Document:

EXHIBIT 10.40

 

CONVERTIBLE PROMISSORY NOTE OF ELITE DATA SERVICES INC.

 

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION 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. 

 

THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION.  AS A RESULT, FOLLOWING ANY REDEMPTION OR CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED INTEREST SET FORTH BELOW.

 

Issuance Date: March 16, 2015 

Total Face Value of Note: $120,000

 

This Note is a duly authorized Convertible Promissory Note of Elite Data Services Inc. a corporation duly organized and existing under the laws of the State of Florida (the “Company”), designated as the Company's Convertible Promissory Note due March 16, 2016 (“Maturity Date”) in the principal amount of $120,000 (the “Note”).

 

For Value Received, the Company hereby promises to pay to the order of Iconic Holdings, LLC or its registered assigns or successors-in-interest (“Holder”) the principal sum of up to $120,000 as set forth in accordance with the terms hereof.

 

The purchase price will be $110,000 of consideration upon execution of the Note Purchase Agreement and all supporting documentation.  The sum of $110,000 shall be remitted and delivered to the Company of which $10,000 shall be assigned for legal and due diligence and $10,000 shall be retained by the Purchaser through an original issue discount for due diligence and legal bills related to this transaction.

 

The Company may repay this Note at any time on or before 180 days from the Effective Date pursuant to the prepayment schedule set forth below, after which the Company may not make further payments on this note prior to the Maturity Date without written consent from the Holder. If the Company repays a payment of consideration on or before 180 days from the Effective Date of that payment, the interest rate on that payment of consideration shall be zero percent (0%). If the Company does not repay a payment of consideration on or before the Maturity Date, a one-time interest charge of 10% shall be applied to the Principal Sum. Both the principal and interest shall be deemed earned as of the date of payment of consideration by the Holder as of the Maturity Date, to the extent such principal amount and interest have been repaid or converted into the Company's Common Stock, $0.0001 par value per share, (the “Common Stock”), in accordance with the terms hereof. In the Event of Default pursuant to Section 2(e), the interest rate shall be 10% per annum (the “Default Rate”). 

  

The Note may be prepaid according to the following schedule: Between 1 and 30 days from the date of execution, the Note may be prepaid for 107.5% of face value. Between 31 and 60 days from the date of execution, the Note may be prepaid for 115% of face value. Between 61 and 90 days from the date of execution, the Note may be prepaid for 120% of face value. Between 91 and 120 days from the date of execution, the Note may be prepaid for 125% of face value. Between 121 and 180 days from the date of execution, the Note may be prepaid for 130% of face value. After 180 days from the date of execution until the Due Date, the Note may not be prepaid without written consent from Iconic.  Whenever any amount expressed to be due by the terms of this Note is due on any day, which is not a Business Day (as defined below), the same shall instead be due on the next succeeding day which is a Business Day.

 

	 
	
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For purposes hereof the following terms shall have the meanings ascribed to them below:

 

“Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City of New York are authorized or required by law or executive order to remain closed.

 

“Conversion Price” shall be equal to 60% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days prior to the date on which Holder elects to convert all or part of the Note.  Holder may not engage in any trading, “shorting” or “hedging” transaction(s) in the Company’s common stock prior to conversion. Holder may convert a maximum of $20,000 in principal from the Note every 10 trading days.

 

“Principal Amount” shall refer to the sum of (i) the original principal amount of this Note, (ii) all accrued but unpaid interest hereunder, and (iii) any default payments owing under the Note but not previously paid or added to the Principal Amount.

 

“Trading Day” shall mean a day on which there is trading on the Principal Market.

 

“Underlying Shares” means the shares of common stock into which the Note is convertible (including interest or principal payments in common stock as set forth herein) in accordance with the terms hereof.

 

The following terms and conditions shall apply to this Note:

 

Section 1.00  Conversion.

 

(a) Conversion Right.  Subject to the terms hereof and restrictions and limitations contained herein, the Holder shall have the right, at the Holder's option, at any time starting on the 181thday from the Issuance Date, to convert the outstanding Principal Amount and interest under this Note in whole or in part.

  

(b) The date of any Conversion Notice hereunder and any Payment Date shall be referred to herein as the “Conversion Date”. 

 

(i)  Stock Certificates or DWAC.  The Company will deliver to the Holder, or Holder’s authorized designee, no later than five Trading Days after the Conversion Date, a certificate or certificates (which certificate(s) shall be free of restrictive legends and trading restrictions) representing the number of shares of Common Stock being acquired upon the conversion of this Note.  In lieu of delivering physical certificates representing the shares of Common Stock issuable upon conversion of this Note, provided the Company's transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder, the Company shall use commercially reasonable efforts to cause its transfer agent to electronically transmit such shares issuable upon conversion to the Holder (or its designee), by crediting the account of the Holder’s (or such designee’s) prime broker with DTC through its Deposits and Withdrawal at Custodian (“DWAC”) program (provided that the same time periods herein as for stock certificates shall apply). 

 

	 
	
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(ii) Charges, Expenses.  Issuance of Common Stock to Holder, or any of its assignees, upon the conversion of this Note shall be made without charge to the Holder for any issuance fee, transfer tax, postage/mailing charge or any other expense with respect to the issuance of such Common Stock. Company shall pay all Transfer Agent fees incurred from the issuance of the Common stock to Holder and acknowledges that this is a material obligation of this Note. If the Company fails to deliver to the Holder such certificate or certificates (or shares through DTC) pursuant to this Section (free of any restrictions on transfer or legends) prior to five Trading Days after the Conversion Date, the Company shall pay to the Holder as liquidated damages an amount equal to $500 per day, until such certificate or certificates are delivered. The Company acknowledges that it would be extremely difficult or impracticable to determine the Holder’s actual damages and costs resulting from a failure to deliver the Common Stock and the inclusion herein of any such additional amounts are the agreed upon liquidated damages representing a reasonable estimate of those damages and costs. Such liquidated damages will be automatically added to the Principal Amount of the Note.

 

(c) Reservation and Issuance of Underlying Securities. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Note (and repayments in Common Stock), free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than three times the number of shares of Common Stock as shall be issuable (taking into account the adjustments under this Section 1 but without regard to any ownership limitations contained herein) upon the conversion of this Note to Common Stock (the “Required Reserve”). Initially, the Holder requires that 800,000 shares be held upon reserve upon signing of this Agreement and shall be responsible for updating the Company if this amount is to be increased or decreased pursuantly.  These shares shall be reserved in proportion with the consideration actually received by the Company and the total sharers reserved will be increased with future payments of consideration by Holder to ensure the Required Reserve is met.  The Company covenants that all shares of Common Stock that shall be issuable will, upon issue, be duly authorized, validly issued, fully-paid, non-assessable and freely-tradable. If the amount of shares on reserve at the Transfer Agent for this Note in Holder’s name shall drop below the Required Reserve, the Company will, within 5 business days of written notification from Holder, instruct the Transfer Agent to increase the number of shares so that the Required Reserve is met.  The Company agrees that this is a material term of this Note and any breach of this will result in a default of the Note.

 

(d) Conversion Limitation.  The Holder will not submit a conversion to the Company that would result in the Holder owning more than 9.99% of the then total outstanding shares of the Company (“Restricted Ownership Percentage”).

 

Section 2.00 Defaults and Remedies.

 

(e) Events of Default. An “Event of Default” is:  (i) a default in payment of any amount due hereunder which default continues for more than 5 business days after the due date; (ii) a default in the timely issuance of underlying shares upon and in accordance with terms hereof, which default continues for five Business Days after the Company has failed to issue shares or deliver stock certificates within the 5th day following the Conversion Date; (iii) failure by the Company for five days after notice has been received by the Company to comply with any material provision of the Note Purchase Agreement; (iv) failure of the Company to remain compliant with DTC, thus incurring a “chilled” status with DTC; (v) if the Company is subject to any Bankruptcy Event; (vi) any failure of the Company to satisfy its  “filing” obligations under the rules and guidelines issued by OTC Markets News Service, OTC Markets.com and their affiliates; (vii) any failure of the Company to provide the Holder with information related to the corporate structure including, but not limited to, the number of authorized and outstanding shares, public float, etc. within five days of request by Holder; (viii) failure to have sufficient number of authorized but unissued shares of the Company’s Common Stock available for any conversion; (ix) failure of Company’s Common Stock to maintain a bid price in its trading market which occurs for at least five consecutive Trading Days; (xii) or (xiii) any breach of Section 1.00 (c). 

 

	 
	
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(f) Remedies.  If an Event of Default occurs and is continuing with respect to the Note, the Holder may declare all of the then outstanding Principal Amount of this Note, including any interest due thereon, to be due and payable immediately without further action or notice. In the event of such acceleration, the amount due and owing to the Holder shall be increased to 150% of the outstanding Principal Amount of the Note held by the Holder plus all accrued and unpaid interest, fees, and liquidated damages, if any. Finally, the Note will accrue liquidated damages of $500 per day from and after the occurrence and during the continuance of an Event of Default. The Company acknowledges that it would be extremely difficult or impracticable to determine the Holder’s actual damages and costs resulting from an Event of Default and any such additional amounts are the agreed upon liquidated damages representing a reasonable estimate of those damages and costs. The remedies under this Note shall be cumulative and automatically added to the principal value of the Note.

 

Section 3.00 General.

 

(g) Payment of Expenses.  The Company agrees to pay all reasonable charges and expenses, including attorneys' fees and expenses, which may be incurred by the Holder in successfully enforcing this Note and/or collecting any amount due under this Note.

 

(h) Assignment, Etc.  The Holder may assign or transfer this Note to any transferee at its sole discretion upon 5 days advance notice to the Company.  This Note shall be binding upon the Company and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns.

 

(i) No Shorting. 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. 

 

(j) Governing Law; Jurisdiction.

 

(i)  Governing Law, Jurisdiction and Venue.  If the Holder brings legal action either by suit or arbitration, this Agreement shall be governed by the laws of California with California having exclusive jurisdiction and venue over the Holder and Company. If the Company brings legal action either by suit or arbitration, this Agreement shall be governed by the laws of Tennessee with Tennessee having exclusive jurisdiction and venue over the Company and Holder.

 

(ii) Arbitration.  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 to Section 3.00 (j)(i). 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.

 

(iii) No Jury Trial.  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.

 

	 
	
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IN WITNESS WHEREOF, the Company has caused this Convertible Promissory Note to be duly executed on the day and in the year first above written.

 

 

	
ELITE DATA SERVICES INC.

	
	
 

	
 

	
	
By:

	
/s/ Charles Rimlinger

	 
	 	
Charles Rimlinger, CEO

	 

 

This Note is acknowledged as:  Note of March 16, 2015

 

 

5EXHIBIT 10.41

 

ADDENDUM #1 TO PROMISSORY NOTE 

 

This Addendum to the Promissory Note dated April 14, 2014 between Steven Frye and Elite Data Services, Inc. for the principal sum of $13,500, extends the Maturity Date from April 15, 2015 to December 31, 2015.

 

This Addendum shall be governed by and construed and enforced in accordance with the laws of Florida.

 

 

	
By:

	
/s/ Sarah Myers

	 
	 	
Sarah Myers, President

	 

 

	
By:

	
/s/ Steven Frye

	 
	 	
Steven Frye, Lender

	 

 

Dated: March 22, 2015

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