Document:

FIRST AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
         ---------------------------------------------------------------
                                       AND
                                       ---
                                     WAIVER
                                     ------

         THIS FIRST  AMENDMENT TO SECOND AMENDED AND RESTATED  CREDIT  AGREEMENT
AND WAIVER (this "Amendment"), dated as of March 30, 2001, is entered into among
(1) VDI MULTIMEDIA,  a California corporation (the "Borrower"),  (2) the Lenders
party  to the  Credit  Agreement  referred  to  below  and  (3)  UNION  BANK  OF
CALIFORNIA,  N.A., as  administrative  agent for such Lenders (in such capacity,
the "Agent").

                                    RECITALS
                                    --------

         A. The Borrower, the Lenders and the Agent previously entered into that
certain Second Amended and Restated  Credit  Agreement dated as of September 28,
2000 (the  "Credit  Agreement").  Capitalized  terms used herein and not defined
shall have the meanings assigned to them in the Credit Agreement.

         B. The Borrower  has informed the Lenders that it is not in  compliance
with certain  financial  covenants  for the period ended  December 31, 2000.  In
addition,  the  Borrower  has  informed  the  Lenders  that it will  restate its
financial  statements for the quarter ended September 30, 2000, causing it to be
out of compliance with certain financial  covenants for the period ended on such
date.  The Borrower has  requested  that the Lenders waive the Events of Default
caused by such noncompliance, as well as waive certain other defaults, and agree
to certain  amendments to the Credit Agreement.  The Lenders have agreed to such
amendments  and waivers,  in each case subject to the terms and  conditions  set
forth below.

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

         SECTION 1.  AMENDMENTS  TO CREDIT  AGREEMENT.  Effective as of the date
first set forth above, the Credit Agreement is hereby amended as follows:

         (a) In the definition of "Borrowing  Base"  contained in Section 1.1 of
the Credit Agreement, the following sentence is added to the end thereof:

         "Notwithstanding  the  foregoing,  for the purpose of  calculating  the
Borrowing Base during the period from January 1, 2001 to December 31, 2001 only,
an amount equal to the Repurchase  Basket shall be subtracted from the aggregate
principal amount of all Loans and Letters of Credit outstanding."

         (b) The  definition of "EBITDA" in Section 1.1 of the Credit  Agreement
is amended in full to read as follows:

             "`EBITDA':  for any period,  for the fiscal  quarter most  recently
         ended and the immediately  preceding three fiscal quarters,  Net Income
         after eliminating  extraordinary  gains and losses, plus (i) provisions
         for income taxes, (ii)  depreciation and  amortization,  (iii) Interest
         Expense  and (iv) with  respect  to each  quarter  of fiscal  year 2001
         (whether  used in  calculating  compliance as of the end of such fiscal
         quarter,  or as of  the  end of any  of  the  subsequent  three  fiscal
         quarters)  up to  $3,825,000  in One-Time  Charges for the  purposes of
         determining  the ratio of Funded  Debt to EBITDA  and the Fixed  Charge
         Ratio  pursuant to  Sections  6.1(a) and  6.1(b).  Notwithstanding  the
         foregoing,  clause (iv) of the immediately  preceding sentence will not
         apply to the Funded  Debt to EBITDA  ratio as used in  calculating  the
         Applicable Margin, any fees hereunder, or otherwise."

                                       1
<PAGE>

         (c) The  definition  of "Net Worth  Requirement"  in Section 1.1 of the
Credit Agreement is amended in full to read as follows:

             "`NET WORTH  REQUIREMENT':  $33,400,000  as of September  30, 2000,
         $32,700,000  as of December  31,  2000,  and as shall  subsequently  be
         increased  on a  quarterly  basis  by an  amount  equal  to  90% of the
         Borrower's  consolidated  Net Income and 100% of the Borrower's and its
         Subsidiaries'  New  Equity  less any and all  amounts  expended  by the
         Borrower and its Subsidiaries  for Permitted  Repurchases in accordance
         with the provisions of this Agreement.  The Net Worth Requirement shall
         not be reduced in the event that the Borrower's consolidated Net Income
         is a negative number."

         (d) The definition of "One-Time Charges" is added to Section 1.1 of the
Credit Agreement in appropriate alphabetical order to read as follows:

             "`ONE-TIME  CHARGES':  with  respect  to the  Borrower,  accounting
         charges  taken (a) with  respect to the fiscal year ended  December 31,
         2000 of (i) up to  $500,000  related  to  severance  costs,  (ii) up to
         $45,000 for the  write-off  of computer  consulting  services and labor
         costs, (iii) up to $1,650,000 for bad debt expense, (iv) up to $400,000
         related to deferred  financing  charges (to the extent such amounts are
         not treated as extraordinary  losses in the calculation of EBITDA), (v)
         up to  $160,000  for the  cost of  stock  options  granted  to  certain
         consultants of Borrower in payment for their fees,  (vi) up to $100,000
         for  loans  and  compensation  payments  made to  former  employees  P.
         Grippaldi, R. Appell and K. Watt (which loans and payments shall not be
         considered  usage of the basket set forth in Section 6.7(g);  and (vii)
         up to  $670,000  to  account  for the  effect  of  adopting  SEC  staff
         accounting  bulletin  101 and (b) with respect to the fiscal year ended
         December 31, 2001, up to $300,000 in  compensation  to former  employee
         Larry Birstock."

         (e) The  definition  of "Permitted  Acquisition"  in Section 1.1 of the
Credit Agreement is amended in full to read as follows:

             "`PERMITTED ACQUISITION': an Acquisition where (a) the Person whose
         assets or equity  interest is being  acquired  has  positive  pro forma
         EBITDA during the twelve month period  immediately prior to the closing
         of such  Acquisition,  (b) the Borrower and each Subsidiary shall be in
         full  compliance  with  each  financial   covenant  contained  in  this
         Agreement immediately prior to and upon the closing of the Acquisition,
         (c)  with  respect  to an  Acquisition  involving  aggregate  cash  and
         non-cash  consideration  less than or equal to $3,000,000,  the Lenders
         have received at least ten Business Days Notice prior to the closing of
         the Acquisition and an executed Covenant  Compliance  Certificate,  (d)
         with respect to any Acquisition  involving  aggregate cash and non-cash
         consideration   exceeding  $3,000,000,   such  Acquisition  shall  have
         received the approval of the Majority Lenders, which approval shall not
         be  unreasonably  withheld  or  delayed;  and (e)  with  respect  to an
         Acquisition involving a public company, such Acquisition shall not have
         been  opposed  by the  board  of  directors  of the  target  entity  or
         otherwise  be deemed  by the  Agent,  in the  exercise  of the  Agent's
         reasonable discretion, to be a hostile Acquisition;  provided, however,
         that,  notwithstanding the foregoing, the Borrower shall not consummate
         any  Acquisition  without  the  approval  of each  Lender  prior to the
         Agent's receipt of the Borrower's  financial  statements for the period
         ending December 31, 2001."

         (f) The  definition  of "Permitted  Repurchases"  in Section 1.1 of the
Credit Agreement is amended in full to read as follows:

             "`PERMITTED REPURCHASES': repurchases or redemptions of the Capital
         Stock of the Borrower in an aggregate  amount not to exceed $678,000 on
         and after the Closing Date but prior to April 1, 2001."

                                       2
<PAGE>

         (g) The definition of "Repurchase  Basket" in Section 1.1 of the Credit
Agreement is amended in full to read as follows:

                  "`REPURCHASE BASKET':  $678,000."

         (h) The first paragraph of Section 2.1(a) is amended to read in full as
follows:

             "(a) Subject to the terms and conditions hereof, each Lender having
         a Loan  Commitment  severally  agrees to (i) make loans on a  revolving
         credit basis through its Applicable Lending Office to the Borrower from
         time to time from and including the  Restatement  Date to but excluding
         the Loan  Commitment  Expiration  Date  (each a  "Revolving  Loan," and
         collectively,  the "Revolving Loans") in accordance with the provisions
         of this Agreement and (ii) participate  through its Applicable  Lending
         Office in  standby  letters  of credit  issued  for the  account of the
         Borrower  pursuant to Section 2.3 from time to time from and  including
         the Restatement  Date to but excluding the Loan  Commitment  Expiration
         Date (each a "Letter of  Credit,"  and  collectively,  the  "Letters of
         Credit");  provided,  however,  that  the  sum  of  (A)  the  aggregate
         principal amount of all Revolving Loans outstanding,  (B) the aggregate
         Letter of Credit Amount of all Letters of Credit  outstanding,  and (C)
         the  aggregate  amount of  unreimbursed  drawings  under all Letters of
         Credit shall not exceed the lesser of the  Aggregate  Commitment or the
         Borrowing Base (except as set forth in Section 2.5(d)) at any time; and
         provided  further,  that the sum of (x) the aggregate  Letter of Credit
         Amount of all  Letters  of  Credit  outstanding  and (y) the  aggregate
         amount of  unreimbursed  drawings under all Letters of Credit shall not
         exceed $1,000,000 at any time. Within the limits of each Revolving Loan
         Lender's  Loan  Commitment,  the Borrower  may borrow,  have Letters of
         Credit  issued for the  Borrower's  account,  prepay  Revolving  Loans,
         reborrow  Revolving Loans, and have additional Letters of Credit issued
         for the Borrower's  account after the  expiration of previously  issued
         Letters of Credit."

         (i) In Section 2.5(d), the following parenthetical is added immediately
following  the word  "Borrowing  Base":  "(after  taking into  account the final
sentence of such definition)".

         (j)  Clause  (iv)  of  Section  3.21  is  deleted  and  replaced   with
"[Intentionally Omitted]".

         (k)  Clause  (iv)  of  Section  5.9  is  deleted  and   replaced   with
"[Intentionally Omitted]".

         (l) In Section  6.1(b),  the table set forth  therein is amended in its
entirety to read as follows:

                                    Period                             Ratio
                                    ------                             -----

         Restatement Date to March 30, 2001                            1.35:1

         March 31, 2001 to June 29, 2001                               1.25:1

         June 30, 2001 to December 30, 2001                            1.35:1

         December 31, 2001 to December 30, 2002                        1.50:1

         December 31, 2002 to Loan Commitment Expiration Date          1.80:1

                                       3
<PAGE>

         (m) A new  sentence  is  added  to the  end of  Section  6.6 to read as
follows:

             "Notwithstanding any provision herein to the contrary,  neither the
         Borrower nor any Subsidiary  shall  repurchase any of its Capital Stock
         without the prior approval of each Lender."

         (n) Section 6.13 is amended to read in full as follows:

             "6.13 CERTAIN ACCOUNTING CHANGES. The Borrower shall not change any
         accounting  methodology or policy  respecting to the calculation of the
         value of its  Operating  Machinery  and  Equipment  without  the  prior
         consent of the Majority  Lenders.  Notwithstanding  the foregoing,  the
         Borrower  shall  be  permitted  to,  as  an  accounting  correction  in
         connection with the restatament of its financial  statements for fiscal
         year 2000, expense costs relating to repair and maintenance contracts."

         SECTION 2. ADDITIONAL  AMENDMENT TO THE CREDIT AGREEMENT.  Effective as
of January 1, 2001,  the Credit  Agreement is hereby  amended to substitute  the
attached Schedule 2.8 for Schedule 2.8 to the Credit  Agreement.  The Borrower's
Funded Debt to EBITDA ratio was greater than 2.00:1.00 for the fiscal year ended
December 31, 2000.  Accordingly,  for the period beginning  January 1, 2001, the
Applicable LIBOR Margin shall be deemed to be 2.75% and the Applicable Base Rate
Margin shall be deemed to be 1.00%.

         SECTION 3. WAIVERS.

         (a) Prior to the amendments  contemplated hereby, Section 2.5(d) of the
Credit Agreement provides that if at any time the aggregate  principal amount of
all Loans and Letters of Credit  outstanding  exceeds the  Borrowing  Base,  the
Borrower shall immediately,  without notice or request by the Agent,  prepay the
Loans (together with accrued interest to the date of prepayment on the principal
amount  prepaid) in an  aggregate  amount equal to such  excess.  The  aggregate
principal  amount of all Loans and Letters of Credit  outstanding  exceeded  the
Borrowing  Base (i) during  December 2000 by up to $58,000,  (ii) during January
2001 by up to $504,000 and (iii) during  February 2001 by up to $504,000 and, in
each case,  the  Borrower  failed to make such  prepayment.  As a result of such
noncompliance,  an Event of Default has  occurred  and is  continuing  under the
Credit  Agreement.  At the Borrower's  request,  the Lenders agree to waive such
Event of Default, subject to the terms and conditions set forth herein.

         (b) Section 5.1(c) of the Credit  Agreement  requires that the Borrower
deliver to the Agent, with sufficient copies for each Lender,  within 30 days of
the end of each  month a report  in form  reasonably  satisfactory  to the Agent
providing information with respect to the Borrower's Accounts Receivable agings.
The Borrower has failed to provide such information for the months ended January
31, 2001 and February 28, 2001. As a result of such  noncompliance,  an Event of
Default  has  occurred  and is  continuing  under the Credit  Agreement.  At the
Borrower's request, the Lenders agree to waive such Event of Default, subject to
the terms and conditions set forth herein;  provided that,  such waiver shall be
null and void, and an Event of Default shall immediately occur hereunder without
notice or grace period,  if the January 31, 2001 report is not received by March
30, 2001 or the February 28, 2001 report is not received by April 13, 2001.

         (c) Section 5.13 of the Credit Agreement requires that the Borrower, on
the twentieth Business Day of each month, shall provide to the Agent a Borrowing
Base Certificate  dated as of the first Business Day of such month. The Borrower
has failed to provide such information dated as of January 1, 2001,  February 1,
2001 and March 1, 2001. As a result of such  noncompliance,  an Event of Default
has occurred and is continuing  under the Credit  Agreement.  At the  Borrower's
request, the Lenders agree to waive such Event of Default,  subject to the terms
and  conditions set forth herein;  provided that,  such waiver shall be null and
void, and an Event of Default shall  immediately  occur hereunder without notice
or grace period, if (i) the January 1, 2001 and February 1, 2001 reports are not
received by March 30,  2001 or (ii) the March 1, 2001 report is not  received by
April 13, 2001.

                                       4
<PAGE>

         (d) Section 6.1(a) of the Credit  Agreement  requires that the ratio of
Funded Debt to EBITDA not exceed  2.50:1.00  for the period  ended  December 31,
2000.  The  Borrower's  ratio of  Funded  Debt to  EBITDA  for such  period  was
2.56:1.00.  As a result of such noncompliance,  an Event of Default has occurred
and is continuing under the Credit  Agreement.  At the Borrower's  request,  the
Lenders  agree  to waive  such  Event  of  Default,  subject  to the  terms  and
conditions set forth herein.

         (e)  Section  6.1(b) of the Credit  Agreement  requires  that the Fixed
Charge Ratio not be less than 1.35:1 as of  September  30, 2000 and December 31,
2000,  calculated  on a cumulative  four quarter  rolling  basis for the present
fiscal quarter and the three  immediately  preceding fiscal quarters.  The Fixed
Charge Ratio for such periods was 1.27:1.00 and  0.89:1.00,  respectively.  As a
result of such noncompliance, an Event of Default has occurred and is continuing
under the Credit  Agreement.  At the  Borrower's  request,  the Lenders agree to
waive  such Event of  Default,  subject  to the terms and  conditions  set forth
herein.

         (f) Prior to the amendments  contemplated hereby, Section 6.1(c) of the
Credit  Agreement  requires  that the  Borrower's  Net  Worth  not be less  than
$35,250,646 as of September 30, 2000,  and  $35,551,449 as of December 31, 2000.
The  Borrower's  Net  Worth was  $33,627,200,  as of  September  30,  2000,  and
$33,153,457 as of December 31, 2000. As a result of such noncompliance, an Event
of Default has occurred and is  continuing  under the Credit  Agreement.  At the
Borrower's request, the Lenders agree to waive such Event of Default, subject to
the terms and conditions set forth herein.

         The foregoing  waivers are given in this instance  only.  The foregoing
waivers shall not be construed as waivers of or consents to any violation of, or
deviation from, any other term or condition of the Credit Agreement or any other
Loan Document,  nor shall such waivers be construed to evidence the  willingness
of the Agent or the Lenders to give any other or additional  waiver,  whether in
similar or different circumstances.

         SECTION 4. CONDITIONS PRECEDENT.  This Amendment shall become effective
as of the date first set forth above upon receipt by the Agent of the following:

         (a) this  Amendment,  duly  executed by the  Borrower  and the Majority
Lenders;

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

         (c) a non-refundable amendment fee of $225,000, payable to the Agent in
immediately available funds, to be shared pro rata by each Lender executing this
Amendment,  which  fee shall be deemed  earned  in full upon  execution  of this
Amendment;

         (d) $34,000 payable to the Agent in immediately  available  funds,  for
payment of appraisal fees incurred to T/A Appraisers;

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

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

                                       5
<PAGE>

         SECTION 5.  REFERENCE  TO AND EFFECT ON THE  CREDIT  AGREEMENT  AND THE
OTHER LOAN DOCUMENTS.

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

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

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

         SECTION  6.   REPRESENTATIONS  AND  WARRANTIES.   The  Borrower  hereby
represents  and  warrants,  for the  benefit of the  Lenders  and the Agent,  as
follows:  (i) the Borrower has al requisite power and authority under applicable
law and under its  charter  documents  to  execute,  deliver  and  perform  this
Amendment,  and to perform  the Credit  Agreement  as amended  hereby;  (ii) all
actions, waivers and consents (corporate, regulatory and otherwise) necessary or
appropriate for the Borrower to execute, deliver and perform this Amendment, and
to  perform  the Credit  Agreement  as amended  hereby,  have been taken  and/or
received;  (iii) this Amendment,  and the Credit  Agreement,  as amended by this
Amendment,  constitute the legal,  valid and binding  obligation of the Borrower
enforceable against it in accordance with the terms hereof; and (iv) each of the
Borrower's  representations and warranties set forth in the Credit Agreement and
the other Loan  Documents is true and correct as of the date  hereof,  except to
the extent  that such  representations  and  warranties  expressly  relate to an
earlier date.

         SECTION 7. EXECUTION IN COUNTERPARTS. This Amendment may be executed in
any  number  of  counterparts  and  by  different  parties  hereto  in  separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken  together  shall  constitute  but one and the
same agreement.  Delivery of an executed counterpart of a signature page to this
Amendment by  telecopier  shall be effective as delivery of a manually  executed
counterpart of this Amendment.

         SECTION 8.  GOVERNING  LAW.  This  Amendment  shall be governed by, and
construed  and  interpreted  in  accordance  with,  the  laws  of the  State  of
California (without reference to its choice of law rules).

                                       6
<PAGE>

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

<TABLE>
<CAPTION>

<S>                                                          <C>
                                     VDI MULTIMEDIA

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

                                     Name:
                                                              --------------------------------------------

                                     Title:
                                                              --------------------------------------------

                                     UNION BANK OF CALIFORNIA, N.A.,

                                     as Agent and a Lender

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

                                     Name:
                                                              --------------------------------------------

                                     Title:
                                                              --------------------------------------------

                                     SANWA BANK CALIFORNIA, as a Lender

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

                                     Name:
                                                              --------------------------------------------

                                     Title:
                                                              --------------------------------------------

                                     U.S. BANK NATIONAL ASSOCIATION, as a Lender

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

                                     Name:
                                                              --------------------------------------------

                                     Title:
                                                              --------------------------------------------
</TABLE>

                                       7
<PAGE>

                                                                   SCHEDULE 2.8

                                APPLICABLE MARGIN

<TABLE>
<CAPTION>

<S>                        <C>                                <C>
Funded Debt/EBITDA         Applicable LIBOR Margin            Applicable Base Rate Margin

     >2.00                           2.75%                               1.00%

 >1.50 but <2.00                     2.50%                               0.75%

     <1.50                           2.25%                               0.50%

</TABLE>
                                       8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00023-of-00352.parquet"}]