EXECUTION VERSION

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| 1 | DEFINITIONS  |   |
|---|-------------------|--------|

| 2 | LOAN  |   |
|---|------------|--------|

| 3 | REPAYMENT  |   |
|---|-----------------|--------|

| 4 | INTEREST  |   |
|---|----------------|--------|

| 5 | ISSUE      OF LOAN SHARES  |   |
|---|---------------------------------|--------|

| 6 | OPTIONAL      AND MANDATORY REDEMPTION  |   |
|---|----------------------------------------------|--------|

| 7 | ADDITIONAL      SUBSCRIPTION RIGHTS (WARRANTS)  |   |
|---|------------------------------------------------------|--------|

| 8 | ISSUE      OF SHARES  |   |
|---|----------------------------|--------|

| 9 | EXCHANGE      RATE MOVEMENTS  |   |
|---|------------------------------------|--------|

| 10 | PAYMENT      OF COSTS, EXPENSES, FEES AND COMMISSIONS  |   |
|----|-------------------------------------------------------------|--------|

| 11 | INDEMNITIES  |   |
|----|-------------------|--------|

| 12 | TERMINATION  |   |
|----|-------------------|--------|

| 13 | COVENANTS  |   |
|----|-----------------|--------|

| 14 | WITHHOLDING      AND GROSSING-UP  |   |
|----|----------------------------------------|--------|

| 15 | NOTICES  |   |
|----|---------------|--------|

| 16 | REMEDIES      AND WAIVERS  |   |
|----|---------------------------------|--------|

| 18 | GOVERNING      LAW AND JURISDICTION  |   |
|----|-------------------------------------------|--------|

| 19 | GENERAL  |   |
|----|---------------|--------|

SCHEDULE 1 - EVENTS OFDEFAULT

SCHEDULE 2 - CONDITIONSPRECEDENT

SCHEDULE 3 - PERMITTED INDEBTEDNESS AND SECURITYSCHEDULE 

CERTIFICATE OF THE REGISTRATION OF AMORTGAGE OR CHARGE

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| (1) | SEVEN ARTS PICTURES PLC      a company incorporated in England and Wales registered number      04276617 whose registered office address is at 30 Farringdon Street,      London EC4A 4HJ (the "Company");      and |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | TRAFALGAR CAPITAL SPECIALIZED      INVESTMENT FUND an investment fund registered in Luxembourg as      represented by its general partner, TRAFALGAR CAPITAL SARL,      a corporation organised and existing under the laws of Luxembourg, with      its principal place of business at 8-10 Rue Mathias Hardt, BP 3023,      Luxembourg L-1030  (the “Lender”). |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 1.   | DEFINITIONS |
|----------------|-------------|

| "Admission"                                   | means      the admission of the Ordinary Shares to trading on AIM or    PLUS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-----------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| “AIM”                             | means      the market of that name operated by the London Stock Exchange      plc                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| “AIM    Rules”                    | means      the rules from time to time published by the London Stock Exchange in      relation to companies admitted to AIM                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| "Bid    Price"                                | shall      mean, on any date, the closing bid price (as reported by Bloomberg) of the      Ordinary Shares;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| "Bloomberg"                                   | means      Bloomberg LP, a financial information provider                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| "Business      Day"                           | means      a day (other than a Saturday or Sunday) on which banks are generally open      for business in London                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| "Cash      Payment"                           | means      any amount paid into the Lender’s Bank Account in accordance with Clause      6.3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| "Cash Payment      Date"                      | means the date of a Cash      Payment Notice                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| "Cash Payment Date Exchange      Rate"        | means in relation to      each Cash Payment Date the UK pounds sterling      to the Euro spot exchange rate as quoted in the London edition of the      Financial Times on such Cash Payment Date                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| "Cash Payment      Notice"                    | has      the meaning given to it in Clause 6.3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| "Closing      Date"                           | means      the date of this Agreement or, if later, the date on which the Lender has      received all of the documents and evidence listed in Schedule 2 in      accordance with Clause 2.2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| "Closing Date Exchange      Rate"             | means      0.7466 (being the agreed UK pounds sterling      to the Euro spot exchange rate on the Closing Date)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| "Composite Guarantee and      Debenture"      | means      the composite guarantee and debenture dated on or around the date of this      Agreement between the Lender and the Company and each Subsidiary, as from      time to time amended, varied, supplemented, extended or      replaced                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| "Consolidation      Event"                    | has      the meaning given to it in Clause 13.1.6                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| "Conversion      Amount"                      | has      the meaning set out in Clause 5.1 of this      Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| "Conversion      Price"                       | means,      in respect of any Loan Notice Date, 75% of the lowest VWAP during the      period of 5 Trading Days following the Loan Notice Date or, if there is no      VWAP on any of those Trading Days, then the lowest Bid Price on those      Trading Days                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| "CREST"                                       | means      the relevant system (as defined in the Uncertificated Securities      Regulations 2001, as amended) and operated by CRESTCo Limited, in      accordance with which securities may be held or transferred in      uncertificated form                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| "Delivery"                                    | in      respect of any Loan Shares means credit of such shares to the Lender’s      CREST Account and Deliver and Delivered shall be      construed accordingly                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| "Delivery      Date"                          | means      the date on which Loan Shares are Delivered pursuant to a Loan      Notice                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| "Event of      Default"                       | means      those events as listed in Schedule 1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| "Final Maturity      Date"                    | has      the meaning given in Clause 3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| "Funds"                                       | means      all monies that the Company receives or is entitled to receive pursuant to      the Fund Raising Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| "Fund      Raising Date"                      | means      each date that Funds are paid to the Company pursuant to the Fund Raising      Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| "Fund      Raising Agreement"                 | means      an exclusive marketing agreement to be entered into between the Zeus      Partners LLP (a limited liability partnership registered number OC316561)      and the Company under which the Company will be entitled to receive a film      producer fee of 6% of all monies raised from investors of Zeus Partners      LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| "Group"                                       | means      the Company and its Subsidiaries from time to time and Group Company shall mean      any of them                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| "Lender’s Bank      Account"            | means      the following account:Dz      Bank AG  (BIC: GENODEFF, BLZ: 500 604 00)Account:      DZ Bank International Luxembourg S.A. (BIC: GENOLULL)Account      number:    14046121Favour:  Trafalgar      Capital Specialized Investment Fund SICAV, IBAN  LU93 1070 9000 5300      1978,or      such other account as the Lender may from time to time notify to the      Company in writing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| "Lender’s CREST      Account"           | means      the following account:Citibank LondonBIC Code: CITIGB2LAccount      number:  6008883831CREST      account:  BA0IFFavour:  Dz Bank Intl      S.A. LuxembourgDesignated      account:  FGN, or      such other account as the Lender may from time to time notify to the      Company in writing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| "Loan"                                        | means      the amount of £500,000 (to be advanced to the Company pursuant to Clause      2) or the principal amount outstanding for      the time being of that loan (including any interest compounded with the      Loan pursuant to Clause 4.1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| "Loan    Notice"                              | has      the meaning set out in Clause 5.1 of this      Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| "Loan Notice      Date"                       | means      the date of a Loan Notice                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| "Loan Notice Date Exchange      Rate"         | means      in relation to each Loan Notice Date the UK pounds sterling      to Euro spot exchange rate as quoted in the London edition of the      Financial Times on such Loan Notice Date                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| "Loan    Shares"                              | means      the new Ordinary Shares to be issued to the Lender pursuant to this      Agreement (other than pursuant to Clause 7.1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| "Mandatory      Contingent Redemption Amount" | means      the amount payable by the Company to the Lender pursuant to Clause 6.2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| "Mandatory Redemption      Amount"            | means      the amount of £50,000 of principal plus interest to be paid on each      Mandatory Redemption Date                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| "Mandatory Redemption      Date"              | means      the date that is 3 months, 4 months and 5 months after the Closing      Date                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| "Material Adverse      Change"                | means      an event or circumstance that constitutes an adverse change in the assets,      financial or trading position of any Group Company such that it would be      reasonably likely to prevent the Company from being able fully and      punctually to perform its payment obligations under this      instrument                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| "Ordinary      Shares"                        | means      ordinary shares of 5 pence each in the capital of the Company (such shares      to rank pari passu with all other ordinary shares from time to time issued      in the capital of the Company) and in the event of a sub-division,      consolidation or reclassification of such shares, the shares of a      different nominal value resulting therefrom                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| "Permitted      Indebtedness"                 | means      the indebtedness of the Group to the parties described under the column      headed "Lender" in Schedule 3 for the amounts of principal described under      the column headed "Loan Amount" in Schedule 3 in respect of the films      described under the column headed "Film" in Schedule 3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| "Permitted      Security"                     | means: (a)any      Security Interest arising under the Transaction Documents;(b)any      lien arising by operation of law and in the ordinary course of trading and      not as a result of any default or omission by any member of the      Group;(c)any      Security Interest arising under any retention of title, hire purchase or      conditional sale arrangement or arrangements having similar effect in      respect of goods supplies to a member of the Group in the ordinary course      of trading and on the supplier's standard or usual terms and not arising      as a result of any default or omission by any member of the      Group;(d)Security      Assignment and Charge dated 6 December 2006 between (i) the Company and      (ii) Blue Rider Finance Inc;(e)Amendment      to a Loan and Security Agreement dated 22 December 2006 between (i) the      Company and (ii) Cheyne Specialty Finance Fund L.P.;(f)Debenture      dated 27 March 2007 between (i) the Company and (ii) Parallel Media      LLC;(g)Charge      and Security Assignment dated 13 August 2007 between (i) the Company and      (ii) Palm Finance Corporation;(h)Amendment      to a Loan and Security Agreement dated 22 December 2006 between (i) Seven      Arts Filmed Entertainment Limited and (ii) Cheyne Specialty Finance Fund      L.P.;(i)Charge      and Security Assignment dated 13 August 2007 between (i) Seven Arts Filmed      Entertainment Limited and (ii) Palm Finance Corporation;(j)in      respect of the Permitted Indebtedness, each of the Security Interests      described under the heading "Security for loan" in Schedule 3 as at the      Closing Date but not including the Security Interests described in      subparagraphs (d) to (i) above |
| "PLUS"                                        | means      the market of that name operated by PLUS Markets plc                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| "PLUS    Rules"                               | means      the rules from time to time published by PLUS Markets plc in relation to      companies admitted to PLUS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| "Redemption      Premium"                     | has      the meaning set out in Clause 6.5                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| "Security      Interest"                      | means      any mortgage, pledge, lien, charge, security assignment, hypothecation,      standard security, security trust, encumbrance or security interest and      any other agreement or arrangement entered into to create or confer      security over any asset or which has a similar effect                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| "Subscription      Notice"                    | has      the meaning set out in Clause 7.1 of this      Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| "  Subsidiary"                      | means      any subsidiary of the Company within the meaning of section 736 of the      Companies Act 1985 (as amended, restated or replaced from time to      time)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| "Taxation"                                    | any      of the following: (a) any tax, duty, impost or levy, past or present, of      the United Kingdom or elsewhere, whether governmental, state, provincial,      local governmental or municipal, including income tax (including income      tax required to be deducted or withheld from or accounted for in respect      of any payment under section 203 of the Taxes Act or otherwise),      corporation tax, advance corporation tax, capital gains tax, inheritance      tax, VAT, customs and other import or export duties, rates, stamp duty,      stamp duty reserve tax, national insurance and social security      contributions; and (b) any fine, penalty, surcharge, interest or other      imposition relating to any tax, duty, impost or levy mentioned in      paragraph(a) of this definition or to any account, record, form, return or      computation required to be kept, preserved, maintained or submitted to any      person for the purposes of any such tax, duty, impost or    levy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| "Trading Day      "                           | means      any day during which the market trading the Ordinary Shares (being either      AIM or PLUS) is open for business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| "Transaction      Documents"                  | means      each of this Agreement, the Composite Guarantee and Debenture and any      other document designated as a Transaction Document by the      Lender;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| "Unencumbered      Films"                     | means      all title and rights whatsoever of the Company or any Group Company in      connection with the films listed in Schedule 4                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| "VWAP"                                        | means      in relation to any Trading Day, the volume weighted average price (as      reported by Bloomberg) of the Ordinary Shares on AIM or PLUS (as      applicable) for that Trading Day                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

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| 2.   | LOAN |
|----------------|------|

| 2.1   | Subject      to Clause 2.2, the Lender shall advance a      Loan of £500,000 to the Company on the Closing  Date. |
|-----------------|------------------------------------------------------------------------------------------------------------------------|

| 2.2   | The      Lender shall only be obliged to comply with Clause 2.1 if on or before the Loan is advanced the      Lender has received all of the documents and evidence listed in Schedule 2      in form and substance satisfactory to the Lender and, on that date, no      Event of Default has occurred and is continuing or would result from the      making of the proposed Loan. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.3   | The      Company shall use the Loan for general working capital purposes to bridge      the Company's cash flow during the term of the Loan. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | REPAYMENT |
|----------------|-----------|

| 3.1   | The      Company shall pay or repay the Loan, together with all other amounts due      to the Lender pursuant to this Agreement, on or before the date which is 6      months after the Closing Date (the "Final Maturity      Date"). |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.2   | Any      such payment or repayment shall be made as set out in this Agreement and      any payment or repayment in cash may only be made in accordance with      Clause 6. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | INTEREST |
|----------------|----------|

| 4.1   | The      Company shall pay interest in arrears to the Lender on the outstanding      amount of the Loan at the rate of 10% per annum which shall be compounded      with, and form part of the principal of, the Loan on the last Business Day      of each month. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.2   | If      the Company fails to pay any amount payable by it under this Agreement on      its due date, interest shall accrue on the overdue amount from the due      date up to the date of actual payment (both before and after judgment) at      the rate of 14% per annum. Any interest accruing under this Clause 4.2 shall be immediately payable by the Company      on demand by the Lender. Any such interest (if unpaid) arising on an      overdue amount will accrue until payment, but will not be compounded with      the overdue amount. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.3   | Interest      will accrue from day to day and is calculated on the basis of the actual      number of days elapsed and a 365 dayyear. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | ISSUE OF LOAN SHARES WHEN AN EVENT OF DEFAULT IS      CONTINUING |
|----------------|------------------------------------------------------------------|

| 5.1   | The      Company shall upon receipt of one or more written notices (a Loan Notice) from the      Lender, at any time when an Event of Default is continuing, issue and      Deliver to the Lender the Loan Shares the subject of that Loan      Notice.  The Loan Notice will specify the pounds sterling value      of the Loan Shares, or the number of Loan Shares, to be issued pursuant to      the Loan Notice (the Conversion Amount) which      shall not exceed the total amount outstanding under this Agreement from      time to time. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.2   | Subject      to Clause 9.1, the number of Loan Shares to      be issued and Delivered by the Company in respect of a Loan Notice shall      be the Conversion Amount specified in that Loan Notice divided by the      Conversion Price.  In the case of any fractional entitlements      the number of Loan Shares to be issued shall be rounded up to the next      whole number. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.3   | The      amounts outstanding under this Agreement will be reduced on each Delivery      Date by the Conversion Amount set out in the Loan Notice relating to that      Loan Notice Date. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.4   | Notwithstanding      any other provision of this Agreement, the Lender may, in its sole      discretion, elect to require the Company to satisfy in cash any amounts      due to the Lender pursuant to either (i) Clause 4.2 or Clause 8.5,      or (ii) any provision of this Agreement after this Agreement has been      terminated in accordance with Clause 12.   |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.5   | Any      payments received, or treated as being received pursuant to Clause 5.3, by the Lender shall be    applied: |
|-----------------|---------------------------------------------------------------------------------------------------------------------|

| 5.5.1   | firstly      to pay any fees, expenses or other amounts due pursuant to this Agreement      other than the amounts referred to in sub Clauses 5.5.2 and 5.5.3  below; |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.5.2   | secondly      to pay any amounts due to the Lender in respect of interest pursuant to      Clause 4.1 of this Agreement;    and |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------|

| 5.5.3   | thirdly      to repay any amount of the Loan still  outstanding. |
|-------------------|------------------------------------------------------------------|

| 6.   | OPTIONALREDEMPTION |
|----------------|--------------------|

| 6.1   | Mandatory Redemption:      The Company shall serve a Cash Payment Notice on the Lender for an      amount such that on each Mandatory Redemption Date the amount outstanding      under the Loan is reduced by an amount equal to the Mandatory Redemption      Amount and on the Final Maturity Date, the amount outstanding under the      Loan will be repaid in full (after taking into account, for the avoidance      of doubt, any Redemption Premium payable pursuant to Clause 6.5.1 or Clause 6.5.2). |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.2   | Mandatory Contingent      Redemption: For as long as, and to the extent that, there are      amounts outstanding under the Loan, the Company shall serve a Cash Payment      Notice on the Lender as soon as practicable after every Fund Raising Date      (and in any event no later than 10 Business Days after such date) for all      Funds received by the Company up to an aggregate of £150,000. For the      avoidance of doubt, any Mandatory Contingent Redemption Amount will be      subject to a Redemption Premium payable pursuant to Clause 6.5.1 or Clause 6.5.2. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.3   | Optional Redemption:      Subject to this Clause 6, the Company      may at any time make a payment in cash in respect of all amounts      outstanding pursuant to this Agreement by giving the Lender written notice      no less than three Trading Days prior to the proposed date of payment (a      “Cash Payment      Notice”). |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.4   | The      Cash Payment Notice will specify the cash amount to be paid by the Company      and the date of payment.  Any amount to be so paid shall be      transferred to the Lender’s Bank Account in cleared funds on the third      Trading Day after the service of a Cash Payment  Notice. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.5   | Each      Cash Payment shall, subject to Clause 9.2, be      applied: |
|-----------------|-----------------------------------------------------------------------|

| 6.5.1   | firstly      to pay any fees, expenses or other amounts due pursuant to this Agreement      other than the amounts referred to in sub Clauses 6.5.2 and 6.5.3      below; |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.5.2   | secondly      to pay any amounts due to the Lender in respect of interest pursuant to      Clause 4.1 of this Agreement;    and |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------|

| 6.5.3   | thirdly      to repay any amount of the Loan still  outstanding. |
|-------------------|------------------------------------------------------------------|

| 6.6   | Any      part of a Cash Payment which is applied pursuant to Clause 6.5.3 shall be subject to a Redemption Premium      as follows: |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------|

| 6.6.1   | 7.5%      if the Cash Payment is made on or before 6 months of the Closing Date;      and |
|-------------------|-------------------------------------------------------------------------------------------|

| 6.6.2   | 15%      if the Cash Payment is made after 6 months of the Closing      Date, |
|-------------------|-------------------------------------------------------------------------------|

| 6.7   | If      a Cash Payment Notice is issued after or on the same date as a Loan Notice      then the Loan Notice will be treated as having been received first. The      amounts received or treated as being received in respect of the Loan      Notice will therefore be applied first (as set out in Clause 5) and then any amounts received or treated as      being received in respect of the Cash Payment Notice will be applied (as      set out in the preceding provisions of this Clause 6). |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7.   | ADDITIONAL SUBSCRIPTION RIGHTS    (WARRANTS) |
|----------------|----------------------------------------------|

| 7.1   | The      Company shall (in addition to the Loan Shares referred to above) upon      receipt of one or more written notices (each a Subscription Notice)      from the Lender at any time after the Closing Date and on or prior to the      fifth anniversary of the Closing Date, issue to the Lender, in accordance      with this Clause 6.1 and Clause 8 such number of Ordinary Shares as are      specified in the SubscriptionNotice. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7.2   | The      Lender shall be entitled to issue Subscription Notices under this      Agreement in respect of up to an aggregate of 800,000 Ordinary Shares (the      Warrant      Shares).  |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7.3   | The      Lender shall, within 3 Trading Days of any Ordinary Shares being Delivered      to the Lender pursuant to Clause 7.1, pay by      cash or cash equivalent to the Company an amount equal to 100% of the VWAP      on the Trading Day immediately prior to the Closing Date or, if there is      no VWAP on that date, then the Bid Price on that date for each such      Ordinary Share. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.   | ISSUE OFSHARES |
|----------------|----------------|

| 8.1   | In      respect of any new Ordinary Shares, including Loan Shares, to be issued to      the Lender pursuant to this Agreement the Company shall make application      for Admission of the Ordinary Shares, as soon as possible after receipt of      a Loan Notice or Subscription Notice (as the case may be). Any such      Admission is expected to be on the third clear Trading Day after such      application is made. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.2   | The      relevant number of Ordinary Shares (including Loan Shares) shall be      Delivered within seven (7) days from the date on which the Loan Notice or      as the case may be, Subscription Notice is received (or deemed to have      been received, in accordance with Clause 15).      Any breach of this Clause 8.2 will amount to      a serious breach of this Agreement which the Company acknowledges may      cause the Lender significant financialloss. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.3   | On      or before the Trading Day immediately prior to the anticipated date of      Admission of any new Ordinary Shares to be issued to the Lender pursuant      to this Agreement the following shalloccur: |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.3.1   | the      Company shall, conditional only upon Admission of such Ordinary Shares,      allot and issue the relevant Ordinary Shares to the  Lender; |
|-------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.3.2   | the      Company shall do all acts and things reasonably necessary to procure      Admission of the relevant Ordinary Shares on the next following Trading      Day; |
|-------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.3.3   | the      Company shall give all necessary directions and instructions to its      registrars to procure that the relevant new Ordinary Shares are Delivered      to the Lender’s CREST Account on the date of  Admission. |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.4   | The      Ordinary Shares to be issued to the Lender under this Agreement shall be      allotted and issued by the Company fully paid and free from all claims,      charges, liens, encumbrances, equities and third party rights whatsoever      and will rank pari passu in all respects with the existing issued Ordinary      Shares including the right to receive all dividends or other distributions      declared, made or paid after the date of their  allotment. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.5   | If      the Company fails to Deliver any Ordinary Shares on the due date in      accordance with its obligations under this Agreement, the Lender may      immediately demand from the Company and the Company shall, without      prejudice to any other rights which the Lender may have under this      Agreement, immediately pay an amount equal to the greater    of: |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.5.1   | 2%      of the then outstanding amount of the Loan;and |
|-------------------|--------------------------------------------------------|

| 8.5.2   | the      difference in value, if the VWAP on the date of actual Delivery is less      than the VWAP on the date when Delivery should have taken place pursuant      to this Agreement. The difference in value shall be calculated by      reference to the number of Ordinary Shares to be Delivered multiplied by      the VWAP (the "Value") on the date the      Ordinary Shares should have been Delivered pursuant to this Agreement less      the Value on the date of actual Delivery of the Ordinary Shares (or in      either case if there is no VWAP on the relevant date then the price shall      be calculated by reference to the Bid Price on the relevant      date). |
|-------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

8.5

| 9.   | EXCHANGE RATE MOVEMENTS |
|----------------|-------------------------|

| 9.1   | If      on any Loan Notice Date, the Loan Notice Date Exchange Rate is less than      the Closing Date Exchange Rate then the number of Loan Shares to be issued      shall be increased by the same percentage as results from dividing the      Closing Date Exchange Rate by the relevant Loan Notice Date Exchange      Rate.  By way of example, if the number of Loan Shares to be      issued in respect of a particular Loan Notice would, but for this Clause      9.1, be 1,000 and if the Closing Date      Exchange Rate is 1.50 and the relevant Loan Notice Date Exchange Rate is      1.45, then 1,035 Loan Shares will be issued in relation to that Loan      Notice. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9.2   | If      on any Cash Payment Date, the Cash Payment Date Exchange Rate is less than      the Closing Date Exchange Rate then the amount of cash required to satisfy      the amounts due pursuant to Clause 6.4 shall      be increased by the same percentage as results from dividing the Closing      Date Exchange Rate by the relevant Cash Payment Date Exchange      Rate. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

6.4.1
9.2
6.4.1
6.4.2
6.4.2
6.5
6.4.3

| 10.   | PAYMENT OF COSTS, EXPENSES, FEES AND      COMMISSIONS |
|-----------------|-------------------------------------------------------|

| 10.1   | Each      of the parties shall pay its own fees and expenses (including the fees of      any solicitors, accountants, or others engaged by such party) in      connection with this Agreement and the transactions contemplated hereby,      except that the Company will pay to the Lender (i) the sum of £15,000 plus      disbursements in respect of the Lender's legal costs and (ii) a due      diligence fee of £5,000. |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.2   | The      Company shall pay and Deliver to the Lender on the Closing Date a facility      commitment fee equal to an amount in cash equal to 5% of the amount of the      Loan. |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.3   | The      legal and other fees and expenses referred to in Clause 10.1 and 10.2 to be      paid in cash shall be paid on or before the date of this Agreement and the      Lender shall, to the extent that such amounts have not already been paid,      be entitled to withhold such amounts from the advance of the Loan to be      made pursuant to Clause 2. |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 11.   | INDEMNITIES |
|-----------------|-------------|

8

| 12.   | TERMINATION |
|-----------------|-------------|

| 12.1   | The      Lender shall be entitled to terminate this Agreement by notice to the      Company immediately at any time: |
|------------------|----------------------------------------------------------------------------------------------------------------------|

| 12.1.1   | if      the Company fails to pay any amount payable by it under this Agreement on      its due date or, within five Business Days after the due date, if such      failure results solely from a technical problem in relation to the      transfer of funds for which the Company is not  responsible; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 12.1.2   | the      Ordinary Shares are de-listed from AIM or PLUS (as      applicable); |
|--------------------|-------------------------------------------------------------------------------|

| 12.1.3   | there      shall occur any suspension of trading of the Ordinary Shares on AIM or      PLUS while any amount is outstanding under this  Agreement; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| 12.1.4   | the      occurrence of any of the Events of Default as set out in Schedule      1. |
|--------------------|------------------------------------------------------------------------------------|

| 12.2   | If      this Agreement is terminated by the Lender in accordance with its terms      then any part of the Loan which has not been advanced shall immediately be      cancelled and any part of the Loan, together with accrued interest, and      all other amounts accrued or outstanding under this Agreement shall become      immediately due and payable and notwithstanding termination of this      Agreement, interest shall continue to run on all outstanding amounts until      the date of actual payment in full of all outstanding    amounts. |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.   | COVENANTS |
|-----------------|-----------|

| 13.1.1   | will      use all reasonable endeavours to maintain the Admission of the Ordinary      Shares to trading on AIM or PLUS (as  applicable); |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.2   | will      do all things necessary (including, without limitation, obtaining      necessary resolutions from an extraordinary general meeting) to ensure      that within 30 days from the Funding Date that, for so long as any amount      remains outstanding under this Agreement, it has the necessary shareholder      authority to issue (i) the requisite number of Loan Shares required to      satisfy a Loan Notice issued in respect of a Conversion Amount equal to at      least the then outstanding amount of the Loan including any interest      capable of becoming due pursuant to Clause 4.1, and (ii) the requisite number of Ordinary      Shares required to satisfy a Subscription Notice in respect of the      aggregate number of Ordinary Shares capable of being issued pursuant to      Clause 7; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.3   | will      file in a timely manner all reports and other documents required of it      under the Companies Act 1985 and the Companies Act 2006, the AIM Rules or      PLUS Rules (as applicable) and all other laws or regulations applicable to      it and will not take any action or file any document to terminate or      suspend such registration or to terminate or suspend the admission of its      Ordinary Shares to trading on AIM or PLUS (as  applicable); |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.4   | will      take all steps reasonably necessary to preserve and continue the corporate      existence of the Company and the other Group  Companies; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.5   | will      immediately notify the Lender upon its becoming aware of the issuance by      the London Stock Exchange plc or PLUS Markets plc (as applicable) of any      suspension or de-listing of the Ordinary Shares from trading on AIM or      PLUS (as applicable); |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.6   | will      not, at any time after the date hereof, until expiry of this Agreement      effect any merger or consolidation of the Company whether by scheme of      arrangement or otherwise with or into, or  a transfer of all or      any substantial part of the assets or undertaking of the Company to      another entity (a Consolidation Event)      unless the resulting successor or acquiring entity (if not the Company)      assumes by written instrument the obligation to either (i) Deliver to the      Lender such shares and/or securities as following such Consolidation Event      the Lender is entitled to receive pursuant to this Agreement or (ii) to      pay to the Lender in cash or by way of Cash Payments the balance of all      monies due and payable under the terms of this  Agreement. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.7   | will      not (unless as directed by a duly passed resolution of the shareholders of      the Company) (i) modify the rights attaching to the Ordinary Shares in      respect of the dividends or liquidation, nor (ii) issue any other class of      share capital carrying any other rights which are more favourable than      such rights currently granted to the Ordinary  Shares; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.8   | will      not, and will procure that no member of the Group will, enter into any      amalgamation, merger or demerger, reconstruction or joint venture or      acquire any business or make any investment, other than with the prior      written consent of the Lender such consent not to be unreasonably      withheld; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.9   | will      not, and will procure that no member of the Group will, create or permit      to subsist any Security Interest, other than the Permitted Security, on      its present or future undertaking, property or assets, including the      Unencumbered Films, or any part of them without the prior written consent      of the Lender; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.10   | will      not, and will procure that no member of the Group will, enter into any      material transaction or arrangement with any person other than on      reasonable market terms, other than to sell products at a below market      price pursuant to pilot schemes or for marketing  purposes; |
|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.11   | will      not, and will procure that no member of the Group will, incur any      liability, actual or contingent, under any guarantee of the indebtedness      of another person, and not lend any money to any person other than in the      ordinary course of the film production or distribution projects existing      as at the Closing Date; |
|---------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.12   | will      not declare or pay any dividends or make any other distribution of income      or capital to its members while an Event of Default is continuing and      except as permitted by theAgreement; |
|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.13   | will      not permit, and will procure that no member of the Group will, or agree to      any variation of any rights attaching to the whole or any part of the      assets other than in the ordinary course of the film production or      distribution projects existing as at the Closing  Date; |
|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.14   | will      notify the Lender of any Event of Default immediately upon becoming aware      of it; |
|---------------------|-------------------------------------------------------------------------------------------------|

| 13.1.15   | will      effect and maintain such insurances as are prudently required to protect      the assets and the business of the Group, including loss of      profits; |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.16   | will      carry on the business of the Group in a proper and efficient manner and      not make any substantial alteration to the nature or mode of conduct of      the business of the Group and keep or cause to be kept proper books of      account relating to it; |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.17   | will      not, and will procure that no member of the Group will, incur or permit to      subsist any indebtedness, other than the Permitted Indebtedness as at the      Closing Date or indebtedness incurred in the ordinary course of the film      production or distribution projects existing as at the Closing Date,      without the prior written consent of theLender; |
|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.1.18   | will      not, and will procure that no member of the Group will, enter into any      transaction to sell, lease, licence, transfer or otherwise dispose of any      asset, including the Unencumbered Films, except for (a) obsolete plant and      equipment for cash and (b) any other asset with the prior written consent      of the Lender. |
|---------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.2   | if      the Company proposes any of thefollowing:- |
|------------------|----------------------------------------------------|

| 13.2.1   | any      allotment or issue of Ordinary Shares or any other instrument convertible      or exchangeable into Ordinary Shares by way of capitalisation of profits      or reserves (including share premium account and any capital redemption      reserve fund); or |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.2.2   | any      reduction of the capital of the Company, any share premium account or      capital redemption reserve fund or otherwise repay, redeem, repurchase,      sub-divide or consolidate the share capital of the  Company, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.2.3   | as      nearly as possible (and in any event not less than) the same proportion of      votes; and |
|--------------------|----------------------------------------------------------------------------------------------------|

| 13.2.4   | the      same entitlement to participate in the profits and assets of the      Company, |
|--------------------|-----------------------------------------------------------------------------------------|

| 13.3   | The      Company represents and warrants to the Lender  that: |
|------------------|---------------------------------------------------------------|

| 13.3.1   | no      Security Interest exists in relation to the Unencumbered Films as at the      Closing Date (other than those Security Interests in favour of the      Lender); |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.3.2   | the      information contained in Schedule 3 is accurate, complete and up to date      as at the Closing Date; |
|--------------------|----------------------------------------------------------------------------------------------------------------|

| 13.3.3   | that      no breach of covenant or event of default is continuing or will occur by      reason of the Loan under any instrument in connection with any Permitted      Indebtedness; and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.3.4   | the      aggregate of the borrowings of the Company do not or, as the case may be,      would not if fully drawn, exceed any borrowing limit in the Company's      constitutional documents or in any trust deed or other agreement or      instrument to which it is a party. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.   | WITHHOLDING ANDGROSSING-UP |
|-----------------|----------------------------|

| 14.1   | Except      as required by law, all payments due to the Lender under this Agreement      will be made free and clear of all deductions and withholdings (whether in      respect of Taxation, set- off, counter-claim or  otherwise). |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.2   | If      any deduction or withholding is required by law to be made from any      payment due to the Lender under this Agreement, the person who is obliged      to make such payment will pay to the Lender such additional amount as is      necessary to ensure that the Lender receives a net amount (after the      deduction or withholding) equal to the amount which it would have received      had the payment in question not been subject to the deduction or      withholding. |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14.3   | If      any payment received by the Lender under this Agreement from the Company      (other than the fees and commissions referred to in Clause 10.1 is subject to Taxation, the person who is      obliged to make such payment will pay to the Lender such additional amount      as is necessary to ensure that the Lender receives and retains a net      amount (after taking into account such Taxation and any Taxation payable      in respect of such additional amount) equal to the full amount which it      would have received and retained had the payment in question not been      subject to Taxation. |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15.   | NOTICES |
|-----------------|---------|

| 15.1   | Any      demand, notice or other communication given or made under or in connection      with this Agreement will be in writing and will, if otherwise given or      made in accordance with this Clause 15 be      deemed to have been duly given or made as  follows: |
|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15.1.1   | if      sent by prepaid first class post, on the second Trading Day after the date      of posting if posted in the UK for UK delivery and on the seventh Trading      Day if posted for overseas delivery;or |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15.1.2   | if      delivered by hand, upon delivery;or |
|--------------------|---------------------------------------------|

| 15.1.3   | if      sent by facsimile or e-mail, on the day of  transmission; |
|--------------------|-------------------------------------------------------------------|

| 15.2   | Any      such demand, notice or other communication will, in the case of service by      post or delivery by hand, be addressed (subject as provided in this      Clause) to the recipient at the recipient’s address stated in this      Agreement or at such other address as may from time to time be notified in      writing by the recipient to the sender as being the recipient’s address      for service. |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15.3   | Any      such demand, notice or other communication will, in the case of service by      facsimile or e-mail be sent to the recipient using the facsimile number or      e-mail set out below. |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15.3.1   | Fax      the Company: +44 323 634 7821 marked for the attention of Elaine New,      Finance Director; |
|--------------------|-------------------------------------------------------------------------------------------------------|

| 15.3.2   | E-mail      the Company:elainnew@googlemail.com; |
|--------------------|--------------------------------------------------|

| 15.3.3   | Fax      the Lender: +1 786-323-1651  marked for the attention of Robert      D. Press Esq; |
|--------------------|-------------------------------------------------------------------------------------------------------|

| 15.3.4   | E-mail      the Lender: bpress@trafcap.com. |
|--------------------|---------------------------------------------|

| 15.4   | The      provisions of this Clause 15 will not apply,      in the case of service of court documents, to the extent that such      provisions are inconsistent with Part 6 of the Civil Procedure      Rules. |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 16.   | REMEDIES ANDWAIVERS |
|-----------------|---------------------|

| 17.   | MISCELLANEOUS |
|-----------------|---------------|

| 18.   | GOVERNING LAW AND  JURISDICTION |
|-----------------|---------------------------------|

| 19.   | GENERAL |
|-----------------|---------|

| 19.1   | This      Agreement represents the whole agreement and understanding between the      parties and supersedes all other agreements and understandings between the      parties or any of them relating to the subject matter of this      Agreement. |
|------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 19.2   | A      person who is not a party to this Agreement shall have no right under the      Contracts (Rights of Third Parties) Act 1999 to enforce any term of this      Agreement but this shall not affect any right or remedy of a third party      which exists or is available apart from that  Act. |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 19.3   | This      Agreement may be executed in any number of counterparts all of which when      taken together shall constitute a single  instrument. |
|------------------|------------------------------------------------------------------------------------------------------------------------------------------------|

----

SCHEDULE 1    

| 1.   | failure      by the Company to pay in full on the due date any sum payable to the      Lender under, and in the manner required by, this Agreement or, within      five Business Days after the due date, if such failure results solely from      a technical problem in relation to the transfer of funds for which the      Company is not responsible; |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | any      representation, warranty or statement made by or in relation to the      Company in this Agreement, or in any document prepared by it or on its      behalf and furnished under or in connection with this Agreement, is      materially incorrect as at the date on which it is made or deemed to be      repeated, unless the underlying circumstances giving rise to the breach      are remedied within ten Business Days of such  date; |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | failure      by the Company to comply duly and punctually with any of the obligations,      covenants or undertakings contained in this Agreement (other than those      referred to in paragraphs 1 and 2 this Schedule 1) and, in the case only      of those obligations, covenants or undertakings which are capable of being      remedied, such failure is not so remedied within five Business Days after      the Company has become aware of thebreach; |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | in      the event that the Company fails to Deliver any Ordinary Shares in      accordance with its obligations under this Agreement to do so within ten      (10) calendar days after the date of the relevant Loan Notice or      Subscription Notice is received (or deemed to have been received, in      accordance with Clause 15) as specified in      Clause 8.5, then this failure to Deliver      shall constitute an Event of Default upon expiry of such 10 day      period; |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | any      Group Company suspends or threatens to suspend all or a substantial part      of its operations, or all or a substantial part of a Group Company’s      assets are expropriated by any governmental or other competent      authority; |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.   | a      meeting is convened or a petition is presented (unless it is demonstrated      to the reasonable satisfaction of the Lender that the petition is      frivolous or vexatious and such petition is set aside within 14 days of      presentation), or an order is made or an effective resolution is passed      for the winding-up of a Group Company, except for the purposes of a      reconstruction or amalgamation whilst solvent on terms previously approved      in writing by the Lender actingreasonably; |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7.   | an      order is made or a petition is presented for the appointment of an      administrator to a Group Company (unless it is demonstrated to the      reasonable satisfaction of the Lender that the petition is frivolous or      vexatious and such petition is set aside within 21 days of      presentation; |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.   | a      distress, execution or other legal process is levied against any of the      assets of a Group Company in respect of any single claim in excess of      £50,000 (fifty thousand pounds), and is not discharged or paid within 14      days; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9.   | an      encumbrancer takes possession or a Receiver or administrative Receiver is      appointed of the whole or any part of the assets or undertaking of a Group      Company; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.   | a      Group Company: |
|-----------------|-----------------------|

| 10.1.1   | ceases      or suspends generally payment of its debts, or announces an intention to      do so, or is unable to pay its debts, or is deemed unable to pay its debts      within the meaning of section 123 (1) (e) or (2) Insolvency Act      1986; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1.2   | proposes,      or its directors make a proposal for, a voluntary arrangement under part I      of the Insolvency Act 1986; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

| 10.1.3   | enters      into any composition or other arrangement for the benefit of its creditors      generally or any class ofcreditors; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| 10.1.4   | the      occurrence of a Material AdverseChange; |
|--------------------|--------------------------------------------------|

| 10.1.5   | litigation      is commenced against a Group Company which is likely to succeed and which,      if successful, would result in a Material Adverse  Change; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1.6   | any      borrowing by a Group Company is declared due and payable prior to its      stated maturity or is placed on demand by reason of an Event of      Default; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1.7   | any      money repayable on demand by a Group Company is not paid upon demand being      made, unless such non-payment is with the agreement of the party to whom      such money is owed; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.1.8   | any      event occurs which, under the applicable law of any relevant jurisdiction,      has an analogous or equivalent effect to any of the events described in      paragraph 10.1.1 to 10.1.7above. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

SCHEDULE 2

| 1.   | On      or before any part of the Loan is advanced, the Lender has received the      following documents and evidence:- |
|----------------|-------------------------------------------------------------------------------------------------------------------------|

| 1.1   | a      certified true copy of the constitutional documents of the Company and      each of its Subsidiaries; |
|-----------------|--------------------------------------------------------------------------------------------------------------|

| 1.2   | a      certified true copy of a resolution of the board of each of the Company      and each of its Subsidiaries:- |
|-----------------|--------------------------------------------------------------------------------------------------------------------|

| 1.2.1   | approving      the terms of, and the transactions contemplated by, the Transaction      Documents to which it is a party and resolving that it execute, deliver      and perform the Transaction Documents to which it is a party;      and |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 1.2.2   | authorising      a specified person or persons to execute the Transaction Documents to      which it is party; |
|-------------------|----------------------------------------------------------------------------------------------------------------|

| 1.3   | an      original of each of the Transaction Documents duly executed by the parties      to those documents; and |
|-----------------|-----------------------------------------------------------------------------------------------------------------|

| 1.4   | an      original certificate or report by the auditors of the Group or other      evidence to the effect that the borrowing limit imposed by Article 104 of      the Articles of Association of the Company is not and will not be exceeded      before the Final Maturity Date, in form and substance satisfactory to the      Lender in its absolute discretion. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | On      or before any part of the Loan is advanced, the Lender has confirmed in      writing that it is satisfied with its legal and commercial due diligence      including its review of (i) cash flows, (ii) content assets and (iii)      valuations. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

SCHEDULE 3

----

SCHEDULE 4

| Film Titles              |
|--------------------------|
| Back      In The Day     |
| Believer                 |
| Captivity                |
| Cemetery      Gates 2006 |
| Dog      Soldiers        |
| Drunk      Boat          |
| Firecracker              |
| Getting      It          |
| Mesmerist                |
| Popstar                  |
| Red      Riding Hood     |
| Silent      Partner      |
| Wedding      Chest       |
| American      summer     |
| Autopsy                  |
| Hades                    |
| Knife      Edge          |
| Neuromancer              |
| Nine      Miles Down     |
| Winter      Queen        |
| Galahad                  |

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CERTIFICATE 

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