THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT AND FORBEARANCE
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     THIS THIRD  AMENDMENT TO SECOND AMENDED AND RESTATED  CREDIT  AGREEMENT AND
FORBEARANCE (this "Amendment"), dated as of July 20, 2001, is entered into among
(1) POINT.360, a California corporation (the "Borrower"),  (2) the Lenders party
to the Credit  Agreement  referred  to below and (3) UNION  BANK OF  CALIFORNIA,
N.A., as administrative agent for such Lenders (in such capacity, the "Agent").

                                    RECITALS
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     A. The  Borrower,  the Lenders and the Agent  previously  entered into that
certain Second Amended and Restated  Credit  Agreement dated as of September 28,
2000,  as amended by a First  Amendment to Second  Amended and  Restated  Credit
Agreement dated as of April 5, 2001 and a Second Amendment to Second Amended and
Restated Credit Agreement and Forbearance (the "Second  Amendment")  dated as of
June 11, 2001 (as  amended,  the  "Credit  Agreement").  Capitalized  terms used
herein and not defined  shall have the  meanings  assigned to them in the Credit
Agreement.

     B. At the time of the Second Amendment,  the aggregate  principal amount of
Loans outstanding  exceeded the Borrowing Base, resulting in an Event of Default
(the "First  Overadvance  Default") under the Credit Agreement.  Pursuant to the
Second  Amendment,  the Agent and the Lenders agreed to forbear,  until June 18,
2001, from exercising  their rights and remedies under the Credit Agreement as a
result of the First Overadvance Default. The First Overadvance Default was cured
on June 18, 2001.

     C.  Based on its  Borrowing  Base  Certificate  dated  June 28,  2001,  the
Borrower was again in default of the  Borrowing  Base  provisions  of the Credit
Agreement by a principal amount equal to $1,337,500.  On or about July 17, 2001,
the Borrower made a repayment in the amount of $100,000,  reducing the principal
amount of such  overadvance  to $1,237,500  (such amount,  the "New  Overadvance
Amount").  Such  overadvance has resulted in a default under Sections 2.1(a) and
2.5(d) of the Credit  Agreement,  and an Event of Default  under Section 7(a) of
the Credit Agreement.  In addition,  the Borrower has informed the Agent that it
is in default of the minimum net worth  covenant  contained in Section 6.1(c) of
the Credit Agreement,  which has resulted in a default under such Section and an
Event of Default under Section 7(c) of the Credit Agreement.

     D. As of the date hereof, prior to the effectiveness of this Amendment, (i)
the Aggregate  Commitment is $35,000,000 and (ii) the aggregate principal amount
of Loans outstanding under the Credit Agreement is $29,849,484.

     E. The Borrower has requested  that the Agent and the Lenders  forbear from
exercising  their  rights and  remedies  under the Credit  Agreement  due to the
occurrence of the foregoing  defaults.  The Agent and the Lenders have agreed to
forbear  from  exercising  such  rights and  remedies,  subject to the terms and
conditions set forth below.

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants
herein contained, the parties hereto agree as follows:


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<PAGE>

     SECTION 1. ACKNOWLEDGEMENT OF EXISTING EVENTS OF DEFAULT AND APPLICATION OF
DEFAULT INTEREST RATE .

         (a) The Borrower hereby  acknowledges  that, on or about June 28, 2001,
     the outstanding principal amount of Loans equaled $29,271,484 ($29,949,484,
     less  $678,000  deducted  per  the  last  sentence  of  the  definition  of
     "Borrowing Base") and the Borrowing Base equaled $27,933,984,  resulting in
     an  overadvance  of $1,337,500 in violation of Section 2.1(a) of the Credit
     Agreement.  On or about July 17, 2001, the Borrower made a repayment in the
     amount of $100,000,  reducing the principal  amount of such  overadvance to
     the New  Overadvance  Amount  of  $1,237,500.  Such  Event  of  Default  is
     continuing and has not been cured. Failure to make the immediate repayment,
     with  interest,  required by Section 2.5(d) has resulted in a payment Event
     of  Default  under  Section  7(a) of the  Credit  Agreement.  Such Event of
     Default is continuing and has not been cured.  Nothing in this Amendment is
     intended to, or shall be construed to, waive such Event of Default.

         (b) The Borrower hereby  acknowledges  that its Net Worth as of May 31,
     2001  was  $32,274,060.  The Net  Worth  Requirement  as of such  date  was
     $32,400,000,  resulting  in a default  under  Section  6.1(c) of the Credit
     Agreement,  and an  Event  of  Default  under  Section  7(c) of the  Credit
     Agreement.  Such  Event of Default is  continuing  and has not been  cured.
     Nothing in this  Amendment is intended to, or shall be construed  to, waive
     such Event of Default.

         (c) The Borrower  acknowledges that,  pursuant to Section 2.8(c) of the
     Credit  Agreement,  all outstanding  amounts under the Credit Agreement are
     accruing  interest at the default  rate  described  therein  (the  "Default
     Rate"),  payable on demand.  The parties hereto agree that the Default Rate
     shall apply to all such outstanding  amounts effective as of June 28, 2001.
     Nothing in this  Section 1(c) shall modify or limit the accrual of interest
     at the Default Rate in connection with the First  Overadvance  Default,  as
     more fully set forth in the Second Amendment.

     SECTION 2.  ACKNOWLEDGEMENT  OF OUTSTANDING  LOANS,  OUTSTANDING  LETTER OF
CREDIT AND EXISTING LOAN DOCUMENTS.

         (a) The Borrower hereby  acknowledges  that, as of the date hereof, the
     outstanding  principal  amount  of Loans  under  the  Credit  Agreement  is
     $29,849,484.

         (b) The  parties  hereto  hereby  acknowledge  and agree that (i) on or
     about January 30, 1998,  UBOC issued that certain  letter of credit bearing
     letter of credit no.  S230996,  dated such date,  expiring on May 31, 2004,
     for the  benefit  of  O.D.S.  Technologies  LP and in the  face  amount  of
     $92,239.20  (the "Existing  Letter of Credit") and (ii) it is the intent of
     the  parties  that the  Existing  Letter of Credit  constitute  a Letter of
     Credit  under the Credit  Agreement,  in all  respects as if such Letter of
     Credit had been  originally  issued  hereunder.  In furtherance  and not in
     limitation of the foregoing, as of the Restatement Date the Existing Letter
     of Credit shall be deemed to be a Letter of Credit,  entitled to all of the
     benefits of the Loan Documents including but not limited to all Guarantees,
     all Collateral Documents and all Guarantor Collateral Documents.

         (c) The  Borrower  acknowledges  and  agrees  that each  Loan  Document
     executed by any Obligor  pursuant to the Credit  Agreement  remains in full
     force  and  effect,  including  but not  limited  to  those  documents  and
     instruments described in Section 2(b) of the Second Amendment.


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     SECTION 3. FORBEARANCE.  Subject to fulfillment of the conditions set forth
below,  the Agent and the Lenders agree to forbear from exercising  until August
27, 2001 (the "Forbearance Period"),  their rights and remedies under the Credit
Agreement  due to the  Events of  Default  described  in  Section 1 hereof.  The
Borrower  agrees and  acknowledges  that in the event that it fails to cure such
Events  of  Default  prior to such  date in  accordance  with the  terms of this
Agreement, (i) such failure shall constitute an immediate Event of Default under
Section 7 of the Credit Agreement having no grace period, and (ii) the Agent and
the Lenders may immediately  exercise their rights and remedies under the Credit
Agreement  and  the  other  Loan   Documents  due  to  such  Event  of  Default.
Furthermore,  the Agent and the Lenders may  exercise  their rights and remedies
under the Credit  Agreement and the other Loan  Documents  immediately  upon the
occurrence  of any  Default  other  than  that  described  in  Section 1 hereof,
including  any Default of the terms of this  Agreement or the Second  Amendment.
Nothing  contained  in this  Agreement  shall be  interpreted  as or be deemed a
release  or a  waiver  by the  Agent  or the  Lenders  of  any of the  terms  or
conditions of the Loan Documents.  Unless specifically amended herein, all terms
and  provisions of the Loan  Documents  shall remain in full force and effect in
accordance  with their original terms.  For the avoidance of doubt,  the parties
hereto  agree that no  borrowings  under the Credit  Agreement,  or  issuance of
Letters of Credit, shall made during the Forbearance Period.

     SECTION  4.  ADDITIONAL  COVENANTS  OF THE  BORROWER.  In  addition  to the
covenants set forth in the Credit Agreement, the other Loan Documents (including
the Second Amendment) and this Agreement, the Borrower hereby agrees as follows:

         (a)  Cure  of  New  Overadvance  Amount  Default.  Notwithstanding  any
     provision of the Credit Agreement to the contrary, the Borrower shall cause
     (either by  repayment,  or by  delivery  of a  Borrowing  Base  Certificate
     pursuant  to  Section  5.13  of the  Credit  Agreement,  on or  before  the
     applicable  Reduction Date, showing an increase in the Borrowing Base as of
     the  immediately  preceding  Monday),  on or before each Reduction Date set
     forth below, the New Overadvance  Amount to be reduced to not more than the
     corresponding Amount set forth below, as follows:

                  REDUCTION DATE             OVERADVANCE AMOUNT
                  --------------             ------------------

                  July 23, 2001                  $1,037,500
                  July 30, 2001                  $  837,500
                  August 6, 2001                 $  637,500
                  August 13, 2001                $  437,500
                  August 20, 2001                $  237,500
                  August 27, 2001                $        0

In the event that, on any Reduction Date, the New Overadvance  Amount is reduced
to an amount less than that required for such date in the foregoing  table (such
excess  reduction,  an "Excess  Payment"),  then such  Excess  Payment  shall be
applied to the  remaining  payments  due under  such  table in inverse  order of
maturity. Any payment made by the Borrower pursuant to this Section 4.1(a) shall
be  received  by the  Agent,  at the office of the Agent set forth in the Credit
Agreement for  repayments,  on or before 12:00 Noon, Los Angeles time.  Interest
accruing  on amounts  so repaid  shall be due and  payable on the next  Interest
Payment Date.


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         (b) FINANCIAL  CONSULTANT.  The Borrower agrees to engage, on or before
     July 20, 2001, a business advisor and/or financial consultant acceptable to
     the Lenders. All fees, costs and expenses of such advisor and/or consultant
     shall be for the account of the Borrower. This Section 4(b) replaces in its
     entirety Section 4(c) of the Second Amendment.

Any failure of the  Borrower to perform any of the  covenants  set forth in this
Section 4 in accordance with their terms shall  constitute an immediately  Event
of Default having no grace period.

     SECTION 5. AMENDMENTS TO CREDIT  AGREEMENT.  Effective as of the date first
set forth above, the Credit Agreement is hereby amended as follows:

         (a)  The   Aggregate   Commitment  is  reduced  from   $35,000,000   to
     $30,050,000. In connection therewith,  Schedule 2.1 to the Credit Agreement
     is replaced with Schedule 2.1 hereto.

         (b) Section 2.1(d) is restated in its entirety to read as follows:

            "(d) All outstanding  Loans shall be due and payable,  to the extent
         not previously  paid in accordance  with the terms hereof,  on the Loan
         Commitment Expiration Date."

         (c) Section 5.1(c) is restated in its entirety to read as follows:

            "(c) MONTHLY REPORTS.  The Borrower shall deliver to the Agent, with
         sufficient copies for each Lender, within 30 days of the end of each of
         the  first  two  months  in  each   quarter,   (i)   consolidated   and
         consolidating statements of income, retained earnings and cash flows of
         the  Borrower  and its  Subsidiaries  for such  month,  and the related
         consolidated  balance sheets of the Borrower and its Subsidiaries as at
         the  end of  such  month,  accompanied  by a  certificate  of a  senior
         financial  officer of the Borrower,  which certificate shall state that
         said consolidated  financial statements fairly present the consolidated
         financial  condition  and results of operations of the Borrower and its
         Subsidiaries,  in  each  case  in  accordance  with  GAAP  consistently
         applied,  as at the end of, and for,  such  period  (subject  to normal
         year-end  audit  adjustments)  and  (ii) a  report  in form  reasonably
         satisfactory  to the Agent  providing  information  with respect to the
         Borrower's Accounts Receivable agings."

     SECTION 6. CONDITIONS  PRECEDENT.  This Amendment shall become effective as
of the date first set forth above upon receipt by the Agent of the following:

         (a) this Amendment, duly executed by the Borrower and each Lender;

         (b) evidence of the Guarantors' consent to this Amendment,  in form and
     substance acceptable to the Agent;

         (c) a release of claims,  executed by the Borrower and the  Guarantors,
     in form and substance acceptable to the Agent;


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<PAGE>

         (d) resolutions of the board of directors of the Borrower,  authorizing
     this Amendment, certified by an appropriate officer of the Borrower;

         (e) all outstanding legal fees incurred by the Agent and/or the Lenders
     in connection  with the Credit  Agreement,  to the extent  requested by the
     Agent or the Lenders to be paid in connection herewith; and

         (f) such other documents, agreements and opinions that the Agent or any
     Lender may request.

     SECTION 7.  REFERENCE TO AND EFFECT ON THE CREDIT  AGREEMENT  AND THE OTHER
LOAN DOCUMENTS.

         (a) Upon the  effectiveness  of this  Amendment,  each reference in the
     Credit Agreement to "this  Agreement,"  "hereunder,"  "hereof," or words of
     like import  referring to the Credit  Agreement,  and each reference in the
     other Loan Documents to "the Credit Agreement," "thereunder," "thereof," or
     words of like import referring to the Credit Agreement, shall mean and be a
     reference to the Credit Agreement, as amended hereby.

         (b) Except as specifically amended herein, the Credit Agreement and all
     other Loan  Documents are and shall continue to be in full force and effect
     and are hereby in all respects ratified and confirmed.

         (c) The execution,  delivery and  effectiveness of this Amendment shall
     not  operate as a waiver of any right,  power or remedy of the Agent or the
     Lenders  under the  Credit  Agreement  or any  other  Loan  Documents,  nor
     constitute a waiver of any  provision of the Credit  Agreement or any other
     Loan Documents, except as specifically set forth herein.

     SECTION 8.  REPRESENTATIONS AND WARRANTIES.  The Borrower hereby represents
and warrants,  for the benefit of the Lenders and the Agent, as follows: (i) the
Borrower has all requisite  power and authority  under  applicable law and under
its charter  documents to execute,  deliver and perform this  Amendment,  and to
perform the Credit  Agreement as amended hereby;  (ii) all actions,  waivers and
consents (corporate,  regulatory and otherwise) necessary or appropriate for the
Borrower to execute,  deliver and  perform  this  Amendment,  and to perform the
Credit Agreement as amended hereby, have been taken and/or received;  (iii) this
Amendment,  and the Credit Agreement,  as amended by this Amendment,  constitute
the legal, valid and binding obligation of the Borrower  enforceable  against it
in  accordance  with  the  terms  hereof;   and  (iv)  each  of  the  Borrower's
representations  and warranties set forth in the Credit  Agreement and the other
Loan  Documents is true and correct as of the date hereof,  except to the extent
that such representations and warranties expressly relate to an earlier date.

     SECTION 9. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and  delivered  shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed  counterpart  of a signature  page to this  Amendment by
telecopier shall be effective as delivery of a manually executed  counterpart of
this Amendment.


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     SECTION  10.  GOVERNING  LAW.  This  Amendment  shall be  governed  by, and
construed  and  interpreted  in  accordance  with,  the  laws  of the  State  of
California (without reference to its choice of law rules).

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be
duly executed and delivered by their proper and duly  authorized  officers as of
the day and year first above written.


     POINT.360 (formerly known as VDI Multimedia)


     By:
         --------------------------------------------

     Name:

         --------------------------------------------

     Title:

         --------------------------------------------



     UNION BANK OF CALIFORNIA, N.A.,

     as Agent and a Lender



     By:
         --------------------------------------------

     Name:

         --------------------------------------------

     Title:

         --------------------------------------------



     SANWA BANK CALIFORNIA, as a Lender



     By:
         --------------------------------------------

     Name:

         --------------------------------------------

     Title:

         --------------------------------------------



     U.S. BANK NATIONAL ASSOCIATION, as a Lender

     By:
         --------------------------------------------

     Name:

         --------------------------------------------

     Title:

         --------------------------------------------


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                                                       SCHEDULE 2.1



                                  COMMITMENTS
                                  -----------

                                                     REVOLVING LOAN
               LENDER                                  COMMITMENT
               ------                                --------------

Union Bank of California, N.A.                         $16,694,444

United California Bank                                 $ 6,677,778

U.S. Bank National Association                         $ 6,677,778
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Total                                                  $30,050,000