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Shareholder Service Backs Dissident in Image Board Fight

28 Sep, 2006 By: Erik Gruenwedel

Less than two weeks before Image Entertainment's pivotal board of directors vote, dissident-slate backer Lionsgate and Image both declared moral victories following an “endorsement” of sorts from an influential securities advisory company.

Institutional Shareholder Services (ISS), which advises shareholders on proxy and regulatory issues, issued a report recommending the election of Lionsgate nominee Dr. Duke Bristow, a UCLA economics professor with a history of corporate governance research experience.

Image will hold board elections at its annual shareholder meeting Oct. 10 in Woodland Hills, Calif.

Lionsgate, which is Image's second largest shareholder and twice tried unsuccessfully to acquire the Chatsworth, Calif.-based distributor, has submitted a slate of six candidates.

In its summary, ISS said Image was underperforming financially and appeared to be “hanging most of its hopes” on the recently announced distribution deal with Relativity Media and monetization of its digital rights. At the same time, ISS said Lionsgate failed to present Image shareholders with a “detailed operational plan,” including the names of those who would run the company if the current management was removed.

“It is definitely a win for Image and a blow for Lionsgate,” said Image COO David Borshell.

He said he wasn't sure if Bristow would want to serve on the board alone and believed ISS' recommendation for just one candidate would likely confuse shareholders accustomed to voting for entire slates — not individual candidates.

“If I was an institutional shareholder, I would probably say [the ISS recommendation] was a vote for Image rather than a vote for [Lionsgate],” Borshell said. “One person from Lionsgate is not going to be able to effect change on the board and the company.”

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

Lionsgate spokesperson Peter Wilkes countered that Bristow's recommendation was a positive for the mini-major. He added that since Image's announcement with Relativity, which CEO Greenwald characterized as “the single most significant distribution agreement … in the history of Image Entertainment,” only Lionsgate had announced an actual distribution deal for Relativity's 3:10 to Yuma, starring Christian Bale and Russell Crowe.

“Our vision is to put in place a board that will focus on increasing shareholding value rather than entrenching themselves in senior management,” said Wilkes.

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