Document:

Exhibit 10.7

 

Image Entertainment, Inc.

20525 Nordhoff Street, Suite 200,

Chatsworth, California 91311

 

April 12, 2010

 

Ted Green

John Hyde

John Avagliano

 

Re:          Equity Incentive
Allocation

 

Gentlemen:

 

The
Company agrees for the benefit of each of you that in the event that, out of
the 14.4% of the fully diluted equity of the Company as of January 8, 2010
(i.e., the “management pool” of equity), equity awards are granted to employees
or consultants of the Company other than John Hyde (or Producers Sales Organization),
Ted Green or Executive (e.g., Messrs. Gagnon and Bromiley), and such
consultants or employees forfeit any such equity awards, the Company shall
award all of such forfeited shares (i) to any new employees or consultants
taking over the duties of the consultants or employees who forfeited such
awards, and (ii) to John Hyde (or Producers Sales Organization), Ted Green
and/or Executive, in each case at such times and in such amounts as the Chief
Executive Officer shall recommend to the Compensation Committee of the Board of
Directors.

 

Very truly yours,

 

IMAGE ENTERTAINMENT, INC.

 

	
  By:

  	
  /s/ THEODORE GREEN

  	
   

  
	
  Name:

  	
  Theodore Green

  	
   

  
	
  Its:

  	
  Chairman/CEOExhibit 10.8

 

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

THIS
FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
(this “Amendment”), dated as of April 15, 2010, is entered into between
WACHOVIA CAPITAL FINANCE CORPORATION (WESTERN), a California corporation, as
Agent and Lender (in such capacities, “Lender”), IMAGE
ENTERTAINMENT, INC., a Delaware corporation (“Image”), EGAMI MEDIA, INC.,
a Delaware corporation (“Egami”, and together with Image, the “Borrowers”,
and each a “Borrower”), and IMAGE ENTERTAINMENT (UK), INC., a
Delaware corporation (“Guarantor”).

 

RECITALS

 

A.            Borrowers, Guarantor, Home
Vision Entertainment, Inc., a Delaware corporation (“Home Vision”)
(which has since been merged with and into Image), and Lender have previously
entered into that certain Loan and Security Agreement dated May 4, 2007, as amended by that
certain First Amendment to Loan and Security Agreement dated as of April 28
2008, as amended by that certain Second Amendment to Loan and Security
Agreement dated as of June 23, 2009, as amended by that certain Third
Amendment to Loan and Security Agreement dated as of July 30, 2009, and as
amended by that certain Fourth Amendment to Loan and Security Agreement dated
as of January 8, 2010 (as amended, the “Loan Agreement”), pursuant to
which Lender has made certain loans and financial accommodations available to
Image.  Terms used herein without
definition shall have the meanings ascribed to them in the Loan Agreement.

 

B.            Borrowers and Guarantor have
requested that Lender amend the Loan Agreement in certain respects, including,
without limitation, to designate Egami as a “Borrower” thereunder, and Lender
is willing to accommodate such request on the terms and conditions set forth
herein.

 

C.            Borrowers and Guarantor are
entering into this Amendment with the understanding and agreement that, except
as specifically provided herein, none of Lender’s rights or remedies as set
forth in the Loan Agreement is being waived or modified by the terms of this
Amendment.

 

AGREEMENT

 

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.             Amendments to Loan Agreement.

 

(a)           Egami is hereby added as a
co-borrower under the Loan Agreement with the same force and effect as if Egami
had duly executed and delivered the Loan Agreement as a “Borrower” thereunder
in addition to Image.  Without limiting
the foregoing:

 

(1)           The definition of “Borrowers”
in Section 1.12 of the Loan Agreement is hereby amended to include Egami.

 

1

 

(2)           Egami and Image shall be
jointly and severally liable for all Obligations.

 

(3)           Egami hereby represents and
warrants to Agent and the Lenders the truth and accuracy of all representations
and warranties applicable to Borrowers in the Loan Agreement (after giving
effect to the inclusion of Egami as set forth in clauses (1)).

 

(4)           Egami hereby agrees to perform
all of the covenants and agreements applicable to Borrowers in the Loan
Agreement.

 

(5)           Agent and the Lenders shall
have all of the rights, remedies, interests and powers as against Egami as
provided to Agent and the Lenders in relation to Borrowers in the Loan
Agreement.

 

(6)           Each reference in any
Financing Agreement (including, without limitation, that certain Guaranty dated
as of March 4, 2007, made by Home Vision and Egami in favor of Agent and
the Lenders) to “Borrower” or “Borrowers” shall hereafter include Egami and any
reference to “Guarantor” or “Guarantors” shall hereafter exclude Egami.

 

(7)           Egami shall no longer be
designated as a “Guarantor” under the Loan Agreement.

 

(b)           The definition of “Availability
Block” in Section 1.8.1 of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:

 

“1.8.1      ‘Availability Block’
shall mean an amount equal to One Million Five Hundred Thousand Dollars
($1,500,000).”

 

(c)           The definition of “Borrowing
Base” in Section 1.13 of the Loan Agreement is hereby amended and restated
to read in its entirety as follows:

 

“1.13       ‘Borrowing Base’
shall mean, at any time, the amount equal to:

 

(a)          the amount equal to
eighty-five percent (85%) of the Eligible Accounts of Borrowers, plus

 

(b)         the lesser of (A) the
Inventory Loan Limit or (B) the sum of: (1) the lesser of sixty
percent (60%) multiplied by the Value of the Eligible Inventory of Borrowers
consisting of Under 52 Week Supply Inventory, or eighty-five percent (85%)
percent of the Net Recovery Percentage multiplied by the Value of such Eligible
Inventory, plus (2) the lesser of twenty percent (20%) multiplied by the
Value of the Eligible Inventory of Borrowers which does not consist of Under 52
Week Supply Inventory, or eighty-five percent (85%) percent of the Net Recovery
Percentage multiplied by the Value of such Inventory, minus

 

(c)          the Availability Block, minus

 

2

 

(d)         Reserves.

 

Notwithstanding
the foregoing, the maximum portion of the Borrowing Base calculated upon
Eligible Accounts that are unpaid more than ninety (90) days after the date of
the original invoice for them (but not more than one hundred five (105) days
after such date), shall be limited to Two Million Five Hundred Thousand Dollars
($2,500,000).  For purposes only of
applying the Inventory Loan Limit, Agent may treat the then undrawn amounts of
outstanding Letters of Credit for the purpose of purchasing Eligible Inventory
as Revolving Loans to the extent Agent is in effect basing the issuance of the
Letter of Credit on the Value of the Eligible Inventory being purchased with
such Letter of Credit.  In determining
the actual amounts of such Letter of Credit to be so treated for purposes of
the sublimit, the outstanding Revolving Loans and Reserves shall be attributed
first to any components of the lending formulas set forth above that are not
subject to such sublimit, before being attributed to the components of the
lending formulas subject to such sublimit. 
The amounts of Eligible Inventory of any Borrower shall, at Agent’s
option, be determined based on the lesser of the amount of Inventory set forth
in the general ledger of such Borrower or the perpetual inventory record
maintained by such Borrower.”

 

(d)           Clause (m) of the definition
of “Eligible Accounts” contained in Section 1.29 of the Loan Agreement is
hereby amended and restated to read in its entirety as follows:

 

“(m)        (i) the aggregate amount of such Accounts owing
by a single account debtor (other than Amazon.com, Anderson Merchandisers,
L.P., Wal-Mart Stores, Inc.,  Best
Buy Co., Inc., Ingram Entertainment, Inc., and Target
Corporation) do not constitute more than ten (10%) percent of the aggregate
amount of all otherwise Eligible Accounts; (ii) the aggregate amount of
such Accounts owing by Target Corporation do not constitute more than
twenty-five percent (25%) of the aggregate amount of all otherwise Eligible
Accounts; (iii) the aggregate amount of such Accounts owing by Best Buy
Co., Inc. and Ingram Entertainment, Inc. do not, in the aggregate,
constitute more than twenty-five percent (25%) of the aggregate amount of all
otherwise Eligible Accounts; (iv) the aggregate amount of such Accounts
owing by Amazon.com do not constitute more than thirty-five percent (35%) of
the aggregate amount of all otherwise Eligible Accounts; and (v) the
aggregate amount of such Accounts owing by Anderson Merchandisers, L.P. and
Wal-Mart Stores, Inc. do not, in the aggregate, constitute more than
thirty-five percent (35%) of the aggregate amount of all otherwise Eligible
Accounts (but, in each case, the portion of the Accounts not in excess of the
applicable percentages may be deemed Eligible Accounts);”

 

(e)           The following is hereby
added to the Loan Agreement as Section 1.29.1:

 

3

 

“1.29.1  ‘Eligible
Inventory’ shall mean, as to each Borrower, Inventory of such Borrower
consisting of finished goods held for resale in the ordinary course of the
business of such Borrower, that in each case satisfy the criteria set forth
below as determined by Agent.  In
general, Eligible Inventory shall not include: 
(a) raw materials; (b) work-in-process; (c) components
which are not part of finished goods; (d) spare parts for equipment; (e) packaging
and shipping materials; (f) supplies used or consumed in such Borrower’s
business; (g) Inventory at premises other than those owned or leased and
controlled by any Borrower unless consented to by Agent in its sole discretion
(which can be revoked by Agent at any time); (h) Inventory subject to a
security interest or lien in favor of any Person other than Agent except those
permitted in this Agreement that are subject to an intercreditor agreement in
form and substance satisfactory to Agent between the holder of such security
interest or lien and Agent; (i) bill and hold goods; (j) unserviceable,
obsolete or slow moving Inventory; (k) Inventory that is not subject to
the first priority, valid and perfected security interest of Agent; (l) damaged
and/or defective Inventory; (m) Inventory purchased or sold on consignment
and (n) Inventory located outside the United States of America. The
criteria for Eligible Inventory set forth above may only be changed and any new
criteria for Eligible Inventory may only be established by Agent in good faith
based on either: (i) an event, condition or other circumstance arising
after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Agent has no written notice thereof
from a Borrower prior to the date hereof, in either case under clause (i) or
(ii) which adversely affects or could reasonably be expected to adversely
affect the Inventory in the good faith determination of Agent.  Any Inventory that is not Eligible Inventory
shall nevertheless be part of the Collateral.”

 

(f)            The definition of “Excess
Availability” in Section 1.38 of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:

 

“1.38       ‘Excess Availability’ shall mean the amount,
as determined by Agent, calculated at any date, equal to: (a) the lesser
of:  (i)  the Borrowing Base and (ii) the
Revolving Loan Limit (in each case under (i) or (ii) after giving
effect to any Reserves other than any Reserves in respect of Letter of Credit
Obligations), minus (b) the sum of: 
(i) the amount of all then outstanding and unpaid Obligations (but
not including for this purpose any outstanding Letter of Credit Obligations),
plus (ii) the amount of all Reserves then established in respect of Letter
of Credit Obligations, and solely for the purpose of the condition precedent
set forth in Section 4.1(f) hereof, plus (iii) the aggregate
amount of all then outstanding and unpaid trade payables and other obligations
of Borrowers which are outstanding more than sixty (60) days past due as of the
end of the immediately preceding month or at Agent’s option, as of a more
recent date based on such reports as Agent may from time to time specify (other

 

4

 

than trade payables or other obligations being
contested or disputed by Borrowers in good faith), plus (iv) without
duplication, the amount of checks issued by Borrowers to pay trade payables and
other obligations which are more than sixty (60) days past due as of the end of
the immediately preceding month or at Agent’s option, as of a more recent date
based on such reports as Agent may from time to time specify (other than trade
payables or other obligations being contested or disputed by Borrowers in good
faith), but not yet sent.”

 

(g)           The definition of “Fixed
Charge Coverage Ratio” contained in Section 1.44 of the Loan Agreement is
hereby amended and restated to read in its entirety as follows:

 

“1.44 ‘Fixed Charge Coverage Ratio’ shall
mean, as to any Person, with respect to any period, the ratio of (a) the
EBITDA of such Person during such period, plus any amortization of
production costs (to the extent not already added to Net Income in calculating
such EBITDA), minus taxes, whether Federal, State or local, and whether
foreign or domestic, that are paid or payable by such Person or its
Subsidiaries in cash in respect of such period, minus any Capital
Expenditures made by such Person or its Subsidiaries during such period to the
extent they are not financed, minus production costs expenditures made
by such Person or its Subsidiaries during such period, and minus any
advances made by such Person or its Subsidiaries during such period to
licensors of any Intellectual Property acquired by any Borrower or Guarantor,
to (b) all principal sums paid or payable by such Person or its
Subsidiaries on Indebtedness during such period and all Interest Expense of
such Person and its Subsidiaries during such period, minus any such
Interest Expense not paid or payable in cash, minus deferred finance
expense on subordinated Indebtedness, and minus any warrant
amortization, in each case made or incurred by such Person or its Subsidiaries
during such period.”

 

(h)           Clause (b)(ii) of the
definition of “Interest Rate” contained in Section 1.57 of the Loan
Agreement is hereby amended and restated to read in its entirety as follows:

 

“(ii) on the Revolving Loans at any time
outstanding in excess of the Borrowing Base or the Revolving Loan Limit
(whether or not such excess(es) arise or are made with or without Agent’s or
any Lender’s knowledge or consent and whether made before or after an Event of
Default).”

 

(i)            The following is hereby
added to the Loan Agreement as Section 1.58.1:

 

“1.58.1   ‘Inventory Loan Limit’ shall mean an
amount equal to $2,500,000.”

 

(j)            The following is hereby
added to the Loan Agreement as Section 1.69.1:

 

5

 

“1.69.1  ‘Maturity
Date’ shall have the meaning set forth in Section 13.1 hereof.”

 

(k)           The following is hereby
added to the Loan Agreement as Section 1.71.1:

 

“1.71.1   ‘Net Recovery Percentage’ shall mean
the fraction, expressed as a percentage, (a) the numerator of which is the
amount equal to the amount of the recovery in respect of the Inventory at such
time on a “net orderly liquidation value” basis as set forth in the most recent
acceptable appraisal of Inventory received by Agent in accordance with Section 7.3,
net of operating expenses, liquidation expenses and commissions, and (b) the
denominator of which is the applicable original cost of the aggregate amount of
the Inventory subject to such appraisal.”

 

(l)            Section 1.88 of the
Loan Agreement is hereby amended and restated to read in its entirety as
follows:

 

“1.88  
Intentionally Omitted.”

 

(m)          A new clause (vii) is
hereby added to the end of the second sentence of the definition of “Reserves”
contained in Section 1.91 of the Loan Agreement as follows:

 

“(vii) a change in the turnover, age or mix of
the categories of Inventory that adversely affects the aggregate value of all
Inventory.”

 

(n)           The definition of “Revolving
Loan Limit” in Section 1.92 of the Loan Agreement is hereby amended and
restated to read in its entirety as follows:

 

“1.92       ‘Revolving Loan Limit’
shall mean an amount equal to $20,000,000.”

 

(o)           The following is hereby
added to the Loan Agreement as Section 1.98.1:

 

“1.98.1  ‘Under
52 Week Supply Inventory’ shall mean, as of any date of determination with
respect to each specific title or product offered by Borrowers, all Inventory
of such specific title or product to the extent the aggregate amount of such
specific Inventory does not exceed twice the amount of such specific Inventory
sold by Borrowers in the prior six months; provided, however,
that any Inventory consisting of a specific title or product for which at least
six month historical sales are not available due to such Inventory being newly
carried by Borrowers shall also constitute Under 52 Week Supply Inventory until
Borrowers have carried such Inventory for at least six months.”

 

(p)           The following is hereby
added to the Loan Agreement as Section 1.98.2:

 

“1.98.2 ‘Value’ shall mean, as determined by
Agent in good faith, with respect to Inventory, the lower of (a) cost
computed on a first-in first-out

 

6

 

basis in accordance with GAAP or (b) market
value, provided, that, for purposes of the calculation of the
Borrowing Base, (i) the Value of the Inventory shall not include:  (A) the portion of the value of
Inventory equal to the profit earned by any Affiliate on the sale thereof to
any Borrower or (B)  write-ups or write-downs in value with respect to
currency exchange rates and (ii) notwithstanding anything to the contrary
contained herein, the cost of the Inventory shall be computed in the same
manner and consistent with the most recent appraisal of the Inventory received
and accepted by Agent prior to the date hereof, if any.”

 

(q)           Section 2.1(a)(i) and
Section 2.1(a)(ii) of the Loan Agreement are hereby amended and
restated to read in their entirety as follows:

 

“(i) the Borrowing Base at such time or (ii) the
Revolving Loan Limit at such time.”

 

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

 

“(b) Except in Agent’s discretion, with the
consent of all Lenders, or as otherwise provided herein, (i) the aggregate
principal amount of the Revolving Loans and Letter of Credit Obligations
outstanding at any time shall not exceed the Borrowing Base, (ii) the
aggregate principal amount of the Revolving Loans and Letter of Credit
Obligations outstanding at any time shall not exceed the Revolving Loan Limit,
and (iii) the aggregate principal amount of the Revolving Loans
outstanding based on the Eligible Inventory shall not exceed the Inventory Loan
Limit.”

 

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

 

“(c) In the event that: (i) except as
otherwise provided herein, the aggregate principal amount of the Revolving
Loans and Letter of Credit Obligations outstanding exceeds the Borrowing Base
or the Revolving Loan Limit, or (ii) the aggregate principal amount of
Revolving Loans and Letter of Credit Obligations based on the Eligible
Inventory exceeds the Inventory Loan Limit, such event shall not limit, waive
or otherwise affect any rights of Agent or Lenders in such circumstances or on
any future occasions and Borrowers shall, upon demand by Agent, which may be
made at any time or from time to time, immediately repay to Agent the entire
amount of any such excess(es) for which payment is demanded.”

 

(t)            Section 2.2(c)(iv) of
the Loan Agreement is hereby amended and restated to read in its entirety as
follows:

 

“(iv) Excess
Availability, prior to giving effect to any Reserves with respect to such
Letter of Credit, on the date of the proposed issuance of any Letter of Credit,
shall be equal to or greater than an amount equal to

 

7

 

one
hundred (100%) percent of the Letter of Credit Obligations with respect
thereto.”

 

(u)           Section 3.2(a) of
the Loan Agreement is hereby amended and restated to read in its entirety as
follows:

 

“(a)         Borrowers shall pay to Agent, for the account of
Lenders, monthly an unused line fee at a rate equal to three-eighths of one
(0.375%) percent per annum calculated upon the amount by which the Revolving
Loan Limit exceeds the average daily principal balance of the outstanding
Revolving Loans and Letters of Credit during the immediately preceding month
(or part thereof) while this Agreement is in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be payable on the
first day of each month in arrears.”

 

(v)           The following is hereby
added as clause (d) to Section 3.2 of the Loan Agreement:

 

“(d) Borrowers shall pay to Agent monthly, for
Agent’s own account, a servicing fee in respect of Agent’s services for each
month (or part thereof) while this Agreement remains in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be fully
earned as of and payable in advance on the first day of each month and shall be
in an amount equal to: (i) Five Thousand Dollars ($5,000) on May 1,
2010, June 1, 2010, and July 1, 2010; (ii) Seven Thousand Five
Hundred Dollars ($7,500) on August 1, 2010; (iii) Twelve Thousand
Five Hundred Dollars ($12,500) on September 1, 2010; and (iv) Fifteen
Thousand Dollars on October 1, 2010, and on the first day of each month
thereafter.”

 

(w)          Section 7.3(d) of
the Loan Agreement is hereby amended and restated to read in its entirety as
follows:

 

“(d) upon
Agent’s request, Borrowers shall, at their expense, no more than two (2) times
in any twelve (12) month period, but at any time or times as Agent may request
on or after an Event of Default, deliver or cause to be delivered to Agent
written appraisals as to the Inventory in form, scope and methodology
acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent
and Lenders and upon which Agent and Lenders are expressly permitted to rely;”

 

(x)            Section 9.17 of the
Loan Agreement is hereby amended and restated to read in its entirety as
follows:

 

“9.17       Fixed Charge Coverage Ratio.  Commencing with the month ending June 30,
2010, Borrowers shall maintain a Fixed Charge Coverage Ratio of not less than
1.1 to 1.0, when measured at the end of each month on a fiscal year-to-date
basis.”

 

8

 

(y)           Section 10.1 of the
Loan Agreement is hereby amended by replacing the “.” at the end of clause (o) thereof
with “, or” and by inserting the following as a new clause (p):

 

“(p) there shall be less than $5,000,000
available to be drawn by Agent under the Permitted Holders L/C.”

 

(z)            Section 12.8 of the
Loan Agreement is hereby amended and restated to read in its entirety as
follows:

 

“Section 12.8  Additional Loans.  Agent shall not make any Revolving Loans or
provide any Letter of Credit to Borrowers on behalf of Lenders intentionally
and with actual knowledge that such Revolving Loans or Letter of Credit would
cause the aggregate amount of the total outstanding Revolving Loans and Letters
of Credit to exceed the Borrowing Base, without the prior consent of all
Lenders, except, that, Agent may make such additional Revolving Loans or
provide such additional Letter of Credit on behalf of Lenders, intentionally
and with actual knowledge that such Revolving Loans or Letter of Credit will
cause the total outstanding Revolving Loans and Letters of Credit to exceed the
Borrowing Base, as Agent may deem necessary or advisable in its discretion, provided,
that: (a) the total principal amount of the additional Revolving
Loans or additional Letters of Credit to Borrowers which Agent may make or
provide after obtaining such actual knowledge that the aggregate principal
amount of the Revolving Loans equal or exceed the Borrowing Base, plus the
amount of Special Agent Advances made pursuant to Section 12.11(a)(ii) hereof
then outstanding, shall not exceed the aggregate amount equal to ten (10%)
percent of the Revolving Loan Limit and shall not cause the total principal
amount of the Revolving Loans and Letters of Credit to exceed the Revolving
Loan Limit and (b) no such additional Revolving Loan or Letter of Credit
shall be outstanding more than ninety (90) days after the date such additional
Revolving Loan or Letter of Credit is made or issued (as the case may be),
except as the Required Lenders may otherwise agree.  Each Lender shall be obligated to pay Agent
the amount of its Pro Rata Share of any such additional Revolving Loans or
Letters of Credit.”

 

(aa)         Sections 12.11(a)(ii)(A) and
12.11(a)(ii)(B) of the Loan Agreement are hereby amended and restated in
their entirety as follows:

 

“(A) the
aggregate principal amount of the Special Agent Advances pursuant to this
clause (ii) outstanding at any time, plus the then outstanding principal
amount of the additional Loans and Letters of Credit which Agent may make or
provide as set forth in Section 12.8 hereof, shall not exceed the amount
equal to ten (10%) percent of the Revolving Loan Limit and (B) the
aggregate principal amount of the Special Agent Advances pursuant to this
clause (ii) outstanding at any time, plus the then outstanding principal
amount of the Loans, shall not exceed the Revolving

 

9

 

Loan
Limit, except at Agent’s option, provided, that, to the extent that the
aggregate principal amount of Special Agent Advances plus the then outstanding
principal amount of the Loans exceed the Revolving Loan Limit, the Special
Agent Advances that are in excess of the Revolving Loan Limit shall be for the
sole account and risk of Agent and notwithstanding anything to the contrary set
forth below, no Lender shall have any obligation to provide its share of such
Special Agent Advances in excess of the Revolving Loan Limit, or”

 

(bb)         Section 13.1(a) of
the Loan Agreement is hereby amended and restated to read in its entirety as
follows:

 

“(a) This Agreement and the other Financing
Agreements shall become effective as of the date set forth on the first page hereof
and shall continue in full force and effect for a term ending on October 25,
2010 (the “Maturity Date”), unless sooner terminated pursuant to the
terms hereof.  Borrowers may terminate
this Agreement at any time upon ten (10) days prior written notice to
Agent (which notice shall be irrevocable); provided, that this Agreement and
all other Financing Agreements must be terminated simultaneously.  In addition, Agent may, at its option, and shall
at the direction of Required Lenders, terminate this Agreement at any time on
or after an Event of Default.  Upon the
Maturity Date or any other effective date of termination of the Financing
Agreements, Borrowers shall pay to Agent all outstanding and unpaid Obligations
and shall furnish cash collateral to Agent (or at Agent’s option, a letter of
credit issued for the account of Borrowers and at Borrowers’ expense, in form
and substance satisfactory to Agent, by an issuer acceptable to Agent and
payable to Agent as beneficiary) in such amounts as Agent determines are
reasonably necessary to secure Agent, Lenders and Issuing Bank from loss, cost,
damage or expense, including attorneys’ fees and expenses, in connection with
any contingent Obligations, including issued and outstanding Letter of Credit
Obligations and checks or other payments provisionally credited to the
Obligations and/or as to which Agent or any Lender has not yet received final
and indefeasible payment and any continuing obligations of Agent or any Lender
pursuant to any Deposit Account Control Agreement and for any of the
Obligations arising under or in connection with any Bank Products in such
amounts as the Bank Product Provider providing such Bank Products may require
(unless such Obligations arising under or in connection with any Bank Products
are paid in full in cash and terminated in a manner satisfactory to such Bank
Product Provider).  The amount of such
cash collateral (or letter of credit, as Agent may determine) as to any Letter
of Credit Obligations shall be in the amount equal to one hundred ten (110%)
percent of the amount of the Letter of Credit Obligations plus the amount of
any fees and expenses payable in connection therewith through the end of the
latest expiration date of the Letters of Credit giving rise to such Letter of
Credit Obligations.  Such payments in
respect of the Obligations and cash

 

10

 

collateral shall be remitted by wire transfer in
Federal funds to the Agent Payment Account or such other bank account of Agent,
as Agent may, in its discretion, designate in writing to Administrative
Borrower for such purpose.  Interest
shall be due until and including the next Business Day, if the amounts so paid
by Borrowers to the Agent Payment Account or other bank account designated by
Agent are received in such bank account later than 12:00 noon, California time.”

 

(cc)         Section 13.1(c) of
the Loan Agreement is hereby amended and restated to read in its entirety as
follows:

 

“(c) Intentionally
Omitted.”

 

2.             Consent.  Image has informed Lender that it wishes to
purchase all (or a significant interest with a potential option to purchase all
remaining Capital Stock) of the Capital Stock or substantially all of the
assets of a Person (the “Acquired Person”) to be disclosed at a later
date, which Person must be approved by Lender in its sole discretion (the “Acquisition”).  The Acquisition is prohibited under the terms
of Section 9.10 of the Loan Agreement and therefore Borrowers have
requested that Lender consent to the Acquisition.  For purposes of Section 9.10 of the Loan
Agreement only, and subject to the terms of this Amendment, Lender hereby
consents to the Acquisition so long as: (i) no Default or Event of Default
exists at the time the Acquisition is consummated or would occur as a result of
the Acquisition; (ii) the Acquisition is on terms and conditions, and
subject to documentation, satisfactory to Lender; (iii) Borrowers shall
have provided Lender with all releases, terminations and other documents as
Lender may require to confirm that after giving effect to the consummation of
the Acquisition, the assets and Capital Stock of the Acquired Person are free
and clear of all liens (except for liens permitted under Section 9.8 of
the Loan Agreement); (iv) Lender shall have received executed copies of
all of the documentation evidencing the Acquisition; and (v) to the extent
the Acquisition is consummated through the formation or acquisition of a new
Subsidiary of a Borrower or Guarantor, such new Subsidiary shall execute such
documents as requested by Lender to make such Subsidiary a Guarantor or
Borrower under the Loan Agreement and to grant a security interest in all of
its assets.  Borrowers hereby acknowledge
and agree that none of the assets acquired in connection with the Acquisition
or generated after consummation of the Acquisition in connection with the business
of the Acquired Person shall be included within the calculation of the
Borrowing Base until such time as Lender has conducted a collateral exam and
audit on such assets satisfactory to Lender and subject to such additional
terms and conditions as Lender may require in its discretion.

 

3.             Amendment Fee.  Borrowers shall pay to Lender an amendment
fee in the amount of Twenty Five Thousand Dollars ($25,000), which shall be
fully earned by Lender, non-refundable, and due and payable by Borrowers on the
date of this Amendment.

 

4.             Release; Covenant Not to Sue.

 

(a)           Each Borrower and Guarantor
hereby absolutely and unconditionally releases and forever discharges Lender,
and any and all participants, parent corporations, subsidiary corporations,
affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents and
employees of 

 

11

 

any of the foregoing (each a “Released Party”),
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which any Borrower or Guarantor has had,
now has or has made claim to have against any such person for or by reason of
any act, omission, matter, cause or thing whatsoever arising from the beginning
of time to and including the date of this Amendment, whether such claims,
demands and causes of action are matured or unmatured or known or unknown.  It is the intention of each Borrower and
Guarantor in providing this release that the same shall be effective as a bar
to each and every claim, demand and cause of action specified, and in
furtherance of this intention it waives and relinquishes all rights and
benefits under Section 1542 of the Civil Code of the State of California,
which provides:

 

“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 MIGHT HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR.”

 

Each
Borrower and Guarantor acknowledges that it may hereafter discover facts
different from or in addition to those now known or believed to be true with
respect to such claims, demands, or causes of action and agree that this
instrument shall be and remain effective in all respects notwithstanding any
such differences or additional facts. 
Each Borrower and Guarantor understands, acknowledges and agrees that
the release set forth above may be pleaded as a full and complete defense and
may be used as a basis for an injunction against any action, suit or other
proceeding which may be instituted, prosecuted or attempted in breach of the
provisions of such release.

 

(b)           Each Borrower and Guarantor,
on behalf of itself and their respective successors, assigns, and other legal
representatives, hereby absolutely, unconditionally and irrevocably, covenants
and agrees with and in favor of each Released Party above that it will not sue
(at law, in equity, in any regulatory proceeding or otherwise) any Released
Party on the basis of any claim released, remised and discharged by any
Borrower or Guarantor pursuant to the above release.  If any Borrower, Guarantor or any of their
respective successors, assigns or other legal representations violates the
foregoing covenant, each Borrower and Guarantor, for itself and its successors,
assigns and legal representatives, agrees to pay, in addition to such other
damages as any Released Party may sustain as a result of such violation, all
reasonable attorneys’ fees and costs incurred by such Released Party as a
result of such violation.

 

5.             Effectiveness of this
Amendment.  The
effectiveness of this Amendment is subject to the following conditions
precedent:

 

(a)           Amendment.  Lender shall have received this Amendment,
fully executed in a sufficient number of counterparts for distribution to all
parties.

 

(b)           Portside.  Lender shall have received evidence, in form
and substance satisfactory to Lender, that any UCC-1s filed against any
Borrower or Guarantor by Portside Growth and Opportunity Fund shall have been
terminated.

 

12

 

(c)           Representations and
Warranties.  The
representations and warranties set forth herein and in the Loan Agreement shall
be true and correct.

 

(d)           Other Required
Documentation.  All other
documents and legal matters in connection with the transactions contemplated by
this Amendment shall have been delivered or executed or recorded and shall be
in form and substance satisfactory to Lender.

 

6.             Representations and
Warranties.  Borrowers
and Guarantor represent and warrant as follows:

 

(a)           Authority.  Each Borrower and Guarantor has the requisite
corporate power and authority to execute and deliver this Amendment, and to
perform its obligations hereunder and under the Financing Agreements (as
amended or modified hereby) to which it is a party.  The execution, delivery and performance by Borrowers
and Guarantor of this Amendment have been duly approved by all necessary
corporate action and no other corporate proceedings are necessary to consummate
such transactions.

 

(b)           Enforceability.  This Amendment has been duly executed and
delivered by Borrowers and Guarantor. 
This Amendment and each Financing Agreement (as amended or modified
hereby) is the legal, valid and binding obligation of Borrowers and Guarantor,
enforceable against them in accordance with its terms, and is in full force and
effect.

 

(c)           Representations and Warranties.  The representations and warranties contained
in each Financing Agreement (other than any such representations or warranties
that, by their terms, are specifically made as of a date other than the date
hereof) are correct on and as of the date hereof as though made on and as of
the date hereof.

 

(d)           Due Execution.  The execution, delivery and performance of
this Amendment are within the power of Borrowers and Guarantor, have been duly
authorized by all necessary corporate action, have received all necessary
governmental approval, if any, and do not contravene any law or any contractual
restrictions binding on any Borrower or Guarantor.

 

(e)           No Default.  No event has occurred and is continuing that
constitutes an Event of Default.

 

7.             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 internal laws of the State of California governing contracts only to
be performed in that State.

 

8.             Counterparts.  This Amendment may be executed in any number
of counterparts and by different parties and separate counterparts, each of
which when so executed and delivered, shall be deemed an original, and all of
which, when taken together, shall constitute one and the same instrument.  Delivery of an executed counterpart of a
signature page to this Amendment by telefacsimile shall be effective as
delivery of a manually executed counterpart of this Amendment.

 

13

 

9.             Reference to and Effect on
the Financing Agreements.

 

(a)           Upon and after the
effectiveness of this Amendment, each reference in the Loan Agreement to “this
Agreement”, “hereunder”, “hereof” or words of like import referring to the Loan
Agreement, and each reference in the other Financing Agreements to “the Loan
Agreement”, “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.

 

(b)           Except as specifically
amended above, the Loan Agreement and all other Financing Agreements, are and
shall continue to be in full force and effect and are hereby in all respects
ratified and confirmed and shall constitute the legal, valid, binding and
enforceable obligations of Borrowers and Guarantor to Lender.

 

(c)           The execution, delivery and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of Lender under any of the
Financing Agreements, nor constitute a waiver of any provision of any of the
Financing Agreements.

 

(d)           To the extent that any terms
and conditions in any of the Financing Agreements 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.

 

10.           Estoppel.  To induce Lender to enter into this Amendment
and to continue to make advances to Borrowers under the Loan Agreement,
Borrowers and Guarantor hereby acknowledge and agree that, as of the date
hereof, there exists no right of offset, defense, counterclaim or objection in favor
of any Borrower or Guarantor as against Lender with respect to the Obligations.

 

11.           Integration.  This Amendment, together with the other
Financing Agreements, incorporates all negotiations of the parties hereto with
respect to the subject matter hereof and is the final expression and agreement
of the parties hereto with respect to the subject matter hereof.

 

12.           Severability.  In case any provision in this Amendment shall
be invalid, illegal or unenforceable, such provision shall be severable from the
remainder of this Amendment and the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

 

[Remainder of Page Left Intentionally Blank]

 

14

 

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/
  JOHN AVAGLIANO

  
	
   

  	
  Name:

  	
  John
  Avagliano

  
	
   

  	
  Title:

  	
  COO/CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EGAMI MEDIA, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  JOHN AVAGLIANO

  
	
   

  	
  Name:

  	
  John
  Avagliano

  
	
   

  	
  Title:

  	
  COO/CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  IMAGE ENTERTAINMENT (UK), INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  JOHN AVAGLIANO

  
	
   

  	
  Name:

  	
  John
  Avagliano

  
	
   

  	
  Title:

  	
  COO/CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WACHOVIA
  CAPITAL FINANCE CORPORATION (WESTERN),

  
	
   

  	
  as
  Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  CARLOS VALLES

  
	
   

  	
  Name:

  	
  Carlos
  Valles

  
	
   

  	
  Title:

  	
  Director

  

 

15

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