Exhibit 4.1





Exhibit 4.1




EXECUTION COPY




SECOND AMENDMENT AND EXCHANGE AGREEMENT




SECOND AMENDMENT AND EXCHANGE AGREEMENT (this “Agreement”), dated as of July 30, 2009, by and
among Image Entertainment, Inc., a Delaware corporation, with headquarters located at 20525
Nordhoff Street, Suite 200, Chatsworth, California 91311 (the “Company”), and Portside Growth and
Opportunity Fund (the “Investor”).



WHEREAS:



A. The Company and the Investor are parties to that certain Securities Purchase Agreement,
dated as of August 30, 2006 (the “2006 Securities Purchase Agreement”), pursuant to which, among
other things, the Investor purchased from the Company (i) senior convertible notes (the “2006
Notes”) and (ii) warrants (the “2006 Warrants”).



B. In connection with the execution and delivery of the 2006 Securities Purchase Agreement,
the Company entered into that certain Registration Rights Agreement, dated August 30, 2006 (the
"2006 Registration Rights Agreement”), by and between the Company and the Investor, pursuant to
which the Company agreed to provide certain registration rights with respect to the Registrable
Securities (as defined in the 2006 Registration Rights Agreement) under the Securities Act of 1933,
as amended (the “1933 Act”), and the rules and regulations promulgated thereunder, and applicable
state securities laws.



C. On November 10, 2006, the Company entered into an Amendment and Exchange Agreement (the
"2006 Amendment and Exchange Agreement) with the Investor, pursuant to which the Company and the
Investor (x) exchanged the 2006 Warrants for amended and restated warrants (the “Replacement
Warrants”), which are exercisable into shares of the Company’s common stock, par value $0.0001 per
share (the “Common Stock”) (the Warrants as exercised, the “Replacement Warrant Shares”), in
accordance with the terms thereof and (y) amended certain terms of the 2006 Securities Purchase
Agreement (as amended by the 2006 Amendment and Exchange Agreement, the “Securities Purchase
Agreement”), the 2006 Notes (as amended by the 2006 Amendment and Exchange Agreement, the “Existing
Notes”) and the 2006 Registration Rights Agreement. The Existing Notes are convertible into shares
of Common Stock (as converted, the “Existing Conversion Shares”) in accordance with the terms
thereof.



D. The Existing Notes are secured by a third priority perfected security interest in
substantially all of the assets of the Company and certain subsidiaries of the Company (the
"Guarantors”), as evidenced by (i) a Security Agreement, dated as of March 6, 2007 (as amended or
modified from time to time in accordance with its terms, the “Security Agreement”), by and among
the Company, the Investor and the Guarantors, (ii) a Pledge Agreement, dated as of March 6, 2007,
by and between the Company and the Investor (as amended or modified from time to time in accordance
with its terms, the “Pledge Agreement”), and (iii) the Guarantees, dated as of March 6, 2007,
granted by the Guarantors in favor of the Investor (as amended or modified from time to time in
accordance with their terms, the “Guarantees” and, together with the Pledge Agreement, the Security
Agreement and any ancillary documents related thereto, collectively the “Existing Security
Documents”).


 


 









 





E. The Company and the Investor desire to enter into this Agreement, pursuant to which, among
other things, the Company and the Investor shall amend and restate all of such Investor’s Existing
Notes for senior convertible notes in the form attached hereto as Exhibit A in the
principal amount of $15,700,972.60 (the “Amended and Restated Notes”) (as converted, collectively,
the “Amended and Restated Conversion Shares”).



F. Concurrently herewith, the Guarantors of the Company are entering into that certain
Reaffirmation of the Existing Security Documents in the form attached hereto as Exhibit B
(the “Ratification Agreement”, and together with the Existing Security Documents, the “Security
Documents”).



G. The Amended and Restated Notes bear interest, which at the option of the Company, subject
to certain conditions, may be paid in shares of Common Stock (the “Exchanged Interest Shares”).



H. The exchange of the Existing Notes of the Investor for the Amended and Restated Notes is
being made in reliance upon the exemption from registration provided by Section 3(a)(9) of the 1933
Act.



I. Capitalized terms used herein and not otherwise defined herein shall have the respective
meanings ascribed to them in the Securities Purchase Agreement, as amended hereby.



NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter
set forth, the Company and the Investor hereby agree as follows:



1. EXCHANGE OF EXISTING NOTES.



(a) Exchange. Subject to satisfaction (or waiver) of the conditions set forth in
Sections 5 and 6 below, on the Closing Date (as defined below), the Investor shall surrender to the
Company the Existing Notes and the Company shall issue and deliver to the Investor the Amended and
Restated Notes (the “Closing”).



(b) Closing Date. The date and time of the Closing (the “Closing Date”) shall be
10:00 a.m., New York time, on the date hereof, subject to notification of satisfaction (or waiver)
of the conditions to the Closing set forth in Sections 5 and 6 below (or such earlier or later date
as is mutually agreed to by the Company and the Investor). The Closing shall occur on the Closing
Date at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022.



(c) Delivery. On the Closing Date, the Company shall deliver to the Investor the
Amended and Restated Notes. The Amended and Restated Notes shall be delivered duly executed on
behalf of the Company and registered in the name of the Investor or its designee.



(d) Purchase Price. The Amended and Restated Notes shall be issued to the Investor in
exchange for the Existing Notes and without the payment of any additional consideration.


 


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2. AMENDMENTS TO TRANSACTION DOCUMENTS.



(a) Ratifications. Except as otherwise expressly provided herein, the Securities
Purchase Agreement and each other Transaction Document and the Security Documents, is, and shall
continue to be, in full force and effect and is hereby ratified and confirmed in all respects,
except that on and after the Closing Date (i) all references in the Securities Purchase Agreement
to “this Agreement”, “hereto”, “hereof”, “hereunder” or words of like import referring to the
Securities Purchase Agreement shall mean the Securities Purchase Agreement as amended by this
Agreement, (ii) all references in the other Transaction Documents and the Security Documents, to
the “Securities Purchase Agreement”, “thereto”, “thereof”, “thereunder” or words of like import
referring to the Securities Purchase Agreement shall mean the Securities Purchase Agreement as
amended by this Agreement, (iii) the Company hereby confirms and agrees that to the extent that any
of the Security Documents or Transaction Documents purports to assign or pledge to the Investor, or
to grant to the Investor a security interest in or lien on, any collateral as security for the
obligations of the Company from time to time existing in respect of the Existing Notes and any
other Transaction Document, such pledge, assignment and/or grant of the security interest or lien
is hereby ratified and confirmed in all respects, and shall apply with respect to the obligations
under the Amended and Restated Notes (iv) all references to the “Notes” in the Security Documents
shall include the “Amended and Restated Notes”, and (v) the Company hereby ratifies and confirms
its obligations under the Security Documents to which it is a party.



(b) Effective as of the Closing Date, each of the Transaction Documents are hereby amended as
follows:




(i) The defined term “Notes” is hereby amended to include the “Amended and Restated
Notes (as defined in that certain Amendment and Exchange Agreement, by any between the
Company and the Buyer, dated as of July 30, 2009 (the “2009 Amendment and Exchange
Agreement”))”.




(ii) The defined term “Conversion Shares” is hereby amended to include the “Amended and
Restated Conversion Shares (as defined in the 2009 Amendment and Exchange Agreement)”.




(iii) The defined term “Interest Shares” is hereby amended to include the “Exchanged
Interest Shares (as defined in the 2009 Amendment and Exchange Agreement)”.




(iv) The defined term “Transaction Documents” is hereby amended to include the Security
Documents and the 2009 Amendment and Exchange Agreement.




(v) All references to “Securities Purchase Agreement” shall mean, and are hereby
replaced by “Securities Purchase Agreement, as amended by the 2006 Amendment and Exchange
Agreement and as further amended by the 2009 Amendment and Exchange Agreement”.


 


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3. REPRESENTATIONS AND WARRANTIES.



(a) Investor Representations. The Investor hereby represents and warrants to the
Company, as of the date hereof and as of the Closing Date:




(i) Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and shall constitute the
legal, valid and binding obligations of the Investor enforceable against the Investor
in accordance with its respective terms, except as such enforceability may be limited
by general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and remedies.




(ii) No Conflicts. The execution, delivery and performance by the
Investor of this Agreement and the consummation by the Investor of the transactions
contemplated hereby will not (i) result in a violation of the organizational documents
of the Investor or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Investor is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including federal
and state securities laws) applicable to the Investor, except in the case of clauses
(ii) and (iii) above, for such conflicts, defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Investor to perform its obligations hereunder.



(b) Company Representations. The Company hereby represents and warrants to the
Investor, as of the date hereof and as of the Closing Date:




(i) Organization and Qualification. The Company and its Subsidiaries are
entities duly organized and validly existing and, to the extent legally applicable, in
good standing under the laws of the jurisdiction in which they are formed, and have
the requisite power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is duly
qualified as a foreign entity to do business and to the extent legally applicable, is
in good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing would not have a
Material Adverse Effect. The Company has no Subsidiaries except as set forth on
Schedule 3(b)(i).




(ii) Authorization; Enforcement; Validity. The Company has the requisite
corporate power and authority to enter into and perform its obligations under this
Agreement, the Amended and Restated Notes, the Irrevocable Transfer Agent Instructions
and each of the other agreements entered into by the


 


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parties hereto in connection with the transactions contemplated by this Agreement
(collectively, the “2009 Transaction Documents”) and to issue the Amended and Restated
Notes, the Amended and Restated Conversion Shares and the Exchanged Interest Shares in
accordance with the terms hereof and thereof. The execution and delivery of the 2009
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Amended and Restated Notes and the reservation for issuance and the
issuance of the Amended and Restated Conversion Shares issuable upon conversion of the
Amended and Restated Notes, have been duly authorized by the Company’s Board of
Directors and other than as set forth in Section 3(b)(v), no further filing, consent
or authorization is required by the Company, its Board of Directors or its
stockholders. This Agreement and the other 2009 Transaction Documents of even date
herewith have been duly executed and delivered by the Company, and constitute the
legal, valid and binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as such enforceability may be limited
by general principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.




(iii) Issuance of Securities. The issuance of the Amended and Restated
Notes is duly authorized and are free from all taxes (other than income taxes payable
by the Investor), liens and charges with respect to the issue thereof. As of the
Closing, a number of shares of Common Stock shall have been duly authorized and
reserved for issuance which equals or exceeds 150% of the sum of the aggregate of the
maximum number of shares of Common Stock issuable (i) upon conversion of the Amended
and Restated Notes and (ii) as Exchanged Interest Shares pursuant to the terms of the
Amended and Restated Notes. Upon conversion in accordance with the Amended and
Restated Notes, the Amended and Restated Conversion Shares and the Exchanged Interest
Shares will be validly issued, fully paid and nonassessable and free from all
preemptive or similar rights, taxes, liens and charges with respect to the issue
thereof, with the holders being entitled to all rights accorded to a holder of Common
Stock. The issuance by the Company of the Amended and Restated Notes, the Amended and
Restated Conversion Shares and the Exchanged Interest Shares is exempt from
registration under the 1933 Act.




(iv) No Conflicts. The execution, delivery and performance of the 2009
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Amended and Restated Notes and reservation for issuance and issuance
of the Amended and Restated Conversion Shares and the Exchanged Interest Shares) will
not (i) result in a violation of any certificate of incorporation, certificate of
formation, any certificate of designations or other constituent documents of the
Company or any of its Subsidiaries, any capital stock of the Company or any of its
Subsidiaries or bylaws of the Company or any of its Subsidiaries or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or both
would become a default) in


 


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any respect under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which the
Company or any of its Subsidiaries is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including foreign, federal and state
securities laws and regulations and the rules and regulations of the Principal Market
applicable to the Company or any of its Subsidiaries or by which any property or asset
of the Company or any of its Subsidiaries is bound or affected.




(v) Consents. Neither the Company nor any of its Subsidiaries is
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or self-regulatory
agency or any other Person in order for it to execute, deliver or perform any of its
obligations under or contemplated by the 2009 Transaction Documents, in each case in
accordance with the terms hereof or thereof, except for the following consents,
authorizations, orders, filings and registrations (none of which is required to be
filed or obtained before the Closing): the filing of a listing application for the
Amended and Restated Conversion Shares and the Exchanged Interest Shares with the
Principal Market, which shall be done pursuant to the rules of the Principal Market.




(vi) Absence of Litigation. Except as set forth in the SEC Documents (as
defined in Section 3(b)(viii)), there is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries, the
Common Stock or any of the Company’s Subsidiaries or any of the Company’s or its
Subsidiaries’ officers or directors that would reasonably be expected to result in a
Material Adverse Effect.




(vii) Disclosure. The Company confirms that, except as will be disclosed
in the 8-K Filing (as defined in Section 4(b)), neither it nor any other Person acting
on its behalf has provided the Investor or its agents or counsel with any information
that constitutes or could reasonably be expected to constitute material, nonpublic
information. The Company understands and confirms that the Investor will rely on the
foregoing representations in effecting transactions in securities of the Company. All
disclosure provided to the Investor regarding the Company and, its Subsidiaries, their
business and the transactions contemplated hereby, including the Schedules to this
Agreement, furnished by or on behalf of the Company is true and correct and does not
contain any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No event or circumstance
has occurred with respect to the Company or any of its Subsidiaries or its or their
business, properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement by the
Company but which has not been so publicly announced or disclosed.


 


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(viii) SEC Documents; Financial Statements. During the two (2) years
prior to the date hereof, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements, notes and schedules
thereto and documents incorporated by reference therein being hereinafter referred to
as the “SEC Documents”). The Company has delivered to the Investor or its respective
representatives true, correct and complete copies of the SEC Documents not available
on the EDGAR system.




(ix) No Event of Default. The Company represents and warrants to the
Investor that after giving effect to the terms of this Agreement, no default or Event
of Default (as defined in the Amended and Restated Notes) shall have occurred and be
continuing as of the date hereof.




(x) Shell Company Status. The Company has never, prior to the date
hereof, been an issuer subject to Rule 144(i) under the 1933 Act.



4. CERTAIN COVENANTS AND AGREEMENTS.



(a) Best Efforts. Each party shall use its best efforts timely to satisfy each of the
conditions to be satisfied by it as provided in Sections 5 and 6 of this Agreement.



(b) Disclosure of Transactions and Other Material Information. On or before 8:30
a.m., New York City time, on the first Business Day following the date of this Agreement, the
Company shall issue a press release and file a Current Report on Form 8-K describing the terms of
the transactions contemplated by the 2009 Transaction Documents in the form required by the 1934
Act and attaching the material 2009 Transaction Documents (including, without limitation, this
Agreement (and all schedules to this Agreement), the Security Documents and the form of the Amended
and Restated Notes) as exhibits to such filing (including all attachments, the “8-K Filing”). From
and after the filing of the 8-K Filing with the SEC, the Investor shall not be in possession of any
material, nonpublic information received from the Company, any of its Subsidiaries or any of its
respective officers, directors, employees or agents, that is not disclosed in the 8-K Filing. The
Company shall not, and shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents, not to, provide the Investor with any material,
nonpublic information regarding the Company or any of its Subsidiaries from and after the filing of
the 8-K Filing with the SEC without the express written consent of the Investor. If the Investor
has, or believes it has, received any such material, nonpublic information regarding the Company or
any of its Subsidiaries, it shall provide the Company with written notice thereof. The Company
shall, within five (5) Trading Days (as defined in the Amended and Restated Notes) of receipt of
such notice, make public disclosure of such material, nonpublic information. In the event of a
breach of the foregoing covenant by the Company, in addition to any other remedy provided herein or
in the Transaction Documents, the Investor shall have the right to make a public disclosure, in the
form of a press release, public advertisement or otherwise, of such material, nonpublic information
without the prior approval


 


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by the Company, its Subsidiaries, or any of its or their respective officers, directors,
employees or agents. The Investor shall not have any liability to the Company, its Subsidiaries,
or any of its or their respective officers, directors, employees, stockholders or agents for any
such disclosure. Subject to the foregoing, neither the Company, its Subsidiaries nor the Investor
shall issue any press releases or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled, without the prior
approval of the Investor, to make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and
(ii) as is required by applicable law and regulations (provided that in the case of clause (i) the
Investor shall be consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Without the prior written consent of the Investor,
neither the Company nor any of its Subsidiaries or affiliates shall disclose the name of the
Investor in any filing, announcement, release or otherwise.



(c) Holding Period. For the purposes of Rule 144, the Company acknowledges that the
holding period of the Amended and Restated Notes (including the corresponding Amended and Restated
Conversion Shares) may be tacked onto the holding period of the Existing Notes and the Company
agrees not to take a position contrary to this Section 4(c). The Company agrees to take all
actions reasonably necessary, including the issuance by its legal counsel of any necessary legal
opinions addressed to the transfer agent, to issue to the Amended and Restated Conversion Shares
without restriction and not containing any restrictive legend without the need for any action by
the Investor.



(d) Fees and Expenses. The Company shall reimburse the Investor for its reasonable
legal and due diligence fees and expenses in an amount not to exceed $45,000 in connection with the
preparation and negotiation of this Agreement and transactions contemplated thereby by paying any
such amount to Schulte Roth & Zabel LLP (the “Investor Counsel Expense”) by wire transfer of U.S.
dollars and immediately available funds in accordance with the written instructions of Schulte Roth
& Zabel LLP delivered to the Company on or prior to the Closing Date. The Investor Counsel Expense
shall be paid by the Company whether or not the transactions contemplated by this Agreement are
consummated. Except as otherwise set forth in this Agreement, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes (other than income
taxes payable by the Investor) and duties levied in connection with the issuance of the Amended
and Restated Notes.



5. CONDITIONS TO COMPANY’S OBLIGATIONS HEREUNDER.



The obligations of the Company to the Investor hereunder are subject to the satisfaction of
each of the following conditions, provided that these conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion by providing the Investor with
prior written notice thereof:



(a) The Investor shall have executed this Agreement and delivered the same to the Company.


 


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(b) The Investor shall have delivered to the Company the Investor’s Existing Notes for
cancellation.



(c) The representations and warranties of the Investor shall be true and correct in all
material respects (except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all respects) as of the
date when made and as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date which shall be true and correct as of such
specified date), and the Investor shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Investor at or prior to the Closing Date.



6. CONDITIONS TO INVESTOR’S OBLIGATIONS HEREUNDER.



The obligations of the Investor hereunder are subject to the satisfaction of each of the
following conditions, provided that these conditions are for the Investor’s sole benefit and may be
waived by the Investor at any time in its sole discretion by providing the Company with prior
written notice thereof:




(a) The Company shall have duly executed and delivered this Agreement to the Investor.



(b) The Company shall have duly executed and delivered to the Investor the Amended and
Restated Notes.



(c) The Company shall have duly executed and delivered to the Investor a copy of the
Irrevocable Transfer Agent Instructions, in the form of Exhibit C attached hereto, which
instructions shall have been delivered to and acknowledged in writing by the Company’s transfer
agent.



(d) The Company shall have delivered to the Investor a certificate (or a fax or pdf copy of
such certificate) evidencing the formation and good standing of the Company and each of its
Subsidiaries in such entity’s jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within ten (10) days of the Closing Date.



(e) The Company shall have delivered to the Investor a certified copy of the Certificate of
Incorporation as certified by the Secretary of State (or comparable office) of the State of
Delaware (or a fax or pdf copy of such certificate) within ten (10) days of the Closing Date.



(f) The Company shall have delivered to the Investor a certificate, executed by the Secretary
of the Company and dated as of the Closing Date, as to (i) the resolutions approving the
transactions contemplated hereby as adopted by the Board in a form reasonably acceptable to the
Investor, (ii) the Certificate of Incorporation and (iii) the Bylaws, each as in effect as of the
Closing, in the form attached hereto as Exhibit D.


 


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(g) The representations and warranties of the Company contained herein shall be true and
correct in all material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and correct in all
respects) as of the date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date which shall be true and correct
as of such specified date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the Closing Date and after
giving effect to the terms of this Agreement. The Investor shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by the Investor in the
form attached hereto as Exhibit E.



(h) The Company shall have delivered to the Investor a Consent and Amendment, by and among the
Company, the Investor and Wachovia Capital Finance Corporation (Western) (the “Senior Lender”), in
the form attached hereto as Exhibit F, duly executed and delivered by the Company and the
Senior Lender, pursuant to which the Senior Lender consents to the transactions contemplated hereby
as required pursuant to Section 6(b) of that certain Subordination Agreement dated as of May 4,
2007, by and between the Senior Lender and the Investor (the “Subordination Agreement”).



(i) The Senior Lender shall have duly executed and delivered to the Investor the Letter
Agreement, in the form attached hereto as Exhibit G. pursuant to which the Senior Lender
and the Investor agree to amend the defined term “Standstill Period” in the Subordination Agreement
to mean “the period beginning July 30, 2009, through and including the first to occur of: (a) the
date upon which the Discharge of Senior Indebtedness shall have occurred, or (b) January 30, 2010”.



(j) The Common Stock (I) shall be designated for quotation or listed on the Principal Market
and (II) shall not have been suspended, as of the Closing Date, by the SEC or the Principal Market
from trading on the Principal Market.



(k) The Company shall have obtained all governmental, regulatory or third party consents and
approvals, if any, necessary for the transactions contemplated hereby.



(l) The parties to the Ratification Agreement shall have duly executed and delivered the
Ratification Agreement to the Investor.



(m) The Company shall have paid to Schulte Roth & Zabel LLP the Investor Counsel Expense in
accordance with Section 4(d) above.



(n) The Company shall have delivered to the Investor such other documents relating to the
transactions contemplated by this Agreement as the Investor or its counsel may reasonably request.


 


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7. TERMINATION.



In the event that the Closing does not occur by the fifth (5th) Business Day after
the date hereof, due to the Company’s or the Investor’s failure to satisfy the conditions set forth
in Sections 5 and 6 hereof (and the nonbreaching party’s failure to waive such unsatisfied
conditions(s)), the nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without liability of any
party to any other party; provided, however, if this Agreement is terminated
pursuant to this Section 7, the Company shall remain obligated to reimburse the Investor for the
expenses described in Section 4(d) above. Upon such termination, the terms hereof shall be null
and void and the parties shall continue to comply with all terms and conditions of the Transaction
Documents, as in effect prior to the execution of this Agreement.



8. MISCELLANEOUS.



(a) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an original, not a
facsimile signature.



(b) Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.



(c) Severability. If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the
provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to
apply to the broadest extent that it would be valid and enforceable, and the invalidity or
unenforceability of such provision shall not affect the validity of the remaining provisions of
this Agreement so long as this Agreement as so modified continues to express, without material
change, the original intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not substantially
impair the respective expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable
provision(s) with a valid provision(s), the effect of which comes as close as possible to that of
the prohibited, invalid or unenforceable provision(s).



(d) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of New York. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed


 


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herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.



(e) No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.



(f) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.



(g) No Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.



(h) Entire Agreement; Effect on Prior Agreements; Amendments. Except for the
Transaction Documents (to the extent any such Transaction Document in effect prior to this
Agreement is not amended by this Agreement), this Agreement supersedes all other prior oral or
written agreements between the Investor, the Company, their affiliates and Persons acting on their
behalf with respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or therein, neither the
Company nor the Investor makes any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be amended other than by an instrument in
writing signed by the Company. No provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought. No consideration shall be offered
or paid to any Person to amend or consent to a waiver or modification of any provision of any of
the Transaction Documents unless the same consideration also is offered to all of the parties to
the Transaction Documents, holders of Amended and Restated Notes. The Company has not, directly or
indirectly, made any agreements with any of the Investor relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in the Transaction
Documents.


 


12









 





(i) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:



If to the Company:



	 	 	 	 	 
	 	 	Image Entertainment, Inc.

20525 Nordhoff Street, Suite 200

Chatsworth, California 91311
	 

	 	Telephone:
	 	(818) 407-9100
	 

	 	Facsimile:
	 	(818) 407-9331
	 

	 	Attention:
	 	Jeff Framer






With a copy to:



	 	 	 	 	 
	 	 	Perkins Coie LLP

131 South Dearborn Street, Suite 1700

Chicago, Illinois 60603-5559
	 

	 	Telephone:
	 	(312) 324-8547
	 

	 	Facsimile:
	 	(312) 324-9547
	 

	 	Attention:
	 	Teri A. Lindquist, Esq.






If to the Transfer Agent:



	 	 	 	 	 
	 	 	Computershare Investor Services

350 Indiana Street, Suite 800

Golden, CO 80401
	 

	 	Telephone:
	 	(303) 262-0710
	 

	 	Facsimile:
	 	303) 262-0700
	 

	 	Attention:
	 	Kathy Heagerty






If to the Investor:



	 	 	 	 	 
	 	 	Portside Growth and Opportunity Fund

c/o Ramius LLC

599 Lexington Avenue, 20th Floor

New York, New York 10022
	 

	 	Telephone:
	 	(212) 845-7955
	 

	 	 	 	(212) 201-4841
	 

	 	Facsimile:
	 	(212) 201-4802
	 

	 	 	 	(212) 845-7986
	 

	 	Attention:
	 	Jeffrey Smith
	 

	 	 	 	Owen Littman





 


13









 





with a copy (for informational purposes only) to:



	 	 	 	 	 
	 	 	Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022
	 

	 	Telephone:
	 	(212) 756-2000
	 

	 	Facsimile:
	 	(212) 593-5955
	 

	 	Attention:
	 	Eleazer N. Klein, Esq.






or to such other address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party five (5) days prior
to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission or (C) provided by an overnight courier service shall
be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above, respectively.



(j) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns in accordance with the terms of
the Securities Purchase Agreement.



(k) Survival. Unless this Agreement is terminated under Section 7, the
representations and warranties of the Company and the Investor contained herein and the agreements
and covenants set forth herein shall survive the Closing.



(l) Remedies. The Investor and each holder of the Securities shall have all rights
and remedies set forth in the Transaction Documents and all rights and remedies which such holders
have been granted at any time under any other agreement or contract and all of the rights which
such holders have under any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. Furthermore, the Company recognizes that in the event
that it fails to perform, observe, or discharge any or all of its obligations under this Agreement,
any remedy at law may prove to be inadequate relief to the Investor. The Company therefore agrees
that the Investor shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond or other security.



[Signature Page Follows]



 


14









 







IN WITNESS WHEREOF, the Investor and the Company have caused their respective signature page
to this Agreement to be duly executed as of the date first written above.



	 	 	 	 	 
	 	COMPANY:



IMAGE ENTERTAINMENT, INC.

 	 
	 	By:  	/s/ JEFF M. FRAMER
 	 
	 	 	Name:  	Jeff M. Framer 	 
	 	 	Title:  	President and CFO 	 
	 



[Signature Page to Second Amendment and Exchange Agreement]



 


 









 








IN WITNESS WHEREOF, the Investor and the Company have caused their respective signature page
to this Agreement to be duly executed as of the date first written above.



	 	 	 	 	 
	 	INVESTOR:
 
PORTSIDE GROWTH AND OPPORTUNITY FUND

 	 
	 	By:  	/s/ JEFFREY C. SMITH
 	 
	 	 	Name:  	Jeffrey C. Smith 	 
	 	 	Title:  	Authorized Signatory 	 
	 



[Signature Page to Second Amendment and Exchange Agreement]