Document:

Exhibit 10.12

 

SEPARATION AGREEMENT AND GENERAL RELEASE OF CLAIMS

 

[Note that the provisions of this Separation Agreement that are in
brackets may or may not apply to the actual Separation Agreement that the
Executive is required to sign pursuant to section 3(d)(iii) of the
Employment Agreement as a condition to receiving severance and certain other
benefits in the event of a Qualifying Termination, depending on the
applicability of the bracketed language to the reasons for the Qualifying
Termination.]

 

This Separation Agreement and General Release of Claims
(the “Agreement”) is entered into by and between RealD Inc., a Delaware
corporation (the “Company”), and Michael V. Lewis (“Executive”)
(together “the Parties”).  This Agreement is effective only if it has
been executed by each of the Parties and the revocation period has
expired without revocation as set forth in Sections 5(c) and (d) below (the “Effective
Date”).

 

WHEREAS, Executive [was/is] an employee of the
Company and served as its Chief Executive Officer pursuant to an employment
agreement with the Company with an effective date of April 1, 2010 (the “Employment
Agreement”);

 

WHEREAS, the Company and Executive mutually
agree that (i) Executive’s employment with the Company [as the Company’s
Chief Executive Officer] was terminated [by the Company without Cause] [by
Executive for Good Reason] (a “Qualifying Termination”) on [DATE] (the “[Qualifying]Termination
Date”), and (ii) that Executive will release the Company and its
affiliates from any and all claims as of the [Effective Date] [Qualifying
Termination Date];

 

WHEREAS, [a Change in Control (as defined in the
Employment Agreement) occurred on [DATE];] and

 

WHEREAS, in accordance with the Employment
Agreement, a Qualifying Termination of Executive’s employment [as the Company’s
Chief Executive Officer] means that Executive is eligible to receive certain
separation benefits provided that, among other things, Executive timely
complies with the requirements of Section 3(d)(iii) of the Employment
Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises
contained herein, the Parties agree as follows:

 

1.               Qualifying Termination of
Employment [as the Company’s Chief Executive Officer]. 
Executive and the Company acknowledge and agree that Executive’s
employment [as the Company’s Chief Executive Officer] with the Company
terminated as of the close of business on the [Qualifying]Termination Date
without regard to whether Executive signs this Agreement or agrees to the
following terms and conditions, and that such termination was treated as a
Qualifying Termination by the Company. 
As of the [Qualifying]Termination Date, it is mutually agreed that
Executive is no longer [the Chief Executive Office] [an employee] [or 

 

1

 

director] of the Company
and no longer holds any positions or offices with the Company [except for his
membership on the Company’s Board of Directors].

 

2.               Separation Benefits. 
In consideration for Executive’s general release of all claims set forth
below and Executive’s other obligations under this Agreement and in
satisfaction of all of the Company’s obligations to Executive and further
provided that: (i) this Agreement is signed by Executive and delivered to the
Company on or before [DATE], (ii) this Agreement is not revoked by Executive
under Section 5 below and therefore becomes effective on or before [DATE], (iii)
Executive remains in continuing material compliance with all of the terms of
this Agreement, and (iv) the termination of Executive’s employment with the
Company [as the Company’s Chief Executive Officer] is treated as a Qualifying
Termination by the Company, then the Company agrees to provide (and continue to
provide) the separation benefits specified in Section 3(a) below to Executive.

 

In the event that
the Company believes you are not in continuing material compliance with the
terms of this Agreement, then the Company shall provide you with written notice of the same and the
Company’s intention to terminate the separation benefits specified in Section 3(a) below
within ninety (90) days of the date on which the general counsel of the Company
or a member of the Board (other than you) first becomes aware of the initial
existence of the condition(s) giving rise to such lack of material
compliance.  If the Company does not
timely provide such notice during the applicable 90 days, then the Company will
be deemed to have waived the right to assert any such breach with respect to
such condition(s) provided that at least one of such persons with knowledge of
the initial existence of the condition(s) remains in service with the
Company through the conclusion of the ninety day notice period.  Notwithstanding the foregoing, in the event that the actions or inactions giving rise to such lack of
material compliance are reasonably capable of being cured, the Company shall
provide you with written notice of the same and the Company’s intention to
terminate the separation benefits specified in Section 3(a) below at
least twenty (20) days prior to the effective date of the termination of
separation benefits.  During such twenty
(20) day period, the Company will suspend payment(s) of the separation benefits
specified in Section 3(a) below, and if the actions or inactions giving rise to
such lack of material compliance are not timely cured, then the Company shall
immediately terminate any and all such separation payments and benefits.  In the event that you cure the circumstances
giving rise to such lack of material compliance within such twenty (20) day
period, the Company shall remove the suspension and continue to provide the
separation payments and benefits specified in Section 3(a) below.

 

3.               Payments, Benefits and
Taxes.

 

(a)          Separation Benefits. 
The Company will provide to Executive the payments and benefits
specified in Section 3(d)(i) (or Section 3(d)(ii) if a
Change in Control is consummated before the 90th day after the [Qualifying]Termination Date) of
the Employment Agreement, subject to Section 3(d)(iv) of the
Employment Agreement, but in no event will payments be provided under both
Sections 3(d)(i) and 3(d)(ii) of the Employment Agreement.  Subject to Section 3(e) below, such
payments and benefits will be provided to Executive at the times specified in
the Employment Agreement.

 

2

 

(b)         Taxes.  Any tax
obligations of Executive and tax liability therefore, including without
limitation any penalties or interest based upon such tax obligations, that
arise from the benefits and payments made to Executive shall be Executive’s
sole responsibility and liability.  All
payments or benefits made under this Agreement to Executive shall be subject to
applicable tax withholding laws and regulations and Executive shall be required
to timely and fully satisfy any such withholding as a condition of receipt of
any payments or benefits.  The terms of Section 12
of the Employment Agreement are also applicable to this Agreement and to all
payments and benefits provided hereunder.

 

(c)          WARN Payments.  The payments
to Executive hereunder shall be considered as including any and all payments by
the Company that could or in fact become payable in connection with the
Executive’s termination of employment pursuant to any applicable legal
requirements, including, without limitation, the Worker Adjustment and
Retraining Notification Act (the “WARN” Act), California Labor Code
sections 1400-1408, or any other similar foreign, federal or state law.

 

(d)         Full Payment.  Except with
respect to any “Excluded Claims” (defined below), Executive represents and
warrants to the Company that, as of the Effective Date, the payments set forth
in Section 3(a) herein constitute all payments or obligations owed by
the Company to Executive in connection with any employment, severance, retention,
or a change in control plan or arrangement.

 

(e)          Internal Revenue Code Section 409A.  The terms of Section 14 of the Employment
Agreement are also applicable to this Agreement and to all payments and
benefits provided hereunder.

 

4.               Executive’s Representations,
Warranties and Covenants.

 

(a)          Executive reaffirms that he will continue to be bound
by, and will continue to comply with, all of the terms and conditions and
covenants in Sections 6 and 7 of the Employment Agreement and also all terms
and conditions of the Confidentiality Agreement (as such term is defined in the
Employment Agreement).

 

(b)         Executive represents and warrants to the Company that,
as of the Effective Date, Executive has no outstanding agreement or obligation
that is in conflict with any of the provisions of this Agreement, or that would
preclude Executive from complying with the provisions hereof, and further
certifies that Executive will not enter into any such conflicting agreement.

 

(c)          Executive represents and warrants to the Company that,
as of the Effective Date, Executive has not filed any claim against the Company
or its affiliates and has not assigned to any third party any claims against
the Company or its affiliates.

 

3

 

(d)         Executive acknowledges that Executive has had the
opportunity to fully review this Agreement and, if Executive so chooses, to
consult with counsel, and is fully aware of Executive’s rights and obligations
under this Agreement.

 

5.               Executive’s Release of
Claims.  In exchange for the Company’s promises set
forth herein, all of which are good and valuable consideration, Executive
hereby covenants not to sue and releases and forever discharges the Company,
its owners, parents, subsidiaries, attorneys, insurers, agents, employees,
stockholders, directors, officers, affiliates, predecessors and successors of
and from any and all rights, claims, actions, demands, causes of action,
obligations, attorneys’ fees, costs, damages, and liabilities of whatever kind
or nature, in law or in equity, that Executive may have (whether known or not
known) (collectively, “Claims”), accruing to Executive as of the
Effective Date, that Executive has ever had, including but not limited to
Claims based on and/or arising under Title VII of the Civil Rights Act of
1964, as amended, The Americans with Disabilities Act, The Family Medical Leave
Act, The Equal Pay Act, The Employee Retirement Income Security Act, The Fair
Labor Standards Act, and/or the California Fair Employment and Housing Act; The
California Constitution, The California Government Code, The California Labor
Code, The Industrial Welfare Commission’s Orders, the Worker Adjustment and
Retraining Notification Act, California Labor Code sections 1400-1408, and any
and all other Claims Executive may have under any other federal, state or local
Constitution, Statute, Ordinance and/or Regulation; and all other Claims
arising under common law including but not limited to tort, express and/or
implied contract and/or quasi-contract, arising out of or, in any way, related
to Executive’s previous relationship with the Company as an employee,
consultant and/or director.  Furthermore,
Executive acknowledges that Executive is waiving and releasing any rights
Executive may have under the Older Workers Benefit Protection Act and Age
Discrimination in Employment Act of 1967 (“ADEA”), as amended, and that
this waiver and release is knowing and voluntary.  Executive acknowledges that the consideration
given for this waiver and release is in addition to anything of value to which
Executive was already entitled. 
Executive further acknowledges that Executive has been advised by this
writing that in accordance with ADEA:

 

(a)         Executive should consult with an attorney
prior to executing this Agreement;

 

(b)        Executive has at least twenty-one (21)
days within which to consider this Agreement;

 

(c)         Executive has up to seven (7) days
following the execution of this Agreement by the Executive to revoke the
Agreement by timely providing written notice of revocation to the Company; and

 

(d)        this Agreement shall not be effective
until the revocation period in Section 5(c) has expired without
revocation by Executive.

 

4

 

The Company and Executive agree that the release set forth in this Section 5
shall be and remain in effect in all respects as a complete general release as
to the matters released.  Notwithstanding
anything to the contrary herein, the Parties agree that Executive is not
waiving any Claims he may have that arise from or are incurred in connection
with any of the following matters (collectively, the “Excluded Claims”).  (i) the Company’s breach of its
obligations under this Agreement or under Section 3(d)(i) and 3(d)(ii) of
the Employment Agreement; (ii) claims for indemnification under Section 2802
of the California Labor Code, pursuant to Section 13 of the Employment
Agreement, under the Company’s Certificate of Incorporation, Articles of
Incorporation or by-laws, pursuant to that certain Indemnification Agreement
(as amended from time to time) dated April 10, 2010, and under any
insurance policy of the Company or the established policies of the Company or
any affiliate thereof expressly providing for such indemnity between Executive
and the Company or any affiliate thereof; (iii) claims for any vested benefits
under the terms of any of the Company’s pension, profit sharing, health,
welfare, stock option, restricted stock, stock incentive, deferred
compensation, supplemental compensation and any other welfare, benefit or other
plan of the Company; (iv) claims for workers’ compensation benefits; (v) any
transactions or agreements entered into, and any occurrences, acts or omissions
occurring, after the Effective Date; (vi) claims arising from Executive’s
status or capacity as a stockholder of the Company or arising under federal
and/or state securities laws; and (vii) claims arising, in Executive’s
sole capacity as a stockholder, under the Third Amended and Restated
Shareholders Agreement, dated December 24, 2007, and amendments thereto,
to which Executive is a party, and under any additional written agreements
between the stockholders, including without limitation the Amended and Restated
Investors’ Rights Agreement, dated December 24, 2007, as any of such
agreements may be amended from time to time.

 

6.               Civil Code Section 1542. 
Executive and the Company acknowledge that they are familiar with the
provisions of California Civil Code Section 1542, which provides as
follows:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.

 

Executive, being aware of
said Code section, agrees to expressly waive any rights Executive may have
thereunder (except with respect to Excluded Claims), as well as under any other
statute or common law principles of similar effect.

 

7.               Labor Code Section 206.5. 
Upon receipt by Executive of the “Accrued Obligations” (as such term is
defined in the Employment Agreement) including all of his salary and unused
vacation time, each accrued through the [Qualifying]Termination Date, Executive
acknowledges that these payments represent all such monies due to Executive
through the [Qualifying] Termination Date. 
In light of the payment by the Company of all wages due, or to become
due 

 

5

 

to Executive (excluding
any additional amounts payable to Executive under Section 3(d) of the
Employment Agreement), California Labor Code Section 206.5 is not
applicable to the Parties hereto.  That
section provides in pertinent part as follows:

 

No employer shall require the execution of any release of any claim or
right on account of wages due, or to become due, or made as an advance on wages
to be earned, unless payment of such wages has been made.

 

8.               Governing Law. 
This Agreement will be governed by the internal substantive laws, but
not the choice of law rules, of the State of California.

 

9.               Assignment. 
This Agreement and all rights under this Agreement will be binding upon
and inure to the benefit of and be enforceable by the Parties hereto and their
respective owners, agents, officers, stockholders, employees, directors, attorneys,
insurers, subsidiaries, parents, affiliates, successors, personal or legal
representatives, executors, administrators, heirs, distributes, devisees,
legatees, and assigns.  This Agreement is
personal in nature, and none of the Parties to this Agreement will, without the
written consent of the other, assign or transfer this Agreement or any right or
obligation under this Agreement to any other person or entity; except that the
rights and obligations of the Company under this Agreement may be assigned
(without the consent of the Executive) to an entity which becomes the successor
to the Company as the result of a merger or other corporate reorganization or
similar transaction or sale of substantially all the assets to a successor
which continues the business of the Company or any other subsidiary of the
Company.

 

10.         Notices.  The terms of Section 11
of the Employment Agreement are also applicable to this Agreement.

 

11.         Integration and Interpretation. 
This Agreement, and the surviving provisions of the Employment
Agreement, represents the entire agreement and understanding between the
parties as to the subject matter hereof and supersedes all prior agreements
whether written or oral.  The terms of
this Agreement have been voluntarily agreed to by Executive and Company, and
the language used in this Agreement shall be deemed to be the language chosen
to express the mutual intent of the Parties. 
This Agreement shall be construed without regard to any presumption or rule requiring
construction against Company or Executive, or in favor of the Party receiving a
particular benefit under this Agreement.

 

12.         Modification.  This
Agreement may only be amended in a writing signed by Executive and an
authorized representative of the Company and which expressly references that
this Agreement is being amended.  No
waiver, alteration, or modification of any of the provisions of this Agreement
will be binding unless in writing and signed by the party against whom
enforcement of the change or modification is sought.  Failure or delay on the part of either party
hereto to enforce any right, power, or privilege hereunder will not be deemed
to constitute a waiver thereof. 
Additionally, a waiver by either party or a breach of any promise hereof
by the 

 

6

 

other party will not
operate as or be construed to constitute a waiver of any subsequent waiver by
such other party.

 

13.         Severability.  Whenever
possible, each provision of this Agreement will be interpreted in such a manner
as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other jurisdiction,
but this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein.

 

14.         No Representations. 
Each Party represents that it has had the opportunity to consult with an
attorney, and has carefully read and understands the scope and effect of the
provisions of this Agreement.  Neither
Party has relied upon any representations or statements made by any other Party
hereto which are not specifically set forth in this Agreement.  By entering into this Agreement, the Company
is not acknowledging or admitting any fault, wrongdoing, or liability on its
part in any way.

 

15.         Authority.  The Company
represents and warrants that the undersigned has the authority to act on behalf
of the Company and to bind the Company and all who may claim through it to the
terms and conditions of this Agreement. 
Executive represents and warrants that he has the capacity to act on his
own behalf and on behalf of all who might claim through Executive to bind them
to the terms and conditions of this Agreement. 
Each Party warrants and represents that there are no liens or claims of
lien or assignments in law or equity or otherwise of or against any of the
claims or causes of action released herein.

 

16.         Voluntary Execution of Agreement. 
This Agreement is executed voluntarily and without any duress or undue
influence on the part or behalf of the Parties hereto, with the full intent of
releasing all claims.  The Parties
acknowledge that:

 

(a)          They have read this Agreement;

 

(b)         They have been represented in the
preparation, negotiation, and execution of this Agreement by legal counsel of
their own choice or that they have voluntarily declined to seek such counsel;

 

(c)          They understand the terms and
consequences of this Agreement and of the releases it contains; and

 

(d)         They are fully aware of the legal and
binding effect of this Agreement.

 

17.         Execution in Multiple Counterparts. 
This
Agreement may be executed in multiple counterparts, each of which when together
shall be deemed to constitute the executed original, and each counterpart shall
have the same force and effect as an original and shall constitute an
effective, binding agreement on the part of the undersigned.

 

7

 

IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
dates shown below.

 

 

	
  MICHAEL V. LEWIS

  	
   

  	
  REALD INC.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  [NAME/TITLE]

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  Dated:

  	
   

  
							

 

8Exhibit 10.20

 

Credit
and Security Agreement

 

This Credit and Security
Agreement (“Agreement”) is entered into as of July 26, 2007, by and
between REAL D, a California
corporation (“Borrower”), and City National Bank, a national banking association
(“CNB”).

 

1.                                 DEFINITIONS. As used in this Agreement, these terms
have the following meanings:

 

1.1                               “Account” or “Accounts”
has the meaning given in the Code, and includes, but is not  limited to, any right to payment for
goods sold or leased or for services rendered which is not evidenced by an
instrument or chattel paper from any Person, whether now existing or hereafter
arising or acquired, whether or not it has been earned by performance.

 

1.2                               “Account Debtor” means the Person obligated on an Account.

 

1.3                               “Adjusted EBITDA” means, as of the date of determination,
EBITDA, minus (a) revenues earned under License Agreements for the twelve (12)
month period ending on the date of determination, plus (b) monitoring fees
(in an aggregate amount not to exceed $350,000.00 per year) paid by Borrower to
Shamrock, plus (c) non-recurring expenses (including without limitation,
those incurred in connection with (i) mergers and acquisitions, (ii) the
incurrence of Debt, (iii) relocation and severance payments related to the
relocation of employees from California to Colorado, not to exceed $450,000.00
in total), and (iv) upgrades to Borrower’s 3-D Theater System, not to
exceed one-fifth (1/5) of such upgrade expenses incurred during the twelve (12)
month period ending on the date of determination, (d) plus revenues
projected by Borrower to be earned under License Agreements for the twelve (12)
month period beginning as of the date of determination.

 

1.4                               “Affiliate” means any Person directly or indirectly
controlling, controlled by, or under  common control with Borrower, and includes any
employee stock ownership plan of Borrower or an Affiliate. “Control” (including
with correlative meaning, the terms “controlling,” “controlled by” and “under
common control with”), as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.

 

1.5                               “Applicable Margin” means a rate per annum based on the
outstanding Loans, divided  by Adjusted EBITDA, calculated as of the last day of
each fiscal quarter and applicable to the next fiscal quarter as set forth
below:

 

	
  Outstanding
  Loans

  	
   

  	
  Applicable Margin (%)

  	
   

  
	
  Adjusted
  EBITDA

  	
   

  	
  For Libor Loans

  	
   

  	
  For Prime Loans

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Greater than 2.5

  	
   

  	
  3.00

  	
  %

  	
  1.00

  	
  %

  
	
  Equal to or greater
  than 2.0 and below 2.5

  	
   

  	
  2.25

  	
  %

  	
  0.25

  	
  %

  
	
  Equal to or greater
  than 1.5 and below 2.0

  	
   

  	
  1.50

  	
  %

  	
  0.00

  	
  %

  
	
  Less than 1.5

  	
   

  	
  1.25

  	
  %

  	
  0.00

  	
  %

  

 

1.6                               “Borrower’s Loan
Account” means
the statement of daily balances on the books of  CNB in which will be recorded Loans made by CNB to
Borrower, payments made on such loans, and

 

1

 

other appropriate debits
and credits as provided by this Agreement. CNB will provide a statement of
account for Borrower’s Loan Account at least once each month on a date
established by CNB, which statement will be accepted by and conclusively
binding upon Borrower unless it notifies CNB in writing to the contrary, within
five (5) days of receipt of such statement, or ten (10) days after
sending of such statement if Borrower does not notify CNB of its non-receipt of
the statement. Statements regarding other credit extended to Borrower will be
provided separately.

 

1.7                               “Borrowing Base” will be in an amount, determined by CNB,
equal to the greater of (a)  the sum of (i) seventy five percent (75%) of the
Eligible Accounts, plus (ii) seventy five percent (75%) of Eligible
Recurring Revenues, and (b) three hundred percent (300%) of Adjusted
EBITDA. In no event will the Borrowing Base exceed the Revolving Credit
Commitment.

 

1.8                               “Borrowing Base
Certificate” means
the certificate, in form and satisfactory to CNB,  executed by Borrower to evidence the Borrowing Base.

 

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

 

1.10                        “Code” means the Uniform Commercial Code of
California, as currently in effect and as amended and replaced from time to
time, except where the Uniform Commercial Code of another state governs the
perfection of a security interest in Collateral located in that state, in which
case, “Code” means the Uniform Commercial Code of such state.

 

1.11                        “Collateral” means all property securing the
Obligations, as described in Section 8.

 

1.12                        “Commitment” means CNB’s commitment to make the Loans
in the aggregate principal amount outstanding at any one time of up to Fifteen
Million Dollars ($15,000,000.00).

 

1.13                        “Contingent Liabilities”
shall mean those
liabilities as defined in FASB Statement No. 5, and not otherwise set
forth in Borrower’s most recent financial statements.

 

1.14                        “Covenant Compliance
Certificate” shall
be in the form of Exhibit A attached hereto.

 

1.15                        “Debt” means, at any date, the aggregate amount
of, without duplication, (a) all obligations of Borrower or any Subsidiary
for borrowed money, or reimbursement for open letters of credit and banker’s
acceptances, (b) all obligations of Borrower or any Subsidiary evidenced
by bonds, debentures, notes or other similar instruments, (c) all
obligations of Borrower or any Subsidiary to pay the deferred purchase price of
property or services, (d) all capitalized lease obligations of Borrower or
any Subsidiary, (e) all obligations or liabilities of others secured by a
lien on any asset of Borrower or any Subsidiary, whether or not such obligation
or liability is assumed, (f) all obligations guaranteed by Borrower or any
Subsidiary, (g) all obligations, direct or indirect, for letters of
credit, and (h) any other obligations or liabilities which are required by
GAAP to be shown as liabilities on the balance sheet of Borrower or any
Subsidiary.

 

1.16                        “Demand Deposit Account”
means Borrower’s
demand deposit account No. 112-788964 maintained with CNB.

 

1.17                        “EBITDA” means, as of the date of determination,
earnings before interest, taxes, depreciation and amortization and will be
determined on a consolidated basis for Borrower and the Subsidiaries, in
accordance with GAAP, and means the sum of (a) net income after
eliminating

 

2

 

extraordinary gains and
losses, plus (b) interest expense, plus (c) provisions for income
taxes, plus (d) depreciation and amortization, each of such items
determined based on the twelve (12) month period ending on the date of
determination.

 

1.18                        “Eligible Account” means an Account of Borrower, which is
not an Account owed under a License Agreement, and:

 

1.18.1              Upon which Borrower’s right to receive payment is
absolute and not contingent upon the fulfillment of any condition (other than
the nonpayment condition contained in License Agreements relating to a minimum
number of theatrical releases in 3D format not being offered or available for
exhibition);

 

1.18.2              Against which is asserted no defense, counterclaim,
discount or set-off, whether well-founded or otherwise;

 

1.18.3              That is a true and correct statement of a bona fide
indebtedness incurred in the amount of the Account with respect to a money
obligation owed by the Account Debtor, including but not limited to obligations
arising, for goods sold or leased and delivered to, or for services rendered to
and accepted by, the Account Debtor;

 

1.18.4              That is owned by Borrower free and clear of all liens,
encumbrances, charges, interests and rights of others, except the security
interests granted to CNB;

 

1.18.5              That does not arise from a sale or lease to or for
services rendered to an employee, stockholder, director, Subsidiary or
Affiliate of Borrower or any entity in which any employee, stockholder,
director, Subsidiary or Affiliate of Borrower has any interest;

 

1.18.6              That is not the obligation of an Account Debtor that
is the federal government unless perfected under the Federal Assignment of
Claims Act of 1940, as amended;

 

1.18.7              That is not the obligation of an Account Debtor
located in a foreign country, except Canada, unless the obligation is insured
by foreign credit insurance satisfactory to CNB or through a letter of credit
negotiated through CNB with drawing documents in order;

 

1.18.8              That is (a) not due and payable on delivery of
goods, receipt of documents or receipt of invoice, or (b) due and payable
not more than thirty (30) days from the original invoice date, in either case
unless otherwise agreed to in writing by CNB;

 

1.18.9              As to which not more than ninety (90) days has elapsed
since the original invoice date, excluding all Accounts owed by Borrower’s
Affiliates which for financial statement purposes would be consolidated with
Borrower under GAAP;

 

1.18.10       As to which the Account Debtor has not:

 

(a)                                 died, suspended business, made a general
assignment for the benefit of creditors, become the subject of a petition under
the Bankruptcy Code or consented to or applied for the appointment of a
receiver, trustee, custodian or liquidator for itself or any of its property;

 

(b)                                 allowed more than 20% of the amounts owed
by such Account Debtor to Borrower to become ineligible under Section 1.18.9;

 

3

 

(c)                                  had its check in payment of an Account
returned unpaid; or

 

(d)                                 become or appear to have become unable,
in the opinion of CNB, to pay the Account in accord with its terms;

 

1.18.11       That does not, when added to all other Accounts that are
obligations of the Account Debtor to Borrower, result in a total sum that
exceeds twenty percent (20%) of the total balance then due on all Accounts; and

 

1.18.12       That is not an obligation owed by the Account Debtor
which is evidenced by chattel paper or an instrument as those terms are defined
in the Code.

 

1.19                        “Eligible License
Agreement” means
a License Agreement:

 

1.19.1              Upon which Borrower’s right to receive payment is
absolute and not contingent upon the fulfillment of any condition (other than
the nonpayment condition contained in License Agreements relating to a minimum
number of theatrical releases in 3D format not being offered or available for
exhibition);

 

1.19.2              Against which is asserted no defense, counterclaim,
discount or set-off, whether well-founded or otherwise;

 

1.19.3              That is a true and correct statement of a bona fide
indebtedness represented by an Account with respect to a money obligation owed
by the Account Debtor, including but not limited to obligations arising, for
goods sold or leased and delivered to for services rendered to and accepted by
the Account Debtor;

 

1.19.4              That is owned by Borrower free and clear of all liens,
encumbrances, charges, interests and rights of others, except that security
interest granted to CNB;

 

1.19.5              That is not the obligation of an Account Debtor
located in a foreign country, except Canada, unless the obligation is insured
through a letter of credit negotiated through CNB with drawing documents in
order;

 

1.19.6              As to which the Account Debtor is not more than 90
days past due; and 

 

1.19.7              As to which the Account Debtor has not:

 

(a)                                 died, suspended business, made a general
assignment for the benefit of creditors, become the subject of a petition under
the Bankruptcy Code or consented to or applied for the appointment of a
receiver, trustee, custodian or liquidator for itself or any of its property;

 

(b)                                 had its check in payment of an Account
returned unpaid; or

 

(c)                                  become or appear to have become unable,
in the opinion of CNB, to pay the Account in accord with its terms.

 

1.20                        “Eligible Period” means, for any measurement date, the
twelve (12) month period beginning on the measurement date.

 

4

 

1.21                        “Eligible Recurring
Revenues” means,
for any Eligible Period, the sum of Release Based Payments, plus Scheduled
License Payments, plus Paid Admission Based Payments.

 

1.22                        “Eurocurrency Reserve
Requirement” means,
for any Interest Period, the aggregate (without duplication) of the rates
(expressed as a decimal) of reserves (including, without limitation, any basic,
marginal, supplemental, or emergency reserves) that are required to be
maintained by banks during such Interest Period under any regulations of the
Board of Governors of the Federal Reserve System, or any other governmental
authority having jurisdiction with respect thereto, applicable to funding based
on so-called “Eurocurrency Liabilities”, including Regulation D (12 CFR 224).

 

1.23                        “Facility Fee” is $37,500.00.

 

1.24                        “Fixed Charges” means, as of the date of determination,
the sum (without duplication) of (a) the aggregate amount of Current
Maturity of Long-Term Debt (“Current Maturity of Long-Term Debt” means that
portion Borrower’s consolidated long-term liabilities, determined in accordance
with GAAP for borrowed money, which will, by the terms thereof, become due and
payable within one (1) year following the date of the balance sheet upon
which such calculations are based.), plus (b) all interest incurred on
borrowed money, plus (c) provisions for income taxes, plus (d) all
maintenance capital expenditures, each of such items determined based on the
twelve (12) month period ending on the date of determination.

 

1.25                        “GAAP” means generally accepted accounting
principles, consistently applied.

 

1.26                        “Guarantor(s)” are ColorLink Inc., a Delaware
corporation, and Stereographics Corporation, a California corporation.

 

1.27                        “Inventory” means goods held for sale or lease in the
ordinary course of business, work in process and any and all raw materials used
in connection with the foregoing.

 

1.28                        “Interest Period” means the period commencing on the date
the LIBOR Loan is made (including the date a Prime Loan is converted to a LIBOR
Loan, or a LIBOR Loan is renewed as a LIBOR Loan, which, in the latter case,
will be the last day of the expiring Interest Period) and ending on the first
day of the month occurring prior to or on the date which is one (1), two (2),
three (3), six (6), nine (9) or twelve (12) months thereafter, as selected
by the Borrower; provided, however, no Interest Period may extend beyond the
Termination Date.

 

1.29                        “LIBOR Base Rate” means the British Banker’s Association
definition of the London InterBank Offered Rates as made available by Bloomberg
LP, or such other information service available to CNB, for the applicable
Interest Period upon which the Interest Period is based for the LIBOR Loan
selected by Borrower and as quoted by CNB on the Business Day Borrower requests
a LIBOR Loan or on the last Business Day of an expiring Interest Period.

 

1.30                        “LIBOR Interest Rate” means, for any Interest Period, the rate
per year (rounded upward to the next one-sixteenth (1/16th) of one percent
(0.0625%), if necessary) determined by CNB to be the quotient of (a) the
LIBOR Base Rate divided by (b) one minus the Eurocurrency Reserve
Requirement for the Interest Period; which is expressed by the following
formula:

 

	
   

  	
  LIBOR
  Base Rate

  	
   

  
	
   

  	
  1-Eurocurrency
  Reserve Requirement

  	
   

  

 

5

 

1.31                        “LIBOR Loan” means any Loan tied to the LIBOR Interest
Rate.

 

1.32                        “License Agreement” means an agreement between Borrower and
an Account Debtor pursuant to which Borrower licenses to Account Debtor the
right to use Borrower’s 3-D theater system for use in exhibiting motion picture
theatrical films and other media in 3D (“3-D Theater System”).

 

1.33                        “Lien” with respect to any property or assets,
means any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or assets
(including any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing).

 

1.34                        “Loan” or “Loans”
means the loans extended by CNB to Borrower pursuant to Section  2.

 

1.35                        “Loan Documents” means, individually and collectively,
this Agreement, any note, guaranty, security or pledge agreement, financing
statement and all other contracts, instruments, addenda and documents executed
in connection with or related to extensions of credit under this Agreement.

 

1.36                        “Material Adverse
Effect” means an
event or occurrence that has had a material adverse effect on (a) the
business, operations, property, assets or condition (financial or otherwise) of
Borrower and its Subsidiaries, taken as a whole, (b) the ability of any
Person to perform and comply with its obligations under the Loan Documents to
which it is a party, or (c) the validity or priority of CNB’s security
interest in the Collateral.

 

1.37                        “Net Worth” means, at any time of determination, the
net worth of Borrower and its consolidated Subsidiaries, determined in
accordance with GAAP.

 

1.38                        “Obligations” means all present and future liabilities
and obligations of Borrower to CNB under each of the Loan Documents, now
existing or hereafter owing, matured or unmatured, direct or indirect, absolute
or contingent, joint or several, including any extensions and renewals thereof
and substitutions therefor.

 

1.39                        “Paid Admission Based
Payments” means,
for an Eligible Period, with respect to those Eligible License Agreements under
which royalty payments are based on an admission fee for each paid admission
for each Screen for each motion picture, $2,000 per Screen for each motion
picture announced and scheduled for release during the Eligible Period.

 

1.40                        “Permitted Individual
Holders” means (a) Mr. Michael
Lewis and the estate of Mr. Michael Lewis (including the beneficiaries
thereof), Mr. Joshua Greer and the estate of Mr. Joshua Greer
(including the beneficiaries thereof) (collectively, the “Current Holders”), (b) members
of the immediate families of the Current Holders, (c) trusts for the benefit
of Current Holders and members of the immediate families of the Current
Holders, and (d) a non-profit corporation or foundation controlled by any
of the Persons described in (a), (b) or (c) of this definition.
Members of a Person’s “immediate family” shall mean such Person’s parents,
brothers, sisters, spouse and lineal descendants.

 

6

 

1.41                        “Permitted Liens” means:

 

1.41.1              Liens existing on the date hereof and described on
Schedule 1.41;

 

1.41.2              Liens arising by operation of law in favor of
materialmen, mechanics, warehousemen, carriers, lessors or other similar
Persons incurred by Borrower or any Subsidiary in the ordinary course of
business which secure its obligations to such Person; provided, however,
that (i) the Borrower or such Subsidiary is not in default with respect to
such payment obligation to such Person, unless the Borrower or such Subsidiary
is in good faith and by appropriate proceedings diligently contesting such
obligation and adequate provision is made for the payment thereof, and (ii) all
such defaults in the aggregate have no Material Adverse Effect;

 

1.41.3              Liens securing taxes, assessments or governmental
charges or levies; provided, however, that (i) neither
the Borrower nor any Subsidiary is in default in respect of any payment
obligation with respect thereto unless the Borrower or such Subsidiary is in
good faith and by appropriate proceedings diligently contesting such obligation
and adequate reserves therefor have been established on the books of the
Borrower or such Subsidiary, as the case may be, in conformity with GAAP and (ii) all
such defaults in the aggregate have no Material Adverse Effect;

 

1.41.4              Liens incurred or pledges and deposits made in the
ordinary course of business in connection with workers’ compensation,
unemployment insurance, old-age pensions and other social security benefits;

 

1.41.5              Liens securing the performance of bids, tenders,
leases, contracts (other than for the repayment of borrowed money), statutory
obligations, surety and appeal bonds and other obligations of like nature,
incurred as an incident to and in the ordinary course of business, and judgment
liens; provided, however, that all such Liens in the
aggregate have no Material Adverse Effect;

 

1.41.6              Zoning restrictions, easements, licenses,
reservations, restrictions on the use of real property or minor irregularities
incident thereto which do not in the aggregate materially detract from the
value or use of the property or assets of the Borrower or any Subsidiary or
impair, in any material manner, the use of such property for the purposes for
which such property is held by the Borrower or any Subsidiary; and

 

1.41.7              Purchase money liens securing Debt incurred in
connection with the acquisition of equipment or other capital assets (where
such liens have a perfected, first priority security interest only in the
equipment and/or other capital assets being purchased).

 

1.42                        “Person” means any individual or entity.

 

1.43                        “Potential Event of
Default” means
any condition that with the giving of notice or passage of time or both would,
unless cured or waived, become an Event of Default.

 

1.44                        “Prime Loan” means any Loan tied to the Prime Rate.

 

1.45                        “Prime Rate” means the rate most recently announced by
CNB at its principal office in Beverly Hills, California as its “Prime Rate.”
Any change in the interest rate resulting from a change in the Prime Rate will
become effective on the day on which each change in the Prime Rate is announced
by CNB.

 

7

 

1.46                        “Release Based Payments”
means license fee
payments due and payable under Eligible License Agreements for an Eligible
Period that are calculated based upon the number of motion pictures scheduled
for release during the Eligible Period, such release schedule to be subject to
CNB’s approval, which approval shall not be unreasonably withheld.

 

1.47                        “Revolving Credit
Commitment” means
CNB’s commitment to make the Loans in the aggregate principal amount at any one
time of up to Fifteen Million Dollars ($15,000,000.00).

 

1.48                        “Scheduled License
Payments” means
license fee payments to be due and payable under Eligible License Agreements
for an Eligible Period, net of any rebates, and which are not Release Based
Payments or Paid Admission Based Payments.

 

1.49                        “Shamrock” means Shamrock Capital Growth Fund II,
L.P.

 

1.50                        “Screens” means those theater movie screens that
have installed Borrower’s 3D theater system under License Agreements.

 

1.51                        “Subordinated Debt” means Debt of Borrower or any Subsidiary,
the repayment of which is subordinated, on terms satisfactory to CNB, to the
Obligations. The holders of Subordinated Debt are listed on Schedule 1.51
hereof.

 

1.52                        “Subsidiary” means any Person, the majority of whose
voting interests are at any time owned, directly or indirectly, by Borrower
and/or by one or more Subsidiaries, other than ColorLink Japan, Ltd.

 

1.53                        “Termination Date” means July 31, 2010, unless the term
of this Agreement is renewed by CNB for an additional period under Section 3,
or such earlier termination date under Section 9.3 upon the occurrence of
an Event of Default. Upon any renewal, the Termination Date will be the renewed
maturity date determined by CNB.

 

1.54                        “Total Senior
Liabilities” means,
as of any date of determination, the amount of all liabilities that should be
reflected as a liability on a consolidated balance sheet of Borrower and the
Subsidiaries prepared in accordance with GAAP, less Subordinated Debt.

 

2.                                      THE CREDIT.

 

2.1                               Loans.  Subject to the terms of this Agreement, CNB agrees to
make loans (“Loans”)  from time to time to Borrower, from the date of this Agreement up to but
not including the Termination Date, at such times as Borrower may request, up
to the amount of the Borrowing Base. The Loans may be repaid and reborrowed at
any time up to the Termination Date; provided, however, that the aggregate
unpaid principal amount of outstanding Loans will at no time exceed the
Borrowing Base.

 

2.1.1                     Interest.  The Loans will bear interest from disbursement until
due (whether at  stated maturity, by acceleration on otherwise) at an annual rate equal
to, at Borrower’s option, either (a) for a LIBOR Loan, the LIBOR Interest
Rate plus the Applicable Margin, or (b) for a Prime Loan, the fluctuating
Prime Rate plus the Applicable Margin. Interest on the Loans and other charges
incurred under this Agreement will accrue daily and be payable (a) except
in respect of a LIBOR Loan, monthly in arrears, on the first day of the next
month, commencing on the first such date following disbursement; (b) if a
LIBOR Loan, on the last day of each Interest Period therefore and upon any
prepayment thereof (to the extent accrued on the amount prepaid); and (c) at
the Termination Date. A Loan tied to the

 

8

 

LIBOR Interest Rate is
called a “LIBOR Loan,” and a Loan tied to the Prime Rate is called a “Prime Loan.”
A Loan will be a Prime Loan any time it is not a LIBOR Loan.

 

2.1.2                     Payment for Amounts
Exceeding Borrowing Base. Borrower will,  immediately upon demand, repay the amount by which the
unpaid principal amount of Borrower’s Loan Account exceeds the amount CNB has
agreed to lend under Section 2.1. The portion of the Loans exceeding the
Borrowing Base (“Overadvance”) will bear additional interest of three percent
(3.0%) per year over the rate set forth in Section 2.1.1 for Prime Loans.

 

2.2                               LIBOR Loan Terms and
Conditions

 

2.2.1                     Procedure for LIBOR
Loans. Borrower may
request that a Loan be a LIBOR Loan (including conversion of a Prime Loan to a
LIBOR Loan, or continuation of a LIBOR Loan as a LIBOR Loan upon the expiration
of an Interest Period). Borrower’s request will be irrevocable, will be made to
CNB using the “Notice of Borrowing” form attached hereto as Exhibit “A,”
no earlier than two (2) Business Days before and no later than 1:00 p.m.
Pacific Time on the day the LIBOR Loan is to be made. If Borrower fails to
select a LIBOR Loan in accordance herewith, the Loan will be a Prime Loan, and,
unless Borrower has selected an additional Interest Period therefore, any
outstanding LIBOR Loan will be deemed a Prime Loan upon expiration of its
then-current Interest Period.

 

2.2.2                     Availability of LIBOR
Loans. Notwithstanding
anything herein to the contrary, each LIBOR Loan must be in the minimum amount
of $500,000.00 and increments of $100,000.00. Borrower may not have more than
five (5) LIBOR Loans outstanding at any one time under this Agreement.
Borrower may have Prime Loans and LIBOR Loans outstanding simultaneously.

 

2.2.3                     Suspension of LIBOR
Loans. If CNB, on
any Business Day, is unable to  determine the LIBOR Base Rate applicable for a new,
continued, or converted LIBOR Loan for any reason, or any law, regulation, or
governmental order, rule or determination, makes it unlawful for CNB to
make a LIBOR Loan, Borrower’s right to select LIBOR Loans will be suspended
until CNB is again able to determine the LIBOR Base Rate or make LIBOR Loans,
as the case may be. During such suspension, new Loans, outstanding Prime Loans,
and LIBOR Loans whose Interest Periods terminate may only be Prime Loans.

 

2.3                               Optional Prepayments. Subject to the provisions of Section 2.6,
Borrower will have the  right to prepay, without premium or penalty, all or any portion of the
Loans; provided, that on each prepayment, Borrower will pay the accrued
interest on the prepaid principal, to the date of such prepayment.

 

2.4                               Default Interest Rate. From and after written notice by CNB to
Borrower of the  occurrence of an Event of Default (and without constituting a waiver of
such Event of Default), the Loans and any other amounts due CNB hereunder (and
interest to the extent permitted by law) will bear additional interest at a
fluctuating rate equal to three percent (3.0%) per year higher than the
interest rate as determined in Sections 2.1.1, until the Event of Default has
been cured; provided, however, with respect to any Overadvance for which additional
interest is then being charged under Section 2.1.2, such additional
interest shall be deducted from any default interest charged on the Overadvance
under this Section, and provided, further, for purposes of this Section, a
LIBOR Loan will be treated as a Prime Loan upon the termination of the Interest
Period. All interest provided for in this Section will be compounded
monthly and payable on demand.

 

9

 

2.5                               Payments. All payments will be in United States
Dollars and in immediately available  funds. Interest will accrue daily and will be computed
(a) in the case of LIBOR Loans, on the basis of a 360-day year, and (b) in
the case of Prime Loans, on the basis of a 365 or 366-day year, in each case
for the actual number of days elapsed. All payments of principal, interest,
fees and other charges incurred under this Agreement will be made by charging,
and Borrower hereby authorizes CNB to charge, Borrower’s Demand Deposit Account
or Borrower’s Loan Account. All loan disbursements made pursuant to this
Agreement shall be made by direct deposit to Borrower’s Demand Deposit Account.
..

 

2.6                               Funding Losses. If Borrower shall (a) repay,
prepay or convert any LIBOR Loans on  any day other than the last day of an Interest Period
for such LIBOR Loans, (b) fail to borrow any Loans in accordance with a
request therefor delivered to CNB (whether as a result of the failure to
satisfy any applicable conditions or otherwise), or (c) fail to make any
prepayment in accordance with any notice of prepayment delivered to the
Administrative Agent, then the Borrower shall, within 10 days of demand by CNB
and presentation by CNB of a certificate setting forth in reasonable detail the
basis for and the amount of costs and losses incurred by CNB for which demand
is made (which certificate shall, in the absence of manifest error, be
conclusive and binding as to the amount of such loss for purposes of this
Agreement), reimburse CNB for all out-of-pocket costs and losses incurred by
CNB as a result of such repayment, prepayment or failure (“Liquidation Costs”).
Borrower understands that such costs and losses may include losses incurred by
CNB as a result of funding and other contracts entered into by CNB to fund
Loans.

 

3.                                      TERM AND TERMINATION.

 

3.1                               Establishment of
Termination Date. The
term of this Agreement will begin as of the  date hereof and continue until the Termination Date,
unless the term is renewed for an additional period by CNB giving Borrower
prior written notice, in which event the Termination Date will mean the renewed
maturity date set forth in such notice. Notwithstanding the foregoing, CNB may,
at its option, terminate this Agreement pursuant to Section 9.3; the date
of any such termination will become the Termination Date as that term is used
in this Agreement. Upon renewal, Borrower authorizes CNB to charge Borrower’s
Loan Account with the amount of the Facility Fee (prorated for the length of
the term of the renewal period) and any applicable Audit Fee.

 

3.1.1                     Obligations Upon the
Termination Date.              Borrower will, upon the  Termination Date, repay the outstanding
principal amount of the Loans plus any accrued interest thereon, and any fees
and charges payable under the Loan Documents.

 

3.2                               Survival of Rights. Any termination of this Agreement will
not affect the rights,  liabilities and obligations of the parties with respect to any
Obligations outstanding on the date of such termination. Until all Obligations
have been fully repaid, CNB will retain its security interest in all existing
Collateral and Collateral arising thereafter.

 

4.                                      CONDITIONS PRECEDENT.

 

4.1                               Extension of Credit. The obligation of CNB to make any Loan or
other extension of  credit hereunder is subject to CNB’s receipt of each of the following,
in form and substance reasonably satisfactory to CNB, and duly executed as
required by CNB:

 

4.1.1                     All Loan Documents required by CNB, including but not
limited to this  Agreement and any guaranties required hereunder;

 

10

 

4.1.2                     (a) a copy of Borrower’s Articles of
Incorporation; (b) a Resolution of  Borrower’s Board of Directors approving and
authorizing the execution, delivery and performance of this Agreement and any
other documents required pursuant to this Agreement, certified by Borrower’s
corporate secretary; and, (c) a copy of the last certificate filed on
behalf of Borrower containing the information required by California
Corporations Code Section 1502(a) or Section 2117(a), as
applicable;

 

4.1.3                     (a) a copy of the Certificate of Incorporation of
ColorLink Inc.; (b) a Resolution  of the Board of Directors of ColorLink Inc. approving
and authorizing the execution, delivery and performance of its continuing
guaranty, certified by its corporate secretary; and, (c) a copy of the
last annual report filed on behalf of ColorLink Inc. containing the information
required by Delaware Corporation Code Section 502;

 

4.1.4                     (a) a copy of the Articles of Incorporation of
Stereographics Corporation; (b) a  Resolution of the Board of Directors of Stereographics
Corporation approving and authorizing the execution, delivery and performance
of its continuing guaranty, certified by its corporate secretary; and, (c) a
copy of the last certificate filed on behalf of Stereographics Corporation
containing the information as that required by California Corporations Code Section 1502(a) or
Section 2117(a), as applicable;

 

4.1.5                     (a) copies (and acknowledgement copies to the
extent reasonably available) of  financing statements (Form UCC-1) duly filed under
the Code in all such jurisdictions as are necessary to perfect CNB’s security
interests created under this Agreement; and (b) evidence that all filings,
recordings and other actions that are necessary or advisable, in CNB’s opinion,
to establish, preserve and perfect CNB’s security interests and liens as legal,
valid and enforceable first security interests and liens in the Collateral have
been effected;

 

4.1.6                     Evidence that the insurance required by Section 6.6
hereof is in effect;

 

4.1.7                     A complete list of claims made against Borrower, as
indicated in Schedule 4.1.6  hereto; and

 

4.1.8                     The Facility Fee.

 

4.2                               Conditions to Each
Extension of Credit. The obligation of CNB to make any Loan or  other extension of credit hereunder will be subject to
the fulfillment of each of the following conditions to CNB’s satisfaction:

 

4.2.1                     The representations and warranties of Borrower set
forth in Section 5 will be  true and correct on the date of the making of each
Loan or other extension of credit with the same effect as though such
representations and warranties had been made on and as of such date;

 

4.2.2                     No Guarantor will have revoked his, her or its
guaranty and no such guaranty  will have become otherwise unenforceable with respect
to future advances;

 

4.2.3                     No holder of Subordinated Debt will be in violation of
his, her or its  Subordination Agreement executed in favor of CNB, and such
Subordination Agreement is enforceable with respect to future advances;

 

4.2.4                     There will be in full force and effect in favor of CNB
a legal, valid and  enforceable first security interest in, and a valid and binding first
lien on the Collateral; and CNB will have received evidence, in form and
substance acceptable to CNB, that all filings, recordings and other

 

11

 

actions that are
necessary or advisable, in the opinion of CNB, in order to establish, protect,
preserve and perfect CNB’s security interests and liens as legal, valid and
enforceable first security interests and liens in the Collateral have been
effected;

 

4.2.5       There will have occurred no Event of Default or
Potential Event of Default; and

 

4.2.6       All other documents and legal matters in connection
with the transactions  described in this Agreement will be reasonably satisfactory in form and
substance to CNB.

 

5.             REPRESENTATIONS AND WARRANTIES. Borrower makes the following
representations  and warranties, which will survive the making and repayment of the
Loans and other extensions of credit:

 

5.1          Corporate Existence, Power and
Authorization. Borrower
and each Subsidiary is duly  organized, validly existing and in good standing under
the laws of the state of its organization, and is duly qualified to conduct
business in each jurisdiction in which its business is conducted. The
execution, delivery and performance of all Loan Documents executed by Borrower
are within Borrower’s powers and have been duly authorized by all necessary
corporate action on the part of Borrower.

 

5.2          Binding Agreement. The Loan Documents constitute the valid
and legally binding  obligations of Borrower, enforceable against Borrower in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or other similar laws of
general application affecting the rights of creditors in general.

 

5.3          Ancillary Documents. To the extent that any security
agreement, subordination  agreement or guaranty is required to be executed by a Subsidiary or
Affiliate, the representations and warranties set forth in Sections 5.1 and 5.2
are also true and correct with respect to such Subsidiary and Affiliate and
such document.

 

5.4          Other Agreements. The execution and performance of the Loan
Documents will not  violate any provision of law or regulation (including, without
limitation, Regulations X and U of the Federal Reserve Board) or any order of
any governmental authority, court or arbitration board or the Articles of
Incorporation or Bylaws of Borrower, or result in the breach of or a default
under any provisions of any agreement to which Borrower is a party.

 

5.5          Litigation. There is no litigation, tax claim,
investigation or proceeding pending,  threatened against or affecting Borrower, any
Subsidiary or Guarantor, or any of their respective properties which, if
adversely determined, would have a Material Adverse Effect.

 

5.6          Financial Condition. The most recent financial statements of
Borrower, its Subsidiaries  and each Guarantor, if any, copies of which have been
delivered to CNB, have been prepared consistent with prior periods and in accordance
with GAAP (except for FASB 123, tax accrual and purchase accounting) and are
true, complete and correct and fairly present, in all material respects, the
financial condition of Borrower, its Subsidiaries or such Guarantor, as the
case may be, including operating results, as of the accounting period
referenced therein. There has been no material adverse change in the financial
condition or business of Borrower or any Subsidiary or Guarantor since the date
of such financial statements. Neither Borrower nor any Subsidiary or Guarantor
has any material liabilities for taxes or long-term leases or commitments,
except as disclosed in the financial statements.

 

12

 

5.7          No Violations. Borrower is not, nor is any Subsidiary,
in violation of any law,  ordinance, rule or regulation to which it or any of its properties
is subject, where such violation would have a Material Adverse Effect.

 

5.8          Collateral. Borrower owns and has possession of and
has the right and power to grant a  security interest in the Collateral, and the
Collateral is genuine and free from liens, adverse claims, setoffs, defaults,
prepayments, defenses and encumbrances except those in favor of CNB and the
Permitted Liens. No bills of lading, warehouse receipts or other documents or
instruments of title are outstanding with respect to the Collateral or any
portion of the Collateral, in favor of a Person other than Borrower. The office
where Borrower keeps its records concerning all Accounts is 100 No. Crescent
Drive, Suite 120, Beverly Hills, CA 90210.

 

5.9          ERISA. Borrower is in compliance in all material
respects with all applicable provisions  of the Employee Retirement Income Security Act of 1974
(“ERISA”). No “Reportable Event” (as defined in ERISA and the regulations
issued thereunder [other than a “Reportable Event” not subject to the provision
for thirty (30) day notice to the Pension Benefit Guaranty Corporation (“PBGC”)
under such regulations]) has occurred with respect to any benefit plan of
Borrower nor are there any unfunded vested liabilities under any benefit plan
of Borrower. Borrower has met its minimum funding requirements under ERISA with
respect to each of its plans and has not incurred any material liability to the
PBGC in connection with any such plan.

 

5.10        Consents. No consent, license, permit, or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority or agency is required in
connection with the execution, delivery and performance by Borrower of this
Agreement or the transactions contemplated hereby.

 

5.11        Use of Proceeds. The proceeds of the Loans will be used by
Borrower solely for (a) prepayment of outstanding Debt, (b) capital
expenditures, (c) working capital purposes in the normal course of
business, and (d) general corporate purposes.

 

5.12        Regulation U. Borrower is not engaged principally, or
as one of its principal activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulations U or X of the Federal Reserve Board). No part of the proceeds of
the Loans will be used by Borrower to purchase or carry any such margin stock
or to extend credit to others for the purpose of purchasing or carrying such
margin stock.

 

5.13        Environmental Matters.

 

5.13.1     The operations of Borrower and each Subsidiary comply
in all material respects with all (a) applicable federal, state and local
environmental, health and safety statutes, regulations and ordinances and (b) terms
of all required permits and licenses, in each case where the failure to so
comply would have a Material Adverse Effect.

 

5.13.2     Borrower and each Subsidiary have received no written
notices of threatened or pending governmental or private civil, criminal or
administrative proceeding regarding any environmental or health and safety
statute, regulation or ordinance and have not been subject to any federal,
state or local investigations, inspections or orders regarding any
environmental or health and safety statute, regulation or ordinance, in each
case which would have a Material Adverse Effect.

 

13

 

5.13.3     Neither Borrower nor any Subsidiary knows of any facts
or conditions which may exist which may subject Borrower or any Subsidiary to
material liability under any federal, state or local environmental, health or
safety statutes, regulations or ordinances, and neither Borrower nor any
Subsidiary is presently or contingently liable for any material removal,
remedial, response or other costs or damages in connection with any release
into the environment of toxic or hazardous substances or waste included on any
federal, state or local hazardous chemical or substance lists under any
federal, state or local statute, regulation or ordinance.

 

6.             AFFIRMATIVE COVENANTS. Borrower agrees that until payment in full of all
Obligations,  Borrower will comply with the following covenants:

 

6.1          Collateral.

 

6.1.1       Borrower will, on demand of CNB, make available to
CNB, shipping and  delivery receipts evidencing the shipment of the goods which gave rise
to an Account; completion certificates or other proof of the satisfactory
performance of services which gave rise to an Account; a copy of the invoice
for each Account; and Borrower’s copy of any written contract or order from
which an Account arose. Unless previously requested by Borrower in writing to
return such documents, CNB will be authorized to destroy any such documentation
six (6) months after its receipt by CNB;

 

6.1.2       Borrower will advise CNB within ten (10) days
whenever an Account Debtor refuses to retain, or returns, any goods from the
sale of which an Account arose, when the sale exceeds $50,000.00;

 

6.1.3       Upon the occurrence and during the continuance of an
Event of Default,  Borrower will give CNB, upon request, specific assignments of Accounts
after they come into existence, and schedules of Accounts, the form and content
of such assignments and schedules to be satisfactory to CNB; but, despite this
provision for express assignments to CNB, CNB will have a continuing security
interest in all Accounts irrespective of whether some Accounts are omitted from
such assignments or whether any assignments are ever given; and Borrower will
execute and deliver to CNB any instrument, document, financing statement,
assignment or other writing which CNB may deem necessary or desirable to carry
out on the terms of this Agreement, to perfect CNB’s security interest in the
Accounts, and any other Collateral for the Obligations, or to enable CNB to
enforce its security interest in any of the foregoing;

 

6.1.4       Borrower will maintain, in accord with sound
accounting practices, accurate  records and books of account showing, among other
things, all Inventory and Accounts, the proceeds of the sale or other
disposition thereof and the collections therefrom. Borrower will not change the
accounting method used to determine Borrower’s Inventory cost without CNB’s
prior written approval. Borrower will permit representative(s) of CNB, at
any reasonable time, to inspect, audit, examine and make extracts or copies
from all books, records and other data relating to the Collateral, to inspect
any of Borrower’s properties and to confirm balances due on Accounts by direct
inquiry to Account Debtors, and will give CNB, promptly upon request, all
information regarding the business or finances of Borrower reasonably requested
by CNB;

 

6.1.5       Borrower will, if requested by CNB, mark its records
concerning its Inventory  and Accounts in a manner satisfactory to CNB to show CNB’s security
interest therein;

 

14

 

6.1.6       Borrower will, if requested by CNB, provide CNB with a
current physical count  of its Inventory in the manner specified by CNB;

 

6.1.7       Borrower will, if requested by CNB, endorse to the
order of and deliver to CNB  any negotiable instrument accepted by Borrower in lieu
of payment in accord with the original terms of sale;

 

6.1.8       Borrower will pay CNB, upon demand, the cost,
including, but not limited to  reasonable attorneys’ fees and expenses (which counsel
may be CNB employees) expended or incurred by CNB (or allocable to CNB’s
in-house counsel) during the continuance of an Event of Default in the
collection or enforcement of any Accounts or other Collateral if CNB itself
undertakes such collection or enforcement, together with all taxes, charges and
expenses of every kind or description paid or incurred by CNB under or with
respect to loans hereunder or any Collateral therefor and Borrower authorizes
CNB to charge the same to any deposit account of Borrower or Borrower’s Loan
Account maintained with CNB;

 

6.1.9       Borrower will promptly notify CNB of any occurrence or
discovery of any event which would cause or has caused a previously Eligible
Account to become ineligible;

 

6.1.10     Borrower will maintain the tangible Collateral in good
condition (ordinary wear and tear excepted) and promptly notify CNB of any
event causing material loss or reduction of value of Collateral and the amount
of such loss or reduction; and

 

6.1.11     Borrower will, upon request by CNB, but in no event
less than once every six (6) months, supply CNB with a current list of the
names and addresses of all Account Debtors.

 

6.2          Financial Statements.  Borrower will
furnish to CNB on a continuing basis:

 

6.2.1       If at the end of any month, Adjusted EBITDA for the
twelve-month period  ending on the last day of such month is $3,000,000.00 or less, then
within thirty (30) days after the end of each month, or sooner if available, a
financial statement consisting of not less than a balance sheet, income
statement, reconciliation of net worth and statement of cash flows, prepared
consistent with prior periods and in accordance with GAAP, which financial
statement may be internally prepared;

 

6.2.2       If at the end of any fiscal quarter, Adjusted EBITDA
for the twelve-month  period ending on the last day of such fiscal quarter is greater than
$3,000,000.00, then within forty-five (45) days after the end of each such
quarterly accounting period of each fiscal year, a financial statement
consisting of not less than a balance sheet, income statement, reconciliation
of net worth and statement of cash flows, prepared consistent with prior
periods and in accordance with GAAP (except for FASB 123, tax accrual and
purchase accounting) and accompanied by the following: (a) supporting
schedules of costs of goods sold, operating expenses and other income and
expense items, and (b) Borrower’s certification as to whether any event
has occurred which constitutes an Event of Default or Potential Event of
Default, and if so, stating the facts with respect thereto, which financial
statement may be internally prepared;

 

6.2.3       Within one hundred fifty (150) days after the close of
Borrower’s fiscal year, a  copy of the annual audit report for Borrower and the
Subsidiaries, including therein a balance sheet, income statement,
reconciliation of net worth and statement of cash flows, with notes thereto,
the balance sheet, income statement and statement of cash flows to be audited
by a certified public

 

15

 

accountant acceptable to
CNB, certified by such accountant to have been prepared in accordance with GAAP
and accompanied by the following: (a) supporting schedules of costs of goods
sold, operating expenses and other income and expense items, and (b) Borrower’s
certification as to whether any event has occurred which constitutes an Event
of Default or Potential Event of Default, and if so, stating the facts with
respect thereto;

 

6.2.4       Within forty five (45) days after the end of each
quarterly accounting period of  each fiscal year, Borrower’s Covenant Compliance
Certificate; and

 

6.2.5       Upon request by CNB, a copy of the Federal Income Tax
Return of Borrower.

 

6.3          Collateral Reports. Borrower will supply the following
collateral reports, together with  such additional information, reports and/or statements
as CNB may reasonably request, within the times set forth below:

 

6.3.1       Within five (5) Business Days of CNB’s request, a
listing and aging by invoice  date of all accounts receivable and accounts payable
(together with sales and payment terms, and detail of outstanding balances due
by invoice date from all Account Debtors);

 

6.3.2       Within thirty (30) days after the end of each fiscal
quarter, a schedule listing for  each License Agreement, the theatre owner, the
territory, the number of theaters, the initial film for which the License
Agreement was entered into, the installation date of the 3-D theatrical system,
the initial fee, the annual fee and such other information that CNB may from
time to time reasonably request; and

 

6.3.3       Whenever Loans outstanding exceed three hundred
percent (300%) of Adjusted EBITDA, a Borrowing Base Certificate within thirty
(30) days after the end of each month.

 

6.4          Taxes and Premiums. Borrower will, and will cause each
Subsidiary to, pay and  discharge all taxes, assessments, governmental charges, and real and
personal property taxes including, but not limited to, federal and state income
taxes, employee withholding taxes and payroll taxes, and all premiums for
insurance required hereunder, prior to the date upon which penalties are
attached thereto. CNB may pay, for the account of Borrower, any of the
foregoing which Borrower fails to pay; any such amounts will be debited to
Borrower’s Loan Account and will be paid by Borrower to CNB, with interest
thereon at the rate stated in Section 2.1.1 (exclusive of LIBOR Loans),
upon demand, unless such taxes, assessments or governmental charges shall be
contested in good faith and by appropriate proceedings and adequate reserves
therefor have been established on the books of Borrower or the appropriate
Subsidiary in conformity with GAAP.

 

6.5          Insurance.

 

6.5.1       Borrower will, and will cause each Subsidiary to, (a) keep
its Inventory,  equipment and any other tangible personal property which is Collateral
insured for the benefit of CNB under a standard mortgagee protection clause (to
whom any loss will be payable) in such amounts, by such companies and against
such risks as may be reasonably satisfactory to CNB; (b) pay the cost of
all such insurance; and (c) deliver certificates evidencing such insurance
to CNB (and copies of policies if requested);;

 

16

 

6.5.2       In addition to the insurance required above, Borrower
will, and will cause each  Subsidiary to, maintain insurance of the types and in
amounts customarily carried in its lines of business, including, but not
limited to, fire, public liability, property damage, business interruption and
worker’s compensation, such insurance to be carried with companies and in
amounts satisfactory to CNB, which approval shall not be unreasonably withheld,
and deliver to CNB, upon request, schedules setting forth all insurance then in
effect; and

 

6.5.3       If Borrower fails to provide and maintain the policies
of insurance required  hereunder, CNB may, but is not obligated to, procure such insurance,
and Borrower will pay all premiums thereon promptly upon demand by CNB,
together with interest thereon at the rate set forth in Section 2.1.1
hereof (exclusive of LIBOR Loans) from the date of expenditure until
reimbursement by Borrower.

 

6.6          Notice. Borrower will promptly advise CNB in
writing of (a) the opening of any new, or  the closing of any existing, places of business, and
any change of Borrower’s name, trade name or other name under which it does
business or of any such new or additional name; (b) the occurrence of any
Event of Default or Potential Event of Default; (c) any litigation pending
or threatened where the amount or amounts in controversy exceed $100,000.00; (d) any
unpaid taxes which are more than fifteen (15) days delinquent; and (e) any
other matter which might materially or adversely affect Borrower’s and its
Subsidiaries’ financial condition, property or business, taken as a whole.

 

6.7          Fair Labor Standards Act. Borrower will, and will cause each
Subsidiary to, comply in  all material respects with the requirements of, and all regulations
promulgated under, the Fair Labor Standards Act.

 

6.8          Corporate Existence. Except as permitted in Section 7.8,
Borrower will, and will cause  each Subsidiary to, maintain its corporate existence
and all of its rights, privileges and franchises necessary or desirable in the
normal course of its business.

 

6.9          Compliance with Law. Borrower will, and will cause each
Subsidiary to, comply with  all requirements of all applicable laws, rules,
regulations (including, but not limited to, ERISA with respect to each of their
benefit plans, and all environmental and hazardous materials laws), orders of
any governmental agency and all material agreements related thereto to which
they are a party, where the failure to so comply would have a Material Adverse
Effect.

 

6.10        Financial Tests. Borrower will :

 

6.10.1     Maintain at all times a sum of (a) Net Worth plus
(b) Subordinated Debt of not less than $20,000,000.00;

 

6.10.2     Achieve for the four fiscal quarters ending March 31,
2008 Adjusted EBITDA of not less than $1,000,000.00;

 

6.10.3     Achieve a ratio of the outstanding Loans on the last
day of each fiscal quarter to Adjusted EBITDA on a rolling four-quarter basis
ending on the last day of each fiscal quarter of not more than (a) 3.0 to
1 on June 30, 2008 and September 30, 2008, (b) 2.5 to 1 on December 31,
2008, and (c) 2.0 to 1 on March 31, 2009 and continuing on each
fiscal quarter-end thereafter; and

 

17

 

6.10.4     Achieve a ratio of Adjusted EBITDA to Fixed Charges,
on a rolling four-quarter basis ending on the last day of each fiscal quarter,
of not less than (a) 1.0 to 1 on June 30, 2008 and September 30,
2008, (b) 1.1 to 1 on December 31, 2008, (c) 1.15 to 1 on March 31,
2009, and (d) 1.25 to 1 on June 30, 2009 and continuing on each
fiscal quarter-end thereafter.

 

6.11        Minimum Screens. Borrower will have Screens subject to
License Agreements of not less than: (a) 700 as of the date of this
Agreement, (b) 1000 as of March 31, 2008, (c) 1,300 as of March 31,
2009, and (d) 1,500 as of June 30, 2009 and thereafter.

 

6.12        Transactions with Affiliates. All contracts and other transactions
between Borrower and its Affiliates (other than its wholly-owned Subsidiaries)
shall be on a basis no less favorable to the Borrower or such Subsidiary as
would be obtained in a comparable arm’s-length transaction with a Person who is
not an Affiliate.

 

7.             NEGATIVE COVENANTS. Borrower agrees that until payment in
full of all the Obligations,  Borrower will not, nor will it permit any Subsidiary
to, do any of the following, without CNB’s prior written consent:

 

7.1          Borrowing. Create, incur, assume or permit to exist
any Debt except (a) Debt  outstanding on the date hereof and listed on Schedule
7.1, (b) Debt to CNB, (c) Subordinated Debt, (d) trade Debt in
the ordinary course of Borrower’s business, (d) purchase money Debt
incurred by either Digital Link, LLC or Digital Link II, LLC, in connection
with the acquisition of equipment or other capital assets, and (e) other
purchase money Debt incurred in connection with the acquisition of equipment or
other capital assets (including capitalized lease expenditures) not to exceed
in the aggregate $100,000.00.

 

7.2          Sale of Assets. Except in respect of the sale or other
disposition of (a) its ownership  interest in ColorLink Japan, Ltd., (b) inventory,
servers and projectors in the ordinary course of business, and (c) equipment
which has become obsolete or reached the end of its useful life (but only to
the extent such equipment is being replaced), sell, transfer, convey, lease or
otherwise dispose of any of its properties or assets (whether in one
transaction or in a series of related transactions) with a fair value in excess
of $100,000.00 in any fiscal year.

 

7.3          Loans. Make loans or advances to any Person,
except credit extended to employees or to  customers in the ordinary course of business.

 

7.4          Contingent Liabilities. Assume, guarantee, endorse, contingently
agree to purchase or  otherwise become liable for the obligation of any Person, including
Borrower, a Subsidiary or Affiliate, except (a) by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business, (b) Contingent
Liabilities in favor of CNB, and (c) those outstanding on the date hereof
and listed on Schedule 7.4.

 

7.5          Investments. Purchase or acquire the obligations or
stock of, or any other interest in, any  partnership, joint venture, limited liability company
or corporation, except (a) direct obligations of the United States of
America; (b) investments in certificates of deposit issued by, and other
deposits with, commercial banks organized under the United States or a State
thereof having capital of at least One Hundred Million Dollars
($100,000,000.00), (c) investments in wholly-owned Subsidiaries, (d) purchases
of the equity interests or assets of ColorLink Japan, Ltd. not currently owned
by Borrower,

 

18

 

and (e) investments
made on or before February 28, 2008 relating to the motion picture “U2 3D”
in an aggregate amount not to exceed $8,000,000.00.

 

7.6          Mortgages, Liens, etc. Create or suffer to exist any Lien on any
of its property or assets,  other than (a) Liens created under the Loan
Documents and (b) Permitted Liens.

 

7.7          Involuntary Liens. Permit any involuntary liens to arise
with respect to any property or  assets including but not limited to those arising from
the levy of a writ of attachment or execution, or the levy of any state or
federal tax lien which lien will not be removed within a period of thirty (30)
days.

 

7.8          Sale and Leaseback. Enter into any sale-leaseback
transaction.

 

7.9          Mergers and Acquisitions. Enter into any merger or consolidation,
or acquire all or  substantially all the assets of any Person, except (a) that a
Subsidiary may be merged into or consolidated with another Subsidiary or with
Borrower and (b) for investments permitted under Section 7.5.

 

7.10        Dividends and Purchase of Stock. Redeem or repurchase stock or partnership
interests, declare or pay any dividends or make any distribution, whether of
capital, income or otherwise, and whether in cash or other property, except
that any Subsidiary may declare distributions to Borrower; provided, however,
if Borrower for any tax year elects to file as a Sub-Chapter S corporation
under the federal or state income tax laws, distributions may be made to
Borrower’s shareholders during any current or subsequent tax year in proportion
to their holdings, in an aggregate amount equal to that payable by an
individual in the highest tax bracket upon Borrower’s taxable income.

 

7.11        Event of Default. Permit a default to occur under any
document or instrument evidencing Debt in an outstanding amount of at least
$50,000.00 incurred under any indenture, agreement or other instrument under
which such Debt may be issued, or any event to occur under any of the foregoing
which would permit any holder of the Debt outstanding thereunder to declare the
same due and payable before its stated maturity, whether or not such
acceleration occurs or such default be waived.

 

8.             SECURITY AGREEMENT.

 

8.1          Grant of Security Interest. To secure all of the Obligations,
Borrower hereby grants  and transfers to CNB a continuing security interest in the following
property whether now owned or hereafter acquired:

 

8.1.1       All of Borrower’s Inventory;

 

8.1.2       All of Borrower’s Accounts;

 

8.1.3       All of Borrower’s general intangibles as that term is
defined in the Code;

 

8.1.4       All of Borrower’s equipment, as that term is defined
in the Code;

 

8.1.5       All of Borrower’s interest in any patents (now
existing or pending), copyrights,  trade names, trademarks and service marks useful to
the operation of Borrower’s business;

 

19

 

8.1.6       All notes, drafts, acceptances, instruments, documents
of title, policies and  certificates of insurance, chattel paper, guaranties and securities now
or hereafter received by Borrower or in which Borrower has or acquires an interest;

 

8.1.7       All cash and noncash proceeds of the foregoing
property, including, without  limitation, proceeds of policies of fire, credit or
other insurance;

 

8.1.8       All of Borrower’s books and records pertaining to any
of the Collateral  described in this Section 8.1; and

 

8.1.9       Any other Collateral which CNB and Borrower may
designate as additional security from time to time by separate instruments.

 

8.2          Notification of Account Debtors. CNB will have the right to notify any
Account Debtor  to make payments directly to CNB, take control of the cash and noncash
proceeds of any Account, and settle any Account, which right CNB may exercise
at any time upon the occurrence and during the continuance of a Potential Event
of Default or an Event of Default, whether Borrower was theretofore making
collections thereon. Until CNB elects to exercise such right, Borrower is
authorized on behalf of CNB to collect and enforce the Accounts. Upon the
occurrence and during the continuation of a Potential Event of Default or an
Event of Default, immediately upon CNB’s request, Borrower will deliver to CNB
for application in accord with this Agreement, all checks, drafts, cash and
other remittances in payment or on account of payment of its Accounts on the
banking day following the receipt thereof, and in precisely the form received,
except for the endorsement of Borrower where necessary to permit collection of
the items, which endorsement Borrower hereby agrees to make. Pending such
delivery, Borrower will not commingle any such checks, cash, drafts and other
remittances with any of its other funds or property, but will hold them
separate and apart therefrom expressly in trust for CNB. All such remittances
will be accompanied by such statements and reports of collections and adjustments
as CNB may reasonably specify.

 

8.3          Attorney-In-Fact. CNB or any of its officers is hereby
irrevocably made the true and  lawful attorney for Borrower with full power of
substitution to do the following: (a) endorse the name of Borrower upon
any and all checks, drafts, money orders and other instruments for the payment
of moneys which are payable to Borrower and constitute collections on Accounts;
(b) execute in the name of Borrower any schedules, assignments,
instruments, documents and statements which Borrower is obligated to give CNB
hereunder; (c) receive, open and dispose of all mail addressed to
Borrower; (d) notify the Post Office authorities to change the address for
delivery of mail addressed to Borrower to such address as CNB will designate;
and (e) do such other acts in the name of Borrower which CNB may deem
necessary or desirable to enforce any Account or other Collateral. The powers
granted CNB hereunder are solely to protect its interests in the Collateral and
will not impose any duty upon CNB to exercise any such powers. Notwithstanding
the foregoing, CNB shall not exercise any of the aforementioned powers unless a
Potential Event of Default or an Event of Default shall have occurred and be
continuing.

 

9.             EVENTS OF DEFAULT AND PROCEEDINGS
UPON DEFAULT.

 

9.1          Events of Default. After expiration of any applicable cure
period set forth in Section 9.1  or 9.2, the following will constitute Events of
Default under this Agreement:

 

20

 

9.1.1       Failure by Borrower to pay when due any (a) principal
amount of Loans, (b)  interest owing in respect of the amount of the Loans and continuation
of such default for three (3) Business Days, or (c) other amount
owing under this Agreement or any other Loan Document, and continuance of any
such default for five (5) Business Days;

 

9.1.2       Any Person, or any Subsidiary of any Person, which is
a party to any Loan  Document fails to perform or observe any of the terms, provisions,
covenants, agreements or obligations under any Loan Document (other than those
described in Section 9.1.1);

 

9.1.3       Any financial statement delivered after the date of
this Agreement,  representation or warranty made or furnished by Borrower or any
Subsidiary or Guarantor in connection with the Loan Documents proves to have
been incorrect in any material respect when made;

 

9.1.4       The entry of an order for relief or the filing of an
involuntary petition with  respect to Borrower or any Subsidiary or Guarantor
under the United States Bankruptcy Code; the appointment of a receiver,
trustee, custodian or liquidator of or for any part of the assets or property
of Borrower or any Subsidiary or Guarantor; or Borrower or any Subsidiary or
Guarantor makes a general assignment for the benefit of creditors;

 

9.1.5       CNB’s security interest in or lien on any material
portion of the Collateral (other  than the Accounts) becomes impaired or otherwise
unenforceable;

 

9.1.6       Any Person obtains an order or decree in any court of
competent jurisdiction  enjoining or prohibiting Borrower or CNB from performing this
Agreement, and such proceedings are not dismissed or such decree is not vacated
within ten (10) days after the granting thereof;

 

9.1.7       Borrower or any Subsidiary neglects, fails or refuses
to keep in full force and  effect any governmental permit, license or approval
which is necessary to the operation of its business;

 

9.1.8       All or substantially all of the property of Borrower
or any Guarantor or  Subsidiary is condemned, seized or otherwise appropriated;

 

9.1.9       The occurrence of (a) a Reportable Event (as
defined in ERISA) which CNB determines in good faith constitutes grounds for
the institution of proceedings to terminate any pension plan by the PBGC, (b) an
appointment of a trustee to administer any pension plan of Borrower, or (c) any
other event or condition which constitutes grounds under ERISA for the
involuntary termination of any pension plan of Borrower, where such event set
forth in (a), (b) or (c) results in a Material Adverse Effect;

 

9.1.10     The Permitted Individual Holders, Shamrock and the
Subsidiaries and Affiliates of Shamrock shall, collectively, no longer control
at least fifty-one percent (51%) of the capital stock of Borrower, on an issued
and outstanding basis;

 

9.1.11     Any obligee of Subordinated Debt fails to comply with
the provisions of the documents evidencing such Subordinated Debt or any
Subordination Agreement; or

 

9.1.12     Any Guarantor revokes its Guaranty, or such Guaranty
becomes otherwise unenforceable with respect to future advances.

 

21

 

9.2          Notice of Default and Cure of
Potential Events of Default. Except with respect to the  Events of Default specified in Sections 9.1.1, 9.1.4,
or 9.1.5 above, and subject to the provisions of Section 9.4, CNB will
give Borrower at least ten (10) days’ written notice of any event which
constitutes, or with the lapse of time would become, an Event of Default,
during which time Borrower will be entitled to cure same.

 

9.3          CNB’s Remedies. Upon the occurrence of an Event of
Default, at the sole and exclusive  option of CNB, and upon written notice to Borrower,
CNB may (a) declare the principal of and accrued interest on the Loans
immediately due and payable in full, whereupon the same will immediately become
due and payable; (b) terminate the obligation of CNB to make additional
Loans hereunder; and/or (c) exercise its rights and remedies under the
Loan Documents and all rights and remedies of a secured party under the Code
and other applicable laws with respect to the Collateral.

 

9.4          Additional Remedies. Notwithstanding any other provision of
this Agreement, upon the  occurrence of any event, action or inaction by Borrower, or if any
action or inaction is threatened which CNB reasonably believes will materially
and negatively affect the value of the Collateral, CNB may take such legal
actions as it deems necessary to protect the Collateral, including, but not
limited to, seeking injunctive relief and the appointment of a receiver,
whether an Event of Default or Potential Event of Default has occurred under
this Agreement.

 

10.          MISCELLANEOUS.

 

10.1        Reimbursement of Costs and Expenses.  Borrower will reimburse CNB for all costs and expenses
relating to this Agreement including, but not limited to, filing, recording or
search fees, audit or verification fees, appraisals of the Collateral and other
out-of-pocket expenses, and reasonable attorneys’ fees and expenses expended or
incurred by CNB (or allocable to CNB’s in-house counsel) in documenting or
administering the Loan Documents or collecting any sum which becomes due CNB
under the Loan Documents, irrespective of whether suit is filed, or in the
protection, perfection, preservation or enforcement of any and all rights of
CNB in connection with the Loan Documents, including, without limitation, the
fees and costs incurred in any out-of-court workout or a bankruptcy or
reorganization proceeding.

 

10.2        Dispute Resolution.

 

10.2.1     Mandatory Arbitration.  At the request of CNB or Borrower, any dispute, claim
or controversy of any kind (whether in contract or tort, statutory or common
law, legal or equitable) now existing or hereafter arising between CNB and
Borrower and in any way arising out of, pertaining to or in connection with: (1) this
Agreement, and/or any renewals, extensions, or amendments thereto; (2) any
of the Loan Documents; (3) any violation of this Agreement or the Loan
Documents; (4) all past, present and future loans; (5) any incidents,
omissions, acts, practices or occurrences arising out of or related to this
Agreement or the Loan Documents causing injury to either party whereby the
other party or its agents, employees or representatives may be liable, in whole
or in part, or (6) any aspect of the present or future relationships of
the parties, will be resolved through final and binding arbitration conducted
at a location determined by the arbitrator in Los Angeles County, California,
and administered by the American Arbitration Association (“AAA”) in accordance
with the California Arbitration Act (Title 9, California Code of Civil
Procedure Section 1280 et. seq.) and the then existing Commercial Rules of
the AAA. Judgment upon any award rendered by the arbitrator(s) may be
entered in any state or federal court having jurisdiction thereof.

 

22

 

10.2.2     Real Property Collateral. Notwithstanding the provisions of Section 10.2.1,
no controversy or claim will be submitted to arbitration without the consent of
all the parties if, at the time of the proposed submission, such controversy or
claim arises from or relates to an obligation owed to CNB which is secured in
whole or in part by real property collateral. If all parties do not consent to
submission of such a controversy or claim to arbitration, the controversy or claim
will be determined as provided in Section 10.2.3.

 

10.2.3     Judicial Reference. At the request of any party, a
controversy or claim which is not submitted to arbitration as provided and
limited in Sections 10.2.1 and 10.2.2 will be determined by a reference in
accordance with California Code of Civil Procedure Sections 638 et. seq. If
such an election is made, the parties will designate to the court a referee or
referees selected under the auspices of the AAA in the same manner as
arbitrators are selected in AAA-sponsored proceedings. The presiding referee of
the panel, or the referee if there is a single referee, will be an active
attorney or retired judge. Judgment upon the award rendered by such referee or
referees will be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.

 

10.2.4     Provisional Remedies, Self Help and
Foreclosure. No
provision of this Agreement will limit the right of any party to: (1) foreclose
against any real property collateral by the exercise of a power of sale under a
deed of trust, mortgage or other security agreement or instrument, or
applicable law, (2) exercise any rights or remedies as a secured party
against any personal property collateral pursuant to the terms of a security
agreement or pledge agreement, or applicable law, (3) exercise self help
remedies such as setoff, or (4) obtain provisional or ancillary remedies
such as injunctive relief or the appointment of a receiver from a court having
jurisdiction before, during or after the pendency of any arbitration or
referral. The institution and maintenance of an action for judicial relief or
pursuit of provisional or ancillary remedies, or exercise of self help remedies
will not constitute a waiver of the right of any party, including the
plaintiff, to submit any dispute to arbitration or judicial reference.

 

10.2.5     Powers and Qualifications of
Arbitrators. The
arbitrator(s) will give effect to statutes of limitation, waiver and
estoppel and other affirmative defenses in determining any claim. Any
controversy concerning whether an issue is arbitratable will be determined by
the arbitrator(s). The laws of the State of California will govern. The
arbitration award may include equitable and declaratory relief. All arbitrator(s) selected
will be required to be a practicing attorney or retired judge licensed to
practice law in the State of California and will be required to be experienced
and knowledgeable in the substantive laws applicable to the subject matter of
the controversy or claim at issue.

 

10.2.6     Discovery. The provisions of California Code of
Civil Procedure Section 1283.05 or its successor section(s) are
incorporated herein and made a part of this Agreement. Depositions may be taken
and discovery may be obtained in any arbitration under this Agreement in
accordance with said section(s).

 

10.2.7     Miscellaneous. The arbitrator(s) will determine
which is the prevailing party and will include in the award that party’s
reasonable attorneys’ fees and costs (including allocated costs of in-house
legal counsel). Each party agrees to keep all controversies and claims and the
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the parties or by
applicable law or regulation.

 

23

 

10.3                           Cumulative Rights and No
Waiver. All
rights and remedies granted to CNB under the Loan Documents are cumulative and
no one such right or remedy is exclusive of any other. No failure or delay on
the part of CNB in exercising any right or remedy will operate as a waiver
thereof, and no single or partial exercise or waiver by CNB of any such right
or remedy will preclude any further exercise thereof or the exercise of any
other right or remedy.

 

10.4                           Applicable Law. This Agreement will be governed by California
law.

 

10.5                           Lien and Right of
Set-off. If an
Event of Default shall have occurred and be continuing, CNB is hereby
authorized at any time and from time to time, without notice to Borrower or any
other Person, to the fullest extent permitted by law, to setoff and apply any
and all deposits (general or specific, time or savings or demand, provisional
or final) at any time held and any other Debt at any time owing by CNB to or
for the credit or the account of Borrower against any and all of the Obligations
of Borrower now or hereafter existing under the Agreement and the other Loan
Documents, irrespective of whether or not CNB shall have made any demand under
this Agreement or such other Loan Documents and although such obligations may
be unmatured. The rights of CNB under this Section are in addition to
other rights and remedies (including other rights of setoff) which CNB may have
under applicable law.

 

10.6                           Notices. Any notice required or permitted under
any Loan Document will be given in writing and will be deemed to have been
given when personally delivered or when sent by the U.S. mail, postage prepaid,
certified, return receipt requested, properly addressed. For the purposes
hereof, the addresses of the parties will, until further notice given as herein
provided, be as follows:

 

	
  CNB:

  	
   

  	
  City National Bank  

  555 South Flower
  Street, 16th Floor  

  Los Angeles,
  California 90071  

  Attention: Aaron
  Cohen, Senior Vice President

  
	
   

  	
   

  	
   

  
	
  with copy to:

  	
   

  	
  City National Bank,
  Legal Department 

  400 North Roxbury Drive  

  Beverly Hills,
  California 90210-5021 

  Attention: Managing Counsel, Credit Unit

  
	
   

  	
   

  	
   

  
	
  Borrower:

  	
   

  	
  REAL D  

  100 N. Crescent
  Drive, Suite 120  

  Beverly Hills,
  California 90210  

  Attention: Andrew
  Skarupa, Chief Financial Officer

  

 

10.7                           Assignments. The provisions of this Agreement are
hereby made applicable to and will inure to the benefit of CNB’s successors and
assigns and Borrower’s successors and assigns; provided, however, that Borrower
may not assign or transfer its rights or obligations under this Agreement without
the prior written consent of CNB. CNB reserves the right to sell, assign,
transfer, negotiate, or grant participations in all or any part of, or any
interest in, CNB’s rights and benefits hereunder, but only with the prior
written consent of Borrower; provided,
however, no such consent shall be required if (i) any such
sale, assignment, transfer, negotiation or participation is to an Affiliate of
CNB (in which circumstances, however, a written notice will be provided to
Borrower of such sale, assignment, transfer, negotiation or participation), or (ii) an
Event of Default has occurred and is continuing.

 

24

 

10.8                           Confidentiality. CNB agrees to keep this Agreement and
information obtained by it pursuant hereto and the other Loan Documents
confidential in accordance with CNB’s customary practices and agrees it will
only use such information in connection with the transactions contemplated by
this Agreement and the other Loan Documents, and not disclose any of such
information other than (a) to CNB’s employees, attorneys, representatives,
agents, directors or other Persons who are, or are expected to be, involved in
the evaluation of such information in connection with, and the administration
and servicing of, the transactions contemplated by this Agreement and who are
advised of the confidential nature of such information, (b) to the extent
such information presently is or hereafter becomes available to CNB on a
non-confidential basis from a source other than Borrower, (c) to the
extent disclosure is required by law, regulation or judicial order or requested
or required by applicable regulators or auditors, or (d) to assignees,
participants or other transferees or potential assignees, participants or other
transferees who agree to be bound by the provisions of this sentence.

 

10.9                           Indemnification.

 

10.9.1                  Borrower will, at all times, defend and indemnify and
hold CNB (which for purposes of this Section 10.9 includes CNB’s parent
company and subsidiaries and all of their respective shareholders, directors,
officers, employees, agents, representatives, successors, attorneys and
assigns) harmless from and against any and all liabilities, claims, demands,
causes of action, losses, damages, expenses (including without limitation
reasonable attorneys’ fees, which attorneys may be employees of CNB, or may be
outside counsel), costs, settlements, judgments or recoveries arising out of or
resulting from (a) any breach of the representations, warranties,
agreements or covenants made by Borrower herein; (b) any suit or
proceeding of any kind or nature whatsoever against CNB arising from or
connected with the transactions contemplated by this Agreement, the Loan
Documents or any of the rights and properties assigned to CNB hereunder; and/or
(c) any suit or proceeding that CNB may deem necessary or advisable to
institute, in the name of CNB, Borrower or both, against any other Person, for
any reason whatsoever to protect the rights of CNB hereunder or under any of
the documents, instruments or agreements executed or to be executed pursuant
hereto, including attorneys’ fees and court costs and all other costs and
expenses incurred by CNB (or allocable to CNB’s in-house counsel), all of which
will be charged to and paid by Borrower and will be secured by the Collateral.
Any obligation or liability of Borrower to CNB under this Section will
survive the Termination Date and the repayment of all Loans and other
extensions of credit and the payment or performance of all other Obligations of
Borrower to CNB.

 

10.9.2                  Borrower will, at all times, indemnify and hold CNB
harmless from and against any liabilities, claims, demands, causes of action,
losses, damages, expenses (including without limitation reasonable attorneys’
fees, which attorneys may be employees of CNB, or may be outside counsel),
costs, settlements, judgments or recoveries directly or indirectly arising out
of or attributable to the use, generation, manufacture, production, storage,
release, threatened release, discharge, disposal or presence of a hazardous
substance on, under, or about Borrower’s property or operations or property
leased to or used by Borrower. For these purposes, the term “hazardous
substances” means any substance which is or becomes designated as “hazardous”
or “toxic” under any Federal, state, or local law. This indemnity will survive
the Termination Date and the repayment of all Obligations of Borrower to CNB.

 

10.10                     Complete Agreement. This Agreement, together with the other
Loan Documents, constitutes the entire agreement of the parties and supersedes
any prior or contemporaneous oral or written agreements or understandings, if
any, which are merged into this Agreement. This Agreement may be amended only
in a writing signed by Borrower and CNB.

 

25

 

10.11                     Headings. Section headings in this Agreement
are included for convenience of reference only and do not constitute a part of
the Agreement for any purpose.

 

10.12                     Accounting Terms. Except as otherwise stated in this
Agreement, all accounting terms and financial covenants and information will be
construed in conformity with, and all financial data required to be submitted
will be prepared in conformity with, GAAP as in effect on the date hereof.

 

10.13                     Severability.  Any provision of the Loan Documents which is
prohibited or  unenforceable in any jurisdiction, will be, only as to such
jurisdiction, ineffective to the extent of such prohibition or
unenforceability, but all the remaining provisions of the Loan Documents will
remain valid.

 

10.14                     Counterparts. This Agreement may be signed in any
number of counterparts which, when taken together, will constitute but one
agreement.

 

IN WITNESS WHEREOF, CNB
and Borrower have caused this Agreement to be executed as of the date first
specified at the beginning of this Agreement.

 

	
  Borrower

  	
  REAL
  D,

  
	
   

  	
  a California
  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Michael V. Lewis

  
	
   

  	
   

  	
  Michael V. Lewis,
  Chairman and Chief

  
	
   

  	
   

  	
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  CNB

  	
  City
  National Bank, a

  
	
   

  	
  national banking association

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Aaron Cohen

  
	
   

  	
   

  	
  Aaron Cohen, Senior
  Vice President

  

 

26

 

Schedule 1.41

 

Existing Liens

 

1.           Purchase money liens
in favor of Barco, Christie and Ballantyne which provide for a perfected first
priority security interest in the equipment or other capital assets purchased
from such entities by Borrower and certain of its Subsidiaries.

 

2.           A perfected, first
priority security interest in all of the assets of ColorLink Inc. securing its payment
and performance of those certain Secured Promissory Notes issued to the former
shareholders of ColorLink Inc. in connection with the acquisition of ColorLink
Inc. by Borrower in March 2007 (the “Shareholder Notes”).

 

3.           A perfected lien on
all of the assets of Borrower securing its guaranty of payment and performance
of the Shareholder Notes, which Lien is subordinate to the lien on all of the
assets of Borrower granted by Borrower to CNB hereunder.

 

27

 

Schedule 1.51

 

Holders of Subordinated Debt

 

	
  Arisawa
  Manufacturing Co.

  	
   

  	
  Sanji
  Arisawa

  
	
  1987
  Crawley Trusts

  	
   

  	
  Crawley
  Ventures, LLC

  
	
  JBC
  Investment Company

  	
   

  	
  1992
  Hatfield Family Trust

  
	
  Steven
  Kim Hatfield Revocable Trust

  	
   

  	
  Mary
  Ruth Hatfield Revocable Trust

  
	
  Barry
  W. Hatfield & Catherine D. Hatfield

  	
   

  	
  Gregory
  B. Clay and Pamela L. Clay

  
	
  George
  M. Hatfield and Beverly A. Hatfield

  	
   

  	
  J.
  Kit Hatfield and Diane L. Hatfield

  
	
  Walker
  Family Revocable Trust

  	
   

  	
  SL&M
  Investment Company

  
	
  Gary
  E. Leslie and Barbara A. Leslie

  	
   

  	
  The
  Leslie Family Unit, RLLLP

  
	
  Leslie
  Family Irrevocable Trust

  	
   

  	
  Intel
  (INTC) - A

  
	
  JAG,
  LLC

  	
   

  	
  Kristina
  M. Johnson 

  
	
  KMJ
  Investments, RLLLP

  	
   

  	
  Rodriguez

  
	
  Leo
  Bannon 

  	
   

  	
  Sharp

  
	
  Charles
  W. Johnson

  	
   

  	
  Sorenson
  Limited Partnership, RLLLP

  
	
  Ralph
  Z. Sorenson

  	
   

  	
  Griffith
  Realty

  
	
  University
  Technology Corporation (CU)

  	
   

  	
  S.
  Gilman

  
	
  T.
  Boysen

  	
   

  	
  Mt.
  Audobon Assoc (Bob Grubb)

  
	
  McKnight

  	
   

  	
  Tom
  Hamilton

  
	
  Ferguson
  Consulting (Ilixco)

  	
   

  	
  David
  A. Warner

  
	
  Duke
  University

  	
   

  	
  Gail
  Goestenkors

  
	
  Stanford
  University

  	
   

  	
  Kathleen
  LaVeau

  
	
  Sherrie
  Parrish

  	
   

  	
  Jonathan
  Birge

  
	
  Carr,
  Wallace

  	
   

  	
  Chen,
  Jianmin

  
	
  Cheng,
  Michael

  	
   

  	
  Coleman,
  David

  
	
  Duncan,
  Terri

  	
   

  	
  Gurinova,
  Lyubov

  
	
  Kondratsky,
  Larisa

  	
   

  	
  Korah,
  John

  
	
  Kramer,
  Kathy Lynn

  	
   

  	
  Lechuga,
  Edgar

  
	
  Leckonby,
  Roy

  	
   

  	
  McCarty,
  Kathy

  
	
  Poole,
  Linda

  	
   

  	
  Robinson,
  Mike

  
	
  Schuck,
  Miller

  	
   

  	
  Thomassian,
  Jill

  
	
  Sato
  (Japan)

  	
   

  	
  Nishi
  (CLJ)

  
	
  Ligihama
  (CLJ)

  	
   

  	
   

  

 

28

 

Schedule
4.1.6

 

Claims

 

[Intentionally
Omitted]

 

29

 

Schedule
7.1

 

Outstanding Debt

 

1.             The Shareholder Notes.

 

2.             The equipment loans secured by the
purchase money liens listed in Item 1. of Schedule 1.41.

 

30

 

Schedule 7.4

 

Contingent Liabilities

 

1.             The Guaranty executed by Borrower
in favor of the former stockholders of ColorLink Inc. pursuant to which
Borrower has guarantied the payment and performance of the Shareholder Notes.

 

31

 

 

EXHIBIT A

 

COVENANT COMPLIANCE CERTIFICATE

 

The
undersigned,                             ,
the                              
of REAL D, a California
corporation ( “Borrower”) delivers this certificate pursuant to the Credit and
Security Agreement (the “Credit Agreement”) dated as of July 26, 2007,
between Borrower and City National Bank (“CNB”). Terms and Section numbers
used herein shall have the same meaning as the Credit Agreement.

 

The undersigned certifies the accuracy of this Certificate as of                               ,
(the “Effective Date”).

 

1.     Net Worth plus Subordinated Debt
(Section 6.10.1):

 

	
   

  	
  1.1

  	
  Net
  Worth:

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2

  	
  Subordinated
  Debt

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.3

  	
  1.1

  	
   

  
	
   

  	
   

  	
  plus
  1.2 (Net Worth plus Subordinated Debt):

  	
  $

  

 

Required: $                          [In
blank space insert figure required in Credit Agreement].

 

2.     Adjusted EBITDA (Section 6.10.2)

 

	
   

  	
  2.1

  	
  EBITDA:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.1.1
  

  	
  Net
  income (after eliminating extraordinary gains and losses): 

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.1.2

  	
  All interest on Debt:

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.1.3

  	
  Cash
  paid for income taxes:

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.1.4

  	
  Depreciation
  and Amortization:

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.1.5

  	
  Revenues
  under License Agreements prior 12 months

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.1.6

  	
  Revenues
  under License Agreement next 12 months

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.1.7

  	
  2.1.1,
  2.1.2, 2.1.3 and 2.1.4, less 2.1.5, plus 2.1.6

  	
  $

  

 

Required: $1,000,000.00 through March 31,
2008.

 

1

 

3.     Ratio of Outstanding Loans to Adjusted
EBITDA (Section 6.10.3)

 

	
   

  	
   

  	
  3.1.1

  	
  Outstanding
  Loans

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.1.2

  	
  Adjusted
  EBITDA (from 2.1.7)

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  Ratio
  of 3.1.1 to 3.1.2

  	
                       to
  one (1)

  

 

Required: Not more than                                to 1 [In blank space insert figure required in Credit Agreement].

 

4.     Ratio of Adjusted EBITDA to Fixed Charges (Section 6.10.4):

 

	
   

  	
  4.1

  	
  Adjusted
  EBITDA (from 2.1.7):

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  Fixed
  Charges:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.2.1

  	
  Current
  Maturity of Long Term Debt:

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.2.2

  	
  Interest
  incurred on borrowed money:

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.2.3

  	
  Cash
  paid for Income Taxes:

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.2.4

  	
  Capital
  Expenditures:

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  4.2.5

  	
  Total
  of 4.2.1, 4.2.2, 4.2.3, and 4.2.4:

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
  Ratio
  of 4.1 to 4.2:

  	
                       to
  one (1)

  

 

Required: At
least                 to  1 [In blank space insert figure required in Credit Agreement]

CERTIFICATION:

 

Each
of the above stated information is true and correct as of the date hereof and
Borrower has met each of the Conditions set forth in Section 4.2, and no
Events of Default or Potential Events of Default presently exist.

 

I
declare under penalty of perjury that the foregoing is true and correct. 

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (Signature
  and Title)

  

 

2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00174-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00174-of-00352.parquet"}]]