Share Escrow Agreement, dated as of April 2, 2012, by and among Theodore S. Green, Producers Sales Organization, John Avagliano, JH Partners Evergreen Fund, L.P., JH Investment Partners III, L.P. and JH Investment Partners GP Fund III, LLC

This Share Escrow Agreement, dated as of April 2, 2012 (this "Agreement"), is made by and among Theodore S. Green, Producers Sales Organization, a California Corporation, and John Avagliano (each, a "Management Representative"), JH PARTNERS EVERGREEN FUND, L.P., JH INVESTMENT PARTNERS III, L.P. and JH INVESTMENT PARTNERS GP FUND III, LLC (the "JH Entities" and, together with the Management Representatives, the "Escrow Parties" and each an "Escrow Party"), and PERKINS COIE LLP, as escrow agent (the "Escrow Agent").

A.           Pursuant to an Agreement and Plan of Merger between RLJ Acquisition, Inc. and Image Entertainment, Inc. dated as of April 2, 2012 (the "Merger Agreement"), the Management Representatives will receive shares of common stock of RLJ Entertainment, Inc., a Nevada corporation, or an affiliate ("RLJ") upon the closing of the transactions contemplated by the Merger Agreement (such date, the "Closing Date").

B.           An aggregate of 100,000 of such shares (the "Escrow Shares") (in the proportion listed on Exhibit A) will be held in escrow by the Escrow Agent for a period of up to nineteen (19) months from the Closing Date (the "Cut-Off Date") and will be subject to forfeiture to the JH Entities unless all of the Release Conditions (defined below) are satisfied.

C.           The Escrow Parties desire to set forth their understandings with regard to the escrow arrangements established by this Agreement.

D.           Capitalized terms not defined in this Agreement have the meaning set forth in the Merger Agreement.

NOW, THEREFORE, in consideration of the premises and agreements of the parties contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:

 

 

 

 

 

 

 

 

 

 

(i)           Each of the JH Entities shall have been paid in full, in cash, all amounts due and payable to such JH Entity as of the date hereof, including, but not limited to: (i) accrued management fee of $600,000; (ii) commitment fee of $500,000 for credit support; (iii) 5% annually of up to $11,500,000 of credit enhancement provided by JH Entities for the period of time from when the JH Entities’ letter of credit (“Letter of Credit”) was posted in favor of PNC until the JH Entities are released from said Letter of Credit; (iv) $59,740 in fees for the posting of the Letter of Credit; and (v) $75,000 to JH Entities legal counsel;

 

(ii)         The interest due and payable on the promissory notes to be issued to the JH Entities in connection with the acquisition of the Series B Preferred Stock by RLJ Acquisition, Inc. (the "Promissory Notes") shall have been paid when due as provided in the Promissory Notes and there shall be no other event of default existing under the Promissory Notes; provided however, that unless the JH Entities elect to receive common stock or additional Promissory Notes as interest under the Promissory Notes, all cash available as residual Excess Cash Flow (as defined in the Promissory Notes) shall be paid to the JH Entities in cash for its interest payment(s);

 

(iii)        Prior to the Cutoff Date:

 

 

 

 

a)           The RLJ Stock must be Listed on the date the Interest Shares become Freely Tradeable; and

 

 

All references to the $7.50 share price shall be adjusted appropriately for stock splits, reverse stock splits and other adjustments that effect RLJ stockholders on a pro rata basis.

 

 

(c)           The satisfaction of the Release Conditions shall be determined by the Escrow Parties.  In making any disbursements hereunder, the Escrow Agent may rely entirely upon the terms set forth herein and on the representations and certifications delivered by the Escrow Parties.

 

(d)           If any Escrow Party disputes whether the Release Conditions have been satisfied all of the Escrow Shares shall be held by the Escrow Agent until the earliest to occur of (i) the Escrow Agent’s receipt of a joint direction executed by the JH Entities and Theodore Green or John Hyde with respect to such amount substantially in the form set forth on Exhibit B hereto, (ii) the Escrow Agent’s receipt of a final, non-appealable judgment, order or decree of the court or other judicial body or arbitrator or panel of arbitrators of competent jurisdiction that decided the underlying claim that indicates whether the JH Entities or the Management Representatives are entitled to the Escrow Shares (each, a "Final Judgment"), together with a certificate from the Escrow Parties, certifying that the Final Judgment constitutes a "final, non-appealable" judgment or (iii) thirty-one (31) days after receipt by the Escrow Agent of any judgment, order or decree that is not a Final Judgment, unless on or prior to the close of business on the 30th day following such receipt, the Escrow Agent receives notice from any party that it has filed an appeal, in which case no distribution shall be made until the conditions in clauses (i), (ii) or (iii) above have been satisfied (any such joint direction, certification of a Final Judgment or non-appeal of a judgment, order or decree being a "Determination of Claim").  Upon receipt of a Determination of Claim, the Escrow Agent shall disburse to the Escrow Parties the number of Escrow Shares as is required by the Determination of Claim.

 

 

 

 

 

(i)          The Escrow Agent shall exercise the same degree of care toward the Escrow Amount as it exercises toward its own similar property and shall not be held to any higher standard of care under this Escrow Agreement.

 

 

(ii)         The Escrow Agent shall be obligated to perform only such duties as are expressly set forth in this Escrow Agreement.  No implied covenants or obligations shall be inferred from this Escrow Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by the provisions of any agreement concerning the Escrow Parties beyond the specific terms hereof.

 

(iii)        The Escrow Agent shall not be liable hereunder except for its own fraud, willful misconduct or bad faith and the Escrow Parties jointly agree to indemnify the Escrow Agent for and hold it harmless as to any loss, liability or expense, including attorney fees, incurred without fraud, willful misconduct or bad faith on the part of the Escrow Agent and arising out of or in connection with this Escrow Agreement.  In no event shall the Escrow Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including, but not limited to, lost profits), even if the Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.

 

(iv)        The Escrow Agent shall be entitled to rely upon any order, judgment, certification, instruction, notice or other writing delivered to it in compliance with the provisions of this Escrow Agreement without being required to determine the authenticity or the correctness or any fact stated therein or the propriety or validity of service thereof.  The Escrow Agent may act in reliance upon any instrument comporting with the provisions of this Escrow Agreement or signature believed by it to be genuine and may assume that any person purporting to give notice or receipt or advice or make any statement or execute any document in connection with the provisions hereof has been duly authorized to do so.  At any time the Escrow Agent may request in writing an instruction in writing from any of the Escrow Parties.

 

(v)         The Escrow Agent makes no representation as to the validity, value, genuineness or collectibility of any security or other document or instrument held by or delivered to it.

 

(vi)        The Escrow Agent shall not be called upon to advise any party as to selling or retaining, or taking or refraining from taking any action with respect to, any securities or other property deposited or acquired by it hereunder.

 

(vii)       In the event of any ambiguity in the provisions of this Escrow Agreement or any dispute between or conflicting claims by or among the undersigned and/or any other person or entity with respect to any funds or property deposited hereunder, the Escrow Agent shall be entitled, at its sole option, to refuse to comply with any and all claims, demands or instructions with respect to such property or funds so long as such dispute or conflict shall continue, and the Escrow Agent shall not be or become liable in any way to the undersigned for its failure or refusal to comply with such conflicting claims, demands or instructions.  The Escrow Agent shall be entitled to refuse to act until either such conflicting or adverse claims or demands shall have been finally determined by binding arbitration (if applicable) or a court of competent jurisdiction or settled by agreement between the conflicting parties as evidenced in a writing, satisfactory to the Escrow Agent or the Escrow Agent shall have received security or an indemnity satisfactory to the Escrow Agent sufficient to hold the Escrow Agent harmless from and against any and all loss, liability or expense which the Escrow Agent may incur by reason of its acting.  The Escrow Agent may in addition elect in its sole option to commence an interpleader action or seek other judicial relief or orders as the Escrow Agent may deem necessary.

 

 

(viii)      No provision of this Escrow Agreement shall require the Escrow Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder.

 

(ix)         Each party to this Escrow Agreement hereby waives and releases the Escrow Agent from any claim that the Escrow Agent is acting as counsel to any party to this Escrow Agreement and Escrow Agent will be free to represent any party to this Escrow Agreement in any matter adverse to any other party to this Escrow Agreement other than matters involving a dispute under this Escrow Agreement. The immunities and exceptions from liability of the Escrow Agent shall extend to its partners, employees and agents.

 

(x)         The provisions of this Section 4(b) shall survive termination of this Escrow Agreement and/or the resignation or removal of the Escrow Agent.

 

 

 

 

 

EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.

 

 

 

 

 

 

[Signatures on following page]

 

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

 

 

	JH INVESTMENT PARTNERS III, L.P.
	By:   JH Evergreen Management, LLC, its General Partner
	By:	/s/R. Todd Forrest
		Name:  R. Todd Forrest
		Title:  Chief Financial Officer
	Address:
	c/o JH Partners, LLC
	451 Jackson Street
	San Francisco, CA 94111
	Telephone:   ###-###-####
	Facsimile:   ###-###-####

 

	JH INVESTMENT PARTNERS GP FUND III, LLC
	By:   JH Evergreen Management, LLC, its Manager
	By:	/s/R. Todd Forrest
		Name:  R. Todd Forrest
		Title:  Chief Financial Officer
	Address:
	c/o JH Partners, LLC
	451 Jackson Street
	San Francisco, CA 94111
	Telephone:   ###-###-####
	Facsimile:   ###-###-####

 

 

 

	THE ESCROW AGENT:
	By:	/s/Perkins Coie LLP
		Name:  David J. Katz
		Title:  Partner
	Address:
	c/o Perkins Coie LLP
	1888 Century Park E, Suite 1700
	Los Angeles, CA 90067-1721
	Attention:  David Katz
	Facsimile:   ###-###-####

 

	THE MANAGEMENT HOLDERS:
	JOHN AVAGLIANO
	/s/John Avagliano
	John Avagliano
	Address:
	656 Daniel Court
	Wyckoff, NJ 07481

 

	THEODORE S. GREEN
	/s/Theodore S. Green
	Theodore S. Green
	Address:
	307 East 87th Street
	New York, NY 10128

 

 

 

 

Management Representative	Number of Escrow Shares
Theodore S. Green	44,444
Producers Sales Organization	37,778
John Avagliano	17,778

JH Entity	Pro Rata Percentage
JH Partners Evergreen Fund, L.P.	85.17%
JH Investment Partners III, L.P.	10.16%
JH Investment Partners GP Fund III, LLC	4.67%

Pursuant to Section 3 of the Escrow Agreement dated as of [_________], 2012 (the "Escrow Agreement") by and among JH PARTNERS EVERGREEN FUND, L.P., JH INVESTMENT PARTNERS III, L.P. and JH INVESTMENT PARTNERS GP FUND III, LLC (the "JH Entities") and ________________ ("Management Representative" and, together with the JH Entities, the "Escrow Parties") and PERKINS COIE LLP, (the "Escrow Agent"), the [JH Parties or Management Representatives, as the case may be] hereby advise the Escrow Agent that the Release Conditions set forth in Section 3 of the Escrow Agreement have been satisfied with respect to the Management Representative and hereby instruct the Escrow Agent to release _________ Escrow Shares from escrow in accordance with the following instructions:

_________________________

_________________________

_________________________

_________________________

 

[JH PARTNERS EVERGREEN FUND, L.P.
JH INVESTMENT PARTNERS III, L.P.
JH INVESTMENT PARTNERS GP FUND III, LLC
By: JH Evergreen Management, LLC, Manager
By:
	Name:
	Title:		]

 

Agent for the Management Representative]
Name: