**EXHIBIT10.43**

 

**EMPLOYMENTAGREEMENT**

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered intoas of April 1, 2004 (the “Effective Date”), by and between IMAGEENTERTAINMENT INC., a California corporation (“Image”), and DAVIDBORSHELL, an individual (“Executive”).

 

**RECITALS**

 

WHEREAS, the Board of Directors of Image has determined that because ofExecutive’s substantial experience with respect to sales and marketing,management and other aspects of the business of Image, Executive’s businessrelationships in connection with the business of Image, and Executive’s pastleadership and familiarity with the clientele served by Image, it is in thebest interests of Image to secure the services of Executive and to provideExecutive 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 andabilities, 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 covenantscontained herein, the parties hereto agree as follows:

 

**1.**             TERM OF AGREEMENT.

** **

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

 

**2.**             ENGAGEMENT.

 

Subject to the terms and conditions contained herein, Image herebyengages the services of Executive (the “Services”) and Executive herebyaccepts such engagement and agrees to render Executive’s Services to Image forthe Term. Executive shall report directly to the Chief Executive Officer andshall have the title of “CHIEF OPERATING OFFICER.”

 

(a)                                  **Extent of Services and Duties**.  Executive shall perform such dutiescompatible with Executive’s position as an “Executive Officer” (as definedbelow) and as the Executive’s Senior Officer or the Board of Directors of Imagemay reasonably require.  In renderingServices to Image, Executive shall use Executive’s best efforts and ability tomaintain, further and promote the interests and welfare of Image.  At the request of

 

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

 

(b)                                 **Exclusive Engagement**.  Executive hereby acknowledges and agreesthat the engagement of Executive by Image under this Agreement is exclusive andthat during the Term hereof Executive shall not, directly or indirectly,whether for compensation or otherwise, engage in any business that iscompetitive with the business of the Company or that otherwise interferes inany significant respect with the Executive’s exclusive commitment and dutiesunder this Agreement, or render any services of a business, commercial orprofessional nature to any other person or organization that is a competitor ofImage or in a business similar to that of Image, without the prior writtenconsent of Image.  Notwithstanding theforegoing, Executive may make and manage personal business investments of hischoice and serve in any capacity with any civic, educational or charitableorganization without seeking or obtaining approval by the Board, provided thatsuch activities and services do not substantially interfere or conflict withthe performance of duties hereunder or create any conflict of interest withsuch duties.

 

**3.**             COMPENSATION.

** **

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

 
| **Period**                                                |   | **Annual  Rate** |
|-----------------------------------------------------------|--------|------------------|
|                                                      |   |             |   |   |   |
| Year ending on the first anniversary of the  date hereof  |   | $                | 274,938 |   | per year |
|                                                      |   |             |   |   |
| Year ending on the second anniversary of  the date hereof |   | $                | 288,654 |   | per year |
|                                                      |   |             |   |   |
| Year ending on the third anniversary of the  date hereof  |   | $                | 303,119 |   | per year |

 

In the event the Term is extended pursuant to Paragraphs 1 and 7, theBase

 

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Salary for each such extension shall be (i) the Base Salary for theyear 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 thebase salary for all subsequent years of the Term, including any extensionsthereto.

 

The Base Salary will be payable in equal biweekly installments or asotherwise provided in accordance with the regular executive officercompensation pay schedules and procedures in effect from time to time forImage, subject to all applicable withholding and deductions.

 

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

 

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

 

The Bonus, if any, granted to Executive will be paid by June 30thof each year.

 

**4.**             OPTIONS AND OTHER STOCK-BASED AWARDS.

 

In addition to Base Salary and discretionary Bonus Compensation, Imagemay grant stock options and other stock-based awards to Executive, in such formand amounts, and at such time or times, as Image’s Board of Directors (or, ifapplicable, the administrators of Image’s stock option plans) shalldetermine.  If this Agreement isterminated early “Without Cause” under Subparagraph 12(b) or upon “Good Reason”by Executive under Paragraph 13(d), all unvested options granted to Executivewill immediately vest.  The vesting ofother stock-based awards will depend upon the provisions of the Executive’saward agreement and the plan (if any) under which the Awards are granted.  Unless this Agreement is terminated earlyfor Cause under Subparagraph 12(a), all options granted to Executive prior toApril 1, 2004 shall be exercisable after employment ceases for the longestperiod permissible under the applicable stock option plan, to the extent theoption was vested as of the date of termination, and all options or rightsgranted on or after April 1, 2004 shall be exercisable as provided in theapplicable award or grant.

 

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

 

**5.**             FRINGE BENEFITS.

 

(a)                                  Imageagrees to provide Executive with fringe benefits including but not limited tothe medical, dental, life and short and long-term disability insurance, expenseallowance and vacation time described below:

 

(i)                                     **Medical, Dental, Life & Short and Long-TermDisability Insurance**.  Imageshall purchase (or, if applicable, maintain) during the Term medical, dental,life and short and long-term disability insurance for Executive, and providecoverage under the medical and dental policies for Executive’s direct dependentbeneficiaries (*e.g.*, spouse andminor children), on terms no less favorable than the terms and conditions ineffect as of the date hereof and at all times at least equal to that receivedby any other Executive Officer, excluding the Chief Executive Officer(collectively, “Insurance”).

 

(ii)                                  **Business/Travel Expenses**.  Executive shall be reimbursed in full forall reasonable and actual out-of-pocket business and travel expenses incurredin the performance of Executive’s Services, on terms and at all times at leastequal to that received by any other Executive Officer, provided Executive shallfirst present an itemized account of such expenditures together with supportingvouchers.

 

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

 

(iv)                              **Car Allowance**.** **Executive shallreceive an annual car allowance of $12,600.00, gross, paid bi-weekly.  Said allowance will remain constantthroughout the Term of this Agreement.

 

**6.**             SEVERANCE.

 

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

 

(a)                                  BaseSalary continuation for a period of 6 months without vacation accrual;

 

(b)                                 anyBonus Compensation payable but not previously paid for any prior completedfiscal year, if Executive has remained employed for the period

 

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contemplated by Subparagraph 3(b); plus a prorated portion of BonusCompensation, if any, otherwise payable pursuant to Subparagraph 3(b) for 6months or any partial fiscal year that has occurred prior to the expiration ofthe Term, whichever is greater, payable only if and when the amount thereof isdetermined in accordance with the terms of the bonus opportunity orentitlement; and

 

(c)                                  Fullinsurance continuation for a period of 6 months, with COBRA entitlementcommencing thereafter, if permissible; otherwise, 6 months insurancecontinuation under COBRA, payable by Image for the first 6 months, and payableby 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 thecontract.  The first option must beexercised by March 31, 2006, through delivery to the address designated byExecutive in Paragraph 15(e) of written notice of intent to extend the Termfrom 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, Executiveagrees as follows:

 

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

 

(i)                                     Financialinformation, such as Image’s earnings, assets, debts, prices, pricingstructure, volumes of purchases or sales or other financial data, whetherrelating to Image generally, or to particular products, services, geographicareas, or time periods;

 

(ii)                                  Supplyand service information, such as goods and services, suppliers’ names oraddresses, terms of supply or service contracts, or of particular transactions,or related information about potential

 

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suppliers, to the extent that such information is not generally knownto the public, and to the extent that the combination of suppliers or use of aparticular supplier, though generally known or available, yields advantages toImage, the details of which are not generally known;

 

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

 

(iv)                              Licensingor Distribution information, such as details about ongoing or proposednegotiations or agreements by or on behalf of Image, terms and details of suchnegotiations or agreements or results of licensing or distribution efforts orinformation about impending transactions; or,

 

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

 

(b)                                 Thatall files, records, documents, data information and customer lists are special,valuable and unique assets of Image and are essential to its continued businesssuccess,  and that under no circumstanceduring the Term hereof or subsequent thereto will he influence or attempt toinfluence any current employee of Image to terminate his or her employment withImage to work for any competitor of Image, nor shall the Executive solicit,directly or indirectly, any customers of Image or disclose or use for thepurpose of such solicitation, without the prior written consent of Image, anyfiles, records, document, data, information, customer lists or any otherproprietary information of Image for a period of 2 (two) years after thetermination, for any reason, of his employment.

 

(c)                                  Executiveacknowledges that any violation of the terms of this Paragraph 8 willconstitute a material breach of this Agreement and will cause Image immediateand irreparable harm and that the damages which Image will suffer may bedifficult 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 andpermanent injunction, without bond, restraining or enjoining such violation byExecutive or any entity or person acting in concert with Executive. Such remedyshall be additional to and not in limitation of any other remedy which mayotherwise be available to Image.

 

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**9.**             INDEMNIFICATION OF EXECUTIVE.

 

Image will, to the maximum extent permitted by law, indemnify and holdExecutive harmless against expenses, including reasonable attorney’s fees,judgments, fines, settlements and other amounts actually and reasonablyincurred in connection with any proceeding arising by reason of Executive’semployment by Image.  Image shalladvance to Executive any expenses incurred in any proceeding to the maximumextent permitted by law.  Executive willbe entitled to utilize defense legal counsel of his choice, subject to theapproval of Image, which approval will not be unreasonably withheld.  Image will at all times maintain directors’and officers’ liability insurance (“D&O Insurance”), or havesufficient funds to self-insure, in amounts and on terms at least as favorableas 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 thelast day of the calendar month of Executive’s death.  In such event, but without limiting any worker’s compensationremedies available to Executive’s estate or survivors, Executive’s personalrepresentative, heirs or beneficiaries entitled by will or the laws of descentand distribution shall be entitled to receive only:

 

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

 

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

 

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

 

(d)                                 dependentInsurance 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, incapacityor injury (“disability”) and other than in connection with an authorized leaveof absence, to perform a majority of Executive’s usual duties for a period oflonger than 120 consecutive days or an aggregate 150 days in a 12-monthperiod.  Image’s obligation to pay BaseSalary will be suspended, subject to compliance with applicable law.  If the suspension because of disability isreasonably anticipated to exceed 180 consecutive days, or an aggregate 210 daysin a 12-month period, Image may terminate this Agreement effective upon 30 daysprior written notice

 

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to Executive.  In such event,Executive shall be entitled to receive, in addition to any other insurancebenefits, the following:

 

(a)                                  BaseSalary continuation for a period of 6 months;

 

(b)                                 anyBonus Compensation payable but not previously paid for any prior completedfiscal year, if Executive has remained employed for that year; plus a proratedportion of Bonus Compensation, if any, otherwise payable pursuant toSubparagraph 3(b) for 6 months or any partial fiscal year that has occurredprior to the suspension of Executive’s duties due to disability, whichever isgreater, payable only if and when the amount thereof is determined inaccordance with the terms of the bonus opportunity or entitlement; and

 

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

 

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

 

**12.**          TERMINATION.

** **

(a)                                  **“Cause.”** In the event of “Cause” (as defined below), Image may terminate thisAgreement at any time effective upon delivery of written notice toExecutive.  In such event, all of Image’sobligations hereunder will immediately terminate without furtherliability.  Moreover, Executive shallnot be entitled to receive any severance, fringe benefits, compensation orother such rights hereunder, nor shall Executive be entitled to receive anyBonus 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 dutieshereunder; (c) knowing and/or willful violation (including conduct in respectof Executive’s supervisory responsibilities) of any law, rule or regulation orother wrongful act that causes or is likely to cause harm, loss or disrepute tothe Company; or (d) conviction of a felony or

 

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misdemeanor (other than minor traffic violations, a first time drivingunder the influence of alcohol conviction, or an offense that does not affectthe business or reputation of the Company); or

 

(ii)                                  Executive’sbreach of any material provision of this Agreement or any other materialagreement between Image and Executive, whenever executed, provided, however,that bona fide disagreements or disputes as to expense reimbursement shall notbe deemed fraud or felonious conduct or Executive’s breach of any materialprovision of this Agreement.

 

(iii)                               Executive’sfailure to comply with all relevant and material obligations, assumable andchargeable to an executive of his corporate rank and responsibilities, underthe Sarbanes-Oxley Act.

 

(iv)                              Inthe event of termination for Cause pursuant to the grounds in Paragraph12(a)(i)(a) or 12(a)(i)(b), Company must first conduct a thorough, good faithinvestigation by an impartial third party (such as a retired judge oralternative dispute resolution service provider) to confirm the Company’sbelief that it is more likely than not that Cause exists to terminateExecutive.

 

(b)                                 **“Without Cause**.”  Notwithstanding anything contained herein to the contrary, ifthis Agreement is terminated prior to expiration of the Term for any reasonother than (i) pursuant to Paragraph 10 or 11, (ii) for Cause or (iii) pursuantto Executive’s Termination for Good Reason pursuant to Paragraph 14, thisAgreement shall be deemed to have been terminated “Without Cause”, and if suchtermination occurs prior to a Change in Control, Executive shall be entitled toreceive all of the compensation, rights and benefits described in Paragraphs3(a) and (b), 4 and 5 through the expiration of the Term and the severancedescribed in Paragraph 6, as if this Agreement were in full force.

 

**13.**          CHANGE IN CONTROL.

** **

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

 

(a)                                  **Termination**.  If (1) this Agreement is terminated prior to expiration of theTerm for any reason other than (a) pursuant to Paragraph 10 (Death) or 11(Permanent Disability/Suspension), (b) for Cause or (c) pursuant to Paragraph14 (Executive’s Right to Terminate for Good Reason) and if such terminationoccurs after a Change in Control, Executive shall be entitled to receive all ofthe compensation, rights and benefits described in Paragraphs 3(a) and (b), 4and 5 for a period of one year following the effective date of termination, orthrough the expiration of the Term,

 

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whichever is longer, and the severance described in Paragraph 6, as ifthis Agreement were in full force.  Ifany other Executive Officer’s options are acquired pursuant to a Change inControl, Executive’s options will be acquired on the same terms as any otherExecutive Officer.  Executive mustreceive 30 days prior written notice of termination regardless of the reasonfor termination.

 

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

 

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

 

(ii)                                  thedate the persons who were members of the Board at the beginning of any 24-monthperiod shall cease to constitute a majority of the Board, unless the election,or the nomination for election by Image’s shareholders, of each new directorwas approved by two-thirds of the members of the Board then in office who werein office at the beginning of the 24-month period; or

 

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

 

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

 

(i)                                     thedate of an acquisition by any Person of beneficial ownership (within themeaning of Rule 13d-3 under Exchange Act) or a pecuniary interest in more than45% of the Common Stock or voting securities then entitled to vote generally inthe election of directors of Image (“Voting Stock”), otherthanan acquisition by one or more Excluded Persons (Image, Image Investors Co. orMessrs. John Kluge, Stuart Subotnick or Executive) in connection with a newissuance of Voting Stock (or rights to acquire Voting Stock) after theeffective date of the 1998 Plan by Image to the Excluded Person in atransaction that the Committee determines

 

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(in advance of the issuance) does not constitute a Change in Controlevent, or in the event that one or more Excluded Persons take Image from apublic company to a privately held company;

 

(ii)                                  approvalby the shareholders of Image of a plan of merger, consolidation, orreorganization of Image or sale or other disposition of all or substantiallyall of Image’s assets involving a more than 50% change in ownership(collectively, a “Business Combination”), other than a BusinessCombination: (1) (a) in which substantially all of the holders of Image’sVoting Stock hold or receive directly or indirectly 50% or more of the votingstock of the resulting entity or a parent company thereof, and (b) after whichno Person (other than any one or more of the Excluded Persons, as definedabove) owns more than 50% of the voting stock of the resulting entity (or aparent company) who did not own directly or indirectly at least that amount ofVoting Stock immediately before the Business Combination; or (2) in which theholders of Image’s capital stock immediately before such Business Combinationwill, immediately after such Business Combination, hold as a group on a fullydiluted basis the ability to elect at least a majority of the directors of thesurviving corporation (or a parent company);

 

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

 

(iv)                              thedate the persons who were members of the Board of Directors at the beginning ofany 24-month period shall cease to constitute a majority of the Board, unlessthe election, or the nomination for election by Image’s shareholders, of eachnew director was approved by two-thirds of the members of the Board ofDirectors then in office who were in office at the beginning of the 24-monthperiod.

 

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

 

(d)                                 **Legal Fees and Expenses**.  If Executive is terminated following aChange in Control and Executive shall incur any legal fees or expenses as aresult of (i) seeking to obtain or enforce any right or benefit provided bythis Agreement or (ii) a claim of wrongful discharge or breach of thisAgreement, Image agrees to pay or reimburse Executive for such fees andexpenses; provided, however, that any claims giving rise to suchfees or expenses must be made in good faith and for good cause.  In the event

 

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there is a dispute regarding Executive’s good faith or the merits ofExecutive’s claim, and it is determined by the court that the claim lackedmerit or was made in bad faith, Executive shall be limited to recovering onlysuch fees and expenses, if any, as the court shall determine.

 

**14.**          EXECUTIVE’S RIGHT TO TERMINATE FOR GOODREASON.

 

During the Term, Executive shall be entitled to terminate Executive’semployment 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 expresswritten consent either before or after a Change in Control:

 

(i)                                     theassignment of any duties materially inconsistent with Executive’s status as anExecutive Officer or a substantial reduction in the nature or status ofExecutive’s responsibilities from those in effect immediately prior to a Changein Control other than any such alteration primarily attributable to the factthat Image may no longer be a public company;

 

(ii)                                  areduction by Image in Base Salary;

 

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

 

(iv)                              thefailure by Image to continue in effect without material change or substantiallysimilar substitution of any compensation or benefit plan in which Executive isentitled to participate, or the failure by Image to continue Executive’sparticipation therein, or the taking of any action by Image which woulddirectly or indirectly materially reduce any of the benefits of such plansenjoyed by Executive immediately prior to the Change in Control, or the takingof any other action by Image which materially adversely changes the conditionsor perquisites of Executive’s employment;

 

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

 

(vi)                              anypurported termination of employment which is not effected pursuant toSubparagraph 13(a), or any such purported termination which would not beconsistent with the terms of this Agreement;

 

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(vii)                           thefailure of Image to maintain adequate D&O insurance coverage pursuant tothe terms of this Agreement, unless such insurance is not available oncommercially reasonable terms; or

 

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

 

The rights provided under this Paragraph 14 to terminate for GoodReason shall not adversely affect any rights of Executive whether before orafter a Change in Control in respect of a breach of this Agreement byImage.  Executive is entitled to allwages, bonuses and benefits for the Balance of the Term of the contract in theevent of a termination under Paragraph 14.

 

**15.**          GENERAL PROVISIONS.

** **

(a)                                  **Successors and Assigns**.  This Agreement is binding upon and shallinure to the benefit of the parties hereto, and any of their heirs, legatees,devisees, personal representatives, assigns and successors in interest of everykind and nature whatsoever.  The partieshereto agree that Executive’s services are personal and that this Agreement isexecuted with respect thereto. Executive shall have no right to sell, transfer or assign this Agreementin any manner whatsoever.

 

(b)                                 **Entire Understanding; Amendment**.  This Agreement and the Exhibit heretoconstitute the entire understanding and agreement between the parties withrespect to the subject matter hereof and supersede (i) any and all prior andpreliminary discussions, (ii) any and all prior written or oral and any and allcontemporaneous written or oral agreements, understandings and negotiationsbetween the parties; including but not limited to prior written or oralemployment agreements and severance agreements, and (iii) all prior writtenEmployment Agreements between Image and Executive.  There are no warranties, representations or other agreementsbetween the parties in connection with the subject matter hereof except as setforth or referred to herein.  ThisAgreement shall not be modified, amended or altered except by an instrument inwriting 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 orunenforceability shall not affect any other provision of this Agreement (or anyportion of any such provision), but this Agreement shall be construed as ifsuch invalid, illegal or unenforceable provision (or portion thereof) had neverbeen contained herein.

 

(d)                                 **Waiver**. The failure by Image, at any time, to require performance by Executiveof any of the provisions hereof, shall not be deemed a waiver of

 

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any kind nor shall it in any way affect Image’s rights thereafter toenforce the same.

 

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

 
| To Image:     |   | IMAGE ENTERTAINMENT, INC      |
|---------------|--------|-------------------------------|
|          |   | 9333 Oso Avenue               |
|          |   | Chatsworth,CA  91311     |
|          |   | Attn: General Counsel         |
|          |   |                          |
| To Executive: |   | DAVID BORSHELL                |
|          |   | c/o Image Entertainment, Inc. |
|          |   | 9333 Oso Avenue               |
|          |   | Chatsworth, CA  91311    |

 

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

 

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

 

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

 

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

 

(i)                                     **Advice of Counsel**.  The parties represent and warrant that inexecuting this Agreement, they have each had the opportunity to obtainindependent financial, legal, tax and other appropriate advice, and are notrelying upon any other party (or the attorneys or other agents of such otherparty) for any such advice.

 

(j)                                     **Subject Headings and Defined Terms**.  Subject headings and choice of defined termsare included for convenience only and shall not be deemed part of thisAgreement.

 

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

 

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

 

 
| IMAGE ENTERTAINMENT, INC. | EXECUTIVE               |
|---------------------------|-------------------------|
|                      |                    |   |
|                      |                    |   |
| By:                       | /s/ Martin W. Greenwald |   | /s/ David Borshell |   |
|                      | Martin W. Greenwald     | David Borshell, an individual |
| Its:                      | Chief Executive Officer |   |
|                           |                         |  |  |  |

 

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