EXCHANGE AGREEMENT
Exhibit 99.(E)
EXECUTION COPY
THIS EXCHANGE AGREEMENT (this “Agreement”) is dated September 9, 2005 (the
“Closing Date”), by and between Lions Gate Entertainment Corp., a corporation organized
under the laws of British Columbia, Canada (“Buyer”), and the sellers set forth on
Schedule 1 attached hereto (each, a “Seller” and collectively, the
“Sellers”).
A. Each Seller is the sole beneficial owner of that number of shares set forth opposite such
Seller’s name on Schedule 1, which in the aggregate total 401,350 shares (the “Image
Shares”) of the Common Stock, no par value (“Image Common Stock”), of Image
Entertainment, Inc., a California corporation (“Image”), which shares are held of record as
set forth on Schedule 1 hereto.
B. On the terms and subject to the conditions set forth herein, Buyer desires to purchase from
each Seller, and each Seller desires to sell to Buyer, the Image Shares beneficially owned by such
Seller in exchange for the issuance by Buyer to each Seller of that number of shares of Common
Shares, without par value, of Buyer (“Buyer Common Stock”) set forth opposite such Seller’s
name on Schedule 1.
ARTICLE 1
TERMS OF EXCHANGE
1.1 Issuance and Exchange of the Buyer Shares for the Image Shares.
(a) Subject to the terms and conditions of this Agreement, simultaneously with the
execution of this Agreement, each Seller hereby sells, assigns, transfers and conveys to
Buyer, and Buyer purchases and accepts from each Seller, all of such Seller’s right, title
and interest in and to the Image Shares beneficially owned by such Seller.
(b) Subject to the terms and conditions of this Agreement, Buyer hereby issues and
sells to each Seller that number of validly issued, fully paid and non-assessable shares of
Buyer Common Stock equal to the product of (i) the number of
Image Shares beneficially owned by such Seller multiplied by (ii) the Exchange Ratio,
rounded up to the nearest whole share (the “Buyer Shares”).
1.2 Closing.
(a) The closing of the transactions contemplated hereby (the “Closing”) is
taking place at 9:00 a.m., Los Angeles time, at the offices of Xxxxxxxx,
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Xxxxxx, Xxxxxxx &
Xxxxxxx LLP, 1901 Avenue of the Stars, 16th Floor, Los Angeles, California, concurrently
with the execution and delivery of this Agreement.
(b) At the Closing, Buyer is:
(1) issuing and delivering to each Seller a certificate or certificates in
definitive form, registered in the name of such Seller, evidencing the Buyer Shares
being issued to and acquired by such Seller at the Closing in exchange for the Image
Shares as set forth on Schedule 1; provided, that because Buyer’s
transfer agent is unable to deliver such certificate or certificates at the Closing,
such certificate or certificates in definitive form shall be delivered to such
Seller as promptly as practicable after the Closing (but in no event later than 10
business days following the Closing); provided, further, that
notwithstanding any delay in delivery of such certificate or certificates, Buyer and
each Seller agree that with respect to the Image Shares being sold hereunder by such
Seller, beneficial ownership of such Image Shares and all of such Seller’s right,
title and interest in and to the Image Shares shall be sold, assigned, transferred
and conveyed by such Seller to Buyer effective immediately upon the execution of
this Agreement; and
(2) executing and delivering to each Seller the registration rights agreement
in the form attached hereto as Exhibit A (the “Registration Rights
Agreement”).
(c) At the Closing, each Seller is:
(1) delivering to Buyer, or directing the delivery to Buyer of, the Image
Shares owned by such Seller by immediate book-entry transfer to an account
maintained by Lions Gate Entertainment Inc., a Delaware corporation and a
wholly-owned subsidiary of Buyer (“LGEI”), with Xxxxxxx Xxxxx, by executing
and delivering to the record owner of the Image Shares the DTC Irrevocable Transfer
Instruction in the form attached hereto as Exhibit B; and
(2) executing and delivering to Buyer the Registration Rights Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller represents and warrants to Buyer, severally and not jointly, as follows:
2.1 Capacity. Seller has the capacity to enter into this Agreement and the right and power to
perform his obligations under this Agreement. Each Person signing on behalf of Seller pursuant to
a power of attorney, if any, has a duly authorized, validly existing and effective power of
attorney from Seller that authorizes such Person to execute, deliver and perform this Agreement on
behalf of Seller.
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2.2 Power and Authority; Enforceability. The execution, delivery and performance by Seller
of this Agreement and the consummation by Seller of the transactions contemplated hereby have been
duly authorized by all necessary action. This Agreement has been duly and validly executed and
delivered by Seller and constitutes a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except to the extent that such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors’
rights generally, and is subject to general principles of equity.
2.3 No Conflict. The execution, delivery and performance by Seller of this Agreement and
the consummation by Seller of the transactions contemplated hereby will not, with or without the
giving of notice or the lapse of time, or both, violate, conflict with or constitute a default
under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of Seller pursuant to the terms of, (a) any order, judgment or decree applicable
to Seller or any of its business or properties, (b) any provision of the charter documents of
Seller, if any, or (c) any agreement or other instrument by which Seller, its affiliates or any of
its or their business or properties is bound or affected.
2.4 Litigation. There is no action, suit, proceeding, claim, arbitration or
investigation (“Action”) pending (or, to knowledge of Seller, currently threatened) against
Seller, and Seller is not a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality, in each case that could
reasonably be expected to materially impair Seller’s ability to perform its obligations under this
Agreement.
2.5 Title to Image Shares. Seller is the sole “beneficial owner” (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
which meaning will apply for all purposes of this Agreement) of, has good and marketable title to,
and has full and unrestricted power to dispose of and vote, the Image Shares, free and clear of any
and all liens, encumbrances, claims, security interests or restrictions (including any contractual
restriction on the right to vote, sell or otherwise dispose of such Image Shares), and there are no
outstanding subscriptions, options, warrants, rights, contracts, understandings or agreements to
purchase or otherwise acquire the Image Shares, except for this Agreement. Record title to the
Image Shares is held as reflected on Schedule 1 hereto. Upon the purchase of the Image
Shares at the Closing,
Buyer shall acquire good and marketable title to the Image Shares, and all rights and benefits
which Seller may possess with respect thereto, including, without limitation, all right, title and
interest in and to any cash dividends, stock dividends or other distributions made with respect
thereto on or after the Closing, free and clear of any and all liens, claims, encumbrances,
security interests or restrictions of any type, kind or nature, except for those restrictions noted
on Schedule 2 to this Agreement. Seller has the necessary and sufficient right and
authority to make the commitments contained in this Agreement with respect to the Image Shares.
The Image Shares are the only shares of capital stock of Image owned by Seller or any of its
affiliates (other than any affiliate which is a party to this Agreement).
2.6 Purchase for Own Account; Investment. Seller is acquiring the Buyer Shares for
investment, for its own account and not for the account of any other Person and not with a view to
distribution thereof in violation of applicable United States federal and state securities laws.
Seller understands that the Buyer Shares have not been registered under the
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Securities Act of 1933,
as amended (the “Securities Act”), by reason of a specific exemption from the registration
provisions of the Securities Act, which depends upon, among other things, the bona fide nature of
Seller’s investment intent, as expressed herein, and that the Buyer Shares must be held
indefinitely unless registered under the Securities Act or an exemption from such registration
becomes available. Seller understands that the Buyer Shares it is purchasing are characterized as
“restricted securities” under the United States federal securities laws, inasmuch as they are being
acquired from Buyer in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under the Securities Act
only in certain limited circumstances. Seller acknowledges that Buyer is not required to register
the Buyer Shares except in accordance with the terms and conditions of the Registration Rights
Agreement. In addition, Seller represents that it is familiar with Rule 144 of the Securities Act,
as presently in effect, and understands the resale limitations imposed thereby and by the
Securities Act and the lockup for sales in Canada for a four-month period following the Closing as
required by applicable Canadian securities laws.
2.7 Financial Matters. Seller understands that the acquisition of the Buyer Shares
involves substantial risk, and its financial condition and investments are such that it is in a
financial position to hold the Buyer Shares for an indefinite period of time and to bear the
economic risk of, and withstand a complete loss of, the Buyer Shares. In addition, by virtue of
its expertise, the advice available to it and previous investment experience, Seller has extensive
knowledge and experience in financial and business matters, investments, securities and private
placements and the capability to evaluate the merits and risks of the transactions contemplated by
this Agreement.
2.8 Access to Data. Seller has had an opportunity to discuss Buyer’s business,
management and financial affairs with its management and to obtain any additional information it
may consider to be necessary or appropriate for deciding whether or not to purchase the Buyer
Shares.
2.9 No General Solicitation. At no time was Seller presented with or solicited by any
leaflet, newspaper or magazine article, radio or television advertisement, or any other form of
general advertising or solicited or invited to attend a promotional meeting, whether by Buyer or
any other Person (whether or not on behalf of Buyer).
2.10 Accredited Investor. Seller is an “accredited investor” within the meaning of
Regulation D of the rules and regulations promulgated under the Securities Act.
2.11 Brokers. Seller has not dealt with, and does not owe any compensation to, any
broker, finder, or other similar Person in connection with its purchase of the Buyer Shares or the
sale of the Image Shares or the other transactions contemplated by this Agreement, other than
normal and customary brokerage fees owed to the broker or custodian listed opposite Seller’s name
on Schedule 1 hereto as record owner of the Image Shares beneficially owned by Seller in
connection with the book-entry transfer of the Image Shares owned by Seller to Buyer.
2.12 Legend. Seller acknowledges that the certificate or certificates evidencing the
Buyer Shares will bear the legend set forth below:
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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY U.S.
STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION WITHOUT AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY ACCEPTABLE TO THE COMPANY, STATING THAT SUCH
SALE, TRANSFER OR ASSIGNMENT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND QUALIFICATION REQUIREMENTS UNDER APPLICABLE U.S. STATE SECURITIES
LAWS. THIS CERTIFICATE MUST BE SURRENDERED TO THE CORPORATION OR ITS TRANSFER AGENT
AS A CONDITION PRECEDENT TO THE TRANSFER OF ANY INTEREST IN THE SECURITIES
REPRESENTED BY THIS CERTIFICATE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK
EXCHANGE (“TSX”); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE
FACILITIES OF THE TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY
CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT ‘GOOD DELIVERY’ IN SETTLEMENT OF TRANSACTIONS ON TSX.
THE NOTATION REQUIRED BY TSX CAN BE REMOVED FROM THE FACE OF THIS CERTIFICATE WHEN
ALL OTHER NOTATIONS THAT THE SECURITIES ARE NOT FREELY TRANSFERABLE CAN BE LEGALLY
REMOVED FROM THIS CERTIFICATE.”
2.13 Purchases and Sales While in Receipt of Certain Information. Seller is aware,
and will advise its Representatives who are informed of the matters that are the subject of this
Agreement, of the restrictions imposed by the United States federal securities laws, including,
without limitation, Rule 14e-3 under the Exchange Act, on the purchase or sale of securities by any
person who has received (a) material, non-public information from the issuer of such securities
and/or (b) the information described in Rule 14e-3 under the Exchange Act in the manner described
therein and on the communication of such information to any other person when it is reasonably
foreseeable that such other person is likely to purchase or sell such securities in reliance upon
such information.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.1 Organization; Good Standing. Buyer is a corporation duly recognized, validly existing
and in good standing under the laws of British Columbia, Canada. Buyer has all
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requisite corporate power and authority to own its properties and carry on its business as now conducted.
3.2 Power and Authority; Enforceability. The execution, delivery and performance by Buyer
of this Agreement and the consummation by Buyer of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Buyer. This Agreement has been
duly and validly executed and delivered by Buyer and constitutes a valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except to the extent that such
enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors’ rights generally and is subject to general principles of
equity.
3.3 No Conflict. The execution, delivery and performance by Buyer of this Agreement and
the consummation by Buyer of the transactions contemplated hereby will not, with or without the
giving of notice or the lapse of time, or both, violate, conflict with or constitute a default
under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of Buyer pursuant to the terms of, (a) any provision of law, rule or regulation
to which Buyer or any of its business or properties is subject, (b) any order, judgment or decree
applicable to Buyer or
any of its business or properties, (c) any provision of the charter documents or bylaws of Buyer or
(d) any agreement or other instrument by which Buyer or any of its business or properties is bound
or attached.
3.4 Valid Issuance of Buyer Shares. The Buyer Shares, when issued and delivered in
accordance with the terms of this Agreement, will be duly and validly issued, fully paid and
nonassessable, and free and clear of all liens, encumbrances, claims, security interests or
restrictions (other than restrictions imposed by applicable securities law and other than those set
forth in Section 2.12 hereof).
3.5 Litigation. There is no Action pending (or, to knowledge of Buyer, currently
threatened) against Buyer or its significant subsidiaries, and Buyer and its significant
subsidiaries are not a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality, that in each case could
reasonably be expected to materially impair Buyer’s ability to perform its obligations under this
Agreement.
3.6 SEC Documents; Financial Statements.
(a) Buyer has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the U.S. Securities and Exchange Commission
(“SEC”) pursuant to the reporting requirements of the Exchange Act and any other
material reports or documents required to be filed with the SEC. As of their respective
dates, all documents filed by Buyer with the SEC (the “SEC Documents”) complied in
all material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of
the SEC Documents, at the time they were filed with the SEC, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
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therein, or necessary in order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) As of their respective dates, the financial statements of Buyer included in the SEC
Documents complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with United States generally accepted
accounting principles (“GAAP”), consistently applied, during the periods involved
(except (1) as may be otherwise indicated in such financial statements or the notes thereto,
or (2) in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all material
respects the consolidated financial position of Buyer and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). The unaudited pro forma combined financial statements filed with the SEC comply in all material respects with the
requirements of Article 11 of Regulation S-X under the Securities Act.
ARTICLE 4
FURTHER COVENANTS OF THE PARTIES
4.1 Cooperation; Further Assurances. At any time and from time to time at or subsequent to
the Closing, any party shall, at the request of any other party, execute, acknowledge and deliver
to such other party, without further consideration, all such additional agreements, assignments,
conveyances, endorsements, certificates and other documents, and take such other actions, as such
other party may reasonably request, in order to otherwise carry out the purposes of, and consummate
the transactions contemplated by, this Agreement.
4.2 Grant of Irrevocable Proxy. Each Seller hereby irrevocably appoints Buyer or any
designee of Buyer, with full power of substitution, as its proxy, agent and attorney-in-fact, with
full power and authority to vote or to execute and deliver written consents, to demand the calling
by any proper officer of Image, pursuant to the Articles or Certificate of Incorporation and Bylaws
of Image and as permitted by applicable law, of an annual or special meeting of the shareholders of
Image, or to exercise related rights with respect to the Image Shares (and any and all interests or
other securities issued in respect of such shares) in such Seller’s place and stead, to the same
extent and with the same effect as such Seller might or would otherwise have been entitled to do,
including, without limitation, the voting of the Image Shares at any meeting (whether annual or
special and whether or not an adjourned meeting and including without limitation Image’s Annual
Meeting of Shareholders to be held September 9, 2005) of Image or action of the shareholders of
Image by written consent. Each Seller hereby acknowledges and agrees that by virtue of the
obligations of such Seller under this Agreement, the irrevocable proxy granted by such Seller
hereunder is coupled with an interest in the Image Shares and, because coupled with an interest,
shall be irrevocable to the fullest extent permitted by law. Each Seller represents and warrants
to Buyer that any proxies heretofore given in respect of the Image Shares by such Seller, if any,
are not irrevocable, and that such proxies have been revoked.
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4.3 Price Adjustment. If on or prior to the first anniversary of the Closing Date, there
occurs a Buyer Acquisition (as defined herein), then:
(a) if the Buyer Acquisition is an All–Stock Buyer Acquisition, and if the Acquisition
Exchange Ratio is greater than the Exchange Ratio, Buyer shall deliver to each Seller, as
additional consideration for the Image Shares, within 15 business days after the
consummation of the Buyer Acquisition, that number of shares of Buyer Common Stock equal to
the lesser of (x) number of shares equal to the quotient obtained by dividing (A) the number
of Image Shares to be sold by such Seller hereunder by (B) the Buyer Closing Share Price,
with such number to be adjusted for any stock
dividends, distributions, combinations, splits, recapitalizations or the like that took
effect after the Closing Date and (y) that number of shares of Buyer Common Stock equal to
(A) the number of Image Shares to be sold by such Seller hereunder, multiplied by
(B) the Acquisition Exchange Ratio, less (C) the number of shares of Buyer Common
Stock delivered to such Seller at the Closing [(A X B) – C], in the case of a fraction of a
share, rounded up to the next whole share; and
(b) if the Buyer Acquisition is other than an All–Stock Buyer Acquisition, and if the
Per–Share Acquisition Price is greater than $4.00 per share, then Buyer shall pay to each
Seller, as additional consideration for the Image Shares, within 2 business days after the
consummation of the Buyer Acquisition, by wire transfer in immediately available funds, an
amount equal to the lesser of (x) an amount equal to (A) the number of Image Shares to be
sold by such Seller hereunder multiplied by $1.00, and (y) that amount equal to (A)
the number of Image Shares to be sold by such Seller hereunder, multiplied by (B)
the Per–Share Acquisition Price, less (C) the deemed aggregate purchase price paid
to such Seller at the Closing, which for purposes of this Section 4.3(b) shall be equal to
the number of Image Shares to be sold by such Seller hereunder multiplied by $4.00 [(A X B)
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(c) The price adjustment provisions in this Section 4.3 shall have no effect on the
Closing or the passing of title to any of the Image Shares to Buyer at Closing.
4.4 Indemnification.
(a) Agreement of Each Seller to Indemnify Buyer. From and after the Closing
and subject to the terms and conditions of this Section 4.4, each Seller shall defend,
indemnify and hold harmless Buyer and its affiliates and their respective Representatives,
successors and permitted assigns (the “Buyer Indemnitees”) from and against, and pay
or reimburse the Buyer Indemnitees for, any and all Damages resulting from, arising out of
or in connection with any of the following: (i) any breach or inaccuracy of any
representation or warranty made by such Seller in this Agreement and (ii) any breach by such
Seller of any of its covenants or agreements made or contained herein or in any instrument,
certificate or agreement delivered by such Seller in connection herewith; provided,
however, that no Buyer Indemnitee shall be entitled to indemnification under this
Section 4.4 to the extent the Damages relate to any inaccuracy or misrepresentation in, or
breach of, or failure to perform, any representation, warranty,
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covenant or agreement made
in this Agreement by Buyer. Notwithstanding anything herein to the contrary, in no case
shall any Seller be responsible for any amount in excess of the aggregate purchase price
assigned to the Image Shares purchased by Buyer from such Seller hereunder.
(b) Agreement of Buyer to Indemnify Sellers. From and after the Closing and
subject to the terms and conditions of this Section 4.4, Buyer shall defend, indemnify and
hold harmless each Seller and its affiliates and their respective
Representatives, successors and permitted assigns (the “Seller Indemnitees”)
from and against, and pay or reimburse the Seller Indemnitees for, any and all Damages
resulting from, arising out of or in connection with any of the following: (i) any breach
or inaccuracy of any representation or warranty made by Buyer in this Agreement and (ii) any
breach by Buyer of any of its covenants or agreements made or contained herein or in any
instrument, certificate or agreement delivered by Buyer in connection herewith;
provided, however, that no Seller Indemnitee shall be entitled to
indemnification under this Section 4.4 to the extent the Damages relate to any inaccuracy or
misrepresentation in, or breach of, or failure to perform, any representation, warranty,
covenant or agreement made in this Agreement by such Seller. Notwithstanding anything
herein to the contrary, in no case shall Buyer be responsible for any amount in excess of
the aggregate purchase price assigned to the Buyer Shares purchased by Seller from Buyer
hereunder.
(c) Survival of Representations, Warranties and Covenants. All representations
and warranties of each party contained herein shall survive the Closing forever. All
covenants and agreements set forth in this Agreement shall survive for so long as
performance is required thereunder. So long as any Buyer Indemnitee or Seller Indemnitee
(each, an “Indemnitee”) asserts a valid claim for indemnification before first to
occur of (i) the expiration of any applicable survival period and (ii) the six month
anniversary of the Closing Date, such Indemnitee shall be deemed to have preserved its
rights to indemnification pursuant to this Section 4.4 regardless of when such claim is
ultimately liquidated or an arbitration has commenced with respect thereto.
(d) Claims for Indemnification. If any Indemnitee shall believe in good faith
that it is entitled to indemnification pursuant to this Section 4.4, such Indemnitee shall
promptly give Buyer or the applicable Seller, as applicable (the “Indemnitor”)
notice of such claim (a “Notice of Claim”) before the expiration of the relevant
time period specified in Section 4.4(c), and no notice of a claim for indemnification may be
made thereafter. Any such Notice of Claim shall set forth in reasonable detail and to the
extent then known the basis for such claim for indemnification and the amount of the claim,
to the extent specified or otherwise known. As long as the Notice of Claim is delivered
within the time period specified in Section 4.4(c), the failure of such Indemnitee to give
the Notice of Claim for indemnification promptly shall not adversely affect such
Indemnitee’s right to indemnification hereunder, except to the extent that the rights of
Indemnitor or its defense of any claim are actually prejudiced by such failure.
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(e) Defense of Claims. In connection with any claim that may give rise to
indemnity under this Section 4.4 resulting from or arising out of any claim against an
Indemnitee by a Person that is not a party hereto (a “Third Party Claim”),
Indemnitor will have the right, but not the obligation, to assume the defense, compromise
and settlement of such claim through counsel of its own choosing, by notifying the
Indemnitee within 15 calendar days after Indemnitor’s receipt of the applicable Notice of
Claim; provided, however, that (i) the counsel for Indemnitor who shall
conduct the defense, compromise and settlement of such claims shall be reasonably
satisfactory to the Indemnitee, (ii) the Indemnitee shall have the right, at its own
expense, to participate in the defense of such claim and to employ counsel, separate from the counsel employed by
Indemnitor, (iii) the Indemnitee shall cooperate in all reasonable respects with Indemnitor
in connection with the defense, compromise and settlement of such claim, (iv) Indemnitor
shall not consent to the entry of a judgment or enter into a compromise or settlement of any
such claim which is subject to indemnification by Indemnitor hereunder, except with the
prior written consent of the Indemnitee (which consent shall not be unreasonably withheld)
and the inclusion of an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding and (v) if the named parties to any
Action (including any impleaded parties) include both Indemnitor and the Indemnitee, and the
Indemnitee has been advised in writing by counsel that there may be one or more legal
defenses available to such Indemnitee that are different from or additional to those
available to Indemnitor, the Indemnitee shall be entitled, at the expense of Indemnitor, to
separate counsel of its own choosing (provided further that the Indemnitee shall not consent
to the entry of a judgment or enter into a compromise or settlement of any such claim,
except with the prior written consent of Indemnitor, which consent shall not be unreasonably
withheld). If Indemnitor fails to assume the defense, compromise and settlement of such
claim within 15 calendar days after Indemnitor’s receipt of the applicable Notice of Claim,
the Indemnitee (upon delivering written notice to Indemnitor to such effect) shall have the
right to undertake, at Indemnitor’s expense, the defense, compromise or settlement of such
claim on behalf of Indemnitor; provided, however, that the Indemnitee shall
not consent to the entry of a judgment or enter into a compromise or settlement of any such
claim, except with the prior written consent of Indemnitor (which shall not be unreasonably
withheld). In the event that the Indemnitee assumes that defense, compromise and settlement
of such claim, the Indemnitee shall keep Indemnitor reasonably informed of the progress of
any such defense, compromise or settlement. Indemnitor shall be liable for any compromise
or settlement of any claim effected pursuant to and in accordance with this Section 4.4 and
for any final judgment (subject to any right of appeal) and Indemnitor agrees to indemnify
and hold harmless (subject to the terms and conditions of Section 4.4(a) or 4.4(b) above, as
applicable) the Indemnitee from and against any Damages by reason of such compromise,
settlement or judgment. Nothing contained in this Section 4.4(e) shall affect or otherwise
modify the terms and conditions of Sections 4.4(a) or 4.4(b).
4.5 Transfer of Buyer Shares. Each Seller hereby covenants and agrees that neither the
Buyer Shares nor any interest or participation therein may be reoffered, sold, assigned,
transferred, pledged, encumbered or otherwise disposed of in the absence of (i) their registration
under the Securities Act or (ii) an opinion of counsel for such Seller, reasonably acceptable to
Buyer, stating that such sale, transfer or assignment is exempt from the registration
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requirements of the Securities Act and qualification requirements under applicable U.S. state securities laws.
The certificate or certificates representing the Buyer Shares must be surrendered to Buyer or its
transfer agent as a condition precedent to the transfer of any interest in the Buyer Shares
represented by such certificate or certificates.
4.6 Assignment of Registration Rights. Each Seller hereby assigns to Buyer all of its rights under that certain Purchase Agreement
dated as of December 20, 2004 by and between Image and such Seller, including, without limitation,
its rights with respect to registration of Image Shares set forth in Section 7 of such agreement.
ARTICLE 5
MISCELLANEOUS
5.1 Definitions. As used in this Agreement, the following terms shall have the meanings
set forth below:
(a) “20-Day Average Price” shall mean, with respect to any date, the average
(rounded to nearest 1/10,000), of the volume weighted averages (rounded to the nearest
1/10,000), of the trading prices of Buyer Common Stock on the New York Stock Exchange, Inc.
(the “NYSE”) as reported by Bloomberg Financial Markets (or such other source as the
parties shall agree in writing) for each of the 20 consecutive trading days ending on and
including the second trading day prior to the first public announcement of an agreement or
letter of intent with respect to a Buyer Acquisition, or, if subsequent to such date, the
terms of such transaction are substantively changed, the date of the first public
announcement of such changed terms.
(b) “Acquisition Exchange Ratio” means the ratio of the number of shares of
Buyer Common Stock (or fraction thereof) received or to be received by each shareholder of
Image (other than Buyer and its Controlled Affiliates) in consideration for each share of
Image Common Stock acquired for Buyer Common Stock in an All–Stock Buyer Acquisition from
such shareholder.
(c) “All–Cash Buyer Acquisition” means a Buyer Acquisition in which cash is the
sole consideration.
(d) “All–Stock Buyer Acquisition” means a Buyer Acquisition in which shares of
Buyer Common Stock constitute the consideration for at least 80% of the shares acquired in
the Buyer Acquisition (other than from Buyer and its Controlled Affiliates).
(e) “Buyer Acquisition” means any: (i) acquisition by Buyer and/or its
Controlled Affiliates of “beneficial ownership” (as that term is defined in Rule 13d-3 of
the Exchange Act) after the Closing Date of all or greater than 80% of the combined voting
power of Image’s then outstanding securities or (ii) merger, consolidation, business
combination or similar transaction involving Image following which Buyer and/or its
Controlled Affiliates have beneficial ownership of all or greater than 80% of the combined
voting power of the surviving corporation’s then outstanding securities.
-11-
(f) “Buyer Closing Share Price” means $10.45, the closing price of the Buyer
Common Stock on the NYSE on September 8, 2005; provided, that if a lower price for
Buyer Common Stock is used by Buyer in any acquisition of Image Common Stock
being negotiated concurrently with this Agreement, the Buyer Closing Share Price shall
be such lower price for purposes of calculating the Exchange Ratio and Section 4.3(a).
(g) “Controlled Affiliate” means, with respect to any Person, such Person’s
subsidiaries and all affiliates of such Person over which such Person, directly or
indirectly, has the power to direct or cause the direction of the management and policies,
whether through the ownership of voting securities, by contract, or otherwise.
(h) “Damages” means any and all losses, damages, costs, obligations, fines,
expenses and liabilities of any kind (whether or not resulting from third party claims),
including out-of-pocket expenses and reasonable attorneys’, accountants’ and other
professional advisors’ fees incurred in the investigation or defense of any of the same or
in asserting any rights in connection therewith; provided, however, that
Damages shall not include consequential, incidental, special or punitive damages (unless any
of the foregoing are required to be paid to a third party), or any diminution in value.
(i) “Exchange Ratio” means the quotient obtained by dividing (i) $4.00 by (ii)
the Buyer Closing Share Price and rounding to the nearest 1/10,000.
(j) “Mixed Cash–Stock Buyer Acquisition” means a Buyer Acquisition which is not
an All–Stock Buyer Acquisition, and in which both cash and shares of Buyer Common Stock are
the consideration.
(k) “Per–Share Acquisition Price” means: (i) with respect to an All–Cash Buyer
Acquisition, the gross per-share cash consideration received or to be received by Image’s
shareholders (other than Buyer and its Controlled Affiliates) in consideration of shares of
Image Common Stock; and (ii) with respect to a Mixed Cash–Stock Buyer Acquisition, (A) the
aggregate cash consideration received by Image’s shareholders (other than Buyer and its
Controlled Affiliates) in the Buyer Acquisition, plus (B) the aggregate number of shares of Buyer Common Stock received by Image’s shareholders (other than Buyer and its
Controlled Affiliates) in the Buyer Acquisition, divided by the 20-Day Average Price,
divided by (C) the aggregate number of shares of Image Common Stock acquired by
Buyer and its Controlled Affiliates (other than from Buyer and its Controlled Affiliates) in
the Buyer Acquisition [(A + B) / C].
(l) “Person” means any individual, firm, corporation, partnership, company,
limited liability company, trust, joint venture, association, governmental entity or other
entity.
(m) “Representatives” shall mean, as to the referenced party or Person, the
directors, officers, employees and agents of such Person and its Controlled Affiliates and
shall also include the legal, accounting and financial advisors of such Person and its
Controlled Affiliates.
-12-
5.2 Expenses and Attorneys’ Fees. Except as otherwise provided herein, each party shall
pay all costs and expenses incurred by or on behalf of such party in connection with the
negotiation of this Agreement and the
performance of the transactions contemplated hereby, including, without limiting the generality of
the foregoing, fees and expenses of consultants, accountants and legal counsel. In the event that
any Action is instituted concerning or arising out of this Agreement, the prevailing party shall
recover all of such party’s costs and attorneys’ fees incurred in each every such Action, including
any and all petitions and appeals therefrom. As used herein, “attorneys’ fees” shall mean
the full and actual costs of any legal services actually rendered in connection with the matters
involved, calculated on the basis of the usual fee charged by the attorneys performing such
services, and shall not be limited to “reasonably attorneys’ fees” as defined by any statute or
rule of court.
5.3 Notices. Except as may be otherwise provided herein, all notices, requests, waivers
and other communications made pursuant to this Agreement shall be in writing and shall be
conclusively deemed to have been duly given (a) when hand delivered to the other party, (b) when
received when sent by facsimile to the facsimile number set forth below, (c) when received when
sent by electronic mail to the electronic mail address set forth below, (d) three business days
after deposit in the U.S. mail with first class certified mail receipt requested postage prepaid
and addressed to the other party as set forth below or (e) the next business day after deposit with
a national overnight delivery service, postage prepaid, addressed to the parties as set forth below
with next-business-day delivery guaranteed, provided that the sending party receives a confirmation
of delivery from the delivery service provider:
| (a) | if to Buyer, to: | |||
| Lions Gate Entertainment Corp. | ||||
| 0000 Xxxxxxxx Xxxxxx, Xxxxx 000 | ||||
| Xxxxx Xxxxxx, Xxxxxxxxxx 00000 | ||||
| Attention: Xxxxx Xxxxx, General Counsel | ||||
| Telephone Number: (000) 000-0000 | ||||
| Facsimile Number: (000) 000-0000 | ||||
| Electronic Mail: xxxxxx@xxx.xxx | ||||
| (b) | with a copy (which shall not constitute notice to Buyer) to: |
| Sheppard, Mullin, Xxxxxxx & Hampton LLP | ||||||||
| 1901 Avenue of the Stars, 00xx Xxxxx | ||||||||
| Xxx Xxxxxxx, Xxxxxxxxxx 00000 | ||||||||
| Attention: Xxxxxxx X. Troop, Esq. | ||||||||
| Xxxxx X. Xxxxxxxxxx, Esq. | ||||||||
| Telephone Number: (000) 000-0000 | ||||||||
| Facsimile Number: (000) 000-0000 | ||||||||
| Electronic Mail: xxxxxx@xxxxxxxxxxxxxx.xxx | ||||||||
| xxxxxxxxxxx@xxxxxxxxxxxxxx.xxx | ||||||||
(c) If to any Seller, to such Seller at the address, facsimile number or email address
set forth on Schedule 1;
-13-
or to such other address or addresses for a party as may have been furnished by such party in like
manner to the other party.
5.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE WITHIN, AND TO BE PERFORMED WITHIN,
SUCH STATE, EXCLUDING CHOICE OF LAW PRINCIPLES OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF
LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
5.5 Entire Agreement; Third Party Beneficiaries. This Agreement constitutes the sole and
entire agreement of the parties with respect to the subject matter hereof and supersedes any and
all prior or contemporaneous agreements, discussions, representations, warranties or other
communications. No party to this Agreement makes any representation or warranty except as
expressly set forth herein. No party to this Agreement has relied on any statement,
representation, or warranty other than the written contents of this Agreement. This Agreement is
not intended to confer upon any Person other than the parties hereto any rights or remedies, except
that LGEI is hereby expressly made a third party beneficiary of this Agreement.
5.6 Counterparts; Facsimile. This Agreement may be executed in counterparts and via
facsimile, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5.7 Amendments and Waivers. This Agreement may not be amended or modified without the
written consent of all parties hereto, nor shall any waiver be effective against any party unless
in a writing executed on behalf of such party. No delay or omission to exercise any right, power
or remedy accruing to any party hereto shall impair any such right, power or remedy of such party
nor be construed to be a waiver of any such right, power or remedy nor constitute any course of
dealing or performance hereunder.
5.8 Severability. If one or more provisions of this Agreement shall be declared void or
unenforceable by any judicial or administrative authority, the validity of any other provision and
of the entire Agreement shall not be affected thereby and such provision or provisions shall be
excluded from the Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforced in accordance with its terms.
5.9 Titles and Subtitles. The titles and subtitles used in this Agreement are for
convenience only and are not to be considered in construing or interpreting any term or provision
of this Agreement.
5.10 Successors and Assigns. This Agreement may not be assigned by any party hereto
without the prior written consent of the other party hereto; provided, however,
that Buyer may upon prior written notice to Sellers assign its rights under this Agreement to any
Controlled Affiliate of Buyer. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors, executors, beneficiaries and permitted
assigns of the parties hereto.
-14-
5.11 Enforcement; Jurisdiction and Forum. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in the Court of Chancery of the
State of Delaware or any federal court located in the State of Delaware, this being in addition to
any other remedy to which they are entitled at law or in equity. In addition, each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of the Court of Chancery of the
State of Delaware and any federal court located in the State of Delaware in the event any dispute
arises out of this Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, (c) agrees that it will not
bring any Action relating to this Agreement in any court other than the Court of Chancery of the
State of Delaware or any federal court sitting in the State of Delaware and (d) waives any right to
trial by jury with respect to any Action related to or arising out of this Agreement.
5.12 Public Announcements. Except as otherwise provided in this Section 5.12, no party to
this Agreement, nor any of its Controlled Affiliates or Representatives, shall make any public
announcement or statement with respect to this Agreement or its subject matter without the prior
written approval of the other party to this Agreement, not to be unreasonably withheld;
provided, however, that (a) neither party shall be prohibited from making any
disclosure to the extent that disclosure is required in connection with the filing of governmental
reports or documents, including without limitation filings with federal and state securities
authorities, or in connection with the preparation of financial statements of a party or its
Controlled Affiliates, notwithstanding that such reports or statements may become public or be
distributed to others in the ordinary course of business; (b) neither party shall be prohibited
from making any disclosure to the extent necessary to enforce that party’s rights under this
Agreement in any Action instituted in connection with this Agreement or the performance by the
parties of their obligations hereunder; and (c) each Seller acknowledges and agrees that Buyer will
file a Schedule 13D and a Form 3 with the Securities and Exchange Commission following the Closing.
5.13 Time of Essence. Time is of the essence with respect to each and every date and time
period set forth or referred to in this Agreement.
[Signature Page Follows]
-15-
IN WITNESS WHEREOF, Buyer and Sellers have caused this Exchange Agreement to be executed and
delivered as of the day and year first above written.
| “BUYER”: | ||||||||
| LIONS GATE ENTERTAINMENT CORP., | ||||||||
| a British Columbia corporation | ||||||||
| By: | /s/ Xxxxx Xxxxx | |||||||
| Name: | XXXXX XXXXX | |||||||
| Its: | EXEC. VP & GENERAL
COUNSEL BUSINESS & LEGAL AFFAIRS |
|||||||
S-1
| “SELLERS”: | ||||||
| LAGUNITAS PARTNERS | ||||||
| By: | Xxxxxx & XxXxxxx | |||||
| Capital Management, LLC, | ||||||
| its General Partner | ||||||
| By: | /s/ X. Xxxxxxxxx McBaine | |||||
| Name: | X. Xxxxxxxxx XxXxxxx | |||||
| Its: | Managing Member | |||||
| XXXXXXX XXXXXX XXXXXX, | ||||||
| an individual | ||||||
| By: | /s/ Xxx X. Xxxxxx | |||||
| Xxx X. Xxxxxx, | ||||||
| as Managing Member of | ||||||
| Xxxxxx & XxXxxxx Capital Management, LLC, | ||||||
| her investment advisor with | ||||||
| power of attorney | ||||||
| XXXXXX BRAND & WEINER | ||||||
| By: | /s/ X. Xxxxxxxxx XxXxxxx | |||||
| X. Xxxxxxxxx McBaine, | ||||||
| as Managing Member of | ||||||
| Xxxxxx & XxXxxxx Capital Management, LLC, | ||||||
| its investment advisor with | ||||||
| power of attorney | ||||||
| XXXXXXX SALES, INC. | ||||||
| By: | /s/ X. Xxxxxxxxx XxXxxxx | |||||
| X. Xxxxxxxxx McBaine, | ||||||
| as Managing Member of | ||||||
| Xxxxxx & XxXxxxx Capital Management, LLC, | ||||||
| its investment advisor with | ||||||
| power of attorney | ||||||
S-2
| “SELLERS”: | ||||||
| (continued) | ||||||
| XXXXXXX FOUNDATION | ||||||
| By: | /s/ X. Xxxxxxxxx XxXxxxx | |||||
| X. Xxxxxxxxx McBaine, | ||||||
| as Managing Member of | ||||||
| Xxxxxx & XxXxxxx Capital Management, LLC, | ||||||
| its investment advisor with | ||||||
| power of attorney | ||||||
| XXXXXXXX COLLEGE | ||||||
| By: | /s/ X. Xxxxxxxxx XxXxxxx | |||||
| X. Xxxxxxxxx McBaine, | ||||||
| as Managing Member of | ||||||
| Xxxxxx & XxXxxxx Capital Management, LLC, | ||||||
| its investment advisor with | ||||||
| power of attorney | ||||||
| XXXXXX & MCBAINE INTERNATIONAL | ||||||
| By: | /s/ X. Xxxxxxxxx XxXxxxx | |||||
| X. Xxxxxxxxx McBaine, | ||||||
| as Managing Member of | ||||||
| Xxxxxx & XxXxxxx Capital Management, LLC, | ||||||
| its investment advisor with | ||||||
| power of attorney | ||||||
| /s/ X. Xxxxxxxxx McBaine | ||
| X. Xxxxxxxxx XxXxxxx, Trustee of | ||
| XXXXXX X. XXXXXXX TESTAMENTARY TRUST | ||
| /s/ X. Xxxxxxxxx McBaine | ||
| X. Xxxxxxxxx, pursuant to power of attorney for his wife | ||
| XXXXX X. XXXXXXX |
S-3
| “SELLERS”: | ||||
| (continued) | ||||
| X. XXXXXXXXX AND XXXXX XXXXXXXXX | ||||
| MCBAINE FOUNDATION | ||||
| By: | /s/ X. Xxxxxxxxx XxXxxxx | |||
| Name: | X. Xxxxxxxxx McBaine | |||
| Its: | Director | |||
| XXXXXX FAMILY FOUNDATION | ||||
| By: | /s/ Xxx X. Xxxxxx | |||
| Name: | Xxx X. Xxxxxx | |||
| Its: | Secretary | |||
| /s/ Xxx X. Xxxxxx | ||
| Xxx X. Xxxxxx, Trustee of | ||
| XXX X. & XXXXX X. XXXXXX TRUST | ||
| /s/ Xxx X. Xxxxxx | ||
| Xxx X. Xxxxxx, Trustee of | ||
| XXXXXXXX XXXXX XXXXXX TRUST | ||
| /s/ Xxx X. Xxxxxx | ||
| Xxx X. Xxxxxx, Trustee of | ||
| XXX X. & XXXXX X. XXXXXX TRUST | ||
| /s/ Xxx X. Xxxxxx | ||
| Xxx X. Xxxxxx, Trustee of | ||
| XXX X. & XXXXX X. XXXXXX TRUST | ||
| /s/ X. Xxxxxxxxx McBaine | ||
| X. XXXXXXXXX XXXXXXX, | ||
| an individual |
S-4
| “SELLERS”: | ||
| (continued) | ||
| /s/ X. Xxxxxxxxx & Xxxxx X. XxXxxxx | ||
| X. XXXXXXXXX & XXXXX X. XXXXXXX, | ||
| by X. Xxxxxxxxx McBaine in his individual capacity | ||
| and for Xxxxx X. XxXxxxx by power of attorney |
S-5
SCHEDULE 1
SELLERS AND RECORD OWNERSHIP OF IMAGE SHARES
| Number of Image | ||||||||||
| Legal Name and Contact Information | Shares Beneficially | Number of | ||||||||
| for Beneficial Owner (1) | Legal Name and Address of Holder of Record | Owned | Buyer Shares | |||||||
Lagunitas Partners |
Banc of America | 208,500 | 79,814 | |||||||
Xxxxxx Brand & Weiner |
Banc of America | 2,950 | 1,130 | |||||||
Xxxxxxx Sales, Inc. |
Banc of America | 13,250 | 5,073 | |||||||
Xxxxxx Family Foundation |
Banc of America | 10,000 | 3,828 | |||||||
Xxxxxxxx College |
Bank of New York | 30,000 | 11,484 | |||||||
Xxxxxx & McBaine International |
Banc of America | 54,500 | 20,863 | |||||||
Xxx X. & Xxxxx X Xxxxxx Trust |
Banc of America | 3,000 | 1,149 | |||||||
Xxx X. & Xxxxx X Xxxxxx Trust |
Banc of America | 22,000 | 8,422 | |||||||
Xxxxxxx Xxxxxx Xxxxxx |
Banc of America | 1,500 | 575 | |||||||
Xxxxxxxx Xxxxx Xxxxxx Trust |
Banc of America | 2,000 | 766 | |||||||
Xxx X. & Xxxxx X Xxxxxx Trust |
Banc of America | 900 | 345 | |||||||
X. Xxxxxxxxx McBaine |
Banc of America | 11,000 | 4,211 | |||||||
J Xxxxxxxxx and Xxxxx Xxxxxxxxx
XxXxxxx Foundation |
Banc of America | 15,750 | 6,030 | |||||||
X. Xxxxxxxxx & Xxxxx X. XxXxxxx |
Banc of America | 2,000 | 000 | |||||||
Xxxxx X. XxXxxxx |
Xxxx xx Xxxxxxx | 1,000 | 383 | |||||||
Xxxxxx X. XxXxxxx Testmentary Trust |
Banc of America | 5,000 | 1,914 | |||||||
Xxxxxxx Foundation |
State Street | 18,000 | 6,891 | |||||||
| (1) | Contact Information for each Seller is as follows: |
| c/o Gruber & XxXxxxx Capital Management, LLC | ||
| 00 Xxxxxx Xxxxx — Xxxxxxxxx, Xxx Xxxxxxxxx, XX 00000 | ||
| Telephone: (000) 000-0000; Facsimile: (000) 000-0000 |
Schedule 1 — Page 1
SCHEDULE 2
RESTRICTIONS ON IMAGE SHARES
None.
Schedule 2 — Page 1
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
A-1
EXHIBIT B
FORM OF DTC TRANSFER INSTRUCTION
[Name of Seller’s Broker / Record Owner]
[Address]
[Telephone Number]
[Facsimile Number]
[Email Address]
[Address]
[Telephone Number]
[Facsimile Number]
[Email Address]
[Attention: ______]
Re: Irrevocable DTC Transfer Instruction
hereby irrevocably instructs you to immediately transfer shares of Image
Entertainment, Inc. (DISK) to the following Xxxxxxx Xxxxx account, Account Number 73B-07080, in the
name of Lions Gate Entertainment Inc., such that the transfer is completed as soon as possible and
in no event later than 12:45 p.m., New York time, on September 9, 2005.
Xxxxxxx Xxxxx’x DTC # is 5198.
The contact person at Xxxxxxx Xxxxx is Xxxxxxx Xxxxxxxxxx: Phone: (000) 000-0000.
Email: xxxxxxx_xxxxxxxxxx@xx.xxx.
Email: xxxxxxx_xxxxxxxxxx@xx.xxx.
Please advise when you have initiated the transfer.
Please contact me with any questions on: .
| Thanks, | ||||
B-1