Document:

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this "Agreement") is dated as of May 18, 2016, between Leo Motors, Inc., a Nevada corporation (the "Company"), and the purchasers identified on the signature pages hereto (each, including its successors and assigns, the "Purchaser").

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506 promulgated thereunder, the Company desires to issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

 

ARTICLE I.

DEFINITIONS

 

1.1 Definitions.  In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Debentures (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:

 

"Acquiring Person" shall have the meaning ascribed to such term in Section 4.7.

 

"Action" shall have the meaning ascribed to such term in Section 3.1(j).

 

"Affiliate" means any Person that, directly or indirectly through one or more intermediary, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

"Board of Directors" means the board of directors of the Company.

 

"Business Day" means any day except Saturday, Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

"Closing" means the closing of the purchase and sale of the Debentures pursuant to Section 2.1.

 

"Closing Date" means the Trading Day when all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers' obligations to pay the Subscription Amount and (ii) the Company's obligations to deliver the Debentures have been satisfied or waived.

 

"Closing Statement" means the Closing Statement in the form Annex A attached hereto.

 

"Commission" means the United States Securities and Exchange Commission.

 

"Common Stock" means the common stock of the Company, par value $.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.

 

"Common Stock Equivalents" means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive Common Stock.

 

"Company" means Leo Motors, Inc.

 

"Company Counsel" means Sichenzia Ross Friedman Ference LLP.

 

"Conversion Price" shall have the meaning ascribed to such term in the Debentures.

 

"Debentures" means the Original Issue Discount Convertible Debentures due, subject to the terms therein, twelve months from the Closing Date, issued by the Company to the Purchaser hereunder, in the form of Exhibit A attached hereto.

 

"Disclosure Schedules" shall have the meaning ascribed to such term in Section 3.1.

 

"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

"Exempt Issuance" means the issuance of (a) shares of Common Stock or options to employees, officers, directors or consultants of the Company pursuant to any stock or option plan or agreement duly adopted for such purpose by the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose, (b) securities upon the exercise, exchange or conversion of any Debentures issued hereunder and/or other securities, options, warrants, convertible securities or other rights to acquire, exercisable or exchangeable for or convertible into, shares of Common Stock, in each case that are issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities, (c) securities issued pursuant to acquisitions of companies, assets or intellectual property (or licensing of assets or intellectual property) or strategic transactions approved by a majority of the disinterested directors of the Company, if any, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company, a university or other non

 

 

financial institution and in which the Company receives benefits in addition to the investment of funds, (d) securities issued or issuable in exchange for consideration other than cash in connection with any other transaction that is not for the primary purpose of financing the Company's business, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

 

"GAAP" shall have the meaning ascribed to such term in Section 3.1(h).

 

"Indebtedness" shall have the meaning ascribed to such term in Section 3.1(aa).

 

"Intellectual Property Rights" shall have the meaning ascribed to such term in Section 3.1(o).

 

"Legend Removal Date" shall have the meaning ascribed to such term in Section 4.1(c).

 

"Liens" means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

 "Material Adverse Effect" shall have the meaning assigned to such term in Section 3.1(b).

 

"Material Permits" shall have the meaning ascribed to such term in Section 3.1(m).

 

"Maximum Rate" shall have the meaning ascribed to such term in Section 5.17.

 

"Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

"Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

"Purchaser Party" shall have the meaning ascribed to such term in Section 4.10.

 

"Required Approvals" shall have the meaning ascribed to such term in Section 3.1(e).

 

"Required Minimum" means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon conversion in full of the Debentures (including Underlying Shares issuable as payment of interest on the Debentures), ignoring any conversion or exercise limits set forth therein.

 

"Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

"SEC Reports" shall have the meaning ascribed to such term in Section 3.1(h).

 

"Securities" means the Debentures and the Underlying Shares.

 

"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

"Short Sales" means all "short sales" as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock). 

 

"SRFF" means Sichenzia Ross Friedman Ference LLP, 61 Broadway, New York, New York 10006.

 

"Subscription Amount" means the aggregate amount to be paid for the Debentures purchased hereunder as specified below the Purchaser's name on the signature page of this Agreement and next to the heading "Subscription Amount," in United States dollars and in immediately available funds.

 

"Subsidiary" means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

"Trading Day" means a day on which the principal Trading Market is open for trading.

 

"Trading Market" means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, LLC, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTC Bulletin Board or the OTC QB maintained by the OTC Markets Group, Inc.

 

"Transaction Documents" means this Agreement, the Debentures, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

"Transfer Agent" means Madison Stock Transfer, Inc., the current transfer agent of the Company with a mailing address of 1688 East 16th Street #7, Brooklyn, NY 11229 and a telephone number of (718) 627-4453 and any successor transfer agent of the Company.

 

"Underlying Shares" means the shares of Common Stock issued and issuable upon conversion or redemption of the Debentures and issued and issuable in lieu of the

 

 

cash payment of interest on the Debentures in accordance with the terms of the Debentures.

 

 "VWAP" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. New York City time to 4:02 p.m. New York City time); (b) if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC QB; (c) if the OTC QB is not a Trading Market, the most recent bid price per share of the Common Stock for such date (or the nearest preceding date) on the "Pink Sheets" as then listed or quoted for trading by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

 

ARTICLE II.

PURCHASE AND SALE

 

2.1 Closing.  On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchaser agrees to purchase, for a purchase price of an aggregate of $359,055, an aggregate of $395,000 in principal amount of the Debentures.  Of the $359,055 purchase price, the initial $179,527.50 shall be funded on the Closing Date, and $179,527.50 shall be funded on or before the 30th day immediately following the Closing Date or, if such date is not a Trading Day, on the date that shall be the immediately following Trading Day (each date a "Closing"). The Purchaser shall deliver to the Company, via wire transfer, immediately available funds equal to its Subscription Amount and the Company shall deliver to the Purchaser its Debentures, as determined pursuant to Section 2.2(a), and the Company and the Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3, the initial Closing shall occur at the offices of SRFF or such other location as the parties shall mutually agree.

 

2.2 Deliveries.  (a)

 

		(a)	On the initial Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

 

		(i)	this Agreement duly executed by the Company; and

 

		(ii)	a Debenture with a principal amount equal to a 9.1% original issue discount of the Purchaser's Subscription Amount, registered in the name of the Purchaser.

 

 

 

		(b)	On the following Closing Date, the Company shall deliver or cause to be delivered to the Purchaser a Debenture with a principal amount equal to a 9.1% original issue discount of the Purchaser's Subscription Amount, registered in the name of the Purchaser.

 

		(c)	On each Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:

 

(i)          this Agreement duly executed by the Purchaser; and

 

		(ii)	such Purchaser's Subscription Amount by wire transfer to the account as specified in writing by the Company. (See Annex A)

 

2.3 Closing Conditions.

 

(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met, unless waived in the sole and absolute discretion of the Company:

 

(i) the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchaser contained herein;

 

(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and

 

(iii) the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

 

(b) The obligations of the Purchaser hereunder in connection with the Closing are subject to the following conditions being met, unless waived in the sole and absolute discretion of the Purchaser:

 

(i) the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein;

 

(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

 

(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement; and

 

(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof.

 

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company.  Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

 

(a) Subsidiaries.  The Company has five Subsidiaries: Leomotors Korea, Inc., LGM Co. Ltd., Leo Trading, Inc., Leo Motors Factory 1, Inc. and Leo Motors Factory 2, Inc.  The Company owns, directly or indirectly, the capital stock or other equity interests of each Subsidiary, in the amounts set forth on Schedule 3.1(a), free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.  If the Company shall at any time in which no Debentures remain outstanding have no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

 

(b) Organization and Qualification.  The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company's ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a "Material Adverse Effect") and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c) Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of each of the Transaction Documents by the

 

 

Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company's stockholders in connection therewith other than in connection with the Required Approvals.  Each Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(d) No Conflicts.  The execution, delivery and performance by the Company of the Transaction Documents and the consummation by it to which it is a party of the other transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company's or any Subsidiary's certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(e) Filings, Consents and Approvals.  The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.6, (ii) such consents, waivers, or authorizations as have been obtained before the Closing, (iii) if required, the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Underlying Shares for trading thereon in the time and manner required thereby and (iv) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the "Required Approvals").

 

(f) Issuance of the Securities.  The issuance of the Debentures has been duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.  The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.  The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares.

 

(g) Capitalization.  The capitalization of the Company immediately prior to Closing is, in all material respects, as set forth in the SEC Reports. Except as provided on Schedule 3.1(g), or the SEC Reports, no Person has (i) any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents except for such, if any, as will have been validly waived before the Closing and (ii) except pursuant to the operation of agreements filed as exhibits to the SEC Reports before the date of this Agreement, the issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchaser) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities.  No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.  Except as filed as exhibits to the SEC Reports, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company's capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company's stockholders.

 

(h) SEC Reports; Financial Statements.  Except as set forth on Schedule 3.1(h) hereto, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under Section 15(d) of the Exchange Act for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the "SEC Reports") on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension, except as set forth on Schedule 3.1(h).  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  The financial statements of the Company included in the SEC Reports comply in all material

 

respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP"), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

(i) Material Changes.  Except as provided in Schedule 3.1(i), since the date of the latest financial statements included in the SEC Reports: (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company equity incentive plans. The Company does not have pending before the Commission any request for confidential treatment of information.  Except for the issuance of the Securities contemplated by this Agreement, no event, liability or development has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one Trading Day prior to the date that this representation is made.

 

(j) Litigation.  Except as disclosed in the SEC Reports, there is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an "Action") which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company.  The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

(k) Labor Relations.  No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect.  None of the Company's or its Subsidiaries' employees is a member of a union that relates to such employee's relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good.  No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.  To the Company's knowledge, the Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(l) Compliance.  To the Company's knowledge, neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other material agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each of the foregoing cases as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(m) Regulatory Permits.  The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect ("Material Permits"), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

(n) Title to Assets.  The Company and the Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title in all personal property owned by it that, in each case, is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the

 

 

Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties in any material respect.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

 

(o) Patents and Trademarks.  To the Company's knowledge (without having conducted any independent investigation): (i) the Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as described in the SEC Reports as necessary or material for use in connection with their respective businesses and which the failure to so have could reasonably be expected to have a Material Adverse Effect (collectively, the "Intellectual Property Rights"); (ii) neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of the Intellectual Property Rights violates or infringes upon the rights of any Person; (iii) all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights, except where the failure to be so enforceable or for such infringements as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (iv) the Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(p) Transactions with Affiliates and Employees.  Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $120,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan of the Company

 

(q) Environmental Laws.  The Company and its subsidiaries are (i) in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except in each of the above cases where noncompliance could not be reasonably expected to have a Material Adverse Effect.

 

 

 

(r) Sarbanes-Oxley; Internal Accounting Controls.  Except as set forth in the SEC Reports, the Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing Date.  The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.  The Company's certifying officers have evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by the Company's most recently filed periodic report under the Exchange Act (such date, the "Evaluation Date").  The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no changes in the Company's internal control over financial reporting (as such term is defined in the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

 

(s) Certain Fees.  Except as disclosed on Schedule 3.1(t), no brokerage or finder's fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents,.  The Purchaser shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(t) Private Placement.  Assuming the accuracy of the Purchaser's representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Debentures by the Company to the Purchaser as contemplated hereby. The issuance and sale of the Debentures hereunder does not contravene the rules and regulations of the Trading Market.

 

(u) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an "investment company" within the meaning of the Investment Company Act of 1940, as amended.  The Company shall conduct its business in a manner so that it will not become subject to the Investment Company Act of 1940, as amended.

 

 

(v) Registration Rights.  Except as disclosed in the SEC Reports, no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company.

 

(w) Listing and Maintenance Requirements.  The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration.  The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

 

(x) Application of Takeover Protections.  The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company's certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchaser as a result of the Purchaser and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company's issuance of the Securities and the Purchaser's ownership of the Securities.

 

(y) Disclosure.  Except with respect to (i) the material terms and conditions of the transactions contemplated by the Transaction Documents and (ii) information given to the Investor, if any, which the Company hereby confirms will not constitute material non-public information six months from the date hereof, the Company confirms that neither it nor any other Person acting on its behalf has provided the Purchaser or their agents or counsel with any information that it believes constitutes or might constitute material, nonpublic information.  The Company understands and confirms that the Purchaser will rely on the foregoing representation in effecting transactions in securities of the Company.  All disclosure furnished in writing by or on behalf of the Company to the Purchaser regarding the Company, its business and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.   The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading.

 

 

The Company acknowledges and agrees that the Purchaser has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

 

(z) No Integrated Offering. Assuming the accuracy of the Purchaser's representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act which would require the registration of any such securities under the Securities Act.

 

(aa) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.

 

(bb) No General Solicitation. Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising.  The Company has offered the Securities for sale only to the Purchaser and certain other "accredited investors" within the meaning of Rule 501 under the Securities Act.

 

(cc) Foreign Corrupt Practices.  Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is  in violation of law or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

 

(dd) No Disagreements with Accountants and Lawyers; Outstanding SEC Comments.  There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is or immediately after the Closing Date will be current with respect to any fees owed to its accountants which could affect the Company's ability to perform any of its obligations under any of the Transaction Documents.  There are no unresolved comments or inquiries received by the Company or its Affiliates from the Commission which remain unresolved as of the date hereof.

 

(ee) Acknowledgment Regarding Purchaser's Purchase of Securities.  The Company acknowledges and agrees that the Purchaser is acting solely in the capacity of an arm's length purchaser with respect to the Transaction Documents and the transactions contemplated thereby.  The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by the Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchaser's purchase of the Securities.  The Company further represents to the Purchaser that the Company's decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

(ff) Disqualification.  No executive officer, member of the Board of Directors of the Company or shareholder of the Company beneficially owning more than 10% of the Company's securities is currently subject to a Disqualifying Event. For purposes of this Agreement, "Disqualifying Event" means any conviction, order, judgment, decree, suspension, explusion, event or other matter set out in Rule 506(d)(1)(i) through (viii) of Regulation D that is currently in effect or which occurred within the periods set out in Rule 506(d)(1)(i) through (viii).

 

3.2 Representations and Warranties of the Purchaser.    The Purchaser hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows:

 

(a) Organization; Authority.  The Purchaser is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by the Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate or similar action on the part of the Purchaser.  Each Transaction Document to which it is a party has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b) Own Account.  The Purchaser understands that the Securities are "restricted securities" and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no

 

 

present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities (this representation and warranty not limiting the Purchaser's right to sell the Securities pursuant to a registration statement or otherwise in compliance with applicable federal and state securities laws) in violation of the Securities Act or any applicable state securities law.  The Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

 

(c) Purchaser Status.  At the time the Purchaser was offered the Debentures, it was, and as of the date hereof it is, and on each date on which it converts any Debentures it will be either: (i) an "accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a "qualified institutional buyer" as defined in Rule 144A(a) under the Securities Act.  The Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

 

(d) Experience of the Purchaser.  The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment.  The Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(e) General Solicitation.  The Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1 Transfer Restrictions.

 

(a) The Securities may only be disposed of in compliance with state and federal securities laws.  In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act.  As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement, including the representations and warranties made by each Purchaser herein, and shall have the rights of a Purchaser under this Agreement.

 

(b) The Purchaser agrees to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following form:

 

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS  [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

The Company acknowledges and agrees that the Purchaser may from time to time grant a security interest in some or all of the Securities to a financial institution that is an "accredited investor" as defined in Rule 501(a) under the Securities Act and who agrees in writing with the Company to be bound by the provisions of this Agreement and, if required under the terms of such arrangement and subject to compliance with applicable federal and state securities laws, the Purchaser may transfer secured Securities to the secured parties.  Absent special circumstances, such a transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the secured party shall be required in connection therewith.  At the Purchaser's expense, the Company will execute and deliver such reasonable documentation as a secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities.

 

(c) Certificates evidencing the Underlying Shares (or, if Underlying Shares are issued in uncertificated form, comparable share notices) shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement covering the resale of such security is effective under the Securities Act, or (ii) following any sale of such Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such Underlying Shares and without volume or manner-of-sale restrictions, or (iv) if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission), as reasonably determined by the Company. Upon the Purchaser's request in connection with a proposed sale of Underlying Shares pursuant to Rule 144 and if the Company reasonably determines it is so required, upon receipt of customary documentation from Purchaser's broker (if the Underlying Shares are sold in brokers

 

transactions), the Company shall, at its own cost and effort, retain legal counsel to provide an opinion letter to the Company's transfer agent opining that the Underlying Shares may be resold without registration under the Securities Act, pursuant to Rule 144, promulgated thereunder, so long as the requirements of Rule 144 are met for any Underlying Shares to be resold thereunder.  The Company shall arrange for any such opinion letter to be provided not later than two (2) business days after the date of delivery to and receipt by the Company of a written request by the Purchaser together with (if required in order to render the opinion) any broker's representation letter of other customary documentation reasonably requested by the Company evidencing compliance with Rule 144 (the "Legend Removal Date").

(d) In addition to the Purchaser's other available remedies, the Company shall pay to the Purchaser, in cash, as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day 5 Trading Days after such damages have begun to accrue) for each Trading Day after the Legend Removal Date until such certificate (or, if the Underlying Shares are in uncertificated form, a comparable notice of share ownership) is delivered without a legend.  Nothing herein shall limit the Purchaser's right to pursue actual damages for the Company's failure to deliver certificates representing any Securities as required by the Transaction Documents, and the Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

(e) The Purchaser agrees that the Purchaser will sell any Securities only pursuant to either an exemption from registration or a registration statement under the Securities Act, including any applicable prospectus delivery requirements, and that if Securities are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company's reliance upon this understanding.

 

4.2 Acknowledgment of Dilution.  The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions.  The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against the Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

 

4.3 Furnishing of Information.  Until the earlier to occur of the time that (i) the Purchaser owns no Securities, or (ii) 18 months from the date hereof, the Company covenants that it will maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to use all commercially reasonable efforts to timely file (or obtain extensions

 

in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act.  As long as the Purchaser owns Securities, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Purchaser and make publicly available in accordance with Rule 144(c) such information as is required for the Purchaser to sell the Securities under Rule 144.  The Company further covenants that it will use all commercially reasonable efforts to take such further action as any holder of Securities may reasonably request, to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act within the requirements of the exemption provided by Rule 144.

 

4.4 Integration.  The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities to the Purchaser in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchaser.

 

4.5 Conversion and Exercise Procedures.  The form of Notice of Conversion included in the Debentures sets forth the totality of the procedures required of the Purchaser in order to convert the Debentures.  No additional legal opinion, other information or instructions shall be required of the Purchaser to convert their Debentures.  The Company shall honor conversions of the Debentures and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

 

4.6 Securities Laws Disclosure; Publicity.  The Company shall, by 8:30 a.m. (New York City time) on the Trading Day immediately following the date hereof, issue a Current Report on Form 8-K disclosing the material terms of the transactions contemplated hereby and including the Transaction Documents as exhibits thereto.  The Company and the Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor the Purchaser shall issue any such press release nor otherwise make any such public statement (other than in the Company's SEC Reports after the Closing Date or exhibits filed therewith) without the prior consent of the Company, with respect to any press release of the Purchaser, or without the prior consent of the Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication.  Notwithstanding the foregoing, other than in connection with the Company's SEC Reports or disclosures to any regulatory agency or Trading Market that the Company determines are necessary or appropriate, the Company shall not publicly disclose the name of the Purchaser, or include the name of the Purchaser, in any press release or similar public statement, without the prior written consent of the Purchaser.

 

4.7 Shareholder Rights Plan.  No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that the Purchaser is an "Acquiring Person" under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect, or that the Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents or any other agreement between the Company and the Purchaser.

 

 

4.8 Non-Public Information.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants and agrees that after the Closing Date neither it, nor any other Person acting on its behalf, will provide the Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto the Purchaser shall have executed a written agreement regarding the confidentiality and use of such information.  The Company understands and confirms that the Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. Purchaser acknowledges that it is aware that the United States securities laws prohibit any person who has material non-public information about a company from purchasing or selling securities of such company, or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities, and Purchaser agrees not to engage in any unlawful trading in securities of the Company or unlawful misuse or misappropriation of any such information.  Purchaser agrees to maintain the confidentiality of and not disclose or use (except for purposes relating to the transactions contemplated by this Agreement) any confidential, proprietary or non-public information disclosed by the Company to Purchaser.

 

4.9 Use of Proceeds.  The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and shall not use such proceeds for: (a) the satisfaction of any portion of the Company's debt (other than payment of trade payables in the ordinary course of the Company's business and prior practices), (b) the redemption of any Common Stock or Common Stock Equivalents or (c) the settlement of any outstanding litigation.

 

4.10 Indemnification of Purchaser.  Subject to the provisions of this Section 4.10, the Company will indemnify and hold the Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls the Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling person (each, a "Purchaser Party") harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys' fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to any action, suit, claim or proceeding brought by a third party against such Purchaser Party arising out of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against a Purchaser in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of the Purchaser, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser's representations, warranties or covenants under the Transaction Documents or any agreements or understandings the Purchaser may have with any such

 

stockholder or any violations by the Purchaser of state or federal securities laws or any conduct by the Purchaser which constitutes fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against the Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party.  Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company's prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party's breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents.

 

4.11 Reservation and Listing of Securities.

 

(a) The Company shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.

 

(b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company's certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 75th calendar day after such date.

 

(c) The Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing on such Trading Market as soon as possible thereafter, (iii) provide to the Purchaser evidence of such listing and (iv) maintain the listing of such Common Stock on any date at least equal to the Required Minimum on such date on such Trading Market or another Trading Market.

 

4.12 Form D; Blue Sky Filings.  The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of the Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities

 

for, sale to the Purchaser at the Closing under applicable securities or "Blue Sky" laws of the states of the United States, and shall provide evidence of such actions promptly upon request of the Purchaser.

 

4.13 Corporate Existence.  So long as any of the Debentures remain outstanding, the Company shall not directly or indirectly consummate any merger, reorganization, restructuring, consolidation, sale of all or substantially all of the Company's assets or any similar transaction or related transactions (each such transaction, an "Organizational Change") unless, prior to the consummation an Organizational Change, the Company obtains the written consent of the Purchaser, which consent shall not be unreasonably withheld.  In any such case, the Company will make appropriate provision with respect to such holders' rights and interests to insure that the provisions of this Section 4.13 will thereafter be applicable to the Debentures.

 

4.14 Transfer Agent.  The Company covenants and agrees that it will at all times while the Debentures remains outstanding maintain a duly qualified independent transfer agent.

 

4.15 Right of First Refusal.  While the Purchaser holds any debentures, if the Company proposes to offer and sell any New Securities (as defined below) subsequent to the date of this Agreement in a transaction primarily for purposes of financing the operations or business of the Company and its Subsidiaries, the Company shall provide to the Purchaser who holds any Debentures written notice (the "Offering Notice") stating the number of New Securities proposed to be offered and sold, the total purchase price, the terms of payment, and any other material terms of the offer (to the extent then known).  For a period of three (3) business days after its receipt of the Offering Notice, such Purchaser may, by written notice delivered to the Company within such time period, accept such offer and elect to purchase all or any portion of such New Securities on the terms set forth in the Offering Notice and similar terms as other investors that purchase New Securities in such offering.  If the Purchaser so elects to participate, the Purchaser shall execute and deliver the same agreements and instruments as other purchasers of the New Securities.  For purposes of this Section, "New Securities" shall mean any equity or convertible debt securities of the Company issued in a transaction primarily for purposes of financing the operations or business of the Company and its Subsidiaries, provided, however, that "New Securities" shall not include any securities issued in Exempt Issuances or any securities issued after the lapse of Right of First Refusal in the event the Purchasers decline to participate in any offering thereof.

 

4.16 No Short Selling.  The Purchaser has and shall not, directly or indirectly, his, her or itself, through related parties, affiliates or otherwise, (i) sell "short" or "short against the box" (as those terms are generally understood) any equity security of the Company or (ii) otherwise engage in any transaction that involves hedging of the Purchaser's position in any equity security of the Company, until the later of (i) the date the Debentures owned by the Purchaser is no longer owned by the Purchaser, or (ii) the Maturity Date (as such term is defined in the Debentures) and the Conversion Date.

 

 

 

ARTICLE V.

MISCELLANEOUS

 

5.1 Termination. This Agreement may be terminated by the Purchaser, as to the Purchaser's obligations hereunder only and without any effect whatsoever on the obligations between the Company and the Purchaser, by written notice to the other parties, if the Closing has not been consummated on or before May __, 2016; provided, however, that such termination will not affect the right of any party to sue for any breach by the other party (or parties).

 

5.2 Fees and Expenses.  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchaser.

 

5.3 Entire Agreement.  The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.4 Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) one Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day, with written confirmation of successful transmission, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as set forth on the signature pages attached hereto.

 

5.5 Amendments; Waivers.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchaser or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

5.6 Headings.  The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

 

5.7 Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns.  The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser (other than by merger).  The Purchaser may assign any or all of its rights under this Agreement to any Person to whom the Purchaser assigns or transfers any Securities, provided that such transfer complies with all applicable federal and state securities laws and that such transferee agrees in writing with the Company to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the Purchaser.

 

5.8 No Third-Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.10.

 

5.9 Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that 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 any other manner permitted by law.   If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys' fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

5.10 Survival.  The representations and warranties shall survive the Closing and the delivery of the Debentures until, with respect to the Purchaser, the Debentures held by the Purchaser has been paid in full or converted into Underlying Shares, at which time they shall expire such respect to Purchaser and shall no longer be of any force or effect.

 

5.11 Execution.  This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a ".pdf" format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or ".pdf" signature page were an original thereof.

 

 

5.12 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

5.13 Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever the Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then the Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion of a Debentures, the Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion or exercise notice.

 

5.14 Replacement of Securities.  If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction.  The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

 

5.15 Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchaser and the Company will be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agrees to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.16 Payment Set Aside.  To the extent that the Company makes a payment or payments to the Purchaser pursuant to any Transaction Document or the Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

 

5.17 Usury.  To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by the Purchaser in order to enforce any right or remedy under any Transaction Document.  Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the "Maximum Rate"), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date forward, unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to the Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by the Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at the Purchaser's election.

 

5.18 Liquidated Damages.  The Company's obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

 

5.19 Saturdays, Sundays, Holidays, etc.If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

5.20 Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto.

 

 

5.21 WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

 

(Signature Pages Follow)

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

	
LEO MOTORS, INC.

 

 

	
Address for Notice:

3F Bokwang Bldg., Seowunro 6 Gil 14, Seocho Gu, Seoul, Korea, 137-863

 

	
By:__________________________________________

     Name:

     Title:

 

By:__________________________________________

     Name:

     Title:

 

With a copy to (which shall not constitute notice):

	 

Fax: +82 70 4015 1825

	 	 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

[PURCHASER SIGNATURE PAGES TO LEO MOTORS, INC. SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

Name of Purchaser: ________________________________________________________

Signature of Authorized Signatory of Purchaser: __________________________________

Name of Authorized Signatory: ____________________________________________________

Title of Authorized Signatory: _____________________________________________________

Email Address of Authorized Signatory: _____________________________________________

Facsimile Number of Authorized Signatory: __________________________________________

Address for Notice of Purchaser:

  

Address for Delivery of Securities for Purchaser (if not same as address for notice):

  

Subscription Amount: _____________

  

EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

[SIGNATURE PAGES CONTINUE]

Annex A

CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date hereto, the purchaser shall purchase an aggregate of $395,000 Original Discount Debentures from Leo Motors Inc., a Nevada corporation (the "Company") for a purchase price of an aggregate of $359,055.  All funds will be wired into an account maintained by the Company.  All funds will be disbursed in accordance with this Closing Statement.

First Closing

	Disbursement Date:	May __, 2016

	
I.   PURCHASE PRICE

 

	 
	 	
Gross Proceeds to be Received

	
$

	 	 
	
II.  DISBURSEMENTS

 

	 
	 	
a)

	 
	 	 	 	 
	 	 	 	 
	 	 
	
Total Amount Disbursed:

	
$ _________________

	 	 
	 	 
	 	 

WIRE INSTRUCTIONS:

 

Second Closing

	Disbursement Date:	June __, 2016

	
I.   PURCHASE PRICE

 

 

 

	 
	 	
Gross Proceeds to be Received

	
$ 179,527.50

 

	 	 
	
II.   DISBURSEMENTS

 

	 
	 	
a)

b)

	 
	 	 	 	 
	 	 	 	 
	 	 
	
Total Amount Disbursed:

	
$ _________________

	 	 
	 	 
	 	 

WIRE INSTRUCTIONS:

 

 

 

(Signature Pages Follow)

 

	
LEO MOTORS, INC.

 

 

	 
	
By:__________________________________________

     Name:

     Title:

 

By:__________________________________________

     Name:

     Title:

 

	 
	
 

 

 

 

 

By:__________________________________________

     Name:

     Title:

 

	 

 

[Closing Statement Signature Page]

SCHEDULE 3.1(a)

List of Subsidiaries

	
Name of Entity

	
Jurisdiction of Incorporation

	
Ownership

	
Leomotors Korea., Inc.

	
Republic of Korea

	
49.9%

	
LGM Co. Ltd.

	
Republic of Korea

	
92.31%

	
Leo Trading, Inc.

	
Republic of Korea

	
50%

	
Leo Motors Factory 1, inc.

	
Republic of Korea

	
50%

	
Leo Motors Factory 2, Inc.

	
Republic of Korea

	
50%

SCHEDULE 3.1(g)

Participation Rights

None.

SCHEDULE 3.1(h)

SEC Reports

None.

SCHEDULE 3.1(i)

Material Changes

None.

SCHEDULE 3.1(t)

Certain Fees

One percent (1%) of the total transaction value to NMS Capital Advisors, LLC pursuant to the Investment Banking Engagement Letter between the Company and NMS Capital Advisors, LLC, dated December 16, 2015, and the Mutual Acknowledgment Letter dated May 12, 2016.deac_ex1069.htm

EXHIBIT 10.69
 
NOTE AND SHARE CANCELLATION AND EXCHANGE AGREEMENT
 
THIS NOTE AND SHARE CANCELLATION AND EXCHANGE AGREEMENT ("Agreement") is entered into as of this 18th day of May 2016, between ELITE DATA SERVICES INC., a Florida corporation (the "Company", also referred to herein as "Releasee"), and BAKER MYERS AND ASSOCIATES LLC, a Nevada limited liability company ("Releasor").
 
RECITALS
 
WHEREAS, Releasee executed that certain unsecured Promissory Note on or about January 13, 2013, as amended, in favor of Releasor in the face amount of $587,500 (the "Principal Sum") and accrued interest of $92,465 (the "Accrued Interest") as of December 31, 2015, pursuant to which Releasee promised to pay to Releasor or its registered assignees, the Principal Sum together with interest thereon in accordance with the Note;
 
WHEREAS, Releasee issued those certain shares of common stock of the Company, par value $0.0001 on or about February 12, 2014 in favor of Releasor in the total amount of Fourteen Million Three (14,000,000) shares ("Shares");
 
WHEREAS, Releasor desires to forego and waive any and all right in, entitlement to or interest in (A) a total of $87,500 in principal, a total of $92,465 in accrued interest, late charges, reimbursable attorneys' fees, reimbursable expenses and any other sums due and payable with respect to the Note totaling $179,952 (the "Cancelled Amount") as of the date of this Agreement (the "Effective Date"), any future payments due under the Cancelled Amount of the Note and all or any other of Releasor's rights under the Cancelled Amount of the Note, thereby extinguishing and canceling the Cancelled Amount of the Note and terminating any and all of Releasee's obligations thereunder, (B) the Shares (hereinafter also referred to as the "Cancelled Shares") in exchange for the issuance an Option Agreement (the "Option Agreement"), attached hereto as Exhibit A, registered in the Releasor's name to purchase up to a certain number of membership interests (the "EDM Membership Interest") of Elite Data Marketing LLC, a Florida limited liability company (the "EDM"), in an amount totaling one hundred percent (100%) of the ownership interest in EDM (the "Option 1"), (B) the issuance by Company to Releasor of a three-year "cashless" common stock purchase warrant (the "Warrant No. BM-1") for the right to purchase a total of 3,000,000 shares of Series B Preferred Stock of the Company (the "Preferred Warrant Shares"), at a purchase price of $0.001 per share, with certain rights and preferences as set forth in the certificate of designation (the "Certificate of Designation of Series B Preferred), in exchange for the Cancelled Shares, as referenced in the Share Exchange Agreement (the "Share Exchange"), attached hereto as Exhibit B, and (C) the issuance a amended and restated convertible redeemable note (the "Redeemable Note") in the aggregate principal face amount of Five Hundred Thousand Dollars (US$500,000), at ten percent (10%) interest per annum commencing on date of execution (the "Effective Date"), due and payable to Releasee by Company in eight (8) separate equal quarterly payments of Sixty-Two Thousand Five Hundred Dollars (USD $62,500), plus accrued interest to date, due on the first day of each quarter beginning on the date of the first quarter following the date of execution of this Note (each a "Maturity Date"), (the "Cancellation Transaction").
 
	 
	1

	

	 

  
NOW, THEREFORE, in consideration of the premises, mutual promises, representations, warranties, covenants and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree to be legally bound as follows:
 
Section 1. Recitals. Releasee and Releasor each acknowledges that the Recitals set forth above are true and accurate. Each of the Recitals is incorporated into this Agreement by reference and is made a part hereof.
 
Section 2. Cancellation of Cancelled Amount; Granted Options and Issued Preferred Shares. On the terms and subject to the conditions of this Agreement, immediately upon the execution of this Agreement by all parties hereto, the Cancellation Transaction shall be deemed to be consummated in terms of the Cancelled Amount, Options and Preferred Shares. Each party hereto acknowledges receipt of the consideration set for in the Recitals above as to be received by such party. 
 
Section 3. Effects of Cancelation. Immediately upon the consummation of the Cancellation Transaction, (A) the Cancelled Amount of the Note (including all principal, interest, fees, penalties, costs, and expenses due thereon or pursuant thereto) shall be deemed paid in full and shall no longer have any legal effect. Notwithstanding anything to the contrary, the balance of the Note shall survive this Cancellation Transaction and remain in full legal effect (the "Note Balance"), and (B) the Cancelled Shares shall be deemed cancelled and void and subsequently returned to the Company's treasury.
 
Section 4. Release. Effective upon consummation of the Cancellation Transaction, Releasor, on behalf of himself and his respective heirs and personal representatives, and all others claiming through or under them, does hereby release, acquit and forever discharge Releasee and its present and former employees, officers, directors, members, shareholders, agents, consultants, counsel or representatives, and its successors and assigns (collectively, the "Releasee Parties"), and each of them, of and from any and all obligations, claims, debts, demands, covenants, contracts, promises, agreements, liabilities, controversies, costs, expenses, attorneys' fees, actions or causes of action of any nature, whatsoever, in law or in equity, whether known or unknown, foreseen or unforeseen, accrued or not accrued, direct or indirect, which the Releasor ever had, now have, or can, shall or may have against any or all of the Releasee Parties, either alone or in combination with others, arising out of or from or in any way related to Cancelled Shares and Cancelled Amount of the Note only, and not the Note Balance.
 
Section 5. Representations of Releasor. Releasor represents and warrants to Releasee as follows:
 
(a) Authorization. All action on the part of Releasor, necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Releasor hereunder has been taken. This Agreement, when executed and delivered by Releasor, will constitute a valid and legally binding obligation of Releasor, enforceable against Releasor in accordance with its terms.
 
(b) Title to Note and Shares. Releasor is the lawful owner of the Note and Shares with good and marketable title thereto free and clear of all the following of any nature whatsoever: security interests, liens, pledges, claims, charges, escrows, encumbrances, options, rights of first offer or refusal, community property rights, mortgages, indentures, security agreements or other agreements, arrangements, contracts, commitments, understandings or obligations, whether written or oral and whether or not relating in any way to credit or the borrowing of money.
 
(c) No Conflicts; Advice. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, does or will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any government, governmental agency, or court to which Releasor is subject or any provision of its organizational documents or other similar governing instruments, or conflict with, violate or constitute a default under any agreement, credit facility, debt or other instrument or understanding to which Releasor is a party. Releasor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with the transactions contemplated hereby.
    	 
	2

	

	 

  

(d) Consents. No authorization, consent, approval or other order of, or declaration to or filing with, any governmental agency or body or other person is required for the valid authorization, execution, delivery and performance by Releasor of this Agreement and the consummation of the transactions contemplated hereby.  
 
(e) Bankruptcy. Releasor is not under the jurisdiction of a court in a Title 11 or similar case (within the meaning of Bankruptcy Code Section 368(a)(3)(A) (or related provisions)) or involved in any insolvency proceeding or reorganization.
 
Section 6. Representations of Releasee. Releasee represents and warrants to Releasor as follows:
 
(a) Authorization. All action on the part of Releasee, necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Releasee hereunder has been taken. This Agreement, when executed and delivered by Releasee, will constitute a valid and legally binding obligation of Releasee, enforceable against Releasee in accordance with its terms.
 
(b) No Conflicts; Advice. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, does or will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any government, governmental agency, or court to which Releasee is subject or any provision of its organizational documents or other similar governing instruments, or conflict with, violate or constitute a default under any agreement, credit facility, debt or other instrument or understanding to which Releasee is a party. Releasee has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with the transactions contemplated hereby.
 
(c) Consents. No authorization, consent, approval or other order of, or declaration to or filing with, any governmental agency or body or other person is required for the valid authorization, execution, delivery and performance by Releasee of this Agreement and the consummation of the transactions contemplated hereby.
 
Section 7. Waivers. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, will be deemed to constitute a waiver by the party taking such action, or compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. The waiver by any party hereto at or before the Closing Date of any condition to its obligations hereunder which is not fulfilled shall preclude such party from seeking redress from the other party hereto for breach of any representations, warranty, covenant or agreement contained in this Agreement.
 
Section 8. Successors and Assigns. This Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors, heirs, personal representatives, and permitted assigns.
 
Section 9. Expenses. Each party hereto shall pay the fees and expenses of such party's advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement, and shall hold the other party hereto harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in connection with any claim for such fees and expenses.
    	 
	3

	

	 

     Section 10. Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient when delivered personally, or by electronic delivery in PDF format (followed by first-class mail), or seventy-two (72) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party's address as set forth below or as subsequently modified by written notice.
 
	If to Releasee to:
	Elite Data Services, Inc. 
4447 N. Central Expressway, 
Suite 110-135 
Dallas, TX 75205 
Attn: Chief Executive Officer 
Phone: (972) 885-3981 
Email: corp@edscompanies.com  

	 
	 

	If to the Releasor to:
	Baker & Myers & Associates LLC  
522B 3rd Avenue S. 
Nashville, TN 37210 
Attn: Sarah Myers, Manager 
Phone: (615) 497-2923 
Email: Sarah-myers@live.com 

  
Section 11. Counterparts. This Agreement may be executed via facsimile in one or more counterparts and transmitted via facsimile or PDF, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. When counterparts of copies have been executed by all parties, they shall have the same effect as if the signatures to each counterpart or copy were upon the same document and copies of such documents shall be deemed valid as originals.
 
Section 12. Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired hereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.
    	 
	4

	

	 

     Section 13. Entire Agreement. This Agreement represents the entire agreement of the parties hereto with respect to the matters contemplated hereby, and there are no written or oral representations, warranties, understandings or agreements with respect hereto except as expressly set forth herein.
 
Section 14. Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by each party or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought.
 
Section 15. Confidentiality. Each of Releasor and Releasee hereby agrees, without the prior written consent of the other, to not disclose, and to otherwise keep confidential, the transactions contemplated hereby and the terms and conditions of this Agreement, except to the extent that disclosure thereof is required by law, rule or regulation; provided, however, that Releasor and Releasee may disclose information regarding such transactions to their respective accountants, attorneys, limited partners, shareholders and other interest holders.
 
Section 16. Further Assurances. Each of Releasor and Releasee hereby agrees and provides further assurances that it will, in the future, execute and deliver any and all further agreements, certificates, instruments and documents and do and perform or cause to be done and performed, all acts and things as may be necessary or appropriate to carry out the intent and accomplish the purposes of this Agreement.
 
Section 17. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Florida without giving effect to any choice or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida. Each of the parties hereto consents to the exclusive jurisdiction and venue of the state courts located in Florida and the federal courts for the District of Florida with respect to all claims under this Agreement. 
 
[Signature Page to Follow]
    	 
	5

	

	 

 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first written above.
 
	 
	RELEASOR:
 
BAKER MYERS AND ASSOCIATES LLC 
a Nevada limited liability company
	 

	 	  	 	 
		By:	/s/ Sarah Myers	 

	 
	 
	Sarah Myers	 

	 
	 
	Manager
	 

	 
	  
	 
	 

		 		
		RELEASEE:
 
ELITE DATA SERVICES, INC. 
a Florida corporation  
	
		 		
		By: 	/s/ Charles Rimlinger	
			Charles Rimlinger	
			Chief Executive Officer	

 
	 
	6

	

	 

 
EXHIBIT A
 
OPTION AGREEMENT #1
 
(Elite Data Marketing LLC)
 
THIS OPTION AGREEMENT (the "Agreement") made and entered into this 18th day of May 2016, by and between ELITE DATA SERVICES INC. ("Grantor") and BAKER & MYERS & ASSOCIATIES LLC ("Optionee").
 
WITNESSETH:
 
WHEREAS, Grantor and Optionee executed that certain Cancellation Agreement on or before May 18, 2016 (the "Cancellation Agreement"), of which this Agreement is made a part thereof, in which Grantor agreed to grant to Optionee an option to purchase certain securities from Grantor, as described in Section 2 hereinbelow.
 
WHEREAS, Grantor wishes to formally grant said option to Optionee under the terms and conditions set forth herein.
 
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein the parties agree as follows:
 
1. RECITALS. The above recitals are true and correct and are incorporated by reference herein.
 
2. GRANT OF OPTION. The Grantor hereby grants to Optionee an option (the "Option") to purchase a certain number of units (the "Optioned Units") of membership interest of Elite Date Marketing LLC, a Delaware limited liability company, a controlled subsidiary of the Grantor (the "Subsidiary"), representing a total of one percent (100%) of the ownership interest of the Subsidiary, in exchange for (A) the transfer and cancellation of 2,000,000 shares of Common Stock of Grantor owed and held by Optionee and the cancellation of a total of $87,500 in principal and $92,465 in interest of the total of $679,465 owed by Grantor to Optionee, and (B) the payment of the Exercise Price from Optionee, as set forth in Section 4 hereinbelow.
 
3. TERM OF OPTION. The Option hereby granted shall be and remain in full force and effect for two (2) years from the date of execution hereof (the "Expiration Date"). 
 
4. EXERCISE OF OPTION.
 
4.1 Exercise Price and Payment. Optionee shall be entitled to purchase all or any part the Optioned Units covered by the Option at an exercise price of a total of Two Hundred Thousand Dollars ($200,000) (the "Exercise Price"), payable in the form a cancellation of a portion of the Note owned and held by the Optionee, as referenced in the Cancellation Agreement, in increments of Two Thousand Dollars ($2,000) (the "Payments"), in exchange for Optioned Units equal to one percent (1%) ownership interest of the Subsidiary. Optionee shall deliver to the Grantor written confirmation each time Optionee elects to exercise the Option, in whole or part, pursuant to Section 4.2 below, referencing the amount of Optioned Units being exercised and the corresponding amount of the Note being cancelled as payment of the Exercise Price.
    	 
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    4.2 Method of Exercise. This Option may be exercised by delivery of an executed written exercise notice from the Optionee (the "Exercise Notice"), which shall state the election to exercise the Option and the number of Optioned Units in respect of which the Option is being exercised (the "Exercised Units"). The Exercise Notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Grantor. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Units in accordance with Section 4.1. This Option shall be deemed to be exercised upon receipt by the Grantor of such fully executed Exercise Note accompanied by such aggregate Exercise Price (the "Option Exercise Date"). 
 
5. REPRESENTATIONS AND WARRANTIES OF THE GRANTOR. Grantor represents and warrants to Optionee, as of the date hereof, and as of the Option Exercise Date, as follows:
 
(a) All actions on the part of Grantor, necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Grantor hereunder has been taken. This Agreement, when executed and delivered by Grantor, will constitute a valid and legally binding obligation of Grantor, enforceable against Grantor in accordance with its terms.
 
(b) Grantor is the lawful owner of the Optioned Units with good and marketable title thereto, and Grantor has the absolute right to sell, assign, convey, transfer and deliver the Units and any and all rights and benefits incident to the ownership thereof (including, without limitation, any registration rights pertaining to the UNits), all of which rights and benefits are transferable by Grantor to Optionee pursuant to this Agreement, free and clear of all the following (collectively called "Claims") of any nature whatsoever: security interests, liens, pledges, claims (pending or, to the Grantor's knowledge, threatened), charges, escrows, encumbrances, lock-up arrangements, options, rights of first offer or refusal, community property rights, mortgages, indentures, security agreements or other agreements, arrangements, contracts, commitments, understandings or obligations, whether written or oral and whether or not relating in any way to credit or the borrowing of money. In addition, there are no voting trusts or proxies in effect relating to the Units. The purchase and sale of the Units as contemplated herein will (i) pass good and marketable title to the Units to Optionee, free and clear of all Claims, and (ii) convey, free and clear of all Claims, any and all rights and benefits incident to the ownership of such Units (including, without limitation, any registration rights pertaining to the Units).
 
(c) Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, does or will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction of any government, governmental agency, or court to which Grantor is subject or any provision of its organizational documents or other similar governing instruments, or conflict with, violate or constitute a default under any agreement, credit facility, debt or other instrument or understanding to which Grantor is a party.
 
(d) There is no action, suit, proceeding, judgment, claim or investigation pending, or to the knowledge of Grantor, threatened against Grantor which could reasonably be expected in any manner to challenge or seek to prevent, enjoin, alter or materially delay any of the transactions contemplated by this Agreement.
 
(e) No authorization, consent, approval or other order of, or declaration to or filing with, any governmental agency or body or other person is required for the valid authorization, execution, delivery and performance by Grantor of this Agreement and the consummation of the transactions contemplated hereby.
 
(f) Grantor is not under the jurisdiction of a court in a Title 11 or similar case (within the meaning of Bankruptcy Code Section 368(a)(3)(A) (or related provisions)) or involved in any insolvency proceeding or reorganization.
    	 
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    6. TRANSFERABILITY OF OPTION. Neither this Option nor the Optioned Units have been registered under the Act. None of this Option, the Optioned Units or the rights and privileges conferred in whole and in part hereby, may be transferred, assigned, pledged, or hypothecated in any manner unless registered under the Act or, in the opinion of counsel satisfactory to the Company, an exemption from registration under the Act is available. Neither this Option nor the Optioned Units shall be subject to levy and execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of this Option or the Optioned Units, or any right or privilege conferred hereby, contrary to the provisions hereof, or upon levy and execution, attachment or similar process on this Option and the rights and privileges conferred under this Agreement, this Option and such rights and privileges shall immediately become null and void. 
 
7. ISSUANCE OF OPTIONED UNITS. Grantor shall be obligated to sell the Optioned Units to the Optionee upon the exercise of the Option. Each certificate representing the restricted Optioned Units shall be stamped or otherwise imprinted with a legend evidencing all applicable federal and local securities laws.
 
8. GRANTOR'S RETENTION OF OWNERSHIP DURING OPTION PERIOD. During the term of this Option, Grantor shall not sell, assign, transfer, bequeath, or otherwise dispose of the Optioned Units, in whole or in part, and Grantor shall not pledge or hypothecate the Optioned Units or create, or permit to be created, any liens against the Optioned Units, in whole or in part. Grantor shall defend the Optioned Units against, and will take such other action as is necessary to remove, any lien or claim on or to the Optioned Units and will defend the right, title and interest of Optionee in and to any of the Optioned Units against the claims and demands of all persons whomsoever. 
 
9. ADJUSTMENTS TO MEMBERSHIP INTEREST ISSUABLE UPON EXERCISE OF OPTION.
 
9.1 An appropriate and proportionate adjustment shall be made in the maximum number and/or kind of securities allocated to this Option, without change in the aggregate purchase price applicable to the unexercised portion of the outstanding Option, but with a corresponding adjustment in the price for each unit of membership interest or other unit of any security covered by this Option upon the Grantor's issuance of such new securities in the Subsidiary ("New Securities"). New Securities shall mean any class or series of membership interest of the Subsidiary, whether now authorized or not, and rights, options or warrants to purchase said class or series of membership interest of the Subsidiary, and securities of any type whatsoever that are, or may become, convertible into common stock or preferred stock of the Company; provided, New Securities does not include (i) securities issued pursuant to any existing Company options outstanding on the date of this Agreement or Company options issued, after the date of this Agreement, pursuant to an existing options issued by the Company(ii) securities offered to the public pursuant to a registration statement; or, (iii) securities issued pursuant to the acquisition of another person by the Company, to purchase substantially all of another person's assets; or, any other reorganization whereby the Company shall own less than fifty percent (50.0%) of the voting power of the surviving entity. Except as provided for in this Section 9, if the outstanding shares of common stock of the Company or units of membership interest of the Subsidiary are increased, decreased, changed into or exchanged for a different number or kind of stock or securities of the Company or Subsidiary or stock or units of a different par value or without par value, through reorganization, recapitalization, reclassification, stock dividend, stock split; or, reverse stock split, the appropriate and proportionate adjustment shall be made hereunder.
    	 
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    9.2 Upon the date (i) of the dissolution or liquidation of the Company; (ii) of a reorganization, merger or consolidation of the Company or Subsidiary with one or more persons in which the Company will not survive; (iii) of a transfer of substantially all of the assets of the Company or Subsidiary; or (iv) that a "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), directly or indirectly, of 50% or more of the total voting equity interests of the Company, then any Option granted hereunder shall be exercisable until the effective date of such event (or such earlier date as this Option would otherwise expire hereunder) and shall terminate and be of no further force or effect on such effective date unless provision be made, in writing, in connection with such event for the assumption of this Option, or the substitution for this Option of new options covering the shares or units of any successor entity, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of securities and prices, in which event this Option or the new options substituted therefor, shall continue in the manner and under the terms so provided. In the event of such dissolution, liquidation, reorganization, merger, consolidation, transfer of assets or change in beneficial ownership of the Company, and if provision is not made in such transaction for the assumption of this Option or the substitution for this Option of new options covering the shares of a successor entity or a parent or subsidiary thereof, then the Optionee shall be entitled, prior to the effective date of any such transaction, to purchase the full number of shares of common stock of the Company which it would otherwise have been entitled to purchase pursuant to this Option during the remaining term of such Option. Upon the first purchase of shares of stock or units of membership interest pursuant to a tender offer or exchange offer, other than by the Company, for all or any part of the stock, the Optionee shall be entitled, prior to the termination date of any such tender offer, to purchase the full number of units of membership under this Option which it otherwise would have been entitled to purchase during the remaining term of such Option. 
 
9.3 Whenever an adjustment to this Option is required to be made pursuant to this Section 9, Grantor shall promptly give written notice to Optionee of such adjustments.
 
10. MISCELLANEOUS.
 
10.1 Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing, and shall be deemed to have been duly given when delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid to the Parties hereto at their addresses indicated hereinafter. Either party may change his or its address for the purpose of this paragraph by written notice similarly given. Parties addresses are as follows:
 
		GRANTOR: 
	 
	OPTIONEE:

		 		
		Elite Data Services Inc. 
	 
	Baker Myers and Associates LLC

		4447 N. Central Expy., Suite 110-135 
	 
	522B 3rd Avenue South 

		Dallas, TX 75205 		Nashville, TN 37210

		Attn: Charles Rimlinger, CEO 		Attn: Sarah Myers, Manager 
		Tel: (972) 885-3981 		Tel: (615) 497-2923
		corp@edscompanies.com 		Sarah-myers@live.com 

 
10.2 Entire Agreement. This Agreement represents the entire agreement of the parties hereto with respect to the matters contemplated hereby, and there are no written or oral representations, warranties, understandings or agreements with respect hereto except as expressly set forth herein.
 
10.3 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by each party or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, will be deemed to constitute a waiver by the party taking such action, or compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.
    	 
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    10.4 Captions. The captions appearing in this Agreement are inserted as a matter of convenience and for reference and in no way affect this Agreement, define, limit or describe its scope or any of its provisions.
 
10.5 Governing Law. This Agreement will be governed by and construed in accordance with the internal laws of the State of Florida without giving effect to any choice or conflict of law provision or rule (whether of the State of Florida or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Florida.
 
10.6 Benefits. This Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors, heirs, personal representatives, and permitted assigns.
 
10.7 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired hereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.
 
10.8 Arbitration. Any controversy, dispute or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration. Arbitration proceedings shall be conducted in accordance with the rules then prevailing of the American Arbitration Association or any successor. The award of the Arbitration shall be binding on the Parties. Judgment shall be entered upon an award of a majority of the arbitrators filed in a court of competent jurisdiction and confirmed by such court. Venue for Arbitration proceedings shall be Orange County, Orlando. The Parties consent that the costs of arbitration, attorneys' fees of the Parties, together with all other expenses shall be paid as provided in the Arbitration award.
 
10.9 Number of Parties. The singular shall include the plural and the plural the singular and one gender shall include all genders. As used in this Agreement the term Affiliate means a person, directly or indirectly through one or more intermediaries, controls or is controlled by, or is under, control with, the Company. 
 
10.10 Currency. In all instances, references to monies used in this Agreement shall be deemed to be United States dollars. 
 
10.11 Multiple Counterparts. This Agreement may be executed via facsimile in one or more counterparts and transmitted via facsimile or PDF, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. When counterparts of copies have been executed by all parties, they shall have the same effect as if the signatures to each counterpart or copy were upon the same document and copies of such documents shall be deemed valid as originals.
 
10.12 Further Assurances. Each of the parties hereby agrees and provides further assurances that it will, in the future, execute and deliver any and all further agreements, certificates, instruments and documents and do and perform or cause to be done and performed, all acts and things as may be necessary or appropriate to carry out the intent and accomplish the purposes of this Agreement.
 
[Signature Page to Follow]
    	 
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    IN WITNESS WHEREOF the undersigned have executed this Agreement as of the day and year first written above. The parties hereto agree that facsimile signatures shall be as effective as if originals.
    	 
	GRANTOR
 
ELITE DATA SERVICES INC.,
a Florida Corporation
	 

	 	  	 	 
		By:	/s/ Charles Rimlinger	 

	 
	 
	Charles Rimlinger
	 

	 
	 
	Chief Executive Officer
	 

	 
	  
	 
	 

		OPTIONEE
 
BAKER & MYERS & ASSOCIATES LLC,
A Nevada limited liability company
	
		 		
		By:	/s/Sarah Myers
	
			Sarah Myers
	
			Manager
	

  
	 
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EXHIBIT B
 
SHARE EXCHANGE AGREEMENT
 
This SHARE EXCHANGE AGREEMENT ("Agreement") is made as of the 18th day of May, 2016 by and among ELITE DATA SERVICES INC., a Florida corporation (the "Company"), and BAKER MYERS AND ASSOCIATES LLC, a Nevada limited liability company (the "Seller").
 
RECITALS
 
WHEREAS, the Company wishes to purchase from the Seller, and the Seller wish to sell to the Company, upon the terms and subject to the conditions stated in this Agreement an aggregate of 12,000,000 shares of Common Stock (as defined below); and
 
WHEREAS, in consideration of the purchase of the Common Shares (as defined below), the Company wishes to issue to the Seller a three-year "cashless" stock purchase warrant (the "Warrant No. BM-1"), attached hereto as Exhibit A-1, for the right to purchase a total of 3,000,000 shares of Series B Preferred Stock of the Company (the "Preferred Shares" or "Preferred Warrant Shares"), at a purchase price of $0.001 per share, with certain rights and preferences, as set forth in the certificate of designation (the "Certificate of Designation of Series B Preferred), attached hereto as Exhibit B of the Warrant No. BM-1 (as defined below).
 
NOW THEREFORE, in consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
 
1. Definitions. For the purposes of this Agreement, the following terms shall have the meanings set forth below:
 
"Affiliate" means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common Control with, such Person.
 
"Agreement" has the meaning set forth in the Preamble.
 
"Business Day" means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.
 
"Closing" has the meaning set forth in Section 3.
 
"Closing Date" has the meaning set forth in Section 3.
 
"Commission" means the Securities and Exchange Commission. 
 
"Common Stock" means the common stock of Elite Data Services Inc. (OTC:DEAC), par value $0.0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
 
"Common Shares" means the total number of shares of Common Stock set forth opposite Seller's name under the heading "Common Shares" on Schedule I hereto.
    	 
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    "Company" has the meaning set forth in the Preamble.
 
"Control" (including the terms "controlling", "controlled by" or "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
 
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.
 
"Losses" has the meaning set forth in Section 8(b)(ii)(A).
 
"Material Adverse Effect" means a material adverse effect on (i) the assets, liabilities, results of operations, condition (financial or otherwise), business, or prospects of the Company and its subsidiaries taken as a whole, (ii) the legality or enforceability of any of the Transaction Documents or (iii) the ability of the Company to perform its obligations under the Transaction Documents.
 
"Preferred Stock" means the Series B preferred stock of Elite Data Services Inc. (OTC:DEAC), par value $0.0001 per share, with certain rights and preferences as set forth in the certificate of designation (the "Certificate of Designation of Series B Preferred), attached hereto as Exhibit B to the Warrant No. BM-1, and any other class of securities into which such securities may hereafter be reclassified or changed.
 
"Preferred Shares" or "Preferred Warrant Shares" means the total number of shares of Preferred Stock set forth opposite Seller's name under the heading "Preferred Shares" on Schedule I hereto.
 
"Person" means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.
 
"Piggy-Back Registration" has the meaning set forth in Section 6.
 
"Registrable Securities" has the meaning set forth in Section 6. 
 
"Registration Statement" has the meaning set forth in Section 6.
 
"Regulation D" has the meaning set forth in Section 5(e).
 
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
 
"SEC Reports" means all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act for the 12 months preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material).
 
"Securities Act" means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.
 
"Securities" means the Common Shares or Preferred Shares.
    	 
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    "Transaction Documents" means this Agreement and all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated by this Agreement or in accordance with the terms and conditions of any Transaction Document.
 
2. Purchase and Sale of the Securities. Subject to the terms and conditions of this Agreement, on the Closing Date (as defined below), substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company shall purchase, and the Seller shall sell to the Company, the Common Shares in exchange for payment as specified in Section 3 below. 
 
3. Closing. The completion of the transactions contemplated hereby (the "Closing") shall occur on the Business Day on which this Agreement has been executed and delivered by the applicable parties thereto and all conditions and covenants set forth in Sections 7(a) and 7(b), in each case, have been satisfied or waived (the "Closing Date"). At the Closing, (a) the Company shall deliver to the Seller the various documents set forth in Section 7(b), and (b) the Seller shall deliver to the Company the various documents set forth in Section 7(a). The Closing shall take place at such location as the Company and the Seller shall mutually agree. Promptly following the Closing, the Company shall deliver to Seller a Warrant Agreement (the "Warrant No. BM-1"), attached hereto as Exhibit A-1, executed by the Company for the right of the Seller to purchase that number of shares of Preferred Stock set forth opposite such Seller's name under the heading "Preferred Warrant Shares" on Schedule I.
 
4. Representations and Warranties of the Company. The Company hereby represents and warrants to the Seller as follows:
 
(a) Organization, Good Standing and Qualification. The Company has been duly organized and validly exists as a corporation in good standing under the laws of the State of Florida. The Company is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its business require such qualification and has all corporate power and authority necessary to own or hold its properties and to conduct the business in which it is engaged, except where the failure to so qualify or have such power or authority would not have, singly or in the aggregate, or could not reasonably be expected to have a Material Adverse Effect.
 
(b) Authorization. The Company has full corporate power and authority to enter into the Transaction Documents and has taken all requisite action on the part of the Company, its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of the Transaction Documents, (ii) the authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Securities. The Transaction Documents constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors' rights generally and to general equitable principles.
 
(c) Capitalization. All of the issued and outstanding shares of the Company's capital stock, including the securities of its Subsidiary, have been duly authorized and validly issued. No Person is entitled to pre-emptive or similar statutory or contractual rights with respect to any securities of the Company or its Subsidiary. Other than as described in the SEC Reports, there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company is or may be obligated to issue any equity securities of any kind and except as contemplated by this Agreement. There are no voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among the Company and any of the security holders of the Company relating to the securities of the Company or Subsidiary held by them.
    	 
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    (d) Valid Issuance. The Securities have been duly and validly authorized and, when issued pursuant to the Transaction Documents, the Securities will be validly issued, fully paid and nonassessable, and shall be free and clear of all encumbrances and restrictions (other than those created by the Seller), except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws. Upon the due exercise of the Option in accordance with its terms, the Option Shares will be validly issued, fully paid and non-assessable free and clear of all encumbrances and restrictions (other than those created by the Investor), except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws.
 
(e) Consents. The execution, delivery and performance by the Company of the Transaction Documents and the offer, issuance of the Securities require no consent of, action by or in respect of, or filing with, any governmental body, agency, or official other than filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods.
 
(f) No Conflict, Breach, Violation or Default. The execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Securities will not result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company pursuant to the terms or provisions of, or result in a breach or violation of any of the terms or provisions of, or conflict with or constitute a default under, or give any party a right to terminate any of its obligations under, or result in the acceleration of any obligation under, (i) the certificate or articles of incorporation or by-laws of the Company or certificate of organization or operating agreement of the Subsidiary, (ii) any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or other evidence of indebtedness, lease, contract or other agreement or instrument to which the Company is a party or by which the Company, it Subsidiary, or any of its properties is bound or affected, or (iii) violate or conflict with any judgment, ruling, decree, order, statute, rule or regulation of any court or other governmental agency or body applicable to the business or properties of the Company, except as to (ii) and (iii) above for such breaches, violations or defaults which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
 
5. Representations and Warranties of the Seller. Seller hereby severally, and not jointly, represents and warrants to the Company that:
 
(a) Organization and Existence. If Seller is an entity, Seller is a validly existing corporation, limited partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority to invest in the Securities pursuant to this Agreement.
 
(b) Authorization. If Seller is an entity, the execution, delivery and performance by Seller of the Transaction Documents to which Seller is a party have been duly authorized and each will constitute the valid and legally binding obligation of Seller, enforceable against Seller in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors' rights generally. If Seller is a person, Seller has reached the age of 21 and has full power and authority to execute and deliver the Transaction Documents to which Seller is a party and each will constitute the valid and legally binding obligation of Seller, enforceable against Seller in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors' rights generally.
 
(c) Purchase Entirely for Own Account. The Securities to be received by Seller hereunder will be acquired for Seller's own account, not as nominee or agent, and Seller is not a broker-dealer registered with the Commission under the Exchange Act or an entity engaged in a business that would require it to be so registered. Nothing contained herein shall be deemed a representation or warranty by Seller to hold the Securities for any period of time.
    	 
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    (d) Brokers and Finders. No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company or any Seller for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of Seller.
 
(e) Accredited Investor. Seller is an "accredited investor" as defined in Rule 501 of Regulation D promulgated by the Commission pursuant to the Securities Act ("Regulation D") and meets the requirements of at least one of the suitability standards for an accredited investor as set forth in Rule 501 of Regulation D. Seller, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial, tax and other matters so as to be capable of evaluating the merits and risks of, and to make an informed investment decision with respect to, the prospective investment in the Securities, which represents a speculative investment, and has so evaluated the merits and risks of such investment. Seller is able to bear the economic risk of an investment in the Securities for an indefinite period and is able to afford a complete loss of such investment.
 
(f) Acknowledgement of Risk. Seller agrees, acknowledges and understands that its investment in the Securities involves a significant degree of risk, including, without limitation that: (a) the Company is a development stage business with limited operating history and may require substantial funds; (b) an investment in the Company is highly speculative and only Persons who can afford the loss of their entire investment should consider investing in the Company and the Securities; (c) the Seller may not be able to liquidate its investment; (d) transferability of the Securities is extremely limited; and (e) in the event of a disposition of the Securities, the Seller can sustain the loss of its entire investment. Seller has considered carefully and understands the risks associated with an investment in the Securities.
 
(g) Restricted Securities. Seller understands and agrees that the Securities have not been registered under the Securities Act or any applicable state securities laws, by reason of their issuance in a transaction that does not require registration under the Securities Act (based in part on the accuracy of the representations and warranties of the Seller contained herein), and that such Securities must be held indefinitely unless a subsequent disposition is registered under the Securities Act or any applicable state securities laws or is exempt from such registration. The Seller acknowledges that the Seller is familiar with Rule 144 and that such person has been advised that Rule 144 permits resales only under certain circumstances. The Seller understands that to the extent that Rule 144 is not available, the Seller will be unable to sell any Securities without either registration under the Securities Act or the existence of another exemption from such registration requirement.
 
(h) Reliance on Representations. The Seller agrees, acknowledges and understands that the Company and its counsel are entitled to rely on the representations, warranties and covenants made by the Seller herein. Such Seller further represents and warrants that this Agreement and the Investor Questionnaire accompanying this Agreement in the form attached hereto as Exhibit B-1 do not contain any untrue statement or a material fact or omit any material fact concerning the Seller.
 
6. Piggy-Back Registration. If at any time on or after the date of this Agreement, the Company proposes to file a registration statement with the Commission in compliance with the Securities Act and the rules and regulations promulgated thereunder (a "Registration Statement") with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or by shareholders of the Company for its own account, then the Company shall register the sale of such number of Common Stock underlying the Preferred Shares and Option Shares converted into shares of the Company (collectively, the "Registrable Securities") as the Seller may request in writing within ten (10) days following receipt of such notice (a "Piggy-Back Registration"). The Company shall cause such Registrable Securities to be included in such registration and shall use its best efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof.
    	 
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    7. Closing Conditions. 
 
(a) The obligation of the Company to consummate the transactions to be performed by it in connection with the Closing is subject to the following conditions being met:
 
(i) the accuracy in all material respects on the Closing Date of the representations and warranties of Seller contained herein (unless as of a specific date therein);
 
(ii) all obligations, covenants and agreements of Seller required to be performed at or prior to the Closing Date shall have been performed;
 
(iii) the delivery by Seller of a completed Investor Questionnaire in the form attached hereto as Exhibit B-1, duly executed by such Seller;
 
(iv) the delivery by Seller of this Agreement, duly executed by such Seller; and
 
(v) the delivery by Seller of a certificate or certificates evidencing ownership of the number of Common Shares set forth opposite such Seller's name under the heading "Common Shares" on Schedule I hereto, endorsed in blank or accompanied by duly executed stock powers in blank.
 
(b) The respective obligations of Seller to consummate the transactions to be performed by each of them in connection with the Closing are subject to the following conditions being met:
 
(i) the accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein);
 
(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed; and
 
(iii) the delivery by the Company of this Agreement duly executed by the Company.
 
8. Miscellaneous.
 
(a) Restrictive Legend. The Securities shall bear the following or similar legend:
 
"[NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN] [THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN] REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS."
    	 
	18

	

	 

    (b) Survival and Indemnification. 
 
(i) Survival. The representations, warranties, covenants and agreements contained in this Agreement shall survive the Closing of the transactions contemplated by this Agreement.
 
(ii) Indemnification.
 
(A) The Company agrees to indemnify and hold harmless Seller and its Affiliates and their respective directors, officers, trustees, members, managers, employees and agents, and their respective successors and assigns, from and against any and all losses, claims, damages, liabilities and expenses (including without limitation reasonable attorney fees and disbursements and other expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof) (collectively, "Losses") to which such Person may become subject as a result of any breach of a material representation, warranty, covenant or agreement made by or to be performed on the part of the Company under the Transaction Documents and will reimburse any such Person for all such amounts as they are incurred by such Person, except if the Seller has committed gross negligence. 
 
(B) Seller, individually, agrees to indemnify and hold harmless the Company and its Affiliates and their respective directors, officers, employees and agents, and their respective successors and assigns, from and against any and all Losses to which such Person may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Seller under the Transaction Documents and will reimburse any such Person for all such amounts as they are incurred by such Person.
 
(c) Successors and Assigns. This Agreement may not be assigned by a party hereto without the prior written consent of the Company or the Seller, as applicable, provided, however, that a Seller may assign its rights and delegate its duties hereunder in whole or in part to an Affiliate or to a third party acquiring some or all of its Securities in a transaction complying with applicable securities laws without the prior written consent of the Company or the other Seller. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Without limiting the generality of the foregoing, in the event that the Company is a party to a merger, consolidation, share exchange or similar business combination transaction in which the Company Securities are converted into the equity securities of another Person, from and after the effective time of such transaction, such Person shall, by virtue of such transaction, be deemed to have assumed the obligations of the Company hereunder, the term "Company" shall be deemed to refer to such Person and the term "Company Securities" shall be deemed to refer to the securities received by the Seller in connection with such transaction. Nothing in this 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 Agreement.
 
(d) Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a ".pdf" format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or ".pdf" signature page were an original thereof.
    	 
	19

	

	 

    (e) Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
 
(f) Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or telecopier, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one Business Day after delivery to such carrier. All notices shall be addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days' advance written notice to the other party:
If to the Company:
 
Elite Data Services Inc. 
 
4447 N. Central Expressway 
Suite 110-135 
Dallas, TX 75205 
Attn: Chief Operating Officer 
Phone: (972) 885-3981 
Email: corp@edscompanies.com
 
If to the Seller:
 
Baker Myers and Associates LLC 
522B 3rd Avenue South 
Nashville, TN 37210 
Attn: Sarah Myers 
Phone: (615) 497-2923 
Email: Sarah-myers@live.com
 
(g) Expenses. The parties hereto shall pay their own costs and expenses in connection herewith. In the event that legal proceedings are commenced by any party to this Agreement against another party to this Agreement in connection with this Agreement or the other Transaction Documents, the party or parties which do not prevail in such proceedings shall severally, but not jointly, pay their pro rata share of the reasonable attorneys' fees and other reasonable out-of-pocket costs and expenses incurred by the prevailing party in such proceedings.
    	 
	20

	

	 

    (h) Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Seller. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Securities purchased under this Agreement at the time outstanding, each future holder of all such Securities, and the Company. 
 
(i) Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.
 
(j) Entire Agreement. This Agreement, including the Exhibits hereto, and the other Transaction Documents constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.
 
(k) Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.
 
(l) Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Florida without regard to the choice of law principles thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of Florida for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
 
[Signature Page to Follow]
    	 
	21

	

	 

    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
    	 
	COMPANY
  
 
ELITE DATA SERVICES INC.,
a Florida Corporation
	 

	 	  	 	 
		By:	/s/ Charles Rimlinger
	 

	 
	 
	Charles Rimlinger
	 

	 
	 
	Chief Executive Officer
	 

	 
	  
	 
	 

		SELLER
 
 
BAKER & MYERS & ASSOCIATES LLC,
A Nevada limited liability company
	
		 		
		By:	/s/ Sarah Myers
	
			Sarah Myers
	
			Manager
	

 
	 
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SCHEDULE I
 
	Seller
	 
	Common 
Shares1
	 
	 
	Preferred 
Warrant Shares2
	 
	 
	Purchase (exchange) 
Price3
	 

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	Total:
	 
	 
	12,000,000	 
	 
	 
	3,000,000	 
	 
	$	43,200.00	 

 
See attached Warrant No. BM-1 Agreement.
 
 
 
 
 
____________________
1 Reflects the number of Common Shares held by such Seller prior to the Closing. 
2 Reflects the number of Preferred Shares to be delivered by the Company to the Seller in accordance with Section 3 of the Agreement. 
3 Reflects the most recent share price of $0.0036 of the Company's common stock as of date of execution.
 
	 
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Exhibit A-1
 
Warrant No. BM-1
 
WARRANT AGREEMENT
 
NEITHER THIS WARRANT NOR THE SHARES OF PREFERRED STOCK FOR WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
 
WARRANT TO PURCHASE SERIES B PREFERRED STOCK
 
EXERCISE PRICE: $0.001 PER SHARE
 
Warrant Certificate Number: W-BM-1
 
Number of Shares of Preferred Stock: Three Million (3,000,000) Shares 
 
Dateof Issuance: May 18, 2016
 
Expiration Date: May 18, 2019 at 5:00 PM, New York Time
 
ELITE DATA SERVICES, INC.(OTCBB:DEAC), a Florida corporation (the "Company"), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, BAKER & MYERS & ASSOCIATES LLC, a Nevada limited liability and/or assigns, the registered holder hereof or its permitted assigns (the "Holder"), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon surrender of this Warrant to Purchase Preferred Stock (including any Warrants to Purchase Preferred and/or Common Stock issued in exchange, transfer or replacement hereof, the "Warrant"), at any time or times on or after the Issuance Date, but not after 5:00 p.m., New York time, on May 18, 2019 (the "Expiration Date"), Three Million (3,000,000) fully paid nonassessable shares of Preferred Stock (as defined below) (the "Warrant Shares"). Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 13. This Warrant is issued pursuant to that certain Note and Share Cancellation and Exchange Agreement (the "Exchange Agreement") dated as of May 18, 2016 by and among the Company and the original Holder hereof. 
 
1. EXERCISE OF WARRANT.
 
(a) Mechanics of Exercise. Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder on any day after the Issuance Date, in whole or in part, by delivery of a written notice, in the form attached hereto as Exhibit A (the "Exercise Notice"), of the Holder's election to exercise this Warrant. The Holder shall be required to deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. On or before the fifth (5th) Business Day following the date on which the Company has received the Exercise Notice, the Company shall transmit an acknowledgment of confirmation of receipt of the Exercise Notice to the Holder and the Company's transfer Agent ("Transfer Agent"). On or before the tenth (10th) Business Day following the date on which the Company has received the Exercise Notice (the "Share Delivery Date"), the Company shall issue in book position, registered in the Company's share register in the name of the Holder or its designee, for the number of shares of Preferred Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of the Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are delivered by book position confirmation evidencing such Warrant Shares, as the case may be. If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three (3) Business Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section IV) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional shares of Preferred Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Preferred Stock to be issued shall be rounded down to the nearest whole number.
    	 
	24

	

	 

    (b) Exercise Price. For purposes of this Warrant, the ("Exercise Price") means $0.001 per share for the total amount of the Warrant Shares granted to Holder in this Warrant.
 
(c) Payment of Exercise Price. Within two (2) Trading Days of the date of the Exercise Notice, the Holder shall make payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the "Aggregate Exercise Price") in cash or by wire transfer of immediately available funds. In lieu of such cash payment, the Holder may also exercise the Warrant by delivery to the Company a written note of an election to effect a cashless exercise for Warrant Shares in whole or in part, pursuant to this Section 1(c) (the "Cashless Exercise"). To the effect a Cashless Exercise, the Holder will surrender this Warrant for that number of shares of Preferred Stock determined by multiplying the number of Warrant Shares to which it would otherwise be entitled by a fraction, the numerator of which shall be the difference between (i) the then current Market Price of a share of the Preferred Stock on the date of exercise, and (ii) the Purchase Price, and the denominator of which shall be the then current Market Price per share of Preferred Stock. In the event that this Warrant is not exercised in full immediately prior to the end of the Exercise Period, this Warrant shall be deemed automatically exercised as to the remaining Warrant Shares at such time by Cashless Exercise without the delivery of any written notice from the Holder. 
 
(d) Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed.
 
(e) Beneficial Ownership. The Holder shall not have the right to exercise this Warrant, to the extent that after giving effect to such exercise, such Person (together with such Person's affiliates) would beneficially own in excess of 4.99% (the "Maximum Percentage") of the shares of Common Stock underlying the Preferred Stock outstanding immediately after giving effect to such exercise. The Company shall be entitled to rely on Holder's exercise notice as an indication that Holder will not, pursuant to such exercise, exceed the Maximum Percentage. For purposes of the foregoing sentence, the aggregate number of shares of Preferred Stock beneficially owned by such Person and its affiliates shall include the number of shares of Preferred Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Preferred Stock which would be issuable upon (i) exercise of the remaining, unexercised portion of this Warrant beneficially owned by such Person and its affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Person and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Warrant, in determining the number of outstanding shares of Preferred Stock, the Holder may rely on the number of outstanding shares of Preferred Stock as reflected in (1) the Company's most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company or the Transfer Agent setting forth the number of shares of Preferred Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within two (2) Business Days confirm orally and in writing to the Holder the number of shares of Preferred Stock then outstanding. In any case, the number of outstanding shares of Preferred Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder and its affiliates since the date as of which such number of outstanding shares of Preferred Stock was reported. By written notice to the Company, the Holder may from time to time increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to the Holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.
    	 
	25

	

	 

 
2. REPRESENTATIONS.
 
(a) By the Holder. The Holder represents and warrants to the Company as follows:
  		(i) 	It is an "accredited investor" within the meaning of Rule 501 of the Securities Act. This Warrant is acquired for the Holder's own account for investment purposes and not with a view to any offering or distribution within the meaning of the Securities Act and any applicable state securities laws. The Holder has no present intention of selling or otherwise disposing of the Warrant or the Warrant Shares in violation of such laws; and

			
		(ii) 	The Holder has sufficient knowledge and expertise in financials and business matters as to be capable of evaluating the merits and risk of its investment in the Company. The Holder acknowledges that it has received all the information it considers necessary or appropriate for deciding whether to make this investment. The Holder understands that this investment involves a high degree of risk and could result in a substantial or complete loss of its investment. The Holder is capable of bearing the economic risks of such investment.

			
		(iii) 	This Warrant has been authorized by all necessary corporate action of the Holder and constitutes a valid and legally binding obligation of the Holder, enforceable in accordance with its terms.

			
		(iv) 	The Holder acknowledges that the Company has indicated that the Warrant and the Warrant Shares have not been registered under the Securities Act by reason of their issuance in a transaction exempt from registration requirements thereof, and that the Warrant Shares will bear a legend stating that such securities have not been registered under the Securities Act and may not be sold or transferred in the absence of such registration or an exemption from such registration.

 
(b) By the Company. The Company represents and warrants that:
 
		(i) 	It (A) is a corporation duly organized, validly existing and in good standing under the laws of the state of its organization, (B) has all requisite power and authority to conduct its business as now conducted and as presently contemplated and to consummate the transactions contemplated hereby and (C) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.

			
		(ii) 	The execution, delivery and performance by the Company of this Warrant (A) has been duly authorized by all necessary corporate action, (B) does not and will not contravene the Company's charter or bylaws or any other organizational document and (C) does not and will not contravene any applicable law or any contractual restriction binding on or otherwise affecting the Company or any of its properties or result in a default under any agreement or instrument to which the Company is a party or by which the Company or its properties may be subject.

			
		(iii) 	This Warrant has been duly executed and delivered by the Company, and is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, moratorium and other laws affecting the rights of creditors generally and general principles of equity.

			
		(iv) 	Assuming the accuracy of the representations made by the Holder in Section 2 hereof, no authorization, consent, approval, license, exemption or other action by, and no registration, qualification, designation, declaration or filing with, any governmental authority is or will be necessary in connection with the execution and delivery by the Company of this Warrant, the issuance by the Company of the Warrant Shares, the consummation of the transactions contemplated hereby, the performance of or compliance with the terms and conditions hereof, or to ensure the legality, validity, and enforceability hereof.

 
	 
	26

	

	 

    		(v) 	The Company has reserved solely for issuance and delivery upon the exercise of this Warrant, such number of shares of Preferred Stock to provide for the exercise in full of this Warrant.

			
		(vi) 	Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would require registration, or the filing of a prospectus qualifying the distribution, of this Warrant being issued hereby under the Securities Act or cause the issuance of this Warrant to be integrated with any prior offering of securities of the Company for purposes of the Securities Act.

 
		1. 	Shares to be Fully Paid. AllWarrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid, and non-assessable and free from all taxes, liens, claims and encumbrances.

			
		2. 	Authorization and Reservation of Shares. During the Exercise Period, the Company shall have duly authorized a sufficient number of shares of Preferred Stock, free from preemptive rights and from any other restrictions imposed by the Company without the consent of the Holder, to provide for the exercise in full of this Warrant. The Company shall at all times during the Exercise Period reserve and keep available out of such authorized but unissued shares of Preferred Stock such number of shares to provide for the exercise in full of this Warrant.

			
		3. 	Listing. In connection with the Holder's exercise of Registration Rights hereunder, the Company shall use its best efforts to promptly secure the listing of the shares of Common Stock underlying the Preferred Stock issuable upon exercise of this Warrant upon each national securities exchange or automated quotation system, if any, upon which shares of Preferred Stock are then listed or become listed (subject to official notice of issuance upon exercise of this Warrant) and shall maintain such listing for so long as any other shares of Preferred Stock shall be so listed.

			
		4. 	Successors and Assigns. Except as expressly provided otherwise herein, this Warrant will be binding upon any entity succeeding to the Company by merger, consolidation, or acquisition of all or substantially all of the Company's assets.

			
		5. 	Blue Sky Laws.The Company shall, on or before the date of issuance of any Warrant Shares, take such actions as the Company shall reasonably determine are necessary to qualify the Warrant Shares for, or obtain exemption for the Warrant Shares for, sale to the Holder of this Warrant upon the exercise hereof under applicable securities or "blue sky" laws of the states of the United States; provided, however, that the Company shall not be required to qualify as a foreign corporation.

			
		6. 	Rule 144 Reports. For so long as the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company agrees to use its best efforts to take all actions reasonably necessary to enable the Holder to sell the Warrant Shares without registration under the Securities Act within the limitations of the exemptions provided by Rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC, including filing on a timely basis all reports required to be filed by the Exchange Act. Upon the request of the Holder, the Company shall deliver to the Holder a written statement as to whether it has complied with such requirements.

 
	 
	27

	

	 

 
3. WARRANT HOLDER NOT DEEMED A STOCKHOLDER.
 
(a) Except as otherwise specifically provided herein, the Holder, solely in such Person's capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person's capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.
 
(b) Transfer of Warrant. This Warrant may be transferred only upon the written consent of the Company, which may be withheld in its sole discretion. No such consent shall be required upon the transfer of this Warrant under the laws of Descent. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant, registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less then the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant to the Holder representing the right to purchase the number of Warrant Shares not being transferred.
 
(c) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant representing the right to purchase the Warrant Shares then underlying this Warrant.
 
(d) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, that no Warrants for fractional shares of Preferred Stock shall be given.
 
(e) Issuance of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant, the Warrant Shares designated by the Holder which, when added to the number of shares of Preferred Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.
    	 
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4. NOTICES.
 
Any notice, statement or demand authorized by this Warrant Agreement or made by the Warrant Agent or by the holder of any Warrant to or on the Corporation shall be both (1) emailed to the Company as set forth herein, and (2) delivered by hand or sent by registered or certified mail or overnight courier service addressed (until another address is filed in writing by the Corporation with the Warrant Agent) as follows:
 
Elite Data Services Inc.  
4447 N. Central Expressway  
Suite 110-135 
Dallas, TX 75205  
Attn: Chief Operating Officer 
Phone: (972) 885-3981 
Email: corp@edscompanies.com
 
Any notice, statement, or demand authorized by this Agreement to be given or made by the holder of any Warrant or by the Corporation to or on the Warrant Agent shall be delivered by hand or sent be registered certified mail or overnight courier service, addressed (until another address is filed in writing by the Corporation with the Warrant Agent) as follows:
 
Baker Myers and Associates LLC 
522B 3rd Avenue South 
Nashville, TN 37210 
Attn: Sarah Myers 
Phone: (615) 497-2923 
Email: Sarah-myers@live.com
 
5. AMENDMENT AND WAIVER.Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder.
 
6. GOVERNING LAW.This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Florida, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Florida or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Florida.
 
7. FORUM SELECTION CLAUSE. Any dispute arising under or in connection with the Warrant or related to the terms of this Agreement shall be subject to the exclusive jurisdiction of the state of Florida located in Orlando, Florida, and any dispute between the parties shall come within the jurisdiction of the court in Orange County, Florida.
    	 
	29

	

	 

    8. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.
 
9. DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within two (2) Business Days of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company's independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten Business Days from the time it receives the disputed determinations or calculations. Such investment bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.
 
10. REMEDIES, OTHER OBLIGATIONS, BREACHES, AND INJUNCTIVE RELIEF. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant.
 
11. TRANSFER. This Warrant may not be offered for sale, sold, transferred or assigned without the written consent of the Company, which may be withheld in its sole discretion, and only in compliance with applicable Federal and State securities laws.
 
12. WARRANT AGENT. The Company shall serve as warrant agent under this Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or stockholder services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register in addition to sending an email to the address set forth in Section 4 hereinaboveor to such other email address as provided by the Company.
 
13. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
 
"Bloomberg" means Bloomberg Financial Markets.
 
"Business Day" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.
    	 
	30

	

	 

    "Closing Bid Price" means, for any security as of any date, the last closing bid price for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price, as the case may be, then the last bid price of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price is reported for such security by Bloomberg, the average of the bid prices of any market makers for such security as reported in the "pink sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.
 
"Common Stock" means (i) the Company's shares of Common Stock, par value $0.0001 per share, and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.
 
"Eligible Market" means the Principal Market, The New York Stock Exchange, Inc., or The NASDAQ Capital Market.
 
"Fundamental Transaction" means that the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Common Stock and Preferred Stock (not including any shares of of Common Stock and Preferred Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the outstanding shares of of Common Stock and Preferred Stock (not including any shares of Common Stock and Preferred Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination), (v) reorganize, recapitalize or reclassify its of Common Stock and Preferred Stock, or (vi) any "person" or "group" (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Preferred Stock.
 
"Parent Entity" of a Person means an entity that, directly or indirectly, controls the applicable Person and whose Preferred stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
 
"Person" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
    	 
	31

	

	 

    "Preferred Stock" means (i) the Company's shares of Series B Preferred Stock, par value $0.0001 per share, (ii) any share capital into which such Preferred Stock shall have been changed or any share capital resulting from a reclassification of such Preferred Stock, (ii) convertible into a certain number shares of Common Stock, other rights and provisions as set forth in the Company's Certificate of Designation of Series B Preferred Stock, attached hereto as Exhibit B.  
 
"Principal Market" means The OTC Bulletin Board.
 
"Registration Statement" means a registration statement on Form S-1, Form S-3, or such other eligible registration form as determined in the sole discretion of the Company, which registers the resale of the Warrant Shares pursuant to Rule 415 promulgated under the Securities Act.
 
"Securities Act" means the Securities Act of 1933, as amended.
 
"Successor Entity" means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.
 
"Trading Day" means any day on which the Common Stock underlying the Preferred Stock are traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Preferred Stock, then on the principal securities exchange or securities market on which the Preferred Stock are then traded; provided that "Trading Day" shall not include any day on which the Preferred Stock are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Preferred Stock are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 5:00 p.m., New York time).
 
[Signature Page to Follow]
    	 
	32

	

	 

    INWITNESS WHEREOF, the Company has caused this Warrant to Purchase Preferred Stock to be duly executed as of the Issuance Date set out above.
    	 
	ELITE DATA SERVICES INC., 
a Florida Corporation
	 

	 	 	 	 
		By:	/s/ Charles Rimlinger
	 

	 
	 
	Charles Rimlinger,
	 

	 
	 
	Chief Executive Officer	 

    	 
	33

	

	 

    EXHIBIT A
 
EXERCISE NOTICE
 
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
 
WARRANT TO PURCHASE COMMON STOCK
 
ELITE DATA SERVICES, INC.
 
The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of Elite Data Services Inc., a Florida corporation (the "Company"), evidenced by the attached Warrant to Purchase Common Stock (the "Warrant"). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
 
1. Payment of Exercise Price. The holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.
 
2. Delivery of Warrant Shares. The Company shall deliver to the Holder _______________ Warrant Shares in accordance with the terms of the Warrant.
 
3. Confirmation. Please send confirmation of receipt of this Exercise Notice to the following facsimile number: ______________________ or email address: ____________________.
 
Date: _______________ __, ______
 
_____________________________
Name of Registered Holder
 
By:  __________________________
 
Name: ________________________
 
Title: _________________________
 
	 
	34

	

	 

 
EXHIBIT B
 
CERTIFICATE OF DESIGNATION OF SERIES B PREFERRED STOCK
 
See Attached.
 
 
 
 
 
	 
	35

	

	 

 

Exhibit B-1
 
Investor Questionnaire
 
See attached.
 
 
 
 
 
	 
	36

	

	 

    EXHIBIT C
 
AMENDED AND RESTATED CONVERTIBLE REDEEMABLE NOTE
 
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT").
 
US $500,000.00
 
ELITE DATA SERVICES, INC.
 
AMENDED AND RESTATED CONVERTIBLE REDEEMABLE NOTE
 
FOR VALUE RECEIVED, ELITE DATA SERVICES, INC. (the "Company") promises to pay to the order of BAKER MYERS AND ASSOCIATES LLC, a Nevada limited liability company and its authorized successors and permitted assigns ("Holder"), the aggregate principal face amount of FIVE HUNDRED THOUSAND DOLLARS (US $500,000.00), at ten percent (10%) interest per annum commencing on January 13, 2013, the execution date of the Original Note (the "Effective Date"), due and payable to Holder by Company in eight (8) separate equal quarterly payments of Sixty-Two Thousand Five Hundred Dollars (USD $62,500.00), plus accrued interest to date, due on the first day of each quarter beginning on the date of the first quarter following the date of execution of this Note (each a "Maturity Date"), pursuant to the terms of Note and Share Cancellation and Exchange Agreement dated even date herewith between Company and Holder, of which this Note is made apart. The Company will pay interest payment and the outstanding principal due upon this Note at the sixth month anniversary and continuing until the Maturity Date. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 3(f) herein.
 
This Note is subject to the following additional provisions:
 
1. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
 
2. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended ("Act"), and applicable state securities laws. Holder shall provide the Company with 3-day written notice of the Note's transfer and shall presume that any attempted transfer to a party is deemed qualified by the Holder. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 3(a) hereof, in addition to the requirements set forth in Section 3(b) and 3(c), and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted ("Notice of Conversion") in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
    	 
	37

	

	 

    3. Note Conversions; Interest Payments; Prepayments, Transfers, Etc.
 
(a) The Holder of this Note is entitled, at its option, beginning on the 181th day after Effective Date, at any time, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to the lesser of $0.01 or a discount of fifty-eight percent (58%) of the lowest trading price of the Common Stock as reported on the OTCQB market place which the Company's shares are traded or any market upon which the Common Stock may be traded in the future ("Exchange"), for the ten (10) prior trading days including the day upon which a Notice of Conversion is received by the Company and its transfer agent (provided such Notice of Conversion is delivered by electronic method of communication to the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price) beginning on the 181th day after Effective Date. 
 
(b) If the shares have not been delivered within three (3) business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the transfer agent of the Company delivering the shares of Common Stock to the Holder within three (3) business days of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company's Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this decrease.
 
(c) At any time or times on or after the Maturity Date, the Holder shall be entitled to convert all of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common Stock in accordance with the stated Conversion Price. The Holder shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, (ii) any Common Stock issuable in connection with the unconverted portion of the Note, and (iii) the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the following, the Holder shall not be limited to aggregate conversions of 4.99% ("Conversion Limitation 1"). The Holder shall have the authority to determine whether the restriction contained in this Section 3(c) will limit any conversion hereunder. The Holder may waive the conversion limitation described in this Section 3(c), in whole or in part, upon and effective after 61-days prior written notice to the Company to increase such percentage to up to 9.99% ("Conversion Limitation 2").
 
(d) The Company shall not issue any fraction of a share of Common Stock upon any conversion; if such issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share except in the event that rounding up would violate the conversion limitation set forth in section 3(c) above.
    	 
	38

	

	 

    (e) If the Company, at any time after the Issuance Date, shall issue any securities convertible into or exchangeable for, directly or indirectly, Common Stock ("Convertible Securities"), other than the Note, or any rights or warrants or options to purchase any such Common Stock or Convertible Securities, shall be issued or sold (collectively, the "Common Stock Equivalents") and the aggregate of the price per share for which Additional Shares of Common Stock may be issuable thereafter pursuant to such Common Stock Equivalent, plus the consideration received by the Company for issuance of such Common Stock Equivalent divided by the number of shares of Common Stock issuable pursuant to such Common Stock Equivalent (the "Aggregate Per Common Share Price") shall be less than the applicable Conversion Price then in effect, or if, after any such issuance of Common Stock Equivalents, the price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall make the Aggregate Per Share Common Price be less than the applicable Conversion Price in effect at the time of such amendment or adjustment, then the applicable Conversion Price upon each such issuance or amendment shall be reduced to the lower of: (i) the Conversion Price; or (ii) a twenty-five percent (25%) discount to the lowest Aggregate Per Common Share Price (whether or not such Common Stock Equivalents are actually then exercisable, convertible or exchangeable in whole or in part) as of the earlier of (A) the date on which the Company shall enter into a firm contract for the issuance of such Common Stock Equivalent, or (B) the date of actual issuance of such Common Stock Equivalent. No adjustment of the applicable Conversion Price shall be made under this Section 6 upon the issuance of any Convertible Security which is outstanding on the day immediately preceding the Issuance Date. No adjustment shall be made to the Conversion Price upon the issuance of Common Stock pursuant to the exercise, conversion or exchange of any Convertible Security or Common Stock Equivalent where an adjustment to the Conversion Price was made as a result of the issuance or purchase of any Convertible Security or Common Stock Equivalent.
 
(f) Interest on any unpaid principal balance of this Note shall be paid at the rate of ten percent (10%) per annum with the first payment being made on the sixth-month anniversary of this Note. Interest shall be paid by the Company in Common Stock ("Interest Shares"). Holder may, at any time after six months, send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 3(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice. 
 
(g) The Notes may be prepaid, in whole or in part, with the following penalties: (i) if the note is prepaid within 90 days of the issuance date, then at 120% of the face amount plus any accrued interest; (ii) if the note is prepaid within 91 days after the issuance date but less than 150 days after the issuance date, then at 130% of the face amount plus any accrued interest; (iii) if the note is prepaid within 150 days after the issuance date but less than 180 days after the issuance date, then at 140% of the face amount plus any accrued interest. This Note may not be prepaid after the 180th day without written permission from Holder. Such redemption must be closed and funded within three (3) days of giving notice of redemption of the right to redeem shall be null and void.
 
(h) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
    	 
	39

	

	 

    (i) In case of any Sale Event (not to include a sale of all or substantially all of the Company's assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
 
4. The Holder agrees that so long as this Note from the Holder and the Company remains outstanding, the Holder will not enter into or effect "short sales" of the Common Stock or hedging transaction which establishes a net short position with respect to the Common Stock of the Company. The Company acknowledges and agrees that upon delivery of a conversion notice by the Holder, the Holder immediately owns the shares of Common Stock described in the conversion notice and any sale of those shares issuable under such conversion notice would not be considered short sales. 
 
5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
 
6. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
 
7. The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.
 
8. If one or more of the following described "Events of Default" shall occur:
 
(a) The Company shall default in the payment of principal or interest on this Note to the Holder by the Company as of the Maturity Date; or
 
(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note under which this note was issued shall be false or misleading in any respect; or
 
(c) The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or
 
(d) The Company shall (1) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (2) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (3) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or
    	 
	40

	

	 

    (e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or
 
(f) Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or
 
(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of thirty (30) days or in any event later than five (5) days prior to the date of any proposed sale thereunder with the exception of the current litigation that is already disclosed as reported on the Company's public filings; or
 
(h) The Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than ten (10) consecutive days;
 
(i) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within three (3) business days of its receipt of a Notice of Conversion (provided that a reasonable attorney opinion has been provided by Holder to the Company in which it deems it can reasonably rely); or
 
(j) The Company shall not be "current" in its filings with the Securities and Exchange Commission, and such shall not be cured within ten (10) business days; or
 
(k) The Company shall lose the "bid" price for its stock and a market (including the OTCBB marketplace or other exchange)
 
Then, or at any time thereafter, unless cured within five (5) business days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(i) the penalty shall be $50 per day the shares are not issued beginning on the 5th day after the conversion notice was delivered to the Company. This penalty shall increase to $100 per day beginning on the 10th day. The penalty for a breach of Section 8(k) shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(h), the outstanding principal due under this Note shall increase by 50%. Further, if a breach of Section 8(m) occurs or is continuing after the 6-month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period (after cure period) as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50% the Holder may elect to convert future conversions at $0.001 per share. If this Note is not paid at maturity, the outstanding principal due under this Note shall increase by ten percent (10%).
    	 
	41

	

	 

    9. At the Holder's election, if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice and documentary evidence indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows: Failure to Deliver Loss = [(High trade price at any time on or after the day of exercise) x (Number of conversion shares)]. Such failure to deliver will be repayable in the Company's Common Stock.
 
10. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
 
11. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.
 
12. The Company represents that it is not a "shell" issuer and has never been a "shell" issuer or that if it previously has been a "shell" issuer that at least 12 months have passed since the Company has reported Form 10 type information indicating it is no longer a "shell issuer.
 
13. The Holder agrees that so long as this Note from the Holder and the Company remains outstanding, the Holder will not enter into or effect "short sales" of the Common Stock or hedging transaction which establishes a net short position with respect to the Common Stock of the Company. The Company acknowledges and agrees that upon delivery of a conversion notice by the Holder, the Holder immediately owns the shares of Common Stock described in the conversion notice and any sale of those shares issuable under such conversion notice would not be considered short sales.
 
14. The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
 
15. Any dispute or claim arising to or in any way related to this Note or the rights and obligations of each of the parties hereto may be settled by binding arbitration pursuant. All arbitration shall be conducted in accordance with the rules and regulations of the American Arbitration Association ("AAA"). AAA shall designate an arbitrator from an approved list of arbitrators following both parties' review and deletion of those arbitrators on the approved list having a conflict of interest with either party. The Company agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner.The Company hereto knowingly and voluntarily waives any and all rights it may have to a trial by jury with respect to any litigation based on, or arising out of, under, or in connection with, this note.
 
16. This Note shall be governed by and construed in accordance with the laws of Florida applicable to contracts made and wholly to be performed within the State of Florida and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of Florida. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.
    	 
	42

	

	 

    IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized on the date referenced below.
    	 
	ELITE DATA SERVICES INC.,
a Florida Corporation
	 

	 	 	 	 
	Date: May 18, 2016
	By:	/s/ Charles Rimlinger
	 

	 
	 
	Charles Rimlinger
	 

	 
	 
	Chief Executive Officer
	 

 
	 
	43

	

	 

 
EXHIBIT A
 
NOTICE OF CONVERSION
 
(To be Executed by the Registered Holder in order to Convert the Note)
 
The undersigned hereby irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of Elite Data Services, Inc. ("Shares") according to the conditions set forth in such Note, as of the date written below.
 
If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
 
Date of Conversion:________________________________________________________________
 
Applicable Conversion Price: _________________________________________________________
 
Signature: _______________________________________________________________________
                 [Print Name of Holder and Title of Signer]
 
Address: ________________________________________________________________________
 
                 ________________________________________________________________________
 
SSN or EIN: _______________________________
 
Shares are to be registered in the following name:__________________________________________
 
Name:  __________________________________________________________________________
 
Address: ________________________________________________________________________
 
Tel: ______________________________________
 
Fax: ______________________________________
 
SSN or EIN: ________________________________
 
Shares are to be sent or delivered to the following account:
 
Account Name: ___________________________________________________________________
 
Address: ________________________________________________________________________
 
 
44

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