in Section 3(g) or the first
      sentence of 3(f), such Investor will immediately discontinue disposition of
      Registrable Securities pursuant to any Registration Statement(s) covering such
      Registrable Securities until such Investor's receipt of the copies of the
      supplemented or amended prospectus contemplated by Section 3(g) or the first
      sentence of 3(f) or receipt of notice that no supplement or amendment is
      required. Notwithstanding anything to the contrary, the Company shall cause
      its
      transfer agent to deliver unlegended shares of Common Stock to a transferee
      of
      an Investor in accordance with the terms of the Securities Purchase Agreement
      in
      connection with any sale of Registrable Securities with respect to which an
      Investor has entered into a contract for sale prior to the Investor's receipt
      of
      a notice from the Company of the happening of any event of the kind described
      in
      Section 3(g) or the first sentence of 3(f) and for which the Investor has not
      yet settled.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    d. Each
      Investor covenants and agrees that it will comply with the prospectus delivery
      requirements of the 1933 Act as applicable to it or an exemption therefrom
      in
      connection with sales of Registrable
      Securities pursuant to the Registration Statement.

     

    5. Expenses
      of Registration.

     

    All
      reasonable expenses, other than underwriting discounts and commissions incurred
      in connection with registrations, filings or qualifications pursuant to Sections
      2 and 3, including, without limitation, all registration, listing and
      qualifications fees, printers and accounting fees, and fees and disbursements
      of
      counsel for the Company, shall be paid by the Company. The Company shall also
      reimburse the Investors for the fees and disbursements of Legal Counsel in
      connection with registration, filing or qualification pursuant to Sections
      2 and
      3 of this Agreement which amount shall be limited to $20,000 for
      each such registration, filing or qualification.

     

    6. Indemnification.

     

    In
      the
      event any Registrable Securities are included in a Registration Statement under
      this Agreement:

     

    a. To
      the
      fullest extent permitted by law, the Company will, and hereby does, indemnify,
      hold harmless and defend each Investor, the directors, officers, members,
      partners, employees, agents, representatives of, and each Person, if any, who
      controls any Investor within the meaning of the 1933 Act or the 1934 Act (each,
      an "Indemnified
      Person"),
      against any losses, claims, damages, liabilities, judgments, fines, penalties,
      charges, costs, reasonable attorneys' fees, amounts paid in settlement or
      expenses, joint or several, (collectively, "Claims")
      incurred in investigating, preparing or defending any action, claim, suit,
      inquiry, proceeding, investigation or appeal taken from the foregoing by or
      before any court or governmental, administrative or other regulatory agency,
      body or the SEC, whether pending or threatened, whether or not an indemnified
      party is or may be a party thereto ("Indemnified
      Damages"),
      to
      which any of them may become subject insofar as such Claims (or actions or
      proceedings, whether commenced or threatened, in respect thereof) arise out
      of
      or are based upon: (i) any untrue statement or alleged untrue statement of
      a
      material fact in a Registration Statement or any post-effective amendment
      thereto or in any filing made in connection with the qualification of the
      offering under the securities or other "blue sky" laws of any jurisdiction
      in
      which Registrable Securities are offered ("Blue
      Sky Filing"),
      or
      the omission or alleged omission to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading, (ii) any
      untrue statement or alleged untrue statement of a material fact contained in
      any
      preliminary prospectus if used prior to the effective date of such Registration
      Statement, or contained in the final prospectus (as amended or supplemented,
      if
      the Company files any amendment thereof or supplement thereto with the SEC)
      or
      the omission or alleged omission to state therein any material fact necessary
      to
      make the statements made therein, in the light of the circumstances under which
      the statements therein were made, not misleading, (iii) any violation or alleged
      violation by the Company of the 1933 Act, the 1934 Act, any other law,
      including, without limitation, any state securities law, or any rule or
      regulation thereunder relating to the offer or sale of the Registrable
      Securities pursuant to a Registration Statement or (iv) any violation of this
      Agreement (the matters in the foregoing clauses (i) through (iv) being,
      collectively, "Violations").
      Subject to Section 6(c), the Company shall reimburse the Indemnified Persons,
      promptly as such expenses are incurred and are due and payable, for any legal
      fees or other reasonable expenses incurred by them in connection with
      investigating or defending any such Claim. Notwithstanding anything to the
      contrary contained herein, the indemnification agreement contained in this
      Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising
      out of or based upon a Violation which occurs in reliance upon and in conformity
      with information furnished in writing to the Company by such Indemnified Person
      for such Indemnified Person expressly for use in connection with the preparation
      of the Registration Statement or any such amendment thereof or supplement
      thereto, if such prospectus was timely made available by the Company pursuant
      to
      Section 3(d) and (ii) shall not apply to amounts paid in settlement of any
      Claim
      if such settlement is effected without the prior written consent of the Company,
      which consent shall not be unreasonably withheld or delayed. Such indemnity
      shall remain in full force and effect regardless of any investigation made
      by or
      on behalf of the Indemnified Person and shall survive the transfer of the
      Registrable Securities by the Investors pursuant to Section 9.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    b. In
      connection with any Registration Statement in which an Investor is
      participating, each such Investor agrees to severally and not jointly indemnify,
      hold harmless and defend, to the same extent and in the same manner as is set
      forth in Section 6(a), the Company, each of its directors, each of its officers
      who signs the Registration Statement and each Person, if any, who controls
      the
      Company within the meaning of the 1933 Act or the 1934 Act (each, an
      "Indemnified
      Party"),
      against any Claim or Indemnified Damages to which any of them may become
      subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
      or
      Indemnified Damages arise out of or are based upon any Violation, in each case
      to the extent, and only to the extent, that such Violation occurs in reliance
      upon and in conformity with written information furnished to the Company by
      such
      Investor expressly for use in connection with such Registration Statement;
      and,
      subject to Section 6(c), such Investor shall reimburse the Indemnified Party,
      promptly as such expenses are incurred and are due and payable, for any legal
      fees or other reasonable expenses incurred by it in connection with
      investigating or defending any such Claim; provided, however, that the indemnity
      agreement contained in this Section 6(b) and the agreement with respect to
      contribution contained in Section 7 shall not apply to amounts paid in
      settlement of any Claim if such settlement is effected without the prior written
      consent of such Investor, which consent shall not be unreasonably withheld
      or
      delayed; provided, further, however, that the Investor shall be liable under
      this Section 6(b) for only that amount of a Claim or Indemnified Damages as
      does
      not exceed the net proceeds to such Investor as a result of the sale of
      Registrable Securities pursuant to such Registration Statement. Such indemnity
      shall remain in full force and effect regardless of any investigation made
      by or
      on behalf of such Indemnified Party and shall survive the transfer of the
      Registrable Securities by the Investors pursuant to Section 9. 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    c. Promptly
      after receipt by an Indemnified Person or Indemnified Party under this Section
      6
      of notice of the commencement of any action or proceeding (including any
      governmental action or proceeding) involving a Claim, such Indemnified Person
      or
      Indemnified Party shall, if a Claim in respect thereof is to be made against
      any
      indemnifying party under this Section 6, deliver to the indemnifying party
      a
      written notice of the commencement thereof, and the indemnifying party shall
      have the right to participate in, and, to the extent the indemnifying party
      so
      desires, jointly with any other indemnifying party similarly noticed, to assume
      control of the defense thereof with counsel mutually satisfactory to the
      indemnifying party and the Indemnified Person or the Indemnified Party, as
      the
      case may be; provided,
      however,
      that an
      Indemnified Person or Indemnified Party shall have the right to retain its
      own
      counsel with the fees and expenses of not more than one counsel for such
      Indemnified Person or Indemnified Party to be paid by the indemnifying party,
      if, in the reasonable opinion of counsel retained by the indemnifying party,
      the
      representation by such counsel of the Indemnified Person or Indemnified Party
      and the indemnifying party would be inappropriate due to actual or potential
      differing interests between such Indemnified Person or Indemnified Party and
      any
      other party represented by such counsel in such proceeding. In the case of
      an
      Indemnified Person, legal counsel referred to in the immediately preceding
      sentence shall be selected by the Investors holding at least a
      majority in
      interest of the Registrable Securities included in the Registration Statement
      to
      which the Claim relates. The Indemnified Party or Indemnified Person shall
      cooperate fully with the indemnifying party in connection with any negotiation
      or defense of any such action or Claim by the indemnifying party and shall
      furnish to the indemnifying party all information reasonably available to the
      Indemnified Party or Indemnified Person which relates to such action or Claim.
      The indemnifying party shall keep the Indemnified Party or Indemnified Person
      reasonably apprised at all times as to the status of the defense or any
      settlement negotiations with respect thereto. No indemnifying party shall be
      liable for any settlement of any action, claim or proceeding effected without
      its prior written consent; provided,
      however,
      that
      the indemnifying party shall not unreasonably withhold, delay or condition
      its
      consent. No indemnifying party shall, without the prior written consent of
      the
      Indemnified Party or Indemnified Person, consent to entry of any judgment or
      enter into any settlement or other compromise which does not include as an
      unconditional term thereof the giving by the claimant or plaintiff to such
      Indemnified Party or Indemnified Person of a release from all liability in
      respect to such Claim or litigation, and such settlement shall not include
      any
      admission as to fault on the part of the Indemnified Party. Following
      indemnification as provided for hereunder, the indemnifying party shall be
      subrogated to all rights of the Indemnified Party or Indemnified Person with
      respect to all third parties, firms or corporations relating to the matter
      for
      which indemnification has been made. The failure to deliver written notice
      to
      the indemnifying party within a reasonable time of the commencement of any
      such
      action shall not relieve such indemnifying party of any liability to the
      Indemnified Person or Indemnified Party under this Section 6, except to the
      extent that the indemnifying party is prejudiced in its ability to defend such
      action.

     

    d. The
      indemnification required by this Section 6 shall be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as and
      when bills are received or Indemnified Damages are incurred.

     

    e. The
      indemnity agreements contained herein shall be in addition to (i) any cause
      of
      action or similar right of the Indemnified Party or Indemnified Person against
      the indemnifying party or others, and (ii) any liabilities the indemnifying
      party may be subject to pursuant to the law.

     

    7. Contribution.

     

    To
      the
      extent any indemnification by an indemnifying party is prohibited or limited
      by
      law, the indemnifying party agrees to make the maximum contribution with respect
      to any amounts for which it would otherwise be liable under Section 6 to the
      fullest extent permitted by law; provided,
      however,
      that:
      (i) no Person involved in the sale of Registrable Securities, which Person
      is
      guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
      of
      the 1933 Act) in connection with such sale, shall be entitled to contribution
      from any Person involved in such sale of Registrable Securities who was not
      guilty of fraudulent misrepresentation; and (ii) contribution by any seller
      of
      Registrable Securities shall be limited in amount to the amount of net proceeds
      received by such seller from the sale of such Registrable Securities pursuant
      to
      such Registration Statement. 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    8. Reports
      Under the 1934 Act.
      

     

    With
      a
      view to making available to the Investors the benefits of Rule 144 promulgated
      under the 1933 Act or any other similar rule or regulation of the SEC that
      may
      at any time permit the Investors to sell securities of the Company to the public
      without registration ("Rule
      144"),
      the
      Company agrees to:

     

    a. make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144;

     

    b. file
      with
      the SEC in a timely manner all reports and other documents required of the
      Company under the 1933 Act and the 1934 Act so long as the Company remains
      subject to such requirements and the filing of such reports and other documents
      is required for the applicable provisions of Rule 144; and

     

    c. furnish
      to each Investor so long as such Investor owns Registrable Securities, promptly
      upon request, (i) a written statement by the Company, if true, that it has
      complied with the reporting requirements of Rule 144, the 1933 Act and the
      1934
      Act, (ii) a copy of the most recent annual or quarterly report of the Company
      and such other reports and documents so filed by the Company and (iii) such
      other information as may be reasonably requested to permit the Investors to
      sell
      such securities pursuant to Rule 144 without registration.

     

    9. Assignment
      of Registration Rights.
      

     

    The
      rights under this Agreement shall be automatically assignable by the Investors
      to any transferee of all or any portion of such Investor's Registrable
      Securities if: (i) the Investor agrees in writing with the transferee or
      assignee to assign such rights and a copy of such agreement is furnished to
      the
      Company within a reasonable time after such assignment; (ii) the Company is,
      within a reasonable time after such transfer or assignment, furnished with
      written notice of (a) the name and address of such transferee or assignee and
      (b) the securities with respect to which such registration rights are being
      transferred or assigned; (iii) immediately following such transfer or assignment
      the further disposition of such securities by the transferee or assignee is
      restricted under the 1933 Act or applicable state securities laws; (iv) at
      or
      before the time the Company receives the written notice contemplated by clause
      (ii) of this sentence the transferee or assignee agrees in writing with the
      Company to be bound by all of the provisions contained herein; and (v) such
      transfer shall have been made in accordance with the applicable requirements
      of
      the Securities Purchase Agreement.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    10. Amendment
      of Registration Rights.

     

    Provisions
      of this Agreement may be amended and the observance thereof may be waived
      (either generally or in a particular instance and either retroactively or
      prospectively), only with the written consent of the Company and the Required
      Holders. Any amendment or waiver effected in accordance with this Section 10
      shall be binding upon each Investor and the Company. No such amendment shall
      be
      effective to the extent that it applies to less than all of the Investors.
      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 this Agreement unless the
      same
      consideration also is offered to all of the parties to this
      Agreement.

     

    11. Miscellaneous.

     

    a. A
      Person
      is deemed to be a holder of Registrable Securities whenever such Person owns
      or
      is deemed to own of record such Registrable Securities. If the Company receives
      conflicting instructions, notices or elections from two or more Persons with
      respect to the same Registrable Securities, the Company shall act upon the
      basis
      of instructions, notice or election received from the record owner of such
      Registrable Securities.

     

    b. 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 (1) Business Day after deposit with a nationally recognized
      overnight delivery 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:   
      (775)
      860-0318

    Attention:   
      Craig
      Ellins

    


    Copy
      (for
      information purposes) 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

    


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    If
      to
      Legal Counsel:

    


    
      	 	 	
              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 a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers
      attached hereto, with copies to such Buyer's representatives as set forth on
      the
      Schedule of Buyers, 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 a courier or overnight courier
      service shall be rebuttable evidence of personal service, receipt by facsimile
      or receipt from a nationally recognized overnight delivery service in accordance
      with clause (i), (ii) or (iii) above, respectively.

     

    c. Failure
      of any party to exercise any right or remedy under this Agreement or otherwise,
      or delay by a party in exercising such right or remedy, shall not operate as
      a
      waiver thereof.

     

    d. 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.
      If any provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction. 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 HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
      CONTEMPLATED HEREBY.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    e. This
      Agreement, the other Transaction Documents and the instruments referenced herein
      and therein constitute the entire agreement among the parties hereto with
      respect to the subject matter hereof and thereof. There are no restrictions,
      promises, warranties or undertakings, other than those set forth or referred
      to
      herein and therein. This Agreement, the other Transaction Documents and the
      instruments referenced herein and therein supersede all prior agreements and
      understandings among the parties hereto with respect to the subject matter
      hereof and thereof.

     

    f. Subject
      to the requirements of Section 9, this Agreement shall inure to the benefit
      of
      and be binding upon the permitted successors and assigns of each of the parties
      hereto.

     

    g. The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

     

    h. This
      Agreement may be executed in identical counterparts, each of which shall be
      deemed an original but all of which shall constitute one and the same agreement.
      This Agreement, once executed by a party, may be delivered to the other party
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.

     

    i. 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 any 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.

     

    j. All
      consents and other determinations required to be made by the Investors pursuant
      to this Agreement shall be made, unless otherwise specified in this Agreement,
      by the Required Holders.

     

    k. 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. 

     

    l. 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.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    m. The
      obligations of each Investor hereunder are several and not joint with the
      obligations of any other Investor, and no provision of this Agreement is
      intended to confer any obligations on any Investor vis-à-vis any other Investor.
      Nothing contained herein, and no action taken by any Investor pursuant hereto,
      shall be deemed to constitute the 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 with respect to such
      obligations or the transactions contemplated herein.

     

    *
      * * * *
      *

    


    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    



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

     

    
      	 	
              COMPANY:

            
	 	 
	 	
              DIGITALFX
                INTERNATIONAL, INC.

            
	 	 
	 	 
	 	 
	 	
              By: __________________________________

              Name:  
                

              Title:    

            
	 	 


    

    


    



    
      
        
          Signature
            Page of the Registration Rights Agreement

        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


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

     

    


    
      	 	
              BUYERS:

            
	 	 
	 	
              PORTSIDE
                GROWTH AND OPPORTUNITY FUND

            
	 	 
	 	 
	 	 
	 	
              By: __________________________________

              Name:  
                

              Title:    

            
	 	 


    

    



    
      
        
          Signature
            Page of the Registration Rights Agreement

        

      

      
        
        

        
          

        

      

      
        
        

      

    


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

     

    


    
      	 	 
	 	 
	 	
              HIGHBRIDGE
                INTERNATIONAL LLC

            
	 	 
	 	 
	 	 
	 	
              By: __________________________________

              Name:  
                

              Title:    

            
	 	 


    

    


    


     


    
      
        
          
            	 	
                    Signature
                      Page of the Registration Rights Agreement

                  	 


          

          


        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          


        

      

    



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

     

    


    
      	 	 
	 	 
	 	
              IROQUOIS
                MASTER FUND, LTD.

            
	 	 
	 	 
	 	 
	 	
              By: __________________________________

              Name:  
                

              Title:    

            
	 	 


    

    


    
      Signature
        Page of the Registration Rights Agreement