EXHIBIT 10.5

 

THIRD AMENDMENT AGREEMENT

 

This Third Amendment Agreement (this “Agreement”) is entered into as of
August 16, 2012, by and between Digital Domain Media Group, Inc., a Florida
corporation with offices located at 10250 SW Village Parkway, Port St. Lucie,
Florida 34987 (the “Company”), and the investor signatory hereto (the
“Investor”), with reference to the following facts:

 

A.                                    The Company and certain investors (the
“May Buyers”) are parties to that certain Securities Purchase Agreement, dated
as of May 6, 2012 (as amended, restated or otherwise modified from time to time,
the “May Securities Purchase Agreement”), pursuant to which on May 7, 2012 the
Company sold, and the Buyers listed on the Schedule of Buyers attached thereto
purchased, certain senior secured convertible notes (as amended pursuant to
those certain First Amendment Agreements dated as of July 12, 2012, and those
certain Second Amendment Agreements dated as of August 14, 2012, between the
Company and each of the Buyers, and as otherwise amended, restated or otherwise
modified from time to time, the “Notes”) convertible into Conversion Shares (as
defined in the May Securities Purchase Agreement) in accordance with the terms
of the Notes and (ii) Warrants (as defined in the May Securities Purchase
Agreement) exercisable to purchase Warrant Shares (as defined in the
May Securities Purchase Agreement) in accordance with the terms of the
Warrants.  Capitalized terms not defined herein shall have the meanings as set
forth in the May Securities Purchase Agreement;

 

B.                                    The Company and certain investors (the
“June Buyers”) are parties to that certain Securities Purchase Agreement, dated
as of June 7, 2012 (as amended, restated or otherwise modified from time to
time, the “June Securities Purchase Agreement”), pursuant to which on June 8,
2012 the Company sold, and the June Buyers purchased, an aggregate of 1,500,000
shares of the Common Stock and warrants to acquire an aggregate of 600,000
shares (subject to adjustment) of the Common Stock;

 

C.                                    The Company has informed the May Buyers
and the June Buyers that the Company desires to execute and deliver (i) a Senior
Secured Convertible Note dated the date hereof in the original principal amount
of $5,000,000 in favor of PBC Digital Holdings II, LLC (“PBC”) in the form
attached hereto as Exhibit A (the “PBC Senior Secured Convertible Note”), (ii) a
Warrant to Purchase Common Stock dated the date hereof in favor of PBC in the
form attached hereto as Exhibit B (the “PBC Warrant”) and (iii) a letter
agreement between PBC and the Company in the form attached hereto as Exhibit C
(the “PBC Letter Agreement”; collectively with the PBC Senior Secured
Convertible Note and the PBC Warrant, the “PBC Documents”);

 

D.                                    The Investor is a May Buyer and/or a
June Buyer;

 

E.                                     The Company has requested that the
Investor provide certain consents and waivers in connection with the Company’s
entering into the PBC Documents; and

 

F.                                      Concurrently herewith, the Company has
also requested that all of the May Buyers and June Buyers constituting Required
Holders (as defined in the June Securities

 

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Purchase Agreement) enter into agreements in form and substance identical to
this Agreement (the “Other Agreements”, and together with this Agreement, the
“Agreements”).

 

NOW, THEREFORE, in consideration of the premises set forth above, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

1.                                      Effective Date.  Upon the later of
(a) such date as the Company and all of the May Buyers and June Buyers
constituting Required Holders (as defined in the June Securities Purchase
Agreement) shall have executed and delivered the Agreements and (b) such date as
the Company shall have paid the Legal Fee Payment (as defined below), this
Agreement shall be deemed effective (the “Effective Date”).

 

2.                                      Amendment, Consents and Waivers.

 

(a)                                 Consent, Amendment and Waiver relating to
the Transaction Documents.  The Investor, if a May Buyer, hereby (i) consents
and agrees, notwithstanding any contrary or inconsistent provision of any of the
Transaction Documents, to the Company entering into each of the PBC Documents,
performing its obligations thereunder and otherwise consummating the
transactions contemplated thereunder; (ii) approves of and adopts the PBC Letter
Agreement as an amendment to the May Securities Purchase Agreement as if it were
a signatory thereto; and (iii) irrevocably waives (A) any and all rights of such
Person with respect to the transactions contemplated by the PBC Documents (the
“PBC Transactions”) arising under Section 4(o) of the May Securities Purchase
Agreement, (B) the application of Section 4(n) of the May Securities Purchase
Agreement to the PBC Transactions, and (C) any and all rights of such Person to
assert an Event of Default (as defined in the Notes) based solely on a breach by
the Company of Section 4(a) of the Registration Rights Agreement between the
Company and the Subordinated Lender.

 

(b)                                 Consent and Waiver relating to the
June Transaction Documents.  The Investor, if a June Buyer, hereby (i) consents
and agrees, notwithstanding any contrary or inconsistent provision of the
Transaction Documents (as defined in the June Securities Purchase Agreement, the
“June Transaction Documents”), to the Company entering into each of the PBC
Documents, performing its obligations thereunder and otherwise consummating the
transactions contemplated thereunder, and (ii) irrevocably waives any rights of
such Person under Section 4(k) of the June Securities Purchase Agreement.

 

3.                                      Acknowledgement; Reaffirmation of
Obligations.  The Company hereby confirms and agrees that, except as set forth
in Section 2 above, (i) the May Securities Purchase Agreement, the Notes, the
Securities, the Security Documents, the Guarantees, the June Securities Purchase
Agreement and each other June Transaction Document is, and shall continue to be,
in full force and effect and is hereby ratified and confirmed in all respects,
(ii) to the extent that the Security Documents, the Guarantees, or any other
Transaction Document purports to assign or pledge to the Buyers and the holders
of the Securities, or to grant to the Collateral Agent a security interest in or
lien on, any collateral as security for the obligations of the Company from time
to time existing in respect of the Notes and any other Transaction

 

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Document, such pledge, assignment and/or grant of the security interest or lien
is hereby ratified and confirmed in all respects, and shall apply with respect
to the obligations under the Notes, and (iii) the execution, delivery and
effectiveness of this Agreement shall not operate as an amendment of any right,
power or remedy of the May Buyers under any Transaction Document, or the
June Buyers under any June Transaction Document, nor constitute an amendment of
any provision of any Transaction Document or June Transaction Document.

 

4.                                      Fees and Expenses.  Concurrently
herewith, (i) the Company shall reimburse Greenberg Traurig, LLP (counsel to the
lead May Buyer) for all reasonable costs and expenses incurred by it in
connection with preparing and delivering this Agreement and with the
transactions contemplated hereby, and the prior unpaid and outstanding legal
fees and expenses incurred by Greenberg Traurig, LLP to date with respect to the
Transaction Documents and the June Transaction Documents (including, without
limitation, all reasonable, documented legal fees and disbursements in
connection therewith, and due diligence in connection with the transactions
contemplated thereby), and (ii) the Company shall reimburse Schulte Roth & Zabel
LLP (counsel to the Collateral Agent) for all reasonable costs and expenses
incurred by it in connection with preparing and delivering this Agreement and
with the transactions contemplated hereby and the prior unpaid and outstanding
legal fees and expenses incurred by Schulte Roth & Zabel LLP to date with
respect to the Transaction Documents and the June Transaction Documents
(including, without limitation, all reasonable, documented legal fees and
disbursements in connection therewith, and due diligence in connection with the
transactions contemplated thereby) (collectively, the “Legal Fee Payment”). 
Except as otherwise set forth in this letter agreement, the Transaction
Documents and the June Transaction Documents, each party to this letter
agreement shall bear its own expenses in connection with the transactions
contemplated hereby.

 

5.                                      Disclosure of Transactions and Other
Material Information.  On or before 8:30 a.m., New York City time, on the first
Business Day following the date of this Agreement, the Company shall file a
Current Report on Form 8-K describing the terms of the transactions contemplated
by this Agreement in the form required by the 1934 Act and attaching the form of
the Agreements as an exhibit to such filing (including all attachments, the “8-K
Filing”).  From and after the filing of the 8-K Filing with the SEC, the
Investor shall not be in possession of any material, nonpublic information
received from the Company, any of its Subsidiaries or any of their respective
officers, directors, employees or agents, that is not disclosed in the 8-K
Filing.

 

6.                                      Representations and Warranties.

 

(a)                                 The Investor represents and warrants to the
Company with respect to only itself that, as of the date hereof and as of the
Effective Date:

 

(i)                                     Organization; Authority. The Investor is
an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization with the requisite power and authority
to enter into and to consummate the transactions contemplated by this Agreement.

 

(ii)                                  Validity; Enforcement.  This Agreement has
been duly and validly authorized, executed and delivered on behalf of the
Investor and constitutes the legal,

 

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valid and binding obligations of the Investor enforceable against the Investor
in accordance with its terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.

 

(iii)                               No Conflicts.  The execution, delivery and
performance by the Investor of this Agreement and the consummation by the
Investor of the transactions contemplated hereby will not (I) result in a
violation of the organizational documents of the Investor, (II) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Investor is a party, or (III) result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws) applicable to the Investor, except in the case of clauses
(II) and (III) above, for such conflicts, defaults, rights or violations which
would not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of the Investor to perform its
obligations hereunder.

 

(b)                      The Company represents and warrants to the Investor
that, as of the date hereof and as of the Effective Date:

 

(i)                                     Organization and Qualification. Each of
the Company and each of its Subsidiaries are entities duly organized and validly
existing and in good standing under the laws of the jurisdiction in which they
are formed, and have the requisite power and authorization to own their
properties and to carry on their business as now being conducted and as
presently proposed to be conducted. Each of the Company and each of its
Subsidiaries is duly qualified as a foreign entity to do business and is in good
standing in every jurisdiction in which its ownership of property or the nature
of the business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect. As used in this Agreement, “Material Adverse
Effect” means any material adverse effect on (i) the business, properties,
assets, liabilities, operations (including results thereof), condition
(financial or otherwise) or prospects of the Company or any Subsidiary,
individually or taken as a whole, (ii) the transactions contemplated hereby or
in any of the other Transaction Documents (as defined below) or (iii) the
authority or ability of the Company or any of its Subsidiaries to perform any of
their respective obligations under any of the Transaction Documents.  Since the
date of the May Securities Purchase Agreement, the Company has not formed or
acquired any Subsidiaries.  “Subsidiaries” means any Person in which the
Company, directly or indirectly, (I) owns any of the outstanding capital stock
or holds any equity or similar interest of such Person or (II) controls or
operates all or any part of the business, operations or administration of such
Person, and each of the foregoing is individually referred to herein as a
“Subsidiary.”  Each of Digital Domain Productions (Sydney) Pty Ltd., Digital
Domain Media Group (Middle East) FZ LLC and Digital Domain Emirates LLC are
wholly-owned Subsidiaries of the Company and each has no or nominal assets,
liabilities or business (the “Inactive Subsidiaries”).

 

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(ii)                                  Authorization; Enforcement; Validity. The
Company and its Subsidiaries have the requisite power and authority to enter
into and perform their obligations under this Agreement. The execution and
delivery of this Agreement by the Company and its Subsidiaries, and the
consummation by the Company and its Subsidiaries of the transactions
contemplated hereby has, to the extent required by applicable law or the charter
documents of such Person, been duly authorized by the Company’s board of
directors, each Subsidiary’s board of directors or other governing body and no
further filing, consent or authorization is required by the Company, its
Subsidiaries, their board of directors or their shareholders or other governing
body. This Agreement has been duly executed and delivered by the Company and
each of its Subsidiaries and constitutes the legal, valid and binding
obligations of the Company and it Subsidiaries, enforceable against the Company
and its Subsidiaries in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies and except as rights to indemnification and to contribution
may be limited by federal or state securities law. “Transaction Documents”
means, as used in this Section 6(b), collectively, this Agreement, the
May Securities Purchase Agreement, the Notes, the Warrants, the Security
Documents, the Guarantees, the Subordination Agreement, the Registration Rights
Agreement, the Voting Agreements, the June Securities Purchase Agreement and the
other June Transaction Documents, the Irrevocable Transfer Agent Instructions
and each of the other agreements and instruments entered into or delivered by
any of the parties hereto in connection with the transactions contemplated
hereby and thereby, as may be amended from time to time.

 

(iii)                               No Conflicts. The execution, delivery and
performance of this Agreement by the Company and each of its Subsidiaries and
the consummation by the Company and its Subsidiaries of the transactions
contemplated hereby will not (I) result in a violation of the Articles of
Incorporation or other organizational documents of the Company or any of its
Subsidiaries, any capital stock of the Company or any of its Subsidiaries or
Bylaws of the Company or any of its Subsidiaries, (II) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or
(III) result in a violation of any law, rule, regulation, order, judgment or
decree (including foreign, federal and state securities laws and regulations and
the rules and regulations of The New York Stock Exchange (the “Principal
Market”) and including all applicable federal laws, rules and regulations)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected except, in
the case of clause (II) or (III) above, to the extent that such violations could
not reasonably be expected to have a Material Adverse Effect.

 

(iv)                              Consents.  Neither the Company nor any
Subsidiary is required to obtain any consent from, authorization or order of, or
make any filing or registration with any Governmental Entity (as defined below)
or any regulatory or self-regulatory agency or any other Person in order for it
to execute, deliver or perform any of its respective

 

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obligations under or contemplated hereby.  All consents, authorizations, orders,
filings and registrations which the Company or any Subsidiary is required to
obtain pursuant to the preceding sentence have been obtained or effected on or
prior to the date hereof (or in the case of filings, will be made timely after
the date hereof), and neither the Company nor any of its Subsidiaries are aware
of any facts or circumstances which might prevent the Company or any of its
Subsidiaries from obtaining or effecting any of the registrations, applications
or filings contemplated hereby. The Company is not in violation of the
requirements of the Principal Market and has no knowledge of any facts or
circumstances which could reasonably lead to delisting or suspension of the
Common Stock in the foreseeable future.  “Governmental Entity” means any nation,
state, county, city, town, village, district, or other political jurisdiction of
any nature, federal, state, local, municipal, foreign, or other government,
governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court or
other tribunal), multi-national organization or body; or body exercising, or
entitled to exercise, any administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of any nature.

 

(v)                                 SEC Documents; Financial Statements. During
the time the Company has been a reporting Company under the 1934 Act, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements, notes and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the “SEC Documents”) (other than as set forth on
Schedule 3(k) to the May Securities Purchase Agreement). As of their respective
dates, the SEC Documents complied as to form in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents (excluding for this purpose the exhibits thereto), at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as in effect as
of the time of filing. Such financial statements have been prepared in
accordance with U.S. generally accepted accounting principles, consistently
applied, during the periods involved (except (I) as may be otherwise indicated
in such financial statements or the notes thereto, or (II) in the case of
unaudited interim statements, to the extent they may exclude footnotes or may be
condensed or summary statements) and fairly present in all material respects the
financial position of the Company and its Subsidiaries as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which will not be material, either individually or in the
aggregate). No other information provided by or on behalf of the Company to any
of the May Buyers or the June Buyers which is not included in the SEC Documents
contains any untrue statement of a material fact or omits to state any material

 

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fact necessary in order to make the statements therein not misleading, in the
light of the circumstance under which they are or were made.

 

(vi)                              Absence of Certain Changes. Since the date of
the Company’s most recent audited financial statements contained in a Form 10-K,
there has been no material adverse change and no material adverse development in
the business, assets, liabilities, properties, operations (including results
thereof), condition (financial or otherwise) or prospects of the Company or any
of its Subsidiaries that would reasonably be expected to result in a material
adverse change. Since the date of the Company’s most recent audited financial
statements contained in a Form 10-K, neither the Company nor any of its
Subsidiaries has (I) declared or paid any dividends, (II) sold any assets,
individually or in the aggregate, outside of the ordinary course of business or
(III) made any material capital expenditures, individually or in the aggregate.
Neither the Company nor any of its Subsidiaries has taken any steps to seek
protection pursuant to any law or statute relating to bankruptcy, insolvency,
reorganization, receivership, liquidation or winding up, nor does the Company or
any Subsidiary have any knowledge or reason to believe that any of their
respective creditors intend to initiate involuntary bankruptcy proceedings or
any actual knowledge of any fact which would reasonably lead a creditor to do
so. The Company and its Subsidiaries, individually and on a consolidated basis,
are not as of the date hereof, and after giving effect to the transactions
contemplated hereby, will not be Insolvent (as defined below). For purposes of
this Section 6(b)(vi), “Insolvent” means, (I) with respect to the Company and
its Subsidiaries, on a consolidated basis, (A) the present fair saleable value
of the Company’s and its Subsidiaries’ assets is less than the amount required
to pay the Company’s and its Subsidiaries’ total Indebtedness (as defined
below), (B) the Company and its Subsidiaries are unable to pay their debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (C) the Company and its Subsidiaries
intend to incur or believe that they will incur debts that would be beyond their
ability to pay as such debts mature; and (II) with respect to the Company and
each Subsidiary, individually, (A) the present fair saleable value of the
Company’s or such Subsidiary’s (as the case may be) assets is less than the
amount required to pay its respective total Indebtedness, (B) the Company or
such Subsidiary (as the case may be) is unable to pay its respective debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (C) the Company or such Subsidiary
(as the case may be) intends to incur or believes that it will incur debts that
would be beyond its respective ability to pay as such debts mature. Neither the
Company nor any of its Subsidiaries has engaged in any business or in any
transaction, and is not about to engage in any business or in any transaction,
for which the Company’s or such Subsidiary’s remaining assets constitute
unreasonably small capital.

 

(vii)                           No Undisclosed Events, Liabilities, Developments
or Circumstances. No event, liability, development or circumstance has occurred
or exists or, to the Company’s knowledge, is reasonably expected to exist or
occur with respect to the Company, any of its Subsidiaries or any of their
respective businesses, properties, liabilities, prospects, operations (including
results thereof) or condition (financial or otherwise), that (I) would be
required to be disclosed by the Company under applicable securities laws on a
registration statement on Form S-1 filed with the SEC relating to an

 

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issuance and sale by the Company of its Common Stock and which has not been
publicly announced, (II) could have a material adverse effect on the
transactions contemplated hereby or (III) could have a Material Adverse Effect.

 

(viii)                        Off Balance Sheet Arrangements. There is no
transaction, arrangement, or other relationship between the Company or any of
its Subsidiaries and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its 1934 Act filings and is not so
disclosed or that otherwise could be reasonably likely to have a Material
Adverse Effect.

 

(ix)                              Disclosure.  The Company confirms that neither
it nor any other Person acting on its behalf has provided any of the May Buyers
or the June Buyers or their agents or counsel with any information that
constitutes or could reasonably be expected to constitute material, non-public
information concerning the Company or any of its Subsidiaries, other than the
existence of the transactions contemplated by this Agreement, the other
Transaction Documents, and the June Transaction Documents.  The Company
understands and confirms that each of the May Buyers and the June Buyers will
rely on the foregoing representations in effecting transactions in securities of
the Company.  All disclosure provided to the May Buyers and the June Buyers
regarding the Company and its Subsidiaries, their businesses and the
transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries is true and
correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading. 
All of the written information furnished after the date hereof by or on behalf
of the Company or any of its Subsidiaries to the Investor pursuant to or in
connection with this Agreement, the other Transaction Documents and the
June Transaction Documents, taken as a whole, will be true and correct in all
material respects as of the date on which such information is so provided and
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading.  Each
press release issued by the Company or any of its Subsidiaries during the twelve
(12) months preceding the date of this Agreement did not at the time of release
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, liabilities, prospects, operations (including results thereof) or
conditions (financial or otherwise), which, under applicable law, rule or
regulation, requires public disclosure at or before the date hereof or
announcement by the Company but which has not been so publicly disclosed.  Any
financial projections and forecasts that have been prepared by or on behalf of
the Company or any of its Subsidiaries and made available to the Investor have
been prepared in good faith based upon reasonable assumptions and represented,
at the time each such financial projection or forecast was delivered to the
Investor, the Company’s best estimate of future financial performance (it being
recognized that such financial projections or forecasts are not to be viewed as
facts and that the actual results during the period or periods covered by any

 

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such financial projections or forecasts may differ from the projected or
forecasted results).

 

7.                                      Remedies.  The Investor and each holder
of the securities issued to the Investor by the Company pursuant to the
May Securities Purchase Agreement and/or the June Securities Purchase Agreement
shall have all rights and remedies set forth in the Transaction Documents and
the June Transaction Documents and all rights and remedies which such holders
have been granted at any time under any other agreement or contract and all of
the rights which such holders have under any law.  Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.  Furthermore, the Company recognizes that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under this Agreement, any remedy at law may prove to be inadequate
relief to the Investor.  The Company therefore agrees that the Investor shall be
entitled to seek temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages and without posting a bond or
other security.

 

8.                                      Independent Nature of Investor’s
Obligations and Rights.  The obligations of the Investor under this Agreement,
any other Transaction Document or any June Transaction Document are several and
not joint with the obligations of any other May Buyer or June Buyer, and the
Investor shall not be responsible in any way for the performance of the
obligations of any other such Person under any Transaction Document or
June Transaction Document or Other Agreement.  Nothing contained herein or in
any Other Agreement or any other Transaction Document or June Transaction
Document, and no action taken by the Investor pursuant hereto, shall be deemed
to constitute the Investor and other such Persons as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investor and such other Persons are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement, any Other Agreement or any other Transaction
Document or June Transaction Document and the Company acknowledges that the
May Buyers and the June Buyers are not acting in concert or as a group with
respect to such obligations or the transactions contemplated by this Agreement,
any Other Agreement and any other Transaction Document or June Transaction
Document.  The Company and the Investor confirm that the Investor has
independently participated in the negotiation of the transactions contemplated
hereby with the advice of its own counsel and advisors.  The Investor shall be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement, any Other Agreement or out
of any other Transaction Documents or June Transaction Documents, and it shall
not be necessary for any other May Buyer or June Buyer to be joined as an
additional party in any proceeding for such purpose.

 

9.                                      No Third Party Beneficiaries.  This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.

 

10.                               Counterparts.  This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall

 

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constitute but one and the same instrument.  In the event that any signature is
delivered by facsimile transmission or by an e-mail which contains a portable
document format (.pdf) file of an executed signature page, such signature
page shall create a valid and binding obligation of the party executing (or on
whose behalf such signature is executed) with the same force and effect as if
such signature page were an original thereof.

 

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

 

12.                               Headings.  The headings of this Agreement are
for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.

 

13.                               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).

 

14.                               Amendments.  No provision of this Agreement
may be amended other than by an instrument in writing signed by the Company and
the Investor.

 

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

 

16.                               Notice.  Whenever notice is required to be
given under this Agreement, unless otherwise provided herein, such notice shall
be given in accordance with the terms of the May Securities Purchase Agreement,
if the Investor is a May Buyer, and in accordance with the terms of the
June Securities Purchase Agreement, if the Investor is a June Buyer.

 

17.                               Successors and Assigns.  This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns in accordance with the terms of the May Securities
Purchase Agreement, if the Investor is a May Buyer, and in accordance with the
terms of the June Securities Purchase Agreement, if the Investor is a
June Buyer.

 

10

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

 

19.  Most Favored Nation.  The Company hereby represents and warrants as of the
date hereof and covenants and agrees from and after the date hereof that none of
the terms offered to any Person with respect to any consent, release, amendment,
settlement or waiver relating to the terms, conditions and transactions
contemplated hereby, is or will be more favorable to such Person than those of
the Investor and this Agreement (each a “Settlement Document”).  If, and
whenever on or after the date hereof, the Company enters into a Settlement
Document, then (i) the Company shall provide notice thereof to the Investor
immediately following the occurrence thereof and (ii) the terms and conditions
of this Agreement and the Securities (other than any limitations on conversion
or exercise set forth therein) shall be, without any further action by the
Investor or the Company, automatically amended and modified in an economically
and legally equivalent manner such that the Investor shall receive the benefit
of the more favorable terms and/or conditions (as the case may be), provided
that upon written notice to the Company at any time the Investor may elect not
to accept the benefit of any such amended or modified term or condition, in
which event the term or condition contained in this Agreement or the Securities
(as the case may be) shall apply to the Investor as it was in effect immediately
prior to such amendment or modification as if such amendment or modification
never occurred with respect to the Investor.  The provisions of this Section 19
shall apply similarly and equally to each Settlement Document.

 

[Signature Pages Follow]

 

11

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IN WITNESS WHEREOF, this Third Amendment Agreement has been executed as of the
date first written above.

 

 

THE INVESTOR:

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, this Third Amendment Agreement has been executed as of the
date first written above.

 

 

THE COMPANY:

 

 

 

DIGITAL DOMAIN MEDIA GROUP, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

--------------------------------------------------------------------------------

 

 

ACKNOWLEDGED AND ACCEPTED BY:

 

 

 

 

 

D2 SOFTWARE, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

DDH LAND HOLDINGS, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

DDH LAND HOLDINGS II, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

DIGITAL DOMAIN

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

--------------------------------------------------------------------------------

 

 

ACKNOWLEDGED AND ACCEPTED BY:

 

 

 

 

 

DIGITAL DOMAIN INSTITUTE, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

DIGITAL DOMAIN INTERNATIONAL, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

DIGITAL DOMAIN PRODUCTIONS, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

DIGITAL DOMAIN STEREO GROUP, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

--------------------------------------------------------------------------------

 

 

ACKNOWLEDGED AND ACCEPTED BY:

 

 

 

 

 

DIGITAL DOMAIN TACTICAL, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

MOTHERSHIP MEDIA, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

TRADITION STUDIOS, INC.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

DIGITAL DOMAIN PRODUCTIONS (VANCOUVER) LTD.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

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