<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
IMAGE ENTERTAINMENT, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
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IMAGE ENTERTAINMENT, INC.
9333 Oso Avenue
Chatsworth, California 91311
--------------------------------------------------------------------------------
NOTICE OF 2000 ANNUAL MEETING
To be held August 30, 2000
Dear Shareholder:
The annual meeting of shareholders of Image Entertainment, Inc., a
California corporation, will be held at The Hilton Hotel, located at 6360 Canoga
Avenue, Woodland Hills, California, on Wednesday, August 30, 2000, at 10:00 a.m.
(local time), for the following purposes:
1. Election of Directors. To elect 4 directors to hold office until their
---------------------
respective successors are duly elected and qualified - Ira S. Epstein,
Martin W. Greenwald, M. Trevenen Huxley and Stuart Segall have been
nominated for election (Proposal 1).
2. Ratification of Appointment of Independent Auditors. To ratify the
---------------------------------------------------
appointment of KPMG LLP as the Company's independent auditors for the
fiscal year ending March 31, 2001 (Proposal 2).
3. Other Business. To transact such other business as may properly come
--------------
before the meeting and any adjournments thereof.
Enclosed with this notice is a proxy statement which describes the
foregoing items of business and a proxy. The board of directors has fixed the
close of business on July 12, 2000 as the record date for determination of
shareholders entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
/s/ Cheryl Lee
CHERYL LEE
Corporate Secretary
Chatsworth, California
July 31, 2000
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ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND IN PERSON, YOU ARE URGED TO MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENVELOPE PROVIDED. EVEN
IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON AT THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
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<PAGE>
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PROXY STATEMENT
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FOR THE ANNUAL MEETING OF SHAREHOLDERS
OF
IMAGE ENTERTAINMENT, INC.
To Be Held on August 30, 2000
Proxy statements and proxies are being furnished to the shareholders of
Image Entertainment, Inc., a California corporation (the "Company"), in
connection with the solicitation of proxies by the Company's board of directors
(the "Board") for use at the Company's annual meeting of shareholders and any
adjournments thereof (the "Annual Meeting"). The Company's principal executive
offices are located at 9333 Oso Avenue, Chatsworth, California 91311 and its
telephone number is (818) 407-9100. It is anticipated that Proxy statements and
proxies will first be mailed to shareholders on or about July 31, 2000.
Time, Date and Place of the Annual Meeting
The Annual Meeting will be held at The Hilton Hotel, located at 6360 Canoga
Avenue, Woodland Hills, California, on Wednesday, August 30, 2000, at 10:00 a.m.
(local time).
Record Date / Shareholders Entitled to Vote
Only shareholders of record at the close of business on July 12, 2000, the
record date fixed by the Board (the "Record Date"), are entitled to notice of
and to vote at the Annual Meeting. On the Record Date, there were 16,490,706
shares of the Company's common stock, no par value, outstanding. No shares of
the Company's preferred stock, $1.00 par value, are outstanding.
SOLICITATION OF PROXIES
Voting of Proxies
A proxy is enclosed for you to vote on Proposals 1 and 2. If the proxy is
properly executed and returned prior to the Annual Meeting, the shares of common
stock it represents will be voted as you direct or, if you indicate no
direction, FOR the director nominees named in Proposal 1 and FOR Proposal 2.
In the event of cumulative voting for directors, the proxyholders appointed
by the proxy (the "Proxyholders") will have discretionary authority to cumulate
votes among the director nominees with respect to which the Proxyholders'
authority to vote was not withheld. The Proxyholders will have discretionary
authority to vote on such business (other than Proposals 1 and 2) as may
properly come before the Annual Meeting (the Board does not currently know of
any such business).
<PAGE>
Revocability of Proxies
A shareholder may revoke a proxy at any time before it is voted at the
Annual Meeting by filing with the Secretary of the Company a written notice of
revocation or a duly executed proxy bearing a later date, or by voting in person
at the Annual Meeting.
Voting in Person by Beneficial Owners
If your shares of common stock are held of record by a broker, bank or
other person, and you wish to attend the Annual Meeting and vote in person, you
must obtain from the broker, bank or other holder of record a proxy confirming
your beneficial ownership of the shares and bring it to the Annual Meeting.
Costs of the Solicitation
The Board is making this proxy solicitation, the costs of which (including
the reasonable charges and expenses of brokerage firms, banks and others for
forwarding proxy materials to beneficial owners of common stock) will be borne
by the Company. Proxies will be solicited through the mails, and may also be
solicited personally or telephonically by the Company's officers, other regular
employees and directors (without additional compensation).
VOTE REQUIRED FOR APPROVAL
Except with respect to cumulative voting for directors, each share of
common stock outstanding as of the Record Date is entitled to one vote on each
matter of business that may properly come before the Annual Meeting.
A majority of the shares of common stock outstanding on the Record Date,
represented in person or by proxy, will constitute a quorum at the Annual
Meeting. Assuming a quorum is present, the four nominees receiving the highest
number of votes will be elected as directors (Proposal 1). Votes against a
candidate have no legal effect.
Assuming a quorum is present, the affirmative vote of the holders of a
majority of the shares of common stock represented in person or by proxy and
voting at the Annual Meeting (the shares affirmatively voted must also
constitute at least a majority of the required quorum and of the votes cast) is
required to ratify the appointment of KPMG LLP as the Company's independent
auditors (Proposal 2).
Abstentions will be treated as present and entitled to vote for purposes of
determining the presence of a quorum. Abstentions, however, will not constitute
a vote "for" or "against" any matter, and thus will be disregarded in the
calculation of a plurality or of shares voting or votes cast on any matter
submitted to the shareholders for a vote.
"Broker non-votes" (meaning shares held by brokers or nominees as to
which instructions have not been received from the beneficial owners or persons
entitled to vote and as to which the broker has physically indicated on the
proxy that the broker or nominee does not have discretionary power to vote on a
particular matter) are counted as present and entitled to vote for purposes of
determining the presence of a quorum. However, for purposes of determining the
outcome of any matter as to which the broker has physically indicated on the
proxy that it does not have discretionary authority to vote, those shares will
be treated as not present and not entitled to vote with respect to that matter
(even though those shares are considered present for quorum purposes and may be
entitled to vote on other matters). Any unmarked proxies, including those
submitted by brokers or nominees, will be voted as indicated in the accompanying
proxy card.
-2-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the shares of
common stock beneficially owned or deemed to be beneficially owned as of July
12, 2000 by: (i) each person known to the Company to be the beneficial owner of
(or deemed under Rule 13d-3 to be the beneficial owner of) more than 5% of the
common stock, (ii) each director of the Company, (iii) each executive officer
named in the Summary Compensation Table set forth in the Executive Compensation
section, and (iv) all directors and executive officers as a group:
<TABLE>
<CAPTION>
Common Stock Percent
Name (1) Beneficially Owned (2)(3) of Class (4)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Image Investors Co. (5)..................................... 6,781,509 ...................... 37.95%
John W. Kluge and Stuart Subotnick (5)
Martin W. Greenwald (6)..................................... 1,149,162 ...................... 6.82%
Stuart Segall (6)........................................... 685,071 ...................... 4.14%
Ira S. Epstein (7).......................................... 101,842 ...................... *
M. Trevenen Huxley.......................................... 17,111 ...................... *
David Borshell.............................................. 145,816 ...................... *
Jeff Framer................................................. 92,563 ...................... *
Cheryl Lee.................................................. 164,735 ...................... *
All directors and executive
officers as a group (7 persons)........................... 2,359,374 ...................... 13.57%
--------------------------------------------------------------------------------------------------------
</TABLE>
*Less than 1%.
Notes To Beneficial Ownership Table:
(1) The mailing address of Image Investors Co. and John W. Kluge and Stuart
Subotnick is c/o Metromedia Company, One Meadowlands Plaza, East
Rutherford, NJ 07073. The mailing address of the other individuals listed
is c/o Image Entertainment, Inc., 9333 Oso Avenue Chatsworth, CA 91311.
(2) 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. Except as noted below, each person named reportedly has
sole voting and investment powers with respect to the common stock
beneficially owned by such person, subject to applicable community property
and similar laws. On July 12, 2000, there were 16,490,706 shares of common
stock outstanding.
(3) The number of shares listed as beneficially owned by each named person (and
the directors and executive officers as a group) includes shares of common
stock underlying options and rights (including restricted stock units
("RSUs") and conversion rights) vested as of or vesting within 60 days
after July 12, 2000, as follows:
<TABLE>
<CAPTION>
Options RSUs Conversion Rights
------- ----- -----------------
<S> <C> <C> <C>
Image Investors Co. (5).................... 0 ...... 0 ............. 1,379,310
John W. Kluge and Stuart Subotnick (5)
Mr. Greenwald.............................. 362,142 ...... 0 ..................... 0
Mr. Segall................................. 40,000 ...... 2,111 ..................... 0
Mr. Epstein................................ 91,731 ...... 2,111 ..................... 0
Mr. Huxley................................. 15,000 ...... 2,111 ..................... 0
Mr. Borshell............................... 136,716 ...... 0 ..................... 0
Mr. Framer................................. 85,716 ...... 0 ..................... 0
Ms. Lee.................................... 157,888 ...... 0 ..................... 0
All directors and executive officers
as a group (7 persons)................... 889,193 ...... 6,333 ..................... 0
</TABLE>
-3-
<PAGE>
Options and rights are non-voting and do not represent prior to exercise,
conversion, or, in the case of an RSU, a distribution event, any right to
dispose of the shares.
(4) Common stock not outstanding but which underlies options and rights
(including RSUs and conversion rights) vested as of or vesting within 60
days after July 12, 2000 is deemed to be outstanding for the purpose of
computing the percentage of the common stock beneficially owned by each
named person (and the directors and executive officers group), but is not
deemed to be outstanding for any other person.
(5) All of the shares of common stock are held of record by Image Investors Co.
("IIC"). The shares of common stock listed in the table as beneficially
owned by IIC may also be deemed to be beneficially owned by John W. Kluge
and Stuart Subotnick by virtue of their being directors, executive officers
and the sole shareholders of IIC. Messrs. Kluge and Subotnick have shared
voting and investment powers with respect to such shares. Amendment No. 11
(dated December 30, 1992) to a Schedule 13D, dated July 18, 1988, filed on
behalf of IIC, John W. Kluge and Stuart Subotnick, states that IIC, John W.
Kluge and Stuart Subotnick each "disclaims membership in a group, although
a group might be deemed to exist." IIC has demand and piggyback
registration rights with respect to 6,543,953 shares of common stock
beneficially owned by IIC (which include 1,379,310 shares of common stock
issuable upon conversion of debt under a credit agreement with the Company
dated as of September 29, 1997).
(6) Includes 1,030 shares of common stock held of record by Momandad, Inc., a
corporation of which Messrs. Greenwald and Segall are the sole
shareholders. With respect to such shares, Messrs. Greenwald and Segall
share voting and investment powers.
(7) Includes 2,000 shares of common stock held by Mr. Epstein's Keogh plan.
PROPOSAL 1
ELECTION OF DIRECTORS
Nominees
The Bylaws provide for a Board consisting of a minimum of 4 and a maximum
of 7 members.
The name of each nominee for election to the Board, his principal
occupation, age, all positions and offices with the Company held by him and the
year he first became a director and additional biographical data is set forth
below. For information regarding each nominee's security ownership, see
"Security Ownership of Certain Beneficial Owners and Management" above.
Martin W. Greenwald (Age: 58) Chairman of the Board, Chief Executive
-------------------
Officer and President since April 1981, and Treasurer since January 1988.
Mr. Greenwald is a 1964 graduate of Fairleigh Dickinson University.
Stuart Segall (Age: 55) Director and Vice President (not an executive
-------------
officer) since April 1981. Mr. Segall's principal occupation is that of
principal of Stu Segall Productions, a television and motion picture
production company with offices in North Hollywood, California and a full-
service production facility in San Diego, California. From 1984 to 1989,
Mr. Segall was a supervising producer for Steven J. Cannell Productions,
Hollywood, California.
Ira S. Epstein (Age: 68) Director since June 1990. Mr. Epstein is of
--------------
counsel to the Beverly Hills law firm of Weissman, Wolff, Bergman, Coleman
& Silverman. Prior to that, Mr. Epstein was the managing partner of
Cooper, Epstein & Hurewitz, where he practiced law from 1975 to 1993. Mr.
Epstein has held officer and director positions in numerous corporations.
-4-
<PAGE>
M. Trevenen Huxley (Age: 48) Director since September 1998. In 1990,
------------------
Mr. Huxley co-founded Muze, Inc., a provider of digital information about
music, books and movies. From 1992 to March 1998, Mr. Huxley served as the
President and Chief Executive Officer of Muze, Inc. and is currently its
Executive Vice President for Business Development. Mr. Huxley is also a
member of the board of directors of both Muze, Inc. and Muze UK, Ltd., a
wholly-owned subsidiary of Muze, Inc. Muze, Inc. is a closely-held
corporation which is controlled by John W. Kluge and Stuart Subotnick.
Messrs. Kluge and Subotnick, through Image Investors Co., are also the
largest shareholders of the Company.
Vote Required
Four directors are to be elected at the Annual Meeting to hold office until
the Company's next annual meeting of shareholders and until their respective
successors have been elected and qualified. Proxies solicited by the Board will
be voted, unless authority to vote is withheld, for the nominees named above or,
if any of these nominees were unavailable to stand for election (an occurrence
not expected by the Board), such substitute nominee(s) as selected by the Board.
If any shareholder has given notice at the Annual Meeting, before the
voting for directors begins, of the shareholder's intention to cumulate votes,
then all shareholders may cumulate their votes, but only for nominees whose
names have been placed in nomination before the voting. Under cumulative
voting, each shareholder is entitled to the number of votes equal to the number
of directors to be elected multiplied by the number of shares of common stock
held by the shareholder. The shareholder may cast all those votes for a single
nominee or distribute them among as many nominees as the shareholder sees fit.
If voting for directors is noncumulative, each share of common stock will be
entitled to one vote for each of the nominees.
In the event of cumulative voting for directors, the Proxyholders will have
discretionary authority to cumulate votes among the nominees named above
(including any substitute nominees) with respect to shares for which the
Proxyholders' authority to vote was not withheld, so as to elect a maximum
number of such nominees.
Assuming a quorum is present, the nominees receiving the highest number of
votes will be elected as directors (votes against a candidate have no effect).
If voting for directors is noncumulative, the holders of a majority of the
shares of common stock voting could elect all the directors.
Board Committees and Meetings
The Board met three times during fiscal 2000. Each director attended all
of the meetings. The Board administers the Company's 1994 Eligible Directors
Stock Option Plan, as amended.
Although the full Board considers all major decisions of the Company, the
Board has established two standing committees to more fully address certain
areas of importance to the Company:
. the Audit Committee, and
. the Compensation Committee
The Company does not have a nominating committee. The functions of a
nominating committee are performed by the entire Board.
Audit Committee. The audit committee is composed of Messrs. Epstein,
Huxley and Segall. As provided in the audit committee's Charter, adopted on
June 5, 2000, the audit committee's primary functions are to (i) monitor
the integrity of the Company's financial reporting process and systems of
internal controls regarding finance, accounting, and legal compliance, (ii)
monitor the independence and performance of the Company's independent auditors
and internal auditing department, and (iii) provide an avenue of communication
among the independent auditors, management, the internal auditing department,
and the Board. The audit committee met once during fiscal 2000.
-5-
<PAGE>
Compensation Committee. The compensation committee is composed of Messrs.
Epstein, Huxley and Segall. The compensation committee's primary functions are
to review and approve salaries, bonuses and other compensation payable to the
Company's executive officers. In addition, the compensation committee
administers the Company's 1998 Incentive Plan, its 1990 and 1992 Stock Option
Plans, and other employee benefit plans of the Company. The compensation
committee met once during fiscal 2000.
Compensation of Directors
Non-employee directors each receive a cash fee of $400 for each Board
meeting attended.
Director RSUs. The formula director award provisions of the 1998 Plan
provides that commencing in 1999 and ending in 2001, on each October 1 (or the
first business day thereafter), each non-executive director (i.e., directors who
are not executive officers of the Company ) then in office will be granted
automatically (without any action by the compensation committee or the Board)
2,240 restricted stock units (the "Director RSU Awards"). In October 1999, the
Company made the first of these Director RSU awards.
The Director RSUs expire 10 years after the date of grant, subject to
earlier termination as described below, and vest on a pro rata basis for each
successive day of service during the next 12-month period, commencing on the
grant date. After 2001, the Board will periodically revisit, for three year
cycles, the specific size of the annual grants (not to exceed 5,000 shares per
director per year). A non-executive director will be eligible to receive no
more than one Director RSU award in each year. Upon termination of services as
a member of the Board due to death or total disability, Director RSUs held by a
director become fully vested. Upon termination of services for any reason other
than death or total disability, all Director RSUs not yet fully vested will be
automatically forfeited. The Director RSUs are subject to the same conversion,
termination, acceleration and other continuing terms as the restricted stock
units granted to the executives under the 1998 Plan and described at page 14.
If, however, a change in control event occurs (see page 11), those terms govern
only to the extent that any changes in the Director RSUs and any Board or
compensation committee action in respect thereof are consistent, both with the
effect of the event on restricted stock or restricted stock units held by
persons other than executive officers or directors of the Company, and with the
effect on shareholders generally in respect of the underlying shares.
Discretionary Option Grants. On July 3, 2000, the Board amended the 1998
Plan to authorize, within plan share limits, discretionary stock option grants
to non-executive directors, provided that (i) the maximum number of shares
subject to options granted to any such individual does not exceed 5,000 shares
within any 12 month period, (ii) the exercise price must be at least equal to
the fair market value of the Company's common stock on the date of grant, and
(iii) the shares cannot vest any earlier than at least one year after the date
of grant, except in the case of death, disability or other circumstances
(including a change in control) to the extent acceleration is contemplated under
the 1998 Plan or the applicable award. Concurrently, on July 3, 2000, the Board
granted to each of Messrs, Epstein, Huxley and Segall an option for 5,000 shares
of the Company's common stock, exercisable at $3.75 (the closing price of the
Company's common stock on the date of grant) and vesting on the first
anniversary of the grant date (the "Year 2000 Grant").
The 1998 Plan continues to provide that discretionary awards may also be
granted to non-executive directors in one or more of the following
circumstances:
. in connection with the grantee becoming a member of the Board;
. to reward a director's exceptional or extraordinary services as a
member of the Board; or,
. in consideration for services to the Company outside of the scope of
his or her normal duties in the ordinary course as a Board member.
Formula Option Grants. From July 1994 to July 1998, the Company made
annual awards to non-employee directors (the "Formula Option Grants") under the
Company's 1994 Eligible Directors Stock Option Plan, as amended
-6-
<PAGE>
(the "Directors Plan"). Since the Director RSU Awards described above replace
and supplant the Formula Option Grants, no grants have been made under the
Directors Plan since July 1998.
Generally, the Formula Options expire 10 years after the respective dates
of grant, subject to earlier termination as described below, and vest in unequal
installments over a 16-month period following the date of grant according to the
following schedule: 50% of the options vest in month 6, 25% vest in month 12,
and the remaining 25% vest in month 16.
If a director's services as a member of the Board terminate by reason of
death or disability, his Formula Options and Year 2000 Grant become fully
exercisable and remain exercisable for one year thereafter or until the
expiration of their stated term, whichever occurs first, and then terminate. If
the director's services terminate for any other reason, the options, to the
extent they are exercisable on such date, remain exercisable for six months or
until the expiration of their stated term, whichever occurs first, and then
terminate. The options not exercisable at the time of a termination of service
will terminate, except as noted above.
Upon the occurrence of certain events (such as a dissolution, liquidation
or certain merger or asset transactions or changes in control of the Company),
each outstanding option will become immediately exercisable.
EXECUTIVE COMPENSATION
The following table sets forth certain annual and long-term compensation,
for each of the last three fiscal years, paid to the Company's Chief Executive
Officer and each Executive Officer whose salary and bonus exceeded $100,000 in
the last fiscal year:
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Annual Compensation Compensation
-------------------------------------------------- --------------------------------------------
Other Restricted Securities All
Annual Stock Underlying Other
Name & Principal Position Fiscal Salary Bonus Compensation Award(s) Options Compensation
Year ($)(1) ($)(2) ($)(3) ($)(4) (#) ($)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Martin W. Greenwald, 2000 $482,483 $247,810 $__ $294,000 0 $38,667 (5)
President & CEO 1999 416,600 147,822 __ 280,000 0 43,613 (6)
1998 284,576 90,300 __ 0 45,990 (7)
David Borshell, 2000 186,473 89,419 __ 85,050 0 3,894 (8)
Chief Operating 1999 165,421 53,408 __ 81,000 0 3,468 (8)
Officer 1998 125,699 300 __ 0 0 2,176 (8)
Jeff Framer, 2000 196,833 47,347 __ 89,775 0 4,102 (8)
Chief Financial 1999 174,255 28,329 __ 85,500 0 3,654 (8)
Officer 1998 131,411 300 __ 0 0 2,381 (8)
Cheryl Lee, 2000 196,833 47,347 __ 89,755 0 4,102 (8)
Chief Admini- 1999 180,893 28,329 __ 85,500 0 3,791 (8)
strative Officer 1998 155,392 300 __ 0 0 2,932 (8)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE>
Notes To Summary Compensation Table:
(1) The fiscal 2000, 1999 and 1998 salary figures for Mr. Greenwald include an
additional annual salary component characterized as an "unaccountable
personal expense allowance" in his employment agreement.
(2) For a description of the formula bonus plan under which each executive
officer's fiscal 2000 and 1999 bonuses were awarded, see "Bonuses" in the
Compensation Committee Report on Executive Compensation. In fiscal 1998,
none of the named executive officers earned a bonus under the formula bonus
plan set forth in each such officer's employment agreement then in effect
(the "Formula Bonus Plan"). However, in May 1997, Mr. Greenwald was
awarded a $90,000 guaranteed, discretionary bonus for fiscal 1998 which was
paid in biweekly installments commencing June 19, 1997 through March 26,
1998. The discretionary bonus was not part of the Formula Bonus Plan.
Each of the named executive officers also received a nominal holiday bonus
of $325 in fiscal 2000 and $300 in each of fiscal 1999 and 1998.
(3) While all the executive officers enjoyed certain perquisites in fiscal
2000, 1999 and 1998, such perquisites did not exceed the lesser of $50,000
or 10% of any executive officer's fiscal year salary and bonus for each
such year.
(4) Reported awards represent restricted stock units ("RSUs") granted on July
1, 1999 to Mr. Greenwald, Mr. Borshell, Mr. Framer and Ms. Lee of of
43,354, 12,542, 13,238 and 13,238 (valued at $6.78/share, the prior five
day average) and on July 6, 1998 of 41,791, 12,090, 12,761 and 12,761,
respectively, under the Company's 1998 Plan (valued at $6.70/share, the
prior five day average). The RSUs are payable solely in shares of the
Company's common stock and vest commencing one year from the award date and
on each of the next four anniversaries of that date in equal installments
at a minimum rate of 20% per year. If in any fiscal year the Company
achieves a minimum specified percentage of the applicable performance
target (which it did not achieve in fiscal year 2000 or 1999), the grant
will vest instead at a rate of 33 1/3% for that year. Each executive
officer is entitled to receive "dividend equivalents" in additional RSUs if
any dividends are paid on the common stock prior to vesting. The number
and market value of RSUs held by each of these executives at March 31, 2000
(based upon the then closing market value stock price of $4.875/share)
were:
Mr. Greenwald, 76,787 and $374,337;
Mr. Borshell, 22,214 and $108,293;
Mr. Framer, 23,447 and $114,304; and
Ms. Lee, 23,447 and $114,304.
If employment by the Company terminates due to total disability or death,
any unvested RSUs in the executive officer's stock unit account will become
fully vested and the shares issuable in payment thereof will be distributed
immediately. Upon retirement, the executive officer'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 fiscal year. If employment by the
Company is terminated for any reason other than death, disability,
retirement or in connection with a change in control event, all unvested
RSUs will be forfeited. For a description of the effects of termination of
employment prior to or following a change in control event, see page 11
("Other Change in Control Arrangements").
The 1998 Plan grants the compensation committee discretion to accelerate,
extend or otherwise modify benefits payable under the RSU awards in various
circumstances, including a termination of employment (other than "for
cause") or a change in control event. See also page 14 ("Restricted Stock
Unit Grants").
For the shares vesting in 2000 and 1999, the Board of Directors, acting on
behalf of the Compensation Committee, allowed the award recipients (if they
so desired) to surrender vested shares to cover applicable withholding
taxes.
-8-
<PAGE>
(5) Includes $3,690 of term life insurance premium payments, $29,985 of
universal life insurance premium payments and $4,992 of Company
contributions to a 401(k) plan.
(6) Includes $3,690 of term life insurance premium payments, $35,057 of
universal life insurance premium payments and $4,866 of Company
contributions to a 401(k) plan.
(7) Includes $3,690 of term life insurance premium payments, $38,230 of
universal life insurance premium payments and $4,070 of Company
contributions to a 401(k) plan.
(8) Entire amount consists of Company contributions to a 401(k) plan.
Options in Last Fiscal Year
In fiscal 2000, no options were granted to any of the executive officers
named in the Summary Compensation Table.
The following table summarizes options exercised in fiscal 2000 by the
named executive officers and certain other information regarding their
outstanding options:
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Value of Unexercised
Number of Shares In-the-Money
Shares Underlying Unexercised Options
Acquired Options at FY-End at FY-End (1)
on Value ----------------------- --------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#)(2) ($)(3) ($)(3)
---- ---------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Martin Greenwald 0 $0 345,000 30,000 $ 0 $ 0
David Borshell 0 0 131,000 0 0 0
Jeff Framer 0 0 80,000 0 0 0
Cheryl Lee 0 0 152,172 0 0 0
</TABLE>
Notes to Aggregate Option Exercises and Fiscal Year-End Option Values Table
(1) Based on the closing price on NASDAQ/NMS of the common stock on March 31,
2000 ($4.875).
(2) In the event of a "change of control" under the Company's Restated 1992
Stock Option Plan, the unvested portion of an option shall immediately
vest. A "change of control" under the plan generally includes (i) an
acquisition by one person (or group of persons) of at least 45% of the
ownership of the Company, (ii) certain changes in the majority of the Board
over a 2-year period, or (iii) shareholder approval of a merger or similar
transaction by the Company or of a plan to sell or dispose of all of the
assets of the Company. Additionally, the committee administering the plan
may (subject to Board approval) terminate the plan and the options. If any
termination occurs, the committee shall give each optionee written notice
of the intention to terminate the plan and the options, and shall permit
the exercise of the options for at least thirty days immediately preceding
the effective date of such termination. In the event an optionee's
employment with the Company ceases for any reason other than death or
disability, the options will terminate two weeks following the date
employment ceases; however, the committee, in its sole discretion, may
extend the exercise period from two weeks to three months. In the event of
an optionee's death or disability, the options may be exercised for one
year thereafter. Subject to the other provisions of the plan, the committee
has discretionary authority to amend or terminate the plan and to do any
other act advisable to administer the plan.
(3) Market value of underlying securities at fiscal year end, minus the
exercise price.
-9-
<PAGE>
Description of Employment Contracts, Termination of Employment and Change in
Control Arrangements
The Company is a party to employment agreements with each of the executive
officers named in the Summary Compensation Table entered into as of July 1,
1998. Except for base salary, bonus compensation and fringe benefits, all of
the terms and conditions of the agreements, as described below, are identical.
Term. The agreements provide for an initial term of two years ending June
30, 2000, with an automatic one year extension to June 30, 2001 unless written
notice of non-renewal is given by either the executive officer or the Company by
January 1, 2000. Following the first automatic 1-year extension, the term shall
be extended automatically for 1 additional year on each July 1, unless the
Company or an executive officer gives written notice of non-renewal by the
preceding January 1. The term of the agreement may not be extended beyond June
30, 2005. There have been no notices of non-renewal to date.
Base Salary. The agreements provide that on each July 1, each executive
will receive a 5% increase to his or her then annual base salary (including, for
Mr. Greenwald, a 5% increase to his annual unaccountable personal expense
allowance). In July 2000, pursuant to the agreements, the base salary amounts
for Mr. Greenwald, Mr. Borshell, Mr. Framer and Ms. Lee increased to $441,000,
$198,450, $209,475 and $209,475, respectively. In addition, Mr. Greenwald's
annual unaccountable personal expense allowance increased to $68,099.
Cash Bonus. Pursuant to the formula bonus plan contemplated by the
agreements, the executive officers earn cash bonuses as incentive short-term
compensation based on the Company's financial performance relative to annually
determined performance targets. The cash bonus plan for fiscal 2001 is based on
a formula relative to earnings before interest, taxes, depreciation and
amortization ("EBITDA"). The applicable cash bonus will be determined using a
formula which measures the Company's performance against a confidential target
EBITDA and multiplies the resulting percentage by a specified percentage of the
executive officer's base salary. The specific performance criteria and targets
as well as percentages of salary or other variables pursuant to which the cash
bonuses are determined are applicable to all of the executive officers and
subject to change annually at the discretion of the compensation committee. For
a further description of the cash bonuses, see the Compensation Committee Report
on Executive Compensation on page 13.
Stock-Based Awards. The agreements provide that stock-based grants will be
in such form and amounts, and at such time or times, as the Board (or, if
applicable, the administrator of the relevant stock option or award plan)
determines.
Severance Packages. The agreements provide for severance packages
consisting of base salary (and, for Mr. Greenwald, his unaccountable personal
expense allowance) and insurance continuation for 6 months, and a pro rata
portion of any bonus payable for the longer of 6 months or that part of the
fiscal year occurring prior to expiration of the term. The agreements also
provide for comparable benefits in the event of an executive officer's death or
total disability.
Termination of Employment. The agreements provide for varying benefits
upon a termination of employment depending upon the reason for the termination
and when it occurs. If an agreement is terminated prior to a change in control
"without cause" (which generally means for any reason than (a) death or
disability, (b) for cause or (c) a voluntary termination), the executive officer
will continue to receive all compensation, rights and benefits under the
agreements through the expiration of the remaining term, plus the severance
benefits described above.
If the employment agreement is terminated due to a change in control for
any reason other than (a) death or total disability, (b) for cause or (c) a
voluntary termination (other than a termination for "good reason"), or by the
executive officer for "good reason," the executive officer will be entitled to
receive all compensation, rights and benefits under the employment agreement for
the longer of one year following the effective date of termination or through
the expiration of the remaining term, plus the severance benefits described
above. "Good reason" generally includes a material reduction in duties, status,
compensation or benefits, a material breach by the Company, or a forced
relocation.
-10-
<PAGE>
If a termination "for cause" occurs, no severance, fringe benefits,
compensation or other such rights, including any pro rata portion of bonus
otherwise due, is due or payable. A termination "for cause" generally includes
the executive officer's fraud, willful misconduct, gross negligence, breach of
fiduciary duty or material breach of an agreement with the Company.
The agreements provide that all unvested existing options granted to the
executive officer will immediately vest if the agreement is terminated by the
Company "without cause" or by the executive for "good reason" following a change
in control. In addition, any unvested portion of the executive officer's RSU
award that has not expired will vest immediately if the Company terminates the
agreement "without cause" within one year after a change in control, or less
than three months prior to and in express anticipation of an announced change in
control. The definition of change in control under the agreements is
substantially equivalent to the definition of a change in control event under
the 1998 Plan, described below under the heading "Other Change in Control
Arrangements."
Fringe Benefits. The executive officers are entitled to receive medical,
dental, life and short and long-term disability insurance, 401(k) plan
participation, vacation and reimbursement for reasonable business expenses. Mr.
Greenwald's agreement further provides for the payment of personal life and
disability insurance premium payments and reimbursement for medical expenses not
covered by medical insurance of up to $30,000 per annum, an additional annual
salary component characterized as an "unaccountable personal expense allowance"
(as stated above), and use of a company car.
Other Change in Control Arrangements
Outstanding stock options granted under the Company's stock option plans
and individual option grants without reference to a plan include provisions for
acceleration of exercisability upon a change in control substantially as
summarized in note 2 to the Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values Table. Options granted under the Company's 1990
Stock Option Plan include provisions for acceleration of exercisability upon a
change of control except in the event the acquiring corporation (or a parent or
subsidiary thereof) agrees to (a) assume the Company's obligations under the
plan and the options or (b) replace the options with new options having terms at
least as favorable to the optionee. Options granted on May 19, 1994 under
individual plans include provisions allowing the Board to terminate the plan and
the option term in the event of a change in control, whereupon the optionee may
exercise the options for at least 60 days following the effective date of
termination. Under the 1990 Stock Option Plan, "change of control" generally
means (1) the dissolution of the Company, (2) the sale of all or substantially
all of the Company assets, or (3) a merger or similar transaction in which the
Company would not be the surviving corporation, or in which the Company would
survive but as the wholly-owned subsidiary of another corporation.
Pursuant to the 1998 Plan, if an executive officer's employment is terminated
by the Company for any reason other than because of death or total disability,
either (a) in express anticipation of an announced transaction that would
constitute a change in control event (as summarized below) and less than 3
months before its occurrence, or (b) within one year following a change in
control event, then any unvested portion of his or her RSU award that has not
previously expired will vest immediately, provided that no RSU vesting will be
accelerated to a date less than six months after the date of grant.
Furthermore, immediately prior to a change in control event, all RSUs credited
to an executive officer's stock unit account (including dividend equivalents)
will vest and will be distributed immediately. A change in control event under
the 1998 Plan generally includes (1) an acquisition by one person (or group of
persons) of at least 45% of the ownership of the Company, other than an
"excluded person," (2) certain changes in a majority of the Board over a 2-year
period, (3) Board and (if required by law) shareholder approval of a plan to
consummate the dissolution or complete liquidation of the Company, or (4)
mergers and similar transactions which result in a 50% change in ownership of
the Company (subject to certain exceptions). The term "excluded persons"
includes Image Investors Co. ("IIC"), a principal shareholder of the Company,
John Kluge and Stuart Subotnick, who own and control IIC, and Mr. Greenwald.
-11-
<PAGE>
Stock Price Performance Graph*
The graph below compares the cumulative total return of the Company, the
NASDAQ U.S. Market Index and a Company-selected peer group for the 5-year period
ending March 31, 2000. The peer group consists of Handleman Company, Musicland
Stores, Rentrak and Valley Media, Inc. (replacing J2 Communications which is no
longer in the home video licensing and distribution business). The graph
assumes an initial investment of $100 on April 1, 1995 in the Company, the
NASDAQ U.S. Market Index and the peer group. The graph also assumes
reinvestment of dividends, if any.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG IMAGE ENTERTAINMENT, NASDAQ U.S. AND PEER GROUP
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
STARTING
BASIS
DESCRIPTION 1995 1996 1997 1998 1999 2000
--------------------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
IMAGE ENTERTAINMENT ($) $100.00 $94.74 $54.39 $42.99 $82.46 $68.41
NASDAQ U.S. ($) $100.00 $135.80 $150.95 $228.88 $309.19 $574.04
PEER GROUP ($) $100.00 $48.28 $42.90 $102.40 $105.77 $77.35
</TABLE>
-----------------------
* This section of the Proxy Statement shall not be deemed to be
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filings of the Company pursuant to the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent the
Company specifically incorporates this section by reference therein, and shall
not be deemed soliciting material or otherwise deemed filed under either of the
Acts.
-12-
<PAGE>
Compensation Committee Report on Executive Compensation**
The Committee. The Company's compensation committee (for the purposes of
this report only, the "Committee") was established in 1992 and is composed
entirely of outside directors. The Committee reviews with the full Board all
aspects of the compensation packages for each executive officer of the Company.
The Committee, and from time to time the full Board, approves such packages and
any amendments thereto. The Committee administers the Company's 1990 Stock
Option Plan, the Restated 1992 Stock Option Plan, the 1998 Plan and other
employee benefit plans of the Company. The following report addresses the
Committee's objectives and its actions and decisions with respect to
compensation for the 2000 fiscal year.
Compensation Objectives. The Committee's goal is to maximize shareholder
value over the long-term by attracting, retaining and motivating key executives.
The executive compensation packages contain three primary components:
. base salary,
. long-term incentive compensation in the form of stock-based awards,
including options and, commencing in fiscal 1999, restricted stock unit
awards ("RSUs"), and
. short-term incentive compensation in the form of annual cash bonuses
based on the Company's financial performance.
The Company offers a contributory 401(k) plan and provides health, life and
disability insurance to all full-time employees.
In fiscal 1999 a new executive compensation structure was implemented in an
effort to better integrate executive compensation with corporate strategic
objectives, maintain a strong link between executive rewards and shareholder
interests, and encourage long-term retention of executive officers, and,
effective July 1, 1998, the Company entered into new employment agreements with
the executive officers. For a further description of the bonus formula, see
"Bonuses" below and page 10 of this proxy statement ("Description of Employment
Contracts, Termination of Employment and Change in Control Arrangements").
In fiscal 2000, the Committee authorized an award to executive officers of
RSUs (substantially similar to the award given in fiscal 1999), which vest on an
annual schedule but may be accelerated based on annual financial performance
targets related to EBITDA. These grants are described below and in the Summary
Compensation Table at page 7.
Base Salary. Base salary is paid in accordance with each executive's
employment agreement. The agreements provide for annual percentage increases to
base salary (and Mr. Greenwald's unaccountable personal expense allowance) of
5%. In fiscal 2000, no other increases in base salary were made.
Option Grants. The Committee views any option grant portion of the
executive compensation packages as a special form of long-term incentive
compensation to be awarded on a limited and non-regular basis. Stock options
granted to executives are priced at or above the fair market value of the common
stock on the date of grant and are intended to give management a stake in the
Company's growth while aligning management interests with those of the
---------------
** The Compensation Committee Report on Executive Compensation shall not be
deemed to be incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filings of the Company pursuant to the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent the Company specifically incorporates this section by reference therein,
and shall not be deemed soliciting material or otherwise deemed filed under
either of the Acts.
-13-
<PAGE>
Company's shareholders. Awards of stock options are determined based on the
Committee's subjective determination of the amount of such awards necessary, as
a supplement to an executive's base salary and performance-based bonus, to
retain and motivate such executive. No options were granted to executive
officers in fiscal 2000.
Restricted Stock Unit Grants. In fiscal 2000, the Committee again
authorized RSU grants to executive officers, effective July 1999, as an
additional form of long-term incentive intended to provide executives with a
more direct incentive to enhance the value of the Company's common stock. The
specific number of RSUs in each grant was based upon a multiple of the
executive's base salary, divided by the average price of the Company's common
stock prior to grant. In general, the base salary multiples for the executive
officers, which ranged from 20% to 70%, increased with the level of
responsibility and the perceived impact of each position on the strategic
direction of the Company. Similarly structured RSU grants were also made in
fiscal 1999.
To encourage retention and promote an alignment of interest with the
Company's shareholders, the RSUs vest over a maximum period of five years;
vesting may be accelerated based upon the Company's financial performance. The
RSUs will vest in equal annual installments of at least 20%; however, if
performance meets or exceeds performance targets established annually by the
Committee, the RSUs will vest at the rate of 33 1/3% for that year. For fiscal
1999 and 2000, the Committee authorized a performance target related to EBITDA.
The fiscal 2000 target was not met so no accelerated vesting occurred.
Bonuses. Under their employment agreements and pursuant to a formula bonus
plan, each of the executive officers was entitled to receive a specified
percentage of his or her salary as a cash bonus for fiscal 2000, the receipt and
amount of which depended on the achievement of specific levels of EBITDA, as
established by the Committee in the first quarter of fiscal 2000. Under the
formula bonus plan, each executive officer's bonus was determined by multiplying
a specified percentage of his or her salary (75% for Mr. Greenwald, 60% for Mr.
Borshell and 30% for each of Mr. Framer and Ms. Lee) by a certain performance
factor, a percentage derived from a comparison of the Company's actual EBITDA to
the target EBITDA. In order for an executive to receive any bonus, the
performance factor had to equal a minimum of 40%, with the amount of the bonus
increasing as the performance factor percentage increased, up to a maximum of
125%.
The specific performance criteria and targets used to determine the bonuses
and RSU accelerated vesting are subject to change annually at the Committee's
discretion to adjust for changes in the Company's business, competitive
conditions, changes in its capitalization, performance and needs. The Committee
has not disclosed publicly the exact targets specified in these awards because
such information is deemed to be confidential and proprietary, the disclosure of
which would be against the best interests of the Company. Bonuses for fiscal
2000, which were paid in fiscal 2001, are reflected in the Summary Compensation
Table at page 7 and under "Compensation of Chief Executive Officer" below.
Compensation of Chief Executive Officer. Pursuant to the formula bonus
plan described in his employment agreement, Mr. Greenwald was eligible for an
annual bonus for fiscal 2000 of 30% to 94% of his base salary if the performance
of the Company exceeded a specified minimum percentage of the applicable EBITDA
performance target established by the Committee in the first quarter of the
fiscal year. Although the Company did not achieve its target EBITDA in fiscal
2000, the Company's actual EBITDA exceeded the specified minimum percentage of
the target results (40%) necessary to receive a bonus. Mr. Greenwald received a
bonus of $247,810, or 59% of his annual base salary, based on the annual bonus
formula established by the Committee for fiscal 2000.
In July 1999, Mr. Greenwald received a grant of 43,354 RSUs. The specific
number of RSUs granted was derived by taking 70% of Mr. Greenwald's base salary
and dividing it by the average price of the Company's common stock prior to
grant, a methodology similar to that previously used to determine the size of a
prior grant made to Mr. Greenwald. The other terms of his RSUs are described in
the "Restricted Stock Unit Grants" section above.
Section 162(m) Policy. To the extent reasonably practicable and to the
extent within the Committee's control, the Committee prefers to limit executive
compensation in ordinary circumstances to that which is deductible by the
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<PAGE>
Company under Section 162(m) of the Internal Revenue Code. During fiscal year
2000, all compensation paid to executive officers was within the Section 162(m)
limit. Grants of RSUs, however, are not considered performance-based for these
purposes and are included as compensation for these purposes only when they
vest. Accordingly, to the extent that the value of shares vesting in any future
year under RSU awards, when combined with salary, allowances and other non-
exempt compensation, exceeds $1,000,000, the excess would not be deductible.
Under current circumstances, the Committee does not satisfy the Code requirement
that performance-based (i.e., Section 162(m) exempt) compensation be awarded by
a committee of at least two "outside directors" (as defined in the Code) because
of the directors' other relationships described below. Nevertheless, the
Committee does not expect non-exempt compensation to exceed the applicable limit
for fiscal year 2001.
COMPENSATION COMMITTEE
Ira S. Epstein
M. Trevenen Huxley
Stuart Segall
Compensation Committee Interlocks and Insider Participation
Mr. Segall is a non-salaried employee and non-executive officer of the
Company.
Mr. Epstein, a non-employee director (and director nominee), served on the
Company's compensation committee for the entire fiscal year 2000. Mr. Epstein
is of counsel to the law firm of Weissman, Wolff, Bergman, Coleman & Silverman,
which in fiscal 2000 was retained by the Company and which continues to provide
legal services to the Company and receives fees for such services at prices
that, in the opinion of management, are fair and reasonable and as favorable to
the Company as those which could have been obtained from unrelated third
parties.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into a credit agreement with Image Investors Co.
("IIC"), a principal shareholder of the Company owned and controlled by John W.
Kluge and Stuart Subotnick, dated as of September 29, 1997 (the "Credit
Agreement"), pursuant to which the Company borrowed $5 million from IIC, with
interest payable quarterly at 8% per annum, and principal due in five years.
The loan is unsecured and subordinated to the Company's senior lender, Foothill
Capital Corporation, and is convertible into the Company's common stock at any
time during the term at a conversion price of $3.625 per share (the closing
price of the Company's common stock on September 29, 1997). Proceeds from the
loan were used to pay down the Company's then outstanding balance under its
revolving credit facility.
Ira S. Epstein, a director of the Company, is of counsel to Weissmann,
Wolff, Bergman, Coleman & Silverman, LLP, a law firm which performed legal
services for the Company during fiscal 2000 and will continue to do so in the
future. During the period from April 1, 1999 to July 12, 2000, the Company paid
Mr. Epstein's law firm fees of approximately $76,000, incurred at rates that, in
the opinion of management, are fair and reasonable, and as favorable to the
Company as those which could have been obtained from unrelated third parties.
Dale Borshell, the mother of David Borshell, the Company's Chief Operating
Officer, is a travel agent at Travel Syndicate. For many years, the Company
has used Travel Syndicate nearly exclusively for its travel needs. During the
period from April 1, 1999 to July 12, 2000, the Company paid Travel Syndicate
approximately $188,000, which included airplane ticket fees and costs, and
expenses relating to hotel and other travel related services booked through
Travel Syndicate, in amounts that, in the opinion of management, are fair and
reasonable, and as favorable to the Company as those which could have been
obtained through or from unrelated third parties.
-15-
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who beneficially own more than 10%
of the common stock, to file with the Securities and Exchange Commission (the
"SEC") and the NASDAQ/NMS initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of the Company. Executive
officers, directors and greater than 10% shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) reports they
file. Based solely upon review of the copies of Section 16(a) reports furnished
to the Company, or written representations from certain reporting persons that
no Forms 5 were required for those persons, the Company believes that, during
fiscal 2000, its executive officers, directors and greater than 10% shareholders
complied with all applicable Section 16(a) filing requirements, except for an
inadvertent late filing on Form 4 by Messrs. Epstein, Huxley and Segall each
covering one transaction in October 1999 (i.e., an automatic award of RSUs under
the 1998 Plan).
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has unanimously appointed, and recommends that the shareholders
ratify the appointment of, KPMG LLP, independent certified public accounts and
the Company's auditors since fiscal 1990, as auditors for fiscal 2001. Though
shareholder ratification is not required by law or otherwise, the Board is
seeking ratification as a matter of good corporate practice. If the appointment
is not ratified, the Board will reconsider the appointment. Representatives of
KPMG LLP will be present at the Annual Meeting, will have the opportunity to
make statements if they so desire, and will be available to respond to
appropriate questions.
Vote Required
Assuming a quorum is present, the affirmative vote of the holders of a
majority of the common stock represented (in person or by proxy) and voting at
the Annual Meeting (the shares affirmatively voting must also constitute at
least a majority of a quorum) is required to ratify the appointment of KPMG LLP
as the Company's independent auditors.
SHAREHOLDER PROPOSALS
To be considered for inclusion in the Company's proxy solicitation
materials for the 2001 Annual Shareholders' Meeting, a shareholder proposal
under SEC Rule 14a-8 must be received by the Company's Corporate Secretary at
the principal executive offices of the Company no later than April 2, 2001.
A shareholder may wish to have a proposal (other than a proposal in respect
of a nominee for election to the Board) presented at the 2001 Annual
Shareholders' Meeting, but not to have such proposal included in the Company's
proxy statement for the meeting. If notice of the proposal is not received by
the Company by June 16, 2001, then the proposal will be deemed untimely under
Rule 14a-4(c) under the Securities Exchange Act of 1934, and the Company will
have the right to exercise discretionary voting authority with respect to the
proposal.
In addition, Article III, Section 4, of the Company's bylaws provides as
follows:
Section 4. Nomination for Director. Nominations for election of
--------- -----------------------
members of the Board of Directors may be made by the Board of
Directors or by any shareholder of any outstanding class of voting
stock of the Company entitled to vote for the election of directors.
Notice of intention to make any nominations, other than by the Board
of Directors, shall be made in writing and shall be received by the
President of the Company no more than 60 days prior to any meeting of
shareholders called for the election of directors, and no more than 10
days after the date the notice of such meeting is sent to shareholders
pursuant to Section 4 of Article II of these bylaws; provided,
however, that if only 10 days' notice of the meeting is given to
shareholders, such notice of intention to nominate shall be
-16-
<PAGE>
received by the President of the Company not later than the time fixed
in the notice of the meeting for the opening of the meeting. Such
notification shall contain the following information to the extent
known to the notifying shareholder: (a) the name and address of each
proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the number of shares of voting stock of the Company owned
by each proposed nominee; (d) the name and residence address of the
notifying shareholder; and (e) the number of shares of voting stock of
the Company owned by the notifying shareholder. Nominations not made
in accordance herewith shall be disregarded by the then chairman of
the meeting, and the inspectors of election shall then disregard all
votes cast for each nominee.
ANNUAL REPORT TO SHAREHOLDERS/FORM 10-K
The Company's Annual Report to Shareholders (also the Company's Form 10-K
for the fiscal year ended March 31, 2000) accompanies this proxy statement but
does not constitute proxy soliciting material. Exhibits to the Annual
Report/Form 10-K are available upon payment of a reasonable fee. Please direct
requests, in writing, to:
CHERYL LEE, ESQ.
Corporate Secretary
Image Entertainment, Inc.
9333 Oso Avenue
Chatsworth, California 91311
OTHER BUSINESS
The Proxyholders will have discretionary authority to vote on such business
(other than Proposals 1 and 2) as may properly come before the Annual Meeting
(the Board does not know of any such business as of this date) and all matters
incident to the conduct of the meeting.
By Order of the Board of Directors,
IMAGE ENTERTAINMENT, INC.
CHERYL LEE
Corporate Secretary
Chatsworth, California
July 31, 2000
--------------------------------------------------------------------------------
Whether or not you expect to attend the meeting, we urge you to promptly
complete, date and sign the enclosed proxy and return it in the envelope
provided. Thank You.
--------------------------------------------------------------------------------
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<PAGE>
IMAGE ENTERTAINMENT, INC.
Proxy Solicited by the Board of Directors for the 2000 Annual Meeting of
Shareholders
August 30, 2000
The undersigned appoints Ira S. Epstein, Martin W. Greenwald, M. Trevenen
Huxley and Stuart Segall, and each of them, proxies (each with full power of
substitution) to represent the undersigned at the Image Entertainment, Inc.
2000 Annual Meeting of Shareholders to be held on August 30, 2000 and any
adjournments thereof and to vote the shares of the Company's common stock held
of record by the undersigned on July 12, 2000 as directed below.
1. Election of Directors (Proposal 1).
[_] FOR all nominees [_] WITHHOLD
listed below (except as AUTHORITY to vote
indicated to the contrary for all nominees
below). listed below.
INSTRUCTION: To withhold authority to vote for any individual nominee(s) strike
a line through the name of the nominee(s) in the following list:
IRA S. EPSTEIN MARTIN W. GREENWALD M. TREVENEN HUXLEY STUART SEGALL
2. Ratification of the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending March 31, 2001 (Proposal 3).
[_] FOR [_] AGAINST [_] ABSTAIN
3. The proxies are authorized to vote in their discretion upon such other
business as may properly come before the Annual Meeting and any matters
incident to the conduct of the Meeting.
PLEASE SIGN ON REVERSE SIDE
The shares represented by this Proxy will be voted as directed above. If no
direction is indicated, the shares represented by this Proxy will be voted FOR
the director nominees named in Proposal 1 and FOR Proposal 2 and will be voted
in the discretion of the proxies on such other business as may properly come
before the Annual Meeting. The undersigned acknowledges receipt of the Notice
of Annual Meeting of Shareholders and the Proxy Statement dated July 31, 2000.
Dated: _______________
Signed: ______________
Signed: ______________
Please date this Proxy and sign
exactly as your name appears
hereon. If shares are jointly
held, this Proxy should be signed
by each joint owner. Executors,
administrators, guardians or
others signing in a fiduciary
capacity should state their full
titles. A Proxy executed by a
corporation should be signed in
its name by its president or
other authorized officer. A Proxy
executed by a partnership should
be signed in its name by an
authorized person.
PLEASE PROMPTLY COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT IN THE
ENVELOPE PROVIDED.
