exhibit_4-3.htm


    
      

    

     

    
      THIS
WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGIS­TERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  EXCEPT
AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE AGREEMENT DATED AS OF
JULY 31, 2008, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRA­TION
STATEMENT FOR SUCH 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 SUCH ACT OR UNLESS SOLD
PURSUANT TO RULE 144 OR REGULATION S UNDER SUCH ACT.

       

      Right to
Purchase 20,000,000 Shares of Common Stock, par value $.001 per
share

       

      STOCK
PURCHASE WARRANT

       

      THIS CERTIFIES THAT, for value
received, New Millennium Capital Partners II, LLC or its registered assigns, is
entitled to purchase from Camelot Entertainment Group
Inc., a Delaware Corporation (the “Company”), at any time or from
time to time during the period specified in Paragraph 2 hereof, 20,000,000
fully paid and nonassessable shares of the Company’s Common Stock, par value
$.001 per share (the “Common
Stock”), at an exercise price per share equal to $.01 (the “Exercise
Price”).  The term “Warrant Shares,” as used herein, refers to
the shares of Common Stock purchasable hereunder.  The Warrant Shares
and the Exercise Price are subject to adjustment as provided in Paragraph 4
hereof.  The term “Warrants” means this Warrant and the other warrants
issued pursuant to that certain Securities Purchase Agreement, dated July 31,
2008, by and among the Company and the Buyers listed on the execution page
thereof (the “Securities
Purchase Agreement”).

       

      This
Warrant is subject to the following terms, provisions, and
conditions:

       

      1.    Manner of Exercise; Issuance
of Certificates; Payment for Shares.

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      
        Subject
to the provisions hereof, this Warrant may be exercised by the holder hereof, in
whole or in part, by the surrender of this Warrant, together with a completed
exercise agreement in the form attached hereto (the “Exercise Agreement”), to the
Company during normal business hours on any business day at the Company’s
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), and upon (i) payment to the
Company in cash, by certified or offi­cial bank check or by wire transfer
for the account of the Company of the Exercise Price for the Warrant Shares
specified in the Exercise Agreement or (ii) delivery to the Company of a written
notice of an election to effect a “Cashless Exercise” (as defined in Section
10(c) below) for the Warrant Shares specified in the Exercise
Agreement.  The Warrant Shares so purchased shall be deemed to be
issued to the holder hereof or such holder’s designee, as the record owner of
such shares, as of the close of business on the date on which this Warrant shall
have been surrendered, the completed Exercise Agreement shall have been
deliv­ered, and payment shall have been made for such shares as set forth
above.  Certifi­cates for the Warrant Shares so purchased,
representing the aggregate number of shares specified in the Exercise Agreement,
shall be delivered to the holder hereof within a reasonable time, not exceeding
five (5) business days, after this Warrant shall have been so
exercised.  The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder.  If this Warrant shall have been exercised only in part, then,
unless this Warrant has expired, the Company shall, at its expense, at the time
of delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this Warrant shall not
then have been exercised.  In addition to all other available remedies
at law or in equity, if the Company fails to deliver certificates for the
Warrant Shares within five (5) business days after this Warrant is exercised,
then the Company shall pay to the holder in cash a penalty (the “Penalty”) equal
to 2% of the number of Warrant Shares that the holder is entitled to multiplied
by the Market Price (as hereinafter defined) for each day that the Company fails
to deliver certificates for the Warrant Shares.  For example, if the
holder is entitled to 100,000 Warrant Shares and the Market Price is $2.00, then
the Company shall pay to the holder $4,000 for each day that the Company fails
to deliver certificates for the Warrant Shares.  The Penalty shall be
paid to the holder by the fifth day of the month following the month in which it
has accrued.

      

       

      Notwithstanding
anything in this Warrant to the contrary, in no event shall the holder of this
Warrant be entitled to exercise a number of Warrants (or portions thereof) in
excess of the number of Warrants (or portions thereof) upon exercise of which
the sum of (i) the number of shares of Common Stock beneficially owned by the
holder and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised Warrants and the
unexercised or unconverted portion of any other securities of the Company
(including the Notes (as defined in the Securities Purchase Agreement)) subject
to a limitation on conversion or exercise analogous to the limitation contained
herein) and (ii) the number of shares of Common Stock issuable upon exercise of
the Warrants (or portions thereof) with respect to which the determination
described herein is being made, would result in beneficial ownership by the
holder and its affiliates of more than 4.9% of the outstanding shares of Common
Stock.  For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (i) of the preceding
sentence.  Notwithstanding anything to the contrary contained herein,
the limitation on exercise of this Warrant set forth herein may not be amended
without (i) the written consent of the holder hereof and the Company and (ii)
the approval of a majority of shareholders of the Company.

       

      2.    Period of
Exercise.

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      This
Warrant is exercisable at any time or from time to time on or after the date on
which this Warrant is issued and delivered pursuant to the terms of the
Securities Purchase Agreement and before 6:00 p.m., New York, New York time on
the seventh (7th)
anniversary of the date of issuance (the “Exercise
Period”).

       

      3.    Certain Agreements of the
Company.

       

      
        The
Company hereby covenants and agrees as follows:

      

       

      (a)           Shares to
be Fully Paid.  All Warrant
Shares will, upon issuance in accordance with the terms of this Warrant, be
validly issued, fully paid, and nonassessable and free from all taxes, liens,
and charges with respect to the issue thereof.

       

      (b)           Reservation
of Shares.  During the
Exercise Period, the Company shall at all times have authorized, and reserved
for the purpose of issuance upon exercise of this Warrant, a suf­ficient
number of shares of Common Stock to provide for the exercise of this
Warrant.

       

      (c)           Listing.  The Company shall
promptly secure the listing of the shares of Common Stock issuable upon exercise
of the Warrant 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 upon exercise of this Warrant) and shall maintain,
so long as any other shares of Common Stock shall be so listed, such listing of
all shares of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national securities exchange or
automated quotation system, as the case may be, and shall maintain such listing
of, any other shares of capital stock of the Company issuable upon the exercise
of this Warrant if and so long as any shares of the same class shall be listed
on such national securities exchange or automated quotation system.

       

      (d)           Certain
Actions Prohibited.  The Company will
not, by amendment of its charter or through any re­organi­zation,
transfer of assets, consolidation, mer­ger, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed by it hereunder,
but will at all times in good faith assist in the carrying out of all the
provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against dilu­tion or other
impairment, consistent with the tenor and purpose of this
Warrant.  Without limiting the general­ity of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this
Warrant.

       

      (e)           Successors
and Assigns.  This Warrant will
be binding upon any entity succeeding to the Company by merger, consolidation,
or acquisition of all or sub­stantially all the Company’s
assets.


      4.           Antidilution Provisions.

       

      During
the Exercise Period, the Exercise Price and the number of Warrant Shares shall
be subject to adjustment from time to time as provided in this Paragraph
4.

       

       

      
        
          
          

        

        
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      In the
event that any adjustment of the Exercise Price as required herein results in a
fraction of a cent, such Exercise Price shall be rounded up to the nearest
cent.

       

      (a)           Adjustment
of Exercise Price and Number of Shares upon Issuance of Common Stock.  Except as
otherwise provided in Paragraphs 4(c) and 4(e) hereof, if and whenever on or
after the date of issuance of this Warrant, the Company issues or sells, or in
accordance with Paragraph 4(b) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Market Price on
the date of issuance (a “Dilutive Issuance”), then immediately upon the Dilutive
Issuance, the Exercise Price will be reduced to a price determined by
multiplying the Exercise Price in effect immediately prior to the Dilutive
Issuance by a fraction, (i) the numerator of which is an amount equal to the sum
of (x) the number of shares of Common Stock actually outstanding immediately
prior to the Dilutive Issuance, plus (y) the quotient of the aggregate
consideration, calculated as set forth in Paragraph 4(b) hereof, received by the
Company upon such Dilutive Issuance divided by the Market Price in effect
immediately prior to the Dilutive Issuance, and (ii) the denominator of which is
the total number of shares of Common Stock Deemed Outstanding (as defined below)
immediately after the Dilutive Issuance.

       

      (b)           Effect on
Exercise Price of Certain Events.  For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:

       

      (i)           Issuance
of Rights or Options.  If the Company in
any manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock (“Convertible
Securities”) (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as “Options”) and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or grant of
such Options, be deemed to be outstanding and to have been issued and sold by
the Company for such price per share.  For purposes of the preceding
sentence, the “price per share for which Common Stock is issuable upon the
exercise of such Options” is determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the issuance or
granting of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all such
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if
applicable).  No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon the
exercise of such Options or upon the conversion or exchange of Convertible
Securities issuable upon exercise of such Options.

       

       

      
        
          
          

        

        
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      (ii)           Issuance
of Convertible Securities.  If the Company in
any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Market Price on the date of
issuance, then the maximum total number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities will, as of the
date of the issuance of such Convertible Securities, be deemed to be outstanding
and to have been issued and sold by the Company for such price per
share.  For the purposes of the preceding sentence, the “price per
share for which Common Stock is issuable upon such conversion or exchange” is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii)
the maximum total number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities.  No further adjustment
to the Exercise Price will be made upon the actual issuance of such Common Stock
upon conversion or exchange of such Convertible Securities.

       

      (iii)           Change in
Option Price or Conversion Rate.  If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.

       

      (iv)           Treatment
of Expired Options and Unexercised Convertible Securities.  If, in any case,
the total number of shares of Common Stock issuable upon exercise of any Option
or upon conversion or exchange of any Convertible Securities is not, in fact,
issued and the rights to exercise such Option or to convert or exchange such
Convertible Securities shall have expired or terminated, the Exercise Price then
in effect will be readjusted to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been
issued.

       

      (v)           Calculation
of Consideration Received.  If any Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or
sale.  In case any Common Stock, Options or Convertible Securities are
issued or sold for a consideration
part or all of which shall be other than cash, the amount of the consideration
other than cash received by the Company will be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Company will be the Market
Price thereof as of the date of receipt.  In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving corporation as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be.  The fair value of any consideration other than cash or
securities will be determined in good faith by the Board of Directors of the
Company.

       

      
        
          
          

        

        
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      (vi)           Exceptions
to Adjustment of Exercise Price.  No adjustment to
the Exercise Price will be made (i) upon the exercise of any warrants, options
or convertible securities granted, issued and outstanding on the date of
issuance of this Warrant; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit
plan, stock option plan or restricted stock plan of the Company now existing or
to be implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the independent members of the Board of
Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose; or (iii) upon the exercise
of the Warrants.

       

      (c)           Subdivision
or Combination of Common Stock.  If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced.  If the
Company at any time combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after the date of
record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased.

       

      (d)           Adjustment
in Number of Shares.  Upon each
adjustment of the Exercise Price pursuant to the provisions of this Paragraph 4,
the number of shares of Common Stock issuable upon exercise of this Warrant
shall be adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.

       

      (e)           Consolidation,
Merger or Sale.  In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger or
sale or conveyance, adequate provision will be made whereby the holder of this
Warrant will have the right to acquire and receive upon exercise of this Warrant
in lieu of the shares of Common Stock immediately theretofore acquirable upon
the exercise of this Warrant, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon
exercise of this Warrant had such consolidation, merger or sale or conveyance
not taken place.  In any such case, the Company will make appropriate
provision to insure that the provisions of this Paragraph 4 hereof will
thereafter be applicable as nearly as may be in relation to any shares of stock
or securities thereafter deliverable upon the exercise of this
Warrant.  The Company will not effect any consolidation, merger or
sale or conveyance unless prior to the consummation thereof, the successor
corporation (if other than the Company) assumes by written instrument the
obligations under this Paragraph 4 and the obligations to deliver to the holder
of this Warrant such shares of stock, securities or assets as, in accordance
with the foregoing provisions, the holder may be entitled to
acquire.

       

       

      
        
          
          

        

        
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      (f)           Distribution
of Assets.  In case the
Company shall declare or make any distribution of its assets (including cash) to
holders of Common Stock as a partial liquidating dividend, by way of return of
capital or otherwise, then, after the date of record for determining
shareholders entitled to such distribution, but prior to the date of
distribution, the holder of this Warrant shall be entitled upon exercise of this
Warrant for the purchase of any or all of the shares of Common Stock subject
hereto, to receive the amount of such assets which would have been payable to
the holder had such holder been the holder of such shares of Common Stock on the
record date for the determination of shareholders entitled to such
distribution.

       

      (g)           Notice of
Adjustment.  Upon the
occurrence of any event which requires any adjustment of the Exercise Price,
then, and in each such case, the Company shall give notice thereof to the holder
of this Warrant, which notice shall state the Exercise Price resulting from such
adjustment and the increase or decrease in the number of Warrant Shares
purchasable at such price upon exercise, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is
based.  Such calculation shall be certified by the Chief Financial
Officer of the Company.

       

      (h)           Minimum
Adjustment of Exercise Price.  No adjustment of
the Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.

       

      (i)           No
Fractional Shares.  No fractional
shares of Common Stock are to be issued upon the exercise of this Warrant, but
the Company shall pay a cash adjustment in respect of any fractional share which
would otherwise be issuable in an amount equal to the same fraction of the
Market Price of a share of Common Stock on the date of such
exercise.

       

      (j)           Other
Notices.  In case at any
time:

       

      (i)           the
Company shall declare any dividend upon the Common Stock payable in shares of
stock of any class or make any other distribution (including dividends or
distributions payable in cash out of retained earnings) to the holders of the
Common Stock;

       

      (ii)          the
Company shall offer for subscription pro rata to the holders of the Common Stock
any additional shares of stock of any class or other rights;


      (iii)         there
shall be any capital reorganiza­tion of the Company, or reclassification of
the Common Stock, or consolidation or merger of the Company with or into, or
sale of all or substan­tially all its assets to, another corporation or
entity; or

       

      
        
          
          

        

        
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      (iv)          there
shall be a voluntary or involun­tary dissolution, liquidation or winding up
of the Company; then, in each such case, the Company shall give to the holder of
this Warrant (a) notice of the date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such divi­dend, distribution, or subscription rights
or for determining the holders of Common Stock entitled to vote in respect of
any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable approximation thereof by the Company) when the same shall take
place.  Such notice shall also specify the date on which the holders
of Common Stock shall be entitled to receive such dividend, distribution, or
subscription rights or to exchange their Common Stock for stock or other
securities or property deliverable upon such reorganization,
re­classification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be.  Such notice shall be given at least
30 days prior to the record date or the date on which the Company’s books are
closed in respect thereto.  Failure to give any such notice or any
defect therein shall not affect the validity of the proceedings referred to in
clauses (i), (ii), (iii) and (iv) above.

       

      (k)           Certain
Events.  If any event
occurs of the type contemplated by the adjustment provisions of this Paragraph 4
but not expressly provided for by such provisions, the Company will give notice
of such event as provided in Paragraph 4(g) hereof, and the Company’s Board of
Directors will make an appropriate adjustment in the Exercise Price and the
number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.

       

      (l)           Certain
Definitions.

       

      (i)           “Common
Stock Deemed Outstanding” shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.

       

      (ii)          “Market
Price,” as of any
date, (i) means the average of the last reported sale prices for the shares of
Common Stock on the OTCBB for the five (5) Trading Days immediately preceding
such date as reported by Bloomberg, or (ii) if the OTCBB is not the principal
trading market for the shares of Common Stock, the average of the last reported
sale prices on the principal trading market for the Common Stock during the same
period as reported by Bloomberg, or (iii) if market value cannot be calculated
as of such date on any of the foregoing bases, the Market Price shall be the
fair market value as reasonably determined in good faith by (a) the Board of
Directors of the Company or, at the option of a majority-in-interest of the
holders of the outstanding Warrants by (b) an independent investment bank of
nationally recognized
standing in the valuation of businesses similar to the business of the
corporation. The manner of determining the Market Price of the Common Stock set
forth in the foregoing definition shall apply with respect to any other security
in respect of which a determination as to market value must be made
hereunder.

       

       

      
        
          
          

        

        
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      (iii)        “Common
Stock,” for
purposes of this Paragraph 4, includes the Common Stock, par value $.001 per
share, and any additional class of stock of the Company having no preference as
to dividends or distributions on liquidation, provided that the shares
purchasable pursuant to this Warrant shall include only shares of Common Stock,
par value $.001 per share, in respect of which this Warrant is exercisable, or
shares resulting from any subdivision or combination of such Common Stock, or in
the case of any reorganization, reclassification, consolidation, merger, or sale
of the character referred to in Paragraph 4(e) hereof, the stock or other
securities or property provided for in such Paragraph.

       

      5.    Issue
Tax.

       

      
        The
issuance of certificates for Warrant Shares upon the exercise of this Warrant
shall be made without charge to the holder of this Warrant or such shares for
any issuance tax or other costs in respect thereof, provided that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than the holder of this Warrant.

      

       

      6.    No Rights or Liabilities as
a Shareholder.

       

      
        This
Warrant shall not entitle the holder hereof to any voting rights or other rights
as a shareholder of the Company.  No provision of this Warrant, in the
absence of affirmative action by the holder hereof to purchase Warrant Shares,
and no mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder for the Exercise Price or as a
shareholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.

      

       

      7.    Transfer, Exchange, and
Replacement of Warrant.

       

      (a)           Restriction
on Transfer.  This Warrant and
the rights granted to the holder hereof are transferable, in whole or in part,
upon surrender of this Warrant, together with a properly executed assignment in
the form attached hereto, at the office or agency of the Company referred to in
Paragraph 7(e) below, pro­vided, however, that any transfer or
assignment shall be subject to the conditions set forth in Paragraph 7(f) hereof
and to the applicable provisions of the Securities Purchase
Agreement.  Until due presentment for registration of transfer on the
books of the Company, the Company may treat the registered holder hereof as the
owner and holder hereof for all purposes, and the Company shall not be affected
by any notice to the con­trary.

       

      (b)           Warrant
Exchangeable for Different Denomina­tions.  This Warrant is
exchange­able, upon the surrender hereof by the holder hereof at the office
or agency of the Company referred to in Paragraph 7(e) below, for new Warrants
of like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.

       

      (c)           Replacement
of Warrant.  Upon receipt of
evi­dence reasonably satisfactory to the Company of the loss, theft,
destruction, or mutilation of this Warrant and, in the case of any such loss,
theft, or destruc­tion, upon delivery of an indemnity agreement
reasonably
satisfactory in form and amount to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Warrant, the Company, at its
expense, will execute and deliver, in lieu thereof, a new Warrant of like
tenor.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (d)           Cancellation;
Payment of Expenses.  Upon the
surrender of this Warrant in connection with any trans­fer, exchange, or
replacement as provided in this Paragraph 7, this Warrant shall be promptly
canceled by the Company.  The Company shall pay all taxes (other than
securities transfer taxes) and all other expenses (other than legal expenses, if
any, incurred by the holder or transferees) and charges payable in connection
with the preparation, execution, and delivery of Warrants pursuant to this
Paragraph 7.

       

      (e)           Register.  The Company shall
maintain, at its principal executive offices (or such other office or agency of
the Company as it may designate by notice to the holder hereof), a register for
this Warrant, in which the Company shall record the name and address of the
person in whose name this Warrant has been issued, as well as the name and
address of each transferee and each prior owner of this Warrant.

       

      (f)           Exercise
or Transfer Without Registration.  If, at the time
of the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the “Securities Act”) and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Securities Act and under applicable state securities or blue sky laws, (ii)
that the holder or transferee execute and deliver to the Company an investment
letter in form and substance acceptable to the Company and (iii) that the
transferee be an “accredited investor” as defined in Rule 501(a) promulgated
under the Securities Act; provided that no such opinion, letter or status as an
“accredited investor” shall be required in connection with a transfer pursuant
to Rule 144 under the Securities Act.  The first holder of this
Warrant, by taking and holding the same, represents to the Company that such
holder is acquiring this Warrant for investment and not with a view to the
distribution thereof.

       

      8.    Notices.

       

      
         All
notices, requests, and other communications required or permitted to be given or
delivered hereunder to the holder of this Warrant shall be in writing, and shall
be personally delivered, or shall be sent by certified or registered mail or by
recognized overnight mail courier, postage prepaid and addressed, to such holder
at the address shown for such holder on the books of the Company, or at such
other address as shall have been furnished to the Company by notice from such
holder.  All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the Company shall be in writing,
and shall be personally delivered, or shall be sent by certified or registered
mail or by recognized overnight mail courier, postage prepaid and addressed, to
the office of the Company at 130 Vantis, Suite 140, Aliso Viejo, CA 92656,
Attention: Chief Executive Officer, or at such other address as shall have been
furnished to the holder of this Warrant by notice from the
Company.  Any such notice, request, or other communication may be sent
by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above.  All notices, requests, and
other communications
shall be deemed to have been given either at the time of the receipt thereof by
the person entitled to re­ceive such notice at the address of such person
for purposes of this Paragraph 9, or, if mailed by registered or certified mail
or with a recognized overnight mail courier upon deposit with the United States
Post Office or such overnight mail courier, if postage is prepaid and the
mailing is properly addressed, as the case may be.

         

         

        
          
            
            

          

          
            10

            
              

            

          

          
            
            

          

        

      

       

      9.    Governing
Law.

       

      
        THIS
WARRANT 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 WARRANT, 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 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 WARRANT SHALL BE RESPONSIBLE FOR ALL FEES AND
EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY IN
CONNECTION WITH SUCH DISPUTE.

      

       

      10.         
Miscellaneous.

       

      (a)           Amendments.  This Warrant and
any provision hereof may only be amended by an instrument in writing signed by
the Company and the holder hereof.

       

      (b)           Descriptive
Headings.  The descriptive
headings of the several paragraphs of this Warrant are in­serted for
purposes of reference only, and shall not affect the meaning or construction of
any of the provisions hereof.

       

      (c)           Cashless
Exercise.  Notwithstanding
anything to the contrary contained in this Warrant, this Warrant may be
exercised by presentation and surrender of this Warrant to the Company at its
principal executive offices with a written notice of the holder’s intention to
effect a cashless exercise, including a calculation of the number of shares of
Common Stock to be issued upon such exercise in accordance with the terms hereof
(a “Cashless Exercise”).  In the event of a Cashless Exercise, in lieu
of paying the Exercise Price in cash, the holder shall surrender this Warrant
for that number of shares of Common Stock determined by multiplying the number
of Warrant Shares to which it would otherwise be entitled by a fraction, the
numerator of which shall be the difference between the then current Market Price
per share of the Common Stock and the Exercise Price,  and the
denominator of which shall be the then current Market Price per share of Common
Stock.  For example, if the holder is exercising 100,000 Warrants with
a per Warrant exercise price of $0.75 per share through a cashless exercise when
the Common Stock’s current Market Price per share is $2.00 per share, then upon
such Cashless Exercise the holder will receive 62,500 shares of Common
Stock.

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (d)           Remedies.  The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the holder, by vitiating the intent and purpose of the
transaction contemplated hereby.  Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Warrant will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Warrant, that the holder 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 Warrant and to
enforce specifically the terms and provisions thereof, without the necessity of
showing economic loss and without any bond or other security being
required.

       

      


       

      


       

      


       

      


       

      


       

      


       

      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

       


      
        
           


        

        
          12

          
            

          

        

        
           


        

      


      IN WITNESS WHEREOF, the
Company has caused this Warrant to be signed by its duly authorized
officer.

       

       

      
        
          	 	Camelot Entertainment Group
      Inc.	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/  
      Robert P.
      Atwell	 
	 	 	Robert
      P. Atwell	 
	 	 	Chief
      Executive Officer and President	 
	 	 	 	 


        

      

      


       

      Dated as
of July 31, 2008

       


      
        
           


        

        
          13

          
            

          

        

        
           


        

      


      FORM
OF EXERCISE AGREEMENT

       

      


       

      Dated:  ________ __,
200_

       

      


       

      To:           ______________________

       

      


       

      


       

      The
undersigned, pursuant to the provisions set forth in the within Warrant, hereby
agrees to purchase ________ shares of Common Stock covered by such Warrant, and
makes pay­ment herewith in full therefor at the price per share provided by
such Warrant in cash or by certified or official bank check in the amount of, or
by surrender of securities issued by the Company (including a portion of the
Warrant) having a market value (in the case of a portion of this Warrant,
determined in accordance with Section 10(c) of the Warrant) equal to
$_________.  Please issue a certificate or certifi­cates for such
shares of Common Stock in the name of and pay any cash for any fractional share
to:

       

       

      
      

       

      
        	 	Name:  _____________________________________
	 	 
	 	Signature:
      __________________________________
	 	Address:
      ___________________________________
	 	                
      ___________________________________
	 	 	 
	 	Note:	

                The
      above signature should correspond exactly with the name on the face of the
      within Warrant, if applicable.

              


      

       

      


      and, if
said number of shares of Common Stock shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of said
undersigned covering the balance of the shares purchasable thereunder less any
frac­tion of a share paid in cash.

       


      
        
           


        

        
          A-1

          
            

          

        

        
           


        

      


      FORM
OF ASSIGNMENT

      


       

      


       

      FOR VALUE RECEIVED, the
undersigned hereby sells, assigns, and transfers all the rights of the
undersigned under the within Warrant, with respect to the number of shares of
Common Stock covered thereby set forth hereinbelow, to:

      


       

      
        	Name
      of Assignee	
                 Address

              	 No of
Shares


      

       

       

       

       

      , and
hereby irrevocably constitutes and appoints ___________________________________
as agent and attorney-in-fact to trans­fer said Warrant on the books of the
within-named corporation, with full power of substitution in the
premises.

       

      


       

      Dated:                      ________
__, 200_

       

       

      
      

       

      
        	In the presence
      of:       	 	__________________________________
	 	Name:	__________________________________
	 	 
	 	Signature:	__________________________________
	 	Title of Signing
      Officer or Agent (if any):
	 	Address	__________________________________
	 	 	__________________________________
	 	 	__________________________________
	 	 	 
	 	Note:	
                The above signature
      should correspond exactly with the name on the face of the within Warrant,
      if applicable.

              


      

       

       

      
        A-2