Document:

Exhibit 10.2

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

WARRANT

 

To Purchase 250,000 Shares of Common Stock of

 

AUGME TECHNOLOGIES, INC.

 

THIS WARRANT (the “Warrant”) certifies that, for value received, Paul R. Arena (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after October 1, 2012 (the “Issue Date”) and on or prior to the five-year anniversary of the Issue Date (the “Termination Date”), but not thereafter, to subscribe for and purchase from Augme Technologies, Inc., a Delaware corporation (the “Company”), up to 250,000 shares (the “Warrant Shares”) of common stock, $.0001 par value per share, of the Company (the “Common Stock”).  The purchase price of each share of Common Stock under this Warrant shall be equal to $1.50 (the “Exercise Price”), subject to adjustment hereunder.  This Warrant is issued pursuant to the Note and Warrant Purchase Agreement of even date hereof among the Company, the Holder and the other investors signatory thereto.

 

1.             Title to Warrant.  Prior to the Termination Date and subject to compliance with applicable laws and Section 7 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form attached hereto as Exhibit A (the “Assignment Form”), properly endorsed.

 

2.             Authorization of Shares.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

 

3.             Exercise of Warrant.

 

(a)           Exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Issue Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise in the form attached hereto as Exhibit B (the “Notice of Exercise”); provided, however, within three (3) Business Days of the date said Notice of Exercise is delivered to the Company, the Holder shall have surrendered this Warrant to the Company, and, if the Holder has not elected to make a cashless exercise as provided below, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank. Certificates for Warrant Shares purchased hereunder shall be delivered to the Holder no later than three (3) Business Days after the delivery to the Company of the Notice of Exercise, surrender of this Warrant and, if the Holder has not elected to make a cashless exercise as provided below, payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”).  Prior to the issuance of such Warrant Shares, if the Company fails to deliver to the Holder a certificate or certificates representing the Warrant Shares pursuant to this Section 3(a) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing Warrant Shares as required pursuant to the terms hereof.

 

(b)           If this Warrant shall have been exercised in part, then the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

(c)           In the event that the Holder elects to make a cashless exercise as provided above, the Company shall issue to the Holder the number of shares of Common Stock equal to the result obtained by (i) subtracting B from A, (ii) multiplying the difference by C, and (iii) dividing the product by A, as set forth in the following equation:

 

X     =      (A - B) x C  where:

A

 

X     =      the number of shares of Common Stock issuable upon a cashless exercise of the Warrant pursuant to the provisions of this Section 3.

 

A     =      the Fair Market Value (as defined below) of one share of Common Stock on the date of net issuance exercise.

 

B     =      the Exercise Price for one share of Common Stock under this Warrant.

 

C     =      the number of shares of Common Stock as to which this Warrant is exercisable.

 

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If the foregoing calculation results in a negative number, then no shares of Common Stock shall be issued upon a cashless exercise.

 

For the purpose of such calculations, the fair market value per share of the shares of Common Stock shall be, (i) if the cashless exercise of the Warrant is in connection with a public offering of the Company’s Common Stock, the public offering price (before deducting commission, discounts or expenses) at which the Common Stock is sold in such offering, (ii) if a public market for the Company’s Common Stock exists at the time of such exercise, the average of the closing bid and asked prices of the Common Stock quoted in the Over-The-Counter Market Summary or the last reported sale price of the Common Stock or closing price quoted on the Nasdaq National Market or on any exchange on which the Common Stock is listed, whichever is applicable, as reported by Bloomberg LP  for the five (5) trading days prior to the date of determination of fair market value; or (iii) if there is no public market for the Company’s Common Stock, determined by the Company’s Board of Directors in good faith.

 

4.             No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall round such fraction of a share up to the nearest whole share.

 

5.             Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form duly executed by the Holder, and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

6.             Closing of Books.  The Company will not close its shareholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

7.             Transfer, Division and Combination.

 

(a)           Subject to compliance with any applicable securities laws and with the provisions of Sections 1, 5 and 7(e) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with an Assignment Form completed and duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in the Assignment Form, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

(b)           This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice

 

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specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

 

(c)           The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7.

 

(d)           The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.

 

(e)           If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the 1933 Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer:  (i) that the Holder or assignee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the 1933 Act and under applicable state securities or blue sky laws; (ii) that the Holder or assignee execute and deliver to the Company an investment representation letter in form and substance reasonably satisfactory to the Company; and (iii) that the assignee be an “accredited investor” as defined in Rule 501(a) promulgated under the 1933 Act or a qualified institutional buyer as defined in Rule 144A(a) under the 1933 Act.

 

8.             No Rights as Shareholder until Exercise.  This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof.  Upon the surrender of this Warrant, the delivery of the Notice of Exercise by facsimile copy, and the payment of the aggregate Exercise Price and the payment of all taxes required to be paid by the Holder prior to the issuance of the Warrant Shares pursuant to Section 5, if any, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender, delivery or payment.

 

9.             Loss, Theft, Destruction or Mutilation of Warrant.  The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

10.           Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

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11.           Adjustments of Exercise Price and Number of Warrant Shares.  The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time if the Company shall:  (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock; (ii) subdivide its outstanding shares of Common Stock into a greater number of shares; (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock; or (iv) issue any shares of its capital stock in a reclassification of the Common Stock.  Upon the happening of any of the events set forth in subsections (i)-(iv) of this Section 11(a), the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in advance thereof.  Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company that are purchasable pursuant hereto immediately after such adjustment.  An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

 

12.           Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets.  In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (excluding cash but including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event.  In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12.  For purposes of this Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to

 

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redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock.  The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets.

 

13.           Voluntary Adjustment by the Company.  The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

 

14.           Notice of Adjustment.  Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

 

15.           Notice of Corporate Action.  If at any time:

 

(a)           the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or

 

(b)           there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or,

 

(c)           there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

 

then, in any one or more of such cases, the Company shall give to Holder: (i) at least 20 days’ prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 20 days’ prior written notice of the date when the same shall take place.  Such notice in accordance with the foregoing clause also shall specify: (A) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (B) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up.  Each such written notice shall be sufficiently given if addressed to

 

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Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 17(d).

 

16.           Authorized Shares.  The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation.

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending the Company’s Articles of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will: (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

17.           Miscellaneous.

 

(a)           Jurisdiction.  This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflict of laws.

 

(b)           Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

 

(c)           Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date.  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the

 

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Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

(d)           Notices.  All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been made when delivered or mailed by first class mail, postage prepaid, as follows:  (a) if to the Holder, at the address of the Holder as shown on the registry books maintained by the Company or the Transfer Agent; and (b) if to the Company, at 350 7th Avenue, 2nd Floor, New York, NY 10001, Attention Chief Executive Officer.

 

(e)           Limitation of Liability.  No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

(f)            Remedies.  Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

 

(g)           Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

 

(h)           Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

(i)            Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

(j)            Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

 

 

	
Dated:  September 25, 2012
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
AUGME   TECHNOLOGIES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
 /s/   Robert F. Hussey
    
	
 
    	
 
    	
Name:
    	
Robert   F. Hussey
    
	
 
    	
 
    	
Title:
    	
Chief   Executive Officer
    

 

 

EXHIBIT A

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute
 this form and supply required information. 
 Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

whose address is

 

.

 

 

Dated:                              ,

 

	
 
    	
Holder’s   Signature:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Holder’s   Address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
Signature   Guaranteed:
    	
 
    	
 
    	
 
    
						

 

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

 

 

EXHIBIT B

 

NOTICE OF EXERCISE

 

To:          Augme Technologies, Inc.

 

The undersigned, the Holder of the attached Warrant, hereby irrevocably elects to exercise the purchase right represented by the Warrant for, and to purchase thereunder,                shares of Common Stock (as such terms are defined in the Warrant, dated                         , 2012, issued by Augme Technologies, Inc. to                                   ).

 

o            (Cash Exercise)  The undersigned has included with this Form of Subscription the purchase price of such shares in full.

 

o            (Cashless Exercise)  The undersigned elects to purchase such shares pursuant to the net exercise provisions of such Warrant.

 

The undersigned hereby requests that the Certificate(s) for such securities be issued in the name(s) and delivered to the address(es) as follows:

 

	
Name:
    	
 
    	
 
    
	
Address:
    	
 
    	
 
    
	
Social   Security Number:
    	
 
    	
 
    
	
Deliver   to:
    	
 
    	
 
    
	
Address:
    	
 
    	
 
    

 

If the foregoing Subscription evidences an exercise of the Warrant to purchase fewer than all of the Warrant Shares (or other securities or property) to which the undersigned is entitled under such Warrant, please issue a new Warrant, of like tenor, for the remaining portion of the Warrant (or other securities or property) in the name(s), and deliver the same to the address(es) as follows:

 

	
Name:
    	
 
    	
 
    
	
Address:
    	
 
    	
 
    

 

DATED:                          , 201  .

 

	
 
    	
 
    	
 
    
	
(Name   of Holder)
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
(Signature   of Holder or Authorized Signatory)
    	
 
    	
(SS   or TIN of Holder)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Signature   Guaranteed:TERM NOTE

 

September 13, 2012

 

$5,527,500.00

 

For value received,
the undersigned POINT.360, a California corporation (the "Borrower"), promises to pay to the order of Bank of
the West (together with its successors and assigns, the "Lender"), the principal amount of Five Million, Five Hundred
Twenty-Seven Thousand, Five Hundred Dollars and Zero Cents ($5,527,500.00) on or before August 31, 2022 (the
"Expiration Date"), as set forth below. The aggregate principal balance outstanding shall bear interest, and interest
shall be payable, in accordance with that certain Interest Rate Election Rider, attached hereto and made a part hereof (the "Interest
Rate Election Rider").

 

Upon the terms and
conditions as set forth herein, the Borrower may request a loan, in one drawing, up to the maximum amount shown above. Proceeds
of the Note shall be used payoff another lender. The Note shall be conclusively deemed to have been made at the request of and
for the benefit of the Borrower (i) when credited to any deposit account of the Borrower maintained with the Lender or (ii) when
paid in accordance with the Borrower's written instructions.

 

This Note is entered
into in connection with one or more certain Loan and Security Agreements or Loan Agreements, dated August 13, 2012 (each
a "Loan Agreement" and collectively, the "Loan Agreements") between the Borrower and the Lender, and any capitalized
terms not defined herein shall have the meanings given to them in the Loan Agreements.

 

The Borrower hereby
promises and agrees to pay principal as follows: Commencing on November 1, 2012, principal shall be paid monthly on
the 1st day of each month in installment(s) of $18,425.00. On the Expiration Date, the Borrower hereby promises and agrees
to pay to the Lender in full the aggregate unpaid principal amount outstanding, together with all accrued and unpaid interest and
all other fees and charges owing to the Lender under this Note.

 

Principal and interest
shall be payable at the Lender's main office or at such other place as the Lender may designate in writing in immediately available
funds in lawful money of the United States of America without set-off, deduction or counterclaim. Interest shall be calculated
on the basis of actual number of days elapsed and a 360-day year. If interest is not paid as and when it is due, it shall be added
to the principal, become and be treated as a part thereof, and shall thereafter bear like interest.

 

“Business Day”
shall mean a day, other than a Saturday or Sunday, on which commercial banks are open for business
in California.

 

At the option of the
Lender, this Note shall become immediately due and payable upon default of any liability, obligation,
covenant or undertaking of the Borrower hereunder or the occurrence at any time of an Event of Default under the
Loan Agreement.

 

Any payments received
by the Lender on account of this Note shall, at the Lender's option, be applied first, to accrued and unpaid interest; second,
to the unpaid principal balance, then any fees, or charges then owed to the Lender by the Borrower; with payments being applied
to installments remaining due in such order and amounts as the Lender may determine in its discretion. Notwithstanding the foregoing,
any payments received after the occurrence and during the continuance of an Event of Default shall be applied in such manner as
the Lender may determine. The Borrower hereby authorizes the Lender to charge any deposit account which the Borrower may maintain
with the Lender for any payment required hereunder without prior notice to the Borrower.

 

    	 

    	 	

    
 

If
pursuant to the terms of this Note, the Borrower is at any time obligated to pay interest on the principal balance at a rate in
excess of the maximum interest rate permitted by applicable law for the loan evidenced by this Note, the applicable interest rate
shall be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have
been payments in reduction of principal and not on account of the interest due hereunder. More specifically, if from any
circumstances whatsoever, fulfillment of any provision of this Note or any other loan document excuted and delivered in connection
with this Note, at the time performance of such provision becomes due, would exceed the limit on interest then permitted by any
applicable usury statute or any other applicable law, the Lender may, at its option (a) reduce the obligations to be fulfilled
to such limit on interest, or (b) apply the amount in excess of such limit on interest to the reduction of the outstanding principal
balance of the obligations, and not to the payment of interest, with the same force and effect as though Borrower had specifically
designated such sums to be so applied to principal and Lender had agreed to accept such extra payments(s) as a premium-free prepayment,
so that in no event shall any exaction be possible under this Note or any other loan document that is in excess of the applicable
limit on interest. It is the intention of Borrower and Lender that the total liability for payments in the nature of interest shall
not exceed the limits imposed by any applicable state or federal interest rate laws. The provisions of this paragraph shall control
every other provision of this Note, and any provision of any other loan document in conflict with this paragraph.

 

The Borrower represents
to the Lender that the proceeds of this Note will not be used for personal, family or household purposes or for the purpose of
purchasing or carrying margin stock or margin securities within the meaning of Regulations U and X of the Board of Governors of
the Federal Reserve System, 12 C.F.R. Parts 221 and 224.

 

The Borrower grants
to the Lender a continuing lien on and security interest in any and all deposits or other sums at any time credited by or due from
the Lender to the Borrower and any cash, securities, instruments or other property of the Borrower in the possession of the Lender,
whether for safekeeping or otherwise, or in transit to or from the Lender (regardless of the reason the Lender had received the
same or whether the Lender has conditionally released the same) as security for the full and punctual payment and performance of
all of the liabilities and obligations of the Borrower to the Lender and such deposits and other sums may be applied or set off
against such liabilities and obligations of the Borrower to the Lender at any time, whether or not such are then due, whether or
not demand has been made and whether or not other collateral is then available to the Lender.

 

No delay or omission
on the part of the Lender in exercising any right hereunder shall operate as a waiver of such right or of any other right of the
Lender, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right
on any future occasion. The Borrower and any other party obligated on account of this Note by contract, by operation of law or
otherwise (the Borrower and each Borrower, if more than one, and each such other party, an "Obligor"), regardless of
the time, order or place of signing, waive presentment, demand, protest, notice of intent to accelerate, notice of acceleration,
notice of dishonor, notice of protest and all other notices and demands of every kind in connection with the delivery, acceptance,
performance or enforcement of this Note, all suretyship defenses of any kind, in each case that would otherwise be available in
connection with this Note including, without limitation, any right (whether now or hereafter existing) to require the holder hereof
to first proceed against the Borrower, or any other party obligated on account of this Note, for any security, and assent to any
extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral,
and to the addition or release of any other party or person primarily or secondarily liable and waives all recourse to suretyship
and guarantor defenses generally, including any defense based on impairment of collateral. To the maximum extent permitted by law,
the Borrower waives and terminates any homestead rights and/or exemptions respecting any premises under the provisions of any applicable
homestead laws, including without limitation, California Code of Civil Procedure Sections 704-710 et seq.

 

To the fullest extent
permitted by law, each Obligor waives:

 

(A) any rights
and defenses that are or may become available to such Obligor by reason of Sections 2787 to 2855, inclusive, of the California
Civil Code;

 

    	2

    	 

    
 

(B) all rights
and defenses that such Obligor may have because any of the indebtedness hereunder is secured by real property; this means, among
other things: (i) the Lender may collect from an Obligor without first foreclosing on any real or personal property collateral
pledged by the Borrower or another Obligor; and (ii) if the Lender forecloses on any real property collateral pledged by the Borrower
or another Obligor: (1) the amount of such indebtedness may be reduced only by the price for which that collateral is sold at the
foreclosure sale, even if the collateral is worth more than the sale price, and (2) the Lender may collect from an Obligor even
if the Lender, by foreclosing on the real property collateral, has destroyed any right such Obligor may have to collect from the
Borrower or another Obligor. This is an unconditional and irrevocable waiver of any rights and defenses each Obligor may have because
any of the indebtedness under this Note is secured by real property. These rights and defenses include, but are not limited to,
any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure;

 

(C) any right or
defense it may have at law or equity, including California Code of Civil Procedure Section 580a, to a fair market value hearing
or action to determine a deficiency judgment after a foreclosure.

 

The Borrower shall
indemnify, defend and hold the Lender and its directors, officers, employees, agents and attorneys (each an "Indemnitee")
harmless against any claim brought or threatened against any Indemnitee by the Borrower or by any other person (as well as from
attorneys' reasonable fees and expenses in connection therewith) on account of the Lender's relationship with the Borrower (each
of which may be defended, compromised, settled or pursued by the Lender with counsel of the Lender's selection, but at the expense
of the Borrower), except for any claim arising out of the gross negligence or willful misconduct of the Lender.

 

The
Borrower agrees to pay, upon demand, costs of collection of all amounts under this Note including, without limitation, principal
and interest, or in connection with the enforcement of, or realization on, any security for this Note, including, without limitation,
to the extent permitted by applicable law, reasonable attorneys' fees and expenses. If any payment due under this Note is
unpaid for 15 days or more, the Borrower shall pay, in addition to any other sums due under this Note
(and without limiting the Lender's other remedies on account thereof), a late charge equal to 5.0% of such unpaid amount.

 

This Note shall be
binding upon the Borrower and upon its heirs, successors, assigns and legal representatives, and shall inure to the benefit of
the Lender and its successors, endorsees and assigns.

 

In the event that at
any time, a surety is liable upon only a portion of the Borrower's or any Obligor's obligations
under this Note and the Borrower provides partial satisfaction of any such obligation(s), each of the Borrower and
each Obligor hereof, if any, hereby waives any right it would otherwise have, under Section 2822 of the California Civil
Code, to designate the portion of the obligations to be satisfied. The designation of the portion of the obligation to be satisfied
shall, to the extent not expressly made by the terms of this Note, be made by the Lender rather than Borrower.

 

The liabilities of
the Borrower and each Borrower, if more than one, and any Obligor are joint and several; provided,
however, the release by the Lender of the Borrower or any one or more Obligors shall not release
any other person obligated on account of this Note. Any and all present and future debts of the Borrower to any Obligor
are subordinated to the full payment and performance of all present and future debts and obligations of the Borrower to the Lender.
Each reference in this Note to the Borrower and each Borrower, if more than one, and Obligor,
is to such person individually and also to all such persons jointly. No person obligated on account of this Note may seek contribution
from any other person also obligated, unless and until all liabilities, obligations and indebtedness to the Lender of the person
from whom contribution is sought have been irrevocably satisfied in full. The release or compromise by the Lender of any collateral
shall not release any person obligated on account of this Note.

 

    	3

    	 

    
 

The Borrower authorizes
the Lender to complete this Note if delivered incomplete in any respect. A photographic or other reproduction of this Note may
be made by the Lender, and any such reproduction shall be admissible in evidence with the same effect as the original itself in
any judicial or administrative proceeding, whether or not the original is in existence.

 

This
Note shall be governed by federal law applicable to the Lender and, to the extent not preempted by federal law, the laws of the
State of California without giving effect to the conflicts of laws principles thereof.

 

Any notices under or
pursuant to this Note shall be deemed duly received and effective if delivered in hand to any officer of agent of the Borrower
or Lender, or if mailed by registered or certified mail, return receipt requested, addressed to the Borrower or Lender at the address
set forth in the Loan Agreement or as any party may from time to time designate by written notice to the other party.

 

The
Borrower irrevocably submits to the nonexclusive jurisdiction of any Federal or state court sitting
in California, over any suit, action or proceeding arising out of or relating to this Note. The Borrower irrevocably waives, to
the fullest extent it may effectively do so under applicable law, any objection it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in any such court and any claim that the same has been brought in an inconvenient
forum. The Borrower hereby consents to any and all process which may be served in any such suit, action or proceeding, (i) by mailing
a copy thereof by registered and certified mail, postage prepaid, return receipt requested, to the Borrower's, address shown below
or as notified to the Lender and (ii) by serving the same upon the Borrower(s) in any other manner otherwise permitted by law,
and agrees that such service shall in every respect be deemed effective service upon the Borrower. 

 

Waiver
Of Jury Trial. THE BORROWER AND LENDER ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, AND THAT IT MAY
BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW EACH PARTY, AFTER CONSULTING (OR HAVING THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF ITS CHOICE, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION RELATED TO THIS NOTE OR ANY OTHER
DOCUMENT, INSTRUMENT OR TRANSACTION BETWEEN THE PARTIES.

 

Judicial
Reference Provision. In the event the above Jury Trial Waiver is unenforceable, the parties elect to proceed under this Judicial
Reference Provision. With the exception of the items specified below, any controversy, dispute or claim between the parties relating
to this Note or any other document, instrument or transaction between the parties (each, a "Claim"), will be resolved
by a reference proceeding in California pursuant to Sections 638 et seq. of the California Code of Civil Procedure, or their successor
sections, which shall constitute the exclusive remedy for the resolution of any Claim, including whether the Claim is subject to
reference. Venue for the reference will be the Superior Court in the County where real property involved in the action, if any,
is located, or in a County where venue is otherwise appropriate under law (the "Court"). The following matters shall
not be subject to reference: (i) nonjudicial foreclosure of any security interests in real or personal property, (ii) exercise
of self-help remedies (including without limitation set-off), (iii) appointment of a receiver, and (iv) temporary, provisional
or ancillary remedies (including without limitation writs of attachment, writs of possession, temporary restraining orders or preliminary
injunctions). The exercise of, or opposition to, any of the above does not waive the right to a reference hereunder.

 

    	4

    	 

    
 

The
referee shall be selected by agreement of the parties. If the parties do not agree, upon request of any party a referee shall be
selected by the Presiding Judge of the Court. The referee shall determine all issues in accordance with existing case law and statutory
law of the State of California, including without limitation the rules of evidence applicable to proceedings at law. The referee
is empowered to enter equitable and legal relief, and rule on any motion which would be authorized in a court proceeding, including
without limitation motions for summary judgment or summary adjudication. The referee shall issue a decision, and pursuant to CCP
§644 the referee's decision shall be entered by the Court as a judgment or order in the same manner as if tried by the Court.
The final judgment or order from any decision or order entered by the referee shall be fully appealable as provided by law. The
parties reserve the right to findings of fact, conclusions of law, a written statement of decision, and the right to move for a
new trial or a different judgment, which new trial if granted, will be a reference hereunder. AFTER CONSULTING (OR HAVING THE OPPORTUNITY
TO CONSULT) WITH COUNSEL OF ITS CHOICE, EACH PARTY AGREES THAT ALL CLAIMS RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED
BY A REFEREE AND NOT A JURY.

  

Executed as of September
13, 2012.

 

 

	 	Borrower:	 
	 	 	 
	 	POINT.360	 
	 	 	 
	 	 	 
	 	By:	 	 
	 	 	Alan R. Steel, Chief Financial Officer	 
	 	 	 
	 	2701 Media Center Drive	 
	 	Los Angeles, California	 
	 	90065	 

 

Term Note 

    	5

    	 

    
 

INTEREST
RATE ELECTION RIDER

 

1.          INTEREST
RATE(S); PAYMENTS AND PREPAYMENTS.

 

1.1          Interest
Rates. The Note shall bear interest at the following rate(s): (a) Two Percent (2.00%) above the Alternate Base
Rate (as hereinafter defined) (an "Alternate Base Rate Balance"); or (b) Three Percent (3.00%) above the
LIBOR Rate (as hereinafter defined) (a "LIBOR Rate Balance"); each an “Available Rate” or an “Available
Rate Balance.”

 

1.2          Notice
of Borrowing and Rate Selection. Upon written or telephonic notice which shall be received by the Lender at or before 11:00
a.m. Pacific time on a Business Day, the Borrower may draw this loan by requesting an Available Rate Balance. The draw may be made
on the day notice is received by the Lender, provided however, that if the Lender shall not have received notice at or before 11:00
a.m. Pacific time on the day such request is made, such draw may, at the Lender's option, be made on the next Business Day. Notice
of any LIBOR Rate Balance shall be received by the Lender no later than two Business Days prior to the day (which shall be a Business
Day) on which the Borrower requests such LIBOR Rate Balance to be made. The notice shall specify the effective date thereof (which
shall be a Business Day), the type of interest rate and the amount to which the interest rate shall apply. Any such notice shall
be irrevocable and shall be subject to other terms and conditions set forth in this Note. For any interest rate selected, the Lender
shall record on the books and records of the Lender an appropriate notation evidencing such selection, each repayment on account
of the principal thereof and the amount of interest paid, and the Borrower authorizes the Lender to maintain such records and make
such notations and agrees that the amount shown on the books and records as outstanding from time to time shall constitute the
amount owing to the Lender pursuant to this Note, absent manifest error.

 

1.3          Payments.
The Borrower hereby promises and agrees to pay interest in arrears on this Note on the 1st calendar day of each month, commencing
on November 1, 2012. If any payment required to be made by the Borrower hereunder becomes due and payable on a day other than a
Business Day, the due date thereof shall be extended to the next succeeding Business Day and interest thereon shall be payable
at then applicable rate during such extension. On the Expiration Date, the Borrower hereby promises and agrees to pay to the Lender
in full the aggregate unpaid principal amount outstanding, together with all accrued and unpaid interest and all other fees and
charges owing to the Lender under this Note.

 

1.4          Interest
Periods. Each Interest Period selected by the Borrower pursuant to the terms of this Interest Rate Election Rider shall commence
on the date selected and shall end on the last day of the time period the Borrower shall elect, in each case as set forth in the
definition of Interest Period in Paragraph 2.1 hereof; provided, however, that (a) any Interest Period that would otherwise end
on a day which is not a Business Day shall be extended to the next Business Day unless such extension would carry such Interest
Period into the next month, in which event such Interest Period shall end on the preceding Business Day; (b) any Interest Period
that begins on the last Business Day of a calendar month (or on a date for which there is no numerically corresponding day in the
calendar month during which such Interest Period is to end), shall (subject to clause (a) above) end on the last Business Day of
such calendar month; and (c) any Interest Period that would otherwise extend beyond the Expiration Date shall end on the Expiration
Date. If the LIBOR Rate for an Interest Period is greater or less than the LIBOR Rate for the immediately preceding Interest Period,
then the rate of interest paid by the Borrower will be adjusted accordingly effective on the first day of such Interest Period.
Notwithstanding the terms of any other provision of this Note or the Loan Agreement, if an LIBOR Rate Balance is subject to a rate
swap contract, then, with respect to such LIBOR Rate Balance and for the entire period of time that such LIBOR Rate Balance is
subject to a rate swap contract, at the end of each Interest Period applicable to such LIBOR Rate Balance the Borrower shall automatically
be deemed to have selected a LIBOR Rate Balance and the same Interest Period as was in effect for the Interest Period just ended,
and such deemed selection may not be revoked or otherwise changed at any time that such Available Rate Balance is subject to a
rate swap contract. If the LIBOR Rate for such LIBOR Rate Balance in the following Interest Period is greater or less than the
LIBOR Rate for the immediately preceding Interest Period, then the rate of interest paid by the Borrower with respect to such LIBOR
Rate Balance will be adjusted accordingly effective on the first day of such Interest Period.

 

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1.5          Conversion
of Outstanding Amounts. Upon written or telephonic notice which shall be received by the Lender at or before 11:00 a.m. Pacific
time on a Business Day, and so long as no Event of Default shall have occurred and be continuing, the Borrower may, on the last
Business Day of the then current Interest Period applicable to an Available Rate Balance, convert the rate on such balance to another
Available Rate. The conversion may be effective on the day notice is received by the Lender, provided however, that if the Lender
shall not have received notice at or before 11:00 a.m. Pacific time on the day such request is made, such election may, at the
Lender's option, become effective on the next Business Day, except that notice to select any LIBOR Rate shall be received by the
Lender no later than two Business Days prior to the day (which shall be a Business Day) on which the Borrower requests such LIBOR
Rate. The notice shall specify the date of such conversion and the amount to be converted.

 

1.6          End
of Interest Period. If, at the end of the relevant Interest Period, and subject to all of the terms and conditions applicable
to a request that a new interest rate be selected, the Lender does not receive timely notice to continue the existing rate or request
another Available Rate, the Borrower shall be deemed to have selected an Alternate Base Rate Balance.

 

1.7          Unavailability
of Rate. In the event that the effective interest rate(s) applicable to the Borrower’s loan evidenced hereby shall cease
to be published or has become unlawful or infeasible by reason of the Lender’s compliance with any new law, rule, regulation,
guideline or order, or any new interpretation of any present law, rule regulation, guideline or order, the Lender, it is sole discretion
shall designate a new base, reference or other rate for general commercial loan reference purposes, it being understood that such
rate is a reference rate, not necessarily the lowest, established from time to time, which serves as the basis upon which effective
interest rates are calculated for loans making reference thereto.

 

1.8          Funding
the Note. The Lender shall be entitled to fund all or any portion of the Note in any manner it may determine in its sole discretion,
but all calculations and transactions hereunder shall be conducted as set forth herein without regard to the manner in which the
Lender actually funded the Note.

 

1.9          Indemnification
for Costs. During any period of time in which interest on the Note is accruing on the basis of an Available Rate other than
one that adjusts on a daily basis, the Borrower shall, upon the Lender's request, promptly pay to and reimburse the Lender for
all costs incurred and payments made by the Lender by reason of any future assessment, reserve, deposit or similar requirement
or any surcharge, tax or fee imposed upon the Lender or as a result of the Lender's compliance with any directive or requirement
of any regulatory authority pertaining or relating to funds used by the Lender in quoting and determining such Available Rate.

 

1.10          Termination
of Pricing Option. After the occurrence of an Event of Default, the Borrower’s right to select pricing options, if applicable,
shall cease, and, if the Borrower would, but for the application of the preceding clause, have had the right to elect among interest
rate options, notwithstanding anything to the contrary in this Note, interest shall accrue at a rate per annum equal to 5.0% plus
the current effective rate for an Alternate Base Rate Balance.

 

1.11          Prepayment.
Borrower may prepay amounts outstanding under this Note bearing interest at an Available Rate in whole or in part provided Borrower
has given Lender not less than 5 Business Days prior written notice of Borrower’s intention to make such prepayment and pays
to Lender the Prepayment Fee (defined below) due as a result. The Prepayment Fee shall also be paid, if Lender, for any other reason,
including acceleration or foreclosure, receives all of any portion of the LIBOR Rate Balance prior to its scheduled payment date.
"Prepayment Fee" is the positive amount, if any, equal to the present value of (i) the amount of interest that would
have been paid through the end of the current Interest Period on the principal amount being repaid at the LIBOR Rate and minus
(ii) the amount of interest Lender would earn if the amount of such prepayment of principal was used to purchase a(n) LIBOR Rate
contract having a maturity date most closely matching with the last day of the relevant Interest Period and such contract was held
by Lender until the last day of the relevant Interest Period. The rate used in the present value calculation shall be the rate
of interest offered on the LIBOR Rate contract having a maturity most closely matching with the last day of the relevant Interest
Period. The time period used in the present value calculation shall be a fraction, the numerator of which is the number of days
in the period between the date of prepayment and the last date of the relevant Interest Period, and the denominator of which shall
be 360 days.

 

    	7

    	 

    
 

If the maturity of
this Note is accelerated by the Lender because of the occurrence of an Event of Default, the resulting acceleration shall be deemed
to be an election on the part of the Borrower to prepay this Note. Accordingly, there shall be added to the amount due after an
Event of Default and resulting acceleration, the fixed rate prepayment charge, calculated as above and using as the prepayment
date the date on which any tender of payment is made, and the Borrower agrees to pay the same.

 

The Borrower, by its
signature below, hereby expressly (i) waives any rights it may have under California Civil Code Section 2954.10 to prepay this
Note, in whole or in part, without penalty, upon acceleration of the maturity date, and (ii) agrees that if, for any reason, a
prepayment of all or any portion of the principal amount of this Note is made upon or following any acceleration of the maturity
date by the Lender on account of any Event of Default by the Borrower, then the Borrower shall be obligated to pay concurrently
with such prepayment the fixed rate prepayment charge specified in the foregoing paragraphs. By signing this provision in the space
provided below, the Borrower hereby declares that the Lender's agreement to make the loan evidenced by this Note constitutes adequate
consideration, given individual weight by the Borrower, for this waiver and agreement.

 

 

	 	Borrower:	 
	 	 	 
	 	POINT.360	 
	 	 	 
	 	 	 
	 	By:	 	 
	 	 	Alan R. Steel, Chief Financial Officer	 

 

 

2.          DEFINITIONS

 

2.1          Definitions.
The following definitions are applicable to this Interest Rate Election Rider:

 

		a)	“Alternate Base Rate” shall mean, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day or, (b) the Federal Funds Rate in effect on such day plus 1⁄2 of 1% or (c) the
Applicable Floating Rate on such date (or, if such date is not a Business Day, the immediately preceding Business Day). Any change
in the Alternate Base Rate due to a change in the Prime Rate or, the Federal Funds Rate or the Applicable Floating Rate shall be
effective from and including the effective date of such change in the Prime Rate or, the Federal Funds Rate or the Applicable Floating
Rate, respectively.

 

		b)	"Applicable Floating Rate" shall mean, as of any date, (a) the One-Month LIBOR Rate on
such day multiplied by the Statutory Reserve Rate plus (b) 1.00%, where "Statutory Reserve Rate" means a fraction (expressed
as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established
by the Board of Governors of the Federal Reserve System with respect to the One-Month LIBOR Rate for Eurocurrency funding (currently
referred to as "Eurocurrencies Liabilities" in Regulation D of the Board of Governors of the Federal Reserve System),
including those reserve percentages imposed pursuant to Regulation D, adjusted automatically and as of the effective date of any
change in any reserve percentage.

 

    	8

    	 

    
 

		c)	“Federal Funds Rate” shall mean, for any day, the weighted average (rounded upwards,
if necessary to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next
1/100 of 1%) of the quotations for such day for such transactions received by the Lender from three Federal funds brokers of recognized
standing selected by it.

 

		d)	“Interest Period” shall mean,

 

		i)	with respect to any LIBOR Rate Balance, one month.

 

		e)	“LIBOR Rate" shall mean the rate determined by the Lender as being the U.S. dollar London
Interbank Offered Rate for such periods appearing on the Bloomberg British Bankers Association LIBOR page BBAM - Official BBA LIBOR
Fixing at approximately 11:00 a.m. (London time) on the second Business Day prior to requesting a LIBOR Rate Balance, or on the
second Business Day prior to the initial draw, or on the second Business Day prior to the next Interest Period.

 

		f)	"One-Month LIBOR Rate" shall mean, on any day, the rate determined by the Lender as being
the U. S. dollar London Interbank Offered Rate for an interest period of one month appearing on the Bloomberg British Bankers Association
LIBOR page BBAM - Official BBA LIBOR Fixing at approximately 11:00 a.m. (London time).

 

		g)	“Prime Rate” shall mean the rate per annum from time to time established by the Lender
as the Prime Rate and made available by the Lender at its main office or, in the discretion of the Lender, the base, reference
or other rate then designated by the Lender for general commercial loan reference purposes, it being understood that such rate
is a reference rate, not necessarily the lowest, established from time to time, which serves as the basis upon which effective
interest rates are calculated for loans making reference thereto.

 

2.2           Other Terms.
Terms set forth in this Note which are defined in the Note shall have the meanings set forth in the Note.

 

    	9

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