Document:

Exhibit
10.3

 

CONSULTING
AGREEMENT

 

This CONSULTING AGREEMENT is dated as of April 14, 2010  (the “Effective Date”), and
is made among Image Entertainment, Inc., a Delaware corporation (the “Company”),
and Producers Sales Organization, a California corporation having an address at
46216 Cry Creek Drive, Badger, CA, 93603 (“Consultant”), and John Hyde,
an individual (“Hyde”).

 

WHEREAS, Consultant is an entity wholly owned, directly or indirectly,
by Hyde.

 

WHEREAS, Hyde is an employee of Consultant.

 

WHEREAS, the Company desires to engage Consultant to provide Hyde’s
executive management services to the Company, subject to the terms and
conditions set forth herein.

 

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

 

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

 

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

 

2.             Duties.

 

(a)           During the Consulting Period,
Consultant shall cause Hyde to provide executive management services to the
Company as  Vice Chairman of the Board of
Directors of the Company (the “Board”) of the Company.  In such position, Hyde shall have such
duties, responsibilities and authority as is customarily assigned to
individuals serving in such position, and, notwithstanding Hyde’s status as an
employee of Consultant, such other duties, responsibilities and authority
consistent with Consultant’s position as the Chief Executive Officer of the
Company (the “Supervising Authority”) specifies from time to time, in
each case, which shall be reasonably commensurate with the duties,
responsibilities and authority of a vice chairman of entities of the Company’s
size and nature within the United States (and Consultant agrees to cause Hyde
to perform such duties and responsibilities as specified by the Supervising
Authority).  In addition, Consultant
hereby agrees to cause Hyde to serve as an officer and/or director of any
subsidiary of the Company without any additional compensation to Consultant, if
so requested by the Board.

 

(b)           Consultant shall cause Hyde to devote
all of Hyde’s skill and knowledge and a substantial portion of Consultant’s
business time, attention and energies to the conscientious performance of all
of the lawful duties, responsibilities and authority that may be assigned to
Consultant hereunder, except for vacation time and absence for sickness and
similar disability.  Nothing contained in this 

 

 

Agreement shall
preclude Consultant or Hyde from devoting time (i) to the projects listed
on Schedule A attached hereto (the “Permitted Projects”), and (ii) to
Hyde’s personal and family investments, or to other businesses, or to Hyde’s
serving as a director of any other profit or not-for-profit company, or from
participating in industry associations; provided, that such activities or
services do not (A) materially interfere with Consultant’s duties
hereunder; (B) materially violate the terms of Section 6
hereof or the Proprietary Information Agreement referred to in Section 7
hereof; (C) involve service to any other profit or not-for-profit company,
a substantial portion of whose business is competitive with a substantial
portion of the Company’s business, or a substantial portion of whose business
is substantially in distribution of DVDs or its successors to the home market
or on-demand programming; or (D) result in Hyde’s joining any boards of
for-profit companies without the prior approval of the Board, such approval not
to be unreasonably withheld, other than directorships related to Permitted
Projects, which shall be deemed to be approved as of the date hereof. 
Consultant shall cause Hyde to provide his services in Los Angeles, California,
or such other location within the Los Angeles, California metropolitan area as
may be designated by the Supervising Authority or the Board from time to
time.  Consultant shall also cause Hyde to render services, on a non-permanent
basis, at such other places within or outside the United States as the
Supervising Authority may reasonably direct from time to time.  Consultant
shall be subject to and comply with, and shall cause Hyde to comply with, the
written policies and procedures generally applicable (and provided) to senior
executives and consultants of the Company to the extent such policies and
procedures are not inconsistent with any term of this Agreement (including any
negatively implied term).

 

3.             Compensation.

 

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

 

(b)           Annual Bonus.  In addition to the Consulting Fee, for each
fiscal year of the Company that begins or ends during the Consulting Period,
Consultant shall have an annual cash bonus opportunity of fifty percent (50%)
of the Consulting Fee (the “Bonus”), which shall be payable if 100% of
the Performance Targets (as defined below) are achieved; provided that if
actual performance of the Company for such period exceeds or is less than 100%
of the Performance Targets (but is at least 85% of the Performance Targets),
the amount of the Bonus shall be adjusted positively or negatively,
respectively, by mathematical interpolation, as reasonably determined in good
faith by the Board or compensation committee. 
For purposes of this Agreement, the “Performance Targets” for the fiscal
years during the Initial Term shall be the achievement of earnings before
interest, taxes, depreciation and amortization (the “EBIDTA Targets”) in
amounts equal to (i) $10.3 million, for fiscal  year ending March 31, 2011, (ii) $17.6
million, for fiscal year ending March 31, 2012, and (iii) $21.1
million, for fiscal year ending March 31, 2013, in each case as confirmed
by the Company’s audited financials for each such fiscal year; provided,
however, that in the event of any material acquisition of a company or
business by the Company, the Performance Targets shall be reasonably adjusted
by the Company and Consultant to take into account any changes to the EBITDA
Targets or other material changes relating to such acquisition that should reasonably
result in a change to the applicable Performance Targets.  Any Bonus

 

 

that becomes
payable pursuant to this Section 3(b) shall be paid to
Consultant as soon as reasonably practicable following the Company’s
determination of whether the Performance Targets for the applicable fiscal year
have been achieved and its calculation of the Bonus for such applicable fiscal
year which, in each case, shall be no later than the earlier of (x) 10
days following the completion of the audit for the applicable fiscal year and (y) the
date that is 75 days following the end of each such applicable fiscal
year.  Notwithstanding anything to the
contrary contained in this Agreement or any applicable bonus plan, program or
arrangement, but except as provided in Section 4, Consultant shall
be entitled to receive any such Bonus only if Consultant is engaged to be a
consultant to the Company on the last business day of the fiscal year to which
the Bonus relates and Hyde continues to be an employee of Consultant on such
date.

 

(c)           Equity Compensation.  During the Consulting Period, Hyde shall be
entitled to participate in any and all equity or other plans that are generally
available to consultants and senior executives. 
Except as otherwise provided in this Agreement, Hyde’s participation in
any such plan shall be on the terms and subject to the conditions specified in
the governing document of the particular plan and applicable award agreement.

 

(d)           Benefits.  The Company shall have no responsibility to
provide Hyde with any employee benefits, including, without limitation,
retirement benefits, medical, dental or disability benefits, workers’
compensation or other insurance benefits.

 

(e)           Expense Reimbursement.  During the Consulting Period, the Company
will pay or reimburse Consultant in accordance with the Company’s written
expense reimbursement policies and procedures for all proper expenses incurred
by Consultant or Hyde in the performance of Consultant’s duties hereunder,
regardless of where incurred.

 

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

 

(g)           No Obligation of
Company to Hyde for Compensation. 
Except as set forth in this Agreement, Consultant shall be solely
responsible for and pay to Hyde all compensation or other consideration payable
to Hyde with respect to the services contemplated by this Agreement, and
Consultant shall indemnify and hold the Company harmless from and against any
claim therefor.

 

4.             Termination.

 

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

 

 

Company has been
or will be terminated and the specific provisions of this Section 4
under which such termination is being effected.

 

(b)           Death; Disability; Termination for
Cause; Resignation Without Good Reason or Expiration of Consulting Period.  Consultant’s engagement with the Company
shall terminate pursuant to this Section 4(b):  (i) upon Hyde’s death or Disability, as
defined in Section 10, (ii) upon Consultant’s voluntary
termination of Consultant’s engagement without Good Reason, (iii) upon a
termination of Consultant’s engagement by the Company for Cause, or (iv) upon
the expiration of the Consulting Period. 
Upon a Termination of Engagement pursuant to this Section 4(b),
the Consulting Period shall terminate and Consultant shall receive (A) any
unpaid Consulting Fee accrued through the Termination Date, as defined in Section 10,
(B) to the extent not previously paid, any Bonus earned and unpaid as of
the Termination Date for any previously completed fiscal year, which shall be
paid on the tenth day after the Termination Date (or, if such day is not a
business day, the next business day after such day), (C) reimbursement of
expenses pursuant to Section 3 incurred through the Termination
Date.

 

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

 

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

 

(ii)           payment of an amount equal to 12
months of Consultant’s annual Consulting Fee as in effect immediately prior to
the Termination Date (but without taking into account any reduction in
Consulting Fee giving rise to a Termination of Engagement by Consultant for
Good Reason); and

 

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

 

Notwithstanding any provision to the contrary in this Agreement, no
amount shall be paid pursuant to Section 4(c) above (except
for the amounts payable under Sections 4(c)(i)) unless, on or prior to
the 60th day following the date of Consultant’s
Termination of Engagement, an effective mutual waiver and release of claims
agreement (the “Release”) in substantially the form attached hereto as Exhibit A
has been executed and remains effective on such date and any applicable
revocation period thereunder has expired; provided that any failure of
the Company to execute the Release shall not reduce or eliminate its 

 

 

 

obligations hereunder.  Subject
to Section 4(e)(i), the amounts described in Sections 4(c)(ii) and
(iii) shall be paid in a single lump sum on the next payroll date
immediately following the expiration of such 60-day period.

 

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

 

(e)           Section 409A.

 

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

 

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

 

 

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

 

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

 

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

 

5.             Independent
Contractor; Withholding.

 

(a)           Independent Contractor.  The parties acknowledge and agree that the
relationship between the Company and Consultant is that of independent
contractors and not that of employer and employee.  Nothing in this Agreement is intended to
create or will be deemed to create or constitute a joint venture or partnership
between the Company and the Lender.

 

(b)           Withholding.  The Company shall deduct any amounts from the
Consulting Fee or other amounts payable to Consultant pursuant to this
Agreement required to be deducted and withheld under applicable law.  The Company shall prepare and submit to the
proper tax authorities (with a copy to Consultant) a Form 1099 in
Consultant’s name.  Consultant shall have
sole responsibility for withholding state and federal income taxes, and paying
all employer taxes, relating to Hyde’s employment by Consultant.  Consultant and Hyde jointly and severally
agree to indemnify the Company against any and all claims asserted by the
Internal Revenue Service or any state tax authority relating
to (i) the misclassification of the relationship between Consultant
and Hyde or (ii) the failure of the Company to withhold or pay any
income or employment taxes with respect to the amounts paid to Consultant
hereunder or (iii) the failure of the Company to offer benefits to
Hyde, including without limitation, retirement benefits.  For the avoidance of doubt, Consultant’s and
Hyde’s liability under this provision shall be limited to the amounts
actually owed to the Internal Revenue Service or any such state tax authority.

 

6.             Noncompetition;
Nonsolicitation.

 

 

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

 

(b)           Noncompetition.  Each of Consultant and Hyde agrees that
during the Consulting Period, except as may otherwise be approved by the Board
or as set forth in Section 2 above, neither Consultant nor Hyde
shall in any manner, directly or indirectly, through any person, firm or
corporation, alone or as a member or a partnership or as an owner, investor,
member, partner, officer, director, stockholder, investor or employee of or
consultant to any other corporation or enterprise or otherwise, compete with
the Company or any of its subsidiaries, within the United States and/or any
foreign country, in the business of distribution of DVDs or its successors to
the home market or on-demand programming as conducted by the Company during
Consultant’s engagement or in planning during Consultant’s engagement in which
Consultant or Hyde was materially involved or had actual knowledge.

 

(c)           Nonsolicitation.  Each of Consultant and Hyde further agrees
that during the Consulting Period and for a period of one year following
Consultant’s Termination of Engagement, neither Consultant nor Hyde shall in
any manner, directly or indirectly (i) induce or attempt to induce any
employee of the Company or any of its subsidiaries (other than Ted Green) to terminate or abandon his or her engagement
for any purpose whatsoever, or (ii) solicit or encourage any customer of
the Company or any of its subsidiaries or independent contractor providing
services to the Company or any of its subsidiaries to terminate or diminish its
relationship with it.

 

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

 

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

 

7.             Confidentiality.  Each of Consultant and Hyde, on the one hand, and
the Company, on the other hand, have entered into the Company’s standard
employee proprietary information agreement (the “Proprietary Information
Agreement”).

 

8.             Enforcement.  The parties hereto agree that the Company may be
damaged irreparably in the event that any provision of Section 6 or
7 of this Agreement were not performed in accordance with its terms or
were otherwise breached and that money damages may be an inadequate remedy for
any such nonperformance or breach. 
Accordingly, the Company and its successors and 

 

 

permitted
assigns shall be entitled, in addition to other rights and remedies existing in
their favor, to seek an injunction or injunctions to prevent any breach or
threatened breach of any such provisions and to enforce such provisions
specifically (without posting a bond or other security), in each case, as a
court of competent jurisdiction may deem necessary or appropriate to restrain
Consultant or Hyde.  In addition, in the
event of any breach of Section 6(c) by Consultant or Hyde,
Consultant and Hyde agree, jointly and severally, to repay to the Company any
amounts paid to Consultant pursuant to Sections 4(c)(iii) and (iv) following
the date of such breach.

 

9.             Representations/Covenant.

 

(a)         By Consultant.  Consultant represents and warrants to the
Company that (i) the execution, delivery and performance of this Agreement
by Consultant does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Consultant is a party or by which Consultant is bound, (ii) Consultant
is not a party to or bound by any engagement, noncompetition agreement or
confidentiality agreement with any other person or entity that would interfere
with the execution, delivery or performance of this Agreement by Consultant, (iii) upon
the execution and delivery of this Agreement by the Company, this Agreement
shall be the valid and binding obligation of Consultant, enforceable in
accordance with its terms.  Consultant
agrees that it will not disclose to or use on behalf of the Company any proprietary
information of a third party without that party’s consent, and (iv) that
Hyde is, and will continue to be during the Term, an employee of
Consultant.  Consultant further agrees
that it will not, during the Term, terminate Hyde’s active employment with
Consultant.  Consultant further agrees
that it will not, during the Term, engage in any transaction that results in
Hyde’s ceasing to have control of Consultant without the express written
consent of the Company.

 

(b)         By Hyde.  Hyde represents and warrants to the Company
that (i) the execution, delivery and performance of this Agreement by Hyde
does not and will not conflict with, breach, violate or cause a default under
any contract, agreement, instrument, order, judgment or decree to which Hyde is
a party or by which Hyde is bound, (ii) Hyde is not a party to or bound by
any engagement, noncompetition agreement or confidentiality agreement with any
other person or entity that would interfere with the execution, delivery or
performance of this Agreement by Hyde, (iii) upon the execution and
delivery of this Agreement by the Company, this Agreement shall be the valid
and binding obligation of Hyde, enforceable in accordance with its terms, and (iv) that
he is, and will continue to be during the Term, an employee of Consultant.  Hyde agrees that he will not disclose to or
use on behalf of the Company any proprietary information of a third party
without that party’s consent.   Hyde
agrees that he will not sell, transfer, gift, hypothecate, pledge or otherwise
dispose of any equity interest in Consultant during the Term without the
express written consent of the Company.

 

(c)         By the Company.  The Company represents and warrants to
Consultant and Hyde that (i) it is fully authorized by action of its Board
(and of any other person or body whose action is required) to enter into this
Agreement and to perform its obligations under it and under the programs, plans
and arrangements referred to in it; (ii) the execution, delivery and
performance of this Agreement by the Company does not violate any applicable
law, regulation, order, judgment or decree or any agreement, arrangement, plan
or corporate governance document to which it is a party or is bound; and (iii) upon
the execution and delivery of this Agreement by the parties, this Agreement
shall be a valid and binding obligation of the Company, enforceable against it
in accordance with its terms.

 

10.          Definitions.

 

“Cause” means the occurrence of any of the following:  (i) Hyde’s conviction of a felony or of
any crime involving moral turpitude, dishonesty, fraud, embezzlement, theft or
misrepresentation, 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

“Termination of Engagement” shall mean the termination of
Consultant’s engagement with the Company under this Agreement on the following
dates:  (i) if Consultant’s
engagement is terminated by Hyde’s death, the date of such death, and (ii) if
Consultant’s engagement is terminated for any other reason, the latest of the
date on which the Notice of Termination is given, the date any applicable cure
period expires, the date of termination specified in such notice (which shall
not be more 

 

 

than 30 days after the date of such notice) and, if no such notice is
given, 30 days after the date of termination of engagement.

 

11.          Insurance;
Indemnification. The Company and each of its subsidiaries shall, to the maximum extent provided
under applicable law, indemnify and hold Consultant and Hyde harmless from and
against any expenses, including reasonable attorney’s fees, judgments, fines,
settlements and other amounts (“Losses”), incurred in connection with
any proceeding arising out of, or related to, Consultant’s engagement by the
Company; provided that the Company and its subsidiaries shall not be obligated
to indemnify Consultant or Hyde for any Losses arising out of their breach of Section 5
of this Agreement or arising out of, in any way connected with, or as a result
of, any misclassification with respect to the relationship between Consultant
and Hyde or the failure of the Company to withhold or pay any income or
employment taxes with respect to the amounts paid to Consultant hereunder or
the failure of the Company to offer benefits to Hyde, including without
limitation, retirement benefits.  The
Company shall, or shall cause a subsidiary thereof to, advance to Consultant or
Hyde any expenses, including attorney’s fees and costs of settlement, incurred
in defending any such proceeding to the maximum extent permitted by applicable
law.  Such costs and expenses incurred by
Consultant and Hyde in defense of any such proceeding shall be paid by the
Company or applicable subsidiary in advance of the final disposition of such
proceeding promptly upon receipt by the Company of (a) written request for
payment; (b) appropriate documentation evidencing the incurrence, amount
and nature of the costs and expenses for which payment is being sought; and (c) an
undertaking adequate under applicable law made by or on behalf of Consultant or
Hyde to repay the amounts so advanced if it shall ultimately be determined
pursuant to any non-appealable judgment or settlement that Consultant or Hyde is
not entitled to be indemnified by the Company or any subsidiary thereof. During the Term and continuing until the
later of (i) the sixth anniversary of the Termination Date and (ii) the
date on which all claims against Consultant or Hyde that would otherwise be
covered by such policy (or policies) become fully time-barred, the Company
shall maintain customary directors’ and officers’ liability insurance for
Consultant or Hyde (as applicable), providing coverage that is no less
favorable to Consultant or Hyde in any material respect (including, but not
limited to, with respect to scope, exclusions, amounts and deductibles) than
the coverage then being provided to any other present or former officer or
director of the Company.

 

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

 

	
   

  	
  If to the Company, to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Image Entertainment, Inc.

  
	
   

  	
   

  	
  20525 Nordhoff Street, Suite 200

  
	
   

  	
   

  	
  Chatsworth, CA 91311

  
	
   

  	
   

  	
  Attention: Chairman of the Board of Directors

  
	
   

  	
   

  	
  Facsimile: (      )

  
	
   

  	
   

  	
   

  
	
   

  	
  If to Consultant or Hyde, to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Producers Sales Organization

  
	
   

  	
   

  	
  46216 Cry Creek Drive

  
	
   

  	
   

  	
  Badger, CA 93603

  

 

 

	
   

  	
   

  	
  Facsimile: (      )

  
	
   

  	
   

  	
   

  
	
   

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Morrison Cohen LLP

  
	
   

  	
   

  	
  909 Third Avenue

  
	
   

  	
   

  	
  New York, NY 10022

  
	
   

  	
   

  	
  Attention: Jack Levy, Esq.

  
	
   

  	
   

  	
  Facsimile: (212) 735-8708

  

 

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

 

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

 

15.                               Successors and Assigns.  This Agreement shall be enforceable by Consultant
and Consultant’s heirs, executors, administrators and legal representatives, by
Hyde and Hyde’s heirs, executors, administrators and legal representatives, and
by the Company and its successors and assigns. 
Neither Consultant nor Hyde may assign this Agreement and any such
assignment shall be null and void. The rights of the Company under this
Agreement shall, without the consent of Consultant or Hyde, be assigned by the
Company to any person, firm, corporation or other business entity which at any
time, whether by purchase, merger or otherwise, directly or indirectly,
acquires all or substantially all of the assets or business of the Company.  The Company will require any successor
(whether direct or indirect, by purchase, merger or otherwise) to all or
substantially all of the business or assets of the Company expressly to assume
and to agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place; provided, however, that no such assumption shall relieve the
Company of its obligations hereunder.  As
used in this Agreement, the “Company” shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law or otherwise.

 

16.                               Governing Law; Venue.  This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of California
without regard to principles of conflicts of laws.  Any suit brought hereon shall be brought in
the state or Federal courts sitting in Los Angeles, California, the parties
hereto hereby waiving any claim or defense that such forum is not 

 

 

convenient or proper.  Each party hereby agrees that any such court
shall have in personal jurisdiction over it and consents to service of process
in any manner authorized by California law.

 

17.                               Arbitration.

 

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

 

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

 

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

 

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

 

19.                               Legal Fees.  The Company shall reimburse
Consultant for all reasonable attorneys’ fees incurred by Consultant or Hyde in
reviewing and negotiating this Agreement and Hyde’s 

 

 

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

 

20.                               Excise Taxes.

 

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

 

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

 

(iii)                               If the Tax Counsel determines that any Excise Tax
is payable by Consultant and that the criteria for reducing the Payments to the
Capped Amount (as described in Section 20(a)(i) above) is met,
then the Company shall reduce the Payments by the amount which, based on the
Tax Counsel’s determination and calculations, would provide Consultant with the
Capped Amount, and 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(d)                                 The Company shall control all proceedings taken
in connection with such contest and, at its sole option, may pursue or forego
any and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim and may, at its sole option,
either direct Consultant to pay the tax claimed and sue for a refund or contest
the claim in any permissible manner, and 

 

 

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

 

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

 

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

 

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

 

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

 

(ii)                                  In
no event shall the Company’s liability for any Gross-Up Payments to Consultant
under this Section 20, taken together with any gross-up payments
payable to Ted Green and John Avagliano pursuant to their respective Employment
Agreements (the “Other Employment Agreements”) with the Company of even
date herewith (the “Aggregate Gross-Up Payments”), exceed $1,000,000
(the “Maximum Amount”) in the aggregate. 
In the event that the Aggregate Gross-Up Payments would exceed
$1,000,000, Consultant’s Gross-Up Payment under this Section 20
shall not exceed an amount equal to (A) the Maximum Amount, multiplied by (B) a
fraction, the numerator of which is equal to the Gross-Up Payment that would be
payable to Consultant pursuant to this Section 20 (without regard
to the application of this Section 20(g)(ii)), and the denominator
of which is the aggregate Gross-Up Payments that would be payable to Consultant
pursuant to this Section 20 and Ted Green and 

 

 

John Avagliano pursuant to the Other Employment Agreements (without
regard to the application of this Section 20(g)(ii) or any
comparable provision in the Other Employment Agreements).

 

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

 

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

 

[SIGNATURE PAGE FOLLOWS]

 

 

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

 

	
   

  	
  IMAGE ENTERTAINMENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ THEODORE GREEN

  
	
   

  	
  Name:

  	
  Theodore Green

  
	
   

  	
  Title:

  	
  Chairman/CEO

  
					

 

 

	
   

  	
  PRODUCERS SALES ORGANIZATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOHN HYDE

  
	
   

  	
  Name:

  	
  John Hyde

  
	
   

  	
  Title:

  	
  VP

  
					

 

 

	
   

  	
  JOHN HYDE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ JOHN HYDE

  

 

 

EXHIBIT A

 

 

Form of Mutual Release

 

 

EXHIBIT A

 

GENERAL
RELEASE OF CLAIMS

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

9.             Miscellaneous Provisions.

 

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

 

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

 

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

 

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

 

 

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

 

	
  EXECUTIVE

  	
  IMAGE ENTERTAINMENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  [Name of Executive]

  	
  Its:

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  Dated:

  	
   

  
						

 

 

EXHIBIT B

 

Class A Stock Option Agreement

 

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

STOCK OPTION GRANT NOTICE AND

STOCK OPTION AGREEMENT

 

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

 

	
  Participant:

  	
   

  	
  Producers
  Sales Organization

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share of Stock:

  	
   

  	
  $

  	
  (1)

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares of Stock Subject to the Option:

  	
   

  	
                                                                                                                                  shares, which represents
        % of the Company’s fully diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010.  The number of Shares subject to this
  Stock Option represents 3.201% of the
  fully diluted common stock of the Company (excluding the Company’s outstanding and underwater stock options) as
  of January 8, 2010  minus the number of shares of Class A
  Restricted Stock granted to such Participant. 
  The number of shares of Stock shall be subject to adjustment for stock
  splits, stock dividends and other events or transactions described in Section 11.1(a) of
  the Plan.

  
	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
   

  	
   

  
					

 

Type of Option:                    o     Incentive
Stock Option      o     Non-Qualified
Stock Option

 

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

 

 

 

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

 

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

 

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  PRODUCERS SALES ORGANIZATION

  
	
  Print Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:   20525 Nordhoff Street, Ste 200 

  	
   

  	
  Address:

  	
   

  
	
                   Chatsworth,
  CA 91311

  	
   

  	
   

  	
   

  
								

 

 

EXHIBIT A

 

TO STOCK OPTION GRANT NOTICE

 

STOCK OPTION AGREEMENT

 

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

 

GENERAL

 

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

 

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

 

GRANT OF OPTION

 

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

 

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

 

A-1

 

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

 

PERIOD OF EXERCISABILITY

 

Commencement of Exercisability.

 

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

 

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

 

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

 

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

 

The expiration of ten years from the Grant Date;

 

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

 

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

 

A-2

 

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

 

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

 

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

 

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

 

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

 

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

 

EXERCISE OF OPTION

 

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

 

A-3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Cash;

 

Check;

 

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

 

A-4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-5

 

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

 

OTHER
PROVISIONS

 

Option
Generally Not Transferable.

 

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

 

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

 

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

 

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

 

A-6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-7

 

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

 

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

 

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

 

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

 

A-8

 

EXHIBIT B

 

TO STOCK
OPTION GRANT NOTICE

 

FORM OF
EXERCISE NOTICE

 

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

 

	
  Grant Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

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

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share of Stock:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Certificate to be issued in name of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cash Payment delivered herewith:

  	
   

  	
  $

  	
   

  	
  (Representing
  the full Exercise Price for the 

  
	
   

  	
   

  	
  Shares,
  as well as any applicable withholding tax)

  
							

 

	
  Type
  of Option:

  	
  o

  	
  Incentive
  Stock Option

  	
   

  	
  o

  	
   

  	
  Non-Qualified
  Stock Option

  

 

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

 

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

 

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

 

B-1

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

B-2

 

	
  ACCEPTED BY: 

  	
   

  	
  SUBMITTED BY 

  
	
  IMAGE
  ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  Print
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
										

 

 

CONSENT
OF SPOUSE

 

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

 

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature
  of Spouse

  

 

B-3

 

EXHIBIT C

 

TO STOCK OPTION
GRANT NOTICE

 

VESTING
PROVISIONS

 

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

 

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

 

2.                                       Accelerated
Vesting.

 

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

 

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

 

C-1

 

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

 

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

 

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

 

C-2

 

EXHIBIT D

 

TO STOCK
OPTION GRANT NOTICE

 

TRANSFER
RESTRICTIONS

 

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

 

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

 

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

 

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

 

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

 

 

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

 

2.                                       Definitions.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

EXHIBIT C

 

Class B Stock Option Agreement

 

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

STOCK OPTION GRANT NOTICE AND

STOCK OPTION AGREEMENT

 

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

 

	
  Participant:

  	
   

  	
  John Avagliano

  
	
   

  	
   

  	
   

  
	
  Grant
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise
  Price per Share of Stock:

  	
   

  	
  $

  	
  (2)

  	
   

  
	
   

  	
   

  	
   

  
	
  Total
  Exercise Price:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Total
  Number of Shares of Stock 

  	
   

  	
   

  	
  shares, which 

  
	
  Subject
  to the Option:

  	
   

  	
  represents       %
  of the Company’s fully diluted Stock (excluding the Company’s outstanding and
  underwater stock options) as of January 8, 2010. The number of Shares subject to this
  Stock Option represents 0.443% of the
  fully diluted common stock of the Company at closing (excluding the Company’s outstanding and underwater stock options) as
  of January 8, 2010  minus the number of shares of
  Class B Restricted Stock granted to such Participant. The number of
  shares of Stock shall be subject to adjustment for stock splits, stock
  dividends and other events or transactions described in
  Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Expiration
  Date:

  	
   

  	
   

  	
   

  
					

 

	
  Type
  of Option:

  	
  o

  	
  Incentive
  Stock Option

  	
   

  	
  o

  	
   

  	
  Non-Qualified
  Stock Option

  

 

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

 

 

	
  Vesting
  Schedule:

  	
   

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

  

 

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

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:   20525
  Nordhoff Street, Ste 200

  Chatsworth,
  CA 91311

  	
   

  	
  Address:

  
						

 

 

EXHIBIT A

 

TO STOCK OPTION GRANT NOTICE

 

STOCK OPTION AGREEMENT

 

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

 

GENERAL

 

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

 

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

 

GRANT
OF OPTION

 

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

 

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

 

A-1

 

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

 

PERIOD
OF EXERCISABILITY

 

Commencement
of Exercisability.

 

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

 

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

 

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

 

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

 

The
expiration of ten years from the Grant Date;

 

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

 

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

 

A-2

 

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

 

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

 

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

 

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

 

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

 

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

 

EXERCISE
OF OPTION

 

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

 

A-3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Cash;

 

Check;

 

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

 

A-4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-5

 

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

 

OTHER
PROVISIONS

 

Option
Generally Not Transferable.

 

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

 

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

 

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

 

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

 

A-6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-7

 

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

 

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

 

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

 

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

 

A-8

 

EXHIBIT B

 

TO STOCK
OPTION GRANT NOTICE

 

FORM OF
EXERCISE NOTICE

 

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

 

	
  Grant Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

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

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share of Stock:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Certificate to be issued in name of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cash Payment delivered herewith:

  	
   

  	
  $

  	
   

  	
  (Representing
  the full Exercise Price for the 

  
	
   

  	
   

  	
  Shares,
  as well as any applicable withholding tax)

  
							

 

	
  Type
  of Option:

  	
  o

  	
  Incentive
  Stock Option

  	
   

  	
  o

  	
   

  	
  Non-Qualified
  Stock Option

  

 

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

 

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

 

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

 

B-1

 

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

 

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

 

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

 

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

 

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

 

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

 

B-2

 

	
  ACCEPTED BY: 

  	
   

  	
  SUBMITTED BY 

  
	
  IMAGE
  ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  Print
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
										

 

 

CONSENT
OF SPOUSE

 

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

 

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature
  of Spouse

  

 

B-3

 

EXHIBIT C

 

TO STOCK
OPTION GRANT NOTICE

 

VESTING
PROVISIONS

 

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

 

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

 

2.                                       Accelerated
Vesting.

 

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

 

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

 

 

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

 

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

 

 

EXHIBIT D

 

Class C Stock Option Agreement

 

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

STOCK OPTION GRANT NOTICE AND

STOCK OPTION AGREEMENT

 

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

 

	
  Participant:

  	
   

  	
  Producers Sales Organization

  
	
   

  	
   

  	
   

  
	
  Grant
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise
  Price per Share of Stock:

  	
   

  	
  $

  	
  (3)

  	
   

  
	
   

  	
   

  	
   

  
	
  Total
  Exercise Price:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Total
  Number of Shares of Stock 

  	
   

  	
   

  	
  shares, which 

  
	
  Subject
  to the Option:

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Expiration
  Date:

  	
   

  	
   

  	
   

  
					

 

	
  Type
  of Option:

  	
  o

  	
  Incentive
  Stock Option

  	
   

  	
  o

  	
   

  	
  Non-Qualified
  Stock Option

  

 

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

 

 

	
  Vesting
  Schedule:

  	
   

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

  

 

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

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  PRODUCERS
  SALES ORGANIZATION

  
	
  Print
  Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:   20525
  Nordhoff Street, Ste 200

  Chatsworth,
  CA 91311

  	
   

  	
  Address:

  
						

 

 

EXHIBIT A

 

TO STOCK OPTION GRANT NOTICE

 

STOCK OPTION AGREEMENT

 

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

 

GENERAL

 

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

 

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

 

GRANT
OF OPTION

 

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

 

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

 

A-1

 

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

 

PERIOD
OF EXERCISABILITY

 

Commencement
of Exercisability.

 

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

 

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

 

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

 

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

 

The
expiration of ten years from the Grant Date;

 

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

 

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

 

A-2

 

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

 

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

 

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

 

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

 

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

 

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

 

EXERCISE
OF OPTION

 

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

 

A-3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Cash;

 

Check;

 

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

 

A-4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-5

 

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

 

OTHER
PROVISIONS

 

Option
Generally Not Transferable.

 

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

 

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

 

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

 

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

 

A-6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-7

 

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

 

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

 

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

 

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

 

A-8

 

EXHIBIT B

 

TO STOCK
OPTION GRANT NOTICE

 

FORM OF
EXERCISE NOTICE

 

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

 

	
  Grant Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

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

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share of Stock:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Certificate to be issued in name of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cash Payment delivered herewith:

  	
   

  	
  $

  	
   

  	
  (Representing
  the full Exercise Price for the 

  
	
   

  	
   

  	
  Shares,
  as well as any applicable withholding tax)

  
							

 

	
  Type
  of Option:

  	
  o

  	
  Incentive
  Stock Option

  	
   

  	
  o

  	
   

  	
  Non-Qualified
  Stock Option

  

 

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

 

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

 

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

 

B-1

 

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

 

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

 

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

 

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

 

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

 

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

 

B-2

 

	
  ACCEPTED BY: 

  	
   

  	
  SUBMITTED BY 

  
	
  IMAGE
  ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  Print
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
										

 

 

CONSENT
OF SPOUSE

 

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

 

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature
  of Spouse

  

 

B-3

 

EXHIBIT C

 

TO STOCK
OPTION GRANT NOTICE

 

VESTING
PROVISIONS

 

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

 

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

 

2.                                       Accelerated
Vesting.

 

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

 

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

 

 

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

 

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

 

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

 

2

 

EXHIBIT E

 

Class A Restricted Stock Award Agreement

 

3

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

RESTRICTED
STOCK AWARD GRANT NOTICE AND

RESTRICTED STOCK AWARD AGREEMENT

 

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

 

	
  Participant:

  	
   

  	
  Producers Sales Organization

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Grant Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares of Restricted Stock:

  	
   

  	
   

  
	
   

  	
   

  	
  Shares, which represents
        % of the Company’s fully-diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010. The number of Shares shall have a value equal to
  (i) the difference between the Fair Market Value of a share of common
  stock on the date of grant of the Options (but not less than $0.20 per share)
  and $0.0366, multiplied by (ii) the number of shares of common stock
  representing 3.201% of the fully
  diluted common stock (excluding the
  Company’s outstanding and underwater stock options) as of January 8,
  2010. The number of Shares shall be subject to adjustment for stock
  splits, stock dividends and other events or transactions described at
  Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

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

  

 

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

 

4

 

Plan,
this Grant Notice or the Restricted Stock Agreement.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  PRODUCERS
  SALES ORGANIZATION

  
	
  Print
  Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:   20525
  Nordhoff Street, Ste 200

  Chatsworth,
  CA 91311

  	
   

  	
  Address:

  
						

 

5

 

EXHIBIT A

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

RESTRICTED STOCK AWARD AGREEMENT

 

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

 

ARTICLE I

ISSUANCE OF SHARES

 

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

 

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

 

ARTICLE II

FORFEITURE AND TRANSFER RESTRICTIONS

 

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

 

A-1

 

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

 

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

 

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

 

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

 

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

 

A-2

 

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

 

ARTICLE III

 

TAXATION REPRESENTATIONS

 

Participant
represents to the Company the following:

 

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

 

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

 

ARTICLE IV

RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS

 

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

 

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

 

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

 

A-3

 

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

 

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

 

ARTICLE V

MISCELLANEOUS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

A-4

 

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

 

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

 

A-5

 

EXHIBIT B

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

VESTING
PROVISIONS

 

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

 

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

 

2.                                       Accelerated
Vesting.

 

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

 

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

 

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

 

3.                                       Definitions.

 

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

 

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

 

B-1

 

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

 

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

 

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

 

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

 

B-2

 

EXHIBIT C

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

STOCK ASSIGNMENT

 

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

 

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

 

 

	
  Dated:
                                ,                          

  	
   

  
	
   

  	
  [Name
  of Participant]

  

 

 

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

 

C-1

 

EXHIBIT D

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

TRANSFER
RESTRICTIONS

 

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

 

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

 

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

 

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

 

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

 

2.                                       Definitions.

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

EXHIBIT F

 

Class B Restricted Stock Award Agreement

 

3

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

RESTRICTED
STOCK AWARD GRANT NOTICE AND

RESTRICTED STOCK AWARD AGREEMENT

 

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

 

	
  Participant:

  	
   

  	
  Producers Sales Organization

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Grant Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares of Restricted 

  	
   

  	
   

  
	
  Stock:

  	
   

  	
  Shares, which represents
        % of the Company’s fully-diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010. The number of Shares shall have a value equal to
  (i) the difference between the Fair Market Value of a share of common
  stock on the date of grant of the Options (but not less than $0.20 per share)
  and $0.0773, multiplied by (ii) the number of shares of common stock
  representing 0.800% of the fully
  diluted common stock (excluding the
  Company’s outstanding and underwater stock options) as of January 8,
  2010. The number of Shares shall be subject to adjustment for stock
  splits, stock dividends and other events or transactions described at
  Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

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

  

 

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

 

4

 

Plan,
this Grant Notice or the Restricted Stock Agreement.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  PRODUCERS
  SALES ORGANIZATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Print
  Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  20525
  Nordhoff Street, Ste 200

  	
   

  	
  Address:

  	
   

  
	
   

  	
  Chatsworth,
  CA 91311

  	
   

  	
   

  	
   

  

 

5

 

EXHIBIT A

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

RESTRICTED STOCK AWARD AGREEMENT

 

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

 

ARTICLE I

 

ISSUANCE OF SHARES

 

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

 

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

 

ARTICLE II

FORFEITURE AND TRANSFER RESTRICTIONS

 

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

 

A-1

 

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

 

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

 

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

 

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

 

A-2

 

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

 

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

 

ARTICLE III

TAXATION
REPRESENTATIONS

 

Participant represents to the Company the following:

 

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

 

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

 

ARTICLE IV

 

RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS

 

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

 

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

 

A-3

 

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

 

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

 

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

 

ARTICLE V

MISCELLANEOUS

 

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

 

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

 

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

 

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

 

A-4

 

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

 

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

 

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

 

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

 

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

 

A-5

 

EXHIBIT B

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

VESTING
PROVISIONS

 

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

 

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

 

2.                                       Accelerated
Vesting.

 

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

 

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

 

B-1

 

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

 

3.                                       Definitions.

 

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

 

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

 

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

 

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

 

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

 

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

 

B-2

 

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

 

B-3

 

EXHIBIT C

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

STOCK
ASSIGNMENT

 

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

 

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

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Name of Participant]

  

 

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

 

C-1

 

EXHIBIT D

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

TRANSFER
RESTRICTIONS

 

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

 

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

 

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

 

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

 

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

 

2.                                       Definitions.

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

EXHIBIT G

 

Class C Restricted Stock Award Agreement

 

3

 

IMAGE ENTERTAINMENT, INC.

 

2010 EQUITY INCENTIVE AWARD PLAN

 

RESTRICTED
STOCK AWARD GRANT NOTICE AND

RESTRICTED STOCK AWARD AGREEMENT

 

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

 

	
  Participant:

  	
   

  	
  Producers Sales Organization

  
	
   

  	
   

  	
   

  
	
  Grant Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Grant Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Number of Shares of

  	
   

  	
   

  
	
  Restricted Stock:

  	
   

  	
  Shares, which represents
        % of the Company’s fully-diluted Stock
  (excluding the Company’s outstanding and underwater stock options) as of
  January 8, 2010. The number of Shares shall have a value equal to
  (i) the difference between the Fair Market Value of a share of common
  stock on the date of grant of the Options (but not less than $0.20 per share)
  and $0.1718, multiplied by (ii) the number of shares of common stock
  representing 0.800% of the fully
  diluted common stock (excluding the
  Company’s outstanding and underwater stock options) as of January 8,
  2010. The number of Shares shall be subject to adjustment for stock
  splits, stock dividends and other events or transactions described at
  Section 11.1(a) of the Plan.

  
	
   

  	
   

  	
   

  
	
  Vesting Schedule:

  	
   

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

  

 

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

 

4

 

Plan, this Grant Notice or the Restricted Stock Agreement.

 

	
  IMAGE ENTERTAINMENT, INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  PRODUCERS SALES ORGANIZATION

  
	
  Print Name:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
    20525 Nordhoff Street, Ste 200

  	
   

  	
  Address:

  
	
   

  	
    Chatsworth, CA 91311

  	
   

  	
   

  
						

 

5

 

EXHIBIT A

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

RESTRICTED STOCK AWARD AGREEMENT

 

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

 

ARTICLE I

 

ISSUANCE OF SHARES

 

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

 

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

 

ARTICLE II

 

FORFEITURE AND TRANSFER RESTRICTIONS

 

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

 

A-1

 

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

 

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

 

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

 

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

 

A-2

 

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

 

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

 

ARTICLE III

 

TAXATION
REPRESENTATIONS

 

Participant represents to the Company the following:

 

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

 

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

 

ARTICLE IV

 

RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS

 

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

 

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

 

A-3

 

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

 

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

 

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

 

ARTICLE V

 

MISCELLANEOUS

 

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

 

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

 

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

 

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

 

A-4

 

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

 

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

 

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

 

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

 

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

 

A-5

 

EXHIBIT B

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

VESTING
PROVISIONS

 

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

 

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

 

2.                                       Accelerated
Vesting.

 

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

 

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

 

B-1

 

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

 

3.                                       Definitions.

 

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

 

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

 

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

 

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

 

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

 

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

 

B-2

 

recognized securities dealer.

 

B-3

 

EXHIBIT C

 

TO RESTRICTED STOCK AWARD GRANT NOTICE

 

STOCK
ASSIGNMENT

 

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

 

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

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [Name of Participant]

  

 

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

 

C-1

 

EXHIBIT D

 

TO
RESTRICTED STOCK AWARD GRANT NOTICE

 

TRANSFER
RESTRICTIONS

 

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

 

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

 

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

 

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

 

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

 

2.                                       Definitions.

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

SCHEDULE A

 

Permitted Projects

 

PSO/REHAB/HYDE Projects

 

April 12, 2010

 

The Jim Henson Company — Vice Chairman of the
Board and consultant regarding corporate strategy

 

BNP Paribas — Consultant for post-production
services company that needs reorganizing — probable Board seat

 

RHI — Consulting, possible Board seat, or
CRO/COO or an equivalent title

 

Short Circuit - international distribution
rights, and DVD rights for the U.S. and Canada...own copyright

 

Short Circuit 3 — developing Short Circuit 3,
The Weinstein Company

 

Flight Of The Navigator - international
distribution rights (excluding the U.K.)...own copyright

 

Flight Of The Navigator 2 — developing Flight
Of The Navigator 2, Disney

 

Eight Million Ways To Die - all rights
licensed to picture in perpetuity to TriStar - own copyright (Matt Scudder) and
can develop additional sequels, prequels & remakes

 

Jaws 3D - all rights licensed to Universal in
perpetuity - profit participation

 

The Player - Administration of worldwide
distribution rights

 

Space Precinct - 24 episodes - worldwide
distribution rights (excluding the U.K.)

 

Filmstar Library - all rights licensed -
oversight

 

Bethune

Boulevard of
Broken Dreams

Carnival of
Souls

No Holds
Barred

Shock to the
System

Secret Agent
Zero

Simple Justice

 

CrownStar Records - 15 record album masters
and art

 

Music Publishing Companies — wholly owned

REG Music (BMI)

Reeves Entertainment Music (ASCAP)

Sun Bound Publishing (ASCAP)

Moon Bound Publishing (BMI)

PSongs Music Publishing (ASCAP)

PSO Film Music (BMI)

 

 

Comic Books

Glory

Warchild

Prophet

Preist

Bloodhunter

Cyberpunx

Doom’s IV

Judgment Day

Maximage

Participation in 18 more Liefeld comic books from a settlement

 

Scripts

Scudder

Flight Of The Navigator - remake

SmarTalk

 

Film/Television Treatments

Warchild

Glory

campUS

 

Literary Properties — owned/controlled

Hydeway  1

Matt Scudder — 16 book detective series by Lawrence Block

Hard Corp

Lies They Tell

The Fear Within

 

Story Concepts and/or Pitches

American Folk

Boogie Daze

China White

Cuff Marks

Enchanted Valley

Old MacDonald

Splat

The Joint

Old Rock

Underground Middle Man

Endicott Lake

Deep Coverage

Comic Response

Checkmate

Buckaroo

Billi Parr

Synthetic Drugs

NIDS

Sleeper Space

Sami & the Space Pirates

 

 

Fairlea Ranches — Badger & Exeter,
California - 1500 acres & 50 acres respectively- oversee general ranch
operations...buy, sell, train, board and show Quarter Horses...buy, sell and rent
various real estate on or around the ranches...

 

National Reined Cow Horse Association/National Reined Cow Horse
Foundation - President of the Foundation, Board
Member...Produces and/or oversees horse shows through out the country

 

Producers Sales Organization — Main operating
company for various Hyde businesses

 

Rehab Incorporated — Used for current
entertainment and consulting servicesExhibit 10.4

 

Form of

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “Agreement”),
dated as of       , 2010, with an effective date
as set forth in Section 18, between Image Entertainment, Inc., a
Delaware corporation (the “Corporation”),
and        (together with such person’s spouse or
domestic partner, “Indemnitee”).

 

W I T N E S S E T H:

 

WHEREAS, Indemnitee is either a member of the board of directors
of the Corporation (the “Board of Directors”),
a director of a wholly owned subsidiary of the Corporation, an officer of the
Corporation or an officer of a wholly owned subsidiary of the Corporation, or
one or more of such positions, and in such capacity or capacities, or otherwise
as an Agent (as hereinafter defined) of the Corporation, is performing a
valuable service for the Corporation; and

 

WHEREAS, the Corporation is aware that competent and experienced
persons are increasingly reluctant to serve as directors or officers of
corporations or other business entities unless they are protected by
comprehensive indemnification and liability insurance, due to increased
exposure to litigation costs and risks resulting from their service to such
entities, and because the exposure frequently bears no reasonable relationship
to the compensation of such directors and officers; and

 

WHEREAS, the Board of Directors of the Corporation has concluded that,
to retain and attract talented and experienced individuals to serve or continue
to serve as officers or directors of the Corporation or its subsidiaries, and
to encourage such individuals to take the business risks necessary for the
success of the Corporation, it is necessary for the Corporation contractually
to indemnify directors and officers and to assume for itself to the fullest
extent permitted by law expenses and damages in connection with claims against
such officers or directors in connection with their service to the Corporation;
and

 

WHEREAS, Section 145 of the General Corporation Law of Delaware
(the “DGCL”), under which the
Corporation is organized, empowers the Corporation to indemnify by agreement
its officers, directors, employees and agents, and persons who serve, at the
request of the Corporation, as directors, officers, employees or agents of
other corporations or enterprises, and expressly provides that the
indemnification provided by the DGCL is not exclusive; and

 

WHEREAS, the Corporation desires and has requested the Indemnitee to
serve or continue to serve as a director, officer or agent of the Corporation
or one or more of its subsidiaries free from undue concern for claims for
damages arising out of or related to such services to the Corporation; and

 

WHEREAS, Indemnitee is willing to serve, continue to serve and to
take on additional service for or on behalf of the Corporation on the condition
that he or she be indemnified as herein provided; and

 

 

WHEREAS, it is intended that Indemnitee shall be paid promptly by the
Corporation all amounts necessary to effectuate in full the indemnity provided
herein; and

 

WHEREAS, certain defined terms are set forth in Section 17 below:

 

NOW, THEREFORE, in consideration of the premises and the covenants in
this Agreement, and of Indemnitee serving or continuing to serve the
Corporation or one or more of its subsidiaries as an Agent and intending to be
legally bound hereby, the parties hereto agree as follows:

 

1.             Services by
Indemnitee.  Indemnitee agrees to
serve or continue to serve (a) as a director or an officer of the
Corporation, or as a manager, director or employee of a wholly owned subsidiary
of the Corporation, or one or more of such positions, and until such time as
Indemnitee resigns or fails to stand for election or is removed from Indemnitee’s
position, or (b) otherwise as an Agent of the Corporation.  Indemnitee may from time to time also perform
other services at the request or for the convenience of, or otherwise
benefiting the Corporation or one or more of its subsidiaries.  Indemnitee may at any time and for any reason
resign or be removed from his or her position or positions (subject to any
other contractual obligation or other obligation imposed by operation of law),
in which event the Corporation shall have no obligation under this Agreement to
continue Indemnitee in any such position.

 

2.             Indemnification of
Indemnitee.  Subject to the
limitations set forth herein and particularly in Section 6 hereof, the
Corporation shall indemnify Indemnitee as follows:

 

(a)           The
Corporation shall, with respect to any Proceeding (as hereinafter defined),
indemnify Indemnitee to the fullest extent permitted by applicable law or as
such law may from time to time be amended (but, in the case of any such
amendment, only to the extent such amendment permits the Corporation to provide
broader indemnification rights than the law permitted the Corporation to
provide before such amendment).  The
right to indemnification conferred herein shall be presumed to have been relied
upon by Indemnitee in serving or continuing to serve the Corporation as an
Agent and shall be enforceable as a contract right.  Without in any way diminishing the scope of
the indemnification provided by this Section 2(a), the rights of
indemnification of Indemnitee shall include but shall not be limited to those
rights hereinafter set forth.

 

(b)           The
Corporation shall indemnify Indemnitee if Indemnitee is or was a party or
witness or is threatened to be made a party or witness to any Proceeding (other
than an action by or in the right of the Corporation) by reason of the fact
that Indemnitee is or was an Agent of the Corporation, or any subsidiary of the
Corporation, or by reason of the fact that Indemnitee is or was serving at the
request of the Corporation as an Agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against Expenses
(as hereinafter defined) or Liabilities (as hereinafter defined), actually and
reasonably incurred by Indemnitee in connection with such Proceeding if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe Indemnitee’s conduct was unlawful.

 

2

 

(c)           The
Corporation shall indemnify Indemnitee if Indemnitee was or is a party or
witness or is threatened to be made a party to any Proceeding by or in the
right of the Corporation or any subsidiary of the Corporation to procure a
judgment in its favor by reason of the fact that Indemnitee is or was an Agent
of the Corporation, or any subsidiary of the 
corporation, or by reason of the fact that Indemnitee is or was serving
at the request of the Corporation as an Agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
Expenses and, to the fullest extent permitted by law, Liabilities if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of the
State of Delaware or such other court shall deem proper.

 

(d)           Notwithstanding
any other provision of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise in defense of any Proceeding or in defense
of any issue or matter therein, Indemnitee shall be indemnified against
all Expenses incurred in connection therewith, except with respect to any
portion of the proceeding relating to a matter described in Section 6.  For these purposes, Indemnitee will be
deemed to have been “successful on the merits” upon termination of any
Proceeding or of any claim, issue or matter therein, by the winning of a motion
to dismiss (with or without prejudice), motion for summary judgment, or
settlement (with or without court approval), or upon a plea of nolo contendere or its equivalent.  If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Corporation for some or a portion
of Expenses, but not, however, for the total amount thereof, the Corporation
shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled.

 

(e)           The
Corporation shall indemnify and hold harmless Indemnitee from any claims for
contribution which may be brought by officers, directors or employees of the
Corporation (other than Indemnitee) who may be jointly liable with Indemnitee.

 

3.             Advancement of
Expenses.  All reasonable Expenses
incurred by or on behalf of Indemnitee (including costs of enforcement of this
Agreement) shall be advanced from time to time by the Corporation to Indemnitee
within thirty (30) days after the receipt by the Corporation of a written
request for an advance of Expenses, whether prior to or after final disposition
of a Proceeding (except to the extent that there has been a Final Adverse
Determination that Indemnitee is not entitled to be indemnified for such
Expenses), including, without limitation, any Proceeding brought by or in the
right of the Corporation.  Notwithstanding
the foregoing, the Indemnitee may alternately request that the Corporation (but
without duplication) (a) pay such Expenses on behalf of Indemnitee or (b) reimburse
Indemnitee for such Expenses.  Indemnitee’s
right to such advancement is not subject to the satisfaction of any standard of
conduct.  The written request for an
advancement, payment or reimbursement of any and all Expenses under this
paragraph shall contain reasonable detail of the Expenses incurred by
Indemnitee.  In the event that such
written request shall be accompanied by an affidavit of counsel to Indemnitee
to the effect that such counsel has reviewed such Expenses and that such
Expenses are reasonable 

 

 

3

 

in such counsel’s view, then such expenses shall be deemed reasonable
in the absence of clear and convincing evidence to the contrary.  By execution of this Agreement, Indemnitee
shall be deemed to have (i) undertaken to repay such expenses if it is
ultimately determined that Indemnitee is not entitled to be indemnified against
such Expenses and (ii) made whatever other undertaking as may be required
by law at the time of any advancement of Expenses with respect to repayment to
the Corporation of such Expenses, but such advancement of Expenses shall
otherwise be unsecured and interest-free, without regard to Indemnitee’s
ability to repay.

 

4.             Presumptions and
Effect of Certain Proceedings.

 

(a)           Upon
making a request for indemnification, Indemnitee shall be presumed to be
entitled to indemnification under this Agreement and the Corporation shall have
the burden of proof to overcome that presumption by a preponderance of the
evidence in reaching any contrary determination.

 

(b)           The
termination of any Proceeding by judgment, order, settlement, arbitration award
or conviction, or upon a plea of nolo contendere or its equivalent shall not
affect this presumption or, except as determined by a judgment or other final
adjudication adverse to Indemnitee, establish a presumption with regard to any
factual matter relevant to determining Indemnitee’s rights to indemnification
hereunder.  If the person or persons so
empowered to make a determination pursuant to Section 5 hereof shall have
failed to make the requested determination within the period provided for in Section 5,
a determination that Indemnitee is entitled to indemnification shall be deemed
to have been made.

 

(c)           The
knowledge and/or actions, or failure to act, or any director, officer, agent or
employee of the Corporation or the Corporation itself shall not be imputed to
Indemnitee for purposes of determining any rights under this Agreement.

 

(d)           For
purposes of any determination of good faith, Indemnitee shall be deemed to
have acted in good faith if Indemnitee’s action is based on the records or
books of account of the Corporation, other than records or books of account
prepared by or under the direct supervision of Indemnitee, including financial
statements, or on information supplied to Indemnitee by the officers of the
Corporation in the course of their duties, or on the advice of legal counsel
for the Corporation or the Board or counsel selected by any committee of the
Board or on information or records given or reports made to the Corporation by
an independent certified public accountant or by an appraiser, investment banker,
compensation consultant, or other expert selected with reasonable care by the
Corporation or the Board or any committee of the Board.  The provisions of this Section 4 shall
not be deemed to be exclusive or to limit in any way the other circumstances in
which the Indemnitee may be deemed to have met the applicable standard of
conduct.  Whether or not the foregoing
provisions of this Section are satisfied, it shall in any event be
presumed that Indemnitee has at all times acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Corporation.

 

5.             Procedure for
Determination of Entitlement to Indemnification.

 

(a)           Whenever
Indemnitee believes that Indemnitee is entitled to indemnification pursuant to
this Agreement, Indemnitee shall submit a written request for
indemnification to the 

 

4

 

Corporation.  Any request for
indemnification shall include sufficient documentation or information
reasonably available to Indemnitee for the determination of entitlement to
indemnification.  In any event, Indemnitee
shall submit Indemnitee’s claim for indemnification within a reasonable time,
not to exceed five (5) years after any judgment, order, settlement,
dismissal, arbitration award, conviction, acceptance of a plea of nolo
contendere or its equivalent, or final determination, whichever is the later
date for which Indemnitee requests indemnification.  The Secretary or other appropriate officer
shall, promptly upon receipt of Indemnitee’s request for indemnification,
advise the Board of Directors in writing that Indemnitee has made such
request.  Determination of Indemnitee’s
entitlement to indemnification shall be made not later than sixty (60) days
after the Corporation’s receipt of Indemnitee’s written request for such
indemnification, provided that any request for indemnification for Liabilities,
other than amounts paid in settlement, shall have been made after a
determination thereof in a Proceeding.  If
it is so determined that the Indemnitee is entitled to indemnification, and
Indemnitee has already paid the Liabilities, reimbursement to the Indemnitee
shall be made within ten (10) days after such determination; otherwise,
the Corporation shall pay the Liabilities on behalf of Indemnitee if and when
Indemnitee becomes legally obligated to make payment.

 

(b)           The
Corporation shall be entitled to select the forum in which Indemnitee’s
entitlement to indemnification will be heard; provided,
however, that if there is a Change in
Control of the Corporation, Independent Legal Counsel (as hereinafter
defined) shall determine whether Indemnitee is entitled to
indemnification.  The forum shall be any
one of the following:

 

(i)            a majority vote of Disinterested Directors
(as hereinafter defined), even though less than a quorum;

 

(ii)           by a committee of Disinterested Directors
designated by majority vote of Disinterested Directors, even though less than a
quorum;

 

(iii)          Independent Legal Counsel, whose
determination shall be made in a written opinion; or

 

(iv)          the stockholders of the Corporation.

 

6.             Specific Limitations
on Indemnification.  Notwithstanding
anything in this Agreement to the contrary, the Corporation shall not be
obligated under this Agreement to make any payment to Indemnitee with respect
to any Proceeding:

 

(a)           To
the extent that payment is actually made to Indemnitee under any insurance
policy, or is made to Indemnitee by the Corporation or an affiliate otherwise
than pursuant to this Agreement. 
Notwithstanding the availability of such insurance, Indemnitee also
may claim indemnification from the Corporation pursuant to this Agreement by
assigning to the Corporation any claims under such insurance to the extent
Indemnitee is paid by the Corporation;

 

(b)           Provided
there has been no Change in Control, for Liabilities in connection with
Proceedings settled without the Corporation’s consent, which consent, however,
shall not be unreasonably withheld;

 

5

 

(c)           For
an accounting of profits made from the purchase or sale by Indemnitee of
securities of the Corporation within the meaning of Section 16(b) of
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or similar provisions of any state statutory or common
law, provided, however, that the Indemnitee shall be entitled to the
advancement of expenses unless the Corporation reasonably determines that
Indemnitee has violated such Section 16(b) and must disgorge profits;

 

(d)           For
any reimbursement of the Corporation by Indemnitee of any bonus or other
incentive-based or equity-based compensation or of any profits realized by
Indemnitee from the sale of securities of the Corporation, as required in each
case under the Exchange Act (including any such reimbursements that arise from
an accounting restatement of the Corporation pursuant to Section 304 of
the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”),
or the payment to the Corporation of profits arising from the purchase and sale
by Indemnitee of securities in violation of Section 306 of the
Sarbanes-Oxley Act), if Indemnitee is held liable therefor;

 

(e)           To
the extent it would be otherwise prohibited by law, if so established by a
judgment or other final adjudication adverse to Indemnitee; or

 

(f)            In
connection with a Proceeding commenced by Indemnitee (other than a Proceeding
commenced by Indemnitee to enforce Indemnitee’s rights under this Agreement)
unless the commencement of such Proceeding was authorized by the Board of
Directors.

 

7.             Fees and Expenses of
Independent Legal Counsel.  The
Corporation agrees to pay the reasonable fees and expenses of Independent Legal
Counsel should such Independent Legal Counsel be retained to make a
determination of Indemnitee’s entitlement to indemnification pursuant to Section 5(b) of
this Agreement, and to fully indemnify such Independent Legal Counsel against
any and all expenses and losses incurred by any of them arising out of or
relating to this Agreement or their engagement pursuant hereto.

 

8.             Rights and Remedies
of Indemnitee.

 

(a)           In
the event that (i) a determination pursuant to Section 5 hereof is
made that Indemnitee is not entitled to indemnification, (ii) advances of
Expenses are not made pursuant to this Agreement, (iii) payment has not
been timely made following a determination of entitlement to indemnification
pursuant to this Agreement, or (iv) Indemnitee otherwise seeks enforcement
of this Agreement, Indemnitee shall be entitled to a final adjudication in
the Court of Chancery of the State of Delaware of the remedy sought.  Alternatively, unless court approval is
required by law for the indemnification sought by Indemnitee, Indemnitee
at Indemnitee’s option may seek an award in arbitration to be conducted by a
single arbitrator pursuant to the commercial arbitration rules of the
American Arbitration Association now in effect, which award is to be made
within ninety (90) days following the filing of the demand for
arbitration.  The Corporation shall not
oppose Indemnitee’s right to seek any such adjudication or arbitration
award.  In any such proceeding or
arbitration Indemnitee shall be presumed to be entitled to indemnification and
advancement of Expenses under this Agreement and the Corporation shall have the
burden of proof to overcome that presumption.

 

6

 

(b)           In
the event that a determination that Indemnitee is not entitled to
indemnification, in whole or in part, has been made pursuant to Section 5
hereof, the decision in the judicial proceeding or arbitration provided in
paragraph (a) of this Section 8 shall be made de novo
and Indemnitee shall not be prejudiced by reason of a determination that
Indemnitee is not entitled to indemnification.

 

(c)           If
a determination that Indemnitee is entitled to indemnification has been made
pursuant to Section 5 hereof, or is deemed to have been made pursuant to Section 4
hereof or otherwise pursuant to the terms of this Agreement, the Corporation
shall be bound by such determination.

 

(d)           The
Corporation shall be precluded from asserting that the procedures and
presumptions of this Agreement are not valid, binding and enforceable.  The Corporation shall stipulate in any such
court or before any such arbitrator that the Corporation is bound by all the
provisions of this Agreement and is precluded from making any assertion to the
contrary.

 

(e)           Expenses
reasonably incurred by Indemnitee in connection with Indemnitee’s request for
indemnification under, seeking enforcement of or to recover damages for breach
of this Agreement shall be advanced by the Corporation when and as incurred by
Indemnitee irrespective of any Final Adverse Determination that Indemnitee is
not entitled to indemnification.

 

(f)            If
the Indemnitee is the subject of or is implicated in any investigation, whether
formal or informal, the Corporation shall provide to the Indemnitee any
information it provides to any third party concerning the investigation,
provided, that by executing this Agreement, Indemnitee agrees to use such
information solely in connection with the defense of such investigation and if
Indemnitee is no longer serving as a Director or employed by the Corporation, Indemnitee
shall at the Corporation’s request execute a confidentiality agreement
substantially in the form of the confidentiality agreement in effect while such
Indemnitee was a Director or employed by the Corporation.

 

(g)           The
Corporation and Indemnitee agree herein that a monetary remedy for breach of
this Agreement, at some later date, may be inadequate, impracticable and difficult
to prove, and further agree that such breach may cause Indemnitee irreparable
harm.  Accordingly, the parties hereto
agree that Indemnitee may enforce this Agreement by seeking injunctive relief
and/or specific performance hereof, without any necessity of showing actual
damage or irreparable harm and that by seeking injunctive relief and/or
specific performance, Indemnitee shall not be precluded from seeking or
obtaining any other relief to which he or she may be entitled.  The Corporation and Indemnitee further agree
that Indemnitee shall be entitled to such specific performance and injunctive
relief, including temporary restraining orders, preliminary injunctions and
permanent injunctions, without the necessity of posting bonds or other
undertaking in connection therewith.  The
Corporation acknowledges that in the absence of a waiver, a bond or undertaking
may be required of Indemnitee by a court, and the Corporation hereby waives any
such requirement of such a bond or undertaking.

 

7

 

9.             Contribution.

 

(a)           To
the fullest extent permissible under applicable law, if the indemnification
provided for in this Agreement is unavailable to Indemnitee for any reason
whatsoever, the Corporation, in lieu of indemnifying Indemnitee, shall
contribute to the amount incurred by Indemnitee, whether for judgments, fines,
penalties, excise taxes, amounts paid or to be paid in settlement and/or for
Expenses, in connection with any claim relating to an indemnifiable event under
this Agreement, in such proportion as is deemed fair and reasonable in light of
all of the circumstances of such Proceeding in order to reflect (i) the
relative benefits received by the Corporation and Indemnitee as a result of the
event(s) and/or transaction(s) giving cause to such Proceeding;
and/or (ii) the relative fault of the Corporation (and its directors,
officers, employees and agents) and Indemnitee in connection with such event(s) and/or
transaction(s).

 

(b)           Whether
or not the indemnification provided in Section 2 of this Agreement is
available, in respect of any threatened, pending or completed action, suit or
proceeding in which the Corporation is jointly liable with Indemnitee (or would
be if joined in such action, suit or proceeding), the Corporation shall pay, in
the first instance, the entire amount of any judgment or settlement of such
action, suit or proceeding without requiring Indemnitee to contribute to such
payment and the Corporation hereby waives and relinquishes any right of contribution
it may have against Indemnitee.  The
Corporation shall not enter into any settlement or any action, suit or
proceeding in which the Corporation is jointly liable with Indemnitee (or would
be if joined in such action, suit or proceeding) unless such settlement
provides for a full and final release of all claims asserted against
Indemnitee.

 

(c)           No
person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not found guilty of such fraudulent misrepresentation.

 

10.          Maintenance of Insurance.  The Corporation represents that it presently
has in place certain directors’ and officers’ liability insurance policies
covering the directors and officers of the Corporation and the directors and
officers of the wholly owned subsidiaries of the Corporation.  Subject only to the provisions within this Section 10,
the Corporation agrees that so long as Indemnitee shall have consented to serve
or shall continue to serve as a director or officer of the Corporation or as a
director, manager or officer of a wholly owned subsidiary of the Corporation,
or one or more of such positions, or as an Agent of the Corporation, and
thereafter so long as Indemnitee shall be subject to any possible Proceeding
(such periods being hereinafter sometimes referred to as the “Indemnification Period”), the
Corporation will use all reasonable efforts to maintain in effect for the
benefit of Indemnitee one or more valid, binding and enforceable policies of
directors’ and officers’ liability insurance from established and reputable
insurers, providing, in all respects, coverage both in scope and amount which
is no less favorable than that presently provided or, following the Corporation’s
initial public offering, than that provided as of the time of such initial
public offering.  Notwithstanding the
foregoing, the Corporation shall not be required to maintain said policies of
directors’ and officers’ liability insurance during any time period if during
such period such insurance is not reasonably available or if it is determined
in good faith by the then directors of the Corporation either that:

 

8

 

(i)            The
premium cost of maintaining such insurance is substantially disproportionate to
the amount of coverage provided thereunder; or

 

(ii)           The
protection provided by such insurance is so limited by exclusions, deductions
or otherwise that there is insufficient benefit to warrant the cost of maintaining
such insurance.

 

If the Corporation has in effect policies of directors’ and officers’
liability insurance at the time that Indemnitee notifies the Corporation of the
commencement of any Proceeding, the Corporation shall give prompt notice of the
commencement of such Proceeding to the insurers in accordance with the
procedures set forth in the respective policies.  The Corporation shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of
Indemnitee, all amounts payable as a result of such proceeding in accordance
with the terms of such policies.  In the
event of a Change in Control or the Corporation’s becoming insolvent, including
being placed into receivership or entering the federal bankruptcy process, the
Corporation shall maintain in force any directors’ and officers’ liability
insurance policies then maintained by the Corporation in providing insurance in
respect of Indemnitee, for a period of six years thereafter (a “Tail Policy”).  Such coverage shall be with the incumbent
insurance carriers using the policies that were in place at the time of the
change of control event (unless the incumbent carriers will not offer such
policies, in which case the Tail Policy shall be substantially comparable in
scope and amount as the expiring policies, shall be placed by the Corporation’s
existing broker, and the insurance carriers for the Tail Policy shall have an
AM Best rating that is the same or better than the AM Best ratings of the
expiring policies, or unless otherwise determined by a majority of the
then-sitting directors).

 

11.          Modification, Waiver,
Termination and Cancellation.  No
supplement, modification, termination, cancellation or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto.  No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver.

 

12.          Subrogation and Set Off.

 

(a)           In
the event of payment under this Agreement, the Corporation shall be subrogated
to the extent of such payment to all of the rights of recovery of Indemnitee,
who shall execute all papers required and shall do everything that may be necessary
to secure such rights, including the execution of such documents necessary to
enable the Corporation effectively to bring suit to enforce such rights.

 

(b)           The
Corporation’s obligation to indemnify, hold harmless, exonerate or advance
Expenses hereunder to Indemnitee who is or was serving at the request of the
Corporation as a director, officer, trustee, partner, managing member,
fiduciary, employee or agent of any other Enterprise shall be reduced by any
amount Indemnitee has actually received as indemnification, hold harmless or
exoneration payments or advancement of expenses from such Enterprise.  Notwithstanding any other provision of this
Agreement to the contrary, (i) Indemnitee shall have no obligation to
reduce, offset, allocate, pursue or apportion any indemnification, hold
harmless, exoneration, advancement, contribution or insurance coverage among
multiple parties possessing such duties to Indemnitee prior to the Corporation’s
satisfaction and performance of all its 

 

9

 

obligations under this Agreement, and (ii) the Corporation shall
perform fully its obligations under this Agreement without regard to whether
Indemnitee holds, may pursue or has pursued any indemnification, advancement,
hold harmless, exoneration, contribution or insurance coverage rights against
any person or entity other than the Corporation.

 

13.          Notice by Indemnitee and
Defense of Claim.  Indemnitee shall
promptly notify the Corporation in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document
relating to any matter, whether civil, criminal, administrative or
investigative which may result in the right to indemnification or the
advancement of Expenses, but the omission so to notify the Corporation will not
relieve it from any liability that it may have to Indemnitee if such omission
does not prejudice the Corporation’s rights. 
If such omission does prejudice the Corporation’s rights, the
Corporation will be relieved from liability only to the extent of such
prejudice.  Notwithstanding the
foregoing, such omission will not relieve the Corporation from any liability
that it may have to Indemnitee otherwise than under this Agreement.  With respect to any Proceeding as to which
Indemnitee notifies the Corporation of the commencement thereof:

 

(a)           The
Corporation will be entitled to participate therein at its own expense; and

 

(b)           The
Corporation jointly with any other indemnifying party similarly notified will
be entitled to assume the defense thereof, with counsel reasonably satisfactory
to Indemnitee; provided, however,
that the Corporation shall not be entitled to assume the defense of any
Proceeding if there has been a Change in Control or if Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the
Corporation and Indemnitee with respect to such Proceeding.  After notice from the Corporation to
Indemnitee of its election to assume the defense thereof, the Corporation will
not be liable to Indemnitee under this agreement for any Expenses subsequently
incurred by Indemnitee in connection with the defense thereof, other than
reasonable costs of investigation or as otherwise provided below.  Indemnitee shall have the right to employ Indemnitee’s
own counsel in such Proceeding, but the fees and expenses of such counsel
incurred after notice from the Corporation of its assumption of the defense
thereof shall be at the expense of Indemnitee unless:

 

(i)            the employment of counsel by Indemnitee has
been authorized by the Corporation;

 

(ii)           Indemnitee shall have reasonably concluded
that counsel engaged by the Corporation may not adequately represent Indemnitee
due to, among other things, actual or potential differing interests; or

 

(iii)          the Corporation shall not in fact have
employed counsel to assume the defense in such Proceeding or shall not in fact
have assumed such defense and be acting in connection therewith with reasonable
diligence; in each of which cases the fees and expenses of such counsel shall
be at the expense of the Corporation; provided, however, that the Indemnitee
must select such counsel from three potential counsel proposed by the
Corporation.

 

10

 

(c)           The
Corporation shall not settle any Proceeding in any manner that would impose any
penalty or limitation on Indemnitee without Indemnitee’s written consent; provided, however, that
Indemnitee will not unreasonably withhold his or her consent to any proposed
settlement.  The Corporation shall
promptly notify Indemnitee once the Corporation has received an offer or
intends to make an offer to settle any such Proceeding and the Corporation
shall provide Indemnitee as much time as reasonably practicable to consider
such offer.  The Corporation may not
exhaust the amount of its directors’ and officers’ liability insurance pursuant
to a settlement agreement unless the settlement provides for a full and final
release of all claims asserted against Indemnitee.

 

14.          Notices.  All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom
said notice or other communication shall have been directed, or
(ii) mailed by certified or registered mail with postage prepaid, on the
third business day after the date on which it is so mailed:

 

(a)           If
to Indemnitee, to the address set forth below Indemnitee’s signature on the
signature page hereof.

 

(b)                                 If to the Corporation,
to:

 

Image Entertainment, Inc.

20525 Nordhoff Street, Suite 200

Chatsworth, CA  91311-6104

Attn:  General Counsel

 

or to such other address as may have been furnished to Indemnitee by
the Corporation or to the Corporation by Indemnitee, as the case may be.

 

15.          Nonexclusivity.  The rights of Indemnitee hereunder shall not
be deemed exclusive of any other rights to which Indemnitee may be entitled
under applicable law, the Corporation’s Certificate of Incorporation or bylaws,
or any agreements, vote of stockholders, resolution of the Board of Directors
or otherwise, and to the extent that during the Indemnification Period the
rights of the then existing directors and officers are more favorable to such
directors or officers than the rights currently provided to Indemnitee
thereunder or under this Agreement, Indemnitee shall be entitled to the
full benefits of such more favorable rights.

 

16.          Indemnification and
Advancement Rights Primary.  The
Corporation hereby acknowledges that Indemnitee has or may have certain rights
to indemnification, advancement of expenses and/or insurance provided by one or
more parties other than the Corporation or an affiliate of the Corporation
(collectively, the “Secondary Indemnitors”).  The Corporation hereby acknowledges and the
Corporation and Indemnitee hereby agree: (i) that the Corporation is the
indemnitor of first resort with respect to any Proceeding in respect of which
indemnification is being sought by Indemnitee; i.e., its obligations to Indemnitee
are primary and any obligation of the Secondary Indemnitors to advance expenses
or to provide indemnification for the same expenses or liabilities incurred by
Indemnitee are secondary; (ii) that the Corporation shall be required to
advance the full amount of expenses incurred by Indemnitee and 

 

11

 

shall be liable for the full amount of all expenses, judgments,
penalties, fines and amounts paid in settlement to the extent legally permitted
and as required by the terms of this Agreement and the Certificate of
Incorporation and/or Bylaws of the Corporation (or any other agreement between
the Corporation and Indemnitee), without regard to any rights Indemnitee may
have against the Secondary Indemnitors; and (iii) that with respect to the
Corporation’s obligations to advance Expenses and to indemnify Indemnitee for
activities undertaken in Indemnitee’s capacity as an Agent of the Corporation,
the Corporation irrevocably waives, relinquishes and releases the Secondary
Indemnitors from any and all claims against the Secondary Indemnitors that the
Corporation may have for contribution, subrogation or any other recovery of any
kind in respect thereof.  The Corporation
further agrees that no advancement or payment by the Secondary Indemnitors on
behalf of Indemnitee with respect to any claim for which Indemnitee has sought
indemnification from the Corporation shall affect the foregoing and the
Secondary Indemnitors shall have a right of contribution and/or subrogation to
the extent of such advancement or payment to all of the rights of recovery of
Indemnitee against the Corporation.

 

17.          Certain Definitions.

 

(a)           “Agent” shall mean any person who is,
is deemed to be, or was, or who has consented to serve as, a director, officer,
employee, agent, fiduciary, joint venturer, partner, manager or other official
of the Corporation or a subsidiary or an affiliate of the Corporation, or any
other entity (including without limitation, an employee benefit plan), in each case
either at the request of, for the convenience of, or otherwise to benefit the
Corporation or a subsidiary of the Corporation. 
Any person who is or was serving as a director, officer, employee or
agent of a subsidiary of the Corporation shall be deemed to be serving, or have
served, at the request of the Corporation.

 

(b)           “Change in Control” shall mean the
occurrence, after the Corporation’s initial public offering, of any of the
following:

 

(i)            Both (A) any “person” (as defined
below) is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing at least thirty percent (30%) of the total voting
power represented by the Corporation’s then outstanding voting securities and (B) the
beneficial ownership by such person of securities representing such percentage
is not approved by a majority of the “Continuing Directors” (as defined below);

 

(ii)           Any “person” is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing at least fifty
percent (50%) of the total voting power represented by the Corporation’s then
outstanding voting securities;

 

(iii)          A change in the composition of the Board of
Directors occurs, as a result of which fewer than two-thirds of the incumbent
directors are directors who either (A) had been directors of the
Corporation on the “look-back date” (as defined below) (the “Original Directors”) or (B) were
elected, or nominated for election, to the Board of Directors with the
affirmative votes of at least a majority in the aggregate of the Original
Directors who were still in office at the time of the election or nomination
and directors 

 

12

 

whose election or nomination was previously so approved (together, the
directors referenced in clauses (A) and (B) of this Section 17(b)(iii) shall
be referred to as the “Continuing Directors”);

 

(iv)          The stockholders of the Corporation approve a
merger or consolidation of the Corporation with any other corporation, if such
merger or consolidation would result in the voting securities of the
Corporation outstanding immediately prior thereto representing (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) 50% or less of the total voting power represented by the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation; or

 

(v)           The stockholders of the Corporation approve (A) a
plan of complete liquidation of the Corporation or (B) an agreement for
the sale or disposition by the Corporation of all or substantially all of the
Corporation’s assets.

 

For purposes of Subsections (i) and (ii) above, the term “person” shall have the same meaning
as when used in Sections 13(d) and 14(d) of the Exchange Act, but
shall exclude (x) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or of a parent or subsidiary of the
Corporation or (y) a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as their
ownership of the common stock of the Corporation.

 

For purposes of Subsection (iii) above, the term “look-back date” shall mean the later
of (x) the date first written above in the preamble to this Agreement or (y) the
date 24 months prior to the date of the event that may constitute a “Change in
Control.”

 

Any other provision of this Section 17(b) notwithstanding,
the term “Change in Control” shall not include a transaction, if undertaken at
the election of the Corporation, the result of which is to sell all or
substantially all of the assets of the Corporation to another corporation (the “surviving
corporation”); provided that the surviving corporation is owned directly or
indirectly by the stockholders of the Corporation immediately following such
transaction in substantially the same proportions as their ownership of the Corporation’s
common stock immediately preceding such transaction; and provided, further,
that the surviving corporation expressly assumes this Agreement.

 

(c)           “Disinterested Director” shall mean a
director of the Corporation who is not or was not a party to the Proceeding in
respect of which indemnification is being sought by Indemnitee.

 

(d)           “Expenses” shall include all direct
and indirect costs (including, without limitation, attorneys’ fees, retainers,
court costs, transcripts, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, the premium, security for, and other costs relating to
any costs bond, supersedes bond, or other appeal bond or its equivalent, all other
disbursements or out-of-pocket expenses and reasonable compensation for time
spent by Indemnitee for which Indemnitee is otherwise not compensated by the
Corporation or any third party) actually and reasonably incurred in 

 

13

 

connection with either the investigation, defense, settlement or appeal
of a Proceeding or establishing or enforcing a right to indemnification under
this Agreement, applicable law or otherwise; provided, however, that “Expenses”
shall not include any Liabilities.

 

(e)           “Final Adverse Determination” shall
mean that a determination that Indemnitee is not entitled to indemnification
shall have been made pursuant to Section 5 hereof and either (1) a
final adjudication in the courts of the State of Delaware from which there is
no further right of appeal or decision of an arbitrator pursuant to Section 8(a) hereof
shall have denied Indemnitee’s right to indemnification hereunder, or (2) Indemnitee
shall have failed to file a complaint in a Delaware court or seek an arbitrator’s
award pursuant to Section 8(a) for a period of one hundred twenty
(120) days after the determination made pursuant to Section 5 hereof.

 

(f)            “Independent Legal Counsel” shall
mean a law firm or a member of a firm or law professor selected by the
Corporation and approved by Indemnitee (which approval shall not be
unreasonably withheld) or, if there has been a Change in Control, selected by
Indemnitee and approved by the Corporation (which approval shall not be
unreasonably withheld), that neither is presently nor in the past five (5) years
has been retained to represent: (i) the Corporation or any of its
subsidiaries or affiliates, or Indemnitee or any corporation of which
Indemnitee was or is a director, officer, employee or agent, or any subsidiary
or affiliate of such a corporation, in any material matter, or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder.  Notwithstanding the
foregoing, the term “Independent Legal Counsel” shall not include any person
who, under the applicable standards of professional conduct then prevailing,
would have a conflict of interest in representing either the Corporation or
Indemnitee in an action to determine Indemnitee’s right to indemnification under
this Agreement.

 

(g)           “Liabilities” shall mean liabilities
of any type whatsoever including, but not limited to, any judgments, fines,
Employee Retirement Income Security Act excise taxes and penalties, any
federal, state, local or foreign taxes imposed on the Indemnitee as a result of
the actual or deemed receipt of any payments under this Agreement, penalties
and amounts paid in settlement (including all interest assessments and other
charges paid or payable in connection with or in respect of such judgments,
fines, penalties or amounts paid in settlement) of any Proceeding.

 

(h)           “Proceeding” shall mean any
threatened, pending or completed action, claim, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any
other proceeding, whether civil, criminal, administrative, investigative,
formal or informal, including any such investigation or proceeding instituted
by or on behalf of the Corporation or its Board of Directors so long as there
is a reasonable likelihood the results of such investigation or proceeding will
be reported to a governmental agency, as reasonably determined by the
Corporation, in which Indemnitee was, is or will be involved as a party, as a
witness or otherwise, that is associated with Indemnitee’s being an Agent of
the Corporation regardless of whether the Indemnitee or the Corporation is a
party to the proceeding in question.

 

18.          Binding Effect; Duration
and Scope of Agreement.  This
Agreement shall be binding upon the parties hereto and their respective
successors and assigns (including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of 

 

14

 

the business or assets of the Corporation), spouses, heirs and personal
and legal representatives.  The
Corporation shall require and cause any successor (whether direct or indirect
by purchase, merger, consolidation or otherwise) to all, substantially all, or
a substantial part, of the business and/or assets of the Corporation, by
written agreement expressly to assume and agree to perform this Agreement in
the same manner and to the same extent that the Corporation would be  required to perform if no such succession had
taken place.

 

This Agreement shall be deemed to be effective as of the commencement
date of the Indemnitee’s service as an officer or director of the Corporation
and shall continue in effect during the Indemnification Period, regardless of
whether Indemnitee continues to serve as an Agent.

 

19.          Severability.  If any provision or provisions of this
Agreement (or any portion thereof) shall be held to be invalid, illegal or
unenforceable for any reason whatsoever:

 

(a)           the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby; and

 

(b)           to
the fullest extent legally possible, the provisions of this Agreement shall be
construed so as to give effect to the intent of any provision held invalid,
illegal or unenforceable.

 

20.          Governing Law.  This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware, as
applied to contracts between Delaware residents entered into and to be
performed entirely within the State of Delaware, without regard to conflict of
laws rules.

 

21.          Consent to Jurisdiction.  The Corporation and Indemnitee each
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding that arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.

 

22.          Entire Agreement.  This Agreement represents the entire agreement
between the parties hereto, and there are no other agreements, contracts or
understandings between the parties hereto with respect to the subject matter of
this Agreement, except as specifically referred to herein or as provided in Section 15
hereof.

 

23.          Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement.

 

15

 

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by a duly authorized officer and Indemnitee has executed this
Agreement as of the date first above written.

 

	
   

  	
  IMAGE ENTERTAINMENT, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  
	
   

  	
  Its

  	
   

  
	
   

  	
   

  
	
   

  	
  INDEMNITEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
					

 

16

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