IMAGE ENTERTAINMENT INC, S-8, 1995-05-16

IMAGE ENTERTAINMENT INC
S-8, 1995-05-16
ALLIED TO MOTION PICTURE PRODUCTION

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1995
REGISTRATION NO. 33-____________

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

IMAGE ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)

California 84-0685613
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

9333 Oso Avenue
Chatsworth, California 91311
(818) 407-9100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

Restated 1992 Stock Option Plan
Miscellaneous Employee/Director Benefit Plans
(Full Title of the Plans)

CHERYL LEE, ESQ.
IMAGE ENTERTAINMENT, INC.
9333 Oso Avenue
Chatsworth, California 91311
(818) 407-9100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

COPIES TO:
CYNTHIA M. DUNNETT, ESQ.
Riordan & McKinzie
300 South Grand Avenue, 29th Floor
Los Angeles, California 90071

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.

If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]

If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================
PROPOSED PROPOSED
TITLE OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE/(2)/ OFFERING PRICE/(2)/ FEE
================================================================================================
<S> <C> <C> <C> <C>
Common Stock (no par value 690,000
per share)/(1)/ shares $6.84 $4,716,250 $1,627
================================================================================================
</TABLE>
(1) Issuable upon the exercise of options under the Restated 1992 Stock Option
Plan and miscellaneous employee benefit plans.
(2) With respect to the 90,000 shares of Common Stock for which options have
been granted, the price is based upon the prices at which the options may
be exercised. With respect to the 600,000 shares of Common Stock for
which options have not been granted, the price is based on the average of
the high and low prices of the Common Stock as quoted on the Nasdaq
National Market on May 9, 1995, a date within five business days prior to
the filing of this Registration Statement.
<PAGE>

EXPLANATORY NOTE

In accordance with the Note to Part I of Form S-8, the information specified by
Part I of Form S-8 has been omitted from this Registration Statement on Form S-
8 for offers of Common Stock of Image Entertainment, Inc. (the "Company")
pursuant to the Restated 1992 Stock Option Plan and miscellaneous
employee/director benefit plans of the Company (the "Employee Benefit Plans").
A Prospectus filed as a part of this Registration Statement has been prepared
in accordance with the requirements of Form S-3 and may be used for reofferings
of Common Stock acquired in the future pursuant to the Employee Benefit Plans
by persons who may be deemed to be "affiliates" (as that term is defined in
Rule 405 under the Securities Act of 1933, as amended) of the Company.
<PAGE>

PROSPECTUS

IMAGE ENTERTAINMENT, INC.
COMMON STOCK, NO PAR VALUE PER SHARE
90,000 SHARES OF COMMON STOCK

This Prospectus relates to the resale by certain officers, directors and
former officers (hereinafter referred to collectively as the "Selling
Shareholders" and individually as a "Selling Shareholder") of 90,000 shares of
the common stock, no par value (the "Common Stock"), of Image Entertainment,
Inc., a California corporation (the "Company"), acquired upon the exercise of
stock options granted by the Company pursuant to miscellaneous
employee/director benefit plans, which shares may be offered from time to time
by the Selling Shareholders or by their pledgees, donees, transferees or other
successors-in-interest. The Company will receive no portion of the proceeds of
sales made hereunder. All registration expenses of this offering are being
borne by the Company, but all selling and other expenses, including brokerage
fees, will be borne by the Selling Shareholders.

PROSPECTIVE PURCHASERS SHOULD CONSIDER THE FACTORS
SET FORTH IN THIS PROSPECTUS UNDER "INVESTMENT CONSIDERATIONS."

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

This Prospectus also relates to such additional shares of Common Stock as
may be issued to the Selling Shareholders because of future stock dividends,
stock splits or similar changes in capital structure.

There can be no assurance that the Selling Shareholders will sell any of
the shares offered hereby.

The Common Stock is traded in the over-the-counter market on the Nasdaq
National Market (Symbol: DISK). Prospective purchasers should obtain current
market information regarding the Common Stock.

No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offering made hereby and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or the Selling Shareholders. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
imply that there has been no change in the affairs of the Company since the
date hereof or that the information herein is correct as of any time subsequent
to the date hereof. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than those to which it
relates, nor does it constitute an offer to or solicitation of any person in
any jurisdiction in which such offer or solicitation would be unlawful. The
shares offered hereby have not been registered for offer or sale under the
securities laws of any state or other jurisdiction as of the date hereof.
Broker-dealers effecting transactions in the shares should confirm the
registration of the shares under the securities laws of the states or other
jurisdictions in which such transactions occur or the existence of exemptions
from such registration, or should cause such registration to occur in
connection with any offer or sale of the shares.

The date of this Prospectus is May 16, 1995.
<PAGE>

TABLE OF CONTENTS
<TABLE>
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Page
----
<S> <C>

AVAILABLE INFORMATION............................. 3

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE... 3

THE COMPANY....................................... 4

INVESTMENT CONSIDERATIONS......................... 4

SELLING SHAREHOLDERS.............................. 6

PLAN OF DISTRIBUTION.............................. 6

INDEMNIFICATION OF DIRECTORS AND OFFICERS......... 7

LEGAL MATTERS..................................... 8

EXPERTS........................................... 8
</TABLE>

2
<PAGE>

AVAILABLE INFORMATION

The Company is subject to the information requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following Regional Offices of the Commission: Room 3190, Northwest Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661-2511; and 14th Floor,
75 Park Place, New York, New York 10007. Copies of such material can be
obtained from the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.

The Company has filed with the Commission a Registration Statement on Form
S-8 (herein, together with all amendments and exhibits thereto and all
documents incorporated by reference therein, referred to as the "Registration
Statement") under the Act, with respect to the shares of Common Stock offered
hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement, certain items of which are omitted as permitted by the
rules and regulations of the Commission. For further information with respect
to the Company and the shares of Common Stock, reference is made to the
Registration Statement. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document
filed as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. Items
and information omitted from this Prospectus but contained in the Registration
Statement may be inspected and copied at the Public Reference Facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company hereby incorporates by reference into this Prospectus the
following documents:

(a) the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1994;

(b) the Company's Quarterly Reports on Form 10-Q for the quarters ended
June 30, September 30, and December 31, 1994;

(c) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on April
21, 1983, as amended by Amendment No. 1 on Form 8 filed with the
Commission on April 22, 1991; and

(d) all documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein, or in any subsequently filed document that is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.

The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the oral or written request of such person,
a copy of any documents incorporated by reference in the Registration Statement
(other than exhibits to such documents). Requests should be directed to Cheryl
Lee, Esq.,

3
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Chief Administrative Officer and General Counsel, Image Entertainment, Inc.,
9333 Oso Avenue, Chatsworth, California 91311, telephone number (818) 407-9100
extension 256.

THE COMPANY

The Company has distributed programming on laserdisc since 1983, and is
the largest laserdisc licensee and distributor in the United States. The
titles distributed by the Company include feature films, music videos, and
children's, educational, documentary and special interest programming. These
titles are obtained from major motion picture studios and other suppliers under
exclusive and nonexclusive license and wholesale distribution agreements.

The Company was incorporated in Colorado in April 1975 as Key
International Film Distributors, Inc., adopted its present name in June 1983
and reincorporated in California in January 1990. The Company's principal
executive offices are located at 9333 Oso Avenue, Chatsworth, California 91311,
and its telephone number is (818) 407-9100.

INVESTMENT CONSIDERATIONS

Prior to making an investment decision, prospective purchasers should
consider the specific factors set forth below as well as the other information
set forth in this Prospectus.

HISTORICAL LOSSES

The Company has posted net losses for each fiscal year since 1984 (with
the exception of the fiscal years ended March 31, 1992 and 1994). No assurance
can be given as to the Company's future profitability.

CAPITAL REQUIREMENTS

The Company's operations require substantial capital. The Company
believes that unrestricted cash and cash equivalents on hand as of the date
hereof, plus anticipated cash flow from operations, will satisfy the Company's
expected working capital requirements during the remainder of fiscal 1996.
However, the Company may from time to time seek debt or equity financing. Such
financing may not be available on terms favorable to the Company, if at all,
and may include the sale of Common Stock, which could adversely affect the
market price of the Common Stock.

GROWTH OF THE LASERDISC MARKET

The Company has developed a strategy and entered into license and
distribution agreements based upon its belief as to the continued growth of the
laserdisc market. Such growth depends upon various factors, including general
economic conditions, sales of laserdisc players, retail availability of
laserdiscs, the number of laserdisc titles and laserdisc manufacturing
capacity. The laserdisc market's failure to grow further could adversely
affect the Company.

PROGRAM ACQUISITION; COMPETITION

As the Company does not produce its own programming, its success depends
upon entering into new and renewing existing licenses and distribution
agreements for feature films and other programming. There is no assurance that
suppliers of programming will continue to enter into or renew licenses and
distribution agreements on terms acceptable to the Company, if at all.

Most of the Company's current competitors have substantially greater
financial resources than the Company. If the laserdisc market expands, the
Company may face increased competition. Further, laserdiscs face

4
<PAGE>

competition from other forms of home video entertainment, e.g. videocassettes
----
and network, syndicated and pay/cable television. New technologies in the
entertainment industry may offer alternate forms of leisure-time entertainment
or alter the way in which existing forms are delivered, thereby increasing
competition.

MANUFACTURING CAPACITY

The Company uses subcontractors to manufacture its laserdiscs. While the
Company believes that manufacturing facilities currently have the aggregate
capacity to fulfill its orders, the demand for laserdiscs may periodically
exceed manufacturing capacity at one or more facilities.

DEPENDENCE ON KEY PERSONNEL

The Company substantially depends upon certain key executives, the loss of
whose services could adversely affect the Company. Several agreements with
suppliers of programming contain, and future agreements may contain,
termination provisions relating to the continued employment of such executives.

POTENTIAL MAJORITY SHAREHOLDER

Image Investors Co. ("IIC"), a Delaware corporation controlled by John W.
Kluge and Stuart Subotnick, had the power to vote 5,202,978 (approximately
35.9%) of the shares of Common Stock outstanding at April 1, 1995. By virtue
of its voting power, IIC may be deemed to have influence over the Company's
management and policies. If IIC were to acquire voting power over more than
50% of the outstanding shares of Common Stock (although there can be no
assurance that it will), such increased voting power would (or could, depending
upon the number of directors if voting for directors were cumulative) enable
IIC to elect at least a majority of the members of the Company's board of
directors and would otherwise enable IIC to approve or disapprove virtually any
matter voted on by the shareholders. In addition, IIC's acquisition or sale of
shares of Common Stock could affect the Company's use of its net operating loss
carryforward.

POTENTIAL COMMON STOCK ISSUANCES; SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION
RIGHTS

As of April 1, 1995, there were 7,429,236 outstanding shares of Common
Stock eligible for resale under Rule 144 promulgated under the Act, of which
6,393,656 shares are entitled to certain registration rights. In addition, as
of April 1, 1995, the Company has issued options and warrants to purchase
6,910,395 shares of Common Stock, of which 6,891,743 shares have been
registered for resale or are entitled to certain registration rights. The
actual or potential sale of shares of Common Stock under Rule 144 or
registration statements may make it more difficult for the Company to obtain
equity financing and may adversely affect the market price of the Common Stock.

5
<PAGE>

SELLING SHAREHOLDERS

The table below sets forth (i) the names and relationships with the
Company of the Selling Shareholders and (ii) the number of shares of Common
Stock which each Selling Shareholder (a) beneficially owned at April 1, 1995,
(b) may sell under this Prospectus and (c) would have beneficially owned if all
the shares offered hereby had been sold on April 1, 1995 (and, if one percent
or more, the percentage of the outstanding shares of Common Stock which such
beneficially owned shares would have represented). There were 13,990,303
shares of Common Stock issued and outstanding at April 1, 1995.

The number of shares beneficially owned includes shares of Common Stock in
which a person has sole or shared voting power and/or sole or shared investment
power. A person is also deemed to be the beneficial owner of shares of Common
Stock if the person has the right to acquire beneficial ownership of the
shares, whether or not within 60 days, through the exercise of options or
warrants.

Common Stock not outstanding which is subject to options and warrants is
deemed to be outstanding for the purpose of computing the percentage of the
Common Stock beneficially owned by each person named below, but is not deemed
to be outstanding for any other person.

Except as noted, each person named below has sole voting and investment
powers with respect to the Common Stock beneficially owned by the person,
subject to applicable community property and similar laws.

AMOUNT AMOUNT AMOUNT PERCENTAGE
BENEFICIALLY TO BE BENEFICIALLY BENEFICIALLY
RELATIONSHIP WITH THE OWNED PRIOR OFFERED OWNED AFTER OWNED AFTER
SELLING SHAREHOLDER COMPANY TO OFFERING HEREBY OFFERING OFFERING

<S> <C> <C> <C> <C> <C>
Martin W. Greenwald Chairman of the 1,250,973 150,000 1,100,973 7.72%
Board, Chief Executive
Officer, President
and Treasurer
Stuart Segall Director 1,130,857 15,000 1,115,857 7.86%
Kyle Kirkland Director 25,000 15,000 10,000 *

Ira S. Epstein/(1)/ Director 34,731 25,000 9,731 *
Russell Harris/(2)(3)/ Director 118,914 25,000 93,914 *
Jeff Framer Chief Financial Officer 39,650 10,000 29,650 *
Cheryl Lee Chief Administrative 93,409 10,000 83,409 *
Officer and General
Counsel
David Borshell Senior Vice President 57,090 10,000 47,090 *
of Operations, Sales and
Marketing
Rick Linton Former Officer 10,000 10,000 0 *

</TABLE>
- ---------------
* Percentage owned is less than 1%.
(1) Includes 2,000 shares of Common stock held by Mr. Epstein's Keogh plan.
(2) Under a December 29, 1987 stock purchase agreement, as amended (the "Stock
Purchase Agreement"), certain investors (including Mr. Harris and IIC) have
acquired shares of Common Stock from the Company. The Schedule 13D, dated
December 29, 1987, filed relative to the initial acquisition of shares
under the Stock Purchase Agreement states that the investors "disclaim
status as a group." The Stock Purchase Agreement grants antidilution
rights in connection with certain issuances of Common Stock. Antidilution
rights outstanding as of April 1, 1995 are included in the table. The
Stock Purchase Agreement also provides that investors collectively holding
a percentage of "Shares" (as defined in the Stock Purchase Agreement) may
cause the Company to register the Shares with the Commission.
(3) Includes 77,514 shares of Common Stock held by Mr. Harris as trustee for a
family trust.

PLAN OF DISTRIBUTION

The shares of Common Stock may be sold from time to time to purchasers
directly by any of the Selling Shareholders. Alternatively, the Selling
Shareholders may from time to time offer the shares of Common Stock through
underwriters, dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Shareholders and/or purchasers of the shares of Common Stock for whom they may
act as agent. The Selling Shareholders and any underwriters, dealers or agents
that participate in the distribution of the shares of Common Stock might be
deemed to be underwriters, and any profit on the sale of such shares of Common
Stock by them and any discounts, commissions or concessions received by any
such underwriters, dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act. At the time a particular
offer of any of the shares of Common Stock is made, to the extent required, a

6
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supplement to this Prospectus will be distributed which will set forth the
aggregate principal amount of stock being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents,
any discounts, commissions or other items constituting compensation from the
Selling Shareholders and any discounts, commissions or concessions allowed or
re-allowed or paid to dealers. The Company is unaware of any plan of
distribution of any of the Selling Shareholders with respect to the resale of
the shares of Common Stock offered hereby.

The shares of Common Stock may be sold in the over-the-counter market or
in privately negotiated transactions. Sales of such shares in the over-the-
counter market may be by means of one or more of the following: (a) a block
trade in which a broker or dealer will attempt to sell his or her shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a dealer as principal and resale
by such dealer for its account pursuant to this Prospectus; and (c) ordinary
brokerage transactions and transactions in which the broker solicits
purchasers. In addition, any securities covered by this Prospectus which
qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than
pursuant to this Prospectus. Each Selling Shareholder will be subject to
applicable provisions of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder, including, without limitation, Rule 10b-
2, 10b-6 and 10b-7, which provisions may limit the timing of purchases and
sales of any of the shares of Common Stock by the Selling Shareholders.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 317 of the California General Corporation Law (the "GCL") provides
that a California corporation (such as the Company) has the power to indemnify
its officers and directors in certain circumstances.

Subdivision (b) of Section 317 of the GCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the corporation to procure a judgment in its
favor), against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with the proceeding if such
director or officer acted in good faith and in a manner reasonably believed to
be in the best interests of the corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of such director or
officer was unlawful.

Subdivision (c) of Section 317 of the GCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending, or
completed action by or in the right of the corporation to procure a judgment in
its favor, against expenses actually and reasonably incurred by such director
or officer in connection with the defense or settlement of the action if such
director or officer acted in good faith, in a manner believed to be in the best
interests of the corporation and its shareholders, except that no
indemnification may be made (i) in respect of any claim, issue or matter as to
which such director or officer shall have been adjudged to be liable to the
corporation in the performance of such director's or officer's duty to the
corporation and its shareholders, unless and only to the extent that the court
in which the proceeding is or was pending shall determine upon application
that, in view of all the circumstances of the case, such director or officer is
fairly or reasonably entitled to indemnity for expenses and then only to the
extent that the court shall determine, (ii) for amounts paid in settling or
otherwise disposing of a pending action without court approval and (iii) for
expenses incurred in defending a pending action which is settled or otherwise
disposed of without court approval.

Section 317 further provides that to the extent a director or officer of
the corporation has been successful in the defense of any proceeding referred
to in subdivision (b) or (c) or in the defense of any claim, issue or matter
therein, such director or officer shall be indemnified against expenses
actually and reasonably incurred in connection therewith; that any other
indemnification under Section 317 shall be made only if authorized, upon a
determination that indemnification is proper, by (i) a majority of a quorum
consisting of directors who are not parties to the proceeding, (ii) if such a
quorum is not obtainable, by independent legal counsel in a written opinion,
(iii) approval of the shareholders, with the shares owned by the person to be
indemnified not being entitled to vote or (iv) by the

7
<PAGE>

court in which the proceeding is or was pending; that indemnification provided
for by Section 317 shall not be deemed exclusive of any additional rights to
which the indemnified party may be entitled; and that the corporation shall
have power to purchase and maintain insurance on behalf of a director or
officer of the corporation against any liability asserted against or incurred
by such director or officer in such capacity or arising out of his or her
status as such whether or not the corporation would have the power to indemnify
him or her against that liability under Section 317.

The GCL permits a corporation to limit, under certain circumstances, a
director's liability for monetary damages for actions brought by or on behalf
of the corporation. The Company's Restated Articles of Incorporation provide
for the elimination of the liability of directors for monetary damages to the
full extent permitted by law.

The Company's Restated Articles of Incorporation and Bylaws provide for
indemnification of the Company's officers and directors to the full extent
permitted by law, including Section 317 of the GCL. In addition, the Company
has entered into indemnification agreements with its officers and directors.
The form and execution of the indemnification agreements, which are intended to
provide the maximum indemnification allowed under California law, were approved
at the Company's October 6, 1989 annual shareholders' meeting. The Company
maintains a directors and officers liability insurance policy providing
aggregate coverage of $5,000,000, including securities-related coverage of
$5,000,000.

Insofar as indemnification for liabilities under the Act may be permitted
to directors, officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby has been passed
upon for the Company by Cheryl Lee, Esq., Chief Administrative Officer and
General Counsel of the Company.

EXPERTS

The financial statements of the Company as of March 31, 1994 and 1993 and
for each of the years in the three-year period ended March 31, 1994, which are
included in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1994 and incorporated by reference in this Prospectus and elsewhere
in the Registration Statement, have been so incorporated in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference in this Prospectus and elsewhere in this Registration
Statement, and upon the authority of said firm as experts in accounting and
auditing.

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IMAGE ENTERTAINMENT, INC.
REGISTRATION STATEMENT ON FORM S-8
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 3. Incorporation of Documents by Reference
---------------------------------------

The Company hereby incorporates by reference into this Registration
Statement the following documents:

(a) the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1994;

(b) the Company's Quarterly Reports on Form 10-Q for the quarters
ended June 30, September 30 and December 31, 1994; and

(c) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on
April 21, 1983, as amended by Amendment No. 1 on Form 8 filed
with the Commission on April 22, 1991.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act, subsequent to the date of this Registration
Statement and prior to the filing of a post-effective amendment which indicates
that all securities offered have been sold or which deregisters all securities
then remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be a part hereof from the date of filing such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein, or in any subsequently filed document that is or is deemed to
be incorporated by reference herein, modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.

Item 4. Description of Securities
-------------------------

Not applicable.

Item 5. Interests of Named Experts and Counsel
--------------------------------------

Not applicable.

Item 6. Indemnification of Directors and Officers
-----------------------------------------

The section in the Prospectus filed herewith entitled "Indemnification of
Directors and Officers" is hereby incorporated by reference in this Item.

Item 7. Exemption from Registration Claimed
-----------------------------------

Not applicable.

II-1
<PAGE>

Item 8. Exhibits

Exhibit No. Description of Exhibit
- ----------- ----------------------

5 Opinion of General Counsel of Image Entertainment, Inc.
Filed herewith.

10.1 Image Entertainment, Inc. Restated 1992 Stock Option Plan.
Incorporated by reference to Exhibit A of the Company's Proxy
Statement dated July 29, 1994.

10.2 Option Agreement dated July 8, 1993 between the Company and
Ira S. Epstein. Filed herewith.

10.3 Option Agreement dated July 8, 1993 between the Company and
Russell Harris. Filed herewith.

10.4 Option Agreement dated July 12, 1994 between the Company and
Ira S. Epstein. Filed herewith.

10.5 Option Agreement dated July 12, 1994 between the Company and
Russell Harris. Filed herewith.

10.6 Form of Option Agreement between the Company and certain
executive officers and key employees. Incorporated by reference
to Exhibit 10.24 of the Company's Annual Report on Form 10-K for
the year ended March 31, 1994.

23.1 Consent of General Counsel of Image Entertainment, Inc.
(contained in Exhibit 5). Filed herewith.

23.2 Consent of KPMG Peat Marwick LLP. Filed herewith.

Item 9. Undertakings
------------

(a) The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post- effective amendment to this Registration Statement;

(i) to include any prospectus required by Section 10(a) (3) of the
Act;

(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the Registration
Statement;

(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;

Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
-------- -------
if the Registration Statement is on Form S-3 or Form S, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.

(2) That, for the purposes of determining any liability under the
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act

II-2
<PAGE>

(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions of Item 6 hereof, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chatsworth, State of California, on May 10,
1995.

IMAGE ENTERTAINMENT, INC.

By: /s/ Martin W. Greenwald
--------------------------------------
Martin W. Greenwald
Chairman of the Board, Chief Executive
Officer, President and Treasurer

Each person whose signature appears below constitutes and appoints Martin
W. Greenwald and Jeff Framer, and each of them, his true and lawful attorneys-
in-fact and agents, each with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign
any or all amendments to this Registration Statement, including post-effective
amendments, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in or about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each of said attorneys-in-fact and agents, or their substitutes, may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date
--------- ------ ----
<S> <C> <C>
/s/ Martin W. Greenwald Chairman of the Board, Chief May 10, 1995
- ------------------------- Executive Officer, President
Martin W. Greenwald and Treasurer (Principal
executive officer)

/s/ Jeff Framer Chief Financial Officer May 10, 1995
- ------------------------- (Principal financial and
Jeff Framer accounting officer)

/s/ Stuart Segall Director May 10, 1995
- -------------------------
Stuart Segall

/s/ Ira S. Epstein Director May 10, 1995
- -------------------------
Ira S. Epstein

/s/ Russell Harris Director May 10, 1995
- -------------------------
Russell Harris

/s/ Kyle Kirkland Director May 10, 1995
- -------------------------
Kyle Kirkland
</TABLE>

II-4
<PAGE>

EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit No. Description of Exhibit Page Number
- ----------- --------------------------------------------------------------------- -----------
<C> <S> <C>
5 Opinion of General Counsel of Image Entertainment, Inc. Filed
herewith.

10.1 Image Entertainment, Inc. Restated 1992 Stock Option Plan. *
Incorporated by reference to Exhibit A of the Company's Proxy
Statement dated July 29, 1994.

10.2 Option Agreement dated July 8, 1993 between the Company and Ira S.
Epstein. Filed herewith.

10.3 Option Agreement dated July 8, 1993 between the Company and Russell
Harris. Filed herewith.

10.4 Option Agreement dated July 12, 1994 between the Company and Ira S.
Epstein. Filed herewith.

10.5 Option Agreement dated July 12, 1994 between the Company and Russell
Harris. Filed herewith.

10.6 Form of Option Agreement between the Company and certain executive *
officers and key employees. Incorporated by reference to Exhibit
10.24 of the Company's Annual Report on Form 10-K for the year ended
March 31, 1994.

23.1 Consent of General Counsel of Image Entertainment, Inc. (contained
in Exhibit 5). Filed herewith.

23.2 Consent of KPMG Peat Marwick LLP. Filed herewith.

</TABLE>
* Incorporated by reference herein.

<PAGE>

[LETTERHEAD OF IMAGE ENTERTAINMENT, INC.]
Exhibit 5

May 10, 1995

IMAGE ENTERTAINMENT, INC.
9333 Oso Avenue
Chatsworth, Ca 91311

Re: S-8 Statement/S-3 Reoffer Prospectus Covering 600,000 Additional Shares
Underlying Options Issuable under the Company's Restated 1992 Stock Option
Plan and 90,000 Shares Underlying Options Issuable under Miscellaneous
Employee Benefit Plans

Ladies and Gentlemen:

I, as Chief Administrative Officer & General Counsel of Image Entertainment,
Inc., a California corporation (the "Company"), have examined the Registration
Statement on Form S-8 (the "Registration Statement") which the Company intends
to file with the Securities and Exchange Commission in connection with the
registration under the Securities Act of 1933, as amended, of an aggregate of
690,000 shares of the Company's common stock, no par value (the "Common Stock"),
all of which are issuable upon exercise of options that have been granted
pursuant to miscellaneous employee/director benefit plans or are to be granted
pursuant to the Image Entertainment, Inc. Restated 1992 Stock Option Plan
(collectively the "Plans").

I have examined the Company's Certificate of Incorporation, Bylaws and corporate
minutes books and the Plans. I have also examined the records of corporate
proceedings taken in connection the approval of the Plans and the issuance and
sale of the Common Stock to be issued pursuant to the exercise of options
granted in connection therewith.

Based upon the foregoing examinations and upon applicable laws, I am of the
opinion that, subject to compliance with the applicable state securities and
blue sky laws, the Common Stock, when offered, sold and paid for pursuant to the
exercise of options granted under the Plans, would be legally issued, fully paid
and non-assessable.

I hereby consent to the use of this opinion as an exhibit to the Registration
Statement.

Sincerely,

/s/ CHERYL LEE
Cheryl Lee, Esq.
Chief Administrative Officer & General Counsel

<PAGE>

OPTION AGREEMENT

- OUTSIDE DIRECTOR GRANT -
(Non-Section 16b-3 Plan)

THIS OPTION AGREEMENT (the "Agreement") is entered into as of July 8, 1993
---------
between IMAGE ENTERTAINMENT, INC., a California corporation (the "Company"), and
-------
IRA EPSTEIN, an outside director of the Company ("Optionee"), and is intended to
--------
reward Optionee for efforts on the Company's behalf and to provide additional
incentive to contribute to the Company's long-term plans and objectives.

1. DEFINITIONS.

a. "ACT" shall mean the Securities Exchange Act of 1934, as amended. All
references herein to Act or Code sections, rules, regulations or other
provisions shall be deemed to include any successors or amendments
thereto.

b. "AGREEMENT" shall mean this Option Agreement and any amendments thereto.

c. "BOARD" shall mean the Company's then board of directors.

d. "CHANGE OF CONTROL" shall be deemed to have occurred on the earliest of
the following dates:

(i) the date, pursuant to Section 13(d) of the Act and the rules
promulgated thereunder, a person, firm or entity shall have
acquired beneficial ownership of more than 45% of the Voting
Stock;

(ii) the date the persons who were members of the Board at the
beginning of any 24-month period shall cease to constitute a
majority of the Board, unless the election, or the nomination
for election by the Company's shareholders, of each new
director was approved by two-thirds of the members of the
Board then in office who were in office at the beginning of
the 24-month period; or

(iii) the date the Company's shareholders shall approve a
definitive agreement (a) to merge or consolidate the Company
with or into another corporation, unless, the holders of the
Company's capital stock immediately before such merger or
consolidation will, immediately following such merger or
consolidation, hold as a group on a fully-diluted basis the
ability to elect at least a majority of the directors of the
surviving corporation (assuming cumulative voting, if
applicable), or (b) to sell or otherwise dispose of all or
substantially all the assets of the Company.

e. "CODE" shall mean the Internal Revenue Code of 1986, as amended.

f. "COMPANY" shall mean Image Entertainment, Inc.

g. "DISABILITY" shall mean a "disabled" (as defined for purposes of Code
Section 422(c)(6)) condition.
<PAGE>

h. "FAIR MARKET VALUE" on a specified date shall mean, (i) if the Stock is
then listed on NASDAQ, the average of the closing bid and asked prices
of the Stock on the last date the Stock traded, (ii) if the Stock is
then listed on the NASDAQ National Market System, the closing price of
the Stock on the last date the Stock traded, (iii) if the Stock is then
listed on an exchange, the closing price of the Stock on the last date
the Stock traded on the principal exchange, or (iv) if none of the above
is applicable, the value of the Stock as reasonably determined by the
Board.

i. "OPTION" shall mean the option granted under this Agreement; provided,
--------
however, that the Option granted under this Agreement is not intended to
-------
qualify under (S)422 of the Code.

j. "OPTIONEE" shall mean the undersigned individual, and, as required by
the context, any Successor.

k. "OPTION PRICE" shall mean the exercise price per share of Stock subject
to the Option.

l. "OUTSIDE DIRECTOR" shall mean a member of the Board who is not an
employee of the Company or any Parent or Subsidiary of the Company.

m. "PARENT" shall mean any corporation, partnership, joint venture or other
entity owning, directly or indirectly, 50% or more of the Voting Stock.

n. "PRESIDENT" shall mean the Company's then President.

o. "SECRETARY" shall mean the Company's then Secretary.

p. "STOCK" shall mean the Company's no par value common stock.

q. "SUBSIDIARY" shall mean any corporation, partnership, joint venture or
other entity, 50% or more of the control of which is owned, directly or
indirectly, by the Company.

r. "SUCCESSOR" shall mean a guardian, conservator, legal representative,
executor, administrator, heir or other successor of the undersigned
individual.

s. "VOTING STOCK" shall mean shares of the Company's outstanding capital
stock having general voting power, with "voting power" meaning the power
under ordinary circumstances (and not merely upon the happening of a
contingency) to vote in the election of directors.

2. ADMINISTRATION.

a. BOARD. The Agreement shall be administered by the Board.

b. BOARD ACTION. A majority of the Board shall constitute a quorum. The
vote of a majority of the members present at a meeting at which there is
a quorum shall be required for action. Any action required or permitted
to be taken by the Board at a meeting may be taken without a meeting if
all members consent in writing to the action.

c. BOARD AUTHORITY. Subject to the other provisions of the Agreement, the
Board shall have discretionary authority (and its actions shall be final
and binding on the Company, Optionee and any other persons with
interests relative to the Agreement):

a. to interpret the Agreement and decide questions of fact arising
with respect thereto;
<PAGE>

b. to adopt, amend and revoke rules and procedures advisable to
administer the Agreement; and,

c. to amend or terminate the Agreement (but only as provided herein)
or do any other act advisable to administer the Agreement.

Without limiting the generality of the foregoing sentence, the Board
shall have the authority to amend the Agreement if advisable to comply
with Code or Act requirements.

3. NO RIGHT TO CONTINUE AS AN OUTSIDE DIRECTOR. This Agreement and any Option
shall not give any Outside Director any right to continue as an Outside
Director, nor shall they prevent the Company or any Parent or Subsidiary,
or their respective shareholders (as the case may be), from terminating or
requesting the resignation on an Outside Director at any time, with or
without cause.

4. GRANT OF OPTION; STOCK RESERVED FOR THE AGREEMENT. Subject to adjustment as
provided in Paragraph 14 below, Optionee is hereby granted an Option to
purchase up to 10,000 shares of Stock. The Company shall at all times
reserve a sufficient number of shares of Stock to meet the requirements of
the Agreement.

5. TERM OF OPTION. Subject to Paragraph 10 below, the term of the Option shall
be ten (10) years from the date hereof

6. OPTION PRICE. Subject to adjustment as provided in Paragraph 14 below, the
Option Price shall be $5.625.

7. VESTING. The Option will vest immediately.

8. EXERCISE OF OPTION. Optionee may exercise the Option by delivering to the
Board (care of the President or Secretary) a written notice, in a form
acceptable to the Board, specifying the number of shares of Stock as to
which the Option is being exercised, together with payment of the exercise
price.

9. PAYMENT OF EXERCISE PRICE. Payment of the exercise price of the shares of
Stock as to which the Option is being exercised shall be made in cash
(including cashless exercises involving a broker) and/or in previously-
owned shares of Stock duly endorsed over to the Company or in shares of
Stock withheld from the exercise (which shares shall be valued at their
Fair Market Value as of the date of exercise). Within a reasonable time
after the Option exercise, the Company shall cause to be issued to Optionee
a certificate for the Stock purchased upon the exercise.

10. EXERCISE UPON TERMINATION OF OUTSIDE DIRECTOR STATUS.

a. OTHER THAN DEATH OR DISABILITY. If Optionee ceases to be an Outside
Director for any reason other than death or disability, the Option shall
terminate two (2) weeks following the date Outside Director status
ceases. However, the Board, in its sole discretion, may permit the
Optionee to exercise the Option for up to three (3) months following
termination of Outside Director status. A terminated Optionee may
exercise the Option only to the extent the Option was exercisable on the
date Outside Director status was terminated. The Option must be
exercised prior to the expiration of its term.

b. DEATH OR DISABILITY. If Optionee ceases to be an Outside Director
because of death or disability, the Option may be exercised for one (1)
year following termination of Outside Director status, but only to the
extent the Option was exercisable on the date Outside Director status
terminated. The Option must be exercised prior to the expiration of its
term.
<PAGE>

c. EXERCISE BY SUCCESSORS. If an Optionee's Successor wishes to exercise
the Option, the Successor must first consent in a writing (in a form
acceptable to the Board) delivered to the Board (care of the President
or Secretary) to be bound by the Agreement.

11. NON-TRANSFERABILITY. The Option may not be transferred except by will or
the laws of descent and distribution, and may be exercised during
Optionee's lifetime only by Optionee or Optionee's guardian or legal
representative. No interest of Optionee under the Agreement shall be
subject to attachment, execution, garnishment, sequestration, the laws of
bankruptcy or any other legal or equitable process. The terms of the Option
shall be binding upon the Successors.

12. OPTIONEE NOT A SHAREHOLDER. Optionee shall have no rights as a shareholder
with respect to any shares of Stock subject to the Option prior to the
issuance of a certificate or certificates for the shares.

13. NO PROHIBITION ON CORPORATE ACTIONS. Nothing in the Agreement shall
prohibit the Company or any Parent or Subsidiary from merging,
consolidating, issuing securities, selling its assets, dissolving or taking
any other corporate action.

14. CHANGE IN CAPITAL STRUCTURE.

a. EVENTS REQUIRING ADJUSTMENT. If, prior to the complete exercise of the
Option, an Event (as defined below) occurs, the Option, to the extent it
has not been exercised, shall entitle Optionee upon future exercise of
the Option to such securities or other property Optionee would have been
entitled to had Optionee owned the Stock subject to the unexercised
portion of the Option at the time the Event occurred. The total purchase
price upon future exercise of the Option shall be the same as if the
Stock were being purchased. Any fractional securities issuable upon the
exercise of the Option as a result of an Event shall instead be payable
in cash based upon the fair market value of the securities (as
determined by the Board) at the time of exercise. If Events occur, the
securities or other property reserved for issuance under the Agreement
shall be appropriately adjusted. "EVENT" shall mean (i) a stock
dividend, recapitalization, reorganization, merger, consolidation,
split-up, combination, exchange or similar event resulting in a change
in the Stock or (ii) a distribution by the Company to its shareholders
of securities of another corporation or entity.

b. CHANGE OF CONTROL. If a Change of Control occurs, the Board may
terminate the Agreement and the Option. If any termination occurs, the
Board shall give Optionee written notice of the intention to terminate
the Agreement and the Option, and shall permit the exercise of the
Option for at least sixty (60) days immediately preceding the effective
date of such termination.

c. OCCURRENCES NOT REQUIRING ADJUSTMENT. Except as expressly provided
herein, the issuance by the Company or any Parent or Subsidiary of
shares of stock of any class, or securities exercisable or convertible
into shares of stock of any class, shall not require adjustment in the
securities or other property subject to the Option.

15. WITHHOLDING AND EMPLOYMENT TAXES. If Optionee exercises the Option,
Optionee shall, within ten (10) days of exercise, deliver to the Board
(care of the President or Secretary) any withholding taxes due. Payment
shall be made in cash (including cashless exercises involving a broker)
and/or in previously-owned shares of Stock duly endorsed over to the
Company or in shares of Stock withheld from the exercise (which shares
shall be valued at their Fair Market Value as of the date of exercise). To
the extent Optionee fails to satisfy the withholding taxes delivery
requirements of this Paragraph 15, the Company and any Parent or Subsidiary
shall have, among other remedies, the right to withhold amounts due to
Optionee from the Company and/or any Parent or Subsidiary.
<PAGE>

16. INVESTMENT REPRESENTATION. If deemed appropriate by the Board, Optionee may
be required to deliver, when exercising the Option, a written
representation that shares of Stock are being acquired for investment and
not for distribution and will be disposed of in compliance with applicable
securities laws.

17. SECURITIES REGISTRATION; COMPLIANCE WITH LAWS, RULES AND REGULATIONS. The
Agreement, the exercise of the Option, and the issuance of Stock upon the
exercise of the Option shall be subject to applicable federal, state, local
and other laws, rules and regulations. Within one (1) year from the date of
grant, the Company will use reasonable business efforts to register under
applicable securities laws the Option and the shares of Stock subject
thereto.

18. AMENDMENTS OR TERMINATION. Subject to Paragraph 14b above, the Board may
amend or terminate the Agreement, except that no amendment or termination
shall materially impair the rights of Optionee without Optionee's consent.

19. SUBJECT HEADINGS. Subject headings are included for convenience only and
shall not be deemed part of the Agreement.

20. GOVERNING LAW. The Agreement and the Option shall be governed by and
construed under the laws of the State of California in force from time to
time, without giving effect to the principles of conflicts of laws under
which the laws of any other jurisdiction would apply.

"COMPANY":
-------

IMAGE ENTERTAINMENT, INC.,
a California corporation

By: /s/ Martin W. Greenwald
MARTIN W. GREENWALD, President

"OPTIONEE":
--------

By: /s/ Ira Epstein
IRA EPSTEIN, an individual

ATTEST:

By: /s/ Cheryl Lee
CHERYL LEE, Secretary

<PAGE>

OPTION AGREEMENT

- OUTSIDE DIRECTOR GRANT -
(Non-Section 16b-3 Plan)

1. DEFINITIONS.

b. "AGREEMENT" shall mean this Option Agreement and any amendments thereto.

c. "BOARD" shall mean the Company's then board of directors.

d. "CHANGE OF CONTROL" shall be deemed to have occurred on the earliest of
the following dates:

(i) the date, pursuant to Section 13(d) of the Act and the rules
promulgated thereunder, a person, firm or entity shall have
acquired beneficial ownership of more than 45% of the Voting
Stock;

immediately following such merger or consolidation, hold as a
group on a fully-diluted basis the ability to elect at least
a majority of the directors of the surviving corporation
(assuming cumulative voting, if applicable), or (b) to sell
or otherwise dispose of all or substantially all the assets
of the Company.

e. "CODE" shall mean the Internal Revenue Code of 1986, as amended.

f. "COMPANY" shall mean Image Entertainment, Inc.

g. "DISABILITY" shall mean a "disabled" (as defined for purposes of Code
Section 422(c)(6)) condition.

i. "OPTION" shall mean the option granted under this Agreement; provided,
--------
however, that the Option granted under this Agreement is not intended to
--------
qualify under (S)422 of the Code.

j. "OPTIONEE" shall mean the undersigned individual, and, as required by
the context, any Successor.

k. "OPTION PRICE" shall mean the exercise price per share of Stock subject
to the Option.

l. "OUTSIDE DIRECTOR" shall mean a member of the Board who is not an
employee of the Company or any Parent or Subsidiary of the Company.

m. "PARENT" shall mean any corporation, partnership, joint venture or other
entity owning, directly or indirectly, 50% or more of the Voting Stock.

n. "PRESIDENT" shall mean the Company's then President.

o. "SECRETARY" shall mean the Company's then Secretary.

p. "STOCK" shall mean the Company's no par value common stock.
<PAGE>

q. "SUBSIDIARY" shall mean any corporation, partnership, joint venture or
other entity, 50% or more of the control of which is owned, directly or
indirectly, by the Company.

r. "SUCCESSOR" shall mean a guardian, conservator, legal representative,
executor, administrator, heir or other successor of the undersigned
individual.

2. ADMINISTRATION.

a. BOARD. The Agreement shall be administered by the Board.

a. to interpret the Agreement and decide questions of fact arising
with respect thereto;

b. to adopt, amend and revoke rules and procedures advisable to
administer the Agreement; and,

c. to amend or terminate the Agreement (but only as provided herein)
or do any other act advisable to administer the Agreement.

Without limiting the generality of the foregoing sentence, the Board
shall have the authority to amend the Agreement if advisable to comply
with Code or Act requirements.

or their respective shareholders (as the case may be), from terminating or
requesting the resignation on an Outside Director at any time, with or
without cause.

5. TERM OF OPTION. Subject to Paragraph 10 below, the term of the Option shall
be ten (10) years from the date hereof

6. OPTION PRICE. Subject to adjustment as provided in Paragraph 14 below, the
Option Price shall be $5.625.

7. VESTING. The Option will vest immediately.

10. EXERCISE UPON TERMINATION OF OUTSIDE DIRECTOR STATUS.

13. NO PROHIBITION ON CORPORATE ACTIONS. Nothing in the Agreement shall prohibit
the Company or any Parent or Subsidiary from merging, consolidating, issuing
securities, selling its assets, dissolving or taking any other corporate
action.

14. CHANGE IN CAPITAL STRUCTURE.

resulting in a change in the Stock or (ii) a distribution by the Company
to its shareholders of securities of another corporation or entity.

19. SUBJECT HEADINGS. Subject headings are included for convenience only and
shall not be deemed part of the Agreement.

"COMPANY":
-------

IMAGE ENTERTAINMENT, INC.,
a California corporation

By: /s/ Martin W. Greenwald
MARTIN W. GREENWALD, President

"OPTIONEE":
--------

By: /s/ Ira Epstein
IRA EPSTEIN, an individual

ATTEST:

By: /s/ Cheryl Lee
CHERYL LEE, Secretary

<PAGE>

IMAGE ENTERTAINMENT, INC.
ELIGIBLE DIRECTOR NON-QUALIFIED STOCK OPTION AGREEMENT

THIS AGREEMENT dated as of the 12 day of July, 1994, between Image
Entertainment, Inc., a California corporation (the "Corporation"), and Ira S.
-----------
Epstein (the "Director").
--------

A. The Corporation has adopted a 1994 Eligible Directors Stock Option Plan
(the "Plan"), subject to shareholder approval at the Corporations next annual
----
shareholders' meeting.

B. Pursuant to Section 2.1 of the Plan, the Corporation has granted an option
(the "Option") to the Director upon the terms and conditions evidenced hereby,
------
as required by the Plan, which Option is not intended as and shall not be deemed
to be an incentive stock option within the meaning of Section 422 of the Code.

NOW, THEREFORE, in consideration of the services rendered and to be rendered
by the Director, the Corporation and the Director agree to the terms and
conditions set forth herein, as required by the terms of the Plan.

1. OPTION GRANT. This Agreement evidences the grant to the Director, as of
July 12, 1994 (the "Option Date"), of an Option to purchase an aggregate of
-----------
15,000 shares of Common Stock (the "Shares") under Section 2(a) of the Plan,
------
subject to the terms and conditions and to adjustment as set forth herein or in
or pursuant to the Plan.

2. EXERCISE PRICE. The Option entitles the Director to purchase (subject to
the terms of Sections 3 through 5 below), all or any part of the Option shares
at a price per share of $7.25, which amount represents the Fair Market Value of
the Shares on the Option Date.

3. OPTION EXERCISABILITY AND TERM. The Option shall first become and remain
exercisable as to one-half of the aggregate number of Shares in Section 1 on
January 12, 1995 and as to an additional one-quarter of such aggregate number of
Shares on the first anniversary of the Option Date; and as to the remaining one-
quarter of such aggregate number of Shares on the second anniversary of the
Option Date, subject to shareholder approval of the Plan, to adjustments under
Section 3.4 of the Plan and to acceleration under Section 3.5 of the Plan. The
Option shall terminate on July 11, 2004, unless earlier terminated in accordance
with the terms of Section 4 below.

4. SERVICE AND EFFECT OF TERMINATION OF SERVICE OR OTHER EVENT. The Director
agrees to serve as a director in accordance with the provisions of the
Corporation's Articles of Incorporation, Bylaws and applicable law. If the
Director's services as a member of the Board shall terminate or in the other
circumstances addressed in Article 3 of the Plan, this Option shall terminate at
the times and to the extent set forth therein.

5. GENERAL TERMS. The Option and this Agreement are subject to, and the
Corporation and the Director agree to be bound by, the provisions of the Plan
that apply to the Option. Such provisions are incorporated herein by this
reference. The Director acknowledges receiving a copy of the Plan and reading
its applicable provisions. Capitalized terms not otherwise defined herein shall
have the meaning assigned to such terms in the Plan.
<PAGE>

6. NONTRANSFERABILITY. The grant of the Option is intended to constitute an
exempt transaction under Rule 16b-3. In furtherance thereof, and for other
reasons, the Option shall be non-transferable as provided in Section 3.2 of the
Plan.

7. SHAREHOLDER APPROVAL. This Option shall be rescinded if shareholder
approval of the Plan is not obtained by December 31, 1995.

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

IMAGE ENTERTAINMENT, INC., OPTIONEE DIRECTOR
a California corporation

By:/s/ MARTIN W. GREENWALD /s/ IRA S. EPSTEIN
------------------------- ------------------
President & Chief Executive Officer
<PAGE>

SPOUSAL CONSENT
---------------

In consideration of the execution of the foregoing Stock Option Agreement by
Image Entertainment, Inc., I, ____________________________, the spouse of the
Director therein named, do hereby agree to be bound by all of the terms and
provisions thereof and of the Plan.

DATED: July 12, 1994

------------------------------

<PAGE>

IMAGE ENTERTAINMENT, INC.
ELIGIBLE DIRECTOR NON-QUALIFIED STOCK OPTION AGREEMENT

THIS AGREEMENT dated as of the 12 day of July, 1994, between Image
Entertainment, Inc., a California corporation (the "Corporation"), and Russell
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Harris (the "Director").
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A. The Corporation has adopted a 1994 Eligible Directors Stock Option Plan
(the "Plan"), subject to shareholder approval at the Corporations next annual
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shareholders' meeting.

7. SHAREHOLDER APPROVAL. This Option shall be rescinded if shareholder
approval of the Plan is not obtained by December 31, 1995.

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

IMAGE ENTERTAINMENT, INC., OPTIONEE DIRECTOR
a California corporation

By: /s/ MARTIN W. GREENWALD /s/ RUSSELL HARRIS
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President & Chief Executive Officer
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SPOUSAL CONSENT
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DATED: July 12, 1994

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<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

The Board of Directors
Image Entertainment, Inc.:

We consent to incorporation by reference in the registration statement on Form
S-8 of Image Entertainment, Inc. of our report dated June 13, 1994, relating to
the balance sheets of Image Entertainment, Inc. as of March 31, 1994 and 1993,
and the related statements of operations, shareholders' equity and cash flows
for each of the years in the three-year ended March 31, 1994, and the related
schedules, which report appears in the March 31, 1994, annual report on Form 10-
K of Image Entertainment, inc. We also consent to the reference to our firm
under the heading "Experts" in the registration statement.

/s/ KPMG Peat Marwick LLP

KPMG Peat Marwick LLP

Los Angeles, California
May 11, 1995