Exhibit 10.14

 

This instrument and the rights and obligations evidenced hereby and any security
interests or other liens securing such obligations are subordinate in the manner
and to the extent set forth in that certain Subordination And Intercreditor
Agreement dated as of May 7, 2012 (as amended, restated or otherwise modified
from time to time, the “Subordination Agreement”) among HUDSON BAY MASTER FUND
LTD., as First Lien Collateral Agent (the “First Lien Collateral Agent”),
COMVEST CAPITAL II, L.P. (the “Subordinated Creditor”), and DIGITAL DOMAIN MEDIA
GROUP, INC. (the “Company”) to the indebtedness (including interest) owed by the
Company, and the security interests and liens securing such indebtedness,
pursuant to that certain Securities Purchase Agreement dated as of May 6, 2012
among the Company, First Lien Collateral Agent and the buyers from time to time
party thereto, that certain Security And Pledge Agreement dated as of May 7,
2012 by and among the Company, First Lien Collateral Agent, and the grantors
party thereto, that certain Canadian Security And Pledge Agreement dated as of
May 7, 2012 by and among the Company, First Lien Collateral Agent, and the
grantors party thereto, and various related documents, and to indebtedness
refinancing the indebtedness under such documents as contemplated by the
Subordination Agreement.  Each holder of this instrument, by its acceptance
hereof, irrevocably agrees to be bound by the provisions of the Subordination
Agreement.

 

GUARANTY

 

GUARANTY, dated as of May 7, 2012, made by each of the undersigned (each a
“Guarantor”, and collectively, the “Guarantors”), in favor of Comvest Capital
II, L.P., a  Delaware limited partnership, as lender under the Debt Exchange
Agreement (as defined below) (the “Lender”).

 

W I T N E S S E T H :

 

WHEREAS, Digital Domain Media Group, Inc., a Florida corporation (the “Company”)
and the Lender are parties to the Debt Exchange Agreement of even date herewith
(as amended, restated, replaced or otherwise modified from time to time, the
“Debt Exchange Agreement”), pursuant to which the Company and the Lender have
agreed, among other things, that the Remaining Outstanding Principal Balance (as
defined in the Debt Exchange Agremeent) will be exchanged into a a new secured
convertible note of the Company (as amended, restated, replaced or otherwise
modified from time to time, the “Note”);

 

WHEREAS, the Debt Exchange Agreement requires that the Guarantors execute and
deliver to the Lender, (i) a guaranty guaranteeing all of the obligations of the
Company under the Debt Exchange Agreement, the Note and the “Transaction
Documents” (as defined in the Debt Exchange Agreement); (ii) that certain
Security and Pledge Agreement of even date herewith granting the Lender a lien
on all of the personal property of the Company and the other grantors party
thereto (collectively, the “Non-Canadian Grantors”) and pledging certain equity
interests (the “Security Agreement”); and (iii) that certain Canadian Security
and Pledge Agreement of even date herewith (the “Canadian Security Agreement”)
granting Lender a lien

 

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on all of the personal property of Digital Domain Productions (Vancouver) Ltd.
(the “Canadian Subsidiary” and, collectively with the Company and the
Non-Canadian Grantors, the “Grantors”).

 

WHEREAS, each Guarantor has determined that the execution, delivery and
performance of this Guaranty directly benefits, and is in the best interest of,
such Guarantor;

 

NOW, THEREFORE, in consideration of the premises and the agreements herein and
in order to induce the Lender to perform under the Debt Exchange Agreement, each
Guarantor hereby agrees with the Lender as follows:

 

SECTION 1.     Definitions.  Reference is hereby made to the Debt Exchange
Agreement and the Note for a statement of the terms thereof.  All terms used in
this Guaranty, which are defined in the Debt Exchange Agreement or the Note and
not otherwise defined herein, shall have the same meanings herein as set forth
therein.

 

SECTION 2.     Guaranty.  The Guarantors, jointly and severally, unconditionally
and irrevocably guarantee to the Lender the prompt payment (whether at stated
maturity, by acceleration, or otherwise) and performance of all of Obligations,
as that term is defined in the Security Agreement (or solely with respect to the
guaranty of the Canadian Subsidiary, as that term is defined in the Canadian
Security Agreement), including, without limitation (i) all principal of and
interest on the Note (including, without limitation, all interest that accrues
after the commencement of any insolvency proceeding of any Grantor, whether or
not the payment of such interest is unenforceable or is not allowable due to the
existence of such insolvency proceeding), and (ii) all fees, interest, premiums,
penalties, contract causes of action, costs, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any of the Transaction Documents (the “Guaranteed Obligations”), and
agrees to pay any and all expenses (including reasonable counsel fees and
expenses) incurred by the Lender in enforcing any rights under this Guaranty. 
Without limiting the generality of the foregoing, each Guarantor’s liability
hereunder shall extend to all amounts that constitute part of the Guaranteed
Obligations and would be owed to the Lender by any party to the Debt Exchange
Agreement, the Note, or the other Transaction Documents (the “Transaction
Parties”) but for the fact that they are unenforceable or not allowable due to
the existence of an Insolvency Proceeding involving the Company or any
Guarantors.

 

Each Guarantor, and by its acceptance of this Guaranty, and the Lender, hereby
confirms that it is the intention of all such Persons that this Guaranty and the
Guaranteed Obligations of each Guarantor hereunder not constitute a fraudulent
transfer or conveyance for purposes of bankruptcy law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign,
federal, provincial or state law to the extent applicable to this Guaranty and
the Guaranteed Obligations of each Guarantor hereunder.  To effectuate the
foregoing intention, the Lender and the Guarantors hereby irrevocably agree that
the Guaranteed Obligations of each Guarantor under this Guaranty at any time
shall be limited to the maximum amount as will result in the Guaranteed
Obligations of such Guarantor under this Guaranty not constituting a fraudulent
transfer or conveyance.

 

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SECTION 3.     Guaranty Absolute; Continuing Guaranty; Assignments.

 

(a)                                  The Guarantors, jointly and severally,
guaranty that the Guaranteed Obligations will be paid strictly in accordance
with the terms of the Transaction Documents, regardless of any law, regulation
or order now or hereafter in effect in any jurisdiction affecting any of such
terms or the rights of the Lender with respect thereto.  The obligations of each
Guarantor under this Guaranty are independent of the Guaranteed Obligations, and
a separate action or actions may be brought and prosecuted against any Guarantor
to enforce such obligations, irrespective of whether any action is brought
against any Transaction Party or whether any Transaction Party is joined in any
such action or actions.  The liability of any Guarantor under this Guaranty
shall be irrevocable, absolute and unconditional irrespective of, and each
Guarantor hereby irrevocably waives, to the extent permitted by law, any
defenses it may now or hereafter have in any way relating to, any or all of the
following:

 

(i)                                   any lack of validity or enforceability of
any Transaction Document or any agreement or instrument relating thereto;

 

(ii)                                any change in the time, manner or place of
payment of, or in any other term of, all or any of the Guaranteed Obligations,
or any other amendment or waiver of or any consent to departure from any
Transaction Document, including, without limitation, any increase in the
Guaranteed Obligations resulting from the extension of additional credit to any
Transaction Party or otherwise;

 

(iii)                             any taking, exchange, release or
non-perfection of any Collateral (as defined in the Security Agreement, or,
solely with respect to the “Collateral” of the Canadian Subsidiary, as defined
in the Canadian Security Agreement), or any taking, release or amendment or
waiver of or consent to departure from any other guaranty, for all or any of the
Guaranteed Obligations;

 

(iv)                             any change, restructuring or termination of the
corporate, limited liability company or partnership structure or existence of
any Transaction Party, including as a result of a merger or amalgamation;

 

(v)                                 any manner of application of Collateral or
any other collateral, or proceeds thereof, to all or any of the Guaranteed
Obligations, or any manner of sale or other disposition of any Collateral or any
other collateral for all or any of the Guaranteed Obligations or any other
Obligations of any Transaction Party under the Transaction Documents or any
other assets of any Transaction Party or any of its Subsidiaries;

 

(vi)                             any failure of the Lender to disclose to any
Transaction Party any information relating to the business, condition (financial
or otherwise), operations, performance, properties or prospects of any other
Transaction Party now or hereafter known to the Lender (each Guarantor waiving
any duty on the part of the Lender to disclose such information); or

 

(vii)                           any other circumstance (including any statute of
limitations) or any existence of or reliance on any representation by the Lender
that might otherwise constitute a defense available to, or a discharge of, any
Transaction Party or any other guarantor or surety.

 

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This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must otherwise be returned by the Lender or any other Person upon the
insolvency, bankruptcy or reorganization of any Transaction Party or otherwise,
all as though such payment had not been made.

 

(b)                                 This Guaranty is a continuing guaranty and
shall (i) remain in full force and effect until the indefeasible cash payment in
full of the Guaranteed Obligations (other than inchoate indemnity obligations)
and/or complete conversion of all of the Company’s obligations under the Note to
equity securities of the Company and payment of all other amounts payable under
this Guaranty (other than inchoate indemnity obligations) and shall not
terminate for any reason prior to the respective Maturity Date of the Note
(other than payment in full of the Note and/or complete conversion of all of the
Company’s obligations under the Note to equity securities of the Company) and
(ii) be binding upon each Guarantor and its respective successors and assigns. 
This Guaranty shall inure to the benefit of and be enforceable by the Lender and
its respective successors, and permitted pledgees, transferees and assigns. 
Without limiting the generality of the foregoing sentence, the Lender may
pledge, assign or otherwise transfer all or any portion of its rights and
obligations under and subject to the terms of any Transaction Document to any
other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to the Lender herein or otherwise, in each
case as provided in the Debt Exchange Agreement or such Transaction Document. 
Notwithstanding the foregoing and for the avoidance of doubt, this Guaranty will
expire and each Guarantor will be released from its obligation hereunder upon
(i) indefeasible and final payment in full in cash of the Guaranteed Obligations
or (ii) complete conversion of all of the Guaranteed Obligations pursuant to the
terms of the Note to equity securities of the Company.

 

SECTION 4.     Waivers.  To the extent permitted by applicable law, each
Guarantor hereby waives promptness, diligence, notice of acceptance and any
other notice with respect to any of the Guaranteed Obligations and this Guaranty
and any requirement that the Lender exhaust any right or take any action against
any Transaction Party or any other Person or any Collateral.  Each Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits.  The Guarantors
hereby waive any right to revoke this Guaranty, and acknowledge that this
Guaranty is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.  To the extent permitted by applicable
law, each Guarantor hereby unconditionally and irrevocably waives (i) any
defense arising by reason of any claim or defense based upon an election of
remedies by the Lender that in any manner impairs, reduces, releases or
otherwise adversely affects the subrogation, reimbursement, exoneration,
contribution or indemnification rights of such Guarantor or other rights of such
Guarantor to proceed against any of the other Transaction Parties, any other
guarantor or any other Person or any Collateral and (ii) any defense based on
any right of set-off or counterclaim against or in respect of the Guaranteed
Obligations of such Guarantor hereunder.  Each Guarantor hereby unconditionally
and irrevocably waives any duty on the part of the Lender to disclose to such
Guarantor any matter, fact or thing relating to the business, condition
(financial or otherwise), operations, performance, properties or prospects of
any other Transaction Party or any of its Subsidiaries now or hereafter known by
the Lender.

 

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SECTION 5.     Subrogation.  No Guarantor may exercise any rights that it may
now or hereafter acquire against any Transaction Party or any other guarantor
that arise from the existence, payment, performance or enforcement of any
Guarantor’s obligations under this Guaranty, including, without limitation, any
right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the
Lender against any Transaction Party or any other guarantor or any Collateral,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, including, without limitation, the right to take or
receive from any Transaction Party or any other guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security solely on account of such claim, remedy or right, unless and
until all of the Guaranteed Obligations (other than inchoate indemnity
obligations) and all other amounts payable under this Guaranty (other than
inchoate indemnity obligations) shall have indefeasibly been paid in full in
cash.  If any amount shall be paid to a Guarantor in violation of the
immediately preceding sentence at any time prior to the later of the
indefeasible payment in full in cash of the Guaranteed Obligations and all other
amounts payable under this Guaranty, such amount shall be held in trust for the
benefit of the Lender and shall forthwith be paid to the Lender to be credited
and applied to the Guaranteed Obligations and all other amounts payable under
this Guaranty, whether matured or unmatured, in accordance with the terms of the
Transaction Document, or to be held as Collateral for any Guaranteed Obligations
or other amounts payable under this Guaranty thereafter arising.  If (a) any
Guarantor shall make payment to the Lender of all or any part of the Guaranteed
Obligations, and (b) all of the Guaranteed Obligations (other than inchoate
indemnity obligations) and all other amounts payable under this Guaranty (other
than inchoate indemnity obligations) shall indefeasibly be paid in full in cash,
the Lender will, at such Guarantor’s request and expense, execute and deliver to
such Guarantor appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation to
such Guarantor of an interest in the Guaranteed Obligations resulting from such
payment by such Guarantor.

 

SECTION 6.     Representations, Warranties and Covenants.

 

(a)                                  Each Guarantor hereby represents and
warrants as of the date first written above as follows:

 

(i)                                     The Guarantor (A) is a corporation,
limited liability company or limited partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization as set forth on the signature pages hereto, (B) has all requisite
corporate, limited liability company or limited partnership power and authority
to conduct its business as now conducted and as presently contemplated and to
execute and deliver this Guaranty and each other Transaction Document to which
the Guarantor is a party, and to consummate the transactions contemplated hereby
and thereby and (C) is duly qualified to do business and is in good standing in
each jurisdiction in which the character of the properties owned or leased by it
or in which the transaction of its business makes such qualification necessary
except where the failure to be so qualified would not result in a Material
Adverse Effect.

 

(ii)                                  The execution, delivery and performance by
the Guarantor of this Guaranty and each other Transaction Document to which the
Guarantor is a party (A) have been

 

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duly authorized by all necessary corporate, limited liability company or limited
partnership action, (B) do not and will not contravene its charter, articles or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, or any applicable law or
any contractual restriction binding on the Guarantor or its properties do not
and will not result in or require the creation of any lien (other than pursuant
to any Transaction Document) upon or with respect to any of its properties, and
(C) to Guarantor’s knowledge, do not and will not result in any default,
noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of
any material permit, license, authorization or approval applicable to it or its
operations or any of its properties.

 

(iii)                             No authorization or approval or other action
by, and no notice to or filing with, any governmental authority is required in
connection with the due execution, delivery and performance by the Guarantor of
this Guaranty or any of the other Transaction Documents to which the Guarantor
is a party (other than expressly provided for in any of the Transaction
Documents).

 

(iv)                             Each of this Guaranty and the other Transaction
Documents to which the Guarantor is or will be a party, when delivered, will be,
a legal, valid and binding obligation of the Guarantor, enforceable against the
Guarantor in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
suretyship or other similar laws and equitable principles (regardless of whether
enforcement is sought in equity or at law).

 

(v)                                 There is no pending or, to the best
knowledge of the Guarantor, threatened action, suit or proceeding against the
Guarantor or to which any of the properties of the Guarantor is subject, before
any court or other governmental authority or any arbitrator that (A) if
adversely determined, could reasonably be expected to have a Material Adverse
Effect or (B) relates to this Guaranty or any of the other Transaction Documents
to which the Guarantor is a party or any transaction contemplated hereby or
thereby.

 

(vi)                              The Guarantor (A) has read and understands the
terms and conditions of the Debt Exchange Agreement and the other Transaction
Documents, and (B) now has and will continue to have independent means of
obtaining information concerning the affairs, financial condition and business
of the Company and the other Transaction Parties, and has no need of, or right
to obtain from the Lender, any credit or other information concerning the
affairs, financial condition or business of the Company or the other Transaction
Parties that may come under the control of the Lender.

 

(vii)                           There are no conditions precedent to the
effectiveness of this Guaranty that have not been satisfied or waived.

 

(b)                                 The Guarantor covenants and agrees that
until indefeasible full and final payment in cash of the Guaranteed Obligations
and/or complete conversion of all of the Company’s obligations under the Note to
equity securities of the Company in accordance with the terms of the Note, it
will comply with each of the covenants (except to the extent applicable only to
a public company) which are set forth in Section 4 of the Debt Exchange
Agreement as if the Guarantor were a party thereto.

 

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SECTION 7.     Right of Set-off.  Upon the occurrence and during the continuance
of any Event of Default, the Lender may, and is hereby authorized to, at any
time and from time to time, without notice to the Guarantors (any such notice
being expressly waived by each Guarantor) and to the fullest extent permitted by
law, set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Lender to or for the credit or the account of any Guarantor against any
and all obligations of the Guarantors now or hereafter existing under this
Guaranty or any other Transaction Document, irrespective of whether or not the
Lender shall have made any demand under this Guaranty or any other Transaction
Document and although such obligations may be contingent or unmatured.  The
Lender agrees to notify the relevant Guarantor promptly after any such set-off
and application made by the Lender, provided that the failure to give such
notice shall not affect the validity of such set-off and application.  The
rights of the Lender under this Section 7 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Lender may have under this Guaranty or any other Transaction Document in law or
otherwise.

 

SECTION 8.     Notices, Etc.  All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to any Guarantor, to it at its address set forth on the signature page hereto,
or if to the Lender, to it at its address set forth in the Debt Exchange
Agreement; or as to any Person at such other address as shall be designated by
such Person in a written notice to such other Person complying as to delivery
with the terms of this Section 8.  All such notices and other communications
shall be effective (i) if mailed (by certified mail, postage prepaid and return
receipt requested), when received or three Business Days after deposited in the
mails, whichever occurs first; (ii) if telecopied, when transmitted and
confirmation is received, provided same is on a Business Day and, if not, on the
next Business Day; or (iii) if delivered by hand, upon delivery, provided same
is on a Business Day and, if not, on the next Business Day.

 

SECTION 9.     CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE.

 

(a)                                  ANY LEGAL ACTION, SUIT OR PROCEEDING WITH
RESPECT TO THIS GUARANTY OR ANY DOCUMENT RELATED HERETO SHALL BE BROUGHT
EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR
IN THE UNITED STATES DISTRICT COURT  FOR THE SOUTHERN DISTRICT OF NEW YORK, BY
EXECUTION AND DELIVERY OF THIS GUARANTY, EACH GUARANTOR HEREBY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFOREMENTIONED COURTS.  EACH GUARANTOR HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, OR BASED ON UPON 28 U.S.C. §
1404, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING AND ADJUDICATION OF ANY
SUCH ACTION, SUIT OR PROCEEDING IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS
TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY
THE COURT.

 

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(b)                                 EACH GUARANTOR IRREVOCABLY CONSENTS TO 
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO ITS ADDRESS FOR NOTICES AS SET FORTH ON THE SIGNATURE
PAGE HERETO, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. 
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE  PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW.  TO THE EXTENT THAT ANY GUARANTOR HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, EACH GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF
ITS OBLIGATIONS UNDER THIS GUARANTY AND THE OTHER TRANSACTION DOCUMENTS.

 

SECTION 10.     WAIVER OF JURY TRIAL, ETC.  EACH GUARANTOR HEREBY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING
ANY RIGHTS UNDER THIS GUARANTY OR THE OTHER TRANSACTION DOCUMENTS, OR UNDER ANY
AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR
WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR
ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS
GUARANTY OR THE OTHER TRANSACTION DOCUMENTS, AND AGREES THAT ANY SUCH ACTION,
PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. 
EACH GUARANTOR CERTIFIES THAT NO OFFICER, REPRESENTATIVE OR ATTORNEY OF THE
LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE
EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING
WAIVERS.  EACH GUARANTOR HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT.

 

SECTION 11.     Taxes.

 

(a)                                  All payments made by any Guarantor
hereunder or under any other Transaction Document shall be made in accordance
with the terms of the respective Transaction Document and shall be made without
set-off, counterclaim, deduction or other defense.  All such payments shall be
made free and clear of and without deduction for any present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding taxes imposed on the net income of the Lender by the
jurisdiction in which the Lender is organized or where it has its principal
lending office (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities, collectively or individually, “Taxes”). 
If any Guarantor shall be required to deduct or to withhold any Taxes from or in
respect of any amount payable hereunder or under any other Transaction Document:

 

(i)                                     the amount so payable shall be increased
to the extent necessary so that after making all required deductions and
withholdings (including Taxes on amounts payable

 

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to the Lender pursuant to this sentence) the Lender receives an amount equal to
the sum it would have received had no such deduction or withholding been made,

 

(ii)                                such Guarantor shall make such deduction or
withholding,

 

(iii)                             such Guarantor shall pay the full amount
deducted or withheld to the relevant taxation authority in accordance with
applicable law, and

 

(iv)                              as promptly as possible thereafter, such
Guarantor shall send the Lender an official receipt (or, if an official receipt
is not available, such other documentation as shall be reasonably satisfactory
to the Lender, as the case may be) showing payment.  In addition, each Guarantor
agrees to pay any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or from the execution, delivery, registration or enforcement of,
or otherwise with respect to, this Agreement or any other Transaction Document
(collectively, “Other Taxes”).

 

(b)                                 Each Guarantor hereby indemnifies and agrees
to hold the Lender harmless from and against Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 11) paid by the Lender as a result of any
payment made hereunder or from the execution, delivery, registration or
enforcement of, or otherwise with respect to, this Agreement or any other
Transaction Document, and any liability (including penalties, interest and
expenses for nonpayment, late payment or otherwise) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted.  This indemnification shall be paid within 30 days from the
date on which the Lender makes written demand therefor, which demand shall
identify the nature and amount of such Taxes or Other Taxes.

 

(c)                                  If any Guarantor fails to perform any of
its obligations under this Section 11, such Guarantor shall indemnify the Lender
for any taxes, interest or penalties that may become payable as a result of any
such failure.  The obligations of the Guarantors under this Section 11 shall
survive the termination of this Guaranty and the payment of the Obligations and
all other amounts payable hereunder.

 

SECTION 12.     Indemnification.

 

(a)                                  Without limitation on any other Obligations
of any Guarantor or remedies of the Lender under this Guaranty, except to the
extent resulting from such Indemnified Party’s gross negligence or willful
misconduct, as determined by a final judgment of a court of competent
jurisdiction, each Guarantor shall, to the fullest extent permitted by law,
indemnify, defend and save and hold harmless the Lender and each of its
affiliates and their respective officers, directors, employees, agents and
advisors (each, an “Indemnified Party”) from and against, and shall pay on
demand, any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party in
connection with or as a result of any failure of any Guaranteed Obligations to
be the legal, valid and binding obligations of any Transaction Party enforceable
against such Transaction Party in accordance with their terms.

 

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(b)                                 Each Guarantor hereby also agrees that none
of the Indemnified Parties shall have any liability (whether direct or indirect,
in contract, tort or otherwise) to any of the Guarantors or any of their
respective affiliates or any of their respective officers, directors, employees,
agents and advisors, and each Guarantor hereby agrees not to assert any claim
against any Indemnified Party on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
facilities, the actual or proposed use of the proceeds of the advances, the
Transaction Documents or any of the transactions contemplated by the Transaction
Documents.

 

SECTION 13.     Subordination.  Each Guarantor hereby subordinates any and all
debts, liabilities and other Obligations owed to such Guarantor by each other
Transaction Party (the “Subordinated Obligations”) to the Guaranteed Obligations
to the extent and in the manner hereinafter set forth in this Section 13:

 

(a)                                  Prohibited Payments, Etc.  Except during
the occurrence and continuance of a Default, each Guarantor may receive
regularly scheduled payments from any other Transaction Party on account of the
Subordinated Obligations.  After the occurrence and during the continuance of
any Default, however, no Guarantor shall demand, accept or take any action to
collect any payment on account of the Subordinated Obligations.

 

(b)                                 Prior Payment of Guaranteed Obligations.  In
any proceeding under any bankruptcy law relating to any other Loan Party, each
Guarantor agrees that the Lender shall be entitled to receive payment in full in
cash of all Guaranteed Obligations (including all interest and expenses accruing
after the commencement of a proceeding under any bankruptcy law, whether or not
constituting an allowed claim in such proceeding (“Post Petition Interest”))
before such Guarantor receives payment of any Subordinated Obligations.

 

(c)                                  Turn-Over.  After the occurrence and during
the continuance of any Default, each Guarantor shall, if the Lender so requests,
collect, enforce and receive payments on account of the Subordinated Obligations
as trustee for the Lender and deliver such payments to the Lender on account of
the Guaranteed Obligations (including all Post Petition Interest), together with
any necessary endorsements or other instruments of transfer, but without
reducing or affecting in any manner the liability of such Guarantor under the
other provisions of this Guaranty.

 

(d)                                 Lender Authorization.  After the occurrence
and during the continuance of any Default, the Lender is authorized and
empowered (but without any obligation to so do), in its discretion, (i) in the
name of each Guarantor, to collect and enforce, and to submit claims in respect
of, Subordinated Obligations and to apply any amounts received thereon to the
Guaranteed Obligations (including any and all Post Petition Interest), and (ii)
to require each Guarantor (A) to collect and enforce, and to submit claims in
respect of, Subordinated Obligations and (B) to pay any amounts received on such
obligations to the Lender for application to the Guaranteed Obligations
(including any and all Post Petition Interest).

 

10

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SECTION 14.     Miscellaneous.

 

(a)                                  Each Guarantor will make each payment
hereunder in lawful money of the United States of America and in immediately
available funds to the Lender, at such address specified by the Lender from time
to time by notice to the Guarantors.

 

(b)                                 No amendment or waiver of any provision of
this Guaranty and no consent to any departure by any Guarantor therefrom shall
in any event be effective unless the same shall be in writing and signed by each
Guarantor and the Lender, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

 

(c)                                  No failure on the part of the Lender to
exercise, and no delay in exercising, any right hereunder or under any other
Transaction Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right hereunder or under any Transaction Document
preclude any other or further exercise thereof or the exercise of any other
right.  The rights and remedies of the Lender provided herein and in the other
Transaction Documents are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law.  The rights of the Lender under any
Transaction Document against any party thereto are not conditional or contingent
on any attempt by the Lender to exercise any of its rights under any other
Transaction Document against such party or against any other Person.

 

(d)                                 Any provision of this Guaranty that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

(e)                                  This Guaranty shall (i) be binding on each
Guarantor and its respective successors and assigns, and (ii) inure, together
with all rights and remedies of the Lender hereunder, to the benefit of the
Lender and its successors, transferees and assigns.  Without limiting the
generality of clause (ii) of the immediately preceding sentence, the Lender may
assign or otherwise transfer its rights and obligations under the Debt Exchange
Agreement or any other Transaction Document to any other Person in accordance
with the terms thereof, and such other Person shall thereupon become vested with
all of the benefits in respect thereof granted to the Lender, as the case may
be, herein or otherwise.  None of the rights or obligations of any Guarantor
hereunder may be assigned or otherwise transferred without the prior written
consent of the Lender.

 

(f)                                    This Guaranty reflects the entire
understanding of the transaction contemplated hereby and shall not be
contradicted or qualified by any other agreement, oral or written, entered into
before the date hereof.

 

(g)                                 Section headings herein are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.

 

(h)                                 THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO CONFLICT OF LAW
PRINCIPLES (EXCEPT 5-1401 OF THE NEW YORK GENERAL

 

11

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OBLIGATION LAW).  FURTHER, THE LAW OF THE STATE OF NEW YORK SHALL APPLY TO ALL
DISPUTES OR CONTROVERSIES ARISING OUT OF OR CONNECTED TO OR WITH THIS GUARANTY
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT 5-1401 OF THE NEW YORK
GENERAL OBLIGATION LAW).

 

SECTION 15.     Currency Indemnity.

 

If, for the purpose of obtaining or enforcing judgment against Guarantor in any
court in any jurisdiction, it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 15 referred to
as the “Judgment Currency”) an amount due under this Guaranty in any currency
(the “Obligation Currency”) other than the Judgment Currency, the conversion
shall be made at the rate of exchange prevailing on the business day immediately
preceding (a) the date of actual payment of the amount due, in the case of any
proceeding in the courts of courts of the jurisdiction that will give effect to
such conversion being made on such date, or (b) the date on which the judgment
is given, in the case of any proceeding in the courts of any other jurisdiction
(the applicable date as of which such conversion is made pursuant to this
Section 15 being hereinafter in this Section 155 referred to as the “Judgment
Conversion Date”).

 

If, in the case of any proceeding in the court of any jurisdiction referred to
in the preceding paragraph, there is a change in the rate of exchange prevailing
between the Judgment Conversion Date and the date of actual receipt of the
amount due in immediately available funds, the Guarantor shall pay such
additional amount (if any, but in any event not a lesser amount) as may be
necessary to ensure that the amount actually received in the Judgment Currency,
when converted at the rate of exchange prevailing on the date of payment, will
produce the amount of the Obligation Currency which could have been purchased
with the amount of’ the Judgment Currency stipulated in the judgment or judicial
order at the rate of exchange prevailing on the Judgment Conversion Date. Any
amount due from the Guarantor under this Section 13 shall be due as a separate
debt and shall not be affected by judgment being obtained for any other amounts
due under or in respect of this Guaranty.

 

 

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12

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IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed by
its respective duly authorized officer, as of the date first above written.

 

 

GUARANTORS:

 

 

 

DIGITAL DOMAIN MEDIA GROUP, INC.

 

 

 

 

 

By:

/s/  John C. Textor

 

 

Name:  John C. Textor

 

 

Title:  Chief Executive Officer

 

 

 

 

 

Address:

c/o Digital Domain Media Group, Inc.

 

 

 

10250 SW Village Parkway

 

 

 

Port St. Lucie, FL 34987

 

 

 

 

 

Facsimile:

(772) 345-8114

 

 

 

D2 SOFTWARE, INC.

 

 

 

By:

/s/  John C. Textor

 

 

Name:  John C. Textor

 

 

Title:  Chief Executive Officer

 

 

 

 

 

 

Address:

c/o Digital Domain Media Group, Inc.

 

 

 

10250 SW Village Parkway

 

 

 

Port St. Lucie, FL 34987

 

 

 

 

 

Facsimile:

(772) 345-8114

 

 

 

DDH LAND HOLDINGS, LLC

 

 

 

By:

/s/  John C. Textor

 

 

Name:  John C. Textor

 

 

Title:  Chief Executive Officer

 

 

 

 

 

Address:

c/o Digital Domain Media Group, Inc.

 

 

 

10250 SW Village Parkway

 

 

 

Port St. Lucie, FL 34987

 

 

 

 

 

 

Facsimile:

(772) 345-8114

 

 

 

 

 

 

Guaranty

 

 

(Subordinated)

 

 

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

 

 

DDH LAND HOLDINGS II, LLC

 

 

 

 

 

By:

/s/  John C. Textor

 

 

Name:  John C. Textor

 

 

Title:  Chief Executive Officer

 

 

 

 

 

Address:

c/o Digital Domain Media Group, Inc.

 

 

 

10250 SW Village Parkway

 

 

 

Port St. Lucie, FL 34987

 

 

 

 

 

Facsimile:

(772) 345-8114

 

 

 

DIGITAL DOMAIN

 

 

 

 

 

By:

/s/  John C. Textor

 

 

Name:  John C. Textor

 

 

Title:  Chief Executive Officer

 

 

 

 

 

 

Address:

c/o Digital Domain Media Group, Inc.

 

 

 

10250 SW Village Parkway

 

 

 

Port St. Lucie, FL 34987

 

 

 

 

 

Facsimile:

(772) 345-8114

 

 

 

DIGITAL DOMAIN INSTITUTE, INC.

 

 

 

 

 

By:

/s/  John C. Textor

 

 

Name:  John C. Textor

 

 

Title:  Chairman

 

 

 

 

 

Address:

c/o Digital Domain Media Group, Inc.

 

 

 

10250 SW Village Parkway

 

 

 

Port St. Lucie, FL 34987

 

 

 

 

 

 

Facsimile:

(772) 345-8114

 

 

 

 

 

 

Guaranty

 

 

(Subordinated)

 

 

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

 

 

DIGITAL DOMAIN INTERNATIONAL, INC.

 

 

 

 

 

By:

/s/  John C. Textor

 

 

Name:  John C. Textor

 

 

Title:  Chief Executive Officer

 

 

 

 

 

Address:

c/o Digital Domain Media Group, Inc.

 

 

 

10250 SW Village Parkway

 

 

 

Port St. Lucie, FL 34987

 

 

 

 

 

Facsimile:

(772) 345-8114

 

 

 

DIGITAL DOMAIN PRODUCTIONS, INC.

 

 

 

 

 

By:

/s/  John C. Textor

 

 

Name:  John C. Textor

 

 

Title:  Chief Executive Officer

 

 

 

 

 

 

Address:

c/o Digital Domain Media Group, Inc.

 

 

 

10250 SW Village Parkway

 

 

 

Port St. Lucie, FL 34987

 

 

 

 

 

Facsimile:

(772) 345-8114

 

 

 

DIGITAL DOMAIN STEREO GROUP, INC.

 

 

 

 

 

By:

/s/  John C. Textor

 

 

Name:  John C. Textor

 

 

Title:  Chief Executive Officer

 

 

 

 

 

Address:

c/o Digital Domain Media Group, Inc.

 

 

 

10250 SW Village Parkway

 

 

 

Port St. Lucie, FL 34987

 

 

 

 

 

 

Facsimile:

(772) 345-8114

 

 

 

 

 

 

Guaranty

 

 

(Subordinated)

 

 

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

 

 

DIGITAL DOMAIN TACTICAL, INC.

 

 

 

 

 

By:

/s/  Mark Covey

 

 

Name:  Mark Covey

 

 

Title:  President

 

 

 

 

 

Address:

c/o Digital Domain Media Group, Inc.

 

 

 

10250 SW Village Parkway

 

 

 

Port St. Lucie, FL 34987

 

 

 

 

 

Facsimile:

(772) 345-8114

 

 

 

MOTHERSHIP MEDIA, INC.

 

 

 

By:

/s/  John C. Textor

 

 

Name:  John C. Textor

 

 

Title:  Chief Executive Officer

 

 

 

 

 

 

Address:

c/o Digital Domain Media Group, Inc.

 

 

 

10250 SW Village Parkway

 

 

 

Port St. Lucie, FL 34987

 

 

 

 

 

Facsimile:

(772) 345-8114

 

 

 

 

 

TRADITION STUDIOS, INC.

 

 

 

 

 

By:

/s/  John C. Textor

 

 

Name:  John C. Textor

 

 

Title:  Chief Executive Officer

 

 

 

 

 

Address:

c/o Digital Domain Media Group, Inc.

 

 

 

10250 SW Village Parkway

 

 

 

Port St. Lucie, FL 34987

 

 

 

 

 

 

Facsimile:

(772) 345-8114

 

 

 

 

 

 

Guaranty

 

 

(Subordinated)

 

 

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

 

 

DIGITAL DOMAIN PRODUCTIONS (VANCOUVER) LTD.

 

 

 

 

 

By:

/s/  John C. Textor

 

 

Name:  John C. Textor

 

 

Title:  Chief Executive Officer

 

 

 

 

 

Address:

c/o Digital Domain Media Group, Inc.

 

 

 

10250 SW Village Parkway

 

 

 

Port St. Lucie, FL 34987

 

 

 

 

 

 

Facsimile:

(778) 783-6099

 

 

 

 

 

 

Guaranty

 

 

(Subordinated)

 

 

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

 

ACCEPTED BY:

 

 

 

COMVEST CAPITAL II, L.P., as Lender

 

 

 

 

 

By:

Comvest Capital II Partners, L.P.,

 

 

its General Partner

 

 

 

 

 

 

 

By:

Comvest Capital II Partners UGP, LLC,

 

 

its General Partner

 

 

 

 

 

 

 

By:

/s/  Robert O’Sullivan

 

 

Name:  Robert O’Sullivan

 

 

Title:  Managing Partner

 

 

 

Address:

Comvest Capital II, L.P.

 

 

525 Okeechobee Boulevard, Suite 1050

 

 

West Palm Beach, Florida 33401

 

 

Attention:

Robert O’Sullivan

 

 

Facsimile:

(561) 727-1798

 

 

 

 

 

Guaranty

 

(Subordinated)

 

 

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