Document:

EXHIBIT 10.1

 

AMENDMENT NUMBER TWELVE TO

LOAN AND SECURITY AGREEMENT

 

THIS AMENDMENT NUMBER TWELVE TO LOAN AND SECURITY
AGREEMENT (this “Amendment”), dated as of September 30, 2004,
between WELLS FARGO FOOTHILL, INC., a California corporation (“Foothill”),
formerly known as Foothill Capital Corporation, with a place of business
located at 2450 Colorado Avenue, Suite 3000 West, Santa Monica, California
90404, and IMAGE ENTERTAINMENT, INC., a
California corporation (“Borrower”), with its chief executive office located at
9333 Oso Avenue, Chatsworth, California 91311, with reference to the following
facts:

 

WHEREAS, Borrower has requested
that Foothill amend that certain Loan and Security Agreement dated as of
December 28, 1998 (as amended, restated, supplemented or otherwise modified
from time to time, the “Agreement”), between Foothill and Borrower as set forth
herein; and

 

WHEREAS, subject to the
satisfaction of the conditions set forth herein, Foothill is willing to so
amend the Agreement in accordance with the terms and conditions hereof.

 

NOW, THEREFORE, in consideration
of the above recitals and the mutual promises contained herein, Foothill and
Borrower hereby agree as follows:

 

SECTION 1.  DEFINED TERMS.

 

Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Agreement.

 

SECTION 2.  AMENDMENTS TO THE
AGREEMENT.

 

(a)           Section
1.1 of the Agreement is hereby amended by adding the following new definitions
in alphabetical order:

 

“Base LIBOR Rate”
means the rate per annum, determined by Foothill in accordance with its
customary procedures, and utilizing such electronic or other quotation sources
as it considers appropriate (rounded upwards, if necessary, to the next
1/100%), to be the rate at which Dollar deposits (for delivery on the first day
of the requested Interest Period) are offered to major banks in the London
interbank market 2 Business Days prior to the commencement of the requested
Interest Period, for a term and in an amount comparable to the Interest Period
and the amount of the LIBOR Rate Loan requested (whether as an initial LIBOR
Rate Loan or as a continuation of a LIBOR Rate Loan or as a conversion of a Reference
Rate Loan to a LIBOR Rate Loan) by Borrower in accordance with this

 

 

Agreement, which
determination shall be conclusive in the absence of manifest error.

 

“Dollars” or “$”
means United States dollars.

 

“Funding Losses”
has the meaning set forth in Section 2.12(b)(ii).

 

“Interest Period”
means, with respect to each LIBOR Rate Loan, a period commencing on the date of
the making of such LIBOR Rate Loan (or the continuation of a LIBOR Rate Loan or
the conversion of a Reference Rate Loan to a LIBOR Rate Loan) and ending 1, 2,
or 3 months thereafter; provided, however, that (a) if any Interest
Period would end on a day that is not a Business Day, such Interest Period
shall be extended (subject to clauses (c)-(e) below) to the next succeeding
Business Day, (b) interest shall accrue at the applicable rate based upon the
LIBOR Rate from and including the first day of each Interest Period to, but
excluding, the day on which any Interest Period expires, (c) any Interest
Period that would end on a day that is not a Business Day shall be extended to
the next succeeding Business Day unless such Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding Business Day, (d) with respect to an Interest Period that begins on
the last Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period),
the Interest Period shall end on the last Business Day of the calendar month
that is 1, 2, or 3 months after the date on which the Interest Period began, as
applicable, and (e) Borrower may not elect an Interest Period which will
end after the Renewal Date.

 

“LIBOR Deadline”
has the meaning set forth in Section 2.12(b)(i).

 

“LIBOR Notice”
means a written notice in the form of Exhibit L-1 to the Twelfth
Amendment.

 

“LIBOR Option” has
the meaning set forth in Section 2.12(a).

 

“LIBOR Rate”
means, for each Interest Period for each LIBOR Rate Loan, the rate per annum
determined by Foothill (rounded upwards, if necessary, to the next 1/100%) by dividing (a) the Base LIBOR Rate for such
Interest Period, by (b) 100% minus the
Reserve Percentage.  The LIBOR Rate shall
be adjusted on and as of the effective day of any change in the Reserve
Percentage.

 

“LIBOR Rate Loan”
means each portion of an Advance that bears interest at a rate determined by
reference to the LIBOR Rate.

 

“LIBOR Rate Margin”
means 3.5 percentage points.

 

2

 

“Reserve Percentage”
means, on any day, for Foothill, the maximum percentage prescribed by the Board
of Governors of the Federal Reserve System (or any successor governmental authority)
for determining the reserve requirements (including any basic, supplemental,
marginal, or emergency reserves) that are in effect on such date with respect
to eurocurrency funding (currently referred to as “eurocurrency liabilities”)
of Foothill, but so long as Foothill is not required or directed under
applicable regulations to maintain such reserves, the Reserve Percentage shall
be zero.

 

“Twelfth Amendment”
means that certain Amendment Number Twelve to Loan and Security Agreement,
dated as of September 30, 2004, between Foothill and Borrower.

 

“Twelfth Amendment
Effective Date” means September 1, 2004, provided that all of the
conditions precedent set forth in Section 4 of the Twelfth Amendment
shall have been satisfied.

 

“Twelfth Amendment Fee”
has the meaning set forth in Section 2.10(k).

 

(b)           Section 1.1 of the Agreement
is hereby amended by deleting the following definitions therein in their
entirety and hereby substituting the following in lieu thereof:

 

“Business Day”
means any day that is not a Saturday, Sunday, or other day on which national
banks are authorized or required to close, except that, if a determination of a
Business Day shall relate to a LIBOR Rate Loan, the term “Business Day” also
shall exclude any day on which banks are closed for dealings in Dollar deposits
in the London interbank market.

 

“Maximum Revolving
Credit Amount” means Twenty-Three Million Dollars ($23,000,000).

 

(c)           Subsection (g) of the definition of
Eligible Accounts contained in Section 1 of the Agreement is amended and
restated in its entirety as follows:

 

“(g)         Accounts with respect to an Account
Debtor (including Musicland Group, Inc. (“Musicland”)) whose total obligations
owing to Borrower 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 Borrower to the
extent that the total obligations of Anderson owing to Borrower exceed

 

3

 

fifteen percent (15%)
of all Eligible Accounts; provided, however, that to the extent
that Anderson’s total obligations are paid on or before the due date (which due
date may not exceed seventy-five (75) days after the invoice date), Anderson’s
obligations may not exceed twenty-five percent (25%) of all Eligible 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 Borrower to the extent that the total obligations of Best Buy owing to
Borrower exceed twenty-five percent (25%) of all Eligible Accounts; provided,
however, that in no event shall Eligible Accounts include Accounts of
Musicland or Best Buy to the extent that the aggregate amount of total
obligations of Musicland and Best Buy owing to Borrower exceed forty percent
(40%) of all Eligible Accounts; and provided  further, 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 exceed forty percent (40%) of all Eligible
Accounts .”

 

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

 

“(w) an amount equal to
Borrower’s collections with respect to Accounts for the immediately preceding
ninety (90) day period; plus”

 

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

 

“(a) Interest Rate.  All Obligations, except for undrawn L/Cs and
L/C Guarantees, shall bear interest, on the average Daily Balance thereof as
follows: (i) if the relevant Obligation is an Advance that is a LIBOR Rate
Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin
and (ii) otherwise, at a per annum rate equal to the Reference Rate plus
the Applicable Margin.”

 

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

 

“(c)         Minimum Interest.  In no event shall the rate of interest
chargeable hereunder be less than five percent (5.0%) per annum.”

 

(g)           Section 2.10 of the Agreement
is hereby amended by deleting the word “and” at the end of clause (i), by
deleting the period at the end of clause (j) and replacing it with “, and”, and
by adding the following new clause (k):

 

“(k)         Twelfth Amendment Fee.  An amendment fee in
the amount of $45,000 (the “Twelfth Amendment Fee”), which amendment

 

4

 

fee shall be fully
earned and non-refundable as of the date hereof, and shall be charged to
Borrower’s Loan Account on such date.”

 

(h)           Section 2 of the Agreement is hereby
amended by adding the following Section 2.12 thereto:

 

“Section 2.12       LIBOR Option.

 

(a) Interest and Interest Payment Dates.  In lieu of having interest charged at
the rate based upon the Reference Rate, Borrower shall have the option (the “LIBOR
Option”) to have interest on all or a portion of the Advances be charged at
a rate of interest based upon the LIBOR Rate. 
Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the
last day of the Interest Period applicable thereto (provided, however,
that, subject to the following clauses (ii) and (iii), in the case of any
Interest Period greater than 3 months in duration, interest shall be payable at
3 month intervals after the commencement of the applicable Interest Period and
on the last day of such Interest Period), (ii) the occurrence of an Event of
Default in consequence of which Foothill has elected to accelerate the maturity
of all or any portion of the Obligations, or (iii) termination of this
Agreement pursuant to the terms hereof. 
On the last day of each applicable Interest Period, unless Borrower
properly has exercised the LIBOR Option with respect thereto, the interest rate
applicable to such LIBOR Rate Loan automatically shall convert to the rate of
interest then applicable to Reference Rate Loans of the same type
hereunder.  At any time that an Event of
Default has occurred and is continuing, Borrower no longer shall have the
option to request that Advances bear interest at a rate based upon the LIBOR
Rate and Foothill shall have the right to convert the interest rate on all
outstanding LIBOR Rate Loans to the rate then applicable to Reference Rate
Loans hereunder.

 

(b) LIBOR Election.

 

(i)            Borrower may, at any time and from
time to time, so long as no Event of Default has occurred and is continuing,
elect to exercise the LIBOR Option by notifying Foothill prior to 11:00 a.m.
(California time) at least 3 Business Days prior to the commencement of the proposed
Interest Period (the “LIBOR Deadline”). 
Notice of Borrower’s election of the LIBOR Option for a permitted
portion of the Advances and an Interest Period pursuant to this Section shall
be made by delivery to Foothill of a LIBOR Notice received by Foothill before
the LIBOR Deadline, or by telephonic notice received by Foothill before the
LIBOR Deadline (to be confirmed by delivery to Foothill of a LIBOR Notice
received by Foothill prior to 5:00 p.m. (California time) on the same day.

 

5

 

(ii)           Each LIBOR Notice shall be
irrevocable and binding on Borrower.  In
connection with each LIBOR Rate Loan, Borrower shall indemnify, defend, and
hold Foothill harmless against any loss, cost, or expense incurred by Foothill
as a result of (a) the payment of any principal of any LIBOR Rate Loan other
than on the last day of an Interest Period applicable thereto (including as a
result of an Event of Default), (b) the conversion of any LIBOR Rate Loan other
than on the last day of the Interest Period applicable thereto, or (c) the
failure to borrow, convert, continue or prepay any LIBOR Rate Loan on the date
specified in any LIBOR Notice delivered pursuant hereto (such losses, costs,
and expenses, collectively, “Funding Losses”).  Funding Losses shall be deemed to equal the
amount determined by Foothill to be the excess, if any, of (i) the amount of
interest that would have accrued on the principal amount of such LIBOR Rate
Loan had such event not occurred, at the LIBOR Rate that would have been
applicable thereto, for the period from the date of such event to the last day
of the then current Interest Period therefor (or, in the case of a failure to
borrow, convert, or continue, for the period that would have been the Interest
Period therefor), minus (ii) the amount of interest that would accrue on such
principal amount for such period at the interest rate which Foothill would be
offered were it to be offered, at the commencement of such period, Dollar
deposits of a comparable amount and period in the London interbank market.  A certificate of Foothill delivered to
Borrower setting forth any amount or amounts that Foothill is entitled to
receive pursuant to this Section 2.12 shall be conclusive absent
manifest error.

 

(iii)          Borrower shall have not more than 5
LIBOR Rate Loans in effect at any given time. 
Borrower only may exercise the LIBOR Option for LIBOR Rate Loans of at
least $1,000,000 and integral multiples of $500,000 in excess thereof.  

 

(c) Prepayments. Borrower
may prepay LIBOR Rate Loans at any time; provided, however, that
in the event that LIBOR Rate Loans are prepaid on any date that is not the last
day of the Interest Period applicable thereto, including as a result of any
automatic prepayment through the required application by Foothill of proceeds
of Borrower’s and its Subsidiaries’ Collections under this Agreement or for any
other reason, including early termination of the term of this Agreement or
acceleration of all or any portion of the Obligations pursuant to the terms
hereof, Borrower shall indemnify, defend, and hold Foothill and its participants
harmless against any and all Funding Losses in accordance with clause (b)(ii)
above.

 

(d) Special Provisions
Applicable to LIBOR Rate.

 

6

 

(i) The LIBOR Rate
may be adjusted by Foothill on a prospective basis to take into account any
additional or increased costs to Foothill of maintaining or obtaining any
eurodollar deposits or increased costs due to changes in applicable law
occurring subsequent to the commencement of the then applicable Interest
Period, including changes in tax laws (except changes of general applicability
in corporate income tax laws) and changes in the reserve requirements imposed
by the Board of Governors of the Federal Reserve System (or any successor),
excluding the Reserve Percentage, which additional or increased costs would
increase the cost of funding loans bearing interest at the LIBOR Rate.  In any such event, Foothill shall give
Borrower notice of such a determination and adjustment and, upon its receipt of
the notice from Foothill, Borrower may, by notice to Foothill (y) require Foothill
to furnish to Borrower a statement setting forth the basis for adjusting such
LIBOR Rate and the method for determining the amount of such adjustment, or (z)
repay the LIBOR Rate Loans with respect to which such adjustment is made
(together with any amounts due under clause (b)(ii) above).

 

(ii) In the event
that any change in market conditions or any law, regulation, treaty, or
directive, or any change therein or in the interpretation of application
thereof, shall at any time after the date hereof, in the reasonable opinion of Foothill,
make it unlawful or impractical for Foothill to fund or maintain LIBOR Rate
Loans or to continue such funding or maintaining, or to determine or charge
interest rates at the LIBOR Rate, Foothill shall give notice of such changed
circumstances to Borrower and (y) in the case of any LIBOR Rate Loans that are
outstanding, the date specified in Foothill’s notice shall be deemed to be the
last day of the Interest Period of such LIBOR Rate Loans, and interest upon the
LIBOR Rate Loans thereafter shall accrue interest at the rate then applicable
to Reference Rate Loans, and (z) Borrower shall not be entitled to elect the
LIBOR Option until Foothill determines that it would no longer be unlawful or
impractical to do so.

 

(e) No Requirement of
Matched Funding. Anything to the contrary contained herein notwithstanding,
neither Foothill, nor any of its participants, is required actually to acquire
eurodollar deposits to fund or otherwise match fund any Obligation as to which
interest accrues at the LIBOR Rate.  The
provisions of this Section shall apply as if Foothill or its participants had
match funded any Obligation as to which interest is accruing at the LIBOR Rate
by acquiring eurodollar deposits for each Interest Period in the amount of the
LIBOR Rate Loans.”

 

(i)            Section 3.3 of the Agreement
is hereby amended and restated in its entirety as follows:

 

7

 

“3.3         Term; Automatic
Renewal.  This Agreement shall
become effective upon the execution and delivery hereof by Borrower and
Foothill and shall continue in full force and effect for a term ending December
28, 2007 (the “Renewal Date”) and automatically shall be renewed for
successive one (1) year periods thereafter, unless sooner terminated pursuant
to the terms hereof.  Either party may
terminate this Agreement effective on the Renewal Date or on any one (1) year
anniversary of the Renewal Date by giving the other party at least one hundred
twenty (120) days prior written notice by registered or certified mail, return
receipt requested.  The foregoing
notwithstanding, Foothill shall have the right to terminate its obligations
under this Agreement immediately and without notice upon the occurrence and
during the continuation of an Event of Default.”

 

(j)            Section 3.5 of the Agreement
is hereby amended and restated in its entirety as follows:

 

“3.5         Early Termination
by Borrower.  The provisions
of Section 3.3 that allow termination of this Agreement by Borrower
only on the Renewal Date and certain anniversaries thereof notwithstanding,
Borrower has the option, at any time upon one hundred twenty (120) days prior
written notice to Foothill, to terminate this Agreement by paying to Foothill,
in full in cash, the Obligations (including an amount equal to 105% of the
undrawn amount of the L/Cs or L/C Guarantees), together with a premium (the “Early
Termination Premium”) equal to: (a) during the period of time from and
after the Twelfth Amendment Effective Date up to December 28, 2005, the sum of one-quarter
of one percent (0.25%) times the Maximum Revolving Credit Amount plus one-quarter
of one percent (0.25%) times the principal amount of any Capital Expenditure
Loans outstanding as of the effective date of the termination of this
Agreement; (b) during the period of time from and after December 28, 2005 up to
December 28, 2006, the sum of one-quarter of one percent (0.25%) times the
Maximum Revolving Credit Amount plus one-quarter of one percent (0.25%) times
the principal amount of any Capital Expenditure Loans outstanding as of the
effective date of the termination of this Agreement; and (iii) during the
period of time from and after December 28, 2006 up to the Renewal Date, the sum
of one-quarter of one percent (0.25%) times the Maximum Revolving Credit Amount
plus one-quarter of one percent (0.25%) times the principal amount of any
Capital Expenditure Loans outstanding as of the effective date of the termination
of this Agreement.”

 

(k)           Section 7.9 of the Agreement
is hereby amended and restated in its entirety as follows:

 

8

 

“7.9        Capital Expenditures.  Make any capital expenditure, or any
commitment therefor, (a) with respect to individual transactions, in excess of
Eight Hundred Thousand Dollars ($800,000); (b) with respect to aggregate
capital expenditures made or committed during Borrower’s fiscal year ended
March 31, 2005, in an aggregate amount in excess of Three Million Two Hundred
Fifty Thousand Dollars ($3,250,000); or (c) with respect to aggregate capital
expenditures made or committed in any other fiscal year, in an aggregate amount
in excess of Two Million Five Hundred Thousand Dollars ($2,500,000); provided,
however, that if the amount available under this covenant is not
expended in any particular year, one hundred percent (100%) thereof, and in all
cases in an amount not to exceed $2,500,000, shall be available to be expended
in the following fiscal year, but only in such subsequent fiscal year, with the
amount so carried over being deemed to have been expended last in such
subsequent year.”

 

SECTION 3.  REPRESENTATIONS AND
WARRANTIES.

 

Borrower hereby represents and warrants to Foothill
that (a) the execution, delivery, and performance of this Amendment and of the
Agreement, as amended by this Amendment, are within its corporate powers, have
been duly authorized by all necessary corporate action, and are not in
contravention of any law, rule, or regulation, or any order, judgment, decree,
writ, injunction, or award of any arbitrator, court, or governmental authority,
or of the terms of its charter or bylaws, 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 Agreement, as amended by this Amendment, constitute
Borrower’s legal, valid, and binding obligation, enforceable against Borrower
in accordance with its 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.

 

SECTION 4. 
CONDITIONS PRECEDENT TO AMENDMENT.

 

The satisfaction of each of the following, unless
waived or deferred by Foothill in its sole discretion, shall constitute
conditions precedent to the effectiveness of this Amendment:

 

(a)           The representations
and warranties in this Amendment, the Agreement as amended by this Amendment,
and the other Loan Documents shall be true and correct in all 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);

 

(b)           No Default, Event of
Default, or event which with the giving of notice or passage of time would
constitute an Event of Default shall have occurred and be continuing on the
date hereof, nor shall result from the consummation of the transactions
contemplated herein; 

 

9

 

(c)           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
or Foothill;

 

(d)           All other documents,
agreements, instruments, and legal matters in connection with the transactions
contemplated by this Amendment shall have been delivered or executed or
recorded and shall be in form and substance satisfactory to Foothill and its
counsel;

 

(e)           Foothill shall have
received the Twelfth Amendment Fee in full in immediately available funds,
which Twelfth Amendment Fee shall be paid by Borrower to Foothill by being
charged to Borrower’s Loan Account as of the date hereof; and

 

(f)            Foothill shall have
received the reaffirmation and consent attached hereto as Exhibit A,
duly executed and delivered by an authorized officer of Guarantor, and the same
shall be in full force and effect.

 

SECTION 5. 
FURTHER ASSURANCES.

 

Borrower shall execute and deliver all agreements,
documents, and instruments, in form and substance satisfactory to Foothill, and
take all actions as Foothill may reasonably request from time to time fully to
consummate the transactions contemplated under this Amendment and the
Agreement, as amended by this Amendment.

 

SECTION 6. 
MISCELLANEOUS.

 

(a)           Upon the
effectiveness of this Amendment, each reference in the Agreement to “this
Agreement”, “hereunder”, “herein”, “hereof” or words of like import referring
to the Agreement shall mean and refer to the Agreement as amended by this
Amendment.

 

(b)           Upon the
effectiveness of this Amendment, each reference in the Loan Documents to the “Loan
Agreement”, “thereunder”, “therein”, “thereof” or words of like import
referring to the Agreement shall mean and refer to the Agreement as amended by
this Amendment.

 

(c)           This Amendment shall
be governed by and construed in accordance with the laws of the State of
California.

 

(d)           This Amendment can
only be amended by a writing signed by both Foothill and Borrower.

 

(e)           This Amendment may
be executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one

 

10

 

and the same Amendment.  Delivery of an executed counterpart of this
Amendment by telefacsimile 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 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.

 

(f)            This Amendment
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.

 

(g)           The 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 Foothill under the Agreement or any other Loan
Document.  The 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.

 

(h)           This Amendment shall
be effective on the Twelfth Amendment Effective Date.

 

[Signature Page Follows]

 

11

 

IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed as of the date first written above.

 

 

	
   

  	
  IMAGE ENTERTAINMENT, INC.,

  
	
   

  	
  a California
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /S/ JEFF M. FRAMER

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO FOOTHILL, INC.,

  
	
   

  	
  a California corporation,
  formerly known as Foothill

  Capital Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /S/ Trent Smart

  	
   

  
	
   

  	
  Title: 

  	
  Vice President

  	
   

  
					

 

 

Exhibit
A

 

REAFFIRMATION AND CONSENT

 

Dated as of September 30, 2004

 

Reference is made hereby to that certain Amendment
Number Twelve to Loan and Security Agreement, dated as of the date hereof (the “Amendment”),
between Image Entertainment, Inc., a California corporation (“Borrower”) and
Wells Fargo Foothill, Inc. (formerly known as Foothill Capital Corporation), a
California corporation (“Foothill”). 
Capitalized terms used herein shall have the meanings ascribed to them
in that certain Loan and Security Agreement, dated as of December 28, 1998 (as
amended, supplemented, or otherwise modified from time to time, the “Agreement”),
between Borrower and Foothill.  The
undersigned hereby (a) represents and warrants to Foothill that the execution,
delivery, and performance of this Reaffirmation and Consent (this “Reaffirmation”)
are within its corporate powers, have been duly authorized by all necessary
corporate action, and are not in contravention of any law, rule, or regulation,
or any order, judgment, decree, writ, injunction, or award of any arbitrator,
court, or governmental authority, or of the terms of its charter or bylaws, 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
Agreement by the Amendment; (c) acknowledges and reaffirms all its obligations
owing to Foothill under the Guaranty and each other Loan Document to which it
is a party; and (d) agrees that each Loan Document to which it is a party is
and shall remain in full force and effect. 
Although the undersigned has been informed of the matters set forth
herein and has acknowledged and agreed to same, it understands that Foothill
shall have no obligation to inform it of such matters in the future or to seek
its acknowledgement or agreement to future amendments or modifications, and
nothing herein shall create such a duty.

 

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

 

	
   

  	
  DVD PLANET.COM, INC.,

  a California corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

 

Exhibit
L-1

 

Form of
LIBOR Notice

 

Wells Fargo Foothill,
Inc.

2450 Colorado Avenue

Suite 3000 West

Santa Monica, California 90404

 

Ladies and Gentlemen:

 

Reference hereby is made to that certain Loan and
Security Agreement, dated as of December 28, 1998 (as amended from time to
time, the “Loan Agreement”), between IMAGE ENTERTAINMENT, INC., a
California corporation (“Borrower”) and WELLS FARGO FOOTHILL, INC., f\k\a
Foothill Capital Corporation, California corporation (“Lender”).  Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Loan
Agreement.

 

This LIBOR Notice represents Borrower’s request to
elect the LIBOR Option with respect to outstanding Advances in the amount of $                         
(the “LIBOR Rate Advance”)[, and is a written confirmation of the
telephonic notice of such election given to Lender].

 

Such LIBOR Rate Advance will have an Interest Period
of [1, 2, or 3] month(s) commencing on
                            .

 

This LIBOR Notice further confirms Borrower’s acceptance,
for purposes of determining the rate of interest based on the LIBOR Rate under
the Loan Agreement, of the LIBOR Rate as determined pursuant to the Loan
Agreement.

 

 

Borrower represents and warrants that (i) as of the
date hereof, each representation or warranty contained in or pursuant to any
Loan Document, any agreement, instrument, certificate, document or other
writing furnished at any time under or in connection with any Loan Document,
and as of the effective date of any advance, continuation or conversion
requested above is true and correct in all material respects (except to the
extent any representation or warranty expressly related to an earlier date),
(ii) each of the covenants and agreements contained in any Loan Document have
been performed (to the extent required to be performed on or before the date
hereof or each such effective date), and (iii) no Default or Event of Default
has occurred and is continuing on the date hereof, nor will any thereof occur
after giving effect to the request above.

 

	
   

  	
  Dated:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  IMAGE ENTERTAINMENT, INC.,
  a

  California corporation, as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  Acknowledged by:

  	
   

  
	
   

  	
   

  
	
  WELLS FARGO FOOTHILL, INC.,

  	
   

  
	
  a California corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:Exhibit 10.1

 

SEPARATION AND RELEASE AGREEMENT

 

Apropos Technology, Inc., an Illinois
corporation (the “Company”), and
Kevin G. Kerns, an employee of the Company (“Executive”),
enter into this Separation and Release Agreement (“Agreement”)
as of the 14th day of September, 2004.

 

WHEREAS, Executive has been employed by the
Company and certain of its affiliated entities;

 

WHEREAS, Executive and the Company are
parties to an Employment Agreement, dated January 1, 2000, as amended (the
“Employment  Agreement”);

 

WHEREAS, Executive and the Company are
parties to an Employee Noncompetition, Nondisclosure and Developments
Agreement, a copy of which is attached hereto as Exhibit A (the “Noncompetition Agreement”);

 

WHEREAS, Executive and the Company have
agreed that Executive’s employment with the Company and its related and
affiliated entities will terminate as of the Separation Date as defined below;
and

 

WHEREAS, Executive and the Company have
negotiated and reached an agreement with respect to all rights, duties and
obligations arising between them, including, but not limited to, any rights,
duties and obligations that have arisen or might arise out of or are in any way
related to Executive’s employment with the Company and its related and
affiliated entities, the Employment Agreement and the conclusion of that
employment.

 

NOW, THEREFORE, in consideration of the
covenants and mutual promises herein contained, it is agreed as follows:

 

1.           Resignation.  Executive acknowledges he resigned as
President and Chief Executive Officer, as a director of the Company, and from
any fiduciary or other position with the Company’s subsidiaries or employee
benefit plans effective July 30, 2004. 
The Company acknowledges and agrees that on July 30, 2004 Executive (i)
ceased to be a director or officer of the Company for purposes of Section 16(b)
of the Securities Exchange Act of 1934 as amended, and Rule 144 promulgated
under the Securities Act of 1933, as amended, and (ii) ceased to have access to
material nonpublic information concerning the Company, and (iii) ceased to be
subject to Company-imposed black out restrictions on trading in Company
stock.  Executive’s employment with the
Company shall end on September 30, 2004 (the “Separation
Date”). 
Until the Separation Date, Executive shall remain an employee under the
direction of and reporting to the President and Chairman of the Company
(subject to vacations and compensating time off) and shall continue to (i)
receive his annual Base Compensation of $230,000, less withholding required by
law, in monthly installments as currently paid; (ii) vest at the rate of 625
shares per month in the 26,339 unvested stock options (as of August 10, 2004)
currently held by Executive and issued under the Company’s 2000 Omnibus
Incentive Plan (the “Stock  Option  Plan”); and
(iii) participate in the Company’s health insurance plan in accordance with its
terms.

 

 

2.           Severance Payment.  Executive shall be entitled to the Severance
Payment of $230,000, less withholding required by law, payable in monthly installments
as provided in Section 7(a) of the Employment Agreement.  Such payments shall commence with the pay
period beginning October 1, 2004 and continue for twelve months.  Executive shall be entitled to no other
rights or benefits under the Employment Agreement or other Company practices
and policies, except as stated in this Agreement, but shall continue to comply
with Executive’s continuing obligations under the Employment Agreement, as well
as his obligations under the Noncompetition Agreement which shall remain in
full force and effect.

 

3.           Consulting Services.  Executive agrees to be available at mutually
convenient times (which will not interfere with Executive’s other
responsibilities) to the Company’s management to provide consulting services for
up to the hourly equivalent of two (2) days per week during the three (3)
months following the Separation Date at no additional compensation; provided,
however, that all out-of-pocket expenses reasonably incurred by the Executive
in connection with such consulting services shall be reimbursed by the Company
in accordance with its normal procedures. 
The parties agree that in connection with the consulting services the
Executive will not receive material nonpublic information which would prevent
Executive from exercising his vested options, or buying or selling Company
stock.

 

4.           AMT Recoveries.  The Company hereby waives and releases its
right to recover or receive reimbursement for any alternative minimum tax
credit available to Executive, including any AMT Recoveries as defined in the
Loan Termination Agreement, dated as of December 27, 2002 (the “Loan Termination Agreement”).  The Loan Termination Agreement is hereby
terminated and shall be of no further force or effect.

 

5.           Stock Options.  Executive shall be entitled to rights
provided under previously granted stock options pursuant to the terms thereof
which have vested as of the Separation Date. 
The Company shall accelerate the vesting of the 114,800 option shares
previously granted to Executive under the Stock Option Plan which were
scheduled to vest in February 2005 and amends such option to provide for a 12
month period of exercise following the Separation Date.  All other vested options must be exercised within
three (3) months following the Separation Date. 
The Company will assist the Executive in the cashless exercise of all
vested options, in accordance with Section 3 of the stock option agreements
governing each option, for the period during which such options are
exercisable; provided, Executive delivers shares of Company stock held for more
than six (6) months.  Executive
acknowledges that the 114,800 options shares scheduled to vest in February
2006, and the 25,714 option shares scheduled to vest monthly have not vested,
shall not vest and shall be terminated. 
The Company will assist in the prompt removal of all restrictive legends
on any certificates evidencing restricted Company common shares held by
Executive and the exchange of such certificates for certificates representing
unrestricted shares to the extent consistent with applicable law.

 

6.           Receipt of Other Compensation.  Executive acknowledges and agrees that, other
than as specifically set forth in this Agreement and notwithstanding any
provisions of the Employment Agreement, or any other agreement, understanding
or Company policy or plan, he is not and will not be due any compensation or
amounts or benefits, including, but not limited to, compensation for unpaid
salary, unpaid bonus, severance and accrued or unused vacation time or

 

2

 

vacation pay from the Company and its related
and affiliated entities, except as stated in this Agreement.  As of and after the Separation Date,
Executive will not be eligible to participate in any of the health benefit
plans of the Company, except as stated in Section 7.  The Company shall promptly reimburse
Executive for business expenses reasonably incurred in the ordinary course of
Executive’s employment on or before July 30, 2004, but not previously
reimbursed; provided the Company’s policies of documentation and approval are
satisfied.

 

7.           Other Benefits.

 

(a)           Executive shall be
eligible to elect Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) continuation coverage under the group medical and
dental plan of the Company as of the Separation Date (or such earlier date, if
any, on which Executive qualifies for such an election), provided that such
COBRA continuation coverage shall terminate in accordance with COBRA and the
terms of the group medical or dental plan.

 

(b)           Executive shall be
entitled to vested and accrued benefits, if any, if and to the extent provided
by the Company’s qualified benefit plans (other than the Stock Option Plan) all
as of the Separation Date.

 

8.           Representations and Warranties.  (a) Executive hereby represents and warrants
to the Company as follows:

 

(1)           Authority.  Executive has full legal capacity and all
requisite power and authority, without the consent of any other person, to
execute and deliver this Agreement and to carry out the transactions
contemplated hereby.

 

(2)           Validity.  This Agreement has been duly executed and
delivered and constitutes the lawful, valid and binding obligation of
Executive, enforceable in accordance with its terms.  The execution and delivery of this Agreement
will not conflict with any law, agreement or other obligation to which
Executive is subject.

 

(3)           Executive
represents that Executive has not engaged in any breach of fiduciary duty or
criminal activity towards the Company.

 

(b)           The Company hereby
represents and warrants to Executive as follows:

 

(1)           Authority.  The Company has full legal capacity and all
requisite power and authority, without the consent of any other person, to
execute and deliver this Agreement, and to carry out the transactions
contemplated hereby.

 

(2)           Validity.  This Agreement has been duly executed and
delivered and constitutes the lawful, valid and legally binding obligation of
the Company, enforceable in accordance with its terms.  The execution and delivery of this Agreement
will not conflict with any law, agreement or other obligation to which the
Company is subject.

 

9.           Return of Property - Ownership of Information.  By the Separation Date, Executive will
promptly return to the Company (regardless of where located or stored) all
reports,

 

3

 

files, memoranda, records, computer equipment
and software, credit cards, cardkey passes, door and file keys, computer access
codes or disks and instructional manuals, and other physical or personal
property which he received or prepared or helped prepare in connection with his
employment with the Company and its related and affiliated entities, and
Executive will not retain any copies, duplicates, reproductions or excerpts
thereof.  The ownership and right of
control of all reports, records, programs, data bases, processes and supporting
documents prepared by, for or on behalf of Executive during his employment are
vested exclusively in the Company and remain the exclusive property of the
Company.

 

10.         Cooperation. Executive agrees to
cooperate with the Company in the truthful and honest investigation,
prosecution and/or defense of any claim in which the Company may have an
interest (subject to reasonable limitations concerning time and place), which
may include (subject to arranging mutually agreeable times for such activities
which will not interfere with Executive’s other responsibilities; and subject
to the Company paying reasonable out-of-pocket expenses incurred by the
Executive and, in the case of extraordinary expenses, only at the Company’s
prior and specific request) making himself available to participate in any
proceeding involving the Company, allowing himself to be interviewed by
representatives of the Company, participating as requested in interviews and/or
preparation by any of the Released Parties of other witnesses, protecting the
applicable legal privileges of the Released Parties, appearing for depositions
and testimony without requiring a subpoena, and producing and/or providing any
documents or names of other persons with relevant information, all without
claim of privilege against the Released Parties.

 

11.         Release By Executive.

 

(a)           Executive on behalf
of himself, his heirs, executors, administrators and assigns, does hereby
knowingly and voluntarily release, acquit and forever discharge the Company and
its related and affiliated entities, successors, assigns and past, present and
future shareholders, directors, trustees, officers, employees, agents, and
attorneys (the “Released  Parties”)
from and against any and all charges, complaints, claims, cross-claims,
third-party claims, counterclaims, contribution claims, liabilities,
obligations, promises, agreements, controversies, damages, actions, causes of
action, suits, rights, demands, costs, losses, debts and expenses of any nature
whatsoever, known or unknown, suspected or unsuspected, foreseen or unforeseen,
matured or unmatured, which, at any time up to and including the date hereof,
exists, have existed, or may arise from any matter whatsoever occurring,
including, but not limited to, any claims arising out of or in any way related
to Executive’s employment with the Company and its related and affiliated
entities and the conclusion thereof or the stock options, which Executive, or
any of his heirs, executors, administrators and assigns and affiliates and
agents ever had, now has or at any time hereafter may have, own or hold against
the Released Parties.  Executive
acknowledges that in exchange for this release, the Company is providing
Executive with total consideration, financial or otherwise, which exceeds what
Executive would have been given without the release.  By executing this Agreement, Executive is waiving
all claims against the Released Parties arising under federal, state and local
labor and antidiscrimination laws and any other restriction on the right to
terminate employment, including, without limitation, Title VII of the Civil
Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq., 42 U.S.C. § 1981,
the Civil Rights Act of 1991, the Age Discrimination in Employment Act, as
amended by the Older Worker Benefit Protection Act,

 

4

 

the Americans with Disabilities Act, the Family and Medical Leave Act,
the Illinois Human Rights Act, or for breach of contract (including, without
limitation, the Employment Agreement or the stock options), for
misrepresentation, for defamation, for wrongful discharge under the common law
of any state, for infliction of emotional distress or for any other tort under
the common law of any state.  This
release shall run to and be binding upon Executive and his heirs and assigns.

 

(b)           EXECUTIVE
SPECIFICALLY WAIVES AND RELEASES THE RELEASED PARTIES FROM ALL CLAIMS EXECUTIVE
MAY HAVE AS OF THE DATE OF EXECUTION OF THIS AGREEMENT (“EXECUTION
DATE”) REGARDING CLAIMS OR RIGHTS
ARISING UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, 29
U.S.C. § 621 (“ADEA”), INCLUDING ANY CLAIMS BASED
ON THE CONCLUSION OF EXECUTIVE’S EMPLOYMENT BY THE COMPANY.  EXECUTIVE FURTHER AGREES:  (A) THAT EXECUTIVE’S WAIVER OF RIGHTS UNDER
THIS RELEASE IS KNOWING AND VOLUNTARY AND IN COMPLIANCE WITH THE OLDER WORKER’S
BENEFIT PROTECTION ACT OF 1990; (B) THAT EXECUTIVE UNDERSTANDS THE TERMS OF
THIS RELEASE; (C) THAT THE BENEFITS CALLED FOR IN THIS AGREEMENT WOULD NOT BE
PROVIDED TO ANY EMPLOYEE TERMINATING HIS EMPLOYMENT WITH THE COMPANY AND ITS
RELATED AND AFFILIATED ENTITIES WHO DID NOT SIGN A RELEASE SIMILAR TO THIS
RELEASE, THAT SUCH PAYMENTS AND BENEFITS WOULD NOT HAVE BEEN PROVIDED HAD
EXECUTIVE NOT SIGNED THIS RELEASE, AND THAT THE PAYMENTS AND BENEFITS ARE IN
EXCHANGE FOR THE SIGNING OF THIS RELEASE; (D) THAT EXECUTIVE HAS BEEN ADVISED
IN WRITING BY THE COMPANY AND ITS RELATED AND AFFILIATED ENTITIES TO CONSULT
WITH AN ATTORNEY PRIOR TO EXECUTING THIS RELEASE; (E) THAT THE COMPANY AND ITS
RELATED AND AFFILIATED ENTITIES HAVE GIVEN EXECUTIVE A PERIOD OF AT LEAST
TWENTY-ONE (21) DAYS WITHIN WHICH TO CONSIDER THIS RELEASE; (F) THAT EXECUTIVE
REALIZES THAT FOLLOWING EXECUTIVE’S EXECUTION OF THIS RELEASE, EXECUTIVE HAS
SEVEN (7) DAYS IN WHICH TO REVOKE THIS RELEASE BY WRITTEN NOTICE TO THE COMPANY
AND IF NOT REVOKED THIS RELEASE SHALL BE EFFECTIVE ON THE EIGHTH DAY AFTER THE
DELIVERY DATE, (G) THAT THIS ENTIRE AGREEMENT SHALL BE VOID AND OF NO FORCE AND
EFFECT IF EXECUTIVE CHOOSES TO SO REVOKE, AND IF EXECUTIVE CHOOSES NOT TO SO
REVOKE, THAT HIS RELEASE THEN BECOMES EFFECTIVE AND ENFORCEABLE, AND (H)
EXECUTIVE DOES NOT RELEASE OR WAIVE ANY RIGHT OR CLAIM WHICH HE MAY HAVE UNDER
THE AGE DISCRIMINATION IN EMPLOYMENT ACT, AS AMENDED BY THE OLDER WORKERS
BENEFITS PROTECTION ACT, WHICH ARISES AFTER THE EXECUTION DATE; PROVIDED THAT
EXECUTIVE ACKNOWLEDGES AND AGREES THAT ANY CLAIM UNDER THE AGE DISCRIMINATION
IN EMPLOYMENT ACT RELATING TO HIS SEPARATION FROM EMPLOYMENT WITH THE COMPANY
OR COMPENSATION OR EMPLOYEE BENEFITS ISSUES HAS ARISEN PRIOR TO THE EXECUTION
DATE.

 

(c)           Nothing contained in
this Section 11 shall release the Company from any obligation under this
Agreement, from claims for indemnification or other obligations under the

 

5

 

Indemnity Agreement dated February 15, 2000 or for vested benefits
under the Company’s qualified employee retirement benefit plans.

 

12.         Release By Company.

 

(a)           In reliance upon and
conditioned upon the representations by Executive contained in this Agreement,
the Company hereby releases Executive from any and all claims, suits, demands,
actions or causes of action of any kind or nature whatsoever, whether the
underlying facts are known or unknown, which the Company has or now claims, or
might have or claim, pertaining to or arising out of Executive’s employment by
the Company.  This release shall run to
and be for the benefit of Executive and his heirs and assigns.  This release shall run to and be binding upon
the Company, and its successor and assigns.

 

(b)           Nothing contained in
this Section 12 shall release Executive from any obligation under this
Agreement, including, without limitation, Executive’s continuing obligations
under the Employment Agreement, the Noncompetition Agreement and ongoing
fiduciary and confidentiality obligations thereunder; provided, however, that
the Post-employment Period under the Noncompetition Agreement shall be deemed
to have commenced on July 31, 2004.

 

13.         Confidentiality.

 

(a)           Executive reaffirms
and agrees to comply with the terms of the Noncompetition Agreement, which is
incorporated herein by reference.

 

(b)           Executive and the
Company agree that they will keep confidential, to the full extent permitted by
law, the terms of this Agreement, all performance hereunder and all
circumstances relating to Executive’s separation from the Company; provided,
however, that Executive and the Company may disclose the same as required by
law (including, but not by way of limitation, the filing of this Agreement with
the Securities and Exchange Commission), for purposes of tax reporting,
pursuant to legal process, in an action to enforce this Agreement, to claim
benefits under this Agreement or under Company benefit plans in which Executive
is a participant or beneficiary, to members of Executive’s immediate family,
legal advisors, and to persons from whom Executive seeks financial advice.

 

(c)           Executive agrees not
to assist or advise any current or former employee with respect to potential
rights or claims against the Company.

 

14.         Non-Disparagement.  No director or executive officer of the
Company will take any action intended in any way to disparage Executive or make
or solicit any comments or statements to the media or to other persons outside
the Company that may reasonably be considered to be derogatory or detrimental
to Executive’s professional reputation. 
Executive will not take any action intended in any way to disparage the
Company or make or solicit any comments or statements to the media or to other
persons that may reasonably be considered to be derogatory or detrimental to
the professional reputation of the past or current Released Parties.  If an employment reference or any other
similar inquiry from a third party is requested about Executive (provided, that
such requests are directed to the Chairman or President of the

 

6

 

Company), the Company will state that by
mutual agreement between Executive and the Company Executive resigned his
employment and will provide other factually accurate information only to the
extent that Executive requests it and releases the Company and its personnel in
connection with such statements.

 

15.         Covenant Not to Sue.  To the maximum extent permitted by law,
Executive covenants not to sue or to institute or cause to be instituted any
action in any federal, state, or local agency or court against the Released
Parties with respect to the subject matter of the release in Section 11.  Notwithstanding the foregoing, nothing herein
shall prevent Executive from instituting any action required to enforce the
terms of this Agreement.  In addition,
nothing herein shall be construed to prevent Executive from enforcing any
rights Executive may have under the Employee Retirement Income Security Act of
1974.  While Executive may file a charge
with state or federal agencies, Executive agrees not to seek or accept any
money damages or any other relief upon the filing of any such administrative
charges or complaints (or judicial proceedings arising from such charges).

 

16.         Executive’s Understanding.  Executive acknowledges by signing this
Agreement that Executive has read and understands this document, that Executive
has conferred with Executive’s attorney regarding the terms and meaning of this
Agreement, that Executive has had sufficient time to consider the terms
provided for in this Agreement, that no representations or inducements have
been made to Executive, except as set forth in this Agreement, and that
Executive has signed the same KNOWINGLY AND VOLUNTARILY.

 

17.         Non-Reliance.  Executive represents to the Company, and the
Company represents to Executive, that in executing this Agreement they do not
rely and have not relied upon any representation or statement not set forth
herein made by the other or by any of the other’s agents, representatives or
attorneys with regard to the subject matter, basis or effect of this Agreement
or otherwise.

 

18.         Severability of Provisions.  In the event that any one or more of the
provisions of this Agreement or the Noncompetition Agreement is held to be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions will not in any way be affected or impaired
thereby.  Moreover, if any one or more of
the provisions contained in this Agreement or the Noncompetition Agreement are
held to be excessively broad as to duration, scope, activity or subject, such
provisions will be construed by limiting and reducing them so as to be
enforceable to the maximum extent compatible with applicable law.

 

19.         Non-Admission of Liability.  The parties agree that neither this Agreement
nor the performance by the parties hereunder constitutes an admission by any of
them of any violation of any federal, state or local law, rule or regulation,
common law, breach of any contract, or any wrongdoing of any type.

 

20.         Non-Assignability.  The rights and benefits available under this
Agreement are personal to Executive and such rights and benefits shall not be
subject to assignment, alienation or transfer, except to the extent such rights
and benefits are lawfully available to the estate or beneficiaries of Executive
upon death.

 

7

 

21.         Notice.  Any notice to be given hereunder shall be in
writing and shall be deemed given when mailed by certified mail, return receipt
requested, or personal or receipted overnight delivery service addressed as
follows:

 

	
   

  	
  To Executive
  at:

  
	
   

  	
   

  
	
   

  	
  Kevin G.
  Kerns

  
	
   

  	
  2210
  Edgebrooke Drive

  
	
   

  	
  Lisle, IL
  60532

  
	
   

  	
  To the
  Company at:

  
	
   

  	
   

  
	
   

  	
  Apropos
  Technology, Inc.

  
	
   

  	
  One Tower
  Lane

  
	
   

  	
  Oak Brook
  Terrace, IL 60181

  
	
   

  	
  Attention:
  Chairman

  

 

22.         Entire Agreement.  This Agreement, which incorporates Executive’s
continuing obligations under the Noncompetition Agreement, sets forth all the
terms and conditions with respect to compensation, remuneration of payments and
benefits due Executive from the Company and its related and affiliated entities
and supersedes and replaces any and all other agreements or understandings
Executive may have had with respect thereto. 
It may not be modified or amended, except in writing and signed by both
parties.

 

23.         Choice of Law.  This Agreement shall be construed in
accordance with the laws of the State of Illinois without regard to its choice
of law rules.

 

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

 

	
   

  	
  APROPOS TECHNOLOGY, INC.

  
	
   

  	
   

  
	
  /s/ Kevin G. Kerns

  	
   

  	
  By:

  	
   /s/ Keith Crandell

  	
   

  
	
  Kevin G. Kerns

  	
  Keith Crandell

  
					

 

8

 

EXHIBIT A

 

APROPOS TECHNOLOGY, INC.

EMPLOYEE NONCOMPETITION,

NONDISCLOSURE AND DEVELOPMENTS AGREEMENT

 

In consideration and as a condition of my
employment or continued employment by Teledata Solutions, Inc., an Illinois
corporation (the “Company”), I hereby agree with the Company as follows:

 

1.  During
the period of my employment by the Company (the “Employment Period”), I will
devote my full time and best efforts during normal working hours to the
business of the Company.  During the
period of my employment by the Company and for six months thereafter, I agree
that I will not, directly or indirectly, alone or as a partner, officer,
director, employee or stockholder of any entity, (a) engage in any business
activity that is in competition with the products or services being developed,
manufactured or sold by the Company, or (b) solicit or do business with any
customer of the Company or any potential customer of the Company.  During the period of my employment and for
two years thereafter, I agree that I will not directly or indirectly, alone or
as a partner, officer, director, employee or stockholder of any entity,
solicit, interfere with or endeavor to entice away any employee of the
Company.  The period following the
termination of my employment during which a restriction applies (the “Post-employment
Period”) shall be extended by the length of any period of time during the
Post-employment Period during which I am in violation of this paragraph plus
the length of any court proceedings necessary to stop such violation.

 

2.  I will
not at any time, whether or after the Employment Period, reveal to any person
or entity any of the trade secrets or confidential information concerning the
organization, business or finances of the Company or of any third party that
the Company is under an obligation to keep confidential (including but not
limited to trade secrets or confidential information respecting inventions,
products, designs, methods, know-how, techniques, systems, processes, software
programs, works or authorship, customer lists, projects, plans and proposals),
except as may be required in the ordinary course of performing my duties as an
employee of the Company, and I shall keep secret all matters entrusted to me
and shall not use or attempt to use any such information in any manner that may
injure or cause loss or may be calculated to injure or cause loss, whether
directly or indirectly, to the Company. 
Further, I agree that during and after the Employment Period I shall not
make, use or permit to be used any notes, memoranda, reports, lists, records,
drawings, sketches, specifications, software programs, data, documentation or
other materials of any nature relating to any matter within the scope of the
business of the Company or concerning any of its dealings or affairs otherwise
than for the benefit of the Company, it being agreed that all of the foregoing
shall be and remain the sole and exclusive property of the Company, and that
immediately upon the termination of my employment I shall deliver all of the
foregoing, and all copies thereof, to the Company, at its main office.

 

3.  If at any
time or times during my employment, I shall (either alone or with others) make,
conceive, create, discover, invent, or reduce to practice any invention,
modification, discovery, design, development, improvement, process, software
program, work of authorship, documentation, formula, data, technique, know-how,
trade secret or intellectual property right whatsoever or any interest therein
(whether or not patentable or registrable under copyright,

 

A-1

 

trademark or similar statutes (including but not limited to the
Semiconductor Chip Protection Act) or subject to analogous protection) (herein
called “Developments”), then:

 

(a)  such Developments and the benefits
thereof are and shall immediately become the sole and absolute property of the
Company and its assigns, as works made for hire or otherwise;

 

(b)  I shall promptly disclose to the
Company (or any persons designated by it) each such Development;

 

(c)  as may be necessary to ensure the
Company’s owners of such Developments, I hereby assign any rights (including,
but not limited to, any copyrights and trademarks) I may have or acquire in the
Developments and benefits and/or rights resulting therefrom to the Company and
its assigns without further compensation; and

 

(d)  I shall
communicate, without cost or delay, and without disclosing to others the same,
all available information relating thereto (with all necessary plans and models) to the
Company.

 

Notwithstanding
the foregoing, this Paragraph 3 shall not apply to Developments for which no
equipment, supplies, facility, or trade secret information of the Company was
used and which was developed entirely on my own time, unless (a) the
Development related (i) to the business of the Company, or (ii) to the Company’s
actual or demonstrably anticipated research or development, or (b) the
Development results from any work performed by me for the Company.

 

4.  I will,
during and after the Employment Period, at the request and cost of the Company,
promptly sign, execute, make and do all such deeds, documents, acts and things
as the Company and its duly authorized agents may reasonably require:

 

(a)  to apply for, obtain, register and
vest in the name of the Company alone (unless the Company otherwise directs)
letters patent, copyrights, trademarks or other analogous protection in any
country throughout the world and when so obtained or vested to renew and
restore the same; and

 

(b)  to defend any judicial, opposition or
other proceedings in respect of such applications and any judicial opposition
or other proceedings or petitions or applications for revocation of such
letters patent, copyright, trademark or other analogous protection.

 

In the event the Company is unable, after
reasonable effort, to secure my signature on any application for letters
patent, copyright or trademark registration or other documents regarding any
legal protection relating to a Development, whether because of my physical or
mental incapacity or for any other reason whatsoever, I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents
as my agent and attorney-in-fact, to act for and in my behalf and stead to
execute and file any such application or applications or other documents and to
do all other lawfully permitted acts to further the prosecution and issuance of

 

A-2

 

letters
patent, copyright or trademark registrations or any other legal protection
thereon with the same legal force and effect as if executed by me.

 

5.  I agree
that any breach of this Agreement by me will cause irreparable damage to the
Company and that in the event of such breach the Company shall have, in
addition to any and all remedies of law, the right to an injunction, specific
performance or other equitable relief to prevent the violation of my
obligations hereunder, without the necessity of a bond or other security.  I further agree and acknowledge that the
post-employment and non-competition provisions set forth in Paragraph 1 hereof,
and the remedies set forth in this paragraph, are necessary and reasonable to
protect the business of the Company.

 

6.  I
understand that this Agreement does not create an obligation on the Company or
any other person or entity to continue my employment.

 

7.  No claim
of mine against the Company shall serve as a defense against the Company’s
enforcement of any provision of this Agreement.

 

8.  I
represent that the Developments identified in the pages, if any, attached
hereto as Exhibit A comprise all the unpatented and unregistered
copyrightable Developments that I have made, conceived or created prior to the
Employment Period, which Developments are excluded from this Agreement.  I understand that it is only necessary to
list the title and purpose of such Developments but not details thereof.

 

9.  I hereby
represent that, except as I have disclosed in writing to the Company, I am not
a party to, or bound by the terms of, any agreement with or obligation to any
previous employer or other party to refrain from using or disclosing any trade
secret or confidential or proprietary information in the course of my
employment with the Company or to refrain from competing, directly or
indirectly, with business of such previous employer or any other party.  I further represent that my performance of
all the terms of this Agreement and as an employee of the Company does not and
will not breach any agreement or obligation to keep in confidence proprietary
information, knowledge or data acquired by me in confidence or in trust prior
to or during my employment with the Company, and I will not disclose to the
Company or induce the Company to use any confidential or proprietary
information or material belonging to any previous employer or others.  I have not entered into, and I agree I will
not enter into, any agreement, either written or oral, in conflict with the
terms of this Agreement.

 

10.  Any
waiver the Company of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach of such provision
or any other provision hereof.

 

11.  I hereby
agree that each provision herein shall be treated as a separate and independent
clause, and the unenforceability of any one clause shall in no way impair the
enforceability of any of the other clauses herein.  Moreover, if one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively
broad as to scope, activity, subject or otherwise so as to be unenforceable at
law, such provision or provisions shall be construed by the appropriate
judicial body by limiting or reducing it or them, so as to be enforceable to
the maximum extent compatible with the applicable law as it shall then appear.

 

A-3

 

12.  My
obligations under this Agreement shall survive the termination of my employment
regardless of the manner of such termination and shall be binding upon my
heirs, executors, administrators and legal representatives.

 

13.  The term
“Company” shall include Teledata Solutions, Inc. and any of its subsidiaries,
subdivisions or affiliates.  The Company
shall have the right to assign this Agreement to its successors and assigns,
and all covenants and agreements hereunder shall inure to the benefit of and be
enforceable by said successors or assigns.

 

14.  This Agreement
shall be governed by and construed in accordance with the internal laws of the
State of Illinois.  Any claims or legal
actions by one party against the other arising out of the relationship between
the parties contemplated herein (whether or not arising under this Agreement)
shall be governed by the laws of the State of Illinois and shall be commenced
and maintained in any state or federal court located in Cook County, Illinois,
and both parties hereby submit to the jurisdiction and venue of any such court.

 

IN WITNESS WHEREOF, the undersigned has executed this Noncompetition
Nondisclosure and Developments Agreement as a sealed instrument as of the 19th
day of March, 1996.

 

	
   

  	
  /s/ Kevin G. Kerns

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Kevin G. Kerns

  
	
   

  	
  Name –Please Print

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  455 Buena Vista

  
	
   

  	
  Redwood City, Ca 94061

  

 

A-4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00074-of-00352.parquet"}]]