Document:

Exhibit 10.1

10.1         Description of Chief Financial Officer
compensatory arrangement.

William J. Kenealy, the
Company’s Chief Financial Officer as of September 29, 2006, receives an annual
base salary of $150,000 for 2006, to be increased on January 1, 2007 to
$170,000.  He is also eligible to
participate in the Company’s Bonus Plan.  In addition, Mr. Kenealy was
granted options to purchase 50,000 shares of the Company’s common stock on
September 29, 2006.  The options vest in increments of 10,000 shares per year
commencing on September 29, 2007, at an exercise price of $2.45 per share, the
Fair Market Value per share of the Company’s common stock on the date of grant,
as described in the Company’s stock option plan under which such options were
issued.

 1Exhibit 10.1

 

AMENDMENT
NUMBER FOUR

TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This AMENDMENT
NUMBER FOUR TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered
into as of November 13, 2006, by WELLS FARGO FOOTHILL, INC., a California corporation (“Lender”),
and IMAGE ENTERTAINMENT, INC., a Delaware
corporation, f/k/a Image Entertainment, Inc., a California corporation, (“Borrower”),
with reference to the following:

WHEREAS, Borrower and Lender are
parties to that certain Amended and Restated Loan and Security Agreement, dated
as of August 10, 2005 (as amended, restated, supplemented, or otherwise
modified from time to time, the “Loan Agreement”);

WHEREAS, Borrower has requested
that Lender make certain amendments to the Loan Agreement and grant a waiver of
certain Events of Default that have occurred under the Loan Agreement; and

WHEREAS, subject to the terms
and conditions set forth herein, Lender is willing to make the amendments and
grant the consents and waiver requested by Borrower.

NOW, THEREFORE, in consideration
of the foregoing and the mutual covenants herein contained, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:

1.               Defined Terms.  Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Loan
Agreement, as amended hereby.

2.               Amendments to
Loan Agreement.

(a)                              Section
1.1 of the Loan Agreement is hereby amended by adding the
following definitions in proper alphabetical order or amending and restating
the following definitions, as the case may be:

““Applicable Margin” means 1.5%.

““Business Day”
means any day that is not a Saturday, Sunday, or other day on which banks are
authorized or required to close in the State of California.”

““Eligible
Accounts” means those Accounts, net of finance charges, created by any
Borrowing Base Party in the ordinary course of business that arise out of such
Borrowing Base Party sale of goods or rendition of services, that strictly
comply with each and all of the representations and warranties respecting
Accounts made in the Loan

 

Documents, and that are
and at all times continue to be acceptable to Foothill in all respects; provided,
however, that standards of eligibility may be fixed and revised from
time to time by Foothill in Foothill’s reasonable credit judgment.  Eligible Accounts shall not include the
following:

 

(a)                                Accounts
that the Account Debtor has failed to pay within forty-five (45) days of the
due date set forth in the invoice or Accounts with selling terms of more than
ninety (90) days, and all Accounts owed by an Account Debtor that has failed to
pay fifty percent (50%) or more of its Accounts owed to Borrower within forty-five
(45) days of the due date set forth in the invoice;

(b)                                 Accounts
with respect to which the Account Debtor is an officer, employee, Affiliate, or
agent of Borrower;

(c)                                Accounts
with respect to which goods are placed on consignment, guaranteed sale, sale or
return, sale on approval, or bill and hold,
are C.O.D. or subject to conditional sale contracts, or other terms by reason
of which the payment by the Account Debtor may be conditional;

(d)                                 Accounts
with respect to which the Account Debtor is not resident of the United States
or Canada, and which are not either (i) covered by credit insurance in
form and amount, and by an insurer, satisfactory to Foothill, or
(ii) supported by one or more letters of credit that are assignable by
their terms and have been delivered to Foothill in an amount, of a tenor, and
issued by a financial institution, acceptable to Foothill;

(e)                                Accounts
with respect to which the Account Debtor is either (i) the United States
or any department, agency, or instrumentality of the United States (exclusive,
however, of Accounts with respect to which Borrower has complied, to the
satisfaction of Foothill, with the Assignment of Claims Act, 31 U.S.C.
§ 3727), or (ii) any State of the United States;

(f)                                    Accounts
with respect to which Borrower or any of its Subsidiaries is or may become
liable to the Account Debtor for goods sold or services rendered by the Account
Debtor to such Person (exclusive, however, of Accounts with respect to which
Borrower shall have obtained an agreement, in form and substance satisfactory
to Foothill, from the Account Debtor agreeing to waive its rights of offset as
against Foothill);

(g)                               Accounts
with respect to an Account Debtor whose total obligations owing to the
Borrowing Base Parties exceed ten percent (10%) of all Eligible Accounts, to
the extent of the obligations owing by such Account Debtor in excess of such
percentage; provided, however, (i) in

 2
 

 

the case of Accounts with
respect to which Anderson Merchandisers (“Anderson”) is the Account
Debtor, Eligible Accounts shall not include Accounts thereof owing to Borrowing
Base Parties to the extent that the total obligations of Anderson owing to the
Borrower and its Subsidiaries exceed twelve and one-half percent (12.5%) of all
Eligible Accounts, it being understood that such percentage threshold for
Accounts owing by Anderson is subject to downward modification in Foothill’s
sole discretion based on Foothill’s continuing review, from time to time, of
the performance of such Accounts, and (ii) in the case of Accounts with
respect to which Best Buy, Inc. (“Best Buy”) is the Account Debtor,
Eligible Accounts shall not include Accounts thereof owing to the Borrowing
Base Parties to the extent that the total obligations of Best Buy owing to the
Borrower and its Subsidiaries exceed twelve and one-half percent (12.5%) of all
Eligible Accounts; and (iii) in the case of Accounts with respect to which AEC
OneStop (“AEC”) is the Account Debtor, Eligible Accounts shall not
include Accounts thereof owing to the Borrowing Base Parties to the extent that
the total obligations of AEC owing to the Borrower and its Subsidiaries exceed
twelve and one-half percent (12.5%) of all Eligible Accounts;

 

(h)                                 Accounts
arising from rebilling or chargebacks with respect to short billing on prior
invoices;

(i)                                   Accounts
with respect to which the Account Debtor disputes liability or makes any claim
with respect thereto (to the extent of the amount of the dispute or claim), or
is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;

(j)                                     Accounts
the collection of which Foothill, in its reasonable credit judgment, believes
to be doubtful by reason of the Account Debtor’s financial condition;

(k)                                  Accounts
that are payable in other than United States Dollars;

(1)                                Accounts
with respect to which the goods giving rise to such Account have not been
shipped and billed to the Account Debtor, the services giving rise to such
Account have not been performed and accepted by the Account Debtor, or the
Account otherwise does not represent a final sale;

(m)                             Accounts
that represent progress payments or other advance billings that are due prior
to the completion of performance by Borrower of the subject contract for goods
or services; and

(n)                                 Accounts
that are not subject to a valid and perfected first priority security interest
in favor of Foothill.”

 3
 

 

““Loan Documents” means this Agreement, the
Lockbox Agreements, the Disbursement Letter, the Letters of Credit, the
Trademark Security Agreement, the Guaranty, the Guarantor Security Agreement,
the Stock Pledge Agreement, the Intercompany Subordination Agreement, any
Collateral Access Agreements and depository account, blocked account, lockbox account or similar
agreements, or note or notes executed by Borrower or its Subsidiaries
and payable to Foothill, any agreement whereby any Person is joined as a party
to any Loan Document or made a continuing guaranty of the Obligations, and any
other agreement entered into, now or in the future, in connection with this
Agreement.”

““Material
Adverse Effect” means a material adverse effect upon (a) the business,
operations, properties, assets, prospects, or financial condition of Borrower
and its Subsidiaries, taken as a whole, (b) the value of the Eligible Accounts
or the validity or priority of Foothill’s Lender’s Lien therein, or (c) the
ability of Borrower or its Subsidiaries to perform, or of Foothill to enforce,
the Obligations.”

““Obligations”
means all loans, Advances, debts, principal, interest (including any interest
that, but for the provisions of the Bankruptcy Code, would have accrued),
contingent reimbursement obligations owing to Foothill under any outstanding
L/Cs or L/C Guarantees, premiums (including Early Termination Premiums),
liabilities (including all amounts charged to Borrower’s Loan Account pursuant
to any agreement authorizing Foothill to charge Borrower’s Loan Account),
obligations, fees, charges, costs or Foothill Expenses (including any fees or
expenses that, but for the provisions of the Bankruptcy Code, would have accrued),
lease payments, guaranties, covenants, and duties owing any Obligor to Foothill
of any kind and description (whether pursuant to or evidenced by the Loan
Documents, by any note or other instrument, or pursuant to any other agreement
between Foothill and any Obligor regarding the financing that is the subject
hereof), whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, and including any debt, liability, or
obligation owing from any Obligors to others that Foothill may have obtained by
assignment or otherwise, and further including all interest not paid when due
and all Foothill Expenses that any Obligor is required to pay or reimburse by
the Loan Documents, by law, or otherwise.”

““Qualified Cash”
means, as of any date of determination, the amount of unrestricted cash and
Cash Equivalents of Borrower and its Subsidiaries that is in Deposit Accounts
or in Securities Accounts, or any combination thereof, and which such Deposit
Account or Securities Account is the subject of a Control Agreement.”

(b)                             Section
1.1 of the Loan Agreement is hereby amended by deleting the
definitions of the following defined terms in their entirety:

“Base LIBOR Rate”

“Capital Expenditure Loan Note”

 4
 

 

“Eligible Inventory”

 

“Interest Period”

“LIBOR Deadline”

“LIBOR Notice”

“LIBOR Option”

“LIBOR Rate”

“LIBOR Rate Loan”

“LIBOR Rate Margin”

(c)                              Section
2.1(a) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

“(a)                            Subject
to the terms and conditions of this Agreement, Foothill agrees to make
revolving advances (“Advances”) to Borrower in an amount at any one time
outstanding not to exceed at any one time the lesser of (i) the Maximum
Revolving Credit Amount less the Letter of Credit Usage, or (ii) the Borrowing
Base less the Letter of Credit Usage. 
For purposes of this Agreement, “Borrowing Base,” as of any date
of determination, shall mean an amount equal to the lesser of:

(i)                                   eighty
percent (80%) of the amount of Eligible Accounts less
the amount, if any, of the Dilution Reserve, and

(ii)                                  
an amount equal to Borrowing Base Parties collections with respect to Accounts
for the immediately preceding seventy-five (75) day period.”

(d)                             Section
2.1(b) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

“(b)                           Anything
to the contrary in Section 2.1(a) above notwithstanding, upon the
occurrence and during the continuance of an Event of Default, Foothill may
reduce its advance rates based upon Eligible Accounts without declaring an
Event of Default if it determines, in its reasonable discretion, that there is
a material impairment of the prospect of repayment of all or any portion of the
Obligations or a material impairment of the value or priority of Foothill’s
security interests in the Collateral.”

 5
 

 

(e)                              Section
2.3 of the Loan Agreement is hereby amended and restated in its
entirety as follows:

“2.3                           [Intentionally Omitted.]”

(f)                                Section
2.5(a) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

“(a)                            Interest
Rate. All Obligations, except for undrawn L/Cs and L/C Guarantees, shall bear
interest, on the average Daily Balance thereof at a per annum rate equal to the
Reference Rate plus the Applicable Margin.”

(g)                             Section
2.5(d) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

“(d)                           Payments.  Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof.  Borrower hereby
authorizes Foothill, at its option, without prior notice to Borrower, to charge
such interest and Letter of Credit fees, all Foothill Expenses (as and when
incurred), and all installments or other payments due under any note or other
Loan Document to Borrower’s Loan Account, which amounts thereafter shall accrue
interest at the rate then applicable hereunder. 
Any interest not paid when due shall be compounded by becoming a part of
the Obligations, and such interest shall thereafter accrue interest at the rate
then applicable hereunder.”

(h)                             Section
2.5(f) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

“(f)                              Intent
to Limit Charges to Maximum Lawful Rate. 
In no event shall the interest rate or rates payable under this
Agreement, plus any other amounts paid in connection herewith, exceed the
highest rate permissible under any law that a court of competent jurisdiction
shall, in a final determination, deem applicable.  Borrower and Foothill, in executing this
Agreement, intend legally to agree upon the rate or rates of interest and
manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or
rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then, ipso facto as of the date of this Agreement, Borrower is
and shall be liable only for the payment of such maximum as allowed by law, and
payment received from Borrower in excess of such legal maximum, whenever
received, shall be applied to reduce the principal balance of the Obligations
to the extent of such excess.”

 6
 

 

(i)                                 Section
2.12 of the Loan Agreement is hereby amended and restated in its
entirety as follows:

“2.12                     [Intentionally
Omitted.]”

(j)                                 Section
2.13 of the Loan Agreement is hereby amended and restated in its
entirety as follows:

“2.13                     [Intentionally
Omitted.]”

(k)                              Section
5.3 of the Loan Agreement is hereby amended and restated in its
entirety as follows:

“5.3                           [Intentionally Omitted].”

(l)                                 Section
6.2 of the Loan Agreement is hereby amended and restated in its
entirety as follows:

“6.2                           Collateral
Reports.  Borrower shall deliver to
Foothill, as soon as they are available, but in no event later than Tuesday of
each week during the term of this Agreement, a detailed aging, by total, of the
Accounts of the Borrower and its Subsidiaries and a reconciliation statement,
each updated through the preceding Friday, and, as soon as they are available,
but in no event later than Tuesday of each week during the term of this Agreement,
a summary aging, by vendor, of all accounts payable, (such summary aging to
include a specific itemization of the amount of accounts payable due and owing
to Lien Creditors with respect to which Borrower or any of its Subsidiaries has
obtained letters of credit to secure the repayment of sums due an owing to such
Lien Creditors from time to time), and any book overdraft, each updated through
the preceding Friday.  Original sales
invoices evidencing daily sales shall be mailed by Borrower to each Account
Debtor with, at Foothill’s request, a copy to Foothill, and, at Foothill’s
direction from and after and during the continuation of an Event of Default,
the invoices shall indicate on their face that the Account has been assigned to
Foothill and that all payments are to be made directly to Foothill.  Borrower shall deliver to Foothill, as
Foothill reasonably may from time to time require, collection reports, sales
journals, invoices, original delivery receipts, customer’s purchase orders,
shipping instructions, bills of lading, and other documentation respecting
shipment arrangements.  Absent such a
request by Foothill, copies of all such documentation shall be held by Borrower
as custodian for Foothill.  In addition,
from time to time, Borrower shall deliver to Foothill such other and additional
information or documentation as Foothill reasonably may request.”

(m)                           Section
6.4 of the Loan Agreement is hereby amended by amending and
restating the first paragraph thereof in its entirety as follows:

 7
 

 

“6.4                           Financial
Statements, Reports, Certificates. 
Borrower agrees to deliver to Foothill: 
(a) as soon as available, but in any event within thirty (30)
days after the end of each month during each of Borrower’s fiscal years (except
for those months that are the end of a fiscal quarter, in which case Borrower
shall deliver such information to Foothill within forty-five (45) days
after the end of such month), a company prepared balance sheet, income
statement, detailed calculation of EBITDA for the month and trailing twelve
months, and, in the case of quarter-end statements, cash flow statement
covering Borrower’s and its Subsidiaries’ operations during such period;
(b) as soon as available, but in any event within ninety (90) days
after the end of each of Borrower’s fiscal years, financial statements of
Borrower for each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Foothill and certified, without any
qualifications, by such accountants to have been prepared in accordance with
GAAP; (c) as soon as available, but in no event later than Tuesday of each
week, a rolling 13-week cash flow forecast (in form and substance reasonably
satisfactory to Foothill) covering Borrower’s and its Subsidiaries’ operations during
such period, together with a certificate from the chief accounting officer of
Borrower representing and warranting that such 13-week cash flow forecast
represents management’s good faith estimates of future financial performance,
based on historical performance; and (d) as soon as available but in no
event later than Tuesday of each week, a detailed rolling month to date report
(in form and substance reasonably satisfactory to Foothill) covering Borrower’s
and its Subsidiaries’ cash and Cash Equivalents, including an indication of
which amounts constitute Qualified Cash. 
Such financial statements (audited and unaudited) set forth in
subsections (a) and (b) herein shall include a balance sheet, profit and loss
statement, and cash flow statement and, if prepared, such accountants’ letter
to management.  Borrower agrees to
deliver financial statements prepared on a consolidating basis so as to present
Borrower and each consolidated entity separately.”

(n)                             Section
6.12(a) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

“(a)                            EBITDA.  (i) Borrower shall not have two consecutive
fiscal quarters of EBITDA losses (exclusive of the quarter ending September 30,
2006) and (ii) Borrower shall maintain EBITDA, for each fiscal period set forth
below, of not less than the amount indicated below opposite such fiscal period:

 8
 

 

 

	
  for the immediately
  preceding twelve-month period ending 10/31/06

  	
   

  	
  $

  	
  (1,500,000

  	
  )

  
	
  for the
  immediately preceding twelve-month period ending 11/30/06

  	
   

  	
  $

  	
  (2,000,000

  	
  )

  
	
  for the
  immediately preceding twelve-month period ending 12/31/06

  	
   

  	
  $

  	
  (3,094,000

  	
  )

  
	
  for the
  immediately preceding twelve-month period ending 01/31/07

  	
   

  	
  $

  	
  (3,094,000

  	
  )

  
	
  for the
  immediately preceding twelve-month period ending 02/28/07

  	
   

  	
  $

  	
  (3,094,000

  	
  )

  
	
  for the
  immediately preceding twelve-month period ending 03/31/07

  	
   

  	
  $

  	
  (2,461,000

  	
  )

  
	
  for the
  immediately preceding twelve-month period ending 04/30/07

  	
   

  	
  $

  	
  (2,461,000

  	
  )

  
	
  for the
  immediately preceding twelve-month period ending 05/31/07

  	
   

  	
  $

  	
  (2,461,000

  	
  )

  
	
  for the
  immediately preceding twelve-month period ending 06/30/07

  	
   

  	
  $

  	
  201,000

  	
   

  
	
  for the
  immediately preceding twelve-month period ending 07/31/07

  	
   

  	
  $

  	
  201,000

  	
   

  
	
  for the
  immediately preceding twelve-month period ending 08/31/07

  	
   

  	
  $

  	
  201,000

  	
   

  
	
  for the
  immediately preceding twelve-month period ending 09/30/07

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  for the
  immediately preceding twelve-month period ending 10/31/07

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  for the
  immediately preceding twelve-month period ending 11/30/07

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  for the immediately
  preceding twelve-month period ending 12/31/07 and for each twelve-month
  period ending at each fiscal quarter end thereafter

  	
   

  	
  $

  	
  3,500,000

  	
  ”

  

 

(o)                             Section
7.1(a) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

“(a)                            Indebtedness
evidenced by this Agreement together with Indebtedness to issuers of letters of
credit that are the subject of L/C Guarantees;”

 9
 

 

(p)                             Section
7.10 of the Loan Agreement is hereby amended and restated in its
entirety as follows:

“7.10                     Consignments.  Without
Foothill’s prior written consent, consign any Inventory of Borrower or its
Subsidiaries or sell any such Inventory on bill and hold, sale or return, sale
on approval, or other conditional terms of sale.  The foregoing to the contrary notwithstanding,
Borrower and any of its Subsidiaries shall be entitled to consign their
respective Inventory to Third Persons so long as no Event of Default exists or
would result therefrom and so long as prior thereto such Person completes such
documentation with the proposed consignee (including the execution and delivery
of a consignment agreement and the filing of a UCC-1 with respect to the
consigned Inventory), as Foothill reasonably may require.”

(q)                             Section
7.13 of the Loan Agreement is hereby amended and restated in its
entirety as follows:

“7.13                     Investments.  Directly
or indirectly make, acquire, or incur any liabilities (including contingent
obligations) for or in connection with (a) the acquisition of the securities
(whether debt or equity) of, or other interests in, a Person, (b) loans,
advances, capital contributions, or transfers of property to a Person, (c) the
acquisition of all or substantially all of the properties or assets of a
Person, other than (i) advances or loans made to employees for travel or other
similar expenses incurred in the ordinary course of business, (ii) additional
advances or loans made to employees in the ordinary course of business in an
aggregate amount not to exceed Six Hundred Thousand Dollars ($600,000) at any
one time, (iii) Permitted Investments, (d) investments in Third Persons engaged
in the same or related lines of business, the aggregate amount of all such
investments not to exceed, as of the date of the making of any such investment,
ten percent (10%) of Borrower’s then extant Tangible Net Worth, so long as no
Event of Default exists or would result therefore, (e) investments in the
production of film or motion pictures or in Third Persons engaged in the
production of film or motion pictures, or (f) investments in the production
of theater, stage performance, music, television, internet or interactive media
or in Third Persons engaged in the production of theater, stage performance,
music, television, internet or interactive media unless Borrower shall have
Excess Availability equal to or greater than Five Million Dollars ($5,000,000)
immediately after giving effect thereto; provided, however, that
after giving effect to any investment permitted by clause (d), Borrower shall
have Excess Availability equal to or greater than Two Million Dollars
($2,000,000), and any Accounts acquired by Borrower from a Third Person or any
Inventory acquired by Borrower from a Third Person outside of the ordinary
course of business, regardless if any such acquisition is otherwise permitted
by the terms of this Agreement, shall not be deemed Eligible Accounts until
categorized as such by Foothill as a result of a field audit or appraisal, as
determined appropriate by Foothill in its reasonable credit judgment.”

 10
 

 

(r)                                Schedules
P-1, 2.6, 5.6(a), 5.6(b), 5.6(c), 5.6(d), 5.7(a), 5.7(b), 5.7(c), 5.9, 5.17,
5.19, 5.20, 6.14, and C-2 of the Loan Agreement are hereby
deleted in their entirety and replaced with Schedules E-1, P-1, 2.6, 5.6(a),
5.6(b), 5.6(c), 5.6(d), 5.7(a), 5.7(b), 5.7(c), 5.9, 5.17, 5.19, 5.20, 6.14,
and C-2 attached hereto, respectively.

3.               Waiver.  Lender hereby waives the Event of Default
that has occurred as a result of the failure by Borrower to comply with Section
6.12(a)(ii) of the Loan Agreement with respect to the fiscal period ending September
30, 2006.

4.               Conditions
Precedent to Amendment.  The
satisfaction of each of the following shall constitute conditions precedent to
the effectiveness of this Amendment and each and every provision hereof:

(a)                              Lender
shall have received this Amendment, duly executed by the parties hereto, and
the same shall be in full force and effect.

(b)                             Lender
shall have received a reaffirmation and consent substantially in the form
attached hereto as Exhibit A, duly executed and delivered by each
Guarantor.

(c)                              Lender
shall have received an amendment fee in the amount of $50,000 (which amount
Borrower authorizes Lender to charge to the Loan Account), which amendment fee
shall be fully earned, non-refundable and due and payable on the date hereof.

(d)                             The
representations and warranties herein and in the Loan Agreement and the other
Loan Documents shall be true and correct in all material respects on and as of
the date hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date).

(e)                              No
Default or Event of Default shall have occurred and be continuing on the date
hereof, nor shall result from the consummation of the transactions contemplated
herein.

(f)                                No
injunction, writ, restraining order, or other order of any nature prohibiting,
directly or indirectly, the consummation of the transactions contemplated herein
shall have been issued and remain in force by any Governmental Authority
against Borrower, any Guarantor, or Lender.

5.               Conditions Subsequent.  The obligation of Lender to continue to make
Advances (or otherwise extend credit hereunder) is subject to the fulfillment,
on or before the date applicable thereto, of following condition subsequent
(the failure by Borrower to so perform or cause to be performed constituting an
Event of Default).  Within 30 days of the
date hereof, Agent shall have received, with respect to all bank accounts of
Borrower or any Guarantor listed on Schedule 5.20, as amended hereby,
that (a) are carrying a balance of $5,000 or more as of the date hereof, or (b)
regularly carry a balance of $5,000 or more, fully executed control agreements
in form and substance satisfactory to Lender.

 11
 

 

6.                                       Release.  Borrower hereby waives, releases, remises and
forever discharges Lender, each of its Affiliates, and each of its officers,
directors, employees, and agents (collectively, the “Releasees”), from
any and all claims, demands, obligations, liabilities, causes of action,
damages, losses, costs and expenses of any kind or character, known or unknown,
past or present, liquidated or unliquidated, suspected or unsuspected, which
Borrower ever had, now has or might hereafter have against any such Releasee
which relates, directly or indirectly, to the Loan Agreement or any other Loan
Document, or to any acts or omissions of any such Releasee with respect to the
Loan Agreement or any other Loan Document, or to the lender-borrower
relationship evidenced by the Loan Documents. 
As to each and every claim released hereunder, Borrower hereby
represents that it has received the advice of legal counsel with regard to the
releases contained herein, and having been so advised, Borrower specifically
waives the benefit of the provisions of Section 1542 of the Civil Code of
California which provides as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A
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.”

As to each and every claim released hereunder,
Borrower also waives the benefit of each other similar provision of applicable
federal or state law, if any, pertaining to general releases after having been
advised by its legal counsel with respect thereto.

7.               Representations
and Warranties.  Borrower represents
and warrants to Lender that (a) the execution, delivery, and performance of
this Amendment and of the Loan Agreement, as amended hereby, (i) are within its
powers, (ii) have been duly authorized by all necessary action, and (iii) are
not in contravention of any law, rule, or regulation applicable to it, or any
order, judgment, decree, writ, injunction, or award of any arbitrator, court,
or Governmental Authority, or of the terms of its Governing Documents, or of
any contract or undertaking to which it is a party or by which any of its
properties may be bound or affected; (b) this Amendment and the Loan Agreement,
as amended hereby, are legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms; and (c)
no Default or Event of Default has occurred (other than as waived herein) and
is continuing on the date hereof or as of the date upon which the conditions
precedent set forth herein are satisfied.

8.               Choice of Law.  The validity of this Amendment, its
construction, interpretation and enforcement, the rights of the parties
hereunder, shall be determined under, governed by, and construed in accordance
with the laws of the State of California.

9.               Counterpart
Execution.  This Amendment may be
executed in any number of counterparts, all of which when taken together shall
constitute one and the same instrument, and any of the parties hereto may
execute this Amendment by signing any such counterpart.  Delivery of an executed counterpart of this
Amendment by telefacsimile or electronic mail shall be equally as effective as
delivery of an original executed counterpart of this Amendment.  Any party delivering an executed counterpart
of this Amendment by telefacsimile or electronic mail also shall deliver an
original executed counterpart of this Amendment, but the failure to deliver

 12
 

 

an original executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Amendment.

10.         Effect on Loan
Documents.

(a)                              The
Loan Agreement, as amended hereby, and each of the other Loan Documents shall
be and remain in full force and effect in accordance with their respective
terms and hereby are ratified and confirmed in all respects.  The execution, delivery, and performance of
this Amendment shall not operate, except as expressly set forth herein, as a modification
or waiver of any right, power, or remedy of Lender under the Loan Agreement or
any other Loan Document.  The waivers,
consents, and modifications herein are limited to the specifics hereof, shall
not apply with respect to any facts or occurrences other than those on which
the same are based, shall not excuse future non-compliance with the Loan
Documents, and shall not operate as a consent to any further or other matter
under the Loan Documents.

(b)                             Upon
and after the effectiveness of this Amendment, each reference in the Loan
Agreement to “this Agreement”, “hereunder”, “herein”, “hereof” or words of like
import referring to the Loan Agreement, and each reference in the other Loan
Documents to “the Loan Agreement”, “thereunder”, “therein”, “thereof” or words
of like import referring to the Loan Agreement, shall mean and be a reference
to the Loan Agreement as modified and amended hereby.

(c)                              To the
extent that any terms and conditions in any of the Loan Documents shall
contradict or be in conflict with any terms or conditions of the Loan
Agreement, after giving effect to this Amendment, such terms and conditions are
hereby deemed modified or amended accordingly to reflect the terms and
conditions of the Loan Agreement as modified or amended hereby.

(d)                             This
Amendment is a Loan Document.

11.         Entire Agreement.  This Amendment embodies the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and supersedes any and all prior or contemporaneous agreements
or understandings with respect to the subject matter hereof, whether express or
implied, oral or written.

[signature page
follows]

 13

 

 

IN WITNESS WHEREOF, the parties have entered into this
Amendment as of the date first above written.

	
  

  	
  IMAGE ENTERTAINMENT, INC.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   /s/ JEFF M. FRAMER

  	
   

  
	
   

  	
  Title: Jeff M.
  Framer, Chief Financial Officer

  

 

[IMAGE ENTERTAINMENT,
INC.]

[SIGNATURE PAGE TO AMENDMENT NUMBER FOUR

TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT]

 

 

 

	
  

  	
  WELLS
  FARGO FOOTHILL, INC.,

  a California corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   /s/ TERRI LE

  	
   

  
	
   

  	
  Title: Terri Le,
  Vice President

  

 

 

 

Exhibit A

REAFFIRMATION AND CONSENT

Dated as of November 13, 2006

Reference hereby is made to that certain Amendment
Number Four to Loan and Security Agreement, dated as of the date hereof (the “Amendment”),
between Wells Fargo Foothill, Inc. (“Lender”), and Image Entertainment,
Inc. (“Borrower”).  Capitalized
terms used herein shall have the meanings ascribed to them in that certain
Amended and Restated Loan and Security Agreement, dated as of August 10, 2005
(as amended, restated, supplemented, or otherwise modified from time to time,
the “Loan Agreement”), between Borrower and Lender.  Each of the undersigned hereby (a) represents
and warrants that the execution and delivery of this Reaffirmation and Consent
are within its powers, have been duly authorized by all necessary action, and
are not in contravention of any law, rule, or regulation applicable to it, or
any order, judgment, decree, writ, injunction, or award of any arbitrator,
court, or Governmental Authority, or of the terms of its Governing Documents,
or of any contract or undertaking to which it is a party or by which any of its
properties may be bound or affected, (b) consents to the amendment of the Loan
Agreement set forth in the Amendment and any waivers granted therein; (c)
acknowledges and reaffirms all obligations owing by it to Lender under any Loan
Document to which it is a party; (d) agrees that each Loan Document to which it
is a party is and shall remain in full force and effect, and (e) ratifies and
confirms its consent to any previous amendments of the Loan Agreement and any
previous waivers granted with respect to the Loan Agreement.  Although each of the undersigned have been
informed of the matters set forth herein and have acknowledged and agreed to
same, each of the undersigned understands that Lender shall have no obligation
to inform the undersigned of such matters in the future or to seek the
undersigned’s acknowledgement or agreement to future amendments, waivers, or
modifications, and nothing herein shall create such a duty.

[signature page
follows]

 

IN WITNESS WHEREOF, the
undersigned have executed this Reaffirmation and Consent as of the date first
set forth above.

 

 

	
  

  	
  HOME
  VISION ENTERTAINMENT, INC.,

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JEFF M.
  FRAMER

  
	
   

  	
  Name: Jeff M.
  Framer

  
	
   

  	
  Title: Chief
  Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EGAMI
  MEDIA, INC.,

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ JEFF M. FRAMER

  
	
   

  	
  Name: Jeff M.
  Framer

  
	
   

  	
  Title: Chief
  Financial Officer

  

 

[IMAGE ENTERTAINMENT,
INC.]

[SIGNATURE PAGE TO REAFFIRMATION AND CONSENT TO AMENDMENT NUMBER FOUR

TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT]

 

 

 

EXHIBIT C-2

(Form of Compliance Certificate)

[on Borrower’s
letterhead]

To:                              Wells
Fargo Foothill, Inc.

2450 Colorado Avenue

Suite 3000 West

Santa Monica, California 90404

Attn: Business Finance Division Manager

Re:          Compliance
Certificate dated                              ,
200    

Ladies and Gentlemen:

Reference is made to that certain Amended and Restated
Loan and Security Agreement, dated as of August 10, 2005 (as the same may from
time to time be amended, modified, supplemented or restated, the “Loan
Agreement”) between Image Entertainment, Inc. (“Borrower”) and Wells Fargo
Foothill, Inc. (“Foothill”).  The
initially capitalized terms used in this Compliance Certificate have the
meanings set forth in the Loan Agreement unless specifically defined herein.

Pursuant to Section 6.4 of the Loan
Agreement, the undersigned officer of Borrower hereby certifies that:

1.             The
financial information of Borrower and its Subsidiaries furnished in Schedule 1
attached hereto, has been prepared in accordance with GAAP (except for year-end
adjustments and the lack of footnotes, in the case of financial statements
delivered under Section 6.4(a) of the Loan Agreement) and fairly
presents the financial condition of Borrower.

2.             Such
officer has reviewed the terms of the Loan Agreement and has made, or caused to
be made under his/her supervision, a review in reasonable detail of the
transactions and condition of Borrower and its Subsidiaries during the
accounting period covered by financial statements delivered pursuant to Section 6.4
of the Loan Agreement.

3.             Such
review has not disclosed the existence on and as of the date hereof, and the
undersigned does not have knowledge of the existence as of the date hereof of
any event or condition that constitutes a Default or Event of Default, except
for such conditions or events listed on Schedule 2 attached hereto,
specifying the nature and period of existence thereof and what action Borrower
has taken, is taking or proposes to take with respect thereto.

4.             Borrower
is in timely compliance with all representations, warranties, and covenants set
forth in the Loan Agreement and the other Loan Documents, except as set forth
on Schedule 2 attached hereto. 
Without limiting the generality of the foregoing, Borrower is in
compliance with the covenants contained in Sections 6.12 and 7.9 of the
Loan Agreement as demonstrated on Schedule 3 hereof.

 

 

IN WITNESS WHEREOF, this Compliance Certificate is
executed by the undersigned this       day of                             ,
                .

	
  

  	
  IMAGE ENTERTAINMENT,
  INC.,

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

 

SCHEDULE
1

 

 

SCHEDULE
2

 

 

SCHEDULE
3

1.   EBITDA.

(a)           Borrower [has/has
not] had two consecutive fiscal quarters of EBITDA losses.

(b)           Borrower’s EBITDA, measured for the 12
- month period ending                   ,
is $                     ,
which amount [is/is not] greater than or equal
to the amount set forth in Section 6.12(a)(ii) of the Loan Agreement for the
corresponding period.

(c)           Borrower’s EBITDA, measured for the 1
– month period ending                ,
is $                      .

2.  Capital Expenditures.

(a)           The
aggregate amount of capital expenditures made or committed to be made to date
in the current fiscal year is $                        .

(b)           The
aggregate amount set forth above [is/is not] in
excess of the aggregate amount of $2,500,000 to be made or committed to be made
during any fiscal year of Borrower (other than the fiscal year ending March 31,
2005).

(c)           The
aggregate amount of capital expenditures made or committed to be made during
the fiscal year ended March 31, 2005 [is/is not] in
excess of $3,250,000.

(d)           The
amount for any individual transaction made or committed to be made during any
fiscal year of Borrower [is/is not] in
excess of $800,000.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}]]