Document:

Unassociated Document

    [FORM
      OF WARRANT]

    

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

    

    DIGITALFX
      INTERNATIONAL, INC.

    

    Warrant
      To Purchase Common Stock

    

    Warrant
      No.: [_______]

    Number
      of
      Shares of Common Stock: [_______]

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

    

    DigitalFX
      International, Inc., a Florida corporation (the "Company"),
      hereby certifies that, for good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, [PORTSIDE GROWTH AND OPPORTUNITY
      FUND][HIGHBRIDGE
      INTERNATIONAL LLC][IROQUOIS MASTER FUND, LTD.],
      the
      registered holder hereof or its permitted assigns (the "Holder"),
      is
      entitled, subject to the terms set forth below, to purchase from the Company,
      at
      the Exercise Price (as defined below) then in effect, upon surrender of this
      Warrant to Purchase Common Stock (including any Warrants to Purchase Common
      Stock issued in exchange, transfer or replacement hereof, the "Warrant"),
      at
      any time or times on or after the date hereof but not after 11:59 p.m., New
      York
      time, on the Expiration Date (as defined below), [ ] ([ ]) fully paid
      nonassessable shares of Common Stock (as defined below) (the
      "Warrant
      Shares").
      This
      Warrant is one of the Warrants to purchase Common Stock (the "SPA
      Warrants")
      issued
      pursuant to Section 1 of that certain Securities Purchase Agreement, dated
      as of
      November 29, 2007 (the "Subscription
      Date"),
      by
      and among the Company and the investors (the "Buyers")
      referred to therein (the "Securities
      Purchase Agreement").
      Except as otherwise defined herein, capitalized terms in this Warrant shall
      have
      the meanings set forth in Section 14.

     

    1.  EXERCISE
      OF WARRANT.

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)  Exercise
      Price.
      For
      purposes of this Warrant, "Exercise
      Price"
      means
      $2.93, subject to adjustment as provided herein.

     

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

     

    
      
        
        

      

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

     

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

      
            B

    

    For
      purposes of the foregoing formula:

     

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

     

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

     

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

    
       

      
        
          
          

        

        
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    (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; Beneficial Ownership.
      

     

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

     

    
      
        
        

      

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

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

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

     

    
      
        
        

      

      
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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. 

     

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

     

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

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    4.  PURCHASE
      RIGHTS; FUNDAMENTAL TRANSACTIONS.

     

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

     

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

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

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

     

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

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    7.  REISSUANCE
      OF WARRANTS.

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

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

     

    10.  GOVERNING
      LAW.
      This
      Warrant shall be governed by and construed and enforced in accordance with,
      and
      all questions concerning the construction, validity, interpretation and
      performance of this Warrant shall be governed by, the internal laws of the
      State
      of New York, without giving effect to any choice of law or conflict of law
      provision or rule (whether of the State of New York or any other jurisdictions)
      that would cause the application of the laws of any jurisdictions other than
      the
      State of New York. 

     

    11.  SEVERABILITY.
      If any
      provision of this Agreement is prohibited by law or otherwise determined to
      be
      invalid or unenforceable by a court of competent jurisdiction, the provision
      that would otherwise be prohibited, invalid or unenforceable shall be deemed
      amended to apply to the broadest extent that it would be valid and enforceable,
      and the invalidity or unenforceability of such provision shall not affect the
      validity of the remaining provisions of this Agreement so long as this Agreement
      as so modified continues to express, without material change, the original
      intentions of the parties as to the subject matter hereof and the prohibited
      nature, invalidity or unenforceability of the provision(s) in question does
      not
      substantially impair the respective expectations or reciprocal obligations
      of
      the parties or the practical realization of the benefits that would otherwise
      be
      conferred upon the parties. The parties will endeavor in good faith negotiations
      to replace the prohibited, invalid or unenforceable provision(s) with a valid
      provision(s), the effect of which comes as close as possible to that of the
      prohibited, invalid or unenforceable provision(s).

     

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

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

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

     

    (a)  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.

     

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

     

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

     

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

     

    (c)  
      "Bloomberg"
      means
      Bloomberg Financial Markets.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

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

     

    (e)  "Closing
      Sale Price"
      means,
      for any security as of any date, the last closing trade price for such security
      on the Principal Market, as reported by Bloomberg, or, if the Principal Market
      begins to operate on an extended hours basis and does not designate the closing
      trade price then the last trade price of such security prior to 4:00:00 p.m.,
      New York time, as reported by Bloomberg, or, if the Principal Market is not
      the
      principal securities exchange or trading market for such security, the last
      trade price of such security on the principal securities exchange or trading
      market where such security is listed or traded as reported by Bloomberg, or
      if
      the foregoing do not apply, the last trade price of such security in the
      over-the-counter market on the electronic bulletin board for such security
      as
      reported by Bloomberg, or, if no last trade price is reported for such security
      by Bloomberg, the average of the bid prices, or the ask prices, respectively,
      of
      any market makers for such security as reported in the "pink sheets" by Pink
      Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Sale
      Price cannot be calculated for a security on a particular date on any of the
      foregoing bases, the Closing Sale Price of such security on such date shall
      be
      the fair market value as mutually determined by the Company and the Holder.
      If
      the Company and the Holder are unable to agree upon the fair market value of
      such security, then such dispute shall be resolved pursuant to Section 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 $0.001 per share, and
      (ii) any share capital into which such Common Stock shall have been changed
      or any share capital resulting from a reclassification of such Common
      Stock.

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

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

     

    (r)  "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.

     

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

     

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

     

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

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

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

     

    
      	 	 	 
	 	DIGITALFX INTERNATIONAL,
              INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name: 
	 	Title:

    
      
        
        

      

      
        20Unassociated Document

    REGISTRATION
      RIGHTS AGREEMENT

     

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

     

    WHEREAS:

     

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

     

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

     

     

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

     

    1. Definitions.
      

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

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

     

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

     

    2. Registration.

     

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

     

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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

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

     

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

     

    3. Related
      Obligations.

     

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

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    4. Obligations
      of the Investors.

     

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

     

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

     

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

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

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

     

    5. Expenses
      of Registration.

     

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

     

    6. Indemnification.

     

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

     

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

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

    7. Contribution.

     

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

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    8. Reports
      Under the 1934 Act.
      

     

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

     

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

     

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

     

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

     

    9. Assignment
      of Registration Rights.
      

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    10. Amendment
      of Registration Rights.

     

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

     

    11. Miscellaneous.

     

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

     

    b. Any
      notices, consents, waivers or other communications required or permitted to
      be
      given under the terms of this Agreement must be in writing and will be deemed
      to
      have been delivered: (i) upon receipt, when delivered personally; (ii) upon
      receipt, when sent by facsimile (provided confirmation of transmission is
      mechanically or electronically generated and kept on file by the sending party);
      or (iii) one (1) Business Day after deposit with a nationally recognized
      overnight delivery service, in each case properly addressed to the party to
      receive the same. The addresses and facsimile numbers for such communications
      shall be:

     

    

    If
      to the
      Company: 

     

    DigitalFX
      International, Inc.

    3035
      East
      Patrick Lane, Suite 9

    Las
      Vegas, Nevada 89120

    Telephone: 
      (702)
      938-9300

    Facsimile:   
      (775)
      860-0318

    Attention:   
      Craig
      Ellins

    

    Copy
      (for
      information purposes) to:

     

    Stubbs
      Alderton & Markiles, LLP

    15260
      Ventura Boulevard

    20th
      Floor

    Sherman
      Oaks, California 91403

    Telephone: 
      (818) 444-4500

    Facsimile:    (818)
      444-6303

    Attention:   
      Gregory Akselrud

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    If
      to
      Legal Counsel:

    

    
      	 	 	
              Schulte
                Roth & Zabel LLP

            

    

    
      	 	 	
              919
                Third Avenue

            

    

    
      	 	 	
              New
                York, New York 10022

            

    

    
      	 	 	
              Telephone: 
                (212) 756-2000

            

    

    
      	 	 	
              Facsimile:    (212)
                593-5955

            

    

    
      	 	 	
              Attention:  
                Eleazer N. Klein, Esq.

            

    

    

    If
      to a
      Buyer, to its address and facsimile number set forth on the Schedule of Buyers
      attached hereto, with copies to such Buyer's representatives as set forth on
      the
      Schedule of Buyers, or to such other address and/or facsimile number and/or
      to
      the attention of such other Person as the recipient party has specified by
      written notice given to each other party five (5) days prior to the
      effectiveness of such change. Written confirmation of receipt (A) given by
      the
      recipient of such notice, consent, waiver or other communication, (B)
      mechanically or electronically generated by the sender's facsimile machine
      containing the time, date, recipient facsimile number and an image of the first
      page of such transmission or (C) provided by a courier or overnight courier
      service shall be rebuttable evidence of personal service, receipt by facsimile
      or receipt from a nationally recognized overnight delivery service in accordance
      with clause (i), (ii) or (iii) above, respectively.

     

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

     

    d. All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by the internal laws of the State of New
      York, without giving effect to any choice of law or conflict of law provision
      or
      rule (whether of the State of New York or any other jurisdictions) that would
      cause the application of the laws of any jurisdictions other than the State
      of
      New York. Each party hereby irrevocably submits to the exclusive jurisdiction
      of
      the state and federal courts sitting in The City of New York, Borough of
      Manhattan, for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein, and
      hereby irrevocably waives, and agrees not to assert in any suit, action or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, that such suit, action or proceeding is brought in an
      inconvenient forum or that the venue of such suit, action or proceeding is
      improper. Each party hereby irrevocably waives personal service of process
      and
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof to such party at the address for such notices to it
      under
      this Agreement and agrees that such service shall constitute good and sufficient
      service of process and notice thereof. Nothing contained herein shall be deemed
      to limit in any way any right to serve process in any manner permitted by law.
      If any provision of this Agreement shall be invalid or unenforceable in any
      jurisdiction, such invalidity or unenforceability shall not affect the validity
      or enforceability of the remainder of this Agreement in that jurisdiction or
      the
      validity or enforceability of any provision of this Agreement in any other
      jurisdiction. EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
      CONTEMPLATED HEREBY.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

    i. Each
      party shall do and perform, or cause to be done and performed, all such further
      acts and things, and shall execute and deliver all such other agreements,
      certificates, instruments and documents, as any other party may reasonably
      request in order to carry out the intent and accomplish the purposes of this
      Agreement and the consummation of the transactions contemplated
      hereby.

     

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

     

    k. The
      language used in this Agreement will be deemed to be the language chosen by
      the
      parties to express their mutual intent and no rules of strict construction
      will
      be applied against any party. 

     

    l. This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other Person.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    m. The
      obligations of each Investor hereunder are several and not joint with the
      obligations of any other Investor, and no provision of this Agreement is
      intended to confer any obligations on any Investor vis-à-vis any other Investor.
      Nothing contained herein, and no action taken by any Investor pursuant hereto,
      shall be deemed to constitute the Investors as a partnership, an association,
      a
      joint venture or any other kind of entity, or create a presumption that the
      Investors are in any way acting in concert or as a group with respect to such
      obligations or the transactions contemplated herein.

     

    *
      * * * *
      *

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

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

     

    
      	 	
              COMPANY:

            
	 	 
	 	
              DIGITALFX
                INTERNATIONAL, INC.

            
	 	 
	 	 
	 	 
	 	
              By: __________________________________

              Name:  
                

              Title:    

            
	 	 

    

    

    

    
      
        
          Signature
            Page of the Registration Rights Agreement

        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

     

    

    
      	 	
              BUYERS:

            
	 	 
	 	
              PORTSIDE
                GROWTH AND OPPORTUNITY FUND

            
	 	 
	 	 
	 	 
	 	
              By: __________________________________

              Name:  
                

              Title:    

            
	 	 

    

    

    
      
        
          Signature
            Page of the Registration Rights Agreement

        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

    

    
      	 	 
	 	 
	 	
              HIGHBRIDGE
                INTERNATIONAL LLC

            
	 	 
	 	 
	 	 
	 	
              By: __________________________________

              Name:  
                

              Title:    

            
	 	 

    

    

    

     

    
      
        
          
            	 	
                    Signature
                      Page of the Registration Rights Agreement

                  	 

          

          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

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

     

    

    
      	 	 
	 	 
	 	
              IROQUOIS
                MASTER FUND, LTD.

            
	 	 
	 	 
	 	 
	 	
              By: __________________________________

              Name:  
                

              Title:    

            
	 	 

    

    

    
      Signature
        Page of the Registration Rights Agreement

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