Image in Ten-Year Multiplatform Distribution Deal with Relativity

CHATSWORTH, August 14: Image Entertainment has signed a
ten-year output agreement to distribute theatrical motion pictures from
Relativity Media on home video—including DVD, HD-DVD and Blu-ray
Disc—and digital formats.

Relativity most recently provided financing and co-produced
or executive produced with Columbia Pictures and Universal Pictures such films
as Talladega Nights: The Ballad of Ricky Bobby starring Will Ferrell, RV
starring Robin Williams, The Fast and the Furious: Tokyo Drift and Inside Man.

Image will exclusively distribute all home video and digital
video formats for motion pictures controlled by Relativity that are not part of
a finance package provided to a major studio. Relativity intends to finance up
to 20 wholly controlled major motion pictures each year after 2007.

As partial consideration for the deal, Image has granted
Relativity 3.4 million shares of its common stock, which makes Relativity one
of Image's largest shareholders.

The first few films under the agreement are expected to be
announced by the end of the quarter and released in the second half of 2007.
Image estimates that the deal will generate DVD and digital revenues in the
“hundreds of millions of dollars” over the next few years.

"The Relativity deal may be the single most significant
agreement we've signed in the history of Image Entertainment," said Martin
W. Greenwald, the company’s president and CEO. "For the past 25 years,
Image has developed an internal distribution platform and forged direct retail
relationships that have become the foundation for our success. As we now move
into the exclusive distribution of major motion pictures, our distribution
capabilities and retail network will continue to be a core asset of our company
and the basis for fully realizing the potential of this agreement."

He continued, "Image now has a significant new
programming category for sale to the home entertainment universe. By releasing
major motion pictures into traditional and non-traditional retail locations,
Image will be the beneficiary of hundreds of millions of dollars in revenues.
This will also dramatically enhance the value of our large and diverse library.
What makes this even more exciting for Image and its shareholders is the grant
of digital video distribution rights in the agreement. This will secure the
long-term viability of our distribution model as digital distribution takes its
place alongside the traditional sales of packaged media."

Relativity's co-founder and co-managing member, Ryan
Kavanaugh, stated, "This deal is a significant component of the expansion
of our single-picture business. After analyzing the various home video
platforms available, we concluded that Image's solid record of success and
innovation, paired with the depth and breadth of its North American retail exposure
and its relationships with the major retailers, made Image the ideal partner
for us to take such a large and important step. We believe that, with this
deal, we are in a position to significantly increase Image's value for their
shareholders, and that together Image and Relativity will be establishing
further creative business transactions."