By : Erik Gruenwedel | Posted: 22 Dec 2009
Financially challenged Image Entertainment said its board of directors had approved the sale of up to $30 million of newly authorized Series B and Series C preferred stock to affiliates of investment group JH Partners, LLC.
Under terms of the Dec. 21 deal, Chatsworth, Calif.-based Image will sell 22,000 shares of Series B stock and 196,702 shares of Series C stock for an aggregate purchase price of $22 million. Image plans to use the funds to maintain operations and pay current debts, including a $4 million delinquent loan payment.
JH Partners has the option to purchase in two tranches (installments) an additional 8,000 shares of Series B stock and 71,528 shares of Series C stock, for $8 million. In addition, Image must pay JH a $1 million transaction fee plus another $1 million for out-of-pocket expenses, and vacate four of the board’s current five members, excluding most likely chairman and founder Marty Greenwald.
JH will appoint four new members to the board.
The deal can be terminated if existing conditions with current lenders are not remedied by Dec. 24, or the funding does not close by Jan. 8, 2010. JH has pledged $5 million to induce current lenders, which include Wachovia, to cooperate until a new credit facility can be documented and funded.
“We are excited about the opportunities for [Image] this new investment brings,” said Jeff Framer, president of Image. “The company has struggled in recent periods because of a lack of resources. The new investors bring a wealth of entertainment industry experience coupled with access to sufficient capital to allow the company to continue growing.”
Indeed, in addition to maintaining a distribution strategy aimed at marketing cast-driven, below-the-radar feature films, Image must contend with the unexpected passing of actress Brittany Murphy, who stars in thriller Across the Hall, which Image is releasing on DVD and Blu-ray Disc Jan. 19.