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).

 

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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











 

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











 

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)