Effective January 1, 2010, the 2010 Stock Plan (the "Plan") was adopted. The Plan provides (a) officers and other employees with opportunities to purchase Common Stock pursuant to options granted which qualify as incentive stock options ("ISOs"); (b) directors, officers, employees and consultants with opportunities to purchase Common Stock pursuant to options granted which do not qualify as ISOs; (c) directors, officers, employees and consultants with awards of Common Stock; (d) directors, officers, employees and consultants opportunities to make direct purchases of Common Stock; and (e) non-employee directors with the opportunities to purchase Common Stock ("Non-Discretionary Options").

The Plan may be administered by the entire Board of Directors ("Board") or by a committee (the "Committee"). Option awards and purchases under the Plan are to be issued at no less than 100% of the fair market value of the underlying shares on the grant date, or 110% in the case of a ten-percent stockholder. The terms and vesting period for each grant will be set forth in the individual award agreements. Options shall be exercisable for a period of ten years from the date of grant, except where a shorter period is required by the Code for certain ISOs or where the Board or Committee selects a shorter period at the time of any discretionary period. Options are scheduled to expire ten years from the date of grant, five years in the case of a ten-percent stockholder. The Common Stock subject to the Stock Rights shall be authorized by unissued shares of Common Stock, par value $0.01, or shares of Common Stock reacquired by the Company in any manner, including purchase, forfeiture or otherwise. The aggregate number of shares of the Company's Common Stock which were issuable pursuant to the Plan was 5,000,000. On July 1, 2011, the Company's Board of Directors approved an amendment to the Plan that increases the aggregate number of shares reserved thereunder to 12,500,000.

As described in Notes 16 and 18, an Amended Agreement was executed with the Commercial Lender and Palm Beach Capital Fund 1 and a personal guaranty was provided by the Company's Chairman and Chief Executive Officer. In connection with this guarantee, a warrant was issued to the Company's Chairman and Chief Executive Officer to purchase 839,105 shares of Common Stock pursuant to the Plan. The fair value of the warrant issued in connection with this Amended Agreement was $3.8 million, which was recorded as Deferred debt issuance costs and Additional paid-in capital in the accompanying consolidated balance sheet at December 31, 2010, which is being amortized to interest expense over the remaining term of the Amended Agreement (including the optional extension period) using the effective interest method (see Note 16). During February and March 2011, this individual exercised the warrant, was issued 839,105 shares of the Company's Common Stock and sold 591,900 of such shares to an unrelated party (see Notes 17 and 18). As this warrant was issued to the Company's Chairman and Chief Executive Officer, this transaction is deemed to be a related party transaction (see Note 22).

On January 5, 2011, the Company granted Digital Domain's Chief Executive Officer the option to purchase 517,000 shares of Common Stock at $0.01 per share that vested immediately and the option to purchase an additional 300,000 shares at $3.00 per share vesting quarterly over two years pursuant to the Plan. As these options were issued to Digital Domain's Chief Executive Officer, these transactions are deemed to be related party transactions (see Note 22). During the year ended December 31, 2011, this individual resigned from such position and continues to serve the Company as Production and Studio Development Executive Advisor. As a result of this change in status, the compensation expense related to the remaining unvested stock options will be revalued as a modification and accounted for under FASB ASC Topic 500-50, Equity-Based Payments to Non-Employees, which requires non-employee options to be measured at fair value at each interim reporting period through the requisite service period.

During the year ended December 31, 2011, additional stock option grants were awarded to three named executive officers to purchase an aggregate of 1,500,000 shares of the Company's Common Stock at $9.63 per share, such options vesting and expiring in accordance with the individual grant agreements.

Options under the Plan are accounted for in accordance with FASB ASC Topic 718, Compensation—Stock Compensation. The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model. The expected term of all options granted represents the time that the options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the options is based on the U.S. Treasury's yield curve in effect at the time of the grant.

For the years ended December 31, 2011 and 2010, volatility ranged from 46.1% to 78.2% and from 43.5% to 51.7%, respectively. For the years ended December 31, 2011 and 2010, the expected term in years was 6.1 years and 9.7 years, respectively, there were no expected dividends, and the risk free rate ranged from 0.4% to 3.5% and 0.8% to 2.9%, respectively.

			Weighted- average Exercise Price per Share

Outstanding at January 1, 2010	—		$	—	—
Granted	2,805,762			2.39	8.1

Outstanding at December 31, 2010	2,805,762			2.39	8.1
Granted	3,650,842			7.05	9.0
Exercised	(839,105	)		0.01	0.0
Forfeited / Expired	(11,321	)		5.10	—

Outstanding at December 31, 2011	5,606,178		$	5.78	8.0

Vested or expected to vest at December 31, 2011	5,606,178		$	5.78	8.0

Exercisable at December 31, 2011	2,447,102		$	3.79	7.5

For the years ended December 31, 2011 and 2010, the estimated grant date fair value of the options granted was $4.89 and $4.98, respectively. No options were cancelled or exercised during the year ended December 31, 2010. There were 11,321 options cancelled and 839,105 options were exercised by the Company's Chairman and Chief Executive Officer as described above during the year ended December 31, 2011. At December 31, 2010, of the 2,805,762 options granted to purchase shares of the Company's Common Stock, 684,526 options were designated to be ISOs to the extent permissible. At December 31, 2011, of the 6,456,604 options granted to purchase shares of the Company's Common Stock, 859,526 were designated to be ISOs to the extent permissible.

There was intrinsic value of options vested or expected to vest and exercisable at December 31, 2011 and 2010 of $10.0 million and $6.2 million, respectively.

Exercise prices for options outstanding as of December 31, 2011 and 2010 ranged from $0.01 to $9.63 and $0.01 to $5.10, respectively. The weighted-average remaining contractual life of those options is 8.0 years and 8.1 years, respectively.

As of December 31, 2011 and 2010, there was $13.1 million and $4.4 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan, respectively. That cost is expected to be recognized over a weighted-average period of 2.4 years and 1.8 years, respectively. The total fair value of shares vested during the years ended December 31, 2011 and 2010 was $13.3 million and $5.2 million, respectively.

Total stock option compensation expense for this plan during the year ended December 31, 2011 and 2010 was $10.5 million and $1.0 million, respectively. No share-based compensation costs have been capitalized as an asset.

As of December 31, 2011, Digital Domain has two share-based compensation plans, which are described below. The compensation cost that has been charged against continuing operations related to stock options was $2.8 million, $0.9 million, $0.3 million, $0.8 million for the years ended December 31, 2011 and 2010, the 2009 Consolidated Period and the 2009 Predecessor Period, respectively. The compensation cost charged against the Discontinued Operations related to stock options was $nil, $nil, $nil and $47,000 for the year ended December 31, 2011 and 2010, the 2009 Consolidated Period and the 2009 Predecessor Period, respectively. Digital Domain has not capitalized as an asset any stock-based compensation costs.

Digital Domain General Common Stock Equity Plan—In September 2006, the Digital Domain 2006 General Common Stock Equity Plan (the "Digital Domain Equity Plan") was established to grant options or restricted stock to current, prospective and former employees, directors and consultants for up to 2,382,861 shares of Digital Domain's Common Stock. On March 26, 2008, Digital Domain's Board of Directors approved an amendment to the Digital Domain Equity Plan that (i) increases the aggregate number of shares reserved thereunder to 2,716,195 and (ii) provides for an annual increase to such number of shares to be added on the first day of each fiscal year equal to the lesser of (a) 333,333 shares, (b) 3.0% of the aggregate number of shares of Digital Domain's Common Stock outstanding on such date, or (c) a lesser amount determined by Digital Domain's Board of Directors. As of December 31, 2011, 1,562,207 shares were available under the Digital Domain Equity Plan for future grants of options or restricted stock.

Option awards under the Digital Domain Equity Plan are to be issued at no less than 100% of the fair market value of the underlying shares on the grant date. Options generally vest semi-annually in eight equal installments over a four-year period from the grant date, provided there has not been a termination of the participant's service as of any vesting date. Options are scheduled to expire ten years from the date of grant, five years in the case of a ten-percent stockholder.

Restricted stock awards ("RSAs") under the Digital Domain Equity Plan may not be issued for consideration less than 85% (100% if granted to a ten-percent stockholder) of the fair market value of the underlying shares on the grant date or on the date the purchase is completed. The terms and vesting period for each RSA will be set forth in the individual award agreements. However, the award cannot have an expiration date that is more than ten years after its grant date.

For the year ended December 31, 2011 and 2010, the 2009 Consolidated Period and the 2009 Predecessor Period there have been no issuances of RSAs under the Digital Domain Equity Plan. There were RSAs that were granted outside of the Digital Domain Equity Plan in connection with the acquisition of The Foundry which are discussed further below.

During June 2011, Digital Domain granted the Company's Chairman and Chief Executive Officer the option to purchase 1,500,000 shares of Digital Domain's Common Stock at $0.001 per share that vested immediately pursuant to the Digital Domain Equity Plan and recorded $2.5 million of stock option compensation expense. This grant was in recognition of services rendered in this individual's capacity as Digital Domain's Chairman. The grant was immediately exercised and, in July 2011, this individual exchanged the Digital Domain Common Stock for 934,580 shares of the Company's Common Stock. As this option, exercise and exchange were contemplated prior to June 30, 2011 and transacted by the Company's Chairman and Chief Executive Officer, in accordance with FASB ASC Subparagraph 855-10-25-1, the Company recorded an additional $6.5 million of stock option compensation expense related to the exchange of the shares of Digital Domain Common Stock into the Company's Common Stock in June 2011. However, in accordance with FASB ASC Subparagraph 855-10-25-2, the Company did not record the exchange for purposes of determining outstanding common stock until July 2011. See Notes 2, 4, 18 and 22 for additional disclosures.

Options under the Digital Domain Equity Plan are accounted for in accordance with FASB ASC Topic 718, Compensation—Stock Compensation. The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model that uses the assumptions noted in the table below. The stock price volatility used in the valuation model is based on the historical volatilities of public companies that are comparable to Digital Domain in type of business and size of revenue consistent with the expected lives of the stock options because Digital Domain believes this is a reasonable representation of future volatility. Digital Domain granted no options after December 31, 2008, with the exception of the grant awarded to the Company's Chairman and Chief Executive Officer discussed above, and estimated the expected life of each stock option granted using the short-cut method permissible under the Securities and Exchange Commission Staff Accounting Bulletin Topic 14, Share-Based Payment ("SAB 107"), which utilizes the weighted-average expected life of each tranche of the stock option, determined based on the sum of each tranche's vesting period plus one-half of the period from the vesting date of each tranche to the stock option's expiration. The risk-free interest rate is based on the implied yield available on U.S. Treasury securities with a term equivalent to the expected life of the stock option. Additionally, Digital Domain uses historical data and management judgment to estimate stock option exercise behavior and employee turnover rates to estimate the number of stock option awards that will eventually vest.

The fair value of share-based payment awards was estimated using the Black-Scholes-Merton option pricing model with the following assumptions and weighted-average fair value for the options issued:

A summary of option activity and related information under the Digital Domain Equity Plan is as follows:

			Weighted- average Exercise Price per Share

Outstanding at December 31, 2009	1,212,314		$	7.26	7.4
Granted	—
Forfeited / Expired	(443,018	)	$	7.64	—

Outstanding at December 31, 2010	769,296		$	7.04	6.3
Granted	1,500,000		$	0.00	—
Exercised	(1,500,000	)	$	0.00	—
Forfeited / Expired	(115,309	)	$	8.15	—

Outstanding at December 31, 2011	653,987		$	6.85	5.2

Vested or expected to vest at December 31, 2011	653,154		$	6.85	5.2

Exercisable at December 31, 2011	652,947		$	6.86	5.2

There was no intrinsic value of options outstanding, vested or expected to vest, and exercisable at December 31, 2011 and 2010, as the estimated fair value of Digital Domain's Common Stock was less than the exercise price of those options.

Exercise prices for options outstanding as of December 31, 2011 and 2010 ranged from $6.00 to $8.40 for each period. The weighted-average remaining contractual life of those options is 5.2 years and 6.3 years, respectively.

As of December 31, 2011 and 2010, there was $nil and $0.4 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Digital Domain Equity Plan, respectively. That cost is expected to be recognized over a weighted-average period of 0.0 years and 0.6 years, respectively. The total fair value of shares vested during the years ended December 31, 2011 and 2010, the 2009 Consolidated Period and the 2009 Predecessor Period was $2.9 million, $0.7 million, $1.1 million, $0.9 million, respectively.

Digital Domain Productions' Stock Option Plan—Digital Domain Productions' 1995 Stock Option Plan (the "Digital Domain Productions Plan") authorized the grant of options to employees, directors, consultants and advisors of Digital Domain Productions for up to 14,143,921 shares of Digital Domain Productions' Common Stock. The options were issued at exercise prices greater than or equal to the estimated fair value of the Digital Domain Productions' Common Stock as of the grant date, vest over a four-year period and expire ten years from the date of grant or at such earlier date as the Board of Directors may otherwise specifically determine in granting such option. As of December 31, 2006, the Digital Domain Productions Plan had expired and therefore, there will be no further grants under this plan. Any options exercised will create a non-controlling interest in Digital Domain Productions.

A summary of option activity and related information under the Digital Domain Productions Plan is as follows:

			Weighted- average Exercise Price per Share

Outstanding at December 31, 2009	441,000		$	0.82
Forfeited / Expired	(132,000	)	$	1.10

Outstanding at December 31, 2010	309,000		$	0.75
Forfeited / Expired	(114,250	)	$	0.86

Outstanding at December 31, 2011	194,750		$	0.70

Vested or expected to vest at December 31, 2011	194,750		$	0.70

Exercisable at December 31, 2011	194,750		$	0.70

There was no intrinsic value of options outstanding, vested or expected to vest, and exercisable at December 31, 2011 and 2010 as the estimated fair value of Digital Domain Productions' Common Stock was less than the exercise price of those options.

Exercise prices for options outstanding as of December 31, 2011 and 2010 was $0.70 for each period. The weighted-average remaining contractual life of those options is 1.2 years and 1.9 years, respectively.

Digital Domain Restricted Stock—In connection with the acquisition of The Foundry in March 2007, Digital Domain issued 522,869 shares of restricted stock as a portion of the purchase consideration. This restricted stock was not issued under the Digital Domain Equity Plan. The restricted common stock has an aggregate value of $3.9 million based on a price per share equal to the restricted stock value of $7.50 per share.

The restricted stock (1) vests annually over three years, (2) is non-transferable and (3) is subject to adjustment for subdivisions, combinations or other corporate transactions that impact the common shares. In addition, all stockholders except for one were required to remain employed (the "continuing employees") in order to receive the rights under the restricted stock agreements. The restricted stock issued to the continuing employees represents compensation for post-acquisition services and is recognized as compensation expense ratably over the period the restricted stock vests.

As further discussed in Note 23, Digital Domain sold The Foundry in June 2009. Digital Domain has determined that the restricted stock will continue to be issued in the amounts and at the dates as originally stipulated (including the final issuance of such restricted stock in 2010). Since the individuals that will be issued restricted stock no longer performed services for Digital Domain after the sale of The Foundry, during the 2009 Predecessor Period, Digital Domain recognized the remaining unrecognized compensation expense. During the 2009 Predecessor Period, the restricted stock awards ("RSAs") resulted in an expense of $1.6 million and $1.3 million, respectively. All of this expense is included in the Discontinued Operations in the accompanying consolidated statements of operations.

			Weighted- Average Grant-Date Fair Value Per Share

Unvested RSAs outstanding—December 31, 2008	348,680		$	7.50
Vested	(165,956	)	$	7.50

Unvested RSAs outstanding—December 31, 2009	182,724		$	7.50
Vested	(182,724	)	$	7.50

Unvested RSAs outstanding—December 31, 2010	—			—

RSAs expected to vest—December 31, 2010	—			—