Document:

Exhibit 10.2

 

NEITHER THE ISSUANCE AND SALE OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.

 

 

	Principal Amount: $43,000.00	Issue Date: November 7, 2014
	Purchase Price: $43,000.00	 

 

CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED,
POCKET GAMES, INC., a Florida corporation (hereinafter called the “Borrower”), hereby promises to pay to the
order of KBM WORLDWIDE, INC., a New York corporation, or registered assigns (the “Holder”) the sum of $43,000.00
together with any interest as set forth herein, on August 11, 2015 (the “Maturity Date”), and to pay interest on the
unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date hereof
(the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment
or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal
or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from
the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that
the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments
due hereunder (to the extent not converted into common stock, $0.0001 par value per share (the “Common Stock”) in accordance
with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address
as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead
be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than
a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or

    	 

    	 

    

executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase
Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

 

This Note is free
from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights
or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof. The following
terms shall apply to this Note:

 

ARTICLE I.
CONVERSION RIGHTS

 

1.1  Conversion
Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is
one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date
of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the
remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount
of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any
shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified
at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided,
however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note
upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of
the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion
or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion
of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso
to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided
in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder upon,
at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion
limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in
such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined
by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in
the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the
Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile
or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New
York, New York time on such conversion date (the “Conversion

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Date”). The term “Conversion
Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted
in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the
interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on
the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts
owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

 

1.2 Conversion
Price.

 

(a) Calculation
of Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as
defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating
to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 58% multiplied by the Market
Price (as defined herein) (representing a discount rate of 42%). “Market Price” means the average of the lowest three
(3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete
Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid
price on the Over-the-Counter Bulletin Board, Pink Sheets electronic quotation system or applicable trading market (the “OTC”)
as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if
the OTC is not the principal trading market for such security, the closing bid price of such security on the principal securities
exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in
any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in
the “pink sheets”. If the Trading Price cannot be calculated for such security on such date in the manner provided
above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in
interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion
Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the
OTC, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

 

(b) Conversion
Price During Major Announcements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower
(i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which
the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially
all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer
to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred
to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price shall,
effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below),
be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement
Date and (y) the

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Conversion Price that would otherwise
be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth
in this Section 1.2(a). For purposes hereof, “Adjusted Conversion Price Termination Date” shall mean, with respect
to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section
1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the
case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender
offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

 

1.3 Authorized
Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock
upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have
authorized and reserved five times the number of shares that is actually issuable upon full conversion of the Note (based on the
Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased
from time to time in accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such
shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities
or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall
be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter
there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion
of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates
for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full
authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock in accordance with the terms and conditions of this Note. If, at any time the Borrower
does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

 

1.4 Method of
Conversion.

 

(a) Mechanics
of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time
to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable
means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section
1.4(b), surrendering this Note at the principal office of the Borrower.

 

(b) Surrender
of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance
with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid
principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount
so converted and the dates of such conversions or shall use

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such other method, reasonably satisfactory
to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of
any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in
the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder
may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will
forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the
Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this
Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented
by this Note may be less than the amount stated on the face hereof.

 

(c) Payment
of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that
of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities
or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are
to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such
tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

 

(d) Delivery
of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other
reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section
1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates
for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”)
(and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with
the terms hereof and the Purchase Agreement.

 

(e) Obligation
of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to
be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of
accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its
obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate
except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion.
If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver
the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder
to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person
or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder
of record, or

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any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of
any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.
The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received
by the Borrower before 6:00 p.m., New York, New York time, on such date.

 

(f) Delivery
of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable
upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities
Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section
1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the
Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its
Deposit Withdrawal Agent Commission (“DWAC”) system.

 

(g) Failure
to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion
of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which
failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock through willful or deliberate hindrances on the part of the Borrower.
Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the
option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued),
shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms
of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this
Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt
to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge
that the liquidated damages provision contained in this Section 1.4(g) are justified.

 

1.5 Concerning
the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such
shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall
have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor
rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the
Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited
Investor (as defined in the Purchase Agreement). Except as otherwise provided in the

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Purchase Agreement (and subject to the
removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been
registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as
of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of
this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective
registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form,
as appropriate:

 

“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.” 

 

The legend set forth
above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i)
the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions
of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration
under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the
Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration
statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel
provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144
or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

1.6 Effect of
Certain Events.

 

(a) Effect of
Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of
the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more
than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other

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business combination of the Borrower
with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to
be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the
consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii)
be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company,
partnership, association, trust or other entity or organization.

 

(b) Adjustment
Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all
of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar
event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares
of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of
all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon
the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted
in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such
case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that
the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares
issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities
or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section
1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least
fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no
such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other
similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor
or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions
shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

(c) Adjustment
Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets)
to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or
distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this
Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets
which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such
Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such
Distribution.

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(d) Purchase
Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or
rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record
holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number
of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion
contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase
Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.

 

(e) Notice
of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events
described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and
prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder,
furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the
time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which
at the time would be received upon conversion of the Note.

 

1.7 Trading
Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which
the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to
this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common
Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common
Stock is then traded (the “Maximum Share Amount”), which shall be 4.99% of the total shares outstanding on the
Closing Date (as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits,
stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the
date hereof. Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under
applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of
Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be
considered an Event of Default under Section 3.3 of the Note.

 

1.8 Status as
Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the
shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the
Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s
rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to

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receive certificates for such shares
of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure
by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates
for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion
of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common
Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted
portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note
has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the
Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default
Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default
and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3)
for the Borrower’s failure to convert this Note.

 

1.9 Prepayment.
Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately
following this paragraph (the “Prepayment Periods”), the Borrower shall have the right, exercisable on not less than
three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest),
in full, in accordance with this Section 1.9. Any notice of prepayment hereunder (an “Optional Prepayment Notice”)
shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising
its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date
of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower
shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the order of the Holder as specified
by the Holder in writing to the Borrower, at least one (1) business day prior to the Optional Prepayment Date. If the Borrower
exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional
Prepayment Amount”) equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately
following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal
amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment
Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder
pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional
Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower
shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

    	10

    	 

    

 

	Prepayment Period 	Prepayment Percentage 
	1. The period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date. 	110% 
	2. The period beginning  on the date which is thirty-one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date 	115% 
	3. The period beginning  on the date which is sixty-one (61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date 	120% 
	4. The period beginning on the date that is ninety-one (91) day from the Issue Date and ending one hundred twenty (120) days following the Issue Date 	125% 
	5. The period beginning on the date that is one hundred twenty-one (121) day from the Issue Date and ending one hundred fifty (150) days following the Issue Date 	130% 
	6. The period beginning on the date that is one hundred fifty-one (151) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date 	135% 

 

After the expiration
of one hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment.

 

ARTICLE II.
 CERTAIN COVENANTS

 

2.1 Distributions
on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s
written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property
or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional
shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect
of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority
of the Borrower’s disinterested directors.

 

2.2 Restriction
on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the
Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other
securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower
or any warrants, rights or options to purchase or acquire any such shares.

 

2.3 Borrowings.
So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written
consent, (a) create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation
of any other person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for
deposit or collection, or (b) suffer to exist any liability for borrowed money, except any borrowings that does not render the
Borrower a "Shell" company as defined in Rule 12b-2 under the Securities Exchange Act of 1934.

 

    	11

    	 

    

2.4 Sale of Assets.
So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written
consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business except
when any sale, lease or disposition is done for fair consideration and does not render the Borrower a "Shell" company
as defined in Rule 12b-2 under the Securities Exchange Act of 1934. Any consent to the disposition of any assets may be conditioned
on a specified use of the proceeds of disposition.

 

2.5 Advances and
Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s
written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a)
in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b)
made in the ordinary course of business, (c) that do not render the Borrower a "Shell" company as defined in Rule 12b-2
under the Securities Exchange Act of 1934 that do or (d) not in excess of $100,000.

 

ARTICLE III.
 EVENTS OF DEFAULT

 

If any of the following
events of default (each, an “Event of Default”) shall occur:

 

3.1 Failure to
Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether
at maturity, upon acceleration or otherwise.

 

3.2 Conversion
and the Shares. The Borrower through willful or deliberate hindrances, fails to issue shares of Common Stock to the Holder
(or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion
rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue)
(electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or
otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or
delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate
for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required
by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer
agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate
for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required
by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described
in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor
its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice
of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an
event of default of this Note, if a conversion of this Note is delayed, hindered or

    	12

    	 

    

frustrated due to a balance owed by
the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer
agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48)
hours of a demand from the Holder.

 

3.3 Breach of
Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any
collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days
after written notice thereof to the Borrower from the Holder.

 

3.4 Breach of
Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement
or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement),
shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have)
a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

 

3.5 Receiver or
Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for
or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a
receiver or trustee shall otherwise be appointed.

 

3.6 Judgments.
Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or
any of its property or other assets for more than $50,000, and shall remain unvacated, unbonded or unstayed for a period of twenty
(20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

 

3.7 Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the
Borrower.

 

3.8 Delisting
of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically
includes the Pink Sheets electronic quotation system) or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq
SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

 

3.9 Failure to
Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or
the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

 

3.10 Liquidation.
Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

    	13

    	 

    

3.11 Cessation
of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts
as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going
concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

 

3.12 Maintenance
of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other
assets which are necessary to conduct its business (whether now or in the future).

 

3.13 Financial
Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period
from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement
would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder
with respect to this Note or the Purchase Agreement.

 

3.14 Reverse Splits.
The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

 

3.15 Replacement
of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior
to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered
pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in
the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

 

3.16
Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents,
a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after
the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under
this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights
and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement
or hereunder. “Other
Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the
benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however,
the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions
will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

 

Upon the occurrence
and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal
hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall
pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). UPON
THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME 

    	14

    	 

    

IMMEDIATELY
DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO:
(Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event
of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on
this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11,
3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the “Default
Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure
to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately
due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to
the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest
on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default
Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections
1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in
clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) or (ii) the “parity value” of
the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion
of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory
Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless
the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall
be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date
of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”)
and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all
of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection,
and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

 

If the Borrower
fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder
shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient
authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number
of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

 

ARTICLE IV.
MISCELLANEOUS

 

4.1 Failure or
Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other
or further exercise

    	15

    	 

    

thereof or of any other right, power
or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

 

4.2 Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:

 

If to
the Borrower, to:

POCKET GAMES, INC.

909 Plainview Avenue

Far Rockaway, Ny 11691

Attn: ELLIOTT POLATOFF, Corporate
Secretary

facsimile:

 

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

[enter name of law firm]

Attn: [attorney name]

[enter address line 1]

[enter city, state, zip]

facsimile: [enter fax number]

 

If to
the Holder:

KBM WORLDWIDE, INC.

80 Cuttermill Road – Suite
410

Great Neck, NY 11021

Attn: Seth Kramer, President

e-mail:
info@kbmworldwide.com 

 

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

Naidich Wurman Birnbaum &
Maday, LLP

Att: Judah A. Eisner, Esq.

Attn: Bernard S. Feldman, Esq.

facsimile: 516-466-3555

e-mail: dyork@nwbmlaw.com

    	16

    	 

    

 

4.3 Amendments.
This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The
term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other
Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended
or supplemented.

 

4.4 Assignability.
This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a)
of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection
with a bona fide margin account or other lending arrangement.

 

4.5 Cost of Collection.
If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable
attorneys’ fees.

 

4.6 Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles
of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note
shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The
parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder
waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party
hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in
connection with this Agreement or any other Transaction Document 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.

 

4.7 Certain Amounts.
Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the
portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the
Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult
to determine and the amount to be so paid by the Borrower represents

    	17

    	 

    

stipulated damages and not a penalty
and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the
sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant
to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to
the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of
Common Stock.

 

4.8 Purchase Agreement.
By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.

 

4.9 Notice of
Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock
unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification
of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders).
In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are
entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including
by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution
or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement
regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The
Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously
with the notification to the Holder in accordance with the terms of this Section 4.9.

 

4.10 Remedies.
The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for
a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the
Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law
or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing
any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic
loss and without any bond or other security being required.

 

    	18

    	 

    

IN WITNESS WHEREOF,
Borrower has caused this Note to be signed in its name by its duly authorized officer this November 7, 2014.

 

POCKET GAMES, INC.

 

By: _______________________________

ELLIOTT POLATOFF

Corporate Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    	19

    	 

    

EXHIBIT A -- NOTICE OF CONVERSION 

 

The undersigned hereby
elects to convert $_________________ principal amount of the Note (defined below) into that number of shares of Common Stock
to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of POCKET GAMES, INC., a Florida
corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of November
7, 2014 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except
for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

[ ]  The
Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned
or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

 

Name of DTC Prime Broker:

Account Number:

 

[ ]  The
undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set
forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below
or, if additional space is necessary, on an attachment hereto:

 

KBM WORLDWIDE, INC.

80 Cuttermill Road – Suite
410

Great Neck, NY 11021

Attention: Certificate Delivery

e-mail: info@kbmworldwide.com

 

Date of Conversion: _____________

Applicable Conversion Price:
$____________

Number of Shares of Common Stock
to be Issued

Pursuant to Conversion of the
Notes: ______________

Amount of Principal Balance
Due remaining

Under the Note after this conversion:
______________

 

KBM WORLDWIDE, INC.

 

By:_____________________________

Name: Seth Kramer

Title: President

Date:

    	20Exhibit 10.5_Exchange Agreement

Exhibit 10.5

EXCHANGE AGREEMENT

This Exchange Agreement (this “Agreement”) is made and entered into as of September 8, 2014, by and among American Media, Inc., a Delaware corporation (the “Company”), AMI Parent Holdings LLC (“Parent”), Chatham Asset Management, LLC, a Delaware limited liability company (“CAM”), on behalf of itself and Chatham Asset High Yield Master Fund, Ltd. and Chatham Eureka Fund, L.P. (collectively, the “Chatham Holders”), and Omega Charitable Partnership, L.P., a limited partnership organized in the Cayman Islands (the “Omega Holder” and, together with the Chatham Holders, the “Noteholders”). References in this Agreement to each Chatham Holder shall be deemed to include CAM, as such Chatham Holder’s duly authorized representative, for purposes of fulfilling the Chatham Holders’ obligations hereunder. The Company and the Noteholders are collectively referred to herein as the “Parties” and individually as a “Party,” as the context requires.

WHEREAS, the Noteholders own (i) $7.8 million in aggregate principal amount of the Company’s 131⁄2% Second Lien Senior Secured Notes due 2018 (the “Second Lien Notes”), issued by the Company pursuant to that certain indenture dated as of December 22, 2010, by and among the Company, the guarantors party thereto and Wilmington Trust, National Association (as successor by merger to Wilmington Trust FSB), as trustee and collateral agent (the “Second Lien Notes Trustee”), as supplemented by the first supplemental indenture dated as of May 13, 2011, the second supplemental indenture dated as of April 25, 2012 and the third supplemental indenture dated as of August 15, 2014 (the “Second Lien Notes Indenture”) and (ii) $113.3
million aggregate principal amount outstanding of 10% Second Lien Senior Secured PIK Notes due 2018 (the “Second Lien PIK Notes” and, together with the Second Lien Notes, the “Notes”) issued pursuant to that certain indenture dated as of October 2, 2013, among AMI, the Guarantors and Wilmington Trust, National Association, as trustee (the “Second Lien PIK Notes Trustee” and, in its capacity as both the Second Lien Notes Trustee and the Second Lien PIK Notes Trustee, the “Trustee”) and as collateral agent, as supplemented by the first supplemental indenture dated as of August 15, 2014 (as such agreement may be amended, restated or supplemented on the date hereof, the “Second Lien PIK Notes Indenture” and, together with the Second Lien Notes Indenture, the “Indentures”); 

WHEREAS, the Noteholders wish to exchange (i) $7.8 million in aggregate principal amount of Second Lien Notes and (ii) $113.3 million in aggregate principal amount of Second Lien PIK Notes for Class A-1 Interests of Holdings (the “Interests”), in the amounts and for delivery to the entities set forth on Schedule B hereto (the “Exchange Interests”); and WHEREAS, Parent wishes to issue the Exchange Interests in exchange for the Notes upon the terms and conditions set forth herein. 

NOW, THEREFORE, in consideration of the mutual covenants, agreements and understandings herein contained, the Parties hereby agree as follows: 

SECTION 1. Exchange of Notes.

1.1.     The Exchange. On and subject to the satisfaction of the terms and conditions and the representations and warranties set forth in this Agreement, on the Closing Date Parent shall, in exchange and as full consideration for the Notes delivered to the Company by the Noteholders on the Closing Date, issue the Exchange Interests.

1.2    Closing. The closing of the exchange of the Notes for the Exchange Interests (the “Closing”) shall take place no later than September 8, 2014 at 5:00 p.m. (New York time) (the “Closing Date”). On the Closing Date:

(a) the Noteholders shall, severally and not jointly, surrender, transfer and deliver all outstanding Notes owned by the Noteholders to the Company via book-entry delivery in accordance with the instructions received from the Company. The Company shall then transfer and deliver such Notes to the Trustee to effect the cancellation of the Notes in accordance with the terms of the Indentures; and

(b) in exchange for the Notes delivered by the Noteholders, Parent shall issue and deliver the Exchange Interests in the amounts and for delivery to the entities and DTC accounts set forth on Schedule B hereto.

The transactions set forth in this Section 1.2 shall be deemed to take place concurrently with each other at the Closing. Neither the Company nor Parent will pay or owe any prepayment or redemption premium under the Indentures with respect to the Notes exchanged for Exchange Interests.

SECTION 2. Conditions of the Noteholders’ Obligations at the Closing. The obligation of the Noteholders to exchange the Notes for the Exchange Interests at the Closing is subject to the satisfaction (or waiver by the Noteholders) as of the Closing of the following conditions: 

2.1     Representations and Warranties True. The representations and warranties contained in Section 4 hereof shall be true and correct in all material respects on the date hereof and as of the Closing as though made as of the Closing Date (or, in the case of representations and warranties that are qualified by materiality or a Material Adverse Effect (as defined below), shall be true and correct on and as of the Closing Date).

2.2     Compliance with Covenants. Each of the Company and Parent shall have complied in all material respects with all of their respective covenants and agreements contained herein to be performed by each of them on or prior to the Closing Date. 

2.3     No Prohibitions. No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any Federal, state, local or foreign government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, or other legal restraint or prohibition shall be in effect preventing the consummation by the Company or Parent or, to the extent applicable, any Noteholder, of the exchange contemplated hereby, the issuance of the Exchange Interests or the transactions contemplated hereby intended to be consummated on the Closing Date.

2.4     Fees and Expenses. The Company shall have paid or cause to be paid, on or before the Closing Date, the reasonable and documented fees, charges and disbursements of Paul, Weiss, Rifkind, Wharton & Garrison LLP as provided for in Section 7 hereof.

SECTION 3. Conditions of the Obligations of the Company and Parent at the Closing.  The obligations of the Company and Parent to consummate the transactions contemplated hereby is subject to the satisfaction (or waiver by the Company or Parent, as applicable) as of the Closing of the following conditions:

3.1     Representations and Warranties True. The representations and warranties contained in Section 5 hereof shall be true and correct in all material respects on the date hereof and as of the Closing as though made as of the Closing Date (or, in the case of representations and warranties that are qualified by materiality or a Material Adverse Effect (as defined below), shall be true and correct on and as of the Closing Date).

3.2     Compliance with Covenants. Each Noteholder shall have complied in all material respects with all of its respective covenants and agreements contained herein to be performed by it on or prior to the Closing Date.

3.3     No Prohibitions. No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any Federal, state, local or foreign government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, or other legal restraint or prohibition shall be in effect preventing the consummation by the Company or Parent or, to the extent applicable, any Noteholder, of the Exchange, the issuance of the Exchange Shares or the transactions 
contemplated hereby intended to be consummated on the Closing Date.

SECTION 4. Representations and Warranties of the Company. As a material inducement to the Noteholders to enter into this Agreement, the Company and Parent hereby jointly and severally represent and warrant to the Noteholders as follows:

4.1 Organization; Requisite Authority. Each of the Company and Parent is a corporation or limited liability company, as applicable, duly organized, validly existing and in good standing under the laws of Delaware, and each of the Company and Parent is duly qualified as a foreign corporation or limited liability company, as applicable, to transact business and is in good standing in each other jurisdiction in which such qualification is required, except where the failure to be so organized or qualified or be in good standing would not reasonable be expected to have a material adverse effect on the financial condition, business or results of operations of Parent and its subsidiaries, taken as a whole (a “Material Adverse Effect”). Each of the Company and Parent possesses all requisite power and authority necessary to consummate the transactions contemplated by this Agreement. 

4.2 Authorization. The execution, delivery and performance of this Agreement have been duly authorized by each of the Company and Parent. This Agreement, when executed and delivered by the Company and Parent in accordance with the terms hereof, shall constitute a valid and binding obligation of the Company and Parent, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and by general equitable principles.

4.3 Validity of Shares. When issued and delivered in accordance with this Agreement, the Exchange Interests to be delivered under this Agreement shall be (i) duly and validly authorized, issued and outstanding, (ii) fully paid and non-assessable, (iii) free and clear of any liens and encumbrances. The Exchange Interests are being offered and sold pursuant to, and in compliance with, Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”).

        

4.4 Broker’s Fees. None of the Company, Parent, or any of the Company or Parent’s officers or directors has retained or authorized any investment banker, broker, finder or other intermediary to act on behalf of the Company or Parent or incurred any liability for any banker’s, broker’s or finder’s fees or commissions in connection with the transactions contemplated by this Agreement.

SECTION 5. Representations and Warranties of the Noteholders. As a material inducement to the Company and Parent to enter into this Agreement, each Noteholder hereby, severally and not jointly, represents and warrants to the Company and Parent as follows:
        
5.1 Organization; Requisite Authority. Each Noteholder is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Each Noteholder possesses all requisite power and authority necessary to consummate the transactions contemplated by this Agreement and transfer the Notes to the Company, free and clear of any lien or encumbrance.

5.2 Authorization. The execution, delivery and performance of this Agreement have been duly authorized by each Noteholder. This Agreement, when executed and delivered by each Noteholder in accordance with the terms hereof, shall constitute a valid and binding obligation of such Noteholder, enforceable against such Noteholder in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and by general equitable principles.

5.3 Ownership. Each Noteholder is the beneficial owner of the aggregate principal amount and any and all accrued and unpaid interest thereon, as the case may be, of the Notes as set forth on Schedule A. Such Noteholder further represents that such Notes are held through the book-entry facilities of DTC by the DTC participants set forth on Schedule A. Upon delivery to the Company of the Notes, and upon such Noteholder’s receipt of the Exchange Interests as consideration in respect thereof as set forth herein, in each case, pursuant to this Agreement, good and valid title to the Notes owned by such Noteholder will pass to the Company, free and clear of any liens, claims, encumbrances, security interests, options or charges of any kind. 

5.4 Information; Consultation with Counsel and Advisors. Each Noteholder is entering into this Agreement as principal (and not as agent or in any other capacity); none of the Company, Parent or any of the Company’s or Parent’s affiliates or agents are acting as a fiduciary for it; it is entering into this Agreement with a full understanding of the terms, conditions and risks thereof and it is capable of and willing to assume those risks. Each Noteholder (a) has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisers in connection herewith to the extent such Noteholder has deemed necessary, (b) has received from the Company all necessary information relating to the Company and its business and had a reasonable opportunity to ask questions of and receive answers from officers and representatives of the Company concerning its financial condition and results of operations and the exchange of the Notes to which this Agreement relates, and any such questions have been answered to its satisfaction, (c) has had the opportunity to review all publicly available records and filings and all other documents concerning the Company that such Noteholder considers necessary or appropriate in making an investment decision, (d) has 
reviewed all information that it believes is necessary or appropriate in connection with the exchange of the Notes and (e) has conducted its own due diligence on the Company and the exchange and has made its own investment decisions based upon its own judgment, due diligence and advice from such advisers as such Noteholder has deemed necessary and not upon any view expressed by or on behalf of the Company or Parent. 

5.5 Broker’s Fees. None of the Noteholders has retained or authorized any investment banker, broker, finder or other intermediary to act on behalf of such Noteholder or incurred any liability for any banker’s, broker’s or finder’s fees or commissions in connection with the transactions contemplated by this Agreement. 

SECTION 6. Termination. The obligation of the Parties to exchange the Notes for the Exchange Shares at the Closing may be terminated at any time prior to the Closing by the mutual written consent of the Parties.
    
SECTION 7. Fees and Expenses. The Company and Parent jointly and severally covenant and agree with the Noteholders that the Company will pay or cause to be paid, in connection with the transactions contemplated by this Agreement, at the Closing (or if earlier, upon termination of this Agreement), the reasonable and documented fees and expenses of Paul, Weiss, Rifkind, Wharton & Garrison LLP, counsel to the Noteholders. 

SECTION 8. Transfer Restrictions. Until the earlier of (i) termination of this Agreement pursuant to Section 6 above or (ii) 12:00 p.m. (New York time) on the date of public announcement of the exchange contemplated hereby by the Company on a Current Report on Form 8-K (which public announcement shall be made prior to 9:00 a.m. (New York time) on the first business day following the Closing), none of the Noteholders shall sell, transfer, assign, pledge, encumber, hypothecate or otherwise dispose of (or offer to undertake any of the foregoing), or enter into any contract, option, commitment or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or other disposition of any Shares. 

SECTION 9. Miscellaneous.

9.1 Obligations of Noteholders. The obligations hereunder of the Noteholders are several and not joint, and a breach by one Noteholder of the terms of this Agreement shall not release other Noteholders from terms of this Agreement or their obligations hereunder and shall not terminate this Agreement.

9.2 Further Assurances. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement or the transactions contemplated hereby, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party may reasonably request.

9.3 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement or the application of any such provision to any Party or circumstance shall be held to be prohibited by, illegal or unenforceable under applicable law in any respect by a court of competent jurisdiction, such provision shall be ineffective only to the extent of such prohibition or illegality or unenforceability, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

9.4 Counterparts. This Agreement may be executed simultaneously in counterparts (including by means of facsimile transmission or “pdf” file thereof), any one of which need not contain the signatures of more than one Party, but all such counterparts taken together shall constitute one and the same Agreement.

        

9.5 Descriptive Headings; Interpretation. The headings and captions used in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized terms used in any Schedule attached hereto and not otherwise defined therein shall have the meanings set forth in this Agreement. The use of the word “including” herein shall mean “including without limitation.” The Parties intend that each representation, warranty and covenant contained herein shall have independent significance.  If any Party has breached any representation, warranty or covenant contained herein in any respect, the fact that there exists another representation, warranty or covenant relating to the same subject matter (regardless of the relative levels of specificity) the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of the first representation, warranty or covenant.

9.6 Entire Agreement. This Agreement and the agreements and documents referred to herein contain the entire agreement and understanding between the Parties with respect to the subject matter hereof and supersede all prior agreements and understandings, whether written or oral, relating to such subject matter in any way. 

9.7 Amendment. This Agreement may be amended, modified or supplemented but only in writing (including a writing evidenced by a facsimile transmission or “pdf” file thereof) signed by the Party against which enforcement is sought.

9.8 APPLICABLE LAW; WAIVER OF JURY TRIAL; THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS ENTERED INTO AND TO BE PERFORMED IN SUCH STATE. THE PARTIES HERETO AGREE TO WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY DISPUTE ARISING FROM OR RELATED TO THIS AGREEMENT.

9.9 Submission to Jurisdiction. Each Party agrees that any suit, action or proceeding bought by it against the other Party arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in any state or federal court in The City of New York, New York, and waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the non-exclusive jurisdiction of such courts in any suit, action or proceeding.

9.10 Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be sent to the Company and each Noteholder at the addresses set forth below:

The Company and Parent:

American Media, Inc.
1000 American Media Way
Boca Raton, Florida 33464
Attention: Chris Polimeni, Executive Vice President – Chief Financial Officer
     and Treasurer
Email: cpolimeni@amilink.com
Fax: (877) 569-5998

and

        

American Media, Inc.
4 New York Plaza
New York, New York 10004
Attention: Eric Klee, Esq., General Counsel
Email: eklee@amilink.com
Fax: (212) 743-6590

The Noteholders:

To the Address under each Noteholder’s name
on Schedule A attached hereto

With a copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019
Attention: Andrew N. Rosenberg, Esq. and Tracey A. Zaccone, Esq.
Email: arosenberg@paulweiss.com and tzaccone@paulweiss.com
Fax: (212) 757-3990

9.11 No Construction Against Draftsperson. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.

(Signatures on next page)

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.

                                                 	
					
	AMERICAN MEDIA, INC.

	 
	 
	 
	 
	 

	 
	 
	/s/ Christopher Polimeni

	 
	 
	Name: Christopher Polimeni
	 

	 
	 
	Executive Vice President, Chief Financial Officer and Treasurer

                                                	
					
	AMI PARENT HOLDINGS LLC

	 
	 
	 
	 
	 

	 
	 
	/s/ James Ruggerio, Jr.

	 
	 
	Name: James Ruggerio, Jr.
	 

	 
	 
	President

                                               	
					
	CHATHAM ASSET MANAGEMENT, LLC

	 
	 
	 
	 
	 

	 
	 
	/s/ James Ruggerio, Jr.

	 
	 
	Name: James Ruggerio, Jr.
	 

	 
	 
	Chief Operating Officer

                                               	
					
	OMEGA CHARITABLE PARTNERSHIP, L.P.

	By: Omega Associates, LLC its Partner

	 
	 
	 

	 
	 
	/s/ David Bloom

	 
	 
	Name: David Bloom
	 

	 
	 
	Member and authorized signatory

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