Document:

Exhibit 10.61

 

FIRST AMENDMENT TO EMPLOYMENT
AGREEMENT

 

This First
Amendment to the Employment Agreement (this “First Amendment”), dated as
of December 18, 2006, is entered into by and among Peninsula Gaming, LLC, a
Delaware limited liability company (“Employer”), Peninsula Gaming
Partners, LLP (“PGP”), a Delaware limited liability company, and Natalie
Schramm (“Employee”).

WHEREAS, Employer
and Employee entered into an Employment Agreement, dated as of July 29, 2004,
(the “Agreement”); and

WHEREAS, the
parties hereto desire to further amend the Agreement subject to the terms and
conditions set forth herein.

NOW, THEREFORE, in
consideration of the mutual agreements and understandings set forth herein and
for good and valuable consideration the adequacy and receipt of which is hereby
acknowledged, the parties hereto agree as follows:

1.             Clause (b) of Section 4 of the
Agreement is hereby amended by deleting last two sentences thereof in their
entirety and replacing them with the following:

“Upon any termination of this Agreement or of Employee’s employment
with the Employer hereunder for any reason, all Granted Units which shall have
vested as of the date of termination or expiration of the Term, shall, upon the
request of the Employee be redeemed by PGP for cash at the fair market value
thereof (as determined below), within 90 days of the date of such request. For
purposes of determining “fair market value” in connection with any redemption
hereunder, “fair market value” shall be determined by the Board of Managers of
PGP in its reasonable discretion.”

2.             Except as herein amended; the
Agreement shall remain in full force and effect and is ratified in all
respects. During the Effective Period, each reference in the Agreement to “this
Agreement,” “hereunder,” “hereof,” “herein” or words of like import, and each
reference to the Agreement in any other agreements, documents or instruments
executed and delivered pursuant to the Agreement, shall mean and be a reference
to the Agreement, as amended by this First Amendment.

3.             Capitalized terms used herein and
not otherwise defined shall have the meanings set forth in the Agreement.

4.             This Amendment may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

IN WITNESS
WHEREOF, the parties hereto have caused this instrument to be duly executed as
of the date first above written.

 

	
  

  	
  PENINSULA
  GAMING, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ M. Brent
  Stevens

  
	
   

  	
   

  	
  Name: M. Brent
  Stevens

  
	
   

  	
   

  	
  Title: Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Natalie
  Schramm

  
	
   

  	
   

  	
  Natalie Schramm

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PENINSULA GAMING
  PARTNERS, LLP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ M. Brent
  Stevens

  
	
   

  	
   

  	
  Name: M. Brent
  Stevens

  
	
   

  	
   

  	
  Title: Chief Executive
  OfficerExhibit
10.62

THIRD
AMENDMENT TO EMPLOYMENT AGREEMENT

This Third Amendment to the
Employment Agreement (this “Third Amendment”), dated as of December 18,
2006, is entered into by and among Peninsula Gaming, LLC, a Delaware limited
liability company (“Employer”), Peninsula Gaming Partners, LLP (“PGP”),
a Delaware limited liability company, and Jonathan Swain (“Employee”).

WHEREAS,
Employer and Employee entered into an Employment Agreement, dated as of July
14, 2004, as amended by that certain Amendment to Employment Agreement, dated
as of February 25, 2005 and by that certain Second Amendment to
Employment Agreement, dated as of September 12, 2005 (as amended, the “Agreement”);
and

WHEREAS, the parties hereto desire to further amend
the Agreement subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual
agreements and understandings set forth herein and for good and valuable
consideration the adequacy and receipt of
which is hereby acknowledged, the parties hereto agree as follows:

1.             Clause
(b) of Section 4 of the Agreement is hereby amended by deleting the fifth
sentence thereof in its  entirety and replacing it with the following:

“Upon any termination of this Agreement or of Employee’s
employment with the Employer hereunder for any reason, all Granted Units which
shall have vested as of the date of termination or expiration of the Term,
shall, upon the request of the Employee, and subject to any restrictions or
limitations contained in any financing arrangements of PGP or any of its direct
and indirect subsidiaries, be redeemed by PGP for cash at the fair market value
thereof (as determined below), within 90 days of the date of such request.”

2.             Except
as herein amended, the Agreement shall remain in full force and effect and is
ratified in all respects. During the Effective Period, each reference in  the Agreement to “this Agreement,” “hereunder,”
“hereof,” “herein” or words of like import, and each reference to the Agreement
in any other agreements, documents or instruments executed and delivered
pursuant to the Agreement, shall mean and be a reference to the Agreement, as
amended by this Third Amendment.

3.             Capitalized
terms used herein and not otherwise defined shall have the meanings set forth
in the Agreement.

4.             This
Amendment may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.

IN WITNESS THEREOF, the parties hereto have caused
this instrument to be duly executed as of the date first above written.

	
  

  	
  PENINSULA GAMING, LLC

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ M. Brent Stevens

  
	
   

  	
   

  	
  Name: M. Brent Stevens

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jonathan Swain

  
	
   

  	
   

  	
  Jonathan Swain

  
	
   

  	
   

  
	
   

  	
  PENINSULA GAMING PARTNERS, LLP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ M. Brent Stevens

  
	
   

  	
   

  	
  Name: M. Brent Stevens

  
	
   

  	
   

  	
  Title: Chief Executive OfficerExhibit 10.8

OPERATING AGREEMENT

OF

DIGITAL
LINK II, LLC

THIS OPERATING AGREEMENT (this “Agreement”),
is made and entered into as of March 6, 2007, by Digital Link II, LLC, a
Delaware limited liability company (the “Company”), REAL
D, a California corporation (“REAL D”), and
Ballantyne of Omaha, Inc., a Delaware corporation (“Ballantyne”).  REAL D and Ballantyne are referred to herein
collectively as the “Members,” and
each individually as a “Member.”

A.                                     The
Members formed the Company for purposes of commercializing certain 3D
technology developed and owned by REAL D.

B.                                       Ballantyne
is a manufacturer and reseller of projectors and other equipment necessary to
the deployment of REAL D’s technology in theatres.

C.                                       REAL
D will license certain of its technology to the Company pursuant to a
non-exclusive license agreement, pursuant to which the Company will have the
right to use and sublicense such technology in connection with the Company’s
sale of digital cinema projection systems (“Cinema
Systems”) to certain operators of theatre venues (“License”).

D.                                      The
Company will purchase projectors and accessories from Ballantyne at the prices
specified in Exhibit B hereto and servers from Doremi Labs, Inc. at the
prices specified in Exhibit A hereto.

E.                                        The
Company shall (i) initially transfer a limited right to use the Cinema Systems
to certain theatre venues, and (ii) install the Cinema Systems against virtual
print fees payable by the studios on such terms and conditions as will be
provided in separate Digital Cinema System Transfer Agreements in substantially
the form attached hereto as Exhibit C (“Transfer Agreement”).

F.                                        Subject to the successful negotiation of
service contracts with the operators of the theatre venues, on terms acceptable
to Ballantyne, Ballantyne will be responsible for the service and maintenance
of such Cinema Systems.

G.                                       REAL
D will initially be responsible for the management and operations of the
Company, for which it will be paid a management fee of (omitted) the virtual
print fees collected by the Company, not to exceed (omitted) per fiscal year,
plus expenses incurred in connection with such management services, as
specified in this Agreement.

In consideration of the premises and the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound the parties hereby agree as follows:

ARTICLE
1:  DEFINITIONS

The following terms have the following respective meanings
(unless the context otherwise requires). 
The singular shall include the plural, and the masculine gender shall
include the feminine and neuter, and conversely, as the context requires.

1.1                                 “Act” means the  Delaware Limited Liability Company Act, codified
in Title 6 of the Delaware Code, Section 18-101 et seq., as amended from time
to time.

1.2                                 “Affiliate” as applied to any Person, means
any other Person directly or indirectly controlling, controlled by, or under
common control with, that Person.

1.3                                 “Agreement” means this Limited Liability
Company Operating Agreement, as amended from time to time.

1.4                                 “Assignee” means a Person who is a permitted
transferee of a Membership Interest in accordance with Article 10.2 below.

1.5                                 “Available Cash” means cash and cash
equivalents of the Company on hand from time to time after (i) provision
for payment of all outstanding and unpaid current obligations of the Company as
of such time; and (ii) provision for reserves for working capital
expenditures, contingent obligations and other future requirements in excess of
reasonably anticipated revenues, such reserves equal to such amount as shall be
approved by a majority of the Board.

1.6                                 “Board” means the Board of Managers of the
Company.

1.7                                 “Business Day” means any day other than a
Saturday, Sunday or other day on which commercial banks in the State of
California are authorized or required by law or executive order to close.

1.8                                 “Capital Account” means the separate Capital
Account maintained by the Company for each Member in accordance with
Regulations Section 1.704-1(b)(2)(iv).

1.9                                 “Chief Executive Officer” means the Chief
Executive Officer of the Company or such other person as shall be designated by
the Board to serve the function as the Chief Executive Officer for purposes of
this Agreement.

1.10                           “Code” means the Internal Revenue Code of
1986, as amended from time to time.  All
references herein to Sections of the Code shall include any corresponding
provision or provisions of succeeding law.

1.11                           “Company” has the meaning set forth in the
preamble hereto.

1.12                           “Confidential Information”  has the meaning assigned to that term in
Section 15.1 hereof.

 2
 

1.13                           “Distribution(s)” means any cash or property distributed to a
Member (or Members) with respect to such Member’s Membership Interest but does
not include (a) any management or other fees or expense reimbursement paid to a
Member, or (b) the repayment of any loans or interest thereon made by any
Member, or Person or Affiliate to the Company.

1.14                           “Fiscal Year” except as provided under the Code, means a twelve
(12) month period ending on December 31st.

1.15                           “Gross Asset Value” of any assets contributed to the Company
shall be the gross fair market value of such asset as determined in good faith
by the Board.

1.16                           “Membership Interest” means the entire legal and equitable
ownership interest in the Company of a Member at any particular time.

1.17                           “Manager” means a member of the Board.

1.18                           “Member Loan Minimum Gain” has the meaning assigned to the term
“partner nonrecourse debt minimum gain” in Regulations Section 1.704-2(i)(2).

1.19                           “Member Loan Nonrecourse Debt” has the meaning assigned to the
term “Partner Nonrecourse Debt” in Regulations Section 1.704-2(b)(4).

1.20                           “Member Loan Nonrecourse Deduction” has the meaning assigned to
the term “Partner Nonrecourse Deduction” in Regulations Section 1.704-2(i)(2).

1.21                           “Members” means Ballantyne and/or REAL D, and their Assignees.

1.22                           “Minimum Gain” has the meaning set forth in Regulations
Sections 1.704-2(b)(2) and 1.704-2(d).

1.23                           “Nonrecourse Deduction” has the meaning set forth in
Regulations Section 1.704-2(b)(1).

1.24                           “Nonrecourse Liability” has the meaning set forth in
Regulations Section 1.704-2(b)(3).

1.25                           “Offeree” has the meaning assigned to that term in
Section 10.3 hereof.

1.26                           “Person” means any individual, partnership, joint venture,
corporation, limited liability company, trust, or other association or entity.

1.27                           “Regulations” means the regulations promulgated by the United
States Department of the Treasury pursuant to and in respect of provisions of
the Code.  All references herein to
Sections of the Regulations shall include any corresponding provision or
provisions of succeeding, similar, substitute, proposed or final Regulations.

1.28                           “Securities Act” means the Securities Act of 1933, as amended
from time to time.

 3
 

ARTICLE
2:  ORGANIZATION AND FORMATION

2.1                                 Formation.   Ballantyne and REAL D hereby form the
Company as a limited liability company under the Act.

2.2                                 Certificate
of Formation.  In furtherance of the
foregoing, the Members shall promptly cause a certificate of formation
substantially in the form of Exhibit D hereto (as amended from time to
time, the “Certificate”) to be
filed with the Secretary of State of Delaware as required by the Act.

2.3                                 Name
of the Company.  The name of the
Company shall be Digital Link II, LLC, and all business and affairs of the
Company shall be conducted under such name.

2.4                                 Principal
Office of the Company.  The Company’s
principal office shall be at such place as the Board shall from time to time
designate.

2.5                                 Business
of the Company.  The Company is being
formed for the purpose of (i) marketing and selling the Systems and
related products to operators of theatre venues, and the provision of related
products and services (activities described in this clause (i) being referred
to as the “Business”),
(ii) performing any and all other activities which may be necessary,
incidental or convenient to carry on the Business, and (iii) engaging in any
other business which it is lawful for a limited liability company to engage
pursuant to the Act.  This Agreement
shall not be deemed to create a partnership or joint venture between the
Members, for any purposes other than federal, state and local tax purposes.

2.6                                 Term.  The term of the Company shall commence
effective as of the close of business on the date of filing of the Certificate
with the Secretary of State of Delaware and shall have perpetual existence,
unless terminated as provided in this Agreement or by the Act.  No Member shall have the right, and each
Member hereby agrees not to withdraw from the Company, nor to dissolve,
terminate or liquidate, or to petition a court for the dissolution, termination
or liquidation of the Company, except as expressly permitted in this Agreement,
and no Member at any time shall have the right, without the consent of the
Company, to petition or to take any action to subject the Company assets, or
any part thereof, to the authority of any court of bankruptcy, insolvency,
receivership or similar proceeding.

2.7                                 Registered
Agent and Office.  The registered
agent for the Company in the State of Delaware shall be Corporation Trust
Center, or such other Person as the Board may designate.  The registered office of the Company shall be
1209 Orange Street, Wilmington, County of New Castle, or such other place as
the Board shall designate.

ARTICLE
3:  MEMBERS

3.1                                 Members.  Ballantyne and REAL D shall be the initial
Members.  As of the date of this
Agreement, there are no other Members of the Company and no other Person has
any right to take part in the ownership of the Company.  Additional members of the Company may be
added (i) pursuant to Section 3.6 below in connection with the transfer of any
Membership Interest, or (ii) as determined by the Board and approved by the
Members pursuant to Section 3.6 below.

 4
 

3.2                                 Membership
Interests.  The Membership Interest
of each Member in and to the Company and its assets, including each Member’s
interest in the income, gains, deductions, credits, allowances, expenses, profits,
losses and distributions realized or incurred from the operation of the
Company, and the initial Capital Account of each initial Member, shall be based
on the value of the business or other assets contributed by or on behalf of
each Member as follows:

	
  

  	
   

  	
  Membership Interest

  	
   

  	
  Initial Capital Account

  	
   

  
	
  Ballantyne

  	
   

  	
  44.4

  	
  %

  	
  $

  	
  (omitted)

  	
   

  
	
  REAL D

  	
   

  	
  55.6

  	
  %

  	
  $

  	
  (omitted)

  	
   

  
	
  TOTAL

  	
   

  	
  100

  	
  %

  	
  $

  	
  (omitted)

  	
   

  

 

Upon the admission of a new Member, the Membership
Interests of all Members shall be proportionately reduced to reflect the
Membership Interest of such new Member (whose Membership Interest shall be
based on the relative value which such new Member’s capital contribution bears
to the value of the existing Members’ Membership Interests).

3.3                                 Voting Rights.

(a)                                           In addition
to voting rights required by law or by other provisions of this Agreement, the
Members shall be entitled to vote on all matters submitted to a vote of the
Members based on their relative Membership Interests.

(b)                                          The
affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the
Membership Interests shall be necessary to authorize:  (i)  amend or waive any provision of
this Agreement in a manner that would materially and adversely affect a Member;
(ii) enter into a Company sale transaction by way of merger, sale of the
Membership Interests, or sale of all or substantially all of the assets; or
(iii) authorize the issuance of securities having a preference over or on
parity with the Membership Interests.

3.4                                 Liability
of Members.  No Member shall be
liable for the debts, obligations or liabilities of the Company, including
under a judgment decree or order of a court. 
No Member shall be liable to any other Member or to the Company by
reason of the actions or inactions of such Member in connection with the
Company unless such actions or omissions are not done or made in good faith or
constitute (a) actual fraud, or (b) willful misconduct with the
intent to harm the Company or any Member.

3.5                                 Inspection Rights.
 On written request stating the purpose,
a Member may examine and copy in person, at such times as reasonably determined
by the Board, and at that Member’s sole expense, records required to be
maintained under the Act and such other information regarding the business,
affairs and financial condition of the Company as is reasonable for the Member
to examine and copy, to the extent that such information is being sought for a
purpose reasonably related to the Member’s ownership interest in the Company.

 5
 

3.6                                 Admission of New
Members.  New Members may be admitted
to the Company, subject to executing an appropriate supplement to this
Agreement and such other documents as the Board of Managers deems necessary or
advisable.

ARTICLE
4:  MANAGEMENT OF THE COMPANY

4.1                                 Authority of the
Board.  The Company shall be managed
by the Board which shall have the full and exclusive power and authority to
represent the Company, to act in its name, and to manage the Company business.

4.2                                 Number and Appointment of Managers.  The Board shall initially be comprised of two
(2) managers (each a “Manager”),
of which one (1) Manager shall be elected by Ballantyne, so long as Ballantyne
remains a Member holding at least a ­40% Membership Interest (“Ballantyne Manager”), and one Manager shall
be elected by REAL D, so long as REAL D remains a Member holding at least a 50%
Membership Interest (“REAL D Managers”).  The Ballantyne Member may only be removed or
replaced, and any vacancy may only be filled, by Ballantyne, and a Manager
elected by REAL D may only be removed or replaced, and any vacancy may only be
filled, by REAL D, so long as Ballantyne or REAL D, respectively, are entitled
to elect Managers pursuant to the preceding sentences.  Managers shall continue to serve until their
death, resignation or removal or replacement in accordance with the terms of
this Agreement.  The initial Managers are
Michael V. Lewis and John P. Wilmers
..

4.3                                 Officers.  Officers and employees of the Company shall
conduct the operations of the Company and related business activities at the
direction of and in a manner consistent with the policies adopted from time to
time by the Board.  The officers of the
Company may include, without limitation, a Chief Executive Officer and
President, Vice President, Secretary and Treasurer.  Each officer shall have such authority and
perform such duties in the management of the property and affairs of the
Company as specified by the Board.

4.4                                 Management
Agreement with REAL D.  REAL D shall
manage and be responsible for the Company’s day-to-day operations, and,
accordingly, shall be vested with all the powers normally vested in the
executive officers of a company, in exchange for a management fee equal to (omitted)
of the virtual print fees collected by the Company, not to exceed (omitted) per
fiscal year, payable at the end of each month. 
The Company shall also reimburse REAL D for its reasonable expenses
incurred in connection with such management services; provided, that any
reimbursements in excess of (omitted) in any fiscal year shall require the
consent of Ballantyne.

4.5                                 Place of Meetings.  Meetings of the Board may be held at whatever
place in the United States specified in the call of the meeting, or such other
place as agreed to by the Board.  In the
absence of specific designation, the meetings shall be held at the principal
office of the Company.  Any member of the
Board shall be permitted to attend any meeting of the Board (or any committee
thereof) in person or by conference call or other means of communications which
provides such member of the Board an opportunity to actively participate in
such meeting.

 6
 

4.6                                 Regular Meetings.  The Board shall meet at least quarterly.  No notice need be given to members of the
Board of regular meetings for which the members have previously designated a
time and place for the meeting.

4.7                                 Special Meetings.  Special meetings of the Board may be held at
any time upon the request of the Chief Executive Officer and President of the
Company or any Member.  Written notice of
any special meeting shall be sent (by facsimile, e-mail, regular mail or any
other reasonable method) to the last known address of each member of the Board
at least five (5) business days before the meeting.  Notice of such meeting may be waived in
writing before or after such meeting, and shall be equivalent to the giving of
notice.  Attendance at such meeting shall
also constitute a waiver of notice thereof, except where such member of the
Board attends for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or
convened.  Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
need be specified in the notice or waiver of notice of such meeting.

4.8                                 Quorum
of and Action by the Board of Managers. 
The presence of a majority of the Managers shall constitute a quorum for
the transaction of business at any meeting of the Board.  Any action to be taken or approved by the Board
hereunder must be taken or approved by majority vote of the members of the
Board present at a meeting of the Board at which a quorum is present and any
action so taken or approved shall constitute the act of the Board.

4.9                                 Resignation.  Any Manager may resign at any time.  Such resignation shall be made in writing and
shall take effect at the time specified therein, or if no time is specified, at
the time of its receipt by the Company.

4.10                           Action
by Written Consent.  Any action that
may be taken at a meeting of the Board may be taken without a meeting if a
consent in writing, setting forth the action to be taken, shall be signed by
all of the Managers entitled to vote at that meeting, and such consent shall
have the same force and effect as a unanimous vote of the Board at a meeting
duly called and held.  No notice shall be
required in connection with the use of a written consent.

4.11                           Other
Business.  Subject to confidentiality
obligations and any fiduciary duties described below, any Manager may engage in
or possess an interest in other business ventures (unconnected with the
Company) of every kind and description, independently or with others.  Neither the Company nor the Members shall
have any rights in or to such independent ventures of the members of the Board
or the income or profits therefrom by virtue of this Agreement.

4.12                           Fiduciary
Duties.

(a)                                           The
fiduciary duties of any Manager shall be limited to making decisions in good
faith and with due care.

(b)                                          No Member or
Manager shall be obligated to offer or present any particular investment
opportunity to the Company, even where such opportunity is of a character
which, if presented to the Company, could be taken and exploited by the Company
but rather such Members and Managers shall have the right to take for the
account of such Member or to recommend to others any such particular investment
opportunity.

 7
 

4.13                           No
Liability for Monetary Damages.   No
Manager shall be liable for any monetary damages to the Company for any breach
of such duties except for receipt of a financial benefit to which such member
is not entitled, voting for or assenting to a distribution to Members in
violation of this Agreement or the Act, or a knowing violation of the law.

4.14                           Committees.  Upon the affirmative vote of a majority of
the members of the Board, committees of the Company may be formed, consisting
of one or more members of the Board, which committees may exercise any or all
of the powers of the Board.

ARTICLE
5:  REPRESENTATIONS AND WARRANTIES OF
BALLANTYNE

Ballantyne hereby represents and warrants the
following to REAL D and the Company:

5.1                                 Organization
and Authority; Ownership.  Ballantyne
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware  and
has all requisite corporate power and authority to own, lease and operate its
properties and assets and to conduct its business as now being conducted.  Ballantyne has the full corporate power and
authority to enter into this Agreement and to perform its obligations hereunder.

5.2                                 No
Violation.  The execution, delivery
and performance by Ballantyne of this Agreement and the transactions
contemplated hereby do not and will not conflict with or result in any
violation of or constitute a breach or default under any term of the
certificate of incorporation or by-laws of Ballantyne, of any agreement, permit
or other instrument to which Ballantyne is a party or by which Ballantyne is
bound or to which the assets or business of Ballantyne or any of its
subsidiaries is subject, or any order, judgment or decree of any court or other
governmental or regulatory authority to which any of the same is bound or
subject, or any law, statute or regulation of any governmental or regulatory
body.

ARTICLE
6:  REPRESENTATIONS AND WARRANTIES OF RTMS

REAL D hereby represents and warrants the following to
Ballantyne:

6.1                                 Organization and
Authority.  REAL D  is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
all requisite corporate power and authority to own, lease and operate their
properties and assets and to conduct its business as now being conducted.  REAL D has full corporate power and authority
to enter into this Agreement and to perform its obligations hereunder.

6.2                                 No Violation.  The execution, delivery and performance by
REAL D of this Agreement and the transactions contemplated hereby do not and
will not conflict with or result in any violation of or constitute a breach or
default under any term of the articles of incorporation or by-laws of REAL D,
of any agreement, permit or other instrument to which REAL D  or any of its subsidiaries is a party or by
which REAL D  or any of its subsidiaries
is bound or to which the assets or businesses are subject, or any order,
judgment or decree of any court or other governmental or regulatory authority
to which any of the same is bound or subject, or any law, statute or regulation
of any governmental or regulatory body.

 8
 

ARTICLE
7:  CAPITAL CONTRIBUTIONS, ASSUMPTIONS

OF
LIABILITIES AND FINANCING.

7.1                                 Initial Capital
Contributions; Assumption of Liabilities. 
As of the date hereof, Ballantyne and REAL D are contributing to the
Company the amounts specified in Section 3.2 above.

7.2                                 Additional Capital
Contributions.  Members are liable for
only the amount of the capital contributions made as of the date hereof.  Any additional capital contribution by a
Member requires the prior written consent of the other Member.  The Members agree that for each additional
Cinema System acquired by the Company, which purchase shall be unanimously
approved by the Managers,  REAL
D shall be obligated to pay 55.6% of the cost and Ballantyne 44.4% of
the cost.  The Members shall make their respective capital contributions
simultaneously.

7.3                                 Interest and Withdrawals.  No interest shall be paid by the Company on
capital contributions or on the balance in any Capital Account.  No Member shall have the right to withdraw
its capital contribution or to demand or receive a return of its capital
contribution except as herein expressly set forth or in the Act in the event of
dissolution.

7.4                                 Loans from Members.  Loans by a Member to the Company shall not be
considered capital contributions.  If any
Member shall advance funds to the Company, the making of such advances shall
not result in any increase in the amount of the Capital Account of such
Member.  The amounts of any such advances
shall be a debt of the Company to such Member and shall be payable or
collectible only out of the Company funds or assets in accordance with the
terms and conditions upon which such advances are made.

7.5                                 Creditors.  The foregoing provisions of this Section 7
are not intended to be for the benefit of any creditor (other than a Member)
of, or any Person to whom any debts, liabilities or obligations are owed by (or
who otherwise has a claim against) the Company or any of the Members, and no
such creditor or other Person shall obtain any rights under such provisions or
shall by reason of such provisions make any claim in respect of any of the aforesaid
debts, liabilities or obligations (or otherwise) against the Company or any of
the Members.

ARTICLE
8:  ALLOCATION AND TAX ACCOUNTING MATTERS

8.1                                 Allocation of Net
Profits or Losses.

(a)                                           Allocation
of Net Profits or Losses.  Subject to
any special allocations pursuant to Section 8.2 hereof, each item of income,
gain, loss, deduction or credit of the Company shall be allocated to and among
the Members in proportion to their relative Membership Interests.

(b)                                          Allocations
in Case of Transfers.  The items of
Company income, gain, loss, deduction or credit allocable to any Member whose
Membership Interest has been transferred in whole or in part, during any fiscal
year, shall be allocated among the Persons who were the holders of such
Membership Interest during such year in proportion to their respective

 9
 

holding
periods, measured in days, without any requirement for the attempted separate
determination of the results of Company operations during such separate
periods.

8.2                                 Special
Allocations.

(a)                                           Minimum
Gain Chargeback.  Notwithstanding any
other provision of this Agreement, if there is a net decrease in Company
minimum gain (as defined in Section 1.704-2(d)(2) of the Regulations),
items of income and gain shall be allocated to all Members in accordance with
Regulations Section 1.704-2(f), and such allocations are intended to
comply with the minimum gain chargeback requirements of Regulations Section
1.704-2 and shall be interpreted consistently therewith.

(b)                                          Section
704(c) Allocation.  Solely for Federal,
state, and local income tax purposes and not for book or Capital Account
purposes, depreciation, amortization, gain, or loss with respect to property
that is properly reflected on the Company’s books at a value that differs from
its adjusted basis for federal income tax purposes shall be allocated in
accordance with the principles and requirements of 704(c) of the Code and the
Regulations promulgated thereunder, and in accordance with the requirements of
the relevant provisions of the Regulations issued under Code Section
704(b).  The Company will use the
traditional method with curative allocations as described in Regulation Section
1.704-3(c) to take into account income, gain, loss and deduction with respect
to property described herein.  For
Capital Account purposes, depreciation, amortization, gain, or loss with
respect to property that is properly reflected on the Company’s books at a
value that differs from its adjusted basis for tax purposes shall be determined
in accordance with the rules of Regulations Section 1.704-1(b)(2)(iv)(g).

(c)                                           Risk
of Loss Allocation.  Any item of
Member Nonrecourse Deduction (as defined in Regulation Section 1.704-2(i)(2))
with respect to a Member Nonrecourse Debt (as defined in Regulation Section
1.704-2(b)(4)) shall be allocated to the Member or Members who bear the
economic risk of loss for such Member Nonrecourse Debt in accordance with
Regulations Section 1.704-2(i)(1).

(d)                                          Allocation
of Excess Nonrecourse Liabilities. 
For the purpose of determining each Member’s share of Company
nonrecourse liabilities pursuant to Regulations Section 1.752-3(a)(3),
and solely for such purpose, each Member’s interest in Company profits is
hereby specified to be such Member’s Membership Interest.

(e)                                           Unexpected
Allocations and Distributions.  No
allocation may be made to a Member to the extent such allocation causes or
increases a deficit balance in such Member’s Adjusted Capital Account.  Notwithstanding any other provision of this
Agreement except Sections 8.2(i) and 8.2(iii) above, in the event that a
Member unexpectedly receives an adjustment, allocation or distribution
described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6)
which results in such Member having a negative Adjusted Capital Account balance
(as determined above), then such Member shall be allocated items of income and
gain in an amount and manner sufficient to eliminate, to the extent required by
the Regulations, such negative balance in such Member’s Adjusted Capital
Account as quickly as possible.  This provision
is intended to satisfy the “qualified income offset” requirements of the
Regulations.

 10
 

8.3                                 Capital
Accounts of Transferred Company Interest. 
Upon the transfer of all or any part of a Membership Interest as
permitted by this Agreement, the Capital Account (or portion thereof) of the
transferor that is attributable to the transferred interest (or portion
thereof) shall carry over
to the transferee, as prescribed by Regulations
Section 1.704-1(b)(2)(iv)(1).

8.4                                 Time
of Allocation.  The allocations set
forth above shall be made as of the end of each Fiscal Year.  All items of income, gain, loss and deduction
shall be allocated, for federal income tax purposes, among the Members in the
same manner as such items are allocated pursuant to Sections 8.1 and 8.2.

8.5                                 Right
to Use Alternative Method of Calculations. 
Notwithstanding anything else in this Section 8 (other than Section
8.6), the Company shall have the right to use a different method of allocating
Company income gain, loss and deduction if it is advised by the Company
accountant or tax counsel that the method of allocation provided herein
violates the Code or Regulations.  The
Board shall notify each Member of any change in the method of allocating
Company income or loss in accordance with this paragraph promptly after the
occurrence thereof.

8.6                                 Adjustment
of Capital Accounts.  After all
allocations for a taxable year are made, Capital Accounts shall be adjusted by
the Company to the extent necessary to comply with applicable laws, regulations
and administrative pronouncements.  The
tax allocation provisions of this Agreement are intended to produce final
Capital Account balances that are at levels (“Target
Final Balances”) which permit liquidating distributions that are
made in accordance with such final Capital Account balances to be equal to the
distributions that would occur under Section 9 hereof if such liquidating
proceeds were distributed pursuant to Section 9.  To the extent that the tax allocation
provisions of this Agreement would not produce the Target Final Balances, the
Members agree to take such actions as are necessary to amend such tax
allocation provisions to produce such Target Final Balances.  Notwithstanding the other provisions of this
Agreement, allocations of income, gain, loss and deduction (including items of
gross income, gain, loss and deduction) shall be made prospectively as
necessary to produce such Target Final Balances (and, to the extent such
prospective allocations would not effect such result, the prior tax returns of
the Company shall be amended to reallocate items of gross income, gain, loss
and deductions to produce such Target Final Balances).

8.7                                 Change
in Economic Arrangement; Membership Interest.  Notwithstanding any other provision of this
Agreement, if the Membership Interest of any Member is adjusted at any time
pursuant to the terms of this Agreement, the Member whose Membership Interest
is increased pursuant to such adjustment shall have the right to amend this
Agreement to take into account the revised economic arrangement of the Members,
but only to the extent required to satisfy the tax allocation rules of Section
704 of the Code and the Regulations thereunder based on the opinion of legal
counsel selected by such Member.

8.8                                 Calculation
of Income, Gain, Loss and Deductions. 
For purposes of this Agreement, the income, gain, loss and deductions
for each Company fiscal year or other period shall be equal to the Company’s
taxable income, gain, loss and deductions, as the case may be, for such year or
period, determined in accordance with Section 703(a) of the Code, with the
following adjustments:

 11
 

(a)                                           Any
income of the Company described in Section 705(a)(1)(B) of the Code that is
exempt from Federal income tax and not otherwise taken into account shall be
added to such taxable income or subtracted from such taxable loss, as the case
may be.

(b)                                          Any
expenditures of the Company described in Section 705(a)(2)(B) of the Code or
treated as Section 705(a)(2)(B) expenditures pursuant to Section 1.704-1(b)(2)(iv)(i)
of the Regulations)and not otherwise taken into account shall be subtracted
from taxable income or added to such taxable loss, as the case may be.

(c)                                           In
the event the value at which any Company asset is reflected in Capital Accounts
is adjusted pursuant to Section 1.704-1(b)(2)(iv)(f) of the Regulations,
the amount of such adjustment shall be taken into account as gain or loss from
the disposition of such asset.

(d)                                          Gain
or loss resulting from any disposition of an asset with respect to which gain
or loss is recognized for Federal income tax purposes shall be computed by
reference to the value at which the asset disposed of is properly reflected in
the Capital Accounts of the Members pursuant to Section 1.704-1(b)(2)(iv)
of the Regulations.

(e)                                           In
lieu of depreciation, amortization and other cost recovery deductions taken
into account in computing taxable income or loss, there shall be taken into
account depreciation, cost recovery or amortization computed in accordance with
Section 1.704-1(b)(2)(iv)(g)(3) of the Regulations.

8.9                                 Income
Tax Returns.  The Treasurer of the
Company shall cause income tax returns for the Company to be prepared and filed
with the appropriate authorities; provided, that copies thereof shall be
provided to each Member for review and comment not less than 30 days prior the
first to occur of the due date for such filing and the actual date of
filing.  As soon as practicable, after
the close of each fiscal year of the Company, the Treasurer of the Company
shall send to each Person who was a Member at any time during such fiscal year
such information as will be sufficient to prepare documents which may be
required to be filed under federal income tax laws.  The Company shall be an accrual method taxpayer.

8.10                           Tax
Matters Member.  REAL D shall be the “tax
matters partner” of the Company pursuant to Section 6231(a)(7) of the
Code.  The Company shall indemnify and
reimburse the tax matters partner for all reasonable expenses, including legal
and accounting fees, claims, liabilities, losses and damages incurred in
connection with its actions as tax matters partner.  Any Member may take such action as permitted
under the Code to cause such Member to become a “notice partner” within the
meaning of Section 6223 of the Code.  The
tax matters partner shall inform each other Member of all significant matters
that may come to the tax matter member’s attention in its capacity as tax
matters member by giving notice thereof and, within a reasonable time, shall
forward to each other Member copies of all significant written communications
it may receive as tax matters partner. 
The tax matters partner shall immediately notify, as soon as
practicable, each other Member of any communication received from the Internal
Revenue Service.  Each Member shall have
the full right to participate in any tax audit or administrative or court
proceeding involving the Company.  The
tax matter partner shall consult in good faith with, and shall consider the
views of, each other Member, regarding such matters and shall make a good faith
attempt to reach a consensus on all issues. 
Except as may be required by law, the

 12
 

tax matters
partner shall not take any action contemplated by Section 6222 through 6232 of
the Code without the consent of all other Members, but this sentence shall not
limit the right of the tax matters partner to take an action on its own behalf
left to the determination of the individual Member under Sections 6222 through
6232 of the Code.

8.11                           Accounts
and Accounting.

(a)                                           Capital
Accounts.  There shall be established
a capital account for each Member (a “Capital
Account”), which shall be determined and maintained throughout the
full term of the Company in accordance with the capital accounting rules of
Regulations Section 1.704-1(b) from time to time in effect.  In no event shall any adjustment in the
Capital Contributions or Membership Interest of any Member be made on account
of any adjustment having been made to the Capital Account of such Member.

(b)                                          Account
Balances.  Except as otherwise
provided in this Agreement, whenever it becomes necessary to ascertain the
balance of any Member’s Capital Account, such determination shall be made after
giving effect to all allocations of Company income, gain, loss and deductions
for the current year, and all distributions for such year, in each case in
respect of transactions effected prior to the date as of which such
determination is being made.

(c)                                           Dispute
Resolution.  Any dispute or
disagreement among the Members with respect to the determination of Capital
Account balances or otherwise with respect to the manner or method of
accounting by the Company may be submitted by any Member to, and resolved by,
an independent certified public accounting firm which shall be jointly chosen
by the Members who have the dispute and which shall not be the Company’s
independent certified public accountants, whose determinations as so made shall
be conclusive and binding upon the Members.

(d)                                          Basis
Information.  Each Member shall
provide to the Company all information for the Company to determine the tax
basis for federal income tax purposes of its interest in any property
contributed to the Company.

8.12                         Section
754 Election.  In the event of a
distribution of property made in the manner provided in Section 734 of the
Code, or in the event of a transfer of any Membership Interest permitted by
this Agreement made in the manner provided in Section 743 of the Code, the
Board may, but shall not be required to, instruct one of the Company’s officers
to file an election under Section 754 of the Code in accordance with the
procedures set forth in the applicable Treasury Regulations.

8.13                         Income
Tax Liability.  Each Member shall be
solely responsible for all taxes as may be applicable to any funds paid or
credited to such Member or income deemed taxable to such Member under this
Agreement and no Member shall be liable to any extent in connection with such
taxes payable by any other Member.

ARTICLE
9:  DISTRIBUTIONS

9.1                                 Distribution
of Cash Flow.  Except as otherwise
provided herein, distributions shall be made to the Members in such amounts and
at such intervals as the Board, in its

 13
 

discretion,
shall determine.  Distributions, to the
extent made, shall be made pro rata according to each Member’s Membership
Interest.

9.2                                 Priority
and Distribution of Assets.  No
Member shall have priority over any other Member either as to the return of
capital or as to distributions.

9.3                                 Minimum
Distributions.  Notwithstanding the
foregoing, if any Member is allocated income which exceeds, on a cumulative
basis, the amount of losses previously allocated to such Member for tax
purposes (the “Excess Income Allocation”),
then the Company shall distribute amounts in accordance with Membership
Interests so that each Memer receives at least the “Minimum Distribution”.  The Minimum Distribution is the amount, if
any, by which (i) the Excess Income Allocation multiplied by the combined
maximum federal and state income tax rates applicable to such Member (reduced
to reflect the maximum federal tax benefit from the deduction of state income
taxes), exceeds (ii) the amount previously distributed to such Member with
respect to the Fiscal Year for which such taxes are payable.

9.4                                 Distribution
in Kind.  If any assets of the
Company are to be distributed in kind (other than a distribution which is a
liquidating distribution to a redeemed Member), each Member receives such
interest therein as a tenant-in-common with all other Members so entitled in
the same proportions as they would have shared in a cash distribution equal to
the value of such property at the time of such distribution.  Any difference between the fair market value
and the amount at which such assets are carried on the books of the Company is
to be recorded as income or loss, as the case may be, and allocated to the Members
immediately prior to such distribution as set forth in Section 8.1 or 8.2, as
applicable, and allocated to each Member’s Capital Account as required by
Regulations Section 1.704-1(b)(2)(iv)(e). 
Such assets are to be distributed on the basis of the fair market value
thereof.

ARTICLE 10: 
RESTRICTIONS ON TRANSFER OF MEMBERSHIP INTERESTS;

ADMISSION
OF MEMBERS

10.1                           Prohibition
on Transfer.  Except as expressly
permitted herein, no Member shall sell, assign, transfer, pledge, encumber or
otherwise dispose of (collectively referred to as “Transfer”) all or any portion of its Membership Interests and
any attempt to do so shall be null and void.

10.2                           Permitted
Transfers.  Members shall have the
unrestricted right to transfer (including, without limitation, by foreclosure)
Membership Interest  (a) to
any lender as collateral security, or (b) to any Subsidiary of such Member, or
any Person of which the Member is a Subsidiary or any Subsidiary of such
Person, (c) to a transferee in connection with a sale of a Member by way of
merger, stock sale, or asset sale.

10.3                           Buy/Sell
Rights.  If any Member desires to
sell its Membership Interest (the “Offeror”)
then the Offeror shall present a written offer (“Sale Proposal”) to sell its Membership Interest at a specified
price to the other Member (the “Offeree”).  If the Offeree accepts the Sale Proposal,
then the parties shall proceed to close on the sale and purchase of such
Membership Interest.  If the Offeree is
interested in purchasing the Membership Interest but believes the valuation is
different from the price specified in the Sale Proposal, the Offeree may

 14
 

request, at
its expense, a Final Market Valuation of the Company, in which case the Offeror
and Offeree shall cooperate and take all efforts necessary to obtain such  Final Market Valuation pursuant to Section
10.3(a), and following which the Offeror and Offeree shall undertake in good
faith the sale procedures described in Section 10.3(c) below.

(a)                                           Procedures
for Market Valuation.  In the event a
market valuation of the Company is required to be completed pursuant to this
Agreement, the Offeror and the Offeree shall select two investment bankers or
qualified appraisers of national reputation (“Appraiser”)
by mutual agreement or, if they cannot agree, each of Ballantyne and
REAL D shall select one Appraiser, to provide an appraisal of the fair
market value of the Company net of outstanding liabilities (“Market Valuation”).  Each of the Appraisers appointed by the
Offeror and the Offeree shall be directed to provide, within 30 business days
following the receipt by the Offeree of the Offeror’s Sale Proposal, each of
the Offeror and the Offeree with a written report of the Appraisers’ respective
Market Valuations (the date of the later submission being referred to herein as
the “Submission Date”).  If the lower of the two Market Valuations is
greater than or equal to 85% of the higher Market Valuation, the final
aggregate Market Valuation (the “Final Market
Valuation”) shall be the average of the two Market Valuations submitted
by such Appraisers.  If the lower of the
two Market Valuations does not equal 85% or more of the higher Market
Valuation, within ten business days following the Submission Date the two
Appraisers selected by the Offeror and Offeree shall jointly select a third
Appraiser to perform a third Market Valuation and submit it to the Offeror and
Offeree within 20 business days following its selection to provide such
valuation.  The Final Market Valuation
shall be the average of the two Market Valuations provided by the Appraisers
which are closest in value to each other, and such average shall constitute the
Final Market Valuation and shall be final and conclusive. Each of the Company
and the Members agree to make reasonably available any such books or records as
any of the parties involved in the valuation process described in this Section
10.1(a) may reasonably require in order to reach a Market Valuation.

(b)                                          Sale
by a Member.  (a) If the Final Market
Valuation is performed, and it is at least 85% of the price contained in the
Sale Proposal, the Offeree can purchase the Offeror’s Membership Interest at
the Sale Proposal price or elect to sell the Company.  If the Final Market Valuation is less than
85% of the Sale Proposal Price, the Offeror can elect to sell its Membership
Interest at the Final Market Valuation Price, if the Offeree is still willing
to purchase the Membership Interest or the Offeror can revoke its offer.  If the Final Valuation Prices is more than
the price contained in the Sale Proposal, the Offeree has the option to
purchase the Offeror’s Membership Interest for the Fair Market Valuation, or
initiate a sale of the Company.

(c)                                           Procedures
for Sale of the Company.  If the
Offeree elects to initiate a sale of the Company pursuant to Section 10.1(b)
above, the Board shall select and retain an investment banking firm of national
reputation to arrange such sale at a target price (“Target Price”) equal to (x) the price contained in the Sale
Proposal if the Final Market valuation was at least 85% of such price, or (y)
the Final Market Valuation if the Final Market Valuation was less than 85% of
the price contained in the Sale Proposal. 
If at least one bona fide offer to purchase the Company for cash and/or
Freely Tradeable Securities on customary terms is received from a buyer at a
price of at least 85% of the Target Price (excluding for these purposes, any
earn-out payments, amounts held in escrow or other forms of contingent
payments) such offer shall be

 15
 

accepted and
the parties shall proceed to consummate the sale.  [If the highest price offer to purchase the
Company is for a price less than 85% of the Target Price (“Best Offer Price”), the Offeror may (a)
revoke the Sale Proposal and abandon the process of selling the Company
pursuant to this Section 10.1(c), or (b) notify the Offeree that it
desires to accept the Best Offer Price within 30 days of receipt thereof.  If the Offeror elects (b), the Offeree shall
then notify the Offeror, within 15 days of receiving such notice described in
(b), whether it (x) will purchase the Offeror’s Membership Interest for the
Best Offer Price or (y) desires to proceed with a sale of the Company to the
third party who offered the Best Offer Price. 
For the purposes hereof, “Freely Tradable Securities” shall mean securities
listed on the New York Stock Exchange or eligible for trading on the Nasdaq
National Market, and which are not subject to restriction on transferability,
whether pursuant to Rule 144, Rule 145, other provisions under the
Securities Act of 1933, as amended, any contractual restriction or otherwise.

(d)                                          Closing;
Payment of Purchase Price.  The
closing of the sale of the Offerer’s Membership Interest to the Offeree (the “Closing”) shall take place within 60 days
after the Offeree agrees to such sale as set forth in this Section 10;
unless the Offeror and Offeree mutually agree to hold the Closing at a
different time.  The purchase price for
such sale shall be payable in cash by check or wire transfer of funds at the
Closing.

(e)                                           Deadlock
by the Board/Members.  In the event
any of the following has occurred and is continuing, the Members shall initiate
the sale procedures specified in 10.3 above:

(i)                                     A
deadlock by the Board regarding any matter; or

(ii)                                  the
failure of either any Member to approve any matter pursuant to Section 3.3(b)
which was approved by the Board.

10.4                           Involuntary
Transfer.  In the event any of the
Membership Interests of a Member are acquired by any Person other than the
other Member(s) by “involuntary transfer” (i.e., any transfer or disposition of
such interests by judicial order, foreclosure, legal process, execution,
attachment or other similar procedure or process), then the other Member(s) (or
Member designee) shall have the option for one year after receipt of actual
notice of such involuntary transfer (or otherwise becoming aware of such
involuntary transfer) to exercise the remedy such Member would have had under
Sections 11.2(a) or 11.2(b), below, as the case may be, had there been an Event
of Disassociation and such Member was not the Disassociating Member.  The option set forth herein shall be
exercisable by providing the transferee with 10 days’ notice.  Each Member shall use its best efforts to
prevent any involuntary transfer of its Membership Interests.  An involuntary transfer shall not release any
Membership Interests held or previously held by any Member from the provisions
of this Agreement or release any Member from its obligations hereunder or from
any default created by such transfer.

ARTICLE
11:  EVENTS OF DISASSOCIATION AND
REMEDIES

11.1                           Definitions
and Cure Periods.  The occurrence of
any of the following events shall constitute an event of disassociation (“Event of Disassociation”) on the part of
the Member with respect to whom such event occurs (“Disassociating Member”), if within 30 days following

 16
 

notice of such
disassociation from another Member, the Disassociating Member fails to commence
substantial efforts to cure such disassociation or thereafter fails within a
reasonable time to prosecute to completion with diligence and continuity the
curing of such disassociation; provided, however, that at the election (without
any obligation to give notice) of the non-disassociating Member(s), occurrence
of any of the events described in subparagraphs (i) - (iv) below shall
constitute an Event of Disassociation immediately upon such occurrence without
any requirement of notice or passage of time except as specifically set forth
in any such subparagraph:

(i)                                     such Member shall
(a) apply for or consent to the appointment of, or the taking of possession by,
a receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (b) make a general assignment for the benefit
of its creditors, (c) commence a voluntary case under any bankruptcy or similar
law (as now or hereafter in effect), (d) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (e) fail to
controvert in a timely manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under any bankruptcy or similar law, (f)
admit its inability to pay its debts generally as such debts become due, (g)
take any action under the laws of its jurisdiction of organization analogous to
any of the foregoing, or (h) take any requisite action for the purpose of
effecting any of the foregoing;

(ii)                                  a proceeding or case
shall be commenced against such Member in any court of competent jurisdiction,
seeking (a) the liquidation, reorganization, dissolution, winding up or
composition or readjustment of its debts, (b) the appointment of a trustee,
receiver, custodian, liquidator or the like of it or of all of any substantial
part of its assets, or (c) similar relief in respect of it, under any
bankruptcy or similar law and such proceeding or case shall continue
undismissed, or unstayed and in effect, for a period of 30 days; or any action
under the laws or the jurisdiction of organization of such entity analogous to
any of the foregoing shall be taken with respect to such entity and shall continue
undismissed, or unstayed and in effect, for a period of 30 days;

(iii)                               all or substantially all
of the assets of such Member or any material portion thereof, is attached,
seized, subject to a writ of distress warrant, or levied upon, or comes into the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors, and the same is not vacated, stayed, dismissed or set aside within
30 days after the occurrence thereof;

(iv)                              dissolution of Member; or

(v)                                 assignment by a Member
of its Membership Interest in contravention of this Agreement.

11.2                           Remedies
of Non-Disassociating Member

(i)                                     Upon
the occurrence of an Event of Disassociation by any Member, the
non-disassociating Member (or its designee) shall have the right to acquire the
Membership Interests of the Disassociating Member for cash at a price equal
to:  (a) if such Event of
Disassociation constitutes an Event of Disassociation under
Section 11.1(v), 75% of the

 17
 

fair market value of the Disassociating Member’s
Membership Interests, as determined in the same manner as provided in
Section 10.3(a) (except that the Disassociating Member shall pay for the
costs related to the appraisal); and (b) if such Event of Disassociation
constitutes an Event of Disassociation under any other subsections of
Section 11, 100% of the fair market value of the Disassociating Member’s
Membership Interests, as determined in the same manner as provided in Section
10.3(a), in either case such value to be determined as of the time immediately
following such Event of Disassociation. 
In furtherance of such right, the non-disassociating Member may notify
the Disassociating Member at any time following an Event of Disassociation of
the election to institute the procedure set forth herein.  Upon receipt of notice of determination of
the purchase price for such disassociating member’s Membership Interests, the
non-disassociating Member shall notify the Disassociating Member of the
election to purchase the interests of the Disassociating Member.

(ii)                                  The
non-disassociating Member shall have the right to purchase a Disassociating
Member’s Membership Interests by payment of one-seventh of the purchase
price (as determined by the procedure pursuant to this Section 11.2(i)) at
closing, with the balance to be paid in equal annual installments over a
seven-year period, the unpaid balance to bear interest at the then Applicable
Federal Rate, with the right of prepayment of any amount at any time without
premium or penalty.

(ii)                                  If
neither the non-disassociating Member nor its designee elects to acquire the
entire interest of the Disassociating Member as set forth in this
Section 11.2(i), the non-disassociating Member may elect to dissolve and
terminate the Company by written notice to the Members within 30 days of such disassociation.  The right of the non-disassociating Member
institute the procedures for purchase of the Disassociating Member’s Membership
Interests as set forth in this Section shall continue until the
non-disassociating Member elects to exercise the right to terminate the
Company.

11.3                           Priority.  Any option exercised by a Member under this
Section 11 shall supersede and have priority over any other option
exercised by a Member under this Agreement, regardless of when either option
was exercised, unless the purchase under another Section has been consummated.

ARTICLE
12:  DISSOLUTION

12.1                           Dissolution.  The Company shall be dissolved and terminated
upon the first to happen of:

(a)                                  The
agreement of all of the Members to dissolve the Company;

(b)                                 The
sale or other disposition of all or substantially all of the Company’s assets,
unless all of the Members otherwise agree;

(c)                                  Any
time at which there are no Members; provided that the Company is not dissolved
and is not required to be wound up if, within 90 days after the occurrence of
the event that terminated the continued membership of the last remaining
member.

(d)                                 The
entry of a decree of judicial dissolution under the Act.

 18
 

ARTICLE
13:  DISTRIBUTIONS UPON TERMINATION

13.1                           Distribution
upon Dissolution.  Upon dissolution
or termination of the Company under Section 12 the affairs of the Company shall
be wound down by the Board in an orderly fashion.  During the period of the winding down of the
affairs of the Company, the rights and obligations of the Members with respect
to the management of the Company shall continue.  The Members shall continue to share income
and losses during the period of liquidation in the same proportions as prior to
said dissolution.  Any gain or loss on
disposition of the Company’s properties in the process of liquidation shall be
credited or charged to the Members’ respective Capital Accounts in proportion
to their Membership Interests.  The
proceeds from liquidation shall be applied to the payment of debts of the
Company and to establishing any reserve which the Board shall reasonably deem
necessary to provide for any contingent or unforeseen liabilities or
obligations of the Company and to the payment of all expenses of liquidation;
and with any remaining proceeds being paid to the Members first, in proportion
to their Capital Accounts, until all Capital Accounts have a zero balance, and
thereafter in proportion to their Membership Interests.

13.2                           Nothing
contained herein shall prevent the Company from distributing its assets in kind
in accordance with the above provisions. 
Any property distributed in kind shall be valued and treated, for
purposes of accounting to and between the Members, as though the property were
sold for cash at its fair value and the cash proceeds were distributed.  No Member shall have any claim or recourse
against any other Member in the event the net assets of the Company are
insufficient to repay any capital contribution. 
In order to minimize any losses attendant upon liquidation and winding
up, a reasonable time shall be allowed for completion of all such activities.

ARTICLE
14:  INDEMNIFICATION

14.1                           Mandatory
Indemnification. The Company shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (other than an action, suit or proceeding
by or in the right of the company), whether civil, criminal, administrative or
investigative, by reason of the fact that he, she or it is or was a Member,
Manager, or executive officer of the Company, against expenses (including
reasonable attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him, her or it in connection with such
action, suit or proceeding to the fullest extent permitted by the Act and
Delaware law.  The Company may indemnify
its other officers, employees and authorized agents, acting within the scope of
their duties as such, to the same extent as Members, Managers and officers
hereunder.

14.2                           Advances
of Expenses.  Expenses (including
reasonable attorneys’ fees) incurred by a Manager, Member or executive officer
in defending any civil, criminal, administrative or investigative action, suit
or proceeding shall be paid by the Company in advance of the final disposition
of such action suit or proceeding upon receipt of an undertaking by or on
behalf of such manager of Member to repay such amount if it shall ultimately be
determined that he, she or it is not entitled to be indemnified by the Company
pursuant to this Section 14.1 or 14.2. 
Such expenses (including attorneys’ fees) incurred by other officers,
employees and agents shall be so paid upon such terms and conditions, if any,
as the Board deems appropriate.

 19
 

14.3                           Non-Exclusive.  The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 14 shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
Members or disinterested Managers or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.

14.4                           Successors
and Assigns.  For purposes of this
Section 14, any reference to the “Company” shall include, in addition to the
resulting or surviving corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, managers, members, employees,
representatives or agents, so that any Person who is or was a director,
officer, manager, member, employee, representative or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, manager, employee, representative or agent
of another corporation, limited liability company, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the
provisions of this Section 14 with respect to the resulting or surviving
corporation as he or she would have with respect to such constituent
corporation if its separate existence had continued.

14.5                           Change
of Status.  The indemnification and
advancement of expenses provided by, or granted pursuant to, this Section 14
shall continue as to a Person who has ceased to be a manager, Member, Manager,
officer, employee, representative or agent and shall inure to the benefit of
the heirs, executors and administrators of such Person.

14.6                           Indemnitee
Initiated Actions.  Notwithstanding
anything in this Article to the contrary, the Company will not have the
obligation of indemnifying any Person with respect to proceedings, claims or
actions initiated or brought voluntarily by such Person and not by way of
defense.

14.7                           Enforceability.  Any Member, Manager, officer, employee or
agent of the Company may apply to any court of competent jurisdiction in the
State of Delaware for indemnification to the extent otherwise permissible under
this Section 14.  The basis of such
indemnification by a court shall be a determination by such court that
indemnification of the member, member of the Manager, member of any committee
of the Company or officer or employee is proper in the circumstances because
such person has met the applicable standards of conduct set forth in the
applicable provision of this Section 14. 
Neither a contrary determination nor the absence of a determination in a
specific case shall be a defense to such application or create a presumption
that the person seeking indemnification has not met any applicable standard of
conduct.

14.8                           Insurance.  The Company shall purchase and maintain
insurance in an amount of not less than $5,000,000 or another arrangement on
behalf of any Person who is or was a Manager, Member, officer, employee or
agent of the Company against liability asserted against such Person or incurred
by such Person in such capacity or arising out of the status of such a Person,
whether or not the Company would have the power to indemnify such Person
against that liability hereunder.

 20
 

ARTICLE
15:  MISCELLANEOUS PROVISIONS

15.1                           Confidentiality.

(a)          The Members agree to refrain from disclosing
Confidential Information about the Company and any of its Affiliates (except to
such Member’s partners, representatives, attorneys, employees, accountants and
other advisors (collectively, the “Advisors”)
of such holders who are legally or ethically obligated to refrain from
disclosing the Confidential Information; provided however, that such Member
shall be responsible for the disclosure of such Confidential Information in
violation of the terms hereof by the Advisors) for so long as such Member is a
Member of the Company and for a period of two (2) years thereafter.  This provision shall not restrict any Member
from disclosing Confidential Information to prospective investors in the
Company (including prospective Assignees) or potential acquirers.

(b)         Notwithstanding the foregoing, the
Confidential Information may be disclosed as may be required (i) by a Member to
its Affiliates and advisors for the purpose of providing return and performance
information on internal portfolio investments, consistent with past practice
and as otherwise required by governmental regulatory agencies or self-regulating
bodies, and (ii) by the a Member’s Affiliates to their Affiliates and advisors
for the purpose of providing return and performance information on internal
portfolio investments, consistent with past practice and as otherwise may be
required by governmental regulatory agencies or self-regulating bodies,
provided, that, the Members and their Affiliates and advisors shall require
that any transferee of such Confidential Information keep the Confidential
Information confidential, consistent with this Section 15.1.

(c)          “Confidential
Information” means any information regarding the business of the
Company or any of its Affiliates, including its operations, operating plans,
customers, customer lists, advertisers, advertiser lists, members, interests,
the identity of any holder of, or amount of, any interests, proposed or current
ventures, business plans, past agreements, potential agreements, private or
proprietary conversations, trade secrets, as well as information relating to
their financial performance, condition or valuation;  provided,
that “Confidential Information” does not include information which: (i) is now,
or hereafter becomes, through no act or failure to act on the part of the
receiving party, generally known or available to the public; (ii) was acquired
by the receiving party before receiving such information from the Company and
without restriction as to use or disclosure; (iii) is hereafter rightfully
furnished to the receiving party by a third party, without restriction as to
use or disclosure; (iv) is information which the receiving party can document
was independently developed by the receiving party without breach of any
obligation of confidentiality; (v) is required to be disclosed pursuant to law,
provided the receiving party uses reasonable efforts to give the Company
reasonable advance notice of such required disclosure; or (vi) is disclosed
with the prior written consent of the Company.

15.2                           Accounting
Basis for Tax and Reporting Purposes. 
The books and records of the Company for tax purposes, for purposes of
this Agreement and for the purpose of reports to the Members shall be kept in
accordance with such method as the Board shall determine.

 21
 

15.3                           Books
and Records.  The books and records
of the Company shall be maintained at the office of the Company.  Each Member shall have reasonable access to
inspect the accounting records of the Company during regular business hours of
the Company at the office of the Company.

15.4                           Reports.  (a) 
Within forty-five (45) days after the end of each Fiscal Year, the Chief
Executive Officer shall send to each Person who was a Member at the end of the
Fiscal Year then ended the balance sheet of the Company as of the end of such
year and statements of operations, changes in Members’ capital and cash flow of
the Company for such year, all of which shall be prepared in accordance with
accounting principles consistently applied. 
Any Member may request audited
financial statements for the Company.  The audit shall be performed by the
accounting firm for the Member requesting the audit.  The Member requesting the audit, shall pay
for the cost of the audit.

(b)                                 Within
seventy five (75) days after the end of each Fiscal Year, the Chief Executive
Officer shall send to each Person who was a Member at any time during the year
then ended such tax information relating to the Company as shall be necessary
for the preparation by such Member of its federal income tax return and
required state income and other tax returns.

(c)                                  Within
10 days after the end of each quarter, the Chief Executive Officer shall send
to each person who is a member an unaudited balance sheet of the Company and
statements of operations, changes in Members’ capital and cash flow of the
Company for such quarter or allow them access to the necessary financial information
to prepare such reports. Each Member
shall have unlimited access to all the financial information of the Company and
may, at its expense, request that an audit of the Company be prepared by such
Member’s accounting firm.

15.5                           Termination
of Certain Provisions.  All the
provisions of this Agreement shall be deemed terminated upon an initial public
offering of the Company.  This Agreement,
or any portion hereof may be terminated with the written agreement of the
Company and each Member.

15.6                           Notices.  Any notice required or permitted to be sent
hereunder shall be delivered personally or mailed, registered or certified
mail, return receipt requested, or delivered by overnight courier service, to
the intended recipient’s address set forth below or to such other address as
the intended recipient designates by written notice to the Company, and shall
be deemed to have been given upon delivery, if delivered personally, three days
after mailing, if mailed, or one Business Day after delivery to the courier, if
delivered by overnight courier service. 
Any such notice shall be mailed as follows:

(i)                                     if
to the Company, to:

Digital Link II LLC

100 North Crescent Drive,
Suite 120

Beverly Hills, CA 90210

(ii)                                  if to any other Member, to its address set forth on the signature page
hereto.

 22
 

15.7                           Entire Agreement.  This Agreement, including the exhibits and
schedules attached hereto, is the entire agreement among the parties hereto
relating to the subject matter hereof. 
It supersedes all prior agreements pertaining to the subject matter
hereof and may not be amended except as provided in Section 15.10 hereof.

15.8                           Severability.  Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.

15.9                           Descriptive Headings.  The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
and shall not be utilized in interpreting this Agreement.

15.10                     Consent to Amendments; Waivers.  Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended or waived at any time
by the written agreement of the Company and each Member.  Any waiver, permit, consent or approval of
any kind or character on the part of any such Member of any provisions or
conditions of this Agreement must be made in writing and shall be effective
only to the extent specifically set forth in such writing.

15.11                     Successors and Assigns.  Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto.

15.12                     Third Party Rights.  The provisions of this Agreement are for the
exclusive benefit of the Company and the Members and no other person
(including, without limitation, any creditor of the Company) shall have any
right or claim against the Company or the Members by reason of these provisions
or be entitled to enforce any of these provisions against the Company or the
Members.

15.13                     Governing Law; Jurisdiction.  All questions concerning the construction,
validity, and interpretation of this Agreement, and the performance of the
obligations imposed by this Agreement, shall be governed by the laws of the
State of Delaware.

15.14                     Remedies.  The parties hereto shall have all rights and
remedies set forth in this Agreement and all rights and remedies available
under any applicable law.  The parties
hereto agree and acknowledge that money may not be an adequate remedy for any
breach of the provisions of this Agreement and that any party may, in its sole
discretion, apply to any court of law or equity of competent jurisdiction for
specific performance or injunctive relief (without posting bond or other
security) in order to enforce, or prevent any violations of, the provisions of
this Agreement.

15.15                     Waiver of Partition.  Except as may be otherwise provided by law in
connection with the winding-up, liquidation and dissolution of the
Company, each Member hereby

 23
 

irrevocably waives any and all rights that it may have to maintain an
action for partition of any of the Company’s property.

15.16                     Counterparts.  This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed
an original, and such counterparts together shall constitute one instrument.

[Balance
of Page Left Blank; Signature Pages Follow]

 24

	
  

  	
  Members:

  
	
   

  	
   

  
	
   

  	
  REAL D

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/

  	
  Michael V. Lewis

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Michael V. Lewis

  
	
   

  	
   

  	
   

  	
  Title:   CEO

  
	
   

  	
   

  	
   

  	
  Address: 

  	
  100 North Cresent Drive

  
	
   

  	
   

  	
   

  	
   

  	
  Suite 120

  
	
   

  	
   

  	
   

  	
   

  	
  Beverly Hills,
  CA 90210

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BALLANTYNE OF OMAHA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/

  	
  John Wilmers

  	
   

  
	
   

  	
   

  	
   

  	
  Name: John Wilmers

  
	
   

  	
   

  	
   

  	
  Title:   CEO

  
	
   

  	
   

  	
   

  	
  Address: 

  	
  4350 McKinley St.

  
	
   

  	
   

  	
   

  	
   

  	
  Omaha, NE 68112

  
								

 

Exhibit A

Doremi Labs,
Inc. Price list

Omitted

 

 2
 

Exhibit B

Balantyne
Price List

Omitted

 3
 

Exhibit C

Digital
Cinema System Transfer Agreement

Omitted

 4
 

Exhibit D

Certificate
of Formation

Omitted

 5
 

Confidential
portions of this agreement have been omitted.

 6

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