LOAN & SECURITY AGREEMENT

EXHIBIT 10.9

        THIS LOAN & SECURITY AGREEMENT (as amended, restated or otherwise modified from time to time, the “ Security Agreement ”) is entered into as of the 7th day of November, 2008, among 301 PRODUCTIONS, INC., a California corporation (the “ Grantor ”), NATIONAL LAMPOON, INC., a California corporation (“ NL ”), and VOODOO PRODUCTION SERVICES, L.L.C. (referred to as the “ Secured Party ”).  The Grantors and the Secured Party are sometimes referred to herein collectively as the “ Parties ” and each individually as a “ Party ”.

WHEREAS, Grantor is the owner of all right, title and interest in and to the motion picture currently titled “National Lampoon’s Legend of Awesomest Maximus” (the “ Film ”).

WHEREAS, NL controls and owns all of the issued and outstanding equity securities of Grantor, and NL and Grantor have entered into that certain Worldwide Distribution Agreement dated as of November 7, 2008 (the “ NL Distribution Agreement ”) pursuant to which Grantor has appointed NL as the worldwide distributor of the Film.

WHEREAS, simultaneously herewith, the Secured Party is lending to Grantor the sum of FOUR HUNDRED FIFTY THOUSAND and NO/100 Dollars ($450,000.00) (the “Loan”) evidenced by that certain Secured Promissory Note of the Company dated as of November 7, 2008 (the “ Secured Promissory Note ”).

WHEREAS, the Secured Party has required the Grantor and NL to execute and deliver this Security Agreement and grant to Secured Party a perfected continuing Lien in the Collateral (as hereinafter defined) in order to secure the prompt and complete payment, observance and performance of all of the Obligations (as hereinafter defined), and as a condition precedent to the making of any loans, advances and any other financial accommodations by the Secured Party.

WHEREAS, VS Investment B, LLC, Voodoo Production Services, L.L.C., Jerry Daigle, Janice Salaman and Alfred J. Ferro Trust have made loans to Grantor in the amounts of $600,000.00, $450,000.00, $450,000.00, $350,000.00 and $125,000.00 each, for a total of $1,975,000.00 which has been or is being fully funded prior to, or contemporaneously with, the funding of the Loan  (the “ Other Loans ”) upon terms substantially similar to the terms of this Security Agreement and the Secured Note, and the Secured Party, VS Investment B, LLC, Janice Salaman, Jerry Daigle and Alfred J. Ferro Trust (together, the “ Intercreditor Group, ” and each being individually referred to as a “ Member of the Intercreditor Group ”) are parties to that certain Intercreditor Agreement of even date herewith (the “ Intercreditor Agreement ”).

NOW, THEREFORE, in consideration of the Loan, the premises and mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.   Defined Terms .  All capitalized terms used but not otherwise defined herein have the meanings given to them in Annex A attached hereto. All other terms contained in this Security Agreement, unless the context indicates otherwise, have the meanings provided for by the Code to the extent the same are used or defined therein.

2.   Grant of Lien .

(a)   To secure the prompt and complete payment, performance and observance of all of the Obligations, Grantor hereby grants, assigns, conveys, mortgages, pledges, hypothecates and transfers to Secured Party a Lien upon all of Grantor’s right, title and interest in, to and under all personal property and other assets, whether now owned by or owing to, or hereafter acquired by or arising in favor of Grantor (including under any trade names, styles or derivations thereof), and whether owned or consigned by or to, or leased from or to, Grantor, and regardless of where located (all of which being hereinafter collectively referred to as the “ Collateral ”), including:

(i)   all rights of every kind and nature (including, without limitation, copyrights) in and to the screenplay of the Film (copyright registration number PAu-3-358-000), and any other literary, musical, dramatic or other literary material of any kind or nature upon which, in whole or in part, the Film is or may be based, or from which it is or may be adapted or inspired or which may be or has been used or included in the Film including, without limitation, all scripts, scenarios, screenplays, bibles, stories, treatments, novels, outlines, books, titles, concepts, characters, manuscripts or other properties or materials of any kind or nature in whatever state of completion and all drafts, versions and variations thereof (collectively, the “ Literary Property ”); without limiting the generality of the foregoing, Grantor shall immediately execute, deliver and cause to be filed and recorded with the United States Copyright Office a Notice of Security Interest and Collateral Assignment of Copyrights in the form of Exhibit 2(a)(i) attached hereto with respect to each and every copyright included in the Collateral;

(ii)   all rights of every kind and nature in and to all physical properties of every kind or nature of or relating to the Film and all versions thereof, including, without limitation, all physical properties relating to the development, production, completion, delivery, exhibition, distribution or other exploitation of the Film, and all versions thereof or any part thereof, including, without limitation, the Literary Property, exposed film, developed film, positives, negatives, prints, answer prints, special effects, pre-print materials (including interpositives, negatives, duplicate negatives, internegatives, color reversals, intermediates, lavenders, fine grain master prints and matrices and all other forms of pre-print elements which may be necessary or useful to produce prints or other copies or additional pre-print elements, whether now known or hereafter devised), soundtracks, recordings, audio and video tapes and discs of all types and gauges, cutouts, trims and any and all other physical properties of every kind and nature relating to the Film in whatever state of completion, and all duplicates, drafts, versions, variations and copies of each thereof (collectively, the “ Physical Properties ”);

(iii)   all collateral, allied, ancillary, subsidiary, publishing and merchandising rights of every kind and nature, without limitation, derived from, appurtenant to or related to the Film or the Literary Property, including, without limitation, all production, exploitation, reissue, remake, sequel, serial or series production rights by use of film, tape or any other recording devices now known or hereafter devised, whether based upon, derived from or inspired by the Film, the Literary Property or any part thereof; all rights to use, exploit and license others to use or exploit any and all novelization, publishing, commercial tieups and merchandising rights of every kind and nature, including, without limitation, all novelization, publishing, merchandising rights and commercial tieups arising out of or connected with or inspired by the Film or the Literary Property, the title or titles of the Film, the characters appearing in the Film or said Literary Property and/or the names or characteristics of said characters, and including further, without limitation, any and all commercial exploitation in connection with or related to the Film, all remakes or sequels thereof and/or the Literary Property;

(iv)   all rights of Grantor of every kind or nature, present and future, in and to all agreements relating to the development, production, completion, delivery and exploitation of the Film, including, without limitation, all agreements for personal services, including the services of writers, directors, cast, producers, special effects personnel, animators, cameramen and other creative, artistic and technical staff and agreements for the use of studio space, equipment, facilities, locations, animation services, special effects services and laboratory contracts;

(v)   all contract rights and general intangibles which grant to any Person any right to acquire, produce, develop, reacquire, finance, release, sell, distribute, subdistribute, lease, sublease, market, license, sublicense, exhibit, broadcast, transmit, reproduce, publicize, or otherwise exploit the Film or any rights in the Film including, without limitation, all such rights pursuant to agreements between Grantor and any Subsidiary which relate to the ownership, production or financing of the Film;

(vi)   all Accounts;

(vii)   all Chattel Paper;

(viii)   all Documents;

(ix)   all General Intangibles (including all Products, Contracts, Intellectual Property, and payment intangibles);

(x)   all Goods (including Inventory, Equipment and Fixtures);

(xi)   all Instruments;

(xii)   all Deposit Accounts and all other bank accounts and all deposits therein;

(xiii)   all money, cash or cash equivalents of Grantor;

(xiv)   all Supporting Obligations and Letter-of-Credit Rights of Grantor; and

(xv)   to the extent not otherwise included, all Proceeds, tort claims insurance claims and other rights to payments not otherwise included in the foregoing and products of the foregoing and all accessions to, substitutions and replacements for, and rents and profits of, each of the foregoing.

(b)   In addition, to secure the prompt and complete payment, performance and observance of the Obligations and in order to induce Secured Party as aforesaid, Grantor hereby grants to Secured Party a right of set-off against the property of Grantor held by Secured Party, consisting of property described above in Section 2(a) now or hereafter in the possession or custody of or in transit to Secured Party, for any purpose, including safekeeping, collection or pledge, for the account of Grantor, or as to which Grantor may have any right or power.

(c)   In addition, to secure the prompt and complete payment, performance and observance of the Obligations and in order to induce Secured Party as aforesaid, NL hereby grants to Secured Party a Lien upon all of NL’s right, title and interest of whatsoever kind or nature in, to, under or relating to the Film, including without limitation all Literary Property and Physical Properties, and the Collection Account (defined below).  All such property and rights shall be included in the Collateral hereunder.

3.   Collection Account; Minimum Guaranty Amount; Profit Participation.

(a)   In order to secure the prompt and complete payment, performance and observance of the Obligations and in order to induce Secured Party as aforesaid, as promptly as practicable after the date hereof, NL shall open a collection account (the “ Collection Account ”) into which NL and the Company shall cause all cash receipts and Proceeds (the “ Funds ”) derived from distribution or exploitation of the Film to be deposited.  Among other things, NL and the Company shall cause all licensees and distributors of the Film and all other third parties (together, “ Payors ”) to pay all amounts of Gross Receipts (as defined in the NL Distribution Agreement) with respect to the Film directly into the Collection Account.  As promptly as reasonably practicable following the date of this Agreement, NL shall deliver to the Secured Party copies of notices of assignment and acknowledgement (in a form reasonably approved by the Secured Party), executed on behalf of NL, the Company and each Payor with respect to the assignment of the existing distribution, license or other agreement (each an “ Existing Distribution Agreement ”) with such Payor hereunder and payment of Gross Proceeds thereunder into the Collection Account (each, a “ Notice of Assignment ”).  Notices of Assignment with respect to distribution, license or other agreements executed hereafter shall be obtained and delivered to the Secured Party as promptly as reasonably practicable following the execution of such agreements (“ Additional Distribution Agreements ”).  The Collection Account shall be governed by an agreement among a bank selected by NL (and reasonably acceptable to the Secured Party), NL, the Company, and the Members of the Intercreditor Group, including the Secured Party, which provides that Funds will be disbursed from the Collection Account pursuant to the written direction of at least 2 of the 3 Designated Representatives (as defined in the Intercreditor Agreement) of the Members of the Intercreditor Group.  The Collection Account shall constitute a deposit account under the control of a secured party pursuant to the Code.  The parties agree that all Funds will be disbursed (and the Secured Party will sign appropriate written directions as aforesaid to disburse the Funds) in the following order and priority:

(i)  First, to pay all residuals due and owing to  Screen Actors Guild (SAG), Directors Guild of America (DGA) and Writers Guild of America (WGA);

(iii)  Third, to reimburse NL all amounts advanced for Approved Distribution Expenses (as defined in the NL Distribution Agreement).

(iv)   Fourth, to pay and satisfy all Obligations, including repayment of all principal, accrued interest and other amounts payable under the Secured Note, and all obligations under the secured notes evidencing the Other Loans to Grantor by the other Members of the Intercreditor Group.

(v)   Fifth, to pay the balance of the Distribution Fee payable to NL under the NL Distribution Agreement.

(vi)  Sixth, to pay NL its royalty of 8% of Gross Receipts in respect of NL’s license to Grantor to use NL’s name, mark and all other intellectual property of NL used in connection with the Film.

(vii)  The balance of the Funds will be paid to Grantor, NL, the Secured Party and/or the Other Members of the Intercreditor Group in accordance with the respective participation agreements among the parties, which provide for participations to each Member of the Intercreditor Group on a pro rata, pari passu basis.

(b)   If, but only if, NL fails to deliver a fully executed Notice of Assignment as required pursuant to Section 3(a) above (i) with respect to an Existing Distribution Agreement, within ninety (90) days following the date of this Agreement, or (ii) with respect to an Additional Distribution Agreement, within ninety (90) days following the date of such Additional Distribution Agreement, then NL hereby guarantees to the Secured Party that the full amount of the minimum guarantee under such Existing Distribution Agreement or Additional Distribution Agreement, as the case may be, will be deposited into the Collection Account, and NL shall make each such deposit (or any deficit therein) if and to the extent not made by the respective Payor on or before the Maturity Date of the Secured Promissory Note.  Any such guaranty by NL with respect to an Existing Distribution Agreement or an Additional Distribution Agreement shall expire if and when NL delivers the Notice of Assignment with respect thereto, provided that such Notice of Assignment is delivered to the Secured Party before the Maturity Date of the Secured Promissory Note.

(c)   As a further inducement to the Secured Party to make the Loan evidenced by the Secured Promissory Note, upon receipt of the proceeds of the Loan, NL hereby agrees to irrevocably assign, transfer and convey to Secured Party a Eleven and One-Half percent (11.5%) net profit participation in the Film, which NL shall pay in cash, in accordance with the terms and conditions of that certain Profit Participation Agreement of even date herewith.

4.   Secured Party’s Rights, Limitations on Secured Party’s Obligations .

(a)   It is expressly agreed by Grantor and NL that, anything herein to the contrary notwithstanding, Grantor and NL shall remain liable under each of their Contracts and each of their Licenses to observe and perform all the conditions and obligations to be observed and performed by them thereunder.  Secured Party shall not have any obligation or liability under any Contract or License by reason of or arising out of this Security Agreement or the granting herein of a Lien thereon or the receipt by Secured Party of any payment relating to any Contract or License pursuant hereto.  Secured Party shall not be required or obligated in any manner to perform or fulfill any of the obligations of Grantor under or pursuant to any Contract or License, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any Contract or License, or to present or file any claims, or to take any action to collect or enforce any performance or the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

(b)   Secured Party may at any time after an Event of Default has occurred and is continuing, without prior notice to Grantor, notify Account Debtors and other Persons obligated on the Collateral that Secured Party has a security interest therein, and that payments shall be made directly to Secured Party.  Thereafter, upon the request of Secured Party, Grantor and NL shall so notify Account Debtors and other Persons obligated on Collateral.  Once any such notice has been given to any Account Debtor or other Person obligated on the Collateral, Grantor and NL shall not give any contrary instructions to such Account Debtor or other Person without Secured Party’s prior written consent.

(c)   Secured Party may at any time after an Event of Default has occurred and is continuing, in Secured Party’s own name, in the name of a nominee of Secured Party or in the name of Grantor communicate (by mail, telephone, facsimile or otherwise) with Account Debtors, parties to Contracts and obligors in respect of Instruments to verify with such Persons, to Secured Party’s satisfaction, the existence, amount, terms of, and any other matter relating to, the Film, the Literary Property, the Physical Properties, any Product, Accounts, General Intangibles (including all Products, Contracts, Intellectual Property, and payment intangibles), Instruments or Chattel Paper included in the Collateral.

5.   Representations and Warranties .  In order to induce the Secured Party to make the Loan, each of Grantor and NL jointly and severally represents and warrants to the Secured Party that that the following statements are true and correct and shall continue to be true and correct until all Obligations to the Secured Party shall have been fully performed and satisfied:

(a)   Grantor and NL each have rights in and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder free and clear of any and all Liens other than the Permitted Additional Lien (as defined in Section 5.(b) below) and Permitted Encumbrances arising in the ordinary course of making the Film.

(b)   This Security Agreement is effective to create a valid and continuing Lien on and, upon the filing of the appropriate financing statements listed on Schedule I hereto, a perfected Lien in favor of Secured Party on the Collateral with respect to which a Lien may be perfected by filing pursuant to the Code.  Such Lien is prior to all other Liens, except the perfected, continuing Liens of the other Members of the Intercreditor Group in the Collateral to secure the Other Loans, which are pari passu with the security interest of Secured Party (the “Permitted Additional Liens”), and Permitted Encumbrances arising in the ordinary course of making the Film that would be prior to Liens in favor of Secured Party as a matter of law, and upon recordation the Lien will be enforceable in favor of Secured Party as such as against any and all creditors of and purchasers from Grantor or NL.  All action by Grantor and NL necessary or desirable to protect and perfect such Lien on each item of the Collateral has been, or shall promptly be, duly taken.

(c)   Schedule II hereto lists all Instruments, Letter-of-Credit Rights and Chattel Paper of Grantor.  All action by Grantor necessary or desirable to protect and perfect the Lien of Secured Party on each item set forth on Schedule II (including the delivery of all originals thereof to Secured Party and the legending of all Chattel Paper as required by Section 5(b) hereof) has been duly taken.  The Lien of Secured Party on the Collateral listed on Schedule II hereto is prior to all other Liens, except the Permitted Additional Liens and Permitted Encumbrances arising in the ordinary course of making the Film that would be prior to the Liens in favor of Secured Party as a matter of law, and such Lien is enforceable in favor of Secured Party as such against any and all creditors of and purchasers from Grantor or NL.

(d)   Grantor’s name as it appears in official filings in the state(s) of its incorporation, the type of entity of Grantor, organizational identification numbers issued by Grantor’s state of incorporation or statement(s) that no such number has been issued, Grantor’s state of incorporation, the location(s) of Grantor’s chief executive office(s), principal place(s) of business, offices, all warehouses and premises where Collateral is stored or located, and the locations of its books and records concerning the Collateral are set forth on Schedule III hereto.

(e)   With respect to any Inventory of Grantor, (i) no Inventory is now, or shall at any time or times hereafter be stored at any location other than as set forth on Schedule III hereto without Secured Party’s prior consent, and if Secured Party gives such consent, Grantor will concurrently therewith obtain bailee, landlord or mortgagee agreements, in each case, satisfactory to Secured Party in its sole discretion, (ii) Grantor has good, indefeasible and merchantable title to such Inventory and such Inventory is not subject to any Lien or security interest or document whatsoever except for the Lien granted to Secured Party and except for the Permitted Additional Lien and Permitted Encumbrances, (iii) such Inventory is not subject to any licensing, patent, royalty, trademark, trade name or copyright agreements with any third parties which would require any consent of any third party upon sale or disposition of that Inventory or the payment of any monies to any third party as a precondition of such sale or other disposition, and (iv) the completion of manufacture, sale or other disposition of such Inventory by Secured Party following an Event of Default shall not require the consent of any Person and shall not constitute a breach or default under any contract or agreement to which Grantor is a party or to which such property is subject.

(f)   Upon the filing of a UCC financing statement and the Notice of Security Interest in Patents and Trademarks and the Notice of Security Interest in Copyrights with the United State Patent and Trademark Office and the United States Copyright Office, as applicable, the Liens granted hereunder with respect to the Grantor’s interest in its Intellectual Property are enforceable as such as against any and all creditors of and purchasers from Grantor or NL.

(g)   Each of Grantor and NL (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of California; (ii) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification except where the failure to be so qualified does not and would not have a material adverse effect on the business, properties or assets of the Grantor; (iii) has the requisite power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now, heretofore and proposed to be conducted; (iv) has all material licenses, permits, consents or approvals from or by, and have made all material filings with, and have given all material notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; and (v) is in compliance with its charter, bylaws, and all applicable provisions of law, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to have a material adverse effect upon Grantor.

(h)   The execution, delivery and performance by Grantor and NL of this Security Agreement, the Notice of Security Interest in Patents and Trademarks, and the Notice of Security Interest in Copyrights and the creation of all Liens provided for herein or therein: (i) are within Grantor’s and NL’s respective power; (ii) have been duly authorized by all necessary corporate action; (iii) do not contravene any provision of Grantor’s or NL’s charters or bylaws; (iv) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (v) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, mortgage, deed of trust, lease, agreement or other instrument to which such Person is a party or by which such Person or any of its property is bound; (vi) do not result in the creation or imposition of any Lien upon any of the property of such Person other than those in favor of Secured Party pursuant to this Security Agreement; and (vii) do not require the consent or approval of any Governmental Authority or any other Person except to the extent any such consent was obtained prior to the date hereof.  This Security Agreement, the Notice of Security Interest in Patents and Trademarks and the Notice of Security Interest in Copyrights executed contemporaneously herewith have been duly executed and delivered by Grantor and NL.  This Security Agreement, each Notice of Security Interest in Patents and Trademarks, and each Notice of Security Interest in Copyrights executed contemporaneously herewith shall constitute a legal, valid and binding obligation of Grantor and NL enforceable against them in accordance with its terms.

(i)   Grantor and NL have obtained and delivered to Secured Party, or will deliver to Secured Party within 10 days following the date of this Agreement, true and complete fully executed copies of all sales agency agreements, all existing distribution and license agreements (and the notices of assignment and the acknowledgement relating thereto), all policies of insurance and all chain-of-title documents related to the Film or to the production, marketing, distribution and/or exploitation of the Film (the “ Related Agreements ”).  

(j)   Neither Grantor, NL nor any other party to any of the Related Agreements is in material default under any of the Related Agreements to which such Persons are parties.  In the event Grantor or NL either knows or believes that any such default exists, Grantor and/or NL, as the case may be shall, within twenty-four (24) hours, deliver written notice of breach to the appropriate party, with a copy to Secured Party.

(k)   There is no action, suit or proceeding at law or in equity or by or before any governmental instrumentality or other agency or any investigation of the affairs of Grantor or NL (or any Affiliate thereof) or any of their managers, members, officers, properties or rights which, if adversely determined, would materially affect (a) the ability of Grantor or NL to perform their obligations concerning the production and exploitation of the Film as contemplated hereby (including, but not limited to, the ability of Grantor or NL to perform their respective obligations under the Related Agreements or to conduct their businesses substantially as being conducted on the date hereof), (b) the financial condition of Grantor or NL, (c) the security interests granted to Secured Party hereunder, or (d) the Collateral; nor is Grantor or NL in default with respect to any judgment, writ, injunction, decree, rule or regulation of any court or governmental instrumentality or other agency which might materially impair the rights of Grantor or NL to carry on their businesses substantially as now being conducted or which might materially or adversely affect the financial condition of Grantor or NL.  Neither Grantor, NL nor the Collateral have been affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of a public enemy or other casualty (whether or not covered by insurance), materially and adversely affecting such Collateral or the business or operations of Grantor or NL.

(l)   Grantor owns all rights in the Film, and Grantor or NL own all rights in the other Collateral, necessary to enable Grantor and NL to fully perform all of their Obligations, representations, warranties and agreements under this Agreement, the Secured Promissory Note, the Related Agreements and the other documents and agreements contemplated hereby.  Other than certain music rights or other customary rights to be licensed in the future, which shall be acquired by completion of the Film and continuing through satisfaction of all Obligations, Grantor shall own all right, title and interest, including copyrights in and to the Film and including all right, title and interest necessary to distribute, exhibit and otherwise exploit the Film in the world, including, without limitation, all necessary rights in the literary, musical or other property or ideas used therein and the right to exhibit the Film in theatres, on television, by means of video cassettes and videodiscs or in any other media or manner contemplated in the Related Agreements.  To the best of Grantor’s and NL’s knowledge, any and all material or matter used in or in connection with the Film, including dialogue, characters, titles, episodes and events, shall be original with or owned by or licensed to Grantor, or in the public domain, and will not infringe any copyrights, trademarks or statutory or common law rights of any Person, or, to the best of Grantor’s and NL’s knowledge, constitute a libel, slander or invasion of privacy of any party, or otherwise infringe on or violate the rights or any other party whomsoever.

(m)   Grantor has delivered to Secured Party a true and correct copy of the final in-going budget for the Film, which shows a total budget of $2,457,849, as approved by all third parties, if any, having approval rights with respect thereto (the “ Final Budget ”).  The Final Budget includes provisions for all expenses necessary for the production of the Film and delivery of the Film in accordance with the terms of all existing distribution and license agreements.

(n)   Grantor and NL have delivered to Secured Party copies of all agreements between Grantor or NL, on the one hand, and any of the other Members of the Intercreditor Group, on the other hand, related to the Film, and neither Grantor nor NL has any agreement or understanding with any such Persons not set forth in the copies of agreements so delivered.

(o)   None of the statements, representations or warranties made by Grantor or NL in this Agreement or any of the other documents or agreements contemplated hereby to which Grantor or NL is a party, as of the respective dates of such statements, representations and warranties, contains any untrue statement of a material fact or omits any material fact necessary to make the statements made not misleading.

(p)   No Fraudulent Transfers .  No transfer of property is being made by Grantor or NL and no obligation is being incurred by Grantor or NL in connection with the transactions contemplated by this Security Agreement with the intent to hinder, delay, or defraud either present or future creditors of Grantor or NL.

6.   Covenants .  Each of Grantor and NL covenants and agrees with Secured Party that from and after the date of this Security Agreement, until payment in full of the Secured Promissory Note and Grantor’s and NL’s performance in full of all Obligations hereunder and under the other agreements between or among the parties as contemplated hereby:

(a)   Further Assurances; Pledge of Instruments; Chattel Paper .

(i)   At any time and from time to time, upon the written request of Secured Party and at the sole expense of Grantor or NL, as the case may be, Grantor and NL shall promptly and duly execute and deliver any and all such further instruments and documents and take such further actions as Secured Party may deem desirable to obtain the full benefits of this Security Agreement and of the rights and powers herein granted, including (A) using best efforts to secure all consents and approvals necessary or appropriate for the assignment to or for the benefit of Secured Party of any License or Contract held by Grantor and to enforce the security interests granted hereunder, and (B) filing any financing or continuation statements under the Code with respect to the Liens granted hereunder.

(ii)   Unless Secured Party shall otherwise consent in writing (which consent may be revoked), after an Event of Default has occurred and is continuing, Grantor and NL shall deliver to Secured Party all Collateral consisting of negotiable Documents, certificated securities, Chattel Paper and Instruments (in each case, accompanied by stock powers, allonges or other instruments of transfer executed in blank) promptly after Grantor or NL receives the same.

(iv)   If requested by Secured Party, Grantor and NL shall obtain authenticated Control Letters from each issuer of uncertificated securities, securities intermediary, or commodities intermediary issuing or holding any financial assets or commodities constituting Collateral hereunder.

(v)   If Grantor is or becomes the beneficiary of a letter of credit, Grantor shall promptly, and in any event within two (2) Business Days after becoming beneficiary, notify Secured Party thereof and, if requested by Secured Party, enter into a tri-party agreement with Secured Party and the issuer and/or confirmation bank with respect to Letter-of-Credit Rights assigning such Letter-of-Credit Rights to Secured Party and directing all payments thereunder upon and during the continuance of a Default or Event of Default to be made to an account identified by Secured Party, all in form and substance reasonably satisfactory to Secured Party.

(vi)   Grantor shall take all steps necessary to grant the Secured Party control of all electronic chattel paper in accordance with the Code and all “transferable records” as defined in each of the Uniform Electronic Transactions Act and the Electronic Signatures in Global and National Commerce Act.

(vii)   Grantor and NL hereby irrevocably authorize the Secured Party at any time and from time to time to file in any filing office in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto that (a) indicate the Collateral (i) as all assets of Grantor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the Code or such jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by the Code for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether Grantor is an organization, the type of organization and any organization identification number issued to the Grantor, and (ii) in the case of a financing statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates.  Grantor agrees to furnish any such information to the Secured Party promptly upon request.  Grantor also ratifies its authorization for the Secured Party to have filed in any Uniform Commercial Code jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

(viii)   Grantor shall as soon as commercially practicable after the same is acquired by it, notify Secured Party of any commercial tort claim (as defined in the Code) acquired by it and unless otherwise consented by Secured Party, Grantor shall enter into a supplement to this Security Agreement, granting to Secured Party a Lien in such commercial tort claim.

(ix)   Grantor shall as soon as commercially practicable after forming or investing in any Wholly-Owned Subsidiary, or any Subsidiary in which any Affiliate owns any Equity Security,  cause such Subsidiary to grant to Secured Party a first priority lien in all assets of such Subsidiary pursuant to a security agreement in substantially the same form as this Agreement.  Grantor shall be under no obligation to cause any such Subsidiary to grant any lien in its assets so long as the sole owners of Equity Securities of such Subsidiary consist of Grantor and Persons who are not Affiliates; provided, however, that if an Affiliate after the formation of any such Subsidiary becomes an owner of any Equity Security in such Subsidiary, then Grantor shall as soon as commercially practicable thereafter cause such Subsidiary to grant to Secured Party a first priority lien in all assets of such Subsidiary pursuant to a security agreement in substantially the same form as this Agreement.  Grantor will on demand pay any reasonable attorneys fees incurred by Secured Party relating to or in connection with the granting of a lien to Secured Party by any Subsidiary pursuant to this Section 6(a)(ix) .

(b)   Maintenance of Records .  Grantor and NL shall keep and maintain, at their own cost and expense, satisfactory and complete records of the Collateral, including a record of any and all payments received and any and all credits granted with respect to the Collateral and all other dealings with the Collateral.  Grantor and NL shall mark their books and records pertaining to the Collateral to evidence this Security Agreement and the Liens granted hereby.  If Grantor or NL retains possession of any Chattel Paper or Instruments with Secured Party's consent, such Chattel Paper and Instruments shall be marked with the following legend:  “This writing and the obligations evidenced or secured hereby are subject to the security interest of VS Investment B, LLC, as Secured Party.”

(c)   Covenants Regarding Patent, Trademark and Copyright Collateral .

(i)   Grantor and NL shall provide reasonable notice to Secured Party of any material change to any application or registration relating to any Copyright (now or hereafter existing), including information that such application or registration is or may become abandoned, finally refused or expired or dedicated, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Copyright Office or any court) regarding Grantor’s ownership of any Copyright, right to register the same, or to keep and exclusively maintain the same.

(ii)   In no event shall Grantor, either directly or through any agent, employee, licensee or designee, file an application for the registration of any Patent, Trademark or Copyright with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency without giving Secured Party prior written notice thereof, and, upon request of Secured Party, Grantor shall execute and deliver any and all applicable Notices of Security Interests in Patents and Trademarks and Notices of Security Interests in Copyrights as Secured Party may request to evidence Secured Party's Lien on such Patent, Trademark or Copyright, and the General Intangibles of Grantor relating thereto or represented thereby.

(iv)   In the event that any of the Copyright Collateral is infringed upon, or misappropriated or diluted by a third party, Grantor shall comply with Section 6(a)(viii) of this Security Agreement.  Grantor shall, unless it shall reasonably determine that such Copyright Collateral is not material to the conduct of its business or operations, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and shall take such other actions as Secured Party shall deem appropriate under the circumstances to protect such Patent, Trademark or Copyright Collateral.

(d)   Indemnification .  In any suit, proceeding or action brought by Secured Party relating to any Collateral for any sum owing with respect thereto or to enforce any rights or claims with respect thereto, Grantor and NL will save, indemnify and keep Secured Party harmless from and against all expense (including reasonable attorneys’ fees and expenses), loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction of liability whatsoever of the Account Debtor or other Person obligated on the Collateral, arising out of a breach by Grantor or NL of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to, or in favor of, such obligor or successors from Grantor or NL, except in the case of Secured Party, to the extent such expense, loss, or damage is attributable solely to the gross negligence or willful misconduct of Secured Party as finally determined by a court of competent jurisdiction. All such obligations of Grantor shall be and remain enforceable against and only against Grantor and shall not be enforceable against Secured Party.  In addition, Grantor shall at all times defend and indemnify and hold Secured Party and its Affiliates, members, managers, officers, directors, employees, representatives, agents, successors and assigns free and harmless from and against any and all liabilities, claims, demands, causes of action, losses, damages, settlements, judgments or recoveries resulting from any breach of any of the warranties, representations, agreements or covenants made by Grantor in this Security Agreement, and from any suit or proceeding of any kind or nature whatsoever against Secured Party arising from or connected with the transactions contemplated by this Security Agreement, the Secured Promissory Note or any of the documents, instruments or agreements to be executed pursuant hereto or any of the rights and properties assigned to Secured Party hereunder, including reasonable outside attorneys’ fees and costs and expenses incurred by Secured Party, all of which shall be charged to and paid by Grantor and shall be secured by the Collateral hereunder; provided , however , that Grantor shall not have any obligation under the foregoing sentence with respect to any such event resulting from an indemnified party’s breach of this Security Agreement, gross negligence or willful misconduct.

(e)   Compliance with Terms of Accounts, Related Agreements, etc.   In all material respects, Grantor and NL will perform, observe and comply with, and cause their employees and agents to perform, observe and comply with, all obligations, covenants, representations and warranties of Grantor or NL under any of the Related Agreements or in respect of the Film or the Collateral and all other agreements to which either is a party or by which either is bound relating to the Film or the Collateral.

(f)   Limitation on Liens on Collateral .  Grantor and NL will not create, permit or suffer to exist, and will defend the Collateral against, and take such other action as is necessary to remove, any Lien on the Collateral except the Permitted Additional Liens and Permitted Encumbrances arising in the ordinary course of making the Film that would be prior to the Liens in favor of Secured Party as a matter of law, and will defend the right, title and interest of Secured Party in and to any of Grantor’s or NL’s rights under the Collateral against the claims and demands of all Persons whomsoever.

(g)   Limitations on Disposition .  Grantor and NL will not sell, lease, license, transfer or otherwise dispose of any of the Collateral (including without limitation any such transfer or disposition by way of capital or equity contribution to another Person), or attempt or contract to do so except for (i) sales, exchanges, trade-ins or other dispositions of Equipment that is substantially worn, damaged, or obsolete in the ordinary course of business, (ii) sales of Inventory to buyers in the ordinary course of business, and (iii) licenses by Grantor or NL of Patents, Trademarks, Copyrights, and other intellectual property rights in the ordinary course of business, and not in a transaction or as part of a series of related transactions whereby substantially all of the Grantor’s assets are transferred to one or more Persons, to (x) a Person that is not an Affiliate or (y) if such transaction has been approved in advance by Grantor’s respective board of directors, a Person that is a Subsidiary; provided, that a license shall be deemed to be not in the ordinary course of business for purposes of this subsection if it is an exclusive license, unless either (I) such license has been approved in advance by Grantor’s board of directors, or (II) such license relates only to a single product.  The rights of the transferee or licensee with respect to any transfer or license as authorized in this subsection will be free and clear of the security interest of Secured Party hereunder; provided, however, that such security interest shall in the event of any such transfer or license continue to attach to all rights of Grantor or NL, as the case may be, pursuant to such transfer or license and the proceeds of such transfer or license as provided elsewhere herein.

(h)   Further Identification of Collateral .  Grantor and NL will, if so requested by Secured Party, furnish to Secured Party, as often as Secured Party reasonably requests (but not more often than quarterly), statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Secured Party may reasonably request, all in such detail as Secured Party may specify.

(i)   Notices .  Grantor and NL will advise Secure