EXHIBIT 10.42


 


EMPLOYMENT
AGREEMENT


 


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


 


RECITALS


 


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


 


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


 


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


 


1.             TERM OF AGREEMENT.


 


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


 


2.             ENGAGEMENT.


 


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


 


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


 


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


 


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


 


3.             COMPENSATION.


 


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


 


	
  Period

  	
   

  	
  Annual Rate

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Year ending on the first anniversary of the date hereof

  	
   

  	
  $

  	
  522,374

  	
   

  	
  per year

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Year ending on the second anniversary of the date hereof

  	
   

  	
  $

  	
  548,493

  	
   

  	
  per year

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Year ending on the third anniversary of the date hereof

  	
   

  	
  $

  	
  575,917

  	
   

  	
  per year

  



 


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


 


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


 


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


 


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


 


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


 


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


 


4.             OPTIONS AND OTHER STOCK-BASED AWARDS.


 


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


 


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


 


5.             FRINGE BENEFITS.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


6.             SEVERANCE.


 


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


 


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


 


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


 


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


 


7.             RENEWAL OPTIONS.


 


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


 


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


 


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


 


8.             CONFIDENTIALITY.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


9.             INDEMNIFICATION OF EXECUTIVE.


 


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


 


10.          DEATH.


 


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


 


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


 


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


 


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


 


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


 


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


 


11.          PERMANENT DISABILITY/SUSPENSION.


 


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


 


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


 


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


 


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


 


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


 


12.          TERMINATION.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


13.          CHANGE IN CONTROL.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(ii)                                  a
reduction by Image in Base Salary;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


15.          GENERAL PROVISIONS.


 


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


 


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


 


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


 


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


 


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


 


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


 


	
  To Image:

  	
   

  	
  IMAGE ENTERTAINMENT, INC

  
	
   

  	
   

  	
  9333 Oso Avenue

  
	
   

  	
   

  	
  Chatsworth,CA  91311

  
	
   

  	
   

  	
  Attn: General Counsel

  
	
   

  	
   

  	
   

  
	
  To Executive:

  	
   

  	
  MARTIN GREENWALD

  
	
   

  	
   

  	
  c/o Image Entertainment, Inc.

  
	
   

  	
   

  	
  9333 Oso Avenue

  
	
   

  	
   

  	
  Chatsworth, CA  91311

  



 


14

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


 


	
  IMAGE ENTERTAINMENT, INC.

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Ira Epstein

  	
   

  	
  /s/ Martin W. Greenwald

  	
   

  
	
   

  	
  Ira Epstein, Esq.

  	
  Martin W. Greenwald, an individual

  
	
  Its:

  	
  Compensation Committee Chairman

  	
   

  
					



 


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