THISNOTEANDTHECOMMONSTOCKISSUABLEUPONCONVERSIONOFTHISNOTEHAVENOTBEENANDWILLNOTBEREGISTEREDWITHTHEUNITEDSTATESSECURITIESANDEXCHANGE COMMISSION OR THESECURITIESCOMMISSIONOF ANY STATEPURSUANTTOANEXEMPTIONFROMREGISTRATIONPROVIDEDUNDER THESECURITIESACTOF 1933,ASAMENDED,ANDTHERULES AND REGULATIONSPROMULGATEDTHEREUNDER(THE "1933ACT”)
US $225,750.00
MAX SOUND CORPORATION.
8% CONVERTIBLEREDEEMABLENOTEDUE DECEMBER 24, 2015
FORVALUERECEIVED,MaxSoundCorporation.(the“Company”)promisestopaytotheorderofBLUECITI,LLCanditsauthorizedsuccessorsandpermittedassigns("Holder"),theaggregateprincipalface amountofTwoHundred TwentyFiveThousandSevenHundredFif-tyDollarsexactly(U.S.$225,750.00)onDecember24,2015("MaturityDate")andtopayinter-est on the principal amountoutstanding hereunderat therateof 8% per annumcommencingonDecember 22, 2014. The Companyacknowledges this Notewasissuedwith a 5%original issue discount(OID)andas such theissuance price was $215,000.00. Theinterest will bepaid to theHolder in whosename this Note isregistered on therecords of the Companyregardingregistra- tionandtransfersofthisNote. The principalof,andintereston,thisNotearepayableat 440East79thStreetSuite4M,NewYork,NY10075,initially,andifchanged,lastappearingontherecords of the Companyasdesignated inwritingby theHolderhereof from time totime. The Companywillpayeachinterestpaymentandtheoutstandingprincipaldue uponthisNotebefore or on the MaturityDate, less anyamountsrequiredbylaw to be deducted or withheld, to theHolderofthisNote bycheckorwiretransferaddressedtosuchHolderatthelastaddressappear- ingon therecords of theCompany.Theforwardingof suchcheck or wiretransfer shallconsti- tute apayment ofoutstandingprincipalhereunderandshallsatisfyanddischarge theliabilityforprincipalonthisNoteto theextentofthesumrepresentedbysuchcheckorwiretransfer.Inter- estshall be payable in Common Stock(asdefinedbelow) pursuant toparagraph4(b) herein.
This Note issubject to thefollowing additional provisions:
GH
Initials
1. ThisNoteisexchangeableforanequalaggregateprincipalamountof
Notesofdifferentauthorizeddenominations,asrequestedbytheHoldersurrenderingthesame.Noservicechargewillbemadeforsuchregistrationortransferorexchange,exceptthatHoldershall payanytaxorothergovernmental chargespayable inconnectiontherewith.
2. TheCompanyshallbeentitled to withholdfrom allpaymentsanyamountsrequired to bewithheldunderapplicable laws.
3. ThisNotemaybetransferredorexchangedonlyincompliancewiththeSecuritiesActof1933,asamended("Act")andapplicablestatesecuritieslaws.Anyattemptedtransfertoanon-qualifying party shall betreatedby theCompanyas void. Priorto duepresent- mentfor transferof thisNote,theCompanyandany agent ofthe Companymaytreat theperson in whose namethis Note is dulyregisteredontheCompany'srecordsas theownerhereofforallother purposes, whether or not this Notebeoverdue,and neither the Company norany suchagent shall beaffectedor boundbynotice to the contrary.AnyHolder of this Noteelectingtoexercise theright of conversionsetforth in Section4(a)hereof, inaddition to therequirementssetforthinSection4(a),andanyprospective transferee ofthisNote,alsoisrequiredtogivethe Company written confirmationthatthisNote isbeingconverted("Notice of Conversion") intheformannexedheretoasExhibit A.Thedateofreceipt(includingreceiptbytelecopy)ofsuch Notice ofConversion shall betheConversionDate.
4. (a)TheHolderofthisNoteisentitled,atitsoption,toconvertalloranyamountoftheprincipalfaceamountofthisNotethenoutstandingintosharesoftheCompa-ny'scommon stock (the"CommonStock")withoutrestrictive legend ofanynature,at a price("ConversionPrice") foreach share of Common Stockequal tothelowerof(i)65% of thelow-est daily VWAPof the Common Stockasreported on theNational QuotationsBureauOTCQBexchangewhich theCompany’sshares aretraded or anyexchange uponwhich the Common Stockmaybetradedin thefuture("Exchange"),forthetenpriortradingdays includingtheday uponwhicha Notice ofConversionisreceivedby the Company(providedsuch Notice ofCon-version isdeliveredbyfax or otherelectronic method ofcommunicationto the Companyafter 4
P.M. EasternStandardorDaylightSavingsTimeiftheHolderwishestoincludethesamedayclosingprice)or(ii)$0.18pershare.Iftheshareshavenotbeendeliveredwithin3businessdays,the NoticeofConversionmaybe rescinded.Suchconversionshallbeeffectuatedby theCompanydeliveringthesharesofCommonStocktotheHolderwithin3businessdaysofreceiptby the Company of the Notice ofConversion.Once theHolderhasreceived suchshares of CommonStock, theHolder shallsurrender thisNote totheCompany,executedbytheHolderevidencingsuchHolder'sintention toconvert thisNote or aspecified portionhereof,and accom-paniedbyproperassignmenthereofin blank.Accruedbutunpaidinterest shall besubjecttoconversion.Nofractionalshares or scriprepresentingfractions of shares will beissued on con-version,butthenumber ofsharesissuableshallberoundedtothenearestwhole share. Intheevent the Companyexperiences a DTC“Chill” on its shares, theconversion price shall bede-creasedto55%instead of65%whilethat“Chill”isineffect.Innoevent shalltheHolderbe al-lowedtoeffectaconversion ifsuchconversion,along withall othersharesofCompanyCom- mon StockbeneficiallyownedbytheHolderanditsaffiliates wouldexceed9.9%oftheout- standingshares of theCommon Stock of theCompany.
(b) InterestonanyunpaidprincipalbalanceofthisNoteshallbepaidat
therateof8%perannum.InterestshallbepaidbytheCompanyinCommonStock("InterestShares").Holdermay,atanytime,sendinaNotice ofConversiontotheCompany forInterestSharesbasedontheformulaprovidedinSection4(a) above.ThedollaramountconvertedintoInterestShares shallbe all or a portionof theaccruedinterestcalculatedon theunpaid principalbalanceof this Noteto the date of suchnotice.
(c) DuringthefirstsixmonthsthisNoteisineffect,theCompanymayre-deemthisNote bypayingtotheHolderanamountasfollows:(i)iftheredemptionoccurswithinthefirst90daysthenanamountequalto125%oftheunpaidprincipalamountofthisNotealongwith any prepaidandearnedinterest, (ii) if theredemptionoccursafter thefirst 90days butbe-forethe 150thday following the issuance of thisNote, thenanamount equal to 135% of theun-paidprincipalamount of this Note along with anyprepaidandearned interestand (iii) if there-demptionoccursafter thefirst 150days but before the 181stday following theissuanceof thisNote, thenanamountequal to 145% of theunpaidprincipalamount ofthis Notealong with anyprepaidandearned interest. This Notemaynot beredeemedafter 180days. Theredemption must beclosedandpaid for within 3businessdays of the Company sending theredemptionde-
mand ortheredemption will beinvalidand the Companymaynot redeem thisNote.
(d) Upon(i)atransferofallorsubstantiallyalloftheassetsoftheCompanyto anypersonin asingletransaction orseriesofrelatedtransactions, (ii) areclassification,capitalreorganizationorotherchangeorexchangeofoutstandingsharesofthe CommonStock,other than aforwardorreverse stock splitorstockdividend, or(iii) anyconsolidation ormergerofthe Company with or intoanotherperson or entity inwhich the Company is not the surviving entity(otherthanamergerwhichiseffectedsolely tochangethejurisdictionofincorporationofthe Companyandresults in areclassification, conversionorexchange ofoutstandingshares of CommonStocksolely intosharesofCommonStock)(eachofitems(i),(ii)and(iii)beingre-ferredtoasa"SaleEvent"),then, ineachcase,theCompany shall,uponrequestof theHolder,redeem this Note in cash for 150% of the principalamount, plusaccrued butunpaidinterestthroughthedateofredemption,orattheelectionoftheHolder,suchHolder may converttheun-paidprincipalamount of this Note(togetherwith theamountofaccrued butunpaidinterest) intoshares of Common Stock immediately priorto suchSaleEvent at the Conversion Price.
(e) Incase of any SaleEvent(nottoincludeasaleofallorsubstantially alloftheCompany’sassets)inconnectionwithwhichthisNoteisnotredeemedorconverted,theCompany shall causeeffectiveprovision to be made so that the Holderof this Note shallhavetherightthereafter,by converting thisNote, topurchase or convert this Note into the kindand number ofshares of stock or othersecurities orproperty (including cash)receivable upon suchreclassification,capitalreorganization or otherchange,consolidation ormergerby a holder of the number ofshares of CommonStock thatcouldhavebeen purchased uponexercise of the Noteandat thesame ConversionPrice,as defined in thisNote,immediatelyprior to suchSaleEvent.The foregoingprovisionsshallsimilarly apply tosuccessiveSaleEvents.Iftheconsidera- tionreceivedby theholders of Common Stock is other than cash, the value shallbeasdeter-minedby theBoardofDirectors of the Companyorsuccessor person or entity acting ingoodfaith.
5. NoprovisionofthisNoteshallalterorimpairtheobligationoftheCom-pany,whichisabsoluteandunconditional,topaytheprincipalof,andintereston,thisNoteatthetime,place,andrate,and in the form,hereinprescribed.
6. TheCompanyherebyexpresslywaivesdemandandpresentmentforpay-ment,noticeofnon-payment,protest,noticeofprotest,noticeofdishonor,noticeofaccelerationorintenttoaccelerate,anddiligenceintakinganyactiontocollectamountscalledforhereunderandshallbedirectly andprimarily liablefor thepaymentofallsumsowingandtobeowinghereto.
7. TheCompanyagreestopayallcostsandexpenses,includingreasonableattorneys'feesandexpenses,whichmaybeincurredbytheHolderincollectinganyamountdueunder this Note.
| 8. | Ifoneor moreof the followingdescribed"Events ofDefault"shalloccur: |
(a) TheCompanyshalldefaultinthepaymentofprincipalorinterestonthisNoteor anyother noteissued to the HolderbytheCompany; or
(b) AnyoftherepresentationsorwarrantiesmadebytheCompanyhereinorinanycertificateorfinancialorotherwrittenstatementsheretoforeorhereafterfurnishedbyoronbehalfoftheCompanyinconnectionwiththeexecutionanddeliveryofthisNote,ortheSe-curitiesPurchaseAgreementunderwhichthisnotewasissued shallbefalseormisleading inanyrespect; or
(c) TheCompanyshallfailtoperformorobserve,inanyrespect,anycove-nant,term,provision,condition,agreementorobligationoftheCompanyunderthisNoteoranyother note issued to theHolder; or
(d) TheCompanyshall(1)becomeinsolvent;(2)admitinwritingitsinabilitytopayitsdebtsgenerallyastheymature;(3)makeanassignmentforthebenefitofcreditorsorcommenceproceedingsforitsdissolution;(4) applyfororconsenttotheappointmentofatrus-tee, liquidatororreceiverforits orforasubstantialpart ofits property orbusiness;(5) fileapeti- tionforbankruptcyrelief,consenttothe filingof suchpetitionorhave filedagainst itaninvol- untary petitionfor bankruptcyrelief,allunderfederal or statelawsas applicable; or
(e) Atrustee,liquidatororreceivershallbeappointedfortheCompanyorforasubstantialpartofitspropertyorbusinesswithoutitsconsentandshallnotbedischargedwith-in sixty(60) daysafter suchappointment; or
(f) Anygovernmentalagencyoranycourtofcompetentjurisdictionatthein-stanceofanygovernmentalagencyshallassumecustodyorcontrolofthewholeoranysubstan-tial portion oftheproperties or assets of the Company; or
(g) Oneormoremoneyjudgments,writsorwarrantsofattachment,orsimilarprocess,inexcessoffiftythousanddollars($50,000)intheaggregate,shallbeenteredor
filedagainsttheCompanyoranyofitspropertiesorotherassetsandshallremainunpaid,unvacated,unbondedorunstayedforaperiodoffifteen(15)daysorinanyeventlaterthanfive
(5)days priorto thedateofanyproposedsalethereunder; or
(h) TheCompanyshallhavedefaultedonorbreachedanytermofanyothernoteofsimilardebtinstrumentintowhichtheCompanyhasenteredandfailedtocuresuchde-fault within theappropriategraceperiod; or
(i) TheCompanyshallhaveitsCommonStockdelistedfromanexchange(includingtheOTCBBexchange)or,iftheCommonStocktradesonanexchange,thentrading in theCommon Stockshall besuspended for morethan 10consecutive days;
(j) IfamajorityofthemembersoftheBoardofDirectorsoftheCompanyonthedatehereofareno longerservingasmembersof theBoard;
(k) TheCompanyshallnotdelivertotheHoldertheCommonStockpursuanttoparagraph4hereinwithoutrestrictivelegendwithin3businessdaysofitsreceiptofaNoticeof Conversion; or
(l) TheCompanyshallnotreplenishthereservesetforthinSection12,with-in 3 businessdays of therequest of theHolder. (m)TheCompanyshallnotbe“current”initsfilings with theSecurities and ExchangeCommission; or
(m) TheCompanyshallnotbe“current”initsfilingswiththeSecuritiesandExchangeCommission; or
(n) The Companyshalllosethe“bid”price for itsstockinamarket(includingtheOTCQBmarketplaceorotherexchange).
Then,oratanytimethereafter,unlesscuredwithin5days,andineachandeverysuchcase,un-lesssuchEventofDefaultshallhavebeenwaivedinwritingbytheHolder(whichwaivershallnotbedeemedtobeawaiver ofany subsequentdefault)attheoptionof theHolderandintheHolder'ssolediscretion,theHoldermayconsider thisNoteimmediatelydueandpayable,with- outpresentment, demand,protest or(further) notice ofany kind(other thannotice of accelera- tion),all ofwhich areherebyexpressly waived,anythingherein or in anynoteor otherinstru- mentscontained to thecontrarynotwithstanding,and theHolder mayimmediately,and withoutexpirationof anyperiodofgrace,enforceany andall of theHolder'srightsandremediesprovid-edherein oranyotherrights orremediesaffordedby law. Uponan Event ofDefault,interest shallaccrueatadefaultinterestrateof24%perannumor,ifsuchrateisusuriousornotpermit- tedbycurrentlaw,thenatthehighestrateofinterestpermittedbylaw. Intheeventofabreach
ofSection8(k)thepenaltyshallbe$250perdaythesharesarenotissuedbeginningonthe4th
dayaftertheconversionnoticewasdeliveredtotheCompany.Thispenaltyshallincreaseto
$500perdaybeginningonthe10thday.ThepenaltyforabreachofSection8(n)shallbeanin-creaseoftheoutstandingprincipalamountsby20%.IncaseofabreachofSection8(i),theout- standingprincipaldueunderthisNoteshallincrease by 50%.IfthisNoteisnotpaidatmaturity, theoutstandingprincipal dueunder this Noteshallincreaseby 10%.
5
IftheHoldershallcommenceanactionorproceedingtoenforceanyprovisionsofthisNote,in-cluding,withoutlimitation,engaginganattorney,theniftheHolderprevailsinsuchaction,theHoldershall bereimbursedbythe Companyfor itsattorneys’feesandothercostsandexpensesincurred in theinvestigation,preparationandprosecution ofsuchaction orproceeding.
Make-WholeforFailuretoDeliverLoss.AttheHolder’selection,iftheCompanyfailsforanyreasontodelivertotheHoldertheconversionsharesbythebythe3rdbusiness dayfollowing the deliveryof a Notice ofConversion to theCompanyand if theHolderincurs aFailure toDeliverLoss, thenatany time theHoldermayprovide the Companywrittennoticeindicating the amountspayable to theHolder inrespect of theFailure toDeliverLossand the Company must maketheHolder wholeas follows:
FailuretoDeliverLoss=[(Hightradepriceatanytimeonorafterthedayofexercise)x(Num-ber ofconversion shares)]
TheCompanymustpaythe Failureto DeliverLossbycash payment,andanysuch cashpaymentmustbemadebythethirdbusinessdayfromthetimeoftheHolder’swrittennoticetotheCom-pany.
9. Incaseany provisionofthisNoteisheldbyacourtofcompetentjurisdic-tiontobeexcessiveinscopeorotherwiseinvalidorunenforceable,suchprovisionshallbead-justedrather than voided,ifpossible, sothatit isenforceable tothemaximumextentpossible,andthevalidityandenforceabilityoftheremainingprovisionsofthisNotewillnot inanyway be affected orimpairedthereby.
10. NeitherthisNotenoranytermhereofmaybeamended,waived,dis-chargedorterminated otherthanbyawritteninstrumentsignedbytheCompanyand theHolder.
11. The Companyrepresentsthatitisnota“shell”issuerandhasneverbeena“shell”issuerorthatifitpreviouslyhasbeena“shell”issuerthatatleast12monthshavepassedsincetheCompany hasreportedform10typeinformationindicatingitisnolongera“shellissu-er.Further.TheCompanywillinstructitscounseltoeither(i)writea144-3(a)(9)opiniontoal-lowforsalabilityof the conversionsharesor(ii)accept such opinionfromHolder’s counsel.
12. TheCompanyshallissueirrevocabletransferagentinstructionsreserving10,000,000sharesofitsCommonStockforconversionsunderthisNote(the“ShareReserve”).ThereserveshallbereplenishedasneededtoallowforconversionsofthisNote.Uponfullconversion of thisNote, any shares remainingin theShare Reserve shall becancelled.The Com- pany shall payallcosts associated with issuing anddelivering the shares.
13. TheCompanywillgivetheHolderdirectnoticeofanycorporateactions,including butnotlimitedtonamechanges,stocksplits,recapitalizationsetc.Thisnoticeshallbegiven to the Holderas soonas possible underlaw.
14. ThisNoteshallbegovernedbyandconstruedinaccordancewiththelawsofNewYorkapplicabletocontractsmadeandwhollytobeperformedwithintheStateofNew
Yorkandshallbebindinguponthesuccessorsandassignsofeachparty hereto.TheHolderandthe Companyherebymutuallywaivetrialbyjuryand consent to exclusivejurisdictionand venueinthecourtsoftheStateofNewYork. ThisAgreementmaybeexecutedincounterparts,and thefacsimiletransmission ofanexecuted counterpart to thisAgreement shall beeffectiveasanoriginal.
INWITNESSWHEREOF,theCompanyhascausedthisNotetobedulyexecut-edbyanofficer thereunto dulyauthorized.
Dated:12/23/14
MAX SOUND CORPORATION
By:Greg HalpernTitle:Chairman
EXHIBIT A
NOTICE OFCONVERSION
(To be ExecutedbytheRegisteredHolder in order toConvert theNote)
Theundersignedherebyirrevocablyelectstoconvert$oftheaboveNoteintoSharesofCommonStockofMaxSoundCorporation.(“Shares”)accord-ingto the conditionsset forth insuchNote,as of the datewritten below.
IfSharesaretobeissuedinthenameofapersonotherthantheundersigned,theundersigned willpayall transferand othertaxes and chargespayablewithrespectthereto.
DateofConversion:ApplicableConversionPrice:Signature:
[PrintName ofHolder and TitleofSigner]
Address:
SSN or EIN:
Shares areto beregistered in the followingname:
Name:Address:Tel:Fax:SSN orEIN:
Shares areto besent ordelivered to thefollowing account:
Account Name:Address:
