Scott K. Ginsburg
Chief Executive Officer
750 W. John Carpenter Freeway, Suite 700
Irving, Texas 75039
(972) 581-2000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement and the satisfaction (or waiver) of the conditions to this offer described herein.

If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

THE INFORMATION IN THIS PROSPECTUS MAY BE CHANGED OR AMENDED. WE MAY NOT COMPLETE THE EXCHANGE OFFER AND ISSUE THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THIS OFFER OR SALE IS NOT PERMITTED.

OFFER BY DG FASTCHANNEL, INC.
to
Exchange Approximately 0.1895 of a Share of Common Stock
of
DG FastChannel, Inc.
for
Each Outstanding Share of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Point.360

THIS OFFER, AND YOUR RIGHT TO WITHDRAW SHARES OF POINT.360 COMMON STOCK YOU TENDER INTO THIS OFFER, WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON [ ], [ ], 2007, UNLESS WE EXTEND THIS OFFER.

We are offering to exchange approximately 0.1895 shares of DG FastChannel common stock for each share of Point.360 common stock (including the associated preferred share purchase rights) that you validly tender in this offer, on the terms and conditions contained in this prospectus and in the related letter of transmittal. The exact number of shares of DG FastChannel common stock to be exchanged for each share of Point.360 common stock will be obtained by dividing 2,000,000 by the number of shares of Point.360 common stock (excluding shares owned directly or indirectly by DG FastChannel or Point.360) issued and outstanding immediately prior to the consummation of this offer. Based on the closing price of Point.360 common stock as reported on the Nasdaq Global Market on June 7, 2007, the last trading day prior to the printing of this prospectus for which this information was practicably available, we assume that 10,554,730 shares of Point.360 common stock will be issued and outstanding immediately prior to the consummation of this offer (excluding shares owned directly or indirectly by DG FastChannel or Point.360).

This offer is being made pursuant to an Agreement and Plan of Merger and Reorganization, which is referred to throughout this prospectus as the merger agreement, dated as of April 16, 2007, by and among DG FastChannel, Point.360 and New 360, a wholly-owned subsidiary of Point.360. The board of directors of Point.360 has (1) adopted the merger agreement and approved the transactions contemplated thereby, including this offer, and (2) recommended that holders of Point.360 common stock accept this offer and tender their Point.360 common stock to DG FastChannel pursuant to this offer. Haig S. Bagerdjian, the largest stockholder of Point.360 and its chairman, president and chief executive officer, who holds approximately 25.23% of the fully diluted shares of Point.360 common stock, calculated as described in this prospectus, has entered into an agreement with DG FastChannel pursuant to which he will be required to tender his shares in the exchange offer.

This offer is conditioned on (1) there being validly tendered and not properly withdrawn prior to the expiration of this offer at least a majority of the fully diluted shares of Point.360 common stock, calculated as described in this prospectus, (2) the completion of the spin-off of New 360, a wholly-owned subsidiary of Point.360 to which Point.360 will contribute all of the assets owned, licensed or leased by Point.360 that are not used exclusively in connection with the advertising distribution business of Point.360, to the Point.360 shareholders (other than DG FastChannel) and (3) the other conditions described in this prospectus under "The Offer—Conditions of the Offer" on page 46.

After completion of this offer, DG FastChannel will cause Point.360 to complete a merger with and into DG FastChannel, with DG FastChannel continuing as the surviving corporation, in which each outstanding share of Point.360 common stock (except for shares beneficially owned directly or indirectly by DG FastChannel for its own account) will be converted into the right to receive shares of DG FastChannel common stock at the same exchange ratio as used in this offer, subject to appraisal rights to the extent applicable under California law. If after the completion of this offer we beneficially own more than 90% of the outstanding shares of Point.360 common stock or if we exercise our option to purchase additional shares directly from Point.360 to reach the 90% threshold, we may effect this merger without the approval of Point.360 stockholders, as permitted under California and Delaware law.

DG FastChannel is not asking Point.360 stockholders for a proxy at this time and Point.360 stockholders are requested not to send a proxy. Any solicitation of proxies, if required, will be made pursuant to separate proxy solicitation materials complying with the requirements of Section 14(a) of the Securities Exchange Act of 1934, as amended, which is referred to throughout this prospectus as the Exchange Act.

SEE "RISK FACTORS" BEGINNING ON PAGE 24 FOR A DISCUSSION OF ISSUES THAT YOU SHOULD CONSIDER IN DETERMINING WHETHER TO TENDER YOUR SHARES IN THIS OFFER.

DG FastChannel common stock is traded on the Nasdaq Global Market under the symbol "DGIT." Point.360 common stock is traded on the Nasdaq Global Market under the symbol "PTSX."

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN THIS OFFER AND THE SUBSEQUENT MERGER OR DETERMINED IF THE INFORMATION CONTAINED IN THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is [ ], 2007 and it will be distributed on or about [ ], 2007.

As permitted under the rules of the Securities and Exchange Commission (the "SEC"), this prospectus incorporates important business and financial information about DG FastChannel that is contained in documents filed with the SEC but that is not included in or delivered with this prospectus. You may obtain copies of these documents, without charge, from the website maintained by the SEC at www.sec.gov, as well as other sources. See "Additional Information—Where You Can Find Additional Information" on page 91. You may also obtain copies of these documents, without charge, upon written or oral request to our information agent, D.F. King & Co., Inc. ("D.F. King") (Banks and Brokerage Firms, please call (212) 269-5550; all others call toll free: (800) 488-8075; the e-mail address is info@dfking.com). To obtain timely delivery of copies of these documents, you should request them no later than five business days prior to the expiration of this offer. UNLESS THIS OFFER IS EXTENDED, THE LATEST YOU SHOULD REQUEST COPIES OF THESE DOCUMENTS IS [ ], [ ], 2007.

Except as otherwise specifically noted, "DG FastChannel," "we," "our," "us" and similar words in this prospectus refer to DG FastChannel, Inc. We refer to Point.360 as "Point.360" and to New 360 as "New 360."

In "Questions and Answers About the Offer" below and in the "Summary" beginning on page 7, we highlight selected information from this prospectus, but we have not included all of the information that may be important to you. To better understand the offer and the subsequent merger, and for a more complete description of their legal terms, you should carefully read this entire prospectus, including the section entitled "Risk Factors" on page 24 and the annexes hereto, as well as the documents we have incorporated by reference into this prospectus. See "Additional Information—Where You Can Find Additional Information" on page 91.

You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with information different from that contained or incorporated by reference in this prospectus. The information contained in this prospectus and the documents incorporated by reference are accurate only as of their respective dates, regardless of the time of delivery of this prospectus. Our business, financial condition, results of operations and prospects may have changed since those dates.

This prospectus contains "forward-looking statements." These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management of DG FastChannel, whose assumptions are based on information currently available to DG FastChannel management. When we use words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "should," "likely," "potential" or similar expressions, we are making forward-looking statements. Forward-looking statements include, but are not limited to, the information concerning possible or assumed future results of operations of DG FastChannel and Point.360 set forth in this prospectus.

Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. The actual results of the combined company after the merger may differ materially from those expressed in the forward-looking statements. Many of the factors that will determine these results and values are beyond DG FastChannel's or Point.360's ability to control or predict. Point.360 shareholders are cautioned not to put undue reliance on any forward-looking statements.

For a discussion of some of the factors that may cause actual results to differ materially from those suggested by the forward-looking statements, please read carefully the information under "Risk Factors" beginning on page 24.

The list of factors discussed under "Risk Factors" that may affect future performance and the accuracy of forward-looking statements is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

This brief summary highlights selected information from this prospectus. It does not contain all of the information that is important to Point.360 shareholders. Point.360 shareholders are urged to read carefully the entire prospectus and the other documents referred to and incorporated by reference in this prospectus to fully understand the offer and the merger. In particular, shareholders of Point.360 should read the documents attached to this prospectus, including the merger agreement, which is attached as Annex A, and the contribution agreement, which is attached as Annex B. For a guide as to where you can obtain more information on DG FastChannel, see "Additional Information—Where You Can Find Additional Information" on page 91.

We are proposing to acquire all of the outstanding shares of Point.360 common stock. We are offering to exchange approximately 0.1895 shares of DG FastChannel common stock for each share of Point.360 common stock (including the associated preferred share purchase rights) that you validly tender in the offer, on the terms and conditions contained in this prospectus and in the related letter of transmittal. The exact number of shares of DG FastChannel common stock to be exchanged for each share of Point.360 common stock will be obtained by dividing 2 million by the number of shares of Point.360 common stock (excluding shares owned directly or indirectly by DG FastChannel or Point.360) issued and outstanding immediately prior to the consummation of the offer. Based on the closing price of Point.360 common stock as reported on the Nasdaq Global Market on June 7, 2007, the last trading day prior to the printing of this prospectus for which this information was practicably available, we assume that 10,554,730 shares of Point.360 common stock will be issued and outstanding immediately prior to the consummation of the offer (excluding shares owned directly or indirectly by DG FastChannel or Point.360).

the right to receive shares of DG FastChannel common stock at the same exchange ratio as used in the offer, subject to appraisal rights to the extent applicable under California law. If, after the completion of the offer, either as a result of the offer alone or in conjunction with the exercise of our option to purchase shares directly from Point.360, we beneficially own more than 90% of the outstanding shares of Point.360 common stock, we may effect the merger without the approval of Point.360 shareholders, as permitted under California and Delaware law. If, on the other hand, after the completion of the offer, we beneficially own more than 50%, but less than 90%, of the outstanding shares of Point.360 common stock, a meeting of Point.360 shareholders and the affirmative vote of at least a majority of the shares of Point.360 common stock outstanding on the record date for such meeting will be needed to complete the merger. Since DG FastChannel will own a majority of the shares of Point.360 common stock outstanding on the record date, approval of the merger by Point.360 shareholders will be assured.

The number of shares of DG FastChannel common stock issued to Point.360 shareholders in the offer and the merger will constitute approximately 11% of the outstanding common stock of the combined company after the merger, without regard to DG FastChannel stock options, and approximately 10% on a fully diluted basis.

Upon the terms and subject to the conditions of the offer, promptly after the expiration of the offer, we will accept shares of Point.360 common stock that are validly tendered and not properly withdrawn in exchange for shares of DG FastChannel common stock. Assuming 10,554,730 shares of Point.360 common stock are issued and outstanding immediately prior to the consummation of the offer (excluding shares owned directly or indirectly by DG FastChannel or Point.360), each share of Point.360 common stock validly tendered and not properly withdrawn prior to the expiration of the offer will be exchanged for 0.1895 shares of DG FastChannel common stock.

We are commencing the offer on [ ], 2007, the date of the distribution of this prospectus. The offer is scheduled to expire at 12:00 midnight, New York City time, on [ ], [ ], 2007, unless we extend the period of the offer. All references to the expiration of the offer mean the time of expiration, as extended.

The offer is subject to a number of conditions, and DG FastChannel will not be required to accept any tendered shares for exchange if any of these conditions are not satisfied or, where permissible, waived as of the expiration of the offer. These conditions provide, among other things, that:

Subject to the right of DG FastChannel to cause the offer to be extended, DG FastChannel can terminate the merger agreement at the expiration date of the offer if no shares of Point.360 common stock have been acquired by DG FastChannel. If any condition to the offer is not satisfied or, if permissible, waived, by any scheduled expiration date of the offer, then we may extend the expiration date from time to time. Each extension may last for such period as DG FastChannel may determine. We also have the right to extend the offer for any period of time required by the applicable rules and regulations of the SEC. We may elect to provide a subsequent offering period of up to 20 business days after the acceptance of shares of Point.360 common stock in the offer if, on the expiration date of the offer, all of the conditions to the offer have been satisfied or waived, but the total number of shares of Point.360 common stock that have been validly tendered and not withdrawn pursuant to the offer is less than 90% of the total number of shares of Point.360 common stock then outstanding or the requirements of Rule 14d-11 under the Exchange Act have been met. DG FastChannel or Point.360 can terminate the merger agreement if the offer is not consummated by March 31, 2008. We can extend the offer by giving oral or written notice of an extension to American Stock Transfer & Trust Company, the exchange agent and depository for the offer. If we decide to extend the offer, we will make a public announcement to that effect no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration. We are not giving any assurance that we will extend the offer. During any extension, all shares of Point.360 common stock previously tendered and not validly withdrawn will remain deposited with the exchange agent and depository, subject to your right to withdraw your shares of Point.360 common stock. If we exercise our right to use a subsequent offering period, we will first consummate the exchange with respect to the shares tendered and not withdrawn in the initial offer period.

Subject to the SEC's applicable rules and regulations and subject to the limitations contained in the merger agreement, we also reserve the right, in our discretion:

We will follow any extension, termination, waiver or amendment, as promptly as practicable, with a public announcement. Subject to the requirements of the Exchange Act and other applicable law, and without limiting the manner in which we may choose to make any public announcement, we assume no obligation to publish, advertise or otherwise communicate any public announcement other than by making a release to Business Wire.

For you to validly tender shares of Point.360 common stock into the offer, you must do one of the following:

These deliveries and arrangements must be made before the expiration of the offer. TENDERS BY NOTICE OF GUARANTEED DELIVERY WILL NOT BE ACCEPTED.

You may withdraw any shares of Point.360 common stock that you previously tendered into the offer at any time before the expiration of the offer by following the procedures described under "The Offer—Withdrawal Rights" on page 51. In addition, if we have not accepted tendered shares for exchange by [ ], [ ], 2007 you may withdraw tendered shares at any time thereafter.

Subject to the satisfaction (or, where permissible, waiver) of the conditions to the offer as of the expiration of the offer, we will accept for exchange shares of Point.360 common stock validly tendered and not properly withdrawn promptly after the expiration of the offer and will exchange shares of DG FastChannel common stock and cash instead of fractional shares for the tendered shares of Point.360 common stock promptly afterwards. In all cases, the exchange of shares of Point.360 common stock tendered and accepted for exchange pursuant to the offer will be made only if the exchange agent and depository timely receives:

We will not issue any fraction of a share of DG FastChannel common stock pursuant to the offer or the merger. Instead, each tendering shareholder who would otherwise be entitled to a fraction of a share of DG FastChannel common stock, after the combination of all fractional shares to which such tendering shareholder would otherwise be entitled, will receive cash (without interest and subject to any withholding for taxes) in lieu of the fractional interests.

The merger agreement provides that, after completion of the offer, Point.360 will, subject to certain conditions, be merged with and into DG FastChannel. Upon completion of the merger, DG FastChannel will continue as the "surviving corporation." In the event that DG FastChannel beneficially owns more than 90% of the outstanding shares of Point.360 common stock upon completion of the offer, the merger agreement provides that the parties will take all necessary and appropropriate action to cause the merger to become effective as soon as practicable, without a meeting of Point.360 shareholders, by effecting a short form merger under California and Delaware law. If at the end of the offer DG FastChannel beneficially owns more than 50%, but less than 90%, of the outstanding shares of Point.360 common stock, DG FastChannel will acquire the remaining outstanding Point.360 common stock by effecting a long form merger under California and Delaware law. This would require notice to and approval by the Point.360 shareholders, which approval may be obtained by DG FastChannel's approval as the majority shareholder of Point.360.

Point.360 has agreed, subject to limited exceptions, that neither Point.360 nor any of its subsidiaries nor any of their respective officers, directors, employees, agents and representatives will initiate or engage in any negotiations concerning an acquisition proposal. However, the merger agreement provides that, prior to the acceptance for exchange by DG FastChannel of Point.360 shares pursuant to the offer, in the event that a third party has made a bona fide acquisition proposal that the Point.360 board of directors reasonably concludes in good faith, after consultation with its financial advisor and outside legal counsel, constitutes, or is reasonably likely to lead to, a superior proposal, Point.360 may engage or participate in discussions or negotiations with such third party and/or furnish to such third party nonpublic information relating to Point.360, provided, that in each case (a) neither Point.360 nor any representative of Point.360 and its subsidiaries have violated any of the restrictions set forth in the merger agreement related to non-solicitation, (b) the Point.360 board of directors reasonably determines in good faith, after consultation with its outside legal counsel, that in light of such acquisition proposal the failure to take such action would reasonably be expected to be a violation of the fiduciary obligations of the Point.360 board of directors to the Point.360 shareholders, and (c) contemporaneously with furnishing any such information to such person or group, Point.360 furnishes such information to DG FastChannel to the extent it has not previously been so furnished to DG FastChannel.

Point.360 has further agreed to take all necessary steps to inform the officers, directors, employees, agents and representatives of Point.360 and its subsidiaries of the non-solicitation obligations under the merger agreement. Point.360 will notify DG FastChannel promptly, orally and in writing (including the name(s) of any party making, the principal terms of, and any written materials provided in connection with, any such proposal, request or inquiry), if any such proposals, requests or inquiries are received by,

any such information is requested from, or any such negotiations or discussions are sought to be initiated with, Point.360.

The merger agreement provides that it can be terminated by Point.360 or DG FastChannel under a number of different scenarios, including:

Termination of the merger by either DG FastChannel or Point.360 under specified circumstances could result in Point.360 being required to pay DG FastChannel a termination fee equal to the sum of (1) $2 million and (2) an amount equal to the aggregate of all expenses undertaken by DG FastChannel in connection with the execution of the merger agreement and the consummation of the transactions contemplated thereunder (such expense amount not to exceed $500,000). Termination of the merger by Point.360 under a specified circumstance could result in DG FastChannel being required to pay Point.360 an amount equal to the sum of (1) $2 million and (2) an amount equal to the aggregate of all expenses undertaken by Point.360 in connection with the execution of the merger

agreement and the consummation of the transactions contemplated thereunder (such expense amount not to exceed $500,000).

The merger agreement provides that, upon acceptance for exchange of Point.360 shares in the offer, we will be entitled to designate a number of directors of Point.360, rounded up to the next whole number, equal to the product of the total number of directors on Point.360's board of directors and the percentage of outstanding Point.360 shares of common stock beneficially owned by us. This would enable us to control the Point.360 board of directors.

It is a condition to the completion of the offer that DG FastChannel and Point.360 receive legal opinions from their respective tax counsel to the effect that the offer and the merger together will constitute a reorganization within the meaning of Section 368(a) the Code. A Point.360 shareholder who, consistent with such opinions, receives his or her shares of DG FastChannel common stock pursuant to a transaction constituting a reorganization within the meaning of Section 368(a) of the Code will not recognize any gain or loss in the offer and/or the merger, except for gain or loss attributable to cash received in lieu of a fractional share of DG FastChannel common stock. Shareholders should consult their tax advisors for a full understanding of all of the tax consequences of the offer and the merger to them.

Under California law, you will not have any appraisal rights in connection with the offer. However, appraisal rights may be available in connection with the merger following completion of the offer under Chapter 13 of the California General Corporation Law (the "CGCL"). A copy of the appraisal rights provisions of the CGCL is attached as Annex C to this prospectus.

We are not aware of any regulatory license or permit material to the ADS business of Point.360 that may be materially adversely affected by our acquisition of Point.360 common stock, or any regulatory filing or approval that would be required for our acquisition of Point.360 common stock. DG FastChannel and Point.360 have made all required filings under the Securities Act of 1933, as amended, which is referred to throughout this prospectus as the Securities Act, and the Exchange Act, in connection with the offer and merger. We are unaware of any requirement for the filing of information with, or the obtaining of the approval of, governmental authorities in any non-U.S. jurisdiction that is applicable to the offer or the merger.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," DG FastChannel will account for the transactions as a business combination. Upon consummation of the transactions, DG FastChannel will record the market value of the DG FastChannel common stock issued, the fair value of the assets and liabilities assumed, as well as the amount of direct transaction costs.

Certain Point.360 directors, officers and shareholders have interests in the offer and the merger that are different from, or are in addition to, those of other shareholders. These interests include:

In addition, Haig S. Bagerdjian, Point.360's chairman, president and chief executive officer, has entered into a support agreement with DG FastChannel, pursuant to which he will be required to tender his shares in the offer. The members of the boards of directors of DG FastChannel and Point.360 were aware of these interests and considered them, among other matters, when they approved the offer, the merger and the merger agreement.

As of the date of this prospectus, DG FastChannel beneficially owns of record 1,612,436 shares of Point.360 common stock, constituting approximately 13.25% of the fully diluted shares of Point.360 common stock. Such shares will be counted for purposes of determining whether the minimum condition in the offer has been satisfied and, after completion of the offer, DG FastChannel will vote such shares in favor of the merger. In addition, pursuant to the indemnification and tax matters agreement, following the consummation of the offer, each of DG FastChannel and New 360 is obligated to indemnify the other party for any and all losses arising out of or relating to any of the liabilities of such party. In other words, New 360 will indemnify DG FastChannel for any and all losses incurred by DG FastChannel resulting from liabilities of New 360. New 360 will also indemnify DG FastChannel for all pre-closing tax liabilities of Point.360.

Comparison of Rights of Holders of Point.360 Common Stock and Holders of DG FastChannel Common Stock (Page 81)

Point.360 is a California corporation, while DG FastChannel is a Delaware corporation. If we complete the offer, holders of Point.360 common stock will become DG FastChannel shareholders, and their rights as shareholders will be governed by Delaware law as well as DG FastChannel's certificate of incorporation and bylaws. There are differences between California law, the articles of incorporation and bylaws of Point.360, on the one hand, and Delaware law, the certificate of incorporation and bylaws of DG FastChannel, on the other hand.

Pursuant to the contribution agreement, prior to the consummation of the offer, Point.360 will contribute, which is referred to throughout this prospectus as the contribution, to its wholly owned subsidiary, New 360, all of the assets owned, licensed or leased by Point.360 that are not used exclusively in connection with the ADS business of Point.360, and New 360 will assume certain liabilities of Point.360. Immediately following the contribution but prior to the consummation of the offer, Point.360 will distribute to its shareholders (other than DG FastChannel) pro rata all of the capital stock then outstanding of New 360. The shares of capital stock of New 360 will be registered under the Exchange Act and will be approved for listing on the Nasdaq Global Market. As a result of the contribution and the spin-off, at the consummation of the offer, the assets and liabilities of Point.360 will consist only of those assets and liabilities exclusively related to the ADS business.

DG FastChannel, Inc., founded in 1991 and incorporated under the laws of Delaware, offers a suite of digital technology products and services. DG FastChannel operates a nationwide digital network out of its Network Operation Center, or "NOC," located in Irving, Texas. The network beneficially links more than 5,000 advertisers and advertising agencies with more than 3,800 television, cable and network broadcast destinations and over 10,000 radio stations across the United States and Canada. Through the NOC, DG FastChannel delivers audio, video, image and data content that comprise transactions between the advertising and broadcast industries.

DG FastChannel's common stock is currently quoted on the Nasdaq Global Market (symbol: DGIT).

Point.360, incorporated under the laws of California, is one of the largest providers of high definition and standard definition digital mastering, data conversion and video and film asset management services to owners, producers and distributors of entertainment and advertising content. Point.360 provides the services necessary to edit, master, reformat, archive and ultimately distribute its clients' film and video content, including television programming, spot advertising, feature films and movie trailers. The company delivers commercials, movie trailers, electronic press kits, infomercials and syndicated programming, by both physical and electronic means, to hundreds of broadcast outlets worldwide. Point.360 provides worldwide electronic distribution, using fiber optics, satellites, and the Internet. Point.360's interconnected facilities in Los Angeles, New York, Chicago, Dallas and San Francisco provide service coverage in each of the major U.S. media centers. Clients include major motion picture studios, advertising agencies and corporations.

Point.360's common stock is currently quoted on the Nasdaq Global Market (symbol: PTSX).

On April 16, 2007, the last trading day before DG FastChannel and Point.360 announced the offer, DG FastChannel common stock closed at $16.94 per share and Point.360 common stock closed at $3.69 per share. On June 7, 2007, the last trading day prior to the printing of this prospectus for which this information was practicably available, DG FastChannel common stock closed at $21.11 per share and Point.360 common stock closed at $5.91 per share.

If you have any questions about the offer or the merger or if you need additional copies of this prospectus, you should contact our information agent:

The information in the following tables is based on the DG FastChannel historical financial statements that DG FastChannel has presented in its prior filings with the SEC. You should read the selected historical financial information in the following tables in connection with the historical financial statements. The DG FastChannel historical financial statements have been incorporated into this document by reference. See "Additional Information—Where You Can Find Additional Information" on page 91.

On May 31, 2006 DG FastChannel completed its acquisition of FastChannel Network, Inc., ("FastChannel") and as a result, FastChannel became a wholly owned subsidiary of DG FastChannel. Accordingly, the operating results of FastChannel have been consolidated into those of DG FastChannel beginning in June, 2006.

The consolidated statement of operations data for the years ended December 31, 2006, 2005, 2004, 2003, and 2002 and the consolidated balance sheet data at December 31, 2006, 2005, 2004, 2003, and 2002 are derived from the consolidated financial statements of DG FastChannel, which were audited by KPMG LLP, an independent registered public accounting firm.

The information in the following tables is based on the Point.360 ADS business historical financial statements, which are included in Annex D. You should read the selected historical financial information in the following tables in connection with the historical financial statements.

The consolidated statement of operations data for the years ended December 31, 2006, 2005, and 2004 and the consolidated balance sheet data at December 31, 2006 and 2005 are derived from the consolidated financial statements of Point.360's ADS business, which were audited by Singer Lewak Greenbaum & Goldstein LLP, independent public accountants. The consolidated statement of operations data for the years ended December 31, 2003 and 2002 and the consolidated balance sheet data at December 31, 2004, 2003 and 2002 are derived from the consolidated financial statements of Point.360's ADS business, which are not audited.

	December 31,
	2006	2005	2004	2003	2002
Cash and cash equivalents	—	—	—	—	—
Working capital	2,396	1,509	1,445	1,166	3,031
Property and equipment, net	1,289	1,605	2,014	2,319	2,595
Total assets	43,697	44,539	44,632	41,362	39,273
Long-term debt, excluding current portion	317	816	988	—	2,340
Stockholders' equity	40,021	39,510	38,944	34,512	34,512

The following summary unaudited pro forma condensed combined financial information was prepared using the purchase method of accounting. The unaudited pro forma condensed combined balance sheet data as of March 31, 2007 assumes the merger took place on March 31, 2007 and combines the DG FastChannel historical balance sheet at March 31, 2007 with Point.360's ADS business historical balance sheet at March 31, 2007. The unaudited pro forma condensed combined balance sheet data as of December 31, 2006 assumes the merger took place on December 31, 2006 and combines the DG FastChannel historical balance sheet at December 31, 2006 with Point.360's ADS business historical balance sheet at December 31, 2006. The unaudited pro forma condensed combined statement of operations data for the three months ended March 31, 2007 gives effect to the merger as if it had occurred on January 1, 2007 and combines DG FastChannel's historical statement of operations for the three months ended March 31, 2007 with Point.360's ADS business statement of operations for the three months ended March 31, 2007. The unaudited pro forma condensed combined statement of operations data for the year ended December 31, 2006 gives effect to the merger as if it had occurred on January 1, 2006 and combines DG FastChannel's historical statement of operations for the year ended December 31, 2006 with Point.360's ADS business statement of operations for the year ended December 31, 2006. The unaudited pro forma condensed combined financial statements all give effect to the recently completed acquisition by DG FastChannel of Pathfire, Inc. DG FastChannel previously announced its acquisition of Pathfire, which was completed on June 4, 2007.

The summary unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the combined financial position or results of operations of future periods or the results that actually would have been realized had the entities been a single entity or members of a consolidated group during the period. The summary unaudited pro forma condensed combined financial information presented below is derived from the unaudited pro forma condensed combined financial statements beginning at page 94 of this prospectus and should be read in conjunction with those statements and the related notes. See "Unaudited Pro Forma Condensed Combined Financial Information." Amounts (except per share amounts) shown are in thousands.

		Three Months Ended March 31, 2007		Year Ended December 31, 2006
Unaudited Pro Forma Condensed Combined Statement of Operations Data:
Revenue		$	29,311	$	104,608
	Net income (loss) from continuing operations	$	1,882	$	(4,860	)
	Net income (loss) from continuing operations per share:
	Basic	$	0.11	$	(0.39	)
	Diluted	$	0.10	$	(0.39	)
Weighted average number of shares:
	Basic		17,844		12,568
	Diluted		18,148		12,568

		As of March 31, 2007	As of December 31, 2006
Unaudited Pro Forma Condensed Combined Balance Sheet Data:
	Cash, cash equivalents and short-term investments	10,000	26,534
	Working capital	15,438	27,164
	Total assets	241,515	261,459
	Long-term liabilities	41,272	58,351
	Stockholders' equity	178,026	175,680

The following table summarizes the net income from continuing operations and book value per common share information for DG FastChannel and Point.360 on a historical and unaudited pro forma combined basis. Pro forma per common share information for DG FastChannel reflects the pro forma impact of the acquisition by DG FastChannel of Pathfire and gives effect to the issuance of additional debt in that acquisition.

The pro forma combined financial information gives effect to the merger and the purchase of Pathfire on the purchase method basis as described in "Unaudited Pro Forma Condensed Combined Financial Information" beginning on page 94. The pro forma combined financial information is presented as if the merger and DG FastChannel's acquisition of Pathfire was completed as of the beginning of each period presented.

The pro forma book value per common share of DG FastChannel is computed by dividing total pro forma stockholders' equity by the pro forma number of shares of DG FastChannel common stock outstanding at the end of the period, in each case, after giving effect to the merger. The historical book value per common share of DG FastChannel and Point.360 is computed by dividing total stockholders' equity by the number of shares of common stock outstanding at the end of the period. The pro forma combined book value per DG FastChannel common share is computed by dividing pro forma combined stockholders' equity by the pro forma number of shares of DG FastChannel common stock outstanding at the end of the period assuming for such purposes that the merger and DG FastChannel's recent acquisition of Pathfire occurred as of the beginning of each period presented.

DG FastChannel expects to incur merger and integration charges as a result of combining DG FastChannel and Point.360's ADS business. DG FastChannel also anticipates that the merger will provide the combined company with financial benefits that include reduced operating expenses and the opportunity to generate more revenue. The pro forma financial information, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect these expenses or benefits and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had DG FastChannel, Pathfire, and Point.360's ADS business actually been combined during the periods presented.

The information in the following table is based on, and should be read together with, the DG FastChannel historical financial information contained in prior SEC filings, which are incorporated herein by reference, Point.360's ADS business historical financial information contained in Annex E

attached hereto and the "Unaudited Pro Forma Condensed Combined Financial Information" beginning on page 94.

DG FastChannel and Point.360 common stock are both listed on the Nasdaq Global Market. DG FastChannel's and Point.360's ticker symbols are "DGIT" and "PTSX," respectively. The following table shows, for the calendar quarters indicated, based on published financial sources, the high and low closing prices of shares of DG FastChannel and Point.360 common stock as reported on the Nasdaq Global Market.

During the periods covered by the following table, neither DG FastChannel nor Point.360 paid dividends.

		DG FastChannel Common Stock		Point.360 Common Stock
		High		Low	High		Low
Fiscal Year 2005
	First quarter		$	15.80	$	10.60		$	3.95	$	3.21
	Second quarter		$	13.50	$	9.60		$	3.50	$	2.76
	Third quarter		$	9.80	$	6.00		$	3.21	$	2.21
	Fourth quarter		$	7.10	$	4.70		$	2.25	$	1.65
Fiscal Year 2006
	First quarter		$	7.40	$	5.20		$	2.70	$	1.85
	Second quarter		$	7.80	$	4.65		$	2.70	$	1.98
	Third quarter		$	10.64	$	5.50		$	2.40	$	1.74
	Fourth quarter		$	13.53	$	10.81		$	3.59	$	1.64
Fiscal Year 2007
	First quarter		$	16.63	$	12.79		$	4.09	$	3.15
	Second quarter (through June 7, 2007)		$	22.22	$	15.96		$	5.98	$	3.40

The prices shown are adjusted to give effect for DG FastChannel's 1-for-10 reverse split on May 26, 2006.

DG FastChannel has never declared or paid cash dividends on its capital stock. DG FastChannel currently expects to retain any future earnings for use in the operation and expansion of its business and does not anticipate paying any cash dividends in the foreseeable future.

The following table sets forth the closing prices per share of DG FastChannel common stock and Point.360 common stock as reported on the Nasdaq Global Market on April 16, 2007 the last full trading day prior to the announcement of the entry into the merger agreement, and June 7, 2007, the most recent practicable date prior to the mailing of this prospectus to Point.360's stockholders.

The following table also sets forth the equivalent price per share of Point.360 common stock reflecting the value of the DG FastChannel common stock that Point.360 stockholders would receive in exchange for each share of Point.360 common stock if the offer or the merger was completed on these two dates. The following table does not reflect the value of the New 360 common stock that Point.360 stockholders would receive in the spin-off.

Date		DG FastChannel Common Stock		Point.360 Common Stock		Equivalent Per Share Price of Point.360 Common Stock with Exchange Ratio of 0.1895
April 16, 2007		$	16.94		$	3.69		$	3.21
June 7, 2007		$	21.11		$	5.91		$	4.00

The above table shows only historical and hypothetical comparisons. These prices may fluctuate prior to the offer and the merger, and Point.360 stockholders are urged to obtain current stock price quotations for DG FastChannel common stock and Point.360 common stock and to review carefully the other information contained in this prospectus or incorporated by reference into this prospectus in deciding whether to tender their shares. See the section entitled "Additional Information—Where You Can Find Additional Information" on page 91.

In deciding whether to tender your shares pursuant to the offer, you should carefully consider the following factors and the other information contained in this document. See "Additional Information—Where You Can Find Additional Information" on page 91 for where you can find the additional risk factors incorporated by reference.

DG FastChannel may not successfully integrate the Point.360 ADS business operations after the merger.

The integration of DG FastChannel and Point.360's ADS business operations after the merger may be difficult, time consuming and costly and may divert the attention of senior management. After completion of the merger, the combined company must successfully integrate, among other things, management, product offerings, sales, facilities, administrative and customer service functions and the management information systems of Point.360's ADS business with those of DG FastChannel. DG FastChannel will need to retain the key employees, customers and other business partners of both companies. In addition, DG FastChannel has also completed a recent acquisition of Pathfire. It is possible that efforts to integrate each of the companies will not be completed as smoothly as planned, which could have a material and adverse impact on the operations of the combined company.

DG FastChannel expects to incur potentially significant merger-related restructuring and integration costs in connection with the transaction and the integration of Point.360's ADS business operations and the acquisition of Pathfire.

DG FastChannel and Point.360 expect to incur costs associated with combining the ADS business operations of the two companies, transaction fees and other costs related to the offer and the merger. DG FastChannel also expects to incur additional costs associated with the acquisition of Pathfire and the integration of each business. DG FastChannel faces potential costs related to employee redeployment or relocation, reorganization or closure of facilities, relocation and disposition of excess telecom lines and equipment and other integration costs. It is expected that DG FastChannel will charge consolidation and integration expenses to operations in fiscal years 2007 and 2008. DG FastChannel has estimated a range of an aggreate of approximately $1.5 to $2.0 million of transaction costs and a range of an aggregate of approximately $2.5 to $3.0 million of consolidation and integration costs. Actual transaction and integration costs may exceed our estimates and may have an adverse effect on the combined company's financial condition and operating results. DG FastChannel expects to account for certain of these costs as purchase-related adjustments when the merger is completed.

The number of shares of DG FastChannel common stock that you will receive in the offer and/or the subsequent merger will be based upon a fixed exchange ratio. The value of the shares of DG FastChannel common stock at the time you receive them could be less than at the time you tender your shares of Point.360 common stock.

In the offer and the subsequent merger, each share of Point.360 common stock will be exchanged for approximately 0.1895 of a share of DG FastChannel common stock, which exchange ratio assumes 10,554,730 shares of Point.360 common stock will be issued and outstanding immediately prior to the consummation of the offer (excluding shares owned directly or indirectly by DG FastChannel or Point.360) and exchanged for a total of 2 million shares of DG FastChannel common stock. This is a fixed exchange ratio. We will not adjust the exchange ratio as a result of any change in the market price of DG FastChannel common stock or Point.360 common stock between the date of this prospectus and the date you receive DG FastChannel common stock. The market price of the DG FastChannel common stock will likely be different on the date you receive such shares than it is

today or on the date you tender shares of Point.360 common stock or on the date the offer expires or the date a subsequent merger is completed, because of changes in the business, financial condition, results of operations or prospects of DG FastChannel, market reactions to our offer, general market and economic conditions and other factors. You are urged to obtain current market quotations for DG FastChannel common stock and Point.360 common stock. See "Comparative Per Share Market Price and Dividend Information" on page 22.

The trading price of shares of DG FastChannel common stock may be affected by factors in addition to those factors affecting the price of Point.360 common stock. The price of shares of DG FastChannel common stock could decline following the offer.

The trading price of DG FastChannel common stock has fluctuated significantly in the past. The future trading price of DG FastChannel common stock is likely to be volatile and could be subject to wide price fluctuations in response to such factors, including:

Point.360 shareholders may receive a lower return on their investment after the merger.

Although DG FastChannel and Point.360 believe that the merger will create financial, operational and strategic benefits for the combined company and its shareholders, these benefits may not be achieved. The combination of DG FastChannel's and Point.360's ADS businesses, even if conducted in an efficient, effective and timely manner, may not result in combined operating efficiencies and financial performance that are better than what each company would have achieved independently if the merger had not occurred. In addition, the issuance of DG FastChannel common stock in the offer and the merger could reduce the market price of DG FastChannel common stock.

Certain of Point.360's directors and officers have interests in the merger that differ from, or are in addition to, their interests as Point.360 shareholders in recommending the offer and merger to Point.360 shareholders.

In considering the recommendation of the Point.360 board of directors that Point.360 shareholders tender their shares, Point.360 shareholders should recognize that some of Point.360's directors and officers have interests in the merger that differ from, or are in addition to, their interests as Point.360 shareholders. These interests include:

These and additional interests are described under the heading "Interests of Certain Persons in the Offer and Subsequent Merger" on page 63.

Point.360 shareholders will have a reduced ownership and voting interest after the merger. In addition, if the value of Point.360's ADS business, together with any synergies to be achieved from its combination with DG FastChannel, is less than the value of the stock to be issued in connection with the offer and the merger, the price of DG FastChannel common stock could decrease.

After completion of the merger, Point.360 shareholders will own a significantly smaller percentage of the combined company and its voting stock than they currently own of Point.360. Following completion of the merger, Point.360 shareholders will own approximately 11% of the combined company. Consequently, Point.360 shareholders will not be able to exercise as much influence over the management and policies of the combined company as they currently exercise over Point.360.

It is possible that the price of the common stock of the combined company will decrease following consummation of the merger. To the extent that the price of the common stock declines as a result of the belief that the value of the stock to be issued in connection with the merger is greater than the value of Point.360's ADS business, together with any synergies to be achieved from its combination with DG FastChannel, the merger could have a dilutive effect on the value of the common stock held by DG FastChannel stockholders.

DG FastChannel could lose key Point.360 personnel necessary to achieve the benefits DG FastChannel and Point.360 expect as a result of the merger.

Point.360's contribution to the combined company's success will depend in part on the continued service of specific Point.360 personnel. The process of combining DG FastChannel and Point.360 could negatively affect employee morale. If a substantial portion of Point.360's key employees leave after DG FastChannel and Point.360 complete the merger, the combined company's business could be adversely affected.

Failure to complete the merger could be costly to Point.360 and its shareholders.

In addition, the merger agreement provides for the payment by Point.360 of a termination fee equal to the sum of (1) $2 million and (2) an amount equal to the aggregate of all expenses incurred by DG FastChannel in connection with the execution of the merger agreement and the consummation of the transactions contemplated thereunder (such expense amount not to exceed $500,000), if the merger agreement is terminated under certain circumstances. The obligation to make that payment may adversely affect the ability of Point.360 to engage in another transaction and may have an adverse impact on the financial condition of Point.360. See "The Merger Agreement—Termination and Termination Fees" on page 79.

We have a history of losses which must be considered in assessing our future prospects.

2003 was the first year we reported net income after having been unprofitable since our inception. While we reported profit again in 2004, we experienced a loss in 2005 and 2006. In 2002, we were

profitable only after excluding the effect of a change in accounting principle. We could continue to generate net losses in the future, which could depress our stock price. Decreases in revenues could occur, which could impair our ability to operate profitably in the future. Future success also depends in part on obtaining reductions in delivery and service costs, particularly our ability to continue to automate order processing and to reduce telecommunications costs. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in new and rapidly evolving markets, such as risks that the market might fail to grow, expenses relating to modifying products and services to meet industry standards as they change over time, and difficulties in gaining and maintaining market share. To address these risks, we must, among other things, respond to competitive developments, attract, retain and motivate qualified persons, continually upgrade our technologies and begin to commercialize products incorporating such technologies. We may not be successful in addressing any or all of these risks and may not be able to achieve and sustain profitability.

We may not be able to obtain additional financing to satisfy our future capital needs.

We intend to continue making capital expenditures to market, develop, produce and deploy at no cost to our customer the various equipment required by the customers to receive our services and to introduce additional services. In addition, we will need to make the investments necessary to maintain and improve our network. We also expect to expend capital to consummate any mergers and acquisitions that we undertake in the future. We may require additional capital sooner than currently anticipated and may not be able to obtain additional funds adequate for our capital needs. We cannot predict any of the factors affecting the revenues and costs of these activities with any degree of certainty. Accordingly, we cannot predict the precise amount of future capital that we will require, particularly if we pursue one or more additional acquisitions.

Furthermore, additional financing may not be available to us, or if it is available, it may not be available on acceptable terms. Our inability to obtain the necessary financing on acceptable terms may prevent us from deploying our products and services effectively, maintaining and improving our products and network and completing advantageous acquisitions. Our inability to obtain the necessary financing could seriously harm our business, financial condition, results of operations and prospects. Consequently, we could be required to:

Our business is highly dependent upon radio and television advertising. If demand for, or margins from, our radio and television advertising delivery services decline, our business results will decline.

We expect that a significant portion of our revenues will continue to be derived from the delivery of radio and television advertising spots from advertising agencies, production studios and dub and ship houses to radio and television stations in the United States. A decline in demand for, or average selling prices of, our radio and television advertising delivery services for any of the following reasons, or otherwise, would seriously harm our business, financial condition, results of operations and prospects:

Additionally, we are dependent on our relationship with the radio and television stations in which we have installed communications equipment. Should a substantial number of these stations go out of business, experience a change in ownership or discontinue the use of our equipment in any way, our business, financial condition, results of operations and prospects would be harmed.

If we are not able to maintain and improve service quality, our business and results of operations will be susceptible to decline.

Our business will depend on making cost-effective deliveries to broadcast stations within the time periods requested by our customers. If we are unsuccessful in making these deliveries, for whatever reason, a station might be prevented from selling airtime that it otherwise could have sold. Our ability to make deliveries to stations within the time periods requested by customers depends on a number of factors, some of which will be outside of our control, including:

Stations may assert claims for lost air-time in these circumstances and dissatisfied advertisers may refuse to make further deliveries through us in the event of a significant occurrence of lost deliveries, which would result in a decrease in our revenues or an increase in our expenses, either of which could lead to a reduction in net income or an increase in net loss. Although we expect that we will maintain insurance against business interruption, such insurance may not be adequate to protect us from significant loss in these circumstances or from the effects of a major catastrophe (such as an earthquake or other natural disaster), which could result in a prolonged interruption of our business.

Our business is highly dependent on electronic video advertising delivery service deployment.

Our inability to maintain units necessary for the receipt of electronically delivered video advertising content in an adequate number of television stations or to capture market share among content delivery customers, which may be the result of price competition, new product introductions from competitors or otherwise, would be detrimental to our business objectives and deter future growth. We have made a substantial investment in upgrading and expanding our NOC and in populating television stations with the units necessary for the receipt of electronically delivered video advertising content. However, we cannot assure you that the maintenance of these units will cause this service to achieve adequate market acceptance among customers that require video advertising content delivery.

In addition, we believe that to more fully address the needs of video delivery customers we have developed a set of ancillary services that typically are provided by dub and ship houses. These ancillary services include cataloging, physical archiving, closed-captioning, modification of slates and format conversions. We will need to provide these services on a localized basis in each of the major cities in which we provide services directly to agencies and advertisers. We currently provide certain of such services to a portion of our customers through our facilities in New York, Los Angeles, Detroit and Chicago. However, we may not be able to successfully provide these services to all customers in those markets or any other major metropolitan area at competitive prices. Additionally, we may not be able to provide competitive video distribution services in other U.S. markets because of the additional costs and expenses necessary to do so and because we may not be able to achieve adequate market acceptance among current and potential customers in those markets.

While we are taking the steps we believe are required to achieve the network capacity and scalability necessary to deliver video content, such as HDTV content, reliably and cost effectively as

video advertising delivery volume grows, we may not achieve such goals because they are highly dependent on the services provided by our telecommunication providers and the technological capabilities of both our customers and the destinations to which content is delivered. If our telecommunication providers are unable or unwilling to provide the services necessary at a rate we are willing to pay or if our customers and/or our delivery destinations do not have the technological capabilities necessary to send and/or receive video content, our goals of adequate network capacity and scalability could be jeopardized.

In addition, we may be unable to retain current audio delivery customers or attract future audio delivery customers who may ultimately demand delivery of both media content unless we can successfully continue to develop and provide video transmission services. The failure to retain such customers could result in a reduction of revenues, thereby decreasing our ability to achieve and maintain profitability.

We rely on bandwidth providers or other third parties for key aspects of the process of providing products and services to our customers, and any failure or interruption in the services and products provided by these third parties could harm our ability to operate our business and damage our reputation.

We rely on third-party vendors, including bandwidth providers. Any disruption in the network access services provided by these third-party providers or any failure of these third-party providers to handle current or higher volumes of use could significantly harm our business. Any financial or other difficulties our providers face may have negative effects on our business, the nature and extent of which we cannot predict. We exercise little control over these third party vendors, which increases our vulnerability to problems with the services they provide. We license technology from third parties to facilitate aspects of our connectivity operations. We have experienced and expect to continue to experience interruptions and delays in service and availability for such elements. Any errors, failures, interruptions or delays experienced in connection with these third-party technologies could negatively impact our relationship with users and adversely affect our business and could expose us to liabilities to third parties.

If we were no longer able to rely on our existing providers of transmissions services, our business and results of operations could be harmed affected.

We obtain our local access transmission services and long distance telephone access through contracts with Sprint, which expires in November 2007, and MCI, which expired in March 2007. While our MCI service continues on a month-to-month basis with no contract, we are evaluating which service provider(s) we will select for future needs. The agreement with Sprint provides for reduced pricing on various services provided in exchange for minimum purchases of $1.0 million for each year of the Sprint contract and the MCI contract provided reduced pricing in exchange for minimum purchases of $0.5 million for 2006. The agreements provide for certain achievement credits once specified purchase levels are met. Any interruption in the supply or a change in the price of either local access or long distance carrier service could increase costs or cause a significant decline in revenues, thereby decreasing our operating results.

As part of our strategy of providing transmittal of audio, video, data and other information using satellite technology, we periodically purchase satellite capacity from third parties owning satellite systems. Although our management attempts to match these expenditures against anticipated revenues from sales of products to customers, they may not be successful at estimating anticipated revenues, and actual revenues from sales of products may fall below expenditures for satellite capacity. In addition, the purchases of satellite capacity require a significant amount of capital. Any inability to purchase satellite capacity or to achieve revenues sufficient to offset the capital expended to purchase satellite

capacity may make our business more vulnerable and significantly affect financial condition and results of operations.

If the existing relationship with Clear Channel Satellite Services is terminated, or if Clear Channel Satellite Services fails to perform as required under its agreement with us, our business could be interrupted.

We have designed and developed the necessary software to enable our current video delivery systems to receive digital satellite transmissions over the AMC-9 satellite system. However, the Clear Channel satellite system may not have the capacity to meet our future delivery commitments and broadcast quality requirements on a cost-effective basis, if at all. We have a non-exclusive agreement with Clear Channel that expires in June 2010. The agreement provides for fixed pricing on dedicated bandwidth and gives us access to satellite capacity for electronic delivery of digital audio and video transmissions by satellite. Clear Channel is required to meet performance specifications as outlined in the agreement, and we are given a credit allowance for future fees if Clear Channel does not meet these requirements. The agreement states that Clear Channel can terminate the agreement if we do not make timely payments or become insolvent.

Certain of our products depend on satellites; any satellite failure could result in interruptions of our service that could negatively impact our business and reputation.

A reduction in the number of operating satellites or an extended disruption of satellite transmissions would impair the current utility of the accessible satellite network and the growth of current and additional market opportunities. Satellites and their ground support systems are complex electronic systems subject to weather conditions, electronic and mechanical failures and possible sabotage. The satellites have limited design lives and are subject to damage by the hostile space environment in which they operate. The repair of damaged or malfunctioning satellites is nearly impossible. If a significant number of satellites were to become inoperable, there could be a substantial delay before they are replaced with new satellites. In addition, satellite transmission can be disrupted by natural phenomena causing atmospheric interference, such as sunspots.

Certain of our products rely on signals from satellites, including, but not limited to, satellite receivers and head-end equipment. Any satellite failure could result in interruptions of our service, negatively impacting our business. We attempt to mitigate this risk by having our customers procure their own agreements with satellite providers.

Interruption or failure of our information technology and communications systems could impair our ability to effectively provide our products and services, which could damage our reputation and harm our operating results.

Our provision of our products and services depends on the continuing operation of our information technology and communications systems. Any damage to or failure of our systems could result in interruptions in our service. Interruptions in our service could reduce our revenues and profits, and our brand could be damaged if people believe our system is unreliable. Our systems are vulnerable to damage or interruption from earthquakes, terrorist attacks, floods, fires, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm our systems, and similar events. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, a decision to close a facility we are using without adequate notice for financial reasons or other unanticipated problems at our NOC could result in lengthy interruptions in our service.

We have experienced system failures in the past and may in the future. Any unscheduled interruption in our service puts a burden on our entire organization and may result in a loss of revenue. If we experience frequent or persistent system failures in our NOC or web-based management

systems, our reputation and brand could be permanently harmed. The steps we have taken to increase the reliability and redundancy of our systems are expensive, reduce our operating margin and may not be successful in reducing the frequency or duration of unscheduled downtime.

The market price of our common stock is likely to continue to be volatile.

Some of the factors that may cause the market price of our common stock to fluctuate significantly include:

Sales of substantial amounts of our common stock in the public market could harm the market price of our common stock.

The sale of substantial amounts of our shares (including shares issuable upon exercise of outstanding options and warrants to purchase our common stock) may cause substantial fluctuations in the price of our common stock. Because investors would be more reluctant to purchase shares of our common stock following substantial sales, the sale of these shares also could impair its ability to raise capital through the sale of additional stock.

Our inability to enter into or develop strategic relationships in key market segments could harm our operating results.

Our strategy depends in part on the development of strategic relationships with leading companies in key market segments, including media broadcasters and digital system providers. We may not be able to successfully form or enter into such relationships, which may jeopardize our ability to generate sales of our products or services in those segments. Specific product lines are dependent to a significant degree on strategic alliances and joint ventures formed with other companies. Various factors could limit our ability to enter into or develop strategic relationships, including, but not limited to, our relatively short operating history, history of losses and the resources available to our competitors. Moreover, the terms of strategic alliances and joint ventures may vest control in a party other than us. Accordingly, the success of the strategic alliance or joint venture may depend upon the actions of that party and not us.

Insiders have substantial control over us which could limit others' ability to influence the outcome of key transactions, including changes in control.

As of December 31, 2006, our executive officers and directors and their respective affiliates owned approximately 17% of our common stock. As a result, these stockholders may be able to control or significantly influence all matters requiring stockholder approval, including the election of directors and the approval of significant corporate transactions. This concentration of ownership may have the effect

of delaying or preventing a change in control of us even if a change of control is in the best interest of all stockholders.

Our business may be harmed if we are not able to protect our intellectual property rights from third-party challenges.

We cannot assure that our intellectual property does not infringe on the proprietary rights of third parties. The steps taken to protect our proprietary information may not prevent misappropriation of such information, and such protection may not preclude competitors from developing confusingly similar brand names or promotional materials or developing products and services similar to ours. We consider our trademarks, copyrights, advertising and promotion design and artwork to be of value and important to our businesses. We rely on a combination of trade secret, copyright and trademark laws and nondisclosure and other arrangements to protect our proprietary rights. We generally enter into confidentiality or license agreements with our distributors and customers and limit access to and distribution of our software, documentation and other proprietary information. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or obtain and use information that we regard as proprietary. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States.

While we believe that our trademarks, copyrights, advertising and promotion design and artwork do not infringe upon the proprietary rights of third parties, we may still receive future communications from third parties asserting that we are infringing, or may be infringing, on the proprietary rights of third parties. Any such claims, with or without merit, could be time-consuming, require us to enter into royalty arrangements or result in costly litigation and diversion of management attention. If such claims are successful, we may not be able to obtain licenses necessary for the operation of our business, or, if obtainable, such licenses may not be available on commercially reasonable terms, either of which could prevent our ability to operate our business.

We may enter into or seek to enter into business combinations and acquisitions that may be difficult to integrate, disrupt our business, dilute stockholder value or divert management attention.

We recently acquired FastChannel Network Inc., Media DVX, Inc., SourceEcreative and the Broadcast Division of Applied Graphics Technologies, Inc., each of which became our wholly-owned subsidiary. In addition, we have recently acquired Pathfire. Our business strategy will include the acquisition of additional complementary businesses and product lines. Any such acquisitions would be accompanied by the risks commonly encountered in such acquisitions, including:

We may not be able to successfully complete any acquisition or, if completed, the acquired business or product line may not be successfully integrated with our operations, personnel or technologies. Any inability to successfully integrate the operations, personnel and technologies associated with an acquired business and/or product line may negatively affect our business and results

of operation. We may dispose of any of our businesses or product lines in the event that we are unable to successfully integrate them, or in the event that management determines that any such business or product line is no longer in our strategic interests.

Failure to manage future growth could hinder the future success of our business.

Our personnel, systems, procedures and controls may not be adequate to support our existing as well as future operations. We will need to continue to implement and improve our operational, financial and management information systems, procedures and controls on a timely basis and to expand, train, motivate and manage our work force. We must also continue to further develop our products and services while implementing effective planning and operating processes, such as continuing to implement and improve operational, financial and management information systems; hiring and training additional qualified personnel; continuing to expand and upgrade our core technologies; and effectively managing multiple relationships with various customers, joint venture and technological partners and other third parties.

We will depend on key personnel to manage the business effectively, and if we are unable to retain our key employees or hire additional qualified personnel, our ability to compete could be harmed.

Our future success will depend to a significant extent upon the services of Scott K. Ginsburg, Chairman of the Board and Chief Executive Officer; and Omar A. Choucair, Chief Financial Officer. Uncontrollable circumstances, such as the death or incapacity of any key executive officer, could have a serious impact on our business.

Our future success will also depend upon our ability to attract and retain highly qualified management, sales, operations, technical and marketing personnel. At the present time there is, and will continue to be, intense competition for personnel with experience in the markets applicable to our products and services. Because of this intense competition, we may not be able to retain key personnel or attract, assimilate or retain other highly qualified technical and management personnel in the future. The inability to retain or to attract additional qualified personnel as needed could have a considerable impact on our business.

Certain provisions of our bylaws may have anti-takeover effects that could prevent a change in control even if the change would be beneficial to its shareholders.

We have a classified board which might, under certain circumstances, discourage the acquisition of a controlling interest of its stock because such acquirer would not have the ability to replace these directors except as the term of each class expires. The directors are divided into three classes with respect to the time for which they hold office. The term of office of one class of directors expires at each annual meeting of stockholders. At each annual meeting of stockholders, directors elected to succeed those directors whose terms then expire are elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election.

Our board of directors may issue, without stockholder approval, preferred stock with rights and preferences superior to those applicable to the common stock.

Our certificate of incorporation includes a provision for the issuance of "blank check" preferred stock. This preferred stock may be issued in one or more series, with each series containing such rights and preferences as the board of directors may determine from time to time, without prior notice to or approval of stockholders. Among others, such rights and preferences might include the rights to dividends, superior voting rights, liquidation preferences and rights to convert into common stock. The rights and preferences of any such series of preferred stock, if issued, may be superior to the rights and

preferences applicable to the common stock and might result in a decrease in the price of the common stock.

We depend upon a number of single or limited-source suppliers, and our ability to produce audio and video distribution equipment could be harmed if those relationships were discontinued.

We rely on fewer than five single or limited-source suppliers for integral components used in the assembly of our audio and video units. If a supplier were to experience financial or operational difficulties that resulted in a reduction or interruption in component supply to us, this would delay our deployment of audio and video units. We rely on our suppliers to manufacture components for use in our products. Some of our suppliers also sell products to our competitors and may in the future become our competitors, possibly entering into exclusive arrangements with our existing competitors. In addition, our suppliers may stop selling our products or components to us at commercially reasonable prices or completely stop selling our products or components to us. If a reduction or interruption of supply were to occur, it could take a significant period of time for us to qualify an alternative subcontractor, redesign our products as necessary and contract for the manufacture of such products. This would have the effect of depressing our business until we were able to establish sufficient component supply through an alternative source. We believe that there are currently alternative component manufacturers that could supply the components required to produce our products, but based on the financial condition and service levels of our current suppliers, we do not feel the need to pursue agreements or understandings with such alternative sources or pursue long-term contracts with our current suppliers. We have experienced component shortages in the past, and material component shortages or production or delivery delays may occur in the future.

We determined that there was a material weakness in our disclosure controls and procedures related such that those controls and procedures were not effective as of December 31, 2006 and December 31, 2004. In the event a material weakness occurs again in the future, our financial statements and results of operations could be harmed and you may not be justified in relying on those financial statements.

For the year ended December 31, 2006, we determined that our disclosure controls and procedures were not effective, and we identified a material weakness in our internal controls over financial reporting for business combinations and stock compensation as of December 31, 2006. For the year ended December 31, 2004, we determined that our disclosure controls and procedures were not effective, and we identified a material weakness in our internal controls over financial reporting for income taxes as of December 31, 2004. In the event that this or any other material weakness occurs in the future, our financial statements and results of operations could be harmed and you may not be justified in relying on those financial statements, either of which could result in a decrease in our stock price.

The Public Company Accounting Oversight Board, or PCAOB, is conducting an annual inspection of our external auditors and we cannot assure you that in the course of this inspection, the PCAOB will not identify additional information in our financial statements which it believes could have been reported differently.

The PCAOB is conducting an inspection of our external auditors, KPMG LLP, and their audit of our financial statements as of and for the year ended December 31, 2005. The PCAOB is a private agency established to oversee the auditors of publicly held companies, and the PCAOB conducts annual inspections on all large public accounting firms that audit the financial statements of publicly held companies. As part of this inspection, the PCAOB has selected, among others, to review KPMG LLP's audit of our financial statements as of and for the year ended December 31, 2005. The PCAOB's inspection of KPMG LLP is ongoing and there can be no assurance as to when it will be completed. In addition, we cannot assure you that in the course of this inspection, the PCAOB will not identify

additional information contained in our historical financial statements which it believes could have been reported differently, or the prospective impact of any such items on our financial statements.

We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and harm our stock price.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, beginning with our Annual Report on Form 10-K for the fiscal year ending December 31, 2007, we will be required to furnish a report by our management on our internal control over financial reporting. Such a report will contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management. Such report must also contain a statement that our auditors have issued an attestation report on management's assessment of such internal controls.

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) provides a framework for companies to assess and improve their internal control systems. The Public Company Accounting Oversight Board's Auditing Standard No. 5, or Standard No. 5 provides the professional standards and related performance guidance for auditors to attest to, and report on, the effectiveness of internal control over financial reporting under Section 404. Management's assessment of internal controls over financial reporting requires management to make subjective judgments and some of the judgments will be in areas that may be open to interpretation and therefore the report may be uniquely difficult to prepare, and our auditors may not agree with management's assessments. We are still performing the system and process documentation and evaluation needed to comply with Section 404, which is both costly and challenging.

During this process, if our management identifies one or more material weaknesses in our internal control over financial reporting, we will be unable to assert such internal control is effective. If we are unable to assert that our internal control over financial reporting is effective as of December 31, 2007 (or if our auditors are unable to attest that our management's report is fairly stated or they are unable to express an opinion on the effectiveness of our internal controls), we could lose investor confidence in the accuracy and completeness of our financial reports, which would harm our stock price.

We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. We cannot be certain as to the timing of completion of our evaluation, testing and any required remediation due in large part to the fact that there is very little precedent available by which to measure compliance with the new Auditing Standard No. 5. If we are not able to complete our assessment under Section 404 in a timely manner, we and our auditors would be unable to conclude that our internal control over financial reporting is effective as of December 31, 2007.

The media distribution products and services industry is divided into several distinct markets, some of which are relatively mature while others are growing rapidly. If the mature markets begin to decline at a time when the developing markets fail to grow as anticipated, it will be increasingly difficult to achieve and maintain profitability.

To date, our design and marketing efforts for our products and services have involved the identification and characterization of the broadcast market segments within the media distribution products and services industry that will be the most receptive to our products and services. We may not have correctly identified and characterized such markets and our planned products and services may not address the needs of those markets. Furthermore, our current technologies may not be suitable for

specific applications within a particular market and further design modifications, beyond anticipated changes to accommodate different markets, may be necessary.

While the electronic distribution of media has been available for several years and growth of this market is modest, many of the products and services now on the market are relatively new. It is difficult to predict the rate at which the market for these new products and services will grow, if at all. Even if the market does grow, it will be necessary to quickly conform our products and services to customer needs and emerging industry standards in order to be a successful participant in those markets, such as the market for high definition, or HD, spots. If the market fails to grow, or grows more slowly than anticipated, it will be difficult for any market participant to succeed and it will be increasingly difficult for us to achieve and maintain profitability.

To achieve and sustain profitability and growth, we must expand our product and service offerings beyond the broadcast markets to include additional market segments within the media distribution products and services industry. Potential new applications for our existing products in new markets include distance learning and training, finance and retail. While our products and services could be among the first commercial products that may be able to serve the convergence of several industry segments, including digital networking, telecommunications, compression products and Internet services, our products and services may not be accepted by that market. In addition, it is possible that:

Because the convergence of digital networking, telecommunications, compression products and Internet services is new and evolving, the growth rate, if any, and the size of the potential market for our products cannot be predicted. If markets for these products fail to develop, develop more slowly than expected or become served by numerous competitors, or if our products do not achieve the anticipated level of market acceptance, our future growth could be jeopardized. Broad adoption of our products and services will require us to overcome significant market development hurdles, many of which we cannot predict.

The industry is in a state of rapid technological change and we may not be able to keep up with that pace.

The advertisement distribution and asset management industry is characterized by extremely rapid technological change, frequent new products, service introductions and evolving industry standards. The introduction of products with new technologies and the emergence of new industry standards can render existing products obsolete and unmarketable. Our future success will depend upon our ability to enhance existing products and services, develop and introduce new products and services that keep pace with technological developments and emerging industry standards and address the increasingly sophisticated needs of our customers, including the need for HD spots. We may not succeed in developing and marketing product enhancements or new products and services that respond to technological change or emerging industry standards. We may experience difficulties that could delay or prevent the successful development, introduction and marketing of these products and services. Our products and services may not adequately meet the requirements of the marketplace and achieve market acceptance. If we cannot, for technological or other reasons, develop and introduce products and services in a timely manner in response to changing market conditions, industry standards or other customer requirements, particularly if we have pre-announced the product and service releases, our business, financial condition, results of operations or cash flows will be harmed.

The marketing and sale of our products and services involve lengthy sales cycles. This makes business forecasting extremely difficult and can lead to significant fluctuations in quarterly results.

Due to the complexity and substantial cost associated with providing integrated product and services to provide audio, video, data and other information across a variety of media and platforms, licensing and selling products and services to our potential customers typically involves a significant technical evaluation. In addition, there are frequently delays associated with educating customers as to the productive applications of our products and services, complying with customers' internal procedures for approving large expenditures and evaluating and accepting new technologies that affect key operations. In addition, certain customers have even longer purchasing cycles that can greatly extend the amount of time it takes to place our products and services with these customers. Because of the lengthy sales cycle and the large size of our potential customers' average orders, if revenues projected from a specific potential customer for a particular quarter are not realized in that quarter, product revenues and operating results for that quarter could be harmed. Revenues will also vary significantly as a result of the timing of product and service purchases and introductions, fluctuations in the rate of development of new markets and new applications, the degree of market acceptance of new and enhanced versions of our products and services, and the level of use of satellite networking and other transmission systems. In addition, increased competition and the general strength of domestic and international economic conditions also impact revenues.

Because expense levels such as personnel and facilities costs, are based, in part, on expectations of future revenue levels, if revenue levels are below expectations, our business, financial condition, results of operations or cash flows will be harmed.

Seasonality in buying patterns also makes forecasting difficult and can result in widely fluctuating quarterly results.

On a historical basis, the industry has experienced lower sales for services in the first quarter, which is somewhat offset with higher sales in the fourth quarter due to increased customer advertising volumes for the holiday selling season. In addition, product and service revenues are influenced by political advertising, which generally occurs every two years. Nevertheless, in any single period, product and service revenues and delivery costs are subject to variation based on changes in the volume and mix of deliveries performed during such period. In addition, we have historically operated with little or no backlog. The absence of backlog and fluctuations in revenues and costs due to seasonality increases the difficulty of predicting our operating results.

The markets in which we will operate are highly competitive, and competition may increase further as new participants enter the market and more established companies with greater resources seek to expand their market share.

Competition within the markets for media distribution is intense. Moreover, these markets have become increasingly concentrated in recent years as a result of acquisitions. We believe that our ability to compete successfully depends on a number of factors, both within and outside of our control, including: (1) the price, quality and performance of our products and those of our competitors; (2) the timing and success of new product introductions; (3) the emergence of new technologies; (4) the number and nature of our competitors in a given market; (5) the protection of intellectual property rights; and (6) general market and economic conditions. In addition, the assertion of intellectual property rights by others and general market and economic conditions factor into the ability to compete successfully. The competitive environment could result in price reductions that could result in lower profits and loss of our market share.

While we offer products and services focused on the electronic distribution of media, we compete with dub and ship houses and production studios. Although many dub and ship houses and production

studios, such as Point.360, generally do not offer electronic delivery, they often have long-standing ties to local distributors that can be difficult to replace. Many of these dub and ship houses and production studios also have greater financial, distribution and marketing resources than we and have achieved a higher level of brand recognition. Production studios, advertising agencies and media buying firms also could deliver directly through entities with package delivery expertise such as Federal Express, United Parcel Service, the United States Postal Service and DHL.

In addition, we compete with a satellite-based video distribution network operated by Vyvx, an operating division of Willtel Communications, which is a wholly-owned subsidiary of Level 3 Communications, Inc. We also anticipate that certain common and/or value-added telecommunications carriers and other companies, could develop and deploy high bandwidth network services targeted at the advertising and broadcast industries, although we believe that no such carriers have yet entered the market for spot distribution in any significant way.

With respect to new markets, such as the delivery of other forms of content to radio and television stations, competition is likely to come from companies in related communications markets and/or package delivery markets. Some of the companies capable of offering products and services with superior functionality include telecommunications providers, such as AT&T, MCI and other fiber and telecommunication companies, each of which would enjoy materially lower electronic delivery transportation costs. Radio networks such as ABC Radio Networks or Westwood One could also become competitors by selling and transmitting advertisements as a complement to their content programming.

Further, other companies may in the future focus significant resources on developing and marketing products and services that will compete with ours.

Our business may not grow if the internet advertising market does not continue to develop or if we are unable to successfully implement our business model.

We have identified video advertising on the Internet as a potential business opportunity. Accordingly, a future component of our business model is to generate revenue by providing interactive marketing and delivery solutions to advertisers, ad agencies and web publishers. The profit potential for this business model is unproven. For our business to be successful, internet advertising will need to achieve increasing market acceptance by advertisers, ad agencies and web publishers. The intense competition among Internet advertising sellers has led to the creation of a number of pricing alternatives for Internet advertising. These alternatives make it difficult for us to project future levels of advertising revenue and applicable gross margin that can be sustained by us or the Internet advertising industry in general.

Intensive marketing and sales efforts may be necessary to educate prospective advertisers regarding the uses and benefits of, and to generate demand for, our products and services. Advertisers may be reluctant or slow to adopt a new approach that may replace, limit or compete with their existing systems. Acceptance of our new solutions will depend on the continued emergence of Internet commerce, communication, and advertising, and demand for its solutions. We cannot assure you that use of the Internet will continue to grow or that current uses of the Internet are sustainable.

Our failure to successfully compete in the internet advertising market may impact our growth.

The markets for Internet advertising and related products and services are intensely competitive and such competition is expected to increase. Our failure to successfully compete may impact our growth. Many of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than ours. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their products or services to address

the needs of our prospective clients. We cannot be certain that we will be able to successfully compete against current or future competitors. In addition, the Internet must compete for a share of advertisers' total budgets with traditional advertising media, such as television, radio, cable and print, as well as content aggregation companies and other companies that facilitate Internet advertising. To the extent that the Internet is perceived to be a limited or ineffective advertising or direct marketing medium, advertisers and direct marketers may be reluctant to devote a significant portion of their advertising budgets to Internet marketing.

We will need to keep pace with rapid technological change in the internet advertising industries.

In order to remain competitive, we will be continually required to enhance and to improve the functionality and features of our Internet advertising systems services, which could require us to invest significant capital. If our competitors introduce new services embodying new technologies, or if new industry standards and practices emerge, our existing services, technology, and systems may become obsolete and we may not have the funds or technical know-how to upgrade our services, technology, and systems. We may face material delays in introducing new services, products, and enhancements. If such delays occur, our users may forego use of our services and select those of our competitors, in which event, our business, prospects, financial condition and results of operations could be materially adversely affected.

In the past several years, DG FastChannel has been executing a strategic plan for growth that involves acquiring and forming alliances with companies in the business of television and radio advertising distribution. In May 2006, Digital Generation Systems, Inc. merged with FastChannel Network, Inc., and the combined company became known as DG FastChannel, Inc. In the discussion that follows, we refer to the company as DG FastChannel with respect to events both before and after the merger with FastChannel Network, Inc.

The following chronology summarizes the key meetings and events that led to the signing of the merger agreement among DG FastChannel, Point.360 and New 360. During this period, Scott K. Ginsburg, Chairman and CEO of DG FastChannel, and Haig S. Bagerdjian, Chairman and CEO of Point.360, held many conversations, both by telephone and in person, about the possible merger of their businesses. The chronology covers only the key events leading up to the merger agreement, and does not purport to catalogue every conversation between representatives of DG FastChannel and Point.360.

In 2002, DG FastChannel identified Point.360 as a possible merger partner. On November 22, 2002, DG FastChannel engaged Roth Capital, an investment bank, to advise the company regarding the possibility of a merger with Point.360 and the potential terms of such a transaction. On January 22, 2003, Roth Capital sent an offer to negotiate letter to Point.360 but received no response from Point.360. During this period, DG FastChannel conducted due diligence based on publicly available information about Point.360.

On September 21, 2004, DG FastChannel sought to acquire a stake in Point.360 and offered to purchase all of Julia Stefanko's shares of Point.360 for $4.00 per share. Ms. Stefanko is the wife of Luke Stefanko, the former President and CEO of Point.360. At the time, Ms. Stefanko owned approximately 18% of the shares of Point.360 common stock then outstanding. Ms. Stefanko rejected DG FastChannel's offer.

On November 17, 2004, Point.360's board of directors adopted a shareholder rights plan—a so-called "poison pill" takeover defense. Under the plan, preferred share purchase rights would be triggered in the event that a person or group (other than Mr. Bagerdjian) acquired or announced an intention to acquire 20% or more of Point.360's common stock. The plan was intended to encourage anyone seeking to acquire Point.360 to negotiate with the Point.360 board of directors prior to attempting a takeover.

On November 30, 2004, DG FastChannel submitted a written offer to the Point.360 board of directors offering to purchase all outstanding shares of Point.360 common stock at $3.50 per share. As of the close of business on that date, shares of Point.360 were trading at $2.46 per share. Point.360's board of directors considered the offer and on December 6, 2004, informed DG FastChannel that it was not interested in pursuing the proposed transaction.

Nearly two years elapsed, during which time Messrs. Bagerdjian and Ginsburg continued informal discussions regarding a possible strategic transaction, before DG FastChannel and Point.360 signed a Nondisclosure Agreement on August 16, 2006. After that agreement was signed, Alan R. Steel, Executive Vice President of Point.360, sent Mr. Ginsburg a letter outlining ideas for a possible transaction between the two companies.

On September 11, 2006, DG FastChannel offered to purchase either Point.360's ADS business for $29 million or the entire company for $4.25 per share in a stock-for-stock merger. As of the close of business on that day, shares of Point.360 were trading at $1.77 per share. Point.360's board of directors

was made aware of DG FastChannel's interest and the terms of the proposed transaction, but did not respond to DG FastChannel's offer.

In late September 2006, Mr. Bagerdjian informed Mr. Ginsburg that he believed the value of Point.360's ADS business was more than $35 million.

On September 29, 2006, DG FastChannel increased its offer for the ADS business to $36 million. Point.360's board of directors was made aware of the offer, but did not respond.

From October to December 2006, Messrs. Bagerdjian and Ginsburg engaged in informal discussions about DG FastChannel's interest in Point.360.

On December 22, 2006, DG FastChannel purchased 1.1 million shares of Point.360, or approximately 11.4% of the then-outstanding shares of Point.360 common stock, from Midwood Capital Management LLC. In the following weeks, DG FastChannel sought to increase its holdings in Point.360 by purchasing Point.360 common stock on the open market. By January 24, 2007, DG FastChannel had increased its ownership stake in Point.360 to approximately 16.5% of the then-outstanding shares of Point.360 common stock. During this period, Messrs. Bagerdjian and Ginsburg met in person at Point.360's headquarters in Burbank, California, and discussed a possible transaction involving the two companies.

On February 5, 2007, Mr. Ginsburg and Omar A. Choucair, Chief Financial Officer of DG FastChannel, met with Messrs. Bagerdjian and Steel at the law offices of Troy & Gould PC in Los Angeles, CA. Also present for the meeting were William Gould and Marty Goldblum of Troy & Gould PC, serving as outside counsel to Point.360. The group discussed the terms and structure of DG FastChannel's proposed acquisition of Point.360's ADS business. DG FastChannel made a presentation that proposed acquiring all of Point.360 at roughly $4.50 per share in a stock-for-stock exchange.

On February 7, 2007, DG FastChannel sent Point.360 a non-binding letter of intent and proposed merger terms. The letter indicated that DG FastChannel valued Point.360's ADS business at between $32 million and $36 million.

On February 12, 2007, Point.360 sent a letter seeking to clarify certain parts of DG FastChannel's proposed February 7 letter of intent and attaching certain additional conditions. Point.360's letter did not include a valuation of the ADS business.

On February 14, 2007, Mr. Choucair sent another non-binding letter of intent to Messrs. Bagerdjian and Steel. The letter provided additional clarification for certain terms, but maintained its previous valuation of Point.360's ADS business of between $32 million and $36 million.

On the same day, Mr. Steel responded to Mr. Choucair and sought further clarification of several aspects of DG FastChannel's most recent letter of intent. Mr. Steel also requested that DG FastChannel state a fixed price for the ADS business.

On February 15, 2007, Mr. Choucair responded to Mr. Steel that DG FastChannel valued the ADS business at $32 million.

On the same day, the Point.360 board of directors met and discussed, among other things, the status of the discussions between Messrs. Bagerdjian and Ginsburg. Mr. Bagerdjian told the board that no agreement had been reached, and that he would keep the board informed of any progress.

On February 22, 2007, Messrs. Ginsburg and Choucair met with Messrs. Bagerdjian and Steel at Point.360's offices. Messrs. Ginsburg and Choucair proposed a stock transaction in which the Point.360 ADS business would be valued at $36.5 million. Messrs. Bagerdjian and Steel took the offer under advisement.

On February 23, 2007, Mr. Ginsburg wrote a letter to Mr. Bagerdjian expressing frustration with the pace of the negotiations and asking the Point.360 board of directors to terminate the company's shareholder rights plan. Mr. Bagerdjian responded that Point.360 would respond once the Point.360 board of directors had a full opportunity to review DG FastChannel's request.

On February 26, 2007, the Point.360 board of directors met to consider DG FastChannel's offer and the February 23 letter from Mr. Ginsburg.

On March 1, 2007, the Point.360 board of directors met once again, and determined that DG FastChannel's offer as structured was not in the best interests of Point.360 or its shareholders.

On March 2, 2007, Mr. Bagerdjian sent an email to Mr. Ginsburg outlining revised terms and conditions for a possible transaction.

On March 2, 2007, Mr. Steel sent to Mr. Ginsburg a non-binding letter of intent that outlined the terms and conditions pursuant to which Point.360 was prepared to proceed with merger negotiations. The non-binding letter proposed that DG FastChannel and Point.360 enter into an exchange offer and merger agreement. According to the proposed terms of the letter, prior to the completion of the offer, Point.360 would (1) contribute to a new entity all of the assets of Point.360 not related to the ADS business and (2) distribute shares in the new entity to existing Point.360 shareholders other than DG FastChannel. In addition, under the letter's terms, DG FastChannel would offer aggregate consideration of 2 million shares of its common stock and the assumption of up to $7 million of Point.360 debt in exchange for all the shares of Point.360 other than those already owned by DG FastChannel. The letter of intent also proposed that DG FastChannel and Point.360 would execute a post-production services agreement, pursuant to which after the contemplated merger, DG FastChannel would outsource vaulting and post-production services to the newly-created entity. The parties agreed to move forward with drawing up documents related to the transaction on the basis of this letter of intent.

On March 5, 2007, DG FastChannel sent a due diligence request list to Point.360. Two days later, Latham & Watkins LLP, counsel to DG FastChannel, distributed a draft merger agreement to Troy & Gould.

On March 10, 2007, Latham & Watkins distributed to Troy & Gould various ancillary and support agreements to the merger agreement.

On March 12, 2007, Messrs. Ginsburg and Choucair and representatives from Latham & Watkins participated in a conference call with Messrs. Bagerdjian and Steel and attorneys from Troy & Gould. The participants negotiated various issues regarding the structure of the transaction and terms and conditions set forth in the draft transaction agreements. They discussed, among other things, the timing of the offer, the spin-off of Point.360's post-production business and whether Point.360 would have limited flexibility to continue discussions with third parties regarding alternative transactions. Subsequent to that conference call, attorneys from Latham & Watkins and Troy & Gould continued to negotiate the transaction agreements.

During the week of March 12, 2007, Point.360 provided DG FastChannel and its other advisors with various documents in response to DG FastChannel's due diligence request. The materials related to Point.360's business, operations, and financial condition. Grant Thornton LLP assisted DG FastChannel with tax diligence, and Gardere Wynne Sewell LLP assisted DG FastChannel with real property diligence.

On March 20, 2007, Latham & Watkins circulated revised drafts of the transaction agreements.

On March 27, 2007, Mr. Ginsburg spoke with Mr. Bagerdjian to resolve various issues regarding the merger agreement. On the same day, Messrs. Bagerdjian and Steel, along with attorneys from Troy

Gould, spoke on the telephone with representatives of Latham & Watkins regarding the ancillary and support agreements to the merger agreement.

On March 28, 2007, DG FastChannel held a telephonic meeting of its board of directors during which the Board discussed the proposed acquisition of Point.360's ADS business.

On March 29, 2007, Mr. Bagerdjian reported to the Point.360 board of directors about the progress of negotiations with DG FastChannel. The directors asked Mr. Bagerdjian to keep them informed as negotiations continued, and Mr. Bagerdjian agreed.

On March 30, 2007, Point.360 engaged Marshall and Stevens, Inc. to provide a fairness opinion to the Point.360 Board of Directors with respect to the proposed transaction.

On April 2, 2007, Messrs. Ginsburg and Choucair and representatives from Latham & Watkins participated in a conference call with Messrs. Bagerdjian and Steel and attorneys from Troy & Gould. The participants discussed unresolved diligence items and engaged in further negotiations over the merger agreement and certain ancillary agreements thereto.

Throughout the first two weeks in April, attorneys from Latham & Watkins and Troy & Gould continued to negotiate the merger and ancillary agreements. At the same time, DG FastChannel and its other advisers continued to conduct due diligence on Point.360's ADS business.

On April 9, 2007, Mr. Choucair clarified certain terms of the merger agreement with Mr. Steel.

On April 11, 2007, DG FastChannel held a meeting of its board of directors to discuss the proposed transaction.

On April 12, 2007, and again the next day, Messrs. Bagerdjian and Steel, along with attorneys from Troy & Gould, spoke on the telephone with attorneys at Latham & Watkins regarding the ancillary agreements to the merger agreement.

On April 13, 2007, Point.360's board of directors met and approved the transaction with DG FastChannel, including the spin-off of the post-production business. At the meeting, Marshall & Stevens delivered its opinion that the transaction was fair to the shareholders of Point.360, and Troy & Gould expressed a tax opinion that the spin-off would qualify as a tax-free reorganization under the Code.

Throughout the morning and afternoon on April 15, 2007, Messrs. Ginsburg and Bagerdjian negotiated the terms of the post-production services agreement. The terms of this agreement provided that for an initial period of five years, DG FastChannel would (1) outsource post-production services to New 360 and (2) use New 360's vaulting services in Los Angeles, provided in each case that New 360's services remain competitive as to price and quality. The agreement was originally proposed by Mr. Bagerdjian in his March 2, 2007 non-binding letter of intent. Subsequent to those discussions, Messrs. Bagerdjian and Steel and attorneys from Troy & Gould spoke on the telephone with representatives from Latham & Watkins regarding the other ancillary agreements to the merger agreement.

In the evening on April 15, 2007, DG FastChannel held a telephonic meeting of its board of directors. William O'Neill, a corporate partner at Latham & Watkins, participated in the board meeting at the invitation of Mr. Ginsburg. During the meeting, Mr. O'Neill discussed the directors' various fiduciary duties in relation to the transaction under Delaware law. Following Mr. O'Neill's presentation, CIBC delivered an oral opinion that the transaction is fair to DG FastChannel, from a financial point of view. The board of directors then conducted a final review of the transaction agreements. The board determined that the merger agreement and the ancillary agreements are in the best interests of DG FastChannel and its shareholders, and voted to approve the merger agreement, the ancillary agreements and the related transactions with Point.360.

On April 16, 2007, after the close of the financial markets in New York, DG FastChannel, Point.360 and New 360 executed the merger agreement and the contribution agreement. Mr. Bagerdjian entered into and executed a support agreement with DG FastChannel.

On the same day, DG FastChannel and Point.360 issued separate press releases announcing the execution of the merger agreement and the contribution agreement and the transactions contemplated thereby, including the offer and the merger.

DG FastChannel's board of directors believes that the merger with Point.360 represents an opportunity to enhance value for DG FastChannel stockholders. The decision of DG FastChannel's board of directors to enter into the merger agreement was the result of careful consideration by the board of directors of numerous factors. Significant factors considered by the DG FastChannel board of directors include, among others:

The foregoing discussion of factors considered by DG FastChannel's board is not meant to be exhaustive, but includes the material factors considered by the DG FastChannel board in approving the merger agreement and the transactions contemplated by the merger agreement. The DG FastChannel board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. Rather, the board members made their respective determinations based on the totality of the information presented to them, including the recommendation by DG FastChannel management, and the judgments of individual members of the board may have been influenced to a greater or lesser degree by different factors.

In deciding whether or not to tender your shares of Point.360 common stock, you should consider the factors described above under "Background and Reasons for the Offer and the Contemplated Merger" on page 40 as well as the factors set forth under "Risk Factors" on page 24 and the other factors set forth in this prospectus. While we believe the offer should be attractive to you as a Point.360 stockholder, you should also consider the following matters:

On April 13, 2007, Point.360's board of directors approved the merger agreement, the offer and the merger. Point.360's board of directors also has recommended that Point.360 shareholders accept the offer and tender their shares of Point.360 common stock in the offer. For more information about the Point.360 board of directors' recommendation and the reasons for its recommendation, please see the Point.360 Recommendation Statement which is being mailed to you together with this offer and prospectus.

Point.360's board of directors has received a written opinion, dated April 13, 2007, from Marshall & Stevens to the effect that, as of the date of the opinion and based on and subject to the matters described in the opinion, the consideration to be received by the holders of Point.360 common stock in the offer and merger is fair, from a financial point of view, to such holders. A summary of Marshall & Stevens' opinion and of the analyses performed, the bases and methods of arriving at the opinion, and a description of Marshall & Stevens' investigation and assumptions, is included in the Point.360 Recommendation Statement. The full text of Marshall & Stevens' written opinion, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Marshall & Stevens in rendering its opinion, is attached to the Point.360 Recommendation Statement.

We are proposing to acquire all of the outstanding shares of Point.360 common stock. We are offering to exchange approximately 0.1895 shares of DG FastChannel common stock for each share of Point.360 common stock (including the associated preferred share purchase rights) that you validly tender in this offer, on the terms and conditions contained in this prospectus and in the related letter of transmittal. The exact number of shares of DG FastChannel common stock to be exchanged for each share of Point.360 common stock will be obtained by dividing 2 million by the number of shares of Point.360 common stock (excluding shares owned directly or indirectly by DG FastChannel or Point.360) issued and outstanding immediately prior to the consummation of this offer. Based on the closing price of Point.360 common stock as reported on the Nasdaq Global Market on June 7, 2007, the last trading day prior to the printing of this prospectus for which this information was practicably available, we assume that 10,554,730 shares of Point.360 common stock will be issued and outstanding immediately prior to the consummation of this offer (excluding shares owned directly or indirectly by DG FastChannel or Point.360) and that each share of Point.360 common stock validly tendered and not properly withdrawn prior to the expiration of this offer will be exchanged for 0.1895 shares of DG FastChannel common stock.

We will not acquire any shares of Point.360 common stock in the offer unless Point.360 stockholders have validly tendered and not properly withdrawn prior to the expiration of the offer that number of shares which, together with the shares then beneficially owned by DG FastChannel, represents at least a majority (50%) of the shares outstanding on a fully diluted basis and no less than a majority (50%) of the voting power of the outstanding shares of Point.360 entitled to vote in the election of directors or (if a greater majority) upon the adoption of the merger agreement. Upon the closing of the offer, based on the number of Point.360 stock options outstanding on June 7, 2007 and assuming no additional exercises of Point.360 options, there will be 10,554,730 shares of Point.360 common stock outstanding and no shares of Point.360 common stock issuable pursuant to outstanding

Point.360 stock options. There are also other conditions to the offer that are described under "—Conditions of the Offer" on page 46.

After completion of the offer, DG FastChannel will cause Point.360 to complete a merger with and into DG FastChannel, in which each outstanding share of Point.360 common stock (except for shares beneficially owned directly or indirectly by DG FastChannel for its own account) will be converted into the right to receive DG FastChannel common stock at the same exchange ratio as used in the offer, subject to appraisal rights to the extent applicable under California law. If, after the completion of the offer, either as a result of the offer alone or in conjunction with the exercise of our option to purchase shares directly from Point.360, we beneficially own more than 90% of the outstanding shares of Point.360 common stock, we may effect this merger without the approval of Point.360 shareholders, as permitted under California and Delaware law. If, on the other hand, after the completion of the offer, we beneficially own more than 50%, but less than 90%, of the outstanding shares of Point.360 common stock, a meeting of Point.360 shareholders and the affirmative vote of at least a majority of the shares of Point.360 common stock outstanding on the record date for such meeting will be needed to complete the merger. Since DG FastChannel will own a majority of the shares of Point.360 common stock outstanding on the record date, approval of the merger by Point.360 shareholders will be assured. See "—Approval of the Merger" on page 56.

When we refer to the expiration of the offer, we mean 12:00 midnight, New York City time, on [ ], [ ], 2007, unless we extend the period of time for which the offer is open, in which case the offer will expire, and references to the expiration of the offer will mean, the latest time and date on which the offer is open.

If you are the record owner of your shares and you tender your shares directly to the exchange agent and depository, you will not be obligated to pay any charges or expenses of the exchange agent and depository or any brokerage commissions. If you own your shares through a broker or other nominee, and your broker or nominee tenders the shares on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply.

We are commencing the offer on [ ], [ ], 2007, the date of the distribution of this prospectus. The offer is scheduled to expire at 12:00 midnight, New York City time, on [ ], [ ], 2007, unless we extend the period of the offer. All references to the expiration of the offer mean the time of expiration, as extended. For more information, see the discussion under "—Extension, Termination and Amendment" below.

The offer is subject to a number of conditions, which we describe below. Notwithstanding any other provisions of the offer, and in addition to DG FastChannel's rights to extend and amend the offer at any time in its sole discretion (subject to the provisions of the merger agreement and any applicable rules and regulations of the SEC, including Rule 14e-l(c) under the Exchange Act), DG FastChannel shall not be required to accept for exchange, or exchange the offer consideration for, any validly tendered shares if any of these conditions are not satisfied or, where permissible, waived as of the expiration of the offer.

There must be validly tendered and not properly withdrawn prior to the expiration of the offer that number of shares which, together with the shares then beneficially owned by DG FastChannel, represents at least a majority (50%) of the shares outstanding on a fully diluted basis and no less than a majority (50%) of the voting power of the outstanding shares of Point.360 entitled to vote in the election of directors or (if a greater majority) upon the adoption of the merger agreement. Upon the closing of the offer, based on the number of Point.360 stock options outstanding on May 31, 2007 and assuming no additional exercises of Point.360 options, there will be 10,554,730 shares of Point.360 common stock outstanding and no shares of Point.360 common stock issuable pursuant to outstanding Point.360 stock options.

The registration statement on Form S-4 of which this prospectus is a part must have become effective under the Securities Act and not be the subject of any stop order or proceedings seeking a stop order.

The shares of DG FastChannel common stock issuable in exchange for shares of Point.360 common stock in the offer and the merger shall have been approved (if such approval is necessary) for quotation on the Nasdaq Global Market.

DG FastChannel shall have received a written opinion from Latham & Watkins LLP to the effect that the offer and the merger together will constitute a reorganization within the meaning of Section 368(a) of the Code (which opinion may rely on such assumptions and representations as such counsel reasonably deems appropriate). In addition, Point.360 shall have received a written opinion from Troy & Gould PC to the effect that the offer and the merger together will constitute a reorganization within the meaning of Section 368(a) of the Code (which opinion may rely on such assumptions and representations as such counsel reasonably deems appropriate).

In addition, notwithstanding any other provisions of the offer, subject to the provisions of the merger agreement and any applicable rules and regulations of the SEC (including Rule 14e-1(c) under the Exchange Act), DG FastChannel shall not be required to accept for exchange, or exchange the offer consideration for, any validly tendered shares if any of the following events has occurred:

All of the foregoing conditions are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any such condition and may be waived by us in whole or in part at any time and from time to time and in our sole discretion, subject in each case to the terms of the merger agreement. Any reference to a condition or requirement being satisfied shall be deemed met if such condition or requirement is so waived. The failure by us at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and, each such right shall be deemed an ongoing right that may be asserted at any time and from time to time.

DG FastChannel and Point.360 cannot assure you that all of the conditions to completing the offer will be satisfied or waived.

Subject to the SEC's applicable rules and regulations and subject to the limitations contained in the merger agreement, we also reserve the right, in our discretion:

For you to validly tender shares of Point.360 common stock in the offer, you must do one of the following:

These deliveries and arrangements must be made before the expiration of the offer. TENDERS BY NOTICE OF GUARANTEED DELIVERY WILL NOT BE ACCEPTED. The term "agent's message" means a message, transmitted by DTC to, and received by, the exchange agent and depository and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering the shares of Point.360 common stock which are the subject of the book-entry confirmation, that the participant has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce that agreement against the participant.

The exchange agent and depository will establish an account with respect to the shares of Point.360 common stock at DTC for purposes of the offer within two business days after the date of the distribution of this prospectus, and any financial institution that is a participant in DTC may make book-entry delivery of the shares of Point.360 common stock by causing DTC to transfer these shares of Point.360 common stock into the exchange agent and depository's account in accordance with DTC's procedure for the transfer. For a tender made by transfer of shares of Point.360 common stock through book-entry delivery at DTC to be valid, the exchange agent and depository must receive, prior to the

expiration of the offer, a book-entry confirmation of transfer and either a duly executed letter of transmittal or a duly executed copy thereof, along with any other required documents, at one of its addresses set forth on the back cover of this prospectus, or an agent's message as part of the book-entry confirmation. Signatures on all letters of transmittal must be guaranteed by an eligible institution, except in cases in which shares of Point.360 common stock are tendered either by a registered holder of shares of Point.360 common stock who has not completed the box entitled "Special Delivery Instructions" on the letter of transmittal or for the account of an eligible institution. By "eligible institution" we mean a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association Inc., including the Securities Transfer Agents Medallion Program (STAMP), the Stock Exchanges Medallion Program (SEMP) and the Nasdaq Medallion Signature Program (MSP), or any other "eligible guarantor institution," as that term is defined in Rule 17Ad-15 under the Exchange Act.

If the certificates for shares of Point.360 common stock are registered in the name of a person other than the person who signs the letter of transmittal, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signature(s) on the certificates or stock powers guaranteed in the manner described above.

The method of delivery of certificates representing shares of Point.360 common stock and all other required documents, including delivery through DTC, is at your option and risk, and the delivery will be deemed made only when actually received by the exchange agent and depository. If delivery is by mail, we recommend registered mail with return receipt requested, properly insured. In all cases, you should allow sufficient time to ensure timely delivery before expiration of the offer.

You may withdraw shares of Point.360 common stock that you tender pursuant to the offer at any time before the expiration of the offer. After the expiration of the offer, tenders are irrevocable.

For your withdrawal to be effective, the exchange agent and depository must receive from you, prior to the expiration of the offer, a written or facsimile transmission notice of withdrawal at one of its addresses set forth on the back cover of this prospectus, and your notice must include your name, address, social security number, the certificate number(s) and the number of shares of Point.360 common stock to be withdrawn, as well as the name of the registered holder, if it is different from that of the person who tendered those shares of Point.360 common stock. If shares of Point.360 common stock have been tendered pursuant to the procedures for book-entry tender discussed above under "—Procedure for Tendering Shares," any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn shares of Point.360 common stock and must otherwise comply with DTC's procedures. If certificates have been delivered or otherwise identified to the exchange agent and depository, the name of the registered holder and the serial numbers of the particular certificates evidencing the shares of Point.360 common stock withdrawn must also be furnished to the exchange agent and depository, as stated above, prior to the physical release of the certificates. We will decide all questions as to the form and validity (including time of receipt) of any notice of withdrawal, in our sole discretion, and our decision will be final and binding.

An eligible institution must guarantee all signatures on the notice of withdrawal unless the shares of Point.360 common stock have been tendered for the account of an eligible institution.

None of DG FastChannel, the exchange agent and depository, the information agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or will incur any liability for failure to give any notification. Any shares of Point.360 common stock that you properly withdraw will be deemed not to have been validly tendered for

purposes of the offer. However, you may retender withdrawn shares of Point.360 common stock by following one of the procedures discussed under "—Procedure for Tendering Shares" at any time before the expiration of the offer.

If less than 90% of the Point.360 shares have been tendered, or if the requirements of Rule 14d-11 under the Exchange Act have been met, we may elect to provide a subsequent offering period of up to 20 business days after the acceptance of shares of Point.360 common stock in the initial offer. You will not have the right to withdraw any shares of Point.360 common stock that you tender during the subsequent offering period. We are required to accept for exchange, and to deliver DG FastChannel common stock in exchange for, shares of Point.360 common stock that are validly tendered, promptly after they are tendered during any subsequent offering period. If we elect to provide a subsequent offering period, we are required to make a public announcement to that effect no later than 9:00 a.m., New York time, on the next business day after the previously scheduled expiration date.

By executing a letter of transmittal, you will agree and acknowledge that our acceptance for exchange of shares of Point.360 common stock you tender in the offer will, without any further action, revoke any prior powers of attorney and proxies that you may have granted in respect of those shares and you will not grant any subsequent proxies and, if any are granted, they will not be deemed effective. We reserve the right to require that, in order for shares of Point.360 common stock to be validly tendered, we must be able to exercise full voting, consent and other rights with respect to those shares of Point.360 common stock immediately upon our acceptance of those shares of Point.360 common stock for exchange.

We will determine questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of shares of Point.360 common stock, in our sole discretion, and our determination will be final and binding. We reserve the absolute right to reject any and all tenders of shares of Point.360 common stock that we determine are not in proper form or the acceptance of or exchange for which may, in the opinion of our counsel, be unlawful. No tender of shares of Point.360 common stock will be deemed to have been validly made until all defects and irregularities in tenders of those shares have been cured or waived. None of DG FastChannel, the exchange agent and depository, the information agent, nor any other person will be under any duty to give notification of any defects or irregularities in the tender of any shares of Point.360 common stock or will incur any liability for failure to give any such notification. Our interpretation of the terms and conditions of our offer, including the letter of transmittal and instructions, will be final and binding.

The tender of shares of Point.360 common stock pursuant to any of the procedures described above will constitute a binding agreement between you and us upon the terms and subject to the conditions of the offer.

Subject to the satisfaction (or, where permissible, waiver) of the conditions to the offer as of the expiration of the offer, we will accept for exchange shares of Point.360 common stock validly tendered and not properly withdrawn promptly after the expiration of the offer and will exchange DG FastChannel common stock and cash in lieu of fractional shares for the tendered shares of Point.360 common stock promptly afterwards. In all cases, exchange of shares of Point.360 common

stock tendered and accepted for exchange pursuant to the offer will be made only if the exchange agent and depository timely receives:

For purposes of the offer, we will be deemed to have accepted for exchange shares of Point.360 common stock validly tendered and not properly withdrawn when, as and if we notify the exchange agent and depository of our acceptance of the tender of those shares of Point.360 common stock pursuant to the offer. The exchange agent and depository will deliver shares of DG FastChannel common stock in exchange for shares of Point.360 common stock pursuant to the offer and cash in lieu of a fraction of a share of DG FastChannel common stock promptly after receipt of our notice. The exchange agent and depository will act as agent for tendering Point.360 stockholders for the purpose of receiving shares of DG FastChannel common stock and cash instead of a fraction of a share of DG FastChannel common stock and transmitting the shares and cash to you. You will not receive any interest on any cash that you are entitled to receive, even if there is a delay in making the exchange. If we do not accept shares of Point.360 common stock for exchange pursuant to the offer or if certificates are submitted for more shares of Point.360 common stock than are tendered in the offer, we will return certificates for these unexchanged shares of Point.360 common stock without expense to the tendering stockholder. If we do not accept shares of Point.360 common stock for exchange pursuant to the offer, shares of Point.360 common stock tendered by book-entry transfer into the exchange agent and depository's account at DTC pursuant to the procedures set forth under "—Procedure for Tendering Shares" will be credited to the account maintained with DTC from which those shares were originally transferred, promptly following expiration or termination of the offer.

We will not issue any fraction of a share of DG FastChannel common stock pursuant to the offer or the merger. In lieu thereof, DG FastChannel will arrange for the exchange agent and depository to make a cash payment (without interest and subject to any withholding for taxes) equal to the fractional share interest multiplied by the closing price of a share of DG FastChannel common stock on the Nasdaq Global Market on the first date that DG FastChannel accepts shares tendered pursuant to the offer.

The following is a general summary of the anticipated material United States federal income tax consequences of the offer and merger to United States holders (as defined below) of Point.360 common stock. This summary applies only to Point.360 stockholders that hold their shares of Point.360 common stock, and will hold the shares of DG FastChannel common stock received in exchange for their shares of Point.360 common stock, as capital assets within the meaning of Section 1221 of the Code.

This discussion does not address all of the United States federal income tax consequences that may be relevant to particular stockholders in light of their individual circumstances, and does not address the tax consequences arising under the laws of any state, local or foreign jurisdiction. In addition, this discussion does not consider any specific facts or circumstances that may be relevant to a stockholder subject to special rules under United States federal income, including without limitation:

If a partnership or other entity treated as a partnership for United States federal income tax purposes holds shares of Point.360 common stock, the tax treatment of a partner generally will depend on the status of the partner and on the activities of the partnership. Partners of partnerships holding Point.360 common stock should consult their tax advisors about the tax consequences of the offer and the merger to them.

No information is provided in this document or the tax opinions referred to in the following paragraphs with respect to the tax consequences, if any, of the offer and the merger under applicable foreign, state, local and other tax laws. This discussion is based, and the tax opinions referred to in the following paragraphs will be based, upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury Regulations, IRS rulings and judicial decisions, as in effect as of the date of this document or the date of the tax opinions, as the case may be. There can be no assurance that future legislative, administrative or judicial changes or interpretations, which changes could apply retroactively, will not affect the accuracy of this discussion or the statements or conclusions set forth in the tax opinions referred to in the following paragraphs. No rulings have been or will be sought from the IRS concerning the tax consequences of the offer and the merger, and none of the tax opinions of counsel to be received in connection with the offer and the merger will be binding on the IRS. As such, there can be no assurance that the IRS will not take a contrary position regarding the tax consequences of the offer and the merger described in this discussion or the tax opinions of counsel or that any such contrary position would not be sustained. The tax opinions referred to in the following

paragraphs rely on facts, assumptions and representations of factual statements and covenants contained in officer's certificates of DG FastChannel and Point.360. In addition, the opinions set forth below assume the absence of changes in facts or in law between the date of this registration statement and the effective time of each of the completion of the offer and the effective time of the merger.

Tax matters are very complicated, and the tax consequences of the offer and the merger to Point.360 stockholders will depend on such stockholder's particular tax situation. POINT.360 STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER AND THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS AND OF CHANGES IN APPLICABLE TAX LAWS.

The obligations of DG FastChannel and Point.360 to complete the offer are conditioned upon the delivery of an opinion to DG FastChannel and to Point.360 by Latham & Watkins LLP and Troy & Gould PC, respectively, that, for federal income tax purposes, the offer and the merger together will constitute a reorganization within the meaning of Section 368(a) of the Code. These opinions of counsel will be given in reliance on customary representations of DG FastChannel and Point.360 and assumptions as to certain factual matters, including that the merger will occur in the ordinary course after completion of the offer.

Subject to the limitations and qualifications set forth in this section "Material U.S. Federal Income Tax Consequences," and in the opinions filed as Exhibits 8.1 and 8.2 to this registration statement, the following are the material federal income tax consequences to Point.360 stockholders who, consistent with the opinions of counsel referred to above, receive their shares of DG FastChannel common stock pursuant to a transaction constituting a reorganization within the meaning of Section 368(a) of the Code:

If the Internal Revenue Service determines successfully that the offer and the merger together do not constitute a reorganization within the meaning of Section 368(a) of the Code, each Point.360 stockholder would be required to recognize gain or loss with respect to each share of Point.360 common stock that he or she surrenders in the offer and the merger in an amount equal to the difference between (a) the sum of the fair market value of any DG FastChannel common stock and cash received in lieu of a fractional share of DG FastChannel common stock and (b) the tax basis of the shares of Point.360 common stock surrendered in exchange therefor. The amount and character of gain or loss will be computed separately for each block of Point.360 common stock that was purchased by the holder in the same transaction. A Point.360 stockholder's aggregate tax basis in the DG FastChannel common stock received in the offer and the merger would in this case equal its fair market value at the time of the closing of the offer or the merger, as applicable, and the holding period for the DG FastChannel common stock will begin the day after the closing of the offer or the merger, as applicable.

Holders of Point.360 common stock may be entitled to appraisal rights in connection with the merger. If a holder of Point.360 common stock receives cash pursuant to the exercise of appraisal rights, such holder generally will recognize gain or loss, measured by the difference between the amount received (other than any amount relating to interest, if any, which will be taxable as ordinary income) and such holder's tax basis in such Point.360 common stock. A holder of Point.360 common stock who exercises appraisal rights is urged to consult its, his or her own tax advisor.

Holders of Point.360 common stock may be subject to "backup withholding" for United States federal income tax purposes on any cash received in the offer or in the merger in lieu of a fractional share of DG FastChannel common stock, unless certain requirements are met. Payments will not be subject to backup withholding if the stockholder (1) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact, or (2) provides DG FastChannel or the third-party paying agent, as appropriate, with the holder's correct taxpayer identification number and completes a form in which the holder certifies that the holder is not subject to backup withholding. The taxpayer identification number of an individual is his or her Social Security number. Any amount paid as backup withholding will be credited against the holder's U.S. federal income liability provided the holder furnishes the required information to the IRS.

The shares of DG FastChannel common stock offered hereby will be registered under the Securities Act and quoted on the Nasdaq Global Market. Accordingly, such shares may be traded freely subject to restrictions under the Securities Act applicable to subsequent transfers of our shares by "affiliates" (as defined in the Securities Act) which, in general, provide that affiliates may not transfer our shares except pursuant to further registration of those shares under the Securities Act or in compliance with Rule 145 (or if applicable, Rule 144) under the Securities Act or another available exemption from registration under the Securities Act.

Under the CGCL and the Delaware General Corporation Law (the "DGCL"), the approval of the board of directors of a company and the affirmative vote of the holders of a majority of the outstanding shares entitled to vote are required to approve a merger and adopt a merger agreement. Point.360's board of directors has previously approved the merger and adopted the merger agreement. If, after completion of this offer, we own less than 90% of the outstanding shares of Point.360 common stock, approval of the merger can be accomplished through a special meeting of Point.360 stockholders to vote on the merger. Since we will own a majority of the shares of Point.360 common stock on the

record date, we would have a sufficient number of shares of Point.360 common stock to approve the merger without the vote of any other Point.360 stockholder and, therefore, approval of the merger by Point.360 stockholders will be assured. Completion of the transaction in this manner is referred to in this prospectus as a "long-form merger." Under the CGCL and the DGCL, a merger can occur without a vote of Point.360 stockholders, referred to as a "short-form merger," if, after completion of the offer, as it may be extended and including any subsequent offering period, we were to own at least 90% of the outstanding shares of Point.360 common stock. If, after completion of the offer, as it may be extended and including any subsequent offering period, or after DG FastChannel's exercise of its option to purchase additional shares from Point.360 directly, we own at least 90% of the outstanding shares of Point.360 common stock, we may complete the acquisition of the remaining outstanding shares of Point.360 common stock by completing a short-form merger.

In connection with the merger, Point.360 shareholders may be entitled to dissenters' rights under Chapter 13 of the CGCL, the full text of which is attached to this prospectus as Annex C. The description of these dissenters' rights contained in this prospectus is not a complete statement of the law pertaining to dissenters' rights under the CGCL and is qualified in its entirety by reference to Chapter 13 of the CGCL. Annex C should be reviewed carefully by any Point.360 shareholder who wishes to exercise dissenters' rights or who wishes to preserve the right to do so, since failure to timely comply with the procedures of the relevant statute will result in the loss of dissenters' rights.

ANY HOLDER OF POINT.360 COMMON STOCK WISHING TO EXERCISE DISSENTERS' RIGHTS IS URGED TO CONSULT LEGAL COUNSEL BEFORE ATTEMPTING TO EXERCISE SUCH RIGHTS.

In the event of a short-form merger, or if the merger agreement is approved by the vote of Point.360 shareholders in a long-form merger and is not abandoned or terminated, holders of Point.360 common stock who did not vote in favor of the merger may, by complying with the procedures and in the manner prescribed by Chapter 13 of the CGCL, be entitled to dissenters' rights as described therein. We refer to the record holders of the shares of Point.360 common stock that are eligible to, and do, exercise their dissenters' rights with respect to the merger as "dissenting shareholders," and the shares with respect to which they exercise dissenters' rights as "dissenting shares."

To qualify as dissenting shares under California law, shares of Point.360 stock must satisfy the following requirements:

In addition, because Point.360 common stock is traded on the Nasdaq Global Market, Point.360 shareholders will not have dissenters' rights, and there will be no dissenting shares, unless holders of 5% or more of the outstanding shares of Point.360 common stock make demands for payment in cash of their shares at their fair market value pursuant to Section 1301 of the CGCL.

The "fair market value" to which a dissenting shareholder is entitled is to be determined as of April 16, 2007, the day before the initial public announcement of the terms of the merger, excluding any appreciation or depreciation in consequence of the merger. The last closing price per share of Point.360's common stock prior to the public announcement of the merger, as reported on the Nasdaq Global Market on April 16, 2007, was $3.69 per share.

A shareholder who has made this demand for payment may not withdraw the demand unless Point.360 consents to the withdrawal.

If the merger is approved by Point.360 shareholders, Point.360 will mail to each shareholder who has voted against the merger and made a proper written demand for payment a notice of the approval of the merger by the Point.360 shareholders within ten days after the date of the approval. This notice of approval of the merger will be accompanied by:

A dissenting shareholder must in turn submit the certificates representing the dissenting shares for endorsement as dissenting shares to Point.360 at its principal office or at the office of its transfer agent within 30 days after the date on which notice of approval of the merger by Point.360 shareholders was mailed to the dissenting shareholder. If the dissenting shareholder transfers the dissenting shares prior to their submission to Point.360 for the required endorsement, the shares will lose their status as dissenting shares.

If upon a dissenting shareholder's delivery to Point.360 or its transfer agent of the stock certificates representing the dissenting shares, Point.360 and the shareholder agree that the shares are dissenting shares and upon the price to be paid for the dissenting shares, then the agreed price plus the legal rate of interest on judgments from the date of the agreement is required by law to be paid to the dissenting shareholder within the later of 30 days after the date of the agreement or 30 days after any statutory or contractual conditions to the completion of the merger are satisfied or waived.

If Point.360 and a shareholder disagree as to whether shares are entitled to be classified as dissenting shares or as to the price for dissenting shares, either the shareholder or Point.360 may file a complaint, within six months after the date on which the notice of the shareholders' approval of the merger was mailed to the shareholder (but not thereafter), in the superior court of the proper county in California requesting that the court determine this issue. The court will determine whether the shares of Point.360 common stock held by the shareholder are dissenting shares, the fair market value

of the shares, or both. The court may appoint one or more impartial appraisers to determine the fair market value of the shares.

Point.360 shareholders considering exercising dissenters' rights should be aware that the fair value of their shares of capital stock, as determined under California law, could be more than, the same as or less than the amount that would be paid to them pursuant to the merger agreement. The costs and expenses of appraisal proceedings under California law, including reasonable compensation to the appraisers to be fixed by the court, will be assessed or apportioned between Point.360 and the shareholder as the court considers equitable. However, if the fair market value as determined in the proceeding exceeds the price offered by Point.360, Point.360 will pay the costs, and, if the fair market value exceeds the price offered by Point.360 in its notice of the approval of the merger by more than 25%, Point.360 may be required to pay the shareholders' attorneys' fees and other fees, together with interest thereon at the legal rate on judgments from the date of compliance with Sections 1300, 1301 and 1302 of the CGCL.

A person having a beneficial interest in Point.360 common stock that is held of record in the name of another person, such as a trustee or nominee, must act promptly to cause the record holder to follow the requirements of Chapter 13 of the CGCL in a timely manner if the person elects to demand payment of the fair market value of the shares.

Any demands, notices, certificates or other documents delivered to Point.360 prior to approval of the merger may be sent to Secretary, Point.360, 2777 North Ontario Street, Burbank, CA 91504. After approval of the merger, they may be sent to Secretary, DG FastChannel, Inc., 750 W. John Carpenter Freeway, Suite 700, Irving, TX 75039.

We are not aware of any regulatory license or permit material to the ADS business of Point.360 that may be materially adversely affected by our acquisition of Point.360 common stock, or any regulatory filing or approval that would be required for our acquisition of Point.360 common stock. DG FastChannel and Point.360 have made all required filings under the Securities Act and the Exchange Act, in connection with the offer and the merger. We are unaware of any requirement for the filing of information with, or the obtaining of the approval of, governmental authorities in any non-U.S. jurisdiction that is applicable to the offer or the merger.

A number of states have adopted takeover laws and regulations which purport, to varying degrees, to be applicable to attempts to acquire securities of corporations which have substantial assets, shareholders, principal executive offices or principal places of business in those states. We have not attempted to comply with any state takeover statutes in connection with the offer, since we do not believe that any of these apply. However, we reserve the right to challenge the validity or applicability of any state law allegedly applicable to the offer, and nothing in this prospectus nor any action taken in connection herewith is intended as a waiver of that right. If one or more takeover statutes apply to the offer and are not found to be invalid, we may be required to file documents with, or receive approvals from, relevant state authorities and we may also be unable to accept for exchange shares of Point.360 common stock tendered into the offer or may delay the offer. See "The Offer—Conditions of the Offer" on page 46.

The tender and the acceptance of shares of Point.360 common stock in the offer will reduce the number of shares of Point.360 common stock that might otherwise trade publicly and also the number of holders of shares of Point.360 common stock. This could adversely affect the liquidity and market value of the remaining shares of Point.360 common stock held by the public. Depending upon the number of shares of Point.360 common stock tendered to and accepted by us in the offer, the shares of Point.360 common stock may no longer meet the requirements of the National Association of Securities Dealers for continued inclusion on the Nasdaq Global Market.

If the Nasdaq Global Market ceased publishing quotations for the shares of Point.360 common stock, it is possible that the shares of Point.360 common stock would continue to trade in the over-the-counter market and that price or other quotations would be reported by other sources. The extent of the public market for such shares of Point.360 common stock and the availability of such quotations would depend, however, upon such factors as the number of shareholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the shares of Point.360 common stock on the part of securities firms, the possible termination of registration under the Exchange Act as described below and other factors. We cannot predict whether the reduction in the number of shares of Point.360 common stock that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the shares of Point.360 common stock.

Shares of Point.360 common stock are currently registered under the Exchange Act. Point.360 can terminate that registration upon application to the SEC if the outstanding shares of Point.360 common stock are not listed on a national securities exchange and if there are fewer than 300 holders of record of shares of Point.360 common stock. Termination of registration of the shares of Point.360 common stock under the Exchange Act would reduce the information that Point.360 must furnish to its shareholders and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirement of furnishing a proxy statement in connection with shareholders meetings pursuant to Section 14(a) and the related requirement of furnishing an annual report to stockholders, no longer applicable with respect to the shares of Point.360 common stock. In addition, if the shares of Point.360 common stock are no longer registered under the Exchange Act, the requirements of Rule 13e-3 under the Exchange Act with respect to "going-private" transactions would no longer be applicable to Point.360. Furthermore, the ability of "affiliates" of Point.360 and persons holding "restricted securities" of Point.360 to dispose of such securities pursuant to Rule 144 under the Securities Act may be impaired or eliminated. If registration of the shares of Point.360 common stock under the Exchange Act were terminated, they would no longer be eligible for Nasdaq Global Market listing or for continued inclusion on the Federal Reserve Board's list of "margin securities." DG FastChannel may seek to cause Point.360 to apply for termination of registration of the shares of Point.360 common stock under the Exchange Act as soon after the expiration of the offer as the requirements for such termination are met. If the Nasdaq Global Market listing and the Exchange Act registration of the shares of Point.360 common stock are not terminated prior to the merger, then the shares of Point.360 common stock will be delisted from the Nasdaq Global Market and the registration of the shares of Point.360 common stock under the Exchange Act will be terminated following the consummation of the merger. The shares of Point.360 common stock are presently "margin securities" under the regulations of the Federal Reserve Board, which has the effect, among other things, of allowing brokers to extend credit on the collateral of shares of Point.360 common stock. Depending on the factors similar to those described above with respect to listing and market quotations, following consummation of the offer, the shares of Point.360 common stock may no longer constitute "margin securities" for the purposes of the Federal Reserve

Board's margin regulations, in which event the shares of Point.360 common stock would be ineligible as collateral for margin loans made by brokers.

Our offer is not conditioned on the receipt of financing. DG FastChannel's fees and expenses in connection with the offer will be paid from DG FastChannel's available capital resources. DG FastChannel intends to deliver the shares of DG FastChannel common stock offered in the offer and the merger from DG FastChannel's available authorized shares.

If the offer is not completed because the minimum condition or another condition is not satisfied or, if permissible, waived, we expect that Point.360 will continue to operate its business as presently operated, subject to market and industry conditions, and will not complete the contribution to, and spin-off of, New 360.

In accordance with SFAS No. 141, "Business Combinations," DG FastChannel will account for the transactions as a business combination. Upon consummation of the transactions, DG FastChannel will record the market value of the DG FastChannel common stock issued, the fair value of the assets and liabilities assumed, as well as the amount of direct transaction costs.

We have retained D.F. King & Co., Inc. as information agent in connection with the offer. The information agent may contact holders of Point.360 common stock by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominee stockholders to forward materials relating to the offer to beneficial owners of Point.360 common stock. We will pay the information agent customary fees for these services in addition to reimbursing the information agent for its reasonable out-of-pocket expenses. We have agreed to indemnify the information agent against certain liabilities and expenses in connection with the offer, including certain liabilities under the U.S. federal securities laws. In addition, we have retained American Stock Transfer & Trust Company as the exchange agent and depository with respect to the offer and the merger. We will pay the exchange agent and depository reasonable and customary fees for its services in connection with the offer and the merger, will reimburse the exchange agent and depository for its reasonable out-of-pocket expenses and will indemnify the exchange agent and depository against certain liabilities and expenses in connection with the performance of its services. We will reimburse brokers, dealers, commercial banks and trust companies and other nominees, upon request, for customary clerical and mailing expenses incurred by them in forwarding offering materials to their customers. We will pay the costs mentioned above in this section. We will not pay any costs or expenses associated with the offer of any Point.360 stockholder. Finally, we are responsible for up to $425,000 of Point.360's transaction-related expenses and, to the extent such expenses exceed $425,000, New 360 is obligated to reimburse us for such excess.

In considering the recommendations of the Point.360 board of directors regarding the offer, Point.360 shareholders should be aware that the directors and officers of Point.360 have interests in the offer and the merger that differ from those of other shareholders of Point.360, as described below. The Point.360 board of directors was aware of these matters and considered them in recommending the tender of shares in the offer.

As a result of these interests, the directors and officers of Point.360 could be more likely to vote to recommend the offer and authorize the merger than if they did not hold these interests, and may have reasons for doing so that are not the same as the interests of Point.360 shareholders. Point.360 shareholders should consider whether these interests may have influenced the directors and officers to support or recommend the offer and the merger.

Certain directors and officers of Point.360 are eligible to receive, and have received, stock options under Point.360's 1996 Stock Incentive Plan, 2000 Nonqualified Stock Option Plan and 2005 Equity Incentive Plan, collectively referred to throughout this prospectus as the Point.360 stock option plans. As of April 13, 2007, the day prior to the execution of the merger agreement, the following directors and officers of Point.360 had outstanding stock options to purchase the number of shares of Point.360's common stock under the Point.360 stock option plans as specified below:

Name	Title	Options	Exercise Prices
Haig S. Bagerdjian(1)	Chairman, President and Chief Executive Officer	15,000 120,000 100,000	$ $ $	3.75 3.94 2.24
Alan R. Steel(2)	Executive Vice President, Finance and Administration, Chief Financial Officer and Secretary	250,000 6,300 20,000 20,000 20,000	$ $ $ $ $	3.75 1.75 2.62 2.38 2.24
Robert A. Baker(3)	Director	5,000 5,000 5,000 15,000 7,500 7,500	$ $ $ $ $ $	2.08 2.55 3.40 3.75 2.95 2.33
Gregory J. Hutchins(4)	Director	15,000 5,000 7,500	$ $ $	3.75 3.40 2.95
G. Samuel Oki(5)	Director	15,000 5,000 7,500 7,500	$ $ $ $	4.63 3.40 2.55 2.33

The merger agreement provides that, at the effective time of the merger, each outstanding option to purchase shares of Point.360 common stock issued by Point.360 pursuant to the Point.360 stock option plans, or any other agreement or arrangement, will be terminated immediately without the payment of consideration to the holder thereof.

However, pursuant to certain revisions of the Point.360 stock option plans, upon approval of the merger agreement, the Point.360 board of directors determined that all options shall vest and become immediately exercisable. Accordingly, all options granted under those plans have vested, and, assuming exercise by the holder of each such option prior to the consummation of the merger, the shares of Point.360 common stock subject thereto will be converted into shares of DG FastChannel common stock as noted above. See "The Merger Agreement—The Merger—The Treatment of Point.360 Stock Options and Stock Appreciation Rights" on page 70.

The severance and change-in-control agreements between Point.360 and each of Messrs. Bagerdjian and Steel will be contributed to, and assumed by New 360, prior to the spin-off, and neither DG FastChannel nor, from and after the contribution, Point.360 shall have any liability thereunder.

It is a condition to DG FastChannel's obligation to complete the offer that New 360 execute a non-competition agreement with DG FastChannel that was prepared in connection with the merger agreement. Pursuant to the non-competition agreement, New 360 has agreed not to compete with the ADS business and not to solicit current employees or customers of DG FastChannel or Point.360 for a period of five years from the effective time of the merger. In addition, Messrs. Bagerdjian and Steel have agreed to execute an officer confidentiality agreement pursuant to which they have agreed to keep confidential certain information of the ADS business of Point.360 for a period of three years after the effective time of the merger.

The merger agreement provides that, after the effective time of the merger, DG FastChannel will indemnify, advance expenses to and hold harmless, to the fullest extent required or permitted under applicable law and to the extent not covered by insurance, the present and former directors and officers of Point.360 and its subsidiaries in respect of acts or omissions occurring prior to or at the effective time of the merger, including in connection with the merger agreement and the transactions contemplated thereby.

period of six years after the effective time of the merger, for Point.360's directors and officers for claims arising from facts or events that occurred at, or prior to, the effective time of the merger agreement and the consummation of the transactions contemplated by the merger agreement. Such insurance coverage shall be substantially equivalent to the coverage afforded by Point.360's existing policies, or if substantially equivalent insurance coverage is unavailable, the best available coverage; provided that the aggregate cost for the purchase of such insurance coverage (for the entire six year "tail" coverage period) shall not exceed $210,000.

In connection with the merger agreement, Mr. Bagerdjian, who holds approximately 25.23% of the fully diluted shares of Point.360 common stock, entered into a support agreement with DG FastChannel on April 16, 2007. Pursuant to such support agreement, among other things:

Mr. Bagerdjian's support agreement with DG FastChannel will terminate, and he will have no obligation to tender his shares of Point.360, and may withdraw any shares previously tendered, if:

As of the date of this prospectus, DG FastChannel beneficially owns of record 1,612,436 shares of Point.360 common stock, constituting approximately 13.25% of the fully diluted shares of Point.360 common stock, which DG FastChannel acquired from another Point.360 shareholder on December 22, 2006 and in ordinary brokerage transactions on the open market on December 28 and 29, 2006 and January 3 and 5, 2007. Such shares will be counted for purposes of determining whether the minimum condition in the offer has been satisfied and, after completion of the offer, DG FastChannel will vote such shares in favor of the merger.

In addition to the noncompetition agreement discussed above, it is a condition to DG FastChannel's obligation to complete the offer that New 360 execute a working capital reconciliation agreement and an indemnification and tax matters agreement that were prepared in connection with the merger agreement. Pursuant to the working capital reconciliation agreement, following the consummation of the offer, DG FastChannel is required to pay New 360 for any net working capital of Point.360 in excess of $1 million. Pursuant to the indemnification and tax matters

agreement, following the consummation of the offer, each of DG FastChannel and New 360 is obligated to indemnify the other party for any and all losses arising out of or relating to any of the liabilities of such party. In other words, New 360 will indemnify DG FastChannel for any and all losses incurred by DG FastChannel resulting from liabilities of New 360. In addition, New 360 is obligated to indemnify DG FastChannel for all pre-closing tax liabilities of Point.360.

Pursuant to the merger agreement, DG FastChannel has agreed to assume up to $7 million of indebtedness under that certain Standard Loan Agreement, dated March 29, 2006, between Point.360 and Bank of America, N.A. and those certain Promissory Notes between General Electric Capital Corporation and Point.360, dated December 30, 2005 and March 30, 2007, respectively. DG FastChannel is required to cause Point.360 to repay all such indebtedness upon the closing of the merger.

The following is a summary of the merger agreement. This summary does not purport to be a complete description of the terms and conditions of the merger agreement and is qualified in its entirety by reference to the merger agreement, a copy of which is attached as Annex A to this prospectus. Point.360 shareholders are urged to read the merger agreement in its entirety. In the event of any discrepancy between the terms of the merger agreement and the following summary, the merger agreement will control.

Prior to the consummation of the offer, Point.360 will contribute to New 360 all of the assets owned, licensed or leased by Point.360 that are not used exclusively in connection with the ADS business of Point.360. New 360 will also assume certain liabilities of Point.360.

Immediately after the contribution to New 360, and prior to the acceptance by DG FastChannel of shares of Point.360 common stock in the offer, Point.360 will distribute to its shareholders (other than DG FastChannel) pro rata all of the capital stock then outstanding of New 360. As a result of these transactions, at the completion of the offer, the assets and liabilities of Point.360 will consist only of those assets and liabilities exclusively related to the ADS Business. In connection with the spin-off, Point.360 has caused or will cause New 360 to (1) prepare and file with the SEC a registration statement on Form 10 promulgated under the Exchange Act to register the capital stock of New 360, (2) prepare and submit to the Nasdaq a listing application covering the shares of capital stock of New 360 to be distributed in the spin-off, (3) use its reasonable efforts to obtain approval for the listing of the shares of New 360 and (4) take any other action reasonably necessary or desirable to effect the contribution and the spin-off.

New 360 and Point.360 have agreed to provide DG FastChannel with any comments that New 360 or Point.360 may receive from time to time from the SEC or its staff with respect to the Form 10 promptly after receipt of such comments, and any written or oral responses. New 360 and Point.360 have agreed to use all reasonable efforts to have the Form 10 declared effective under the Exchange Act as promptly as practicable and to keep the Form 10 effective as long as is necessary to complete the spin-off. If, at any time, New 360 or Point.360 discovers any information relating to it, or any of its affiliates, officers or directors, that should be set forth in an amendment to the Form 10 so that such document would not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, New 360 or Point.360 have agreed to promptly notify DG FastChannel and an appropriate amendment or supplement describing such information will be promptly filed with the SEC and disseminated to Point.360's shareholders, to the extent required by applicable federal securities laws.

The merger agreement provides for the making of the offer. The obligation of DG FastChannel to accept for exchange shares of Point.360 common stock tendered pursuant to the offer is subject to the satisfaction of the minimum condition and certain other conditions described under "The Offer—Conditions of the Offer" on page 46.

We may extend the offer beyond the initial scheduled expiration date set forth on the cover of this prospectus, or any subsequent scheduled expiration date, for such period as we may determine, if at the scheduled expiration of the offer, any of the conditions to our obligation to accept for exchange, and to exchange shares of DG FastChannel common stock for, shares of Point.360 common stock tendered shall not be satisfied or waived.

In addition, we may elect to provide a subsequent offering period after the acceptance of shares of Point.360 common stock in the offer:

We may purchase additional shares of Point.360 common stock at a purchase price per top-up option share equal to the offer consideration, payable in shares of DG FastChannel common stock or cash in an amount equal to the value of the offer consideration, directly from Point.360 if the number of shares of Point.360 common stock that have been validly tendered and not withdrawn pursuant to the offer is less than 90% of the total number of shares of Point.360 common stock then outstanding. Point.360 has granted us an irrevocable option to purchase up to that number of shares of Point.360 common stock equal to the lowest number of shares of Point.360 common stock that, when added to the number of shares of Point.360 common stock owned by DG FastChannel at the time, equals 90% of the total number of shares of Point.360 common stock then outstanding, on a fully diluted basis. DG FastChannel may exercise this option, subject to certain conditions, at any one time after DG FastChannel's acceptance for exchange pursuant to the offer but before the effective time of the merger.

Subject to the terms of the offer and the merger agreement, and the satisfaction, or waiver, of the conditions to the offer, we are required to accept for exchange all shares of Point.360 common stock validly tendered and not withdrawn pursuant to the offer promptly after the applicable expiration date of the offer, as it may be extended pursuant to the merger agreement, and are required to exchange all accepted shares of Point.360 common stock promptly after acceptance. We will not issue fractional shares of DG FastChannel common stock in the offer. Instead, each tendering Point.360 shareholder who would otherwise be entitled to a fractional share (after aggregating all fractional shares of DG FastChannel common stock that otherwise would be received by the shareholder) will receive cash equal to the fractional share interest multiplied by the closing price of a share of DG FastChannel common stock on the Nasdaq Global Market on the date that DG FastChannel accepts shares tendered pursuant to the offer.

Subject to the terms of the merger agreement, promptly upon the acceptance by DG FastChannel of any shares for exchange pursuant to the offer which, together with the shares then beneficially owned by DG FastChannel, represent at least a majority of the shares of Point.360 and at all times thereafter, DG FastChannel shall be entitled to designate such number of directors, rounded up to the next whole number, on the Point.360 board of directors (the "Point.360 Board") as will give DG FastChannel, subject to compliance with Section 14(f) of the Exchange Act, representation on the Point.360 Board is equal to the product of the total number of directors on the Point.360 Board multiplied by the percentage that the aggregate number of shares beneficially owned by DG FastChannel or any of its affiliates bears to the number of shares outstanding. Point.360 has agreed, upon request by DG FastChannel, to promptly fill vacancies or newly-created directorships on the Point.360 Board, promptly increase the size of the Point.360 Board and/or promptly secure the resignations of such number of incumbent directors as is necessary to enable DG FastChannel's designees to be elected or designated to the Point.360 Board, and shall use its best efforts to cause

DG FastChannel's designees to be elected. Subject to applicable law, Point.360 has agreed to promptly take all action necessary pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under the merger agreement, including mailing to shareholders (together with the Schedule 14D-9) such information required by Section 14(f) and Rule 14f-1 as is necessary to enable DG FastChannel's designees to be elected or designated to the Point.360 Board. DG FastChannel has agreed to provide Point.360 with information with respect to DG FastChannel's designees and DG FastChannel's officers, directors and affiliates to the extent required by Section 14(f) and Rule 14f-1.

In the event DG FastChannel's designees are elected in accordance with the foregoing, until the effective time of the merger, Point.360 has agreed to cause the Point.360 Board to maintain two directors (the "continuing directors") who are "independent directors" as defined by Rule 4200(a)(15) of the Nasdaq Marketplace Rules and eligible to serve on Point.360's audit committee under the Exchange Act and Nasdaq rules, and at least one of whom shall be an "audit committee financial expert" as defined in Item 401(h) of Regulation S-K and the instructions thereto. If any continuing director is unable to serve due to death, disability or resignation, the remaining continuing director shall be entitled to elect or designate another person to fill the vacancy, and that person shall be deemed a continuing director. If no continuing director then remains, the other directors shall designate two persons to fill the vacancies, and such persons shall be deemed continuing directors. If DG FastChannel's designees constitute a majority of the Point.360 Board after the acceptance of any shares for exchange pursuant to the offer and before the effective time, then the vote of a majority of the continuing directors shall (in addition to any approval rights of the Point.360 Board or the shareholders of Point.360) be required (1) for Point.360 to amend or terminate the merger agreement, (2) to exercise or waive any of Point.360's rights, benefits or remedies under the merger agreement, if such action would materially and adversely affect the shareholders of Point.360 (other than DG FastChannel), (3) to amend Point.360's governing documents if such action would materially and adversely affect the shareholders of Point.360 (other than DG FastChannel) or (4) to take any other action of the Point.360 Board in connection with the merger agreement if such action would materially and adversely affect the shareholders of Point.360 (other than DG FastChannel); provided that if there shall be no continuing directors as a result of such persons' deaths, disabilities or refusal to serve, then the actions above may be effected by majority vote of the entire Point.360 Board.

The merger agreement provides that, after completion of the offer, Point.360 will, subject to the conditions described below, be merged with and into DG FastChannel, with DG FastChannel continuing as the "surviving corporation."

The merger will become effective when a certificate of merger is filed with the Secretary of State of the State of California and the Secretary of State of the State of Delaware or at such other time as specified in the certificate of merger. The merger will be completed after all of the conditions to the merger contained in the merger agreement are satisfied or, where permissible, waived.

DG FastChannel shall take all necessary action such that (1) the certificate of incorporation of DG FastChannel as in effect immediately before the effective time shall be the certificate of incorporation of the surviving corporation until thereafter changed or amended as provided therein or by applicable law and (2) the bylaws of DG FastChannel as in effect immediately before the effective time shall be the bylaws of the surviving corporation until thereafter changed or amended as provided therein or by applicable law.

Under the terms of the merger agreement, upon the effective time of the merger, each share of Point.360 common stock (including the associated preferred share repurchase rights) issued and outstanding immediately before the merger other than dissenting shares or shares held by Point.360, DG FastChannel or any wholly-owned subsidiary of DG FastChannel, will be converted into the right to receive approximately 0.1895 of a share of DG FastChannel common stock. (For the method of calculating the exact ratio of conversion, see "Offer—Exchange of Shares of Point.360 Common Stock" on page 45.) Shares of Point.360 common stock held by Point.360, DG FastChannel or any wholly-owned subsidiary of DG FastChannel immediately before the completion of the merger will be canceled at the effective time of the merger without payment of any consideration and without any action on the part of DG FastChannel or Point.360.

We will not issue fractional shares of DG FastChannel common stock in the merger. Instead, each tendering Point.360 shareholder who would otherwise be entitled to a fractional share (after aggregating all fractional shares of DG FastChannel common stock that otherwise would be received by the shareholder) will receive cash equal to the fractional share interest multiplied by the closing price of a share of DG FastChannel common stock on the Nasdaq Global Market on the date of the effective time of the merger.

The merger agreement provides that, promptly after the effective time of the merger, the exchange agent will mail to each record holder of a certificate or certificates that represented outstanding shares of Point.360 common stock immediately before the merger, a letter of transmittal and instructions for use in exchanging Point.360 common stock certificates for DG FastChannel common stock certificates. In addition, the merger agreement contemplates that, after the exchange agent receives back from a record holder a Point.360 common stock certificate, together with the letter of transmittal, properly completed and duly executed, the record holder shall be entitled to receive (1) a check representing cash in lieu of any fractional shares and any dividends or other distributions to which such holder is entitled pursuant to the merger agreement, and (2) a certificate representing that number of shares of DG FastChannel common stock which such holder has the right to receive pursuant to the merger agreement.

Prior to the completion of the merger, the administrator of the Point.360 stock plans shall have resolved to determine that each unexercised option to purchase shares of Point.360 common stock and each stock appreciation right granted pursuant to such stock plans shall terminate immediately before the effective time without the payment of consideration to the holders thereof. Point.360 will take all necessary and appropriate action to effect the termination of all such options and stock appreciation rights, without any liability to Point.360 or the surviving corporation.

The merger agreement contains a number of representations and warranties made by DG FastChannel and Point.360, including the following:

The merger agreement also contains representations and warranties made solely by Point.360, including:

The merger agreement also contains a representation and warranty made solely by DG FastChannel that no vote of DG FastChannel shareholders is required for DG FastChannel to consummate the transactions contemplated by the merger agreement.

In addition, the merger agreement contains representations and warranties made by New 360, including:

The representations and warranties asserted in the merger agreement will not survive the merger.

Except as set forth in the merger agreement, made known in the Point.360 disclosure schedule, or as consented to in writing by DG FastChannel, Point.360 has agreed that, until completion of the merger or termination of the merger agreement, it will conduct its and its subsidiaries' business in the ordinary course of business consistent with past practice. In addition, Point.360 will seek to preserve intact the ADS business present business organizations, maintain satisfactory relations with and keep available the services of their current officers and other key employees who are employed in the ADS business, maintain in effect all licenses, approvals and authorizations relating to the ADS business, and preserve existing relationships with customers and suppliers. Without limiting the above, Point.360 has agreed that it and its subsidiaries will be subject to specific restrictions laid out in the merger agreement relating to:

Except as set forth in the merger agreement or as consented to in writing by Point.360, DG FastChannel and its subsidiaries have agreed that, until the effective time of the merger or termination of the merger agreement, they will be subject to specific restrictions laid out in the merger agreement relating to:

DG FastChannel is obligated to prepare and file the Form S-4 registration statement with the SEC, of which this prospectus is a part. DG FastChannel shall use its reasonable efforts to have:

DG FastChannel has agreed to promptly provide Point.360 with copies of any written comments and to promptly inform Point.360 of any oral comments that DG FastChannel may receive from time to time from the SEC with respect to the S-4 or the offer documents. DG FastChannel has agreed not to make any amendment or supplement to the S-4 without providing Point.360 a reasonable opportunity to review the amendment or supplement, and has agreed to give due consideration to all reasonable additions, deletions or changes suggested by Point.360.

DG FastChannel has also agreed to advise Point.360 promptly of the time when the S-4 is declared effective, the issuance of any stop order, the suspension of the qualification of the DG FastChannel common stock issuable in connection with the offer or the merger for offering or sale in any jurisdiction, or of any request by the SEC for amendment of the S-4.

If, prior to the effective time of the merger, either DG FastChannel or Point.360 discovers any information relating to either party that should be set forth in an amendment or a supplement to the S-4, or to any of the filings related to the offer, so that the documents would not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, the party that discovers that information is obligated to promptly notify the other party, and an appropriate amendment or supplement describing such information will be promptly filed with the SEC and disseminated to holders of Point.360 common stock.

Notwithstanding the above, prior to the consummation of the offer, if (1) Point.360 receives an unsolicited bona fide written proposal from a third party relating to an acquisition proposal or a bona fide written proposal relating to an acquisition proposal from a third party with whom Point.360 has conducted discussions or negotiations prior to the date of the merger agreement, and (2) the Point.360 Board concludes in good faith, after consultation with its financial advisor and outside legal counsel, that such acquisition proposal is, or is reasonably likely to result in, a superior proposal and that the failure to provide nonpublic information concerning Point.360 or participate in negotiations or discussions would result in a breach by the Point.360 Board of its fiduciary duties to Point.360 shareholders under applicable law, Point.360 may, subject to its giving DG FastChannel at least three business days' prior written notice:

In addition to the prior notice obligations above, Point.360 has agreed to promptly notify and advise DG FastChannel of any acquisition proposal or of any request for information or inquiry that relates to an acquisition proposal. This notification shall include:

Point.360 has agreed to promptly inform DG FastChannel of any changes in the material terms or conditions of any acquisition proposal received.

Point.360 may continue discussions or negotiations with respect to an acquisition proposal with any third party if such discussions or negotiations were commenced prior to the date of the merger agreement, but Point.360 has the burden of demonstrating that such discussions or negotiations commenced prior to the date of the merger agreement in the event of a dispute with DG FastChannel.

An "acquisition proposal" includes any inquiry, offer, proposal or indication of interest by any third party that relates to:

A "superior proposal" includes any bona fide written acquisition proposal, obtained after the date of the merger agreement and not in breach of the merger agreement, which the Point.360 Board determines in its good faith judgment would be more favorable to Point.360's shareholders than the offer by and merger with DG FastChannel and is reasonably capable of being completed in a time frame that is customary for similar transactions, and that relates to:

In connection with entering into the merger agreement, the Point.360 Board has determined that the merger agreement, the contribution agreement, the offer and the merger are advisable, fair to, and in the best interests of Point.360 and its shareholders. In addition, the Point.360 Board has recommended that its shareholders accept the offer and approve the merger and the merger agreement, if required by applicable law, and has agreed not to withdraw, qualify or amend in any manner adverse to DG FastChannel or to the transactions contemplated by the merger agreement, the approval or recommendation by the Point.360 Board. The Point.360 Board has also agreed, among other things, not to approve or recommend any third-party acquisition proposal, and to recommend that Point.360's shareholders not tender their shares into any tender or exchange offer that, if successful, would result in any person or group becoming a beneficial owner of 10% or more of the outstanding shares of Point.360 (other than a tender or exchange offer by DG FastChannel or Mr. Bagerdjian).

However, the Point.360 board of directors may take any of the above prohibited actions if all of the following conditions are satisfied:

Notwithstanding the above, Point.360 has agreed not to enter into any written agreement (other than a confidentiality agreement), arrangement or understanding with respect to a superior proposal

unless the merger agreement is validly terminated and DG FastChannel has received payment for its transaction expenses and a termination fee of $2,000,000.

The merger agreement provides that, for a period of six years after the effective time of the merger, DG FastChannel will cause the surviving company in the merger to indemnify persons who were directors or officers of Point.360 or its subsidiaries prior to the effective time of the merger who incur liabilities or expense arising out of or relating to actions or omissions occurring before the effective time of the merger to the full extent permissible under applicable law. In addition, DG FastChannel has agreed to cause the surviving company in the merger to advance expenses with respect to any matters subject to indemnification, to the extent provided for in Point.360's articles of incorporation and bylaws.

DG FastChannel has agreed to purchase run-off or "tail" insurance coverage under its existing directors' and officers' liability insurance polices, or from another insurer, that provides coverage for a period of six years after the effective time of the merger, for Point.360's directors and officers for claims arising from facts or events that occurred at, or prior to, the effective time of the merger agreement and the consummation of the transactions contemplated by the merger agreement. Such insurance coverage shall be substantially equivalent to the coverage afforded by Point.360's existing policies, or if substantially equivalent insurance coverage is unavailable, the best available coverage; provided that the aggregate cost for the purchase of such insurance coverage (for the entire six year "tail" coverage period) shall not exceed $210,000.

After the effective time of the merger, DG FastChannel has agreed that it will assume and honor all employee benefit plans and programs in which any employee of the ADS business participates, in accordance with the terms in effect immediately before the effective time. However, DG FastChannel may provide to ADS business employees who continue to be employed by DG FastChannel after the effective time benefits under DG FastChannel's employee benefit plans in lieu of any benefits under Point.360's benefit plans.

For a list of the conditions to the offer, see "The Offer—Conditions of the Offer" on page 46.

Neither DG FastChannel nor Point.360 will be required to complete the merger unless:

DG FastChannel and Point.360 cannot assure you that all of the conditions to completing the merger will be satisfied or waived.

The merger agreement may be terminated and the offer and the merger may be abandoned at any time before the effective time of the merger in a number of different ways.

The merger agreement may be terminated by mutual written consent of DG FastChannel and Point.360.

The merger agreement may also be terminated by either DG FastChannel or Point.360 if:

The merger agreement may be terminated by DG FastChannel alone if prior to DG FastChannel's acceptance of Point.360 common stock for exchange pursuant to the offer:

The merger agreement may be terminated by Point.360 alone if, prior to DG FastChannel's acceptance of Point.360 common stock for exchange pursuant to the offer:

Should any of these potential grounds for termination occur, DG FastChannel's and Point.360's board of directors may or may not exercise their respective rights to terminate the merger agreement.

Point.360 has agreed to pay DG FastChannel (1) a fee of $2,000,000 and (2) an amount equal to DG FastChannel's actual expenses in connection with the negotiation, execution, and delivery of the merger agreement and actions taken in furtherance of the transactions contemplated by the merger agreement, not exceeding $500,000 in the aggregate, in liquidated damages if the merger agreement is terminated by DG FastChannel due to:

DG FastChannel has agreed to pay Point.360 (1) a fee of $2,000,000 and (2) an amount equal to Point.360's actual expenses in connection with the negotiation, execution, and delivery of the merger agreement and actions taken in furtherance of the transactions contemplated by the merger agreement, not exceeding $500,000 in the aggregate, in liquidated damages if the merger agreement is terminated by Point.360 due to a DG FastChannel material adverse effect.

Except for any claims based on fraud, if the termination fee is paid, such fee is the exclusive monetary and equitable remedy against the other party for damages suffered as a result of the failure of the offer, the merger and the other transactions contemplated by the merger agreement to be consummated.

DG FastChannel, Point.360 and New 360 may amend the merger agreement in writing by action taken by their respective boards of directors at any time. However, after the completion of the offer, no amendment may be made which decreases the merger consideration, and, after adoption of the merger agreement by Point.360 shareholders, no amendment may be made which by law requires further approval by the shareholders without obtaining such further approval.

Except as set forth in the working capital reconciliation agreement, all fees, costs and expenses incurred in connection with the merger agreement, the offer and the merger shall be paid by the party incurring such fees, costs and expenses.

Point.360 is one of the largest providers of distribution services to owners of advertising content. Point.360 provides the services necessary to distribute its clients' spot advertising, using electronic and physical means. Point.360 delivers commercials to hundreds of broadcast outlets worldwide. Through interconnected facilities in Los Angeles, New York, Chicago, Dallas and San Francisco, Point.360 provides service coverage in each of the major U.S. media centers. Clients include major advertising agencies and corporations.

Point.360 operates in a highly competitive environment in which customers desire a broad range of service at a reasonable price. There are many competitors offering some or all of the services provided by Point.360. Point.360 attracts and retains customers by maintaining a high service level at reasonable prices.

In recent years, electronic delivery services have grown while physical duplication and delivery have been declining. Point.360 expects this trend to continue for the foreseeable future. All of Point.360's electronic, fiber optics, satellite and Internet deliveries are made using third party vendors, which eliminates its need to invest in such capability. However, the use of others to deliver its services poses the risk that costs may rise in certain situations that cannot be passed on to customers, thereby lowering gross margins. There is also the risk that third party vendors who directly compete with Point.360 will succeed in taking away business or refuse to allow Point.360 to use their distribution channels. While curtailment of these services has not materially affected Point.360's ability to deliver commercial spots, Point.360 has not been able to pass on increased alternative delivery costs to its customers since June 2005. While Point.360 is exploring other lower cost alternatives, gross margins related to spot delivery revenues will be lower until such alternatives become available.

The Point.360 has an opportunity to expand its business by establishing closer relationships with its customers through excellent service at a competitive price and maintaining adequate third party distribution channels. Point.360's success is also dependent upon attracting and maintaining employees capable of maintaining such relationships. Also, growth can be achieved by acquiring similar businesses which can increase revenues by adding new customers, or expanding services provided to existing customers.

Point.360's business generally involves the immediate servicing needs of customers. Most orders are fulfilled within several days. At any particular time, Point.360 has little firm backlog.

COMPARISON OF THE RIGHTS OF HOLDERS OF POINT.360 COMMON STOCK AND HOLDERS OF DG FASTCHANNEL COMMON STOCK

In connection with the offer and the merger, Point.360 shareholders will be exchanging shares of Point.360, a California corporation, for shares of DG FastChannel, a Delaware corporation. California law and Delaware law differ in many respects. It is not practical to summarize all of the differences that could materially affect the rights of Point.360 shareholders as holders of shares of DG FastChannel common stock following the offer and the merger. However, the significant differences between the corporation laws of California and Delaware and between the articles of incorporation and bylaws of Point.360 and the certificate of incorporation and bylaws of DG FastChannel include the following:

Point.360. Point.360's articles of incorporation authorize 50,000,000 shares of common stock, no par value per share, and 5,000,000 shares of preferred stock, no par value per share.

DG FastChannel. DG FastChannel's certificate of incorporation authorizes 200,000,000 shares of common stock, par value $0.001 per share, and 15,000,000 shares of preferred stock, par value $0.001 per share. DG FastChannel's certificate of incorporation provides that shares of preferred stock may be issued from time to time in one or more series by the board of directors. The board can fix the

designations, preference, limitations and relative rights of each series of preferred stock. The rights of preferred stockholders may supersede the rights of common stockholders. As of June 7, 2007, there were no shares of DG FastChannel preferred stock issued and outstanding.

Point.360. Under California law, although changes in the number of directors must in general be approved by the shareholders, the board of directors may fix the exact number of directors within a stated range set forth in the articles of incorporation or bylaws. A bylaw specifying or changing a fixed number of directors or the maximum or minimum number of directors may only be adopted by the approval of the majority of the outstanding shares. Point.360's bylaws provide that the number of directors shall be five.

DG FastChannel. Delaware law permits the board of directors to change the authorized number of directors by amendment to the bylaws or in the manner provided in the bylaws unless the number of directors is fixed in the certificate of incorporation, in which case a change in the number of directors may be made only by amendment to the certificate of incorporation. DG FastChannel's certificate of incorporation does not currently fix or restrict the number of directors. DG FastChannel's bylaws provide that the number of directors shall be fixed from time to time by resolution of the Board of Directors. DG FastChannel's board of directors currently consists of seven members.

Point.360. California Law provides that any shareholder is entitled to cumulate his or her votes in the election of directors upon proper notice of his or her intention to do so, except that a "listed" corporation may eliminate cumulative voting with shareholder approval. Point.360's bylaws eliminate cumulative voting with respect to the election of directors.

DG FastChannel. Under Delaware law, cumulative voting in the election of directors is not mandatory, and for cumulative voting to be effective it must be expressly provided for in the certificate of incorporation. In an election of directors under cumulative voting, each share of stock normally having one vote is entitled to a number of votes equal to the number of directors to be elected. A shareholder may then cast all such votes for a single candidate or may allocate them among as many candidates as the shareholder may choose. Without cumulative voting, the holders of a majority of the shares present at an annual meeting would have the power to elect all the directors to be elected at that meeting, and no person could be elected without the support of holders of a majority of the shares. DG FastChannel's certificate of incorporation does not provide for cumulative voting.

Point.360. Under California law, any director or the entire board of directors may be removed, with or without cause, with the approval of a majority of the outstanding shares entitled to vote; however, no directors may be removed (unless the entire board is removed) if the number of votes cast against the removal would be sufficient to elect the director under cumulative voting.

DG FastChannel. Under Delaware law, a director of a corporation that does not have a classified board of directors or cumulative voting may be removed without cause by a majority shareholder vote. In the case of a Delaware corporation having cumulative voting, if less than the entire board is to be removed, a director may not be removed unless the shares voted against such removal would not be sufficient to elect the director under cumulative voting. A director of a corporation with a classified board of directors can be removed only for cause unless the certificate of incorporation otherwise provides. DG FastChannel's certificate of incorporation and bylaws do not provide for cumulative voting. The company has a classified board of directors.

Point.360. Under California law, any vacancy on the board of directors other than one created by removal of a director may be filled by the board of directors, unless otherwise provided in the articles of incorporation or bylaws. If the number of directors is less than a quorum, a vacancy may be filled by the unanimous written consent of the directors then in office, by the affirmative vote of a majority of the directors at a meeting held pursuant to notice or waivers of notice, or by a sole remaining director. A vacancy created by removal of a director can only be filled by the shareholders unless board approval is authorized by a corporation's articles of incorporation or by a bylaw approved by the corporation's shareholders. The bylaws of Point.360 provide that vacancies on its board of directors (other than vacancies created by the removal of a director) may be filled by the majority of the directors then in office, or by a sole remaining director.

DG FastChannel. Under Delaware law, unless otherwise provided in the certificate of incorporation or the bylaws, (i) vacancies on a board of directors and (ii) newly created directorships resulting from an increase in the number of directors may be filled by a majority of the directors then in office. The bylaws of DG FastChannel provide that any vacancies on its board of directors may be filled by a majority of the directors then in office, or by a sole remaining director.

Point.360. Under California law, any loan or guaranty to or for the benefit of a director or officer of the corporation or any of its subsidiaries requires approval of the shareholders unless such loan or guaranty is provided under a plan approved by shareholders owning a majority of the outstanding shares of the corporation. In addition, under California law, shareholders of any corporation with 100 or more shareholders of record may approve a bylaw authorizing the board of directors alone to approve a loan or guaranty to or on behalf of an officer (whether or not a director) if the board determines that such a loan or guaranty may reasonably be expected to benefit the corporation. Point.360's bylaws do not contain any provision authorizing the board of directors alone to approve a loan or guaranty to or on behalf of an officer.

DG FastChannel. Under Delaware law, a corporation may make loans to, guarantee the obligations of, or otherwise assist its officers or other employees and those of its subsidiaries when such action, in the judgment of the directors, may reasonably be expected to benefit the corporation. DG FastChannel's certificate of incorporation and bylaws do not contain any provisions addressing loans or guarantees to or for the benefit of its and its subsidiaries' officers and employees.

Section 13(k) of the Exchange Act added pursuant to Section 402 of the Sarbanes Oxley Act of 2002, makes it unlawful for any issuer, "directly or indirectly, including through any subsidiary, to extend or maintain credit, to arrange for the extension of credit, or to renew an extension of credit, in the form of a personal loan to or for any director or executive officer (or equivalent thereof) of that issuer." Rule 3b-7 under the Exchange Act defines "executive officer" of an issuer to include the issuer's "president, any vice president ... in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy making function or any other person who performs similar policy making functions for the issuer." The impact of Section 13(k) is to limit loans or guarantees with respect to persons who are directors or officers subject to Section 16 of the Exchange Act.

Point.360. Under California law, a special meeting of shareholders may be called by the board of directors, the chairman of the board, the president, the holders of shares entitled to cast not less than 10% of the votes at such meeting or such other persons as are authorized by the articles of incorporation or bylaws. Point.360's bylaws provide that a special meeting of the shareholders may be

called by the chairman of the board, or by the president, or by the board of directors, or by the holders of shares entitled to cast not less than 10% of the votes at the meeting.

DG FastChannel. Under Delaware law, a special meeting of shareholders may be called by the board of directors or by any other person authorized to do so in the certificate of incorporation or the bylaws. DG FastChannel's bylaws provide that a special meeting of the stockholders, other than those required by statute, may be called at any time by order of the board of directors and shall be called by the chairman of the board, the president, or the secretary at the request in writing of the holders of not less than 10% of the voting power represented by all the shares issued, outstanding and entitled to be voted at the proposed special meeting.

California law and Delaware law contain similar provisions and limitations on indemnification by a corporation of its officers, directors, employees and other agents. Neither DG FastChannel nor Point.360 is aware of any pending legal action against the officers, directors or employees of such company which would be covered by such indemnification provisions. Both California law and Delaware law also permit a corporation to adopt a provision in its charter eliminating the liability of a director to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, provided such liability does not arise from certain proscribed conduct (including intentional misconduct and breach of the duty of loyalty).

Point.360. California law does not permit the elimination of monetary liability where such liability is based on: (i) intentional misconduct or knowing and culpable violation of law; (ii) acts or omissions that a director believes to be contrary to the best interests of the corporation or its shareholders or that involve the absence of good faith on the part of the director; (iii) receipt of an improper personal benefit; (iv) acts or omissions that show reckless disregard for the director's duty to the corporation or its shareholders, where the director in the ordinary course of performing a director's duties should be aware of a risk of serious injury to the corporation or its shareholders; (v) acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the director's duty to the corporation and its shareholders; (vi) transactions between the corporation and a director who has a material financial interest in such transaction; or (vii) liability for improper distributions, loans or guarantees. Point.360's articles of incorporation eliminate liability of the directors for monetary damages to the fullest extent permissible under California law.

DG FastChannel. Delaware law permits a corporation to eliminate the liability of directors for monetary damages arising out of a breach of fiduciary duty, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. Such limitation of liability provisions may not limit a director's liability for violation of, or otherwise relieve the company or its directors from the necessity of complying with federal or state securities laws, or affect the availability of nonmonetary remedies such as injunctive relief or rescission. DG FastChannel's certificate of incorporation eliminates the liability of directors for monetary damages to the fullest extent permitted by Delaware law.

Both California law and Delaware law allow any shareholder to inspect the shareholders' list for a purpose reasonably related to such person's interest as a shareholder. California law provides, in addition, an absolute right to inspect and copy the corporation's shareholders' list by a person or persons holding 5% or more of a corporation's voting shares, or any shareholder or shareholders holding 1% or more of such shares who has filed a Schedule 14A with the SEC relating to the election of directors. Delaware law provides for inspection rights as to a list of stockholders entitled to vote at a

meeting within a ten day period preceding a stockholders' meeting for any purpose germane to the meeting. However, Delaware law contains no provisions comparable to the absolute right of inspection provided by California law to certain shareholders. Point.360's and DG FastChannel's bylaws contain provisions that confirm but that do not extend the rights granted to their shareholders in accordance with California and Delaware law, respectively.

Point.360. Under California law, a shareholder is not entitled to preemptive rights to subscribe for additional issuances of stock, or any security convertible into stock, unless the rights are specifically granted in the articles of incorporation. The Point.360 articles of incorporation do not provide for any such preemptive rights.

DG FastChannel. Under Delaware law, a stockholder is not entitled to preemptive rights to subscribe for additional issuances of stock, or any security convertible into stock, unless the rights are specifically granted in the certificate of incorporation. The DG FastChannel certificate of incorporation does not provide for any such preemptive rights.

Point.360. California law dispenses with the concepts of par value of shares as well as statutory definitions of capital, surplus and the like. Under California law, a corporation may not make any distribution (including dividends, whether in cash or other property, and repurchases of its shares) unless either the corporation's retained earnings immediately prior to the proposed distribution equal or exceed the amount of the proposed distribution or, immediately after giving effect to such distribution, the corporation's assets (exclusive of good will, capitalized research and development expenses and deferred charges) would be at least equal to 125% of its liabilities (not including deferred taxes, deferred income and other deferred credits), and the corporation's current assets, as defined, would be at least equal to its current liabilities (or 125% of its current liabilities if the average pre-tax and pre-interest earnings for the preceding two fiscal years were less than the average interest expenses for such year). Such tests are applied to California corporations on a consolidated basis. Under California law, there are certain exceptions to the foregoing rules for repurchases of shares in connection with certain rescission actions or pursuant to certain employee stock plans.

DG FastChannel. Delaware law recognizes the concepts of par value, capital and surplus. Delaware law permits a corporation, unless otherwise restricted by its certificate of incorporation, to declare and pay dividends out of its surplus or, if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year, as long as the amount of capital of the corporation is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets. DG FastChannel's certificate of incorporation does not provide for any such restriction on the ability to declare and pay dividends.

In addition, Delaware law generally provides that a corporation may redeem or repurchase its shares only if such redemption or repurchase would not impair the capital of the corporation. The ability of a Delaware corporation to pay dividends on, or to make repurchases or redemptions of, its shares is dependent on the financial status of the corporation standing alone and not on a consolidated basis. In determining the amount of surplus of a Delaware corporation, the assets of the corporation, including stock of subsidiaries owned by the corporation, must be valued at their fair market value as determined by the board of directors, regardless of their historical book value.

Both California and Delaware law generally require that a majority of the shareholders of both acquiring and target corporations approve statutory mergers. In addition, under both California and

Delaware law, with certain exceptions, any merger or sale of all or substantially all of the assets must be approved by a majority of the outstanding shares entitled to vote of the corporation transferring such assets. With certain exceptions, California law also requires that mergers, reorganizations, certain sales of assets and similar transactions be approved by a majority vote of each class of shares outstanding. By contrast, Delaware law generally does not require class voting, except in certain transactions involving an amendment to the certificate of incorporation which adversely affects a specific class or series of shares. California law also requires that holders of non-redeemable common stock receive non-redeemable common stock in a merger of the corporation with the holder of more than 50% but less than 90% of such common stock or its affiliate unless all of the holders of such common stock consent to the transaction. This provision of California law may have the effect of making a "cash-out" merger by a majority shareholder more difficult to accomplish. Delaware law has no comparable provision.

Point.360. California law contains an exception to its voting requirements for reorganizations where shareholders or the corporation itself, or both, immediately prior to the reorganization will own immediately after the reorganization equity securities constituting more than 83.3% (or five-sixths) of the voting power of the surviving or acquiring corporation or its parent entity. California law also provides that, except in certain circumstances, when a tender offer or a proposal for a reorganization or for a sale of assets is made by an interested party (generally, a controlling or managing party of the target corporation), an affirmative opinion in writing as to the fairness of the consideration to be paid to the shareholders must be delivered to shareholders. This fairness opinion requirement does not apply to a corporation which does not have shares held of record by at least 100 persons, or to a transaction which has been qualified under California state securities laws. Furthermore, if a tender of shares or vote is sought pursuant to an interested party's proposal and a later proposal is made by another party at least ten days prior to the date of acceptance of the interested party proposal, the shareholders must be informed of the later offer and be afforded a reasonable opportunity to withdraw any vote, consent or proxy, or to withdraw any tendered shares. Delaware law has no comparable provision.

DG FastChannel. Delaware law does not require a stockholder vote of the surviving corporation in a merger (unless the corporation provides otherwise in its certificate of incorporation) if: (i) the merger agreement does not amend the existing certificate of incorporation; (ii) each share of stock of the surviving corporation outstanding immediately before the effective date of the merger is an identical outstanding share after the merger and; (iii) either no shares of common stock of the surviving corporation and no shares, securities or obligations convertible into such stock are to be issued or delivered under the plan of merger, or the authorized unissued shares or shares of common stock of the surviving corporation to be issued or delivered under the plan of merger plus those initially issuable upon conversion of any other shares, securities or obligations to be issued or delivered under such plan do not exceed 20% of the shares of common stock of such constituent corporation outstanding immediately prior to the effective date of the merger.

Point.360. Under California law, an amendment to the articles of incorporation requires the approval of the corporation's board of directors and a majority of the outstanding shares entitled to vote, either before or after the board approval, although certain minor amendments may be adopted by the board alone such as amendments causing stock splits (including an increase in the authorized number of shares in proportion thereto) and amendments changing names and addresses given in the articles.

DG FastChannel. Under Delaware law, an amendment to the certificate of incorporation requires the approval of the corporation's board of directors and a majority of the outstanding shares.

DG FastChannel's certificate of incorporation reserves the right of DG FastChannel to amend, change or repeal any provision of the certificate in the manner prescribed by Delaware law.

Point.360. Under California law, a corporation's bylaws may be adopted, amended or repealed by either the board of directors or the shareholders of the corporation. Point.360's bylaws may be amended or repealed by the affirmative vote of a majority of the outstanding shares entitled to vote or by the written assent of shareholders entitled to vote such shares, except as otherwise provided by law.

DG FastChannel. Under Delaware law, after a corporation has received any payment for any of its stock, the power to adopt, amend or repeal bylaws is entirely with the shareholders of the corporation. However, a corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors of the corporation. DG FastChannel's bylaws authorize the board of directors to adopt, amend or repeal the bylaws of the corporation.

Point.360. Under California law, unless otherwise provided in the articles of incorporation, any action required to be taken or which may be taken at an annual or special meeting of shareholders may be taken without a meeting if a consent in writing is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize such action at a meeting at which all shares entitled to vote were present and voted. If consent is sought for less than the shareholders entitled to vote, notice, as required under California law, shall be given. Point.360's bylaws provide for action by written consent of its shareholders consistent with California law and require that, with respect to the election of directors, a written consent shall be effective only if signed by the holders of all of the outstanding shares entitled to vote for the election of directors.

DG FastChannel. Under Delaware law, unless otherwise provided in the certificate of incorporation, any action to be taken at an annual or special meeting of shareholders may be taken without a meeting, without prior notice and without a vote if a written consent to the action shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize such action at a meeting at which all shares entitled to vote were present and voted. DG FastChannel's certificate of incorporation denies shareholders the power to act by written consent.

Under California and Delaware law, a shareholder of a corporation participating in certain major corporate transactions may, under varying circumstances, be entitled to dissenters' rights pursuant to which such shareholder may receive cash in the amount of the fair market value of the shares held by such shareholder (as determined by a court or by agreement of the corporation and the shareholder) in lieu of the consideration such shareholder would otherwise receive in the transaction.

Point.360. Under California law, shareholders of a California corporation whose shares do not have transfer restrictions imposed by the corporation or by law and are listed on a national securities exchange (including the Nasdaq) or on a list of over-the-counter margin stocks issued by the Board of Governors of the Federal Reserve System generally, which we refer to as a listed company, do not have dissenters' rights unless the holders of at least 5% of the class of outstanding shares demand the right. Additionally, dissenters' rights are unavailable if the shareholders of a corporation or the corporation itself, or both, immediately prior to a reorganization will own (immediately after the reorganization) more than five-sixths of the voting power of the surviving or acquiring corporation or its parent. Under California law, a shareholder attempting to assert dissenters' rights must hold capital stock that satisfies each of the following requirements: (i) the shares must have been outstanding on the company's record date; (ii) the shares must not have been voted in favor of the reorganization (or, in the case of a listed

company, must have been voted against the reorganization); (iii) the holder of such shares must make a written demand that the company repurchase such shares of capital stock at fair market value; and (iv) the holder of such shares must submit certificates for endorsement. A vote by proxy or in person against the merger does not in and of itself constitute a demand for appraisal under California law. California law generally affords dissenters' rights in reorganizations that are structured as sales of assets.

DG FastChannel. The limitations on the availability of dissenters' rights under Delaware law are different from those under California law. Under Delaware law, dissenters' rights are not available to (i) shareholders with respect to a merger or consolidation by a corporation the shares of which are either listed on a national securities exchange or designated as a national market system security on an inter-dealer quotation system by the National Association of Securities Dealers, Inc. or are held of record by more than 2,000 holders if such shareholders receive only shares of the surviving corporation or shares of any other corporation which are either listed on a national securities exchange or designated as a national market system security on an inter-dealer quotation system by the National Association of Securities Dealers, Inc. or are held of record by more than 2,000 holders; or (ii) shareholders of a corporation surviving a merger if no vote of the shareholders of the surviving corporation is required to approve the merger because, among other things, the number of shares to be issued in the merger does not exceed 20% of the shares of the surviving corporation outstanding immediately prior to the merger and if certain other conditions are met. Delaware law also does not provide shareholders of a corporation with dissenters' rights when the corporation acquires another business through the issuance of its stock (a) in exchange for the assets of the business to be acquired; (b) in exchange for the outstanding stock of the corporation to be acquired; or (c) in a merger of the corporation to be acquired with a subsidiary of the acquiring corporation. California law, by contrast, treats these kinds of acquisitions in the same manner as a direct merger of the acquiring corporation with the corporation to be acquired.

Point.360. Under California law, shareholders holding 50% or more of the voting power of a corporation may authorize its dissolution, with or without the approval of the corporation's board of directors. California law provides that this right may not be modified by the articles of incorporation. Point.360's articles of incorporation do not contain any provisions that contradict these provisions of California law.

DG FastChannel. Under Delaware law, a dissolution must be approved by shareholders holding 100% of the total voting power of the corporation or the dissolution must be initiated by the board of directors and approved by a simple majority of the shareholders of the corporation. In the event of such a board-initiated dissolution, Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions. DG FastChannel's certificate of incorporation contains no such supermajority voting requirement. Accordingly, a majority of the shares voting at a meeting at which a quorum is present would be sufficient to approve a dissolution of DG FastChannel that had previously been approved by its board of directors.

Point.360. California law does not include a statute expressly validating shareholders rights plans. Point.360 currently has a shareholder rights plan in effect. The rights under that plan are triggered upon the earlier of (i) 10 business days following the later of (a) the first date of a public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding shares of common stock or (b) the first date on which an executive officer of the Point.360 has actual knowledge of such acquisition, or (ii) 10 business days following the commencement of a tender offer or exchange offer

that would result in a person or group beneficially owning 20% or more of the outstanding shares of common stock. However, under the plan, as amended, the rights are not triggered by the acquisition of shares of Point.360 common stock by DG FastChannel pursuant to the merger agreement.

DG FastChannel. The Delaware General Corporation Law does not include a statutory provision expressly validating stockholder rights plans; however, such plans have generally been upheld by decisions of courts applying Delaware law. DG FastChannel currently does not have a shareholder rights plan in effect.

Point.360. California law does not have any provision comparable to the anti-takeover provisions in Delaware law that are described below. However, as described above in "Shareholder Approval of Mergers and Other Business Combinations," California law does require the consent of all of the shareholders of the class to a "cash-out" merger by a majority shareholder, except where the majority shareholder already owns 90% or more of the voting power of the target corporation. Delaware law has no comparable provision.

DG FastChannel. Delaware law prohibits, in certain circumstances, a "business combination" between the corporation and an "interested stockholder" within three years of the stockholder becoming an "interested stockholder." An "interested stockholder" is a holder who, directly or indirectly, controls 15% or more of the outstanding voting stock or is an affiliate of the corporation and was the owner of 15% or more of the outstanding voting stock at any time within the prior three-year period. A "business combination" includes a merger or consolidation, a sale or other disposition of assets having an aggregate market value equal to 10% or more of the consolidated assets of the corporation or the aggregate market value of the outstanding stock of the corporation and certain transactions that would increase the interested stockholder's proportionate share ownership in the corporation. This provision does not apply where:

DG FastChannel's certificate of incorporation and bylaws do not exempt the corporation from the coverage of Section 203. The application of Section 203 to DG FastChannel confers upon the board of directors the power to reject a proposed business combination in certain circumstances, even though a potential acquiror may be offering a substantial premium for DG FastChannel's shares over the then-current market price.

Under both California and Delaware law, certain contracts or transactions in which one or more of a corporation's directors has an interest are not void or voidable because of such interest provided that certain conditions, such as obtaining the required approval and fulfilling the requirements of good faith and full disclosure, are met. With certain exceptions, the conditions are similar under California and Delaware law. Under both California and Delaware law, (i) either the shareholders or the board of directors must approve any such contract or transaction after full disclosure of the material facts, and, in the case of board of director approval, the contract or transaction must also be "just and reasonable" (in California) or "fair" (in Delaware) to the corporation or (ii) the contract or transaction must have been just and reasonable or fair as to the corporation at the time it was approved. In the latter case, California law explicitly places the burden of proof on the interested director. Under California law, if shareholder approval is sought, the interested director is not entitled to vote his or her shares at a shareholder meeting with respect to any action regarding such contract or transaction. If the approval of the board of directors is sought, the contract or transaction must be approved by a majority vote of a quorum of the directors, without counting the vote of any interested directors (except that interested directors may be counted for purposes of establishing a quorum).

California law provides that a shareholder bringing a derivative action on behalf of a corporation need not have been a shareholder at the time of the transaction in question, provided that certain tests are met. Under Delaware law, a shareholder may only bring a derivative action on behalf of the corporation if the shareholder was a shareholder of the corporation at the time of the transaction in question or his or her stock thereafter devolved upon him or her by operation of law. California law also provides that the corporation or the defendant in a derivative suit may make a motion to the court for an order requiring the plaintiff shareholder to furnish a security bond. Delaware law does not have a similar bonding requirement.

There are no "fair price" or similar provisions in either Point.360's or DG FastChannel's articles or certificate of incorporation or bylaws.

Information regarding the business and background of our executive officers and directors, executive compensation and certain relationships and related transactions is contained in Amendment No. 1 to DG FastChannel's Annual Report on Form 10-K for the year ended December 31, 2006, as filed on April 27, 2007, and is incorporated by reference into this prospectus.

Gardere Wynne Sewell LLP, counsel to DG FastChannel, has passed upon the validity of the DG FastChannel common stock to be issued in connection with the offer and the merger. Latham & Watkins LLP, counsel to DG FastChannel, and Troy & Gould PC, counsel to Point.360, are expected to render opinions concerning the federal income tax consequences of the merger.

The consolidated financial statements and schedule of DG FastChannel, Inc. and subsidiaries (f/k/a Digital Generation Systems, Inc.) as of December 31, 2006 and 2005, and for each of the years in the three-year period ended December 31, 2006 have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

The financial statements of Point.360's ADS business as of December 31, 2006, and for each of the three years in the period ended December 31, 2006 have been included herein in reliance upon the report of Singer Lewark Greenbaum & Goldstein LLP, independent auditors, as set forth in their report thereon appearing elsewhere in this document and upon the authority of said firm as experts in accounting and auditing.

The financial statements of Pathfire, Inc. as of December 31, 2006, and for each of the two years in the period ended December 31, 2006 have been included herein in reliance upon the report of Habif, Arogeti & Wynne, LLP, independent auditors, as set forth in their report thereon appearing in our Form 8-K incorporated by reference herein and upon the authority of said firm as experts in accounting and auditing.

DG FastChannel and Point.360 file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or information that the companies file at the SEC's public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for further information. DG FastChannel's and Point.360's SEC filings are also available to the public from commercial document retrieval services and at the Internet website maintained by the SEC at http://www.sec.gov.

DG FastChannel filed the registration statement on Form S-4 to register with the SEC the shares of DG FastChannel common stock to be issued to Point.360 stockholders in the offer and the merger. This prospectus is a part of that registration statement and constitutes a prospectus of DG FastChannel. DG FastChannel will also file with the SEC, on the same day as it commences the offer, a tender offer statement on Schedule TO pursuant to the Exchange Act in connection with the offer. You may obtain copies of the Form S-4 and the Schedule TO (and any amendments to those documents) in the manner described above. Point.360 is required to file with the SEC a solicitation/recommendation statement on Schedule 14D-9 regarding the offer within ten business days from the date of the distribution of this prospectus and to disseminate this statement to Point.360 stockholders. Point.360 has agreed to file its

recommendation statement on the same day that we file the registration statement on Form S-4 with the SEC. A copy of Point.360's recommendation statement on Schedule 14D-9 is enclosed. You may also obtain a copy of the Schedule 14D-9 (and any amendments to that document) in the manner described above.

As allowed by SEC rules, this prospectus does not contain all the information you can find in the DG FastChannel registration statement or the exhibits to the registration statement. The SEC allows DG FastChannel to "incorporate by reference" information into this prospectus, which means that DG FastChannel can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be a part of this prospectus, except for any information that is superseded by information that is included directly in this document. This prospectus incorporates by reference the documents set forth below that DG FastChannel has previously filed with the SEC. These documents contain important information about DG FastChannel and its financial condition.

DG FastChannel SEC Filings (File No. 0-27644)		Period
Annual Report on Form 10-K		Year ended December 31, 2006
Amendment to Annual Report on Form 10-K		Year ended December 31, 2006, as filed on April 27, 2007
Quarterly Report on Form 10-Q		Quarter ended March 31, 2007
Current Reports on Forms 8-K and 8-K/A (other than any disclosure furnished, but not filed, pursuant to Item 2.02 or Item 7.01 of Form 8-K)		Filed on June 8, May 10, May 8, April 25, April 16, April 13 and March 26, 2007
The description of DG FastChannel's common stock set forth in DG FastChannel's registration statement on Form S-4, including any amendment or report filed with the SEC for the purpose of updating such description		Filed on September 15, 2000

All additional documents that DG FastChannel may file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and prior to the earlier of the effective time of the merger and the termination of the merger agreement, shall also be deemed to be incorporated by reference.

DG FastChannel has supplied all information contained or incorporated by reference in this prospectus relating to DG FastChannel. Point.360 has supplied all information contained in this prospectus relating to Point.360.

You can obtain any of the documents incorporated by reference through DG FastChannel, the SEC or the SEC's Internet web site as described above. Documents incorporated by reference are available from DG FastChannel without charge, excluding all exhibits unless DG FastChannel has specifically incorporated by reference an exhibit in this prospectus. Stockholders may obtain documents incorporated by reference in this prospectus by requesting them in writing or by telephone from DG FastChannel at the following addresses:

If you would like to request documents from us, please do so by [ ], [ ], 2007 to receive them before the initial expiration of the exchange offer. If you request any incorporated

documents from DG FastChannel, DG FastChannel will mail them to you by first-class mail, or other equally prompt means, within one business day of receipt of your request.

You should rely only on the information contained or incorporated by reference in this prospectus to make your decision regarding the tender of shares. DG FastChannel and Point.360 have not authorized anyone to provide you with information that is different from what is contained in this prospectus. This prospectus is dated [ ], 2007, and was first mailed to stockholders on [ ], 2007. You should not assume that the information contained in the prospectus is accurate as of any date other than that date, and neither the mailing of this prospectus to the stockholders nor the issuance of DG FastChannel shares in the offer or the merger shall create any implication to the contrary.

The offer is being made solely by this prospectus and the related letter of transmittal and is being made to holders of all outstanding shares of Point.360 common stock. We are not aware of any jurisdiction where the making of the offer is prohibited by any administrative or judicial action or pursuant to any valid state statute. If we become aware of any valid state statute prohibiting the making of the offer or the acceptance of shares pursuant thereto, we will make a good faith effort to comply with any such state statute. If, after making a good faith effort, we cannot comply with that state statute, the offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of shares in that state. In any jurisdiction where the securities, blue sky or other laws require the offer to be made by a licensed broker or dealer, the offer shall be deemed to be made on our behalf by one or more registered brokers or dealers licensed under the laws of that jurisdiction. No person has been authorized to give any information or make any representation on behalf of DG FastChannel not contained in this prospectus or in the letter of transmittal, and if given or made, such information or representation must not be relied upon as having been authorized.

Under the terms of the merger agreement, the holders of Point.360 common stock will receive up to 2,000,000 shares of DG FastChannel common stock and as a result, after the Offer and the merger, holders of Point.360 common stock immediately prior to the Offer and the merger will own approximately 11% of the combined company and the holders of DG FastChannel common stock immediately prior to the Offer and the merger will collectively own approximately 89% of the combined company.

DG FastChannel will be the parent of Point.360, and will be the surviving registrant in the merger. On the date of the merger, the assets and liabilities of Point.360 will be recorded at their estimated fair values.

In accordance with Rule 11-02 of Regulation S-X, the accompanying pro forma financial information does not include discontinued operations. Accordingly, the financial information of Point.360 only reflects its advertising distribution business which is proposed to be acquired by DG FastChannel pursuant to the merger agreement. The financial results of Point.360's non-advertising distribution business, which is proposed to be contributed to New 360 and spun-off immediately prior to consummating the Offer, is not contained in the pro forma financial statements.

The combined company unaudited pro forma condensed consolidated balance sheet as of March 31, 2007 is derived from the unaudited financial statements of DG FastChannel, Point.360 and Pathfire and gives effect to (i) the merger, (ii) the acquisition of Pathfire, and (iii) the pro forma adjustments as if the transactions had occurred on March 31, 2007.

The combined company unaudited pro forma condensed consolidated statement of operations for the three months ended March 31, 2007 is derived from the unaudited financial statements of DG FastChannel, Point.360 and Pathfire and gives effect to (i) the merger, (ii) the acquisition of Pathfire, and (iii) the pro forma adjustments as if the transactions had occurred on January 1, 2007.

The combined company unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2006 is derived from the audited financial statements of DG FastChannel, Point.360 and Pathfire and gives effect to (i) the merger, (ii) the acquisition of Pathfire, and (iii) the pro forma adjustments as if the transactions had occurred on January 1, 2006.

The combined company unaudited pro forma condensed consolidated balance sheet and statements of operations do not purport to represent what the financial position or results of operations actually would have been if the merger and the Pathfire acquisition had occurred as of such dates, or what such results will be for any future periods.

The combined company unaudited pro forma condensed consolidated financial information is derived from the historical financial statements of DG FastChannel, Point.360, and Pathfire and the assumptions and adjustments described in the accompanying notes. The pro forma adjustments are based on preliminary estimates and assumptions that DG FastChannel believes are reasonable under the circumstances. The preliminary allocations of the estimated purchase prices to the assets and liabilities of Point.360 and Pathfire reflects the assumption that the historical carrying amounts of assets and liabilities approximate their fair market values except for certain purchased intangible assets which have been included at their estimated fair values. The actual allocation of the purchase price may differ from that reflected in the combined company unaudited pro forma condensed consolidated financial statements after a more extensive review of the fair value of the assets and liabilities is completed. The combined company unaudited pro forma financial information should be read in conjunction with the historical financial statements and the accompanying notes thereto of DG FastChannel, Point.360, and Pathfire appearing elsewhere in the registration statement or incorporated by reference. The combined company unaudited pro forma condensed combined financial information does not reflect any cost savings, restructuring charges or other economic efficiencies nor debt refinancing which may result from the merger and the acquisition.

COMBINED COMPANY UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
MARCH 31, 2007

	Point.360			Pathfire			Total
Tangible net assets	$	(2,759	)	$	(5,554	)	$	(8,313	)
Purchased intangibles		16,000			12,000			28,000
Goodwill		27,273			18,875			46,148

Total purchase price	$	40,514		$	25,321		$	65,835

COMBINED COMPANY UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2007

COMBINED COMPANY UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006

This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement"), is dated as of April 16, 2007, by and among DG FastChannel, Inc., a Delaware corporation (the "Purchaser"), POINT.360, a California corporation (the "Company"), and NEW 360, a California corporation and a wholly-owned subsidiary of the Company (the "PPB Sub"). Capitalized terms used herein have the meanings assigned to them in Section 9.5 or elsewhere in this Agreement as described in Section 9.6.

WHEREAS, the respective Boards of Directors of the Purchaser and the Company have approved, and deem it advisable and in the best interests of their respective shareholders to consummate, the acquisition of the Company by the Purchaser upon the terms and subject to the conditions set forth herein;

WHEREAS, in furtherance thereof and pursuant to this Agreement, the Purchaser has agreed to commence an exchange offer (as it may be amended from time to time as permitted by this Agreement, the "Offer") to acquire all of the common stock, no par value per share, of the Company (the "Company Common Stock") issued and outstanding, including the associated preferred share purchase rights (the "Company Rights") issued pursuant to the Amended and Restated Rights Agreement, dated as of November 17, 2004, between the Company and American Stock Transfer and Trust Company, as Rights Agent (the "Company Rights Agreement") (which Company Rights together with the Company Common Stock are hereinafter referred to as the "Shares"), in which Offer each Share validly tendered and not properly withdrawn would be exchanged for a number of shares of common stock, par value $0.001 per share, of the Purchaser (the "Purchaser Common Stock") equal to the quotient obtained by dividing (x) 2,000,000 by (y) the number of Shares (excluding Shares owned directly or indirectly by the Purchaser or the Company) issued and outstanding immediately prior to the consummation of the Offer (such amount of shares, or any greater amount of shares, of Purchaser Common Stock paid per Share pursuant to the Offer, the "Offer Consideration", which would equal 0.2252 assuming 8,882,882 Shares (excluding Shares owned directly or indirectly by the Purchaser or the Company) are issued and outstanding immediately prior to the consummation of the Offer);

WHEREAS, the Board of Directors of the Company (the "Company Board of Directors") has, on the terms and subject to the conditions set forth herein, (i) approved the Offer and (ii) adopted this Agreement, and is recommending that the Company's shareholders accept the Offer, tender their Shares to the Purchaser and approve this Agreement;

WHEREAS, the respective Boards of Directors of the Purchaser and the Company have approved the merger of the Company with and into the Purchaser with the Purchaser as the survivor, as set forth below (the "Merger" and, together with the Offer and the other transactions contemplated by this Agreement, the "Transactions"), in accordance with the General Corporation Law of the State of California (the "CGCL") and the General Corporation Law of the State of Delaware (the "DGCL"), and upon the terms and subject to the conditions set forth in this Agreement, whereby each issued and outstanding Share not owned directly or indirectly by the Purchaser or the Company will be converted into the right to receive the Offer Consideration;

WHEREAS, as a condition of and inducement to the Purchaser's willingness to enter into this Agreement, simultaneously with the execution of this Agreement, Haig S. Bagerdjian is entering into a support agreement with the Purchaser (the "Support Agreement"), pursuant to which, among other things, Mr. Bagerdjian has agreed to validly tender and not withdraw pursuant to the Offer all of the Shares beneficially owned by him, net of shares, if any, sold by Mr. Bagerdjian upon the exercise of Company Options to pay the exercise price of such options and net of shares, if any, withheld by the Company to satisfy withholding obligations upon the exercise of such options;

WHEREAS, as a condition of and inducement to the Purchaser's willingness to enter into this Agreement, simultaneously with the execution of this Agreement, the Company is entering into a media distribution service agreement with the Purchaser (the "Media Distribution Service Agreement");

WHEREAS, on the Acceptance Date, the Company shall contribute (the "Contribution") all of the Excluded Assets owned, licensed or leased by the Company to the PPB Sub, and the PPB Sub shall assume all of the Assumed Liabilities, in each case in accordance with that certain contribution agreement, dated as of the date hereof, among the PPB Sub, the Purchaser and the Company attached hereto as Exhibit A (the "Contribution Agreement");

WHEREAS, immediately following the Contribution but prior to the consummation of the Offer, the Company shall distribute (the "Spin-Off") to its shareholders (other than the Purchaser) pro rata all of the capital stock then outstanding of the PPB Sub;

WHEREAS, following the consummation of the Merger on the Closing Date, the PPB Sub shall change its name to "Point.360";

WHEREAS, as a condition of and inducement to the Company's willingness to enter into this Agreement, the Purchaser has agreed to enter into the Post Production Services Agreement on the Acceptance Date;

WHEREAS, for federal income tax purposes, the Offer and the Merger are intended to qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement is intended to constitute a plan of reorganization; and

WHEREAS, the parties hereto desire to (i) make certain representations and warranties, (ii) enter into certain covenants and agreements in connection with the Offer and the Merger and (iii) prescribe various conditions to the Offer and the Merger.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

Section 1.1 The Offer. (a) Provided that (i) this Agreement shall not have been terminated in accordance with Section 8.1, (ii) none of the events set forth in Annex I (other than paragraphs (f) and (i)) shall have occurred and be continuing and (iii) the Company shall have complied with its applicable obligations under Section 1.2, as promptly as practicable after the effectiveness of the Form 10, and in any event, within five (5) business days thereafter, the Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the "Exchange Act")) the Offer, subject to (i) there being validly tendered in the Offer (in the aggregate) and not withdrawn prior to the expiration of the Offer that number of Shares which, together with the Shares then beneficially owned by the Purchaser, represents at least a majority of the Shares outstanding on a fully diluted basis and no less than a majority of the voting power of the outstanding shares of capital stock of the Company entitled to vote in the election of directors or (if a greater majority) upon the adoption of this Agreement (collectively, the "Minimum Condition") and (ii) the satisfaction or waiver of the other conditions and requirements set forth in Annex I. Subject to the prior satisfaction or waiver by the Purchaser of the Minimum Condition and the other conditions and requirements set forth in Annex I, the Purchaser shall consummate the Offer in accordance with its terms and accept for exchange, and exchange the Offer Consideration for, all Shares tendered pursuant to the Offer as soon as practicable after the Purchaser is legally permitted to do so under applicable law; provided, however, that the initial expiration date of

the Offer shall be the date that is twenty (20) business days following the commencement of the Offer (the "Initial Expiration Date"). The obligation of the Purchaser to accept for exchange, and to exchange the Offer Consideration for, any Shares validly tendered on or prior to the expiration of the Offer and not withdrawn shall be subject to the Minimum Condition and the other conditions and requirements set forth in Annex I. The Offer shall be made by means of an offer to exchange (the "Offer to Exchange") that contains the terms set forth in this Agreement, the Minimum Condition and the other conditions and requirements set forth in Annex I. The Purchaser shall not decrease the Offer Consideration, change the form of consideration payable in the Offer or reduce the maximum number of Shares to be purchased in the Offer without the prior written consent of the Company. For the avoidance of doubt: (x) if on the Initial Expiration Date (as it may be extended), all conditions to the Offer shall not have been satisfied or waived, the Purchaser may, from time to time, in its sole discretion, extend the Initial Expiration Date, for such period as the Purchaser may determine, (y) the Purchaser may, in its sole discretion, provide a "subsequent offering period" in accordance with Rule 14d-11 under the Exchange Act and (z) the Purchaser may, in its sole discretion, extend the Offer for any reason on one or more occasions for an aggregate period of not more than ten (10) business days beyond the latest expiration date of the Offer that would otherwise be permitted under clause (x) of this sentence if, on such expiration date, there have not been tendered (and not withdrawn) at least ninety percent (90%) of the outstanding Shares on a fully diluted basis. The Purchaser may (i) increase the Offer Consideration and extend the Offer to the extent required by applicable law in connection with such increase and (ii) extend the Offer to the extent otherwise required by applicable law, in each case in its sole discretion and without the Company's consent. The Purchaser shall not terminate the Offer prior to any scheduled expiration date (as the same may be extended or required to be extended) without the written consent of the Company, except in the event that this Agreement is terminated pursuant to Section 8.1. If the Offer is terminated or withdrawn by the Purchaser, or this Agreement is terminated prior to the exchange of Shares in the Offer, the Purchaser shall promptly return, and shall cause any depository or exchange agent, including the Exchange Agent, acting on behalf of the Purchaser, to return all tendered Shares to the registered holders thereof.

(b) Notwithstanding anything to the contrary contained in this Article I, no certificates or scrip representing fractional shares of Purchaser Common Stock shall be issued upon the surrender for exchange of the Shares pursuant to the Offer, no dividends or other distributions with respect to the Purchaser Common Stock shall be payable on or with respect to any such fractional share interest and such fractional share interests will not entitle the owner thereof to vote or to any other rights of a shareholder of the Purchaser. In lieu of any such fractional shares, each tendering shareholder who would otherwise be entitled to a fractional share of Purchaser Common Stock (after aggregating all fractional shares of Purchaser Common Stock that otherwise would have been received by such shareholder) shall, upon surrender of his or her Certificate or Certificates, be entitled to receive an amount of cash (without interest) determined by multiplying (i) the closing price of a share of Purchaser Common Stock as reported on the Nasdaq Global Market (the "Nasdaq") on the Acceptance Date by (ii) the fractional share interest to which such shareholder would otherwise be entitled. The parties acknowledge that payment of the cash consideration in lieu of issuing fractional shares was not separately bargained for consideration, but merely represents a mechanical rounding off for purposes of simplifying the corporate and accounting complexities that would otherwise be caused by the issuance of fractional shares.

(c) As soon as practicable on the date the Offer is commenced, the Purchaser shall (i) file with the Securities and Exchange Commission (the "SEC"), pursuant to Regulation M-A under the Exchange Act ("Regulation M-A"), a Tender Offer Statement on Schedule TO with respect to the Offer (together with all amendments, supplements and exhibits thereto, the "Schedule TO") and (ii) file with the SEC a registration statement on Form S-4 to register, under the Securities Act, the offer and sale of the Purchaser Common Stock pursuant to the Offer and the Merger (together with all amendments, supplements and exhibits thereto, the "Registration Statement"). The Registration Statement shall

include a preliminary prospectus (the "Prospectus") containing the information required under Rule 14d-4(b) promulgated under the Exchange Act. The Schedule TO shall include the summary term sheet required under Regulation M-A and, as exhibits, the Offer to Exchange and a form of letter of transmittal and summary advertisement (collectively with the Prospectus, and together with any amendments and supplements thereto and to the Prospectus, the "Offer Documents"). The Purchaser shall cause the Offer Documents to be disseminated to the holders of the Shares as and to the extent required by applicable federal securities laws. The Company shall provide the Purchaser with all information concerning the Company and its directors, officers and affiliates as shall be required to be included in the Offer Documents and the Registration Statement. The Company and its counsel shall be given a reasonable opportunity to review the Registration Statement and the Offer Documents before they are filed with the SEC, and the Purchaser shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Company and its counsel. In addition, the Purchaser shall provide the Company and its counsel with copies of any written comments, and shall inform them of any oral comments, that the Purchaser or its counsel may receive from time to time from the SEC or its staff with respect to the Registration Statement or the Offer Documents promptly after receipt of such comments, and any written or oral responses thereto. The Company and its counsel shall be given a reasonable opportunity to review any such written responses, and the Purchaser shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Company and its counsel. No amendment or supplement to the Offer Documents shall be made by the Purchaser without providing the Company and its counsel a reasonable opportunity to review any such amendment or supplement, and the Purchaser shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Company and its counsel.

(d) The Purchaser shall use its reasonable efforts to have the Registration Statement declared effective under the Securities Act as promptly as practicable after the filing thereof with the SEC and to keep the Registration Statement effective as long as is necessary to complete the Offer and the Merger. Notwithstanding any other provision herein to the contrary, no amendment or supplement to the Registration Statement will be made by the Purchaser without the approval of the Company, which will not be unreasonably withheld, conditioned or delayed; provided, that with respect to documents filed by the Purchaser which are incorporated by reference in the Registration Statement, this right of approval shall apply only with respect to information relating to this Agreement, the Transactions or the Company or its business, financial condition or results of operations. The Purchaser shall take any action (other than qualifying to do business in any jurisdiction in which it is now not so qualified) reasonably required to be taken under applicable state securities or Blue Sky laws in connection with the issuance of the Purchaser Common Stock in the Offer and the Merger. The Purchaser will advise the Company, promptly after it receives notice thereof, of the time when the Registration Statement is declared effective, the issuance of any stop order, the suspension of the qualification of the Purchaser Common Stock issuable in connection with the Offer or the Merger for offering or sale in any jurisdiction, or of any request by the SEC for amendment of the Registration Statement. Following the time the Registration Statement is declared effective, the Purchaser shall file the final prospectus included therein under Rule 424(b) promulgated pursuant to the Securities Act.

(e) If, at any time prior to the Effective Time, the Company or the Purchaser discovers any information relating to either party, or any of their respective affiliates, officers or directors, that should be set forth in an amendment or a supplement to any of the Registration Statement, the Offer Documents or the Schedule 14D-9, as the case may be, so that such documents would not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, the party that discovers that information shall promptly notify the other party and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws.

(f) The Company agrees that no Shares held by the Company or any of its Subsidiaries will be tendered to the Purchaser pursuant to the Offer. The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Company Board of Directors referred to in clause (iii) of Section 3.4

(g) Notwithstanding anything herein to the contrary, the Purchaser, the Company or the Exchange Agent may withhold the Offer Consideration as it reasonably deems necessary to satisfy its withholding obligations under applicable law, and the withholding of any such Offer Consideration for such purpose shall be treated as the payment thereof to the Person from whom such amount was withheld for purposes of determining whether such Person received amounts to which such Person is entitled hereunder.

Section 1.2 Company Actions. (a) Contemporaneous with the filing of the Schedule TO and the Registration Statement, the Company shall, in a manner that complies with Rule 14d-9 under the Exchange Act, file with the SEC a Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (together with all amendments, supplements and exhibits thereto, the "Schedule 14D-9") that shall contain the recommendation referred to in clause (iii) of Section 3.4. The Company shall cause the Schedule 14D-9 to be disseminated to the holders of the Shares as and to the extent required by applicable federal securities laws. The Purchaser shall provide the Company with all information concerning the Purchaser and its directors, officers and affiliates as shall be required to be included in the Schedule 14D-9. The Company, on the one hand, and the Purchaser, on the other hand, agrees to promptly correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect or as otherwise required by applicable law. The Company further agrees to take all steps necessary to cause the Schedule 14D-9, as so corrected (if applicable), to be filed with the SEC and disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. The Purchaser and its counsel shall be given a reasonable opportunity to review the Schedule 14D-9 before it is filed with the SEC, and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Purchaser and its counsel. In addition, the Company shall provide the Purchaser and its counsel with copies of any written comments, and shall inform them of any oral comments, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the Company's receipt of such comments, and any written or oral responses thereto. The Purchaser and its counsel shall be given a reasonable opportunity to review any such written responses, and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Purchaser and its counsel. No amendment or supplement to the Schedule 14D-9 shall be made by the Company without providing the Purchaser and its counsel a reasonable opportunity to review any such amendment or supplement, and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Purchaser and its counsel.

(b) In connection with the Offer, the Company shall promptly furnish or cause its transfer agent to furnish to the Purchaser mailing labels, security position listings of Shares held in stock depositories and any available listing or computer files containing the names and addresses of the record holders of the Shares as of the most recent practicable date, and shall promptly furnish the Purchaser with such information and assistance (including, but not limited to, lists of record holders and beneficial owners of the Shares, updated promptly from time to time upon the Purchaser's request, and their addresses, mailing labels and lists of security positions) as the Purchaser or its agent may reasonably request for the purpose of communicating the Offer to the record and beneficial holders of the Shares. Except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer, the Merger and the other Transactions, the Purchaser shall hold in confidence the information contained in any such labels, listings and files, shall use such information only in

connection with the Offer and the Merger and, if this Agreement shall be terminated, shall promptly deliver to the Company all copies of such information.

Section 1.3 Directors. (a) Promptly upon the acceptance of any Shares for exchange pursuant to the Offer which, together with the Shares then beneficially owned by the Purchaser, represent at least a majority of the Shares outstanding on a fully diluted basis and at all times thereafter, the Purchaser shall be entitled to elect or designate such number of directors, rounded up to the next whole number, on the Company Board of Directors as is equal to the product of the total number of directors on the Company Board of Directors (giving effect to the directors elected or designated by the Purchaser pursuant to this sentence) multiplied by the percentage that the aggregate number of Shares beneficially owned by the Purchaser and any of its affiliates bears to the total number of Shares then outstanding. The Company shall, upon the Purchaser's request at any time following the acceptance of any Shares for exchange pursuant to the Offer, take such actions, including but not limited to promptly filling vacancies or newly-created directorships on the Company Board of Directors, promptly increasing the size of the Company Board of Directors (including by amending the Company Bylaws if necessary so as to increase the size of the Company Board of Directors) and/or promptly securing the resignations of such number of its incumbent directors as are necessary or desirable to enable the Purchaser's designees to be so elected or designated to the Company Board of Directors, and shall use its best efforts to cause the Purchaser's designees to be so elected or designated at such time. The Company shall, upon the Purchaser's request following the acceptance of any Shares for exchange pursuant to the Offer, also cause Persons elected or designated by the Purchaser to constitute the same percentage (rounded up to the next whole number) as is on the Company Board of Directors of (i) each committee of the Company Board of Directors, (ii) each board of directors (or similar body) of each Company Subsidiary and (iii) each committee (or similar body) of each such board, in each case only to the extent permitted by applicable law and the Marketplace Rules of the Nasdaq. Upon consummation of the Offer, the Company shall take all action necessary to elect to be treated as a "controlled company" as defined by Nasdaq Marketplace Rule 4350(c) and make all necessary filings and disclosures associated with such status. The Company's obligations under this Section 1.3(a) shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company shall promptly upon execution of this Agreement take all actions required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this Section 1.3(a), including mailing to shareholders (together with the Schedule 14D-9) the information required by Section 14(f) and Rule 14f-1 as is necessary to enable the Purchaser's designees to be elected or designated to the Company Board of Directors. The Purchaser shall provide the Company with information with respect to the Purchaser's designees and the Purchaser's officers, directors and affiliates to the extent required by Section 14(f) and Rule 14f-1. The provisions of this Section 1.3(a) are in addition to and shall not limit any rights that the Purchaser or any of its affiliates may have as a holder or beneficial owner of Shares as a matter of applicable law with respect to the election of directors or otherwise.

(b) In the event that the Purchaser's designees are elected or designated to the Company Board of Directors pursuant to Section 1.3(a), then, until the Effective Time, the Company shall cause the Company Board of Directors to maintain two (2) directors who are members of the Company Board of Directors on the date hereof, each of whom shall be an "independent director" as defined by Rule 4200(a)(15) of the Nasdaq Marketplace Rules and eligible to serve on the Company's audit committee under the Exchange Act and Nasdaq rules and, at least one of whom shall be an "audit committee financial expert" as defined in Item 401(h) of Regulation S-K and the instructions thereto (the "Continuing Directors"); provided, however, that if any Continuing Director is unable to serve due to death, disability or resignation, the remaining Continuing Director(s) shall be entitled to elect or designate another Person (or Persons) to fill such vacancy, and such Person (or Persons) shall be deemed to be a Continuing Director for all purposes of this Agreement. If no Continuing Director then remains, the other directors shall designate two (2) Persons to fill such vacancies and such Persons shall be deemed Continuing Directors for all purposes of this Agreement. Notwithstanding anything in

this Agreement to the contrary, if the Purchaser's designees constitute a majority of the Company Board of Directors after the acceptance of any Shares for exchange pursuant to the Offer and prior to the Effective Time, then the affirmative vote of a majority of the Continuing Directors shall (in addition to the approval rights of the Company Board of Directors or the shareholders of the Company as may be required by the Restated Articles of Incorporation of the Company (as amended, the "Company Articles"), the bylaws of the Company (as amended, the "Company Bylaws", and together with the Company Articles, the "Company Governing Documents") or applicable law) be required (i) for the Company to amend or terminate this Agreement, (ii) to exercise or waive any of the Company's rights, benefits or remedies hereunder, if such action would materially and adversely affect the holders of the Shares (other than the Purchaser), (iii) to amend the Company Governing Documents if such action would materially and adversely affect the holders of the Shares (other than the Purchaser) or (iv) to take any other action of the Company Board of Directors under or in connection with this Agreement if such action would materially and adversely affect the holders of the Shares (other than the Purchaser); provided, however, that if there shall be no Continuing Directors as a result of such Persons' deaths, disabilities or refusal to serve, then such actions may be effected by majority vote of the entire Company Board of Directors.

Section 1.4 Offer Exchange Fund; Distributions on Shares of Purchaser Common Stock. (a) The Purchaser shall designate a bank or trust company to act as agent for the holders of the Shares in connection with the Offer and the Merger (the "Exchange Agent") and to receive the consideration to which the holders of the Shares shall become entitled pursuant to Section 1.1 and Section 2.1. Prior to the Acceptance Date, the Purchaser shall deposit, or shall cause to be deposited, with the Exchange Agent, for the benefit of the holders of the Shares, for exchange in accordance with the terms of the Offer set forth in this Article I, (i) certificates representing the shares of Purchaser Common Stock issuable to such holders in the Offer and (ii) any cash in lieu of fractional shares of Purchaser Common Stock to be paid pursuant to Section 1.1(b) (such cash and certificates for shares of Purchaser Common Stock, together with any dividends or distributions with respect thereto, being hereinafter referred to as, the "Offer Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable instructions, make cash payments and deliver the shares of Purchaser Common Stock contemplated to be issued pursuant to Section 1.1 out of the Offer Exchange Fund. Any cash and shares of Purchaser Common Stock remaining in the Offer Exchange Fund seven (7) business days following the Acceptance Date shall be returned to the Purchaser, which shall thereafter be responsible to make payments to the holders of the Shares that have validly tendered their Shares pursuant to the Offer.

(b) For purposes of determining entitlement to dividends or other distributions declared on shares of Purchaser Common Stock, holders of the Shares who have validly tendered and not withdrawn such shares pursuant to the Offer shall be deemed to be record holders of the shares of Purchaser Common Stock as of the Acceptance Date, notwithstanding the fact that certificates representing such shares have not yet been issued or delivered to tendering shareholders (or, if applicable, appropriate book-entries have not yet been made).

Section 1.5 The Merger. (a) Subject to the terms and conditions of this Agreement, and in accordance with the CGCL and the DGCL, at the Effective Time, the Company and the Purchaser shall consummate the Merger pursuant to which (i) the Company shall be merged with and into the Purchaser and the separate corporate existence of the Company shall thereupon cease, (ii) the Purchaser shall be the surviving corporation in the Merger and shall continue to be governed by the applicable laws of the State of Delaware and (iii) the separate corporate existence of the Purchaser with all its property, rights, privileges, powers and franchises shall continue unaffected by the Merger. The corporation surviving the Merger is sometimes hereinafter referred to as the "Surviving Corporation." The Merger shall have the effects set forth in Section 1107 of the CGCL and Section 259 of the DGCL.

(b) The Purchaser and the Surviving Corporation shall take all necessary action such that (i) the certificate of incorporation of the Purchaser as in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law and (ii) the bylaws of the Purchaser as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law.

Section 1.6 Effective Time. The Purchaser and the Company shall cause appropriate articles of merger or other appropriate documents (the "Articles of Merger") to be executed and filed on the Closing Date (or on such other date as the Purchaser and the Company may agree) with (i) the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL and (ii) the Secretary of State of the State of California in accordance with the relevant provisions of the CGCL and shall make all other filings or recordings required under the CGCL or the DGCL. The Merger shall become effective at the time such Articles of Merger have been duly filed with the Secretary of State of the State of Delaware or such date and time as is agreed upon by the parties and specified in the Articles of Merger, such date and time hereinafter referred to as the "Effective Time."

Section 1.7 Closing. The closing of the Merger (the "Closing") will take place at 9:00 a.m., New York City time, on a date to be specified by the parties, such date to be no later than the second (2^nd) business day after satisfaction or waiver of all of the conditions set forth in Article VII (the "Closing Date"), at the offices of Latham & Watkins LLP, 555 Eleventh Street NW, Suite 1000, Washington, DC unless another date or place is agreed to in writing by the parties hereto.

Section 1.8 Directors and Officers of the Surviving Corporation. The directors of the Purchaser immediately prior to the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation, and the officers of the Purchaser immediately prior to the Effective Time, from and after the Effective Time, shall be the officers of the Surviving Corporation, in each case until their respective successors shall have been duly elected, designated or qualified, or until their earlier death, resignation or removal in accordance with the Surviving Corporation's articles of incorporation and bylaws.

Section 1.9 Subsequent Actions. If at any time after the Effective Time the Surviving Corporation shall determine, in its sole discretion, or shall be advised, that any deeds, bills of sale, instruments of conveyance, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of the Company acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, then the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of the Company, all such deeds, bills of sale, instruments of conveyance, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title or interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement.

Section 1.10 Stockholder Approval. (a) As promptly as practicable following the Acceptance Date, (i) the Purchaser shall vote, or cause to be voted, all of the Shares then owned by it or any of its Subsidiaries and affiliates (including, without limitation, all Shares acquired pursuant to the Offer), or shall approve an action by written consent, in favor of the approval of the Merger and the adoption of this Agreement and (ii) if required by applicable law in order to consummate the Merger, the Company, acting through the Company Board of Directors, shall, in accordance with applicable law and the Company Governing Documents, in conjunction with the Purchaser, prepare and file with the SEC an information statement pursuant to Regulation 14C under the Exchange Act (the "Information Statement") relating to the Merger and this Agreement and obtain and furnish the information required

by the SEC to be included therein and respond promptly to any comments made by the SEC with respect to such preliminary Information Statement and cause a definitive Information Statement to be mailed to its shareholders at the earliest practicable date. The Purchaser shall provide the Company with all information concerning the Purchaser and its directors, officers and affiliates as shall be required to be included in the Information Statement. The Company, on the one hand, and the Purchaser, on the other hand, agrees to promptly correct any information provided by it for use in the Information Statement if and to the extent that it shall have become false or misleading in any material respect or as otherwise required by applicable law. The Company further agrees to take all steps necessary to cause the Information Statement, as so corrected (if applicable), to be filed with the SEC and disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. The Purchaser and its counsel shall be given a reasonable opportunity to review the Information Statement before it is filed with the SEC, and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Purchaser and its counsel. In addition, the Company shall provide the Purchaser and its counsel with copies of any written comments, and shall inform them of any oral comments, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Information Statement promptly after the Company's receipt of such comments, and any written or oral responses thereto. The Purchaser and its counsel shall be given a reasonable opportunity to review any such written responses, and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Purchaser and its counsel. No amendment or supplement to the Information Statement shall be made by the Company without providing the Purchaser and its counsel a reasonable opportunity to review any such amendment or supplement, and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Purchaser and its counsel.

(b) Notwithstanding the foregoing, in the event that the Purchaser shall acquire at least ninety percent (90%) of the outstanding Shares on a fully diluted basis pursuant to the Offer or otherwise in accordance with the provisions hereof, the parties hereto agree, at the request of the Purchaser and subject to Article VII, to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of the shareholders of the Company, in accordance with Section 253 of the DGCL and Section 1110 of the CGCL.

Section 2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holders of any securities of the Company or the Purchaser:

(a) Purchaser Common Stock. Each issued and outstanding share of Purchaser Common Stock shall remain outstanding and be one fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation.

(b) Cancellation of Treasury Stock and Purchaser-Owned Stock. All Shares that are owned by the Company as treasury stock and any Shares owned by the Purchaser or any wholly-owned Subsidiary of the Purchaser shall be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(c) Conversion of Shares. Each issued and outstanding Share (other than the Shares to be cancelled in accordance with Section 2.1(b) and other than any Dissenting Shares) shall be converted into the right to receive the Offer Consideration (together with any cash in lieu of fractional shares of Purchaser Common Stock to be paid pursuant to Section 2.2(d)) (collectively, the "Merger Consideration"). From and after the Effective Time, all such Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration therefor upon the surrender of such certificate in accordance with Section 2.2, without interest thereon.

(a) Merger Exchange Fund. Prior to the Effective Time, the Purchaser shall deposit, or shall cause to be deposited, with the Exchange Agent, for the benefit of the holders of the Shares, the aggregate Merger Consideration, including (i) certificates representing the shares of Purchaser Common Stock issuable to such holders in the Merger pursuant to Section 2.1 and (ii) any cash in lieu of fractional shares of Purchaser Common Stock to be paid pursuant to Section 2.2(d) (such cash and certificates for shares of Purchaser Common Stock, together with any dividends or distributions with respect thereto, being hereinafter referred to as, the "Merger Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable instructions, make cash payments and deliver the shares of Purchaser Common Stock contemplated to be issued pursuant to Section 2.1 out of the Merger Exchange Fund.

(b) Exchange Procedures. Promptly after the Effective Time, the Purchaser shall instruct the Exchange Agent to mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding Shares (the "Certificates") and whose Shares were converted pursuant to Section 2.1 into the right to receive the Merger Consideration (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as the Purchaser may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for payment of the Merger Consideration. Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by the Purchaser, together with such letter of transmittal, properly completed and duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor (x) a check representing (I) cash in lieu of any fractional shares of Purchaser Common Stock to which such holder is entitled pursuant to Section 2.2(d) and (II) any dividends or other distributions to which such holder is entitled pursuant to Section 2.2(c), and (y) a certificate representing that number of whole shares of Purchaser Common Stock which such holder has the right to receive in respect of each Share formerly represented by such Certificate (after taking into account all Shares then held by such holder), and the Certificate so surrendered shall forthwith be cancelled. No interest will be paid or accrued on any cash in lieu of fractional shares or on any unpaid dividends and distributions payable to holders of Certificates. If payment of the Merger Consideration is to be made to a Person other than the Person in whose name the surrendered Certificate is registered, it shall be a condition precedent of payment that (x) the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and (y) the Person requesting such payment shall have paid any transfer and other Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such Tax either has been paid or is not required to be paid. Until surrendered as contemplated by this Section 2.2, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration as contemplated by this Section 2.2, without interest thereon.

(c) Distributions with Respect to Unexchanged Shares of Purchaser Common Stock. No dividends or other distributions declared or made after the Effective Time with respect to the Purchaser Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Purchaser Common Stock represented thereby, and no cash payment in lieu of any fractional shares shall be paid to any such holder pursuant to Section 2.2(d), unless and until the holder of such Certificate shall surrender such Certificate. Subject to the effect of escheat, Tax or other applicable laws, following surrender of any such Certificate, there shall be paid to the holder of the certificates representing whole shares of Purchaser Common Stock issued in exchange therefor, without interest, (i) the amount of any cash payable with respect to a fractional share of Purchaser Common Stock to which such holder is entitled pursuant to Section 2.2(d) and the amount of dividends or other distributions with a record date after the Effective Time and theretofore paid with

respect to such whole shares of Purchaser Common Stock and (ii) at the appropriate payment date, the amount of dividends or other distributions, with a record date after the Effective Time but prior to surrender and a payment date occurring after surrender, payable with respect to such whole shares of Purchaser Common Stock.

(d) No Fractional Shares. No certificates or scrip representing fractional shares of Purchaser Common Stock shall be issued upon the surrender for exchange of Certificates pursuant to the Merger, and such fractional share interests will not entitle the owner thereof to vote or to any rights of a shareholder of the Purchaser. In lieu of any such fractional shares, each shareholder who would otherwise be entitled to a fractional share of Purchaser Common Stock (after aggregating all fractional shares of Purchaser Common Stock that otherwise would have been received by such shareholder) shall, upon surrender of his or her Certificate or Certificates, be entitled to receive an amount of cash (without interest) determined by multiplying (i) the closing price of a share of Purchaser Common Stock as reported on the Nasdaq on the date of the Effective Time by (ii) the fractional share interest to which such shareholder would otherwise be entitled. The parties acknowledge that payment of the cash consideration in lieu of issuing fractional shares was not separately bargained for consideration, but merely represents a mechanical rounding off for purposes of simplifying the corporate and accounting complexities that would otherwise be caused by the issuance of fractional shares.

(e) Transfer Books; No Further Ownership Rights in Shares. At the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of any Shares on the records of the Company. From and after the Effective Time, the holders of Certificates outstanding immediately prior to the Effective Time shall cease to have any rights with respect to the Shares formerly represented thereby, except as otherwise provided for herein or by applicable law. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be cancelled and exchanged as provided in this Article II.

(f) Termination of Merger Exchange Fund; No Liability. At any time following six (6) months after the Effective Time, the Surviving Corporation shall be entitled to require the Exchange Agent to deliver to it any consideration (including any interest received with respect thereto) made available to the Exchange Agent and not disbursed (or for which disbursement is pending subject only to the Exchange Agent's routine administrative procedures) to holders of Certificates, and thereafter such holders shall be entitled to look only to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates, without any interest thereon. Notwithstanding the foregoing, neither the Surviving Corporation nor the Exchange Agent shall be liable to any holder of a Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

(g) Withholding Rights. The Purchaser, the Surviving Corporation and the Exchange Agent, as the case may be, shall be entitled to deduct and withhold from the relevant Merger Consideration otherwise payable pursuant to this Agreement to any holder of Shares such amounts that the Purchaser, the Surviving Corporation or the Exchange Agent is required to deduct and withhold with respect to the making of such payment under the Code, the rules and regulations promulgated thereunder or any provision of applicable state, local or foreign law. To the extent that amounts are so withheld by the Purchaser, the Surviving Corporation or the Exchange Agent, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by the Purchaser, the Surviving Corporation or the Exchange Agent.

(h) Lost, Stolen or Destroyed Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Purchaser or the Surviving Corporation, the posting by

such Person of a bond if the fair market value of the Shares formerly represented by such Certificate exceeds $3,000, in such reasonable amount as the Purchaser or the Surviving Corporation may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate (i) a check representing (x) cash in lieu of any fractional shares of Purchaser Common Stock to which such holder is entitled pursuant to Section 2.2(d) and (y) any dividends or other distributions to which such holder is entitled pursuant to Section 2.2(c), and (ii) a certificate representing that number of whole shares of Purchaser Common Stock which such holder has the right to receive in respect of each Share formerly represented by such Certificate (after taking into account all Shares then held by such holder).

Section 2.3 Dissenting Shares. (a) Notwithstanding anything in this Agreement to the contrary, any Shares outstanding immediately prior to the Effective Time and held by a holder who is entitled to demand and properly demands appraisal of such Shares ("Dissenting Shares") pursuant to, and who complies in all respects with, Chapter 13 of the CGCL (the "Dissenters Provisions") shall be entitled to payment of the fair value of such Dissenting Shares in accordance with the Dissenters Provisions; provided, however, that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to dissent under the Dissenters Provisions, then the right of such holder to be paid the fair value of such holder's Dissenting Shares shall cease and such Dissenting Shares shall be deemed to have been converted as of the Effective Time into, and to have become exchangeable solely for, the right to receive the Merger Consideration.

(b) The Company shall serve prompt notice to the Purchaser of any demands received by the Company for dissenter's rights of any Shares, and the Purchaser shall have the right to participate in all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, without the prior written consent of the Purchaser, make any payment with respect to, or settle or compromise or offer to settle or compromise, any such demand, or agree to do any of the foregoing. Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 2.2(a) to pay for Shares for which dissenter's rights have been perfected shall be returned to the Purchaser upon demand.

Section 2.4 Top-Up Option. (a) The Company hereby grants to the Purchaser an irrevocable option (the "Top-Up Option") to purchase that number of Shares (the "Top-Up Option Shares") equal to the lowest number of Shares that, when added to the number of Shares owned by the Purchaser at the time of such exercise, shall constitute one (1) Share more than ninety percent (90%) of the Shares then outstanding, on a fully diluted basis, at a price per Top-Up Option Share equal to the Offer Consideration, payable (at the Purchaser's option) in shares of Purchaser Common Stock or cash in an amount equal to the value of the Offer Consideration; provided, however, that the Top-Up Option shall not be exercisable, unless immediately after such exercise the Purchaser would own more than ninety percent (90%) of the Shares then outstanding, on a fully diluted basis; provided, further, that the Top-Up Option shall not be exercisable to the extent doing so would cause the merger not to qualify as a reorganization within the meaning of Section 368(a) of the Code.

(b) The Purchaser may exercise the Top-Up Option, in whole but not in part, at any one time after the occurrence of a Top-Up Exercise Event and prior to the Effective Time. For purposes of this Agreement, a "Top-Up Exercise Event" shall occur if the Purchaser shall have accepted at least a majority of the Shares then outstanding, on a fully diluted basis, for exchange pursuant to the Offer (including, without limitation, any subsequent offering that the Purchaser may elect to extend pursuant to the terms and conditions of this Agreement) but constituting, together with the number of Shares owned by the Purchaser at the time of such acceptance, less than ninety percent (90%) of the Shares then outstanding, on a fully diluted basis.

(c) In the event the Purchaser wishes to exercise the Top-Up Option, the Purchaser shall send to the Company a written notice (a "Top-Up Exercise Notice," and the date of which notice is referred to

herein as the "Top-Up Notice Date") specifying the denominations of the certificate or certificates evidencing the Top-Up Option Shares which the Purchaser wishes to receive, and the place, time and date for the closing of the purchase and sale of the Top-Up Option Shares pursuant to the Top-Up Option (the "Top-Up Closing"). The Company shall, promptly after receipt of the Top-Up Exercise Notice, deliver a written notice to the Purchaser confirming the number of Top-Up Option Shares and the aggregate purchase price therefore (the "Top-Up Notice Receipt"). At the Top-Up Closing, the Purchaser shall pay the Company the aggregate price required to be paid for the Top-Up Option Shares, by, at the Purchaser's option, (i) delivery of shares of Purchaser Common Stock or (ii) wire transfer of same day funds to a bank account designated by the Company, and the Company shall cause to be issued to the Purchaser a certificate or certificates representing the Top-Up Option Shares. Upon delivery by the Purchaser to the Company of the Top-Up Exercise Notice, and the payment of the consideration described in the immediately preceding sentence, the Purchaser shall be deemed to be the holder of record of the Top-Up Option Shares issuable upon that exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing those Top-Up Option Shares shall not then be actually delivered to the Purchaser or the Company shall have failed or refused to designate the bank account described in the immediately preceding sentence.

(d) Subject to the terms and conditions hereof, and for so long as this Agreement has not been terminated pursuant to Section 8.1, the Company agrees that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued Shares issuable pursuant to this Agreement so that the Top-Up Option may be exercised without additional authorization of Shares, after giving effect to all other options, warrants, convertible securities and other rights to purchase Shares.

Section 2.5 Treatment of Company Options, SARs and Restricted Stock. (a) At or prior to the Closing, the administrator of the Company Stock Plans shall have resolved under the Company Stock Plans (including under Section 7.2(b) of the Company's 1996 Stock Incentive Plan, Section 6.1.2 of the Company's 2000 Nonqualified Stock Option Plan and Section 6.1.2 of the Company's 2005 Equity Incentive Plan) to determine that each unexercised option to purchase Shares ("Company Options") and stock appreciation right ("SAR"), whether settled in cash or Shares, granted pursuant to such Company Stock Plans shall terminate immediately prior to the Effective Time (collectively, the "Canceled Stock Rights") without the payment of consideration to the holders thereof, and the Company will take all necessary and appropriate action to effect the termination of all Canceled Stock Rights (including, but not limited to, the giving of any notice required under any agreement relating to the Canceled Stock Rights), in each case without any Liability to the Company or the Surviving Corporation.

(b) Upon the consummation of the Offer each Share subject to restrictions and forfeiture ("Restricted Stock") granted pursuant to the Company Stock Plans will, by its terms and with no action of the Company, be fully vested. The vesting of Restricted Stock shall be net of all applicable withholding Taxes.

Section 2.6 Affiliates. Notwithstanding anything to the contrary herein, no shares of Purchaser Common Stock shall be delivered to a Person who may be deemed an "affiliate" of the Company in accordance with Section 6.9 hereof for purposes of Rule 145 under the Securities Act until such Person has executed and delivered to the Purchaser an executed copy of the affiliate letter contemplated in Section 6.9 hereof.

Except as set forth in the Company's disclosure schedule delivered to the Purchaser immediately prior to the execution of this Agreement (the "Company Disclosure Schedule"), the Company represents

and warrants to the Purchaser as set forth below. Each disclosure set forth in the Company Disclosure Schedule is identified by reference to, or has been grouped under a heading referring to, a specific individual section of this Agreement and disclosure made pursuant to any section thereof shall be deemed to be disclosed on each of the other sections of the Company Disclosure Schedule to the extent the applicability of the disclosure to such other section is reasonably apparent from the disclosure made.

Notwithstanding anything to the contrary in this Agreement, except for the representations and warranties that are contained in Sections 3.1 to 3.7, 3.10, 3.12, 3.16, 3.18, 3.19, 3.20, 3.23 and 3.24, none of the Company's representations or warranties that are contained in this Article III shall be deemed to have been made with respect to (and none of such representations or warranties shall be deemed to apply or refer to) any Assets or Liabilities other than (i) the Acquired Assets, (ii) the Retained Liabilities, or (iii) the ADS Business.

Section 3.1 Organization. (a) The Company and each of the Company Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of the State of California and has the requisite corporate power and authority to own, operate and lease the Acquired Assets and to conduct the ADS Business as it is now being conducted. The Company and each of the Company Subsidiaries is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of the ADS Business or the ownership, leasing or operation of the Acquired Assets makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or to be in good standing has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Section 3.1(a) of the Company Disclosure Schedule sets forth a true, complete and correct list of all foreign jurisdictions in which the Company and each Company Subsidiary is so qualified or licensed and in good standing. The Company has delivered to or made available to the Purchaser prior to the execution of this Agreement true, complete and correct copies of any amendments to the Company Governing Documents not filed as of the date hereof with the SEC. The Company is in compliance with the terms of the Company Governing Documents.

(b) Subsidiaries. Other than International Video Conversions, Inc., a California corporation, the Company does not directly or indirectly beneficially own or hold any Equity Interests in any other Person. All outstanding shares of capital stock of, or other Equity Interests in, each Company Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable and are owned directly or indirectly by the Company, free and clear of any Liens.

Section 3.2 Capitalization. (a) The authorized capital stock of the Company consists of (i) 50,000,000 Shares, (ii) 5,000,000 shares of preferred stock, no par value per share (the "Company Preferred Stock"), and (iii) 400,000 shares of Series A junior participating preferred stock, no par value per share (the "Junior Preferred Stock"). As of March 31, 2007, (i) 9,984,746 Shares were issued and outstanding, (ii) no shares of Company Preferred Stock were issued and outstanding, (iii) no shares of Junior Preferred Stock were issued and outstanding, (iv) no Shares were issued and held in the treasury of the Company or otherwise owned by the Company and (v) a total of 3,667,570 Shares were reserved for issuance pursuant to the Company Stock Plans of which 2,182,420 Shares were subject to outstanding Company Options and SARs (collectively, the "Company Stock Rights"). All of the outstanding Shares are, and all Shares which may be issued pursuant to the exercise of outstanding Company Stock Rights will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and non-assessable. Except for issuances of Shares pursuant to the Company Stock Rights described in the first sentence of Section 3.2(b), since March 31, 2007, the Company has not issued any Shares or designated or issued any shares of Company Preferred Stock or Junior Preferred Stock. There are no bonds, debentures, notes or other indebtedness having general voting rights (or convertible into securities having such rights) ("Voting Debt") of the Company or any Company Subsidiary issued and outstanding. Except for the Company Stock Rights described in the

first sentence of Section 3.2(b), there are no (x) options, warrants, calls, pre-emptive rights, subscriptions or other rights, agreements, arrangements or commitments of any kind, including any shareholder rights plan, relating to, or the value of which is determined in reference to, the issued or unissued capital stock of the Company or any Company Subsidiary, obligating the Company or any Company Subsidiary to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock or Voting Debt of, or other equity interest in, the Company or any Company Subsidiary or securities convertible into or exchangeable for such shares or equity interests, or obligating the Company or any Company Subsidiary to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment (collectively, "Equity Interests") or (y) outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any Shares or any capital stock of, or other Equity Interests in, the Company or any Company Subsidiary or any affiliate of the Company or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in the Company, any Company Subsidiary or other Person. No Company Subsidiary owns any Shares.

(b) As of March 31, 2007, the Company had outstanding Company Options to purchase 2,182,420 Shares, no SARs and no shares of Restricted Stock granted under the Company Stock Plans. All of such Company Stock Rights and Restricted Stock have been granted to employees or directors of the Company and the Company Subsidiaries in the ordinary course of business consistent with past practice pursuant to the Company Stock Plans. Since March 31, 2007, the Company has not granted any Company Stock Rights or shares of Restricted Stock. Section 3.2(b) of the Company Disclosure Schedule sets forth a listing of all outstanding Company Stock Rights and shares of Restricted Stock as of March 31, 2007 and (i) the date of their grant and the portion of which that is vested as of March 31, 2007 and if applicable, the exercise price therefor, (ii) the date upon which each Company Stock Right would normally be expected to expire absent termination of employment or other acceleration and (iii) whether or not such Company Option is intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code.

(c) There are no voting trusts or other agreements or understandings to which the Company or any Company Subsidiary is a party with respect to the voting of any Shares or any capital stock of, or other Equity Interest in, the Company, any of the Company Subsidiaries or other Person. Neither the Company nor any Company Subsidiary has granted any preemptive rights, anti-dilutive rights or rights of first refusal or similar rights.

(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution, delivery and performance by the Company of this Agreement, and the consummation by it of the Transactions, have been duly and validly authorized by the Company Board of Directors and no other corporate action on the part of the Company is necessary to authorize the execution and delivery by the Company of this Agreement and the consummation by it of the Transactions, subject, in the case of the Merger, to the approval of this Agreement by the holder(s) of a majority of all of the Shares entitled to be cast, if required by applicable law. This Agreement has been duly executed and delivered by the Company and, assuming due and valid authorization, execution and delivery hereof by the Purchaser, is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors' rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

(b) The Company Rights Agreement has been amended so that, until the valid termination of this Agreement in accordance with Article VIII hereto: (i) the Purchaser and each Purchaser Subsidiary are each exempt from the definition of "Acquiring Person" contained in the Company Rights Agreement, and no "Shares Acquisition Date" or "Distribution Date" or "Triggering Event" (as such terms are defined in the Company Rights Agreement) will occur as a result of the execution of this Agreement or the consummation of the Offer, the Merger and the other Transactions and (ii) the Company Rights Agreement will terminate and the Company Rights will expire immediately prior to the Effective Time. The Company Rights Agreement, as so amended, has not been further amended or modified. The Company has previously provided a true, complete and correct copy of the Company Rights Agreement and all amendments thereto through the date hereof to the Purchaser.

Section 3.4 Board Approvals. The Company Board of Directors, at a meeting duly called and held, has unanimously (i) determined that this Agreement, the Offer, the Merger and other Transactions are advisable, fair to, and in the best interests of the Company and its shareholders; (ii) duly and validly approved and taken all corporate action required to be taken by the Company Board of Directors to authorize the consummation of the Transactions and (iii) recommended that the shareholders of the Company accept the Offer, tender their Shares to the Purchaser pursuant to the Offer and approve and adopt this Agreement and the Merger, if required by applicable law. No further corporate action is required by the Company Board of Directors, pursuant to the CGCL or otherwise, in order for the Company to approve this Agreement or the Transactions, including the Merger, subject to the approval of this Agreement by the holder(s) of a majority of all of the Shares entitled to be cast, if required by applicable law, as contemplated by Section 1.10, which is the only shareholder vote that is required for approval of this Agreement and the consummation of the Merger by the Company. The Company has been advised by its directors and officers that they intend to tender all Shares beneficially owned by them into the Offer.

Section 3.5 Consents and Approvals; No Violations. Except as set forth in Section 3.5 of the Company Disclosure Schedule, none of the execution, delivery or performance of this Agreement by the Company, the acceptance for exchange or acquisition of the Shares pursuant to the Offer, the consummation by the Company of the Transactions or compliance by the Company with any of the provisions of this Agreement will (i) conflict with or result in any breach of any provision of the Company Governing Documents or the organizational documents of any Company Subsidiary, (ii) require any filing by the Company or any Company Subsidiary with, or the permit, authorization, consent or approval of, any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, foreign, federal, state, local or supernational (a "Governmental Entity") or any other Person (except for (A) compliance with any applicable requirements of the Securities Act, the Exchange Act or any state securities or Blue Sky laws, (B) any filings as may be required under the DGCL or the CGCL in connection with the Merger, (C) filings, permits, authorizations, consents and approvals as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), or (D) the filing with the SEC and the Nasdaq of (1) the Schedule 14D-9, (2) an Information Statement, if required by applicable law, (3) the information required by Rule 14f-1 under the Exchange Act, (4) the Form 10 and (5) such reports under Section 13(a) of the Exchange Act as may be required in connection with this Agreement and the Offer and the Merger), (iii) result in a modification, violation or breach of, constitute (with or without notice or lapse of time or both) a default (or give rise to any right, including, but not limited to, any right of termination, vesting, amendment, cancellation or acceleration) under, or require any consent or approval under, any of the terms, conditions or provisions of any note, bond, mortgage, lien, indenture, lease, license, contract, understanding or agreement, whether oral or written, or other instrument or obligation to which the Company or any Company Subsidiary is a party (or by which any of them or any of their respective properties or assets is bound) (the "Company Agreements"), (iv) result in the creation or imposition of any Lien (other than Permitted Liens) on any of the Acquired Assets held by the Company or any of the Company Subsidiaries, or (v) violate any order,

writ, injunction, decree, statute, rule or regulation applicable to the Company, any Company Subsidiary or any of their respective properties or assets; except in the case of clauses (ii), (iii), (iv) or (v) where (w) any failure to obtain such permits, authorizations, consents or approvals, (x) any failure to make such filings, (y) any creation or imposition of such Lien, or (z) any such modifications, violations, rights, breaches or defaults have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or have a material adverse effect on the ability of the Company to consummate the Offer, the Merger or any of the other Transactions.

Section 3.6 Company SEC Documents and Company Financial Statements. (a) The Company and each Company Subsidiary has filed or furnished (as applicable) with the SEC all forms, reports, schedules, statements and other documents required by it to be filed or furnished (as applicable) since and including December 31, 2003 under the Exchange Act or the Securities Act of 1933, as amended (the "Securities Act") (together with all certifications required pursuant to the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act")) (such documents and any other documents filed by the Company and each Company Subsidiary with the SEC, as have been amended since the time of their filing, collectively, the "Company SEC Documents"). As of their respective dates the Company SEC Documents (a) did not (or with respect to Company SEC Documents filed after the date hereof, will not) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading and (b) complied in all material respects with the applicable requirements of the Exchange Act or the Securities Act, as the case may be, the Sarbanes-Oxley Act and the applicable rules and regulations of the SEC thereunder. None of the Company Subsidiaries is currently required to file any forms, reports or other documents with the SEC. All of the audited consolidated financial statements and unaudited consolidated interim financial statements of the Company and its consolidated Subsidiaries included in the Company SEC Documents, as amended or supplemented prior to the date hereof (collectively, the "Company Financial Statements"), (i) have been or will be, as the case may be, prepared from, are in accordance with, and accurately reflect the books and records of the Company and its consolidated Subsidiaries in all material respects, (ii) have been or will be, as the case may be, prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and (iii) fairly present in accordance with GAAP the consolidated financial position and the consolidated results of operations and cash flows of the Company and its consolidated Subsidiaries as of the times and for the periods referred to therein.

(b) Without limiting the generality of Section 3.6(a), (i) Singer Lewak Greenbaum & Goldstein LLP has not resigned or been dismissed as independent public accountant of the Company as a result of or in connection with any disagreement with the Company on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, (ii) no executive officer of the Company has failed in any respect to make, without qualification, the certifications required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act with respect to any form, report or schedule filed by the Company with the SEC since the enactment of the Sarbanes-Oxley Act and (iii) no enforcement action has been initiated or, to the knowledge of the Company, threatened against the Company by the SEC relating to disclosures contained in any Company SEC Document.

(c) The Company represents and warrants that, by reason of the Company's status as a "non-accelerated filer," the Company is not yet required to comply with the provisions of Section 404 of the Sarbanes-Oxley Act and the rules of the SEC thereunder regarding internal control over financial reporting, and, assuming such representation and warranty is true and accurate, the Purchaser acknowledges that the Company shall not be construed as representing or warranting in this Agreement that it is in compliance with Section 404 of the Sarbanes-Oxley Act or the SEC rules thereunder.

Section 3.7 Internal Controls; Sarbanes-Oxley Act. The Company and the Company Subsidiaries have designed and maintained a system of internal controls over financial reporting (as defined in

Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting. The Company (i) has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and is accumulated and communicated to the Company's management as appropriate to allow timely decisions regarding required disclosure and (ii) has disclosed to the Company's auditors and the audit committee of the Company Board of Directors (and made summaries of such disclosures available to the Purchaser) (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect in any material respect the Company's ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls over financial reporting. The Company is in compliance in all material respects with all effective provisions of the Sarbanes-Oxley Act.

Section 3.8 Absence of Certain Changes. (a) Except as contemplated by this Agreement and except as set forth in Section 3.8 of the Company Disclosure Schedule or in the Company SEC Documents filed prior to the date hereof, since December 31, 2006 (the "Balance Sheet Date"), the Company and each Company Subsidiary has conducted the ADS Business in the ordinary course of business consistent with past practice.

(b) From the Balance Sheet Date through the date of this Agreement (i) no fact(s), change(s), event(s), development(s) or circumstance(s) relating to the ADS Business, the Acquired Assets or the Retained Liabilities has occurred, arisen, come into existence or become known, which has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, and (ii) no action has been taken by the Company or any Company Subsidiary that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of Section 5.1.

Section 3.9 No Undisclosed Liabilities. Except (a) as disclosed in the Company SEC Documents filed prior to the date hereof or the Company Financial Statements included therein, (b) for Retained Liabilities incurred since the Balance Sheet Date that would not or would not reasonably be expected to, individually or in the aggregate, be in excess of $25,000, (c) for Retained Liabilities incurred under this Agreement or in connection with the Transactions and (d) for Retained Liabilities incurred under any Company Agreement other than Retained Liabilities due to breaches thereunder, neither the Company nor any Company Subsidiary has incurred any Retained Liabilities required by GAAP to be recognized or disclosed on a consolidated balance sheet of the Company or any Company Subsidiary or in the notes thereto. The Company's accruals for loss contingencies relating to the ADS Business, the Acquired Assets or the Retained Liabilities reflected in its balance sheet included in its most recent report on Form 10-K filed prior to the date hereof are the only accruals which would be required under Statement of Financial Accounting Standards No. 5 with regard to such loss contingencies of the Company existing on the date hereof or hereafter, except for such losses which, in the aggregate, do not exceed $25,000.

Section 3.10 Litigation. Except as set forth on Section 3.10 of the Company Disclosure Schedule, there is no claim, action, suit, arbitration, investigation, alternative dispute resolution action or any other judicial or administrative proceeding, in law or equity, pending against (or, to the Company's knowledge, threatened against or naming as a party thereto), the Company or any Company Subsidiary (or any of their respective rights or properties) or any executive officer or director of the Company or any Company Subsidiary (in their capacity as such). None of the Company or any Company Subsidiary is subject to any outstanding order, writ, injunction, decree or arbitration ruling, judgment, award or other finding where the amount at issue exceeds $25,000 or which would reasonably be expected to prohibit or materially delay the consummation of the Offer, the Merger or any of the other Transactions.

Section 3.11 Employee Benefit Plans; ERISA. (a) With respect to the ADS Employees, Section 3.11(a) of the Company Disclosure Schedule sets forth a true, correct and complete list of all employee benefit plans, programs, agreements or arrangements, including pension, retirement, profit sharing, deferred compensation, stock option, change in control, retention, equity or equity-based compensation, stock purchase, employee stock ownership, severance pay, vacation, bonus or other incentive plans, all medical, vision, dental or other health plans, all life insurance plans, and all other employee benefit plans or fringe benefit plans, including "employee benefit plans" as that term is defined in Section 3(3) of ERISA, in each case, whether oral or written, funded or unfunded, or insured or self-insured, maintained by the Company or any Company Subsidiary, or to which the Company or any Company Subsidiary contributed or is obligated to contribute thereunder, or with respect to which the Company or any Company Subsidiary has or may have any Liability, in each case, for or to any current or former ADS Employees (collectively, the "Company Benefit Plans").

(b) All Company Benefit Plans that are intended to be subject to Code Section 401(a) and any trust agreement that is intended to be tax exempt under Code Section 501(a) have been determined by the Internal Revenue Service to be qualified under Code Section 401(a) and exempt from taxation under Code Section 501(a), and, to the knowledge of the Company, nothing has occurred that would adversely affect the qualification of any such plan. Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect: (i) each Company Benefit Plan and any related trust subject to ERISA complies with and has been administered in substantial compliance with, (A) the provisions of ERISA, (B) all provisions of the Code, (C) all other applicable laws and (D) its terms and the terms of any collective bargaining or collective labor agreements; (ii) neither the Company nor any Company Subsidiary has received any written notice from any Governmental Entity questioning or challenging such compliance; (iii) there are no unresolved claims or disputes under the terms of, or in connection with, the Company Benefit Plans other than claims for benefits which are payable in the ordinary course; (iv) there has not been any "prohibited transaction" (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Company Benefit Plan; (v) no litigation has been commenced with respect to any Company Benefit Plan and, to the knowledge of the Company, no such litigation is threatened (other than routine claims for benefits in the normal course); (vi) there are no governmental audits or investigations pending or, to the knowledge of the Company, threatened in connection with any Company Benefit Plan; and (vii) to the knowledge of the Company, there are not any facts that could give rise to any liability in the event of any governmental audit or investigation.

(c) Except as set forth in Section 3.11(c) of the Company Disclosure Schedule, neither the Company nor any ERISA Affiliate of the Company (as defined below) (i) sponsors or contributes to a Company Benefit Plan that is a "defined benefit plan" (as defined in ERISA Section 3(35)); (ii) has an "obligation to contribute" (as defined in ERISA Section 4212) to a Company Benefit Plan that is a "multiemployer plan" (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)); (iii) has any Liability under Title IV of ERISA with respect to a Company Benefit Plan, either directly or through any ERISA Affiliate; and (iv) sponsors, maintains or contributes to any plan, program or arrangement that provides for post-retirement or other post-employment welfare benefits (other than health care continuation coverage as required by applicable law).

(d) With respect of each of the Company Benefit Plans which is subject to Title IV of ERISA, the present value of accrued benefits under such plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such plan's actuary with respect to such plan, did not, as of its latest valuation date, exceed the then current value of the assets of such plan allocable to such accrued benefits. No Company Benefit Plan nor any trust established under a Company Benefit Plan has incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recent fiscal year of each of the Company Benefit Plans ended prior to the date of this Agreement.

(e) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, all reports, returns and similar documents with respect to all Company Benefit Plans required to be filed by the Company or any Company Subsidiary with any Governmental Entity or distributed to any Company Benefit Plan participant have been duly and timely filed or distributed.

(f) Section 3.11(f) of the Company Disclosure Schedule discloses whether each Company Benefit Plan that is an employee welfare benefit plan is (i) unfunded or self-insured, (ii) funded through a "welfare benefit fund", as such term is defined in Code Section 419(e) or other funding mechanism or (iii) insured. Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, each such employee welfare benefit plan may be amended or terminated (including with respect to benefits provided to retirees and other former employees) without liability (other than benefits then payable under such plan without regard to such amendment or termination) to the Company or any Company Subsidiary at any time. The Company and each Company Subsidiary complies in all material respects with the applicable requirements of Section 4980B(f) of the Code or any similar state statute with respect to each Company Benefit Plan that is a group health plan within the meaning of Section 5000(b)(1) of the Code or such state statute. Neither the Company nor any Company Subsidiary has any material obligations for retiree health or life insurance benefits under any Company Benefit Plan (other than for continuation coverage under Section 4980B(f) of the Code).

(g) Except as may be required by applicable law, or as contemplated under this Agreement, neither the Company nor any Company Subsidiary has any plan or commitment to create any additional Company Benefit Plans, or to amend or modify any existing Company Benefit Plan in such a manner as to materially increase the cost of such Company Benefit Plan to the Company or any Company Subsidiary.

(h) Section 3.11(h) of the Company Disclosure Schedule discloses: (i) each material payment (including any bonus, severance, unemployment compensation, deferred compensation, forgiveness of indebtedness or golden parachute payment) becoming due to any current or former ADS Employee under any Company Benefit Plan; (ii) any increase in any material respect any benefit otherwise payable under any Company Benefit Plan; (iii) any acceleration in any material respect of the time of payment or vesting of any such benefits under any Company Benefit Plan; or (iv) any material obligation to fund any trust or other arrangement with respect to compensation or benefits under a Company Benefit Plan in each case caused or triggered by the execution and delivery of this Agreement or the consummation of the Offer, the Merger or the other Transactions. No payment or benefit which has been, will or may be made by the Company or any Company Subsidiary with respect to any current or former ADS Employee located in the United States in connection with the execution and delivery of this Agreement or the consummation of the Transactions would be characterized as an "excess parachute payment" with the meaning of Section 280G(b)(1) of the Code or fail to be deductible under Section 162(m) of the Code.

(i) True, correct and complete copies have been delivered or made available to the Purchaser by the Company of all Company Benefit Plans (including all amendments and attachments thereto); written summaries of any Company Benefit Plan not in writing, all related trust documents; all insurance contracts or other funding arrangements to the degree applicable; the two (2) most recent annual information filings (Form 5500) and annual financial reports for those Company Benefit Plans (where required); the most recent determination letter from the Internal Revenue Service (where required); and the most recent summary plan descriptions for the Company Benefit Plans and in respect of defined Company Benefit Plans, the most recent actuarial valuation and any subsequent valuation or funding advice (including draft valuations).

(j) None of the Company or any Company Subsidiary has entered into any contract, agreement, arrangement or understanding with any officer or director of the Company or any Company Subsidiary in connection with or in contemplation of the Transactions.

Section 3.12 Taxes. (a) The Company and each Company Subsidiary has timely filed with the appropriate Governmental Entity all income Tax Returns and other material Tax Returns required to be filed by them, and all such Tax Returns are complete and correct in all material respects. All Taxes due and payable by the Company and each Company Subsidiary have been paid, and the Company and each Company Subsidiary have provided adequate reserves in accordance with GAAP in their financial statements for any Taxes that have not been paid. The Company has delivered or made available and will continue to make available to the Purchaser complete and accurate copies of all material Tax Returns relating to any Tax periods of the Company or any Company Subsidiary for which the statute of limitations has not expired.

(b) There are currently no deficiencies for Taxes that have been claimed, proposed or assessed by any Governmental Entity against the Company or any Company Subsidiary for which adequate reserves have not been provided in the Company Financial Statements. There are no pending, or, to the Company's knowledge, any threatened audits or other administrative proceedings or court proceedings with regard to any Taxes or Tax Returns of the Company or any Company Subsidiary. There are no matters under discussion with any Governmental Entity with respect to Taxes.

(c) The Company and each Company Subsidiary has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

(d) To the knowledge of the Company, no payment of any consideration with respect to the Offer or the Merger is subject to withholding under Section 1441 or 1445 of the Code.

(e) None of the Company or any Company Subsidiary has engaged in a transaction similar to any "reportable transaction" or "listed transaction" within the meaning of current, former or temporary Treasury Regulation Section 1.6011-4 for which there is no amount reflected in the financial statements of the Company or relevant Company Subsidiary.

(f) Neither the Company nor, to its knowledge, any of its affiliates has taken or agreed to take any action that would prevent the Offer and the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. The Company is not aware of any agreement, plan or other circumstance that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

Section 3.13 Contracts. Except as filed as exhibits to the Company SEC Documents filed prior to the date hereof, or as disclosed in Section 3.13 of the Company Disclosure Schedule, there is no Company Agreement relating to the ADS Business, the Acquired Assets or the Retained Liabilities (a) any of the benefits to any party of which will be increased, or the vesting of the benefits to any party of which will be accelerated, by the occurrence of any of the Transactions or the value of any of the benefits to any party of which will be calculated on the basis of any of the Transactions (except as disclosed pursuant to Section 3.11) or (b) which, as of the date hereof, (i) is a "material contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (ii) involves aggregate expenditures in excess of $50,000 per annum, (iii) involves aggregate expenditures in excess of $50,000 and was not entered into in the ordinary course of business, (iv) contains "take or pay" provisions applicable to the Company or any Company Subsidiary, (v) contains any non-compete or exclusivity provisions with respect to any line of business or geographic area with respect to the Company, any Company Subsidiary or any of the Company's current or future affiliates, or which restricts the conduct of any line of business by the Company, any of the Company's current or future affiliates, any Company Subsidiary or any geographic area in which the Company, any Company Subsidiary or any of the Company's current or future affiliates may conduct business, in each case in any respect, (vi) would reasonably be expected to prohibit or materially delay the consummation of the Offer, the Merger or any of the other Transactions or (vii) is necessary for the conduct of the ADS Business as currently conducted but constitutes an Excluded Asset. Each contract of the type described in this Section 3.13,

whether or not set forth in Section 3.13 of the Company Disclosure Schedule, is referred to herein as a "Company Material Contract". Each Company Agreement relating to the ADS Business, the Acquired Assets or the Retained Liabilities is valid and binding on the Company and each Company Subsidiary party thereto and, to the Company's knowledge, each other party thereto, as applicable, and in full force and effect, and the Company and each Company Subsidiary has performed all obligations required to be performed by it under each such Company Agreement and, to the Company's knowledge, each other party to each such Company Agreement has performed all obligations required to be performed by it under such Company Agreement, except as would not, or would not be reasonably expected to, individually or in the aggregate, (1) prohibit or materially delay the consummation of the Offer, the Merger or any of the other Transactions, (2) otherwise prevent or materially delay performance by the Company of any of its material obligations under this Agreement or (3) result in a Company Material Adverse Effect. None of the Company or any Company Subsidiary knows of, or has received notice of, any violation or default under (or any condition which with the passage of time or the giving of notice would cause such a violation of or default under) any Company Agreement relating to the ADS Business, the Acquired Assets or the Retained Liabilities except for violations or defaults that would not, or would not be reasonably expected to, individually or in the aggregate, (1) prohibit or materially delay consummation of the Offer, the Merger or any of the other Transactions, (2) otherwise prevent or materially delay performance by the Company of any of its material obligations under this Agreement or (3) result in a Company Material Adverse Effect.

The Company has delivered to the Purchaser or provided to the Purchaser for review, prior to the execution of this Agreement, true, complete and correct copies of all of the Company Material Contracts or other Company Agreements relating to the ADS Business, the Acquired Assets or the Retained Liabilities required to be disclosed in Section 3.13 of the Company Disclosure Schedule, which are not filed as exhibits to the Company SEC Documents and the Company Material Contracts or other Company Agreements required to be disclosed in Section 3.13 of the Company Disclosure Schedule filed as exhibits to the Company SEC Documents are true, complete and correct copies of such contracts.

Section 3.14 Title to Properties; Encumbrances. Except as disclosed in Section 3.14 of the Company Disclosure Schedule, the Company and each of the Company Subsidiaries has good, valid and marketable title to, or, in the case of leased properties and assets, valid leasehold interests in, all of the Acquired Assets except where the failure to have such good, valid and marketable title has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect; in each case subject to no Liens, except for (a) Liens reflected in the consolidated balance sheet of the Company and its consolidated Subsidiaries as of the Balance Sheet Date, (b) Liens consisting of zoning or planning restrictions, easements, permits and other restrictions or limitations on the use of real property or irregularities in title thereto, which do not materially impair the value of such properties or the use of such properties by the Company or any of the Company Subsidiaries in the operation of its respective business, (c) Liens for current Taxes, assessments or governmental charges or levies on property not yet due and payable and Liens for Taxes that are being contested in good faith by appropriate proceedings and for which an adequate reserve has been provided on the appropriate financial statements, (d) purchase money Liens incurred in the ordinary course of business, and (e) materialmen's, mechanics', carriers', workmens', warehousemens', repairmens' and other like Liens arising in the ordinary course of business, or deposits to retain the release of such Liens (the foregoing Liens (a)-(e), "Permitted Liens"). The Company and each of the Company Subsidiaries is in compliance with the terms of all material leases of Acquired Assets to which it is a party. All such material leases are in full force and effect, and the Company and each of the Company Subsidiaries enjoys peaceful and undisturbed possession under all such material leases. The Acquired Assets are sufficient to conduct the ADS Business as currently conducted as a division of the Company. The Company's general ledger attached to the Contribution Agreement is complete and accurate in all material respects as of the date hereof and, after being updated between the date hereof

and the Acceptance Date, will be complete and accurate in all material respects as of the Acceptance Date.

(a) Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company or a Company Subsidiary owns free and clear of all Liens or has the defensible right to use, whether through ownership, licensing or otherwise, all Intellectual Property used in the ADS Business ("Company Intellectual Property") in each case in substantially the same manner as such Company Intellectual Property is used in connection with the ADS Business as conducted on the date hereof. Except as set forth in Section 3.15 of the Company Disclosure Schedule and except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect (a) no written claim of invalidity or conflicting ownership rights has been made or, to the Company's knowledge, threatened by a third party with respect to any Company Intellectual Property and no Company Intellectual Property is the subject of any pending or, to the Company's knowledge, threatened action, suit, claim, investigation, arbitration or other proceeding, (b) no registration for any Company Intellectual Property has been cancelled, abandoned or adjudicated invalid, (c) no Person has given notice to the Company or any Company Subsidiary that the use of any Company Intellectual Property by the Company, any Company Subsidiary or any licensee is infringing or has infringed any third party's domestic or foreign rights in or to any Intellectual Property, or that the Company, any Company Subsidiary or any licensee has misappropriated or improperly used or disclosed any trade secret, confidential or proprietary information or know-how, (d) to the Company's knowledge, none of the Company Intellectual Property has been or is currently being infringed, misappropriated or otherwise violated by any third party, (e) the making, using, selling, manufacturing, marketing, licensing, reproduction, distribution or publishing of any process, machine or product, or any component thereof, does not and will not infringe any domestic or foreign rights of any third party, and does not and will not involve the misappropriation or improper use or disclosure of any trade secrets, confidential or proprietary information or know-how of any third party, (f) there exists no prior act or current conduct or use by the Company, any Company Subsidiary or any third party that would void or invalidate any Company Intellectual Property, (g) the Company and each Company Subsidiary has taken reasonable measures to safeguard the confidentiality and value of all Company Intellectual Property comprising trade secrets or other confidential information, (h) no third party has any joint ownership interest in or to any Company Intellectual Property in which the Company or any Company Subsidiary claims an ownership right and (i) the execution, delivery and performance of this Agreement by the Company and the consummation of the Transactions will not breach, violate or conflict with any instrument or agreement concerning any Company Intellectual Property, will not cause the forfeiture or termination or give rise to a right of forfeiture or termination of any rights in or to the Company Intellectual Property or impair the right of the Purchaser or the Surviving Corporation to make, use, sell, license or dispose of, or to bring any action for the infringement of, any Company Intellectual Property in the same manner as the Company has prior to the date hereof.

(b) To the Company's knowledge, all Software that is reasonably necessary for the conduct of the ADS Business as it is currently conducted was developed by either (i) employees of the Company within the scope of their employment or under obligation to assign all of their rights to the Company pursuant to a written agreement or (ii) agents, consultants, or independent contractors who have assigned or are obligated to assign all of their rights in such Software to the Company pursuant to a written agreement. Without limiting the foregoing, to the Company's knowledge, all former and current employees, agents, consultants and independent contractors of the Company or any of the Company Subsidiaries who were or are members of management or who have contributed or participated in the conception or development of Technology that is reasonably necessary for the conduct of the ADS Business as it is currently conducted, or are or will be contributing to or participating in such

conception or development, have assigned or otherwise transferred, or are obligated to assign or otherwise transfer pursuant to a written agreement, to the Company all of their rights in any such Technology.

(c) To the Company's knowledge, no Software or other material that is distributed as "free software," "open source software," or under a similar licensing or distribution model is incorporated into, combined with, or distributed in conjunction with any product of the ADS Business ("Incorporated Open Source Materials"). To the Company's knowledge, none of the Incorporated Open Source Materials are licensed under terms that create, or purport to create, obligations for the Company or any of the Company Subsidiaries with respect to its or their Technology that is reasonably necessary for the conduct of the ADS Business as it is currently conducted or that grant, or purport to grant, to any third Person, any rights to such Technology or any immunities under such Intellectual Property (including but not limited to using any Incorporated Open Source Materials that require, as a condition of use, modification and/or distribution, that other Software incorporated into, derived from or distributed with such Incorporated Open Source Materials be (i) disclosed or distributed in source code form, (ii) disclosed for the purpose of making derivative works, or (iii) redistributable at no charge).

(a) Neither the Company nor any Company Subsidiary is or has been a party to any collective bargaining or other labor union or foreign work council contract applicable to Persons employed by the Company or any of the Company Subsidiaries. As of the date of this Agreement, there is no labor dispute, strike or work stoppage against the Company or any of the Company Subsidiaries pending or, to the knowledge of the Company, threatened that may interfere with the respective business activities of the Company or any Company Subsidiary. As of the date of this Agreement, to the knowledge of the Company, none of the Company, any Company Subsidiary or any of their respective representatives or employees has committed any material unfair labor practice in connection with the operation of the respective businesses of the Company and the Company Subsidiaries.

(b) With respect to the ADS Business, the Company and the Company Subsidiaries have complied in all material respects with all applicable laws, rules and regulations with respect to employment, employment practices, and terms, conditions and classification of employment (including applicable laws, rules and regulations regarding wage and hour requirements, immigration status, discrimination in employment, employee health and safety and the Workers' Adjustment and Retraining Notification Act).

(a) The Company and the Company Subsidiaries have complied and are in compliance with all laws, rules and regulations, ordinances, judgments, decrees, orders, writs and injunctions of all Government Entities relating to the ADS Business, the Acquired Assets or the Retained Liabilities, except for instances of possible noncompliance that have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, and no notice, charge or assertion has been received by the Company or any Company Subsidiary or, to the Company's knowledge, threatened against the Company or any Company Subsidiary alleging any violation of any of the foregoing, except for instances of possible noncompliance that have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. All licenses, authorizations, consents, permits and approvals relating to the ADS Business, the Acquired Assets or the Retained Liabilities required under such laws, rules and regulations are in full force and effect except where the failure to be in full force and effect has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

(b) The Company and each Company Subsidiary is in possession of all authorizations, licenses, permits, certificates, approvals and clearances of any Governmental Entity necessary for the Company and each Company Subsidiary to own, lease and operate the Acquired Assets or to carry on the ADS Business substantially in the manner described in the Company SEC Documents filed prior to the date hereof and substantially as it is being conducted as of the date hereof (the "Company Permits"), and all such Company Permits are valid, and in full force and effect, except where the failure to have, or the suspension or cancellation of, or failure to be valid or in full force and effect of, any of the Company Permits have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

(c) None of the Company or any of the Company Subsidiaries, any of their respective directors, officers, agents, employees or representatives (in each case acting in their capacities as such) has (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, (ii) directly or indirectly paid or delivered any fee, commission or other sum of money or item of property, however characterized, to any finder, agent or other party acting on behalf of or under the auspices of a governmental official or Governmental Entity, in the United States or any other country, that was illegal under any applicable law, (iii) made any payment to any customer or supplier, or to any officer, director, partner, employee or agent of any such customer or supplier, for the unlawful sharing of fees to any such customer or supplier or any such officer, director, partner, employee or agent for the unlawful rebating of charges or (iv) engaged in any other unlawful reciprocal practice, or made any other unlawful payment or given any other unlawful consideration to any such customer or supplier or any such officer, director, partner, employee or agent, except, in each case, for such payments, violations, conduct or other practices that have not and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 3.18 Information in the Information Statement. The Information Statement, if any (and any amendment thereof or supplement thereto), at the date mailed to the Company's shareholders and at the time of any meeting of Company shareholders to be held in connection with the Merger, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by the Company with respect to statements made therein based on information supplied by the Purchaser for inclusion in the Information Statement. The Information Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. The representations and warranties that are contained in this Section 3.18 are limited to information provided by the Company prior to the Acceptance Date for inclusion in the Information Statement and do not apply to any actions or omissions that occur on or after the Acceptance Date.

Section 3.19 Information in the Registration Statement, the Offer Documents and the Schedule 14D-9. The information supplied by the Company prior to the Acceptance Date expressly for inclusion in the Registration Statement will not (at the time it becomes effective under the Securities Act) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The information supplied by the Company prior to the Acceptance Date expressly for inclusion in the Offer Documents will not (at the respective times such materials, or any amendments or supplements thereto, are filed with the SEC, first published, sent or given to shareholders of the Company, the Offer expires or shares of Purchaser Common Stock are delivered in connection with the Offer, or at the Effective Time, as the case may be) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The Schedule 14D-9 will comply as to form in all material respects with the provisions of Rule 14d-9 of the Exchange Act and any other

applicable federal securities laws and will not (at the time the Schedule 14D-9, or any amendment or supplement thereto, is filed with the SEC, first published, sent or given to shareholders of the Company, the Offer expires or shares of Purchaser Common Stock are delivered in connection with the Offer, or at the Effective Time, as the case may be) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, except that the Company makes no representation or warranty with respect to statements made in the Schedule 14D-9 based on information furnished by the Purchaser for inclusion therein.

Section 3.20 Opinion of Financial Advisor. The Company has received the opinion of Marshall & Stevens, Incorporated (the "Company Financial Advisor"), to the effect that, as of the date hereof, the consideration to be received in the Offer and the Merger by the holders of the Shares is fair to such shareholders from a financial point of view, and such opinion has not been modified or withdrawn. The Company has been authorized by the Company Financial Advisor to permit the inclusion of such opinion in its entirety in the Offer Documents, the Schedule 14D-9 and the Information Statement.

Section 3.21 Insurance. With respect to the ADS Business, the Company maintains insurance coverage with reputable and financially sound insurers, or maintains self-insurance practices, in such amounts and covering such risks as are in accordance with normal industry practice for companies engaged in businesses similar to the ADS Business (taking into account the cost and availability of such insurance). All such policies are in full force and effect, all premiums due and payable have been paid, and no written notice of cancellation or termination has been received with respect to any such policy. Neither the Company nor any Company Subsidiary is in material breach or default, and neither the Company nor any Company Subsidiary has taken any action or failed to take any action which, with notice or the lapse of time, would constitute such a breach or default, or permit termination or material modification of any of the insurance policies. The consummation of the Transactions will not, in and of itself, cause the revocation, cancellation or termination of any such insurance policy.

Section 3.22 Environmental Laws and Regulations. Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect and except as set forth in Section 3.22 of the Company Disclosure Schedule or in the Company SEC Documents filed prior to the date hereof, (i) Hazardous Materials have not been generated, used, treated or stored on, transported to or from or Released or disposed of on, any Company Property, (ii) the Company and each of Company Subsidiary is in compliance with all applicable Environmental Laws and the requirements of any permits issued under such Environmental Laws with respect to any Company Property, (iii) there are no past, pending or, to the Company's knowledge, threatened Environmental Claims against the Company or any of the Company Subsidiaries with respect to the ADS Business or any Company Property and (iv) there are no facts or circumstances, conditions or occurrences regarding the ADS Business or any Company Property that would reasonably be expected to form the basis of an Environmental Claim against the Company or any of the Company Subsidiaries or any Company Property.

(a) No broker, investment banker, financial advisor or other Person, other than the Company Financial Advisor, the fees and expenses of which will be paid by the Company, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the Offer or the Merger based upon arrangements made by or on behalf of Company.

(b) Section 3.23 of the Company Disclosure Schedule sets forth a good faith estimate of all third party fees and expenses agreed to, or expected to be incurred, by the Company or any Company Subsidiary in connection with the negotiation, execution and delivery of this Agreement and the consummation of the Transactions, including the portion of such fees and expenses that the Purchaser is responsible for paying. The fee payable by the Company to the Company Financial Advisor shall not

exceed the amount specified in Section 3.23 of the Company Disclosure Schedule. True, complete and correct copies of all agreements between the Company and the Company Financial Advisor concerning this Agreement and the Transactions, including, without limitation, any fee arrangements, have been previously provided to the Purchaser, except to the extent such agreements have been redacted with respect to pricing incentives thresholds.

Section 3.24 Takeover Statutes. The Company Board of Directors and the Company have taken all action necessary to irrevocably render inapplicable to the Transactions, during the period from the date of this Agreement until the termination of this Agreement, the Company Rights and each and every state takeover statute or similar statute or regulation that applies or purports to apply to the Company with respect to this Agreement, the Offer, the Merger or any other Transaction.

Section 3.25 Customers. The documents and information supplied by the Company to the Purchaser or any of its representatives in connection with this Agreement with respect to relationships and volumes of ADS Business done with its significant customers are accurate in all material respects. During the last twelve (12) months, the Company has not received any notice of termination from any of the ten (10) largest customers of the Company relating to the ADS Business or any information that any such customer intends to materially decrease the amount of ADS Business that it does with the Company.

Section 3.26 Unaudited Income Statement. Attached as Section 3.26 of the Company Disclosure Schedule is a true and complete copy of the unaudited pro forma consolidated statement of income of the Company and its consolidated Subsidiaries for the ADS Business for the twelve-month period ended December 31, 2006 (the "Unaudited Income Statement"). The audited pro forma consolidated statement of income of the Company and its consolidated Subsidiaries for the ADS Business for such twelve-month period (the "Audited Income Statement") accompanying the unqualified opinion and report by Singer Lewak Greenbaum & Goldstein LLP to be delivered to the Purchaser pursuant to Section 6.13 will not differ materially from the Unaudited Income Statement.

Section 4.1 Organization. The Purchaser and each of the Purchaser Subsidiaries is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has the requisite corporate or other power, as the case may be, and authority to own, operate and lease its properties and assets and to conduct its business as it is now being conducted, except, as to the Purchaser Subsidiaries, for those jurisdictions where the failure to be so organized, existing or in good standing has not had and would not reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect. The Purchaser and each of the Purchaser Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or to be in good standing has not had and would not reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect.

Section 4.2 Subsidiaries. Exhibit 21.1 to the Purchaser's Annual Report on Form 10-K for the fiscal year ended December 31, 2006, includes all the Purchaser Subsidiaries that, as of the date of this Agreement, are "Significant Subsidiaries" (as defined in Rule 1-02 of Regulation S-X of the SEC). All outstanding shares of capital stock of, or other Equity Interests in, each such Significant Subsidiary have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by

the Purchaser, free and clear of any Liens. Other than the Purchaser Subsidiaries, the Purchaser does not directly or indirectly beneficially own any Equity Interests in any other Person except for non-controlling investments made in the ordinary course of business in entities which are not individually or in the aggregate material to the Purchaser and the Purchaser Subsidiaries as a whole.

Section 4.3 Capitalization. (a) The authorized capital stock of the Purchaser consists of (i) 200,000,000 shares of Purchaser Common Stock and (ii) 15,000,000 shares of preferred stock, $0.001 par value per share (the "Purchaser Preferred Stock"). As of March 31, 2007, 2007, (i) 15,793,396 and 15,849,766 shares of Purchaser Common Stock were issued and outstanding, respectively, (ii) no shares of Preferred Stock were issued and outstanding, (iii) 56,370 shares of Purchaser Common Stock were issued and held in the treasury of the Purchaser or otherwise owned by the Purchaser, (iv) 1,751,195 shares of Purchaser Common Stock were reserved for issuance pursuant to the Purchaser Stock Plans, of which 553,695 shares of Purchaser Common Stock were subject to outstanding options to purchase shares of Purchaser Common Stock ("Purchaser Options") granted pursuant to the Purchaser Stock Plans and (v) 660,491 shares of Purchaser Common Stock were subject to Warrants (collectively with Purchaser Options, the "Purchaser Stock Rights"). All of the outstanding shares of the Purchaser's capital stock are, and all shares of Purchaser Common Stock which may be issued pursuant to the exercise of outstanding Purchaser Stock Rights will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and non-assessable. Since March 31, 2007, the Purchaser has not issued any shares of Purchaser Common Stock or designated or issued any shares of Purchaser Preferred Stock. There is no Voting Debt of the Purchaser or any Purchaser Subsidiary issued and outstanding. Except for the Purchaser Stock Rights, there are no (x) options, warrants, calls, pre-emptive rights, subscriptions or other rights, agreements, arrangements or commitments of any kind, including any shareholder rights plan, relating to, or the value of which is determined in reference to, the issued or unissued capital stock of the Purchaser or any Purchaser Subsidiary, obligating the Purchaser or any Purchaser Subsidiary to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock or Voting Debt of, or other Equity Interest in, the Purchaser or any Purchaser Subsidiary or (y) outstanding contractual obligations of the Purchaser or any Purchaser Subsidiary to repurchase, redeem or otherwise acquire any shares of Purchaser Common Stock or any capital stock of, or other Equity Interests in, the Purchaser or any Purchaser Subsidiary or any affiliate of the Purchaser or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in the Purchaser or any Purchaser Subsidiary. No Purchaser Subsidiary owns any shares of Purchaser Common Stock.

(b) There are no voting trusts or other agreements or understandings to which the Purchaser or any Purchaser Subsidiary is a party with respect to the voting of shares of Purchaser Common Stock or any capital stock of, or other Equity Interest in, the Purchaser, any of the Purchaser Subsidiaries or other Person.

(c) The shares of Purchaser Common Stock to be issued pursuant to the Offer and the Merger in accordance with Section 1.1 and Section 2.1 (i) will be duly authorized, validly issued, fully paid and non-assessable and not subject to preemptive rights created by statute, the Purchaser's articles of incorporation or bylaws (the "Purchaser Governing Documents") or any agreement to which the Purchaser is a party or is bound and (ii) will, when issued, be registered under the Securities Act and the Exchange Act and registered or exempt from registration under applicable state securities or Blue Sky laws.

Section 4.4 Authorization; Validity of Agreement; Purchaser Action. The Purchaser has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution, delivery and performance by the Purchaser of this Agreement, and the consummation by it of the Transactions, have been duly and validly authorized by all necessary corporate action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and, assuming due and valid authorization,

execution and delivery hereof by the Company, is a valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors' rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

Section 4.5 Consents and Approvals; No Violations. None of the execution, delivery or performance of this Agreement by the Purchaser, the consummation by the Purchaser of the Transactions or compliance by the Purchaser with any of the provisions of this Agreement will (i) conflict with or result in any breach of any provision of the Purchaser Governing Documents or the organizational documents of any Purchaser Subsidiary, (ii) require any filing by the Purchaser or any Purchaser Subsidiary with, or the permit, authorization, consent or approval of, any Governmental Entity or any other Person (except for (A) compliance with any applicable requirements of the Securities Act, the Exchange Act or any state securities or Blue Sky laws, (B) any filings as may be required under the CGCL or the DGCL in connection with the Merger, (C) filings, permits, authorizations, consents and approvals as may be required under the HSR Act or (D) the filing with the SEC of (1) the Schedule TO and (2) the Registration Statement), (iii) result in a modification, violation or breach of, constitute (with or without notice or lapse of time or both) a default (or give rise to any right, including, but not limited to, any right of termination, amendment, cancellation or acceleration) under, or require any consent or approval under, any of the terms, conditions or provisions of any note, bond, mortgage, lien, indenture, lease, license, contract, understanding or agreement, whether oral or written, or other instrument or obligation to which the Purchaser or any Significant Subsidiary is a party or by which any of them or any of their respective properties or assets is bound (the "Purchaser Agreements"), or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Purchaser, any Purchaser Subsidiaries or any of their respective properties or assets; except in the case of clauses (ii) or (iii) where (x) any failure to obtain such permits, authorizations, consent or approvals, (y) any failure to make such filings or (z) any such modifications, violations, rights, breaches or defaults have not had and would not reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect or have a material adverse effect on the ability of the Purchaser to consummate the Offer, the Merger or any of the other Transactions.

Section 4.6 Purchaser SEC Documents and Purchaser Financial Statements. The Purchaser and each of the Purchaser Subsidiaries has filed or furnished (as applicable) with the SEC all forms, reports, schedules, statements and other documents required by it to be filed or furnished (as applicable) since and including December 31, 2003 under the Exchange Act or the Securities Act (together with all certifications required pursuant to the Sarbanes-Oxley Act) (such documents and any other documents filed by the Purchaser and each Purchaser Subsidiary with the SEC, as have been amended since the time of their filing, collectively, the "Purchaser SEC Documents"). As of their respective dates the Purchaser SEC Documents (a) did not (or with respect to Purchaser SEC Documents filed after the date hereof, will not) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading and (b) complied in all material respects with the applicable requirements of the Exchange Act or the Securities Act, as the case may be, the Sarbanes-Oxley Act and the applicable rules and regulations of the SEC thereunder. None of the Purchaser Subsidiaries is currently required to file any forms, reports or other documents with the SEC. All of the audited consolidated financial statements and unaudited consolidated interim financial statements of the Purchaser and its consolidated Subsidiaries included in the Purchaser SEC Documents, as amended or supplemented prior to the date hereof (collectively, the "Purchaser Financial Statements"), (i) have been or will be, as the case may be, prepared from, are in accordance with, and accurately reflect the books and records of the Purchaser and its consolidated

Subsidiaries in all material respects, (ii) have been or will be, as the case may be, prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and (iii) fairly present in all material respects in accordance with GAAP the consolidated financial position and the consolidated results of operations and cash flows of the Purchaser and its consolidated Subsidiaries as of the times and for the periods referred to therein.

Section 4.7 Litigation. There is no claim, action, suit, arbitration, investigation, alternative dispute resolution action or any other judicial or administrative proceeding pending against (or, to the Purchaser's knowledge, threatened against or naming as a party thereto), the Purchaser or any Purchaser Subsidiary (or any of their respective rights or properties) or any executive officer or director of the Purchaser or any Purchaser Subsidiary (in their capacity as such), which has had or would reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect. None of the Purchaser or any Purchaser Subsidiary is subject to any outstanding order, writ, injunction, decree or arbitration ruling, judgment, award or other finding, which has had or would reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect or prohibit or materially delay the consummation of the Offer, the Merger or any of the other Transactions.

Section 4.8 No Undisclosed Liabilities. Except (a) as disclosed in the Purchaser SEC Documents filed prior to the date hereof or the Purchaser Financial Statements included therein, (b) for Liabilities incurred since December 31, 2006 that would not or would not reasonably be expected to, individually or in the aggregate, be in excess of $250,000, (c) for Liabilities incurred under this Agreement or in connection with the Transactions and (d) for Liabilities incurred under any Purchaser Agreement other than Liabilities due to breaches thereunder, neither the Purchaser nor any Purchaser Subsidiary has incurred any Liabilities required by GAAP to be recognized or disclosed on a consolidated balance sheet of the Purchaser or any Purchaser Subsidiary or in the notes thereto.

Section 4.9 Absence of Purchaser Material Adverse Effect. From December 31, 2006 through the date of this Agreement, no fact(s), change(s), event(s), development(s) or circumstance(s) has occurred, arisen, come into existence or become known, which has had or would reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect.

Section 4.10 Information in the Information Statement. None of the information supplied by the Purchaser in writing expressly for inclusion or incorporation by reference in the Information Statement (or any amendment thereof or supplement thereto) will, at the date mailed to the Company's shareholders and at the time of any meeting of Company shareholders to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading.

Section 4.11 Information in the Registration Statement, the Offer Documents and the Schedule 14D-9. The Registration Statement will not (at the time it becomes effective under the Securities Act) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by the Purchaser with respect to statements made therein based on information supplied by the Company for inclusion in the Registration Statement. The Offer Documents will not (at the respective times such materials, or any amendments or supplements thereto, are filed with the SEC, first published, sent or given to shareholders of the Company, the Offer expires or shares of Purchaser Common Stock are delivered in connection with the Offer, or at the Effective Time, as the case may be) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by the Purchaser with respect to statements made therein based on information supplied by the Company for

inclusion in the or the Offer Documents. Each of the Registration Statement and the Offer Documents will comply as to form in all material respects with applicable federal securities laws and the rules and regulations thereunder. The information supplied by the Purchaser expressly for inclusion in the Schedule 14D-9 will not (at the time the Schedule 14D-9, or any amendment or supplement thereto, is filed with the SEC, first published, sent or given to shareholders of the Company, the Offer expires or shares of Purchaser Common Stock are delivered in connection with the Offer, or at the Effective Time, as the case may be) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

Section 4.12 No Vote Required. No vote of the shareholders of the Purchaser is required by law, the Purchaser Governing Documents or otherwise in order for the Purchaser to consummate the Transactions.

Section 4.13 Ownership of Shares. As of the date of this Agreement, the Purchaser owns 1,612,436 Shares.

Section 4.14 Tax Matters. Neither the Purchaser nor, to its knowledge, any of its affiliates has taken or agreed to take any action that would prevent the Offer and the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. The Purchaser is not aware of any agreement, plan or other circumstance that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

Section 4.15 Brokers; Expenses. No broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the Offer or the Merger based upon arrangements made by or on behalf of the Purchaser, other than those Persons the fees and expenses of which will be paid by the Purchaser.

Section 5.1 Interim Operations of the Company. Except as expressly set forth in Section 5.1 of the Company Disclosure Schedule, as expressly required pursuant to this Agreement (including with respect to the consummation of the Contribution and the Spin-Off) or as agreed in writing by the Purchaser, from the date hereof until the earlier of (A) the valid termination of this Agreement in accordance with Article VIII hereto and (B) the time the designees of the Purchaser have been elected to, and shall constitute a majority of, the Company Board of Directors pursuant to Section 1.3 (the "Appointment Date"), the Company shall, and shall cause the Company Subsidiaries to, (i) conduct the ADS Business in the ordinary course consistent with past practice, (ii) use commercially reasonable efforts to preserve intact the ADS Business present business organizations, (iii) use commercially reasonable efforts to maintain satisfactory relations with and keep available the services of their current officers and other key employees who are employed in the ADS Business, (iv) maintain in effect all material foreign, federal, state and local licenses, approvals and authorizations relating to the ADS Business, the Acquired Assets or the Retained Liabilities, including all material licenses and permits that are required for the Company or any Company Subsidiary to carry on the ADS Business and (v) use commercially reasonable efforts to preserve existing relationships with material customers, lenders, suppliers, distributors and others having material ADS Business relationships with the Company and the Company Subsidiaries. Without limiting the generality of the foregoing, except as expressly set forth in Section 5.1 of the Company Disclosure Schedule, as expressly required pursuant to this Agreement (including with respect to the consummation of the Contribution and the Spin-Off) or as agreed in writing by the Purchaser, from the date hereof until the earlier of (x) the valid

termination of this Agreement in accordance with Article VIII hereto and (y) the Appointment Date, the Company shall not, nor shall it permit any Company Subsidiary to, directly or indirectly:

(a) amend the Company Governing Documents or equivalent documents of any Company Subsidiary or amend the terms of any outstanding security of the Company or any Company Subsidiary;

(b) split, combine, subdivide, redeem or reclassify any shares of capital stock of the Company or any Company Subsidiary;

(c) declare, set aside or pay any dividend or other distribution payable in cash, stock or property (or any combination thereof) with respect to its capital stock;

(d) redeem, purchase or otherwise acquire, or offer to redeem, purchase or otherwise acquire, any Equity Interests;

(e) issue, sell, pledge, deliver, transfer, dispose of or encumber any shares of, or securities convertible into or exchangeable for, or grant any Company Stock Rights, Restricted Stock or warrants, calls, commitments or rights of any kind to acquire any shares of, capital stock of any class, or grant to any Person any right the value of which is based on the value of Shares or other capital stock, other than the issuance of Shares reserved for issuance on the date hereof pursuant to the exercise of the Company Stock Rights disclosed in Section 3.2(b) of the Company Disclosure Schedule and outstanding on the date hereof in the ordinary course of business consistent with past practice of the Company Stock Plans (or, if a Triggering Event (as defined in the Company Rights Agreement) by a party other than the Purchaser shall occur, the Company Rights);

(f) acquire (whether pursuant to merger, stock or asset purchase or otherwise) in one transaction or any series of related transactions (i) except in the ordinary course of business consistent with past practice, any assets (not constituting Excluded Assets) having a fair market value in excess of $25,000 or (ii) any Equity Interests in any Person or any business or division of any Person or all or substantially all of the assets of any Person (or business or division thereof);

(g) transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any Acquired Assets, other than (i) sales in the ordinary course of business consistent with past practice and (ii) dispositions of equipment and property no longer used in the operation of the business;

(h) (i) (A) incur or assume any long-term or short-term indebtedness for borrowed money constituting Retained Liabilities, other than under the Bank of America and General Electric Capital Corporation credit facilities referred to in the definition of "Retained Liabilities," or (B) make any material modification or amendment to the terms thereof; (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person to the extent such obligations constitute Retained Liabilities; or (iii) make any loans, advances or capital contributions to, or investments in, any other Person other than (x) loans, advances or capital contributions to, or investments in, wholly owned Company Subsidiaries made in the ordinary course of business consistent with past practice or (y) loans, advances, capital contributions or investments that constitute Assumed Liabilities;

(i) make any change in, or accelerate the vesting of, the compensation or benefits payable or to become payable to, or grant any severance or termination pay to, any of its directors or ADS Employees (other than increases in wages to employees who are not directors, executive officers or affiliates, in the ordinary course of business consistent with past practice or as required by applicable law or the terms of any agreement existing on the date hereof and other than the acceleration of the vesting of Company Options), other than as required by law enter into or amend any employment, consulting, severance, retention, change in control, termination pay, collective bargaining or other agreement or any equity based compensation, pension, deferred compensation, welfare benefits or other employee benefit plan or arrangement, or make any loans to any of its directors or ADS

Employees or make any change in its existing borrowing or lending arrangements for or on behalf of any of such Persons pursuant to a Company Benefit Plan or otherwise;

(j) pay or make any accrual or arrangement for payment of any pension, retirement allowance or other employee benefit pursuant to any existing plan, agreement or arrangement to any director or ADS Employee or make any accrual or arrangement for payment to any directors of the Company or ADS Employees of any amount relating to unused vacation days, except payments and accruals made in the ordinary course of business consistent with past practice; adopt or pay, grant, issue, accelerate or accrue salary or other payments or benefits pursuant to any pension, profit-sharing, bonus, extra compensation, incentive, deferred compensation, Company Stock Plan, stock purchase, group insurance, severance pay, retirement or other employee benefit plan, agreement or arrangement, or any employment or consulting agreement with or for the benefit of any Company director or ADS Employee, whether past or present, or amend in any material respect any such existing plan, agreement or arrangement in a manner inconsistent with the foregoing;

(k) except as publicly announced prior to the date hereof, plan, announce, implement or effect any material reduction in labor force, lay-off, early retirement program, severance program or other program or effort concerning the termination of employment of ADS Employees other than routine employee terminations for cause or following performance reviews;

(l) incur any capital expenditures relating to the ADS Business or any Retained Liabilities in respect thereof in excess of $20,000, individually, or $75,000, in the aggregate during any calendar month;

(m) enter into any agreement or arrangement that limits or otherwise restricts the Company, any Company Subsidiary (other than the PPB Sub) or any of their present or future affiliates or any successor thereto from engaging or competing in any line of business or in any location;

(n) enter into, amend, modify or terminate any material contract, agreement or arrangement (including any Company Material Contract) relating to the ADS Business, the Acquired Assets or the Retained Liabilities, or otherwise waive, release or assign any material rights, claims or benefits thereunder;

(o) settle, pay or discharge any litigation, investigation, arbitration, proceeding or other claim relating to the ADS Business or Retained Liability, other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice, of such claims and Liabilities (i) expressly disclosed or reserved against in the most recent Company Financial Statements included in the Company SEC Documents filed prior to the date hereof in amounts no greater than the amount reserved with respect to the relevant Liability therein or (ii) incurred in the ordinary course of business consistent with past practice since the date of such financial statements;

(p) permit any insurance policy relating to the ADS Business naming it as a beneficiary or a loss payee to be cancelled or terminated without reasonable prior notice to the Purchaser;

(q) change any of the accounting methods used by it materially affecting its assets, liabilities or business, except for such changes required by GAAP or Regulation S-X promulgated under the Exchange Act, as concurred in by its independent registered public accountants;

(r) revalue in any material respect any Acquired Assets, including writing down the value of inventory or writing down notes or accounts receivable, other than in the ordinary course of business consistent with past practice;

(s) make or change any material Tax election, change an annual accounting period, adopt or change any accounting method, file any amended Tax Returns;

(t) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any Company Subsidiary (other than as contemplated by this Agreement);

(u) take any action, including the amendment of the Company Rights Agreement (other than as contemplated by this Agreement) or the adoption of any other shareholder rights plan, which would, directly or indirectly, restrict or impair the ability of the Purchaser to vote, or otherwise to exercise the rights and receive the benefits of a shareholder with respect to, securities of the Company acquired or controlled or to be acquired or controlled by the Purchaser;

(v) take, or agree in writing or otherwise to take, any action that would or is reasonably likely to result in any of the conditions to the Merger set forth in Article VII hereto or any of the conditions or requirements to the Offer set forth in Annex I not being satisfied, or would make any representation or warranty of the Company contained herein inaccurate in any material respect at, or as of any time prior to, the Effective Time, or that would materially impair the ability of the Company to consummate the Merger in accordance with the terms hereof or materially delay such consummation; and

(w) enter into any written agreement, contract, commitment or arrangement to do any of the foregoing, or authorize, recommend, propose, in writing or announce an intention to do any of the foregoing.

Section 5.2 Interim Operations of the Purchaser. Except as expressly required pursuant to this Agreement or as agreed in writing by the Company, from the date hereof until the earlier of (x) the valid termination of this Agreement in accordance with Article VIII hereto and (y) the Effective Time, the Purchaser shall not, nor shall it permit any Purchaser Subsidiary to, directly or indirectly:

(a) amend the Purchaser Governing Documents in a manner adverse to the Company's shareholders as opposed to any other holders of shares of Purchaser Common Stock;

(b) split, combine, subdivide or reclassify any shares of capital stock of the Purchaser without appropriate adjustment being made to the Offer Consideration payable to the holders of Shares in the Offer or the Merger;

(c) declare, set aside or pay any dividend or other distribution payable in cash, stock or property (or any combination thereof) with respect to its capital stock;

(e) issue, sell or grant any shares of capital stock of the Purchaser except at the market price or upon the exercise of options, warrants, convertible securities, calls, commitments or rights of any kind to acquire any shares of such capital stock which were issued with an exercise or conversion price of not less than the market price at the time of issuance; provided, however, that the foregoing shall not prohibit issuances of capital stock, options or rights as part of normal employee compensation in the ordinary course of business; and provided, further, however, that this clause (e) shall not prohibit the issuance of capital stock, options, warrants, convertible securities or other rights in connection with the acquisition of another Person or business or division of another Person if such acquisition is otherwise permitted by clause (f) below;

(f) acquire (whether pursuant to merger, stock or asset purchase or otherwise) in one transaction or any series of related transactions any equity interests in any Person or any business or division of any Person or all or substantially all of the assets of any Person (or business or division thereof), unless such acquisition or the entering into of a definitive agreement relating to the consummation of such acquisition would not, in the reasonable judgment of the Purchaser at the time of such determination, (A) impose any material delay in the obtaining of, or materially increase the risk of not obtaining, any authorizations, consents, orders, declarations or approvals of any Governmental Entity necessary to consummate the Offer or the Merger or the expiration or termination of any applicable waiting period under the HSR Act, or (B) materially increase the risk of any Governmental Entity entering an order prohibiting the consummation of the Offer or the Merger or commencing any action seeking to achieve any of the effects described in clause (i) of paragraph (a) of Annex I; and

(g) enter into any written agreement, contract, commitment or arrangement to do any of the foregoing, or authorize, recommend, propose, in writing or announce an intention to do any of the foregoing.

Section 5.3 No Solicitation; Unsolicited Proposals. (a) Except as permitted by Section 5.3(f), from the date of this Agreement until the Effective Time or, if earlier, the valid termination of this Agreement in accordance with Article VIII, the Company shall not, and shall cause all of the Company Subsidiaries and the Company's and such Company Subsidiaries' respective officers, directors, employees, investment bankers, attorneys, accountants or other agents (collectively, "Representatives") not to, directly or indirectly, (i) solicit or initiate (including by way of furnishing information) any inquiries or the making or submission of any proposal that constitutes an Acquisition Proposal, (ii) solicit any inquiries that may relate to an Acquisition Proposal, (iii) participate or engage in any discussions or negotiations with, or disclose or provide any non-public information or data relating to the Company or any Company Subsidiary or afford access to the properties, books or records or employees of the Company or any Company Subsidiary to, any Person (or group of Persons) other than the Purchaser and its Subsidiaries and Representatives (any such Person and its Representatives (excluding the Company's and the Purchaser's Representatives in their capacity as such), a "Third Party") relating to an Acquisition Proposal, (iv) attempt to make or implement an Acquisition Proposal, (v) accept an Acquisition Proposal, or (vi) enter into any agreement, arrangement, undertaking, contract, commitment or understanding (including any agreement in principle or letter of intent or understanding) with respect to or contemplating an Acquisition Proposal or enter into any agreement, arrangement, undertaking, contract, commitment or understanding requiring the Company to abandon, terminate or fail to consummate the Transactions.

(b) Notwithstanding the restrictions set forth in Section 5.3(a), if, at any time prior to the Acceptance Date, (i) the Company receives an unsolicited bona fide written proposal from a Third Party relating to an Acquisition Proposal and under circumstances in which the Company has complied with its obligations under Section 5.3(a) or the Company receives a bona fide written proposal relating to an Acquisition Proposal from a Third Party with whom the Company has conducted discussions or negotiations prior to the date of this Agreement with respect to an Acquisition Proposal and (ii) the Company Board of Directors concludes in good faith (after consultation with its financial advisor and outside legal counsel) (such consultation with a financial advisor and outside legal counsel, "After Consultation") that (A) such Acquisition Proposal is, or is reasonably likely to result in, a Superior Proposal and (B) the failure to provide nonpublic information or data concerning the Company or participate in negotiations or discussions concerning such Acquisition Proposal would result in a breach by the Company Board of Directors of its fiduciary duties to the Company's shareholders under applicable law, the Company may, subject to its giving the Purchaser at least three (3) business days' prior written notice (which notice shall contain, the identity of such Third Party, a copy of the written Acquisition Proposal, a description of any other material terms pertinent thereto and a statement to the effect that the Company has complied with its covenants under, and made the determination required by, this Section 5.3 and intends to furnish nonpublic information to, or enter into discussions or negotiations with, such Third Party), (x) furnish information with respect to the Company and Company Subsidiaries to such Third Party pursuant to a customary confidentiality agreement containing terms no less restrictive than the terms of the Confidentiality Agreement, dated August 16, 2006, by and between the Purchaser and the Company (the "Confidentiality Agreement"), provided, that a copy of all such information is delivered simultaneously to the Purchaser to the extent it has not previously been so furnished to the Purchaser and (y) participate in discussions or negotiations regarding such Acquisition Proposal.

(c) In addition to any prior notice obligations contained in Section 5.3(b), the Company shall as promptly as practicable (and in any event within twenty-four (24) hours) notify and advise the Purchaser of any Acquisition Proposal or of any request for information or inquiry that relates to or could be expected to lead to an Acquisition Proposal, which notification shall include (i) the applicable written Acquisition Proposal, request or inquiry (or, if oral, the material terms and conditions of such Acquisition Proposal, request or inquiry) and (ii) the identity of the Person (and its principals) making such Acquisition Proposal, request or inquiry. The Company shall inform the Purchaser as promptly as

practicable (and in any event within twenty-four (24) hours) of any changes (whether or not in writing) in the material terms or conditions of any Acquisition Proposal received (including any change in price, structure or form of the consideration). In fulfilling its obligations under this Section 5.3(c), the Company shall provide or make available promptly (and in any event within twenty-four (24) hours) to the Purchaser copies of all written correspondence or other written material, including material in electronic form, between the Company or its Representatives and such Third Party or its Representatives.

(d) Nothing contained in this Agreement shall prohibit the Company from issuing a "stop-look-and-listen communication" pursuant to Rule 14d-9(f) or taking and disclosing to its shareholders a position as required by Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act, subject to compliance with the requirements of Section 5.3(a), (b) and (c) and Section 5.4.

(e) The Company agrees not to release or permit the release of any Person from, or to waive or permit the waiver of any provision of, any confidentiality, "standstill" or similar agreement to which any of the Company or any Company Subsidiary is a party and will promptly provide the Purchaser with a copy of such agreements. The Company will use its best efforts to enforce or cause to be enforced each such agreement at the request of the Purchaser.

(f) Nothing in this Section 5.3 or in any other provision of this Agreement shall prohibit the Company or its Representatives from continuing discussions or negotiations with respect to an Acquisition Proposal with any Third Party if such discussions or negotiations with the Third Party were commenced prior to the date of this Agreement; provided that the Company shall have the burden of demonstrating that such discussions or negotiations commenced prior to the date of this Agreement in the event of a dispute with the Purchaser regarding that issue.

Section 5.4 Board Recommendation. (a) Subject to Section 5.4(b), neither the Company Board of Directors nor any committee thereof shall (i) withdraw, qualify, modify, change or amend in any manner adverse to the Transactions, the Purchaser (including pursuant to the Schedule 14D-9 or any amendment thereto), the approval or recommendation by the Company Board of Directors or any committee thereof of the Offer, this Agreement, the Merger or any other Transaction (the "Company Recommendation") or take any action or make any statement, filing or release inconsistent with the Company Recommendation, (ii) take a neutral position or make no recommendation with respect to an Acquisition Proposal that has been publicly disclosed or otherwise become known to any Person other than the Company, the Purchaser and their respective Representatives ("Public Disclosure") after a reasonable amount of time has elapsed for the Company Board of Directors or any committee thereof to review and make a recommendation with respect thereto (and in no event more than ten (10) business days following such Public Disclosure), (iii) fail to reconfirm the Company Recommendation or its approval of this Agreement, the Offer, the Merger or any other Transaction promptly, and in any event within two (2) business days, following the Purchaser's request to do so, (iv) approve or recommend (or propose publicly to approve or recommend) any Acquisition Proposal, (v) if a tender offer or exchange offer that, if successful, would result in any Person or group becoming a beneficial owner of ten percent (10%) or more of the outstanding Shares is commenced (other than by the Purchaser or Haig S. Bagerdjian), fail to recommend that the Company's shareholders not tender their Shares in such tender or exchange offer, (vi) permit the Company or any Company Subsidiary to enter into any agreement (other than a confidentiality agreement as contemplated by Section 5.3(b)), arrangement or understanding, including any letter of intent or understanding, with respect to any Acquisition Proposal or (vii) resolve or propose to take any action described in clauses (i) through (vi) (each of the foregoing actions described in clauses (i) through (vii) being referred to as a "Company Change in Recommendation").

(b) Notwithstanding the provisions of Section 5.4(a), if, prior to the Acceptance Date, the Company Board of Directors determines in good faith, After Consultation, that the failure to make a

Company Change in Recommendation described in clause (i), (ii), (iii), (iv) or (v) would result in a breach by the Company Board of Directors of its fiduciary duties to the Company's shareholders under applicable law, the Company Board of Directors may make a Company Change in Recommendation described in such clauses of Section 5.4(a) to the extent required to prevent such a breach but, in each case, only (i) after the Company provides to the Purchaser a written notice (a "Notice of Recommendation Change") (x) of its intention to make a Company Change in Recommendation, (y) if such Company Change in Recommendation is in connection with a Superior Proposal, (1) specifying the material terms and conditions of such Superior Proposal, including the amount per Share that the Company's shareholders will receive and including a copy of such Superior Proposal with all accompanying documentation and (2) identifying the Person making such Superior Proposal (it being understood and agreed that any amendment to the financial terms or any other material terms of such Superior Proposal shall require a new Notice of Recommendation Change and a new five (5) business day period) and (z) if such Company Change in Recommendation is not in connection with a Superior Proposal, specifying the reason therefor, (ii) after cooperating in good faith with the Purchaser to make such adjustments in the terms and conditions of this Agreement as would enable the Company to proceed with the Company Recommendation without a Company Change in Recommendation; provided, however, that any such adjustment to the terms and conditions of this Agreement shall be at the sole discretion of the Purchaser at the time, and (iii) if the Purchaser does not, within five (5) business days of the Purchaser's receipt of the Notice of Recommendation Change, make an offer that the Board of Directors of the Company determines in good faith, After Consultation, (x) in the case of a Company Change in Recommendation in connection with a Superior Proposal, to be as favorable to the Company's shareholders as such Superior Proposal or (y) if such Company Change in Recommendation is not in connection with a Superior Proposal, would otherwise enable the Company to proceed with the Company Recommendation. Notwithstanding the foregoing, the Company shall not be entitled to enter into any written agreement (other than a confidentiality agreement as contemplated by Section 5.3(b)), arrangement or understanding with respect to a Superior Proposal unless this Agreement has been or concurrently is validly terminated by its terms pursuant to Section 8.1(f) and the Purchaser has received, by wire transfer of immediately available funds, any amounts due to the Purchaser pursuant to Section 8.2(b).

Section 5.5 Notification. The Company agrees that it will promptly inform its and the Company Subsidiaries' respective Representatives of the obligations undertaken in this Article V.

Section 6.1 Additional Agreements. Subject to the terms and conditions hereof, the Company, the Purchaser and the PPB Sub shall comply in all material respects with all applicable laws and with all applicable rules and regulations of any Governmental Entity to achieve the satisfaction of the Minimum Condition and all other conditions and requirements set forth in Annex I attached hereto and in Article VII, and to consummate and make effective the Merger and the other Transactions. Subject to the limitations set forth in Section 6.4, the Company, the Purchaser and the PPB Sub shall use their commercially reasonable efforts to obtain in a timely manner all necessary waivers, consents and approvals and to effect all necessary registrations and filings, and to use their commercially reasonable efforts to take, or cause to be taken, all other actions and to do, or cause to be done, all other things necessary, proper or advisable to consummate and make effective as promptly as practicable the Transactions; provided, that nothing contained in this Section 6.1 shall require any party to waive or exercise any right hereunder which is waivable or exercisable in the sole discretion of such party. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of the Company, the Purchaser and the

PPB Sub shall use their commercially reasonable efforts to take, or cause to be taken, all such necessary actions.

Section 6.2 Notification of Certain Matters. The Company shall give prompt notice to the Purchaser and the Purchaser shall give prompt notice to the Company, of (a) the occurrence or non-occurrence of any event whose occurrence or non-occurrence, as the case may be, would be likely to cause either (i) any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the Effective Time or (ii) any condition or requirement set forth in Annex I to be unsatisfied at any time from the date hereof to the Acceptance Date (except to the extent it refers to a specific date) and (b) any material failure of the Company or the Purchaser, as the case may be, or any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 6.2 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice or the representations or warranties of the parties or the conditions to the obligations of the parties hereto.

(a) From the date of this Agreement until the Effective Time, the Company shall, and shall cause the Company Subsidiaries to, (i) upon reasonable prior notice, give the Purchaser, its officers and a reasonable number of its employees and its authorized representatives, reasonable access during normal business hours to the Company Agreements relating to the ADS Business and to contracts, books, records, analysis, projections, plans, systems, personnel, commitments, offices and other facilities and properties of the Company and the Company Subsidiaries relating to the ADS Business and their accountants and accountants' work papers relating to the ADS Business and (ii) furnish the Purchaser on a timely basis with such financial and operating data and other information with respect to the ADS Business, the Acquired Assets and the Retained Liabilities as the Purchaser may from time to time reasonably request and use commercially reasonable efforts to make available at all reasonable times during normal business hours to the officers, employees, accountants, counsel and other representatives of the Purchaser the appropriate individuals (including management personnel, attorneys, accountants and other professionals) for discussion of the ADS Business, the Acquired Assets and the Retained Liabilities as the Purchaser may reasonably request.

(b) The terms of the Confidentiality Agreement shall apply to any information provided to the Purchaser pursuant to Section 6.3(a).

(c) No investigation heretofore conducted or conducted pursuant to this Section 6.3 shall affect any representation or warranty made by the parties hereunder.

(a) Each of the Company and the Purchaser shall use its commercially reasonable efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under any applicable law or otherwise to consummate and make effective the Transactions as promptly as practicable, (ii) obtain from any Governmental Entities any consents, licenses, permits, waivers, clearances, approvals, authorizations or orders required to be obtained or made by the Purchaser or the Company or any of their respective Subsidiaries, or avoid any action or proceeding by any Governmental Entity (including, without limitation, those in connection with the HSR Act), in connection with the authorization, execution and delivery of this Agreement and the consummation of the Transactions, (iii) make or cause to be made the applications or filings required to be made by the Purchaser or the Company or any of their respective Subsidiaries under or with respect to the HSR Act or any other applicable laws in connection with the authorization, execution and delivery of this Agreement and the consummation of the Transactions, and pay any fees due in connection with such applications or filings, as promptly as is reasonably practicable, and in any event

within ten (10) business days after the date hereof, (iv) comply at the earliest practicable date with any request under or with respect to the HSR Act and any such other applicable laws for additional information, documents or other materials received by the Purchaser or the Company or any of their respective Subsidiaries from the Federal Trade Commission or the Department of Justice or any other Governmental Entity in connection with such applications or filings or the Transactions and (v) coordinate and cooperate with, and give due consideration to all reasonable additions, deletions or changes suggested by the other party in connection with, making (A) any filing under or with respect to the HSR Act or any such other applicable laws and (B) any filings, conferences or other submissions related to resolving any investigation or other inquiry by any such Governmental Entity. Each of the Company and the Purchaser shall, and shall cause their respective affiliates to, furnish to the other party all information necessary for any such application or other filing to be made in connection with the Transactions. Each of the Company and the Purchaser shall promptly inform the other of any material communication with, and any proposed understanding, undertaking or agreement with, any Governmental Entity regarding any such application or filing. If a party hereto intends to independently participate in any meeting with any Governmental Entity in respect of any such filings, investigation or other inquiry, then such party shall give the other party reasonable prior notice of such meeting and invite Representatives of the other party to participate in the meeting with the Governmental Entity unless prohibited by such Governmental Entity. The parties shall coordinate and cooperate with one another in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party in connection with all meetings, actions and proceedings under or relating to any such application or filing.

(b) The Company and the Purchaser shall give (or shall cause their respective Subsidiaries to give) any notices to third parties, and use, and cause their respective Subsidiaries to use, commercially reasonable efforts to obtain any third party consents, (i) necessary, proper or advisable to consummate the Transactions, (ii) required to be disclosed in the Company Disclosure Schedule or (iii) required to prevent a Company Material Adverse Effect or a Purchaser Material Adverse Effect from occurring prior to or after the consummation of the Offer; provided, however, that the Company and the Purchaser shall coordinate and cooperate in determining whether any actions, notices, consents, approvals or waivers are required to be given or obtained, or should be given or obtained, from parties to any Company Material Contracts in connection with consummation of the Transactions and seeking any such actions, notices, consents, approvals or waivers. In the event that either party shall fail to obtain any third party consent described in the first sentence of this Section 6.4(b), such party shall use commercially reasonable efforts, and shall take any such actions reasonably requested by the other party hereto, to mitigate any adverse effect upon the Company and the Purchaser, their respective Subsidiaries, and their respective businesses resulting, or which could reasonably be expected to result after the consummation of the Offer, from the failure to obtain such consent. Notwithstanding the foregoing, the Purchaser shall not be required to, and neither the Company or any Company Subsidiary will without the written consent of the Purchaser, make any material payment to any third party or agree to any limitation on the conduct of its business, in order to obtain any such consent.

(c) From the date of this Agreement until the consummation of the Offer, each of the Purchaser and the Company shall promptly notify the other in writing of any pending or, to the knowledge of the Purchaser or the Company (as the case may be), threatened action, suit, arbitration or other proceeding or investigation by any Governmental Entity or any other Person (i) challenging or seeking material damages in connection with the Transactions or (ii) seeking to restrain or prohibit the consummation of the Transactions or otherwise limit in any material respect the right of the Purchaser or any affiliate of the Purchaser to own or operate all or any portion of the businesses or assets of the Company or any Company Subsidiary.

(d) If any administrative or judicial action or proceeding is instituted (or threatened to be instituted) by a Governmental Entity challenging the Transactions as violative of any applicable law,

each of the Company and the Purchaser shall, and shall cause their respective affiliates to, cooperate and use their commercially reasonable efforts to contest and resist, except insofar as the Company and the Purchaser may otherwise agree, any such action or proceeding, including any action or proceeding that seeks a temporary restraining order or preliminary injunction that would prohibit, prevent or restrict consummation of the Transactions.

(e) Notwithstanding anything set forth in this Agreement, nothing contained in this Agreement shall give the Purchaser, directly or indirectly, the right to control or direct the operations of the Company prior to the consummation of the Offer. Prior to the consummation of the Offer, the Company shall exercise, consistent with the terms and conditions of this Agreement, control and supervision over its business operations.

(f) If necessary to obtain from any Governmental Entities any consents, licenses, permits, waivers, clearances approvals, authorizations or orders required to be obtained or made by the Purchaser or the Company or any of their respective Subsidiaries, under the HSR Act, each of the Purchaser and the Company shall cooperate with each other, and if necessary to (x) obtain any such regulatory approval or (y) have vacated, lifted, reversed or overturned any decree, judgment, injunction, or other order (whether temporary, preliminary or permanent).

Section 6.5 Publicity. So long as this Agreement is in effect, neither the Company nor the Purchaser, nor any of their respective controlled affiliates, shall issue or cause the publication of any press release or other announcement with respect to the Offer, the Merger or this Agreement without the prior consent of the other party, except as such party reasonably concludes, after receiving the advice of outside counsel, is required by applicable law or by any listing agreement with or the listing rules of a national securities exchange or trading market in which event such party shall endeavor, on a basis reasonable under the circumstances, to provide a meaningful opportunity to the other party to review and comment upon such press release or other announcement and shall give due consideration to all reasonable additions, deletions or changes suggested thereto.

(a) For a period of six (6) years after the Effective Time, the Surviving Corporation shall indemnify, defend and hold harmless the individuals who served as officers or directors of the Company and the Company Subsidiaries at any time at or prior to the Effective Time (the "Covered Persons") as provided by the terms of the Company Governing Documents in effect on the date hereof and under any agreements (the "Indemnification Agreements") as in effect on the date hereof (true, complete and correct copies of which previously have been provided to the Purchaser) against any liabilities and expenses (including counsel fees and disbursements, and amounts of judgments, fines or penalties against, or amounts paid in settlement by, any Covered Person) actually and reasonably incurred by such Covered Persons arising out of or relating to actions or omissions occurring at or prior to the Effective Time to the full extent permissible under applicable provisions of the CGCL and/or the DGCL; provided, that the Surviving Corporation's obligation to pay any amount in settlement shall be conditioned upon such settlement being effected with the written consent of the Surviving Corporation, which consent shall not be unreasonably withheld; provided, further, that in the event any claim or claims are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until disposition of any and all such claims.

(b) The Surviving Corporation shall advance expenses (including reasonable legal fees and expenses) incurred in the defense of any claim, action, suit, proceeding or investigation with respect to any matters subject to indemnification pursuant to Section 6.6(a) pursuant to the procedures set forth, and to the extent provided, in the Company Governing Documents or the Indemnification Agreements as in effect on the date hereof; provided, however, that any Person to whom expenses are advanced undertakes, to the extent required by the Company Governing Documents or the CGCL and/or the

DGCL, to repay such advanced expenses if it is ultimately determined that such Person is not entitled to indemnification.

(c) The Surviving Corporation shall maintain and extend all existing officers' and directors' liability insurance ("D&O Insurance") for a period of not less than six (6) years after the Effective Time with respect to claims arising in whole or in part from facts or events that actually or allegedly occurred on or before the Effective Date, including in connection with the approval of this Agreement and the Transactions; provided, however, that the Surviving Corporation may substitute therefor policies of substantially equivalent coverage and amounts containing terms no less favorable to the Covered Persons than the existing D&O Insurance; provided, further, that if the existing D&O Insurance expires or is terminated or cancelled during such period through no fault of the Surviving Corporation, the Surviving Corporation shall obtain substantially similar D&O Insurance; provided further, however, that in no event shall the Surviving Corporation be required to pay aggregate premiums for insurance under this Section 6.6(c) in excess of 300% of the aggregate premiums paid by the Company in 2006 for such purpose (the "Base Premium"), the true and correct amount of which is set forth in Section 6.6(c) of the Company Disclosure Schedule; and provided, further, that if the Surviving Corporation is unable to obtain the amount of insurance required by this Section 6.6(c) for such aggregate premium, the Surviving Corporation shall obtain as much insurance as can be obtained for aggregate premiums not in excess of 300% of the Base Premium. In lieu of the foregoing, the Purchaser may elect to obtain prepaid policies prior to the Effective Time, which policies provide the Covered Persons with D&O Insurance coverage of equivalent amount and on at least as favorable terms as that provided by the Company's current D&O Insurance for an aggregate period of at least six (6) years with respect to claims arising from facts or events that occurred on or before the Effective Time, including, without limitation, in connection with the approval of this Agreement and the Transactions. If such prepaid policies have been obtained prior to the Effective Time, the Surviving Corporation shall be relieved of all further obligations under this Section 6.6(c); provided, that the Surviving Corporation shall maintain such policies in full force and effect, and continue to honor its obligations thereunder.

(d) In the event the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then and in each such case, proper provision shall be made so that such continuing or surviving corporation or entity or transferee of such assets, as the case may be, shall assume all of the applicable obligations set forth in this Section 6.6.

(e) The Covered Persons (and their successors and heirs) are intended third party beneficiaries of this Section 6.6, and this Section 6.6 shall not be amended in a manner that is adverse to the Covered Persons (including their successors and heirs) or terminated without the consent of the Covered Persons (including their successors and heirs) affected thereby.

Section 6.7 State Takeover Laws. If any "control share acquisition", "fair price" or other anti-takeover laws or regulations enacted under state or federal laws becomes or is deemed to become applicable to the Company, the Offer, the acquisition of Shares pursuant to the Offer, the Merger or any other Transaction, then the Company Board of Directors shall take all action necessary to render such statute inapplicable to the foregoing.

(a) During the period from the date hereof to the Effective Time, the Company shall and shall cause each of the Company Subsidiaries to: (i) timely file all Tax Returns ("Post Signing Returns") required to be filed by the Company or such Company Subsidiary, as the case may be, and all Post Signing Returns shall be prepared in a manner consistent with past practice, (ii) timely pay all Taxes due and payable by the Company and such Company Subsidiary, respectively and (iii) promptly notify the Purchaser of any federal or state income or franchise, or other material Tax, suit, claim, action,

investigation, proceeding or audit pending against or with respect to the Company or any Company Subsidiary in respect of any Tax matters (or any significant developments with respect to ongoing Tax matters), including material Tax liabilities and material refund claims.

(b) This Agreement is intended to constitute a "plan of reorganization" within the meaning of Section 1.368-2(g) of the income tax regulations promulgated under the Code. From and after the date of this Agreement and until the Effective Time, each party hereto shall use its reasonable best efforts to cause the Offer and the Merger to qualify, and will not knowingly take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken which action or failure to act could prevent the Offer and the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. Following the Effective Time, none of the Surviving Corporation or any of its affiliates knowingly shall take any action, cause any action to be taken, fail to take any action or cause any action to fail to be taken, which action or failure to act could cause the Offer and the Merger to fail to qualify as a reorganization within the meaning of Section 368(a) of the Code.

Section 6.9 Company Affiliates. No later than five (5) business days after the date of this Agreement, the Company shall deliver to the Purchaser a list of names and addresses of those persons who were, in the Company's reasonable judgment, on such date, affiliates (within the meaning of Rule 145 of the rules and regulations promulgated under the Securities Act (each such person being, a "Company Affiliate")) of the Company. The Company shall provide the Purchaser with such information and documents as the Purchaser shall reasonably request for purposes of reviewing such list. The Company shall use its reasonable best efforts to deliver or cause to be delivered to the Purchaser, prior to the Initial Expiration Date, an affiliate letter in the form attached hereto as Exhibit B, executed by each of the Company Affiliates identified in the foregoing list and any person who shall, to the knowledge of the Company, have become a Company Affiliate subsequent to the delivery of such list. Notwithstanding anything in this Agreement to the contrary, the Purchaser shall not be required to maintain the effectiveness of the Registration Statement for the purpose of resale by Company Affiliates of shares of Purchaser Common Stock.

Section 6.10 Nasdaq Listing. The Purchaser shall as promptly as practicable prepare and submit to the Nasdaq a listing application covering the shares of Purchaser Common Stock to be issued in the Offer and the Merger, and shall use its reasonable efforts to obtain, prior to the Initial Expiration Date (or as soon thereafter as practicable) and prior to the Effective Time, approval for the listing of Purchaser Common Stock to be issued in the Offer and the Merger, as the case may be, subject to official notice of issuance to the Nasdaq, and the Company shall cooperate with the Purchaser with respect to such listing.

Section 6.11 Company Rights Agreement. The Company covenants and agrees that, prior to the valid termination of this Agreement in accordance with Article VIII hereto, it will not (A) redeem the Company Rights, (B) amend the Company Rights Agreement or (C) take any action which would allow any Person (as defined in the Company Rights Agreement) other than the Purchaser, any Purchaser Subsidiary or Haig Bagerdjian to beneficially own (for purposes of this Section 6.11, as defined in the Company Rights Agreement) twenty percent (20%) or more of the Shares without causing a Distribution Date or a Triggering Event (as each such term is defined in the Company Rights Agreement) to occur.

Section 6.12 Employee Benefit and Section 16 Matters. The Purchaser agrees that, from and after the Effective Time, except as explicitly provided herein, the Purchaser shall assume and honor all employee benefit plans and programs in which any ADS Business employee of the Company or any Company Subsidiary (the "ADS Employees") participates in accordance with their terms as in effect immediately prior to the Effective Time, subject to any amendment or termination thereof that may be permitted by such terms or as otherwise permitted by applicable law; provided that, in lieu of any benefits under Company Benefit Plans, the Purchaser may provide the ADS Employees who continue

to be employed by the Purchaser after the Effective Time with employee benefits under the Purchaser's employee benefit plans and programs pursuant to the terms thereof. The foregoing shall not be construed to prevent the termination of employment of any ADS Employee or the amendment or termination of any particular employee benefit plan or program to the extent permitted by its terms as in effect immediately prior to the Effective Time or as otherwise permitted by applicable law. The provisions of this Section 6.12 are not intended to create rights of third party beneficiaries. Prior to the Effective Time, the Company Board of Directors, or an appropriate committee of non-employee directors thereof, shall adopt a resolution consistent with the interpretive guidance of the SEC so that the receipt by any officer or director of the Company who is a covered person of the Company for purposes of Section 16 of the Exchange Act and the rules and regulations thereunder ("Section 16") of shares of Purchaser Common Stock in exchange for Shares pursuant to this Agreement and the Merger shall be an exempt transaction for purposes of Section 16.

Section 6.13 Contribution and Spin-Off Transactions. On the Acceptance Date prior to the consummation of the Offer, the Company and the PPB Sub shall consummate the Contribution and immediately thereafter consummate the Spin-Off. In connection therewith, the PPB Sub shall, and the Company shall cause the PPB Sub to, (i) as promptly as practicable, and in any event, within forty five (45) business days after the date hereof, prepare and file with the SEC a registration statement on Form 10 promulgated under the Exchange Act to register the capital stock of the PPB Sub (the "Form 10"); (ii) prepare and submit to the Nasdaq a listing application covering the shares of capital stock of the PPB Sub to be distributed to the Company's shareholders in the Spin-Off; (iii) use its reasonable efforts to obtain, prior to the consummation of the Spin-Off, approval for the listing of such shares, subject to official notice of issuance to the Nasdaq; and (iv) take any other action reasonably necessary or desirable to effect the Contribution and the Spin-Off. The PPB Sub and the Company shall provide the Purchaser and its counsel with copies of any written comments, and shall inform them of any oral comments, that the PPB Sub or the Company or their counsel may receive from time to time from the SEC or its staff with respect to the Form 10 promptly after receipt of such comments, and any written or oral responses thereto. The PPB Sub shall, and the Company shall cause the PPB Sub to, use all reasonable efforts to have the Form 10 declared effective under the Exchange Act as promptly as practicable and to keep the Form 10 effective as long as is necessary to consummate the Spin-Off. If, at any time, the PPB Sub or the Company discovers any information relating to it, or any of its affiliates, officers or directors, that should be set forth in an amendment to the Form 10 so that such document would not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, the PPB Sub and the Company shall promptly notify the Purchaser and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and disseminated to the Company's shareholders, in each case as and to the extent required by applicable federal securities laws. The Company shall use its best efforts to deliver the Audited Income Statement to the Purchaser as soon as practicable, and in any event, within thirty (30) business days after the date hereof.

Section 6.14 Delivery of Financial Statements. The Company shall cause to be delivered to the Purchaser unaudited consolidated balance sheets for the ADS Business and related unaudited consolidated statements of income of the Company and its consolidated Subsidiaries for the ADS Business, for each monthly period completed subsequent to the date of this Agreement (the "Monthly Unaudited Financial Information"). The Monthly Unaudited Financial Information shall be so delivered on or before the date that is thirty (30) days following the end of the relevant month.

Section 6.15 Non-Solicitation by the Parties. Prior to the Acceptance Date and, if this Agreement is terminated for any reason, prior to the first anniversary of the termination of this Agreement, each party hereto agrees that it shall not, directly or indirectly, (i) seek to employ or recruit any employee of the other party (or its Subsidiaries), unless such employee (x) resigns voluntarily (without any direct or

indirect solicitation or other inducement from such party or any of its affiliates), (y) is terminated by such other party, or (z) seeks employment on an unsolicited basis, or in response to general advertising conducted in the ordinary course of the business of such party consistent with past practice and which is not specifically directed towards employees of such other party or its Subsidiaries or (ii) induce or attempt to induce any officer or director of the other party to leave the employ of the other party. Other than as contemplated by the Media Distribution Service Agreement, prior to the Acceptance Date, each party hereto agrees that it shall not, directly or indirectly, (a) solicit any customer, supplier, licensee, licensor or other business relation of the other party with respect to the products and/or services of the ADS Business or the equivalent business of the Purchaser, as applicable, or (b) induce or attempt to induce any customer, supplier, licensee, licensor or other business relation of the ADS Business or the equivalent business of the Purchaser, as applicable, to cease doing business with the other party; provided, however, that notwithstanding the foregoing, the Purchaser may respond to unsolicited requests from customers of the ADS Business. Other than as contemplated by the Media Distribution Service Agreement, if this Agreement is terminated for any reason, during the 120-day period following the termination of this Agreement, the Purchaser agrees that it shall not, directly or indirectly, (I) solicit any customer, supplier, licensee, licensor or other business relation of the Company with respect to the products and/or services of the ADS Business or (II) induce or attempt to induce any customer, supplier, licensee, licensor or other business relation of the ADS Business to cease doing business with the Company; provided, however, that notwithstanding the foregoing, the Purchaser may respond to unsolicited requests from customers of the ADS Business.

Section 6.16 Appraisal. As soon as reasonably practicable following the date hereof, the Company shall retain the Company Financial Advisor to determine the PPB Fair Market Value (such determination being referred to as the "Appraisal"). The Company Financial Advisor shall deliver to the Purchaser and the Company a written report setting forth the Appraisal (the "PPB Appraisal Report"). The Company and the PPB Sub will cooperate with the Company Financial Advisor in connection with the conduct of the Appraisal and promptly provide the Company Financial Advisor with such information that the Company Financial Advisor shall reasonably request to complete the Appraisal, and the Company and the PPB Sub will use reasonable efforts to cause (i) the Appraisal to be completed and (ii) the Company Financial Advisor to complete the PPB Appraisal Report as soon as reasonably practicable after the date hereof. The fees and expenses of the Company Financial Advisor shall be paid as set forth in Section 3.23 of the Company Disclosure Schedule. For the purpose hereof, the "PPB Fair Market Value" means the fair market value of the PPB Sub as a going concern assuming that the PPB Sub's liabilities consist solely of the Assumed Liabilities.

Section 6.17 Repayment of Loans. After the Acceptance Date but prior to the Effective Time, the Company shall repay in full all outstanding indebtedness under the Standard Loan Agreement, dated March 29, 2006, between the Company and Bank of America, N.A. and the Promissory Notes between General Electric Capital Corporation and the Company, dated December 30, 2005 and March 30, 2007, respectively; provided that such repayment obligation shall not exceed a total of $7,000,000. Within five (5) business days after such repayment is made, (i) the Company shall pay to the PPB Sub, by a wire transfer of immediately available funds to an account specified in writing by the PPB Sub, an amount in cash equal to the excess, if any, of $7,000,000 over the amount of such indebtedness that was outstanding as of the Acceptance Date, and (ii) the PPB Sub shall pay to the Company, by a wire transfer of immediately available funds to an account specified in writing by the Company, an amount in cash equal to the excess, if any, of the amount of such indebtedness that was outstanding as of the Acceptance Date over $7,000,000.

Section 6.18 Delivery of Purchaser Certificate. The Purchaser shall deliver to the Company, on the Acceptance Date, a certificate executed by the Chief Executive Officer and the Chief Financial Officer of the Purchaser, dated as of the Acceptance Date, to the effect that none of the events set forth in Sections 8.1(b)(ii)(B) and 8.1(b)(v) have occurred and to the effect that each of the

representations and warranties of the Purchaser contained in Article IV remains true and correct in all material respects as of the Acceptance Date except for representations and warranties that relate to a specific date or time (which need only be true and correct in all material respects as of such date or time).

Section 6.19 Ancillary Agreements. On the Acceptance Date, the Purchaser, the Company and the PPB Sub, as applicable, shall enter into the Ancillary Agreements.

Section 6.20 ADS Business Revenue Reconciliation. Within one (1) business day of the date hereof, the Company shall provide the Purchaser with a reconciliation statement by customer of the aggregate amount of ADS Business revenue set forth in Section 9.5 of the Company Disclosure Schedule to the aggregate amount of ADS Business revenue set forth in the Unaudited Income Statement.

Section 7.1 Conditions to Each Party's Obligations to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by the Purchaser and the Company, as the case may be, to the extent permitted by applicable law:

(a) Shareholder Approval. The Merger shall have been approved and this Agreement shall have been adopted by the holder(s) of a majority of all of the Shares entitled to be cast, if required by applicable law;

(b) Statutes; Court Orders. No statute, rule or regulation shall have been enacted or promulgated by any Governmental Entity which prohibits the consummation of the Merger, and there shall be no order or injunction of a court of competent jurisdiction in effect preventing the consummation of the Merger;

(c) Exchange of Shares in Offer. The Purchaser shall have accepted for exchange, and exchanged the Offer Consideration for, all Shares validly tendered and not withdrawn pursuant to the Offer; provided, however, that this condition shall be deemed to have been satisfied with respect to the obligation of the Purchaser to effect the Merger if the Purchaser fails to accept for exchange, or exchange the Offer Consideration for, Shares validly tendered and not withdrawn pursuant to the Offer in violation of the terms of the Offer or of this Agreement;

(d) Nasdaq Listing. The shares of Purchaser Common stock to be issued in the Merger shall have been authorized for listing on the Nasdaq, subject to official notice of issuance to the Nasdaq;

(e) Registration Statement. The Registration Statement shall have been declared effective by the SEC under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC and no proceeding for that purpose shall have been initiated by the SEC and not concluded or withdrawn;

(f) Resignations. Each of the directors of the Company (other than the Purchaser's designees to the Company Board of Directors) shall have delivered his or her resignation to the Company Board of Directors and/or the board of directors of each of the Company Subsidiaries, as applicable, effective as of the Closing; and

(g) Dismissal of Litigation. The legal actions involving the Purchaser and the Company listed in Section 7.1(g) of the Company Disclosure Schedule shall have been dismissed with prejudice pursuant to documents and court filings reasonably satisfactory to the Purchaser, the Company and the PPB Sub.

Section 8.1 Termination. This Agreement may be terminated and the Transactions may be abandoned at any time before the Effective Time, whether before or after shareholder approval thereof:

(a) By mutual written consent of the Purchaser and the Company duly authorized by the Company Board of Directors and the Board of Directors of the Purchaser;

(b) By the Purchaser, in the case of clause (iii) below, by either the Purchaser or the Company (by action of the Company Board of Directors), in the case of clauses (i), (ii) and (iv) below, or by the Company in the case of clause (v) below:

(c) By the Purchaser, at any time prior to the Acceptance Date, if (i) the Company Board of Directors or any committee thereof shall have made a Company Change in Recommendation, (ii) the Company shall have violated or breached any of its obligations under Section 5.3 or Section 5.4 or (iii) any Person other than the Purchaser, Haig S. Bagerdjian and Julia Stefanko shall have become the beneficial owner of more than twenty percent (20%) of the outstanding Shares;

(d) By the Purchaser, if the Offer shall have expired without acceptance for exchange of Shares thereunder, other than as a result of a breach by the Purchaser of its obligations hereunder or thereunder;

(e) By the Purchaser, if the Minimum Condition shall not have been satisfied by the Initial Expiration Date (including any extensions thereof); provided, however, that the Purchaser shall not be entitled to terminate this Agreement pursuant to this Section 8.1(e) if it is in material breach of its representations and warranties, covenants or other obligations under this Agreement and such breach has been the cause of, or resulted in, such failure to satisfy the Minimum Condition; or

(f) By the Company, prior to the Acceptance Date, if the Company enters into an agreement with a Third Party regarding a Superior Proposal and if the Company has complied with its obligations under Section 5.3 and Section 5.4.

Section 8.2 Effect of Termination. (a) In the event of the termination of this Agreement as provided in Section 8.1, written notice thereof shall forthwith be given to the other party specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith become null and void and there shall be no liability on the part of the Purchaser or the Company to the other party, except (i) as set forth in Section 6.3(b), Section 6.5, and Section 6.15, this Section 8.2 and Section 9.3 through Section 9.14 and (ii) nothing herein shall relieve any party from liability for any act of fraud committed by such party in connection with this Agreement or the transactions contemplated by this Agreement.

(b) If the Purchaser shall have terminated this Agreement pursuant to Section 8.1(b)(ii), Section 8.1(c)(i) or Section 8.1(c) (ii), or, if the Company shall have terminated this Agreement pursuant to Section 8.1(f), then the Company shall (i) pay to the Purchaser promptly, but in no event later than five (5) business days after the date of such termination, a termination fee of $2,000,000 (the "Termination Fee") and (ii) pay to the Purchaser promptly (and in no event later than five (5) business days after receipt of statement(s) therefor) an amount equal to the Purchaser's actual documented out-of-pocket expenses in connection with the negotiation, execution and delivery of this Agreement (including due diligence), compliance with the obligations of the Purchaser hereunder and actions taken in furtherance of the consummation of the Transactions, not to exceed $500,000 in the aggregate (the "Purchaser Expenses").

(d) If the Company shall have terminated this Agreement pursuant to Section 8.1(b)(ii), then the Purchaser shall (i) pay to the Company promptly, but in no event later than five (5) business days after the date of such termination, the Termination Fee and (ii) pay to the Company promptly (and in no event later than five (5) business days after receipt of statement(s) therefor) an amount equal to the Company's actual documented out-of-pocket expenses in connection with the negotiation, execution and delivery of this Agreement (including due diligence), compliance with the obligations of the Company hereunder and actions taken in furtherance of the consummation of the Transactions, not to exceed $500,000 in the aggregate (the "Company Expenses").

(e) The Termination Fee, the Purchaser Expenses and the Company Expenses, as applicable, shall be paid by wire transfer of immediately available funds to an account designated in writing by the recipient thereof. For the avoidance of doubt, in no event shall (i) the Company or the Purchaser be obligated to pay the Termination Fee on more than one occasion, (ii) the Company's aggregate liability for the Purchaser Expenses exceed $500,000, or (iii) the Purchaser's aggregate liability for Company Expenses exceed $500,000. Except to the extent required by applicable law, neither the Company or the Purchaser shall withhold any withholding Taxes on any payment under this Section 8.2.

(f) Each party acknowledges that the agreements contained in this Section 8.2 are an integral part of the Transactions and (i) if the Purchaser fails to pay the Termination Fee and/or the Company Expenses and the Company commences a suit which results in a judgment against the Purchaser for the Termination Fee and/or the Company Expenses, the Purchaser shall pay the Company its costs and expenses (including reasonable attorney's fees and disbursements) in connection with such suit or (ii) if

the Company fails to pay the Termination Fee and/or the Purchaser Expenses and the Purchaser commences a suit which results in a judgment against the Company for the Termination Fee and/or the Purchaser Expenses, the Company shall pay the Purchaser its costs and expenses (including reasonable attorney's fees and disbursements) in connection with such suit.

(g) The Purchaser and the Company agree that the Termination Fee is not a penalty but is instead intended to represent liquidated damages in a reasonable amount that will compensate the Purchaser or the Company, as applicable, for the efforts and resources expended and opportunities foregone while negotiating this Agreement, which amount would otherwise be impossible to calculate with precision. Each of the Purchaser and the Company also agrees that the payment of the Termination Fee, the Purchaser Expenses or the Company Expenses, as applicable, shall constitute its exclusive monetary and equitable remedy against the other party and its shareholders, directors, officers and agents for losses, expenses and damages suffered as a result of the failure of the Offer, the Merger and the other transactions contemplated by this Agreement to be consummated, except nothing herein shall relieve any party from liability for any act of fraud committed by such party in connection with this Agreement or the transactions contemplated by this Agreement.

Section 9.1 Amendment and Modification. Subject to applicable law and as otherwise provided in this Agreement, this Agreement may be amended, modified and supplemented in any and all respects, whether before or after any vote of shareholders of the Company contemplated hereby, by written agreement of the parties hereto, by action taken by their respective boards of directors, but, after the Acceptance Date, no amendment shall be made which decreases the Merger Consideration and, after the adoption of this Agreement by the shareholders of the Company, no amendment shall be made which by law requires further approval by such shareholders without obtaining such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

Section 9.2 Non-Survival of Representations and Warranties. None of the representations and warranties in this Agreement, or in any instrument delivered pursuant to this Agreement, shall survive the Effective Time or a termination of this Agreement in accordance with Section 8.1. This Section 9.2 does not limit any covenant of the parties to this Agreement that, by its terms, contemplates performance after the Effective Time.

Section 9.3 Expenses. Except as expressly set forth in Section 8.2(b) and Section 8.2(d) and in the Working Capital Reconciliation Agreement (as defined in Annex I to this Agreement), all fees, costs and expenses incurred in connection with this Agreement, the Offer and the Merger shall be paid by the party incurring such fees, costs and expenses.

Section 9.4 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally (notice deemed given upon receipt), telecopied (notice deemed given upon confirmation of receipt) or sent by a nationally recognized overnight courier service, such as Federal Express (notice deemed given upon receipt of proof of delivery), to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

"Acceptance Date" means the date on which the Purchaser accepts for exchange, and exchanges the Offer Consideration for, all Shares validly tendered and not withdrawn pursuant to the Offer.

"Acquired Assets" means all of the Assets set forth in Schedule C (Acquired Assets) to the Contribution Agreement and any Assets identified after the date hereof but prior to the Acceptance Date by the Company's independent public accountants that should have been set forth in such schedule (including the general ledger attached thereto) but for the fact that such accountants have not completed the audit of the ADS Business as of the date hereof.

"Acquisition Proposal" means any inquiry, offer, proposal or indication of interest, whether or not in writing, as the case may be, by any Third Party that relates to (i) a transaction or series of transactions (including any merger, consolidation, recapitalization, liquidation or other direct or indirect business combination) involving the Company or any Company Subsidiary or the issuance or acquisition of shares of capital stock or other equity securities of (A) the Company representing ten percent (10%) or more (by voting power) of the outstanding capital stock of the Company or (B) any Company Subsidiary, (ii) any tender or exchange offer that if consummated would result in any Person, together with all affiliates thereof, beneficially owning shares of capital stock or other equity securities of the Company representing ten percent (10%) or more (by voting power) of the outstanding capital stock of the Company or (iii) the acquisition, license, purchase or other disposition of the technology, business or assets (including the capital stock or assets of any Company Subsidiary) of the Company outside the ordinary course of business or inconsistent with past practice.

"ADS Business" means the business, activities and operations of the Company representing advertising agencies, advertisers, brands and other media companies which require services for short-form media content (i.e., short-form commercial advertising spots) including, but not limited to, electronic and physical distribution of standard and high definition content to local television stations, television networks, cable systems, cable networks and radio stations; provided that such service was performed in any of the facilities constituting Acquired Assets; provided, further, that the ADS Business shall also include (i) digital video and audio editing (including closed captioning and tagging), (ii) standards conversion, (iii) broadcast encoding, (iv) archival services, (v) international delivery and (vi) DVD authoring, in each case solely to the extent any such service was performed for any of the ADS Customers in any of the facilities constituting Acquired Assets.

"ADS Customers" means the Company's customers during calendar years 2006 and 2005 listed in Section 9.5 of the Company Disclosure Schedule, which sets forth the amount of ADS Business revenue generated by each such customer during each such calendar year.

"Ancillary Agreements" means, collectively, the Noncompetition Agreement, the Post Production Services Agreement, the Working Capital Reconciliation Agreement, the Indemnification and Tax Matters Agreement and the Officer Confidentiality Agreement.

"Assets" means all of the Company's or any Company Subsidiary's right, title and interest in and to all assets, properties and claims of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible and wherever situated), including, without limitation, cash, the Company Agreements (including leases of real property and contracts with employees), the Company Intellectual Property (including Software), Books and Records (as defined in the Contribution Agreement), accounts receivable, equity interests in Subsidiaries and in other Persons, inventories, prepaid expenses, security deposits, real estate, fixtures, equipment, furniture, office supplies, vehicles, Tax refunds, deferred Tax benefits, claims against other Persons, insurance policies, licenses, permits and goodwill.

"Assumed Liabilities" means (i) accounts payable and other accrued expenses not exclusively related to the ADS Business; (ii) accrued wages and benefits of the employees of the Company or any Subsidiary (other than the employees listed in Schedule C (Acquired Assets) to the Contribution Agreement); (iii) any indebtedness in excess of $7,000,000 under (x) that certain Standard Loan Agreement, dated March 29, 2006, between the Company and Bank of America, N.A. and (y) those certain Promissory Notes between General Electric Capital Corporation and the Company, dated December 30, 2005 and March 30, 2007, respectively, (iv) any and all Liabilities of the Company or any Company Subsidiary, whether arising before, on or after the consummation of the Contribution, to the extent resulting from or arising out of (x) the operation or conduct of the Company's business (other than the ADS Business) prior to the consummation of the Contribution on the Acceptance Date or (y) the past, present or future ownership or use of any of the Excluded Assets, (v) all Liabilities for Taxes of the Company and its Subsidiaries for any Pre-Acceptance Date Tax Period (as such term is defined in the Indemnification and Tax Matters Agreement) and (vi) those Liabilities set forth in Schedule B (Assumed Liabilities) to the Contribution Agreement; provided, however, that the Assumed Liabilities shall not include any of the Retained Liabilities.

"beneficial owner" has the meaning ascribed to such term under Rule 13d-3 of the Exchange Act.

"business days" means any day, other than Saturday, Sunday or a United States federal holiday, and shall consist of the time period from 12:01 a.m. through 12:00 midnight New York City time.

"Cash" as of any date means cash and cash equivalents calculated net of issued but uncleared checks and drafts.

"Company Material Adverse Effect" means an effect which is or is reasonably likely to (i) be either in the short term or in the long term materially adverse to the properties, assets, liabilities, condition

(financial or otherwise), business or results of operations of the ADS Business, taken as a whole, (ii) impair the ability of the Company to perform its obligations under this Agreement or (iii) prevent or materially delay the consummation of the Transactions; but shall exclude any effect resulting from (w) the announcement of the Offer or the Merger, (x) any changes in general economic conditions in industries in which the Company operates, which conditions do not affect the Company or the Company Subsidiaries disproportionately relative to other entities operating in such industries, (y) any changes in the United States or global economy as a whole and (z) any generally applicable change in law, rule or regulation or GAAP, which do not disproportionately affect the Company or the Company Subsidiaries.

"Company Property" means any real property and improvements included in the Acquired Assets, now or heretofore, owned, leased or operated by the Company or any of the Company Subsidiaries or their respective predecessors.

"Company Stock Plans" mean collectively the Company's 1996 Stock Incentive Plan, 2000 Nonqualified Stock Option Plan, 2005 Equity Incentive Plan and each other stock option, stock appreciation rights or other equity incentive plan maintained or assumed by the Company or any Company Subsidiary.

"Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, Liens, notices of noncompliance or violation, investigations or proceedings under any Environmental Law or any permit issued under any such Environmental Law, including, without limitation, (A) any and all Environmental Claims by Governmental Entities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law and (B) any and all Environmental Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment.

"Environmental Law" means any federal, state, foreign or local statute, law, rule, regulation, ordinance, code or rule of common law and any judicial or administrative interpretation thereof binding on the Company or its operations or property as of the date hereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, health or Hazardous Materials, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. sec. 9601 et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. sec. 6901 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. sec. 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. sec. 2601 et seq.; the Clean Air Act, 42 U.S.C. sec. 7401 et seq.; Oil Pollution Act of 1990, 33 U.S.C. sec. 2701 et seq.; the Safe Drinking Water Act, 42 U.S.C. sec. 300f et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. sec. 1801 et seq.; the Occupational Safety and Health Act of 1970, 29 U.S.C. sec. 651 et seq., and all similar or analogous foreign, state, regional or local statutes, secondary and subordinate legislation, and directives, and the rules and regulations promulgated thereunder.

"ERISA Affiliate" means any trade or business, whether or not incorporated, that together with the Company would be deemed a single employer for purposes of Section 4001 of ERISA or Sections 414(b), (c), (m), (n) or (o) of the Code.

"Excluded Assets" means all of the Assets not used exclusively in connection with the ADS Business, including, without limitation, those Assets set forth in Schedule A (Excluded Assets) to the Contribution Agreement; provided, however, that the Excluded Assets shall not include any of the Assets set forth in Schedule C (Acquired Assets) to the Contribution Agreement and any Assets identified after the date hereof but prior to the Acceptance Date by the Company's independent public accountants that should have been set forth in such schedule (including the general ledger attached thereto) but for the fact that such accountants have not completed the audit of the ADS Business as of the date hereof.

"Hazardous Materials" means (A) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; (B) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "extremely hazardous substances," "restricted hazardous wastes," "toxic substances," "toxic pollutants," or words of similar import, under any applicable Environmental Law; and (C) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Entity.

"Intellectual Property" means all intellectual property, confidential information and proprietary information, including, but not limited to, (a) patents and patent applications (including all reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof) and patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); (b) trademarks, service marks, trade dress, trade names, Internet domain names, assumed names and corporate names, together with the goodwill of the business associated with and symbolized by such trademarks, service marks, trade dress, trade names and corporate names, in each case whether or not registered; (c) published and unpublished works of authorship, whether copyrightable or not, including all statutory and common law copyrights associated therewith; (d) all registrations, applications, extensions and renewals for any of the items listed in clauses (b) and (c); (e) trade secrets; (f) websites; (g) all computer programs, including operating systems, applications, routines, interfaces and all software implementation of algorithms, models and methodologies, whether in source code or object code form (collectively, "Software"); and (h) lists of customers and potential customers (including any lists of electronic mail addresses of customers and potential customers); formulae; compositions; know how; research and development information; artwork and graphic design; manuscripts; drawings; specifications; lists of suppliers and service providers; pricing and cost information and records; test reports; manuals; financial, business, sales and marketing proposals, research, data and plans; technical and computer data; databases; documentation; promotional materials and related information; and other intellectual property, confidential information and proprietary rights, in each case in any medium, including digital, and in any jurisdiction, together with all causes of action, judgments, settlements, claims and demands of any nature related thereto, including the right to prosecute any past infringements or other violations thereof.

"knowledge" will be deemed to be present when the matter in question was known by, or brought to the attention of, any officer or director of the Purchaser or the Company, as the case may be.

"Liabilities" means all liabilities and obligations, whether accrued, fixed or contingent, mature or inchoate, known or unknown, reflected on a balance sheet or otherwise, including those arising under any Company Agreement, and those arising under any law, rule, regulation, ordinance, judgment, decree, order, writ or injunction of any Government Entity or any award of any arbitrator of any kind.

"Lien" means, with respect to any asset (including any security) any mortgage, pledge, lien, security interest, conditional and installment sale agreement, encumbrance, charge or other claim of third parties of any kind, including, without limitation, any easement, right of way or other encumbrance to title, or any option, right of first refusal or right of first offer, in respect of such asset; provided, however, that Liens shall not include restrictions on transfer of securities imposed by applicable state and federal securities laws.

"on a fully diluted basis" means, as of the relevant date, (i) all Shares and other capital stock of the Company entitled to vote in the election of directors or upon the adoption of this Agreement plus (ii) all Shares and other capital stock of the Company that may be required to be issued or delivered pursuant to Company Stock Rights or other Equity Interests, whether or not then vested or exercisable; provided that shares of Junior Preferred Stock issuable with respect to the Company Rights shall be excluded from such number.

"Person" means a natural person, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Entity or other entity or organization.

"Purchaser Material Adverse Effect" means an effect which is or is reasonably likely to (i) be either in the short term or in the long term materially adverse to the properties, assets, liabilities, condition (financial or otherwise), business or results of operations of the Purchaser and the Purchaser Subsidiaries, taken as a whole, (ii) impair the ability of the Purchaser to perform its obligations under this Agreement or (iii) that prevent or materially delay the consummation of the Transactions; but shall exclude any effect resulting from (w) the announcement of the Offer or the Merger, (x) any changes in general economic conditions in industries in which the Purchaser operates, which conditions do not affect the Purchaser or the Purchaser Subsidiaries disproportionately relative to other entities operating in such industries, (y) any changes in the United States or global economy as a whole and (z) any generally applicable change in law, rule or regulation or GAAP, which do not disproportionately affect the Purchaser or the Purchaser Subsidiaries. Notwithstanding the foregoing, all references to Purchaser Material Adverse Effect contained in this Agreement shall be deemed to refer solely to the properties, assets, liabilities, condition (financial or otherwise), business or results of operations of the Purchaser and the Purchaser Subsidiaries, taken as a whole, without including its ownership of the Company and the Company Subsidiaries after giving effect to the Merger.

"Purchaser Stock Plans" mean collectively the Purchaser's 1992 Stock Option Plan, 1996 Supplement Option Plan, 1995 Director Option Plan and each other stock option, stock appreciation rights or other equity incentive plan maintained or assumed by the Purchaser or any Purchaser Subsidiary.

"Purchaser Subsidiary" means each Person which is a Subsidiary of the Purchaser.

"Release" means disposing, discharging, injecting, spilling, leaking, leaching, dumping, emitting, escaping, emptying or seeping into or upon any land or water or air, or otherwise entering into the environment.

"Retained Liabilities" means (i) accounts payable and other accrued expenses exclusively related to the ADS Business; (ii) accrued wages and benefits of the employees listed in Schedule C (Acquired Assets) to the Contribution Agreement; (iii) no more than $7,000,000 of indebtedness under (x) that certain Standard Loan Agreement, dated March 29, 2006, between the Company and Bank of America, N.A. and (y) those certain Promissory Notes between General Electric Capital Corporation and the Company, dated December 30, 2005 and March 30, 2007, respectively; (iv) any and all Liabilities (other than for Taxes) of the Company or any Company Subsidiary, whether arising before, on or after the Acceptance Date, to the extent not inconsistent with any Liabilities set forth in the definition of "Assumed Liabilities" or identified in Schedule B (Assumed Liabilities) to the Contribution Agreement and resulting exclusively from or arising exclusively out of (x) the operation or conduct of the ADS Business prior to or after the consummation of the Contribution, (y) the operation or conduct of the Company's business after the consummation of the Contribution or (z) the past, present or future ownership or use of any of the Acquired Assets; (v) all Liabilities for Taxes of the Company for any Post-Acceptance Date Tax Period (as such term is defined in the Indemnification and Tax Matters Agreement); and (vi) those Liabilities set forth in Schedule D (Retained Liabilities) to the Contribution Agreement.

"Subsidiary" means with respect to any Person, any corporation, limited liability company, partnership or other organization, whether incorporated or unincorporated, of which (i) at least a majority of the outstanding shares of capital stock of, or other equity interests, having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or

more of its Subsidiaries or (ii) such Person or any other Subsidiary of such Person is a general partner (excluding any such partnership where such Person or any Subsidiary of such Person does not have a majority of the voting interest in such partnership).

"Superior Proposal" means any bona fide written Acquisition Proposal, obtained after the date hereof and not in breach of this Agreement (provided, that for the purposes of this definition, (A) the applicable percentages in clauses (i) and (ii) of the definition of Acquisition Proposal shall be sixty-five percent (65%) as opposed to ten percent (10%) and (B) any acquisition, license, purchase or other disposition referred to in clause (iii) of the definition of Acquisition Proposal shall be for at least sixty-five percent (65%) of the assets (including the capital stock or assets of any Company Subsidiary)), which on its most recently amended or modified terms (if amended or modified) the Company Board of Directors determines in its good faith judgment, After Consultation, taking into account, among other things, all legal, financial, regulatory, timing and other aspects of the proposal and the Third Party making the Acquisition Proposal and any adjustment to the terms and conditions of this Agreement proposed by the Purchaser in response to such Acquisition Proposal (i) would, if consummated, be more favorable to the Company's shareholders than the Offer and the Merger and (ii) is reasonably capable of being completed in a time frame that is customary for similar transactions.

"Tax" or "Taxes" means any and all taxes, fees, levies, duties, tariffs, imposts and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Entity or domestic or foreign taxing authority or the payment or reimbursement for which is due pursuant to contract, including, without limitation, license, registration, transfer and documentation fees.

"Tax Claim" means any audit, investigation, litigation or other proceeding conducted by or with any Governmental Entity with respect to Taxes.

"Tax Return" means any return, report, certificate, form or similar statement or document or other communication required or permitted to be supplied to, or filed with, a Governmental Entity in connection with the determination, assessment or collection of any Tax or the administration of any laws relating to any Tax.

"Technology" means all tangible embodiments or instantiations of any of the following, in any format or medium: (a) Software; (b) works of authorship other than Software; (c) inventions and improvements, whether or not patentable; (d) trade secrets; (e) tools, methods and processes.

"Warrants" means the outstanding warrants to purchase shares of Purchaser Common Stock.

Section 9.6 Terms Defined Elsewhere. The following terms are defined elsewhere in this Agreement, as indicated below:

Section 9.7 Interpretation. The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. All references made in this Agreement to Articles, Sections, subsections, paragraphs and clauses are references to Articles, Sections, subsections, paragraphs and clauses of this Agreement unless otherwise indicated. Whenever the words "include", "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation." As used in this Agreement, the term "affiliates" shall have the meaning set forth in Rule 12b-2 of the Exchange Act.

Section 9.8 Counterparts. This Agreement may be executed manually or by facsimile by the parties hereto, in any number of counterparts, each of which shall be considered one and the same agreement and shall become effective when a counterpart hereof shall have been signed by each party and delivered to the other party.

Section 9.9 Entire Agreement; No Third-Party Beneficiaries. This Agreement (including the Company Disclosure Schedule and the Annex and Exhibits hereto) and the Confidentiality Agreement:

Section 9.10 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Offer or the Merger is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the Offer and the Merger are fulfilled to the extent possible.

(a) Except as required by the mandatory provisions of the CGCL and the DGCL, this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to conflicts of laws principles that would result in the application of the law of any other state.

(b) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any Delaware State court and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby or for recognition or enforcement of any judgment relating thereto, and each of the parties hereby irrevocably and unconditionally (i) agrees not to commence any such action or

proceeding except in such court, (ii) agrees that any claim in respect of any such action or proceeding may be heard and determined in such Delaware State court, (iii) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such action or proceeding in any such Delaware State court and (iv) waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such Delaware State court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.4. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

Section 9.12 Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE OFFER AND MERGER CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.12.

Section 9.13 Assignment. This Agreement shall not be assigned by any party hereto (whether by operation of law or otherwise) without the prior written consent of the other party. Subject to the preceding sentence, but without relieving any party hereto of any obligation hereunder, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.

Section 9.14 Enforcement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties hereto shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at law or in equity.

Section 9.15 Representations of the PPB Sub. The PPB Sub represents and warrants to the Purchaser as set forth below.

(a) The PPB Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of California, and the PPB Sub has all requisite corporate power and corporate authority to execute and deliver this Agreement and to perform its obligations hereunder and consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement.

(b) This Agreement has been duly authorized, executed and delivered by the PPB Sub, and constitutes a valid and binding obligation of the PPB Sub enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law).

(c) The PPB Sub was formed solely for purposes of engaging in the Transactions, and the PPB Sub has not conducted any activities other than in connection with the Agreement and the Contribution Agreement and activities related thereto or in furtherance thereof.

IN WITNESS WHEREOF, the Purchaser, the Company and the PPB Sub have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above.

Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) the Purchaser's rights to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Merger Agreement and any applicable rules and regulations of the SEC, including Rule 14e-l(c) under the Exchange Act), the Purchaser shall not be required to accept for exchange, or exchange the Offer Consideration for, any validly tendered Shares unless (i) the Minimum Condition shall have been satisfied; (ii) the Registration Statement shall have been declared effective by the SEC under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC and no proceeding for that purpose shall have been initiated by the SEC and not concluded or withdrawn; (iii) the shares of Purchaser Common Stock to be issued in exchange for Shares in the Offer shall have been authorized for listing on the Nasdaq, subject to official notice of issuance to the Nasdaq; (iv) the Purchaser shall have received, prior to the consummation of the Spin-Off, a written opinion of Latham & Watkins LLP to the effect that the Offer and the Merger together will constitute a reorganization within the meaning of Section 368(a) of the Code (which opinion may rely on such assumptions and representations as such counsel reasonably deems appropriate); and (v) the Company shall have received, prior to the consummation of the Spin-Off, a written opinion of Troy & Gould PC to the effect that the Offer and the Merger together will constitute a reorganization within the meaning of Section 368(a) of the Code (which opinion may rely on such assumptions and representations as such counsel reasonably deems appropriate). Furthermore, notwithstanding any other provisions of the Offer, subject to the provisions of the Merger Agreement and any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, the Purchaser shall not be required to accept for exchange, or exchange the Offer Consideration for, any validly tendered Shares if any of the following events has occurred:

(a) there shall be threatened in writing or pending any suit, action or proceeding by any Person against the Purchaser, the Company or any Company Subsidiary that, in the reasonable judgment of the Purchaser, is (i) seeking to prohibit or impose any material limitations on the Purchaser's ownership or operation (or that of any of its Subsidiaries or affiliates) of all or a material portion of its businesses or assets, the ADS Business or the Acquired Assets, taken as a whole, or to compel the Purchaser or its Subsidiaries and affiliates to dispose of, license or hold separate any material portion of the ADS Business or the Acquired Assets or the business or assets of the Purchaser and its Subsidiaries, in each case taken as a whole, (ii) challenging the acquisition by the Purchaser of any Shares under the Offer or the Top-Up Option or seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the exercise of the Top-Up Option or seeking to obtain from the Company or the Purchaser any damages in connection with or seeking to make more costly the making or consummation of the Offer or the consummation of the Merger, in each case in amounts that are or would be, individually or in the aggregate, material in relation to the Company and the Company Subsidiaries, taken as a whole, (iii) seeking to impose material limitations on the ability of the Purchaser, or render the Purchaser unable, to accept for exchange, or exchange the Offer Consideration for, some or all of the Shares pursuant to the Offer, the Top-Up Option or the Merger, or seeking to require divestiture thereof or any material portion of the Acquired Assets, (iv) seeking to impose material limitations on the ability of the Purchaser effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares purchased or owned by it on all matters properly presented to the Company's shareholders or (v) which otherwise has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;

(b) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or which is deemed applicable pursuant to an authoritative interpretation by or on behalf of a Government Entity to the Offer or the Merger, or any other action shall be taken by

any Governmental Entity, that is likely, individually or in the aggregate, to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above;

(c) (i) any of the representations and warranties of the Company contained in Section 3.2, Section 3.3, Section 3.4, the final sentence of Section 3.6(a), Section 3.8(b)(i), the first sentence of Section 3.20, Section 3.23(a) and Section 3.24 of the Merger Agreement shall not be true and correct in all material respects as of the date of such determination, except for representations and warranties that relate to a specific date or time (which need only be true and correct in all material respects as of such date or time) or (ii) except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, any of the representations and warranties of the Company contained in the Merger Agreement, other than the representations and warranties referenced in clause (i) of this paragraph (c), shall not be true and correct (without giving effect to any references to materiality or Company Material Adverse Effect contained therein) as of the date of such determination, except for representations and warranties that relate to a specific date or time (which need only be true and correct (without giving effect to any references to materiality or Company Material Adverse Effect contained therein) as of such date or time);

(d) since the date of the Merger Agreement, any fact(s), change(s), event(s), development(s) or circumstance(s) has occurred, arisen or come into existence or become known to the Company or the Purchaser which has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;

(e) the Company shall have breached or failed, in any material respect, to perform or to comply with any agreement or covenant to be performed or complied with by it under the Merger Agreement and such breach or failure shall not have been cured;

(f) the Purchaser shall have failed to receive a certificate executed by the Chief Executive Officer and the Chief Financial Officer of the Company, dated as of the scheduled expiration of the Offer, to the effect that the conditions set forth in paragraphs (c), (d) and (e) of this Annex I have not occurred;

(g) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on the NYSE, the American Stock Exchange or the NASDAQ Stock Market for a period in excess of three (3) hours (excluding suspensions or limitations resulting from physical damage or interference with such exchanges not related to market conditions), (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, (iii) a commencement of war, armed hostilities, any material terrorist activities or other international or national calamity directly or indirectly involving the United States, or (iv) in the case of clause (iii), a material acceleration or worsening thereof;

(h) (i) there shall have been a Company Change in Recommendation; or (ii) any Person (other than the Purchaser, Julia Stefanko or Haig S. Bagerdjian) shall have become the beneficial owner of more than ten percent (10%) of the outstanding Shares;

(i) the Company shall not have secured irrevocable resignations from all but two (2) directors, each of whom is an "independent director" as defined by Rule 4200(a)(15) of the Nasdaq Marketplace Rules and eligible to serve on the Company's audit committee under the Exchange Act and Nasdaq rules, effective upon the consummation of the Offer;

(j) the Contribution and the Spin-Off shall not have been consummated in accordance with the Contribution Agreement;

(k) the PPB Sub shall have failed to execute and deliver to the Purchaser a noncompetition agreement in substantially the form attached to the Merger Agreement as Exhibit C (the "Noncompetition Agreement");

(l) the PPB Sub shall have failed to execute and deliver to the Purchaser a post-production agreement in substantially the form attached to the Merger Agreement as Exhibit D (the "Post Production Services Agreement");

(m) either the Company or the PPB Sub shall have failed to execute and deliver to the Purchaser a working capital reconciliation agreement in substantially the form attached to the Merger Agreement as Exhibit E (the "Working Capital Reconciliation Agreement");

(n) the PPB Sub shall have failed to execute and deliver to the Purchaser an indemnification and tax matters agreement in substantially the form attached to the Merger Agreement as Exhibit F (the "Indemnification and Tax Matters Agreement");

(o) either Haig S. Bagerdjian or Alan R. Steel shall have failed to execute and deliver to the Purchaser a confidentiality agreement in substantially the form attached to the Merger Agreement as Exhibit G (the "Officer Confidentiality Agreement"); or

(p) the Merger Agreement shall have been terminated in accordance with its terms.

The foregoing conditions are for the sole benefit of the Purchaser, may be asserted by the Purchaser regardless of the circumstances giving rise to such condition, and may be waived by the Purchaser in whole or in part at any time and from time to time and in the sole discretion of the Purchaser, subject in each case to the terms of the Merger Agreement. Any reference in this Annex I or in the Merger Agreement to a condition or requirement being satisfied shall be deemed met if such condition or requirement is so waived. The failure by the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and, each such right shall be deemed an ongoing right that may be asserted at any time and from time to time.

The capitalized terms used in this Annex I shall have the meanings set forth in the Merger Agreement to which it is annexed, except that the term "Merger Agreement" shall be deemed to refer to the agreement to which this Annex I is annexed.

This CONTRIBUTION AGREEMENT (this "Agreement"), dated as of April 16, 2007, is by and among Point.360, a California corporation ("Point.360"), New 360, a California corporation and wholly owned subsidiary of Point.360 ("New 360"), and DG FastChannel, Inc., a Delaware corporation ("DG"). All capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Merger Agreement (as defined below).

WHEREAS, Point.360, New 360, and DG are parties to an Agreement and Plan of Merger and Reorganization, dated as of the date hereof (the "Merger Agreement"), pursuant to which, among other things, DG will acquire the ADS Business of Point.360;

WHEREAS, pursuant to the Merger Agreement, DG has agreed to commence an exchange offer (the "Exchange Offer") to acquire all of the issued and outstanding shares (the "Point.360 Shares") of the common stock, no par value per share, of Point.360, in which Exchange Offer each Point.360 Share validly tendered and not properly withdrawn will be exchanged for a certain number of shares of common stock, par value $0.001 per share, of DG (the "DG Common Stock") as provided in the Merger Agreement (such amount of shares of DG Common Stock paid per Point.360 Share pursuant to the Exchange Offer, the "Exchange Offer Consideration");

WHEREAS, the Merger Agreement provides that, following the date (the "Acceptance Date") on which DG accepts for exchange, and exchanges the Exchange Offer Consideration for, all Point.360 Shares validly tendered and not withdrawn pursuant to the Exchange Offer, Point.360 will be merged with and into DG, with DG continuing as the surviving corporation;

WHEREAS, the Merger Agreement contemplates that, on the Acceptance Date immediately prior to the consummation of the Exchange Offer: (i) Point.360 will contribute to New 360 all of the Excluded Assets in exchange for shares of New 360 common stock; (ii) New 360 will assume all of the Assumed Liabilities; and (iii) immediately thereafter, Point.360 will distribute to its shareholders (other than DG), on a pro rata basis, without consideration being paid by such shareholders, all then-outstanding shares of New 360 common stock (the "Spin-Off");

WHEREAS, it is the intention of the parties to this Agreement that the contribution by Point.360 of the Excluded Assets to New 360 and the assumption of the Assumed Liabilities by New 360, together with the Spin-Off, will qualify as a reorganization within the meaning of Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended;

NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Agreement and in the Merger Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

For purposes of this Agreement, the following terms shall have the respective meanings set forth below:

(a) "Acceptance Date" has the meaning set forth in the recitals to this Agreement.

(b) "Agreement" has the meaning set forth in the first paragraph of this Agreement.

(d) "Books and Records" means all books of account, ledgers, general, financial, legal, regulatory, Tax, accounting, personnel and employment records, files, customer lists, sales and promotional

literature, correspondence, manuals, data, papers and other information, whether in hard copy or computer or other format, of Point.360 and/or IVC.

(e) "Cash" as of any specified date means cash and cash equivalents calculated net of issued but uncleared checks and drafts.

(f) "CBS Agreement" has the meaning set forth in Section 2(f) of this Agreement.

(i) "DG Common Stock" has the meaning set forth in the recitals to this Agreement.

(j) "DG Confidentiality Agreement" has the meaning set forth in Section 3(b)(ii).

(k) "Exchange Offer" has the meaning set forth in the recitals to this Agreement.

(l) "Exchange Offer Consideration" has the meaning set forth in the recitals to this Agreement.

(n) "IVC" means International Video Conversions, Inc., a California corporation and wholly owned subsidiary of Point.360.

(p) "Merger Agreement" has the meaning set forth in the recitals to this Agreement.

(q) "Merger Effective Time" means the time at which the merger of Point.360 with and into DG that is contemplated by the Merger Agreement becomes effective in accordance with the Delaware General Corporation Law and the California General Corporation Law.

(r) "New 360" has the meaning set forth in the first paragraph of this Agreement.

(s) "Non-ADS Real Property Leases" means the six (6) leases or sub-leases by Point.360 of real property that are described in Schedule A to this Agreement.

(t) "Point.360" has the meaning set forth in the first paragraph of this Agreement.

(u) "Point.360 Shares" has the meaning set forth in the recitals to this Agreement.

(w) "Tax Attribute" means a net operating loss, net capital loss, investment credit, foreign Tax credit, excess charitable contribution, general business credit or any other item of loss, deduction or credit that could reduce a Tax liability.

(x) "Tax Item" means any item of income, gain, loss, deduction, credit, recapture of credit or any other item (including the basis or adjusted basis of property) which increases or decreases Income Taxes paid or payable in any taxable period.

(z) "Tentative Tax Item Allocation Date" has the meaning set forth in Section 7.

(aa) "Transfer" or "Transfers" means the contribution, assignment, conveyance and transfer.

(bb) "Transfer of Excluded Assets" has the meaning set forth in Section 2(a).

(a) Transfer of Excluded Assets by Point.360 to New 360. Effective as of immediately prior to DG's consummation of the Exchange Offer on the Acceptance Date, Point.360 hereby Transfers to

New 360 (the "Transfer of Excluded Assets"), in exchange for the concurrent issuance by New 360 to Point.360 of a number of shares of New 360 common stock equal to the number of Point.360 Shares outstanding on the Acceptance Date (other than Point.360 Shares owned by DG), all of the right, title and interest of Point.360 and/or IVC in and to all of the Excluded Assets. Point.360 shall retain all of its right, title and interest in and to all of the Acquired Assets.

(b) Assumption of Assumed Liabilities by New 360. Effective as of immediately prior to DG's consummation of the Exchange Offer on the Acceptance Date, Point.360 hereby delegates to New 360, and New 360 hereby assumes from Point.360, and agrees to pay, perform, discharge and fulfill, all of the Assumed Liabilities (the "Assumption of Assumed Liabilities" and, together with the Transfer of Excluded Assets, the "Contribution").

(c) Spin-Off of New 360 Common Stock. On the Acceptance Date immediately following the Contribution but immediately prior to DG's consummation of the Exchange Offer, Point.360 shall distribute to its shareholders (other than DG), on a pro rata basis, without consideration being paid by such shareholders, all of the outstanding shares of New 360 common stock. Subject to any limitations imposed by applicable law, Point.360 shall be entitled to select the record date to be used in determining the shareholders entitled to receive the distribution of shares of New 360 common stock in the Spin-Off; provided that such record date must be prior to the Acceptance Date.

(d) Further Assurances. This Agreement is intended by the parties to fully evidence and carry out (without the need for additional documents) the Acceptance Date Transfer of the Excluded Assets by Point.360 to New 360 pursuant to Section 2(a) and the Acceptance Date assumption by New 360 of the Assumed Liabilities pursuant to Section 2(b); provided, however, from and after the Acceptance Date, (i) if requested by New 360, Point.360 shall execute and deliver to New 360 a bill of sale or similar instrument that further evidences the Transfer of the Excluded Assets to New 360 and/or stock powers with respect to the Transfer of the capital stock of IVC to New 360, and (ii) if requested by Point.360 or DG, New 360 shall execute and deliver to Point.360 an assumption agreement or similar instrument that further evidences New 360's assumption of the Assumed Liabilities. Each such instrument must be in form and substance reasonably satisfactory to Point.360, New 360 and DG. Without limiting the generality of the foregoing, from and after the Acceptance Date, each of Point.360, New 360 and DG shall cooperate with the other parties in executing and delivering any other instruments necessary to effectuate the Contribution as may be reasonably requested by any other party from time to time, in each case consistent with the terms of this Agreement.

(e) Conditions to Point.360's Obligations. Point.360 shall not be obligated to Transfer the Excluded Assets to New 360, and New 360 shall not be obligated to assume the Assumed Liabilities, unless and until (i) the Form 10 to be filed by New 360 with the SEC has been declared effective under the Exchange Act, and no stop order with respect thereto is in effect and (ii) DG has given Point.360 at least one (1) business day's prior written notice of the Acceptance Date.

(f) CBS Agreement. Point.360 and CBS Worldwide Distribution, CBS Broadcasting, Inc. are parties to an Agreement, dated January 31, 2006 (the "CBS Agreement"), that constitutes an Excluded Asset. New 360 hereby agrees that: (i) it shall comply with the terms of the CBS Agreement from and after the Acceptance Date; (ii) it shall not use any products or services under the CBS Agreement from and after the Acceptance Date; and (iii) it shall not allow any renewal, extension or further assignment of the CBS Agreement.

(g) No Representations or Warranties. This Agreement shall not be construed as containing, expressly or by implication, any representations or warranties by Point.360, New 360 or DG regarding (i) the nature, condition, amount or value of any Acquired Assets, Assumed Liabilities, Excluded Assets or Retained Liabilities, (ii) any consents, waivers or approvals from Governmental Entities and other third parties that are required to be obtained in connection with the transactions contemplated by this Agreement or (iii) the absence of security interests, liens, claims and other encumbrances with respect

to any Acquired Assets or Excluded Assets. All Acquired Assets and Excluded Assets are being transferred or retained, as applicable, on an "as is," "where is" basis.

SECTION 3. RETENTION BY POINT.360 OF THE ACQUIRED ASSETS AND RETAINED LIABILITIES

(a) For the avoidance of doubt, from and after the Contribution: (i) Point.360 shall retain all of its right, title and interest in and to the Acquired Assets to the same extent that such right, title, and interest existed immediately prior to the Contribution; (ii) Point.360 shall retain the obligation to pay, perform, discharge and fulfill all of the Retained Liabilities; (iii) New 360 shall have no right, title or interest in or to any of the Acquired Assets; and (iv) New 360 shall have no obligation to pay, perform, discharge or fulfill any of the Retained Liabilities.

(c) Point.360 Lockbox. From and after the Acceptance Date, New 360 shall remit to DG on a weekly basis any payments received by New 360 in respect of accounts receivable constituting Acquired Assets (regardless of the manner in which such payments are received by New 360).

(a) Effective upon the consummation of the Contribution, New 360 hereby grants to Point.360 and DG a non-exclusive, non-transferable, royalty-free license for a term of five (5) years after the Acceptance Date to use, solely in connection with the operation of the ADS Business, all Intellectual Property constituting Excluded Assets that is currently used in the conduct of the ADS Business (the "Licensed IP"); provided that New 360 shall not further license the Licensed IP to any third party engaged in a business equivalent to the ADS Business. Neither Point.360 nor New 360 makes any representation or warranty, expressed or implied, regarding any of the Licensed IP. Neither Point.360 nor DG shall have the right to use any of the Licensed IP after the expiration of the five-year term described in this Section 4(a). DG hereby agrees to pay any license fees or other fees owed by New 360 to third party licensors in respect of the Licensed IP arising from DG's use of the Licensed IP; provided that DG shall be responsible to pay only the incremental fees owed by New 360 arising out of DG's use of the Licensed IP in a manner other than the manner in which Point.360 currently uses the Licensed IP to conduct the ADS Business.

(b) After the Acceptance Date, New 360 shall cooperate with DG and Point.360 in permitting such parties to use the Licensed IP to the same extent and in the same manner that Point.360 currently uses the Licensed IP to conduct the ADS Business. DG and Point.360 agree to comply with any reasonable quality control standards and confidentiality requirements regarding the Licensed IP that may be delivered to them from time to time by New 360, and New 360 shall be entitled to terminate the license granted pursuant to Section 4(a) if DG or Point.360 fails in any material respect to comply with the requirements of this sentence and such failure remains uncured after ten (10) business days following DG's receipt of written notice thereof.

(c) From the consummation of the Contribution through and until the Merger Effective Time, New 360 hereby grants to Point.360 an exclusive, non-transferable, royalty-free license to use and display the trademark "Point.360" solely in connection with the conduct of the ADS Business.

(d) From and after the Merger Effective Time, (i) neither Point.360 nor DG shall have any right to use the trademark "Point.360" and (ii) each of Point.360 and DG shall use its best efforts to remove or strike "Point.360" from the Acquired Assets, including stationery, websites, e-mail and other documents as soon as practicable thereafter.

(a) Notwithstanding anything else in this Agreement to the contrary, with respect to each Non-ADS Real Property Lease for which a lessor's consent to the Transfer of such lease to New 360

has not been obtained prior to the Acceptance Date but for which a lessor's consent to a sublease to New 360 has been obtained prior to the Acceptance Date, (i) such Non-ADS Real Property Lease shall be deemed to be an Acquired Asset until such time, if any, as the lessor's consent to the Transfer of such lease to New 360 is obtained and (ii) Point.360 and New 360 shall enter into a sublease regarding such Non-ADS Real Property Lease prior to the Acceptance Date, such sublease to have substantially the same terms as such Non-ADS Real Property Lease.

(b) Notwithstanding anything else in this Agreement to the contrary, with respect to each Non-ADS Real Property Lease for which a lessor has neither consented to the Transfer of such lease to New 360 nor consented to a sublease to New 360 (a "Problematic Lease"), (i) such Problematic Lease shall be deemed to be an Acquired Asset until such time, if any, as the lessor's consent to the Transfer of such lease to New 360 is obtained; (ii) Point.360 shall use its reasonable commercial efforts to cooperate in any reasonable and lawful arrangement to permit New 360 to occupy and use the real property and improvements covered by such Problematic Lease in the ordinary course of business in accordance with past practice, including accepting such reasonable direction as New 360 shall request of Point.360; and (iii) New 360 shall pay and remit to Point.360 at the beginning of each month following the Acceptance Date, an amount equal to the sum of the rent and any other amounts payable to the lessor under such Problematic Lease for such month. Notwithstanding anything else in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign, license, sublicense, lease, sublease, convey or transfer any Problematic Lease or any claim or right or any benefit arising thereunder or resulting therefrom unless and until the lessor's consent to the Transfer of such lease to New 360 or the sublease to New 360 has been obtained.

(c) From and after the Acceptance Date, DG shall cooperate, at New 360's sole cost and expense, with New 360 to obtain the lessor's consent to the Transfer of any Non-ADS Real Property Lease deemed to be an Acquired Asset pursuant to this Section 5 to New 360.

On the Acceptance Date, New 360 and DG will become parties to an Indemnification and Tax Matters Agreement (the "Indemnification Agreement") substantially in the form of Exhibit F to the Merger Agreement. The Indemnification Agreement will set forth certain indemnification and other obligations of New 360 and DG regarding the Assumed Liabilities, the Retained Liabilities, Taxes and other matters.

Any Tax Items or Tax Attributes required or permitted to be allocated to or between Point.360 and New 360 for taxable periods ending on or before the Acceptance Date shall be allocated to or between Point.360 and New 360 in accordance with applicable Tax law. Within sixty (60) days of the Contribution (the "Tentative Tax Item Allocation Date"), the accountants for New 360 shall tentatively determine (or cause to be determined) reasonably and in good faith the amounts and proper allocation of such items and attributes to and between Point.360 and New 360, and the Tax basis of the assets and liabilities transferred to New 360 in connection with the Contribution (the tentative determination and allocation of such Tax Items, Tax Attributes and tax basis information, the "Tentative Tax Item Allocation"). On the Tax Item Tentative Allocation Date, New 360 shall forward to DG the Tentative Tax Item Allocation and information in adequate detail to explain the basis of such calculation. New 360 shall provide DG with access to the Books and Records used by New 360 to determine the Tentative Tax Items Allocation and such other information as DG reasonably requests that may be pertinent to its review of the Tentative Tax Items Allocation. DG may dispute the calculation of the Tentative Tax Item Allocation or any element thereof by notifying New 360 of such disagreement in writing, setting forth in reasonable detail the particulars of such disagreement, within thirty (30) days after its receipt of the Tentative Tax Item Allocation. In the event that DG does not provide such a notice of disagreement within such thirty (30) day period, it shall be deemed to have accepted the

accuracy of such Tentative Tax Item Allocation, which shall be final, binding and conclusive for all purposes hereunder. In the event any such notice of disagreement is timely provided, New 360 and DG shall use their commercially reasonable efforts for a period of thirty (30) days (or such longer period as they may mutually agree) to resolve any disagreements with respect to the calculation of the Tentative Tax Item Allocation. If New 360 and DG are unable to resolve such disagreements then, at any time thereafter, either New 360 or DG may require that an independent accounting firm of recognized national standing mutually selected by New 360 and DG (the "Auditor") shall resolve any remaining disagreements. The Auditor shall determine as promptly as practicable whether the Tentative Tax Item Allocation is correct under applicable Tax law and (only with respect to the remaining disagreements submitted to the Auditor) whether and to what extent (if any) the Tentative Tax Item Allocation requires adjustment. The fees and expenses of the Auditor shall be shared equally by New 360 and DG. The determination of the Auditor shall be final, conclusive and binding on the parties. The Tax Item Allocation as finally determined in accordance with this Section 7 is hereinafter referred as to the "Final Tax Item Allocation". New 360 and Point.360 agree to compute their Tax liabilities for taxable periods after the Acceptance Date consistent with the Final Tax Item Allocation and treat the Tax Attributes and Tax Items as reflected on any federal (or applicable state, local or foreign) income Tax Return filed by the parties as presumptively correct.

(a) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally (notice deemed given upon receipt), telecopied (notice deemed given upon confirmation of receipt), or sent by a nationally recognized overnight courier service, such as Federal Express (notice deemed given upon receipt of proof of delivery), to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

(b) Counterparts; Facsimile. This Agreement may be executed manually or by facsimile by the parties hereto, in any number of counterparts, each of which shall be considered one and the same agreement and shall become effective when a counterpart hereof shall have been signed by each party and delivered to the other party.

(c) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California, without giving effect to conflicts of laws principles that would result in the application of the law of any other state.

(d) Assignment. This Agreement shall not be assigned by any party hereto (whether by operation of law or otherwise) without the prior written consent of the other party. Subject to the preceding sentence, but without relieving any party hereto of any obligation hereunder, this Agreement will be binding upon, inure to the benefit of, and be enforceable by the parties and their respective successors and assigns.

(e) Amendments; Waiver. This Agreement may be amended or modified only by a written instrument signed by each of the parties hereto. Any party may waive any provision of this Agreement or compliance therewith; provided that such waiver is set forth in an instrument in writing signed by the party to be bound thereby. Any waiver or failure to insist on strict compliance with any agreement or obligation contained herein shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

(f) Severability. If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement are not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated by this Agreement are fulfilled to the extent possible..

(g) WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (1) NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (2) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (3) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (4) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8(g).

(h) Termination. This Agreement, and all rights and obligations of the parties hereunder, shall terminate on the date the Merger Agreement is terminated in accordance with its terms; provided, however, that this Section 8 shall survive any termination of this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above.

"Excluded Assets" means all of the Assets not used exclusively in connection with the ADS Business, including, without limitation, those Assets set forth in this Schedule A.

(1) The severance and change-in-control agreements between Point.360 and each of Haig S. Bagerdjian and Alan R. Steel;

(2) All employees of Point.360 and/or IVC, other than employees listed in Schedule C to this Agreement;

(3) The "Point.360" trademark and all other Intellectual Property (including Software and the trademarks "Reel-Safe", "Vision.360", "Spot.360", "Point Perfect", "Vault.360", "Audio.360" and "Post.360");

(5) All Cash (including proceeds from the exercise prior to the Merger Effective Time of the Company Options) and bank accounts;

(7) All security deposits delivered in connection with the Non-ADS Real Property Leases, other than the security deposit under any Non-ADS Real Property Lease for which the lessor's consent to the Transfer of such lease to New 360 is not obtained within 45 days after the Closing Date;

(8) All Company Agreements (including the CBS Agreement and the DG Confidentiality Agreement), other than Company Agreements that constitute Acquired Assets;

(9) All Tax refunds and other Tax benefits arising from any activities of Point.360 and/or IVC conducted during the Pre-Acceptance Date Tax Period (as such term is defined in the Indemnification Agreement);

(10) All Books and Records, other than minute books and share records relating to Point.360 and other than Books and Records pertaining exclusively to the ADS Business, any Acquired Asset or any Retained Liability;

(11) Assets identified in the attached general ledger of Point.360 (as updated through the Acceptance Date) under the "Post Group" heading; and

(12) Asset Purchase Agreement, dated March 7, 2007, by and among Point.360, Eden FX and the shareholders of Eden FX.

Notwithstanding the foregoing provisions of this Schedule A, the Excluded Assets shall not include any of the Assets set forth in the Schedule C to this Agreement and any Assets identified after the date hereof but prior to the Acceptance Date by Point.360's independent public accountants that should have been set forth in Schedule C to this Agreement (including the general ledger attached hereto) but for the fact that such accountants have not completed the audit of the ADS Business as of the date hereof.

"Assumed Liabilities" means (i) accounts payable and other accrued expenses not exclusively related to the ADS Business; (ii) accrued wages and benefits of the employees of Point.360 and/or IVC (other than the employees listed in Schedule C to this Agreement); (iii) any indebtedness in excess of $7,000,000 under (x) that certain Standard Loan Agreement, dated March 29, 2006, between Point.360 and Bank of America, N.A. and (y) those certain Promissory Notes between General Electric Capital Corporation and Point.360, dated December 30, 2005 and March 30, 2007, respectively, (iv) any and all Liabilities of Point.360 and/or IVC, whether arising before, on or after the consummation of the Contribution, to the extent resulting from or arising out of (x) the operation or conduct of Point.360's business (other than the ADS Business) prior to the consummation of the Contribution on the Acceptance Date or (y) the past, present or future ownership or use of any of the Excluded Assets, (v) all Liabilities for Taxes of Point.360 and/or IVC for any Pre-Acceptance Date Tax Period (as such term is defined in the Indemnification Agreement) and (vi) those Liabilities set forth in this Schedule B.

(1) Liabilities arising under the Company Agreements described in Schedule A to this Agreement; and

(2) Liabilities identified in the attached general ledger of Point.360 (as updated through the Acceptance Date) under the "Post Group" heading.

Notwithstanding the foregoing provisions of this Schedule B, the Assumed Liabilities shall not include any of the Retained Liabilities.

"Acquired Assets" means all of the Assets set forth in this Schedule C and any Assets identified after the date hereof but prior to the Acceptance Date by Point.360's independent public accountants that should have been set forth in this Schedule C (including the general ledger attached hereto) but for the fact that such accountants have not completed the audit of the ADS Business as of the date hereof.

(1) The severance contract between Point.360 and Jonathan Lurie, dated March 2, 2007, and the severance contract between Point.360 and John Lipuma, dated February 15, 2007;

(2) Change in Control Agreements between Point.360 and the following employees of the ADS Business: Jonathan Lurie; Mark Dunn; Bruce Jones; John McKinley; Mike Rizzotti; and George Bonet;

(3) The following employees of Point.360 and/or IVC: Enstrom, Kathleen Dawn; Lurie, Jonathan; Coppage, Marty Lee; Cuomo, Andrew G.; Dunn, Mark A.; Francis, Kenneth R.; Kroeter, Clifford; Kroll, Valerie D.; Lipuma, John J.; Rashid, Gary S.; Webb, James M.; Mendez, Raul F.; Jones, Bruce F.; McCallum, Richard Eugene; Delos Reyes, Maria Regina; Ruhtz, Craig A.; Snyder, Shane; Otto, David L.; Desiderio, Kent P.; Guardado, Vladimir D.; Sanchez, Marlon; Gonzalez, Jesus Pancho D.; Averseng, Alain; Robles, Abel; Isavi, Allen; Mersola, Jamie M.; Orellana, Veronica; Rizzotti, Michael A.; Schoeder, Richard E.; Cucinotti, Christina; Foster, Monica Thea; Kachoian, Leslie Heskin; Kroll, Stephanie Diane; Lives, Wesley H.; Moreno, Nicole M.; Norman, Connie; Russomano, Pamela Ann; Sheveck, Vicki Ann; Mendoza, Victor; Pellerin, Ruth N.; Apodaca, Miguel; Luna, Daniel; Romandi, Adam; Valenzuela, Julio Roberto; Hutcherson, Anise Antonetta; Rodriguez, Aracely; Bey, Tyryn; Cruz, Percy M.; Vasquez, Ellery; Bailey, Lonnie; Bonet, George A.; Joaquin, Juneann M.; Marquez, Oscar; Williams, Mikel U.; Alcocer, Moises; Malloy, Norman A.; Mauras, Roberto; Ogletree, Derrick S.; Thompson, Ramel R.; Yorke, Patricia R.; Nunez, Juan E.; Rosado, Ricky; Karst, Susan I.; Abbinante, John; Andrew, Gregory H.; Rios Lira, Jose Angel; Lorek, Jon; McKinley, John; Barnes, Merlin K.; Foster, Karen D.; Mannino, Vincent; Michelon, Maria; Harris, Yvonne B; Archer, Marcello D.; Ortiz, Ramon G.; Van Riper, Mary S.; Enstrom, Kimberly J.; Johnson, Robert C.; Thomas, Erin L.; Lowery, Darci A.; Rhodes, Jerry D.; McClintock, Magan E.; Smith, Kati Lea; Emmert, Steven C.; Davis, Gary Dewayne; Scoggins, Kevin Scott; Smith, Anna M.; Alfaro, Efrain; Fernandez, Gerardo Manuel; Grant, Dennis E.; Villacorta Baian Lombardo;

(4) Accounts receivable, deposits, inventory (including, without limitation, tape stock and labels), and prepaid expenses exclusively related to the ADS Business;

(5) Security deposits delivered in connection with any Non-ADS Real Property Lease for which the lessor's consent to the Transfer of such lease to New 360 is not obtained within 45 days after the Closing Date;

(8) Books and Records pertaining exclusively to the ADS Business, any Acquired Asset or any Retained Liability, including, without limitation, invoices and order history, rate cards, historical monthly financial statements, detailed inventory of the boxed or pallet storage of media assets (regardless of where stored), attached hereto, customers' media files, customer lists and employee/payroll files of the employees listed in this Schedule C;

(9) Assets identified in the attached general ledger of Point.360 (as updated through the Acceptance Date) under the "ADS Group" heading; and

(10) Any shares of DG Common Stock owned, beneficially or of record, by Point.360.

"Retained Liabilities" means (i) accounts payable and other accrued expenses exclusively related to the ADS Business; (ii) accrued wages and benefits of the employees listed in Schedule C to this Agreement; (iii) no more than $7,000,000 of indebtedness ("Specified Indebtedness") under (x) that certain Standard Loan Agreement, dated March 29, 2006, between Point.360 and Bank of America, N.A. and (y) those certain Promissory Notes between General Electric Capital Corporation and Point.360, dated December 30, 2005 and March 30, 2007, respectively; (iv) any and all Liabilities (other than for Taxes) of Point.360 and/or IVC, whether arising before, on or after the Acceptance Date, to the extent not inconsistent with any Liabilities set forth in the definition of "Assumed Liabilities" or identified in Schedule B to this Agreement and resulting exclusively from or arising exclusively out of (x) the operation or conduct of the ADS Business prior to or after the consummation of the Contribution, (y) the operation or conduct of Point.360's business after the consummation of the Contribution or (z) the past, present or future ownership or use of any of the Acquired Assets; (v) all Liabilities for Taxes of Point.360 for any Post-Acceptance Date Tax Period (as such term is defined in the Indemnification Agreement); and (vi) those Liabilities set forth in this Schedule D.

(1) Liabilities arising under the Company Agreements described in Schedule C to this Agreement; and

(2) Liabilities identified in the attached general ledger of Point.360 (as updated through the Acceptance Date) under the "ADS Group" heading; provided that, notwithstanding anything to the contrary in such general ledger, it is understood and agreed by the parties hereto that Retained Liabilities shall include up to $7,000,000 of Specified Indebtedness.

(a) If the approval of the outstanding shares (Section 152) of a corporation is required for a reorganization under subdivisions (a) and (b) or subdivision (e) or (f) of Section 1201, each shareholder of the corporation entitled to vote on the transaction and each shareholder of a subsidiary corporation in a short-form merger may, by complying with this chapter, require the corporation in which the shareholder holds shares to purchase for cash at their fair market value the shares owned by the shareholder which are dissenting shares as defined in subdivision (b). The fair market value shall be determined as of the day before the first announcement of the terms of the proposed reorganization or short-form merger, excluding any appreciation or depreciation in consequence of the proposed action, but adjusted for any stock split, reverse stock split, or share dividend which becomes effective thereafter.

(b) As used in this chapter, "dissenting shares" means shares which come within all of the following descriptions:

(c) As used in this chapter, "dissenting shareholder" means the recordholder of dissenting shares and includes a transferee of record.

(a) If, in the case of a reorganization, any shareholders of a corporation have a right under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to purchase their shares for cash, that corporation shall mail to each such shareholder a notice of the approval of the reorganization by its outstanding shares (Section 152) within 10 days after the date of that approval, accompanied by a copy of Sections 1300, 1302, 1303, and 1304 and this section, a statement of the price determined by the corporation to represent the fair market value of

the dissenting shares, and a brief description of the procedure to be followed if the shareholder desires to exercise the shareholder's right under those sections. The statement of price constitutes an offer by the corporation to purchase at the price stated any dissenting shares as defined in subdivision (b) of Section 1300, unless they lose their status as dissenting shares under Section 1309.

(b) Any shareholder who has a right to require the corporation to purchase the shareholder's shares for cash under Section 1300, subject to compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the corporation to purchase shares shall make written demand upon the corporation for the purchase of those shares and payment to the shareholder in cash of their fair market value. The demand is not effective for any purpose unless it is received by the corporation or any transfer agent thereof (1) in the case of shares described in clause(A) or (B) of paragraph (1) of subdivision (b) of Section 1300 (without regard to the provisos in that paragraph), not later than the date of the shareholders' meeting to vote upon the reorganization, or (2) in any other case within 30 days after the date on which the notice of the approval by the outstanding shares pursuant to subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder.

(c) The demand shall state the number and class of the shares held of record by the shareholder which the shareholder demands that the corporation purchase and shall contain a statement of what that shareholder claims to be the fair market value of those shares as of the day before the announcement of the proposed reorganization or short-form merger. The statement of fair market value constitutes an offer by the shareholder to sell the shares at that price.

Within 30 days after the date on which notice of the approval by the outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, the shareholder shall submit to the corporation at its principal office or at the office of any transfer agent thereof, (a) if the shares are certificated securities, the shareholder's certificates representing any shares which the shareholder demands that the corporation purchase, to be stamped or endorsed with a statement that the shares are dissenting shares or to be exchanged for certificates of appropriate denomination so stamped or endorsed or (b) if the shares are uncertificated securities, written notice of the number of shares which the shareholder demands that the corporation purchase. Upon subsequent transfers of the dissenting shares on the books of the corporation, the new certificates, initial transaction statement, and other written statements issued therefore shall bear a like statement, together with the name of the original dissenting holder of the shares.

(a) If the corporation and the shareholder agree that the shares are dissenting shares and agree upon the price of the shares, the dissenting shareholder is entitled to the agreed price with interest thereon at the legal rate on judgments from the date of the agreement. Any agreements fixing the fair market value of any dissenting shares as between the corporation and the holders thereof shall be filed with the secretary of the corporation.

(b) Subject to the provisions of Section 1306, payment of the fair market value of dissenting shares shall be made within 30 days after the amount thereof has been agreed or within 30 days after any statutory or contractual conditions to the reorganization are satisfied, whichever is later, and in the case of certificated securities, subject to surrender of the certificates therefore, unless provided otherwise by agreement.

(a) If the corporation denies that the shares are dissenting shares, or the corporation and the shareholder fail to agree upon the fair market value of the shares, then the shareholder demanding purchase of such shares as dissenting shares or any interested corporation, within six months after the

date on which notice of the approval by the outstanding shares (Section 152) or notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but not thereafter, may file a complaint in the superior court of the proper county praying the court to determine whether the shares are dissenting shares or the fair market value of the dissenting shares or both or may intervene in any action pending on such a complaint.

(b) Two or more dissenting shareholders may join as plaintiffs or be joined as defendants in any such action and two or more such actions may be consolidated.

(c) On the trial of the action, the court shall determine the issues. If the status of the shares as dissenting shares is in issue, the court shall first determine that issue. If the fair market value of the dissenting shares is in issue, the court shall determine, or shall appoint one or more impartial appraisers to determine, the fair market value of the shares.

(a) If the court appoints an appraiser or appraisers, they shall proceed forthwith to determine the fair market value per share. Within the time fixed by the court, the appraisers, or a majority of them, shall make and file a report in the office of the clerk of the court. Thereupon, on the motion of any party, the report shall be submitted to the court and considered on such evidence as the court considers relevant. If the court finds the report reasonable, the court may confirm it.

(b) If a majority of the appraisers appointed fail to make and file a report within 10 days from the date of their appointment or within such further time as may be allowed by the court or the report is not confirmed by the court, the court shall determine the fair market value of the dissenting shares.

(c) Subject to the provisions of Section 1306, judgment shall be rendered against the corporation for payment of an amount equal to the fair market value of each dissenting share multiplied by the number of dissenting shares which any dissenting shareholder who is a party, or who has intervened, is entitled to require the corporation to purchase, with interest thereon at the legal rate from the date on which judgment was entered.

(d) Any such judgment shall be payable forthwith with respect to uncertificated securities and, with respect to certificated securities, only upon the endorsement and delivery to the corporation of the certificates for the shares described in the judgment. Any party may appeal from the judgment.

(e) The costs of the action, including reasonable compensation to the appraisers to be fixed by the court, shall be assessed or apportioned as the court considers equitable, but, if the appraisal exceeds the price offered by the corporation, the corporation shall pay the costs (including in the discretion of the court attorneys' fees, fees of expert witnesses and interest at the legal rate on judgments from the date of compliance with Sections 1300, 1301 and 1302 if the value awarded by the court for the shares is more than 125 percent of the price offered by the corporation under subdivision (a) of Section 1301).

To the extent that the provisions of Chapter 5 prevent the payment to any holders of dissenting shares of their fair market value, they shall become creditors of the corporation for the amount thereof together with interest at the legal rate on judgments until the date of payment, but subordinate to all other creditors in any liquidation proceeding, such debt to be payable when permissible under the provisions of Chapter 5.

Cash dividends declared and paid by the corporation upon the dissenting shares after the date of approval of the reorganization by the outstanding shares (Section 152) and prior to payment for the

shares by the corporation shall be credited against the total amount to be paid by the corporation therefore.

Except as expressly limited in this chapter, holders of dissenting shares continue to have all the rights and privileges incident to their shares, until the fair market value of their shares is agreed upon or determined. A dissenting shareholder may not withdraw a demand for payment unless the corporation consents thereto.

Dissenting shares lose their status as dissenting shares and the holders thereof cease to be dissenting shareholders and cease to be entitled to require the corporation to purchase their shares upon the happening of any of the following:

(a) The corporation abandons the reorganization. Upon abandonment of the reorganization, the corporation shall pay on demand to any dissenting shareholder who has initiated proceedings in good faith under this chapter all necessary expenses incurred in such proceedings and reasonable attorneys' fees.

(b) The shares are transferred prior to their submission for endorsement in accordance with Section 1302 or are surrendered for conversion into shares of another class in accordance with the articles.

(c) The dissenting shareholder and the corporation do not agree upon the status of the shares as dissenting shares or upon the purchase price of the shares, and neither files a complaint or intervenes in a pending action as provided in Section 1304, within six months after the date on which notice of the approval by the outstanding shares or notice pursuant to subdivision (i) of Section 1110 was mailed to the shareholder.

(d) The dissenting shareholder, with the consent of the corporation, withdraws the shareholder's demand for purchase of the dissenting shares.

If litigation is instituted to test the sufficiency or regularity of the votes of the shareholders in authorizing a reorganization, any proceedings under Sections 1304 and 1305 shall be suspended until final determination of such litigation.

This chapter, except Section 1312, does not apply to classes of shares whose terms and provisions specifically set forth the amount to be paid in respect to such shares in the event of a reorganization or merger.

(a) No shareholder of a corporation who has a right under this chapter to demand payment of cash for the shares held by the shareholder shall have any right at law or in equity to attack the validity of the reorganization or short-form merger, or to have the reorganization or short-form merger set aside or rescinded, except in an action to test whether the number of shares required to authorize or approve the reorganization have been legally voted in favor thereof; but any holder of shares of a class whose terms and provisions specifically set forth the amount to be paid in respect to them in the event of a reorganization or short-form merger is entitled to payment in accordance with those terms and provisions or, if the principal terms of the reorganization are approved pursuant to subdivision (b) of Section 1202, is entitled to payment in accordance with the terms and provisions of the approved reorganization.

(b) If one of the parties to a reorganization or short-form merger is directly or indirectly controlled by, or under common control with, another party to the reorganization or short-form merger, subdivision (a) shall not apply to any shareholder of such party who has not demanded payment of cash for such shareholder's shares pursuant to this chapter; but if the shareholder institutes any action to attack the validity of the reorganization or short-form merger or to have the reorganization or short-form merger set aside or rescinded, the shareholder shall not thereafter have any right to demand payment of cash for the shareholder's shares pursuant to this chapter. The court in any action attacking the validity of the reorganization or short-form merger or to have the reorganization or short-form merger set aside or rescinded shall not restrain or enjoin the consummation of the transaction except upon 10 days' prior notice to the corporation and upon a determination by the court that clearly no other remedy will adequately protect the complaining shareholder or the class of shareholders of which such shareholder is a member.

(c) If one of the parties to a reorganization or short-form merger is directly or indirectly controlled by, or under common control with, another party to the reorganization or short-form merger, in any action to attack the validity of the reorganization or short-form merger or to have the reorganization or short-form merger set aside or rescinded, (1) a party to a reorganization or short-form merger which controls another party to the reorganization or short-form merger shall have the burden of proving that the transaction is just and reasonable as to the shareholders of the controlled party, and (2) a person who controls two or more parties to a reorganization shall have the burden of proving that the transaction is just and reasonable as to the shareholders of any party so controlled.

A conversion pursuant to Chapter 11.5 (commencing with Section 1150) shall be deemed to constitute a reorganization for purposes of applying the provisions of this chapter, in accordance with and to the extent provided in Section 1159.

We have audited the accompanying balance sheets of the advertising distribution business of Point.360 ("ADS Business" or the "Company") as of December 31, 2006 and 2005, and the related statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provided a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2006 and 2005, and the results of its operations and their cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

ADS Business
Statements of Shareholders' Equity
(in thousands except for share amounts)

On April 13, 2007, Point.360's Board of Directors preliminarily approved a plan to contribute the assets and liabilities related Point.360's businesses other than the spot advertising distribution businesses to a wholly-owned subsidiary, New 360, and to subsequently distribute the common stock of New 360 of Point.360 shareholders on a share-for-sale basis to form an independent, publicly traded entity. See Note 12. The net assets contributed to New 360 are shown as Investment in New 360 in the accompanying Balance Sheets.

The accompanying Financial Statements include the accounts and transactions of Point.360 involved primarily in the duplication and distribution of advertising content (the "ADS Business" or the "Company"). The accompanying Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. All intercompany balances and transactions have been eliminated in the Financial Statements.

The Company's combined results of operations, financial position and cash flows may not be indicative of its future performance and do not necessarily reflect what the combined results of operations, financial position and cash flows would have been had the Company operated as a separate, stand-alone entity during the periods presented, including changes in its operations and capitalization as a result of the separation of New 360 from Point.360.

Certain corporate and general and administrative expenses, including those related to executive management, tax, accounting, legal and treasury services, have been allocated to New 360 based on the ratio of New 360's revenues to total Point.360 revenues. Additionally, certain balance sheet amounts have been allocated to New 360 based on the ratio of New 360's working capital, net fixed assets and other factors at each year end. Management believes such allocations are reasonable. However, the associated expenses recorded by the Company in the accompanying Statements of Income may not be indicative of the actual expenses that would have been incurred had the Company been operating without New 360 for the periods presented. Following the separation of New 360 from Point.360, the Company will perform these functions using other internal resources or purchased services.

SG&A expense net of expenses allocated to subsidiary, were $6.5 million (31.3% of sales) in 2006 as compared to $6.5 million (27.9% of sales) in 2005.

The Company provides worldwide electronic and physical distribution of audio and video of advertising content using fiber optics, satellite, Internet and air and ground transportation. The Company delivers commercials by both physical and electronic means to thousands of broadcast outlets worldwide. The Company's interconnected facilities provide service coverage to all major U.S. media centers. Clients include major motion picture studios, advertising agencies and corporations.

The financial statements include the accounts of the Company's facilities engaged in the distribution of advertising content. All significant intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash equivalents represent highly liquid short-term investments with original maturities of less than three months.

The Company records revenues when the services have been completed. Although sales and receivables are concentrated in the advertising industry, credit risk due to financial insolvency is limited because of the financial stability of the customer base (i.e., large advertising agencies).

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, and accounts receivable. The Company maintains its cash and cash equivalents with high credit quality financial institutions; at times, such balances with any one financial institution may exceed FDIC insured limits.

Credit risk with respect to trade receivables is concentrated due to the large number of orders with major advertising agencies in any particular reporting period. Our five largest customers represented 44% and 45% of accounts receivable at December 31, 2005 and December 31, 2006, respectively. The Company reviews credit evaluations of its customers but does not require collateral or other security to support customer receivables.

The five largest customers accounted for 29%, 31% and 32% of net sales for the years ended December 31, 2004, 2005 and 2006, respectively. TBWA Chait Day accounted for 10% of sales in 2005, and the Weinstein Co., LLC accounted for 11% of sales in 2006.

Inventories comprise raw materials, principally tape stock, and are stated at the lower of cost or market. Cost is determined using the average cost method.

Property and equipment are stated at cost. Expenditures for additions and major improvements are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Amortization of leasehold improvements is computed using the straight-line method over the lesser of the estimated useful lives of the improvements or the remaining lease term.

Prior to the January 1, 2002 implementation of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), goodwill was amortized on a straight-line basis over 5-20 years. Since that date, goodwill has been subject to periodic impairment tests in accordance with SFAS 142.

The Company identifies and records impairment losses on long-lived assets, including goodwill that is not identified with an impaired asset, when events and circumstances indicate that such assets might be impaired. Events and circumstances that may indicate that an asset is impaired include significant decreases in the market value of an asset, a change in the operating model or strategy and competitive forces.

The Company evaluates its goodwill on an annual basis and when events and circumstances indicate that the carrying amount of an asset may not be recoverable. If the independent appraisal or other indicator of value of the asset or the expected undiscounted future cash flow attributable to the asset is less than the carrying amount of the asset, an impairment loss equal to the excess of the asset's carrying value over its fair value is recorded. In 2006, fair value was determined using independent appraisals and other valuation techniques, depending on the nature of the assets. To date, no such impairment has been recorded.

The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts for financial reporting purposes and the tax basis of assets and liabilities. A valuation allowance is recorded for that portion of deferred tax assets for which it is more likely than not that the assets will not be realized.

Advertising costs are not significant to the Company's operations and are expensed as incurred.

To meet the reporting requirements of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments" ("SFAS 107"), the Company calculates the fair value of financial instruments and includes this additional information in the notes to financial statements when the fair value is different than the book value of those financial instruments. When the fair value is equal to the book value, no additional disclosure is made. The Company uses quoted market prices whenever available to calculate these fair values.

Prior to January 1, 2006, as permitted by SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company measured compensation costs in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees ("APB 25"), but provided pro forma disclosures of net income and earnings per share using the fair value method defined by FAS 123. Under APB No. 25, compensation expense was recognized over the vesting period

based on the difference, if any, on the date of grant between the deemed fair value for accounting purposes of the Company's stock and the exercise price on the date of grant. The Company accounted for stock issued to non-employees in accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force ("EITF") 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods and Services."

Had the Company determined compensation cost based on the fair value for its stock options at grant date, as set forth under SFAS 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:

			2004			2005
Net income (loss):
	As reported		$	3,505,000		$	457,000
		Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(255,000	)		(738,000	)

	Pro forma			3,250,000			(281,000	)
Earnings (loss) per share:
	As reported:
		Basic		0.38			0.05
		Diluted		0.36			0.05
	Pro forma:
		Basic		0.35			(0.03	)
		Diluted		0.34			(0.03	)

The fair value for these options was estimated at the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2004 and 2005, respectively: expected volatility of 44% and 38% and risk-free interest rates of 1.33% and 3.26%. A dividend yield of 0% and expected life of five years was assumed for 2004 and 2005 grants. The weighted average fair value of options granted at the fair market price on the grant date in 2004 and 2005 were $1.03 and $1.05, respectively. All options granted in 2004 and 2005 were at fair market price.

On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), "Share-Based Payment,"("SFAS 123(R)") which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors based on estimated fair values. SFAS 123(R) supersedes the Company's previous accounting under APB 25 for periods beginning in fiscal 2006. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 ("SAB 107") relating to SFAS 123(R). The Company applied the provisions of SAB 107 in its adoption of SFAS 123(R). See Note 10.

The Company follows SFAS No. 128, "Earnings per Share" ("SFAS 128"), and related interpretations for reporting Earnings per Share. SFAS 128 requires dual presentation of Basic Earnings per Share ("Basic EPS") and Diluted Earnings per Share ("Diluted EPS"). Basic EPS excludes dilution and is computed by dividing net income (loss) by the weighted average number of

common shares outstanding during the reported period. Diluted EPS reflects the potential dilution that could occur if stock options were exercised using the treasury stock method.

In accordance with SFAS 128, basic earnings (loss) per share are calculated based on the weighted average number of shares of common stock outstanding during the reporting period. Diluted earnings per share are calculated giving effect to all potentially dilutive common shares, assuming such shares were outstanding during the reporting period.

A reconciliation of the denominator of the basic EPS computation to the denominator of the diluted EPS computation is as follows:

	2004	2005	2006
Weighted average number of common shares outstanding used in computation of basic EPS	9,196,620	9,346,533	9,511,006
Dilutive effect of outstanding stock options	474,775	367,278	104,425

Weighted average number of common and potential common shares outstanding used in computation of diluted EPS	9,674,395	9,713,811	9,615,431

Outstanding stock options excluded in the computation of diluted EPS	1,878,172	1,342,357	1,921,405

		2004		2005		2006
Cash payments for income taxes (net of refunds)		$	441,000		$	131,000		$	1,568,000
Cash payments for interest			140,000			224,000			185,000

In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155, "Accounting for Certain Hybrid Financial Instruments" ("SFAS 155"), which amends SFAS No. 133, "Accounting for Derivatives Instruments and Hedging Activities" (SFAS 133") and SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" (SFAS 140"). SFAS 155 amends SFAS 133 to narrow the scope exception for interest-only and principal-only strips on debt instruments to include only such strips representing rights to receive a specified portion of the contractual interest or principle cash flows. SFAS 155 also amends SFAS 140 to allow qualifying special-purpose entities to hold a passive derivative financial instrument pertaining to beneficial interests that itself is derivative instrument. The Company is currently evaluating the impact this new Standard, but believes that it will not have a material impact on the Company's financial position, results of operations or cash flows.

rights and to reduce the volatility that results from using different measurement attributes. The Company is currently assessing the impact that the adoption of SFAS 156 will have on its results of operation and financial position.

In July 2006, the FASB released FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. This interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. This statement is effective for fiscal years beginning after December 15, 2006. If there are changes in net assets as a result of application of FIN 48, these will be accounted for as an adjustment to retained earnings. The Company adopted FIN 48 in the first quarter of 2007, and determined that FIN 48 will not impact the Company's financial position and results of operations..

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS 157 establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is required to adopt the provision of SFAS 157, as applicable, beginning in fiscal year 2008. Management does not believe the adoption of SFAS 157 will have a material impact on the Company's financial position or results of operations.

During 1997 to 2005, the Company acquired ten businesses. These acquisitions were accounted for as purchases, with the excess of the purchase price over the fair value of the net assets acquired allocated to goodwill. The contingent portion of the purchase prices, to the extent earned was recorded as an increase to goodwill. As of December 31, 2006, additional earn-out payments are as described below. The consolidated financial statements reflect the operations of the acquired companies since their respective acquisition dates.

Goodwill and other intangibles, net as of December 31, 2005 and 2006, consist of the following:

	Actual
	2005			2006
Goodwill	$	35,050,000		$	37,050,000
Covenant not to compete		1,000,000			1,000,000

		36,050,000			38,050,000
Less accumulated amortization		(6,576,000	)		(6,576,000	)

	$	29,474,000		$	31,474,000

The Company ceased amortizing goodwill on January 1, 2002 with the adoption of SFAS 142. The covenant not to compete was fully amortized in 2003.

Point.360 historically operated in a single business segment due to the combination of facility assets, sales forces and management subsequent to the acquisitions and the integration of branding and communications efforts. The goodwill acquired, therefore, is common to all Point.360 facilities. As of December 31, 2006, the goodwill assignable to the Company was determined by comparing pro forma

operating income generated by, and capital invested in, the facilities remaining with the Company to that of all Point.360 facilities including New 360. Based on this analysis, goodwill has been allocated to the Company as follows:

In July 2002, Point.360 acquired an option to purchase three subsidiaries of Alliance Atlantis Communications, Inc. ("Alliance") engaged in businesses related to those of Point.360. During the following 18 months, Point.360 performed due diligence, extended the option to purchase, and attempted to obtain financing for the acquisition and toe replace existing credit facilities.

In June 2003, discussion with Alliance and the new lenders were terminated. In July 2003, Alliance filed several actions against Point.360 seeking to recover various damages from Point.360 related to breach of the option agreement and related non-disclosure agreement. In August, 2003, Point.360 filed a counterclaim alleging breach of contract.

Pursuant to a Settlement and Mutual Release Agreement executed in November 2004, Alliance and Point.360 agreed to settle all claims. Pursuant to the agreement, Point.360 paid Alliance $575,000 in cash in November 2004. In 2004, Point.360 wrote off the settlement amount and other deferred costs related to the proposed Alliance transaction. The portion of the write off allocated to the Company was determined using the same criteria as that prescribed for goodwill described above.

In order to expand its relationships with customers and gain new customers, on July 1, 2004, Point.360 acquired all of the outstanding stock of International Video Conversions, Inc. ("IVC") for $7 million in cash. The purchase agreement required possible additional payments of $1 million, $2 million and $2 million in 2005, 2006 and 2007, respectively, if earnings before interest, taxes, depreciation and amortization during the 30 months after the acquisition reached certain predetermined levels (the second two increments of $2 million each were earned and are reflected as accrued liabilities on the balance sheets as of December 31, 2005 and 2006, respectively). As part of the transaction, Point.360 entered into employment and/or non competition agreements with four senior officers of IVC which fixed responsibilities, salaries and other benefits and set forth limitations on the individuals' ability to compete with Point.360 for the term of the earn-out period (30 months). To pay for the acquisition, Point.360 used $2.3 million of cash on hand and borrowed $4.7 million under the term loan portion of Point.360's bank facility.

The total purchase consideration ($12 million either paid or accrued as of December 31, 2006) has been allocated to the assets and liabilities acquired based on their respective estimated fair values as summarized below.

Cash and cash equivalents		$	1,205,000
Inventories			120,000
Other current assets			1,000
Accounts receivable			2,036,000
Goodwill			5,242,000
Property, plant and equipment			6,009,000

	Total assets acquired		14,613,000
Accounts payable			(442,000	)
Accrued			(417,000	)
Income tax payable			(72,000	)
Deferred tax liabilities			(1,682,000	)

Current and other liabilities assumed			(2,613,000	)

	Net assets acquired over liabilities, and purchase price	$	12,000,000

As stated above, a portion of Point.360's goodwill has been allocated to New 360 based on an allocation formula.

The unaudited pro forma results of the combined operations of the Company and IVC for the year ended December 31, 2004, as if the acquisition had occurred as of the beginning of 2004 rather than as of the acquisition date, are not shown as IVC's operations are part of New 360.

In 2005, the Company issued 105,000 shares in connection with a purchase of assets. The shares were recorded at fair value on the issue date. In connection with the transition, $186,000 was recorded as goodwill.

During 2005, the amount of goodwill, net, for both the Company and New 360 increased from $27,288,000 to $29,474,000 due to the $2,000,000 earn-out payment accrued for the IVC acquisition and $186,000 of excess of fair value of stock issued over the fair value of purchased assets, as noted above. During 2006, the amount of goodwill, net, increased from $29,474,000 to $31,474,000 due to the $2,000,000 earn-out payment accrued for the IVC acquisition. The periodic impairment test of goodwill performed in accordance with SFAS 142 as of September 30, 2006 required no goodwill impairment.

	December 31,
	2005			2006
Machinery and equipment	$	3,622,000		$	3,699,000
Leasehold improvements		1,503,000			1,509,000
Computer equipment		486,000			609,000
Equipment under capital lease		12,000			12,000
Office furniture		192,000			199,000
Less accumulated depreciation and amortization		(4,210,000	)		(4,739,000	)

	$	1,605,000		$	1,289,000

Depreciation is expensed over the estimated lives of machinery and equipment (7 years), computer equipment (5 years) and leasehold improvements (2 to 10 years depending on the remaining term of the respective leases or estimated useful life of the improvement). Depreciation expense totaled $1,240,000, $954,000 and $888,000 for the years ended December 31, 2004, 2005 and 2006, respectively. Equipment under capital leases are fully amortized as of December 31, 2005 and 2006.

The Company has a 401(K) plan, which covers substantially all employees. Each participant is permitted to make voluntary contributions not to exceed the lesser of: 20% of his or her respective compensation or the applicable statutory limitation, and is immediately 100% vested. The Company matches one-fourth of the first 4% contributed by the employee. Company contributions to the plan were $27,000, $33,000 and $35,000 in 2004, 2005 and 2006, respectively.

On December 30, 2005, the Company entered into a $10 million term loan agreement. The term loan provides for interest at LIBOR (5.37% as of December 31, 2006) plus 3.15% and is secured by the Company's equipment. In March 2006, the Company prepaid $4 million of the principal with proceeds of a sale/leaseback transaction. The term loan will be repaid in 60 equal monthly principal payments plus interest. Proceeds of the term loan were used to repay the previously existing term loan.

In March 2006, the Company entered into a new revolving credit agreement, which provides up to $10 million of revolving credit. The two-year agreement provides for interest of LIBOR (5.37% as of December 31, 2006) plus 1.85% for the first six months of the agreement, and thereafter at either (i) prime minus 0%—1.00% or (ii) LIBOR plus 1.50%—2.5%, depending on the level of the Company's ratio of outstanding debt to fixed charges (as defined). The facility is secured by all of the Company's assets, except for equipment securing the new term loan as described in Note 6. The revolving credit agreement requires the Company to comply with various financial and business covenants. There are cross default provisions contained in the two in both the new revolving and term loan agreements. As of December 31, 2006, the company was in compliance with revolving and term loan agreement covenants.

The Company has financed the purchase of certain equipment through the issuance of bank notes payable and under capital leasing arrangements. The notes bear interest at rates ranging from 3% to LIBOR plus 3.15%. Such obligations are payable in monthly installments through May 2019.

Amounts owed under the Point.360's borrowing arrangements have been allocated to the Company in proportion to the Company's net working capital and net property and equipment to that of the Company and New 360 combined as follows:

	Total Point.360		Allocable to New 360		Allocable to Company
Borrowing under revolving credit agreement	$	3,007,000	$	1,465,000	$	1,542,000
Current portion of borrowings under notes payables		1,174,000		1,068,000		106,000
Notes payable, less current portion		3,474,000		3,157,000		316,000

Total	$	7,655,000	$	5,690,000	$	1,965,000

Annual maturities for debt under bank notes payable allocated to the Company as of December 31, 2006, are as follows:

The Company's provision for (benefit from) income taxes for the three years ended December 31, 2006 consists of the following:

			Year Ended December 31,
			2004			2005		2006
Current tax (benefit) expense:
	Federal		$	1,866,000		$	842,000	$	876,000
	State			413,000			178,000		145,000

		Total current		2,279,000			1,020,000		1,021,000

Deferred tax expense:
	Federal			(38,000	)		85,000		(400,000	)
	State			29,000			10,000		(90,000	)

		Total deferred		(9,000	)		95,000		(490,000	)

		Total provision for (benefit from) for income taxes	$	2,270,000		$	1,115,000	$	531,000

The composition of the deferred tax assets (liabilities) at December 31, 2005 and December 31, 2006 are listed below:

		2005			2006
Accrued liabilities		$	48,000		$	122,000
Allowance for doubtful accounts			60,000			115,000
Other			2,000			7,000

	Total current deferred tax assets		110,000			244,000

Property and equipment			(6,000	)		380,000
Goodwill and other intangibles			(114,000	)		(176,000	)
Other			13,000			45,000

	Total non-current deferred tax liabilities		(107,000	)		249,000

	Net deferred tax liability	$	3,000		$	493,000

The provision for (benefit from) income taxes differs from the amount of income tax determined by applying the applicable U.S. Statutory income taxes rates to income before taxes as a result of the following differences:

	2004		2005		2006
Federal tax computed at statutory rate	34	%	34	%	34	%
State taxes, net of federal benefit and net operating loss limitation	6	%	6	%	6	%
Other (meals and entertainment)	—		—		1	%

	40	%	40	%	41	%

The Company leases office and production facilities in California, Illinois, Texas and New York under various operating leases. Approximate minimum rental payments under these non-cancelable operating leases as of December 31, 2006 are as follows:

Total rental expense was approximately $1,303,000, $1,368,000 and $1,475,000 for the three years in the period ended December 31, 2006, respectively.

On September 30, 2003 the Company entered into severance agreements with its Chief Executive Officer and Chief Financial Officer which continue in effect through December 31, 2007, and are renewed automatically on an annual basis after that unless notice is received terminating the agreement

by September 30 of the preceding year. The severance agreements contain a "Golden Parachute" provision. The severance agreements will be assumed by New 360.

As a result of the separation of Point.360's post production business into Subsidiary and the proposed distribution of New 360 to Point.360's shareholders, the Company will attempt to assign to New 360 the entire liability for Point.360's post production facility leases. While New 360 will indemnify the Company against any losses arising from New 360's breach of its obligation under the leases, there is a possibility that the Company could be liable for future costs associated with the leases. New 360's approximate minimum rental payments under these leases as of December 31, 2006 are as follows:

On July 10, 2006, Digital Generation Systems, Inc. ("DG") filed a claim in the District Court of Dallas County, Texas, alleging that the Company interfered with a contract between DG and Pathfire, Inc. ("Pathfire"), which contract provided that DG was granted exclusive use of Pathfire's network for the distribution of advertising content. The DG/Pathfire exclusivity excluded the distribution of certain other types of content (other than advertising content) to be distributed by Pathfire for CBS/ Viacom. The claim alleges that the Company was aware of the exclusivity provision during its negotiations with CBS Worldwide Distribution. CBS Broadcasting, Inc. ("CBS"), which resulted in a January 2006 contract between the Company and CBS ("CBS Contract"). Under the CBS Contract, the Company licensed advertising content distribution services from CBS, which services were to be performed utilizing Pathfire's IP-Multicast Format Store & Forward technology. DG alleges that the Company's knowledge of the exclusivity provision during the Company's negotiations with CBS and the resulting use of Pathefire's technology for distribution of ads caused damage to DG. The claim seeks unspecified actual and punitive damages and other costs of prosecution.

If DG is successful in its claim, the possibility exists that the Pathfire distribution technology will become unavailable to the Company, through which the Company currently distributes a portion of its commercial spots. If that occurs, the Company believes it has alternative means to fulfill customer needs.

The Company believes the complaint is without merit and will not have a material effect on the Company's financial position. Regardless, CBS has agreed to indemnify the Company pursuant to the CBS Contract to the extent permitted by law or otherwise.

From time to time the Company may become a party to other legal actions and complaints arising in the ordinary course of business, although it is not currently involved in any such material legal proceedings.

In November 2004, the Company implemented a stock rights program. Pursuant to the program, stockholders of record November 17, 2004 received a dividend of one right to purchase for $10 one one-hundredth of a share of a newly created Series A Junior Participating Preferred Stock. The rights are attached to the Company's Common Stock and will also become attached to shares issued subsequent to November 17, 2004. The rights will not be traded separately and will not become exercisable until the occurrence of a triggering event, defined as an accumulation by a single person or group of 20% or more of the Company's Common Stock. The rights will expire on November 16, 2014 and are redeemable at $0.0001 per right.

After a triggering event, the rights will detach from the Common Stock. If the Company is then merged into, or is acquired by, another corporation, the Company has the opportunity to either (i) redeem the rights or (ii) permit the rights holder to receive in the merger stock of the Company or the acquiring company equal to two times the exercise price of the right (i.e., $20). In the latter instance, the rights attached to the acquirer's stock become null and void. The effect of the rights program is to make a potential acquisition of the Company more expensive for the acquirer if, in the opinion of the Company's Board of Directors, the offer is inadequate.

In May 1996, the Board of Directors approved the 1996 Stock Incentive Plan (the "1996 Plan"). The 1996 Plan provided for the award of options to purchase up to 900,000 shares of common stock, as well as stock appreciation rights, performance share awards and restricted stock awards. In July 1999, the Company's shareholders approved an amendment to the 1996 Plan increasing the number of shares reserved for grant to 2,000,000 and providing for automatic increases of 300,000 shares on each August 1 thereafter to a maximum of 4,000,000 shares. As of December 31, 2006, there were 1,293,904 options outstanding under the 1996 Plan and no options were available for grant.

In December 2000, the Company's Board of Directors adopted the 2000 Nonqualified Stock Option Plan (the "2000 Plan"). As amended, the 2000 Plan provided for the award of options to purchase up to 1,500,000 shares of common stock. Options may be granted under the 2000 Plan solely to attract people who have not previously been employed by the Company as a substantial inducement to join the Company. As of December 31, 2006, there were 627,950 options outstanding under the plan and no options were available for grant.

In February 2005, the Board of Directors approved the 2005 Equity Incentive Plan (the "2005 Plan"). The 2005 Plan provides for the award of options to purchase up to 2,000,000 shares of common stock, as well as stock appreciation rights and restricted stock awards. Upon approval of the 2005 Plan by the Company's shareholders in May 2005, the 1996 Plan and the 2000 Plan were terminated, except that outstanding options under those plans were not terminated. As of December 31, 2006, there were 521,150 options outstanding under the 2005 Plan and 1,478,850 options were available for grant.

Under all plans, the stock option price per share for options granted is determined by the Board of Directors and is based on the market price of the Company's common stock on the date of grant, and each option is exercisable within the period and in the increments as determined by the Board, except that no option can be exercised later than ten years from the date it was granted. The stock options generally vest over one to five years.

On January 1, 2006, the Company adopted SFAS 123(R) which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors based on estimated fair values. SFAS 123(R) requires companies to estimate the fair value of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our Consolidated Statements of Income. Prior to the adoption of SFAS 123(R), the Company accounted for stock-based awards to employees and directors using the intrinsic value method in accordance with APB 25 as allowed under SFAS 123. Under the intrinsic value method, no stock-based compensation expense had been recognized in our Consolidated Statements of Income for awards to employees and directors because the exercise price of our stock options equaled the fair market value of the underlying stock at the date of grant.

SFAS 123(R) requires companies to estimate the fair value of share-based payment awards to employees and directors on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company's Consolidated Statements of Income (loss). Stock-based compensation expense recognized in the Consolidated Statements of Income (Loss) for the year ended December 31, 2006 included compensation expense for the share-based payment awards granted subsequent to January1, 2006 based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). There were no outstanding uninvested share-based payment awards as of January 1, 2006. For stock-based awards issued to employees and directors, stock-based compensation is attributed to expense using the straight-line single option method, which is consistent with how the prior-priced pro formas were provided were provided. As stock-based compensation expense recognized in the Statements of Consolidated Income (Loss) for 2006 is based on awards expected to vest, SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. For the year ended December 31, 2006, expected forfeitures are immaterial and as such the Company is recognizing forfeitures as the occur. In the pro-forma information provided under SFAS 123 for the periods prior to fiscal 2006, the Company accounted for forfeitures as the occurred.

The Company adopted SFAS 123(R) using the modified prospective transition method, which requires the application of the accounting standard as of January 1, 2006, the first day of the Company's fiscal year 2006. The consolidated financial statements as of and for the year ended December 31, 2006 reflect the impact of SFAS 123(R). In accordance with the modified prospective transition method, consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R). Stock-based compensation expense related to employee or director stock options recognized for the year ended December 31, 2006 was $81,000 ($23,000 net of tax benefit).

The Company's determination of fair value of share-based payment awards to employees and directors on the date of grant uses the Black-Sholes model, which is affected by the Company's stock price as well as assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, the expected stock price volatility over the expected volatility over the expected term of the awards, and actual and projected employee stock options exercise behaviors. The Company estimates expected volatility using historical data. The expected term is estimated using the "safe harbor" provisions under SAB 107.

During the year ended December 31, 2006, the Company granted awards of stock options for 399,950 shares at an average market price of $2.25 per share. At December 31, 2006, there were options outstanding to acquire 2,443,004 shares at an average exercise price of $2.89 per share. The estimated fair value of all awards granted during the year ended December 31, 2006 was $399,000. The total fair value of options expensed during 2006 was $81,000. The fair value of each option was estimated on the date of grant using the Black-Sholes option -pricing model with the following weighted average assumptions:

The following table summarizes the status of these plans as of December 31, 2006:

	1996 Plan	2000 Plan	2005 Plan
Options originally available	3,800,000	1,500,000	2,000,000
Stock options outstanding	1,314,000	632,000	540,000
Options available for grant	—	—	1,479,000

	Number of Shares		Weighted Average Exercise Price
Balance at December 31, 2003	2,050,678		$	2.91
Granted during 2004	608,100			2.58
Exercised during 2004	(101,573	)		2.76
Cancelled during 2004	(204,258	)		3.14

Balance at December 31, 2004	2,352,947		$	2.82
Granted during 2005	606,400			2.63
Exercised during 2005	(27,725	)		1.97
Cancelled during 2005	(265,825	)		3.01

Balance at December 31, 2005	2,665,797		$	2.79
Granted during 2006	399,950			2.25
Exercised during 2006	(380,725	)		1.50
Cancelled during 2006	(242,018	)		2.95

Balance at December 31, 2006	2,443,004		$	2.89

As of December 31, 2006, the total compensation costs related to non-vested awards yet to be expensed was approximately $0.3 million to be amortized over the next four years. The Company's portion of compensation costs was approximately $0.2 million.

The weighted average exercise prices for options granted and exercisable and the weighted average remaining contractual life for options outstanding as of December 31, 2005 and 2006 was as follows:

	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Intrinsic Value
As of December 31, 2005
Employees—Outstanding	2,300,797	$	2.69	3.33	$	116,000
Employees—Expected to Vest	2,300,797	$	2.69	3.33	$	116,000
Employees—Exercisable	2,300,797	$	2.69	3.33	$	116,000
Non-Employees—Outstanding	365,000	$	3.44	3.87	$	1,000
Non-Employees—Expected to Vest	365,000	$	3.44	3.87	$	1,000
Non-Employees—Exercisable	365,000	$	3.44	3.87	$	1,000
As of December 31, 2006
Employees—Outstanding	2,078,004	$	2.80	3.09	$	1,802,000
Employees—Expected to Vest	2,041,009	$	2.81	3.04	$	1,752,000
Employees—Exercisable	1,726,854	$	2.91	2.79	$	1,331,000
Non-Employees—Outstanding	365,000	$	3.42	3.26	$	114,000
Non-Employees—Expected to Vest	365,000	$	3.42	3.26	$	114,000
Non-Employees—Exercisable	365,000	$	3.42	3.26	$	114,000

Additional information with respect to outstanding options as of December 31, 2006 is a follows (shares in thousands):

Options Outstanding				Options Exercisable
Options Exercise Price Range		Number of Shares	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number of Shares	Weighted Average Exercise Price
$	1.75- 4.79	2,438	3.1 Years	$	2.88	2,087	$	2.99
$	7.00-10.00	5	0.2 Years	$	7.00	5	$	7.00

We have elected to adopt the detailed method provided in SFAS 123(R) for calculating the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool and Consolidated Statements of Cash Flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of SFAS 123(R).

The following tables set forth quarterly supplementary data for each of the years in the two-year period ended December 31, 2006 (in thousands except per share data).

		2005
		Quarter Ended
		Quarter Ended								Year Ended Dec 31
		March 31		June 30		Sept 30		Dec 31		Year Ended Dec 31
Revenues		$	6,417	$	5,125	$	6,294	$	5,303	$	23,139
Gross profit		$	2,871	$	2,027	$	2,615	$	1,931	$	9,444
Net income (loss)		$	201	$	57	$	169	$	30	$	457

Income (loss) per share:
	Basic	$	0.02	$	0.01	$	0.02	$	0.00	$	0.05
	Diluted	$	0.02	$	0.01	$	0.02	$	0.00	$	0.05

		2006
		Quarter Ended
		Quarter Ended									Year Ended Dec 31
		March 31		June 30		Sept 30		Dec 31			Year Ended Dec 31
Revenues		$	5,575	$	5,075	$	4,904	$	5,131		$	20,685
Gross profit		$	2,010	$	1,937	$	1,898	$	1,745		$	7,590
Net income (loss)		$	153	$	99	$	195	$	(57	)	$	390

Income (loss) per share:
	Basic	$	0.02	$	0.01	$	0.02	$	(0.01	)	$	0.04
	Diluted	$	0.02	$	0.01	$	0.02	$	(0.01	)	$	0.04

On April 16, 2007, Point.360, New 360 and DG FastChannel, Inc. ("DG FastChannel") entered into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement").

Under the terms of the Merger Agreement, DG FastChannel has agreed to make an exchange offer (the "Exchange Offer") for all outstanding shares of Point.360 common stock, no par value per share, including the associated preferred stock purchase rights (collectively, the "Point.360 Shares"), in which Exchange Offer each Point.360 Share tendered and accepted by DG FastChannel will be exchanged for a number of shares of common stock, par value $0.001 per share, of DG FastChannel (the "DG Common Stock") equal to the quotient obtained by dividing (x) 2,000,000 by (y) the number of Point.360 Shares (excluding Point.360 Shares owned by DG or Point.360) issued and outstanding immediately prior to the completion of the Exchange Offer (such amount of shares of DG Common Stock paid per Point.360 Share pursuant to the Exchange Offer is referred to herein as the "Exchange Offer Consideration"). The completion of the Exchange Offer is subject to customary conditions, including a minimum condition that not less than a majority of the outstanding Point.360 Shares on a fully diluted basis are validly tendered and not withdrawn prior to the expiration of the Exchange Offer.

In addition, on April 16, 2007, Point.360, DG FastChannel, and New 360 entered into a Contribution Agreement (the "Contribution Agreement"). Pursuant to the Contribution Agreement,

prior to the completion of the Exchange Offer, Point.360 will contribute (the "Contribution") to New 360 all of the assets owned, licensed, or leased by Point.360 that are not used exclusively in connection with the ADS Business, and New 360 will assume certain liabilities of Point.360. Immediately following the Contribution but prior to the completion of the Exchange Offer, Point.360 will distribute (the "Spin-Off") to its shareholders (other than DG FastChannel) on a pro rata basis all of the capital stock then outstanding of New 360.

On May 14, 2007, New 360 filed a Registration Statement on Form 10 (the "Form 10") with the Securities and Exchange Commission for the purpose of registering New 360's common stock under Section 12(b) of the Securities Exchange Act of 1934, as amended. Among other things, the Form 10 contains: (1) a detailed description of the Contribution and the Spin-Off; (2) a description of Point.360's post-production business that will be transferred to New 360 pursuant to the Contribution; (3) risk factors relating to New 360's business, the Contribution and Spin-Off and New 360's common stock; (4) a valuation of New 360 by Point.360's financial advisor; (5) management's discussion and analysis of New 360's financial condition and results of operations for each of the three years in the period ended December 31, 2006; (6) unaudited pro forma financial statements of New 360 as of December 31, 2006, and for the year then ended, giving effect to the Contribution and Spin-Off; (7) audited financial statements for New 360 as of December 31, 2006 and 2005 and for each of the three years in the period ended December 31, 2006; and (8) a description of New 360's proposed management and executive compensation policies.

It is anticipated that New 360's common stock will be approved for listing on the Nasdaq Global Market. As a result of the Contribution and the Spin-Off, at the completion of the Exchange Offer, the assets and liabilities of Point.360 will consist only of those assets and liabilities exclusively related to the ADS Business.

As soon as practicable following the completion of the Exchange Offer, DG FastChannel has agreed to effect the merger of Point.360 with and into DG FastChannel (the "Merger"), with DG FastChannel continuing as the surviving corporation. Upon the completion of the Merger, each Point.360 Share not purchased in the Exchange Offer will be converted into the right to receive the Exchange Offer Consideration, without interest. The Merger Agreement contains customary representations and warranties, covenants, and conditions. Completion of the Contribution, the Spin-Off, and the Exchange Offer is a condition of DG FastChannel's obligation to effect the Merger.

Copies of the Merger Agreement and the Contribution Agreement are attached as Annexes A and B, respectively, to this prospectus. The preceding description of the Merger Agreement and the Contribution Agreement does not purport to be complete and is qualified in its entirety by reference to such exhibits.

ADS Business
Statements of Shareholders' Equity
(in thousands except for share amounts)

On April 13, 2007, Point.360's Board of Directors preliminarily approved a plan to contribute the assets and liabilities related Point.360's businesses other than the spot advertising distribution businesses to a wholly-owned subsidiary, New 360, and to subsequently distribute the common stock of New 360 of Point.360 shareholders on a share-for-sale basis to form an independent, publicly traded entity. The net assets contributed to New 360 are shown as Investment in New 360 in the accompanying Balance Sheets.

The accompanying Financial Statements include the accounts and transaction of Point.360 involved primarily in the duplication and distribution of advertising content (the "ADS Business" or the "Company"). The accompanying Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. All intercompany balances and transactions have been eliminated in the Financial Statements.

Certain corporate and general and administrative expenses, including those related to executive management, tax, accounting, legal and treasury services, have been allocated to New 360 based on the ratio of New 360's revenues to total Point.360 revenues. Additionally, certain balance sheet amounts have been allocated to New 360 based on the ration of New 360's working capital, net fixed assets and other factors at each year end. Management believes such allocations are reasonable. However, the associated expenses recorded by the Company in the accompanying Statements of Income may not be indicative of the actual expenses that would have been incurred had the Company been operating without Subsidiary for the periods presented. Following the separation of New 360 from Point.360, the Company will perform these functions using other internal resources or purchased services.

SG&A expense net of expenses allocated to New 360, were $1.4 million (27.0% of sales) in the first quarter of 2007 as compared to $1.5 million (27.6% of sales) in the first quarter of 2006.

ADS BUSINESS
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our Financial Statements and accompanying Notes thereto included elsewhere herein. Except for the historical information contained herein, certain statements in this discussion are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, which involve certain risks and uncertainties, which could cause actual results to differ materially from those discussed herein, including but not limited to competition, customer and industry concentration, depending on technological developments, risks related to expansion, dependence on key personnel, fluctuating results and seasonality and control by management. See the relevant portions of the Point.360's documents filed with the Securities and Exchange Commission and Risk Factors in this report, for a further discussion of these and other risks and uncertainties applicable to the Company's business. For purposes of this discussion and analysis all references to "we" or the "ADS Business" refer to the advertising distribution business of Point.360.

We are one of the largest providers of spot advertising distribution services to owners of advertising content. We provide the services necessary to distribute our clients' spot advertising, using electronic and physical means. We deliver commercials to hundreds of broadcast outlets worldwide. Our interconnected facilities in Los Angeles, New York, Chicago, Dallas and San Francisco provide service coverage in each of the major U.S. media centers. Clients include major advertising agencies and corporations.

We operate in a highly competitive environment in which customers desire a broad range of service at a reasonable price. There are many competitors offering some or all of the services provided by the ADS Business. We attract and retain customers by maintaining a high service level at reasonable prices.

In recent years, electronic delivery services have grown while physical duplication and delivery have been declining. We expect this trend to continue for the foreseeable future. All of our electronic, fiber optics, satellite and Internet deliveries are made using third party vendors, which eliminates our need to invest in such capability. However, the use of others to deliver our services poses the risk that costs may rise in certain situations that cannot be passed on to customers, thereby lowering gross margins. There is also the risk that third party vendors who directly compete with us will succeed in taking away business or refuse to allow us to use their distribution channels. In fact, in June 2005, one such vendor/competitor notified us that its electronic distribution channel would not be available to us except in very limited circumstances, or unless we entered certain "preferred vendor" arrangements that we believed would not be in the best long-term interests of Point.360. While curtailment of these services has not materially affected our ability to deliver commercial spots, we have not been able to pass on increased alternative delivery costs to our customers since June 2005. While we are exploring other lower cost alternatives, gross margins related to spot delivery revenues will be lower until such alternatives become available.

The ADS Business has an opportunity to expand its business by establishing closer relationships with our customers through excellent service at a competitive price and maintaining adequate third party distribution channels. Our success is also dependent on attracting and maintaining employees capable of maintaining such relationships. Also, growth can be achieved by acquiring similar businesses which can increase revenues by adding new customers, or expanding services provided to existing customers.

Our business generally involves the immediate servicing needs of our customers. Most orders are fulfilled within several days. At any particular time, we have little firm backlog.

We believe that our nationwide interconnected facilities provide the ability to better service national customers than single-location competitors. We will look to expand both our service offering and geographical presence through acquisition of other businesses or opening additional facilities.

The following table sets forth the amount and percentage relationship to revenues of certain items included within the ADS Business' Statement of Income for the quarters ended March 31, 2006 and 2007. The commentary below is based on these financial statements (in thousands).

Revenues. Revenues were $5.2 million for the quarter ended March 31, 2007, compared to $5.6 million for the quarter ended March 31, 2006. Revenues declined in 2007 due to a number of factors including: (i) price compression due to competition in spot advertising distribution, (ii) consolidation among some customers that has resulted in less business being available to Point.360, and (iii) the continuing trend toward electronic distribution of commercial spots as opposed to physical duplication and distribution which results in lower revenues. These factors have been somewhat offset by acquiring new customers.

Gross Profit. In 2007, gross margin was 43.6% of sales, compared to 36.1% the same quarter for last year. The increase in gross profit percentage is due to lower electronic delivery costs afforded by a new distribution vendor, the elimination of a low margin sales and declining wages and benefits. We expect gross margins to fluctuate in the future as the sales mix changes.

Selling, General and Administrative Expense, Net of Allocation of Corporate Expenses to Subsidiary. SG&A expense, net of expenses allocated to subsidiary, were $1.4 million (27.0% of sales) in the 2007 quarter as compared to $1.5 million (27.6% of sales) in the 2006 quarter.

Operating Income. Operating income increased $0.4 million to $0.9 million in 2007, compared to $0.5 million in 2006.

Interest Expense. Interest expense in the first quarter of 2007 was $10,000, compared to $54,000 in the 2006 quarter. The decrease was due to lower debt levels offset partially by higher rates on variable interest debt.

Net Income. Net income for 2007 was $0.5 million compared to $0.3 million in 2006.

The following table sets forth the amount and percentage relationship to revenues of certain items included within the ADS Business' Statement of Income for the years ended December 31, 2004, 2005 and 2006. The commentary below is based on these financial statements (in thousands).

Revenues. Revenues were $20.7 million for the year ended December 31, 2006, compared to $23.1 million for the year ended December 31, 2005. Revenues declined in 2006 due to a number of factors including: (i) price compression due to competition in spot advertising distribution, (ii) consolidation among some customers that has resulted in less business being available to Point.360, and (iii) the continuing trend toward electronic distribution of commercial spots as opposed to physical duplication and distribution which results in lower revenues. These factors have been somewhat offset by acquiring new customers.

Gross Profit. In 2006, gross margin was 36.7% of sales, compared to 40.8% for last year. The decrease in gross profit percentage is due to lower sales offset by declining wages and benefits. The decrease was also due to higher alternative electronic and physical delivery costs necessitated by one major electronic vendor's decision in July 2005 to prohibit our use of its distribution network. We expect gross margins to fluctuate in the future as the sales mix changes.

Selling, General and Administrative Expense, Net of Allocation of Corporate Expenses to Subsidiary. SG&A expense, net of expenses allocated to subsidiary, were $6.5 million (31.3% of sales) in 2006 as compared to $6.5 million (27.9% of sales) in 2005.

Operating Income. Operating income decreased $1.9 million to $1.1 million in 2006, compared to $3.0 million in 2005.

Interest Expense. Interest expense for 2006 was $185,000, compared to $244,000 in 2005. The decrease was due to lower debt levels offset partially by higher rates on variable interest debt.

Net Income. Net income for 2006 was $0.4 million compared to $0.5 million in 2005.

Revenues. Revenues decreased $1.7 million to $23.1 million for the year ended December 31, 2005, compared to $24.8 million in 2004. The decline is due to lower spot advertising revenues as customer's switched to electronic from physical distribution. Revenues for physical distribution of tapes containing commercial spot advertising include tape stock and freight. Revenue from freight, the charge

to customers for sending commercial spots physically, declined to about 12% of sales in 2005 from 12.7% in the prior year. In electronic distribution, sales consist of only the electronic fee for distributing the advertisement.

Gross Profit. In 2005, gross profit decreased by 8.5% of sales. Gross profit on sales was 40.8% in 2005 compared to 49.3% in 2004, the decline being due principally to higher wages and benefits and delivery costs. In July 2005, electronic delivery vendor used by the Company ceased providing it services to us necessitating the use of more expensive delivery alternatives.

Selling, General And Administrative Expense, net of Allocation of Corporate Expenses to Subsidiary. SG&A expense, net of expenses allocated to subsidiary, increased $0.2 million, to $6.5 million in 2005, compared to $6.3 million in 2004 due principally to lower allocated corporate expenses partially offset by higher selling costs. As a percentage of revenues, SG&A, net of expenses allocation, was 27.9% for 2005 and 25.6% in 2004.

In 2004, the Company wrote off approximately $1.1 million of deferred acquisition and financing and settlement costs related to the termination of the potential acquisition, a portion of which has been allocated to the Company's subsidiary.

Operating Income. Operating income decreased $2.9 million to $3.0 million, compared to $5.9 million in 2004.

Interest Expense. Interest expense for 2005 was $244,000 compared to $152,000 in 2004. The increase in 2005 resulted from generally increasing interest rates on the Company's variable rate debt and increased outstanding borrowings.

Net Income. The net income for 2005 was $0.5 million, a decrease of $3.0 million compared to net income of $3.5 million for 2004.

This discussion should be read in conjunction with the notes to the financial statements and the corresponding information more fully herein. The ADS Business' liquidity and capital resources have historically been those of Point.360. The following narrative reflects this fact even though debt and interest expense amounts in the ADS Business' financial statements represent allocations of total Point.360 debt and interest expense as explained in the Notes to the financial statements.

On December 30, 2006, Point.360 entered a new $10 million term loan agreement. The term loan provides for interest at LIBOR (5.37% at December 31, 2006) plus 3.15%, or 8.52% at December 31, 2006, and is secured by Point. 360's equipment. The term loan was to be repaid in 60 equal principal payments plus interest. Proceeds of the loans were used to pay off our previously existing term loan.

In March 2006, Point.360 entered into a new credit agreement which provides up to $10 million of revolving credit based on 80% of acceptable accounts receivables, as defined. The two-year agreement provides for interest of LIBOR plus 1.85% for the first six months of the agreement, and thereafter either (i) prime (8.25% at December 31, 2006) minus 0%—1.00% or (ii) LIBOR plus 1.50%—2.50% depending on the level of Point.360's ratio of outstanding debt to fixed charges (as defined), or 7.25% or 7.07%, respectively, at December 31, 2006. The facility is secured by all of Point.360's assets, except for equipment securing a new term loan as described above.

In March 2006, Point.360 entered into a sale and leaseback transaction with respect to its Media Center vaulting real estate. The real estate was sold for $13,946,000 resulting in a $1.2 million after tax gain. Additionally, Point.360 received $500,000 from the purchaser for improvements. In accordance with SFAS No.28. "Accounting for Sales with Leasebacks"("SFAS 28"), the gain and the improvement allowance will be amortized over the initial 15-year lease term as reduced rent. Net proceeds at the

closing of the sale and the improvement advance (approximately $13.9 million) were used to pay off the mortgage and other outstanding debt. In accordance with our agreement with the revolving credit lender, we prepaid $4 million of the term loan. As a result of the prepayment, monthly principal payments on the term loan were reduced by approximately $70,000 per month (840,000 per year).

On March 30, 2007, Point.360 entered into an additional $2.5 million term loan agreement. The loan provides for interest at 8.35% per annum and is secured by Point.360's equipment. The loan will be repaid in 45 equal monthly installments of principal and interest.

The following table summarizes the March 31, 2007 status of our revolving line of credit and term loans.

	Total Point.360		Portion Allocable to Company		Due from Subsidiary
Revolving credit	$	1,893,000	$	752,000	$	1,141,000
Current portion of term loan		1,078,000		155,000		923,000
Long-term portion of term loan		5,092,000		452,000		4,640,000

Total	$	8,783,000	$	1,359,000	$	7,424,000

Monthly and annual principal and interest payments due under the term debt are approximately $94,000 and $1.1 million, respectively, assuming no change in interest rates, down from $260,000 and $3,100,000, respectively, from the term loan in existence in 2005.

Cash generated by operating activities is directly dependent upon sales levels and gross margins achieved. We generally receive payments from customers in 50-90 days after services are performed. The larger payroll and freight components of cost of sales must be paid currently and within 30 days, respectively. Payment terms of other liabilities vary by vendor and type. Income taxes must be paid quarterly. Fluctuations in sales levels will generally affect cash flow negatively or positively in early periods of growth or contraction, respectively, because of operating cash receipt/payment timing. Other investing and financing cash flows also affect cash availability.

The bank revolving credit agreement requires Point.360 to maintain a minimum "quick ratio" and a minimum "fixed charge coverage ratio." Point.360's quick ratio (current assets less current liabilities) was 1.13 as of December 31, 2006 as compared to a minimum requirement of 0.80. The fixed charge coverage ratio compares, on a rolling twelve-month basis, earnings before interests, taxes, depreciation and amortization ("EBITDA") plus rent expense and non-cash charges less income tax payments, to (ii) interest expense plus rent expense, the current portion of long term debt and maintenance capital expenditures. As of December 31, 2006, the fixed charge coverage ratio was 1.55 as compared to a minimum requirement of 1.10. If Point.360 fails to meet minimum covenant levels, amounts outstanding under the credit agreement and, by cross default provisions; the term loan will become due and payable.

Point.360 expects that remaining amounts available under the revolving credit arrangement (approximately $6,300,000 at March 31, 2007), the availability of bank or institutional credit from new sources and cash generated from operations will be sufficient to fund debt service, operating needs and about $2.5 - 3.5 million of capital expenditures for the next twelve months.

The acquisition of International Video Conversion, Inc. ("IVC") by Point.360 was completed in July 2004 for $2.3 million in cash and $4.7 million in borrowings. The IVC purchase agreement also required payments of $1 million, $2 million and $2 million in 2005, 2006 and 2007, respectively, if certain predetermined earnings levels (as defined) are met. In April 2005, $1 million was paid. $2 million was paid in 2006. $2 million will be paid in 2007.

The following table summarizes Point.360's contractual obligations as of March 31, 2007 due in the future:

	Payment due by Period
Contractual Obligations	Total		Less than 1 Year		Years 2 and 3		Years 4 and 5		Thereafter
Long Term Debt Obligations	$	6,903,000	$	1,937,000	$	3,095,000	$	1,872,000	$	—
Capital Lease Obligations		48,000		48,000		—		—		—
Operating Lease Obligations		31,600,000		5,038,000		8,177,000		5,329,000		13,055,000

Total	$	38,551,000	$	7,023,000	$	11,292,000	$	7,201,000	$	13,055,000

The following table summarizes Point.360's contractual obligations as of March 31, 2007 due in the future applicable to the ADS Business:

Contractual Obligations	Total		Less than 1 Year		Years 2 and 3		Years 4 and 5		Thereafter
Long Term Debt Obligations	$	607,000	$	170,000	$	273,000	$	165,000	$	—
Capital Lease Obligations		—		—		—		—		—
Operating Lease Obligations		5,909,000		1,186,000		2,213,000		825,000		1,684,000

Total	$	6,516,000	$	1,356,000	$	2,486,000	$	990,000	$	1,684,000

During the past year, Point.360 has generated sufficient cash to meet operating, capital expenditure and debt service needs and obligations, as well as to provide sufficient cash reserves to address contingencies. When preparing estimates of future cash flows, we consider historical performance, technological changes, market factors, industry trends and other criteria. In our opinion, the ADS Business will continue to be able to fund its needs for the foreseeable future.

Point.360 will continue to consider the acquisition of businesses complementary to its current operations. Consummation of any such acquisition or other expansion of the business conducted by Point.360 may be subject to Point.360 securing additional financing, perhaps at a cost higher than our existing term loans. Future earnings and cash flow may be negatively impacted to the extent that any acquired entities do not generate sufficient earnings and cash flow to offset the increased financing costs.

On April 16, 2007, Point.360, New 360 and DG FastChannel, Inc. ("DG FastChannel") entered into an Agreement and Plan of Merger and Reorganization (the "Merger Agreement") pursuant to which the ADS Business will be merged with DG FastChannel. Pursuant to the Merger Agreement, DG FastChannel will assume or pay off the Company's contractual obligations set forth above.

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and judgments, including those related to allowance for doubtful accounts, valuation of long-lived assets, and accounting for income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. We believe the following critical accounting

policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Critical accounting policies are those that are important to the portrayal of the ADS Business' financial condition and results, and which require management to make difficult, subjective and/or complex judgments. Critical accounting policies cover accounting matters that are inherently uncertain because the future resolution of such matters is unknown. We have made critical estimates in the following areas:

Revenues. We perform various services for our clients, including duplication and distribution of advertising spots. A customer orders one or more of these services with respect to a commercial spot. The sum total of services performed on a particular element becomes the deliverable (i.e., the customer will pay for the services ordered in total when the entire job is completed).

Allowance for doubtful accounts. We are required to make judgments, based on historical experience and future expectations, as to the collectibility of accounts receivable. The allowances for doubtful accounts and sales returns represent allowances for customer trade accounts receivable that are estimated to be partially or entirely uncollectible. These allowances are used to reduce gross trade receivables to their net realizable value. We record these allowances as a charge to selling, general and administrative expenses based on estimates related to the following factors: i) customer specific allowance; ii) amounts based upon an aging schedule and iii) an estimated amount, based on our historical experience, for issues not yet identified.

Valuation of long-lived and intangible assets. Long-lived assets, consisting primarily of property, plant and equipment and intangibles (consisting only of goodwill), comprise a significant portion of the ADS Business' total assets. Long-lived assets, including goodwill are reviewed for impairment whenever events or changes in circumstances have indicated that their carrying amounts may be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset to its fair value in a current transaction between willing parties, other than in a forced liquidation sale. Fair value was estimated by independent appraisals and other valuation techniques.

Factors we consider important which could trigger an impairment review include the following:

When we determine that the carrying value of intangibles, long-lived assets and related goodwill and enterprise level goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on comparing the carrying amount of the asset to its fair value in a current transaction between willing parties or, in the absence of such measurement, on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. Any amount of impairment so determined would be written off as a charge to the income statement, together with an equal reduction of the related asset. Net intangible assets, long-lived assets and goodwill amounted to approximately $23.5 million as of December 31, 2006.

In 2002, Statement of Financial Accounting Standards ("SFAS") No.142, "Goodwill and Other Intangible Assets" ("SFAS 142") became effective and as a result, Point.360 ceased to amortize approximately $26.3 million of goodwill in 2002 and performed an annual impairment review thereafter. The initial test on January 1, 2002 and the Fiscal 2002 to 2006 tests performed as of September 30 of each year required no goodwill impairment. In the 2006 test performed as of September 30, 2006, we determined the fair value of the enterprise using independent appraisals and other valuation techniques. If future appraisals or future performances are affected by the factors cited above, resulting potential impairment could adversely affect the reported goodwill asset value and earnings.

Accounting for income taxes. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax provision in the statement of operations.

Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. The net deferred tax liability related to the ADS Business as of December 31, 2006 was $0.5 million. The ADS Business did not record a valuation allowance against its deferred tax assets as of December 31, 2006.

In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155, "Accounting for Certain Hybrid Financial Instruments" ("SFAS 155"), which amends SFAS No. 133, "Accounting for Derivatives Instruments and Hedging Activities" (SFAS 133") and SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" (SFAS 140"). SFAS 155 amends SFAS 133 to narrow the scope exception for interest-only and principal-only strips on debt instruments to include only such strips representing rights to receive a specified portion of the contractual interest or principle cash flows. SFAS 155 also amends SFAS 140 to allow qualifying special-purpose entities to hold a passive derivative financial instrument pertaining to beneficial interests that it is derivative instrument. We are currently evaluating the impact this new Standard, but believes that it will not have a material impact on our financial position, results of operations or cash flows.

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets—an amendment of FASB Statement No. 140". The provisions of SFAS 156 are effective for fiscal years beginning after September 15, 2006. This statement was issued to simplify the accounting for servicing rights and to reduce the volatility that results from using different measurement attributes. We are is currently assessing the impact that the adoption of SFAS 156 will have on its results of operations and financial position.

In July 2006, the FASB released FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. This interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. This statement is effective for fiscal years beginning after December 15, 2006. If there are changes in net assets as a

result of application of FIN 48, these will be accounted for as an adjustment to retained earnings. The Company adopted FIN 48 in the first quarter of 2007, and determined that FIN 48 will not impact the Company's financial position and results of operations.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurement." SFAS 157 establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We are required to adopt the provision of SFAS 157, as applicable, beginning in fiscal year 2008. Management does not believe the adoption of SFAS 157 will have a material impact on our financial position or results of operations.

Market Risk. Point.360 had borrowings of $7.6 million at December 31, 2006 under term loan and revolving credit agreements. All debt was subject to a variable interest rate. The weighted average interest rate paid during 2006 was 7.8%. For variable rate debt outstanding at December 31, 2006, a .25% increase in interest rates will increase annual interest expense by approximately $19,000. Amounts outstanding under the revolving credit facility provide for interest at the banks' prime rate minus 0%-1.00% assuming the same amount of outstanding debt or LIBOR plus 1.5% to 2.5% and LIBOR plus 3.15% for the term loan. Our market risk exposure with respect to financial instruments is to changes in prime or LIBOR rates.

Questions and requests for assistance may be directed to the information agent at the address and telephone numbers listed below. Additional copies of this prospectus, the letter of transmittal and other tender offer materials may be obtained from the information agent as set forth below, and will be furnished promptly at our expense. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the offer.

You may obtain information regarding the Tender Offer from the Information Agent as follows:

Banks and Brokerage Firms, Please Call: (212) 269-5550
All Others Call Toll-free: (800) 488-8075

Section 145 of the Delaware General Corporation Law permits DG FastChannel's board of directors to indemnify any person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with any threatened, pending or completed action, suit or proceeding in which such person is made a party by reason of his or her being or having been a director, officer, employee or agent of DG FastChannel, or serving or having served, at the request of DG FastChannel, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, in terms sufficiently broad to permit such indemnification under circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act. The statute provides that indemnification pursuant to its provisions is not exclusive of other rights of indemnification to which a person may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise.

Articles 8 and 9 of DG FastChannel's Certificate of Incorporation provides for indemnification of its directors, officers, employees and other agents to the fullest extent permitted by law.

As permitted by Sections 102 and 145 of the Delaware General Corporation Law, DG FastChannel's Certificate of Incorporation eliminates the liability of a DG FastChannel director for monetary damages to DG FastChannel and its stockholders arising from a breach or alleged breach of a director's fiduciary duty except for liability for any breach of a director's duty of loyalty to DG FastChannel or its stockholders, liability for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, liability under section 174 of the Delaware General Corporation Law, or liability for any transaction from which the director derived an improper personal benefit.

In addition, DG FastChannel maintains officers' and directors' insurance covering certain liabilities that may be incurred by officers and directors in the performance of their duties.

See the Exhibit Index attached to this Registration Statement and incorporated by reference.

(a) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(b) The undersigned Registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report, to security holders that is incorporated by reference in the proxy statement/prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information.

(c) The undersigned Registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form.

(d) The Registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet the requirements of Section l0(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(e) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

(f) The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

(g) The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

Pursuant to the requirements of the Securities Act, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Irving, State of Texas, on June 8, 2007.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated below and on the dates indicated.

Delaware (State or Other Jurisdiction of Incorporation or Organization)		7319 (Primary Standard Industrial Classification Code Number)		94-3140772 (I.R.S. Employer Identification Number)
750 W. John Carpenter Freeway, Suite 700 Irving, Texas 75039 (972) 581-2000 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)

Title of Each Class of Securities Being Registered	Amount To Be Registered(1)	Proposed Maximum Offering Price Per Unit	Proposed Maximum Aggregate Offering Price(2)	Amount of Registration Fee


Common Stock, par value $0.001 per share	2,000,000	N/A	$61,006,339	$1,873

Q.		Who Is Offering to Buy Your Shares?
A.		DG FastChannel delivers the standard in digital media services to the advertising, broadcast and publishing industries. DG FastChannel's innovative technology solutions help advertisers and agencies work faster, smarter and more competitively. Offering both the ubiquitous reach of multicast satellite transmissions and the targeted capabilities of Internet technologies, DG FastChannel has deployed a suite of business intelligence and asset management tools and creative and production resources designed specifically for the advertising community. DG FastChannel's next generation distribution platform includes high definition electronic video distribution capabilities that streamline the advertising process from point of ingest via digital distribution to its edge-servers located at TV, cable and network broadcasters. DG FastChannel's online media distribution network and suite of products and services are relied upon by more than 5,000 advertisers and agencies, and over 21,000 online radio, television, cable, network and print publishing destinations.
Q.		Why Are We Making the Offer?
A.		We are making the offer for the purpose of acquiring control of Point.360 and ultimately all of the outstanding shares of Point.360 common stock.
Q.		How will Point.360 be Restructured Prior to the Consummation of the Offer?
A.		Pursuant to a Contribution Agreement, which is referred to throughout this prospectus as the contribution agreement, dated as of April 16, 2007, by and among DG FastChannel, Point.360 and New 360, prior to the consummation of the offer, Point.360 will contribute to its wholly owned subsidiary, New 360, all of the assets owned, licensed or leased by Point.360 that are not used exclusively in connection with the business of Point.360 representing advertising agencies, advertisers, brands and other media companies, which is referred to throughout this prospectus as the ADS business, and New 360 will assume certain liabilities of Point.360. Immediately following such contribution but prior to the consummation of the offer, Point.360 will distribute to its shareholders (other than DG FastChannel) pro rata all of the capital stock then outstanding of New 360, which is referred throughout this prospectus as the spin-off. The shares of capital stock of New 360 will be registered under the Exchange Act and will be approved for listing on the Nasdaq Global Market. As a result of such contribution and spin-off transactions, at the consummation of the offer, the assets and liabilities of Point.360 will consist only of those assets and liabilities exclusively related to the ADS business.
Q.		What Will You Receive in Exchange for the Shares of Point.360 Common Stock that You Tender in the Offer?
A.		If we complete the offer, you will receive approximately 0.1895 shares of DG FastChannel common stock for each share of Point.360 common stock (including the associated preferred share purchase rights) that you validly tender in the offer, on the terms and conditions contained in this prospectus and in the related letter of transmittal. The exact number of shares of DG FastChannel common stock to be exchanged for each share of Point.360 common stock will be obtained by dividing 2 million by the number of shares of Point.360 common stock (excluding shares owned directly or indirectly by DG FastChannel or Point.360) issued and outstanding immediately prior to the consummation of the offer. Based on the closing price of Point.360 common stock as reported on the Nasdaq Global Market on June 7, 2007, the last trading day prior to the printing of this prospectus for which this information was practicably available, we assume that 10,554,730 shares of Point.360 common stock will be issued and outstanding immediately prior to the consummation of the offer (excluding shares owned directly or indirectly by DG FastChannel or Point.360).

	We will not issue fractional shares of DG FastChannel common stock. Instead, any Point.360 shareholder entitled to receive a fractional share of DG FastChannel common stock will receive a cash payment in lieu of the fractional interest. See "The Offer—Cash Instead of Fractional Shares of DG FastChannel Common Stock" on page 53.
Q.	What Does the Board of Directors of Point.360 Think of the Offer and the Merger?
A.	On April 13, 2007, the board of directors of Point.360 approved the merger agreement, the offer and the merger, the contribution agreement and determined that the merger agreement and the transactions contemplated thereby, including the offer, are advisable, fair to and in the best interest of Point.360 shareholders. The board of directors of Point.360 also has recommended that Point.360 shareholders approve the merger contemplated by the merger agreement, if required by applicable law, accept the offer and tender their shares of Point.360 common stock in the offer. The board of directors of Point.360 has received a written opinion, dated April 13, 2007, from Marshall & Stevens, Incorporated, or Marshall & Stevens, the financial advisor to Point.360, to the effect that, as of the date of the opinion and based on and subject to the matters described in the opinion, the consideration to be received by Point.360 shareholders in the offer and merger is fair, from a financial point of view, to such shareholders. A summary of Marshall & Stevens' opinion, including the analyses performed, the bases and methods of arriving at the opinion and a description of Marshall & Stevens' investigation and assumptions, is provided in Point.360's Solicitation/Recommendation Statement on Schedule 14D-9, which is referred to throughout this prospectus as the Point.360 Recommendation Statement, which is being mailed to you together with this prospectus. The full text of Marshall & Stevens' written opinion, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached to the Point.360 Recommendation Statement as Annex A. For more information about the position of the board of directors of Point.360 on the offer, see the Point.360 Recommendation Statement.
Q.	What Does Point.360's Largest Shareholder Think of the Offer and the Merger?
A.	On April 16, 2007, Haig S. Bagerdjian, the largest shareholder of Point.360 and Point.360's chairman, president and chief executive officer, holding approximately 25.23% of the fully diluted shares of Point.360 common stock, entered into a support agreement with DG FastChannel pursuant to which he will be required to tender his shares in the offer. See "Interests of Certain Persons in the Offer and Subsequent Merger—Certain Agreements Between Haig Bagerdjian and DG FastChannel" on page 65.
Q.	What Are the Potential Benefits of the Offer and the Merger to Point.360 Shareholders?
A.	We believe that the offer should be attractive to Point.360 shareholders for the reasons described elsewhere in this prospectus, as well as for the following reasons:
	•	based on the closing prices of shares of Point.360 common stock on April 16 and 17, 2007, the last trading day preceding, and the trading day immediately following, respectively, our first announcement of our intention to acquire the outstanding shares of Point.360 common stock, the price per share of Point.360 Common Stock increased by 47%. On June 7, 2007, the last trading date prior to the printing of this prospectus for which this information was practicably available, the closing prices of a share of DG FastChannel common stock and a share of Point.360 common stock, as reported on the Nasdaq Global Market, were $21.11 and $5.91, respectively;
	•	you will have the opportunity to hold shares in a larger, more diversified combined company which we believe will have greater access to capital to pursue strategic growth opportunities in the digital media services industry than would Point.360 on a stand-alone basis; and

	•	you will have the opportunity to continue to share in the ADS business, future performance through your ownership of shares of DG FastChannel common stock, as well as an opportunity to similarly share in the performance of our other businesses.
Q.	What Are Some of the Other Factors You Should Consider in Deciding Whether to Tender Your Shares of Point.360 Common Stock?
A.	In addition to the factors described elsewhere in this prospectus, you should consider the following:
	•	as a DG FastChannel stockholder, your interest in the performance and prospects of the ADS business would only be indirect and in proportion to your share ownership in DG FastChannel. You, therefore, will not realize the same financial benefits of future appreciation in the value of the ADS business, if any, that you may realize if the offer and the merger were not completed and you remained a Point.360 shareholder; and
	•	an investment in a company of Point.360's size may be associated with greater risk and a greater potential for a higher return than an investment in a more diversified company such as DG FastChannel. On the other hand, as a shareholder in a more diversified company, your investment will be exposed to risks and events that likely would have had little or no effect on Point.360 as a stand-alone company.
	We describe various factors Point.360 shareholders should consider in deciding whether to tender their shares under "Risk Factors" on page 24 and "Background and Reasons for the Offer and Contemplated Merger—Additional Factors for Consideration by Point.360 Shareholders" on page 44.
Q.	How Do You Participate in the Offer?
A.	You are urged to read this entire prospectus carefully, and to consider how the offer and the merger affect you. Then, if you wish to tender your shares of Point.360 common stock, you should complete and sign the enclosed letter of transmittal and return it with your stock certificates to the exchange agent and depository at its address set forth on the back cover page of this prospectus or, if you hold your shares in "street name" through a broker, ask your broker to tender your shares. Please read this prospectus carefully for more information about procedures for tendering your shares, the timing of the offer, extensions of the offer period and your rights to withdraw your shares from the offer prior to the expiration date.
Q.	What Are the Most Significant Conditions to the Offer?
A.	The offer is conditioned upon, among other things, satisfaction of the requirement that there must be validly tendered, and not properly withdrawn, prior to the expiration of the offer, at least a majority of the fully diluted shares of Point.360 common stock, which is defined as the sum of all outstanding shares of Point.360 common stock and all shares of Point.360 common stock issuable pursuant to outstanding Point.360 stock options. In addition to this "minimum condition," the following conditions must also be met as of the expiration of the offer, unless waived by us, where permissible:
	•	the registration statement on Form S-4 of which this prospectus is a part must have become effective;
	•	the shares of DG FastChannel common stock issuable in the offer shall have been approved for listing on the Nasdaq Global Market;
	•	Point.360 and DG FastChannel shall have received certain tax opinions;
	•	there shall have been no event having a material adverse effect on Point.360 and no specified breaches by Point.360 of the merger agreement;

Table of Contents		i
Questions and Answers About the Offer		1
Cautionary Statement Regarding Forward-Looking Statements		7
Summary		7
	The Offer	7
	The Spin-Off	14
	The Companies	15
Selected Consolidated Historical Financial Information		16
Summary Unaudited Pro-Forma Condensed Combined Financial Information		19
Unaudited Comparative Per Common Share Data		20
Comparative Per Share Market Price and Dividend Information		22
Recent Closing Prices		23
Risk Factors		24
	Risks Relating to the Offer and the Subsequent Merger	24
	Risks Relating to DG FastChannel and the Combined Company	26
	Risks Relating to the Industry	35
Background and Reasons for the Offer and the Contemplated Merger		40
	Background of the Offer and the Contemplated Merger	40
	Additional Factors for Consideration by Point.360 Shareholders	44
Recommendation of Point.360's Board of Directors		45
The Offer		45
	Exchange of Shares of Point.360 Common Stock	45
	Timing of the Offer	46
	Conditions of the Offer	46
	Extension, Termination and Amendment	49
	Procedure for Tendering Shares	50
	Withdrawal Rights	51
	Subsequent Offering Period	52
	Effect of a Tender of Shares	52
	Delivery of Shares of DG FastChannel Common Stock	52
	Cash Instead of Fractional Shares of DG FastChannel Common Stock	53
	Material U.S. Federal Income Tax Consequences	53
	Transferability of Shares of DG FastChannel Common Stock	56
	Approval of the Merger	56
	Appraisal Rights	57
Certain Legal Matters		60
	Regulatory Approvals	60
	State Takeover Laws	60
Certain Effects of the Offer		61
	Effects on the Market; Exchange Act Registration	61
	Financing of the Offer	62
	Conduct of Point.360 if the Offer is Not Completed	62
	Accounting Treatment	62
	Fees and Expenses	62
Interests of Certain Persons in the Offer and the Subsequent Merger		63
	Interests of Management and the Point.360 Board	63
	Certain Agreements Between Haig Bagerdjian and DG FastChannel	65
	Interests of DG FastChannel in the Offer	65

The Merger Agreement		67
	The Spin-Off	67
	The Offer	67
	The Merger	69
	Representations and Warranties	71
	Conduct of Business Pending the Merger	72
	Preparation of Registration Statement	75
	No Solicitation of Alternative Transactions	75
	Point.360 Board of Directors	77
	Indemnification and Insurance	78
	Employee Benefits	78
	Conditions to the Offer	78
	Conditions to the Merger	78
	Termination and Termination Fees	79
	Amendment	80
	Costs and Expenses	80
Information About Point.360's ADS Business		81
Comparison of the Rights of Holders of Point.360 Common Stock and Holders of DG FastChannel Common Stock		81
Information Concerning Directors and Executive Officers of DG FastChannel		91
Additional Information		91
	Legal Matters	91
	Experts	91
	Where You Can Find Additional Information	91
	Miscellaneous	93
Unaudited Pro-Forma Condensed Combined Financial Information		94
Annex A Agreement and Plan of Merger and Reorganization		A-1
Annex B Contribution Agreement		B-1
Annex C Chapter 13 of the California General Corporation Law		C-1
Annex D Point.360's ADS Business Audited Financial Statements at December 31, 2006 and 2005 and for Each of the Three Years Ended December 31, 2006		D-1
Annex E Point.360's ADS Business Unaudited Financial Statements at March 31, 2007 and for the Three Months Ended March 31, 2007 and 2006		E-1
Annex F Point.360 Management's Discussion and Analysis of Financial Condition and Results of Operations		F-1

	•	there shall be no legal impediments to the offer and certain events such as trading suspensions, banking moratoriums or the commencement or acceleration of a war or any material terrorist activities involving the United States shall not have occurred;
	•	Point.360's board of directors shall not have withdrawn its recommendation of the offer and no person (other than DG FastChannel, Julia Stefanko or Mr. Bagerdjian) shall have become the beneficial owner of more than 10% of the outstanding shares of Point.360 common stock;
	•	the contribution and the spin-off shall have been completed;
	•	DG FastChannel shall have received, from New 360, an executed non-competition agreement, post-production services agreement, working capital reconciliation agreement, and indemnification and tax matters agreement;
	•	DG FastChannel shall have received, from certain members of Point.360 management, an executed officer confidentiality agreement; and
	•	the merger agreement shall not have been terminated pursuant to its terms.
	These conditions and other conditions to the offer are discussed in this prospectus under "The Offer—Conditions of the Offer" on page 46.
Q.	If You Decide Not to Tender, How Will This Affect the Offer and Your Shares of Point.360 Common Stock?
A.	We will not acquire any shares of Point.360 common stock in the offer unless the minimum condition is satisfied. Your failure to tender your shares of Point.360 common stock will reduce the likelihood that we will receive tenders of a sufficient number of shares of Point.360 common stock to be able to complete the offer. However, in light of the agreement with Mr. Bagerdjian to tender his shares, the fact that DG FastChannel already owns 13.25% of the fully diluted shares of Point.360 common stock and the intent of the directors and officers of Point.360 to tender the shares they hold in the offer, we believe that it is highly likely that the minimum condition will be satisfied in the offer, unless an event occurs that enables Point.360 to terminate the merger agreement.
	The offer is the first step in our acquisition of Point.360's ADS business and is intended to facilitate the acquisition of all outstanding shares of Point.360 common stock. After completion of the offer, we will cause Point.360 to complete a merger with and into DG FastChannel, with DG FastChannel continuing as the surviving corporation, which is referred to throughout this prospectus as the merger. The purpose of the merger is to acquire all outstanding shares of Point.360 common stock not exchanged in the offer. In the merger, each outstanding share of Point.360 common stock (except for shares beneficially owned directly or indirectly by DG FastChannel for its own account) will be converted into the right to receive shares of DG FastChannel common stock at the same exchange ratio used in the offer, subject to appraisal rights to the extent applicable under California law. If the merger takes place, except for your right to an appraisal of your shares of Point.360 common stock to the extent applicable under California law, the only difference to you between tendering your Point.360 common stock in the offer and not tendering your Point.360 common stock is that you will receive shares of DG FastChannel common stock earlier if you tender your shares in the offer. An earlier tender of your shares of Point.360 common stock may, however, help to ensure the satisfaction of the minimum condition and the completion of the offer and merger.

Q.	How Long Will It Take to Complete the Offer and the Merger?
A.	We hope to complete the offer by the third quarter of 2007. The offer is currently scheduled to expire at 12:00 midnight, New York City time, on [ ], [ ], 2007. However, we may extend the offer if the conditions to the offer have not been satisfied as of the offer's scheduled expiration or if we are required to extend the offer pursuant to the SEC's tender offer rules. After completion of the offer, DG FastChannel will cause Point.360 to be merged with and into DG FastChannel, with each outstanding share of Point.360 common stock (except for shares beneficially owned directly or indirectly by DG FastChannel for its own account) being converted into the right to receive shares of DG FastChannel common stock at the same exchange ratio as used in the offer, subject to appraisal rights to the extent applicable under California law. If, after the completion of the offer we beneficially own more than 90% of the outstanding shares of Point.360 common stock, including because we have exercised our option to purchase shares directly from Point.360, we may effect the merger without the approval of Point.360 shareholders, as permitted under California and Delaware law, which could occur promptly following the completion of the offer. If we complete the offer but own less than 90% of the Point.360 common stock after the offer, and we do not exercise our option to purchase shares directly from Point.360, then the merger will require Point.360 shareholder approval. As the then-majority shareholder of Point.360, we will approve the merger by written consent and we will complete the merger after a definitive information statement regarding the merger is disseminated to Point.360 shareholders. In such circumstances, the consummation of the merger could take six weeks or more following the completion of the offer.
Q.	Do You Have to Vote to Approve the Offer or the Merger?
A.	Because we are extending the offer directly to Point.360 shareholders, Point.360 shareholders are not being asked to vote to approve the offer. Approval by Point.360 shareholders, however, may be required to approve the merger following the successful completion of the offer. If approval is required, once the offer is completed, it can be accomplished solely by us because we will own a majority of the shares of Point.360 common stock at that time. Point.360 shareholders will receive an information statement relating to our approval of the merger. If we own 90% or more of the outstanding common stock of Point.360 following completion of the offer or if we exercise our option to purchase additional shares directly from Point.360 to reach the 90% threshold, the merger can be accomplished without any vote of Point.360 shareholders under applicable California and Delaware law.
Q.	What Percentage of the DG FastChannel Common Stock Will Current Point.360 Shareholders Own after the Completion of the Offer and the Merger?
A.	We anticipate that the completion of the offer and the merger will result in the exchange of the outstanding shares of Point.360 common stock into approximately 11% of the DG FastChannel common stock outstanding at the conclusion of the transactions, without regard to DG FastChannel stock options, and approximately 10% on a fully diluted basis. In general, this assumes that:
	•	2.0 million shares of DG FastChannel common stock would be issued in the offer and the subsequent merger;
	•	approximately 15.9 million shares of DG FastChannel common stock are outstanding before giving effect to the completion of the offer and the subsequent merger; and
	•	no Point.360 shareholders exercise appraisal rights.

Q.	Will You be Taxed on the Shares of DG FastChannel Common Stock that You Receive?
A.	It is a condition to the completion of the offer that DG FastChannel and Point.360 receive legal opinions from their respective tax counsel to the effect that the offer and the merger together will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, or the Code. A Point.360 shareholder who, consistent with such opinions, receives his, her or its shares of DG FastChannel common stock pursuant to a transaction constituting a reorganization within the meaning of Section 368(a) of the Code will not recognize any gain or loss in the offer and/or the merger, except for gain or loss attributable to cash received in lieu of a fractional share of DG FastChannel common stock. Shareholders should consult their tax advisors for a full understanding of all of the tax consequences of the offer and the merger to them. See "The Offer—Material U.S. Federal Income Tax Consequences" on page 53.
Q.	Do the Statements on the Cover Page Regarding this Prospectus Being Subject to Change or Amendment and the Registration Statement Filed with the SEC Not Yet Being Effective Mean that the Offer May Not Commence?
A.	No. As permitted under SEC rules, we may commence the offer without the registration statement, of which this prospectus is a part, having been declared effective by the SEC. We cannot, however, complete the offer and accept for exchange any shares of Point.360 common stock tendered in the offer until the registration statement is declared effective by the SEC and the other conditions to our offer have been satisfied or, where permissible, waived. The offer will commence when we first mail this prospectus and the related letter of transmittal to Point.360 shareholders.
Q.	Are DG FastChannel's Business, Results of Operations, Financial Condition and Prospects Relevant to Your Decision to Tender Your Shares in the Offer?
A.	Yes. Shares of Point.360 common stock accepted in the offer will be exchanged for shares of DG FastChannel common stock and therefore you should consider DG FastChannel's business, results of operations, financial condition and prospects before you decide whether to tender your shares in the offer. In considering our business, results of operations, financial condition and prospects, you should review the documents incorporated by reference in this prospectus because they contain detailed business, financial and other information about us. See "Additional Information—Where You Can Find Additional Information" on page 91.
Q.	Whom Can You Call with Questions about the Offer?
A.	You can contact our information agent for the offer:
		D.F. King & Co., Inc. 48 Wall Street, 22nd Floor New York, NY 10005 Banks and Brokerage Firms, please call (212) 269-5550 All others call toll-free: (800) 488-8075

Basic net income (loss) per common share from continuing operations	$	0.04		$	(0.27	)	$	0.46		$	0.81		$	(17.94	)
Basic net income (loss) per common share from discontinued operations	$	(0.10	)	$	0.12		$	(0.02	)	$	(0.22	)	$	(0.07	)
Basic net income (loss) per common share	$	(0.06	)	$	(0.15	)	$	0.44		$	0.59		$	(18.01	)
Diluted net income (loss) per common share from continuing operations	$	0.04		$	(0.27	)	$	0.46		$	0.77		$	(17.92	)
Diluted net income (loss) per common share from discontinued operations	$	(0.10	)	$	0.12		$	(0.02	)	$	(0.21	)	$	(0.07	)
Diluted net income (loss) per common share	$	(0.06	)	$	(0.15	)	$	0.44		$	0.56		$	(17.99	)
Basic weighted average common shares outstanding		10,568			7,378			7,277			7,137			7,072
Diluted weighted average common shares outstanding		10,568			7,378			7,320			7,489			7,081

		As of and For the Three Months Ended March 31, 2007		As of and For the Year Ended December 31, 2006
Historical DG FastChannel:
	Net income from continuing operations per common share—basic	$	0.15	$	0.04
	Net income from continuing operations per common share—diluted	$	0.15	$	0.04
	Book value per common share	$	9.10	$	8.96
	Dividends declared per common share		—		—
Historical Point.360:
	Net income per common share—basic	$	0.05	$	0.04
	Net income per common share—diluted	$	0.05	$	0.04
	Book value per common share	$	4.07	$	4.10
	Dividends declared per common share		—		—
Unaudited pro forma combined per DG FastChannel share:
	Net income (loss) from continuing operations per common share—basic	$	0.11	$	(0.39	)
	Net income (loss) from continuing operations per common share—diluted	$	0.10	$	(0.39	)
	Book value per common share	$	9.97	$	9.85
	Dividends declared per common share		—		—

		Historical DG FastChannel			Historical Point.360		Historical Pathfire			Subtotal			Pro Forma Adjustments			Pro Forma Combined
Cash		$	24,574		$	—	$	1,740		$	26,314		$	(16,314	)(1)	$	10,000
Accounts receivable, net			16,322			4,421		2,567			23,310			(280	)(8)		23,030
Inventory			—			195		46			241			—			241
Deferred Income taxes			2,129			244		—			2,373			—			2,373
Other current assets			1,370			51		323			1,744			—			1,744
Assets held for sale from discontinued operations			267			—		—			267			—			267

Total current assets			44,662			4,911		4,676			54,249			(16,594	)		37,655
Property and equipment, net			11,837			1,167		3,271			16,275			—			16,275
Long term investments			5,773			13,298		—			19,071			(19,071	)(4)		—
Goodwill			65,194			23,736		—			88,930			22,412	(2),(7)		111,342
Deferred income taxes, net			8,949			249		—			9,198			162	(5)		9,360
Intangible assets, net			34,525			—		—			34,525			28,000	(2)		62,525
Other noncurrent assets			914			209		1,480			2,603			—			2,603
Noncurrent assets held for sale from discontinued operations			1,755			—		—			1,755			—			1,755

Total assets		$	173,609		$	43,570	$	9,427		$	226,606		$	14,909		$	241,515

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities		$	9,018		$	1,536	$	1,928		$	12,482		$	(280	)(8)	$	12,202
Deferred revenue			1,159			—		2,021			3,180			—			3,180
Current portion of long-term debt and capital leases			4,188			907		2,426			7,521			(907	)(6)		6,614
Obligations of discontinued operations			221			—		—			221			—			221

Total current liabilities			14,586			2,443		6,375			23,404			(1,187	)		22,217
Long-term debt and capital leases			14,800			452		2,353			17,605			11,014	(1),(6)		28,619
Other long-term liabilities			—			—		1,453			1,453						1,453
Deferred income taxes			—			—		—			—			11,200	(7)		11,200

Total liabilities			29,386			2,895		10,181			42,462			21,027			63,489
Redeemable convertible preferred stock			—			—		131,933			131,933			(131,933	)(3)		—
	Shareholders' equity:
	Capital stock		333,983			20,165		5,169			359,317			8,722	(1),(3)		368,039
	Accumulated deficit		(189,159	)		20,510		(137,856	)		(306,505	)		117,346	(3)		(189,159	)
	Treasury stock, at cost		(853	)		—		—			(853	)		—			(853	)
	Other comprehensive income		252			—		—			252			(253	)(5)		(1	)

	Total shareholders' equity		144,223			40,675		(132,687	)		52,211			125,815			178,026

	Total liabilities, redeemable convertible preferred stock and shareholders' equity	$	173,609		$	43,570	$	9,427		$	226,606		$	14,909		$	241,515

		Historical
		Historical												Pro Forma Adjustments			Pro Forma Combined
		DG FastChannel			Point.360			Pathfire			Subtotal			Pro Forma Adjustments			Pro Forma Combined
Revenues:		$	19,894		$	5,175		$	4,267		$	29,336		$	(25)	(4)	$	29,311
Costs and expenses:
	Cost of revenues		8,870			2,827			1,969			13,666			—			13,666
	Sales and marketing		1,362			304			599			2,265			—			2,265
	Research and development		476			—			758			1,234			—			1,234
	General and administrative		2,584			970			685			4,239			—			4,239
	Depreciation and amortization		2,545			212			612			3,369			700	(1)		4,069

	Total costs and expenses		15,837			4,313			4,623			24,773			700			25,473

	Income (loss) from operations		4,057			862			(356	)		4,563			(725	)		3,838
Other (income) expense:
	Interest income and other (income) expense, net		(196	)		(1	)		(29	)		(226	)		130	(2)		(96	)
	Interest expense		370			11			176			557			244	(2)		801

	Total other expense		174			10			147			331			374			705

Net income (loss) before provision for income taxes from continuing operations			3,883			852			(503	)		4,232			(1,099	)		3,133
Provision for income taxes			1,551			341			—			1,892			(641)	(3)		1,251

Net income (loss) from continuing operations			2,332		$	511		$	(503	)	$	2,340		$	(458	)	$	1,882

Basic net income (loss) per common share from continuing operations		$	0.15														$	0.11
Diluted net income (loss) per common share from continuing operations		$	0.15														$	0.10
Basic weighted average common shares outstanding			15,844									15,844			2,000			17,844
Diluted weighted average common shares outstanding			16,148									16,148			2,000			18,148

			Page
ARTICLE I THE OFFER AND MERGER			A-7
	Section 1.1	The Offer	A-7
	Section 1.2	Company Actions	A-10
	Section 1.3	Directors	A-11
	Section 1.4	Offer Exchange Fund; Distributions on Shares of Purchaser Common Stock	A-12
	Section 1.5	The Merger	A-12
	Section 1.6	Effective Time	A-13
	Section 1.7	Closing	A-13
	Section 1.8	Directors and Officers of the Surviving Corporation	A-13
	Section 1.9	Subsequent Actions	A-13
	Section 1.10	Stockholder Approval	A-13
ARTICLE II CONVERSION OF SECURITIES			A-14
	Section 2.1	Conversion of Capital Stock	A-14
	Section 2.2	Exchange of Certificates	A-15
	Section 2.3	Dissenting Shares	A-17
	Section 2.4	Top-Up Option	A-17
	Section 2.5	Treatment of Company Options, SARs and Restricted Stock	A-18
	Section 2.6	Affiliates	A-18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY			A-18
	Section 3.1	Organization	A-19
	Section 3.2	Capitalization	A-19
	Section 3.3	Authorization; Validity of Agreement; Company Action	A-20
	Section 3.4	Board Approvals	A-21
	Section 3.5	Consents and Approvals; No Violations	A-21
	Section 3.6	Company SEC Documents and Company Financial Statements	A-22
	Section 3.7	Internal Controls; Sarbanes-Oxley Act	A-22
	Section 3.8	Absence of Certain Changes	A-23
	Section 3.9	No Undisclosed Liabilities	A-23
	Section 3.10	Litigation	A-23
	Section 3.11	Employee Benefit Plans; ERISA	A-24
	Section 3.12	Taxes	A-26
	Section 3.13	Contracts	A-26
	Section 3.14	Title to Properties; Encumbrances	A-27
	Section 3.15	Intellectual Property	A-28
	Section 3.16	Labor Matters	A-29
	Section 3.17	Compliance with Laws; Permits	A-29
	Section 3.18	Information in the Information Statement	A-30
	Section 3.19	Information in the Registration Statement, the Offer Documents and the Schedule 14D-9	A-30
	Section 3.20	Opinion of Financial Advisor	A-31
	Section 3.21	Insurance	A-31
	Section 3.22	Environmental Laws and Regulations	A-31
	Section 3.23	Brokers; Expenses	A-31
	Section 3.24	Takeover Statutes	A-32

	December 31,
	2006		2005		2004		2003		2002
Cash and cash equivalents	$	24,474	$	1,886	$	8,059	$	7,236	$	2,527
Working capital		25,106		1,722		9,054		9,206		2,150
Property and equipment, net		12,829		11,494		10,692		9,471		12,212
Total assets		172,996		110,065		102,027		78,357		80,070
Long-term debt, excluding current portion		15,650		20,834		8,447		2,400		4,548
Net assets (liabilities) of discontinued operations		2,441		3,242		1,928		7,097		(17,495	)
Shareholders' equity		141,886		80,207		79,432		75,474		70,004

	Section 3.25	Customers	A-32
	Section 3.26	Unaudited Income Statement	A-32
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER			A-32
	Section 4.1	Organization	A-32
	Section 4.2	Subsidiaries	A-32
	Section 4.3	Capitalization	A-33
	Section 4.4	Authorization; Validity of Agreement; Purchaser Action	A-33
	Section 4.5	Consents and Approvals; No Violations	A-34
	Section 4.6	Purchaser SEC Documents and Purchaser Financial Statements	A-34
	Section 4.7	Litigation	A-35
	Section 4.8	No Undisclosed Liabilities	A-35
	Section 4.9	Absence of Purchaser Material Adverse Effect	A-35
	Section 4.10	Information in the Information Statement	A-35
	Section 4.11	Information in the Registration Statement, the Offer Documents and the Schedule 14D-9	A-35
	Section 4.12	No Vote Required	A-36
	Section 4.13	Ownership of Shares	A-36
	Section 4.14	Tax Matters	A-36
	Section 4.15	Brokers; Expenses	A-36
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER			A-36
	Section 5.1	Interim Operations of the Company	A-36
	Section 5.2	Interim Operations of the Purchaser	A-39
	Section 5.3	No Solicitation; Unsolicited Proposals	A-40
	Section 5.4	Board Recommendation	A-41
	Section 5.5	Notification	A-42
ARTICLE VI ADDITIONAL AGREEMENTS			A-42
	Section 6.1	Additional Agreements	A-42
	Section 6.2	Notification of Certain Matters	A-43
	Section 6.3	Access; Confidentiality	A-43
	Section 6.4	Consents and Approvals	A-43
	Section 6.5	Publicity	A-45
	Section 6.6	Directors' and Officers' Insurance and Indemnification	A-45
	Section 6.7	State Takeover Laws	A-46
	Section 6.8	Certain Tax Matters	A-46
	Section 6.9	Company Affiliates	A-47
	Section 6.10	Nasdaq Listing	A-47
	Section 6.11	Company Rights Agreement	A-47
	Section 6.12	Employee Benefit and Section 16 Matters	A-47
	Section 6.13	Contribution and Spin-Off Transactions	A-48
	Section 6.14	Delivery of Financial Statements	A-48
	Section 6.15	Non-Solicitation by the Parties	A-48
	Section 6.16	Appraisal	A-49
	Section 6.17	Repayment of Loans	A-49
	Section 6.18	Delivery of Purchaser Certificate	A-49
	Section 6.19	Ancillary Agreements	A-50
	Section 6.20	ADS Business Revenue Reconciliation	A-50

ARTICLE VII CONDITIONS			A-50
	Section 7.1	Conditions to Each Party's Obligations to Effect the Merger	A-50
ARTICLE VIII TERMINATION			A-51
	Section 8.1	Termination	A-51
	Section 8.2	Effect of Termination	A-52
ARTICLE IX MISCELLANEOUS			A-53
	Section 9.1	Amendment and Modification	A-53
	Section 9.2	Non-Survival of Representations and Warranties	A-53
	Section 9.3	Expenses	A-53
	Section 9.4	Notices	A-53
	Section 9.5	Certain Definitions	A-54
	Section 9.6	Terms Defined Elsewhere	A-59
	Section 9.7	Interpretation	A-62
	Section 9.8	Counterparts	A-62
	Section 9.9	Entire Agreement; No Third-Party Beneficiaries	A-62
	Section 9.10	Severability	A-62
	Section 9.11	Governing Law; Jurisdiction	A-62
	Section 9.12	Waiver of Jury Trial	A-63
	Section 9.13	Assignment	A-63
	Section 9.14	Enforcement	A-63
	Section 9.15	Representations of the PPB Sub	A-63

*ANNEX*
Annex I		Conditions to the Offer
*EXHIBITS*
Exhibit A		Contribution Agreement
Exhibit B		Form of Rule 145 Affiliate Letter
Exhibit C		Form of Noncompetition Agreement
Exhibit D		Form of Post Production Services Agreement
Exhibit E		Form of Working Capital Reconciliation Agreement
Exhibit F		Form of Indemnification and Tax Matters Agreement
Exhibit G		Form of Officer Confidentiality Agreement
*COMPANY DISCLOSURE SCHEDULE*
Section 3.1(a)		Foreign Jurisdictions
Section 3.2(b)		Company Stock Rights
Section 3.5		Consents
Section 3.8		Absence of Certain Changes
Section 3.10		Litigation
Section 3.11		Employee Benefit Plans
Section 3.13		Material Contracts
Section 3.14		Title to Properties
Section 3.15		Intellectual Property
Section 3.22		Environmental
Section 3.23		Brokers/Transaction Expenses
Section 3.26		Unaudited Income Statement
Section 5.1		Interim Operations
Section 6.6(c)		D&O Insurance
Section 7.1(g)		Litigation Matters
Section 9.5		ADS Customers

ADS Employees		Section 6.12
After Consultation		Section 5.3(b)
Agreement		Preamble
Appointment Date		Section 5.1
Appraisal		Section 6.16
Articles of Merger		Section 1.6
Audited Income Statement		Section 3.26
Balance Sheet Date		Section 3.8(a)
Base Premium		Section 6.6(c)
Canceled Stock Rights		Section 2.5(a)
Certificates		Section 2.2(b)
CGCL		Recitals
Closing		Section 1.7

Closing Date		Section 1.7
Code		Recitals
Company		Preamble
Company Affiliate		Section 6.9
Company Agreements		Section 3.5
Company Articles		Section 1.3(b)
Company Benefit Plans		Section 3.11(a)
Company Board of Directors		Recitals
Company Bylaws		Section 1.3(b)
Company Change in Recommendation		Section 5.4(a)
Company Common Stock		Recitals
Company Disclosure Schedule		Article III
Company Expenses		Section 8.2(d)
Company Financial Advisor		Section 3.20
Company Financial Statements		Section 3.6(a)
Company Governing Documents		Section 1.3(b)
Company Intellectual Property		Section 3.15
Company Material Contract		Section 3.13
Company Options		Section 2.5(a)
Company Permits		Section 3.16(b)
Company Preferred Stock		Section 3.2(a)
Company Recommendation		Section 5.4(a)
Company Rights		Recitals
Company Rights Agreement		Recitals
Company SEC Documents		Section 3.6(a)
Company Stock Rights		Section 3.2(a)
Confidentiality Agreement		Section 5.3(b)
Continuing Directors		Section 1.3(b)
Contribution		Recitals
Contribution Agreement		Recitals
Covered Persons		Section 6.6(a)
D&O Insurance		Section 6.6(c)
DGCL		Recitals
Dissenters Provisions		Section 2.3(a)
Dissenting Shares		Section 2.3(a)
Effective Time		Section 1.6
Equity Interests		Section 3.2(a)
Exchange Act		Section 1.1(a)
Exchange Agent		Section 1.4(a)
Form 10		Section 6.13
GAAP		Section 3.6(a)
Governmental Entity		Section 3.5
HSR Act		Section 3.5
Incorporated Open Source Materials		Section 3.15(c)
Indemnification Agreements		Section 6.6(a)
Indemnification and Tax Matters Agreement		Annex I
Information Statement		Section 1.10(a)
Initial Expiration Date		Section 1.1(a)
Junior Preferred Stock		Section 3.2(a)
Media Distribution Service Agreement		Recitals
Merger		Recitals

Merger Consideration		Section 2.1(c)
Merger Exchange Fund		Section 2.2(a)
Minimum Condition		Section 1.1(a)
Monthly Unaudited Financial Information		Section 6.14
Nasdaq		Section 1.1(b)
Noncompetition Agreement		Annex I
Notice of Recommendation Change		Section 5.4(b)
Offer		Recitals
Offer Consideration		Recitals
Offer Documents		Section 1.1(c)
Offer Exchange Fund		Section 1.4(a)
Offer to Exchange		Section 1.1(a)
Officer Confidentiality Agreement		Annex I
Outside Date		Section 8.1(b)(iv)
Permitted Liens		Section 3.14
Post Production Services Agreement		Annex I
Post Signing Returns		Section 6.8(a)
PPB Appraisal Report		Section 6.16
PPB Fair Market Value		Section 6.16
PPB Sub		Preamble
Prospectus		Section 1.1(c)
Public Disclosure		Section 5.4(a)
Purchaser		Preamble
Purchaser Agreements		Section 4.5
Purchaser Common Stock		Recitals
Purchaser Expenses		Section 8.2(b)
Purchaser Financial Statements		Section 4.6
Purchaser Governing Documents		Section 4.3(c)
Purchaser Options		Section 4.3(a)
Purchaser Preferred Stock		Section 4.3(a)
Purchaser SEC Documents		Section 4.6
Purchaser Stock Rights		Section 4.3(a)
Registration Statement		Section 1.1(c)
Regulation M-A		Section 1.1(c)
Representatives		Section 5.3(a)
Restricted Stock		Section 2.5(b)
SAR		Section 2.5(a)
Sarbanes-Oxley Act		Section 3.6(a)
Schedule 14D-9		Section 1.2(a)
Schedule TO		Section 1.1(c)
SEC		Section 1.1(c)
Section 16		Section 6.12
Securities Act		Section 3.6(a)
Shares		Recitals
Significant Subsidiaries		Section 4.2
Spin-Off		Recitals
Support Agreement		Recitals
Surviving Corporation		Section 1.5(a)
Termination Fee		Section 8.2(b)
Third Party		Section 5.3(a)
Top-Up Closing		Section 2.4(c)

Top-Up Exercise Event		Section 2.4(b)
Top-Up Exercise Notice		Section 2.4(c)
Top-Up Notice Date		Section 2.4(c)
Top-Up Notice Receipt		Section 2.4(c)
Top-Up Option		Section 2.4(a)
Top-Up Option Shares		Section 2.4(a)
Transactions		Recitals
Unaudited Income Statement		Section 3.26
Voting Debt		Section 3.2(a)
Working Capital Reconciliation Agreement		Annex I

		DG FASTCHANNEL, INC.
		By	/s/ SCOTT K. GINSBURG Name: Scott K. Ginsburg Title: Chairman and CEO
		POINT.360
		By	/s/ HAIG S. BAGERDJIAN Name: Haig S. Bagerdjian Title: Chairman, President and CEO
		NEW 360
		By	/s/ HAIG S. BAGERDJIAN Name: Haig S. Bagerdjian Title: Chairman, President and CEO

Report of Independent Registered Public Accounting Firm		D-2
Financial Statements:
	Balance Sheets— December 31, 2005 and 2006	D-3
	Statements of Income— Fiscal Years Ended December 31, 2004, 2005 and 2006	D-4
	Statements of Shareholders' Equity— Fiscal Years Ended December 31, 2004, 2005 and 2006	D-5
	Statements of Cash Flows— Fiscal Years Ended December 31, 2004, 2005 and 2006	D-6
Notes to Financial Statements		D-7

			December 31,
			2005		2006
Assets
Current assets:
	Cash and cash equivalents		$	—	$	—
	Accounts receivable, net of allowances for doubtful accounts of $140,000 and $269,000, respectively			5,209,000		5,264,000
	Inventories, net			221,000		210,000
	Prepaid expenses and other current assets			75,000		37,000
	Deferred income taxes			110,000		244,000

		Total current assets		5,615,000		5,755,000
Property and equipment, net (Note 4)				1,605,000		1,289,000
Deferred income taxes				—		249,000
Deposit and other assets				202,000		209,000
Investment in and advances to New 360				16,309,000		13,975,000
Goodwill (Note 3)				20,808,000		22,220,000

		Total assets	$	44,539,000	$	43,697,000

Liabilities and Shareholders' Equity
Current liabilities:
	Accounts payable		$	1,617,000	$	1,214,000
	Accrued wages and benefits			505,000		268,000
	Other accrued expenses			—		228,000
	Borrowings under revolving credit agreement (Notes 6)			1,852,000		1,542,000
	Current portion of borrowings under notes payable (Note 6)			132,000		106,000

		Total current liabilities		4,106,000		3,359,000

Deferred income taxes				107,000		—
Notes payable, less current portion (Note 6)				816,000		317,000

		Total long-term liabilities		923,000		317,000

		Total liabilities		5,029,000		3,676,000

Commitments and contingencies (Note 8)				—		—
Shareholders' equity
	Preferred stock—no par value; 5,000,000 shares authorized; none outstanding			—		—
	Common stock—no par value; 50,000,000 shares authorized; 9,368,857 and 9,749,582 shares issued and outstanding, respectively			17,971,000		18,488,000
	Additional paid-in capital			1,159,000		1,077,000
	Retained earnings			20,380,000		20,456,000

		Total shareholders' equity		39,510,000		40,021,000

		Total liabilities and shareholders' equity	$	44,539,000	$	43,697,000

	Shares	Amount		Additional Paid-in Capital			Retained Earnings			Shareholders Equity
Balance on December 31, 2003	9,134,559	$	17,625	$	624		$	19,119		$	37,368
Net income	—		—		—			3,505			3,505
Net loss attributable to New 360	—		—		—			(2,258	)		(2,258	)
Shares issued in connection with exercise of stock options	101,573		278		—			—			278
Tax effect of options exercised	—		—		51			—			51

Balance on December 31, 2004	9,236,132		17,903		675			20,366			38,944
Net income	—		—		—			457			457
Net loss attributable to New 360	—		—		—			(443	)		(443	)
Shares issued in connection with purchase of equipment (Note 3)	105,000		—		484			—			484
Shares issued in connection with exercise of stock options	27,725		68		—			—			68

Balance on December 31, 2005	9,368,857		17,971		1,159			20,380			39,510
Net income	—		—		—			263			390
Net loss attributable to New 360	—		—		—			(187	)		(314	)
Shares issued in connection with exercise of stock options	380,725		517		—			—			517
Incentive—based option expense	—		—		140			—			140
Cash paid in conjunction with acquisition	—		—		(222	)		—			(222	)

Balance on December 31, 2006	9,749,582	$	18,488	$	1,077		$	20,456		$	40,021

	2005		2006
Allocable to ADS Business	$	20,808,000	$	22,220,000
Allocable to New 360		8,666,000		9,254,000

Total Point.360 Goodwill	$	29,474,000	$	31,474,000

2007	$	1,158,000
2008		1,177,000
2009		1,000,000
2010		419,000
2011		384,000
Thereafter		1,792,000

2007	$	3,757,000
2008		3,447,000
2009		2,376,000
2010		2,173,000
2011		2,216,000
Thereafter		12,693,000

	Year Ended December 31,
	2005		2006
Risk-free interest rate	3.26	%	4.95	%
Expected term (years)	5.0		5.0
Volatility	38	%	47	%
Expected annual dividends	—		—

		Page
Financial Statements:
	Unaudited Balance Sheets— December 31, 2006 and March 31, 2007	E-2
	Unaudited Statements of Income— Three Months ended March 31, 2006 and 2007	E-3
	Unaudited Statements of Shareholders' Equity— Three Months ended March 31, 2007	E-4
	Unaudited Statements of Cash Flows— Three Months ended March 31, 2006 and 2007	E-5
Notes to Financial Statements		E-6

			December 31, 2006		March 31, 2007
*Assets*
Current assets:
	Cash and cash equivalents		$	—	$	—
	Accounts receivable, net of allowances for doubtful accounts of $269,000 and $278,000, respectively			5,264,000		4,421,000
	Inventories, net			210,000		195,000
	Prepaid expenses and other current assets			37,000		51,000
	Deferred income taxes			244,000		244,000

		Total current assets		5,755,000		4,911,000
Property and equipment, net				1,289,000		1,167,000
Deferred income taxes				249,000		249,000
Deposit and other assets				209,000		209,000
Investment in and advances to New 360				13,975,000		13,298,000
Goodwill				22,220,000		23,736,000

		Total assets	$	43,697,000	$	43,570,000

*Liabilities and Shareholders' Equity*
Current liabilities:
	Accounts payable		$	1,214,000	$	1,037,000
	Accrued wages and benefits			268,000		204,000
	Other accrued expenses			228,000		294,000
	Borrowings under revolving credit agreement			1,542,000		752,000
	Current portion of borrowings under notes payable			106,000		156,000

		Total current liabilities		3,359,000		2,443,000

Notes payable, less current portion				317,000		452,000

		Total long-term liabilities		317,000		452,000

		Total liabilities		3,676,000		2,895,000

Commitments and contingencies				—		—
Shareholders' equity
	Preferred stock—no par value; 5,000,000 shares authorized; none outstanding			—		—
	Common stock—no par value; 50,000,000 shares authorized; 9,749,582 and 9,984,746 shares issued and outstanding, respectively			18,488,000		19,067,000
	Additional paid-in capital			1,077,000		1,098,000
	Retained earnings			20,456,000		20,510,000

		Total shareholders' equity		40,021,000		40,675,000

		Total liabilities and shareholders' equity	$	43,697,000	$	43,570,000

			Quarter Ended March 31,
			2006			2007
Revenues			$	5,575,000		$	5,175,000
Cost of services sold				(3,563,000	)		(2,917,000	)

	Gross profit			2,012,000			2,258,000
Selling, general and administrative expense				(2,373,000	)		(2,189,000	)
Allocation of corporate expenses to subsidiary				838,000			793,000

	Operating income			477,000			862,000
Interest expense (net)				(54,000	)		(10,000	)

Income before income taxes				423,000			852,000
Provision for income taxes				(169,000	)		(341,000	)

	Net income		$	254,000		$	511,000

Earnings per share:
	Basic:
		Net income	$	0.03		$	0.05
		Weighted average number of shares		9,370,724			9,947,730

	Diluted:
		Net income	$	0.03		$	0.05
		Weighted average number of shares including the dilutive effect of stock options		9,537,361			10,448,818

			Quarter Ended March 31,
			2006			2007
Cash flows from operating activities:
	Net income		$	254,000		$	511,000
	Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization			224,000			212,000
	Provision for doubtful accounts			13,000			9,000
Changes in operating assets and liabilities (net of acquisitions):
	(Increase) decrease in accounts receivable			(164,000	)		834,000
	(Increase) decrease in inventories			18,000			15,000
	(Increase) in prepaid expenses and other current assets			18,000			(14,000	)
	(Increase) decrease in other assets			(2,000	)		—
	(Decrease) increase in accounts payable			597,000			(177,000	)
	Increase (decrease) in accrued expenses			(35,000	)		—

		Net cash and cash equivalents provided by operating activities		923,000			1,390,000

Cash flows from investing activities:
	Capital expenditures			(146,000	)		(90,000	)
	Adjustments to investment in and advances to New 360			346,000			221,000

		Net cash and cash equivalents used in investing activities		200,000			131,000

Cash flows from financing activities:
	Change in revolving credit agreement			(713,000	)		(790,000	)
	(Increase) decrease in goodwill			—			(1,515,000	)
	Proceeds from exercise of stock options			5,000			599,000
	Increase in (repayment of) notes payable			(385,000	)		185,000
	Repayment of capital lease obligations			(30,000	)		—

		Net cash and cash equivalents used in financing activities		(1,123,000	)		(1,521,000	)

Net increase in cash and cash equivalents				—			—
Cash and cash equivalents at beginning of year				—			—

Cash and cash equivalents at end of year			$	—		$	—

		Quarter Ended March 31
		2006					2007
		Amount			Percent of Revenues		Amount			Percent of Revenues
Revenues		$	5,575		100.0	%	$	5,175		100.0	%
Costs of services sold			(3,563	)	(63.9	)		(2,917	)	(56.4	)

Gross profit			2,012		36.1			2,258		43.6
Selling, general and administrative expense			(2,373	)	(42.6	)		(2,189	)	(42.3	)
Allocation of corporate expenses to subsidiary			838		15.0			793		15.3

	Operating income		477		8.6			862		16.7
Interest expense, net			(54	)	(1.0	)		(10	)	(0.2	)
(Provision for) benefit from income taxes			(169	)	(3.0	)		(341	)	(6.6	)

Net income (loss)		$	254		4.5		$	511		9.9