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                                                                   EXHIBIT 10.69

                         LIMITED FORBEARANCE AGREEMENT

     LIMITED FORBEARANCE AGREEMENT, dated as of January 11, 2001 among THE
KUSHNER-LOCKE COMPANY (the "Borrower"), its subsidiaries (the "Guarantors",
and together with the Borrower, the "Credit Parties"), the Lenders party to the
Credit Agreement defined below (the "Lenders") and THE CHASE MANHATTAN BANK
(formerly known as Chemical Bank), as Agent and as Fronting Bank for the
Lenders (the "Agent").

     The Borrower, the Guarantors, the Lenders and the Agent are parties to a
Credit, Security, Guaranty and Pledge Agreement, dated as of June 16, 1996, as
amended (the "Credit Agreement"). All capitalized terms not otherwise defined
herein are used as defined in the Credit Agreement.

     As set forth in Section 1 below, Defaults and Events of Default under the
Credit Agreement have occurred and are continuing. The borrower has also
advised the Agent that it intends to sell its film library and related
accounts receivable and has retained Houlihan, Lokey, Howard & Zukin, Inc.
("Houlihan Lokey") to advise and assist the Borrower in connection with such
proposed sale.

     In order to allow the Borrower additional time to prepare for the proposed
sale of its film library and related accounts receivable and to explore various
restructuring options, the Borrower has requested that the Agent and the
Lenders (i) forebear from applying collections in respect of the Credit
Parties' receivables to repayment of the Loans and (ii) release a portion of
such collections to fund operating expenses of the Credit Parties. In order to
induce the Agent and the Lenders to agree to such forbearance, the Credit
Parties have offered to make certain acknowledgments and enter into certain
agreements as hereinafter set forth.

     Accordingly, the parties hereby agree as follows:

     1.   Acknowledgments. The Credit Parties expressly acknowledge that
(i) Defaults and Events of Default are now continuing under the Credit
Agreement, including without limitation Defaults and Events of Defaults
resulting from the failure of the Borrower to make interest payments when due
and the failure of the Borrower to make principal repayments required by
Section 2.9(d) of the Credit Agreement, and (ii) as a consequence the Borrower
is not entitled to request any additional Loans and the Agent and the Lenders
are entitled to immediately accelerate the Loans and to exercise various other
remedies under the Credit Agreement and the other Fundamental Documents.

     2    Forbearance Period. For purposes of this Agreement, the term
"Forbearance Period" shall mean the period commencing upon satisfaction in full
of the conditions precedent set forth in Section 6 of this Agreement and ending
at 5 P.M. New York City time on January 31, 2001 (such date, as it may be
extended from time to time by written agreement of the Required Lenders, is
hereinafter referred to as the "Stated Expiration Date") or such earlier time
as any of the following shall occur (each a "Termination Event"):
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          (i) any other creditor of any Credit Party shall commence involuntary
bankruptcy proceedings against such Credit Party and such Credit Party shall not
have obtained, within three (3) Business Days after the commencement of such
involuntary bankruptcy proceedings, an order of the applicable bankruptcy court
approving this Agreement and authorizing the directing the Credit Parties to
fully perform their obligations hereunder;

          (ii) any other creditor of any Credit Party shall attempt to execute
a judgment, or obtain attachment on any asset of such Credit Party or otherwise
exercise any similar remedy against any asset of such Credit Party and three
(3) Business Days shall have elapsed after receipt by the Credit Parties of
written notice from the Agent stating that such event has occurred and will
constitute a Termination Event;


          (iii) any Credit Party shall commence a voluntary case under the
Bankruptcy Code or file a proceeding seeking protection under any other law for
the relief of debtors or any Credit Party shall have consented in writing or on
the record to an order for relief, or an order for relief shall have been
entered, in any involuntary bankruptcy case or proceeding brought against such
Credit Party;

          (iv) the Borrower shall make any payment of interest or principal to
any holder of Subordinated Debt on account of any Subordinated Debt;

          (v) any Event of Default of a type described in paragraphs (i), (j),
(m) or (n) of Section 7 of the Credit Agreement shall have occurred and three
(3) Business Days shall have elapsed after receipt by the Credit Parties of
written notice from the Agent stating that such event has occurred and will
constitute a Termination Event; or

          (vi) The Borrower or any Credit Party shall fail to timely comply
with any covenant or term of this Agreement and such non-compliance shall have
been cured within three (3) Business Days after written notice thereof has been
received by the Credit Parties.

So long as any Termination Event, or any event which with the giving of notice
and passage of time would constitute a Termination Event, shall have occurred
and be continuing, the Agent shall not be obligated to disburse any Collected
Funds pursuant to Section 5 below.

     3.   Collection of Funds. Notwithstanding the provisions of Section 2.9 or
8.7 of the Credit Agreement, any other provision of the Credit Agreement, any
other agreement to which any of the Credit Parties is a party, or any other
right which the Agent or any Lender may have (whether under contract or any
applicable principle of law or equity), so long as the Forbearance Period shall
be continuing, all amounts currently on deposit (including without limitation
deposits of general or special, time or demand, provisional or final natures) in
the Cash Collateral Account, the Chemical Clearing Account, the Concentration
Account, any Collection Account, or any other account of the Borrower or any
other Credit Party maintained at the office of the Agent (all of the foregoing
accounts being referred to herein collectively as the "Chase Accounts"), and all
collections in respect of the Credit Parties' receivables and all other proceeds
of Collateral which are deposited into a Chase Account or otherwise come into
the possession or control of the Agent shall not be offset against or applied to
the payment of the Loans or any



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other Obligation, debt or liability to the Agent or any Lender, and shall
instead be held by the Agent in the Cash Collateral Account. All such funds so
held in the Cash Collateral Account shall be referred to herein as the
"Collected Funds".

     4.   Limitation on Disbursements. So long as the Forbearance Period shall
be continuing, the Borrower and the other Credit Parties agree that they will
limit their cash disbursements during each week to the amounts set forth on
the Disbursement Schedule attached hereto as Exhibit A (the "Disbursement
Schedule"); provided, that if the actual amount of cash disbursements in any
week for any category is less than the maximum amount permitted for such week
as set forth in the Disbursement Schedule, then such unused excess may be
carried over and used in any subsequent week during the Forbearance Period.

     5.   Application of Funds in Chase Accounts. So long as the Forbearance
Period shall be continuing and no event which with the giving of notice and
passage of time would constitute a Termination Event shall have occurred and be
continuing, the Agent shall disburse the Collected Funds as follows:

          (i)  upon the request of Borrower, to the Borrower in any given week,
solely to the extent that amounts held in the CNB Account (as defined in
Section 7 below) and the Credit Parties' various operating accounts at Comerica
Bank--California (collectively, the "Comerica Accounts") are insufficient to
pay all actual disbursements for such week which are permitted to be made in
accordance with Section 4 hereof;

          (ii) in such amounts as the Borrower may hereafter specifically
request in writing be disbursed to the Agent (for the benefit of the Lenders)
for application toward the payment of the Obligations; and

          (iii) to pay the reasonable expenses of Morgan, Lewis & Bockius LLP,
counsel to the Agent, Ernst & Young LLP ("E&Y"), and other professionals
retained by the Agent in connection with the Credit Agreement, upon receipt by
the Borrower of reasonable documentation of such expenses.

At any time after the termination of the Forbearance Period for any reason
whatsoever, the Agent shall apply any balance in the Chase Accounts to the
extent required by the Credit Agreement.

     6.   Conditions to Effectiveness. The provisions of Sections 3, 4, and 5 of
this Agreement shall not become effective unless and until each of the
following conditions have been satisfied; (i) the Agent shall have received
counterparts of this Agreement executed by each of the parties hereto; and (ii)
the Agent shall have received for deposit in the Cash Collateral Account of all
checks, drafts or other instruments currently in the possession or control of
any Credit Party constituting collections in respect of the Agreement dated
March 10, 2000 (the "United Releasing Distribution Agreement") between the
Borrower and United Releasing International, Ltd. ("United Releasing").

     7.   City National Bank Instructions. The parties agree that any amounts
held by City National Bank on behalf of the Borrower in any and all accounts at
its offices (collectively, the "CNB Account") shall be first used by the
Borrower for payment of the scheduled disbursements set forth in the
Disbursement Schedule. The Borrower agrees that within three (3) Business

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Days of the execution of this Agreement, it will cause to be delivered to the
Agent a copy of irrevocable written instructions, in form reasonably acceptable
to the Agent, from the Borrower to City National Bank (and will use its best
efforts to cause such instructions to be duly acknowledged by City National
Bank) instructing City National Bank to honor checks drawn by Borrower upon the
CNB Account to the extent of the funds on deposit therein and to immediately
remit to the Cash Collateral Account the proceeds of any payments received from
account debtors which have not already been credited to the CNB Account,
including any payment received from United Releasing in respect of the United
Releasing Distribution Agreement, all as required by Section 8.3(c) of the
Credit Agreement. The Agent agrees that it will cooperate with the Borrower in
a timely manner in executing the irrevocable written instructions to City
National Bank described in the immediately proceeding sentence.

     8.   Final Consultants. The Credit Parties acknowledge that E&Y has been
retained on behalf of the Agent and the Lenders for the purpose of reviewing
and verifying the accuracy of the Borrowing Base Certificates, disbursements
schedules, and various other reports delivered by the Borrower and the
other Credit Parties to the Agent and the Lenders pursuant to the Credit
Agreement monitoring the Credit Parties' compliance with this Agreement, and
otherwise assisting the Agent and the Lenders in connection with the Credit
Agreement. The Credit Parties hereby agree to make available to representatives
of E&Y all such non-privileged books, accounts, records and other papers as may
be requested by such representatives, and shall permit such representatives of
E&Y to discuss the affairs, finances and accounts with, and be advised as to
the same by, officers of the Borrower and the other Credit Parties and their
outside accountants, PricewaterhouseCoopers, all at reasonable times. The
Credit Parties acknowledge that pursuant to the Credit Agreement, the Borrower
is obligated to pay the fees and expenses of E&Y and that such obligation is
included in the "Obligations" as defined in the Credit Agreement.

     9.   Restructuring/Crisis Management Advisor. The Borrower covenants and
agrees with the Agent and the Lenders that no later than fourteen (14) days
after the date hereof it shall retain an experienced and reputable
restructuring/crisis management advisor (reasonably acceptable to the Agent) to
explore restructuring and other options available to the Borrower and its
subsidiaries and to assist the Borrower and its subsidiaries with their cash
management/cash conservation activities.

     10.  Plan of Divestiture. In connection with the proposed sale of its film
library and related accounts receivable, the Borrower and Credit Parties each
agree that on or before January 26, 2001, it will distribute, or cause to be
distributed, to prospective purchasers identified by the Borrower and Houlihan
Lokey, an offering circular with respect to the sale of its film library and
related accounts receivable of the Borrower and its subsidiaries, with copies
of such circular to the Agent and its counsel.

     11.  Other Bank Accounts; Remittance of Payments from Account Debtors.
The Borrower and the Credit Parties hereby agree that none of them will open or
maintain any bank account other than (i) the Chase Accounts, (ii) the CNB
Account, (iii) the various operating accounts at Comerica Bank-California, and
(iv) production accounts relating to projects currently in production.
Furthermore, the Borrower and the Credit Parties covenant and agree that they
will continue to comply with the terms of Section 8.3 and 5.18(d) of the Credit
Agreement.

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     12.  Negotiations. The Agent, the Lenders and the Borrower have commenced
negotiations concerning the Loans and the Credit Agreement. The Agent, the
Lenders and the Borrower each plan to discuss and negotiate various courses of
action in an attempt to reach certain agreements with respect to the Loans. The
Agent, the Lenders or the Borrower (or any of them), each in their sole
discretion, may terminate these negotiations at any time and for any reason,
without any liability or obligations for such termination or in connection with
the negotiations.

     13. Requirement for Written Documentation; Amendments. The Agent, the
Lenders and the Borrower acknowledge that the negotiations have been, and may
continue to be, complex. While the Agent, the Lenders and the Borrower may
reach agreement on one or more preliminary issues, it is hereby agreed that
unless definitive documentation is executed by the Agent and the Lenders, by
the Borrower, and by any other parties required by such definitive
documentation, neither the Agent, the Lenders nor the Borrower shall be bound
by any such agreements. No amendments or modifications may be made to this
Agreement, other than in writing.

     14. No Commitment or Waiver; No Prejudice. This Agreement does not (i)
represent a commitment by the Agent or any Lender to make any new loans or
financial accommodations to the Borrower, (ii) represent a commitment by the
Agent or any Lender to restructure or extend or make any financial
accommodations or, except as expressly set forth above, forbear on any Loans or
(iii) except as otherwise provided herein, represent an intention by the Agent
or any Lender to waive, modify or amend any of its rights or remedies with
respect to the Loans. Any discussions on, prior to or subsequent to the date
hereof among the parties hereto, are for negotiation purposes only and have
been and will be without prejudice to the Agent's and the Lenders' rights and
remedies under the Fundamental Documents, at law or in equity.

     15. Due Diligence. In addition to all other conditions set forth herein,
the parties hereto acknowledge that the Agent's and the Lenders' willingness to
enter into any other documents is subject to the Agent's and Lenders'
continuing due diligence and review of documents delivered or to be delivered
by or for the benefits of the Borrower to the Agent and the Lenders.

     16. Entire Agreement. This Agreement constitutes the entire agreement of
the parties concerning the subject matter hereof and supersedes any prior or
contemporaneous representations or agreements, either oral or written, not
contained herein.

     17. Full Force and Effect. Except as otherwise expressly set forth herein,
the Credit Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof.

     18. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

     19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.


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     20.  Headings. The headings of this Agreement are for the purposes of
reference only and shall not affect the construction of this greement.

     21.  Notices. Notices and other communications provided for herein shall be
in writing and shall be delivered or mailed (or in the case of facsimile
communication, if delivered by such facsimile communication equipment)
addressed, if to the Agent, to it at 380 Madison Avenue, 9th floor, New York,
New York, 10017, Attention: Mary Ellen Egbert, Facsimile No. 212-622-4834, with
a copy to Chase Securities Inc., 1800 Century Park East, Suite 400, Los Angeles,
California 90067, Attention: Christa Thomas, Facsimile: 310-788-5628, and a copy
to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178,
Attention: Richard S. Petretti, Esq. and Menachem Zelmanovitz, Esq. Facsimile:
212-309-6273; or if to the Borrower and Guarantors, to them at 11601 Wilshire
Boulevard, 21st floor, Los Angeles, California 90025, Attention: Peter Locke and
Donald Kushner, Facsimile: 310-481-2094, with a copy to Stutman, Treister &
Glatt, 3699 Wilshire Boulevard, Suite 900, Los Angeles, California 90010,
Attention: Isaac Pachulski, Esq. Facsimile: 213-251-5288, or if to a Lender, to
it at its address set forth on its signature page hereto, or such other address
as such party may from time to time designate by giving written notice to the
other parties hereunder. Notices delivered to the Borrower in accordance with
the foregoing sentence, shall also be deemed to have been duly delivered to each
of the guarantors.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all as of the date and year
first above written.

                                        BORROWER:

                                        THE KUSHNER-LOCKE COMPANY



                                        By: /s/ PETER LOCKE
                                            ------------------------------------
                                            Name:  Peter Locke
                                            Title: CO-CEO


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                                   GUARANTORS:

                                   KL PRODUCTIONS, INC.
                                   POST AND PRODUCTION SERVICES, INC.
                                   TWILIGHT ENTERTAINMENT, INC.
                                   KLF GUILD CO.
                                   KLTV DEVELOPMENT CO.
                                   KUSHNER-LOCKE INTERNATIONAL, INC.
                                   KL INTERACTIVE MEDIA, INC.
                                   DAYTON WAY PICTURES III, INC.


                                   By: /s/ PETER LOCKE
                                      ---------------------------------
                                      Name: Peter Locke
                                      Title:


                                   KLC/NEW CITY
                                   By its General Partner
                                   THE KUSHNER-LOCKE COMPANY


                                   By: /s/ PETER LOCKE
                                      ---------------------------------
                                      Name: Peter Locke
                                      Title:



                                   LENDERS:

Executed in                        THE CHASE MANHATTAN BANK (formerly
New York, New York                 known as Chemical Bank), as Agent



                                   By:
                                      ---------------------------------
                                      Name:
                                      Title:


                                   NIB CAPITAL BANK, N.V. (formerly known as
                                   De Nationale Investeringsbank N.V)



                                   By:
                                      ---------------------------------
                                      Name:
                                      Title:




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                                        COMERICA BANK -- CALIFORNIA

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:



                                        FAR EAST NATIONAL BANK

                                        By:
                                            ------------------------------------
                                            Name:
                                            Title:


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