EXHIBIT 10.42

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of April 1,
2004 (the “Effective Date”), by and between IMAGE ENTERTAINMENT INC., a
California corporation (“Image”), and MARTIN W. GREENWALD, an individual
(“Executive”).

 

RECITALS

 

WHEREAS, the Board of Directors of Image has determined that because of
Executive’s substantial experience with respect to sales and marketing,
management and other aspects of the business of Image, Executive’s business
relationships in connection with the business of Image, and Executive’s past
leadership and familiarity with the clientele served by Image, it is in the best
interests of Image to secure the services of Executive and to provide Executive
with the compensation and benefits set forth herein; and

 

WHEREAS, Executive desires to render to Image, on an exclusive basis,
Executive’s professional services with respect to Executive’s experience and
abilities, and Image desires to secure, on an exclusive basis, Executive’s
services, on the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, the parties hereto agree as follows:

 

1.             TERM OF AGREEMENT.

 

Except as otherwise expressly set forth herein, this Agreement shall remain in
full force and effect for the period commencing as of the date hereof and ending
on March 31, 2007 (the “Term”) subject to exercise of the Renewal Option Periods
set forth in Section 7 herein.  The capitalized word “Term” as used in other
paragraphs of this Agreement (except Paragraph 3(a)) shall include any
extensions pursuant to the preceding sentence.

 

2.             ENGAGEMENT.

 

Subject to the terms and conditions contained herein, Image hereby engages the
services of Executive (the “Services”) and Executive hereby accepts such
engagement and agrees to render Executive’s Services to Image for the Term.
Executive shall report directly to the Image Board of Directors and initially
shall have the title of “CHIEF EXECUTIVE OFFICER and PRESIDENT.”

 

(a)                                  Extent of Services and Duties.  Executive
shall perform such duties compatible with Executive’s position as an “Executive
Officer” (as defined below) and as the Board of Directors of Image may
reasonably require.  In rendering Services to Image, Executive shall use
Executive’s best efforts and ability to maintain, further and promote the
interests and welfare of Image.  At the request of Image, Executive shall serve
as an

 

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officer or director of Image or any entity controlled by Image or in which it
has a substantial direct or indirect interest (any such entity or entities
together with Image, the “Company”), without additional compensation, provided
that Executive is included on any such entity’s directors and officers insurance
policy (if any) or is otherwise fully indemnified by Image for all such
additional duties to the full extent provided by law.  For purposes of this
Agreement, “Executive Officer” shall include any person similarly designated as
an “Executive Officer” in that person’s Employment Agreement with Image.

 

(b)                                 Exclusive Engagement.  Executive hereby
acknowledges and agrees that the engagement of Executive by Image under this
Agreement is exclusive and that during the Term hereof Executive shall not,
directly or indirectly, whether for compensation or otherwise, engage in any
business that is competitive with the business of the Company or that otherwise
interferes in any significant respect with the Executive’s exclusive commitment
and duties under this Agreement, or render any services of a business,
commercial or professional nature to any other person or organization that is a
competitor of Image or in a business similar to that of Image, without the prior
written consent of Image.  Notwithstanding the foregoing, Executive may make and
manage personal business investments of his choice and serve in any capacity
with any civic, educational or charitable organization without seeking or
obtaining approval by the Board, provided that such activities and services do
not substantially interfere or conflict with the performance of duties hereunder
or create any conflict of interest with such duties.

 

3.             COMPENSATION.

 

(a)                                  Base Salary.  During the Term of this
Agreement, Image hereby agrees to pay Executive for all Services to be rendered
hereunder a base salary (“Base Salary”) at the following rates, with annual
raises for any specific year as reflected below:

 

Period

 

Annual Rate

 

 

 

 

 

Year ending on the first anniversary of the date hereof

 

$

522,374

 

per year

 

 

 

 

 

Year ending on the second anniversary of the date hereof

 

$

548,493

 

per year

 

 

 

 

 

Year ending on the third anniversary of the date hereof

 

$

575,917

 

per year

 

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In the event the Term is extended pursuant to Paragraphs 1 and 7, the Base
Salary for each such extension shall be (i) the Base Salary for the year ending
on the expiration date of the Term prior to the extension plus (ii) an amount
equal to five percent (5%) of the Base Salary.

 

For fiscal year April 1, 2004 through March 31, 2005, only, the aforementioned
increase in base salary will be calculated on a 3.75% increase from the previous
year.  Commencing April 1, 2005, the full 5% increase will be added to the base
salary for all subsequent years of the Term, including any extensions thereto.

 

The Base Salary will be payable in equal biweekly installments or as otherwise
provided in accordance with the regular executive officer compensation pay
schedules and procedures in effect from time to time for Image, subject to all
applicable withholding and deductions.

 

There shall be deducted from all compensation payable to Executive hereunder
such sums, including without limitation, social security, income tax withholding
and unemployment insurance, as Image is by law obligated to deduct and
additionally as the Executive may duly authorize.

 

(b)                                 Bonus Compensation.  Executive may be
entitled to participate in a bonus plan in an amount and form of payment to be
presented annually by the CEO and Compensation Committee to Image.  Executive
acknowledges that any Bonus is discretionary and based on corporate
profitability and Executive’s performance, jointly.

 

The Bonus, if any, granted to Executive will be paid at the latest by June 30th
of each year.

 

4.             OPTIONS AND OTHER STOCK-BASED AWARDS.

 

In addition to Base Salary and discretionary Bonus Compensation, Image may grant
stock options and other stock-based awards to Executive, in such form and
amounts, and at such time or times, as Image’s Board of Directors (or, if
applicable, the administrators of Image’s stock option plans) shall determine. 
If this Agreement is terminated early “Without Cause” under Subparagraph 12(b)
or upon “Good Reason” by Executive under Paragraph 14, all unvested options
granted to Executive will immediately vest.  The vesting of other stock-based
awards will depend upon the provisions of the Executive’s award agreement and
the plan (if any) under which the Awards are granted.  Unless this Agreement is
terminated early for Cause under Subparagraph 12(a), all options granted to
Executive prior to April 1, 2004 shall be exercisable after employment ceases
for the longest period permissible under the applicable stock option plan, to
the extent the option was vested as of the date of termination, and all options
or rights granted on or after April 1, 2004 shall be exercisable as provided in
the applicable award or grant.

 

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The Parties acknowledge that the Compensation Committee will be presented with a
revised Executive Stock Plan by the CEO, which, when approved, will be intended
to provide Executive with enhanced stock option opportunities.

 

5.             FRINGE BENEFITS.

 

(a)                                  Image agrees to provide Executive with
fringe benefits including but not limited to the medical, dental, life and short
and long-term disability insurance, expense allowance and vacation time
described below:

 

(i)                                     Medical, Dental And Life Insurance. 
Image shall purchase (or, if applicable, maintain) during the Term medical,
dental and life insurance for Executive, and provide coverage under the medical
and dental policies for Executive’s direct dependent beneficiaries (e.g., spouse
and minor children), on terms no less favorable than the terms and conditions in
effect as of the date hereof and at all times at least equal to that received by
any other Executive Officer (collectively, “Insurance”).

 

(ii)                                  Business/Travel Expenses.  Executive shall
be reimbursed in full for all reasonable and actual out-of-pocket business and
travel expenses incurred in the performance of Executive’s Services, on terms
and at all times at least equal to that received by any other Executive Officer,
provided Executive shall first present an itemized account of such expenditures
together with supporting vouchers.

 

(iii)                               Vacation Time.  Executive is entitled to 4
weeks of paid vacation time per year of the Term, but may accrue no more than 8
weeks vacation during the Term.  Executive must exercise all or part of his
vacation benefits upon the accrual of eight unused weeks before further vacation
benefits will accrue.

 

(b)                                 CEO Fringe Benefits.  Notwithstanding the
foregoing, Image agrees to also provide Executive with the following fringe
benefits:

 

(i)                                     Personal Life and Non-Reimbursable
Medical Expenses.  Image shall purchase (or, if applicable, maintain, or
reimburse Executive for the cost of premiums for) personal life insurance for
Executive on terms no less favorable than the terms and conditions in effect as
of the date hereof; provided, however, that the annual premium payment for such
coverage, together with payment for any non-reimbursable medical expenses (i.e.,
medical expenses not covered by the medical and dental policies), shall not
exceed $55,000 per annum (“The Premium/Expense Cap”).  Said Premium/Expense Cap
will increase by 5% each year,

 

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commencing April 1, 2005.  Executive shall have the exclusive right to name the
beneficiaries of such coverage.

 

(ii)                                  Personal Expenses.  Executive shall
receive an unaccountable, personal expense allowance annualized at $86,916 per
year for the first year of the current Term, payable in equal monthly
installments of $7,243, gross pay.  For each year of the Term commencing on the
first anniversary of the date hereof, Executive will receive a 5% increase to
Executive’s then personal expense allocation.

 

(iii)                               Company Car.  Executive shall be entitled to
the use of a company car and to reimbursement for all reasonable expenses
incurred in connection with the use of such car, including but not limited to
the costs of gasoline, maintenance/service and car insurance.  A portion of the
cost of said gasoline and/or maintenance, as well as a percentage of the lease
value attributed to personal use may be charged against Executive at the end of
each fiscal year as determined by Image and consistent with IRS requirements.

 

6.             SEVERANCE.

 

Upon expiration of the Term, Executive shall be entitled to receive:

 

(a)                                  Base Salary continuation for a period of 6
months without vacation accrual; and

 

(b)                                 any Bonus Compensation payable but not
previously paid for any prior completed fiscal year, if Executive has remained
employed for the period contemplated by Subparagraph 3(b); plus a prorated
portion of Bonus Compensation, if any, otherwise payable pursuant to
Subparagraph 3(b) for 6 months or any partial fiscal year that has occurred
prior to the expiration of the Term, whichever is greater, payable only if and
when the amount thereof is determined in accordance with the terms of the bonus
opportunity or entitlement; and

 

(c)                                  Full insurance continuation for a period of
6 months, with COBRA entitlement commencing thereafter, if permissible;
otherwise, 6 months insurance continuation under COBRA, payable by Image for the
first 6 months, and payable by Executive at his option for the balance of the
COBRA term.

 

7.             RENEWAL OPTIONS.

 

Image may exercise 2 one-year options to extend the term of the contract.  The
first option must be exercised by March 31, 2006, through delivery to the
address

 

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designated by Executive in Paragraph 15(e) of written notice of intent to extend
the Term from April 1, 2007 through March 31, 2008.

 

The second one year option must be exercised by Image by March 31, 2007, in the
same manner described above, to extend the term from April 1, 2008 to March 31,
2009.

 

8.             CONFIDENTIALITY.

 

In consideration of the payments to be received hereunder, Executive agrees as
follows:

 

(a)                                  That during the Term of this Agreement he
will have access to and become acquainted with various “Trade Secrets” (as
defined below) and proprietary information of Image.  Except as Executive’s
duties may require or as Image may otherwise consent to in writing, Executive
will not at any time disclose or use to the detriment of Image or the sole
benefit of Executive, either directly or indirectly, and either during or
subsequent to the Term hereof, any information, knowledge or data he receives in
confidence or acquires from Image or which relates to the Trade Secrets of
Image.  For purposes of this Agreement “Trade Secrets” shall include, but not be
limited to:

 

(i)                                     Financial information, such as Image’s
earnings, assets, debts, prices, pricing structure, volumes of purchases or
sales or other financial data, whether relating to Image generally, or to
particular products, services, geographic areas, or time periods;

 

(ii)                                  Supply and service information, such as
goods and services, suppliers’ names or addresses, terms of supply or service
contracts, or of particular transactions, or related information about potential
suppliers, to the extent that such information is not generally known to the
public, and to the extent that the combination of suppliers or use of a
particular supplier, though generally known or available, yields advantages to
Image, the details of which are not generally known;

 

(iii)                               Marketing information, such as details about
ongoing or proposed marketing programs or agreements by or on behalf of Image,
sales forecasts or results of marketing efforts or information about impending
transactions;

 

(iv)                              Licensing or Distribution information, such as
details about ongoing or proposed negotiations or agreements by or on behalf of
Image, terms and details of such negotiations or agreements or results of
licensing or distribution efforts or information about impending transactions;
or,

 

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(v)                                 Customer information, such as any
compilation of past, existing or prospective customers, customers’ proposals or
agreements between customers and status of customers accounts or credit, or
related information about actual or prospective customers.

 

(b)                                 That all files, records, documents, data
information and customer lists are special, valuable and unique assets of Image
and are essential to its continued business success,  and that under no
circumstance during the Term hereof or subsequent thereto will he influence or
attempt to influence any current employee of Image to terminate his or her
employment with Image to work for any competitor of Image, nor shall the
Executive solicit, directly or indirectly, any customers of Image or disclose or
use for the purpose of such solicitation, without the prior written consent of
Image, any files, records, document, data, information, customer lists or any
other proprietary information of Image for a period of 2 (two) years after the
termination, for any reason, of his employment.

 

(c)                                  Executive acknowledges that any violation
of the terms of this Paragraph 8 will constitute a material breach of this
Agreement and will cause Image immediate and irreparable harm and that the
damages which Image will suffer may be difficult or impossible to measure. 
Therefore, upon any actual or impending violation of this Paragraph 8, Image
shall be entitled to the issuance of a restraining order, preliminary and
permanent injunction, without bond, restraining or enjoining such violation by
Executive or any entity or person acting in concert with Executive. Such remedy
shall be additional to and not in limitation of any other remedy which may
otherwise be available to Image.

 

9.             INDEMNIFICATION OF EXECUTIVE.

 

Image will, to the maximum extent permitted by law, indemnify and hold Executive
harmless against expenses, including reasonable attorney’s fees, judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding arising by reason of Executive’s employment by
Image.  Image shall advance to Executive any expenses incurred in any proceeding
to the maximum extent permitted by law.  Executive will be entitled to utilize
defense legal counsel of his choice, subject to the approval of Image, which
approval will not be unreasonably withheld.  Image will at all times maintain
directors’ and officers’ liability insurance (“D&O Insurance”), or have
sufficient funds to self-insure, in amounts and on terms at least as favorable
as the D&O Insurance policy in effect on the date hereof.

 

10.          DEATH.

 

In the event of Executive’s death this Agreement will terminate on the last day
of the calendar month of Executive’s death.  In such event, but without limiting
any worker’s compensation remedies available to Executive’s estate or survivors,

 

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Executive’s personal representative, heirs or beneficiaries entitled by will or
the laws of descent and distribution shall be entitled to receive only:

 

(a)                                  All accrued but unpaid wages, bonus
payments and vacation;

 

(b)                                 Base Salary continuation for a period of 6
months or the expiration of the Term, whichever occurs first;

 

(c)                                  any Bonus Compensation payable but not
previously paid for any prior completed fiscal year, if Executive has remained
employed for the period contemplated by Subparagraph 3(b); plus a prorated
portion of Bonus Compensation, if any, otherwise payable pursuant to
Subparagraph 3(b) for 6 months or any partial fiscal year that has occurred
prior to the expiration of the Term, whichever is greater, payable only if and
when the amount thereof is determined in accordance with the terms of the bonus
opportunity or entitlement; and

 

(d)                                 dependent Insurance continuation for a
period of 6 months or the expiration of the Term, whichever occurs first.

 

11.          PERMANENT DISABILITY/SUSPENSION.

 

If Executive fails, because of physical or mental illness, incapacity or injury
(“disability”) and other than in connection with an authorized leave of absence,
to perform a majority of Executive’s usual duties for a period of longer than
120 consecutive days or an aggregate 150 days in a 12-month period.  Image’s
obligation to pay Base Salary will be suspended, subject to compliance with
applicable law.  If the suspension because of disability is reasonably
anticipated to exceed 180 consecutive days, or an aggregate 210 days in a
12-month period, Image may terminate this Agreement effective upon 30 days prior
written notice to Executive.  In such event, Executive shall be entitled to
receive, in addition to any other insurance benefits, the following:

 

(a)                                  Base Salary continuation for a period of 6
months;

 

(b)                                 any Bonus Compensation payable but not
previously paid for any prior completed fiscal year, if Executive has remained
employed for that year; plus a prorated portion of Bonus Compensation, if any,
otherwise payable pursuant to Subparagraph 3(b) for 6 months or any partial
fiscal year that has occurred prior to the suspension of Executive’s duties due
to disability, whichever is greater, payable only if and when the amount thereof
is determined in accordance with the terms of the bonus opportunity or
entitlement; and

 

(c)                                  Payment of insurance premiums for a period
of 6 months in addition to any other premium benefits available through the
insurance policies.

 

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Disagreement as to the severity, characterization or anticipated duration of a
disability or suspension and/or the date such disability/suspension commenced,
as it relates only to company-provided benefits exclusive of disability
insurance-funded benefits, shall be settled by the majority decision of three
neutral arbitrators (or licensed physicians, if the parties so agree) — one to
be selected by each party to the dispute, the two thus appointed shall choose
the third, and the three thus appointed shall constitute the board of
arbitration.  Such board, acting by majority vote within 30 days after choosing
the third arbitrator, shall resolve such disagreement and their decision shall
be final and binding on Executive, Image and any other person with an interest
in the matter.

 

12.          TERMINATION.

 

(a)                                  “Cause.”  In the event of “Cause” (as
defined below), Image may terminate this Agreement at any time effective upon
delivery of written notice to Executive.  In such event, all of Image’s
obligations hereunder will immediately terminate without further liability. 
Moreover, Executive shall not be entitled to receive any severance, fringe
benefits, compensation or other such rights hereunder, nor shall Executive be
entitled to receive any Bonus Compensation otherwise payable pursuant to
Subparagraph 3(b).  For purposes of this Agreement “Cause” shall include, but is
not limited to:

 

(i)                                     Executive’s (a) fraud, dishonesty or
felonious conduct or breach of fiduciary duty; (b)willful misconduct or gross
negligence in the performance of Executive’s duties hereunder; (c) knowing
and/or willful violation (including conduct in respect of Executive’s
supervisory responsibilities) of any law, rule or regulation or other wrongful
act that causes or is likely to cause harm, loss or disrepute to the Company; or
(d) conviction of a felony or misdemeanor (other than minor traffic violations,
a first time driving under the influence of alcohol conviction, or an offense
that does not affect the business or reputation of the Company); or

 

(ii)                                  Executive’s breach of any material
provision of this Agreement or any other material agreement between Image and
Executive, whenever executed, provided, however, that bona fide disagreements or
disputes as to expense reimbursement shall not be deemed fraud or felonious
conduct or Executive’s breach of any material provision of this Agreement.

 

(iii)                               Executive’s failure to comply with all
relevant and material obligations, assumable and chargeable to an executive of
his corporate rank and responsibilities, under the Sarbanes-Oxley Act.

 

(iv)                              In the event of termination for Cause pursuant
to the grounds in Paragraph 12(a)(i)(a) or 12(a)(i)(b), Company must first
conduct a

 

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thorough, good faith investigation by an impartial third party (such as a
retired judge or alternative dispute resolution service provider) to confirm the
Company’s belief that it is more likely than not that Cause exists to terminate
Executive.

 

(b)                                 “Without Cause.”  Notwithstanding anything
contained herein to the contrary, if this Agreement is terminated prior to
expiration of the Term for any reason other than (i) pursuant to Paragraph 10 or
11, (ii) for Cause, or (iii) pursuant to Executive’s Termination for Good Reason
pursuant to Paragraph 14, this Agreement shall be deemed to have been terminated
“Without Cause.”  If such termination occurs prior to a Change in Control,
Executive shall be entitled to receive all of the compensation, rights and
benefits described in Paragraphs 3(a) and (b), 4 and 5 through the expiration of
the Term and the severance described in Paragraph 6, as if this Agreement were
in full force.

 

13.          CHANGE IN CONTROL.

 

Notwithstanding anything contained herein to the contrary, the terms and
conditions of this Paragraph 13 shall control upon or following a “Change in
Control” (as defined below).

 

(a)                                  Termination.  If (1) this Agreement is
terminated prior to expiration of the Term for any reason other than (a)
pursuant to Paragraph 10 (Death) or 11 (Permanent Disability/Suspension), (b)
for Cause or (c) pursuant to Paragraph 14 (Executive’s Right to Terminate for
Good Reason) and if such termination occurs after a Change in Control, Executive
shall be entitled to receive all of the compensation, rights and benefits
described in Paragraphs 3(a) and (b), 4 and 5 for a period of one year following
the effective date of termination, or through the expiration of the Term,
whichever is longer, and the severance described in Paragraph 6, as if this
Agreement were in full force.  If any other Executive Officer’s options are
acquired pursuant to a Change in Control, Executive’s options will be acquired
on the same terms as any other Executive Officer.  Executive must receive 30
days prior written notice of termination regardless of the reason for
termination.

 

(b)                                 “Change in Control Prior to Effective
Date.”  With respect to options granted prior to the Effective Date, “Change in
Control” shall mean and be deemed to have occurred on the earliest of the
following dates:

 

(i)                                     the date, pursuant to Section 13(d) of
the Act and the rules promulgated thereunder, a person shall have acquired
beneficial ownership of more than 45% of the Voting Stock;

 

(ii)                                  the date the persons who were members of
the Board at the beginning of any 24-month period shall cease to constitute a

 

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majority of the Board, unless the election, or the nomination for election by
Image’s shareholders, of each new director was approved by two-thirds of the
members of the Board then in office who were in office at the beginning of the
24-month period; or

 

(iii)                               the date Image’s shareholders shall approve
a definitive agreement (a) to merge or consolidate Image with or into another
corporation, unless the holders of Image’s capital stock immediately before such
merger or consolidation will, immediately following such merger or
consolidation, hold as a group on a fully-diluted basis the ability to elect at
least a majority of the directors of the surviving corporation (assuming
cumulative voting, if applicable), or (b) to sell or otherwise dispose of all or
substantially all the assets of Image.

 

(c)                                  “Change in Control After Effective Date.”
 For purposes of this Agreement and of options and other stock-based awards
granted after the Effective Date, “Change in Control” shall mean and be deemed
to have occurred on the earliest of the following dates or events:

 

(i)                                     the date of an acquisition by any Person
of beneficial ownership (within the meaning of Rule 13d-3 under Exchange Act) or
a pecuniary interest in more than 45% of the Common Stock or voting securities
then entitled to vote generally in the election of directors of Image (“Voting
Stock”), other than an acquisition by one or more Excluded Persons (Image, Image
Investors Co. or Messrs. John Kluge, Stuart Subotnick or Executive) in
connection with a new issuance of Voting Stock (or rights to acquire Voting
Stock) after the effective date of the 1998 Plan by Image to the Excluded Person
in a transaction that the Committee determines (in advance of the issuance) does
not constitute a Change in Control event, or in the event that one or more
Excluded Persons take Image from a public company to a privately held company;

 

(ii)                                  approval by the shareholders of Image of a
plan of merger, consolidation, or reorganization of Image or sale or other
disposition of all or substantially all of Image’s assets involving a more than
50% change in ownership (collectively, a “Business Combination”), other than a
Business Combination: (1) (a) in which substantially all of the holders of
Image’s Voting Stock hold or receive directly or indirectly 50% or more of the
voting stock of the resulting entity or a parent company thereof, and (b) after
which no Person (other than any one or more of the Excluded Persons, as defined
above) owns more than 50% of the voting stock of the resulting entity (or a
parent company) who did not own directly or indirectly at least that amount of
Voting Stock immediately before the Business Combination; or (2) in which the

 

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holders of Image’s capital stock immediately before such Business Combination
will, immediately after such Business Combination, hold as a group on a fully
diluted basis the ability to elect at least a majority of the directors of the
surviving corporation (or a parent company);

 

(iii)                               approval by the Board of Directors and (if
required by law) by shareholders of Image of a plan to consummate the
dissolution or complete liquidation of Image; or

 

(iv)                              the date the persons who were members of the
Board of Directors at the beginning of any 24-month period shall cease to
constitute a majority of the Board, unless the election, or the nomination for
election by Image’s shareholders, of each new director was approved by
two-thirds of the members of the Board of Directors then in office who were in
office at the beginning of the 24-month period.

 

For purposes of determining whether a Change in Control has occurred, a
transaction includes all transactions in a series of related transactions, and
terms used in this definition but not defined are used as defined in the 1998
Plan.

 

(d)                                 Legal Fees and Expenses.  If Executive is
terminated following a Change in Control and Executive shall incur any legal
fees or expenses as a result of (i) seeking to obtain or enforce any right or
benefit provided by this Agreement or (ii) a claim of wrongful discharge or
breach of this Agreement, Image agrees to pay or reimburse Executive for such
fees and expenses; provided, however, that any claims giving rise to such fees
or expenses must be made in good faith and for good cause.  In the event there
is a dispute regarding Executive’s good faith or the merits of Executive’s
claim, and it is determined by the court that the claim lacked merit or was made
in bad faith, Executive shall be limited to recovering only such fees and
expenses, if any, as the court shall determine.

 

14.          EXECUTIVE’S RIGHT TO TERMINATE FOR GOOD REASON.

 

During the Term, Executive shall be entitled to terminate Executive’s employment
with Image for “Good Reason” (as defined below).  For purposes of this Agreement
“Good Reason” shall mean any of the following events which occurs without
Executive’s express written consent either before or after a Change in Control:

 

(i)                                     the assignment of any duties materially
inconsistent with Executive’s status as an Executive Officer or a substantial
reduction in the nature or status of Executive’s responsibilities from those in
effect immediately prior to a Change in Control other

 

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than any such alteration primarily attributable to the fact that Image may no
longer be a public company;

 

(ii)                                  a reduction by Image in Base Salary;

 

(iii)                               the relocation of Image’s principal
executive offices to a location more than 35 miles from the current locale
unless closer to home or Image’s requiring Executive to be based anywhere other
than Image’s principal executive offices except for required travel on Image’s
business to an extent substantially consistent with Executive’s present travel
obligations;

 

(iv)                              the failure by Image to continue in effect
without material change or substantially similar substitution of any
compensation or benefit plan in which Executive is entitled to participate, or
the failure by Image to continue Executive’s participation therein, or the
taking of any action by Image which would directly or indirectly materially
reduce any of the benefits of such plans enjoyed by Executive immediately prior
to the Change in Control, or the taking of any other action by Image which
materially adversely changes the conditions or perquisites of Executive’s
employment;

 

(v)                                 the failure of Image to obtain a successor’s
assumption and agreement to perform this Agreement, unless the assumption occurs
by operation of law;

 

(vi)                              any purported termination of employment which
is not effected pursuant to Subparagraph 13(a), or any such purported
termination which would not be consistent with the terms of this Agreement;

 

(vii)                           the failure of Image to maintain adequate D&O
insurance coverage pursuant to the terms of this Agreement, unless such
insurance is not available on commercially reasonable terms; or

 

(viii)                        the breach by Image of any material term of this
Agreement.

 

The rights provided under this Paragraph 14 to terminate for Good Reason shall
not adversely affect any rights of Executive whether before or after a Change in
Control in respect to a breach of this Agreement by Image.  Executive is
entitled to all wages, bonuses and benefits for the Balance of the Term of the
contract in the event of a termination under Paragraph 14.

 

15.          GENERAL PROVISIONS.

 

(a)                                  Successors and Assigns.  This Agreement is
binding upon and shall inure to the benefit of the parties hereto, and any of
their heirs, legatees, devisees, personal representatives, assigns and
successors in interest of every kind and nature whatsoever.  The parties hereto
agree that

 

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Executive’s services are personal and that this Agreement is executed with
respect thereto.  Executive shall have no right to sell, transfer or assign this
Agreement in any manner whatsoever.

 

(b)                                 Entire Understanding; Amendment.  This
Agreement and the Exhibit hereto constitute the entire understanding and
agreement between the parties with respect to the subject matter hereof and
supersede (i) any and all prior and preliminary discussions, (ii) any and all
prior written or oral and any and all contemporaneous written or oral
agreements, understandings and negotiations between the parties; including but
not limited to prior written or oral employment agreements and severance
agreements, and (iii) all prior written Employment Agreements between Image and
Executive.  There are no warranties, representations or other agreements between
the parties in connection with the subject matter hereof except as set forth or
referred to herein.  This Agreement shall not be modified, amended or altered
except by an instrument in writing executed by the parties hereto.

 

(c)                                  Severability.  In case one or more of the
provisions contained in this Agreement (or any portion of any such provision)
shall for any reason be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement (or any portion of any such provision), but this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision (or portion thereof) had never been contained herein.

 

(d)                                 Waiver.  The failure by Image, at any time,
to require performance by Executive of any of the provisions hereof, shall not
be deemed a waiver of any kind nor shall it in any way affect Image’s rights
thereafter to enforce the same.

 

(e)                                  Notices.  All notices, requests, demands
and other communications provided for by this Agreement shall be in writing and
shall be deemed to have been given 24 hours after deposit thereof for mailing at
any general or branch United States Post Office, enclosed in a registered or
certified postpaid envelope and addressed as follows:

 

To Image:

 

IMAGE ENTERTAINMENT, INC

 

 

9333 Oso Avenue

 

 

Chatsworth,CA  91311

 

 

Attn: General Counsel

 

 

 

To Executive:

 

MARTIN GREENWALD

 

 

c/o Image Entertainment, Inc.

 

 

9333 Oso Avenue

 

 

Chatsworth, CA  91311

 

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The parties hereto may designate a different place at which notice shall be
given; provided, however, that any such notice of change of address shall be
effective only upon receipt.

 

(f)                                    Good Faith.  The parties hereto shall
perform, fulfill and discharge their duties and obligations hereunder in a
reasonable manner in good faith.

 

(g)                                 Governing Law.  This Agreement and all
rights, obligations and liabilities arising hereunder shall be construed and
enforced in accordance with the laws of the State of California.

 

(h)                                 Attorneys’ Fees.  Subject to Paragraph
13(e), in the event it becomes necessary to commence any proceeding or action to
enforce the provisions of this Agreement, the court before whom the same shall
be tried may award the prevailing party all costs and expenses thereof,
including without limitation, reasonable attorney’s fees, the usual, customary
and lawfully recoverable court costs, and all other expenses in connection
therewith.

 

(i)                                     Advice of Counsel.  The parties
represent and warrant that in executing this Agreement, they have each had the
opportunity to obtain independent financial, legal, tax and other appropriate
advice, and are not relying upon any other party (or the attorneys or other
agents of such other party) for any such advice.

 

(j)                                     Subject Headings and Defined Terms. 
Subject headings and choice of defined terms are included for convenience only
and shall not be deemed part of this Agreement.

 

(k)                                  Cumulative Rights and Remedies.  The rights
and remedies provided for in this Agreement shall be cumulative; resort to one
right or remedy shall not preclude resort to another or to any other right or
remedy provided for by law or in equity.

 

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as of the date first above written.

 

 

IMAGE ENTERTAINMENT, INC.

EXECUTIVE

 

 

 

 

 

 

By:

/s/ Ira Epstein

 

/s/ Martin W. Greenwald

 

 

Ira Epstein, Esq.

Martin W. Greenwald, an individual

Its:

Compensation Committee Chairman

 

 

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