Document:

Exhibit
10.1

Liquidmetal
Technologies, Inc.

25800 Commercentre Drive, Suite
100

Lake
Forest, California  92630

November
13, 2006

Mr.
James Kang

Hyundai Hyperiod

Youngsan-Gu, Hannam-Dong

Seoul,
Korea

Re:  Amendment of Stock Option Agreements and
Consulting Agreement

This
letter agreement sets forth the terms upon which Liquidmetal Technologies, Inc.
(the “Company”) has agreed to amend certain stock option agreements and the
consulting agreement dated October 20, 2006 (the “Consulting Agreement”) between
you and the Company.

Effective
as of the date of this letter and notwithstanding the termination of your
employment with the Company, the Company has agreed that those options
previously granted to you under the Company’s various option plans (the “Plans”)
will continue to be exercisable by you as if you had been employed by the
Company on an uninterrupted basis at all times so long as you continue to be
engaged by the Company as a consultant or an employee.  Specifically, the following stock options
shall be subject to the extension.

	
  Plan

  	
   

  	
  Date of 

  Grant

  	
   

  	
  Grant Type

  	
   

  	
  Exercise

  Price

  	
   

  	
  No. Of

  Remaining

  Options 

  Extended

  	
   

  
	
  1996 LT
  Incentive Plan

  	
   

  	
  4/8/1998

  	
   

  	
  Incentive

  	
   

  	
  $

  	
  2.325

  	
   

  	
  43,010

  	
   

  
	
  Non-Qualified

  	
   

  	
  4/8/1998

  	
   

  	
  Non-Qualified

  	
   

  	
  $

  	
  2.325

  	
   

  	
  253,764

  	
   

  
	
  1996 LT
  Incentive Plan

  	
   

  	
  5/21/2001

  	
   

  	
  Non-Qualified

  	
   

  	
  $

  	
  6.200

  	
   

  	
  2,532,359

  	
   

  
	
  1996 LT Incentive Plan

  	
   

  	
  5/21/2001

  	
   

  	
  Incentive

  	
   

  	
  $

  	
  6.200

  	
   

  	
  48,387

  	
   

  

 

Notwithstanding
the foregoing, the options for which you will have an extended exercise period
as set forth above, shall in all other respects continue to be subject to the
terms and conditions of the Plans and the applicable stock option agreements
(including conditions and restrictions on exercise, vesting, termination and
expiration of grant).

Also
effective as of the date of this letter, the Consulting Agreement shall be
amended whereby “Section 5. Termination; paragraph (a) Death” shall be stricken
in its entirety and replaced with the following:

 

5.              Termination; (a) Death:  In
the event of Consultant’s death, the Consultant’s estate shall be entitled to
receive the consulting fees that the Consultant would otherwise be entitled to receive
under this Agreement on an uninterrupted basis up through December 31, 2009, the
termination date of this Agreement.

If
you are in agreement with the terms, conditions, and restrictions of this
letter agreement, please sign below to indicate your assent.  Upon your signature, this letter agreement
shall be deemed to be an amendment to the above-referenced stock options
agreements.

	
   

  	
  Sincerely

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Larry Buffington

  	
   

  
	
   

  	
  Larry Buffington, President and CEO

  
	
   

  
	
   

  
	
  Acknowledged and Agreed as of

  
	
  the 13th day of November, 2006

  
	
   

  
	
  Signature:

  	
  /s/ James Kang

  	
   

  
	
   

  	
  James Kang, individually

  
					

 

 2Exhibit
4.1

	
  COMMON STOCK

  

  PAR VALUE $.0001

  	
  

  	
  COMMON
  STOCK

  

 

	
  Certificate

  	
   

  	
   

  	
  Shares

  
	
  Number

  	
   

  	
   

  	
  * * 600620 * * * * * *

  
	
  ZQ 000223

  	
   

  	
  IMAGE
  ENTERTAINMENT, INC.

  	
  * * * 600620 * * * * *

  
	
   

  	
   

  	
  INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

  	
  * * * * 600620 * * * *

  
	
   

  	
   

  	
  100,000,000 AUTHORIZED SHARES $.0001 PAR VALUE

  	
  * * * * * 600620 * * *

  
	
   

  	
   

  	
   

  	
  * * * * * * 600620 * *

  

 

	
  THIS CERTIFIES THAT

  	
  

  	
  CUSIP 452439 20
  1

  SEE REVERSE FOR CERTAIN DEFINITIONS

  
	
   

  	
   

  	
   

  
	
  is the owner of

  	
  

  	
   

  

 

FULLY-PAID AND NON-ASSESSABLE SHARES OF THE COMMON
STOCK, OF

IMAGE
ENTERTAINMENT, INC.

transferable on the books of
the Corporation by the holder hereof in person or by holder’s duly authorized
attorney, upon surrender of this Certificate properly endorsed. This
Certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Articles of Incorporation and Bylaws of
the Corporation as now or hereafter amended (a copy of which is on file with
the Transfer Agent), to all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer Agent.

In Witness
Whereof, the
facsimile seal of the Corporation and the facsimile signatures of its duly authorized
officers.

	
  
President & CEO

  

  	
  

  	
  DATED  <<Month Day, Year>>

  

  COUNTERSIGNED AND REGISTERED:

  COMPUTERSHARE TRUST CO., INC.

  (DENVER)

  TRANSFER AGENT AND REGISTRAR,

  

  

 

	
  Corporate Secretary

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  AUTHORIZED SIGNATURE

  	
   

  

 

SECURITY
INSTRUCTIONS ON REVERSE

 

TRANSFER FEE: $25.00 PER CERTIFICATE ISSUED

IMAGE
ENTERTAINMENT, INC.

THE CORPORATION WILL FURNISH
TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE A FULL STATEMENT OF THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS, OF EACH CLASS OF STOCK OR SERIES THEREOF AUTHORIZED TO BE
ISSUED AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES
AND/OR RIGHTS.

	
  The following abbreviations, when used in the
  inscription on the face of this certificate, shall be construed as though
  they were written out in full according to applicable laws or regulations:

  
	
   

  
	
  TEN COM - as tenants in common

  	
  UNIF GIFT MIN ACT-

  	
  Custodian

  	
   

  
	
   

  	
   

  	
  (Cust)

  	
  (Minor)

  	
   

  
	
  TEN ENT  - as tenants by the entireties

  	
   

  	
  under Uniform Gifts to Minors Act

  
	
   

  	
   

  	
  (State)

  
	
  JT TEN     - as joint
  tenants with right of 

  	
  UNIF TRF MIN ACT

  	
  Custodian (until
  age)

  	
   

  
	
                      survivorship
  and not as tenants 

  	
   

  	
  (Cust)

  	
  (Minor)

  
	
                      in
  common

  	
   

  	
  under Uniform Transfers to Minors Act

  	
   

  
	
   

  	
   

  	
   

  	
  (State)

  
	
                      Additional
  abbreviations may also be used though not in the above list.

  	
   

  
											

 

THIS CERTIFICATE ALSO
EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A RIGHTS
AGREEMENT BETWEEN IMAGE ENTERTAINMENT, INC., AND COMPUTERSHARE TRUST COMPANY,
INC., DATED AS OF OCTOBER 31, 2005 (THE “RIGHTS AGREEMENT”), THE TERMS OF WHICH
ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL EXECUTIVE OFFICES OF IMAGE ENTERTAINMENT, INC.  UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN
THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES
AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE.  IMAGE ENTERTAINMENT, INC. WILL MAIL TO THE
HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER
RECEIPT OF A WRITTEN REQUEST THEREFOR. 
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS ISSUED TO ANY PERSON WHO BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE
RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY ANY
SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.

	
  For value received, 

  	
   

  	
   hereby sell, assign and transfer unto

  
	
   

  	
   

  
	
  PLEASE INSERT SOCIAL SECURITY

  	
   

  	
   

  
	
  OR OTHER IDENTIFYING NUMBER

  	
   

  	
   

  
	
  OF ASSIGNEE

  	
   

  	
   

  
	
   

  
	
   

  
	
  (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
  INCLUDING POSTAL ZIP CODE, OF ASSIGNEE)

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  	
   

  	
  Shares

  
	
  of the capital stock represented by the within
  Certificate, and do hereby irrevocably constitute and appoint

  
	
   

  
	
   

  	
   

  	
  Attorney 

  
	
  to transfer the said stock on the books of the
  within-named Corporation with full power of substitution in the premises.

  
							

 

	
  Dated: 

  	
   

  	
  20

  	
   

  	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Signature(s) Guaranteed:

  	
   

  
	
   

  	
   

  
	
  BY:

  	
   

  	
   

  	
  Signature: 

  	
   

  	
   

  
	
  THE SIGNATURE(S) SHOULD BE
  GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION 

  (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP
  IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE
  17Ad-15.

  	
   

  	
  Notice:   THE SIGNATURE TO THIS ASSIGNMENT MUST
  CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN
  EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.

  	
   

  
												

 

	
  SECURITY INSTRUCTIONS

  	
   

  
	
  THIS IS WATERMARKED PAPER, DO NOT ACCEPT WITHOUT
  NOTING

  WATERMARK HOLD TO LIGHT TO VERIFY WATERMARK.Exhibit 4.6

 

AMENDMENT AND EXCHANGE AGREEMENT

THIS AMENDMENT AND
EXCHANGE AGREEMENT (this “Agreement”) is
made as of this 10th day of November, 2006, by and among Image Entertainment,
Inc., a Delaware corporation, with headquarters located at 20525 Nordhoff Street, Suite 200, Chatsworth,
California 91311 (the “Company”)
and Portside Growth and
Opportunity Fund (the “Investor”).

Recitals

WHEREAS, the
Company, the Investor are parties to that certain Securities Purchase
Agreement, dated as of August 30, 2006 (the “Securities
Purchase Agreement”), pursuant to which, among other things, the
Investor purchased from the Company (i) senior convertible notes (the “Notes”), which are convertible into shares
of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) (the Notes as converted, the
“Conversion Shares”), in
accordance with the terms thereof, and (ii) warrants (the “Existing
Warrants”), which are exercisable
into shares of Common Stock (the “Existing  Warrant Shares”).  Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings ascribed to them in
the Securities Purchase Agreement; and

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

WHEREAS, the
Company and the Investor desire to enter into this Agreement, pursuant to
which, among other things, (i) the Investor shall exchange its Existing Warrant
for a warrant in the form attached hereto as Exhibit A (the “Replacement Warrant”), which shall be convertible into Common Stock (as converted,
the “Replacement Warrant Shares”),
in accordance with the terms thereof and (ii) certain terms of the Securities
Purchase Agreement, Note and Registration Rights Agreement shall be amended,
including, without limitation, to ensure that the Replacement Warrant Shares
shall be covered by the terms set forth in the Registration Rights Agreement;
and

WHEREAS, the exchange of the Existing Note
for the Replacement Note is being made in reliance upon the exemption from
registration provided by Section 3(a)(9) of the 1933 Act.

NOW,
THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

1.                                       EXCHANGE.

(a)           Exchange. 
Subject to satisfaction (or waiver) of the conditions set forth in
Sections 4 and 5 below, the Investor shall surrender to the Company at the
closing contemplated by this Agreement (the “Closing”) the Existing Warrant and the Company shall

 

 

issue and deliver to the Investor the Replacement Warrant for the same
number of Warrant Shares of the Existing Warrant being so exchanged.

 

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

2.                                       AMENDMENTS
TO THE TRANSACTION DOCUMENTS.

(a)           Amendments to Note.

(i)            Section 4(a) shall
be amended as follows:

(1)         Sections 4(a)(xi) and
4(a)(xii) shall be renumbered as Sections 4(a)(xii) and 4(a)(xiii),
respectively.

(2)         The following shall be
inserted as a new Section 4(a)(xi):

“(xi)         The Company’s failure to deliver shares
of Common Stock to the Holder upon the Conversion of any Conversion Amount due
to the limitation on conversion set forth in Section 3(d)(ii);

(ii)           The Notes are
hereby amended by inserting the following paragraph in the place of Section
5(a) of the Notes:

“The Company shall not enter into or
be party to a Fundamental Transaction unless the Successor Entity assumes in
writing all of the obligations of the Company under this Note and the other
Transaction Documents in accordance with the provisions of this Section 5(a)
pursuant to written agreements in form and substance satisfactory to the
Required Holders and approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Notes in
exchange for such Notes a security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to the Notes, including, without
limitation, having a principal amount and interest rate equal to the principal
amounts then outstanding and the interest rates of the Notes held by such
holder, having similar conversion rights as the Notes, and satisfactory to the
Required Holders; provided that the provisions of Section 14 need not be
included in the  security of the
Successor Entity.  Upon
the occurrence of any Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Note referring to the “Company”
shall refer instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the Company under
this Note with the same effect as if such Successor Entity had been named as
the Company

 

 

herein.  Upon consummation of the Fundamental
Transaction, the Successor Entity shall deliver to the Holder confirmation that
there shall be issued upon conversion or redemption of this Note at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Company’s Common Stock (or
other securities, cash, assets or other property) issuable upon the conversion or redemption of the Notes prior to such
Fundamental Transaction, such shares of
the publicly traded common stock (or their equivalent) of the Successor Entity
(including its Parent Entity) or if the Successor Entity (including its Parent
Entity) is a privately held company, the common equity of the Successor Entity,
as adjusted in accordance with the provisions of this Note.  The provisions of this Section shall
apply similarly and equally to successive Fundamental Transactions and shall be
applied without regard to any limitations on the conversion or redemption of
this Note. “

(iii)          The Notes are
hereby amended by inserting the following paragraph in the place of Section
5(b) of the Notes:

“No
sooner than fifteen (15) days nor later than ten (10) days prior to the
consummation of a Change of Control, but not prior to the public announcement
of such Change of Control, the Company shall deliver written notice thereof via
facsimile and overnight courier to the Holder (a “Change of Control Notice”). 
At any time during the period beginning after the Holder’s receipt of a
Change of Control Notice and ending twenty (20) Trading Days after the
consummation of such Change of Control, the Holder may require the Company to
redeem all or any portion of this Note by delivering written notice thereof (“Change
of Control Redemption Notice”)
to the Company, which Change of Control Redemption Notice shall indicate
the Conversion Amount the Holder is electing to redeem.  The portion of this Note subject to
redemption pursuant to this Section 5 shall be redeemed by the Company in cash
at a price equal to the greater of (i) the product of (x) the Conversion Amount
being redeemed and (y) the quotient determined by dividing (A) the greater of
the Closing Sale Price of the Common Stock immediately prior to the
consummation of the Change of Control, the Closing Sale Price immediately
following the public announcement of such proposed Change of Control and the
Closing Sale Price of the Common Stock immediately prior to the public
announcement of such proposed Change of Control by (B) the Conversion Price and
(ii) 120% of the Conversion Amount being redeemed (the “Change of Control Redemption
Price”).  Notwithstanding the foregoing, if the Successor Entity (including its Parent Entity)
is a privately held company, at any time during the period beginning
after the Holder’s receipt of a Change of Control Notice and ending twenty (20)
Trading Days after the consummation of such Change of Control, the Company may
require the Holder to redeem all of this Note by delivering written notice
thereof (“Company Change of Control Redemption Notice”) to the Holder.  The Note shall be redeemed by the Company in
cash at a price equal to the greater of (i) the product of (x) the Conversion
Amount being redeemed and (y) the quotient determined by dividing (A) the
greater of the Closing Sale Price of the Common Stock immediately prior to the
consummation of the Change of Control, the Closing Sale Price

 

 

immediately
following the public announcement of such proposed Change of Control and the
Closing Sale Price of the Common Stock immediately prior to the public
announcement of such proposed Change of Control by (B) the Conversion Price and
(ii) 125% of the Conversion Amount being redeemed (the “Company Change of Control Redemption Price”). 
Redemptions required by this Section 5 shall be made in accordance with
the provisions of Section 12 and shall have priority to payments to
stockholders in connection with a Change of Control.  To the extent redemptions required by this
Section 5(b) are deemed or determined by a court of competent jurisdiction to
be prepayments of the Note by the Company, such redemptions shall be deemed to
be voluntary prepayments. 
Notwithstanding anything to the contrary in this Section 5, but subject
to Section 3(d), until the Change of Control Redemption Price or the Company
Change of Control Redemption Price, as applicable, is paid in full, the
Conversion Amount submitted for redemption under this Section 5(c) may be
converted, in whole or in part, by the Holder into Common Stock pursuant to
Section 3.  The parties hereto agree that
in the event of the Company’s redemption of any portion of the Note under this
Section 5(b), the Holder’s damages would be uncertain and difficult to estimate
because of the parties’ inability to predict future interest rates and the
uncertainty of the availability of a suitable substitute investment opportunity
for the Holder.  Accordingly, any
redemption premium due under this Section 5(b) is intended by the parties to
be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of
its investment opportunity and not as a penalty.”

(iv)          The
defined terms “Redemption Notice”, “Redemption Premium” and “Redemption Price”
contained in the Note shall be amended and restated in its entirety as follows:

““Redemption Notices” means, collectively, the Event of
Default Redemption Notices, the Change of Control Redemption Notices, the
Company Change of Control Redemption Notice and the Installment Notice, each of the foregoing, individually, a
Redemption Notice.

““Redemption Premium” means (i) in the case of the
Events of Default described in Section 4(a)(i) - (vi) and (ix) - (xiii), 120%
or (ii) in the case of the Events of Default described in Section 4(a)(vii) -
(viii), 100%.”

““Redemption Prices” means, collectively, the
Event of Default Redemption Price, Change of Control Redemption Price, Company
Change of Control Redemption Price and the Installment Price and,
each of the foregoing, individually, a Redemption Price.

(b)           Amendments
to Securities Purchase Agreements and Registration Rights Agreement.  

 

 

(i)            The Securities
Purchase Agreement and the Registration Rights Agreement are hereby amended as
follows:

(1)         All references to
“Warrants” shall mean, and are hereby replaced with, the “Replacement
Warrants”;

(2)         All references to
“Warrant Shares” shall mean, and are hereby replaced with, the “Replacement
Warrant Shares”; and

(3)         The defined term
“Transaction Documents” is hereby amended to include this Agreement and the
Replacement Warrants.

(ii)           The Securities
Purchase Agreement is hereby amended by inserting the following paragraph in
the place of Section 4(e) of the Securities Purchase Agreement:

“Financial Information.  The Company agrees to send the following to
each Investor (as defined in the Registration Rights Agreement) during the
Reporting Period (i) unless the following are filed with the SEC through EDGAR
and are available to the public through the EDGAR system, within one (1)
Business Day after the filing thereof with the SEC, a copy of its Annual
Reports and Quarterly Reports on Form 10-K, 10-KSB, 10-Q or 10-QSB, any interim
reports or any consolidated balance sheets, income statements, stockholders’
equity statements and/or cash flow statements for any period other than annual,
any Current Reports on Form 8-K and any registration statements (other than on
Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on the same day as
the release thereof, facsimile or e-mailed copies of all press releases issued
by the Company or any of its Subsidiaries, and (iii) copies of any notices and
other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.  Notwithstanding anything
herein to the contrary, upon consummation of a Fundamental Transaction (as
defined in the Notes) in which the Successor Entity (as defined in the Notes)
is a privately held company, the Company shall not be obligated to provide to
the Investors the reports required by the proceeding sentence, but rather shall
send to each investor the following: (i) annual financial reports, (ii)
quarterly financial reports and (iii) all such other financial reports as the
Company gives to the holders of any Indebtedness.  As used herein, “Business Day”
means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain
closed.”

(iii)          The Registration
Rights Agreement is further amended by amending and restating the defined terms
“Filing Deadline”, “Effectiveness Deadline” and “Required Registration Amount”
in their entirety as follows:

““Filing Deadline” means November 14, 2006.”;

““Effectiveness Deadline” means January 13,
2007.”.

 

 

““Required Registration Amount” for the
Registration Statement initially means the sum of (i) nineteen and ninety nine
hundredths of a percent (19.99%) of the issued and outstanding Common Stock and
(ii) the number of Warrant Shares issuable pursuant to the Warrants, assuming
exercise of the Warrants at the Floor Price (as defined in the Warrants)
(without regard to any limitations on exercise of the Warrants) and in the
event the Company obtains the approval of its stockholders as required by the
applicable rules of the Principal Market (as defined in the Notes) for
issuances of shares of Common Stock in excess of the Exchange Cap (as defined
in the Notes) then Required Registration Amount shall mean 150% of the sum of
(i) the aggregate of the maximum number of Conversion Shares issued and
issuable pursuant to the Notes at the then applicable Conversion Price as of
the trading day immediately preceding the applicable date of determination,
(ii) the number of Warrant Shares issued and issuable pursuant to the Warrants
as of the trading day immediately preceding the applicable date of
determination and (iii) the number of Interest Shares issued or issuable
pursuant to the terms of the Notes as of the trading date immediately preceding
the applicable date of determination (without regard to any limitations on
conversion of the Notes or exercise of the Warrants), in each case subject to
adjustment as provided in Section 2(e).”

(iv)          The
Registration Rights Agreement is hereby amended by inserting the following
paragraph in the place of Section 2(b) of the Registration Rights Agreement:

“Allocation of Registrable Securities.  The initial number of Registrable Securities
included in any Registration Statement and any increase in the number of
Registrable Securities included therein shall be allocated pro rata among the
Investors based on the number of Registrable Securities held by each Investor
at the time the Registration Statement covering such initial number of
Registrable Securities or increase thereof is declared effective by the
SEC.  In the event that an Investor sells
or otherwise transfers any of such Investor’s Registrable Securities, each
transferee shall be allocated a pro rata portion of the then remaining number
of Registrable Securities included in such Registration Statement for such
transferor.  Any shares of Common Stock
included in a Registration Statement and which remain allocated to any Person
which ceases to hold any Registrable Securities covered by such Registration
Statement shall be allocated to the remaining Investors, pro rata based on the
number of Registrable Securities then held by such Investors which are covered
by such Registration Statement.  In no
event shall the Company include any securities other than Registrable
Securities on any Registration Statement without the prior written consent of
the Required Holders; provided, however, that the Company may include on any
Registration Statement up to 270,198 shares of Common Stock issued by the Company
in 2002 to Standard Broadcasting Corporation Limited and up to 100,000 shares of
Common Stock issued by the Company in 2003 to Image Investors Co.”

(c)           Amendments to the Transaction Documents.

 

 

(i)            Notwithstanding
anything in the Transaction Documents to the contrary, upon consummation of a
Fundamental Transaction (as defined in the Notes) in which the Successor Entity
(as defined in the Notes) is a privately held Company, the following provisions
shall no longer apply:

(1)         Sections 4(c), 4(f)
and 4(j) of the Securities Purchase Agreement and the last sentence of Section
4(k) of the Securities Purchase Agreement; and

(2)         Section 4(a)(ii) of the Notes.

3.                                       REPRESENTATIONS
AND WARRANTIES.

(a)           Authorization; Enforcement; Validity. 
The Company has the requisite power and authority to enter into and
perform its obligations under this Agreement. 
This Agreement has been duly and validly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws from time to time in effect that affect creditors’ rights
generally, and by legal and equitable limitations on the availability of specific
remedies.

(b)           No
Conflicts.  The execution, delivery and performance by
the Company of this Agreement and consummation by the Company of the
transactions contemplated by this Agreement do not and will not: (i) violate
the organizational documents of the Company, 
(ii) violate any decree or judgment of any court or other governmental
authority applicable to or binding on the Company; (iii) violate any provision
of any federal or state statute, rule or regulation which is applicable to the
Company; or (iv) violate any contract to which the Company or any of its assets
or properties are bound, or conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of , any agreement, indenture or instrument to which Company is a
party.

(c)           Approvals.  The Company has obtained all governmental,
regulatory or third party consents and approvals if any, and approval from its stockholders,
necessary, if any, to consummate the transactions contemplated by this
Agreement.

(d)           Solvency.  Neither the Company nor any of its
Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy
law nor does the Company have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact that would reasonably lead a creditor to do so.  The Company and its Subsidiaries,
individually and on a consolidated basis, are not as of the date hereof, and
after giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent (as defined below).  For purposes of this Section 3(d), “Insolvent” means, with respect to any Person (i) the present
fair saleable value of such Person’s assets is less than the amount required to
pay such Person’s total Indebtedness, (ii) such Person is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities

 

 

become absolute and
matured, (iii) such Person intends to incur or believes that it will incur
debts that would be beyond its ability to pay as such debts mature or (iv) such
Person has unreasonably small capital with which to conduct the business in
which it is engaged as such business is now conducted and is proposed to be
conducted

4.                                       CONDITIONS
TO COMPANY’S OBLIGATIONS HEREUNDER.

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

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

(b)           The Investor shall have delivered to the Company its
Existing Warrant for cancellation.

(c)           The representations and warranties of the Investor in
Section 3(a) hereof shall be true and correct as of the date when made and as
of the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct
as of such specified date).

5.                                       CONDITIONS
TO INVESTOR’S OBLIGATIONS HEREUNDER.

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

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

(b)           The
Company shall have executed and delivered to the Investor the Replacement
Warrant being issued to the Investor at the Closing.

(c)           The representations and warranties of the Company in Section 3(b)
hereof shall be true and correct as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties
that speak as of a specific date, which shall be true and correct as of such
specified date).

6.                                       CERTAIN
COVENANTS AND AGREEMENTS.

(a)           Disclosure of Transactions and Other Material
Information.  On or before 8:30 a.m.,
New York Time, on the first
Business Day following the date of this Agreement, the Company shall file a
Current Report on Form 8-K describing the terms of the transactions
contemplated by this Agreement and attaching a copy of this Agreement.

 

 

(b)           Fees and Expenses. 
The Company shall pay upon execution of this Agreement an expense
allowance to the Investor not to exceed $25,000 for reimbursement of reasonable
legal expenses incurred in connection with the execution of this Agreement and
any and all documents executed in connection therewith.

7.                                       MISCELLANEOUS.

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

(b)           Governing Law; Jurisdiction.  All questions concerning the construction,
validity, enforcement and interpretation of this Amendment shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York
or any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. 
Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by mailing a
copy thereof to such party at the address for such notices to it under this
Amendment and agrees that such service shall constitute good and sufficient
service of process and notice thereof. 
Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR
IN CONNECTION WITH OR ARISING OUT OF THIS AMENDMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

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

(d)           Severability. 
If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction.

(e)           Further Assurances. 
Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably

 

 

request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.

(f)            Effect
of Agreement.  Except as modified
hereby, each of the Transaction Documents (as defined in the Securities Purchase
Agreement) shall remain in full force and effect.

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

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

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 

 

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

	
  

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  IMAGE
  ENTERTAINMENT, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JEFF M.
  FRAMER 

  	
   

  
	
   

  	
   

  	
  Name: Jeff M.
  Framer 

  
	
   

  	
   

  	
  Title: Chief
  Financial Officer

  

 

 

 

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

	
  

  	
  INVESTOR:

  
	
   

  	
   

  
	
   

  	
  PORTSIDE GROWTH AND OPPORTUNITY
  FUND

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JEFFREY SMITH

  	
   

  
	
   

  	
   

  	
  Name: Jeffrey Smith

  
	
   

  	
   

  	
  Title: Authorized Signatory

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