Exhibit 10.8

 

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as
of April 15, 2010, is entered into between WACHOVIA CAPITAL FINANCE CORPORATION
(WESTERN), a California corporation, as Agent and Lender (in such capacities,
“Lender”), IMAGE ENTERTAINMENT, INC., a Delaware corporation (“Image”), EGAMI
MEDIA, INC., a Delaware corporation (“Egami”, and together with Image, the
“Borrowers”, and each a “Borrower”), and IMAGE ENTERTAINMENT (UK), INC., a
Delaware corporation (“Guarantor”).

 

RECITALS

 

A.            Borrowers, Guarantor, Home Vision Entertainment, Inc., a Delaware
corporation (“Home Vision”) (which has since been merged with and into Image),
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, and as amended by that certain Fourth Amendment to Loan and
Security Agreement dated as of January 8, 2010 (as amended, the “Loan
Agreement”), pursuant to which Lender has made certain loans and financial
accommodations available to Image.  Terms used herein without definition shall
have the meanings ascribed to them in the Loan Agreement.

 

B.            Borrowers and Guarantor have requested that Lender amend the Loan
Agreement in certain respects, including, without limitation, to designate Egami
as a “Borrower” thereunder, and Lender is willing to accommodate such request on
the terms and conditions set forth herein.

 

C.            Borrowers and Guarantor are 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)           Egami is hereby added as a co-borrower under the Loan Agreement
with the same force and effect as if Egami had duly executed and delivered the
Loan Agreement as a “Borrower” thereunder in addition to Image.  Without
limiting the foregoing:

 

(1)           The definition of “Borrowers” in Section 1.12 of the Loan
Agreement is hereby amended to include Egami.

 

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(2)           Egami and Image shall be jointly and severally liable for all
Obligations.

 

(3)           Egami hereby represents and warrants to Agent and the Lenders the
truth and accuracy of all representations and warranties applicable to Borrowers
in the Loan Agreement (after giving effect to the inclusion of Egami as set
forth in clauses (1)).

 

(4)           Egami hereby agrees to perform all of the covenants and agreements
applicable to Borrowers in the Loan Agreement.

 

(5)           Agent and the Lenders shall have all of the rights, remedies,
interests and powers as against Egami as provided to Agent and the Lenders in
relation to Borrowers in the Loan Agreement.

 

(6)           Each reference in any Financing Agreement (including, without
limitation, that certain Guaranty dated as of March 4, 2007, made by Home Vision
and Egami in favor of Agent and the Lenders) to “Borrower” or “Borrowers” shall
hereafter include Egami and any reference to “Guarantor” or “Guarantors” shall
hereafter exclude Egami.

 

(7)           Egami shall no longer be designated as a “Guarantor” under the
Loan Agreement.

 

(b)           The definition of “Availability Block” in Section 1.8.1 of the
Loan Agreement is hereby amended and restated to read in its entirety as
follows:

 

“1.8.1      ‘Availability Block’ shall mean an amount equal to One Million Five
Hundred Thousand Dollars ($1,500,000).”

 

(c)           The definition of “Borrowing Base” in Section 1.13 of the Loan
Agreement is hereby amended and restated to read in its entirety as follows:

 

“1.13       ‘Borrowing Base’ shall mean, at any time, the amount equal to:

 

(a)          the amount equal to eighty-five percent (85%) of the Eligible
Accounts of Borrowers, plus

 

(b)         the lesser of (A) the Inventory Loan Limit or (B) the sum of:
(1) the lesser of sixty percent (60%) multiplied by the Value of the Eligible
Inventory of Borrowers consisting of Under 52 Week Supply Inventory, or
eighty-five percent (85%) percent of the Net Recovery Percentage multiplied by
the Value of such Eligible Inventory, plus (2) the lesser of twenty percent
(20%) multiplied by the Value of the Eligible Inventory of Borrowers which does
not consist of Under 52 Week Supply Inventory, or eighty-five percent (85%)
percent of the Net Recovery Percentage multiplied by the Value of such
Inventory, minus

 

(c)          the Availability Block, minus

 

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(d)         Reserves.

 

Notwithstanding the foregoing, the maximum portion of the Borrowing Base
calculated upon Eligible Accounts that are unpaid more than ninety (90) days
after the date of the original invoice for them (but not more than one hundred
five (105) days after such date), shall be limited to Two Million Five Hundred
Thousand Dollars ($2,500,000).  For purposes only of applying the Inventory Loan
Limit, Agent may treat the then undrawn amounts of outstanding Letters of Credit
for the purpose of purchasing Eligible Inventory as Revolving Loans to the
extent Agent is in effect basing the issuance of the Letter of Credit on the
Value of the Eligible Inventory being purchased with such Letter of Credit.  In
determining the actual amounts of such Letter of Credit to be so treated for
purposes of the sublimit, the outstanding Revolving Loans and Reserves shall be
attributed first to any components of the lending formulas set forth above that
are not subject to such sublimit, before being attributed to the components of
the lending formulas subject to such sublimit.  The amounts of Eligible
Inventory of any Borrower shall, at Agent’s option, be determined based on the
lesser of the amount of Inventory set forth in the general ledger of such
Borrower or the perpetual inventory record maintained by such Borrower.”

 

(d)           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:

 

“(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., and Target
Corporation) 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; and (v) 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);”

 

(e)           The following is hereby added to the Loan Agreement as
Section 1.29.1:

 

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“1.29.1  ‘Eligible Inventory’ shall mean, as to each Borrower, Inventory of such
Borrower consisting of finished goods held for resale in the ordinary course of
the business of such Borrower, that in each case satisfy the criteria set forth
below as determined by Agent.  In general, Eligible Inventory shall not
include:  (a) raw materials; (b) work-in-process; (c) components which are not
part of finished goods; (d) spare parts for equipment; (e) packaging and
shipping materials; (f) supplies used or consumed in such Borrower’s business;
(g) Inventory at premises other than those owned or leased and controlled by any
Borrower unless consented to by Agent in its sole discretion (which can be
revoked by Agent at any time); (h) Inventory subject to a security interest or
lien in favor of any Person other than Agent except those permitted in this
Agreement that are subject to an intercreditor agreement in form and substance
satisfactory to Agent between the holder of such security interest or lien and
Agent; (i) bill and hold goods; (j) unserviceable, obsolete or slow moving
Inventory; (k) Inventory that is not subject to the first priority, valid and
perfected security interest of Agent; (l) damaged and/or defective Inventory;
(m) Inventory purchased or sold on consignment and (n) Inventory located outside
the United States of America. The criteria for Eligible Inventory set forth
above may only be changed and any new criteria for Eligible Inventory may only
be established by Agent in good faith based on either: (i) an event, condition
or other circumstance arising after the date hereof, or (ii) an event, condition
or other circumstance existing on the date hereof to the extent Agent has no
written notice thereof from a Borrower prior to the date hereof, in either case
under clause (i) or (ii) which adversely affects or could reasonably be expected
to adversely affect the Inventory in the good faith determination of Agent.  Any
Inventory that is not Eligible Inventory shall nevertheless be part of the
Collateral.”

 

(f)            The definition of “Excess Availability” in Section 1.38 of the
Loan Agreement is hereby amended and restated to read in its entirety as
follows:

 

“1.38       ‘Excess Availability’ shall mean the amount, as determined by Agent,
calculated at any date, equal to: (a) the lesser of:  (i)  the Borrowing Base
and (ii) the Revolving Loan Limit (in each case under (i) or (ii) after giving
effect to any Reserves other than any Reserves in respect of Letter of Credit
Obligations), minus (b) the sum of:  (i) the amount of all then outstanding and
unpaid Obligations (but not including for this purpose any outstanding Letter of
Credit Obligations), plus (ii) the amount of all Reserves then established in
respect of Letter of Credit Obligations, and solely for the purpose of the
condition precedent set forth in Section 4.1(f) hereof, plus (iii) the aggregate
amount of all then outstanding and unpaid trade payables and other obligations
of Borrowers which are outstanding more than sixty (60) days past due as of the
end of the immediately preceding month or at Agent’s option, as of a more recent
date based on such reports as Agent may from time to time specify (other

 

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than trade payables or other obligations being contested or disputed by
Borrowers in good faith), plus (iv) without duplication, the amount of checks
issued by Borrowers to pay trade payables and other obligations which are more
than sixty (60) days past due as of the end of the immediately preceding month
or at Agent’s option, as of a more recent date based on such reports as Agent
may from time to time specify (other than trade payables or other obligations
being contested or disputed by Borrowers in good faith), but not yet sent.”

 

(g)           The definition of “Fixed Charge Coverage Ratio” contained in
Section 1.44 of the Loan Agreement is hereby amended and restated to read in its
entirety as follows:

 

“1.44 ‘Fixed Charge Coverage Ratio’ shall mean, as to any Person, with respect
to any period, the ratio of (a) the EBITDA of such Person during such period,
plus any amortization of production costs (to the extent not already added to
Net Income in calculating such EBITDA), minus taxes, whether Federal, State or
local, and whether foreign or domestic, that are paid or payable by such Person
or its Subsidiaries in cash in respect of such period, minus any Capital
Expenditures made by such Person or its Subsidiaries during such period to the
extent they are not financed, minus production costs expenditures made by such
Person or its Subsidiaries during such period, and minus any advances made by
such Person or its Subsidiaries during such period to licensors of any
Intellectual Property acquired by any Borrower or Guarantor, to (b) all
principal sums paid or payable by such Person or its Subsidiaries on
Indebtedness during such period and all Interest Expense of such Person and its
Subsidiaries during such period, minus any such Interest Expense not paid or
payable in cash, minus deferred finance expense on subordinated Indebtedness,
and minus any warrant amortization, in each case made or incurred by such Person
or its Subsidiaries during such period.”

 

(h)           Clause (b)(ii) of the definition of “Interest Rate” contained in
Section 1.57 of the Loan Agreement is hereby amended and restated to read in its
entirety as follows:

 

“(ii) on the Revolving Loans at any time outstanding in excess of the Borrowing
Base or the Revolving Loan Limit (whether or not such excess(es) arise or are
made with or without Agent’s or any Lender’s knowledge or consent and whether
made before or after an Event of Default).”

 

(i)            The following is hereby added to the Loan Agreement as
Section 1.58.1:

 

“1.58.1   ‘Inventory Loan Limit’ shall mean an amount equal to $2,500,000.”

 

(j)            The following is hereby added to the Loan Agreement as
Section 1.69.1:

 

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“1.69.1  ‘Maturity Date’ shall have the meaning set forth in Section 13.1
hereof.”

 

(k)           The following is hereby added to the Loan Agreement as
Section 1.71.1:

 

“1.71.1   ‘Net Recovery Percentage’ shall mean the fraction, expressed as a
percentage, (a) the numerator of which is the amount equal to the amount of the
recovery in respect of the Inventory at such time on a “net orderly liquidation
value” basis as set forth in the most recent acceptable appraisal of Inventory
received by Agent in accordance with Section 7.3, net of operating expenses,
liquidation expenses and commissions, and (b) the denominator of which is the
applicable original cost of the aggregate amount of the Inventory subject to
such appraisal.”

 

(l)            Section 1.88 of the Loan Agreement is hereby amended and restated
to read in its entirety as follows:

 

“1.88   Intentionally Omitted.”

 

(m)          A new clause (vii) is hereby added to the end of the second
sentence of the definition of “Reserves” contained in Section 1.91 of the Loan
Agreement as follows:

 

“(vii) a change in the turnover, age or mix of the categories of Inventory that
adversely affects the aggregate value of all Inventory.”

 

(n)           The definition of “Revolving Loan Limit” in Section 1.92 of the
Loan Agreement is hereby amended and restated to read in its entirety as
follows:

 

“1.92       ‘Revolving Loan Limit’ shall mean an amount equal to $20,000,000.”

 

(o)           The following is hereby added to the Loan Agreement as
Section 1.98.1:

 

“1.98.1  ‘Under 52 Week Supply Inventory’ shall mean, as of any date of
determination with respect to each specific title or product offered by
Borrowers, all Inventory of such specific title or product to the extent the
aggregate amount of such specific Inventory does not exceed twice the amount of
such specific Inventory sold by Borrowers in the prior six months; provided,
however, that any Inventory consisting of a specific title or product for which
at least six month historical sales are not available due to such Inventory
being newly carried by Borrowers shall also constitute Under 52 Week Supply
Inventory until Borrowers have carried such Inventory for at least six months.”

 

(p)           The following is hereby added to the Loan Agreement as
Section 1.98.2:

 

“1.98.2 ‘Value’ shall mean, as determined by Agent in good faith, with respect
to Inventory, the lower of (a) cost computed on a first-in first-out

 

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basis in accordance with GAAP or (b) market value, provided, that, for purposes
of the calculation of the Borrowing Base, (i) the Value of the Inventory shall
not include:  (A) the portion of the value of Inventory equal to the profit
earned by any Affiliate on the sale thereof to any Borrower or (B)  write-ups or
write-downs in value with respect to currency exchange rates and
(ii) notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Agent prior to the
date hereof, if any.”

 

(q)           Section 2.1(a)(i) and Section 2.1(a)(ii) of the Loan Agreement are
hereby amended and restated to read in their entirety as follows:

 

“(i) the Borrowing Base at such time or (ii) the Revolving Loan Limit at such
time.”

 

(r)            Section 2.1(b) of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:

 

“(b) Except in Agent’s discretion, with the consent of all Lenders, or as
otherwise provided herein, (i) the aggregate principal amount of the Revolving
Loans and Letter of Credit Obligations outstanding at any time shall not exceed
the Borrowing Base, (ii) the aggregate principal amount of the Revolving Loans
and Letter of Credit Obligations outstanding at any time shall not exceed the
Revolving Loan Limit, and (iii) the aggregate principal amount of the Revolving
Loans outstanding based on the Eligible Inventory shall not exceed the Inventory
Loan Limit.”

 

(s)           Section 2.1(c) of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:

 

“(c) In the event that: (i) except as otherwise provided herein, the aggregate
principal amount of the Revolving Loans and Letter of Credit Obligations
outstanding exceeds the Borrowing Base or the Revolving Loan Limit, or (ii) the
aggregate principal amount of Revolving Loans and Letter of Credit Obligations
based on the Eligible Inventory exceeds the Inventory Loan Limit, such event
shall not limit, waive or otherwise affect any rights of Agent or Lenders in
such circumstances or on any future occasions and Borrowers shall, upon demand
by Agent, which may be made at any time or from time to time, immediately repay
to Agent the entire amount of any such excess(es) for which payment is
demanded.”

 

(t)            Section 2.2(c)(iv) of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:

 

“(iv) Excess Availability, prior to giving effect to any Reserves with respect
to such Letter of Credit, on the date of the proposed issuance of any Letter of
Credit, shall be equal to or greater than an amount equal to

 

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one hundred (100%) percent of the Letter of Credit Obligations with respect
thereto.”

 

(u)           Section 3.2(a) of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:

 

“(a)         Borrowers shall pay to Agent, for the account of Lenders, monthly
an unused line fee at a rate equal to three-eighths of one (0.375%) percent per
annum calculated upon the amount by which the Revolving Loan Limit exceeds the
average daily principal balance of the outstanding Revolving Loans and Letters
of Credit during the immediately preceding month (or part thereof) while this
Agreement is in effect and for so long thereafter as any of the Obligations are
outstanding, which fee shall be payable on the first day of each month in
arrears.”

 

(v)           The following is hereby added as clause (d) to Section 3.2 of the
Loan Agreement:

 

“(d) Borrowers shall pay to Agent monthly, for Agent’s own account, a servicing
fee in respect of Agent’s services for each month (or part thereof) while this
Agreement remains in effect and for so long thereafter as any of the Obligations
are outstanding, which fee shall be fully earned as of and payable in advance on
the first day of each month and shall be in an amount equal to: (i) Five
Thousand Dollars ($5,000) on May 1, 2010, June 1, 2010, and July 1, 2010;
(ii) Seven Thousand Five Hundred Dollars ($7,500) on August 1, 2010;
(iii) Twelve Thousand Five Hundred Dollars ($12,500) on September 1, 2010; and
(iv) Fifteen Thousand Dollars on October 1, 2010, and on the first day of each
month thereafter.”

 

(w)          Section 7.3(d) of the Loan Agreement is hereby amended and restated
to read in its entirety as follows:

 

“(d) upon Agent’s request, Borrowers shall, at their expense, no more than two
(2) times in any twelve (12) month period, but at any time or times as Agent may
request on or after an Event of Default, deliver or cause to be delivered to
Agent written appraisals as to the Inventory in form, scope and methodology
acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent
and Lenders and upon which Agent and Lenders are expressly permitted to rely;”

 

(x)            Section 9.17 of the Loan Agreement is hereby amended and restated
to read in its entirety as follows:

 

“9.17       Fixed Charge Coverage Ratio.  Commencing with the month ending
June 30, 2010, Borrowers shall maintain a Fixed Charge Coverage Ratio of not
less than 1.1 to 1.0, when measured at the end of each month on a fiscal
year-to-date basis.”

 

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(y)           Section 10.1 of the Loan Agreement is hereby amended by replacing
the “.” at the end of clause (o) thereof with “, or” and by inserting the
following as a new clause (p):

 

“(p) there shall be less than $5,000,000 available to be drawn by Agent under
the Permitted Holders L/C.”

 

(z)            Section 12.8 of the Loan Agreement is hereby amended and restated
to read in its entirety as follows:

 

“Section 12.8  Additional Loans.  Agent shall not make any Revolving Loans or
provide any Letter of Credit to Borrowers on behalf of Lenders intentionally and
with actual knowledge that such Revolving Loans or Letter of Credit would cause
the aggregate amount of the total outstanding Revolving Loans and Letters of
Credit to exceed the Borrowing Base, without the prior consent of all Lenders,
except, that, Agent may make such additional Revolving Loans or provide such
additional Letter of Credit on behalf of Lenders, intentionally and with actual
knowledge that such Revolving Loans or Letter of Credit will cause the total
outstanding Revolving Loans and Letters of Credit to exceed the Borrowing Base,
as Agent may deem necessary or advisable in its discretion, provided, that:
(a) the total principal amount of the additional Revolving Loans or additional
Letters of Credit to Borrowers which Agent may make or provide after obtaining
such actual knowledge that the aggregate principal amount of the Revolving Loans
equal or exceed the Borrowing Base, plus the amount of Special Agent Advances
made pursuant to Section 12.11(a)(ii) hereof then outstanding, shall not exceed
the aggregate amount equal to ten (10%) percent of the Revolving Loan Limit and
shall not cause the total principal amount of the Revolving Loans and Letters of
Credit to exceed the Revolving Loan Limit and (b) no such additional Revolving
Loan or Letter of Credit shall be outstanding more than ninety (90) days after
the date such additional Revolving Loan or Letter of Credit is made or issued
(as the case may be), except as the Required Lenders may otherwise agree.  Each
Lender shall be obligated to pay Agent the amount of its Pro Rata Share of any
such additional Revolving Loans or Letters of Credit.”

 

(aa)         Sections 12.11(a)(ii)(A) and 12.11(a)(ii)(B) of the Loan Agreement
are hereby amended and restated in their entirety as follows:

 

“(A) the aggregate principal amount of the Special Agent Advances pursuant to
this clause (ii) outstanding at any time, plus the then outstanding principal
amount of the additional Loans and Letters of Credit which Agent may make or
provide as set forth in Section 12.8 hereof, shall not exceed the amount equal
to ten (10%) percent of the Revolving Loan Limit and (B) the aggregate principal
amount of the Special Agent Advances pursuant to this clause (ii) outstanding at
any time, plus the then outstanding principal amount of the Loans, shall not
exceed the Revolving

 

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Loan Limit, except at Agent’s option, provided, that, to the extent that the
aggregate principal amount of Special Agent Advances plus the then outstanding
principal amount of the Loans exceed the Revolving Loan Limit, the Special Agent
Advances that are in excess of the Revolving Loan Limit shall be for the sole
account and risk of Agent and notwithstanding anything to the contrary set forth
below, no Lender shall have any obligation to provide its share of such Special
Agent Advances in excess of the Revolving Loan Limit, or”

 

(bb)         Section 13.1(a) of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:

 

“(a) 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 October 25, 2010 (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.  In addition, Agent may,
at its option, and shall at the direction of Required Lenders, terminate this
Agreement at any time on or after an Event of Default.  Upon the Maturity Date
or any other effective date of termination of the Financing Agreements,
Borrowers shall pay to Agent all outstanding and unpaid Obligations and shall
furnish cash collateral to Agent (or at Agent’s option, a letter of credit
issued for the account of Borrowers and at Borrowers’ expense, in form and
substance satisfactory to Agent, by an issuer acceptable to Agent and payable to
Agent as beneficiary) in such amounts as Agent determines are reasonably
necessary to secure Agent, Lenders and Issuing Bank from loss, cost, damage or
expense, including attorneys’ fees and expenses, in connection with any
contingent Obligations, including issued and outstanding Letter of Credit
Obligations and checks or other payments provisionally credited to the
Obligations and/or as to which Agent or any Lender has not yet received final
and indefeasible payment and any continuing obligations of Agent or any Lender
pursuant to any Deposit Account Control Agreement and for any of the Obligations
arising under or in connection with any Bank Products in such amounts as the
Bank Product Provider providing such Bank Products may require (unless such
Obligations arising under or in connection with any Bank Products are paid in
full in cash and terminated in a manner satisfactory to such Bank Product
Provider).  The amount of such cash collateral (or letter of credit, as Agent
may determine) as to any Letter of Credit Obligations shall be in the amount
equal to one hundred ten (110%) percent of the amount of the Letter of Credit
Obligations plus the amount of any fees and expenses payable in connection
therewith through the end of the latest expiration date of the Letters of Credit
giving rise to such Letter of Credit Obligations.  Such payments in respect of
the Obligations and cash

 

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collateral shall be remitted by wire transfer in Federal funds to the Agent
Payment Account or such other bank account of Agent, as Agent may, in its
discretion, designate in writing to Administrative Borrower for such purpose. 
Interest shall be due until and including the next Business Day, if the amounts
so paid by Borrowers to the Agent Payment Account or other bank account
designated by Agent are received in such bank account later than 12:00 noon,
California time.”

 

(cc)         Section 13.1(c) of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:

 

“(c) Intentionally Omitted.”

 

2.             Consent.  Image has informed Lender that it wishes to purchase
all (or a significant interest with a potential option to purchase all remaining
Capital Stock) of the Capital Stock or substantially all of the assets of a
Person (the “Acquired Person”) to be disclosed at a later date, which Person
must be approved by Lender in its sole discretion (the “Acquisition”).  The
Acquisition is prohibited under the terms of Section 9.10 of the Loan Agreement
and therefore Borrowers have requested that Lender consent to the Acquisition. 
For purposes of Section 9.10 of the Loan Agreement only, and subject to the
terms of this Amendment, Lender hereby consents to the Acquisition so long as:
(i) no Default or Event of Default exists at the time the Acquisition is
consummated or would occur as a result of the Acquisition; (ii) the Acquisition
is on terms and conditions, and subject to documentation, satisfactory to
Lender; (iii) Borrowers shall have provided Lender with all releases,
terminations and other documents as Lender may require to confirm that after
giving effect to the consummation of the Acquisition, the assets and Capital
Stock of the Acquired Person are free and clear of all liens (except for liens
permitted under Section 9.8 of the Loan Agreement); (iv) Lender shall have
received executed copies of all of the documentation evidencing the Acquisition;
and (v) to the extent the Acquisition is consummated through the formation or
acquisition of a new Subsidiary of a Borrower or Guarantor, such new Subsidiary
shall execute such documents as requested by Lender to make such Subsidiary a
Guarantor or Borrower under the Loan Agreement and to grant a security interest
in all of its assets.  Borrowers hereby acknowledge and agree that none of the
assets acquired in connection with the Acquisition or generated after
consummation of the Acquisition in connection with the business of the Acquired
Person shall be included within the calculation of the Borrowing Base until such
time as Lender has conducted a collateral exam and audit on such assets
satisfactory to Lender and subject to such additional terms and conditions as
Lender may require in its discretion.

 

3.             Amendment Fee.  Borrowers shall pay to Lender an amendment fee in
the amount of Twenty Five Thousand Dollars ($25,000), which shall be fully
earned by Lender, non-refundable, and due and payable by Borrowers on the date
of this Amendment.

 

4.             Release; Covenant Not to Sue.

 

(a)           Each Borrower and Guarantor hereby absolutely and unconditionally
releases and forever discharges Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of

 

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any of the foregoing (each a “Released Party”), from any and all claims, demands
or causes of action of any kind, nature or description, whether arising in law
or equity or upon contract or tort or under any state or federal law or
otherwise, which any Borrower or Guarantor has had, now has or has made claim to
have against any such person for or by reason of any act, omission, matter,
cause or thing whatsoever arising from the beginning of time to and including
the date of this Amendment, whether such claims, demands and causes of action
are matured or unmatured or known or unknown.  It is the intention of each
Borrower and Guarantor in providing this release that the same shall be
effective as a bar to each and every claim, demand and cause of action
specified, and in furtherance of this intention it waives and relinquishes all
rights and benefits under Section 1542 of the Civil Code of the State of
California, which provides:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MIGHT HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.”

 

Each Borrower and Guarantor acknowledges that it may hereafter discover facts
different from or in addition to those now known or believed to be true with
respect to such claims, demands, or causes of action and agree that this
instrument shall be and remain effective in all respects notwithstanding any
such differences or additional facts.  Each Borrower and Guarantor understands,
acknowledges and agrees that the release set forth above may be pleaded as a
full and complete defense and may be used as a basis for an injunction against
any action, suit or other proceeding which may be instituted, prosecuted or
attempted in breach of the provisions of such release.

 

(b)           Each Borrower and Guarantor, on behalf of itself and their
respective successors, assigns, and other legal representatives, hereby
absolutely, unconditionally and irrevocably, covenants and agrees with and in
favor of each Released Party above that it will not sue (at law, in equity, in
any regulatory proceeding or otherwise) any Released Party on the basis of any
claim released, remised and discharged by any Borrower or Guarantor pursuant to
the above release.  If any Borrower, Guarantor or any of their respective
successors, assigns or other legal representations violates the foregoing
covenant, each Borrower and Guarantor, for itself and its successors, assigns
and legal representatives, agrees to pay, in addition to such other damages as
any Released Party may sustain as a result of such violation, all reasonable
attorneys’ fees and costs incurred by such Released Party as a result of such
violation.

 

5.             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)           Portside.  Lender shall have received evidence, in form and
substance satisfactory to Lender, that any UCC-1s filed against any Borrower or
Guarantor by Portside Growth and Opportunity Fund shall have been terminated.

 

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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.

 

6.             Representations and Warranties.  Borrowers and Guarantor
represent and warrant as follows:

 

(a)           Authority.  Each Borrower and Guarantor 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 Borrowers and Guarantor 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 Borrowers and Guarantor.  This Amendment and each Financing
Agreement (as amended or modified hereby) is the legal, valid and binding
obligation of Borrowers and Guarantor, enforceable against them 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 Borrowers and Guarantor, 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 any Borrower or Guarantor.

 

(e)           No Default.  No event has occurred and is continuing that
constitutes an Event of Default.

 

7.             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.

 

8.             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.

 

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9.             Reference to and Effect on the Financing Agreements.

 

(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 Borrowers
and Guarantor 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.

 

10.           Estoppel.  To induce Lender to enter into this Amendment and to
continue to make advances to Borrowers under the Loan Agreement, Borrowers and
Guarantor hereby acknowledge and agree that, as of the date hereof, there exists
no right of offset, defense, counterclaim or objection in favor of any Borrower
or Guarantor as against Lender with respect to the Obligations.

 

11.           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.

 

12.           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

 

 

 

 

 

EGAMI MEDIA, INC.,

 

a Delaware corporation

 

 

 

 

 

By:

/s/ JOHN AVAGLIANO

 

Name:

John Avagliano

 

Title:

COO/CFO

 

 

 

 

 

IMAGE ENTERTAINMENT (UK), INC.,

 

a Delaware corporation

 

 

 

 

 

By:

/s/ JOHN AVAGLIANO

 

Name:

John Avagliano

 

Title:

COO/CFO

 

 

 

 

 

WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN),

 

as Agent and Lender

 

 

 

 

 

By:

/s/ CARLOS VALLES

 

Name:

Carlos Valles

 

Title:

Director

 

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