CONVERTIBLE PROMISSORY
NOTE
S500,000 PLUS INTEREST DUE &
PAYABLE
THIS NOTE AND THE SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE SHARES
ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR APPLICABLE EXEMPTION OR SAFE HARBOR
PROVISION.
FOR VALUE RECEIVED, on the Effective Date, as
defined below on the signature page, Camelot Entertainment
Group, Inc. as Obligor ("Borrower," or ''Obligor"), hereby
promises to pay to the Lender ("Lender" or " Holder"), as defined
below on the signature page, the Principal Sum, as defined below,
along with the Interest Rate, as defined below, according to the
terms herein.
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JMJ Financial / Its Principal, or Its
Assignees
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The "Principal
Sum" shall be:
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$500,000 (five hundred thousand US Dollars):
Subject to the following: accrued, unpaid interest shall be added
to the Principal Sum.
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The
"Consideration" shall be:
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$500,000 (five hundred thousand US dollars) in
the form of the Secured & Collateralized Promissory Note
Document C-08172009a (including Security & Collateral
Agreement).
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The "Interest
Rate" shall be:
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12% one-time interest charge on the Principal
Sum. No interest or principal payments are required until the
Maturity Date, but both principal and interest may be included in
conversion prior to maturity date.
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The "Conversion
Price" shall be the following price:
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As applied to the Conversion Formula set forth
in 2.2, 50% (fifty percent) of the lowest trade price in the 20
trading days previous to the conversion; as applies to Camelot
Entertainment Group, Inc. voting common stock.
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The "Maturity
Date" is the date upon which the Principal Sum of this Note, as
well as any unpaid interest shall be due and payable, and that date
shall be:
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3 (three) years from the Effective Date, as
defined below on the signature page.
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The "Prepayment
Terms" shall be:
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Prepayment is
not permitted, unless approved by Holder in writing.
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ARTICLE 1
PAYMENT-RELATED PROVISIONS
1.1 Interest Rate. Subject to the
Holder's right to convert, interest payable on this Note will
accrue interest at the Interest Rate and shall be applied to the
Principal Sum.
ARTICLE 2
CONVERSION RIGHTS
The Holder will have the right to
convert the Principal Sum and accrued interest under this Note into
Shares of the Borrower's Common Stock as set forth
below.
2.1 Conversion Rights and Cashless
Exercise. Subject to the terms set forth in Section 2.7, the Holder
will have the right at its election from and after the Effective
Date, and then at any time, to convert all or part of the
outstanding and unpaid Principal Sum and accrued interest into
shares of fully paid and nonassessable shares of common stock of
Camelot Entertainment Group, Inc. (as such stock exists on the date
of issuance of this Note, or any shares of capital stock of Camelot
Entertainment Group, Inc. into which such stock is hereafter
changed or reclassified, the "Common Stock") as per the Conversion
Formula set forth in Section 2.2. Any such conversion shall be
cashless, and shall not require further payment from Holder. Unless
otherwise agreed in writing by both the Borrower and the Holder, at
no time will the Holder convert any amount of the Note into common
stock that would result in the Holder owning more than 4.99% of the
common stock outstanding of Camelot Entertainment Group, Inc.
Shares from any such conversion will be delivered to Holder within
2 (two) business days of conversion notice delivery (see 3.1) via
10:30am priority overnight delivery service (see Section
2.6).
2.2. Conversion Formula. The number
of shares issued through conversion is the conversion amount
divided by the conversion price.
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# Shares =
Conversion Amount
Conversion Price
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2.3 Conversion Formula Adjustments. The
Conversion Formula described in Sections 2.2 and the number and
kind of shares or other securities to be issued upon conversion is
subject to adjustment upon any of the events as described in 2.3.1
to 2.3.3, or any other event as mutually agreed in writing by both
the Holder and Borrower. The adjustment due to any of the described
events shall be: The result of the Conversion Formula described in
2.2 above shall be multiplied by (2) two, such that the number of
shares calculated in the Conversion Formula would be
doubled.
2.3.1. Merger, Consolidation or Sale
of Assets. If the Borrower at any time consolidates with or merges
into, or sells or conveys all or substantially all of its assets
to, any other entity, the unpaid Principal Sum of this Note and
accrued interest thereon will thereafter be deemed to evidence the
right to purchase such number and kind of shares or other
securities and property as would have been issuable or
distributable, on account of such consolidation, merger, sale or
conveyance, upon or with respect to the securities subject to the
conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision
will similarly apply to successive transactions of a similar nature
by any such successor or purchaser. Without limiting the generality
of the foregoing, the anti-dilution provisions of this Note will
apply to such securities of such successor or purchaser after any
such consolidation, merger, sale or conveyance.
2.3.2. Reclassification. If the
Borrower at any time, by reclassification or otherwise, changes the
Common Stock into the same or a different number of securities of
any class or cl
