Document:

exhibit10_5.htm

    Exhibit 10.5

    AMENDMENT NO.
2

    TO

    EMPLOYMENT
AGREEMENT

    

    This AMENDMENT NO. 2 (the “Amendment”)
to the Employment Agreement, dated May 1, 1997, as amended on June 30, 2005 (the
“Employment Agreement”), by and between Walco International, Inc., a Delaware
corporation (the “Company”) and James C. Robison (the “Executive”) is entered
into as of the 7th day of May, 2008.  Animal Health International,
Inc., a Delaware corporation, f/k/a Steer Parent Corporation (“AHII”) is a party
to this Amendment solely for the purposes of Section 6(e) of this
Amendment.

    

    WHEREAS, on January 30, 2007, AHII
completed an initial public offering of its securities; and

    

    WHEREAS, following such offering, the
Company and the Executive desire to amend certain terms of the Employment
Agreement as set forth herein.

    

    NOW THEREFORE, for good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows.

    

    1.           Capitalized
Terms.  All capitalized terms used, but not defined herein,
shall have the same meaning as prescribed in the Employment
Agreement.

    

    2.           Amendment to Section 2 of
Employment Agreement.  Section 2 of the Employment Agreement is
hereby deleted and replaced in its entirety by the following:

    

    2.  Term.  The
term of this Agreement shall commence on the effective date hereof and shall
continue until December 31, 2010, and thereafter shall automatically extend for
one or more additional one-year renewal periods, subject to earlier termination
pursuant to Section 5 hereof.

    

    3.           Amendment to Section 5.4 of
the Employment Agreement.  Section 5.4 of the Employment
Agreement is hereby deleted and replaced in its entirety by the
following:

    

    5.4           By the Company Other than
for Cause.  The Company may terminate the Executive's
employment hereunder other than for Cause at any time upon notice to the
Executive.

    

    4.           Amendment to Section 5.5 of
the Employment Agreement.  Section 5.5 of the Employment
Agreement is hereby deleted and replaced in its entirety by the
following:

    

    5.5           Resignation by the Executive
for Good Reason.  The Executive may resign his employment
hereunder for Good Reason, upon notice to the Company setting forth in
reasonable detail the nature of such Good Reason.  The following shall
constitute Good Reason for termination by the Executive: (i) willful failure of
the Company to provide the Executive the Base Salary and benefits in accordance
with the terms of Section 4 hereof other than, in the case of a material
reduction in Base Salary or benefits, any such reduction which is part of a
general reduction or other concessionary arrangement affecting all employees or
affecting that group of employees of which the Executive is a member, (ii) a
material diminution in the nature or scope of the Executive's powers, duties or
responsibilities without the Executive's prior consent; provided, however, that
any diminution of the business of the Company or any of its Affiliates,
including without limitation the sale or transfer of any or all of the assets of
the Company or any of its Affiliates, shall not constitute "Good Reason", or
(iii) any other material breach of this Agreement.  If the Executive
believes Good Reason exists for terminating this Agreement, he shall give the
Company written notice of the acts or omissions constituting Good Reason within
90 days of the initial existence of such acts or omissions, and no termination
of this Agreement shall be effective unless and until the Company fails to cure
such acts or omissions within 30 days after receiving the written notice and the
Executive separates from service within two years following the initial
existence of the acts or omissions giving rise to Good Reason.

    

    5.           Compensation Due Upon
Termination of Agreement in Accordance with Sections 5.4 and 5.5 of the
Employment Agreement.  In the event of a termination of the
Employment Agreement in accordance with Sections 5.4 and 5.5 of the Employment
Agreement, as revised pursuant to this Amendment, then the Company and AHII
shall have no further obligation to the Executive under the Employment Agreement
or otherwise, except for (a) payment of any earned but unpaid Base Salary
through the date of termination; (b) payment of any authorized but un-reimbursed
business expenses through the date of termination; (c) payment of any earned,
vested benefits (other than any entitlement to severance or separation pay, if
any) that the Executive may have under the applicable provisions of any benefit
plan or policy of the Company in which the Executive is participating before the
date of termination; and (d) payment of the severance (the "Severance")
described in Section 6 of this Amendment.  The Executive shall not be
entitled to the Severance if his employment is terminated due to his death, due
to his disability, by the Company for Cause in accordance with Section 5.3 of
the Employment Agreement, if the Executive resigns other than for Good Reason,
or because either party provides a proper notice of non-renewal in accordance
with Section 2 of the Employment Agreement, as revised pursuant to this
Amendment.

    

    6.           Severance.  The
Severance shall include the following:

    

    (a)           Severance
Pay.  The Company shall pay the Executive severance pay (the
"Severance Pay") an amount equal to 24 months of the Executive’s Base Salary,
minus applicable taxes and withholdings.  The Severance Pay shall be
paid as follows:  (i) $450,000 of the Severance Pay shall be paid in
equal semi-monthly installments on the fifteenth and last day of each month
beginning on March 31st of the year following the date of termination and ending
on the 15th day of the month containing the second anniversary of the date of
termination, provided that the date of termination constitutes a separation from
service for purposes of Code Section 409A, and (ii) the remaining difference
between the amount equal to (x) 24 months of the Executive’s Base Salary less
(y) $450,000 of the Severance Pay, shall be paid in equal semi-monthly
installments on the fifteenth and last day of each month beginning on fifteenth
day of the month following the month in which the date of termination occurs and
ending on March 15th of the year following the date of termination, provided
that the date of termination constitutes a separation from service for purposes
of Code Section 409A and provided further that the Company receives no later
than 45 days after the date of termination the release of claims described in
Section 7 of this Amendment.

    

    (b)           Company
Vehicle.  On the 30th day following the effective date of the
release of claims referenced in Section 7 of this Amendment, the Company shall
transfer title and ownership to the Executive of the Company vehicle provided
for his use before the date of termination.

    

    (c)           Medical and Dental
Insurance.  Subject to any employee contributions applicable to
active employees generally, if the Executive is entitled to continue his
coverage under applicable law and plan terms and timely elects to continue
medical, dental and vision insurance continuation coverage following the date of
termination under the Consolidated Omnibus Budget Reconciliation Act ("COBRA"),
the Company shall provide for such coverage at the Company's expense for 18
months following the date of termination in accordance with Section 8 of this
Amendment (the "MDV Premium Payments").  If the Executive thereafter
exhausts his COBRA coverage eligibility and obtains subsequent medical, dental
and/or vision insurance coverage by purchasing an individual insurance policy
that is reasonably acceptable to the Company, the Company shall reimburse the
Executive for the cost of such coverage in accordance with Section 8 of this
Amendment (the "MDV Reimbursement").  Such MDV Reimbursements shall be
made as soon as practicable, but in no event later than the last day of the
calendar month following the calendar month in which such costs were
incurred.  The Company's obligation for MDV Reimbursements under this
Section 6(c) shall extend (i) for six months; or (ii) the date the Executive
obtains other group health insurance coverage (as a result of subsequent
employment, marriage, or otherwise) through another employer's group health
insurance plan, whichever is sooner.  The Company's obligations under
this Section 6(c) are conditioned on the Executive communicating with the
Company as necessary to facilitate payment and promptly notifying the Company's
General Counsel in writing if he becomes eligible for other group health
insurance coverage through another employer's group health insurance
plan.

    

    (d)           Life and
Long-Term-Disability Insurance.  The Company shall continue to
pay the premiums on the Executive's life and disability insurance policy
provided under Section 4.7 of the Employment Agreement in effect immediately
before the Termination Date for 18 months following the date of termination in
accordance with Section 8 of this Amendment (the "Life/Disability Premium
Payments").  If the Executive thereafter elects to continue such life
and disability insurance coverage, the Company shall reimburse the Executive for
the cost of such coverage in accordance with Section 8 of this Amendment (the
"Life/Disability Reimbursement").  Such Life/Disability Reimbursements
shall be made as soon as practicable, but in no event later than the last day of
the calendar month following the calendar month in which such costs were
incurred.  The Company's obligation for Life/Disability Reimbursements
under this Section 6(d) shall extend (i) for six months, or (ii) the date the
Executive obtains other life or disability insurance, as applicable and of
comparable coverage, as a result of subsequent employment, whichever is
sooner.  The Company's obligations under this Section 6(d) are
conditioned on the Executive communicating with the Company as necessary to
facilitate payment and promptly notifying the Company's General Counsel in
writing if he becomes eligible for other life insurance coverage through another
employer.

    

    (e)           Extension of Vesting Period
for Stock Options.  AHII shall continue to vest and make
exercisable for 24 months after the date of termination any unvested stock
options awarded to the Executive pursuant to the Executive under the Animal
Health International, Inc. 2007 Stock Option and Incentive Plan (the "Stock
Option Plan") and those certain two Incentive Stock Option Agreements with the
Executive (the "Stock Option Agreements").   In no event shall
stock options awarded to the Executive be exercisable more than 10 years after
their grant date.

    

    7.           Conditions on Payment of
Severance.  Notwithstanding any other provision in the
Employment Agreement or this Amendment, the Company's obligation to pay the
Severance to the Executive is subject to the condition that the Executive
complies with his post-termination covenants under Sections 9.1 and 9.3 of the
Employment Agreement, as revised pursuant to this Amendment.  The
Company shall have the right to suspend or cease payment of any Severance as
well as to seek restitution of any Severance already paid, if such covenants
have been breached by the Executive but all other provisions of this Agreement
shall remain in full force and effect.  The Company's payment of
Severance to the Executive is also subject to the condition that the Executive
signs a release of claims in a form satisfactory to the Company within
forty-five (45) days of the date he receives notice of termination of his
employment or the date he receives a copy of the release of claims, whichever is
later, and upon his not revoking the release of claims thereafter as permitted
by applicable law.

    

    8.           Limit on Company Obligations
for Premium Payments and Reimbursements.  In no event shall the
Company's obligations to make the MDV Premium Payments and the Life/Disability
Premium Payments exceed a combined total of $1,000 per month.  The
Company shall each month initially apply the $1,000 toward any outstanding MDV
Premium Payments and then toward any outstanding Life/Disability Premium
Payments.  In no event shall the Company's obligations to make the MDV
Reimbursements and Life/Disability Reimbursements exceed a combined total of
$1,000 per month.  The Company shall each month initially apply the
$1,000 toward any outstanding MDV Reimbursements and then to any outstanding
Life/Disability Reimbursements.

    

    9.           Internal Revenue Code
Section 409A.  The Employment Agreement, as revised by this
Amendment, is intended to be exempt from the tax imposed by Internal Revenue
Code section 409A and its related rules, regulations, and other guidance ("Code
Section 409A") and any ambiguous provisions shall be construed in a manner that
is compliant with or exempt from the application of Code Section
409A.  If a provision of the Agreement would result in the imposition
of an applicable tax under Code Section 409A, such provision shall be reformed
to the extent permissible under Code Section 409A to avoid imposition of the
applicable tax, with such reformation effected in a manner that has the most
favorable tax result to the Executive.  The parties shall cooperate
and work together in good faith to take all such action as reasonably may be
necessary or appropriate to effectuate the intent of this
paragraph.  Notwithstanding the preceding sentence or any other
provision of the Employment Agreement, as revised by this Amendment, the
Executive shall be solely responsible for any risk that the compensation to be
paid by the Company to the Executive pursuant to the Employment Agreement, as
revised by this Amendment, may be subjected to the tax imposed by Code Section
409A.

    

    10.           Reimbursement for Physical
Examinations.  Company shall, as additional compensation during
employment, reimburse the Executive for an annual physical medical examination
by the Executive’s private physician in an amount not to exceed $3,000 in any
Company fiscal year.

    

    11.           Amendment of Section 9.1 of
the Employment Agreement.  Sections 9.1 of the Employment
Agreement is hereby deleted and replaced in its entirety by the
following:

    

    9.1           While
the Executive is employed by the Company and for a period of three years after
his employment terminates (the "Non-Competition Period"), the Executive shall
not, directly or indirectly, whether as an owner, partner, investor, consultant,
agent, employee, co-venturer, or otherwise, compete with the Company or any of
its Affiliates within the United States (or within any county of any of the
states hereof), Mexico, Canada, or Brazil.  Specifically, but without
limiting the foregoing, the Executive agrees not to engage in any manner in any
activity that is directly or indirectly competitive or potentially competitive
with the business of the Company or any of its Affiliates as conducted or under
consideration at any time during the Executive's
employment.  Restricted activity includes without limitation accepting
employment or a consulting position with any Person who is, or at any time
within twelve (12) months prior to termination of the Executive's employment has
been, a customer or supplier of the Company or any of its
Affiliates.  For the purposes of this Section 9, the business of the
Company and its Affiliates shall include all of the Products and the Executive's
undertaking shall encompass all items, products and services that may be used in
substitution for Products.

    

    12.           Amendment of Section 9.3 of
the Employment Agreement.  Section 9.3 of the Employment
Agreement is hereby deleted and replaced in its entirety by the
following:

    

    9.3           The
Executive further agrees that while he is employed by the Company and for a
period of three years thereafter, the Executive will not hire or attempt to hire
any employee of the Company or any of its Affiliates, assist in such hiring by
any Person, encourage any such employee to terminate his or her relationship
with the Company or any of its Affiliates, or solicit or encourage any customer,
supplier, licensee, franchiser or other entity with a business relationship with
them or, in the case of a supplier, to conduct with any Person any business or
activity which is conducted or could be conducted with the Company or any of its
Affiliates.

    

    13.           Entire
Agreement.  This Amendment constitutes the sole and entire
agreement of the parties with respect to the second amendment of the Employment
Agreement; supersedes all prior verbal and written understandings and agreements
between the parties relating to its subject matters; and may not be modified
except in a writing signed by both parties.

    

    IN WITNESS WHEREOF, the undersigned
have executed this Agreement as of the date first written above:

    

                                                                           

    
      	
               EXECUTIVE    

            	 WALCO
      INTERNATIONAL, INC.
	 	 
	 	 
	 /s/ James C.
      Robison	 By:  /s/
      William F. Lacey
	 James C.
      Robison 	 Name: 
      William F. Lacey
	 	 Title: 
      Senior V.P. and C.F.O.
	 	 
	 	 ANIMAL HEALTH
      INTERNATIONAL, INC.
	 	 Solely for the
      purpose of Section 6(e) hereof
	 	 
	 	 By: /s/
      William F. Lacey
	 	 Name: 
      William F. Lacey
	 	 Title: 
      Senior V.P. and C.F.O.trafalgar.htm

    

      EXECUTION VERSION

       

      

      DATED January 31st
2008

      

      

      

      

      

      

      

      

      (1)
SEVEN ARTS PICTURES PLC

      

      (2)
TRAFALGAR CAPITAL SPECIALIZED INVESTMENT FUND

      

      

       

      

       

      

      

      

      

      

      

      
        

        

        BRIDGING
LOAN AGREEMENT

        (£500,000)

        

        

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

       

      

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      
        	
                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 OF
DEFAULT 

       

      SCHEDULE 2 - CONDITIONS
PRECEDENT

       

      SCHEDULE 3 - PERMITTED INDEBTEDNESS AND SECURITY
SCHEDULE 

      

      CERTIFICATE OF THE REGISTRATION OF A
MORTGAGE OR CHARGE

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      THIS AGREEMENT is made
on                                              2008

       

      BETWEEN

       

      
        	
                (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”).

              

      

       

      BACKGROUND

       

      The
Lender has agreed to advance to the Company an amount of £500,000 conditional on
and subject to the terms set out in this Agreement.

       

      IT IS AGREED:

       

      
        	
                1.  

              	
                DEFINITIONS

              

      

       

      
        In this
Agreement:

        
          	
                  "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:    14046121

                  Favour:  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 London

                  BIC Code: CITIGB2L

                  Account
      number:  6008883831

                  CREST
      account:  BA0IF

                  Favour:  Dz Bank Intl
      S.A. Luxembourg

                  Designated
      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

                

        

        

        
          
             

          

          
            3

            
              

            

          

          
             

          

        

       

       

      
        
          	
                  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 day
year.

              

      

       

      
        	
                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.  

              	
                OPTIONAL
REDEMPTION

              

      

       

      
        	
                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,

              

      

       

      such
that:

       

      Cash
Payment = Loan repaid multiplied by (1 + x),

       

      where x
is the Redemption Premium applicable on the date the Cash Payment is made
expressed as a fraction.

       

      
        	
                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 Subscription
Notice.

              

      

       

      
        	
                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 OF
SHARES

              

      

       

      
        	
                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 financial
loss.

              

      

       

      
        	
                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 shall
occur:

              

      

       

      
        	
                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).

              

      

       

      The
parties agree that this Clause 8.5 represents a
genuine pre-estimate of loss and is not in any way intended to be a
penalty.

       

      
        	
                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.

              

      

       

      By way of
example, if the amount of cash required to repay all amounts due pursuant to
Clause 6.4.1  would, but for this Clause
9.2, be £1,000 and if the Closing Date Exchange
Rate is 1.50 and the relevant Cash Payment Notice Date Exchange Rate is 1.45
then the amount of cash from the Cash Payment required to repay all amounts due
pursuant to Clause 6.4.1 will be £1,034.48.
Accordingly only the surplus over £1,034.48 from such Cash Payment will be
applied (again in the same manner) towards any amounts due pursuant to Clause 6.4.2 and if any amount of the Cash Payment remains
after all amounts so due pursuant to Clause 6.4.2
have been paid then the surplus will be applied (again in the same manner and
after the application of Clause 6.5) to pay amounts
pursuant to Clause 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

              

      

       

      The
Company shall indemnify, and keep indemnified, the Lender and any person who
acts as the servant, agent, delegate or attorney of the Lender against all
claims, costs, expenses and liabilities (including all indirect or consequential
claims, costs, expenses and liabilities and any related legal costs and
disbursements) which any of them may suffer or incur arising in any way from any
failure by the Company to comply with its obligations under this Agreement
(including, without limitation, any breach of Clause 8) or any other Transaction Document and/or the
enforcement of, or the preservation of any of the Lender's rights under, this
Agreement.

       

      
        	
                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

              

      

       

      The
Company covenants to the Lender that (otherwise than with the prior written
consent of the Lender) whilst this Agreement is in place it:

       

      
        	
                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 the
Agreement;

              

      

       

      
        	
                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 the
Lender;

              

      

       

      
        	
                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 the
following:-

              

      

       

      
        	
                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,

              

      

       

      (each an
Adjustment Event) the
terms of this Agreement (including to the extent necessary the definitions of
Subscription Price and the Warrant Shares) shall be adjusted in a manner
appropriate so that, after such adjustment, the Lender's rights to acquire
Ordinary Shares under this Agreement, if exercised will carry:

       

      
        	
                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,

              

      

       

      as if the
Adjustment Event had not occurred.

       

      
        	
                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 AND
GROSSING-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;

              

      

       

      provided
however that, if it is delivered by hand or sent by facsimile or e-mail on a day
which is not a Trading Day or after 4.00 pm London time on a Trading Day, it
will instead be deemed to have been given or made on the next Trading
Day.

       

      
        	
                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 AND
WAIVERS

              

      

       

      No
failure to exercise, nor any delay in exercising, on the part of the Lender, any
right or remedy under this Agreement shall operate as a waiver, nor shall any
single or partial exercise of any right or remedy prevent any further or other
exercise or the exercise of any other right or remedy.  The rights and
remedies provided in this Agreement are cumulative and not exclusive of any
rights or remedies provided by law.

       

      
        	
                17.  

              	
                MISCELLANEOUS

              

      

       

      If the
VWAP is not reported by Bloomberg on any day during a Pricing Period or if the
Bid Price is not reported by Bloomberg on any relevant date, such other
information provider as the Lender nominates with the approval of the Company
(not to be unreasonably withheld) shall be utilised in its place.

       

      
        	
                18.  

              	
                GOVERNING LAW AND
  JURISDICTION

              

      

       

      This
Agreement is governed by and is to be construed in accordance with English law
and the courts of England have exclusive jurisdiction to settle any dispute
arising out of or in connection with this Agreement (including a dispute
regarding the existence, validity or termination of this Agreement)

       

      
        	
                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.

              

      

       

      
        
          
             

             

            20\21643994.12\CA07

             

          

           

        

        
          4

          
            

          

        

        
           

        

      

      SCHEDULE 1                                

       

      EVENTS
OF DEFAULT

       

      Each of
the following is an Event of Default:

       

      
        	
                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 the
breach;

              

      

       

      
        	
                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 acting
reasonably;

              

      

       

      
        	
                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 of
creditors;

              

      

       

      
        	
                10.1.4  

              	
                the
      occurrence of a Material Adverse
Change;

              

      

       

      
        	
                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 10.1.7
above.

              

      

       

      

       

      
        
          
             

             

            20\21643994.12\CA07

             

          

           

        

        
          5

          
            

          

        

        
           

        

      

      SCHEDULE 2                                

       

      CONDITIONS PRECEDENT

       

      
        	
                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.

              

      

       

      
        
          
             

             

            20\21643994.12\CA07

             

          

           

        

        
          6

          
            

          

        

        
           

        

      

      SCHEDULE 3

       

      PERMITTED INDEBTEDNESS AND SECURITY
SCHEDULE

       

      

      

      

       

      
        
          
             

             

            20\21643994.12\CA07

             

          

           

        

        
          7

          
            

          

        

        
           

        

      

      SCHEDULE 4

       

      UNENCUMBERED TITLE AND RIGHTS
SCHEDULE

       

      

        
          	
                  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

                

        

      
        
          
             

             

            20\21643994.12\CA07

             

          

           

        

        
          8

          
            

          

        

        
           

        

      

      This
Agreement has been entered into as a Deed on the date stated at the beginning of
this Agreement.

       

      

       

      SIGNED as a deed
by SEVEN
ARTS PICTURES
PLC                                                                   

       

      acting
by                                                                  

      

      Director

      /s/ Elaine New 

       

      Director
/Secretary

       

      

      

      

      SIGNED as a deed on behalf of
TRAFALGAR CAPITAL
SPECIALIZED INVESTMENT FUND

      acting by
its general partner)

      TRAFALGAR CAPITAL
SARL                                                                   

       

      /s/ Andrew Garai (Chairnan of the
Board)

       

      

       

      
        
          
            20\21643994.12\CA07                                                               

          

           

        

        
          9

          
            

          

        

        
           

        

      

      

       

      CERTIFICATE OF THE REGISTRATION

       

      OF A MORTGAGE OR CHARGE

       

      Pursuant
to section 401(2) of the Companies Act 1985

      

      

       

      COMPANY
No.                                         04276617

       

      THE
REGISTRAR OF COMPANIES FOR ENGLAND AND WALES HEREBY CERTIFIES THAT

       

      GUARANTEE
& DEBENTURE DATED THE 31st JANUARY 2008 AND CREATED BY SEVEN

       

      ARTS
PICTURES PLC FOR SECURING ALL MONIES DUE OR TO BECOME DUE FROM

      THE
COMPANY AND/OR ALL OR ANY OF THE OTHER COMPANIES NAMED THEREIN TO TRAFALGAR
CAPITAL SPECIALIZED INVESTMENT FUND ON ANY ACCOUNT

       

      WHATSOEVER
WAS REGISTERED PURSUANT TO CHAPTER1PART XII OF THE

       

      COMPANIES
ACT                                                                                    1985             ON
THE 7th FEBRUARY2008.

       

      GIVEN AT
COMPANIES HOUSE, CARDIFF
THE                                                                                                                    1th
FEBRUARY2008.

      
        
           

        

        
          10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00141-of-00352.parquet"}]]