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Digital Domain Media Group Senior Lenders Agree To Limited Forbearance

Digital Domain Media Group, Inc. (NYSE: DDMG) (the “Company”) today announced that each of the holders of its six senior secured convertible notes in the aggregate original principal amount of $35 million issued by the Company on May 7, 2012, (collectively, the “Senior Notes”) has agreed to forbear (each, a “Forbearance”) from enforcing its remedies under its Senior Note (and the security and other agreements relating thereto) until such time as it elects to withdraw such Forbearance on not less than 48 hours’ advance notice to the Company.

As previously announced, the Company is continuing to evaluate its alternatives, including (i), in conjunction with the holders of the Senior Notes, a term sheet received from an institutional investor proposing a senior secured debt financing transaction that would potentially refinance the Company’s obligations under the Senior Notes as well as provide operating funds to the Company, and (ii) a term sheet received from a business partner of the Company relating to a significant equity investment in an operating subsidiary of the Company. There can be no assurance, however, that any transaction, will be consummated, or, if consummated, that any transaction will be on terms satisfactory to the Company. As previously disclosed, an inability to quickly access additional sources of liquidity to fund the Company’s current operating cash needs would materially adversely affect its financial condition and would require it to seek relief or protection from its creditors.

As previously disclosed by the Company in a Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on September 4, 2012, each of the holders of the Senior Notes advised the Company on August 21, 2012, that its Senior Note is in default. In the event that any holder of the Senior Notes withdraws its Forbearance, such holder may elect to pursue all of its available remedies under its Senior Note (and the security and other agreements relating thereto) arising as the result of an Event of Default (as defined in such Senior Note), including, without limitation, foreclosing on the first-priority security interest in all of the personal property of the Company and its subsidiaries held by the Collateral Agent (as defined in such Senior Note) for the benefit of the holders of the Senior Notes.

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