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      [FORM
        OF AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE NOTE]

       

      NEITHER
        THE ISSUANCE AND SALE OF THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE
        IS
        CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
        OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE OFFERED
        FOR
        SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
        REGISTRATION STATEMENT FOR THESE SECURITIES UNDER THE SECURITIES ACT OF 1933,
        AS
        AMENDED, OR (B) AN OPINION OF COUNSEL, IN A REASONABLY ACCEPTABLE FORM, THAT
        REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
        TO RULE
        144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES
        MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
        OR
        FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE
        SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii)
        AND
        18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY,
        THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS
        SET
        FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS
        NOTE.

       

      DigitalFX
        International, Inc.

       

      Amended
        and Restated Senior Secured Convertible Note

       

      
        	
                Issuance
                  Date: November 30, 2007

              	
                Original
                  Principal Amount: U.S.$[____________]1

              

      

      
         

      

      FOR
        VALUE RECEIVED,
        DigitalFX International, Inc., a Florida corporation (the "Company"),
        hereby promises to pay to [PORTSIDE GROWTH AND OPPORTUNITY FUND][HIGHBRIDGE
        INTERNATIONAL LLC][IROQUOIS MASTER FUND, LTD.]
        or
        registered assigns ("Holder")
        the
        amount set out above as the Original Principal Amount (as reduced pursuant
        to
        the terms hereof pursuant to redemption, conversion or otherwise, the
        "Principal")
        when
        due, whether upon the Maturity Date (as defined below), on any Installment
        Date
        with respect to the Installment Due on such Installment Date (each as defined
        herein), acceleration, redemption or otherwise (in each case in accordance
        with
        the terms hereof) and to pay interest ("Interest")
        on any
        outstanding Principal at the applicable Interest Rate, from the date set
        out
        above as the Issuance Date (the "Issuance Date")
        until
        the same becomes due and payable, whether upon an Interest Date (as defined
        below), any Installment Date, the Maturity Date, acceleration, conversion,
        redemption or otherwise (in each case in accordance with the terms hereof).
        This
        Amended and Restated Senior Secured Convertible Note amends, supplements,
        modifies and completely restates and supersedes the Senior Secured Convertible
        Note, dated as of the Issuance Date (the "Existing
        Note"),
        issued by the Company to the Holder with an Original Principal Amount of
        $_______, but shall not, except as specifically amended hereby or as set
        forth
        in the Holder's Amendment and Exchange Agreement (as defined below), constitute
        a release, satisfaction or novation of any of the obligations under the Existing
        Note or any other Transaction Document (as defined in the Securities Purchase
        Agreement). This Amended and Restated Senior Secured Convertible Note (including
        all Senior Secured Convertible Notes issued in exchange, transfer or replacement
        hereof, this "Note")
        is one
        of an issue of Amended and Restated Senior Secured Convertible Notes
        (collectively, the "Notes"
        and
        such other Amended and Restated Senior Secured Convertible Notes, the
        "Other Notes")
        amending and restating the terms of the Existing Note pursuant to Section
        1 of
        those certain Amendment and Exchange Agreements, dated as of March 24, 2008
        (the
        "Replacement
        Date"),
        by
        and between each of the Buyers (as defined in the Securities Purchase Agreement)
        and the Company (individually, with respect to any Buyer, the "Amendment
        and
        Exchange Agreement" and collectively, with respect to all Buyers, the
        "Amendment
        and Exchange Agreements").
        Certain capitalized terms used herein are defined in Section 29.

      
        
          
            

          

        

        1 Insert
          amount equal to current Principal amount of Existing Note minus such Holder's
          pro rata amount of $4,000,000.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (1) PAYMENTS
        OF PRINCIPAL.
        On each
        Installment Date, the Company shall pay to the Holder an amount equal to
        the
        Installment Amount due on such Installment Date in accordance with Section
        8. On
        the Maturity Date, the Company shall pay to the Holder an amount in cash
        representing all outstanding Principal, accrued and unpaid Interest and accrued
        and unpaid Late Charges, if any, on such Principal and Interest. The
        "Maturity Date"
        shall
        be November 30, 2010, as may be extended at the option of the Holder (i)
        in the
        event that, and for so long as, an Event of Default (as defined in Section
        4(a))
        shall have occurred and be continuing on the Maturity Date (as may be extended
        pursuant to this Section 1) or any event that shall have occurred and be
        continuing that with the passage of time and the failure to cure would result
        in
        an Event of Default and (ii) through the date that is ten (10) Business Days
        after the consummation of a Change of Control in the event that a Change
        of
        Control is publicly announced or a Change of Control Notice (as defined in
        Section 5(b)) is delivered prior to the Maturity Date. Other than as
        specifically permitted by this Note, the Company may not prepay any portion
        of
        the outstanding Principal, accrued and unpaid Interest or accrued and unpaid
        Late Charges, if any, on such Principal and Interest.

       

      (2) INTEREST;
        INTEREST RATE.
        Interest
        on this Note shall commence accruing on the Replacement Date and shall be
        computed on the basis of a 360-day year comprised of twelve (12) thirty (30)
        day
        months and shall be payable in arrears for each Calendar Quarter on the first
        day of the succeeding Calendar Quarter during the period beginning on the
        Issuance Date and ending on, and including, the Maturity Date (each, an
        "Interest Date")
        with
        the first Interest Date being July 1, 2008, in cash. Prior to the payment
        of
        Interest on an Interest Date, Interest on this Note shall accrue at the Interest
        Rate and be payable by way of inclusion of the Interest in the Conversion
        Amount
        in accordance with Section 3(b)(i). From and after the occurrence of an Event
        of
        Default, the Interest Rate shall be increased to twelve percent (12.0%).
        In the
        event that such Event of Default is subsequently cured, the adjustment referred
        to in the preceding sentence shall cease to be effective as of the date of
        such
        cure; provided that the Interest as calculated at such increased rate during
        the
        continuance of such Event of Default shall continue to apply to the extent
        relating to the days after the occurrence of such Event of Default through
        and
        including the date of cure of such Event of Default.

       

      (3) CONVERSION
        OF NOTES.
        This
        Note shall be convertible into shares of the Company's common stock, par
        value
        $0.001 per share (the "Common
        Stock"),
        on
        the terms and conditions set forth in this Section 3.

       

      (a) Conversion
        Right.
        Subject
        to the provisions of Section 3(d), at any time or times on or after the Issuance
        Date, the Holder shall be entitled to convert any portion of the outstanding
        and
        unpaid Conversion Amount (as defined below) into fully paid and nonassessable
        shares of Common Stock in accordance with Section 3(c), at the Conversion
        Rate
        (as defined below). The Company shall not issue any fraction of a share of
        Common Stock upon any conversion. If the issuance would result in the issuance
        of a fraction of a share of Common Stock, the Company shall round such fraction
        of a share of Common Stock up to the nearest whole share. The Company shall
        pay
        any and all taxes that may be payable with respect to the issuance and delivery
        of Common Stock upon conversion of any Conversion Amount.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      (b) Conversion
        Rate.
        The
        number of shares of Common Stock issuable upon conversion of any Conversion
        Amount pursuant to Section 3(a) shall be determined by dividing (x) such
        Conversion Amount by (y) the Conversion Price (the "Conversion
        Rate").

       

      (i) "Conversion
        Amount"
        means
        the sum of (A) the portion of the Principal to be converted, redeemed or
        otherwise with respect to which this determination is being made, (B) accrued
        and unpaid Interest with respect to such Principal and (C) accrued and unpaid
        Late Charges with respect to such Principal and Interest.

       

      (ii) "Conversion
        Price"
        means,
        as of any Conversion Date (as defined below) or other date of determination,
        $[___]2,
        subject
        to adjustment as provided herein.

       

      (c) Mechanics
        of Conversion.

       

      (i) Optional
        Conversion.
        To
        convert any Conversion Amount into shares of Common Stock on any date (a
        "Conversion
        Date"),
        the
        Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
        on or
        prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice
        of conversion in the form attached hereto as Exhibit
        I
        (the
        "Conversion
        Notice")
        to the
        Company and (B) if required by Section 3(c)(iii), surrender this Note to
        a
        common carrier for delivery to the Company as soon as practicable on or
        following such date (or an indemnification undertaking with respect to this
        Note
        in the case of its loss, theft or destruction). On or before the first
        (1st)
        Trading
        Day following the date of receipt of a Conversion Notice, the Company shall
        transmit by facsimile a confirmation of receipt of such Conversion Notice
        to the
        Holder and the Company's transfer agent (the "Transfer
        Agent").
        On or
        before the second (2nd)
        Trading
        Day following the date of receipt of a Conversion Notice (the "Share
        Delivery Date"),
        the
        Company shall (x) provided that the Transfer Agent is participating in the
        Depository Trust Company ("DTC")
        Fast
        Automated Securities Transfer Program, credit such aggregate number of shares
        of
        Common Stock to which the Holder shall be entitled to the Holder's or its
        designee's balance account with DTC through its Deposit Withdrawal Agent
        Commission system or (y) if the Transfer Agent is not participating in the
        DTC
        Fast Automated Securities Transfer Program, issue and deliver to the address
        as
        specified in the Conversion Notice, a certificate, registered in the name
        of the
        Holder or its designee, for the number of shares of Common Stock to which
        the
        Holder shall be entitled. If this Note is physically surrendered for conversion
        as required by Section 3(c)(iii) and the outstanding Principal of this Note
        is
        greater than the Principal portion of the Conversion Amount being converted,
        then the Company shall as soon as practicable and in no event later than
        three
        (3) Business Days after receipt of this Note and at its own expense, issue
        and
        deliver to the holder a new Note (in accordance with Section 18(d)) representing
        the outstanding Principal not converted. The Person or Persons entitled to
        receive the shares of Common Stock issuable upon a conversion of this Note
        shall
        be treated for all purposes as the record holder or holders of such shares
        of
        Common Stock on the Conversion Date. In the event of a partial conversion
        of
        this Note pursuant hereto, the principal amount converted shall be deducted
        from
        the Installment Amounts relating to the Installment Dates or from the Maturity
        Date Payment or from any other amount owing from the Company pursuant hereto
        as
        set forth by the Holder in the Conversion Notice.

      
        
          
            

          

          2 Insert
            price equal to the greater of (i) 105% of the arithmetic average of the
            Weighted
            Average Price of the Common Stock for the five (5) Trading Day period
            ending on
            the Trading Day immediately prior to the Replacement Date and (ii)
            $2.00.

        

      

      
        
          
          

        

        
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      (ii) Company's
        Failure to Timely Convert.
        If
        within three (3) Trading Days after the Company's receipt of the facsimile
        copy
        of a Conversion Notice the Company shall fail to issue and deliver a certificate
        to the Holder or credit the Holder's balance account with DTC for the number
        of
        shares of Common Stock to which the Holder is entitled upon conversion of
        any
        Conversion Amount (a "Conversion
        Failure"),
        then
        (A) the Company shall pay damages to the Holder for each day of such Conversion
        Failure in an amount equal to 1.5% of the product of (I) the sum of the number
        of shares of Common Stock not issued to the Holder on or prior to the Share
        Delivery Date and to which the Holder is entitled, and (II) the Closing Sale
        Price of the Common Stock on the Share Delivery Date and (B) the Holder,
        upon
        written notice to the Company, may void its Conversion Notice with respect
        to,
        and retain or have returned, as the case may be, any portion of this Note
        that
        has not been converted pursuant to such Conversion Notice; provided
        that the
        voiding of a Conversion Notice shall not affect the Company's obligations
        to
        make any payments which have accrued prior to the date of such notice pursuant
        to this Section 3(c)(ii) or otherwise. In addition to the foregoing, if within
        three (3) Trading Days after the Company's receipt of the facsimile copy
        of a
        Conversion Notice the Company shall fail to issue and deliver a certificate
        to
        the Holder or credit the Holder's balance account with DTC for the number
        of
        shares of Common Stock to which the Holder is entitled upon such holder's
        conversion of any Conversion Amount, and if on or after such Trading Day
        the
        Holder purchases (in an open market transaction or otherwise) Common Stock
        to
        deliver in satisfaction of a sale by the Holder of Common Stock issuable
        upon
        such conversion that the Holder anticipated receiving from the Company (a
        "Buy-In"),
        then
        the Company shall, within three (3) Trading Days after the Holder's request
        and
        in the Holder's discretion, either (i) pay cash to the Holder in an amount
        equal
        to the Holder's total purchase price (including brokerage commissions and
        other
        out-of-pocket expenses, if any) for the shares of Common Stock so purchased
        (the
"Buy-In
        Price"),
        at
        which point the Company's obligation to issue and deliver such certificate
        or to
        credit the Holder's balance account with DTC for the number of shares of
        Common
        Stock to which the Holder is entitled upon such Holder's conversion of any
        Conversion Amount shall terminate, or (ii) promptly honor its obligation
        to
        deliver to the Holder a certificate or certificates representing such Common
        Stock and pay cash to the Holder in an amount equal to the excess (if any)
        of
        the Buy-In Price over the product of (A) such number of shares of Common
        Stock,
        times (B) the Closing Bid Price on the Conversion Date.

       

      (iii) Registration;
        Book-Entry.
        The
        Company shall maintain a register (the "Register")
        for
        the recordation of the names and addresses of the holders of each Note and
        the
        principal amount of the Notes held by such holders (the "Registered
        Notes").
        The
        entries in the Register shall be conclusive and binding for all purposes
        absent
        manifest error. The Company and the holders of the Notes shall treat each
        Person
        whose name is recorded in the Register as the owner of a Note for all purposes,
        including, without limitation, the right to receive payments of principal
        and
        interest hereunder, notwithstanding notice to the contrary. A Registered
        Note
        may be assigned or sold in whole or in part only by registration of such
        assignment or sale on the Register. Upon its receipt of a request to assign
        or
        sell all or part of any Registered Note by a Holder, the Company shall record
        the information contained therein in the Register and issue one or more new
        Registered Notes in the same aggregate principal amount as the principal
        amount
        of the surrendered Registered Note to the designated assignee or transferee
        pursuant to Section 18. Notwithstanding anything to the contrary set forth
        herein, upon conversion of any portion of this Note in accordance with the
        terms
        hereof, the Holder shall not be required to physically surrender this Note
        to
        the Company unless (A) the full Conversion Amount represented by this Note
        is
        being converted or (B) the Holder has provided the Company with prior written
        notice (which notice may be included in a Conversion Notice) requesting
        reissuance of this Note upon physical surrender of this Note. The Holder
        and the
        Company shall maintain records showing the Principal, Interest and Late Charges,
        if any, converted and the dates of such conversions or shall use such other
        method, reasonably satisfactory to the Holder and the Company, so as not
        to
        require physical surrender of this Note upon conversion.

      
        
          
          

        

        
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      (iv) Pro
        Rata Conversion; Disputes.
        In the
        event that the Company receives a Conversion Notice from more than one holder
        of
        Notes for the same Conversion Date and the Company can convert some, but
        not
        all, of such portions of the Notes submitted for conversion, the Company,
        subject to Section 3(d), shall convert from each holder of Notes electing
        to
        have Notes converted on such date a pro rata amount of such holder's portion
        of
        its Notes submitted for conversion based on the principal amount of Notes
        submitted for conversion on such date by such holder relative to the aggregate
        principal amount of all Notes submitted for conversion on such date. In the
        event of a dispute as to the number of shares of Common Stock issuable to
        the
        Holder in connection with a conversion of this Note, the Company shall issue
        to
        the Holder the number of shares of Common Stock not in dispute and resolve
        such
        dispute in accordance with Section 23.

       

      (v) Company's
        Right of Mandatory Conversion.
        

       

      (A) Mandatory
        Conversion.
        If at
        any time from and after the one (1) year anniversary of the Issuance Date
        (the
        "Mandatory
        Conversion Eligibility Date"),
        (i)
        the Weighted Average Price of the Common Stock equals or exceeds for each
        of any
        twenty (20) out of thirty (30) consecutive Trading Days following the Mandatory
        Conversion Eligibility Date (the "Mandatory
        Conversion Measuring Period")
        $2.75
        (as adjusted for any stock splits, stock dividends, recapitalizations,
        combinations, reverse stock splits or other similar events during such period)
        and (ii) there shall not have been any Equity Conditions Failure, the Company
        shall have the right to require the Holder to convert all, or any portion,
        of
        the Conversion Amount then remaining under this Note into fully paid, validly
        issued and nonassessable shares of Common Stock in accordance with
        Section 3(c) hereof at the Conversion Rate as of the Mandatory Conversion
        Date (as defined below) with respect to the Conversion Amount (a "Mandatory
        Conversion");
        provided, however, that the Company cannot require the Holder to convert
        any
        Conversion Amount that would result in the issuance of shares of Common Stock
        in
        excess of the Share Cap (as defined below). The Company may exercise its
        right
        to require conversion under this Section 3(c)(v)(A) by delivering within
        not
        more than two (2) Trading Days following
        the end of any such Mandatory Conversion Measuring Period a
        written
        notice thereof by facsimile and overnight courier to all, but not less than
        all,
        of the holders of Notes and the Transfer Agent (the "Mandatory
        Conversion Notice"
        and the
        date all of the holders received such notice is referred to as the "Mandatory
        Conversion Notice Date").
        The
        Company may deliver one (1) Mandatory Conversion Notice hereunder and the
        Mandatory Conversion Notice shall be irrevocable. The Mandatory Conversion
        Notice shall state (1) the Trading Day selected for the Mandatory Conversion
        in
        accordance herewith, which Trading Day shall be at least twenty (20) Trading
        Days but not more than sixty (60) Trading Days following the Mandatory
        Conversion Notice Date (the "Mandatory
        Conversion Date"),
        (2)
        the aggregate Conversion Amount of the Notes subject to mandatory conversion
        from all of the holders of the Notes pursuant hereto (and analogous provisions
        under the Other Notes) and (3) the number of shares of Common Stock to be
        issued
        to the Holder on the Mandatory Conversion Date. All Conversion Amounts converted
        by the Holder after the Mandatory Conversion Notice Date shall reduce the
        Conversion Amount of this Note required to be converted on the Mandatory
        Conversion Date. The mechanics of conversion set forth in Section 3(c) shall
        apply to any Mandatory Conversion as if the Company and the Transfer Agent
        had
        received from the Holder on the Mandatory Conversion Date a Conversion Notice
        with respect to the Conversion Amount being converted pursuant to the Mandatory
        Conversion. Notwithstanding the foregoing, if the Company cannot effect a
        Mandatory Conversion, in whole or in part, of the Conversion Amount of this
        Note
        (such portion, the "Unconverted
        Amount")
        as
        contemplated in any Mandatory Conversion Notice due to the limitation on
        conversions set forth in Section 3(d)(i), then, as of the applicable Mandatory
        Conversion Date, Interest on such Unconverted Amount shall cease to accrue
        and
        such Unconverted Amount shall be converted in accordance with Section 3(c)(i)
        on
        such date such conversion is permitted under Section 3(d)(i). 

      
        
          
          

        

        
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      (B) Pro
        Rata Conversion Requirement.
        If the
        Company elects to cause a conversion of any Conversion Amount of this Note
        pursuant to Section 3(c)(v)(A), then it must simultaneously take the same
        action
        in the same proportion with respect to the Other Notes. If the Company elects
        a
        Mandatory Conversion of this Note pursuant to Section 3(c)(v)(A) (or similar
        provisions under the Other Notes) with respect to less than all of the
        Conversion Amounts of the Notes then outstanding, then the Company shall
        require
        conversion of a Conversion Amount from each of the holders of the Notes equal
        to
        the product of (I) the aggregate Conversion Amount of Notes which the Company
        has elected to cause to be converted pursuant to Section 3(c)(v)(A), multiplied
        by (II) the fraction, the numerator of which is the sum of the aggregate
        Original Principal Amount of the Notes purchased by such holder of outstanding
        Notes and the denominator of which is the sum of the aggregate Original
        Principal Amount of the Notes purchased by all holders holding outstanding
        Notes
        (such fraction with respect to each holder is referred to as its "Conversion Allocation
        Percentage,"
        and
        such amount with respect to each holder is referred to as its "Pro
        Rata Conversion Amount");
        provided, however, that in the event that any holder's Pro Rata Conversion
        Amount exceeds the outstanding Principal amount of such holder's Note, then
        such
        excess Pro Rata Conversion Amount shall be allocated amongst the remaining
        holders of Notes in accordance with the foregoing formula. In the event that
        the
        initial holder of any Notes shall sell or otherwise transfer any of such
        holder's Notes, the transferee shall be allocated a pro rata portion of such
        holder's Conversion Allocation Percentage and the Pro Rata Conversion
        Amount.

       

      (d) Limitations
        on Conversions.
        

       

      (i) Beneficial
        Ownership.
        The
        Company shall not effect any conversion of this Note, and the Holder of this
        Note shall not have the right to convert any portion of this Note pursuant
        to
        Section 3(a), to the extent that after giving effect to such conversion,
        the
        Holder (together with the Holder's affiliates) would beneficially own in
        excess
        of 4.99% (the "Maximum
        Percentage")
        of the
        number of shares of Common Stock outstanding immediately after giving effect
        to
        such conversion. For purposes of the foregoing sentence, the number of shares
        of
        Common Stock beneficially owned by the Holder and its affiliates shall include
        the number of shares of Common Stock issuable upon conversion of this Note
        with
        respect to which the determination of such sentence is being made, but shall
        exclude the number of shares of Common Stock which would be issuable upon
        (A)
        conversion of the remaining, nonconverted portion of this Note beneficially
        owned by the Holder or any of its affiliates and (B) exercise or conversion
        of the unexercised or nonconverted portion of any other securities of the
        Company (including, without limitation, any Other Notes or Warrants) subject
        to
        a limitation on conversion or exercise analogous to the limitation contained
        herein beneficially owned by the Holder or any of its affiliates. Except
        as set
        forth in the preceding sentence, for purposes of this Section 3(d)(i),
        beneficial ownership shall be calculated in accordance with Section 13(d)
        of the
        Securities Exchange Act of 1934, as amended (the "Exchange
        Act").
        For
        purposes of this Section 3(d)(i), in determining the number of outstanding
        shares of Common Stock, the Holder may rely on the number of outstanding
        shares
        of Common Stock as reflected in (x) the Company's most recent Form 10-K,
        Form
        10-KSB Form 10-Q, Form 10-QSB or Form 8-K, as the case may be, (y) a more
        recent
        public announcement by the Company or (z) any other notice by the Company
        or the
        Transfer Agent setting forth the number of shares of Common Stock outstanding.
        For any reason at any time, upon the written request of the Holder, the Company
        shall within one (1) Business Day confirm in writing to the Holder the number
        of
        shares of Common Stock then outstanding. In any case, the number of outstanding
        shares of Common Stock shall be determined after giving effect to the conversion
        or exercise of securities of the Company, including this Note, by the Holder
        or
        its affiliates since the date as of which such number of outstanding shares
        of
        Common Stock was reported. By written notice to the Company, the Holder may
        from
        time to time increase or decrease the Maximum Percentage to any other percentage
        not in excess of 9.99% specified in such notice; provided that (i) any such
        increase will not be effective until the sixty-first (61st)
        day
        after such notice is delivered to the Company, and (ii) any such increase
        or
        decrease will apply only to the Holder and not to any other holder of
        Notes.

      
        
          
          

        

        
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      (ii) Principal
        Market Regulation.
        The
        Company shall not be obligated to issue any shares of Common Stock upon
        conversion of this Note, and the Holder of this Note shall not have the right
        to
        receive upon conversion of this Note any shares of Common Stock, if the issuance
        of such shares of Common Stock would exceed the aggregate number of shares
        of
        Common Stock which the Company may issue upon conversion or exercise, as
        applicable, of the Notes and Warrants without breaching the Company's
        obligations under the rules or regulations of the Principal Market (which
        the
        parties acknowledge is currently 19.99% of the outstanding shares of Common
        Stock on the date immediately prior to the Replacement Date) (the "Exchange
        Cap"),
        except that such limitation shall not apply in the event that the Company
        (A)
        obtains the approval of its stockholders as required by the applicable rules
        of
        the Principal Market for issuances of Common Stock in excess of such amount
        or
        (B) obtains a written opinion from outside counsel to the Company that such
        approval is not required, which opinion shall be reasonably satisfactory
        to the
        Required Holders. Until such approval or written opinion is obtained, no
        purchaser of the Notes pursuant to the Securities Purchase Agreement (each
        a
        "Purchaser"
        and,
        collectively, the "Purchasers")
        shall
        be issued in the aggregate, upon conversion or exercise, as applicable, of
        Notes
        or Warrants, shares of Common Stock in an amount greater than the product
        of the
        Exchange Cap multiplied by a fraction, the numerator of which is the principal
        amount of Notes issued to each Purchaser pursuant to the Securities Purchase
        Agreement on the Closing Date and the denominator of which is the aggregate
        principal amount of all Notes issued to the Purchasers pursuant to the
        Securities Purchase Agreement on the Closing Date (with respect to each
        Purchaser, the "Exchange
        Cap Allocation").
        In
        the event that any Purchaser shall sell or otherwise transfer any of such
        Purchaser's Notes, the transferee shall be allocated a pro rata portion of
        such
        Purchaser's Exchange Cap Allocation, and the restrictions of the prior sentence
        shall apply to such transferee with respect to the portion of the Exchange
        Cap
        Allocation allocated to such transferee. In the event that any holder of
        Notes
        shall convert all of such holder's Notes into a number of shares of Common
        Stock
        which, in the aggregate, is less than such holder's Exchange Cap Allocation,
        then the difference between such holder's Exchange Cap Allocation and the
        number
        of shares of Common Stock actually issued to such holder shall be allocated
        to
        the respective Exchange Cap Allocations of the remaining holders of Notes
        on a
        pro rata basis in proportion to the aggregate principal amount of the Notes
        then
        held by each such holder.

       

      (iii) No
        Conversion in Excess of Cap.
        Notwithstanding anything herein to the contrary, the Company shall not be
        obligated to issue shares of Common Stock upon conversion of the Notes and
        the
        exercise of the Warrants in excess of 45,000,000 in the aggregate (the
        "Share
        Cap").
        To
        the extent that any conversion hereunder would require the Company to issue
        shares in excess of the Share Cap, the Company shall only be obligated to
        issue
        to the Holder upon such conversion that amount of shares which would not
        exceed
        the Share Cap. 

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      (4) RIGHTS
        UPON EVENT OF DEFAULT.

       

      (a) Event
        of Default.
        Each of
        the following events shall constitute an "Event
        of Default":

       

      (i) the
        failure of the applicable Registration Statement (as defined in the Registration
        Rights Agreement) required to be filed pursuant to the Registration Rights
        Agreement to be declared effective by the SEC on or prior to the date that
        is
        sixty (60) days after the Effectiveness Deadline (as defined in the Registration
        Rights Agreement), or, while the applicable Registration Statement is required
        to be maintained effective pursuant to the terms of the Registration Rights
        Agreement, the effectiveness of the applicable Registration Statement lapses
        for
        any reason (including, without limitation, the issuance of a stop order)
        or is
        unavailable to any holder of the Notes for sale of all of such holder's
        Registrable Securities (as defined in the Registration Rights Agreement)
        required to be registered in accordance with the terms of the Registration
        Rights Agreement, and such lapse or unavailability continues for a period
        of ten
        (10) consecutive days or for more than an aggregate of thirty (30) days in
        any
        365-day period (other than days during an Allowable Grace Period (as defined
        in
        the Registration Rights Agreement));

       

      (ii) the
        suspension from trading or failure of the Common Stock to be listed on an
        Eligible Market for a period of five (5) consecutive Trading Days or for
        more
        than an aggregate of ten (10) Trading Days in any 365-day period;

       

      (iii) the
        Company's (A) failure to cure a Conversion Failure by delivery of the required
        number of shares of Common Stock within ten (10) Business Days after the
        applicable Conversion Date or (B) notice, written or oral, to any holder
        of the
        Notes, including by way of public announcement or through any of its agents,
        at
        any time, of its intention not to comply with a request for conversion of
        any
        Notes into shares of Common Stock that is tendered in accordance with the
        provisions of the Notes;

       

      (iv) at
        any
        time following the tenth (10th)
        consecutive Business Day that the Holder's Authorized Share Allocation is
        less
        than the number of shares of Common Stock that the Holder would be entitled to
        receive upon a conversion of the full Conversion Amount of this Note (without
        regard to any limitations on conversion set forth in Section 3(d) or
        otherwise);

       

      (v) the
        Company's failure to pay to the Holder any amount of Principal, Redemption
        Price, Interest, Late Charges or other amounts when and as due under this
        Note
        or any other Transaction Document (as defined in the Securities Purchase
        Agreement) or any other agreement, document, certificate or other instrument
        delivered in connection with the transactions contemplated hereby and thereby
        to
        which the Holder is a party, except, in the case of a failure to pay Interest
        and Late Charges when and as due, in which case only if such failure continues
        for a period of at least three (3) Business Days;

       

      (vi) any
        default under, redemption of or acceleration prior to maturity of any
        Indebtedness of the Company or any of its Subsidiaries (as defined in Section
        3(a) of the Securities Purchase Agreement), other than with respect to any
        Other
        Notes;

      
        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        

      

      (vii) the
        Company or any of its Subsidiaries pursuant to or within the meaning of Title
        11, U.S. Code, or any similar Federal, foreign or state law for the relief
        of
        debtors (collectively, "Bankruptcy
        Law"),
        (A)
        commences a voluntary case, (B) consents to the entry of an order for relief
        against it in an involuntary case, (C) consents to the appointment of a
        receiver, trustee, assignee, liquidator or similar official (a "Custodian"),
        (D)
        makes a general assignment for the benefit of its creditors or (E) admits
        in
        writing that it is generally unable to pay its debts as they become
        due;

       

      (viii) a
        court
        of competent jurisdiction enters an order or decree under any Bankruptcy
        Law
        that (A) is for relief against the Company or any of its Subsidiaries in
        an
        involuntary case, (B) appoints a Custodian of the Company or any of its
        Subsidiaries or (C) orders the liquidation of the Company or any of its
        Subsidiaries;

       

      (ix) a
        final
        judgment or judgments for the payment of money aggregating in excess of the
        Judgment Default Amount are rendered against the Company or any of its
        Subsidiaries and which judgments are not, within sixty (60) days after the
        entry
        thereof, bonded, discharged or stayed pending appeal, or are not discharged
        within sixty (60) days after the expiration of such stay; provided, however,
        that any judgment which is covered by insurance or an indemnity from a
        creditworthy party shall not be included in calculating the Judgment Default
        Amount so long as the Company provides the Holder a written statement from
        such
        insurer or indemnity provider (which written statement shall be reasonably
        satisfactory to the Holder) to the effect that such judgment is covered by
        insurance or an indemnity and the Company will receive the proceeds of such
        insurance or indemnity within thirty (30) days of the issuance of such
        judgment;

       

      (x) the
        Company breaches any representation, warranty, covenant or other term or
        condition of any Transaction Document, except, in the case of a breach of
        a
        covenant which is curable, only if such breach continues for a period of
        at
        least ten (10) consecutive Business Days;

       

      (xi) any
        breach or failure in any respect to comply with Section 14 of this Note or
        any
        Financial Covenant Failure (as defined below), except, in the case of a breach
        of a covenant which is curable, only if such breach continues for a period
        of at
        least ten (10) consecutive Business Days; 

       

      (xii) a
        Public
        Information Failure (as defined in the Amendment and Exchange Agreement)
        only if
        such failure continues for a period of at least three (3) consecutive Business
        Days; or

       

      (xiii) any
        Event
        of Default (as defined in the Other Notes) occurs with respect to any Other
        Notes.

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      (b) Redemption
        Right.
        Upon
        the occurrence of an Event of Default with respect to this Note or any Other
        Note, the Company shall within one (1) Business Day deliver written notice
        thereof via facsimile and overnight courier (an "Event
        of Default Notice")
        to the
        Holder. At any time after the earlier of the Holder's receipt of an Event
        of
        Default Notice and the Holder becoming aware of an Event of Default, the
        Holder
        may require the Company to redeem all or any portion of this Note by delivering
        written notice thereof (the "Event
        of Default Redemption Notice")
        to the
        Company, which Event of Default Redemption Notice shall indicate the portion
        of
        this Note the Holder is electing to redeem; provided, that notwithstanding
        the
        foregoing, solely with respect to any Event of Default set forth in Sections
        4(a)(ii) and (iv), the Holder may not submit an Event of Default Redemption
        Notice after the thirtieth (30th) Business Day after the later of (x) the
        date
        such Event of Default is cured or otherwise resolved and (y) the date the
        Company delivers the Event of Default Notice with respect to such Event of
        Default to the Holder. Each portion of this Note subject to redemption by
        the
        Company pursuant to this Section 4(b) shall be redeemed by the Company at
        a
        price equal to the greater of (i) the product of (A) the Conversion Amount
        to be
        redeemed and (B) the Redemption Premium and (ii) the product of (A) the
        Conversion Rate with respect to such Conversion Amount in effect at such
        time as
        the Holder delivers an Event of Default Redemption Notice and (B) the greater
        of
        (I) the Closing Sale Price of the Common Stock on the date immediately preceding
        such Event of Default, (II) the Closing Sale Price of the Common Stock on
        the
        date immediately after such Event of Default and (III) the Closing Sale Price
        of
        the Common Stock on the date the Holder delivers the Event of Default Redemption
        Notice (the "Event
        of Default Redemption
        Price").
        Redemptions required by this Section 4(b) shall be made in accordance with
        the
        provisions of Section 12. To the extent redemptions required by this Section
        4(b) are deemed or determined by a court of competent jurisdiction to be
        prepayments of the Note by the Company, such redemptions shall be deemed
        to be
        voluntary prepayments. The parties hereto agree that in the event of the
        Company's redemption of any portion of the Note under this Section 4(b),
        the
        Holder's damages would be uncertain and difficult to estimate because of
        the
        parties' inability to predict future interest rates and the uncertainty of
        the
        availability of a suitable substitute investment opportunity for the Holder.
        Accordingly, any Redemption Premium due under this Section 4(b) is intended
        by
        the parties to be, and shall be deemed, a reasonable estimate of the Holder's
        actual loss of its investment opportunity and not as a penalty. In the event
        of
        a partial redemption of this Note pursuant hereto, the principal amount redeemed
        shall be deducted from the Installment Amounts relating to the applicable
        Installment Dates or from the Maturity Date Payment or from any other amount
        owing from the Company pursuant hereto as set forth in the Event of Default
        Redemption Notice.

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      (5) RIGHTS
        UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

       

      (a) Assumption.
        The
        Company shall not enter into or be party to a Fundamental Transaction unless
        (i)  the Successor Entity assumes in writing all of the obligations of the
        Company under this Note and the other Transaction Documents in accordance
        with
        the provisions of this Section 5(a) pursuant to written agreements in form
        and
        substance satisfactory to the Required Holders and approved by the Required
        Holders prior to such Fundamental Transaction, including agreements to deliver
        to each holder of Notes in exchange for such Notes a security of the Successor
        Entity evidenced by a written instrument substantially similar in form and
        substance to the Notes, including, without limitation, having a principal
        amount
        and interest rate equal to the principal amounts then outstanding and the
        interest rates of the Notes held by such holder, having similar conversion
        rights as the Notes and having similar ranking to the Notes, and satisfactory
        to
        the Required Holders and (ii) the Successor Entity (including its Parent
        Entity) is a publicly traded corporation whose common stock is quoted on
        or
        listed for trading on an Eligible Market. Upon the occurrence of any Fundamental
        Transaction, the Successor Entity shall succeed to, and be substituted for
        (so
        that from and after the date of such Fundamental Transaction, the provisions
        of
        this Note referring to the "Company" shall refer instead to the Successor
        Entity), and may exercise every right and power of the Company and shall
        assume
        all of the obligations of the Company under this Note with the same effect
        as if
        such Successor Entity had been named as the Company herein. Upon consummation
        of
        the Fundamental Transaction, the Successor Entity shall deliver to the Holder
        confirmation that there shall be issued upon conversion or redemption of
        this
        Note at
        any
        time after the consummation of the Fundamental Transaction, in lieu of the
        shares of Common Stock (or
        other
        securities, cash, assets or other property) issuable
        upon the conversion or redemption of the Notes prior to such Fundamental
        Transaction,
        such
        shares of the publicly traded common stock (or their equivalent) of the
        Successor Entity, as adjusted in accordance with the provisions of this Note.
        The
        provisions of this Section shall apply similarly and equally to successive
        Fundamental Transactions and shall be applied without regard to any limitations
        on the conversion or redemption of this Note.

       

      (b) Redemption
        Right.
        No
        sooner than fifteen (15) days nor later than ten (10) days prior to the
        consummation of a Change of Control, but not prior to the public announcement
        of
        such Change of Control, the Company shall deliver written notice thereof
        via
        facsimile and overnight courier to the Holder (a "Change
        of Control Notice").
        At
        any time during the period beginning on the date of the Holder's receipt
        of a
        Change of Control Notice and ending twenty (20) Trading Days after the
        consummation of such Change of Control, the Holder may require the Company
        to
        redeem all or any portion of this Note by delivering written notice thereof
        ("Change
        of Control Redemption Notice")
        to the
        Company, which Change of Control Redemption Notice shall indicate the Conversion
        Amount the Holder is electing to redeem. The portion of this Note subject
        to
        redemption pursuant to this Section 5 shall be redeemed by the Company in
        cash
        at a price equal to the greater of (i) the product of (x) the Conversion
        Amount
        being redeemed and (y) the quotient determined by dividing (A) the greater
        of
        the Closing Sale Price of the Common Stock immediately prior to the consummation
        of the Change of Control, the Closing Sale Price immediately following the
        public announcement of such proposed Change of Control and the Closing Sale
        Price of the Common Stock immediately prior to the public announcement of
        such
        proposed Change of Control by (B) the Conversion Price and (ii) 125% of the
        Conversion Amount being redeemed (the "Change
        of Control Redemption Price").
        Redemptions required by this Section 5 shall be made in accordance with the
        provisions of Section 12 and shall have priority to payments to stockholders
        in
        connection with a Change of Control. To the extent redemptions required by
        this
        Section 5(b) are deemed or determined by a court of competent jurisdiction
        to be
        prepayments of the Note by the Company, such redemptions shall be deemed
        to be
        voluntary prepayments. Notwithstanding anything to the contrary in this Section
        5, but subject to Section 3(d), until the Change of Control Redemption Price
        (together with any interest thereon) is paid in full, the Conversion Amount
        submitted for redemption under this Section 5(c) may be converted, in whole
        or
        in part, by the Holder into shares of Common Stock, or in the event the
        Conversion Date is after the consummation of the Change of Control, shares
        of
        publicly traded common stock (or their equivalent) of the Successor Entity
        pursuant to Section 3. The parties hereto agree that in the event of the
        Company's redemption of any portion of the Note under this Section 5(b),
        the
        Holder's damages would be uncertain and difficult to estimate because of
        the
        parties' inability to predict future interest rates and the uncertainty of
        the
        availability of a suitable substitute investment opportunity for the Holder.
        Accordingly, any redemption premium due under this Section 5(b) is intended
        by
        the parties to be, and shall be deemed, a reasonable estimate of the Holder's
        actual loss of its investment opportunity and not as a penalty. In the event
        of
        a partial redemption of this Note pursuant hereto, the principal amount redeemed
        shall be deducted from the Installment Amounts relating to the applicable
        Installment Dates or from the Maturity Date Payment or from any other amount
        owing from the Company pursuant hereto as set forth as set forth in the Change
        of Control Redemption Notice.

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      (6) RIGHTS
        UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

       

      (a) Purchase
        Rights.
        If at
        any time the Company grants, issues or sells any Options, Convertible Securities
        or rights to purchase stock, warrants, securities or other property pro rata
        to
        the record holders of any class of Common Stock (the "Purchase
        Rights"),
        then
        the Holder will be entitled to acquire, upon the terms applicable to such
        Purchase Rights, the aggregate Purchase Rights which the Holder could have
        acquired if the Holder had held the number of shares of Common Stock acquirable
        upon complete conversion of this Note (without taking into account any
        limitations or restrictions on the convertibility of this Note) immediately
        before the date on which a record is taken for the grant, issuance or sale
        of
        such Purchase Rights, or, if no such record is taken, the date as of which
        the
        record holders of Common Stock are to be determined for the grant, issue
        or sale
        of such Purchase Rights.

       

      (b) Other
        Corporate Events.
        In
        addition to and not in substitution for any other rights hereunder, prior
        to the
        consummation of any Fundamental Transaction pursuant to which holders of
        shares
        of Common Stock are entitled to receive securities or other assets with respect
        to or in exchange for shares of Common Stock (a "Corporate
        Event"),
        the
        Company shall make appropriate provision to insure that the Holder will
        thereafter have the right to receive upon a conversion of this Note, at the
        Holder's option, (i) in addition to the shares of Common Stock receivable
        upon
        such conversion, such securities or other assets to which the Holder would
        have
        been entitled with respect to such shares of Common Stock had such shares
        of
        Common Stock been held by the Holder upon the consummation of such Corporate
        Event (without taking into account any limitations or restrictions on the
        convertibility of this Note) or (ii) in lieu of the shares of Common Stock
        otherwise receivable upon such conversion, such securities or other assets
        received by the holders of shares of Common Stock in connection with the
        consummation of such Corporate Event in such amounts as the Holder would
        have
        been entitled to receive had this Note initially been issued with conversion
        rights for the form of such consideration (as opposed to shares of Common
        Stock)
        at a conversion rate for such consideration commensurate with the Conversion
        Rate. Provision made pursuant to the preceding sentence shall be in a form
        and
        substance satisfactory to the Required Holders. The provisions of this Section
        shall apply similarly and equally to successive Corporate Events and shall
        be
        applied without regard to any limitations on the conversion or redemption
        of
        this Note.

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      (7) RIGHTS
        UPON ISSUANCE OF OTHER SECURITIES.

       

      (a) Adjustment
        of Conversion Price upon Issuance of Common Stock.
        If and
        whenever on or after the Subscription Date through the eighteen (18) month
        anniversary of the Issuance Date, the Company issues or sells, or in accordance
        with this Section 7(a) is deemed to have issued or sold, any shares
        of
Common
        Stock (including the issuance or sale of shares
        of
Common
        Stock owned or held by or for the account of the Company, but excluding
shares
        of
Common
        Stock deemed to have been issued or sold by the Company in connection with
        any
        Excluded Security) for a consideration per share (the "New
        Issuance Price")
        less
        than a price (the "Applicable
        Price")
        equal
        to $1.20 (as adjusted for any stock splits, stock dividends, recapitalizations,
        combinations, reverse stock splits or other similar events) (the foregoing
        a
        "Dilutive
        Issuance"),
        then
        immediately after such Dilutive Issuance, the Conversion Price then in effect
        shall be reduced to an amount equal to the
        New
        Issuance Price. If
        and
        whenever after the eighteen (18) month anniversary of the Issuance Date,
        the
        Company issues or sells, or in accordance with this Section 7(a) is deemed
        to
        have issued or sold, any shares
        of
Common
        Stock (including the issuance or sale of shares
        of
Common
        Stock owned or held by or for the account of the Company, but excluding
shares
        of
Common
        Stock deemed to have been issued or sold by the Company in connection with
        any
        Excluded Security) in a Dilutive Issuance, then immediately after such Dilutive
        Issuance, the Conversion Price then in effect shall be reduced to an amount
        equal the
        product of (A) the Conversion Price in effect immediately prior to such
        Dilutive Issuance and (B) the quotient determined by dividing (1) the
        sum of (I) the product derived by multiplying the Conversion Price in effect
        immediately prior to such Dilutive Issuance and the number of shares of Common
        Stock Deemed Outstanding immediately prior to such Dilutive Issuance plus
        (II) the consideration, if any, received by the Company upon such Dilutive
        Issuance, by (2) the product derived by multiplying (I) the Conversion
        Price in effect immediately prior to such Dilutive Issuance by (II) the
        number of shares of Common Stock Deemed Outstanding immediately after such
        Dilutive Issuance. For
        purposes of determining the adjusted Conversion Price under this Section
        7(a),
        the following shall be applicable:

       

      (i) Issuance
        of Options.
        If the
        Company in any manner grants or sells any Options and the lowest price per
        share
        for which one share
        of
Common
        Stock is issuable upon the exercise of any such Option or upon conversion
        or
        exchange or exercise of any Convertible Securities issuable upon exercise
        of
        such Option is less than the Applicable Price, then each such share
        of
Common
        Stock underlying such Option shall be deemed to be outstanding and to have
        been
        issued and sold by the Company at the time of the granting or sale of such
        Option for such price per share. For purposes of this Section 7(a)(i), the
        "lowest price per share for which one share
        of
Common
        Stock is issuable upon the exercise of any such Option or upon conversion
        or
        exchange or exercise of any Convertible Securities issuable upon exercise
        of
        such Option" shall be equal to the sum of the lowest amounts of consideration
        (if any) received or receivable by the Company with respect to any one
share
        of
Common
        Stock upon granting or sale of the Option, upon exercise of the Option and
        upon
        conversion or exchange or exercise of any Convertible Security issuable upon
        exercise of such Option. No further adjustment of the Conversion Price shall
        be
        made upon the actual issuance of such share of Common Stock or of such
        Convertible Securities upon the exercise of such Options or upon the actual
        issuance of such Common Stock upon conversion or exchange or exercise of
        such
        Convertible Securities.

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      (ii) Issuance
        of Convertible Securities.
        If the
        Company in any manner issues or sells any Convertible Securities and the
        lowest
        price per share for which one share of Common Stock is issuable upon such
        conversion or exchange or exercise thereof is less than the Applicable Price,
        then each such share of Common Stock underlying such Convertible Securities
        shall be deemed to be outstanding and to have been issued and sold by the
        Company at the time of the issuance or sale of such Convertible Securities
        for
        such price per share. For the purposes of this Section 7(a)(ii), the "lowest
        price per share for which one share of Common Stock is issuable upon such
        conversion or exchange or exercise" shall be equal to the sum of the lowest
        amounts of consideration (if any) received or receivable by the Company with
        respect to any one share of Common Stock upon the issuance or sale of the
        Convertible Security and upon the conversion or exchange or exercise of such
        Convertible Security. No further adjustment of the Conversion Price shall
        be
        made upon the actual issuance of such share of Common Stock upon conversion
        or
        exchange or exercise of such Convertible Securities, and if any such issue
        or
        sale of such Convertible Securities is made upon exercise of any Options
        for
        which adjustment of the Conversion Price had been or are to be made pursuant
        to
        other provisions of this Section 7(a), no further adjustment of the Conversion
        Price shall be made by reason of such issue or sale.

       

      (iii) Change
        in Option Price or Rate of Conversion.
        If the
        purchase price provided for in any Options, the additional consideration,
        if
        any, payable upon the issue, conversion, exchange or exercise of any Convertible
        Securities, or the rate at which any Convertible Securities are convertible
        into
        or exchangeable or exercisable for Common Stock changes at any time, the
        Conversion Price in effect at the time of such change shall be adjusted to
        the
        Conversion Price which would have been in effect at such time had such Options
        or Convertible Securities provided for such changed purchase price, additional
        consideration or changed conversion rate, as the case may be, at the time
        initially granted, issued or sold. For purposes of this Section 7(a)(iii),
        if
        the terms of any Option or Convertible Security that was outstanding as of
        the
        Subscription Date are changed in the manner described in the immediately
        preceding sentence, then such Option or Convertible Security and the Common
        Stock deemed issuable upon exercise, conversion or exchange thereof shall
        be
        deemed to have been issued as of the date of such change. No adjustment shall
        be
        made if such adjustment would result in an increase of the Conversion Price
        then
        in effect.

       

      (iv) Calculation
        of Consideration Received.
        In case
        any Option is issued in connection with the issue or sale of other securities
        of
        the Company, together comprising one integrated transaction, (x) the Options
        will be deemed to have been issued for a value determined by use of the Black
        Scholes Option Pricing Model (the "Option
        Value")
        and
        (y) the other securities issued or sold in such integrated transaction shall
        be
        deemed to have been issued for the difference of (I) the aggregate consideration
        received by the Company, less (II) the Option Value. If any Common Stock,
        Options or Convertible Securities are issued or sold or deemed to have been
        issued or sold for cash, the consideration received therefor will be deemed
        to
        be the net amount received by the Company therefor. If any Common Stock,
        Options
        or Convertible Securities are issued or sold for a consideration other than
        cash, the amount of the consideration other than cash received by the Company
        will be the fair value of such consideration, except where such consideration
        consists of securities, in which case the amount of consideration received
        by
        the Company will be the Closing Sale Price of such securities on the date
        of
        receipt. If any Common Stock, Options or Convertible Securities are issued
        to
        the stockholders of the non-surviving entity in connection with any merger
        in
        which the Company is the surviving entity, the amount of consideration therefor
        will be deemed to be the fair value of such portion of the net assets and
        business of the non-surviving entity as is attributable to such Common Stock,
        Options or Convertible Securities, as the case may be. The fair value of
        any
        consideration other than cash or securities will be determined jointly by
        the
        Company and the Required Holders. If such parties are unable to reach agreement
        within ten (10) days after the occurrence of an event requiring valuation
        (the
        "Valuation
        Event"),
        the
        fair value of such consideration will be determined, at the Company's expense,
        within five (5) Business Days after the tenth (10th)
        day
        following the Valuation Event by an independent, reputable appraiser jointly
        selected by the Company and the Required Holders. The determination of such
        appraiser shall be deemed binding upon all parties absent manifest error.
        

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      (v) Record
        Date.
        If the
        Company takes a record of the holders of Common Stock for the purpose of
        entitling them (A) to receive a dividend or other distribution payable in
        Common
        Stock, Options or in Convertible Securities or (B) to subscribe for or purchase
        Common Stock, Options or Convertible Securities, then such record date will
        be
        deemed to be the date of the issue or sale of the Common Stock deemed to
        have
        been issued or sold upon the declaration of such dividend or the making of
        such
        other distribution or the date of the granting of such right of subscription
        or
        purchase, as the case may be.

       

      (b) Adjustment
        of Conversion Price upon Subdivision or Combination of Common
        Stock.
        If the
        Company at any time on or after the Subscription Date subdivides (by any
        stock
        split, stock dividend, recapitalization or otherwise) one or more classes
        of its
        outstanding shares of Common Stock into a greater number of shares, the
        Conversion Price in effect immediately prior to such subdivision will be
        proportionately reduced. If the Company at any time on or after the Subscription
        Date combines (by combination, reverse stock split or otherwise) one or more
        classes of its outstanding shares of Common Stock into a smaller number of
        shares, the Conversion Price in effect immediately prior to such combination
        will be proportionately increased.

       

      (c) Other
        Events.
        If any
        event occurs of the type contemplated by the provisions of this Section 7
        but
        not expressly provided for by such provisions (including, without limitation,
        the granting of stock appreciation rights, phantom stock rights or other
        rights
        with equity features), then the Company's Board of Directors will make an
        appropriate adjustment in the Conversion Price so as to protect the rights
        of
        the Holder under this Note; provided that no such adjustment will increase
        the
        Conversion Price as otherwise determined pursuant to this Section
        7.

       

      (d) De
        Minimis Adjustments.
        No
        adjustment in the Conversion Price shall be required unless such adjustment
        would require an increase or decrease of at least $0.01 in such price; provided,
        however, that any adjustment which by reason of this Section 7(d) is not
        required to be made shall be carried forward and taken into account in any
        subsequent adjustments under this Section 7. All calculations under this
        Section
        7 shall be made by the Company in good faith and shall be made to the nearest
        cent or to the nearest one hundredth of a share, as applicable. No adjustment
        need be made for a change in the par value or no par value of the Company's
        Common Stock.

      
        
          
          

        

        
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      (e) Voluntary
        Adjustment By Company.
        The
        Company may at any time during the term of this Note reduce the then current
        Conversion Price to any amount and for any period of time deemed appropriate
        by
        the Board of Directors of the Company.

       

      (f) Adjustment
        of Conversion Price.
        On
        March 26, 2009 (the "Adjustment
        Date"),
        the
        Conversion Price shall be reset to the Adjustment Price.

       

      (8) INSTALLMENTS.
        On each
        applicable Installment Date, the Company shall pay to the Holder of this
        Note
        the Installment Amount due as of such date. The Installment Amount shall
        be
        payable by the Company in cash on the applicable Installment Date by wire
        transfer of immediately available funds. Notwithstanding anything to the
        contrary in this Section 8 until the applicable Installment Amount (together
        with any interest thereon) is paid in full, the Installment Amount (together
        with any interest thereon) may be converted, in whole or in part, by the
        Holder
        into Common Stock pursuant to Section 3. In the event the Holder elects to
        convert all or any portion of the Installment Amount prior to the applicable
        Installment Date as set forth in the immediately preceding sentence, the
        Conversion Amount so converted shall be deducted from the Installment Amounts
        relating to the Installment Dates as set forth in the applicable Conversion
        Notice. 

       

      (9) SECURITY.
        This
        Note and the Other Notes are secured to the extent and in the manner set
        forth
        in the Security Documents (as defined in the Securities Purchase
        Agreement).

       

      (10) NONCIRCUMVENTION.
        The
        Company hereby covenants and agrees that the Company will not, by amendment
        of
        its Certificate of Incorporation, Bylaws or through any reorganization, transfer
        of assets, consolidation, merger, scheme of arrangement, dissolution, issue
        or
        sale of securities, or any other voluntary action, avoid or seek to avoid
        the
        observance or performance of any of the terms of this Note, and will at all
        times in good faith carry out all of the provisions of this Note and take
        all
        action as may be required to protect the rights of the Holder of this Note.
        

       

      (11) RESERVATION
        OF AUTHORIZED SHARES.

       

      (a) Reservation.
        The
        Company shall initially reserve out of its authorized and unissued Common
        Stock
        a number of shares of Common Stock for each of the Notes equal to 130% of
        the
        Conversion Rate with respect to the Conversion Amount of each such Note as
        of
        the Issuance Date.
        So
        long as any of the Notes are outstanding, the Company shall take all action
        necessary to reserve and keep available out of its authorized and unissued
        Common Stock, solely for the purpose of effecting the conversion of the Notes,
        130% of the number of shares of Common Stock as shall from time to time be
        necessary to effect the conversion of all of the Notes then outstanding;
        provided that at no time shall the number of shares of Common Stock so reserved
        be less than the number of shares required to be reserved by the previous
        sentence (without regard to any limitations on conversions) (the "Required
        Reserve Amount").
        The
        initial number of shares of Common Stock reserved for conversions of the
        Notes
        and each increase in the number of shares so reserved shall be allocated
        pro
        rata among the holders of the Notes based on the principal amount of the
        Notes
        held by each holder at the Closing (as defined in the Securities Purchase
        Agreement) or increase in the number of reserved shares, as the case may
        be (the
        "Authorized
        Share Allocation").
        In
        the event that a holder shall sell or otherwise transfer any of such holder's
        Notes, each transferee shall be allocated a pro rata portion of such holder's
        Authorized Share Allocation. Any shares of Common Stock reserved and allocated
        to any Person which ceases to hold any Notes shall be allocated to the remaining
        holders of Notes, pro rata based on the principal amount of the Notes then
        held
        by such holders.

      
        
          
          

        

        
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      (b) Insufficient
        Authorized Shares.
        If at
        any time while any of the Notes remain outstanding the Company does not have
        a
        sufficient number of authorized and unreserved shares of Common Stock to
        satisfy
        its obligation to reserve for issuance upon conversion of the Notes at least
        a
        number of shares of Common Stock equal to the Required Reserve Amount (an
        "Authorized
        Share Failure"),
        then
        the Company shall immediately take all action necessary to increase the
        Company's authorized shares of Common Stock to an amount sufficient to allow
        the
        Company to reserve the Required Reserve Amount for the Notes then outstanding.
        Without limiting the generality of the foregoing sentence, as soon as
        practicable after the date of the occurrence of an Authorized Share Failure,
        but
        in no event later than sixty (60) days after the occurrence of such Authorized
        Share Failure, the Company shall hold a meeting of its stockholders for the
        approval of an increase in the number of authorized shares of Common Stock.
        In
        connection with such meeting, the Company shall provide each stockholder
        with a
        proxy statement and shall use its best efforts to solicit its stockholders'
        approval of such increase in authorized shares of Common Stock and to cause
        its
        board of directors to recommend to the stockholders that they approve such
        proposal.

       

      (12) HOLDER'S
        REDEMPTIONS.

       

      (a) Mechanics.
        The
        Company shall deliver the applicable Event of Default Redemption Price to
        the
        Holder within five (5) Business Days after the Company's receipt of the Holder's
        Event of Default Redemption Notice. If the Holder has submitted a Change
        of
        Control Redemption Notice in accordance with Section 5(b), the Company shall
        deliver the applicable Change of Control Redemption Price to the Holder
        concurrently with the consummation of such Change of Control if such notice
        is
        received prior to the consummation of such Change of Control and within five
        (5)
        Business Days after the Company's receipt of such notice otherwise. In the
        event
        of a redemption of less than all of such Conversion Amount of this Note,
        the
        Company shall promptly cause to be issued and delivered to the Holder a new
        Note
        (in accordance with Section 18(d)) representing the outstanding Principal
        which
        has not been redeemed. In the event that the Company does not pay the applicable
        Redemption Price to the Holder within the time period required, at any time
        thereafter and until the Company pays such unpaid Redemption Price in full,
        the
        Holder shall have the option, in lieu of redemption, to require the Company
        to
        promptly return to the Holder all or any portion of this Note representing
        such
        Conversion Amount that was submitted for redemption and for which the applicable
        Redemption Price (together with any Late Charges thereon) has not been paid.
        Upon the Company's receipt of such notice, (x) the Redemption Notice shall
        be
        null and void with respect to such Conversion Amount, (y) the Company shall
        immediately return this Note, or issue a new Note (in accordance with Section
        18(d)) to the Holder representing such Conversion Amount and (z) the Conversion
        Price of this Note or such new Notes shall be adjusted to the lesser of (A)
the
        Conversion Price as in effect on the date on which the applicable Redemption
        Notice is voided and (B) the lowest Closing Bid Price of the Common Stock
        during
        the period beginning on and including the date on which the applicable
        Redemption Notice is delivered to the Company and ending on and including
        the
        date on which the applicable Redemption Notice is voided. The Holder's delivery
        of a notice voiding a Redemption Notice and exercise of its rights following
        such notice shall not affect the Company's obligations to make any payments
        of
        Late Charges which have accrued prior to the date of such notice with respect
        to
        the Conversion Amount subject to such notice.

      
        
          
          

        

        
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      (b) Redemption
        by Other Holders.
        Upon
        the Company's receipt of notice from any of the holders of the Other Notes
        for
        redemption or repayment as a result of an event or occurrence substantially
        similar to the events or occurrences described in Section 4(b), Section 5(b)
        or
        Section 8 (each, an "Other
        Redemption Notice"),
        the
        Company shall immediately, but no later than two (2) Business Days of its
        receipt thereof, forward to the Holder by facsimile a copy of such notice.
        If
        the Company receives a Redemption Notice and one or more Other Redemption
        Notices, during the seven (7) Business Day period beginning on and including
        the
        date which is three (3) Business Days prior to the Company's receipt of the
        Holder's Redemption Notice and ending on and including the date which is
        three
        (3) Business Days after the Company's receipt of the Holder's Redemption
        Notice
        and the Company is unable to redeem all principal, interest and other amounts
        designated in such Redemption Notice and such Other Redemption Notices received
        during such seven (7) Business Day period, then the Company shall redeem
        a pro
        rata amount from each holder of the Notes (including the Holder) based on
        the
        principal amount of the Notes submitted for redemption pursuant to such
        Redemption Notice and such Other Redemption Notices received by the Company
        during such seven (7) Business Day period.

       

      (13) VOTING
        RIGHTS.
        The
        Holder shall have no voting rights as the holder of this Note, except as
        required by law, including, but not limited to, the Florida Business Corporation
        Act of the State of Florida and as expressly provided in this Note.

       

      (14) COVENANTS.

       

      (a) Rank. All
        payments due under this Note (i) shall rank pari
        passu
        with all
        Other Notes and (ii) shall be senior to all other Indebtedness of the Company
        and its Subsidiaries, other than Permitted Indebtedness secured by Permitted
        Liens.

       

      (b) Incurrence
        of Indebtedness.
        So long
        as this Note is outstanding, the Company shall not, and the Company shall
        not
        permit any of its Subsidiaries to, directly or indirectly, incur or guarantee,
        assume or suffer to exist any Indebtedness, other than (i) the Indebtedness
        evidenced by this Note and the Other Notes and (ii) Permitted
        Indebtedness.

       

      (c) Existence
        of Liens.
        So long
        as this Note is outstanding, the Company shall not, and the Company shall
        not
        permit any of its Subsidiaries to, directly or indirectly, allow or suffer
        to
        exist any mortgage, lien, pledge, charge, security interest or other encumbrance
        upon or in any property or assets (including accounts and contract rights)
        owned
        by the Company or any of its Subsidiaries (collectively, "Liens")
        other
        than Permitted Liens.

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      (d) Restricted
        Payments.
        The
        Company shall not, and the Company shall not permit any of its Subsidiaries
        to,
        directly or indirectly, redeem, defease, repurchase, repay or make any payments
        in respect of, by the payment of cash or cash equivalents (in whole or in
        part,
        whether by way of open market purchases, tender offers, private transactions
        or
        otherwise), all or any portion of any Indebtedness (other than this Note
        and the
        Other Notes), whether by way of payment in respect of principal of (or premium,
        if any) or interest on such Indebtedness, if at the time such payment is
        due or
        is otherwise made or, after giving effect to such payment, an event
        constituting, or that with the passage of time and without being cured would
        constitute, an Event of Default has occurred and is continuing; provided
        that
        notwithstanding the foregoing, no principal (or any portion thereof) of any
        Subordinated Indebtedness may be paid (whether upon maturity, redemption,
        acceleration or otherwise) so long as this Note is outstanding.

       

      (e) Restriction
        on Redemption and Cash Dividends.
        Until
        all of the Notes have been converted, redeemed or otherwise satisfied in
        accordance with their terms, the Company shall not, directly or indirectly,
        redeem, repurchase or declare or pay any cash dividend or distribution on
        its
        capital stock without the prior express written consent of the Required
        Holders.

       

      (f) Financial
        Covenants; Announcement of Operating Results.

       

      (i) Consolidated
        Revenue Test.
        So long
        as this Note is outstanding, the Company's Consolidated Revenues as of the
        end
        of each Fiscal Quarter following the Issuance Date shall equal or exceed
        the
        amount equal to the applicable Consolidated Revenue threshold set forth in
        the
        first row of the Table of Financial Thresholds attached hereto as Schedule
        I
        with
        respect to such Fiscal Quarter (the "Consolidated
        Revenue Test").

       

      (ii) Consolidated
        EBITDA Test.
        So long
        as this Note is outstanding, the Company's Consolidated EBITDA as of the
        end of
        each Fiscal Quarter following the Issuance Date shall equal or exceed the
        amount
        equal to the applicable Consolidated EBITDA threshold set forth in the second
        row of the Table of Financial Thresholds attached hereto as Schedule
        I
        with
        respect to such Fiscal Quarter (the "Consolidated
        EBITDA Test",
        and
        together with the Consolidated Revenue Test, the "Financial
        Tests").

       

      (iii) Operating
        Results Announcement.
        Commencing with the Fiscal Quarter ending March 31, 2008, the Company shall
        publicly disclose and disseminate (such date, the "Announcement
        Date")
        its
        operating results (the "Operating
        Results")
        (x)
        for each of the first three Fiscal Quarters of each fiscal year no later
        than
        the forty-fifth (45th)
        day
        after the end of such Fiscal Quarter and (y) for the fourth Fiscal Quarter
        of each Fiscal Year, no later than the ninetieth (90th)
        day
        after the end of such Fiscal Year, and in the event the Company shall have
        satisfied the Financial Tests such announcement shall include a statement
        to the
        effect that the Company is not in breach of the Financial Tests for such
        Fiscal
        Quarter. On the Announcement Date, the Company shall also provide to the
        Holders
        a certification, executed on behalf of the Company by the Chief Financial
        Officer of the Company, certifying that the Company satisfied the Financial
        Tests for such Fiscal Quarter. If the Company has failed to meet any Financial
        Test for such Fiscal Quarter (a "Financial
        Covenant Failure"),
        the
        foregoing written certification that the Company provides to the Holders
        shall
        also state each Financial Test that has not been met (a "Financial
        Covenant Failure Notice").
        Concurrently with the delivery of each Financial Covenant Failure Notice
        to the
        Holders, the Company shall also make publicly available (as part of a Quarterly
        Report on Form 10-Q, Annual Report on Form 10-K or on a Current Report on
        Form
        8-K, or otherwise) the Operating Results, the Financial Covenant Failure
        Notice
        and the fact that an Event of Default has occurred under the Notes. The Company
        shall disclose in Schedule III to this Note its net revenues (calculated
        in
        accordance with GAAP) for January and February of 2008 and its cash on hand
        as
        of February 29, 2008.

      
        
          
          

        

        
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      (g) Intellectual
        Property.
        So
        long
        as any Note is outstanding, the Company shall not, and shall not permit any
        Subsidiary to, directly or indirectly, (i) assign, transfer or otherwise
        encumber or allow any other Person to have any rights or license to any of
        the
        Intellectual Property Rights (as defined in the Securities Purchase Agreement)
        of the Company or its Subsidiaries other than Permitted Indebtedness and
        Permitted Liens, (ii) grant any royalties and other Indebtedness with respect
        to
        any of the Intellectual Property Rights other than Permitted
        Indebtedness or
        (ii)
        take any action or inaction to impair the value of their Intellectual Property
        Rights.

       

      (h) Creation
        of New Subsidiaries.
        So long
        as the obligations of the Company under this Note are outstanding, if the
        Company shall create or acquire any Subsidiary, simultaneous with the creation
        or acquisition of such Subsidiary, the
        Company shall (i) promptly cause such Subsidiary to become a guarantor by
        executing a guaranty in favor of the Holder in form and substance reasonably
        acceptable to the Company, the Subsidiary and the Holder, (ii) promptly cause
        such Subsidiary to become a grantor under the Security Agreement by executing
        a
        joinder to the Security Agreement in form and substance reasonably acceptable
        to
        the Company, the Subsidiary and the Holder, (iii) promptly cause such Subsidiary
        to become a pledgor by the Company and such Subsidiary executing a pledge
        agreement in form and substance reasonably acceptable to the Company, the
        Subsidiary and the Holder, and (iv) promptly cause such Subsidiary to duly
        execute and/or deliver such opinions of counsel and other documents, in form
        and
        substance reasonable acceptable to the Holder, as the Holder shall reasonably
        request with respect thereto.

       

      (i) Collateral
        Accounts.

       

      (i) If
        at any
        time after the Closing Date, the average daily balance of any account of
        the
        Company that is not subject to an account control agreement in favor of the
        Collateral Agent exceeds $50,000 during any calendar month (including the
        calendar month in which the Closing Date occurs), the Company shall, within
        twenty (20) Business Days following the last day of such calendar month,
        deliver
        to the Collateral Agent an account control agreement, in form and substance
        reasonably satisfactory to the Collateral Agent, duly executed by the Company
        and the depositary bank in which such account is maintained.

       

      (ii) Notwithstanding
        anything to the contrary contained in clause (a) above, and without limiting
        any
        of the foregoing, if at any time on or after the date that is twenty (20)
        Business Days following the Closing Date, the total aggregate amount of the
        Company's cash that is not subject to a control agreement in favor of the
        Collateral Agent exceeds $100,000 (the "Maximum
        Free Cash Amount"),
        the
        Company shall within two (2) Business Days following such date, transfer
        to an
        account subject to an account agreement in favor of the Collateral Agent
        an
        amount sufficient to reduce the total aggregate amount of the Company's cash
        that is not subject to an account control agreement in favor of the Collateral
        Agent to an amount not in excess of the Maximum Free Cash Amount.

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      (j) Change
        in Collateral; Collateral Records.
        The
        Company shall (i) give the Collateral Agent (as defined in the Securities
        Purchase Agreement) not less than thirty (30) days' prior written notice of
        any change in the location of any Collateral (as defined in the Security
        Documents (as defined in the Securities Purchase Agreement)), other than
        to
        locations set forth on Schedule 13(g) hereto and with respect to which the
        Collateral Agent has filed financing statements and otherwise fully perfected
        its Liens thereon, (ii) advise the Collateral Agent promptly, in sufficient
        detail, of any material adverse change relating to the type, quantity or
        quality
        of the Collateral or the Lien granted thereon and (iii) execute and
        deliver, and cause each of its Subsidiaries to execute and deliver, to the
        Collateral Agent for the benefit of the Holder and holders of the Other Notes
        from time to time, solely for the Collateral Agent's convenience in maintaining
        a record of Collateral, such written statements and schedules as the Collateral
        Agent may reasonably require, designating, identifying or describing the
        Collateral.

       

      (k) Transactions
        with Affiliates.
        The
        Company shall not, nor shall it permit any of its Subsidiaries to, enter
        into,
        renew, extend or be a party to, any transaction or series of related
        transactions (including, without limitation, the purchase, sale, lease, transfer
        or exchange of property or assets of any kind or the rendering of services
        of
        any kind) with any Affiliate, except (i) in the ordinary course of business
        in a manner and to an extent consistent with past practice and necessary
        or
        desirable for the prudent operation of its business, for fair consideration
        and
        on terms no less favorable to it or its Subsidiaries than would be obtainable
        in
        a comparable arm's length transaction with a Person that is not an Affiliate
        thereof.

       

      (l) Change
        in Nature of Business.
        The
        Company shall not make, or permit any of its Subsidiaries to make, any change
        in
        the nature of its business as described in the Company's most recent annual
        report filed on Form 10-K with the SEC. The
        Company shall not modify its corporate structure or purpose.

       

      (m) Preservation
        of Existence, Etc.
        The
        Company shall maintain and preserve, and cause each of its Subsidiaries to
        maintain and preserve, its existence, rights and privileges, and become or
        remain, and cause each of its Subsidiaries to become or remain, duly qualified
        and in good standing in each jurisdiction in which the character of the
        properties owned or leased by it or in which the transaction of its business
        makes such qualification necessary.

       

      (n) Maintenance
        of Properties, Etc.
        The
        Company shall maintain and preserve, and cause each of its Subsidiaries to
        maintain and preserve, all of its properties which are necessary or useful
        in
        the proper conduct of its business in good working order and condition, ordinary
        wear and tear excepted, and comply, and cause each of its Subsidiaries to
        comply, at all times with the provisions of all leases to which it is a party
        as
        lessee or under which it occupies property, so as to prevent any loss or
        forfeiture thereof or thereunder.

      
        
          
          

        

        
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      (o) Maintenance
        of Insurance.
        The
        Company shall maintain, and cause each of its Subsidiaries to maintain,
        insurance with responsible and reputable insurance companies or associations
        (including, without limitation, comprehensive general liability insurance)
        with
        respect to its properties (including all real properties leased or owned
        by it)
        and business, in such amounts and covering such risks as is required by any
        governmental authority having jurisdiction with respect thereto or as is
        carried
        generally in accordance with sound business practice by companies in similar
        businesses similarly situated and in any event in amount, adequacy and scope
        reasonably satisfactory to the Collateral Agent. All policies covering the
        Collateral are to be made payable to the Collateral Agent for the benefit
        of the
        Holder and the holder of the Other Notes, as its interests may appear, in
        case
        of loss, under a standard non-contributory "lender" or "secured party" clause
        and are to contain such other provisions as the Collateral Agent may require
        to
        fully protect the interest of the Holder and the holder of the Other Notes
        in
        the Collateral and to any payments to be made under such policies. All
        certificates of insurance are to be delivered to the Collateral Agent and
        the
        policies are to be premium prepaid, with the loss payable and additional
        insured
        endorsement in favor of the Collateral Agent and such other Persons as the
        Collateral Agent may designate from time to time, and shall provide for not
        less
        than thirty (30) days' prior written notice to the Collateral Agent of the
        exercise of any right of cancellation. If the Company or any of its Subsidiaries
        fails to maintain such insurance, the Collateral Agent may arrange for such
        insurance, but at the Company's expense and without any responsibility on
        the
        Collateral Agent's part for obtaining the insurance, the solvency of the
        insurance companies, the adequacy of the coverage, or the collection of claims.
        Upon the occurrence and during the continuance of an Event of Default, the
        Collateral Agent shall have the sole right, in the name of the Holder and
        the
        holders of the Other Notes, the Company and its Subsidiaries, to file claims
        under any insurance policies, to receive, receipt and give acquittance for
        any
        payments that may be payable thereunder, and to execute any and all
        endorsements, receipts, releases, assignments, reassignments or other documents
        that may be necessary to effect the collection, compromise or settlement
        of any
        claims under any such insurance policies.

       

      (15) PARTICIPATION.
        The
        Holder, as the holder of this Note, shall be entitled to receive such dividends
        paid and distributions made to the holders of Common Stock to the same extent
        as
        if the Holder had converted this Note into Common Stock (without regard to
        any
        limitations on conversion herein or elsewhere) and had held such shares of
        Common Stock on the record date for such dividends and distributions. Payments
        under the preceding sentence shall be made concurrently with the dividend
        or
        distribution to the holders of Common Stock. 

       

      (16) VOTE
        TO ISSUE, OR CHANGE THE TERMS OF, NOTES.
        The
        affirmative vote at a meeting duly called for such purpose or the written
        consent without a meeting of the Required Holders shall be required for any
        change or amendment to this Note or the Other Notes. No
        consideration shall be offered or paid to any holder of Notes to amend or
        consent to a waiver or modification of the Notes unless the same consideration
        also is offered to all of the holders of Notes.

       

      (17) TRANSFER.
        This
        Note may be offered, sold, assigned or transferred by the Holder without
        the
        consent of the Company, subject only to the provisions of Section 2(f) of
        the
        Securities Purchase Agreement.

      
        
          
          

        

        
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      (18) REISSUANCE
        OF THIS NOTE.

       

      (a) Transfer.
        If this
        Note is to be transferred, the Holder shall surrender this Note to the Company,
        whereupon the Company will forthwith issue and deliver upon the order of
        the
        Holder a new Note (in accordance with Section 18(d)), registered as the Holder
        may request, representing the outstanding Principal being transferred by
        the
        Holder and, if less then the entire outstanding Principal is being transferred,
        a new Note (in accordance with Section 18(d)) to the Holder representing
        the
        outstanding Principal not being transferred. The Holder and any assignee,
        by
        acceptance of this Note, acknowledge and agree that, by reason of the provisions
        of Section 3(c)(iii) and this Section 18(a) following conversion or redemption
        of any portion of this Note, the outstanding Principal represented by this
        Note
        may be less than the Principal stated on the face of this Note.

       

      (b) Lost,
        Stolen or Mutilated Note.
        Upon
        receipt by the Company of evidence reasonably satisfactory to the Company
        of the
        loss, theft, destruction or mutilation of this Note, and, in the case of
        loss,
        theft or destruction, of any indemnification undertaking by the Holder to
        the
        Company in customary form and, in the case of mutilation, upon surrender
        and
        cancellation of this Note, the Company shall execute and deliver to the Holder
        a
        new Note (in accordance with Section 18(d)) representing the outstanding
        Principal.

       

      (c) Note
        Exchangeable for Different Denominations.
        This
        Note is exchangeable, upon the surrender hereof by the Holder at the principal
        office of the Company, for a new Note or Notes (in accordance with Section
        18(d)
        and in principal amounts of at least $100,000) representing in the aggregate
        the
        outstanding Principal of this Note, and each such new Note will represent
        such
        portion of such outstanding Principal as is designated by the Holder at the
        time
        of such surrender.

       

      (d) Issuance
        of New Notes.
        Whenever the Company is required to issue a new Note pursuant to the terms
        of
        this Note, such new Note (i) shall be of like tenor with this Note, (ii)
        shall
        represent, as indicated on the face of such new Note, the Principal remaining
        outstanding (or in the case of a new Note being issued pursuant to Section
        18(a)
        or Section 18(c), the Principal designated by the Holder which, when added
        to
        the principal represented by the other new Notes issued in connection with
        such
        issuance, does not exceed the Principal remaining outstanding under this
        Note
        immediately prior to such issuance of new Notes), (iii) shall have an issuance
        date, as indicated on the face of such new Note, which is the same as the
        Issuance Date of this Note, (iv) shall have the same rights and conditions
        as
        this Note, and (v) shall represent accrued and unpaid Interest and Late Charges
        on the Principal and Interest of this Note, if any, from the Issuance
        Date.

       

      (19) REMEDIES,
        CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
        RELIEF.
        The
        remedies provided in this Note shall be cumulative and in addition to all
        other
        remedies available under this Note and any of the other Transaction Documents
        at
        law or in equity (including a decree of specific performance and/or other
        injunctive relief), and nothing herein shall limit the Holder's right to
        pursue
        actual and consequential damages for any failure by the Company to comply
        with
        the terms of this Note. Amounts set forth or provided for herein with respect
        to
        payments, conversion and the like (and the computation thereof) shall be
        the
        amounts to be received by the Holder and shall not, except as expressly provided
        herein, be subject to any other obligation of the Company (or the performance
        thereof). The Company acknowledges that a breach by it of its obligations
        hereunder will cause irreparable harm to the Holder and that the remedy at
        law
        for any such breach may be inadequate. The Company therefore agrees that,
        in the
        event of any such breach or threatened breach, the Holder shall be entitled,
        in
        addition to all other available remedies, to an injunction restraining any
        breach, without the necessity of showing economic loss and without any bond
        or
        other security being required.

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      (20) PAYMENT
        OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
        If (a)
        this Note is placed in the hands of an attorney for collection or enforcement
        or
        is collected or enforced through any legal proceeding or the Holder otherwise
        takes action to collect amounts due under this Note or to enforce the provisions
        of this Note or (b) there occurs any bankruptcy, reorganization, receivership
        of
        the Company or other proceedings affecting Company creditors' rights and
        involving a claim under this Note, then the Company shall pay the costs incurred
        by the Holder for such collection, enforcement or action or in connection
        with
        such bankruptcy, reorganization, receivership or other proceeding, including,
        but not limited to, financial advisory fees and attorneys' fees and
        disbursements.

       

      (21) CONSTRUCTION;
        HEADINGS.
        This
        Note shall be deemed to be jointly drafted by the Company and all the Purchasers
        and shall not be construed against any person as the drafter hereof. The
        headings of this Note are for convenience of reference and shall not form
        part
        of, or affect the interpretation of, this Note.

       

      (22) FAILURE
        OR INDULGENCE NOT WAIVER.
        No
        failure or delay on the part of the Holder in the exercise of any power,
        right
        or privilege hereunder shall operate as a waiver thereof, nor shall any single
        or partial exercise of any such power, right or privilege preclude other
        or
        further exercise thereof or of any other right, power or privilege.

       

      (23) DISPUTE
        RESOLUTION.
        In the
        case of a dispute as to the determination of the Closing Bid Price, the Closing
        Sale Price or the Weighted Average Price or the arithmetic calculation of
        the
        Conversion Rate or any Redemption Price, the Company shall submit the disputed
        determinations or arithmetic calculations via facsimile within two (2) Business
        Days of receipt, or deemed receipt, of the Conversion Notice or Redemption
        Notice or other event giving rise to such dispute, as the case may be, to
        the
        Holder. If the Holder and the Company are unable to agree upon such
        determination or calculation within three (3) Business Days of such disputed
        determination or arithmetic calculation being submitted to the Holder, then
        the
        Company shall, within two (2) Business Days submit via facsimile (a) the
        disputed determination of the Closing Bid Price, the Closing Sale Price or
        the
        Weighted Average Price to an independent, reputable investment bank selected
        by
        the Company and approved by the Holder or (b) the disputed arithmetic
        calculation of the Conversion Rate or any Redemption Price to the Company's
        independent, outside accountant. The Company, at the Company's expense, shall
        cause the investment bank or the accountant, as the case may be, to perform
        the
        determinations or calculations and notify the Company and the Holder of the
        results no later than ten (10) Business Days from the time it receives the
        disputed determinations or calculations. Such investment bank's or accountant's
        determination or calculation, as the case may be, shall be binding upon all
        parties absent demonstrable error.

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

      (24) NOTICES;
        PAYMENTS.

       

      (a) Notices.
        Whenever notice is required to be given under this Note, unless otherwise
        provided herein, such notice shall be given in accordance with Section 9(f)
        of
        the Securities Purchase Agreement. The Company shall provide the Holder with
        prompt written notice of all actions taken pursuant to this Note, including
        in
        reasonable detail a description of such action and the reason therefor. Without
        limiting the generality of the foregoing, the Company will give written notice
        to the Holder (i) immediately upon any adjustment of the Conversion Price,
        setting forth in reasonable detail, and certifying, the calculation of such
        adjustment and (ii) at least twenty (20) days prior to the date on which
        the
        Company closes its books or takes a record (A) with respect to any dividend
        or
        distribution upon the Common Stock, (B) with respect to any pro rata
        subscription offer to holders of Common Stock or (C) for determining rights
        to
        vote with respect to any Fundamental Transaction, dissolution or liquidation,
        provided in each case that such information shall be made known to the public
        prior to or in conjunction with such notice being provided to the
        Holder.

       

      (b) Payments.
        Whenever any payment of cash is to be made by the Company to any Person pursuant
        to this Note, such payment shall be made in lawful money of the United States
        of
        America by a check drawn on the account of the Company and sent via overnight
        courier service to such Person at such address as previously provided to
        the
        Company in writing (which address, in the case of each of the Purchasers,
        shall
        initially be as set forth on the Schedule of Buyers attached to the Securities
        Purchase Agreement); provided that the Holder may elect to receive a payment
        of
        cash via wire transfer of immediately available funds by providing the Company
        with prior written notice setting out such request and the Holder's wire
        transfer instructions. Whenever any amount expressed to be due by the terms
        of
        this Note is due on any day which is not a Business Day, the same shall instead
        be due on the next succeeding day which is a Business Day and, in the case
        of
        any Interest Date which is not the date on which this Note is paid in full,
        the
        extension of the due date thereof shall not be taken into account for purposes
        of determining the amount of Interest due on such date. Any amount of Principal
        or other amounts due under the Transaction Documents which is not paid when
        due
        shall result in a late charge being incurred and payable by the Company in
        an
        amount equal to interest on such amount at the rate of eighteen percent (18%)
        per annum from the date such amount was due until the same is paid in full
        ("Late
        Charge").

       

      (25) CANCELLATION.
        After
        all Principal, accrued Interest and other amounts at any time owed on this
        Note
        have been paid in full, including pursuant to a redemption or conversion
        of this
        Note, this Note shall automatically be deemed canceled, shall be surrendered
        to
        the Company for cancellation and shall not be reissued.

       

      (26) WAIVER
        OF NOTICE.
        To the
        extent permitted by law, the Company hereby waives demand, notice, protest
        and
        all other demands and notices in connection with the delivery, acceptance,
        performance, default or enforcement of this Note and the Securities Purchase
        Agreement.

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      (27) GOVERNING
        LAW; JURISDICTION;
        JURY TRIAL.
        This
        Note shall be construed and enforced in accor-dance with, and all questions
        concerning the construction, validity, interpretation and performance of
        this
        Note 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.
        The Company 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. The Company 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 it set forth on the signature page hereto 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. Nothing contained herein
        shall
        be deemed or operate to preclude the Holder from bringing suit or taking
        other
        legal action against the Company in any other jurisdiction to collect on
        the
        Company's obligations to the Holder, to realize on any collateral or any
        other
        security for such obligations, or to enforce a judgment or other court ruling
        in
        favor of the Holder. THE
        COMPANY 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 NOTE OR ANY TRANSACTION CONTEMPLATED
        HEREBY.

       

      (28) SEVERABILITY.
        If any
        provision of this Note 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 Note so long as this Note 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).

       

      (29) CERTAIN
        DEFINITIONS.
        For
        purposes of this Note, the following terms shall have the following
        meanings:

       

      (a) "Adjustment
        Price"
        means
        the greater of (i) 105% of the arithmetic average of the Weighted Average
        Price
        of the Common Stock over each of the five (5) consecutive Trading Days ending
        on
        the Trading Day immediately prior to the Adjustment Date (the "Measuring
        Period")
        and
        (ii) $1.00 (as adjusted for any stock splits, stock dividends,
        recapitalizations, combinations, reverse stock splits or other similar events);
        provided however, that in no event shall the Adjustment Price be greater
        than
        $3.00 (as adjusted for any stock splits, stock dividends, recapitalizations,
        combinations, reverse stock splits or other similar events). All such
        determinations shall be appropriately adjusted for any stock split, stock
        dividend, stock combination or other similar transaction that proportionately
        decreases or increases the Common Stock during such Measuring
        Period.

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

      (b) "Approved
        Stock Plan"
        means
        any employee benefit plan which has been approved by the Board of Directors
        of
        the Company, pursuant to which the Company's securities may be issued to
        any
        employee, officer or director for services provided to the Company.

       

      (c) "Bloomberg"
        means
        Bloomberg Financial Markets.

       

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

       

      (e) "Calendar
        Quarter"
        means
        each of: the period beginning on and including January 1 and ending on and
        including March 31; the period beginning on and including April 1 and ending
        on
        and including June 30; the period beginning on and including July 1 and ending
        on and including September 30; and the period beginning on and including
        October
        1 and ending on and including December 31.

       

      (f) "Change
        of Control"
        means
        any Fundamental Transaction other than (i) any reorganization, recapitalization
        or reclassification of the Common Stock in which holders of the Company's
        voting
        power immediately prior to such reorganization, recapitalization or
        reclassification continue after such reorganization, recapitalization or
        reclassification to hold publicly traded securities and, directly or indirectly,
        the voting power of the surviving entity or entities necessary to elect a
        majority of the members of the board of directors (or their equivalent if
        other
        than a corporation) of such entity or entities, or (ii) pursuant to a migratory
        merger effected solely for the purpose of changing the jurisdiction of
        incorporation of the Company. 

       

      (g) "Closing
        Bid Price"
        and
        "Closing
        Sale Price"
        means,
        for any security as of any date, the last closing bid price and last closing
        trade price, respectively, for such security on the Principal Market, as
        reported by Bloomberg, or, if the Principal Market begins to operate on an
        extended hours basis and does not designate the closing bid price or the
        closing
        trade price, as the case may be, then the last bid price or last trade price,
        respectively, of such security prior to 4:00:00 p.m., New York Time, as reported
        by Bloomberg, or, if the Principal Market is not the principal securities
        exchange or trading market for such security, the last closing bid price
        or last
        trade price, respectively, of such security on the principal securities exchange
        or trading market where such security is listed or traded as reported by
        Bloomberg, or if the foregoing do not apply, the last closing bid price or
        last
        trade price, respectively, of such security in the over-the-counter market
        on
        the electronic bulletin board for such security as reported by Bloomberg,
        or, if
        no closing bid price or last trade price, respectively, is reported for such
        security by Bloomberg, the average of the bid prices, or the ask prices,
        respectively, of any market makers for such security as reported in the "pink
        sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).
        If
        the Closing Bid Price or the Closing Sale Price cannot be calculated for
        a
        security on a particular date on any of the foregoing bases, the Closing
        Bid
        Price or the Closing Sale Price, as the case may be, of such security on
        such
        date shall be the fair market value as mutually determined by the Company
        and
        the Holder. If the Company and the Holder are unable to agree upon the fair
        market value of such security, then such dispute shall be resolved pursuant
        to
        Section 23. All such determinations to be appropriately adjusted for any
        stock
        dividend, stock split, stock combination or other similar transaction during
        the
        applicable calculation period.

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

      (h) "Closing
        Date"
        shall
        have the meaning set forth in the Securities Purchase Agreement, which date
        is
        the date the Company initially issued Notes pursuant to the terms of the
        Securities Purchase Agreement.

       

      (i) "Common
        Stock Deemed Outstanding"
        means,
        at any given time, the number of shares of Common Stock outstanding at such
        time, plus the number of shares of Common Stock deemed to be outstanding
        pursuant to Sections 7(a)(i) and 7(a)(ii) hereof regardless of whether the
        Options or Convertible Securities are actually exercisable at such time,
        but
        excluding any Common Stock owned or held by or for the account of the Company
        or
        issuable upon conversion or exercise, as applicable, of the Notes and the
        Warrants.

       

      (j) "Consolidated
        EBITDA"
        means,
        for any period, Consolidated Net Income for such period (without giving effect
        to any extraordinary gains or losses) adjusted by adding thereto (in each
        case
        to the extent deducted in determining Consolidated Net Income for such period),
        without duplication, the amount of (i) total interest expense (subtracting
        therefrom any interest income) (inclusive of amortization of deferred financing
        fees and other original issue discount and banking fees and charges
        (e.g.,
        letter
        of credit fees and commitment fees) including those arising from any beneficial
        conversion feature of the Notes)
        of the
        Company and its Subsidiaries determined on a consolidated basis for such
        period,
        (ii) all expenses and accounting charges associated with the amendment and
        restatement of the Existing Notes, including the loss on extinguishment of
        the
        Existing Notes, legal and consulting fees, and other related expenses as
        itemized and subject to the limitations set forth in Schedule
        II
        hereto,
        (iii) provision for taxes based on income and foreign withholding taxes for
        the
        Company and its Subsidiaries determined on a consolidated basis for such
        period,
        (iv) all depreciation and amortization expense of the Company and its
        Subsidiaries determined on a consolidated basis for such period, and (v)
        all
        non-cash stock compensation expenses of the Company (i.e., expenses paid
        through
        the issuance of equity interests of Company, or options therefor, rather
        than in
        cash) incurred during such period (except to the extent any such expense
        will
        require a cash payment in a future period).

       

      (k) "Consolidated
        Net Income"
        means,
        for any period, the net income (or loss) of the Company and its Subsidiaries
        for
        such period, determined on a consolidated basis (after any deduction for
        minority interests). 

       

      (l) "Consolidated
        Revenues"
        means,
for
        any
        period, the total consolidated revenues of the Company and its Subsidiaries
        for
        such period, as determined in accordance with GAAP. 

       

      (m) "Contingent
        Obligation"
        means,
        as to any Person, any direct or indirect liability, contingent or otherwise,
        of
        that Person with respect to any indebtedness, lease, dividend or other
        obligation of another Person if the primary purpose or intent of the Person
        incurring such liability, or the primary effect thereof, is to provide assurance
        to the obligee of such liability that such liability will be paid or discharged,
        or that any agreements relating thereto will be complied with, or that the
        holders of such liability will be protected (in whole or in part) against
        loss
        with respect thereto.

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      (n) "Convertible
        Securities"
        means
        any stock or securities (other than Options) directly or indirectly convertible
        into or exercisable or exchangeable for Common Stock.

       

      (o) "Eligible
        Market"
        means
        the Principal Market, the OTC Bulletin Board, The New York Stock Exchange,
        Inc.,
        The NASDAQ
        Global
        Market, The NASDAQ
        Global
        Select Market or The Nasdaq Capital Market.

       

      (p) "Eligible
        Marketable Securities"
        as of
        any date means marketable securities which would be reflected on a consolidated
        balance sheet of the Company and its Subsidiaries prepared as of such date
        in
        accordance with GAAP,
        and
        which are permitted under the Company's investment policies as in effect
        on the
        Issuance Date or approved thereafter by the Company's Board of
        Directors.

       

      (q) "Equity
        Conditions"
        means
        each of the following conditions: (i) on each day during the period beginning
        six (6) months prior to the applicable date of determination and ending on
        and
        including the applicable date of determination (provided, however, that solely
        for purposes of this clause (i), to the extent the applicable date of
        determination falls less than six (6) months after the earlier of (A) the
        Effectiveness Deadline and (B) the Effective Date (as defined in the
        Registration Rights Agreement) (the "Registration
        Measuring Date"),
        such
        period shall begin at such Registration Measuring Date) (the "Equity
        Conditions Measuring Period"),
        either
        (x) the Registration Statement filed pursuant to the Registration Rights
        Agreement shall be effective and available for the resale of all remaining
        Registrable Securities required
        to be registered in
        accordance with the terms of the Registration Rights Agreement or
        (y)
        all
        shares of Common Stock issuable upon conversion of the Notes and exercise
        of the
        Warrants shall be eligible for sale without restriction and without the need
        for
        registration under any applicable federal or state securities laws;
        (ii) on
        each day during the Equity Conditions Measuring Period the Common
        Stock
        is
        designated for quotation on the Principal Market or any other Eligible Market
        and shall not have been suspended from trading on such exchange or market
        (other
        than suspensions of not more than two (2) days and occurring prior to the
        applicable date of determination due to business announcements by the Company)
        nor shall delisting or suspension by such exchange or market be or have been
        threatened or pending either (A) in writing by such exchange or market or
        (B) by
        falling below the then effective minimum listing maintenance requirements
        of
        such exchange or market; (iii) during the six (6) month period ending on
        and
        including the date immediately preceding the applicable date of determination,
        the Company shall have delivered Conversion Shares upon conversion of the
        Notes
        shares of Common Stock upon exercise of the Warrants to the holders on a
        timely
        basis as set forth in Section 3(c)(i) hereof (and analogous provisions under
        the
        Other Notes) and Section 1(a) of the Warrants; (iv) any applicable shares
        of
Common
        Stock to
        be
        issued in connection with the event requiring determination may be issued
        in
        full without violating Section 3(d) hereof and the rules or regulations of
        the
        Principal Market or any other applicable Eligible Market; (v) during the
        Equity
        Conditions Measuring Period, the Company shall not have failed to timely
        make
        any payments within five (5) Business Days of when such payment is due pursuant
        to any Transaction Document; (vi) during the Equity Conditions Measuring
        Period,
        there shall not have occurred either (A) the public announcement of a pending,
        proposed or intended Fundamental Transaction which has not been abandoned,
        terminated or consummated, or (B) an
        Event
        of Default or (C) an event that with the passage of time or giving of notice
        would constitute an Event of Default; (vii) the Company shall have no knowledge
        of any fact that would cause (x) the Registration Statements required pursuant
        to the Registration Rights Agreement not to be effective and available for
        the
        resale of all remaining Registrable Securities in accordance with the terms
        of
        the Registration Rights Agreement or (y) any shares of Common Stock issuable
        upon conversion of the Notes and shares of Common Stock issuable upon exercise
        of the Warrants not to be eligible for sale without restriction pursuant
        to Rule
        144(k) and any applicable state securities laws; and (viii) the
        Company otherwise shall have been in compliance with and shall not have breached
        any provision, covenant, representation or warranty of any Transaction
        Document.

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

      (r) "Equity
        Conditions Failure"
        means
        that on any day during the period commencing ten (10) Trading Days prior
        to the
        Mandatory Conversion Notice Date through the Mandatory Conversion Date the
        Equity Conditions have not been satisfied (or waived in writing by the
        Holder).

       

      (s) "Excluded
        Securities"
        means
        any Common Stock issued or issuable: (i) in connection with any Approved
        Stock
        Plan, provided, however, that to the extent such Common Stock would result
        in a
        Dilutive Issuance such number of shares of Common Stock does not exceed 500,000
        shares of Common Stock in any twelve month period nor 1,500,000 shares of
        Common
        Stock, in the aggregate; (ii) upon conversion of the Notes or the exercise
        of
        the Warrants; (iii) pursuant to a bona fide firm commitment underwritten
        public
        offering with Maxim Group LLC or another nationally recognized underwriter
        which
        generates gross proceeds to the Company of at least $10,000,000 (other than
        an
        "at-the-market offering" as defined in Rule 415(a)(4) under the 1933 Act
        and
        "equity lines"); (iv) upon conversion, exercise or exchange of any Options
        or
        Convertible Securities which are outstanding on the day immediately preceding
        the Subscription Date, provided that the terms of such Options or Convertible
        Securities are not amended, modified or changed on or after the Subscription
        Date; and (v) in connection with mergers, acquisitions, strategic business
        partnerships or joint ventures, in each case with non-affiliated third parties
        and otherwise on an arm's-length basis, the primary purpose of which, in
        the
        reasonable judgment of the Company's Board of Directors, is not to raise
        additional capital.

       

      (t) "Fiscal
        Quarter" means
        each of the fiscal quarters adopted by the Company for financial reporting
        purposes that correspond to the Company's fiscal year as of the date hereof
        that
        ends on December 31.

       

      (u) "Fiscal
        Year" means
        the
        fiscal year adopted by the Company for financial reporting purposes that
        ends on
        December 31.

       

      (v) "Fundamental
        Transaction"
        means
        that the Company shall, directly or indirectly, in one or more related
        transactions, (i) consolidate or merge with or into (whether or not the Company
        is the surviving corporation) another Person or Persons, if the holders of
        the
        Voting Stock (not including any shares of Voting Stock held by the Person
        or
        Persons making or party to, or associated or affiliated with the Persons
        making
        or party to, such consolidation or merger) immediately prior to such
        consolidation or merger shall hold or have the right to direct the voting
        of
        less than 50% of the Voting Stock or such voting securities of such other
        surviving Person immediately following such transaction, (ii) sell, assign,
        transfer, convey or otherwise dispose of all or substantially all of the
        properties or assets of the Company to another Person, (iii) allow another
        Person to make a purchase, tender or exchange offer that is accepted by the
        holders of more than the 50% of the outstanding shares of Voting Stock (not
        including any shares of Voting Stock held by the Person or Persons making
        or
        party to, or associated or affiliated with the Persons making or party to,
        such
        purchase, tender or exchange offer), (iv) consummate a stock purchase agreement
        or other business combination (including, without limitation, a reorganization,
        recapitalization, spin-off or scheme of arrangement) with another Person
        whereby
        such other Person acquires more than the 50% of the outstanding shares of
        Voting
        Stock (not including any shares of Voting Stock held by the other Person
        or
        other Persons making or party to, or associated or affiliated with the other
        Persons making or party to, such stock purchase agreement or other business
        combination), (v) reorganize, recapitalize or reclassify its Common Stock
        or
        (vi) any "person" or "group" (as these terms are used for purposes of Sections
        13(d) and 14(d) of the Exchange Act) is or shall become the "beneficial owner"
        (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
        of
        50% of the aggregate ordinary voting power represented by issued and outstanding
        Common Stock.

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

      (w) "GAAP"
        means
        United States generally accepted accounting principles, consistently applied
        in
        accordance with past practices.

       

      (x) "Holder
        Pro Rata Amount"
        means a
        fraction (i) the numerator of which is the Principal amount of this Note
        on the
        Closing Date and (ii) the denominator of which is the aggregate principal
        amount
        of all Notes issued to the initial purchasers pursuant to the Securities
        Purchase Agreement on the Closing Date.

       

      (y) "Indebtedness"
        of any
        Person means, without duplication (i) all indebtedness for borrowed money,
        (ii)
        all obligations issued, undertaken or assumed as the deferred purchase price
        of
        property or services, including (without limitation) "capital leases" in
        accordance with generally accepted accounting principles (other than trade
        payables entered into in the ordinary course of business), (iii) all
        reimbursement or payment obligations with respect to letters of credit, surety
        bonds and other similar instruments, (iv) all obligations evidenced by notes,
        bonds, debentures or similar instruments, including obligations so evidenced
        incurred in connection with the acquisition of property, assets or businesses,
        (v) all indebtedness created or arising under any conditional sale or other
        title retention agreement, or incurred as financing, in either case with
        respect
        to any property or assets acquired with the proceeds of such indebtedness
        (even
        though the rights and remedies of the seller or bank under such agreement
        in the
        event of default are limited to repossession or sale of such property), (vi)
        all
        monetary obligations under any leasing or similar arrangement which, in
        connection with generally accepted accounting principles, consistently applied
        for the periods covered thereby, is classified as a capital lease, (vii)
        all
        indebtedness referred to in clauses (i) through (vi) above secured by (or
        for
        which the holder of such Indebtedness has an existing right, contingent or
        otherwise, to be secured by) any mortgage, lien, pledge, charge, security
        interest or other encumbrance upon or in any property or assets (including
        accounts and contract rights and intellectual property rights) owned by any
        Person, even though the Person which owns such assets or property has not
        assumed or become liable for the payment of such indebtedness, (viii) all
        royalties and related payment or prepayment or other obligations of
        the
        Company or any of its Subsidiaries relating
        to any Intellectual Property Rights of the Company or any of its Subsidiaries
        and
        (ix)
        all Contingent Obligations in respect of indebtedness or obligations of others
        of the kinds referred to in clauses (i) through (viii) above.

       

      (z) "Installment
        Amount"
        means,
        with respect to any Installment Date, the lesser of (i) the sum of (A) the
        product of $25,000 multiplied
        by the
        Holder Pro Rata Amount plus (B) any accrued and unpaid Interest on such amount
        and (ii) the Principal amount (plus any accrued and unpaid interest thereon)
        under this Note as of such Installment Date, as any such Installment Amount
        may
        be reduced pursuant to the terms of this Note, whether upon conversion,
        redemption or otherwise. For the avoidance of doubt, any accrued and unpaid
        interest which may be paid pursuant to this definition shall be deducted
        from
        the total interest to be paid on any subsequent Interest Payment
        Date.

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

      (aa) "Installment
        Date"
        means
        July 1, 2008 and the first (1st)
        day of
        each calendar month thereafter prior to the Maturity Date.

       

      (bb) "Interest
        Rate"
        means
seven
        and
        one-half percent (7.50%) per annum, subject to periodic adjustment pursuant
        to
        Section 2.

       

      (cc) "Judgment
        Default Amount"
        means,
        as of any given date, the lesser of (i) $1,000,000 and (ii) 1% of the sum
        of the
        Consolidated Revenue for the four completed Fiscal Quarters immediately
        preceding such date.

       

      (dd) "Options"
        means
        any rights, warrants or options to subscribe for or purchase shares of Common
        Stock or Convertible Securities.

       

      (ee) "Parent
        Entity"
        of a
        Person means an entity that, directly or indirectly, controls the applicable
        Person and whose common stock or equivalent equity security is quoted or
        listed
        on an Eligible Market, or, if there is more than one such Person or Parent
        Entity, the Person or Parent Entity with the largest public market
        capitalization as of the date of consummation of the Fundamental
        Transaction.

       

      (ff) "Permitted
        Indebtedness"
        means
        (i) Permitted Line of Credit, (ii) Indebtedness incurred by the Company that
        is
        made expressly subordinate in right of payment to the Indebtedness evidenced
        by
        this Note, as reflected in a written agreement acceptable to the Holder and
        approved by the Holder in writing, and which Indebtedness does not provide
        at
        any time for (1) the payment, prepayment, repayment, repurchase or defeasance,
        directly or indirectly, of any principal or premium, if any, thereon until
        ninety-one (91) days after the Maturity Date or later and (2) total interest
        and
        fees at a rate in excess of seven and one-half percent (7.50%) per annum
        (collectively, the "Subordinated
        Indebtedness"),
        (iii)
        Indebtedness secured by Permitted Liens (other than the Existing Liens),
        (iv)
        Indebtedness evidenced by this Note and the Other Notes, and (v) extensions,
        refinancings and renewals of any items in clauses (i) through (iv) above,
        provided that the principal amount is not increased or the terms modified
        to
        impose more burdensome terms upon the Company or its Subsidiaries, as the
        case
        may be.

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

      (gg) "Permitted
        Liens"
        means
        (i) any Lien for taxes not yet due or delinquent or being contested in good
        faith by appropriate proceedings for which adequate reserves have been
        established in accordance with GAAP, (ii) any statutory Lien arising in the
        ordinary course of business by operation of law with respect to a liability
        that
        is not yet due or delinquent, (iii) any Lien created by operation of law,
        such
        as materialmen's liens, mechanics' liens and other similar liens, arising
        in the
        ordinary course of business with respect to a liability that is not yet due
        or
        delinquent or that are being contested in good faith by appropriate proceedings,
        (iv) Liens (A) upon or in any equipment (as defined in the Security Agreement)
        acquired or held by the Company or any of its Subsidiaries to secure the
        purchase price of such equipment or indebtedness incurred solely for the
        purpose
        of financing the acquisition or lease of such equipment, or (B) existing
        on such
        equipment at the time of its acquisition, provided that the Lien is confined
        solely to the property so acquired and improvements thereon, and the proceeds
        of
        such equipment, (v) Liens incurred in connection with the extension, renewal
        or
        refinancing of the indebtedness secured by Liens of the type described in
        clauses (i) and (iv) above, provided that any extension, renewal or replacement
        Lien shall be limited to the property encumbered by the existing Lien and
        the
        principal amount of the Indebtedness being extended, renewed or refinanced
        does
        not increase, (vi) Liens securing the Company's obligations under the Notes;
        (vii) leases or subleases and licenses and sublicenses granted to others
        in the
        ordinary course of the Company's business, not interfering in any material
        respect with the business of the Company and its Subsidiaries taken as a
        whole,
        (viii) Liens in favor of customs and revenue authorities arising as a
        matter of law to secure payments of custom duties in connection with the
        importation of goods, (ix)
        Liens
        arising from judgments, decrees or attachments in circumstances not constituting
        an Event of Default under Section 4(a)(ix), (x) Liens created in favor of
        certain financial institutions to secure the Company's obligations under
        its
        automated teller machine cash agreements, and (xi) Liens securing the
        obligations under the Permitted Line of Credit.

       

      (hh) "Permitted
        Line of Credit"
        means a
        line of credit, to be entered into by the Company after the date hereof with
        a
        lender determined by the Company in its reasonable discretion, in the maximum
        amount of $2,000,000 to be used by the Company solely in connection with
        the
        purchase for resale of products related to the Company’s set-top box business;
        provided that (i) such line of credit will be secured solely by the products
        purchased for resale, and (ii) the Holder shall have a second lien on such
        assets.

       

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

       

      (jj) "Principal
        Market"
        means
        the American Stock Exchange.

       

      (kk) "Redemption
        Notices"
        means,
        collectively, the Event of Default Redemption Notices and the Change of Control
        Redemption Notices, each of the foregoing, individually, a Redemption
        Notice.

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

      (ll) "Redemption
        Premium"
        means
        (i) in the case of the Events of Default described in Section 4(a)(i) - (vi)
        and
        (ix) - (xii), 125% or (ii) in the case of the Events of Default described
        in
        Section 4(a)(vii) - (viii), 100%.

       

      (mm) "Redemption
        Prices"
        means,
        collectively, the Event of Default Redemption Price and Change of Control
        Redemption Price, each of the foregoing, individually, a Redemption
        Price.

       

      (nn) "Registration
        Rights Agreement"
        means
        that certain Registration Rights Agreement dated as of the Subscription Date
        by
        and among the Company and the initial holders of the Notes relating to, among
        other things, the registration of the resale of the Common Stock issuable
        upon
        conversion of the Notes and exercise of the Warrants.

       

      (oo) "Required
        Holders"
        means
        the holders of Notes representing at least a majority of the aggregate principal
        amount of the Notes then outstanding.

       

      (pp) "SEC"
        means
        the United States Securities and Exchange Commission. 

       

      (qq) "Securities
        Purchase Agreement"
        means
        that certain securities purchase agreement dated as of the Subscription Date
        by
        and among the Company and the initial holders of the Notes pursuant to which
        the
        Company issued the Notes and the Warrants, as may be amended from time to
        time
        in accordance with its terms, including, without limitation pursuant to the
        Amendment and Exchange Agreements. 

       

      (rr) "Subscription
        Date"
        means
        November 29, 2007.

       

      (ss) "Successor
        Entity"
        means
        the Person, which may be the Company, formed by, resulting from or surviving
        any
        Fundamental Transaction or the Person with which such Fundamental Transaction
        shall have been made, provided that if such Person is not a publicly traded
        entity whose common stock or equivalent equity security is quoted or listed
        for
        trading on an Eligible Market, Successor Entity shall mean such Person's
        Parent
        Entity.

       

      (tt) "Trading
        Day"
        means
        any day on which the shares of Common Stock are traded on the Principal Market,
        or, if the Principal Market is not the principal trading market for the shares
        of Common Stock, then on the principal securities exchange or securities
        market
        on which the shares of Common Stock are then traded; provided that "Trading
        Day"
        shall not include any day on which the shares of Common Stock are scheduled
        to
        trade on any such exchange or market for less than 4.5 hours or any day that
        the
        shares of Common Stock are suspended from trading during the final hour of
        trading on such exchange or market (or if such exchange or market does not
        designate in advance the closing time of trading on any such exchange or
        market,
        then during the hour ending at 4:00:00 p.m., New York Time).

       

      (uu) "Voting
        Stock"
        of a
        Person means capital stock of such Person of the class or classes pursuant
        to
        which the holders thereof have the general voting power to elect, or the
        general
        power to appoint, at least a majority of the board of directors, managers
        or
        trustees of such Person (irrespective of whether or not at the time capital
        stock of any other class or classes shall have or might have voting power
        by
        reason of the happening of any contingency).

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

      (vv) "Warrants"
        has the
        meaning ascribed to such term in the Securities Purchase Agreement, and shall
        include all warrants issued in exchange therefor or replacement
        thereof.

       

      (ww) "Weighted
        Average Price"
        means,
        for any security as of any date, the dollar volume-weighted average price
        for
        such security on the Principal Market during the period beginning at 9:30:01
        a.m., New York Time (or such other time as the Principal Market publicly
        announces is the official open of trading), and ending at 4:00:00 p.m., New
        York
        Time (or such other time as the Principal Market publicly announces is the
        official close of trading) as reported by Bloomberg through its "Volume at
        Price" functions, or, if the foregoing does not apply, the dollar
        volume-weighted average price of such security in the over-the-counter market
        on
        the electronic bulletin board for such security during the period beginning
        at
        9:30:01 a.m., New York Time (or such other time as such market publicly
        announces is the official open of trading), and ending at 4:00:00 p.m., New
        York
        Time (or such other time as such market publicly announces is the official
        close
        of trading) as reported by Bloomberg, or, if no dollar volume-weighted average
        price is reported for such security by Bloomberg for such hours, the average
        of
        the highest closing bid price and the lowest closing ask price of any of
        the
        market makers for such security as reported in the "pink sheets" by Pink
        Sheets
        LLC (formerly the National Quotation Bureau, Inc.). If the Weighted Average
        Price cannot be calculated for such security on such particular date on any
        of
        the foregoing bases, the Weighted Average Price of such security on such
        date
        shall be the fair market value as mutually determined by the Company and
        the
        Required Holders. If the Company and the Required Holders are unable to agree
        upon the fair market value of such security, then such dispute shall be resolved
        pursuant to Section 22. All such determinations to be appropriately adjusted
        for
        any stock dividend, stock split, stock combination or other similar transaction
        during the applicable calculation period.

       

      (30) MAXIMUM
        PAYMENTS.
        Nothing
        contained herein shall be deemed to establish or require the payment of a
        rate
        of interest or other charges in excess of the maximum permitted by applicable
        law. In the event that the rate of interest required to be paid or other
        charges
        hereunder exceed the maximum permitted by such law, any payments in excess
        of
        such maximum shall be credited against amounts owed by the Company to the
        Holder
        and thus refunded to the Company.

       

      (31) DISCLOSURE.
        Upon
        receipt or delivery by the Company of any notice in accordance with the terms
        of
        this Note, unless the Company has in good faith determined that the matters
        relating to such notice do not constitute material, nonpublic information
        relating to the Company or its Subsidiaries, the Company shall within one
        (1)
        Business Day after any such receipt or delivery publicly disclose such material,
        nonpublic information on a Current Report on Form 8-K or otherwise. In the
        event
        that the Company believes that a notice delivered to the Holder contains
        material, nonpublic information, relating to the Company or its Subsidiaries,
        the Company shall indicate to the Holder contemporaneously with delivery
        of such
        notice, and in the absence of any such indication, the Holder shall be allowed
        to presume that all matters relating to such notice do not constitute material,
        nonpublic information relating to the Company or its Subsidiaries.

       

      [Signature
        Page Follows]

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the Company has caused this Note to be duly executed as
        of the
        Issuance Date set out above.

      
        	 	 	 
	 	
                DIGITALFX
                  INTERNATIONAL, INC.

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                
Name:
                Craig Ellins
	 	Title: Chief
                Executive Officer

      

       

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

      EXHIBIT
        I

      DIGITALFX
        INTERNATIONAL, INC.

      CONVERSION
        NOTICE

       

      Reference
        is made to the Amended and Restated Senior Secured Convertible Note (the
        "Note")
        issued
        to the undersigned by DigitalFX International, Inc. (the "Company").
        In
        accordance with and pursuant to the Note, the undersigned hereby elects to
        convert the Conversion Amount (as defined in the Note) of the Note indicated
        below into shares of Common Stock par value $0.001 per share (the "Common
        Stock")
        of the
        Company, as of the date specified below.

       

      

      
        	
                Date
                  of Conversion:

              	 
	 	 
	
                Aggregate
                  Conversion Amount to be converted:

              	 
	 	 
	
                Installment
                  Amounts to be reduced and Installment Dates of reduction or Maturity
                  Date
                  payment, or any other amounts owing from the Company to be reduced
                  at
                  Holder's option:

              	 
	 	 
	
                Please
                  confirm the following information:

              
	 
	
                Conversion
                  Price:

              	 
	 	 
	
                Number
                  of shares of Common Stock to be issued:

              	 
	 	 
	
                Please
                  issue the Common Stock into which the Note is being converted in
                  the
                  following name and to the following address:

              
	 
	
                Issue
                  to:

              	 
	 	 
	 	 
	 	 
	
                Facsimile
                  Number:

              	 
	 	 
	
                Authorization:

              	 
	 	 
	
                By:

              	 
	 	 
	
                Title:

              	 
	 	 
	
                Dated:

              	 
	 	 
	
                Account
                  Number:

              	 
	
                  (if
                  electronic book entry transfer)

              	 
	 	 
	
                Transaction
                  Code Number:

              	 
	
                  (if
                  electronic book entry transfer)

              	 

      

       

      

      
        
          
          

        

        
          37

          
            

          

        

        
          
          

        

      

      ACKNOWLEDGMENT

       

      The
        Company hereby acknowledges this Conversion Notice and hereby directs
        Continental Stock Transfer & Trust Company to issue the above indicated
        number of shares of Common Stock in accordance with the Transfer Agent
        Instructions dated March 26, 2008 from the Company and acknowledged and agreed
        to by Continental Stock Transfer & Trust Company.

       

      
        	 	 	 
	 	
                DIGITALFX
                  INTERNATIONAL, INC.

              
	 
 	 
 	 
 
	 	By:  	 
	 	
                
Name:
                Craig Ellins
	 	Title: Chief
                Executive Officer

      

       

      
        
          
          

        

        
          38

          
            

          

        

        
          
          

        

      

      Schedule
        I

       

      Table
        of Financial Thresholds

       

      (U.S.
        Dollars in Millions)

       

      
        	 	
                Fiscal
                  Quarter ending March 31, 2008

              	
                Fiscal
                  Quarter ending 

                June
                  30, 2008

              	
                Fiscal
                  Quarter ending September 30, 2008

              	
                Fiscal
                  Quarter ending December 31, 2008

              	
                Fiscal
                  Quarter ending March 31, 2009

              	
                Fiscal
                  Quarter ending

                June
                  30, 2009

              	
                Fiscal
                  Quarter ending September 30, 2009

              	
                Fiscal
                  Quarter ending December 31, 2009

              	
                Fiscal
                  Quarter ending March 31, 2010

              	
                Fiscal
                  Quarter ending 

                June
                  30, 2010

              	
                Fiscal
                  Quarter ending September 30, 2010

              	
                Fiscal
                  Quarter ending December 31, 2010 and each Fiscal Quarter
                  thereafter

              
	
                Consolidated
                  Revenue

              	
                $4.80

              	
                $5.30

              	
                $5.75

              	
                $6.20

              	
                $6.50

              	
                $6.75

              	
                $7.00

              	
                $7.25

              	
                $7.75

              	
                $8.10

              	
                $8.50

              	
                $9.00

              
	
                Consolidated
                  EBITDA

              	
                $(1.50)

              	
                $(0.50)

              	
                $(0.30)

              	
                $0.50

              	
                $0.15

              	
                $0.225

              	
                $0.30

              	
                $0.375

              	
                $0.500

              	
                $0.600

              	
                $0.700

              	
                $0.800

              

      

      

      
        
          
          

        

        
          39

          
            

          

        

        
          
          

        

      

      Schedule
        II

      

      Expenses
        and Accounting Charges Associated with Restatement of Existing
        Notes

      

       

      Based
        on
        preliminary estimates, the Company expects to include in its financial results
        for the first quarter of fiscal 2008 total expenses and accounting charges
        associated with the amendment and restatement of the Existing Notes in the
        range
        of $1,000,000 to $2,000,000, consisting of:

       

      
        	 	
                ·

              	
                cash
                  expenses for legal and professional services in the range of $100,000
                  to
                  $150,000; and

              

      

       

      
        	 	
                ·

              	
                non-cash
                  expenses for the loss on extinguishment of the Existing Notes
                  including:

              

      

       

      
        	 	
                o

              	
                the
                  fair value of 1,000,000 shares of common stock granted (based on
                  market
                  value on the Closing Date; and

              

      

       

      
        	 	
                o

              	
                a
                  write down of previously recorded deferred financing fees and the
                  beneficial conversion feature associated with the Existing
                  Notes.

              

      

       

      The
        determination of the actual amount of such charges is subject to the
        following:

       

      
        	 	
                ·

              	
                A
                  complete analysis by the Company’s finance department;
                  and

              

      

       

      
        	 	
                ·

              	
                Review
                  and approval by the Company’s registered independent accounting
                  firm.

              

      

       

      In
        addition, certain variables, such as the Company’s stock price on the Closing
        Date, will effect the valuation of the total charges associated with the
        amendment and restatement of the Existing Notes.

       

      
        
          
          

        

        
          40

          
            

          

        

        
          
          

        

      

      Schedule
        III

       

      Net
        Revenue and Cash Balance

      

       

      
        	
                ALL
                  ITEMS PRELIMINARY AND SUBJECT TO INDEPENDENT
                  AUDIT

              
	 	 
	
                Net
                  Revenues:

              
	 	 
	
                Jan
                  & Feb 08

              	
                $
                  3,037,000 

              
	 	 
	 	 
	
                Cash
                  on Hand:

              
	 	 
	
                2/29/2008

              	
                $
                  6,031,000 

              

      

      

      
        
          
          

        

        
          41Unassociated Document

    

      [FORM
        OF AMENDED AND RESTATED WARRANT]

      

      NEITHER
        THE ISSUANCE AND SALE OF THIS WARRANT NOR THE SECURITIES FOR WHICH THIS WARRANT
        IS EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
        AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE
        OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
        AN
        EFFECTIVE REGISTRATION STATEMENT FOR THESE SECURITIES UNDER THE SECURITIES
        ACT
        OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
        SELECTED BY THE HOLDER), IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION
        IS
        NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
        144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES MAY
        BE
        PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
        ARRANGEMENT SECURED BY THE SECURITIES.

      

      DIGITALFX
        INTERNATIONAL, INC.

      

      Amended
        and Restated Warrant To Purchase Common Stock

      

      Warrant
        No.: [_______]

      Number
        of
        Shares of Common Stock: [            
        ]

      Date
        of
        Issuance: November 30, 2007 ("Issuance
        Date")

      

      DigitalFX
        International, Inc., a Florida corporation (the "Company"),
        hereby certifies that, for good and valuable consideration, the receipt and
        sufficiency of which are hereby acknowledged, [PORTSIDE GROWTH AND OPPORTUNITY
        FUND][HIGHBRIDGE
        INTERNATIONAL LLC][IROQUOIS MASTER FUND, LTD.],
        the
        registered holder hereof or its permitted assigns (the "Holder"),
        is
        entitled, subject to the terms set forth below, to purchase from the Company,
        at
        the Exercise Price (as defined below) then in effect, upon surrender of this
        Warrant to Purchase Common Stock (including any Warrants to Purchase Common
        Stock issued in exchange, transfer or replacement hereof, the "Warrant"),
        at
        any time or times on or after the date hereof but not after 11:59 p.m., New
        York
        time, on the Expiration Date (as defined below), [__________]
        ([              
 ])1 
        fully
        paid nonassessable shares of Common Stock (as defined below) (the
        "Warrant
        Shares").
        This
        Amended and Restated Warrant amends, supplements, modifies and completely
        restates and supersedes the warrant, dated as of the Issuance Date (the
        "Existing
        Warrant"),
        issued by the Company to the Holder for the exercise of
        [___________]2 
        shares
        of Common Stock, but shall not, except as specifically amended hereby or
        as set
        forth in the Holder's Amendment and Exchange Agreement (as defined below),
        constitute a release, satisfaction or novation of any of the obligations
        under
        the Existing Warrant or any other Transaction Document (as defined in the
        Securities Purchase Agreement). This Amended and Restated Warrant is one
        of an
        issue of Amended and Restated Warrants to Purchase Common Stock (the
        "SPA
        Warrants")
        amending and restating the terms of the Existing Warrant pursuant to Section
        1
        of those certain Amendment and Exchange Agreements, dated as of March [__],
        2008
        (the "Replacement
        Date"),
        by
        and between each of the Buyers (as defined in the Securities Purchase Agreement)
        and the Company (individually, with respect to any Buyer, the "Amendment
        and
        Exchange Agreement" and collectively, with respect to all Buyers, the
        "Amendment
        and Exchange Agreements").
        Except as otherwise defined herein, capitalized terms in this Warrant shall
        have
        the meanings set forth in Section 16.

      
        
          

        

      

      
        
          1 Insert
            a
            number of shares equal to 50% of the number of Conversion Shares (as
            defined in
            the Securities Purchase Agreement) issuable as of the Replacement Date
            upon
            conversion of the SPA Securities issued to the Holder pursuant to the
            Securities
            Purchase Agreement.

        

        
          2
            Insert
            number of Warrant Shares issuable under the Existing Warrant of the
            Holder.

        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      1. EXERCISE
        OF WARRANT.

       

      (a) Mechanics
        of Exercise.
        Subject
        to the terms and conditions hereof (including, without limitation, the
        limitations set forth in Section 1(f)), this Warrant may be exercised
        by the
        Holder on any day on or after the date hereof, in whole or in part, by
        (i) delivery of a written notice, in the form attached hereto as
Exhibit
        A
        (the
        "Exercise
        Notice"),
        of
        the Holder's election to exercise this Warrant and (ii) (A) payment to the
        Company of an amount equal to the applicable Exercise Price multiplied by
        the
        number of Warrant Shares as to which this Warrant is being exercised (the
        "Aggregate
        Exercise Price")
        in
        cash or by wire transfer of immediately available funds or (B) by notifying
        the
        Company that this Warrant is being exercised pursuant to a Cashless Exercise
        (as
        defined in Section 1(d)). The Holder shall not be required to deliver the
        original Warrant in order to effect an exercise hereunder. Execution and
        delivery of the Exercise Notice with respect to less than all of the Warrant
        Shares shall have the same effect as cancellation of the original Warrant
        and
        issuance of a new Warrant evidencing the right to purchase the remaining
        number
        of Warrant Shares. On or before the first (1st)
        Business Day following the date on which the Company has received each of
        the
        Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless
        Exercise) (the "Exercise
        Delivery Documents"),
        the
        Company shall transmit by facsimile an acknowledgment of confirmation of
        receipt
        of the Exercise Delivery Documents to the Holder and the Company's transfer
        agent (the "Transfer
        Agent").
        On or
        before the second (2nd)
        Trading
        Day following the date on which the Company has received all of the Exercise
        Delivery Documents (the "Share
        Delivery Date"),
        the
        Company shall (X) provided that the Transfer Agent is participating in The
        Depository Trust Company ("DTC")
        Fast
        Automated Securities Transfer Program, upon the request of the Holder, credit
        such aggregate number of Warrant Shares to which the Holder is entitled pursuant
        to such exercise to the Holder's or its designee's balance account with DTC
        through its Deposit Withdrawal Agent Commission system, or (Y) if the Transfer
        Agent is not participating in the DTC Fast Automated Securities Transfer
        Program, issue and dispatch by overnight courier to the address as specified
        in
        the Exercise Notice, a certificate, registered in the Company's share register
        in the name of the Holder or its designee, for the number of shares of Common
        Stock to which the Holder is entitled pursuant to such exercise. Upon delivery
        of the Exercise Delivery Documents, the Holder shall be deemed for all corporate
        purposes to have become the holder of record of the Warrant Shares with respect
        to which this Warrant has been exercised, irrespective of the date such Warrant
        Shares are credited to the Holder's DTC account or the date of delivery of
        the
        certificates evidencing such Warrant Shares, as the case may be. If this
        Warrant
        is submitted in connection with any exercise pursuant to this Section 1(a)
        and
        the number of Warrant Shares represented by this Warrant submitted for exercise
        is greater than the number of Warrant Shares being acquired upon an exercise,
        then the Company shall as soon as practicable and in no event later than
        three
        (3) Business Days after any exercise and at its own expense, issue a new
        Warrant
        (in accordance with Section 7(d)) representing the right to purchase the
        number
        of Warrant Shares purchasable immediately prior to such exercise under this
        Warrant, less the number of Warrant Shares with respect to which this Warrant
        is
        exercised. No fractional shares of Common Stock are to be issued upon the
        exercise of this Warrant, but rather the number of shares of Common Stock
        to be
        issued shall be rounded up to the nearest whole number. The Company shall
        pay
        any and all taxes which may be payable with respect to the issuance and delivery
        of Warrant Shares upon exercise of this Warrant. 

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      (b) Exercise
        Price.
        For
        purposes of this Warrant, "Exercise
        Price"
        means
        $[___]3 ,
        subject
        to adjustment as provided herein.

       

      (c) Company's
        Failure to Timely Deliver Securities.
        If the
        Company shall fail for any reason (other than a good faith dispute as to
        the
        determination of the Exercise Price or the arithmetic calculation of the
        Warrant
        Shares) or for no reason to issue to the Holder within five (5) Business
        Days of
        receipt of the Exercise Delivery Documents, a certificate for the number
        of
        shares of Common Stock to which the Holder is entitled and register such
        shares
        of Common Stock on the Company's share register or to credit the Holder's
        balance account with DTC for such number of shares of Common Stock to which
        the
        Holder is entitled upon the Holder's exercise of this Warrant, then, in addition
        to all other remedies available to the Holder, the Company shall pay in cash
        to
        the Holder on each day after such fifth (5th)
        Business Day that the issuance of such shares of Common Stock is not timely
        effected an amount equal to 1.5% of the product of (A) the sum of the number
        of
        shares of Common Stock not issued to the Holder on a timely basis and to
        which
        the Holder is entitled and (B) the Weighted Average Price of the shares of
        Common Stock on the Trading Day immediately preceding the last possible date
        which the Company could have issued such shares of Common Stock to the Holder
        without violating Section 1(a). In addition to the foregoing, if within three
        (3) Trading Days after the Company's receipt of the facsimile copy of a Exercise
        Notice the Company shall fail to issue and deliver a certificate to the Holder
        and register such shares of Common Stock on the Company's share register
        or
        credit the Holder's balance account with DTC for the number of shares of
        Common
        Stock to which the Holder is entitled upon the Holder's exercise hereunder,
        and
        if on or after such Trading Day the Holder purchases (in an open market
        transaction or otherwise) shares of Common Stock to deliver in satisfaction
        of a
        sale by the Holder of shares of Common Stock issuable upon such exercise
        that
        the Holder anticipated receiving from the Company (a "Buy-In"),
        then
        the Company shall, within five (5) Business Days after the Holder's request
        and
        in the Holder's discretion, either (i) pay cash to the Holder in an amount
        equal
        to the Holder's total purchase price (including brokerage commissions, if
        any)
        for the shares of Common Stock so purchased (the "Buy-In
        Price"),
        at
        which point the Company's obligation to deliver such certificate (and to
        issue
        such Warrant Shares) shall terminate, or (ii) promptly honor its obligation
        to
        deliver to the Holder a certificate or certificates representing such Warrant
        Shares and pay cash to the Holder in an amount equal to the excess (if any)
        of
        the Buy-In Price over the product of (A) such number of shares of Common
        Stock,
        times (B) the Weighted Average Price on the date of exercise.

      
        

      

      3
        Insert
        price equal to 110% of the arithmetic average of the Weighted Average Price
        of
        the Common Stock for the five (5) Trading Day period ending on the Trading
        day
        immediately prior to the Replacement Date.

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      (d) Cashless
        Exercise.
         Notwithstanding
        anything contained herein to the contrary, if a registration statement covering
        the resale of the Warrant Shares that are the subject of the Exercise Notice
        by
        the Holder pursuant to the 1933 Act (the "Unavailable
        Warrant Shares")
        is not
        available for the resale of such Unavailable Warrant Shares, the Holder may,
        in
        its sole discretion, exercise this Warrant in whole or in part and, in lieu
        of
        making the cash payment otherwise contemplated to be made to the Company
        upon
        such exercise in payment of the Aggregate Exercise Price, elect instead to
        receive upon such exercise the "Net Number" of shares of Common Stock determined
        according to the following formula (a "Cashless
        Exercise"):

       

      Net
        Number = (A
        x
        B) - (A x C)

       
        B

       

      For
        purposes of the foregoing formula:

       

      A=
        the
        total number of shares with respect to which this Warrant is then being
        exercised.

       

      B=
        the
        Weighted Average Price of the shares of Common Stock (as reported by Bloomberg)
        on the date immediately preceding the date of the Exercise Notice.

       

      C=
        the
        Exercise Price then in effect for the applicable Warrant Shares at the time
        of
        such exercise.

      

      (e) Disputes.
        In the
        case of a dispute as to the determination of the Exercise Price or the
        arithmetic calculation of the Warrant Shares, the Company shall promptly
        issue
        to the Holder the number of Warrant Shares that are not disputed and resolve
        such dispute in accordance with Section 13.

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      (f)Limitations
        on Exercises; Beneficial Ownership.
        

       

      (i)
        The
        Company shall not effect the exercise of this Warrant, and the Holder shall
        not
        have the right to exercise this Warrant, to the extent that after giving
        effect
        to such exercise, such Person (together with such Person's affiliates) would
        beneficially own in excess of 4.99% the "Maximum
        Percentage")
        of the
        shares of Common Stock outstanding immediately after giving effect to such
        exercise. For purposes of the foregoing sentence, the aggregate number of
        shares
        of Common Stock beneficially owned by such Person and its affiliates shall
        include the number of shares of Common Stock issuable upon exercise of this
        Warrant with respect to which the determination of such sentence is being
        made,
        but shall exclude shares of Common Stock which would be issuable upon (x)
        exercise of the remaining, unexercised portion of this Warrant beneficially
        owned by such Person and its affiliates and (y) exercise or conversion of
        the
        unexercised or unconverted portion of any other securities of the Company
        beneficially owned by such Person and its affiliates (including, without
        limitation, any convertible notes or convertible preferred stock or warrants)
        subject to a limitation on conversion or exercise analogous to the limitation
        contained herein. Except as set forth in the preceding sentence, for purposes
        of
        this paragraph, beneficial ownership shall be calculated in accordance with
        Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes
        of this Warrant, in determining the number of outstanding shares of Common
        Stock, the Holder may rely on the number of outstanding shares of Common
        Stock
        as reflected in (1) the Company's most recent Form 10-K, Form 10-KSB, Form
        10-Q,
        Form 10-QSB, Current Report on Form 8-K or other public filing with the
        Securities and Exchange Commission ("SEC")
        as the
        case may be, (2) a more recent public announcement by the Company or (3)
        any
        other notice by the Company or the Transfer Agent setting forth the number
        of
        shares of Common Stock outstanding. For any reason at any time, upon the
        written
        request of the Holder, the Company shall within one (1) Business Day confirm
        orally and in writing to the Holder the number of shares of Common Stock
        then
        outstanding. In any case, the number of outstanding shares of Common Stock
        shall
        be determined after giving effect to the conversion or exercise of securities
        of
        the Company by the Holder and its affiliates since the date as of which such
        number of outstanding shares of Common Stock was reported. By written notice
        to
        the Company, the Holder may from time to time increase or decrease the Maximum
        Percentage to any other percentage not in excess of 9.99% specified in such
        notice; provided that any such increase will not be effective until the
        sixty-first (61st)
        day
        after such notice is delivered to the Company. The
        provisions of this paragraph shall be construed and implemented in a manner
        otherwise than in strict conformity with the terms of this Section 1(f) to
        correct this paragraph (or any portion hereof) which may be defective or
        inconsistent with the intended beneficial ownership limitation herein contained
        or to make changes or supplements necessary or desirable to properly give
        effect
        to such limitation.

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      (ii)
        Principal
        Market Regulation.
        The
        Company shall not be obligated to issue any shares of Common Stock upon exercise
        of this Warrant, if the issuance of such shares of Common Stock would exceed
        that number of shares of Common Stock which the Company may issue upon exercise
        of this Warrant (including, as applicable, any shares of Common Stock issued
        upon conversion or as interest on the SPA Securities) without breaching the
        Company's obligations under the rules or regulations of the Principal Market
        (which the parties acknowledge is currently 19.99% of the outstanding shares
        of
        Common Stock on the date immediately prior to the Replacement Date) (the
        "Exchange
        Cap"),
        except that such limitation shall not apply in the event that the Company
        (A)
        obtains the approval of its stockholders as required by the applicable rules
        of
        the Principal Market for issuances of shares of Common Stock in excess of
        such
        amount or (B) obtains a written opinion from outside counsel to the Company
        that
        such approval is not required, which opinion shall be reasonably satisfactory
        to
        the Required Holders. Until such approval or written opinion is obtained,
        no
        Holder shall be issued, upon exercise or conversion, as applicable, of any
        SPA
        Warrants or SPA Securities, shares of Common Stock in an amount greater than
        the
        product of the Exchange Cap multiplied by a fraction, the numerator of which
        is
        the principal amount of SPA Securities issued to such Holder pursuant to
        the
        Securities Purchase Agreement on the Issuance Date and the denominator of
        which
        is the principal amount of SPA Securities issued to the Holders pursuant
        to the
        Securities Purchase Agreement on the Issuance Date (with respect to each
        Holder,
        the "Exchange
        Cap Allocation").
        In
        the event that any Holder shall sell or otherwise transfer any of such Holder's
        SPA Warrants, the transferee shall be allocated a pro rata portion of such
        Holder's Exchange Cap Allocation, and the restrictions of the prior sentence
        shall apply to such transferee with respect to the portion of the Exchange
        Cap
        Allocation allocated to such transferee. In the event that any Holder of
        SPA
        Warrants shall exercise all of such Holder's SPA Warrants into a number of
        shares of Common Stock which, in the aggregate, is less than such Holder's
        Exchange Cap Allocation, then the difference between such Holder's Exchange
        Cap
        Allocation and the number of shares of Common Stock actually issued to such
        Holder shall be allocated to the respective Exchange Cap Allocations of the
        remaining Holders of SPA Warrants on a pro rata basis in proportion to the
        shares of Common Stock underlying the SPA Warrants then held by each such
        Holder. In the event that the Company is prohibited from issuing any Warrant
        Shares for which an Exercise Notice has been received as a result of the
        operation of this Section 1(f)(ii), the Company shall pay cash in exchange
        for
        cancellation of such Warrant Shares, at a price per Warrant Share equal to
        the
        difference between the Closing Sale Price and the Exercise Price as of the
        date
        of the attempted exercise.

       

      (iii)
        No
        Exercise in Excess of Cap.
        Notwithstanding anything herein to the contrary, the Company shall not be
        obligated to issue shares of Common Stock upon conversion of the SPA Securities
        and the exercise of the Warrants in excess of 45,000,000 in the aggregate
        (the
        "Share
        Cap").
        To
        the extent that any exercise hereunder would require the Company to issue
        shares
        in excess of the Share Cap, the Company shall only be obligated to issue
        to the
        Holder upon such exercise that amount of shares which would not exceed the
        Share
        Cap.

       

      (g) Insufficient
        Authorized Shares.
        If at
        any time while this Warrant remains outstanding the Company does not have
        a
        sufficient number of authorized and unreserved shares of Common Stock to
        satisfy
        its obligation to reserve for issuance upon exercise of this Warrant at least
        a
        number of shares of Common Stock equal to 130% (the "Required
        Reserve Amount")
        of the
        number of shares of Common Stock as shall from time to time be necessary
        to
        effect the exercise of all of this Warrant then outstanding (an "Authorized
        Share Failure"),
        then
        the Company shall immediately take all action necessary to increase the
        Company's authorized shares of Common Stock to an amount sufficient to allow
        the
        Company to reserve the Required Reserve Amount for this Warrant then
        outstanding. Without limiting the generality of the foregoing sentence, as
        soon
        as practicable after the date of the occurrence of an Authorized Share Failure,
        but in no event later than ninety (90) days after the occurrence of such
        Authorized Share Failure, the Company shall hold a meeting of its stockholders
        for the approval of an increase in the number of authorized shares of Common
        Stock. In connection with such meeting, the Company shall provide each
        stockholder with a proxy statement and shall use its best efforts to solicit
        its
        stockholders' approval of such increase in authorized shares of Common Stock
        and
        to cause its board of directors to recommend to the stockholders that they
        approve such proposal.

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      2.
        ADJUSTMENT
        OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
        The
        Exercise Price and the number of Warrant Shares shall be adjusted from time
        to
        time as follows:

       

      (a) Adjustment
        upon Issuance of shares of Common Stock.
        If and
        whenever on or after the Subscription Date and through and including the
        eighteen (18) month anniversary of the Issuance Date, the Company issues
        or
        sells, or in accordance with this Section 2 is deemed to have issued or sold,
        any shares of Common Stock (including the issuance or sale of shares of Common
        Stock owned or held by or for the account of the Company, but excluding shares
        of Common Stock deemed to have been issued by the Company in connection with
        any
        Excluded Securities (as defined in the SPA Securities) for a consideration
        per
        share (the "New
        Issuance Price")
        less
        than a price (the "Applicable
        Price")
        equal
        to the Exercise Price in effect immediately prior to such issue or sale or
        deemed issuance or sale (the foregoing a "Dilutive
        Issuance"),
        then
        immediately after such Dilutive Issuance, the Exercise Price then in effect
        shall be reduced to an amount equal to the New Issuance Price. In the event
        of
        any Dilutive Issuance after the eighteen (18) month anniversary of the Issuance
        Date, then immediately after such Dilutive Issuance, the Exercise Price then
        in
        effect shall be reduced to an amount equal to the product of (A) the Exercise
        Price in effect immediately prior to such Dilutive Issuance and (B) the quotient
        determined by dividing (1) the sum of (I) the product derived by multiplying
        the
        Exercise Price in effect immediately prior to such Dilutive Issuance and
        the
        number of shares of Common Stock Deemed Outstanding immediately prior to
        such
        Dilutive Issuance plus (II) the consideration, if any, received by the Company
        upon such Dilutive Issuance, by (2) the product derived by multiplying (I)
        the
        Exercise Price in effect immediately prior to such Dilutive Issuance by (II)
        the
        number of shares of Common Stock Deemed Outstanding immediately after such
        Dilutive Issuance.
        Upon
        each such adjustment of the Exercise Price hereunder, the number of Warrant
        Shares shall be adjusted to the number of shares of Common Stock determined
        by
        multiplying the Exercise Price in effect immediately prior to such adjustment
        by
        the number of Warrant Shares acquirable upon exercise of this Warrant
        immediately prior to such adjustment and dividing the product thereof by
        the
        Exercise Price resulting from such adjustment. For purposes of determining
        the
        adjusted Exercise Price under this Section 2(a), the following shall be
        applicable:

       

      (i) Issuance
        of Options.
        If the
        Company in any manner grants any Options and the lowest price per share for
        which one share of Common Stock is issuable upon the exercise of any such
        Option
        or upon conversion, exercise or exchange of any Convertible Securities issuable
        upon exercise of any such Option is less than the Applicable Price, then
        such
        share of Common Stock shall be deemed to be outstanding and to have been
        issued
        and sold by the Company at the time of the granting or sale of such Option
        for
        such price per share. For purposes of this Section 2(a)(i), the "lowest price
        per share for which one share of Common Stock is issuable upon exercise of
        such
        Options or upon conversion, exercise or exchange of such Convertible Securities
        issuable upon exercise of any such Option" shall be equal to the sum of the
        lowest amounts of consideration (if any) received or receivable by the Company
        with respect to any one share of Common Stock upon the granting or sale of
        the
        Option, upon exercise of the Option and upon conversion, exercise or exchange
        of
        any Convertible Security issuable upon exercise of such Option. No further
        adjustment of the Exercise Price or number of Warrant Shares shall be made
        upon
        the actual issuance of such shares of Common Stock or of such Convertible
        Securities upon the exercise of such Options or upon the actual issuance
        of such
        shares of Common Stock upon conversion, exercise or exchange of such Convertible
        Securities. 

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      (ii) Issuance
        of Convertible Securities.
        If the
        Company in any manner issues or sells any Convertible Securities and the
        lowest
        price per share for which one share of Common Stock is issuable upon the
        conversion, exercise or exchange thereof is less than the Applicable Price,
        then
        such share of Common Stock shall be deemed to be outstanding and to have
        been
        issued and sold by the Company at the time of the issuance or sale of such
        Convertible Securities for such price per share. For the purposes of this
        Section 2(a)(ii), the "lowest price per share for which one share of Common
        Stock is issuable upon the conversion, exercise or exchange thereof" shall
        be
        equal to the sum of the lowest amounts of consideration (if any) received
        or
        receivable by the Company with respect to one share of Common Stock upon
        the
        issuance or sale of the Convertible Security and upon conversion, exercise
        or
        exchange of such Convertible Security. No further adjustment of the Exercise
        Price or number of Warrant Shares shall be made upon the actual issuance
        of such
        shares of Common Stock upon conversion, exercise or exchange of such Convertible
        Securities, and if any such issue or sale of such Convertible Securities
        is made
        upon exercise of any Options for which adjustment of this Warrant has been
        or is
        to be made pursuant to other provisions of this Section 2(a), no further
        adjustment of the Exercise Price or number of Warrant Shares shall be made
        by
        reason of such issue or sale. 

       

      (iii) Change
        in Option Price or Rate of Conversion.
        If the
        purchase price provided for in any Options, the additional consideration,
        if
        any, payable upon the issue, conversion, exercise or exchange of any Convertible
        Securities, or the rate at which any Convertible Securities are convertible
        into
        or exercisable or exchangeable for shares of Common Stock increases or decreases
        at any time, the Exercise Price and the number of Warrant Shares in effect
        at
        the time of such increase or decrease shall be adjusted to the Exercise Price
        and the number of Warrant Shares which would have been in effect at such
        time
        had such Options or Convertible Securities provided for such increased or
        decreased purchase price, additional consideration or increased or decreased
        conversion rate, as the case may be, at the time initially granted, issued
        or
        sold. For purposes of this Section 2(a)(iii), if the terms of any Option
        or
        Convertible Security that was outstanding as of the date of issuance of this
        Warrant are increased or decreased in the manner described in the immediately
        preceding sentence, then such Option or Convertible Security and the shares
        of
        Common Stock deemed issuable upon exercise, conversion or exchange thereof
        shall
        be deemed to have been issued as of the date of such increase or decrease.
        No
        adjustment pursuant to this Section 2(a) shall be made if such adjustment
        would
        result in an increase of the Exercise Price then in effect or a decrease
        in the
        number of Warrant Shares.

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      (iv) Calculation
        of Consideration Received.
        In case
        any Option is issued in connection with the issue or sale of other securities
        of
        the Company, together comprising one integrated transaction, (x) the Options
        will be deemed to have been issued for a value determined by use of the Black
        Scholes Option Pricing Model (the "Option
        Value")
        and
        (y) the other securities issued or sold in such integrated transaction shall
        be
        deemed to have been issued for the difference of (I) the aggregate consideration
        received by the Company, less (II) the Option Value. If any shares of Common
        Stock, Options or Convertible Securities are issued or sold or deemed to
        have
        been issued or sold for cash, the consideration received therefor will be
        deemed
        to be the net amount received by the Company therefor. If any shares of Common
        Stock, Options or Convertible Securities are issued or sold for a consideration
        other than cash, the amount of such consideration received by the Company
        will
        be the fair value of such consideration, except where such consideration
        consists of securities, in which case the amount of consideration received
        by
        the Company will be the Weighted Average Price of such security on the date
        of
        receipt. If any shares of Common Stock, Options or Convertible Securities
        are
        issued to the owners of the non-surviving entity in connection with any merger
        in which the Company is the surviving entity, the amount of consideration
        therefor will be deemed to be the fair value of such portion of the net assets
        and business of the non-surviving entity as is attributable to such shares
        of
        Common Stock, Options or Convertible Securities, as the case may be. The
        fair
        value of any consideration other than cash or securities will be determined
        jointly by the Company and the Required Holders. If such parties are unable
        to
        reach agreement within ten (10) days after the occurrence of an event requiring
        valuation (the "Valuation
        Event"),
        the
        fair value of such consideration will be determined within five (5) Business
        Days after the tenth (10th)
        day
        following the Valuation Event by an independent, reputable appraiser jointly
        selected by the Company and the Required Holders. The determination of such
        appraiser shall be final and binding upon all parties absent manifest error
        and
        the fees and expenses of such appraiser shall be borne by the Company.

       

      (v) Record
        Date.
        If the
        Company takes a record of the holders of shares of Common Stock for the purpose
        of entitling them (A) to receive a dividend or other distribution payable
        in shares of Common Stock, Options or in Convertible Securities or (B) to
        subscribe for or purchase shares of Common Stock, Options or Convertible
        Securities, then such record date will be deemed to be the date of the issue
        or
        sale of the shares of Common Stock deemed to have been issued or sold upon
        the
        declaration of such dividend or the making of such other distribution or
        the
        date of the granting of such right of subscription or purchase, as the case
        may
        be. 

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      (b) Adjustment
        upon Subdivision or Combination of Common Stock.
        If the
        Company at any time on or after the Subscription Date subdivides (by any
        stock
        split, stock dividend, recapitalization or otherwise) one or more classes
        of its
        outstanding shares of Common Stock into a greater number of shares, the Exercise
        Price in effect immediately prior to such subdivision will be proportionately
        reduced and the number of Warrant Shares will be proportionately increased.
        If
        the Company at any time on or after the Subscription Date combines (by
        combination, reverse stock split or otherwise) one or more classes of its
        outstanding shares of Common Stock into a smaller number of shares, the Exercise
        Price in effect immediately prior to such combination will be proportionately
        increased and the number of Warrant Shares will be proportionately decreased.
        Any adjustment under this Section 2(b) shall become effective at the close
        of
        business on the date the subdivision or combination becomes
        effective.

       

      (c) Other
        Events.
        If any
        event occurs of the type contemplated by the provisions of this Section 2
        but
        not expressly provided for by such provisions (including, without limitation,
        the granting of stock appreciation rights, phantom stock rights or other
        rights
        with equity features), then the Company's Board of Directors will make an
        appropriate adjustment in the Exercise Price and the number of Warrant Shares
        so
        as to protect the rights of the Holder; provided that no such adjustment
        pursuant to this Section 2(c) will increase the Exercise Price or decrease
        the
        number of Warrant Shares as otherwise determined pursuant to this Section
        2.

       

      (d) De
        Minimis Adjustments.
        No
        adjustment in the Conversion Price shall be required unless such adjustment
        would require an increase or decrease of at least $0.01 in such price, provided,
        however, that any adjustment which by reason of this Section 2(d) is not
        required to be made shall be carried forward and taken into account in any
        subsequent adjustments under this Section 2. All calculations under this
        Section
        2 shall be made by the Company in good faith and shall be made to the nearest
        cent or to the nearest one hundredth of a share, as applicable. No adjustment
        need be made for a change in the par value or no par value of the Company's
        Common Stock.

       

      (e) Voluntary
        Adjustment By Company.
        The
        Company may at any time during the term of this Warrant reduce the then current
        Exercise Price to any amount and for any period of time deemed appropriate
        by
        the Board of Directors of the Company.

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      3.
        RIGHTS
        UPON DISTRIBUTION OF ASSETS.
        If the
        Company shall declare or make any dividend or other distribution of its assets
        (or rights to acquire its assets) to holders of shares of Common Stock, by
        way
        of return of capital or otherwise (including, without limitation, any
        distribution of cash, stock or other securities, property or options by way
        of a
        dividend, spin off, reclassification, corporate rearrangement, scheme of
        arrangement or other similar transaction) (a "Distribution"),
        at
        any time after the issuance of this Warrant, then, in each such
        case:

       

      (a) any
        Exercise Price in effect immediately prior to the close of business on the
        record date fixed for the determination of holders of shares of Common Stock
        entitled to receive the Distribution shall be reduced, effective as of the
        close
        of business on such record date, to a price determined by multiplying such
        Exercise Price by a fraction of which (i) the numerator shall be the Weighted
        Average Price of the shares of Common Stock on the Trading Day immediately
        preceding such record date minus the value of the Distribution (as determined
        in
        good faith by the Company's Board of Directors) applicable to one share of
        Common Stock, and (ii) the denominator shall be the Weighted Average Price
        of
        the shares of Common Stock on the Trading Day immediately preceding such
        record
        date; and

       

      (b) the
        number of Warrant Shares shall be increased to a number of shares equal to
        the
        number of shares of Common Stock obtainable immediately prior to the close
        of
        business on the record date fixed for the determination of holders of shares
        of
        Common Stock entitled to receive the Distribution multiplied by the reciprocal
        of the fraction set forth in the immediately preceding paragraph (a); provided
        that in the event that the Distribution is of shares of Common Stock (or
        common
        stock) ("Other
        Shares of Common Stock")
        of a
        company whose common shares are traded on a national securities exchange
        or a
        national automated quotation system, then the Holder may elect to receive
        a
        warrant to purchase Other Shares of Common Stock in lieu of an increase in
        the
        number of Warrant Shares, the terms of which shall be identical to those
        of this
        Warrant, except that such warrant shall be exercisable into the number of
        shares
        of Other Shares of Common Stock that would have been payable to the Holder
        pursuant to the Distribution had the Holder exercised this Warrant immediately
        prior to such record date and with an aggregate exercise price equal to the
        product of the amount by which the exercise price of this Warrant was decreased
        with respect to the Distribution pursuant to the terms of the immediately
        preceding paragraph (a) and the number of Warrant Shares calculated in
        accordance with the first part of this paragraph (b).

       

      4.
        PURCHASE
        RIGHTS; FUNDAMENTAL TRANSACTIONS.

       

      (a) Purchase
        Rights.
        In
        addition to any adjustments pursuant to Section 2 above, if at any time the
        Company grants, issues or sells any Options, Convertible Securities or rights
        to
        purchase stock, warrants, securities or other property pro rata to the record
        holders of any class of shares of Common Stock (the "Purchase
        Rights"),
        then
        the Holder will be entitled to acquire, upon the terms applicable to such
        Purchase Rights, the aggregate Purchase Rights which the Holder could have
        acquired if the Holder had held the number of shares of Common Stock acquirable
        upon complete exercise of this Warrant (without regard to any limitations
        on the
        exercise of this Warrant) immediately before the date on which a record is
        taken
        for the grant, issuance or sale of such Purchase Rights, or, if no such record
        is taken, the date as of which the record holders of shares of Common Stock
        are
        to be determined for the grant, issue or sale of such Purchase
        Rights.

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      (b) Fundamental
        Transactions.
        The
        Company shall not enter into or be party to a Fundamental Transaction unless
        (i)  the Successor Entity assumes in writing all of the obligations of the
        Company under this Warrant and the other Transaction Documents in accordance
        with the provisions of this Section (4)(b) pursuant to written agreements
        in
        form and substance satisfactory to the Required Holders and approved by the
        Required Holders prior to such Fundamental Transaction, including agreements
        to
        deliver to each holder of the SPA Warrants in exchange for such Warrants
        a
        security of the Successor Entity evidenced by a written instrument substantially
        similar in form and substance to this Warrant, including, without limitation,
        an
        adjusted exercise price equal to the value for the shares of Common Stock
        reflected by the terms of such Fundamental Transaction, and exercisable for
        a
        corresponding number of shares of capital stock equivalent to the shares
        of
        Common Stock acquirable and receivable upon exercise of this Warrant (without
        regard to any limitations on the exercise of this Warrant) prior to such
        Fundamental Transaction, and satisfactory to the Required Holders and
        (ii) the Successor Entity (including its Parent Entity) is a publicly
        traded corporation whose common stock is quoted on or listed for trading
        on an
        Eligible Market. Upon the occurrence of any Fundamental Transaction, the
        Successor Entity shall succeed to, and be substituted for (so that from and
        after the date of such Fundamental Transaction, the provisions of this Warrant
        referring to the "Company" shall refer instead to the Successor Entity),
        and may
        exercise every right and power of the Company and shall assume all of the
        obligations of the Company under this Warrant with the same effect as if
        such
        Successor Entity had been named as the Company herein. Upon consummation
        of the
        Fundamental Transaction, the Successor Entity shall deliver to the Holder
        confirmation that there shall be issued upon exercise of this Warrant
at
        any
        time after the consummation of the Fundamental Transaction, in lieu of the
        shares of the common stock (or
        other
        securities, cash, assets or other property) issuable
        upon the exercise of the Warrant
        prior
        to
        such Fundamental Transaction,
        such
        shares of the publicly traded Common Stock (or its equivalent) of the Successor
        Entity (including its Parent Entity) which the Holder would have been entitled
        to receive upon the happening of such Fundamental Transaction had this Warrant
        been converted immediately prior to such Fundamental Transaction, as adjusted
        in
        accordance with the provisions of this Warrant.
        In
        addition to and not in substitution for any other rights hereunder, prior
        to the
        consummation of any Fundamental Transaction pursuant to which holders of
        shares
        of Common Stock are entitled to receive securities or other assets with respect
        to or in exchange for shares of Common Stock (a "Corporate
        Event"),
        the
        Company shall make appropriate provision to insure that the Holder will
        thereafter have the right to receive upon an exercise of this Warrant
at
        any
        time after the consummation of
        the
        Fundamental Transaction but
        prior
        to the Expiration Date,
        in lieu
        of the shares of the Common Stock (or
        other
        securities, cash, assets or other property) issuable
        upon the exercise of this Warrant prior to such Fundamental
        Transaction,
        such
        shares of stock, securities, cash, assets or any other property whatsoever
        (including warrants or other purchase or subscription rights) which the Holder
        would have been entitled to receive upon the happening of such Fundamental
        Transaction had this Warrant been exercised immediately prior to such
        Fundamental Transaction. Provision
        made pursuant to the preceding sentence shall be in a form and substance
        reasonably satisfactory to the Holder. The provisions of this Section shall
        apply similarly and equally to successive Fundamental Transactions and Corporate
        Events and shall be applied without regard to any limitations on the exercise
        of
        this Warrant.

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      (c) Notwithstanding
        the foregoing, in the event of a Fundamental Transaction, at the request
        of the
        Holder delivered before the forty-fifth (45th)
        day
        after the consummation of such Fundamental Transaction, the Company (or the
        Successor Entity) shall purchase this Warrant from the Holder by paying to
        the
        Holder, within ten (10) Business Days after such request (or, if later, on
        the
        effective date of the Fundamental Transaction), cash in an amount equal to
        the
        Black Scholes Value of the remaining unexercised portion of this Warrant
        on the
        date of such Fundamental Transaction.

       

      5.
        NONCIRCUMVENTION.
        The
        Company hereby covenants and agrees that the Company will not, by amendment
        of
        its Certificate of Incorporation, Bylaws or through any reorganization, transfer
        of assets, consolidation, merger, scheme of arrangement, dissolution, issue
        or
        sale of securities, or any other voluntary action, avoid or seek to avoid
        the
        observance or performance of any of the terms of this Warrant, and will at
        all
        times in good faith carry out all the provisions of this Warrant and take
        all
        action as may be required to protect the rights of the Holder. Without limiting
        the generality of the foregoing, the Company (i) shall not increase the par
        value of any shares of Common Stock receivable upon the exercise of this
        Warrant
        above the Exercise Price then in effect, (ii) shall take all such actions
        as may be necessary or appropriate in order that the Company may validly
        and
        legally issue fully paid and nonassessable shares of Common Stock upon the
        exercise of this Warrant and (iii) shall, so long as any of the SPA Warrants
        are
        outstanding, take all action necessary to reserve and keep available out
        of its
        authorized and unissued shares of Common Stock, solely for the purpose of
        effecting the exercise of the SPA Warrants, 130% of the number of shares
        of
        Common Stock as shall from time to time be necessary to effect the exercise
        of
        the SPA Warrants then outstanding (without regard to any limitations on
        exercise.

       

      6.
        WARRANT
        HOLDER NOT DEEMED A STOCKHOLDER.
        Except
        as otherwise specifically provided herein, the Holder, solely in such Person's
        capacity as a holder of this Warrant, shall not be entitled to vote or receive
        dividends or be deemed the holder of share capital of the Company for any
        purpose, nor shall anything contained in this Warrant be construed to confer
        upon the Holder, solely in such Person's capacity as the Holder of this Warrant,
        any of the rights of a shareholder of the Company or any right to vote, give
        or
        withhold consent to any corporate action (whether any reorganization, issue
        of
        stock, reclassification of stock, consolidation, merger, conveyance or
        otherwise), receive notice of meetings, receive dividends or subscription
        rights, or otherwise, prior to the issuance to the Holder of the Warrant
        Shares
        which such Person is then entitled to receive upon the due exercise of this
        Warrant. In addition, nothing contained in this Warrant shall be construed
        as
        imposing any liabilities on the Holder to purchase any securities (upon exercise
        of this Warrant or otherwise) or as a shareholder of the Company, whether
        such
        liabilities are asserted by the Company or by creditors of the Company.
        Notwithstanding this Section 6, the Company shall provide the Holder with
        copies
        of the same notices and other information given to the shareholders of the
        Company generally, contemporaneously with the giving thereof to the
        shareholders.

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      7.
        REISSUANCE
        OF WARRANTS.

       

      (a) Transfer
        of Warrant.
        If this
        Warrant is to be transferred, the Holder shall surrender this Warrant to
        the
        Company, whereupon the Company will forthwith issue and deliver upon the
        order
        of the Holder a new Warrant (in accordance with Section 7(d)), registered
        as the
        Holder may request, representing the right to purchase the number of Warrant
        Shares being transferred by the Holder and, if less than the total number
        of
        Warrant Shares then underlying this Warrant is being transferred, a new Warrant
        (in accordance with Section 7(d)) to the Holder representing the right to
        purchase the number of Warrant Shares not being transferred.

       

      (b) Lost,
        Stolen or Mutilated Warrant.
        Upon
        receipt by the Company of evidence reasonably satisfactory to the Company
        of the
        loss, theft, destruction or mutilation of this Warrant, and, in the case
        of
        loss, theft or destruction, of any indemnification undertaking by the Holder
        to
        the Company in customary form and, in the case of mutilation, upon surrender
        and
        cancellation of this Warrant, the Company shall execute and deliver to the
        Holder a new Warrant (in accordance with Section 7(d)) representing the right
        to
        purchase the Warrant Shares then underlying this Warrant.

       

      (c) Exchangeable
        for Multiple Warrants.
        This
        Warrant is exchangeable, upon the surrender hereof by the Holder at the
        principal office of the Company, for a new Warrant or Warrants (in accordance
        with Section 7(d)) representing in the aggregate the right to purchase the
        number of Warrant Shares then underlying this Warrant, and each such new
        Warrant
        will represent the right to purchase such portion of such Warrant Shares
        as is
        designated by the Holder at the time of such surrender; provided, however,
        that
        no Warrants for fractional shares of Common Stock shall be given.

       

      (d) Issuance
        of New Warrants.
        Whenever the Company is required to issue a new Warrant pursuant to the terms
        of
        this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
        (ii) shall represent, as indicated on the face of such new Warrant, the right
        to
        purchase the Warrant Shares then underlying this Warrant (or in the case
        of a
        new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant
        Shares designated by the Holder which, when added to the number of shares
        of
        Common Stock underlying the other new Warrants issued in connection with
        such
        issuance, does not exceed the number of Warrant Shares then underlying this
        Warrant), (iii) shall have an issuance date, as indicated on the face of
        such
        new Warrant which is the same as the Issuance Date, and (iv) shall have the
        same
        rights and conditions as this Warrant. 

      
        
          
            
            

          

          
            14

            
              

            

          

          
            
            

          

        

      

      8.
        NOTICES.
        Whenever notice is required to be given under this Warrant, unless otherwise
        provided herein, such notice shall be given in accordance with Section 9(f)
        of
        the Securities Purchase Agreement. The Company shall provide the Holder with
        prompt written notice of all actions taken pursuant to this Warrant, including
        in reasonable detail a description of such action and the reason therefore.
        Without limiting the generality of the foregoing, the Company will give written
        notice to the Holder (i) immediately upon any adjustment of the Exercise
        Price,
        setting forth in reasonable detail, and certifying, the calculation of such
        adjustment and (ii) at least fifteen (15) days prior to the date on which
        the
        Company closes its books or takes a record (A) with respect to any dividend
        or
        distribution upon the shares of Common Stock, (B) with respect to any grants,
        issuances or sales of any Options, Convertible Securities or rights to purchase
        stock, warrants, securities or other property to holders of shares of Common
        Stock (other than Excluded Securities) or (C) for determining rights to vote
        with respect to any Fundamental Transaction, dissolution or liquidation,
        provided in each case that such information shall be made known to the public
        prior to or in conjunction with such notice being provided to the Holder.
        

       

      9.AMENDMENT
        AND WAIVER.
        Except
        as otherwise provided herein, the provisions of this Warrant may be amended
        and
        the Company may take any action herein prohibited, or omit to perform any
        act
        herein required to be performed by it, only if the Company has obtained the
        written consent of the Required Holders; provided that no such action may
        increase the exercise price of any SPA Warrant or decrease the number of
        shares
        or class of stock obtainable upon exercise of any SPA Warrant without the
        written consent of the Holder. No such amendment shall be effective to the
        extent that it applies to less than all of the holders of the SPA Warrants
        then
        outstanding.

       

      10.
        GOVERNING
        LAW.
        This
        Warrant shall be governed by and construed and enforced in accordance with,
        and
        all questions concerning the construction, validity, interpretation and
        performance of this Warrant 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. 

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      11.
        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).

       

      12.
        CONSTRUCTION;
        HEADINGS.
        This
        Warrant shall be deemed to be jointly drafted by the Company and all the
        Buyers
        and shall not be construed against any person as the drafter hereof. The
        headings of this Warrant are for convenience of reference and shall not form
        part of, or affect the interpretation of, this Warrant.

       

      13.
        DISPUTE
        RESOLUTION.
        In the
        case of a dispute as to the determination of the Exercise Price or the
        arithmetic calculation of the Warrant Shares, the Company shall submit the
        disputed determinations or arithmetic calculations via facsimile within two
        (2)
        Business Days of receipt of the Exercise Notice giving rise to such dispute,
        as
        the case may be, to the Holder. If the Holder and the Company are unable
        to
        agree upon such determination or calculation of the Exercise Price or the
        Warrant Shares within three Business Days of such disputed determination
        or
        arithmetic calculation being submitted to the Holder, then the Company shall,
        within two (2) Business Days submit via facsimile (a) the disputed determination
        of the Exercise Price to an independent, reputable investment bank selected
        by
        the Company and approved by the Holder or (b) the disputed arithmetic
        calculation of the Warrant Shares to the Company's independent, outside
        accountant. The Company shall cause at its expense the investment bank or
        the
        accountant, as the case may be, to perform the determinations or calculations
        and notify the Company and the Holder of the results no later than ten (10)
        Business Days from the time it receives the disputed determinations or
        calculations. Such investment bank's or accountant's determination or
        calculation, as the case may be, shall be binding upon all parties absent
        demonstrable error.

       

      14.
        REMEDIES,
        OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.
        The
        remedies provided in this Warrant shall be cumulative and in addition to
        all
        other remedies available under this Warrant and the other Transaction Documents,
        at law or in equity (including a decree of specific performance and/or other
        injunctive relief), and nothing herein shall limit the right of the Holder
        to
        pursue actual damages for any failure by the Company to comply with the terms
        of
        this Warrant. The Company acknowledges that a breach by it of its obligations
        hereunder will cause irreparable harm to the Holder and that the remedy at
        law
        for any such breach may be inadequate. The Company therefore agrees that,
        in the
        event of any such breach or threatened breach, the holder of this Warrant
        shall
        be entitled, in addition to all other available remedies, to an injunction
        restraining any breach, without the necessity of showing economic loss and
        without any bond or other security being required.

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      15.
        TRANSFER.This
        Warrant may be offered for sale, sold, transferred or assigned without the
        consent of the Company, except as may otherwise be required by Section 2(f)
        of
        the Securities Purchase Agreement.

       

      16
        .CERTAIN
        DEFINITIONS.
        For
        purposes of this Warrant, the following terms shall have the following
        meanings:

       

      (a)"1933
        Act"
        means
        the Securities Act of 1933, as amended.

       

      (b)"Black
        Scholes Value"
        means
        the value of this Warrant based on the Black and Scholes Option Pricing Model
        obtained from the "OV" function on Bloomberg determined as of the day of
        closing
        of the applicable Fundamental Transaction for pricing purposes and reflecting
        (i) a risk-free interest rate corresponding to the U.S. Treasury rate for
        a
        period equal to the remaining term of this Warrant as of such date of request,
        (ii) an expected volatility equal to the greater of 60% and the 100 day
        volatility obtained from the HVT function on Bloomberg as of the day immediately
        following the public announcement of the applicable Fundamental Transaction
        and
        (iii) the underlying price per share used in such calculation shall be the
        sum
        of the price per share being offered in cash, if any, plus the value of any
        non-cash consideration, if any, being offered in the Fundamental
        Transaction.

       

      (c) "Bloomberg"
        means
        Bloomberg Financial Markets.

       

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

       

      (e) "Closing
        Sale Price"
        means,
        for any security as of any date, the last closing trade price for such security
        on the Principal Market, as reported by Bloomberg, or, if the Principal Market
        begins to operate on an extended hours basis and does not designate the closing
        trade price then the last trade price of such security prior to 4:00:00 p.m.,
        New York time, as reported by Bloomberg, or, if the Principal Market is not
        the
        principal securities exchange or trading market for such security, the last
        trade price of such security on the principal securities exchange or trading
        market where such security is listed or traded as reported by Bloomberg,
        or if
        the foregoing do not apply, the last trade price of such security in the
        over-the-counter market on the electronic bulletin board for such security
        as
        reported by Bloomberg, or, if no last trade price is reported for such security
        by Bloomberg, the average of the bid prices, or the ask prices, respectively,
        of
        any market makers for such security as reported in the "pink sheets" by Pink
        Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing
        Sale
        Price cannot be calculated for a security on a particular date on any of
        the
        foregoing bases, the Closing Sale Price of such security on such date shall
        be
        the fair market value as mutually determined by the Company and the Holder.
        If
        the Company and the Holder are unable to agree upon the fair market value
        of
        such security, then such dispute shall be resolved pursuant to Section 13.
        All
        such determinations to be appropriately adjusted for any stock dividend,
        stock
        split, stock combination or other similar transaction during the applicable
        calculation period.

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      (f) "Common
        Stock"
        means
        (i) the Company's shares of Common Stock, par value $0.001 per share, and
        (ii) any share capital into which such Common Stock shall have been changed
        or any share capital resulting from a reclassification of such Common
        Stock.

       

      (g) "Common
        Stock Deemed Outstanding"
        means,
        at any given time, the number of shares of Common Stock actually outstanding
        at
        such time, plus the number of shares of Common Stock deemed to be outstanding
        pursuant to Sections 2(a)(i) and 2(a)(ii) hereof regardless of whether the
        Options or Convertible Securities are actually exercisable at such time,
        but
        excluding any shares of Common Stock owned or held by or for the account
        of the
        Company or issuable upon exercise of the SPA Warrants. 

       

      (h) "Convertible
        Securities"
        means
        any stock or securities (other than Options) directly or indirectly convertible
        into or exercisable or exchangeable for shares of Common Stock.

       

      (i) "Eligible
        Market"
        means
        the Principal Market, the OTC Bulletin Board, The New York Stock Exchange,
        Inc.,
        The NASDAQ Capital Market, The NASDAQ Global Select Market or The NASDAQ
        Global
        Market.

       

      (j) "Expiration
        Date"
        means
        the date sixty (60) months after the Issuance Date or, if such date falls
        on a
        day other than a Business Day or on which trading does not take place on
        the
        Principal Market (a "Holiday"),
        the
        next date that is not a Holiday.

       

      (k) Fundamental
        Transaction"
        means
        that the Company shall, directly or indirectly, in one or more related
        transactions, (i) consolidate or merge with or into (whether or not the Company
        is the surviving corporation) another Person or Persons, if the holders of
        the
        Voting Stock (not including any shares of Voting Stock held by the Person
        or
        Persons making or party to, or associated or affiliated with the Persons
        making
        or party to, such consolidation or merger) immediately prior to such
        consolidation or merger shall hold or have the right to direct the voting
        of
        less than 50% of the Voting Stock or such voting securities of such other
        surviving Person immediately following such transaction, or (ii) sell, assign,
        transfer, convey or otherwise dispose of all or substantially all of the
        properties or assets of the Company to another Person, or (iii) allow another
        Person to make a purchase, tender or exchange offer that is accepted by the
        holders of more than the 50% of the outstanding shares of Voting Stock (not
        including any shares of Voting Stock held by the Person or Persons making
        or
        party to, or associated or affiliated with the Persons making or party to,
        such
        purchase, tender or exchange offer), or (iv) consummate a stock purchase
        agreement or other business combination (including, without limitation, a
        reorganization, recapitalization, spin-off or scheme of arrangement) with
        another Person whereby such other Person acquires more than the 50% of the
        outstanding shares of Voting Stock (not including any shares of Voting Stock
        held by the other Person or other Persons making or party to, or associated
        or
        affiliated with the other Persons making or party to, such stock purchase
        agreement or other business combination), (v) reorganize, recapitalize or
        reclassify its Common Stock or (vi) any "person" or "group" (as these terms
        are
        used for purposes of Sections 13(d) and 14(d) of the Securities Exchange
        Act of
        1934, as amended) is or shall become the "beneficial owner" (as defined in
        Rule
        13d-3 under the Securities Exchange Act of 1934, as amended), directly or
        indirectly, of 50% of the aggregate ordinary voting power represented by
        issued
        and outstanding Common Stock.

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

      (l) "Options"
        means
        any rights, warrants or options to subscribe for or purchase shares of Common
        Stock or Convertible Securities.

       

      (m) "Parent
        Entity"
        of a
        Person means an entity that, directly or indirectly, controls the applicable
        Person and whose common stock or equivalent equity security is quoted or
        listed
        on an Eligible Market, or, if there is more than one such Person or Parent
        Entity, the Person or Parent Entity with the largest public market
        capitalization as of the date of consummation of the Fundamental
        Transaction.

       

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

       

      (o) "Principal
        Market"
        means
        the American Stock Exchange.

       

      (p) "Required
        Holders"
        means
        the holders of the SPA Warrants representing at least a majority of shares
        of
        Common Stock underlying the SPA Warrants then outstanding.

       

      (q) "SPA
        Securities"
        means
        the Notes issued pursuant to the Securities Purchase Agreement. 

       

      (r) "Securities
        Purchase Agreement"
        means
        that certain securities purchase agreement dated as of the Subscription Date
        by
        and among the Company and the initial holders of the Warrants pursuant to
        which
        the Company issued the Warrants, as amended from time to time in accordance
        with
        its terms, including, without limitation, pursuant to the Amendment and Exchange
        Agreements.

       

      (s) "Subscription
        Date"
        means
        November 29, 2007.

       

      (t) "Successor
        Entity"
        means
        the Person (or, if so elected by the Required Holders, the Parent Entity)
        formed
        by, resulting from or surviving any Fundamental Transaction or the Person
        (or,
        if so elected by the Required Holders, the Parent Entity) with which such
        Fundamental Transaction shall have been entered into.

       

      (u) "Trading
        Day"
        means
        any day on which the Common Stock are traded on the Principal Market, or,
        if the
        Principal Market is not the principal trading market for the Common Stock,
        then
        on the principal securities exchange or securities market on which the Common
        Stock are then traded; provided that "Trading Day" shall not include any day on
        which the Common Stock are scheduled to trade on such exchange or market
        for
        less than 4.5 hours or any day that the Common Stock are suspended from trading
        during the final hour of trading on such exchange or market (or if such exchange
        or market does not designate in advance the closing time of trading on such
        exchange or market, then during the hour ending at 4:00:00 p.m., New York
        time).

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      (v) "Voting
        Stock"
        of a
        Person means capital stock of such Person of the class or classes pursuant
        to
        which the holders thereof have the general voting power to elect, or the
        general
        power to appoint, at least a majority of the board of directors, managers
        or
        trustees of such Person (irrespective of whether or not at the time capital
        stock of any other class or classes shall have or might have voting power
        by
        reason of the happening of any contingency).

       

      (w) "Weighted
        Average Price"
        means,
        for any security as of any date, the dollar volume-weighted average price
        for
        such security on the Principal Market during the period beginning at 9:30:01
        a.m., New York City time, and ending at 4:00:00 p.m., New York City time,
        as
        reported by Bloomberg through its "Volume at Price" function or, if the
        foregoing does not apply, the dollar volume-weighted average price of such
        security in the over-the-counter market on the electronic bulletin board
        for
        such security during the period beginning at 9:30:01 a.m., New York City
        time,
        and ending at 4:00:00 p.m., New York City time, as reported by Bloomberg,
        or, if
        no dollar volume-weighted average price is reported for such security by
        Bloomberg for such hours, the average of the highest closing bid price and
        the
        lowest closing ask price of any of the market makers for such security as
        reported in the "pink sheets" by Pink Sheets LLC (formerly the National
        Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated
        for
        such security on such date on any of the foregoing bases, the Weighted Average
        Price of such security on such date shall be the fair market value as mutually
        determined by the Company and the Required Holders. If the Company and the
        Required Holders are unable to agree upon the fair market value of the security,
        then such dispute shall be resolved pursuant to Section 13 with the term
        "Weighted Average Price" being substituted for the term "Exercise Price."
        All
        such determinations shall be appropriately adjusted for any share dividend,
        share split or other similar transaction during such period.

       

      [Signature
        Page Follows]

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF,
        the
        Company has caused this Warrant to Purchase Common Stock to be duly executed
        as
        of the Issuance Date set out above.

       

      
        	 	 	 
	 	DIGITALFX
                INTERNATIONAL, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
                
Name: Craig
                Ellins
	 	Title:
                Chief Executive Officer

      

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        A

      

      EXERCISE
        NOTICE

      TO
        BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

      AMENDED
        AND RESTATED WARRANT TO PURCHASE COMMON STOCK

      

      DIGITALFX
        INTERNATIONAL, INC.

       

      The
        undersigned holder hereby exercises the right to purchase _________________
        of
        the shares of Common Stock ("Warrant
        Shares")
        of
        DigitalFX International, Inc., a Florida corporation (the "Company"),
        evidenced by the attached Amended and Restated Warrant to Purchase Common
        Stock
        (the "Warrant").
        Capitalized terms used herein and not otherwise defined shall have the
        respective meanings set forth in the Warrant.

      

      1.
        Form
        of Exercise Price. The Holder intends that payment of the Exercise Price
        shall
        be made as:

      

      ____________ a
        "Cash
        Exercise"
        with
        respect to _________________ Warrant Shares; and/or

      

      ____________ a
        "Cashless
        Exercise"
        with
        respect to _______________ Warrant Shares.

      

      2.
        Payment of Exercise Price. In the event that the holder has elected a Cash
        Exercise with respect to some or all of the Warrant Shares to be issued pursuant
        hereto, the holder shall pay the Aggregate Exercise Price in the sum of
        $___________________ to the Company in accordance with the terms of the
        Warrant.

      

      3.
        Delivery of Warrant Shares. The Company shall deliver to the holder __________
        Warrant Shares in accordance with the terms of the Warrant.

      

      Date:
        _______________  __, ______

      

      

      _________________________________

      Name
        of
        Registered Holder

       

       

      By:         
        __________________________    

      Name:

      Title:

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

      ACKNOWLEDGMENT

      

      

      The
        Company hereby acknowledges this Exercise Notice and hereby directs Continental
        Stock Transfer & Trust Company to issue the above indicated number of shares
        of Common Stock in accordance with the Transfer Agent Instructions dated
        March
        26, 2008 from the Company and acknowledged and agreed to by Continental Stock
        Transfer & Trust Company.

       

      
        	 	 	 
	 	DIGITALFX
                INTERNATIONAL, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
                
Name:
	 	Title:

      

       

      
        
          
          

        

        
          23

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