Lionsgate Sends Letter to Image Stockholders Urging Replacement of Board

The text of the letter is below. For more information, pleasevisit www.votetoimproveimage.com.

September 12, 2006

Dear Fellow Image Stockholder:

Lionsgate is Image Entertainment's second largest stockholder. Weown approximately 19% of the outstanding shares to be voted at theupcoming annual stockholder meeting, nearly twice the amount owned byall the company's directors and officers combined. We believe Image'spoor financial performance, sham "strategic alternatives process" andsuccession of 11th hour anti-takeover measures and transactions areunacceptable - and we are taking action to protect stockholderinterests.

We have nominated six highly qualified, independent directors toreplace Image's current directors, whom we believe are entrenched,conflicted, and not acting in your best interests. These nominees willensure that Image's Board is working to create value for allstockholders. We need your support to replace Image's do-nothingBoard. We urge you to vote the BLUE proxy card today - by telephone,by Internet or by signing, dating and returning the enclosed BLUEproxy card in the postage-paid envelope provided.

We believe our nominees will better address the following criticalissues facing Image:

-- Poor Stock Price Performance - Image has an extraordinarily illiquid stock, which has significantly underperformed the S&P 500 and Nasdaq over the last two years. This shortfall would likely have been even more extreme without the price support that our $4.00 purchase proposals have provided since August 2005.

-- Abysmal Financial Performance - Image's EPS, operating margins, gross margins and return on capital have all declined over the last six quarters.

-- Failed Management Approach - Image's undisciplined management approach has failed with respect to internal matters (e.g. controlling overhead) and external matters (e.g. retaining talent).

-- Sham "Strategic Alternatives Process" by Conflicted Board - It took the "independent" special committee of Image's board seven months to hire Lazard to explore strategic alternatives and now, five months later, they still have nothing to show for their efforts. We believe one reason for this startlingly ineffective process is the web of relationships that many of the "independent" directors have with Image (which presumably would be at risk if Image executed a value-maximizing strategic transaction).

-- Repeated Entrenchment Tactics - While allegedly exploring strategic alternatives and on the eve of a stockholder referendum on the Company's future direction, Image's board and management appear to be intent on executing transactions that will make Image less attractive to acquirers.

Image's Stock Price Has Plunged Nearly 39% Since The Beginning of2005

Image's stock price has collapsed over the past year and a half,falling from $5.94 on December 31, 2004, to $3.64 today, a drop ofnearly 39%. If you invested a Dollar in the S&P 500 on January 1,2005, you would have earned 46% more than from investing in Image.Image has also significantly underperformed the NASDAQ over the sameperiod.

We believe the precipitous decline of Image shares would have beeneven more dramatic if not for our purchases of over 4 million sharesbeginning in July 2005, and our subsequent offers to acquire allremaining Image shares for $4.00 per share in Lionsgate shares inAugust 2005 and for $4.00 per share in cash in October 2005. When wemade our original offer in August 2005, Image shares were trading at$2.82. Our offers spurred Image to announce in April 2006 that itwould explore strategic alternatives - but five months later thisprocess has produced nothing. In July 2006, at the company'sinvitation as part of its "strategic alternatives" process, we renewedour $4.00 per share cash offer, but Image has not formally responded.
Indexed Performance of Image vs. S&P 500 and NASDAQ Since 1/1/05

(MULTIMEDIA AVAILABLE:
http://www.businesswire.com/cgi-bin/mmg.cgi?eid=5225572 )

Image's Financial Performance Has Been Abysmal:

EPS Has Dropped From $0.05 to a Loss of $0.11 Over the Last SixQuarters

Image's earnings per share (EPS) have declined dramatically overthe last six quarters, from $0.05 per share to negative $0.11 pershare in the most recent quarter, as the company's margins havecontinued to erode. Image's failure to meet analyst expectations,which it has missed five out of the last six quarters, reflects whatwe believe is an inability to execute. Image recently reported anotherdismal quarter, recording a loss of $2.3 million, or 11 cents pershare, for the first quarter of its 2007 fiscal year, even worse thanthe loss of $1.7 million, or eight cents per share, for the year-agoquarter. This was five cents below analysts' expectations and a 38%increase in the loss compared to the year-ago quarter.

In the last six quarters, Image's operating margins have declinedfrom 4.2% for the quarter ended March 31, 2005 to a negative 9.1% forthe quarter ended June 30, 2006. Over the same period, Image's grossmargins have declined from 26.1% (16.3% after selling expenses) to18.6% (8.1% after selling expenses). Return on capital has gonenegative over the same period, from 2.9% in the quarter ended March31, 2005, to a negative 0.6% for the quarter ended June 30, 2006. Inthree of the past six quarters, Image has been in violation of a debtcovenant and in each case had to seek a waiver from its creditors. Webelieve these trends reflect a management and Board whose strategy andexecution are deeply flawed.

Management's Passive, Undisciplined Approach Has Failed:

We Need Action, Not More "Hope"

Image appears content to "hope" improved industry results at thebox office will result in greater demand for its products and thatthey will enjoy a "surprise" as they did when they released the "BlueCollar Comedians" in 2005, which they subsequently lost as the talentwent to competitors.

Here are some revealing recent comments by Image's Chairman andCEO:
"Profit margins have a tendency to bounce around from quarter to
quarter depending upon the titles sold. And I would hope that by the
end of the day, our gross profit margins will average over 25%." (June
28, 2006)

"...if we get lucky in a couple of instances, it will have a positive
impact on our numbers." (June 28, 2006)

"It's been a very difficult past several months. The stock's
performance has been anything but stellar, yet, we remain focused on
the overall performance of the Company and with that performance,
hopefully the result will increase in shareholder value." (August 11,
2005)

While Image waits and hopes to get lucky, its operational andfinancial missteps continue to damage the company's prospects anderode its overall performance:

-- Out of Control Overhead: Image's overhead costs are running at an alarming 14-15% of revenues. While Lionsgate is a larger entertainment company with a more diverse revenue base, by comparison our overhead costs are about 7.5% of revenues.

-- Weak Inventory Management: Image's lack of a vendor managed inventory system has seriously hindered its ability to meet customer needs. Their efforts to develop such a system have failed. Image has been forced to write off almost $250,000 for software development over the past two years.

-- Undisciplined Rollup Strategy: In our view, Image consistently overpays and enters into unfavorable partnership agreements for often questionable content. For example, we believe Image severely overpaid when it spent $8.2 million to acquire Public Media Inc. in 2005. Image itself said that the fair value of Public Media's library was actually $300,000. Image inexplicably agreed to pay $5.7 million for Public Media's goodwill, while $800,000 went to severance packages for the terminated management team and separately an additional $1.5 million was paid to another company, Criterion, for the right to distribute their movies that were part of the Public Media library.

-- Inability to Retain Talent: Image enjoyed "surprising success" (their words) when in 2005 they sold $21 million of "Blue Collar Comedians" DVDs, but the company failed to retain the talent as the comedians associated with those DVDs promptly left Image for other studios. The same talent exodus occurred after the contract expired in June 2005 for "Eagles: Hell Freezes Over," the other DVD that generated meaningful revenue for Image that year.

-- Wasteful Spending on Film Production: In another desperate attempt to find growth, Image has spent approximately $4.2 million and committed an additional $4.4 million for the remainder of fiscal 2007 on what we believe is an ill-conceived film production business. This business has never made any money, and no senior Image executive has any relevant experience in the highly specialized film production business.

Image's Entrenched, Conflicted Board Refuses to Seriously ExploreStrategic Alternatives to Maximize Stockholder Value - Ignoring aPremium $4.00 Per Share Offer

Image Chairman, CEO and President Marty Greenwald has said, "...ifthere was an opportunity to improve our position and increasestockholder value in the right scenario, we would certainly move inthat direction" (August 11, 2005). However, over the past 12 monthssince we made our offer, although the Board formed a special committeeand hired an advisor, The Salter Group, to review our bid in Septemberlast year, and then seven months later hired Lazard to "explorestrategic alternatives," the Special Committee has not formallyresponded to our latest offer, has made no announcements about theprogress of the strategic review, and refuses to answer questionsraised by analysts and the media.

To our bewilderment, the Board continues to ignore our fullyfinanced cash offer of $4.00 per share, which we renewed in July 2006at Image's request. The offer represents a 33% premium over Image'sstock price the day before we made our offer public on September 13,2005, and a nearly 50% premium over the price before we began buyingImage shares in the market on July 13, 2005. We still do not have aformal response from Image's Board to our premium offer.

Image instead appears to be focused on taking further entrenchingdefensive measures such as the implementation of a poison pill andreincorporating to Delaware with, among other things, a classifiedboard, although thanks to our successful lawsuit delayingimplementation of this anti-takeover device, the Image stockholdershave one last opportunity to remove in one meeting this self-servingboard. Recently, Image has entered into two highly dilutive stocktransactions (see below) without a shareholder vote on the eve of thismeeting.

We believe Image's supposedly "independent" directors are in factunable to act in the best interests of all stockholders. Five out ofthe seven Image directors have "certain relationships and relatedtransactions" with Image, according to the company's own proxystatement. They work at companies that are paid directly by Image forconsulting services or have significant business ties to the company.Several leading firms that examine corporate governance practicesagree.

Last year, Glass Lewis, a leading investment research and proxyadvisory firm, recommended withholding votes for three Image directors(Ira S. Epstein, M. Trevenen Huxley and Robert J. McCloskey) becausethe firm saw serious conflicts in the fact that the companies thesedirectors work for are all paid advisors to Image. Mr. Epstein, who ischairman of the supposedly independent special committee that reviewedour offer, is of counsel at Greenberg Traurig, LLP, a law firm thatregularly provides services to Image. The Glass Lewis report stated,"We view such relationships as potentially creating conflicts fordirectors, as they may be forced to weigh their own interests inrelation to shareholder interests when making board decisions."

Nell Minow of the corporate governance research firm CorporateLibrary said this month that the extensive director conflicts "aregoing to make it very difficult for the company to show that theylooked at the proposals for purchase fairly and independently." (TheWall Street Journal, "Determining Board Independence; Debate Heats UpAbout Outside Directors' Ties To Image Entertainment," 9/6/06).

The Relativity Deal and Image's Convertible Debt TransactionFurther Entrench Management, Dilute Stockholders and CreateSignificant Risks

On August 14, 2006, Image announced a distribution deal withRelativity Media that it hailed as a "landmark" and "historic"agreement for the company. Remarkably, Image did not claim the dealhas any stockholder benefits, and it is not allowing stockholders tovote on it. While Image says it is hopeful that the deal will resultin significant financial gains for the company, it readily admits thatno revenue will be realized from this deal for at least a year, andeven then, the likelihood of the delivery of profitable titles at thattime is doubtful.

Image has not filed the agreement with the Securities and ExchangeCommission, which is highly unusual for a public company announcingwhat it considers to be an "historic" deal. Without the facts,stockholders have to rely on only Image's hype and vague projections.Image says the deal will bring it "hundreds of millions in revenue."But what is the basis for making that claim given that Relativity hasprovided no information about titles they will distribute throughImage?

Michael Kelman of Susquehanna Financial Group, an independentresearch analyst who follows Image, wrote in a recent report, "We arestill somewhat uncertain as to the ultimate potential of this newrevenue stream, particularly given the lack of details regarding thefilm slate." He also noted "...we believe this new distribution dealis likely to yield significantly more earnings volatility, withresults fluctuating based on the performance of higher profile filmreleases."

While Image offers no support for its claims of "hundreds ofmillions" in expected revenue, the risks they describe are alarming.Here are their own words:
"We do not control the timing or manner in which Relativity will
finance, produce and deliver programs to us. Relativity's decisions
regarding the selection, delivery and timing of release of theatrical
and direct-to-video motion picture titles will have a significant
effect on our future revenues...
"We will face substantial challenges in expanding our distribution
capabilities to adequately meet the anticipated increase in our
average sales per title and our overall sales as a result of major
motion pictures to be delivered to us for home video and digital
distribution over the ten-year term of our agreement with
Relativity...
"We may not handle the expansion effectively and efficiently, it
may be unsuccessful or take longer than anticipated, and we may not
realize the anticipated benefits from the transaction, which could
result in write-offs and other related expenses. Any of the foregoing
could have a material adverse effect on our business, results of
operations and financial condition...
"In addition, we may require increased funding to meet our
increased requirements, which we may not be able to obtain in
sufficient time, on acceptable terms, or at all..."
(Image Quarterly Report on Form 10-Q filed with the SEC on August
14, 2006)

We believe this opaque and questionable deal benefits only theImage board and management. Image has announced it will issue 3.4million new shares to Relativity, or nearly 16% of outstanding sharesas of August 25, 2006 - shares which after issuance presumably can bevoted at any time after this annual meeting, diluting the votingrights of existing stockholders and presumably aligning a large votingblock with management. Worse yet, the performance objectives otherwiserequired to be achieved in connection with the release to Relativityof 2.8 million of these shares are ignored in the event of a change ofcontrol. This agreement is a veiled self-preservation tactic thatflies in the face of good corporate governance. The Board approved it.A new Board is needed to challenge it.

Shortly after the Relativity deal, Image took another step tofurther entrench management. On August 31st, the company announcedthat it privately placed $17 million of five year convertible notes,convertible at $4.25 per share, and warrants to acquire one millionshares at $4.25 per share. Among other onerous terms, the convertiblenotes provide a change of control put at a minimum of a 20% premium toface (i.e., $1.20 per each dollar of debt). Neither the Board'sSpecial Committee nor its advisors, Lazard, participated in theconvertible debt deal. Hearing rumors of the imminent transaction, wesent Image management a letter to urge them not to take this egregiousstep toward further entrenchment and further erosion of shareholdervalue. Image blatantly ignored our request.

The combined impact of the Relativity deal and the convertibledebt and warrants placement is that Image -in a less than three-weekperiod on the eve of your opportunity to vote on the future directionof the company - has announced the issuance of 8.4 million shares andshare equivalents representing as much as a 39% increase in Image'soutstanding shares as of August 25, 2006. The result of thesequestionable deals is to massively dilute all existing Imagestockholders and further entrench Image's Board and management.

Vote for Independent Directors Who Will Work For You

The independent candidates we have nominated were chosen based ontheir extensive experience and record of achievement in corporategovernance, business/finance and the entertainment industry. Westrongly believe they are far superior to Image's current Board andask that you compare the credentials and performance of the twogroups. The independent candidates have no previous relationship witheither Lionsgate or Image. The independent nominees are:

-- Duke K. Bristow, Ph.D. Dr. Bristow, 49, is a noted economist and seasoned pharmaceutical executive who has spent over 15 years at the University of California, Los Angeles researching and teaching on topics including corporate governance, corporate finance and entrepreneurship. Previously, he spent 10 years with Eli Lilly & Company (NYSE:LLY), one of the world's leading pharmaceutical companies, where he held management positions in the pharmaceutical, medical science and diagnostics divisions and in corporate finance.

-- Jack R. Crosby. Mr. Crosby, 79, has over 25 years of executive experience in the media and entertainment industries. He is currently Chairman of the Board of Directors and Chief Executive Officer of CinemaStar Luxury Theaters, Inc., an owner and operator of multi-screen movie theaters in Southern California and Northern Mexico. Previously, he was Chairman of the Board of Directors of Tescorp, Inc., an owner and operator of cable TV systems in Argentina, from its inception in 1980 until it was sold in 1998, and served as Chief Executive Officer from 1991 to 1998.

-- Edward Huguez. Mr. Huguez, 48, has a track record of success in the media and entertainment industries, having held management positions with several leading companies over the last 14 years. Since 2004, he has been Executive Vice President, Affiliate Sales and Marketing, for Starz Entertainment Group LLC, a provider of premium movie services through the Starz and Encore pay TV channels. Starz is a subsidiary of Liberty Media Corporation. From 2001 to 2003 he was Chairman of the Board, President, and Chief Executive Officer of Midstream Technologies, a provider of network-based on-demand solutions to the cable TV industry.

-- Joseph J. Incandela. Mr. Incandela, 59, has a wide variety of private equity and operating experience. He has been a member of the Board of Advisors of The Cross Country Group, LLC, a privately held provider of roadside services to the domestic automobile industry, since 2003 and Chairman of the Board of Advisors since 2005. Effective September 17, 2006, Mr. Incandela will be the Chief Executive Officer of Cross Country Home Services, a wholly-owned subsidiary of the Cross Country Group. He founded private equity firm Overture Capital Partners in 2000, and was its President until 2004. From 1991 to 1999, Mr. Incandela was a Managing Director of Thomas H. Lee Partners, a private equity investment firm.

-- Joachim Kiener. Mr. Kiener, 52, is an investor who has a deep background in the media, publishing and music industries. He was Chairman and Chief Executive Officer of TV Guide from 1999 until its merger with Gemstar International Group in 2000. After the merger, Mr. Kiener was Co-President and Co-Chief Operating Officer of Gemstar-TV Guide International, Inc. (NASDAQ:GMST), a global media and technology company, where he oversaw the television and magazine businesses.

-- Barry David Perlstein. Mr. Perlstein, 42, is a skilled entertainment industry executive with specialized knowledge of localizing creative content for global distribution. He has been Chief Executive Officer and a member of the Board of Directors of SDI Media Group, Inc., a provider of localization services to the entertainment industry, and its predecessor company, SDI Media, since 2003. Previously, he was President of the SDI Media USA division, having joined the company through its acquisition of Gelula & Co.

Please see our definitive proxy statement, enclosed with thisletter and filed with the SEC on September 5, 2006, for more detailedbiographies on our nominees. Our nominees have no prior relationshipwith Lionsgate or with Image. The only commitment given to Lionsgateby our nominees with respect to their service on the Image Board ifthey are elected - and the only commitment Lionsgate has sought fromthem - is that they will exercise their independent judgment in allmatters before the Image Board in accordance with their fiduciaryduties. Despite the claim by Image in its proxy statement that thepurpose of this slate appears to be to accept an offer from Lionsgate,the independent nominees have not made, nor has Lionsgate sought, anycommitment with respect to any offer to acquire Image.

Instead, unlike the current entrenched Board, the independentnominees will ensure that the Image Board fairly reviews any credibleoffer to acquire Image, and if they find that offer to be in the bestinterests of Image and its stockholders, to present that offer to theImage stockholders in accordance with their fiduciary duties. Webelieve our candidates have the integrity, leadership and experiencenecessary to make a substantial positive impact on Image's managementand Board of Directors.

Vote for Stockholder Value. Vote the BLUE card.

Enclosed are our proxy materials which present the strongcredentials of our six director nominees to replace current Imagedirectors. Included is a BLUE proxy card. Vote the BLUE card if youagree that Image needs a strong, independent Board that will act inthe best interests of all stockholders. You will also receive, or mayhave already received, proxy materials from Image containing a whiteproxy card. Ignore the white card. If you have already voted the whiteproxy card, you can automatically revoke that earlier vote by simplyvoting your BLUE proxy card - by telephone, by Internet or by signing,dating and returning the enclosed BLUE proxy card in the postage-paidenvelope provided.

USE YOUR BLUE PROXY CARD TO VOTE FOR STOCKHOLDER VALUE

If you have any questions, please call our proxy solicitor,Innisfree M&A Incorporated, toll-free at 888-750-5834.

For additional information, please visitwww.votetoimproveimage.com.
Sincerely,

Jon Feltheimer
Chief Executive Officer
Lions Gate Entertainment Corp.

______________

See Annex B to our definitive proxy statement, enclosed with this
letter and filed with the SEC on September 5, 2006, for a list of
participants in the solicitation of proxies.

Lionsgate is the leading independent filmed entertainment studio,winning this year's Best Picture Academy Award (R) for Crash, and theCompany is a premier producer and distributor of motion pictures,television programming, home entertainment, family entertainment andvideo-on-demand content. Its prestigious and prolific library of morethan 7,800 titles is a valuable source of recurring revenue and afoundation for the growth of the Company's core businesses. TheLionsgate brand is synonymous with original, daring, qualityentertainment in markets around the globe.