Document:

Exhibit 10.1

 

EMPLOYMENT
AGREEMENT

 

This EMPLOYMENT AGREEMENT is dated as of April 14, 2010  (the “Effective Date”), and
is made among Image Entertainment, Inc., a Delaware corporation (the “Company”),
and Ted Green  (“Executive”).

 

WHEREAS, the Company and Executive desire to enter into this Employment
Agreement (the “Agreement”) upon the terms and conditions hereinafter
set forth.

 

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

 

1.                                      Employment Period.  The term of Executive’s employment hereunder
shall commence effective as of the Effective Date and, unless terminated
pursuant to Section 4 hereof, shall continue through the third
anniversary of the Effective Date (such period referred to herein as the “Initial
Term”); provided that the term of employment hereunder shall be
automatically extended for an additional one-year period (each, an “Extension
Period”), beginning upon the expiration of the Initial Term, or upon
expiration of any Extension Period, unless Executive shall have given written
notice of non-extension to the Company at least 90 days prior to the
then-applicable expiration date or the Company shall have given written notice
of non-extension to Executive prior to the then-applicable expiration date (the
Initial Term and any Extension Period shall be referred to herein as the “Employment
Period”); provided that if the Company gives less than twelve months’
notice of non-extension, the term of employment hereunder shall automatically
be extended until the twelve-month anniversary of the giving of such notice.

 

2.                                      Employment Duties.

 

(a)                                  During the Employment Period, Executive shall
serve as Chairman of the Board of Directors of the Company (the “Board”)
and Chief Executive Officer of the Company. 
In such position, Executive shall have such duties, responsibilities and
authority as is customarily assigned to individuals serving in such position,
and such other duties, responsibilities and authority consistent with Executive’s
position as the Board of Directors of the Company (the “Supervising
Authority”) specifies from time to time, in each case, which shall be
reasonably commensurate with the duties, responsibilities and authority of a
chairman of the board of directors and chief executive officer of entities of
the Company’s size and nature within the United States.  During the Employment Period, the Company
shall also nominate Executive for election (or re-election, as the case may be)
as a member of the Board at the expiration of each term of office, and
Executive shall serve as a member of the Board for each period for which he is
so elected.  In addition, Executive
hereby consents to serve as an officer and/or director of any subsidiary of the
Company without any additional salary or compensation, if so requested by the
Board.

 

(b)                                 Executive shall be employed by the Company on a
full-time basis (i.e., 40 hours per work week). Executive shall devote all of
Executive’s skill and knowledge and substantially all of Executive’s attention
and energies to the conscientious performance of all of the lawful duties,
responsibilities and authority that may be assigned to Executive hereunder,
except for vacation time and absence for sickness and similar disability.
Nothing contained in this Agreement shall preclude Executive from devoting time
to personal and family investments, or to other businesses, or as a director of
any other profit or not-for-profit company, or from participating in industry
associations; provided, that such activities or services do not (i) materially
interfere with Executive’s duties hereunder; (ii) materially violate the
terms of Section 6 hereof or the Proprietary Information Agreement
referred to in Section 7 hereof; (iii) involve service to any
other profit or not-for-profit company, a substantial portion of whose

 

 

business is
competitive with a substantial portion of the Company’s business, or a
substantial portion of whose business is substantially in distribution of DVDs
or its successors to the home market or on-demand programming; or (iv) result
in Executive joining any boards of for-profit companies without the prior
approval of the Board, such approval not to be unreasonably withheld, other
than China MediaExpress Holdings, Inc., Masterbeat, and Content Capital
Partners, LLC, which shall be deemed to be approved as of the date hereof.
Executive shall also render services, on a non-permanent basis, at such other
places within or outside the United States as the Supervising Authority may
reasonably direct from time to time. Executive shall be subject to and comply
with the written policies and procedures generally applicable (and provided) to
senior executives of the Company to the extent such policies and procedures are
not inconsistent with any term of this Agreement (including any negatively
implied term).

 

3.                                      Compensation.

 

(a)                                  Base Salary.  During the Employment Period,
the Company shall pay Executive a base salary at a rate not less than $300,000
per annum, payable in accordance with the Company’s then effective payroll
practices.  The Board shall review
Executive’s base salary annually during the Employment Period and, in its sole
discretion, may increase (but not decrease) such base salary from time to
time.  The annual base salary payable to
Executive under this Section 3(a), as the same may be increased
from time to time, shall hereinafter be referred to as the “Salary.”  In addition, for services performed from January 8,
2010, through the Effective Date, the Company shall make a lump sum cash
payment to Executive of an amount equal to the amount Executive would have
received during such period had this Agreement been in effect since January 8,
2010, but only to the extent such amounts have not previously been paid to
Executive.  This lump sum payment shall
be made within 10 days following the Effective Date.

 

(b)                                 Annual Bonus.  In addition to the Salary, for
each fiscal year of the Company that begins or ends during the Employment
Period, Executive shall have an annual cash bonus opportunity of fifty percent
(50%) of Base Salary (the “Bonus”), which shall be payable if 100% of
the Performance Targets (as defined below) are achieved; provided that if
actual performance of the Company for such period exceeds or is less than 100%
of the Performance Targets (but is at least 85% of the Performance Targets),
the amount of the Bonus shall be adjusted positively or negatively,
respectively, by mathematical interpolation, as reasonably determined in good
faith by the Board or compensation committee. 
For purposes of this Agreement, the “Performance Targets” for the fiscal
years during the Initial Term shall
be the achievement of earnings before interest, taxes, depreciation and
amortization (the “EBIDTA Targets”) in amounts equal to (i) $10.3
million, for fiscal  year ending March 31,
2011, (ii) $17.6 million, for fiscal year ending March 31, 2012, and (iii) $21.1
million, for fiscal year ending March 31, 2013, in each case as confirmed
by the Company’s audited financials for each such fiscal year; provided,
however, that in the event of any material acquisition of a company or
business by the Company, the Performance Targets shall be reasonably adjusted
by the Company and Executive to take into account any changes to the EBITDA
Targets or other material changes relating to such acquisition that should
reasonably result in a change to the applicable Performance Targets.  Any Bonus
that becomes payable pursuant to this Section 3(b) shall be
paid to Executive as soon as reasonably practicable following the Company’s
determination of whether the Performance Targets for the applicable fiscal year
have been achieved and its calculation of the Bonus for such applicable fiscal
year which, in each case, shall be no later than the earlier of (x) 10
days following the completion of the audit for the applicable fiscal year and (y) the
date that is 75 days following the end of each such applicable fiscal
year.  Notwithstanding anything to the
contrary contained in this Agreement or any applicable bonus plan, program or
arrangement, but except as provided in Section 4, Executive shall
be entitled to receive any such Bonus only if Executive is employed on the last
business day of the fiscal year to which the Bonus relates.

 

 

(c)                                  Benefits.  During the Employment Period,
Executive (and any dependents and beneficiaries of Executive to the extent
provided therein) shall be entitled to participate in any and all employee
benefit plans, programs or arrangements (as amended from time to time)
sponsored by the Company for its senior executives or employees at a level
commensurate with Executive’s position and no less favorable to Executive than
those applicable to such senior executives or employees, including, without
limitation, life and disability insurance (“Benefits”).  Executive shall be entitled to four weeks of
vacation, with up to two weeks of carryover accumulation, which shall accrue on
the Effective Date and each January 1 thereafter occurring during the
Employment Period.  During the Employment
Period, Executive shall be entitled to all other fringe benefits as are from
time to time made generally available to senior executives or employees of the
Company.

 

(d)                                 Equity Compensation.  During
the Employment Period, Executive shall be entitled to participate in any and
all equity or other employee benefit plans that are generally available to
senior executives, as distinguished from general management, of the Company on
a basis commensurate with Executive’s position and no less favorable to
Executive than those applicable to such senior executives.  Except as otherwise provided in this
Agreement, Executive’s participation in and benefits under any such plan shall
be on the terms and subject to the conditions specified in the governing
document of the particular plan and applicable award agreement.

 

(e)                                  Expense Reimbursement.  During
the Employment Period, the Company will pay or reimburse Executive in
accordance with the Company’s written expense reimbursement policies and
procedures (i) for business class travel over three hours, temporary
housing, auto and other reasonable out of pocket expenses incurred in
association with Executive’s commute to and from his home in New York and Los
Angeles, as well as for working in Los Angeles and (ii) the Company shall
reimburse Executive in accordance with the Company’s policies and procedures
for all proper expenses incurred by Executive in the performance of Executive’s
duties hereunder, regardless of where incurred.

 

(f)                                    Application of Section 409A of the Code to
Reimbursements.  Any amounts payable under Section 3(e) and
Section 19 shall be made as promptly as is reasonably practicable, in
accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv), and paid
no later than the last day of Executive’s taxable year following the taxable year
in which Executive incurred the expenses. 
The amounts provided under Section 3(e) and Section 19
during any taxable year of Executive’s will not affect such amounts provided in
any other taxable year of Executive’s, and Executive’s right to reimbursement
for such amounts shall not be subject to liquidation or exchange for any other
benefit.

 

4.                                      Termination.

 

(a)                                  At-Will Employment.  The
Company and Executive acknowledge that Executive’s employment is and shall
continue to be at-will, as defined under applicable law.  Executive acknowledges and agrees that
nothing in this Agreement shall confer upon Executive any right with respect to
continuation of employment by the Company, nor shall it interfere in any way
with Executive’s right or the Company’s right to terminate Executive’s
employment at any time, with or without Cause, as defined in Section 10,
or with or without Good Reason, as defined in Section 10, subject
to Executive’s right to receive certain payments upon termination as set forth
in this Section 4.  Any
termination of Executive’s employment under this Agreement (other than in the
event of Executive’s death), shall be communicated by a written Notice of
Termination addressed to the other party to this Agreement.  A “Notice of Termination” shall mean a
notice stating that Executive’s employment with the Company has been or will be
terminated and the specific provisions of this Section 4 under
which such termination is being effected.

 

(b)                                 Death; Disability; Termination for Cause;
Resignation Without Good Reason or

 

 

Expiration of
Employment Period.  Executive’s employment with the Company shall
terminate pursuant to this Section 4(b):  (i) upon Executive’s death or
Disability, as defined in Section 10, (ii) upon Executive’s
voluntary termination of Executive’s employment without Good Reason, (iii) upon
a termination of Executive’s employment by the Company for Cause, or (iv) upon
the expiration of the Employment Period. 
Upon a Termination of Employment pursuant to this Section 4(b),
the Employment Period shall terminate and Executive (or Executive’s estate)
shall receive (A) any unpaid Salary and unused vacation accrued through
the Termination Date, as defined in Section 10, (B) to the
extent not previously paid, any Bonus earned and unpaid as of the Termination
Date for any previously completed fiscal year, which shall be paid on the tenth
day after the Termination Date (or, if such day is not a business day, the next
business day after such day), (C) all Benefits determined in accordance
with the Company’s applicable Benefit plans then in effect, and (D) reimbursement
of expenses pursuant to Section 3 incurred through the Termination
Date.

 

(c)                                  Termination Without Cause; Resignation for Good
Reason.  Executive’s employment with the Company shall
terminate pursuant to this Section 4(c):  (i) upon a termination of Executive’s
employment by the Company without Cause or (ii) upon Executive’s
termination of Executive’s employment for Good Reason.  Upon a Termination of Employment pursuant to
this Section 4(c), the Employment Period shall terminate and
Executive (or Executive’s estate) shall be entitled to:

 

(i)                                     any unpaid Salary and unused vacation accrued
through the Termination Date and, to the extent not previously paid, any Bonus
earned and unpaid as of the Termination Date for any previously completed
fiscal year, which shall be paid on the tenth day after the Termination Date
(or, if such day is not a business day, the next business day after such day);

 

(ii)                                  all Benefits determined in accordance with the
Company’s applicable Benefit plans then in effect and reimbursement of expenses
pursuant to Section 3 incurred through the Termination Date;

 

(iii)                               payment of an amount equal to 12 months of
Executive’s annual Salary as in effect immediately prior to the Termination
Date (but without taking into account any reduction in Salary giving rise to a
termination of employment by Executive for Good Reason);

 

(iv)                              payment of a pro rata portion, based on the
number of days elapsed in the fiscal year of termination through and including
the date of termination, of the Bonus Executive would have been entitled to
receive for the year of termination but for termination of his employment.  If termination of Executive’s employment
occurs during the first six months of a fiscal year, the Bonus Executive would
have been entitled to receive for the year of termination shall be deemed to be
equal the average of the Bonuses Executive received for the two previous fiscal
years (or the actual bonus for the previous fiscal year if termination occurs
during the first six months of the second full fiscal year following the
Effective Date).  If termination of
Executive’s employment occurs during the second six months of a fiscal year (or
at any time during the first full fiscal year following the Effective Date),
the Company’s performance during the portion of such fiscal year preceding
termination of Executive’s employment shall be annualized, and the Bonus
Executive would have received for such fiscal year shall be deemed to be the
Bonus Executive would have earned if the annualized performance had been the
actual performance for such fiscal year; and

 

(v)                                 for the period beginning on the date of
termination and ending on the date which is twelve (12) full months following
the date of termination (or, if earlier, the date on which Executive accepts
employment with another employer that provides comparable benefits in terms of
cost and scope of coverage), the Company shall pay for and provide Executive
and his eligible dependents and beneficiaries (to the extent provided therein)
who were covered under the Company’s health plans as of

 

 

the date of Executive’s termination with
healthcare benefits which are substantially the same as the benefits provided
to Executive and such dependents and beneficiaries immediately prior to the
date of termination, including, if necessary, paying the costs associated with
continuation coverage pursuant to COBRA (provided that Executive shall be
solely responsible for all matters relating to his continuation of coverage
pursuant to COBRA, including, without limitation, his election of such
coverage).

 

Notwithstanding any provision to the contrary in this Agreement, no
amount shall be paid pursuant to Section 4(c) above (except
for the amounts payable under Sections 4(c)(i) and (ii))
unless, on or prior to the 60th day following the date of Executive’s
Termination of Employment, an effective mutual waiver and release of claims
agreement (the “Release”) in substantially the form attached hereto as Exhibit A
has been executed and remains effective on such date and any applicable
revocation period thereunder has expired; provided that any failure of
the Company to execute the Release shall not reduce or eliminate its
obligations hereunder.  Subject to Section 4(e)(i),
the amounts described in Sections 4(c)(iii) and (iv) shall
be paid in a single lump sum on the next payroll date immediately following the
expiration of such 60-day period.

 

(d)                                 No Duty to Mitigate.  In no
event shall Executive be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to Executive under any of
the provisions of this Agreement and such amounts shall not be reduced whether
or not Executive obtains other employment; provided, however,
that any loans, advances or other amounts owed by Executive to the Company may
be offset by the Company against amounts payable to Executive under this Section 4.

 

(e)                                  Section 409A.

 

(i)                                     Payment Delay.  Notwithstanding anything herein
to the contrary, to the extent any payments to Executive pursuant to this
Agreement are non-qualified deferred compensation subject to Section 409A
of the Code, then (A) to the extent required by Section 409A of the
Code, no amount shall be payable unless Executive’s termination of employment
constitutes a Separation from Service and (B) if Executive, at the time of
his Separation from Service, is determined by the Company to be a “specified
employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, such
that delayed commencement of any portion of the termination benefits payable to
Executive pursuant to this Agreement is required in order to avoid a prohibited
distribution under Section 409A(a)(2)(B)(i) of the Code (any such
delayed commencement, a “Payment Delay”), then such portion of the
payments to be made to Executive shall not be provided to Executive prior to
the earlier of (A) the expiration of the six-month period measured from
the date of Executive’s Separation from Service, (B) the date of Executive’s
death or (C) such earlier date as is permitted under Section 409A.  Upon the expiration of the applicable Code Section 409A(a)(2)(B)(i) deferral
period, all payments deferred pursuant to a Payment Delay shall be paid in a
lump sum with interest on the foregoing at the applicable federal rate for
instruments of less than one year, to Executive within 30 days following such
expiration, and any remaining payments due under the Agreement shall be paid as
otherwise provided herein.  The
determination of whether Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of
the Code as of the time of his Separation from Service shall be made by the
Company in accordance with the terms of Section 409A of the Code and
applicable guidance thereunder (including without limitation Treasury
Regulation Section 1.409A-1(i) and any successor provision thereto).

 

(ii)                                  Exceptions to Payment Delay. 
Notwithstanding Section 4(e)(i), to the maximum extent
permitted by applicable law, amounts payable to Executive pursuant to Section 4(c) shall
be made in reliance upon Treasury Regulation Section 1.409A-1(b)(9) (with
respect to separation pay plans) or Treasury Regulation Section 1.409A-1(b)(4) (with
respect to short-term deferrals). 
Accordingly, the severance payments provided for in Section 4(c) are
not intended to provide for any

 

 

deferral of compensation subject to Section 409A
of the Code to the extent (A) the severance payments payable pursuant to Section 4(c),
by their terms and determined as of the date of Executive’s Termination of
Employment, may not be made later than the 15th day of the
third calendar month following the later of (1) the end of the Company’s
fiscal year in which Executive’s Termination of Employment occurs or (2) the
end of the calendar year in which Executive’s Termination of Employment occurs,
or (B) such severance payments do not exceed an amount equal to two times
the lesser of (1) the amount of Executive’s annualized compensation based
upon Executive’s annual rate of pay for the calendar year immediately preceding
the calendar year in which Executive’s Termination of Employment occurs
(adjusted for any increase during the calendar year in which such Termination
of Employment occurs that would be expected to continue indefinitely had Executive
remained employed with the Company) or (2) the maximum amount that may be
taken into account under a qualified plan pursuant to Section 401(a)(17)
for the calendar year in which Executive’s Termination of Employment occurs.

 

(f)                                    Exclusive Remedy.  Except
as otherwise expressly required by law or as specifically provided herein, all
of Executive’s rights to salary, severance, benefits, bonuses and other amounts
hereunder (if any) accruing after the termination of Executive’s employment
shall cease upon such termination.  In
addition, Executive acknowledges and agrees that he is not entitled to any
reimbursement by the Company for any taxes payable by Executive as a result of
the payments and benefits received by Executive pursuant to this Section 4
other than as set forth in Section 20.

 

(g)                                 Effect of Termination on Other Plans and Programs.  In the
event that Executive’s employment with the Company is terminated for any
reason, Executive shall be entitled to receive all amounts payable and benefits
accrued under any otherwise applicable plan, policy, program or practice of the
Company in which Executive was a participant immediately prior to the
Termination Date in accordance with the terms thereof; provided, that,
if Executive’s termination is without Cause or for Good Reason, Executive shall
not be entitled to receive any payments or benefits under any such plan,
policy, program or practice providing any severance or incentive compensation,
and the provisions of Section 4(c) hereof shall supersede the
provisions of any such plan, policy, program or practice.

 

(h)                                 Return of the Company’s Property.  As soon
as reasonably practicable following the termination of his employment in any
manner, Executive shall surrender to the Company or destroy, at his option, all
lists, books and records of, or in connection with, the Company’s business, and
all other property belonging to the Company, it being distinctly understood
that all such lists, books and records, and other documents, are the property
of the Company.  If Executive elects to
destroy such property, Executive shall deliver to the Company a signed
statement certifying compliance with this Section 4(g).  Nothing contained in this Section 4(g) or
the Proprietary Information Agreement (as defined below) shall prevent
Executive from retaining and utilizing copies of benefit plans and programs in
which Executive retains an interest, desk calendars, his personal rolodex or
files, personal office furnishings or such other personal records and documents
as may Executive may reasonably require.

 

5.                                      Federal and State Withholding.  The Company shall deduct from the amounts payable
to Executive pursuant to this Agreement the amount of all federal, state and
local taxes required to be withheld by the Company under applicable law.

 

6.                                      Noncompetition; Nonsolicitation.

 

(a)                                  General.  Executive acknowledges that in
the course of Executive’s employment with the Company, Executive has and will
become familiar with trade secrets and other confidential information
concerning the Company and that Executive’s services will be of special, unique
and extraordinary value to the Company.

 

 

(b)                                 Noncompetition.  Executive agrees that during the
Employment Period, except as may otherwise be approved by the Board or as set
forth in Section 2 above, Executive shall not in any manner,
directly or indirectly, through any person, firm or corporation, alone or as a
member or a partnership or as an owner, investor, member, partner, officer,
director, stockholder, investor or employee of or consultant to any other
corporation or enterprise or otherwise, compete with the Company or any of its
subsidiaries, within the United States and/or any foreign country, in the
business of distribution of DVDs or its successors to the home market or
on-demand programming as conducted by the Company during Executive’s employment
or in planning during Executive’s employment in which Executive was materially
involved or had actual knowledge.

 

(c)                                  Nonsolicitation.  Executive further agrees that
during the Employment Period and for a period of one year following Executive’s
Termination of Employment, Executive shall not in any manner, directly or
indirectly (i) induce or attempt to induce any employee of the Company or
any of its subsidiaries (other
than John Hyde) to terminate or
abandon his or her employment for any purpose whatsoever, or (ii) solicit
or encourage any customer of the Company or any of its subsidiaries or
independent contractor providing services to the Company or any of its
subsidiaries to terminate or diminish its relationship with it.

 

(d)                                 Nondisparagement. 
Executive agrees that Executive shall neither, directly or indirectly,
engage in any conduct or make any statement disparaging in any way the Company,
its subsidiaries or any of their personnel nor, directly or indirectly, engage
in any other conduct or make any other statement that could be reasonably
expected to impair the goodwill of the Company or the reputation of the
Company, in each case, except to the extent required by law, and then only
after consultation with the Company to the extent possible, or to enforce the
terms of this Agreement.  The Company and
its affiliates agree they will not, directly or indirectly, engage in any
conduct or make any statement disparaging or criticizing in any way Executive,
or engage in any other conduct or make any other statement that could be
reasonably expected to impair the reputation of Executive, in each case, except
to the extent required by law, and then only after consultation with Executive
to the extent possible, or to enforce the terms of this Agreement.

 

(e)                                  Exceptions.  Nothing in this Section 6
shall prohibit Executive (i) from being a stockholder in a mutual fund or
a diversified investment company, (ii) from being an owner of not more
than five percent of the outstanding stock of any class of a corporation, any
securities of which are publicly traded, so long as Executive has no active
participation in the business of such corporation,  (iii) from providing services to or on
behalf of any other business entities in accordance with Section 2,
or (iv) from making generalized solicitations for employees through
advertisements and hiring any persons through such generalized solicitations.

 

7.                                      Confidentiality.  Executive and the Company have entered into the
Company’s standard employee proprietary information agreement (the “Proprietary
Information Agreement”).

 

8.                                      Enforcement.  The parties hereto agree that the Company may be
damaged irreparably in the event that any provision of Section 6 or
7 of this Agreement were not performed in accordance with its terms or
were otherwise breached and that money damages may be an inadequate remedy for
any such nonperformance or breach. 
Accordingly, the Company and its successors and permitted assigns shall
be entitled, in addition to other rights and remedies existing in their favor,
to seek an injunction or injunctions to prevent any breach or threatened breach
of any such provisions and to enforce such provisions specifically (without
posting a bond or other security), in each case, as a court of competent
jurisdiction may deem necessary or appropriate to restrain Executive.  In addition, in the event of any breach of Section 6(c) by
Executive, Executive shall repay to the Company any amounts paid to him pursuant
to Sections 4(c)(iii) and (iv) following the date of
such breach.

 

 

9.                                      Representations/Covenant.  Executive represents and warrants to the Company
that (a) the execution, delivery and performance of this Agreement by
Executive does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Executive is a party or by which Executive is bound, (b) Executive
is not a party to or bound by any employment agreement, noncompetition
agreement or confidentiality agreement with any other person or entity that
would interfere with the execution, delivery or performance of this Agreement
by Executive, and (c) upon the execution and delivery of this Agreement by
the Company, this Agreement shall be the valid and binding obligation of
Executive, enforceable in accordance with its terms.  Executive agrees that he will not disclose to
or use on behalf of the Company any proprietary information of a third party
without that party’s consent.  The
Company represents and warrants to Executive that (i) it is fully
authorized by action of its Board (and of any other person or body whose action
is required) to enter into this Agreement and to perform its obligations under
it and under the programs, plans and arrangements referred to in it; (ii) the
execution, delivery and performance of this Agreement by the Company does not
violate any applicable law, regulation, order, judgment or decree or any
agreement, arrangement, plan or corporate governance document to which it is a
party or is bound; and (iii) upon the execution and delivery of this
Agreement by the parties, this Agreement shall be a valid and binding
obligation of the Company, enforceable against it in accordance with its terms.

 

10.                               Definitions.

 

“Cause” means the occurrence of any of the following:  (i) Executive’s conviction of a felony
or of any crime involving moral turpitude, dishonesty, fraud, embezzlement,
theft or misrepresentation, (ii) gross neglect or gross misconduct by Executive
in connection with the performance of Executive’s duties (other than due to
Executive’s physical or mental illness), (iii) a material breach by
Executive of this Agreement, the Proprietary Information Agreement or the
Company’s material policies, rules and regulations referred to in Section 2(b),
or (iv) willful engagement in any other conduct that involves a material
breach of a fiduciary obligation on the part of Executive as an officer or
member of the Board, or that would reasonably be expected to have a material
and adverse economic effect upon the Company and its subsidiaries.  The circumstances described in items (ii) through
(iv) (but not item (i)) above shall be subject to notice and an
opportunity to cure as follows:  If the
Board believes events have occurred constituting Cause within the meaning of
items (ii) through (iv), the Board shall give written notice to Executive
within 180 days after the Board learns of such events, which notice shall set
forth in reasonable detail the grounds for its belief and the actions required
to cure such failure.  Executive shall
then have 30 business days after notice to explain and/or remedy the situation,
and Cause shall not exist until such period has expired and the circumstances
have not been explained or remedied.

 

“Code” means the Internal Revenue Code of 1986, as amended from
time to time, and the Treasury Regulations and other guidance issued
thereafter.

 

“Disability” means the inability of Executive, due to a physical
or mental incapacity or disability, to perform the essential functions of
Executive’s position, with or without reasonable accommodation, required of
Executive for a continuous period of 90 days or any 120 days within any
12-month period.  However, in no event
shall a disability be a Disability unless Executive is considered to be
disabled under the long-term disability plan of the Company for which Executive
is eligible.

 

“Good Reason” means a termination by Executive of Executive’s
employment hereunder if (i) any of the following events occurs without
Executive’s express prior written consent; (ii) such event is not fully
cured within 30 business days after Executive gives written notice to the
Company describing such event and demanding cure; (iii) such cure notice
is given within 180 days after Executive learns of the occurrence of such
event; and (iv) Termination of Employment occurs within 30 business days
after

 

 

the expiration of any cure right: 
(A) a material diminution in Executive’s Salary; (B) a
material diminution in Executive’s authority, duties or responsibilities,
including a material adverse change in Executive’s reporting relationships; (C) a
material breach of this Agreement by the Company; (D) the Company’s
failure to issue to Executive, on or before July 15, 2010, (1) stock
options pursuant to the forms of stock option agreements attached hereto as Exhibits
B, C and D and (2) shares of restricted stock pursuant
to the restricted stock award agreements attached hereto as Exhibits E, F
and G; (E) the upon the failure by the Company (or its stockholders
as the case may be) to elect or reelect or to appoint or reappoint Executive as
Chairman of the Board; provided, however, that failure to reelect or reappoint
the Executive as Chairman of the Board shall not constitute Good Reason if
Cause exists for the removal of Executive from the Board or from his position
as Chairman of the Board or for the failure to nominate or elect Executive to
the Board or as Chairman of the Board; or (F) the appointment of a
Co-Chairman of the Board].

 

“Separation from Service” shall mean Executive’s “separation
from service” with the Company (as such term is defined in Treasury Regulation Section 1.409A-1(h) and
any successor provision thereto), including without limitation due to Executive’s
Termination of Employment.

 

“Termination Date” means the date on which Executive’s
Termination of Employment with the Company occurs pursuant to Section 4.

 

“Termination of Employment” shall mean Executive’s “termination
of employment” with the Company (within the meaning of Treasury Regulation Section 1.409A-1(h)(ii) and
any successor provision thereto) on the following dates:  (i) if Executive’s employment is
terminated by Executive’s death, the date of Executive’s death, and (ii) if
Executive’s employment is terminated for any other reason, the latest of the
date on which the Notice of Termination is given, the date any applicable cure
period expires, the date of termination specified in such notice (which shall
not be more than 30 days after the date of such notice) and, if no such notice
is given, 30 days after the date of termination of employment.

 

11.                               Insurance; Indemnification. The
Company and each of its subsidiaries shall, to the maximum extent provided
under applicable law, indemnify and hold Executive harmless from and against
any expenses, including reasonable attorney’s fees, judgments, fines,
settlements and other amounts (“Losses”), incurred in connection with
any proceeding arising out of, or related to, Executive’s employment by the
Company.  The Company shall, or shall
cause a subsidiary thereof to, advance to Executive any expenses, including
attorney’s fees and costs of settlement, incurred in defending any such
proceeding to the maximum extent permitted by applicable law.  Such costs and expenses incurred by Executive
in defense of any such proceeding shall be paid by the Company or applicable
subsidiary in advance of the final disposition of such proceeding promptly upon
receipt by the Company of (a) written request for payment; (b) appropriate
documentation evidencing the incurrence, amount and nature of the costs and
expenses for which payment is being sought; and (c) an undertaking
adequate under applicable law made by or on behalf of Executive to repay the
amounts so advanced if it shall ultimately be determined pursuant to any
non-appealable judgment or settlement that Executive is not entitled to be
indemnified by the Company or any subsidiary thereof. During the Employment Period and continuing until the later of (i) the
sixth anniversary of the Termination Date and (ii) the date on which all
claims against Executive that would otherwise be covered by such policy (or
policies) become fully time-barred, the Company shall maintain customary
directors’ and officers’ liability insurance for Executive, providing coverage
that is no less favorable to Executive in any material respect (including, but
not limited to, with respect to scope, exclusions, amounts and deductibles)
than the coverage then being provided to any other present or former officer or
director of the Company.

 

12.                               Notices.  All notices and other communications required or
permitted hereunder

 

 

shall be in
writing and shall be deemed given when (a) delivered personally or by
overnight courier to the following address of the other parties hereto (or such
other address for such parties as shall be specified by notice given pursuant
to this Section) or (b) sent by facsimile to the following facsimile
number of the other parties hereto (or such other facsimile number for such parties
as shall be specified by notice given pursuant to this Section), with the
confirmatory copy delivered by overnight courier to the address of such parties
pursuant to this Section 12:

 

If to the Company, to:

 

Image Entertainment, Inc.

20525 Nordhoff Street, Suite 200

Chatsworth, CA 91311

Attention:  Chairman of the Board of
Directors

Facsimile: 
(      )

 

If to Executive, to:

 

Ted Green

 

Facsimile: 
(          )

 

With a copy to (which shall not constitute
notice):

 

Morrison Cohen LLP

909 Third Avenue

New York, NY 10022

Attention:  Jack Levy, Esq.

Facsimile:  (212) 735-8708

 

13.                               Severability.  Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under applicable law or rule in
any jurisdiction, such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of any other provision of this
Agreement or the validity, legality or enforceability of such provision in any
other jurisdiction, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.

 

14.                               Entire Agreement; Inconsistencies.  This Agreement, the Proprietary Information
Agreement and the Exhibits hereto shall constitute the entire agreement and
understanding between the parties with respect to the subject matter hereof and
thereof and supersede and preempt any prior understandings, agreements or
representations by or between the parties, written or oral, which may have
related in any manner to the subject matter hereof or thereof.  In the event of any inconsistency between any
provision of this Agreement and any provision of any employee handbook,
personnel manual, program, policy, or arrangement of the Company, or any
provision of any agreement, plan, or corporate governance document of any of
them, the provisions of this Agreement shall control unless Executive otherwise
agrees in a signed writing that expressly refers to the provision whose control
Executive is waiving.  The Company agrees
not to impose any restrictions, enforceable by injunction, on Executive’s post-employment
activities, other than those expressly set forth in this Agreement and the
Proprietary Information Agreement.

 

 

15.                               Successors and Assigns.  This Agreement shall be enforceable by Executive
and Executive’s heirs, executors, administrators and legal representatives, and
by the Company and its successors and assigns. 
Executive may not assign this Agreement and any such assignment shall be
null and void. The rights of the Company under this Agreement shall, without
the consent of Executive, be assigned by the Company to any person, firm,
corporation or other business entity which at any time, whether by purchase, merger
or otherwise, directly or indirectly, acquires all or substantially all of the
assets or business of the Company.  The
Company will require any successor (whether direct or indirect, by purchase,
merger or otherwise) to all or substantially all of the business or assets of
the Company expressly to assume and to agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place; provided, however, that no
such assumption shall relieve the Company of its obligations hereunder.  As used in this Agreement, the “Company”
shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law or otherwise.

 

16.                               Governing Law; Venue.  This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of California
without regard to principles of conflicts of laws.  Any suit brought hereon shall be brought in
the state or Federal courts sitting in Los Angeles, California, the parties
hereto hereby waiving any claim or defense that such forum is not convenient or
proper.  Each party hereby agrees that
any such court shall have in personal jurisdiction over it and consents to
service of process in any manner authorized by California law.

 

17.                               Arbitration.

 

(a)                                  Generally.  Except as otherwise provided in Section 8
hereof or as otherwise required by law, any dispute, claim, question or
controversy arising under or relating to this Agreement, Executive’s employment
with the Company or the termination thereof (each such dispute, claim, question
or controversy, a “Dispute”) shall be resolved by submitting such
Dispute to binding arbitration administered by JAMS pursuant to its Employment
Arbitration Rules and Procedures and subject to its Employment Arbitration
Minimum Standards of Procedural Fairness (collectively, the “Rules”),
and pursuant to the procedures set forth in this Section 17.  In the event of any conflict between the Rules and
the procedures set forth in this Section 17, the procedures set
forth in this Section 17 shall control.  Any such arbitration shall be brought within
any otherwise applicable statute of limitations period, and shall be the sole
and exclusive means for resolving such Dispute (other than for injunctive
relief pursuant to Section 8 or as otherwise required by law).

 

(b)                                 Procedures.  Any arbitration shall be held in
Los Angeles, California (except for any arbitration brought by Executive, which
shall be held in New York, New York) and conducted before a single neutral
arbitrator selected by mutual agreement of the parties hereto within 30 days of
the initiation of the arbitration or, if they are unable to agree, by JAMS
under its rules.  The arbitrator shall
take submissions and hear testimony, if necessary, and shall render a written
decision as promptly as practicable.  The
arbitrator may grant any legal or equitable remedy or relief that the arbitrator
deems just and equitable, to the same extent that remedies or relief could be
granted by a state or federal court in the United States.  The decision of the arbitrator shall be
final, binding and conclusive on all parties and interested persons.  It is the intention of the parties hereto
that they shall be entitled to fair and adequate discovery in accordance with
the Federal Rules of Civil Procedure. 
The parties hereto shall keep confidential the fact of the arbitration,
the dispute being arbitrated, and the decision of the arbitrator.

 

(c)                                  Enforcement; Costs.  Judgment
upon the award rendered by the arbitrator may be entered in any court having
competent jurisdiction.  All fees and
expenses of any arbitration, including, but not limited to, reasonable attorneys’
fees and disbursements of all parties, with respect to a Dispute

 

 

under this
Agreement shall be borne by the Non-prevailing Party.  The determination of whether a party is to be
deemed the “Non-prevailing Party” in any arbitration shall be solely within the
province of the arbitrator.  Neither
party shall be liable for punitive or exemplary damages.

 

18.                               Amendment and Waiver.  The provisions of this Agreement may be amended
or waived only by the written agreement of the Company and Executive, and no
course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.  If the Company and Executive
determine that any payments or benefits payable under this Agreement intended
to comply with Sections 409A(a)(2), (3) and (4) of the Code do not
comply with Section 409A of the Code, the Company and Executive agree to
amend this Agreement, or take such other actions as the Company and Executive
deem reasonably necessary or appropriate, to comply with the requirements of Section 409A
of the Code, the Treasury Regulations thereunder (or any applicable correction
relief) while preserving the economic agreement of the parties.  If any provision of the Agreement would cause
such payments or benefits to fail to so comply, such provision shall not be
effective and shall be null and void with respect to such payments or benefits,
and such provision shall otherwise remain in full force and effect.

 

19.                               Legal Fees.  The Company shall reimburse
Executive for all reasonable attorneys’ fees incurred by Executive in reviewing
and negotiating this Agreement and Executive’s equity arrangements (whether or
not incentive-based), as well as for any attorneys’ fees incurred by Executive
and associated with the diligence and negotiations of the JH fund’s acquisition
of the Company on January 8, 2010, plus up to a maximum of $15,000 in the
aggregate for Ted Green, John Avagliano and John Hyde for any reasonable
related expenses.  Such reimbursement
shall be made within 30 days following presentation to the Company of
appropriate invoices or other documentation for the amount of such fees and
expenses.

 

20.                               Excise Taxes.

 

(a)                                  (i) In the event that any payment or benefit
received or to be received by Executive pursuant to the terms of this Agreement
(the “Contract Payments”) or in connection with Executive’s termination
of employment or contingent upon a change in control (as defined under Section 280G
of the Code) of the Company pursuant to any plan or arrangement or other
agreement with the Company (or any affiliate) (“Other Payments” and,
together with the Contract Payments, the “Payments”) would be subject to
the excise tax (the “Excise Tax”) imposed by Section 4999 of the
Code, as determined as provided below, the Company shall pay to Executive, at
the time specified in Section 20(b) below, an additional
amount (the “Gross-Up Payment”) such that the net amount retained by
Executive, after deduction of all amounts required to be paid upon the payment
provided for by this Section 20(a), and any interest, penalties or
additions to tax payable by Executive with respect thereto, shall be equal to
the total present value of the Excise Taxes imposed upon the Payments;
provided, however, that if Executive’s Payment is, when calculated on a
net-after-tax basis, less than 110% of the amount of the Payment which could be
paid to Executive under Section 280G of the Code without causing the
imposition of the Excise Tax, then the Payment shall be limited to the largest
amount payable (as described above) without resulting in the imposition of any
Excise Tax (such amount, the “Capped Amount”).

 

(ii)                                  For purposes of determining the Capped Amount,
whether any of the Payments will be subject to the Excise Tax and the amounts
of such Excise Tax, (A) the total amount of the Payments shall be treated
as “parachute payments” within the meaning of Section 280G(b)(2) of
the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of
the Code shall be treated as subject to the Excise Tax, except to the extent
that, in the opinion of independent tax counsel selected by the Company’s
independent auditors and acceptable to Executive (“Tax Counsel”), a
Payment

 

 

(in whole or in part) does not constitute a “parachute
payment” within the meaning of Section 280G(b)(2) of the Code, or
such “excess parachute payments” (in whole or in part) are not subject to the
Excise Tax, (B) the amount of the Payments that shall be treated as
subject to the Excise Tax shall be equal to the lesser of (1) the total
amount of the Payments or (2) the amount of “excess parachute payments”
within the meaning of Section 280G(b)(1) of the Code (after applying
clause (A) hereof), and (C) the value of any noncash benefits or any
deferred payment or benefit shall be determined by Tax Counsel in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment, Executive shall be
deemed to pay federal income tax at the highest marginal rates of federal
income taxation applicable to individuals in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
effective rates of taxation applicable to individuals as are in effect in the
state and locality of Executive’s residence in the calendar year in which the
Gross-Up Payment is to be made, net of the maximum reduction in federal income
taxes that can be obtained from deduction of such state and local taxes, taking
into account any limitations applicable to individuals subject to federal
income tax at the highest marginal rates.

 

(iii)                               If the Tax Counsel determines that any Excise Tax
is payable by Executive and that the criteria for reducing the Payments to the
Capped Amount (as described in Section 20(a)(i) above) is met,
then the Company shall reduce the Payments by the amount which, based on the
Tax Counsel’s determination and calculations, would provide Executive with the
Capped Amount, and pay to Executive such reduced Payments; provided that the
Company shall first reduce the severance payment under Section 4(c) and
shall next reduce the benefits provided under the Company’s incentive equity
plan pursuant to which Executive has been awarded equity. If the Tax Counsel
determines that an Excise Tax is payable, without reduction pursuant to Section 20(a)(i),
above, the Company shall pay the required Gross-Up Payment to, or for the
benefit of, in accordance with Section 20(b). If the Tax Counsel
determines that no Excise Tax is payable by Executive, it shall, at the same
time as it makes such determination, furnish Executive with an opinion that he
has substantial authority not to report any Excise Tax on his/her federal,
state, local income or other tax return. Any determination by the Tax Counsel
as to the amount of the Gross-Up Payment shall be binding upon the Company and
Executive absent a contrary determination by the Internal Revenue Service or a
court of competent jurisdiction; provided, however, that no such determination
shall eliminate or reduce the Company’s obligation to provide any Gross-Up
Payment that shall be due as a result of such contrary determination.

 

(b)                                 The Gross-Up Payments provided for in Section 20(a) hereof
shall be made upon the earlier of (i) the payment to Executive of any
Contract Payment or Other Payment or (ii) the imposition upon Executive or
payment by Executive of any Excise Tax.

 

(c)                                  Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of a Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than 10 business days after Executive
is informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid.
Executive shall not pay such claim prior to the expiration of the 30 day period
following the date on which Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim, Executive
shall:

 

(i)                                     give the Company any information reasonably
requested by the Company relating to such claim;

 

(ii)                                  take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time to
time, including, without limitation, accepting 

 

 

legal representation with respect to such
claim by an attorney reasonably selected by the Company and reasonably
satisfactory to Executive;

 

(iii)                               cooperate with the Company in good faith in order
to effectively contest such claim; and

 

(iv)                              permit the Company to participate in any
proceedings relating to such claim;

 

provided, however, that the Company shall
bear and pay directly all costs and expenses (including, but not limited to,
additional interest and penalties and related legal, consulting or other
similar fees) incurred in connection with such contest and shall indemnify and
hold Executive harmless, on an after-tax basis, for any Excise Tax or other tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses.

 

(d)                                 The Company shall control all proceedings taken
in connection with such contest and, at its sole option, may pursue or forego
any and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such
payment to Executive on an interest-free basis, and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or other tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and provided, further, that if Executive is required to extend the
statute of limitations to enable the Company to contest such claim, Executive
may limit this extension solely to such contested amount. The Company’s control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority. In addition, no position may be taken
nor any final resolution be agreed to by the Company without Executive’s
consent if such position or resolution could reasonably be expected to
adversely affect Executive (including any other tax position of Executive
unrelated to the matters covered hereby).

 

(e)                                  As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by
the Company or the Tax Counsel hereunder, it is possible that Gross-Up Payments
which will not have been made by the Company should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies and Executive thereafter is required to
pay to the Internal Revenue Service an additional amount in respect of any
Excise Tax, the Company or the Tax Counsel shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall promptly be paid
by the Company to or for the benefit of Executive.

 

(f)                                    If, after the receipt by Executive of the
Gross-Up Payment or an amount advanced by the Company in connection with the
contest of an Excise Tax claim, Executive becomes entitled to receive any refund
with respect to such claim, Executive shall promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by Executive of an
amount advanced by the Company in connection with an Excise Tax claim, a
determination is made that Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify Executive in writing of
its intent to contest the denial of 

 

 

such refund prior
to the expiration of 30 days after such determination, such advance shall be
forgiven and shall not be required to be repaid.

 

(g)                                 Notwithstanding the foregoing provisions of this Section 20:

 

(i)                                     In no event shall the Company’s liability for
Gross-Up Payments to Executive under this Section 20 exceed the
amount of the “tax gross-up payment” on any Payment permitted under Treasury
Regulation Section 1.409A-3(i)(1)(v); and

 

(ii)                                  In
no event shall the Company’s liability for any Gross-Up Payments to Executive
under this Section 20, taken together with any gross-up payments
payable to  Producers Sales Organization
pursuant to the Consulting Agreement (the “Consulting Agreement”) with
the Company and John Hyde of even date herewith and any gross-up payments payable
to John Avagliano pursuant to his Employment Agreement (the “Avagliano
Employment Agreement”) with the Company of even date herewith (the “Aggregate
Gross-Up Payments”), exceed $1,000,000 (the “Maximum Amount”) in the
aggregate.  In the event that the
Aggregate Gross-Up Payments would exceed $1,000,000, Executive’s Gross-Up
Payment under this Section 20 shall not exceed an amount equal to (A) the
Maximum Amount, multiplied by (B) a fraction, the numerator of which is
equal to the Gross-Up Payment that would be payable to Executive pursuant to
this Section 20 (without regard to the application of this Section 20(g)(ii)),
and the denominator of which is the aggregate Gross-Up Payments that would be
payable to Executive pursuant to this Section 20 and Producers
Sales Organization pursuant to the Consulting Agreement and John Avagliano
pursuant to the Avagliano Employment Agreement (without regard to the
application of this Section 20(g)(ii) or any comparable
provision in such other Agreements).

 

(h)                                 The Gross-Up Payment shall be paid in accordance
with Treasury Regulation Section 1.409A-3(i)(1)(v).  Interest and penalties with respect to any
Gross-Up Payment or that are otherwise incurred by the Company on Executive’s
behalf or required to be paid by the Company under this Section 20
shall be paid to Executive or on Executive’s behalf only to the extent
permitted under Treasury Regulation Section 1.409A-3(i)(1)(v).  Notwithstanding the other provisions of this Section 20,
all Gross-Up Payments shall be made to the Executive not later than the end of
the calendar year following the year in which the Executive remits the related
taxes, in accordance with Treasury Regulation Section 1.409A-3(i)(1)(v).  Any costs and expenses (including any Excise
Tax, income or other taxes or interest and penalties) incurred by the Company
on Executive’s behalf or required to be paid by the Company under this Section 20
due to any tax contest, audit or litigation shall be paid by the Company by the
end of Executive’s taxable year following Executive’s taxable year in which the
taxes that are the subject of the tax contest, audit or litigation are remitted
to the taxing authority, or where, as a result of such tax contest, audit or
litigation, no taxes are remitted, the end of Executive’s taxable year
following Executive’s taxable year in which the audit is completed or there is
a final and nonappealable settlement or other resolution of the contest or
litigation, in accordance with Treasury Regulation Section 1.409A-3(i)(1)(v).

 

21.                               Counterparts.  This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original and both of which
together shall constitute one and the same instrument.  The parties hereto agree to accept a signed
facsimile copy or portable document format of this Agreement as a fully binding
original.

 

[SIGNATURE PAGE FOLLOWS]

 

 

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

 

	
   

  	
  IMAGE ENTERTAINMENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOHN P. AVAGLIANO

  
	
   

  	
  Name:

  	
  John P. Avagliano

  
	
   

  	
  Title:

  	
  COO/CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ TED GREEN

  
	
   

  	
  Ted Green

  
				

 

 

EXHIBIT A

 

Form of Mutual Release

 

 

EXHIBIT A

 

GENERAL
RELEASE OF CLAIMS

 

This General
Release of Claims (“Release”) is entered into as of this
           day of                 ,
        , between [NAME OF EXECUTIVE] (“Executive”),
and Image Entertainment, Inc., a Delaware corporation (the “Company”)
(collectively referred to herein as the “Parties”).

 

WHEREAS, Executive
and the Company are parties to that certain Employment Agreement dated as of
[DATE OF AGREEMENT] (the “Employment Agreement”);

 

WHEREAS, the
Parties agree that Executive is entitled to certain severance benefits under
the Employment Agreement, subject to Executive’s execution of this Release; and

 

WHEREAS, the
Company and Executive now wish to fully and finally to resolve all matters
between them.

 

NOW, THEREFORE, in
consideration of, and subject to, the severance benefits payable to Executive
pursuant to the Employment Agreement, the adequacy of which is hereby
acknowledged by Executive, and which Executive acknowledges that he would not
otherwise be entitled to receive, Executive and the Company hereby agree as
follows:

 

1.                                       General Release of Claims by Executive.  Executive, on behalf of himself and his
heirs, executors, administrators, successors, agents, and assigns, hereby fully
and without limitation releases and forever discharges the Company, and (as the
case may be) its present and former shareholders, parents, owners, members,
partners, subsidiaries, divisions, affiliates, officers, directors, agents,
employees, consultants, contractors, customers, clients, insurers,
representatives, lawyers, predecessors, successors and assigns, employee
welfare benefit plans and pension or deferred compensation plans under Section 401
of the Internal Revenue Code of 1986, as amended, and their trustees,
administrators and other fiduciaries, and all persons acting by, through, under
or in concert with them, or any of them (“Releasees”), both individually
and collectively, from any and all rights, claims, demands, liabilities,
actions, causes of action, damages, losses, costs, expenses and compensation,
of whatever nature whatsoever, known or unknown, fixed or contingent (“Claims”),
arising directly or indirectly out of, relating to, or in any other way
involving in any manner whatsoever the Executive’s employment by the Company or
the separation thereof, and any and all claims arising under federal, state, or
local laws relating to employment, including without limitation claims of
wrongful discharge, breach of express or implied contract, fraud,
misrepresentation, defamation, or liability in tort, claims of any kind that
may be brought in any court or administrative agency, any claims arising under
Title VII of the Civil Rights Act of 1964, as amended; the Equal Pay Act, as
amended; the Age Discrimination in Employment Act, as amended; the Family and
Medical Leave Act of 1993; the California Fair Employment and Housing Act of
1993, as amended; the California Labor Code (including but not limited to
Sections 970 and 6310); the Fair Labor Standards Act, as amended; Section 17200
of the Business and Professions Code; the federal and state wage and hour laws;
the Americans With Disabilities Act, as amended; the Immigration Reform and
Control Act of 1986; the Employee Retirement Income Security Act of 1974, as
amended; the Uniformed Services Employment and Reemployment Rights Act; the
Rehabilitation Act of 1973, as amended; the

 

 

California Family Rights Act; the Worker Adjustment and Retraining
Notification Act; the California common law of fraud, misrepresentation,
negligence, defamation, infliction of emotional distress, breach of contract,
or wrongful termination; and/or any other local, state or federal law, rule, or
regulation governing employment, discrimination in employment, workplace
safety, or the payment of wages and benefits. 
Executive represents that there are no lawsuits pending by Executive
against Releasees and/or promises to dismiss any and all lawsuits that
Executive might have filed against Releasees. 
Executive promises never to file a lawsuit asserting any Claims that are
released in this Release.  Executive
agrees that if he hereafter commences, joins in, or in any manner seeks relief
through any suit arising out of, based upon, or relating to any of the Claims
released hereunder or in any manner asserts against the Releasees, or any of
them, any of the Claims released hereunder, Executive shall pay to the
Releasees, and each of them, in addition to any other damages caused to the
Releasees thereby, all attorneys’ fees incurred by the Releasees in defending
or otherwise responding to said suit or claim.

 

Notwithstanding the
generality of the foregoing, Executive does not release the following claims:

 

(i)                                     Claims for unemployment
compensation or any state disability insurance benefits pursuant to the terms
of applicable state law;

 

(ii)                                  Claims for workers’
compensation insurance benefits under the terms of any worker’s compensation
insurance policy or fund of the Company;

 

(iii)                               Claims pursuant to the terms
and conditions of the federal law known as COBRA;

 

(iv)                              Claims for indemnity under
the Employment Agreement or bylaws of the Company, as provided for by Delaware
law or under any applicable insurance policy with respect to Executive’s
liability as an employee, director or officer of the Company;

 

(v)                                 Claims based on any right
Executive may have to enforce the Company’s executory obligations under the
Employment Agreement;

 

(vi)                              Claims based on Executive’s
stock awards described in Section 3; and

 

(vii)                           Claims based on Executive’s
purchased equity.

 

2.                                       Waiver of Unknown Claims by Executive.  Executive is aware of California Civil Code Section 1542,
which provides as follows:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR.

 

 

With full awareness and understanding of the above provisions,
Executive hereby waives any rights he may have under Section 1542, as well
as under any other statutes or common law principles of similar effect.  Executive intends to, and hereby does,
release Releasees from Claims which he does not presently know or suspect to
exist at this time.

 

3.                                       Stock Awards.  Executive currently holds the stock options
and/or restricted shares of the Company’s common stock granted under the
Company’s 2010 Equity Incentive Plan (the “Plan”) and listed on Exhibit A
hereto and no others.  Executive’s and
the Company’s rights with respect to such awards shall be as set forth in the
Plan and the award agreements pursuant to which such stock options and
restricted shares of the Company’s common stock were granted.

 

4.                                       Release of Claims by the Company.  The Company voluntarily releases and
discharges the Executive and his heirs, successors, administrators,
representatives and assigns from all Claims which it may have against the
Executive as the result of his employment or the discontinuance of his
employment and that are based upon facts known, or which in the exercise of
reasonable diligence should have been known, to the Company’s Board of
Directors.  Notwithstanding the
foregoing, nothing herein shall release or discharge any Claim by the Company
against the Executive, or the right of the Company to bring any action, legal
or otherwise, against the Executive as a result of any failure by him to
perform his obligations under this Agreement, or as a result of any acts of
willful misconduct or gross negligence. 
The Company represents that it are not aware after reasonable due
inquiry of any facts or circumstances that would give rise to or form the basis
of any claim against Executive based on willful misconduct or gross negligence.

 

5.                                       Confidentiality of Agreement.  Except as may be required by law or court
order, neither Executive, his attorney, nor any person acting by, through,
under or in concert with them shall disclose the terms of this Release to any
individual or entity other than their immediate family and accountants or tax
preparers as may be necessary. In the event that a disclosure authorized by
this Release is made, Executive shall inform the person to whom information is
disclosed of the confidential nature of this Release and that, upon being
informed of the terms of this Release, the person shall be equally bound by the
provisions of this paragraph.

 

6.                                       Advice of Counsel.  Executive has had the advice of independent
legal counsel of his own choosing in negotiations for and the preparation of
this Release.  Executive has carefully
read the provisions of this Release and is fully apprised of and understands
the provisions of this Release and their legal effect and consequences.  Executive has executed this Release after careful
and independent investigation, and affirmatively warrants that he is not
executing this Release under fraud, duress or undue influence.

 

7.                                       Integration.  This Release, the Employment Agreement,
the Proprietary Information Agreement, the Plan, [the Stock Option
Agreement(s)] and [the Restricted Stock Agreement(s)] [insert names of
purchased equity documents] set forth the final, sole, and entire agreement
between Executive and the Company and supersede any and all prior agreements,
negotiations, discussions or understandings between Executive and the Company
concerning the

 

 

subject matter of this Release. 
This Release may not be altered, amended, or modified, except by a
further writing signed by Executive and a member of the Board of Directors of
the Company.

 

8.                                       Voluntary.  Executive acknowledges and agrees that he has
read this Release carefully, understands all of its terms, and agrees to those
terms voluntarily.

 

9.                                       Miscellaneous Provisions.

 

(a)                                  The
provisions of this Release are severable. 
If any provision is held to be invalid or unenforceable, it shall not
affect the validity or enforceability of any other provision.

 

(b)                                 This
Release shall be construed as a whole in accordance with its fair meaning and
in accordance with the laws of the State of California.  The language in this Release shall not be
construed for or against any particular party.

 

(c)                                  This
Release may be executed in ink or by facsimile and in one or more counterparts,
each of which shall be an original but all of which shall constitute one and
the same instrument.

 

(d)                                 This
Release shall apply to, bind, and inure to the benefit of the Parties and their
respective successors and assigns.

 

 

IN WITNESS WHEREOF, the Parties hereto have executed this Release on
the dates indicated below.

 

	
  EXECUTIVE

  	
   

  	
  IMAGE ENTERTAINMENT, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
    [Name of Executive]

  	
   

  	
  Its:

  	
   

  
	
    Dated:

  	
   

  	
   

  	
  Dated:

  	
   

  
							

 

 

EXHIBIT B

 

Class A Stock Option Agreement

 

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

STOCK OPTION GRANT NOTICE AND

STOCK OPTION AGREEMENT

 

Image Entertainment, Inc., a Delaware corporation (the “Company”), pursuant to its 2010 Equity
Incentive Award Plan (the “Plan”), hereby
grants to the holder listed below (“Participant”), an
option to purchase the number of shares of the Company’s common stock (“Stock”), set forth below (the “Option”).  This
Option is subject to all of the terms and conditions set forth herein and in
the Stock Option Agreement attached hereto as Exhibit A (the “Stock Option Agreement”) and the
Plan, which are incorporated herein by reference.  Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Stock Option
and the Stock Option Agreement.

 

	
  Participant:

  	
   

  	
  Theodore S.
  Green

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share of

  Stock:

  	
   

  	
  $

  	
  (1)

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  shares,

  
	
  Total Number of Shares of Stock

  Subject to the Option:

  	
   

  	
  which represents
        % of the Company’s fully diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010. The
  number of Shares subject to this Stock Option represents 3.668% of the fully diluted common stock of
  the Company (excluding the Company’s
  outstanding and underwater stock options) as of January 8, 2010  minus
  the number of shares of Class A Restricted Stock granted to such
  Participant. The number of shares of Stock shall be subject to adjustment for
  stock splits, stock dividends and other events or transactions described in
  Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
   

  	
   

  
					

 

	
  Type of Option:

  	
   

  	
  o   Incentive
  Stock Option          o   Non-Qualified
  Stock Option

  

 

(1)  Not to be less than $0.20 per share.

 

 

	
  Vesting Schedule:

  	
   

  	
  The Option shall vest pursuant to the provisions of Exhibit C
  attached hereto.

  

 

By his or her signature, the Participant agrees to be bound by the
terms and conditions of the Plan, the Stock Option Agreement and this Grant
Notice.  The Participant has reviewed the
Stock Option Agreement, the Plan and this Grant Notice in their entirety, has
had an opportunity to obtain the advice of counsel prior to executing this Grant
Notice and fully understands all provisions of this Grant Notice, the Stock
Option Agreement and the Plan. 
Participant hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions arising
under the Plan or relating to the Option.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
  20525 Nordhoff Street, Ste 200

  	
   

  	
  Address:

  	
   

  
	
   

  	
  Chatsworth, CA 91311

  	
   

  	
   

  	
   

  
										

 

 

EXHIBIT A

 

TO STOCK OPTION GRANT NOTICE

 

STOCK OPTION AGREEMENT

 

Pursuant to the Stock Option Grant Notice (the “Grant
Notice”) to which this Stock Option Agreement (this “Agreement”) is attached, Image Entertainment, Inc.,
a Delaware corporation (the “Company”), has granted
to the Participant an Option under the Company’s 2010 Equity Incentive Award
Plan (the “Plan”) to purchase the number of shares of
Stock indicated in the Grant Notice.

 

GENERAL

 

Defined Terms.  Capitalized terms not
specifically defined herein shall have the meanings specified in the Plan and
the Grant Notice.

 

Incorporation of Terms of Plan.  The
Option is subject to the terms and conditions of the Plan which are
incorporated herein by reference.  In the
event of any inconsistency between the Plan and this Agreement, the terms of
the Plan shall control.  Notwithstanding
anything to the contrary contained in the Plan, the Grant Notice or this
Agreement, (a) Sections 5.3, 10.6, 11.2 and 11.3 of the Plan shall not
apply at any time to the Shares and (b) the Administrator shall exercise
its discretion only reasonably in good faith.

 

GRANT OF OPTION

 

Grant of Option.  In consideration of the
Participant’s past and/or continued employment with or service to the Company
or a Parent or Subsidiary and for other good and valuable consideration,
effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants to
the Participant the Option to purchase any part or all of an aggregate of the
number of shares of Stock set forth in the Grant Notice, upon the terms and
conditions set forth in the Plan, the Grant Notice and this Agreement.  Unless designated as a Non-Qualified Stock
Option in the Grant Notice, the Option shall be an Incentive Stock Option to
the maximum extent permitted by law.

 

Exercise Price.  The exercise price of the shares
of Stock subject to the Option shall be as set forth in the Grant Notice,
without commission or other charge; provided,
however, that the price per share
of the shares of Stock subject to the Option shall not be less than 100% of the
Fair Market Value of a share of Stock on the Grant Date.  Notwithstanding the foregoing, if this Option
is designated as an Incentive Stock Option and the Participant owns (within the
meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any “subsidiary
corporation” of the Company or any “parent corporation” of the Company (each
within the meaning of Section 424 of the Code), the price per share of the
shares of Stock subject to the Option shall not be less than 110% of the Fair
Market Value of a share of Stock on the Grant Date.

 

A-1

 

No Right to Continued Employment.  Nothing
in the Plan, the Grant Notice, or this Agreement shall confer upon the
Participant any right to continue in the employ or service of the Company or
any Parent or Subsidiary or shall interfere with or restrict in any way the
rights of the Company and any Parent or Subsidiary, which rights are hereby
expressly reserved, to discharge or terminate the services of the Participant
at any time for any reason whatsoever, except to the extent expressly provided
otherwise in a written agreement between the Company or a Parent or Subsidiary
and the Participant.

 

PERIOD OF EXERCISABILITY

 

Commencement of Exercisability.

 

Subject to Sections 3.2, 3.3 and 5.6, the Option shall become vested
and exercisable in such amounts and at such times as are set forth in the Grant
Notice.

 

No portion of the Option which has not become vested and exercisable at
the date of the Participant’s Termination of Service shall thereafter become
vested and exercisable, except as may be otherwise provided in the Grant Notice
or provided by the Administrator or as set forth in a written agreement between
the Company and the Participant.

 

Duration of Exercisability.  The
installments provided for in the vesting schedule set forth in the Grant Notice
are cumulative.  Each such installment
which becomes vested and exercisable pursuant to the vesting schedule set forth
in the Grant Notice shall remain vested and exercisable until it becomes
unexercisable under Section 3.3.

 

Expiration of Option.  Subject to the provisions of Exhibit C
to the Grant Notice, the Option may not be exercised to any extent by anyone
after the first to occur of the following events:

 

The expiration of ten years from the Grant Date;

 

If this Option is designated as an Incentive Stock Option and the
Participant owned (within the meaning of Section 424(d) of the Code),
at the time the Option was granted, more than 10% of the total combined voting
power of all classes of stock of the Company or any “subsidiary corporation” of
the Company or any “parent corporation” of the Company (each within the meaning
of Section 424 of the Code), the expiration of five years from the Grant
Date;

 

The expiration of three months from the date of the Participant’s
Termination of Service, unless such termination occurs by reason of the
Participant’s death, Disability or for Cause (as defined in Exhibit C
to the Grant Notice); provided, however, that if, during any part of such three month
period, Participant’s Option is not exercisable solely because of the condition
set forth in Section 4.5(b), Participant’s Option shall not expire until
the earlier of the Expiration Date or until it shall have been exercisable for
an aggregate period of thirty days after Participant’s Termination of Service;

 

A-2

 

The expiration of one year from the date of the Participant’s death if
Participant dies prior to his or her Termination of Service or within three
months after his or her Termination of Service;

 

The expiration of one year from the date of the Participant’s Termination
of Service by reason of the Participant’s Disability; or

 

The date of Participant’s Termination of Service by the Company for
Cause.

 

If the Participant’s option is an Incentive Stock Option, note that, to
obtain the federal income tax advantages associated with an “incentive stock
option,” the Code requires that at all times beginning on the date of grant of
the Participant’s Option and ending on the day three months before the date of
Participant’s Option’s exercise, Participant must be an Employee of the Company
or an affiliate, except in the event of Participant’s death or Disability.  The Company has provided for extended
exercisability of Participant’s Option under certain circumstances for
Participant’s benefit but cannot guarantee that Participant’s Option will
necessarily be treated as an “incentive stock option” if Participant continues
to be employed by or provide services to the Company or an affiliate as a
Consultant or Director after Participant’s employment terminates or if
Participant otherwise exercises its options more than three months after the
date Participant’s employment terminates.

 

In addition and for the avoidance of doubt, upon Termination of
Service, the Participant’s vested Option shall be subject to the call right
specified in Section 4 of the Stockholders Agreement (defined below).

 

Special Tax Consequences.  The
Participant acknowledges that, to the extent that the aggregate Fair Market
Value (determined as of the time the Option is granted) of all shares of Stock
with respect to which Incentive Stock Options, including the Option, are
exercisable for the first time by the Participant in any calendar year exceeds
$100,000, the Option and such other options shall be Non-Qualified Stock
Options to the extent necessary to comply with the limitations imposed by Section 422(d) of
the Code.  The Participant further
acknowledges that the rule set forth in the preceding sentence shall be
applied by taking the Option and other “incentive stock options” into account
in the order in which they were granted, as determined under Section 422(d) of
the Code and the Treasury Regulations thereunder.

 

EXERCISE OF OPTION

 

Person Eligible to Exercise.  Except
as provided in Section 5.1, during the lifetime of the Participant, only
the Participant may exercise the Option or any portion thereof, unless it has
been disposed of pursuant to a DRO. 
After the death of the Participant, any exercisable portion of the
Option may, prior to the time when the Option becomes unexercisable under Section 3.3,
be exercised by the Participant’s personal representative or by any person
empowered to do so under the deceased Participant’s will or under the then
applicable laws of descent and distribution.

 

A-3

 

Partial Exercise.  Any exercisable portion of the
Option or the entire Option, if then wholly exercisable, may be exercised in
whole or in part at any time prior to the time when the Option or portion
thereof becomes unexercisable under Section 3.3.

 

Manner of Exercise.  The Option, or any exercisable
portion thereof, may be exercised solely by delivery to the Secretary of the
Company (or any third party administrator or other person or entity designated
by the Company) of all of the following prior to the time when the Option or
such portion thereof becomes unexercisable under Section 3.3:

 

An Exercise Notice in writing signed by the Participant or any other
person then entitled to exercise the Option or portion thereof, stating that
the Option or portion thereof is thereby exercised, such notice complying with
all applicable rules established by the Administrator.  Such notice shall be substantially in the
form attached as Exhibit B to the Grant Notice (or such other form
as is prescribed by the Administrator);

 

The receipt by the Company of full payment for the shares of Stock with
respect to which the Option or portion thereof is exercised, including payment
of any applicable withholding tax, which may be in one or more of the forms of
consideration permitted under Section 4.4;

 

Any other written representations as may be required in the
Administrator’s reasonable discretion to evidence compliance with the
Securities Act or any other applicable law, rule, or regulation; and

 

In the event the Option or portion thereof shall be exercised pursuant
to Section 4.1 by any person or persons other than the Participant,
appropriate proof of the right of such person or persons to exercise the
Option.

 

Notwithstanding any of the foregoing, the Company shall have the right
to specify all conditions of the manner of exercise, which conditions may vary
by country and which may be subject to change from time to time.

 

Method of Payment.  Payment of the exercise price
and any applicable withholding tax shall be by any of the following, or a
combination thereof, at the election of the Participant, subject to Section 10.1
of the Plan:

 

Cash;

 

Check;

 

Delivery of a notice that the Participant has placed a market sell
order with a broker with respect to shares of Stock then issuable upon exercise
of the Option, and that the broker has been directed to pay a sufficient
portion of the net proceeds of the sale to the Company in satisfaction of the
aggregate exercise price; provided, that
payment of such proceeds is then made to the Company upon settlement of such
sale;

 

A-4

 

With the consent of the Administrator, by delivery of a full recourse
promissory note on such terms and conditions as may be approved by the
Administrator;

 

With the consent of the Administrator, surrender of other shares of
Stock which (A) in the case of shares of Stock acquired from the Company,
have been owned by the Participant for more than six (6) months on the
date of surrender (or such longer or shorter period as may be determined by the
Administrator), and (B) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the shares of Stock with respect to
which the Option or portion thereof is being exercised;

 

With the consent of the Administrator, surrendered shares of Stock
issuable upon the exercise of the Option having a Fair Market Value on the date
of exercise equal to the aggregate exercise price of the shares of Stock with
respect to which the Option or portion thereof is being exercised; or

 

With the consent of the Administrator, property of any kind which
constitutes good and valuable consideration.

 

(h)                                 Notwithstanding
any other provision of the Plan or this Agreement, if Participant is a Director
or “executive officer” of the Company within the meaning of Section 13(k) of
the Exchange Act, he or she shall not be permitted to make payment pursuant to
this Section 4.4, or continue any extension of credit with respect to such
payment with a loan from the Company or a loan arranged by the Company, in
violation of Section 13(k) of the Exchange Act.

 

Conditions to Issuance of Stock Certificates.  The
shares of Stock deliverable upon the exercise of the Option, or any portion
thereof, may be either previously authorized but unissued shares of Stock or
issued shares of Stock which have then been reacquired by the Company.  Such shares of Stock shall be fully paid and
nonassessable.  The Company shall not be
required to issue or deliver any shares of Stock purchased upon the exercise of the Option or portion thereof prior to
fulfillment of all of the following conditions which, with the exception of Section 4.5(d),
the Company agrees to use to best efforts to promptly complete:

 

The admission of such shares of Stock to listing on all stock exchanges
on which such Stock is then listed;

 

The completion of any registration or other qualification of such
shares of Stock under any state or federal law or under rulings or regulations
of the Securities and Exchange Commission or of any other governmental
regulatory body, which the Administrator shall, in its reasonable discretion,
deem necessary or advisable;

 

The obtaining of any approval or other clearance from any state or
federal governmental agency which the Administrator shall, in its reasonable discretion,
determine to be necessary or advisable; and

 

The receipt by the Company of full payment for such shares of Stock,
including payment of any applicable withholding tax, which may be in one or
more of the forms of consideration permitted under Section 4.4, subject to
Section 10.1 of the Plan.

 

A-5

 

Rights as Stockholder.  The holder of the Option shall
not be, nor have any of the rights or privileges of, a stockholder of the
Company in respect of any shares of Stock purchasable upon the exercise of any
part of the Option unless and until such shares of Stock shall have been issued
by the Company to such holder (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company)
and, once issued, such shares of Stock shall be freely tradeable and non-forfeitable,
except to the extent set forth in the Stockholders Agreement, dated as of April 12,
2010, of the Company (the “Stockholders Agreement”), and in Exhibit D
to the Grant Notice.   No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the shares of Stock are issued, except as provided in Article 11 of
the Plan.

 

OTHER PROVISIONS

 

Option Generally Not Transferable.

 

Subject to Section 5.1(c), the Option may not be sold, pledged,
assigned or transferred in any manner other than by will or the laws of descent
and distribution or, subject to the consent of the Administrator, pursuant to a
DRO, unless and until the shares of Stock underlying the Option have been
issued, and all restrictions applicable to such shares of Stock have
lapsed.  Neither the Option nor any
interest or right therein shall be liable for the debts, contracts or
engagements of Participant or his or her successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect, except to the extent that such
disposition is permitted by the preceding sentence.

 

Unless transferred to a Permitted Transferee in accordance with Section 5.1(c),
during the lifetime of Participant, only Participant may exercise the Option or
any portion thereof, unless it has been disposed of pursuant to a DRO.  After the death of Participant, any
exercisable portion of the Option may, prior to the time when the Option
becomes unexercisable under Section 3.3, be exercised by Participant’s
personal representative or by any person empowered to do so under the deceased
Participant’s will or under the then applicable laws of descent and
distribution.

 

(c)                                  Notwithstanding
any other provision in this Agreement, with the consent of the Administrator
and to the extent the Option is designated as a Non-Qualified Stock Option, the
Option may be transferred to, exercised by and paid to one or more Permitted
Transferees, subject to the terms and conditions set forth in Section 10.3
of the Plan.  Subject to such conditions
and procedures as the Administrator may require, a Permitted Transferee may
exercise the Option or any portion thereof during the Participant’s lifetime.

 

(d)                                 The
Shares issuable upon exercise of the Option shall also be subject to the
transfer restrictions set forth in Exhibit D to the Grant Notice.

 

A-6

 

Adjustments.  The Participant acknowledges that the Option
is subject to modification and termination in certain events as provided in
this Agreement and Article 11 of the Plan.

 

Notices.  Any notice to be given under the terms of
this Agreement to the Company shall be addressed to the Company in care of the
Secretary of the Company at the address given beneath the signature of the
Company’s authorized officer on the Grant Notice, and any notice to be given to
Participant shall be addressed to Participant at the address given beneath
Participant’s signature on the Grant Notice. 
By a notice given pursuant to this Section 5.3, either party may
hereafter designate a different address for notices to be given to that
party.  Any notice which is required to
be given to Participant shall, if Participant is then deceased, be given to the
person entitled to exercise his or her Option pursuant to Section 4.1 by
written notice under this Section 5.3. 
Any notice shall be deemed duly given when sent via email or when sent
by certified mail (return receipt requested) and deposited (with postage
prepaid) in a post office or branch post office regularly maintained by the
United States Postal Service.

 

Titles.  Titles are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of this
Agreement.

 

Governing Law; Severability.  The laws
of the State of Delaware shall govern the interpretation, validity,
administration, enforcement and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflicts of
laws.

 

Conformity to Securities Laws.  The
Participant acknowledges that the Plan, the Grant Notice and this Agreement are
intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules promulgated
by the Securities and Exchange Commission thereunder, and state securities laws
and regulations.  Notwithstanding
anything herein to the contrary, the Plan shall be administered, and the Option
is granted and may be exercised, only in such a manner as to conform to such
laws, rules and regulations.  To the
extent permitted by applicable law, the Plan, the Grant Notice and this
Agreement shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

 

Entire Agreement; Amendments.  The Plan
and this Agreement (including all Exhibits hereto) constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Participant with respect to the subject
matter hereof.  This Agreement may not be
modified, amended or terminated except by an instrument in writing, signed by
Participant or such other person as may be permitted to exercise the Option
pursuant to Section 4.1 and by a duly authorized representative of the
Company.

 

Successors and Assigns.  The Company may assign any of
its rights under this Agreement to single or multiple assignees, and this
Agreement shall inure to the benefit of the successors and assigns of the
Company.  Subject to the restrictions on
transfer herein set forth in Section 5.1, this Agreement shall be binding
upon Participant and his or her heirs, executors, administrators, successors
and assigns.

 

Notification of Disposition.  If this
Option is designated as an Incentive Stock Option, Participant shall give
prompt notice to the Company of any disposition or other transfer of any 

 

A-7

 

shares of Stock
acquired under this Agreement if such disposition or transfer is made (a) within
two years from the Grant Date with respect to such shares of Stock or (b) within
one year after the transfer of such shares of Stock to the Participant.  Such notice shall specify the date of such
disposition or other transfer and the amount realized, in cash, other property,
assumption of indebtedness or other consideration, by Participant in such
disposition or other transfer.

 

Limitations Applicable to Section 16 Persons. 
Notwithstanding any other provision of the Plan or this Agreement, if Participant
is subject to Section 16 of the Exchange Act, the Plan, the Option and
this Agreement shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act
(including any amendment to Rule 16b-3 of the Exchange Act) that are
requirements for the application of such exemptive rule.  To the extent permitted by applicable law,
this Agreement shall be deemed amended to the extent necessary to conform to such
applicable exemptive rule.

 

Not a Contract of Employment.  Nothing
in this Agreement, the Grant Notice, or the Plan shall confer upon the
Participant any right to continue to serve as an employee or other service
provider of the Company or any Parent or Subsidiary.

 

5.12                        Stockholder
Approval.  The Plan will be submitted
for approval by the Company’s stockholders within twelve months before or after
the date the Plan was initially adopted by the Board.  The Option may not be exercised to any extent
by anyone prior to the time when the Plan is approved by the stockholders, and
if such approval has not been obtained within twelve months after the date the
Plan was initially adopted by the Board, the Option shall thereupon be canceled
and become null and void.

 

A-8

 

EXHIBIT B

 

TO
STOCK OPTION GRANT NOTICE

 

FORM OF
EXERCISE NOTICE

 

Effective as of today,                              ,
                  
the undersigned (“Participant”)
hereby elects to exercise Participant’s option to purchase                              
shares of the Stock (the “Shares”)  of Image Entertainment, Inc.
(the “Company”)  under
and pursuant to the Image Entertainment, Inc. 2010 Equity Incentive Award
Plan (the “Plan”) and the Stock Option
Grant Notice and Stock Option Agreement dated                              ,
         (the “Option
Agreement”).  Capitalized
terms used herein without definition shall have the meanings given in the
Option Agreement.

 

	
  Grant Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of Shares of Stock as to which
  Option is Exercised:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share of Stock:

  	
   

  	
  $                        

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $                        

  	
   

  
	
   

  	
   

  	
   

  
	
  Certificate to be issued in name of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cash Payment delivered herewith:

  	
   

  	
  $

  	
   

  	
  (Representing the full

  
	
   

  	
   

  	
  Exercise Price for the Shares, as well as any applicable withholding
  tax)

  
							

 

	
  Type of Option:

  	
   

  	
  o   Incentive
  Stock Option          o   Non-Qualified
  Stock Option

  

 

1.                                      Representations
of Participant.  Participant
acknowledges that Participant has received, read and understood the Plan and
the Option Agreement. Participant agrees to abide by and be bound by their
terms and conditions

 

2.                                      Rights
as Stockholder.  Until the Shares are
issued (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to
Shares subject to the Option, notwithstanding the exercise of the Option.  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Article 11 of the Plan.  The Shares shall be freely tradeable and
non-forfeitable, except to the extent set forth in the Stockholders Agreement
and in Exhibit D to the Grant Notice.

 

3.                                      Tax
Consultation.  Participant
understands that Participant may suffer adverse tax consequences as a result of
Participant’s purchase or disposition of the Shares.  Participant represents that Participant has
consulted with any tax consultants Participant deems advisable in 

 

B-1

 

connection with the purchase or disposition of the Shares and that
Participant is not relying on the Company for any tax advice.

 

4.                                      Successors
and Assigns.  This Agreement shall
inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer
herein set forth, this Agreement shall be binding upon Participant and his or
her heirs, executors, administrators, successors and assigns.

 

5.                                      Interpretation.  Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or by the Company forthwith to
the Administrator, which shall review such dispute at its next regular meeting.  The resolution of such a dispute by the
Administrator shall be final and binding on the Company and on Participant.

 

6.                                      Governing
Law; Severability.  This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware, excluding that body of law pertaining to conflicts of law.  Should any provision of this Agreement be
determined by a court of law to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable.

 

7.                                      Notices.  Any notice required or permitted hereunder
shall be given in accordance with the provisions set forth in Section 5.3
of the Option Agreement.

 

8.                                      Further
Instruments.  The parties agree to
execute such further instruments and to take such further action as may be
reasonably necessary to carry out the purposes and intent of this Agreement.

 

9.                                      Entire
Agreement.  The Plan and Option
Agreement are incorporated herein by reference. 
This Agreement, the Plan and the Option Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Participant with respect to the subject
matter hereof.

 

B-2

 

	
               ACCEPTED
  BY:
 IMAGE ENTERTAINMENT, INC.

  	
   

  	
  SUBMITTED BY

  PARTICIPANT:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
  Print Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
									

 

CONSENT OF SPOUSE

 

I,                                         ,
spouse of                                   ,
have read and approve the Option Agreement and this Exercise Notice between my
spouse and Image Entertainment, Inc. 
In consideration of granting of the right to my spouse to purchase
shares of Image Entertainment, Inc. set forth in the Option Agreement and
this Exercise Notice, I hereby appoint my spouse as my attorney-in-fact in
respect to the exercise of any rights under the Option Agreement and this
Exercise Notice and agree to be bound by the provisions of the Plan, the Option
Agreement and this Exercise Notice insofar as I may have any rights in said
agreements or any shares issued pursuant thereto under the community property
laws or similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Exercise Notice.

 

	
  Dated: 

  	
   

  	
  ,

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature of Spouse

  

 

B-3

 

EXHIBIT C

 

TO
STOCK OPTION GRANT NOTICE

 

VESTING
PROVISIONS

 

Capitalized terms used in this Exhibit C and not defined
below shall have the meanings given them in the Plan, the Grant Notice to which
this Exhibit C is attached or the Agreement attached thereto.  In the event of any inconsistency between
this Exhibit C, on the one hand, and the Plan, the Grant Notice or
the Agreement, on the other hand, the provisions of this Exhibit C
shall govern.

 

1.                                      Vesting.  Subject to Section 2 below, the Option
shall vest as to 25% of the shares of Stock subject to the Option (rounded up
to the nearest whole share) on January 8, 2011, and as to 6.25% of the
total number of shares of Stock subject to the Option (rounded up to the
nearest whole share on the last day of each three-month period of Participant’s
continued service to the Company as an Employee thereafter, so that all of the
shares of Stock subject to the Option shall be vested on January 8,
2014.  The term “Time
Percentage” shall mean, as of any given date, a fraction,
expressed as a percentage, the numerator of which is the number of shares of
Stock subject to the portion of the Option that is then vested, and the denominator
of which is the total number of shares of Stock subject to the Option
(disregarding, for this purpose, whether the Option has been exercised in whole
or in part).

 

2.                                      Accelerated
Vesting.

 

(a)                                 In
the event of Participant’s Termination of Employment by the Company without
Cause (as defined below) or by Participant for Good Reason (as defined below),
the Option shall vest and become exercisable as to such number of shares of
Stock subject to the Option as would have vested during the one year period following
the date of Participant’s Termination of Employment had Participant remained an
Employee through such date.  In addition,
the vested portion of the Option (whether vested prior to the Participant’s
Termination of Employment or by application of this Section 2(a)) shall
remain exercisable by Participant through the date that is one year following
the date of Participant’s Termination of Employment; provided,
however, that in no event shall the
Option remain exercisable beyond the expiration date set forth in Section 3.3(a) of
the Agreement.  Notwithstanding the
foregoing, the accelerated vesting and extended exercisability of the Option
outlined in this clause (a) shall be contingent on Participant’s execution
and non-revocation of the Release (as defined below).

 

(b)                                 In
the event of Participant’s Termination of Employment as a result of the Company’s
election not to extend the Employment Period (as defined below) beyond the
Initial Term (as defined below), the Option shall vest and become exercisable
as to 100% of the shares of Stock on the date of Participant’s Termination of
Employment.  In addition, the vested
portion of the Option (whether vested prior to the Participant’s Termination of
Employment or by application of this Section 2(b)) shall remain
exercisable by Participant through the date that is one year following the
expiration of the Initial Term; provided, however, that in no event shall the Option remain
exercisable beyond the expiration date set forth in Section 3.3(a) of
the 

 

C-1

 

Agreement.  Notwithstanding the
foregoing, the accelerated vesting and extended exercisability of the Option
outlined in this clause (b) shall be contingent on Participant’s execution
and non-revocation of the Release (as defined below).

 

(c)                                  To
the extent not then vested or exercisable, the Option shall vest and become
exercisable as to 100% of the shares of Stock subject to the Option in the
event of a Change in Control prior to Participant’s Termination of Employment

 

(d)                                 For
purposes of this Exhibit B, the terms “Cause,”
“Employment Period,” “Good Reason,” “Initial
Term” and “Release”
shall have the meanings given to such terms in that certain Employment
Agreement dated April 14, 2010, between Participant and the Company;
provided that the “Initial Term” shall mean such term without regard to any
extension of the Employment Period as a result of the Company’s failure to give
less than 12 months’ notice of non-extension of the Initial Term.

 

C-2

 

EXHIBIT D

 

TO
STOCK OPTION GRANT NOTICE

 

TRANSFER
RESTRICTIONS

 

Capitalized terms used in this Exhibit D and not defined
below shall have the meanings given them in the Plan, the Grant Notice to which
this Exhibit D is attached or the Agreement attached thereto.

 

1.                                      Transfer
Restrictions.  The following transfer
restrictions shall apply to the shares issuable upon exercise of the Option and
shall be in addition to the restrictions set forth in Section 5.1 and Exhibit C
of the Agreement.

 

(a)                                 In
consideration of the grant of the Option, Participant agrees that Participant
will not (and will cause any spouse or immediate family of the spouse or the
undersigned living in the Participant’s household not to), without the prior written
consent of the Administrator (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale), pledge, transfer,
establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under
the Exchange Act, or otherwise dispose of any shares of Stock issued or
issuable upon the exercise of the Option currently or hereafter owned either of
record or beneficially (as defined in Rule 13d-3 under the Exchange Act)
by Participant (or such spouse or family member), or publicly announce an
intention to do any of the foregoing, unless such shares constitute
Transferable Shares (as defined below).

 

(b)                                 In
addition, the foregoing restrictions shall not apply to the transfer of any or
all of the shares of Stock issued upon exercise of the Option owned by
Participant, either during his lifetime or on death, by gift, will or the laws
of descent and distribution to Participant’s immediate family or to a trust the
beneficiaries of which are exclusively Participant and/or a member or members
of his immediate family (provided that
it shall be a condition to such transfer that the donee, beneficiary,
distributee or transferee executes and delivers to Company an agreement stating
that he, she or it is receiving and holding the shares of Stock issued upon
exercise of the Option subject to the provisions of the Agreement, and there
shall be no further transfer or distribution of such shares of Stock, except in
accordance with the Agreement).

 

(c)                                  In
addition, notwithstanding the restrictions in this Exhibit D, the
undersigned may at any time after the date hereof (i) exercise the Option
(including by any means set forth in Section 4.3 of the Agreement) (provided that in any such case the shares of Stock issued
upon exercise shall remain subject to the provisions of the Agreement and this Exhibit D),
or (ii) enter into a trading plan or modify an existing trading plan
meeting the requirements of Rule 10b5-1 under the Exchange Act relating to
the sale of shares of Stock issuable upon exercise of the Option, if then
permitted by the Company and applicable law 

 

 

(provided that the Shares subject to such
trading plans may not be sold unless and until they are Transferable Shares).

 

2.                                      Definitions.

 

(a)                                 For
the purposes of this Exhibit D, “immediate
family” shall mean the spouse, domestic partner, lineal
descendant (including adopted children), father, mother, brother or sister of
the transferor.

 

(b)                                 For
purposes of this Exhibit D, “Transferable Shares”
shall mean, as of any measurement date, such number of shares of Stock issuable
upon exercise of the Option as is equal to the greater of (i) the Sale
Percentage as of such date or (ii) the Release Percentage as of such date.

 

(c)                                  For
purposes of this Exhibit D, the “Release
Percentage” shall mean (i) prior to the date that is 18
months following January 8, 2010, 0%, (ii) from the date that is 18
months following January 8, 2010 until the date that is two years after
January 8, 2010, (x) 50% multiplied by (y) the Time Percentage
(as defined in Exhibit C), (iii) from the date that is two
years following January 8, 2010 until the date that is thirty months after
January 8, 2010, (x) 75% multiplied by (y) the Time Percentage,  and (iv) on and after the date that is
30 months after January 8, 2010, 100%.

 

(d)                                 For
purposes of this Exhibit D, the “Sale
Percentage” shall mean, as of any measurement date, (i) 100%
minus (ii) the percentage of the shares of the Company’s Series C
preferred stock (or the shares of Stock issuable upon conversion thereof)
originally purchased by the JH Stockholders (as defined below) (including
through exercise of the Additional Purchase Right (as defined below)) still
held by the JH Stockholders through the date of measurement; provided that, for the avoidance of doubt, if the Additional
Purchase Right is exercised, Participant will not be required to increase his
ownership of Company securities and the Sale Percentage will be applied to the
Shares held as of such time.

 

(e)                                  For
purposes of this Exhibit D, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(f)                                   For
purposes of this Exhibit D, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(g)                                  For
purposes of this Exhibit D, the terms “Cause”
and “Good Reason” shall have the meanings
given to such terms in that certain Employment Agreement dated April 14,
2010, between Participant and the Company.

 

 

EXHIBIT C

 

Class B Stock Option Agreement

 

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

STOCK OPTION GRANT NOTICE AND

STOCK OPTION AGREEMENT

 

Image Entertainment, Inc., a Delaware corporation (the “Company”), pursuant to its 2010 Equity
Incentive Award Plan (the “Plan”), hereby
grants to the holder listed below (“Participant”), an
option to purchase the number of shares of the Company’s common stock (“Stock”), set forth below (the “Option”).  This
Option is subject to all of the terms and conditions set forth herein and in
the Stock Option Agreement attached hereto as Exhibit A (the “Stock Option Agreement”) and the
Plan, which are incorporated herein by reference.  Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Stock Option
and the Stock Option Agreement.

 

	
  Participant:

  	
   

  	
  Theodore S.
  Green

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share of Stock: 

  	
   

  	
  $

  	
  (2)

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares of Stock

  	
   

  	
   

  
	
  Subject to the Option:

  	
   

  	
   

  	
  shares,

  
	
   

  	
   

  	
  which represents
        % of the Company’s fully diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010. The
  number of Shares subject to this Stock Option represents 0.917% of the fully diluted common stock of
  the Company at closing (excluding the
  Company’s outstanding and underwater stock options) as of January 8,
  2010  minus the number of shares of Class B Restricted
  Stock granted to such Participant. The number of shares of Stock shall be
  subject to adjustment for stock splits, stock dividends and other events or
  transactions described in Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
   

  	
   

  
						

 

	
  Type of Option:

  	
   

  	
  o   Incentive
  Stock Option          o   Non-Qualified
  Stock Option

  

 

(2)  Not to be less than $0.20 per share.

 

 

	
  Vesting Schedule:

  	
   

  	
  The Option shall vest pursuant to the provisions of Exhibit C
  attached hereto.

  

 

By his or her signature, the Participant agrees to be bound by the
terms and conditions of the Plan, the Stock Option Agreement and this Grant
Notice.  The Participant has reviewed the
Stock Option Agreement, the Plan and this Grant Notice in their entirety, has
had an opportunity to obtain the advice of counsel prior to executing this
Grant Notice and fully understands all provisions of this Grant Notice, the
Stock Option Agreement and the Plan. 
Participant hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions arising
under the Plan or relating to the Option.

 

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
  20525 Nordhoff Street, Ste 200

  	
   

  	
  Address:

  
	
   

  	
  Chatsworth, CA 91311

  	
   

  	
   

  
									

 

 

EXHIBIT A

 

TO STOCK OPTION GRANT NOTICE

 

STOCK OPTION AGREEMENT

 

Pursuant to the Stock Option Grant Notice (the “Grant
Notice”) to which this Stock Option Agreement (this “Agreement”) is attached, Image Entertainment, Inc.,
a Delaware corporation (the “Company”), has
granted to the Participant an Option under the Company’s 2010 Equity Incentive
Award Plan (the “Plan”) to purchase the number of shares of
Stock indicated in the Grant Notice.

 

GENERAL

 

Defined Terms.  Capitalized terms not
specifically defined herein shall have the meanings specified in the Plan and
the Grant Notice.

 

Incorporation of Terms of Plan.  The
Option is subject to the terms and conditions of the Plan which are
incorporated herein by reference.  In the
event of any inconsistency between the Plan and this Agreement, the terms of
the Plan shall control.  Notwithstanding
anything to the contrary contained in the Plan, the Grant Notice or this
Agreement, (a) Sections 5.3, 10.6, 11.2 and 11.3 of the Plan shall not
apply at any time to the Shares and (b) the Administrator shall exercise
its discretion only reasonably in good faith.

 

GRANT OF OPTION

 

Grant of Option.  In consideration of the
Participant’s past and/or continued employment with or service to the Company
or a Parent or Subsidiary and for other good and valuable consideration,
effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants to
the Participant the Option to purchase any part or all of an aggregate of the
number of shares of Stock set forth in the Grant Notice, upon the terms and
conditions set forth in the Plan, the Grant Notice and this Agreement.  Unless designated as a Non-Qualified Stock
Option in the Grant Notice, the Option shall be an Incentive Stock Option to
the maximum extent permitted by law.

 

Exercise Price.  The exercise price of the shares
of Stock subject to the Option shall be as set forth in the Grant Notice,
without commission or other charge; provided,
however, that the price per share
of the shares of Stock subject to the Option shall not be less than 100% of the
Fair Market Value of a share of Stock on the Grant Date.  Notwithstanding the foregoing, if this Option
is designated as an Incentive Stock Option and the Participant owns (within the
meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any “subsidiary
corporation” of the Company or any “parent corporation” of the Company (each
within the meaning of Section 424 of the Code), the price per share of the
shares of Stock subject to the Option shall not be less than 110% of the Fair
Market Value of a share of Stock on the Grant Date.

 

A-1

 

No Right to Continued Employment.  Nothing
in the Plan, the Grant Notice, or this Agreement shall confer upon the
Participant any right to continue in the employ or service of the Company or
any Parent or Subsidiary or shall interfere with or restrict in any way the
rights of the Company and any Parent or Subsidiary, which rights are hereby
expressly reserved, to discharge or terminate the services of the Participant
at any time for any reason whatsoever, except to the extent expressly provided
otherwise in a written agreement between the Company or a Parent or Subsidiary
and the Participant.

 

PERIOD OF EXERCISABILITY

 

Commencement of Exercisability.

 

Subject to Sections 3.2, 3.3 and 5.6, the Option shall become vested
and exercisable in such amounts and at such times as are set forth in the Grant
Notice.

 

No portion of the Option which has not become vested and exercisable at
the date of the Participant’s Termination of Service shall thereafter become
vested and exercisable, except as may be otherwise provided in the Grant Notice
or provided by the Administrator or as set forth in a written agreement between
the Company and the Participant.

 

Duration of Exercisability.  The
installments provided for in the vesting schedule set forth in the Grant Notice
are cumulative.  Each such installment
which becomes vested and exercisable pursuant to the vesting schedule set forth
in the Grant Notice shall remain vested and exercisable until it becomes
unexercisable under Section 3.3.

 

Expiration of Option.  Subject to the provisions of Exhibit C
to the Grant Notice, the Option may not be exercised to any extent by anyone
after the first to occur of the following events:

 

The expiration of ten years from the Grant Date;

 

If this Option is designated as an Incentive Stock Option and the
Participant owned (within the meaning of Section 424(d) of the Code),
at the time the Option was granted, more than 10% of the total combined voting
power of all classes of stock of the Company or any “subsidiary corporation” of
the Company or any “parent corporation” of the Company (each within the meaning
of Section 424 of the Code), the expiration of five years from the Grant
Date;

 

The expiration of three months from the date of the Participant’s
Termination of Service, unless such termination occurs by reason of the
Participant’s death, Disability or for Cause (as defined in Exhibit C
to the Grant Notice); provided, however, that if, during any part of such three month
period, Participant’s Option is not exercisable solely because of the condition
set forth in Section 4.5(b), Participant’s Option shall not expire until
the earlier of the Expiration Date or until it shall have been exercisable for
an aggregate period of thirty days after Participant’s Termination of Service;

 

A-2

 

The expiration of one year from the date of the Participant’s death if
Participant dies prior to his or her Termination of Service or within three
months after his or her Termination of Service;

 

The expiration of one year from the date of the Participant’s
Termination of Service by reason of the Participant’s Disability; or

 

The date of Participant’s Termination of Service by the Company for
Cause.

 

If the Participant’s option is an Incentive Stock Option, note that, to
obtain the federal income tax advantages associated with an “incentive stock
option,” the Code requires that at all times beginning on the date of grant of
the Participant’s Option and ending on the day three months before the date of
Participant’s Option’s exercise, Participant must be an Employee of the Company
or an affiliate, except in the event of Participant’s death or Disability.  The Company has provided for extended
exercisability of Participant’s Option under certain circumstances for
Participant’s benefit but cannot guarantee that Participant’s Option will necessarily
be treated as an “incentive stock option” if Participant continues to be
employed by or provide services to the Company or an affiliate as a Consultant
or Director after Participant’s employment terminates or if Participant
otherwise exercises its options more than three months after the date
Participant’s employment terminates.

 

In addition and for the avoidance of doubt, upon Termination of
Service, the Participant’s vested Option shall be subject to the call right
specified in Section 4 of the Stockholders Agreement (defined below).

 

Special Tax Consequences.  The
Participant acknowledges that, to the extent that the aggregate Fair Market
Value (determined as of the time the Option is granted) of all shares of Stock
with respect to which Incentive Stock Options, including the Option, are
exercisable for the first time by the Participant in any calendar year exceeds
$100,000, the Option and such other options shall be Non-Qualified Stock
Options to the extent necessary to comply with the limitations imposed by Section 422(d) of
the Code.  The Participant further
acknowledges that the rule set forth in the preceding sentence shall be
applied by taking the Option and other “incentive stock options” into account
in the order in which they were granted, as determined under Section 422(d) of
the Code and the Treasury Regulations thereunder.

 

EXERCISE OF OPTION

 

Person Eligible to Exercise.  Except
as provided in Section 5.1, during the lifetime of the Participant, only
the Participant may exercise the Option or any portion thereof, unless it has
been disposed of pursuant to a DRO. 
After the death of the Participant, any exercisable portion of the
Option may, prior to the time when the Option becomes unexercisable under Section 3.3,
be exercised by the Participant’s personal representative or by any person
empowered to do so under the deceased Participant’s will or under the then
applicable laws of descent and distribution.

 

A-3

 

Partial Exercise.  Any exercisable portion of the
Option or the entire Option, if then wholly exercisable, may be exercised in
whole or in part at any time prior to the time when the Option or portion
thereof becomes unexercisable under Section 3.3.

 

Manner of Exercise.  The Option, or any exercisable
portion thereof, may be exercised solely by delivery to the Secretary of the
Company (or any third party administrator or other person or entity designated
by the Company) of all of the following prior to the time when the Option or
such portion thereof becomes unexercisable under Section 3.3:

 

An Exercise Notice in writing signed by the Participant or any other
person then entitled to exercise the Option or portion thereof, stating that
the Option or portion thereof is thereby exercised, such notice complying with
all applicable rules established by the Administrator.  Such notice shall be substantially in the
form attached as Exhibit B to the Grant Notice (or such other form
as is prescribed by the Administrator);

 

The receipt by the Company of full payment for the shares of Stock with
respect to which the Option or portion thereof is exercised, including payment
of any applicable withholding tax, which may be in one or more of the forms of
consideration permitted under Section 4.4;

 

Any other written representations as may be required in the
Administrator’s reasonable discretion to evidence compliance with the
Securities Act or any other applicable law, rule, or regulation; and

 

In the event the Option or portion thereof shall be exercised pursuant
to Section 4.1 by any person or persons other than the Participant,
appropriate proof of the right of such person or persons to exercise the
Option.

 

Notwithstanding any of the foregoing, the Company shall have the right
to specify all conditions of the manner of exercise, which conditions may vary
by country and which may be subject to change from time to time.

 

Method of Payment.  Payment of the exercise price
and any applicable withholding tax shall be by any of the following, or a
combination thereof, at the election of the Participant, subject to Section 10.1
of the Plan:

 

Cash;

 

Check;

 

Delivery of a notice that the Participant has placed a market sell
order with a broker with respect to shares of Stock then issuable upon exercise
of the Option, and that the broker has been directed to pay a sufficient
portion of the net proceeds of the sale to the Company in satisfaction of the
aggregate exercise price; provided, that
payment of such proceeds is then made to the Company upon settlement of such sale;

 

A-4

 

With the consent of the Administrator, by delivery of a full recourse
promissory note on such terms and conditions as may be approved by the
Administrator;

 

With the consent of the Administrator, surrender of other shares of
Stock which (A) in the case of shares of Stock acquired from the Company,
have been owned by the Participant for more than six (6) months on the
date of surrender (or such longer or shorter period as may be determined by the
Administrator), and (B) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the shares of Stock with respect to
which the Option or portion thereof is being exercised;

 

With the consent of the Administrator, surrendered shares of Stock
issuable upon the exercise of the Option having a Fair Market Value on the date
of exercise equal to the aggregate exercise price of the shares of Stock with
respect to which the Option or portion thereof is being exercised; or

 

With the consent of the Administrator, property of any kind which
constitutes good and valuable consideration.

 

(h)                                 Notwithstanding
any other provision of the Plan or this Agreement, if Participant is a Director
or “executive officer” of the Company within the meaning of Section 13(k) of
the Exchange Act, he or she shall not be permitted to make payment pursuant to
this Section 4.4, or continue any extension of credit with respect to such
payment with a loan from the Company or a loan arranged by the Company, in violation
of Section 13(k) of the Exchange Act.

 

Conditions to Issuance of Stock Certificates.  The
shares of Stock deliverable upon the exercise of the Option, or any portion
thereof, may be either previously authorized but unissued shares of Stock or
issued shares of Stock which have then been reacquired by the Company.  Such shares of Stock shall be fully paid and
nonassessable.  The Company shall not be
required to issue or deliver any shares of Stock purchased upon the exercise of the Option or portion thereof prior to
fulfillment of all of the following conditions which, with the exception of Section 4.5(d),
the Company agrees to use to best efforts to promptly complete:

 

The admission of such shares of Stock to listing on all stock exchanges
on which such Stock is then listed;

 

The completion of any registration or other qualification of such
shares of Stock under any state or federal law or under rulings or regulations
of the Securities and Exchange Commission or of any other governmental
regulatory body, which the Administrator shall, in its reasonable discretion,
deem necessary or advisable;

 

The obtaining of any approval or other clearance from any state or
federal governmental agency which the Administrator shall, in its reasonable
discretion, determine to be necessary or advisable; and

 

The receipt by the Company of full payment for such shares of Stock,
including payment of any applicable withholding tax, which may be in one or
more of the forms of consideration permitted under Section 4.4, subject to
Section 10.1 of the Plan.

 

A-5

 

Rights as Stockholder.  The holder of the Option shall
not be, nor have any of the rights or privileges of, a stockholder of the
Company in respect of any shares of Stock purchasable upon the exercise of any
part of the Option unless and until such shares of Stock shall have been issued
by the Company to such holder (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company)
and, once issued, such shares of Stock shall be freely tradeable and
non-forfeitable, except to the extent set forth in the Stockholders Agreement,
dated as of April 12, 2010, of the Company (the “Stockholders Agreement”).   No adjustment will be made for a dividend or
other right for which the record date is prior to the date the shares of Stock
are issued, except as provided in Article 11 of the Plan.

 

OTHER PROVISIONS

 

Option Generally Not Transferable.

 

Subject to Section 5.1(c), the Option may not be sold, pledged,
assigned or transferred in any manner other than by will or the laws of descent
and distribution or, subject to the consent of the Administrator, pursuant to a
DRO, unless and until the shares of Stock underlying the Option have been
issued, and all restrictions applicable to such shares of Stock have
lapsed.  Neither the Option nor any
interest or right therein shall be liable for the debts, contracts or
engagements of Participant or his or her successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect, except to the extent that such
disposition is permitted by the preceding sentence.

 

Unless transferred to a Permitted Transferee in accordance with Section 5.1(c),
during the lifetime of Participant, only Participant may exercise the Option or
any portion thereof, unless it has been disposed of pursuant to a DRO.  After the death of Participant, any
exercisable portion of the Option may, prior to the time when the Option
becomes unexercisable under Section 3.3, be exercised by Participant’s
personal representative or by any person empowered to do so under the deceased
Participant’s will or under the then applicable laws of descent and distribution.

 

(c)                                  Notwithstanding
any other provision in this Agreement, with the consent of the Administrator
and to the extent the Option is designated as a Non-Qualified Stock Option, the
Option may be transferred to, exercised by and paid to one or more Permitted
Transferees, subject to the terms and conditions set forth in Section 10.3
of the Plan.  Subject to such conditions
and procedures as the Administrator may require, a Permitted Transferee may
exercise the Option or any portion thereof during the Participant’s lifetime.

 

Adjustments.  The Participant acknowledges that the Option
is subject to modification and termination in certain events as provided in
this Agreement and Article 11 of the Plan.

 

A-6

 

Notices.  Any notice to be given under the terms of
this Agreement to the Company shall be addressed to the Company in care of the
Secretary of the Company at the address given beneath the signature of the
Company’s authorized officer on the Grant Notice, and any notice to be given to
Participant shall be addressed to Participant at the address given beneath
Participant’s signature on the Grant Notice. 
By a notice given pursuant to this Section 5.3, either party may
hereafter designate a different address for notices to be given to that
party.  Any notice which is required to
be given to Participant shall, if Participant is then deceased, be given to the
person entitled to exercise his or her Option pursuant to Section 4.1 by
written notice under this Section 5.3. 
Any notice shall be deemed duly given when sent via email or when sent
by certified mail (return receipt requested) and deposited (with postage
prepaid) in a post office or branch post office regularly maintained by the
United States Postal Service.

 

Titles.  Titles are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of this
Agreement.

 

Governing Law; Severability.  The laws
of the State of Delaware shall govern the interpretation, validity, administration,
enforcement and performance of the terms of this Agreement regardless of the
law that might be applied under principles of conflicts of laws.

 

Conformity to Securities Laws.  The
Participant acknowledges that the Plan, the Grant Notice and this Agreement are
intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules promulgated
by the Securities and Exchange Commission thereunder, and state securities laws
and regulations.  Notwithstanding
anything herein to the contrary, the Plan shall be administered, and the Option
is granted and may be exercised, only in such a manner as to conform to such
laws, rules and regulations.  To the
extent permitted by applicable law, the Plan, the Grant Notice and this
Agreement shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

 

Entire Agreement; Amendments.  The Plan
and this Agreement (including all Exhibits hereto) constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Participant with respect to the subject
matter hereof.  This Agreement may not be
modified, amended or terminated except by an instrument in writing, signed by
Participant or such other person as may be permitted to exercise the Option
pursuant to Section 4.1 and by a duly authorized representative of the
Company.

 

Successors and Assigns.  The Company may assign any of
its rights under this Agreement to single or multiple assignees, and this
Agreement shall inure to the benefit of the successors and assigns of the
Company.  Subject to the restrictions on
transfer herein set forth in Section 5.1, this Agreement shall be binding
upon Participant and his or her heirs, executors, administrators, successors
and assigns.

 

Notification of Disposition.  If this
Option is designated as an Incentive Stock Option, Participant shall give
prompt notice to the Company of any disposition or other transfer of any shares
of Stock acquired under this Agreement if such disposition or transfer is made (a) within
two years from the Grant Date with respect to such shares of Stock or (b) within
one year after

 

A-7

 

the transfer of such shares of
Stock to the Participant.  Such notice
shall specify the date of such disposition or other transfer and the amount
realized, in cash, other property, assumption of indebtedness or other
consideration, by Participant in such disposition or other transfer.

 

Limitations
Applicable to Section 16 Persons.  Notwithstanding any other provision of the
Plan or this Agreement, if Participant is subject to Section 16 of the
Exchange Act, the Plan, the Option and this Agreement shall be subject to any
additional limitations set forth in any applicable exemptive rule under Section 16
of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange
Act) that are requirements for the application of such exemptive rule.  To the extent permitted by applicable law,
this Agreement shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

 

Not a
Contract of Employment.  Nothing in this Agreement, the Grant Notice,
or the Plan shall confer upon the Participant any right to continue to serve as
an employee or other service provider of the Company or any Parent or
Subsidiary.

 

5.12                        Stockholder
Approval.  The Plan
will be submitted for approval by the Company’s stockholders within twelve
months before or after the date the Plan was initially adopted by the
Board.  The Option may not be exercised
to any extent by anyone prior to the time when the Plan is approved by the
stockholders, and if such approval has not been obtained within twelve months
after the date the Plan was initially adopted by the Board, the Option shall
thereupon be canceled and become null and void.

 

A-8

 

EXHIBIT B

 

TO STOCK
OPTION GRANT NOTICE

 

FORM OF
EXERCISE NOTICE

 

Effective
as of today,
                             ,
                  
the undersigned (“Participant”)
hereby elects to exercise Participant’s option to purchase
                             
shares of the Stock (the “Shares”)  of Image Entertainment, Inc.
(the “Company”)  under
and pursuant to the Image Entertainment, Inc. 2010 Equity Incentive Award
Plan (the “Plan”) and the Stock Option
Grant Notice and Stock Option Agreement dated
                             ,
         (the “Option
Agreement”).  Capitalized
terms used herein without definition shall have the meanings given in the
Option Agreement.

 

	
  Grant Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of Shares of Stock as to which Option is Exercised:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share of Stock:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Certificate to be issued in name of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cash Payment delivered herewith:

  	
   

  	
  $

  	
   

  	
  (Representing
  the full Exercise Price for the 

  
	
   

  	
   

  	
  Shares,
  as well as any applicable withholding tax)

  
							

 

	
  Type
  of Option:

  	
  o

  	
  Incentive
  Stock Option

  	
   

  	
  o

  	
   

  	
  Non-Qualified
  Stock Option

  

 

1.                                      Representations
of Participant.  Participant
acknowledges that Participant has received, read and understood the Plan and
the Option Agreement. Participant agrees to abide by and be bound by their
terms and conditions

 

2.                                      Rights as
Stockholder.  Until the
Shares are issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a stockholder shall exist with
respect to Shares subject to the Option, notwithstanding the exercise of the
Option.  No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Article 11 of the Plan.  The Shares shall be freely tradeable and
non-forfeitable, except to the extent set forth in the Stockholders Agreement.

 

3.                                      Tax
Consultation.  Participant
understands that Participant may suffer adverse tax consequences as a result of
Participant’s purchase or disposition of the Shares.  Participant represents that Participant has
consulted with any tax consultants Participant deems advisable in connection
with the purchase or disposition of the Shares and that Participant is not
relying on the Company for any tax advice.

 

B-1

 

4.                                      Successors and
Assigns.  This Agreement shall inure to
the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer
herein set forth, this Agreement shall be binding upon Participant and his or
her heirs, executors, administrators, successors and assigns.

 

5.                                      Interpretation.  Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or by the Company forthwith to
the Administrator, which shall review such dispute at its next regular
meeting.  The resolution of such a
dispute by the Administrator shall be final and binding on the Company and on
Participant.

 

6.                                      Governing Law;
Severability.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware, excluding that body of law pertaining to conflicts of
law.  Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.

 

7.                                      Notices.  Any notice required or permitted hereunder
shall be given in accordance with the provisions set forth in Section 5.3
of the Option Agreement.

 

8.                                      Further
Instruments.  The parties
agree to execute such further instruments and to take such further action as
may be reasonably necessary to carry out the purposes and intent of this
Agreement.

 

9.                                      Entire
Agreement.  The Plan
and Option Agreement are incorporated herein by reference.  This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and Participant
with respect to the subject matter hereof.

 

B-2

 

	
  ACCEPTED BY: 

  	
   

  	
  SUBMITTED BY 

  
	
  IMAGE
  ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  Print
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
										

 

 

CONSENT
OF SPOUSE

 

I,
                                        ,
spouse of                                   ,
have read and approve the Option Agreement and this Exercise Notice between my
spouse and Image Entertainment, Inc. 
In consideration of granting of the right to my spouse to purchase
shares of Image Entertainment, Inc. set forth in the Option Agreement and
this Exercise Notice, I hereby appoint my spouse as my attorney-in-fact in
respect to the exercise of any rights under the Option Agreement and this
Exercise Notice and agree to be bound by the provisions of the Plan, the Option
Agreement and this Exercise Notice insofar as I may have any rights in said
agreements or any shares issued pursuant thereto under the community property
laws or similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Exercise Notice.

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature
  of Spouse

  

 

B-3

 

EXHIBIT C

 

TO STOCK
OPTION GRANT NOTICE

 

VESTING
PROVISIONS

 

Capitalized
terms used in this Exhibit C and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit C
is attached or the Agreement attached thereto. 
In the event of any inconsistency between this Exhibit C, on
the one hand, and the Plan, the Grant Notice or the Agreement, on the other
hand, the provisions of this Exhibit C shall govern.

 

1.                                      Vesting.  Subject to Section 2 below, the Option
shall vest as to 100% of the shares of Stock subject to the Option upon the
earlier of (a) the achievement of the Company Stock Price Hurdle, or (b) January 8,
2019, subject to Participant’s continued service to the Company as an Employee
through such vesting date.  For purposes
of this Exhibit C, the “Company Stock Price Hurdle”
shall mean (A) the Fair Market Value of the Stock (calculated pursuant to
clause (i) or (ii) of Section 2.21 of the Plan only) equaling or
exceeding $0.0773 for any 20 out of 30 consecutive trading days beginning on or
after January 8, 2012 or (B) the occurrence of a Change in Control in
which the equity value per share of Stock in such Change in Control transaction
equals or exceeds $0.0773.

 

2.                                      Accelerated
Vesting.

 

(a)                                 In the event of
Participant’s Termination of Employment by the Company without Cause (as
defined below) or by Participant for Good Reason (as defined below) prior to
the vesting of the Option pursuant to Section 1 above, the Option shall
vest and become exercisable as to 100% of the shares of Stock subject to the
Option if the Company Stock Price Hurdle is achieved on or before the date that
is one year following such Termination of Employment; provided that if
there is not a Trading Market for the Stock at the time of such Termination of
Employment and there has not been an unbroken period of six months during which
there has been a Trading Market between such Termination of Employment and the
end of the one-year period following such Termination of Employment, such
one-year period shall be extended until the earliest of (A) the last day
of any unbroken six-month period during which there has been a continuous
Trading Market, (B) the occurrence of a Change of Control and (C) the
date that is five years following such Termination of Employment.  In addition, the Option shall remain
exercisable by Participant through the later of (i) the date that is one
year following such Termination of Employment (if the Option has vested and
become exercisable on or prior to such date) or (ii) the date that is 30
days following the date on which the Option vests and becomes exercisable
pursuant to this clause (a); provided, however, that in no event shall the Option remain
exercisable beyond the expiration date set forth in Section 3.3(a) of
the Agreement.  Notwithstanding the
foregoing, the accelerated vesting and extended exercisability of the Option
outlined in this clause (a) shall be contingent on Participant’s execution
and non-revocation of the Release (as defined below).

 

(b)                                 In the event of
Participant’s Termination of Employment as a result of the

 

 

Company’s
election not to extend the Employment Period (as defined below) beyond the
Initial Term (as defined below) prior to the vesting of the Option pursuant to Section 1
above, the Option shall vest and become exercisable as to 100% of the shares of
Stock subject to the Option if the Company Stock Price Hurdle is achieved on or
before the date that is one year following the expiration of the Initial Term; provided
that if there is not a Trading Market for the Stock at the time of such
Termination of Employment and there has not been an unbroken period of six
months during which there has been a Trading Market between such Termination of
Employment and the end of the one-year period following the expiration of the
Initial Term, such one-year period shall be extended until the earliest of (A) the
last day of any unbroken six-month period during which there has been a
continuous Trading Market, (B) the occurrence of a Change of Control and (C) the
date that is five years following the expiration of the Initial Term.  In addition, the Option shall remain
exercisable by Participant through the later of (i) the date that is one
year following the expiration of the Initial Term (if the Option has vested and
become exercisable on or prior to such date) or (ii) the date that is 30
days following the date on which the Option vests and becomes exercisable
pursuant to this clause (a); provided, however, that in no event shall the Option remain
exercisable beyond the expiration date set forth in Section 3.3(a) of
the Agreement.  Notwithstanding the
foregoing, the accelerated vesting and extended exercisability of the Option
outlined in this clause (b) shall be contingent on Participant’s execution
and non-revocation of the Release (as defined below).

 

(d)                                 For purposes of
this Exhibit B, the terms “Cause,” “Employment Period,” “Good Reason,” “Initial
Term” and “Release”
shall have the meanings given to such terms in that certain Employment
Agreement dated April 14, 2010, between Participant and the Company;
provided that the “Initial Term” shall mean such term without regard to any
extension of the Employment Period as a result of the Company’s failure to give
less than 12 months’ notice of non-extension of the Initial Term.

 

 

EXHIBIT D

 

Class C Stock Option Agreement

 

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

STOCK OPTION GRANT NOTICE AND

STOCK OPTION AGREEMENT

 

Image
Entertainment, Inc., a Delaware corporation (the “Company”), pursuant
to its 2010 Equity Incentive Award Plan (the “Plan”), hereby
grants to the holder listed below (“Participant”), an
option to purchase the number of shares of the Company’s common stock (“Stock”), set forth below (the “Option”).  This
Option is subject to all of the terms and conditions set forth herein and in
the Stock Option Agreement attached hereto as Exhibit A (the “Stock Option Agreement”) and the
Plan, which are incorporated herein by reference.  Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Stock Option
and the Stock Option Agreement.

 

	
  Participant:

  	
   

  	
  Theodore S. Green

  
	
   

  	
   

  	
   

  
	
  Grant
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise
  Price per Share of Stock:

  	
   

  	
  $

  	
  (3)

  	
   

  
	
   

  	
   

  	
   

  
	
  Total
  Exercise Price:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Total
  Number of Shares of Stock Subject to the Option:

  	
   

  	
                                                                                                                                  shares, which represents       % of
  the Company’s fully diluted Stock (excluding the Company’s outstanding and
  underwater stock options) as of January 8, 2010. The number of Shares subject to this
  Stock Option represents 0.917% of the
  fully diluted common stock of the Company at closing (excluding the Company’s outstanding and underwater stock options) as
  of January 8, 2010  minus the number of shares of
  Class C Restricted Stock granted to such Participant. The number of
  shares of Stock shall be subject to adjustment for stock splits, stock
  dividends and other events or transactions described in
  Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Expiration
  Date:

  	
   

  	
   

  	
   

  
					

 

	
  Type
  of Option:

  	
  o

  	
  Incentive
  Stock Option

  	
   

  	
  o

  	
   

  	
  Non-Qualified
  Stock Option

  

 

(3) 
Not to be less than $0.20 per share.

 

 

	
  Vesting
  Schedule:

  	
   

  	
  The
  Option shall vest pursuant to the provisions of Exhibit C
  attached hereto.

  

 

By
his or her signature, the Participant agrees to be bound by the terms and
conditions of the Plan, the Stock Option Agreement and this Grant Notice.  The Participant has reviewed the Stock Option
Agreement, the Plan and this Grant Notice in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Grant
Notice and fully understands all provisions of this Grant Notice, the Stock
Option Agreement and the Plan. 
Participant hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions arising
under the Plan or relating to the Option.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:   20525
  Nordhoff Street, Ste 200

  Chatsworth,
  CA 91311

  	
   

  	
  Address:

  
						

 

 

EXHIBIT A

 

TO STOCK OPTION GRANT NOTICE

 

STOCK OPTION AGREEMENT

 

Pursuant
to the Stock Option Grant Notice (the “Grant Notice”) to which
this Stock Option Agreement (this “Agreement”) is attached, Image
Entertainment, Inc., a Delaware corporation (the “Company”), has
granted to the Participant an Option under the Company’s 2010 Equity Incentive
Award Plan (the “Plan”) to purchase the number of shares of
Stock indicated in the Grant Notice.

 

22.

GENERAL

 

(a)                                 Defined Terms.  Capitalized terms not specifically defined
herein shall have the meanings specified in the Plan and the Grant Notice.

 

(b)                                 Incorporation of Terms of Plan.  The Option is subject to the terms and
conditions of the Plan which are incorporated herein by reference.  In the event of any inconsistency between the
Plan and this Agreement, the terms of the Plan shall control.  Notwithstanding anything to the contrary
contained in the Plan, the Grant Notice or this Agreement, (a) Sections
5.3, 10.6, 11.2 and 11.3 of the Plan shall not apply at any time to the Shares
and (b) the Administrator shall exercise its discretion only reasonably in
good faith.

 

23.

GRANT
OF OPTION

 

(a)                                 Grant of Option.  In consideration of the Participant’s past
and/or continued employment with or service to the Company or a Parent or
Subsidiary and for other good and valuable consideration, effective as of the
Grant Date set forth in the Grant Notice (the “Grant
Date”), the Company irrevocably grants to the Participant the Option
to purchase any part or all of an aggregate of the number of shares of Stock set
forth in the Grant Notice, upon the terms and conditions set forth in the Plan,
the Grant Notice and this Agreement. 
Unless designated as a Non-Qualified Stock Option in the Grant Notice,
the Option shall be an Incentive Stock Option to the maximum extent permitted
by law.

 

(b)                                 Exercise Price.  The exercise price of the shares of Stock
subject to the Option shall be as set forth in the Grant Notice, without
commission or other charge; provided,
however, that the price per share
of the shares of Stock subject to the Option shall not be less than 100% of the
Fair Market Value of a share of Stock on the Grant Date.  Notwithstanding the foregoing, if this Option
is designated as an Incentive Stock Option and the Participant owns (within the
meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any “subsidiary
corporation” of the Company or any “parent corporation” of the Company (each
within the meaning of Section 424 of the Code), the price per share of the
shares of Stock subject to the Option shall not be less than 110% of the Fair
Market Value of a share of Stock on the Grant Date.

 

A-1

 

(c)                                  No Right to Continued Employment.  Nothing in the Plan, the Grant Notice, or
this Agreement shall confer upon the Participant any right to continue in the
employ or service of the Company or any Parent or Subsidiary or shall interfere
with or restrict in any way the rights of the Company and any Parent or
Subsidiary, which rights are hereby expressly reserved, to discharge or
terminate the services of the Participant at any time for any reason
whatsoever, except to the extent expressly provided otherwise in a written
agreement between the Company or a Parent or Subsidiary and the Participant.

 

24.

PERIOD
OF EXERCISABILITY

 

(a)                                  Commencement of Exercisability.

 

(i)                                     Subject to Sections 3.2, 3.3 and 5.6, the Option shall become vested and
exercisable in such amounts and at such times as are set forth in the Grant
Notice.

 

(ii)                                  No portion of the Option which has not become vested and exercisable at
the date of the Participant’s Termination of Service shall thereafter become
vested and exercisable, except as may be otherwise provided in the Grant Notice
or provided by the Administrator or as set forth in a written agreement between
the Company and the Participant.

 

(b)                                 Duration of Exercisability.  The installments provided for in the vesting
schedule set forth in the Grant Notice are cumulative.  Each such installment which becomes vested
and exercisable pursuant to the vesting schedule set forth in the Grant Notice
shall remain vested and exercisable until it becomes unexercisable under Section 3.3.

 

(c)                                  Expiration of Option.  Subject to the provisions of Exhibit C
to the Grant Notice, the Option may not be exercised to any extent by anyone
after the first to occur of the following events:

 

(i)                                     The expiration of ten years from the Grant Date;

 

(ii)                                  If this Option is designated as an Incentive Stock Option and the
Participant owned (within the meaning of Section 424(d) of the Code),
at the time the Option was granted, more than 10% of the total combined voting
power of all classes of stock of the Company or any “subsidiary corporation” of
the Company or any “parent corporation” of the Company (each within the meaning
of Section 424 of the Code), the expiration of five years from the Grant
Date;

 

(iii)                               The expiration of three months from the date of the Participant’s
Termination of Service, unless such termination occurs by reason of the
Participant’s death, Disability or for Cause (as defined in Exhibit C
to the Grant Notice); provided, however, that if, during any part of such three month
period, Participant’s Option is not exercisable solely because of the condition
set forth in Section 4.5(b), Participant’s Option shall not expire until
the earlier of the Expiration Date or until it shall have been exercisable for
an aggregate period of thirty days after Participant’s Termination of Service;

 

A-2

 

(iv)                              The expiration of one year from the date of the Participant’s death if
Participant dies prior to his or her Termination of Service or within three
months after his or her Termination of Service;

 

(v)                                 The expiration of one year from the date of the Participant’s Termination
of Service by reason of the Participant’s Disability; or

 

(vi)                              The date of Participant’s Termination of Service by the Company for
Cause.

 

If
the Participant’s option is an Incentive Stock Option, note that, to obtain the
federal income tax advantages associated with an “incentive stock option,” the
Code requires that at all times beginning on the date of grant of the
Participant’s Option and ending on the day three months before the date of
Participant’s Option’s exercise, Participant must be an Employee of the Company
or an affiliate, except in the event of Participant’s death or Disability.  The Company has provided for extended
exercisability of Participant’s Option under certain circumstances for
Participant’s benefit but cannot guarantee that Participant’s Option will
necessarily be treated as an “incentive stock option” if Participant continues
to be employed by or provide services to the Company or an affiliate as a
Consultant or Director after Participant’s employment terminates or if
Participant otherwise exercises its options more than three months after the
date Participant’s employment terminates.

 

In
addition and for the avoidance of doubt, upon Termination of Service, the
Participant’s vested Option shall be subject to the call right specified in Section 4
of the Stockholders Agreement (defined below).

 

(d)                                 Special Tax Consequences.  The Participant acknowledges that, to the
extent that the aggregate Fair Market Value (determined as of the time the
Option is granted) of all shares of Stock with respect to which Incentive Stock
Options, including the Option, are exercisable for the first time by the
Participant in any calendar year exceeds $100,000, the Option and such other
options shall be Non-Qualified Stock Options to the extent necessary to comply
with the limitations imposed by Section 422(d) of the Code.  The Participant further acknowledges that the
rule set forth in the preceding sentence shall be applied by taking the
Option and other “incentive stock options” into account in the order in which
they were granted, as determined under Section 422(d) of the Code and
the Treasury Regulations thereunder.

 

25.

EXERCISE
OF OPTION

 

(a)                                  Person Eligible to Exercise.  Except as provided in Section 5.1,
during the lifetime of the Participant, only the Participant may exercise the
Option or any portion thereof, unless it has been disposed of pursuant to a
DRO.  After the death of the Participant,
any exercisable portion of the Option may, prior to the time when the Option
becomes unexercisable under Section 3.3, be exercised by the Participant’s
personal representative or by any person empowered to do so under the deceased
Participant’s will or under the then applicable laws of descent and
distribution.

 

A-3

 

(b)                                 Partial Exercise.  Any exercisable portion of the Option or the
entire Option, if then wholly exercisable, may be exercised in whole or in part
at any time prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.3.

 

(c)                                  Manner of Exercise.  The Option, or any exercisable portion
thereof, may be exercised solely by delivery to the Secretary of the Company
(or any third party administrator or other person or entity designated by the
Company) of all of the following prior to the time when the Option or such
portion thereof becomes unexercisable under Section 3.3:

 

(i)                                     An Exercise Notice in writing signed by the Participant or any other
person then entitled to exercise the Option or portion thereof, stating that
the Option or portion thereof is thereby exercised, such notice complying with
all applicable rules established by the Administrator.  Such notice shall be substantially in the
form attached as Exhibit B to the Grant Notice (or such other form
as is prescribed by the Administrator);

 

(ii)                                  The receipt by the Company of full payment for the shares of Stock with
respect to which the Option or portion thereof is exercised, including payment
of any applicable withholding tax, which may be in one or more of the forms of
consideration permitted under Section 4.4;

 

(iii)                               Any other written representations as may be required in the Administrator’s
reasonable discretion to evidence compliance with the Securities Act or any
other applicable law, rule, or regulation; and

 

(iv)                              In the event the Option or portion thereof shall be exercised pursuant to
Section 4.1 by any person or persons other than the Participant,
appropriate proof of the right of such person or persons to exercise the
Option.

 

Notwithstanding
any of the foregoing, the Company shall have the right to specify all
conditions of the manner of exercise, which conditions may vary by country and
which may be subject to change from time to time.

 

(d)                                 Method of Payment.  Payment of the exercise price and any
applicable withholding tax shall be by any of the following, or a combination
thereof, at the election of the Participant, subject to Section 10.1 of
the Plan:

 

(i)                                     Cash;

 

(ii)                                  Check;

 

(iii)                               Delivery of a notice that the Participant has placed a market sell order
with a broker with respect to shares of Stock then issuable upon exercise of
the Option, and that the broker has been directed to pay a sufficient portion
of the net proceeds of the sale to the Company in satisfaction of the aggregate
exercise price; provided, that payment of such
proceeds is then made to the Company upon settlement of such sale;

 

A-4

 

(iv)                              With the consent of the Administrator, by delivery of a full recourse
promissory note on such terms and conditions as may be approved by the
Administrator;

 

(v)                                 With the consent of the Administrator, surrender of other shares of Stock
which (A) in the case of shares of Stock acquired from the Company, have
been owned by the Participant for more than six (6) months on the date of
surrender (or such longer or shorter period as may be determined by the
Administrator), and (B) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the shares of Stock with respect to
which the Option or portion thereof is being exercised;

 

(vi)                              With the consent of the Administrator, surrendered shares of Stock
issuable upon the exercise of the Option having a Fair Market Value on the date
of exercise equal to the aggregate exercise price of the shares of Stock with
respect to which the Option or portion thereof is being exercised; or

 

(vii)                           With the consent of the Administrator, property of any kind which
constitutes good and valuable consideration.

 

(h)                                 Notwithstanding
any other provision of the Plan or this Agreement, if Participant is a Director
or “executive officer” of the Company within the meaning of Section 13(k) of
the Exchange Act, he or she shall not be permitted to make payment pursuant to
this Section 4.4, or continue any extension of credit with respect to such
payment with a loan from the Company or a loan arranged by the Company, in
violation of Section 13(k) of the Exchange Act.

 

(e)                                  Conditions
to Issuance of Stock Certificates.  The shares of Stock deliverable upon the
exercise of the Option, or any portion thereof, may be either previously
authorized but unissued shares of Stock or issued shares of Stock which have
then been reacquired by the Company. 
Such shares of Stock shall be fully paid and nonassessable.  The Company shall not be required to issue or
deliver any shares of Stock purchased
upon the exercise of the Option or portion thereof prior to fulfillment of all
of the following conditions which, with the exception of Section 4.5(d),
the Company agrees to use to best efforts to promptly complete:

 

(i)                                     The admission of such shares of Stock to listing on all stock exchanges
on which such Stock is then listed;

 

(ii)                                  The completion of any registration or other qualification of such shares
of Stock under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory
body, which the Administrator shall, in its reasonable discretion, deem
necessary or advisable;

 

(iii)                               The obtaining of any approval or other clearance from any state or
federal governmental agency which the Administrator shall, in its reasonable
discretion, determine to be necessary or advisable; and

 

A-5

 

(iv)                              The receipt by the Company of full payment for such shares of Stock,
including payment of any applicable withholding tax, which may be in one or
more of the forms of consideration permitted under Section 4.4, subject to
Section 10.1 of the Plan.

 

(f)                                    Rights as Stockholder.  The holder of the Option shall not be, nor
have any of the rights or privileges of, a stockholder of the Company in
respect of any shares of Stock purchasable upon the exercise of any part of the
Option unless and until such shares of Stock shall have been issued by the
Company to such holder (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) and, once issued,
such shares of Stock shall be freely tradeable and non-forfeitable, except to
the extent set forth in the Stockholders Agreement, dated as of April 12,
2010, of the Company (the “Stockholders Agreement”).   No adjustment will be made for a dividend or
other right for which the record date is prior to the date the shares of Stock
are issued, except as provided in Article 11 of the Plan.

 

26.

OTHER
PROVISIONS

 

(a)                                  Option Generally Not Transferable.

 

(i)                                     Subject to Section 5.1(c), the Option may not be sold, pledged,
assigned or transferred in any manner other than by will or the laws of descent
and distribution or, subject to the consent of the Administrator, pursuant to a
DRO, unless and until the shares of Stock underlying the Option have been issued,
and all restrictions applicable to such shares of Stock have lapsed.  Neither the Option nor any interest or right
therein shall be liable for the debts, contracts or engagements of Participant
or his or her successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any
other means whether such disposition be voluntary or involuntary or by
operation of law by judgment, levy, attachment, garnishment or any other legal
or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect,
except to the extent that such disposition is permitted by the preceding
sentence.

 

(ii)                                  Unless transferred to a Permitted Transferee in accordance with Section 5.1(c),
during the lifetime of Participant, only Participant may exercise the Option or
any portion thereof, unless it has been disposed of pursuant to a DRO.  After the death of Participant, any
exercisable portion of the Option may, prior to the time when the Option
becomes unexercisable under Section 3.3, be exercised by Participant’s
personal representative or by any person empowered to do so under the deceased
Participant’s will or under the then applicable laws of descent and distribution.

 

(c)                                  Notwithstanding
any other provision in this Agreement, with the consent of the Administrator
and to the extent the Option is designated as a Non-Qualified Stock Option, the
Option may be transferred to, exercised by and paid to one or more Permitted
Transferees, subject to the terms and conditions set forth in Section 10.3
of the Plan.  Subject to such conditions
and procedures as the Administrator may require, a Permitted Transferee may
exercise the Option or any portion thereof during the Participant’s lifetime.

 

A-6

 

(b)                                 Adjustments.  The Participant acknowledges that the Option
is subject to modification and termination in certain events as provided in
this Agreement and Article 11 of the Plan.

 

(c)                                  Notices.  Any notice to be given under the terms of
this Agreement to the Company shall be addressed to the Company in care of the
Secretary of the Company at the address given beneath the signature of the
Company’s authorized officer on the Grant Notice, and any notice to be given to
Participant shall be addressed to Participant at the address given beneath
Participant’s signature on the Grant Notice. 
By a notice given pursuant to this Section 5.3, either party may
hereafter designate a different address for notices to be given to that
party.  Any notice which is required to
be given to Participant shall, if Participant is then deceased, be given to the
person entitled to exercise his or her Option pursuant to Section 4.1 by
written notice under this Section 5.3. 
Any notice shall be deemed duly given when sent via email or when sent
by certified mail (return receipt requested) and deposited (with postage
prepaid) in a post office or branch post office regularly maintained by the
United States Postal Service.

 

(d)                                 Titles.  Titles are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of this
Agreement.

 

(e)                                  Governing Law; Severability.  The laws of the State of Delaware shall
govern the interpretation, validity, administration, enforcement and
performance of the terms of this Agreement regardless of the law that might be
applied under principles of conflicts of laws.

 

(f)                                    Conformity to Securities Laws.  The Participant acknowledges that the Plan,
the Grant Notice and this Agreement are intended to conform to the extent
necessary with all provisions of the Securities Act and the Exchange Act and
any and all regulations and rules promulgated by the Securities and
Exchange Commission thereunder, and state securities laws and regulations.  Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Option is granted and may be
exercised, only in such a manner as to conform to such laws, rules and
regulations.  To the extent permitted by
applicable law, the Plan, the Grant Notice and this Agreement shall be deemed
amended to the extent necessary to conform to such laws, rules and
regulations.

 

(g)                                 Entire Agreement; Amendments.  The Plan and this Agreement (including all
Exhibits hereto) constitute the entire agreement of the parties and supersede
in their entirety all prior undertakings and agreements of the Company and
Participant with respect to the subject matter hereof.  This Agreement may not be modified, amended
or terminated except by an instrument in writing, signed by Participant or such
other person as may be permitted to exercise the Option pursuant to Section 4.1
and by a duly authorized representative of the Company.

 

(h)                                 Successors and Assigns.  The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer
herein set forth in Section 5.1, this Agreement shall be binding upon
Participant and his or her heirs, executors, administrators, successors and
assigns.

 

A-7

 

(i)                                     Notification of Disposition.  If this Option is designated as an Incentive
Stock Option, Participant shall give prompt notice to the Company of any
disposition or other transfer of any shares of Stock acquired under this
Agreement if such disposition or transfer is made (a) within two years
from the Grant Date with respect to such shares of Stock or (b) within one
year after the transfer of such shares of Stock to the Participant.  Such notice shall specify the date of such
disposition or other transfer and the amount realized, in cash, other property,
assumption of indebtedness or other consideration, by Participant in such
disposition or other transfer.

 

(j)                                     Limitations Applicable to Section 16 Persons.  Notwithstanding any other
provision of the Plan or this Agreement, if Participant is subject to Section 16
of the Exchange Act, the Plan, the Option and this Agreement shall be subject
to any additional limitations set forth in any applicable exemptive rule under
Section 16 of the Exchange Act (including any amendment to Rule 16b-3
of the Exchange Act) that are requirements for the application of such
exemptive rule.  To the extent permitted
by applicable law, this Agreement shall be deemed amended to the extent
necessary to conform to such applicable exemptive rule.

 

(k)                                  Not a Contract of Employment.  Nothing in this Agreement, the Grant Notice,
or the Plan shall confer upon the Participant any right to continue to serve as
an employee or other service provider of the Company or any Parent or
Subsidiary.

 

5.12                           Stockholder
Approval.  The Plan
will be submitted for approval by the Company’s stockholders within twelve
months before or after the date the Plan was initially adopted by the
Board.  The Option may not be exercised
to any extent by anyone prior to the time when the Plan is approved by the
stockholders, and if such approval has not been obtained within twelve months
after the date the Plan was initially adopted by the Board, the Option shall
thereupon be canceled and become null and void.

 

A-8

 

EXHIBIT B

 

TO STOCK
OPTION GRANT NOTICE

 

FORM OF
EXERCISE NOTICE

 

Effective
as of today,
                             ,
                  
the undersigned (“Participant”)
hereby elects to exercise Participant’s option to purchase
                             
shares of the Stock (the “Shares”)  of Image Entertainment, Inc.
(the “Company”)  under
and pursuant to the Image Entertainment, Inc. 2010 Equity Incentive Award
Plan (the “Plan”) and the Stock Option
Grant Notice and Stock Option Agreement dated
                             ,
         (the “Option
Agreement”).  Capitalized
terms used herein without definition shall have the meanings given in the
Option Agreement.

 

	
  Grant Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of Shares of Stock as to which Option is Exercised:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share of Stock:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Certificate to be issued in name of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cash Payment delivered herewith:

  	
   

  	
  $

  	
   

  	
  (Representing
  the full Exercise Price for the 

  
	
   

  	
   

  	
  Shares,
  as well as any applicable withholding tax)

  
							

 

	
  Type
  of Option:

  	
  o

  	
  Incentive
  Stock Option

  	
   

  	
  o

  	
   

  	
  Non-Qualified
  Stock Option

  

 

1.                                       Representations
of Participant.  Participant
acknowledges that Participant has received, read and understood the Plan and
the Option Agreement. Participant agrees to abide by and be bound by their
terms and conditions

 

2.                                       Rights as Stockholder.  Until the Shares are issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to Shares subject to the
Option, notwithstanding the exercise of the Option.  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Article 11 of the Plan.  The Shares shall be freely tradeable and
non-forfeitable, except to the extent set forth in the Stockholders Agreement.

 

3.                                       Tax
Consultation.  Participant
understands that Participant may suffer adverse tax consequences as a result of
Participant’s purchase or disposition of the Shares.  Participant represents that Participant has
consulted with any tax consultants Participant deems advisable in connection
with the purchase or disposition of the Shares and that Participant is not
relying on the Company for any tax advice.

 

B-1

 

4.                                       Successors and
Assigns.  This Agreement shall inure to
the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer
herein set forth, this Agreement shall be binding upon Participant and his or
her heirs, executors, administrators, successors and assigns.

 

5.                                       Interpretation.  Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or by the Company forthwith to
the Administrator, which shall review such dispute at its next regular
meeting.  The resolution of such a
dispute by the Administrator shall be final and binding on the Company and on
Participant.

 

6.                                       Governing Law;
Severability.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware, excluding that body of law pertaining to conflicts of
law.  Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.

 

7.                                       Notices.  Any notice required or permitted hereunder
shall be given in accordance with the provisions set forth in Section 5.3
of the Option Agreement.

 

8.                                       Further
Instruments.  The parties
agree to execute such further instruments and to take such further action as
may be reasonably necessary to carry out the purposes and intent of this
Agreement.

 

9.                                       Entire
Agreement.  The Plan
and Option Agreement are incorporated herein by reference.  This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and Participant
with respect to the subject matter hereof.

 

B-2

 

	
  ACCEPTED BY: 

  	
   

  	
  SUBMITTED BY 

  
	
  IMAGE
  ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  Print
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
										

 

 

CONSENT
OF SPOUSE

 

I,
                                        ,
spouse of
                                  ,
have read and approve the Option Agreement and this Exercise Notice between my
spouse and Image Entertainment, Inc. 
In consideration of granting of the right to my spouse to purchase
shares of Image Entertainment, Inc. set forth in the Option Agreement and
this Exercise Notice, I hereby appoint my spouse as my attorney-in-fact in
respect to the exercise of any rights under the Option Agreement and this
Exercise Notice and agree to be bound by the provisions of the Plan, the Option
Agreement and this Exercise Notice insofar as I may have any rights in said
agreements or any shares issued pursuant thereto under the community property
laws or similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Exercise Notice.

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature
  of Spouse

  

 

B-3

 

EXHIBIT C

 

TO STOCK
OPTION GRANT NOTICE

 

VESTING
PROVISIONS

 

Capitalized
terms used in this Exhibit C and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit C
is attached or the Agreement attached thereto. 
In the event of any inconsistency between this Exhibit C, on
the one hand, and the Plan, the Grant Notice or the Agreement, on the other
hand, the provisions of this Exhibit C shall govern.

 

1.                                       Vesting.  Subject to Section 2 below, the Option
shall vest as to 100% of the shares of Stock subject to the Option upon the
earlier of (a) the achievement of the Company Stock Price Hurdle, or (b) January 8,
2019, subject to Participant’s continued service to the Company as an Employee
through such vesting date.  For purposes
of this Exhibit C, the “Company Stock Price Hurdle”
shall mean (A) the Fair Market Value of the Stock (calculated pursuant to
clause (i) or (ii) of Section 2.21 of the Plan only) equaling or
exceeding $0.19 for any 20 out of 30 consecutive trading days beginning on or
after January 8, 2013 or (B) the occurrence of a Change in Control in
which the equity value per share of Stock in such Change in Control transaction
equals or exceeds $0.19.

 

2.                                       Accelerated
Vesting.

 

(a)                                  In the event of
Participant’s Termination of Employment by the Company without Cause (as
defined below) or by Participant for Good Reason (as defined below) prior to
the vesting of the Option pursuant to Section 1 above, the Option shall
vest and become exercisable as to 100% of the shares of Stock subject to the
Option if the Company Stock Price Hurdle is achieved on or before the date that
is one year following such Termination of Employment; provided that if
there is not a Trading Market for the Stock at the time of such Termination of
Employment and there has not been an unbroken period of six months during which
there has been a Trading Market between such Termination of Employment and the
end of the one-year period following such Termination of Employment, such
one-year period shall be extended until the earliest of (A) the last day
of any unbroken six-month period during which there has been a continuous
Trading Market, (B) the occurrence of a Change of Control and (C) the
date that is five years following such Termination of Employment.  In addition, the Option shall remain
exercisable by Participant through the date that is one year following such
Termination of Employment (if the Option has vested and become exercisable on
or prior to such date); provided, however, that in no event shall the Option remain
exercisable beyond the expiration date set forth in Section 3.3(a) of
the Agreement.  Notwithstanding the
foregoing, the accelerated vesting and extended exercisability of the Option
outlined in this clause (a) shall be contingent on Participant’s execution
and non-revocation of the Release (as defined below).

 

(b)                                 In the event of
Participant’s Termination of Employment as a result of the Company’s election
not to extend the Employment Period (as defined below) beyond the Initial Term
(as defined below) prior to the vesting of the Option pursuant to Section 1
above, the

 

 

Option
shall vest and become exercisable as to 100% of the shares of Stock subject to
the Option if the Company Stock Price Hurdle is achieved on or before the date
that is one year following the expiration of the Initial Term; provided
that if there is not a Trading Market for the Stock at the time of such
Termination of Employment and there has not been an unbroken period of six
months during which there has been a Trading Market between such Termination of
Employment and the end of the one-year period following the expiration of the
Initial Term, such one-year period shall be extended until the earliest of (A) the
last day of any unbroken six-month period during which there has been a
continuous Trading Market, (B) the occurrence of a Change of Control and (C) the
date that is five years following such Termination of Employment.  In addition, the Option shall remain
exercisable by Participant through the later of (i) the date that is one
year following the expiration of the Initial Term (if the Option has vested and
become exercisable on or prior to such date) or (ii) the date that is 30
days following the date on which the Option vests and becomes exercisable
pursuant to this clause (a); provided, however, that in no event shall the Option remain
exercisable beyond the expiration date set forth in Section 3.3(a) of
the Agreement.  Notwithstanding the
foregoing, the accelerated vesting and extended exercisability of the Option
outlined in this clause (b) shall be contingent on Participant’s execution
and non-revocation of the Release (as defined below).

 

(c)                                  The Option
shall vest and become exercisable as to one hundred percent (100%) of the
shares of Stock subject to the Option in the event of a Change in Control prior
to Participant’s Termination of Employment, provided that the price per share
of Stock pursuant to the Change in Control transaction equals or exceeds $0.19.

 

(d)                                 For purposes of
this Exhibit B, the terms “Cause,” “Employment Period,” “Good Reason,” “Initial
Term” and “Release”
shall have the meanings given to such terms in that certain Employment
Agreement dated April 14, 2010, between Participant and the Company;
provided that the “Initial Term” shall mean such term without regard to any
extension of the Employment Period as a result of the Company’s failure to give
less than 12 months’ notice of non-extension of the Initial Term.

 

2

 

EXHIBIT E

 

Class A Restricted Stock Award Agreement

 

3

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

RESTRICTED
STOCK AWARD GRANT NOTICE AND

RESTRICTED STOCK AWARD AGREEMENT

 

Image
Entertainment, Inc., a Delaware corporation (the “Company”), pursuant
to its 2010 Equity Incentive Award Plan (the “Plan”), hereby
grants to the individual listed below (“Participant”)  the number of shares of the Company’s
Stock (the “Shares”) set forth
below.  This Restricted Stock award is
subject to all of the terms and conditions as set forth herein and in the
Restricted Stock Award Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”) and the
Plan, which are incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Grant Notice and the Restricted Stock Agreement.

 

	
  Participant:

  	
   

  	
  Theodore S. Green

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Grant Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares of Restricted 

  	
   

  	
   

  
	
  Stock:

  	
   

  	
  Shares, which represents
        % of the Company’s fully-diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010. The number of Shares shall have a value equal to
  (i) the difference between the Fair Market Value of a share of common
  stock on the date of grant of the Options (but not less than $0.20 per share)
  and $0.0366, multiplied by (ii) the number of shares of common stock
  representing 3.668% of the fully
  diluted common stock (excluding the
  Company’s outstanding and underwater stock options) as of January 8,
  2010. The number of Shares shall be subject to adjustment for stock
  splits, stock dividends and other events or transactions described at
  Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

  	
  The
  Shares shall be released from the Forfeiture Restriction set forth in
  Section 2.1 of the Restricted Stock Agreement on the dates and in the
  amounts indicated in Exhibit B to this Grant Notice.

  

 

By
his or her signature, Participant agrees to be bound by the terms and
conditions of the Plan, the Restricted Stock Agreement and this Grant Notice.
Participant has reviewed the Restricted Stock Agreement, the Plan and this
Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel
prior to executing this Grant Notice and fully understands all provisions of
this Grant Notice, the Restricted Stock Agreement and the Plan.  Participant hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator of the Plan upon any questions arising under the 

 

4

 

Plan,
this Grant Notice or the Restricted Stock Agreement.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:   20525
  Nordhoff Street, Ste 200

  Chatsworth,
  CA 91311

  	
   

  	
  Address:

  
						

 

5

 

EXHIBIT A

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

RESTRICTED STOCK AWARD AGREEMENT

 

Pursuant
to the Restricted Stock Award Grant Notice (“Grant
Notice”)  to which this Restricted
Stock Award Agreement (this “Agreement”) is  attached, Image Entertainment, Inc.,
a Delaware corporation (the “Company”),  has granted to Participant the
right to purchase the number of shares of Restricted Stock under the Company’s
2010 Equity Incentive Award Plan (the “Plan”)  indicated in the Grant Notice. The
Shares are subject to the terms and conditions of the Plan which are
incorporated herein by reference. 
Capitalized terms not specifically defined herein shall have the
meanings specified in the Plan and the Grant Notice.

 

ARTICLE I

ISSUANCE OF SHARES

 

1.1                                 Issuance of
Shares.  Pursuant to the Plan and
subject to the terms and conditions of this Agreement, effective on the Grant
Date, the Company irrevocably grants to Participant the number of shares of
Stock set forth in the Grant Notice (the “Shares”),  in consideration of Participant’s employment
with or service to the Company or one of its Subsidiaries on or before the Grant
Date, for which the Administrator has determined Participant has not been fully
compensated, and the Administrator has determined that the benefit received by
the Company as a result of such employment or service has a value that exceeds
the aggregate par value of the Shares, which Shares, when issued in accordance
with the terms hereof, shall be fully paid and nonassessable.  Notwithstanding anything to the contrary
contained in the Plan, the Grant Notice or this Agreement, (a) Sections
10.6, 11.2 and 11.3 of the Plan shall not apply at any time to the Shares and (b) the
Administrator shall exercise its discretion only reasonably in good faith.

 

1.2                                 Issuance
Mechanics.  On the
Grant Date, the Company shall issue the Shares to Participant and shall (a) cause
a stock certificate or certificates representing the Shares to be registered in
the name of Participant, or (b) cause such Shares to be held in book entry
form.  If a stock certificate is issued,
it shall be delivered to and held in custody by the Company and shall bear the
restrictive legends required by Section 4.1 below.  If the Shares are held in book entry form,
then such entry will reflect that the Shares are subject to the restrictions of
this Agreement.  Participant’s execution
of a stock assignment in the form attached as Exhibit C to the
Grant Notice (the “Stock Assignment”) shall be a
condition to the issuance of the Shares.

 

ARTICLE II

FORFEITURE AND TRANSFER RESTRICTIONS

 

2.1                                 Forfeiture
Restriction.  Subject to
the provisions of Section 2.2 below and Exhibit B to the Grant
Notice, in the event of Participant’s cessation of Service for any reason,
including as a result of Participant’s death or Disability, all of the
Unreleased Shares (as defined below) shall thereupon be forfeited immediately and
without any further action by the Company (the “Forfeiture
Restriction”).  Upon the
occurrence of such a forfeiture, the Company shall become the legal and
beneficial owner of the Unreleased Shares and all rights and interests therein
or relating thereto, and the Company shall have the right to retain and
transfer to its own name the number of Unreleased Shares being forfeited by
Participant.  The Unreleased Shares and
Participant’s executed Stock Assignment in the form attached as Exhibit C
to the Grant Notice 

 

A-1

 

shall
be held by the Company in accordance with Section 2.4 until the Shares are
forfeited as provided in this Section 2.1, until such Unreleased Shares
are fully released from the Forfeiture Restriction, or until such time as this
Agreement no longer is in effect (e.g., upon Termination of Service).  Participant hereby authorizes and directs the
Secretary of the Company, or such other person designated by the Committee, to
transfer the Unreleased Shares which have been forfeited pursuant to this Section 2.1
from Participant to the Company.

 

2.2                                 Release of
Shares from Forfeiture Restriction.  The Shares shall be released from the
Forfeiture Restriction in accordance with the vesting schedule set forth in the
Grant Notice.  Any of the Shares which,
from time to time, have not yet been released from the Forfeiture Restriction
are referred to herein as “Unreleased Shares.”  In the event any of the Shares are released
from the Forfeiture Restriction, any dividends or other distributions paid on
such Shares and held by the Company pursuant to Section 2.4 shall be
promptly paid by the Company to Participant. 
As soon as administratively practicable following the release of any
Shares from the Forfeiture Restriction, the Company shall, as applicable,
either deliver to Participant the certificate or certificates representing such
Shares in the Company’s possession belonging to Participant, or, if the Shares
are held in book entry form, then the Company shall remove the notations on the
book form.  Participant (or the
beneficiary or personal representative of Participant in the event of
Participant’s death or incapacity, as the case may be) shall deliver to the
Company any representations or other documents or assurances as the Company or
its representatives deem necessary or advisable in connection with any such
delivery.

 

2.3                                 Transfer
Restriction.  No
Unreleased Shares or any interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the Participant or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect.  The
Shares shall also be subject to the transfer restrictions set forth in Exhibit D
to the Grant Notice.

 

2.4                                 Escrow.  The Unreleased Shares and Participant’s
executed Stock Assignment shall be held by the Company until the Shares are
forfeited as provided in Section 2.1, until such Unreleased Shares are fully
released from the Forfeiture Restriction, or until such time as this Agreement
no longer is in effect  (e.g., upon
Termination of Service).  In such event,
Participant shall not retain physical custody of any certificates representing
Unreleased Shares issued to Participant. 
Participant, by acceptance of this Award, shall be deemed to appoint,
and does so appoint, the Company and each of its authorized representatives as
Participant’s attorney(s)-in-fact to effect any transfer of forfeited
Unreleased Shares (and any dividends or other distributions paid on such Shares) to the Company as
may be required pursuant to the Plan or this Agreement, and to execute such
representations or other documents or assurances as the Company or such
representatives deem necessary or advisable in connection with any such
transfer.  The Company, or its designee,
shall not be liable for any act it may do or omit to do with respect to holding
the Shares in escrow and while acting in good faith and in the exercise of its
judgment.

 

2.5                                 Rights as
Stockholder.  Except as
otherwise provided herein, upon issuance of the Shares by the Company,
Participant shall have all the rights of a stockholder with respect to said
Shares, 

 

A-2

 

subject
to the restrictions herein, including the right to vote the Shares and to
receive all dividends or other distributions paid or made with respect to the
Shares.  In addition, the Shares shall be
subject to the Stockholders Agreement, dated as of April 12, 2010, of the
Company (the “Stockholders Agreement”), to the extent provided therein.

 

ARTICLE III

 

TAXATION REPRESENTATIONS

 

Participant
represents to the Company the following:

 

(a)                                  Participant has
reviewed with his or her own tax advisors the federal, state, local and foreign
tax consequences of this investment and the transactions contemplated by this
Agreement.  Participant is relying solely
on such advisors and not on any statements or representations of the Company or
any of its agents.  Participant
understands that Participant (and not the Company) shall be responsible for his
or her own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.

 

(b)                                 Notwithstanding
anything to the contrary in this Agreement, the Company shall be entitled to
require payment (which payment may be made in cash, by deduction from other
compensation payable to Participant or in any form of consideration permitted
by the Plan) of any sums required by federal, state or local tax law to be
withheld with respect to the issuance, lapsing of restrictions on or sale of
the Shares.   The Company shall not be
obligated to deliver any stock certificate representing vested Shares to Participant
or Participant’s legal representative, or, if the Shares are held in book entry
form, to remove the notations on the book form, unless and until Participant or
Participant’s legal representative shall have paid or otherwise satisfied in
full the amount of all federal, state and local taxes applicable to the taxable
income of Participant resulting from the issuance, lapsing of restrictions on
or sale of the Shares.

 

ARTICLE IV

RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS

 

4.1                                 Legends.  The certificate or certificates representing
the Shares, if any, shall bear the following legend (as well as any legends
required by the Company’s charter and applicable state and federal corporate
and securities laws):

 

THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE IN FAVOR OF
THE COMPANY AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A
RESTRICTED STOCK AWARD AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

4.2                                 Refusal to
Transfer; Stop-Transfer Notices.  The Company shall not be required (a) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (b) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.  Participant agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company 

 

A-3

 

may
issue appropriate “stop transfer” instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

 

4.3                                 Removal of
Legend.  After such time as the
Forfeiture Restriction shall have lapsed with respect to the Shares, and upon
Participant’s request, a new certificate or certificates representing such
Shares shall be issued without the legend referred to in Section 4.1 and
delivered to Participant.  If the Shares
are held in book entry form, the Company shall cause any restrictions noted on
the book form to be removed.  In
addition, for the avoidance of doubt, at such time, such Shares shall be freely
transferable and non-forfeitable, and only subject to the Stockholders
Agreement  and Exhibit D to
the Grant Notice.

 

ARTICLE V

 

MISCELLANEOUS

 

5.1                                 Governing Law.  This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law.

 

5.2                                 Entire
Agreement; Enforcement of Rights.   This Agreement and the Plan set forth the
entire agreement and understanding of the parties relating to the subject
matter herein and merge all prior discussions between them.  No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, shall be
effective unless in writing signed by the parties to this Agreement.

 

5.3                                 Severability.  If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. 
In the event that the parties cannot reach a mutually agreeable and
enforceable replacement for such provision, then (a) such provision shall
be excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of
the Agreement shall be enforceable in accordance with its terms.

 

5.4                                 Notices.  Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient when delivered
personally or sent by electronic mail (with return receipt requested and
received) or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified, if to the Company, at its principal offices, and if
to Participant, at Participant’s address, electronic mail address or fax number
in the Company’s employee records or as subsequently modified by written
notice.

 

5.5                                 Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

 

5.6                                 Successors and Assigns.  The rights and benefits of this Agreement
shall inure to the benefit of, and be enforceable by the Company’s successors
and assigns.  The Company may assign its
rights under this Agreement to any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company without the prior written consent of
Participant. The rights and obligations of Participant under this Agreement may
only be assigned with the prior written consent of the Company.

 

5.7                                 Conformity to Securities Laws.  Participant acknowledges that the Plan is
intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules promulgated
by the Securities and Exchange Commission thereunder, and state securities laws
and regulations.  Notwithstanding
anything herein to the contrary, the Plan shall be administered, and the Shares
are to be issued, only in

 

A-4

 

such a manner as to conform to such laws, rules and
regulations.  To the extent permitted by
applicable law, the Plan and this Agreement shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.

 

5.8                                 NO RIGHT TO CONTINUED SERVICE.  THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT
THE LAPSING OF THE FORFEITURE RESTRICTION PURSUANT TO SECTION 2.1 HEREOF
IS EARNED ONLY BY CONTINUING SERVICE TO THE COMPANY OR ITS SUBSIDIARIES AS AN “AT
WILL” EMPLOYEE OR CONSULTANT OF THE COMPANY OR ITS SUBSIDIARIES OR AN
INDEPENDENT DIRECTOR OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR
ACQUIRING SHARES HEREUNDER).  THE PARTICIPANT
FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE FORFEITURE RESTRICTION SCHEDULE SET FORTH HEREIN
DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN
EMPLOYEE, CONSULTANT OR INDEPENDENT DIRECTOR FOR SUCH PERIOD, FOR ANY PERIOD,
OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY’S OR ANY OF ITS
SUBSIDIARIES’ RIGHT TO TERMINATE THE PARTICIPANT’S EMPLOYMENT OR SERVICE TO THE
COMPANY AT ANY TIME.

 

A-5

 

EXHIBIT B

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

VESTING
PROVISIONS

 

Capitalized
terms used in this Exhibit B and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit B
is attached or the Agreement attached thereto. 
In the event of any inconsistency between this Exhibit B, on
the one hand, and the Plan, the Grant Notice or the Agreement, on the other
hand, the provisions of this Exhibit B shall govern.

 

1.                                       Vesting.  Subject to Section 2 below, as of any
measurement date, such aggregate number of Shares (rounded up to the next whole
Share) shall be considered to have been released from the Forfeiture
Restriction as is determined by multiplying (a) the Time Percentage (as
defined below) as of such date by (b) the Sale Percentage (as defined
below) as of such date.

 

2.                                       Accelerated
Vesting.

 

(a)                                  In the event of
Participant’s Termination of Employment by the Company without Cause (as
defined below) or by Participant for Good Reason (as defined below), such number
of Shares as would have been released from the Forfeiture Restriction during
the one year period following the date of Participant’s Termination of
Employment had Participant remained an Employee through such date shall vest
and be released from the Forfeiture Restriction as of the date of Participant’s
Termination of Employment.  In the event
of Participant’s Termination of Employment as a result of the Company’s
election not to extend the Employment Period (as defined below) beyond the
Initial Term (as defined below), 100% of the Shares shall vest and be released
from the Forfeiture Restriction as of the date of Participant’s Termination of
Employment.

 

(b)                                 To the extent
not then vested, 100% of the Shares shall be released from the Forfeiture
Restriction in the event of a Change in Control prior to Participant’s
Termination of Employment.

 

(c)                                  Notwithstanding
the foregoing, the accelerated release of Shares from the Forfeiture
Restriction outlined in Section 2(a) and the increase in the Sale
Percentage pursuant to the proviso in Section 3(b) as a result of
certain Terminations of Employment shall be contingent on Participant’s
execution and non-revocation of the Release (as defined below).

 

3.                                       Definitions.

 

(a)                                  For purposes of
this Exhibit B, the “Time Percentage”
shall mean (i) 25% as of January 8, 2011, plus (ii) an
additional 6.25% for each three-month period of Participant’s continued service
to the Company as an Employee thereafter.

 

(b)                                 For purposes of
this Exhibit B, the “Sale Percentage”
shall mean, as of any date, (i) 100% minus (ii) the percentage of the
shares of the Company’s Series C preferred

 

B-1

 

stock
(or the shares of Stock issuable upon conversion thereof) originally purchased
by the JH Stockholders (as defined below) (including through exercise of the
Additional Purchase Right (as defined below) still held by the JH Stockholders
through the date of measurement; provided that
the Sale Percentage shall be deemed to be 100% on the first to occur of (x) January 8,
2015 or (y) the date of Participant’s Termination of Employment by the
Company without Cause (as defined below), by Participant for Good Reason (as
defined below) or as a result of Participant’s death or Disability, or in the
event of Participant’s Termination of Employment as a result of the Company’s
election not to extend the Employment Period (as defined below); and, provided, further, that
for the avoidance of doubt, if the Additional Purchase Right is exercised,
Participant will not be required to increase his ownership of Company
securities and the Sale Percentage will be applied to the Shares held as of
such time.

 

(c)                                  For purposes of
this Exhibit B, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(d)                                 For purposes of
this Exhibit B, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(e)                                  For purposes of
this Exhibit B, the terms “Cause,” “Employment Period,” “Good Reason,” “Initial
Term” and “Release”
shall have the meanings given to such terms in that certain Employment
Agreement dated April 14, 2010, between Participant and the Company;
provided that the “Initial Term” shall mean such term without regard to any
extension of the Employment Period as a result of the Company’s failure to give
less than 12 months’ notice of non-extension of the Initial Term.

 

B-2

 

EXHIBIT C

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

STOCK ASSIGNMENT

 

FOR
VALUE RECEIVED, the undersigned, [Name of Participant], hereby sells, assigns
and transfers unto IMAGE ENTERTAINMENT, INC., a Delaware corporation,
              
shares of the Common Stock of IMAGE ENTERTAINMENT, INC., a Delaware
corporation, standing in its name of the books of said corporation represented
by Certificate
No.            herewith
and do hereby irrevocably constitute and appoint
                                      
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.

 

This
Stock Assignment may be used only in accordance with the Restricted Stock Award
Grant Notice and Restricted Stock Award Agreement between IMAGE ENTERTAINMENT, INC.
and the undersigned dated
                  ,
200    .

 

	
  Dated:
  

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Name
  of Participant]

  

 

 

INSTRUCTIONS:  Please do not fill in the blanks other than
the signature line.  The purpose of this
assignment is to enable the Company to enforce the Forfeiture Restriction as
set forth in the Stock Award Grant Notice and Restricted Stock Award Agreement,
without requiring additional signatures on the part of the stockholder.

 

C-1

 

EXHIBIT D

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

TRANSFER
RESTRICTIONS

 

Capitalized
terms used in this Exhibit D and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit D
is attached or the Agreement attached thereto.

 

1.                                       Transfer
Restrictions.  The
following transfer restrictions shall apply to the Shares and shall be in
addition to the restrictions set forth in Section 2.3 and Exhibit B
of the Agreement.

 

(a)                                  In
consideration of the grant of the Shares, Participant agrees that Participant
will not (and will cause any spouse or immediate family of the spouse or the
undersigned living in the Participant’s household not to), without the prior
written consent of the Administrator (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale), pledge, transfer,
establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under
the Exchange Act, or otherwise dispose of any of the Shares currently or
hereafter owned either of record or beneficially (as defined in Rule 13d-3
under the Exchange Act) by Participant (or such spouse or family member), or
publicly announce an intention to do any of the foregoing, unless such Shares
constitute Transferable Shares (as defined below).

 

(b)                                 In addition,
the foregoing restrictions shall not apply to the transfer of any or all of the
Shares, either during his lifetime or on death, by gift, will or the laws of
descent and distribution to Participant’s immediate family or to a trust the
beneficiaries of which are exclusively Participant and/or a member or members
of his immediate family (provided that
it shall be a condition to such transfer that the donee, beneficiary,
distributee or transferee executes and delivers to Company an agreement stating
that he, she or it is receiving and holding the Shares subject to the
provisions of the Agreement, and there shall be no further transfer or
distribution of such Shares, except in accordance with the Agreement).

 

(c)                                  In addition,
notwithstanding the restrictions in this Exhibit D, the undersigned
may at any time after the date hereof enter into a trading plan or modify an
existing trading plan meeting the requirements of Rule 10b5-1 under the
Exchange Act relating to the sale of the Shares, if then permitted by the
Company and applicable law (provided that
the Shares subject to such trading plans may not be sold unless and until they
are Transferable Shares).

 

2.                                       Definitions.

 

(a)                                  For the
purposes of this Exhibit D, “immediate family”
shall mean the spouse, domestic partner, lineal descendant (including adopted
children), father, mother, brother or sister of the transferor.

 

 

(b)                                 For purposes of
this Exhibit D, “Transferable Shares”
shall mean, as of any measurement date, such number of the Shares as is equal
to the greater of (i) the Sale Percentage as of such date or (ii) the
Release Percentage as of such date.

 

(c)                                  For purposes of
this Exhibit D, the “Release Percentage”
shall mean (i) 0% prior to January 8, 2015 and (ii) 100% on and
after January 8, 2015.

 

(d)                                 For purposes of
this Exhibit D, the “Sale Percentage”
shall mean, as of any measurement date, (i) 100% minus (ii) the
percentage of the shares of the Company’s Series C preferred stock (or the
shares of Stock issuable upon conversion thereof) originally purchased by the
JH Stockholders (as defined below) (including through exercise of the
Additional Purchase Right (as defined below)) still held by the JH Stockholders
through the date of measurement; provided that,
for the avoidance of doubt, if the Additional Purchase Right is exercised,
Participant will not be required to increase his ownership of Company
securities and the Sale Percentage will be applied to the Shares held as of
such time.

 

(e)                                  For purposes of
this Exhibit D, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(f)                                    For purposes of
this Exhibit D, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(g)                                 For purposes of
this Exhibit D, the terms “Cause” and “Good Reason” shall have the meanings
given to such terms in that certain Employment Agreement dated April 14,
2010, between Participant and the Company.

 

2

 

EXHIBIT F

 

Class B Restricted Stock Award Agreement

 

3

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

RESTRICTED
STOCK AWARD GRANT NOTICE AND

RESTRICTED STOCK AWARD AGREEMENT

 

Image
Entertainment, Inc., a Delaware corporation (the “Company”), pursuant
to its 2010 Equity Incentive Award Plan (the “Plan”), hereby
grants to the individual listed below (“Participant”)  the number of shares of the Company’s
Stock (the “Shares”) set forth
below.  This Restricted Stock award is
subject to all of the terms and conditions as set forth herein and in the
Restricted Stock Award Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”) and the
Plan, which are incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Grant Notice and the Restricted Stock Agreement.

 

	
  Participant:

  	
   

  	
  Theodore S. Green

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Grant Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares of Restricted 

  	
   

  	
   

  
	
  Stock:

  	
   

  	
  Shares, which represents
        % of the Company’s fully-diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010. The number of Shares shall have a value equal to
  (i) the difference between the Fair Market Value of a share of common
  stock on the date of grant of the Options (but not less than $0.20 per share)
  and $0.0773, multiplied by (ii) the number of shares of common stock
  representing 0.917% of the fully diluted
  common stock (excluding the Company’s
  outstanding and underwater stock options) as of January 8, 2010.
  The number of Shares shall be subject to adjustment for stock splits, stock
  dividends and other events or transactions described at Section 11.1(a) of
  the Plan.

  
	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

  	
  The
  Shares shall be released from the Forfeiture Restriction set forth in
  Section 2.1 of the Restricted Stock Agreement on the dates and in the
  amounts indicated in Exhibit B to this Grant Notice.

  

 

By
his or her signature, Participant agrees to be bound by the terms and
conditions of the Plan, the Restricted Stock Agreement and this Grant Notice.
Participant has reviewed the Restricted Stock Agreement, the Plan and this
Grant Notice in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Grant Notice and fully understands all
provisions of this Grant Notice, the Restricted Stock Agreement and the
Plan.  Participant hereby agrees to accept
as binding, conclusive and final all decisions or interpretations of the
Administrator of the Plan upon any questions arising under the 

 

4

 

Plan,
this Grant Notice or the Restricted Stock Agreement.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:   20525
  Nordhoff Street, Ste 200

  Chatsworth,
  CA 91311

  	
   

  	
  Address:

  
						

 

5

 

EXHIBIT A

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

RESTRICTED STOCK AWARD AGREEMENT

 

Pursuant
to the Restricted Stock Award Grant Notice (“Grant
Notice”)  to which this Restricted
Stock Award Agreement (this “Agreement”) is  attached, Image Entertainment, Inc.,
a Delaware corporation (the “Company”),  has granted to Participant the
right to purchase the number of shares of Restricted Stock under the Company’s
2010 Equity Incentive Award Plan (the “Plan”)  indicated in the Grant Notice. The
Shares are subject to the terms and conditions of the Plan which are
incorporated herein by reference. 
Capitalized terms not specifically defined herein shall have the
meanings specified in the Plan and the Grant Notice.

 

ARTICLE I

 

ISSUANCE OF SHARES

 

1.1                                 Issuance of
Shares.  Pursuant to the Plan and
subject to the terms and conditions of this Agreement, effective on the Grant
Date, the Company irrevocably grants to Participant the number of shares of
Stock set forth in the Grant Notice (the “Shares”),  in consideration of Participant’s employment
with or service to the Company or one of its Subsidiaries on or before the
Grant Date, for which the Administrator has determined Participant has not been
fully compensated, and the Administrator has determined that the benefit
received by the Company as a result of such employment or service has a value
that exceeds the aggregate par value of the Shares, which Shares, when issued
in accordance with the terms hereof, shall be fully paid and
nonassessable.  Notwithstanding anything
to the contrary contained in the Plan, the Grant Notice or this Agreement, (a) Sections
10.6, 11.2 and 11.3 of the Plan shall not apply at any time to the Shares and (b) the
Administrator shall exercise its discretion only reasonably in good faith.

 

1.2                                 Issuance
Mechanics.  On the
Grant Date, the Company shall issue the Shares to Participant and shall (a) cause
a stock certificate or certificates representing the Shares to be registered in
the name of Participant, or (b) cause such Shares to be held in book entry
form.  If a stock certificate is issued,
it shall be delivered to and held in custody by the Company and shall bear the
restrictive legends required by Section 4.1 below.  If the Shares are held in book entry form,
then such entry will reflect that the Shares are subject to the restrictions of
this Agreement.  Participant’s execution
of a stock assignment in the form attached as Exhibit C to the
Grant Notice (the “Stock Assignment”) shall be a
condition to the issuance of the Shares.

 

ARTICLE II

 

FORFEITURE AND TRANSFER RESTRICTIONS

 

2.1                                 Forfeiture
Restriction.  Subject to
the provisions of Section 2.2 below and Exhibit B to the Grant
Notice, in the event of Participant’s cessation of Service for any reason,
including as a result of Participant’s death or Disability, all of the
Unreleased Shares (as defined below) shall thereupon be forfeited immediately
and without any further action by the Company (the “Forfeiture
Restriction”).  Upon the
occurrence of such a forfeiture, the Company shall become the legal and
beneficial owner of the Unreleased Shares and all rights and interests therein
or 

 

A-1

 

relating
thereto, and the Company shall have the right to retain and transfer to its own
name the number of Unreleased Shares being forfeited by Participant.  The Unreleased Shares and Participant’s
executed Stock Assignment in the form attached as Exhibit C to the
Grant Notice shall be held by the Company in accordance with Section 2.4
until the Shares are forfeited as provided in this Section 2.1, until such
Unreleased Shares are fully released from the Forfeiture Restriction, or until
such time as this Agreement no longer is in effect (e.g., upon Termination of
Service).  Participant hereby authorizes
and directs the Secretary of the Company, or such other person designated by the
Committee, to transfer the Unreleased Shares which have been forfeited pursuant
to this Section 2.1 from Participant to the Company.

 

 

2.2                                 Release of
Shares from Forfeiture Restriction.  The Shares shall be released from the
Forfeiture Restriction in accordance with the vesting schedule set forth in the
Grant Notice.  Any of the Shares which,
from time to time, have not yet been released from the Forfeiture Restriction
are referred to herein as “Unreleased Shares.”  In the event any of the Shares are released
from the Forfeiture Restriction, any dividends or other distributions paid on
such Shares and held by the Company pursuant to Section 2.4 shall be
promptly paid by the Company to Participant. 
As soon as administratively practicable following the release of any
Shares from the Forfeiture Restriction, the Company shall, as applicable,
either deliver to Participant the certificate or certificates representing such
Shares in the Company’s possession belonging to Participant, or, if the Shares
are held in book entry form, then the Company shall remove the notations on the
book form.  Participant (or the
beneficiary or personal representative of Participant in the event of
Participant’s death or incapacity, as the case may be) shall deliver to the
Company any representations or other documents or assurances as the Company or
its representatives deem necessary or advisable in connection with any such
delivery.

 

2.3                               Transfer Restriction.  No Unreleased Shares or any interest or right
therein or part thereof shall be liable for the debts, contracts or engagements
of the Participant or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect.  The Shares shall also be subject to the
transfer restrictions set forth in Exhibit D to the Grant Notice.

 

2.4                                 Escrow.  The Unreleased Shares and
Participant’s executed Stock Assignment shall be held by the Company until the
Shares are forfeited as provided in Section 2.1, until such Unreleased
Shares are fully released from the Forfeiture Restriction, or until such time
as this Agreement no longer is in effect 
(e.g., upon Termination of Service). 
In such event, Participant shall not retain physical custody of any
certificates representing Unreleased Shares issued to Participant.  Participant, by acceptance of this Award,
shall be deemed to appoint, and does so appoint, the Company and each of its
authorized representatives as Participant’s attorney(s)-in-fact to effect any
transfer of forfeited Unreleased Shares (and any dividends or other
distributions paid on such Shares) to
the Company as may be required pursuant to the Plan or this Agreement, and to
execute such representations or other documents or assurances as the Company or
such representatives deem necessary or advisable in connection with any such
transfer.  The

 

A-2

 

Company, or its designee, shall not be liable for any
act it may do or omit to do with respect to holding the Shares in escrow and
while acting in good faith and in the exercise of its judgment.

 

2.5                                 Rights as Stockholder.  Except as
otherwise provided herein, upon issuance of the Shares by the Company,
Participant shall have all the rights of a stockholder with respect to said
Shares, subject to the restrictions herein, including the right to vote the
Shares and to receive all dividends or other distributions paid or made with
respect to the Shares.  In addition, the
Shares shall be subject to the Stockholders Agreement, dated as of April 12,
2010, of the Company (the “Stockholders Agreement”), to the extent provided
therein.

 

ARTICLE III

TAXATION REPRESENTATIONS

 

Participant
represents to the Company the following:

 

(a)                                  Participant has
reviewed with his or her own tax advisors the federal, state, local and foreign
tax consequences of this investment and the transactions contemplated by this
Agreement.  Participant is relying solely
on such advisors and not on any statements or representations of the Company or
any of its agents.  Participant
understands that Participant (and not the Company) shall be responsible for his
or her own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.

 

(b)                                 Notwithstanding
anything to the contrary in this Agreement, the Company shall be entitled to
require payment (which payment may be made in cash, by deduction from other
compensation payable to Participant or in any form of consideration permitted
by the Plan) of any sums required by federal, state or local tax law to be
withheld with respect to the issuance, lapsing of restrictions on or sale of
the Shares.   The Company shall not be
obligated to deliver any stock certificate representing vested Shares to
Participant or Participant’s legal representative, or, if the Shares are held
in book entry form, to remove the notations on the book form, unless and until
Participant or Participant’s legal representative shall have paid or otherwise
satisfied in full the amount of all federal, state and local taxes applicable
to the taxable income of Participant resulting from the issuance, lapsing of
restrictions on or sale of the Shares.

 

ARTICLE IV

RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS

 

4.1                                 Legends.  The certificate or certificates representing
the Shares, if any, shall bear the following legend (as well as any legends
required by the Company’s charter and applicable state and federal corporate
and securities laws):

 

THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE IN FAVOR OF
THE COMPANY AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A
RESTRICTED STOCK AWARD AGREEMENT BETWEEN THE COMPANY AND THE 

 

A-3

 

STOCKHOLDER,
A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

4.2                                 Refusal to
Transfer; Stop-Transfer Notices.  The Company shall not be required (a) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (b) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.  Participant agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate “stop transfer” instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.

 

4.3                                 Removal of
Legend.  After such time as the
Forfeiture Restriction shall have lapsed with respect to the Shares, and upon
Participant’s request, a new certificate or certificates representing such
Shares shall be issued without the legend referred to in Section 4.1 and
delivered to Participant.  If the Shares
are held in book entry form, the Company shall cause any restrictions noted on
the book form to be removed.  In
addition, for the avoidance of doubt, at such time, such Shares shall be freely
transferable and non-forfeitable, and only subject to the Stockholders
Agreement  and Exhibit D to
the Grant Notice.

 

ARTICLE V

 

MISCELLANEOUS

 

5.1                                 Governing Law.  This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law.

 

5.2                                 Entire
Agreement; Enforcement of Rights.   This Agreement and the Plan set forth the
entire agreement and understanding of the parties relating to the subject
matter herein and merge all prior discussions between them.  No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, shall be
effective unless in writing signed by the parties to this Agreement.

 

5.3                                 Severability.  If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(a) such provision shall be excluded from this Agreement, (b) the
balance of the Agreement shall be interpreted as if such provision were so
excluded and (c) the balance of the Agreement shall be enforceable in
accordance with its terms.

 

5.4                                 Notices.  Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient when delivered
personally or sent by electronic mail (with return receipt requested and
received) or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified, if to the Company, at its principal offices, and if
to Participant, at Participant’s address, 

 

A-4

 

electronic
mail address or fax number in the Company’s employee records or as subsequently
modified by written notice.

 

5.5                                 Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

 

5.6                                 Successors and Assigns.  The rights and benefits of this Agreement
shall inure to the benefit of, and be enforceable by the Company’s successors
and assigns.  The Company may assign its
rights under this Agreement to any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company without the prior written consent of
Participant. The rights and obligations of Participant under this Agreement may
only be assigned with the prior written consent of the Company.

 

5.7                                 Conformity to Securities Laws. 
Participant acknowledges that the Plan is intended to conform to the
extent necessary with all provisions of the Securities Act and the Exchange Act
and any and all regulations and rules promulgated by the Securities and
Exchange Commission thereunder, and state securities laws and regulations.  Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Shares are to be issued, only
in such a manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law,
the Plan and this Agreement shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.

 

(l)                                     5.8                                 NO RIGHT TO CONTINUED SERVICE.  THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT
THE LAPSING OF THE FORFEITURE RESTRICTION PURSUANT TO SECTION 2.1 HEREOF
IS EARNED ONLY BY CONTINUING SERVICE TO THE COMPANY OR ITS SUBSIDIARIES AS AN “AT
WILL” EMPLOYEE OR CONSULTANT OF THE COMPANY OR ITS SUBSIDIARIES OR AN
INDEPENDENT DIRECTOR OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR
ACQUIRING SHARES HEREUNDER).  THE
PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE FORFEITURE RESTRICTION SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS AN EMPLOYEE, CONSULTANT OR INDEPENDENT DIRECTOR FOR SUCH PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY’S OR ANY OF
ITS SUBSIDIARIES’ RIGHT TO TERMINATE THE PARTICIPANT’S EMPLOYMENT OR SERVICE TO
THE COMPANY AT ANY TIME.

 

A-5

 

EXHIBIT B

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

VESTING
PROVISIONS

 

Capitalized
terms used in this Exhibit B and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit B
is attached or the Agreement attached thereto. 
In the event of any inconsistency between this Exhibit B, on
the one hand, and the Plan, the Grant Notice or the Agreement, on the other
hand, the provisions of this Exhibit B shall govern.

 

1.                                       Vesting.  Subject to Section 2 below, and subject
to the Company’s achievement of the Company Stock Price Hurdle (as defined
below), as of any measurement date, such aggregate number of Shares (rounded up
to the next whole Share) shall be considered to have been released from the
Forfeiture Restriction as is equal to the Sale Percentage (as defined below) as
of such date.  Notwithstanding the foregoing,
100% of the Shares shall be released from the Forfeiture Restriction on January 8,
2019.

 

2.                                       Accelerated
Vesting.

 

(a)                                  In the event of
Participant’s Termination of Employment by the Company without Cause (as
defined below) or by Participant for Good Reason (as defined below) prior to
the Company Stock Price Hurdle having been achieved, 100% of the Shares will be
released from the Forfeiture Restriction if the Company Stock Price Hurdle is
achieved on or before the date that is one year following such Termination of
Employment; provided that if there is not a Trading Market for the Stock
at the time of such Termination of Employment and there has not been an
unbroken period of six months during which there has been a Trading Market
between such Termination of Employment and the end of the one-year period
following such Termination of Employment, such one-year period shall be
extended until the earliest of (A) the last day of any unbroken six-month
period during which there has been a continuous Trading Market, (B) the
occurrence of a Change in Control and (C) the date that is five years
following such Termination of Employment. 
In the event of Participant’s Termination of Employment as a result of
the Company’s election not to extend the Employment Period (as defined below)
beyond the Initial Term (as defined below) prior to the Company Stock Price
Hurdle having been achieved, 100% of the Shares will be released from the
Forfeiture Restriction if the Company Stock Price Hurdle is achieved on or before
the date that is one year following the expiration of the Initial Term; provided
that if there is not a Trading Market for the Stock at the time of such
Termination of Employment and there has not been an unbroken period of six
months during which there has been a Trading Market between such Termination of
Employment and the end of the one-year period following the expiration of the
Initial Term, such one-year period shall be extended until the earliest of (A) the
last day of any unbroken six-month period during which there has been a
continuous Trading Market, (B) the occurrence of a Change in Control and (C) the
date that is five years following the expiration of the Initial Term.

 

(b)                                 Notwithstanding
the foregoing, the accelerated release of Shares from the

 

B-1

 

Forfeiture
Restriction outlined in Section 2(a) and the increase in the Sale
Percentage pursuant to the proviso in Section 3(b) as a result of
certain Terminations of Participant’s Employment shall be contingent on
Participant’s execution and non-revocation of the Release (as defined below).

 

3.                                       Definitions.

 

(a)                                  For purposes of
this Exhibit B, the “Company Stock Price Hurdle”
shall mean (A) the Fair Market Value of the Stock (calculated pursuant to
clause (i) or (ii) of Section 2.21 of the Plan only) equaling or
exceeding $0.0773 for any 20 out of 30 consecutive trading days beginning on or
after January 8, 2012 or (B) the occurrence of a Change in Control in
which the equity value per share of Stock in such Change in Control transaction
equals or exceeds $0.0773.

 

(b)                                 For purposes of
this Exhibit B, the “Sale Percentage”
shall mean, as of any date, (i) 100% minus (ii) the percentage of the
shares of the Company’s Series C preferred stock (or the shares of Stock
issuable upon conversion thereof) originally purchased by the JH Stockholders
(as defined below) (including through exercise of the Additional Purchase Right
(as defined below) still held by the JH Stockholders through the date of
measurement; provided that the Sale Percentage
shall be deemed to be 100% on the first to occur of (x) January 8,
2015 or (y) the date of Participant’s Termination of Employment by the
Company without Cause (as defined below), by Participant for Good Reason (as
defined below) or as a result of Participant’s death or Disability, or in the
event of Participant’s Termination of Employment as a result of the Company’s
election not to extend the Employment Period (as defined below); and, provided, further, that
for the avoidance of doubt, if the Additional Purchase Right is exercised,
Participant will not be required to increase his ownership of Company
securities and the Sale Percentage will be applied to the Shares held as of
such time.

 

(c)                                  For purposes of
this Exhibit B, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(d)                                 For purposes of
this Exhibit B, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(e)                                  For purposes of
this Exhibit B, the terms “Cause,” “Employment Period,” “Good Reason,” “Initial
Term” and “Release”
shall have the meanings given to such terms in that certain Employment
Agreement dated April 14, 2010, between Participant and the Company;
provided that the “Initial Term” shall mean such term without regard to any
extension of the Employment Period as a result of the Company’s failure to give
less than 12 months’ notice of non-extension of the Initial Term.

 

(f)                                    For purposes of
this Exhibit B, the term “Trading Market”
shall mean (A) the listing of the Stock on any (i) established
securities exchange (such as the New York Stock Exchange, the NASDAQ Global
Market and the NASDAQ Global Select Market), (ii) national

 

B-2

 

market
system or (iii) automated quotation system or (B) the regular
quotation of the Stock by a recognized securities dealer.

 

B-3

 

EXHIBIT C

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

STOCK ASSIGNMENT

 

FOR
VALUE RECEIVED, the undersigned, [Name of Participant], hereby sells, assigns
and transfers unto IMAGE ENTERTAINMENT, INC., a Delaware corporation,
              
shares of the Common Stock of IMAGE ENTERTAINMENT, INC., a Delaware
corporation, standing in its name of the books of said corporation represented
by Certificate
No.            herewith
and do hereby irrevocably constitute and appoint
                                      
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.

 

This
Stock Assignment may be used only in accordance with the Restricted Stock Award
Grant Notice and Restricted Stock Award Agreement between IMAGE ENTERTAINMENT, INC.
and the undersigned dated
                  ,
200    .

 

 

	
  Dated:
  

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Name
  of Participant]

  

 

 

INSTRUCTIONS:  Please do not fill in the blanks other than
the signature line.  The purpose of this
assignment is to enable the Company to enforce the Forfeiture Restriction as
set forth in the Stock Award Grant Notice and Restricted Stock Award Agreement,
without requiring additional signatures on the part of the stockholder.

 

C-1

 

EXHIBIT D

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

TRANSFER
RESTRICTIONS

 

Capitalized
terms used in this Exhibit D and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit D
is attached or the Agreement attached thereto.

 

1.                                       Transfer
Restrictions.  The
following transfer restrictions shall apply to the Shares and shall be in
addition to the restrictions set forth in Section 2.3 and Exhibit B
of the Agreement.

 

(a)                                  In
consideration of the grant of the Shares, Participant agrees that Participant
will not (and will cause any spouse or immediate family of the spouse or the
undersigned living in the Participant’s household not to), without the prior
written consent of the Administrator (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale), pledge, transfer, establish
an open “put equivalent position” within the meaning of Rule 16a-1(h) under
the Exchange Act, or otherwise dispose of any of the Shares currently or
hereafter owned either of record or beneficially (as defined in Rule 13d-3
under the Exchange Act) by Participant (or such spouse or family member), or
publicly announce an intention to do any of the foregoing, unless such Shares
constitute Transferable Shares (as defined below).

 

(b)                                 In addition,
the foregoing restrictions shall not apply to the transfer of any or all of the
Shares, either during his lifetime or on death, by gift, will or the laws of
descent and distribution to Participant’s immediate family or to a trust the
beneficiaries of which are exclusively Participant and/or a member or members
of his immediate family (provided that
it shall be a condition to such transfer that the donee, beneficiary,
distributee or transferee executes and delivers to Company an agreement stating
that he, she or it is receiving and holding the Shares subject to the provisions
of the Agreement, and there shall be no further transfer or distribution of
such Shares, except in accordance with the Agreement).

 

(c)                                  In addition,
notwithstanding the restrictions in this Exhibit D, the undersigned
may at any time after the date hereof enter into a trading plan or modify an
existing trading plan meeting the requirements of Rule 10b5-1 under the
Exchange Act relating to the sale of the Shares, if then permitted by the
Company and applicable law (provided that
the Shares subject to such trading plans may not be sold unless and until they
are Transferable Shares).

 

2.                                       Definitions.

 

 

(a)                                  For the
purposes of this Exhibit D, “immediate family”
shall mean the spouse, domestic partner, lineal descendant (including adopted
children), father, mother, brother or sister of the transferor.

 

(b)                                 For purposes of
this Exhibit D, “Transferable Shares”
shall mean, as of any measurement date, such number of the Shares as is equal
to the greater of (i) the Sale Percentage as of such date or (ii) the
Release Percentage as of such date.

 

(c)                                  For purposes of
this Exhibit D, the “Release Percentage”
shall mean (i) 0% prior to January 8, 2015 and (ii) 100% on and
after January 8, 2015.

 

(d)                                 For purposes of
this Exhibit D, the “Sale Percentage”
shall mean, as of any measurement date, (i) 100% minus (ii) the
percentage of the shares of the Company’s Series C preferred stock (or the
shares of Stock issuable upon conversion thereof) originally purchased by the
JH Stockholders (as defined below) (including through exercise of the
Additional Purchase Right (as defined below)) still held by the JH Stockholders
through the date of measurement; provided that,
for the avoidance of doubt, if the Additional Purchase Right is exercised,
Participant will not be required to increase his ownership of Company
securities and the Sale Percentage will be applied to the Shares held as of
such time.

 

(e)                                  For purposes of
this Exhibit D, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(f)                                    For purposes of
this Exhibit D, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(g)                                 For purposes of
this Exhibit D, the terms “Cause” and “Good Reason” shall have the meanings
given to such terms in that certain Employment Agreement dated April 14,
2010, between Participant and the Company.

 

2

 

EXHIBIT G

 

Class C Restricted Stock Award Agreement

 

3

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

RESTRICTED
STOCK AWARD GRANT NOTICE AND

RESTRICTED STOCK AWARD AGREEMENT

 

Image Entertainment, Inc., a Delaware corporation (the “Company”), pursuant to its 2010 Equity
Incentive Award Plan (the “Plan”), hereby
grants to the individual listed below (“Participant”)  the number of shares of the Company’s
Stock (the “Shares”) set forth
below.  This Restricted Stock award is
subject to all of the terms and conditions as set forth herein and in the Restricted
Stock Award Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”) and the
Plan, which are incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in this
Grant Notice and the Restricted Stock Agreement.

 

	
  Participant:

  	
   

  	
  Theodore S. Green

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Grant Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares of

  	
   

  	
   

  
	
  Restricted Stock:

  	
   

  	
   

  
	
   

  	
   

  	
  Shares, which represents
        % of the Company’s fully-diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010. The number of Shares shall have a value equal to
  (i) the difference between the Fair Market Value of a share of common
  stock on the date of grant of the Options (but not less than $0.20 per share)
  and $0.1718, multiplied by (ii) the number of shares of common stock
  representing 0.917% of the fully
  diluted common stock (excluding the
  Company’s outstanding and underwater stock options) as of January 8,
  2010. The number of Shares shall be subject to adjustment for stock
  splits, stock dividends and other events or transactions described at
  Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

  	
  The Shares shall be released from the Forfeiture Restriction set
  forth in Section 2.1 of the Restricted Stock Agreement on the dates and
  in the amounts indicated in Exhibit B to this Grant Notice.

  

 

By his or her signature, Participant agrees to be bound by the terms
and conditions of the Plan, the Restricted Stock Agreement and this Grant Notice.
Participant has reviewed the Restricted Stock Agreement, the Plan and this
Grant Notice in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Grant Notice and fully understands all
provisions of this Grant Notice, the Restricted Stock Agreement and the
Plan.  Participant hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Administrator of the Plan upon any questions arising under the 

 

4

 

Plan, this Grant Notice or the Restricted Stock Agreement.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
     20525 Nordhoff Street, Ste 200

  	
   

  	
  Address:

  
	
   

  	
     Chatsworth, CA 91311

  	
   

  	
   

  
								

 

5

 

EXHIBIT A

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

RESTRICTED STOCK AWARD AGREEMENT

 

Pursuant to the Restricted Stock Award Grant Notice (“Grant Notice”)  to which
this Restricted Stock Award Agreement (this “Agreement”) is  attached, Image Entertainment, Inc.,
a Delaware corporation (the “Company”),  has granted to Participant the
right to purchase the number of shares of Restricted Stock under the Company’s
2010 Equity Incentive Award Plan (the “Plan”)  indicated in the Grant Notice. The
Shares are subject to the terms and conditions of the Plan which are
incorporated herein by reference. 
Capitalized terms not specifically defined herein shall have the
meanings specified in the Plan and the Grant Notice.

 

ARTICLE I

 

ISSUANCE OF SHARES

 

1.1                                 Issuance
of Shares.  Pursuant to the Plan and
subject to the terms and conditions of this Agreement, effective on the Grant
Date, the Company irrevocably grants to Participant the number of shares of
Stock set forth in the Grant Notice (the “Shares”),  in consideration of Participant’s employment
with or service to the Company or one of its Subsidiaries on or before the
Grant Date, for which the Administrator has determined Participant has not been
fully compensated, and the Administrator has determined that the benefit
received by the Company as a result of such employment or service has a value
that exceeds the aggregate par value of the Shares, which Shares, when issued
in accordance with the terms hereof, shall be fully paid and
nonassessable.  Notwithstanding anything
to the contrary contained in the Plan, the Grant Notice or this Agreement, (a) Sections
10.6, 11.2 and 11.3 of the Plan shall not apply at any time to the Shares and (b) the
Administrator shall exercise its discretion only reasonably in good faith.

 

1.2                                 Issuance
Mechanics.  On the Grant Date, the
Company shall issue the Shares to Participant and shall (a) cause a stock
certificate or certificates representing the Shares to be registered in the
name of Participant, or (b) cause such Shares to be held in book entry
form.  If a stock certificate is issued,
it shall be delivered to and held in custody by the Company and shall bear the
restrictive legends required by Section 4.1 below.  If the Shares are held in book entry form,
then such entry will reflect that the Shares are subject to the restrictions of
this Agreement.  Participant’s execution
of a stock assignment in the form attached as Exhibit C to the
Grant Notice (the “Stock Assignment”) shall be a
condition to the issuance of the Shares.

 

ARTICLE II

 

FORFEITURE AND TRANSFER RESTRICTIONS

 

2.1                                 Forfeiture
Restriction.  Subject to the
provisions of Section 2.2 below and Exhibit B to the Grant
Notice, in the event of Participant’s cessation of Service for any reason,
including as a result of Participant’s death or Disability, all of the
Unreleased Shares (as defined below) shall thereupon be forfeited immediately
and without any further action by the Company (the “Forfeiture
Restriction”).  Upon the
occurrence of such a forfeiture, the Company shall become the legal and
beneficial owner of the Unreleased Shares and all rights and interests therein
or 

 

A-1

 

relating thereto, and the Company shall have the right to retain and
transfer to its own name the number of Unreleased Shares being forfeited by
Participant.  The Unreleased Shares and
Participant’s executed Stock Assignment in the form attached as Exhibit C
to the Grant Notice shall be held by the Company in accordance with Section 2.4
until the Shares are forfeited as provided in this Section 2.1, until such
Unreleased Shares are fully released from the Forfeiture Restriction, or until
such time as this Agreement no longer is in effect (e.g., upon Termination of
Service).  Participant hereby authorizes
and directs the Secretary of the Company, or such other person designated by
the Committee, to transfer the Unreleased Shares which have been forfeited
pursuant to this Section 2.1 from Participant to the Company.

 

2.2                                 Release of Shares
from Forfeiture Restriction.  The
Shares shall be released from the Forfeiture Restriction in accordance with the
vesting schedule set forth in the Grant Notice. 
Any of the Shares which, from time to time, have not yet been released
from the Forfeiture Restriction are referred to herein as “Unreleased
Shares.”  In the event any
of the Shares are released from the Forfeiture Restriction, any dividends or
other distributions paid on such Shares and held by the Company pursuant to Section 2.4
shall be promptly paid by the Company to Participant.  As soon as administratively practicable
following the release of any Shares from the Forfeiture Restriction, the
Company shall, as applicable, either deliver to Participant the certificate or
certificates representing such Shares in the Company’s possession belonging to
Participant, or, if the Shares are held in book entry form, then the Company
shall remove the notations on the book form. 
Participant (or the beneficiary or personal representative of
Participant in the event of Participant’s death or incapacity, as the case may
be) shall deliver to the Company any representations or other documents or
assurances as the Company or its representatives deem necessary or advisable in
connection with any such delivery.

 

2.3                               Transfer Restriction.  No
Unreleased Shares or any interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the Participant or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect.  The
Shares shall also be subject to the transfer restrictions set forth in Exhibit D
to the Grant Notice.

 

2.4                                 Escrow. 
The Unreleased Shares and Participant’s executed Stock Assignment shall
be held by the Company until the Shares are forfeited as provided in
Section 2.1, until such Unreleased Shares are fully released from the
Forfeiture Restriction, or until such time as this Agreement no longer is in
effect  (e.g., upon Termination of
Service).  In such event, Participant
shall not retain physical custody of any certificates representing Unreleased
Shares issued to Participant. 
Participant, by acceptance of this Award, shall be deemed to appoint,
and does so appoint, the Company and each of its authorized representatives as
Participant’s attorney(s)-in-fact to effect any transfer of forfeited
Unreleased Shares (and any dividends or other distributions paid on such Shares) to the Company as
may be required pursuant to the Plan or this Agreement, and to execute such
representations or other documents or assurances as the Company or such
representatives deem necessary or advisable in connection with any such
transfer.  The 

 

A-2

 

Company, or its designee, shall not be liable
for any act it may do or omit to do with respect to holding the Shares in
escrow and while acting in good faith and in the exercise of its judgment.

 

2.5                                 Rights as Stockholder.  Except as otherwise provided herein, upon
issuance of the Shares by the Company, Participant shall have all the rights of
a stockholder with respect to said Shares, subject to the restrictions herein,
including the right to vote the Shares and to receive all dividends or other
distributions paid or made with respect to the Shares.  In addition, the Shares shall be subject to
the Stockholders Agreement, dated as of April 12, 2010, of the Company
(the “Stockholders Agreement”), to the extent provided therein.

 

ARTICLE III

 

TAXATION
REPRESENTATIONS

 

Participant represents to the Company the following:

 

(a)                                  Participant has
reviewed with his or her own tax advisors the federal, state, local and foreign
tax consequences of this investment and the transactions contemplated by this
Agreement.  Participant is relying solely
on such advisors and not on any statements or representations of the Company or
any of its agents.  Participant
understands that Participant (and not the Company) shall be responsible for his
or her own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.

 

(b)                                 Notwithstanding
anything to the contrary in this Agreement, the Company shall be entitled to
require payment (which payment may be made in cash, by deduction from other
compensation payable to Participant or in any form of consideration permitted
by the Plan) of any sums required by federal, state or local tax law to be
withheld with respect to the issuance, lapsing of restrictions on or sale of
the Shares.   The Company shall not be
obligated to deliver any stock certificate representing vested Shares to
Participant or Participant’s legal representative, or, if the Shares are held
in book entry form, to remove the notations on the book form, unless and until
Participant or Participant’s legal representative shall have paid or otherwise
satisfied in full the amount of all federal, state and local taxes applicable
to the taxable income of Participant resulting from the issuance, lapsing of
restrictions on or sale of the Shares.

 

ARTICLE IV

 

RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS

 

4.1                                 Legends.  The certificate or certificates representing
the Shares, if any, shall bear the following legend (as well as any legends
required by the Company’s charter and applicable state and federal corporate
and securities laws):

 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE IN
FAVOR OF THE COMPANY AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE
TERMS OF A RESTRICTED STOCK AWARD AGREEMENT BETWEEN THE COMPANY AND THE 

 

A-3

 

STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.

 

4.2                                 Refusal
to Transfer; Stop-Transfer Notices. 
The Company shall not be required (a) to transfer on its books any
Shares that have been sold or otherwise transferred in violation of any of the
provisions of this Agreement or (b) to treat as owner of such Shares or to
accord the right to vote or pay dividends to any purchaser or other transferee
to whom such Shares shall have been so transferred.  Participant agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate “stop transfer” instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

 

4.3                                 Removal
of Legend.  After such time as the
Forfeiture Restriction shall have lapsed with respect to the Shares, and upon
Participant’s request, a new certificate or certificates representing such
Shares shall be issued without the legend referred to in Section 4.1 and
delivered to Participant.  If the Shares
are held in book entry form, the Company shall cause any restrictions noted on
the book form to be removed.  In
addition, for the avoidance of doubt, at such time, such Shares shall be freely
transferable and non-forfeitable, and only subject to the Stockholders
Agreement  and Exhibit D to
the Grant Notice.

 

ARTICLE V

 

MISCELLANEOUS

 

5.1                                 Governing
Law.  This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of Delaware, without giving effect to principles of conflicts of
law.

 

5.2                                 Entire
Agreement; Enforcement of Rights.  
This Agreement and the Plan set forth the entire agreement and
understanding of the parties relating to the subject matter herein and merge
all prior discussions between them.  No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the
parties to this Agreement.

 

5.3                                 Severability.  If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. 
In the event that the parties cannot reach a mutually agreeable and
enforceable replacement for such provision, then (a) such provision shall
be excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of
the Agreement shall be enforceable in accordance with its terms.

 

5.4                                 Notices.  Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient when delivered
personally or sent by electronic mail (with return receipt requested and
received) or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified, if to the Company, at its principal offices, and if
to Participant, at Participant’s address, 

 

A-4

 

electronic mail address or fax number in the Company’s employee records
or as subsequently modified by written notice.

 

5.5                                 Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

 

5.6                                 Successors and
Assigns.  The rights and benefits of
this Agreement shall inure to the benefit of, and be enforceable by the Company’s
successors and assigns.  The Company may
assign its rights under this Agreement to any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company without the
prior written consent of Participant. The rights and obligations of Participant
under this Agreement may only be assigned with the prior written consent of the
Company.

 

5.7                                 Conformity to Securities Laws.  Participant acknowledges that the Plan is
intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules promulgated
by the Securities and Exchange Commission thereunder, and state securities laws
and regulations.  Notwithstanding
anything herein to the contrary, the Plan shall be administered, and the Shares
are to be issued, only in such a manner as to conform to such laws, rules and
regulations.  To the extent permitted by
applicable law, the Plan and this Agreement shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.

 

(m)                               5.8                                 NO RIGHT TO CONTINUED SERVICE.  THE
PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE LAPSING OF THE FORFEITURE
RESTRICTION PURSUANT TO SECTION 2.1 HEREOF IS EARNED ONLY BY CONTINUING
SERVICE TO THE COMPANY OR ITS SUBSIDIARIES AS AN “AT WILL” EMPLOYEE OR
CONSULTANT OF THE COMPANY OR ITS SUBSIDIARIES OR AN INDEPENDENT DIRECTOR OF THE
COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR ACQUIRING SHARES
HEREUNDER).  THE PARTICIPANT FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE FORFEITURE RESTRICTION SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN
EMPLOYEE, CONSULTANT OR INDEPENDENT DIRECTOR FOR SUCH PERIOD, FOR ANY PERIOD,
OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY’S OR ANY OF ITS
SUBSIDIARIES’ RIGHT TO TERMINATE THE PARTICIPANT’S EMPLOYMENT OR SERVICE TO THE
COMPANY AT ANY TIME.

 

A-5

 

EXHIBIT B

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

VESTING
PROVISIONS

 

Capitalized terms used in this Exhibit B and not defined
below shall have the meanings given them in the Plan, the Grant Notice to which
this Exhibit B is attached or the Agreement attached thereto.  In the event of any inconsistency between
this Exhibit B, on the one hand, and the Plan, the Grant Notice or
the Agreement, on the other hand, the provisions of this Exhibit B
shall govern.

 

1.                                       Vesting.  Subject to Section 2 below, and subject
to the Company’s achievement of the Company Stock Price Hurdle (as defined
below), as of any measurement date, such aggregate number of Shares (rounded up
to the next whole Share) shall be considered to have been released from the
Forfeiture Restriction as is equal to the Sale Percentage (as defined below) as
of such date.  Notwithstanding the
foregoing, 100% of the Shares shall be released from the Forfeiture Restriction
on January 8, 2019.

 

2.                                       Accelerated
Vesting.

 

(a)                                  In
the event of Participant’s Termination of Employment by the Company without
Cause (as defined below) or by Participant for Good Reason (as defined below)
prior to the Company Stock Price Hurdle having been achieved, 100% of the
Shares will be released from the Forfeiture Restriction if the Company Stock
Price Hurdle is achieved on or before the date that is one year following such
Termination of Employment; provided that if there is not a Trading
Market for the Stock at the time of such Termination of Employment and there
has not been an unbroken period of six months during which there has been a
Trading Market between such Termination of Employment and the end of the
one-year period following such Termination of Employment, such one-year period
shall be extended until the earliest of (A) the last day of any unbroken
six-month period during which there has been a continuous Trading Market, (B) the
occurrence of a Change in Control and (C) the date that is five years
following such Termination of Employment. 
In the event of Participant’s Termination of Employment as a result of
the Company’s election not to extend the Employment Period (as defined below)
beyond the Initial Term (as defined below) prior to the Company Stock Price
Hurdle having been achieved, 100% of the Shares will be released from the
Forfeiture Restriction if the Company Stock Price Hurdle is achieved on or
before the date that is one year following the expiration of the Initial Term; provided
that if there is not a Trading Market for the Stock at the time of such
Termination of Employment and there has not been an unbroken period of six
months during which there has been a Trading Market between such Termination of
Employment and the end of the one-year period following the expiration of the
Initial Term, such one-year period shall be extended until the earliest of (A) the
last day of any unbroken six-month period during which there has been a
continuous Trading Market, (B) the occurrence of a Change in Control and (C) the
date that is five years following such Termination of Employment.

 

(b)                                 Notwithstanding
the foregoing, the accelerated release of Shares from the

 

B-1

 

Forfeiture Restriction outlined in Section 2(a) and the
increase in the Sale Percentage pursuant to the proviso in Section 3(b) as
a result of certain Terminations of Participant’s Employment shall be
contingent on Participant’s execution and non-revocation of the Release (as
defined below).

 

3.                                       Definitions.

 

(a)                                  For
purposes of this Exhibit B, the “Company
Stock Price Hurdle” shall mean (A) the Fair Market Value of
the Stock (calculated pursuant to clause (i) or (ii) of Section 2.21
of the Plan only) equaling or exceeding $0.19 for any 20 out of 30 consecutive
trading days beginning on or after January 8, 2013 or (B) the
occurrence of a Change in Control in which the equity value per share of Stock
in such Change in Control transaction equals or exceeds $0.19.

 

(b)                                 For
purposes of this Exhibit B, the “Sale
Percentage” shall mean, as of any date, (i) 100% minus (ii) the
percentage of the shares of the Company’s Series C preferred stock (or the
shares of Stock issuable upon conversion thereof) originally purchased by the
JH Stockholders (as defined below) (including through exercise of the
Additional Purchase Right (as defined below) still held by the JH Stockholders
through the date of measurement; provided that
the Sale Percentage shall be deemed to be 100% on the first to occur of (x) January 8,
2015 or (y) the date of Participant’s Termination of Employment by the
Company without Cause (as defined below), by Participant for Good Reason (as
defined below) or as a result of Participant’s death or Disability, or in the
event of Participant’s Termination of Employment as a result of the Company’s
election not to extend the Employment Period (as defined below); and, provided, further, that
for the avoidance of doubt, if the Additional Purchase Right is exercised,
Participant will not be required to increase his ownership of Company
securities and the Sale Percentage will be applied to the Shares held as of
such time.

 

(c)                                  For
purposes of this Exhibit B, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(d)                                 For
purposes of this Exhibit B, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(e)                                  For
purposes of this Exhibit B, the terms “Cause,”
“Employment Period,” “Good Reason,” “Initial
Term” and “Release”
shall have the meanings given to such terms in that certain Employment
Agreement dated April 14, 2010, between Participant and the Company;
provided that the “Initial Term” shall mean such term without regard to any
extension of the Employment Period as a result of the Company’s failure to give
less than 12 months’ notice of non-extension of the Initial Term.

 

(f)                                    For
purposes of this Exhibit B, the term “Trading
Market” shall mean (A) the listing of the Stock on any (i) established
securities exchange (such as the New York Stock Exchange, the NASDAQ Global
Market and the NASDAQ Global Select Market), (ii) national market system
or (iii) automated quotation system or (B) the regular quotation of
the Stock by a

 

B-2

 

recognized securities dealer.

 

B-3

 

EXHIBIT C

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

STOCK
ASSIGNMENT

 

FOR VALUE RECEIVED, the undersigned, [Name of Participant], hereby
sells, assigns and transfers unto IMAGE ENTERTAINMENT, INC., a Delaware
corporation,
              
shares of the Common Stock of IMAGE ENTERTAINMENT, INC., a Delaware
corporation, standing in its name of the books of said corporation represented
by Certificate
No.            herewith
and do hereby irrevocably constitute and appoint                                       
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.

 

This Stock Assignment may be used only in accordance with the
Restricted Stock Award Grant Notice and Restricted Stock Award Agreement between
IMAGE ENTERTAINMENT, INC. and the undersigned dated
                  ,
200    .

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Name of Participant]

  

 

INSTRUCTIONS: 
Please do not fill in the blanks other than the signature line.  The purpose of this assignment is to enable
the Company to enforce the Forfeiture Restriction as set forth in the Stock
Award Grant Notice and Restricted Stock Award Agreement, without requiring
additional signatures on the part of the stockholder.

 

C-1

 

EXHIBIT D

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

TRANSFER
RESTRICTIONS

 

Capitalized terms used in this Exhibit D and not defined
below shall have the meanings given them in the Plan, the Grant Notice to which
this Exhibit D is attached or the Agreement attached thereto.

 

1.                                       Transfer
Restrictions.  The following transfer
restrictions shall apply to the Shares and shall be in addition to the
restrictions set forth in Section 2.3 and Exhibit B of the
Agreement.

 

(a)                                  In
consideration of the grant of the Shares, Participant agrees that Participant
will not (and will cause any spouse or immediate family of the spouse or the
undersigned living in the Participant’s household not to), without the prior
written consent of the Administrator (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale), pledge, transfer,
establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under
the Exchange Act, or otherwise dispose of any of the Shares currently or
hereafter owned either of record or beneficially (as defined in Rule 13d-3
under the Exchange Act) by Participant (or such spouse or family member), or
publicly announce an intention to do any of the foregoing, unless such Shares
constitute Transferable Shares (as defined below).

 

(b)                                 In
addition, the foregoing restrictions shall not apply to the transfer of any or
all of the Shares, either during his lifetime or on death, by gift, will or the
laws of descent and distribution to Participant’s immediate family or to a
trust the beneficiaries of which are exclusively Participant and/or a member or
members of his immediate family (provided that
it shall be a condition to such transfer that the donee, beneficiary,
distributee or transferee executes and delivers to Company an agreement stating
that he, she or it is receiving and holding the Shares subject to the
provisions of the Agreement, and there shall be no further transfer or distribution
of such Shares, except in accordance with the Agreement).

 

(c)                                  In
addition, notwithstanding the restrictions in this Exhibit D, the
undersigned may at any time after the date hereof enter into a trading plan or
modify an existing trading plan meeting the requirements of Rule 10b5-1
under the Exchange Act relating to the sale of the Shares, if then permitted by
the Company and applicable law (provided that
the Shares subject to such trading plans may not be sold unless and until they
are Transferable Shares).

 

2.                                       Definitions.

 

 

(a)                                  For
the purposes of this Exhibit D, “immediate
family” shall mean the spouse, domestic partner, lineal
descendant (including adopted children), father, mother, brother or sister of
the transferor.

 

(b)                                 For
purposes of this Exhibit D, “Transferable Shares”
shall mean, as of any measurement date, such number of the Shares as is equal
to the greater of (i) the Sale Percentage as of such date or (ii) the
Release Percentage as of such date.

 

(c)                                  For
purposes of this Exhibit D, the “Release
Percentage” shall mean (i) 0% prior to January 8, 2015
and (ii) 100% on and after January 8, 2015.

 

(d)                                 For
purposes of this Exhibit D, the “Sale
Percentage” shall mean, as of any measurement date, (i) 100%
minus (ii) the percentage of the shares of the Company’s Series C
preferred stock (or the shares of Stock issuable upon conversion thereof)
originally purchased by the JH Stockholders (as defined below) (including
through exercise of the Additional Purchase Right (as defined below)) still
held by the JH Stockholders through the date of measurement; provided that, for the avoidance of doubt, if the Additional
Purchase Right is exercised, Participant will not be required to increase his
ownership of Company securities and the Sale Percentage will be applied to the
Shares held as of such time.

 

(e)                                  For
purposes of this Exhibit D, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(f)                                    For
purposes of this Exhibit D, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(g)                                 For
purposes of this Exhibit D, the terms “Cause”
and “Good Reason” shall have the meanings
given to such terms in that certain Employment Agreement dated April 14,
2010, between Participant and the Company.Exhibit 10.2

 

EMPLOYMENT
AGREEMENT

 

This
EMPLOYMENT AGREEMENT is dated as of April 14, 2010  (the
“Effective Date”), and is made among Image Entertainment, Inc., a
Delaware corporation (the “Company”), and John Avagliano (“Executive”).

 

WHEREAS,
the Company and Executive desire to enter into this Employment Agreement (the “Agreement”)
upon the terms and conditions hereinafter set forth.

 

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

 

1.                                      Employment Period.  The term of Executive’s employment hereunder shall commence effective as
of the Effective Date and, unless terminated pursuant to Section 4
hereof, shall continue through the third anniversary of the Effective Date
(such period referred to herein as the “Initial Term”); provided
that the term of employment hereunder shall be automatically extended for an
additional one-year period (each, an “Extension Period”), beginning upon
the expiration of the Initial Term, or upon expiration of any Extension Period,
unless Executive shall have given written notice of non-extension to the
Company at least 90 days prior to the then-applicable expiration date or the
Company shall have given written notice of non-extension to Executive prior to
the then-applicable expiration date (the Initial Term and any Extension Period
shall be referred to herein as the “Employment Period”); provided that
if the Company gives less than twelve months’ notice of non-extension, the term
of employment hereunder shall automatically be extended until the twelve-month
anniversary of the giving of such notice.

 

2.                                      Employment Duties.

 

(a)                                  During the Employment Period, Executive shall serve as Chief Operating
Officer and Chief Financial Officer of the Company.  In such position, Executive shall have such
duties, responsibilities and authority as is customarily assigned to
individuals serving in such position, and such other duties, responsibilities
and authority consistent with Executive’s position as the Chief Executive
Officer of the Company (the “Supervising Authority”) specifies from time
to time, in each case, which shall be reasonably commensurate with the duties,
responsibilities and authority of a chief operating officer and chief financial
officer of entities of the Company’s size and nature within the United
States.  In addition, Executive hereby
consents to serve as an officer and/or director of any subsidiary of the
Company without any additional salary or compensation, if so requested by the
Board.

 

(b)                                 Executive shall be employed by the Company on a full-time basis (i.e., 40
hours per work week).  Executive shall
devote all of Executive’s skill and knowledge and substantially all of
Executive’s business time, attention and energies to the conscientious performance
of all of the lawful duties, responsibilities and authority that may be
assigned to Executive hereunder, except for vacation time and absence for
sickness and similar disability.  Nothing
contained in this Agreement shall preclude Executive from devoting time to
personal and family investments, or as a director of any not-for-profit
company, or from participating in industry associations; provided, that such
activities or services do not (i) materially interfere with Executive’s
duties hereunder; or (ii) materially violate the terms of Section 6
hereof or the Proprietary Information Agreement referred to in Section 7
hereof.  Executive agrees that he will
not join any boards of for-profit companies without the prior approval of the
Board, such approval not to be unreasonably withheld.  Executive’s primary place of employment shall
be the Company’s facility in Los Angeles, California, or such other location
within the Los Angeles, California metropolitan area as may be designated by
the Supervising Officer or the Board from time to time.  Executive shall also render services at such
other places within or outside the United States as the Supervising Authority

 

 

or the Board may reasonably
direct from time to time.  Executive
shall be subject to and comply with the written policies and procedures
generally applicable (and provided) to senior executives of the Company to the
extent such policies and procedures are not inconsistent with any term of this
Agreement (including any negatively implied term.

 

3.                                      Compensation.

 

(a)                                  Base Salary.  During the Employment Period, the Company
shall pay Executive a base salary at a rate not less than $300,000  per annum, payable in accordance
with the Company’s then effective payroll practices.  The Board shall review Executive’s base
salary annually during the Employment Period and, in its sole discretion, may
increase (but not decrease) such base salary from time to time.  The annual base salary payable to Executive
under this Section 3(a), as the same may be increased from time to
time, shall hereinafter be referred to as the “Salary.”  In addition, for services performed from January 8,
2010, through the Effective Date, the Company shall make a lump sum cash
payment to Executive of an amount equal to the amount Executive would have
received during such period had this Agreement been in effect since January 8,
2010, but only to the extent such amounts have not previously been paid to
Executive.  This lump sum payment shall
be made within 10 days following the Effective Date.

 

(b)                                 Annual Bonus.  In addition to the Salary, for each fiscal
year of the Company that begins or ends during the Employment Period, Executive
shall have an annual cash bonus opportunity of fifty percent (50%) of Base
Salary (the “Bonus”), which shall be payable if 100% of the Performance
Targets (as defined below) are achieved; provided that if actual performance of
the Company for such period exceeds or is less than 100% of the Performance
Targets (but is at least 85% of the Performance Targets), the amount of the
Bonus shall be adjusted positively or negatively, respectively, by mathematical
interpolation, as reasonably determined in good faith by the Board or
compensation committee.  For purposes of
this Agreement, the “Performance Targets” for the fiscal years during the
Initial Term shall be the achievement of earnings before interest, taxes, depreciation
and amortization (the “EBIDTA Targets”) in amounts equal to (i) $10.3
million, for fiscal  year ending March 31,
2011, (ii) $17.6 million, for fiscal year ending March 31, 2012, and (iii) $21.1
million, for fiscal year ending March 31, 2013, in each case as confirmed
by the Company’s audited financials for each such fiscal year; provided,
however, that in the event of any material acquisition of a company or
business by the Company, the Performance Targets shall be reasonably adjusted
by the Company and Executive to take into account any changes to the EBITDA
Targets or other material changes relating to such acquisition that should
reasonably result in a change to the applicable Performance Targets.  Any Bonus that becomes payable
pursuant to this Section 3(b) shall be paid to Executive as
soon as reasonably practicable following the Company’s determination of whether
the Performance Targets for the applicable fiscal year have been achieved and
its calculation of the Bonus for such applicable fiscal year which, in each
case, shall be no later than the earlier of (x) 10 days following the
completion of the audit for the applicable fiscal year and (y) the date
that is 75 days following the end of each such applicable fiscal year.  Notwithstanding anything to the contrary
contained in this Agreement or any applicable bonus plan, program or
arrangement, but except as provided in Section 4, Executive shall be
entitled to receive any such Bonus only if Executive is employed on the last
business day of the fiscal year to which the Bonus relates.  Notwithstanding the foregoing, Executive’s
Bonus for fiscal year 2011 shall not be less than $50,000 (the “2011 Guaranteed
Bonus”).

 

(c)                                  Benefits.  During the Employment Period, Executive (and
any dependents and beneficiaries of Executive to the extent provided therein)
shall be entitled to participate in any and all employee benefit plans,
programs or arrangements (as amended from time to time) sponsored by the
Company for its senior executives or employees at a level commensurate with
Executive’s position and no less favorable to Executive than those applicable
to such senior executives or employees, including, 

 

 

without limitation, life and
disability insurance (“Benefits”). 
Executive shall be entitled to four weeks of vacation, with up to two
weeks of carryover accumulation, which shall accrue on the Effective Date and
each January 1 thereafter occurring during the Employment Period.  During the Employment Period, Executive shall
be entitled to all other fringe benefits as are from time to time made
generally available to senior executives or employees of the Company.

 

(d)                                 Equity Compensation.  During the Employment Period, Executive shall
be entitled to participate in any and all equity or other employee benefit
plans that are generally available to senior executives, as distinguished from
general management, of the Company on a basis commensurate with Executive’s
position and no less favorable to Executive than those applicable to such
senior executives.  Except as otherwise
provided in this Agreement, Executive’s participation in and benefits under any
such plan shall be on the terms and subject to the conditions specified in the
governing document of the particular plan and applicable award agreement.

 

(e)                                  Expense Reimbursement.  During the Employment Period, the Company
will pay or reimburse Executive in accordance with the Company’s written
expense reimbursement policies and procedures (i) for business class
travel over three hours, temporary housing, auto and other reasonable out of
pocket expenses incurred in association with Executive’s commute to and from
his home in New York and Los Angeles, as well as for working in Los Angeles and
(ii) the Company shall reimburse Executive in accordance with the Company’s
policies and procedures for all proper expenses incurred by Executive in the
performance of Executive’s duties hereunder, regardless of where incurred.

 

(f)                                    Relocation Benefits.

 

(i)                                     The Company will pay or reimburse Executive in accordance with the
Company’s written expense reimbursement policies and procedures for (A) ordinary
and necessary moving, house search, travel, lodging, storage and similar expenses
incurred by Executive on or prior to December 31, 2010 in relocating
Executive, Executive’s spouse, dependent children and household effects and
automobiles from New York to Los Angeles, including, but not limited to, the
cost of temporary housing and transportation expenses reasonably necessary to
permit Executive to obtain a suitable permanent residence, and (B) all
reasonable costs incurred by Executive in connection with the sale of Executive’s
residence in New York and all reasonable costs incurred by Executive in
connection with the purchase of Executive’s residence in Los Angeles,
including, but not limited to, all closing costs such as commissions, title
insurance, attorneys’ fees, transfer taxes, escrow costs and unamortized
financing costs (i.e., unamortized points) (collectively, the “Reimbursement”).

 

(ii)                                  In addition, the Company shall pay to Executive a tax gross-up (the “Tax
Gross-Up”) for any income taxes Executive is required to pay resulting from
the Reimbursement and from the Tax Gross-Up, which Tax Gross-Up shall be paid
in accordance with Treasury Regulation Section 1.409A-3(i)(1)(v).  The Reimbursement shall be subject to an
aggregate cap of $120,000 and the Tax Gross-Up shall be subject to an aggregate
cap of $75,000.  The Reimbursement and
the Tax Gross-Up shall be paid to Executive within 30 days following the
Company’s receipt of a written request for such reimbursement, but subject to
receipt by the Company of supporting receipts and/or documentation and/or
receipts in form and substance reasonably acceptable to the Company.  If Executive’s employment terminates pursuant
to clause (ii) or (iii) of Section 4(b) prior to the
second anniversary of the Effective Date, Executive shall re-pay to the Company
the after-tax amount of a pro rata portion of the Reimbursement and the Tax
Gross-Up based on the number of days elapsed in the two-year period ending on
the second anniversary of the Effective Date.

 

(g)                                 Application of Section 409A
of the Code to Expense Reimbursements.  Any amounts payable under Sections 3(e) and
(f), Section 4(c)(vi) and Section 19 shall
be made as promptly as

 

 

is
reasonably practicable, in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv),
and paid no later than the last day of Executive’s taxable year following the
taxable year in which Executive incurred the expenses.  The amounts provided under Sections 3(e) and
(f), Section 4(c)(vi) and Section 19 during
any taxable year of Executive’s will not affect such amounts provided in any
other taxable year of Executive’s, and Executive’s right to reimbursement for
such amounts shall not be subject to liquidation or exchange for any other
benefit.

 

4.                                      Termination.

 

(a)                                  At-Will Employment.  The Company and Executive acknowledge that
Executive’s employment is and shall continue to be at-will, as defined under
applicable law.  Executive acknowledges
and agrees that nothing in this Agreement shall confer upon Executive any right
with respect to continuation of employment by the Company, nor shall it
interfere in any way with Executive’s right or the Company’s right to terminate
Executive’s employment at any time, with or without Cause, as defined in Section 10,
or with or without Good Reason, as defined in Section 10, subject
to Executive’s right to receive certain payments upon termination as set forth
in this Section 4.  Any
termination of Executive’s employment under this Agreement (other than in the
event of Executive’s death), shall be communicated by a written Notice of
Termination addressed to the other party to this Agreement.  A “Notice of Termination” shall mean a
notice stating that Executive’s employment with the Company has been or will be
terminated and the specific provisions of this Section 4 under
which such termination is being effected.

 

(b)                                 Death; Disability; Termination for Cause; Resignation Without Good Reason
or Expiration of Employment Period.  Executive’s employment with the Company shall
terminate pursuant to this Section 4(b):  (i) upon Executive’s death or
Disability, as defined in Section 10, (ii) upon Executive’s
voluntary termination of Executive’s employment without Good Reason, (iii) upon
a termination of Executive’s employment by the Company for Cause, or (iv) upon
the expiration of the Employment Period. 
Upon a Termination of Employment pursuant to this Section 4(b),
the Employment Period shall terminate and Executive (or Executive’s estate)
shall receive (A) any unpaid Salary and unused vacation accrued through
the Termination Date, as defined in Section 10, (B) to the
extent not previously paid, any Bonus earned and unpaid as of the Termination
Date for any previously completed fiscal year, which shall be paid on the tenth
day after the Termination Date (or, if such day is not a business day, the next
business day after such day), (C) all Benefits determined in accordance
with the Company’s applicable Benefit plans then in effect, and (D) reimbursement
of expenses pursuant to Section 3 incurred through the Termination
Date.

 

(c)                                  Termination Without Cause; Resignation for Good Reason.  Executive’s employment with the
Company shall terminate pursuant to this Section 4(c):  (i) upon a termination of Executive’s
employment by the Company without Cause or (ii) upon Executive’s
termination of Executive’s employment for Good Reason.  Upon a Termination of Employment pursuant to
this Section 4(c), the Employment Period shall terminate and
Executive (or Executive’s estate) shall be entitled to:

 

(i)                                     any unpaid Salary and unused vacation accrued through the Termination
Date and, to the extent not previously paid, any Bonus earned and unpaid as of
the Termination Date for any previously completed fiscal year, which shall be
paid on the tenth day after the Termination Date (or, if such day is not a
business day, the next business day after such day);

 

(ii)                                  all Benefits determined in accordance with the Company’s applicable
Benefit plans then in effect and reimbursement of expenses pursuant to Section 3
incurred through the Termination Date;

 

 

(iii)                               payment of an amount equal to 12 months of Executive’s annual Salary as
in effect immediately prior to the Termination Date (but without taking into
account any reduction in Salary giving rise to a termination of employment by
Executive for Good Reason);

 

(iv)                              payment of the positive difference, if any, of (A) a pro rata
portion, based on the number of days elapsed in the fiscal year of termination
through and including the date of termination, of the Bonus Executive would
have been entitled to receive for the year of termination but for termination
of his employment minus (B) any amount payable pursuant to clause (vii) below.  If termination of Executive’s employment
occurs during the first six months of a fiscal year, the Bonus Executive would
have been entitled to receive for the year of termination shall be deemed to be
equal the average of the Bonuses Executive received for the two previous fiscal
years (or the actual bonus for the previous fiscal year if termination occurs
during the first six months of the second full fiscal year following the Effective
Date).  If termination of Executive’s
employment occurs during the second six months of a fiscal year (or at any time
during the first full fiscal year following the Effective Date), the Company’s
performance during the portion of such fiscal year preceding termination of
Executive’s employment shall be annualized, and the Bonus Executive would have
received for such fiscal year shall be deemed to be the Bonus Executive would
have earned if the annualized performance had been the actual performance for
such fiscal year;

 

(v)                                 for the period beginning on the date of termination and ending on the
date which is twelve (12) full months following the date of termination (or, if
earlier, the date on which Executive accepts employment with another employer
that provides comparable benefits in terms of cost and scope of coverage), the
Company shall pay for and provide Executive and his eligible dependents and
beneficiaries (to the extent provided therein) who were covered under the
Company’s health plans as of the date of Executive’s termination with
healthcare benefits which are substantially the same as the benefits provided
to Executive and such dependents and beneficiaries immediately prior to the
date of termination, including, if necessary, paying the costs associated with
continuation coverage pursuant to COBRA (provided that Executive shall be
solely responsible for all matters relating to his continuation of coverage
pursuant to COBRA, including, without limitation, his election of such
coverage);

 

(vi)                              Relocation benefits under Section 3(f) (including the
same maximum aggregate Reimbursement and Tax Gross-Up) for moving from Los
Angeles to New York to the extent any such eligible relocation expenses are
actually incurred by Executive on or before the six-month anniversary of the
date of Executive’s Termination of Employment. 
Such reimbursement shall made within 30 days following the Company’s
receipt of a written request for such reimbursement, subject to receipt by the
Company of supporting receipts and/or documentation and receipts in form and
substance reasonably acceptable to the Company and shall be subject to the
provisions of Section 3(g); and

 

(vii)                           Payment of the 2011 Guaranteed Bonus, to the extent not already paid to
Executive.

 

Notwithstanding
any provision to the contrary in this Agreement, no amount shall be paid
pursuant to Section 4(c) above (except for the amounts payable
under Sections 4(c)(i) and (ii)) unless, on or prior to the
60th day following the date of Executive’s
Termination of Employment, an effective mutual waiver and release of claims
agreement (the “Release”) in substantially the form attached hereto as Exhibit A
has been executed and remains effective on such date and any applicable
revocation period thereunder has expired; provided that any failure of
the Company to execute the Release shall not reduce or eliminate its
obligations hereunder.  Subject to Section 4(e)(i),
the amounts described in Sections 4(c)(iii) and (iv) shall
be paid in a single lump sum on the next payroll date immediately following the
expiration of such 60-day period.

 

 

(d)                                 No
Duty to Mitigate.  In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not Executive obtains other
employment; provided, however, that any loans, advances or other
amounts owed by Executive to the Company may be offset by the Company against
amounts payable to Executive under this Section 4.

 

(e)                                  Section 409A.

 

(i)                                     Payment Delay.  Notwithstanding anything herein to the
contrary, to the extent any payments to Executive pursuant to this Agreement
are non-qualified deferred compensation subject to Section 409A of the
Code, then (A) to the extent required by Section 409A of the Code, no
amount shall be payable unless Executive’s termination of employment
constitutes a Separation from Service and (B) if Executive, at the time of
his Separation from Service, is determined by the Company to be a “specified
employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, such
that delayed commencement of any portion of the termination benefits payable to
Executive pursuant to this Agreement is required in order to avoid a prohibited
distribution under Section 409A(a)(2)(B)(i) of the Code (any such
delayed commencement, a “Payment Delay”), then such portion of the
payments to be made to Executive shall not be provided to Executive prior to
the earlier of (A) the expiration of the six-month period measured from
the date of Executive’s Separation from Service, (B) the date of Executive’s
death or (C) such earlier date as is permitted under Section 409A.  Upon the expiration of the applicable Code Section 409A(a)(2)(B)(i) deferral
period, all payments deferred pursuant to a Payment Delay shall be paid in a
lump sum with interest on the foregoing at the applicable federal rate for
instruments of less than one year, to Executive within 30 days following such
expiration, and any remaining payments due under the Agreement shall be paid as
otherwise provided herein.  The
determination of whether Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of
the Code as of the time of his Separation from Service shall be made by the
Company in accordance with the terms of Section 409A of the Code and
applicable guidance thereunder (including without limitation Treasury
Regulation Section 1.409A-1(i) and any successor provision thereto).

 

(ii)                                  Exceptions to Payment Delay.  Notwithstanding Section 4(e)(i),
to the maximum extent permitted by applicable law, amounts payable to Executive
pursuant to Section 4(c) shall be made in reliance upon
Treasury Regulation Section 1.409A-1(b)(9) (with respect to separation
pay plans) or Treasury Regulation Section 1.409A-1(b)(4) (with
respect to short-term deferrals). 
Accordingly, the severance payments provided for in Section 4(c) are
not intended to provide for any deferral of compensation subject to Section 409A
of the Code to the extent (A) the severance payments payable pursuant to Section 4(c),
by their terms and determined as of the date of Executive’s Termination of
Employment, may not be made later than the 15th day of the third calendar month following the
later of (1) the end of the Company’s fiscal year in which Executive’s
Termination of Employment occurs or (2) the end of the calendar year in
which Executive’s Termination of Employment occurs, or (B) such severance
payments do not exceed an amount equal to two times the lesser of (1) the
amount of Executive’s annualized compensation based upon Executive’s annual
rate of pay for the calendar year immediately preceding the calendar year in
which Executive’s Termination of Employment occurs (adjusted for any increase
during the calendar year in which such Termination of Employment occurs that
would be expected to continue indefinitely had Executive remained employed with
the Company) or (2) the maximum amount that may be taken into account
under a qualified plan pursuant to Section 401(a)(17) for the calendar
year in which Executive’s Termination of Employment occurs.

 

(f)                                    Exclusive Remedy.  Except as otherwise expressly required by law
or as specifically provided herein, all of Executive’s rights to salary,
severance, benefits, bonuses and other amounts hereunder (if any) accruing
after the termination of Executive’s employment shall cease upon

 

 

such termination.  In addition, Executive acknowledges and
agrees that he is not entitled to any reimbursement by the Company for any
taxes payable by Executive as a result of the payments and benefits received by
Executive pursuant to this Section 4 other than as set forth in Section 4(c)(vi) and
Section 20.

 

(g)                                 Effect of Termination on Other Plans and Programs.  In the event that Executive’s
employment with the Company is terminated for any reason, Executive shall be
entitled to receive all amounts payable and benefits accrued under any
otherwise applicable plan, policy, program or practice of the Company in which
Executive was a participant immediately prior to the Termination Date in
accordance with the terms thereof; provided, that, if Executive’s
termination is without Cause or for Good Reason, Executive shall not be
entitled to receive any payments or benefits under any such plan, policy,
program or practice providing any severance or incentive compensation, and the
provisions of Section 4(c) hereof shall supersede the
provisions of any such plan, policy, program or practice.

 

(h)                                 Return of the Company’s Property.  As soon as reasonably practicable following
the termination of his employment in any manner, Executive shall surrender to
the Company or destroy, at his option, all lists, books and records of, or in
connection with, the Company’s business, and all other property belonging to
the Company, it being distinctly understood that all such lists, books and
records, and other documents, are the property of the Company.  If Executive elects to destroy such property,
Executive shall deliver to the Company a signed statement certifying compliance
with this Section 4(g). 
Nothing contained in this Section 4(g) or the
Proprietary Information Agreement (as defined below) shall prevent Executive
from retaining and utilizing copies of benefit plans and programs in which
Executive retains an interest, desk calendars, his personal rolodex or files,
personal office furnishings or such other personal records and documents as may
Executive may reasonably require.

 

5.                                      Federal and State Withholding.  The Company shall deduct from the amounts payable to Executive pursuant
to this Agreement the amount of all federal, state and local taxes required to
be withheld by the Company under applicable law.

 

6.                                      Noncompetition; Nonsolicitation.

 

(a)                                  General.  Executive acknowledges that in the course of
Executive’s employment with the Company, Executive has and will become familiar
with trade secrets and other confidential information concerning the Company
and that Executive’s services will be of special, unique and extraordinary
value to the Company.

 

(b)                                 Noncompetition.  Executive agrees that during the Employment
Period, except as may otherwise be approved by the Board or as set forth in Section 2
above, Executive shall not in any manner, directly or indirectly, through any
person, firm or corporation, alone or as a member or a partnership or as an
owner, investor, member, partner, officer, director, stockholder, investor or
employee of or consultant to any other corporation or enterprise or otherwise,
compete with the Company or any of its subsidiaries, within the United States
and/or any foreign country, in the business of distribution of DVDs or its
successors to the home market or on-demand programming as conducted by the
Company during Executive’s employment or in planning during Executive’s
employment in which Executive was materially involved or had actual knowledge.

 

(c)                                  Nonsolicitation.  Executive further agrees that during the
Employment Period and for a period of one year following Executive’s
Termination of Employment, Executive shall not in any manner, directly or
indirectly (i) induce or attempt to induce any employee of the Company or
any of its subsidiaries to terminate or abandon his or her employment for any
purpose whatsoever, or (ii) solicit

 

 

or encourage any customer of
the Company or any of its subsidiaries or independent contractor providing
services to the Company or any of its subsidiaries to terminate or diminish its
relationship with it.

 

(d)                                 Nondisparagement.  Executive agrees that Executive shall
neither, directly or indirectly, engage in any conduct or make any statement
disparaging in any way the Company, its subsidiaries or any of their personnel
nor, directly or indirectly, engage in any other conduct or make any other
statement that could be reasonably expected to impair the goodwill of the
Company or the reputation of the Company, in each case, except to the extent
required by law, and then only after consultation with the Company to the
extent possible, or to enforce the terms of this Agreement.  The Company and its affiliates agree they
will not, directly or indirectly, engage in any conduct or make any statement
disparaging or criticizing in any way Executive, or engage in any other conduct
or make any other statement that could be reasonably expected to impair the
reputation of Executive, in each case, except to the extent required by law,
and then only after consultation with Executive to the extent possible, or to
enforce the terms of this Agreement.

 

(e)                                  Exceptions.  Nothing in this Section 6 shall
prohibit Executive (i) from being a stockholder in a mutual fund or a
diversified investment company, (ii) from being an owner of not more than
five percent of the outstanding stock of any class of a corporation, any
securities of which are publicly traded, so long as Executive has no active
participation in the business of such corporation,  (iii) from providing services to or on
behalf of any other business entities in accordance with Section 2,
or (iv) from making generalized solicitations for employees through advertisements
and hiring any persons through such generalized solicitations.

 

7.                                      Confidentiality.  Executive and the Company have entered into the Company’s standard
employee proprietary information agreement (the “Proprietary Information
Agreement”).

 

8.                                      Enforcement.  The parties hereto agree that the Company may be damaged irreparably in
the event that any provision of Section 6 or 7 of this
Agreement were not performed in accordance with its terms or were otherwise
breached and that money damages may be an inadequate remedy for any such
nonperformance or breach.  Accordingly,
the Company and its successors and permitted assigns shall be entitled, in
addition to other rights and remedies existing in their favor, to seek an
injunction or injunctions to prevent any breach or threatened breach of any
such provisions and to enforce such provisions specifically (without posting a
bond or other security), in each case, as a court of competent jurisdiction may
deem necessary or appropriate to restrain Executive.  In addition, in the event of any breach of Section 6(c) by
Executive, Executive shall repay to the Company any amounts paid to him
pursuant to Sections 4(c)(iii) and (iv) following the
date of such breach.

 

9.                                      Representations/Covenant.  Executive represents and warrants to the Company that (a) the
execution, delivery and performance of this Agreement by Executive does not and
will not conflict with, breach, violate or cause a default under any contract,
agreement, instrument, order, judgment or decree to which Executive is a party
or by which Executive is bound, (b) Executive is not a party to or bound
by any employment agreement, noncompetition agreement or confidentiality
agreement with any other person or entity that would interfere with the
execution, delivery or performance of this Agreement by Executive, and (c) upon
the execution and delivery of this Agreement by the Company, this Agreement
shall be the valid and binding obligation of Executive, enforceable in
accordance with its terms.  Executive
agrees that he will not disclose to or use on behalf of the Company any
proprietary information of a third party without that party’s consent.  The Company represents and warrants to
Executive that (i) it is fully authorized by action of its Board (and of
any other person or body whose action is required) to enter into this Agreement
and to perform its obligations under it and under the programs, plans and
arrangements referred to in it; (ii) the execution, delivery and
performance of this Agreement by the Company does not violate any applicable
law, regulation, order, judgment or decree or

 

 

any agreement, arrangement,
plan or corporate governance document to which it is a party or is bound; and (iii) upon
the execution and delivery of this Agreement by the parties, this Agreement
shall be a valid and binding obligation of the Company, enforceable against it
in accordance with its terms.

 

10.                               Definitions.

 

“Cause”
means the occurrence of any of the following: 
(i) Executive’s conviction of a felony or of any crime involving
moral turpitude, dishonesty, fraud, embezzlement, theft or misrepresentation, (ii) gross
neglect or gross misconduct by Executive in connection with the performance of
Executive’s duties (other than due to Executive’s physical or mental illness), (iii) a
material breach by Executive of this Agreement, the Proprietary Information
Agreement or the Company’s material policies, rules and regulations
referred to in Section 2(b), or (iv) willful engagement in any
other conduct that involves a material breach of a fiduciary obligation on the
part of Executive as an officer or member of the Board, or that would
reasonably be expected to have a material and adverse economic effect upon the
Company and its subsidiaries.  The
circumstances described in items (ii) through (iv) (but not item (i))
above shall be subject to notice and an opportunity to cure as follows:  If the Board believes events have occurred
constituting Cause within the meaning of items (ii) through (iv), the
Board shall give written notice to Executive within 180 days after the Board
learns of such events, which notice shall set forth in reasonable detail the
grounds for its belief and the actions required to cure such failure.  Executive shall then have 30 business days
after notice to explain and/or remedy the situation, and Cause shall not exist
until such period has expired and the circumstances have not been explained or
remedied.

 

“Code”
means the Internal Revenue Code of 1986, as amended from time to time, and the
Treasury Regulations and other guidance issued thereafter.

 

“Disability”
means the inability of Executive, due to a physical or mental incapacity or
disability, to perform the essential functions of Executive’s position, with or
without reasonable accommodation, required of Executive for a continuous period
of 90 days or any 120 days within any 12-month period.  However, in no event shall a disability be a
Disability unless Executive is considered to be disabled under the long-term
disability plan of the Company for which Executive is eligible.

 

“Good
Reason” means a termination by Executive of Executive’s employment
hereunder if (i) any of the following events occurs without Executive’s
express prior written consent; (ii) such event is not fully cured within
30 business days after Executive gives written notice to the Company describing
such event and demanding cure; (iii) such cure notice is given within 180
days after Executive learns of the occurrence of such event; and (iv) Termination
of Employment occurs within 30 business days after the expiration of any cure
right:  (A) a material diminution in
Executive’s Salary; (B) a material diminution in Executive’s authority,
duties or responsibilities, including a material adverse change in Executive’s
reporting relationships; (C) a material breach of this Agreement by the
Company; (D) the Company’s failure to issue to Executive, on or before July 15,
2010, (1) stock options pursuant to the forms of stock option agreements
attached hereto as Exhibits B, C and D and (2) shares
of restricted stock pursuant to the restricted stock award agreements attached
hereto as Exhibits E, F and G; or (E) requiring
Executive to change the principal location of Executive’s employment outside of
the Los Angeles, California metropolitan area.

 

“Separation
from Service” shall mean Executive’s “separation from service” with the
Company (as such term is defined in Treasury Regulation Section 1.409A-1(h) and
any successor provision thereto), including without limitation due to Executive’s
Termination of Employment.

 

 

“Termination
Date” means the date on which Executive’s Termination of Employment with
the Company occurs pursuant to Section 4.

 

“Termination
of Employment” shall mean Executive’s “termination of employment” with the
Company (within the meaning of Treasury Regulation Section 1.409A-1(h)(ii) and
any successor provision thereto) on the following dates:  (i) if Executive’s employment is
terminated by Executive’s death, the date of Executive’s death, and (ii) if
Executive’s employment is terminated for any other reason, the latest of the
date on which the Notice of Termination is given, the date any applicable cure
period expires, the date of termination specified in such notice (which shall
not be more than 30 days after the date of such notice) and, if no such notice
is given, 30 days after the date of termination of employment.

 

11.                               Insurance; Indemnification. The Company and each of its
subsidiaries shall, to the maximum extent provided under applicable law,
indemnify and hold Executive harmless from and against any expenses, including
reasonable attorney’s fees, judgments, fines, settlements and other amounts (“Losses”),
incurred in connection with any proceeding arising out of, or related to,
Executive’s employment by the Company. 
The Company shall, or shall cause a subsidiary thereof to, advance to
Executive any expenses, including attorney’s fees and costs of settlement,
incurred in defending any such proceeding to the maximum extent permitted by
applicable law.  Such costs and expenses
incurred by Executive in defense of any such proceeding shall be paid by the
Company or applicable subsidiary in advance of the final disposition of such
proceeding promptly upon receipt by the Company of (a) written request for
payment; (b) appropriate documentation evidencing the incurrence, amount
and nature of the costs and expenses for which payment is being sought; and (c) an
undertaking adequate under applicable law made by or on behalf of Executive to
repay the amounts so advanced if it shall ultimately be determined pursuant to
any non-appealable judgment or settlement that Executive is not entitled to be
indemnified by the Company or any subsidiary thereof. During the Employment Period and continuing until the later of (i) the
sixth anniversary of the Termination Date and (ii) the date on which all
claims against Executive that would otherwise be covered by such policy (or
policies) become fully time-barred, the Company shall maintain customary
directors’ and officers’ liability insurance for Executive, providing coverage
that is no less favorable to Executive in any material respect (including, but
not limited to, with respect to scope, exclusions, amounts and deductibles)
than the coverage then being provided to any other present or former officer or
director of the Company.

 

12.                               Notices.  All
notices and other communications required or permitted hereunder shall be in
writing and shall be deemed given when (a) delivered personally or by
overnight courier to the following address of the other parties hereto (or such
other address for such parties as shall be specified by notice given pursuant
to this Section) or (b) sent by facsimile to the following facsimile
number of the other parties hereto (or such other facsimile number for such
parties as shall be specified by notice given pursuant to this Section), with
the confirmatory copy delivered by overnight courier to the address of such
parties pursuant to this Section 12:

 

If
to the Company, to:

 

Image Entertainment, Inc.

20525 Nordhoff Street, Suite 200

Chatsworth, CA 91311

Attention:  Chairman of the Board
of Directors

Facsimile: 
(      )

 

If to Executive, to:

 

 

John
Avagliano

 

 

Facsimile:
(      )

 

With a copy to (which shall not constitute notice):

 

Morrison
Cohen LLP

909
Third Avenue

New
York, NY 10022

Attention:
Jack Levy, Esq.

Facsimile:
(212) 735-8708

 

13.                               Severability.  Whenever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision of this Agreement or the
validity, legality or enforceability of such provision in any other
jurisdiction, but this Agreement shall be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.

 

14.                               Entire Agreement; Inconsistencies.  This Agreement, the Proprietary Information Agreement and the Exhibits
hereto shall constitute the entire agreement and understanding between the
parties with respect to the subject matter hereof and thereof and supersede and
preempt any prior understandings, agreements or representations by or between
the parties, written or oral, which may have related in any manner to the
subject matter hereof or thereof.  In the
event of any inconsistency between any provision of this Agreement and any
provision of any employee handbook, personnel manual, program, policy, or
arrangement of the Company, or any provision of any agreement, plan, or
corporate governance document of any of them, the provisions of this Agreement
shall control unless Executive otherwise agrees in a signed writing that
expressly refers to the provision whose control Executive is waiving.  The Company agrees not to impose any
restrictions, enforceable by injunction, on Executive’s post-employment
activities, other than those expressly set forth in this Agreement and the
Proprietary Information Agreement.

 

15.                               Successors and Assigns.  This Agreement shall be enforceable by Executive and Executive’s heirs,
executors, administrators and legal representatives, and by the Company and its
successors and assigns.  Executive may
not assign this Agreement and any such assignment shall be null and void. The
rights of the Company under this Agreement shall, without the consent of
Executive, be assigned by the Company to any person, firm, corporation or other
business entity which at any time, whether by purchase, merger or otherwise,
directly or indirectly, acquires all or substantially all of the assets or
business of the Company.  The Company
will require any successor (whether direct or indirect, by purchase, merger or
otherwise) to all or substantially all of the business or assets of the Company
expressly to assume and to agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession had taken place; provided, however, that no such assumption
shall relieve the Company of its obligations hereunder.  As used in this Agreement, the “Company”
shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law or otherwise.

 

16.                               Governing Law; Venue.  This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of California without regard to
principles of

 

 

conflicts of laws. 
Any suit brought hereon shall be brought in the state or Federal courts
sitting in Los Angeles, California, the parties hereto hereby waiving any claim
or defense that such forum is not convenient or proper.  Each party hereby agrees that any such court
shall have in personal jurisdiction over it and consents to service of process
in any manner authorized by California law.

 

17.                               Arbitration.

 

(a)                                  Generally.  Except as otherwise provided in Section 8
hereof or as otherwise required by law, any dispute, claim, question or
controversy arising under or relating to this Agreement, Executive’s employment
with the Company or the termination thereof (each such dispute, claim, question
or controversy, a “Dispute”) shall be resolved by submitting such
Dispute to binding arbitration administered by JAMS pursuant to its Employment
Arbitration Rules and Procedures and subject to its Employment Arbitration
Minimum Standards of Procedural Fairness (collectively, the “Rules”),
and pursuant to the procedures set forth in this Section 17.  In the event of any conflict between the Rules and
the procedures set forth in this Section 17, the procedures set
forth in this Section 17 shall control.  Any such arbitration shall be brought within
any otherwise applicable statute of limitations period, and shall be the sole
and exclusive means for resolving such Dispute (other than for injunctive
relief pursuant to Section 8 or as otherwise required by law).

 

(b)                                 Procedures.  Any arbitration shall be held in Los Angeles,
California, and conducted before a single neutral arbitrator selected by mutual
agreement of the parties hereto within 30 days of the initiation of the
arbitration or, if they are unable to agree, by JAMS under its rules.  The arbitrator shall take submissions and
hear testimony, if necessary, and shall render a written decision as promptly
as practicable.  The arbitrator may grant
any legal or equitable remedy or relief that the arbitrator deems just and
equitable, to the same extent that remedies or relief could be granted by a state
or federal court in the United States. 
The decision of the arbitrator shall be final, binding and conclusive on
all parties and interested persons.  It
is the intention of the parties hereto that they shall be entitled to fair and
adequate discovery in accordance with the Federal Rules of Civil
Procedure.  The parties hereto shall keep
confidential the fact of the arbitration, the dispute being arbitrated, and the
decision of the arbitrator.

 

(c)                                  Enforcement; Costs.  Judgment upon the award rendered by the
arbitrator may be entered in any court having competent jurisdiction.  All fees and expenses of any arbitration,
including, but not limited to, reasonable attorneys’ fees and disbursements of
all parties, with respect to a Dispute under this Agreement shall be borne by
the Non-prevailing Party.  The
determination of whether a party is to be deemed the “Non-prevailing Party” in
any arbitration shall be solely within the province of the arbitrator.  Neither party shall be liable for punitive or
exemplary damages.

 

18.                               Amendment and Waiver.  The provisions of this Agreement may be amended or waived only by the
written agreement of the Company and Executive, and no course of conduct or
failure or delay in enforcing the provisions of this Agreement shall affect the
validity, binding effect or enforceability of this Agreement.  If the Company and Executive determine that
any payments or benefits payable under this Agreement intended to comply with
Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A
of the Code, the Company and Executive agree to amend this Agreement, or take
such other actions as the Company and Executive deem reasonably necessary or
appropriate, to comply with the requirements of Section 409A of the Code,
the Treasury Regulations thereunder (or any applicable correction relief) while
preserving the economic agreement of the parties.  If any provision of the Agreement would cause
such payments or benefits to fail to so comply, such provision shall not be
effective and shall be null and void with respect to such payments or benefits,
and such provision shall otherwise remain in full force and effect.

 

 

19.                               Legal Fees.  The Company shall reimburse Executive for all
reasonable attorneys’ fees incurred by Executive in reviewing and negotiating
this Agreement and Executive’s equity arrangements (whether or not
incentive-based), as well as for any attorneys’ fees incurred by Executive and
associated with the diligence and negotiations of the JH fund’s acquisition of
the Company on January 8, 2010, plus up to a maximum of $15,000 in the
aggregate for Ted Green, John Avagliano and John Hyde for any reasonable
related expenses.  Such reimbursement
shall be made within 30 days following presentation to the Company of
appropriate invoices or other documentation for the amount of such fees and
expenses.

 

20.                               Excise Taxes.

 

(a)                                  (i) In the event that any payment or benefit received or to be
received by Executive pursuant to the terms of this Agreement (the “Contract
Payments”) or in connection with Executive’s termination of employment or
contingent upon a change in control (as defined under Section 280G of the
Code) of the Company pursuant to any plan or arrangement or other agreement
with the Company (or any affiliate) (“Other Payments” and, together with
the Contract Payments, the “Payments”) would be subject to the excise
tax (the “Excise Tax”) imposed by Section 4999 of the Code, as
determined as provided below, the Company shall pay to Executive, at the time
specified in Section 20(b) below, an additional amount (the “Gross-Up
Payment”) such that the net amount retained by Executive, after deduction
of all amounts required to be paid upon the payment provided for by this Section 20(a),
and any interest, penalties or additions to tax payable by Executive with
respect thereto, shall be equal to the total present value of the Excise Taxes
imposed upon the Payments; provided, however, that if Executive’s Payment is,
when calculated on a net-after-tax basis, less than 110% of the amount of the
Payment which could be paid to Executive under Section 280G of the Code
without causing the imposition of the Excise Tax, then the Payment shall be
limited to the largest amount payable (as described above) without resulting in
the imposition of any Excise Tax (such amount, the “Capped Amount”).

 

(ii)                                  For purposes of determining the Capped Amount, whether any of the
Payments will be subject to the Excise Tax and the amounts of such Excise Tax, (A) the
total amount of the Payments shall be treated as “parachute payments” within
the meaning of Section 280G(b)(2) of the Code, and all “excess
parachute payments” within the meaning of Section 280G(b)(1) of the
Code shall be treated as subject to the Excise Tax, except to the extent that,
in the opinion of independent tax counsel selected by the Company’s independent
auditors and acceptable to Executive (“Tax Counsel”), a Payment (in
whole or in part) does not constitute a “parachute payment” within the meaning
of Section 280G(b)(2) of the Code, or such “excess parachute payments”
(in whole or in part) are not subject to the Excise Tax, (B) the amount of
the Payments that shall be treated as subject to the Excise Tax shall be equal
to the lesser of (1) the total amount of the Payments or (2) the
amount of “excess parachute payments” within the meaning of Section 280G(b)(1) of
the Code (after applying clause (A) hereof), and (C) the value of any
noncash benefits or any deferred payment or benefit shall be determined by Tax
Counsel in accordance with the principles of Sections 280G(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay federal income tax at the highest marginal
rates of federal income taxation applicable to individuals in the calendar year
in which the Gross-Up Payment is to be made and state and local income taxes at
the highest effective rates of taxation applicable to individuals as are in
effect in the state and locality of Executive’s residence in the calendar year
in which the Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes that can be obtained from deduction of such state and
local taxes, taking into account any limitations applicable to individuals
subject to federal income tax at the highest marginal rates.

 

(iii)                               If the Tax Counsel determines that any Excise Tax is payable by Executive
and that the criteria for reducing the Payments to the Capped Amount (as
described in Section

 

 

20(a)(i) above)
is met, then the Company shall reduce the Payments by the amount which, based
on the Tax Counsel’s determination and calculations, would provide Executive
with the Capped Amount, and pay to Executive such reduced Payments; provided
that the Company shall first reduce the severance payment under Section 4(c) and
shall next reduce the benefits provided under the Company’s incentive equity
plan pursuant to which Executive has been awarded equity. If the Tax Counsel
determines that an Excise Tax is payable, without reduction pursuant to Section 20(a)(i),
above, the Company shall pay the required Gross-Up Payment to, or for the
benefit of, in accordance with Section 20(b). If the Tax Counsel
determines that no Excise Tax is payable by Executive, it shall, at the same
time as it makes such determination, furnish Executive with an opinion that he
has substantial authority not to report any Excise Tax on his/her federal,
state, local income or other tax return. Any determination by the Tax Counsel
as to the amount of the Gross-Up Payment shall be binding upon the Company and
Executive absent a contrary determination by the Internal Revenue Service or a
court of competent jurisdiction; provided, however, that no such determination
shall eliminate or reduce the Company’s obligation to provide any Gross-Up Payment
that shall be due as a result of such contrary determination.

 

(b)                                 The Gross-Up Payments provided for in Section 20(a) hereof
shall be made upon the earlier of (i) the payment to Executive of any
Contract Payment or Other Payment or (ii) the imposition upon Executive or
payment by Executive of any Excise Tax.

 

(c)                                  Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after Executive is informed in
writing of such claim and shall apprise the Company of the nature of such claim
and the date on which such claim is requested to be paid. Executive shall not
pay such claim prior to the expiration of the 30 day period following the date
on which Executive gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is
due). If the Company notifies Executive in writing prior to the expiration of
such period that it desires to contest such claim, Executive shall:

 

(i)                                     give the Company any information reasonably requested by the Company
relating to such claim;

 

(ii)                                  take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company and reasonably satisfactory to
Executive;

 

(iii)                               cooperate with the Company in good faith in order to effectively contest
such claim; and

 

(iv)                              permit the Company to participate in any proceedings relating to such
claim;

 

provided, however, that the Company shall bear and pay
directly all costs and expenses (including, but not limited to, additional
interest and penalties and related legal, consulting or other similar fees)
incurred in connection with such contest and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or other tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses.

 

(d)                                 The Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and

 

 

conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of such
payment to Executive on an interest-free basis, and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or other tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and provided, further, that if Executive is required to extend the
statute of limitations to enable the Company to contest such claim, Executive
may limit this extension solely to such contested amount. The Company’s control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority. In addition, no position may be taken
nor any final resolution be agreed to by the Company without Executive’s
consent if such position or resolution could reasonably be expected to
adversely affect Executive (including any other tax position of Executive
unrelated to the matters covered hereby).

 

(e)                                  As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Company or the Tax
Counsel hereunder, it is possible that Gross-Up Payments which will not have
been made by the Company should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies and Executive thereafter is required to
pay to the Internal Revenue Service an additional amount in respect of any
Excise Tax, the Company or the Tax Counsel shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall promptly be paid
by the Company to or for the benefit of Executive.

 

(f)                                    If, after the receipt by Executive of the Gross-Up Payment or an amount
advanced by the Company in connection with the contest of an Excise Tax claim,
Executive becomes entitled to receive any refund with respect to such claim,
Executive shall promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by Executive of an amount advanced by the Company in
connection with an Excise Tax claim, a determination is made that Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify Executive in writing of its intent to contest the denial of
such refund prior to the expiration of 30 days after such determination, such
advance shall be forgiven and shall not be required to be repaid.

 

(g)                                 Notwithstanding the foregoing provisions of this Section 20:

 

(i)                                     In no event shall the Company’s liability for Gross-Up Payments to
Executive under this Section 20 exceed the amount of the “tax
gross-up payment” on any Payment permitted under Treasury Regulation Section 1.409A-3(i)(1)(v);
and

 

(ii)                                  In no event
shall the Company’s liability for any Gross-Up Payments to Executive under this
Section 20, taken together with any gross-up payments payable to
Ted Green pursuant to his Employment Agreement (the “Green Employment
Agreement”) with the Company of even date herewith and any gross-up
payments payable to Producers Sales Organization pursuant to the Consulting
Agreement (the “Consulting Agreement”) with the Company and John Hyde of
even date herewith (the “Aggregate Gross-Up Payments”), exceed
$1,000,000 (the “Maximum Amount”) in the aggregate.  In the event that the Aggregate Gross-Up
Payments would exceed $1,000,000, Executive’s Gross-Up Payment under this Section 20
shall not exceed an amount equal to (A) the Maximum Amount,

 

 

multiplied
by (B) a fraction, the numerator of which is equal to the Gross-Up Payment
that would be payable to Executive pursuant to this Section 20
(without regard to the application of this Section 20(g)(ii)), and
the denominator of which is the aggregate Gross-Up Payments that would be
payable to Executive pursuant to this Section 20 and Ted Green
pursuant to the Green Employment Agreement and Producers Sales Organization
pursuant to the Consulting Agreement (without regard to the application of this
Section 20(g)(ii) or any comparable provision in such other
agreements).

 

(h)                                 The Gross-Up Payment shall be paid in accordance with Treasury Regulation
Section 1.409A-3(i)(1)(v).  Interest
and penalties with respect to any Gross-Up Payment or that are otherwise
incurred by the Company on Executive’s behalf or required to be paid by the
Company under this Section 20 shall be paid to Executive or on
Executive’s behalf only to the extent permitted under Treasury Regulation Section 1.409A-3(i)(1)(v).  Notwithstanding the other provisions of this Section 20,
all Gross-Up Payments shall be made to the Executive not later than the end of
the calendar year following the year in which the Executive remits the related
taxes, in accordance with Treasury Regulation Section 1.409A-3(i)(1)(v).  Any costs and expenses (including any Excise
Tax, income or other taxes or interest and penalties) incurred by the Company
on Executive’s behalf or required to be paid by the Company under this Section 20
due to any tax contest, audit or litigation shall be paid by the Company by the
end of Executive’s taxable year following Executive’s taxable year in which the
taxes that are the subject of the tax contest, audit or litigation are remitted
to the taxing authority, or where, as a result of such tax contest, audit or
litigation, no taxes are remitted, the end of Executive’s taxable year
following Executive’s taxable year in which the audit is completed or there is
a final and nonappealable settlement or other resolution of the contest or
litigation, in accordance with Treasury Regulation Section 1.409A-3(i)(1)(v).

 

21.                               Counterparts.  This Agreement may be executed in two counterparts, each of which shall
be deemed to be an original and both of which together shall constitute one and
the same instrument.  The parties hereto
agree to accept a signed facsimile copy or portable document format of this
Agreement as a fully binding original.

 

[SIGNATURE PAGE FOLLOWS]

 

 

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

 

	
   

  	
  IMAGE
  ENTERTAINMENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/
  THEODORE GREEN

  
	
   

  	
  Name:
  

  	
  Theodore
  Green

  
	
   

  	
  Title:
  

  	
  Chairman/CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  JOHN AVAGLIANO

  
	
   

  	
  John Avagliano

  

 

 

EXHIBIT A

 

Form of Mutual Release

 

 

EXHIBIT A

 

GENERAL
RELEASE OF CLAIMS

 

This General Release of Claims (“Release”)
is entered into as of this
           day of
                ,
        , between [NAME OF EXECUTIVE] (“Executive”),
and Image Entertainment, Inc., a Delaware corporation (the “Company”)
(collectively referred to herein as the “Parties”).

 

WHEREAS, Executive and the Company
are parties to that certain Employment Agreement dated as of [DATE OF
AGREEMENT] (the “Employment Agreement”);

 

WHEREAS, the Parties agree that
Executive is entitled to certain severance benefits under the Employment
Agreement, subject to Executive’s execution of this Release; and

 

WHEREAS, the Company and Executive
now wish to fully and finally to resolve all matters between them.

 

NOW, THEREFORE, in consideration
of, and subject to, the severance benefits payable to Executive pursuant to the
Employment Agreement, the adequacy of which is hereby acknowledged by
Executive, and which Executive acknowledges that he would not otherwise be
entitled to receive, Executive and the Company hereby agree as follows:

 

1.                                       General Release of Claims by Executive.  Executive, on behalf of himself and his
heirs, executors, administrators, successors, agents, and assigns, hereby fully
and without limitation releases and forever discharges the Company, and (as the
case may be) its present and former shareholders, parents, owners, members,
partners, subsidiaries, divisions, affiliates, officers, directors, agents,
employees, consultants, contractors, customers, clients, insurers,
representatives, lawyers, predecessors, successors and assigns, employee
welfare benefit plans and pension or deferred compensation plans under Section 401
of the Internal Revenue Code of 1986, as amended, and their trustees, administrators
and other fiduciaries, and all persons acting by, through, under or in concert
with them, or any of them (“Releasees”), both individually and
collectively, from any and all rights, claims, demands, liabilities, actions,
causes of action, damages, losses, costs, expenses and compensation, of
whatever nature whatsoever, known or unknown, fixed or contingent (“Claims”),
arising directly or indirectly out of, relating to, or in any other way
involving in any manner whatsoever the Executive’s employment by the Company or
the separation thereof, and any and all claims arising under federal, state, or
local laws relating to employment, including without limitation claims of
wrongful discharge, breach of express or implied contract, fraud, misrepresentation,
defamation, or liability in tort, claims of any kind that may be brought in any
court or administrative agency, any claims arising under Title VII of the Civil
Rights Act of 1964, as amended; the Equal Pay Act, as amended; the Age
Discrimination in Employment Act, as amended; the Family and Medical Leave Act
of 1993; the California Fair Employment and Housing Act of 1993, as amended;
the California Labor Code (including but not limited to Sections 970 and 6310);
the Fair Labor Standards Act, as amended; Section 17200 of the Business
and Professions Code; the federal and state wage and hour laws; the Americans
With Disabilities Act, as amended; the Immigration Reform and Control Act of
1986; the Employee Retirement Income Security Act of 1974, as amended; the
Uniformed Services Employment and Reemployment Rights Act; the Rehabilitation
Act of 1973, as amended; the 

 

 

California
Family Rights Act; the Worker Adjustment and Retraining Notification Act; the
California common law of fraud, misrepresentation, negligence, defamation,
infliction of emotional distress, breach of contract, or wrongful termination;
and/or any other local, state or federal law, rule, or regulation governing
employment, discrimination in employment, workplace safety, or the payment of
wages and benefits.  Executive represents
that there are no lawsuits pending by Executive against Releasees and/or
promises to dismiss any and all lawsuits that Executive might have filed
against Releasees.  Executive promises
never to file a lawsuit asserting any Claims that are released in this
Release.  Executive agrees that if he
hereafter commences, joins in, or in any manner seeks relief through any suit
arising out of, based upon, or relating to any of the Claims released hereunder
or in any manner asserts against the Releasees, or any of them, any of the
Claims released hereunder, Executive shall pay to the Releasees, and each of
them, in addition to any other damages caused to the Releasees thereby, all
attorneys’ fees incurred by the Releasees in defending or otherwise responding
to said suit or claim.

 

Notwithstanding the generality of
the foregoing, Executive does not release the following claims:

 

(i)                                     Claims for unemployment compensation or any state
disability insurance benefits pursuant to the terms of applicable state law;

 

(ii)                                  Claims for workers’ compensation insurance benefits under
the terms of any worker’s compensation insurance policy or fund of the Company;

 

(iii)                               Claims pursuant to the terms and conditions of the federal
law known as COBRA;

 

(iv)                              Claims for indemnity under the Employment Agreement or
bylaws of the Company, as provided for by Delaware law or under any applicable
insurance policy with respect to Executive’s liability as an employee, director
or officer of the Company;

 

(v)                                 Claims based on any right Executive may have to enforce the
Company’s executory obligations under the Employment Agreement;

 

(vi)                              Claims based on Executive’s stock awards described in Section 3;
and

 

(vii)                           Claims based on Executive’s purchased equity.

 

2.                                       Waiver of Unknown Claims by Executive.  Executive is aware of
California Civil Code Section 1542, which provides as follows:

 

A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR.

 

 

With
full awareness and understanding of the above provisions, Executive hereby
waives any rights he may have under Section 1542, as well as under any
other statutes or common law principles of similar effect.  Executive intends to, and hereby does, release
Releasees from Claims which he does not presently know or suspect to exist at
this time.

 

3.                                       Stock Awards.  Executive currently holds the stock options
and/or restricted shares of the Company’s common stock granted under the
Company’s 2010 Equity Incentive Plan (the “Plan”) and listed on Exhibit A
hereto and no others.  Executive’s and
the Company’s rights with respect to such awards shall be as set forth in the
Plan and the award agreements pursuant to which such stock options and
restricted shares of the Company’s common stock were granted.

 

4.                                       Release of Claims by the Company.  The Company voluntarily releases and
discharges the Executive and his heirs, successors, administrators,
representatives and assigns from all Claims which it may have against the
Executive as the result of his employment or the discontinuance of his
employment and that are based upon facts known, or which in the exercise of
reasonable diligence should have been known, to the Company’s Board of
Directors.  Notwithstanding the foregoing,
nothing herein shall release or discharge any Claim by the Company against the
Executive, or the right of the Company to bring any action, legal or otherwise,
against the Executive as a result of any failure by him to perform his
obligations under this Agreement, or as a result of any acts of willful
misconduct or gross negligence.  The
Company represents that it are not aware after reasonable due inquiry of any
facts or circumstances that would give rise to or form the basis of any claim
against Executive based on willful misconduct or gross negligence.

 

5.                                       Confidentiality of Agreement.  Except as may be required by law or court
order, neither Executive, his attorney, nor any person acting by, through,
under or in concert with them shall disclose the terms of this Release to any
individual or entity other than their immediate family and accountants or tax
preparers as may be necessary. In the event that a disclosure authorized by
this Release is made, Executive shall inform the person to whom information is
disclosed of the confidential nature of this Release and that, upon being
informed of the terms of this Release, the person shall be equally bound by the
provisions of this paragraph.

 

6.                                       Advice of Counsel.  Executive has had the advice of independent
legal counsel of his own choosing in negotiations for and the preparation of
this Release.  Executive has carefully
read the provisions of this Release and is fully apprised of and understands
the provisions of this Release and their legal effect and consequences.  Executive has executed this Release after
careful and independent investigation, and affirmatively warrants that he is
not executing this Release under fraud, duress or undue influence.

 

7.                                       Integration.  This Release, the Employment
Agreement, the Proprietary Information Agreement, the Plan, [the Stock Option
Agreement(s)] and [the Restricted Stock Agreement(s)] [insert names of
purchased equity documents] set forth the final, sole, and entire agreement
between Executive and the Company and supersede any and all prior agreements,
negotiations, discussions or understandings between Executive and the Company
concerning the 

 

 

subject
matter of this Release.  This Release may
not be altered, amended, or modified, except by a further writing signed by
Executive and a member of the Board of Directors of the Company.

 

8.                                       Voluntary.  Executive
acknowledges and agrees that he has read this Release carefully, understands
all of its terms, and agrees to those terms voluntarily.

 

9.                                       Miscellaneous Provisions.

 

(a)                                  The provisions
of this Release are severable.  If any
provision is held to be invalid or unenforceable, it shall not affect the
validity or enforceability of any other provision.

 

(b)                                 This Release
shall be construed as a whole in accordance with its fair meaning and in
accordance with the laws of the State of California.  The language in this Release shall not be
construed for or against any particular party.

 

(c)                                  This Release
may be executed in ink or by facsimile and in one or more counterparts, each of
which shall be an original but all of which shall constitute one and the same
instrument.

 

(d)                                 This Release
shall apply to, bind, and inure to the benefit of the Parties and their
respective successors and assigns.

 

 

IN
WITNESS WHEREOF, the Parties hereto have executed this Release on the dates
indicated below.

 

	
  EXECUTIVE

  	
   

  	
  IMAGE
  ENTERTAINMENT, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  [Name of Executive]

  	
   

  	
  Its:

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  Dated:

  	
   

  
					

 

 

EXHIBIT B

 

Class A Stock Option Agreement

 

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

STOCK OPTION GRANT NOTICE AND

STOCK OPTION AGREEMENT

 

Image
Entertainment, Inc., a Delaware corporation (the “Company”), pursuant
to its 2010 Equity Incentive Award Plan (the “Plan”), hereby
grants to the holder listed below (“Participant”), an
option to purchase the number of shares of the Company’s common stock (“Stock”), set forth below (the “Option”). This Option is subject to all of the
terms and conditions set forth herein and in the Stock Option Agreement
attached hereto as Exhibit A (the “Stock
Option Agreement”) and the Plan, which are incorporated
herein by reference. Unless otherwise defined herein, the terms defined in the
Plan shall have the same defined meanings in this Stock Option and the Stock
Option Agreement.

 

	
  Participant:

  	
   

  	
  John Avagliano

  
	
   

  	
   

  	
   

  
	
  Grant
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise
  Price per Share of Stock:

  	
   

  	
  $

  	
  (1)

  	
   

  
	
   

  	
   

  	
   

  
	
  Total
  Exercise Price:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Total
  Number of Shares of Stock Subject to the Option:

  	
   

  	
                                                                                         shares, which represents
        % of the Company’s fully diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010. The
  number of Shares subject to this Stock Option represents 1.771% of the fully diluted common stock of
  the Company (excluding the Company’s
  outstanding and underwater stock options) as of January 8, 2010  minus
  the number of shares of Class A Restricted Stock granted to such
  Participant. The number of shares of Stock shall be subject to adjustment for
  stock splits, stock dividends and other events or transactions described in
  Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Expiration
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Type
  of Option:

  	
  o   Incentive
  Stock Option        o   Non-Qualified
  Stock Option

  
					

 

(1)
Not to be less than $0.20 per share.

 

 

	
  Vesting
  Schedule:

  	
  The
  Option shall vest pursuant to the provisions of Exhibit C
  attached hereto.

  

 

By
his or her signature, the Participant agrees to be bound by the terms and
conditions of the Plan, the Stock Option Agreement and this Grant Notice.  The Participant has reviewed the Stock Option
Agreement, the Plan and this Grant Notice in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Grant
Notice and fully understands all provisions of this Grant Notice, the Stock
Option Agreement and the Plan. 
Participant hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions arising
under the Plan or relating to the Option.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
  20525
  Nordhoff Street, Ste 200

  	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
  Chatsworth,
  CA 91311

  	
   

  	
   

  	
   

  	
   

  
							

 

 

EXHIBIT A

 

TO STOCK OPTION GRANT NOTICE

 

STOCK OPTION AGREEMENT

 

Pursuant
to the Stock Option Grant Notice (the “Grant Notice”) to which
this Stock Option Agreement (this “Agreement”) is attached, Image
Entertainment, Inc., a Delaware corporation (the “Company”), has
granted to the Participant an Option under the Company’s 2010 Equity Incentive
Award Plan (the “Plan”) to purchase the number of shares of
Stock indicated in the Grant Notice.

 

GENERAL

 

Defined
Terms. 
Capitalized terms not specifically defined herein shall have the
meanings specified in the Plan and the Grant Notice.

 

Incorporation
of Terms of Plan.  The Option is subject to the terms and
conditions of the Plan which are incorporated herein by reference.  In the event of any inconsistency between the
Plan and this Agreement, the terms of the Plan shall control.  Notwithstanding anything to the contrary
contained in the Plan, the Grant Notice or this Agreement, (a) Sections
5.3, 10.6, 11.2 and 11.3 of the Plan shall not apply at any time to the Shares
and (b) the Administrator shall exercise its discretion only reasonably in
good faith.

 

GRANT
OF OPTION

 

Grant
of Option.  In consideration of the Participant’s past
and/or continued employment with or service to the Company or a Parent or
Subsidiary and for other good and valuable consideration, effective as of the
Grant Date set forth in the Grant Notice (the “Grant
Date”), the Company irrevocably grants to the Participant the Option
to purchase any part or all of an aggregate of the number of shares of Stock
set forth in the Grant Notice, upon the terms and conditions set forth in the
Plan, the Grant Notice and this Agreement. 
Unless designated as a Non-Qualified Stock Option in the Grant Notice,
the Option shall be an Incentive Stock Option to the maximum extent permitted
by law.

 

Exercise
Price.  The
exercise price of the shares of Stock subject to the Option shall be as set
forth in the Grant Notice, without commission or other charge; provided, however,
that the price per share of the shares of Stock subject to the Option shall not
be less than 100% of the Fair Market Value of a share of Stock on the Grant
Date.  Notwithstanding the foregoing, if
this Option is designated as an Incentive Stock Option and the Participant owns
(within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company or any “subsidiary
corporation” of the Company or any “parent corporation” of the Company (each
within the meaning of Section 424 of the Code), the price per share of the
shares of Stock subject to the Option shall not be less than 110% of the Fair
Market Value of a share of Stock on the Grant Date.

 

A-1

 

No
Right to Continued Employment.  Nothing in the Plan, the Grant Notice, or
this Agreement shall confer upon the Participant any right to continue in the
employ or service of the Company or any Parent or Subsidiary or shall interfere
with or restrict in any way the rights of the Company and any Parent or
Subsidiary, which rights are hereby expressly reserved, to discharge or
terminate the services of the Participant at any time for any reason
whatsoever, except to the extent expressly provided otherwise in a written
agreement between the Company or a Parent or Subsidiary and the Participant.

 

PERIOD
OF EXERCISABILITY

 

Commencement
of Exercisability.

 

Subject
to Sections 3.2, 3.3 and 5.6, the Option shall become vested and exercisable in
such amounts and at such times as are set forth in the Grant Notice.

 

No
portion of the Option which has not become vested and exercisable at the date
of the Participant’s Termination of Service shall thereafter become vested and
exercisable, except as may be otherwise provided in the Grant Notice or
provided by the Administrator or as set forth in a written agreement between
the Company and the Participant.

 

Duration
of Exercisability.  The installments provided for in the vesting
schedule set forth in the Grant Notice are cumulative.  Each such installment which becomes vested
and exercisable pursuant to the vesting schedule set forth in the Grant Notice
shall remain vested and exercisable until it becomes unexercisable under Section 3.3.

 

Expiration
of Option.  Subject to the provisions of Exhibit C
to the Grant Notice, the Option may not be exercised to any extent by anyone
after the first to occur of the following events:

 

The
expiration of ten years from the Grant Date;

 

If
this Option is designated as an Incentive Stock Option and the Participant
owned (within the meaning of Section 424(d) of the Code), at the time
the Option was granted, more than 10% of the total combined voting power of all
classes of stock of the Company or any “subsidiary corporation” of the Company
or any “parent corporation” of the Company (each within the meaning of Section 424
of the Code), the expiration of five years from the Grant Date;

 

The
expiration of three months from the date of the Participant’s Termination of
Service, unless such termination occurs by reason of the Participant’s death,
Disability or for Cause (as defined in Exhibit C to the Grant
Notice); provided, however,
that if, during any part of such three month period, Participant’s Option is
not exercisable solely because of the condition set forth in Section 4.5(b),
Participant’s Option shall not expire until the earlier of the Expiration Date
or until it shall have been exercisable for an aggregate period of thirty days
after Participant’s Termination of Service;

 

A-2

 

The
expiration of one year from the date of the Participant’s death if Participant
dies prior to his or her Termination of Service or within three months after
his or her Termination of Service;

 

The
expiration of one year from the date of the Participant’s Termination of
Service by reason of the Participant’s Disability; or

 

The
date of Participant’s Termination of Service by the Company for Cause.

 

If
the Participant’s option is an Incentive Stock Option, note that, to obtain the
federal income tax advantages associated with an “incentive stock option,” the
Code requires that at all times beginning on the date of grant of the
Participant’s Option and ending on the day three months before the date of
Participant’s Option’s exercise, Participant must be an Employee of the Company
or an affiliate, except in the event of Participant’s death or Disability.  The Company has provided for extended
exercisability of Participant’s Option under certain circumstances for
Participant’s benefit but cannot guarantee that Participant’s Option will
necessarily be treated as an “incentive stock option” if Participant continues
to be employed by or provide services to the Company or an affiliate as a
Consultant or Director after Participant’s employment terminates or if
Participant otherwise exercises its options more than three months after the
date Participant’s employment terminates.

 

In
addition and for the avoidance of doubt, upon Termination of Service, the
Participant’s vested Option shall be subject to the call right specified in Section 4
of the Stockholders Agreement (defined below).

 

Special
Tax Consequences.  The Participant acknowledges that, to the
extent that the aggregate Fair Market Value (determined as of the time the
Option is granted) of all shares of Stock with respect to which Incentive Stock
Options, including the Option, are exercisable for the first time by the
Participant in any calendar year exceeds $100,000, the Option and such other
options shall be Non-Qualified Stock Options to the extent necessary to comply
with the limitations imposed by Section 422(d) of the Code.  The Participant further acknowledges that the
rule set forth in the preceding sentence shall be applied by taking the
Option and other “incentive stock options” into account in the order in which
they were granted, as determined under Section 422(d) of the Code and
the Treasury Regulations thereunder.

 

EXERCISE
OF OPTION

 

Person
Eligible to Exercise.  Except as provided in Section 5.1,
during the lifetime of the Participant, only the Participant may exercise the
Option or any portion thereof, unless it has been disposed of pursuant to a
DRO.  After the death of the Participant,
any exercisable portion of the Option may, prior to the time when the Option
becomes unexercisable under Section 3.3, be exercised by the Participant’s
personal representative or by any person empowered to do so under the deceased
Participant’s will or under the then applicable laws of descent and
distribution.

 

A-3

 

Partial
Exercise.  Any exercisable portion of the Option or the
entire Option, if then wholly exercisable, may be exercised in whole or in part
at any time prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.3.

 

Manner
of Exercise.  The Option, or any exercisable portion
thereof, may be exercised solely by delivery to the Secretary of the Company
(or any third party administrator or other person or entity designated by the
Company) of all of the following prior to the time when the Option or such
portion thereof becomes unexercisable under Section 3.3:

 

An
Exercise Notice in writing signed by the Participant or any other person then
entitled to exercise the Option or portion thereof, stating that the Option or
portion thereof is thereby exercised, such notice complying with all applicable
rules established by the Administrator. 
Such notice shall be substantially in the form attached as Exhibit B
to the Grant Notice (or such other form as is prescribed by the Administrator);

 

The
receipt by the Company of full payment for the shares of Stock with respect to
which the Option or portion thereof is exercised, including payment of any
applicable withholding tax, which may be in one or more of the forms of
consideration permitted under Section 4.4;

 

Any
other written representations as may be required in the Administrator’s
reasonable discretion to evidence compliance with the Securities Act or any
other applicable law, rule, or regulation; and

 

In the
event the Option or portion thereof shall be exercised pursuant to Section 4.1
by any person or persons other than the Participant, appropriate proof of the
right of such person or persons to exercise the Option.

 

Notwithstanding
any of the foregoing, the Company shall have the right to specify all
conditions of the manner of exercise, which conditions may vary by country and
which may be subject to change from time to time.

 

Method
of Payment.  Payment of the exercise price and any
applicable withholding tax shall be by any of the following, or a combination
thereof, at the election of the Participant, subject to Section 10.1 of
the Plan:

 

Cash;

 

Check;

 

Delivery
of a notice that the Participant has placed a market sell order with a broker
with respect to shares of Stock then issuable upon exercise of the Option, and
that the broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the aggregate exercise
price; provided, that payment of such proceeds
is then made to the Company upon settlement of such sale;

 

A-4

 

With
the consent of the Administrator, by delivery of a full recourse promissory
note on such terms and conditions as may be approved by the Administrator;

 

With
the consent of the Administrator, surrender of other shares of Stock which (A) in
the case of shares of Stock acquired from the Company, have been owned by the
Participant for more than six (6) months on the date of surrender (or such
longer or shorter period as may be determined by the Administrator), and (B) have
a Fair Market Value on the date of surrender equal to the aggregate exercise
price of the shares of Stock with respect to which the Option or portion
thereof is being exercised;

 

With
the consent of the Administrator, surrendered shares of Stock issuable upon the
exercise of the Option having a Fair Market Value on the date of exercise equal
to the aggregate exercise price of the shares of Stock with respect to which
the Option or portion thereof is being exercised; or

 

With
the consent of the Administrator, property of any kind which constitutes good
and valuable consideration.

 

(h)                                 Notwithstanding
any other provision of the Plan or this Agreement, if Participant is a Director
or “executive officer” of the Company within the meaning of Section 13(k) of
the Exchange Act, he or she shall not be permitted to make payment pursuant to
this Section 4.4, or continue any extension of credit with respect to such
payment with a loan from the Company or a loan arranged by the Company, in
violation of Section 13(k) of the Exchange Act.

 

Conditions
to Issuance of Stock Certificates.  The shares of Stock deliverable upon the
exercise of the Option, or any portion thereof, may be either previously
authorized but unissued shares of Stock or issued shares of Stock which have
then been reacquired by the Company. 
Such shares of Stock shall be fully paid and nonassessable.  The Company shall not be required to issue or
deliver any shares of Stock purchased
upon the exercise of the Option or portion thereof prior to fulfillment of all
of the following conditions which, with the exception of Section 4.5(d),
the Company agrees to use to best efforts to promptly complete:

 

The
admission of such shares of Stock to listing on all stock exchanges on which
such Stock is then listed;

 

The
completion of any registration or other qualification of such shares of Stock
under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory
body, which the Administrator shall, in its reasonable discretion, deem
necessary or advisable;

 

The
obtaining of any approval or other clearance from any state or federal
governmental agency which the Administrator shall, in its reasonable
discretion, determine to be necessary or advisable; and

 

The
receipt by the Company of full payment for such shares of Stock, including
payment of any applicable withholding tax, which may be in one or more of the
forms of consideration permitted under Section 4.4, subject to Section 10.1
of the Plan.

 

A-5

 

Rights
as Stockholder.  The holder of the Option shall not be, nor
have any of the rights or privileges of, a stockholder of the Company in
respect of any shares of Stock purchasable upon the exercise of any part of the
Option unless and until such shares of Stock shall have been issued by the
Company to such holder (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) and, once
issued, such shares of Stock shall be freely tradeable and non-forfeitable,
except to the extent set forth in the Stockholders Agreement, dated as of April 12,
2010, of the Company (the “Stockholders Agreement”), and in Exhibit D
to the Grant Notice.   No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the shares of Stock are issued, except as provided in Article 11 of
the Plan.

 

OTHER
PROVISIONS

 

Option
Generally Not Transferable.

 

Subject
to Section 5.1(c), the Option may not be sold, pledged, assigned or
transferred in any manner other than by will or the laws of descent and
distribution or, subject to the consent of the Administrator, pursuant to a
DRO, unless and until the shares of Stock underlying the Option have been
issued, and all restrictions applicable to such shares of Stock have
lapsed.  Neither the Option nor any
interest or right therein shall be liable for the debts, contracts or
engagements of Participant or his or her successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect, except to the extent that such
disposition is permitted by the preceding sentence.

 

Unless
transferred to a Permitted Transferee in accordance with Section 5.1(c),
during the lifetime of Participant, only Participant may exercise the Option or
any portion thereof, unless it has been disposed of pursuant to a DRO.  After the death of Participant, any
exercisable portion of the Option may, prior to the time when the Option
becomes unexercisable under Section 3.3, be exercised by Participant’s
personal representative or by any person empowered to do so under the deceased
Participant’s will or under the then applicable laws of descent and
distribution.

 

(c)                                  Notwithstanding
any other provision in this Agreement, with the consent of the Administrator
and to the extent the Option is designated as a Non-Qualified Stock Option, the
Option may be transferred to, exercised by and paid to one or more Permitted
Transferees, subject to the terms and conditions set forth in Section 10.3
of the Plan.  Subject to such conditions
and procedures as the Administrator may require, a Permitted Transferee may
exercise the Option or any portion thereof during the Participant’s lifetime.

 

(d)                                 The Shares
issuable upon exercise of the Option shall also be subject to the transfer
restrictions set forth in Exhibit D to the Grant Notice.

 

A-6

 

Adjustments.  The Participant acknowledges
that the Option is subject to modification and termination in certain events as
provided in this Agreement and Article 11 of the Plan.

 

Notices.  Any notice to be given under the
terms of this Agreement to the Company shall be addressed to the Company in
care of the Secretary of the Company at the address given beneath the signature
of the Company’s authorized officer on the Grant Notice, and any notice to be
given to Participant shall be addressed to Participant at the address given
beneath Participant’s signature on the Grant Notice.  By a notice given pursuant to this Section 5.3,
either party may hereafter designate a different address for notices to be
given to that party.  Any notice which is
required to be given to Participant shall, if Participant is then deceased, be
given to the person entitled to exercise his or her Option pursuant to Section 4.1
by written notice under this Section 5.3. 
Any notice shall be deemed duly given when sent via email or when sent
by certified mail (return receipt requested) and deposited (with postage
prepaid) in a post office or branch post office regularly maintained by the
United States Postal Service.

 

Titles.  Titles are provided herein for
convenience only and are not to serve as a basis for interpretation or
construction of this Agreement.

 

Governing
Law; Severability.  The laws of the State of Delaware shall
govern the interpretation, validity, administration, enforcement and
performance of the terms of this Agreement regardless of the law that might be
applied under principles of conflicts of laws.

 

Conformity
to Securities Laws.  The Participant acknowledges that the Plan,
the Grant Notice and this Agreement are intended to conform to the extent
necessary with all provisions of the Securities Act and the Exchange Act and
any and all regulations and rules promulgated by the Securities and
Exchange Commission thereunder, and state securities laws and regulations.  Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Option is granted and may be
exercised, only in such a manner as to conform to such laws, rules and
regulations.  To the extent permitted by
applicable law, the Plan, the Grant Notice and this Agreement shall be deemed
amended to the extent necessary to conform to such laws, rules and
regulations.

 

Entire
Agreement; Amendments.  The Plan and this Agreement (including all
Exhibits hereto) constitute the entire agreement of the parties and supersede
in their entirety all prior undertakings and agreements of the Company and
Participant with respect to the subject matter hereof.  This Agreement may not be modified, amended
or terminated except by an instrument in writing, signed by Participant or such
other person as may be permitted to exercise the Option pursuant to Section 4.1
and by a duly authorized representative of the Company.

 

Successors
and Assigns.  The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer
herein set forth in Section 5.1, this Agreement shall be binding upon
Participant and his or her heirs, executors, administrators, successors and
assigns.

 

Notification
of Disposition.  If this Option is designated as an Incentive
Stock Option, Participant shall give prompt notice to the Company of any
disposition or other transfer of any 

 

A-7

 

shares of Stock acquired under
this Agreement if such disposition or transfer is made (a) within two
years from the Grant Date with respect to such shares of Stock or (b) within
one year after the transfer of such shares of Stock to the Participant.  Such notice shall specify the date of such
disposition or other transfer and the amount realized, in cash, other property,
assumption of indebtedness or other consideration, by Participant in such
disposition or other transfer.

 

Limitations
Applicable to Section 16 Persons.  Notwithstanding any other provision of the
Plan or this Agreement, if Participant is subject to Section 16 of the
Exchange Act, the Plan, the Option and this Agreement shall be subject to any
additional limitations set forth in any applicable exemptive rule under Section 16
of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange
Act) that are requirements for the application of such exemptive rule.  To the extent permitted by applicable law,
this Agreement shall be deemed amended to the extent necessary to conform to such
applicable exemptive rule.

 

Not a
Contract of Employment.  Nothing in this Agreement, the Grant Notice,
or the Plan shall confer upon the Participant any right to continue to serve as
an employee or other service provider of the Company or any Parent or
Subsidiary.

 

5.12                           Stockholder
Approval.  The Plan
will be submitted for approval by the Company’s stockholders within twelve
months before or after the date the Plan was initially adopted by the
Board.  The Option may not be exercised
to any extent by anyone prior to the time when the Plan is approved by the
stockholders, and if such approval has not been obtained within twelve months
after the date the Plan was initially adopted by the Board, the Option shall
thereupon be canceled and become null and void.

 

A-8

 

EXHIBIT B

 

TO STOCK
OPTION GRANT NOTICE

 

FORM OF
EXERCISE NOTICE

 

Effective
as of today,
                             ,
                  
the undersigned (“Participant”)
hereby elects to exercise Participant’s option to purchase
                             
shares of the Stock (the “Shares”)  of Image Entertainment, Inc.
(the “Company”)  under
and pursuant to the Image Entertainment, Inc. 2010 Equity Incentive Award
Plan (the “Plan”) and the Stock Option
Grant Notice and Stock Option Agreement dated
                             ,
         (the “Option
Agreement”).  Capitalized
terms used herein without definition shall have the meanings given in the
Option Agreement.

 

	
  Grant Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of Shares of Stock as to which Option is Exercised:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share of Stock:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Certificate to be issued in name of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cash Payment delivered herewith:

  	
   

  	
  $                            
  (Representing the full Exercise Price for the Shares, as well as any
  applicable withholding tax)

  
					

 

	
  Type
  of Option:

  	
  o   Incentive Stock Option      o   Non-Qualified Stock Option

  

 

1.                                       Representations
of Participant.  Participant
acknowledges that Participant has received, read and understood the Plan and
the Option Agreement. Participant agrees to abide by and be bound by their
terms and conditions

 

2.                                       Rights as
Stockholder.  Until the
Shares are issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a stockholder shall exist with
respect to Shares subject to the Option, notwithstanding the exercise of the
Option.  No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Article 11 of the Plan.  The Shares shall be freely tradeable and
non-forfeitable, except to the extent set forth in the Stockholders Agreement
and in Exhibit D to the Grant Notice.

 

3.                                       Tax
Consultation.  Participant
understands that Participant may suffer adverse tax consequences as a result of
Participant’s purchase or disposition of the Shares.  Participant represents that Participant has
consulted with any tax consultants Participant deems advisable in 

 

B-1

 

connection
with the purchase or disposition of the Shares and that Participant is not
relying on the Company for any tax advice.

 

4.                                       Successors and
Assigns.  This Agreement shall inure to
the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer
herein set forth, this Agreement shall be binding upon Participant and his or
her heirs, executors, administrators, successors and assigns.

 

5.                                       Interpretation.  Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or by the Company forthwith to
the Administrator, which shall review such dispute at its next regular meeting.  The resolution of such a dispute by the
Administrator shall be final and binding on the Company and on Participant.

 

6.                                       Governing Law;
Severability.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware, excluding that body of law pertaining to conflicts of
law.  Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.

 

7.                                       Notices.  Any notice required or permitted hereunder
shall be given in accordance with the provisions set forth in Section 5.3
of the Option Agreement.

 

8.                                       Further
Instruments.  The parties
agree to execute such further instruments and to take such further action as
may be reasonably necessary to carry out the purposes and intent of this
Agreement.

 

9.                                       Entire
Agreement.  The Plan
and Option Agreement are incorporated herein by reference.  This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and Participant
with respect to the subject matter hereof.

 

B-2

 

	
  ACCEPTED BY:

  IMAGE
  ENTERTAINMENT, INC.

  	
   

  	
  SUBMITTED BY

  PARTICIPANT:

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  Print
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
							

 

CONSENT
OF SPOUSE

 

I,
                                        ,
spouse of
                                  ,
have read and approve the Option Agreement and this Exercise Notice between my
spouse and Image Entertainment, Inc. 
In consideration of granting of the right to my spouse to purchase
shares of Image Entertainment, Inc. set forth in the Option Agreement and
this Exercise Notice, I hereby appoint my spouse as my attorney-in-fact in
respect to the exercise of any rights under the Option Agreement and this
Exercise Notice and agree to be bound by the provisions of the Plan, the Option
Agreement and this Exercise Notice insofar as I may have any rights in said
agreements or any shares issued pursuant thereto under the community property
laws or similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Exercise Notice.

 

 

	
  Dated:
                                ,               

  	
   

  	
   

  
	
   

  	
   

  	
  Signature
  of Spouse

  

 

B-3

 

EXHIBIT C

 

TO STOCK
OPTION GRANT NOTICE

 

VESTING
PROVISIONS

 

Capitalized
terms used in this Exhibit C and not defined below shall have the meanings
given them in the Plan, the Grant Notice to which this Exhibit C is
attached or the Agreement attached thereto. 
In the event of any inconsistency between this Exhibit C, on
the one hand, and the Plan, the Grant Notice or the Agreement, on the other
hand, the provisions of this Exhibit C shall govern.

 

1.                                       Vesting.  Subject to Section 2 below, the Option
shall vest as to 25% of the shares of Stock subject to the Option (rounded up
to the nearest whole share) on January 8, 2011, and as to 6.25% of the
total number of shares of Stock subject to the Option (rounded up to the
nearest whole share on the last day of each three-month period of Participant’s
continued service to the Company as an Employee thereafter, so that all of the
shares of Stock subject to the Option shall be vested on January 8,
2014.  The term “Time
Percentage” shall mean, as of any given date, a fraction,
expressed as a percentage, the numerator of which is the number of shares of
Stock subject to the portion of the Option that is then vested, and the
denominator of which is the total number of shares of Stock subject to the
Option (disregarding, for this purpose, whether the Option has been exercised
in whole or in part).

 

2.                                       Accelerated
Vesting.

 

(a)                                  In the event of
Participant’s Termination of Employment by the Company without Cause (as
defined below) or by Participant for Good Reason (as defined below), the Option
shall vest and become exercisable as to such number of shares of Stock subject
to the Option as would have vested during the one year period following the
date of Participant’s Termination of Employment had Participant remained an
Employee through such date.  In addition,
the vested portion of the Option (whether vested prior to the Participant’s
Termination of Employment or by application of this Section 2(a)) shall
remain exercisable by Participant through the date that is one year following
the date of Participant’s Termination of Employment; provided,
however, that in no event shall the
Option remain exercisable beyond the expiration date set forth in Section 3.3(a) of
the Agreement.  Notwithstanding the
foregoing, the accelerated vesting and extended exercisability of the Option
outlined in this clause (a) shall be contingent on Participant’s execution
and non-revocation of the Release (as defined below).

 

(b)                                 In the event of
Participant’s Termination of Employment as a result of the Company’s election
not to extend the Employment Period (as defined below) beyond the Initial Term
(as defined below), the Option shall vest and become exercisable as to 100% of
the shares of Stock on the date of Participant’s Termination of
Employment.  In addition, the vested
portion of the Option (whether vested prior to the Participant’s Termination of
Employment or by application of this Section 2(b)) shall remain
exercisable by Participant through the date that is one year following the
expiration of the Initial Term; provided, however, that in no event shall the Option remain
exercisable beyond the expiration date set forth in Section 3.3(a) of
the 

 

C-1

 

Agreement.  Notwithstanding the foregoing, the
accelerated vesting and extended exercisability of the Option outlined in this
clause (b) shall be contingent on Participant’s execution and
non-revocation of the Release (as defined below).

 

(c)                                  To the extent
not then vested or exercisable, the Option shall vest and become exercisable as
to 100% of the shares of Stock subject to the Option in the event of a Change
in Control prior to Participant’s Termination of Employment

 

(d)                                 For purposes of
this Exhibit B, the terms “Cause,” “Employment Period,” “Good Reason,” “Initial
Term” and “Release”
shall have the meanings given to such terms in that certain Employment
Agreement dated April 14, 2010, between Participant and the Company;
provided that the “Initial Term” shall mean such term without regard to any
extension of the Employment Period as a result of the Company’s failure to give
less than 12 months’ notice of non-extension of the Initial Term.

 

C-2

 

EXHIBIT D

 

TO STOCK
OPTION GRANT NOTICE

 

TRANSFER
RESTRICTIONS

 

Capitalized
terms used in this Exhibit D and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit D
is attached or the Agreement attached thereto.

 

1.                                       Transfer
Restrictions.  The
following transfer restrictions shall apply to the shares issuable upon
exercise of the Option and shall be in addition to the restrictions set forth
in Section 5.1 and Exhibit C of the Agreement.

 

(a)                                  In
consideration of the grant of the Option, Participant agrees that Participant
will not (and will cause any spouse or immediate family of the spouse or the
undersigned living in the Participant’s household not to), without the prior
written consent of the Administrator (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale), pledge, transfer, establish
an open “put equivalent position” within the meaning of Rule 16a-1(h) under
the Exchange Act, or otherwise dispose of any shares of Stock issued or
issuable upon the exercise of the Option currently or hereafter owned either of
record or beneficially (as defined in Rule 13d-3 under the Exchange Act)
by Participant (or such spouse or family member), or publicly announce an
intention to do any of the foregoing, unless such shares constitute
Transferable Shares (as defined below).

 

(b)                                 In the event of
Participant’s Termination of Employment by the Company without Cause or
Participant’s resignation for Good Reason, the foregoing restrictions shall not
apply to the transfer or sale of any Shares solely to satisfy tax withholding
obligations related to the vesting of the Shares.

 

(c)                                  In addition,
the foregoing restrictions shall not apply to the transfer of any or all of the
shares of Stock issued upon exercise of the Option owned by Participant, either
during his lifetime or on death, by gift, will or the laws of descent and
distribution to Participant’s immediate family or to a trust the beneficiaries
of which are exclusively Participant and/or a member or members of his
immediate family (provided that it shall be a
condition to such transfer that the donee, beneficiary, distributee or
transferee executes and delivers to Company an agreement stating that he, she
or it is receiving and holding the shares of Stock issued upon exercise of the
Option subject to the provisions of the Agreement, and there shall be no
further transfer or distribution of such shares of Stock, except in accordance
with the Agreement).

 

(d)                                 In addition,
notwithstanding the restrictions in this Exhibit D, the undersigned
may at any time after the date hereof (i) exercise the Option (including
by any means set forth in Section 4.3 of the Agreement) (provided that in any such case the shares of Stock issued
upon exercise shall remain subject to the provisions of the Agreement and this

 

 

Exhibit D), or (ii) enter
into a trading plan or modify an existing trading plan meeting the requirements
of Rule 10b5-1 under the Exchange Act relating to the sale of shares of
Stock issuable upon exercise of the Option, if then permitted by the Company and
applicable law (provided that the Shares subject
to such trading plans may not be sold unless and until they are Transferable
Shares).

 

2.                                       Definitions.

 

(a)                                  For the
purposes of this Exhibit D, “immediate family”
shall mean the spouse, domestic partner, lineal descendant (including adopted
children), father, mother, brother or sister of the transferor.

 

(b)                                 For purposes of
this Exhibit D, “Transferable Shares”
shall mean, as of any measurement date, such number of shares of Stock issuable
upon exercise of the Option as is equal to the greater of (i) the Sale
Percentage as of such date or (ii) the Release Percentage as of such date.

 

(c)                                  For purposes of
this Exhibit D, the “Release Percentage”
shall mean (i) prior to the date that is 18 months following January 8,
2010, 0%, (ii) from the date that is 18 months following January 8,
2010 until the date that is two years after January 8, 2010, (x) 50%
multiplied by (y) the Time Percentage (as defined in Exhibit C),
(iii) from the date that is two years following January 8, 2010 until
the date that is thirty months after January 8, 2010, (x) 75%
multiplied by (y) the Time Percentage, 
and (iv) on and after the date that is 30 months after
January 8, 2010, 100%.

 

(d)                                 For purposes of
this Exhibit D, the “Sale Percentage”
shall mean, as of any measurement date, (i) 100% minus (ii) the
percentage of the shares of the Company’s Series C preferred stock (or the
shares of Stock issuable upon conversion thereof) originally purchased by the
JH Stockholders (as defined below) (including through exercise of the
Additional Purchase Right (as defined below)) still held by the JH Stockholders
through the date of measurement; provided that,
for the avoidance of doubt, if the Additional Purchase Right is exercised,
Participant will not be required to increase his ownership of Company
securities and the Sale Percentage will be applied to the Shares held as of
such time.

 

(e)                                  For purposes of
this Exhibit D, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(f)                                    For purposes of
this Exhibit D, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(g)                                 For purposes of
this Exhibit D, the terms “Cause” and “Good Reason” shall have the meanings
given to such terms in that certain Employment Agreement dated April 14,
2010, between Participant and the Company.

 

 

EXHIBIT C

 

Class B Stock Option Agreement

 

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

STOCK OPTION GRANT NOTICE AND

STOCK OPTION AGREEMENT

 

Image
Entertainment, Inc., a Delaware corporation (the “Company”), pursuant
to its 2010 Equity Incentive Award Plan (the “Plan”), hereby
grants to the holder listed below (“Participant”), an
option to purchase the number of shares of the Company’s common stock (“Stock”), set forth below (the “Option”).  This
Option is subject to all of the terms and conditions set forth herein and in
the Stock Option Agreement attached hereto as Exhibit A (the “Stock Option Agreement”) and the
Plan, which are incorporated herein by reference.  Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Stock Option
and the Stock Option Agreement.

 

	
  Participant:

  	
   

  	
  Producers Sales Organization

  
	
   

  	
   

  	
   

  
	
  Grant
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise
  Price per Share of Stock:

  	
   

  	
  $                                                                                     (2)

  
	
   

  	
   

  	
   

  
	
  Total
  Exercise Price:

  	
   

  	
  $                                                                                     

  
	
   

  	
   

  	
   

  
	
  Total
  Number of Shares of Stock Subject to the Option:

  	
   

  	
                                                                                       shares, which represents       % of
  the Company’s fully diluted Stock (excluding the Company’s outstanding and
  underwater stock options) as of January 8, 2010. The number of Shares subject to this
  Stock Option represents 0.800% of the
  fully diluted common stock of the Company at closing (excluding the Company’s outstanding and underwater stock options) as
  of January 8, 2010  minus the number of shares of
  Class B Restricted Stock granted to such Participant. The number of
  shares of Stock shall be subject to adjustment for stock splits, stock
  dividends and other events or transactions described in
  Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Expiration
  Date:

  	
   

  	
   

  	
   

  

 

	
  Type
  of Option:

  	
  o   Incentive Stock Option      o   Non-Qualified Stock Option

  

 

(2) 
Not to be less than $0.20 per share.

 

 

	
  Vesting
  Schedule:

  	
  The
  Option shall vest pursuant to the provisions of Exhibit C
  attached hereto.

  

 

By
his or her signature, the Participant agrees to be bound by the terms and
conditions of the Plan, the Stock Option Agreement and this Grant Notice.  The Participant has reviewed the Stock Option
Agreement, the Plan and this Grant Notice in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Grant
Notice and fully understands all provisions of this Grant Notice, the Stock
Option Agreement and the Plan. 
Participant hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions arising
under the Plan or relating to the Option.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  PRODUCERS
  SALES ORGANIZATION

  
	
   

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  20525
  Nordhoff Street, Ste 200

  	
  Address:

  
	
   

  	
  Chatsworth,
  CA 91311

  	
   

  	
   

  
								

 

 

EXHIBIT A

 

TO STOCK OPTION GRANT NOTICE

 

STOCK OPTION AGREEMENT

 

Pursuant
to the Stock Option Grant Notice (the “Grant Notice”) to which
this Stock Option Agreement (this “Agreement”) is attached, Image
Entertainment, Inc., a Delaware corporation (the “Company”), has
granted to the Participant an Option under the Company’s 2010 Equity Incentive
Award Plan (the “Plan”) to purchase the number of shares of
Stock indicated in the Grant Notice.

 

GENERAL

 

Defined
Terms. 
Capitalized terms not specifically defined herein shall have the
meanings specified in the Plan and the Grant Notice.

 

Incorporation
of Terms of Plan.  The Option is subject to the terms and
conditions of the Plan which are incorporated herein by reference.  In the event of any inconsistency between the
Plan and this Agreement, the terms of the Plan shall control.  Notwithstanding anything to the contrary
contained in the Plan, the Grant Notice or this Agreement, (a) Sections
5.3, 10.6, 11.2 and 11.3 of the Plan shall not apply at any time to the Shares
and (b) the Administrator shall exercise its discretion only reasonably in
good faith.

 

GRANT
OF OPTION

 

Grant
of Option.  In consideration of the Participant’s past
and/or continued employment with or service to the Company or a Parent or
Subsidiary and for other good and valuable consideration, effective as of the
Grant Date set forth in the Grant Notice (the “Grant
Date”), the Company irrevocably grants to the Participant the Option
to purchase any part or all of an aggregate of the number of shares of Stock
set forth in the Grant Notice, upon the terms and conditions set forth in the
Plan, the Grant Notice and this Agreement. 
Unless designated as a Non-Qualified Stock Option in the Grant Notice,
the Option shall be an Incentive Stock Option to the maximum extent permitted
by law.

 

Exercise
Price.  The
exercise price of the shares of Stock subject to the Option shall be as set
forth in the Grant Notice, without commission or other charge; provided, however,
that the price per share of the shares of Stock subject to the Option shall not
be less than 100% of the Fair Market Value of a share of Stock on the Grant
Date.  Notwithstanding the foregoing, if
this Option is designated as an Incentive Stock Option and the Participant owns
(within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company or any “subsidiary
corporation” of the Company or any “parent corporation” of the Company (each
within the meaning of Section 424 of the Code), the price per share of the
shares of Stock subject to the Option shall not be less than 110% of the Fair
Market Value of a share of Stock on the Grant Date.

 

A-1

 

No
Right to Continued Employment.  Nothing in the Plan, the Grant Notice, or
this Agreement shall confer upon the Participant any right to continue in the
employ or service of the Company or any Parent or Subsidiary or shall interfere
with or restrict in any way the rights of the Company and any Parent or
Subsidiary, which rights are hereby expressly reserved, to discharge or
terminate the services of the Participant at any time for any reason
whatsoever, except to the extent expressly provided otherwise in a written
agreement between the Company or a Parent or Subsidiary and the Participant.

 

PERIOD
OF EXERCISABILITY

 

Commencement
of Exercisability.

 

Subject
to Sections 3.2, 3.3 and 5.6, the Option shall become vested and exercisable in
such amounts and at such times as are set forth in the Grant Notice.

 

No
portion of the Option which has not become vested and exercisable at the date
of the Participant’s Termination of Service shall thereafter become vested and
exercisable, except as may be otherwise provided in the Grant Notice or
provided by the Administrator or as set forth in a written agreement between
the Company and the Participant.

 

Duration
of Exercisability.  The installments provided for in the vesting
schedule set forth in the Grant Notice are cumulative.  Each such installment which becomes vested
and exercisable pursuant to the vesting schedule set forth in the Grant Notice
shall remain vested and exercisable until it becomes unexercisable under Section 3.3.

 

Expiration
of Option.  Subject to the provisions of Exhibit C
to the Grant Notice, the Option may not be exercised to any extent by anyone
after the first to occur of the following events:

 

The
expiration of ten years from the Grant Date;

 

If
this Option is designated as an Incentive Stock Option and the Participant
owned (within the meaning of Section 424(d) of the Code), at the time
the Option was granted, more than 10% of the total combined voting power of all
classes of stock of the Company or any “subsidiary corporation” of the Company
or any “parent corporation” of the Company (each within the meaning of Section 424
of the Code), the expiration of five years from the Grant Date;

 

The
expiration of three months from the date of the Participant’s Termination of
Service, unless such termination occurs by reason of the Participant’s death,
Disability or for Cause (as defined in Exhibit C to the Grant
Notice); provided, however,
that if, during any part of such three month period, Participant’s Option is
not exercisable solely because of the condition set forth in Section 4.5(b),
Participant’s Option shall not expire until the earlier of the Expiration Date
or until it shall have been exercisable for an aggregate period of thirty days
after Participant’s Termination of Service;

 

A-2

 

The
expiration of one year from the date of the Participant’s death if Participant
dies prior to his or her Termination of Service or within three months after
his or her Termination of Service;

 

The
expiration of one year from the date of the Participant’s Termination of
Service by reason of the Participant’s Disability; or

 

The
date of Participant’s Termination of Service by the Company for Cause.

 

If
the Participant’s option is an Incentive Stock Option, note that, to obtain the
federal income tax advantages associated with an “incentive stock option,” the
Code requires that at all times beginning on the date of grant of the
Participant’s Option and ending on the day three months before the date of
Participant’s Option’s exercise, Participant must be an Employee of the Company
or an affiliate, except in the event of Participant’s death or Disability.  The Company has provided for extended
exercisability of Participant’s Option under certain circumstances for
Participant’s benefit but cannot guarantee that Participant’s Option will
necessarily be treated as an “incentive stock option” if Participant continues
to be employed by or provide services to the Company or an affiliate as a
Consultant or Director after Participant’s employment terminates or if
Participant otherwise exercises its options more than three months after the
date Participant’s employment terminates.

 

In
addition and for the avoidance of doubt, upon Termination of Service, the
Participant’s vested Option shall be subject to the call right specified in Section 4
of the Stockholders Agreement (defined below).

 

Special
Tax Consequences.  The Participant acknowledges that, to the
extent that the aggregate Fair Market Value (determined as of the time the
Option is granted) of all shares of Stock with respect to which Incentive Stock
Options, including the Option, are exercisable for the first time by the
Participant in any calendar year exceeds $100,000, the Option and such other
options shall be Non-Qualified Stock Options to the extent necessary to comply
with the limitations imposed by Section 422(d) of the Code.  The Participant further acknowledges that the
rule set forth in the preceding sentence shall be applied by taking the
Option and other “incentive stock options” into account in the order in which
they were granted, as determined under Section 422(d) of the Code and
the Treasury Regulations thereunder.

 

EXERCISE
OF OPTION

 

Person
Eligible to Exercise.  Except as provided in Section 5.1,
during the lifetime of the Participant, only the Participant may exercise the
Option or any portion thereof, unless it has been disposed of pursuant to a
DRO.  After the death of the Participant,
any exercisable portion of the Option may, prior to the time when the Option
becomes unexercisable under Section 3.3, be exercised by the Participant’s
personal representative or by any person empowered to do so under the deceased
Participant’s will or under the then applicable laws of descent and
distribution.

 

A-3

 

Partial
Exercise.  Any exercisable portion of the Option or the
entire Option, if then wholly exercisable, may be exercised in whole or in part
at any time prior to the time when the Option or portion thereof becomes
unexercisable under Section 3.3.

 

Manner
of Exercise.  The Option, or any exercisable portion
thereof, may be exercised solely by delivery to the Secretary of the Company
(or any third party administrator or other person or entity designated by the
Company) of all of the following prior to the time when the Option or such
portion thereof becomes unexercisable under Section 3.3:

 

An
Exercise Notice in writing signed by the Participant or any other person then
entitled to exercise the Option or portion thereof, stating that the Option or
portion thereof is thereby exercised, such notice complying with all applicable
rules established by the Administrator. 
Such notice shall be substantially in the form attached as Exhibit B
to the Grant Notice (or such other form as is prescribed by the Administrator);

 

The
receipt by the Company of full payment for the shares of Stock with respect to
which the Option or portion thereof is exercised, including payment of any
applicable withholding tax, which may be in one or more of the forms of
consideration permitted under Section 4.4;

 

Any
other written representations as may be required in the Administrator’s
reasonable discretion to evidence compliance with the Securities Act or any
other applicable law, rule, or regulation; and

 

In the
event the Option or portion thereof shall be exercised pursuant to Section 4.1
by any person or persons other than the Participant, appropriate proof of the
right of such person or persons to exercise the Option.

 

Notwithstanding
any of the foregoing, the Company shall have the right to specify all
conditions of the manner of exercise, which conditions may vary by country and
which may be subject to change from time to time.

 

Method
of Payment.  Payment of the exercise price and any
applicable withholding tax shall be by any of the following, or a combination
thereof, at the election of the Participant, subject to Section 10.1 of
the Plan:

 

Cash;

 

Check;

 

Delivery
of a notice that the Participant has placed a market sell order with a broker
with respect to shares of Stock then issuable upon exercise of the Option, and
that the broker has been directed to pay a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the aggregate exercise
price; provided, that payment of such proceeds
is then made to the Company upon settlement of such sale;

 

A-4

 

With
the consent of the Administrator, by delivery of a full recourse promissory
note on such terms and conditions as may be approved by the Administrator;

 

With
the consent of the Administrator, surrender of other shares of Stock which (A) in
the case of shares of Stock acquired from the Company, have been owned by the
Participant for more than six (6) months on the date of surrender (or such
longer or shorter period as may be determined by the Administrator), and (B) have
a Fair Market Value on the date of surrender equal to the aggregate exercise
price of the shares of Stock with respect to which the Option or portion
thereof is being exercised;

 

With
the consent of the Administrator, surrendered shares of Stock issuable upon the
exercise of the Option having a Fair Market Value on the date of exercise equal
to the aggregate exercise price of the shares of Stock with respect to which
the Option or portion thereof is being exercised; or

 

With
the consent of the Administrator, property of any kind which constitutes good
and valuable consideration.

 

(h)                                 Notwithstanding
any other provision of the Plan or this Agreement, if Participant is a Director
or “executive officer” of the Company within the meaning of Section 13(k) of
the Exchange Act, he or she shall not be permitted to make payment pursuant to
this Section 4.4, or continue any extension of credit with respect to such
payment with a loan from the Company or a loan arranged by the Company, in
violation of Section 13(k) of the Exchange Act.

 

Conditions
to Issuance of Stock Certificates.  The shares of Stock deliverable upon the
exercise of the Option, or any portion thereof, may be either previously
authorized but unissued shares of Stock or issued shares of Stock which have
then been reacquired by the Company. 
Such shares of Stock shall be fully paid and nonassessable.  The Company shall not be required to issue or
deliver any shares of Stock purchased
upon the exercise of the Option or portion thereof prior to fulfillment of all
of the following conditions which, with the exception of Section 4.5(d),
the Company agrees to use to best efforts to promptly complete:

 

The
admission of such shares of Stock to listing on all stock exchanges on which
such Stock is then listed;

 

The
completion of any registration or other qualification of such shares of Stock
under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory
body, which the Administrator shall, in its reasonable discretion, deem
necessary or advisable;

 

The
obtaining of any approval or other clearance from any state or federal
governmental agency which the Administrator shall, in its reasonable
discretion, determine to be necessary or advisable; and

 

The
receipt by the Company of full payment for such shares of Stock, including
payment of any applicable withholding tax, which may be in one or more of the
forms of consideration permitted under Section 4.4, subject to Section 10.1
of the Plan.

 

A-5

 

Rights
as Stockholder.  The holder of the Option shall not be, nor
have any of the rights or privileges of, a stockholder of the Company in
respect of any shares of Stock purchasable upon the exercise of any part of the
Option unless and until such shares of Stock shall have been issued by the
Company to such holder (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) and, once
issued, such shares of Stock shall be freely tradeable and non-forfeitable,
except to the extent set forth in the Stockholders Agreement, dated as of April 12,
2010, of the Company (the “Stockholders Agreement”).   No adjustment will be made for a dividend or
other right for which the record date is prior to the date the shares of Stock
are issued, except as provided in Article 11 of the Plan.

 

OTHER
PROVISIONS

 

Option
Generally Not Transferable.

 

Subject
to Section 5.1(c), the Option may not be sold, pledged, assigned or
transferred in any manner other than by will or the laws of descent and
distribution or, subject to the consent of the Administrator, pursuant to a
DRO, unless and until the shares of Stock underlying the Option have been
issued, and all restrictions applicable to such shares of Stock have
lapsed.  Neither the Option nor any
interest or right therein shall be liable for the debts, contracts or
engagements of Participant or his or her successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect, except to the extent that such
disposition is permitted by the preceding sentence.

 

Unless
transferred to a Permitted Transferee in accordance with Section 5.1(c),
during the lifetime of Participant, only Participant may exercise the Option or
any portion thereof, unless it has been disposed of pursuant to a DRO.  After the death of Participant, any
exercisable portion of the Option may, prior to the time when the Option
becomes unexercisable under Section 3.3, be exercised by Participant’s
personal representative or by any person empowered to do so under the deceased
Participant’s will or under the then applicable laws of descent and
distribution.

 

(c)                                  Notwithstanding
any other provision in this Agreement, with the consent of the Administrator
and to the extent the Option is designated as a Non-Qualified Stock Option, the
Option may be transferred to, exercised by and paid to one or more Permitted
Transferees, subject to the terms and conditions set forth in Section 10.3
of the Plan.  Subject to such conditions
and procedures as the Administrator may require, a Permitted Transferee may
exercise the Option or any portion thereof during the Participant’s lifetime.

 

Adjustments.  The Participant acknowledges
that the Option is subject to modification and termination in certain events as
provided in this Agreement and Article 11 of the Plan.

 

A-6

 

Notices.  Any notice to be given under the terms of
this Agreement to the Company shall be addressed to the Company in care of the
Secretary of the Company at the address given beneath the signature of the
Company’s authorized officer on the Grant Notice, and any notice to be given to
Participant shall be addressed to Participant at the address given beneath
Participant’s signature on the Grant Notice. 
By a notice given pursuant to this Section 5.3, either party may
hereafter designate a different address for notices to be given to that
party.  Any notice which is required to
be given to Participant shall, if Participant is then deceased, be given to the
person entitled to exercise his or her Option pursuant to Section 4.1 by
written notice under this Section 5.3. 
Any notice shall be deemed duly given when sent via email or when sent
by certified mail (return receipt requested) and deposited (with postage
prepaid) in a post office or branch post office regularly maintained by the
United States Postal Service.

 

Titles.  Titles are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of this
Agreement.

 

Governing Law; Severability.  The laws
of the State of Delaware shall govern the interpretation, validity, administration,
enforcement and performance of the terms of this Agreement regardless of the
law that might be applied under principles of conflicts of laws.

 

Conformity to Securities Laws.  The
Participant acknowledges that the Plan, the Grant Notice and this Agreement are
intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules promulgated
by the Securities and Exchange Commission thereunder, and state securities laws
and regulations.  Notwithstanding
anything herein to the contrary, the Plan shall be administered, and the Option
is granted and may be exercised, only in such a manner as to conform to such
laws, rules and regulations.  To the
extent permitted by applicable law, the Plan, the Grant Notice and this
Agreement shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

 

Entire Agreement; Amendments.  The Plan
and this Agreement (including all Exhibits hereto) constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Participant with respect to the subject
matter hereof.  This Agreement may not be
modified, amended or terminated except by an instrument in writing, signed by
Participant or such other person as may be permitted to exercise the Option
pursuant to Section 4.1 and by a duly authorized representative of the
Company.

 

Successors and Assigns.  The Company may assign any of
its rights under this Agreement to single or multiple assignees, and this
Agreement shall inure to the benefit of the successors and assigns of the
Company.  Subject to the restrictions on
transfer herein set forth in Section 5.1, this Agreement shall be binding
upon Participant and his or her heirs, executors, administrators, successors
and assigns.

 

Notification of Disposition.  If this
Option is designated as an Incentive Stock Option, Participant shall give
prompt notice to the Company of any disposition or other transfer of any shares
of Stock acquired under this Agreement if such disposition or transfer is made (a) within
two years from the Grant Date with respect to such shares of Stock or (b) within
one year after 

 

 

the transfer of
such shares of Stock to the Participant. 
Such notice shall specify the date of such disposition or other transfer
and the amount realized, in cash, other property, assumption of indebtedness or
other consideration, by Participant in such disposition or other transfer.

 

Limitations Applicable to Section 16 Persons. 
Notwithstanding any other provision of the Plan or this Agreement, if
Participant is subject to Section 16 of the Exchange Act, the Plan, the
Option and this Agreement shall be subject to any additional limitations set
forth in any applicable exemptive rule under Section 16 of the
Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act)
that are requirements for the application of such exemptive rule.  To the extent permitted by applicable law,
this Agreement shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

 

Not a Contract of Employment.  Nothing
in this Agreement, the Grant Notice, or the Plan shall confer upon the
Participant any right to continue to serve as an employee or other service
provider of the Company or any Parent or Subsidiary.

 

5.12                           Stockholder
Approval.  The Plan will be submitted
for approval by the Company’s stockholders within twelve months before or after
the date the Plan was initially adopted by the Board.  The Option may not be exercised to any extent
by anyone prior to the time when the Plan is approved by the stockholders, and
if such approval has not been obtained within twelve months after the date the
Plan was initially adopted by the Board, the Option shall thereupon be canceled
and become null and void.

 

A-8

 

EXHIBIT B

 

TO
STOCK OPTION GRANT NOTICE

 

FORM OF
EXERCISE NOTICE

 

Effective as of today,                              ,
                  
the undersigned (“Participant”)
hereby elects to exercise Participant’s option to purchase                              
shares of the Stock (the “Shares”)  of Image Entertainment, Inc.
(the “Company”)  under
and pursuant to the Image Entertainment, Inc. 2010 Equity Incentive Award
Plan (the “Plan”) and the Stock Option
Grant Notice and Stock Option Agreement dated                              ,
         (the “Option
Agreement”).  Capitalized
terms used herein without definition shall have the meanings given in the
Option Agreement.

 

	
  Grant Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of Shares of Stock as to which
  Option is

  	
   

  	
   

  
	
  Exercised:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share of Stock:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Certificate to be issued in name of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cash Payment delivered herewith:

  	
   

  	
  $

  	
   

  	
  (Representing the full Exercise Price for the Shares, as 

  
	
   

  	
   

  	
  well as any applicable withholding tax)

  
						

 

	
  Type of Option:

  	
   

  	
  o   Incentive
  Stock Option          o   Non-Qualified
  Stock Option

  

 

1.                                       Representations
of Participant.  Participant
acknowledges that Participant has received, read and understood the Plan and
the Option Agreement. Participant agrees to abide by and be bound by their
terms and conditions

 

2.                                       Rights
as Stockholder.  Until the Shares are
issued (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to
Shares subject to the Option, notwithstanding the exercise of the Option.  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Article 11 of the Plan.  The Shares shall be freely tradeable and
non-forfeitable, except to the extent set forth in the Stockholders Agreement.

 

3.                                       Tax
Consultation.  Participant
understands that Participant may suffer adverse tax consequences as a result of
Participant’s purchase or disposition of the Shares.  Participant represents that Participant has
consulted with any tax consultants Participant deems advisable in connection
with the purchase or disposition of the Shares and that Participant is not
relying on the Company for any tax advice.

 

B-1

 

4.                                       Successors
and Assigns.  This Agreement shall
inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer
herein set forth, this Agreement shall be binding upon Participant and his or
her heirs, executors, administrators, successors and assigns.

 

5.                                       Interpretation.  Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or by the Company forthwith to
the Administrator, which shall review such dispute at its next regular
meeting.  The resolution of such a
dispute by the Administrator shall be final and binding on the Company and on
Participant.

 

6.                                       Governing
Law; Severability.  This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware, excluding that body of law pertaining to conflicts of law.  Should any provision of this Agreement be
determined by a court of law to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable.

 

7.                                       Notices.  Any notice required or permitted hereunder
shall be given in accordance with the provisions set forth in Section 5.3
of the Option Agreement.

 

8.                                       Further
Instruments.  The parties agree to
execute such further instruments and to take such further action as may be
reasonably necessary to carry out the purposes and intent of this Agreement.

 

9.                                       Entire
Agreement.  The Plan and Option
Agreement are incorporated herein by reference. 
This Agreement, the Plan and the Option Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Participant with respect to the subject
matter hereof.

 

B-2

 

 

	
             ACCEPTED BY:

  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  SUBMITTED BY

  PARTICIPANT:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
  Print Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
									

 

CONSENT OF SPOUSE

 

I,
                                        ,
spouse of
                                  ,
have read and approve the Option Agreement and this Exercise Notice between my
spouse and Image Entertainment, Inc. 
In consideration of granting of the right to my spouse to purchase
shares of Image Entertainment, Inc. set forth in the Option Agreement and
this Exercise Notice, I hereby appoint my spouse as my attorney-in-fact in
respect to the exercise of any rights under the Option Agreement and this
Exercise Notice and agree to be bound by the provisions of the Plan, the Option
Agreement and this Exercise Notice insofar as I may have any rights in said
agreements or any shares issued pursuant thereto under the community property
laws or similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Exercise Notice.

 

	
  Dated: 

  	
   

  	
  ,

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature of Spouse

  

 

B-3

 

EXHIBIT C

 

TO
STOCK OPTION GRANT NOTICE

 

VESTING
PROVISIONS

 

Capitalized terms used in this Exhibit C and not defined
below shall have the meanings given them in the Plan, the Grant Notice to which
this Exhibit C is attached or the Agreement attached thereto.  In the event of any inconsistency between
this Exhibit C, on the one hand, and the Plan, the Grant Notice or
the Agreement, on the other hand, the provisions of this Exhibit C
shall govern.

 

1.                                       Vesting.  Subject to Section 2 below, the Option
shall vest as to 100% of the shares of Stock subject to the Option upon the
earlier of (a) the achievement of the Company Stock Price Hurdle, or (b) January 8,
2019, subject to Participant’s continued service to the Company as an Employee
through such vesting date.  For purposes
of this Exhibit C, the “Company Stock Price Hurdle”
shall mean (A) the Fair Market Value of the Stock (calculated pursuant to
clause (i) or (ii) of Section 2.21 of the Plan only) equaling or
exceeding $0.0773 for any 20 out of 30 consecutive trading days beginning on or
after January 8, 2012 or (B) the occurrence of a Change in Control in
which the equity value per share of Stock in such Change in Control transaction
equals or exceeds $0.0773.

 

2.                                       Accelerated
Vesting.

 

(a)                                  In
the event of Participant’s Termination of Employment by the Company without
Cause (as defined below) or by Participant for Good Reason (as defined below)
prior to the vesting of the Option pursuant to Section 1 above, the Option
shall vest and become exercisable as to 100% of the shares of Stock subject to
the Option if the Company Stock Price Hurdle is achieved on or before the date
that is one year following such Termination of Employment; provided that
if there is not a Trading Market for the Stock at the time of such Termination
of Employment and there has not been an unbroken period of six months during
which there has been a Trading Market between such Termination of Employment
and the end of the one-year period following such Termination of Employment,
such one-year period shall be extended until the earliest of (A) the last
day of any unbroken six-month period during which there has been a continuous
Trading Market, (B) the occurrence of a Change of Control and (C) the
date that is five years following such Termination of Employment.  In addition, the Option shall remain
exercisable by Participant through the later of (i) the date that is one
year following such Termination of Employment (if the Option has vested and
become exercisable on or prior to such date) or (ii) the date that is 30
days following the date on which the Option vests and becomes exercisable
pursuant to this clause (a); provided, however, that in no event shall the Option remain
exercisable beyond the expiration date set forth in Section 3.3(a) of
the Agreement.  Notwithstanding the
foregoing, the accelerated vesting and extended exercisability of the Option
outlined in this clause (a) shall be contingent on Participant’s execution
and non-revocation of the Release (as defined below).

 

(b)                                 In
the event of Participant’s Termination of Employment as a result of the

 

 

Company’s election not to extend the Employment Period (as defined
below) beyond the Initial Term (as defined below) prior to the vesting of the
Option pursuant to Section 1 above, the Option shall vest and become
exercisable as to 100% of the shares of Stock subject to the Option if the
Company Stock Price Hurdle is achieved on or before the date that is one year
following the expiration of the Initial Term; provided that if there is
not a Trading Market for the Stock at the time of such Termination of
Employment and there has not been an unbroken period of six months during which
there has been a Trading Market between such Termination of Employment and the
end of the one-year period following the expiration of the Initial Term, such
one-year period shall be extended until the earliest of (A) the last day
of any unbroken six-month period during which there has been a continuous
Trading Market, (B) the occurrence of a Change of Control and (C) the
date that is five years following the expiration of the Initial Term.  In addition, the Option shall remain
exercisable by Participant through the later of (i) the date that is one
year following the expiration of the Initial Term (if the Option has vested and
become exercisable on or prior to such date) or (ii) the date that is 30
days following the date on which the Option vests and becomes exercisable
pursuant to this clause (a); provided, however, that in no event shall the Option remain
exercisable beyond the expiration date set forth in Section 3.3(a) of
the Agreement.  Notwithstanding the
foregoing, the accelerated vesting and extended exercisability of the Option
outlined in this clause (b) shall be contingent on Participant’s execution
and non-revocation of the Release (as defined below).

 

(d)                                 For
purposes of this Exhibit B, the terms “Cause,”
“Employment Period,” “Good Reason,” “Initial
Term” and “Release”
shall have the meanings given to such terms in that certain Employment
Agreement dated April 14, 2010, between Participant and the Company;
provided that the “Initial Term” shall mean such term without regard to any extension
of the Employment Period as a result of the Company’s failure to give less than
12 months’ notice of non-extension of the Initial Term.

 

 

EXHIBIT D

 

Class C Stock Option Agreement

 

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

STOCK OPTION GRANT NOTICE AND

STOCK OPTION AGREEMENT

 

Image Entertainment, Inc., a Delaware corporation (the “Company”), pursuant to its 2010 Equity
Incentive Award Plan (the “Plan”), hereby
grants to the holder listed below (“Participant”), an
option to purchase the number of shares of the Company’s common stock (“Stock”), set forth below (the “Option”).  This
Option is subject to all of the terms and conditions set forth herein and in
the Stock Option Agreement attached hereto as Exhibit A (the “Stock Option Agreement”) and the
Plan, which are incorporated herein by reference.  Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Stock Option
and the Stock Option Agreement.

 

	
  Participant:

  	
   

  	
  John Avagliano

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share of

  	
   

  	
   

  
	
  Stock:

  	
   

  	
  $ (3)

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares of Stock Subject to the 

  	
   

  	
   

  	
  shares,

  
	
  Option:

  	
   

  	
  which represents
        % of the Company’s fully diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010.  The number of Shares subject to this
  Stock Option represents 0.443% of the
  fully diluted common stock of the Company at closing (excluding the Company’s outstanding and underwater stock options) as
  of January 8, 2010  minus the number of shares of Class C
  Restricted Stock granted to such Participant. 
  The number of shares of Stock shall be subject to adjustment for stock
  splits, stock dividends and other events or transactions described in Section 11.1(a) of
  the Plan.

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
   

  	
   

  
					

 

	
  Type of Option:

  	
   

  	
  o   Incentive Stock Option          o   Non-Qualified
  Stock Option

   

  

 

(3)  Not to be less than $0.20 per share.

 

 

	
  Vesting Schedule:

  	
   

  	
  The Option shall vest pursuant to the provisions of Exhibit C
  attached hereto.

  

 

By his or her signature, the Participant agrees to be bound by the
terms and conditions of the Plan, the Stock Option Agreement and this Grant
Notice.  The Participant has reviewed the
Stock Option Agreement, the Plan and this Grant Notice in their entirety, has
had an opportunity to obtain the advice of counsel prior to executing this
Grant Notice and fully understands all provisions of this Grant Notice, the
Stock Option Agreement and the Plan. 
Participant hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions arising
under the Plan or relating to the Option.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Print Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
  20525 Nordhoff Street, Ste 200 

  	
   

  	
  Address:

  
	
   

  	
  Chatsworth, CA 91311

  	
   

  	
   

  
								

 

 

EXHIBIT A

 

TO STOCK OPTION GRANT NOTICE

 

STOCK OPTION AGREEMENT

 

Pursuant to the Stock Option Grant Notice (the “Grant
Notice”) to which this Stock Option Agreement (this “Agreement”) is attached, Image Entertainment, Inc.,
a Delaware corporation (the “Company”), has
granted to the Participant an Option under the Company’s 2010 Equity Incentive
Award Plan (the “Plan”) to purchase the number of shares of
Stock indicated in the Grant Notice.

 

GENERAL

 

Defined Terms.  Capitalized terms not
specifically defined herein shall have the meanings specified in the Plan and
the Grant Notice.

 

Incorporation of Terms of Plan.  The
Option is subject to the terms and conditions of the Plan which are
incorporated herein by reference.  In the
event of any inconsistency between the Plan and this Agreement, the terms of
the Plan shall control.  Notwithstanding
anything to the contrary contained in the Plan, the Grant Notice or this
Agreement, (a) Sections 5.3, 10.6, 11.2 and 11.3 of the Plan shall not
apply at any time to the Shares and (b) the Administrator shall exercise
its discretion only reasonably in good faith.

 

GRANT OF OPTION

 

Grant of Option.  In consideration of the
Participant’s past and/or continued employment with or service to the Company
or a Parent or Subsidiary and for other good and valuable consideration,
effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants to
the Participant the Option to purchase any part or all of an aggregate of the
number of shares of Stock set forth in the Grant Notice, upon the terms and
conditions set forth in the Plan, the Grant Notice and this Agreement.  Unless designated as a Non-Qualified Stock
Option in the Grant Notice, the Option shall be an Incentive Stock Option to the
maximum extent permitted by law.

 

Exercise Price.  The exercise price of the shares
of Stock subject to the Option shall be as set forth in the Grant Notice,
without commission or other charge; provided,
however, that the price per share
of the shares of Stock subject to the Option shall not be less than 100% of the
Fair Market Value of a share of Stock on the Grant Date.  Notwithstanding the foregoing, if this Option
is designated as an Incentive Stock Option and the Participant owns (within the
meaning of Section 424(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any “subsidiary
corporation” of the Company or any “parent corporation” of the Company (each
within the meaning of Section 424 of the Code), the price per share of the
shares of Stock subject to the Option shall not be less than 110% of the Fair
Market Value of a share of Stock on the Grant Date.

 

A-1

 

No Right to Continued Employment.  Nothing
in the Plan, the Grant Notice, or this Agreement shall confer upon the
Participant any right to continue in the employ or service of the Company or
any Parent or Subsidiary or shall interfere with or restrict in any way the
rights of the Company and any Parent or Subsidiary, which rights are hereby
expressly reserved, to discharge or terminate the services of the Participant
at any time for any reason whatsoever, except to the extent expressly provided
otherwise in a written agreement between the Company or a Parent or Subsidiary
and the Participant.

 

PERIOD OF EXERCISABILITY

 

Commencement of Exercisability.

 

Subject to Sections 3.2, 3.3 and 5.6, the Option shall become vested
and exercisable in such amounts and at such times as are set forth in the Grant
Notice.

 

No portion of the Option which has not become vested and exercisable at
the date of the Participant’s Termination of Service shall thereafter become
vested and exercisable, except as may be otherwise provided in the Grant Notice
or provided by the Administrator or as set forth in a written agreement between
the Company and the Participant.

 

Duration of Exercisability.  The
installments provided for in the vesting schedule set forth in the Grant Notice
are cumulative.  Each such installment which
becomes vested and exercisable pursuant to the vesting schedule set forth in
the Grant Notice shall remain vested and exercisable until it becomes
unexercisable under Section 3.3.

 

Expiration of Option.  Subject to the provisions of Exhibit C
to the Grant Notice, the Option may not be exercised to any extent by anyone
after the first to occur of the following events:

 

The expiration of ten years from the Grant Date;

 

If this Option is designated as an Incentive Stock Option and the
Participant owned (within the meaning of Section 424(d) of the Code),
at the time the Option was granted, more than 10% of the total combined voting
power of all classes of stock of the Company or any “subsidiary corporation” of
the Company or any “parent corporation” of the Company (each within the meaning
of Section 424 of the Code), the expiration of five years from the Grant
Date;

 

The expiration of three months from the date of the Participant’s
Termination of Service, unless such termination occurs by reason of the Participant’s
death, Disability or for Cause (as defined in Exhibit C to the
Grant Notice); provided, however,
that if, during any part of such three month period, Participant’s Option is
not exercisable solely because of the condition set forth in Section 4.5(b),
Participant’s Option shall not expire until the earlier of the Expiration Date
or until it shall have been exercisable for an aggregate period of thirty days
after Participant’s Termination of Service;

 

A-2

 

The expiration of one year from the date of the Participant’s death if
Participant dies prior to his or her Termination of Service or within three
months after his or her Termination of Service;

 

The expiration of one year from the date of the Participant’s
Termination of Service by reason of the Participant’s Disability; or

 

The date of Participant’s Termination of Service by the Company for
Cause.

 

If the Participant’s option is an Incentive Stock Option, note that, to
obtain the federal income tax advantages associated with an “incentive stock
option,” the Code requires that at all times beginning on the date of grant of
the Participant’s Option and ending on the day three months before the date of
Participant’s Option’s exercise, Participant must be an Employee of the Company
or an affiliate, except in the event of Participant’s death or Disability.  The Company has provided for extended
exercisability of Participant’s Option under certain circumstances for
Participant’s benefit but cannot guarantee that Participant’s Option will
necessarily be treated as an “incentive stock option” if Participant continues
to be employed by or provide services to the Company or an affiliate as a
Consultant or Director after Participant’s employment terminates or if Participant
otherwise exercises its options more than three months after the date
Participant’s employment terminates.

 

In addition and for the avoidance of doubt, upon Termination of
Service, the Participant’s vested Option shall be subject to the call right
specified in Section 4 of the Stockholders Agreement (defined below).

 

Special Tax Consequences.  The
Participant acknowledges that, to the extent that the aggregate Fair Market
Value (determined as of the time the Option is granted) of all shares of Stock
with respect to which Incentive Stock Options, including the Option, are
exercisable for the first time by the Participant in any calendar year exceeds
$100,000, the Option and such other options shall be Non-Qualified Stock
Options to the extent necessary to comply with the limitations imposed by Section 422(d) of
the Code.  The Participant further
acknowledges that the rule set forth in the preceding sentence shall be
applied by taking the Option and other “incentive stock options” into account
in the order in which they were granted, as determined under Section 422(d) of
the Code and the Treasury Regulations thereunder.

 

EXERCISE OF OPTION

 

Person Eligible to Exercise.  Except
as provided in Section 5.1, during the lifetime of the Participant, only
the Participant may exercise the Option or any portion thereof, unless it has
been disposed of pursuant to a DRO. 
After the death of the Participant, any exercisable portion of the
Option may, prior to the time when the Option becomes unexercisable under Section 3.3,
be exercised by the Participant’s personal representative or by any person
empowered to do so under the deceased Participant’s will or under the then
applicable laws of descent and distribution.

 

A-3

 

Partial Exercise.  Any exercisable portion of the
Option or the entire Option, if then wholly exercisable, may be exercised in
whole or in part at any time prior to the time when the Option or portion
thereof becomes unexercisable under Section 3.3.

 

Manner of Exercise.  The Option, or any exercisable
portion thereof, may be exercised solely by delivery to the Secretary of the
Company (or any third party administrator or other person or entity designated
by the Company) of all of the following prior to the time when the Option or
such portion thereof becomes unexercisable under Section 3.3:

 

An Exercise Notice in writing signed by the Participant or any other
person then entitled to exercise the Option or portion thereof, stating that
the Option or portion thereof is thereby exercised, such notice complying with
all applicable rules established by the Administrator.  Such notice shall be substantially in the
form attached as Exhibit B to the Grant Notice (or such other form
as is prescribed by the Administrator);

 

The receipt by the Company of full payment for the shares of Stock with
respect to which the Option or portion thereof is exercised, including payment
of any applicable withholding tax, which may be in one or more of the forms of
consideration permitted under Section 4.4;

 

Any other written representations as may be required in the
Administrator’s reasonable discretion to evidence compliance with the
Securities Act or any other applicable law, rule, or regulation; and

 

In the event the Option or portion thereof shall be exercised pursuant
to Section 4.1 by any person or persons other than the Participant,
appropriate proof of the right of such person or persons to exercise the
Option.

 

Notwithstanding any of the foregoing, the Company shall have the right
to specify all conditions of the manner of exercise, which conditions may vary
by country and which may be subject to change from time to time.

 

Method of Payment.  Payment of the exercise price
and any applicable withholding tax shall be by any of the following, or a
combination thereof, at the election of the Participant, subject to Section 10.1
of the Plan:

 

Cash;

 

Check;

 

Delivery of a notice that the Participant has placed a market sell
order with a broker with respect to shares of Stock then issuable upon exercise
of the Option, and that the broker has been directed to pay a sufficient
portion of the net proceeds of the sale to the Company in satisfaction of the
aggregate exercise price; provided, that
payment of such proceeds is then made to the Company upon settlement of such
sale;

 

A-4

 

With the consent of the Administrator, by delivery of a full recourse
promissory note on such terms and conditions as may be approved by the
Administrator;

 

With the consent of the Administrator, surrender of other shares of
Stock which (A) in the case of shares of Stock acquired from the Company,
have been owned by the Participant for more than six (6) months on the
date of surrender (or such longer or shorter period as may be determined by the
Administrator), and (B) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the shares of Stock with respect to
which the Option or portion thereof is being exercised;

 

With the consent of the Administrator, surrendered shares of Stock
issuable upon the exercise of the Option having a Fair Market Value on the date
of exercise equal to the aggregate exercise price of the shares of Stock with
respect to which the Option or portion thereof is being exercised; or

 

With the consent of the Administrator, property of any kind which
constitutes good and valuable consideration.

 

(h)                                 Notwithstanding
any other provision of the Plan or this Agreement, if Participant is a Director
or “executive officer” of the Company within the meaning of Section 13(k) of
the Exchange Act, he or she shall not be permitted to make payment pursuant to
this Section 4.4, or continue any extension of credit with respect to such
payment with a loan from the Company or a loan arranged by the Company, in
violation of Section 13(k) of the Exchange Act.

 

Conditions to Issuance of Stock Certificates.  The
shares of Stock deliverable upon the exercise of the Option, or any portion
thereof, may be either previously authorized but unissued shares of Stock or
issued shares of Stock which have then been reacquired by the Company.  Such shares of Stock shall be fully paid and
nonassessable.  The Company shall not be
required to issue or deliver any shares of Stock purchased upon the exercise of the Option or portion thereof prior to
fulfillment of all of the following conditions which, with the exception of Section 4.5(d),
the Company agrees to use to best efforts to promptly complete:

 

The admission of such shares of Stock to listing on all stock exchanges
on which such Stock is then listed;

 

The completion of any registration or other qualification of such
shares of Stock under any state or federal law or under rulings or regulations
of the Securities and Exchange Commission or of any other governmental
regulatory body, which the Administrator shall, in its reasonable discretion,
deem necessary or advisable;

 

The obtaining of any approval or other clearance from any state or
federal governmental agency which the Administrator shall, in its reasonable
discretion, determine to be necessary or advisable; and

 

The receipt by the Company of full payment for such shares of Stock,
including payment of any applicable withholding tax, which may be in one or
more of the forms of consideration permitted under Section 4.4, subject to
Section 10.1 of the Plan.

 

A-5

 

Rights as Stockholder.  The holder of the Option shall
not be, nor have any of the rights or privileges of, a stockholder of the
Company in respect of any shares of Stock purchasable upon the exercise of any
part of the Option unless and until such shares of Stock shall have been issued
by the Company to such holder (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company)
and, once issued, such shares of Stock shall be freely tradeable and
non-forfeitable, except to the extent set forth in the Stockholders Agreement,
dated as of April 12, 2010, of the Company (the “Stockholders Agreement”).   No adjustment will be made for a dividend or
other right for which the record date is prior to the date the shares of Stock
are issued, except as provided in Article 11 of the Plan.

 

OTHER PROVISIONS

 

Option Generally Not Transferable.

 

Subject to Section 5.1(c), the Option may not be sold, pledged,
assigned or transferred in any manner other than by will or the laws of descent
and distribution or, subject to the consent of the Administrator, pursuant to a
DRO, unless and until the shares of Stock underlying the Option have been
issued, and all restrictions applicable to such shares of Stock have
lapsed.  Neither the Option nor any
interest or right therein shall be liable for the debts, contracts or engagements
of Participant or his or her successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void
and of no effect, except to the extent that such disposition is permitted by
the preceding sentence.

 

Unless transferred to a Permitted Transferee in accordance with Section 5.1(c),
during the lifetime of Participant, only Participant may exercise the Option or
any portion thereof, unless it has been disposed of pursuant to a DRO.  After the death of Participant, any exercisable
portion of the Option may, prior to the time when the Option becomes
unexercisable under Section 3.3, be exercised by Participant’s personal
representative or by any person empowered to do so under the deceased
Participant’s will or under the then applicable laws of descent and
distribution.

 

(c)                                  Notwithstanding
any other provision in this Agreement, with the consent of the Administrator
and to the extent the Option is designated as a Non-Qualified Stock Option, the
Option may be transferred to, exercised by and paid to one or more Permitted
Transferees, subject to the terms and conditions set forth in Section 10.3
of the Plan.  Subject to such conditions
and procedures as the Administrator may require, a Permitted Transferee may
exercise the Option or any portion thereof during the Participant’s lifetime.

 

Adjustments.  The Participant acknowledges that the Option
is subject to modification and termination in certain events as provided in
this Agreement and Article 11 of the Plan.

 

A-6

 

Notices.  Any notice to be given under the terms of
this Agreement to the Company shall be addressed to the Company in care of the
Secretary of the Company at the address given beneath the signature of the
Company’s authorized officer on the Grant Notice, and any notice to be given to
Participant shall be addressed to Participant at the address given beneath
Participant’s signature on the Grant Notice. 
By a notice given pursuant to this Section 5.3, either party may
hereafter designate a different address for notices to be given to that
party.  Any notice which is required to
be given to Participant shall, if Participant is then deceased, be given to the
person entitled to exercise his or her Option pursuant to Section 4.1 by written
notice under this Section 5.3.  Any
notice shall be deemed duly given when sent via email or when sent by certified
mail (return receipt requested) and deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United States Postal
Service.

 

Titles.  Titles are provided herein for convenience
only and are not to serve as a basis for interpretation or construction of this
Agreement.

 

Governing Law; Severability.  The laws
of the State of Delaware shall govern the interpretation, validity,
administration, enforcement and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflicts of
laws.

 

Conformity to Securities Laws.  The
Participant acknowledges that the Plan, the Grant Notice and this Agreement are
intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules promulgated
by the Securities and Exchange Commission thereunder, and state securities laws
and regulations.  Notwithstanding
anything herein to the contrary, the Plan shall be administered, and the Option
is granted and may be exercised, only in such a manner as to conform to such
laws, rules and regulations.  To the
extent permitted by applicable law, the Plan, the Grant Notice and this
Agreement shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

 

Entire Agreement; Amendments.  The Plan
and this Agreement (including all Exhibits hereto) constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Participant with respect to the subject
matter hereof.  This Agreement may not be
modified, amended or terminated except by an instrument in writing, signed by
Participant or such other person as may be permitted to exercise the Option
pursuant to Section 4.1 and by a duly authorized representative of the
Company.

 

Successors and Assigns.  The Company may assign any of
its rights under this Agreement to single or multiple assignees, and this
Agreement shall inure to the benefit of the successors and assigns of the
Company.  Subject to the restrictions on
transfer herein set forth in Section 5.1, this Agreement shall be binding
upon Participant and his or her heirs, executors, administrators, successors
and assigns.

 

Notification of Disposition.  If this
Option is designated as an Incentive Stock Option, Participant shall give
prompt notice to the Company of any disposition or other transfer of any shares
of Stock acquired under this Agreement if such disposition or transfer is made (a) within
two years from the Grant Date with respect to such shares of Stock or (b) within
one year after 

 

A-7

 

the transfer of
such shares of Stock to the Participant. 
Such notice shall specify the date of such disposition or other transfer
and the amount realized, in cash, other property, assumption of indebtedness or
other consideration, by Participant in such disposition or other transfer.

 

Limitations Applicable to Section 16 Persons. 
Notwithstanding any other provision of the Plan or this Agreement, if
Participant is subject to Section 16 of the Exchange Act, the Plan, the
Option and this Agreement shall be subject to any additional limitations set
forth in any applicable exemptive rule under Section 16 of the
Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act)
that are requirements for the application of such exemptive rule.  To the extent permitted by applicable law,
this Agreement shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

 

Not a Contract of Employment.  Nothing
in this Agreement, the Grant Notice, or the Plan shall confer upon the
Participant any right to continue to serve as an employee or other service
provider of the Company or any Parent or Subsidiary.

 

5.12                           Stockholder
Approval.  The Plan will be submitted
for approval by the Company’s stockholders within twelve months before or after
the date the Plan was initially adopted by the Board.  The Option may not be exercised to any extent
by anyone prior to the time when the Plan is approved by the stockholders, and
if such approval has not been obtained within twelve months after the date the
Plan was initially adopted by the Board, the Option shall thereupon be canceled
and become null and void.

 

A-8

 

EXHIBIT B

 

TO
STOCK OPTION GRANT NOTICE

 

FORM OF
EXERCISE NOTICE

 

Effective as of today,                              ,
                  
the undersigned (“Participant”)
hereby elects to exercise Participant’s option to purchase                              
shares of the Stock (the “Shares”)  of Image Entertainment, Inc.
(the “Company”)  under
and pursuant to the Image Entertainment, Inc. 2010 Equity Incentive Award
Plan (the “Plan”) and the Stock Option
Grant Notice and Stock Option Agreement dated                              ,
         (the “Option
Agreement”).  Capitalized
terms used herein without definition shall have the meanings given in the
Option Agreement.

 

	
  Grant Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of Shares of Stock as to which
  Option

  	
   

  	
   

  
	
  is Exercised:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share of Stock:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Certificate to be issued in name of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Cash Payment delivered herewith:

  	
   

  	
  $

  	
   

  	
  (Representing the full 

  
	
   

  	
   

  	
  Exercise Price for the Shares, as well as any applicable withholding
  tax)

  
						

 

	
  Type of Option:

  	
   

  	
  o   Incentive
  Stock Option          o   Non-Qualified
  Stock Option

  

 

1.                                       Representations
of Participant.  Participant
acknowledges that Participant has received, read and understood the Plan and
the Option Agreement. Participant agrees to abide by and be bound by their
terms and conditions

 

2.                                       Rights
as Stockholder.  Until the Shares are
issued (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to
Shares subject to the Option, notwithstanding the exercise of the Option.  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are issued,
except as provided in Article 11 of the Plan.  The Shares shall be freely tradeable and
non-forfeitable, except to the extent set forth in the Stockholders Agreement.

 

3.                                       Tax
Consultation.  Participant
understands that Participant may suffer adverse tax consequences as a result of
Participant’s purchase or disposition of the Shares.  Participant represents that Participant has
consulted with any tax consultants Participant deems advisable in connection
with the purchase or disposition of the Shares and that Participant is not
relying on the Company for any tax advice.

 

B-1

 

4.                                       Successors
and Assigns.  This Agreement shall
inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer
herein set forth, this Agreement shall be binding upon Participant and his or
her heirs, executors, administrators, successors and assigns.

 

5.                                       Interpretation.  Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or by the Company forthwith to
the Administrator, which shall review such dispute at its next regular
meeting.  The resolution of such a
dispute by the Administrator shall be final and binding on the Company and on
Participant.

 

6.                                       Governing
Law; Severability.  This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware, excluding that body of law pertaining to conflicts of law.  Should any provision of this Agreement be
determined by a court of law to be illegal or unenforceable, the other
provisions shall nevertheless remain effective and shall remain enforceable.

 

7.                                       Notices.  Any notice required or permitted hereunder
shall be given in accordance with the provisions set forth in Section 5.3
of the Option Agreement.

 

8.                                       Further
Instruments.  The parties agree to
execute such further instruments and to take such further action as may be
reasonably necessary to carry out the purposes and intent of this Agreement.

 

9.                                       Entire
Agreement.  The Plan and Option
Agreement are incorporated herein by reference. 
This Agreement, the Plan and the Option Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Participant with respect to the subject matter
hereof.

 

B-2

 

	
  ACCEPTED BY: 

  	
   

  	
  SUBMITTED BY 

  
	
  IMAGE
  ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  Print
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
										

 

 

CONSENT
OF SPOUSE

 

I,
                                        ,
spouse of
                                  ,
have read and approve the Option Agreement and this Exercise Notice between my
spouse and Image Entertainment, Inc. 
In consideration of granting of the right to my spouse to purchase
shares of Image Entertainment, Inc. set forth in the Option Agreement and
this Exercise Notice, I hereby appoint my spouse as my attorney-in-fact in
respect to the exercise of any rights under the Option Agreement and this
Exercise Notice and agree to be bound by the provisions of the Plan, the Option
Agreement and this Exercise Notice insofar as I may have any rights in said
agreements or any shares issued pursuant thereto under the community property
laws or similar laws relating to marital property in effect in the state of our
residence as of the date of the signing of the foregoing Exercise Notice.

 

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature
  of Spouse

  

 

B-3

 

EXHIBIT C

 

TO STOCK
OPTION GRANT NOTICE

 

VESTING
PROVISIONS

 

Capitalized
terms used in this Exhibit C and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit C
is attached or the Agreement attached thereto. 
In the event of any inconsistency between this Exhibit C, on
the one hand, and the Plan, the Grant Notice or the Agreement, on the other
hand, the provisions of this Exhibit C shall govern.

 

1.                                       Vesting.  Subject to Section 2 below, the Option
shall vest as to 100% of the shares of Stock subject to the Option upon the
earlier of (a) the achievement of the Company Stock Price Hurdle, or (b) January 8,
2019, subject to Participant’s continued service to the Company as an Employee
through such vesting date.  For purposes
of this Exhibit C, the “Company Stock Price Hurdle”
shall mean (A) the Fair Market Value of the Stock (calculated pursuant to
clause (i) or (ii) of Section 2.21 of the Plan only) equaling or
exceeding $0.19 for any 20 out of 30 consecutive trading days beginning on or
after January 8, 2013 or (B) the occurrence of a Change in Control in
which the equity value per share of Stock in such Change in Control transaction
equals or exceeds $0.19.

 

2.                                       Accelerated
Vesting.

 

(a)                                  In the event of
Participant’s Termination of Employment by the Company without Cause (as
defined below) or by Participant for Good Reason (as defined below) prior to
the vesting of the Option pursuant to Section 1 above, the Option shall
vest and become exercisable as to 100% of the shares of Stock subject to the
Option if the Company Stock Price Hurdle is achieved on or before the date that
is one year following such Termination of Employment; provided that if
there is not a Trading Market for the Stock at the time of such Termination of
Employment and there has not been an unbroken period of six months during which
there has been a Trading Market between such Termination of Employment and the
end of the one-year period following such Termination of Employment, such
one-year period shall be extended until the earliest of (A) the last day
of any unbroken six-month period during which there has been a continuous
Trading Market, (B) the occurrence of a Change of Control and (C) the
date that is five years following such Termination of Employment.  In addition, the Option shall remain
exercisable by Participant through the date that is one year following such
Termination of Employment (if the Option has vested and become exercisable on
or prior to such date); provided, however, that in no event shall the Option remain
exercisable beyond the expiration date set forth in Section 3.3(a) of
the Agreement.  Notwithstanding the
foregoing, the accelerated vesting and extended exercisability of the Option
outlined in this clause (a) shall be contingent on Participant’s execution
and non-revocation of the Release (as defined below).

 

(b)                                 In the event of
Participant’s Termination of Employment as a result of the Company’s election
not to extend the Employment Period (as defined below) beyond the Initial Term
(as defined below) prior to the vesting of the Option pursuant to Section 1
above, the

 

 

Option
shall vest and become exercisable as to 100% of the shares of Stock subject to
the Option if the Company Stock Price Hurdle is achieved on or before the date
that is one year following the expiration of the Initial Term; provided
that if there is not a Trading Market for the Stock at the time of such
Termination of Employment and there has not been an unbroken period of six
months during which there has been a Trading Market between such Termination of
Employment and the end of the one-year period following the expiration of the
Initial Term, such one-year period shall be extended until the earliest of (A) the
last day of any unbroken six-month period during which there has been a
continuous Trading Market, (B) the occurrence of a Change of Control and (C) the
date that is five years following such Termination of Employment.  In addition, the Option shall remain
exercisable by Participant through the later of (i) the date that is one
year following the expiration of the Initial Term (if the Option has vested and
become exercisable on or prior to such date) or (ii) the date that is 30
days following the date on which the Option vests and becomes exercisable
pursuant to this clause (a); provided, however, that in no event shall the Option remain
exercisable beyond the expiration date set forth in Section 3.3(a) of
the Agreement.  Notwithstanding the
foregoing, the accelerated vesting and extended exercisability of the Option
outlined in this clause (b) shall be contingent on Participant’s execution
and non-revocation of the Release (as defined below).

 

(c)                                  The Option
shall vest and become exercisable as to one hundred percent (100%) of the
shares of Stock subject to the Option in the event of a Change in Control prior
to Participant’s Termination of Employment, provided that the price per share
of Stock pursuant to the Change in Control transaction equals or exceeds $0.19.

 

(d)                                 For purposes of
this Exhibit B, the terms “Cause,” “Employment Period,” “Good Reason,” “Initial
Term” and “Release”
shall have the meanings given to such terms in that certain Employment
Agreement dated April 14, 2010, between Participant and the Company;
provided that the “Initial Term” shall mean such term without regard to any
extension of the Employment Period as a result of the Company’s failure to give
less than 12 months’ notice of non-extension of the Initial Term.

 

2

 

EXHIBIT E

 

Class A Restricted Stock Award Agreement

 

3

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

RESTRICTED
STOCK AWARD GRANT NOTICE AND

RESTRICTED STOCK AWARD AGREEMENT

 

Image
Entertainment, Inc., a Delaware corporation (the “Company”), pursuant
to its 2010 Equity Incentive Award Plan (the “Plan”), hereby
grants to the individual listed below (“Participant”)  the number of shares of the Company’s
Stock (the “Shares”) set forth
below.  This Restricted Stock award is
subject to all of the terms and conditions as set forth herein and in the
Restricted Stock Award Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”) and the
Plan, which are incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Grant Notice and the Restricted Stock Agreement.

 

	
  Participant:

  	
   

  	
  John Avagliano

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Grant Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares of Restricted Stock:

  	
   

  	
   

  
	
   

  	
   

  	
  Shares, which represents
        % of the Company’s fully-diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010. The number of Shares shall have a value equal to
  (i) the difference between the Fair Market Value of a share of common
  stock on the date of grant of the Options (but not less than $0.20 per share)
  and $0.0366, multiplied by (ii) the number of shares of common stock
  representing 1.771% of the fully
  diluted common stock (excluding the
  Company’s outstanding and underwater stock options) as of January 8,
  2010. The number of Shares shall be subject to adjustment for stock
  splits, stock dividends and other events or transactions described at
  Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

  	
  The
  Shares shall be released from the Forfeiture Restriction set forth in
  Section 2.1 of the Restricted Stock Agreement on the dates and in the
  amounts indicated in Exhibit B to this Grant Notice.

  

 

By
his or her signature, Participant agrees to be bound by the terms and
conditions of the Plan, the Restricted Stock Agreement and this Grant Notice.
Participant has reviewed the Restricted Stock Agreement, the Plan and this
Grant Notice in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Grant Notice and fully understands all
provisions of this Grant Notice, the Restricted Stock Agreement and the
Plan.  Participant hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Administrator of the Plan upon any questions arising under the 

 

4

 

Plan,
this Grant Notice or the Restricted Stock Agreement.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:   20525
  Nordhoff Street, Ste 200

  Chatsworth,
  CA 91311

  	
   

  	
  Address:

  
						

 

5

 

EXHIBIT A

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

RESTRICTED STOCK AWARD AGREEMENT

 

Pursuant
to the Restricted Stock Award Grant Notice (“Grant
Notice”)  to which this Restricted
Stock Award Agreement (this “Agreement”) is  attached, Image Entertainment, Inc.,
a Delaware corporation (the “Company”),  has granted to Participant the
right to purchase the number of shares of Restricted Stock under the Company’s
2010 Equity Incentive Award Plan (the “Plan”)  indicated in the Grant Notice. The Shares
are subject to the terms and conditions of the Plan which are incorporated
herein by reference.  Capitalized terms
not specifically defined herein shall have the meanings specified in the Plan
and the Grant Notice.

 

ARTICLE I

ISSUANCE OF SHARES

 

1.1                                 Issuance of
Shares.  Pursuant to the Plan and
subject to the terms and conditions of this Agreement, effective on the Grant
Date, the Company irrevocably grants to Participant the number of shares of
Stock set forth in the Grant Notice (the “Shares”),  in consideration of Participant’s employment
with or service to the Company or one of its Subsidiaries on or before the
Grant Date, for which the Administrator has determined Participant has not been
fully compensated, and the Administrator has determined that the benefit
received by the Company as a result of such employment or service has a value
that exceeds the aggregate par value of the Shares, which Shares, when issued
in accordance with the terms hereof, shall be fully paid and nonassessable.  Notwithstanding anything to the contrary
contained in the Plan, the Grant Notice or this Agreement, (a) Sections
10.6, 11.2 and 11.3 of the Plan shall not apply at any time to the Shares and (b) the
Administrator shall exercise its discretion only reasonably in good faith.

 

1.2                                 Issuance
Mechanics.  On the
Grant Date, the Company shall issue the Shares to Participant and shall (a) cause
a stock certificate or certificates representing the Shares to be registered in
the name of Participant, or (b) cause such Shares to be held in book entry
form.  If a stock certificate is issued,
it shall be delivered to and held in custody by the Company and shall bear the
restrictive legends required by Section 4.1 below.  If the Shares are held in book entry form,
then such entry will reflect that the Shares are subject to the restrictions of
this Agreement.  Participant’s execution
of a stock assignment in the form attached as Exhibit C to the
Grant Notice (the “Stock Assignment”) shall be a
condition to the issuance of the Shares.

 

ARTICLE II

FORFEITURE AND TRANSFER RESTRICTIONS

 

2.1                                 Forfeiture
Restriction.  Subject to
the provisions of Section 2.2 below and Exhibit B to the Grant
Notice, in the event of Participant’s cessation of Service for any reason,
including as a result of Participant’s death or Disability, all of the
Unreleased Shares (as defined below) shall thereupon be forfeited immediately
and without any further action by the Company (the “Forfeiture
Restriction”).  Upon the
occurrence of such a forfeiture, the Company shall become the legal and
beneficial owner of the Unreleased Shares and all rights and interests therein
or relating thereto, and the Company shall have the right to retain and
transfer to its own name the number of Unreleased Shares being forfeited by Participant.  The Unreleased Shares and Participant’s
executed Stock Assignment in the form attached as Exhibit C to the
Grant Notice 

 

A-1

 

shall
be held by the Company in accordance with Section 2.4 until the Shares are
forfeited as provided in this Section 2.1, until such Unreleased Shares
are fully released from the Forfeiture Restriction, or until such time as this
Agreement no longer is in effect (e.g., upon Termination of Service).  Participant hereby authorizes and directs the
Secretary of the Company, or such other person designated by the Committee, to
transfer the Unreleased Shares which have been forfeited pursuant to this Section 2.1
from Participant to the Company.

 

2.2                                 Release of
Shares from Forfeiture Restriction.  The Shares shall be released from the
Forfeiture Restriction in accordance with the vesting schedule set forth in the
Grant Notice.  Any of the Shares which,
from time to time, have not yet been released from the Forfeiture Restriction are
referred to herein as “Unreleased Shares.”  In the event any of the Shares are released
from the Forfeiture Restriction, any dividends or other distributions paid on
such Shares and held by the Company pursuant to Section 2.4 shall be
promptly paid by the Company to Participant. 
As soon as administratively practicable following the release of any
Shares from the Forfeiture Restriction, the Company shall, as applicable,
either deliver to Participant the certificate or certificates representing such
Shares in the Company’s possession belonging to Participant, or, if the Shares
are held in book entry form, then the Company shall remove the notations on the
book form.  Participant (or the
beneficiary or personal representative of Participant in the event of
Participant’s death or incapacity, as the case may be) shall deliver to the
Company any representations or other documents or assurances as the Company or
its representatives deem necessary or advisable in connection with any such
delivery.

 

2.3                                 Transfer Restriction.  No Unreleased Shares or any interest or right
therein or part thereof shall be liable for the debts, contracts or engagements
of the Participant or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect.  The Shares shall also be subject to the
transfer restrictions set forth in Exhibit D to the Grant Notice.

 

2.4                                 Escrow.  The Unreleased Shares and Participant’s
executed Stock Assignment shall be held by the Company until the Shares are
forfeited as provided in Section 2.1, until such Unreleased Shares are
fully released from the Forfeiture Restriction, or until such time as this
Agreement no longer is in effect  (e.g.,
upon Termination of Service).  In such
event, Participant shall not retain physical custody of any certificates
representing Unreleased Shares issued to Participant.  Participant, by acceptance of this Award,
shall be deemed to appoint, and does so appoint, the Company and each of its
authorized representatives as Participant’s attorney(s)-in-fact to effect any
transfer of forfeited Unreleased Shares (and any dividends or other
distributions paid on such Shares) to
the Company as may be required pursuant to the Plan or this Agreement, and to
execute such representations or other documents or assurances as the Company or
such representatives deem necessary or advisable in connection with any such
transfer.  The Company, or its designee,
shall not be liable for any act it may do or omit to do with respect to holding
the Shares in escrow and while acting in good faith and in the exercise of its
judgment.

 

2.5                                 Rights as
Stockholder.  Except as
otherwise provided herein, upon issuance of the Shares by the Company,
Participant shall have all the rights of a stockholder with respect to said
Shares, 

 

A-2

 

subject
to the restrictions herein, including the right to vote the Shares and to
receive all dividends or other distributions paid or made with respect to the
Shares.  In addition, the Shares shall be
subject to the Stockholders Agreement, dated as of April 12, 2010, of the
Company (the “Stockholders Agreement”), to the extent provided therein.

 

ARTICLE III

TAXATION REPRESENTATIONS

 

Participant
represents to the Company the following:

 

(a)                                  Participant has
reviewed with his or her own tax advisors the federal, state, local and foreign
tax consequences of this investment and the transactions contemplated by this
Agreement.  Participant is relying solely
on such advisors and not on any statements or representations of the Company or
any of its agents.  Participant
understands that Participant (and not the Company) shall be responsible for his
or her own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.

 

(b)                                 Notwithstanding
anything to the contrary in this Agreement, the Company shall be entitled to
require payment (which payment may be made in cash, by deduction from other
compensation payable to Participant or in any form of consideration permitted
by the Plan) of any sums required by federal, state or local tax law to be
withheld with respect to the issuance, lapsing of restrictions on or sale of
the Shares.   The Company shall not be
obligated to deliver any stock certificate representing vested Shares to
Participant or Participant’s legal representative, or, if the Shares are held
in book entry form, to remove the notations on the book form, unless and until
Participant or Participant’s legal representative shall have paid or otherwise
satisfied in full the amount of all federal, state and local taxes applicable
to the taxable income of Participant resulting from the issuance, lapsing of
restrictions on or sale of the Shares.

 

ARTICLE IV

RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS

 

4.1                                 Legends.  The certificate or certificates representing
the Shares, if any, shall bear the following legend (as well as any legends
required by the Company’s charter and applicable state and federal corporate
and securities laws):

 

THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE IN FAVOR OF
THE COMPANY AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A
RESTRICTED STOCK AWARD AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

4.2                                 Refusal to
Transfer; Stop-Transfer Notices.  The Company shall not be required (a) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (b) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.  Participant agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company 

 

A-3

 

may
issue appropriate “stop transfer” instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

 

4.3                                 Removal of
Legend.  After such time as the
Forfeiture Restriction shall have lapsed with respect to the Shares, and upon
Participant’s request, a new certificate or certificates representing such
Shares shall be issued without the legend referred to in Section 4.1 and
delivered to Participant.  If the Shares
are held in book entry form, the Company shall cause any restrictions noted on
the book form to be removed.  In
addition, for the avoidance of doubt, at such time, such Shares shall be freely
transferable and non-forfeitable, and only subject to the Stockholders
Agreement  and Exhibit D to
the Grant Notice.

 

ARTICLE V

MISCELLANEOUS

 

5.1                                 Governing Law.  This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law.

 

5.2                                 Entire
Agreement; Enforcement of Rights.   This Agreement and the Plan set forth the
entire agreement and understanding of the parties relating to the subject
matter herein and merge all prior discussions between them.  No modification of or amendment to this Agreement,
nor any waiver of any rights under this Agreement, shall be effective unless in
writing signed by the parties to this Agreement.

 

5.3                                 Severability.  If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. 
In the event that the parties cannot reach a mutually agreeable and
enforceable replacement for such provision, then (a) such provision shall
be excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of
the Agreement shall be enforceable in accordance with its terms.

 

5.4                                 Notices.  Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient when delivered
personally or sent by electronic mail (with return receipt requested and
received) or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified, if to the Company, at its principal offices, and if
to Participant, at Participant’s address, electronic mail address or fax number
in the Company’s employee records or as subsequently modified by written
notice.

 

5.5                                 Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

 

5.6                                 Successors and Assigns.  The rights and benefits of this Agreement
shall inure to the benefit of, and be enforceable by the Company’s successors
and assigns.  The Company may assign its
rights under this Agreement to any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company without the prior written consent of
Participant. The rights and obligations of Participant under this Agreement may
only be assigned with the prior written consent of the Company.

 

5.7                                 Conformity to Securities Laws.  Participant acknowledges that the Plan is
intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules promulgated
by the Securities and Exchange Commission thereunder, and state securities laws
and regulations.  Notwithstanding
anything herein to the contrary, the Plan shall be administered, and the Shares
are to be issued, only in

 

A-4

 

such a manner as to conform to such laws, rules and
regulations.  To the extent permitted by
applicable law, the Plan and this Agreement shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.

 

5.8                                 NO RIGHT TO CONTINUED SERVICE.  THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT
THE LAPSING OF THE FORFEITURE RESTRICTION PURSUANT TO SECTION 2.1 HEREOF
IS EARNED ONLY BY CONTINUING SERVICE TO THE COMPANY OR ITS SUBSIDIARIES AS AN “AT
WILL” EMPLOYEE OR CONSULTANT OF THE COMPANY OR ITS SUBSIDIARIES OR AN
INDEPENDENT DIRECTOR OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR
ACQUIRING SHARES HEREUNDER).  THE
PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE FORFEITURE RESTRICTION SCHEDULE SET FORTH HEREIN
DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN
EMPLOYEE, CONSULTANT OR INDEPENDENT DIRECTOR FOR SUCH PERIOD, FOR ANY PERIOD,
OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY’S OR ANY OF ITS
SUBSIDIARIES’ RIGHT TO TERMINATE THE PARTICIPANT’S EMPLOYMENT OR SERVICE TO THE
COMPANY AT ANY TIME.

 

A-5

 

EXHIBIT B

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

VESTING
PROVISIONS

 

Capitalized
terms used in this Exhibit B and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit B
is attached or the Agreement attached thereto. 
In the event of any inconsistency between this Exhibit B, on
the one hand, and the Plan, the Grant Notice or the Agreement, on the other
hand, the provisions of this Exhibit B shall govern.

 

1.                                       Vesting.  Subject to Section 2 below, as of any
measurement date, such aggregate number of Shares (rounded up to the next whole
Share) shall be considered to have been released from the Forfeiture
Restriction as is determined by multiplying (a) the Time Percentage (as
defined below) as of such date by (b) the Sale Percentage (as defined
below) as of such date.

 

2.                                       Accelerated
Vesting.

 

(a)                                  In the event of
Participant’s Termination of Employment by the Company without Cause (as
defined below) or by Participant for Good Reason (as defined below), such
number of Shares as would have been released from the Forfeiture Restriction
during the one year period following the date of Participant’s Termination of
Employment had Participant remained an Employee through such date shall vest
and be released from the Forfeiture Restriction as of the date of Participant’s
Termination of Employment.  In the event
of Participant’s Termination of Employment as a result of the Company’s
election not to extend the Employment Period (as defined below) beyond the
Initial Term (as defined below), 100% of the Shares shall vest and be released
from the Forfeiture Restriction as of the date of Participant’s Termination of
Employment.

 

(b)                                 To the extent
not then vested, 100% of the Shares shall be released from the Forfeiture
Restriction in the event of a Change in Control prior to Participant’s
Termination of Employment.

 

(c)                                  Notwithstanding
the foregoing, the accelerated release of Shares from the Forfeiture
Restriction outlined in Section 2(a) and the increase in the Sale
Percentage pursuant to the proviso in Section 3(b) as a result of
certain Terminations of Employment shall be contingent on Participant’s
execution and non-revocation of the Release (as defined below).

 

3.                                       Definitions.

 

(a)                                  For purposes of
this Exhibit B, the “Time Percentage”
shall mean (i) 25% as of January 8, 2011, plus (ii) an
additional 6.25% for each three-month period of Participant’s continued service
to the Company as an Employee thereafter.

 

(b)                                 For purposes of
this Exhibit B, the “Sale Percentage”
shall mean, as of any date, (i) 100% minus (ii) the percentage of the
shares of the Company’s Series C preferred

 

B-1

 

stock
(or the shares of Stock issuable upon conversion thereof) originally purchased
by the JH Stockholders (as defined below) (including through exercise of the
Additional Purchase Right (as defined below) still held by the JH Stockholders
through the date of measurement; provided that
the Sale Percentage shall be deemed to be 100% on the first to occur of (x) January 8,
2015 or (y) the date of Participant’s Termination of Employment by the
Company without Cause (as defined below), by Participant for Good Reason (as
defined below) or as a result of Participant’s death or Disability, or in the
event of Participant’s Termination of Employment as a result of the Company’s
election not to extend the Employment Period (as defined below); and, provided, further, that
for the avoidance of doubt, if the Additional Purchase Right is exercised,
Participant will not be required to increase his ownership of Company
securities and the Sale Percentage will be applied to the Shares held as of
such time.

 

(c)                                  For purposes of
this Exhibit B, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(d)                                 For purposes of
this Exhibit B, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(e)                                  For purposes of
this Exhibit B, the terms “Cause,” “Employment Period,” “Good Reason,” “Initial
Term” and “Release”
shall have the meanings given to such terms in that certain Employment
Agreement dated April 14, 2010, between Participant and the Company;
provided that the “Initial Term” shall mean such term without regard to any
extension of the Employment Period as a result of the Company’s failure to give
less than 12 months’ notice of non-extension of the Initial Term.

 

B-2

 

EXHIBIT C

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

STOCK ASSIGNMENT

 

FOR
VALUE RECEIVED, the undersigned, [Name of Participant], hereby sells, assigns
and transfers unto IMAGE ENTERTAINMENT, INC., a Delaware corporation,
              
shares of the Common Stock of IMAGE ENTERTAINMENT, INC., a Delaware
corporation, standing in its name of the books of said corporation represented
by Certificate
No.            herewith
and do hereby irrevocably constitute and appoint                                       
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.

 

This
Stock Assignment may be used only in accordance with the Restricted Stock Award
Grant Notice and Restricted Stock Award Agreement between IMAGE ENTERTAINMENT, INC.
and the undersigned dated
                  ,
200    .

 

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Name
  of Participant]

  

 

 

INSTRUCTIONS:  Please do not fill in the blanks other than
the signature line.  The purpose of this
assignment is to enable the Company to enforce the Forfeiture Restriction as
set forth in the Stock Award Grant Notice and Restricted Stock Award Agreement,
without requiring additional signatures on the part of the stockholder.

 

C-1

 

EXHIBIT D

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

TRANSFER
RESTRICTIONS

 

Capitalized
terms used in this Exhibit D and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit D
is attached or the Agreement attached thereto.

 

1.                                       Transfer
Restrictions.  The
following transfer restrictions shall apply to the Shares and shall be in
addition to the restrictions set forth in Section 2.3 and Exhibit B
of the Agreement.

 

(a)                                  In
consideration of the grant of the Shares, Participant agrees that Participant
will not (and will cause any spouse or immediate family of the spouse or the
undersigned living in the Participant’s household not to), without the prior
written consent of the Administrator (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale), pledge, transfer,
establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under
the Exchange Act, or otherwise dispose of any of the Shares currently or
hereafter owned either of record or beneficially (as defined in Rule 13d-3
under the Exchange Act) by Participant (or such spouse or family member), or
publicly announce an intention to do any of the foregoing, unless such Shares
constitute Transferable Shares (as defined below).

 

(b)                                 In the event of
Participant’s Termination of Employment by the Company without Cause or
Participant’s resignation for Good Reason, the foregoing restrictions shall not
apply to the transfer or sale of any Shares solely to satisfy tax withholding
obligations related to the vesting of the Shares.

 

(c)                                  In addition,
the foregoing restrictions shall not apply to the transfer of any or all of the
Shares, either during his lifetime or on death, by gift, will or the laws of
descent and distribution to Participant’s immediate family or to a trust the
beneficiaries of which are exclusively Participant and/or a member or members
of his immediate family (provided that
it shall be a condition to such transfer that the donee, beneficiary,
distributee or transferee executes and delivers to Company an agreement stating
that he, she or it is receiving and holding the Shares subject to the
provisions of the Agreement, and there shall be no further transfer or
distribution of such Shares, except in accordance with the Agreement).

 

(d)                                 In addition,
notwithstanding the restrictions in this Exhibit D, the undersigned
may at any time after the date hereof enter into a trading plan or modify an
existing trading plan meeting the requirements of Rule 10b5-1 under the
Exchange Act relating to the sale of the Shares, if then permitted by the
Company and applicable law (provided that
the Shares subject to such trading plans may not be sold unless and until they
are Transferable Shares).

 

 

2.                                       Definitions.

 

(a)                                  For the
purposes of this Exhibit D, “immediate family”
shall mean the spouse, domestic partner, lineal descendant (including adopted
children), father, mother, brother or sister of the transferor.

 

(b)                                 For purposes of
this Exhibit D, “Transferable Shares”
shall mean, as of any measurement date, such number of the Shares as is equal
to the greater of (i) the Sale Percentage as of such date or (ii) the
Release Percentage as of such date.

 

(c)                                  For purposes of
this Exhibit D, the “Release Percentage”
shall mean (i) 0% prior to January 8, 2015 and (ii) 100% on and
after January 8, 2015.

 

(d)                                 For purposes of
this Exhibit D, the “Sale Percentage”
shall mean, as of any measurement date, (i) 100% minus (ii) the
percentage of the shares of the Company’s Series C preferred stock (or the
shares of Stock issuable upon conversion thereof) originally purchased by the
JH Stockholders (as defined below) (including through exercise of the
Additional Purchase Right (as defined below)) still held by the JH Stockholders
through the date of measurement; provided that,
for the avoidance of doubt, if the Additional Purchase Right is exercised,
Participant will not be required to increase his ownership of Company securities
and the Sale Percentage will be applied to the Shares held as of such time.

 

(e)                                  For purposes of
this Exhibit D, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(f)                                    For purposes of
this Exhibit D, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(g)                                 For purposes of
this Exhibit D, the terms “Cause” and “Good Reason” shall have the meanings
given to such terms in that certain Employment Agreement dated April 14,
2010, between Participant and the Company.

 

2

 

EXHIBIT F

 

Class B Restricted Stock Award Agreement

 

3

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

RESTRICTED
STOCK AWARD GRANT NOTICE AND

RESTRICTED STOCK AWARD AGREEMENT

 

Image
Entertainment, Inc., a Delaware corporation (the “Company”), pursuant
to its 2010 Equity Incentive Award Plan (the “Plan”), hereby
grants to the individual listed below (“Participant”)  the number of shares of the Company’s
Stock (the “Shares”) set forth
below.  This Restricted Stock award is
subject to all of the terms and conditions as set forth herein and in the
Restricted Stock Award Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”) and the
Plan, which are incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Grant Notice and the Restricted Stock Agreement.

 

	
  Participant:

  	
   

  	
  John Avagliano

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Grant Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares of Restricted Stock:

  	
   

  	
   

  
	
   

  	
   

  	
  Shares, which represents
        % of the Company’s fully-diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010. The number of Shares shall have a value equal to
  (i) the difference between the Fair Market Value of a share of common
  stock on the date of grant of the Options (but not less than $0.20 per share)
  and $0.0773, multiplied by (ii) the number of shares of common stock
  representing 0.443% of the fully
  diluted common stock (excluding the
  Company’s outstanding and underwater stock options) as of January 8,
  2010. The number of Shares shall be subject to adjustment for stock
  splits, stock dividends and other events or transactions described at
  Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

  	
  The
  Shares shall be released from the Forfeiture Restriction set forth in
  Section 2.1 of the Restricted Stock Agreement on the dates and in the
  amounts indicated in Exhibit B to this Grant Notice.

  

 

By
his or her signature, Participant agrees to be bound by the terms and
conditions of the Plan, the Restricted Stock Agreement and this Grant Notice.
Participant has reviewed the Restricted Stock Agreement, the Plan and this
Grant Notice in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Grant Notice and fully understands all
provisions of this Grant Notice, the Restricted Stock Agreement and the
Plan.  Participant hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Administrator of the Plan upon any questions arising under the 

 

4

 

Plan,
this Grant Notice or the Restricted Stock Agreement.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:   20525
  Nordhoff Street, Ste 200

  Chatsworth,
  CA 91311

  	
   

  	
  Address:

  
						

 

5

 

EXHIBIT A

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

RESTRICTED STOCK AWARD AGREEMENT

 

Pursuant
to the Restricted Stock Award Grant Notice (“Grant
Notice”)  to which this Restricted
Stock Award Agreement (this “Agreement”) is  attached, Image Entertainment, Inc.,
a Delaware corporation (the “Company”),  has granted to Participant the
right to purchase the number of shares of Restricted Stock under the Company’s
2010 Equity Incentive Award Plan (the “Plan”)  indicated in the Grant Notice. The
Shares are subject to the terms and conditions of the Plan which are
incorporated herein by reference. 
Capitalized terms not specifically defined herein shall have the
meanings specified in the Plan and the Grant Notice.

 

ARTICLE I

 

ISSUANCE OF SHARES

 

1.1                                 Issuance of
Shares.  Pursuant to the Plan and
subject to the terms and conditions of this Agreement, effective on the Grant
Date, the Company irrevocably grants to Participant the number of shares of
Stock set forth in the Grant Notice (the “Shares”),  in consideration of Participant’s employment
with or service to the Company or one of its Subsidiaries on or before the
Grant Date, for which the Administrator has determined Participant has not been
fully compensated, and the Administrator has determined that the benefit
received by the Company as a result of such employment or service has a value
that exceeds the aggregate par value of the Shares, which Shares, when issued
in accordance with the terms hereof, shall be fully paid and
nonassessable.  Notwithstanding anything
to the contrary contained in the Plan, the Grant Notice or this Agreement, (a) Sections
10.6, 11.2 and 11.3 of the Plan shall not apply at any time to the Shares and (b) the
Administrator shall exercise its discretion only reasonably in good faith.

 

1.2                                 Issuance
Mechanics.  On the
Grant Date, the Company shall issue the Shares to Participant and shall (a) cause
a stock certificate or certificates representing the Shares to be registered in
the name of Participant, or (b) cause such Shares to be held in book entry
form.  If a stock certificate is issued,
it shall be delivered to and held in custody by the Company and shall bear the
restrictive legends required by Section 4.1 below.  If the Shares are held in book entry form,
then such entry will reflect that the Shares are subject to the restrictions of
this Agreement.  Participant’s execution
of a stock assignment in the form attached as Exhibit C to the
Grant Notice (the “Stock Assignment”) shall be a
condition to the issuance of the Shares.

 

ARTICLE II

FORFEITURE AND TRANSFER RESTRICTIONS

 

2.1                                 Forfeiture
Restriction.  Subject to
the provisions of Section 2.2 below and Exhibit B to the Grant
Notice, in the event of Participant’s cessation of Service for any reason,
including as a result of Participant’s death or Disability, all of the
Unreleased Shares (as defined below) shall thereupon be forfeited immediately
and without any further action by the Company (the “Forfeiture
Restriction”).  Upon the
occurrence of such a forfeiture, the Company shall become the legal and
beneficial owner of the Unreleased Shares and all rights and interests therein
or

 

A-1

 

relating
thereto, and the Company shall have the right to retain and transfer to its own
name the number of Unreleased Shares being forfeited by Participant.  The Unreleased Shares and Participant’s
executed Stock Assignment in the form attached as Exhibit C to the
Grant Notice shall be held by the Company in accordance with Section 2.4
until the Shares are forfeited as provided in this Section 2.1, until such
Unreleased Shares are fully released from the Forfeiture Restriction, or until
such time as this Agreement no longer is in effect (e.g., upon Termination of
Service).  Participant hereby authorizes
and directs the Secretary of the Company, or such other person designated by
the Committee, to transfer the Unreleased Shares which have been forfeited pursuant
to this Section 2.1 from Participant to the Company.

 

2.2                                 Release of
Shares from Forfeiture Restriction.  The Shares shall be released from the
Forfeiture Restriction in accordance with the vesting schedule set forth in the
Grant Notice.  Any of the Shares which,
from time to time, have not yet been released from the Forfeiture Restriction
are referred to herein as “Unreleased Shares.”  In the event any of the Shares are released
from the Forfeiture Restriction, any dividends or other distributions paid on
such Shares and held by the Company pursuant to Section 2.4 shall be
promptly paid by the Company to Participant. 
As soon as administratively practicable following the release of any
Shares from the Forfeiture Restriction, the Company shall, as applicable,
either deliver to Participant the certificate or certificates representing such
Shares in the Company’s possession belonging to Participant, or, if the Shares
are held in book entry form, then the Company shall remove the notations on the
book form.  Participant (or the
beneficiary or personal representative of Participant in the event of
Participant’s death or incapacity, as the case may be) shall deliver to the
Company any representations or other documents or assurances as the Company or
its representatives deem necessary or advisable in connection with any such
delivery.

 

2.3                               Transfer Restriction.  No Unreleased Shares or any interest or right
therein or part thereof shall be liable for the debts, contracts or engagements
of the Participant or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect.  The Shares shall also be subject to the
transfer restrictions set forth in Exhibit D to the Grant Notice.

 

2.4                                 Escrow.  The Unreleased Shares and
Participant’s executed Stock Assignment shall be held by the Company until the
Shares are forfeited as provided in Section 2.1, until such Unreleased
Shares are fully released from the Forfeiture Restriction, or until such time
as this Agreement no longer is in effect 
(e.g., upon Termination of Service). 
In such event, Participant shall not retain physical custody of any
certificates representing Unreleased Shares issued to Participant.  Participant, by acceptance of this Award,
shall be deemed to appoint, and does so appoint, the Company and each of its
authorized representatives as Participant’s attorney(s)-in-fact to effect any
transfer of forfeited Unreleased Shares (and any dividends or other distributions
paid on such Shares) to the
Company as may be required pursuant to the Plan or this Agreement, and to
execute such representations or other documents or assurances as the Company or
such representatives deem necessary or advisable in connection with any such
transfer.  The 

 

A-2

 

Company, or its designee, shall not be liable for any
act it may do or omit to do with respect to holding the Shares in escrow and
while acting in good faith and in the exercise of its judgment.

 

2.5                                 Rights as Stockholder.  Except as
otherwise provided herein, upon issuance of the Shares by the Company,
Participant shall have all the rights of a stockholder with respect to said
Shares, subject to the restrictions herein, including the right to vote the
Shares and to receive all dividends or other distributions paid or made with
respect to the Shares.  In addition, the
Shares shall be subject to the Stockholders Agreement, dated as of April 12,
2010, of the Company (the “Stockholders Agreement”), to the extent provided
therein.

 

ARTICLE III

TAXATION REPRESENTATIONS

 

Participant
represents to the Company the following:

 

(a)                                  Participant has
reviewed with his or her own tax advisors the federal, state, local and foreign
tax consequences of this investment and the transactions contemplated by this
Agreement.  Participant is relying solely
on such advisors and not on any statements or representations of the Company or
any of its agents.  Participant
understands that Participant (and not the Company) shall be responsible for his
or her own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.

 

(b)                                 Notwithstanding
anything to the contrary in this Agreement, the Company shall be entitled to
require payment (which payment may be made in cash, by deduction from other
compensation payable to Participant or in any form of consideration permitted
by the Plan) of any sums required by federal, state or local tax law to be
withheld with respect to the issuance, lapsing of restrictions on or sale of
the Shares.   The Company shall not be
obligated to deliver any stock certificate representing vested Shares to
Participant or Participant’s legal representative, or, if the Shares are held
in book entry form, to remove the notations on the book form, unless and until
Participant or Participant’s legal representative shall have paid or otherwise
satisfied in full the amount of all federal, state and local taxes applicable
to the taxable income of Participant resulting from the issuance, lapsing of
restrictions on or sale of the Shares.

 

ARTICLE IV

RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS

 

4.1                                 Legends.  The certificate or certificates representing
the Shares, if any, shall bear the following legend (as well as any legends
required by the Company’s charter and applicable state and federal corporate
and securities laws):

 

THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE IN FAVOR OF
THE COMPANY AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A
RESTRICTED STOCK AWARD AGREEMENT BETWEEN THE COMPANY AND THE 

 

A-3

 

STOCKHOLDER,
A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

4.2                                 Refusal to
Transfer; Stop-Transfer Notices.  The Company shall not be required (a) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (b) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.  Participant agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate “stop transfer” instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.

 

4.3                                 Removal of
Legend.  After such time as the
Forfeiture Restriction shall have lapsed with respect to the Shares, and upon
Participant’s request, a new certificate or certificates representing such
Shares shall be issued without the legend referred to in Section 4.1 and
delivered to Participant.  If the Shares
are held in book entry form, the Company shall cause any restrictions noted on
the book form to be removed.  In
addition, for the avoidance of doubt, at such time, such Shares shall be freely
transferable and non-forfeitable, and only subject to the Stockholders
Agreement  and Exhibit D to
the Grant Notice.

 

ARTICLE V

MISCELLANEOUS

 

5.1                                 Governing Law.  This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law.

 

5.2                                 Entire
Agreement; Enforcement of Rights.   This Agreement and the Plan set forth the
entire agreement and understanding of the parties relating to the subject
matter herein and merge all prior discussions between them.  No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, shall be
effective unless in writing signed by the parties to this Agreement.

 

5.3                                 Severability.  If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. 
In the event that the parties cannot reach a mutually agreeable and
enforceable replacement for such provision, then (a) such provision shall
be excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of
the Agreement shall be enforceable in accordance with its terms.

 

5.4                                 Notices.  Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient when delivered
personally or sent by electronic mail (with return receipt requested and
received) or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified, if to the Company, at its principal offices, and if
to Participant, at Participant’s address, 

 

A-4

 

electronic
mail address or fax number in the Company’s employee records or as subsequently
modified by written notice.

 

5.5                                 Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

 

5.6                                 Successors and Assigns.  The rights and benefits of this Agreement
shall inure to the benefit of, and be enforceable by the Company’s successors
and assigns.  The Company may assign its
rights under this Agreement to any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company without the prior written consent of
Participant. The rights and obligations of Participant under this Agreement may
only be assigned with the prior written consent of the Company.

 

5.7                                 Conformity to Securities Laws. 
Participant acknowledges that the Plan is intended to conform to the
extent necessary with all provisions of the Securities Act and the Exchange Act
and any and all regulations and rules promulgated by the Securities and
Exchange Commission thereunder, and state securities laws and regulations.  Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Shares are to be issued, only
in such a manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law,
the Plan and this Agreement shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.

 

(b)                                 5.8                                 NO RIGHT TO CONTINUED SERVICE.  THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT
THE LAPSING OF THE FORFEITURE RESTRICTION PURSUANT TO SECTION 2.1 HEREOF
IS EARNED ONLY BY CONTINUING SERVICE TO THE COMPANY OR ITS SUBSIDIARIES AS AN “AT
WILL” EMPLOYEE OR CONSULTANT OF THE COMPANY OR ITS SUBSIDIARIES OR AN
INDEPENDENT DIRECTOR OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR
ACQUIRING SHARES HEREUNDER).  THE
PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE FORFEITURE RESTRICTION SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS AN EMPLOYEE, CONSULTANT OR INDEPENDENT DIRECTOR FOR SUCH PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY’S OR ANY OF
ITS SUBSIDIARIES’ RIGHT TO TERMINATE THE PARTICIPANT’S EMPLOYMENT OR SERVICE TO
THE COMPANY AT ANY TIME.

 

A-5

 

EXHIBIT B

 

TO RESTRICTED
STOCK AWARD GRANT NOTICE

 

VESTING
PROVISIONS

 

Capitalized
terms used in this Exhibit B and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit B
is attached or the Agreement attached thereto. 
In the event of any inconsistency between this Exhibit B, on
the one hand, and the Plan, the Grant Notice or the Agreement, on the other
hand, the provisions of this Exhibit B shall govern.

 

1.                                       Vesting.  Subject to Section 2 below, and subject
to the Company’s achievement of the Company Stock Price Hurdle (as defined
below), as of any measurement date, such aggregate number of Shares (rounded up
to the next whole Share) shall be considered to have been released from the
Forfeiture Restriction as is equal to the Sale Percentage (as defined below) as
of such date.  Notwithstanding the
foregoing, 100% of the Shares shall be released from the Forfeiture Restriction
on January 8, 2019.

 

2.                                       Accelerated
Vesting.

 

(a)                                  In the event of
Participant’s Termination of Employment by the Company without Cause (as
defined below) or by Participant for Good Reason (as defined below) prior to
the Company Stock Price Hurdle having been achieved, 100% of the Shares will be
released from the Forfeiture Restriction if the Company Stock Price Hurdle is
achieved on or before the date that is one year following such Termination of
Employment; provided that if there is not a Trading Market for the Stock
at the time of such Termination of Employment and there has not been an
unbroken period of six months during which there has been a Trading Market
between such Termination of Employment and the end of the one-year period
following such Termination of Employment, such one-year period shall be
extended until the earliest of (A) the last day of any unbroken six-month
period during which there has been a continuous Trading Market, (B) the
occurrence of a Change in Control and (C) the date that is five years
following such Termination of Employment. 
In the event of Participant’s Termination of Employment as a result of
the Company’s election not to extend the Employment Period (as defined below)
beyond the Initial Term (as defined below) prior to the Company Stock Price
Hurdle having been achieved, 100% of the Shares will be released from the Forfeiture
Restriction if the Company Stock Price Hurdle is achieved on or before the date
that is one year following the expiration of the Initial Term; provided
that if there is not a Trading Market for the Stock at the time of such
Termination of Employment and there has not been an unbroken period of six
months during which there has been a Trading Market between such Termination of
Employment and the end of the one-year period following the expiration of the
Initial Term, such one-year period shall be extended until the earliest of (A) the
last day of any unbroken six-month period during which there has been a
continuous Trading Market, (B) the occurrence of a Change in Control and (C) the
date that is five years following the expiration of the Initial Term.

 

(b)                                 Notwithstanding
the foregoing, the accelerated release of Shares from the

 

B-1

 

Forfeiture
Restriction outlined in Section 2(a) and the increase in the Sale
Percentage pursuant to the proviso in Section 3(b) as a result of
certain Terminations of Participant’s Employment shall be contingent on
Participant’s execution and non-revocation of the Release (as defined below).

 

3.                                       Definitions.

 

(a)                                  For purposes of
this Exhibit B, the “Company Stock Price Hurdle”
shall mean (A) the Fair Market Value of the Stock (calculated pursuant to
clause (i) or (ii) of Section 2.21 of the Plan only) equaling or
exceeding $0.0773 for any 20 out of 30 consecutive trading days beginning on or
after January 8, 2012 or (B) the occurrence of a Change in Control in
which the equity value per share of Stock in such Change in Control transaction
equals or exceeds $0.0773.

 

(b)                                 For purposes of
this Exhibit B, the “Sale Percentage”
shall mean, as of any date, (i) 100% minus (ii) the percentage of the
shares of the Company’s Series C preferred stock (or the shares of Stock
issuable upon conversion thereof) originally purchased by the JH Stockholders
(as defined below) (including through exercise of the Additional Purchase Right
(as defined below) still held by the JH Stockholders through the date of
measurement; provided that the Sale Percentage
shall be deemed to be 100% on the first to occur of (x) January 8,
2015 or (y) the date of Participant’s Termination of Employment by the Company
without Cause (as defined below), by Participant for Good Reason (as defined
below) or as a result of Participant’s death or Disability, or in the event of
Participant’s Termination of Employment as a result of the Company’s election
not to extend the Employment Period (as defined below); and, provided, further, that
for the avoidance of doubt, if the Additional Purchase Right is exercised,
Participant will not be required to increase his ownership of Company
securities and the Sale Percentage will be applied to the Shares held as of
such time.

 

(c)                                  For purposes of
this Exhibit B, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(d)                                 For purposes of
this Exhibit B, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(e)                                  For purposes of
this Exhibit B, the terms “Cause,” “Employment Period,” “Good Reason,” “Initial
Term” and “Release”
shall have the meanings given to such terms in that certain Employment
Agreement dated April 14, 2010, between Participant and the Company;
provided that the “Initial Term” shall mean such term without regard to any
extension of the Employment Period as a result of the Company’s failure to give
less than 12 months’ notice of non-extension of the Initial Term.

 

(f)                                    For purposes of
this Exhibit B, the term “Trading Market”
shall mean (A) the listing of the Stock on any (i) established
securities exchange (such as the New York Stock Exchange, the NASDAQ Global
Market and the NASDAQ Global Select Market), (ii) national

 

B-2

 

market
system or (iii) automated quotation system or (B) the regular
quotation of the Stock by a recognized securities dealer.

 

B-3

 

EXHIBIT C

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

STOCK ASSIGNMENT

 

FOR
VALUE RECEIVED, the undersigned, [Name of Participant], hereby sells, assigns
and transfers unto IMAGE ENTERTAINMENT, INC., a Delaware corporation,
              
shares of the Common Stock of IMAGE ENTERTAINMENT, INC., a Delaware
corporation, standing in its name of the books of said corporation represented
by Certificate
No.            herewith
and do hereby irrevocably constitute and appoint
                                      
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.

 

This
Stock Assignment may be used only in accordance with the Restricted Stock Award
Grant Notice and Restricted Stock Award Agreement between IMAGE ENTERTAINMENT, INC.
and the undersigned dated
                  ,
200    .

 

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Name
  of Participant]

  

 

 

INSTRUCTIONS:  Please do not fill in the blanks other than
the signature line.  The purpose of this
assignment is to enable the Company to enforce the Forfeiture Restriction as
set forth in the Stock Award Grant Notice and Restricted Stock Award Agreement,
without requiring additional signatures on the part of the stockholder.

 

C-1

 

EXHIBIT D

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

TRANSFER
RESTRICTIONS

 

Capitalized
terms used in this Exhibit D and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit D
is attached or the Agreement attached thereto.

 

1.                                       Transfer
Restrictions.  The
following transfer restrictions shall apply to the Shares and shall be in
addition to the restrictions set forth in Section 2.3 and Exhibit B
of the Agreement.

 

(a)                                  In
consideration of the grant of the Shares, Participant agrees that Participant
will not (and will cause any spouse or immediate family of the spouse or the
undersigned living in the Participant’s household not to), without the prior
written consent of the Administrator (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale), pledge, transfer,
establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under
the Exchange Act, or otherwise dispose of any of the Shares currently or
hereafter owned either of record or beneficially (as defined in Rule 13d-3
under the Exchange Act) by Participant (or such spouse or family member), or
publicly announce an intention to do any of the foregoing, unless such Shares
constitute Transferable Shares (as defined below).

 

(b)                                 In the event of
Participant’s Termination of Employment by the Company without Cause or
Participant’s resignation for Good Reason, the foregoing restrictions shall not
apply to the transfer or sale of any Shares solely to satisfy tax withholding
obligations related to the vesting of the Shares.

 

(c)                                  In addition,
the foregoing restrictions shall not apply to the transfer of any or all of the
Shares, either during his lifetime or on death, by gift, will or the laws of
descent and distribution to Participant’s immediate family or to a trust the
beneficiaries of which are exclusively Participant and/or a member or members
of his immediate family (provided that
it shall be a condition to such transfer that the donee, beneficiary,
distributee or transferee executes and delivers to Company an agreement stating
that he, she or it is receiving and holding the Shares subject to the
provisions of the Agreement, and there shall be no further transfer or
distribution of such Shares, except in accordance with the Agreement).

 

(d)                                 In addition,
notwithstanding the restrictions in this Exhibit D, the undersigned
may at any time after the date hereof enter into a trading plan or modify an
existing trading plan meeting the requirements of Rule 10b5-1 under the
Exchange Act relating to the sale of the Shares, if then permitted by the
Company and applicable law (provided that
the Shares subject to such trading plans may not be sold unless and until they
are Transferable Shares).

 

 

2.                                       Definitions.

 

(a)                                  For the
purposes of this Exhibit D, “immediate family”
shall mean the spouse, domestic partner, lineal descendant (including adopted
children), father, mother, brother or sister of the transferor.

 

(b)                                 For purposes of
this Exhibit D, “Transferable Shares”
shall mean, as of any measurement date, such number of the Shares as is equal
to the greater of (i) the Sale Percentage as of such date or (ii) the
Release Percentage as of such date.

 

(c)                                  For purposes of
this Exhibit D, the “Release Percentage”
shall mean (i) 0% prior to January 8, 2015 and (ii) 100% on and
after January 8, 2015.

 

(d)                                 For purposes of
this Exhibit D, the “Sale Percentage”
shall mean, as of any measurement date, (i) 100% minus (ii) the
percentage of the shares of the Company’s Series C preferred stock (or the
shares of Stock issuable upon conversion thereof) originally purchased by the
JH Stockholders (as defined below) (including through exercise of the
Additional Purchase Right (as defined below)) still held by the JH Stockholders
through the date of measurement; provided that,
for the avoidance of doubt, if the Additional Purchase Right is exercised,
Participant will not be required to increase his ownership of Company
securities and the Sale Percentage will be applied to the Shares held as of
such time.

 

(e)                                  For purposes of
this Exhibit D, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(f)                                    For purposes of
this Exhibit D, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(g)                                 For purposes of
this Exhibit D, the terms “Cause” and “Good Reason” shall have the meanings
given to such terms in that certain Employment Agreement dated April 14,
2010, between Participant and the Company.

 

2

 

EXHIBIT G

 

Class C Restricted Stock Award Agreement

 

3

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

RESTRICTED
STOCK AWARD GRANT NOTICE AND

RESTRICTED STOCK AWARD AGREEMENT

 

Image
Entertainment, Inc., a Delaware corporation (the “Company”), pursuant
to its 2010 Equity Incentive Award Plan (the “Plan”), hereby
grants to the individual listed below (“Participant”)  the number of shares of the Company’s
Stock (the “Shares”) set forth
below.  This Restricted Stock award is
subject to all of the terms and conditions as set forth herein and in the
Restricted Stock Award Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”) and the
Plan, which are incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Grant Notice and the Restricted Stock Agreement.

 

	
  Participant:

  	
   

  	
  John Avagliano

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Grant Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares of Restricted Stock:

  	
   

  	
   

  
	
   

  	
   

  	
  Shares, which represents
        % of the Company’s fully-diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010. The number of Shares shall have a value equal to
  (i) the difference between the Fair Market Value of a share of common
  stock on the date of grant of the Options (but not less than $0.20 per share)
  and $0.1718, multiplied by (ii) the number of shares of common stock
  representing 0.443% of the fully
  diluted common stock (excluding the
  Company’s outstanding and underwater stock options) as of January 8,
  2010. The number of Shares shall be subject to adjustment for stock
  splits, stock dividends and other events or transactions described at
  Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

  	
  The
  Shares shall be released from the Forfeiture Restriction set forth in
  Section 2.1 of the Restricted Stock Agreement on the dates and in the
  amounts indicated in Exhibit B to this Grant Notice.

  

 

By
his or her signature, Participant agrees to be bound by the terms and
conditions of the Plan, the Restricted Stock Agreement and this Grant Notice.
Participant has reviewed the Restricted Stock Agreement, the Plan and this
Grant Notice in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Grant Notice and fully understands all
provisions of this Grant Notice, the Restricted Stock Agreement and the
Plan.  Participant hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Administrator of the Plan upon any questions arising under the 

 

4

 

Plan,
this Grant Notice or the Restricted Stock Agreement.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:   20525
  Nordhoff Street, Ste 200

  Chatsworth,
  CA 91311

  	
   

  	
  Address:

  
						

 

5

 

EXHIBIT A

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

RESTRICTED STOCK AWARD AGREEMENT

 

Pursuant
to the Restricted Stock Award Grant Notice (“Grant
Notice”)  to which this Restricted
Stock Award Agreement (this “Agreement”) is  attached, Image Entertainment, Inc.,
a Delaware corporation (the “Company”),  has granted to Participant the
right to purchase the number of shares of Restricted Stock under the Company’s
2010 Equity Incentive Award Plan (the “Plan”)  indicated in the Grant Notice. The
Shares are subject to the terms and conditions of the Plan which are
incorporated herein by reference. 
Capitalized terms not specifically defined herein shall have the
meanings specified in the Plan and the Grant Notice.

 

ARTICLE I

 

ISSUANCE OF SHARES

 

1.1                                 Issuance of
Shares.  Pursuant to the Plan and
subject to the terms and conditions of this Agreement, effective on the Grant
Date, the Company irrevocably grants to Participant the number of shares of
Stock set forth in the Grant Notice (the “Shares”),  in consideration of Participant’s employment
with or service to the Company or one of its Subsidiaries on or before the
Grant Date, for which the Administrator has determined Participant has not been
fully compensated, and the Administrator has determined that the benefit
received by the Company as a result of such employment or service has a value
that exceeds the aggregate par value of the Shares, which Shares, when issued
in accordance with the terms hereof, shall be fully paid and
nonassessable.  Notwithstanding anything
to the contrary contained in the Plan, the Grant Notice or this Agreement, (a) Sections
10.6, 11.2 and 11.3 of the Plan shall not apply at any time to the Shares and (b) the
Administrator shall exercise its discretion only reasonably in good faith.

 

1.2                                 Issuance
Mechanics.  On the
Grant Date, the Company shall issue the Shares to Participant and shall (a) cause
a stock certificate or certificates representing the Shares to be registered in
the name of Participant, or (b) cause such Shares to be held in book entry
form.  If a stock certificate is issued,
it shall be delivered to and held in custody by the Company and shall bear the
restrictive legends required by Section 4.1 below.  If the Shares are held in book entry form,
then such entry will reflect that the Shares are subject to the restrictions of
this Agreement.  Participant’s execution
of a stock assignment in the form attached as Exhibit C to the
Grant Notice (the “Stock Assignment”) shall be a
condition to the issuance of the Shares.

 

ARTICLE II

FORFEITURE AND TRANSFER RESTRICTIONS

 

2.1                                 Forfeiture
Restriction.  Subject to
the provisions of Section 2.2 below and Exhibit B to the Grant
Notice, in the event of Participant’s cessation of Service for any reason,
including as a result of Participant’s death or Disability, all of the
Unreleased Shares (as defined below) shall thereupon be forfeited immediately
and without any further action by the Company (the “Forfeiture
Restriction”).  Upon the
occurrence of such a forfeiture, the Company shall become the legal and
beneficial owner of the Unreleased Shares and all rights and interests therein
or 

 

A-1

 

relating
thereto, and the Company shall have the right to retain and transfer to its own
name the number of Unreleased Shares being forfeited by Participant.  The Unreleased Shares and Participant’s
executed Stock Assignment in the form attached as Exhibit C to the
Grant Notice shall be held by the Company in accordance with Section 2.4
until the Shares are forfeited as provided in this Section 2.1, until such
Unreleased Shares are fully released from the Forfeiture Restriction, or until
such time as this Agreement no longer is in effect (e.g., upon Termination of
Service).  Participant hereby authorizes
and directs the Secretary of the Company, or such other person designated by
the Committee, to transfer the Unreleased Shares which have been forfeited
pursuant to this Section 2.1 from Participant to the Company.

 

2.2                                 Release of
Shares from Forfeiture Restriction.  The Shares shall be released from the
Forfeiture Restriction in accordance with the vesting schedule set forth in the
Grant Notice.  Any of the Shares which,
from time to time, have not yet been released from the Forfeiture Restriction
are referred to herein as “Unreleased Shares.”  In the event any of the Shares are released
from the Forfeiture Restriction, any dividends or other distributions paid on
such Shares and held by the Company pursuant to Section 2.4 shall be
promptly paid by the Company to Participant. 
As soon as administratively practicable following the release of any
Shares from the Forfeiture Restriction, the Company shall, as applicable,
either deliver to Participant the certificate or certificates representing such
Shares in the Company’s possession belonging to Participant, or, if the Shares
are held in book entry form, then the Company shall remove the notations on the
book form.  Participant (or the
beneficiary or personal representative of Participant in the event of
Participant’s death or incapacity, as the case may be) shall deliver to the
Company any representations or other documents or assurances as the Company or
its representatives deem necessary or advisable in connection with any such
delivery.

 

2.3                               Transfer Restriction.  No Unreleased Shares or any interest or right
therein or part thereof shall be liable for the debts, contracts or engagements
of the Participant or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect.  The Shares shall also be subject to the
transfer restrictions set forth in Exhibit D to the Grant Notice.

 

2.4                                 Escrow.  The Unreleased Shares and
Participant’s executed Stock Assignment shall be held by the Company until the
Shares are forfeited as provided in Section 2.1, until such Unreleased
Shares are fully released from the Forfeiture Restriction, or until such time
as this Agreement no longer is in effect 
(e.g., upon Termination of Service). 
In such event, Participant shall not retain physical custody of any
certificates representing Unreleased Shares issued to Participant.  Participant, by acceptance of this Award,
shall be deemed to appoint, and does so appoint, the Company and each of its
authorized representatives as Participant’s attorney(s)-in-fact to effect any
transfer of forfeited Unreleased Shares (and any dividends or other
distributions paid on such Shares) to
the Company as may be required pursuant to the Plan or this Agreement, and to
execute such representations or other documents or assurances as the Company or
such representatives deem necessary or advisable in connection with any such
transfer.  The 

 

A-2

 

Company, or its designee, shall not be liable for any
act it may do or omit to do with respect to holding the Shares in escrow and
while acting in good faith and in the exercise of its judgment.

 

2.5                                 Rights as Stockholder.  Except as
otherwise provided herein, upon issuance of the Shares by the Company,
Participant shall have all the rights of a stockholder with respect to said
Shares, subject to the restrictions herein, including the right to vote the
Shares and to receive all dividends or other distributions paid or made with
respect to the Shares.  In addition, the
Shares shall be subject to the Stockholders Agreement, dated as of April 12,
2010, of the Company (the “Stockholders Agreement”), to the extent provided
therein.

 

ARTICLE III

TAXATION REPRESENTATIONS

 

Participant
represents to the Company the following:

 

(a)                                  Participant has
reviewed with his or her own tax advisors the federal, state, local and foreign
tax consequences of this investment and the transactions contemplated by this
Agreement.  Participant is relying solely
on such advisors and not on any statements or representations of the Company or
any of its agents.  Participant
understands that Participant (and not the Company) shall be responsible for his
or her own tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.

 

(b)                                 Notwithstanding
anything to the contrary in this Agreement, the Company shall be entitled to
require payment (which payment may be made in cash, by deduction from other
compensation payable to Participant or in any form of consideration permitted
by the Plan) of any sums required by federal, state or local tax law to be
withheld with respect to the issuance, lapsing of restrictions on or sale of
the Shares.   The Company shall not be
obligated to deliver any stock certificate representing vested Shares to
Participant or Participant’s legal representative, or, if the Shares are held
in book entry form, to remove the notations on the book form, unless and until
Participant or Participant’s legal representative shall have paid or otherwise
satisfied in full the amount of all federal, state and local taxes applicable
to the taxable income of Participant resulting from the issuance, lapsing of
restrictions on or sale of the Shares.

 

ARTICLE IV

RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS

 

4.1                                 Legends.  The certificate or certificates representing
the Shares, if any, shall bear the following legend (as well as any legends
required by the Company’s charter and applicable state and federal corporate
and securities laws):

 

THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO FORFEITURE IN FAVOR OF
THE COMPANY AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF A
RESTRICTED STOCK AWARD AGREEMENT BETWEEN THE COMPANY AND THE 

 

A-3

 

STOCKHOLDER,
A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

4.2                                 Refusal to
Transfer; Stop-Transfer Notices.  The Company shall not be required (a) to
transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (b) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.  Participant agrees that, in
order to ensure compliance with the restrictions referred to herein, the Company
may issue appropriate “stop transfer” instructions to its transfer agent, if
any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.

 

4.3                                 Removal of
Legend.  After such time as the
Forfeiture Restriction shall have lapsed with respect to the Shares, and upon
Participant’s request, a new certificate or certificates representing such
Shares shall be issued without the legend referred to in Section 4.1 and
delivered to Participant.  If the Shares
are held in book entry form, the Company shall cause any restrictions noted on
the book form to be removed.  In
addition, for the avoidance of doubt, at such time, such Shares shall be freely
transferable and non-forfeitable, and only subject to the Stockholders
Agreement  and Exhibit D to
the Grant Notice.

 

ARTICLE V

MISCELLANEOUS

 

5.1                                 Governing Law.  This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law.

 

5.2                                 Entire
Agreement; Enforcement of Rights.   This Agreement and the Plan set forth the
entire agreement and understanding of the parties relating to the subject
matter herein and merge all prior discussions between them.  No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, shall be effective
unless in writing signed by the parties to this Agreement.

 

5.3                                 Severability.  If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. 
In the event that the parties cannot reach a mutually agreeable and
enforceable replacement for such provision, then (a) such provision shall
be excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of
the Agreement shall be enforceable in accordance with its terms.

 

5.4                                 Notices.  Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient when delivered
personally or sent by electronic mail (with return receipt requested and received)
or fax or forty-eight (48) hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified, if to the Company, at its principal offices, and if to
Participant, at Participant’s address, 

 

A-4

 

electronic
mail address or fax number in the Company’s employee records or as subsequently
modified by written notice.

 

5.5                                 Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

 

5.6                                 Successors and Assigns.  The rights and benefits of this Agreement
shall inure to the benefit of, and be enforceable by the Company’s successors
and assigns.  The Company may assign its
rights under this Agreement to any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company without the prior written consent of
Participant. The rights and obligations of Participant under this Agreement may
only be assigned with the prior written consent of the Company.

 

5.7                                 Conformity to Securities Laws. 
Participant acknowledges that the Plan is intended to conform to the
extent necessary with all provisions of the Securities Act and the Exchange Act
and any and all regulations and rules promulgated by the Securities and
Exchange Commission thereunder, and state securities laws and regulations.  Notwithstanding anything herein to the
contrary, the Plan shall be administered, and the Shares are to be issued, only
in such a manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law,
the Plan and this Agreement shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.

 

(c)                                  5.8                                 NO RIGHT TO CONTINUED SERVICE.  THE PARTICIPANT ACKNOWLEDGES AND AGREES THAT
THE LAPSING OF THE FORFEITURE RESTRICTION PURSUANT TO SECTION 2.1 HEREOF
IS EARNED ONLY BY CONTINUING SERVICE TO THE COMPANY OR ITS SUBSIDIARIES AS AN “AT
WILL” EMPLOYEE OR CONSULTANT OF THE COMPANY OR ITS SUBSIDIARIES OR AN
INDEPENDENT DIRECTOR OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR
ACQUIRING SHARES HEREUNDER).  THE
PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE FORFEITURE RESTRICTION SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS AN EMPLOYEE, CONSULTANT OR INDEPENDENT DIRECTOR FOR SUCH PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE COMPANY’S OR ANY OF
ITS SUBSIDIARIES’ RIGHT TO TERMINATE THE PARTICIPANT’S EMPLOYMENT OR SERVICE TO
THE COMPANY AT ANY TIME.

 

A-5

 

EXHIBIT B

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

VESTING
PROVISIONS

 

Capitalized
terms used in this Exhibit B and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit B
is attached or the Agreement attached thereto. 
In the event of any inconsistency between this Exhibit B, on
the one hand, and the Plan, the Grant Notice or the Agreement, on the other
hand, the provisions of this Exhibit B shall govern.

 

1.                                       Vesting.  Subject to Section 2 below, and subject
to the Company’s achievement of the Company Stock Price Hurdle (as defined
below), as of any measurement date, such aggregate number of Shares (rounded up
to the next whole Share) shall be considered to have been released from the
Forfeiture Restriction as is equal to the Sale Percentage (as defined below) as
of such date.  Notwithstanding the
foregoing, 100% of the Shares shall be released from the Forfeiture Restriction
on January 8, 2019.

 

2.                                       Accelerated
Vesting.

 

(a)                                  In the event of
Participant’s Termination of Employment by the Company without Cause (as
defined below) or by Participant for Good Reason (as defined below) prior to
the Company Stock Price Hurdle having been achieved, 100% of the Shares will be
released from the Forfeiture Restriction if the Company Stock Price Hurdle is
achieved on or before the date that is one year following such Termination of
Employment; provided that if there is not a Trading Market for the Stock
at the time of such Termination of Employment and there has not been an
unbroken period of six months during which there has been a Trading Market
between such Termination of Employment and the end of the one-year period
following such Termination of Employment, such one-year period shall be extended
until the earliest of (A) the last day of any unbroken six-month period
during which there has been a continuous Trading Market, (B) the
occurrence of a Change in Control and (C) the date that is five years
following such Termination of Employment. 
In the event of Participant’s Termination of Employment as a result of
the Company’s election not to extend the Employment Period (as defined below)
beyond the Initial Term (as defined below) prior to the Company Stock Price
Hurdle having been achieved, 100% of the Shares will be released from the
Forfeiture Restriction if the Company Stock Price Hurdle is achieved on or
before the date that is one year following the expiration of the Initial Term; provided
that if there is not a Trading Market for the Stock at the time of such
Termination of Employment and there has not been an unbroken period of six
months during which there has been a Trading Market between such Termination of
Employment and the end of the one-year period following the expiration of the Initial
Term, such one-year period shall be extended until the earliest of (A) the
last day of any unbroken six-month period during which there has been a
continuous Trading Market, (B) the occurrence of a Change in Control and (C) the
date that is five years following such Termination of Employment.

 

(b)                                 Notwithstanding
the foregoing, the accelerated release of Shares from the

 

B-1

 

Forfeiture
Restriction outlined in Section 2(a) and the increase in the Sale
Percentage pursuant to the proviso in Section 3(b) as a result of
certain Terminations of Participant’s Employment shall be contingent on
Participant’s execution and non-revocation of the Release (as defined below).

 

3.                                       Definitions.

 

(a)                                  For purposes of
this Exhibit B, the “Company Stock Price Hurdle”
shall mean (A) the Fair Market Value of the Stock (calculated pursuant to
clause (i) or (ii) of Section 2.21 of the Plan only) equaling or
exceeding $0.19 for any 20 out of 30 consecutive trading days beginning on or
after January 8, 2013 or (B) the occurrence of a Change in Control in
which the equity value per share of Stock in such Change in Control transaction
equals or exceeds $0.19.

 

(b)                                 For purposes of
this Exhibit B, the “Sale Percentage”
shall mean, as of any date, (i) 100% minus (ii) the percentage of the
shares of the Company’s Series C preferred stock (or the shares of Stock
issuable upon conversion thereof) originally purchased by the JH Stockholders
(as defined below) (including through exercise of the Additional Purchase Right
(as defined below) still held by the JH Stockholders through the date of
measurement; provided that the Sale Percentage
shall be deemed to be 100% on the first to occur of (x) January 8,
2015 or (y) the date of Participant’s Termination of Employment by the
Company without Cause (as defined below), by Participant for Good Reason (as
defined below) or as a result of Participant’s death or Disability, or in the
event of Participant’s Termination of Employment as a result of the Company’s
election not to extend the Employment Period (as defined below); and, provided, further, that
for the avoidance of doubt, if the Additional Purchase Right is exercised,
Participant will not be required to increase his ownership of Company securities
and the Sale Percentage will be applied to the Shares held as of such time.

 

(c)                                  For purposes of
this Exhibit B, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(d)                                 For purposes of
this Exhibit B, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(e)                                  For purposes of
this Exhibit B, the terms “Cause,” “Employment Period,” “Good Reason,” “Initial
Term” and “Release”
shall have the meanings given to such terms in that certain Employment
Agreement dated April 14, 2010, between Participant and the Company;
provided that the “Initial Term” shall mean such term without regard to any
extension of the Employment Period as a result of the Company’s failure to give
less than 12 months’ notice of non-extension of the Initial Term.

 

(f)                                    For purposes of
this Exhibit B, the term “Trading Market”
shall mean (A) the listing of the Stock on any (i) established
securities exchange (such as the New York Stock Exchange, the NASDAQ Global
Market and the NASDAQ Global Select Market), (ii) national market system
or (iii) automated quotation system or (B) the regular quotation of
the Stock by a

 

B-2

 

recognized
securities dealer.

 

B-3

 

EXHIBIT C

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

STOCK ASSIGNMENT

 

FOR
VALUE RECEIVED, the undersigned, [Name of Participant], hereby sells, assigns
and transfers unto IMAGE ENTERTAINMENT, INC., a Delaware corporation,
              
shares of the Common Stock of IMAGE ENTERTAINMENT, INC., a Delaware
corporation, standing in its name of the books of said corporation represented
by Certificate
No.            herewith
and do hereby irrevocably constitute and appoint                                       
to transfer the said stock on the books of the within named corporation with
full power of substitution in the premises.

 

This
Stock Assignment may be used only in accordance with the Restricted Stock Award
Grant Notice and Restricted Stock Award Agreement between IMAGE ENTERTAINMENT, INC.
and the undersigned dated
                  ,
200    .

 

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Name
  of Participant]

  

 

 

INSTRUCTIONS:  Please do not fill in the blanks other than
the signature line.  The purpose of this
assignment is to enable the Company to enforce the Forfeiture Restriction as
set forth in the Stock Award Grant Notice and Restricted Stock Award Agreement,
without requiring additional signatures on the part of the stockholder.

 

C-1

 

EXHIBIT D

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

TRANSFER
RESTRICTIONS

 

Capitalized
terms used in this Exhibit D and not defined below shall have the
meanings given them in the Plan, the Grant Notice to which this Exhibit D
is attached or the Agreement attached thereto.

 

1.                                       Transfer
Restrictions.  The
following transfer restrictions shall apply to the Shares and shall be in
addition to the restrictions set forth in Section 2.3 and Exhibit B
of the Agreement.

 

(a)                                  In
consideration of the grant of the Shares, Participant agrees that Participant
will not (and will cause any spouse or immediate family of the spouse or the
undersigned living in the Participant’s household not to), without the prior
written consent of the Administrator (which consent may be withheld in its sole
discretion), directly or indirectly, sell, offer, contract or grant any option
to sell (including without limitation any short sale), pledge, transfer,
establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under
the Exchange Act, or otherwise dispose of any of the Shares currently or
hereafter owned either of record or beneficially (as defined in Rule 13d-3
under the Exchange Act) by Participant (or such spouse or family member), or
publicly announce an intention to do any of the foregoing, unless such Shares
constitute Transferable Shares (as defined below).

 

(b)                                 In the event of
Participant’s Termination of Employment by the Company without Cause or
Participant’s resignation for Good Reason, the foregoing restrictions shall not
apply to the transfer or sale of any Shares solely to satisfy tax withholding
obligations related to the vesting of the Shares.

 

(c)                                  In addition,
the foregoing restrictions shall not apply to the transfer of any or all of the
Shares, either during his lifetime or on death, by gift, will or the laws of
descent and distribution to Participant’s immediate family or to a trust the
beneficiaries of which are exclusively Participant and/or a member or members
of his immediate family (provided that
it shall be a condition to such transfer that the donee, beneficiary,
distributee or transferee executes and delivers to Company an agreement stating
that he, she or it is receiving and holding the Shares subject to the
provisions of the Agreement, and there shall be no further transfer or
distribution of such Shares, except in accordance with the Agreement).

 

(d)                                 In addition,
notwithstanding the restrictions in this Exhibit D, the undersigned
may at any time after the date hereof enter into a trading plan or modify an
existing trading plan meeting the requirements of Rule 10b5-1 under the
Exchange Act relating to the sale of the Shares, if then permitted by the
Company and applicable law (provided that
the Shares subject to such trading plans may not be sold unless and until they
are Transferable Shares).

 

 

2.                                       Definitions.

 

(a)                                  For the
purposes of this Exhibit D, “immediate family”
shall mean the spouse, domestic partner, lineal descendant (including adopted
children), father, mother, brother or sister of the transferor.

 

(b)                                 For purposes of
this Exhibit D, “Transferable Shares”
shall mean, as of any measurement date, such number of the Shares as is equal
to the greater of (i) the Sale Percentage as of such date or (ii) the
Release Percentage as of such date.

 

(c)                                  For purposes of
this Exhibit D, the “Release Percentage”
shall mean (i) 0% prior to January 8, 2015 and (ii) 100% on and
after January 8, 2015.

 

(d)                                 For purposes of
this Exhibit D, the “Sale Percentage”
shall mean, as of any measurement date, (i) 100% minus (ii) the
percentage of the shares of the Company’s Series C preferred stock (or the
shares of Stock issuable upon conversion thereof) originally purchased by the
JH Stockholders (as defined below) (including through exercise of the Additional
Purchase Right (as defined below)) still held by the JH Stockholders through
the date of measurement; provided that,
for the avoidance of doubt, if the Additional Purchase Right is exercised,
Participant will not be required to increase his ownership of Company
securities and the Sale Percentage will be applied to the Shares held as of
such time.

 

(e)                                  For purposes of
this Exhibit D, “JH Stockholders”
shall have the meaning given to such term in the Stockholders Agreement.

 

(f)                                    For purposes of
this Exhibit D, “Additional Purchase Right”
shall have the meaning given to such term in that certain Securities Purchase
Agreement dated as of December 21, 2009, among the Company, JH Partners,
LLC and the Investors listed on the schedule thereto, as amended.

 

(g)                                 For purposes of
this Exhibit D, the terms “Cause” and “Good Reason” shall have the meanings
given to such terms in that certain Employment Agreement dated April 14,
2010, between Participant and the Company.

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