BTP, Image filing outlines breach, default of proposed merger agreement

By Lisa Kerner

Charlotte, N.C., Feb. 1 - BTP Acquisition Co., LLC notified Image Entertainment, Inc. of an anticipated breach and default regarding the companies' amended and restated agreement and plan of merger, dated June 27, 2007.

The notice was included in an 8-K filing with the Securities and Exchange Commission.

Image responded to the notification on Feb. 1, making certain corrections. In addition, Image disputed BTP's claim that Image failed to provide all necessary cooperation in connection with the arrangement and obtaining of financing.

Image had previously notified BTP, an affiliate of David Bergstein, that BTP is in breach of their merger agreement.

In addition, Image notified CT1 Holdings that CT1 is in breach of their output distribution agreement, dated Dec. 7, a prior news release stated.

The merger was slated to close on Feb. 1 but the two sides agreed to extend the deadline until 5 p.m. ET on Feb. 5. Image's board will meet again on Feb. 5.

It was previously reported that CT1, the parent company of Capitol Films and ThinkFilm, notified Image that it believes Image is in breach of the output distribution agreement. CT1 revoked the authority to distribute its programming under the agreement.

On Jan. 24, Image filed a lawsuit in the Los Angeles County Superior Court against CT1, BTP and ThinkFilm regarding the breach of contract under the output distribution agreement.

"In exchange for the $3 million deposited by BTP in a trust account and the execution of the output distribution agreement with CT1 Holdings, Image granted numerous requests by BTP to extend the closing date to allow BTP the time to finalize the required financing for the merger," an Image spokesman said in the earlier release.

BTP demanded the return of the $3 million, a prior SEC filing stated.

In March 2007, BTP agreed to acquire Image for $4.40 per share in a cash transaction valued at $132 million, including debt.

Image Entertainment is an independent licensee, producer and distributor of home entertainment programming in North America based in Chatsworth, Calif.

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