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Lionsgate Bows 'Improve Image' Web Site

12 Sep, 2006 By: Erik Gruenwedel

The gloves are coming off as Image Entertainment and its second-largest shareholder, Lionsgate, trade counter claims in regulatory filings prior to Image's board of director elections Oct. 10.Lionsgate launched a dedicated Web site (www.votetoimproveimage.com) in an all-out effort to elect its slate of candidates to the board the Chatsworth, Calif.-based distributor. Santa Monica, Calif.-based Lionsgate has twice unsuccessfully attempted to acquire Image.

Image countered with a letter to Lionsgate claiming to be “deeply disturbed” by the mini-major's tactics and anti-competitive campaign that it said “artificially deflate” Image's stock price.

Lionsgate's “Image” site features links to stockholder letters, press releases, Securities and Exchange Commission filings, voting tips for Image shareholders and related contact information.

With about 19% of Image's outstanding shares, Lionsgate contends it is “taking action” to protect shareholder interests against “Image's poor financial performance, sham ‘strategic alternatives process' and succession of 11th hour anti-takeover measures,” among other issues.

In its letter, Image said Lionsgate failed to provide “any legitimate factual basis” for its claim that the distributor's recent agreement with theatrical film production company Relativity Media had “questionable economic benefits” for shareholders.

“It appears from [Lionsgate's] recent statements, filings and overall actions that its desire may be to keep Image's share price from increasing in the hopes its inadequate $4 offer will be accepted,” wrote Dennis Hohn Cho, SVP, business affairs and general counsel. “This type of behavior coming from our largest competitor and second largest shareholder is, in our opinion, manipulative and self-serving, and not in the best interests of our other shareholders.”

Image has characterized Lionsgate's board slate as having “limited home video entertainment distribution expertise” and potentially conflicting financial and business interests favorable to Lionsgate.

Image is imploring shareholders to re-elect its current board, which includes chairman, president and CEO Martin Greenwald.

A Lionsgate representative was not immediately available for comment.

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