Document:

PROFESSIONAL SERVICES AGREEMENT
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This  PROFESSIONAL SERVICES AGREEMENT (the "AGREEMENT") is made this 22nd day of
February,  2007,  by  and  among  DIGITALFX  INTERNATIONAL,  INC.,  a  Florida
corporation (the "COMPANY"), and BOLSOVER ENDEAVOURS, party unlimited ("BOLSOVER
ENDEAVOURS").

                                    RECITALS
     A.     The  Company  and Bolsover Endeavours entered into an oral agreement
for Bolsover Endeavours to provide certain services to the Company.

     B.     The  parties  desire to enter into this Agreement to memorialize the
terms  and  conditions  of  the  foregoing  oral  agreement.

     C.     The  Company  desires  to  engage Bolsover Endeavours to provide the
Company  (i) the services of Christopher Bolsover ("PROFESSIONAL"), and (ii) the
various  sales, marketing and management services set forth herein, in each case
subject  to  the  terms  and  conditions  set  forth  in  this  Agreement.

     NOW,  THEREFORE,  in consideration of the mutual promises herein contained,
the  parties  agree  as  follows:

                                   SECTION I.
                                 EFFECTIVE DATE

     The  effective  date  of  this  Agreement  shall  be  January  1, 2007 (the
"EFFECTIVE  DATE").

                                   SECTION II.
                                     DUTIES

     2.1     Engagement.  Bolsover  Endeavours  is hereby engaged to provide the
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services  of  Professional  and  to  provide  the services set forth herein, and
Bolsover  Endeavours hereby accepts such engagement.  The primary purpose of the
engagement  hereunder  will  be  to  assist in expanding the number of affiliate
distributors  (the  "DISTRIBUTORS")  of  the  Company  and  of Helloworld.com, a
digital  media  website  operated  by  DigitalFX Networks, LLC, a Nevada limited
liability  company  and  wholly-owned  subsidiary of the Company, and to provide
such  other  activities  as  the Company shall reasonably determine from time to
time.

     2.2     Authority.  Professional  shall  have  the  authority to incur such
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costs  and  expenses  on behalf of VMdirect, L.L.C., VMDirect UK, Ltd., VMDirect
EU,  Ltd.  and  other  foreign  subsidiaries  of  the  Company  as  subsequently
established  in  accordance  with  approved  budgets.

     2.3     Executive  Appointment.  Professional  shall  be  appointed  as the
             ----------------------
President of International Development of VMdirect, L.L.C.  Notwithstanding such
appointment,  Bolsover  Endeavours shall remain an independent consultant of the
Company  providing  services  through  Professional,  an  employee  of  Bolsover
Endeavours,  in  accordance  with  the  provisions  of  Section  VII.

<PAGE>
It shall be Professional's responsibility to manage international operations for
the  Company  for  all  countries  outside  of  North  America.

     2.4     Professional's  Responsibilities.  Without  limiting any portion of
             --------------------------------
the  foregoing,  the  parties  acknowledge  and  agree  that  Professional's
responsibilities  will  also  encompass,  but  not be limited to, the following:

          (a)     Taking  such  action  as is necessary or required to establish
and  oversee  the  operation  and  growth  of  the  Company's  activities in all
countries  outside  of  North  America  (collectively the "BOLSOVER COUNTRIES"),
including  Australia,  the United Kingdom and New Zealand which are currently in
operation.

          (b)     Taking  such  action as is necessary and required to identify,
in  consultation  with  Craig  Ellins,  four (4) additional countries outside of
North  America  (the  "INITIAL  EXPANSION  COUNTRIES") other than Australia, the
United Kingdom and New Zealand, in which Professional will establish and oversee
the  operation and growth of the Company's activies within the first twelve (12)
months  of  the  Effective  Date,  and thereafter to identify other countries in
which  Professional  will  establish and oversee the operation and growth of the
Company's  activies.

          (c)     Opening  operations  in the Initial Expansion Countries during
the  first  twelve  (12)  months after the Effective Date and thereafter opening
operations  in  additional  Bolsover Countries as validated by the Company.  The
parties  to  this  Agreement  understand  that  Professional's  ability  to open
operations  in  new  countries will be dependent upon (i) the Company making the
necessary  changes to the affiliate program as required by each targeted country
and  (ii) the Company being able to deliver a working, translated version of the
website, except if India is chosen as one of the new countries in which case the
website  shall  remain  in  English.

          (d)     Responsibility  for  obtaining regulatory documents and taking
all  action  necessary  to  legally  sell the Company's products in the Bolsover
Countries  within  the  timeframes  outlined  above.

          (e)     Professional  will have the authority to advance funds to lead
Distributors  (one per Initial Expansion Country) and pay draws up to $5,000 per
month  per  lead  Distributor  for three (3) months after the Effective Date and
prior  to that lead Distributor earning commissions in said country.  After such
three  (3)-month  period,  the  performance  of  the  lead  Distributors will be
evaluated  by  Professional  and  Craig  Ellins.

          (f)     Obtaining minimum sales of $5 million per annum, as calculated
in  January  2008 using actual sales for November and December, 2007, annualized
for the Bolsover Countries, by the end of the first twelve (12) months after the
Effective  Date.  Notwithstanding  the  foregoing,  10% of the sales required by
this  Section  2.4(f)  may  be  sales generated by Professional in North America
during  fiscal  2007.

          (g)     Obtaining  minimum  sales  of  $10  million  per  annum,  as
calculated  in  January 2009 using actual sales for November and December, 2008,
annualized  for  the  Bolsover  Countries,  by  the  end  of  the  second twelve
(12)-month  period  after  the  Effective  Date.  Notwithstanding  the

<PAGE>
foregoing,  10%  of  the  sales  required  by  this  Section 2.4(g) may be sales
generated  by  Professional  in  North  America  during  fiscal  2008.

          (h)     Obtaining  minimum  sales  of  $15  million  per  annum,  as
calculated  in January 20010 using actual sales for November and December, 2009,
annualized for the Bolsover Countries, by the end of the third twelve (12)-month
period  after  the  Effective  Date.  Notwithstanding  the foregoing, 10% of the
sales  required by this Section 2.4(h) may be sales generated by Professional in
North  America  during  fiscal  2009.

          (i)     Obtaining  the  minimum  sales  levels  set  forth in Sections
2.4(f),  (g) and (h) without incurring costs and using resources that are not in
accordance  with  the  annual  budget  for  the  Bolsover  Countries approved by
Professional and the Company.  Professional has reviewed and accepted the fiscal
2007  aggregate  sales budget developed by the Company's corporate finance staff
for the Bolsover Countries.  Professional shall revise or re-forecast the fiscal
2007  sales  budget  for  each  Bolsover  Country  as  requested by the Company.
Commencing  with  fiscal  2008,  Professional shall prepare the sales budget for
each  Bolsover Country on an annual basis or for interim periods as requested by
the  Company.

          (j)     Visiting  the  Company's  headquarters in Las Vegas, Nevada at
least  once  per  three  (3)-month  period.

          (k)     Providing  leadership  from  his  homes  in  Australia and the
United  Kingdom.

     2.5     Company's Responsibilities.  The Company (or its subsidiaries) will
             --------------------------
be  required to employ or contract with two persons in support of Professional's
activities  hereunder,  one  of  whom  will  provide  administrative  support to
Professional  from  Las  Vegas,  Nevada,  and  the  other  of  whom will provide
translation  and  communication  services  from  Australia.

                                  SECTION III.
                           USE OF AGENTS OR ASSISTANTS

     Bolsover  Endeavours  shall engage the services of any agents or assistants
which  it  may  deem  proper,  and  it may further employ, engage, or retain the
services  of  such  other persons or corporations to aid or assist in the proper
performance  of  its  duties.  The  costs  of  the  services  of  such agents or
assistants shall be chargeable to Bolsover Endeavours, and any expenses incurred
by  Bolsover  Endeavours  or  Professional in engaging such agents or assistants
shall  be  paid  by  Bolsover  Endeavours,  unless  any  such  expenditures  are
previously  approved  in  writing  by  the  Company  or  are contained within an
approved  budget.  Without  limiting  the foregoing, the parties acknowledge and
agree  that  Bolsover  Endeavours  shall  at all times use, and that the Company
specifically  requires  and  has bargained under the terms of this Agreement for
the  use  of,  Professional.

                                   SECTION IV.
                                 CONSULTING FEE

     4.1     Professional  Fee.  Bolsover  Endeavours  shall  be  granted  an
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"affiliate  spot  or level" under which new sales to and by affiliates generated
thereunder  will  be  used for commission calculation purposes.  This affiliated
level  shall  not  be  announced  to  the  network  and  shall  be  held  in

<PAGE>
strictest  confidence.  The  Company  shall  not  pay  Professional  or Bolsover
Endeavours  commissions  in  connection  with  the  granted affiliate level.  In
consideration  for  the  services  provided  hereunder, Bolsover Endeavours will
receive,  on  a  monthly  basis,  an  amount  (the  "PROFESSIONAL FEE") equal to
$20,833.33  (USD).  The  Professional  Fee shall be paid within twenty (20) days
after  each month end.  If the commissions that would have been paid to Bolsover
Endeavours  for  the entire twelve (12)-month period under the granted affiliate
level  are  greater  than  the  Professional  Fees  during the prior twelve (12)
months,  then Bolsover Endeavours shall receive the additional compensation as a
bonus within sixty (60) days after the twelve (12)-month period has ended.  Such
bonus  shall  be  the  difference  in the amount due and owing under the granted
affiliate  level  and  the  Professional  Fee paid over the corresponding twelve
(12)-month  period.  Notwithstanding the foregoing, if commissions accrued under
the  granted  affiliate  level  exceed  the  Professional  Fee  for  three  (3)
consecutive  months,  then  Bolsover  Endeavours  shall  be  paid the difference
between  the Professional Fee and the amount accrued under the granted affiliate
level in accordance with normal and customary payments to affiliates in place at
that  time,  and  such  amounts  shall  be  excluded  from  the bonus payable to
Professional  hereunder.

     4.2     Reimbursable  Expenses.  In  addition to the foregoing, the Company
             ----------------------
shall  pay  for  business class airfare (for any flight over four (4) hours) and
reasonable hotel accommodations. Professional shall be issued a corporate credit
card  that will only be used to charge business expenses related to expenditures
made  on  behalf  of  the  Company.  The  credit  card  statement  and  required
documented  receipts  will be submitted to the Company and all approved expenses
shall  be  paid within ten (10) business days after the Company has received and
approved  the  claimed  expenditures  of  Professional on behalf of the Company.
Professional  agrees  to  provide  the  Company  with  copies and access to such
receipts  (including  copies),  ledgers,  and other records as may be reasonably
appropriate  for  the Company or its accountants to verify the amount and nature
of  any  such  expenses.

     4.3     Stock  Issuance.  Professional  shall  receive,  within  ten  (10)
             ---------------
business  days  of  the Effective Date, 10,000 shares of the common stock of the
Company  (the  "SHARES").  The  Shares  shall  be  restricted  shares within the
meaning  contemplated  under  the  Securities Act of 1933, as amended (the "1933
ACT").

     4.4     Affiliate  Level.  In  the  event  that  Professional  continues to
             ----------------
provide  services  to  the  Company  pursuant to this Agreement and the combined
annual sales in United States dollars for the Bolsover Countries equal or exceed
$15  million,  the  affiliate  level granted to Bolsover Endeavours shall become
permanent  and  shall not be affected by the termination of this Agreement.  For
the  avoidance  of doubt, upon any termination hereof, Professional shall not be
entitled  to any compensation, payment or other remuneration except as expressly
set  forth  in  Section  VI.

                                   SECTION V.
                            INVESTOR REPRESENTATIONS

     5.1     Accredited  Investor.  Professional  is  an  "accredited  investor"
             --------------------
within  the  meaning of Rule 501 of Regulation D promulgated under the 1933 Act.

     5.2     Investment  Intent.  Professional  is  acquiring the Shares for its
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own  account,  not as nominee or agent, and not with a view to, or for resale in
connection  with,  any distribution thereof in

<PAGE>
any transaction which would be in violation of the securities laws of the United
States  or  any state thereof. By executing this Agreement, Professional further
represents  that Professional does not presently have any contract, undertaking,
agreement  or  arrangement  with  any  person  to  sell,  transfer  or  grant
participations to such person or to any third person, with respect to any of the
Shares.

     5.3     Restricted  Status.  Professional  understands that the Shares have
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not  been  registered  under  the  1933  Act  by  reason of a specific exemption
therefrom, and that Professional must, therefore, bear the economic risk of such
investment  indefinitely, unless the Shares are registered under the 1933 Act or
unless  an  exemption  from  registration  is  available.  Professional  further
understands  that  the Shares are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired in a transaction
not  involving  a  public  offering  and  that  under  such  laws and applicable
regulations  restricted  securities may be resold without registration under the
1933  Act  only  in  certain limited circumstances, and it represents that it is
familiar  with  Rule  144  and  Rule  144A  promulgated  under  the 1933 Act, as
presently  in effect, and understands the resale limitations imposed thereby and
by  the  1933  Act.

     5.4     Sophistication.  Professional  acknowledges  that  it  (i)  has  a
             --------------
pre-existing  personal  or  business  relationship  with the Company, or (ii) by
reason  of  Professional's  business or financial experience, it is able to fend
for  itself, can bear the economic risk of its investment and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the  merits  and  risks  of  the  investment  in  the  Shares.

     5.5     Regulatory  Approval.  Professional  understands that no securities
             --------------------
administrator  of  any  state  or any other jurisdiction has made any finding or
determination  relating  to the fairness of an investment in the Shares and that
no  securities  administrator  of  any  state  or  any  other  jurisdiction  has
recommended  or  endorsed,  or  will  recommend  or endorse, the offering of the
Shares.

     5.6     No  Solicitation.  Professional  acknowledges  that  no  general
             ----------------
solicitation  or  general advertising (including communications published in any
newspaper,  magazine  or  other broadcast) has been received by Professional and
that no public solicitation or advertisement with respect to the offering of the
Shares  has  been  made  to  Professional.

     5.7     Advice  of Counsel.  Professional has relied solely upon the advice
             ------------------
of  Professional's  own tax and legal advisors with respect to the tax and other
legal  aspects  of  the  investment  in  the  Shares.

     5.8     Reliance  on  Representations.  Professional  acknowledges  that
             -----------------------------
neither  the  Company  nor  DFXN,  nor any officer, director, employee, agent or
representative  thereof, have made any representations or warranties of any kind
to Professional including representations regarding future revenues, earnings or
profits  of  the  Company  or  DFXN,  the future value of the Shares, the future
capitalization  of  the  Company or DFXN, the occurrence or timing of any public
offering  by  the  Company  or  DFXN,  the amount of future business that may be
transacted by the Company or DFXN or otherwise. Professional further understands
that  the  Company's and DFXN's success in achieving its goals and objectives in
the future and implementing its business plan cannot be predicted and is subject
to  numerous factors not within the control of the Company or DFXN. Professional
is not purchasing the Shares based upon representations, oral or written, by any
person  with  respect  to  the

<PAGE>
future  value  of,  or  income  from,  the  Shares,  or  the length of time that
Professional  will  be  required to remain as the owner of the Shares but rather
upon  an independent examination and judgment as to the prospects of the Company
or  DFXN.

     5.9     Legends.  It  is  understood  that  the certificates evidencing the
             -------
Shares may bear one or all of the following legends:

          "THE  SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
          REGISTERED  UNDER THE SECURITIES ACT OF 1933, AND MAY NOT BE
          OFFERED,  SOLD, PLEDGED, HYPOTHECATED, ASSIGNED, TRANSFERRED
          OR  OTHERWISE  DISPOSED OF EXCEPT IN ACCORDANCE WITH THE ACT
          AND THE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE
          COMMISSION  THEREUNDER."

Any other legend required by applicable state securities laws.

                                   SECTION VI.
                                DEVOTION OF TIME

     6.1     Devotion  of  Time.  Professional  shall  devote  such  time to the
             ------------------
performance  of his duties under this Agreement as is reasonably necessary for a
satisfactory  performance.  Should  the  Company require additional services not
included  in  the  Agreement, Professional shall make a reasonable effort to get
such  additional  services  into  his  time  schedule  without  decreasing  the
effectiveness  of  the  performance  of  his  duties  hereunder.

     6.2     Method  for  Provision  of  Services.  Professional  shall have the
             ------------------------------------
right  to  determine the method, details, and means of performing the work to be
performed  for the Company.  The Company shall, however, be entitled to exercise
general  power  of supervision and control over the results of work performed by
Professional to assure satisfactory performance, including the right to inspect,
the  right  to stop work, the right to make suggestions or recommendations as to
the  details  of  the  work, and the right to propose modifications to the work.

     6.3     Reporting  and  Evaluation.  Professional  shall  report  to  a
             --------------------------
representative  designated  by  the  Company.  Bolsover  Endeavours acknowledges
that,  from time to time, the Company may monitor Bolsover Endeavours' employees
for  the  purpose  of  evaluating  the professionalism of such employees and the
performance  of  contracted services.  Said monitoring may be done personally or
by  mechanical,  electronic or other means.  Bolsover Endeavours hereby consents
to  such  monitoring  and  agrees  that  the  same may be undertaken without its
knowledge  and  without  further  notification  to  Bolsover  Endeavours.

     6.4     Termination.
             -----------

          (a)     Any  party  can terminate this Agreement upon thirty (30) days
prior  written  notice of termination delivered to the other party.  If Bolsover
Endeavours  terminates  this  Agreement

<PAGE>
for  any  reason  prior  to the time that combined annual sales in United States
dollars  for  the  Bolsover  Countries  equal  or  exceed  $15 million, Bolsover
Endeavours  shall  be  entitled  to  no  further  compensation or consulting fee
hereunder and shall lose the granted affiliate level.  If the Company terminates
this  Agreement for cause (as defined below), Bolsover Endeavours shall lose its
granted  affiliate  level.

          (b)     This Agreement shall terminate at the Company's option (except
for the restrictions set forth in Sections VII and IX which shall remain in full
force and effect) upon the delivery of written notice by the Company to Bolsover
Endeavours  in  the  event  of  the  occurrence  of  any  of  the following: (a)
Professional  becomes  disabled  by  accident  or  illness so as to be unable to
perform  duties  required  under  this Agreement for a period of thirty-one (31)
working  days;  (b)  the  death of Professional; (c) the Company terminates this
Agreement  "for  cause"  which,  in  the  sole  discretion of the Company, shall
include,  without limitation, (i) activities which in the reasonable judgment of
the  Company,  exercised  in  good  faith,  adversely  affect the Company or its
subsidiaries,  or  their  respective  relations  with customers or regulatory or
licensing agencies with jurisdiction thereof, (ii) any act or omission knowingly
undertaken  or omitted by Professional or Bolsover Endeavours with the intent of
causing  damage  to  the  Company  or  its  subsidiaries,  or  their  respective
properties,  assets, businesses, stockholders, officers, directors or employees;
(iii)  any  act  of  Professional  or  Bolsover  Endeavours involving a material
personal  profit  to  Professional  or  Bolsover  Endeavours, including, without
limitation,  any  fraud, misappropriation or embezzlement, involving properties,
assets  or  funds  of  the  Company  or its subsidiaries; (iv) Professional's or
Bolsover  Endeavours' material failure to perform their normal duties hereunder;
(v)  conviction  of,  or  pleading  nolo  contendere to (A) any crime or offense
involving  monies  or other property of the Company or its subsidiaries, (B) any
felony  offense;  or  (C)  any  crime  of  moral  turpitude; (vi) a violation by
Professional  or  Bolsover  Endeavours  of  any  policy  of  the  Company or its
subsidiaries,  or  of  any  law,  regulation  or regulatory policy applicable to
Professional or Bolsover Endeavours, or (vii) Professional's chronic or habitual
use  or  consumption of drugs or alcoholic beverages; (d) the failure or refusal
of  Professional,  Bolsover Endeavours or its employees, agent or subcontractors
to  comply  with any other provisions of this Agreement; and/or (e) Professional
or  Bolsover  Endeavours  fails to achieve the objectives stated herein.  If the
Agreement  is  terminated  by  the  Company pursuant to this Section 6.4(b), the
right  of  Professional to any form of compensation or consulting fee under this
Agreement  shall  cease on the date of such termination.  The Company shall have
no  further  obligation  to  Professional  under  any  of the provisions of this
Agreement.

                                  SECTION VII.
                                     STATUS

     7.1     Independent  Contractor.  Professional  shall  be  an  independent
             -----------------------
contractor  and  not  an employee of the Company under this Agreement.  Bolsover
Endeavours  and  Professional (collectively the "BOLSOVER PARTIES") shall defend
and  indemnify  the  Company, and each of its subsidiaries and/or affiliates (in
each  case,  whether  controlled  directly  or  indirectly  through  one or more
intermediaries),  and  their  respective  predecessors,  successors and assigns,
directors,  officers,  employees,  and  agents,  and  each  of  them  (each,  an
"INDEMNIFIED  PARTY")  and  hold  each  such Indemnified Party harmless from and
against  any  and  all losses, liabilities, damages, claims, suits, settlements,
third  party  costs  and  expenses,  including,  as  and when incurred, costs of
investigation,  settlement and defense and attorneys' fees, court costs, and any
interest  costs  or  penalties  arising  out

<PAGE>
of  or  relating to (i) any breach of any covenant, agreement, representation or
warranty  made by Professional or Bolsover Endeavours under this Agreement, (ii)
any  violation  of  applicable  law,  statute,  act,  rule  or  regulation  by
Professional  or Bolsover Endeavours in their respective performance of services
under  this  Agreement,  (iii)  any  act  or  omission  undertaken or omitted by
Professional  or  Bolsover  Endeavours  in  the  performance  of  their services
hereunder,  (iv)  any  and all claims for withholding of federal, state or local
income  taxes,  if  any,  and  taxes  under  Federal  Insurance Contribution Act
("FICA")  and the Federal Unemployment Taxation Act ("FUTA"), and (v) any claims
raised by any employee, contractor or other agent of Bolsover Endeavours engaged
by  Professional  or  Bolsover  Endeavours hereunder, whether or not approved by
Company.

     7.2     Taxes.  As Professional is acting as an independent contractor, the
             -----
Company shall not be responsible for any taxes, including but not limited to any
state  and  federal  taxes,  federal  income tax, payroll tax deductions, or any
necessary  required  fees,  or  unemployment  compensation,  state  industrial
insurance  system  contributions or otherwise required by the laws of the United
States  or  the  State  of  Nevada.  The  Company  shall  have  no liability and
Professional  and/or  Bolsover  Endeavours  shall be responsible for the cost of
providing  and  maintaining  insurance  of  any  type  or description, including
without  limitation  workers'  compensation  as  may  be  required by state law,
liability,  property,  business  interruption,  life  or  any  other  insurance.

     7.3     Professional  Relationship.  The  parties  shall  be  independent
             --------------------------
contractors  to  one  another,  and nothing herein shall be deemed to cause this
Agreement  to  create  an  agency,  partnership,  or  joint  venture between the
parties.  Nothing  in  this  Agreement  shall  be  interpreted  or  construed as
creating  or  establishing the relationship of employer and employee between the
Company  and  either  Bolsover  Endeavours,  Professional  or  any  employee,
subcontractor or agent of Professional and/or Bolsover Endeavours.  The Bolsover
Parties  shall  be  entirely  and solely responsible for their acts and those of
their  employees,  agents  or subcontractors while engaged in the performance of
services  hereunder.  The  Bolsover  Parties  are  not  obligated to perform any
activities  in association with the Company except as required by this Agreement
or  as  otherwise  mutually  agreed.

                                  SECTION VIII.
                                    COVENANTS

     8.1     Prior Agreements.  The Bolsover Parties agree that the terms herein
             ----------------
pertaining  to  Confidentiality, Non-Competition, Non-Disparagement, Cooperation
and  Non-Solicitation are binding and supersede previously executed agreement(s)
or  any  actual,  perceived  or  contemplated oral agreements. In the event of a
conflict  between  the  Confidentiality,  Non-Competition,  Non-Disparagement,
Cooperation  and  Non-Solicitation  provisions  of  this Agreement and any prior
agreement(s)  whether  written  or  oral, the provisions of this Agreement shall
control.  For  the avoidance of doubt, (i) any reference in this Section VIII to
the  Company  and its subsidiaries shall expressly refer to and include DFXN and
its  respective  subsidiaries, and (ii) the restrictions provided hereunder with
respect  to  Professional  shall  apply  to  Christopher  Bolsover, as if he was
expressly  referenced  herein.

     8.2     Confidentiality.  The  Bolsover  Parties  will have access to trade
             ---------------
secrets  and  confidential  information  about  the  Company,  its products, its
customers,  its  marketing  plans  and  its

<PAGE>
methods  of  doing  business. Each of the Bolsover Parties acknowledges that the
Company's  trade secrets, private or secret processes as they exist from time to
time,  and  information  concerning  products,  developments,  manufacturing
techniques,  new  product  plans,  equipment,  inventions,  discoveries,  patent
applications,  ideas, designs, engineering drawings, sketches, renderings, other
drawings,  manufacturing  and  test  data,  computer programs, progress reports,
materials,  costs, specifications, processes, methods, research, procurement and
sales  activities  and  procedures, promotion and pricing techniques, and credit
and  financial data concerning customers of the Company and its subsidiaries, as
well  as  information  relating to the management, operation, or planning of the
Company  and its subsidiaries ("PROPRIETARY INFORMATION") are valuable, special,
and  unique  assets of the Company and its subsidiaries, access to and knowledge
of  which may be essential to the performance of the Professional's duties under
this  Agreement.  In  light  of the highly competitive nature of the industry in
which  the  Company  and  its subsidiaries conduct their businesses, each of the
Bolsover  Parties  agrees  that  all  Proprietary  Information  obtained  by the
Bolsover  Parties  as  a  result  of their relationship with the Company and its
subsidiaries shall be considered confidential. In recognition of this fact, each
of  the  Bolsover  Parties agrees that such party will not, during and after the
term  of  this  Agreement,  disclose  any of such Proprietary Information to any
person  or  entity for any reason or purpose whatsoever, and such party will not
make use of any Proprietary Information for such party's own purposes or for the
benefit  of any other person or entity (except the Company and its subsidiaries)
under  any circumstances. At all times during the term of this Agreement and for
an  indefinite  period  thereafter, neither Professional nor Bolsover Endeavours
may, directly or indirectly, disclose or use any of the Proprietary Information;
provided,  that  such  party  will  not  incur  any  liability for disclosure of
information  which  (a)  is required in the course of such party's engagement by
the  Company  to be disclosed by any federal, state, or local regulatory body or
court  of competent jurisdiction; (b) is permitted to be disclosed in writing by
the Company or (c) is within the public domain or comes within the public domain
without  any  breach  of  this  Agreement. The Bolsover Parties shall return all
written material in whatever media, photographs and all other documentation made
available  or  supplied  by  the  Company  to  such  parties  and all copies and
reproductions  thereof.

     8.3     Non-Competition.
             ---------------

          (a)     In  order  to  further  protect  the  confidentiality  of  the
Proprietary  Information  and in recognition of the highly competitive nature of
the  industries  in  which  the  Company  and  its  subsidiaries  conduct  their
businesses,  and  for  the  consideration set forth herein, Professional further
agrees  as  follows:

               (i)     Restriction  on  Competition.  During  and for the period
                       ----------------------------
commencing  on  the  Effective  Date  and  ending  on the date on which Bolsover
Endeavours'  consulting  relationship  with the Company terminates, the Bolsover
Parties  will  not  directly  or  indirectly  engage  in any Business Activities
(hereinafter  defined), other than on behalf of the Company or its subsidiaries,
whether  such  engagement  is  as  an  officer,  director, proprietor, employee,
partner,  investor  (other  than  as a holder of less than 1% of the outstanding
capital  stock of a publicly-traded corporation), consultant, advisor, agent, or
other  participant,  in any geographic area in which the products or services of
the  Company  or  its  subsidiaries have been distributed or provided during the
period  of  Bolsover  Endeavours'  consulting relationship with the Company. For
purposes  of  this  Agreement,  the  term  "BUSINESS  ACTIVITIES" shall mean the
design,  development,  manufacture,  sale,  marketing,  or

<PAGE>
servicing of products similar in those offered by the Company, together with all
other  activities  engaged  in  by the Company or any of its subsidiaries at any
time  during  Bolsover Endeavours' consulting relationship with the Company, and
activities  in  any way related to activities with respect to which Professional
renders  consulting  services  under  this  Agreement.

               (ii)     Dealings with Customers  of  the Company. During and for
                        ----------------------------------------
the  period  commencing  on  the  Effective Date and ending on the date on which
Bolsover  Endeavours'  consulting  relationship with the Company terminates, the
Bolsover  Parties  will not directly or indirectly engage in any of the Business
Activities  (other  than  on  behalf  of  the  Company  or  its subsidiaries) by
supplying  products  or providing services to any customer with whom the Company
or  its  subsidiaries  have done any business during the consulting relationship
with  the  Company,  whether  as  an  officer,  director,  proprietor, employee,
partner,  investor  (other  than  as a holder of less than 1% of the outstanding
capital  stock of a publicly traded corporation), consultant, advisor, agent, or
other  participant.

               (iii)     Assistance  to  Others.  During  and  for  the  period
                         ----------------------
commencing  on  the  Effective  Date  and  ending  on the date on which Bolsover
Endeavours'  consulting  relationship  with the Company terminates, the Bolsover
Parties  will not directly or indirectly assist others in engaging in any of the
Business  Activities in any manner prohibited to the Bolsover Parties under this
Agreement.

               (iv)     Company's  Employees.  During  and  for  the  period
                        --------------------
commencing  on  the  Effective  Date  and  ending  on the date on which Bolsover
Endeavours'  consulting  relationship  with the Company terminates, the Bolsover
Parties  will  not directly or indirectly induce employees of the Company or any
of its subsidiaries or affiliates to engage in any activity hereby prohibited to
the  Bolsover  Parties  or  to  terminate  their  employment.

          (b)     The  Bolsover  Parties  understand  and  agree  that  direct
competition  means  development,  production,  promotion, or sale of products or
services  competitive  with  those  of  Company.  Indirect  competition  means
employment  by  any  competitor  or  third  party providing products or services
competing  with  Company's  products  or services, for whom the Bolsover Parties
will perform the same or similar function as the Bolsover Parties have performed
for  the  Company  during  their  engagement  with  the  Company.

     8.4     Non-Disparagement.  During the term of this Agreement and for three
             -----------------
(3)  years  thereafter,  neither  the Bolsover Parties nor Company will take any
actions  or  make any verbal or written statements which disparage the other. In
the  case  of  the  Company,  this shall include any of its affiliates, or their
respective officers, directors, shareholders, partners or employees.

     8.5     Cooperation.
             -----------

          (a)     During  the  term  of  this  Agreement  and  for two (2) years
thereafter,  (the  "COOPERATION  PERIOD"),  the  Bolsover Parties agree to fully
cooperate  with  the  Company  and  its  affiliates  during the entire scope and
duration  of  any litigation or administrative proceedings involving any matters
with  which  the Bolsover Parties were involved during their engagement with the
Company.

<PAGE>
          (b)     During  the  Cooperation Period, in the event a Bolsover Party
is contacted by parties or their legal counsel involved in litigation adverse to
the  Company or its affiliates, each Bolsover Party (i) agrees to provide notice
to  the  Company  of  such contact as soon as practicable; and (ii) acknowledges
that  any communication with or in the presence of legal counsel for the Company
(including without limitation the Company's outside legal counsel, the Company's
inside  legal counsel, and legal counsel of each related or affiliated entity of
the  Company)  shall be privileged to the extent recognized by law and, further,
that it will not do anything to waive such privilege unless and until a court of
competent jurisdiction decides that the communication is not privileged.  In the
event the existence or scope of the privileged communication is subject to legal
challenge, then the Company must either waive the privilege or pursue litigation
to protect the privilege at the Company's sole expense.

          (c)     Promptly  upon  the Company's receipt of expense statements or
vouchers  or  such  other  supporting  information as the Company may reasonably
require,  in  accordance with such reasonable practices, policies and procedures
as  the  Company  may  adopt  from time to time, the Company shall reimburse the
Bolsover  Parties  for all reasonable expenses incurred in providing services or
assistance  as  described in this Section 8.5.  The Bolsover Parties acknowledge
that  such  reimbursement is limited to costs and expenses incurred in complying
with  the  obligations  hereunder and do not include fees for services provided.

     8.6     Non-Solicitation.  During  the  Cooperation  Period,  the  Bolsover
             ----------------
Parties agree they will not, directly or indirectly, induce or attempt to induce
any  person  who  is  an  employee,  officer,  or  agent of the Company, whether
employed  directly  by  Company or as independent contractors, to terminate said
relationship.

     8.7     Regulations.  The  Bolsover Parties recognize that their efforts on
             -----------
behalf  of  the  Company  are  regulated by federal and state laws, statutes and
regulations  and  agree  to  conduct  their  activities  under this Agreement in
conformity  with  all  such  laws,  statutes  and  regulations.

     8.8     Equitable  Relief.  The  Bolsover Parties and the Company expressly
             -----------------
agree  and  understand  that  monetary damages for any breach of this Agreement,
including,  without  limitation,  this Section VIII, will be inadequate and that
the  damages  flowing  from  such  breach  are  not readily susceptible to being
measured  in  monetary  terms.  Accordingly,  it  is  acknowledged  that  either
Bolsover  Endeavours  or  the  Company shall be entitled to immediate injunctive
relief  in any court of competent jurisdiction and, if the court so permits, may
obtain  specific  performance  or a temporary or permanent order restraining any
threatened  or  further  breach  on  the  posting  of  a  minimal bond.  Nothing
contained  in  this  Section  8.8  shall be deemed to limit the Company's or the
Bolsover  Parties' remedies for any breach of this Agreement that may be pursued
or  availed.

     8.9     Survival  Beyond  Term  of Agreement.  The obligations set forth in
             ------------------------------------
this  Section  VIII  shall survive termination of this Agreement for the periods
provided  for  in  this  Section  VIII.

     8.10     Invalidity.  If  any  of  the  covenants contained in this Section
              ----------
VIII  are  determined by the final judgment of a court of competent jurisdiction
to  be unenforceable or invalid because of the geographic scope or time duration
of  such  restrictions, such provisions will be deemed retroactively modified to
provide  for the maximum geographic scope and time duration that would make such

<PAGE>
provisions  enforceable  and  valid.  However,  no such retroactive modification
will  affect  any  of  the  Company's  or the Bolsover Parties' rights hereunder
arising  out  of  the breach of any such covenant.  The parties hereby authorize
any  court  of competent jurisdiction to reform this Agreement to give effect to
the retroactive modification provisions contained in this Section 8.10.

                                   SECTION IX.
                                    PUBLICITY

     9.1     Publicity.  The  contents of this Agreement are confidential and no
             ---------
party  shall  issue  press releases or engage in other types of publicity of any
nature  dealing  with  the  legal  details  of  this Agreement without the other
party's  prior  written  consent.  However, approval of such disclosure shall be
deemed  to  be  given  to  the extent such disclosure is required to comply with
governmental rules, regulations or other government requirements.

     9.2     The Bolsover Parties Shall Refrain From Publishing Statements.  The
             -------------------------------------------------------------
Bolsover  Parties  shall  refrain from publishing any oral or written statements
about  Company,  any of its subsidiaries or affiliates, or any of such entities'
officers, directors, agents or representatives that are slanderous, libelous, or
defamatory;  or  that disclose private or confidential information about Company
or  any  of  its  subsidiaries  or affiliates, or any of such entities' business
affairs,  officers, directors, agents, or representatives; or that constitute an
intrusion  into  the  seclusion  or  private  lives  of  Company  or  any of its
subsidiaries  or  affiliates,  or  any  of  such  entities' officers, employees,
directors,  officers,  agents,  or  representatives;  or  that  give  rise  to
unreasonable  publicity  about  the  private  lives  of  Company  or  any of its
subsidiaries  or  affiliates,  or  any  of  such  entities' officers, directors,
agents,  or representatives; or that place Company or any of its subsidiaries or
affiliates,  or  any  of  such  entities'  officers,  directors,  agents,  or
representatives  in  a  false  light  before  the  public;  or that constitute a
misappropriation  of  the name or likeness of Company or any of its subsidiaries
or  affiliates,  or  any  of  such  entities'  officers,  directors,  agents, or
representatives.  A violation or threatened violation of this prohibition may be
enjoined  by the courts. The rights afforded the Company and its subsidiaries or
affiliates,  or  any  of  such  entities'  officers,  directors,  agents,  or
representatives  under  this provision are in addition to any and all rights and
remedies  otherwise  afforded  by  law.

                                   SECTION X.
                                    DISPUTES

     10.1     Jurisdiction.  The  Bolsover  Parties  and Company expressly agree
              ------------
and  understand that the dispute resolution procedures set forth in Section 10.2
for  any  breach  of  Sections  VI,  VIII  or IX will be inadequate and that the
damages  flowing  from such breach are not readily susceptible to being measured
in  monetary terms.  Accordingly, it is acknowledged that Bolsover Endeavours or
the  Company  shall  be entitled to seek immediate injunctive relief and, if the
court  so  permits,  may obtain specific performance or a temporary or permanent
order restraining any threatened or further breach of Sections VI, VIII or IX on
the  posting of a minimal bond.  Nothing contained in this Section 10.1 shall be
deemed  to  limit the Company's or the Bolsover Parties' remedies for any breach
of  this  Agreement  that may be pursued or availed of.  For any dispute arising
under  Sections  VI,  VIII  or  IX  of  this Agreement, and subject to the final
sentence  of  this Section 10.1, the parties agree to the exclusive jurisdiction
of  the  courts  of  Clark  County,  State  of  Nevada.  Any  other

<PAGE>
disputes arising under or relating to the subject matter of this Agreement shall
be  resolved  in  accordance  with Section 10.2.  Notwithstanding the above, the
Company  shall  at  its  option  have the right to invoke the dispute resolution
procedures  set forth in Section 10.2 for any breach of Sections VI, VIII or IX.

     10.2     Resolution  of  Controversies.
              -----------------------------

          (a)     Except  as  provided in Section 10.1, any dispute, controversy
or  claim  between or among two or more parties arising under or relating to the
subject  matter of this Agreement (collectively, a "DISPUTE") shall be attempted
to  be settled by the parties to such dispute, in good faith, by submitting each
such  Dispute  to  Professional,  on  the  one  hand,  and  to  a  designated
representative of the Company, on the other hand, who shall meet within ten (10)
days  as  reasonably  requested  by  either  party. If the parties are unable to
resolve  the Dispute within thirty (30) days thereafter, then such Dispute shall
be  submitted  to  arbitration  in  accordance  with  this  Section  10.2.

          (b)     Any  Dispute not resolved in accordance with this Section 10.2
shall  be  determined solely and exclusively by arbitration under, and practices
then  in  effect  of  the  American  Arbitration  Association, or any successors
thereto  ("AAA"),  in  Las  Vegas, Nevada, unless the parties otherwise agree in
writing.  The  parties  shall, in connection with such arbitration, be permitted
to  conduct  any  discovery permitted under the Nevada Rules of Civil Procedure;
provided,  however, that each party shall only be permitted to present three (3)
--------   -------
witnesses  before  the  arbitrator.  Professional  and the Company shall jointly
select  an  arbitrator.  In the event Professional and the Company fail to agree
upon  an  arbitrator  within  ten  (10)  days, then each of them shall select an
arbitrator and such arbitrators shall then select a third arbitrator to serve as
the  sole  arbitrator;  provided,  that if either party, in such event, fails to
                        --------
select an arbitrator within seven (7) days, such arbitrator shall be selected by
the  AAA  upon  application  of either party.  Within twenty (20) days after the
conclusion  of the arbitration hearing, the arbitrator shall use his or her best
efforts  to  prepare  written  findings  of  fact  and  conclusions  of  law.

          (c)     Judgment  upon  the award of the arbitrator in accordance with
this  Section 10.2 shall be final and binding and may be entered in any court of
Clark  County,  Nevada  and  in any United States federal court sitting in Clark
County,  Nevada,  and  the  parties hereby irrevocably waive any right to appeal
from  such  judgment.  Each  party  hereby  irrevocably submits to the exclusive
jurisdiction  of  such  courts  with respect to such matters.  Each party hereby
irrevocably  waives, to the fullest extent permitted by law, any objection which
it  may now or hereafter have to the laying of venue in any such suit, action or
proceeding  in  any  of  such courts or any claims that any such suit, action or
proceeding  brought in any such court has been brought in an inconvenient forum.
Each  party to this Agreement covenants not to institute any action in any court
or  before  any  other  Governmental  Entity with respect to any matter under or
relating  to  the subject matter of this Agreement other than in accordance with
this  Section  10.2.

     10.3     Situs  of  Arbitration.  Arbitration  proceedings shall be held in
              ----------------------
Clark  County,  Nevada.  The  decision  of  the arbitrator(s) shall be final and
binding  upon  the  parties hereto, and not subject to appeal.  The proceedings,
all  pleadings,  documents, correspondence and the arbitration award shall be in
English.  Judgment  upon the award or decision rendered by the arbitrator(s) may
be  rendered  in

<PAGE>
any  court  having competent jurisdiction thereof, or application may be made to
such  court  for  a judicial recognition of the award or an order of enforcement
thereof,  as  the  case  may  be.

                                   SECTION XI.
                                  MISCELLANEOUS

     11.1     Waiver.  Neither  the  failure  nor  any  delay on the part of any
              ------
party  to  exercise  any  right, remedy, power or privilege under this Agreement
shall  operate  as a waiver (express or implied) of that right, remedy, power or
privilege.  No  waiver  (express  or  implied)  of  any  right, remedy, power or
privilege  with  respect  to  any  particular occurrence shall be construed as a
waiver  of  such  right,  remedy,  power  or privilege with respect to any other
occurrence.

     11.2     Entire Agreement.  This Agreement constitutes the entire Agreement
              ----------------
of  the  parties  with  respect  to the subject matter hereof and supersedes any
preexisting  agreements between the Company and the Bolsover Parties, as well as
all  proposals,  oral  or  written,  and  all  negotiations,  conversations  or
discussions  heretofore  had  between the parties related to this Agreement. The
parties  hereto  acknowledge  they  have  not  been  induced  to enter into this
Agreement  by  any representations or statements, oral or written, not expressly
contained  herein.  The parties further acknowledge and agree that neither party
will  hereafter  claim  that  this  Agreement  has  been  altered,  modified, or
otherwise  changed  by  oral  communication  of  any  kind  or  character.

     11.3     Amendment.  This  Agreement shall not be deemed or construed to be
              ---------
modified, amended, rescinded, canceled or waived, in whole or in part, except by
written amendment signed by the parties hereto after the date of this Agreement.

     11.4     Notice.  All  notices  and  other  communications  under  or  in
              ------
connection with this Agreement shall be in writing and shall be deemed given (a)
if  delivered  personally  (including  by  overnight express or messenger), upon
delivery,  (b)  if  delivered  by  registered  or certified mail (return receipt
requested),  upon  the  earlier  of  actual  delivery  or three days after being
mailed,  or  (c)  if  given  by  telecopy,  upon confirmation of transmission by
telecopy provided a confirming copy of such notice was also mailed, in each case
to  the  parties at the following addresses or to such other address or telecopy
number  as  shall  be  specified  in  writing  by the intended recipient of such
notice:

                    If to Company:
                    DIGITALFX INTERNATIONAL, INC.
                    3035 East Patrick Lane, Suite 9
                    Las Vegas, Nevada 89120
                    Attention: Legal Department
                    Telecopier:  (702) 506-0668

                    If to a Bolsover Party:
                    BOLSOVER ENDEAVOURS
                    c/o CHRISTOPHER BOLSOVER
                    357 Mann Street
                    Gosford, New South Wales 2250
                    Australia

<PAGE>
Any  party  may  change  such  party's  address for notices by notice duly given
pursuant  to  this  Section  11.4.

     11.5     Attorneys  Fees.  In any action or proceeding to enforce the terms
              ---------------
of  this Agreement or to redress any violation of this Agreement, the prevailing
party  shall  be  entitled  to  recover as damages its attorney's fees and costs
incurred, whether or not the action is reduced to judgment.

     11.6     Governing  Law.  The  laws  of  the  State of Nevada of the United
              --------------
States  applicable  to  contracts  made or to be wholly performed there (without
giving  effect  to choice of law or conflict of law principles) shall govern the
validity,  construction, performance and effect of this Agreement, except to the
extent governed by federal law, irrespective of the fact that one or more of the
parties  now  is,  or  may become, a resident or citizen of a different state or
country.  The  parties  hereby  expressly  submit  solely  to  the  personal
          ------------------------------------------------------------------
jurisdiction  of  the  court  or  arbitral forum located in Las Vegas, County of
--------------------------------------------------------------------------------
Clark,  State  of  Nevada,  United  States of America and waive any objection or
--------------------------------------------------------------------------------
defense based on personal jurisdiction or venue that might otherwise be asserted
--------------------------------------------------------------------------------
to  proceedings  in  such  forum(s).
-----------------------------------

     11.7     Construction.  The terms and conditions of this Agreement shall be
              ------------
construed  as  a  whole  according to their fair meaning and not strictly for or
against  any party. The parties acknowledge that any rule of construction to the
effect  that ambiguities are to be resolved against the drafting party shall not
apply  in the interpretation of this Agreement. The provisions of this Agreement
shall be interpreted in a reasonable manner to give effect to the purpose of the
parties.  As  used  in this Agreement, the masculine, feminine or neuter gender,
and  the  singular or plural, shall be deemed to include the others whenever and
wherever  the  context  so  requires.

          (a)     For the purposes of this Agreement, unless the context clearly
requires,  "or"  is  not  exclusive.

          (b)     This Agreement shall not be construed for or against any party
by  reason  of  the  authorship  or alleged authorship of any provisions hereof.

          (c)     For  purposes  of  this  Agreement,  "including"  shall  mean
"including  without  limitation."

          (d)     References  to  law,  regulations and other governmental rules
shall  mean  such  laws,  regulations  and  rules  as  in  effect at the time of
determination (taking into account any amendments thereto effective at such time
without regard to whether such amendments were enacted or adopted after the date
of  this  Agreement) and shall include all successor laws, regulations and rules
thereto.

          (e)     References  to  "$"  or  "dollars"  or  "funds"  or "money" or
"monies"  or  "amounts"  or  "cash"  or other words of similar import shall mean
lawful  currency  of  the  United  States.

<PAGE>
          (f)     References  to  "Federal"  or  "federal" shall be to the laws,
agencies  or  other  attributes  of  the  United States (and not to any State or
locality  thereof).

          (g)     References  to  "days" shall mean calendar days; references to
"business  days"  shall  mean all days other than Saturday, Sunday and days that
are  legal  holidays  in  the  State  of  Nevada.

     11.8     Severability.  While  the  provisions  contained in this Agreement
              ------------
are  considered  by  the  parties  to  be reasonable in all circumstances, it is
recognized  that  provisions  of  the  nature in question may fail for technical
reasons  and,  accordingly,  it is hereby agreed and declared that if any one or
more  of  such  provisions  shall,  either by itself or themselves or taken with
others,  be  adjudged  to  be  invalid  as  exceeding  what is reasonable in all
circumstances  for  the protection of the interests of the parties, but would be
valid  if any particular restriction or provisions were deleted or restricted or
limited  in  a particular manner, then the said provisions shall apply with such
deletion,  restriction,  limitation,  reduction, curtailment, or modification as
may  be  necessary  to  make  them  valid  and  effective.

     11.9     Necessary  Action.  Each  of the parties shall do any act or thing
              -----------------
and  execute  any  or  all  documents  or  instruments  necessary  or  proper to
effectuate  the  provisions  and  intent of this Agreement.  Each of the parties
represents  and  warrants  that they have all requisite authority to execute and
perform  this  Agreement.

     11.10     Voluntary  Nature Agreement.  Each of the parties represents that
               ---------------------------
it  has carefully read and understood this Agreement, and that it is fully aware
of its legal effect and that it had an opportunity to consult with its own legal
counsel  and  tax  advisors  with  regard to this Agreement, and with respect to
Bolsover  Endeavours,  the  compensation  to  be received hereunder. Each of the
parties  acknowledges  and  agrees  that  it  is  signing this Agreement freely,
voluntarily  and  with  full  knowledge  of  its  terms  and  consequences.

     11.11     Captions  and  Headings.  The  captions and headings appearing at
               -----------------------
the  commencement of the sections of this Agreement are descriptive only and for
the  convenience  of reference and shall not define, limit or describe the scope
of  intent  of  this  Agreement,  nor  in  any  way  affect  this  Agreement.

     11.12     Counterparts.  This  Agreement  may  be  executed  in two or more
               ------------
counterparts  and  by  different  parties in separate counterparts (including by
facsimile).  All  counterparts  shall  constitute one and the same agreement (or
other document) and shall become effective when one or more counterparts of this
Agreement  have been signed by each party (including by facsimile) and delivered
to  the  other  party.

     11.13     Successors  and  Assigns.  The provisions of this Agreement shall
               ------------------------
be  binding  upon  and  inure  to  the  benefit  of the parties hereto and their
respective  successors  and assigns; provided that no party may assign, delegate
or  otherwise  transfer  any  of  its rights or obligations under this Agreement
without  the prior written consent of the other parties, which consent shall not
be  unreasonably  withheld.

<PAGE>
     11.14     Third-Party  Beneficiaries.  Nothing  contained in this Agreement
               --------------------------
is  intended  to  nor  shall it confer upon any person or entity, other than the
parties  hereto  and  their  respective  subsidiaries,  successors and permitted
assigns,  any  benefit,  right or remedies under or by reason of this Agreement.

     11.15     Representations  and Warranties.  The Bolsover Parties  represent
               -------------------------------
and  warrant  that  they  are  not  restricted  or  prohibited, contractually or
otherwise,  from  entering  into  and performing each of the terms and covenants
contained  in  this  Agreement, and that their execution and performance of this
Agreement  will  not violate or breach any other agreements between the Bolsover
Parties  and any other person or entity.  The Bolsover Parties further represent
and warrant that they have not, and will not in the course of their provision of
services hereunder, share, disclose or use any confidential or other proprietary
information or materials of any third party except as expressly permitted in the
course  of  their  provision  of  services  hereunder.

<PAGE>
PLEASE  READ  THIS  AGREEMENT  CAREFULLY.  YOU  ARE  ADVISED  TO CONSULT WITH AN
ATTORNEY  PRIOR  TO  EXECUTING  THIS  AGREEMENT.

IN WITNESS WHEREOF, the parties have duly executed this Agreement on the day and
year set forth below.

BOLSOVER ENDEAVOURS

/s/ Christopher Bolsover                   1/30/07
-------------------------------------      -------------------------------------
Christopher Bolsover                       Date

DIGITALFX INTERNATIONAL, INC.

By: /s/ Craig Ellins                       2/22/07
    ---------------------------------      -------------------------------------
Title: CEO                                 Date

ACKNOWLEDGED AND AGREED:

/s/ Christopher Bolsover                   1/30/07
-------------------------------------      -------------------------------------
Christopher Bolsover                       Date[FORM
      OF SERIES B WARRANT]

     

    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL,
      IN A
      GENERALLY 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, THE 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 WARRANT SHOULD CAREFULLY REVIEW THE TERMS
      OF
      THIS WARRANT. THE SECURITIES REPRESENTED BY THIS WARRANT MAY BE LESS THAN THE
      NUMBER SET FORTH ON THE FACE HEREOF.

    

    [Insert
      for Non-Convertible Warrants: THE SECURITIES REPRESENTED BY THIS CERTIFICATE
      MAY
      NOT BE EXERCISED UNTIL THE STOCKHOLDER APPROVAL DATE (AS DEFINED IN THE
      SECURITIES PURCHASE AGREEMENT, DATED MARCH 16, 2007, BY AND AMONG THE COMPANY
      AND THE BUYERS PARTY THERETO).]

    

    CLEVELAND
      BIOLABS, INC.

    

    SERIES
      B Warrant To Purchase Common Stock

    

    Warrant
      No.: B-______

    Number
      of
      Shares of Common Stock:_____________

    Date
      of
      Issuance: March 16, 2007 ("Issuance
      Date")

    

    Cleveland
      BioLabs, Inc., a Delaware corporation (the "Company"),
      hereby certifies that, for good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, [BUYER] 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 September 16, 2007 (the "Initial
      Exercise Date"),
      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").
      Except as otherwise defined herein, capitalized terms in this Warrant shall
      have
      the meanings set forth in Section 15. This Warrant is one of the Warrants (as
      defined in the Securities Purchase Agreement) to purchase Common Stock (the
      "SPA
      Warrants"
      issued
      pursuant to Section 1 of that certain Securities Purchase Agreement, dated
      as of
      March 16, 2007 (the "Subscription
      Date"),
      by
      and among the Company and the investors (the "Buyers")
      referred to therein (the "Securities
      Purchase Agreement").

     

    
      
        
1 Insert
        number of shares equal to 50% of the Conversion Amount (as defined in the
        Certificate of Designations) on the Issuance Date divided by the initial
        Conversion Price (as defined in the Certificate of
        Designations).

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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 Initial Exercise Date, in whole or in part
      by
      (i) delivery of a written notice, in the form attached hereto as Exhibit B
      (the
      "Exercise
      Notice"),
      of
      the Holder's election to exercise this Warrant, (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 wire transfer of immediately available funds, or (B) to the extent
      permitted by Section 1(d), by notifying the Company that this Warrant is being
      exercised pursuant to a Cashless Exercise (as defined in Section 1(d)), and
      (iii) if required by Section 2(h) or unless the Holder has previously delivered
      this Warrant to the Company and it or a new replacement Warrant has not yet
      been
      delivered to the Holder, the surrender of this Warrant to a common carrier
      for
      overnight delivery to the Company; provided, that if such Warrant Shares are
      to
      be issued in any name other than that of the registered holder of this Warrant,
      such issuance shall be deemed a transfer and the provisions of Section 7(a)
      shall be applicable. On or before the first (1st) Business Day following the
      date on which the Company has received each of the Exercise Notice, the
      Aggregate Exercise Price (or notice of a Cashless Exercise) and, if required,
      this Warrant (collectively, 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 third (3rd) Business 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 shares of Common Stock 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 to the Company 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, other than income, franchise, profits or similar
      taxes of the Holder or taxes resulting from issuance of Warrant Shares to a
      Person other than the Holder. 

     

    
      
        
        

      

      
        -
          2
          -

        
          

        

      

      
        
        

      

    

     

    (b)  Exercise
      Price.
      For
      purposes of this Warrant, "Exercise
      Price"
      means
      $10.36, subject to adjustment as provided herein. 

     

    (c)  Company's
      Failure to Timely Deliver Securities.
      If the
      Company shall fail for any reason or for no reason to issue to the Holder within
      three (3) Trading 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
      third Business Day that the issuance of such shares of Common Stock is not
      timely effected an amount equal to 1.0% 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 Closing Sale 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 Exercise Delivery Documents,
      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 such holder's exercise hereunder or if
      the
      Company fails to deliver to the Holder the certificate or certificates
      representing the applicable Warrant Shares (or credit the Holder's balance
      account at DTC with the applicable Warrant Shares) within three (3) Trading
      Days
      after its obligation to do so under clause (ii) below 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 three (3) 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 or credit
      such
      Holder's balance account with DTC (and to issue such shares of Common Stock)
      shall terminate, or (ii) promptly honor its obligation to deliver to the Holder
      a certificate or certificates representing such shares of Common Stock or credit
      such Holder's balance account with DTC 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 date
      of
      exercise. By complying with either of clauses (i) or (ii) in the preceding
      sentence in accordance with the Holder's request, the Company shall have been
      deemed to have cured the failure to timely deliver such shares of Common
      Stock.

     

    
      
        
        

      

      
        -
          3
          -

        
          

        

      

      
        
        

      

    

     

    (d)  Cashless
      Exercise.
       Notwithstanding
      anything contained herein to the contrary, if a Registration Statement (as
      defined in the Registration Rights Agreement) covering the Warrant Shares that
      are the subject of the Exercise Notice (the "Unavailable
      Warrant Shares")
      is
      required pursuant to the Registration Rights Agreement to be available for
      the
      resale of such Unavailable Warrant Shares but is not so available, 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
      arithmetic average of the Weighted Average Price of the shares of Common Stock
      (as reported by Bloomberg) over the five (5) consecutive Trading Days ending
      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 12.

     

    (f)  Limitations
      on Exercises.
      

     

    (i)  Beneficial
      Ownership.
      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 9.99% (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 (i)
      exercise of the remaining, unexercised portion of this Warrant beneficially
      owned by such Person and its affiliates and (ii) 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 (the
      "Exchange
      Act").
      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, 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 or oral request of the Holder,
      the
      Company shall within one 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, including
      the
      SPA Securities and the SPA Warrants, by the Holder and its affiliates since
      the
      date as of which such number of outstanding shares of Common Stock was reported.
      

     

    
      
        
        

      

      
        -
          4
          -

        
          

        

      

      
        
        

      

    

     

    (ii)  Principal
      Market Regulation.
      Notwithstanding anything to the contrary contained herein, 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 or conversion,
      as applicable, of the SPA Warrants and SPA Securities or otherwise without
      breaching the Company's obligations under the rules or regulations of the
      Principal Market (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
      Buyer shall be issued in the aggregate, 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 total number of shares of Common Stock underlying
      the SPA Warrants and SPA Securities issued to such Buyer pursuant to the
      Securities Purchase Agreement on the Issuance Date and the denominator of which
      is the aggregate number of shares of Common Stock underlying all of the SPA
      Warrants (other than the Non-Convertible Warrants (as defined in the Securities
      Purchase Agreement)) and SPA Securities (other than the Non-Convertible
      Preferred Shares (as defined in the Securities Purchase Agreement)) issued
      to
      the Buyers pursuant to the Securities Purchase Agreement on the Issuance Date
      (with respect to each Buyer, the "Exchange
      Cap Allocation").
      In
      the event that any Buyer shall sell or otherwise transfer any of such Buyer's
      SPA Warrants, the transferee shall be allocated a pro rata portion of such
      Buyer'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 for, convert all
      of
      such holder’s SPA Securities 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
      and
      SPA Securities on a pro rata basis in proportion to the shares of Common Stock
      underlying the SPA Warrants and SPA Securities then held by each such holder.
      In
      the event that the Company is prohibited from issuing any Warrant Shares for
      which Exercise Delivery Documents have 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 Weighted Average Price and the Exercise Price as of the
      date
      of the attempted exercise.

     

    
      
        
        

      

      
        -
          5
          -

        
          

        

      

      
        
        

      

    

     

    (g)  Insufficient
      Authorized Shares.
      If at
      any time while this Warrant 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 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 reasonably 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 reasonable 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.

     

    (h)  Book-Entry.
      Upon
      exercise of this Warrant in accordance with the terms hereof, the Holder shall
      not be required to physically surrender this Warrant to the Company unless
      it is
      being exercised for all of the Warrant Shares represented by the Warrant. The
      Holder and the Company shall maintain records showing the number of Warrant
      Shares exercised and issued and the dates of such exercises or shall use such
      other method, reasonably satisfactory to the Holder and the Company, so as
      not
      to require physical surrender of this Warrant upon each such exercise. In the
      event of any dispute or discrepancy, such records of the Company establishing
      the number of Warrant Shares to which the Holder is entitled shall be
      controlling and determinative in the absence of manifest error. Notwithstanding
      the foregoing, if this Warrant is exercised as aforesaid, the Holder may not
      transfer this Warrant unless the Holder first physically surrenders this Warrant
      to the Company in accordance with Section 7(a). The Holder and any assignee,
      by
      acceptance of this Warrant, acknowledge and agree that, by reason of the
      provisions of this paragraph, following exercises of any portion of this
      Warrant, the number of Warrant Shares represented by this Warrant may be less
      than the number stated on the face hereof. 

     

    (i)  [INSERT
      IN NON-CONVERTIBLE WARRANTS:
      Notwithstanding the foregoing, this Warrant shall not be exercisable until
      after
      the Stockholder Approval Date (as defined in the Securities Purchase
      Agreement).]

     

    
      
        
        

      

      
        -
          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, 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 Certificate of Designations) 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 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. 

     

      (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. 

     

    
      
        
        

      

      
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      (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.

     

      (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 in which no specific
      consideration is allocated to such Options by the parties thereto, the Options
      will be deemed to have been issued for a consideration of $0.01. 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.

     

    
      
        
        

      

      
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          8
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      (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.

     

      (vi)    
      Floor
      Price.
      Until
      such time as the Company receives the Stockholder Approval, no adjustment
      pursuant to Section 2(a) shall cause the Exercise Price to be less than $10.36,
      as adjusted for any stock dividend, stock split, stock combination,
      reclassification or similar transaction.

     

    (b)  Adjustment
      upon Subdivision or Combination of shares 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 consistent with the provisions of this Section 2 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.

     

    
      
        
        

      

      
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    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 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, 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 shares 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;
      provided, however, 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 this Section
      3.

     

    4.  PURCHASE
      RIGHTS; FUNDAMENTAL TRANSACTIONS.

     

    (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 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; provided
      that, notwithstanding anything to the contrary contained herein in any such
      case
      the provisions of Section 2 shall not be applicable to such grant, issuance
      or
      sale by the Company.

     

    (b)  Fundamental
      Transactions.
      The
      Company shall not enter into or be party to a Fundamental Transaction in which
      the Company is not a surviving entity holding all or substantially all of the
      assets that the Company held prior to such Fundamental Transaction, unless
      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 reasonably satisfactory to the Required Holders, including agreements
      to deliver to each holder of 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 reasonably satisfactory to the Required Holders.
      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) purchasable
      upon the exercise of the 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 the 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 Required Holders. 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.

     

    
      
        
        

      

      
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          10
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    (c)  Notwithstanding
      the foregoing, in the event of a Fundamental Transaction other than one in
      which
      a Successor Entity that is a publicly traded corporation whose stock is quoted
      or listed for trading on an Eligible Market assumes this Warrant such that
      the
      Warrant shall be exercisable for the publicly traded Common Stock of such
      Successor Entity, at the request of the Holder delivered before the ninetieth
      (90th)
      day
      after such Fundamental Transaction, the Company (or the Successor Entity) shall
      purchase this Warrant from the Holder by paying to the Holder, within five
      (5)
      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 calculated using the Black Scholes Option Pricing
      Model.

     

    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 reasonably 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 reasonably 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).

     

    
      
        
        

      

      
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    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 stockholder 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 stockholder 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 stockholders of the
      Company generally, contemporaneously with the giving thereof to the
      stockholders.

     

    7.  REISSUANCE
      OF WARRANTS.

     

    (a)  Transfer
      of Warrant.
      If this
      Warrant is to be transferred in accordance herewith and the Purchase Agreement,
      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 then 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.

     

    
      
        
        

      

      
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          12
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    (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.

     

    8.  MANDATORY
      EXERCISE; REDEMPTION.

     

    (a)  Mandatory
      Exercise.
      Within
      one Business Day of the last Trading Day of any Mandatory
      Exercise Period, the Company may, at its election, deliver notice to the Holder
      confirming that a Mandatory Exercise Period has occurred. Subject to
      satisfaction (or waiver by the Holder) of the Conditions to Mandatory Exercise
      (as defined below), within ten (10) Business Days after the receipt of the
      Mandatory Exercise Notice (the “Mandatory
      Exercise Deadline”),
      the
      Holder, subject to the first paragraph of this Warrant, shall submit an Exercise
      Notice in accordance with Section 2 (a “Mandatory
      Exercise Notice”),
      electing to exercise this Warrant, for all of the then remaining Warrant Shares
      which are not subject to an Exercise Notice delivered to the Company by the
      Holder on or prior to delivery to the Holder of the Mandatory Exercise Notice,
      and shall submit to the Company the Aggregate Exercise Price therefor, in cash,
      by wire transfer of immediately available funds. This Warrant shall be exercised
      in its entirety in accordance with Section 2 on the date on which the Company
      receives the Aggregate Exercise Price pursuant to the preceding sentence (the
      “Mandatory
      Exercise Date”).
      Upon
      the written request of the Holder of this Warrant, the Company shall promptly,
      but in no event later than one (1) Business Day following the receipt of such
      request, confirm in writing the status of the Company’s compliance with each of
      the Conditions to Mandatory Exercise.

     

    (b)  Redemption
      of Warrants.
      If the
      Holder shall have failed to exercise this Warrant with respect to all of the
      Warrant Shares, or shall have failed to have paid the applicable Aggregate
      Exercise Price, by the Mandatory Exercise Deadline and the Conditions to
      Mandatory Exchange have been satisfied (or waived by the Holder), (i) this
      Warrant shall be redeemed by the Company at a price (the “Redemption Amount”)
      equal
      to the product of (A) $0.01, and (B) the number of Warrant Shares as to which
      this Warrant has not been exercised on or prior to the Mandatory Exercise
      Deadline; (ii) the Company shall promptly pay the Redemption Amount to the
      Holder, by check or wire transfer, and (iii) after the Mandatory Exercise
      Deadline, this Warrant shall represent only the right to receive the Redemption
      Amount, and the Holder shall have no other rights hereunder, with respect to
      the
      Warrant Shares as to which this Warrant has not been exercised.

     

    (c)  Conditions
      to Mandatory Exercise.
      “Conditions
      to Mandatory Exercise”
      shall
      mean, on each day commencing with the first day of the applicable Mandatory
      Exercise Period through and including the earlier of the Mandatory Exercise
      Date
      and the Mandatory Exercise Deadline, the Equity Conditions (as defined in the
      Certificate of Designations) shall have been satisfied.

     

    
      
        
        

      

      
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    (d) Pro
      Rata Redemption Requirement.
      If the
      Company elects to cause a mandatory exercise pursuant to Section 8(a), then
      it
      must simultaneously take the same action in the same manner with respect to
      the
      other SPA Warrants. 

     

    9.  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) promptly 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, other than Excluded Securities,
      to holders of shares 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.

     

    10.  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 change the 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.

     

    11.  GOVERNING
      LAW.
      This
      Warrant shall be governed by and construed and enforced in accor-dance 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.

     

    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 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.

     

    
      
        
        

      

      
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    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
      right
      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.

     

    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, provided that any such offer, sale, transfer
      or assignment is in compliance with applicable securities law, and the terms
      and
      conditions hereof and of the Securities Purchase Agreement .

     

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

     

    (a)  "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
      immediately following the public announcement of the applicable Fundamental
      Transaction 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 and (ii) an expected volatility equal to the greater
      of
      60% and the 100 day volatility obtained from the HVT function on
      Bloomberg.

     

    (b)  "Bloomberg"
      means
      Bloomberg Financial Markets.

     

    
      
        
        

      

      
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    (c)  "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.

     

    (d)  "Certificate
      of Designations"
      means
      the certificate of designations for the Series B Convertible Preferred Stock
      in
      the form attached as Exhibit
      A
      to the
      Securities Purchase Agreement.

     

    (e)  "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 the 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 12. All such determinations to be appropriately adjusted
      for
      any stock dividend, stock split, stock combination or other similar transaction
      during the applicable calculation period.

     

    (f)  "Common
      Stock"
      means
      (i) the Company's shares of Common Stock, par value $0.005 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.

     

    
      
        
        

      

      
        -
          16
          -

        
          

        

      

      
        
        

      

    

     

    (i)  "Eligible
      Market"
      means
      the NASDAQ Capital Market, the American Stock Exchange, the New York Stock
      Exchange, the NASDAQ Global Market or the NASDAQ Global Select
      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 Trading 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 (or in the case of clause (vi) any “person” or “group” (as
      these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
      Act)) 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 (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 either
      the outstanding shares of Common Stock (not including any shares of Common
      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 Common Stock (not including
      any
      shares of Common 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) 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.

     

    (l)  “Mandatory
      Exercise Period” means
      any
      period of thirty (30) consecutive Trading Days during which the Closing Sale
      Price of the Common Stock on each such Trading Day is equal to or greater than
      the Mandatory Exercise Trigger Price.

     

    (m)  “Mandatory
      Exercise Trigger Price” means
      Thirty Dollars ($30.00) (subject to adjustment for stock splits, stock dividends
      and other similar events after the Issuance Date).

     

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

     

    (o)  "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.

     

    
      
        
        

      

      
        -
          17
          -

        
          

        

      

      
        
        

      

    

     

    (p)  "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.

     

    (q)  "Principal
      Market"
      means
      the NASDAQ Capital Market.

     

    (r)  "Registration
      Rights Agreement"
      means
      that certain Registration Rights Agreement dated as of the Issuance Date by
      and
      among the Company and the Buyers.

     

    (s)  "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.

     

    (t)  "SPA
      Securities"
      means
      the Preferred Shares issued pursuant to the Securities Purchase
      Agreement.

     

    (u)  "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.

     

    (v)  "Trading
      Day"
      means
      any day on which the Common Stock is scheduled to trade 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 is then traded; provided that "Trading Day" shall not include
      any day on which the Common Stock is scheduled to trade on such exchange or
      market for less than 4.5 hours or any day that the Common Stock is 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).

     

    (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 such
      security, then such dispute shall be resolved pursuant to Section 12 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]

    

    
      
        
        

      

      
        -
          18
          -

        
          

        

      

      
        
        

      

    

    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.

     

    
      	 	 	 
	 	CLEVELAND
              BIOLABS, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name: Michael
              Fonstein
	 	Title: Chief
              Executive Officer and President

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    

    EXERCISE
      NOTICE

    TO
      BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
      TO PURCHASE COMMON STOCK

    

    CLEVELAND
      BIOLABS, INC.

    The
      undersigned holder hereby exercises the right to purchase _________________
      of
      the shares of Common Stock ("Warrant
      Shares")
      of
      Cleveland BioLabs, Inc., a Delaware corporation (the "Company"),
      evidenced by the attached 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 (to the extent
      permitted).

    

    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:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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
      __, 2007 from the Company and acknowledged and agreed to by Continental Stock
      Transfer & Trust Company.

     

    
      	 	 	 
	 	CLEVELAND
              BIOLABS, INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
                
Name:

            
	 	
              Title:

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