exhibit_4-1.htm


    
      

    
EXHIBIT
4.1

     

    SECURITIES
PURCHASE AGREEMENT

     

    


     

    SECURITIES
PURCHASE AGREEMENT (this “Agreement”), dated as of July
31, 2008, by and among Camelot Entertainment Group, Inc., a Delaware
Corporation, with headquarters located at 130 Vantis, Suite 140, Aliso Viejo, CA
92656 (the “Company”),
and each of the purchasers set forth on the signature pages hereto (the “Buyers”).

     

    WHEREAS:

     

    A.           The
Company and the Buyers are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by the rules and
regulations as promulgated by the United States Securities and Exchange
Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933 Act”);

     

    B.           Buyers
desire to purchase and the Company desires to issue and sell, upon the terms and
conditions set forth in this Agreement  10% secured convertible notes of
the Company, in the form attached hereto as Exhibit “A”, in the aggregate
principal amount of One Hundred Sixty Thousand Dollars ($160,000) (together with
any note(s) issued in replacement thereof or as a dividend thereon or otherwise
with respect thereto in accordance with the terms thereof, the “Notes”), convertible into
shares of common stock, par value $.001 per share, of the Company (the “Common Stock”), upon the terms
and subject to the limitations and conditions set forth in such Notes and
 stock purchase warrants, in the form attached hereto as Exhibit “B”, to purchase an
aggregate of 20,000,000 shares of Common Stock (the “Warrants”).

     

    C.           Each
Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, such principal amount of Notes and number of Warrants as is set forth
immediately below its name on the signature pages hereto; and

     

    D.           Contemporaneous
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, in the form attached
hereto as Exhibit “C”
(the “Registration Rights
Agreement”), pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.

     

    NOW THEREFORE, the Company and
each of the Buyers severally (and not jointly) hereby agree as
follows:

     

    1.    PURCHASE
AND SALE OF NOTES AND WARRANTS.

     

    a.    Purchase
of Notes and Warrants.  On the Closing Date (as defined below),
the Company shall issue and sell to each Buyer and each Buyer severally agrees
to purchase from the Company such principal amount of Notes and number of
Warrants as is set forth immediately below such Buyer’s name on the signature
pages hereto.

     


    
      
         


      

      
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    b.    Form of
Payment.  On the Closing Date (as defined below),  each
Buyer shall pay the purchase price for the Notes and the Warrants to be issued
and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire
transfer of immediately available funds to the Company, in accordance with the
Company’s written wiring instructions, against delivery of the Notes in the
principal amount equal to the Purchase Price and the number of Warrants as is
set forth immediately below such Buyer’s name on the signature pages hereto, and
 the Company shall deliver such Notes and Warrants duly executed on behalf
of the Company, to such Buyer, against delivery of such Purchase
Price.

     

    c.    Closing
Date.  Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Notes and the Warrants pursuant to this
Agreement (the “Closing
Date”) shall be 12:00 noon, Eastern Standard Time on July 31, 2008, or
such other mutually agreed upon time.  The closing of the transactions
contemplated by this Agreement (the “Closing”) shall occur on the
Closing Date at such location as may be agreed to by the parties.

     

    d.    Subsequent
Closings  Upon (i) the filing of a proxy or information
statement with the SEC (the “Second Funding Date”) to obtain
approval of the company’s stockholders to issue all of the shares of Common
Stock issuable upon conversion or exercise of, or otherwise with respect to, the
Notes and the Warrants in accordance with Delaware law and any applicable rules
or regulations of the OTCBB and/or Nasdaq, either through a reverse stock split
of the common stock or an increase in authorized capital of the Company, the
Company shall issue and sell to the Buyers and the Buyers severally agree to
purchase from the Company an aggregate of Fifty Thousand Dollars ($50,000)
principal amount of Notes, and (ii) upon approval of the company’s stockholders
and the effectiveness of the reverse stock split of the common stock or an
increase in authorized capital of the Company (the “Final Funding Date,” and
collectively with the Second Funding Date, the “Funding Date”), the Company
shall issue and sell to the Buyers and the Buyers severally agree to purchase
from the Company an aggregate of Sixty Thousand Dollars ($60,000) principal
amount of Notes. On the Second Funding Date and on the Final Funding Date, the
Buyers will transfer funds by wire transfer to be of immediate availability to
the Company.  In addition, on the Funding Date, the Company shall
deliver to the Buyers a closing certificate in form and substance satisfactory
to the Buyers.  Notwithstanding the foregoing, either the Company or a
majority-in-interest of the Buyers may terminate their obligations under this
Section 1(d) upon thirty (30) days written notice to the other
party.

     

    2.    BUYERS’
REPRESENTATIONS AND WARRANTIES.  Each Buyer severally (and not
jointly) represents and warrants to the Company solely as to such Buyer
that:

     

    a.    Investment
Purpose.  As of the date hereof, the Buyer is purchasing the
Notes and the shares of Common Stock issuable upon conversion of or otherwise
pursuant to the Notes (including, without limitation, such additional shares of
Common Stock, if any, as are issuable  on account of interest on the Notes,
 as a result of the events described in Sections 1.3 and 1.4(g) of the
Notes and Section 2(c) of the Registration Rights Agreement or  in payment
of the Standard Liquidated Damages Amount (as defined in Section 2(f) below)
pursuant to this Agreement, such shares of Common Stock being collectively
referred to herein as the “Conversion Shares”) and the
Warrants and the shares of Common Stock issuable upon exercise thereof (the
“Warrant Shares” and,
collectively with the Notes, Warrants and Conversion Shares, the “Securities”) for its own
account and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from registration under
the 1933 Act; provided, however, that by
making the representations herein, the Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.

     


    
      
         


      

      
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    b.    Accredited
Investor Status.  The Buyer is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D (an “Accredited
Investor”).

     

    c.    Reliance
on Exemptions.  The Buyer understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities.

     

    d.    Information.  The
Buyer and its advisors, if any, have been, and for so long as the Notes and
Warrants remain outstanding will continue to be, furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities which have been requested by
the Buyer or its advisors.  The Buyer and its advisors, if any, have
been, and for so long as the Notes and Warrants remain outstanding will continue
to be, afforded the opportunity to ask questions of the
Company.  Notwithstanding the foregoing, the Company has not disclosed
to the Buyer any material nonpublic information and will not disclose such
information unless such information is disclosed to the public prior to or
promptly following such disclosure to the Buyer.  Neither such
inquiries nor any other due diligence investigation conducted by Buyer or any of
its advisors or representatives shall modify, amend or affect Buyer’s right to
rely on the Company’s representations and warranties contained in Section 3
below.  The Buyer understands that its investment in the Securities
involves a significant degree of risk. The Buyers are not aware of any facts
that may constitute a breach of any of the Company's representations and
warranties made herein.

     

    e.    Governmental
Review.  The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Securities.

     

     

    
      
        
        

      

      
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    f.    Transfer
or Re-sale.  The Buyer understands that  except as
provided in the Registration Rights Agreement, the sale or re-sale of the
Securities has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Securities may not be transferred
unless  the Securities are sold pursuant to an effective registration
statement under the 1933 Act,  the Company shall receive an opinion of
counsel that shall be in form, substance and scope customary for opinions of
counsel in comparable transactions to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration, which opinion shall be accepted by the Company,
 the Securities are sold or transferred to an “affiliate” (as defined in
Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who
agrees to sell or otherwise transfer the Securities only in accordance with this
Section 2(f) and who is an Accredited Investor,  the Securities are sold
pursuant to Rule 144, or  the Securities are sold pursuant to Regulation S
under the 1933 Act (or a successor rule) (“Regulation S”), and the
Company shall receive an opinion of counsel that shall be in form, substance and
scope customary for opinions of counsel in corporate transactions, which opinion
shall be accepted by the Company; (ii) any sale of such Securities made in
reliance on Rule 144 may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any re-sale of such Securities
under circumstances in which the seller (or the person through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the 1933
Act) may require compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the Company nor
any other person is under any obligation to register such Securities under the
1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder (in each case, other than pursuant to the
Registration Rights Agreement).  Notwithstanding the foregoing or
anything else contained herein to the contrary, the Securities may be pledged as
collateral in connection with a bona fide margin account
or other lending arrangement.  In the event that the Company does not
accept the opinion of counsel with respect to the transfer of Securities
pursuant to an exemption from registration, such as Rule 144 or Regulation S,
within five (5) business days of delivery of the opinion to the Company, the
Company shall pay to the Buyer liquidated damages of three percent (3%) of the
outstanding amount of the Notes per month plus accrued and unpaid interest on
the Notes, prorated for partial months, in cash or shares at the option of the
Company (“Standard Liquidated
Damages Amount”).  If the Company elects to be pay the Standard
Liquidated Damages Amount in shares of Common Stock, such shares shall be issued
at the Conversion Price (as defined in the Notes) at the time of
payment.

     

    g.    Legends.  The
Buyer understands that the Notes and the Warrants and, until such time as the
Conversion Shares and Warrant Shares have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement or otherwise may be sold
pursuant to Rule 144 or Regulation S without any restriction as to the number of
securities as of a particular date that can then be immediately sold, the
Conversion Shares and Warrant Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the certificates for such Securities):

    
    

     

    
      	
              “The securities
      represented by this certificate have not been registered under the
      Securities Act of 1933, as amended.  The securities may not be
      sold, transferred or assigned in the absence of an effective registration
      statement for the securities under said Act, or an opinion of counsel, in
      form, substance and scope customary for opinions of counsel in comparable
      transactions, that registration is not required under said Act or unless
      sold pursuant to Rule 144 or Regulation S under said
  Act.”

            


    

     

     

    
      
        
        

      

      
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    The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective
registration statement filed under the 1933 Act or otherwise may be sold
pursuant to Rule 144 or Regulation S without any restriction as to the number of
securities as of a particular date that can then be immediately sold, or (b) the
Company is provided with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to the effect that
a public sale or transfer of such Security may be made without registration
under the 1933 Act, which opinion shall be accepted by the Company so that the
sale or transfer is effected or (c) the Company is provided with reasonable
assurances that such Security can be sold pursuant to Rule 144 or Regulation
S.

     

    h.    Authorization;
Enforcement. This Agreement and the Registration Rights Agreement have
been duly and validly authorized.  This Agreement has been duly
executed and delivered on behalf of the Buyer, and this Agreement constitutes,
and upon execution and delivery by the Buyer of the Registration Rights
Agreement, such agreement will constitute, valid and binding agreements of the
Buyer enforceable in accordance with their terms.

     

    i.    Residency.  The
Buyer is a resident of the jurisdiction set forth immediately below such Buyer’s
name on the signature pages hereto.

    


     

    3.    REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.  The Company represents and
warrants to each Buyer that:

     

    a.    Organization
and Qualification.  The Company and each of its Subsidiaries
(as defined below), if any, is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is
incorporated, with full power and authority (corporate and other) to own, lease,
use and operate its properties and to carry on its business as and where now
owned, leased, used, operated and conducted.  Schedule 3(a) sets forth a
list of all of the Subsidiaries of the Company and the jurisdiction in which
each is incorporated.  The Company and each of its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership or use of property or the nature of
the business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect.  “Material
Adverse Effect” means any material adverse effect on the business,
operations, assets, financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered into in connection
herewith.  “Subsidiaries” means any
corporation or other organization, whether incorporated or unincorporated, in
which the Company owns, directly or indirectly, any equity or other ownership
interest.

     

     

    
      
        
        

      

      
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    b.    Authorization;
Enforcement.  (i) The Company has all requisite corporate power
and authority to enter into and perform this Agreement, the Registration Rights
Agreement, the Notes and the Warrants and to consummate the transactions
contemplated hereby and thereby and to issue the Securities, in accordance with
the terms hereof and thereof, (ii) the execution and delivery of this Agreement,
the Registration Rights Agreement, the Notes and the Warrants
by the Company and the consummation by it of the transactions contemplated
hereby and thereby (including without limitation, the issuance of the Notes and
the Warrants and the issuance and reservation for issuance of the Conversion
Shares and Warrant Shares issuable upon conversion or exercise thereof) have
been duly authorized by the Company’s Board of Directors and no further consent
or authorization of the Company, its Board of Directors, or its shareholders is
required, (iii) this Agreement has been duly executed and delivered by the
Company by its authorized representative, and such authorized representative is
the true and official representative with authority to sign this Agreement and
the other documents executed in connection herewith and bind the Company
accordingly, and (iv) this Agreement constitutes, and upon execution and
delivery by the Company of the Registration Rights Agreement, the Notes and the
Warrants, each of such instruments will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.

     

    c.    Capitalization.  As
of the date hereof, the authorized capital stock of the Company consists of (i)
500,000,000 shares of Common Stock, of which 267,506,332 shares are issued and
outstanding, 20,000,000 shares are reserved for issuance pursuant to the
Company’s stock option plans, 30,833,333 shares are reserved for issuance
pursuant to securities (other than the Notes and the Warrants) exercisable for,
or convertible into or exchangeable for shares of Common Stock and subject to
obtaining Shareholder Approval (as defined in Section 4(l)) 100,000,000 shares
are reserved for issuance upon conversion of the Notes and the Additional Notes
and exercise of the Warrants (subject to adjustment pursuant to the Company’s
covenant set forth in Section 4(h) below); (ii) 25,000,000 shares of Class A
Convertible Preferred Stock, of which 20,751,090 shares are issued and
outstanding; (iii) 10,000,000 shares of Class B Convertible Preferred Stock, of
which 8,650,957 shares are issued and outstanding; and (iii) 10,000,000 shares
of Class C Convertible Preferred Stock, of which 0 shares are issued and
outstanding.  All of such outstanding shares of capital stock are, or
upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable.  No shares of capital stock of the Company are subject
to preemptive rights or any other similar rights of the shareholders of the
Company or any liens or encumbrances imposed through the actions or failure to
act of the Company.  Except as disclosed in Schedule 3(c), as of the
effective date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its Subsidiaries, (ii) there are no agreements or arrangements under
which the Company or any of its Subsidiaries is obligated to register the sale
of any of its or their securities under the 1933 Act (except the Registration
Rights Agreement) and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in any agreement
providing rights to security holders) that will be triggered by the issuance of
the Notes, the Warrants, the Conversion Shares or Warrant Shares.  The
Company has furnished to the Buyer true and correct copies of the Company’s
Certificate of Incorporation as in effect on the date hereof (“Certificate of
Incorporation”), the Company’s By-laws, as in effect on the date hereof
(the “By-laws”), and the
terms of all securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect
thereto.  The Company shall provide the Buyer with a written update of
this representation signed by the Company’s
Chief Executive or Chief Financial Officer on behalf of the Company as of the
Closing Date.

     

     

    
      
        
        

      

      
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    d.    Issuance
of Shares.  Subject to obtaining Stockholder Approval (as
defined in Section 4(l)), the Conversion Shares and Warrant Shares are duly
authorized and reserved for issuance and, upon conversion of the Notes and
exercise of the Warrants in accordance with their respective terms, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of shareholders of the
Company and will not impose personal liability upon the holder
thereof.

     

    e.    Acknowledgment
of Dilution.  The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares and Warrant Shares upon conversion of the Note or exercise of
the Warrants.  The Company further acknowledges that its obligation to
issue Conversion Shares and Warrant Shares upon conversion of the Notes or
exercise of the Warrants in accordance with this Agreement, the Notes and the
Warrants is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the
Company.

     

    f.    No
Conflicts.  Subject to obtaining Stockholder Approval (as
defined in Section 4(l)), the execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Notes and the Warrants by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance of the Conversion Shares and Warrant Shares) will not (i) conflict
with or result in a violation of any provision of the Certificate of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its Subsidiaries is a party, or (iii)  result in a violation
of any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) applicable to
the Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect).  Neither the Company nor any of its Subsidiaries is
in violation of its Certificate of Incorporation, By-laws or other
organizational documents and neither the Company nor any of its Subsidiaries is
in default (and no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under, and neither
the Company nor any of its Subsidiaries has taken any action or failed to take
any action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party or by which any property or
assets of the Company or any of its Subsidiaries is bound or affected, except
for possible defaults as would not, individually or in the aggregate, have a
Material Adverse Effect. The businesses of the Company and its Subsidiaries, if
any, are not being conducted, and shall not be conducted so long as a
Buyer
owns any of the Securities, in violation of any law, ordinance or regulation of
any governmental entity.  Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable state securities
laws, the Company is not required to obtain any consent, authorization or order
of, or make any filing or registration with, any court, governmental agency,
regulatory agency, self regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its obligations
under this Agreement, the Registration Rights Agreement, the Notes or the
Warrants in accordance with the terms hereof or thereof or to issue and sell the
Notes and Warrants in accordance with the terms hereof and to issue the
Conversion Shares upon conversion of the Notes and the Warrant Shares upon
exercise of the Warrants.  Except as disclosed in Schedule 3(f), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof.  The Company is not in violation of the
listing requirements of the Over-the-Counter Bulletin Board (the “OTCBB”) and does not
reasonably anticipate that the Common Stock will be delisted by the OTCBB in the
foreseeable future.  The Company and its Subsidiaries are unaware of
any facts or circumstances which might give rise to any of the
foregoing.

     

     

    
      
        
        

      

      
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    g.    SEC
Documents; Financial Statements.  Except as disclosed in Schedule 3(g), the Company has
timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents (other than exhibits to
such documents) incorporated by reference therein, being hereinafter referred to
herein as the “SEC
Documents”).  The Company has delivered to each Buyer true and
complete copies of the SEC Documents, except for such exhibits and incorporated
documents.  As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.  None of the statements made in any such SEC Documents is,
or has been, required to be amended or updated under applicable law (except for
such statements as have been amended or updated in subsequent filings prior the
date hereof).  As of their respective dates, the financial statements
of the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with United States generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments).  Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to December 31, 2007 and (ii)
obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not material to the
financial condition or operating results of the Company.

     

     

     

    
      
        
        

      

      
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    h.    Absence
of Certain Changes.  Except as set forth on Schedule 3(h), since December
31, 2007, there has been no material adverse change and no material adverse
development in the assets, liabilities, business, properties, operations,
financial condition, and results of operations or prospects of the Company or
any of its Subsidiaries.

     

    i.    Absence
of Litigation.  Except as set forth on Schedule 3(i), there is no
action, suit, claim, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its Subsidiaries, or their
officers or directors in their capacity as such, that could have a Material
Adverse Effect.  Schedule 3(i) contains a
complete list and summary description of any pending or, to the knowledge of the
Company, threatened proceeding against or affecting the Company or any of its
Subsidiaries, without regard to whether it would have a Material Adverse
Effect.  The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.

     

    j.    Patents,
Copyrights, etc.  The Company and each of its Subsidiaries owns
or possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, trade secrets, trademarks,
trademark applications, service marks, service names, trade names and copyrights
(“Intellectual
Property”) necessary to enable it to conduct its business as now operated
(and, except as set forth in Schedule 3(j) hereof, to the
best of the Company’s knowledge, as presently contemplated to be operated in the
future); there is no claim or action by any person pertaining to, or proceeding
pending, or to the Company’s knowledge threatened, which challenges the right of
the Company or of a Subsidiary with respect to any Intellectual Property
necessary to enable it to conduct its business as now operated (and, except as
set forth in Schedule
3(j) hereof, to the best of the Company’s knowledge, as presently
contemplated to be operated in the future); to the best of the Company’s
knowledge, the Company’s or its Subsidiaries’ current and intended products,
services and processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing.  The
Company and each of its Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of their Intellectual
Property.

     

    k.    No
Materially Adverse Contracts, Etc.  Neither the Company nor any
of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company’s officers has or is expected in the future to have a
Material Adverse Effect.  Neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment of
the Company’s officers has or is expected to have a Material Adverse
Effect.

     


    
      
         


      

      
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    l.    Tax
Status.  Except as set forth on Schedule 3(l), the Company and
each of its Subsidiaries has made or filed all federal, state and foreign income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject (unless and only to the extent that the Company and each
of its Subsidiaries has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes) and has paid all taxes and
other governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply.  There
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.  The Company has not executed a waiver with
respect to the statute of limitations relating to the assessment or collection
of any foreign, federal, state or local tax.  Except as set forth on
Schedule 3(l), none of
the Company’s tax returns is presently being audited by any taxing
authority.

     

    m.    Certain
Transactions.  Except as set forth on Schedule 3(m) and except for
arm’s length transactions pursuant to which the Company or any of its
Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than the Company or any of its Subsidiaries could obtain from
third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.

     

    n.    Disclosure.  All
information relating to or concerning the Company or any of its Subsidiaries set
forth in this Agreement and provided to the Buyers pursuant to Section 2(d)
hereof and otherwise in connection with the transactions contemplated hereby is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading.  No event or circumstance has occurred or exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company’s reports filed under the 1934 Act
are being incorporated into an effective registration statement filed by the
Company under the 1933 Act).

     

    o.    Acknowledgment
Regarding Buyers’ Purchase of Securities.  The Company
acknowledges and agrees that the Buyers are acting solely in the capacity of
arm’s length purchasers with respect to this Agreement and the transactions
contemplated hereby.  The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any statement made by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to the Buyers’ purchase of the Securities.  The Company further
represents to each Buyer that the Company’s decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.

     

    
      
        
        

      

      
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    p.    No
Integrated Offering.  Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require registration under the
1933 Act of the issuance of the Securities to the Buyers.  The
issuance of the Securities to the Buyers will not be integrated with any other
issuance of the Company’s securities (past, current or future) for purposes of
any shareholder approval provisions applicable to the Company or its
securities.

     

    q.    No
Brokers.  Except as set forth in Schedule 3(q), the Company has
taken no action which would give rise to any claim by any person for brokerage
commissions, transaction fees or similar payments relating to this Agreement or
the transactions contemplated hereby.

     

    r.    Permits;
Compliance.  The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the “Company Permits”), and there
is no action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits.  Neither the
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.  Since
December 31, 2007, neither the Company nor any of its Subsidiaries has received
any notification with respect to possible conflicts, defaults or violations of
applicable laws, except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.

     

    s.    Environmental
Matters.

     

    (i)    Except
as set forth in Schedule
3(s), there are, to the Company’s knowledge, with respect to the Company
or any of its Subsidiaries or any predecessor of the Company, no past or present
violations of Environmental Laws (as defined below), releases of any material
into the environment, actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 or similar federal, state,
local or foreign laws and neither the Company nor any of its Subsidiaries has
received any notice with respect to any of the foregoing, nor is any action
pending or, to the Company’s knowledge, threatened in connection with any of the
foregoing.  The term “Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including,
without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants
contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved
thereunder.

     

    
      
        
        

      

      
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    (ii)    Other
than those that are or were stored, used or disposed of in compliance with
applicable law, no Hazardous Materials are contained on or about any real
property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company’s
or any of its Subsidiaries’ business.

     

    (iii)    Except
as set forth in Schedule
3(s), there are no underground storage tanks on or under any real
property owned, leased or used by the Company or any of its Subsidiaries that
are not in compliance with applicable law.

     

    t.    Title to
Property.  The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(t) or such as would
not have a Material Adverse Effect.  Any real property and facilities
held under lease by the Company and its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as would not have
a Material Adverse Effect.

     

    u.    Insurance.  The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged.  Neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse
Effect.  The Company has provided to Buyer true and correct copies of
all policies relating to directors’ and officers’ liability coverage, errors and
omissions coverage, and commercial general liability coverage.

     

    v.    Internal
Accounting Controls.  The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment of
the Company’s board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted
only in accordance with management’s general or specific authorization and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

     

     

    
      
        
        

      

      
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    w.    Foreign
Corrupt Practices.  Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended, or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.

     

    x.    Solvency.  The
Company (after giving effect to the transactions contemplated by this Agreement)
is solvent (i.e., its assets have
a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not, after giving effect to the transaction
contemplated by this Agreement, have the ability to, nor does it intend to take
any action that would impair its ability to, pay its debts from time to time
incurred in connection therewith as such debts mature.  The Company
did not receive a qualified opinion from its auditors with respect to its most
recent fiscal year end and, after giving effect to the transactions contemplated
by this Agreement, does not anticipate or know of any basis upon which its
auditors might issue a qualified opinion in respect of its current fiscal
year.

     

    y.    No
Investment Company.  The Company is not, and upon the issuance
and sale of the Securities as contemplated by this Agreement will not be an
“investment company” required to be registered under the Investment Company Act
of 1940 (an “Investment
Company”).  The Company is not controlled by an Investment
Company.

     

    z.    Breach of
Representations and Warranties by the Company.  If the Company
breaches any of the representations or warranties set forth in this Section 3,
and in addition to any other remedies available to the Buyers pursuant to this
Agreement, the Company shall pay to the Buyer the Standard Liquidated Damages
Amount in cash or in shares of Common Stock at the option of the Company, until
such breach is cured.  If the Company elects to pay the Standard
Liquidated Damages Amounts in shares of Common Stock, such shares shall be
issued at the Conversion Price at the time of payment.

     

    4.    COVENANTS.

     

    a.    Best
Efforts.  The parties shall use their best efforts to satisfy
timely each of the conditions described in Section 6 and 7 of this
Agreement.

     

    b.    Form D;
Blue Sky Laws.  The Company agrees to file a Form D, if
required, with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Buyer promptly after such filing.  The
Company shall, on or before the Closing Date,
take such action as the Company shall reasonably determine is necessary to
qualify the Securities for sale to the Buyers at the applicable closing pursuant
to this Agreement under applicable securities or “blue sky” laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to each Buyer on or prior to
the Closing Date.

     

     

    
      
        
        

      

      
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    c.    Reporting
Status; Eligibility to Use Form S-3, Form or Form S-1. The Company’s Common
Stock is registered under Section 12(g) of the 1934 Act. The Company represents
and warrants that, at the time of the filing of registration statement covering
the resale of the Conversion Shares and the Warrant Shares, it will meet the
requirements for the use of Form S-3 or Form S-1 for registration of the sale by
the Buyer of the Registrable Securities (as defined in the Registration Rights
Agreement).  So long as the Buyer beneficially owns any of the
Securities, the Company shall timely file all reports required to be filed with
the SEC pursuant to the 1934 Act, and the Company shall not terminate its status
as an issuer required to file reports under the 1934 Act even if the 1934 Act or
the rules and regulations thereunder would permit such
termination.  The Company further agrees to file all reports required
to be filed by the Company with the SEC in a timely manner so as to become
eligible, and thereafter to maintain its eligibility, if any, for the use of
Form S-3.  The Company shall issue a press release and file a Form 8-K
describing the material terms of the transaction contemplated hereby as soon as
practicable following the Closing Date but in no event more than four (4)
business days of the Closing Date, which press release shall be subject to prior
review by the Buyers.  The Company agrees that such press release
shall not disclose the name of the Buyers unless expressly consented to in
writing by the Buyers or unless required by applicable law or regulation, and
then only to the extent of such requirement.

     

    d.    Use of
Proceeds.  The Company shall use the proceeds from the sale of
the Notes and the Warrants in the manner set forth in Schedule 4(d) attached hereto
and made a part hereof and shall not, directly or indirectly, use such proceeds
for any loan to or investment in any other corporation, partnership, enterprise
or other person (except in connection with its currently existing direct or
indirect Subsidiaries)

     

     

     

     

     

    
      
        
        

      

      
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    e.    Future
Offerings.  Subject to the exceptions and first right of
refusal described below, the Company will not negotiate or contract with any
party to obtain additional equity financing (including debt financing with an
equity component) that involves (A) the issuance of Common Stock at a discount
to the market price of the Common Stock on the date of issuance (taking into
account the value of any warrants or options to acquire Common Stock issued in
connection therewith) or (B) the issuance of convertible securities that are
convertible into an indeterminate number of shares of Common Stock or (C) the
issuance of warrants during the period (the “Lock-up Period”) beginning on
the Closing Date and ending on the date the Registration Statement (as defined
in the Registration Rights Agreement) is declared effective.  In
addition, subject to the exceptions described below, the Company will not
conduct any equity financing (including debt with an equity component) (“Future Offerings”) during the
period beginning on the Closing Date and ending eighteen (18) months after the
end of the Lock-up Period unless it shall have first delivered to each Buyer, at
least twenty (20) business days prior to the closing of such Future Offering,
written notice describing the proposed Future Offering, including the terms and
conditions thereof and proposed definitive documentation to be entered into in
connection therewith, and providing each Buyer an option during the fifteen (15)
day
period following delivery of such notice to purchase its pro rata share (based
on the ratio that the aggregate principal amount of Notes purchased by it
hereunder bears to the aggregate principal amount of Notes purchased hereunder)
of the securities being offered in the Future Offering on the same terms as
contemplated by such Future Offering (the limitations referred to in this
section, including but not limited to Future Offering and the Lock-up
Period,  collectively as referred to as the “Capital Raising
Limitations”).   For purposes of this
Agreement, discussions relating to financing of the construction of studio
facilities with investment banks, commercial banks, investment groups,
development partners or individual investors shall not be considered engaging in
equity financing. Notwithstanding the above, Camelot Film Group, Inc. and
Camelot Studio Group, Inc., two of the Company’s wholly owned subsidiaries,
shall not be subject to the these Capital Raising Limitations as set forth
herein. Further, the Company may engage in Future Offering activities or support
such activities of Camelot Film Group, Inc. and Camelot Studio Group, Inc. upon
written notice to the Lenders if such Future Offering is specifically for the
purposes of construction of studio facilities and or film production. Such
financing shall not be subject to any right of first refusal if the Future
Offering is in excess of $10,000,000 regardless of whether such offering is an
underwritten public offering or private equity transaction. Similarly, efforts
made by the Company’s development, production and or studio partners to obtain
financing for the construction of studio facilities shall not be considered a
breach of this provision.  In the event the terms and conditions of a
proposed Future Offering are amended in any respect after delivery of the notice
to the Buyers concerning the proposed Future Offering, the Company shall deliver
a new notice to each Buyer describing the amended terms and conditions of the
proposed Future Offering and each Buyer thereafter shall have an option during
the fifteen (15) day period following delivery of such new notice to purchase
its pro rata share of the securities being offered on the same terms as
contemplated by such proposed Future Offering, as amended.  The
foregoing sentence shall apply to successive amendments to the terms and
conditions of any proposed Future Offering.  The Capital Raising
Limitations shall not apply to any transaction involving (i) issuances of
securities in a firm commitment underwritten public offering (excluding a
continuous offering pursuant to Rule 415 under the 1933 Act) or (ii) issuances
of securities as consideration for a merger, consolidation or purchase of
assets, or in connection with any strategic partnership or joint venture (the
primary purpose of which is not to raise equity capital), or in connection with
the disposition or acquisition of a business, product or license by the Company
(iii) any transaction involving Camelot Film Group, Inc and Camelot Studio
Group, Inc.  The Capital Raising Limitations also shall not apply to
the issuance of securities upon exercise or conversion of the Company’s options,
warrants or other convertible securities outstanding as of the date hereof or to
the grant of additional options or warrants, or the issuance of additional
securities, under any employment agreement, contracts; or to the issuance of
securities through a Company stock option or restricted stock plan approved by
the shareholders of the Company.

     

     

    
      
        
        

      

      
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    f.    Expenses.  At
the Closing, the Company shall reimburse Buyers for expenses incurred by them in
connection with the negotiation, preparation, execution, delivery and
performance of this Agreement and the other agreements to be executed in
connection herewith (“Documents”), including,
without limitation, reasonable attorneys’ and consultants’ fees and expenses,
transfer agent fees, fees for stock quotation services, fees relating to any
amendments or modifications of the Documents or any consents or waivers of
provisions in the Documents, fees for the preparation of opinions of counsel,
escrow fees, and costs of restructuring the transactions contemplated by the
Documents.  When possible, the Company must pay
these fees directly, otherwise the Company must make immediate payment for
reimbursement to the Buyers for all fees and expenses immediately upon written
notice by the Buyer or the submission of an invoice by the Buyer.
Notwithstanding anything herein to the contrary, the Company’s obligation to
reimburse Buyers’ expenses shall not exceed $10,000 in the
aggregate.

     

    g.    Financial
Information.  The Company agrees to send or make available the
following reports to each Buyer until such Buyer transfers, assigns, or sells
all of the Securities:  within ten (10) days after the filing with the SEC,
a copy of its Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and
any Current Reports on Form 8-K;  within one (1) day after release, copies
of all press releases issued by the Company or any of its Subsidiaries; and
 contemporaneously with the making available or giving to the shareholders
of the Company, copies of any notices or other information the Company makes
available or gives to such shareholders.

     

    h.    Authorization
and Reservation of Shares.  Subject to obtaining Stockholder
Approval (as defined in Section 4(l)), the Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the conversion or exercise of the
outstanding Notes and Warrants and issuance of the Conversion Shares and Warrant
Shares in connection therewith (based on the Conversion Price of the Notes or
Exercise Price of the Warrants in effect from time to time) and as otherwise
required by the Notes.  Except as a result of a reverse split of the
Common Stock, the Company shall not reduce the number of shares of Common Stock
reserved for issuance upon conversion of Notes and exercise of the Warrants
without the consent of each Buyer.  The Company shall at all times
maintain the number of shares of Common Stock so reserved for issuance at an
amount (“Reserved
Amount”) equal to the number that is then actually issuable upon
conversion of the Notes and Additional Notes and upon exercise of the Warrants
and the Additional Warrants (based on the Conversion Price of the Notes or the
Exercise Price of the Warrants in effect from time to time).  If at
any time the number of shares of Common Stock authorized and reserved for
issuance (“Authorized and
Reserved Shares”) is below the Reserved Amount, the Company will promptly
take all corporate action necessary to authorize and reserve a sufficient number
of shares, including, without limitation, calling a special meeting of
shareholders to authorize additional shares to meet the Company’s obligations
under this Section 4(h), in the case of an insufficient number of authorized
shares, obtain shareholder approval of an increase in such authorized number of
shares, and voting the management shares of the Company in favor of an increase
in the authorized shares of the Company to ensure that the number of authorized
shares is sufficient to meet the Reserved Amount.  If the Company
fails to obtain such shareholder approval within sixty (60) days following the
date on which the number of Reserved Amount exceeds the Authorized and Reserved
Shares, the Company shall pay to the Borrower the Standard Liquidated Damages
Amount (as defined in Section 2(f) above), in cash or in shares of Common Stock
at the option of the Buyer.  If the Buyer elects to be paid the
Standard Liquidated Damages Amount in shares of Common Stock, such shares shall
be issued at the Conversion Price at the time of payment.  In order to
ensure that the Company has authorized a sufficient amount of shares to meet the
Reserved Amount at all times, the Company must deliver to the Buyer at the end
of every quarter a list detailing (1) the current amount of shares authorized by
the Company and reserved for the Buyer; and (2) amount of shares issuable upon
conversion of the Notes and upon exercise of the Warrants and as payment
of
interest accrued on the Notes for one year.  If the Company fails to
provide such list within forty-five (45) business days of the end of each
quarter, the Company shall pay the Standard Liquidated Damages Amount, in cash
or in shares of Common Stock at the option of the Buyer, until the list is
delivered.  If the Buyer elects to be paid the Standard Liquidated
Damages Amount in shares of Common Stock, such shares shall be issued at the
Conversion Price at the time of payment.

     

     

    
      
        
        

      

      
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    i.    Listing.  If
not already listed, the Company shall promptly secure the listing of the
Conversion Shares and Shares underlying the Warrants upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance) and, so
long as any Buyer owns any of the Securities, shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion
Shares and Warrant Shares from time to time issuable upon conversion of the
Notes or exercise of the Warrants.  The Company will obtain and, so
long as any Buyer owns any of the Securities, maintain the listing and trading
of its Common Stock on the OTCBB or any equivalent replacement exchange, the
Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap
Market (“Nasdaq
SmallCap”), the New York Stock Exchange (“NYSE”), or the American Stock
Exchange (“AMEX”) and
will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Financial Industry Regulatory
Authority (“FINRA”) and
such exchanges, as applicable.  The Company shall promptly provide to
each Buyer copies of any notices it receives from the OTCBB and any other
exchanges or quotation systems on which the Common Stock is then listed
regarding the continued eligibility of the Common Stock for listing on such
exchanges and quotation systems.

     

    j.    Corporate
Existence.  So long as a Buyer beneficially owns any Notes or
Warrants, the Company shall maintain its corporate existence and shall not sell
all or substantially all of the Company’s assets, except in the event of a
merger or consolidation or sale of all or substantially all of the Company’s
assets, where the surviving or successor entity in such transaction (i) assumes
the Company’s obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded corporation
whose Common Stock is listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap,
NYSE or AMEX.

     

    k.    No
Integration.  The Company shall not make any offers or sales of
any security (other than the Securities) under circumstances that would require
registration of the Securities being offered or sold hereunder under the 1933
Act or cause the offering of the Securities to be integrated with any other
offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.

     

    l.    Stockholder
Approval.  The Company shall file a proxy or information
statement with the SEC no later than August 8, 2008 and use its best efforts to
obtain on or before, August 25, 2008, such approvals of the Company’s
stockholders as may be required to (i) issue all of the shares of Common Stock
issuable upon conversion or exercise of, or otherwise with respect to, the Notes
and the Warrants in accordance with Delaware law and any applicable rules or
regulations of the OTCBB and/or Nasdaq, either through a reverse stock split of
the common stock or an increase in authorized capital (collectively, the
“Stockholder Approval”).  The company can furnish to each buyer and
its legal counsel promptly (but in no event
less than two (2) business days) before the same is filed with the SEC, one copy
of the proxy or information statement and any amendment thereto, and shall
deliver to each buyer promptly each letter written by or on behalf of the
company to the SEC or the staff of the SEC, and each item of correspondence from
the SEC or the staff of the SEC, in each case relating to such proxy or
information statement. The company will promptly (but in no event more than
three (3) business days) use its best efforts to respond to any and all comments
received from the SEC (which comments shall be made available to each buyer).
The Company shall comply with the filing and disclosure requirements of Section
14 under the 1934 Act in connection with the Stockholder Approval.

     

     

    
      
        
        

      

      
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    m.    Breach of
Covenants.  If the Company
breaches any of the covenants set forth in this Section 4, and in addition to
any other remedies available to the Buyers pursuant to this Agreement, the
Company shall pay to the Buyers the Standard Liquidated Damages Amount, in cash
or in shares of Common Stock at the option of the Company, until such breach is
cured.  If the Company elects to pay the Standard Liquidated Damages
Amount in shares, such shares shall be issued at the Conversion Price at the
time of payment.

     

    n.    Trading
Activities.  Neither the
Buyers nor their affiliates has an open short position in the common stock of
the Company and the Buyers agree that they have not and shall not, and that they
will cause their affiliates not to, engage in any short sales, including, but
not limited to naked short sales, of or hedging transactions with respect to the
common stock of the Company nor will they request or cause their brokerage firms
to engage in any such activities.

     

    5.    TRANSFER
AGENT INSTRUCTIONS.  The Company shall issue irrevocable
instructions to its transfer agent to issue certificates, registered in the name
of each Buyer or its nominee, for the Conversion Shares and Warrant Shares in
such amounts as specified from time to time by each Buyer to the Company upon
conversion of the Notes or exercise of the Warrants in accordance with the terms
thereof (the “Irrevocable
Transfer Agent Instructions”).  Prior to registration of the
Conversion Shares and Warrant Shares under the 1933 Act or the date on which the
Conversion Shares and Warrant Shares may be sold pursuant to Rule 144 without
any restriction as to the number of Securities as of a particular date that can
then be immediately sold, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement.  The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares and
Warrant Shares, prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately sold), will
be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights
Agreement.  Nothing in this Section shall affect in any way the
Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply
with all applicable prospectus delivery requirements, if any, upon re-sale of
the Securities.  If a Buyer provides the Company, at the cost of the
Company, with (i) an opinion of counsel in form, substance and scope customary
for opinions in comparable transactions, to the effect
that a public sale or transfer of such Securities may be made without
registration under the 1933 Act and such sale or transfer is effected or (ii)
the Buyer provides reasonable assurances that the Securities can be sold
pursuant to Rule 144, the Company shall permit the transfer, and, in the case of
the Conversion Shares and Warrant Shares, promptly instruct its transfer agent
to issue one or more certificates, free from restrictive legend, in such name
and in such denominations as specified by such Buyer.  The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers, by vitiating the intent and purpose of the
transactions contemplated hereby.  Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5 may be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section, that the Buyers shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate transfer, without the necessity
of showing economic loss and without any bond or other security being
required.

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    6.    CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.  The obligation of the
Company hereunder to issue and sell the Notes and Warrants to a Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date of each of
the following conditions thereto, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion:

     

    a.    The
applicable Buyer shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to the Company.

     

    b.    The
applicable Buyer shall have delivered the Purchase Price in accordance with
Section 1(b) above.

     

    c.    The
representations and warranties of the applicable Buyer shall be true and correct
in all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date), and the applicable Buyer shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the applicable Buyer at or prior to the Closing Date.

     

    d.    No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

     

    7.    CONDITIONS
TO EACH BUYER’S OBLIGATION TO PURCHASE.  The obligation of each
Buyer hereunder to purchase the Notes and Warrants at the Closing is subject to
the satisfaction, at or before the Closing Date of each of the following
conditions, provided that these conditions are for such Buyer’s sole benefit and
may be waived by such Buyer at any time in its sole discretion:

     

    a.    The
Company shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to the Buyer.

     


    
      
         


      

      
        19

        
          

        

      

      
         


      

    


    b.    The
Company shall have delivered to such Buyer duly executed Notes (in such
denominations as the Buyer shall request) and Warrants in accordance with
Section 1(b) above.

     

    c.    The
Irrevocable Transfer Agent Instructions, in form and substance satisfactory to a
majority-in-interest of the Buyers, shall have been delivered to and
acknowledged in writing by the Company’s Transfer Agent.

     

    d.    The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at such time (except for representations and warranties that speak as of a
specific date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date.  The Buyer shall have received a
certificate or certificates, executed by the chief executive officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by such Buyer including, but not
limited to certificates with respect to the Company’s Certificate of
Incorporation, By-laws and Board of Directors’ resolutions relating to the
transactions contemplated hereby.

     

    e.    No
litigation, statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by or in
any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.

     

    f.    No
event shall have occurred which could reasonably be expected to have a Material
Adverse Effect on the Company.

     

    g.    The
Conversion Shares and Shares underlying the Warrants shall have been authorized
for quotation on the OTCBB and trading in the Common Stock on the OTCBB shall
not have been suspended by the SEC or the OTCBB.

     

    h.    The
Buyer shall have received an opinion of the Company’s counsel, dated as of the
Closing Date, in form, scope and substance reasonably satisfactory to the Buyer
and in substantially the same form as Exhibit “D” attached
hereto.

     

    i.    The
Buyer shall have received an officer’s certificate described in Section 3(c)
above, dated as of the Closing Date.

     

    8.    GOVERNING
LAW; MISCELLANEOUS.

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    a.    Governing
Law.  THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS.  THE PARTIES HERETO HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS
LOCATED
IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT,
THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR
PROCEEDING.  BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A
PARTY MAILED BY FIRST CLASS MAIL CERTIFIED RETURN RECEIPT REQUESTED SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH
SUIT OR PROCEEDING.  NOTHING HEREIN SHALL AFFECT EITHER PARTY’S RIGHT
TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.  BOTH PARTIES
AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL
BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH
JUDGMENT OR IN ANY OTHER LAWFUL MANNER.  THE PARTY WHICH DOES NOT
PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL
FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY
IN CONNECTION WITH SUCH DISPUTE.

     

    b.    Counterparts;
Signatures by Facsimile.  This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party.  This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

     

    c.    Headings.  The
headings of this Agreement are for convenience of reference only and shall not
form part of, or affect the interpretation of, this Agreement.

     

    d.    Severability.  In
the event that any provision of this Agreement is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law.  Any provision
hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.

     

    e.    Entire
Agreement; Amendments.  This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters.  No
provision of this Agreement may be waived or amended other than by an instrument
in writing signed by the majority in interest of the Buyers.

     

    f.    Notices.  Any
notices required or permitted to be given under the terms of this Agreement
shall be sent by certified or registered mail (return receipt requested) or
delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed in
the mail, if mailed by regular United States mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a
party.  The addresses for such communications shall be:

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    If to the
Company:

    


    Camelot
Entertainment Group, Inc.

    130
Vantis, Suite 140

    Aliso
Viejo, CA 92656

    Attention:
Chief Executive Officer

    Telephone:
(949) 334-2950

    Facsimile:  (949)
334-2951

    


    With a
copy to:

     

    Astor
Weiss Kaplan & Mandel, LLP

    The
Bellevue, 6th Floor

    200 South
Broad Street

    Philadelphia,
PA  19102

    Attention:
Christopher P. Flannery

    Telephone:
(215) 893-4594

    Facsimile:  (215)
400-2222

    


    


    If to a
Buyer:  To the address set forth immediately below such Buyer’s name
on the signature pages hereto.

     

    With copy
to:

    


    Ballard
Spahr Andrews & Ingersoll, LLP

    1735
Market Street

    51st
Floor

    Philadelphia,
Pennsylvania  19103

    Attention:  Gerald
J. Guarcini, Esq.

    Telephone:  215-864-8625

    Facsimile:   215-864-8999


     

    Each
party shall provide notice to the other party of any change in
address.

     

    g.    Successors
and Assigns.  This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and assigns.  Neither
the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the
other.  Notwithstanding the foregoing, subject to Section 2(f),
any Buyer may assign its rights hereunder to any person that purchases
Securities in a private transaction from a Buyer or to any of its “affiliates,”
as that term is defined under the 1934 Act, without the consent of the
Company.

     

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    h.   Third
Party Beneficiaries.  This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

     

    i.    Survival.  The
representations and warranties of the Company and the agreements and covenants
set forth in Sections 3, 4, 5 and 8 shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or on behalf of the
Buyers.  Both parties agree to indemnify and hold harmless the other
party and all their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach by either
party of any of its representations, warranties and covenants set forth in
Sections 3 and 4 hereof or any of its covenants and obligations under this
Agreement or the Registration Rights Agreement, including advancement of
expenses as they are incurred.

     

    j.    Publicity.  The
Company, and each of the Buyers shall have the right to review a reasonable
period of time before issuance of any press releases, SEC, OTCBB or FINRA
filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of each of the Buyers, to
make any press release or SEC, OTCBB (or other applicable trading market) or
FINRA filings with respect to such transactions as is required by applicable law
and regulations (although each of the Buyers shall be consulted by the Company
in connection with any such press release prior to its release and shall be
provided with a copy thereof and be given an opportunity to comment
thereon).

     

    k.   Further
Assurances.  Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

     

    l.    No Strict
Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any
party.

     

    m.   Remedies.  Both
parties acknowledge that a breach by it of its obligations hereunder will cause
irreparable harm to the other party by vitiating the intent and purpose of the
transaction contemplated hereby.  Accordingly, the parties
acknowledges that the remedy at law for a breach of its obligations under this
Agreement will be inadequate and agrees, in the event of a breach or threatened
breach by the party of the provisions of this Agreement, that the Buyers shall
be entitled, in addition to all other available remedies at law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Agreement and
to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being
required.

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

     

     

     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, the
undersigned Buyers and the Company have caused this Agreement to be duly
executed as of the date first above written.

     

    


    CAMELOT
ENTERTAINMENT GROUP, INC.

     

    
      
        	 	 	 	 	 
	
                /s/ 
      Robert P. Atwell

              	 	 	
                 

              	 
	
                Robert
      P. Atwell

              	 	 	
                 

              	 
	
                Chief
      Executive Officer

              	 	 	
                 

              	 


      



    


    NEW
MILLENNIUM CAPITAL PARTNERS II, LLC

    By:  First
Street Manager II, LLP

     

    
      	 	 	 	 	 
	
              /s/ 
      Corey S. Ribotsky

            	 	 	
               

            	 
	
              Corey
      S. Ribotsky

            	 	 	
               

            	 
	
              Manager

            	 	 	
               

            	 


    

     

    
    

    


    
      	
              RESIDENCE: 

            	
              New
      York

            


    

     

    
      	
              ADDRESS: 

            	
              1044
      Northern Boulevard

              Suite
      302

              Roslyn,
      New York 11576

              Facsimile: (516)
      739-7115

              Telephone: (516)
      739-7110

            


    

    
AGGREGATE
SUBSCRIPTION AMOUNT:

    
    

     

    
      	Aggregate Principal
      Amount of Notes:	
               $50,000

            
	Number of
      Warrants:  	
               20,000,000

            
	Aggregate Purchase
      Price:  	
                $50,000

            


    

     

     

    
      
         


      

      
        24

        
          

        

      

      
         


      

    


    SCHEDULE
3(A)

     

    SUBSIDIARIES
OF THE COMPANY

     

     

    


     

    
      	 Camelot Film
      Group, Inc.  	
              (1)

            	 NV
	 Camelot Studio
      Group, Inc.      	
              (2)

            	 NV
	 Camelot
      Production Services Group, Inc.     	
               

            	 NV
	 Camelot
      Development Group, LLC.  	
              (3)

            	 NV
	 Camelot
      Distribution Group, Inc.     	
              (4)

            	
               NV

            
	 Camelot
      Features, Inc.   	
              (5)

            	 NV
	 Camelot Films,
      Inc.  	
              (6)

            	 CA, DE,
      NV
	 Camelot
      Technologies, Inc.      	 	 NV
	 Capital Arts
      Enterprises, Inc.    	
              (7)

            	 CA
	 Capital Arts
      International, Inc.   	
              (8)

            	 CA
	 Dstage.com,
      Inc.       	 	 DE
	 Ferris Wheel
      Films, Inc.      	
              (9)

            	 CA,
    NV
	 Latin Ladies,
      LLC.     	
              (10)

            	 NV
	 Pioneer
      Entertainment, LLC.     	
              (11)

            	 NV
	 Camelot Urban
      Entertainment, Inc. 	
              (12)

            	 NV


    

     

    
      
Notes:

    

    


    (1)           Exempt from this
Agreement

    (2)           Exempt from this
Agreement

    (3)           A
subsidiary of Camelot Studio Group

    (4)           A
subsidiary of Camelot Film Group

    (5)           A
subsidiary of Camelot Film Group

    (6)           A
subsidiary of Camelot Film Group

    (7)           A
subsidiary of Camelot Film Group

    (8)           A
subsidiary of Camelot Film Group

    (9)           A
subsidiary of Camelot Film Group

    (10)         A
subsidiary of Camelot Film Group

    (11)         A
subsidiary of Camelot Film Group

    (12)         A
subsidiary of Camelot Film Group

    



    
      
         


      

      
        S-1

        
          

        

      

      
         


      

    


    SCHEDULE
3(C)

    


    OUTSTANDING
STOCK, OPTIONS, WARRANTS, SCRIP, RIGHTS TO SUBSCRIBE FOR, PUTS, CALLS, RIGHTS OF
FIRST REFUSAL, AGREEMENTS, UNDERSTANDINGS, CLAIMS OR OTHER COMMITMENTS OR
RIGHTS

    


    The
following agreements include provisions for stock, options, warrants,
etc.:

    


    Consulting
agreement with The Corporate Solution, Inc.  (Wholly owned by Camelot
Chairman Robert P. Atwell).

    Consulting
agreement with Eagle Consulting Group, Inc.  (Wholly owned by Camelot
Chairman Robert P. Atwell).

    Consulting
agreements with The Atwell Group, Inc.  (Wholly owned by Camelot
Chairman Robert P. Atwell) (exact amounts TBD).

    Employment
Agreements with Robert P. Atwell CEO and George Jackson CFO (exact amount
TBD).

    Scorpion
Bay, LLC, a California Limited Liability Company, 500,000 options on same terms
and conditions as Management, other transactions (exact amount
TBD).

    Bastien
and Associates (Studio Architects), Stock and Option Agreement (exact amount
TBD)

    Studio
Project Stock and Option Agreements (exact amount TBD).

    Capital
Arts Entertainment Pending Acquisition (exact amount TBD).

    Capital
Arts Entertainment Consulting Agreement (exact amount TBD)

    Legal
fees and expenses including stock and option agreements (exact amount
TBD).

    Employee
Stock Option Program, Management and employee options (exact amount
TBD).

    Barnholtz
Entertainment Pending Acquisition (exact amount TBD)

    Camelot
Film Group Financing Package (exact amount TBD)

    Camelot
Studio Group Financing Package (exact amount TBD)

    N.I.R.
Agreements (exact amount TBD)

    Warner
Artist Management (exact amount TBD)

    Camelot
Development Group (exact amount TBD)

    Camelot
Development Tustin (exact amount TBD)

    JIT Stock
Purchase Agreement (exact amount TBD)

    Brown
Stock Agreement (exact amount TBD)

    Petrucelli
Stock Agreement (exact amount TBD)

    Camelot
Entertainment Group Financing Package (exact amount TBD)

    Camelot
Film Group Property Acquisitions (including scripts and other material, rights,
etc.) (exact amount TBD)

    Camelot
Studio Group Property and Rights Acquisitions (including land, buildings and
equipment, etc.) (exact amount TBD)

    Camelot
Production Services Group Service Agreements (exact amount TBD)

    


    


    



    
      
         


      

      
        S-2

        
          

        

      

      
         


      

    


    SCHEDULE
3(F)

    


    CONSENTS,
AUTHORIZATIONS, ORDERS, FILINGS AND REGISTRATIONS

    


    All
filings current with SEC.

    


     

    No
additional registration statements filed at this time.

    


    Previous
filings include SB2 and S8 registrations.

     

     

     

     

     

     


    
      
         


      

      
        S-3

        
          

        

      

      
         


      

    


    SCHEDULE
3(G)

    


    SEC
FILINGS NOT FILED

    


    


    None, all
filings up to date.

    


     

     

     

     

    
 


    
      
         


      

      
        S-4

        
          

        

      

      
         


      

    


    SECTION
3(H)

    


    


    Absence
of Certain Changes

    


    


    In
accordance with the agreements being entered into between the parties, the
Company will be refocusing its efforts on shorter term, revenue generating
activities while still implementing its overall business plan.

     

     

     


    
      
         


      

      
        S-5

        
          

        

      

      
         


      

    


    SCHEDULE
3(I)

    


    PROCEEDINGS
HAVING A MATERIAL ADVERSE EFFECT

    


     

    None

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        S-6

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
3(J)

    


    SUITS
AGAINST INTELLECTUAL PROPERTY

    


    


    None

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        S-7

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
3(L)

    


    TAXES
NOT FILED/BEING AUDITED

    


    


    Tax
filings in progress for federal and state (no income taxes owed)

     

     

     

     

     

     

     


    
      
         


      

      
        S-8

        
          

        

      

      
         


      

    


    SCHEDULE
3(M)

    


    TRANSACTIONS
IN WHICH AN OFFICER OR DIRECTOR IS A PARTY

    


     

    Mr.
Robert P. Atwell, Chairman and CEO of Camelot owns Eagle Consulting Group, Inc.,
The Corporate Solution, Inc., The Atwell Group, Inc., all of which have provided
funding and / or consulting services to Camelot and its subsidiaries. Mr. Atwell
and/or the above entities provided collateral and guarantees in connection with
the Scorpion Bay LLC and other transactions.

    


     

     

     

    
 

    



    
      
         


      

      
        S-9

        
          

        

      

      
         


      

    


    SCHEDULE
3(Q)

    


    ACTIONS
GIVING RISE TO BROKERAGE FEES/COMMISSIONS

    


     

    None

     

     

     

    
 

    
      
         


      

      
        S-10

        
          

        

      

      
         


      

    


    SCHEDULE
3(S)

    


    PAST/PRESENT
VIOLATIONS OF ENVIRONMENTAL LAWS

    


     

    None

     

     

     

     

     


    
      
         


      

      
        S-11

        
          

        

      

      
         


      

    


    SCHEDULE
3(T)

    


    ENCUMBERANCES
TO REAL PROPERTY

    


     

    Camelot
Trademark (Robert P. Atwell)

    


    Certain
scripts and film properties have shared rights (various)

     

     

     


    
      
         


      

      
        S-12

        
          

        

      

      
         


      

    


    SCHEDULE
4(D)

    


    USE
OF PROCEEDS

    


     

    
    

     

    
      	 Audit
      Fees	 	$	21,000	 
	 Insurance  	 	$	5,295	 
	 Legal           	 	$	13,395	 
	 Operations   	 	$	71,870	 
	 PR                 	 	$	20,000	 
	 Staff           	 	$	6,000	 
	 Debt          	 	$	12,440	 
	 Document
      Fees 	 	$	10,000	 
	 	 	 	 	 
	 Total:  	 	$	160,000	 


    

     

    
 


    
      
         


      

      
        S-13

        
          

        

      

      
         


      

    


    SCHEDULE
4(E)

    


     

    Future
Offerings

    


    Camelot
Entertainment Group S-1 or similar (exact amount TBD)

    Camelot
Film Group (exact amount TBD)

    Camelot
Studio Group (exact amount TBD)

    


    Stock/Options/Warrants
issued in connection with agreements listed on Schedule 3(c)

     

     

     

     

     

     

     

     

     

     

     

     

    S-14