IMAGE ENTERTAINMENT, INC.
PERFORMANCE RESTRICTED STOCK UNIT AWARD AGREEMENT
THIS AGREEMENT dated as of the 6th day of July, 1998,
between IMAGE ENTERTAINMENT, INC., a California corporation (the
"Corporation") and ____________ (the "Employee").
The Board of Directors has approved and subject to
shareholder approval the Corporation has adopted the Image
Entertainment, Inc. 1998 Incentive Plan (the "Plan").
The Corporation has granted to the Employee as of the
date first above written (the "Award Date") a performance
restricted stock unit award (the "Performance Restricted Stock
Unit Award" or "Award") under Section 5.1 of the Plan, upon the
terms and conditions set forth herein and subject to shareholder
approval of the Plan.
In consideration of services rendered and to be
rendered by the Employee and the mutual promises made herein and
the mutual benefits to be derived therefrom, the parties agree as
follows:
1. Grant. Subject to the terms of this Award
Agreement, the Corporation grants to the Employee a Performance
Restricted Stock Unit Award with respect to an aggregate of
______ shares of Common Stock (the "Restricted Stock Units").
2. General Terms. The Award is subject to, and the
Corporation and the Employee agree to be bound by, the terms and
conditions of the Plan and the General Provisions Applicable to
Performance Restricted Stock Unit Awards Granted Under the Plan
(the "General Provisions") that have been adopted pursuant to the
Plan. The Plan and the General Provisions are incorporated
herein by this reference. The Employee acknowledges receiving a
copy of the Plan and General Provisions and reading their
provisions. Capitalized terms not otherwise defined herein shall
have the meaning assigned to such terms in the Plan or General
Provisions.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
EMPLOYEE IMAGE ENTERTAINMENT, INC.
(a California corporation)
By:
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------------------------------ Title:
(Print Name) -------------------------
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(Address)
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(City, State, Zip Code)
GENERAL PROVISIONS APPLICABLE TO
PERFORMANCE RESTRICTED STOCK UNIT AWARDS
GRANTED UNDER IMAGE ENTERTAINMENT, INC.'S
1998 INCENTIVE PLAN
The specific purposes of Performance Restricted Stock
Unit Awards authorized under the Image Entertainment, Inc. 1998
Incentive Plan (the "Plan") are to encourage and reward continued
service and high levels of performance to the Corporation and to
provide greater incentives for service and performance by
offering compensation competitive with similar companies.
Capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Plan or the Award
Agreement, as the case may be.
These General Provisions supplement the provisions of
Award Agreements contemplated by Section 5.1 of the Plan and
shall apply to any Performance Restricted Stock Unit Award
granted under the Plan when incorporated by reference in the
Award Agreement.
1. Vesting; Lapse of Restrictions. Restricted Stock
Units credited to an Employee's Stock Unit Account (other than
Restricted Stock Units representing Dividend Equivalents) shall
vest, and restrictions (other than those set forth in Section 12
(Compliance; Application of Securities Laws)) shall lapse, with
respect to 20% of the total original number of Stock Units
(subject to adjustment under Section 6.2 of the Plan) comprising
the Award on each of the first, second, third, fourth and fifth
anniversaries of June 30, 1998, so that the restricted period
covered hereby shall have expired with respect to the total
number of Stock Units no later than June 30, 2003, unless (i) the
Award has earlier vested or has been accelerated, as provided in
Section 5(c) (Termination of Service without Cause Prior to or
Following Change in Control Event), Section 6 (Total Disability
or Death), Section 7 (Retirement), Section 8 (Acceleration for
Performance), Section 9 (Adjustments) or Section 10 (Acceleration
Immediately Prior to Change in Control Event) or has been
otherwise accelerated pursuant to the Plan; (ii) the Committee
has taken other action with respect to the Award permitted by the
Plan; or (iii) the Award Agreement otherwise provides. If the
provisions of Section 8 apply and are paid for a prior fiscal
year before June 30 of the current fiscal year, no additional
installment shall vest on such June 30.
2. Form of Distribution of Stock Unit Accounts. Once
vested, Restricted Stock Units credited to an Employee's Stock
Unit Account shall be distributed in an equivalent whole number
of shares of the Company's Common Stock, together with any
Dividend Equivalents with respect to that number of shares. Any
fractional share interests shall be accumulated; the Committee,
however, may determine that cash, other securities, or other
property will be paid or transferred in lieu of any fractional
share interests.
3. Limitations on Rights Associated with Stock Units.
An Employee's Stock Unit Account shall be a memorandum account on
the books of the Company. The Restricted Stock Units credited to
an Employee's Stock Unit Account shall be used solely as a device
for the determination of the number of shares of Common Stock to
be eventually distributed to the Employee in accordance with the
Plan. The Stock Units shall not be treated as property or as a
trust fund of any kind. No Employee shall be entitled to any
voting or other shareholder rights with respect to Restricted
Stock Units granted or credited under the Plan. The number of
Restricted Stock Units credited (and the number of shares to
which the Employee is entitled under the Plan) shall be subject
to adjustment in accordance with Section 9 and the terms of the
Plan.
4. Dividend Equivalent Credits to Stock Unit Account.
As of the applicable dividend payment date, an Employee's Stock
Unit Account shall be credited with additional Restricted Stock
Units in an amount equal to any dividends paid on that number of
shares equal to the aggregate number of Restricted Stock Units in
the Employee's Stock Unit Account as of that date divided by the
Fair Market Value of a share of Common Stock as of that date.
Restricted Stock Units in respect of these Dividend Equivalent
credits will be distributed in shares to the Employee or
forfeited in the same manner as shares issuable in respect of the
Stock Units to which the Dividend Equivalents relate.
5. Effect of Termination of Employment.
(a) Forfeiture after Certain Events. Except as
provided in Section 5(c) (Termination without Cause Prior to or
Following Change in Control Event), Section 6 (Total Disability
or Death) or Section 7 (Retirement) hereof, the Employee's
Restricted Stock Units shall be forfeited to the extent such
Stock Units have not become vested or to the extent they remain
subject to restrictions upon the date an Employee is no longer
employed by the Corporation for any reason, whether with or
without cause, voluntarily or involuntarily, unless the Committee
otherwise provides consistent with the terms of the Plan. If an
entity ceases to be a Subsidiary, such action shall be deemed to
be a termination of employment of all employees of that entity,
but the Committee may make provision in such circumstances for
accelerated vesting of some or all of the remaining Restricted
Stock Units under any Awards then held by some or all such
Employees, effective immediately prior to such event.
(b) Termination of Restricted Stock Units. Upon the
occurrence of any forfeiture of Restricted Stock Units hereunder,
such unvested, forfeited Stock Units, without payment of any
consideration by the Corporation, shall automatically terminate
and the Restricted Stock Units Account cancelled, without any
other action by the Employee, or the Employee's Beneficiary or
Personal Representative, as the case may be.
(c) Termination of Service Without Cause In
Anticipation of or Following Change in Control Event. If an
Employee's employment by the Corporation is terminated by the
Corporation for any reason other than because of death or Total
Disability (as defined in the Plan) or for Cause (as defined in
the Plan or the Employment Agreement), either (i) in express
anticipation of an announced transaction that would constitute a
Change in Control Event (as defined in Section 7 of the Plan) and
less than three months before its occurrence, or (b) within one
year following a Change in Control Event, as determined by the
Committee in its sole and absolute discretion, then any portion
of his or her Award that has not previously expired and that has
not previously vested shall thereupon vest, subject to the
provisions of Section 9 (Adjustments) hereof and Section 6.2 of
the Plan; provided, however, that in no event shall restrictions
on the Stock Units lapse or the Stock Units vest earlier than six
months after the date hereof.
6. Effect of Total Disability or Death. If the
Employee incurs a Total Disability or dies while employed by the
Corporation, the Employee's Stock Unit Account shall be fully
vested and the shares issuable in payment thereof shall be
distributed immediately.
7. Effect of Retirement. Upon Retirement, the
Employee's Stock Unit Account will be credited with a pro rata
portion of the next installment of the Award that would otherwise
vest based on the number of quarters or partial quarters served
during the Applicable Performance Period.
8. Acceleration for Performance.
(a) The Committee shall determine the performance of
the Corporation as measured, over the Applicable Performance
Period, as measured in relation to specified Business Criteria or
models specified by the Committee in accordance with the
provisions of subsection (b). The Performance Factor shall then
be evaluated against a specified Performance Target in accordance
with the provisions of subsection (c). If and to the extent the
Corporation's performance as certified by the Committee meets or
exceeds the Minimum Specified Percentage of the Performance
Target for a particular fiscal year, the Employee's original
Award shall be subject to accelerated vesting as provided in
Section 8(c) as of the date of the Committee's determination, to
be made as soon as practicable following the year-end audit but
no later than June 29 in accordance with the provisions of
subsection (b) ("Determination Date"). To the extent that an
Award is not subject to accelerated vesting as of any particular
Determination Date by reason of performance, the Award shall
remain eligible for accelerated vesting as of each subsequent
Determination Date (prior to the forfeiture or other vesting of
the Award) based upon the Corporation's performance during each
subsequent Applicable Performance Period relative to the then
applicable Business Criteria and Performance Targets.
(b) Terms used in this Section 8 have the following
meanings, subject to the Committee's authority hereunder and the
Plan:
"Applicable Performance Period" shall mean the fiscal
year period commencing April 1, 1998 and ending March 31, 1999,
or the applicable fiscal year ending on any March 31 thereafter
within the term of the Award.
"Business Criteria" shall have the meaning set forth in
Section 5.2.7 of the Plan. For fiscal year 1999, the Committee
has determined that earnings before interest, taxes, depreciation
and amortization ("EBITDA") shall constitute the relevant
business criterion for the purpose of determining the Performance
Factor and Performance Target for fiscal 1999.
"Determination Date" shall mean the date no later than
June 29 of each year as of which the Committee makes its
determination of the Corporation's Performance Factor for the
Applicable Performance Period and other decisions essential to
the calculation of the extent (if any) to which Performance
Restricted Stock Unit Awards governed by these General Provisions
shall be subject to accelerated performance vesting.
"Minimum Specified Percentage" shall mean the minimum
percentage of the Performance Target that the Performance Factor
must meet or surpass in order to accelerate vesting, as specified
annually by the Committee on or before June 29 of the Applicable
Performance Period. In order for the vesting of the Awards to
accelerate in fiscal year 1999, the Performance Factor must reach
a minimum of 80% of the EBITDA Performance Target.
"Performance Factor" shall mean the percentage
determined by dividing the Corporation's actual performance as
measured by the Business Criteria or model specified by the
Performance Target. The relevant Business Criteria underlying
the determination of the Performance Factor shall be set by the
Committee on or before June 29 of the Applicable Performance
Period. For fiscal 1999, the Performance Factor of the
Corporation shall be determined by dividing the Corporation's
actual EBITDA (Business Criterion) by the target EBITDA specified
by the Committee as the Performance Target for fiscal 1999. For
2000, 2001 and future fiscal years, the Committee shall establish
on or before June 29 of the applicable year, the applicable
Business Criteria, Performance Target and Minimum Specified
Percentage for accelerated vesting.
"Performance Target" shall mean the target level of
performance set by the Committee and based on the relevant
Business Criteria for the Applicable Performance Period. The
specific EBITDA performance targets for 1999 and future years are
confidential and available to the Employee from the Chief
Executive Officer or Chief Financial Officer upon request.
(c) Accelerated Vesting. If the Performance Factor in
any applicable Performance Period meets or exceeds the applicable
Minimum Specified Percentage for any Applicable Performance
Period, the Restricted Stock Units will vest at a rate of 33 1/3%
(rather than 20%) of the total number of Stock Units (subject to
adjustment under Section 6.2 of the Plan) for that Applicable
Performance Period; provided, however, that performance vesting
will not occur until the Committee or its delegate(s) confirm(s)
based on audited results that the Corporation satisfied the
applicable performance objective.
9. Adjustments in Case of Changes in Common Stock.
If there shall occur any change in the outstanding shares of the
Company's Common Stock by reason of any stock dividend, stock
split, recapitalization, merger, consolidation, combination or
other reorganization, exchange of shares, sale of all or
substantially all of the assets of the Company, split-up, split-
off, spin-off, extraordinary redemption, liquidation or similar
corporate change or change in capitalization or any distribution
to holders of the Company's Common Stock (other than cash
dividends and cash distributions), the Committee shall make such
proportionate and equitable adjustments (if any) consistent with
the effect of such even on stockholders generally (but without
duplication of benefits if Dividend Equivalents are credited), as
the Committee determines to be necessary or appropriate, in the
number, kind and/or character of shares of Common Stock or other
securities, property and/or rights contemplated hereunder and of
rights in respect of Restricted Stock Units and Stock Unit
Accounts credited under the Plan so as to preserve the benefits
intended, but only to the extent that such adjustment or
determination in respect of the Awards would be consistent with
the requirements of Section 162(m) to qualify as performance-
based compensation.
10. Acceleration Immediately Prior to Change in
Control Event. Immediately prior to the occurrence of a Change
in Control Event, all Restricted Stock Units credited to an
Employee's Stock Unit Account (including Dividend Equivalents),
shall vest and shall be distributed immediately.
11. Continuance of Employment. Notwithstanding any
commitment of the Employee to remain in the employ of the
Corporation, the grant of an Award shall not confer upon the
Employee any right with respect to the continuation of his or her
employment or other service by the Corporation or any Subsidiary
or constitute any contract or agreement of employment or other
service. These General Provisions shall not alter or in any way
affect the rights of the Corporation or the Employee under any
other written employment agreement between them, except as
expressly provided herein.
12. Compliance; Application of Securities Laws.
No shares of Common Stock shall be delivered and
(subsequent to vesting and delivery) no shares shall be offered
for sale by the holder unless and until any then applicable
requirements of the Securities and Exchange Commission (the
"Commission") or any other regulatory agency having jurisdiction
and any exchanges upon which the Common Stock may be listed shall
have been fully satisfied. Upon the Corporation's request, the
Employee, or any other person entitled to such shares of Common
Stock pursuant to the Award, shall provide a written assurance of
compliance (or representations reasonably requested by the
Corporation to assure such compliance) satisfactory to the
Corporation.
The Committee may impose such additional conditions on
the Award or on its acceleration or vesting or on the payment of
any related tax or withholding obligation as in its sole
discretion may be required or advisable to satisfy any applicable
legal or regulatory requirements, including, without limitation,
provisions necessary to avoid liability under Section 16 of the
Exchange Act or to secure benefits of Rule 16b-3 (or any
successor rule) promulgated by the Commission pursuant to the
Exchange Act.
13. Tax Withholding.
The Corporation shall satisfy any state or federal
income tax withholding obligation arising upon distributions of
shares of Common Stock in respect of an Employee's Stock Unit
Account by reducing the number of shares of Common Stock
otherwise deliverable to the Employee. The appropriate number of
shares required to satisfy such tax withholding obligation in the
case of Restricted Stock Units will be based on the Fair Market
Value of a share of Common Stock on the day prior to the date of
distribution. If the Corporation, for any reason, cannot (or
chooses not to) satisfy the withholding obligation in accordance
with the preceding sentence, the Employee shall pay or provide
for payment in cash of the amount of any taxes which the Company
may be required to withhold with respect to the benefits
hereunder.
14. Employment by Subsidiaries. Employment by any
Subsidiary shall be considered as the equivalent of employment by
the Corporation for all purposes hereunder.
15. Notices. Any notice to be given under the terms
of the Plan, these General Provisions or an Award Agreement shall
be in writing and addressed to the Corporation at its principal
executive office, to the attention of the Corporate Secretary and
to the Employee at the address given beneath the Employee's
signature to the Award Agreement, or at such other address as
either party may thereafter designate in writing to the other.
16. Administration of Awards.
(a) Powers of Committee. Subject to the limitations
of the Plan, the Committee shall have the responsibility for
carrying out the intents and purposes of these General Provisions
and related Performance Restricted Stock Unit Awards and shall
have all powers necessary to accomplish those purposes,
including, but not by way of limitation, the following:
(i) to construe, interpret and administer the
General Provisions and Award Agreements;
(ii) to make all determinations required by these
General Provisions;
(iii) to collect and interpret such reported
results of and other information regarding the Corporation
as the Committee may deem advisable or appropriate, or to
utilize such other readily available information as it may
deem advisable or appropriate, with respect to
determinations made hereunder;
(iv) to determine, compute and certify the extent
of vesting and the amount of any other benefits payable to
Employees hereunder; and
(v) to, in determining the performance of each
relative entity, make such adjustments as it deems
appropriate and equitable in its discretion to reflect
changes in capitalization and similar corporate changes
affecting the Corporation.
In making any discretionary adjustments hereunder or
under the Plan, the Committee shall make the same adjustments and
confer the same benefits on all holders of Restricted Stock Units
subject to these General Provisions, unless the Award Agreement
otherwise expressly provides. Notwithstanding anything contained
herein to the contrary, the Committee shall have no discretion to
increase the number of shares to be delivered upon attainment of
the performance goals set forth herein except pursuant to Section
6.2 of the Plan.
(b) No Liability of Committee. The determination of
the Committee made in good faith as to any disputed question or
controversy shall be binding and conclusive for all purposes of
the Award Agreement and the Plan. In performing its duties, the
Committee shall be entitled to rely on information, opinions,
reports or statements prepared or presented by: (i) officers or
employees of the Corporation whom the Committee believes to be
reliable and competent as to such matters, and (ii) counsel (who
may be employees of the Corporation), accountants and other
persons as to matters which the Committee believes to be within
such persons' professional or expert competence. The Committee
shall be fully protected with respect to any action taken or
omitted by it in good faith pursuant to the advice of such
persons.
(c) Amendments. The Committee further may amend
Awards and these General Provisions, subject to the limitations
of Section 6.6.4 of the Plan; provided, however, that except as
contemplated by Section 9 (Adjustments), no amendment or
termination shall cancel or otherwise adversely affect in any
material respect, without his or her written consent, the
Employee's rights with respect to the Employee's Stock Unit
Account or dividend equivalent credits thereon so long as the
Account is outstanding). Any amendments authorized hereby shall
be stated in an instrument in writing, and all Employees shall be
bound by permitted amendments upon receipt of notice thereof.
