UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/T/A
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the fiscal year ended ________________________
OR
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the transition period from January 1, 2007 to June 30,
2007
Commission
File Number 001-33468
POINT.360
(Exact
name of registrant as specified in its charter)
|
California
(State
or other jurisdiction of
incorporation
or organization)
|
01-0893376
(I.R.S.
Employer Identification No.)
|
|
|
|
|
2777
North Ontario Street, Burbank, CA
(Address
of principal executive offices)
|
91504
(Zip
Code)
|
Registrant's
telephone number, including area code (818) 565-1400
Securities
registered pursuant to Section 12(b) of the Act:
Common
Stock, no par value.
Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act.
Yes o
No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Yes
o
No
x
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x
No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K/T or any amendment
to
this Form 10-K/T. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer”
in Rule
12b-2 of the Exchange Act. (Check one):
Large
accelerated filer ¨
Accelerated
filer ¨
Non-accelerated
filer x
Indicate
by check mark if whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes ¨
No
x
The
aggregate market value of the voting common equity held by non-affiliates of
the
registrant as of the first business day that the registrant became a publicly
traded entity (August 14, 2007) was approximately $15.0 million. As of November
12, 2007, there were 10,553,410 shares of Common Stock outstanding.
EXPLANATORY
NOTE
The
purpose of this amendment is to include the information required by Part III
of
Form 10-K which was omitted from the Company’s Form 10-K/T as originally filed
on November 12, 2007.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The
Company was formed as a wholly-owned subsidiary (named “New 360”) of Point.360
(“Parent Company”) in April 2007. The post-production assets of the Parent
Company were contributed to New 360 on August 14, 2007, after which all New.360
common stock was distributed to the Parent Company’s shareholders. New 360
subsequently changed its name to Point.360 after the merger of the Parent with
DG FastChannel, Inc.
Our
executive officers and directors were previously executive officers and
directors of the Parent Company. Executive and director compensation information
shown below is for the transition period January 1 to June 30, 2007, which
compensation was paid by the Parent Company.
Executive
Officers and Directors
The
directors and executive officers of the Company are as follows:
|
Name
|
Age
|
Position
|
| |
|
|
|
Haig
S. Bagerdjian
|
51
|
Chairman
of the Board of Directors, President and
Chief
Executive Officer
|
| |
|
|
|
Alan
R. Steel
|
62
|
Executive
Vice President, Finance and Administration,
Chief
Financial Officer and Secretary
|
| |
|
|
|
Robert
A. Baker
|
68
|
Director
|
| |
|
|
|
Greggory
J. Hutchins
|
45
|
Director
|
| |
|
|
|
Sam
P. Bell
|
70
|
Director
|
| |
|
|
|
G.
Samuel Oki
|
56
|
Director
|
Directors
are elected at each annual meeting of shareholders, and each executive officer
serves until his resignation, death, or removal by the Board of
Directors.
HAIG
S.
BAGERDJIAN became Chairman of the Board of the Parent Company in September
2001
and was appointed President and Chief Executive Officer in October 2002. He
was
appointed to these positions with the Company in April 2007. He was Executive
Vice President of Syncor International Corporation, a leading provider of
radiopharmaceuticals, comprehensive nuclear pharmacy services and medical
imaging services, from 1991 to 2002. From 1987 to 1991, he served in several
executive level positions at Calmark Holding Corporation. He also was General
Counsel for American Adventure, Inc., which was a subsidiary of Calmark Holding.
Mr. Bagerdjian received a J.D. from Harvard Law School and is admitted to the
State Bar of California. Mr. Bagerdjian is a director of Innodata-Isogen, Inc.
ALAN
R.
STEEL became Executive Vice President, Finance and Administration and Chief
Financial Officer of the Parent Company in November 2000. He was appointed
to
these positions with the Company in April 2007. From 1994 to 2000, Mr. Steel
was
Vice President, Finance and Chief Financial Officer of Advanced Machine Vision
Corporation, a NASDAQ listed company involved in research, development,
manufacturing and sales of sophisticated vision sorting and defect removal
equipment for food, paper, tobacco and other markets. From 1983 to 1994, Mr.
Steel was Vice President and Chief Financial Officer of DDL Electronics, Inc.,
a
New York Stock Exchange listed company in the electronics industry. Mr. Steel
served as controller of DDL from 1980-1983. Mr. Steel was previously a financial
manager for Atlantic Richfield Company and a certified public accountant with
Arthur Andersen & Co.
ROBERT
A.
BAKER is the President and Chief Executive Officer of RAB Associates, a Los
Angeles, California-based firm specializing in financial reorganizations, crisis
management and equity receiverships, which he founded in 1974. Prior to
establishing RAB Associates, Mr. Baker was the President and CEO of American
Management Company, a management consulting firm specializing in computer system
design and programming.
GREGGORY
J. HUTCHINS is a tax partner at Holthouse Carlin & Van Trigt, LLP, a public
accounting firm. Prior to joining Holthouse Carlin & Van Trigt in January
1993, Mr. Hutchins served as Senior Tax Manager for KPMG Peat Marwick, managing
corporate and high net worth individual clients from August 1984 until December
1992.
SAM
P.
BELL was President of Los Angeles Business Advisors (LABA) from 1996 to 2004,
at
which time, LABA ceased operations. LABA was comprised of 30 chief executive
officers of major companies in the Los Angeles region and focused on high impact
projects where their collective resources could be utilized to positively
influence the economic vitality of the area. Prior to joining LABA, Mr. Bell
was
Area Managing Partner of Ernst & Young, certified public accountants, for
the Pacific Southwest Region, retiring in 1996 after 39 years with the firm.
Mr.
Bell currently serves, or has served in the past, in high level positions for
numerous charitable and educational concerns, and is a current panel member
for
the NASDAQ in reviewing filing issues for NASDAQ-listed companies. Mr. Bell
is
currently a board member of TCW Convertible Securities Fund, Inc., TCW Galileo
Funds and Broadway National Bank.
G.
SAMUEL
OKI has served as President of Meta Information Services, Inc., a database
and
information management services enterprise, since 1982. Mr. Oki is also active
as an officer and board member of a number of closely held companies in the
electronic information management sector. Mr. Oki has a B.S. degree in
Horticulture from Colorado State University and an M.B.A. from the University
of
Southern California.
Committees
of the Board of Directors
The
Company’s Board of Directors has the following committees:
Audit
Committee
The
Audit
Committee of our Board of Directors is comprised of Messrs. Oki, Baker and
Bell
(Chairman). All members of our Audit Committee are independent directors as
required by the listing standards of the Nasdaq Global Market and the SEC.
Messrs. Oki, Baker and Bell are each an “audit committee financial expert” as
defined by regulations of the SEC.
Our
Audit
Committee assists our Board in its oversight of our financial reporting process.
Our management has primary responsibility for the financial statements and
the
reporting process, including systems of internal controls. Our independent
auditors are responsible for auditing our financial statements and expressing
an
opinion as to their conformity to accounting principles generally accepted
in
the United States.
In
the
performance of its oversight function, our Audit Committee reviews and discusses
with management and the independent auditors our audited financial statements.
Our Audit Committee discusses with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61 and Auditing
Standard No. 2 relating to communication with audit committees. In
addition, our Audit Committee receives from the independent auditors the written
disclosures and letter required by Independence Standards Board Standard
No. 1 relating to independence discussions with audit committees. Our Audit
Committee also discusses with the independent auditors their independence from
Point.360 and our management and considers whether the independent auditor’s
provision of non-audit services to our company is compatible with maintaining
the auditors’ independence.
Our
Audit
Committee discusses with our internal and independent auditors the overall
scope
and plans for their respective audits. Our Audit Committee meets with the
internal and independent auditors, with and without management present, to
discuss the results of their examinations, their evaluations of our internal
controls and the overall quality of our financial reporting. In addition, our
Audit Committee meets with our Chief Executive Officer and Chief Financial
Officer to discuss the processes that they have undertaken to evaluate the
accuracy and fair presentation of our financial statements and the effectiveness
of our system of disclosure controls and procedures.
Compensation
Committee
The
Compensation Committee of our Board of Directors is comprised of Messrs. Oki
(Chairman), Hutchins, Bell and Baker. Our Compensation Committee has oversight
responsibility for the compensation programs for our executive officers and
other employees. All members of our Compensation Committee are independent
directors as required by (1) the listing standards of the Nasdaq Global
Market, (2) relevant federal securities laws and regulations, including
Section 16 of the Securities Exchange Act of 1934, and
(3) Section 162(m) of the Code.
Nominating
and Governance Committee
The
Nominating and Governance Committee of our Board of Directors is comprised
of
Messrs. Baker (Chairman) Hutchins, Bell and Oki. Our Nominating and Governance
Committee considers and recommends candidates for election to our Board, advises
our Board on director compensation, oversees performance evaluations of our
Board and Board committees and advises our Board on corporate governance
matters. All members of our Nominating and Governance Committee are independent
directors as required by the listing standards of the Nasdaq Global
Market.
Our
Nominating and Governance Committee will consider and recommend candidates
for
election to our Board. The Committee will also consider candidates for election
to our Board submitted by shareholders. Each member of the committee
participates in the review and discussion of director candidates. In addition,
a
member of our Board of Directors who is not on the committee may meet with
and
evaluate the suitability of candidates. In making its selections of candidates
to recommend for election, the committee will seek persons who have achieved
prominence in their field and who possess significant experience in areas of
importance to our company. The minimum qualifications that our Nominating and
Governance Committee will require in any nominated candidate will include
integrity, independence, forthrightness, analytical skills and the willingness
to devote appropriate time and attention to our affairs. Candidates would also
need to demonstrate a willingness to work as part of a team in an atmosphere
of
trust and a commitment to represent the interests of all our shareholders rather
than those of a specific constituency. Successful candidates will also need
to
demonstrate significant experience in areas of importance to our company, such
as general management, finance, marketing, technology, law, international
business or public sector activities
Code
of Ethics
On
May
30, 2007, the Company adopted a Code of Ethics (the “Code”) applicable to the
Company’s Chief Executive Officer, Chief Financial Officer and all other
employees. Among other provisions, the Code sets forth standards for honest
and
ethical conduct, full and fair disclosure in public filings and shareholder
communications, compliance with laws, rules and regulations, reporting of code
violations and accountability for adherence to the Code. The text of the Code
has been posted on the Company’s website (www.point360.com).
A copy
of the Code can be obtained free-of-charge upon written request to:
Corporate
Secretary
Point.360
2777
North Ontario Street
Burbank,
CA 91504
If
the
Company makes any amendment to, or grant any waivers of, a provision of the
Code
that applies to our principal executive officer or principal financial officer
and that requires disclosure under applicable SEC rules, we intend to disclose
such amendment or waiver and the reasons for the amendment or waiver on our
website.
Section
16(a) Beneficial Ownership Reporting Compliance
Under
Section 16(a) of the Securities Exchange Act of 1934 and rules promulgated
thereunder, the Company’s directors, executive officers, and any person holding
beneficially more than 10% of the Company’s common stock are required to report
their ownership of the Company’s securities and any changes in that ownership to
the Securities and Exchange Commission and to file copies of the reports with
the Company. Specific due dates for these reports have been established, and
the
Company is required to report in this Annual Report on Form 10-K/T/A any
failures to file by these dates during the last fiscal year.
Based
upon a review of filings with the SEC and written representations that no other
reports were required, the Company believes that all of its directors, executive
officers and persons owning more than 10% of the Company’s common stock complied
during the six months ended June 30, 2007 with the reporting requirements of
Section 16(a) of the Exchange Act.
ITEM
11. EXECUTIVE COMPENSATION
Compensation
of Directors
Each
director who is not an employee of the Company is paid a cash fee of $3,000
per
quarter, $750 for each meeting attended in person and $500 for each meeting
attended telephonically. Board committee members receive $500 for each meeting
not held in conjunction with a Board meeting. The chairman of the audit
committee receives $5,000 per year, and chairmen of other board committees
receive $2,500 per year. Each director also receives an annual fully-vested
stock option grant to purchase 7,500 shares at an exercise price equal to the
fair market value on the date of any annual meeting at which the director is
reelected to the Board. Members of the Board who are not employees of the
Company receive options to purchase 15,000 shares of Common Stock upon their
initial election to the Board. These options vest in 50% increments over the
two-year period following the date of grant. Directors are also reimbursed
for
travel and other reasonable expenses relating to meetings of the
Board.
The
following table sets forth for each director who is not also a named executive
in the Summary Compensation Table, compensation for the six months ended June
30, 2007:
|
Director
Compensation
|
|
| |
|
Fees
Earned or
|
|
Option
|
|
|
|
|
Name
|
|
Paid
in Cash ($)
|
|
Awards
($)
|
|
Total
($)
|
|
|
Robert
A. Baker
|
|
$
|
12,000
|
|
$
|
-
|
|
$
|
12,000
|
|
|
Greggory
J. Hutchins
|
|
|
10,250
|
|
|
-
|
|
|
10,250
|
|
|
Sam
P. Bell
|
|
|
13,250
|
|
|
-
|
|
|
13,250
|
|
|
G.
Samuel Oki
|
|
|
12,000
|
|
|
-
|
|
|
12,000
|
|
Executive
Compensation Discussion and Analysis
Overview
of Compensation Program
The
Compensation Committee (for purposes of this analysis, the “Committee”) of the
Board has responsibility for establishing, implementing and continually
monitoring adherence with Point.360’s compensation philosophy. The Committee
ensures that the total compensation paid to the named executives is fair,
reasonable and competitive. Generally, the types of compensation and benefits
provided to the named executives are similar to those provided to other
executive officers.
Compensation
Philosophy and Objectives
The
Committee believes that the most effective executive compensation program is
one
that is designed to reward the achievement of specific annual, long-term and
strategic goals by Point.360, and which aligns executives’ interests with those
of the stockholders by rewarding performance above established goals, with
the
ultimate objective of improving shareholder value. The Committee evaluates
both
performance and compensation to ensure that Point.360 maintains its ability
to
attract and retain superior employees in key positions and that compensation
provided to key employees remains competitive relative to the compensation
paid
to similarly situated executives of our peer companies. To that end, the
Committee believes executive compensation packages provided by Point.360 to
its
executives, including the named executive officers, should include both cash
and
stock-based compensation that reward performance as measured against established
goals.
Role
of the Chief Executive Officer in Compensation Decisions
The
Committee makes all compensation decisions for the named executive officers
and
approves recommendations regarding equity awards to other executives of
Point.360. Decisions regarding the non-equity compensation of other executives
are made by the Chief Executive Officer in concert with the Committee.
The
Chief
Executive Officer reviews the performance of various executives. The conclusions
reached and recommendations based on these reviews, including with respect
to
salary adjustments and annual award amounts, are presented to the Committee.
The
Committee can exercise its discretion in modifying any recommended adjustments
or awards to executives.
Setting
Executive Compensation
Based
on
the foregoing objectives, the Committee has structured Point.360’s annual and
long-term incentive-based cash and non-cash executive compensation to motivate
executives to achieve the business goals set by Point.360 and reward the
executives for achieving such goals. In furtherance of this, the Committee
periodically engages outside human resources consulting firms, to conduct
reviews of its total compensation program for the Chief Executive Officer as
well as for other key executives. The reviews provide the Committee with
relevant market data and alternatives to consider when making compensation
decisions for the Chief Executive Officer and on the recommendations being
made
by Point.360’s management for executives other than the Chief Executive
Officer.
In
making
compensation decisions, the Committee compares each element of total
compensation against benchmarks prepared by the consultants for companies of
a
similar size and complexity as Point.360.
Point.360
competes with many larger companies for top executive-level talent. As such,
the
Committee generally sets compensation for executives at the 50th
to
75th
percentile of compensation paid to similarly situated executives of the
companies comprising the benchmark group. Variations on this objective may
occur
as dictated by the experience level of the individual and market factors. These
objectives recognize the Committee’s expectation that, over the long term,
Point.360 will generate shareholder returns in excess of the average of its
peer
group.
A
significant percentage of total compensation is allocated to incentives as
a
result of the philosophy mentioned above. There is no pre-established policy
or
target for the allocation between either cash and non-cash or short-term and
long-term incentive compensation. Rather, the Committee reviews information
provided by Cook to determine the appropriate level and mix of incentive
compensation. Income from such incentive compensation is realized as a result
of
the performance of Point.360 or the individual, depending on the type of award,
compared to established goals.
2007
Executive Compensation Components
For
the
six months ended June 30, 2007, the principal components of compensation for
named executive officers were:
|
|
· |
performance-based
incentive compensation;
|
|
|
· |
long-term
equity incentive compensation; and
|
|
|
· |
other
personal benefits.
|
Base
Salary
Point.360
provides named executive officers and other employees with base salary to
compensate them for services rendered during the fiscal year. Base salary ranges
for named executive officers are determined for each executive based on his
or
her position and responsibility by using market data. Base salary ranges are
designed so that salary opportunities for a given position will be between
80%
and 125% of the midpoint of the base salary established for each
range.
During
its review of base salaries for executives, the Committee primarily considers:
| |
·
|
market
data provided by our outside
consultants;
|
| |
·
|
internal
review of the executive’s compensation, both individually and relative to
other executive officers; and
|
|
|
· |
individual
performance of the executive.
|
Salary
levels are typically considered annually as part of Point.360’s performance
review process as well as upon a promotion or other change in job
responsibility. Merit based increases to salaries of named executives officers
are based on the Committee’s assessment of the individual’s performance.
Performance
- Based Incentive Compensation
The
Executive Bonus Plan (“EBP”)
is
an annual cash incentive program for executives including the named executives.
The EBP provides guidelines for the calculation of annual non-equity incentive
based compensation, subject to Committee oversight and modification. The EBP
includes various incentive levels based on the participant’s accountability and
impact on Point.360 operations, with target award opportunities that are
established as a percentage of base salary. These targets range from 10% of
base
salary to 30% of base salary for Point.360’s named executive
officers.
For
the
named executive officers, 70% of the award is based upon achievement of
corporate financial objectives relating to earnings, and the remaining 30%
of an
executive’s EBP award is based upon the accomplishment of individual goals. The
Committee may also grant discretionary bonuses for outstanding performance.
At
the
beginning of February of each fiscal year, the Committee sets minimum, target
and maximum levels for each component of the corporate financial objective
portion of the EBP. Payment of awards under the EBP are based upon the
achievement of such objectives for the current year. Named executive officers
participating in the EBP receive:
| |
·
|
no
payment for the corporate financial objective portion of the EBP
award
unless Point.360 achieves the minimum performance level (as computed
for
the total corporate financial objective
portion);
|
| |
·
|
a
payment of less than 7% of base salary for the corporate financial
objective portion of the EBP award if Point.360 achieves or exceeds
the
minimum performance level;
|
| |
·
|
a
payment of at least 7% but less than 14% of base salary for the corporate
financial objective portion of the EBP award if Point.360 achieves
or
exceeds the target performance level but does not attain the “stretch”
performance level;
|
| |
·
|
a
payment of 21% of base salary for corporate financial objective portion
of
the EPB award if Point.360 achieves or exceeds the maximum performance
levels; and
|
| |
·
|
a
payment of remaining portion of the award based on achievement of
individual goals.
|
For
executives, other than the named executives, the EBP award opportunity is based
on achievement of Point.360, group and facility financial objectives, in
addition to achievement of individual goals.
Upon
completion of the fiscal year, the Committee assesses the performance of
Point.360 for the corporate financial objective of the EBP comparing the actual
fiscal year results to the pre-determined minimum, target, stretch and maximum
levels. In making the annual determination of the minimum, target, stretch
and
maximum levels, the Committee may consider the specific circumstances facing
Point.360 during the coming year. Targets are set in alignment with Point.360’s
strategic plan and expectations regarding earnings performance.
Over
the
past five years, the Parent Company achieved performance in excess of the target
level one time. The payout percentage in that year was in accordance with the
EBP. Additionally, the Parent Company’s Committee authorized discretionary
bonuses to selected executives and the named executives in two of the past
five
years.
Long-term
Equity Compensation
Under
Point.360’s 2007 Equity Incentive Plan the (“2007 Plan”), the Committee may
grant participants shares of Point.360’s common stock, restricted stock, share
units, stock options, stock appreciation rights and/or performance units.
All
awards of stock options under the 2007 Plan will be made at the market price
at
the time of the award. Awards of stock options to executives are generally
made
annually by the Committee. Newly hired or promoted executives may be granted
awards of stock options on their hire or promotion date. Grants of stock options
to newly hired executives are made at the next regularly scheduled Committee
meeting on or following their hire date.
Perquisites
and Other Personal Benefits
Point.360
provides named executive officers with perquisites and other personal benefits
that Point.360 and the Committee believe are reasonable and consistent with
its
overall compensation program to better enable Point.360 to attract and retain
superior employees for key positions. The Committee periodically reviews the
levels of perquisites and other personal benefits provided to named executive
officers.
The
named
executive officers are provided either the use of a company automobile or an
automobile allowance and reimbursement of health insurance costs under the
health plan available to all Point.360 employees.
Attributed
costs of the personal benefits described above for the named executive officers
for the six months ended June 30, 2007 are included in the “Summary Compensation
Table.”
Point.360
has entered into Severance Agreements with certain key employees, including
the
named executive officers. The Severance Agreements are designed to promote
stability and continuity of senior management. Information regarding applicable
payments under such agreements for the named executive officers is provided
under the heading “Severance Agreements.”
Compensation
Committee Report
The
Compensation Committee of Point.360 has reviewed and discussed the Compensation
Discussion
and Analysis required by Item 402(b) of Regulation S-K with management and,
based on such review and discussions, the Compensation Committee recommended
to
the Board that the Compensation Discussion and Analysis be included in the
Company’s report on Form 10-K/T.
|
THE
COMPENSATION COMMITTEE
|
| |
|
G.
Samuel Oki, Chairman
|
|
Sam
P. Bell
|
|
Greggory
J. Hutchins
|
|
Robert
A. Baker
|
Executive
Compensation
Summary
Compensation Table
The
following table sets forth the compensation for the Chief Executive Officer
(“CEO”) and the Chief Financial Officer for the six-month period ended June 30,
2007. No other executive officer’s total compensation for that period exceeded
$100,000 on an annualized basis.
|
Name
and Principal
Position
|
|
Six-monthPeriod
|
|
Salary
($)
|
|
Bonus
|
|
Option
Awards
($)
|
|
All
Other
Compensation
|
|
Total
($)
|
|
|
Haig
S. Bagerdjian
Chairman,
President and
|
|
|
2007
|
|
$
|
167,000
|
|
$
|
-
|
|
$
|
-
|
|
$
|
10,000
|
|
$
|
278,000
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan
R. Steel
|
|
|
2007
|
|
$
|
111,000
|
|
$
|
-
|
|
$
|
-
|
|
$
|
5,000
|
|
$
|
266,000
|
|
|
Executive
Vice President, Finance and Administration, Chief Financial Officer,
and
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Amounts
consist of annual contributions made to the Company’s 401(k) plan, health
insurance premiums and automobile expenses paid by the Company for the benefit
of the named executive officer.
Stock
Options Granted in the six months ended June 30, 2007
No
stock
options or incentive stock awards were granted to the executive officers named
in the Summary Compensation Table during the year six months ended June 30,
2007.
There
were no unexercised stock options or other outstanding equity awards as of
June
30, 2007 for the executive officers named in the Summary Compensation
Table.
Aggregated
Option Exercises in six months ended June 30, 2007
The
following table shows the options granted by the Parent Company that were
exercised by each of the Company’s executive officers who are named in the
Summary Compensation Table during the six months ended June 30, 2007. No options
have been granted by the Company since its inception in April 2007.
Option
Exercises
|
Name
|
|
Number
of Shares
Acquired
on
Exercise
(#)
|
|
Value
Realized on
Exercise
($)(1)
|
|
| |
|
|
|
|
|
|
Haig
S. Bagerdjian
|
|
|
435,000
|
|
$
|
795,000
|
|
|
Alan
R. Steel
|
|
|
316,300
|
|
$
|
631,000
|
|
(1)Amounts
shown represent the difference between the market price of the underlying stock
on the exercise date and the exercise price.
Equity
Incentive Plan
Point.360’s
Board of Directors has adopted the Point.360 2007 Equity Incentive Plan (the
“Plan”). Up to 2,000,000 shares of our common stock may be issued under the
Plan. Pursuant to the Plan, officers, non-employee directors and employees
of
Point.360, as well as other persons who render services to or are otherwise
associated with Point.360, are eligible to receive incentive and/or nonqualified
stock options. The Plan expires in April 2017. The Plan is administered by
the
Board of Directors. The selection of participants, allotments of shares,
determination of price and other conditions or purchase of options will be
determined by the Board or a Stock Option Committee appointed by the Board
at
its sole discretion in order to attract and retain persons instrumental to
the
success of Point.360. Incentive stock options granted under the Plan are
exercisable for a period of up to ten years from the date of grant at an
exercise price which is not less than the fair market value of the common stock
on the date of the grant, except that the term of an incentive stock option
granted under the Plan to shareholder owning more than 10% of the voting power
of Point.360 on the date of grant may not exceed five years and its exercise
price may not be less than 110% of the fair market value of the common stock
on
the date of the grant. Non-qualified options granted under the Plan may not
be
granted at less than the fair market value of the common stock on the date
of
grant.
Severance
Agreements
The
Company has entered into severance agreements with Messrs. Bagerdjian and Steel.
The agreements provide that if Mr. Bagerdjian or Mr. Steel is terminated
following a change in control during the term of the agreements other than
for
cause, disability or without good reason (as defined), then Mr. Bagerdjian
and
Mr. Steel shall receive a severance payment equal to 275% and 200%,
respectively, of the sum of (i) base salary and (ii) the higher of (x) the
average bonus earned during the preceding three years or (y) the target annual
bonus for the year in which the termination occurs. If terminated under the
severance agreement, Mr. Bagerdjian and Mr. Steel would also receive employee
benefits for specified periods of time. Furthermore, previously granted stock
options shall vest fully. Under certain circumstances, amounts paid pursuant
to
the severance agreements will be subject to a tax gross-up payment if such
amounts are subject to an excise tax as contemplated by Section 280G of the
Internal Revenue Code. For purposes of the severance agreements, a change of
control shall be deemed to have occurred if (i) a tender offer shall be made
and
consummated for the ownership of 35% or more of the outstanding voting
securities of the Company, (ii) the Company shall be merged or consolidated
with
another corporation and as result of such merger or consolidation less than
50%
of the outstanding voting securities of the surviving or resulting corporation
shall be owned in the aggregate by the former shareholders of the Company,
other
than affiliates (within the meaning of the Exchange Act) of any party to such
merger or consolidation, as the same shall have existed immediately prior to
such merger or consolidation, (iii) the Company shall sell, lease, exchange
or
transfer substantially all of its assets to another corporation, entity or
person which is not a wholly-owned subsidiary, (iv) a person (other than
Executive), as defined in Sections 13(d) and 14 (d) of the Exchange Act, shall
acquire 35% or more of the outstanding voting securities of the Company (whether
directly, indirectly, beneficially or of record, in a single transaction or
a
series of related transactions by one person or more than one person acting
in
concert), or (v) the shareholders of the Company approve a plan or proposal
for
the liquidation or dissolution of the Company.
Assuming
that a triggering event occurred on June 30, 2007, severance amounts payable
would have been $1,388,000 and $628,000 for Messrs. Bagerdjian and Steel,
respectively, plus life, disability and health insurance benefits for 33 months
immediately following the date of termination. The value of such benefits is
estimated to be $14,000 and $20,000 for Messrs. Bagerdjian and Steel,
respectively, based on the cost of such benefits on June 30, 2007.
Indemnification
of Officers and Directors
Point.360’s
Articles of Incorporation limit the liability of our directors. As permitted
by
the California General Corporation Law, directors will not be liable to
Point.360 for monetary damages arising from a breach of their fiduciary duty
as
directors in certain circumstances. Such limitation does not affect liability
for any breach of a director’s duty to Point.360 or its shareholders (1) with
respect to approval by the director of any transaction from which he derives
an
improper personal benefit, (2) with respect to acts or omissions involving
an
absence of good faith, that he believes to be contrary to the best interest
of
Point.360 or our shareholders, that involve intentional misconduct or a knowing
culpable violations of law, that constitute an unexcused pattern or inattention
that amounts to an abdication of his duty to Point.360 or our shareholders,
or
that show a reckless disregard for his duty to Point.360 or our shareholders
in
circumstances in which he was, or should have been aware, in the ordinary course
of performing his duties, of a risk of serious injury to Point.360 or our
shareholders, or (3) based on transactions between Point.360 and our directors
or another corporation with interrelated directors or on improper distribution,
loans or guarantees under applicable sections of the California General
Corporation Law. Such limitation of liability also does not affect the
availability of equitable remedies such as injunctive relief or rescission.
Our
Bylaws state that, to the
maximum extent permitted by the California General Corporation Law and by our
Articles of Incorporation, we will indemnify each of our officers and directors
and may indemnify each of our other agents against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with any proceeding arising by reason of the fact that any such person is or
was
an agent of Point.360. Our Bylaws also state that the indemnification provided
by the Bylaws will not be deemed exclusive of any other rights to which any
person seeking indemnification or advancement of expenses may be entitled under
the Bylaws or any agreement, vote of shareholders, or disinterested directors,
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and that no provision of the Bylaws
will limit or prohibit indemnifica-tion by us to the fullest extent permitted
by
California law.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933,
as
amended (the “Securities Act”), may be permitted to our officers and directors
pursuant to the provisions described above, we have been informed that, in
the
opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth certain information regarding the beneficial
ownership of Common Stock as of September 30, 2007, by (i) each person who
is
known by the Company to own beneficially more than 5% of the outstanding Common
Stock; (ii) each of Point.360’s directors and director nominees; (iii) each
executive officer identified in the Summary Compensation Table; and (iv) all
executive officers and directors of the Company as a group:
|
Name
of Beneficial Owner
|
|
Total
number of shares to be beneficially owned
|
|
Approximate
Percent of Ownership
|
|
| |
|
|
|
|
|
|
Haig
S. Bagerdjian
|
|
|
3,070,234
|
|
|
29.1
|
%
|
|
Julia
Stefanko (1)
|
|
|
1,252,568
|
|
|
11.9
|
%
|
|
Millenco,
L.L.C. (2)
|
|
|
559,131
|
|
|
5.3
|
%
|
|
Robert
A. Baker
|
|
|
11,500
|
|
|
*
|
|
|
Greggory
J. Hutchins
|
|
|
38,500
|
|
|
*
|
|
|
Sam
P. Bell
|
|
|
20,000
|
|
|
*
|
|
|
G.
Samuel Oki
|
|
|
23,600
|
|
|
*
|
|
|
Alan
R. Steel
|
|
|
52,300
|
|
|
*
|
|
| |
|
|
|
|
|
|
|
|
All
directors and executive officers as a group
|
|
|
3,216,134
|
|
|
30.5
|
%
|
|
*
Less than 1%.
|
| |
|
(1)
.
Julia Stefanko’s mailing address is 2777 North Ontario Street, Burbank,
California 91504.
|
| |
|
(2)
.
Millenco, L.L.C.’s business address is 666 Fifth Avenue, 8th Floor, New
York, New York 10103.
|
Equity
Compensation Plan Information
The
following table sets forth information regarding the securities authorized
for
issuance under our equity compensation plans as of June 30, 2007:
|
Plan
Category
|
|
(a)
Number
of Securities
to
be Issued upon
Exercise
of
Outstanding
Options,
Warrants
and Rights
|
|
(b)
Weighted
Average Exercise
Price
of Outstanding
Options,
Warrants and
Rights
|
|
(c)
Number
of Securities
Remaining
Available for
Future
Issuance under
Equity
Compensation
Plans
(Excluding
Securities
Reflected
in Column(a)
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by shareholders
|
|
|
-
|
|
$
|
-
|
|
|
2,000,000
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not
approved
by shareholders
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
During
the six months ended June 30, 2007, the Company paid $11,000 to Holthouse Carlin
& Van Trigt LLP (“HCVT”) for preparation of tax returns and other tax
related services. Mr. Hutchins is a partner in HCVT.
The
Board
of Directors has determined that each director other than the Company’s Chief
Executive Officer, Haig S. Bagerdjian, is “independent”
within the meaning of Rule 4200(a)(15) of the Nasdaq Stock Market, Inc., and
that each member of
the
Audit Committee, the Nominating and Governance Committee and the Compensation
Committee is “independent”
within the meaning of Rule 4200(a)(15).
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Singer
Lewak Greenbaum & Goldstein LLP (“Singer Lewak”) examined, as independent
auditors, the financial statements of the Company for the year ended December
31, 2006 and the six months ended June 30, 2007. The following table shows
the
fees billed to us by Singer Lewak for the audit and other services rendered
by
Singer Lewak during these periods. The Audit Committee has determined that
the
non-audit services rendered by Singer Lewak were compatible with maintaining
Singer Lewak’s independence.
| |
|
2006
|
|
2007
|
|
|
Audit
Fees (1)
|
|
$
|
108,400
|
|
$
|
74,000
|
|
|
Audit-Related
Fees (2)
|
|
|
9,600
|
|
|
-
|
|
|
Total
|
|
$
|
118,000
|
|
$
|
74,000
|
|
|
|
(1) |
Audit
fees represent fees for professional services provided in connection
with
the audit of our financial statements and review of our quarterly
financial statements and audit services provided in connection with
other
statutory or regulatory filings.
|
|
|
(2) |
Audit-related
fees consisted primarily of accounting consultations, and services
rendered in connection with a proposed acquisition and implementation
of
Sarbanes-Oxley Act internal control requirements.
|
All
audit
related and other services rendered by Singer Lewak were pre-approved by the
Audit Committee. The Audit Committee has adopted a pre-approval policy that
provides for the pre-approval of all services performed for us by Singer Lewak.
The policy authorizes the Audit Committee to delegate to one or more of its
members pre-approval authority with respect to permitted services. Pursuant
to
this policy, the Board delegated such authority to the Chairman of the Audit
Committee. All pre-approval decisions must be reported to the Audit Committee
at
its next meeting if not approved in conjunction with an Audit Committee
Meeting.
ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| |
(a)
|
Documents
filed as part of this report:
|
| Exhibit
No. |
Exhibit
Description
|
|
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. § 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
|
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. § 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated:
December 5, 2007
| |
|
|
| |
Point.360
|
|
|
|
| |
By: |
/s/
Alan
R. Steel |
| |
Alan
R. Steel
|
| |
Executive
Vice President,
Finance
and Administration,
Chief
Financial Officer
|
