Filed by Bowne Pure Compliance





Exhibit 10.1




SETTLEMENT AGREEMENT AND MUTUAL RELEASE




THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE (the “Agreement”) is entered into as of
June 24, 2008, by and between IMAGE ENTERTAINMENT, INC. (“Image”), on the one hand, and CT1
HOLDINGS, LLC (“CT1”); CAPITOL FILMS US, LLC (“Capitol”); THINKFILM, LLC
(“ThinkFilm”); BTP ACQUISITION COMPANY, LLC (“BTP”); IEAC, INC. (“Merger Sub”);
R2D2, LLC (“R2D2”); and DAVID BERGSTEIN (collectively, the “CT1 Parties”), on the
other hand. The parties to this Agreement will collectively be referred to as the
“Parties.”



R E C I T A L S:




On March 29, 2007, Image entered into an Agreement and Plan of Merger with BTP and Merger Sub
pursuant to which BTP would acquire all of the shares of Image common stock.



Also on March 29, 2007, Image entered into a Guarantee Agreement (the “Guarantee”)
with CT1 and R2D2, pursuant to which CT1 and R2D2 guaranteed the prompt payment to Image of a
“Business Interruption Fee” of $4.2 million if and when payable under the merger agreement.



On June 27, 2007, Image entered into an Amended and Restated Agreement and Plan of Merger with
BTP and Merger Sub (the “Merger Agreement”), pursuant to which BTP would acquire a majority
of the shares of Image. The Merger Agreement again provided that BTP would pay to Image a “Business
Interruption Fee” of $4.2 million, upon termination of the Merger Agreement under certain
circumstances. The Guarantee, by its terms, applied to the amended and restated Merger Agreement.



On December 7, 2007, in connection with an extension of the closing date for the merger, BTP
agreed to deposit (and later did deposit) $2 million into a trust account held by Manatt, Phelps &
Phillips, LLP (“Manatt”) for the benefit of Image, to cover a portion of the Business
Interruption Fee.



Also as of December 7, 2007, Image and CT1 entered into an Output Distribution Agreement (the
“Output Agreement”) respecting certain distribution rights to the programming of ThinkFilm
and Capitol Films.



On December 14, 2007, Image and CT1 amended the Output Agreement to add * and
* to such agreement.





 




	 	 	 
	*	 	This material has been omitted pursuant to a request
for confidential treatment and filed separately with the Securities and
Exchange Commission.




 


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On January 14, 2008, in connection with a further extension of the closing date for the
merger, BTP agreed to deposit (and later did deposit) an additional $1 million into the trust
account held by Manatt for the benefit of Image, to cover an additional portion of the Business
Interruption Fee. The total $3 million deposited by BTP into the trust account held by Manatt for
the benefit of Image (the “Escrowed Monies”) are currently still being held by Manatt.



On January 24, 2008, Image filed a lawsuit in the Los Angeles Superior Court (case number LASC
BC 384278) for breach of contract and declaratory relief against CT1; BTP; Capitol; and ThinkFilm,
arising out of an alleged anticipatory breach of the Original Output Agreement (the “LASC
Action”).




On January 25, 2008 CT1 purported to terminate the Original Output Agreement.




At various times, Image and BTP gave notice of the termination the Merger Agreement.



On February 6, 2008, Image filed a Demand for Arbitration in front of JAMS against CT1
Holdings, LLC, Capitol Films, LLC, and ThinkFilm for declaratory relief and breach of contract
seeking, among other relief, a judicial declaration that the Original Output Agreement remains in
full force and effect. On February 20, 2008, Image filed an Amended Demand for Arbitration in front
of JAMS, alleging additional claims and adding David Bergstein as a party respondent. The Demand
for Arbitration and Amended Demand for Arbitration shall collectively be referred to as the
“JAMS Action.”



As of February 7, 2008, Image and CT1 entered into an Interim Distribution Agreement (as
subsequently amended to extend the expiry date, the “Interim Agreement”) with respect to
the distribution by Image of certain ThinkFilm and Capitol Films’ programming.



On February 11, 2008, Image filed a lawsuit in the Court of Chancery of the State of Delaware,
C.A. No. 3536-VCN, entitled Image Entertainment, Inc. v. BTP Acquisition Company, et al., alleging
breach of the Merger Agreement as against BTP and Merger Sub and breach of the Guarantee as against
CT1 and R2D2 (the “Delaware Action”).



On or about March 17, 2008, CT1, Capitol, Think and BTP filed a cross-complaint against Image
in the LASC Action.



On March 28, 2008, BTP, Merger Sub and CT1 filed counterclaims against Image in the Delaware
Action.



On June 4, 2008, the Court in the LASC Action granted Image’s motion to compel arbitration of
the LASC Action.


 


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



TERMS OF AGREEMENT





1. Merger Termination; Output Distribution Agreement Novation.



1.1 The termination of the Merger Agreement (“Merger Termination”) is hereby
acknowledged, the Merger Agreement shall be null and void and there shall be no liability or
obligation on the part of any of the Parties thereto or their respective representatives.



1.2 The Output Agreement and Interim Agreement are being amended by the parties concurrently
herewith (the “Distribution Agreement Novation”) which shall govern the terms of
distribution by Image under the Output Agreement and Interim Agreement.



1.3 The parties hereby understand, acknowledge and agree that the stand-alone agreements for
the programs: *, *, *, *, * and * (which shall shortly be executed between the Parties)
shall remain in full force and effect in accordance with their respective terms and are not subject
to or covered by this Agreement.



2. Merger Termination Payment. As a full and final settlement of the Parties’ disputes with respect
to the Merger Agreement and the Merger Termination, subject to the execution of this Agreement by
all Parties, the Parties jointly authorize and direct the release of the Escrowed Monies as
follows: Two million dollars ($2,000,000) payable to Image (the “Image Retained Funds”) and
the balance of one million dollars ($1,000,000), plus all accrued interest on the Escrowed Monies
(the “BTP Funds”) to BTP. The Parties further agree that Image and BTP will execute, and
deliver to Manatt, Joint Instructions in the form attached hereto as Exhibit 1. In the event that
further instructions to Manatt are deemed required and are unsigned by either Image or BTP, a
fully-executed copy of this Agreement, signed by all Parties, shall be deemed sufficient binding
authorization to Manatt to release the Escrow Monies in the manner set forth herein.



3. Dismissal.




Immediately following the execution of this Agreement by each Party and the release of the
Escrowed Monies as indicated above, the Parties shall cause to be filed Requests for Dismissals of
the LASC Action, the Delaware Action and JAMS Action (including all cross-complaints and/or
counterclaims), in proper form for each tribunal and as mutually approved by counsel for all
Parties, such dismissals being effected with prejudice. The Parties shall effect such actions
without delay.





 




	 	 	 
	*	 	This material has been omitted pursuant to a request
for confidential treatment and filed separately with the Securities and
Exchange Commission.




 


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3. Mutual Releases.




Except as to the rights and obligations created by this Agreement, and in consideration of the
terms and provisions of this Agreement and the promises referenced herein, Image, on the one hand,
and the CT1 Parties, on the other, shall and hereby do forever relieve, release and discharge each
other and, without limitation, their respective present, former and future representatives,
including without limitation, predecessors, successors, affiliates, members, managers, partners,
officers, directors, shareholders, attorneys, parent and subsidiary corporations and entities, the
officers, directors, employees, agents, and shareholders of each of them, and each of them, from
any and all claims, cross-claims, counterclaims, demands, debts, liabilities, obligations,
promises, acts, agreements, costs, offsets, expenses, damages, actions and causes of action of
whatever kind or nature, whether known or unknown, suspected or unsuspected which exist, or have
existed at any time up to and including the date hereof, including, without limitation, any claims
arising out of or in connection with the Merger Agreement, the Merger Termination, the Guarantee,
the Support Agreements, the Original Output Agreement, the Interim Agreement and all claims alleged
in the LASC Action, the Delaware Action and JAMS Action, or which could have been asserted as
cross-claims or counterclaims in those actions.



The Parties acknowledge that they may hereafter discover facts different from or in addition
to those which they now know or believe to be true with respect to any release herein made, and
agree that every release herein made is now and will remain effective notwithstanding such
different or additional facts or the discovery thereof. The Parties hereto expressly waive and
relinquish any and all rights and benefits conferred upon them by the provisions of section 1542 of
the California Civil Code, which are as follows:



“A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release, which
if known by him or her must have materially affected his or her settlement with
the debtor.”



The Parties acknowledge that the foregoing waiver of the provisions of section 1542 of the
California Civil Code, and any similar or comparable law of any other state, is part of the
consideration hereunder. The Parties expressly consent that the mutual general releases set forth
herein shall be given full force and effect in accordance with each and all of their express terms
and provisions, including those terms and provisions relating to unknown and unsuspected Claims,
demands and causes of action, if any, to the same effect as those terms and provisions relating to
any other Claims, demands and causes of action hereinabove specified.


 


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Notwithstanding the foregoing, nothing contained herein is intended to release any Party to
this Agreement (or any other person) from any rights and obligations that may exist with respect to
the Distribution Agreement Novation between the Parties or their affiliates, or any stand-alone or
single-purpose distribution or license agreement entered into between Image and CT1 or any
affiliate of CT1 in connection with a particular film or title including, but not limited to,
*, *, *, *, *
and * (which shall shortly be executed between the Parties).



4. Status of Claims.




The Parties each represent and warrant that the claims released under Section 4 of this
Agreement have not in any way been assigned, transferred, hypothecated or otherwise encumbered, and
that they are the sole and absolute owners of such claims. The Parties agree to indemnify each
other from any loss or damage caused by any breach of warranty set forth in this paragraph.



This Agreement and the releases contained herein are and shall remain valid, regardless of any
claim or controversy which may arise with respect to or under the Distribution Agreement Novation.



5. Miscellaneous.




5.1. No Admission of Liability or Fault. The Parties hereto expressly understand and
agree that this Agreement is a good faith compromise and settlement of disputed claims, and that
neither Party is hereby admitting any wrongdoing or liability.



5.2. Headings and Interpretations. The titles and headings of the various paragraphs
of this Agreement are intended solely for convenience of reference and are not intended to define,
limit, extend, explain, modify or place any construction on any of the provisions of this
Agreement. No provision in this Agreement is to be interpreted for or against any Party because
that Party or its legal representative drafted such provision.



5.3. Entire Agreement/Amendments. This Agreement supersedes all prior agreements and
understandings between the Parties hereto, except as provided herein. Each of the Parties hereto
acknowledges to each of the other Parties that no other Party or any agent or attorney of any Party
has made any promise, representation or warranty whatsoever, express or implied, written or oral,
not contained herein concerning the subject matter hereof to induce it to execute this Agreement,
and each of the Parties hereto acknowledges that it has not executed this Agreement in reliance on
any promise, representation or warranty not expressly contained herein. No person has any authority to make any representation or promise on behalf of any Party that is not set
forth herein. This Agreement may be modified only by a written instrument duly executed by each of
the Parties hereto.





 




	 	 	 
	*	 	This material has been omitted pursuant to a request
for confidential treatment and filed separately with the Securities and
Exchange Commission.




 


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5.4. Attorneys’ Fees. Each Party shall each bear its own attorneys’ fees and costs
arising out of or in connection with the LASC Action, the Delaware Action, the JAMS Action and this
Agreement.



5.5. Assignment. This Agreement, including without limitation the mutual releases
herein, shall inure to the benefit of and be binding on the Parties and their respective
successors, heirs, legal representatives and assigns.



5.6. Severability. The fact that a covenant, condition or other provision herein
contained may be held to be invalid, void or illegal by a court of competent jurisdiction will not
automatically render this Agreement, in its entirety, invalid, void, or illegal.



5.7. Waiver. No breach of any provision hereof can be waived except in writing by the
Party against whom enforcement of the waiver is sought. Waiver of one breach of any provision
hereof shall not be deemed to be a waiver of any other breach of the same or any other provision
hereof.



5.8. Counterparts. This Agreement may be executed in counterparts. When each Party has
signed and delivered such counterpart to the other Party, each counterpart shall be deemed an
original, and, when taken together with other signed counterparts, shall constitute on Agreement
which shall be binding upon and effective as to all of the Parties. No counterpart shall be
effective until all Parties hereto have executed and exchanged an executed counterpart hereof. A
signature will be deemed binding and the Party bound upon receipt of a fax copy of the signature
page.



5.9. Dispute Resolution. In the event of any dispute regarding the interpretation,
performance or enforcement of this Agreement, the parties agree to submit the dispute for
arbitration in Los Angeles, California in accordance with the Comprehensive Arbitration Rules and
Procedures (“Rules”) of JAMS. The arbitrator shall be bound to apply California substantive
law. The provisions of Section 1283.05 of the California Code of Civil Procedure authorizing the
taking of depositions and obtaining discovery are incorporated herein by this reference and shall
be applicable to any such arbitration; provided, however, that each party shall be entitled to
take a minimum of three (3) depositions in addition to whatever other discovery the parties may
agree upon or the arbitrator may order. The arbitrator shall have no authority to change, extend,
modify or suspend any of the terms of this Agreement. The parties may seek, from a court of
competent



 


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jurisdiction, provisional remedies or injunctive relief in support of their respective rights and
remedies hereunder without waiving any right to arbitration. However, the merits of any action that
involves such provisional remedies or injunctive relief, including, without limitation, the terms
of any permanent injunction, shall be determined by arbitration under this paragraph. The parties
shall equally pay and bear the costs of the arbitrator and such arbitration, and each party shall
otherwise bear its own attorneys’ fees, unless the arbitrator, in his or her discretion, orders
otherwise. The determination of the arbitrator shall be final and conclusive upon the parties
hereto and may be enforced in any court of competent jurisdiction.



5.10. Governing Law. This Agreement will be construed and interpreted in accordance
with the laws of California applicable to contracts made and fully performed in California. THE
PARTIES SHALL NOT RAISE, AND HEREBY WAIVE, ANY DEFENSES BASED UPON VENUE, INCONVENIENCE OF THE
FORUM, LACK OF PERSONAL JURISDICTION, OR SUFFICIENCY OF SERVICE OR PROCESS IN ANY SUCH ACTION OR
SUIT.



5.11. Joint Press Release; Public Filings. The Parties shall cooperate in the
preparation and dissemination of a joint press release, if any, approved as to form both by Image
and the CT1 Parties, relating to the settlement of all pending lawsuits between the parties;
provided, that the Parties acknowledge that Image has public company reporting obligations which it
must timely effect. The Parties intend that Image not file this Agreement as an exhibit with its
public filings, but if such filing is deemed legally required by Image, Image shall file this
Agreement under a request for confidential treatment, in form reasonably acceptable to the CT1
Parties.



5.12. Confidentiality. The parties agree to treat confidentially and shall refrain
from disclosing the terms and conditions of this Agreement and any other information furnished
hereunder except to the extent a party is requested or required (by oral question or request for
information or documents in legal proceedings, interrogatories, subpoena, civil investigative
demand, SEC, government regulatory requirement, audit or similar process) to disclose such terms,
conditions or information, in which case the party receiving such request or demand shall promptly
notify the other party so that such other party may seek an appropriate protective order and/or
waive compliance with this provision.



5.13. Effective Date. This Agreement shall become effective upon execution of this
Agreement by all of the Parties.


 


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IN WITNESS WHEREOF, the Parties hereby execute this Agreement as of the date hereof.



Image Entertainment, Inc.



	 	 	 
	/s/ DAVID BORSHELL
 

By: David Borshell

	 	 
	Its: President
	 	 
	 
	 	 
	BTP Acquisition Company LLC
	 	 
	 
	 	 
	/s/ DAVID BERGSTEIN
 

By: David Bergstein

	 	 
	Its: Manager
	 	 
	 
	 	 
	CT1 Holdings LLC
	 	 
	 
	 	 
	/s/ DAVID BERGSTEIN
 

By: David Bergstein

	 	 
	Its: Manager
	 	 
	 
	 	 
	Thinkfilm LLC
	 	 
	 
	 	 
	/s/ DAVID BERGSTEIN
 

By: David Bergstein

	 	 
	Its: Manager
	 	 
	 
	 	 
	Capitol Film US, LLC
	 	 
	 
	 	 
	/s/ DAVID BERGSTEIN
 

By: David Bergstein

	 	 
	Its: Manager
	 	 
	 
	 	 
	R2D2, LLC
	 	 
	 
	 	 
	/s/ DAVID BERGSTEIN
	 	 
	 

	 	 
	By: David Bergstein
	 	 
	Its: Manager
	 	 





 


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	IEAC, Inc.
	 	 
	 
	 	 
	/s/ DAVID BERGSTEIN
 

By: David Bergstein
Its: President

	 	 
	 
	 	 
	/s/ DAVID BERGSTEIN
 

David Bergstein

	 	 







 


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