Document:

exhibit_10-7.htm

EXHIBIT 10.7

 

PREFERRED STOCK PURCHASE AGREEMENT

 

This Preferred Stock Purchase Agreement (the “Stock Purchase Agreement”) is made as of April 27, 2010 (the "Effective Date") by and between Camelot Entertainment Group, Inc., a Delaware corporation (“Camelot”), and Clarity Partners I, LLC, a California limited liability company (“Purchaser”).

 

RECITALS

 

A. Purchaser holds a security interest  in all of the tangible and intangible assets (the "Liberation Assets") of Liberation Entertainment, Inc., a Delaware corporation (“Liberation"), pursuant to the terms of approximately $19.27 million in secured debt issued by Liberation to Purchaser (the “Purchaser’s Liberation Debt").

 

B. Under a general assignment for the benefit of creditors made by Liberation dated as of January 29, 2010 (the “General Assignment”), all right, title and interest in and to the Liberation Assets was transferred to a third party assignee, CMBG Advisors, Inc. ("Seller") and such Seller will act, pursuant to California law, as assignee for the benefit of creditors of Liberation, which creditors include, without limitation Purchaser.

 

C. Pursuant to the terms of that certain Asset Purchase Agreement of even date herewith (the "Asset Purchase Agreement") by and between Camelot, Camelot’s wholly-owned subsidiary, Camelot Film Group, Inc. (“CFG”), and Seller, Camelot will acquire and Seller will sell and assign to CFG all of the Liberation Assets. Among other things, it is a condition to closing of the transactions contemplated by the Asset Purchase Agreement that Purchaser relinquish and withdraw any and all claims (the "Withdrawal of Claims") that it has in the General Assignment arising from and out of Purchaser’s Liberation Debt.

 

D. Purchaser is willing to deliver the Withdrawal of Claims to Seller, and to otherwise facilitate the sale of the Liberation Assets to CFG, in exchange for the issuance by Camelot of $2.5 million of its shares of Class E Convertible Preferred Stock, par value $0.0001 per share (the “Class E Preferred Stock”), as further set forth below. In connection with and as consideration for the delivery of the Withdrawal of Claims to Seller, Camelot has agreed to issue and sell such shares of Class E Preferred Stock to Purchaser, as further set forth below.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing, and of the mutual promises, representations, warranties, covenants and conditions set forth in this Stock Purchase Agreement, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

 

1. Purchase and Sale of Preferred Stock.

 

1.1           Certificate of Designation.  Camelot shall adopt and file with the Secretary of State of the State of Delaware on or before the Closing, as defined below, the Certificate of Designation of Class E Preferred Stock in the form attached hereto as Exhibit A (the “Certificate of Designation”).

 

  

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1.2           Sale and Issuance of Class E Preferred Stock.  Subject to the terms and conditions of this Stock Purchase Agreement, in exchange for the delivery by Purchaser of the Withdrawal of Claims to Seller at the Closing, Camelot agrees to sell and issue to Purchaser Two Million Five Hundred Thousand Dollars ($2,500,000.00) of Class E Preferred Stock that is convertible into shares of Camelot Common Stock at the per share purchase price in accordance with Section 6.3 below (the "Issued Shares").

 

1.3           As further consideration for the delivery by Purchaser of the Withdrawal of Claims to Seller at the Closing, Camelot also agrees to the following with respect to the animated television series entitled “Wolverine” (collectively “Wolverine”): if Camelot retains the DVD and television distribution rights to Wolverine (the “Rights”) on or before April 26,  2011 (the "Negotiation Period"), then Camelot shall pay Purchaser the sum of Three Hundred Fifty Thousand Dollars ($350,000.00) either in cash via the wire transfer of immediately available funds or in freely tradable shares of Common Stock, valued at the volume weighted average price per share of Common Stock over the 30 day trading period immediately prior to the date that Camelot secures the Rights (the "Wolverine Shares"), in Camelot's sole discretion, provided that the Negotiation Period shall be automatically extended for three (3) months if Camelot is in active negotiations to retain the Rights at the expiration of the Negotiation Period.

 

1.4            Notwithstanding its obligations pursuant to Section 1.3 above, Camelot will also pay Purchaser, in cash, sixty percent (60%) of the Net Wolverine Revenue received by Camelot ("Purchaser's Percentage") during the Negotiation Period, as extended, until Camelot has retained the Rights, with such payments to be made within three (3) business days of Camelot's receipt of such revenue. For purposes of this Section 1.4, "Net Wolverine Revenue" shall mean all gross revenue derived from the Wolverine assets less Camelot's documented out-of-pocket expenses incurred in connection with the management of the Wolverine, which expenses shall include Camelot's payments to Seller. If Camelot does not retain the Rights during the  Negotiation Period, as extended hereunder, then Camelot will continue to pay Purchaser an amount equal to Purchaser's Percentage either in cash via the wire transfer of immediately available funds or in freely tradable shares of Common Stock, valued at the volume weighted average price per share of Common Stock over the 30 day trading period immediately prior to the date of delivery to Purchaser, in Camelot's sole discretion, until Purchaser has received an aggregate Three Hundred Fifty Thousand Dollars ($350,000.00).

 

1.5           Closing; Delivery.

 

(a)           The purchase and sale of the Issued Shares shall take place remotely via the electronic exchange of documents and signatures on the date hereof or at such other time and place as Camelot and Purchaser mutually agree upon, orally or in writing (which time and place are designated as the “Closing”).

 

(b)           At the Closing, Camelot shall deliver to Purchaser acknowledgement and confirmation from Camelot’s transfer agent that the Issued Shares have been authorized and ready for delivery to Purchaser on demand.

 

 

2. Representations and Warranties of Camelot.  Camelot hereby represents and warrants to Purchaser that, except as set forth on the Schedule of Exceptions attached as Exhibit C hereto

 

  

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(the “Schedule of Exceptions”), the following are true and correct in all respects as of the Closing:

 

2.1           Organization, Good Standing and Qualification   Camelot is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as presently conducted and as currently proposed to be conducted.  Camelot is duly qualified to transact business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on the business, assets (including intangible assets), liabilities, financial condition, property, or results of operation of Camelot (a "Material Adverse Effect").

 

2.2           Capitalization   Upon the filing of the Certificate of Designation and immediately prior to the Closing, the authorized and outstanding capital of Camelot will consist of:

 

(a)           100,000,000 authorized shares of Preferred Stock, of which  50,443,032 are issued and outstanding, including 16,147,511 of Class A Convertible Preferred shares; 27,144,021 of Class B Convertible Preferred shares; and 7,151,500 of Class C Convertible Preferred shares. All of the outstanding shares of Preferred Stock have been duly authorized, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws.

 

 (b)           19,900,000,000 authorized shares of Common Stock, par value $0.0001 per share (the "Common Stock"), of which 8,448,116,075 shares are issued, and 8,098,116,075 are issued and outstanding. All of the outstanding shares of Common Stock have been duly authorized, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws. The Common Stock constitutes the only class of equity securities of Camelot or any of its subsidiaries registered or required to be registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

 

(c)           An aggregate of 3,000,000,000 shares of Common Stock reserved for issuance to officers, directors, employees and consultants of Camelot pursuant to its 2009 Stock Option/Stock Issuance Plan, duly adopted by Camelot’s Board of Directors and approved by Camelot’s stockholders (the “Stock Plan”). Of such reserved shares of Common Stock, 2,795,000,000 shares have been issued pursuant to options and are outstanding, and 205,000,000 remain available for issuance under the Stock Plan.

 

(d)           Except as set forth above,   as of the date hereof, there are outstanding (i) no shares of capital stock or other voting securities of Camelot, (ii) no securities of Camelot or its subsidiaries convertible into or exchangeable for shares of capital stock, or voting securities of Camelot, (iii) no options or other rights to acquire from Camelot or its subsidiaries and no obligations of Camelot or its subsidiaries to issue any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of Camelot, and (iv) no equity equivalent interests in the ownership or earnings of Camelot or its subsidiaries or other similar rights (collectively, "Camelot Securities").  As of the date hereof, there are no outstanding obligations of Camelot or any of its subsidiaries to repurchase, redeem or otherwise acquire any Camelot Securities. There are no stockholder agreements, voting trusts or other agreements or understandings to which Camelot is a party or by which it is bound relating to the voting of any shares of capital stock of Camelot.

 

  

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(e)           OTC Trading. Once certificates representing shares of Common Stock issuable to Purchaser on its exercise of Conversion Rights and/or issuable as Additional Consideration, Gross-Up Shares, as each such term is defined below, or the Wolverine Shares are delivered thereto, such shares Common Stock will be listed on the Over the Counter Bulletin Board (“OTCBB”), or a national exchange, and subject to the rules and regulations of the Securities Act of 1933, as amended (the “Securities Act”),  will otherwise be eligible for either immediate sale by Purchaser without restriction as a result of an effective registration statement, or be eligible for sale following applicable holding periods under Rule 144 of the Securities Act.

 

2.3           Reserved

 

2.4           Authorization   All corporate action on the part of Camelot, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Stock Purchase Agreement and the Asset Purchase Agreement (sometimes collectively, the "Transaction Agreements"), the performance of all obligations of Camelot hereunder and thereunder and the authorization, issuance and delivery of the Issued Shares, the Additional Consideration, the Gross-Up Shares, the Wolverine Shares and the Common Stock issuable upon conversion thereof (sometimes collectively, the “Securities”) has been taken or will be taken prior to the Closing, and the Transaction  Agreements, when executed and delivered by Camelot, shall constitute valid and legally binding obligations of Camelot, enforceable against Camelot in accordance with their respective terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

2.5           Valid Issuance of Securities   The Issued Shares, when issued, sold and delivered in accordance with the terms of this Stock Purchase Agreement for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under applicable state and federal securities laws and liens or encumbrances created by or imposed by the Purchaser.  The Additional Consideration, if issued, sold and delivered in accordance with the terms of this Stock Purchase Agreement for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under applicable state and federal securities laws and liens or encumbrances created by or imposed by the Purchaser. The Gross-Up Shares, if issued, sold and delivered in accordance with the terms of this Stock Purchase Agreement for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under applicable state and federal securities laws and liens or encumbrances created by or imposed by the Purchaser. The Wolverine Shares, if issued, sold and delivered in accordance with the terms of this Stock Purchase Agreement, will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under applicable state and federal securities laws and liens or encumbrances created by or imposed by the Purchaser.  Based in part upon the representations of the Purchaser in Section 3 of this Stock Purchase Agreement, the Issued Shares and, if issued, the Additional Consideration, the Gross-Up Shares and the Wolverine Shares (and the Common Stock issuable upon conversion of thereof, as the case may be) will be issued in compliance with all applicable federal and state securities laws. The Common Stock issuable upon conversion of the Issued Shares, the Additional Consideration, the Gross-Up Shares, and the Wolverine Shares, as the case may be, has been reserved for issuance, and upon issuance in accordance with the terms of the Certificate of Designation, will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under applicable federal and state securities laws and liens or encumbrances created by or imposed by the Purchaser.    The sale of each of the Issued Shares and, if issued, the Additional Consideration, the Gross-Up Shares and the Wolverine Shares is not, and the subsequent conversion of any and all such shares will not be, subject to any preemptive rights, rights of first refusal or similar rights which have not been properly waived or complied with.

  

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2.6           Governmental Consents and Filings   Except as required by the Securities Act, assuming the accuracy of the representations made by Purchaser in Section 3 of this Stock Purchase Agreement, no consent, approval, order or authorization of, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of Camelot in connection with the consummation of the transactions contemplated by this Stock Purchase Agreement.

2.7           Litigation   There is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or, to Camelot’s knowledge, currently threatened (i) against Camelot or any officer, director or key employee of Camelot or (ii) that questions the validity of the Transaction Agreements or the right of Camelot to enter into them, or to consummate the transactions contemplated by the Transaction Agreements.  Neither Camelot nor any of its officers, directors or key employees is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality.  There is no action, suit, proceeding or investigation by Camelot pending or which Camelot intends to initiate.  The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened in writing (or any basis therefor known to Camelot) involving the prior employment of any of Camelot’s employees, their use in connection with Camelot’s business, or any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers.

2.8           Reports and Financial Statements  

 

(a)          Camelot has filed all required forms, reports and documents (the "Camelot SEC Reports") with the Securities and Exchange Commission (“SEC” or “Commission”) since inception, each of which complied at the time of filing in all material respects with all applicable requirements of the Securities Act and the Exchange Act, each as in effect on the date such form, report or document was filed.  When filed, no Camelot SEC Report contained any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein in light of the circumstances under which they were made not misleading, except to the extent superseded by a Camelot SEC Report filed subsequently and prior to the date thereof.  The consolidated financial statements of Camelot included in the Camelot SEC Reports (the “Camelot Financial Statements”) fairly present in conformity in all material respects with generally accepted accounting principles applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of Camelot and its consolidated subsidiaries as of the dates thereof and their consolidated results of operations and changes in financial position for the periods then ended.  Camelot maintains accounting controls and systems which are sufficient to provide reasonable assurances that (i) all transactions are executed in accordance with management’s general or specific authorization, (ii) all transactions are recorded as necessary to permit the accurate preparation of financial statements in conformity with generally accepted accounting principles and to maintain proper accountability for items, (iii) access to their property and assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for items is compared with the actual levels at reasonable intervals and appropriate action is taken with respect to any differences.

 

  

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2.9           Compliance with Other Instruments. Camelot is not, and will not be as of the Closing, in violation or default (i) of any provisions of its Restated Certificate or Incorporation or Bylaws, (ii) of any instrument, judgment, order, writ or decree, (iii) under any note, indenture or mortgage, or (iv) under any lease, agreement, contract or purchase order to which it is a party or by which it is bound or of any provision of federal or state statute, rule or regulation applicable to Camelot.  The execution, delivery and performance of the Transaction Agreements and the consummation of the transactions contemplated hereby or thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event which results in the creation of any lien, charge or encumbrance upon any assets of Camelot or the suspension, revocation, impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to Camelot, its prospects, business or operations, or any of its assets or properties.

 

2.10           Title to Property and Assets   Except as disclosed in Exhibit 2.10 attached hereto, Camelot owns its property and assets free and clear of all mortgages, deeds of trust, liens, loans and encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair Camelot’s ownership or use of such property or assets.  With respect to the property and assets it leases, Camelot is in material compliance with such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances other than to the lessors of such property or assets.

2.11           Changes   Since the date of the Camelot Financial Statements, there has not been:

(a)           any change in the assets, liabilities, financial condition or operating results of Camelot from that reflected in the Financial Statements, except changes in the ordinary course of business that have not caused, in the aggregate, Material Adverse Effect;

 

(b)           any damage, destruction or loss, whether or not covered by insurance, that constitutes a Material Adverse Effect;

 

(c)           any waiver or compromise by Camelot of a valuable right or of a material debt owed to it;

 

  

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(d)           any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by Camelot, except in the ordinary course of business and the satisfaction or discharge of which would not have a Material Adverse Effect;

 

(e)           any material change to a material contract or agreement by which Camelot or any of its assets is bound or subject, except for such changes in the ordinary course of business;

 

(f)           any mortgage, pledge, transfer of a security interest in, or lien, created by Camelot, with respect to any of its material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair Camelot’s ownership or use of such property or assets;

 

(g)           any notice received that any major customer or supplier has terminated or  materially reduced or threatened to terminate or materially reduce its purchases from or provision of products or services to Camelot;

 

(h)           to Camelot’s knowledge, any other event or condition of any character, other than events affecting the economy or Camelot’s industry generally,  that could reasonably be expected to result in a Material Adverse Effect; or

 

(i)           any arrangement or commitment by Camelot to do any of the things described in this Section 2.11.

 

2.12           Taxes. Camelot has duly and timely filed all tax returns and reports (including information returns and reports) as required by law.  These returns and reports are true and correct in all material respects.  Camelot has paid all taxes and other assessments due, except those contested by it in good faith with respect to which (i) an adequate reserve therefor has been established and is maintained in accordance with generally accepted accounting principles and (ii) there has been no action to foreclose a lien on Camelot’s property as a result of such unpaid taxes.  Camelot has not made any election pursuant to the Internal Revenue Code of 1986, as amended that would have a Material Adverse Effect.  Camelot has never had any tax deficiency proposed or assessed against it and has not executed any waiver of any statute of limitations on the assessment or collection of any tax or governmental charge.  None of Camelot's federal income tax returns and none of its state income or franchise tax or sales or use tax returns have ever been audited by governmental authorities.  Since Camelot's inception, Camelot has not incurred any taxes, assessments or governmental charges other than in the ordinary course of business and Camelot has made adequate provisions on its books of account for all taxes, assessments and governmental charges with respect to its business, properties and operations.  Camelot has withheld or collected from each payment made to each of its employees, the amount of all taxes (including, but not limited to, federal income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be withheld or collected therefrom, and has paid the same to the proper tax receiving officers or authorized depositories.

2.13           Disclosure  Camelot has made available to Purchaser all the information reasonably available to Camelot that Purchaser has requested for deciding whether to acquire the Issued Shares.  No representation or warranty of Camelot contained in the Stock Purchase Agreement, the other Transaction Agreements or in any certificate, instrument or document provided to Purchaser in connection with the transactions contemplated hereby and thereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which such statements were made.

  

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3. Representations and Warranties of Purchaser

 

Purchaser represents and warrants to Camelot, as of the Closing that:

3.1           Authorization Purchaser has full power and authority to enter into the this Stock Purchase Agreement, which, when executed and delivered by Purchaser, will constitute valid and legally binding obligations of Purchaser, enforceable in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

3.2           Purchase Entirely for Own Account This Stock Purchase Agreement is made with Purchaser in reliance upon Purchaser’s representations to Camelot, that the Securities to be acquired by Purchaser hereunder will be acquired for investment for Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same, provided that, at the Closing, Purchaser will assign shares of Class E Preferred Stock valued at $95,000, along with all of the rights, benefits and obligations attributable thereto, to Jay Boberg, formerly the Chief Executive Officer of Liberation.  By executing this Stock Purchase Agreement, Purchaser further represents that it does not presently have any contract, undertaking, agreement or arrangement to sell, transfer or grant participations to any third party, with respect to any such Securities.

3.3           Disclosure of Information  Purchaser has had an opportunity to ask questions and receive answers from Camelot regarding the terms and conditions of the offering of the Issued Shares, the Additional Consideration and the Gross-Up Shares, each as hereinafter defined, as the case may be, and the business, properties, prospects and financial condition of Camelot.  The foregoing, however, does not limit or modify the representations and warranties of Camelot in Section 2 of this Stock Purchase Agreement or the right of Purchaser to rely on such representations and warranties.

3.4           Restricted Securities  Purchaser understands that the Securities will be characterized as “restricted securities” under the federal securities laws, inasmuch as they are being acquired from Camelot in a transaction not involving a public offering, and that under such laws and applicable regulations such Securities may not be resold without registration under the Securities Act, except in certain limited circumstances.  In this connection, Purchaser represents that it is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. Purchaser acknowledges that Camelot has no obligation to register or qualify the Securities for resale, except as set forth below.  Purchaser further acknowledges that if an exemption from registration or qualification is available, it may be conditioned on various requirements including, but not limited to, the time and manner of sale, the holding period for the Securities, and on requirements relating to Camelot that are outside Purchaser’s control, and which Camelot is under no obligation and may not be able to satisfy.

  

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3.5           Accredited Investor Status Purchaser is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

3.6           No Brokers Neither Purchaser, nor any of its officers, employees, agents, directors, stockholders or partners has engaged the services of a broker, investment banker or finder to contact any potential investor nor has Purchaser or any of Purchaser’s officers, employees, agents, directors, stockholders or partners, agreed to pay any commission, fee or other remuneration to any third party to solicit or contact any potential investor, provided that Purchaser has agreed to pay Gordon Smith in connection with the transactions contemplated by this Stock Purchase Agreement.

 

4. Conditions of the Purchaser’s Obligations at Closing

 

The obligations of Purchaser to deliver the Withdrawal of Claims and to otherwise purchase the Issued Shares, the Consideration, the Gross-Up Shares and the Wolverine Shares, as the case may be, under this Stock Purchase Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

4.1           Representations and Warranties  The representations and warranties of Camelot contained in Section 2 shall be true and correct in all material respects on and as of such Closing.

4.2           Performance Camelot shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Stock Purchase Agreement that are required to be performed or complied with by it on or before the Closing.

4.3           Compliance Certificate The Chief Executive Officer or Chief Operating Officer of Camelot shall deliver to Purchaser at the Closing a certificate certifying that the conditions specified in Sections 4.1 and 4.2 have been fulfilled.

4.4           Qualifications All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Shares pursuant to this Stock Purchase Agreement shall be obtained and effective as of the Closing.

4.5           Opinion of Company Counsel The Purchasers shall have received from Christopher P. Flannery, securities counsel for Camelot, an opinion, dated as of such Closing, in substantially the form of Exhibit D.

4.6           Certificate  of Designation.  Camelot shall have filed the Certificate of Designation with the Secretary of State of Delaware on or prior to the Closing, which shall continue to be in full force and effect as of the Closing.

  

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4.7           Secretary’s Certificate  The Secretary of Camelot shall have delivered to Purchaser at the Closing a certificate certifying (i) the Certificate of Designation, (ii) the Bylaws of Camelot, (iii) resolutions of the Board of Directors of Company approving the Transaction Stock Purchase Agreements and the transactions contemplated hereby and thereby, and, if appropriate, (iv) resolutions of the stockholders of Company approving the Certificate of Designation and the other transactions contemplated by the Transaction Stock Purchase Agreements to the extent applicable.

4.8           Asset Purchase Agreement.  The transactions contemplated by the Asset Purchase Agreement shall have been consummated in accordance with the terms thereof.

 

4.9           Proceedings and Documents All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to Purchaser, and Purchaser (or its counsel) shall have received all such counterpart original and certified or other copies of such documents as reasonably requested.  Such documents shall include good standing certificates from Camelot’s state of incorporation and any state in which Camelot is qualified to do business.

 

5. Conditions of Camelot’s Obligations at Closing

 

The obligations of Camelot to Purchaser under this Stock Purchase Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:

5.1           Representations and Warranties The representations and warranties of Purchaser contained in Section 3 shall be true and correct in all material respects on and as of such Closing.

5.2           Performance All covenants, agreements and conditions contained in this Stock Purchase Agreement to be performed by Purchaser on or prior to such Closing shall have been performed or complied with in all material respects.

5.3           Qualifications  All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Shares pursuant to this Stock Purchase Agreement shall be obtained and effective as of the Closing.

 

6. Covenants

6.1           Reports Under the Exchange Act.  With a view to making available to Purchaser the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the SEC that may at any time permit Purchaser to sell securities of Camelot to the public without registration or pursuant to a registration on Form S-1, Camelot agrees to:

 

(a)           make and keep current public information available, as those terms are understood and defined in SEC Rule 144, at all times after the first registration statement filed by Camelot for the offering of its securities to the public so long as Camelot remains subject to the periodic reporting requirements under Sections 13 or 15(d) of the Exchange Act;

 

  

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(b)           take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable Purchaser to utilize Form S-3 for the sale of its shares of Common Stock;

 

(c)           file with the SEC in a timely manner all reports and other documents required of Camelot under the Securities Act and the Exchange Act; and

 

(d)           furnish to Purchaser upon request (i) a written statement by Camelot that it has complied with the reporting requirements of SEC Rule 144, the Securities Act and the Exchange Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly report of Camelot and such other reports and documents so filed by Camelot, and (iii) such other information as may be reasonably requested in availing Purchaser of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.

 

6.2           Issuance of Additional Consideration. On or before April 30, 2011, if (a) Camelot has not completed one or more of the acquisitions described on Exhibit E hereto (the "Potential Acquisitions") or one or more transactions substantially similar to the Potential Acquisitions, (b) the fair market value of the Issued Shares received by Purchaser in connection with the consummation of the transactions contemplated by this Stock Purchase Agreement does not equal or exceed $3,125,000 as of such date or (c)  Camelot has not completed an additional financing that results in net proceeds to Camelot of at least Ten Million Dollars ($10,000,000.00) then, commencing on  May  1, 2011 (the "Additional Issuance Date") and, so long as none of the transactions contemplated by subsections (a), (b) or (c) above has been satisfied,  on the first day of each of the four (4) consecutive months thereafter, Camelot shall issue to Purchaser $100,000 in each such month for a total of $500,000 as the Additional Consideration.  For purposes of this Section 6.2, "Additional Consideration" shall mean that number of shares of Class E Preferred Stock, valued at the greater of (x) the fair market value thereof as of the Additional Issuance Date and (y) the Class E Issuance Price, that equals an aggregate of $500,000.

 

6.3           Conversion Rights. During each and every quarterly period in the three (3) year period following the Closing Date, commencing in the quarter ended June 30, 2010 (each, a "Quarterly Conversion Period"),  Purchaser shall have the right to convert (each, a "Conversion Right") that number of shares of Class E Preferred Stock equal to $208,333 of fully registered and freely tradable shares of Common Stock, or (b) if an effective registration statement relating to shares of Common Stock is not then on file with the Commission, then restricted  shares of Common Stock eligible for sale following applicable holding periods under Rule 144 of the Securities Act, in either case, with such conversion price equal to the quarterly volume weighted average price per share of Common Stock  during the Quarterly Conversion Period ended June 30, 2010 (the "Conversion Price"). Notwithstanding anything contained herein to the contrary, if any of the Additional Consideration, Gross-Up Shares or Wolverine Shares are issued pursuant to the terms of this Agreement, then, beginning with the Quarterly Conversion Period ending March 31, 2011 and for each Quarterly Conversion Period thereafter, a pro rata portion of such Additional Consideration, Gross-Up Shares and Wolverine Shares shall be subject to the Conversion Rights granted hereunder. Purchaser understands and acknowledges that any conversion that results in Purchaser’s Common Stock holdings exceeding 4.99% of the issued and outstanding shares of Common Stock at the time of conversion shall mandate public filings with the Commission by Purchaser.

 

  

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6.4           Gross-Up Shares. Following the conversion into shares of Common Stock of all shares of Class E Preferred Stock held by Purchaser, if the fair market value of all such shares of Common Stock received by Purchaser in connection with the exercise of all Conversion Rights held thereby, excluding any Additional Consideration and Wolverine Shares otherwise received by Purchaser pursuant to the terms of this Agreement, does not equal at least $2,500,000, then on or before April 10, 2013, Camelot shall issue and deliver to Purchaser that number of shares of Common Stock (the “Gross-Up Shares”) determined by (a) calculating the amount equal to (i) $2,500,000 less (ii) the value of the consideration actually received by Purchaser following such conversion, and dividing such amount by (b) the Conversion Price as of March 31, 2013.

 

6.5           Expiration of Conversion Rights; Sale of Preferred Stock. Purchaser agrees that, to the extent it has not exercised all Conversion Rights on or prior to April 15, 2013, all such unexercised Conversion Rights shall expire. Following such date, if Purchaser elects to sell any shares of Class E Preferred Stock not otherwise converted into Common Stock it shall first deliver written notice of such intention to Camelot (the "Preferred Stock Sale Notice"), which notice shall include the number of shares of Class E Preferred Stock that Purchase wishes to sell (the "Offered Shares"). Within ten (10) calendar days after its receipt of the Preferred Stock Sale Notice (the "Preferred Stock Purchase Period"), Camelot shall have the right to purchase all, but not less than all, of the Offered Shares at a per share price equal to the volume weighted average price per share of Common Stock for the thirty (30) trading days prior to the date of Preferred Stock Sale Notice (the "Preferred Stock Purchase Price"). Camelot may exercise such purchase right prior to the of the Preferred Stock Purchase Period via the delivery of a wire transfer in immediately available funds to an account designated by Purchaser in an amount equal to the Preferred Stock Purchase Price multiplied by the Offered Shares. Should Camelot not elect to purchase the Offered Shares during the Preferred Stock Purchase Period, Purchaser shall be free to dispose of such Offered Shares in one or more transactions on terms and conditions acceptable to Purchaser, in its sole discretion.

 

6.6           Piggyback Registration. If Camelot proposes to register on its own behalf or on behalf of its current principal management stockholders (the "Management Holders") any of its stock under the Securities Act in connection with the public offering of such securities for cash (other than a registration on Form S-8 or any successor form relating solely to the sale of securities to participants in a Company stock plan or a transaction covered by Rule 145 under the Securities Act), Camelot shall, at such time, promptly give Purchaser written notice of such registration.  Upon the written request of Purchaser given within twenty (20) days after mailing of such notice by Camelot in accordance with Section 7.6 below, Camelot shall cause to be registered under the Securities Act all of the shares of Common Stock issuable on conversion of shares of Class E Preferred Stock that Purchaser has requested to be registered (the "Registrable Securities"). In connection with any offering involving an underwriting of shares of Common Stock, if the total amount of securities, including Registrable Securities, requested by the Management Holders and Purchaser exceeds the amount of securities that the underwriters determine in their sole discretion is compatible with the success of the offering, then Camelot shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among Purchaser and the Management Holders according to the total amount of securities entitled to be included therein owned by each such selling holder).

 

  

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6.7           Securities Act Filing; Registration of Shares; Repurchase of Shares. Promptly following the Closing Camelot shall make and all filings required pursuant to all applicable federal and state securities laws, including without limitation, those set forth in the Securities Act and the Exchange Act. In that regard, Camelot shall use its best efforts not to identify Purchaser by name in any such filings and shall use its best efforts to redact all references to Purchaser in any exhibits attached thereto, subject to filing requirements of the Commission. Additionally, as soon as possible following the Closing, Camelot shall prepare and file with the Commission a registration statement on Form S-1 relating to the registration of sufficient shares of Common Stock so as to allow the conversion of the Issued Shares, Additional Consideration, Gross-Up Shares and Wolverine Shares, and, thereafter, shall use its best efforts to have such registration statement declared effective within one hundred eighty (180) days thereafter. Notwithstanding anything contained herein to the contrary, prior to the effectiveness of such registration statement, Camelot shall use it best efforts to arrange a purchase of that number of shares of Class E Preferred Stock held by Purchaser equal to $125,000.

 

6.8           Indemnification. Camelot hereby agrees to indemnify and hold Purchaser, its partners, members, owners, officers, directors, agents, attorneys, successors, and assigns, harmless from any and all liability, loss, damage, claim, expense, cost, fine, fee, penalty, obligation or injury including, without limitation, those resulting from any and all actions, suits, proceedings, demands, assessments, judgments, award or arbitration, together with reasonable costs and expenses including the reasonable outside attorneys’ fees and other legal costs and expenses relating thereto any material breach by Camelot of any representation, warranty, covenant, condition or other obligation of Camelot hereunder.

 

6.9           Wolverine Assets. Camelot shall use its best efforts to (a) secure the Rights prior to the end of the Negotiation Period and (b) to exploit the Rights in a commercially reasonable manner.

 

7. Miscellaneous

7.1           Survival of Warranties Unless otherwise set forth in this Stock Purchase Agreement, the warranties, representations and covenants of Camelot and Purchaser contained in or made pursuant to this Stock Purchase Agreement shall survive the execution and delivery of this Stock Purchase Agreement and the Closing and shall in no way be affected or limited by any investigation of the subject matter thereof made by or on behalf of Purchaser or Camelot.

7.2           Successors and Assigns The terms and conditions of this Stock Purchase Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties, including transferees of any Securities.  Nothing in this Stock Purchase Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Stock Purchase Agreement, except as expressly provided in this Stock Purchase Agreement.

  

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7.3           Governing Law This Stock Purchase Agreement shall be governed by and construed in accordance with the internal laws of the State of California, without regard to its principles of conflicts of laws.

7.4           Counterparts  This Stock Purchase Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.  This Stock Purchase Agreement and the other Transaction Stock Purchase Agreements may also be executed and delivered by facsimile or other electronic delivery of signature.

7.5           Titles and Subtitles The titles and subtitles used in this Stock Purchase Agreement are used for convenience only and are not to be considered in construing or interpreting this Stock Purchase Agreement.

7.6           Notices All notices or other communications required or permitted hereunder shall be in writing and faxed, emailed, mailed or delivered to each party as follows at the address, facsimile number or email address set forth on the signature page or exhibits hereto, or at such other address, number or email address as such party shall have furnished in writing.  All notices and communications will be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one business day after being delivered by facsimile or email (with receipt of appropriate confirmation), (iv) one business day after being deposited with an overnight courier service of recognized standing; or (v) four days after being deposited in the US mail, first class with postage prepaid.  If notice is given Camelot, a copy shall be provided to Camelot Entertainment Group, Inc., 8001 Irvine Center Drive, Suite 400, Irvine, CA 92618. If notice is given to Clarity, a copy shall be provided to Strategic Law Partners, LLP, 500 S. Grand Avenue, Suite 2050, Los Angeles, CA 90071, Attn: Timothy F. Silvestre.

7.7           Finder’s Fee Each party represents that, other than as noted in Sections 2.14 and 3.6 above, it neither is nor will be obligated for any finder’s fee or commission in connection with this transaction.  Purchaser agrees to indemnify and to hold harmless Camelot from any liability for any commission or compensation in the nature of a finder’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which Purchaser or any of its officers, employees, or representatives is responsible.  Camelot agrees to indemnify and hold harmless Purchaser from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) for which Camelot or any of its officers, employees or representatives is responsible.

7.8           Fees and Expenses Each party to this Stock Purchase Agreement shall be responsible for all fees and expenses incurred thereby, including without limitation the fees of its legal counsel.

7.9           Attorney’s Fees If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of any of the Transaction Agreements, the prevailing party shall be entitled to recover reasonable and necessary attorneys’ fees, costs and disbursements in addition to any other relief to which such party may be entitled.

  

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7.10           Amendments and Waivers This Stock Purchase Agreement may be amended or waived only with the prior written consent of each of Camelot and Purchaser.

7.11           Severability If one or more provisions of this Stock Purchase Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Stock Purchase Agreement and the balance of the Stock Purchase Agreement shall be interpreted as though such provision were so excluded and shall be enforceable in accordance with its terms.

7.12           Delays or Omissions No delay or omission to exercise any right, power or remedy accruing to any party under this Stock Purchase Agreement, upon any breach or default of any other party under this Stock Purchase Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Stock Purchase Agreement, or any waiver on the part of any party of any provisions or conditions of this Stock Purchase Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.  All remedies, either under this Stock Purchase Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

            7.13         Public Announcements.  Subject to any requirement of applicable law, all public announcements or similar publicity with respect to this Stock Purchase Agreement or the Asset Purchase Agreement shall be made or issued only with the prior written consent of both Camelot and Purchaser, which consent shall not be unreasonably withheld.  In the event that any such public announcement or publicity is required by in connection with Camelot’s reporting obligations to the SEC, the parties hereto will consult prior to the making thereof and use reasonable efforts to obtain approval from the other party regarding the content thereof; provided, however, that Camelot shall not take the position that any such public filing is required unless determined in good faith by Camelot’s Chief Executive Officer and/or Camelot’s Board of Directors after consultation with Camelot’s outside legal counsel.  Prior to making any announcement or public filing required by law regarding this Stock Purchase Agreement or the Asset Purchase Agreement Camelot shall provide a copy thereof to Purchaser and shall provide Purchaser with a reasonable opportunity to review such filing and consult with Camelot regarding its contents.   Camelot acknowledges that the execution of this Stock Purchase Agreement will obligate Camelot to a current report on Form 8-K with the Commission and issue a press release, which shall be subject to the prior approval of Purchaser pursuant to the Commission’s rules and regulations, including, but not limited to, fair disclosure provisions arising under the Exchange Act.   In addition, Camelot shall be solely responsible to make any filing, declaration or registration with, or to obtain any permit, authorization, consent or approval of the Commission in each case, which may be required in connection with the Stock Purchase Agreement and/or the Asset Purchase Agreement.

7.14           Entire Agreement  This Stock Purchase Agreement and the documents referred to herein, including, without limitation, the other Transaction Agreements, constitute the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements relating to the subject matter hereof existing between the parties hereto, including without limitation that certain Binding Letter of Intent dated as of March 15, 2010, are expressly canceled.

 

  

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IN WITNESS WHEREOF, the parties have executed this Preferred Stock Purchase Stock Purchase Agreement as of the date first written above.

CAMELOT

Camelot Entertainment Group, Inc.

 

 

By:/s/ Rober P. Atwell

Robert P. Atwell, President

 

 

Camelot Film Group, Inc.

By: /s/Rober P. Atwell

Robert P. Atwell, President

Address:

8001 Irvine Center Drive, Suite 400

Irvine, CA 92618

Clarity Partners I, LLC

By:____________________________      

Its:

Address:

100 North Crescent Drive, Ste. 300

Beverly Hills, CA 90210

  

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Acceptance of Assignment:

In connection with the assignment of shares of Class E Preferred Stock to the undersigned by Purchaser, the undersigned hereby confirms that it will be bound by and subject to the terms and conditions of this Agreement that are applicable to such shares, and that the representations and warranties set forth in Section 3 of this Agreement are true and correct with respect to the undersigned.

Boberg Living Trust U/A DTD 01/31/1997

By: /s/ Jay Boberg

             Jay Boberg, Trustee

By: /s/ Alison Cooper

            Alison Cooper, Trustee

 

  

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EXHIBITS

Exhibit A -                      Form of Certificate of Designation

Exhibit B -                      Issued Shares

Exhibit C -                      Schedule of Exceptions

Exhibit D -                      Legal Opinion of Counsel to Camelot

Exhibit E -                      Potential Acquisitions

 

 

 

 

 

 

 

 

 

 

  

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EXHIBIT A

FORM OF

CERTIFICATE OF DETERMINATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

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EXHIBIT B

ISSUED SHARES

Purchaser                                                      Dollar Value of Shares                                                                # of Shares

Clarity Partners, L.P.                                                 $2,153,000

Clarity Advisors, L.P.                                                 $317,150

Clarity Associates, L.P.                                              $29,850

 

 

  

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EXHIBIT C

SCHEDULE OF EXCEPTIONS

Section 2.2.

Employee and Consultant Agreements and Contracts

JMJ Financial Agreements and Contracts

AJW Partners, New Millennium, AJW Offshore and AJW Qualified and related

party Agreements and  Contracts

Hope Capital and Mazuma Agreements and Contracts

Ayuda Funding Agreements and Contracts

Incentive Capital Agreements and Contracts

The Atwell Group Agreements and Contracts

  

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EXHIBIT D

FORM OF LEGAL OPINION OF COUNSEL TO CAMELOT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

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EXHIBIT E

POTENTIAL ACQUISITIONS

Cineworks Digital Studios, Inc.

Revelation Films, ltd.

barnholtz entertainment, inc.

23exhibit_10-6.htm

Exhibit 10.6

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (“Agreement”) is made as of April 28, 2010, by and between CMBG ADVISORS, INC., a California corporation, in its sole and limited capacity as assignee for the benefit of creditors of Liberation Entertainment, Inc. (the “Seller”); and CAMELOT FILM GROUP, INC., a Nevada corporation (“CFG” or “Buyer”), and a wholly-owned subsidiary of CAMELOT ENTERTAINMENT GROUP, INC., a Delaware corporation (“CMGR”).

RECITALS

A.              Liberation Entertainment, Inc., a Delaware corporation (“Liberation”), with principal offices located at 1990 Westwood Boulevard, Penthouse 3, Los Angeles, California 90025, pursuant to that certain General Assignment made by Liberation in favor of Seller dated as of January 29, 2010 (the “General Assignment”), transferred ownership of its right, title and interest in and to all of its tangible and intangible assets, wherever located, including, without limitation, all of Liberation’s accounts receivable, contract rights, certificates of deposit, letters of credit, available access passwords to computers and other media, license rights and rights to payment that are uncollected as the date of Closing (collectively, the “Liberation Assets”) to Seller, and in so doing has also designated Seller to act, pursuant to California law, as the Assignee for the Benefit of Creditors of Liberation. A true copy of the duly-executed General Assignment is attached hereto as Exhibit A.

B.              Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, the Assets (as defined in Section 1.1 below), on the terms and subject to the conditions set forth in this Agreement.

AGREEMENT

 

 

NOW, THEREFORE, for good and valuable consideration, and in consideration of the mutual covenants and agreements set forth in this Agreement, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1.         PURCHASE AND SALE OF ASSETS

1.1              Agreement to Sell and Purchase the Assets.  Subject to the terms and conditions of this Agreement, and in reliance on the representations, warranties and covenants set forth in this Agreement, Seller hereby agrees to sell, assign, transfer and convey to Buyer at the Closing (as defined in Section 2.2 below), and Buyer hereby agrees to purchase and acquire from Seller at the Closing, all of Seller’s right, title and interest in and to all of the Liberation Assets including without limitation, to the extent of Seller’s right, title or interest therein, if any, (a) all accounts receivable related to the Liberation Assets as of the date of Closing, as defined below,  (b) all accounts receivable related to the “Restricted Liberation Assets” (as defined in Section 9.2.4 below) as of the date of the Closing; (c) all other Assets as described and identified on Schedule 1.1 annexed hereto and by this reference made a part hereof; and (d) any and  all other Assets not described or  identified on Schedule 1.1  (collectively, the “Assets”); provided, however, that notwithstanding anything to the contrary contained in this Agreement, the Assets shall not include (a) cash held by Seller on account of Assets at the Closing); and (b) subject to the provisions of Section 1.3 below, each “Restricted Liberation Asset” (as identified in Section 9.2.4.), but only to the extent that, by the Closing, the Buyer has been unable to negotiate and resolve any third party claim that such third party’s consent is required to transfer such Restricted Liberation Asset (“Claim”).  The Assets will be sold, assigned, transferred and conveyed to Buyer (subject to the provisions of Section 1.6 below) on the Closing Date “as is” and “where is”, with no representations or warranties other than those specifically set forth hereinbelow.

  

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1.2              Buyer’s Post-Closing Right to Collect Revenues and Resolve Claims With Respect to Restricted Liberation Assets.  Following the Closing, Buyer shall have the exclusive right, and shall use good faith best efforts, to negotiate and resolve all Claims relating to consent with respect to transferability of  a Restricted Liberation Asset raised by a third party.  Further, Buyer shall have the exclusive right to collect and retain any revenues derived from the post-Closing distribution and other exploitation of such Restricted Liberation Asset to the extent ultimately agreed upon between Buyer and the applicable third party(ies).

1.3               Resolved and Unresolved Claims.  In the event Buyer successfully resolves a Claim(s), the Restricted Liberation Asset(s) relating to such Claim(s) shall be deemed an Asset transferred pursuant to this Agreement.  To the extent that the Claims are not resolved within one hundred twenty (120) days following the Closing, then Buyer shall cease and desist from exploiting any such Asset, its rights set forth in Section 1.2 shall cease, and Seller shall own and dispose of such Asset(s) subject to such unresolved Claims, in its discretion.  For purposes of Sections 1.1, 1.2 and 1.3, successfully resolving a Claim shall mean Buyer’s and Seller’s receipt of a written notification from a third party claimant advising that such third party claimant consents to or does not oppose the transfer of the subject Restricted Liberation Asset by Seller to Buyer.

                1.4           No Representations or Warranties by Seller.   The parties acknowledge that the Buyer, and not the Seller or Liberation, have generated the Schedule 1.1 list of Assets from the data in the Seller’s data bank stored on Liberation’s server and elsewhere, including but not limited to copyright information, creditor lists, websites, copyrights, trademarks, registration marks, patents, advertising and marketing graphics and materials, logos, deals by library titles and distribution agreements, DVD inventory reports, film elements and materials in storage, rights and terms of each Liberation library title, rights termination correspondence, files on all library titles, and miscellaneous furniture, fixtures and office equipment.  It is expressly acknowledged and agreed that, except as may otherwise be provided herein, neither Liberation nor the Seller shall make any representation(s) or warranty(ies) whatsoever regarding the content and completeness of the Schedule 1.1 listing of Assets, including, without limitation, any representation or warranty that  (a) Liberation and/or the Seller has or had at any time any ownership interest whatsoever in any particular item of the Assets; and (b) any of the Assets are, or might become, subject to claims and/or liens by third parties.

 

  

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1.5              Liberation’s Accounts Receivable; Notices to Liberation Account Debtors and Other Third Party Licensees.

            

 1.5.1   Within ten (10) calendar days from the date of Closing, the Buyer shall, execute and deliver to each account debtor and to each third party licensor from whom Liberation licensed any rights comprising the Assets written notice advising each such account debtor and/or such third party licensee of the sale and assignment of the Liberation accounts receivable to the Buyer, and directing each such account debtor and such third party licensee to henceforth make payments directly to the Buyer.

             1.5.2  In the event the Seller receives any accounts receivable, license payments or royalty payments that constitute Assets from and after the date of Closing hereunder, the Seller shall hold such payments in trust for Buyer and then forthwith deliver any such payments in kind directly to the Buyer at the following address: Camelot Entertainment Group, Inc., 8001 Irvine Center Drive, Suite 400, Irvine, CA 92618, Attention:  Accounting Department.

1.6              Asset Transfer; Passage of Title; Delivery.

1.6.1           Title Passage.  Upon the Closing, title to all of the Assets shall pass to Buyer.  Upon successful resolution of a Claim, title to the subject Restricted Liberation Asset shall pass to the Buyer.

1.6.2    Delivery of Assets.  On the Closing Date (as defined in Section 2.2) or as soon thereafter as is reasonably practicable, but no later than 5 business days after the Closing Date, Seller shall transfer physical possession of the tangible Assets to the Buyer or to the Buyer’s authorized agent, provided, however, that the expenses of retrieving, removing and transferring the Assets to Buyer as necessary shall be borne exclusively by Buyer and the Buyer shall fully comply with its undertakings as set forth in this Agreement regarding obtaining possession, custody and control of the Assets.  It is expressly understood and agreed that Seller shall promptly pay all storage costs incurred with respect to the Assets prior to Closing to the extent necessary to assure that possession of the such Assets can be delivered to the Buyer free and clear of warehouseman’s liens or the like (“Storage Costs”).  Seller shall execute and deliver to Buyer such laboratory access letters or the like provided by Buyer in a form reasonably acceptable to Seller and Buyer authorizing Buyer to take possession, custody and control of the tangible Assets for all locations where the tangible Assets may be located both inside and outside California.

1.6.3    Seller’s access to Liberation’s Business Records.  The parties agree that Seller shall retain Liberation’s original minute book, corporate records, payroll records and personnel files and files for prior years’ tax returns, provided that all business records of Liberation relating to the Assets shall be delivered to Buyer at the Closing.  To the extent that the Seller may, in its sole determination, require business records of Liberation to administer the assignment estate or wind up the business of Liberation or file tax returns, Buyer shall provide Seller with access to all such records at reasonable times and upon reasonable notice, including the right to photocopy any such business records at Seller’s expense, and, as necessary, to have access to original business records.

 

 

 

  

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2.         PURCHASE PRICE; CLOSING

 

2.1              Purchase Price. In consideration of the sale, transfer, conveyance and assignment of all the Assets to Buyer, the Buyer and CMGR jointly and severally agrees to pay and deliver the following consideration:

2.1.1.  At Closing, the sum of Five Hundred Thousand Dollars ($500,000.00) to Seller in cash or immediately available funds via wire transfer in accordance with the wiring instruction annexed hereto as Schedule 2.1.1.

2.1.2  On or before the Due Date (as defined below) either (a) deliver to creditors of Liberation identified by Seller Four Hundred Fifty Thousand Dollars ($450,000.00) in fully paid and non-assessable shares of CMGR Common Stock pursuant to and in compliance with Section 7.4 hereof, or (b) deliver to Seller the sum of Four Hundred Fifty Thousand Dollars ($450,000.00) in cash or immediately available funds via wire transfer in accordance with the wiring instruction annexed hereto as Schedule 2.1.1.  The “Due Date” shall be the date that is one eighty hundred (180) days after the date that Seller supplies the list of creditors referred to in Section 7.4.1.

 

2.1.3  As additional consideration for the specific assets of Liberation related to the animated television series entitled “Wolverine” (collectively referred to  as “Wolverine”), subject only to the Buyer being able to retain the DVD and television distribution rights to Wolverine (the “Rights”), on or before the one year anniversary of the Closing Date (the “Post-Closing One-Year Period”), the Buyer shall pay the Seller the sum of Ninety Thousand Dollars ($90,000.00) in cash or immediately available funds via wire transfer in accordance with the wiring instruction annexed hereto as Schedule 2.1.1.

2.1.4  Notwithstanding anything to the contrary contained hereinabove, during the Post-Closing One-Year Period, Buyer will pay Seller a monthly fee of twenty (20%) of the first Fifteen Thousand Dollars ($15,000.00) collected by Buyer in connection with Wolverine, after deducting Buyer’s actual, out-of-pocket costs incurred in retaining the Rights.  In the event that Buyer is fully-recouped of its actual out-of-pocket costs prior to the end of the Post-Closing One-Year Period, then Seller would receive ten percent (10%) of all Wolverine monies which Buyer collects during the remainder of the Post-Closing One-Year Period, up to a maximum of Ninety-Thousand Dollars ($90,000.00).  All monies paid to Seller pursuant to this Section 2.1.4 shall be applied and serve to reduce any monies due pursuant to Section 2.1.3 above, or Section 2.1.5 below, whichever is applicable.

2.1.5  In the event that Buyer is unable to retain the Rights by the end of the Post-Closing One-Year Period, then Buyer shall continue to pay Seller the applicable monthly fee percentage delineated in Section 2.1.4 above until Seller has been paid One Hundred Twenty Thousand Dollars ($120,000.00), at which point Seller would cease to share in any such Wolverine revenue whatsoever, and Buyer’s obligations to Seller regarding Wolverine pursuant to this Agreement shall cease and terminate.

  

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2.1.6  Buyer agrees that it will comply with Schedule 2.1.6 hereof with respect to certain reporting rights of Seller.

2.2. Closing.  The consummation of the purchase and sale of the Assets contemplated hereby will take place at a closing to be held at the offices of the Seller at a mutually-agreeable time on or before April 28, 2010, unless such date is extended by the approval of both Buyer and Seller (the “Closing Date”).

2.3 Allocation of Purchase Price.  Seller shall prepare an allocation of the Purchase Price among the Liberation Assets in accordance with section 1060 of the Internal Revenue Code of 1986, as amended (“Code”) and the regulations promulgated thereunder and as necessary to comply with any provision of state or local law, including and sales or other transfer taxes.  Seller shall deliver such allocations to Buyer within 30 days after the Closing or as soon thereafter as practicable.  Buyer agrees to fully cooperate with Seller and respond to all reasonable requests for information in connection with the preparation of such allocations.  Seller will reasonably consult with Buyer regarding the preparation of any sales Tax returns in connection with the sale of the Liberation Assets, but the Seller’s decision with respect to all of Seller’s sales and other Tax matters, including the filing of sales Tax returns, will be in the Seller’s sole discretion.  In the event that material new information arises after the Closing that is relevant to the application of the sales Tax to the sale of the Liberation Assets, then, at the reasonable request of Buyer, Seller shall take such reasonable steps as may be appropriate to seek a refund of excessive Taxes otherwise paid in connection with the transactions contemplated hereby.  To the extent that Buyer and Seller agree in a writing signed by an authorized representative of both Buyer and Seller on an allocation of the Purchase Price for purposes of section 1060 of the Code, then Seller and Buyer shall report, act and file income tax returns consistent with such agreed allocation. As used in this Agreement, “Tax” or “Taxes” shall mean, unless qualified, all income, excise, gross receipts, ad valorum, sales, use, employment, franchise, profits, excise, gains, privilege, occupation, property, transfer, unemployment compensation, social security, payroll, license, school, intangibles or other taxes, fees, stamp taxes, duties, charges, levies or assessments of any kind whatsoever (whether payable directly or by withholding), together with any interest and any penalties, additions to tax or additional amounts imposed by any governmental entity having jurisdiction over the assessment, determination, collection, or other imposition of any Tax.

3.         OBLIGATIONS ASSUMED.

3.1              No Monetary Liabilities or  Obligations Assumed by Buyer.  Except as expressly provided in this Agreement, Buyer shall not assume or become obligated in any way to pay any liabilities, debts or obligations of Seller or of Liberation whatsoever, including, but not limited to, any liabilities or obligations now or hereafter arising from Liberation’s and/or Seller’s business activities that took place prior to the Closing. Upon the Closing, Buyer assumes and agrees to perform all obligations under contracts and agreements contained in the Assets, and Buyer shall be solely responsible for all obligations and liabilities arising as a result of distribution and/or exploitation of the Assets after the Closing (including, without limitation, participations and residuals due to guild or collective bargaining agreements; provided, however, that the obligations being assumed by Buyer hereunder shall be limited in each case to that portion of those obligations and liabilities (the “Assumed Liabilities”) that occur or are incurred or are related to the period of time after the Closing

  

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3.2              No Obligations to Third Parties.  The execution and delivery of this Agreement shall not be deemed to confer any rights upon any person(s) or entity(ies) other than the parties hereto, or make any person or entity a third party beneficiary of this Agreement, or to obligate either party to any person or entity other than the parties to this Agreement.  The provisions hereof shall in no way expand the rights or remedies of third parties against Buyer as compared to the rights and remedies such parties would have against Seller and/or Liberation if the Closing were not consummated.

3.3              Transfer Taxes.  Buyer shall indemnify and pay to Seller upon demand all sales, use, transfer, excise, stamp or other Taxes resulting from the sale of the Assets and the assumption of the Assumed Liabilities contemplated by this Agreement, if any. Buyer shall pay the amount of $10,000 to Seller at the Closing in partial payment of such Taxes.  When Seller has determined the amount of sales Taxes due, Seller will provide Buyer with a notice of the amount of such sales Taxes.  If the amount of such sales Taxes is greater than $10,000, then Buyer shall promptly pay Seller in the same manner as payments are made at the Closing an amount equal to (i) the amount of such sales Taxes, less (ii) the $10,000 paid to Seller at Closing.  If the amount of such sales Taxes is less than $10,000, then Seller shall promptly pay Buyer an amount equal to (i) the $10,000 paid to Seller at Closing, less (ii) the amount of such sales Taxes.

4.         REPRESENTATIONS AND WARRANTIES OF BUYER AND CMGR.

Buyer and CMGR hereby jointly and severally represent and warrant to Seller that all the following statements are true, accurate and correct:

4.1              Due Organization.  CFG is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada, and is in good standing and qualified to do business in the State of California and in every jurisdiction where required to be qualified to do business.  CMGR is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, and is in good standing and qualified to do business in the State of California and in every jurisdiction where required to be qualified to do business.

4.2              Power and Authority; Enforceability.  Each such party has all necessary power and authority to enter into this Agreement and all other documents that such party is required to execute and deliver hereunder, and holds or will timely hold all permits, licenses, orders and approvals of all federal, state and local governmental or regulatory bodies necessary and required therefor.  The signing, delivery and performance by such party of this Agreement, and the consummation of all the transactions contemplated hereby, have been duly and validly authorized by such party.  This Agreement, when signed and delivered by such party, will be duly and validly executed and delivered and will be the valid and binding obligation of such party, enforceable against such party in accordance with its terms, subject to the laws relating to bankruptcy, insolvency and relief of debtors, and rules and laws governing specific performance, injunctions, relief and other equitable remedies.

  

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4.3              Authorization for this Agreement.  No authorization, approval, consent of, or filing with any governmental body, department, bureau, agency, public board, authority or other third party is required for the consummation by such party of the transactions contemplated by this Agreement, other than the registration of the issuance and sale of the Common Stock with the Securities and Exchange Commission and the continued listing of the CMGR Common Stock with the OTCBB.

4.4              Litigation.  There is no litigation, suit, action, arbitration, inquiry, investigation or proceeding pending or, to the knowledge of such party, threatened, before any court, agency or other governmental body against such party (or any corporation or entity affiliated with such party) which seeks to enjoin or prohibit or otherwise prevent the transactions contemplated hereby.

4.5              Capitalization: 

 

4.5.1 CMGR is a reporting company under the Securities Exchange of 1934, as amended, and is current in filing all reports due thereunder.  As of the Closing Date, the authorized capital stock of 20,000,000,000 consists of 19,900,000,000 shares of Common Stock, par value $0.0001, 8,748,116,075 of which are issued and outstanding, and 100,000,000 shares of Preferred Stock, par value $0.0001, 50,443,032 of which are issued and outstanding.

 

           4.5.2  All issued and outstanding shares of the stock of CMGR (i) have been duly authorized and validly issued and are fully paid and nonassessable; and (ii) were issued in compliance with all applicable state and federal laws concerning the issuance of securities.

   

4.6              Financial Statements.  The financial statements for 2009 through September 30, 2009 provided to the Seller by any of the Buyer in connection with the transactions contemplated by this Agreement were true and accurate as of the date(s) of the same.

4.7              Material Information. The Buyer have provided Seller with all information requested by the Seller in connection with its decision to accept the CMGR Common Stock as partial consideration for the purchase price for the Assets under this Agreement.  Neither this Agreement, the Exhibits hereto, nor any other document delivered by the Buyer to Seller or their attorneys or agents in connection herewith or with the transactions contemplated hereby, contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make the statements contained herein or therein not misleading.

	
5.

	
REPRESENTATIONS AND WARRANTIES OF SELLER.

Seller represents and warrants to Buyer that all of the following statements are true, accurate and correct:

  

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5.1              Corporate Organization.  Seller is a corporation duly organized, validly existing, and in good standing under the laws of the State of California.

5.2              Power and Authority; Enforceability.  Seller has all necessary power and authority to enter into this Agreement and all other documents that Seller is required to execute and deliver hereunder as the Assignee under the General Assignment under the laws of the State of California.  The signing, delivery and performance by Seller of this Agreement, and the consummation of all the transactions contemplated hereby, have been duly and validly authorized by Seller.  This Agreement, when signed and delivered by Seller, will be duly and validly executed and delivered and will be the valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to the laws relating to bankruptcy, insolvency and relief of debtors, and rules and laws governing specific performance, injunctions, relief and other equitable remedies.

5.3              Litigation.  To the best actual knowledge of Seller, without any diligence or inquiry, there is no litigation, suit, action, arbitration, inquiry, investigation or proceeding pending before any court, agency or other governmental body against Seller and/or Liberation which seeks to enjoin or prohibit or otherwise prevent the transactions contemplated hereby.

5.4              Assets.  Seller has not transferred title to any of the Assets to any third party other than to Buyer and has not granted any security interest(s) in any of the Assets to any third party.

6.         DISCLAIMER OF ALL OTHER REPRESENTATIONS.

6.1   The parties hereby agree that Seller sells, assigns, transfers and conveys the Assets to Buyer “as is” and “where is”, and that Seller is not making and has not made any representations or warranties whatsoever except as expressly set forth herein, and, by way of illustration and not of limitation, Seller expressly disclaims any representation or warranty as to merchantability, fitness or use.  Anything to the contrary contained herein notwithstanding, Seller expressly disclaims any representation or warranty of whatsoever kind and nature with respect to the transferability and/or assignability of any of the Assets.

6.2           BUYER ACKNOWLEDGES AND AGREES THAT UPON CLOSING SELLER SHALL SELL AND CONVEY TO BUYER AND BUYER SHALL ACCEPT THE ASSETS “AS IS, WHERE IS, WITH ALL FAULTS.”  BUYER HAS NOT RELIED AND WILL NOT RELY ON, AND SELLER IS NOT LIABLE FOR OR BOUND BY, ANY EXPRESS OR IMPLIED WARRANTIES, GUARANTEES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE ASSETS OR RELATING THERETO MADE OR FURNISHED BY SELLER OR ITS REPRESENTATIVES, TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, EXCEPT AS EXPRESSLY STATED HEREIN.

  

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6.3           BUYER ACKNOWLEDGES TO SELLER THAT BUYER HAS HAD AND WILL CONTINUE TO HAVE THE OPPORTUNITY TO CONDUCT PRIOR TO AND FOLLOWING THE CLOSING SUCH INSPECTIONS AND INVESTIGATIONS OF THE ASSETS AS BUYER DEEMS NECESSARY OR DESIRABLE TO SATISFY ITSELF IN ITS SOLE AND ABSOLUTE DISCRETION AS TO THE NATURE, CONTENT, QUALITY AND TRANSFERABILITY, ETC., OF THE ASSETS AND ITS ACQUISITION THEREOF.  BUYER FURTHER WARRANTS AND REPRESENTS TO SELLER THAT BUYER WILL RELY SOLELY ON ITS OWN REVIEW AND OTHER INSPECTIONS AND INVESTIGATIONS IN THIS TRANSACTION AND NOT UPON THE INFORMATION PROVIDED BY OR ON BEHALF OF SELLER, OR ITS AGENTS, EMPLOYEES OR REPRESENTATIVES WITH RESPECT THERETO. BUYER HEREBY ASSUMES THE RISK THAT ADVERSE MATTERS INCLUDING, BUT NOT LIMITED TO, LATENT OR PATENT DEFECTS, ADVERSE PHYSICAL OR OTHER ADVERSE MATTERS, MAY NOT HAVE BEEN REVEALED BY BUYER’S REVIEW AND INSPECTIONS AND INVESTIGATIONS OF THE ASSETS.

6.4              BUYER ACKNOWLEDGES THAT SOME ASSETS MAY CONTAIN THIRD-PARTY INTELLECTUAL PROPERTY THAT MAY HAVE BEEN LICENSED BY LIBERATION OR OTHERWISE ACQUIRED BY LIBERATION THAT MAY CONTAIN RESTRICTIONS ON TRANSFER OR AS TO WHICH TRANSFER MAY BE PROHIBITED BY LAW.  BUYER UNDERSTANDS THAT NO CONSENT OF THIRD PARTIES WAS OBTAINED BY SELLER PRIOR TO THE ASSIGNMENT AND SALE OF THE ASSETS TO BUYER PURSUANT TO THIS AGREEMENT, AND WILL NOT BE OBTAINED OR SOUGHT BY SELLER AS PART OF THIS AGREEMENT. BUYER SHALL ACCEPT FULL RESPONSIBILITY FOR COMMUNICATING WITH THIRD PARTIES WHOSE INTELLECTUAL PROPERTY MAY BE INCLUDED IN THE ASSETS TRANSFERRED HEREBY, AND AT ITS OPTION AND IN ITS SOLE AND ABSOLUTE DISCRETION BUYER SHALL EITHER (i) OBTAIN REQUIRED CONSENTS IF ANY FROM THIRD PARTIES AND PAY ANY AND ALL LICENSING OR OTHER FEES, COSTS, EXPENSES OR CHARGES AS MAY BE REQUIRED AND THAT MAY BE ASSOCIATED WITH USING AND EXPLOITING SAID ASSETS AFTER THE CLOSING; (ii)  NOT USE OR EXPLOIT SUCH ASSET, AND RETURN SUCH ASSET TO THE APPROPRIATE THIRD PARTY ON SUCH TERMS AS THE BUYER MAY DETERMNE IN ITS SOLE DISCRETION; OR (iii) USE GOOD FAITH, BEST EFFORTS TO NEGOTIATE AND RESOLVE ANY CONSENT TO TRANSFER ISSUES  DIRECTLY WITH ANY SUCH THIRD PARTY(IES).  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER, AS ASSIGNEE FOR THE BENEFIT OF CREDITORS OF LIBERATION, EXPRESSLY DISCLAIMS ANY LIABILITY WHATSOEVER WITH RESPECT TO THE TRANSFER TO BUYER OF RIGHTS IN THE ASSETS, INCLUDING RESTRICTED LIBERATION ASSETS, FROM AND AFTER THE CLOSING DATE.

 

  

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7.         COVENANTS OF BUYER.

 

7.1              Taxes and any Other Charges Related to the Sale. Buyer agrees to promptly pay or reimburse Seller for all applicable sales, transfer, use or other Taxes, including interest and penalties, imposed on and/or related to the sale of the Assets to Buyer under this Agreement by any tax authority or other governmental agency and to defend, indemnify and hold Seller harmless from and against any such taxes, duties, claims, or charges for payment thereof by any tax authority or other governmental agency including all reasonable, outside attorney and accountancy fees and other expenses incurred in any audit or dispute resolution proceedings in connection therewith.

7.2              Further Assurances.  Buyer shall cooperate with Seller and promptly sign and deliver to Seller any and such additional documents, instruments, endorsements and related information and take actions as Seller may reasonably request for the purpose of effecting the transfer of Seller’s right, title and interest in and to the Assets and the Restricted Liberation Assets to Buyer, and/or carrying out the provisions of this Agreement, including the preparation of all Tax returns of Seller and Liberation.

7.3              Property Held in Trust.  To the extent that Buyer receive physical possession of any property which is not a Asset hereunder, Buyer agree to hold such property in trust for the owner of such property and to return such property to its owner upon request and proof of ownership from such owner.  

7.4         Agreement to Register and Issue Stock.

             7.4.1 CMGR shall file a registration statement with the Securities and Exchange Commission (the “Commission”) within thirty (30) days after Seller provides a final stockholder recipient list comprised of the creditors of Liberation to Buyer, in accordance with the Commission’s rules and regulations, registering Four Hundred Fifty Thousand Dollars ($450,000) in Common Stock of CMGR (the “CMGR Common Stock”) based upon the price per share as defined below for delivery upon effectiveness of the registration statement to the creditors of Liberation.  CMGR shall use its best efforts to cause the registration statement to become effective no later than one hundred (100) days after such filing, subject to comments and requirements of the Commission (“Registration”).  The price per share shall be equal to the ninety (90) day average closing price of the Common Stock of CMGR on the OTCBB (as defined below) immediately prior to the issuance of the CMGR Common Stock to the creditors of Liberation in accordance with Section 2.1.2 hereof.

              7.4.2  CMGR covenants, represents and warrants that, upon issuance of the CMGR Common Stock to the creditors of Liberation identified by Seller, such CMGR Common Stock shall be duly authorized and validly issued, fully paid and non-assessable and issued in compliance with all applicable state and federal laws concerning the issuance of securities.  Such CMGR Common Stock shall be freely transferable by the holder thereof without further registration, qualification or listing. Once the CMGR Common Stock certificates are delivered, said CMGR Common Stock will continue to be listed on the Over the Counter Bulletin Board (“OTCBB”), or a national exchange, and eligible for immediate sale.

  

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7.5         Security Interest.  In order to provide Seller with acceptable security to assure that the Buyer fully complies with its obligations to Seller as set forth in Section 2.1 above and Section 11 below, Buyer shall grant to Seller a second priority security interest in and to the Assets, which security interest shall be second in priority to that of Buyer’s lender, which shall be granted a first priority security interest in the Assets.  Such security interest shall be evidenced by a Security Agreement and UCC-1 Financing Statement executed by the Buyer in favor of the Seller substantially in the form of Exhibit D annexed hereto and by this reference incorporated herein. In connection therewith, Seller expressly agrees to enter into an Intercreditor Agreement (the “Intercreditor Agreement”) with Buyer’s lender setting forth Seller’s and Buyer’s lenders respective rights, responsibilities and obligations with respect to realizing on their respective security interests in the Assets in the event of default by Buyer under Sections 2.1.2, 2.1.3 and 11 of this Agreement, substantially in the form annexed hereto as Exhibit E.

7.6              Conduct of Business Post-Closing; Potential Legal Actions.  Buyer agrees that should Buyer determine in its sole and absolute discretion that the cost of defending claims of third parties with respect to Assets and/or Restricted Liberation Assets acquired under this Agreement outweighs the cost and benefit of defending against such claims, Buyer will at its option settle with any such claimant on such terms as the Buyer may determine in its sole discretion, which may include selling, assigning or abandoning to such claimant Buyer’s interest in any such Assets in whole or in part.

7.6.1   Exploitation of Assets in Accordance with Pre-Closing Agreements.  Buyer agrees that if it elects to exploit an Asset, then it shall exploit such Asset either in accordance with any applicable pre-Closing agreement or contract between a third party and Liberation or Liberation’s predecessors-in-interest with respect to such Asset, or in accordance with any new and/or renegotiated agreement governing any such Asset between Buyer or Buyer’s assignee and the applicable third party, such election to be in Buyer’s sole and absolute discretion; provided, however, that if Buyer elects to exploit any such Asset in accordance with a pre-Closing agreement or contract, Buyer shall be liable for the Assumed Liabilities (pursuant to Section 3.1 above) only, and not be liable for any liabilities arising  from or out of Liberation’s and/or Seller’s business activities that took place prior to the Closing.

 

 

7.6.2   Suspension of Use or Exploitation of Asset.  If a third party (“Third Party Plaintiff”) commences an action in a court of competent jurisdiction or an arbitration proceeding (each a “Legal Action”) against Seller and/or any of its officers, directors, owners, agents or attorneys (each, a “Seller Party” and collectively, the “Seller Parties”), with respect to any Asset transferred by Seller to Buyer pursuant to the terms of this Agreement, which Legal Action alleges a breach of a contractual term requiring such Third Party Plaintiff’s consent to transfer such Asset (the “Subject Asset”); and if, in the good faith opinion of Seller, either (a) Buyer’s indemnification under Section 11 may be insufficient to protect the Seller Parties from a Loss in connection with such Legal Action,  or (b) after providing the Buyer a period of two (2) business days to consult with Seller regarding the potential exposure or liability of any Seller Party as a result of such Legal Action, Seller determines that further, sale, distribution, licensing, use or other exploitation (collectively “Exploitation”) of the Subject Asset would materially increase the legal exposure or liability of any Seller Party, then Buyer shall, immediately upon the written request of Seller (the “Cease and Desist Notice”), cease and desist, and, to the fullest extent that Buyer has the right to do so with respect to the Subject Asset, shall use its best efforts to cause its subdistributors or sales agents to cease and desist, from further exploitation of such Subject Asset (which shall include the suspension of the Subject Asset from further exhibition or sale) from and after the date of such Cease and Desist Notice, until such time as (i) each Seller Party has been dismissed from such Legal Action with prejudice or (ii) such Legal Action is otherwise fully and finally resolved with respect to the legal exposure or liability of each Seller Party arising from the transfer of the Subject Asset.  Notwithstanding anything contained in this Section 7.6.2 to the contrary, Buyer shall have the right, in its sole discretion, to return the Subject Asset to the Third Party Plaintiff and, following dismissal of all claims against each Seller Party arising from the transfer by Seller to Buyer of such Subject Asset, and the reimbursement under Section 11 of all of the expenses of each Seller Party arising from the Legal Action relating to such Subject Asset, Buyer’s obligations under this Section 7.6.2 and under Section 11 with respect thereto shall terminate.  Seller agrees to use its best efforts to seek the resolution of any Legal Action relating to any Subject Asset, including without limitation issues relating to consent to transfer, as promptly and economically as possible, provided that the parties acknowledge and agree that Seller best efforts in this instance shall be subject to the fact that the handling and defense of such Legal Action will be governed by the provisions of Section 11.

  

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8.         COVENANTS OF SELLER.

Seller covenants and agrees with Buyer as follows:

8.1              Further Assurances.  Seller shall cooperate with Buyer and promptly sign and deliver to Buyer any and such additional documents, instruments, endorsements and related information and take actions as Buyer may reasonably request for the purpose of effecting the transfer of Seller’s title to the Assets and the Restricted Liberation Assets, if applicable, to Buyer, and/or carrying out the provisions of this Agreement, provided, however, that Seller shall be reimbursed for its reasonable, actual, out-of-pocket costs and expenses incurred in providing such documents, instruments, endorsements or related information, which additional documents, instruments, endorsements or related information shall be prepared solely by Buyer.

9.         CONDITIONS TO CLOSING.

9.1              Conditions to Buyer’s Obligations.  The obligations of Buyer hereunder shall be subject to the satisfaction and fulfillment of each of the following conditions, except as Buyer may expressly waive the same in writing:

9.1.1           Accuracy of Representations and Warranties.  The representations and warranties made herein by Seller shall be true and correct in all material respects, and not misleading in any material respect, on and as of the date given, and on and as of the Closing Date with the same force and effect as though such representations and warranties were made on and as of the Closing Date.

  

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9.1.2           Compliance.  As of the Closing Date, Seller shall have complied in all material respects with, and shall have fully performed, in all material respects, all conditions, covenants and obligations of this Agreement imposed on Seller and required to be performed or complied with by Seller at, or prior to, the Closing Date.

9.1.3           Delivery of Closing Documents.  Seller shall have delivered, and Buyer shall have received, the documents described in Section 10.2 hereof.

9.2              Conditions to Seller’s Obligations.  The obligations of Seller hereunder shall be subject to the satisfaction and fulfillment of each of the following conditions, except as Seller may expressly waive the same in writing:

9.2.1           Accuracy of Representations and Warranties.  The representations and warranties made herein by Buyer in Section 4 hereof shall be true and correct in all material respects, and not misleading in any material respect, on and as of the date given, and on and as of the Closing Date with the same force and effect as though such representations and warranties were made on and as of the Closing Date.

9.2.2           Compliance.  The Buyer shall have complied in all material respects with, and shall have fully performed, the terms, conditions, covenants and obligations of this Agreement imposed thereon to be performed or complied with by the Buyer at, or prior to, the Closing Date.

9.2.3           Delivery of Closing Documents.  The Buyer shall have delivered, and Seller shall have received, the documents described in Section 10.1 hereof.

                        9.2.4  Restricted Liberation Assets.  Buyer and Seller acknowledge that underlying agreements or contracts with respect to the Restricted Liberation Assets listed on Schedule 9.2.4 hereto may each require consent for the transfer of such Restricted Liberation Asset, regardless of any potential contractual liability for monies due as a result of a pre-Closing breach or default of such underlying agreements or contracts.  To the extent that such consent for transfer is not obtained prior to the Closing for any such Restricted Liberation Asset, then such Restricted Liberation Asset is designated as such for purposes of Section 1.1 hereof.

9.2.5           Escrow.  The Buyer shall have deposited the Reserved Shares with the Transfer Agent in the name of the Escrow Agent (each as defined in Section 11.2.6 hereof).

10.         CLOSING OBLIGATIONS.

10.1              Buyer’s Closing Obligations.  At the Closing, Buyer shall deliver to Seller the following:

10.1.1  Payment of the cash portion of the purchase price by wire transfer to Seller pursuant to subsection 2.1.1 above and the payment in accordance with subsection 3.3 above;

  

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10.1.2  The Bill of Sale Agreement, in the form attached hereto as Exhibit C, signed by an authorized officer of the  Buyer on behalf of the  Buyer;

10.1.3  The Assignment and Assumption Agreement, in the form attached hereto as Exhibit B, signed by an authorized officer of the  Buyer on behalf of the  Buyer;

 10.1.4  The Security Agreement, in the form attached hereto as Exhibit D­­, signed by an authorized officer of the Buyer on behalf of the Buyer;

10.1.5  A certificate of the Secretary of CFG and CMGR, attaching true, correct and complete copies of (a) the Certificate of Incorporation and Bylaws of such party as amended to date; (b) resolutions of the Board of Directors of such party approving and authorizing the execution, delivery and performance of the agreements and documents executed in connection herewith;

10.1.6  An agreement of Clarity withdrawing the claim filed by Clarity in the General Assignment and terminating and waiving all of Clarity’s claims against Liberation, in form and substance satisfactory to Seller;

10.1.7     A guaranty of CMGR in the form attached hereto as Exhibit F;

10.1.8   A resale certificate of Buyer in form and substance reasonably satisfactory to Seller;

10.1.9  Such other documents, instruments and agreements as Seller may reasonably request.

 

 

10.2              Seller’s Closing Obligations.  At the Closing, Seller shall deliver to Buyer the following:

10.2.1  The Assets in accordance with Section 1.6;

10.2.2 The Assignment and Assumption Agreement, in the form attached hereto as Exhibit B , signed by an authorized officer of Seller on behalf of Seller;

10.2.3  The Bill of Sale Agreement, in the form attached hereto as Exhibit C, signed by an authorized officer of each Seller on behalf of Seller;

10.2.5  The Intercreditor Agreement in the form attached hereto as Exhibit E, signed by an authorized officer of Seller on behalf of Seller; and

 

10.2.6           Such other documents, instruments and agreements as Buyer may reasonably request.

 

  

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11.         INDEMNIFICATION.

11.1              Indemnified Losses.  For the purpose of this Section 11.1 and when used elsewhere in this Agreement, “Loss” shall mean and include any and all liability, loss, damage, claim, expense, cost, fine, fee, penalty, obligation or injury including, without limitation, those resulting from any and all actions, suits, proceedings, demands, assessments, judgments, award or arbitration, together with reasonable costs and expenses including the reasonable outside attorneys’ fees and other legal costs and expenses relating thereto.

 

 

11.2              Indemnification By Buyer.  Buyer (referred to herein as the “Indemnifying Party”) agrees to defend, indemnify and hold harmless Seller, any parent, subsidiary or affiliate of Seller and any director, officer, employee, stockholder, agent or attorney of Seller or of any parent, subsidiary or affiliate of Seller (each, an “Indemnified Party”) from and against and in respect of any Loss which arises out of or results from:

11.2.1           any breach by CMGR or CFG of any covenant, representation or warranty made herein;

11.2.2           the use and exploitation of the Assets after the Closing, including any actions pursuant to Sections 6.4 and/or 7.6 above;

11.2.3           Claims by third parties with respect to any of the Assets arising out of the transfer of the Assets with or without the consent of a third party as may be required pursuant to the terms and conditions of a third party’s agreement(s) with Liberation or Liberation’s predecessor(s)-in-interest (other than Storage Costs and any other costs and expenses which Seller agrees to bear under this Agreement), it being expressly understood and agreed that Buyer's indemnification pursuant to Section 11 shall not extend to any liabilities arising  from or out of Liberation’s and/or Seller’s business activities that took place prior to the Closing;.  

11.2.4            the Assumed Liabilities; and

                        11.2.5   Any costs of removal (excluding Storage Costs), post-Closing holdover costs, damages and expenses and any injuries incurred by or in connection with Buyer’s access to and use of the premises of the Seller or of Liberation in connection with due diligence and/or the transfer and removal of the Assets as contemplated herein.

11.2.6     As additional security to assure Seller that the Buyer fully complies with its obligations to Seller as set forth in this Section 11, Buyer shall at its own expense, establish a stock reserve account (the “Reserve  Account”) in the name of a mutually approved Escrow Agent (the “Escrow Agent”) with the transfer agent of CMGR stock (“Transfer Agent”) into which Reserve Account Buyer shall deposit on the Closing Date a sufficient number of registered shares of CMGR common stock having a market value of at least One Hundred Thousand Dollars ($100,000.00) (the “Reserved Shares”) for sale of said Reserved Shares in accordance with the procedures set forth below.  The Reserved Shares shall be sold from time to time by the Escrow Agent as may be necessary to reimburse Seller for all Covered Legal Expenses, as defined below.  The parties will negotiate in good faith and enter into standard Escrow and Reserve agreements within two business days following the Closing Date, which shall contain, among other provisions, the deposit of the Reserved Shares with the Transfer Agent in the name of the Escrow Agent and the periodic sale thereof by the Escrow Agent in connection with the payment to Seller of its Covered Legal Expenses and the circumstances that would trigger the termination of the Escrow Agreement, as further described below. For purposes of the Reserve Account, "Covered Legal Expenses" shall mean the reasonable, actual, out-of-pocket legal fees and expenses incurred by Seller in connection with any Legal Action against any Seller Party.  Five (5) business days after receipt by Escrow Agent and Buyer of reasonable documentation of such Seller Legal Expenses, Escrow Agent shall initiate the sale of the requisite amount of Reserved Shares to pay for such Covered Legal Expenses and pay to Seller cash via wire transfer of immediately available funds an amount equal to such Covered Legal Expenses.  Upon the earlier of (a) Seller’s written acknowledgement to Buyer that all such potential claims have been resolved to Seller’s satisfaction, or (b) one (1) year from the date of this Agreement, the Escrow Agent will return all unsold Reserved Shares to Buyer, and close the Reserve Account and the Escrow Account, and the obligations of the Buyer to the Seller pursuant to this Section 11.2.6. shall cease and terminate.

  

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11.3              Procedure.

11.3.1  Notice.  In the event that Indemnified Party seeks to be indemnified against a Loss, it shall give written notice thereof to the Indemnifying Party as appropriate. Notwithstanding the foregoing, the rights of any Indemnified Party to be indemnified in respect of any Loss resulting from the asserted liability shall not be adversely affected by the Indemnified Party’s failure to give or delay in giving notice unless (and then only to the extent that) the  Indemnifying Party is materially prejudiced thereby.

11.3.2           Defense.  If any claim, demand or liability is asserted by any third party against any Indemnified Party, the Indemnifying Party shall be entitled to participate therein and defend any action or proceeding brought against the Indemnified Party in respect of matters embraced by the indemnity, and the Indemnifying Party shall have the right to conduct and control the defense subject to the Indemnified Party’s approval in writing of outside counsel selected by the Indemnifying Party.  After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party under this Section 11.3 for any reasonable legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation.  In any action defended by the Indemnifying Party the Indemnified Party shall have the right to be represented by its own counsel at its own expense unless (1) the employment of such counsel shall have been authorized in writing by the Indemnifying Party; or (2) the Indemnifying Party shall not have properly employed counsel reasonably satisfactory to such Indemnified Party to have charge of the defense of such action; in each of such cases such fees and expenses shall be paid and advanced by the Indemnifying Party.  In addition, if the named parties to any such action, suit or proceeding (including any impleaded parties) shall include both such Indemnified Party and Indemnifying Party, and such Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from, or additional to, those available to the Indemnifying Party, and if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of such action, suit or proceeding on behalf of such Indemnified Party, and the Indemnified Party may participate in the defense of such action, suit or proceeding and such fees and expenses shall be paid and advanced by the Indemnifying Party; it being understood, however, that the Indemnifying Party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel for all such Indemnified Party).  The Indemnifying Party will not, without Indemnified Party’s written consent, settle or compromise any indemnifiable claim or consent to the entry of any judgment in respect thereof unless such settlement, compromise or consent includes an unconditional release of the Indemnified Party from all liability in respect of such indemnifiable claim.  The parties shall cooperate in the defense of all third party claims which may give rise to indemnifiable claims hereunder.

12.         MISCELLANEOUS.

12.1              Expenses.  Except as otherwise provided herein, each of the parties hereto shall bear its own expenses (including without limitation attorneys’ fees) in connection with the negotiation and consummation of the transaction contemplated hereby.

12.2              Notices.  Any notice required or permitted to be given under this Agreement shall be in writing and shall be personally or sent by certified or registered United States mail, postage prepaid, or sent by nationally recognized overnight express courier and addressed as follows:

12.2.1           If to Seller:

CMBG Advisors, Inc.

848 Leonard Road

Los Angeles, CA  90049                                                                                     Attention:  James Baer, President

With copy to:

Mara Morner-Ritt, Esq.

Baer & Troff, LLP

c/o Brandon & Morner-Ritt, P.C.

2001 Wilshire Boulevard, Suite 400

Santa Monica, CA  90403

12.2.2           If to Buyer:

Camelot Entertainment Group, Inc.

8001 Irvine Center Drive, Suite 400

  

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Irvine, CA 92618                                                                           

                                               Attention:  Robert P. Atwell, Chairman and CEO

With copy to:

J. A. Ted Baer, Esq.

                                                21 East Canon Perdido Street, Suite 223

Santa Barbara, CA 93101

 

	
  

	
Any such Notices shall be deemed to have been duly given and effective:

 

	
  

	
(i)              Upon receipt if delivered in person; or

 

	
  

	
(ii)

	
On the date of machine transmittal (except if sent after 5:00 p.m. recipient's time, then the Notice shall be deemed given at 9:00 a.m. on the next business day) when electronically transmitted by facsimile or email, with a copy also given as described in (iv); or

	
  

	
(iii)

	
One (1) day after deposit with a national overnight delivery service; or

	
  

	
(iv)

	
Three (3) days after deposit with the United States Post Office by certified mail, return receipt requested, postage prepaid.

Any party to whom Notices are to be sent pursuant to this Agreement may from time to time change its address, facsimile number, or email address for future communication hereunder by giving Notice in the manner prescribed herein to all other parties named in this Section 12.2, provided that the change shall not be effective until five (5) business days after the Notice of change has been given.

12.3              Entire Agreement; Survival.  This Asset Purchase Agreement, the Schedules and Exhibits hereto (which are incorporated herein by reference) and any agreements to be executed and delivered in connection herewith, together constitute the entire agreement and understanding between the parties and there are no agreements or commitments with respect to the transactions contemplated herein except as set forth in this Agreement.  This Agreement supersedes any prior offer, agreement or understanding between the parties with respect to the transactions contemplated hereby. The representations and warranties contained in this Agreement will survive the Closing.

12.4              Amendment; Waiver.  Any term or provision of this Agreement may be amended only by a writing signed by duly-authorized officers of both the Seller and the Buyer.  The observance of any term or provision of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a writing signed by the party to be bound by such waiver.  No waiver by a party of any breach of this Agreement will be deemed to constitute a waiver of any other breach or any succeeding breach.

12.5              Execution in Counterparts.  For the convenience of the parties, this Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

  

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12.6              Benefit and Burden.  This Agreement shall be binding upon, shall inure to the benefit of, and be enforceable by and against, the parties hereto and their respective successors and permitted assigns.

12.7              Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of California (excluding application of any choice of law doctrines that would make applicable the law of any other state or jurisdiction) and, where appropriate, applicable federal law.

12.8              Severability.  If any provision of this Agreement is for any reason and to any extent deemed to be invalid or unenforceable, then such provision shall not be voided but rather shall be enforced to the maximum extent then permissible under then applicable law and so as to reasonably effect the intent of the parties hereto, and the remainder of this Agreement will remain in full force and effect.

12.9              Attorneys’ Fees.  Should a suit or arbitration be brought to enforce or interpret any provision of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees to be fixed in amount by the Court or the Arbitrator(s) (including without limitation costs, expenses and fees on any appeal).  The prevailing party will be entitled to recover its costs of suit or arbitration, as applicable, regardless of whether such suit or arbitration proceeds to a final judgment or award.

12.10              Survival.  The representations, warranties, covenants and agreements made herein shall survive the closing of the transactions contemplated hereby.

  

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IN WITNESS WHEREOF, Buyer and Seller executed and delivered this Agreement by their duly authorized representatives as of the Effective Date.

SELLER:                                                                                             BUYER:

CMBG Advisors, Inc., in its sole and                                            Camelot Film Group, Inc.

limited capacity as Assignee for the Benefit

of Creditors of Liberation Entertainment, Inc.

 

 

	
ByJames Baer

James Baer, President

	
By:Robert P. Atwell 

Robert P. Atwell, President        

	
         

WITH RESPECT TO OBLIGATIONS PURSUANT TO SECTION 2.1, SECTION 4 AND SECTION 7 ONLY:

Camelot Entertainment Group, Inc.

By:/s/ Robert P. Atwell

 Robert P. Atwell, President

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