Document:

Unassociated Document

    
      
        	
                 
      

              	
                10.1 Form of Debt
      Conversion Agreement

              

      

      

      

      

      WILLING
HOLDING, INC. DEBT CONVERSION AGREEMENT

      

      ALL
WILLING HOLDING, INC. DEBT IS CONVERTED AT THE RATE OR $.6624 PER
SHARE

      

      

      

      Name
of Debt Holder

      

      

      

      $
000,000.00 OF DEBT IS CONVERTED INTO X,XXX SHARES OF CLASS A COMMON
STOCK

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      

      

      THE
COMMON STOCK BEING ISSUED FOR DEBT CONVERSION HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE.  THE COMMON STOCK MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE COMMON STOCK UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND SUCH STATE LAWS AS MAY BE APPLICABLE, OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      

      DEBT CONVERSION
AGREEMENT

      

      DEBT
CONVERSION AGREEMENT (the "Agreement") between Willing Holding,
Inc.  a Florida corporation (the "Company"), and the debt
holder  identified on the signature page hereto (Name of Debt Holder
and “DH”).

      

      BACKGROUND

      

      

      1.            
REPRESENTATIONS
AND WARRANTIES.

      Debt Holder (“DH”) hereby represents
and warrants that:

      

      (a)           DH
has such knowledge and experience in financial and business matters that DH is
capable of evaluating the merits and risks of the prospective investment in the
Company and of protecting his own interests in connection
therewith;

      

      (b)           DH
can bear the economic risk of losing DH's entire investment;

      

      (c)           DH
's overall commitment to investments which are not readily marketable is not
disproportionate to DH 's net worth, DH's investment in the Common Stock will
not cause such overall commitment to become excessive, and the investment is
suitable for DH when viewed in light of DH's other securities holdings and DH 's
financial situation and needs;

      

      (d)           DH
has adequate means of providing for DH's current needs and personal
contingencies;

      

      (e)           DH
recognizes that the Company is in its development stage with respect to its
business plan, and DH has evaluated and fully understands all risks in DH's
decision to exchange debt for  Common Stock hereunder, including,
without limitation, the Risk Factors set forth on Exhibit “A” attached
hereto;

      

      (f)           DH
understands the business in which the Company is engaged;

      

      (g)           DH
is an "Accredited Investor" as such term is defined in Rule 501 of Regulation D
under the Securities Act of 1993, as amended (the "Securities Act"), which
definition is set forth on Exhibit "B" attached hereto.  DH represents
and warrants that all the information contained in Exhibit C, Investor
Questionnaire, is accurate in all material respects.

      

      2.             DH'S
REPRESENTATIONS AND WARRANTIES.

      

      DH represents and warrants
that:

      

      (a)           DH
has received, has carefully read and understands the Company's Business
Plan;

      

      (b)           DH
has been furnished with all additional documents and information which DH has
requested;

      

      (c)           DH
has had the opportunity to ask questions of and received answers from the
Company concerning the Company, and the Common Stock and to obtain any
additional information necessary to verify the accuracy of the information
furnished;

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      (d)           DH
has relied only on the foregoing information and documents in determining to
make this subscription;

      

      (e)           The
Business Plan and other information furnished by the Company do not constitute
investment, accounting, legal or tax advice and DH is relying on professional
advisers for such advice;

      

      (f)           All
documents, records and books pertaining to DH's investment have been made
available for inspection by DH and by DH's attorney, and/or DH's accountant
and/or DH's DH representative, and the relevant books and records of the Company
will be available upon reasonable notice, for inspection by investors during
reasonable business hours at the Company's principal place of
business;

      

      (g)           DH
and DH's advisors (which advisors do not include the Company or its principals,
representatives or counsel) have such knowledge and experience in legal,
financial and business matters as to be capable of evaluating the merits and
risks of investing in the Company and of making an informed investment
decision;

      

      (h)           DH
understands, acknowledges and agrees that the Company is relying solely upon the
representations and warranties made herein in determining to exchange DH’s debt
into the Common Stock

      

      (i)           The
DH understands the meaning and legal consequences of the foregoing
representations and warranties.  The DH certifies that each of the
foregoing representations and warranties is true and correct as of the date
hereof and shall survive the execution hereof and the conversion of the debt
into the Common Stock.

      

      3.           
CONVERSION IRREVOCABLE
BY DH BUT SUBJECT TO

      
        	
                 
      

              	
                ACCEPTANCE OR
      REJECTION BY THE COMPANY.

              

      

      

      (a)           This
Debt Conversion  Agreement is not, and shall not be, revocable by
DH.

      

      4.            
INDEMNIFICATION
AND HOLD HARMLESS.

      

      DH agrees that if the DH breaches any
agreement, representation or warranty the DH has made in this Debt
Conversion  Agreement, DH agrees to indemnify and hold harmless the
Company and its directors, officers, employees, shareholders, financial
advisors, attorneys and accountants against any claim, liability, loss, damage
or expense (including, without limitation, attorneys' fees and other costs of
investigating and litigating claims) caused, directly or indirectly, by the DH's
breach.

      

      7.           
MISCELLANEOUS.

      

      (a)           THIS
DEBT CONVERSION AGREEMENT IS MADE UNDER, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA, APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.

      

      (b)           Any
notice, demand or other communication which any party hereto may be required, or
may elect, to give to anyone interested hereunder shall be sufficiently given if
(a) deposited, postage prepaid, in a United States mail letter box, registered
or certified mail, return receipt requested, addressed to such address as may be
given herein, or (b) delivered personally at such address.  Notices to
the Company shall be addressed to Thomas L. DiStefano
III,   Chairman, Willing Holding, Inc., 3 Centerview Drive, Suite
240, Greensboro, North Carolina 27407.

       

      
        
           

        

        
          B-2

          
            

          

        

        
           

        

      

       

      
 

      IN WITNESS WHEREOF, the parties hereto
have executed and delivered this Conversion of Debt Agreement on August
_____,  2009.

      

      

      DH
$000,000.00 for X,XXX shares of Class A Common Stock

      

      

      
        	
                ______________________________________________

              	 

      

      Name of
Debt Holder

      

      

      

      
        	
                Accepted
      By:

              	______________________________________
	 
      	
                Thomas
      L. DiStefano III

              
	 
      	
                Chairman/CEO

              

      

      
 

       

       

       

       

       

       

       

       

       

       

       

       

      
        
           

        

        
          B-3AMENDED
AND RESTATED STANDARD LOAN AGREEMENT

     

    By
and Between

     

    BANK
OF AMERICA, N.A.

     

    and

     

    POINT.360

     

    Dated
as of August 25, 2009

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

      
         

        TABLE OF
CONTENTS

      

       

      
        
          
            
              
                
                  	 	 	Page
	 	 	 
	
                          1.

                        	
                          DEFINITIONS

                        	
                          1

                        
	 	 	 
	
                          2.

                        	
                          THE
      FACILITY: LINE OF CREDIT AMOUNT AND TERMS

                        	
                          4

                        

                

              

            

          

        

        

        
          
            
              	 	
                      2.1.

                    	
                      Line
      of Credit Amount

                    	
                      4

                    
	 	
                      2.2.

                    	
                      Availability
      Period

                    	
                      4

                    
	 	
                      2.3.

                    	
                      Conditions
      to Availability of Credit

                    	
                      4

                    
	 	
                      2.4.

                    	
                      Repayment
      Terms

                    	
                      5

                    
	 	
                      2.5.

                    	
                      Interest
      Rate

                    	
                      5

                    
	 	
                      2.6.

                    	
                      Optional
      Interest Rates

                    	
                      5

                    
	 	
                      2.7.

                    	
                      Applicable
      Margin

                    	
                      5

                    
	 	
                      2.8.

                    	
                      Standby
      Letters of Credit

                    	
                      6

                    

            

          

        

        

        
          
            	
                    3.

                  	
                    OPTIONAL
      INTEREST RATE

                  	
                    7

                  

          

        

        

        
          
            	 	
                    3.1.

                  	
                    Optional
      Rates

                  	
                    7

                  
	 	
                    3.2.

                  	
                    LIBOR
      Rate

                  	
                    7

                  

          

        

        

        
          
            	
                    4.

                  	
                    FEES
      AND EXPENSES

                  	
                    9

                  

          

        

        

        
          
            	 	
                    4.1.

                  	
                    Fees

                  	
                    9

                  
	 	
                    4.2.

                  	
                    Expenses

                  	
                    10

                  
	 	
                    4.3.

                  	
                    Reimbursement
      Costs

                  	
                    10

                  

          

        

        

        
          
            
              	
                      5.

                    	
                      COLLATERAL

                    	
                      10

                    
	 	 	 
	
                      6.

                    	
                      DISBURSEMENTS,
      PAYMENTS AND COSTS

                    	
                      10

                    

            

          

        

        

        
          
            	 	
                    6.1.

                  	
                    Disbursements
      and Payments

                  	
                    10

                  
	 	
                    6.2.

                  	
                    Telephone
      and Telefax Authorization

                  	
                    10

                  
	 	
                    6.3.

                  	
                    Direct
      Debit

                  	
                    11

                  
	 	
                    6.4.

                  	
                    Banking
      Days

                  	
                    11

                  
	 	
                    6.5.

                  	
                    Interest
      Calculation

                  	
                    11

                  
	 	
                    6.6.

                  	
                    Default
      Rate

                  	
                    11

                  
	 	
                    6.7.

                  	
                    Taxes

                  	
                    12

                  
	 	
                    6.8.

                  	
                    Overdrafts

                  	
                    12

                  
	 	
                    6.9.

                  	
                    Payments
      in Kind

                  	
                    12

                  

          

        

         

        
          
             

          

          
            i

            
              

            

          

          
             

          

        

         

        
          TABLE OF
CONTENTS

          (continued)

        

         

        
          
            	
                    7.

                  	
                    CONDITIONS

                  	
                    12

                  

          

        

        

        
          
            	 	
                    7.1.

                  	
                    Authorizations

                  	
                    13

                  
	 	
                    7.2.

                  	
                    Governing
      Documents

                  	
                    13

                  
	 	
                    7.3.

                  	
                    Guaranty

                  	
                    13

                  
	 	
                    7.4.

                  	
                    Security
      Agreements

                  	
                    13

                  
	 	
                    7.5.

                  	
                    Stock
      Pledge

                  	
                    13

                  
	 	
                    7.6.

                  	
                    Perfection
      and Evidence of Priority

                  	
                    13

                  
	 	
                    7.7.

                  	
                    Payment
      of Fees

                  	
                    13

                  
	 	
                    7.8.

                  	
                    Principal
      Balance of GECC Term Loan

                  	
                    14

                  
	 	
                    7.9.

                  	
                    Good
      Standing

                  	
                    14

                  
	 	
                    7.10.

                  	
                    Legal
      Opinion

                  	
                    14

                  
	 	
                    7.11.

                  	
                    Intentionally
      Omitted

                  	
                    14

                  
	 	
                    7.12.

                  	
                    Landlord
      Agreement

                  	
                    14

                  
	 	
                    7.13.

                  	
                    Insurance

                  	
                    14

                  
	 	
                    7.14.

                  	
                    Other
      Required Documentation

                  	
                    14

                  
	 	
                    7.15.

                  	
                    Other
      Conditions

                  	
                    15

                  

          

        

        

        
          
            	
                    8.

                  	
                    REPRESENTATIONS
      AND WARRANTIES

                  	
                    15

                  

          

        

        

        
          
            	 	
                    8.1.

                  	
                    Formation

                  	
                    15

                  
	 	
                    8.2.

                  	
                    Authorization

                  	
                    15

                  
	 	
                    8.3.

                  	
                    Enforceable
      Agreement

                  	
                    16

                  
	 	
                    8.4.

                  	
                    Good
      Standing

                  	
                    16

                  
	 	
                    8.5.

                  	
                    No
      Conflicts

                  	
                    16

                  
	 	
                    8.6.

                  	
                    Financial
      Information

                  	
                    16

                  
	 	
                    8.7.

                  	
                    Lawsuits

                  	
                    16

                  
	 	
                    8.8.

                  	
                    Collateral

                  	
                    16

                  
	 	
                    8.9.

                  	
                    Permits,
      Franchises

                  	
                    16

                  
	 	
                    8.10.

                  	
                    Other
      Obligations

                  	
                    17

                  
	 	
                    8.11.

                  	
                    Tax
      Matters

                  	
                    17

                  
	 	
                    8.12.

                  	
                    No
      Event of Default

                  	
                    17

                  
	 	
                    8.13.

                  	
                    Insurance

                  	
                    17

                  
	 	
                    8.14.

                  	
                    Governmental
      Authorization

                  	
                    17

                  

          

        

         

        
          
             

          

          
            ii

            
              

            

          

          
             

          

        

         

        
          TABLE OF
CONTENTS

          (continued)

           

        

        
          
            	
                    9.

                  	
                    COVENANTS

                  	
                    17

                  

          

        

        

        
          
            	 	
                    9.1.

                  	
                    Use
      of Proceeds

                  	
                    17

                  
	 	
                    9.2.

                  	
                    Financial
      Information

                  	
                    18

                  
	 	
                    9.3.

                  	
                    Leverage
      Ratio

                  	
                    19

                  
	 	
                    9.4.

                  	
                    Basic
      Fixed Charge Coverage Ratio

                  	
                    19

                  
	 	
                    9.5.

                  	
                    Dividends
      and Distributions

                  	
                    20

                  
	 	
                    9.6.

                  	
                    Bank
      as Principal Depository

                  	
                    20

                  
	 	
                    9.7.

                  	
                    Other
      Debts

                  	
                    20

                  
	 	
                    9.8.

                  	
                    Other
      Liens

                  	
                    20

                  
	 	
                    9.9.

                  	
                    Maintenance
      of Assets

                  	
                    21

                  
	 	
                    9.10.

                  	
                    Investments

                  	
                    21

                  
	 	
                    9.11.

                  	
                    Loans

                  	
                    22

                  
	 	
                    9.12.

                  	
                    Change
      of Management

                  	
                    22

                  
	 	
                    9.13.

                  	
                    Change
      of Control

                  	
                    22

                  
	 	
                    9.14.

                  	
                    Additional
      Negative Covenants

                  	
                    22

                  
	 	
                    9.15.

                  	
                    Notices
      to Bank

                  	
                    23

                  
	 	
                    9.16.

                  	
                    Insurance

                  	
                    24

                  
	 	
                    9.17.

                  	
                    Compliance
      with Laws

                  	
                    24

                  
	 	
                    9.18.

                  	
                    ERISA
      Plans

                  	
                    24

                  
	 	
                    9.19.

                  	
                    Books
      and Records

                  	
                    24

                  
	 	
                    9.20.

                  	
                    Audits

                  	
                    25

                  
	 	
                    9.21.

                  	
                    Perfection
      of Liens

                  	
                    25

                  
	 	
                    9.22.

                  	
                    Cooperation

                  	
                    25

                  

          

        

        

        
          
            	
                    10.

                  	
                    DEFAULT
      AND REMEDIES

                  	
                    25

                  

          

        

        

        
          
            	 	
                    10.1.

                  	
                    Failure
      to Pay

                  	
                    25

                  
	 	
                    10.2.

                  	
                    Other
      Bank Agreements

                  	
                    25

                  
	 	
                    10.3.

                  	
                    Cross-default

                  	
                    25

                  
	 	
                    10.4.

                  	
                    False
      Information

                  	
                    26

                  
	 	
                    10.5.

                  	
                    Bankruptcy

                  	
                    26

                  
	 	
                    10.6.

                  	
                    Receivers

                  	
                    26

                  
	 	
                    10.7.

                  	
                    Lien
      Priority

                  	
                    26

                  
	 	
                    10.8.

                  	
                    Judgments

                  	
                    26

                  
	 	
                    10.9.

                  	
                    Material
      Adverse Change

                  	
                    26

                  
	 	
                    10.10.

                  	
                    Government
      Action

                  	
                    26

                  
	 	
                    10.11.

                  	
                    Default
      under Related Documents

                  	
                    27

                  
	 	
                    10.12.

                  	
                    Other
      Breach Under Agreement

                  	
                    27

                  

          

        

         

        
          
             

          

          
            iii

            
              

            

          

          
             

          

        

         

        
          TABLE OF
CONTENTS

          (continued)

           

        

        
          
            	
                    11.

                  	
                    ENFORCING
      THIS AGREEMENT; MISCELLANEOUS

                  	
                    27

                  

          

        

        

        
          
            	 	
                    11.1.

                  	
                    Disposition
      of Schedules and Reports

                  	
                    27

                  
	 	
                    11.2.

                  	
                    Returned
      Merchandise

                  	
                    27

                  
	 	
                    11.3.

                  	
                    Verification
      of Receivables

                  	
                    27

                  
	 	
                    11.4.

                  	
                    Waiver
      of Confidentiality

                  	
                    27

                  
	 	
                    11.5.

                  	
                    GAAP

                  	
                    28

                  
	 	
                    11.6.

                  	
                    California
      Law

                  	
                    28

                  
	 	
                    11.7.

                  	
                    Successors
      and Assigns

                  	
                    28

                  
	 	
                    11.8.

                  	
                    Arbitration
      and Waiver of Jury Trial

                  	
                    28

                  
	 	
                    11.9.

                  	
                    Severability;
      Waivers

                  	
                    30

                  
	 	
                    11.10.

                  	
                    Attorneys’
      Fees

                  	
                    30

                  
	 	
                    11.11.

                  	
                    One
      Agreement

                  	
                    30

                  
	 	
                    11.12.

                  	
                    Indemnification

                  	
                    31

                  
	 	
                    11.13.

                  	
                    Notices

                  	
                    31

                  
	 	
                    11.14.

                  	
                    Headings

                  	
                    31

                  
	 	
                    11.15.

                  	
                    Counterparts

                  	
                    31

                  

          

        

      

       

      
        
           

        

        
          iv

          
            

          

        

        
           

        

      

    

     

    AMENDED
AND RESTATED STANDARD LOAN AGREEMENT

     

    This
Amended and Restated Standard Loan Agreement dated as of August 25, 2009, is
entered into by and between Bank of America, N.A. (the “Bank”) and Point.360, a
California corporation (the “Borrower”)m with reference to the following
facts:

     

    RECITALS

     

    A.           The
Bank and the Borrower are parties to a Standard Loan Agreement, dated as of
August 7, 2007 (the “Prior Loan Agreement”), pursuant to which the Bank has
provided the Borrower a secured working capital revolving credit facility in the
amount of $8,000,000 and a sub-line of credit of $1,000,000 for the issuance of
standby letters of credit.

     

    B.           The
Prior Loan Agreement is scheduled to terminate on August 31, 2009.

     

    C.           The
Bank and the Borrower wish to enter into this Agreement, which shall amend,
restate, replace and supersede (but shall not constitute a novation of) the
Prior Loan Agreement and which hereinafter shall govern the terms and conditions
under which the Bank shall provide financing to the Borrower.

     

    NOW,
THEREFORE, the parties hereby agree as follows:

     

    1.           DEFINITIONS

     

    In
addition to the terms which are defined elsewhere in this Agreement, the
following terms have the respective meanings indicated for the purposes of this
Agreement:

     

    “Acceptable
Receivable” means an account receivable which satisfies the following
requirements:

     

    
      	
              (a)

            	
              The
      account has resulted from the sale of goods or the performance of services
      by the Borrower in the ordinary course of the Borrower’s business and
      without any further obligation on the part of the Borrower to service,
      repair, or maintain any such goods sold other than pursuant to any
      applicable warranty.

            

    

     

    
      	
              (b)

            	
              There
      are no conditions which must be satisfied before the Borrower is entitled
      to receive payment of the account.  Accounts arising from COD
      sales, consignments or guaranteed sales are not
  acceptable.

            

    

     

    
      	
              (c)

            	
              The
      debtor upon the account does not claim any defense to payment of the
      account, whether well founded or
otherwise.

            

    

     

    
      	
              (d)

            	
              The
      account is not the obligation of an account debtor who has asserted or may
      assert any counterclaims or offsets against the Borrower (including
      offsets for any “contra accounts” owed by the Borrower to the account
      debtor for goods purchased by the Borrower or for services performed for
      the Borrower).

            

    

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    
      	
              (e)

            	
              The
      account represents a genuine obligation of the debtor for goods sold to
      and accepted by the debtor, or for services performed for and accepted by
      the debtor.  To the extent any credit balances exist in favor of
      the debtor, such credit balances shall be deducted from the account
      balance.

            

    

     

    
      	
              (f)

            	
              The
      account balance does not include the amount of any finance or service
      charges payable by the account debtor.  To the extent any
      finance charges or service charges are included, such amounts shall be
      deducted from the account balance.

            

    

     

    
      	
              (g)

            	
              The
      Borrower has sent an invoice to the debtor in the amount of the
      account.

            

    

     

    
      	
              (h)

            	
              The
      Borrower is not prohibited by the laws of the state where the account
      debtor is located from bringing an action in the courts of that state to
      enforce the debtor’s obligation to pay the account.  The
      Borrower has taken all appropriate actions to ensure access to the courts
      of the state where the account debtor is located, including, where
      necessary, the filing of a Notice of Business Activities Report or other
      similar filing with the applicable state agency or the qualification by
      the Borrower as a foreign corporation authorized to transact business in
      such state.

            

    

     

    
      	
              (i)

            	
              The
      account is owned by the Borrower free of any title defects or any liens or
      interests of others except the security interest in favor of the
      Bank.

            

    

     

    
      	
              (j)

            	
              The
      debtor upon the account is not any of the
  following:

            

    

     

    
      	
               
      

            	
              (i)

            	
              An
      employee, affiliate, parent or subsidiary of the Borrower, or an entity
      which has common officers or directors with the
  Borrower.

            

    

     

    
      	
               
      

            	
              (ii)

            	
              The
      U.S. government or any agency of department of the U.S. government unless
      the Bank agrees in writing to accept the obligation, the Borrower complies
      with the procedures in the Federal Assignment of Claims Act of 1940
      (41 U.S.C. § 15) with respect to the obligation, and the
      underlying contract expressly provides that neither the U.S. government
      nor any agency or department thereof shall have the right of set-off
      against the Borrower.

            

    

     

    
      	
               
      

            	
              (iii)

            	
              Any
      state, county, city or town or
municipality.

            

    

     

    
      	
               
      

            	
              (iv)

            	
              Any
      person or entity located in a foreign
country.

            

    

     

    
      	
              (k)

            	
              The
      account is not in default.  An account will be considered in
      default if any of the following
occur:

            

    

     

    
      	
              (l)

            	
              The
      account is not paid within 90 days from its invoice date or
      60 days from its due date, whichever occurs first, provided that,
      so long as NewsCorp maintains a credit rating of not lower than BBB by
      Standard & Poors, accounts in an aggregate amount at any time of up to
      Five Hundred Thousand Dollars ($500,000) owed to the Borrower by 20th
      Century Fox may be outstanding for up to 120 days from their invoice date
      or 90 days from their due date, whichever occurs
  first;

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              (i)

            	
              the
      debtor obligated upon the account suspends business, makes a general
      assignment for the benefit of creditors, or fails to pay its debts
      generally as they come due; or

            

    

     

    
      	
               
      

            	
              (ii)

            	
              any
      petition is filed by or against the debtor obligated upon the account
      under any bankruptcy law or any other law or laws for the relief of
      debtors.

            

    

     

    
      	
               
      

            	
              (iii)

            	
              The
      account is not the obligation of a debtor who is in default (as defined
      above) on 50% or more of the accounts upon which such debtor is
      obligated.

            

    

     

    
      	
              (m)

            	
              The
      account does not arise from the sale of goods which remain in the
      Borrower’s possession or under the Borrower’s
  control.

            

    

     

    
      	
              (n)

            	
              The
      account is not evidenced by a promissory note or chattel paper, nor is the
      account debtor obligated to the Borrower under any other obligation which
      is evidenced by a promissory note.

            

    

     

    
      	
              (o)

            	
              The
      account is otherwise acceptable to the
Bank.

            

    

     

    In
addition to the foregoing limitations, the dollar amount of accounts included as
Acceptable Receivables which are the obligations of a single debtor shall not
exceed the concentration limit established for that debtor.  To the
extent the total of such accounts exceed a debtor’s concentration limit, the
amount of any such excess shall be excluded.  The concentration limit
for each debtor shall be equal to 20% of the total amount of the Borrower’s
Acceptable Receivables at that time, provided that, so
long as NewsCorp maintains a credit rating of not lower than BBB by Standard
& Poors, the concentration limit for 20th Century
Fox shall be equal to 45% of the total amount of the Borrower’s Acceptable
Receivables at any time.

     

    “Borrowing Base” means
80% of the balance due on Acceptable Receivables.

     

    After
calculating the Borrowing Base as provided above, the Bank may deduct such
reserves as the Bank may establish from time to time in its reasonable credit
judgment, including, without limitation, reserves for rent at leased locations
subject to statutory or contractual landlord’s liens, dilution, and the amount
of estimated maximum exposure, as determined by the Bank from time to time,
under any interest rate contracts which the Borrower enters into with the Bank
(including interest rate swaps, caps, floors, options thereon, combinations
thereof, or similar contracts).

     

    “Borrowing
Certificate” means a certificate setting forth a calculation of the
Acceptable Receivables and the Borrowing Base, substantially in the form of
Exhibit A
attached hereto.

     

    “Credit Limit” means
the amount of Five Million Dollars ($5,000,000).

     

    "GECC" means General
Electric Capital Corporation.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    “Guarantor “ means
International Video Conversions, Inc., a California corporation and a
wholly-owned subsidiary of Borrower.

     

    2.           THE
FACILITY:  LINE OF CREDIT AMOUNT AND TERMS

     

    2.1.           Line of Credit
Amount.

     

    
      	
              (a)

            	
              During
      the availability period described below, the Bank will provide a line of
      credit (the “Facility”) to the Borrower.  The amount of the
      Facility (the “Facility Commitment”) is equal to the lesser of
      (i) the Credit Limit or (ii) the Borrowing Base as determined by
      the Bank from time to time in accordance with this
    Agreement.

            

    

     

    
      	
              (b)

            	
              The
      Facility is a revolving line of credit.  During the availability
      period, the Borrower may repay principal amounts and reborrow
      them.

            

    

     

    
      	
              (c)

            	
              The
      Borrower agrees not to permit the principal balance outstanding to exceed
      the Facility Commitment.  If the Borrower exceeds this limit,
      the Borrower will immediately pay the excess to the Bank upon the Bank’s
      demand.

            

    

     

    2.2.           Availability
Period.

     

    The
Facility is available between the date hereof and October 31, 2010, or such
earlier date as the availability may terminate as provided in this Agreement (as
applicable, the “Facility Expiration Date”).

     

    The
availability period for the Facility will be considered renewed if and only if
the Bank has sent to the Borrower a written notice of renewal effective as of
the Facility Expiration Date for the Facility (the “Renewal
Notice”).  If the Facility is renewed, it will continue to be subject
to all the terms and conditions set forth in this Agreement except as modified
by the Renewal Notice.  If the Facility is renewed, the term
“Expiration Date” shall mean the date set forth in the Renewal Notice as the
Expiration Date and the same process for renewal will apply to any subsequent
renewal of the Facility.  A renewal fee may be charged at the Bank’s
option.  The amount of the renewal fee will be specified in the
Renewal Notice.

     

    2.3.           Conditions to Availability
of Credit.

     

    In
addition to the items required to be delivered to the Bank under the paragraph
entitled “Financial Information” in the “Covenants” section of this Agreement,
the Borrower will promptly deliver the following to the Bank at such times as
may be requested by the Bank:

     

    
      	
              (a)

            	
              A
      borrowing certificate, in form and detail satisfactory to the Bank,
      setting forth the Acceptable Receivables on which the requested extension
      of credit is to be based.

            

    

     

    
      	
              (b)

            	
              Copies
      of the invoices or the record of invoices from the Borrower’s sales
      journal for such Acceptable Receivables and a listing of the names and
      addresses of the debtors obligated
thereunder.

            

    

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    
      	
              (c)

            	
              Copies
      of the delivery receipts, purchase orders, shipping instructions, bills of
      lading and other documentation pertaining to such Acceptable
      Receivables.

            

    

     

    
      	
              (d)

            	
              Copies
      of the cash receipts journal pertaining to the borrowing
      certificate.

            

    

     

    2.4.           Repayment
Terms.

     

    
      	
              (a)

            	
              The
      Borrower will pay interest on September 1, 2009, and then on the first day
      of each month thereafter until payment in full of any principal
      outstanding under the Facility.

            

    

     

    
      	
              (b)

            	
              The
      Borrower will repay in full any principal, interest or other charges
      outstanding under the Facility no later than the Facility Expiration
      Date.

            

    

     

    
      	
              (c)

            	
              Any
      interest period for an optional interest rate (as described below) shall
      expire no later than the Facility Expiration
  Date.

            

    

     

    2.5.           Interest
Rate.

     

    
      	
              (a)

            	
              The
      interest rate is a rate per year equal to the Bank’s Prime Rate plus the
      Applicable Margin as defined below.

            

    

     

    
      	
              (b)

            	
              The
      Prime Rate is the rate of interest publicly announced from time to time by
      the Bank as its Prime Rate.  The Prime Rate is set by the Bank
      based on various factors, including the Bank’s costs and desired return,
      general economic conditions and other factors, and is used as a reference
      point for pricing some loans.  The Bank may price loans to its
      customers at, above, or below the Prime Rate.  Any change in the
      Prime Rate shall take effect at the opening of business on the day
      specified in the public announcement of a change in the Bank’s Prime
      Rate.

            

    

     

    2.6.           Optional Interest
Rates.

     

    Instead
of the interest rate based on the rate stated in the paragraph entitled
“Interest Rate” above, the Borrower may elect the optional interest rate listed
below for the Facility during interest periods agreed to by the Bank and the
Borrower.  The optional interest rate shall be subject to the terms
and conditions described later in this Agreement.  Any principal
amount bearing interest at the optional rate under this Agreement is referred to
as a “Portion.”  The following optional interest rate is
available:

     

    The LIBOR
Rate plus the Applicable Margin as defined below.

     

    2.7.           Applicable
Margin.

     

    For the
period commencing on the date of this Agreement and ending on the date the Bank
receives a compliance certificate and financial statement for the Borrower's
fiscal quarter ending September 30, 2009 (the “Initial Pricing Period”), the
Applicable Margin for advances bearing interest on the basis of the Prime Rate
shall be minus
one-quarter (0.25) percentage point per annum and the Applicable Margin for
advances bearing interest on the basis of the LIBOR Rate shall be plus two and
one-quarter (2.25) percentage points per annum.  Following the Initial
Pricing Period, the Applicable Margin shall be the following amounts per annum,
based upon the Fixed Charge Coverage Ratio (as defined in the “Covenants”
section of this Agreement), as set forth in the most recent compliance
certificate (or, if no compliance certificate is required, the Borrower’s most
recent financial statements) received by the Bank as required in the Covenants
section:

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	 	 	      
                                            Applicable
      Margin

                                            (in
      percentage points per annum)

                                          
	 	 	 	 
	
                                            Pricing
      Level

                                          	
                                            Fixed
      Charge Coverage Ratio

                                          	
                                            Prime
      Rate +/-

                                          	
                                            LIBOR
      RATE +

                                          
	
                                            1

                                          	
                                            <
      1.15x

                                          	
                                            0.50

                                          	
                                            3.00

                                          
	
                                            2

                                          	
                                            <
      1.25x

                                          	
                                            0.25

                                          	
                                            2.75

                                          
	
                                            3

                                          	
                                            <
      1.35x

                                          	
                                            0.0

                                          	
                                            2.50

                                          
	
                                            4

                                          	
                                            <
      1.50x

                                          	
                                            (0.25)

                                          	
                                            2.25

                                          
	
                                            5

                                          	
                                            >
      1.50x

                                          	
                                            (0.50)

                                          	
                                            2.00

                                          

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    Except
during the Initial Pricing Period, the Applicable Margin shall be in effect from
the date the most recent compliance certificate or financial statement is
received by the Bank until the date the next compliance certificate or financial
statement is received; provided, however, that if the Borrower fails to timely
deliver the next compliance certificate or financial statement, the Applicable
Margin from the date such compliance certificate or financial statement was due
until the date such compliance certificate or financial statement is received by
the Bank shall be the highest pricing level set forth above.

     

    2.8.           Standby Letters of
Credit.

     

    
      	
              (a)

            	
              During
      the availability period, at the request of the Borrower, the Bank will
      issue standby letters of credit with a maximum maturity of 365 days but
      not to extend beyond the Facility Expiration Date.  The standby
      letters of credit may include a provision providing that the maturity date
      will be automatically extended each year for an additional year unless the
      Bank gives written notice to the contrary; provided, however, that each
      standby letter of credit must include a final maturity date of not later
      than one hundred eighty (180) days after the Facility Expiration Date and
      which will not be subject to automatic
  extension.

            

    

     

    
      	
              (b)

            	
              The
      amount of the standby letters of credit outstanding at any one time
      (including the drawn and unreimbursed amounts of the standby letters of
      credit) may not exceed One Million Dollars
  ($1,000,000).

            

    

     

    
      	
              (c)

            	
              In
      calculating the principal amount outstanding under the Facility
      Commitment, the calculation shall include the amount of any standby
      letters of credit outstanding, including amounts drawn on any standby
      letters of credit and not yet
reimbursed.

            

    

     

    
      	
              (d)

            	
              The
      Borrower agrees:

            

    

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              (i)

            	
              Any
      sum drawn under a standby letter of credit may, at the option of the Bank,
      be added to the principal amount outstanding under this
      Agreement.  The amount will bear interest and be due as
      described elsewhere in this
Agreement.

            

    

     

    
      	
               
      

            	
              (ii)

            	
              If
      there is a default under this Agreement, to immediately prepay and make
      the Bank whole for any outstanding standby letters of
    credit.

            

    

     

    
      	
               
      

            	
              (iii)

            	
              The
      issuance of any standby letter of credit and any amendment to a standby
      letter of credit is subject to the Bank’s written approval and must be in
      form and content satisfactory to the Bank and in favor of a beneficiary
      acceptable to the Bank.

            

    

     

    
      	
               
      

            	
              (iv)

            	
              To
      sign the Bank’s form Application and Agreement for Standby Letter of
      Credit.

            

    

     

    
      	
               
      

            	
              (v)

            	
              To
      pay any issuance and/or other fees that the Bank notifies the Borrower
      will be charged for issuing and processing standby letters of credit for
      the Borrower.

            

    

     

    
      	
               
      

            	
              (vi)

            	
              To
      allow the Bank to automatically charge its checking account for applicable
      fees, discounts, and other charges.

            

    

     

    
      	
               
      

            	
              (vii)

            	
              To
      pay the Bank a non-refundable fee equal to one and one-half percent (1.5%)
      per annum of the outstanding undrawn amount of each standby letter of
      credit, payable annually in advance, calculated on the basis of the face
      amount outstanding on the day the fee is calculated.  If there
      is a default under this Agreement, at the Bank’s option, the amount of the
      fee shall be increased to six percent (6%) per annum, effective starting
      on the day the Bank provides notice of the increase to the
      Borrower.

            

    

     

    3.           OPTIONAL
INTEREST RATE

     

    3.1.           Optional
Rates.

     

    The
optional interest rate provided for in Paragraph 1.7 is a rate per
year.  Interest will be paid on the first day of the first month
following the commencement of the applicable interest period, and then on the
same day of each month thereafter until payment
in full of any principal outstanding under this Agreement.  No Portion
will be converted to a different interest rate during the applicable interest
period.  Upon the occurrence of an event of default under this
Agreement, the Bank may terminate the availability of the optional interest rate
for interest periods commencing after the default occurs.  At the end
of any interest period, the interest rate will revert to the rate stated in the
paragraph(s) entitled “Interest Rate” above, unless the Borrower has designated
another optional interest rate for the Portion.

     

    3.2.           LIBOR
Rate.

     

    The
election of the LIBOR Rate shall be subject to the following terms and
requirements:

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    
      	
              (a)

            	
              The
      interest period during which the LIBOR Rate will be in effect will be 30,
      60 or 90 days or one year.  The first day of the interest period
      must be a day other than a Saturday or a Sunday on which banks are open
      for business in New York and London and dealing in offshore dollars (a
      “LIBOR Banking Day”).  The last day of the interest period and
      the actual number of days during the interest period will be determined by
      the Bank using the practices of the London inter-bank
    market.

            

    

     

    
      	
              (b)

            	
              Each
      LIBOR Rate Portion will be for an amount not less than Five Hundred
      Thousand Dollars ($500,000).

            

    

     

    
      	
              (c)

            	
              The
      “LIBOR Rate” means the interest rate determined by the following
      formula.  (All amounts in the calculation will be determined by
      the Bank as of the first day of the interest
  period.)

            

    

     

    LIBOR
Rate = London
Inter-Bank Offered Rate

     

                                                                                            
(1.00 - Reserve Percentage)

     

    Where,

     

    
      	
               
      

            	
              (i)

            	
              “London
      Inter-Bank Offered Rate” means, for any applicable interest period, the
      rate per annum equal to the British Bankers Association LIBOR Rate (“BBA
      LIBOR”), as published by Reuters (or other commercially available source
      providing quotations of BBA LIBOR as selected by the Bank from time to
      time) at approximately 11:00 a.m. London time two (2) London Banking Days
      before the commencement of the interest period, for U.S. Dollar deposits
      (for delivery on the first day of such interest period) with a term
      equivalent to such interest period.  If such rate is not
      available at such time for any reason, then the rate for that interest
      period will be determined by such alternate method as reasonably selected
      by the Bank.  A “London Banking Day” is a day on which banks in
      London are open for business and dealing in offshore
    dollars.

            

    

     

    
      	
               
      

            	
              (ii)

            	
              “Reserve
      Percentage” means the total of the maximum reserve percentages for
      determining the reserves to be maintained by member banks of the Federal
      Reserve System for Eurocurrency Liabilities, as defined in Federal Reserve
      Board Regulation D, rounded upward to the nearest 1/100 of one
      percent.  The percentage will be expressed as a decimal, and
      will include, but not be limited to, marginal, emergency, supplemental,
      special, and other reserve
percentages.

            

    

     

    
      	
              (d)

            	
              The
      Borrower shall irrevocably request a LIBOR Rate Portion no later than
      12:00 noon Pacific time on the LIBOR Banking Day preceding the day on
      which the London Inter-Bank Offered Rate will be set, as specified
      above.  For example, if there are no intervening holidays or
      weekend days in any of the relevant locations, the request must be made at
      least three days before the LIBOR Rate takes
  effect.

            

    

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
      	
              (e)

            	
              The
      Bank will have no obligation to accept an election for a LIBOR Rate
      Portion if any of the following described events has occurred and is
      continuing:

            

    

     

    
      	
               
      

            	
              (i)

            	
              Dollar
      deposits in the principal amount, and for periods equal to the interest
      period, of a LIBOR Rate Portion are not available in the London inter-bank
      market; or

            

    

     

    
      	
               
      

            	
              (ii)

            	
              the
      LIBOR Rate does not accurately reflect the cost of a LIBOR Rate
      Portion.

            

    

     

    
      	
              (f)

            	
              Each
      prepayment of a LIBOR Rate Portion, whether voluntary, by reason of
      acceleration or otherwise, will be accompanied by the amount of accrued
      interest on the amount prepaid and a prepayment fee as described
      below.  A “prepayment” is a payment of an amount on a date
      earlier than the scheduled payment date for such amount as required by
      this Agreement.

            

    

     

    
      	
              (g)

            	
              The
      prepayment fee shall be in an amount sufficient to compensate the Bank for
      any loss, cost or expense incurred by it as a result of the prepayment,
      including any loss of anticipated profits and any loss or expense arising
      from the liquidation or reemployment of funds obtained by it to maintain
      such Portion or from fees payable to terminate the deposits from which
      such funds were obtained.  The Borrower shall also pay any
      customary administrative fees charged by the Bank in connection with the
      foregoing.  For purposes of this paragraph, the Bank shall be
      deemed to have funded each Portion by a matching deposit or other
      borrowing in the applicable interbank market, whether or not such Portion
      was in fact so funded.

            

    

     

    4.           FEES
AND EXPENSES

     

    4.1.           Fees.

     

    
      	
              (a)

            	
              Closing
      Fee.  The Borrower agrees to pay a one-time loan fee in
      the amount of Thirty-Seven Thousand Five Hundred Dollars
      ($37,500).  This fee is due on the date of this
      Agreement.  The Borrower acknowledges and agrees that the Bank
      may effect payment of this fee when due by charging the full amount
      thereof either to the Facility or to the Borrower’s designated deposit
      account with the Bank.

            

    

     

    
      	
              (b)

            	
              Unused Commitment
      Fee.  The Borrower agrees to pay a fee on any difference
      between the Facility Commitment and the amount of credit it actually uses,
      determined by the average of the daily amount of credit outstanding during
      the specified period.  The fee will be calculated at 0.50% per
      year.  The calculation of credit outstanding shall include the
      undrawn amount of letters of credit.  This fee is due in arrears
      on September 1, 2009, and on the same day of each following quarter in arrears until
      the expiration of the availability
period.

            

    

     

    
      	
              (c)

            	
              Waiver
      Fee.  If the Bank, at its discretion, agrees to waive or
      amend any terms of this Agreement, the Borrower will, at the Bank’s
      option, pay the Bank a fee for each waiver or amendment in an amount
      advised by the Bank at the time the Borrower requests the waiver or
      amendment.  Nothing in this paragraph shall imply that the Bank
      is obligated to agree to any waiver or amendment requested by the
      Borrower.  The Bank may impose additional requirements as a
      condition to any waiver or
amendment.

            

    

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    
      	
              (d)

            	
              Late
      Fee.  To the extent permitted by law, the Borrower agrees
      to pay a late fee in an amount not to exceed four percent (4%) of any
      payment that is more than fifteen (15) days late.  The
      imposition and payment of a late fee shall not constitute a waiver of the
      Bank’s rights with respect to the default, including Bank’s right to
      charge interest at the default interest rate provided for in Section
      6.6.

            

    

     

    4.2.           Expenses.

     

    The
Borrower agrees to immediately repay the Bank for expenses that include, but are
not limited to, filing, recording and search fees, appraisal fees, title report
fees, and documentation fees.

     

    4.3.           Reimbursement
Costs.

     

    
      	
              (a)

            	
              The
      Borrower agrees to reimburse the Bank for any expenses it incurs in the
      preparation of this Agreement and any agreement or instrument required by
      this Agreement.  Expenses include, but are not limited to,
      reasonable attorneys’ fees, including any allocated costs of the Bank’s
      in-house counsel to the extent permitted by applicable
  law.

            

    

     

    
      	
              (b)

            	
              The
      Borrower agrees to reimburse the Bank for the cost of periodic field
      examinations of the Borrower’s books, records and collateral, and
      appraisals of the collateral, at such intervals as the Bank may reasonably
      require.  The actions described in this paragraph may be
      performed by employees of the Bank or by independent
      appraisers.

            

    

     

    5.           COLLATERAL

     

    The
timely payment and performance of the Borrower’s obligations to the Bank under
this Agreement are secured by a security interest in the Collateral described in
the Security Agreement, of even date herewith, by and between the Borrower and
the Bank.

     

    6.           DISBURSEMENTS,
PAYMENTS AND COSTS

     

    6.1.           Disbursements and
Payments.

     

    
      	
              (a)

            	
              Each
      payment by the Borrower will be made in U.S. Dollars and immediately
      available funds by direct debit to a deposit account as specified
      below.

            

    

     

    
      	
              (b)

            	
              Each
      disbursement by the Bank and each payment by the Borrower will be
      evidenced by records kept by the Bank.  In addition, the Bank
      may, at its discretion, require the Borrower to sign one or more
      promissory notes.

            

    

     

    6.2.           Telephone and Telefax
Authorization.

     

    
      	
              (a)

            	
              The
      Bank may honor telephone or telefax instructions for advances or
      repayments or
      for the designation of optional interest rates and telefax requests for
      the issuance of letters of credit given, or purported to be given, by any
      one of the individuals authorized to sign loan agreements on behalf of the
      Borrower, or any other individual designated by any one of such authorized
      signers.

            

    

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    
      	
              (b)

            	
              Advances
      will be deposited in and repayments will be withdrawn from the Borrower’s
      designated deposit account with the Bank (the “Designated Bank
      Account”).

            

    

     

    
      	
              (c)

            	
              The
      Borrower will indemnify and hold the Bank harmless from all liability,
      loss, and costs in connection with any act resulting from telephone or
      telefax instructions the Bank reasonably believes are made by any
      individual authorized by the Borrower to give such
      instructions.  This paragraph will survive this Agreement’s
      termination, and will benefit the Bank and its officers, employees, and
      agents.

            

    

     

    6.3.           Direct
Debit.

     

    
      	
              (a)

            	
              The
      Borrower agrees that interest and principal payments and any fees will be
      deducted automatically on the due date from the Designated Deposit
      Account.

            

    

     

    
      	
              (b)

            	
              The
      Borrower will maintain sufficient funds in the account on the dates the
      Bank enters debits authorized by this Agreement.  If there are
      insufficient funds in the account on the date the Bank enters any debit
      authorized by this Agreement, the Bank may reverse the
    debit.

            

    

     

    6.4.           Banking
Days.

     

    Unless
otherwise provided in this Agreement, a banking day is a day other than a
Saturday, Sunday or other day on which commercial banks are authorized to close,
or are in fact closed, in the state where the Bank’s lending office is located,
and, if such day relates to amounts bearing interest at an offshore rate (if
any), means any such day on which dealings in dollar deposits are conducted
among banks in the offshore dollar interbank market.  All payments and
disbursements which would be due on a day which is not a banking day will be due
on the next banking day.  All payments received on a day which is not
a banking day will be applied to the credit on the next banking
day.

     

    6.5.           Interest
Calculation.

     

    Except as
otherwise stated in this Agreement, all interest and fees, if any, will be
computed on the basis of a 360-day year and the actual number of days
elapsed.  This results in more interest or a higher fee than if a
365-day year is used.  Installments of principal which are not paid
when due under this Agreement shall continue to bear interest until
paid.

     

    6.6.           Default
Rate.

     

    Upon the
occurrence of any default or after maturity or after judgment has been rendered
on any obligation under this Agreement, all amounts outstanding under this
Agreement, including any interest, fees, or costs which are not paid when due,
will at the option of the Bank bear interest at a rate which is 2.0 percentage
points higher than the rate of interest otherwise provided under this
Agreement.  This may result in compounding of
interest.  This will not constitute a waiver of any
default.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    6.7.           Taxes.

     

    If any
payments to the Bank under this Agreement are made from outside the United
States, the Borrower will not deduct any foreign taxes from any payments it
makes to the Bank.  If any such taxes are imposed on any payments made
by the Borrower (including payments under this paragraph), the Borrower will pay
the taxes and will also pay to the Bank, at the time interest is paid, any
additional amount which the Bank specifies as necessary to preserve the
after-tax yield the Bank would have received if such taxes had not been
imposed.  The Borrower will confirm that it has paid the taxes by
giving the Bank official tax receipts (or notarized copies) within thirty (30)
days after the due date.

     

    6.8.           Overdrafts.

     

    At the
Bank’s sole option in each instance, the Bank may do one of the
following:

     

    
      	
              (a)

            	
              The
      Bank may make advances under this Agreement to prevent or cover an
      overdraft on any account of the Borrower with the Bank.  Each
      such advance will accrue interest from the date of the advance or the date
      on which the account is overdrawn, whichever occurs first, at the interest
      rate described in this Agreement.  The Bank may make such
      advances even if the advances may cause any credit limit under this
      Agreement to be exceeded.

            

    

     

    
      	
              (b)

            	
              The
      Bank may reduce the amount of credit otherwise available under this
      Agreement by the amount of any overdraft on any account of the Borrower
      with the Bank.

            

    

     

    This
paragraph shall not be deemed to authorize the Borrower to create overdrafts on
any of the Borrower’s accounts with the Bank.

     

    6.9.           Payments in
Kind.

     

    If the
Bank requires delivery in kind of the proceeds of collection of the Borrower’s
accounts receivable, such proceeds shall be credited to interest, principal, and
other sums owed to the Bank under this Agreement in the order and proportion
determined by the Bank in its sole discretion.  All such credits will
be conditioned upon collection and any returned items may, at the Bank’s option,
be charged to the Borrower.

     

    7.           CONDITIONS

     

    Before
the Bank is required to extend any credit to the Borrower under this Agreement,
it must receive any documents and other items it may reasonably require, in form
and content acceptable to the Bank, including any items specifically listed
below.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    7.1.           Authorizations.

     

    Evidence
that the execution, delivery and performance by the Borrower of this Agreement
and/or any instrument or agreement required under this Agreement to which the
Borrower is a party have been duly authorized by the Borrower.

     

    7.2.           Governing
Documents.

     

    Certification
from the secretary of the Borrower that there have been no changes to the
organizational documents of the Borrower from the copies of those documents
delivered by the Borrower in conjunction with the Prior Loan
Agreement.

     

    7.3.           Guaranty.

     

    Written
confirmation from the Guarantor that the continuing guaranty executed by the
Guarantor in favor of the Bank in conjunction with the Prior Loan Agreement
remains in full force and effect and hereinafter shall apply to the Borrower’s
indebtedness, liabilities and obligations under this Agreement.

     

    7.4.           Security
Agreements.

     

    Written
confirmation from an authorized officer of the Borrower and the Guarantor that
the respective security agreements executed by the Borrower and the Guarantor in
favor of the Bank in conjunction with the Prior Loan Agreement shall remain in
full force and effect and hereinafter shall secure the payment and performance
of the Borrower’s indebtedness, liabilities and obligations to the Bank under
this Agreement.

     

    7.5.           Stock
Pledge.

     

    Written
confirmation from an authorized officer of the Borrower that the stock pledge
agreement executed by the Borrower in favor of the Bank in conjunction with the
Prior Loan Agreement covering all of the capital stock of the Guarantor shall
remain in full force and effect and hereinafter shall secure the payment and
performance of the Borrower’s indebtedness, liabilities and obligations to the
Bank under this Agreement.

     

    7.6.           Perfection and Evidence of
Priority.

     

    Evidence
that the security interests and liens created in favor of the Bank in
conjunction with the Prior Loan Agreement continue to be valid, enforceable,
properly perfected in a manner acceptable to the Bank, and prior to all others’
rights and interests, except those the Bank previously consented to in
writing.

     

    7.7.           Payment of
Fees.

     

    Payment
of all fees and other amounts due and owing to the Bank, including without
limitation payment of all accrued and unpaid expenses incurred by the Bank as
required by the paragraph entitled “Reimbursement Costs.”

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    7.8.           Principal Balance of GECC
Term Loan.

     

    Confirmation
from the Borrower that as of the date of this Agreement the outstanding
principal amount of the GECC Term Loan is Two Million Eight Hundred Thirty-Eight
Thousand Six Hundred Eleven Dollars ($2,838,611).

     

    7.9.           Good
Standing.

     

    Certificates
of good standing for the Borrower from the State of California and from any
other state in which the Borrower is required to qualify to conduct its
business.

     

    7.10.                    Legal
Opinion.

     

    A written
opinion from legal counsel to the Borrower, covering such matters as the Bank
may require.  The legal counsel and the terms of the opinion must be
acceptable to the Bank.

     

    7.11.                    Intentionally
Omitted.

     

    7.12.                    Landlord
Agreement.

     

    The
landlord waiver signed by the lessor of the Borrower’s leased facility located
at 2777 Ontario Street, Burbank, CA 91504 in conjunction with the Prior Loan
Agreement shall be in effect on the date of this Agreement or the Bank shall
have established a reserve against borrowing availability under the Facility in
an amount equal to three (3) months rent for such facility.

     

    7.13.                    Insurance.

     

    Evidence
of insurance coverage, as required in the “Covenants” section of this
Agreement.

     

    7.14.                    Other Required
Documentation.

     

    
      	
              (a)

            	
              Secretary
      Certificate.  A secretary certificate from the secretary
      of the Borrower, attaching the authorizations required by Paragraph 7.1,
      the organizational documents required by Paragraph 7.2, signatures and
      incumbency information regarding officers and such other information as
      the Bank may reasonably request.

            

    

     

    
      	
              (b)

            	
              Closing Date Borrowing
      Certificate.  A completed borrowing certificate on the
      Bank’s standard form, demonstrating the Borrower’s borrowing base as of
      the month end immediately preceding the date of this
      Agreement.

            

    

     

    
      	
              (c)

            	
              Closing Date
      Compliance Certificate.  A completed compliance
      certificate on the Bank’s standard form, demonstrating that as of the date
      of this Agreement, the Borrower is in compliance with all of the financial
      covenants required under this
Agreement.

            

    

     

    
      	
              (d)

            	
              Additional
      Information.  The Bank shall have received and been
      satisfied with its review of such additional information relating to
      litigation, tax, accounting, labor, insurance, material contracts,
      contingent liabilities and management matters affecting the Borrower and
      the Guarantor as the Bank may reasonably
  request.

            

    

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    7.15.                    Other
Conditions.

     

    
      	
              (a)

            	
              Satisfactory Updated
      Field Examination.  The Bank shall have completed and
      been satisfied with the results of an updated field examination of the
      Borrower’s assets and books and
records.

            

    

     

    
      	
              (b)

            	
              Satisfactory Due
      Diligence Review.  The Bank shall have completed and been
      satisfied with the results of its due diligence review, including a
      satisfactory review of the terms and conditions of all of the Borrower’s
      related party debt, the Borrower’s sources of
  funds.

            

    

     

    
      	
              (c)

            	
              No Material Adverse
      Change.  There shall not have occurred a material adverse
      change in the business, assets, liabilities (actual or contingent),
      operations, condition (financial or otherwise) or prospects of the
      Borrower and its subsidiaries taken as a whole or in the facts and
      information regarding such entities as indicated on the audited financial
      statements for the Borrower’s fiscal year ended June 30, 2008 other than
      as described to the Bank (goodwill impairment and non-recurring cash and
      non-cash charges).

            

    

     

    
      	
              (d)

            	
              No Material Adverse
      Litigation.  There shall not be as of the date of this
      Agreement any action, suit, investigation or proceeding pending or
      threatened in any court or before any arbitrator or governmental authority
      that purports (i) to materially and adversely affect the Borrower or its
      subsidiaries, or (ii) to affect any transaction contemplated hereby or the
      ability of the Borrower or its subsidiaries or any other guarantor to
      perform their respective obligations under this Agreement or any of the
      other loan documents entered into in connection with this
      Agreement.

            

    

     

    8.           REPRESENTATIONS
AND WARRANTIES

     

    When the
Borrower signs this Agreement, and until the Bank is repaid in full, the
Borrower makes the following representations and warranties.  Each
request for an extension of credit constitutes a renewal of these
representations and warranties as of the date of the request:

     

    8.1.           Formation.

     

    The
Borrower is a corporation organized under the laws of the State of
California.

     

    8.2.           Authorization.

     

    This
Agreement, and any instrument or agreement required hereunder, are within the
Borrower’s powers, have been duly authorized, and do not conflict with any of
its organizational papers.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    8.3.           Enforceable
Agreement.

     

    This
Agreement is a legal, valid and binding agreement of the Borrower, enforceable
against the Borrower in accordance with its terms, and any instrument or
agreement required hereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable.

     

    8.4.           Good
Standing.

     

    In each
state in which the Borrower does business, it is properly licensed, in good
standing, and, where required, in compliance with fictitious name
statutes.

     

    8.5.           No
Conflicts.

     

    This
Agreement does not conflict with any law, agreement, or obligation by which the
Borrower is bound.

     

    8.6.           Financial
Information.

     

    All
financial and other information that has been or will be supplied to the Bank is
sufficiently complete to give the Bank accurate knowledge of the Borrower’s (and
the Guarantor’s) financial condition, including all material contingent
liabilities.  Since the date of the most recent financial statement
provided to the Bank, there has been no material adverse change in the business
condition (financial or otherwise), operations, properties or prospects of the
Borrower (or the Guarantor) other than as described in Section
7.15(c).  If the Borrower is comprised of the trustees of a trust, the
foregoing representations shall also pertain to the trustor(s) of the
trust.

     

    8.7.           Lawsuits.

     

    There is
no lawsuit, tax claim or other dispute pending or threatened against the
Borrower which, if lost, would impair the Borrower’s financial condition or
ability to repay the loan, except as have been disclosed in writing to the
Bank.

     

    8.8.           Collateral.

     

    All
collateral required in this Agreement is owned by the grantor of the security
interest free of any title defects or any liens or interests of others, except
those which have been approved by the Bank in writing.

     

    8.9.           Permits,
Franchises.

     

    The
Borrower possesses all permits, memberships, franchises, contracts and licenses
required and all trademark rights, trade name rights, patent rights, copyrights,
and fictitious name rights necessary to enable it to conduct the business in
which it is now engaged.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

     

    8.10.                    Other
Obligations.

     

    The
Borrower is not in default on any obligation for borrowed money, any purchase
money obligation or any other material lease, commitment, contract, instrument
or obligation, except as have been disclosed in writing to the
Bank.

     

    8.11.                    Tax
Matters.

     

    The
Borrower has no knowledge of any pending assessments or adjustments of its
income tax for any year and all taxes due have been paid, except as have been
disclosed in writing to the Bank.

     

    8.12.                    No Event of
Default.

     

    There is
no event which is, or with notice or lapse of time or both would be, a default
under this Agreement.

     

    8.13.                    Insurance.

     

    The
Borrower has obtained, and maintained in effect, the insurance coverage required
in the “Covenants” section of this Agreement.

     

    8.14.                    Governmental
Authorization.

     

    No
approval, consent, exemption, authorization, or other action by, or notice to,
or filing with, any governmental authority (including, without limitation, any
nation, state or other political subdivision thereof, any central bank, and any
entity exercising executive, legislative, judicial, regulatory or administrative
functions, and any corporation or other entity owned or controlled by any of the
foregoing) is necessary or required in connection with the execution, delivery
or performance by, or enforcement against, the Borrower of this Agreement or any
other instrument or agreement required hereunder.

     

    9.           COVENANTS

     

    The
Borrower agrees, so long as credit is available under this Agreement and until
the Bank is repaid in full:

     

    9.1.           Use of
Proceeds.

     

    
      	
              (a)

            	
              To
      use the proceeds of the Facility only for working capital and general
      corporate purposes and for the issuance of standby letters of
      credit.

            

    

     

    
      	
              (b)

            	
              The
      proceeds of the credit extended under this Loan Agreement may not be used
      directly or indirectly to purchase or carry any “margin stock” as that
      term is defined in Regulation U of the Board of Governors of the Federal
      Reserve System, or extend credit to or invest in other parties for the
      purpose of purchasing or carrying any such “margin stock,” or to reduce or
      retire any indebtedness incurred for such
  purpose.

            

    

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    9.2.           Financial
Information.

     

    To
provide the following financial information and statements in form and content
acceptable to the Bank, and such additional information as requested by the Bank
from time to time:

     

    
      	
              (a)

            	
              A
      Borrowing Certificate as of the last day of each month within twenty (20)
      days after month end and, upon the Bank’s request, copies of the invoices
      or the record of invoices from the Borrower’s sales journal for the
      Borrower’s Acceptable Receivables and a listing of the names and addresses
      of the debtors obligated thereunder, copies of the delivery receipts,
      purchase orders, shipping instructions, bills of lading and other
      documentation pertaining to such Acceptable Receivables, and copies of the
      cash receipts journal pertaining to the Borrowing
    Certificate.

            

    

     

    
      	
              (b)

            	
              Upon
      the Bank's request, a detailed aging of the Borrower’s receivables by
      invoice or a summary aging by account debtor, as specified by the
      Bank.

            

    

     

    
      	
              (c)

            	
              Upon
      the Bank's request, a summary aging by vendor of accounts
      payable.

            

    

     

    
      	
              (d)

            	
              If
      the Bank requires the Borrower to deliver the proceeds of accounts
      receivable to the Bank upon collection by the Borrower, a schedule of the
      amounts so collected and delivered to the
Bank.

            

    

     

    
      	
              (e)

            	
              Upon
      the Bank’s request, a listing of the names and addresses of all debtors
      obligated upon the Borrower’s accounts
  receivable.

            

    

     

    
      	
              (f)

            	
              Copies
      of all letters of credit issued in support of the Borrower’s accounts
      receivable.

            

    

     

    
      	
              (g)

            	
              Promptly
      upon the Bank’s request, such other books, records, statements, lists of
      property and accounts, budgets, forecasts or reports as to the Borrower
      and the Guarantor as the Bank may
request.

            

    

     

    
      	
              (h)

            	
              Within
      90 days after the Borrower’s fiscal year end, the annual financial
      statements of the Borrower.  These financial statements must be
      audited (with an opinion satisfactory to the Bank) by a Certified Public
      Accountant acceptable to the Bank.  The statements shall be
      prepared on a consolidated basis.

            

    

     

    
      	
              (i)

            	
              Within
      45 days after the period’s end in the case of the first three fiscal
      quarters of each fiscal year of the Borrower and within 60 days after the
      end of the fourth fiscal quarter of each such fiscal year, quarterly
      financial statements of the Borrower, certified and dated by an authorized
      financial officer.  These financial statements may be
      company-prepared.  The statements shall be prepared on a
      consolidated basis.

            

    

     

    
      	
              (j)

            	
              Promptly,
      upon sending or receipt, copies of any management letters and
      correspondence relating to management letters, sent or received by the
      Borrower to or from the Borrower’s auditor.  If no management
      letter is prepared, the Bank may, in its discretion, request a letter from
      such auditor stating that no deficiencies were noted that would otherwise
      be addressed in a management
letter.

            

    

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    
      	
              (k)

            	
              Copies
      of the Form 10-K Annual Report, Form 10-Q Quarterly Report and Form 8-K
      Current Report for the Borrower concurrent with the date of filing with
      the Securities and Exchange
Commission.

            

    

     

    
      	
              (l)

            	
              Financial
      projections covering a time period acceptable to the Bank and specifying
      the assumptions used in creating the projections.  The
      projections shall be provided to the Bank no less often than 45 days after
      the end of each fiscal year.

            

    

     

    
      	
              (m)

            	
              Within
      45 days after the end of each fiscal quarter, a compliance
      certificate of the Borrower, signed by an authorized financial officer and
      setting forth (i) the information and computations (in sufficient detail)
      to establish that the Borrower is in compliance with all financial
      covenants at the end of the period covered by the financial statements
      then being furnished and (ii) whether there existed as of the date of such
      financial statements and whether there exists as of the date of the
      certificate, any default under this Agreement and, if any such default
      exists, specifying the nature thereof and the action the Borrower is
      taking and proposes to take with respect
  thereto.

            

    

     

    9.3.           Leverage
Ratio.

     

    To
maintain on a consolidated basis a Leverage Ratio of at least
1.75:1.0.

     

    “Leverage
Ratio” means the ratio of (a) the total assets of the Borrower (excluding
goodwill and other intangible assets of the Borrower) to (b) the total
liabilities of the Borrower (excluding the deferred gain on the sale of the
Borrower’s so-called “Media Center” property).

     

    This
ratio will be calculated at the end of each fiscal quarter of the
Borrower.

     

    9.4.           Basic Fixed Charge Coverage
Ratio.

     

    To
maintain on a consolidated basis a Basic Fixed Charge Coverage Ratio of at least
1.1:1.0.

     

    “Basic
Fixed Charge Coverage Ratio” means the ratio of (a) the sum of EBITDA plus
lease expense and rent expense to (b) the sum of income taxes (to the
extent paid in cash), interest expense, lease expense, rent expense, the current
portion of long term debt (excluding amounts outstanding under the Facility) and
the current portion of capitalized lease obligations.

     

    “EBITDA”
means net income, less income or plus loss from discontinued operations and
extraordinary items, plus income taxes, plus interest expense, plus
depreciation, depletion, amortization, Sarbanes Oxley Act-related cash expenses
incurred between December 2008 and June 2009 of no more than $1,100,000 and
other non-recurring, non-cash charges, provided that any
such non-recurring, non-cash charges if incurred after June 30, 2009 shall be
approved by the Bank.

     

    This
ratio will be calculated at the end of each fiscal quarter of the Borrower,
using the results of the twelve-month period ending with that fiscal
quarter.  The current portion of long-term liabilities will be
measured as of the last day of the calculation period.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

     

    9.5.           Dividends and
Distributions.

     

    Not to
declare or pay any dividends (except dividends paid in capital stock),
redemptions of stock or membership interests, distributions and withdrawals (as
applicable) to its owners.

     

    9.6.           Bank as Principal
Depository.

     

    To
maintain the Bank as its principal depository bank, including for the
maintenance of business, cash management, operating and administrative deposit
accounts.

     

    9.7.           Other
Debts.

     

    Not to
have outstanding or incur any direct or contingent liabilities (other than those
to the Bank), or become liable for the liabilities of others, without the Bank’s
written consent.  This does not prohibit:

     

    
      	
              (a)

            	
              Acquiring
      goods, supplies, or merchandise on normal trade
  credit.

            

    

     

    
      	
              (b)

            	
              Endorsing
      negotiable instruments received in the usual course of
      business.

            

    

     

    
      	
              (c)

            	
              The
      Borrower’s term loan indebtedness to GECC, the aggregate outstanding
      principal amount of which on the date of this Agreement is Two Million
      Eight Hundred Thirty-Eight Thousand Six Hundred Eleven Dollars
      ($2,838,611).

            

    

     

    
      	
              (d)

            	
              Obtaining
      surety bonds in the usual course of
business.

            

    

     

    
      	
              (e)

            	
              Liabilities,
      lines of credit and leases in existence on the date of this Agreement
      disclosed in writing to the Bank.

            

    

     

    
      	
              (f)

            	
              The
      Borrower’s term loan indebtedness to Lehman Brothers (“Lehman”) in an
      original principal amount of up to $6,400,000 (the “Lehman Loan”),
      incurred by the Borrower to finance the purchase of the Borrower’s leased
      facility located at 1133 Hollywood Way, Burbank, California (the “Burbank
      Facility”).

            

    

     

    
      	
              (g)

            	
              Additional
      debts and lease obligations for the acquisition of fixed assets, to the
      extent permitted elsewhere in this
Agreement.

            

    

     

    
      	
              (h)

            	
              The
      Borrower’s term loan indebtedness to M.J. Lantry Trust (“Lantry”) in an
      original principal amount of up to $3,562,500 (the “Lantry Loan”),
      incurred by the Borrower to finance the purchase of the Borrower’s
      facility located at 1147 Vine Street, Hollywood, California (the “Vine
      Facility”).

            

    

     

    9.8.           Other
Liens.

     

    Not to
create, assume, or allow any security interest or lien (including judicial
liens) on property the Borrower now or later owns, except:

     

    
      	
              (a)

            	
              Liens
      and security interests in favor of the
Bank.

            

    

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

    
      	
              (b)

            	
              Liens
      for taxes not yet due.

            

    

     

    
      	
              (c)

            	
              Liens
      outstanding on the date of this Agreement disclosed in writing to the
      Bank, including liens in favor of GECC, which are subject to the terms of
      the intercreditor agreement required by Paragraph 7.11
    hereof.

            

    

     

    
      	
              (d)

            	
              Additional
      purchase money security interests in assets acquired after the date of
      this Agreement, if the total principal amount of debts secured by such
      liens does not exceed Five Hundred Thousand Dollars ($500,000) at any one
      time.

            

    

     

    
      	
              (e)

            	
              The
      lien created by the deed of trust on the Burbank Facility, granted by the
      Borrower to Lehman as collateral security for the payment and performance
      of the Borrower’s obligations to Lehman in connection with the Lehman
      Loan.

            

    

     

    
      	
              (f)

            	
              The
      lien created by the deed of trust on the Vine Facility, granted by the
      Borrower to Lantry as collateral security for the payment and performance
      of the Borrower’s obligations to Lantry in connection with the Lantry
      Loan.

            

    

     

    9.9.           Maintenance of
Assets.

     

    
      	
              (a)

            	
              Not
      to sell, assign, lease, transfer or otherwise dispose of any part of the
      Borrower’s business or the Borrower’s assets except in the ordinary course
      of the Borrower’s business.

            

    

     

    
      	
              (b)

            	
              Not
      to sell, assign, lease, transfer or otherwise dispose of any assets for
      less than fair market value, or enter into any agreement to do
      so.

            

    

     

    
      	
              (c)

            	
              Not
      to enter into any sale and leaseback agreement covering any of its fixed
      assets.

            

    

     

    
      	
              (d)

            	
              To
      maintain and preserve all rights, privileges, and franchises the Borrower
      now has.

            

    

     

    
      	
              (e)

            	
              To
      make any repairs, renewals, or replacements to keep the Borrower’s
      properties in good working
condition.

            

    

     

    9.10.                    Investments.

     

    Not to
have any existing, or make any new, investments in any individual or entity, or
make any capital contributions or other transfers of assets to any individual or
entity, except for:

     

    
      	
              (a)

            	
              Existing
      investments disclosed to the Bank in
writing.

            

    

     

    
      	
              (b)

            	
              Investments
      in the Borrower’s current
subsidiaries.

            

    

     

    
      	
              (c)

            	
              Investments
      in any of the following:

            

    

     

    
      	
               
      

            	
              (i)

            	
              certificates
      of deposit;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              U.S.
      treasury bills and other obligations of the federal
      government;

            

    

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              (iii)

            	
              readily
      marketable securities (including commercial paper, but excluding
      restricted stock and stock subject to the provisions of Rule 144 of the
      Securities and Exchange
Commission).

            

    

     

    9.11.                    Loans.

     

    Not to
make any loans, advances or other extensions of credit to any individual or
entity, except for:

     

    
      	
              (a)

            	
              Existing
      extensions of credit disclosed to the Bank in
  writing.

            

    

     

    
      	
              (b)

            	
              Extensions
      of credit to the Borrower’s current
  subsidiaries.

            

    

     

    
      	
              (c)

            	
              Extensions
      of credit in the nature of accounts receivable or notes receivable arising
      from the sale or lease of goods or services in the ordinary course of
      business to non-affiliated
entities.

            

    

     

    9.12.                    Change of
Management.

     

    Not to
make any substantial change in the present executive or management personnel of
the Borrower.

     

    9.13.                    Change of
Control.

     

    Not to
cause or permit:

     

    
      	
              (a)

            	
              Haig
      S. Bagerdjian to cease to be the chief executive officer of the Borrower
      unless within sixty (60) days after Mr. Bagerdjian ceases to hold such
      office the Borrower secures a replacement chief executive officer
      satisfactory to the Bank.

            

    

     

    
      	
              (b)

            	
              Haig
      S. Bagerdjian to cease to own directly or indirectly, beneficially or of
      record, at least fifteen (15%) of all shares of voting securities of the
      Borrower (provided that such percentage may be less than fifteen percent
      (15%), but not less than seven and one-half percent (7.5%), if such
      reduction is due to the issuance of shares of voting securities of the
      Borrower as consideration for an acquisition permitted under Paragraph
      9.14(b) below).

            

    

     

    
      	
              (c)

            	
              Individuals
      who constituted the Borrower’s board of directors as of the date of this
      Agreement (collectively, the “Existing Directors”) to cease to constitute
      a majority of the directors then in office (provided that the Existing
      Directors may constitute less than a majority if such reduction is due to
      the appointment of additional directors in connection with an acquisition
      permitted under Paragraph 9.14(b)
below).

            

    

     

    9.14.                    Additional Negative
Covenants.

     

    Not to,
without the Bank’s written consent:

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

    
      	
              (a)

            	
              Except
      as permitted under Paragraph 9.14(b) below, enter into any consolidation,
      merger, or other combination, or become a partner in a partnership, a
      member of a joint venture, or a member of a limited liability
      company.

            

    

     

    
      	
              (b)

            	
              Acquire
      or purchase a business or its assets for total purchase consideration of
      more than Three Million Dollars ($3,000,000) for any single transaction or
      Four Million Dollars ($4,000,000) in the aggregate in any fiscal year for
      all such transactions, or acquire or purchase a business or its assets
      irrespective of the total amount of purchase consideration for such
      transaction or the total purchase consideration for all such transactions
      in any year if the Borrower cannot demonstrate to the Bank’s reasonable
      satisfaction that the Borrower would be in pro forma compliance with the
      financial and other covenants set forth in this Agreement after giving
      effect to such acquisition or purchase or if the Bank otherwise does not
      consent to such acquisition or
purchase.

            

    

     

    
      	
              (c)

            	
              Engage
      in any business activities substantially different from the Borrower’s
      present business.

            

    

     

    
      	
              (d)

            	
              Liquidate
      or dissolve the Borrower’s
business.

            

    

     

    
      	
              (e)

            	
              Voluntarily
      suspend its business for more than seven (7) days in any thirty (30) day
      period.

            

    

     

    9.15.                    Notices to
Bank.

     

    To
promptly notify the Bank in writing of:

     

    
      	
              (a)

            	
              Any
      lawsuit over One Million Dollars ($1,000,000) against the Borrower or the
      Guarantor.

            

    

     

    
      	
              (b)

            	
              Any
      substantial dispute between any governmental authority and the Borrower or
      the Guarantor.

            

    

     

    
      	
              (c)

            	
              Any
      event of default under this Agreement, or any event which, with notice or
      lapse of time or both, would constitute an event of
    default.

            

    

     

    
      	
              (d)

            	
              Any
      material adverse change in the Borrower’s (or the Guarantor’s) business
      condition (financial or otherwise), operations, properties or prospects,
      or ability to repay the credit.

            

    

     

    
      	
              (e)

            	
              Any
      change in the Borrower’s name, legal structure, place of business, or
      chief executive office if the Borrower has more than one place of
      business.

            

    

     

    
      	
              (f)

            	
              Any
      actual contingent liabilities of the Borrower (or the Guarantor), and any
      such contingent liabilities which are reasonably foreseeable, where such
      liabilities are in excess of One Million Dollars ($1,000,000) in the
      aggregate.

            

    

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

    9.16.                    Insurance.

     

    
      	
              (a)

            	
              General Business
      Insurance.  To maintain insurance satisfactory to the
      Bank as to amount, nature and carrier covering property damage (including
      loss of use and occupancy) to any of the Borrower’s properties, business
      interruption insurance, public liability insurance including coverage for
      contractual liability, product liability and workers’ compensation, and
      any other insurance which is usual for the Borrower’s
      business.  Each policy shall provide for at least thirty (30)
      days prior notice to the Bank of any cancellation
  thereof.

            

    

     

    
      	
              (b)

            	
              Insurance Covering
      Collateral.  If required by the Bank, to maintain all
      risk property damage insurance policies covering the tangible property
      comprising the collateral.  Each such insurance policy required
      by the Bank must be for the full replacement cost of the collateral and
      include a replacement cost endorsement.  Such insurance (if
      required by the Bank) must be issued by an insurance company acceptable to
      the Bank and must include a lender’s loss payable endorsement in favor of
      the Bank in a form acceptable to the
Bank.

            

    

     

    
      	
              (c)

            	
              Evidence of
      Insurance.  Upon the request of the Bank, to deliver to
      the Bank a copy of each insurance policy, or, if permitted by the Bank, a
      certificate of insurance listing all insurance in
  force.

            

    

     

    9.17.                    Compliance with
Laws.

     

    To comply
with the laws (including any fictitious or trade name statute), regulations, and
orders of any government body with authority over the Borrower’s
business.  The Bank shall have no obligation to make any advance to
the Borrower except in compliance with all applicable laws and regulations and
the Borrower shall fully cooperate with the Bank in complying with all such
applicable laws and regulations.

     

    9.18.                    ERISA
Plans.

     

    Promptly
during each year, to pay and cause any subsidiaries to pay contributions
adequate to meet at least the minimum funding standards under ERISA with respect
to each and every Plan; file each annual report required to be filed pursuant to
ERISA in connection with each Plan for each year; and notify the Bank within ten
(10) days of the occurrence of any Reportable Event that might constitute
grounds for termination of any capital Plan by the Pension Benefit Guaranty
Corporation or for the appointment by the appropriate United States District
Court of a trustee to administer any Plan.  “ERISA” means the Employee
Retirement Income Security Act of 1974, as amended from time to
time.  Capitalized terms in this paragraph shall have the meanings
defined within ERISA.

     

    9.19.                    Books and
Records.

     

    To
maintain adequate books and records.

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

     

    9.20.                    Audits.

     

    To allow
the Bank and its agents to inspect the Borrower’s properties and examine, audit,
and make copies of books and records at any reasonable time.  If any
of the Borrower’s properties, books or records are in the possession of a third
party, the Borrower authorizes that third party to permit the Bank or its agents
to have access to perform inspections or audits and to respond to the Bank’s
requests for information concerning such properties, books and
records.

     

    9.21.                    Perfection of
Liens.

     

    To help
the Bank maintain the perfection of and protect its security interests and
liens, and reimburse it for related costs it incurs to protect its security
interests and liens.

     

    9.22.                    Cooperation.

     

    To take
any action reasonably requested by the Bank to carry out the intent of this
Agreement.

     

    10.           DEFAULT
AND REMEDIES

     

    If any of
the following events of default occurs, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice.  If an event which, with notice
or the passage of time, will constitute an event of default has occurred and is
continuing, the Bank has no obligation to make advances or extend additional
credit under this Agreement.  In addition, if any event of default
occurs, the Bank shall have all rights, powers and remedies available under any
instruments and agreements required by or executed in connection with this
Agreement, as well as all rights and remedies available at law or in
equity.  If an event of default occurs under the paragraph entitled
“Bankruptcy,” below, with respect to the Borrower, then the entire debt
outstanding under this Agreement will automatically be due
immediately.

     

    10.1.                    Failure to
Pay.

     

    The
Borrower fails to make a payment under this Agreement when due.

     

    10.2.                    Other Bank
Agreements.

     

    Any
default occurs under any other agreement the Borrower (or any Obligor) or any of
the Borrower’s related entities or affiliates has with the Bank or any affiliate
of the Bank.  For purposes of this Agreement, “Obligor” shall mean the
Guarantor or any party pledging collateral to the Bank.

     

    10.3.                    Cross-default.

     

    Any
default occurs under any agreement in connection with any credit in excess of
Five Hundred Thousand Dollars ($500,000) the Borrower (or any Obligor) or any of
the Borrower’s related entities or affiliates has obtained from anyone else or
which the Borrower (or any Obligor) or any of the Borrower’s related entities or
affiliates has guaranteed.

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     

    10.4.                    False
Information.

     

    The
Borrower or any Obligor has given the Bank materially false or misleading
information or representations.

     

    10.5.                    Bankruptcy.

     

    The
Borrower, any Obligor, or any general partner of the Borrower or of any Obligor
files a bankruptcy petition, a bankruptcy petition is filed against any of the
foregoing parties, or the Borrower, any Obligor, or any general partner of the
Borrower or of any Obligor makes a general assignment for the benefit of
creditors.  The default will be deemed cured if any bankruptcy
petition filed against the Borrower, any Obligor, or any general partner of the
Borrower or of any Obligor is dismissed within a period of forty-five (45) days
after the filing; provided, however, that such cure opportunity will be
terminated upon the entry of an order for relief in any bankruptcy case arising
from such a petition.

     

    10.6.                    Receivers.

     

    A
receiver or similar official is appointed for a substantial portion of the
Borrower’s or any Obligor’s business, or the business is terminated, or, if any
Obligor is anything other than a natural person, such Obligor is liquidated or
dissolved.

     

    10.7.                    Lien
Priority.

     

    The Bank
fails to have an enforceable first lien (except for any prior liens to which the
Bank has consented in writing) on or security interest in any property given as
security for this Agreement (or any guaranty).

     

    10.8.                    Judgments.

     

    Any
judgments or arbitration awards are entered against the Borrower or any Obligor,
or the Borrower or any Obligor enters into any settlement agreements with
respect to any litigation or arbitration, in an aggregate amount of Two Hundred
Fifty Thousand Dollars ($250,000) or more in excess of any insurance coverage or
in an aggregate amount of Five Hundred Thousand Dollars ($500,000) or more,
irrespective of the amount of insurance coverage.

     

    10.9.                    Material Adverse
Change.

     

    A
material adverse change occurs, or is reasonably likely to occur, in the
Borrower’s (or any Obligor’s) business condition (financial or otherwise),
operations, properties or prospects, or ability to repay the
credit.

     

    10.10.                    Government
Action.

     

    Any
government authority takes action that the Bank believes materially adversely
affects the Borrower’s or any Obligor’s financial condition or ability to
repay.

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

     

    10.11.                    Default under Related
Documents.

     

    Any
default occurs under any guaranty, subordination agreement, security agreement,
deed of trust, mortgage, or other document required by or delivered in
connection with this Agreement or any such document is no longer in effect, or
any guarantor purports to revoke or disavow the guaranty.

     

    10.12.                    Other Breach Under
Agreement.

     

    A default
occurs under any other term or condition of this Agreement not specifically
referred to in this Article.  This includes any failure or anticipated
failure by the Borrower (or any other party named in the Covenants section) to
comply with any financial covenants set forth in this Agreement, whether such
failure is evidenced by financial statements delivered to the Bank or is
otherwise known to the Borrower or the Bank.  If, in the Bank’s
opinion, the breach is capable of being remedied, the breach will not be
considered an event of default under this Agreement for a period of thirty (30)
days after the date on which the Bank gives written notice of the breach to the
Borrower.

     

    11.           ENFORCING
THIS AGREEMENT; MISCELLANEOUS

     

    11.1.                    Disposition of Schedules and
Reports.

     

    The Bank
will not be obligated to return any schedules, invoices, statements, budgets,
forecasts, reports or other papers delivered by the Borrower.  The
Bank will destroy or otherwise dispose of such materials at such time as the
Bank, in its discretion, deems appropriate.

     

    11.2.                    Returned
Merchandise.

     

    Until the
Bank exercises its rights to collect the accounts receivable as provided under
any security agreement required under this Agreement, the Borrower may continue
its present policies for returned merchandise and adjustments.  Credit
adjustments with respect to returned merchandise shall be made immediately upon
receipt of the merchandise by the Borrower or upon such other disposition of the
merchandise by the debtor in accordance with the Borrower’s
instructions.  If a client adjustment is made with respect to any
Acceptable Receivable, the amount of such adjustment shall no longer be included
in the amount of such Acceptable Receivable in computing the Borrowing
Base.

     

    11.3.                    Verification of
Receivables.

     

    The Bank
may at any time, either orally or in writing, request confirmation from any
debtor of the current amount and status of the accounts receivable upon which
such debtor is obligated.

     

    11.4.                    Waiver of
Confidentiality.

     

    The
Borrower authorizes the Bank to discuss the Borrower’s financial affairs and
business operations with any accountants, auditors, business consultants, or
other professional advisors employed by the Borrower, and authorizes such
parties to disclose to the Bank such financial and business information or
reports (including management letters) concerning the Borrower as the Bank may
request.

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

    11.5.                    GAAP.

     

    Except as
otherwise stated in this Agreement, all financial information provided to the
Bank and all financial covenants will be made under generally accepted
accounting principles, consistently applied.

     

    11.6.                    California
Law.

     

    This
Agreement is governed by California law.

     

    11.7.                    Successors and
Assigns.

     

    This
Agreement is binding on the Borrower’s and the Bank’s respective successors and
assignees.  The Borrower agrees that it may not assign this Agreement
without the Bank’s prior consent.  The Bank may sell participations in
or assign this loan, and may exchange information about the Borrower (including,
without limitation, any information regarding any hazardous substances) with
actual or potential participants or assignees.  If a participation is
sold or the loan is assigned, the purchaser will have the right of set-off
against the Borrower.

     

    11.8.                    Arbitration and Waiver of
Jury Trial.

     

    
      	
              (a)

            	
              This
      paragraph concerns the resolution of any controversies or claims between
      the parties, whether arising in contract, tort or by statute, including
      but not limited to controversies or claims that arise out of or relate
      to:  (i) this agreement (including any renewals, extensions
      or modifications); or (ii) any document related to this agreement
      (collectively a “Claim”).  For the purposes of this arbitration
      provision only, the term “parties” shall include any parent corporation,
      subsidiary or affiliate of the Bank involved in the servicing, management
      or administration of any obligation described or evidenced by this
      agreement.

            

    

     

    
      	
              (b)

            	
              At
      the request of any party to this agreement, any Claim shall be resolved by
      binding arbitration in accordance with the Federal Arbitration Act (Title
      9, U.S. Code) (the “Act”).  The Act will apply even though this
      agreement provides that it is governed by the law of a specified
      state.  The arbitration will take place on an individual basis
      without resort to any form of class
action.

            

    

     

    
      	
              (c)

            	
              Arbitration
      proceedings will be determined in accordance with the Act, the
      then-current rules and procedures for the arbitration of financial
      services disputes of the American Arbitration Association or any successor
      thereof (“AAA”), and the terms of this paragraph.  In the event
      of any inconsistency, the terms of this paragraph shall
      control.  If AAA is unwilling or unable to (i) serve as the
      provider of arbitration or (ii) enforce any provision of this
      arbitration clause, the Bank may designate another arbitration
      organization with similar procedures to serve as the provider of
      arbitration.

            

    

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

     

    
      	
              (d)

            	
              The
      arbitration shall be administered by AAA and conducted, unless otherwise
      required by law, in any U.S. state where real or tangible personal
      property collateral for this credit is located or if there is no such
      collateral, in the state specified in the governing law section of this
      agreement.  All Claims shall be determined by one arbitrator;
      however, if Claims exceed Five Million Dollars ($5,000,000), upon the
      request of any party, the Claims shall be decided by three
      arbitrators.  All arbitration hearings shall commence within
      ninety (90) days of the demand for arbitration and close within ninety
      (90) days of commencement and the award of the arbitrator(s) shall be
      issued within thirty (30) days of the close of the
      hearing.  However, the arbitrator(s), upon a showing of good
      cause, may extend the commencement of the hearing for up to an additional
      sixty (60) days.  The arbitrator(s) shall provide a concise
      written statement of reasons for the award.  The arbitration
      award may be submitted to any court having jurisdiction to be confirmed,
      judgment entered and enforced.

            

    

     

    
      	
              (e)

            	
              The
      arbitrator(s) will give effect to statutes of limitation in determining
      any Claim and may dismiss the arbitration on the basis that the Claim is
      barred. For purposes of the application of the statute of limitations, the
      service on AAA under applicable AAA rules of a notice of Claim is the
      equivalent of the filing of a lawsuit.  Any dispute concerning
      this arbitration provision or whether a Claim is arbitrable shall be
      determined by the arbitrator(s).  The arbitrator(s) shall have
      the power to award legal fees pursuant to the terms of this
      agreement.

            

    

     

    
      	
              (f)

            	
              This
      paragraph does not limit the right of any party
      to:  (i) exercise self-help remedies, such as but not
      limited to, setoff; (ii) initiate judicial or non-judicial
      foreclosure against any real or personal property collateral;
      (iii) exercise any judicial or power of sale rights, or (iv) act
      in a court of law to obtain an interim remedy, such as but not limited to,
      injunctive relief, writ of possession or appointment of a receiver, or
      additional or supplementary
remedies.

            

    

     

    
      	
              (g)

            	
              The
      procedure described above will not apply if the Claim, at the time of the
      proposed submission to arbitration, arises from or relates to an
      obligation to the Bank secured by real property.  In this case,
      all of the parties to this agreement must consent to submission of the
      Claim to arbitration.  If both parties do not consent to
      arbitration, the Claim will be resolved as follows: The parties will
      designate a referee (or a panel of referees) selected under the auspices
      of AAA in the same manner as arbitrators are selected in AAA administered
      proceedings. The designated referee(s) will be appointed by a court as
      provided in California Code of Civil Procedure Section 638 and the
      following related sections.  The referee (or presiding referee
      of the panel) will be an active attorney or a retired
      judge.  The award that results from the decision of the
      referee(s) will be entered as a judgment in the court that appointed the
      referee, in accordance with the provisions of California Code of Civil
      Procedure Sections 644 and 645.

            

    

     

    
      	
              (h)

            	
              The
      filing of a court action is not intended to constitute a waiver of the
      right of any party, including the suing party, thereafter to require
      submittal of the Claim to
arbitration.

            

    

     

    
      	
              (i)

            	
              By
      agreeing to binding arbitration, the parties irrevocably and voluntarily
      waive any right they may have to a trial by jury in respect of any
      Claim.  Furthermore, without intending in any way to limit this
      agreement to arbitrate, to the extent any Claim is not arbitrated, the
      parties irrevocably and voluntarily waive any right they may have to a
      trial by jury in respect of such Claim to the maximum extent they may
      legally do so under applicable California law.  This provision
      is a material inducement for the parties entering into this
      agreement.

            

    

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

    11.9.                    Severability;
Waivers.

     

    If any
part of this Agreement is not enforceable, the rest of the Agreement may be
enforced.  The Bank retains all rights, even if it makes a loan after
default.  If the Bank waives a default, it may enforce a later
default.  Any consent or waiver under this Agreement must be in
writing.

     

    11.10.                    Attorneys’
Fees.

     

    The
Borrower shall reimburse the Bank for any reasonable costs and attorneys’ fees
incurred by the Bank in connection with the enforcement or preservation of any
rights or remedies under this Agreement and any other documents executed in
connection with this Agreement, and in connection with any amendment, waiver,
“workout” or restructuring under this Agreement.  In the event of a
lawsuit or arbitration proceeding, the prevailing party is entitled to recover
costs and reasonable attorneys’ fees incurred in connection with the lawsuit or
arbitration proceeding, as determined by the court or arbitrator.  In
the event that any case is commenced by or against the Borrower under the
Bankruptcy Code (Title 11, United States Code) or any similar or successor
statute, the Bank is entitled to recover costs and reasonable attorneys’ fees
incurred by the Bank related to the preservation, protection, or enforcement of
any rights of the Bank in such a case.  As used in this paragraph,
“attorneys’ fees” includes the allocated costs of the Bank’s in-house
counsel.

     

    11.11.                    One
Agreement.

     

    This
Agreement and any related security or other agreements required by this
Agreement, collectively:

     

    
      	
              (a)

            	
              represent
      the sum of the understandings and agreements between the Bank and the
      Borrower concerning this credit;

            

    

     

    
      	
              (b)

            	
              replace
      any prior oral or written agreements between the Bank and the Borrower
      concerning this credit; and

            

    

     

    
      	
              (c)

            	
              are
      intended by the Bank and the Borrower as the final, complete and exclusive
      statement of the terms agreed to by
them.

            

    

     

    In the
event of any conflict between this Agreement and any other agreements required
by this Agreement, this Agreement will prevail.  Any reference in any
related document to a “promissory note” or a “note” executed by the Borrower and
dated as of the date of this Agreement shall be deemed to refer to this
Agreement, as now in effect or as hereafter amended, renewed, or
restated.

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

     

    11.12.                    Indemnification.

     

    The
Borrower will indemnify and hold the Bank harmless from any loss, liability,
damages, judgments, and reasonable costs of any kind relating to or arising
directly or indirectly out of (a) this Agreement or any document required
hereunder, (b) any credit extended or committed by the Bank to the Borrower
hereunder, and (c) any litigation or proceeding related to or arising out of
this Agreement, any such document, or any such credit.  This indemnity
includes but is not limited to reasonable attorneys’ fees (including the
reasonable allocated cost of in-house counsel).  This indemnity
extends to the Bank, its parent, subsidiaries and all of their directors,
officers, employees, agents, successors, attorneys, and assigns.  This
indemnity will survive repayment of the Borrower’s obligations to the
Bank.  All sums due to the Bank hereunder shall be obligations of the
Borrower, due and payable immediately without demand.

     

    11.13.                    Notices.

     

    Unless
otherwise provided in this Agreement or in another agreement between the Bank
and the Borrower, all notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, or by overnight courier,
to the addresses on the signature page of this Agreement, or sent by facsimile
to the fax numbers listed on the signature page, or to such other addresses as
the Bank and the Borrower may specify from time to time in
writing.  Notices and other communications shall be effective
(i) if mailed, upon the earlier of receipt or five (5) days after deposit
in the U.S. mail, first class, postage prepaid, (ii) if telecopied, when
transmitted, (iii) if sent by electronic mail, when transmitted, or (iv) if
hand-delivered, by courier or otherwise (including telegram, lettergram or
mailgram), when delivered.

     

    11.14.                    Headings.

     

    Article
and paragraph headings are for reference only and shall not affect the
interpretation or meaning of any provisions of this Agreement.

     

    11.15.                    Counterparts.

     

    This
Agreement may be executed in as many counterparts as necessary or convenient,
and by the different parties on separate counterparts each of which, when so
executed, shall be deemed an original but all such counterparts shall constitute
but one and the same agreement.

     

    [Rest
of page intentionally left blank; signature page follows]

     

     

     

     

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

     

    This
Agreement is executed as of the date stated at the top of the first
page.

     

    
      
        	
                Bank
      of America, N.A.

                 

                 

                By
      \s\ harad C. Bhatt

                Sharad C. Bhatt

                Vice President

              	
                Point.360,

                a
      California corporation

                 

                By
      \s\ Alan R. Steel

                Alan R. Steel

                Executive Vice
      President,

                Finance and
      Administration

                and Chief Financial
      Officer

              
	
                 

                Address
      where notices to

                 

                the
      Bank are to be sent:

                 

                Bank of America,
N.A.

                333 South Hope
      Street,

                13th
      Floor

                Los Angeles, California
      90071

                Attn: Sharad Bhatt

                Telephone: (213)
      621-7114

                Facsimile: (213)
      457-8599

                E-mail:  sharad.bhatt@  

                                            
      bankofamerica.com

                 

              	
                 

                Address
      where notices to

                 

                the
      Borrower are to be sent::

                 

                Point.360

                2777 North Ontario
      Street

                Burbank, California
      91504

                Attn:  Chief Financial
      Officer

                Telephone:  (818)
      565-1400

                Facsimile:  (818)
      847-2503

                E-mail:
      asteel@point360.com

              

      

       

      
        
           

        

        
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