DATED January 31st 2008 BRIDGING LOAN AGREEMENT
DATED January 31st
2008
(2)
TRAFALGAR CAPITAL SPECIALIZED INVESTMENT FUND
1
2
THIS AGREEMENT is made
on 2008
BETWEEN
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(1)
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SEVEN ARTS PICTURES PLC
a company incorporated in England and Wales registered number
04276617 whose registered office address is at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ (the "Company");
and
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(2)
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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 ▇-▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇-▇▇▇▇ (▇▇▇ “Lender”).
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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:
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1.
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In this
Agreement:
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"Admission"
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means
the admission of the Ordinary Shares to trading on AIM or
PLUS
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“AIM”
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means
the market of that name operated by the London Stock Exchange
plc
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“AIM
Rules”
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means
the rules from time to time published by the London Stock Exchange in
relation to companies admitted to AIM
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"Bid
Price"
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shall
mean, on any date, the closing bid price (as reported by Bloomberg) of the
Ordinary Shares;
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"Bloomberg"
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means
Bloomberg LP, a financial information provider
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"Business
Day"
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means
a day (other than a Saturday or Sunday) on which banks are generally open
for business in London
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"Cash
Payment"
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means
any amount paid into the Lender’s Bank Account in accordance with Clause
6.3
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"Cash Payment
Date"
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means the date of a Cash
Payment Notice
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"Cash Payment Date Exchange
Rate"
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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
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"Cash Payment
Notice"
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has
the meaning given to it in Clause 6.3
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"Closing
Date"
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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
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"Closing Date Exchange
Rate"
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means
0.7466 (being the agreed UK pounds sterling
to the Euro spot exchange rate on the Closing Date)
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"Composite Guarantee and
Debenture"
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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
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"Consolidation
Event"
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has
the meaning given to it in Clause 13.1.6
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"Conversion
Amount"
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has
the meaning set out in Clause 5.1 of this
Agreement
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"Conversion
Price"
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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
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"CREST"
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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
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"Delivery"
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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
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"Delivery
Date"
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means
the date on which Loan Shares are Delivered pursuant to a Loan
Notice
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"Event of
Default"
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means
those events as listed in Schedule 1
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"Final Maturity
Date"
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has
the meaning given in Clause 3
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"Funds"
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means
all monies that the Company receives or is entitled to receive pursuant to
the Fund Raising Agreement
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"Fund
Raising Date"
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means
each date that Funds are paid to the Company pursuant to the Fund Raising
Agreement
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"Fund
Raising Agreement"
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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
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"Group"
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means
the Company and its Subsidiaries from time to time and Group Company shall mean
any of them
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"Lender’s Bank
Account"
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means
the following account:
Dz
Bank AG (BIC: ▇▇▇▇▇▇▇▇, BLZ: 500 604 00)
Account:
DZ Bank International Luxembourg S.A. (BIC: ▇▇▇▇▇▇▇▇)
Account
number: ▇▇▇▇▇▇▇▇
Favour: Trafalgar
Capital Specialized Investment Fund SICAV, IBAN ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇,
or
such other account as the Lender may from time to time notify to the
Company in writing
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"Lender’s CREST
Account"
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means
the following account:
Citibank London
BIC Code: ▇▇▇▇▇▇▇▇
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
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"Loan"
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"Loan
Notice"
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has
the meaning set out in Clause 5.1 of this
Agreement
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"Loan Notice
Date"
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means
the date of a Loan Notice
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"Loan Notice Date Exchange
Rate"
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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
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"Loan
Shares"
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means
the new Ordinary Shares to be issued to the Lender pursuant to this
Agreement (other than pursuant to Clause 7.1)
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"Mandatory
Contingent Redemption Amount"
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means
the amount payable by the Company to the Lender pursuant to Clause 6.2
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"Mandatory Redemption
Amount"
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means
the amount of £50,000 of principal plus interest to be paid on each
Mandatory Redemption Date
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"Mandatory Redemption
Date"
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means
the date that is 3 months, 4 months and 5 months after the Closing
Date
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"Material Adverse
Change"
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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
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"Ordinary
Shares"
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means
ordinary shares of 5 ▇▇▇▇▇ 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
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"Permitted
Indebtedness"
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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
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"Permitted
Security"
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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
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"PLUS"
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means
the market of that name operated by PLUS Markets plc
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"PLUS
Rules"
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means
the rules from time to time published by PLUS Markets plc in relation to
companies admitted to PLUS
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"Redemption
Premium"
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has
the meaning set out in Clause 6.5
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"Security
Interest"
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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
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"Subscription
Notice"
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has
the meaning set out in Clause 7.1 of this
Agreement
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" Subsidiary"
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means
any subsidiary of the Company within the meaning of section 736 of the
Companies ▇▇▇ ▇▇▇▇ (as amended, restated or replaced from time to
time)
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"Taxation"
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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
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"Trading Day
"
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means
any day during which the market trading the Ordinary Shares (being either
AIM or PLUS) is open for business
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"Transaction
Documents"
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means
each of this Agreement, the Composite Guarantee and Debenture and any
other document designated as a Transaction Document by the
Lender;
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"Unencumbered
Films"
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means
all title and rights whatsoever of the Company or any Group Company in
connection with the films listed in Schedule 4
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"VWAP"
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means
in relation to any Trading Day, the volume weighted average price (as
reported by Bloomberg) of the Ordinary Shares on AIM or PLUS (as
applicable) for that Trading Day
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3
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2.
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2.1
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Subject
to Clause 2.2, the Lender shall advance a
Loan of £500,000 to the Company on the Closing
Date.
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2.2
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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.
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2.3
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The
Company shall use the Loan for general working capital purposes to bridge
the Company's cash flow during the term of the Loan.
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3.
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3.1
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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").
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3.2
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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.
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4.
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4.1
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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.
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4.2
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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.
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4.3
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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.
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5.
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ISSUE OF LOAN SHARES WHEN AN EVENT OF DEFAULT IS
CONTINUING
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5.1
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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.
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5.2
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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.
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5.3
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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.
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5.4
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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.
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5.5
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Any
payments received, or treated as being received pursuant to Clause 5.3, by the Lender shall be
applied:
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5.5.1
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5.5.2
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secondly
to pay any amounts due to the Lender in respect of interest pursuant to
Clause 4.1 of this Agreement;
and
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5.5.3
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thirdly
to repay any amount of the Loan still
outstanding.
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6.
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OPTIONAL
REDEMPTION
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6.1
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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).
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6.2
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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.
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6.3
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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”).
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6.4
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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.
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6.5
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Each
Cash Payment shall, subject to Clause 9.2, be
applied:
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6.5.1
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6.5.2
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secondly
to pay any amounts due to the Lender in respect of interest pursuant to
Clause 4.1 of this Agreement;
and
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6.5.3
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thirdly
to repay any amount of the Loan still
outstanding.
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6.6
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Any
part of a Cash Payment which is applied pursuant to Clause 6.5.3 shall be subject to a Redemption Premium
as follows:
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6.6.1
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7.5%
if the Cash Payment is made on or before 6 months of the Closing Date;
and
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6.6.2
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15%
if the Cash Payment is made after 6 months of the Closing
Date,
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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.
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6.7
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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).
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7.
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ADDITIONAL SUBSCRIPTION RIGHTS
(WARRANTS)
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7.1
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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.
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7.2
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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).
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7.3
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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.
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8.
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ISSUE OF
SHARES
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8.1
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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.
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8.2
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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.
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8.3
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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:
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8.3.1
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the
Company shall, conditional only upon Admission of such Ordinary Shares,
allot and issue the relevant Ordinary Shares to the
Lender;
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8.3.2
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the
Company shall do all acts and things reasonably necessary to procure
Admission of the relevant Ordinary Shares on the next following Trading
Day;
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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.
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8.4
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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.
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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:
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8.5.1
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2%
of the then outstanding amount of the Loan;
and
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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.
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9.
|
EXCHANGE RATE MOVEMENTS
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|
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.
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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.
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10.
|
PAYMENT OF COSTS, EXPENSES, FEES AND
COMMISSIONS
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|
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.
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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.
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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.
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11.
|
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.
|
|
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.
|
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 ▇▇▇ ▇▇▇▇ and the Companies ▇▇▇ ▇▇▇▇, 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.
|
|
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: ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇ marked for the attention of ▇▇▇▇▇▇ New,
Finance Director;
|
|
15.3.2
|
E-mail
the Company:
▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇;
|
|
15.3.3
|
Fax
the Lender: ▇▇ ▇▇▇-▇▇▇-▇▇▇▇ marked for the attention of ▇▇▇▇▇▇
▇. Press Esq;
|
|
15.3.4
|
E-mail
the Lender: ▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇.
|
|
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.
|
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.
|
|
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) ▇▇▇ ▇▇▇▇ 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
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 ▇▇▇
▇▇▇▇;
|
|
10.1.2
|
proposes,
or its directors make a proposal for, a voluntary arrangement under part I
of the Insolvency ▇▇▇ ▇▇▇▇;
|
|
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
|
20\21643994.12\CA07
5
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
PERMITTED INDEBTEDNESS AND SECURITY
SCHEDULE
20\21643994.12\CA07
7
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/ ▇▇▇▇▇▇ New
Director
/Secretary
SIGNED as a deed on behalf of
TRAFALGAR CAPITAL
SPECIALIZED INVESTMENT FUND
acting by
its general partner)
TRAFALGAR CAPITAL
SARL
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇ (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 ▇▇▇ ▇▇▇▇
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