Document:

Unassociated Document

    STANDARD
      LOAN AGREEMENT

     

    By
      and Between

     

    BANK
      OF AMERICA, N.A.

     

    and

     

    NEW
      360

     

    (which
      intends to change its name to Point.360 after the date
      hereof)

     

    Dated
      as of August 7, 2007

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    LOAN
      AGREEMENT

     

    This
      Agreement dated as of August 7, 2007, is between Bank of America, N.A. (the
      “Bank”) and New 360, a California corporation, which intends to change its name
      to Point.360 after the date hereof (the “Borrower”).

     

    RECITALS

     

    A. The
      Bank
      was a party to a Standard Loan Agreement dated as of March 29, 2006 (the "Prior
      Loan Agreement") with Point.360, a California corporation ("Old
      Point.360").

     

    B. On
      April
      16, 2007, Old Point.360 entered into a merger agreement and various related
      agreements (collectively, the "DG Merger Documents") with DG FastChannel, Inc.
      ("DG") pursuant to which Old Point.360 agreed to transfer its spot advertising
      (multimedia) business to, and merge with, DG.

     

    C. To
      facilitate the transfer of its spot advertising business to DG pursuant to
      the
      DG Merger Documents, Old Point.360 (i) created the Borrower as a new subsidiary,
      (ii) will transfer all of Old Point.360’s assets other than those associated
      with its spot advertising business to the Borrower on the Facility Commencement
      Date (as defined below), and (iii) will distribute the shares of the Borrower
      to
      the shareholders of Old Point.360 on the Facility Commencement
      Date.

     

    D. The
      Borrower intends to carry on all of the businesses formerly conducted by Old
      Point.360 other than the Old Point.360 spot advertising business, which will
      be
      conducted by DG upon completion of the Merger.

     

    E. The
      Borrower has requested that the Bank provide the Borrower a secured working
      capital revolving credit facility in the amount of $8,000,000 and a sub-line
      of
      credit of $1,000,000 for the issuance of standby letters of credit, and the
      Bank
      is willing to provide such credit facilities to the Borrower on the terms and
      conditions set forth in this Agreement.

     

    NOW,
      THEREFORE, the parties hereby agree as follows:

     

    1.  DEFINITIONS

     

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

     

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

     

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

            

    

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      	(j)  	
              The
                debtor upon the account is not any of the
                following:

            

    

     

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

            

    

     

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

            

    

     

    
      	(iii)  	
              Any
                state, county, city or town or
                municipality.

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	(iv)  	
              Any
                person or entity located in a foreign
                country.

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      	(o)  	
              The
                account is otherwise acceptable to the
                Bank.

            

    

     

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

     

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

     

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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

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

     

    “Credit
      Limit”
means
      the amount of Eight Million Dollars ($8,000,000).

     

    "GECC"
      means
      General Electric Capital Corporation.

     

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

     

    “Merger”
means
      the merger of Old Point.360 with DG pursuant to the DG Merger
      Documents.

     

    2.  THE
      FACILITY: LINE OF CREDIT AMOUNT AND TERMS

     

    2.1.  Line
      of Credit Amount.

     

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

            

    

     

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

            

    

     

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

            

    

     

    2.2.  Availability
      Period.

     

    The
      Facility is available between the date on which the Merger occurs (the “Facility
      Commencement Date”) and the date which is twenty-four (24) months after the
      Facility Commencement Date, or such earlier date as the availability may
      terminate as provided in this Agreement (as applicable, the “Facility Expiration
      Date”).

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    2.3.  Conditions
      to Availability of Credit.

     

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

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      	(d)  	
              Copies
                of the cash receipts journal pertaining to the borrowing
                certificate.

            

    

     

    2.4.  Repayment
      Terms.

     

    
      	(a)  	
              The
                Borrower will pay interest on September 1, 2007, and then on the
                first day
                of each month thereafter until payment in full of any principal
                outstanding under the Facility.

            

    

     

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

            

    

     

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

            

    

     

    2.5.  Interest
      Rate.

     

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

            

    

     

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

            

    

     

    2.6.  Optional
      Interest Rates.

     

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

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    The
      LIBOR
      Rate plus the Applicable Margin as defined below.

     

    2.7.  Applicable
      Margin.

     

    For
      the
      period commencing on the date of this Agreement and ending on the date the
      Bank
      receives a compliance certificate and financial statement for the Borrower's
      fiscal quarter ending September 30, 2007 (the “Initial Pricing Period”), the
      Applicable Margin for advances bearing interest on the basis of the Prime Rate
      shall be minus
      three-quarters (0.75) percentage point per annum and the Applicable Margin
      for
      advances bearing interest on the basis of the LIBOR Rate shall be plus
      one and
      three-quarters (1.75) percentage points per annum. Following the Initial Pricing
      Period, the Applicable Margin shall be the following amounts per annum, based
      upon the Fixed Charge Coverage Ratio (as defined in the “Covenants” section of
      this Agreement), as set forth in the most recent compliance certificate (or,
      if
      no compliance certificate is required, the Borrower’s most recent financial
      statements) received by the Bank as required in the Covenants
      section:

     

    
      	 	 	
              
                Applicable
                  Margin

              

              (in
                percentage points per annum)

            
	
              Pricing
                Level

            	
              Fixed
                Charge Coverage Ratio

            	
               

              Prime
                Rate +

            	
               

              LIBOR
                RATE +

            
	
              1

            	
              <
                1.15x

            	
              0.00

            	
              2.50

            
	
              2

            	
              <
                1.25x

            	
              (0.25)

            	
              2.25

            
	
              3

            	
              <
                1.35x

            	
              (0.50)

            	
              2.00

            
	
              4

            	
              <
                1.50x

            	
              (0.75)

            	
              1.75

            
	
              5

            	
              >
                1.50x

            	
              (1.00)

            	
              1.50

            

    

     

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

     

    2.8.  Standby
      Letters of Credit.

     

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

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

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

            

    

     

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

            

    

     

    
      	(d)  	
              The
                Borrower agrees:

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    3.  OPTIONAL
      INTEREST RATE

     

    3.1.  Optional
      Rates.

     

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

     

    3.2.  LIBOR
      Rate.

     

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

     

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

            

    

     

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

            

    

     

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

            

    

     

    LIBOR
      Rate = London
      Inter-Bank Offered Rate

     

     (1.00
      - Reserve Percentage)

     

    Where,

     

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

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    4.  FEES
      AND
      EXPENSES

     

    4.1.  Fees.

     

    
      	(a)  	
              Closing
                Fee.
                The Borrower agrees to pay a loan fee in the amount of Thirty-Three
                Thousand Dollars ($33,000). This fee is due on the Facility Commencement
                Date.

            

    

     

    
      	(b)  	
              Unused
                Commitment Fee.
                The Borrower agrees to pay a fee on any difference between the Facility
                Commitment and the amount of credit it actually uses, determined
                by the
                average of the daily amount of credit outstanding during the specified
                period. The fee will be calculated at 0.25% per year. The calculation
                of
                credit outstanding shall include the undrawn amount of letters of
                credit.
                This fee is due in arrears on September 1, 2007, and on the same
                day of
                each following quarter in
                arrears until the expiration of the availability
                period.

            

    

     

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

            

    

     

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

            

    

     

    4.2.  Expenses.

     

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

     

    4.3.  Reimbursement
      Costs.

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    5.  COLLATERAL

     

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

     

    6.  DISBURSEMENTS,
      PAYMENTS AND COSTS

     

    6.1.  Disbursements
      and Payments.

     

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

            

    

     

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

            

    

     

    6.2.  Telephone
      and Telefax Authorization.

     

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

            

    

     

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

            

    

     

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

            

    

     

    6.3.  Direct
      Debit.

     

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

            

    

     

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

            

    

     

    6.4.  Banking
      Days.

     

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

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    6.5.  Interest
      Calculation.

     

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

     

    6.6.  Default
      Rate.

     

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

     

    6.7.  Taxes.

     

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

     

    6.8.  Overdrafts.

     

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

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

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

     

    6.9.  Payments
      in Kind.

     

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

     

    7.  CONDITIONS

     

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

     

    7.1.  Authorizations.

     

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

     

    7.2.  Governing
      Documents.

     

    A
      copy of
      the organizational documents of the Borrower and Guarantor.

     

    7.3.  Guaranty.

     

    A
      continuing guaranty signed by the Guarantor.

     

    7.4.  Security
      Agreements.

     

    Signed
      original security agreements from each of the Borrower and the
      Guarantor.

     

    7.5.  Stock
      Pledge.

     

    A
      signed
      stock pledge agreement from the Borrower covering all of the capital stock
      of
      the Guarantor.

     

    7.6.  Perfection
      and Evidence of Priority.

     

    Evidence
      that the security interests and liens in favor of the Bank are valid,
      enforceable, properly perfected in a manner acceptable to the Bank and prior
      to
      all others’ rights and interests, except those the Bank consents to in
      writing.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    7.7.  Payment
      of Fees.

     

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

     

    7.8.  Pay
      Down of GECC Term Loans.

     

    Evidence
      that the principal balance of Borrower’s existing term loan indebtedness to GECC
      has been paid down to not more than Seven Million Dollars ($7,000,000) in
      connection with the closing of the transactions contemplated under the DG Merger
      Documents.

     

    7.9.  Good
      Standing.

     

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

     

    7.10.  Legal
      Opinion.

     

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

     

    7.11.  Intercreditor
      Agreement.

     

    An
      intercreditor agreement in favor of the Bank signed by GECC and acknowledged
      by
      the Borrower.

     

    7.12.  Landlord
      Agreements.

     

    A
      landlord waiver signed by the lessor of each of the following leased facilities
      of the Borrower or the Bank shall have established a reserve against borrowing
      availability under the Facility in an amount equal to three (3) months rent
      for
      each such facility for which the Bank has not received a signed landlord
      waiver:

     

    
      	(a)  	
              2777
                Ontario Street, Burbank, CA 91504;
                and

            

    

    
       

      	(b)  	1220 N. Highland Avenue, Hollywood, CA
              90038.

    

     

    7.13.  Insurance.

     

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

     

    7.14.  Other
      Required Documentation.

     

    
      	(a)  	
              Secretary
                Certificates.
                Secretary certificates from the secretary of the Borrower and the
                Guarantor, attaching the authorizations required by Paragraph 7.1,
                the
                organizational documents required by Paragraph 7.2, signatures and
                incumbency information regarding officers and such other information
                as
                the Bank may reasonably request.

            

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    
      	(b)  	
              Closing
                Date Borrowing Certificate.
                A
                completed borrowing certificate on the Bank’s standard form, demonstrating
                the Borrower’s borrowing base on the date of this
                Agreement.

            

    

     

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

            

    

     

    
      	(d)  	
              Disbursement
                Instructions.
                A
                disbursement instruction letter signed by the Borrower, authorizing
                the
                Bank to utilize the proceeds of the initial advances to be made on
                the
                date of this Agreement to pay the closing fee payable to the Bank
                on such
                date pursuant to Section 3.1(a) above and to pay such other items as
                the Borrower may direct.

            

    

     

    
      	(e)  	
              Financial
                Statements.
                The Bank shall have received and been satisfied with the results
                of (i)
                the consolidated financial statements of the Borrower and its subsidiaries
                for the fiscal year ended December 31, 2006, including balance sheets,
                income and cash flow statements audited by independent public accountants
                of recognized national standing and prepared in conformity with GAAP,
                (ii)
                the unaudited consolidated financial statements of the Borrower and
                its
                subsidiaries for the fiscal quarter ended March 31, 2007, including
                balance sheets, income and cash flow statements, prepared in conformity
                with GAAP, and (iii) such other financial information relating to
                the
                Borrower and its subsidiaries as the Bank may reasonably
                require.

            

    

     

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

            

    

     

    7.15.  Other
      Conditions.

     

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

            

    

     

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

            

    

     

    
      	(c)  	
              No
                Material Adverse Change.
                There shall not have occurred a material adverse change in the business,
                assets, liabilities (actual or contingent), operations, condition
                (financial or otherwise) or prospects of the Borrower and its subsidiaries
                taken as a whole or in the facts and information regarding such entities
                as indicated on the internally-prepared financial statements for
                the
                Borrower’s fiscal year ended December 31,
                2005.

            

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

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

            

    

     

    
      	(e)  	
              Minimum
                Opening Availability.
                The Borrower shall have borrowing availability under the Facility
                Commitment of not less than $2,000,000 after giving effect to the
                payment
                of all of the Borrower’s trade payables to within 30 days of written terms
                and of any and all book overdrafts.

            

    

     

    
      	(f)  	
              Termination
                of Prior Loan Agreement; Release of the Bank’s Liens under Prior Loan
                Documents.
                The Bank and Old Point.360 shall have terminated the Prior Loan Agreement,
                the Bank shall have no further funding obligations to Old Point.360
                under
                the Prior Loan Agreement, and the Bank shall have released and terminated
                all security interests and liens on the assets of Old Point.360 or
                the
                Guarantor received and held by the Bank in connection with the
                indebtedness under the Prior Loan
                Agreement.

            

    

     

    
      	(g)  	
              Satisfactory
                DG Merger Documents.
                The Bank and its counsel shall have been reasonably satisfied with
                their
                review of the DG Merger Documents and with all aspects of the transactions
                contemplated thereunder.

            

    

     

    
      	
              (h)

            	
              Transfer
                of Assets to the Borrower; Occurrence of Merger.
                Old Point.360 shall have transferred to Borrower all of the assets
                of all
                businesses of Old Point.360 other than the Old Point.360 spot advertising
                business, and the Merger shall have
                occurred.

            

    

     

    8.  REPRESENTATIONS
      AND WARRANTIES

     

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

     

    8.1.  Formation.

     

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

     

    8.2.  Authorization.

     

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

     

    8.3.  Enforceable
      Agreement.

     

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    8.4.  Good
      Standing.

     

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

     

    8.5.  No
      Conflicts.

     

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

     

    8.6.  Financial
      Information.

     

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

     

    8.7.  Lawsuits.

     

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

     

    8.8.  Collateral.

     

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

     

    8.9.  Permits,
      Franchises.

     

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

     

    8.10.  Other
      Obligations.

     

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

     

    8.11.  Tax
      Matters.

     

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

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    8.12.  No
      Event of Default.

     

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

     

    8.13.  Insurance.

     

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

     

    8.14.  Governmental
      Authorization.

     

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

     

    9.  COVENANTS

     

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

     

    9.1.  Use
      of
      Proceeds.

     

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

            

    

     

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

            

    

     

    9.2.  Financial
      Information.

     

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

     

    
      	(a)  	
              A
                Borrowing Certificate as of the last day of each month within ten
                (10)
                days after month end and, upon the Bank’s request, copies of the invoices
                or the record of invoices from the Borrower’s sales journal for the
                Borrower’s Acceptable Receivables and a listing of the names and addresses
                of the debtors obligated thereunder, copies of the delivery receipts,
                purchase orders, shipping instructions, bills of lading and other
                documentation pertaining to such Acceptable Receivables, and copies
                of the
                cash receipts journal pertaining to the Borrowing
                Certificate.

            

    

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    9.3.  [Intentionally
      Omitted.]

     

    9.4.  Basic
      Fixed Charge Coverage Ratio.

     

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

     

    “Basic
      Fixed Charge Coverage Ratio” means the ratio of (a) the sum of EBITDA plus
      lease expense and rent expense, minus income tax, minus dividends, withdrawals,
      and other distributions, to (b) the sum of interest expense, lease expense,
      rent expense, the current portion of long term debt and the current portion
      of
      capitalized lease obligations and maintenance capital expenditures.

     

    “EBITDA”
      means net income, less income or plus loss from discontinued operations and
      extraordinary items, plus income taxes, plus interest expense, plus
      depreciation, depletion, amortization and other non-cash charges, plus one-time
      charges in an aggregate amount not to exceed $500,000 related to the Merger
      and
      the contribution of assets by Old Point.360 to the Borrower.

     

    This
      ratio will be calculated at the end of each reporting period for which the
      Bank
      requires financial statements, using the results of the twelve-month period
      ending with that reporting period, provided
      that for
      the calculation date of September 30, 2007 only, this ratio shall be calculated
      by using (i) the actual nine-month results for the period commencing on January
      1, 2007 and ending on September 30, 2007 and (ii) adding the following to such
      results:

     

    the
      results for the twelve-month period ended December 31, 2006; divided by
      twelve
      (12); and multiplied by
      three
      (3). The current portion of long-term liabilities will be measured as of the
      last day of the calculation period.

     

    9.5.  Dividends
      and Distributions.

     

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

     

    9.6.  Bank
      as Principal Depository.

     

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

     

    9.7.  Other
      Debts.

     

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

     

    
      	(a)  	
              Acquiring
                goods, supplies, or merchandise on normal trade
                credit.

            

    

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    
      	(b)  	
              Endorsing
                negotiable instruments received in the usual course of
                business.

            

    

     

    
      	(c)  	
              The
                Borrower’s term loan indebtedness to GECC, the aggregate original
                principal amount of which on a cumulative basis from the date of
                this
                Agreement shall not exceed Seven Million Dollars
                ($7,000,000).

            

    

     

    
      	(d)  	
              Obtaining
                surety bonds in the usual course of
                business.

            

    

     

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

            

    

     

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

            

    

     

    9.8.  Other
      Liens.

     

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

     

    
      	(a)  	
              Liens
                and security interests in favor of the
                Bank.

            

    

     

    
      	(b)  	
              Liens
                for taxes not yet due.

            

    

     

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

            

    

     

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

            

    

     

    9.9.  Maintenance
      of Assets.

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    9.10.  Investments.

     

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

     

    
      	(a)  	
              Existing
                investments disclosed to the Bank in
                writing.

            

    

     

    
      	(b)  	
              Investments
                in the Borrower’s current
                subsidiaries.

            

    

     

    
      	(c)  	
              Investments
                in any of the following:

            

    

     

    
      	(i)  	
              certificates
                of deposit;

            

    

     

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

            

    

     

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

            

    

     

    9.11.  Loans.

     

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

     

    
      	(a)  	
              Existing
                extensions of credit disclosed to the Bank in
                writing.

            

    

     

    
      	(b)  	
              Extensions
                of credit to the Borrower’s current
                subsidiaries.

            

    

     

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

            

    

     

    9.12.  Change
      of Management.

     

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

     

    9.13.  Change
      of Control.

     

    Not
      to
      cause or permit:

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

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

            

    

     

    9.14.  Additional
      Negative Covenants.

     

    Not
      to,
      without the Bank’s written consent:

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      	(d)  	
              Liquidate
                or dissolve the Borrower’s
                business.

            

    

     

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

            

    

     

    9.15.  Notices
      to Bank.

     

    To
      promptly notify the Bank in writing of:

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

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

            

    

     

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

            

    

     

    9.16.  Insurance.

     

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

            

    

     

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

            

    

     

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

            

    

     

    9.17.  Compliance
      with Laws.

     

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

     

    9.18.  ERISA
      Plans.

     

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

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    9.19.  Books
      and Records.

     

    To
      maintain adequate books and records.

     

    9.20.  Audits.

     

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

     

    9.21.  Perfection
      of Liens.

     

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

     

    9.22.  Landlord
      Waivers. 

     

    To
      use
      its best efforts to cause the lessor of each leased facility of the Borrower
      other than those identified in Paragraph 7.12 to execute and deliver to the
      Bank
      a landlord waiver or subordination in favor of, and in form and substance
      reasonably satisfactory to, the Bank within ninety (90) days after the date
      of
      this Agreement.

     

    9.23.  Cooperation.

     

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

     

    10.  DEFAULT
      AND REMEDIES

     

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

     

    10.1.  Failure
      to Pay.

     

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

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    10.2.  Other
      Bank Agreements.

     

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

     

    10.3.  Cross-default.

     

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

     

    10.4.  False
      Information.

     

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

     

    10.5.  Bankruptcy.

     

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

     

    10.6.  Receivers.

     

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

     

    10.7.  Lien
      Priority.

     

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

     

    10.8.  Judgments.

     

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

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    10.9.  Material
      Adverse Change.

     

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

     

    10.10.  Government
      Action.

     

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

     

    10.11.  Default
      under Related Documents.

     

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

     

    10.12.  Other
      Breach Under Agreement.

     

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

     

    11.  ENFORCING
      THIS AGREEMENT; MISCELLANEOUS

     

    11.1.  Disposition
      of Schedules and Reports.

     

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

     

    11.2.  Returned
      Merchandise.

     

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

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    11.3.  Verification
      of Receivables.

     

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

     

    11.4.  Waiver
      of Confidentiality.

     

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

     

    11.5.  GAAP.

     

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

     

    11.6.  California
      Law.

     

    This
      Agreement is governed by California law.

     

    11.7.  Successors
      and Assigns.

     

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

     

    11.8.  Arbitration
      and Waiver of Jury Trial.

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

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

            

    

     

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

            

    

     

    11.9.  Severability;
      Waivers.

     

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

     

    11.10.  Attorneys’
      Fees.

     

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

     

    11.11.  One
      Agreement.

     

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

     

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

            

    

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

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

            

    

     

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

            

    

     

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

     

    11.12.  Indemnification.

     

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

     

    11.13.  Notices.

     

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

     

    11.14.  Headings.

     

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

     

    11.15.  Counterparts.

     

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

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

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

     

    
      	
              Bank
                of America

               

               

              By___________________________

              Daniel
                M. Timmons

              Vice
                President

            	 	
              New
                360,

              a
                California corporation

              (which
                intends to change its name to Point.360 after the date
                hereof)

               

               

              By_____________________________

              Alan
                R. Steel

              Executive
                Vice President,

              Finance
                and Administration

              and
                Chief Financial Officer

            
	 	 	 
	
              Address
                where notices to

               

              the
                Bank are to be sent:

               

              Bank
                of America, N.A.

              333
                South Hope Street, 

              13th
                Floor

              Los
                Angeles, California 90071

              Attn:
                Daniel Timmons

              Telephone:
                (213) 621-7180

              Facsimile:
                (213) 621-3610

              E-mail:
                daniel.timmons@

               bankofamerica.com

               

            	 	
              Address
                where notices to

               

              the
                Borrower are to be sent::

               

              Point.360

              2777
                North Ontario Street

              Burbank,
                California 91504

              Attn:
                Chief Financial Officer

              Telephone:
                (818) 565-1400

              Facsimile:
                (818) 847-2503

              E-mail:
                asteel@point360.com

            

    

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    
      TABLE
        OF CONTENTS

       

      
        	 	 	 	 	 	 	
                Page

              	 
	 	 	 	 	 	 	 	 
	
                1.

              	 	 	
                DEFINITIONS

              	 	 	
                1

              	 
	
                2.

              	 	 	
                THE
                  FACILITY: LINE OF CREDIT AMOUNT AND TERMS

              	 	 	
                4

              	 
	
              	 	 	
                
                  2.1.
                    Line of Credit Amount

                

              	 	 	
                4

              	 
	
                 

              	 	 	
                
                  2.2.
                    Availability Period

                

              	 	 	
                4

              	 
	
              	 	 	
                
                  2.3.
                    Conditions to Availability of Credit

                

              	 	 	
                5

              	 
	
              	 	 	
                
                  2.4.
                    Repayment Terms

                

              	 	 	
                5

              	 
	
              	 	 	
                
                  2.5.
                    Interest Rate

                

              	 	 	
                5

              	 
	
              	 	 	
                
                  2.6.
                    Optional Interest Rates

                

              	 	 	
                5

              	 
	
              	 	 	
                
                  2.7.
                    Applicable Margin

                

              	 	 	
                6

              	 
	
              	 	 	
                
                  2.8.
                    Standby Letters of Credit

                

              	 	 	
                6

              	 
	
                3.

              	 	 	
                OPTIONAL
                  INTEREST RATE

              	 	 	
                8

              	 
	
              	 	 	
                
                  3.1.
                    Optional Rates

                

              	 	 	
                8

              	 
	
              	 	 	
                
                  3.2.
                    LIBOR Rate

                

              	 	 	
                8

              	 
	
                4.

              	 	 	
                FEES
                  AND EXPENSES

              	 	 	
                10

              	 
	
              	 	 	
                
                  4.1.
                    Fees

                

              	 	 	
                10

              	 
	
              	 	 	
                
                  4.2.
                    Expenses

                

              	 	 	
                10

              	 
	
              	 	 	
                
                  4.3.
                    Reimbursement Costs

                

              	 	 	
                10

              	 
	
                5.

              	 	 	
                COLLATERAL

              	 	 	
                11

              	 
	
                6.

              	 	 	
                DISBURSEMENTS,
                  PAYMENTS AND COSTS

              	 	 	
                11

              	 
	
              	 	 	
                
                  6.1.
                    Disbursements and Payments

                

              	 	 	
                11

              	 
	
              	 	 	
                
                  6.2.
                    Telephone and Telefax Authorization

                

              	 	 	
                11

              	 
	
              	 	 	
                
                  6.3.
                    Direct Debit

                

              	 	 	
                11

              	 
	
              	 	 	
                
                  6.4.
                    Banking Days

                

              	 	 	
                11

              	 
	
              	 	 	
                
                  6.5.
                    Interest Calculation

                

              	 	 	
                12

              	 
	
              	 	 	
                
                  6.6.
                    Default Rate

                

              	 	 	
                12

              	 
	
              	 	 	
                
                  6.7.
                    Taxes

                

              	 	 	
                12

              	 
	
              	 	 	
                
                  6.8.
                    Overdrafts

                

              	 	 	
                12

              	 
	
              	 	 	
                
                  6.9.
                    Payments in Kind

                

              	 	 	
                13

              	 
	
                7.

              	 	 	
                CONDITIONS

              	 	 	
                13

              	 
	
              	 	 	
                
                  7.1.
                    Authorizations

                

              	 	 	
                13

              	 

      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        TABLE
          OF CONTENTS

        (continued)

         

      

      
        	 	 	 	 	 	 	
                Page

              	 
	 	 	 	 	 	 	 	 
	
              	 	 	
                
                  7.2.
                    Governing Documents

                

              	 	 	
                13

              	 
	
              	 	 	
                
                  7.3.
                    Guaranty

                

              	 	 	
                13

              	 
	
              	 	 	
                
                  7.4.
                    Security Agreements

                

              	 	 	
                13

              	 
	
              	 	 	
                
                  7.5.
                    Stock Pledge

                

              	 	 	
                13

              	 
	
              	 	 	
                
                  7.6.
                    Perfection and Evidence of Priority

                

              	 	 	
                13

              	 
	
              	 	 	
                
                  7.7.
                    Payment of Fees

                

              	 	 	
                14

              	 
	
              	 	 	
                
                  7.8.
                    Pay down of GECC Term Loans

                

              	 	 	
                14

              	 
	
              	 	 	
                
                  7.9.
                    Good Standing

                

              	 	 	
                14

              	 
	
              	 	 	
                
                  7.10.
                    Legal Opinion

                

              	 	 	
                14

              	 
	
              	 	 	
                
                  7.11.
                    Intercreditor Agreement

                

              	 	 	
                14

              	 
	
              	 	 	
                
                  7.12.
                    Landlord Agreements

                

              	 	 	
                14

              	 
	
              	 	 	
                
                  7.13.
                    Insurance

                

              	 	 	
                14

              	 
	
              	 	 	
                
                  7.14.
                    Other Required Documentation

                

              	 	 	
                14

              	 
	
              	 	 	
                
                  7.15.
                    Other Conditions

                

              	 	 	
                15

              	 
	
                8.

              	 	 	
                REPRESENTATIONS
                  AND WARRANTIES

              	 	 	
                16

              	 
	
              	 	 	
                
                  8.1.
                    Formation

                

              	 	 	
                16

              	 
	
              	 	 	
                
                  8.2.
                    Authorization

                

              	 	 	
                16

              	 
	
              	 	 	
                
                  8.3.
                    Enforceable Agreement

                

              	 	 	
                16

              	 
	
              	 	 	
                
                  8.4.
                    Good Standing

                

              	 	 	
                16

              	 
	
              	 	 	
                
                  8.5.
                    No Conflicts

                

              	 	 	
                17

              	 
	
              	 	 	
                
                  8.6.
                    Financial Information

                

              	 	 	
                17

              	 
	
              	 	 	
                
                  8.7.
                    Lawsuits

                

              	 	 	
                17

              	 
	
              	 	 	
                
                  8.8.
                    Collateral

                

              	 	 	
                17

              	 
	
              	 	 	
                
                  8.9.
                    Permits, Franchises

                

              	 	 	
                17

              	 
	
              	 	 	
                
                  8.10.
                    Other Obligations

                

              	 	 	
                17

              	 
	
              	 	 	
                
                  8.11.
                    Tax Matters

                

              	 	 	
                17

              	 
	
              	 	 	
                
                  8.12.
                    No Event of Default

                

              	 	 	
                17

              	 
	
              	 	 	
                
                  8.13.
                    Insurance

                

              	 	 	
                18

              	 
	
              	 	 	
                
                  8.14.
                    Governmental Authorization

                

              	 	 	
                18

              	 
	
                9.

              	 	 	
                COV
                  NANTS

              	 	 	
                18

              	 

      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

       

      
        TABLE
          OF CONTENTS

        (continued)

      

       

      
        	 	 	 	 	 	 	
                Page

              	 
	 	 	 	 	 	 	 	 
	
              	 	 	
                
                  9.1.
                    Use of Proceeds

                

              	 	 	
                18

              	 
	
              	 	 	
                
                  9.2.
                    Financial Information

                

              	 	 	
                18

              	 
	
              	 	 	
                
                  9.3.
                    [Reserved.]

                

              	
                 

              	 	
                20

              	 
	
              	 	 	
                
                  9.4.
                    Basic Fixed Charge Coverage Ratio

                

              	 	 	
                20

              	 
	
              	 	 	
                
                  9.5.
                    Dividends and Distributions

                

              	 	 	
                20

              	 
	
              	 	 	
                
                  9.6.
                    Bank as Principal Depository

                

              	 	 	
                20

              	 
	
              	 	 	
                
                  9.7.
                    Other Debts

                

              	 	 	
                20

              	 
	
              	 	 	
                
                  9.8.
                    Other Liens

                

              	 	 	
                21

              	 
	
              	 	 	
                
                  9.9.
                    Maintenance of Assets

                

              	 	 	
                21

              	 
	
              	 	 	
                
                  9.10.
                    Investments

                

              	 	 	
                21

              	 
	
              	 	 	
                
                  9.11.
                    Loans

                

              	 	 	
                22

              	 
	
              	 	 	
                
                  9.12.
                    Change of Management

                

              	 	 	
                22

              	 
	
              	 	 	
                
                  9.13.
                    Change of Control

                

              	 	 	
                22

              	 
	
              	 	 	
                
                  9.14.
                    Additional Negative Covenants

                

              	 	 	
                23

              	 
	
              	 	 	
                
                  9.15.
                    Notices to Bank

                

              	 	 	
                23

              	 
	
              	 	 	
                
                  9.16.
                    Insurance

                

              	 	 	
                24

              	 
	
              	 	 	
                
                  9.17.
                    Compliance with Laws

                

              	 	 	
                24

              	 
	
              	 	 	
                
                  9.18.
                    ERISA Plans

                

              	 	 	
                24

              	 
	
              	 	 	
                
                  9.19.
                    Books and Records

                

              	 	 	
                24

              	 
	
              	 	 	
                
                  9.20.
                    Audits

                

              	 	 	
                25

              	 
	
              	 	 	
                
                  9.21.
                    Perfection of Liens

                

              	 	 	
                25

              	 
	
              	 	 	
                
                  9.22.
                    Cooperation

                

              	 	 	
                25

              	 
	
                10.

              	 	 	
                DEFAULT
                  AND REMEDIES

              	 	 	
                25

              	 
	
              	 	 	
                
                  10.1.
                    Failure to Pay

                

              	 	 	
                25

              	 
	
              	 	 	
                
                  10.2.
                    Other Bank Agreements

                

              	 	 	
                25

              	 
	
              	 	 	
                
                  10.3.
                    Cross-default

                

              	 	 	
                25

              	 
	
              	 	 	
                
                  10.4.
                    False Information

                

              	 	 	
                26

              	 
	
              	 	 	
                
                  10.5.
                    Bankruptcy

                

              	 	 	
                26

              	 
	
              	 	 	
                
                  10.6.
                    Receivers

                

              	 	 	
                26

              	 
	
              	 	 	
                
                  10.7.
                    Lien Priority

                

              	 	 	
                26

              	 

      

       

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

    

     

    
      
        
          TABLE
            OF CONTENTS

          (continued)

           

        

      

      
        	 	 	 	 	 	 	
                Page

              	 
	 	 	 	 	 	 	 	 
	
              	 	 	
                
                  10.8.
                    Judgments

                

              	 	 	
                26

              	 
	
              	 	 	
                
                  10.9.
                    Material Adverse Change

                

              	 	 	
                26

              	 
	
              	 	 	
                
                  10.10.
                    Government Action

                

              	 	 	
                26

              	 
	
              	 	 	
                
                  10.11.
                    Default under Related Documents

                

              	 	 	
                27

              	 
	
              	 	 	
                
                  10.12.
                    Other Breach Under Agreement

                

              	 	 	
                27

              	 
	
                11.

              	 	 	
                ENFORCING
                  THIS AGREEMENT; MISCELLANEOUS

              	 	 	
                27

              	 
	
              	 	 	
                
                  11.1.
                    Disposition of Schedules and Reports

                

              	 	 	
                27

              	 
	
              	 	 	
                
                  11.2.
                    Returned Merchandise

                

              	 	 	
                27

              	 
	
              	 	 	
                
                  11.3.
                    Verification of Receivables

                

              	 	 	
                27

              	 
	
              	 	 	
                
                  11.4.
                    Waiver of Confidentiality

                

              	 	 	
                27

              	 
	
              	 	 	
                
                  11.5.
                    GAAP

                

              	 	 	
                28

              	 
	
              	 	 	
                
                  11.6.
                    California Law

                

              	 	 	
                28

              	 
	
              	 	 	
                
                  11.7.
                    Successors and Assigns

                

              	 	 	
                28

              	 
	
              	 	 	
                
                  11.8.
                    Arbitration and Waiver of Jury Trial

                

              	 	 	
                28

              	 
	
              	 	 	
                
                  11.9.
                    Severability; Waivers

                

              	 	 	
                30

              	 
	
              	 	 	
                
                  11.10.
                    Attorneys’ Fees

                

              	 	 	
                30

              	 
	
              	 	 	
                
                  11.11.
                    One Agreement

                

              	 	 	
                30

              	 
	
              	 	 	
                
                  11.12.
                    Indemnification

                

              	 	 	
                31

              	 
	
              	 	 	
                
                  11.13.
                    Notices

                

              	 	 	
                31

              	 
	
              	 	 	
                
                  11.14.
                    Headings

                

              	 	 	
                31

              	 
	
              	 	 	
                
                  11.15.
                    Counterparts

                

              	 	 	
                31

              	 

      

       

      
        
          
          

        

        
          ivUnassociated Document

    PROMISSORY
      NOTE

     

    March
      30, 2007

    (Date)

    

    FOR
      VALUE
      RECEIVED, Point.360,
      a
      corporation located at the address stated below ("Maker")
      promises, jointly and severally if more than one, to pay to the order of
General
      Electric Capital Corporation
      or any
      subsequent holder hereof (each, a "Payee")
      at its
      office located at 2400
      E. Katella Avenue, Suite 800, Anaheim, CA 92806
      or at
      such other place as Payee may designate as follows:

    

    (a)
      the
      principal sum of Two
      Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00),
      and

    (b)
      interest on the unpaid principal balance from the date hereof through and
      including the dates of payment, at a fixed, simple interest rate of Eight and
      35/100 percent (8.35%) per annum (the "Contract
      Rate")
      in
      Forty-Five (45) consecutive monthly installments of principal and interest
      as
      follows:

     

    
      
        	
                Periodic
                  Installment

              	 	
                Amount

              	 
	 	 	 	 
	1
                - 44	 	$	64,898.15	 

      

    

     

    (each,
      a
"Periodic
      Installment")
      and a
      final installment which shall be in the amount of the total outstanding and
      unpaid principal, accrued interest and any and all amounts due hereunder and
      under the other Debt Documents (as defined below). The first Periodic
      Installment shall be due and payable on May
      1,
      2007
      and the
      following Periodic Installments and the final installment shall be due and
      payable on the same day of each succeeding period (each, a "Payment
      Date").
      All
      payments shall be applied: first,
      to
      interest due and unpaid hereunder and under the other Debt Documents;
second,
      to all
      other amounts due and unpaid hereunder and under the other Debt Documents,
      and
      then to principal due hereunder and under the other Debt Documents. The
      acceptance by Payee of any payment which is less than payment in full of all
      amounts due and owing at such time shall not constitute a waiver of Payee's
      right to receive payment in full at such time or at any prior or subsequent
      time. Interest shall be calculated on the basis of a 365-day year (or a 366-day
      leap year, as applicable) and will be charged at the Contract Rate for each
      calendar day on which any principal is outstanding. The payment of any Periodic
      Installment after its due date shall result in a corresponding decrease in
      the
      portion of the Periodic Installment credited to the remaining unpaid principal
      balance. The payment of any Periodic Installment prior to its due date shall
      result in a corresponding increase in the portion of the Periodic Installment
      credited to the remaining unpaid principal balance.

     

    All
      amounts due hereunder and under the other Debt Documents are payable in the
      lawful currency of the United States of America. Maker hereby expressly
      authorizes Payee to insert the date value is actually given in the blank space
      on the face hereof and on all related documents pertaining hereto.

     

    This
      Note
      may be secured by a security agreement, chattel mortgage, pledge agreement
      or
      like instrument (each of which is hereinafter called a "Security
      Agreement",
      and
      collectively with any other document or agreement related thereto or to this
      Note, the "Debt
      Documents").

     

    Time
      is
      of the essence hereof. If Payee does not receive from Maker payment in full
      of
      any Periodic Installment or any other sum due under this Note or any other
      Debt
      Document is not received within ten (10) days after its due date, Maker agrees
      to pay a late fee equal to five percent (5%) on such late Periodic Installment
      or other sum, but not exceeding any lawful maximum. Such late fee will be
      immediately due and payable, and is in addition to any other costs, fees and
      expenses that Maker may owe as a result of such late payment. Additionally,
      if
      (i) Maker fails to make payment of any amount due hereunder within ten (10)
      days
      after the same becomes due and payable; or (ii) Maker is in default under,
      or
      fails to perform under any term or condition contained in any Debt Document,
      then the entire principal sum remaining unpaid, together with all accrued
      interest thereon and any other sum payable under this Note or any other Debt
      Document, at the election of Payee, shall immediately become due and payable,
      with interest thereon at the lesser of eighteen percent (18%) per annum or
      the
      highest rate not prohibited by applicable law from the date of such accelerated
      maturity until paid (both before and after any judgment). The application of
      such 18% interest rate shall not be interpreted or deemed to extend any cure
      period set forth in this Note or any other Debt Document, cure any default
      or
      otherwise limit Payee's right or remedies hereunder or under any Debt
      Document.

    

    Maker
      may
      prepay in full, but not in part, all outstanding amounts hereunder before they
      are due on any scheduled Payment Date upon at least thirty (30) days' prior
      written notice to Payee. Payee is authorized and entitled to apply any amounts
      paid by Maker as a prepayment of indebtedness to delinquent interest or other
      amounts due and owing from Maker to Payee hereunder and under any other Debt
      Documents before application of such funds to principal outstanding
      hereunder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    If
      Maker
      makes a prepayment of this Note for any reason, Maker shall pay irrevocably
      and
      in full to Payee (i) all outstanding principal amounts, (ii) all accrued
      interest, (iii) the Prepayment Fee (as defined below) and (iv) any and all
      other
      amounts due hereunder or under the other Debt Documents. Maker specifically
      acknowledges that, to the fullest extent allowed by applicable law, it shall
      be
      liable for the Prepayment Fee on any acceleration hereof or under the other
      Debt
      Documents. In the event of an acceleration hereof or under the other Debt
      Documents, the Prepayment Fee shall be determined as if (a) Maker prepaid this
      Note in full immediately before such acceleration and (b) the prepayment notice
      referred to above was received by Payee thirty (30) days prior to such
      date.

    

    For
      purposes hereof, "Prepayment
      Fee"
      shall be
      an amount equal to (i) Make Whole Amount plus (ii) an additional sum equal
      to
      the following percentage of remaining principal balance for prepayments
      occurring in the indicated period: Two percent (2%) (for prepayments occurring
      prior to the first anniversary of the date hereof), Two percent (2%) (for
      prepayments occurring on and after the first anniversary of the date hereof
      but
      prior to the second anniversary of the date hereof), One percent (1%) (for
      prepayments occurring on and after the second anniversary of the date hereof
      but
      prior to the third anniversary of the date hereof) and zero percent (0%) (for
      prepayments occurring any time thereafter). For the purpose hereof, the term
      "Make
      Whole Amount"
      means
      (i) the net present value of the remaining scheduled principal and interest
      payments (including any balloon or other amount of principal payable that but
      for the prepayment of this Note would be payable on or prior to the scheduled
      maturity date hereof), discounted to the prepayment date at a per annum interest
      rate equal to the then Reinvestment Rate (as defined below) minus (ii) the
      principal balance outstanding as of the prepayment date (immediately prior
      to
      any such prepayment); provided, that the Make Whole Amount shall be deemed
      zero
      if the calculation results in a negative number. For purposes hereof, the term
      "Reinvestment
      Rate"
      means
      the per annum interest rate that is equal to the sum of (a) Three and 85/100
      percent (3.85%) plus (b) the stated yield to maturity of United States Treasury
      Notes having a life equal to the remaining term of this Note as stated in the
      most current Federal Reserve Statistical Release H.15 (519) on the day Payee
      receives the prepayment notice. If no maturity exactly corresponds to the
      remaining term of this Note, the Treasury Note life to be adopted from Federal
      Reserve Statistical Release H.15 (519) shall correspond to a full
      number-of-years period, excluding partial years of such remaining
      term.

    

    Notwithstanding
      the foregoing, if during the first year of the term of this Note, Maker proposes
      to engage in a transaction to change its controlling ownership, which Payee
      determines, in its sole discretion, requires payment in full of all outstanding
      obligations under this Note, then provided there exists no default hereunder
      or
      under any other Debt Document at such time, Maker shall have no obligations
      to
      Payee for the foregoing Prepayment Fee or Make Whole Amount in connection with
      such prepayment.

    

    It
      is the
      intention of the parties hereto to comply with the applicable usury laws;
      accordingly, it is agreed that, notwithstanding any provision to the contrary
      in
      this Note or any other Debt Document, in no event shall this Note or any other
      Debt Document require the payment or permit the collection of interest in excess
      of the maximum amount permitted by applicable law. If any such excess interest
      is contracted for, charged or received under this Note or any other Debt
      Document, or if all of the principal balance shall be prepaid, so that under
      any
      of such circumstances the amount of interest contracted for, charged or received
      under this Note or any other Debt Document on the principal balance shall exceed
      the maximum amount of interest permitted by applicable law, then in such event:
      (a) the provisions of this paragraph shall govern and control, (b) neither
      Maker
      nor any other person or entity now or hereafter liable for the payment hereof
      shall be obligated to pay the amount of such interest to the extent that it
      is
      in excess of the maximum amount of interest permitted by applicable law, (c)
      any
      such excess which may have been collected shall be either applied as a credit
      against the then unpaid principal balance or refunded to Maker, at the option
      of
      Payee, and (d) the effective rate of interest shall be automatically reduced
      to
      the maximum lawful contract rate allowed under applicable law as now or
      hereafter construed by the courts having jurisdiction thereof. It is further
      agreed that without limitation of the foregoing, all calculations of the rate
      of
      interest contracted for, charged or received under this Note or any Debt
      Document which are made for the purpose of determining whether such rate exceeds
      the maximum lawful contract rate, shall be made, to the extent permitted by
      applicable law, by amortizing, prorating, allocating and spreading in equal
      parts during the period of the full stated term of the indebtedness evidenced
      hereby, all interest at any time contracted for, charged or received from Maker
      or otherwise by Payee in connection with such indebtedness; provided, however,
      that if any applicable state law is amended or the law of the United States
      of
      America preempts any applicable state law, so that it becomes lawful for Payee
      to receive a greater interest per annum rate than is presently allowed, Maker
      agrees that, on the effective date of such amendment or preemption, as the
      case
      may be, the lawful maximum hereunder shall be increased to the maximum interest
      per annum rate allowed by the amended state law or the law of the United States
      of America.

     

    Maker
      hereby consents to any and all extensions of time, renewals, waivers or
      modifications of, and all substitutions or releases of, security or of any
      party
      primarily or secondarily liable on this Note or any other Debt Document or
      any
      term and provision of either, which may be made, granted or consented to by
      Payee, and agrees that suit may be brought and maintained against Maker and/or
      any and all sureties, endorsers, guarantors or any others who may at any time
      become liable for payments and performance under this Note and any other Debt
      Documents (each such person, other than Maker, an "Obligor"),
      at
      the
      election of Payee without joinder of any other as a party thereto, and that
      Payee shall not be required first to foreclose, proceed against, or exhaust
      any
      security hereof in order to enforce payment of this Note. Maker hereby waives
      presentment, demand for payment, notice of nonpayment, protest, notice of
      protest, notice of dishonor, and all other notices in connection herewith,
      as
      well as filing of suit (if permitted by law) and diligence in collecting this
      Note or enforcing any of the security hereof, and agrees to pay (if permitted
      by
      law) all expenses incurred in collection, including Payee's actual attorneys'
      fees.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    THIS
      NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
      STATE
      OF CONNECTICUT.

    

    MAKER
      IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
      COURTS LOCATED IN THE STATE OF CONNECTICUT TO HEAR AND DETERMINE ANY SUIT,
      ACTION OR PROCEEDING AND TO SETTLE ANY DISPUTES, WHICH MAY ARISE OUT OF OR
      IN
      CONNECTION HEREWITH AND WITH THE DEBT DOCUMENTS (COLLECTIVELY, THE
      "PROCEEDINGS"), AND MAKER FURTHER IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE
      TO
      REMOVE ANY SUCH PROCEEDINGS FROM ANY SUCH COURT (EVEN IF REMOVAL IS SOUGHT
      TO
      ANOTHER OF THE ABOVE-NAMED COURTS). MAKER IRREVOCABLY WAIVES ANY OBJECTION
      WHICH
      IT MIGHT NOW OR HEREAFTER HAVE TO THE ABOVE-NAMED COURTS BEING NOMINATED AS
      THE
      EXCLUSIVE FORUM TO HEAR AND DETERMINE ANY SUCH PROCEEDINGS AND AGREES NOT TO
      CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE ABOVE-NAMED
      COURTS FOR ANY REASON WHATSOEVER, THAT IT OR ITS PROPERTY IS IMMUNE FROM LEGAL
      PROCESS FOR ANY REASON WHATSOEVER, THAT ANY SUCH COURT IS NOT A CONVENIENT
      OR
      APPROPRIATE FORUM IN EACH CASE WHETHER ON THE GROUNDS OF VENUE OR FORUM
      NON-CONVENIENS OR OTHERWISE. MAKER ACKNOWLEDGES THAT BRINGING ANY SUCH SUIT,
      ACTION OR PROCEEDING IN ANY COURT OTHER THAN THE COURTS SET FORTH ABOVE WILL
      CAUSE IRREPARABLE HARM TO PAYEE WHICH COULD NOT ADEQUATELY BE COMPENSATED BY
      MONETARY DAMAGES, AND, AS SUCH, MAKER AGREES THAT, IN ADDITION TO ANY OF THE
      REMEDIES TO WHICH PAYEE MAY BE ENTITLED AT LAW OR IN EQUITY, PAYEE WILL BE
      ENTITLED TO AN INJUNCTION OR INJUNCTIONS (WITHOUT THE POSTING OF ANY BOND AND
      WITHOUT PROOF OF ACTUAL DAMAGES) TO ENJOIN THE PROSECUTION OF ANY SUCH
      PROCEEDINGS IN ANY OTHER COURT. Notwithstanding
      the foregoing, each of Maker and Payee shall have the right to apply to a court
      of competent jurisdiction in the United States of America or abroad for
      equitable relief as is necessary to preserve, protect and enforce its respective
      rights under this Note and any other Debt Document, including, but not limited
      to orders of attachment or injunction necessary to maintain the status quo
      pending litigation or to enforce judgments against Maker, any Obligor or the
      collateral pledged to Payee pursuant to any Debt Document or to gain possession
      of such collateral.
      MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
      OR
      CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS
      NOTE,
      ANY DEBT DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE RELATING TO THE SUBJECT
      MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP
      THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE SCOPE OF THIS WAIVER
      IS
      INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN
      ANY
      COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
      OF
      DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS
      IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
      AND
      THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
      OR
      MODIFICATIONS TO THIS NOTE, ANY DEBT DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR
      AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE
      EVENT
      OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
      COURT.

    

    This
      Note
      and the other Debt Documents constitute the entire agreement of Maker and Payee
      with respect to the subject matter hereof and supersede all prior
      understandings, agreements and representations, express or implied.

     

    No
      variation or modification of this Note, or any waiver of any of its provisions
      or conditions, shall be valid unless in writing and signed by an authorized
      representative of Maker and Payee. Any such waiver, consent, modification or
      change shall be effective only in the specific instance and for the specific
      purpose given.

    

    Payment
      Authorization

    

    Payee
      is
      hereby directed and authorized by Maker to advance and/or apply the
      proceeds of the loan as evidenced by this Note to the following parties in
      the
      stipulated amounts as set forth below:

     

    
      
        	Company
                Name	
                 

              	
                Amount

              	 
	 	 	 	 
	Point.360	 	$	$
                2,500,000.00	 

      

       

      Via
        Wire
        Transfer To:

    

    Bank
      of
      America

    333
      South
      Hope Street

    Los
      Angeles, CA 90071

    ABA
      No.
      026009593

    Account
      No. 14599-28310

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Any
      provision in this Note or any of the other Debt Documents which is in conflict
      with any statute, law or applicable rule shall be deemed omitted, modified
      or
      altered to conform thereto.

     

    
      	
              Point.360

               

              By:
                _________________________________________________

               

              Name:________________________________________________

               

              Title:_________________________________________________

               

              Federal
                Tax ID #: 954272619
                

               

              Address:
                2777 ONTARIO STREET, BURBANK, LOS ANGELES County, CA 91504  

            

    

     

    
      
        
        

      

      
        4

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