Document:

EXHIBIT
10.1

AMENDMENT
NUMBER THREE

TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

This AMENDMENT
NUMBER THREE TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT (this “Amendment”) is entered
into as of August 9, 2006, by WELLS FARGO FOOTHILL, INC., a California corporation (“Lender”),
and IMAGE ENTERTAINMENT, INC., a  Delaware corporation, f/k/a Image
Entertainment, Inc., a California corporation, (“Borrower”), with
reference to the following:

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

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

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

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

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

2.      Amendments
to Loan Agreement.

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

“Applicable Margin” means as of any date of
determination, the per annum percentage determined by the matrix set forth
below, based upon the average Excess Availability for the calendar month
immediately preceding such date of determination:

	
  Average Excess Availability

  	
   

  	
  Applicable Margin

  	
   

  
	
  Greater than
  $15,000,000

  	
   

  	
  0.25

  	
  %

  
	
  Greater than
  $7,500,000 but less than or equal to $15,000,000

  	
   

  	
  0.50

  	
  %

  
	
  Less than or equal to
  $7,500,000

  	
   

  	
  0.75

  	
  %

  

 

 

 

“Dilution Reserve” means, as of the date of any
determination, an amount equal to (a) the amount of Eligible Accounts,
multiplied by (b) the amount (expressed as a percentage and calculated
based upon the prior twelve month period) of Accounts of the Borrowing Base
Parties which were the subject of credit memoranda and other dilution in excess
of ten percent (10%).

“EBITDA” means, with respect to any fiscal
period, consolidated earnings of the Borrower and its Subsidiaries before all
interest, taxes, depreciation and amortization expenses (excluding Borrower’s
or its subsidiaries amortized production costs) for such period, determined in
accordance with GAAP, plus solely with respect to Borrower’s fiscal year ending
2007, reasonable legal fees relating to the anti-takeover defense against Lions
Gate Entertainment Corp., in an amount not to exceed $500,000 per fiscal
quarter and $1,000,000 in the aggregate.

“Eligible Accounts” means those Accounts, net
of finance charges, created by any Borrowing Base Party in the ordinary course
of business that arise out of such Borrowing Base Party sale of goods or
rendition of services, that strictly comply with each and all of the
representations and warranties respecting Accounts made in the Loan Documents,
and that are and at all times continue to be acceptable to Foothill in all
respects; provided, however, that standards of eligibility may be
fixed and revised from time to time by Foothill in Foothill’s reasonable credit
judgment.  Eligible Accounts shall not
include the following:

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

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

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

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

 2
 

 

 

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

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

(g)           Accounts
with respect to an Account Debtor whose total obligations owing to the
Borrowing Base Parties exceed fifteen percent (15%) of all Eligible Accounts,
to the extent of the obligations owing by such Account Debtor in excess of such
percentage; provided, however, (i) in the case of Accounts
with respect to which Anderson Merchandisers (“Anderson”) is the Account
Debtor, Eligible Accounts shall not include Accounts thereof owing to Borrowing
Base Parties to the extent that the total obligations of Anderson owing to the
Borrower and its Subsidiaries exceed thirty percent (30%) of all Eligible
Accounts, it being understood that such percentage threshold for Accounts owing
by Anderson is subject to downward modification in Foothill’s sole discretion
based on Foothill’s continuing review, from time to time, of the performance of
such Accounts, and (ii) in the case of Accounts with respect to which Best
Buy, Inc. (“Best Buy”) is the Account Debtor, Eligible Accounts shall
not include Accounts thereof owing to the Borrowing Base Parties to the extent
that the total obligations of Best Buy owing to the Borrower and its
Subsidiaries exceed twenty-five percent (25%) of all Eligible Accounts; provided,
however, that in no event shall Eligible Accounts include Accounts of
Anderson or Best Buy to the extent that the aggregate amount of total
obligations of Anderson and Best Buy owing to Borrower and its Subsidiaries
exceed forty-five percent (45%) of all Eligible Accounts;

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

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

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

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

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

 3
 

 

 

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

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

“Guarantors” means, each Subsidiary of
Borrower, and “Guarantor” means any one of them.

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

“LIBOR Rate Margin” means as of any date of
determination, the per annum percentage determined by the matrix set forth
below, based upon the average Excess Availability for the calendar month
immediately preceding such date of determination:

	
  Average Excess Availability for the preceding month

  	
   

  	
  LIBOR Rate Margin

  	
   

  
	
  Greater than
  $15,000,000

  	
   

  	
  2.75

  	
  %

  
	
  Greater than
  $7,500,000 but less than or equal to $15,000,000

  	
   

  	
  3.00

  	
  %

  
	
  Less than or equal to
  $7,500,000

  	
   

  	
  3.25

  	
  %

  

 

“Trademark Security Agreement” means any trademark
security agreement entered
into by and among any Guarantor and Foothill to effectuate Foothill’s
existing security interests in the trademarks and other general intangibles
described therein.

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

(w)          an
amount equal to Borrowing Base Parties collections with respect to Accounts for
the immediately preceding seventy-five (75) day period; plus

 4
 

 

 

(c)           Section 2.10(b) of the Loan Agreement is
hereby amended and restated in its entirety as follows:

(b)           Unused
Line Fee.  On the first day of each month
during the term of this Agreement, a fee in an amount equal to one-quarter of
one percent (0.25%) per annum times the Average Unused Portion of the Maximum Revolving
Credit Amount from and after the Restatement Effective Date;

(d)           Section 2.10(d) of the Loan Agreement is
hereby amended and restated in its entirety as follows:

(d)           Financial
Examination, Documentation, and Appraisal Fees. 
Foothill’s customary fee of Eight Hundred Fifty Dollars ($850) per day
per examiner, plus out-of-pocket expenses for each financial analysis and
examination (i.e., audits) of Borrower performed by Foothill or its agents; the
out-of-pocket expenses for each appraisal of the Collateral performed by
personnel employed by Foothill; and the actual charges paid or incurred by
Foothill if it elects to employ the services of one or more third Persons to
perform such financial analyses and examinations (i.e., audits) of Borrower or
to appraise the Collateral; provided  however, that if the average
Excess Availability (for the six calendar month period ending immediately
preceding such date of determination) is at least $10,000,000, Borrower shall
be obligated to pay such fees and expenses for no more than two financial
audits or examinations, or appraisals, per calendar year; provided, further,
that if the average Excess Availability (for the three calendar month period
ending immediately preceding such date of determination) is at least $5,000,000,
such financial audits and examinations, and appraisals, may be conducted only
as agreed upon by Foothill and Borrower; provided, further,
notwithstanding anything contained in the preceding two provisos, (i) Foothill
may conduct audits, examinations, and appraisals with such frequency as
Foothill shall require and (ii) Borrower shall be required to pay or otherwise
reimburse Foothill the cost of such audits and examinations, and appraisals if
(x) an Event of Default has occurred and is continuing, or (y) Foothill and
Borrower have agreed that an audit or appraisal is appropriate.

(e)           Section 3.2(b) of the Loan Agreement is
hereby amended and restated in its entirety as follows:

(b)           The
obligation of Foothill to make any Advance or provide any Capital Expenditure
Loan under this Agreement is subject to the fulfillment, to the satisfaction of
Foothill and its counsel, of each of the following conditions within the time
period therefore specified below, and the failure by Borrower to so perform or cause
to be performed shall constitute an immediate Event of Default); provided,
however, any such condition may be waived partially or completely by
Foothill in its sole discretion by writing (which, for avoidance of doubt shall
include an email by an authorized representative of Foothill):

(i)      On or before August 31, 2006, Foothill
shall have received a joinder agreement duly executed and delivered by Image
Entertainment (UK), Inc., and each other Guarantor as Lender shall deem
necessary in its sole and absolute discretion and the same shall be in form and
substance satisfactory to Lender;

 5
 

 

 

(ii)     On or before August 31, 2006, Foothill
shall have received a trademark security agreement entered into by each Guarantor as
Foothill shall deem necessary in its sole and absolute discretion to effectuate
Foothill’s existing security interests in the trademarks and other general
intangibles described therein, duly executed and in form and substance
satisfactory to Foothill in its sole discretion;

(iii)    On or before August 31, 2006, Foothill shall
have received all original certificates representing the Stock pledged by each
of the Guarantors, as applicable, pursuant to the joinder agreement referenced
in subparagraph (i) immediately above as well as Stock powers with
respect thereto endorsed in blank.

(iv)   On or before August 31, 2006, Foothill shall
have with respect to  each of the
Guarantors:

(a) a certificate from
the Secretary of each such Guarantor (i) attaching and attesting to the
resolutions of such Guarantor’s Board of Directors authorizing its execution,
delivery, and performance of the Loan Documents to which such Guarantor is a
party, and authorizing specific officers of such Guarantor to execute the same,
and (ii) attesting to the incumbency and signatures of such specific
officers of such Guarantor.

(b) copies of each such
Guarantor’s By-laws and Articles or Certificate of Incorporation, as amended,
modified, or supplemented to August 9, 2006, certified by the Secretary of such
Guarantor;

(c) Foothill shall have
received a certificate of status with respect to each such Guarantor, dated no
earlier than August 1, 2006, such certificate to be issued by the appropriate
officer of the jurisdiction of organization of such Guarantor, which
certificate shall indicate that such Guarantor is in good standing in such
jurisdiction;

(d) Foothill shall have
received certificates of status with respect to each such Guarantor, each dated
no earlier than August 1, 2006, such certificates to be issued by the
appropriate officer of the jurisdictions (other than the jurisdiction of
organization of such Guarantor) in which its failure to be duly qualified or
licensed would constitute a Material Adverse Effect, which certificates shall
indicate that such Guarantor is in good standing in such jurisdictions;

(e) Foothill shall have
received evidence that appropriate financing statements have been duly filed in
such office or offices as may be necessary or, in the opinion of Foothill,
desirable to perfect the Foothill’s Liens in and to the Collateral, and
Foothill shall have received certified searches reflecting the filing of all
such financing statements and which results, except as otherwise agreed to in
writing by Foothill, shall not show any such Liens;

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

 6
 

 

 

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

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

  	
   

  	
  $3,500,000

  	
   

  
	
  for the
  immediately preceding twelve-month period ending 09/30/06

  	
   

  	
  $1,500,000

  	
   

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

  	
   

  	
  $2,000,000

  	
   

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

  	
   

  	
  $2,500,000

  	
   

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

  	
   

  	
  $2,500,000

  	
   

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

  	
   

  	
  $3,000,000

  	
   

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

  	
   

  	
  $3,500,000

  	
   

  

 

(g)           Schedules 5.6(a), 5.6(b), 5.6(c), 5.7(a), 5.7(b), and
5.7(c) of the Loan Agreement are hereby deleted in their entirety
and replaced with Schedules 5.6(a), 5.6(b), 5.6(c), 5.7(a), 5.7(b), and 5.7(c)
attached hereto, respectively.

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

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

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

 7
 

 

 

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

(c)           Lender shall have received an amendment fee in the amount of
$20,000, which amount Borrower authorizes Lender to charge to the Loan Account.

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

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

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

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

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

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

6.      Representations
and Warranties.  Borrower represents
and warrants to Lender that (a) the execution, delivery, and performance of
this Amendment and of the Loan Agreement, as amended hereby, (i) are within its
powers, (ii) have been duly authorized by all necessary action, and (iii) are
not in contravention of any law, rule, or regulation applicable to it, or any
order, 

 8
 

 

 

judgment, decree, writ, injunction, or award of any
arbitrator, court, or Governmental Authority, or of the terms of its Governing
Documents, or of any contract or undertaking to which it is a party or by which
any of its properties may be bound or affected; (b) this Amendment and the Loan
Agreement, as amended hereby, are legal, valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms; and (c) no Default or Event of Default has occurred and is continuing on
the date hereof or as of the date upon which the conditions precedent set forth
herein are satisfied.

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

8.      Counterpart
Execution.  This Amendment may be
executed in any number of counterparts, all of which when taken together shall
constitute one and the same instrument, and any of the parties hereto may
execute this Amendment by signing any such counterpart.  Delivery of an executed counterpart of this
Amendment by telefacsimile or electronic mail shall be equally as effective as
delivery of an original executed counterpart of this Amendment.  Any party delivering an executed counterpart
of this Amendment by telefacsimile or electronic mail also shall deliver an
original executed counterpart of this Amendment, but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Amendment.

9.      Effect
on Loan Documents.

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

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

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

 9
 

 

 

(d)           This Amendment is a Loan Document.

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

[signature page
follows]

 10

 

 

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

	
   

  	
  IMAGE ENTERTAINMENT, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ JEFF M. FRAMER

  
	
   

  	
  Title: Chief Financial Officer

  

 

 

[SIGNATURE PAGE TO AMENDMENT
NUMBER THREE TO 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT]

 

 

 

	
  

  	
  WELLS FARGO FOOTHILL, INC.,

  
	
   

  	
  a California corporation

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Terri Le

  
	
   

  	
  Title: Vice President

  

 

 

[SIGNATURE PAGE TO
AMENDMENT NUMBER THREE TO 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT]

 

 

Exhibit A

REAFFIRMATION AND CONSENT

Dated as of August 9, 2006

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

[signature page
follows]

 

 

[SIGNATURE PAGE TO
REAFFIRMATION AND CONSENT TO AMENDMENT NUMBER THREE TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT]

 

 

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

	
   

  	
  HOME VISION ENTERTAINMENT, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ JEFF M. FRAMER

  
	
   

  	
  Name: Jeff M. Framer

  
	
   

  	
  Title: Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EGAMI MEDIA, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ JEFF M. FRAMER

  
	
   

  	
  Name: Jeff M. Framer

  
	
   

  	
  Title: Chief Financial Officer

  

 

 

 

[SIGNATURE PAGE TO
REAFFIRMATION AND CONSENT TO AMENDMENT NUMBER THREE TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT]

 

 

SCHEDULE
5.6

Schedule 5.6(a)

State of
Incorporation

	
  Image Entertainment, Inc.

  	
  Image
  Entertainment (UK), Inc.

  
	
  a Delaware corporation

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
  Egami Media, Inc.

  	
  Home Vision
  Entertainment, Inc.

  
	
  a Delaware corporation

  	
  (formerly Public
  Media, Inc.)

  
	
   

  	
  a Delaware
  corporation

  

 

Schedule 5.6(b)

Location
of Chief Executive Offices

	
  Image Entertainment, Inc.

  	
  Image
  Entertainment (UK), Inc.

  
	
  20525 Nordhoff Street, Suite 200

  	
  20525 Nordhoff
  Street, Suite 200

  
	
  Chatsworth, California 91311-6104

  	
  Chatsworth,
  California 91311-6104

  
	
   

  	
   

  
	
  Egami Media, Inc.

  	
  Home Vision
  Entertainment, Inc.

  
	
  20525 Nordhoff Street, Suite 200

  	
  (formerly Public
  Media, Inc.)

  
	
  Chatsworth, California 91311-6104

  	
  20525 Nordhoff
  Street, Suite 200

  
	
   

  	
  Chatsworth,
  California 91311-6104

  

 

Schedule 5.6(c)

Organizational
Numbers

	
  Image Entertainment, Inc.

  	
  Image
  Entertainment (UK), Inc.

  
	
  FEIN: 84-0685613

  	
  FEIN: 20-2253290

  
	
  Delaware Corporation Number: 4008621

  	
  Delaware
  Corporation #3894243

  
	
  California Corporation #C1472348

  	
   

  
	
   

  	
   

  
	
   

  	
  Home Vision
  Entertainment, Inc.

  
	
  Egami Media, Inc.

  	
  (formerly Public
  Media, Inc.)

  
	
  FEIN: 20-1804998

  	
  FEIN: 36-2103866

  
	
  Delaware Corporation Number: 3864923

  	
  Delaware
  Corporation #0772065

  
	
  California Corporation #C2720460

  	
  Illinois
  Corporation #53133568

  
	
   

  	
  California
  Corporation #C2063045

  

 

As of August 8, 2006

 

 

Schedule 5.6(d)

Commercial
Tort Claims

None Held

 

As of August 8, 2006

 

 

SCHEDULE
5.7

 

Schedule 5.7(a)

Active
Subsidiaries of Image Entertainment, Inc.

Egami Media, Inc.

Wholly-owned
subsidiary, incorporated in Delaware

Image Entertainment (UK),
Inc.

Wholly-owned
subsidiary, incorporated in Delaware

Home Vision
Entertainment, Inc. (formerly Public Media, Inc.)

Wholly-owned
subsidiary, incorporated in Delaware

 

Schedule 5.7(b)

Capital
Stock of Image Entertainment, Inc., a Delaware corporation

Total Authorized:  125,000,000

100,000,000 designated as
Common Stock with $.0001 par value

25,000,000
designated as Preferred Stock with $.0001 par value

Total Issued and
Outstanding Common Stock:  21,296,346

Total Issued Preferred
Stock:  None

Total Options and
Warrants Issued and Outstanding: 3,798,399

 

Schedule 5.7(c)

Capital
Stock of Subsidiaries of Image Entertainment, Inc.

Egami
Media, Inc., a Delaware corporation

Total Authorized:  150,000,000

100,000,000 designated as
Common Stock with $0.0001 par value

50,000,000 designated
as Preferred Stock with $0.0001 par value

Total Outstanding Common
Stock: 10,000,000 (100% of outstanding stock of Egami held by Image)

Total Issued
Preferred Stock:  None

Total Options Authorized
by 2005 Incentive Compensation Plan: 
10,000,000

Total Options
Issued and Outstanding: 3,450,000 (held by employees)

 

As of August 8, 2006

 

 

Image
Entertainment (UK), Inc., a Delaware corporation

Total Authorized:  1,000,000

1,000,000 designated as
Common Stock with $0.0001 par value

No Preferred Stock

Total Outstanding
Common Stock: 1,000,000 (100% of Image UK held by Image Entertainment, Inc.)

Home
Vision Entertainment, Inc. (formerly Public Media, Inc.), a Delaware
corporation

Total Authorized:  20,000

20,000 designated as
Common Stock with $0.01 par value

No Preferred Stock

Total Outstanding
Common Stock: 13,265 (100% of Home Vision held by Image)

 

As of August 8, 2006Exhibit 10.21

 

B R I D G E  B A N K

 

July 12,2006

 

AML
Communications, Inc.

Mr. Jacob Inbar, President

1000 Avenida Acaso

Camarillo, CA
93012

 

 

Re: Bridge Bank
Credit Facility

 

 

Dear Jacob:

 

Thank you for
allowing Bridge Bank (“BB) the
opportunity to strengthen its relationship with AML Communications,  Inc. (“AML” or
“Borrower”). I would like to take this opportunity to propose some terms and
conditions for the credit facility under discussion. Bridge Bank (the “Bank” or “Lender”) is interested in continuing
its banking relationship with AML and will
consider the banking services described below. Please note that this letter is
not intended to constitute a commitment or offer to lend on the part of the
Lender, but rather to summarize for discussion purposes the credit accommodation
that we are interested in considering at this time. The Lender’s proposal to
make credit facilities available is subject to the approval of its Loan
Committee, and will be represented via the final Business Financing Agreement.

 

	
  Borrower:

  	
   

  	
  AML Communications,
  Inc.

  
	
   

  	
   

  	
   

  
	
  Lender:

  	
   

  	
  Bridge Bank, NA

  
	
   

  	
   

  	
   

  
	
  Credit Facilities:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Facility 1

  	
   

  	
  $1,000,000 Domestic Accounts Receivable Line of
  Credit.

  
	
   

  	
   

  	
   

  
	
  Facility 2:

  	
   

  	
  $1,000,000 Equipment Term Loan (inclusive of the
  existing -$200,000 outstanding). Borrower eligible to advance up to an
  additional -$800,000 in
  Equipment Term debt.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The net amount
  outstanding will not exceed $2,000,000 at anytime.

  
	
   

  	
   

  	
   

  
	
  Purpose:

  	
   

  	
  Provide working capital and equipment financing.

  
	
   

  	
   

  	
   

  
	
  Advance Rates:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Facility 1:

  	
   

  	
  Up to 80% of the gross eligible domestic receivables
  (net of pre-paid deposits, offsets, and contras related to each specific
  account debtor). Ineligible account criteria is as follows unless otherwise
  approved by the Bank: Account balances over 90 days from invoice date, concentration
  balances in excess of 30%, pre-billings, affiliated accounts, foreign
  accounts with the exception of Canada, progress billings, retention billings,
  bill & hold
  accounts, cross-aged balances whereby the amounts over 90 days of any account
  exceeds 35% of the total balance of that account debtor. Lender to approve
  exceptions to the standard concentration limit on a caseby- case basis. In
  addition, U.S. Government accounts will be considered eligible with a proper assignment
  of claims as required by Lender, or as otherwise approved by Lender. Lender
  will approve foreign accounts on a case-by-case basis.

  

 

 

 

 

FINANCIAL PROPOSAL FOR AML COMMUNICATIONS,
INC.

 

	
  Facility 2:

  	
   

  	
  Up to 100% of the invoice cost of purchased
  equipment or other eligible purchases acceptable to Lender. Eligible Invoices
  included invoices for new capital equipment, furniture, and software purchased
  within 90 days of formal loan documentation. Minimum draw of $50,000 per advance.

  
	
   

  	
   

  	
   

  
	
  Rates & Fees:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Interest Rate - Facility 1:

  	
   

  	
  Wall Street Journal “WSJ” Prime Rate (currently
  8.25%) plus 0.25%.

  
	
   

  	
   

  	
   

  
	
  Interest Rate - Facility 2: 

  	
   

  	
  WSJ Prime Rate plus 0.50%.

  
	
   

  	
   

  	
   

  
	
  Facility Fee:

  	
   

  	
  $5,000 (0.25% of total Credit Facility) due at
  signing of definitive Bank loan documents.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $2,500 (0.25% of Facility 1) due 12 months from the
  date of definitive Bank loan documents.

  
	
   

  	
   

  	
   

  
	
  Repayment:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Facility 1:

  	
   

  	
  Interest to be paid monthly, principal due upon
  maturity.

  
	
   

  	
   

  	
   

  
	
  Facility 2:

  	
   

  	
  Existing Term Loans to continue amortizing under
  existing repayment schedule. Draw period of six months from date of
  Modification Agreement for the remaining eligible Equipment Term Loan
  advances. At the end of the draw period, the outstanding advanced amount will
  be termed out for principal repayment over 30 (thirty) monthly payments.

  
	
   

  	
   

  	
   

  
	
  Maturity &

  Payment Term:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Facility 1:

  	
   

  	
  Twenty-four (24) months from date of documents.

  
	
   

  	
   

  	
   

  
	
  Facility 2:

  	
   

  	
  Thirty-six (36) months from date of documents.

  
	
   

  	
   

  	
   

  
	
  Warrants:

  	
   

  	
  None.

  
	
   

  	
   

  	
   

  
	
  Financial

  Covenants:

  	
   

  	
   

  
	
   

  	
   

  	
  1.

  	
   

  	
  Borrower to maintain on a monthly basis a Quick
  Ratio of 1.50 to 1.00, which shall be defined as unrestricted cash and
  equivalents at Bank plus A/R divided
  by current liabilities (including all Bank debt).

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.

  	
   

  	
  Borrower to stay within 80% of planned quarterly
  revenue.

  
	
   

  	
   

  	
   

  
	
  Collateral:

  	
   

  	
  Lender will maintain a perfected first priority
  security interest in all of the Borrower’s Assets, including intellectual
  property and general intangibles currently owned or later acquired. Lender will
  be in second position on specific fixed assets previously financed elsewhere.

  
	
   

  	
   

  	
   

  
	
  Subordinated Debt:

  	
   

  	
  Any other debt and/or lien holder (if any exist),
  will be required to enter into an inter-creditor / subordination agreement acceptable
  to the Lender and/or be terminated. Exception for specific fixed asset liens
  previously existing.

  
	
   

  	
   

  	
   

  
	
  Banking

  Relationship:

  	
   

  	
  Borrower will maintain its primary operating and
  investment accounts with Lender. All cash & cash equivalents held outside
  of Bridge Bank will be subject to a Collateral Control Agreement acceptable
  to the Bank.

  

 

 2
 

 

 

	
  Reporting:

  	
   

  	
  Borrower to provide the following information:

  
	
   

  	
   

  	
  ·

  	
   

  	
  Within 30 days of each month end: Balance Sheet,
  Income Statement and statement of cash flows together with compliance
  certificate.

  
	
   

  	
   

  	
  ·

  	
   

  	
  Prior to borrowing and within 30 days of each
  month-end while borrowing on Facility 1: Accounts receivable and payable
  aging reports together with borrowing base certificate.

  
	
   

  	
   

  	
  ·

  	
   

  	
  Within 150 days of each fiscal year end: CPA
  prepared annual financial statements.

  
	
   

  	
   

  	
  ·

  	
   

  	
  Within 30 days prior to each fiscal year end: Annual
  board approved financial forecast.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Field

  Examination:

  	
   

  	
  Prior to borrowing on Facility 1 and while there is a balance
  outstanding, annual field examinations required, or upon Lenders’ request at
  the Borrower’s expense. Costs may range fiom $750.00 - $1,250.00 per day with the duration and scope of the exam to
  be determined at time of field examination.

  
	
   

  	
   

  	
   

  
	
  Insurance:

  	
   

  	
  Bank to be named loss payee on primary genera1
  business insurance.

  
	
   

  	
   

  	
   

  
	
  Conditions of

  Closing:

  	
   

  	
   

  
	
   

  	
   

  	
  ·

  	
   

  	
  After due diligence inquiry conducted by Lender,
  there shall be no discovery of any facts or circumstances which would, as
  determined by Lender at its sole discretion, negatively effect or potentially
  negatively effect the collectability of the obligations under or in
  connection with the Business Finance Agreement.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·

  	
   

  	
  No representation, warranty, or disclosure made to
  Lender by Borrower shall prove to be false or misleading as of the date made.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·

  	
   

  	
  All documentation forms would be provided by Lender
  and, assuming that Lender has approved all due diligence concerning Borrower,
  Borrower shall have properly executed all documentation required by the
  Lender.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ·

  	
   

  	
  Borrower to insure subordination of any debt or
  lien, fiom any other secured party, and supply Lender with any other support
  deemed necessary.

  
							

 

This proposal
letter is provided solely for the purpose described herein and may not be
disclosed to or relied upon by any other party without the Lender’s prior
written consent. This proposal is intended to form the basis for a discussion
of a credit accommodation, and further negotiations adding to or modifying the
general scope of the major terms shall not be precluded by the issuance of this
Proposal Letter. The Lender’s proposal to make the credit facilities available
is subject to the approval of its Loan Committee, and any commitment to lend
will be made in writing. This proposal is confidential and proprietary for the
sole purpose of discussions between the parties hereunder.

 

Bridge Bank
reserves the right to issue press releases, advertisements and other
promotional materials describing any successfid outcome of services provided on
your behalf. The Borrower agrees that Bridge Bank shall have the right to identify
the Borrower by name in those materials.

 

 3
 

 

 

 

Whether or not the
transactions contemplated hereby are consummated, by your acceptance hereof:
(a) you agree to bear all reasonable out-of-pocket expenses of Lender and all
fees and disbursements of Lender’s counsel (including the allocated costs of
inside counsel) relating to the preparation of this letter and of the proposed
financing documentation and to the transaction contemplated hereby and thereby,
and (b) you agree to indemnify Lender, its affiliates, and their respective directors,
officers and employees and to defend and hold Lender, its affiliates and such
other persons harmless from and against all losses, claims, damages,
liabilities and expenses (including expenses of litigation or preparation
thereof) which Lender or any such affiliates or such other persons in
connection with or arising out of the matters referred to herein, except for
damages resulting from the gross negligence or willful misconduct of the
Lender.

 

If the basic terms
and conditions described above are acceptable, please so indicate by signing
this letter and returning the same to the attention of the undersigned by no
later than July  21, 2006, or by such date agreed upon by Bridge Bank in writing.

 

Thanks again for
allowing Bridge Bank to make this proposal and please feel free to contact me
with any questions you may have. I look forward to establishing a relationship
with you.

 

Best Regards,

 

 

 

 

Mike Lederman

Vice President

 

 

Agreed and acknowledged:

 

 

	
  /s/ Jacob Inbar

  	
   

  	
  7/17/06

  	
   

  
	
  AML Communications,
  Inc.

  	
   

  	
  Date

  

 

 4

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