Document:

EXHIBIT
10.3

 

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION
AGREEMENT (this “Agreement”), effective as of ____________, 201_ (the “Effective Date”), is made between
Digital Domain Media Group, Inc., a Florida corporation (the “Company”), and _______________ (the “Indemnitee”).

WHEREAS, it is essential
to the Company to retain and attract as directors and officers the most capable persons available; and

WHEREAS, the Indemnitee
is a director and/or officer of the Company; and

WHEREAS, basic protection
against undue risk of personal liability of the Company’s directors and officers heretofore has been provided through insurance
coverage providing reasonable protection at reasonable cost, but as a result of substantial changes in the marketplace for such
insurance it has become increasingly more difficult to obtain such insurance on terms providing reasonable protection at reasonable
cost; and

WHEREAS, the current
Amended and Restated Articles of Incorporation of the Company and Amended and Restated Bylaws of the Company (collectively, the
“Charter Documents”) require the Company to indemnify and advance expenses to its directors and officers to the fullest
extent permitted by law and the Indemnitee has been serving and continues to serve as a director and/or officer of the Company
in part in reliance on such Charter Documents; and

WHEREAS, the current
difficulty in obtaining adequate directors’ and officers’ liability insurance coverage at a reasonable cost and uncertainties
as to the availability of indemnification created by recent court decisions have increased the risk that the Company will be unable
to retain and attract as directors and officers the most capable persons available; and

WHEREAS, the Board
of Directors of the Company (the “Board”) has determined that the inability of the Company to retain and attract as
directors and officers the most capable persons available would be detrimental to the interests of the Company and that the Company
therefore should seek to assure such persons that adequate indemnification and insurance coverage will be available in the future;
and

WHEREAS, in recognition
of the Indemnitee’s need for substantial protection against personal liability in order to enhance and motivate the Indemnitee’s
continued service to the Company in an effective manner, the increasing difficulty in obtaining satisfactory directors’ and
officers’ liability insurance coverage, and the Indemnitee’s reliance on the Charter Documents, and in part to provide
the Indemnitee with specific contractual assurance that the protection promised by such Charter Documents will be available to
the Indemnitee (regardless of, among other things, any amendment to or revocation of such Charter Documents or any change in the
composition of the Board, or certain acquisition change in control transactions relating to the Company), the Company wishes to
provide in this Agreement for indemnification of and the advancing of expenses to the Indemnitee to the fullest extent (whether
partial or complete) permitted by law and as set forth in this Agreement, and, to the extent such insurance is maintained, for
the continued coverage of the Indemnitee under the Company’s directors’ and officers’ liability insurance policies;

NOW, THEREFORE,
in consideration of the premises and of the Indemnitee continuing to serve the Company directly or, at its request, another enterprise,
and intending to be legally bound hereby, the parties hereto agree as follows:

1. Basic Indemnification
Arrangement.

(a) In accordance
with the provisions of the Florida Business Corporation Act, the Company shall, to the fullest extent legally permissible, indemnify
the Indemnitee against any and all fees and expenses (including attorneys’ fees), judgments, fines, penalties and amounts
paid in settlement actually and reasonably incurred by the Indemnitee in the defense or settlement of any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including any action by or
in the right of the Company), in which the Indemnitee may be involved or with which the Indemnitee was, is or is threatened to
be made, while in office or thereafter, a defendant or respondent by reason of the Indemnitee being or having been an officer
or director of the Company, or, at the Company’s request, another enterprise. 

  

  

(b) If so requested
by the Indemnitee, the Company shall advance (within ten (10) business days of such request) any and all expenses, including attorneys’
fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee
as a result of the actual or deemed receipt of any payments under this Agreement, actually and reasonably paid or incurred by the
Indemnitee in connection with the defense or settlement of any such action, suit or other proceeding (“Expenses”),
to the Indemnitee (an “Expense Advance”). The Company shall, in accordance with such request (but without duplication),
either (i) pay such Expenses on behalf of the Indemnitee, or (ii) reimburse the Indemnitee for such Expenses. The Indemnitee’s
right to an Expense Advance upon such request is absolute (subject to Section 1(d)) and shall not be subject to any prior determination
by the Company, the Board, or any Reviewing Party (defined below), that the Indemnitee has satisfied any applicable standard of
conduct for indemnification.

(c) Notwithstanding
anything in this Agreement to the contrary, the Indemnitee shall not be entitled to indemnification or advancement of Expenses
pursuant to this Agreement in connection with any threatened, pending or completed action, suit or proceeding initiated by the
Indemnitee unless (i) the Company has joined in or the Board has authorized or consented to the initiation of such threatened,
pending or completed action, suit or proceeding, or (ii) the threatened, pending or completed action, suit or proceeding is
one to enforce the Indemnitee’s rights under this Agreement, or (iii) the action, suit or proceeding is instituted after
a Change in Control (as defined below) (other than a Change in Control approved by a majority of the directors on the Board who
were directors immediately prior to such Change in Control).

(d) Notwithstanding
the foregoing, (i) the indemnification obligations of the Company under Section 1(a) shall be subject to the condition
that a Reviewing Party shall not have determined that the Indemnitee would not be permitted to be so indemnified under applicable
law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 1(b) shall be subject to the
condition that, if, when and to the extent that a Reviewing Party determines that the Indemnitee would not be permitted to be so
indemnified under applicable law, the Company shall be entitled to be reimbursed by the Indemnitee (who hereby agrees to so reimburse
the Company) for all such amounts theretofore paid (it being understood and agreed that the foregoing agreement by the Indemnitee
shall be deemed to satisfy any requirement that the Indemnitee provide the Company with an undertaking to repay any Expense Advance
if it is ultimately determined that the Indemnitee is not entitled to indemnification under applicable law); provided, however,
that if the Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a
determination that the Indemnitee should be indemnified under applicable law, any determination made by such Reviewing Party that
the Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and the Indemnitee shall not
be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto
(as to which all rights of appeal therefrom have been exhausted or lapsed). The Indemnitee’s undertaking to repay such Expense
Advances shall be unsecured and interest-free. If there has been no determination by a Reviewing Party within thirty (30) days
after written demand is presented to the Company by the Indemnitee or if a Reviewing Party determines that the Indemnitee would
not be permitted to be indemnified in whole or in part under applicable law, the Indemnitee shall have the right to commence litigation
in any court in the States of California or Florida having subject matter jurisdiction thereof and in which venue is proper seeking
an initial determination by the court or challenging any such determination by such Reviewing Party or any aspect thereof, including
the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding.
Any determination by a Reviewing Party otherwise shall be conclusive and binding on the Company and the Indemnitee for purposes
of this Agreement. For the purposes of this Agreement, a “Reviewing Party” shall mean any appropriate person or body
consisting of a member or members of the Board or any other person or body appointed by the Board who is not a party to the particular
claim for which the Indemnitee is seeking indemnification, which may include independent legal counsel.

  

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(e) If there is
a Change in Control (as defined below) after the Effective Date, then the acquiring or successor Person (as defined below), as
the case may be (the "Successor"), shall not diminish or limit in any manner the indemnification rights available to
the Indemnitee immediately prior to such Change in Control, with respect to matters arising prior to such Change of Control, whether
such rights were available under this Agreement, or pursuant to any other agreement, any resolution of the Company’s shareholders
or the Board, any provision of the Charter Documents, or any statute or rule of law providing for indemnification, now or hereafter
in effect. No such Successor shall cancel, limit or in any way diminish the rights or coverage provided to the Indemnitee pursuant
to one or more directors' and officers' insurance policies carried by the Company immediately prior to any such Change in Control.
For the purposes of this Agreement, the term "Change in Control" shall mean (i) the acquisition by any person or entity,
or any group of persons or entities acting in concert (collectively, a "Person"), of direct or indirect beneficial ownership
of 40% or more of the voting power or voting securities of the Company, (ii) the acquisition by any Person of direct or indirect
beneficial ownership of 20% or more of the voting power or voting securities of the Company and the subsequent election of a majority
of the members of the Board who were not members of the Board for the two-year period immediately preceding their election (provided
that any such new member whose election was approved by a vote of at least 2/3 of the directors then still in office who either
were directors at the beginning of such two year period or whose election or nomination for election was also previously so approved
shall be deemed to have been members of the Board for such entire two year period), (iii) a transfer of all or substantially all
of the Company's assets to another Person who is not a wholly owned subsidiary of the Company, (iv) the approval of the stockholders
of the Company of a complete liquidation of the Company, or (v) the merger or consolidation of the Company with another corporation
where, as a result of such merger or consolidation, less than 60% of the outstanding voting securities of the surviving or resulting
corporation shall then be owned by the stockholders of the Company immediately prior to such merger or consolidation.

2.Contribution.
If the indemnification provided for in Section 1 above for any reason is held by a court of competent jurisdiction to be unavailable
to an Indemnitee in respect of any fees and expenses, judgments, fines, penalties or amounts paid in settlement referred to therein,
then the Company, in lieu of indemnifying such Indemnitee thereunder, shall contribute to the amount paid or payable by such Indemnitee
as a result of such fees and expenses, judgments, fines, penalties or amounts paid in settlement (i) in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Indemnitee, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to
in clause (i) above but also the relative fault of the Company and the Indemnitee in connection with the action or inaction which
resulted in such fees and expenses, judgments, fines, penalties or amounts paid in settlement, as well as any other relevant equitable
considerations. In connection specifically with the registration of the Company's securities, the relative benefits received by
the Company and the Indemnitee shall be deemed to be in the same respective proportions that the net proceeds from the offering
(before deducting expenses) received by the Company and the Indemnitee, in each case as set forth in the table on the cover page
of the applicable prospectus, bear to the aggregate public offering price of the securities so offered. The relative fault of the
Company and the Indemnitee in connection with the registration of the Company’s securities shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the Indemnitee and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or omission. The Company and the Indemnitee agree that
it would not be just and equitable if contribution pursuant to this Section 2 were determined by pro rata or per capita allocation
or by any other method of allocation which does not take account of the equitable considerations referred supra to in this
paragraph. In connection with the registration of the Company's securities, in no event shall Indemnitee be required to contribute
any amount under this Section 2 in excess of the lesser of (i) that proportion of the total of such fees and expenses, judgments,
fines, penalties or amounts paid in settlement indemnified against equal to the proportion of the total securities sold under such
registration statement which is being sold by such Indemnitee or (ii) the proceeds received by such Indemnitee from its sale of
securities under such registration statement. No person found guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act of 1933, as amended) shall be entitled to contribution from any person who was not found guilty of
such fraudulent misrepresentation.

  

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3.Other Expenses.
The Company shall be liable to and shall pay the Indemnitee for any and all expenses (including attorneys’ fees) which are
incurred by the Indemnitee in connection with any action brought by the Indemnitee for (i) indemnification or advance payment
of Expenses by the Company under this Agreement or any other agreement or Charter Documents now or hereafter in effect relating
to indemnification and/or (ii) recovery under any directors’ and officers’ liability insurance policies maintained
by the Company, regardless of whether the Indemnitee ultimately is determined to be entitled to such indemnification, advance expense
payment or insurance recovery, as the case may be. The Company also shall be liable to and shall pay the Indemnitee for any and
all expenses and disbursements incurred by the Indemnitee in connection with (i) any appeal resulting from any proceeding contemplated
by Section 1 above, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas
bond, or other appeal bond or its equivalent or (ii) the interpretation, enforcement or defense of Indemnitee’s rights under
this Agreement or any other agreement or Charter Documents now or hereafter in effect relating to indemnification, by litigation
or otherwise. If requested by the Indemnitee, the Company shall promptly advance (but in no event more than ten (10) business days
after receiving a request therefor) any such expenses to the Indemnitee.

4. Partial Indemnity.
If the Indemnitee is entitled under any provision of this Agreement to indemnification or payment by the Company for some or a
portion of the expenses, judgments, fines, penalties and amounts paid in settlement of any threatened, pending or completed action,
suit or proceeding but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify or pay the Indemnitee
for the portion thereof to which the Indemnitee is entitled hereunder.

 

5. Burden of Proof.
In connection with any determination by a Reviewing Party or court of competent jurisdiction as to whether the Indemnitee is entitled
to be indemnified hereunder the Reviewing Party or court shall presume that the Indemnitee has satisfied the applicable standard
of conduct and is entitled to indemnification, and the burden of proof shall be on the Company to establish, by clear and convincing
evidence, that the Indemnitee is not so entitled.

6. No Other Presumptions.
For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a
presumption that the Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law. In addition, neither the failure of a Reviewing Party to have
made a determination as to whether the Indemnitee has met any particular standard of conduct or had any particular belief, nor
an actual determination by a Reviewing Party that the Indemnitee has not met such standard of conduct or did not have such belief,
prior to the commencement of legal proceedings by the Indemnitee to secure a judicial determination that the Indemnitee should
be indemnified under applicable law, shall be a defense to the Indemnitee’s claim or create a presumption that the Indemnitee
has not met any particular standard of conduct or did not have any particular belief.

7. Nonexclusivity,
Etc. The rights of the Indemnitee hereunder shall be in addition to any other rights the Indemnitee may have under the Charter
Documents or the Florida Business Corporation Act or otherwise. To the extent that a change in applicable law (whether by statute
or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Charter Documents
or this Agreement, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits
so afforded by such change.

8. Liability
Insurance. To the extent the Company maintains an insurance policy or policies providing directors’ and officers’
liability insurance, the Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the
maximum extent of the coverage available for any Company director or officer.

 9. Notification,
Defense and Settlement of Claims.

(a) Promptly after
receipt by the Indemnitee of notice of the threat or commencement of any action, suit or proceeding, the Indemnitee shall, if a
claim in respect hereof is to be made by the Indemnitee against the Company under this Agreement, notify the Company of the threat
or commencement thereof; provided, however, that so long as the Company is not prejudiced by any delay in so notifying the Company,
such delay shall not constitute a waiver or release by the Indemnitee of rights hereunder.

  

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(b) Except as otherwise
expressly provided below, to the extent that it may wish, the Company, jointly with any other indemnifying party similarly notified,
shall be entitled to assume the defense thereof and to employ counsel reasonably satisfactory to the Indemnitee. After notice from
the Company to the Indemnitee of its election to so assume the defense thereof, the Company shall not be liable to the Indemnitee
under this Agreement for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof
other than as otherwise provided below. The Indemnitee shall have the right to employ counsel of his or her own choosing in such
action, suit or proceeding, but the fees and expenses of such counsel incurred after notice from the Company of assumption by the
Company of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee
has been specifically authorized by the Company, such authorization to be conclusively established by action by disinterested members
of the Board though less than a quorum, (ii) representation by the same counsel of both the Indemnitee and the Company would, in
the reasonable judgment of the Indemnitee and the Company, be inappropriate due to an actual or potential conflict of interest
between the Company and the Indemnitee in the conduct of the defense of such action, suit or proceeding, such conflict of interest
to be conclusively established by an opinion of counsel to the Company to such effect, (iii) the counsel employed by the Company
and reasonably satisfactory to the Indemnitee has advised the Indemnitee in writing that such counsel’s representation of
the Indemnitee would likely involve such counsel in representing differing interests which could adversely affect the judgment
or loyalty of such counsel to the Indemnitee, whether it be a conflicting, inconsistent, diverse or other interest or (iv) the
Company shall not in fact have employed counsel to assume the defense of such action, suit or proceeding, in each of which cases
the fees and expenses of counsel shall be paid by the Company. The Company shall not be entitled to assume the defense of any action,
suit or proceeding brought by or on behalf of the Company or as to which a conflict of interest has been established as provided
in (ii) above. Notwithstanding the foregoing, if an insurance company has supplied directors’ and officers’ liability
insurance covering an action, suit or proceeding, then such insurance company shall employ counsel to conduct the defense of such
action, suit or proceeding unless the Indemnitee and the Company reasonably concur in writing that such counsel is unacceptable.

(c) Notwithstanding
any term to the contrary herein, the Company shall not be liable to indemnify the Indemnitee under this Agreement for any amounts
paid in settlement of any action or claim effected without the Company’s written consent. The Company shall not settle any
action or claim in any manner which would impose any liability or penalty on the Indemnitee or include a statement as to, or an
admission of, fault, culpability or a failure to act, by or on behalf of the Indemnitee, without the Indemnitee’s prior written
consent. Neither the Company nor the Indemnitee shall unreasonably withhold consent to any proposed settlement.

10. Amendments,
Etc. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by
the party against whom enforcement of the waiver is sought, and no such waiver shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

11. Subrogation.
In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who shall execute all papers required and shall do everything that may be necessary or desireable
to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce
such rights.

 

12. No Duplication
of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against
the Indemnitee in connection with any threatened, pending or completed action, suit or proceeding to the extent the Indemnitee
has otherwise actually received payment (under any insurance policy, provision of a Charter Document or otherwise) of the amounts
otherwise indemnifiable hereunder.

  

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13. Notice.
All notices, requests, consents or other communications under this Agreement shall be delivered by hand or sent by registered or
certified mail, return receipt requested, or by overnight prepaid courier of recognized standing, or by facsimile (receipt confirmed)
to:

 

 

	if to the Company:	 	
        Digital Domain Media, Inc.

        8881 South US Highway One

        Port St. Lucie, FL 34952 Attention:  General Counsel

        Facsimile: [______________________

	 	 
	if to the Indemnitee:	 	
        [Name]

        [Address]

        [Address]

        [Facsimile]

         

All such notices, requests, consents
and other communications shall be deemed to have been duly delivered and received three (3) days following the date on which
so mailed, or one (1) day following the date sent if sent by an overnight prepaid courier of recognized standing, or on the
date on which delivery is made by hand or by facsimile transmission.

14. Binding Effect,
Etc. This Agreement shall be effective as of the Effective Date and shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, legatees,
administrators, executors and personal and legal representatives. This Agreement shall continue in effect regardless of whether
the Indemnitee continues to serve as an officer or director of the Company or of any other enterprise at the Company’s request.

15. Severability.
The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within
a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable
in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions
hereof shall not be in any way impaired and shall remain enforceable to the fullest extent permitted by law.

16. Governing
Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Florida applicable
to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws or that of any
other jurisdiction.

 

IN WITNESS WHEREOF, the
parties hereto have executed this Indemnification Agreement as of the Effective Date.

 

DIGITAL DOMAIN MEDIA GROUP, INC.

 

 

By: _______________________________________

Name:

Title:

 

 

___________________________________________

[Name of Indemnitee]Unassociated Document

 

CONVERTIBLE SECURED PROMISSORY NOTE AND OPTION AGREEMENT

	  	
New Castle County, Delaware

	
U.S. $6,000,000.00

	
November 24, 2010

 

FOR VALUE RECEIVED, the undersigned, Digital Domain Holdings Corporation, a Florida corporation (formerly known as Wyndcrest DD Florida, Inc., a Florida Corporation) (the “Borrower”) hereby promises to pay to the order of PBC MGPEF DDH, LLC, a Delaware limited liability company (“PBC Macquarie Lender”), the aggregate principal amount of all PBC Macquarie Loans (as defined in the Loan Agreement) advanced by PBC Macquarie Lender to the Borrower from time to time in an amount of up to but not exceeding Six Million and Dollars ($6,000,000.00), together with interest accrued on the unpaid principal amount of this Convertible Secured Promissory Note and Option Agreement (this “Note”) plus all fees, expenses and other costs as provided for in that certain Second Amended and Restated Loan Agreement, of even date herewith, among the Borrower, PBC Digital Holdings, LLC, a Delaware limited liability company, PBC Macquarie Lender, and Lydian Private Bank, a federal savings bank (as amended, restated, supplemented, or modified from time to time, the “Loan Agreement”). All capitalized terms not otherwise defined herein shall have the meanings and definitions set forth in the Loan Agreement. This Note is the PBC Macquarie Convertible Note referred to in, and is entitled to the benefits and conditions of, the Loan Agreement.

 

1.        Payment of Principal and Interest.        The Borrower promises to pay principal and interest on all amounts due and owing hereunder and pursuant to the Loan Agreement from the date hereof until all such amounts due and owing are paid in full, payable at the interest rate and at the time(s) as set forth in the Loan Agreement. All payments of principal and interest made by the Borrower with respect to this Note shall be paid to PBC Macquarie Lender by wire transfer of immediately available funds to such account as PBC Macquarie Lender shall so direct, or by: check All payments made with respect to this Note shall be made in United States Dollars.

 

2.        Prepayment.        This Note is subject to the prepayment provisions set forth in Section 2.03 of the Loan Agreement.

 

3.        Conversion Right.

 

(a)       Conversion.        PBC Macquarie Lender has the right to convert (the “Conversion Right”), at its option, subject to the terms and provisions hereof, all or a portion of the unpaid amount of this Note into shares of common stock (the “Common Stock”) of the Borrower (the “Shares”) as described in this Section 3, at any time prior to the Termination Date The number of Shares into which this Note is convertible is equal to the product of an amount equal to the number of Shares of the Common Stock Deemed Outstanding (as defined below) on the date of conversion, multiplied by a fraction, the numerator of which is the aggregate unpaid amount of the Note being converted and the denominator of which is the sum of (y) One Hundred Million (100,000,000) plus (z) the aggregate unpaid amount of the Note being converted. For purposes of this Note, “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) or warrants 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 or warrants actually outstanding at such time), in each case, regardless of whether the options, warrants or convertible securities are actually exercisable at such time.

 

  

  

  

 

The Borrower represents that, for the avoidance of doubt, the calculation of Common Stock Deemed Outstanding and the number of Shares into which this Note is convertible shall be determined in accordance with the Capitalization Table attached as Exhibit A, which provides that, as of November 24, 2010, if PBC Macquarie Lender elected to convert this Note in full into Shares, upon such conversion PBC Macquarie Lender would be issued 1,579,892 Shares.

 

(b)       Method of Conversion.        The Conversion Right shall be exercised by written notice from PBC Macquarie Lender to the Borrower (the “Conversion Notice”) stating PBC Macquarie Lender’s election to convert all or a portion of the amount due under this Note into Shares of the Borrower and the amount so elected to convert. The Borrower, as soon as practicable thereafter, shall amend its stock ledger and other corporate records to reflect the issuance of the Shares to PBC Macquarie Lender and shall deliver to PBC Macquarie Lender a certificate or certificates representing the number of Shares PBC Macquarie Lender is entitled following the conversion, together with a check payable to PBC Macquarie Lender for any fractional shares as required by Section 5(a) below. The Borrower represents that upon issuance, the converted Shares will be duly and validly issued, fully paid and non-assessable. This Note, or such portion thereof, as applicable, shall be deemed to have been converted as of the close of business on the date the Conversion Notice is sent to the Borrower as provided herein, and PBC Macquarie Lender shall be treated for all purposes as the holder of record of such converted Shares on the Borrower’s books and records as of the close of business on such date (the “Conversion Date”).

 

4.        Purchase Option.

 

(a)       Option.    If all or any portion of the PBC Macquarie Loans are prepaid (such prepaid amount shall be referred to herein as the “Prepaid Amount”) in accordance with the terms of the Loan Agreement and PBC Macquarie Lender has not exercised its Conversion Right as set forth in Section 3 hereof prior to the prepayment, PBC Macquarie Lender is hereby granted an option to purchase, exercisable on or before September 30, 2012 (the “Purchase Option”), such number of Shares equal to a percentage amount of the Common Stock Deemed Outstanding on the date of exercise of the Purchase Option, determined by dividing (i) the aggregate amount of the Prepaid Amount used to exercise the Purchase Option (the “Exercise Price”) by (ii) the sum of (y) One Hundred Million (100,000,000) plus (z) the aggregate amount of the Prepaid Amount used to exercise the Purchase Option, in consideration for the payment of the Exercise Price. PBC Macquarie Lender shall have no obligation to exercise the Purchase Option.

 

(b)       Exercising the Purchase Option.    The Purchase Option shall be exercised by written notice from PBC Macquarie Lender to the Borrower (the “Option Notice”) stating PBC Macquarie Lender’s election to purchase Shares, the Exercise Price and the number of Shares to be purchased.

 

  

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(c)       Closing of the Purchase Option.    The closing of the Purchase Option (the “Closing”) shall take place at a time selected by PBC Macquarie Lender, but no later than thirty (30) Business Days after receipt of the Option Notice by the Borrower. At the Closing, the Borrower and PBC Macquarie Lender shall execute a purchase agreement that stall contain substantially the same representations, warranties, covenants and indemnities as contained in that certain Convertible Note and  Warrant Purchase Agreement dated the date hereof, by and between the Borrower and PBC Macquarie Lender. The Borrower shall amend its stock ledger and other corporate records to reflect the issuance of the Shares that are purchased pursuant to the Purchase Option (the “Purchased Shares”) to PBC Macquarie Lender and shall deliver to PBC Macquarie Lender a certificate or certificates representing the number of Purchased Shares PBC Macquarie Lender is entitled following the exercise of the Purchase Option, together with a check payable to PBC Macquarie Lender for any fractional shares as required by Section 5(a) below.  The Borrower represents that upon issuance, the Purchased Shares will be duly and validly issued, fully paid and non-assessable.

 

5.        Certain Provisions Applicable to the Conversion Right and the Purchase Option.

 

(a)       No Fractional Shares.    No fractional Shares will be issued upon conversion of this Note or the exercise of the Purchase Option. In lieu of any fractional share to which PBC Macquarie Lender would otherwise be entitled, the Borrower will pay to PBC Macquarie Lender in cash any amount that would otherwise be converted into such fractional share or purchased by PBC Macquarie Lender

 

(b)       Reserved Shares.    The Borrower shall at all times keep authorized and approved under its organizational documents the number of Shares issuable upon the conversion or the exercise of the Purchase Option and shall take all such action as may be required from time to time to validly and legally issue Shares upon such conversion or the exercise of the Purchase Option.

 

6.        Late Charge.    If any amounts due and owing under the PBC Macquarie Loans are not paid within five (5) Business Days of the date when due, the Borrower shall pay PBC Macquarie Lender a “late charge” in the amount of five percent (5%) of the amount of the payment that is past due.

 

7.       Event of Default.    Upon the occurrence and during the continuance of an Event of Default as set forth in the Loan Agreement, PBC Macquarie Lender shall have the rights and remedies that are set forth in the Loan Agreement and the other Loan Documents, subject to the Borrower’s applicable cure rights and notice periods provided in the Loan Agreement.

 

8.        Secured Note.    This Note is secured by the Collateral as set forth in the Collateral Documents.

 

9.        Maximum Interest Rate.    In no event shall the interest rate payable with respect to this Note exceed the maximum rate of interest permitted to be charged under applicable law (the “Maximum Interest Rate”). If the amount of interest payable for the account of PBC Macquarie Lender exceeds the Maximum Interest Rate, the amount of interest payable for PBC Macquarie Lender’s account on such interest payment date shall automatically be reduced to the Maximum Interest Rate.

 

  

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10.      Amendments, Etc.        No amendment or waiver of any provision of this Note, and no consent to any departure by the Borrower herefrom, shall in any event be effective unless the same shall be in writing and signed by PBC Macquarie Lender, and then such waiver or consent shall he effective only in the specific instance and for the specific purpose for which given

 

11.      Expenses.        The Borrower hereby agrees upon demand to pay to PBC Macquarie Lender the amount of any and all reasonable fees and expenses in accordance with the terms set forth in the Loan Agreement.

 

12       Waivers; Remedies.

 

(a)       The Borrower hereby waives all applicable exemption rights, whether under any state constitution, homestead laws or otherwise, as well as any presentment for payment, demand, notice of dishonor and protest of this Note.

 

(b)      No failure on the part of PBC Macquarie Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

 

13.      Assignment.        This Note may be assigned in accordance with the assignment provisions set forth in the Loan Agreement; provided, however, that the right to principal of, and stated interest on this Note is not negotiable by endorsement of PBC Macquarie Lender or any assignee of PBC Macquarie Lender unless such endorsement is accompanied by the following actions of the Borrower:

 

(a)       The Borrower shall maintain a registry of the ownership of this Note (the “Registry”) at its principal office.

 

(b)      The Registry shall reflect PBC Digital Holdings, LLC as the original holder of this Note, and shall reflect such subsequent transferee as the Borrower shall receive notice thereof, by deliver to it of a certified copy of the assignment of the Note duly executed by the then current holder thereof.

 

(c)       Notices of the assignment of this Note shall be furnished by PBC Macquarie Lender (as reflected in the Registry) to the Borrower by certified or registered mail.

 

No transfer of this Note shall be valid unless reflected in the Registry in accordance with the provisions of the above paragraph.

 

14.      Severability.        The provisions of this Note shall be severable and the invalidity or unenforceability of any one or more of the provisions of this Note shall not affect the validity and enforceability of the other provisions.

 

  

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15.      No Setoffs.      No indebtedness evidenced by this Note shall be deemed to have been setoff or shall be setoff or compensated by all or part of any claim, cause of action, counterclaim or cross-claim, whether liquidated or unliquidated, which the Borrower may have or claim to have against PBC Macquarie Lender. Furthermore, in respect to the present indebtedness of, or any future indebtedness incurred by, the Borrower to PBC Macquarie Lender, the Borrower waives, to the fullest extent permitted by law, the benefits of any applicable law, regulation or procedure that substantially provides that, if (i) cross-demands for money have existed between persons at any point in time and (ii) neither demand was barred by the applicable statute of limitations and (iii) an action is thereafter commenced by one such person, then the other may assert in his answer the defense of payment in that the two demands are compensated so far as they equal each others, notwithstanding that an independent action asserting the claim would at the time of filing the answer be barred by the applicable statute of limitations.

 

16.      Loss, Theft, Destruction or Mutilation of Note.        In the event of the loss, theft or destruction of this Note, upon PBC Macquarie Lender’s written request, accompanied by an indemnification and/or security reasonably satisfactory to the Borrower, or in the event of the mutilation of this Note, upon PBC Macquarie Lender’s surrender to the Borrower of the mutilated Note, the Borrower shall execute and deliver to PBC Macquarie Lender (or any party that PBC Macquarie Lender designates), as the case may be, a new promissory note in form and content identical to this Note in lieu of the lost, stolen, destroyed or mutilated Note.

 

17.      Unconditional Payment.        If any payment received by PBC Macquarie Lender hereunder shall be deemed by a court of competent jurisdiction to have been a voidable preference or fraudulent conveyance under any bankruptcy, insolvency or other debtor relief law, then the obligation to make such payment shall survive any cancellation or satisfaction of this Note or return thereof to the Borrower and shall not be discharged or satisfied with any prior payment thereof or cancellation of this Note, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof, and such payment shall be immediately due and payable upon demand. No release of any security for this Note or any party liable for payment of this Note shall release or affect the liability of the Borrower or any other party who may become liable for payment of all or any part of the indebtedness evidenced by this Note. PBC Macquarie Lender may release any guarantor, surety or indemnitor of this Note from liability, in every instance without the consent of the Borrower hereunder and without waiving any rights which PBC Macquarie Lender may have hereunder or under any of the other Loan Documents or under applicable law or in equity.

 

18.      Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.

 

(a)       This Note shall be governed by, and construed in accordance with, the laws of the State of Delaware without regard to conflict of law principles that may cause the laws of another jurisdiction to apply.

 

  

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(b)       The Borrower hereby irrevocably consents to the exclusive jurisdiction of any state courts located within the State of Delaware or the United States District Court for the District of Delaware, in connection with any action or proceeding arising out of or relating to this Note or any document or instrument delivered pursuant to this Note or otherwise. In any such litigation, the Borrower waives, to the fullest extent it may effectively do so, personal service of any summons, complaint or other process and agrees that the service thereof may be made by certified or registered mail directed to the Borrower, at the Borrower’s address set forth on the signature page hereto. The Borrower hereby waives, to the fullest extent it may effectively do so, the defenses of forum non conveniens and improper venue.

 

(c)      The Borrower irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Note, or the actions of PBC Macquarie Lender in the negotiation, administration, performance or enforcement thereof.

 

[signature page attached]

 

  

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IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

 

	  	BORROWER:	 
	  	  	  	 
	  	DIGITAL DOMAIN HOLDINGS	 
	  	CORPORATION a Florida corporation	 
	 	 	 	 
	  	
By:

	/s/ John Textor  	 
	  	
Name:

	
John Textor

	 
	  	
Title:

	
CEO

	 
	  	
Address:

	
153 Gomez Rd

	 
	  	  	
Hobe Sowd, FL 33455

	 

 

Signature Page to PBC Macquarie Note

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