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Unassociated Document

 

EXHIBIT 10.46

 

WARRANT

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT AND ARE BEING SOLD IN RELIANCE UPON THE EXEMPTION CONTAINED IN SECTION 517.061 (11) OF SUCH ACT. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE RESOLD OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT OR STATE SECURITIES LAWS, OR UNLESS THE TRANSFERRING INVESTOR OBTAINS AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE.

  

 

  

Warrant Certificate No.: W-__

Original Issue Date: June 30, 2011

FOR VALUE RECEIVED, Digital Domain Media Group, Inc., a Florida corporation (the “Company”), hereby certifies that Comvest Capital II LP, or its registered assigns (the “Holder”) is entitled to purchase from the Company a number of shares of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock equal to two percent (2.00%) of the Common Stock Deemed Outstanding on the date of any exercise of this Warrant, taking into account shares of Common Stock issuable upon such exercise, subject only to dilution for Permitted Dilution Events and less the aggregate number of shares of Common Stock previously issued from time to time as a result of any partial exercise of this Warrant in accordance with Section 4, at an aggregate purchase price of $10.00 (the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used herein are defined in Section 1 hereof. The calculation of the number of shares of Common Stock issuable upon exercise of this Warrant is determined by subtracting the amount of Common Stock Deemed Outstanding from the result of dividing (i) the amount of Common Stock Deemed Outstanding on the date of exercise by (ii) the sum of one (1) minus two percent (2.00%). For avoidance of doubt, if the Holder were to exercise this Warrant in full into shares of Common Stock as of the Original Issue Date, upon such exercise the Holder would be issued ________ shares of Common Stock.

This Warrant has been issued pursuant to the terms of the Warrant Purchase Agreement, dated as of June 30, 2011 (as amended from time to time, the “Purchase Agreement”), between the Company and the Holder.

1.           Definitions. As used in this Warrant, the following terms have the respective meanings set forth below:

“Aggregate Exercise Price” means an amount equal to the product of (a) the Exercise Price multiplied by (b) a fraction, the numerator of which is the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 4 hereof, and the denominator of which is the number of Warrant Shares purchasable upon exercise of this Warrant in full. In no event shall the Aggregate Exercise Price exceed the Exercise Price.

“Board” means the board of directors of the Company.

“Business Day” means each day of the week except Saturdays, Sundays, and days on which banking institutions are authorized by law to close in the State of Florida.

“Common Stock” means the common stock, no par value, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof.

  

 

  

“Common Stock Deemed Outstanding” means, at any given time, the sum of (a) the number of shares of Common Stock actually outstanding at such time, plus (b) the number of shares of Common Stock issuable upon exercise of outstanding Options, regardless of whether such Options are actually exercisable at such time, plus (c) the number of shares of Common Stock issuable upon exercise of any other Options (other than Options described in clause (b) above) actually outstanding at such time, plus (d) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities actually outstanding at such time (treating as actually outstanding any Convertible Securities issuable upon exercise of Options actually outstanding at such time), in each case, regardless of whether the Options or Convertible Securities are actually exercisable at such time; provided that all Excluded Issuances and Common Stock issued or issuable upon the exercise of this Warrant shall be excluded from the calculation of “Common Stock Deemed Outstanding.”

“Company” has the meaning set forth in the preamble.

“Convertible Note” means that certain Convertible Note issued by the Company to Holder, of even date herewith.

“Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

“Excluded Issuances” means any issuance or sale by the Company after the Original Issue Date of: (a) shares of Common Stock issued upon the exercise of this Warrant or (b) up to an aggregate of 1,000,000 shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations) issued directly or upon the exercise of Options to directors, officers, employees, or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company, in each case authorized by the Board and issued pursuant to the Company’s stock plan referred to as the "Wyndcrest DD Florida, Inc. - 2010 Stock Plan"; or (c) shares of Common Stock issued upon the conversion or exercise of Options (other than Options covered by clause (b) above) or Convertible Securities issued prior to the Original Issue Date, provided that such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof.

“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 4 shall have been satisfied at or prior to 5:00 p.m., Miami, Florida time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

“Exercise Agreement” has the meaning set forth in Section 4(a)(i).

“Exercise Period” has the meaning set forth in Section 3.

  

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“Exercise Price” has the meaning set forth in the preamble.

“Fair Market Value” means, as of any particular date, either (1) (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on the OTC Bulletin Board or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the OTC Bulletin Board or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on The OTC Bulletin Board or similar quotation system or association at the end of such day; in each case of clauses (a) - (d), averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined, subject to a maximum discount of twenty percent (20%) or (2) the fair market value of the stock of the Company as determined by a nationally recognized independent valuation firm approved by the Holder, with the prior reasonable consent of the Company; provided, that if the Common Stock is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on The OTC Bulletin Board or similar quotation system or association, the “Fair Market Value” of the Common Stock shall be the fair market value of the stock of the Company as determined by a nationally recognized independent valuation firm approved by the Holder, with the prior reasonable consent of the Company.

“Holder” has the meaning set forth in the preamble.

“Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

“Original Issue Date” means June 30, 2011.

“Permitted Dilution Events” means (i) a public offering of the stock of the Company; provided that the Holder is treated the same as the shareholders of the Company then existing immediately prior to such offering; provided further that the Holder has the right to participate in such offering on an equal pro-rata basis (the calculation of which shall be made assuming this Warrant had been exercised in full into Warrant Shares) to the same extent as the other shareholders of the Company then existing immediately prior to such offering; (ii) a private offering of the stock of the Company; provided that the Holder is treated the same as the shareholders of the Company then existing immediately prior to such offering; provided further that the Holder has the right to participate in such offering on an equal pro-rata basis (the calculation of which shall be made assuming this Warrant had been exercised in full into Warrant Shares) to the same extent as the shareholders of the Company then existing immediately prior to such offering, (iii) the issuance by the Company of additional shares of stock in connection with an acquisition, a merger, consolidation, share exchange or other business combination involving the Company and approved by the requisite shareholders of the Company and the Holder and (iv) issuances of options under stock option or other equity incentive plans approved by the Board exercisable for up to 1,000,000 shares of Common Stock (including the exercise of such options), so long as the exercise price set forth in such options is no less than $3.07 per share (equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations); provided that, notwithstanding the foregoing, any offering or issuance of shares of stock of the Company for less than Fair Market Value or (other than clause (iv) above) for which the Holder was not given the opportunity to participate shall not constitute a Permitted Dilution Event.

  

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“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

“Purchase Agreement” has the meaning set forth in the preamble.

“Warrant” means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

“Warrant Shares” means the shares of Common Stock or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

2.           Vesting Period. Once the Company makes its first draw on the $15,000,000 Revolving Line of Credit between the Company and the Registered Holder (the “Revolver”), the Holder’s right to exercise this Warrant shall partially vest and this Warrant thereafter shall be exercisable into 50% of the number of shares of Common Stock described in the first paragraph of this Warrant. If prior to December 31, 2011, the Company draws down $7,500,000 or more on the Revolver, on December 31, 2011 the remainder of the Holder’s right to exercise this Warrant shall vest and this Warrant thereafter shall be exercisable into 100% of the number of shares of Common Stock described in the first paragraph of this Warrant.

3.           Term of Warrant. Subject to the terms and conditions hereof, at any time or from time to time after the Vesting Date and prior to 5:00 p.m., Miami, Florida time, on the tenth (10th) anniversary of the Original Issue Date or, if such day is not a Business Day, on the next preceding Business Day (the “Exercise Period”), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder (subject to adjustment as provided herein).

  

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Exercise of Warrant.

(a)         Exercise Procedure. This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i)        surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an “Exercise Agreement”), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

(ii)       payment to the Company of the Aggregate Exercise Price in accordance with Section 4(b).

(b)        Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in the Exercise Agreement, by the following methods:

(i)        by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;

(ii)       by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price;

(iii)      by surrendering to the Company (x) Warrant Shares previously acquired by the Holder with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price and/or (y) other securities or debt instruments of the Company having a value as of the Exercise Date equal to the Aggregate Exercise Price (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends and in the case of shares of Common Stock shall be the Fair Market Value thereof); or

(iv)      any combination of the foregoing.

In the event of any withholding of Warrant Shares or surrender of other equity securities pursuant to clause (ii), (iii) or (iv) above where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld or surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value per Warrant Share as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.

  

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(c)         Delivery of Stock Certificates. Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Warrant Price (in accordance with Section 4(a)hereof), the Company shall, as promptly as practicable, and in any event within three (3) Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 4(d)hereof. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 7 below, such other Person's name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

(d)         Fractional Shares. The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii)  the Fair Market Value of one Warrant Share on the Exercise Date.

(e)         Delivery of New Warrant. Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 4(c)hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(f)          Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect to the exercise of this warrant, the Company hereby represents, covenants and agrees:

(i)        This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

(ii)       All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

  

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(iii)      The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

(iv)      The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

(g)         Conditional Exercise. Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, or otherwise), such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

(h)         Reservation of Shares. During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant.

  

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Effect of Certain Events on Warrant Shares.

(a)         Adjustment to Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger. In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company's assets to another Person or (v) other similar transaction, in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction, and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment (in form and substance reasonably satisfactory to the Holder) shall be made with respect to the Holder's rights under this Warrant to insure that the provisions of this Warrant shall thereafter be applicable, as nearly as possible, to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant. The provisions of this Section 4(a) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transaction. The Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and reasonably satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated by the provisions of this Section 4(a), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 4 instead of giving effect to the provisions contained in this Section 4(a) with respect to this Warrant.

(b)        Dividends and Distributions. Subject to the provisions of Section 4(a), as applicable, if the Company shall, at any time or from time to time after the Original Issue Date, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of the Company, cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive the kind and amount of securities of the Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Warrant Shares on the date of such event.

(c)         Certificate as to Adjustment.

(i)        As promptly as reasonably practicable following any adjustment of the kind of Warrant Shares pursuant to the provisions of Section 4(a), but in any event not later than three (3) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

(ii)       As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than three (3) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the amount of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

  

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(d)         Notices.  In the event:

(i)        that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

(ii)       of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company's assets to another Person; or

(iii)      of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

then, and in each such case, the Company shall send or cause to be sent to the Holder at least ten (10) days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.

6.           Purchase Rights. In addition to any adjustments pursuant to Section 4(a) above, if at any time the Company grants, issues or sells any shares of Common Stock, Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the “Purchase Rights”), then the Holder shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder would have acquired if the Holder had held the number of Warrant Shares acquirable upon complete exercise of this Warrant (and conversion into shares of Common Stock) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. Anything herein to the contrary notwithstanding, the Holder shall not be entitled to the Purchase Rights granted herein with respect to any Excluded Issuance.

  

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7.           Transfer of Warrant. Subject to the transfer conditions referred to in the legends endorsed hereon and Section 9(b) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B, together with funds sufficient to pay any transfer taxes described in Section 4(f)(iv) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled. The Holder, by acceptance hereof, agrees that this Warrant and the Warrant Shares to be issued upon exercise hereof are being acquired for investment and not with a view towards resale or distribution and that it will not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933. This Warrant and all Warrant Shares issued upon exercise hereof (unless registered under the Securities Act of 1933) shall be stamped or imprinted with the legend indicated on the first page of this Warrant.

8.           Holder Not Deemed a Stockholder; Limitations on Liability. Except as otherwise specifically provided herein (including Section 4(b)), prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 8, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.

	
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Replacement on Loss; Division and Combination.

(a)         Replacement of Warrant on Loss. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided, that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

  

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(b)         Division and Combination of Warrant. Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment which may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice. Without the prior written consent of the Company, this Warrant may not be assigned, disposed of, encumbered, or otherwise transferred (any such action, a “Transfer”), except to an Affiliate (as defined in the Credit Agreement between Holder and Company of even date herewith) of Holder; provided, however, that any Warrant Shares issued upon exercise of this Warrant shall not be subject to such restriction. Any Transfer not in compliance with this Section 9(b) shall be null and void ab initio.

10.         No Impairment. The Company shall not, by amendment of its Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the Holder in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant.

	
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Compliance with the Securities Act.

(a)         Agreement to Comply with the Securities Act; Legend. The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 11 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the “Securities Act”). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

  

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“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.”

(b)         Representations of the Holder. In connection with the issuance of this Warrant, the representations and warranties made by the Holder in Section 3.2 of the Purchase Agreement are hereby incorporated by reference.

(c)         Lock-up. “Registrable Shares” means at any time any shares of Common Stock owned by the Holder, whether acquired on the date hereof or hereafter acquired; provided, however, that Registrable Shares shall not include any shares the sale of which has been registered pursuant to a registration statement filed under the Securities Act which has been declared effective. The Holder hereby agrees that he, she or it will not sell or otherwise transfer or dispose of any Registrable Shares or other securities of the Company held by such Holder for a period of time specified by the Company and its underwriter (not to exceed 180 days) following the effective date of a registration statement. The Holder agrees to execute an agreement relating to such restriction upon the request of the Company or its underwriter, which agreement shall be in writing in a form satisfactory to the Company and such underwriter. The Company may impose stop-transfer instructions with respect to the Registrable Shares or other securities subject to the foregoing restriction until the end of such “lockup” period.

12.         Warrant Register. The Company shall keep and properly maintain at its principal executive offices books for the registration of the Warrant and any transfers thereof. The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

13.         Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be provided in the manner set forth in Section 9.2 of the Purchase Agreement.

  

12

  

14.         Cumulative Remedies. Except to the extent expressly provided in Section 7to the contrary, the rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

15.         Equitable Relief. Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction, without posting a bond or proving special damages.

16.         Entire Agreement. This Warrant and the Purchase Agreement (including the other agreements, documents, certificates and instruments referenced therein), constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Warrant and the Purchase Agreement, the statements in the body of this Warrant shall control.

17.         Successor and Assigns. This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

18.         No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

19.         Headings. The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

20.         Amendment and Modification; Waiver. Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

  

13

  

21.         Severability. If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

22.         Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of Florida without giving effect to any choice or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Florida.

23.         Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of Florida in each case located in the city of Miami and County of Dade, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party's address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

24.         Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

25.         Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

26.         No Strict Construction. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

  

14

  

[SIGNATURE PAGE FOLLOWS]

  

15

  

IN WITNESS WHEREOF, the Company has duly executed this Warrant on June 30, 2011.

	
DIGITAL DOMAIN MEDIA

GROUP, INC

	  
	
By:

	
/s/ John Textor

	
Name:  

	
John Textor

	
Title:

	
CEO

	
Accepted and agreed,

	  
	
Comvest Capital II LP

	  
	
By:

	
ComVest Capital II Partners L.P.,

	  	
its General Partner

	  	  
	
By:

	
ComVest Capital II Partners UGP, LLC,

	  	
its General Partner

	  	  
	
By:

	
       

	
Name:  

	
Robert O'Sullivan

	
Title:

	
Managing Partner

  

 

  

IN WITNESS WHEREOF, the Company has duly executed this Warrant on June 30, 2011.

	
DIGITAL DOMAIN MEDIA

GROUP, INC

	  
	
By:

	
       

	
Name:  

	  
	
Title:

	  

	
Accepted and agreed,

	  
	
COMVEST CAPITAL II, L.P.

	  
	
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

  

16Unassociated Document

EXHIBIT 10.47

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”) is made and entered into by and between DIGITAL DOMAIN HOLDINGS CORPORATION, a Florida corporation (“Company”) and Edwin C. Lunsford, III (“Employee”).

 

1.  Employment.

 

The Company agrees to employ Employee, and Employee agrees to perform his services exclusively for the Company, on the terms and conditions set forth in this Agreement.

 

2.  Term.

 

The term of this Agreement (the “Term”) shall commence on July 29,2010 (“Commencement Date”) and shall continue in effect until terminated pursuant to the provisions of Section 6.

 

3.  Position and Duties.

 

During the term of his employment under this Agreement, Employee shall serve as “General Counsel and Senior Vice-President” of the Company. In such position, Employee will have the authority and responsibility normally attendant to an employee holding such position and will, among other things, be responsible for overseeing and managing the Company’s legal services requirements, other activities related thereto, adhering to the budgets set forth and approved by the Company, taking direction from the Board of Directors, and acting at all times in the Company’s best interests. From time to time Employee may be asked to perform other duties for the Company which may include, but shall not be limited to, sitting on various committees, acting on behalf of the Company for trade organizations, and/or assisting others in the Company in their divisions. Employee shall report directly to the President and CEO of the Company. Employee will at all times perform all of the duties and obligations required of him by the terms of this Agreement in a loyal and conscientious manner and to the best of Employee’s ability and experience.

 

4.  Base Salary. Bonus Compensation and Equity.

 

(a) In consideration for all rights and services provided by Employee, Employee shall receive an annual base salary of $250,000.00 (the “Base Salary”). Such Base Salary shall be payable at such intervals as salaries are paid by the Company to other employees of the Company, subject to the usual and required employee payroll deductions and withholdings. The Base Salary shall be subject to minimum annual increases of 7% over the prior year’s Base Salary, with any increase in excess of such minimum to be determined by the Company’s Board of Directors (or the Compensation Committee of such Board of Directors), in its sole and absolute discretion.

 

  

  

  

 

(b)  In addition to the Base Salary, Employee will be eligible to receive an annual discretionary bonus (the “Annual Bonus”). Employee’s Annual Bonus during the Term shall be unconditionally guaranteed at a non-discretionary minimum of 20% of the then-applicable Base Salary, and shall have a maximum of 60% of the then-applicable Base Salary, provided that any amount in addition to the minimum 20% shall be within the sole and absolute discretion of the Company’s Board of Directors (or the Compensation Committee of the Board of Directors) and shall be based upon Employee’s achievement of certain mutually agreed objectives and goals and/or Employee’s contribution to the success of the Company’s legal, financial and business objectives and goals for the fiscal year with respect to which the Annual Bonus is calculated, such determination to be made by the Company’s Board of Directors (or the Compensation Committee of the Board of Directors) in its sole and absolute discretion. The Company’s overall financial performance will also be considered in determining whether any of the discretionary portion of the Annual Bonus is awarded and, if so, the amount. Employee must remain continuously employed by Company through the date on which the Annual Bonus is paid to be eligible to receive such Annual Bonus. In any event, the Annual Bonus payable for a given year shall be paid no later than February 28 of the following year. The Annual Bonus shall be subject to all required federal, state and local tax withholding.

 

(c)   Employee is also being granted a stock option (“Option”) to purchase an aggregate of Two Hundred Eighty Thousand (280,000) shares of the common stock of the Company at the price of $4.50 per share. Such Option will vest in 8 equal quarterly increments of Thirty Five Thousand (35,000) option shares each over the first 2 years of the Agreement, with the first option shares vesting on November 1, 2010 and the remaining 7 tranches vesting every three months thereafter. Upon any Change of Control (defined in Section 6 below) any unvested option shares shall immediately vest.

 

(d)  In the event Company sells or transfers a controlling interest in, or more than 50% of the stock of, Digital Domain, a Delaware corporation, or it’s subsidiary Digital Domain Productions, Inc., a Delaware corporation, Company shall pay Employee a cash bonus of Four Hundred Thousand Dollars ($400,000.00) payable in 2 annual installments of $200,000.00 each on the first and second anniversaries of the closing date of any such sale or transfer. Such bonus shall be subject to all required federal, state and local tax withholding and Employee must remain continuously employed by Company through the date on which such bonus is to be paid to be eligible to receive such bonus.

 

(e)   Upon full execution of this Agreement Company shall pay Employee a Signing Bonus of $10,000.00. Such bonus shall be subject to all required federal, state and local tax withholding

 

  

  

  

 

5.  Expenses and Benefits.

 

(a)  Employee shall be entitled to reimbursement for all reasonable and ordinary expenses incurred by Employee in the course of, and directly related to, the rendering of services pursuant to this Agreement in accordance with the Company’s policies for reimbursement of such expenses, and the limitations thereon, that are in effect at the time such expenses are incurred. Such expenses shall be supported by reasonable documentation and accepted standards and rules that the Company will put into place from time to time.

 

(b)  During his employment under this Agreement, Employee shall be entitled to participate in or receive benefits under the Company’s medical, health, disability, retirement, welfare and insurance plans and arrangements then in effect and generally made available from time to time to the management employees of the Company, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. Company reserves the right to modify, suspend, or discontinue any and all of its health and welfare benefit plans, practices, policies, and programs at any time without recourse by Employee so long as such action is taken generally with respect to all other similarly-situated peer executives and does not single out Employee.

 

(c)  Employee shall be entitled to twenty (20) days of paid vacation each year during the Term. Such vacation time shall accrue and cumulate in accordance with the Company’s vacation policy.

 

(d)  Employee shall be entitled to reimbursement of legal expenses incurred by Employee in the event any entity institutes legal action against Employee based on Employee entering into this Agreement and/or related to Employee’s efforts as an employee or member of the Board of Directors of the Company. The contents of this section shall in no way limit indemnification provisions contained in other agreements or documents of the Company, and in that regard Company generally agrees to indemnify Employee against and in respect of any and all claims, actions, or demands, to the extent permitted by the Company’s By-laws and applicable law.

 

6.  Termination.

 

(a) The Company may terminate Employee’s employment and the Company’s obligations under this Agreement at any time “for cause,” subject, in each case, only to the termination compensation requirements set forth in Section 7. The following shall constitute termination “for cause”:

 

(1) Employee’s death or permanent disability; or

 

  

  

  

 

(2) The Company’s termination of Employee under any of the following circumstances, which also shall without limitation each be deemed to be a material breach of this Agreement:

 

(i)   The material breach by Employee of any material covenant contained in this Agreement or in Exhibit A;

 

(ii)  The material breach by the Employee of any material provision of the Company’s rules, regulations, policies or procedures in effect from time to time;

 

(iii)  The repudiation or purported termination of this Agreement by Employee (other than a termination by Employee pursuant to Section 6(b)); or

 

(iv)  The conviction (by trial or upon a plea) of Employee of a felony involving moral turpitude;

 

provided that, with respect to paragraphs (i) and (ii) supra, if the underlying breach is capable of cure, the basis of a “for cause” termination by the Company shall only arise if such breach is not cured within thirty (30) days after written demand for cure is given to Employee by the Company identifying such breach with reasonable particularity.

 

(b) Employee, at his option and in his sole and absolute discretion, may terminate Employee’s employment under this Agreement if:

 

(1)  The Company materially breaches any material covenant contained in this Agreement which breach, if capable of cure, is not cured within thirty (30) days after written demand for cure is given to the Company by Employee identifying the breach with reasonable particularity; or

 

(2)  The Company assigns to Employee duties and responsibilities substantially inconsistent with the duties and responsibilities described in Section 3 of this Agreement and (i) Employee thereafter notifies the Company in writing of the fact that Employee believes such has occurred, describing with reasonable particularity the facts upon which such conclusion is based, and (ii) the Company fails, within forty-five (45) days following receipt of such notice, to reassign to Employee duties and responsibilities substantially consistent with those described in Section 3 hereof.

 

  

  

  

 

(3)  Upon a “Change of Control” (defined below), provided that Employee shall have twelve (12) months following a Change of Control to exercise Employee’s right to terminate this Agreement pursuant to this subsection. For purposes of this Agreement “Change of Control” shall mean (i) any transaction or series of transactions in which any person or group (within the meaning of Rule 13d-5 under the Exchange Act and Sections 13(d) and 14(d) of the Exchange Act) becomes the direct or indirect “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), by way of a stock issuance, tender offer, merger, consolidation, other business combination or otherwise, of greater than 40% of the total voting power (on a fully diluted basis as if all convertible securities had been converted and all warrants and options had been exercised) entitled to vote in the election of directors of Company (including any transaction in which Company becomes a wholly-owned or majority-owned subsidiary of another corporation), (ii) any merger or consolidation or reorganization in which Company does not survive, (iii) any merger or consolidation in which Company survives, but the shares of Company’s Common Stock outstanding immediately prior to such merger or consolidation represent 40% or less of the voting power of Company after such merger or consolidation, and (iv) any transaction in which more than 40% of Company’s assets are sold.

 

(4)  Upon a “Constructive Discharge” (defined below), provided that Employee shall have twelve (12) months following a Constructive Discharge to exercise Employee’s right to terminate this Agreement pursuant to this subsection. For purposes of this Agreement “Constructive Discharge” shall mean the occurrence of any of the following events after the date of a Change of Control without Employee’s express written consent: (i) the scope of Employee’s authority, duties and responsibilities are materially diminished; or (ii) a reduction by Company in Employee’s Base Salary, bonus arrangement, or other material benefits as in effect on the date of such Change of Control.

 

(5)  If Company relocates its offices more than 50 miles from Employee’s home

 

(c) Any termination by the Company or by Employee pursuant to this Section 6 shall be effected by written notice of termination given to the other, and such termination shall be effective upon the giving of such notice, unless, in the case of a termination notice given by the Company to Employee, such notice states that the termination shall become effective on a later date (“Delayed Termination”), in which case such termination shall become effective on the date set forth in the notice. In the event of a Delayed Termination, the Company shall have the right in its sole discretion to determine whether or not Employee comes into the office and works during the period of time from the date the notice is given until the termination date; provided that, in any case, Employee shall be considered a full-time employee of the Company through the termination date.

 

  

  

  

 

7. Compensation Upon Termination.

 

(a)  If the Company terminates Employee’s employment and its obligations under this Agreement for cause, the Company shall pay Employee his Base Salary and accrued but unused vacation through the date on which his employment is terminated, and the Company shall have no other obligations to Employee under this Agreement after the date of termination; provided that the Company shall retain all rights and remedies it may have against Employee by reason of any breach of this Agreement by Employee.

 

(b)  If the Company terminates Employee’s employment under this Agreement other than for cause, or if Employee terminates such employment pursuant to Section 6(b) of this Agreement, then in either such event the Company shall pay Employee his accrued compensation through the date on which his employment is terminated, and additionally shall continue to pay to Employee the Base Salary for a period equal to twelve (12) months following the termination of employment (“Severance Period”). Continuation of Base Salary under this clause during the Severance Period shall be paid in accordance with the Company’s normal payroll practices at the time such amounts would otherwise have been paid to the Employee, except as provide in Section 11(g) to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). The Company retains the right to discontinue any severance payments if Employee, after termination, acts in such a manner as to harm or defame the Company. During the Severance Period, Employee agrees (1) to make himself available to answer questions and to cooperate in the transition of his duties, (2) to timely respond to any inquiries from Company, including making himself reasonably available for interviews, and (3) to cooperate with Company in the prosecution and/or defense of any claim, including making himself available for any interviews, appearing at depositions, and producing requested documents.

 

8.  Non-Solicitation of Employees.

 

Employee agrees that he will not at any time during the Term, or during the twelve-month period following any termination of this Agreement or his employment hereunder, solicit (directly or indirectly) any employees or then-engaged contractors of the Company to render services as an employee or contractor for or on behalf of Employee or any other person; provided that with respect to any such employee or contractor personally recruited to the Company by Employee after the Commencement Date, such obligation shall be in effect for the Term and for a period of six (6) months following any such termination.

 

9.  Confidentiality.

 

The terms of the Confidential Information and Inventions Agreement attached hereto as Exhibit A are incorporated herein by this reference as if set forth in full herein and Employee agrees to act in accordance with and be bound by all of such terms, Employee covenants and agrees to keep the specific terms and provisions of this Agreement (other than compensation) in strictest confidence and not to disclose the same to any other person, other than Employee’s legal, accounting and financial advisers, to the extent necessary in order for them to discharge their professional responsibilities to Employee.

 

  

  

  

 

10.  Rules, Regulations, Policies and Procedures.

 

Employee acknowledges that he shall perform his services in full compliance with all of the Company’s rules, regulations, policies and procedures, as the same may be in effect from time to time.

 

11.  Miscellaneous Provisions.

 

(a)  Notices. All notices or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered properly given if delivered to the address set forth below, in the case of the Company, or to the address set forth beneath Employee’s signature hereto, in the case of Employee, by (1) U.S. certified mail, return receipt requested, postage prepaid, (2) facsimile with confirmation of successful transmission, or (3) personal delivery. Either party may change his or its address by giving written notice of the change to the other party in accordance with this provision. Any notice given prior to the notice of change of address shall not be affected by the notice of address change.

 

Address for Company:

 

Digital Domain Holdings Corporation 

10521 SW Village Center Drive 

Suite 201

Port St. Lucie, Florida 34987 

Attention: Chief Executive Officer 

Telecopier: (772) 345-8114

 

(b)  Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties with respect thereto.

 

(c)  Employee Representation. Employee hereby represents to the Company that the execution and delivery of this Agreement by Employee and the Company and the performance by Employee of Employee’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any employment agreement or other agreement or policy to which Employee is a party or otherwise bound.

 

(d)  Governing Law and Venue. This Agreement shall be enforced, governed by and construed in accordance with the laws of the State of Florida. The parties agree that all actions or proceedings initiated by either party hereto arising directly or indirectly out of this Agreement shall be litigated in federal or state court in West Palm Beach, Florida. The parties hereto expressly submit and consent in advance to such jurisdiction and agree that service of summons and complaint or other process or papers may be made by registered or certified mail addressed to the relevant party at the address set forth herein. The parties hereto waive any claim that a federal or state court in West Palm Beach, Florida, is an inconvenient or an improper forum.

 

  

  

  

 

(e)  Assignment. This Agreement, and all of Employee’s rights and duties hereunder, shall not be assignable or delegable by Employee. Any purported assignment or delegation by Employee in violation of the foregoing shall be null and void ab initio and of no force and effect. Subject to the Change of Control provisions in section 6 and 7 herein, this Agreement may be assigned by the Company to a person or entity which is an affiliate or a successor in interest to substantially all of the business operations of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such affiliate or successor person or entity.

 

(f)   Survival. The terms set forth in Sections 7-11, inclusive, shall survive any termination of this Agreement.

 

(g)  Section 409A. All payments of  “nonqualified deferred compensation” (within the meaning of Section 409A of the Code) are intended to comply with the requirements of Code Section 409A, and shall be interpreted in accordance therewith. Neither party individually or in combination may accelerate any such deferred payment, except in compliance with Code Section 409A, and no amount shall be paid prior to the earliest date on which it is permitted to be paid under Code Section 409A. In the event that the Employee is determined to be a “key employee” (as defined in Code Section 416(i) (without regard to paragraph (5) thereof)) of Company at a time when its stock is deemed to be publicly traded on an established securities market, payments determined to be “nonqualified deferred compensation” payable following termination of employment shall be made no earlier than the earlier of (i) the last day of the sixth (6th) complete calendar month following such termination of employment, or (ii) the Employee’s death, consistent with the provisions of Code Section 409A. Any payment delayed by reason of the prior sentence shall be paid out in a single lump sum at the end of such required delay period in order to catch up to the original payment schedule. Unless otherwise expressly provided, any payment of compensation by Company to the Employee, whether pursuant to this Agreement or otherwise, shall be made within two and one-half months (21⁄2 months) after the end of the calendar year in which the Employee’s right to such payment vests (i.e., is not subject to a substantial risk of forfeiture for purposes of Code Section 409A). Notwithstanding anything herein to the contrary, no amendment may be made to this Agreement if it would cause the Agreement or any payment hereunder not to be in compliance with Code Section 409A.

 

(h)  Cooperation. Employee shall provide Employee’s reasonable cooperation to the Company in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during Employee’s employment hereunder, provided that the Company reimburses Employee for any costs or expenses reasonably incurred in connection with such cooperation.

 

  

  

  

 

(i) Severability. If any provision of this Agreement is determined to be invalid or unenforceable for any reason and to any extent, the remainder of this Agreement shall not be affected thereby, but shall be enforced to the greatest extent permitted by law.

 

(j) Captions. All titles and captions of sections and subsections contained in the Agreement are for convenience or reference only and shall not be deemed part of this Agreement.

 

(k) Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Signatures sent by facsimile transmission or email shall be deemed to be originals.

 

In witness whereof, the parties hereto intending to be bound hereby execute and deliver this Employment Agreement as of the __ day of ________, 2010.

 

	
COMPANY:

	 
	  	 
	
DIGITAL DOMAIN HOLDINGS CORPORATION

	  	 
	  	 
	
John C. Textor

	 
	
Chairman and Chief Executive Officer

	 
	  	 
	  	 
	
Jonathan Teaford

	 
	
Director and President

	 
	  	 
	
EMPLOYEE

	 
	  	 
	  	 
	
Edwin C. Lunsford, III

	 
	
Address:

	
113 Bowsprit Drive

	  	
North Palm Beach, FL 33408

 

  

  

  

 

EXHIBIT A

 

Employee Confidential Information and Inventions Agreement

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