EXECUTION
VERSION











DATED  January
31st 2008











































(1)
THE CHARGORS


named
herein





(2)
TRAFALGAR CAPITAL SPECIALIZED INVESTMENT FUND























GUARANTEE
      AND DEBENTURE

















1


CONTENTS




Clause Page







1
            INTERPRETATION




2
            COVENANT
      TO PAY




3
            CHARGES




4
            PROTECTION
      OF CHARGEHOLDER'S RIGHTS




5
            COVENANTS




6
            DEMAND
      AND ENFORCEMENT




7
            RECEIVERS




8
            POWER
      OF ATTORNEY




9
            APPLICATION
      OF MONEYS RECEIVED BY THE LENDER OR THE
      RECEIVER




10
            CONSOLIDATION




11
            PROTECTION
      OF THIRD PARTIES




12
            PROTECTION
      OF THE LENDER AND THE RECEIVER




13
            PROVISIONS
      RELATING TO THE LENDER




14
            MISCELLANEOUS
      PROVISIONS




SCHEDULE 1 - THE
CHARGORS




SCHEDULE 2 - TERMS OF
GUARANTEE




SCHEDULE 3 - REGISTERED AND
UNREGISTERED LAND




SCHEDULE 4 - DEED OF
ACCESSION







20\21644241.3\CA07
 2





THIS GUARANTEE AND DEBENTURE
is made
on                                                                                                                                           2008




BETWEEN:-




(1)
            THE COMPANIES whose
      names and registered offices are set out in Schedule 1 (together with
      each company which becomes a party hereto by executing a Deed of
      Accession, each a "Chargor" and together
      the "Chargors");
      and




(2)
            TRAFALGAR CAPITAL SPECIALIZED
      INVESTMENT FUNDan 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”).




IT IS AGREED as
follows:-




1.
            INTERPRETATION




1.1  Definitions




In this
Guarantee and Debenture, unless the context otherwise requires:-




"Asset
      Contracts"
            means
      all the rights of each Chargor, now or in the future, arising out of or in
      connection with any agreement:-
              (i)for
      the acquisition of any property (real or personal) by any Chargor (except
      to the extent that such rights amount to an interest in land effectively
      charged by way of legal mortgage or fixed charge by Clause 3.1.1 or 3.1.2) including, without limitation, any option
      to acquire property; or
              (ii)for
      the hire, hire purchase, lease or loan of any property (real or personal),
      to any Chargor (except as aforesaid)"Assets"
            means
      all the undertaking, property, assets, rights and revenues of each Chargor
      whatsoever, and wheresoever, present or future"Bridging
      Loan Agreement"
            means
      the £500,000 bridging loan agreement dated on or around the date of this
      deed between the Principal Borrower and the Lender as from time to time
      varied, amended, supplemented, extended or replaced"Companies"
            means
      the Chargors together with any other Group Companies from time to time,
      and, (where the context permits), includes each or any of them and "Company" means each or
      any of them"Dangerous
      Substance"
            means
      any radiation and any substance (whether natural or artificial and whether
      in solid or liquid or gaseous form) capable (whether alone or in
      combination with any other substance) of causing harm to man or any other
      living organism or damaging property or the Environment including, without
      limitation, any controlled, special, hazardous, toxic, radioactive or
      dangerous waste"Debts"
            means
      all book and other debts now or in the future owing to each Chargor
      (whether alone or jointly with any other person), whenever payable and
      whether liquidated or unliquidated, certain or contingent, including,
      without limitation, credit balances on any account at any bank or
      financial institution other than the Lender, and together with all
      cheques, bills of exchange, negotiable instruments, credits and securities
      at any time given in relation to, or to secure payment of, any such debt,
      but "Debts" does
      not include any asset or right effectively charged by way of fixed charge
      under any other provision of Clause 3"Deed of
      Accession"
            means
      a deed substantially in the form of Schedule 4 executed, or to be
      executed, by a person becoming a Chargor"Encumbrance"
            means
      any mortgage, charge (whether fixed or floating), pledge, lien,
      hypothecation, standard security, assignation in security, bond and
      floating charge or other security interest of any kind, and any right of
      set-off, assignment, trust, flawed asset or other agreement
      or  arrangement whatsoever for the purpose of providing security
      or having a similar effect to the provision of security"Environment"
            means
      all, or any of, the following media, the air (including, without
      limitation, the air within buildings and the air within other natural or
      man-made structures above or below ground), water (including, without
      limitation, ground and surface water) and land (including, without
      limitation, surface and sub-surface soil)"Environmental
      Law"
            means
      all applicable laws (whether civil, criminal or administrative and
      including, without limitation, common law), regulations, codes of
      practice, circulars, guidance notes and the like (whether in the United
      Kingdom or elsewhere) concerning nuisance, pollution, the protection of
      human health, the Environment, conditions in any work place or the
      generation, transportation, storage, treatment or disposal of waste or
      Dangerous Substances"Event of
      Default"
            has
      the meaning given in the Finance Documents"Finance
      Documents"
            means
      the Bridging Loan Agreement"Fixed Plant and
      Equipment"
            means
      all plant, machinery or equipment of each Chargor of any kind (including,
      without limitation, all cables, pipes, switchgear, heating, lighting,
      electrical, water and gas apparatus) which does not for any reason
      constitute a Fixture, but is now or at any time directly or indirectly
      attached by any means and for any purpose to any land or building, whether
      or not it is removable or intended to form part of the land or
      building"Fixtures"
            means
      all things of any kind now or at any time affixed to land for any purpose,
      including, without limitation, trade and tenants
  fixtures"Group
      Company"
            has
      the meaning given in the Finance Documents"Guarantor"
            means
      any Chargor insofar only as it covenants under Clause 2.1.2 to pay or discharge money due or owing
      from or liabilities of each other Chargor to the Lender and "Guarantors" and "Guarantee" shall be
      construed accordingly"Insurances"
            means,
      in relation to each Chargor,  all the right, title and interest
      of such Chargor, now or in the future, in or under any policy of insurance
      or assurance or to the proceeds thereof"Intellectual
      Property"
            means,
      in relation to each Chargor, all the right, title and interest of such
      Chargor,  now or in the future, in or to any of the
      following:-
              (i)any
      registered intellectual property right in any territory, including,
      without limitation, patents, trade marks, service marks, registered
      designs, and any similar right in any territory and any applications or
      right to apply for any of the above;
              (ii)any
      invention, copyright, design right or performance right;
              (iii)any
      trade secrets, know-how and confidential information; and
              (iv)the
      benefit of any agreement or licence for the use (by such Chargor or any
      other person) of any such right"Land"
            means
      any estate, right or interest in or over land, whether legal or equitable,
      and wherever the land is situated, including, without limitation, any
      buildings and Fixtures on land, and the benefit of any covenants or rights
      owed to any person or enforceable by him by virtue of the ownership
      possession or occupation of land but for these purposes "land" excludes heritable
      property situated in Scotland"Loose Plant and
      Equipment"
            means,
      in relation to each Chargor, all plant, machinery, equipment and motor
      vehicles now or at any time owned by such Chargor as a capital asset which
      is not Fixed Plant and Equipment, including, without limitation, any
      moulds, patterns, tools (other than hand tools and consumable tooling),
      dies and jigs"Other
      Claims"
            means,
      in relation to each Chargor, all rights, claims or obligations of any kind
      whatsoever now  or at any time owed to such Chargor capable of
      being  satisfied by the payment of money, which are not
      effectively charged by way of fixed charge by any other provision of this
      Guarantee and Debenture"Principal
      Borrower"
            means
      Seven Arts Pictures Plc (registered number 04276617)"Principal"
            means
      any Company insofar only as it owes money or has incurred liabilities to
      the Lender except as a Guarantor"Receiver"
            means
      any receiver appointed under this Guarantee and Debenture, and, where more
      than one receiver has been appointed, each of them"Rents"
            means,
      in relation to each Chargor, any sum payable to such Chargor (and any
      right to recover any such a sum):-
              (i)by
      way of rent, service charge or otherwise under any lease of Land, or as
      mesne profits, licence fee, or otherwise howsoever  for the use
      or occupation of or trespass upon Land, or other income arising from any
      Land;
              (ii)by
      way of rent or otherwise for or in connection with the possession or use
      of, or in respect of any trespass to or conversion of, any chattel except
      insofar as the same is effectively charged by way of fixed charge by
      Clause 3.1.1 or 3.1.2"Secured
      Liabilities"
            means
      all liabilities and obligations owed by the Chargors to the Lender whether
      due, owing or incurred now or in the future, and of any kind, however
      arising  and in any currency, whether or not immediately
      payable, whether certain or contingent, whether sole or joint, whether as
      principal or as surety, whether or not the Lender was the original
      creditor in respect thereof, and including, without limitation, interest,
      commission, costs, charges and expenses charged by the Lender at rates
      agreed between it and a Chargor or, in the absence of express agreement,
      in accordance with the Lender's normal practice for the time being
      provided that no liability or obligation shall, as far as concerns any
      Chargor, be included in the definition of "Secured Liabilities" if and to
      the extent that, if it were so included, this Guarantee and Debenture
      would constitute unlawful financial assistance by that Chargor contrary to
      section 151 Companies Act 1985"Securities"
            means,
      in relation to each Chargor, all the right, title and interest of such
      Chargor, now or in the future, in any stocks, shares, debentures, loan
      stocks, instruments creating or acknowledging any debt, or other
      securities issued by any person (whether or not marketable) including,
      without limitation, all rights and benefits arising and all money payable
      in respect of or in substitution or exchange for any of them, whether by
      way of conversion, redemption, preference, bonus, option, dividend,
      interest or otherwise, and including, without limitation, all Securities
      owned by such Chargor in any other Company"Security
      Documents"
            has
      the meaning given in the Finance Documents


1.2  Interpretation




In this
Guarantee and Debenture, unless the context otherwise requires:-




1.2.1  the
singular includes the plural and vice versa, and reference to any gender
includes the other genders;




1.2.2  references
to persons include bodies corporate, associations, partnerships, organisations,
states, state agencies and any other entity, whether or not having separate
legal personality;




1.2.3  words and
phrases defined in the Companies Act 1985 have the same meanings in this
Guarantee and Debenture but the word "company" includes any body
corporate;




1.2.4  references
to Clauses are to clauses or sub-clauses of this Guarantee and Debenture,
references to a Schedule are to a schedule to this Guarantee and Debenture and
references within a Schedule to paragraphs are to paragraphs or sub-paragraphs
of that Schedule; and




1.2.5  references
to any rate of interest shall be construed as meaning that rate as from time to
time in force, calculated from day to day, and compounded on the Lender's usual
days for charging interest in each year, both before and after judgment; and
references to a base lending rate shall, if there is no such published or
determinable rate at the appropriate time, be construed as meaning such
reasonably equivalent rate as the Lender shall select.




1.3  Further
interpretation




In this
Guarantee and Debenture:-




1.3.1  any
reference to any statute or statutory instrument or any section or part thereof
includes any enactment (present or future) replacing or amending it or any
instrument, order or regulation made under it and also includes any past
statutory provisions (as from time to time modified or re-enacted) which such
provision has directly or indirectly replaced;




1.3.2  headings
are for reference purposes only and shall not affect the construction of
anything in this Guarantee and Debenture;




1.3.3  references
to this Guarantee and Debenture (or to any specified provision of this Guarantee
and Debenture) or any other document shall be construed as references to this
Guarantee and Debenture, that provision or that document as in force for the
time being and as amended in accordance with its terms, or, as the case may be,
with the agreement of the relevant parties and, if so required in the relevant
document, with the prior written consent of the Lender;




1.3.4  a "Chargor" shall include its
successors and permitted assigns; and




1.3.5  the
"Lender" shall include
its successors and assigns.




1.4  Schedules




The
Schedules shall be treated as an integral part of this Guarantee and Debenture
and references to this Guarantee and Debenture shall include the
Schedules.




1.5  Incorporation
of terms




Unless
otherwise defined herein, capitalised terms defined in the Finance Documents
shall have the same meaning when used in this Guarantee and
Debenture.




2.  COVENANTTO PAY




2.1  Covenant




Each
Chargor hereby covenants:-




2.1.1  to pay or
discharge to the Lender on demand  any or all of the Secured
Liabilities owing or incurred by such Chargor;




2.1.2  and
guarantees to pay or discharge to the Lender on demand any or all of the Secured
Liabilities owing or incurred by each other Company (except as a Guarantor for
the Chargor giving this covenant); and




2.1.3  in either
case  to pay interest to the Lender upon any sum so demanded until
payment (both before and after any judgment) at 3% above the rate applicable to
that sum immediately before demand (or, if there was no such applicable rate, at
16% per annum).




2.2  Guarantee




The
guarantee contained in Clause 2.1.2 is given
subject to, and with the benefit of, the provisions set out in Schedule 2
by each Chargor separately and also jointly with every other Chargor except the
Chargor guaranteed.




2.3  Guarantee
binding




Each
Chargor agrees to be bound by the guarantee contained in Clause 2.1.2, even if any other Company  which was
intended to execute this Guarantee and Debenture may not do so or may not be
effectually bound.




2.4  Demands




The
making of one demand under this Guarantee and Debenture will not preclude the
Lender making any further demands.




3.  CHARGES




3.1  Charging
clause




As
security for payment of the Secured Liabilities, each Chargor with full title
guarantee hereby charges to the Lender:-




3.1.1  by way of
first legal mortgage all Land now owned by such Chargor, including, without
limitation, the land which is described in Schedule 3 hereto;




3.1.2  by way of
first fixed equitable charge all Land which such Chargor acquires in the
future;




3.1.3  by way of
separate first fixed charges:-




(a)  all the
goodwill and uncalled capital of such Chargor, present or future;




(b)  the
Securities of such Chargor;




(c)  the
Insurances of such Chargor;




(d)  the
Intellectual Property of such Chargor;




(e)  the Debts
of such Chargor;




(f)  the Rents
of such Chargor;




(g)  the Asset
Contracts of such Chargor;




(h)  the Other
Claims of such Chargor;




(i)  the Fixed
Plant and Equipment of such Chargor; and




(j)  the Loose
Plant and Equipment of such Chargor;




3.1.4  by way of
first floating charge all those Assets of such Chargor which are not for any
reason effectively charged by this Guarantee and Debenture by way of fixed
charge or mortgage, including, without limitation, any heritable property of
such Chargor situated in Scotland.




3.2  Qualifying
floating charge




Paragraph
14 of Schedule B1 to the Insolvency Act 1986 will apply to any floating charge
created by this Debenture.




4.  PROTECTIONOF CHARGEHOLDER'S RIGHTS




4.1  Moneys
received




Each
Chargor shall pay into such Chargor's account as the Lender may direct all
moneys which it receives in respect of any Debts, Securities,
Insurances,  Intellectual Property, Rents  and any other of
the rights and claims charged to the Lender under Clause 3.1.3, and not withdraw any moneys from that account
unless the Lender permits it to do so, and until such payment hold all moneys so
received upon trust for the Lender and shall not without the prior written
consent of the Lender charge, factor, discount or assign any of them in favour
of any other person, or otherwise deal with them except for the purpose of
collecting them in and paying them as required by this Clause.




4.2  Covenants




Each
Chargor covenants that it will not, without the prior written consent of the
Lender or save as expressly permitted pursuant to the Finance
Documents:-




4.2.1  create
any Encumbrance, or allow any Encumbrance to arise or continue, on or over any
of the Assets; or




4.2.2  to part
with or dispose of all or any of the Assets charged by way of fixed charge or
mortgage; or




4.2.3  to part
with or dispose of all or any of the Assets charged by way of floating charge
except in the ordinary course of carrying on its business as a going
concern.




4.3  Conversion
of floating charge




The
Lender may if an Event of Default has occurred and is continuing from time to
time by notice in writing to any Chargor convert any floating charge created by
this Guarantee and Debenture into a fixed charge, in respect of any Assets of
such Chargor which are specified in any such notice.  Any such
floating charge shall automatically be converted into a fixed
charge:-




4.3.1  in
respect of any Assets of any Chargor, immediately prior to such Chargor agreeing
or resolving (unless the Lender has first consented in writing to it) to create
any  Encumbrance over those Assets in favour of any other person, or
to part with or dispose of them otherwise than in the ordinary course of
carrying on such Chargor's business as a going concern or as permitted pursuant
to the Finance Documents or if the Lender notifies the relevant Chargor in
writing that it in good faith considers those Assets to be in danger of being
seized or sold under any form of distress, attachment, execution or other legal
process or to be otherwise in jeopardy; and




4.3.2  in
respect of all the Assets of any Chargor, if such Chargor ceases to carry on
business or to be a going concern or if any voluntary arrangement or other
moratorium (other than a moratorium which the Company is entitled to obtain
under Section 1A of the Insolvency Act 1986) or compromise with any of such
Chargor’s creditors, or any class of them, is proposed or put into
effects;




but so
that this Clause 4.3 shall not apply to any
Assets situated in Scotland.




4.4  Application
to Land Registry




Each
Chargor hereby applies to the Chief Land Registrar for a restriction to be
entered on the register of title of all registered land now or in the future
owned by such Chargor in the following terms:-




"No
disposition of the registered estate by the proprietor of the registered estate
is to be registered without a written consent signed by the proprietor for the
time being of a charge dated [insert date] in favour of
[insert name of Lender]
referred to in the charges register".




4.5  Deposit
of deeds and title documents




Each
Chargor shall, subject to the rights of any prior mortgagee, deposit with the
Lender and the Lender during the continuance of this security shall be entitled
to hold all deeds and documents of title relating to such Chargor’s Land,
Securities (including, without limitation, warrants and coupons) and
Insurances.




4.6  Further
assurances




Each
Chargor shall, at is own expense, at any time when required by the Lender
execute and deliver to the Lender:-




4.6.1  a valid
legal mortgage of any Land now or in the future owned by such
Chargor;




4.6.2  a fixed
charge over any interest, not capable of being charged by way of legal mortgage,
in any Land now or in the future belonging to such Chargor;




4.6.3  a legal
assignment or other fixed security over all or any of its Intellectual
Property;




4.6.4  a legal
charge over all or any of its Securities;




4.6.5  a chattel
mortgage over such chattels, plant, machinery, computers and/or other equipment
of such Chargor as the Lender may specify;




4.6.6  a fixed
charge or other fixed security over any of its Assets over which there is a
floating charge;




4.6.7  where any
of its Assets are situated outside England and Wales, such fixed security under
the law of the place where the Asset is situated as the Lender may
require;




4.6.8  a notice
to any third party of any of the charges or assignments contained in this
Guarantee and Debenture;




4.6.9  execute
and deliver to the Lender a legal assignment of any Debts which the Lender shall
require, and give notice of any such assignment to any person when required by
the Lender; and




4.6.10  all deeds
and documents which the Lender may deem necessary or desirable to vest in the
Lender the security intended to be created by this Guarantee and Debenture over
all or any of the Assets,




in each
case, in the Lender's standard form or such other form as the Lender may
require.  In the case of Assets situated outside England and Wales,
references to any form of security shall be taken to refer to any form of
security available under the relevant local law which the Lender may
select.




4.7  Other
acts




Without
prejudice to Clause 4.6, each Chargor shall,
at its own expense, at any time when required by the Lender do and concur in all
acts or things as the Lender may deem necessary or desirable to vest in the
Lender the security intended to be created by this Guarantee and Debenture over
all or any of the Assets or to facilitate the enforcement of that security, or
the exercise of any powers or discretions intended to be vested in the Lender or
the Receiver by this Guarantee and Debenture.




4.8  Continuing
security




This
Guarantee and Debenture shall be a continuing security to the Lender and shall
remain in force until expressly discharged in writing by the Lender
notwithstanding any intermediate settlement of account or other matter or thing
whatsoever, and shall be without prejudice and in addition to any other right,
remedy or security of any kind which the Lender may have now or at any time in
the future  for or in respect of any of the Secured
Liabilities.




4.9  Chargors'
certificates




Each
Chargor hereby certifies that this Guarantee and Debenture does not contravene
any of the provisions of the memorandum and articles of association of such
Chargor and has been duly authorised and executed in accordance
therewith.




5.  COVENANTS




5.1  General
covenants




While
this Guarantee and Debenture continues in force, each Chargor shall comply with
all the covenants and undertakings on its part contained in the Finance
Documents and, without prejudice to them, shall:-




5.1.1  forthwith
notify the Lender of the acquisition of any Land or any Intellectual
Property;




5.1.2  effect
and maintain in force insurance in respect of the Assets in accordance with
Clause 13.1.15 of the Finance Documents;




5.1.3  ensure
that each such insurance names the Lender as a co-insured (or, at the option of
the Lender, that the Lender's interest is noted on the policy);




5.1.4  promptly
pay all premiums, and do all other things required to keep each insurance in
full force and effect and not liable to be avoided or to have any claim
thereunder refused;




5.1.5  promptly
as and when requested by the Lender supply to the Lender copies of all such
policies of insurance;




5.1.6  in
relation to all Land owned or occupied by such Chargor:-




(a)  keep all
buildings and all plant, machinery, fixtures, fittings and other effects charged
under this Guarantee and Debenture in good and substantial repair and in good
working order and condition (except only for fair wear and tear) and will not,
without the prior written consent of the Lender, alter, pull down, remove or
dispose of any of the same except in the ordinary course of repair, maintenance
or improvement;




(b)  as soon
as reasonably practicable, provide to the Lender such documents or information
in its possession or under its control relating to such Land as the Lender may
from time to time reasonably require;




(c)  punctually
pay or cause to be paid and keep the Lender indemnified against, all rents,
rates, taxes, levies, charges, duties, assessments, impositions and outgoings
whatever (whether parliamentary, parochial, local or otherwise) assessed,
charged or imposed upon or now or in the future payable by it in respect of all
or any Land vested in such Chargor or in which it has an interest and, when
required, produce to the Lender (if available) proof of such
payment;




(d)  ensure
the due observance of all laws, statutes, statutory instruments, regulations and
bye-laws for the time being in force and all notices, orders and requirements of
any competent authority (statutory or otherwise) and all directives and codes of
practice affecting any Land vested in such Chargor or in which it has an
interest or affecting such Chargor’s business or the Assets of such Chargor or
relating to the protection of the environment or health and safety, where, in
each case, failure to do so would result in any material adverse effect, and
carry out all works and give effect to all arrangements which any such authority
may in respect of the aforesaid direct or recommend;




(e)  complete
with reasonable expedition any building operations commenced at any time by such
Chargor on any such Land to the reasonable satisfaction of the Lender and any
competent authority and in conformity with all requisite planning and bye-law
consents (including, but not limited to,  the provisions of any
agreement entered into by such Chargor with any such authority) all of which
building operations shall have been previously approved in writing by the Lender
(such approval not to have been unreasonably withheld or delayed);




(f)  observe
and perform the terms of all agreements, assignments, contracts, conveyances,
grants and other deeds and documents for the time being binding on such Chargor
or affecting any such Land or its use or enjoyment, where, in each case, failure
to do so would result in any material adverse effect, and such Chargor shall not
knowingly take or omit to take any action of any kind whereby any interest or
estate of such Chargor in any such Land may be forfeited or otherwise adversely
affected;




(g)  at all
times observe and perform (and ensure that any other person at any time
occupying any such Land also observes and performs) all restrictive and other
covenants to which such Land or any part of it may from time to time be
subject,  all obligations on the part of such Chargor or any such
occupier in any lease or tenancy agreement and all building regulations and all
restrictions, conditions and stipulations for the time being affecting such Land
or any part of it or the use or enjoyment of such Land;




(h)  within
seven days deliver to the Lender any notice or proceedings served on such
Chargor and relating to any alleged breach of any of the above;




(i)  at all
times keep such Land in a safe condition for all persons foreseeably likely to
be present on any part of it, and where necessary or desirable for such
purposes, erect and maintain fencing, barriers, covers and other security
measures; and




(j)  permit
the Lender at any reasonable time to enter on the land, inspect it and any
assets on it, and take copies of any documents there.




5.1.7  at all
times comply with all applicable Environmental Law, and obtain and comply with
the terms of any licence or permit under any Environmental Law which is
necessary or desirable to carry on any of such Chargor’s businesses
or  activities and which failure to comply with or obtain could in the
opinion of the Lender be expected to have a material adverse effect on such
Chargor;




5.1.8  take all
action necessary to maintain any registered rights to Intellectual Property in
full force and effect, and to make and pursue all applications which it is
entitled to make for any such rights;




5.1.9  in
relation to the Intellectual Property owned by such Chargor:-




(a)  take all
necessary action to protect and maintain such Intellectual Property and as soon
as reasonably practicable notify the Lender of any infringement or alleged
infringement or any challenge to the validity of any such Intellectual Property
of which such Chargor has notice and supply the Lender with all information in
its possession relating thereto as the Lender may reasonably
request;




(b)  duly
register (and pay all fees and costs in connection therewith) in such registers
or with such authorities as may be available for the purpose (in the United
Kingdom or elsewhere) and in such names as may be required by the law and
practice of the place of registration such of the following as may be capable of
registration, whether in the United Kingdom or elsewhere:-




(i)  this
Guarantee and Debenture;




(ii)  all
licences, registered user agreements or other interests granted to or acquired
by such Chargor relating to such Intellectual Property; and




(iii)  all
future assignments and/or mortgages made under this Guarantee and
Debenture;




(c)  pay all
application, registration, renewal and other payments necessary for effecting,
protecting, maintaining or renewing registrations required to be made under
Clause 5.1.9(b)
before the latest time provided for payment thereof and do all other reasonable
acts and things necessary for maintaining all such Intellectual Property in full
force and effect and send or deliver to the Lender the receipt (if provided) for
every such payment immediately after the same shall have been
made.  If default shall be made by such Chargor in making such
payments or doing such acts or things, the Lender may make such payments or
cause such acts or things to be done.  All moneys expended by the
Lender under this provision shall be recoverable by the Lender under
Clause 14.5;




(d)  use
reasonable endeavours to procure that any agents acting for it shall agree in
writing to notify the Lender of any renewal or other fees due in respect of any
such Intellectual Property and of any such acts or things necessary for
protecting and maintaining any of such Intellectual Property before such payment
is due or such act or thing must be done;




(e)  diligently
commence and prosecute all proceedings as may be necessary to prevent
infringement or, as applicable, continued infringement of such Intellectual
Property belonging to such Chargor unless the Lender (acting reasonably) is
satisfied that to do so would not be in the commercial interests of such
Chargor;




(f)  maintain
an up-to-date record of all trade marks, applications for registration of trade
marks and of all copyright, patents and patent applications owned by such
Chargor and provide a copy to the Lender on written request;




(g)  at the
request of the Lender, provide the Lender with a written summary of all trade
marks, trade mark applications, trade names and Intellectual Property comprised
in Clause 3.1.3(d) acquired by such Chargor
(whether in the United Kingdom or elsewhere) since the creation of this
Guarantee and Debenture or the date of the last notification, as the case may
be;




(h)  not to
sell, assign, transfer, license or agree to license any such Intellectual
Property or any interest therein or permit any third party to use such
Intellectual Property;




(i)  not to
alter any specification for which any trade mark has been registered or give its
consent to registration by a third party of any trade mark the same or
confusingly similar to any trade mark; and




(j)  not
without the Lender's prior written consent, use the Lender's name in or join the
Lender into any proceedings relating to infringement of any such Intellectual
Property.




5.2  Default




If any
Chargor is in default under any of the covenants set out in Clause 5.1 (or any of its other obligations under this
Guarantee and Debenture), the Lender may at its sole discretion (but will not be
obliged to) take any steps which it considers necessary or desirable to remedy
the default or make good its effects in whole or in part, and in particular,
without limitation, may pay any amount which any Chargor ought to pay and may
authorise any person to enter, by force if necessary, on any Land or into any
building owned or occupied by such Chargor and perform works  and may
put in place or renew any insurance. Neither the Lender, nor any person
authorised by it, shall be deemed to have taken possession of any Land by virtue
of exercising any power given by this Clause 5.2, irrespective of the degree of control exercised
over the Land or access to it, unless and until the Lender (or any such person)
serves notice in writing on the relevant Chargor expressly stipulating its
intention to take possession.




5.3  Insurance
proceeds




The
Lender shall be entitled to be paid the proceeds of any Insurance to which any
Chargor is entitled (other than any indemnity against liability to a third
party) and each Chargor hereby irrevocably instructs any insurer in respect of
any such policy to pay such proceeds to the Lender and undertakes to the Lender
to issue such further instructions to that effect as the Lender may
require.




5.4  Application
of insurance proceeds




All
moneys received in respect of any Insurance whatsoever (other than any indemnity
against liability to a third party) shall as the Lender in its sole discretion
requires be applied either in making good the loss or damage in respect of which
the money is received or in or towards discharge of the Secured
Liabilities.




6.  DEMANDAND ENFORCEMENT




6.1  Enforcement




This
Guarantee and Debenture shall become enforceable in respect of and against any
Chargor:-




6.1.1  upon any
demand being made by the Lender for payment of any of the Secured Liabilities by
such Chargor;




6.1.2  upon any
request being made by such Chargor to the Lender for the appointment of a
receiver or for the Lender to exercise any other power or right available to
it;




6.1.3  upon the
occurrence of any event referred to in Clause 4.3.2, or any event causing the floating charge
created by this Guarantee and Debenture to become fixed in relation to any
Assets of such Chargor; or




6.1.4  upon the
passing of any resolution, or the presentation of a petition, for winding up of
such Chargor or the making of an application for an administration order in
relation to such Chargor or the taking of any steps in relation to the
appointment of an administrator of such Chargor.




6.2  Demand
for payment




Any
demand for payment, and any other notice to be given by the Lender under this
Guarantee and Debenture, shall be in writing and may be signed by any official
of the Lender, and may be made of or given to any Chargor at any place of
business of such Chargor, or the registered office of such
Chargor:-




6.2.1  by
delivering it to any such place; or




6.2.2  by
sending it by first class post to any such place (in which case it shall be
deemed received at 10.00am on the next Business Day after posting, and proof of
posting shall be proof of delivery); or




6.2.3  by
sending it by fax to any fax number of such Chargor (in which case it shall be
deemed received when sent, and proof of sending shall be proof of
receipt).




6.3  Power
of sale




At any
time after this Guarantee and Debenture has become enforceable, the Lender may
exercise, in respect of any Asset, the power of sale given to mortgagees by the
Law of Property Act 1925. The restrictions imposed by section 103 of that Act
shall not apply, and the Lender may delegate the exercise of its power of sale
to any Receiver or other person.




7.  RECEIVERS




7.1  Appointment




At any
time after this Guarantee and Debenture has become enforceable in respect of and
against any Chargor, the Lender may appoint any person or persons to be a
receiver or receivers of all or any part of the Assets of such Chargor hereby
charged or an administrator of such Chargor.  An appointment over part
only of such Assets shall not preclude the Lender from making any subsequent
appointment over any other part of such Assets.




7.2  Appointment
in writing




The
appointment of a Receiver shall be in writing, and may be signed by any officer
of the Lender. Where more than one person is acting at any time as Receiver,
they shall have power to act severally as well as jointly.




7.3  Remuneration




The
Lender may from time to time determine the remuneration of the Receiver (which
shall not be subject to the limit in section 109(6) of the Law of Property Act
1925)  and may (subject to the application of section 45 of the
Insolvency Act 1986) remove any person  from office in relation to all
or any part of the Assets of which he is the Receiver and at any time (before or
after any person shall have vacated office or ceased to act as Receiver in
respect of any of such Assets) appoint a further or other receiver or receivers
over all or any part of such Assets.




7.4  Powers




The
Receiver shall be the agent of the relevant Chargor (which shall be solely
liable for his acts, defaults and remuneration) unless and until such Chargor
goes into liquidation whereafter he shall act as principal and shall not become
the agent of the Lender, and the Receiver shall have and be entitled to exercise
in relation to such Chargor all the powers set out in Schedule 1 to the
Insolvency Act 1986 and in applying that Schedule:-




7.4.1  the words
"he" and "him" refer to the Receiver; and




7.4.2  references
to the property of the company are to the Assets over which the
Receiver  is appointed;




and in
particular by way of addition to but without limiting such powers (and without
prejudice to the Lender's powers) the Receiver shall have power to do the
following things namely:-




7.4.3  power to
carry on or join with any person in carrying on any business (whether or not
carried on by such Chargor prior to his appointment); and




7.4.4  power to
maintain, repair, make safe, improve and develop any Land or other Asset of such
Chargor and to do all such other things as may in his opinion be necessary or
desirable for maintaining or enhancing the value or marketability of any such
Asset.




8.  POWEROF ATTORNEY




8.1  Appointment




Each
Chargor hereby irrevocably and by way of security appoints the Lender (whether
or not a Receiver has been appointed) and also (as a separate appointment) each
Receiver severally as the attorney and attorneys of such Chargor with power to
do any act, and execute and deliver any deed or other document, on behalf of and
in the name of such Chargor, which such Chargor could be required to do or
execute under any provision of this Guarantee and Debenture, or which the Lender
in its sole opinion may consider necessary or desirable for perfecting the
Lender's title to any of the Assets of such Chargor or enabling the Lender or
the Receiver to exercise any of its or his rights or powers under this Guarantee
and Debenture.




8.2  Ratification




Each
Chargor hereby ratifies and confirms and agrees to ratify and confirm whatever
any such attorney as is mentioned in Clause 8.1 shall do or purport to do in the exercise or
purported exercise of all or any of the powers, acts or other matters referred
to in Clause 8.1.




9.  APPLICATIONOF MONEYS RECEIVED BY THE LENDER OR THE
RECEIVER




9.1  Application
of moneys




All sums
received by virtue of this Guarantee and Debenture and/or any other Security
Documents by the Lender or the Receiver shall, subject to the payment of any
claim having priority to this Guarantee and Debenture, be paid or applied in the
following order of priority:-




9.1.1  in
satisfaction of all costs, charges and expenses incurred and payments made by
the Lender or the Receiver (including, without limitation, legal expenses) and
of the remuneration of the Receiver;




9.1.2  in or
towards payment to the Lender of the Secured Liabilities in such order as the
Lender may at its discretion require; and




9.1.3  as to the
surplus (if any), to the person or persons entitled thereto.




9.2  Money
paid




Notwithstanding
the provisions of Clause 9.1, only money
actually paid by the Receiver to the Lender  shall be capable of being
applied by the Lender in or towards satisfaction of any money or liabilities or
other sums hereby secured.




9.3  Suspense
account




The
Lender may, without prejudice to any other rights it may have, at any time and
from time to time place (and keep for such time as it may think prudent) any
moneys received, recovered or realised under or by virtue of this Guarantee and
Debenture or any other Security Document on a separate or suspense account to
the credit of the relevant Chargor or of the Lender as the Lender shall think
fit without any intermediate obligation on the Lender's part to apply the same
or any part thereof in or towards the discharge of the Secured
Liabilities.




10.  CONSOLIDATION




10.1  Combination
of accounts




In
addition to any general lien, right to combine accounts, right to set-off or
other right which it may at any time have, the Lender shall have the right at
any time or times, without notice to the relevant Chargor, to combine or
consolidate all or any accounts which it then has in relation to such Chargor
(in whatever name) and any Secured Liabilities owed by such Chargor to the
Lender, and/or to set-off or transfer any amounts standing to the credit of one
or more accounts of such Chargor in or towards satisfaction of any Secured
Liabilities owed to the Lender on any other account or otherwise.




10.2  Application




The
Lender's rights under Clause 10.1
apply:-




10.2.1  whether
or not any demand has been made hereunder, or any liability concerned has fallen
due for payment;




10.2.2  whether
or not any credit balance is immediately available or subject to any
restriction;




10.2.3  irrespective
of the currencies in which any balance or liability is denominated, and the
Lender may for the purpose of exercising its right elect to convert any sum or
liability in one currency into any other at its spot rate applying at or about
11.00am on the date of conversion; and




10.2.4  in
respect of any Secured Liabilities owed by the relevant Chargor, whether owed
solely or jointly, certainly or contingently, presently or in the future, as
principal or surety, and howsoever arising.




11.  PROTECTIONOF THIRD PARTIES




11.1  Statutory
powers




In favour
of any purchaser, the statutory powers of sale and of appointing a receiver
which are conferred upon the Lender, as varied and extended by this Guarantee
and Debenture, and all other powers of the Lender, shall be deemed to arise and
be exercisable immediately after the execution of this Guarantee and
Debenture.




11.2  Purchasers




No
purchaser from or other person dealing with the Lender, any person to whom it
has delegated any of its powers, or the Receiver shall be concerned to enquire
whether any of the powers which they have exercised has arisen or become
exercisable, or whether the Secured Liabilities remain outstanding or whether
any event has happened to authorise the Receiver to act or as to the propriety
or validity of the exercise of any such power; and the title and position of a
purchaser or such person shall not be impeachable by reference to any of those
matters.




11.3  Receipts




The
receipt of the Lender or the Receiver shall be an absolute and conclusive
discharge to a purchaser or such person and shall relieve him of any obligation
to see to the application of any moneys paid to or by the direction of the
Lender or the Receiver.




12.  PROTECTIONOF THE LENDER AND THE RECEIVER




12.1  No
liability




The
Lender and any Receiver shall not be liable in respect of any loss or damage
which arises out of the exercise, or attempted or purported exercise of, or the
failure to exercise any of their respective powers under this Guarantee and
Debenture.




12.2  Not
mortgagee in possession




Without
prejudice to any other provision of this Guarantee and Debenture, entry into
possession of any Asset shall not render the Lender or the Receiver liable to
account as mortgagee in possession or to be liable for any loss on realisation
or for any default or omission for which a mortgagee in possession might be
liable and if and whenever the Lender or the Receiver enters into possession of
any Asset it shall be entitled at any time it or he thinks fit to go out of such
possession.




12.3  Indemnity




Each
Chargor shall indemnify and keep indemnified the Lender, every Receiver, and any
person who acts as the servant, agent, delegate or attorney of any of them,
against all claims, costs, expenses and liabilities which they may suffer or
incur arising in any way out of the taking or holding of this Guarantee and
Debenture, the exercise or purported exercise of any right, power, authority or
discretion given  by it, or any other act or omission in relation to
this Guarantee and Debenture or the Assets.




12.4  Currency
provision




If any
amount due to be paid to the Lender is, for any reason, paid in a currency (the
"currency of payment")
other than the currency in which it was expressed to be payable (the "contractual currency"), the
Lender may wherever it thinks fit apply the amount of the currency of payment
received by it in the purchase, in accordance with its normal practice, of the
contractual currency, and if this results in any shortfall below the amount due
in the contractual currency, after deducting all taxes, costs and commissions
payable in connection with that purchase, the relevant Chargor shall indemnify
the Lender against the amount of the shortfall.




12.5  Continuing
protection




The
provisions of this Clause 12 shall continue in
full force and effect notwithstanding any release or discharge of this Guarantee
and Debenture, or the discharge of any Receiver from office.




13.  PROVISIONSRELATING TO THE LENDER




13.1  Powers
and discretions




The
rights, powers and discretions given to the Lender in this Guarantee and
Debenture:-




13.1.1  may be
exercised as often as and in such manner as, the Lender thinks fit;




13.1.2  are
cumulative, and are not exclusive of any of its rights under the general law;
and




13.1.3  may only
be waived in writing and specifically, and any delay in exercising, or
non-exercise of, any right, is not a waiver of it.




13.2  Certificates




A
certificate by an officer of the Lender:-




13.2.1  as to any
amount for the time being due to it under the Finance Documents; or




13.2.2  as to any
sums payable to it under this Guarantee and Debenture;




shall
(save in the case of manifest error) be conclusive and binding upon the Chargors
for all purposes.




13.3  Assignment




The
Lender may assign this Guarantee and Debenture to any successor in title to any
of the Secured Liabilities and may disclose any information in its possession
relating to any Chargor, its affairs or the Secured Liabilities to any actual or
prospective assignee.




13.4  Delegation




The
Lender may at any time and from time to time delegate by power of attorney or in
any other manner to any person or persons all or any of the rights, powers and
discretions which are for the time being exercisable by it under this Guarantee
and Debenture. Any such delegation may be made upon such terms (including power
to sub-delegate) as the Lender may think fit. The Lender shall not in any way be
liable or responsible to the Chargors for any loss or damage arising from any
act, default, omission or misconduct on the part of any such delegate or
sub-delegate.




13.5  Trusts




The
perpetuity period for any trust constituted by this Guarantee and Debenture
shall be 80 years.




14.  MISCELLANEOUSPROVISIONS




14.1  Powers
of sale, leasing and accepting surrenders




While
this Guarantee and Debenture continues in force:-




14.1.1  no
statutory or other power of granting or agreeing to grant or of accepting or
agreeing to accept surrenders of leases or tenancies of the Land hereby charged
or any part of it shall be capable of being exercised by the Chargors or any of
them;  and




14.1.2  no
Chargor shall be entitled to part with possession (otherwise than on the
termination of any lease, tenancy or licence to it of any Land, or to share
occupation of any Land with any other person or persons, or to surrender any
lease of Land  or permit such a lease to be assigned or
forfeited,




without
the prior written consent of the Lender.




14.2  Consolidation
of mortgages




Section
93 of the Law of Property Act 1925 dealing with the consolidation of mortgages
shall not apply to this security.




14.3  Extension




The
statutory powers of sale, leasing and accepting surrenders exercisable by the
Lender are hereby extended so that the Lender may, either in its own name or in
that of any Chargor:-




14.3.1  grant a
lease or leases (whether or not at a premium)  of the whole or any
part or parts of any Land owned by such Chargor, with such rights relating to
other Land and containing such covenants on the part of such Chargor and
generally on such terms and conditions as the Lender shall think fit (including,
without limitation, the payment of money to a lessee or tenant on a surrender);
and




14.3.2  accept a
surrender of any lease on such terms as the Lender may think fit in either case,
without any of the restrictions on such powers contained in section 99 and 100
of the Law of Property Act 1925.




14.4  Severability




If any
provision of this Guarantee and Debenture is illegal, invalid or unenforceable
in any jurisdiction, that shall not affect:-




14.4.1  the
validity or enforceability of any other provision, in any jurisdiction;
or




14.4.2  the
validity or enforceability of that particular provision, in any other
jurisdiction.




14.5  Costs,
charges and expenses




All
costs, charges and expenses incurred or paid by the Lender or by the Receiver in
the exercise of any power or right given by this Guarantee and Debenture or in
relation to any consent requested by any Chargor, or in perfecting or otherwise
in connection with this Guarantee and Debenture or the Assets, including,
without limitation, all moneys expended by the Lender under Clause 5.2,  all sums recoverable under
Clause 12 and all costs of the Lender (on an
indemnity basis) of all proceedings for  the enforcement
of  this Guarantee and Debenture or for obtaining payment of moneys
hereby secured, shall be recoverable from  such  Chargor as
debts and shall bear interest until payment at the rate or rates applicable or
if there is no applicable rate at 16% per annum.




14.6  Amendments
and variations




This
Guarantee and Debenture shall remain in full force and effect notwithstanding
any amendments or variations from time to time to the Finance Documents
(including, without limitation, any increase in the amount of the Secured
Liabilities) and all references to the Finance Documents or any Security
Document herein shall be taken as referring to the Finance Documents or such
Security Document as amended or varied from time to time.




14.7  Information




The
Lender may from time to time seek from any other person having dealings with the
Chargors such information about the Chargors and their affairs as the Lender may
think fit and each Chargor hereby authorises and requests any such person to
provide any such information to the Lender and agrees to provide such further
authority in this regard as the Lender may from time to time reasonably
require.




14.8  Joint
and separate liability




Unless
the context otherwise requires, all covenants, agreements, representations and
warranties on the part of the Chargors contained in this Guarantee and Debenture
are given by them jointly and separately and shall be construed
accordingly.




14.9  Authority
of Principal Borrower




Each
Chargor (except the Principal Borrower) hereby irrevocably authorises the
Principal Borrower to act on its behalf in administering the terms of this
Guarantee and Debenture and in signing on its behalf any document varying,
supplementing, restating and/or replacing the terms and conditions contained in
this Guarantee and Debenture or any document ancillary to it (including, for the
avoidance of doubt but without limitation, any Deed of Accession).




14.10  Deemed
separate charges




This
Guarantee and Debenture shall, in relation to each Chargor, be read and
construed as if it were a separate Guarantee and Debenture relating to such
Chargor to the intent that if any Encumbrance created or any guarantee or other
undertaking given by any other Chargor in this Guarantee and Debenture shall be
invalid or liable to be set aside for any reason, this shall not affect any
Encumbrance created or any guarantee or other undertaking given hereunder by
such first Chargor.




14.11  Counterparts




This
Guarantee and Debenture may be executed in any number of counterparts, and this
has the same effect as if the signatures on the counterparts were on a single
copy of this Guarantee and Debenture.




14.12  Contracts
(Rights of Third Parties) Act 1999




A person
who is not a Party has no right under the Contracts (Rights of Third Parties)
Act 1999 to enforce or enjoy the benefit of any term of this Guarantee and
Debenture.  This clause does not affect any right or remedy of any
person which exists or is available otherwise than pursuant to that
Act.




14.13  Deeds
of accession




Each of
the parties hereto agrees that each Deed of Accession shall be supplemental to
this Guarantee and Debenture and be binding on and enure to the benefit of all
the parties hereto.




14.14  Governing
law




This
Guarantee and Debenture shall be governed by and construed in accordance with
English law and each Chargor hereby submits for the benefit of the Lender to the
jurisdiction of the English courts for the purposes of any dispute in relation
to it but without prejudice to the right of the Lender to commence proceedings
against such Chargor in any other jurisdiction.




EXECUTED AND DELIVERED AS A
DEED by each Chargor and executed by the Lender on the date
hereof




20\21644241.3\CA07
 3


SCHEDULE1


THE
CHARGORS








Company
      name
            No
            Address
      for service
            Fax
      number for serviceSeven
      Arts Pictures Plc
            04276617
            30
      Farringdon Street
              London
      EC4A 4HJ
            +44
      323 634 7821Seven
      Arts Filmed Entertainment Limited
            05160597
            30
      Farringdon Street
              London
      EC4A 4HJ
            +44
      323 634 7821











20\21644241.3\CA07
 4


SCHEDULE2


TERMS
OF GUARANTEE





1.
            The
      Lender may without giving notice to or obtaining any consent from the
      Guarantor and without affecting the Guarantor's liability hereunder renew,
      vary or determine any accommodation given to the Principal, hold over,
      renew, modify or release any security or guarantee now or hereafter held
      from the Principal or any other person including any other person liable
      under this Guarantee in respect of the liabilities hereby secured and/or
      any liabilities of the Guarantor and grant time or indulgence to or
      compound with the Principal or any such person and this Guarantee shall
      not be discharged nor shall the Guarantor's liability under it be affected
      by anything which would not have discharged or affected the Guarantor's
      liability if the Guarantor had been a principal debtor to the Lender
      instead of a guarantor.




2.  This
Guarantee shall be additional to any other guarantee or security now or
hereafter held in respect of the liabilities hereby secured.  This
Guarantee may be enforced without the Lender first making demand on the
Principal or taking any steps or proceedings against the Principal or having
recourse to any such other guarantee or security.




3.  This
Guarantee shall be a continuing security and shall remain in force
notwithstanding any disability of the Guarantor and irrespective of whatever
dealings may occur on any account between the Lender and the
Principal.




4.  The
Guarantor has not taken and will not take, without the written consent of the
Lender, any security from the Principal in connection with this Guarantee and
any security so taken shall be held in trust for the Lender and as security for
the liability of the Guarantor to the Lender hereunder.




5.  In
respect of the Guarantor's liability hereunder, the Lender shall have a lien on
all Securities or other property of the Guarantor held by the Lender whether for
safe custody or otherwise.  The Lender shall further be entitled (as
well before as after demand hereunder) to set off against any credit balance on
any account of the Guarantor with the Lender (whether current or otherwise or
subject to notice or not) and against any interest accruing thereon, any
liabilities of the Guarantor to the Lender arising under or pursuant to the
Finance Documents or any Security Document and if such liabilities or any part
thereof are or is in a different currency from a credit balance against which
the Lender seeks to set it off, the Lender shall be entitled to utilise currency
of the account in credit for the purchase, at its spot rate of exchange, of an
amount in the currency of the liability not exceeding the amount of such
liability and also to pay out of the credit balance any additional sum which the
Lender may be required to pay for such currency.




6.  This
Guarantee shall apply to all of the Secured Liabilities of the Principal to the
Lender and shall not be affected by any fluctuation in, or intermediate
discharge of, such liabilities and until such liabilities have been discharged
in full, the Guarantor shall not be entitled to share in any security held or
money received by the Lender on account of such liabilities or to stand in the
place of the Lender in respect of any security or money nor, until such
liabilities have been discharged in full, shall the Guarantor take any step to
enforce any right or claim against the Principal in respect of any moneys paid
by the Guarantor to the Lender hereunder or have or exercise any rights as
surety in competition with the Lender.




7.  Any
moneys received by the Lender in connection with this Guarantee may be placed to
the credit of a suspense account and such receipt shall not affect the right of
the Lender to claim or prove against the Principal (or any other person liable)
for the entire amount of the liabilities of the Principal.  Such
moneys or any part thereof may at the Lender's option be applied in or towards
discharge of such liabilities of the Principal to the Lender as the Lender may
in its absolute discretion determine.




8.  If this
Guarantee is determined or called in by demand made by the Lender, the Lender
may open a new account or accounts with the Principal or any other person for
whose liabilities this Guarantee is available as security.  If the
Lender does not open a new account, it shall nevertheless be treated as if it
had done so at the time of determination or calling in and as from that time all
payments made to the Lender shall be credited or be treated as having been
credited to the new account and shall not operate to reduce the amount for which
this Guarantee is available as security at that time.




9.  This
Guarantee shall not be discharged nor shall the Guarantor's liability be
affected by reason of any failure of or irregularity, defect or informality in
any security given by or on behalf of the Principal in respect of the moneys or
liabilities hereby secured nor by any legal limitation, bar or restriction,
dissolution, disability, incapacity or want of any borrowing powers of the
Principal or want of authority of any director, manager, official or other
person appearing to be acting for the Principal in any matter in respect of the
moneys or liabilities hereby secured or by any supervening matters rendering the
performance of the obligations of the Principal illegal in any jurisdiction and
such moneys or liabilities will be recoverable by the Lender from the Guarantor
as sole or principal debtor.




10.  Any
settlement or discharge or release between the Guarantor and the Lender shall be
conditional upon no security or payment to the Lender by the Principal or any
other person being avoided or reduced for any reason and the Lender shall be
entitled to recover the value or amount of such security or payment from the
Guarantor subsequently as if such settlement, discharge or release had not
occurred.  Any liability of the Guarantor under this paragraph
(whether actual or contingent) shall be a liability in respect of which the
Lender may exercise the rights referred to in paragraph 5 of this Schedule
2.




11.  Other
than with the prior written consent of the Lender, the Guarantor shall not
terminate this Guarantee whilst any part of the Secured Liabilities remains
outstanding.




12.  None of
the terms of this Guarantee are enforceable by any person other than the
Guarantor, the Lender and any person to whom the Lender has assigned its rights
pursuant to the Finance Documents or a Security Document.




20\21644241.3\CA07
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SCHEDULE3


REGISTERED
AND UNREGISTERED LAND





Registered
Land





Title
      number
            Description
            Chargor











Unregistered
Land











Description
            Chargor

















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SCHEDULE4


DEED
OF ACCESSION





THIS DEED OF ACCESSION is made
on
[                       ]




BETWEEN:-




(1)
            [                        ]
      (the "New
      Chargor"), a company incorporated in England or Wales whose
      registered office is at
      [                                      ];




(2)
            [                        ]
      LIMITED (the
      "Company") for
      itself and as agent for and on behalf of each of the other Chargors named
      in the Guarantee and Debenture referred to below;
  and




(3)
            TRAFALGAR CAPITAL SPECIALIZED
      INVESTMENT FUNDan 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”).




WHEREAS:-




(A)
            The
      New Chargor is or will on the date hereof become a wholly-owned Subsidiary
      of the Company.




(B)
            The
      Company has entered into a guarantee and debenture dated
      [                  ]
      (as supplemented and amended by Deeds of Accession or otherwise from time
      to time, the "Guarantee
      and Debenture") between the Company, each of the companies named
      therein as Chargors and the Lender.




(C)
            The
      New Chargor at the request of the Company and in consideration of the
      Lender making or continuing to make facilities available to the Company or
      any other member of its group and after giving due consideration to the
      terms and conditions of the Finance Documents and the Guarantee and
      Debenture and satisfying itself that there are reasonable grounds for
      believing that the entry into this Deed by it will be of benefit to it,
      has decided in good faith and for the purpose of carrying on its business
      to enter into this Deed and thereby become a Chargor under the Guarantee
      and Debenture.




IT IS AGREED as
follows:-




1.
            Terms
      defined in the Guarantee and Debenture shall have the same meaning in this
      Deed.




2.  The New
Chargor hereby agrees:-




2.1  to become
a party to and to be bound by the terms of the Guarantee and Debenture as a
Chargor with immediate effect and so that the Guarantee and Debenture shall be
read and construed for all purposes as if the New Chargor had been an original
party thereto in the capacity of Chargor (but so that the security created and
guarantee given consequent on such accession shall be created and given on the
date hereof); and




2.2  to be
bound by all the covenants and agreements in the Guarantee and Debenture which
are expressed to be binding on a Chargor.




3.  In
accordance with the foregoing, the New Chargor now grants and gives to the
Lender the charges, mortgages and other security and the guarantee described in
the Guarantee and Debenture as being granted, created or made or given by the
Chargors thereunder in favour of the Lender and grants to the Lender the
floating charge as described in Clause 3.1.4
of the Guarantee and Debenture, to the intent that its charges, mortgages and
other security and its guarantee shall be effective and binding upon it and its
property and assets and shall not in any way be avoided, discharged or released
or otherwise adversely affected by any ineffectiveness or invalidity of the
Guarantee and Debenture or of any other party's execution thereof or any other
Deed of Accession, or by any avoidance, invalidity, discharge or release of any
charge or mortgage or guarantee contained in the Guarantee and Debenture or in
any other Deed of Accession.




4.  The
Company, for itself and as agent for and on behalf of all the other Chargors
under the Guarantee and Debenture, hereby agrees to all matters provided for
herein.




5.  The
Guarantee and Debenture and this Deed shall be read as one to this extent and so
that references in the Guarantee and Debenture to "this Guarantee and
Debenture", "herein", and similar phrases shall be deemed to include this
Deed.




6.  This Deed
shall be governed by and construed in accordance with English law.




IN WITNESS whereof this Deed
of Accession has been executed as a deed on the date first above
written




EXECUTED (but not
      delivered
              until
      the date hereof) AS A
      DEED
              by
      [                       ]
      LIMITED
              acting
      by:-
            Director
              /s/ ELaine
      New
              Director/Secretary





20\21644241.3\CA07
 7





The
      ChargorsEXECUTED (but not
      delivered until
              the
      date hereof) AS A
      DEED by
              SEVEN ARTS PICTURES
      PLCacting by:-
            )
              )
              )
              
              Director
              /s/ Elaine
      New
              Director/SecretaryEXECUTED (but not
      delivered until
              the
      date hereof) AS A
      DEED by
              SEVEN ARTS FILMED ENTERTAINMENT
      LIMITEDacting
      by:-
            )
              )
              )
              
              Director
              /s/ Elaine
      New
              Director/SecretaryThe
      Lender


SIGNEDas a deed on behalf
of


TRAFALGAR


CAPITAL
SPECIALIZED
INVESTMENT


FUND


acting by
its general
partner


TRAFALGAR
CAPITAL SARL





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