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Exhibit 10.4
 
SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

THIS SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated
as of July 29, 2010, is entered into between WELLS FARGO CAPITAL FINANCE, LLC, a
Delaware limited liability company, as successor by merger to Wachovia Capital
Finance Corporation (Western), as Agent and Lender (in such capacities,
“Lender”), and IMAGE ENTERTAINMENT, INC., a Delaware corporation (“Borrower”).
 
RECITALS
 
A.            Borrower, Egami Media, Inc., a Delaware corporation (which has
since been merged with and into Borrower), Image Entertainment (UK), Inc., a
Delaware corporation (which has since been merged with and into Borrower), Home
Vision Entertainment, Inc., a Delaware corporation (which has since been merged
with and into Borrower), and Lender have previously entered into that certain
Loan and Security Agreement dated May 4, 2007, as amended by that certain First
Amendment to Loan and Security Agreement dated as of April 28 2008, as amended
by that certain Second Amendment to Loan and Security Agreement dated as of June
23, 2009, as amended by that certain Third Amendment to Loan and Security
Agreement dated as of July 30, 2009, as amended by that certain Fourth Amendment
to Loan and Security Agreement dated as of January 8, 2010, as amended by that
certain Fifth Amendment to Loan and Security Agreement dated as of April 15,
2010, and as amended by that certain Sixth Amendment to Loan and Security
Agreement dated as of May 3, 2010 (as amended, the “Loan Agreement”), pursuant
to which Lender has made certain loans and financial accommodations available to
Borrower.  Terms used herein without definition shall have the meanings ascribed
to them in the Loan Agreement.
 
B.             Borrower has requested that Lender amend the Loan Agreement in
certain respects, and Lender is willing to accommodate such request on the terms
and conditions set forth herein.
 
C.             Borrower is entering into this Amendment with the understanding
and agreement that, except as specifically provided herein, none of Lender’s
rights or remedies as set forth in the Loan Agreement is being waived or
modified by the terms of this Amendment.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
 
1.             Amendments to Loan Agreement.
 
(a)           Clause (m) of the definition of "Eligible Accounts" contained in
Section 1.29 of the Loan Agreement is hereby amended and restated to read in its
entirety as follows:
 
 
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"(m)           (i) the aggregate amount of such Accounts owing by a single
account debtor (other than Amazon.com, Anderson Merchandisers, L.P., Wal-Mart
Stores, Inc.,  Best Buy Co., Inc., Ingram Entertainment, Inc., Target
Corporation, and AEC One Stop) do not constitute more than ten (10%) percent of
the aggregate amount of all otherwise Eligible Accounts; (ii) the aggregate
amount of such Accounts owing by Target Corporation do not constitute more than
twenty-five percent (25%) of the aggregate amount of all otherwise Eligible
Accounts; (iii) the aggregate amount of such Accounts owing by Best Buy Co.,
Inc. and Ingram Entertainment, Inc. do not, in the aggregate, constitute more
than twenty-five percent (25%) of the aggregate amount of all otherwise Eligible
Accounts; (iv) the aggregate amount of such Accounts owing by Amazon.com do not
constitute more than thirty-five percent (35%) of the aggregate amount of all
otherwise Eligible Accounts; (v) the aggregate amount of such Accounts owing by
AEC One Stop do not constitute more than twenty-five percent (25%) of the
aggregate amount of all otherwise Eligible Accounts; and (vi) the aggregate
amount of such Accounts owing by Anderson Merchandisers, L.P. and Wal-Mart
Stores, Inc. do not, in the aggregate, constitute more than thirty-five percent
(35%) of the aggregate amount of all otherwise Eligible Accounts (but, in each
case, the portion of the Accounts not in excess of the applicable percentages
may be deemed Eligible Accounts);"
 
(b)           Effective as of February 1, 2011, the definition of “Revolving
Loan Limit” in Section 1.92 of the Loan Agreement shall be amended and restated
to read in its entirety as follows:
 
“1.92           ‘Revolving Loan Limit’ shall mean an amount equal to
$15,000,000.”
 
(c)           Effective as of February 1, 2011, the principal amount set forth
below the Lender's signature on the signature pages to the Loan Agreement shall
be amended and restated to read in its entirety as follows: "$15,000,000".
 
(d)           The first sentence of Section 13.1(a) of the Loan Agreement is
hereby amended and restated to read in its entirety as follows:
 
“This Agreement and the other Financing Agreements shall become effective as of
the date set forth on the first page hereof and shall continue in full force and
effect for a term ending on July 31, 2011 (the “Maturity Date”), unless sooner
terminated pursuant to the terms hereof.  Borrowers may terminate this Agreement
at any time upon ten (10) days prior written notice to Agent (which notice shall
be irrevocable); provided, that this Agreement and all other Financing
Agreements must be terminated simultaneously.”
 
2.             Condition Subsequent.  With respect to the audited consolidated
financial statements of Parent and its Subsidiaries delivered to Lender pursuant
to 9.6(a)(ii) of the Loan Agreement for the fiscal year of Borrower ending March
31, 2010, on or before July 31, 2010, Borrower shall provide Lender with an
unqualified opinion of independent certified public accountants, which
accountants shall be an independent accounting firm selected by Borrower and
acceptable to Lender, that such audited consolidated financial statements have
been prepared in accordance with GAAP, and present fairly in all material
respects the results of operations and financial condition of Parent and its
Subsidiaries as of the end of such fiscal year.  Failure to deliver such opinion
within such time frame shall constitute an Event of Default.
 
 
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3.             Amendment Fee.
 
(a)           Borrower shall pay to Lender an amendment fee in the amount of
Five Hundred Thousand Dollars ($500,000) (the "Amendment Fee").  $100,000 of the
Amendment Fee shall be non-refundable, fully earned, and due and payable by
Borrower on the date of this Amendment.  The remaining portion of the Amendment
Fee shall be non-refundable, fully earned, and due and payable by Borrower as
follows: (a) $50,000 on September 30, 2010, (b) $50,000 on October 25, 2010, (c)
$100,000 on December 31, 2010, and (d) $200,000 on March 31,
2011.  Notwithstanding the foregoing, if the Loan Agreement is terminated and
all Obligations are fully repaid prior to the date a portion of the Amendment
Fee is fully earned and due and payable in accordance with the preceding
sentence, Lender shall waive payment of such portion of the Amendment Fee.
 
(b)           On or prior to August 13, 2010, Borrower shall provide Lender with
an irrevocable standby letter of credit with an original face amount of
$400,000, issued on behalf of JH Partners Evergreen Fund, LP by a financial
institution acceptable to Lender in its sole discretion, naming Lender as
beneficiary of such letter of credit, and otherwise with terms and in form and
substance satisfactory to Lender in its sole discretion (the “Amendment Fee
Related L/C”).  Failure of Borrower to provide the Amendment Fee Related L/C on
or prior to August 13, 2010, shall constitute an Event of Default.  For
clarification, the Amendment Fee Related L/C is separate and distinct from the
Permitted Holders L/C.
 
(c)           To the extent there is not sufficient Excess Availability to cover
any portion of the Amendment Fee then due and payable by Borrower in accordance
with clause (a) above, Lender shall be permitted to make a draw on the Amendment
Fee Related L/C to pay such portion of the Amendment Fee then due and payable by
Borrower.  Upon the termination of the Loan Agreement and repayment in full of
all Obligations (including, without limitation, any unpaid portion of the
Amendment Fee then due and payable), Lender shall return the Amendment Fee
Related L/C to Borrower.
 
4.             Effectiveness of this Amendment.  The effectiveness of this
Amendment is subject to the following conditions precedent:
 
(a)           Amendment.  Lender shall have received this Amendment, fully
executed in a sufficient number of counterparts for distribution to all parties.
 
(b)           Permitted Holders L/C.  Lender shall have received an amendment to
the Permitted Holders L/C, in form and substance satisfactory to Agent in its
sole discretion, extending the expiration date of such letter of credit to no
earlier than August 6, 2011.
 
 
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(c)           Representations and Warranties.  The representations and
warranties set forth herein and in the Loan Agreement shall be true and correct.
 
(d)           Other Required Documentation.  All other documents and legal
matters in connection with the transactions contemplated by this Amendment shall
have been delivered or executed or recorded and shall be in form and substance
satisfactory to Lender.
 
5.             Representations and Warranties.  Borrower represents and warrants
as follows:
 
(a)           Authority.  Borrower has the requisite corporate power and
authority to execute and deliver this Amendment, and to perform its obligations
hereunder and under the Financing Agreements (as amended or modified hereby) to
which it is a party.  The execution, delivery and performance by Borrower of
this Amendment have been duly approved by all necessary corporate action and no
other corporate proceedings are necessary to consummate such transactions.
 
(b)           Enforceability.  This Amendment has been duly executed and
delivered by Borrower.  This Amendment and each Financing Agreement (as amended
or modified hereby) is the legal, valid and binding obligation of Borrower,
enforceable against it in accordance with its terms, and is in full force and
effect.
 
(c)           Representations and Warranties.  The representations and
warranties contained in each Financing Agreement (other than any such
representations or warranties that, by their terms, are specifically made as of
a date other than the date hereof) are correct on and as of the date hereof as
though made on and as of the date hereof.
 
(d)           Due Execution.  The execution, delivery and performance of this
Amendment are within the power of Borrower, have been duly authorized by all
necessary corporate action, have received all necessary governmental approval,
if any, and do not contravene any law or any contractual restrictions binding on
Borrower.
 
(e)           No Default.  No event has occurred and is continuing that
constitutes an Event of Default.
 
6.             Choice of Law.  The validity of this Amendment, its construction,
interpretation and enforcement, the rights of the parties hereunder, shall be
determined under, governed by, and construed in accordance with the internal
laws of the State of California governing contracts only to be performed in that
State.
 
7.             Counterparts.  This Amendment may be executed in any number of
counterparts and by different parties and separate counterparts, each of which
when so executed and delivered, shall be deemed an original, and all of which,
when taken together, shall constitute one and the same instrument.  Delivery of
an executed counterpart of a signature page to this Amendment by telefacsimile
shall be effective as delivery of a manually executed counterpart of this
Amendment.
 
8.             Reference to and Effect on the Financing Agreements.
 
 
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(a)           Upon and after the effectiveness of this Amendment, each reference
in the Loan Agreement to “this Agreement”, “hereunder”, “hereof” or words of
like import referring to the Loan Agreement, and each reference in the other
Financing Agreements to “the Loan Agreement”, “thereof” or words of like import
referring to the Loan Agreement, shall mean and be a reference to the Loan
Agreement as modified and amended hereby.
 
(b)           Except as specifically amended above, the Loan Agreement and all
other Financing Agreements, are and shall continue to be in full force and
effect and are hereby in all respects ratified and confirmed and shall
constitute the legal, valid, binding and enforceable obligations of Borrower to
Lender.
 
(c)           The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of Lender under any of the Financing Agreements, nor constitute
a waiver of any provision of any of the Financing Agreements.
 
(d)           To the extent that any terms and conditions in any of the
Financing Agreements shall contradict or be in conflict with any terms or
conditions of the Loan Agreement, after giving effect to this Amendment, such
terms and conditions are hereby deemed modified or amended accordingly to
reflect the terms and conditions of the Loan Agreement as modified or amended
hereby.
 
9.             Estoppel.  To induce Lender to enter into this Amendment and to
continue to make advances to Borrower under the Loan Agreement, Borrower hereby
acknowledges and agrees that, as of the date hereof, there exists no right of
offset, defense, counterclaim or objection in favor of Borrower as against
Lender with respect to the Obligations.
 
10.           Integration.  This Amendment, together with the other Financing
Agreements, incorporates all negotiations of the parties hereto with respect to
the subject matter hereof and is the final expression and agreement of the
parties hereto with respect to the subject matter hereof.
 
11.           Severability.  In case any provision in this Amendment shall be
invalid, illegal or unenforceable, such provision shall be severable from the
remainder of this Amendment and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
 
[Remainder of Page Left Intentionally Blank]
 
 
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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date
first above written.
 

 
IMAGE ENTERTAINMENT, INC.,
 
a Delaware corporation
     
By:
/s/ JOHN AVAGLIANO
 
Name:   
John Avagliano
 
Title:
COO/CFO
             
WELLS FARGO CAPITAL FINANCE, LLC,
 
as Agent and Lender
     
By:
/s/ CARLOS VALLES
 
Name: 
Carlos Valles
 
Title:
Vice President

 
 
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