8%CONVERTIBLEREDEEMABLEPROMISSORYNOTE
| EffectiveDateMay8,2015 | | | | | | US$52,500.00 |
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| DueMay9,2016 | | | | | | |
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THISNOTEANDTHECOMMONSTOCKISSUABLEUPONCONVERSIONOFTHISNOTEHAVENOTBEENANDWILLNOTBEREGISTEREDWITHTHEUNITEDSTATESSECURITIESANDEXCHANGECOMMISSIONORTHESECURITIESCOMMISSIONOFANYSTATEPURSUANTTOANEXEMPTIONFROMREGISTRATIONPROVIDEDUNDERTHESECURITIESACTOF1933, ASAMENDED,ANDTHERULESANDREGULATIONSPROMULGATEDTHEREUNDER(THE "1933ACT”)
FORVALUERECEIVED,MaxSoundCorporation(the“Company”)promisestopaytotheorderofGWHoldingsGroup,LLC.,anditsauthorizedsuccessorsandpermittedassigns("Holder"),theaggregateprincipalfaceamountofFiftyTwoThousandFiveHundredDol---larsexactly(U.S.52,500.00)onMay9,2016("MaturityDate").TheCompanywillpayin---terest ontheprincipalamountoutstandingattherateof 8%perannum,whichwillcom--- menceonMay 8,2015. The Company acknowledgestheissuancepriceofthisNotewas
$50,000.00,asitwasissuedwitha5%originalissuediscount(“OID”).TheinterestwillbepaidtotheHolderinwhosenamethisNoteisregisteredontherecordsoftheCompanyre---gardingregistrationandtransfersofthisNote.Theprincipalof,andintereston,thisNotearepayable at137 MontagueStreet,Suite 29, Brooklyn,NY11201, initially,and ifchanged,lastappearingontherecordsoftheCompanyasdesignatedinwritingbytheHolderhereof from time to time. The Company will pay each interest payment and the outstandingprin--- cipal due upon this Note before or on the Maturity Date, less any amounts required bylawtobedeductedorwithheld,totheHolderofthisNotebycheckorwiretransferaddressed to suchHolderatthelastaddressappearingon therecordsoftheCompany. Theforward--- ing of such check or wire transfer shall constitute a payment ofoutstandingprincipalhere---underandshallsatisfyanddischargetheliabilityforprincipal onthisNoteto the extentof thesumrepresentedbysuchcheckorwiretransfer. InterestshallbepayableinCommon Stock (asdefinedbelow) pursuantto paragraph4(b) herein.
ThisNoteissubjecttothefollowingadditionalprovisions:
1.ThisNoteisexchangeableforanequalaggregateprincipalamountof Notesofdifferentauthorizeddenominations,asrequestedbytheHoldersurrenderingthe same.Noservicechargewillbemadeforsuchregistrationortransferorexchange,except thatHoldershallpayanytaxorothergovernmentalchargespayableinconnectionthere---
GH
Initials
with.
2. Underallapplicablelaws,theCompanyshallbeentitledtowithhold anyamountsfromallpaymentsitisentitledto.
3. ThisNotemayonlybetransferredorexchangedincompliancewith theSecuritiesActof1933,asamended("Act")andanyapplicablestatesecuritieslaws.Allattemptstransfertoanon---qualifyingpartyshallbetreatedbytheCompanyasvoid.PriortoduepresentmentfortransferofthisNote,theCompanyandanyagentoftheCompany maytreatthepersoninwhosenamethisNoteisdulyregisteredontheCompany'srecordsasthe ownerhereofforallotherpurposes,whetherornotthisNote beoverdue, andnei--- ther the Company nor anysuch agent shall be affectedor bound by noticeto the contrary. AnyHolderofthisNoteelectingtoexercisetherightofconversionsetforthinSection4(a)hereof, in addition to the requirements set forth in Section 4(a), and any prospectivetrans--- feree ofthis Note,alsois requiredto givetheCompany writtenconfirmationthat thisNote is beingconverted ("Notice ofConversion") inthe form annexed hereto asExhibitA. The date ofreceipt(includingreceipt bytelecopy) ofsuch Noticeof Conversion shall betheConversionDate.
4. (a)TheHolderofthisNotehastheoption,atanytime,toconvertalloranyamountoftheprincipalfaceamountofthisNotethenoutstandingintosharesoftheCompany'scommonstock(the"CommonStock")ataprice("ConversionPrice")foreachshareofCommonStockequalto65%ofthetwolowestclosingbidpricesoftheCommon Stock as reportedon the National QuotationsBureauOTCQBexchangewhichtheCompany’sshares aretraded orany exchangeupon whichthe CommonStock maybetradedinthefuture("Exchange"), for the (i)fifteenpriortradingdaysincludingtheday upon which a Notice of Conversion is received by the Company (provided such Notice of ConversionisdeliveredbyfaxorotherelectronicmethodofcommunicationtotheCom---pany after 4 P.M. Eastern Standard or Daylight Savings Time if the Holderwishes toin--- clude the same day closing price) or(ii)fifteentradingdaysprior to May8,2015. TheNo--- tice of Conversion may be rescinded if the shares have not been delivered within 3busi---nessdays. The Company shalldeliver the shares of Common Stock totheHolderwithin 3 businessdaysofreceiptby theCompanyofthe NoticeofConversion. TheHolder shall surrender this Note to the Company upon receipt of the shares of CommonStock, executedbytheHolder. Thiswill make cleartheHolder'sintentiontoconvertthis Note or a speci--- fied portion hereof, and accompanied by proper assignment hereof in blank. Accrued but unpaidinterestshallbesubjecttoconversion. The number of issuable shares will be rounded to thenearestwhole share,andnofractional shares or scriprepresentingfrac---tionsofshareswillbeissuedonconversion. IntheeventtheCompanyexperiencesaDTC “Chill” on its shares, theconversion price shall be decreased to 55% instead of 65% while that “Chill” is in effect.Notwithstandinganything to thecontrarycontained in the Note(except assetforthbelowinthisSection),theNoteshallnot beconvertiblebyInvestor, and Com---panyshallnoteffectanyconversionoftheNoteorotherwiseissue anysharesofCommonStocktothe extent (but onlytothe extent)thatInvestortogetherwithany of itsaffiliates
wouldbeneficiallyowninexcessof4.99%(the“MaximumPercentage”)oftheCom---monStockoutstanding.Totheextenttheforegoinglimitationapplies,thedeterminationofwhetheraNoteshallbeconvertible(vis---à---visotherconvertible,exercisableorex---changeablesecuritiesownedbyInvestororanyofitsaffiliates)andofwhichsuch securi---ties shall be convertible, exercisable or exchangeable (as amongallsuchsecuritiesownedby Investor and its affiliates) shall, subject to such Maximum Percentage limitation, be de--- terminedonthebasisofthefirstsubmissiontoCompanyforconversion,exerciseorex--- change(asthecasemaybe). NopriorinabilitytoconvertaNote,ortoissuesharesof CommonStock,pursuanttothisSectionshallhaveanyeffectontheapplicabilityofthe provisionsofthisSectionwithrespecttoanysubsequentdeterminationofconvertibility. Forpurposes of thisSection,beneficialownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(e) of the 1934 Act (as defined below) andtherules andregulations promulgated thereunder.Theprovisions of thisSection shall be implemented ina mannerotherwise thanin strictconformity withthe termsof thisSec--- tiontocorrectthisSection(or anyportionhereof)whichmaybe defectiveorinconsistentwiththeintended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage limitation . The limitations contained in this Section shall apply to asuccessorholderofthisNoteandshallbeunconditional,irrevocableandnon---waivable. For any reason at any time, upon the written or oral request of Investor, Company shallwithin one (1)businessdayconfirmorallyandinwritingtoInvestorthenumberofsharesofCommonStockthenoutstanding,includingbyvirtueofanypriorconversionorexercise of convertible or exercisable securities into Common Stock, including, without limitation,pursuanttothisNote.
(b) InterestonanyunpaidprincipalbalanceofthisNoteshallbepaidattherateof8%perannum.InterestshallbepaidbytheCompanyinCommonStock("InterestShares").Holdermay,atanytime,sendinaNoticeofConversiontotheCompa---nyforInterestSharesbasedontheformulaprovidedinSection4(a)above. Thedollar amountconvertedintoInterestSharesshallbealloraportionoftheaccruedinterest cal---culatedontheunpaidprincipalbalanceofthisNotetothedateofsuchnotice.
(c) DuringthefirstsixmonthsthisNoteisineffect,theCompany mayredeemthisNotebypayingtotheHolderanamountequalto130%oftheunpaidprincipalamountofthisNotealongwithanyprepaidandearnedinterest.ThisNotemay notberedeemedafter180days.Theredemptionmustbeclosedandpaidforwithin3businessdaysoftheCompanysendingtheredemptiondemandortheredemptionwillbe invalidandtheCompanymaynotredeemthisNote.
(d) Upon(i)atransferofallorsubstantiallyalloftheassetsoftheCompanytoanypersoninasingletransactionorseriesofrelatedtransactions,(ii)are---classification,capitalreorganizationorotherchangeorexchangeofoutstandingsharesoftheCommonStock,otherthanaforwardorreversestocksplitorstockdividend,or(iii)any consolidation or merger of the Companywithorintoanotherpersonorentityin
whichthe Companyis notthe surviving entity (otherthan amerger whichis effectedsolelytochangethejurisdictionofincorporationoftheCompanyandresultsinareclassification,conversionorexchangeofoutstandingsharesofCommonStocksolelyintosharesofCom---monStock)(eachofitems(i),(ii)and(iii)beingreferredtoasa"SaleEvent"),then,ineach case,theCompanyshall,uponrequestoftheHolder,redeemthisNoteincashfor150%of theprincipalamount,plusaccruedbutunpaidinterestthroughthedateofredemption,or atthe election of theHolder, such Holder mayconvert the unpaid principalamount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the ConversionPrice.
(e) IncaseofanySaleEvent(nottoincludeasaleofallorsubstan---tiallyalloftheCompany’sassets)inconnectionwithwhichthisNoteisnotredeemedorconverted,theCompanyshallcauseeffectiveprovisiontobemadesothattheHolderofthisNoteshallhavetherightthereafter,byconvertingthisNote,topurchaseorconvertthisNoteintothekindandnumberofsharesofstockorothersecuritiesorproperty(in---cludingcash)receivableuponsuchreclassification,capitalreorganizationorotherchange, consolidation or merger by a holder of the number of shares of Common Stock that could have beenpurchasedupon exercise of the Note and at the same Conversion Price, asde--- fined in this Note, immediately prior to such Sale Event. The foregoing provisions shallsim--- ilarlyapply to successiveSaleEvents.If theconsiderationreceivedbythe holdersofCom--- mon Stockisotherthancash,thevalueshallbe asdeterminedbytheBoardofDirectorsof the Company orsuccessor personor entity actingin good faith.
5. NoprovisionofthisNoteshallalterorimpairtheobligationofthe Company,whichisabsoluteandunconditional,topaytheprincipalof,andintereston,thisNoteatthetime,place,andrate,andintheform,hereinprescribed.
6. TheCompanyherebyexpresslywaivesdemandandpresentmentfor payment,noticeof non---payment, protest,noticeof protest,noticeof dishonor, noticeof ac---celerationorintenttoaccelerate,anddiligenceintakinganyactiontocollectamounts calledforhereunderandshallbedirectlyandprimarilyliableforthepaymentofallsums owingandtobeowinghereto.
7. TheCompanyagreestopayallcostsandexpenses,includingreasona---bleattorneys'feesandexpenses,whichmaybeincurredbytheHolderincollectingany amountdueunderthisNote.
cur:
| 8. | Ifoneormoreofthefollowingdescribed"EventsofDefault"shalloc--- |
(a) TheCompanyshalldefaultinthepaymentofprincipalorin---terestonthisNoteoranyothernoteissuedtotheHolderbytheCompany;or
| (b) | AnyoftherepresentationsorwarrantiesmadebytheCompa--- |
nyhereinorinanycertificateorfinancialorotherwrittenstatementsheretoforeorhereaf---terfurnished by or onbehalf of the Companyin connection with the executionand delivery ofthisNote,ortheSecuritiesPurchaseAgreementunderwhichthisnotewasissuedshallbefalseormisleadinginanyrespect;or
(c) TheCompanyshallfailtoperformorobserve,inanyrespect, anycovenant,term,provision,condition,agreementorobligationoftheCompanyunderthisNoteoranyothernoteissuedtotheHolder;or
(d) TheCompanyshall(1)becomeinsolvent;(2)admitinwriting itsinabilitytopayitsdebtsgenerallyastheymature;(3)makeanassignmentforthebene---fitofcreditorsorcommenceproceedingsforitsdissolution;(4)applyfororconsenttotheappointmentofatrustee,liquidatororreceiverforitsorforasubstantialpartofitsproper---tyorbusiness;(5)fileapetitionforbankruptcyrelief, consenttothefilingofsuchpetitionor havefiledagainstitaninvoluntarypetitionforbankruptcyrelief,allunderfederal or state laws asapplicable; or
(e) Atrustee,liquidatororreceivershallbeappointedforthe Companyorforasubstantialpartofitspropertyorbusinesswithoutitsconsentandshallnotbedischargedwithinsixty(60)daysaftersuchappointment;or
(f) Anygovernmentalagencyoranycourtofcompetentjurisdic---tionattheinstanceofanygovernmentalagencyshallassumecustodyorcontrolofthewholeoranysubstantialportionofthepropertiesorassetsoftheCompany;or
(g) Oneormoremoneyjudgments,writsorwarrantsofattach---ment,orsimilarprocess,inexcessoffiftythousanddollars($50,000)intheaggregate,shallbeenteredorfiledagainsttheCompanyoranyofitspropertiesorotherassetsandshallremain unpaid,unvacated,unbondedorunstayedforaperiodoffifteen(15)daysorinany eventlaterthanfive(5)dayspriortothedateofanyproposedsalethereunder;or
(h) TheCompanyshallhavedefaultedonorbreachedanytermofanyothernoteofsimilardebtinstrumentintowhichtheCompanyhasenteredandfailedtocuresuchdefaultwithintheappropriategraceperiod;or
(i) TheCompanyshallhaveitsCommonStockdelistedfromanexchange(includingtheOTCBBexchange)or,iftheCommonStocktradesonanexchange,thentradingintheCommonStockshallbesuspendedformorethan10consecutivedays;
(j) IfamajorityofthemembersoftheBoardofDirectorsofthe CompanyonthedatehereofarenolongerservingasmembersoftheBoard;
(k) TheCompanyshallnotdelivertotheHoldertheCommonStockpursuanttoparagraph4hereinwithoutrestrictivelegendwithin3businessdaysof
itsreceiptofaNoticeofConversion;or
(l) TheCompanyshallnotreplenishthereservesetforthinSec---tion12,within3businessdaysoftherequestoftheHolder.IftheCompanydoesnotre---plenishthereservesetforthinSection12,within5businessdaysoftherequestoftheHolderthentheconversiondiscountsetforthinSection4(a)shallbeincreasedfroma35% conversiondiscounttoa70%conversiondiscount;or
(m) TheCompanyshallnotbe“current”initsfilingswiththeSecu---ritiesandExchangeCommission;or
(n) TheCompanyshalllosethe“bid”priceforitsstockinamarket (includingtheOTCQBmarketplaceorotherexchange).
Then,oratanytimethereafter,unlesscuredwithin5days,andineachandeverysuchcase,unlesssuchEventofDefaultshallhavebeenwaivedinwritingbytheHolder(whichwaivershallnotbedeemedtobeawaiverofanysubsequentdefault)attheoptionoftheHolderandintheHolder'ssolediscretion,theHoldermayconsiderthisNoteimmediatelydueandpayable,withoutpresentment,demand,protestor(further)noticeofanykind (otherthannotice ofacceleration), allof which are herebyexpressly waived,anythinghereinorinanynoteorotherinstrumentscontainedtothecontrarynotwithstanding,and the Holder may immediately, and without expiration of any period of grace, enforce any andall of the Holder's rights and remedies provided herein or any other rights or remediesaffordedbylaw.UponanEvent ofDefault,interest shallaccrueat a defaultinterestrate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k) thepenal--- tyshall be$250perdaytheshares arenotissuedbeginningonthe 4thday after theconver--- sion notice was delivered to the Company. This penalty shall increase to $500 per daybe---ginning onthe10thday. Thepenalty for abreach ofSection 8(n) shall be anincrease of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the outstanding principal due underthis Noteshall increaseby 50%. If thisNote is notpaid atmaturity, theoutstandingprincipal dueunder this Note shall increase by 10%.
IftheHoldershallcommenceanactionorproceedingtoenforceanyprovisionsofthis Note,including,withoutlimitation,engaginganattorney,theniftheHolderprevailsinsuch action,theHoldershallbereimbursedbytheCompanyforitsattorneys’feesandothercosts andexpensesincurred in the investigation,preparationandprosecution of such ac---tionorproceeding.
AttheHolder’selection,iftheCompanyfailsforanyreasontodelivertotheHolderthe conversionsharesbythebythe3rdbusinessdayfollowingthedeliveryofaNoticeofCon---versiontotheCompanyandiftheHolderincursaFailuretoDeliverLoss,thenatanytime theHoldermayprovidetheCompanywrittennoticeindicatingtheamountspayabletotheHolderinrespectoftheFailuretoDeliverLossandtheCompanymustmakethe Holder
wholeasfollows:
FailuretoDeliverLoss=[(Hightradepriceatanytimeonorafterthe dayofexercise)x(Numberofconversionshares)]
TheCompanymustpaytheFailuretoDeliverLossbycashpayment,andanysuchcash paymentmustbemadebythethirdbusinessdayfromthetimeoftheHolder’swrittenno---ticetotheCompany.
9. IncaseanyprovisionofthisNoteisheldbyacourtofcompetentju---risdictiontobeexcessiveinscopeorotherwiseinvalidorunenforceable,suchprovisionshallbeadjustedratherthanvoided,ifpossible,sothatitisenforceabletothemaximum extentpossible,andthevalidityandenforceabilityoftheremainingprovisionsofthisNotewillnotinanywaybeaffectedorimpairedthereby.
10. NeitherthisNotenoranytermhereofmaybeamended,waived,dis---chargedorterminatedotherthanbyawritteninstrumentsignedbytheCompanyandtheHolder.
11. TheCompanyrepresentsthatitisnota“shell”issuerandhasneverbeena“shell”issuerorthatifitpreviouslyhasbeena“shell”issuerthatatleast12months havepassedsincetheCompanyhasreportedform10typeinformationindicatingitisnolongera“shellissuer.Further.TheCompanywillinstructitscounseltoeither(i)writea144---3(a)(9)opiniontoallowforsalabilityoftheconversionsharesor(ii)acceptsuchopinionfromHolder’scounsel.
12. TheCompanyshallissueirrevocabletransferagentinstructionsre---serving3,000,000sharesofitsCommonStockforconversionsunderthisNote(the“ShareReserve”).UponfullconversionofthisNote,anysharesremainingintheShareReserveshallbecancelled.TheCompanyshallpayallcostsassociatedwithissuinganddeliveringtheshares.At all times following the 135thday following theclosing date, the reserve shall bemaintainedwiththeTransferAgentatthreetimestheamountofsharesrequirediftheNotewould befullyconverted.
13. TheCompanywillgivetheHolderdirectnoticeofanycorporateac---tions,includingbutnotlimitedtonamechanges,stocksplits,recapitalizationsetc.Thisno---ticeshallbegiventotheHolderassoonaspossibleunderlaw.
14. ThisNoteshallbegovernedbyandconstruedinaccordancewiththelawsofNewYorkapplicabletocontractsmadeandwhollytobeperformedwithintheStateofNewYorkandshallbebindinguponthesuccessorsandassignsofeachpartyhereto.TheHolderandtheCompanyherebymutuallywaivetrialbyjuryandconsenttoexclusivejurisdictionandvenue inthecourtsofthe State of NewYork. This Agreementmay be exe--- cuted in counterparts, and the facsimile transmission of an executed counterpart to this
Agreementshallbeeffectiveasanoriginal.
INWITNESSWHEREOF,theCompanyhascausedthisNotetobedulyexecutedbyanof---ficerthereuntodulyauthorized.
Dated:5/8/15
MAXSOUNDCORPORATION
By: Title:
CFO
EXHIBITA
NOTICEOFCONVERSION
(TobeExecutedbytheRegisteredHolderinordertoConverttheNote)
Theundersignedherebyirrevocablyelectstoconvert$
ofthe
aboveNoteinto
SharesofCommonStockofMaxSoundCorporation(“Shares”)ac---
cordingtotheconditionssetforthinsuchNote,asofthedatewrittenbelow.
IfSharesaretobeissuedinthenameofapersonotherthantheundersigned,theundersignedwillpayalltransferandothertaxesandchargespayablewithrespectthereto.
DateofConversion:ApplicableConversionPrice:Signature:
Address:
[PrintNameofHolderandTitleofSigner]
SSNorEIN:Sharesaretoberegisteredinthefollowingname:
Name: Address: Tel: Fax:SSNorEIN:
Sharesaretobesentordeliveredtothefollowingaccount:
AccountName: Address:
