Exhibit 10.2
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BYTHIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACTOF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATIONSTATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, ASAMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THATREGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED INCONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN ORFINANCING ARRANGEMENT SECURED BY THE SECURITIES.
| Principal Amount: $33,000.00 | | Issue Date: December 10, 2014 |
| Purchase Price: $33,000.00 | | |
CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED,POCKET GAMES, INC., a Florida corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of KBMWORLDWIDE, INC., a New York corporation, or registered assigns (the “Holder”) the sum of$33,000.00 together with any interest as set forth herein, on September 12, 2015 (the “MaturityDate”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly setforth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof untilthe same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of dayselapsed. All payments due hereunder (to the extent not converted into common stock, $0.0001par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made inlawful money of the United States of America. All payments shall be made at such address asthe Holder shall hereafter give to the Borrower by written notice made in accordance with theprovisions of this Note. Whenever any amount expressed to be due by the terms of this Note isdue on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day onwhich commercial banks in the city of New York, New York are authorized or required by lawor executive order to remain closed. Each capitalized term used herein, and not otherwisedefined, shall have the meaning ascribed thereto
in that certain Securities Purchase Agreementdated the date hereof, pursuant to which this Note was originally issued(the “Purchase Agreement”).
This Note is free from all taxes, liens, claims and encumbrances with respect to the issuethereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall apply to this Note:
ARTICLE I.CONVERSION RIGHTS
1.1 Conversion Right. The Holder shall have the right from time to time, and atany time during the period beginning on the date which is one hundred eighty (180) daysfollowing the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the dateof payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or ArticleIII, each in respect of the remaining outstanding principal amount of this Note to convert all orany part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or anyshares of capital stock or other securities of the Borrower into which such Common Stock shallhereafter be changed or reclassified at the conversion price(the “Conversion Price”) determinedas provided herein (a “Conversion”);provided,however, that in no event shall the Holder beentitled to convert any portion of this Note in excess of that portion of this Note upon conversionof which the sum of (1) the number of shares of Common Stock beneficially owned by theHolder and its affiliates (other than shares of Common Stock which may be deemed beneficiallyowned through the ownership of the unconverted portion of the Notes or the unexercised orunconverted portion of any other security of the Borrower subject to a limitation on conversionor exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, asamended (the“Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso,provided,further,however, that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specifiedin such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice ofconversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered tothe Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term
“Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to beconverted in such conversionplus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date,plus(3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2)plus (4) at the Holder’s option, any amounts owed to the Holderpursuant to Sections 1.3 and 1.4(g) hereof.
1.2Conversion Price.
(a)Calculation of Conversion Price. The conversion price(the“Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower,combinations, recapitalization, reclassifications, extraordinary distributions and similar events).The "Variable Conversion Price" shall mean 58% multiplied by the Market Price (as definedherein) (representing a discount rate of 42%). “Market Price” means the average of the lowestthree (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.“TradingPrice” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, Pink Sheets electronic quotation system or applicable trading market(the“OTC”) as reported by a reliable reporting service (“Reporting Service”) designated by theHolder (i.e. Bloomberg) or, if the OTC is not the principal trading market for such security, theclosing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any ofthe foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets”. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order todetermine the Conversion Price of such Notes. “Trading Day” shall mean any day on which theCommon Stock is tradable for any period on the OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.
(b)Conversion Price During Major Announcements. Notwithstandinganything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a publicannouncement that it intends to consolidate or merge with any other corporation (other than amerger in which the Borrower is the surviving or continuing corporation and its capital stock isunchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) anyperson, group or entity (including the Borrower) publicly announces a tender offer to purchase50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of theannouncement referred to in clause (i) or (ii) is hereinafter referred to as the“AnnouncementDate”), then the Conversion Price shall, effective upon the Announcement Date and continuingthrough the Adjusted Conversion Price Termination Date (as defined below), be equal to thelower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. Fromand after
the Adjusted Conversion Price Termination Date, the Conversion Price shall bedetermined as set forth in this Section 1.2(a). For purposes hereof,“Adjusted Conversion PriceTermination Date” shall mean, with respect to any proposed transaction or tender offer (ortakeover scheme) for which a public announcement as contemplated by this Section 1.2(b) hasbeen made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme)which caused this Section 1.2(b) to become operative.
1.3 Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued CommonStock a sufficient number of shares, free from preemptive rights, to provide for the issuance ofCommon Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement.The Borrower is required at all times to have authorized and reserved five times the number ofshares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shallbe increased from time to time in accordance with the Borrower’s obligations hereunder. TheBorrower represents that upon issuance, such shares will be duly and validly issued, fully paidand non-assessable. In addition, if the Borrower shall issue any securities or make any change toits capital structure which would change the number of shares of Common Stock into which theNotes shall be convertible at the then current Conversion Price, the Borrower shall at the sametime make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of theoutstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transferagent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agentswho are charged with the duty of executing stock certificates to execute and issue the necessarycertificates for shares of Common Stock in accordance with the terms and conditions of thisNote.
If, at any time the Borrower does not maintain the Reserved Amount it will beconsidered an Event of Default under Section 3.2 of the Note.
1.4Method of Conversion.
(a)Mechanics of Conversion. Subject to Section 1.1, this Note may beconverted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of theBorrower.
(b)Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entireunpaid principal amount of this Note is so converted. The Holder and the Borrower shall
maintain records showing the principal amount so converted and the dates of such conversions orshall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not torequire physical surrender of this Note upon each such conversion. In the event of any dispute ordiscrepancy, such records of the Borrower shall,primafacie, be controlling and determinative inthe absence of manifest error. Notwithstanding the foregoing, if any portion of this Note isconverted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliverupon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment bythe Holder of any applicable transfer taxes) may request, representing in the aggregate theremaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance ofthis Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.
(c)Payment of Taxes. The Borrower shall not be required to pay any taxwhich may be payable in respect of any transfer involved in the issue and delivery of shares ofCommon Stock or other securities or property on conversion of this Note in a name other thanthat of the Holder (or in street name), and the Borrower shall not be required to issue or deliverany such shares or other securities or property unless and until the person or persons (other thanthe Holder or the custodian in whose street name such shares are to be held for the Holder’saccount) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(d)Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means ofcommunication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to orupon the order of the Holder certificates for the Common Stock issuable upon such conversionwithin three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordancewith the terms hereof and the Purchase Agreement.
(e)Obligation of Borrower to Deliver Common Stock. Upon receipt bythe Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record ofthe Common Stock issuable upon such conversion, the outstanding principal amount and theamount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion,and, unless the Borrower defaults on its obligations under this Article I, all rights with respect tothe portion of this Note being so converted shall forthwith terminate except the right to receivethe Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, theBorrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same,any waiver or consent with respect to any provision thereof, the recovery of any judgmentagainst any person or any action to enforce the same, any failure or delay in the enforcement ofany other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. TheConversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New Yorktime, on such date.
(f)Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) FastAutomated Securities Transfer(“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrowershall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker withDTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.
(g)Failure to Deliver Common Stock Prior to Deadline. Without in anyway limiting the Holder’s right to pursue other remedies, including actual damages and/orequitable relief, the parties agree that if delivery of the Common Stock issuable upon conversionof this Note is not delivered by the Deadline (other than a failure due to the circumstancesdescribed in Section 1.3 above, which failure shall be governed by such Section) the Borrowershall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock through willful or deliberate hindrances on the part of the Borrower. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice tothe Borrower by the first day of the month following the month in which it has accrued), shall beadded to the principal amount of this Note, in which event interest shall accrue thereon inaccordance with the terms of this Note and such additional principal amount shall be convertibleinto Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in thisSection 1.4(g) are justified.
1.5 Concerning the Shares. The shares of Common Stock issuable uponconversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant toan effective registration statement under the Act or (ii) the Borrower or its transfer agent shallhave been furnished with an opinion of counsel (which opinion shall be in form, substance andscope customary for opinions of counsel in comparable transactions) to the effect that the sharesto be sold or transferred may be sold or transferred pursuant to an exemption from suchregistration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or asuccessor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined inRule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement).Except as otherwise provided in the Purchase Agreement (and subject to the removal provisionsset forth below), until such time as the shares of Common Stock issuable upon conversion of thisNote have been registered
under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediatelysold, each certificate for shares of Common Stock issuable upon conversion of this Note that hasnot been so included in an effective registration statement or that has not been sold pursuant toan effective registration statement or an exemption that permits removal of the legend, shall beara legend substantially in the following form, as appropriate:
“NEITHER THE ISSUANCE AND SALE OF THE SECURITIESREPRESENTED BY THIS ERTIFICATE NOR THE SECURITIES INTOWHICH THESE SECURITIES ARE EXERCISABLE HAVE BEENREGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ORAPPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BEOFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THEABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THESECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B)AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BYTHE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OROTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THESECURITIES.”
The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary foropinions of counsel in comparable transactions, to the effect that a public sale or transfer of suchCommon Stock may be made without registration under the Act, which opinion shall be acceptedby the Company so that the sale or transfer is effected or (ii) in the case of the Common Stockissuable upon conversion of this Note, such security is registered for sale by the Holder under aneffective registration statement filed under the Act or otherwise may be sold pursuant to Rule144 without any restriction as to the number of securities as of a particular date that can then beimmediately sold. In the event that the Company does not accept the opinion of counselprovided by the Holder with respect to the transfer of Securities pursuant to an exemption fromregistration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event ofDefault pursuant to Section 3.2 of the Note.
1.6Effect of Certain Events.
(a)Effect of Merger, Consolidation, Etc. At the option of the Holder, thesale, conveyance or disposition of all or substantially all of the assets of the Borrower, theeffectuation by the Borrower of a transaction or series of related transactions in which more than50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event ofDefault (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to theDefault Amount (as
defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership,association, trust or other entity or organization.
(b)Adjustment Due to Merger, Consolidation, Etc. If, at any time whenthis Note is issued and outstanding and prior to conversion of all of the Notes, there shall be anymerger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of theBorrower or another entity, or in case of any sale or conveyance of all or substantially all of theassets of the Borrower other than in connection with a plan of complete liquidation of theBorrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock,securities or assets which the Holder would have been entitled to receive in such transaction hadthis Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafterdeliverable upon the conversion hereof. The Borrower shall not affect any transaction describedin this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or shareexchanges.
(c)Adjustment Due to Distribution. If the Borrower shall declare or makeany distribution of its assets (or rights to acquire its assets) to holders of Common Stock as adividend, stock repurchase, by way of return of capital or otherwise (including any dividend ordistribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determiningshareholders entitled to such Distribution, to receive the amount of such assets which would havebeen payable to the Holder with respect to the shares of Common Stock issuable upon suchconversion had such Holder been the holder of such shares of Common Stock on the record datefor the determination of shareholders entitled to such Distribution.
(d)Purchase Rights. If, at any time when any Notes are issued andoutstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class ofCommon Stock, then the Holder of this Note will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could haveacquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion containedherein) immediately before the date on which a record is taken for the grant, issuance or sale ofsuch Purchase Rights or, if no such record is taken, the date as of which the record holders ofCommon Stock are to be determined for the grant, issue or sale of such Purchase Rights.
(e)Notice of Adjustments. Upon the occurrence of each adjustment orreadjustment of the Conversion Price as a result of the events described in this Section 1.6, theBorrower, at its expense, shall promptly compute such adjustment or readjustment and prepareand furnish to the Holder a certificate setting forth such adjustment or readjustment and showingin detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities orproperty which at the time would be received upon conversion of the Note.
1.7Trading Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the“Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the ClosingDate (as defined in the Purchase Agreement), subject to equitable adjustment from time to timefor stock splits, stock dividends, combinations, capital reorganizations and similar events relatingto the Common Stock occurring after the date hereof. Once the Maximum Share Amount hasbeen issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rulesor regulations of any stock exchange, interdealer quotation system or other self-regulatoryorganization with jurisdiction over the Borrower or any of its securities on the Borrower’s abilityto issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of anyfurther right to convert this Note, this will be considered an Event of Default under Section 3.3of the Note.
1.8Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issuedbecause their issuance would exceed such Holder’s allocated portion of the Reserved Amount orMaximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) theHolder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to anyremedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th)business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holderof Common Stock
by so notifying the Borrower) the Holder shall regain the rights of a Holder ofthis Note with respect to such unconverted portions of this Note and the Borrower shall, as soonas practicable, return such unconverted Note to the Holder or, if the Note has not beensurrendered, adjust its records to reflect that such portion of this Note has not been converted. Inall cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent requiredthereby for such Conversion Default and any subsequent Conversion Default and (ii) the right tohave the Conversion Price with respect to subsequent conversions determined in accordance withSection 1.3) for the Borrower’s failure to convert this Note.
1.9Prepayment. Notwithstanding anything to the contrary contained in thisNote, at any time during the periods set forth on the table immediately following this paragraph (the “Prepayment Periods”), the Borrower shall have the right, exercisable on not less than three(3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note(principal and accrued interest), in full, in accordance with this Section 1.9. Any notice ofprepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of theNote at its registered addresses and shall state: (1) that the Borrower is exercising its right toprepay the Note, and (2) the date of prepayment which shall be not more than three (3) TradingDays from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the“Optional Prepayment Date”), the Borrower shall make payment of the Optional PrepaymentAmount (as defined below) to Holder, or upon the order of the Holder as specified by the Holderin writing to the Borrower, at least one (1) business day prior to the Optional Prepayment Date.If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to theHolder of an amount in cash (the “Optional Prepayment Amount”) equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately following this paragraphopposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstandingprincipal amount of this Noteplus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Dateplus (y) Default Interest, if any, on theamounts referred to in clauses (w) and (x)plus (z) any amounts owed to the Holder pursuant toSections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and failsto pay the Optional Prepayment Amount due to the Holder of the Note within two (2) businessdays following the Optional Prepayment Date, the Borrower shall forever forfeit its right toprepay the Note pursuant to this Section 1.9.
| Prepayment Period | Prepayment Percentage |
| | |
1. The period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date. | 110% |
2. The period beginning on the date which is thirty-one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date | 115% |
3. The period beginning on the date which is sixty-one(61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date | 120% |
|
4. The period beginning on the date that is ninety-one (91) day from the Issue Date and ending one hundred twenty (120days following the Issue Date | 125% |
5. The period beginning on the date that is one hundred twenty-one (121) day from the Issue Date and ending one hundred fifty (150) days following the Issue Date | 130% |
6. The period beginning on the date that is one hundred fifty-one (151) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date | 135% |
After the expiration of one hundred eighty (180) following the date of the Note,the Borrower shall have no right of prepayment.
ARTICLE II. CERTAIN COVENANTS
2.1Distributions on Capital Stock. So long as the Borrower shall have anyobligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay,declare or set apart for such payment, any dividend or other distribution (whether in cash,property or other securities) on shares of capital stock other than dividends on shares of CommonStock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stockexcept for distributions pursuant to any shareholders’ rights plan which is approved by a majorityof the Borrower’s disinterested directors.
2.2Restriction on Stock Repurchases. So long as the Borrower shall have anyobligation under this Note, the Borrower shall not without the Holder’s written consent redeem,repurchase or otherwise acquire (whether for cash or in exchange for property or other securitiesor otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.
2.3Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, (a) create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any other person, firm, partnership, joint venture or corporation, except by theendorsement of negotiable instruments for deposit or collection, or (b) suffer to exist any liabilityfor borrowed money, except any borrowings that does not render the Borrower a "Shell"company as defined in Rule 12b-2 under the Securities Exchange Act of 1934.
2.4Sale of Assets. So long as the Borrower shall have any obligation under thisNote, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business except when any sale, lease or disposition is done for fair consideration and does not render the
Borrower a "Shell" company as defined in Rule 12b-2 under the Securities Exchange Act of1934. Any consent to the disposition of any assets may be conditioned on a specified use of theproceeds of disposition.
2.5Advances and Loans. So long as the Borrower shall have any obligationunder this Note, the Borrower shall not, without the Holder’s written consent, lend money, givecredit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business, (c) that do not render the Borrower a "Shell" company as defined in Rule12b-2 under the Securities Exchange Act of 1934 that do or (d) not in excess of $100,000.
ARTICLE III. EVENTS OF DEFAULT
If any of the following events of default (each, an “Event of Default”) shall occur:
3.1Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration orotherwise.
3.2Conversion and the Shares. The Borrower through willful or deliberate hindrances, fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer orcause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant tothis Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for shares of Common Stock to be issued tothe Holder upon conversion of or otherwise pursuant to this Note as and when required by thisNote, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/orhinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transferinstructions in respect thereof) on any certificate for any shares of Common Stock issued to theHolder upon conversion of or otherwise pursuant to this Note as and when required by this Note(or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or anywritten announcement, statement or threat not to honor its obligations shall not be rescinded inwriting) for three (3) business days after the Holder shall have delivered a Notice of Conversion.It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shallbe an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrateddue to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion,such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours ofa demand from the Holder.
3.3Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but notlimited to the Purchase Agreement and such breach continues for a period of ten (10) days afterwritten notice thereof to the Borrower from the Holder.
3.4Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuanthereto or in connection herewith (including, without limitation, the Purchase Agreement), shallbe false or misleading in any material respect when made and the breach of which has (or withthe passage of time will have) a material adverse effect on the rights of the Holder with respect tothis Note or the Purchase Agreement.
3.5Receiver or Trustee. The Borrower or any subsidiary of the Borrower shallmake an assignment for the benefit of creditors, or apply for or consent to the appointment of areceiver or trustee for it or for a substantial part of its property or business, or such a receiver ortrustee shall otherwise be appointed.
3.6Judgments. Any money judgment, writ or similar process shall be entered orfiled against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty(20) days unless otherwise consented to by the Holder, which consent will not be unreasonablywithheld.
3.7Bankruptcy.Bankruptcy, insolvency, reorganization or liquidationproceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy lawor any law for the relief of debtors shall be instituted by or against the Borrower or anysubsidiary of the Borrower.
3.8Delisting of Common Stock. The Borrower shall fail to maintain the listing ofthe Common Stock on at least one of the OTC (which specifically includes the Pink Sheets electronic quotation system) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American StockExchange.
3.9Failure to Comply with the Exchange Act. The Borrower shall fail to complywith the reporting requirements of the Exchange Act; and/or the Borrower shall cease to besubject to the reporting requirements of the Exchange Act.
3.10Liquidation. Any dissolution, liquidation, or winding up of Borrower orany substantial portion of its business.
3.11Cessation of Operations. Any cessation of operations by Borrower orBorrower admits it is otherwise generally unable to pay its debts as such debts become due,provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.12Maintenance of Assets. The failure by Borrower to maintain anymaterial intellectual property rights, personal, real property or other assets which are necessary toconduct its business (whether now or in the future).
3.13Financial Statement Restatement.The restatement of any financialstatements filed by the Borrower with the SEC for any date or period from two years prior to theIssue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the PurchaseAgreement.
3.14Reverse Splits. The Borrower effectuates a reverse split of itsCommon Stock without twenty (20) days prior written notice to the Holder.
3.15Replacement of Transfer Agent. In the event that the Borrower proposes toreplace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision toirrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successortransfer agent to Borrower and the Borrower.
3.16Cross-Default. Notwithstanding anything to the contrary contained in thisNote or the other related or companion documents, a breach or default by the Borrower of anycovenant or other term or condition contained in any of the Other Agreements, after the passageof all applicable notice and cure or grace periods, shall, at the option of the Holder, be considereda default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of thisNote and the Other Agreements by reason of a default under said Other Agreement orhereunder.“Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of theHolder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all otherexisting and future debt of Borrower to the Holder.
Upon the occurrence and during the continuation of any Event of Default specified inSection 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when dueat the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to theDefault Sum(as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THENOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWERSHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINEDHEREIN); MULTIPLIED
BY (Z) TWO (2). Upon the occurrence and during the continuation ofany Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principalhereof or interest thereon when due on this Note upon a Trading Market Prepayment Eventpursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately due andpayable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder,an amount equal to the greater of (i) 150%times thesum of (w) the then outstanding principal amount of this Noteplus (x) accrued and unpaid interest on the unpaid principal amount of thisNote to the date of payment (the “Mandatory Prepayment Date”)plus (y) Default Interest, if any,on the amounts referred to in clauses (w) and/or (x)plus (z) any amounts owed to the Holderpursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note tothe date of paymentplus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity value” of the Default Sum to be prepaid, whereparity value means (a) the highest number of shares of Common Stock issuable upon conversionof or otherwise pursuant to such Default Sum in accordance with Article I, treating the TradingDay immediately preceding the Mandatory Prepayment Date as the “Conversion Date” forpurposes of determining the lowest applicable Conversion Price, unless the Default Event arisesas a result of a breach in respect of a specific Conversion Date in which case such ConversionDate shall be the Conversion Date),multiplied by (b) the highest Closing Price for the CommonStock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall beentitled to exercise all other rights and remedies available at law or in equity.
If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to theDefault Amount divided by the Conversion Price then in effect.
ARTICLE IV.MISCELLANEOUS
4.1Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remediesotherwise available.
4.2Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by writtennotice. Any notice or other communication required or permitted to be given hereunder shall bedeemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (ifdelivered on a business day during normal business hours where such notice is to be received), orthe first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses forsuch communications shall be:
If to the Borrower, to:
POCKET GAMES, INC.
909 Plainview Avenue
Far Rockaway, Ny 11691
Attn: DAVID LOVATT, Chief Executive Officer facsimile:
With a copy by fax only to (which copy shall not constitute notice):
[enter name of law firm]
Attn: [attorney name]
[enter address line 1]
[enter city, state, zip]
facsimile: [enter fax number]
If to the Holder:
KBM WORLDWIDE, INC.
80 Cuttermill Road - Suite 410
Great Neck, NY 11021
Attn: Seth Kramer, President
e-mail:info@kbmworldwide.com
With a copy by fax only to (which copy shall not constitute notice):
Naidich Wurman Birnbaum & Maday, LLP
Att: Judah A. Eisner, Esq.
Attn: Bernard S. Feldman, Esq.
facsimile: 516-466-3555
e-mail: dyork@nwbmlaw.com
4.3Amendments. This Note and any provision hereof may only be amended byan instrument in writing signed by the Borrower and the Holder. The term “Note” and allreference thereto, as used throughout this instrument, shall mean this instrument (and the otherNotes issued pursuant to the Purchase Agreement) as originally executed, or if later amended orsupplemented, then as so amended or supplemented.
4.4Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors andassigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a)of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with abonafide margin account or other lendingarrangement.
4.5Cost of Collection. If default is made in the payment of this Note, theBorrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.
4.6Governing Law. This Note shall be governed by and construed in accordancewith the laws of the State of New York without regard to principles of conflicts of laws. Anyaction brought by either party against the other concerning the transactions contemplated by thisNote shall be brought only in the state courts of New York or in the federal courts located in thestate and county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense basedon lack of jurisdiction or venue or based uponforum non conveniens. The Borrower and Holderwaive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicablestatute or rule of law, then such provision shall be deemed inoperative to the extent that it mayconflict therewith and shall be deemed modified to conform with such statute or rule of law.Any such provision which may prove invalid or unenforceable under any law shall not affect thevalidity or enforceability of any other provision of any agreement. Each party herebyirrevocably waives personal service of process and consents to process being served in any suit,action or proceeding in connection with this Agreement or any other Transaction Document bymailing a copy thereof via registered or certified mail or overnight delivery (with evidence ofdelivery) to such party at the address in effect for notices to it under this Agreement and agreesthat such service shall constitute good and sufficient service of process and notice thereof.Nothing contained herein shall be deemed to limit in any way any right to serve process in anyother manner permitted by law.
4.7Certain Amounts. Whenever pursuant to this Note the Borrower is required topay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, theBorrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate theHolder in part for loss of the opportunity to convert this Note and to earn a return from the saleof shares of
Common Stock acquired upon conversion of this Note at a price in excess of theprice paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree thatsuch amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note intoshares of Common Stock.
4.8Purchase Agreement. By its acceptance of this Note, each party agrees to bebound by the applicable terms of the Purchase Agreement.
4.9Notice of Corporate Events. Except as otherwise provided below, the Holderof this Note shall have no rights as a Holder of Common Stock unless and only to the extent thatit converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials andother information sent to shareholders). In the event of any taking by the Borrower of a recordof its shareholders for the purpose of determining shareholders who are entitled to receivepayment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose ofdetermining shareholders who are entitled to vote in connection with any proposed sale, lease orconveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or otherevent to the extent known at such time. The Borrower shall make a public announcement of anyevent requiring notification to the Holder hereunder substantially simultaneously with thenotification to the Holder in accordance with the terms of this Section 4.9.
4.10Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges thatthe remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that theHolder shall be entitled, in addition to all other available remedies at law or in equity, and inaddition to the penalties assessable herein, to an injunction or injunctions restraining, preventingor curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security beingrequired.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by itsduly authorized officer this December 10, 2014.
POCKET GAMES, INC.
By: _______________________________
DAVID LOVATT
Chief Executive Officer
EXHIBIT A -- NOTICE OF CONVERSION
The undersigned hereby elects to convert $_________________principal amount of theNote (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of POCKET GAMES, INC., a Floridacorporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated asof December 10, 2014 (the “Note”), as of the date written below. No fee will be charged to the Holder forany conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
[ ]The Borrower shall electronically transmit the Common Stock issuable pursuant to thisNotice of Conversion to the account of the undersigned or its nominee with DTC throughits Deposit Withdrawal Agent Commission system (“DWAC Transfer”).
Name of DTC Prime Broker:
Account Number:
[ ]The undersigned hereby requests that the Borrower issue a certificate or certificates forthe number of shares of Common Stock set forth below (which numbers are based on theHolder’s calculation attached hereto) in the name(s) specified immediately below or, ifadditional space is necessary, on an attachment hereto:
KBM WORLDWIDE, INC.
80 Cuttermill Road - Suite 410 Great Neck, NY 11021
Attention: Certificate Delivery
e-mail: info@kbmworldwide.com
Date of Conversion: _____________
Applicable Conversion Price: $____________
Number of Shares of Common Stock to be Issued Pursuant to Conversion of the Notes:______________
Amount of Principal Balance Due remaining under the Note after this conversion: ______________
KBM WORLDWIDE, INC.
By:_____________________________
Name: Seth Kramer
Title: President
Date:
