POINT.360




SECURED PROMISSORY
NOTE




$934,063.73.
              November
      1, 2010Burbank,
      California





FOR VALUE
RECEIVED, POINT.360, a California corporation (“Company”), promises to pay to
the order of TROYGOULD PC, a California Professional corporation (the “Holder”), the principal sum of
Nine Hundred Thirty-Four Thousand Sixty-Three and 73/100 Dollars ($ 934,063.73),
plus interest thereon from the date hereof, at the rate of 3% per
annum.    This Note represents the outstanding balance of
all unpaid invoices for litigation work performed by Holder for Company through
September 30, 2010, which have not been paid in full (“Accrued
Invoices”).




The
payment of this Note, including interest accrued thereon, is secured pursuant to
the terms of that certain (i) security agreement, dated as of the date hereof,
by and between the Company and Holder covering all of the assets of the Company
(the “Security
Agreement”) and (ii) a deed of trust, dated as of the date hereof, by the
Company as trustor in favor of the Holder as beneficiary covering two separate
parcels of improved real property located in Los Angeles County,
California.  ADDITIONAL RIGHTS OF THE HOLDER ARE SET FORTH IN THE
SECURITY AGREEMENT AND THE DEED OF TRUST.




The
following sets forth the rights of the Holder and the terms to which this Note
is subject, and to which the Holder, by the acceptance of this Note,
agrees:




1.           Definitions.  As
used in this Note, the following capitalized terms have the following
meanings:




1.1           “Cash
Proceeds Event” shall mean any divestiture, financing, recapitalization, sale of
securities of the Company or other transaction not in the ordinary course of
business that results in cash proceeds to the
Company.  Notwithstanding for foregoing, any financing or other
transaction pursuant to which Haig S. Bagerdjian acts in the capacity as a
principal or a guarantor of all or any portion of the cash proceeds to the
Company, shall be expressly excluded from the definition of a Cash Proceeds
Event.




1.2           “Company
Sale” means any transaction whereby (a) the Company merges or consolidates with
any Person or Persons in a transaction in which the Company is not the surviving
entity; or (b) the Company sells substantially all of it assets.




1.3           “Contingent
Assets” shall mean the Holthouse Claim and the IVC/Burbank Lease
Renegotiation.




1.4           “Deed
of Trust” shall mean the deed of trust described in the introductory paragraph
of this Note.




1.5           “Event
of Default” has the meaning given in Section 4 hereof.





1.6           “Holder”
shall mean the Person specified in the introductory paragraph of this Note or
any Person to whom this Note is endorsed or assigned.




1.7           “Holthouse
Claim” shall mean a claim that the Company has asserted against Holthouse Carlin
& Van Trigt LLP on account of a tax matter alleged to have been improperly
handled by the Holthouse Firm.




1.8           “IVC/Burbank
Lease Renegotiation” shall mean current renegotiation by Company with its
landlord over its IVC building lease wherein Company expects to recoup a
significant portion of prior rent and/or other payments from its
landlord.




1.9           “Note”
shall mean this Note.




1.10           “Person” means an individual, a sole
proprietorship, a partnership, a corporation, a limited liability company, a
limited liability partnership, an association, an institution, a joint stock
company, a trust, a joint venture, an unincorporated organization, other entity
or a governmental entity.




1.11           “Security
Agreement” shall mean the agreement described in the introductory paragraph of
this Note.




1.12           “Security
Interest” has the meaning given in Section 3.1.




2.           Payments.




2.1           Interest.Interest shall accrue on
this Note at the rate of three percent (3.0%) per annum and shall be computed on
the basis of a 365-day year for the actual number of days elapsed.




2.2           Minimum
Payments.  Company shall make an initial payment of principal
and interest to Holder in the amount of Forty Thousand Dollars ($40,000.00)
concurrently with execution of this Note.  Thereafter, Company shall
make monthly payments of principal and interest to Holder in the minimum amount
of Twenty Thousand Dollars ($20,000.00) on the first day of each and every
month, commencing December 1, 2010, and continuing until all accrued but unpaid
interest and the unpaid principal balance of this Note have been paid in
full.  The Company shall, commencing with the end of the fourth
calendar quarter of 2010, and each calendar quarter thereafter review in good
faith with Holder its projected cash flow for the next calendar quarter to
determine if it can reasonably increase the amount of the minimum monthly
payments required under this Paragraph 2.2.  Any such increased
minimum monthly payments shall then be applicable for the ensuing calendar
quarter.  The projected cash flow shall be determined in good faith by
Company and in accordance with its usual and customary budgeting
standards.


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2.3           Contingent
Payments.  Immediately upon the receipt of cash by Company from
any of the Contingent Assets, Company shall make a payment on the outstanding
principal balance of this Note equal to (i) 20% of the unrestricted cash
received by the Company from the IVC/Burbank Lease Renegotiation and (ii)
33-1/3% of any settlement amounts received in cash on the Holthouse
Claim.  These payments of principal will be applied against the last
amounts due under this Note and shall not satisfy the minimum monthly payments
required under Paragraph 2.2 above.  In the event of a Cash Proceeds
Event (other than a financing from Haig Bagerdjian) in which the Holder does not
receive at least 20% of the proceeds as a prepayment of this Note due to a good
faith determination by Company that its financial condition does not enable it
to make such payment to Holder, the cash portion from the Contingent Assets
payable to Holder in each case shall increase to 50%.  Payments
pursuant to this Paragraph 2.3 shall in no event exceed the then remaining
unpaid balance of principal and accrued interest on this Note.




2.4           Voluntary
Prepayment.  Company may prepay this Note in whole or in part
at any time without penalty or premium.




2.4.1                      One Year
Payoff.  If Company is able to pay this Note in full (including
any additional amounts owing to Holder pursuant to the terms of the Security
Agreement or Deed of Trust for subsequently Accrued Invoices), on or before
October 1, 2011, all interest accrued for the year will be forgiven and waived
and the original principal amount will be reduced by 12-1/2%.




2.4.2                      Eighteen Month
Payoff.  If Company is able to pay this Note in full (including
any additional amounts owing to Holder pursuant to the terms of the Security
Agreement or Deed of Trust for subsequently Accrued Invoices), after October 1,
2011, but on or before April 1, 2012, all interest for the eighteen months will
be forgiven and waived and the original principal amount will be reduced by
6.0%




2.5           Priority of
Payments.All payments made by
Company hereunder (including, without limitation, any prepayments) shall be
applied first to the payment of expenses due under this Note, if any, second to
interest accrued on this Note, and third to the payment of principal on this
Note.




2.6           Company
Sale.  Upon completion of any Company Sale the entire remaining
unpaid principal balance of this Note and all accrued but unpaid interest
thereon shall become immediately due and payable in full.




2.7           Financial
Documentation.  Company will provide the Holder with detailed
documentation to support its determinations described in Paragraphs 2.2 and 2.3
above




3.           Security
Interest and Deed of Trust.




3.1           Security Interest. To
secure the prompt and complete payment and performance when due (whether at
stated maturity, by acceleration or otherwise) of any and all of the obligations
owed to the Holder under this Note, Company grants to the Holder a lien on, and
security interest on all of the assets of Company (the “Security Interest”) pursuant
to the terms of the Security Agreement.  Such Security Agreement shall
be subject to the terms and potential seniority of any and all liens or security
interests that predate it and which Security Interest shall be subject to and
junior in position to any Company financings for working capital or the purchase
of real property or equipment from an institutional source or any similar
financing from or guaranteed by Haig S. Bagerdjian.


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3.2           Deed of Trust. To
secure the prompt and complete payment and performance when due (whether at
stated maturity, by acceleration or otherwise) of any and all of the obligations
owed to the Holder under this Note, Company grants to the Holder a lien on, two
separate and distinct improved parcels or real property as evidenced by the Deed
of Trust that will be recorded in the real property records in Los Angeles,
California.  Such Deed of Trust shall be subject to the terms and
potential seniority of any and all liens or encumbrances that predate it and
which Deed of Trust shall be subject to and junior in position to any Company
financings for working capital or the purchase of real property or equipment
from an institutional source or any similar financing from or guaranteed by Haig
S. Bagerdjian.




4.           Events of
Default.The occurrence of
any of the following shall constitute a “Event of Default” under this
Note:




4.1           Failure to Pay.
Company shall fail to (i) pay when due any monthly payment on the due date
hereunder or (ii) any other payment required under the terms of this Note on the
date due and such payment shall not have been made within 10 days of Company’s
receipt of Holder’s written notice to Company of such failure to
pay.




4.2           Breaches of Covenants to the
Note.  Company shall fail to observe or perform any other
covenant, obligation, condition or agreement contained in this Note, the
Security Agreement or the Deed of Trust and such failure shall continue for 20
days after the Company’s receipt of Holder’s written notice to Company of such
breach; or




4.3           Voluntary Bankruptcy or
Insolvency Proceedings.  Company shall (i) apply for or consent
to the appointment of a receiver, trustee, liquidator or custodian of itself or
of all or a substantial part of its property, (ii) admit in writing its
inability to pay its debts generally as they mature, (iii) make a general
assignment for the benefit of its or any of its creditors, (iv) be dissolved or
liquidated, (v) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or consent to any such relief or to the appointment of or taking possession of
its property by any official in an involuntary case or other proceeding
commenced against it, or (vi) take any action for the purpose of effecting any
of the foregoing; or




4.4           Involuntary Bankruptcy or
Insolvency Proceedings.  Proceedings for the appointment of a
receiver, trustee, liquidator or custodian of Company or of all or a substantial
part of the property thereof, or an involuntary case or other proceedings
seeking liquidation, reorganization or other relief with respect to Company or
the debts thereof under any bankruptcy, insolvency or other similar law now or
hereafter in effect shall be commenced and an order for relief entered or such
proceeding shall not be dismissed or discharged within 30 days of
commencement.




5.           Rights of
the Holder upon Default.




5.1           Acceleration. Upon
any Event of Default, but subject to any applicable cure period, all outstanding
obligations payable by Company under this Note shall automatically become
immediately due and payable without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived, anything contained
herein to the contrary notwithstanding; provided that upon
the occurrence or existence of any Event of Default all outstanding obligations
payable by Company under this Note shall automatically become immediately due
and payable.


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5.2           Default Rate of
Interest.  During any period in which an Event of Default has
occurred and is continuing, Company shall pay interest on the unpaid principal
balance hereof at a rate per annum equal to the rate 10%.




6.           Remedies
on Default.  In case any one
or more Events of Default shall occur and be continuing, the Holder may proceed
to protect and enforce its rights by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in the Security Agreement of the Deed of Trust or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or
otherwise.  No course of dealing and no delay on the part of the
Holder in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice the Holder’s rights, powers or
remedies.




7.           Notice of
Events.  Company agrees to
give prompt written notice to the Holder of:




7.1           The
occurrence of any Event of Default or event that may, with notice or lapse of
time or both, result in an Event of Default; or




7.2           Any
Cash Proceeds Event or proposed working capital or other financings that may
require the Holder to subordinate its Security Interest or encumbrance upon the
Company’s assets; or




7.3           Any
proposed Company Sale.




8.           Waiver
and Amendment.  This Note may not be amended, supplemented,
modified or waived except in a writing executed by Company and the Holder. A
waiver with reference to one event shall not be construed as continuing or as a
bar to or waiver of any right or remedy as to a subsequent event.  No
delay or omission of the Holder to exercise any right, whether before or after a
default hereunder, shall impair any such right or shall be construed to be a
waiver of any right or default, and the acceptance at any time by the Holder of
any past-due amount shall not be deemed to be a waiver of the right to require
prompt payment when due of any other amounts then or thereafter due and
payable.




9.           Notices.  All
notices, requests, demands and other communications provided for hereunder shall
be in writing and mailed (by first class registered or certified mail, postage
prepaid), sent by express overnight courier service or electronic facsimile
transmission with a copy by mail, or delivered to the applicable party at the
addresses indicated below:


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If
      to Company:Point.3602777
      North Ontario StreetBurbank,
      CA 91504Attention:  Alan
      R. SteelFax:
      818-847-2503Email:
      Asteel@point360.comIf
      to the Holder:TroyGould,
      PC1801
      Century Park EastLos
      Angeles CA 90067Attention:
      Sanford J. HillsbergFax:
      310-201-4746Email:
      sjhillsberg@troygould.com





or, as to
each of the foregoing, at such other address as shall be designated by such
person in a written notice to the other party complying as to delivery with the
terms of this Paragraph 9.  All such notices, requests, demands and
other communications shall, when mailed or sent, respectively, be effective (i)
three days after being deposited in the mails or (ii) one business day after
being deposited with the express overnight courier service or sent by electronic
facsimile transmission or by email (with receipt confirmed), respectively,
addressed as aforesaid.




10.           Attorney’s
Fees.  Company agrees to reimburse the Holder for all
reasonable costs, including, without limitation, reasonable attorneys’ fees,
incurred to collect this Note if this Note is not paid when due.




11.           Governing
Law.  This Note and all actions arising out of or in connection
with this Note shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflicts of law provisions of’
the State of California, or of any other state.




12.           Payment
on Non-Business Days.  Whenever any payment to be made on this
Note shall be stated to be due on a day that is not a business day, such payment
may be made on the next succeeding business day.




13.           Preparation
of this Note.  TroyGould PC has not represented or advised
Company in connection with Company’s execution of this Note. In interpreting the
provisions of this Note, there shall be no presumption against the party
primarily responsible for the drafting of this Note, the Security Agreement or
the Deed of Trust.


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14.           Company’s
Right to Independent Counsel.  The Company is advised hereby
that the Company may seek the advise of an independent lawyer of the Company’s
choice and is given a reasonable opportunity to seek that advice before signing
this Note.




IN
WITNESS WHEREOF, Company has caused this Note to be issued as of the date first
written above.




COMPANY:POINT.360,
      a California corporationBy:Alan
      R. Steel, Executive
Vice-President




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