Exhibit 10.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): October 6, 2017
| Point.360 | ||
| (Exact name of registrant as specified in its charter) |
| California | 001-33468 | 01-0893376 | ||
| (State or other jurisdiction | (Commission | (I.R.S. Employer | ||
| of incorporation) | File Number) | Identification No.) | ||
|
2701 Media Center Drive Los Angeles, CA 90065 |
91504 | |||
| (Address of principal executive offices) | (Zip Code) |
| Registrant’s telephone number, including area code: | (323) 987-9405 |
| (Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth
company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 1.02. Termination of a Material Definitive Agreement
On October 6, 2017, Point.360 (the “Company”) and REEP OFC 2300 Empire CA LLC, the landlord of the Company’s leased facility at 2300 Empire Ave., Burbank CA 91504 (the “Premises”), entered into a Stipulation for Entry of Judgment (the “Agreement”). The Agreement provides that (i) the December 31, 2017 expiration date of the lease for the Premises will be accelerated to December 4, 2017; (ii) the Company will return possession of the Premises and pay to the landlord approximately $0.9 million for past due rent and damages by December 4, 2017; and (iii) assuming the Company complies with (ii) above, the landlord will not assert any administrative priority claim for any post-petition (see Item 8.01 below) rent or charges for the period of occupancy prior to December 4, 2017.
The discussion in the preceding paragraph is qualified in its entirety by the full text of the Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference into this Item 1.02.
Item 2.04. Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.
The Company’s filing of a Bankruptcy Petition (see Item 8.01 for a definition of capitalized terms) described in Item 8.01 constitutes an event of default that could accelerate the Company’s obligations under the following debt instruments (collectively, the “Debt Instruments”):
Term Loan Agreement and related Security Agreement, both dated as of July 8, 2015, among Point.360, Medley Capital Corporation and Medley Opportunity Fund II LP (the “Medley Agreements”).
Amended and Restated Loan and Security Agreement dated July 13, 2016 between the Company and Austin Financial Services, Inc. (the “Austin Agreement”).
As of October 10, 2017, the Company had approximately (i) $6.4 million in outstanding obligations under the Medley Agreements, and (ii) $2.4 million outstanding under the Austin Agreement. The Debt Instruments provide that as a result of the commencement of the Chapter 11 Case, the principal and accrued interest due thereunder shall be automatically and immediately due and payable. Any efforts to enforce such payment obligations under the Debt Instruments are automatically stayed as a result of the filing of the Bankruptcy Petition, and the creditors’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
The Company’s filing of a Bankruptcy Petition could also constitute an event of default under each of the following facility operating leases:
Lease Agreement (Media Center) dated March 29, 2006, between the Company and LEAFS Properties, LP.
Standard Industrial/Commercial Single-Tenant Lease-Net (Hollywood Way) dated October 11, 2016 between Point.360 and HWAY LLC.
Lease Agreement (Empire) effective as of July 1, 2015 (entered into August 24, 2015) between Point.360 and Walton Empire Center V, L.L.C. (lease subsequently assumed by REEP OFC 2300 Empire CA LLC – see Item 1.02).
Except as set forth in Item 1.02 above with respect to the Empire lease, as a result of the filing, the landlords of the facilities may have the right to terminate the leases, regain possession, and require the Company to pay rent and damages as provided in the leases subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
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Item 7.01 Regulation FD Disclosure.
On October 11, 2017, the Company issued a press release announcing the filing of the Chapter 11 Case, as described in Item 8.01. A copy of the press release is being furnished as Exhibit 99.1 and is incorporated into this Item 7.01 by reference.
The information furnished pursuant to Item 7.01, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is not subject to the liabilities of that section and is not deemed incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended (the “Securities Act”), unless specifically identified therein as being incorporated therein by reference.
8.01. Other Events.
On October 10, 2017 (the “Petition Date”), the Company filed a voluntary petition (the “Bankruptcy Petition”) and the case commenced thereby (the “Chapter 11 Case”) under Chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of California (the “Court”). The Company has filed a motion with the Court seeking to administer the Chapter 11 Case under the caption Point.360, a California Corporation (Case No. 2:17-bk-22432-WB). No trustee has been appointed, and the Company will continue to operate its business as “debtor in possession” under the jurisdiction of the Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Court. The Company expects to continue its operations without interruption during the pendency of the Chapter 11 Case.
In connection with the Chapter 11 Case, the Company intends to seek authority to enter into and perform under a debtor-in-possession (“DIP”) financing on terms and conditions to be negotiated with a DIP lender. Any DIP financing will be subject to the entry of an order of the Bankruptcy Court approving the DIP financing.
Item 9.01. Financial Statements and Exhibits.
99.1 Press release dated October 11, 2017
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Point.360 | |||
| October 11, 2017 | By: | /s/ John Schweizer | |
| Name: John Schweizer | |||
| Title: Vice President, Controller | |||
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Exhibit 10.1
Exhibit 99.1
NEWS BULLETIN |
FOR FURTHER INFORMATION:
POINT.360 2701 MEDIA CENTER DRIVE LOS ANGELES, CA 90065 OTC-Pink: PTSX |
AT THE COMPANY:
John Schweizer
Vice President, Controller
(323) 987-9405
FOR IMMEDIATE RELEASE – LOS ANGELES, CA, October 11, 2017
POINT.360 FILES VOLUNTARY PETITION FOR REORGANIZATION – BUSINESS OPERATIONS TO CONTINUE AS USUAL
Point.360 (OTC-Pink: PTSX), a leading provider of integrated media management services, announced today that it has filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Central District of California (the “Bankruptcy Court”). The Company intends to use the filing to reorganize its capital structure and gain access to liquidity, reduce costs and liabilities, optimize its operations and locations to meet customer demands and create the most value for stakeholders. The Company is considering all possible options for maximizing stakeholder value, including further consolidation of facilities. The Company believes that the restructuring will allow it to become more competitive in today’s post production market. It is also reviewing investment options with existing stakeholders and third parties.
Haig S. Bagerdjian, the Company’s Chairman, President and Chief Executive Officer said: “We believe the restructuring is a positive step for the future of the Company and we are committed to providing our customers quality post production services. We value our relationships with our vendors and appreciate their support throughout this process. We will continue to offer the same unparalleled service for which the Company has been known since its founding.”
During the restructuring process, the Company plans to continue to operate its business as usual and to fulfill customer orders and pay vendors. The Company has filed with the Bankruptcy Court, and anticipates receiving approval of, customary motions to allow the Company to make certain necessary payments to employees and vendors that will ensure continued operations through the restructuring and beyond.
About Point.360
Point.360 (PTSX) is a value add service organization specializing in content creation, manipulation and distribution processes integrating complex technologies to solve problems in the life cycle of Rich Media. With locations in greater Los Angeles, Point.360 performs high and standard definition audio and video post production, creates virtual effects and archives and distributes physical and electronic Rich Media content worldwide, serving studios, independent producers, corporations, non-profit organizations and governmental and creative agencies. Point.360 provides the services necessary to edit, master, reformat and archive clients’ audio and video content, including television programming, feature films and movie trailers. Point.360’s interconnected facilities provide service coverage to all major U.S. media centers. See www.point360.com and www.mvf.com.
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Forward-looking Statements
Certain statements in Point.360 press releases may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements regarding (i) the Company’s projected revenues, earnings, cash flow and EBITDA; (ii) planned focus on internal growth and acquisitions; (iii) reduction of facilities and actions to streamline operations; (iv) actions being taken to reduce costs and improve customer service and (v) new business and new acquisitions. Please also refer to the risk factors described in the Company’s SEC filings, including its annual reports on Form 10-K. Such statements are inherently subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from those expected or anticipated in the forward-looking statements. In addition to the factors described in the Company’s SEC filings, the following factors, among others, could cause actual results to differ materially from those expressed herein: (a) lower than expected net sales, operating income and earnings; (b) less than expected growth; (c) actions of competitors including business combinations, technological breakthroughs, new product offerings and promotional successes; (d) the risk that anticipated new business may not occur or be delayed; (e) the risk of inefficiencies that could arise due to top level management changes; (f) general economic and political conditions that adversely impact the Company’s customers’ willingness or ability to purchase or pay for services from the Company and (g) the Company's ability to raise the capital it needs to remain in business.
Additional potential risks and uncertainties associated with the petition include, among others: (i) the Company’s ability to obtain approval with respect to motions in the Chapter 11 case and the Bankruptcy Court’s rulings in the Chapter 11 case and the outcome of the Chapter 11 cases in general; (ii) the length of time the Company will operate under the Chapter 11 case; (iii) risks associated with third-party motions in the Chapter 11 case; (iv) the potential adverse effects of the Chapter 11 case on the Company’s liquidity, results of operations or business prospects; (v) increased legal and advisor costs related to Chapter 11 case and other litigation and the inherent risks involved in a bankruptcy process; (vi) the effect of the Chapter 11 case on the trading price in the Company’s common stock; (vii) the Company’s ability to fulfill its obligations to its customers, suppliers and employees; (viii) the ability of Company employees and customers to benefit from the transaction; (ix) the Company’s access, on favorable terms, to any required financing; and (x) other factors disclosed by the Company from time to time in its filings with the SEC, including those described under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of the Company.
The Company has no responsibility to update forward-looking statements contained herein to reflect events or circumstances occurring after the date of this release.
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