Exhibit 10.1





EXHIBIT 10.1




LOAN AND SECURITY AGREEMENT




by and among




IMAGE ENTERTAINMENT, INC.

as Administrative Borrower




and




EGAMI MEDIA, INC.,

IMAGE ENTERTAINMENT (UK), INC. and

HOME VISION ENTERTAINMENT, INC.

as Guarantors




WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN)

as Agent




and




THE LENDERS FROM TIME TO TIME PARTY HERETO

as Lenders




Dated: May 4, 2007









 


 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	SECTION 1. DEFINITIONS
	 	 	1	 
	SECTION 2. CREDIT FACILITIES
	 	 	23	 
	2.1 Loans
	 	 	23	 
	2.2 Letters of Credit
	 	 	23	 
	2.3 Commitments
	 	 	26	 
	SECTION 3. INTEREST AND FEES
	 	 	27	 
	3.1 Interest
	 	 	27	 
	3.2 Fees
	 	 	28	 
	3.3 Changes in Laws and Increased Costs of Loans
	 	 	29	 
	SECTION 4. CONDITIONS PRECEDENT
	 	 	31	 
	4.1 Conditions Precedent to Initial Loans and Letters of Credit
	 	 	31	 
	4.2 Conditions Precedent to All Loans and Letters of Credit
	 	 	33	 
	SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
	 	 	34	 
	5.1 Grant of Security Interest
	 	 	34	 
	5.2 Perfection of Security Interests
	 	 	35	 
	SECTION 6. COLLECTION AND ADMINISTRATION
	 	 	38	 
	6.1 Borrowers’ Loan Accounts
	 	 	38	 
	6.2 Statements
	 	 	38	 
	6.3 Collection of Accounts
	 	 	39	 
	6.4 Payments
	 	 	40	 
	6.5 Taxes
	 	 	41	 
	6.6 Authorization to Make Loans
	 	 	43	 
	6.7 Use of Proceeds
	 	 	43	 
	6.8 Appointment of Administrative Borrower as Agent for Requesting Loans
and Receipts of Loans and Statements
	 	 	43	 
	6.9 Pro Rata Treatment
	 	 	44	 
	6.10 Sharing of Payments, Etc
	 	 	44	 
	6.11 Settlement Procedures
	 	 	45	 
	6.12 Obligations Several; Independent Nature of Lenders’ Rights
	 	 	47	 
	6.13 Bank Products
	 	 	48	 






 


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TABLE OF CONTENTS
(continued)





	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	SECTION 7. COLLATERAL REPORTING AND COVENANTS
	 	 	48	 
	7.1 Collateral Reporting
	 	 	48	 
	7.2 Accounts Covenants
	 	 	49	 
	7.3 Inventory Covenants
	 	 	50	 
	7.4 Equipment and Real Property Covenants
	 	 	50	 
	7.5 Power of Attorney
	 	 	51	 
	7.6 Right to Cure
	 	 	52	 
	7.7 Access to Premises
	 	 	52	 
	SECTION 8. REPRESENTATIONS AND WARRANTIES
	 	 	52	 
	8.1 Corporate Existence, Power and Authority
	 	 	52	 
	8.2 Name; State of Organization; Chief Executive Office; Collateral Locations
	 	 	53	 
	8.3 Financial Statements; No Material Adverse Change
	 	 	53	 
	8.4 Priority of Liens; Title to Properties
	 	 	54	 
	8.5 Tax Returns
	 	 	54	 
	8.6 Litigation
	 	 	54	 
	8.7 Compliance with Other Agreements and Applicable Laws
	 	 	54	 
	8.8 Environmental Compliance
	 	 	55	 
	8.9 Employee Benefits
	 	 	55	 
	8.10 Bank Accounts
	 	 	56	 
	8.11 Intellectual Property
	 	 	56	 
	8.12 Subsidiaries; Affiliates; Capitalization; Solvency
	 	 	57	 
	8.13 Labor Disputes
	 	 	57	 
	8.14 Restrictions on Subsidiaries
	 	 	58	 
	8.15 Material Contracts
	 	 	58	 
	8.16 Payable Practices
	 	 	58	 
	8.17 Accuracy and Completeness of Information
	 	 	58	 
	8.18 Security Interests of SAG and WGA
	 	 	58	 
	8.19 Survival of Warranties; Cumulative
	 	 	59	 






 


-ii-









 




TABLE OF CONTENTS
(continued)





	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
	 	 	59	 
	9.1 Maintenance of Existence
	 	 	59	 
	9.2 New Collateral Locations
	 	 	59	 
	9.3 Compliance with Laws, Regulations, Etc
	 	 	60	 
	9.4 Payment of Taxes and Claims
	 	 	60	 
	9.5 Insurance
	 	 	61	 
	9.6 Financial Statements and Other Information
	 	 	61	 
	9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc
	 	 	63	 
	9.8 Encumbrances
	 	 	65	 
	9.9 Indebtedness
	 	 	67	 
	9.10 Loans, Investments, Etc
	 	 	68	 
	9.11 Dividends and Redemptions
	 	 	70	 
	9.12 Transactions with Affiliates
	 	 	71	 
	9.13 Compliance with ERISA
	 	 	71	 
	9.14 End of Fiscal Years; Fiscal Quarters
	 	 	72	 
	9.15 Change in Business
	 	 	72	 
	9.16 Limitation of Restrictions Affecting Subsidiaries
	 	 	72	 
	9.17 Fixed Charge Coverage Ratio
	 	 	72	 
	9.18 Copyrights
	 	 	73	 
	9.19 License Agreements
	 	 	74	 
	9.20 Foreign Assets Control Regulations, Etc
	 	 	75	 
	9.21 After Acquired Real Property
	 	 	76	 
	9.22 Costs and Expenses
	 	 	76	 
	9.23 Further Assurances
	 	 	77	 
	SECTION 10. EVENTS OF DEFAULT AND REMEDIES
	 	 	77	 
	10.1 Events of Default
	 	 	77	 
	10.2 Remedies
	 	 	79	 
	SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
	 	 	83	 
	11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver
	 	 	83	 
	11.2 Waiver of Notices
	 	 	84	 
	11.3 Amendments and Waivers
	 	 	85	 
	11.4 Waiver of Counterclaims
	 	 	86	 
	11.5 Indemnification
	 	 	87	 






 


-iii-









 





TABLE OF CONTENTS
(continued)





	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	SECTION 12. THE AGENT
	 	 	87	 
	12.1 Appointment, Powers and Immunities
	 	 	87	 
	12.2 Reliance by Agent
	 	 	88	 
	12.3 Events of Default
	 	 	88	 
	12.4 Wachovia in its Individual Capacity
	 	 	89	 
	12.5 Indemnification
	 	 	89	 
	12.6 Non-Reliance on Agent and Other Lenders
	 	 	89	 
	12.7 Failure to Act
	 	 	90	 
	12.8 Additional Loans
	 	 	90	 
	12.9 Concerning the Collateral and the Related Financing Agreements
	 	 	90	 
	12.10 Field Audit, Examination Reports and other Information; Disclaimer by
Lenders
	 	 	90	 
	12.11 Collateral Matters
	 	 	91	 
	12.12 Agency for Perfection
	 	 	93	 
	12.13 Successor Agent
	 	 	93	 
	12.14 Other Agent Designations
	 	 	93	 
	SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
	 	 	94	 
	13.1 Term
	 	 	94	 
	13.2 Interpretative Provisions
	 	 	96	 
	13.3 Notices
	 	 	97	 
	13.4 Partial Invalidity
	 	 	98	 
	13.5 Confidentiality
	 	 	98	 
	13.6 Successors
	 	 	99	 
	13.7 Assignments; Participations
	 	 	100	 
	13.8 Entire Agreement
	 	 	102	 
	13.9 USA Patriot Act
	 	 	102	 
	13.10 Counterparts, Etc
	 	 	102	 






 


-iv-









 





INDEX

TO

EXHIBITS AND SCHEDULES




	 	 	 
	Exhibit A

	 	Form of Assignment and Acceptance
	 
	 	 
	Exhibit B

	 	Information Certificate
	 
	 	 
	Exhibit C

	 	Form of Compliance Certificate
	 
	 	 
	Schedule 1.41

	 	Existing Letters of Credit
	 
	 	 
	Schedule 1.76

	 	Permitted Holders
	 
	 	 
	Schedule 5.2(f)

	 	Beneficial Letters of Credit
	 
	 	 
	Schedule 8.8

	 	Environmental Compliance
	 
	 	 
	Schedule 8.13

	 	Labor Contracts
	 
	 	 
	Schedule 8.15

	 	Material Contracts
	 
	 	 
	Schedule 9.9

	 	Indebtedness
	 
	 	 
	Schedule 9.10

	 	Loans and Advances







 


 









 







LOAN AND SECURITY AGREEMENT




This Loan and Security Agreement dated May 4, 2007 is entered into by and among Image
Entertainment, Inc., a Delaware corporation (“Administrative Borrower” as hereinafter further
defined), Egami Media, Inc., a Delaware corporation (“Egami”), Image Entertainment (UK), Inc., a
Delaware corporation (“Image (UK)”), Home Vision Entertainment, Inc., a Delaware corporation (“HVE”
and together with Egami and Image (UK), each individually a “Guarantor” and collectively,
“Guarantors” as hereinafter further defined), the parties hereto from time to time as lenders,
whether by execution of this Agreement or an Assignment and Acceptance (each individually, a
“Lender” and collectively, “Lenders” as hereinafter further defined) and Wachovia Capital Finance
Corporation (Western), a California corporation, in its capacity as agent for Lenders (in such
capacity, “Agent” as hereinafter further defined).



W I T N E S S E T H:




WHEREAS, Administrative Borrower and Guarantors have requested that Agent and Lenders enter
into financing arrangements with Administrative Borrower pursuant to which Lenders may make loans
and provide other financial accommodations to Administrative Borrower; and



WHEREAS, each Lender is willing to agree (severally and not jointly) to make such loans and
provide such financial accommodations to Administrative Borrower on a pro rata basis according to
its Commitment (as defined below) on the terms and conditions set forth herein and Agent is willing
to act as agent for Lenders on the terms and conditions set forth herein and the other Financing
Agreements;



NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:



SECTION 1. DEFINITIONS




For purposes of this Agreement, the following terms shall have the respective meanings given
to them below:



1.1 “Accounts” shall mean, as to each Borrower and Guarantor, all present and future rights of
such Borrower and Guarantor to payment of a monetary obligation, whether or not earned by
performance, which is not evidenced by chattel paper or an instrument, (a) for property that has
been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services
rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d)
arising out of the use of a credit or charge card or information contained on or for use with the
card.


 


 









 





1.2 “Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for any
Eurodollar Rate Loan comprising part of the same borrowing (including conversions, extensions and
renewals), the rate per annum determined by dividing (a) the London Interbank Offered Rate for such
Interest Period by (b) a percentage equal to: (i) one (1) minus (ii) the
Reserve Percentage. For purposes hereof, “Reserve Percentage” shall mean for any day, that
percentage, (expressed as a decimal) which is in effect from time to time under Regulation D of the
Board of Governors of the Federal Reserve System (or any successor), as such regulation may be
amended from time to time or any successor regulation, as the maximum reserve requirement
(including, without limitation, any basic, supplemental, emergency, special, or marginal reserves)
applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or
against any other category of liabilities that includes deposits by reference to which the interest
rate of Eurodollar Loans is determined), whether or not any Lender has any Eurocurrency liabilities
subject to such reserve requirement at that time. Eurodollar Loans shall be deemed to constitute
Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without
benefits of credits for proration, exceptions or offsets that may be available from time to time to
a Lender. The Adjusted Eurodollar Rate shall be adjusted automatically on and as of the effective
date of any change in the Reserve Percentage.



1.3 “Administrative Borrower” shall mean Image Entertainment, Inc., a Delaware corporation in
its capacity as Administrative Borrower on behalf of itself and any other Borrowers pursuant to
Section 6.8 hereof and it successors and assigns in such capacity.



1.4 “Affiliate” shall mean, with respect to a specified Person, any other Person which
directly or indirectly, through one or more intermediaries, controls or is controlled by or is
under common control with such Person, and without limiting the generality of the foregoing,
includes (a) any Person which beneficially owns or holds five (5%) percent or more of any class of
Voting Stock of such Person or other equity interests in such Person, (b) any Person of which such
Person beneficially owns or holds five (5%) percent or more of any class of Voting Stock or in
which such Person beneficially owns or holds five (5%) percent or more of the equity interests and
(c) any director or executive officer of such Person. For the purposes of this definition, the
term “control” (including with correlative meanings, the terms “controlled by” and “under common
control with”), as used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by agreement or otherwise.



1.5 “Agent” shall mean Wachovia Capital Finance Corporation (Western) in its capacity as agent
on behalf of Lenders pursuant to the terms hereof and any replacement or successor agent hereunder.



1.6 “Agent Payment Account” shall mean account no. 5000000030321 of Agent at Wachovia Bank,
National Association, or such other account of Agent as Agent may from time to time designate to
Administrative Borrower as the Agent Payment Account for purposes of this Agreement and the other
Financing Agreements.


 


2









 





1.7 “Applicable Margin” shall mean, at any time, with respect to any Prime Rate Loan or
Eurodollar Rate Loan, the applicable rate per annum set forth below under the caption “Prime
Spread” or “Eurodollar Spread”, as the case may be, based upon the EBITDA of Parent and its
Subsidiaries during the twelve (12) months, or such lesser number of months that have elapsed from
and including April 2007, ending on the most recent determination date, provided
that until the first day of the month immediately following the delivery to the Agent,
pursuant to Section 9.6(a) hereof, of the consolidated financial information for the fiscal quarter
ending
September 30, 2007, the “Applicable Margin” shall be the applicable rate per annum set forth
below in Category 3:



	 	 	 	 	 	 	 	 	 
	 	 	Prime	 	 	Eurodollar	 
	EBITDA	 	Spread	 	 	Spread	 
	Category 1
	 	 	0.0	%	 	 	1.50	%
	3 $8,500,000
	 	 	 	 	 	 	 	 
	Category 2
	 	 	0.0	%	 	 	1.75	%
	< $8,500,000
but
3 $7,500,000

	 	 	 	 	 	 	 	 
	Category 3
	 	 	0.0	%	 	 	2.00	%
	< $7,500,000
but
3 $5,500,000

	 	 	 	 	 	 	 	 
	Category 4
	 	 	0.25	%	 	 	2.25	%
	< $5,500,000
	 	 	 	 	 	 	 	 







For purposes of the foregoing, (a) the Applicable Margin shall be determined as of the end of
each fiscal quarter of Parent (commencing with the fiscal quarter ending September 30, 2007) based
upon the annual or monthly financial statements (for periods ending on the last day of a fiscal
quarter or year) delivered pursuant to Section 9.6(a), and (b) each change in the Applicable Margin
resulting from the EBITDA of Parent and its Subsidiaries shall be effective during the period
commencing on and including the first day of the month immediately following the date of delivery
to the Agent of such financial statements indicating such change and ending on the date immediately
preceding the effective date of the next such change, provided that the EBITDA
shall be deemed to be in Category 4 at the option of the Agent or at the request of the Required
Lenders if the Parent fails to deliver the annual or monthly financial statements required to be
delivered by it pursuant to Section 9.6(a) hereof, during the period from the expiration of the
time for delivery thereof until such financial statements are delivered. If any such financial
statements overstate the EBITDA, and if as a result of such overstatement, the interest and fees
charged hereunder are less than what would have been charged had such financial statements
accurately stated the EBITDA, then Borrowers shall be responsible for the difference between the
interest and fees charged as result of such overstatement and what would have been charged had such
financial statements accurately stated the EBITDA, and shall pay the amount of such difference to
the Agent upon its demand therefor.



1.8 “Assignment and Acceptance” shall mean an Assignment and Acceptance substantially in the
form of Exhibit A attached hereto (with blanks appropriately completed) delivered to Agent in
connection with an assignment of a Lender’s interest hereunder in accordance with the provisions of
Section 13.7 hereof.



1.9 “Bank Product Provider” shall mean any Lender, Affiliate of Lender or other financial
institution (in each case as to any such Lender, Affiliate or other financial institution to the
extent approved by Agent) that provides any Bank Products to Borrowers or Guarantors.


 


3









 





1.10 “Bank Products” shall mean any one or more of the following types or services or
facilities provided to a Borrower by a Bank Product Provider: (a) credit cards or stored value
cards or (b) cash management or related services, including (i) the automated clearinghouse
transfer of funds for the account of a Borrower pursuant to agreement or overdraft for any accounts
of Borrowers maintained at Agent or any Bank Product Provider that are subject to the control of
Agent pursuant to any Deposit Account Control Agreement to which Agent or such Bank Product
Provider is a party, as applicable, and (ii) controlled disbursement services and (c) Hedge
Agreements if and to the extent permitted hereunder. Any of the foregoing shall only be included
in the definition of the term “Bank Products” to the extent that the Bank Product Provider has
been approved by Agent.




1.11 “Blocked Accounts” shall have the meaning set forth in Section 6.3 hereof.



1.12 “Borrowers” shall mean, collectively, the following (together with their respective
successors and assigns): (a) Image Entertainment, Inc., a Delaware corporation; and (b) any other
Person that at any time after the date hereof becomes a Borrower; each sometimes being referred to
herein individually as a “Borrower”.




1.13 “Borrowing Base” shall mean, at any time, as to each Borrower, the amount equal to:



(a) the amount equal to eighty-five (85%) percent of the Eligible Accounts of such Borrower,
minus




(b) Reserves attributable to such Borrower.



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).



1.14 “Business Day” shall mean any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized or required to close under the laws of the State of California or
the State of North Carolina, and a day on which Agent is open for the transaction of business,
except that if a determination of a Business Day shall relate to any Eurodollar Rate Loans, the
term Business Day shall also exclude any day on which banks are closed for dealings in dollar
deposits in the London interbank market or other applicable Eurodollar Rate market.



1.15 “Capital Expenditures” shall mean, for any period, any expenditure of money under a
Capital Lease or for the lease, purchase or other acquisition of any capital asset, for the lease
of any other asset, whether payable currently or in the future, or for the purchase or construction
of assets, or for improvements or additions thereto, which are capitalized on a Person’s balance
sheet.



1.16 “Capital Leases” shall mean, as applied to any Person, any lease of (or any agreement
conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee
which in accordance with GAAP, is required to be reflected as a liability on the balance sheet of
such Person.


 


4









 





1.17 “Capital Stock” shall mean, with respect to any Person, any and all shares, interests,
participations or other equivalents (however designated) of such Person’s capital stock or
partnership, limited liability company or other equity interests at any time outstanding, and any
and all rights, warrants or options exchangeable for or convertible into such capital stock or
other interests (but excluding any debt security that is exchangeable for or convertible into such
capital stock).



1.18 “Cash Equivalents” shall mean, at any time, (a) any evidence of Indebtedness with a
maturity date of ninety (90) days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof; provided, that,
the full faith and credit of the United States of America is pledged in support thereof; (b)
certificates of deposit or bankers’ acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $1,000,000,000; (c) commercial paper (including
variable rate demand notes) with a maturity of ninety (90) days or less issued by a corporation
(except an Affiliate of any Borrower or Guarantor) organized under the laws of any State of the
United States of America or the District of Columbia and rated at least A-1 by Standard & Poor’s
Ratings Service, a division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody’s Investors
Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the types described in clause (a) above entered into with any financial
institution having combined capital and surplus and undivided profits of not less than
$1,000,000,000; (e) repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States of America or issued
by any governmental agency thereof and backed by the full faith and credit of the United States of
America, in each case maturing within ninety (90) days or less from the date of acquisition;
provided, that, the terms of such agreements comply with the guidelines set forth
in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others,
as adopted by the Comptroller of the Currency on October 31, 1985; and (f) investments in money
market funds and mutual funds which invest substantially all of their assets in securities of the
types described in clauses (a) through (e) above.



1.19 “Change of Control” shall mean (a) the transfer (in one transaction or a series of
transactions) of all or substantially all of the assets of any Borrower or Guarantor to any Person
or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than as permitted in
Section 9.7 hereof; (b) the liquidation or dissolution of any Borrower or Guarantor or the adoption
of a plan by the stockholders of any Borrower or Guarantor relating to the dissolution or
liquidation of such Borrower or Guarantor, other than as permitted in Section 9.7 hereof; (c) the
acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act),
except for one or more Permitted Holders, of beneficial ownership, directly or indirectly, of a
majority of the voting power of the total outstanding Voting Stock of any Borrower or Guarantor or
the Board of Directors of any Borrower or Guarantor; (d) during any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board of Directors of any
Borrower or Guarantor (together with any new directors who have been appointed by any Permitted
Holder, or whose nomination for election by the stockholders of such Borrower or Guarantor, as the
case may be, was approved by a vote of at least sixty-six and two-thirds (66 2/3%) percent of the
directors then still in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of Directors of any
Borrower or Guarantor then still in office; or (e) the failure of Parent to own directly or
indirectly one hundred (100%) percent of the voting power of the total outstanding Voting Stock of
any other Borrower or Guarantor.


 


5









 





1.20 “Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from
time to time hereafter be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.




1.21 “Collateral” shall have the meaning set forth in Section 5 hereof.



1.22 “Collateral Access Agreement” shall mean an agreement in writing, in form and substance
satisfactory to Agent, from any lessor of premises to any Borrower or Guarantor, or any other
person to whom any Collateral is consigned or who has custody, control or possession of any such
Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is
located, in favor of Agent with respect to the Collateral at such premises or otherwise in the
custody, control or possession of such lessor, consignee or other person.



1.23 “Commitment” shall mean, at any time, as to each Lender, the principal amount set forth
below such Lender’s signature on the signatures pages hereto designated as the Commitment or on
Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 13.7 hereof, as the same may be adjusted
from time to time in accordance with the terms hereof; sometimes being collectively referred to
herein as “Commitments”.



1.24 “Credit Facility” shall mean the Loans and Letters of Credit provided to or for the
benefit of any Borrower pursuant to Sections 2.1 and 2.2 hereof.



1.25 “Default” shall mean an act, condition or event which with notice or passage of time or
both would constitute an Event of Default.




1.26 “Defaulting Lender” shall have the meaning set forth in Section 6.11 hereof.



1.27 “Deposit Account Control Agreement” shall mean an agreement in writing, in form and
substance satisfactory to Agent, by and among Agent, the Borrower or Guarantor with a deposit
account at any bank and the bank at which such deposit account is at any time maintained which
provides that such bank will comply with instructions originated by Agent directing disposition of
the funds in the deposit account without further consent by such Borrower or Guarantor and has such
other terms and conditions as Agent may require.



1.28 “EBITDA” shall mean, as to any Person, with respect to any period, an amount equal to:
(a) the Net Income of such Person and its Subsidiaries for such period on a consolidated basis
determined in accordance with GAAP, plus (b) depreciation, amortization and other non-cash
charges (including, but not limited to, imputed interest and deferred compensation) of such Person
for such period (to the extent deducted in the computation of Net Income), all in accordance with
GAAP, plus (c) Interest Expense of such Person for such period (to the extent deducted in
the computation of Net Income), plus (d) charges for Federal, State, local and foreign
income taxes for such period (to the extent deducted in the computation of Net
Income), plus (e) all extraordinary losses and unusual losses related to the
restructuring of the business of such Person and costs associated with the financing transaction
contemplated by this Agreement, minus (f) all income (and plus all charges, up to the
amount of such income) attributable to any Subsidiary of such Person.


 


6









 





1.29 “Eligible Accounts” shall mean Accounts created by a Borrower that in each case satisfy
the criteria set forth below as determined by Agent subject to the provisions of Section 9.18
hereof. In general, subject to those provisions, Accounts shall be Eligible Accounts if:



(a) such Accounts arise from the actual and bona fide sale and delivery of goods by such
Borrower or rendition of services by such Borrower in the ordinary course of its business which
transactions are completed in accordance with the terms and provisions contained in any documents
related thereto;



(b) such Accounts are not unpaid more than sixty (60) days after the original due date for
them or more than one hundred five (105) days after the date of the original invoice for them;



(c) such Accounts comply with the terms and conditions contained in Section 7.2(b) of this
Agreement;



(d) such Accounts do not arise from sales on consignment, guaranteed sale, sale and return,
sale on approval, or other terms under which payment by the account debtor may be conditional or
contingent;



(e) the chief executive office of the account debtor with respect to such Accounts is located
in the United States of America or Canada (provided, that, at any time promptly
upon Agent’s request, such Borrower shall execute and deliver, or cause to be executed and
delivered, such other agreements, documents and instruments as may be required by Agent to perfect
the security interests of Agent in those Accounts of an account debtor with its chief executive
office or principal place of business in Canada in accordance with the applicable laws of the
Province of Canada in which such chief executive office or principal place of business is located
and take or cause to be taken such other and further actions as Agent may request to enable Agent
as secured party with respect thereto to collect such Accounts under the applicable Federal or
Provincial laws of Canada) or, at Agent’s option, if the chief executive office and principal place
of business of the account debtor with respect to such Accounts is located other than in the United
States of America or Canada, then if either: (i) the account debtor has delivered to such Borrower
an irrevocable letter of credit issued or confirmed by a bank satisfactory to Agent and payable
only in the United States of America and in U.S. dollars, sufficient to cover such Account, in form
and substance satisfactory to Agent and if required by Agent, the original of such letter of credit
has been delivered to Agent or Agent’s agent and the issuer thereof, and such Borrower has complied
with the terms of Section 5.2(f) hereof with respect to the assignment of the proceeds of such
letter of credit to Agent or naming Agent as transferee beneficiary thereunder, as Agent may
specify, or (ii) such Account is subject to credit insurance payable to Agent issued by an insurer
and on terms and in an amount acceptable to Agent, or (iii) such Account is otherwise acceptable in
all respects to Agent (subject to such lending formula with respect thereto as Agent may
determine);


 


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(f) such Accounts do not consist of progress billings (such that the obligation of the account
debtors with respect to such Accounts is conditioned upon such Borrower’s satisfactory completion
of any further performance under the agreement giving rise thereto), bill and hold invoices or
retainage invoices, except as to bill and hold invoices, if Agent shall have received an agreement
in writing from the account debtor, in form and substance satisfactory to Agent, confirming the
unconditional obligation of the account debtor to take the goods related thereto and pay such
invoice;



(g) the account debtor with respect to such Accounts has not asserted a counterclaim, defense
or dispute and is not owed or does not claim to be owed any amounts that may give rise to any right
of setoff or recoupment against such Accounts (but the portion of the Accounts of such account
debtor in excess of the amount at any time and from time to time owed by such Borrower to such
account debtor or claimed owed by such account debtor may be deemed Eligible Accounts);



(h) there are no facts, events or occurrences which would impair the validity, enforceability
or collectability of such Accounts or reduce the amount payable or delay payment thereunder;



(i) such Accounts are subject to the first priority, valid and perfected security interest of
Agent and any goods giving rise thereto are not, and were not at the time of the sale thereof,
subject to any liens 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;



(j) neither the account debtor nor any officer or employee of the account debtor with respect
to such Accounts is an officer, employee, agent or other Affiliate of any Borrower or Guarantor;



(k) the account debtors with respect to such Accounts are not any foreign government, the
United States of America, any State, political subdivision, department, agency or instrumentality
thereof, unless, if the account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Agent’s request, the Federal
Assignment of Claims Act of 1940, as amended or any similar State or local law, if applicable, has
been complied with in a manner satisfactory to Agent;



(l) there are no proceedings or actions which are threatened or pending against the account
debtors with respect to such Accounts which might result in any material adverse change in any such
account debtor’s financial condition (including, without limitation, any bankruptcy, dissolution,
liquidation, reorganization or similar proceeding);



(m) the aggregate amount of such Accounts owing by a single account debtor (other than
Amazon.com, AEC One Stop and Anderson Merchandising) do not constitute more than ten (10%) percent
of the aggregate amount of all otherwise Eligible Accounts and such Accounts owing by each of
Amazon.com and AEC One Stop do not, in each case, constitute more than twenty-five (25%) percent of
the aggregate amount of all otherwise Eligible Accounts and such Accounts owing by Anderson
Merchandising do not constitute more than thirty (30%)
percent of the aggregate amount of all otherwise Eligible Accounts (but the portion of the
Accounts not in excess of the applicable percentages may be deemed Eligible Accounts);


 


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(n) such Accounts are not owed by an account debtor who has Accounts unpaid more than sixty
(60) days after the original due date for them or more than one hundred five (105) days after the
original invoice date for them which constitute more than fifty (50%) percent of the total Accounts
of such account debtor;



(o) the account debtor is not located in a state requiring the filing of a Notice of Business
Activities Report or similar report in order to permit such Borrower to seek judicial enforcement
in such State of payment of such Account, unless such Borrower has qualified to do business in such
state or has filed a Notice of Business Activities Report or equivalent report for the then current
year or such failure to file and inability to seek judicial enforcement is capable of being
remedied without any material delay or material cost;



(p) such Accounts are owed by account debtors whose total indebtedness to such Borrower does
not exceed the credit limit with respect to such account debtors as determined by such Borrower
from time to time, to the extent such credit limit as to any account debtor is established
consistent with the current practices of such Borrower as of the date hereof and such credit limit
is acceptable to Agent (but the portion of the Accounts not in excess of such credit limit may be
deemed Eligible Accounts); and



(q) such Accounts are owed by account debtors deemed creditworthy at all times by Agent in
good faith.



The criteria for Eligible Accounts set forth above may only be changed and any new criteria
for Eligible Accounts 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 Accounts in the good faith determination of
Agent. Any Accounts that are not Eligible Accounts shall nevertheless be part of the Collateral.



1.30 “Eligible Transferee” shall mean (a) any Lender; (b) the parent company of any Lender
and/or any Affiliate of such Lender which is at least fifty (50%) percent owned by such Lender or
its parent company; (c) any person (whether a corporation, partnership, trust or otherwise) that is
engaged in the business of making, purchasing, holding or otherwise investing in bank loans and
similar extensions of credit in the ordinary course of its business and is administered or managed
by a Lender or with respect to any Lender that is a fund which invests in bank loans and similar
extensions of credit, any other fund that invests in bank loans and similar extensions of credit
and is managed by the same investment advisor as such Lender or by an Affiliate of such investment
advisor, and in each case is approved by Agent; and (d) any other commercial bank, financial
institution or “accredited investor” (as defined in Regulation D under the Securities Act of 1933)
approved by Agent, provided, that, (i) neither any Borrower nor any Guarantor or
any Affiliate of any Borrower or Guarantor shall qualify as an Eligible Transferee and (ii) no
Person to whom any Indebtedness which is in any way subordinated in right of
payment to any other Indebtedness of any Borrower or Guarantor shall qualify as an Eligible
Transferee, except as Agent may otherwise specifically agree.


 


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1.31 “Environmental Laws” shall mean all foreign, Federal, State and local laws (including
common law), legislation, rules, codes, licenses, permits (including any conditions imposed
therein), authorizations, judicial or administrative decisions, injunctions or agreements between
any Borrower or Guarantor and any Governmental Authority, (a) relating to pollution and the
protection, preservation or restoration of the environment (including air, water vapor, surface
water, ground water, drinking water, drinking water supply, surface land, subsurface land, plant
and animal life or any other natural resource), or to human health or safety, (b) relating to the
exposure to, or the use, storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or disposal, or threatened
release, of Hazardous Materials, or (c) relating to all laws with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous Materials. The term
“Environmental Laws” includes (i) the Federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic Substances Control Act,
the Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of
1974, (ii) applicable state counterparts to such laws and (iii) any common law or equitable
doctrine that may impose liability or obligations for injuries or damages due to, or threatened as
a result of, the presence of or exposure to any Hazardous Materials.



1.32 “Equipment” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and
Guarantor’s now owned and hereafter acquired equipment, wherever located, including machinery, data
processing and computer equipment (whether owned or licensed and including embedded software),
vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter
affixed thereto or used in connection therewith, and substitutions and replacements thereof,
wherever located.



1.33 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, together with all
rules, regulations and interpretations thereunder or related thereto.



1.34 “ERISA Affiliate” shall mean any person required to be aggregated with any Borrower, any
Guarantor or any of its or their respective Subsidiaries under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.



1.35 “ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043(c) of
ERISA or the regulations issued thereunder, with respect to a Pension Plan, other than events as to
which the requirement of notice has been waived in regulations by the Pension Benefit Guaranty
Corporation; (b) the adoption of any amendment to a Pension Plan that would require the provision
of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) a complete or
partial withdrawal by any Borrower, Guarantor or any ERISA Affiliate from a Multiemployer Plan or a
cessation of operations which is treated as such a withdrawal or notification that a Multiemployer
Plan is in reorganization; (d) the filing of a notice of intent to
terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or
4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to
terminate a Pension Plan; (e) an event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan; (f) the imposition of any liability under Title IV of ERISA, other
than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of
ERISA, upon any Borrower, Guarantor or any ERISA Affiliate in excess of $250,000 and (g) any other
event or condition with respect to a Plan including any Pension Plan subject to Title IV of ERISA
maintained, or contributed to, by any ERISA Affiliate that could reasonably be expected to result
in liability of any Borrower in excess of $250,000.


 


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1.36 “Eurodollar Rate Loans” shall mean any Loans or portion thereof on which interest is
payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof.



1.37 “Event of Default” shall mean the occurrence or existence of any event or condition
described in Section 10.1 hereof.



1.38 “Excess Availability” shall mean, as to each Borrower, the amount, as determined by
Agent, calculated at any date, equal to: (a) the lesser of: (i) the Borrowing Base of such
Borrower and (ii) the Revolving Loan Limit of such Borrower (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 of such
Borrower (but not including for this purpose Obligations of such Borrower arising pursuant to any
guarantees in favor of Agent and Lenders of the Obligations of the other Borrowers or 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 such Borrower 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 than trade payables
or other obligations being contested or disputed by such Borrower in good faith), plus (iv) without
duplication, the amount of checks issued by such Borrower 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 such
Borrower in good faith), but not yet sent.



1.39 “Exchange Act” shall mean the Securities Exchange Act of 1934, together with all rules,
regulations and interpretations thereunder or related thereto.



1.40 “Existing Lenders” shall mean Wells Fargo Foothill, Inc. and its predecessors, successors
and assigns.



1.41 “Existing Letters of Credit” shall mean, collectively, the letters of credit issued for
the account of a Borrower or Guarantor or for which such Borrower or Guarantor is otherwise liable
listed on Schedule 1.41 hereto, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.


 


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1.42 “Fee Letter” shall mean the letter agreement, dated of even date herewith, by and among
Borrowers, Guarantors and Agent, setting forth certain fees payable by Borrowers to Agent for the
benefit of itself and Lenders, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.



1.43 “Financing Agreements” shall mean, collectively, this Agreement and all notes,
guarantees, security agreements, deposit account control agreements, investment property control
agreements, intercreditor agreements and all other agreements, documents and instruments now or at
any time hereafter executed and/or delivered by any Borrower or Obligor in connection with this
Agreement; provided, that, in no event shall the term Financing Agreements be
deemed to include any Hedge Agreement.



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, calculated without giving effect to
any asset write-downs associated with Source Entertainment, expenses directly associated with that
certain Agreement and Plan of Merger dated as of March 29, 2007 among BTP Acquisition Company, LLC,
IEAC, Inc. and Parent, and any expenses directly associated with derivative shareholder lawsuits
against Parent, 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, and minus any Capital Expenditures made by such Person or
its Subsidiaries during such period to the extent they are not financed, 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, minus any warrant amortization, and plus production
costs expenditures, in each case made or incurred by such Person or its Subsidiaries during such
period.



1.45 “Foreign Lender” shall mean any Lender that is organized under the laws of a jurisdiction
other than that in which a Borrower is resident for tax purposes. For purposes of this definition,
the United States of America, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.




1.46 “Funding Bank” shall have the meaning given to such term in Section 3.3 hereof.



1.47 “GAAP” shall mean generally accepted accounting principles in the United States of
America as in effect from time to time as set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public Accountants and the
statements and pronouncements of the Financial Accounting Standards Board which are applicable to
the circumstances as of the date of determination consistently applied, except that, for purposes
of Sections 9.17 and 9.18 hereof, GAAP shall be determined on the basis of such principles in
effect on the date hereof and consistent with those used in the preparation of the most recent
audited financial statements delivered to Agent prior to the date hereof.


 


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1.48 “Governmental Authority” shall mean any nation or government, any state, province, or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.



1.49 “Guarantors” shall mean, collectively, the following (together with their respective
successors and assigns): (a) Egami Media, Inc., a Delaware corporation; (b) Image Entertainment
(UK), Inc., a Delaware corporation; (c) Home Vision Entertainment, Inc., a Delaware corporation;
and (d) any other Person that at any time after the date hereof becomes party to a guarantee in
favor of Agent or any Lender or otherwise liable on or with respect to the Obligations or who is
the owner of any property which is security for the Obligations (other than Borrowers); each
sometimes being referred to herein individually as a “Guarantor”.



1.50 “Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials
and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials,
biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or
type of pollutants or contaminants (including materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes
and including any other substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or toxic under any
Environmental Law).



1.51 “Hedge Agreement” shall mean an agreement between any Borrower or Guarantor and Agent or
any Bank Product Provider that is a swap agreement as such term is defined in 11 U.S.C. Section
101, and including any rate swap agreement, basis swap, forward rate agreement, commodity swap,
interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap
agreement rate, floor agreement, rate collar agreement, currency swap agreement, cross-currency
rate swap agreement, currency option, any other similar agreement (including any option to enter
into any of the foregoing or a master agreement for any the foregoing together with all supplements
thereto) for the purpose of protecting against or managing exposure to fluctuations in interest or
exchange rates, currency valuations or commodity prices; sometimes being collectively referred to
herein as “Hedge Agreements”.


 


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1.52 “Indebtedness” shall mean, with respect to any Person, any liability, whether or not
contingent, (a) in respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes,
debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase
price of any property or services (other than an account payable to a trade creditor (whether or
not an Affiliate) incurred in the ordinary course of business of such Person and payable in
accordance with customary trade practices); (c) all obligations as lessee under leases which have
been, or should be, in accordance with GAAP recorded as Capital Leases; (d) any contractual
obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any
indebtedness described in this definition of another Person, including, without limitation, any
such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or
otherwise acquire such indebtedness, obligation or liability or any security therefor, or to
provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of
income, or other financial condition; (e) all obligations with respect to redeemable stock and
redemption or repurchase obligations under any Capital Stock or other
equity securities issued by such Person; (f) all reimbursement obligations and other
liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise),
letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such
Person’s account; (g) all indebtedness of such Person in respect of indebtedness of another Person
for borrowed money or indebtedness of another Person otherwise described in this definition which
is secured by any consensual lien, security interest, collateral assignment, conditional sale,
mortgage, deed of trust, or other encumbrance on any asset of such Person, whether or not such
obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person,
all as of such time; (h) all obligations, liabilities and indebtedness of such Person (marked to
market) arising under swap agreements, cap agreements and collar agreements and other agreements or
arrangements designed to protect such person against fluctuations in interest rates or currency or
commodity values; (i) all obligations owed by such Person under License Agreements with respect to
non-refundable, advance or minimum guarantee royalty payments; (j) indebtedness of any partnership
or joint venture in which such Person is a general partner or a joint venturer to the extent such
Person is liable therefor as a result of such Person’s ownership interest in such entity, except to
the extent that the terms of such indebtedness expressly provide that such Person is not liable
therefor or such Person has no liability therefor as a matter of law and (k) the principal and
interest portions of all rental obligations of such Person under any synthetic lease or similar
off-balance sheet financing where such transaction is considered to be borrowed money for tax
purposes but is classified as an operating lease in accordance with GAAP.



1.53 “Information Certificate” shall mean, collectively, the Information Certificates of
Borrowers and Guarantors constituting Exhibit B hereto containing material information with respect
to Borrowers and Guarantors, their respective businesses and assets provided by or on behalf of
Borrowers and Guarantors to Agent in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.



1.54 “Intellectual Property” shall mean, as to each Borrower and Guarantor, such Borrower’s
and Guarantor’s now owned and hereafter arising or acquired: patents, patent rights, patent
applications, copyrights, works which are the subject matter of copyrights, copyright applications,
copyright registrations, trademarks, servicemarks, trade names, trade styles, trademark and service
mark applications, and licenses and rights to use any of the foregoing and all applications,
registrations and recordings relating to any of the foregoing as may be filed in the United States
Copyright Office, the United States Patent and Trademark Office or in any similar office or agency
of the United States, any State thereof, any political subdivision thereof or in any other country
or jurisdiction, together with all rights and privileges arising under applicable law with respect
to any Borrower’s or Guarantor’s use of any of the foregoing; all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for
past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae,
processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating
standards; goodwill (including any goodwill associated with any trademark or servicemark, or the
license of any trademark or servicemark); customer and other lists in whatever form maintained;
trade secret rights, copyright rights, rights in works of authorship, domain names and domain name
registration; software and contract rights relating to computer software programs, in whatever form
created or maintained.


 


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1.55 “Interest Expense” shall mean, for any period, as to any Person and its Subsidiaries, all
of the following as determined in accordance with GAAP, total interest expense, whether paid or
accrued (including the interest component of Capital Leases for such period), including, without
limitation, all bank fees, commissions, discounts and other fees and charges owed with respect to
letters of credit, banker’s acceptances or similar instruments, but excluding (a) amortization of
discount and amortization of deferred financing fees and closing costs paid in cash in connection
with the transactions contemplated hereby, (b) interest paid in property other than cash and (c)
any other interest expense not payable in cash.



1.56 “Interest Period” shall mean for any Eurodollar Rate Loan, a period of approximately one
(1), two (2), or three (3) months duration as any Borrower (or Administrative Borrower on behalf of
such Borrower) may elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, such Borrower (or Administrative
Borrower on behalf of such Borrower) may not elect an Interest Period which will end after the last
day of the then-current term of this Agreement.




1.57 “Interest Rate” shall mean,




(a) Subject to clause (b) of this definition below:



(i) as to Prime Rate Loans, a rate equal to the sum of the Applicable Margin plus the Prime
Rate; and



(ii) as to Eurodollar Rate Loans, a rate equal to the sum of the Applicable Margin plus the
Adjusted Eurodollar Rate (in each case, based on the London Interbank Offered Rate applicable for
the Interest Period selected by a Borrower, or by Administrative Borrower on behalf of such
Borrower, as in effect two (2) Business Days prior to the commencement of the Interest Period,
whether such rate is higher or lower than any rate previously quoted to any Borrower or Guarantor).



(b) Notwithstanding anything to the contrary contained in clause (a) of this definition, the
Interest Rate shall mean a rate two (2.0%) percent per annum higher than the applicable rate set
forth in such clause (a), at Agent’s option, without notice, (i) either (A) for the period on and
after the date of termination or non-renewal hereof until such time as all Obligations are
indefeasibly paid and satisfied in full in immediately available funds, or (B) for the period from
and after the date of the occurrence of any Event of Default, and for so long as such Event of
Default is continuing as determined by Agent and (ii) on the Revolving Loans to any Borrower at any
time outstanding in excess of the Borrowing Base of such Borrower or the Revolving Loan Limit of
such Borrower (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).



1.58 “Inventory” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and
Guarantor’s now owned and hereafter existing or acquired goods, wherever located, which (a) are
leased by such Borrower or Guarantor as lessor; (b) are held by such Borrower or Guarantor for sale
or lease or to be furnished under a contract of service; (c) are
furnished by such Borrower or Guarantor under a contract of service; or (d) consist of raw
materials, work in process, finished goods or materials used or consumed in its business.


 


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1.59 “Investment Property Control Agreement” shall mean an agreement in writing, in form and
substance satisfactory to Agent, by and among Agent, any Borrower or Guarantor (as the case may be)
and any securities intermediary, commodity intermediary or other person who has custody, control or
possession of any investment property of such Borrower or Guarantor acknowledging that such
securities intermediary, commodity intermediary or other person has custody, control or possession
of such investment property on behalf of Agent, that it will comply with entitlement orders
originated by Agent with respect to such investment property, or other instructions of Agent, and
has such other terms and conditions as Agent may require.



1.60 “Lenders” shall mean the financial institutions who are signatories hereto as Lenders and
other persons made a party to this Agreement as a Lender in accordance with Section 13.7 hereof,
and their respective successors and assigns; each sometimes being referred to herein individually
as a “Lender”.



1.61 “Letter of Credit Documents” shall mean, with respect to any Letter of Credit, such
Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any
application therefor, and any agreements, instruments, guarantees or other documents (whether
general in application or applicable only to such Letter of Credit) governing or providing for (a)
the rights and obligations of the parties concerned or at risk or (b) any collateral security for
such obligations.




1.62 “Letter of Credit Limit” shall mean $2,000,000.



1.63 “Letter of Credit Obligations” shall mean, at any time, the sum of (a) the aggregate
undrawn amount of all Letters of Credit outstanding at such time, plus (b) the aggregate amount of
all drawings under Letters of Credit for which the issuer thereof has not at such time been
reimbursed, plus (c) without duplication, the aggregate amount of all payments made by each Lender
to the issuer with respect to such Lender’s participation in Letters of Credit as provided in
Section 2.2 for which Borrowers have not at such time reimbursed the Lenders, whether by way of a
Revolving Loan or otherwise.



1.64 “Letters of Credit” shall mean all letters of credit (whether documentary or stand-by and
whether for the purchase of inventory, equipment or otherwise) issued by an issuer for the account
of any Borrower pursuant to this Agreement, and all amendments, renewals, extensions or
replacements thereof and including, but not limited to, the Existing Letters of Credit. The issuer
of the Letters of Credit shall be, and all references to such issuer herein shall mean, Wachovia
Bank, National Association and its successors and assigns or such other bank as Lender may from
time to time designate.




1.65 “License Agreements” shall have the meaning set forth in Section 8.11 hereof.




1.66 “Loans” shall mean, collectively, the Revolving Loans.


 


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1.67 “London Interbank Offered Rate” shall mean, with respect to any Eurodollar Loan for the
Interest Period applicable thereto, the rate of interest per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page)
as the London interbank offered rate for deposits in U.S. Dollars at approximately 11:00 A.M.
(London time) two (2) Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, that, if more than one rate is specified on Telerate
Page 3750, the applicable rate shall be the arithmetic mean of all such rates. If, for any reason,
such rate is not available, the term “London Interbank Offered Rate” shall mean, with respect to
any Eurodollar Loan for the Interest Period applicable thereto, the rate of interest per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page
as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London
time) two (2) Business Days prior to the first day of such Interest Period for a term comparable
to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen
LIBO Page, the applicable rate shall be the arithmetic mean of all such rates.



1.68 “Material Adverse Effect” shall mean a material adverse effect on (a) the financial
condition, business, performance or operations of Borrowers; (b) the legality, validity or
enforceability of this Agreement or any of the other Financing Agreements; (c) the legality,
validity, enforceability, perfection or priority of the security interests and liens of Agent upon
the Collateral; (d) the Collateral or its value; (e) the ability of any Borrower to repay the
Obligations or of any Borrower to perform its obligations under this Agreement or any of the other
Financing Agreements as and when to be performed; or (f) the ability of Agent or any Lender to
enforce the Obligations or realize upon the Collateral or otherwise with respect to the rights and
remedies of Agent and Lenders under this Agreement or any of the other Financing Agreements.



1.69 “Material Contract” shall mean (a) any contract or other agreement (other than the
Financing Agreements), written or oral, of any Borrower or Guarantor involving monetary liability
of or to any Person in an amount in excess of $500,000 in any fiscal year and (b) any other
contract or other agreement (other than the Financing Agreements), whether written or oral, to
which any Borrower or Guarantor is a party as to which the breach, nonperformance, cancellation or
failure to renew by any party thereto would have a Material Adverse Effect.



1.70 “Multiemployer Plan” shall mean a “multi-employer plan” as defined in Section 4001(a)(3)
of ERISA which is or was at any time during the current year or the immediately preceding six (6)
years contributed to by any Borrower, Guarantor or any ERISA Affiliate or with respect to which any
Borrower, Guarantor or any ERISA Affiliate may incur any liability.


 


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1.71 “Net Income” shall mean, with respect to any Person, for any period, the aggregate of the
net income (loss) of such Person and its Subsidiaries, on a consolidated basis, for such period
(excluding to the extent included therein any extraordinary or one-time gains or losses) after
deducting all charges which should be deducted before arriving at the net income (loss) for such
period and after deducting the Provision for Taxes for such period, all as determined in accordance
with GAAP, provided, that, (a) the net income of any Person that is not a
wholly-owned Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid or payable to such
Person or a wholly-owned Subsidiary of such Person; (b) the effect of any change in accounting
principles adopted by such Person or its Subsidiaries after the date hereof shall be excluded; and
(c) the net income (if positive) of any wholly-owned Subsidiary to the extent that the declaration
or payment of dividends or similar distributions by such wholly-owned Subsidiary to such
Person or to any other wholly-owned Subsidiary of such Person is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule of government regulation applicable to such wholly-owned Subsidiary shall be
excluded. For the purpose of this definition, net income excludes any gain or loss, together with
any related Provision for Taxes for such gain or loss realized upon the sale or other disposition
of any assets that are not sold in the ordinary course of business (including, without limitation,
dispositions pursuant to sale and leaseback transactions), or of any Capital Stock of such Person
or a Subsidiary of such Person and any net income realized as a result of changes in accounting
principles or the application thereof to such Person.



1.72 “Obligations” shall mean (a) any and all Loans, Letter of Credit Obligations and all
other obligations, liabilities and indebtedness of every kind, nature and description owing by any
or all of Borrowers to Agent or any Lender or any Issuing Bank, including principal, interest,
charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, arising under this Agreement or any of the other Financing Agreements or on
account of any Letter of Credit and all other Letter of Credit Obligations, whether now existing or
hereafter arising, whether arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to such Borrower under the United
States Bankruptcy Code or any similar statute (including the payment of interest and other amounts
which would accrue and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or
unliquidated, or secured or unsecured and (b) for purposes only of Section 5.1 hereof and subject
to the priority in right of payment set forth in Section 6.4 hereof, all obligations, liabilities
and indebtedness of every kind, nature and description owing by any or all of Borrowers or
Guarantors to Agent or any Bank Product Provider arising under or pursuant to any Bank Products,
whether now existing or hereafter arising, provided, that, (i) as to any such obligations,
liabilities and indebtedness arising under or pursuant to a Hedge Agreement, the same shall only be
included within the Obligations if upon Agent’s request, Agent shall have entered into an
agreement, in form and substance satisfactory to Agent, with the Bank Product Provider that is a
counterparty to such Hedge Agreement, as acknowledged and agreed to by Borrowers and Guarantors,
providing for the delivery to Agent by such counterparty of information with respect to the amount
of such obligations and providing for the other rights of Agent and such Bank Product Provider in
connection with such arrangements, (ii) any Bank Product Provider, other than Wachovia and its
Affiliates, shall have delivered written notice to Agent that (A) such Bank Product Provider has
entered into a transaction to provide Bank Products to a Borrower and Guarantor and (B) the
obligations arising pursuant to such Bank Products provided to Borrowers and Guarantors constitute
Obligations entitled to the benefits of the security interest of Agent granted hereunder, and Agent
shall have accepted such notice in writing and (iii) in no event shall any Bank Product Provider
acting in such capacity to whom such obligations, liabilities or indebtedness are owing be deemed a
Lender for purposes hereof to the extent of and as to such obligations, liabilities or indebtedness
except that each reference to the term “Lender” in Sections 12.1, 12.2, 12.3(b), 12.6, 12.7, 12.9,
12.12 and 13.6 hereof shall be deemed to include such Bank Product Provider and in no event shall
the approval of any such person in its capacity as Bank Product Provider be required in connection
with the release or termination of any security interest or lien of Agent.


 


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1.73 “Other Taxes” shall have the meaning given to such term in Section 6.5 hereof.



1.74 “Parent” shall mean Image Entertainment, Inc., a Delaware corporation, and its successors
and assigns.



1.75 “Participant” shall mean any financial institution that acquires and holds a
participation in the interest of any Lender in any of the Loans and Letters of Credit in conformity
with the provisions of Section 13.7 of this Agreement governing participations.



1.76 “Permitted Holders” shall mean the persons listed on Schedule 1.76 hereto and their
respective successors and assigns.



1.77 “Person” or “person” shall mean any individual, sole proprietorship, partnership,
corporation (including any corporation which elects subchapter S status under the Code), limited
liability company, limited liability partnership, business trust, unincorporated association, joint
stock corporation, trust, joint venture or other entity or any government or any agency or
instrumentality or political subdivision thereof.



1.78 “Pension Plan” shall mean a pension plan (as defined in Section 3(2) of ERISA) subject to
Title IV of ERISA which any Borrower or Guarantor sponsors, maintains, or to which any Borrower,
Guarantor or ERISA Affiliate makes, is making, or is obligated to make contributions, other than a
Multiemployer Plan.



1.79 “Plan” shall mean an employee benefit plan (as defined in Section 3(3) of ERISA) which
any Borrower or Guarantor sponsors, maintains, or to which it makes, is making, or is obligated to
make contributions, or in the case of a Multiemployer Plan has made contributions at any time
during the immediately preceding six (6) plan years or with respect to which any Borrower or
Guarantor may incur liability.



1.80 “Prime Rate” shall mean the higher of the rate from time to time publicly announced by
Reference Bank, as its prime rate, whether or not such announced rate is the best rate available at
such bank or the Federal Funds Effective Rate from time to time plus one-half (1/2%) percent. The
term “Federal Funds Effective Rate” shall mean, for any period, a fluctuating interest rate per
annum equal, for each day during such period, to the weighted average of the rates on overnight
Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds
brokers, as published for such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such transactions
received by Agent from three Federal Funds brokers of recognized standing selected by it.



1.81 “Prime Rate Loans” shall mean any Loans or portion thereof on which interest is payable
based on the Prime Rate in accordance with the terms thereof.



1.82 “Pro Rata Share” shall mean as to any Lender, the fraction (expressed as a percentage)
the numerator of which is such Lender’s Commitment and the denominator of which is the aggregate
amount of all of the Commitments of Lenders, as adjusted from time to time in accordance with the
provisions of Section 13.7 hereof; provided, that, if the Commitments have
been terminated, the numerator shall be the unpaid amount of such Lender’s Loans and its
interest in the Letters of Credit and the denominator shall be the aggregate amount of all unpaid
Loans and Letters of Credit.


 


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1.83 “Provision for Taxes” shall mean, with respect to any Person, for any period, an amount
equal to all taxes imposed on or measured by net income, whether Federal, State or local, and
whether foreign or domestic, that are paid or payable by such Person and its Subsidiaries in
respect of such period on a consolidated basis in accordance with GAAP.



1.84 “Real Property” shall mean all now owned and hereafter acquired real property of each
Borrower and Guarantor, including leasehold interests, together with all buildings, structures, and
other improvements located thereon and all licenses, easements and appurtenances relating thereto,
wherever located.



1.85 “Receivables” shall mean all of the following now owned or hereafter arising or acquired
property of each Borrower and Guarantor: (a) all Accounts; (b) all interest, fees, late charges,
penalties, collection fees and other amounts due or to become due or otherwise payable in
connection with any Account; (c) all payment intangibles of such Borrower or Guarantor; (d)
letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof issued
payable to any Borrower or Guarantor or otherwise in favor of or delivered to any Borrower or
Guarantor in connection with any Account; or (e) all other accounts, contract rights, chattel
paper, instruments, notes, general intangibles and other forms of obligations owing to any Borrower
or Guarantor, whether from the sale and lease of goods or other property, licensing of any property
(including Intellectual Property or other general intangibles), rendition of services or from loans
or advances by any Borrower or Guarantor or to or for the benefit of any third person (including
loans or advances to any Affiliates or Subsidiaries of any Borrower or Guarantor) or otherwise
associated with any Accounts, Inventory or general intangibles of any Borrower or Guarantor
(including, without limitation, choses in action, causes of action, tax refunds, tax refund claims,
any funds which may become payable to any Borrower or Guarantor in connection with the termination
of any Plan or other employee benefit plan and any other amounts payable to any Borrower or
Guarantor from any Plan or other employee benefit plan, rights and claims against carriers and
shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty
or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the
lives of employees on which any Borrower or Guarantor is a beneficiary).



1.86 “Records” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and
Guarantor’s present and future books of account of every kind or nature, purchase and sale
agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software storage media and
devices, file cabinets or containers in or on which the foregoing are stored (including any rights
of any Borrower or Guarantor with respect to the foregoing maintained with or by any other person).



1.87 “Reference Bank” shall mean Wachovia Bank, National Association, or such other bank as
Agent may from time to time designate.


 


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1.88 “Renewal Date” shall have the meaning set forth in Section 13.1 hereof.




1.89 “Register” shall have the meaning set forth in Section 13.7 hereof.



1.90 “Required Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate
sixty-six and two-thirds (66 2/3%) percent or more of the aggregate of the Commitments of all
Lenders, or if the Commitments shall have been terminated, Lenders to whom at least sixty-six and
two-thirds (66 2/3%) percent of the then outstanding Obligations are owing.



1.91 “Reserves” shall mean as of any date of determination, such amounts as Agent may from
time to time establish and revise in good faith reducing the amount of Loans and Letters of Credit
that would otherwise be available to any Borrower under the lending formula(s) provided for herein:
(a) to reflect events, conditions, contingencies or risks which, as determined by Agent in good
faith, adversely affect, or would have a reasonable likelihood of adversely affecting, either (i)
the Collateral or any other property which is security for the Obligations or its value or (ii) the
assets, business or prospects of any Borrower or Obligor or (iii) the security interests and other
rights of Agent or any Lender in the Collateral (including the enforceability, perfection and
priority thereof) or (b) to reflect Agent’s good faith belief that any collateral report or
financial information furnished by or on behalf of any Borrower or Obligor to Agent is or may have
been incomplete, inaccurate or misleading in any material respect or (c) to reflect outstanding
Letter of Credit Obligations as provided in Section 2.2 hereof or (d) in respect of any state of
facts which Agent determines in good faith constitutes a Default or an Event of Default. Without
limiting the generality of the foregoing, Reserves may, at Agent’s option, be established to
reflect: (i) dilution with respect to the Accounts (based on the ratio of the aggregate amount of
non-cash reductions in Accounts for any period to the aggregate dollar amount of the sales of such
Borrower for such period) as calculated by Agent for any period is or is reasonably anticipated to
be greater than five (5%) percent; (ii) returns, discounts, claims, credits and allowances of any
nature that are not paid pursuant to the reduction of Accounts; (iii) sales, excise or similar
taxes included in the amount of any Accounts reported to Agent; (iv) amounts due or to become due
to owners and lessors of premises where any Collateral is located, other than for those locations
where Agent has received a Collateral Access Agreement that Agent has accepted in writing; (v)
amounts due or to become due to owners and licensors of trademarks and other Intellectual Property
used by any Borrower and (vi) obligations, liabilities or indebtedness (contingent or otherwise) of
Borrowers or Guarantors to Agent or any Bank Product Provider arising under or in connection with
any Bank Products or as such Affiliate or Person may otherwise require in connection therewith to
the extent that such obligations, liabilities or indebtedness constitute Obligations as such term
is defined herein or otherwise receive the benefit of the security interest of Agent in any
Collateral. The amount of any Reserve established by Agent shall have a reasonable relationship to
the event, condition or other matter which is the basis for such reserve as determined by Agent in
good faith and to the extent that such Reserve is in respect of amounts that may be payable to
third parties Agent may, at its option, deduct such Reserve from the Revolving Loan Limit, at any
time that such limit is less than the amount of the Borrowing Base.


 


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1.92 “Revolving Loan Limit” shall mean, as to each Borrower, at any time, the amount equal to
the $15,000,000 minus the then outstanding principal amount of the Revolving Loans
and Letters of Credit provided to the other Borrowers, provided that upon the
election of Administrative Borrower exercised by prior written notice to Agent, the foregoing
amount of $15,000,000 may be increased to $20,000,000 so long as (a) no Default or Event of Default
has occurred and is continuing, (b) the Fixed Charge Coverage Ratio of Borrowers for the twelve
(12) months most recently ended, or such lesser number of months that have elapsed from and
including April 2007, is no less than 1.10 to one, and (c) as of the date of such increase, the
difference of the Excess Availability minus the aggregate sum of principal payments becoming due on
Indebtedness during the following six (6) months, is no less than $5,000,000.



1.93 “Revolving Loans” shall mean the loans now or hereafter made by or on behalf of any
Lender or by Agent for the account of any Lender on a revolving basis pursuant to the Credit
Facility (involving advances, repayments and readvances) as set forth in Section 2.1 hereof.



1.94 “Secured Parties” shall mean, collectively, (a) Agent, (b) Issuing Bank, (c) Lenders, and
(d) Bank Product Providers (to the extent approved by Agent).



1.95 “Solvent” shall mean, at any time with respect to any Person, that at such time such
Person (a) is able to pay its debts as they mature and has (and has a reasonable basis to believe
it will continue to have) sufficient capital (and not unreasonably small capital) to carry on its
business consistent with its practices as of the date hereof, and (b) the assets and properties of
such Person at a fair valuation (and including as assets for this purpose at a fair valuation all
rights of subrogation, contribution or indemnification arising pursuant to any guarantees given by
such Person) are greater than the Indebtedness of such Person, and including subordinated and
contingent liabilities computed at the amount which, such person has a reasonable basis to believe,
represents an amount which can reasonably be expected to become an actual or matured liability (and
including as to contingent liabilities arising pursuant to any guarantee the face amount of such
liability as reduced to reflect the probability of it becoming a matured liability).




1.96 “Special Agent Advances” shall have the meaning set forth in Section 12.11 hereof.



1.97 “Subsidiary” or “subsidiary” shall mean, with respect to any Person, any corporation,
limited liability company, limited liability partnership or other limited or general partnership,
trust, association or other business entity of which an aggregate of at least a majority of the
outstanding Capital Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time, Capital Stock of any other
class or classes of such corporation shall have or might have voting power by reason of the
happening of any contingency), managers, trustees or other controlling persons, or an equivalent
controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such
Person and/or one or more subsidiaries of such Person.



1.98 “UCC” shall mean the Uniform Commercial Code as in effect in the State of California and
any successor statute, as in effect from time to time (except that terms used herein which are
defined in the Uniform Commercial Code as in effect in the State of California on the date hereof
shall continue to have the same meaning notwithstanding any replacement or amendment of such
statute except as Agent may otherwise determine).


 


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1.99 “Voting Stock” shall mean with respect to any Person, (a) one (1) or more classes of
Capital Stock of such Person having general voting powers to elect at least a majority of the board
of directors, managers or trustees of such Person, irrespective of whether at the time Capital
Stock of any other class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such Person described in
clause (a) of this definition.



1.100 “Wachovia” shall mean Wachovia Capital Finance Corporation (Western), a California
corporation, in its individual capacity, and its successors and assigns.



SECTION 2. CREDIT FACILITIES



2.1 Loans.



(a) Subject to and upon the terms and conditions contained herein, each Lender severally (and
not jointly) agrees to make its Pro Rata Share of Revolving Loans to each Borrower from time to
time in amounts requested by such Borrower (or Administrative Borrower on behalf of such Borrower)
up to the aggregate amount outstanding for all Lenders at any time equal to the lesser of: (i) the
Borrowing Base of such Borrower at such time or (ii) the Revolving Loan Limit of such Borrower at
such time.



(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 to a Borrower shall not exceed the Borrowing Base of such Borrower, and
(ii) the aggregate principal amount of the Revolving Loans and Letter of Credit Obligations
outstanding at any time to a Borrower shall not exceed the Revolving Loan Limit of such Borrower.



(c) In the event that except as otherwise provided herein, the aggregate principal amount of
the Revolving Loans and Letter of Credit Obligations outstanding to a Borrower exceeds the
Borrowing Base of such Borrower or the Revolving Loan Limit of such Borrower, 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.




2.2 Letters of Credit.



(a) Subject to and upon the terms and conditions contained herein and in the Letter of Credit
Documents, at the request of a Borrower (or Administrative Borrower on behalf of such Borrower),
Agent agrees to provide or arrange for the account of such Borrower one or more Letters of Credit,
for the ratable risk of each Lender according to its Pro Rata Share, containing terms and
conditions acceptable to Agent and the issuer thereof.


 


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(b) The Borrower requesting such Letter of Credit (or Administrative Borrower on behalf of
such Borrower) shall give Agent three (3) Business Days’ prior written notice of such Borrower’s
request for the issuance of a Letter of Credit. Such notice shall be
irrevocable and shall specify the original face amount of the Letter of Credit requested, the
effective date (which date shall be a Business Day and in no event shall be a date less than ten
(10) days prior to the end of the then current term of this Agreement) of issuance of such
requested Letter of Credit, whether such Letter of Credit may be drawn in a single or in partial
draws, the date on which such requested Letter of Credit is to expire (which date shall be a
Business Day and shall not be more than one year from the date of issuance), the purpose for which
such Letter of Credit is to be issued, and the beneficiary of the requested Letter of Credit. The
Borrower requesting the Letter of Credit (or Administrative Borrower on behalf of such Borrower)
shall attach to such notice the proposed terms of the Letter of Credit. The renewal or extension
of any Letter of Credit shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.



(c) In addition to being subject to the satisfaction of the applicable conditions precedent
contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of
Credit shall be available unless each of the following conditions precedent have been satisfied in
a manner satisfactory to Agent: (i) the Borrower requesting such Letter of Credit (or
Administrative Borrower on behalf of such Borrower) shall have delivered to the proposed issuer of
such Letter of Credit at such times and in such manner as such proposed issuer may require, an
application, in form and substance satisfactory to such proposed issuer and Agent, for the issuance
of the Letter of Credit and such other Letter of Credit Documents as may be required pursuant to
the terms thereof, and the form and terms of the proposed Letter of Credit shall be satisfactory to
Agent and such proposed issuer; (ii) as of the date of issuance, no order of any court, arbitrator
or other Governmental Authority shall purport by its terms to enjoin or restrain money center banks
generally from issuing letters of credit of the type and in the amount of the proposed Letter of
Credit, and no law, rule or regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Governmental Authority with
jurisdiction over money center banks generally shall prohibit, or request that the proposed issuer
of such Letter of Credit refrain from, the issuance of letters of credit generally or the issuance
of such Letters of Credit; (iii) after giving effect to the issuance of such Letter of Credit, the
Letter of Credit Obligations shall not exceed the Letter of Credit Limit; and (iv) the Excess
Availability of the Borrower requesting such Letter of Credit, 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 one hundred (100%) percent of the
Letter of Credit Obligations with respect thereto. Effective on the issuance of each Letter of
Credit, a Reserve shall be established in the applicable amount set forth above.



(d) Except in Agent’s discretion, with the consent of all Lenders, the amount of all
outstanding Letter of Credit Obligations shall not at any time exceed the Letter of Credit Limit.


 


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(e) Each Borrower shall reimburse immediately the issuer of a Letter of Credit for any draw
under any Letter of Credit issued for the account of such Borrower by such issuer and pay such
issuer the amount of all other charges and fees payable to issuer in connection with any Letter of
Credit issued for the account of such Borrower immediately when due, irrespective of any claim,
setoff, defense or other right which such Borrower may have at any time against the issuer or any
other Person. Each drawing under any Letter of Credit or
other amount payable in connection therewith when due shall constitute a request by the
Borrower for whose account such Letter of Credit was issued to Agent for a Prime Rate Loan in the
amount of such drawing or other amount then due and shall be made by Agent on behalf of Lenders as
a Revolving Loan (or Special Agent Advance, as the case may be). The date of such Loan shall be the
date of the drawing or as to other amounts, the due date therefor. Any payments made by or on
behalf of Agent or any Lender to an issuer and/or related parties in connection with any Letter of
Credit shall constitute additional Revolving Loans to such Borrower pursuant to this Section 2 (or
Special Agent Advances as the case may be).



(f) Borrowers and Guarantors shall indemnify and hold Agent and Lenders harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses which Agent or any
Lender may suffer or incur in connection with any Letter of Credit and any documents, drafts or
acceptances relating thereto, including any losses, claims, damages, liabilities, costs and
expenses due to any action taken by any issuer or correspondent with respect to any Letter of
Credit, except for such losses, claims, damages, liabilities, costs or expenses that are a direct
result of the gross negligence or wilful misconduct of Agent or any Lender as determined pursuant
to a final non-appealable order of a court of competent jurisdiction. Each Borrower and Guarantor
assumes all risks with respect to the acts or omissions of the drawer under or beneficiary of any
Letter of Credit and for such purposes the drawer or beneficiary shall be deemed such Borrower’s
agent. Each Borrower and Guarantor assumes all risks for, and agrees to pay, all foreign, Federal,
State and local taxes, duties and levies relating to any goods subject to any Letter of Credit or
any documents, drafts or acceptances thereunder. Each Borrower and Guarantor hereby releases and
holds Agent and Lenders harmless from and against any acts, waivers, errors, delays or omissions
with respect to or relating to any Letter of Credit, except for the gross negligence or wilful
misconduct of Agent or any Lender as determined pursuant to a final, non-appealable order of a
court of competent jurisdiction. The provisions of this Section 2.2(f) shall survive the payment
of Obligations and the termination of this Agreement.



(g) In connection with Inventory purchased pursuant to any Letter of Credit, Borrowers and
Guarantors shall, at Agent’s request, instruct all suppliers, carriers, forwarders, customs
brokers, warehouses or others receiving or holding cash, checks, Inventory, documents or
instruments in which Agent holds a security interest that upon Agent’s request, such items are to
be delivered to Agent and/or subject to Agent’s order, and if they shall come into such Borrower’s
or Guarantor’s possession, to deliver them, upon Agent’s request, to Agent in their original form.
Except as otherwise provided herein, Agent shall not exercise such right to request such items so
long as no Default or Event of Default shall exist or have occurred and be continuing. Except as
Agent may otherwise specify, Borrowers shall designate Agent or the issuer of the Letter of Credit
related thereto, as the consignee on all bills of lading and other negotiable and non-negotiable
documents.


 


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(h) Each Borrower and Guarantor hereby irrevocably authorizes and directs any issuer of a
Letter of Credit to name such Borrower or Guarantor as the account party therein and to deliver to
Agent all instruments, documents and other writings and property received by issuer pursuant to the
Letter of Credit and to accept and rely upon Agent’s instructions and agreements with respect to
all matters arising in connection with the Letter of Credit or the Letter of Credit Documents with
respect thereto. Nothing contained herein shall be deemed or
construed to grant any Borrower or Guarantor any right or authority to pledge the credit of
Agent or any Lender in any manner. Agent and Lenders shall have no liability of any kind with
respect to any Letter of Credit provided by an issuer unless Agent has duly executed and delivered
to such issuer the application or a guarantee or indemnification in writing with respect to such
Letter of Credit. Borrowers and Guarantors shall be bound by any reasonable interpretation made in
good faith by Agent, or any other issuer or correspondent under or in connection with any Letter of
Credit or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation
may be inconsistent with any instructions of any Borrower or Guarantor.



(i) Immediately upon the issuance or amendment of any Letter of Credit, each Lender shall be
deemed to have irrevocably and unconditionally purchased and received, without recourse or
warranty, an undivided interest and participation to the extent of such Lender’s Pro Rata Share of
the liability with respect to such Letter of Credit and the obligations of Borrowers with respect
thereto (including all Letter of Credit Obligations with respect thereto). Each Lender shall
absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be
obligated to pay to the issuer of any such Letter of Credit therefor and discharge when due, its
Pro Rata Share of all of such obligations arising under such Letter of Credit. Without limiting
the scope and nature of each Lender’s participation in any Letter of Credit, to the extent that the
issuer has not been reimbursed or otherwise paid as required hereunder or under any such Letter of
Credit, each such Lender shall pay to the issuer its Pro Rata Share of such unreimbursed drawing or
other amounts then due to issuer in connection therewith.



(j) The obligations of Borrowers to pay each Letter of Credit Obligations and the obligations
of Lenders to make payments to Agent for the account of any issuer with respect to Letters of
Credit shall be absolute, unconditional and irrevocable and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances, whatsoever,
notwithstanding the occurrence or continuance of any Default, Event of Default, the failure to
satisfy any other condition set forth in Section 4 or any other event or circumstance. If such
amount is not made available by a Lender when due, Agent shall be entitled to recover such amount
on demand from such Lender with interest thereon, for each day from the date such amount was due
until the date such amount is paid to Agent at the interest rate then payable by any Borrower in
respect of Loans that are Prime Rate Loans. Any such reimbursement shall not relieve or otherwise
impair the obligation of Borrowers to reimburse the issuer under any Letter of Credit or make any
other payment in connection therewith.



(k) Any rights, remedies, duties or obligations granted or undertaken by any Borrower to any
issuer or correspondent in any application for any Letter of Credit, or any other agreement in
favor of any issuer or correspondent relating to any Letter of Credit, shall be deemed to have been
granted or undertaken by such Borrower to Agent. Any duties or obligations undertaken by Agent to
any issuer or correspondent in any application for any Letter of Credit, or any other agreement by
Agent in favor of any issuer or correspondent relating to any Letter of Credit, shall be deemed to
have been undertaken by Borrowers to Agent and to apply in all respects to Borrowers.



2.3 Commitments. The aggregate amount of each Lender’s Pro Rata Share of the Loans
and Letter of Credit Obligations shall not exceed the amount of such Lender’s
Commitment, as the same may from time to time be amended in accordance with the provisions
hereof.


 


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SECTION 3. INTEREST AND FEES



3.1
Interest.



(a) Borrowers shall pay to Agent, for the benefit of Lenders, interest on the outstanding
principal amount of the Loans at the Interest Rate. All interest accruing hereunder on and after
the date of any Event of Default or termination hereof shall be payable on demand.



(b) Each Borrower (or Administrative Borrower on behalf of such Borrower) may from time to
time request Eurodollar Rate Loans or may request that Prime Rate Loans be converted to Eurodollar
Rate Loans or that any existing Eurodollar Rate Loans continue for an additional Interest Period.
Such request from a Borrower (or Administrative Borrower on behalf of such Borrower) shall specify
the amount of the Eurodollar Rate Loans or the amount of the Prime Rate Loans to be converted to
Eurodollar Rate Loans or the amount of the Eurodollar Rate Loans to be continued (subject to the
limits set forth below) and the Interest Period to be applicable to such Eurodollar Rate Loans.
Subject to the terms and conditions contained herein, three (3) Business Days after receipt by
Agent of such a request from a Borrower (or Administrative Borrower on behalf of such Borrower),
such Eurodollar Rate Loans shall be made or Prime Rate Loans shall be converted to Eurodollar Rate
Loans or such Eurodollar Rate Loans shall continue, as the case may be, provided,
that, (i) no Default or Event of Default shall exist or have occurred and be continuing,
(ii) no party hereto shall have sent any notice of termination of this Agreement, (iii) such
Borrower (or Administrative Borrower on behalf of such Borrower) shall have complied with such
customary procedures as are established by Agent and specified by Agent to Administrative Borrower
from time to time for requests by Borrowers for Eurodollar Rate Loans, (iv) no more than four (4)
Interest Periods may be in effect at any one time, (v) the aggregate amount of the Eurodollar Rate
Loans must be in an amount not less than $2,000,000 or an integral multiple of $1,000,000 in excess
thereof, (vi) the maximum amount of the Eurodollar Rate Loans in the aggregate at any time
requested by Borrowers shall not exceed the amount equal to eighty (80%) percent of the lowest
principal amount of the Revolving Loans which it is anticipated will be outstanding during the
applicable Interest Period, in each case as determined by Agent in good faith (but with no
obligation of Agent or Lenders to make such Loans), and (vii) Agent and each Lender shall have
determined that the Interest Period or Adjusted Eurodollar Rate is available to Agent and such
Lender and can be readily determined as of the date of the request for such Eurodollar Rate Loan by
such Borrower. Any request by or on behalf of a Borrower for Eurodollar Rate Loans or to convert
Prime Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall
be irrevocable. Notwithstanding anything to the contrary contained herein, Agent and Lenders shall
not be required to purchase United States Dollar deposits in the London interbank market or other
applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions hereof
shall be deemed to apply as if Agent and Lenders had purchased such deposits to fund the Eurodollar
Rate Loans.


 


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(c) Any Eurodollar Rate Loans shall automatically convert to Prime Rate Loans upon the last
day of the applicable Interest Period, unless Agent has received and
approved a request to continue such Eurodollar Rate Loan at least three (3) Business Days
prior to such last day in accordance with the terms hereof. Any Eurodollar Rate Loans shall, at
Agent’s option, upon notice by Agent to Parent, be subsequently converted to Prime Rate Loans in
the event that this Agreement shall terminate or not be renewed. Borrowers shall pay to Agent, for
the benefit of Lenders, upon demand by Agent (or Agent may, at its option, charge any loan account
of any Borrower) any amounts required to compensate any Lender or Participant for any loss
(including loss of anticipated profits), cost or expense incurred by such person, as a result of
the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.



(d) Interest shall be payable by Borrowers to Agent, for the account of Lenders, monthly in
arrears not later than the first day of each calendar month and shall be calculated on the basis of
a three hundred sixty (360) day year and actual days elapsed. The interest rate on non-contingent
Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an amount equal to
each increase or decrease in the Prime Rate effective on the day any change in such Prime Rate is
announced. In no event shall charges constituting interest payable by Borrowers to Agent and
Lenders exceed the maximum amount or the rate permitted under any applicable law or regulation, and
if any such part or provision of this Agreement is in contravention of any such law or regulation,
such part or provision shall be deemed amended to conform thereto.




3.2 Fees.



(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 aggregate sum of the Revolving Loan Limits for all Borrowers 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.



(b) Borrowers shall pay to Agent, for the account of Lenders, a fee at a per annum rate equal
to the Applicable Margin for Eurodollar Rate Loans, on the average daily maximum amount available
to be drawn under all of such Letters of Credit for the immediately preceding month (or part
thereof), payable in arrears as of the first day of each succeeding month, computed for each day
from the date of issuance to the date of expiration; except that Borrowers shall pay, at Agent’s
option, without notice, such fee at a rate two (2%) percent greater than the otherwise applicable
rate on such average daily maximum amount for: (i) the period from and after the date of
termination or non-renewal hereof until Lenders have received full and final payment of all
Obligations (notwithstanding entry of a judgment against any Borrower or Guarantor) and (ii) the
period from and after the date of the occurrence of an Event of Default for so long as such Event
of Default is continuing as determined by Agent. Such letter of credit fees shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of
Borrowers to pay such fee shall survive the termination or non-renewal of this Agreement. In
addition to the letter of credit fees provided above, Borrowers shall pay to the issuer of any
Letter of Credit for its own account (without sharing with Lenders) the letter of credit fronting
and negotiation fees agreed to by Borrowers and such
issuer from time to time and the customary charges from time to time of such issuer with
respect to the issuance, amendment, transfer, administration, cancellation and conversion of, and
drawings under, such Letters of Credit.


 


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(c) Borrowers shall pay to Agent the other fees and amounts set forth in the Fee Letter in the
amounts and at the times specified therein. To the extent payment in full of the applicable fee is
received by Agent from Borrowers on or about the date hereof, Agent shall pay to each Lender its
share of such fees in accordance with the terms of the arrangements of Agent with such Lender.




3.3 Changes in Laws and Increased Costs of Loans.



(a) If after the date hereof, either (i) any change in, or in the interpretation of, any law
or regulation is introduced, including, without limitation, with respect to reserve requirements,
applicable to any Lender or any banking or financial institution from whom any Lender borrows funds
or obtains credit (a “Funding Bank”), or (ii) a Funding Bank or any Lender complies with any future
guideline or request from any central bank or other Governmental Authority or (iii) a Funding Bank
or any Lender determines that the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described below, or a Funding
Bank or any Lender complies with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable agency, and in the
case of any event set forth in this clause (iii), such adoption, change or compliance has or would
have the direct or indirect effect of reducing the rate of return on any Lender’s capital as a
consequence of its obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, change or compliance (taking into consideration the Funding Bank’s
or Lender’s policies with respect to capital adequacy) by an amount deemed by such Lender to be
material, and the result of any of the foregoing events described in clauses (i), (ii) or (iii) is
or results in an increase in the cost to any Lender of funding or maintaining the Loans, the
Letters of Credit or its Commitment, then Borrowers and Guarantors shall from time to time upon
demand by Agent pay to Agent additional amounts sufficient to indemnify such Lender against such
increased cost on an after-tax basis (after taking into account applicable deductions and credits
in respect of the amount indemnified). A certificate as to the amount of such increased cost shall
be submitted to Administrative Borrower by Agent or the applicable Lender and shall be conclusive,
absent manifest error.



(b) If prior to the first day of any Interest Period, (i) Agent shall have determined in good
faith (which determination shall be conclusive and binding upon Borrowers and Guarantors) that, by
reason of circumstances affecting the relevant market, adequate and reasonable means do not exist
for ascertaining the Adjusted Eurodollar Rate for such Interest Period, (ii) Agent has received
notice from the Required Lenders that the Adjusted Eurodollar Rate determined or to be determined
for such Interest Period will not adequately and fairly reflect the cost to Lenders of making or
maintaining Eurodollar Rate Loans during such Interest Period, or (iii) Dollar deposits in the
principal amounts of the Eurodollar Rate Loans to which such Interest Period is to be applicable
are not generally available in the London interbank
market, Agent shall give telecopy or telephonic notice thereof to Administrative Borrower as
soon as practicable thereafter, and will also give prompt written notice to Administrative Borrower
when such conditions no longer exist. If such notice is given (A) any Eurodollar Rate Loans
requested to be made on the first day of such Interest Period shall be made as Prime Rate Loans,
(B) any Loans that were to have been converted on the first day of such Interest Period to or
continued as Eurodollar Rate Loans shall be converted to or continued as Prime Rate Loans and (C)
each outstanding Eurodollar Rate Loan shall be converted, on the last day of the then-current
Interest Period thereof, to Prime Rate Loans. Until such notice has been withdrawn by Agent, no
further Eurodollar Rate Loans shall be made or continued as such, nor shall any Borrower (or
Administrative Borrower on behalf of any Borrower) have the right to convert Prime Rate Loans to
Eurodollar Rate Loans.


 


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(c) Notwithstanding any other provision herein, if the adoption of or any change in any law,
treaty, rule or regulation or final, non-appealable determination of an arbitrator or a court or
other Governmental Authority or in the interpretation or application thereof occurring after the
date hereof shall make it unlawful for Agent or any Lender to make or maintain Eurodollar Rate
Loans as contemplated by this Agreement, (i) Agent or such Lender shall promptly give written
notice of such circumstances to Administrative Borrower (which notice shall be withdrawn whenever
such circumstances no longer exist), (ii) the commitment of such Lender hereunder to make
Eurodollar Rate Loans, continue Eurodollar Rate Loans as such and convert Prime Rate Loans to
Eurodollar Rate Loans shall forthwith be canceled and, until such time as it shall no longer be
unlawful for such Lender to make or maintain Eurodollar Rate Loans, such Lender shall then have a
commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is requested and (iii) such
Lender’s Loans then outstanding as Eurodollar Rate Loans, if any, shall be converted automatically
to Prime Rate Loans on the respective last days of the then current Interest Periods with respect
to such Loans or within such earlier period as required by law. If any such conversion of a
Eurodollar Rate Loan occurs on a day which is not the last day of the then current Interest Period
with respect thereto, Borrowers and Guarantors shall pay to such Lender such amounts, if any, as
may be required pursuant to Section 3.3(d) below.



(d) Borrowers and Guarantors shall indemnify Agent and each Lender and to hold Agent and each
Lender harmless from any loss or expense which Agent or such Lender may sustain or incur as a
consequence of (i) default by Borrower in making a borrowing of, conversion into or extension of
Eurodollar Rate Loans after such Borrower (or Administrative Borrower on behalf of such Borrower)
has given a notice requesting the same in accordance with the provisions of this Loan Agreement,
(ii) default by any Borrower in making any prepayment of a Eurodollar Rate Loan after such Borrower
has given a notice thereof in accordance with the provisions of this Agreement, and (iii) the
making of a prepayment of Eurodollar Rate Loans on a day which is not the last day of an Interest
Period with respect thereto. With respect to Eurodollar Rate Loans, such indemnification may
include an amount equal to the excess, if any, of (A) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, converted or extended, for the period from
the date of such prepayment or of such failure to borrow, convert or extend to the last day of the
applicable Interest Period (or, in the case of a failure to borrow, convert or extend, the Interest
Period that would have commenced on the date of such failure) in each case at the applicable rate
of interest for such Eurodollar Rate Loans provided for herein over (B) the amount of interest (as
determined by such Agent or such
Lender) which would have accrued to Agent or such Lender on such amount by placing such amount
on deposit for a comparable period with leading banks in the interbank Eurodollar market. This
covenant shall survive the termination or non-renewal of this Agreement and the payment of the
Obligations.


 


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SECTION 4. CONDITIONS PRECEDENT




4.1 Conditions Precedent to Initial Loans and Letters of Credit. The obligation of
Lenders to make the initial Loans or of Agent and Lenders to provide for the initial Letters of
Credit hereunder is subject to the satisfaction of, or waiver of, immediately prior to or
concurrently with the making of such Loan or the issuance of such Letter of Credit of each of the
following conditions precedent:



(a) Agent shall have received, in form and substance satisfactory to Agent, all releases,
terminations and such other documents as Agent may request to evidence and effectuate the
termination by the Existing Lenders of their respective financing arrangements with Borrowers and
Guarantors and the termination and release by it or them, as the case may be, of any interest in
and to any assets and properties of each Borrower and Guarantor, duly authorized, executed and
delivered by it or each of them, including, but not limited to, (i) UCC termination statements for
all UCC financing statements previously filed by it or any of them or their predecessors, as
secured party and any Borrower or Guarantor, as debtor; and (ii) satisfactions and discharges of
any mortgages, deeds of trust or deeds to secure debt by any Borrower or Guarantor in favor of it
or any of them, in form acceptable for recording with the appropriate Governmental Authority;



(b) all requisite corporate action and proceedings in connection with this Agreement and the
other Financing Agreements shall be satisfactory in form and substance to Agent, and Agent shall
have received all information and copies of all documents, including records of requisite corporate
action and proceedings which Agent may have requested in connection therewith, such documents where
requested by Agent or its counsel to be certified by appropriate corporate officers or Governmental
Authority (and including a copy of the certificate of incorporation of each Borrower and Guarantor
certified by the Secretary of State (or equivalent Governmental Authority) which shall set forth
the same complete corporate name of such Borrower or Guarantor as is set forth herein and such
document as shall set forth the organizational identification number of each Borrower or Guarantor,
if one is issued in its jurisdiction of incorporation);



(c) no material adverse change shall have occurred in the assets, business or prospects of
Borrowers since the date of Agent’s latest field examination (not including for this purpose the
field review referred to in clause (d) below) and no change or event shall have occurred which
would impair the ability of any Borrower or Guarantor to perform its obligations hereunder or under
any of the other Financing Agreements to which it is a party or of Agent or any Lender to enforce
the Obligations or realize upon the Collateral;


 


31









 





(d) Agent shall have completed a field review of the Records and such other information with
respect to the Collateral as Agent may require to determine the amount of Loans available to
Borrowers (including, without limitation, current perpetual inventory records
and/or roll-forwards of Accounts through the date of closing, together with such supporting
documentation as may be necessary or appropriate, and other documents and information that will
enable Agent to accurately identify and verify the Collateral), the results of which in each case
shall be satisfactory to Agent, not more than three (3) Business Days prior to the date hereof or
such earlier date as Agent may agree;



(e) Agent shall have received, in form and substance satisfactory to Agent, all consents,
waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or
desirable in order to permit, protect and perfect its security interests in and liens upon the
Collateral or to effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including, without limitation, Collateral Access Agreements;



(f) the Excess Availability as determined by Agent, as of the date hereof, shall be not less
than $5,000,000 after giving effect to the initial Loans made or to be made and Letters of Credit
issued or to be issued in connection with the initial transactions hereunder;



(g) Agent shall have received, in form and substance satisfactory to Agent, a guaranty duly
executed and delivered by Guarantors;



(h) Agent shall have received, in form and substance satisfactory to Agent, subordination
agreements duly executed and delivered by Sonopress LLC, a Delaware limited liability company, and
Portside Growth and Opportunity Fund, a company organized under the laws of the Cayman Islands,
respectively, and acknowledged by Administrative Borrower;



(i) Agent shall have received, in form and substance satisfactory to Agent, Deposit Account
Control Agreements by and among Agent, each Borrower and Guarantor, as the case may be and each
bank where such Borrower (or Guarantor) has a deposit account, in each case, duly authorized,
executed and delivered by such bank and Borrower or Guarantor, as the case may be (or Agent shall
be the bank’s customer with respect to such deposit account as Agent may specify);



(j) Agent shall have received evidence, in form and substance satisfactory to Agent, that
Agent has a valid perfected first priority security interest in all of the Collateral;



(k) Agent shall have received and reviewed lien and judgment search results for the
jurisdiction of organization of each Borrower and Guarantor, the jurisdiction of the chief
executive office of each Borrower and Guarantor and all jurisdictions in which assets of Borrowers
and Guarantors are located, which search results shall be in form and substance satisfactory to
Agent;



(l) Agent shall have received originals of the shares of the stock certificates representing
all of the issued and outstanding shares of the Capital Stock of each Borrower and Guarantor (other
than Parent) and owned by any Borrower or Guarantor, in each case together with stock powers duly
executed in blank with respect thereto;


 


32









 





(m) Agent shall have received evidence of insurance and loss payee endorsements required
hereunder and under the other Financing Agreements, in form and
substance satisfactory to Agent, and certificates of insurance policies and/or endorsements
naming Agent as loss payee;



(n) Agent shall have received, in form and substance satisfactory to Agent, such opinion
letters of counsel to Borrowers and Guarantors with respect to the Financing Agreements and such
other matters as Agent may request; and



(o) the other Financing Agreements and all instruments and documents hereunder and thereunder
shall have been duly executed and delivered to Agent, in form and substance satisfactory to Agent.



4.2 Conditions Precedent to All Loans and Letters of Credit. The obligation of
Lenders to make the Loans, including the initial Loans, or of the Agent and Lenders to provide for
any Letter of Credit, including the initial Letters of Credit, is subject to the further
satisfaction of, or waiver of, immediately prior to or concurrently with the making of each such
Loan or the issuance of such Letter of Credit of each of the following conditions precedent:



(a) all representations and warranties contained herein and in the other Financing Agreements
shall be true and correct with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing each such Letter of
Credit and after giving effect thereto, except to the extent that such representations and
warranties expressly relate solely to an earlier date (in which case such representations and
warranties shall have been true and accurate on and as of such earlier date);



(b) no law, regulation, order, judgment or decree of any Governmental Authority shall exist,
and no action, suit, investigation, litigation or proceeding shall be pending or threatened in any
court or before any arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit,
restrain or otherwise affect (A) the making of the Loans or providing the Letters of Credit, or (B)
the consummation of the transactions contemplated pursuant to the terms hereof or the other
Financing Agreements or (ii) has or has a reasonable likelihood of having a Material Adverse
Effect; and



(c) no Default or Event of Default shall exist or have occurred and be continuing on and as of
the date of the making of such Loan or providing each such Letter of Credit and after giving effect
thereto.


 


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SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST




5.1 Grant of Security Interest. To secure payment and performance of all Obligations,
each Borrower and Guarantor hereby grants to Agent, for itself and the benefit of Secured Parties,
a continuing security interest in, a lien upon, and a right of set off against, and hereby assigns
to Agent, for itself and the benefit of Lenders, as security, all personal and real property and
fixtures, and interests in property and fixtures, of each Borrower and Guarantor, whether now owned
or hereafter acquired or existing, and wherever located (together with all other collateral
security for the Obligations at any time granted to or held or acquired by Agent or any Lender,
collectively, the “Collateral”), including:




(a) all Accounts;




(b) all general intangibles, including, without limitation, all Intellectual Property;




(c) all goods, including, without limitation, Inventory and Equipment;




(d) all Real Property and fixtures;



(e) all chattel paper, including, without limitation, all tangible and electronic chattel
paper;




(f) all instruments, including, without limitation, all promissory notes;




(g) all documents;




(h) all deposit accounts;



(i) all letters of credit, banker’s acceptances and similar instruments and including all
letter-of-credit rights;



(j) all supporting obligations and all present and future liens, security interests, rights,
remedies, title and interest in, to and in respect of Receivables and other Collateral, including
(i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit
and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit,
replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or
secured party, (iii) goods described in invoices, documents, contracts or instruments with respect
to, or otherwise representing or evidencing, Receivables or other Collateral, including returned,
repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other
persons securing the obligations of account debtors;



(k) all (i) investment property (including securities, whether certificated or uncertificated,
securities accounts, security entitlements, commodity contracts or commodity accounts) and (ii)
monies, credit balances, deposits and other property of any Borrower or Guarantor now or hereafter
held or received by or in transit to Agent, any Lender or its Affiliates or at any other depository
or other institution from or for the account of any Borrower or Guarantor, whether for safekeeping,
pledge, custody, transmission, collection or otherwise;



(l) all commercial tort claims, including, without limitation, those identified in the
Information Certificate;




(m) to the extent not otherwise described above, all Receivables;




(n) all Records; and



(o) all products and proceeds of the foregoing, in any form, including insurance proceeds and
all claims against third parties for loss or damage to or destruction of or other involuntary
conversion of any kind or nature of any or all of the other Collateral.


 


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5.2 Perfection of Security Interests.



(a) Each Borrower and Guarantor irrevocably and unconditionally authorizes Agent (or its
agent) to file at any time and from time to time such financing statements with respect to the
Collateral naming Agent or its designee as the secured party and such Borrower or Guarantor as
debtor, as Agent may require, and including any other information with respect to such Borrower or
Guarantor or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such
jurisdiction as Agent may determine, together with any amendment and continuations with respect
thereto, which authorization shall apply to all financing statements filed on, prior to or after
the date hereof. Each Borrower and Guarantor hereby ratifies and approves all financing statements
naming Agent or its designee as secured party and such Borrower or Guarantor, as the case may be,
as debtor with respect to the Collateral (and any amendments with respect to such financing
statements) filed by or on behalf of Agent prior to the date hereof and ratifies and confirms the
authorization of Agent to file such financing statements (and amendments, if any). Each Borrower
and Guarantor hereby authorizes Agent to adopt on behalf of such Borrower and Guarantor any symbol
required for authenticating any electronic filing. In the event that the description of the
collateral in any financing statement naming Agent or its designee as the secured party and any
Borrower or Guarantor as debtor includes assets and properties of such Borrower or Guarantor that
do not at any time constitute Collateral, whether hereunder, under any of the other Financing
Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed
authorized by such Borrower or Guarantor to the extent of the Collateral included in such
description and it shall not render the financing statement ineffective as to any of the Collateral
or otherwise affect the financing statement as it applies to any of the Collateral. In no event
shall any Borrower or Guarantor at any time file, or permit or cause to be filed, any correction
statement or termination statement with respect to any financing statement (or amendment or
continuation with respect thereto) naming Agent or its designee as secured party and such Borrower
or Guarantor as debtor.



(b) Each Borrower and Guarantor does not have any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except as set forth in the Information
Certificate. In the event that any Borrower or Guarantor shall be entitled to or shall receive any
chattel paper or instrument after the date hereof, Borrowers and Guarantors shall promptly notify
Agent thereof in writing. Promptly upon the receipt thereof by or on behalf of any Borrower or
Guarantor (including by any agent or representative), such Borrower or Guarantor shall deliver, or
cause to be delivered to Agent, all tangible chattel paper and instruments that such Borrower or
Guarantor has or may at any time acquire, accompanied by such instruments of transfer or assignment
duly executed in blank as Agent may from time to time specify, in each case except as Agent may
otherwise agree. At Agent’s option, each Borrower and Guarantor shall, or Agent may at any time on
behalf of any Borrower or Guarantor, cause the original of any such instrument or chattel paper to
be conspicuously marked in a form and manner acceptable to Agent with the following legend
referring to chattel paper or instruments as applicable: “This [chattel paper][instrument] is
subject to the security interest of Wachovia Capital Finance Corporation and any sale, transfer,
assignment or encumbrance of this [chattel paper][instrument] violates the rights of such secured
party.”


 


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(c) In the event that any Borrower or Guarantor shall at any time hold or acquire an interest
in any electronic chattel paper or any “transferable record” (as such term is
defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce
Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction), such Borrower or Guarantor shall promptly notify Agent thereof in writing. Promptly
upon Agent’s request, such Borrower or Guarantor shall take, or cause to be taken, such actions as
Agent may request to give Agent control of such electronic chattel paper under Section 9-105 of the
UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures
in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic
Transactions Act, as in effect in such jurisdiction.



(d) Each Borrower and Guarantor does not have any deposit accounts as of the date hereof,
except as set forth in the Information Certificate. Borrowers and Guarantors shall not, directly
or indirectly, after the date hereof open, establish or maintain any deposit account unless each of
the following conditions is satisfied: (i) Agent shall have received not less than five (5)
Business Days prior written notice of the intention of any Borrower or Guarantor to open or
establish such account which notice shall specify in reasonable detail and specificity acceptable
to Agent the name of the account, the owner of the account, the name and address of the bank at
which such account is to be opened or established, the individual at such bank with whom such
Borrower or Guarantor is dealing and the purpose of the account, (ii) the bank where such account
is opened or maintained shall be acceptable to Agent, and (iii) on or before the opening of such
deposit account, such Borrower or Guarantor shall as Agent may specify either (A) deliver to Agent
a Deposit Account Control Agreement with respect to such deposit account duly authorized, executed
and delivered by such Borrower or Guarantor and the bank at which such deposit account is opened
and maintained or (B) arrange for Agent to become the customer of the bank with respect to the
deposit account on terms and conditions acceptable to Agent. The terms of this subsection (d) shall
not apply to deposit accounts specifically and exclusively used for payroll, payroll taxes and
other employee wage and benefit payments to or for the benefit of any Borrower’s or Guarantor’s
salaried employees.



(e) No Borrower or Guarantor owns or holds, directly or indirectly, beneficially or as record
owner or both, any investment property, as of the date hereof, or have any investment account,
securities account, commodity account or other similar account with any bank or other financial
institution or other securities intermediary or commodity intermediary as of the date hereof, in
each case except as set forth in the Information Certificate.



(i) In the event that any Borrower or Guarantor shall be entitled to or shall at any time
after the date hereof hold or acquire any certificated securities, such Borrower or Guarantor shall
promptly endorse, assign and deliver the same to Agent, accompanied by such instruments of transfer
or assignment duly executed in blank as Agent may from time to time specify. If any securities,
now or hereafter acquired by any Borrower or Guarantor are uncertificated and are issued to such
Borrower or Guarantor or its nominee directly by the issuer thereof, such Borrower or Guarantor
shall immediately notify Agent thereof and shall as Agent may specify, either (A) cause the issuer
to agree to comply with instructions from Agent as to such securities, without further consent of
any Borrower or Guarantor or such nominee, or (B) arrange for Agent to become the registered owner
of the securities.


 


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(ii) Borrowers and Guarantors shall not, directly or indirectly, after the date hereof open,
establish or maintain any investment account, securities account, commodity
account or any other similar account (other than a deposit account) with any securities
intermediary or commodity intermediary unless each of the following conditions is satisfied: (A)
Agent shall have received not less than five (5) Business Days prior written notice of the
intention of such Borrower or Guarantor to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner
of the account, the name and address of the securities intermediary or commodity intermediary at
which such account is to be opened or established, the individual at such intermediary with whom
such Borrower or Guarantor is dealing and the purpose of the account, (B) the securities
intermediary or commodity intermediary (as the case may be) where such account is opened or
maintained shall be acceptable to Agent, and (C) on or before the opening of such investment
account, securities account or other similar account with a securities intermediary or commodity
intermediary, such Borrower or Guarantor shall as Agent may specify either (i) execute and deliver,
and cause to be executed and delivered to Agent, an Investment Property Control Agreement with
respect thereto duly authorized, executed and delivered by such Borrower or Guarantor and such
securities intermediary or commodity intermediary or (ii) arrange for Agent to become the
entitlement holder with respect to such investment property on terms and conditions acceptable to
Agent.



(f) Borrowers and Guarantors are not the beneficiary or otherwise entitled to any right to
payment under any letter of credit, banker’s acceptance or similar instrument as of the date
hereof, except as set forth in Schedule 5.2(f) hereto. In the event that any Borrower or Guarantor
shall be entitled to or shall receive any right to payment under any letter of credit, banker’s
acceptance or any similar instrument, whether as beneficiary thereof or otherwise after the date
hereof, such Borrower or Guarantor shall promptly notify Agent thereof in writing. Such Borrower
or Guarantor shall immediately, as Agent may specify, either (i) deliver, or cause to be delivered
to Agent, with respect to any such letter of credit, banker’s acceptance or similar instrument, the
written agreement of the issuer and any other nominated person obligated to make any payment in
respect thereof (including any confirming or negotiating bank), in form and substance satisfactory
to Agent, consenting to the assignment of the proceeds of the letter of credit to Agent by such
Borrower or Guarantor and agreeing to make all payments thereon directly to Agent or as Agent may
otherwise direct or (ii) cause Agent to become, at Borrowers’ expense, the transferee beneficiary
of the letter of credit, banker’s acceptance or similar instrument (as the case may be).



(g) Borrowers and Guarantors do not have any commercial tort claims as of the date hereof,
except as set forth in the Information Certificate. In the event that any Borrower or Guarantor
shall at any time after the date hereof have any commercial tort claims, such Borrower or Guarantor
shall promptly notify Agent thereof in writing, which notice shall (i) set forth in reasonable
detail the basis for and nature of such commercial tort claim and (ii) include the express grant by
such Borrower or Guarantor to Agent of a security interest in such commercial tort claim (and the
proceeds thereof). In the event that such notice does not include such grant of a security
interest, the sending thereof by such Borrower or Guarantor to Agent shall be deemed to constitute
such grant to Agent. Upon the sending of such notice, any commercial tort claim described therein
shall constitute part of the Collateral and shall be deemed included therein. Without limiting the
authorization of Agent provided in Section 5.2(a) hereof or otherwise arising by the execution by
such Borrower or Guarantor of this Agreement or any of the other Financing Agreements, Agent is
hereby irrevocably authorized from time to
time and at any time to file such financing statements naming Agent or its designee as secured
party and such Borrower or Guarantor as debtor, or any amendments to any financing statements,
covering any such commercial tort claim as Collateral. In addition, each Borrower and Guarantor
shall promptly upon Agent’s request, execute and deliver, or cause to be executed and delivered, to
Agent such other agreements, documents and instruments as Agent may require in connection with such
commercial tort claim.


 


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(h) Borrowers and Guarantors do not have any goods, documents of title or other Collateral in
the custody, control or possession of a third party as of the date hereof, except as set forth in
the Information Certificate and except for goods located in the United States in transit to a
location of a Borrower or Guarantor permitted herein in the ordinary course of business of such
Borrower or Guarantor in the possession of the carrier transporting such goods. In the event that
any goods, documents of title or other Collateral are at any time after the date hereof in the
custody, control or possession of any other person not referred to in the Information Certificate
or such carriers, Borrowers and Guarantors shall promptly notify Agent thereof in writing.
Promptly upon Agent’s request, Borrowers and Guarantors shall deliver to Agent a Collateral Access
Agreement duly authorized, executed and delivered by such person and the Borrower or Guarantor that
is the owner of such Collateral.



(i) Borrowers and Guarantors shall take any other actions reasonably requested by Agent from
time to time to cause the attachment, perfection and first priority of, and the ability of Agent to
enforce, the security interest of Agent in any and all of the Collateral, including, without
limitation, (i) executing, delivering and, where appropriate, filing financing statements and
amendments relating thereto under the UCC or other applicable law, to the extent, if any, that any
Borrower’s or Guarantor’s signature thereon is required therefor, (ii) causing Agent’s name to be
noted as secured party on any certificate of title for a titled good if such notation is a
condition to attachment, perfection or priority of, or ability of Agent to enforce, the security
interest of Agent in such Collateral, (iii) complying with any provision of any statute, regulation
or treaty of the United States as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of Agent to enforce, the security
interest of Agent in such Collateral, (iv) obtaining the consents and approvals of any Governmental
Authority or third party, including, without limitation, any consent of any licensor, lessor or
other person obligated on Collateral, and taking all actions required by any earlier versions of
the UCC or by other law, as applicable in any relevant jurisdiction.



SECTION 6. COLLECTION AND ADMINISTRATION




6.1 Borrowers’ Loan Accounts. Agent shall maintain one or more loan account(s) on its
books in which shall be recorded (a) all Loans, Letters of Credit and other Obligations and the
Collateral, (b) all payments made by or on behalf of any Borrower or Guarantor and (c) all other
appropriate debits and credits as provided in this Agreement, including fees, charges, costs,
expenses and interest. All entries in the loan account(s) shall be made in accordance with Agent’s
customary practices as in effect from time to time.



6.2 Statements. Agent shall render to Administrative Borrower each month a statement
setting forth the balance in the Borrowers’ loan account(s) maintained by Agent for Borrowers
pursuant to the provisions of this Agreement, including principal, interest, fees, costs
and expenses. Each such statement shall be subject to subsequent adjustment by Agent but
shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrowers
and Guarantors and conclusively binding upon Borrowers and Guarantors as an account stated except
to the extent that Agent receives a written notice from Administrative Borrower of any specific
exceptions of Administrative Borrower thereto within thirty (30) days after the date such statement
has been received by Parent. Until such time as Agent shall have rendered to Administrative
Borrower a written statement as provided above, the balance in any Borrower’s loan account(s) shall
be presumptive evidence of the amounts due and owing to Agent and Lenders by Borrowers and
Guarantors.


 


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6.3 Collection of Accounts.



(a) Borrowers shall establish and maintain, at their expense, blocked accounts or lockboxes
and related blocked accounts (in either case, “Blocked Accounts”), as Agent may specify, with such
banks as are acceptable to Agent into which Borrowers shall promptly deposit and direct their
respective account debtors to directly remit all payments on Receivables and all payments
constituting proceeds of Inventory or other Collateral in the identical form in which such payments
are made, whether by cash, check or other manner. Borrowers shall deliver, or cause to be
delivered to Agent a Deposit Account Control Agreement duly authorized, executed and delivered by
each bank where a Blocked Account is maintained as provided in Section 5.2 hereof or at any time
and from time to time Agent may become the bank’s customer with respect to any of the Blocked
Accounts and promptly upon Agent’s request, Borrowers shall execute and deliver such agreements and
documents as Agent may require in connection therewith. Each Borrower and Guarantor agrees that
all payments made to such Blocked Accounts or other funds received and collected by Agent or any
Lender, whether in respect of the Receivables, as proceeds of Inventory or other Collateral or
otherwise shall be treated as payments to Agent and Lenders in respect of the Obligations and
therefore shall constitute the property of Agent and Lenders to the extent of the then outstanding
Obligations.



(b) For purposes of calculating the amount of the Loans available to each Borrower, such
payments will be applied (conditional upon final collection) to the Obligations on the Business Day
of receipt by Agent of immediately available funds in the Agent Payment Account provided such
payments and notice thereof are received in accordance with Agent’s usual and customary practices
as in effect from time to time and within sufficient time to credit such Borrower’s loan account on
such day, and if not, then on the next Business Day. For the purposes of calculating interest on
the Obligations, such payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) Business Day following the date of receipt of immediately
available funds by Agent in the Agent Payment Account provided such payments or other funds and
notice thereof are received in accordance with Agent’s usual and customary practices as in effect
from time to time and within sufficient time to credit such Borrower’s loan account on such day,
and if not, then on the next Business Day. In the event that at any time or from time to time
there are no Revolving Loans outstanding, Agent shall be entitled to an administrative fee in an
amount calculated based on the Interest Rate for Prime Rate Loans (on a per annum basis) multiplied
by the amount of the funds received in the Blocked Account for such day as calculated by Agent in
accordance with its customary practice. The economic benefit of the timing in the application of
payments (and the administrative charge with respect thereto, if applicable) shall be for the sole
benefit of Agent.


 


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(c) Each Borrower and Guarantor and their respective employees, agents and Subsidiaries shall,
acting as trustee for Agent, receive, as the property of Agent, any monies, checks, notes, drafts
or any other payment relating to and/or proceeds of Accounts or other Collateral which come into
their possession or under their control and immediately upon receipt thereof, shall deposit or
cause the same to be deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Agent. In no event shall the same be commingled with any Borrower’s or
Guarantor’s own funds. Borrowers agree to reimburse Agent on demand for any amounts owed or paid
to any bank or other financial institution at which a Blocked Account or any other deposit account
or investment account is established or any other bank, financial institution or other person
involved in the transfer of funds to or from the Blocked Accounts arising out of Agent’s payments
to or indemnification of such bank, financial institution or other person. The obligations of
Borrowers to reimburse Agent for such amounts pursuant to this Section 6.3 shall survive the
termination of this Agreement.




6.4 Payments.



(a) All Obligations shall be payable to the Agent Payment Account as provided in Section 6.3
or such other place as Agent may designate from time to time. Subject to the other terms and
conditions contained herein, Agent shall apply payments received or collected from any Borrower or
Guarantor or for the account of any Borrower or Guarantor (including the monetary proceeds of
collections or of realization upon any Collateral) as follows: first, to pay any fees,
indemnities or expense reimbursements then due to Agent, Lenders and Issuing Bank from any Borrower
or Guarantor; second, to pay interest due in respect of any Loans (and including any
Special Agent Advances) or Letter of Credit Obligations; third, to pay or prepay principal
in respect of Special Agent Advances; fourth, to pay principal due in respect of the Loans
and to pay Obligations then due arising under or pursuant to any Hedge Agreements of a Borrower or
Guarantor with Agent or a Bank Product Provider (up to the amount of any then effective Reserve
established in respect of such Obligations), on a pro rata basis; fifth, to
pay or prepay any other Obligations whether or not then due, in such order and manner as Agent
determines and at any time an Event of Default exists or has occurred and is continuing, to provide
cash collateral for any Letter of Credit Obligations or other contingent Obligations (but not
including for this purpose any Obligations arising under or pursuant to any Bank Products); and
sixth, to pay or prepay any Obligations arising under or pursuant to any Bank Products
(other than to the extent provided for above) on a pro rata basis. Notwithstanding
anything to the contrary contained in this Agreement, (i) unless so directed by Administrative
Borrower, or unless a Default or an Event of Default shall exist or have occurred and be
continuing, Agent shall not apply any payments which it receives to any Eurodollar Rate Loans,
except (A) on the expiration date of the Interest Period applicable to any such Eurodollar Rate
Loans or (B) in the event that there are no outstanding Prime Rate Loans and (ii) to the extent any
Borrower uses any proceeds of the Loans or Letters of Credit to acquire rights in or the use of any
Collateral or to repay any Indebtedness used to acquire rights in or the use of any Collateral,
payments in respect of the Obligations shall be deemed applied first to the Obligations arising
from Loans and Letters of Credit that were not used for such purposes and second to the Obligations
arising from Loans and Letters of Credit the proceeds of which were used to acquire rights in or
the use of any Collateral in the chronological order in which such Borrower acquired such rights in
or the use of such Collateral.


 


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(b) At Agent’s option, all principal, interest, fees, costs, expenses and other charges
provided for in this Agreement or the other Financing Agreements may be charged directly to the
loan account(s) of any Borrower maintained by Agent. If after receipt of any payment of, or
proceeds of Collateral applied to the payment of, any of the Obligations, Agent or any Lender is
required to surrender or return such payment or proceeds to any Person for any reason, then the
Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue
and this Agreement shall continue in full force and effect as if such payment or proceeds had not
been received by Agent or such Lender. Borrowers and Guarantors shall be liable to pay to Agent,
and do hereby indemnify and hold Agent and Lenders harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4(b) shall remain effective notwithstanding any
contrary action which may be taken by Agent or any Lender in reliance upon such payment or
proceeds. This Section 6.4 shall survive the payment of the Obligations and the termination of
this Agreement.




6.5 Taxes.



(a) Any and all payments by or on account of any of the Obligations shall be made free and
clear of and without deduction or withholding for or on account of, any setoff, counterclaim,
defense, duties, taxes, levies, imposts, fees, deductions, charges, withholdings, liabilities,
restrictions or conditions of any kind, excluding (i) in the case of each Lender and Agent (A)
taxes measured by its net income, and franchise taxes imposed on it, by the jurisdiction (or any
political subdivision thereof) under the laws of which such Lender or Agent (as the case may be) is
organized and (B) any United States withholding taxes payable with respect to payments under the
Financing Agreements under laws (including any statute, treaty or regulation) in effect on the date
hereof (or, in the case of an Eligible Transferee, the date of the Assignment and Acceptance)
applicable to such Lender or Agent, as the case may be, but not excluding any United States
withholding taxes payable as a result of any change in such laws occurring after the date hereof
(or the date of such Assignment and Acceptance) and (ii) in the case of each Lender, taxes measured
by its net income, and franchise taxes imposed on it as a result of a present or former connection
between such Lender and the jurisdiction of the Governmental Authority imposing such tax or any
taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, fees,
deductions, charges, withholdings and liabilities being hereinafter referred to as “Taxes”).



(b) If any Taxes shall be required by law to be deducted from or in respect of any sum payable
in respect of the Obligations to any Lender or Agent (i) the sum payable shall be increased as may
be necessary so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 6.5), such Lender or Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been made, (ii) the
relevant Borrower or Guarantor shall make such deductions, (iii) the relevant Borrower or Guarantor
shall pay the full amount deducted to the relevant taxing authority or other authority in
accordance with applicable law and (iv) the relevant Borrower or Guarantor shall deliver to Agent
evidence of such payment.



(c) In addition, each Borrower and Guarantor agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar levies of the United
States or any political subdivision thereof or any applicable foreign jurisdiction,
and all liabilities with respect thereto, in each case arising from any payment made hereunder
or under any of the other Financing Agreements or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any of the other Financing Agreements
(collectively, “Other Taxes”).


 


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(d) Each Borrower and Guarantor shall indemnify each Lender and Agent for the full amount of
Taxes and Other Taxes (including any Taxes and Other Taxes imposed by any jurisdiction on amounts
payable under this Section 6.5) paid by such Lender or Agent (as the case may be) and any liability
(including for penalties, interest and expenses) arising therefrom or with respect thereto, whether
or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be
made within thirty (30) days from the date such Lender or Agent (as the case may be) makes written
demand therefor. A certificate as to the amount of such payment or liability delivered to
Administrative Borrower by a Lender (with a copy to Agent) or by Agent on its own behalf or on
behalf of a Lender, shall be conclusive absent manifest error.



(e) As soon as practicable after any payment of Taxes or Other Taxes by any Borrower or
Guarantor, such Borrower or Guarantor shall furnish to Agent, at its address referred to herein,
the original or a certified copy of a receipt evidencing payment thereof.



(f) Without prejudice to the survival of any other agreements of any Borrower or Guarantor
hereunder or under any of the other Financing Agreements, the agreements and obligations of such
Borrower or Guarantor contained in this Section 6.5 shall survive the termination of this Agreement
and the payment in full of the Obligations.



(g) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax
under the law of the jurisdiction in which the applicable Borrower is resident for tax purposes, or
any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any
of the other Financing Agreements shall deliver to Administrative Borrower (with a copy to Agent),
at the time or times prescribed by applicable law or reasonably requested by Administrative
Borrower or Agent (in such number of copies as is reasonably requested by the recipient), whichever
of the following is applicable (but only if such Foreign Lender is legally entitled to do so): (i)
duly completed copies of Internal Revenue Service Form W-8BEN claiming exemption from, or a
reduction to, withholding tax under an income tax treaty, or any successor form, (ii) duly
completed copies of Internal Revenue Service Form 8-8ECI claiming exemption from withholding
because the income is effectively connection with a U.S. trade or business or any successor form,
(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest
under Sections 871(h) or 881(c) of the Code, (A) a certificate of the Lender to the effect that
such Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent
shareholder” of a Borrower within the meaning of Section 881(c)(3)(B) of the Code or a “controlled
foreign corporation” described and Section 881(c)(3)(C) of the Code and (B) duly completed copies
of Internal Revenue Service Form W-8BEN claiming exemption from withholding under the portfolio
interest exemption or any successor form or (iv) any other applicable form, certificate or document
prescribed by applicable law as a basis for claiming exemption from or a reduction in United States
withholding tax duly completed together with such supplementary documentation as may be prescribed
by applicable law to permit a Borrower to determine the withholding or deduction
required to be made. Unless Administrative Borrower and Agent have received forms or other
documents satisfactory to them indicating that payments hereunder or under any of the other
Financing Agreements to or for a Foreign Lender are not subject to United States withholding tax or
are subject to such tax at a rate reduced by an applicable tax treaty, Borrowers or Agent shall
withhold amounts required to be withheld by applicable requirements of law from such payments at
the applicable statutory rate.


 


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(h) Any Lender claiming any additional amounts payable pursuant to this Section 6.5 shall use
its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions)
to change the jurisdiction of its applicable lending office if the making of such a change would
avoid the need for, or reduce the amount of, any such additional amounts that would be payable or
may thereafter accrue and would not, in the sole determination of such Lender, be otherwise
disadvantageous to such Lender.



6.6 Authorization to Make Loans. Agent and Lenders are authorized to make the Loans
based upon telephonic or other instructions received from anyone purporting to be an officer of
Administrative Borrower or any Borrower or other authorized person or, at the discretion of Agent,
if such Loans are necessary to satisfy any Obligations. All requests for Loans or Letters of
Credit hereunder shall specify the date on which the requested advance is to be made (which day
shall be a Business Day) and the amount of the requested Loan. Requests received after 11:00 a.m.
California time on any day shall be deemed to have been made as of the opening of business on the
immediately following Business Day. All Loans and Letters of Credit under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for the benefit of, any
Borrower or Guarantor when deposited to the credit of any Borrower or Guarantor or otherwise
disbursed or established in accordance with the instructions of any Borrower or Guarantor or in
accordance with the terms and conditions of this Agreement.



6.7 Use of Proceeds. Borrowers shall use the initial proceeds of the Loans and
Letters of Credit hereunder only for: (a) payments to each of the persons listed in the
disbursement direction letter furnished by Borrowers to Agent on or about the date hereof and (b)
costs, expenses and fees in connection with the preparation, negotiation, execution and delivery of
this Agreement and the other Financing Agreements. All other Loans made or Letters of Credit
provided to or for the benefit of any Borrower pursuant to the provisions hereof shall be used by
such Borrower only for general operating, working capital and other proper corporate purposes of
such Borrower not otherwise prohibited by the terms hereof. None of the proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin security or for the
purposes of reducing or retiring any indebtedness which was originally incurred to purchase or
carry any margin security or for any other purpose which might cause any of the Loans to be
considered a “purpose credit” within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System, as amended.



6.8 Appointment of Administrative Borrower as Agent for Requesting Loans and Receipts of
Loans and Statements.



(a) Each Borrower hereby irrevocably appoints and constitutes Administrative Borrower as its
agent and attorney-in-fact to request and receive Loans and Letters of Credit pursuant to this
Agreement and the other Financing Agreements from Agent or any Lender in the
name or on behalf of such Borrower. Agent and Lenders may disburse the Loans to such bank
account of Administrative Borrower or a Borrower or otherwise make such Loans to a Borrower and
provide such Letters of Credit to a Borrower as Administrative Borrower may designate or direct,
without notice to any other Borrower or Guarantor. Notwithstanding anything to the contrary
contained herein, Agent may at any time and from time to time require that Loans to or for the
account of any Borrower be disbursed directly to an operating account of such Borrower.


 


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(b) Administrative Borrower hereby accepts the appointment by Borrowers to act as the agent
and attorney-in-fact of Borrowers pursuant to this Section 6.8. Administrative Borrower shall
ensure that the disbursement of any Loans to each Borrower requested by or paid to or for the
account of Parent, or the issuance of any Letter of Credit for a Borrower hereunder, shall be paid
to or for the account of such Borrower.



(c) Each Borrower and other Guarantor hereby irrevocably appoints and constitutes
Administrative Borrower as its agent to receive statements on account and all other notices from
Agent and Lenders with respect to the Obligations or otherwise under or in connection with this
Agreement and the other Financing Agreements.



(d) Any notice, election, representation, warranty, agreement or undertaking by or on behalf
of any other Borrower or any Guarantor by Administrative Borrower shall be deemed for all purposes
to have been made by such Borrower or Guarantor, as the case may be, and shall be binding upon and
enforceable against such Borrower or Guarantor to the same extent as if made directly by such
Borrower or Guarantor.



(e) No purported termination of the appointment of Administrative Borrower as agent as
aforesaid shall be effective, except after ten (10) days’ prior written notice to Agent.



6.9 Pro Rata Treatment. Except to the extent otherwise provided in this Agreement or
as otherwise agreed by Lenders: (a) the making and conversion of Loans shall be made among the
Lenders based on their respective Pro Rata Shares as to the Loans and (b) each payment on account
of any Obligations to or for the account of one or more of Lenders in respect of any Obligations
due on a particular day shall be allocated among the Lenders entitled to such payments based on
their respective Pro Rata Shares and shall be distributed accordingly.




6.10 Sharing of Payments, Etc.



(a) Each Borrower and Guarantor agrees that, in addition to (and without limitation of) any
right of setoff, banker’s lien or counterclaim Agent or any Lender may otherwise have, each Lender
shall be entitled, at its option (but subject, as among Agent and Lenders, to the provisions of
Section 12.3(b) hereof), to offset balances held by it for the account of such Borrower or
Guarantor at any of its offices, in dollars or in any other currency, against any principal of or
interest on any Loans owed to such Lender or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of whether such balances are then due to such Borrower or
Guarantor), in which case it shall promptly notify Administrative Borrower and Agent thereof;
provided, that, such Lender’s failure to give such notice shall not affect the
validity thereof.


 


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(b) If any Lender (including Agent) shall obtain from any Borrower or Guarantor payment of any
principal of or interest on any Loan owing to it or payment of any other amount under this
Agreement or any of the other Financing Agreements through the exercise of any right of setoff,
banker’s lien or counterclaim or similar right or otherwise (other than from Agent as provided
herein), and, as a result of such payment, such Lender shall have received more than its Pro Rata
Share of the principal of the Loans or more than its share of such other amounts then due hereunder
or thereunder by any Borrower or Guarantor to such Lender than the percentage thereof received by
any other Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount of such
excess and simultaneously purchase from such other Lenders a participation in the Loans or such
other amounts, respectively, owing to such other Lenders (or such interest due thereon, as the case
may be) in such amounts, and make such other adjustments from time to time as shall be equitable,
to the end that all Lenders shall share the benefit of such excess payment (net of any expenses
that may be incurred by such Lender in obtaining or preserving such excess payment) in accordance
with their respective Pro Rata Shares or as otherwise agreed by Lenders. To such end all Lenders
shall make appropriate adjustments among themselves (by the resale of participation sold or
otherwise) if such payment is rescinded or must otherwise be restored.



(c) Each Borrower and Guarantor agrees that any Lender purchasing a participation (or direct
interest) as provided in this Section may exercise, in a manner consistent with this Section, all
rights of setoff, banker’s lien, counterclaim or similar rights with respect to such participation
as fully as if such Lender were a direct holder of Loans or other amounts (as the case may be)
owing to such Lender in the amount of such participation.



(d) Nothing contained herein shall require any Lender to exercise any right of setoff,
banker’s lien, counterclaims or similar rights or shall affect the right of any Lender to exercise,
and retain the benefits of exercising, any such right with respect to any other Indebtedness or
obligation of any Borrower or Guarantor. If, under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies,
such Lender shall, to the extent practicable, assign such rights to Agent for the benefit of
Lenders and, in any event, exercise its rights in respect of such secured claim in a manner
consistent with the rights of Lenders entitled under this Section to share in the benefits of any
recovery on such secured claim.




6.11 Settlement Procedures.



(a) In order to administer the Credit Facility in an efficient manner and to minimize the
transfer of funds between Agent and Lenders, Agent may, at its option, subject to the terms of this
Section, make available, on behalf of Lenders, the full amount of the Loans requested or charged to
any Borrower’s loan account(s) or otherwise to be advanced by Lenders pursuant to the terms hereof,
without requirement of prior notice to Lenders of the proposed Loans.


 


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(b) With respect to all Loans made by Agent on behalf of Lenders as provided in this Section,
the amount of each Lender’s Pro Rata Share of the outstanding Loans shall be computed weekly, and
shall be adjusted upward or downward on the basis of the amount of the outstanding Loans as of 5:00
p.m. New York time on the Business Day immediately preceding
the date of each settlement computation; provided, that, Agent retains the
absolute right at any time or from time to time to make the above described adjustments at
intervals more frequent than weekly, but in no event more than twice in any week. Agent shall
deliver to each of the Lenders after the end of each week, or at such lesser period or periods as
Agent shall determine, a summary statement of the amount of outstanding Loans for such period (such
week or lesser period or periods being hereinafter referred to as a “Settlement Period”). If the
summary statement is sent by Agent and received by a Lender prior to 12:00 p.m. New York time, then
such Lender shall make the settlement transfer described in this Section by no later than 3:00 p.m.
New York time on the same Business Day and if received by a Lender after 12:00 p.m. New York time,
then such Lender shall make the settlement transfer by not later than 3:00 p.m. New York time on
the next Business Day following the date of receipt. If, as of the end of any Settlement Period,
the amount of a Lender’s Pro Rata Share of the outstanding Loans is more than such Lender’s Pro
Rata Share of the outstanding Loans as of the end of the previous Settlement Period, then such
Lender shall forthwith (but in no event later than the time set forth in the preceding sentence)
transfer to Agent by wire transfer in immediately available funds the amount of the increase.
Alternatively, if the amount of a Lender’s Pro Rata Share of the outstanding Loans in any
Settlement Period is less than the amount of such Lender’s Pro Rata Share of the outstanding Loans
for the previous Settlement Period, Agent shall forthwith transfer to such Lender by wire transfer
in immediately available funds the amount of the decrease. The obligation of each of the Lenders
to transfer such funds and effect such settlement shall be irrevocable and unconditional and
without recourse to or warranty by Agent. Agent and each Lender agrees to mark its books and
records at the end of each Settlement Period to show at all times the dollar amount of its Pro Rata
Share of the outstanding Loans and Letters of Credit. Each Lender shall only be entitled to
receive interest on its Pro Rata Share of the Loans to the extent such Loans have been funded by
such Lender. Because the Agent on behalf of Lenders may be advancing and/or may be repaid Loans
prior to the time when Lenders will actually advance and/or be repaid such Loans, interest with
respect to Loans shall be allocated by Agent in accordance with the amount of Loans actually
advanced by and repaid to each Lender and the Agent and shall accrue from and including the date
such Loans are so advanced to but excluding the date such Loans are either repaid by Borrowers or
actually settled with the applicable Lender as described in this Section.



(c) To the extent that Agent has made any such amounts available and the settlement described
above shall not yet have occurred, upon repayment of any Loans by a Borrower, Agent may apply such
amounts repaid directly to any amounts made available by Agent pursuant to this Section. In lieu
of weekly or more frequent settlements, Agent may, at its option, at any time require each Lender
to provide Agent with immediately available funds representing its Pro Rata Share of each Loan,
prior to Agent’s disbursement of such Loan to Borrower. In such event, all Loans under this
Agreement shall be made by the Lenders simultaneously and proportionately to their Pro Rata Shares.
No Lender shall be responsible for any default by any other Lender in the other Lender’s
obligation to make a Loan requested hereunder nor shall the Commitment of any Lender be increased
or decreased as a result of the default by any other Lender in the other Lender’s obligation to
make a Loan hereunder.


 


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(d) If Agent is not funding a particular Loan to a Borrower (or Administrative Borrower for
the benefit of such Borrower) pursuant to Sections 6.11(a) and 6.11(b) above on any day, but is
requiring each Lender to provide Agent with immediately available funds on the
date of such Loan as provided in Section 6.11(c) above, Agent may assume that each Lender will
make available to Agent such Lender’s Pro Rata Share of the Loan requested or otherwise made on
such day and Agent may, in its discretion, but shall not be obligated to, cause a corresponding
amount to be made available to or for the benefit of such Borrower on such day. If Agent makes
such corresponding amount available to a Borrower and such corresponding amount is not in fact made
available to Agent by such Lender, Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon for each day from the date such payment was
due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such
period (as published by the Federal Reserve Bank of New York or at Agent’s option based on the
arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal
funds arranged prior to 9:00 a.m. (New York City time) on that day by each of the three leading
brokers of Federal funds transactions in New York City selected by Agent) and if such amounts are
not paid within three (3) days of Agent’s demand, at the highest Interest Rate provided for in
Section 3.1 hereof applicable to Prime Rate Loans. During the period in which such Lender has not
paid such corresponding amount to Agent, notwithstanding anything to the contrary contained in this
Agreement or any of the other Financing Agreements, the amount so advanced by Agent to or for the
benefit of any Borrower shall, for all purposes hereof, be a Loan made by Agent for its own
account. Upon any such failure by a Lender to pay Agent, Agent shall promptly thereafter notify
Administrative Borrower of such failure and Borrowers shall pay such corresponding amount to Agent
for its own account within five (5) Business Days of Administrative Borrower’s receipt of such
notice. A Lender who fails to pay Agent its Pro Rata Share of any Loans made available by the
Agent on such Lender’s behalf, or any Lender who fails to pay any other amount owing by it to
Agent, is a “Defaulting Lender”. Agent shall not be obligated to transfer to a Defaulting Lender
any payments received by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender
be entitled to the sharing of any payments hereunder (including any principal, interest or fees).
Amounts payable to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may
hold and, in its discretion, relend to a Borrower the amount of all such payments received or
retained by it for the account of such Defaulting Lender. For purposes of voting or consenting to
matters with respect to this Agreement and the other Financing Agreements and determining Pro Rata
Shares, such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s Commitment
shall be deemed to be zero (0). This Section shall remain effective with respect to a Defaulting
Lender until such default is cured. The operation of this Section shall not be construed to
increase or otherwise affect the Commitment of any Lender, or relieve or excuse the performance by
any Borrower or Guarantor of their duties and obligations hereunder.



(e) Nothing in this Section or elsewhere in this Agreement or the other Financing Agreements
shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender
from its obligation to fulfill its Commitment hereunder or to prejudice any rights that any
Borrower may have against any Lender as a result of any default by any Lender hereunder in
fulfilling its Commitment.



6.12 Obligations Several; Independent Nature of Lenders’ Rights. The obligation of
each Lender hereunder is several, and no Lender shall be responsible for the obligation or
commitment of any other Lender hereunder. Nothing contained in this Agreement or any of the other
Financing Agreements and no action taken by the Lenders pursuant hereto or thereto shall be deemed
to constitute the Lenders to be a partnership, an association, a joint venture or any
other kind of entity. The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt, and subject to Section 12.3 hereof, each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and it shall not be necessary for any
other Lender to be joined as an additional party in any proceeding for such purpose.


 


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6.13 Bank Products. Borrowers and Guarantors, or any of their Subsidiaries, may (but
no such Person is required to) request that the Bank Product Providers provide or arrange for such
Person to obtain Bank Products from Bank Product Providers, and each Bank Product Provider may, in
its sole discretion, provide or arrange for such Person to obtain the requested Bank Products.
Borrowers and Guarantors or any of their Subsidiaries that obtains Bank Products shall indemnify
and hold Agent, each Lender and their respective Affiliates harmless from any and all obligations
now or hereafter owing to any other Person by any Bank Product Provider in connection with any Bank
Products other than for gross negligence or willful misconduct on the part of any such indemnified
Person. This Section 6.13 shall survive the payment of the Obligations and the termination of this
Agreement. Borrower and its Subsidiaries acknowledge and agree that the obtaining of Bank Products
from Bank Product Providers (a) is in the sole discretion of such Bank Product Provider, and (b) is
subject to all rules and regulations of such Bank Product Provider.



SECTION
7. COLLATERAL REPORTING AND COVENANTS



7.1 Collateral Reporting.



(a) Borrowers shall provide Agent with the following documents in a form satisfactory to
Agent:



(i) on a weekly basis, schedules of sales made, credits issued and cash received, together
with a certificate of the Borrowing Base;



(ii) as soon as possible after the end of each month (but in any event within ten (10)
Business Days after the end thereof), on a monthly basis or more frequently as Agent may request,
(A) agings of accounts receivable (together with a reconciliation to the previous month’s aging and
general ledger) which shall identify the copyright titles whose sale generated each account
receivable or portion thereof and (B) agings of accounts payable (and including information
indicating the amounts owing to owners and lessors of leased premises, warehouses, processors and
other third parties from time to time in possession of any Collateral);



(iii) upon Agent’s request, (A) copies of customer statements, purchase orders, sales
invoices, credit memos, remittance advices and reports, and copies of deposit slips and bank
statements, (B) copies of shipping and delivery documents, (C) copies of purchase orders, invoices
and delivery documents for Inventory and Equipment acquired by any Borrower or Guarantor, (D)
perpetual inventory reports, and (E) inventory reports by location and category (and including the
amounts of Inventory and the value thereof at any leased locations and at premises of warehouses,
processors or other third parties);



(iv) such other reports as to the Collateral as Agent shall request from time to time.


 


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(b) If any Borrower’s or Guarantor’s records or reports of the Collateral are prepared or
maintained by an accounting service, contractor, shipper or other agent, such Borrower and
Guarantor hereby irrevocably authorizes such service, contractor, shipper or agent to deliver such
records, reports, and related documents to Agent and to follow Agent’s instructions with respect to
further services at any time that an Event of Default exists or has occurred and is continuing.




7.2 Accounts Covenants.



(a) Borrowers shall notify Agent promptly of: (i) any material delay in any Borrower’s
performance of any of its material obligations to any account debtor or the assertion of any
material claims, offsets, defenses or counterclaims by any account debtor, or any material disputes
with account debtors, or any settlement, adjustment or compromise thereof, (ii) all material
adverse information known to any Borrower or Guarantor relating to the financial condition of any
account debtor and (iii) any event or circumstance which, to the best of any Borrower’s or
Guarantor’s knowledge, would cause Agent to consider any then existing Accounts as no longer
constituting Eligible Accounts. No credit, discount, allowance or extension or agreement for any
of the foregoing shall be granted to any account debtor without Agent’s consent, except in the
ordinary course of a Borrower’s or Guarantor’s business in accordance with practices and policies
previously disclosed in writing to Agent and except as set forth in the schedules delivered to
Agent pursuant to Section 7.1(a) above. So long as no Event of Default exists or has occurred and
is continuing, Borrowers and Guarantors shall settle, adjust or compromise any claim, offset,
counterclaim or dispute with any account debtor. At any time that an Event of Default exists or
has occurred and is continuing, Agent shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account debtors or grant any
credits, discounts or allowances.



(b) With respect to each Account: (i) the amounts shown on any invoice delivered to Agent or
schedule thereof delivered to Agent shall be true and complete, (ii) no payments shall be made
thereon except payments immediately delivered to Agent pursuant to the terms of this Agreement,
(iii) no credit, discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except as reported to Agent in accordance with this Agreement and
except for credits, discounts, allowances or extensions made or given in the ordinary course of
each Borrower’s business in accordance with practices and policies previously disclosed to Agent,
(iv) there shall be no setoffs, deductions, contras, defenses, counterclaims or disputes existing
or asserted with respect thereto except as reported to Agent in accordance with the terms of this
Agreement, (v) none of the transactions giving rise thereto will violate any applicable foreign,
Federal, State or local laws or regulations, all documentation relating thereto will be legally
sufficient under such laws and regulations and all such documentation will be legally enforceable
in accordance with its terms.



(c) Agent shall have the right at any time or times, in Agent’s name or in the name of a
nominee of Agent, to verify the validity, amount or any other matter relating to any Receivables or
other Collateral, by mail, telephone, facsimile transmission or otherwise.


 


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7.3 Inventory Covenants. With respect to the Inventory: (a) each Borrower and
Guarantor shall at all times maintain inventory records reasonably satisfactory to Agent, keeping
correct and accurate records itemizing and describing the kind, type, quality and quantity of
Inventory, such Borrower’s or Guarantor’s cost therefor and daily withdrawals therefrom and
additions thereto; (b) Borrowers and Guarantors shall conduct a physical count of the Inventory
(either in one count or a series of counts) at least once each year but at any time or times as
Agent may request on or after an Event of Default, and promptly following such physical inventory
shall supply Agent with a report in the form and with such specificity as may be satisfactory to
Agent concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory
from the locations set forth or permitted herein, without the prior written consent of Agent,
except for sales of Inventory in the ordinary course of its business and except to move Inventory
directly from one location set forth or permitted herein to another such location and except for
Inventory shipped from the manufacturer thereof to such Borrower or Guarantor which is in transit
to the locations set forth or permitted herein; (d) Borrowers shall, at their expense, 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; (e) Borrowers and Guarantors shall produce, use, store and
maintain the Inventory with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with applicable laws (including the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders
related thereto); (f) none of the Inventory or other Collateral constitutes farm products or the
proceeds thereof; (g) each Borrower and Guarantor assumes all responsibility and liability arising
from or relating to the production, use, sale or other disposition of the Inventory; (h) Borrowers
and Guarantors shall not sell Inventory to any customer on approval, or any other basis which
entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such
Inventory; (i) Borrowers and Guarantors shall keep the Inventory in good and marketable condition;
and (j) Borrowers and Guarantors shall not, without prior written notice to Agent or the specific
identification of such Inventory in a report with respect thereto provided by Administrative
Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment
or approval.



7.4 Equipment and Real Property Covenants. With respect to the Equipment and Real
Property: (a) Borrowers and Guarantors shall, at their expense, 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 Equipment and/or the Real Property in form, scope and methodology acceptable
to Agent and by an appraiser acceptable to Agent, addressed to Agent and upon which Agent is
expressly permitted to rely; (b) Borrowers and Guarantors shall keep the Equipment in good order,
repair, running and marketable condition (ordinary wear and tear excepted); (c) Borrowers and
Guarantors shall use the Equipment and Real Property with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with all applicable laws;
(d) the Equipment is and shall be used in the business of Borrowers and Guarantors and not for
personal, family, household or farming use; (e) Borrowers and Guarantors shall not remove any
Equipment from the locations set forth or permitted herein, except to the extent necessary to have
any Equipment repaired or maintained in the ordinary course of its business or to move Equipment
directly from one location set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of such Borrower or Guarantor in the
ordinary course of business; (f) the Equipment is now and shall remain personal property and
Borrowers and Guarantors shall not permit any of
the Equipment to be or become a part of or affixed to real property; and (g) each Borrower and
Guarantor assumes all responsibility and liability arising from the use of the Equipment and Real
Property.


 


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7.5 Power of Attorney. Each Borrower and Guarantor hereby irrevocably designates and
appoints Agent (and all persons designated by Agent) as such Borrower’s and Guarantor’s true and
lawful attorney-in-fact, and authorizes Agent, in such Borrower’s, Guarantor’s or Agent’s name, to:
(a) at any time an Event of Default exists or has occurred and is continuing (i) demand payment on
Receivables or other Collateral, (ii) enforce payment of Receivables by legal proceedings or
otherwise, (iii) exercise all of such Borrower’s or Guarantor’s rights and remedies to collect any
Receivable or other Collateral, (iv) sell or assign any Receivable upon such terms, for such amount
and at such time or times as the Agent deems advisable, (v) settle, adjust, compromise, extend or
renew an Account, (vi) discharge and release any Receivable, (vii) prepare, file and sign such
Borrower’s or Guarantor’s name on any proof of claim in bankruptcy or other similar document
against an account debtor or other obligor in respect of any Receivables or other Collateral,
(viii) notify the post office authorities to change the address for delivery of remittances from
account debtors or other obligors in respect of Receivables or other proceeds of Collateral to an
address designated by Agent, and open and dispose of all mail addressed to such Borrower or
Guarantor and handle and store all mail relating to the Collateral; and (ix) do all acts and things
which are necessary, in Agent’s determination, to fulfill such Borrower’s or Guarantor’s
obligations under this Agreement and the other Financing Agreements and (b) at any time to (i) take
control in any manner of any item of payment in respect of Receivables or constituting Collateral
or otherwise received in or for deposit in the Blocked Accounts or otherwise received by Agent or
any Lender, (ii) have access to any lockbox or postal box into which remittances from account
debtors or other obligors in respect of Receivables or other proceeds of Collateral are sent or
received, (iii) endorse such Borrower’s or Guarantor’s name upon any items of payment in respect of
Receivables or constituting Collateral or otherwise received by Agent and any Lender and deposit
the same in Agent’s account for application to the Obligations, (iv) endorse such Borrower’s or
Guarantor’s name upon any chattel paper, document, instrument, invoice, or similar document or
agreement relating to any Receivable or any goods pertaining thereto or any other Collateral,
including any warehouse or other receipts, or bills of lading and other negotiable or
non-negotiable documents, (v) clear Inventory the purchase of which was financed with a Letter of
Credit through U.S. Customs or foreign export control authorities in such Borrower’s or Guarantor’s
name, Agent’s name or the name of Agent’s designee, and to sign and deliver to customs officials
powers of attorney in such Borrower’s or Guarantor’s name for such purpose, and to complete in such
Borrower’s or Guarantor’s or Agent’s name, any order, sale or transaction, obtain the necessary
documents in connection therewith and collect the proceeds thereof, and (vi) sign such Borrower’s
or Guarantor’s name on any verification of Receivables and notices thereof to account debtors or
any secondary obligors or other obligors in respect thereof. Each Borrower and Guarantor hereby
releases Agent and Lenders and their respective officers, employees and designees from any
liabilities arising from any act or acts under this power of attorney and in furtherance thereof,
whether of omission or commission, except as a result of Agent’s or any Lender’s own gross
negligence or wilful misconduct as determined pursuant to a final non-appealable order of a court
of competent jurisdiction.


 


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7.6 Right to Cure. Agent may, at its option, upon notice to Administrative Borrower,
(a) cure any default by any Borrower or Guarantor under any material agreement with a third party
that affects the Collateral, its value or the ability of Agent to collect, sell or otherwise
dispose of the Collateral or the rights and remedies of Agent or any Lender therein or the ability
of any Borrower or Guarantor to perform its obligations hereunder or under any of the other
Financing Agreements, (b) pay or bond on appeal any judgment entered against any Borrower or
Guarantor, (c) discharge taxes, liens, security interests or other encumbrances at any time levied
on or existing with respect to the Collateral and (d) pay any amount, incur any expense or perform
any act which, in Agent’s judgment, is necessary or appropriate to preserve, protect, insure or
maintain the Collateral and the rights of Agent and Lenders with respect thereto. Agent may add
any amounts so expended to the Obligations and charge any Borrower’s account therefor, such amounts
to be repayable by Borrowers on demand. Agent and Lenders shall be under no obligation to effect
such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation
or liability of any Borrower or Guarantor. Any payment made or other action taken by Agent or any
Lender under this Section shall be without prejudice to any right to assert an Event of Default
hereunder and to proceed accordingly.



7.7 Access to Premises. From time to time as requested by Agent, at the cost and
expense of Borrowers, (a) Agent or its designee shall have complete access to all of each
Borrower’s and Guarantor’s premises during normal business hours and after notice to Parent, or at
any time and without notice to Administrative Borrower if an Event of Default exists or has
occurred and is continuing, for the purposes of inspecting, verifying and auditing the Collateral
and all of each Borrower’s and Guarantor’s books and records, including the Records, and (b) each
Borrower and Guarantor shall promptly furnish to Agent such copies of such books and records or
extracts therefrom as Agent may request, and Agent or any Lender or Agent’s designee may use during
normal business hours such of any Borrower’s and Guarantor’s personnel, equipment, supplies and
premises as may be reasonably necessary for the foregoing and if an Event of Default exists or has
occurred and is continuing for the collection of Receivables and realization of other Collateral.



SECTION 8. REPRESENTATIONS AND WARRANTIES




Each Borrower and Guarantor hereby represents and warrants to Agent and Lenders the following
(which shall survive the execution and delivery of this Agreement):



8.1 Corporate Existence, Power and Authority. Each Borrower and Guarantor is a
corporation duly organized and in good standing under the laws of its jurisdiction of organization
and is duly qualified as a foreign corporation and in good standing in all states or other
jurisdictions where the nature and extent of the business transacted by it or the ownership of
assets makes such qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on such Borrower’s or Guarantor’s financial
condition, results of operation or business or the rights of Agent in or to any of the Collateral.
The execution, delivery and performance of this Agreement, the other Financing Agreements and the
transactions contemplated hereunder and thereunder (a) are all within each Borrower’s and
Guarantor’s corporate powers, (b) have been duly authorized, (c) are not in contravention of law or
the terms of any Borrower’s or Guarantor’s certificate of incorporation, by laws, or other
organizational documentation, or any indenture, agreement or undertaking to which any
Borrower or Guarantor is a party or by which any Borrower or Guarantor or its property are
bound and (d) will not result in the creation or imposition of, or require or give rise to any
obligation to grant, any lien, security interest, charge or other encumbrance upon any property of
any Borrower or Guarantor. This Agreement and the other Financing Agreements to which any Borrower
or Guarantor is a party constitute legal, valid and binding obligations of such Borrower and
Guarantor enforceable in accordance with their respective terms.


 


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8.2 Name; State of Organization; Chief Executive Office; Collateral Locations.



(a) The exact legal name of each Borrower and Guarantor is as set forth on the signature page
of this Agreement and in the Information Certificate. No Borrower or Guarantor has, during the
five years prior to the date of this Agreement, been known by or used any other corporate or
fictitious name or been a party to any merger or consolidation, or acquired all or substantially
all of the assets of any Person, or acquired any of its property or assets out of the ordinary
course of business, except as set forth in the Information Certificate.



(b) Each Borrower and Guarantor is an organization of the type and organized in the
jurisdiction set forth in the Information Certificate. The Information Certificate accurately sets
forth the organizational identification number of each Borrower and Guarantor or accurately states
that such Borrower or Guarantor has none and accurately sets forth the federal employer
identification number of each Borrower and Guarantor.



(c) The chief executive office and mailing address of each Borrower and Guarantor and each
Borrower’s and Guarantor’s Records concerning Accounts are located only at the address identified
as such in the Information Certificate and its only other places of business and the only other
locations of Collateral, if any, are the addresses set forth in the Information Certificate,
subject to the rights of any Borrower or Guarantor to establish new locations in accordance with
Section 9.2 below. The Information Certificate correctly identifies any of such locations which
are not owned by a Borrower or Guarantor and sets forth the owners and/or operators thereof.



8.3 Financial Statements; No Material Adverse Change. All financial statements
relating to any Borrower or Guarantor which have been or may hereafter be delivered by any Borrower
or Guarantor to Agent and Lenders have been prepared in accordance with GAAP (except as to any
interim financial statements, to the extent such statements are subject to normal year-end
adjustments and do not include any notes) and fairly present in all material respects the financial
condition and the results of operation of such Borrower and Guarantor as at the dates and for the
periods set forth therein. Except as disclosed in any interim financial statements furnished by
Borrowers and Guarantors to Agent prior to the date of this Agreement, there has been no act,
condition or event which has had or is reasonably likely to have a Material Adverse Effect since
the date of the most recent audited financial statements of any Borrower or Guarantor furnished by
any Borrower or Guarantor to Agent prior to the date of this Agreement. The projections dated
March 13, 2007 for the fiscal year ending March 31, 2008 that have been delivered to Agent or any
projections hereafter delivered to Agent have been prepared in light of the past operations of the
businesses of Borrowers and Guarantors and are based upon estimates and assumptions stated therein,
all of which Borrowers and Guarantors have determined to be reasonable and fair in light of the
then current conditions and current facts and reflect the good
faith and reasonable estimates of Borrowers and Guarantors of the future financial performance
of Parent and its Subsidiaries and of the other information projected therein for the periods set
forth therein.


 


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8.4 Priority of Liens; Title to Properties. The security interests and liens granted
to Agent under this Agreement and the other Financing Agreements constitute valid and perfected
first priority liens and security interests in and upon the Collateral subject only to the liens
indicated on the Information Certificate and the other liens permitted under Section 9.8 hereof.
Each Borrower and Guarantor has good and marketable fee simple title to or valid leasehold
interests in all of its Real Property and good, valid and merchantable title to all of its other
properties and assets subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except those granted to Agent and such others as are specifically listed on
the Information Certificate or permitted under Section 9.8 hereof.



8.5 Tax Returns. Each Borrower and Guarantor has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be filed by it. All
information in such tax returns, reports and declarations is complete and accurate in all material
respects. Each Borrower and Guarantor has paid or caused to be paid all taxes due and payable or
claimed due and payable in any assessment received by it, except taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and available to such
Borrower or Guarantor and with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid Federal, State, county,
local, foreign and other taxes whether or not yet due and payable and whether or not disputed.



8.6 Litigation. Except as set forth on the Information Certificate, (a) there is no
investigation by any Governmental Authority pending, or to the best of any Borrower’s or
Guarantor’s knowledge threatened, against or affecting any Borrower or Guarantor, its or their
assets or business and (b) there is no action, suit, proceeding or claim by any Person pending, or
to the best of any Borrower’s or Guarantor’s knowledge threatened, against any Borrower or
Guarantor or its or their assets or goodwill, or against or affecting any transactions contemplated
by this Agreement, in each case, which if adversely determined against such Borrower or Guarantor
has or could reasonably be expected to have a Material Adverse Effect.




8.7 Compliance with Other Agreements and Applicable Laws.



(a) Borrowers and Guarantors are not in default in any respect under, or in violation in any
respect of the terms of, any material agreement, contract, instrument, lease or other commitment to
which it is a party or by which it or any of its assets are bound. Borrowers and Guarantors are in
compliance with the requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority relating to their respective businesses, including, without limitation,
those set forth in or promulgated pursuant to the Occupational Safety and Health Act of 1970, as
amended, the Fair Labor Standards Act of 1938, as amended, ERISA, the Code, as amended, and the
rules and regulations thereunder, and all Environmental Laws.



(b) Borrowers and Guarantors have obtained all material permits, licenses, approvals,
consents, certificates, orders or authorizations of any Governmental Authority
required for the lawful conduct of its business (the “Permits”). All of the Permits are valid
and subsisting and in full force and effect. There are no actions, claims or proceedings pending
or to the best of any Borrower’s or Guarantor’s knowledge, threatened that seek the revocation,
cancellation, suspension or modification of any of the Permits.


 


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8.8 Environmental Compliance.



(a) Except as set forth on Schedule 8.8 hereto, Borrowers, Guarantors and any Subsidiary of
any Borrower or Guarantor have not generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not
owned by it) in any manner which at any time violates in any material respect any applicable
Environmental Law or Permit, and the operations of Borrowers, Guarantors and any Subsidiary of any
Borrower or Guarantor complies in all material respects with all Environmental Laws and all
Permits.



(b) Except as set forth on Schedule 8.8 hereto, there has been no investigation by any
Governmental Authority or any proceeding, complaint, order, directive, claim, citation or notice by
any Governmental Authority or any other person nor is any pending or to the best of any Borrower’s
or Guarantor’s knowledge threatened, with respect to any non compliance with or violation of the
requirements of any Environmental Law by any Borrower or Guarantor and any Subsidiary of any
Borrower or Guarantor or the release, spill or discharge, threatened or actual, of any Hazardous
Material or the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental, health or safety
matter, which adversely affects or could reasonably be expected to adversely affect in any material
respect any Borrower or Guarantor or its or their business, operations or assets or any properties
at which such Borrower or Guarantor has transported, stored or disposed of any Hazardous Materials.



(c) Except as set forth on Schedule 8.8 hereto, Borrowers, Guarantors and their Subsidiaries
have no material liability (contingent or otherwise) in connection with a release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any Hazardous
Materials.



(d) Borrowers, Guarantors and their Subsidiaries have all Permits required to be obtained or
filed in connection with the operations of Borrowers and Guarantors under any Environmental Law and
all of such licenses, certificates, approvals or similar authorizations and other Permits are valid
and in full force and effect.




8.9 Employee Benefits.



(a) Each Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other Federal or State law. Each Plan which is intended to qualify under
Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue
Service and to the best of any Borrower’s or Guarantor’s knowledge, nothing has occurred which
would cause the loss of such qualification. Each Borrower and its ERISA Affiliates have made all
required contributions to any Plan subject to Section 412 of the Code,
and no application for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.



(b) There are no pending, or to the best of any Borrower’s or Guarantor’s knowledge,
threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to
any Plan. There has been no prohibited transaction or violation of the fiduciary responsibility
rules with respect to any Plan.


 


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(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) based on the
latest valuation of each Pension Plan and on the actuarial methods and assumptions employed for
such valuation (determined in accordance with the assumptions used for funding such Pension Plan
pursuant to Section 412 of the Code) the aggregate current value of accumulated benefit liabilities
of such Pension Plan under Section 4001(a)(16) of ERISA does not exceed the aggregate current value
of the assets of such Pension Plan; (iii) each Borrower and Guarantor, and their ERISA Affiliates,
have not incurred and do not reasonably expect to incur, any liability under Title IV of ERISA with
respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv)
each Borrower and Guarantor, and their ERISA Affiliates, have not incurred and do not reasonably
expect to incur, any liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with
respect to a Multiemployer Plan; and (v) each Borrower and Guarantor, and their ERISA Affiliates,
have not engaged in a transaction that would be subject to Section 4069 or 4212(c) of ERISA.



8.10 Bank Accounts. All of the deposit accounts, investment accounts or other
accounts in the name of or used by any Borrower or Guarantor maintained at any bank or other
financial institution are set forth on the Information Certificate, subject to the right of each
Borrower and Guarantor to establish new accounts in accordance with Section 5.2 hereof.



8.11 Intellectual Property. Each Borrower and Guarantor owns or licenses or otherwise
has the right to use all Intellectual Property necessary for the operation of its business as
presently conducted or proposed to be conducted. As of the date hereof, Borrowers and Guarantors
do not have any Intellectual Property registered, or subject to pending applications, in the United
States Patent and Trademark Office or any similar office or agency in the United States, any State
thereof, any political subdivision thereof or in any other country, other than those described in
the Information Certificate and has not granted any licenses with respect thereto other than as set
forth in the Information Certificate. No event has occurred which permits or would permit after
notice or passage of time or both, the revocation, suspension or termination of such rights. To
the best of any Borrower’s and Guarantor’s knowledge, no slogan or other advertising device,
product, process, method, substance or other Intellectual Property or goods bearing or using any
Intellectual Property presently contemplated to be sold by or employed by any Borrower or Guarantor
infringes any patent, trademark, servicemark, tradename, copyright, license or other Intellectual
Property owned by any other Person presently and no claim or litigation is pending or threatened
against or affecting any Borrower or Guarantor contesting its right to sell or use any such
Intellectual Property. The Information Certificate sets forth all of the agreements or other
arrangements of each Borrower and Guarantor pursuant to which such Borrower or Guarantor has a
license or other right to use any trademarks, logos, designs, representations or other Intellectual
Property owned by another
person as in effect on the date hereof and the dates of the expiration of such agreements or
other arrangements of such Borrower or Guarantor as in effect on the date hereof (collectively,
together with such agreements or other arrangements as may be entered into by any Borrower or
Guarantor after the date hereof, collectively, the “License Agreements” and individually, a
“License Agreement”). No trademark, servicemark, copyright or other Intellectual Property at any
time used by any Borrower or Guarantor which is owned by another person, or owned by such Borrower
or Guarantor subject to any security interest, lien, collateral assignment, pledge or other
encumbrance in favor of any person other than Agent and in or against the rights or interest of
such Borrower or Guarantor, is affixed to any Inventory, except (a) to the extent permitted under
the term of the license agreements listed on the Information Certificate and (b) to the extent the
sale of Inventory to which such Intellectual Property is affixed is permitted to be sold by such
Borrower or Guarantor under applicable law (including the United States Copyright Act of 1976).


 


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8.12 Subsidiaries; Affiliates; Capitalization; Solvency.



(a) Each Borrower and Guarantor does not have any direct or indirect Subsidiaries or
Affiliates and is not engaged in any joint venture or partnership except as set forth in the
Information Certificate.



(b) Each Borrower and Guarantor is the record and beneficial owner of all of the issued and
outstanding shares of Capital Stock of each of the Subsidiaries listed on the Information
Certificate as being owned by such Borrower or Guarantor and there are no proxies, irrevocable or
otherwise, with respect to such shares and no equity securities of any of the Subsidiaries are or
may become required to be issued by reason of any options, warrants, rights to subscribe to, calls
or commitments of any kind or nature and there are no contracts, commitments, understandings or
arrangements by which any Subsidiary is or may become bound to issue additional shares of it
Capital Stock or securities convertible into or exchangeable for such shares.



(c) The issued and outstanding shares of Capital Stock of each Borrower and Guarantor are
directly and beneficially owned and held by the persons indicated in the Information Certificate,
and in each case all of such shares have been duly authorized and are fully paid and
non-assessable, free and clear of all claims, liens, pledges and encumbrances of any kind, except
as disclosed in writing to Agent prior to the date hereof.



(d) Each Borrower and Guarantor is Solvent and will continue to be Solvent after the creation
of the Obligations, the security interests of Agent and the other transaction contemplated
hereunder.




8.13 Labor Disputes.



(a) Set forth on Schedule 8.13 hereto is a list (including dates of termination) of all
collective bargaining or similar agreements between or applicable to each Borrower and Guarantor
and any union, labor organization or other bargaining agent in respect of the employees of any
Borrower or Guarantor on the date hereof.


 


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(b) There is (i) no significant unfair labor practice complaint pending against any Borrower
or Guarantor or, to the best of any Borrower’s or Guarantor’s knowledge, threatened against it,
before the National Labor Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is pending on the date
hereof against any Borrower or Guarantor or, to best of any Borrower’s or Guarantor’s knowledge,
threatened against it, and (ii) no significant strike, labor dispute, slowdown or stoppage is
pending against any Borrower or Guarantor or, to the best of any Borrower’s or Guarantor’s
knowledge, threatened against any Borrower or Guarantor.



8.14 Restrictions on Subsidiaries. Except for restrictions contained in this
Agreement or any other agreement with respect to Indebtedness of any Borrower or Guarantor
permitted hereunder as in effect on the date hereof, there are no contractual or consensual
restrictions on any Borrower or Guarantor or any of its Subsidiaries which prohibit or otherwise
restrict (a) the transfer of cash or other assets (i) between any Borrower or Guarantor and any of
its or their Subsidiaries or (ii) between any Subsidiaries of any Borrower or Guarantor or (b) the
ability of any Borrower or Guarantor or any of its or their Subsidiaries to incur Indebtedness or
grant security interests to Agent or any Lender in the Collateral.



8.15 Material Contracts. Schedule 8.15 hereto sets forth all Material Contracts to
which any Borrower or Guarantor is a party or is bound as of the date hereof. Borrowers and
Guarantors have delivered true, correct and complete copies of such Material Contracts to Agent on
or before the date hereof. Borrowers and Guarantors are not in breach or in default in any
material respect of or under any Material Contract and have not received any notice of the
intention of any other party thereto to terminate any Material Contract.



8.16 Payable Practices. Each Borrower and Guarantor have not made any material change
in the historical accounts payable practices from those in effect immediately prior to the date
hereof.



8.17 Accuracy and Completeness of Information. All information furnished by or on
behalf of any Borrower or Guarantor in writing to Agent or any Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction contemplated hereby or
thereby, including all information on the Information Certificate is true and correct in all
material respects on the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to have a Material Adverse
Affect, which has not been fully and accurately disclosed to Agent in writing prior to the date
hereof.



8.18 Security Interests of SAG and WGA. With respect to any security interest of
Screen Actors Guild, Inc. (“SAG”) or Writers Guild of America, West, Inc. (“WGA”) in personal
property of Administrative Borrower in connection with the motion picture titled “Sisters”,
Administrative Borrower is not required to remit any payments on Accounts generated from the sale
of such motion picture to SAG or WGA, and Administrative Borrower is entitled to use such payments.
Agent would not be violating any rights of SAG or WGA in collecting any payments on such Accounts
(it being understood and agreed though that such Accounts will not be Eligible Accounts hereunder
for so long as SAG or WGA hold any security interest therein).


 


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8.19 Survival of Warranties; Cumulative. All representations and warranties contained
in this Agreement or any of the other Financing Agreements shall survive the execution and delivery
of this Agreement and shall be deemed to have been made again to Agent and Lenders on the date of
each additional borrowing or other credit accommodation hereunder and shall be conclusively
presumed to have been relied on by Agent and Lenders regardless of any investigation made or
information possessed by Agent or any Lender. The representations and warranties set forth herein
shall be cumulative and in addition to any other representations or warranties which any Borrower
or Guarantor shall now or hereafter give, or cause to be given, to Agent or any Lender.



SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS



9.1 Maintenance of Existence.



(a) Each Borrower and Guarantor shall at all times preserve, renew and keep in full force and
effect its corporate existence and rights and franchises with respect thereto and maintain in full
force and effect all licenses, trademarks, tradenames, approvals, authorizations, leases, contracts
and Permits necessary to carry on the business as presently or proposed to be conducted, except as
to any Guarantor other than Parent as permitted in Section 9.7 hereto.



(b) No Borrower or Guarantor shall change its name unless each of the following conditions is
satisfied: (i) Agent shall have received not less than thirty (30) days prior written notice from
Administrative Borrower of such proposed change in its corporate name, which notice shall
accurately set forth the new name; and (ii) Agent shall have received a copy of the amendment to
the Certificate of Incorporation of such Borrower or Guarantor providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation or organization of such
Borrower or Guarantor as soon as it is available.



(c) No Borrower or Guarantor shall change its chief executive office or its mailing address or
organizational identification number (or if it does not have one, shall not acquire one) unless
Agent shall have received not less than thirty (30) days’ prior written notice from Administrative
Borrower of such proposed change, which notice shall set forth such information with respect
thereto as Agent may require and Agent shall have received such agreements as Agent may reasonably
require in connection therewith. No Borrower or Guarantor shall change its type of organization,
jurisdiction of organization or other legal structure.



9.2 New Collateral Locations. Each Borrower and Guarantor may only open any new
location within the continental United States provided such Borrower or Guarantor (a) gives Agent
thirty (30) days prior written notice of the intended opening of any such new location and (b)
executes and delivers, or causes to be executed and delivered, to Agent such agreements, documents,
and instruments as Agent may deem reasonably necessary or desirable to protect its interests in the
Collateral at such location.


 


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9.3 Compliance with Laws, Regulations, Etc.



(a) Each Borrower and Guarantor shall, and shall cause any Subsidiary to, at all times, comply
in all material respects with all laws, rules, regulations, licenses, approvals,
orders and other Permits applicable to it and duly observe all requirements of any foreign,
Federal, State or local Governmental Authority.



(b) Borrowers and Guarantors shall give written notice to Agent immediately upon any
Borrower’s or Guarantor’s receipt of any notice of, or any Borrower’s or Guarantor’s otherwise
obtaining knowledge of, (i) the occurrence of any event involving the release, spill or discharge,
threatened or actual, of any Hazardous Material or (ii) any investigation, proceeding, complaint,
order, directive, claims, citation or notice with respect to: (A) any non-compliance with or
violation of any Environmental Law by any Borrower or Guarantor or (B) the release, spill or
discharge, threatened or actual, of any Hazardous Material other than in the ordinary course of
business and other than as permitted under any applicable Environmental Law. Copies of all
environmental surveys, audits, assessments, feasibility studies and results of remedial
investigations shall be promptly furnished, or caused to be furnished, by such Borrower or
Guarantor to Agent. Each Borrower and Guarantor shall take prompt action to respond to any
material non-compliance with any of the Environmental Laws and shall regularly report to Agent on
such response.



(c) Without limiting the generality of the foregoing, whenever Agent reasonably determines
that there is non-compliance, or any condition which requires any action by or on behalf of any
Borrower or Guarantor in order to avoid any non compliance, with any Environmental Law, Borrowers
shall, at Agent’s request and Borrowers’ expense: (i) cause an independent environmental engineer
reasonably acceptable to Agent to conduct such tests of the site where non-compliance or alleged
non compliance with such Environmental Laws has occurred as to such non-compliance and prepare and
deliver to Agent a report as to such non-compliance setting forth the results of such tests, a
proposed plan for responding to any environmental problems described therein, and an estimate of
the costs thereof and (ii) provide to Agent a supplemental report of such engineer whenever the
scope of such non-compliance, or such Borrower’s or Guarantor’s response thereto or the estimated
costs thereof, shall change in any material respect.



(d) Each Borrower and Guarantor shall indemnify and hold harmless Agent and Lenders and their
respective directors, officers, employees, agents, invitees, representatives, successors and
assigns, from and against any and all losses, claims, damages, liabilities, costs, and expenses
(including reasonable attorneys’ fees and expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage, release, threatened
release, spill, discharge, disposal or presence of a Hazardous Material, including the costs of any
required or necessary repair, cleanup or other remedial work with respect to any property of any
Borrower or Guarantor and the preparation and implementation of any closure, remedial or other
required plans. All representations, warranties, covenants and indemnifications in this Section
9.3 shall survive the payment of the Obligations and the termination of this Agreement.



9.4 Payment of Taxes and Claims. Each Borrower and Guarantor shall, and shall cause
any Subsidiary to, duly pay and discharge all taxes, assessments, contributions and governmental
charges upon or against it or its properties or assets, except for taxes, assessments,
contributions and governmental charges not to exceed $25,000 in the aggregate, and except for taxes
the validity of which are being contested in good faith by appropriate proceedings
diligently pursued and available to such Borrower, Guarantor or Subsidiary, as the case may
be, and with respect to which adequate reserves have been set aside on its books to the extent
required by GAAP.


 


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9.5 Insurance. Each Borrower and Guarantor shall, and shall cause any Subsidiary to,
at all times, maintain with financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation engaged in the
same or similar businesses and similarly situated. Said policies of insurance shall be reasonably
satisfactory to Agent as to form, amount and insurer. Borrowers and Guarantors shall furnish
certificates, policies or endorsements to Agent as Agent shall reasonably require as proof of such
insurance, and, if any Borrower or Guarantor fails to do so, Agent is authorized, but not required,
to obtain such insurance at the expense of Borrowers. All policies shall provide for at least
thirty (30) days prior written notice to Agent of any cancellation or reduction of coverage and
that Agent may act as attorney for each Borrower and Guarantor in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling, amending and
canceling such insurance. Borrowers and Guarantors shall cause Agent to be named as a loss payee
and an additional insured (but without any liability for any premiums) under such insurance
policies and Borrowers and Guarantors shall obtain non-contributory lender’s loss payable
endorsements to all insurance policies in form and substance satisfactory to Agent. Such lender’s
loss payable endorsements shall specify that the proceeds of such insurance shall be payable to
Agent as its interests may appear and further specify that Agent and Lenders shall be paid
regardless of any act or omission by any Borrower, Guarantor or any of its or their Affiliates.
Without limiting any other rights of Agent or Lenders, any insurance proceeds received by Agent at
any time may be applied to payment of the Obligations, whether or not then due, in any order and in
such manner as Agent may determine. Upon application of such proceeds to the Revolving Loans,
Revolving Loans may be available subject and pursuant to the terms hereof to be used for the costs
of repair or replacement of the Collateral lost or damages resulting in the payment of such
insurance proceeds.




9.6 Financial Statements and Other Information.



(a) Each Borrower and Guarantor shall, and shall cause any Subsidiary to, keep proper books
and records in which true and complete entries shall be made of all dealings or transactions of or
in relation to the Collateral and the business of such Borrower, Guarantor and its Subsidiaries in
accordance with GAAP. Borrowers and Guarantors shall promptly furnish to Agent and Lenders all
such financial and other information as Agent shall reasonably request relating to the Collateral
and the assets, business and operations of Borrowers and Guarantors, and Borrower shall notify the
auditors and accountants of Borrowers and Guarantors that Agent is authorized to obtain such
information directly from them. Without limiting the foregoing, Borrowers shall furnish or cause
to be furnished to Agent, the following:



(i) within thirty-five (35) days after the end of each fiscal month, or if the fiscal month is
the last month of a fiscal quarter, then within forty-five (45) days after the end thereof, monthly
unaudited consolidated financial statements, and unaudited consolidating financial statements
(including in each case balance sheets, statements of income and loss, and statements of
shareholders’ equity, and where the fiscal month is the last month of a fiscal
quarter, statements of cash flow), all in reasonable detail, fairly presenting in all material
respects the financial position and the results of the operations of Parent and its Subsidiaries as
of the end of and through such fiscal month, certified to be correct by the chief financial officer
of Parent, subject to normal year-end adjustments and accompanied by a compliance certificate
substantially in the form of Exhibit C hereto, along with a schedule in a form reasonably
satisfactory to Agent of the calculations used in determining, as of the end of such month, whether
Borrowers and Guarantors were in compliance with the covenants set forth in Sections 9.17 and 9.18
of this Agreement for such month, and


 


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(ii) within ninety (90) days after the end of each fiscal year, audited consolidated financial
statements and unaudited consolidating financial statements of Parent and its Subsidiaries
(including in each case balance sheets, statements of income and loss, statements of cash flow, and
statements of shareholders’ equity), and the accompanying notes thereto, all in reasonable detail,
fairly presenting in all material respects the financial position and the results of the operations
of Parent and its Subsidiaries as of the end of and for such fiscal year, together with the
unqualified opinion of independent certified public accountants with respect to the audited
consolidated financial statements, which accountants shall be an independent accounting firm
selected by Administrative Borrower and acceptable to Agent, 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 and for the fiscal year then ended, and



(iii) at such time as available, but in no event later than forty-five (45) days prior to the
end of each fiscal year (commencing with the fiscal year of Borrowers ending March 31, 2008),
projected consolidated financial statements (including in each case, forecasted balance sheets and
statements of income and loss, statements of cash flow, and statements of shareholders’ equity) of
Parent and its Subsidiaries for the next fiscal year, all in reasonable detail, and in a format
consistent with the projections delivered by Borrowers to Agent prior to the date hereof, together
with such supporting information as Agent may reasonably request. Such projected financial
statements shall be prepared on a monthly basis for the next succeeding year. Such projections
shall represent the reasonable best estimate by Borrowers and Guarantors of the future financial
performance of Parent and its Subsidiaries for the periods set forth therein and shall have been
prepared on the basis of the assumptions set forth therein which Borrowers and Guarantors believe
are fair and reasonable as of the date of preparation in light of current and reasonably
foreseeable business conditions (it being understood that actual results may differ from those set
forth in such projected financial statements). Each year Borrowers shall provide to Agent a
semi-annual update with respect to such projections or at any time a Default or Event of Default
exists or has occurred and is continuing, more frequently as Agent may require.



(b) Borrowers and Guarantors shall promptly notify Agent in writing of the details of (i) any
loss, damage, investigation, action, suit, proceeding or claim relating to Collateral having a
value of more than $250,000 or which if adversely determined would result in any material adverse
change in any Borrower’s or Guarantor’s business, properties, assets, goodwill or condition,
financial or otherwise, (ii) any Material Contract being terminated or amended or any new Material
Contract entered into (in which event Borrowers and Guarantors shall provide Agent with a copy of
such Material Contract), (iii) any order, judgment or decree in excess of $250,000 shall have been
entered against any Borrower or Guarantor any of its or their
properties or assets, (iv) any notification of a material violation of laws or regulations
received by any Borrower or Guarantor, (v) any ERISA Event, and (vi) the occurrence of any Default
or Event of Default.


 


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(c) Promptly after the sending or filing thereof, Borrowers shall send to Agent copies of (i)
all reports which Parent or any of its Subsidiaries sends to its security holders generally, (ii)
if specifically requested by Agent, all reports and registration statements which Parent or any of
its Subsidiaries files with the Securities Exchange Commission, any national or foreign securities
exchange or the National Association of Securities Dealers, Inc., and such other reports as Agent
may hereafter specifically identify to Administrative Borrower that Agent will require be provided
to Agent, (iii) all press releases and (iv) all other statements concerning material changes or
developments in the business of a Borrower or Guarantor made available by any Borrower or Guarantor
to the public.



(d) Borrowers and Guarantors shall furnish or cause to be furnished to Agent such budgets,
forecasts, projections and other information respecting the Collateral and the business of
Borrowers and Guarantors, as Agent may, from time to time, reasonably request. Agent is hereby
authorized to deliver a copy of any financial statement or any other information relating to the
business of Borrowers and Guarantors to any court or other Governmental Authority or to any Lender
or Participant or prospective Lender or Participant or any Affiliate of any Lender or Participant.
Each Borrower and Guarantor hereby irrevocably authorizes and directs all accountants or auditors
to deliver to Agent, at Borrowers’ expense, copies of the financial statements of any Borrower and
Guarantor and any reports or management letters prepared by such accountants or auditors on behalf
of any Borrower or Guarantor and to disclose to Agent and Lenders such information as they may have
regarding the business of any Borrower and Guarantor. Any documents, schedules, invoices or other
papers delivered to Agent or any Lender may be destroyed or otherwise disposed of by Agent or such
Lender one (1) year after the same are delivered to Agent or such Lender, except as otherwise
designated by Administrative Borrower to Agent or such Lender in writing.



9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Each Borrower and
Guarantor shall not, and shall not permit any Subsidiary to, directly or indirectly,



(a) merge into or with or consolidate with any other Person or permit any other Person to
merge into or with or consolidate with it except as provided in that certain Agreement and Plan of
Merger dated as of March 29, 2007 among BTP Acquisition Company, LLC, IEAC, Inc. and Parent, and
except that any wholly-owned Subsidiary of Parent (other than any Borrower) may merge with and into
or consolidate with any other wholly-owned Subsidiary of Parent (other than any Borrower),
provided, that, each of the following conditions is satisfied as determined by
Agent in good faith: (i) Agent shall have received not less than ten (10) Business Days’ prior
written notice of the intention of such Subsidiaries to so merge or consolidate, which notice shall
set forth in reasonable detail satisfactory to Agent, the persons that are merging or
consolidating, which person will be the surviving entity, the locations of the assets of the
persons that are merging or consolidating, and the material agreements and documents relating to
such merger or consolidation, (ii) Agent shall have received such other information with respect to
such merger or consolidation as Agent may reasonably request, (iii) as of the effective date of the
merger or consolidation and after giving effect thereto, no Default
or Event of Default shall exist or have occurred, (iv) Agent shall have received, true,
correct and complete copies of all agreements, documents and instruments relating to such merger or
consolidation, including, but not limited to, the certificate or certificates of merger to be filed
with each appropriate Secretary of State (with a copy as filed promptly after such filing), (v) the
surviving corporation shall expressly confirm, ratify and assume the Obligations and the Financing
Agreements to which it is a party in writing, in form and substance satisfactory to Agent, and
Borrowers and Guarantors shall execute and deliver such other agreements, documents and instruments
as Agent may request in connection therewith;


 


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(b) sell, issue, assign, lease, license, transfer, abandon or otherwise dispose of any Capital
Stock or Indebtedness to any other Person or any of its assets to any other Person, except for




(i) sales of Inventory in the ordinary course of business,



(ii) the sale or other disposition of Equipment (including worn-out or obsolete Equipment or
Equipment no longer used or useful in the business of any Borrower or Guarantor) so long as such
sales or other dispositions do not involve Equipment having an aggregate fair market value in
excess of $100,000 for all such Equipment disposed of in any fiscal year of Borrowers or as Agent
may otherwise agree, and



(iii) the issuance and sale by any Borrower or Guarantor of Capital Stock of such Borrower or
Guarantor after the date hereof; provided, that, (A) Agent shall have received not
less than ten (10) Business Days’ prior written notice of such issuance and sale by such Borrower
or Guarantor, which notice shall specify the parties to whom such shares are to be sold, the terms
of such sale, the total amount which it is anticipated will be realized from the issuance and sale
of such stock and the net cash proceeds which it is anticipated will be received by such Borrower
or Guarantor from such sale, (B) such Borrower or Guarantor shall not be required to pay any cash
dividends or repurchase or redeem such Capital Stock or make any other payments in respect thereof,
except as otherwise permitted in Section 9.11 hereof, (C) the terms of such Capital Stock, and the
terms and conditions of the purchase and sale thereof, shall not include any terms that include any
limitation on the right of any Borrower to request or receive Loans or Letters of Credit or the
right of any Borrower and Guarantor to amend or modify any of the terms and conditions of this
Agreement or any of the other Financing Agreements or otherwise in any way relate to or affect the
arrangements of Borrowers and Guarantors with Agent and Lenders or are more restrictive or
burdensome to any Borrower or Guarantor than the terms of any Capital Stock in effect on the date
hereof, (D) except as Agent may otherwise agree in writing, all of the proceeds of the sale and
issuance of such Capital Stock shall be paid to Agent for application to the Obligations in such
order and manner as Agent may determine or at Agent’s option, to be held as cash collateral for the
Obligations and (E) as of the date of such issuance and sale and after giving effect thereto, no
Default or Event of Default shall exist or have occurred,



(iv) the issuance of Capital Stock of any Borrower or Guarantor consisting of common stock
pursuant to an employee stock option or grant or similar equity plan or 401(k) plans of such
Borrower or Guarantor for the benefit of its employees, directors and consultants,
provided, that, in no event shall such Borrower or Guarantor be required to issue,
or
shall such Borrower or Guarantor issue, Capital Stock pursuant to such stock plans or 401(k)
plans which would result in a Change of Control or other Event of Default,


 


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(c) wind up, liquidate or dissolve except that any Guarantor (other than Parent) may wind up,
liquidate and dissolve, provided, that, each of the following conditions is
satisfied, (i) the winding up, liquidation and dissolution of such Guarantor shall not violate any
law or any order or decree of any court or other Governmental Authority in any material respect and
shall not conflict with or result in the breach of, or constitute a default under, any indenture,
mortgage, deed of trust, or any other agreement or instrument to which any Borrower or Guarantor is
a party or may be bound, (ii) such winding up, liquidation or dissolution shall be done in
accordance with the requirements of all applicable laws and regulations, (iii) effective upon such
winding up, liquidation or dissolution, all of the assets and properties of such Guarantor shall be
duly and validly transferred and assigned to a Borrower, free and clear of any liens, restrictions
or encumbrances other than the security interest and liens of Agent (and Agent shall have received
such evidence thereof as Agent may require) and Agent shall have received such deeds, assignments
or other agreements as Agent may request to evidence and confirm the transfer of such assets to of
such Guarantor to a Borrower, (iv) Agent shall have received all documents and agreements that any
Borrower or Guarantor has filed with any Governmental Authority or as are otherwise required to
effectuate such winding up, liquidation or dissolution, (v) no Borrower or Guarantor shall assume
any Indebtedness, obligations or liabilities as a result of such winding up, liquidation or
dissolution, or otherwise become liable in respect of any obligations or liabilities of the entity
that is winding up, liquidating or dissolving, unless such Indebtedness is otherwise expressly
permitted hereunder, (vi) Agent shall have received not less than ten (10) Business Days prior
written notice of the intention of such Guarantor to wind up, liquidate or dissolve, and (vii) as
of the date of such winding up, liquidation or dissolution and after giving effect thereto, no
Default or Event of Default shall exist or have occurred; or




(d) agree to do any of the foregoing.



9.8 Encumbrances. Each Borrower and Guarantor shall not, and shall not permit any
Subsidiary to, create, incur, assume or suffer to exist any security interest, mortgage, pledge,
lien, charge or other encumbrance of any nature whatsoever on any of its assets or properties,
including the Collateral, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any security interest or lien with respect to any
such assets or properties, except:




(a) the security interests and liens of Agent for itself and the benefit of Secured Parties;



(b) liens securing the payment of taxes, assessments or other governmental charges or levies
either not yet overdue or the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to such Borrower, or Guarantor or Subsidiary, as the
case may be and with respect to which adequate reserves have been set aside on its books;


 


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(c) non-consensual statutory liens (other than liens securing the payment of taxes) arising in
the ordinary course of such Borrower’s, Guarantor’s or Subsidiary’s business to
the extent: (i) such liens secure Indebtedness which is not overdue or (ii) such liens secure
Indebtedness relating to claims or liabilities which are fully insured and being defended at the
sole cost and expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to such Borrower, Guarantor or such
Subsidiary, in each case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books;



(d) zoning restrictions, easements, licenses, covenants and other restrictions affecting the
use of Real Property which do not interfere in any material respect with the use of such Real
Property or ordinary conduct of the business of such Borrower, Guarantor or such Subsidiary as
presently conducted thereon or materially impair the value of the Real Property which may be
subject thereto;



(e) purchase money security interests in Equipment (including Capital Leases) and purchase
money mortgages on Real Property to secure Indebtedness permitted under Section 9.9(b) hereof;



(f) pledges and deposits of cash by any Borrower or Guarantor after the date hereof in the
ordinary course of business in connection with workers’ compensation, unemployment insurance and
other types of social security benefits consistent with the current practices of such Borrower or
Guarantor as of the date hereof;



(g) pledges and deposits of cash by any Borrower or Guarantor after the date hereof to secure
the performance of tenders, bids, leases, trade contracts (other than for the repayment of
Indebtedness), statutory obligations and other similar obligations in each case in the ordinary
course of business consistent with the current practices of such Borrower or Guarantor as of the
date hereof; provided, that, in connection with any performance bonds issued by a
surety or other person, the issuer of such bond shall have waived in writing any rights in or to,
or other interest in, any of the Collateral in an agreement, in form and substance satisfactory to
Agent;



(h) liens arising from (i) operating leases and the precautionary UCC financing statement
filings in respect thereof and (ii) equipment or other materials which are not owned by any
Borrower or Guarantor located on the premises of such Borrower or Guarantor (but not in connection
with, or as part of, the financing thereof) from time to time in the ordinary course of business
and consistent with current practices of such Borrower or Guarantor and the precautionary UCC
financing statement filings in respect thereof;



(i) judgments and other similar liens arising in connection with court proceedings that do not
constitute an Event of Default, provided, that, (i) such liens are being contested
in good faith and by appropriate proceedings diligently pursued, (ii) adequate reserves or other
appropriate provision, if any, as are required by GAAP have been made therefor, (iii) a stay of
enforcement of any such liens is in effect and (iv) Agent may establish a Reserve with respect
thereto; and



(j) the security interests and liens set forth on the Information Certificate.


 


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9.9 Indebtedness. Each Borrower and Guarantor shall not, and shall not permit any
Subsidiary to, incur, create, assume, become or be liable in any manner with respect to, or permit
to exist, any Indebtedness, or guarantee, assume, endorse, or otherwise become responsible for
(directly or indirectly), the Indebtedness, performance, obligations or dividends of any other
Person, except:




(a) the Obligations;



(b) purchase money Indebtedness (including Capital Leases) arising after the date hereof to
the extent secured by purchase money security interests in Equipment (including Capital Leases) and
purchase money mortgages on Real Property not to exceed $150,000 in the aggregate at any time
outstanding so long as such security interests and mortgages do not apply to any property of such
Borrower, Guarantor or Subsidiary other than the Equipment or Real Property so acquired, and the
Indebtedness secured thereby does not exceed the cost of the Equipment or Real Property so
acquired, as the case may be;



(c) guarantees by any Borrower or Guarantor of the Obligations of the other Borrowers or
Guarantors in favor of Agent for the benefit of Lenders and the other Secured Parties;



(d) the Indebtedness of any Borrower or Guarantor to any other Borrower or Guarantor arising
after the date hereof pursuant to loans by any Borrower or Guarantor permitted under Section
9.10(g) hereof;



(e) Indebtedness of any Borrower or Guarantor entered into in the ordinary course of business
pursuant to a Hedge Agreement; provided, that, (i) such arrangements are with a
Bank Product Provider, (ii) such arrangements are not for speculative purposes, and (iii) such
Indebtedness shall be unsecured, except to the extent such Indebtedness constitutes part of the
Obligations arising under or pursuant to Hedge Agreements with a Bank Product Provider that are
secured under the terms hereof;



(f) unsecured Indebtedness of any Borrower or Guarantor arising after the date hereof to any
third person (but not to any other Borrower or Guarantor), provided, that, each of
the following conditions is satisfied as determined by Agent: (i) such Indebtedness shall be on
terms and conditions acceptable to Agent and shall be subject and subordinate in right of payment
to the right of Agent and Lenders to receive the prior indefeasible payment and satisfaction in
full payment of all of the Obligations pursuant to the terms of an intercreditor agreement between
Agent and such third party, in form and substance satisfactory to Agent, (ii) Agent shall have
received not less than ten (10) days prior written notice of the intention of such Borrower or
Guarantor to incur such Indebtedness, which notice shall set forth in reasonable detail
satisfactory to Agent the amount of such Indebtedness, the person or persons to whom such
Indebtedness will be owed, the interest rate, the schedule of repayments and maturity date with
respect thereto and such other information as Agent may request with respect thereto, (iii) Agent
shall have received true, correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness, (iv) except as Agent may otherwise agree in
writing, all of the proceeds of the loans or other accommodations


 


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giving rise to such Indebtedness
shall be paid to Agent for application to the Obligations in such
order and manner as Agent may determine or at Agent’s option, to be held as cash collateral for the
Obligations, (v) in no event shall the aggregate principal amount of such Indebtedness incurred
during the term of this Agreement exceed $150,000, (vi) as of the date of incurring such
Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or have
occurred, (vii) such Borrower and Guarantor shall not, directly or indirectly, (A) amend, modify,
alter or change the terms of such Indebtedness or any agreement, document or instrument related
thereto, except, that, such Borrower or Guarantor may, after prior written notice to Agent,
amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the
timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness
(other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection
therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness (except
pursuant to regularly scheduled payments permitted herein), or set aside or otherwise deposit or
invest any sums for such purpose, and (viii) Borrowers and Guarantors shall furnish to Agent all
notices or demands in connection with such Indebtedness either received by any Borrower or
Guarantor or on its behalf promptly after the receipt thereof, or sent by any Borrower or Guarantor
or on its behalf concurrently with the sending thereof, as the case may be;



(g) the Indebtedness set forth on Schedule 9.9 hereto; provided, that,
(i) except for the payment in full of the Senior Convertible Note dated August 30, 2006 issued by
Parent to the order of Portside Growth and Opportunity Fund in the original principal amount of
$17,000,000, which payment may be made solely from the funds contributed by BTP Acquisition
Company, LLC as provided in that certain Agreement and Plan of Merger dated as of March 29, 2007
amount BTP Acquisition Company, LLC, IEAC, Inc. and Parent, Borrowers and Guarantors may only make
regularly scheduled payments of principal and interest in respect of such Indebtedness in
accordance with the terms of the agreement or instrument evidencing or giving rise to such
Indebtedness as in effect on the date hereof, (ii) Borrowers and Guarantors shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or any agreement,
document or instrument related thereto as in effect on the date hereof except, that, Borrowers and
Guarantors may, after prior written notice to Agent, amend, modify, alter or change the terms
thereof so as to extend the maturity thereof, or defer the timing of any payments in respect
thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith, or (B) redeem,
retire, defease, purchase or otherwise acquire such Indebtedness, or set aside or otherwise deposit
or invest any sums for such purpose, and (iii) Borrowers and Guarantors shall furnish to Agent all
notices or demands in connection with such Indebtedness either received by any Borrower or
Guarantor or on its behalf, promptly after the receipt thereof, or sent by any Borrower or
Guarantor or on its behalf, concurrently with the sending thereof, as the case may be.



9.10 Loans, Investments, Etc. Each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, directly or indirectly, make any loans or advance money or property to
any person, or invest in (by capital contribution, dividend or otherwise) or purchase or repurchase
the Capital Stock or Indebtedness or all or a substantial part of the assets or property of any
person, or form or acquire any Subsidiaries, or agree to do any of the foregoing, except:



(a) the endorsement of instruments for collection or deposit in the ordinary course of
business;


 


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(b) investments in cash or Cash Equivalents, provided, that, (i) no Loans are
then outstanding and (ii) the terms and conditions of Section 5.2 hereof shall have been satisfied
with respect to the deposit account, investment account or other account in which such cash or Cash
Equivalents are held;



(c) the existing equity investments of each Borrower and Guarantor as of the date hereof in
its Subsidiaries, provided, that, no Borrower or Guarantor shall have any further
obligations or liabilities to make any capital contributions or other additional investments or
other payments to or in or for the benefit of any of such Subsidiaries;



(d) loans and advances by any Borrower or Guarantor to employees of such Borrower or Guarantor
not to exceed the principal amount of $500,000 in the aggregate at any time outstanding for: (i)
reasonably and necessary work-related travel or other ordinary business expenses to be incurred by
such employee in connection with their work for such Borrower or Guarantor and (ii) reasonable and
necessary relocation expenses of such employees (including home mortgage financing for relocated
employees);



(e) stock or obligations issued to any Borrower or Guarantor by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing to such Borrower or
Guarantor in connection with the insolvency, bankruptcy, receivership or reorganization of such
Person or a composition or readjustment of the debts of such Person; provided,
that, the original of any such stock or instrument evidencing such obligations shall be
promptly delivered to Agent, upon Agent’s request, together with such stock power, assignment or
endorsement by such Borrower or Guarantor as Agent may request;



(f) obligations of account debtors to any Borrower or Guarantor arising from Accounts which
are past due evidenced by a promissory note made by such account debtor payable to such Borrower or
Guarantor; provided, that, promptly upon the receipt of the original of any such
promissory note by such Borrower or Guarantor, such promissory note shall be endorsed to the order
of Agent by such Borrower or Guarantor and promptly delivered to Agent as so endorsed;



(g) loans by a Borrower or Guarantor to another Borrower or Guarantor after the date hereof,
provided, that,



(i) as to all of such loans, (A) within thirty (30) days after the end of each fiscal month,
Borrowers shall provide to Agent a report in form and substance satisfactory to Agent of the
outstanding amount of such loans as of the last day of the immediately preceding month and
indicating any loans made and payments received during the immediately preceding month, (B) the
Indebtedness arising pursuant to any such loan shall not be evidenced by a promissory note or other
instrument, unless the single original of such note or other instrument is promptly delivered to
Agent upon its request to hold as part of the Collateral, with such endorsement and/or assignment
by the payee of such note or other instrument as Agent may require, (C) as of the date of any such
loan and after giving effect thereto, the Borrower or Guarantor making such loan shall be Solvent,
and (D) as of the date of any such loan and after giving effect thereto, no Default or Event of
Default shall exist or have occurred and be continuing,


 


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(ii) as to loans by a Guarantor to a Borrower, (A) the Indebtedness arising pursuant to such
loan shall be subject to, and subordinate in right of payment to, the right of Agent and Lenders to
receive the prior final payment and satisfaction in full of all of the Obligations on terms and
conditions acceptable to Agent, (B) promptly upon Agent’s request, Agent shall have received a
subordination agreement, in form and substance satisfactory to Agent, providing for the terms of
the subordination in right of payment of such Indebtedness of such Borrower to the prior final
payment and satisfaction in full of all of the Obligations, duly authorized, executed and delivered
by such Guarantor and such Borrower, and (C) such Borrower shall not, directly or indirectly make,
or be required to make, any payments in respect of such Indebtedness prior to the end of the then
current term of this Agreement;



(iii) as to loans by a Borrower to a Guarantor or another Borrower, as of the date of any such
loan and after giving effect thereto, the Excess Availability of the Borrower making the loan shall
be no less than $1,500,000;



(h) Borrowers may make investments in film projects so long as (i) no Default or Event of
Default has occurred and is continuing or would result therefrom, (ii) the aggregate sum of such
investments shall not exceed $3,000,000 during any fiscal year and $8,000,000 during the entire
term of this Agreement (as it may be renewed or extended) and (iii) the Excess Availability shall
be no less than $1,500,000 both immediately before and after giving effect to any such investment;
and



(i) the loans and advances set forth on Schedule 9.10 hereto; provided, that,
as to such loans and advances, Borrowers and Guarantors shall not, directly or indirectly, amend,
modify, alter or change the terms of such loans and advances or any agreement, document or
instrument related thereto and Borrowers and Guarantors shall furnish to Agent all notices or
demands in connection with such loans and advances either received by any Borrower or Guarantor or
on its behalf, promptly after the receipt thereof, or sent by any Borrower or Guarantor or on its
behalf, concurrently with the sending thereof, as the case may be.



9.11 Dividends and Redemptions. Each Borrower and Guarantor shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of any Capital Stock of
such Borrower or Guarantor now or hereafter outstanding, or set aside or otherwise deposit or
invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any
shares of any class of Capital Stock (or set aside or otherwise deposit or invest any sums for such
purpose) for any consideration or apply or set apart any sum, or make any other distribution (by
reduction of capital or otherwise) in respect of any such shares or agree to do any of the
foregoing, except that:



(a) any Borrower or Guarantor may declare and pay such dividends or redeem, retire, defease,
purchase or otherwise acquire any shares of any class of Capital Stock for consideration in the
form of shares of common stock (so long as after giving effect thereto no Change of Control or
other Default or Event of Default shall exist or occur);



(b) Borrowers and Guarantors may pay dividends to the extent permitted in Section 9.12 below;


 


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(c) any Subsidiary of a Borrower or Guarantor may pay dividends to a Borrower;



(d) Borrowers and Guarantors may repurchase Capital Stock consisting of common stock held by
employees pursuant to any employee stock ownership plan thereof upon the termination, retirement or
death of any such employee in accordance with the provisions of such plan, provided,
that, as to any such repurchase, each of the following conditions is satisfied: (i) as of
the date of the payment for such repurchase and after giving effect thereto, no Default or Event of
Default shall exist or have occurred and be continuing, (ii) such repurchase shall be paid with
funds legally available therefor, (iii) such repurchase shall not violate any law or regulation or
the terms of any indenture, agreement or undertaking to which such Borrower or Guarantor is a party
or by which such Borrower or Guarantor or its or their property are bound, and (iv) the aggregate
amount of all payments for such repurchases in any calendar year shall not exceed $150,000.



9.12 Transactions with Affiliates. Each Borrower and Guarantor shall not, directly or
indirectly:



(a) purchase, acquire or lease any property from, or sell, transfer or lease any property to,
any officer, director or other Affiliate of such Borrower or Guarantor, except in the ordinary
course of and pursuant to the reasonable requirements of such Borrower’s or Guarantor’s business
(as the case may be) and upon fair and reasonable terms no less favorable to such Borrower or
Guarantor than such Borrower or Guarantor would obtain in a comparable arm’s length transaction
with an unaffiliated person; or



(b) make any payments (whether by dividend, loan or otherwise) of management, consulting or
other fees for management or similar services, or of any Indebtedness owing to any officer,
employee, shareholder, director or any other Affiliate of such Borrower or Guarantor, except (i)
reasonable compensation to officers, employees and directors for services rendered to such Borrower
or Guarantor in the ordinary course of business, and (ii) payments by any such Borrower or
Guarantor to Parent for actual and necessary reasonable out-of-pocket legal and accounting,
insurance, marketing, payroll and similar types of services paid for by Parent on behalf of such
Borrower or Guarantor, in the ordinary course of their respective businesses or as the same may be
directly attributable to such Borrower or Guarantor and for the payment of taxes by or on behalf of
Parent.



9.13 Compliance with ERISA. Each Borrower and Guarantor shall, and shall cause each
of its ERISA Affiliates to: (a) maintain each Plan in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal and State law; (b) cause each Plan which
is qualified under Section 401(a) of the Code to maintain such qualification; (c) not terminate any
Pension Plan so as to incur any material liability to the Pension Benefit Guaranty Corporation; (d)
not allow or suffer to exist any prohibited transaction involving any Plan or any trust created
thereunder which would subject such Borrower, Guarantor or such ERISA Affiliate to a material tax
or other liability on prohibited transactions imposed under Section 4975 of the Code or ERISA; (e)
make all required contributions to any Plan which it is obligated to pay under Section 302 of
ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow or suffer to exist any
accumulated funding deficiency, whether or not waived, with respect to any
such Pension Plan; (g) not engage in a transaction that could be subject to Section 4069 or
4212(c) of ERISA; or (h) not allow or suffer to exist any occurrence of a reportable event or any
other event or condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any Plan that is a single employer plan, which termination could result in
any material liability to the Pension Benefit Guaranty Corporation.


 


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9.14 End of Fiscal Years; Fiscal Quarters. Each Borrower and Guarantor shall, for
financial reporting purposes, cause its, and each of its Subsidiaries’ (a) fiscal years to end on
March 31 of each year and (b) fiscal quarters to end on March 31, June 30, September 30, and
December 31 of each year.



9.15 Change in Business. Each Borrower and Guarantor shall not engage in any business
other than the business of such Borrower or Guarantor on the date hereof and any business
reasonably related, ancillary or complimentary to the business in which such Borrower or Guarantor
is engaged on the date hereof.



9.16 Limitation of Restrictions Affecting Subsidiaries. Each Borrower and Guarantor
shall not, directly, or indirectly, create or otherwise cause or suffer to exist any encumbrance or
restriction which prohibits or limits the ability of any Subsidiary of such Borrower or Guarantor
to (a) pay dividends or make other distributions or pay any Indebtedness owed to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; (b) make loans or advances to such
Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor, (c) transfer any of its
properties or assets to such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor;
or (d) create, incur, assume or suffer to exist any lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, other than encumbrances and restrictions arising
under (i) applicable law, (ii) this Agreement, (iii) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of such Borrower or Guarantor or any
Subsidiary of such Borrower or Guarantor, (iv) customary restrictions on dispositions of real
property interests found in reciprocal easement agreements of such Borrower or Guarantor or any
Subsidiary of such Borrower or Guarantor, (v) any agreement relating to permitted Indebtedness
incurred by a Subsidiary of such Borrower or Guarantor prior to the date on which such Subsidiary
was acquired by such Borrower or such Guarantor and outstanding on such acquisition date, and (vi)
the extension or continuation of contractual obligations in existence on the date hereof;
provided, that, any such encumbrances or restrictions contained in such extension
or continuation are no less favorable to Agent and Lenders than those encumbrances and restrictions
under or pursuant to the contractual obligations so extended or continued.




9.17 Fixed Charge Coverage Ratio. Borrowers shall maintain:



(a) a Fixed Charge Coverage Ratio of no less than 1.0-to-1.0 during each fiscal year to date
period ending on the last day of any month from April 2007 through November 2007 (inclusive),
provided that the covenant in this Section 9.17(a) will not be tested as to any particular such
period if Borrowers had Excess Availability hereunder equal to or greater than $2,000,000 at all
times during the thirty (30) days preceding the date on which the financial statements for the
applicable month are furnished to Agent pursuant to Section 9.6(a)(i) hereof;


 


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(b) a Fixed Charge Coverage Ratio of no less than 0.8-to-1.0 to one during the nine (9) months
ending December 31, 2007 (regardless of Excess Availability);



(c) Excess Availability equal to or greater than $2,000,000 at all times from December 31,
2007 through and including the date on which the financial statements for December 2007 are
furnished to Agent pursuant to Section 9.6(a)(i) hereof;



(d) a Fixed Charge Coverage Ratio of no less than 0.8-to-1.0 during each of the fiscal year to
date periods ending on January 31, 2008 and February 29, 2008, provided that the
covenant in this Section 9.17(d) will not be tested as to any particular such period if Borrowers
had Excess Availability hereunder equal to or greater than $5,000,000 at all times during the
thirty (30) days preceding the date on which the financial statements for the applicable month are
furnished to Agent pursuant to Section 9.6(a)(i) hereof;



(e) a Fixed Charge Coverage Ratio of no less than 1.0-to-1.0 during the fiscal year ending
March 31, 2008, provided that the covenant in this Section 9.17(e) will not be
tested if Borrowers had Excess Availability hereunder equal to or greater than $5,000,000 at all
times during the thirty (30) days preceding the date on which the financial statements for March
2008 are furnished to Agent pursuant to Section 9.6(a)(i) hereof; and



(f) for each month after March 2008, a Fixed Charge Coverage Ratio during the twelve (12)
month period ending on the last day of such month of no less than the minimum ratio determined by
Agent for such month (as set forth below), provided that the covenant in this
Section 9.17(f) will not be tested as to any particular such period if Borrowers had Excess
Availability hereunder equal to or greater than $5,000,000 at all times during the thirty (30) days
preceding the date on which the financial statements for the applicable month are furnished to
Agent pursuant to Section 9.6(a)(i) hereof. Agent will, upon written notice to Administrative
Borrower, establish the minimum ratio for each month in a fiscal year based upon the projected
financial statements for such fiscal year furnished to Agent pursuant to Section 9.6(a)(iii) hereof
(it being understood that the minimum ratios so established for any fiscal year will be no less
stringent than the minimum ratios established for the prior fiscal year).



9.18 Copyrights. With respect to all titles that any Borrower or Guarantor is
actively manufacturing and distributing copies of as copyright licensee or owner (collectively, the
“Active Licensed/Owned Titles”), Administrative Borrower shall, during the first ninety (90) day
period following the date of this Agreement, determine which of the Active Licensed/Owned Titles
has been registered with the United States Copyright Office and which of the Active Licensed/Owned
Titles have not been so registered. On or before the ninetieth (90th) day following the
date of this Agreement, Administrative Borrower shall furnish Agent with a written report
identifying (a) those Active Licensed/Owned Titles that have been registered with the United States
Copyright Office, (b) those Active Licensed/Owned Titles that have not been so registered, and
(c) those titles that any Borrower or Guarantor is actively distributing but is not manufacturing
copies of pursuant to a license and is only purchasing copies of (collectively, the “Active
Non-Licensed/Owned Titles”). During the second ninety (90) day period following the date of this
Agreement, Administrative Borrower shall use its best efforts to obtain either a copy of the
Certificate of Copyright Registration issued by the United States Copyright Office for each of the
Active Licensed/Owned Titles (“Registration Certificate”) or (to the


 


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extent applicable) written confirmation from the owner or licensor of such Active Licensed/Owned
Title that such Active Licensed/Owned Title has not been registered with the United States
Copyright Office and that no such registration will be made (“Non-Registration Confirmation”).
Administrative Borrower shall, no later than the one hundred eightieth (180th) day
following the date of this Agreement, furnish Agent with all of the Registration Certificates and
Non-Registration Confirmations so obtained, together with copyright security agreement(s) duly
executed and delivered by each of the applicable Borrowers and Guarantors in form and substance
satisfactory to Agent for recording with the United States Copyright Office and covering all of the
Active Licensed/Owned Titles for which Registration Certificates are so furnished to Agent (it
being understood that Agent will then and from time to time thereafter conduct searches, at
Borrowers’ expense, of the records of the United States Copyright Office on selective Active
Licensed/Owned Titles). On or before such one hundred eightieth (180th) day,
Administrative Borrower shall also furnish Agent with a written report (a “Copyright Report”)
identifying (c) those Active Licensed/Owned Titles for which a Registration Certificate or
Non-Registration Confirmation has been furnished to Agent, (d) those Active Licensed/Owned Titles
for which a Registration Certificate or Non-Registration Confirmation has not been furnished to
Agent and (e) the Active Non-Licensed/Owned Titles. As soon as possible after the end of each
month after the one hundred eightieth (180th) day following the date of this Agreement
(but in any event within ten (10) Business Days after the end thereof), Administrative Borrower
shall furnish Agent with a Registration Certificate or (to the extent applicable) Non-Registration
Confirmation for each Active Licensed/Owned Title obtained by any Borrower or Guarantor during such
month, together with amendment(s) to copyright security agreement(s) or new copyright security
agreement(s) (as applicable) duly executed and delivered by each of the applicable Borrowers and
Guarantors in form and substance satisfactory to Agent for recording with the United States
Copyright Office and covering all of such Active Licensed/Owned Titles for which Registration
Certificates are so furnished to Agent, and together with a current Copyright Report. Commencing
on the one hundred eightieth (180th) day following the date of this Agreement, as to any
of the Active Licensed/Owned Titles for which a Registration Certificate or Non-Registration
Confirmation and a copyright security agreement or amendment are not furnished to Agent as set
forth above, any Account (or portion thereof) generated from such Active Licensed/Owned Titles will
not be deemed an Eligible Account. Administrative Borrower shall provide Agent with such further
documents as Agent may request with respect to the foregoing matters.




9.19 License Agreements.



(a) Each Borrower and Guarantor shall (i) promptly and faithfully observe and perform all of
the material terms, covenants, conditions and provisions of the material License Agreements to
which it is a party to be observed and performed by it, at the times set forth therein, if any,
(ii) not do, permit, suffer or refrain from doing anything that could reasonably be expected to
result in a default under or breach of any of the terms of any material License Agreement, (iii)
not cancel, surrender, modify, amend, waive or release any material License Agreement in any
material respect or any term, provision or right of the licensee thereunder in any material
respect, or consent to or permit to occur any of the foregoing; except, that, subject to Section
9.19(b) below, such Borrower or Guarantor may cancel, surrender or release any material License
Agreement in the ordinary course of the business of such Borrower or Guarantor; provided,
that, such Borrower or Guarantor (as the case may be) shall give Agent


 


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not less than thirty (30) days prior written notice of its intention to so cancel, surrender
and release any such material License Agreement, (iv) give Agent prompt written notice of any
material License Agreement entered into by such Borrower or Guarantor after the date hereof,
together with a true, correct and complete copy thereof and such other information with respect
thereto as Agent may request, (v) give Agent prompt written notice of any material breach of any
obligation, or any default, by any party under any material License Agreement, and deliver to Agent
(promptly upon the receipt thereof by such Borrower or Guarantor in the case of a notice to such
Borrower or Guarantor and concurrently with the sending thereof in the case of a notice from such
Borrower or Guarantor) a copy of each notice of default and every other notice and other
communication received or delivered by such Borrower or Guarantor in connection with any material
License Agreement which relates to the right of such Borrower or Guarantor to continue to use the
property subject to such License Agreement, and (vi) furnish to Agent, promptly upon the request of
Agent, such information and evidence as Agent may reasonably require from time to time concerning
the observance, performance and compliance by such Borrower or Guarantor or the other party or
parties thereto with the material terms, covenants or provisions of any material License Agreement.



(b) Each Borrower and Guarantor will either exercise any option to renew or extend the term of
each material License Agreement to which it is a party in such manner as will cause the term of
such material License Agreement to be effectively renewed or extended for the period provided by
such option and give prompt written notice thereof to Agent or give Agent prior written notice that
such Borrower or Guarantor does not intend to renew or extend the term of any such material License
Agreement or that the term thereof shall otherwise be expiring, not less than sixty (60) days prior
to the date of any such non-renewal or expiration. In the event of the failure of such Borrower or
Guarantor to extend or renew any material License Agreement to which it is a party, Agent shall
have, and is hereby granted, the irrevocable right and authority, at its option, to renew or extend
the term of such material License Agreement, whether in its own name and behalf, or in the name and
behalf of a designee or nominee of Agent or in the name and behalf of such Borrower or Guarantor,
as Agent shall determine at any time that an Event of Default shall exist or have occurred and be
continuing. Agent may, but shall not be required to, perform any or all of such obligations of
such Borrower or Guarantor under any of the License Agreements, including, but not limited to, the
payment of any or all sums due from such Borrower or Guarantor thereunder. Any sums so paid by
Agent shall constitute part of the Obligations.



9.20 Foreign Assets Control Regulations, Etc. None of the requesting or borrowing of
the Loans or the requesting or issuance, extension or renewal of any Letter of Credit or the use of
the proceeds of any thereof will violate the Trading With the Enemy Act (50 USC §1 et seq., as
amended) (the “Trading With the Enemy Act”) or any of the foreign assets control regulations of the
United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) (the “Foreign
Assets Control Regulations”) or any enabling legislation or executive order relating thereto
(including, but not limited to (a) Executive order 13224 of September 21, 2001 Blocking Property
and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66
Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law
107-56). None of Borrowers or any of their Subsidiaries or other Affiliates is or will become a
“blocked person” as described in the Executive Order, the
Trading with the Enemy Act or the Foreign Assets Control Regulations or engages or will
engage in any dealings or transactions, or be otherwise associated, with any such “blocked person”.


 


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9.21 After Acquired Real Property. If any Borrower or Guarantor hereafter acquires
any Real Property or fixtures, then if such Real Property or fixtures at any location (or series of
adjacent, contiguous or related locations, and regardless of the number of parcels) has a fair
market value in an amount equal to or greater than $150,000 (or if a Default or Event of Default
exists, then regardless of the fair market value of such assets), without limiting any other rights
of Agent or any Lender, or duties or obligations of any Borrower or Guarantor, promptly upon
Agent’s request, such Borrower or Guarantor shall execute and deliver to Agent a mortgage, deed of
trust or deed to secure debt, as Agent may determine, in form and substance satisfactory to Agent
and in form appropriate for recording in the real estate records of the jurisdiction in which such
Real Property or other property is located granting to Agent a first and only lien and mortgage on
and security interest in such Real Property, fixtures or other property (except as such Borrower or
Guarantor would otherwise be permitted to incur hereunder or under the Mortgages or as otherwise
consented to in writing by Agent) and such other agreements, documents and instruments as Agent may
require in connection therewith.



9.22 Costs and Expenses. Borrowers and Guarantors shall pay to Agent on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the preparation,
negotiation, execution, delivery, recording, syndication, administration, collection, liquidation,
enforcement and defense of the Obligations, Agent’s rights in the Collateral, this Agreement, the
other Financing Agreements and all other documents related hereto or thereto, including any
amendments, supplements or consents which may hereafter be contemplated (whether or not executed)
or entered into in respect hereof and thereof, including: (a) all costs and expenses of filing or
recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable); (b) costs and
expenses and fees for insurance premiums, environmental audits, title insurance premiums, surveys,
assessments, engineering reports and inspections, appraisal fees and search fees, background
checks, costs and expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together with Agent’s customary
charges and fees with respect thereto; (c) charges, fees or expenses charged by any bank or issuer
in connection with any Letter of Credit; (d) costs and expenses of preserving and protecting the
Collateral; (e) costs and expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the security interests and liens of Agent, selling or otherwise realizing
upon the Collateral, and otherwise enforcing the provisions of this Agreement and the other
Financing Agreements or defending any claims made or threatened against Agent or any Lender arising
out of the transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); (f) all out-of-pocket expenses and costs heretofore and
from time to time hereafter incurred by Agent during the course of periodic field examinations of
the Collateral and such Borrower’s or Guarantor’s operations, plus a per diem charge at Agent’s
then standard rate for Agent’s examiners in the field and office (which rate as of the date hereof
is $850 per person per day) provided that so long as no Default or Event of Default
has occurred and is continuing, Borrowers and Guarantors will not be charged with more than $20,000
of such expenses, costs and per diem charges per year for any such field examinations conducted
after the date of this Agreement; and (g) the fees
and disbursements of counsel (including legal assistants) to Agent in connection with any of
the foregoing.


 


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9.23 Further Assurances. At the request of Agent at any time and from time to time,
Borrowers and Guarantors shall, at their expense, duly execute and deliver, or cause to be duly
executed and delivered, such further agreements, documents and instruments, and do or cause to be
done such further acts as may be necessary or proper to evidence, perfect, maintain and enforce the
security interests and the priority thereof in the Collateral and to otherwise effectuate the
provisions or purposes of this Agreement or any of the other Financing Agreements. Agent may at
any time and from time to time request a certificate from an officer of any Borrower or Guarantor
representing that all conditions precedent to the making of Loans and providing Letters of Credit
contained herein are satisfied. In the event of such request by Agent, Agent and Lenders may, at
Agent’s option, cease to make any further Loans or provide any further Letters of Credit until
Agent has received such certificate and, in addition, Agent has determined that such conditions are
satisfied.



SECTION 10. EVENTS OF DEFAULT AND REMEDIES




10.1 Events of Default. The occurrence or existence of any one or more of the
following events are referred to herein individually as an “Event of Default”, and collectively as
“Events of Default”:



(a) (i) any Borrower fails to pay any of the Obligations when due or (ii) any Borrower or
Guarantor fails to perform any of the covenants contained in Sections 9.3, 9.4, 9.13, 9.14, 9.15,
and 9.16 of this Agreement and such failure shall continue for ten (10) days; provided,
that, such ten (10) day period shall not apply in the case of: (A) any failure to observe
any such covenant which is not capable of being cured at all or within such ten (10) day period or
which has been the subject of a prior failure within a six (6) month period or (B) an intentional
breach by any Borrower or Guarantor of any such covenant or (iii) any Borrower or Guarantor fails
to perform any of the terms, covenants, conditions or provisions contained in this Agreement or any
of the other Financing Agreements other than those described in Sections 10.1(a)(i) and 10.1(a)(ii)
above;



(b) any representation, warranty or statement of fact made by any Borrower or Guarantor to
Agent in this Agreement, the other Financing Agreements or any other written agreement, schedule,
confirmatory assignment or otherwise shall when made or deemed made be false or misleading in any
material respect;



(c) any Guarantor revokes or terminates or purports to revoke or terminate or fails to perform
any of the terms, covenants, conditions or provisions of any guarantee, endorsement or other
agreement of such party in favor of Agent or any Lender;



(d) any judgment for the payment of money is rendered against any Borrower or Guarantor in
excess of $250,000 in any one case or in excess of $500,000 in the aggregate (to the extent not
covered by insurance where the insurer has assumed responsibility in writing for such judgment) and
shall remain undischarged or unvacated for a period in excess of thirty (30) days or execution
shall at any time not be effectively stayed, or any judgment other than for the
payment of money, or injunction, attachment, garnishment or execution is rendered against any
Borrower or Guarantor or any of the Collateral having a value in excess of $250,000;


 


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(e) any Guarantor (being a natural person or a general partner of an Guarantor which is a
partnership) dies or any Borrower or Guarantor, which is a partnership, limited liability company,
limited liability partnership or a corporation, dissolves or suspends or discontinues doing
business;



(f) any Borrower or Guarantor makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal creditors in connection
with a moratorium or adjustment of the Indebtedness due to them;



(g) a case or proceeding under the bankruptcy laws of the United States of America now or
hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether
at law or in equity) is filed against any Borrower or Guarantor or all or any part of its
properties and such petition or application is not dismissed within thirty (30) days after the date
of its filing or any Borrower or Guarantor shall file any answer admitting or not contesting such
petition or application or indicates its consent to, acquiescence in or approval of, any such
action or proceeding or the relief requested is granted sooner;



(h) a case or proceeding under the bankruptcy laws of the United States of America now or
hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether
at a law or equity) is filed by any Borrower or Guarantor or for all or any part of its property;



(i) any default in respect of any Indebtedness of any Borrower or Guarantor (other than
Indebtedness owing to Agent and Lenders hereunder), in any case in an amount in excess of $250,000,
which default continues for more than the applicable cure period, if any, with respect thereto, or
any default by any Borrower or Guarantor under any Material Contract, which default continues for
more than the applicable cure period, if any, with respect thereto and/or is not waived in writing
by the other parties thereto, or any breach by Parent of that certain Agreement and Plan of Merger
dated as of March 29, 2007 among BTP Acquisition Company, LLC, IEAC, Inc. and Parent, or Parent
otherwise becomes liable thereunder for the “Termination Fee” or “Fiduciary Fee” as defined
therein;



(j) any material provision hereof or of any of the other Financing Agreements shall for any
reason cease to be valid, binding and enforceable with respect to any party hereto or thereto
(other than Agent) in accordance with its terms, or any such party shall challenge the
enforceability hereof or thereof, or shall assert in writing, or take any action or fail to take
any action based on the assertion that any provision hereof or of any of the other Financing
Agreements has ceased to be or is otherwise not valid, binding or enforceable in accordance with
its terms, or any security interest provided for herein or in any of the other Financing Agreements
shall cease to be a valid and perfected first priority security interest in any of the Collateral
purported to be subject thereto (except as otherwise permitted herein or therein);


 


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(k) an ERISA Event shall occur which results in or could reasonably be expected to result in
liability of any Borrower in an aggregate amount in excess of $250,000;



(l) any Change of Control, provided that the Change in Control resulting
directly from the transactions contemplated in that certain Agreement and Plan of Merger dated as
of March 29, 2007 among BTP Acquisition Company, LLC, IEAC, Inc. and Parent shall not constitute a
Default or Event of Default;



(m) the indictment by any Governmental Authority, or as Agent may reasonably and in good faith
determine, the threatened indictment by any Governmental Authority of any Borrower or Guarantor of
which any Borrower, Guarantor or Agent receives notice, in either case, as to which there is a
reasonable possibility of an adverse determination, in the good faith determination of Agent, under
any criminal statute, or commencement or threatened commencement of criminal or civil proceedings
against such Borrower or Guarantor, pursuant to which statute or proceedings the penalties or
remedies sought or available include forfeiture of (i) any of the Collateral having a value in
excess of $50,000 or (ii) any other property of any Borrower or Guarantor which is necessary or
material to the conduct of its business;



(n) there shall be a material adverse change in the business, assets or prospects of any
Borrower or Guarantor after the date hereof; or




(o) there shall be an event of default under any of the other Financing Agreements.




10.2 Remedies.



(a) At any time an Event of Default exists or has occurred and is continuing, Agent and
Lenders shall have all rights and remedies provided in this Agreement, the other Financing
Agreements, the UCC and other applicable law, all of which rights and remedies may be exercised
without notice to or consent by any Borrower or Guarantor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights, remedies and powers
granted to Agent and Lenders hereunder, under any of the other Financing Agreements, the UCC or
other applicable law, are cumulative, not exclusive and enforceable, in Agent’s discretion,
alternatively, successively, or concurrently on any one or more occasions, and shall include,
without limitation, the right to apply to a court of equity for an injunction to restrain a breach
or threatened breach by any Borrower or Guarantor of this Agreement or any of the other Financing
Agreements. Subject to Section 12 hereof, Agent may, and at the direction of the Required Lenders
shall, at any time or times, proceed directly against any Borrower or Guarantor to collect the
Obligations without prior recourse to the Collateral.


 


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(b) Without limiting the generality of the foregoing, at any time an Event of Default exists
or has occurred and is continuing, Agent may, at its option and shall upon the direction of the
Required Lenders, (i) upon notice to Administrative Borrower, accelerate the payment of all
Obligations and demand immediate payment thereof to Agent for itself and the benefit of Lenders
(provided, that, upon the occurrence of any Event of Default described in Sections
10.1(g) and 10.1(h), all Obligations shall automatically become immediately due and
payable), and (ii) terminate the Commitments whereupon the obligation of each Lender to make
any Loan and an issuer to issue any Letter of Credit shall immediately terminate (provided,
that, upon the occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h), the
Commitments and any other obligation of the Agent or a Lender hereunder shall automatically
terminate).



(c) Without limiting the foregoing, at any time an Event of Default exists or has occurred and
is continuing, Agent may, in its discretion (i) with or without judicial process or the aid or
assistance of others, enter upon any premises on or in which any of the Collateral may be located
and take possession of the Collateral or complete processing, manufacturing and repair of all or
any portion of the Collateral, (ii) require any Borrower or Guarantor, at Borrowers’ expense, to
assemble and make available to Agent any part or all of the Collateral at any place and time
designated by Agent, (iii) collect, foreclose, receive, appropriate, setoff and realize upon any
and all Collateral, (iv) remove any or all of the Collateral from any premises on or in which the
same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (v) sell, lease, transfer, assign, deliver or otherwise dispose of any
and all Collateral (including entering into contracts with respect thereto, public or private sales
at any exchange, broker’s board, at any office of Agent or elsewhere) at such prices or terms as
Agent may deem reasonable, for cash, upon credit or for future delivery, with the Agent having the
right to purchase the whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of any Borrower or Guarantor, which
right or equity of redemption is hereby expressly waived and released by Borrowers and Guarantors
and/or (vi) terminate this Agreement. If any of the Collateral is sold or leased by Agent upon
credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Agent. If notice of disposition of Collateral is required
by law, ten (10) days prior notice by Agent to Administrative Borrower designating the time and
place of any public sale or the time after which any private sale or other intended disposition of
Collateral is to be made, shall be deemed to be reasonable notice thereof and Borrowers and
Guarantors waive any other notice. In the event Agent institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of prejudgment remedy, each Borrower and
Guarantor waives the posting of any bond which might otherwise be required. At any time an Event of
Default exists or has occurred and is continuing, upon Agent’s request, Borrowers will either, as
Agent shall specify, furnish cash collateral to the issuer to be used to secure and fund the
reimbursement obligations to the issuer in connection with any Letter of Credit Obligations or
furnish cash collateral to Agent for the Letter of Credit Obligations. Such cash collateral 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.


 


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(d) At any time or times that an Event of Default exists or has occurred and is continuing,
Agent may, in its discretion, enforce the rights of any Borrower or Guarantor against any account
debtor, secondary obligor or other obligor in respect of any of the Accounts or other Receivables.
Without limiting the generality of the foregoing, Agent may, in its discretion, at such time or
times (i) notify any or all account debtors, secondary obligors or other obligors in respect
thereof that the Receivables have been assigned to Agent and that Agent has a security interest
therein and Agent may direct any or all account debtors, secondary obligors and other
obligors to make payment of Receivables directly to Agent, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any
terms or conditions, any and all Receivables or other obligations included in the Collateral and
thereby discharge or release the account debtor or any secondary obligors or other obligors in
respect thereof without affecting any of the Obligations, (iii) demand, collect or enforce payment
of any Receivables or such other obligations, but without any duty to do so, and Agent and Lenders
shall not be liable for any failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take whatever other action
Agent may deem necessary or desirable for the protection of its interests and the interests of
Lenders. At any time that an Event of Default exists or has occurred and is continuing, at Agent’s
request, all invoices and statements sent to any account debtor shall state that the Accounts and
such other obligations have been assigned to Agent and are payable directly and only to Agent and
Borrowers and Guarantors shall deliver to Agent such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise to any Accounts as Agent may require.
In the event any account debtor returns Inventory when an Event of Default exists or has occurred
and is continuing, Borrowers shall, upon Agent’s request, hold the returned Inventory in trust for
Agent, segregate all returned Inventory from all of its other property, dispose of the returned
Inventory solely according to Agent’s instructions, and not issue any credits, discounts or
allowances with respect thereto without Agent’s prior written consent.



(e) To the extent that applicable law imposes duties on Agent or any Lender to exercise
remedies in a commercially reasonable manner (which duties cannot be waived under such law), each
Borrower and Guarantor acknowledges and agrees that it is not commercially unreasonable for Agent
or any Lender (i) to fail to incur expenses reasonably deemed significant by Agent or any Lender to
prepare Collateral for disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not required by other law,
to fail to obtain consents of any Governmental Authority or other third party for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against account debtors, secondary obligors or other persons obligated on Collateral or to
remove liens or encumbrances on or any adverse claims against Collateral, (iv) to exercise
collection remedies against account debtors and other persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other persons, whether or not in the same
business as any Borrower or Guarantor, for expressions of interest in acquiring all or any portion
of the Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition
of Collateral, whether or not the collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of the types included
in the Collateral or that have the reasonable capability of doing so, or that match buyers and
sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, (xi) to purchase insurance or credit enhancements to insure Agent
or Lenders against risks of loss, collection or disposition of Collateral or to provide to Agent or
Lenders a guaranteed return from the collection or disposition of Collateral, or (xii) to the
extent deemed appropriate by Agent, to obtain the services of other brokers, investment bankers,
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Agent in
the collection or disposition of any of the Collateral. Each Borrower and Guarantor acknowledges that the purpose of this Section
is to provide non-exhaustive indications of what actions or omissions by Agent or any Lender would
not be commercially unreasonable in the exercise by Agent or any Lender of remedies against the
Collateral and that other actions or omissions by Agent or any Lender shall not be deemed
commercially unreasonable solely on account of not being indicated in this Section. Without
limitation of the foregoing, nothing contained in this Section shall be construed to grant any
rights to any Borrower or Guarantor or to impose any duties on Agent or Lenders that would not have
been granted or imposed by this Agreement or by applicable law in the absence of this Section.



(f) For the purpose of enabling Agent to exercise the rights and remedies hereunder, each
Borrower and Guarantor hereby grants to Agent, to the extent assignable, an irrevocable,
non-exclusive license (exercisable at any time an Event of Default shall exist or have occurred and
for so long as the same is continuing) without payment of royalty or other compensation to any
Borrower or Guarantor, to use, assign, license or sublicense any of the trademarks, service-marks,
trade names, business names, trade styles, designs, logos and other source of business identifiers
and other Intellectual Property and general intangibles now owned or hereafter acquired by any
Borrower or Guarantor, wherever the same maybe located, including in such license reasonable access
to all media in which any of the licensed items may be recorded or stored and to all computer
programs used for the compilation or printout thereof.



(g) At any time an Event of Default exists or has occurred and is continuing, Agent may apply
the cash proceeds of Collateral actually received by Agent from any sale, lease, foreclosure or
other disposition of the Collateral to payment of the Obligations, in whole or in part and in
accordance with the terms hereof, whether or not then due or may hold such proceeds as cash
collateral for the Obligations. Borrowers and Guarantors shall remain liable to Agent and Lenders
for the payment of any deficiency with interest at the highest rate provided for herein and all
costs and expenses of collection or enforcement, including attorneys’ fees and expenses.



(h) Without limiting the foregoing, upon the occurrence of a Default or an Event of Default,
(i) Agent and Lenders may, at Agent’s option, and upon the occurrence of an Event of Default at the
direction of the Required Lenders, Agent and Lenders shall, without notice, (A) cease making Loans
or arranging for Letters of Credit or reduce the lending formulas or amounts of Loans and Letters
of Credit available to Borrowers and/or (B) terminate any provision of this Agreement providing for
any future Loans or Letters of Credit to be made by Agent and Lenders to Borrowers and (ii) Agent
may, at its option, establish such Reserves as Agent determines, without limitation or restriction,
notwithstanding anything to the contrary contained herein.


 


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SECTION
11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING
LAW



11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.



(a) The validity, interpretation and enforcement of this Agreement and the other Financing
Agreements (except as otherwise provided therein) and any dispute arising out
of the relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of California but excluding any
principles of conflicts of law or other rule of law that would cause the application of the law of
any jurisdiction other than the laws of the State of California.



(b) Borrowers, Guarantors, Agent and Lenders irrevocably consent and submit to the
non-exclusive jurisdiction of the Superior Court of the State of California for the County of Los
Angeles and the United States District Court for the Central District of California, whichever
Agent may elect, and waive any objection based on venue or forum non conveniens with respect to any
action instituted therein arising under this Agreement or any of the other Financing Agreements or
in any way connected with or related or incidental to the dealings of the parties hereto in respect
of this Agreement or any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in contract, tort,
equity or otherwise, and agree that any dispute with respect to any such matters shall be heard
only in the courts described above (except that Agent and Lenders shall have the right to bring any
action or proceeding against any Borrower or Guarantor or its or their property in the courts of
any other jurisdiction which Agent deems necessary or appropriate in order to realize on the
Collateral or to otherwise enforce its rights against any Borrower or Guarantor or its or their
property).



(c) Each Borrower and Guarantor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail (return receipt
requested) directed to its address set forth herein and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at
Agent’s option, by service upon any Borrower or Guarantor (or Administrative Borrower on behalf of
such Borrower or Guarantor) in any other manner provided under the rules of any such courts.
Within thirty (30) days after such service, such Borrower or Guarantor shall appear in answer to
such process, failing which such Borrower or Guarantor shall be deemed in default and judgment may
be entered by Agent against such Borrower or Guarantor for the amount of the claim and other relief
requested.



(d) BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER
FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS, GUARANTORS, AGENT AND LENDERS EACH
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY AND THAT ANY BORROWER, ANY GUARANTOR, AGENT OR ANY LENDER MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT
OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.


 


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(e) If any action or proceeding is filed in a court of the State of California by or against
any party hereto in connection with any of the transactions contemplated by this Agreement or any
document related hereto, (a) the court shall, and is hereby directed to, make a general reference
pursuant to California Code of Civil Procedure Section 638 to a referee or referees to hear and
determine all of the issues in such action or proceeding (whether of fact or law) and to report a
statement of decision, provided that at the option of Agent, any such issues pertaining to a
“provisional remedy” as defined in California Code of Civil Procedure Section 1281.8 shall be heard
and determined by the court, (b) any arbitrator of JAMS shall be deemed qualified as a referee in
such action or proceeding for the purpose of subdivision (a) of Section 641 of the California Code
of Civil Procedure, and (c) Borrowers shall be solely responsible to pay all fees and expenses of
any referee appointed in such action or proceeding.



(f) Agent and Lenders shall not have any liability to any Borrower or Guarantor (whether in
tort, contract, equity or otherwise) for losses suffered by such Borrower or Guarantor in
connection with, arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in connection herewith,
unless it is determined by a final and non-appealable judgment or court order binding on Agent and
such Lender, that the losses were the result of acts or omissions constituting gross negligence or
willful misconduct. In any such litigation, Agent and Lenders shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in
the performance by it of the terms of this Agreement. Each Borrower and Guarantor: (i) certifies
that neither Agent, any Lender nor any representative, agent or attorney acting for or on behalf of
Agent or any Lender has represented, expressly or otherwise, that Agent and Lenders would not, in
the event of litigation, seek to enforce any of the waivers provided for in this Agreement or any
of the other Financing Agreements and (ii) acknowledges that in entering into this Agreement and
the other Financing Agreements, Agent and Lenders are relying upon, among other things, the waivers
and certifications set forth in this Section 11.1 and elsewhere herein and therein.



11.2 Waiver of Notices. Each Borrower and Guarantor hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect to any and all
instruments and chattel paper, included in or evidencing any of the Obligations or the Collateral,
and any and all other demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly provided for herein.
No notice to or demand on any Borrower or Guarantor which Agent or any Lender may elect to give
shall entitle such Borrower or Guarantor to any other or further notice or demand in the same,
similar or other circumstances.


 


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11.3 Amendments and Waivers.



(a) Neither this Agreement nor any other Financing Agreement nor any terms hereof or thereof
may be amended, waived, discharged or terminated unless such amendment, waiver, discharge or
termination is in writing signed by Agent and the Required Lenders or at Agent’s option, by Agent
with the authorization or consent of the Required Lenders, and as to amendments to any of the
Financing Agreements (other than with respect to any provision of Section 12 hereof), by any
Borrower and such amendment, waiver, discharger or termination shall be effective and binding as to
all Lenders only in the specific instance and for the specific
purpose for which given; except, that, no such amendment, waiver, discharge or termination
shall:



(i) reduce the interest rate or any fees or extend the time of payment of principal, interest
or any fees or reduce the principal amount of any Loan or Letters of Credit, in each case without
the consent of each Lender directly affected thereby,



(ii) increase the Commitment of any Lender over the amount thereof then in effect or provided
hereunder, in each case without the consent of the Lender directly affected thereby,



(iii) release any Collateral (except as expressly required hereunder or under any of the other
Financing Agreements or applicable law and except as permitted under Section 12.11(b) hereof),
without the consent of Agent and all of Lenders,



(iv) reduce any percentage specified in the definition of Required Lenders, without the
consent of Agent and all of Lenders,



(v) consent to the assignment or transfer by any Borrower or Guarantor of any of their rights
and obligations under this Agreement, without the consent of Agent and all of Lenders,



(vi) amend, modify or waive any terms of this Section 11.3 hereof, without the consent of
Agent and all of Lenders, or



(vii) increase the advance rate constituting part of the Borrowing Base or increase the Letter
of Credit Limit, without the consent of Agent and all of Lenders.



(b) Agent and Lenders shall not, by any act, delay, omission or otherwise be deemed to have
expressly or impliedly waived any of its or their rights, powers and/or remedies unless such waiver
shall be in writing and signed as provided herein. Any such waiver shall be enforceable only to
the extent specifically set forth therein. A waiver by Agent or any Lender of any right, power
and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Agent or any Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.


 


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(c) Notwithstanding anything to the contrary contained in Section 11.3(a) above, in connection
with any amendment, waiver, discharge or termination, in the event that any Lender whose consent
thereto is required shall fail to consent or fail to consent in a timely manner (such Lender being
referred to herein as a “Non-Consenting Lender”), but the consent of any other Lenders to such
amendment, waiver, discharge or termination that is required are obtained, if any, then Wachovia
shall have the right, but not the obligation, at any time thereafter, and upon the exercise by
Wachovia of such right, such Non-Consenting Lender shall have the obligation, to sell, assign and
transfer to Wachovia or such Eligible Transferee as Wachovia may specify, the Commitment of such
Non-Consenting Lender and all rights and interests of such Non-Consenting Lender pursuant thereto.
Wachovia shall provide the Non-Consenting Lender with prior written notice of its intent to
exercise its right under this Section, which notice shall specify on date on which such purchase
and sale shall occur. Such purchase
and sale shall be pursuant to the terms of an Assignment and Acceptance (whether or not
executed by the Non-Consenting Lender), except that on the date of such purchase and sale,
Wachovia, or such Eligible Transferee specified by Wachovia, shall pay to the Non-Consenting Lender
(except as Wachovia and such Non-Consenting Lender may otherwise agree) the amount equal to: (i)
the principal balance of the Loans held by the Non-Consenting Lender outstanding as of the close of
business on the business day immediately preceding the effective date of such purchase and sale,
plus (ii) amounts accrued and unpaid in respect of interest and fees payable to the Non-Consenting
Lender to the effective date of the purchase (but in no event shall the Non-Consenting Lender be
deemed entitled to any early termination fee), minus (iii) the amount of the closing fee received
by the Non-Consenting Lender pursuant to the terms hereof or of any of the other Financing
Agreements multiplied by the fraction, the numerator of which is the number of months remaining in
the then current term of the Credit Facility and the denominator of which is the number of months
in the then current term thereof. Such purchase and sale shall be effective on the date of the
payment of such amount to the Non-Consenting Lender and the Commitment of the Non-Consenting Lender
shall terminate on such date.



(d) The consent of Agent shall be required for any amendment, waiver or consent affecting the
rights or duties of Agent hereunder or under any of the other Financing Agreements, in addition to
the consent of the Lenders otherwise required by this Section and the exercise by Agent of any of
its rights hereunder with respect to Reserves or Eligible Accounts shall not be deemed an amendment
to the advance rates provided for in this Section 11.3. Notwithstanding anything to the contrary
contained in Section 11.3(a) above, (i) in the event that Agent shall agree that any items
otherwise required to be delivered to Agent as a condition of the initial Loans and Letters of
Credit hereunder may be delivered after the date hereof, Agent may, in its discretion, agree to
extend the date for delivery of such items or take such other action as Agent may deem appropriate
as a result of the failure to receive such items as Agent may determine or may waive any Event of
Default as a result of the failure to receive such items, in each case without the consent of any
Lender and (ii) Agent may consent to any change in the type of organization, jurisdiction of
organization or other legal structure of any Borrower, Guarantor or any of their Subsidiaries and
amend the terms hereof or of any of the other Financing Agreements as may be necessary or desirable
to reflect any such change, in each case without the approval of any Lender.



(e) The consent of Agent and a Bank Product Provider that is providing Bank Products and has
outstanding any such Bank Products at such time that are secured hereunder shall be required for
any amendment to the priority of payment of Obligations arising under or pursuant to any Hedge
Agreements of a Borrower or Guarantor or other Bank Products as set forth in Section 6.4(a) hereof.



11.4 Waiver of Counterclaims. Each Borrower and Guarantor waives all rights to
interpose any claims, deductions, setoffs or counterclaims of any nature (other then compulsory
counterclaims) in any action or proceeding with respect to this Agreement, the Obligations, the
Collateral or any matter arising therefrom or relating hereto or thereto.


 


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11.5 Indemnification. Each Borrower and Guarantor shall, jointly and severally,
indemnify and hold Agent and each Lender, and their respective officers, directors, agents,
employees, advisors and counsel and their respective Affiliates (each such person being an
“Indemnitee”), harmless from and against any and all losses, claims, damages, liabilities,
costs or expenses (including attorneys’ fees and expenses) imposed on, incurred by or asserted
against any of them in connection with any litigation, investigation, claim or proceeding commenced
or threatened related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Financing Agreements, or any undertaking
or proceeding related to any of the transactions contemplated hereby or any act, omission, event or
transaction related or attendant thereto, including amounts paid in settlement, court costs, and
the fees and expenses of counsel except that Borrowers and Guarantors shall not have any obligation
under this Section 11.5 to indemnify an Indemnitee with respect to a matter covered hereby
resulting from the gross negligence or wilful misconduct of such Indemnitee as determined pursuant
to a final, non-appealable order of a court of competent jurisdiction (but without limiting the
obligations of Borrowers or Guarantors as to any other Indemnitee). To the extent that the
undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable
because it violates any law or public policy, Borrowers and Guarantors shall pay the maximum
portion which it is permitted to pay under applicable law to Agent and Lenders in satisfaction of
indemnified matters under this Section. To the extent permitted by applicable law, no Borrower or
Guarantor shall assert, and each Borrower and Guarantor hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or as a result of,
this Agreement, any of the other Financing Agreements or any undertaking or transaction
contemplated hereby. No Indemnitee referred to above shall be liable for any damages arising from
the use by unintended recipients of any information or other materials distributed by it through
telecommunications, electronic or other information transmission systems in connection with this
Agreement or any of the other Financing Agreements or the transaction contemplated hereby or
thereby. All amounts due under this Section shall be payable upon demand. The foregoing indemnity
shall survive the payment of the Obligations and the termination or non-renewal of this Agreement.



SECTION 12. THE AGENT




12.1 Appointment, Powers and Immunities. Each Lender irrevocably designates, appoints
and authorizes Wachovia to act as Agent hereunder and under the other Financing Agreements with
such powers as are specifically delegated to Agent by the terms of this Agreement and of the other
Financing Agreements, together with such other powers as are reasonably incidental thereto. Agent
(a) shall have no duties or responsibilities except those expressly set forth in this Agreement and
in the other Financing Agreements, and shall not by reason of this Agreement or any other Financing
Agreement be a trustee or fiduciary for any Lender; (b) shall not be responsible to Lenders for any
recitals, statements, representations or warranties contained in this Agreement or in any of the
other Financing Agreements, or in any certificate or other document referred to or provided for in,
or received by any of them under, this Agreement or any other Financing Agreement, or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any
other Financing Agreement or any other document referred to or provided for herein or therein or
for any failure by any Borrower or any Guarantor or any other Person to perform any of its
obligations hereunder or thereunder; and (c) shall not be responsible to Lenders for any action
taken or omitted to be taken by it hereunder or under any other Financing Agreement or under any
other document or instrument referred to or provided for herein or therein or in connection
herewith or therewith,
except for its own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction. Agent may employ agents and
attorneys in fact and shall not be responsible for the negligence or misconduct of any such agents
or attorneys in fact selected by it in good faith. Agent may deem and treat the payee of any note
as the holder thereof for all purposes hereof unless and until the assignment thereof pursuant to
an agreement (if and to the extent permitted herein) in form and substance satisfactory to Agent
shall have been delivered to and acknowledged by Agent.


 


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12.2 Reliance by Agent. Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by telephone, telecopy, telex, telegram or
cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of
the proper Person or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not expressly provided for by
this Agreement or any other Financing Agreement, Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given
by the Required Lenders or all of Lenders as is required in such circumstance, and such
instructions of such Agents and any action taken or failure to act pursuant thereto shall be
binding on all Lenders.




12.3 Events of Default.



(a) Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or an
Event of Default or other failure of a condition precedent to the Loans and Letters of Credit
hereunder, unless and until Agent has received written notice from a Lender, or Borrower specifying
such Event of Default or any unfulfilled condition precedent, and stating that such notice is a
“Notice of Default or Failure of Condition”. In the event that Agent receives such a Notice of
Default or Failure of Condition, Agent shall give prompt notice thereof to the Lenders. Agent
shall (subject to Section 12.7) take such action with respect to any such Event of Default or
failure of condition precedent as shall be directed by the Required Lenders to the extent provided
for herein; provided, that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such
action, with respect to or by reason of such Event of Default or failure of condition precedent, as
it shall deem advisable in the best interest of Lenders. Without limiting the foregoing, and
notwithstanding the existence or occurrence and continuance of an Event of Default or any other
failure to satisfy any of the conditions precedent set forth in Section 4 of this Agreement to the
contrary, unless and until otherwise directed by the Required Lenders, Agent may, but shall have no
obligation to, continue to make Loans and issue or cause to be issued any Letter of Credit for the
ratable account and risk of Lenders from time to time if Agent believes making such Loans or
issuing or causing to be issued such Letter of Credit is in the best interests of Lenders.



(b) Except with the prior written consent of Agent, no Lender may assert or exercise any
enforcement right or remedy in respect of the Loans, Letter of Credit Obligations or other
Obligations, as against any Borrower or Guarantor or any of the Collateral or other property of any
Borrower or Guarantor.


 


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12.4 Wachovia in its Individual Capacity. With respect to its Commitment and the
Loans made and Letters of Credit issued or caused to be issued by it (and any successor acting as
Agent), so long as Wachovia shall be a Lender hereunder, it shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were not acting as
Agent, and the term “Lender” or “Lenders” shall, unless the context otherwise indicates, include
Wachovia in its individual capacity as Lender hereunder. Wachovia (and any successor acting as
Agent) and its Affiliates may (without having to account therefor to any Lender) lend money to,
make investments in and generally engage in any kind of business with Borrowers (and any of its
Subsidiaries or Affiliates) as if it were not acting as Agent, and Wachovia and its Affiliates may
accept fees and other consideration from any Borrower or Guarantor and any of its Subsidiaries and
Affiliates for services in connection with this Agreement or otherwise without having to account
for the same to Lenders.



12.5 Indemnification. Lenders agree to indemnify Agent (to the extent not reimbursed
by Borrowers hereunder and without limiting any obligations of Borrowers hereunder) ratably, in
accordance with their Pro Rata Shares, for any and all claims of any kind and nature whatsoever
that may be imposed on, incurred by or asserted against Agent (including by any Lender) arising out
of or by reason of any investigation in or in any way relating to or arising out of this Agreement
or any other Financing Agreement or any other documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby (including the costs and expenses that
Agent is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof or of
any such other documents, provided, that, no Lender shall be liable for any of the
foregoing to the extent it arises from the gross negligence or willful misconduct of the party to
be indemnified as determined by a final non-appealable judgment of a court of competent
jurisdiction. The foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.



12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has,
independently and without reliance on Agent or other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of Borrowers and Guarantors
and has made its own decision to enter into this Agreement and that it will, independently and
without reliance upon Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and decisions in taking or
not taking action under this Agreement or any of the other Financing Agreements. Agent shall not
be required to keep itself informed as to the performance or observance by any Borrower or
Guarantor of any term or provision of this Agreement or any of the other Financing Agreements or
any other document referred to or provided for herein or therein or to inspect the properties or
books of any Borrower or Guarantor. Agent will use reasonable efforts to provide Lenders with any
information received by Agent from any Borrower or Guarantor which is required to be provided to
Lenders or deemed to be requested by Lenders hereunder and with a copy of any Notice of Default or
Failure of Condition received by Agent from any Borrower or any Lender; provided,
that, Agent shall not be liable to any Lender for any failure to do so, except to the
extent that such failure is attributable to Agent’s own gross negligence or willful misconduct as
determined by a final non-appealable judgment of a court of competent jurisdiction. Except for
notices, reports and other documents expressly required to be furnished to Lenders by Agent or
deemed requested by Lenders hereunder, Agent shall not have any duty or responsibility to provide
any Lender with any other credit or other information concerning the affairs, financial condition
or business of any Borrower or Guarantor that may come into the possession of Agent.


 


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12.7 Failure to Act. Except for action expressly required of Agent hereunder and
under the other Financing Agreements, Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further assurances to its
satisfaction from Lenders of their indemnification obligations under Section 12.5 hereof against
any and all liability and expense that may be incurred by it by reason of taking or continuing to
take any such action.



12.8 Additional Loans. Agent shall not make any Revolving Loans or provide any Letter
of Credit to any Borrower 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 such Borrower to exceed the Borrowing Base of such
Borrower, 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 such Borrower to exceed the Borrowing Base of
such Borrower, 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 any Borrower 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
Bases of Borrowers, 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
aggregate sum of the Revolving Loan Limits for all Borrowers and shall not cause the total
principal amount of the Revolving Loans and Letters of Credit to exceed the aggregate sum of the
Revolving Loan Limits for all Borrowers 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.



12.9 Concerning the Collateral and the Related Financing Agreements. Each Lender
authorizes and directs Agent to enter into this Agreement and the other Financing Agreements. Each
Lender agrees that any action taken by Agent or Required Lenders in accordance with the terms of
this Agreement or the other Financing Agreements and the exercise by Agent or Required Lenders of
their respective powers set forth therein or herein, together with such other powers that are
reasonably incidental thereto, shall be binding upon all of the Lenders.



12.10 Field Audit, Examination Reports and other Information; Disclaimer by Lenders.
By signing this Agreement, each Lender:



(a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes
available, a copy of each field audit or examination report and report with respect to the
Borrowing Base prepared or received by Agent (each field audit or examination report and report
with respect to the Borrowing Base being referred to herein as a “Report” and collectively,
“Reports”), appraisals with respect to the Collateral and financial statements with respect Parent
and its Subsidiaries received by Agent;


 


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(b) expressly agrees and acknowledges that Agent (i) does not make any representation or
warranty as to the accuracy of any Report, appraisal or financial statement or (ii) shall not be
liable for any information contained in any Report, appraisal or financial statement;



(c) expressly agrees and acknowledges that the Reports are not comprehensive audits or
examinations, that Agent or any other party performing any audit or examination will inspect only
specific information regarding Borrowers and Guarantors and will rely significantly upon Borrowers’
and Guarantors’ books and records, as well as on representations of Borrowers’ and Guarantors’
personnel; and



(d) agrees to keep all Reports confidential and strictly for its internal use in accordance
with the terms of Section 13.5 hereof, and not to distribute or use any Report in any other manner.




12.11 Collateral Matters.



(a) Agent may, at its option, from time to time, at any time on or after an Event of Default
and for so long as the same is continuing or upon any other failure of a condition precedent to the
Loans and Letters of Credit hereunder, make such disbursements and advances (“Special Agent
Advances”) which Agent, in its sole discretion, (i) deems necessary or desirable either to preserve
or protect the Collateral or any portion thereof or (ii) to enhance the likelihood or maximize the
amount of repayment by Borrowers and Guarantors of the Loans and other Obligations,
provided, that, (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 aggregate sum of the
Revolving Loan Limits for all Borrowers 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 aggregate sum of the Revolving Loan Limits for all
Borrowers, 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
aggregate sum of the Revolving Loan Limits for all Borrowers, the Special Agent Advances that are
in excess of the aggregate sum of the Revolving Loan Limits for all Borrowers 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
aggregate sum of the Revolving Loan Limits for all Borrowers, or (iii) to pay any other amount
chargeable to any Borrower or Guarantor pursuant to the terms of this Agreement or any of the other
Financing Agreements consisting of (A) costs, fees and expenses and (B) payments to Issuing Bank in
respect of any Letter of Credit Obligations. The Special Agent Advances shall be repayable on
demand and together with all interest thereon shall constitute Obligations secured by the
Collateral. Special Agent Advances shall not constitute Loans but shall otherwise constitute
Obligations hereunder. Interest on Special Agent Advances shall be payable at the Interest Rate
then applicable to Prime Rate Loans and shall be payable on demand. Without limitation of its
obligations pursuant to Section 6.11, each Lender agrees that it shall make available to Agent,
upon Agent’s demand, in immediately available funds, the amount equal to such Lender’s Pro
Rata Share of each such Special Agent Advance. If such funds are not made available to Agent
by such Lender, such Lender shall be deemed a Defaulting Lender and Agent shall be entitled to
recover such funds, on demand from such Lender together with interest thereon for each day from the
date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for
each day during such period (as published by the Federal Reserve Bank of New York or at Agent’s
option based on the arithmetic mean determined by Agent of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of the
three leading brokers of Federal funds transactions in New York City selected by Agent) and if such
amounts are not paid within three (3) days of Agent’s demand, at the highest Interest Rate provided
for in Section 3.1 hereof applicable to Prime Rate Loans.


 


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(b) Lenders hereby irrevocably authorize Agent, at its option and in its discretion to release
any security interest in, mortgage or lien upon, any of the Collateral (i) upon termination of the
Commitments and payment and satisfaction of all of the Obligations and delivery of cash collateral
to the extent required under Section 13.1 below, or (ii) constituting property being sold or
disposed of if Administrative Borrower or any Borrower or Guarantor certifies to Agent that the
sale or disposition is made in compliance with Section 9.7 hereof (and Agent may rely conclusively
on any such certificate, without further inquiry), or (iii) constituting property in which any
Borrower or Guarantor did not own an interest at the time the security interest, mortgage or lien
was granted or at any time thereafter, or (iv) having a value in the aggregate in any twelve (12)
month period of less than $500,000, and to the extent Agent may release its security interest in
and lien upon any such Collateral pursuant to the sale or other disposition thereof, such sale or
other disposition shall be deemed consented to by Lenders, or (v) if required or permitted under
the terms of any of the other Financing Agreements, including any intercreditor agreement, or (vi)
approved, authorized or ratified in writing by all of Lenders. Except as provided above, Agent
will not release any security interest in, mortgage or lien upon, any of the Collateral without the
prior written authorization of all of Lenders. Upon request by Agent at any time, Lenders will
promptly confirm in writing Agent’s authority to release particular types or items of Collateral
pursuant to this Section.



(c) Without any manner limiting Agent’s authority to act without any specific or further
authorization or consent by the Required Lenders, each Lender agrees to confirm in writing, upon
request by Agent, the authority to release Collateral conferred upon Agent under this Section.
Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens granted to Agent upon
any Collateral to the extent set forth above; provided, that, (i) Agent shall not
be required to execute any such document on terms which, in Agent’s opinion, would expose Agent to
liability or create any obligations or entail any consequence other than the release of such
security interest, mortgage or liens without recourse or warranty and (ii) such release shall not
in any manner discharge, affect or impair the Obligations or any security interest, mortgage or
lien upon (or obligations of any Borrower or Guarantor in respect of) the Collateral retained by
such Borrower or Guarantor.


 


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(d) Agent shall have no obligation whatsoever to any Lender or any other Person to
investigate, confirm or assure that the Collateral exists or is owned by any Borrower or Guarantor
or is cared for, protected or insured or has been encumbered, or that any particular items of
Collateral meet the eligibility criteria applicable in respect of the Loans or Letters of
Credit hereunder, or whether any particular reserves are appropriate, or that the liens and
security interests granted to Agent pursuant hereto or any of the Financing Agreements or otherwise
have been properly or sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any particular manner or under any
duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and
powers granted or available to Agent in this Agreement or in any of the other Financing Agreements,
it being understood and agreed that in respect of the Collateral, or any act, omission or event
related thereto, subject to the other terms and conditions contained herein, Agent may act in any
manner it may deem appropriate, in its discretion, given Agent’s own interest in the Collateral as
a Lender and that Agent shall have no duty or liability whatsoever to any other Lender.



12.12 Agency for Perfection. Each Lender hereby appoints Agent and each other Lender
as agent and bailee for the purpose of perfecting the security interests in and liens upon the
Collateral of Agent in assets which, in accordance with Article 9 of the UCC can be perfected only
by possession (or where the security interest of a secured party with possession has priority over
the security interest of another secured party) and Agent and each Lender hereby acknowledges that
it holds possession of any such Collateral for the benefit of Agent as secured party. Should any
Lender obtain possession of any such Collateral, such Lender shall notify Agent thereof, and,
promptly upon Agent’s request therefor shall deliver such Collateral to Agent or in accordance with
Agent’s instructions.



12.13 Successor Agent. Agent may resign as Agent upon thirty (30) days’ notice to
Lenders and Parent. If Agent resigns under this Agreement, the Required Lenders shall appoint from
among the Lenders a successor agent for Lenders. If no successor agent is appointed prior to the
effective date of the resignation of Agent, Agent may appoint, after consulting with Lenders and
Parent, a successor agent from among Lenders. Upon the acceptance by the Lender so selected of its
appointment as successor agent hereunder, such successor agent shall succeed to all of the rights,
powers and duties of the retiring Agent and the term “Agent” as used herein and in the other
Financing Agreements shall mean such successor agent and the retiring Agent’s appointment, powers
and duties as Agent shall be terminated. After any retiring Agent’s resignation hereunder as
Agent, the provisions of this Section 12 shall inure to its benefit as to any actions taken or
omitted by it while it was Agent under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is thirty (30) days after the date of a retiring Agent’s
notice of resignation, the retiring Agent’s resignation shall nonetheless thereupon become
effective and Lenders shall perform all of the duties of Agent hereunder until such time, if any,
as the Required Lenders appoint a successor agent as provided for above.



12.14 Other Agent Designations. Agent may at any time and from time to time determine
that a Lender may, in addition, be a “Co-Agent”, “Syndication Agent”, “Documentation Agent” or
similar designation hereunder and enter into an agreement with such Lender to have it so identified
for purposes of this Agreement. Any such designation shall be effective upon written notice by
Agent to Administrative Borrower of any such designation. Any Lender that is so designated as a
Co-Agent, Syndication Agent, Documentation Agent or such similar designation by Agent shall have no
right, power, obligation, liability, responsibility or duty under this Agreement or any of the
other Financing Agreements other than those applicable to all Lenders as such. Without limiting
the foregoing, the Lenders so identified shall not have or be deemed to have any fiduciary
relationship with any Lender and no Lender shall be
deemed to have relied, nor shall any Lender rely, on a Lender so identified as a Co-Agent,
Syndication Agent, Documentation Agent or such similar designation in deciding to enter into this
Agreement or in taking or not taking action hereunder.


 


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SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS



13.1
Term.



(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
the date three (3) years from the date hereof (the “Renewal Date”), and from year to year
thereafter, unless sooner terminated pursuant to the terms hereof. Agent may, at its option (or
shall at the direction of any Lender in writing received by Agent at least ninety (90) days prior
to the Renewal Date or the anniversary of any Renewal Date, as the case may be), terminate this
Agreement and the other Financing Agreements, or Administrative Borrower or any Borrower may
terminate this Agreement and the other Financing Agreements, each case, effective on the Renewal
Date or on the anniversary of the Renewal Date in any year by giving to the other party at least
sixty (60) days prior written notice; provided, that, this Agreement and all other
Financing Agreements must be terminated simultaneously. In addition, Borrowers may terminate this
Agreement at any time upon ten (10) days prior written notice to Agent (which notice shall be
irrevocable) and 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 Renewal 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 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.




 


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(b) No termination of the Commitments, this Agreement or any of the other Financing Agreements
shall relieve or discharge any Borrower or Guarantor of its respective duties, obligations and
covenants under this Agreement or any of the other Financing Agreements until all Obligations have
been fully and finally discharged and paid, and Agent’s continuing security interest in the
Collateral and the rights and remedies of Agent and Lenders hereunder, under the other Financing
Agreements and applicable law, shall remain in effect until all such Obligations have been fully
and finally discharged and paid. Accordingly, each Borrower and Guarantor waives any rights it may
have under the UCC to demand the filing of termination statements with respect to the Collateral
and Agent shall not be required to send such termination statements to Borrowers or Guarantors, or
to file them with any filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations paid and satisfied in full in immediately available
funds.



(c) If for any reason this Agreement is terminated prior to the Renewal Date, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the
parties as to a reasonable calculation of Agent’s and each Lender’s lost profits as a result
thereof, Borrowers agree to pay to Agent, for the benefit of Lenders, upon the effective date of
such termination, an early termination fee in the amount equal to the applicable percentage set
forth below of the aggregate sum of the Revolving Loan Limits for all Borrowers, based upon the
period in which the effective date of termination occurs:



	 	 	 
	Amount	 	Period
	 
	 	 
	1.0% of such aggregate sum

	 	From the date hereof to and including the
first anniversary of the date hereof.
	 
	 	 
	0.75% of such aggregate sum

	 	From and after the first anniversary of the
date hereof to but not including the third
anniversary of the date hereof or if the term
of this Agreement is extended, at any time
prior to the end of the then current term.






Such early termination fee shall be presumed to be the amount of damages sustained by Agent and
Lenders as a result of such early termination and Borrowers and Guarantors agree that it is
reasonable under the circumstances currently existing (including, but not limited to, the
borrowings that are reasonably expected by Borrowers hereunder and the interest, fees and other
charges that are reasonably expected to be received by Agent and Lenders pursuant to the Credit
Facility). In addition, Agent and Lenders shall be entitled to such early termination fee upon the
occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if Agent
and Lenders do not exercise the right to terminate this Agreement, but elect, at their option, to
provide financing to any Borrower or permit the use of cash collateral under the United States
Bankruptcy Code. The early termination fee provided for in this Section 13.1 shall be deemed
included in the Obligations.


 


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13.2 Interpretative Provisions.



(a) All terms used herein which are defined in Article 1, Article 8 or Article 9 of the UCC
shall have the meanings given therein unless otherwise defined in this Agreement.



(b) All references to the plural herein shall also mean the singular and to the singular shall
also mean the plural unless the context otherwise requires.



(c) All references to any Borrower, Guarantor, Agent and Lenders pursuant to the definitions
set forth in the recitals hereto, or to any other person herein, shall include their respective
successors and assigns.



(d) The words “hereof”, “herein”, “hereunder”, “this Agreement” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.



(e) The word “including” when used in this Agreement shall mean “including, without
limitation” and the word “will” when used in this Agreement shall be construed to have the same
meaning and effect as the word “shall”.



(f) An Event of Default shall exist or continue or be continuing until such Event of Default
is waived in accordance with Section 11.3 or is cured in a manner satisfactory to Agent, if such
Event of Default is capable of being cured as determined by Agent.



(g) All references to the term “good faith” used herein when applicable to Agent or any Lender
shall mean, notwithstanding anything to the contrary contained herein or in the UCC, honesty in
fact in the conduct or transaction concerned. Borrowers and Guarantors shall have the burden of
proving any lack of good faith on the part of Agent or any Lender alleged by any Borrower or
Guarantor at any time.



(h) Any accounting term used in this Agreement shall have, unless otherwise specifically
provided herein, the meaning customarily given in accordance with GAAP, and all financial
computations hereunder shall be computed unless otherwise specifically provided herein, in
accordance with GAAP as consistently applied and using the same method for inventory valuation as
used in the preparation of the financial statements of Parent most recently received by Agent prior
to the date hereof. Notwithstanding anything to the contrary contained in GAAP or any
interpretations or other pronouncements by the Financial Accounting Standards Board or otherwise,
the term “unqualified opinion” as used herein to refer to opinions or reports provided by
accountants shall mean an opinion or report that is unqualified and also does not include any
explanation, supplemental comment or other comment concerning the ability of the applicable person
to continue as a going concern or the scope of the audit.



(i) In the computation of periods of time from a specified date to a later specified date, the
word “from” means “from and including”, the words “to” and “until” each mean “to but excluding” and
the word “through” means “to and including”.


 


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(j) Unless otherwise expressly provided herein, (i) references herein to any agreement,
document or instrument shall be deemed to include all subsequent amendments, modifications,
supplements, extensions, renewals, restatements or replacements with respect thereto, but only to
the extent the same are not prohibited by the terms hereof or of any other Financing Agreement, and
(ii) references to any statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, recodifying, supplementing or
interpreting the statute or regulation.



(k) The captions and headings of this Agreement are for convenience of reference only and
shall not affect the interpretation of this Agreement.



(l) This Agreement and other Financing Agreements may use several different limitations, tests
or measurements to regulate the same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in accordance with their terms.



(m) This Agreement and the other Financing Agreements are the result of negotiations among and
have been reviewed by counsel to Agent and the other parties, and are the products of all parties.
Accordingly, this Agreement and the other Financing Agreements shall not be construed against Agent
or Lenders merely because of Agent’s or any Lender’s involvement in their preparation.




13.3 Notices.



(a) All notices, requests and demands hereunder shall be in writing and deemed to have been
given or made: if delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next Business Day, one (1)
Business Day after sending; and if by certified mail, return receipt requested, five (5) days after
mailing. Notices delivered through electronic communications shall be effective to the extent set
forth in Section 13.3(b) below. All notices, requests and demands upon the parties are to be given
to the following addresses (or to such other address as any party may designate by notice in
accordance with this Section):



	 	 	 	 	 
	 

	 	If to any Borrower or Guarantor:
	 	Image Entertainment, Inc.
	 

	 	 	 	20525 Nordhoff Street, Suite 200
	 

	 	 	 	Chatsworth, CA 91311-6104
	 

	 	 	 	Attention: Chief Financial Officer
	 

	 	 	 	Telephone No.: (818) 534-9299
	 

	 	 	 	Telecopy No.: (818) 407-9151






 


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	 	with a copy to:
	 	Dreier Stein & Kahan LLP
	 

	 	 	 	1620 26th Street, 6th Floor, North Tower
	 

	 	 	 	Santa Monica, CA 90404
	 

	 	 	 	Attention: Steve Peden, Esq.
	 

	 	 	 	Telephone No.: (310) 828-9050
	 

	 	 	 	Telecopy No.: (310) 828-9101
	 
	 	 	 	 
	 

	 	 	 	Wachovia Capital Finance Corporation
	 

	 	 	 	(Western)
	 

	 	 	 	251 S. Lake Avenue, Suite 900
	 

	 	 	 	Pasadena, CA 91101
	 

	 	 	 	Attention: Portfolio Manager
	 

	 	 	 	Telephone No.: (626) 304-4900
	 

	 	 	 	Telecopy No.: (626) 304-4949






(b) Notices and other communications to Lenders Bank hereunder may be delivered or furnished
by electronic communication (including e-mail and Internet or intranet websites) pursuant to
procedures approved by Agent or as otherwise determined by Agent, provided, that, the foregoing
shall not apply to notices to any Lender pursuant to Section 2 hereof if such Lender, as
applicable, has notified Agent that it is incapable of receiving notices under such Section by
electronic communication. Unless Agent otherwise requires, (i) notices and other communications
sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement
from the intended recipient (such as by the “return receipt requested” function, as available,
return e-mail or other written acknowledgement), provided, that, if such notice or other
communication is not given during the normal business hours of the recipient, such notice shall be
deemed to have been sent at the opening of business on the next Business Day for the recipient, and
(ii) notices or communications posted to an Internet or intranet website shall be deemed received
upon the deemed receipt by the intended recipient at its e-mail address as described in the
foregoing clause (i) of notification that such notice or communications is available and
identifying the website address therefor.



13.4 Partial Invalidity. If any provision of this Agreement is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole,
but this Agreement shall be construed as though it did not contain the particular provision held to
be invalid or unenforceable and the rights and obligations of the parties shall be construed and
enforced only to such extent as shall be permitted by applicable law.




13.5 Confidentiality.



(a) Agent and each Lender shall use all reasonable efforts to keep confidential, in accordance
with its customary procedures for handling confidential information and safe and sound lending
practices, any non-public information supplied to it by any Borrower pursuant to this Agreement
which is clearly and conspicuously marked as confidential at the time such information is furnished
by such Borrower to Agent or such Lender, provided, that, nothing contained herein
shall limit the disclosure of any such information: (i) to the extent required by statute, rule,
regulation, subpoena or court order, (ii) to bank examiners and other regulators,
auditors and/or accountants, in connection with any litigation to which Agent or such Lender
is a party, (iii) to any Lender or Participant (or prospective Lender or Participant) or to any
Affiliate of any Lender so long as such Lender or Participant (or prospective Lender or
Participant) or Affiliate shall have been instructed to treat such information as confidential in
accordance with this Section 13.5, or (iv) to counsel for Agent or any Lender or Participant (or
prospective Lender or Participant).


 


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(b) In the event that Agent or any Lender receives a request or demand to disclose any
confidential information pursuant to any subpoena or court order, Agent or such Lender, as the case
may be, agrees (i) to the extent permitted by applicable law or if permitted by applicable law, to
the extent Agent or such Lender determines in good faith that it will not create any risk of
liability to Agent or such Lender, Agent or such Lender will promptly notify Administrative
Borrower of such request so that Administrative Borrower may seek a protective order or other
appropriate relief or remedy and (ii) if disclosure of such information is required, disclose such
information and, subject to reimbursement by Borrowers of Agent’s or such Lender’s expenses,
cooperate with Administrative Borrower in the reasonable efforts to obtain an order or other
reliable assurance that confidential treatment will be accorded to such portion of the disclosed
information which Administrative Borrower so designates, to the extent permitted by applicable law
or if permitted by applicable law, to the extent Agent or such Lender determines in good faith that
it will not create any risk of liability to Agent or such Lender.



(c) In no event shall this Section 13.5 or any other provision of this Agreement, any of the
other Financing Agreements or applicable law be deemed: (i) to apply to or restrict disclosure of
information that has been or is made public by any Borrower, Guarantor or any third party or
otherwise becomes generally available to the public other than as a result of a disclosure in
violation hereof, (ii) to apply to or restrict disclosure of information that was or becomes
available to Agent or any Lender (or any Affiliate of any Lender) on a non-confidential basis from
a person other than a Borrower or Guarantor, (iii) to require Agent or any Lender to return any
materials furnished by a Borrower or Guarantor to Agent or a Lender or prevent Agent or a Lender
from responding to routine informational requests in accordance with the Code of Ethics for the
Exchange of Credit Information promulgated by The Robert Morris Associates or other applicable
industry standards relating to the exchange of credit information. The obligations of Agent and
Lenders under this Section 13.5 shall supersede and replace the obligations of Agent and Lenders
under any confidentiality letter signed prior to the date hereof or any other arrangements
concerning the confidentiality of information provided by any Borrower or Guarantor to Agent or any
Lender. In addition, Agent and Lenders may disclose information relating to the Credit Facility to
Gold Sheets and other similar bank trade publications, with such information to consist of deal
terms and other information customarily found in such publications.



13.6 Successors. This Agreement, the other Financing Agreements and any other
document referred to herein or therein shall be binding upon and inure to the benefit of and be
enforceable by Agent, Lenders, Borrowers, Guarantors and their respective successors and assigns,
except that Borrower may not assign its rights under this Agreement, the other Financing Agreements
and any other document referred to herein or therein without the prior written consent of Agent and
Lenders. Any such purported assignment without such express prior written consent shall be void.
No Lender may assign its rights and obligations under this
Agreement without the prior written consent of Agent, except as provided in Section 13.7
below. The terms and provisions of this Agreement and the other Financing Agreements are for the
purpose of defining the relative rights and obligations of Borrowers, Guarantors, Agent and Lenders
with respect to the transactions contemplated hereby and there shall be no third party
beneficiaries of any of the terms and provisions of this Agreement or any of the other Financing
Agreements.


 


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13.7 Assignments; Participations.



(a) Each Lender may, with the prior written consent of Agent, assign all or, if less than all,
a portion equal to at least $5,000,000 in the aggregate for the assigning Lender, of such rights
and obligations under this Agreement to one or more Eligible Transferees (but not including for
this purpose any assignments in the form of a participation), each of which assignees shall become
a party to this Agreement as a Lender by execution of an Assignment and Acceptance;
provided, that, (i) such transfer or assignment will not be effective until
recorded by Agent on the Register and (ii) Agent shall have received for its sole account payment
of a processing fee from the assigning Lender or the assignee in the amount of $5,000.



(b) Agent shall maintain a register of the names and addresses of Lenders, their Commitments
and the principal amount of their Loans (the “Register”). Agent shall also maintain a copy of each
Assignment and Acceptance delivered to and accepted by it and shall modify the Register to give
effect to each Assignment and Acceptance. The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and any Borrowers, Guarantors, Agent and Lenders
may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes
of this Agreement. The Register shall be available for inspection by Administrative Borrower and
any Lender at any reasonable time and from time to time upon reasonable prior notice.



(c) Upon such execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and
to the other Financing Agreements and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations
(including, without limitation, the obligation to participate in Letter of Credit Obligations) of a
Lender hereunder and thereunder and the assigning Lender shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement.



(d) By execution and delivery of an Assignment and Acceptance, the assignor and assignee
thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other
than as provided in such Assignment and Acceptance, the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any of the other Financing
Agreements or the execution, legality, enforceability, genuineness, sufficiency or value of this
Agreement or any of the other Financing Agreements furnished pursuant hereto, (ii) the assigning
Lender makes no representation or warranty and assumes no responsibility with respect to the




 


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financial
condition of any Borrower, Guarantor or any of their Subsidiaries or the performance or observance by any Borrower or Guarantor of any of the
Obligations; (iii) such assignee confirms that it has received a copy of this Agreement and the
other Financing Agreements, together with such other documents and information it has deemed
appropriate to make its own credit analysis and decision to enter into such Assignment and
Acceptance, (iv) such assignee will, independently and without reliance upon the assigning Lender,
Agent and based on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under this Agreement and
the other Financing Agreements, (v) such assignee appoints and authorizes Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement and the other Financing
Agreements as are delegated to Agent by the terms hereof and thereof, together with such powers as
are reasonably incidental thereto, and (vi) such assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of this Agreement and the other
Financing Agreements are required to be performed by it as a Lender. Agent and Lenders may furnish
any information concerning any Borrower or Guarantor in the possession of Agent or any Lender from
time to time to assignees and Participants.



(e) Each Lender may sell participations to one or more banks or other entities in or to all or
a portion of its rights and obligations under this Agreement and the other Financing Agreements
(including, without limitation, all or a portion of its Commitments and the Loans owing to it and
its participation in the Letter of Credit Obligations, without the consent of Agent or the other
Lenders); provided, that, (i) such Lender’s obligations under this Agreement
(including, without limitation, its Commitment hereunder) and the other Financing Agreements shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, and Borrowers, Guarantors, the other Lenders and Agent shall
continue to deal solely and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement and the other Financing Agreements, and (iii) the Participant
shall not have any rights under this Agreement or any of the other Financing Agreements (the
Participant’s rights against such Lender in respect of such participation to be those set forth in
the agreement executed by such Lender in favor of the Participant relating thereto) and all amounts
payable by any Borrower or Guarantor hereunder shall be determined as if such Lender had not sold
such participation.



(f) Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans
hereunder to a Federal Reserve Bank in support of borrowings made by such Lenders from such Federal
Reserve Bank; provided, that, no such pledge shall release such Lender from any of
its obligations hereunder or substitute any such pledgee for such Lender as a party hereto.



(g) Borrowers and Guarantors shall assist Agent or any Lender permitted to sell assignments or
participations under this Section 13.7 in whatever manner reasonably necessary in order to enable
or effect any such assignment or participation, including (but not limited to) the execution and
delivery of any and all agreements, notes and other documents and instruments as shall be requested
and the delivery of informational materials, appraisals or other documents for, and the
participation of relevant management in meetings and conference calls with, potential Lenders or
Participants. Borrowers shall certify the correctness, completeness and accuracy, in all material
respects, of all descriptions of Borrowers and Guarantors and their
affairs provided, prepared or reviewed by any Borrower or Guarantor that are contained in any
selling materials and all other information provided by it and included in such materials.


 


101









 





13.8 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to be delivered in
connection herewith or therewith represents the entire agreement and understanding concerning the
subject matter hereof and thereof between the parties hereto, and supersede all other prior
agreements, understandings, negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether oral or written. In
the event of any inconsistency between the terms of this Agreement and any schedule or exhibit
hereto, the terms of this Agreement shall govern.



13.9 USA Patriot Act. Each Lender subject to the USA PATRIOT Act (Title III of Pub.L.
107-56 (signed into law October 26, 2001) (the “Act”) hereby notifies Borrowers and Guarantors that
pursuant to the requirements of the Act, it is required to obtain, verify and record information
that identifies each person or corporation who opens an account and/or enters into a business
relationship with it, which information includes the name and address of Borrowers and Guarantors
and other information that will allow such Lender to identify such person in accordance with the
Act and any other applicable law. Borrowers and Guarantors are hereby advised that any Loans or
Letters of Credit hereunder are subject to satisfactory results of such verification.



13.10 Counterparts, Etc. This Agreement or any of the other Financing Agreements may
be executed in any number of counterparts, each of which shall be an original, but all of which
taken together shall constitute one and the same agreement. Delivery of an executed counterpart of
this Agreement or any of the other Financing Agreements by telefacsimile or other electronic method
of transmission shall have the same force and effect as the delivery of an original executed
counterpart of this Agreement or any of such other Financing Agreements. Any party delivering an
executed counterpart of any such agreement by telefacsimile or other electronic method of
transmission shall also deliver an original executed counterpart, but the failure to do so shall
not affect the validity, enforceability or binding effect of such agreement.


 


102









 





IN WITNESS WHEREOF, Agent, Lenders, Borrower and Guarantors have caused these presents to be
duly executed as of the day and year first above written.



	 	 	 	 	 	 	 	 	 	 	 	 	 
	AGENT	 	 	 	 	 	BORROWER
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	WACHOVIA CAPITAL FINANCE 
CORPORATION
(WESTERN), as Agent	 	 	 	IMAGE ENTERTAINMENT, INC.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ JAMES E. CAMPBELL	 	 	 	By:	 	/s/ JEFF M. FRAMER
	 	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	DIRECTOR
	 	 	 	 	 	Title:
	 	CHIEF FINANCIAL OFFICER
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	LENDER	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	WACHOVIA CAPITAL FINANCE 
CORPORATION
(WESTERN)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ JAMES E. CAMPBELL	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	DIRECTOR	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Commitment: $15,000,000 or if the
aggregate sum of the Revolving Loan Limits
is increased, then $20,000,000	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	GUARANTORS	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	EGAMI MEDIA, INC.	 	 	 	HOME VISION ENTERTAINMENT, INC.
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ JEFF M. FRAMER	 	 	 	By:	 	/s/ JEFF M. FRAMER
	 	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	CHIEF FINANCIAL OFFICER
	 	 	 	 	 	Title:
	 	CHIEF FINANCIAL OFFICER
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	IMAGE ENTERTAINMENT (UK), INC.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ JEFF M. FRAMER	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	CHIEF FINANCIAL OFFICER	 	 	 	 	 	 	 	 







 


S-1









 







EXHIBIT A

to

LOAN AND SECURITY AGREEMENT




ASSIGNMENT AND ACCEPTANCE AGREEMENT




This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this “Assignment and Acceptance”) dated as of
                    , 200_____ 

is made between                                          (the “Assignor”) and
                                         (the “Assignee”).



W I T N E S S E T H:




WHEREAS, Wachovia Capital Finance Corporation (Western), in its capacity as agent pursuant to
the Loan Agreement (as hereinafter defined) acting for and on behalf of the financial institutions
which are parties thereto as lenders (in such capacity, “Agent”), and the financial institutions
which are parties to the Loan Agreement as lenders (individually, each a “Lender” and collectively,
“Lenders”) have entered or are about to enter into financing arrangements pursuant to which Agent
and Lenders may make loans and advances and provide other financial accommodations to Image
Entertainment, Inc., (“Administrative Borrower”) as set forth in the Loan and Security Agreement,
dated May 4, 2007, by and among Administrative Borrower, certain of its affiliates, Agent and
Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, the “Loan Agreement”), and the other agreements, documents and
instruments referred to therein or at any time executed and/or delivered in connection therewith or
related thereto (all of the foregoing, together with the Loan Agreement, as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being
collectively referred to herein as the “Financing Agreements”);



WHEREAS, as provided under the Loan Agreement, Assignor committed to making Loans (the
“Committed Loans”) to Borrowers in an aggregate amount not to exceed $                     (the
“Commitment”);



WHEREAS, Assignor wishes to assign to Assignee [part of the] [all] rights and obligations of
Assignor under the Loan Agreement in respect of its Commitment in an amount equal to
$                     (the “Assigned Commitment Amount”) on the terms and subject to the conditions set
forth herein and Assignee wishes to accept assignment of such rights and to assume such obligations
from Assignor on such terms and subject to such conditions;



 


A-1









 





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



1. Assignment and Acceptance.



(a) Subject to the terms and conditions of this Assignment and Acceptance, Assignor hereby
sells, transfers and assigns to Assignee, and Assignee hereby purchases, assumes and undertakes
from Assignor, without recourse and without representation or warranty (except as provided in this
Assignment and Acceptance) an interest in (i) the Commitment and
each of the Committed Loans of Assignor and (ii) all related rights, benefits, obligations,
liabilities and indemnities of the Assignor under and in connection with the Loan Agreement and the
other Financing Agreements, so that after giving effect thereto, the Commitment of Assignee shall
be as set forth below and the Pro Rata Share of Assignee shall be
 _____ (_____%) percent.



(b) With effect on and after the Effective Date (as defined in Section 5 hereof), Assignee
shall be a party to the Loan Agreement and succeed to all of the rights and be obligated to perform
all of the obligations of a Lender under the Loan Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an amount equal to the
Assigned Commitment Amount. Assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of the Loan Agreement are required to be performed by it
as a Lender. It is the intent of the parties hereto that the Commitment of Assignor shall, as of
the Effective Date, be reduced by an amount equal to the Assigned Commitment Amount and Assignor
shall relinquish its rights and be released from its obligations under the Loan Agreement to the
extent such obligations have been assumed by Assignee; provided, that, Assignor
shall not relinquish its rights under Sections 2.2, 6.4, 6.9, 11.5 and 12.5 of the Loan Agreement
to the extent such rights relate to the time prior to the Effective Date.



(c) After giving effect to the assignment and assumption set forth herein, on the Effective
Date Assignee’s Commitment will be $                    .



(d) After giving effect to the assignment and assumption set forth herein, on the Effective
Date Assignor’s Commitment will be $                     (as such amount may be further reduced by any
other assignments by Assignor on or after the date hereof).




2. Payments.



(a) As consideration for the sale, assignment and transfer contemplated in Section 1 hereof,
Assignee shall pay to Assignor on the Effective Date in immediately available funds an amount equal
to $                    , representing Assignee’s Pro Rata Share of the principal amount of all Committed
Loans.



(b) Assignee shall pay to Agent the processing fee in the amount specified in Section 13.7(a)
of the Loan Agreement.



3. Reallocation of Payments. Any interest, fees and other payments accrued to the
Effective Date with respect to the Commitment, Committed Loans and outstanding Letters of Credit
shall be for the account of Assignor. Any interest, fees and other payments accrued on and after
the Effective Date with respect to the Assigned Commitment Amount shall be for the account of
Assignee. Each of Assignor and Assignee agrees that it will hold in trust for the other party any
interest, fees and other amounts which it may receive to which the other party is entitled pursuant
to the preceding sentence and pay to the other party any such amounts which it may receive promptly
upon receipt.


 


A-2









 





4. Independent Credit Decision. Assignee acknowledges that it has received a copy of
the Loan Agreement and the Schedules and Exhibits thereto, together with copies of the most recent
financial statements of Parent and its Subsidiaries, and such other documents and
information as it has deemed appropriate to make its own credit and legal analysis and
decision to enter into this Assignment and Acceptance and agrees that it will, independently and
without reliance upon Assignor, Agent or any Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit and legal decisions in
taking or not taking action under the Loan Agreement.




5. Effective Date; Notices.



(a) As between Assignor and Assignee, the effective date for this Assignment and Acceptance
shall be                     , 200_____ 

(the “Effective Date”); provided, that, the
following conditions precedent have been satisfied on or before the Effective Date:



(i) this Assignment and Acceptance shall be executed and delivered by Assignor and Assignee;



(ii) the consent of Agent as required for an effective assignment of the Assigned Commitment
Amount by Assignor to Assignee shall have been duly obtained and shall be in full force and effect
as of the Effective Date;



(iii) written notice of such assignment, together with payment instructions, addresses and
related information with respect to Assignee, shall have been given to Administrative Borrower and
Agent;



(iv) Assignee shall pay to Assignor all amounts due to Assignor under this Assignment and
Acceptance; and




(v) the processing fee referred to in Section 2(b) hereof shall have been paid to Agent.



(b) the execution of this Assignment and Acceptance, Assignor shall deliver to Administrative
Borrower and Agent for acknowledgment by Agent, a Notice of Assignment in the form attached hereto
as Schedule 1.




6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AN AGENT]



(a) Assignee hereby appoints and authorizes Assignor in its capacity as Agent to take such
action as agent on its behalf to exercise such powers under the Loan Agreement as are delegated to
Agent by Lenders pursuant to the terms of the Loan Agreement.



(b) Assignee shall assume no duties or obligations held by Assignor in its capacity as Agent
under the Loan Agreement.]


 


A-3









 





7. Withholding Tax. Assignee (a) represents and warrants to Assignor, Agent and
Borrowers that under applicable law and treaties no tax will be required to be withheld by
Assignee, Agent or Borrowers with respect to any payments to be made to Assignee hereunder or under
any of the Financing Agreements, (b) agrees to furnish (if it is organized under the laws of any
jurisdiction other than the United States or any State thereof) to Agent and Borrowers prior to the
time that Agent or Borrowers are required to make any payment of principal, interest or
fees hereunder, duplicate executed originals of either U.S. Internal Revenue Service Form
W-8BEN or W-8ECI, as applicable (wherein Assignee claims entitlement to the benefits of a tax
treaty that provides for a complete exemption from U.S. federal income withholding tax on all
payments hereunder) and agrees to provide new such forms upon the expiration of any previously
delivered form or comparable statements in accordance with applicable U.S. law and regulations and
amendments thereto, duly executed and completed by Assignee, and (c) agrees to comply with all
applicable U.S. laws and regulations with regard to such withholding tax exemption.




8. Representations and Warranties.



(a) Assignor represents and warrants that (i) it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and clear of any security
interest, lien, encumbrance or other adverse claim, (ii) it is duly organized and existing and it
has the full power and authority to take, and has taken, all action necessary to execute and
deliver this Assignment and Acceptance and any other documents required or permitted to be executed
or delivered by it in connection with this Assignment and Acceptance and to fulfill its obligations
hereunder, (iii) no notices to, or consents, authorizations or approvals of, any Person are
required (other than any already given or obtained) for its due execution, delivery and performance
of this Assignment and Acceptance, and apart from any agreements or undertakings or filings
required by the Loan Agreement, no further action by, or notice to, or filing with, any Person is
required of it for such execution, delivery or performance, and (iv) this Assignment and Acceptance
has been duly executed and delivered by it and constitutes the legal, valid and binding obligation
of Assignor, enforceable against Assignor in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general
application relating to or affecting creditors’ rights and to general equitable principles.



(b) Assignor makes no representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with the Loan Agreement or
any of the other Financing Agreements or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Agreement or any other instrument or document
furnished pursuant thereto. Assignor makes no representation or warranty in connection with, and
assumes no responsibility with respect to, the solvency, financial condition or statements of
Borrowers, Guarantors or any of their respective Affiliates, or the performance or observance by
Borrowers, Guarantors or any other Person, of any of its respective obligations under the Loan
Agreement or any other instrument or document furnished in connection therewith.



(c) Assignee represents and warrants that (i) it is duly organized and existing and it has
full power and authority to take, and has taken, all action necessary to execute and deliver this
Assignment and Acceptance and any other documents required or permitted to be executed or delivered
by it in connection with this Assignment and Acceptance, and to fulfill its obligations hereunder,
(ii) no notices to, or consents, authorizations or approvals of, any Person are required (other
than any already given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the
Loan Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance; and (iii) this
Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal,
valid and binding obligation of Assignee, enforceable against Assignee in accordance with the terms
hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors’ rights to general equitable
principles.


 


A-4









 





9. Further Assurances. Assignor and Assignee each hereby agree to execute and deliver
such other instruments, and take such other action, as either party may reasonably request in
connection with the transactions contemplated by this Assignment and Acceptance, including the
delivery of any notices or other documents or instruments to Borrowers or Agent, which may be
required in connection with the assignment and assumption contemplated hereby.




10. Miscellaneous.



(a) Any amendment or waiver of any provision of this Assignment and Acceptance shall be in
writing and signed by the parties hereto. No failure or delay by either party hereto in exercising
any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without prejudice to any rights
with respect to any other for further breach thereof.




(b) All payments made hereunder shall be made without any set-off or counterclaim.



(c) Assignor and Assignee shall each pay its own costs and expenses incurred in connection
with the negotiation, preparation, execution and performance of this Assignment and Acceptance.



(d) This Assignment and Acceptance may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one and the same instrument.



(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF CALIFORNIA. Assignor and Assignee each irrevocably submits to the
non-exclusive jurisdiction of any State or Federal court sitting in Los Angeles County, California
over any suit, action or proceeding arising out of or relating to this Assignment and Acceptance
and irrevocably agrees that all claims in respect of such action or proceeding may be heard and
determined in such State or Federal court. Each party to this Assignment and Acceptance hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient
forum to the maintenance of such action or proceeding.



(f) ASSIGNOR AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY OF THE
OTHER FINANCING AGREEMENTS OR ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS
(WHETHER ORAL OR WRITTEN).


 


A-5









 





IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment and Acceptance to be
executed and delivered by their duly authorized officers as of the date first above written.



	 	 	 	 	 
	 	

[ASSIGNOR]

 	 
	 	By:  	 	 
	 	 	Title: 	 	 
	 	 	 	 
	 
	 	[ASSIGNEE]

 	 
	 	By:  	 	 
	 	 	Title: 	 	 



 


A-6









 





	 	 	 	 	 



SCHEDULE 1


NOTICE OF ASSIGNMENT AND ACCEPTANCE




                    , 20__




	 	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	 
	Attn.:
	 	 	 	 
	 

	 	 

	 	 







Re:                                                            



Ladies and Gentlemen:



Wachovia Capital Finance Corporation (Western), in its capacity as agent pursuant to the Loan
Agreement (as hereinafter defined) acting for and on behalf of the financial institutions which are
parties thereto as lenders (in such capacity, “Agent”), and the financial institutions which are
parties to the Loan Agreement as lenders (individually, each a “Lender” and collectively,
“Lenders”) have entered or are about to enter into financing arrangements pursuant to which Agent
and Lenders may make loans and advances and provide other financial accommodations to Image
Entertainment, Inc. (“Administrative Borrower”) as set forth in the Loan and Security Agreement,
dated May 7, 2007, by and among Administrative Borrower, certain of its affiliates, Agent and
Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, the “Loan Agreement”), and the other agreements, documents and
instruments referred to therein or at any time executed and/or delivered in connection therewith or
related thereto (all of the foregoing, together with the Loan Agreement, as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being
collectively referred to herein as the “Financing Agreements”). Capitalized terms not otherwise
defined herein shall have the respective meanings ascribed thereto in the Loan Agreement.



1. We hereby give you notice of, and request your consent to, the assignment by
                                         (the “Assignor”) to                                 
         (the “Assignee”) such
that after giving effect to the assignment Assignee shall have an interest equal to                      (_____%)
percent of the total Commitments pursuant to the Assignment and Acceptance Agreement attached
hereto (the “Assignment and Acceptance”). We understand that the Assignor’s Commitment shall be
reduced by $                    , as the same may be further reduced by other assignments on or after the
date hereof.



2. Assignee agrees that, upon receiving the consent of Agent to such assignment, Assignee will
be bound by the terms of the Loan Agreement as fully and to the same extent as if the Assignee were
the Lender originally holding such interest under the Loan Agreement.


 


A-7









 






3. The following administrative details apply to Assignee:



	 	 	 	 	 	 	 	 	 
	 

	 	(A)
	 	Notice address:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Assignee name:	 	 	 	 
	 

	 	 	 	Address:
	 	 

	 	 
	 

	 	 	 	Attention:
	 	 

	 	 
	 

	 	 	 	Telephone:
	 	 

	 	 
	 

	 	 	 	Telecopier:
	 	 

	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	(B)
	 	Payment instructions:	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Account No.:	 	 	 	 
	 

	 	 	 	At:
	 	 

	 	 
	 

	 	 	 	Reference:
	 	 

	 	 
	 

	 	 	 	Attention:
	 	 

	 	 
	 

	 	 	 	 	 	 

	 	 






4. You are entitled to rely upon the representations, warranties and covenants of each of
Assignor and Assignee contained in the Assignment and Acceptance.


 


A-8









 





IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of Assignment and Acceptance
to be executed by their respective duly authorized officials, officers or agents as of the date
first above mentioned.



	 	 	 	 	 
	 	
Very truly yours,



[NAME OF ASSIGNOR]

 	 
	 	By:  	 	 
	 	 	Title: 	 	 
	 	

[NAME OF ASSIGNEE]

 	 
	 	By:  	 	 
	 	 	Title: 	 	 
	 	 	 	 



	 	 	 	 	 
	 	ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:




WACHOVIA CAPITAL FINANCE
CORPORATION (WESTERN), as Agent

 	 
	 	By:  	 	 
	 	 	Title: 	 	 
	 	 	 	 




 


A-9











 




EXHIBIT B

to

LOAN AND SECURITY AGREEMENT




INFORMATION CERTIFICATE




 


 









 







GUIDELINES FOR PREPARATION OF INFORMATION CERTIFICATE




The attached document is a form of Information Certificate, which you should complete
carefully, completely and accurately.




Please note:



1. You should consult your attorneys and accountants in order to complete the Information
Certificate.



2. Prepare a separate information certificate for each entity that is a proposed borrower or
guarantor.



3. If there is insufficient space provided in the Information Certificate for a response to
any question, please include additional pages as exhibits to the certificate.



4. Return the Information Certificate to us as soon as possible. The information in it is
necessary for us to prepare the loan documentation.



5. We will rely on the information you give us in the Information Certificate and it may be
incorporated into the Loan and Security Agreement between us. You should consider your responses
to have the importance of your representations in the Loan Agreement.



If you have any questions in connection with the preparation of the Information Certificate,
please let us know.




Thank you for your cooperation. We look forward to working with you.



WACHOVIA CAPITAL FINANCE

CORPORATION (WESTERN)





 


 









 







INFORMATION CERTIFICATE

OF

IMAGE ENTERTAINMENT, INC.




Dated: March 6, 2007




Wachovia Capital Finance Corporation (Western)

251 South Lake Avenue, Suite 900

Pasadena, California 91101




In order to assist you in the evaluation of the financing you are considering of Image
Entertainment, Inc. (the “Company”), to expedite the preparation of required
documentation, and to induce you to provide financing to the Company, we represent and warrant to
you the following information about the Company, its organizational structure and other matters of
interest to you:




	1.	 	The Company has been formed by filing the following document with the Secretary of State of
the State of Delaware:






	 	þ 	 	Certificate/Articles of Incorporation
	 
	 	o 	 	Certificate/Articles of Organization
	 
	 	o 	 	Other [specify]                                         






The date of formation of the Company by the filing of the document specified above with the
Secretary of State was August 1, 2005.




	2.	 	The Company was not formed by filing a document with any Secretary of State. The Company is
organized as a [specify type of organization, (e.g., general partnership, sole proprietorship,
etc.)] N/A.  The Company’s governing document is a [name
legal document, if one exists, (e.g., partnership agreement, etc.]                     .






	3.	 	The full and exact name of the Company as set forth in the document specified in Item 1 or 2,
or (if no document is specified in Item 1 or 2) the full and
exact legal name used in the Company’s business, is: Image Entertainment, Inc.






	4.	 	The Company uses and owns the following trade name(s) in the operation of its business (e.g.
billing, advertising, etc.; note: do not include names which are product names only): N/A
	 
	 	 	[Check one of the boxes below.]






	 	o  	 	We have attached a blank sample of every invoice that uses a tradename.
	 
	 	þ  	 	We do not use any tradename on any invoices.




 


 









 











	5.	 	The Company maintains offices, leases or owns real estate, has employees, pays taxes, or
otherwise conducts business in the following States (including the
State of its organization): California, Nevada, Delaware, Illinois, Texas, and New Jersey






	6.	 	The Company has filed the necessary documents with the Secretary of State to qualify as a
foreign corporation in the following States: California and Nevada






	7.	 	The Company’s authority to do business has been revoked or suspended, or the Company is
otherwise not in good standing in the following States: N/A






	8.	 	The Company is the owner of the following licenses and permits, issued by the federal, state
or local agency or authority indicated opposite thereto:





	 	 	 
	Type of License	 	Issuing Agency or Authority
	 	 	 
	Tax Registration Certificate
	 	City of Los Angeles
	Police Commission Permit
	 	City of Los Angeles







	9.	 	In conducting its business activities, the Company is subject to regulation by federal, state
or local agencies or authorities (e.g., FDA, EPA, state or municipal liquor licensing
agencies, federal or state carrier commissions, etc.) as follows:





	 	 	 	 	 
	 	 	Type of Activity	 	Regulatory Agency or Authority
	 
	 	 	 	 
	 

	 	Status as a public company
	 	Securities & Exchange Commission, NASD
	 

	 	Taxes
	 	Internal Revenue Service, Franchise Tax
	 

	 	 	 	Board (CA), other states as needed







	10.	 	The Company has never been involved in a bankruptcy or reorganization except: [explain]
N/A






	11.	 	Between the date the Company was formed and now, the Company has used other names as set
forth below: N/A





	 	 	 
	Period of Time	 	Prior Name
	 	 	 
	From                      to                     	 	 
	 	 	 
	From                      to                     	 	 
	 	 	 






 


 









 





	12.	 	Between the date the Company was formed and now, the Company has made or entered into mergers
or acquisitions with other companies as set forth below:





	 	 	 	 	 
	Approximate Date	 	Other Entity	 	Description of Transaction
	 
	 	 	 	 
	August 1, 2005

	 	Public Media, Inc.
	 	Acquisition/Changed name to
	 

	 	 	 	Home Vision Entertainment, Inc.







	13.	 	The chief executive office of the Company is located at the street address set forth below,
which is in Los Angeles County, in the State of California:






20525 Nordhoff Street, Suite 200

Chatsworth, CA 91311




	14.	 	The books and records of the Company pertaining to accounts, contract rights, inventory, etc.
are located at the following street address:






20525 Nordhoff Street, Suite 200

Chatsworth, CA 91311


 


 









 






	15.	 	In addition to the chief executive office, the Company has inventory, equipment or other
assets located at the addresses set forth below. In each case, we have noted whether the
location is owned, leased or operated by third parties and the names and addresses of any
mortgagee, lessor or third party operator:





	 	 	 	 	 
	 	 	 	 	Name and Address of Third
	 	 	 	 	Party with Interest in
	Street Address with County	 	Company’s Interest	 	Location
	 	 	(e.g., owner, lessee or bailee)	 	(e.g., mortgagee, lessor
	 	 	 	 	or warehouseman)
	 
	 	 	 	 
	20525 Nordhoff St.

	 	Lessee
	 	Amiscope Properties
	Suite 200

	 	(Los Angeles County)
	 	8730 Wilshire Blvd. #300
	Chatsworth, CA 91311

	 	 	 	Beverly Hills, CA 90211
	(corporate headquarters)

	 	 	 	(Lessor)
	 
	 	 	 	 
	6650 S. Spencer St.*

	 	Lessee
	 	Spencer Street Investors
LLC
	Las Vegas, NV 89119

	 	(Clark County)
	 	10900 Wilshire Blvd. #1500
	(primary warehouse)

	 	 	 	Los Angeles, CA 90024
	 

	 	 	 	(Lessor)
	 
	 	 	 	 
	6295 S. Pearl St.**

	 	Lessee
	 	Arrowhead 11&12 Prop.LLC
	Suites 800 & 900

	 	(Clark County)
	 	9061 Santa Monica Blvd.
	Las Vegas, NV 89120

	 	 	 	Los Angeles, CA 90069
	(storage facility #1)

	 	 	 	(Lessor)
	 
	 	 	 	 
	5275 S. Arville St.**

	 	Lessee
	 	5275 Arville St. LLC
	Suites 152 & 364

	 	(Clark County)
	 	10900 Wilshire Blvd. #1500
	Las Vegas, NV 89119

	 	 	 	Los Angeles, CA 90024
	(storage facility #2)

	 	 	 	(Lessor)
	 
	 	 	 	 
	77 Oxford St. #213-214

	 	Lessee
	 	MWB Business Exchange
	London W1D 2ES UK

	 	(United Kingdom)
	 	1 West Garden Place
	(UK office-ends 8/07)

	 	 	 	Kendal Street
	 

	 	 	 	London W2 2AQ UK
	 

	 	 	 	(Lessor)
	 
	 	 	 	 
	Sonopress

	 	Distributor for Image
	 	Sonopress — John Pierce
	11500 80th Ave.

	 	 	 	108 Monticello Rd.
	Pleasant Prairie, WI 53158

	 	 	 	Weaverville, NC 28787








	 	 	 
	*	 	90% of inventory at this location will be transferred to the Pleasant Prairie location of
Sonopress by end of June 2007, remaining 10% will be transferred by end of July 2007. All IT
assets will be transferred back to corporate headquarters by end of August 2007.
	 
	**	 	Ancillary storage facilities in Las Vegas will be closed by end of April 2007.



 


 









 










	16.	 	In the course of its business, the Company’s inventory and/or other assets are handled by the
following customs brokers and/or freight forwarders:





	 	 	 	 	 
	Name	 	Address	 	Type of Service/Assets Handled
	 
	 	 	 	 
	UPS

	 	335 E. Arby Lane
	 	Freight/Product
	 

	 	Las Vegas, NV 89119	 	 
	 
	 	 	 	 
	Pilot Air Freight

	 	6175 S. Sandhill Rd.
	 	Freight/Product
	 

	 	Las Vegas, NV 89120	 	 
	 
	 	 	 	 
	Senderex

	 	10425 La Cienga Blvd.
	 	Freight/Product
	 

	 	Los Angeles, CA 90045	 	 
	 
	 	 	 	 
	Friesen X

	 	4800 Eastgate Parkway
	 	Freight/Product
	 

	 	Mississauga, ON	 	 
	 

	 	L4W 3W6 Canada	 	 






 


 









 






	17.	 	The places of business or other locations of any assets used by the Company during the last
four (4) months other than those listed above are as follows:





	 	 	 	 	 	 	 
	 	 	 	 	State & Zip	 	 
	Street Address	 	City	 	Code	 	County
	 
	 	 	 	 	 	 
	PRIMARY Replicator:
	 	 	 	 	 	 
	Sonopress (replication)
	 	 	 	 	 	 
	108 Monticello Road

	 	Weaverville
	 	NC 28787
	 	Buncombe
	Sonopress (packaging)
	 	 	 	 	 	 
	4600 Commerce
	 	 	 	 	 	 
	Crossings
Dr.

	 	Louisville
	 	KY 40229
	 	Jefferson
	Sonopress (pkg & dist)
	 	 	 	 	 	 
	11500 80th Ave.

	 	Pleasant Prairie
	 	WI 53158
	 	Kenosha
	 
	 	 	 	 	 	 
	Smaller Replicators:
	 	 	 	 	 	 
	Sony DADC
	 	 	 	 	 	 
	1800 N. Fruitridge Ave.

	 	Terre Haute
	 	IN 47804
	 	Vigo
	 
	 	 	 	 	 	 
	U-Tech Media
	 	 	 	 	 	 
	2880 E. Philadelphia St.

	 	Ontario
	 	CA 91761
	 	San Bernardino
	 
	 	 	 	 	 	 
	Cinram
	 	 	 	 	 	 
	1200 Lackawanna

	 	Olyphant
	 	PA 18448
	 	Lackawanna
	 
	 	 	 	 	 	 
	L&M Optical West
	 	 	 	 	 	 
	24865 Ave. Rockefeller

	 	Valencia
	 	CA 91355
	 	Los Angeles
	 
	 	 	 	 	 	 
	Allied Vaughn
	 	 	 	 	 	 
	1200 Thorndale Avenue

	 	Elk Grove
	 	IL 60007
	 	Cook






 


 









 






	18.	 	The Company is affiliated with, or has ownership in, the following entities (including
subsidiaries):





	 	 	 	 	 	 	 	 	 
	 	 	Chief Executive	 	 	 	Ownership
	 	 	Office	 	Jurisdiction of	 	Percentage or
	Name of Entity	 	(same for all)	 	Incorporation	 	Relationship
	 
	 	 	 	 	 	 	 	 
	Egami Media, Inc.

	 	c/o Image
	 	Delaware
	 	 	100	%
	(subsidiary)

	 	Entertainment, Inc.	 	 	 	 	 	 
	Home Vision
	 	 	 	 	 	 	 	 
	Entertainment, Inc.

	 	20525 Nordhoff St.
	 	Delaware
	 	 	100	%
	(subsidiary)

	 	Suite 200	 	 	 	 	 	 
	Image Entertainment
	 	 	 	 	 	 	 	 
	(UK), Inc.

	 	Chatsworth, CA
	 	Delaware
	 	 	100	%
	(subsidiary)

	 	91311	 	 	 	 	 	 







	19.	 	The Federal Employer Identification Number of the Company is 84-0685613 .






	20.	 	Under the Company’s charter documents, and under the laws of the State in which the Company
is organized, the shareholders, members or other equity holders do not have to consent in
order for the Company to borrow money, incur debt or obligations, pledge or mortgage the
property of the Company, grant a security interest in the property of the Company or guaranty
the debt of obligations of another person or entity.





	 	 	 	 	 
	 

	 	þ True
	o 	Incorrect [explain]:
	 
	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 







The power to take the foregoing actions is vested exclusively in the Board of
Directors

[name the body (e.g. Board of Directors) or person (e.g. general partner, sole Manager) that
has such authority].




	21.	 	The officers of the Company (or people performing similar functions) and their respective
titles are as follows:





	 	 	 
	Title	 	Name
	Chief Executive Officer

	 	Martin W. Greenwald
	Chief Operating Officer

	 	David Borshell
	Chief Financial Officer

	 	Jeff M. Framer
	Chief Marketing Officer

	 	Jeff Fink
	Corporate Secretary

	 	Dennis Hohn Cho






 


 









 






The following people will have signatory powers as to all your of transactions with the
Company:




Martin W. Greenwald, David Borshell, Jeff M. Framer, Dennis Hohn Cho




	22.	 	With respect to the officers noted above, such officers are affiliated with or have ownership
in the following corporations (indicate name and address of affiliated companies, type of
operations, ownership percentage or other relationship):

N/A






	23.	 	The Company is governed by Board of Directors [insert name of governing body or
person (e.g. Board of Directors, sole Manager, General Partner)]. The members of such
governing body of the Company are:


Martin W. Greenwald (Chairman), David Coriat, Ira Epstein, Gary Haber, 

M. Trevenen Huxley, Robert J. McCloskey






	24.	 	The name of the stockholders, members, partners or other equity holders of the Company and
their equity holdings are as follows (if equity interests are widely held indicate only equity
owners with 10% or more of the equity interests):





	 	 	 	 	 	 	 
	 	 	 	 	Ownership
	Name	 	No. of Shares or Units	 	Percentage
	Image Investors Co.

	 	6,069,767
	 	 	28	%
	 

	 	(includes 100,000 shares	 	 	 	 
	 

	 	underlying a warrant)	 	 	 	 







	25.	 	There are no judgments or litigation pending by or against the Company, its subsidiaries
and/or affiliates or any of its officers/principals, except as follows:
See attached litigation schedule.






	26.	 	At the present time, there are no delinquent taxes due (including, but not limited to, all
payroll taxes, personal property taxes, real estate taxes or income taxes) except as follows:


No delinquent taxes. The Company owes taxes to the State of Texas in the amount of
$15,212.67 for tax year ended March 31, 2006, which amount is due by May 15, 2007.






The Company also received an Illinois Department of Revenue (IDR) BTR-76 Taxpayer
Notification, assessing a late-payment penalty for the tax year ended March 31, 2006.
According to the notification, the Company owes $12,657.89, which amount is due by April 19,
2007. The Company’s tax accountants, KPMG, believe these taxes are not due
and have written to IDR explaining such on April 18, 2007. We have not received a
response yet.


 


 









 






The Company received an IRS Audit Notification Letter received for Public Media, Inc.
(“PMI”) (former name of subsidiary Home Vision Entertainment, Inc.) for the tax year ended
December 31, 2004 (covering a period prior to Image’s acquisition of Home Vision
Entertainment, Inc.). The Company’s tax accountants, KPMG LLP, have been administering the
audit on PMI’s behalf. KPMG representatives believe that there will not be a material
adjustment. Based on the slow pace of the audit and requests made so far, they believe the
audit will not conclude within the next month. The IRS audit has not raised any issues. The
Company is indemnified by the former shareholders of PMI and has not yet released the
remaining funds in the PMI escrow account totaling $291,093. This amount is not reflected as
cash on the Company’s financial statements and will be released to the former shareholders
of PMI upon conclusion of the audit.




	27.	 	The Company’s assets are owned and held free and clear of any security interests, liens or
attachments, except as follows:





	 	 	 	 	 
	 	 	 	 	Amount of
	Lienholder	 	Assets Pledged	 	Debt Secured
	 
	 	 	 	 
	Wells Fargo Foothill

	 	All assets & stock of subsidiaries
	 	N/A
	Sonopress LLC

	 	Manufactured inventory — subordinated
to Foothill	 	 
	Portside Growth &
	 	 	 	 
	Opportuntity Fund/Ramius

	 	All assets — subordinated to Foothill	 	 
	HP Financing (UCC-1)

	 	IT equipment financed	 	 
	Writers Guild of
America,
	 	 	 	 
	West, Inc.

	 	Receivables generated by Sisters title	 	 
	Screen Actors Guild, Inc.

	 	Receivables generated by Sisters title	 	 
	Marlin Leasing Corp

(UCC-1)

	 	Leased equipment	 	 
	Citicapital Technology
	 	 	 	 
	Finance, Inc. (UCC-1)

	 	Leased equipment	 	 
	IOS Capital (UCC-1)

	 	Leased equipment	 	 






 


 









 






	28.	 	The Company has not guaranteed and is not otherwise liable for the obligations of others,
except as follows:





	 	 	 	 	 
	 	 	 	 	Amount of
	Debtor	 	Creditor	 	Obligation
	 
	Beach Boulevard Center
(store lease for DVDPlanet)

	 	DVDPlanet (previously our
subsidiary — now owned by Infinity Resources —
Image is guarantor on lease until
12/31 should Infinity not satisfy
their obligations)
	 	$104,125.00

(as of 2/28/07)







	29.	 	The Company does not own or license any trademarks, patents, copyrights or other intellectual
property, except as follows (indicate type of intellectual property and whether owned or
licensed, registration number, date of registration, and, if licensed, the name and address of
the licensor):





	 	 	 	 	 	 	 
	 	 	Registration	 	 	 	 
	 	 	Number and Date	 	Owned or 	 	Name and Address
	Type of Intellectual Property	 	of Registration	 	 Licensed	 	of Licensor
	(all Registered Marks)	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Image

	 	1588570 — 3/27/90,	 	Owned — Image	 	N/A
	 

	 	renewed 11/17/00
	 	 
	 	 
	Image Entertainment

	 	2627964 — 10/1/02
	 	Owned — Image
	 	N/A
	Image Entertainment

	 	2665836 — 12/24/02
	 	Owned — Image
	 	N/A
	Image Music Group

	 	2901782 — 11/9/04
	 	Owned — Image
	 	N/A
	Egami Media, a
subsidiary of Image
	 	 	 	 	 	 
	Entertainment

	 	78542865 — 1/5/05
	 	Owned — Egami
	 	N/A
	HVE

	 	3000209 — 9/27/05
	 	Owned — PMI
	 	N/A
	Home Vision 

Entertainment

	 	77132881 — Pending
	 	Owned — Image
	 	N/A







Please also see the attached Distribution Rights Schedule.




	30.	 	The Company owns or uses the following materials (e.g., software, film footage, scripts,
etc.) that are subject to registration with the United States Copyright Office, though at
present copyright registrations have not been filed with respect to
such materials: Video, audio and computer software




 


 









 





	31.	 	The Company does not have any deposit or investment accounts with any bank, savings and loan
or other financial institution, except as follows, for the purposes and of the types
indicated:





	 	 	 	 	 	 	 	 	 
	 	 	Contact Person and	 	 	 	 
	Bank Name and Branch Address	 	Phone Number	 	Account No.	 	Purpose/Type
	Union Bank of Calif.

	 	Greg Melidonian
	 	 	0700495507	 	 	Lockbox
	San Fernando Valley

	 	(213) 236-4008
	 	 	3030148974	 	 	General Oper.
	Corporate Deposits 303

	 	Jose Duenes
	 	 	9080005994	 	 	Controlled Dist.
	P.O. Box 513840

	 	(213) 236-6421
	 	 	3030148982	 	 	Payroll
	Los Angeles, CA 90051

	 	 	 	 	3030156748	 	 	International
	 

	 	 	 	 	3030162179	 	 	Egami
	 
	 
	HSBC Bank plc

	 	Karen Swaden
	 	 	01359002	 	 	Gen-ImageUK
	City of London


	 	 	 	 	 	 	 	 
	Commercial Centre

20 Eastcheap
	 	+4402076996940	 	 	 	 	 	 
	London EC3M 1ED UK
	 	 	 	 	 	 	 	 







	32.	 	The Company has no processing arrangements for credit card payments or payments made by check
(e.g. Telecheck) except as follows:





	 	 	 	 	 
	 	 	Contact Person	 	 
	Processor Name and Address	 	and Phone Number	 	Account No.
	 
	 	 	 	 
	None
	 	 	 	 
	 

	 	 
	 	 
	 
	 

	 	 
	 	 
	 
	 

	 	 
	 	 







	33.	 	The Company owns or has registered to it the following motor vehicles, the original title
certificates for which shall be delivered to Lender prior to closing:





	 	 	 	 	 	 	 
	 	 	Name of Registrant	 	 	 	 
	 	 	as it appears on the	 	 	 	Year, Make and
	State Where Titled and, if different, Registered	 	Title Certificate	 	VIN	 	Model
	 
	 	 	 	 	 	 
	Not Applicable
	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 
	 

	 	 
	 	 
	 	 
	 
	 

	 	 
	 	 
	 	 







	34.	 	With regard to any pension or profit sharing plan:






	 	(a)	 	A determination as to qualification has been issued.

	 
	 	(b)	 	Funding is on a current basis and in compliance with established requirements.






	35.	 	The Company’s fiscal year ends: March 31.




 


 









 





	36.	 	Certified Public Accountants for the Company is the firm of:






	 	 	 	 	 
	 

	 	Name:
	 	BDO Seidman LLP
	 

	 	Address:
	 	
1900 Avenue of the Stars, 11th
Floor, Los Angeles, CA 90067
	 

	 	Telephone:
	 	(310) 577-0300
	 

	 	Facsimile:
	 	(310) 577-1777
	 

	 	E-Mail:
	 	bpowell@bdo.com
	 	 	Partner Handling Relationship: Bill Powell

Were statements uncertified for any fiscal year? No







	37.	 	The Company’s counsel with respect to the proposed loan transaction is the firm of:





	 	 	 	 	 
	 

	 	Name:
	 	Dreier Stein & Kahan LLP
	 

	 	Address:
	 	1620 26th St., 6th Floor, North Tower, Santa Monica, CA 90404
	 

	 	Telephone:
	 	(310) 828-9108
	 

	 	Facsimile:
	 	(424) 202-6208
	 

	 	E-Mail:
	 	speden@dskllp.com
	 	 	Partner Handling Relationship: Steve Peden, Esq.







	38.	 	The Company’s counsel with respect to matters other than the proposed loan transaction, if
different, is the firm of:





	 	 	 	 	 
	 

	 	Name:
	 	Image Entertainment, Inc.
	 

	 	Address:
	 	20525 Nordhoff St., Suite 200, Chatsworth, CA 91311
	 

	 	Telephone:
	 	(818) 534-9262
	 

	 	Facsimile:
	 	(818) 407-9331
	 

	 	E-Mail:
	 	dcho@image-entertainment.com
	 	 	Partner Handling Relationship: Dennis Hohn Cho, Esq.
	 
	 	 	 	 
	 

	 	Name:
	 	Foley & Lardner LLP (SEC Matters)
	 

	 	Address:
	 	2029 Century Park E., Suite 3500, Los Angeles, CA 90067
	 

	 	Telephone:
	 	(310) 975-7912
	 

	 	Facsimile:
	 	(310) 557-8475
	 

	 	E-Mail:
	 	dnanda@foley.com
	 	 	Partner Handling Relationship: Deepak Nanda, Esq.







 


 











 




We agree to give you prompt written notice of any change or amendment with respect to any of
the foregoing information. Until you receive such notice, you will be entitled to rely in all
respects on the foregoing information.



	 	 	 	 	 
	 	Very truly yours,



IMAGE ENTERTAINMENT, INC.

 	 
	 	By:  	/s/ JEFF M. FRAMER
 	 
	 	 	Title:  	Chief Financial Officer 	 
	 	 	 
	 	By:  	                                              /s/ DENNIS HOHN CHO
 	 
	 	 	Title:  	SVP, Business Affairs & General
Counsel 	 
	 



 


 









 





SCHEDULE 8.6




Litigation





	1.	 	Ayub Bey v. Playboy Entertainment Group, Inc. et al. (Case# CV-3583 in the United States
District Court, Southern District of New York): This case is for copyright infringement
for an allegedly unlicensed musical composition that is allegedly included within a certain
Playboy video program. The Company has a full indemnity from Playboy, who produced the titles
at issue. Playboy carries errors and omissions insurance in the amount of at least $1,000,000
per occurrence. The lawsuits have been tendered to Playboy’s insurance carrier, who is
defending the lawsuits on the defendants’ behalf. In the event the plaintiff wins this case,
the Company should be liable in this dispute only to the extent the judgment exceeds
$1,000,000 and to the extent that Playboy (which as of the date of this letter has a market
cap of approximately $300 million) is unable to pay the judgment.






	2.	 	Dear Cinestudi S.p.A. v. International Media Films, Inc. et al. (Case# 03-CIV-3038(RMB)
in the United States District Court, Southern District of New York): This case is for
copyright infringement for a program to which our licensor, International Media Films and/or
Alfredo Leone, allegedly does not have the rights. The Company has a full indemnity from our
licensor, who licensed us the title at issue.






	3.	 	Russian Entertainment Wholesale, Inc. dba St. Petersburg Publishing House v. Close-Up
International, Inc. et al. (Case# CV-05 4073(DGT)(JMA) in the United States District Court,
Eastern District of New York): This case is for copyright infringement for programs to
which our licensor, Widnes Enterprises and/or Roman Dikhtyar, allegedly does not have the
rights. The Company has a full indemnity from our licensor, who licensed us the titles at
issue.






	4.	 	Niche Entertainment, Inc. v. Image Entertainment, Inc. (Case# BC366644 in the Superior
Court for the State of California for the County of Los Angeles): This case is for breach
of contract and related claims on a distribution agreement for a program called “Tha Westside”
brought by our licensor on the program. The Company believes this claim is meritless and
frivolous.






	5.	 	General Home Systems, Inc. v. Image Entertainment, Inc. (Case# A535844 in the District
Court of Clark County, Nevada): This case is for breach of contract and related claims on
clean-up work for a flood that occurred at the Company’s Las Vegas warehouse. The claim is
for $10,000 plus interest, service charges, costs and attorneys’ fees. The Company carries
commercial general liability insurance in the amount of at least $1,000,000 per occurrence.






	6.	 	Image Entertainment, Inc. v. Xyion LLC et al. (Arbitration# 1220035821 at JAMS Los
Angeles): This cross-complaint is for breach of contract and related claims on a license
agreement for programs titled Floss Angeles and Import Flavas 1-5. When the Company sued the
licensor for non-delivery and breach of contract, the licensor filed his cross-complaint. The
Company believes this claim is meritless and frivolous.




 


 









 






	7.	 	Potential Guild Claim regarding The Twilight Zone: There is a potential guild claim
for residuals on The Twilight Zone which has been prepared for arbitration, but CBS is in
negotiations to settle this matter. We have a full indemnity from CBS.






	8.	 	Potential Unauthorized Use Claim regarding La Dolce Vita/The Magic of Fellini: There
is a potential claim alleging unauthorized use of a portion of La Dolce Vita within the
program The Magic of Fellini. We have a full indemnity from our licensor, Piccini
Productions, and E&O insurance is also available. The Company has not sold this title since
September of 2004.






	9.	 	Potential Copyright Infringement Claim regarding From Beyond the Grave: There is a
potential claim alleging copyright infringement of From Beyond the Grave. We have a full
indemnity from our licensor, Retromedia. The Company has advised the claimant that this
program was never released by the Company and does not believe this is a threat.






	10.	 	Potential Photo Use Claim regarding Ella Fitzgerald: First Lady of Song: There is a
potential photo use claim on Ella Fitzgerald: First Lady of Song. An agency claims they own
the rights to the photo of Ella Fitzgerald that we used on our packaging. The program is
scheduled for release on April 17, 2007. We have a full indemnity from our licensor, Lucy II
Productions, and E&O insurance is also available. Our licensor has advised us that they
possess all their releases, including for the photo, and that in their view, the claim is
without merit.






	11.	 	Potential Breach of Contract Claim regarding John Entwhistle: An Ox Tale: There is a
potential breach of contract claim on John Entwhistle: An Ox Tale between our licensor, Icon
Television Music, Inc. dba Act 1 Entertainment, and a third party, Bleeding Edge Music. Both
parties claim the other party breached their agreement (which we are not a party to). Our
licensor refuses to pay the balance of the money under the contract to Bleeding Edge Music
until it cures its alleged breach. We have maintained that the dispute is between our
licensor and Bleeding Edge Music, and that the Company is not a party to their contract and
therefore should not be involved, but Bleeding Edge Music may still attempt to draw us into
their dispute. We have a full indemnity from our licensor, and E&O insurance is also
available.






	12.	 	Potential Copyright Infringement Claim regarding Devil’s Nightmare: There is a
potential claim alleging copyright infringement of Devil’s Nightmare. We have a full
indemnity from our licensor, Salvation Films. Salvation Films is currently in discussions to
resolve this dispute.






	13.	 	Potential Reclamation Claim: There is a potential reclamation claim by a licensor
who we overpaid for music publishing payments. After we discovered the error, we withheld the
overpayments from ongoing quarterly royalty payments to the licensor, RM Associates. During
this time, the licensor went into receivership (a procedure for bankruptcy in the United
Kingdom), and was purchased by Digital Classics. Digital Classics now claims that we did not
have the right to deduct the overpayments, and we dispute their claim. We have an ongoing
relationship with Digital Classics, and are in discussions to resolve this dispute.




 


 









 











	14.	 	Potential Rights Dispute regarding Langrishe Go Down: There is a potential claim
alleging copyright infringement on the title Langrishe Go Down. The Company has a full
indemnity from its licensor, Castle Hill Productions, and E&O insurance is also available.






	15.	 	Potential Rights Dispute regarding Max Ernst: There is a potential claim alleging
copyright infringement on the title Max Ernst. The Company has a full indemnity from its
licensor, RM Associates. This title went into sell-off on December 31, 2006. The Company
currently carries no inventory of the title, and all distribution has been placed on hold.






	16.	 	Cindy Henzel, et al. v. Image Entertainment, Inc. et al. (Case# BC369249 in the Court for
the State of California for the County of Los Angeles): On April 10, 2007, this purported
class action shareholder complaint was filed against Image and certain of its officers and
members of its board of directors in the Superior Court of the State of California, County of
Los Angeles. The named plaintiff proposes to represent a class of the Company’s stockholders
and claims, among other things, that in connection with the proposed business combination
transaction with BTP the directors breached their fiduciary duties of due care, good faith and
loyalty by failing to maximize stockholder value and by creating deterrents to third party
offers. Among other things, the complaint seeks class action status, and a court order
enjoining the consummation of the merger and directing the defendants to take appropriate
steps to maximize stockholder value. While the lawsuit is in its preliminary stage, the
Company believes that the claims in the lawsuit are without merit and intends to vigorously
defend it.






	17.	 	Potential Copyright Infringement Claim regarding Die Entfuhrung Aus Dem Serail:
There is a potential claim alleging copyright infringement of Die Entfuhrung Aus Dem Serail.
We have a full indemnity from our licensor, Digital Classics (formerly RM Associates). The
Company is no longer selling the Program.






	18.	 	Screen Actors Guild v. Elder & Image Entertainment (Arbitration# TM2441): This claim
is based on our licensor Vanskie Elder’s alleged failure to upgrade his SAG agreements from an
experimental film to a home video release for the program “Issues.” The claim is for
additional SAG residuals and contributions to pension and health plans, and for failure to
obtain an assumption agreement from the distributor. Elder was advised by SAG of these issues
in May of 2006, but failed to notify the Company who subsequently released the program. The
Company has advised SAG that it is not responsible under its agreement with Elder for any of
these monies, nor is the Company responsible for any SAG agreements. The Company has further
requested to be removed from the arbitration. The Company has tendered the claim to Elder who
represented and warranted that the Program was fully cleared for distribution, and that he was
responsible for all guild and union fees. This program carries E&O insurance, although a
claim has not yet been tendered to the provider.






	19.	 	Potential Copyright Infringement Claim regarding “Man of Aran” and Potentially “Nanook”
and “Lousiana Story”: There is a potential claim that excerpts from an apparently
unlicensed program entitled “Francis Flaherty: Hidden and Seeking” are contained within the
bonus features of certain films distributed by the Company. The Company has a full indemnity
from our licensors, who licensed us the titles at issue.




 


 









 











	20.	 	Potential Preference Claim by Musicland: On April 2, 2007, the Company received a
letter from the winddown officer for Musicland, seeking to negotiate a settlement of an
alleged preference claim. The amount claimed as preferential transfers was $1,539,468.52, and
the amount conceded as valid defenses was $1,097,769.75, resulting in an alleged “net
preference” amount of $441,698.77. The winddown officer has offered to settle the preference
claim for 90% of $441,698.77, or $397,528.89. The Company believes we have additional
defenses and is in the process of hiring outside bankruptcy counsel to represent it.






	21.	 	Various Collections Matters with Image as Plaintiff: The Company occasionally
initiates collections lawsuits against licensors who have failed to deliver product per their
contractual obligations. These lawsuits are filed in the ordinary course of business, and do
not constitute a material liability.






	22.	 	Various Rights Disputes with Image as Plaintiff: The Company occasionally initiates
lawsuits against third party who have allegedly infringed on product under Image’s control.
These lawsuits are filed in the ordinary course of business, and do not constitute a material
liability.




 


 









 




EXHIBIT C

TO

LOAN AND SECURITY AGREEMENT




Compliance Certificate





			
	To:	 	Wachovia Capital Finance Corporation (Western), as Agent

251 S. Lake Avenue, Suite 900

Pasadena, CA 91101





Ladies and Gentlemen:



I hereby certify to you pursuant to Section 9.6 of the Loan Agreement (as defined below) as
follows:



1. I am the duly elected Chief Financial Officer of Image Entertainment, Inc., a Delaware
corporation (“Administrative Borrower”). Capitalized terms used herein without definition shall
have the meanings given to such terms in the Loan and Security Agreement, dated May 4, 2007, by and
among Wachovia Capital Finance Corporation (Western) as agent for the financial institutions party
thereto as lenders (in such capacity, “Agent”) and the financial institutions party thereto as
lenders (collectively, “Lenders”), Administrative Borrower and certain of its affiliates (as such
Loan and Security Agreement is amended, modified or supplemented, from time to time, the “Loan
Agreement”).



2. I have reviewed the terms of the Loan Agreement, and have made, or have caused to be made
under my supervision, a review in reasonable detail of the transactions and the financial condition
of Borrowers and Guarantors, during the immediately preceding fiscal month.



3. The review described in Section 2 above did not disclose the existence during or at the end
of such fiscal month, and I have no knowledge of the existence and continuance on the date hereof,
of any condition or event which constitutes a Default or an Event of Default, except as set forth
on Schedule I attached hereto. Described on Schedule I attached hereto are the exceptions, if any,
to this Section 3 listing, in detail, the nature of the condition or event, the period during which
it has existed and the action which any Borrower or Guarantor has taken, is taking, or proposes to
take with respect to such condition or event.



4. I further certify that, based on the review described in Section 2 above, no Borrower or
Guarantor has not at any time during or at the end of such fiscal month, except as specifically
described on Schedule II attached hereto or as permitted by the Loan Agreement, done any of the
following:



(a) Changed its respective corporate name, or transacted business under any trade name, style,
or fictitious name, other than those previously described to you and set forth in the Financing
Agreements.



(b) Changed the location of its chief executive office, changed its jurisdiction of
incorporation, changed its type of organization or changed the location of or disposed of any
of its properties or assets (other than pursuant to the sale of Inventory in the ordinary
course of its business or as otherwise permitted by Section 9.7 of the Loan Agreement), or
established any new asset locations.


 


C-1









 





(c) Materially changed the terms upon which it sells goods (including sales on consignment) or
provides services, nor has any vendor or trade supplier to any Borrower or Guarantor during or at
the end of such period materially adversely changed the terms upon which it supplies goods to any
Borrower or Guarantor.



(d) Permitted or suffered to exist any security interest in or liens on any of its properties,
whether real or personal, other than as specifically permitted in the Financing Agreements.



(e) Received any notice of, or obtained knowledge of any of the following not previously
disclosed to Agent: (i) the occurrence of any event involving the release, spill or discharge of
any Hazardous Material in violation of applicable Environmental Law in a material respect or (ii)
any investigation, proceeding, complaint, order, directive, claims, citation or notice with respect
to: (A) any non-compliance with or violation of any applicable Environmental Law by any Borrower or
Guarantor in any material respect or (B) the release, spill or discharge of any Hazardous Material
in violation of applicable Environmental Law in a material respect or (C) the generation, use,
storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous
Materials in violation of applicable Environmental Laws in a material respect or (D) any other
environmental, health or safety matter, which has a material adverse effect on any Borrower or
Guarantor or its business, operations or assets or any properties at which such Borrower or
Guarantor transported, stored or disposed of any Hazardous Materials.



(f) Become aware of, obtained knowledge of, or received notification of, any breach or
violation of any material covenant contained in any instrument or agreement in respect of
Indebtedness for money borrowed by any Borrower or Guarantor.



5. Attached hereto as Schedule III are the calculations used in determining, as of the end of
the fiscal month ended                     , 20 _____, whether Borrowers and Guarantors are in compliance with
the covenants set forth in Section 9.17 of the Loan Agreement for such fiscal month.




The foregoing certifications are made and delivered this day of                     , 20_.



	 	 	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	IMAGE ENTERTAINMENT, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 





 


C-2









 





SCHEDULE 1.41




Existing Letters of Credit




None



 


 









 





SCHEDULE 1.76




Permitted Holders




None



 


 









 





SCHEDULE 5.2(F)




Beneficial Letters of Credit




None



 


 









 





SCHEDULE 8.8




Environmental Compliance




None



 


 









 





SCHEDULE 8.13




Labor Disputes




None



 


 









 





SCHEDULE 8.15




Material Contracts





	1.	 	Exclusive Distribution Agreement, dated as of August 1, 2005, by and between the Company and
The Criterion Collection.






	2.	 	Co-Financing Agreement, dated as of June 13, 2003, by and between the Company and Deluxe
Global Media Services, LLC.






	3.	 	Letter Agreement, dated as of November 9, 2005, by and between the Company and Ron White,
Inc., as amended on November 9, 2005 and August 2, 2006.






	4.	 	Carrier Agreement, dated as of October 25, 2004, by and between the Company and United Parcel
Service Inc.






	5.	 	Video and DVD Distribution Agreement, dated as of April 8, 2003, by and between Home Vision
Entertainment/Public Media, Inc., subsidiary of the Company, and BBC Worldwide Americas Inc.






	6.	 	Home Video License Agreement, dated as of August 17, 1999, by and between Public Media, Inc.,
subsidiary of the Company, and BBC Worldwide Americas, Inc., as amended on October 8, 2001,
March 19, 2002, and October 29, 2002.






	7.	 	Home Video License Agreement, dated as of February 22, 2000, by and between Public Media,
Inc., subsidiary of the Company, and BBC Worldwide Americas, Inc.






	8.	 	Home Video License Agreement, dated as of March 31, 1998, by and between Public Media, Inc.,
subsidiary of the Company, and BBC Worldwide Americas Inc., as amended on April 23, 1999, May
25, 2000, and October 8, 2001.






	9.	 	Video and DVD Distribution Agreement, dated as of November 11, 2004, by and between Public
Media, Inc., d/b/a Home Vision Entertainment, subsidiary of the Company, and BBC Worldwide
Americas Inc., as amended on May 10, 2005.






	10.	 	Letter Agreement, dated as of May 27, 2004, by and between the Company and Dark Horse
Entertainment, as amended on September 17, 2004, October 21, 2004, February 17, 2005, February
18, 2005, May 10, 2005, June 14, 2005, July 29, 2005, January 30, 2006, and February 3, 2006.






	11.	 	Short Form License, dated as of March 14, 2006, by and between the Company and Milwaukie
Productions, LLC.






	12.	 	Exclusive License Agreement, dated as of August 7, 2006, by and between the Company and
Yanni, Inc.






	13.	 	Completion Guarantee Agreement, dated as of March 6, 2006, by and between the Company and
Film Finances Canada (1998) Ltd. (for production called “Sisters”).






	14.	 	Co-Financing/Co-Production Agreement, dated as of December 31, 2005, by and between the
Company and Sisters Wooster Inc.






	15.	 	Standard Multi-Tenant Office Lease — Gross and Addendum, dated as of January 7, 2004, by and
between the Company and Amiscope Properties.






	16.	 	Exclusive Distribution Agreement, dated as of December 5, 2005, by and between the Company
and Bandai Visual USA Inc.






	17.	 	Assignment of The Twilight Zone, dated as of July 1, 1999, by and between the Company CBS
Video, CBS Enterprises and Matsushita Electric Corporation of America, as amended on October
3, 2002 and August 31, 2004.




 


 









 











	18.	 	Health Net PPO Group Insurance Policy for California employees, dated as of August 1, 2004,
by and between the Company and Health Net.






	19.	 	Health Net PPO Group Insurance Policy for out-of-state employees, dated as of August 1, 2004,
by and between the Company and Health Net.






	20.	 	Group Hospital and Professional Service Agreement, dated as of August 1, 2004, by and between
the Company and Health Net.






	21.	 	Letter Agreement, dated as of October 2, 2003, by and between the Company, Git R Done
Productions Inc. and Parallel Entertainment, Inc., as amended on June 17, 2004.






	22.	 	Exclusive Distribution & License Agreement, dated as of August 25, 2004, by and between the
Company and QD3 Entertainment.






	23.	 	Exclusive Distribution & License Agreement, dated as of August 7, 2001, by and between the
Company and QD3 Entertainment, as amended on November 19, 2001, July 14, 2002, October 2,
2002, October 30, 2002, April 17, 2003, August 14, 2003, October 22, 2003, December 19, 2003,
May 11, 2004, August 2, 2004, January 20, 2005, June 21, 2005, June 23, 2005, June 24, 2005,
May 17, 2006 and June 26, 2006.






	24.	 	Exclusive Audio Distribution Agreement, dated as of July 16, 2002, by and between the Company
and QD3 Entertainment.






	25.	 	Exclusive Distribution Agreement, dated as of November 2, 2005, by and between the Company
and QD3 Entertainment Inc.






	26.	 	Exclusive Distribution Agreement, dated as of November 2, 2005, by and between the Company
and QD3 Entertainment Inc.






	27.	 	Exclusive License Agreement, dated as of October 1, 2005, by and between Playboy
Entertainment Group, Inc.






	28.	 	Replication Agreement, dated as of June 30, 2006, by and between the Company and Sonopress
LLC.






	29.	 	Standard Industrial/Commercial Single-Tenant Lease, dated as of November 4, 2002, by and
between the Company and Spencer Street Investors, LLC.






	30.	 	Home Video Distribution Agreement, dated as of September 1, 2006, by and between the Company
and Discovery Licensing, Inc.





31. Company Convertible Note.




	32.	 	Stock Purchase Agreement, dated as of August 30, 2006, by and between the Company and
Portside Growth and Opportunity Fund.






	33.	 	Registration Rights Agreement, dated as of August 30, 2006, by and between the Company and
Portside Growth and Opportunity Fund.





34. The Portside Warrant.




	35.	 	Amendment and Exchange Agreement, dated as of November 10 , 2006, by and between the Company
and Portside Growth and Opportunity Fund.






	36.	 	License and Distribution Agreement, dated as of June 12, 2006, by and between the Company and
NBC Universal Television Distribution.






	37.	 	Letter Agreement, dated as of October 21, 2005, by and between the Company and NBC Universal
Television Distribution.






	38.	 	Letter Agreement, dated as of May 10, 2006, by and between the Company, Bass Productions,
Ltd. and Zomba Recording, LLC.






	39.	 	Exclusive Distribution Agreement, dated as of July 26, 2006, by and between the Company and
Plus 1 LLC.




 


 









 











	40.	 	Exclusive Distribution Agreement, dated as of May 6, 2002, by and between the Company and
Producers Sales Organization, as amended on February 7, 2003 and March 3, 2005. This
agreement contains a key man clause which provides that if Martin Greenwald is no longer
employed by the Company, the distribution agreement term is shortened to the earlier of May 5,
2010, or one year after Martin Greenwald’s departure, plus a six month sell-off.






	41.	 	Exclusive Output License Agreement, dated as of October 14, 2005, by and between the Company
and Clear Channel Entertainment Television Holdings, Inc.






	42.	 	Exclusive License Agreement, dated as of December 7, 2005, by and between the Company and On
A Stick Productions.






	43.	 	Exclusive License Agreement, dated as of August 8, 2006, by and between the Company and Sofa
Entertainment, Inc.






	44.	 	Exclusive License Agreement, dated as of September 14, 2000, by and between the Company and
Delilah Films Inc.






	45.	 	Exclusive License Agreement, dated as of May 29, 2002, by and between the Company and Delilah
Films Inc.






	46.	 	License Agreement Term Sheet, dated as of August 16, 2004, by and between the Company and
Delilah Films Inc.






	47.	 	Exclusive License Agreement, dated as of March 1, 2002, by and between the Company and
Delilah Films Inc.






	48.	 	Exclusive Output Distribution Agreement, dated as of December 14, 2005, by and between the
Company and Bigger and Better Media, Ltd.






	49.	 	License Agreement, dated as of July 20, 1999, by and between the Company, Cable Entertainment
Distribution Company, Inc. and General Media Entertainment, Inc.






	50.	 	Output License Agreement, dated as of June 1, 1999, by and between the Company, Cable
Entertainment Distribution Company, Inc. and General Media Entertainment, Inc.






	51.	 	Exclusive Output License Agreement, dated as of July 25, 2000, by and between the Company and
General Media Entertainment, Inc., as amended on June 20, 2002.






	52.	 	Statement of Work (replicating pricing), dated as of September 1, 2005, by and between the
Company and Sony DADC.






	53.	 	DVD Replication Agreement, dated as of July 21, 2006, by and between the Company and U-Tech
Media USA.






	54.	 	Property Insurance Policy No. TE-853, dated as of April 1, 2006, by and between the Company
and Affiliated FM Insurance Company, as brokered by Marsh Risk and Insurance Services.






	55.	 	Workers’ Compensation Insurance Policy No. N0030000279-01, dated as of April 1, 2006, by and
between the Company and Clarendon National Insurance Company, as brokered by Marsh Risk and
Insurance Services.






	56.	 	Commercial Package General Liability and Crime Insurance Policy No. 7954-9944, dated as of
June 1, 2006, by and between the Company and Vigilant Insurance Company, as brokered by Marsh
Risk and Insurance Services.






	57.	 	Automobile Liability and Physical Damage Insurance Policy No. 7954-9945, dated as of June 1,
2006, by and between the Company and Federal Insurance Company, as brokered by Marsh Risk and
Insurance Services.






	58.	 	Umbrella Liability Insurance Policy No. 7954-9946, dated as of June 1, 2006, by and between
the Company and Federal Insurance Company, as brokered by Marsh Risk and Insurance Services.




 


 









 











	59.	 	Foreign Package Property, General Liability, Non-Owned Hired Auto, Workers’ Compensation
Insurance Policy No. PHFD36920014, dated as of June 1, 2006, by and between the Company and
Ace American Insurance Company, as brokered by Marsh Risk and Insurance Services.






	60.	 	Errors & Omissions Media Liability Insurance Policy No. 9802-7717, dated as of June 1, 2006,
by and between the Company and Executive Risk, as brokered by Marsh Risk and Insurance
Services.






	61.	 	Employed Lawyers Liability Insurance Policy No. 009655332, dated as of November 15, 2006, by
and between the Company and American International Specialty Lines Insurance Company, as
brokered by DLD Insurance Brokers, Inc.






	62.	 	Directors and Officers Liability ($5 Million Primary) Insurance Policy No. DONG23633036001,
dated as of December 10, 2006, by and between the Company and ACE American Insurance Company,
as brokered by Arthur J. Gallagher and Company and related Premium Finance Statement,
Disclosure Statement and Security Agreement.






	63.	 	Directors and Officers Liability ($10 Million Excess $5 Million) Insurance Policy No.
9658301, dated as of December 10, 2006, by and between the Company and National Union Fire
Insurance Company of Pennsylvania, as brokered by Arthur J. Gallagher and Company and related
Premium Finance Statement, Disclosure Statement and Security Agreement.






	64.	 	Directors and Officers Liability ($5 Million Excess $15 Million — Side A DIC) Insurance
Policy No. 00MM023728206, dated as of December 10, 2006, by and between the Company and
Hartford — Nutmeg Insurance Company, as brokered by Arthur J. Gallagher and Company and
related Premium Finance Statement, Disclosure Statement and Security Agreement.






	65.	 	Employment Practices Liability Insurance Policy No. EOC904491401, dated as of December 10,
2006, by and between the Company and Zurich American Insurance Company, as brokered by Arthur
J. Gallagher and Company.






	66.	 	Master Lease and Financing Agreement, dated as of January 2, 2004, by and between the Company
and Hewlett-Packard Financial Services Company, as amended on January 13, 2004, June 29, 2006,
July 24, 2006, and December 21, 2006.






	67.	 	Exclusive Sublicense and Subdistribution Agreement, dated as of January 1, 2005, by and
between the Company and Egami Media, Inc., the Company’s subsidiary.






	68.	 	Pricing memo, dated as of January 5, 2005, by and between the Company and Shorewood
Packaging, as amended January 20, 2005, February 15, 2006, July 13, 2006, and August 1, 2006.






	69.	 	Freight pricing memos, dated as of July 2, 1999, February 15, 2001, August 24, 2004 and
February 1, 2006, by and between the Company and Senderex.






	70.	 	Freight Pricing Memo, dated as of March 1, 2004, by and between the Company and Pilot Air
Freight.




 


 









 










SCHEDULE 9.9




Indebtedness

As of March 31, 2007




Image Entertainment, Inc.




Sonopress LLC

$9,541,559.50




Portside Growth and Opportunity Fund

$17,000,000.00




HP Financial Services

$277,493.06




Egami Media, Inc.




None




Image Entertainment (UK), Inc.




None




Home Vision Entertainment, Inc. (formerly Public Media, Inc.)




None



 


 









 





SCHEDULE 9.10(h)




Loans and Advances




None