THISNOTEANDTHECOMMONSTOCK ISSUABLEUPONCONVERSIONOFTHISNOTE HAVENOTBEENANDWILLNOTBE REGISTEREDWITHTHEUNITEDSTATES SECURITIESANDEXCHANGECOMMISSIONOR THESECURITIESCOMMISSIONOFANYSTATE PURSUANTTOANEXEMPTIONFROM REGISTRATIONPROVIDEDUNDERTHE SECURITIESACTOF1933,ASAMENDED,AND THE RULES AND REGULATIONS PROMULGATEDTHEREUNDER(THE"1933 ACT”)
US$110,000.00
MAXSOUND CORPORATION.
8%CONVERTIBLEREDEEMABLENOTEDUENOVEMBER4,2015
BACKEND
FORVALUERECEIVED,MaxSoundCorporation.(the“Company”)promisestopaytotheorderofLGCAPITALFUNDING,LLCanditsauthorizedsuccessorsandpermittedas-signs("Holder"),theaggregateprincipalfaceamountofOneHundredtenThousandDollarsex- actly(U.S.$110,000.00)onNovember4, 2015("MaturityDate")andto payinterestontheprin- cipalamountoutstandinghereunderattherateof8%perannumcommencingonNovember4, 2014.TheinterestwillbepaidtotheHolderinwhosenamethisNoteisregisteredontherecords oftheCompanyregardingregistrationandtransfersofthisNote.Theprincipalof,andinterest on,thisNote arepayable at1218 UnionStreet, Suite#2, Brooklyn,NY 11225,initially, andif changed,lastappearingontherecordsoftheCompanyasdesignatedinwritingbytheHolder hereof from time to time.The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to bedeductedorwithheld, totheHolderof thisNotebycheck orwiretransfer addressedtosuch Holder at the last address appearing on the records of the Company. The forwarding ofsuch check or wire transfer shall constitute a payment of outstanding principal hereunder and shall sat- isfyand discharge the liability forprincipal on this Note tothe extent of the sumrepresented by suchcheck or wire transfer.Interest shall be payable inCommon Stock (as defined below) pur- suant to paragraph 4(b) herein.
ThisNoteissubjecttothefollowingadditionalprovisions:
GH
Initials
1. ThisNoteisexchangeableforanequalaggregateprincipalamountof Notesofdifferentauthorizeddenominations,asrequestedbytheHoldersurrenderingthesame. Noservicechargewillbemadeforsuchregistrationortransferorexchange,exceptthatHolder shallpayanytaxorothergovernmentalchargespayableinconnectiontherewith.
2. TheCompanyshallbeentitledtowithholdfromallpaymentsanyamounts requiredtobewithheldunderapplicablelaws.
3. ThisNotemaybetransferredorexchangedonlyincompliancewiththe SecuritiesActof1933,asamended("Act")andapplicablestatesecuritieslaws.Anyattempted transfertoanon-qualifyingpartyshallbetreatedbytheCompanyasvoid.Priortoduepresent- mentfortransferofthisNote,theCompanyandanyagentoftheCompanymaytreattheperson inwhosenamethisNoteisdulyregisteredontheCompany'srecordsastheownerhereofforall otherpurposes,whetherornotthis Notebeoverdue,andneithertheCompanynoranysuch agentshallbeaffectedorboundbynoticetothecontrary.AnyHolderofthisNoteelectingto exercisetherightofconversionsetforthinSection4(a)hereof,inadditiontotherequirements setforthinSection4(a),andanyprospectivetransfereeofthisNote,alsoisrequiredtogivethe CompanywrittenconfirmationthatthisNoteisbeingconverted("NoticeofConversion")inthe formannexedheretoasExhibitA.Thedateofreceipt(includingreceipt bytelecopy)ofsuch Notice of Conversion shall be the Conversion Date.
4. (a)TheHolderofthisNoteisentitled,atitsoption,toconvertallor anyamountoftheprincipalfaceamountofthisNotethenoutstandingintosharesoftheCompa- ny'scommonstock(the"CommonStock")withoutrestrictivelegendofanynature,ataprice ("ConversionPrice")foreachshareofCommonStockequalto65%ofthelowestdailyVWAPoftheCommonStockasreportedontheNationalQuotationsBureauOTCQBexchangewhich theCompany’ssharesaretradedoranyexchangeuponwhichtheCommonStockmaybetraded inthefuture("Exchange"),forthetenpriortradingdaysincludingthedayuponwhichaNotice ofConversionisreceivedbytheCompany(providedsuchNoticeofConversionisdeliveredby faxorotherelectronicmethodofcommunicationtotheCompanyafter4P.M.EasternStandard orDaylightSavingsTimeif theHolderwishestoincludethesamedayclosingprice).If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescind- ed. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conver- sion. Once the Holder has received such shares of Common Stock, the Holder shall surrender thisNotetotheCompany,executedbytheHolderevidencingsuchHolder'sintentiontoconvert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip repre- senting fractions of shares will be issued on conversion, but the number of shares issuable shall beroundedtothenearestwholeshare.IntheeventtheCompanyexperiencesaDTC“Chill”on its shares, the conversion price shall be decreased to 55% instead of 65% while that “Chill” is in effect.In the event the Company is not “Current” in its SEC filings at the time this note is cashfunded,the discount shall be decreased to 40%. In no event shall the Holder beallowed to effect aconversionifsuchconversion,alongwithallothersharesofCompanyCommonStockbenefi- ciallyownedbytheHolderanditsaffiliateswouldexceed9.9%oftheoutstandingsharesofthe Common Stock of the Company.
(b) InterestonanyunpaidprincipalbalanceofthisNoteshallbepaidatthe rateof8%perannum.InterestshallbepaidbytheCompanyinCommonStock("Interest Shares").TheHoldermay,atanytime,sendinaNoticeofConversiontotheCompanyforIn- terest SharesbasedontheformulaprovidedinSection4(a)above.The dollaramountconverted intoInterestSharesshallbealloraportionoftheaccruedinterestcalculatedontheunpaidprin- cipalbalanceofthisNotetothe dateofsuchnotice.
(c) ThisNotemaynotbeprepaid,exceptthatifthe$110,000Rule144con- vertible redeemablenoteissuedbytheCompanyofevendateherewithisredeemedby theCom- panywithin6monthsoftheissuancedateofsuchNote,allobligationsoftheCompanyunder thisNoteandallobligationsoftheHolderundertheHolderissuedBackEndNotewillbeauto- maticallybedeemedsatisfiedandthisNoteandtheHolderissuedBackEndNotewillbeauto- maticallybedeemedcancelledandofnofurtherforceoreffect.
(d) Upon(i)atransferofallorsubstantiallyalloftheassetsoftheCompany toanypersoninasingletransactionorseriesofrelatedtransactions,(ii)areclassification,capital reorganizationorotherchangeorexchangeofoutstandingsharesoftheCommonStock,other thanaforwardorreversestocksplitorstockdividend,or(iii)anyconsolidationormergerofthe CompanywithorintoanotherpersonorentityinwhichtheCompanyisnotthesurvivingentity (otherthanamergerwhich iseffectedsolelytochangethejurisdictionofincorporationofthe Companyandresultsinareclassification,conversionorexchangeofoutstandingsharesof CommonStocksolelyintosharesofCommonStock)(eachofitems(i),(ii)and(iii)beingre- ferredtoasa"SaleEvent"),then,ineachcase,theCompanyshall,uponrequestoftheHolder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the un- paid principalamountofthisNote(togetherwiththe amountofaccruedbutunpaidinterest)into shares ofCommonStockimmediatelypriortosuchSale EventattheConversionPrice.
(e) In caseofany SaleEvent(not toincludea saleofall orsubstantiallyall of theCompany’sassets)inconnectionwithwhichthisNoteisnotredeemedorconverted,the CompanyshallcauseeffectiveprovisiontobemadesothattheHolderofthisNoteshallhave therightthereafter,byconvertingthisNote,topurchaseorconvertthisNoteintothekindand numberofsharesofstockorothersecuritiesorproperty(includingcash)receivableuponsuch reclassification,capitalreorganizationorotherchange,consolidationormerger byaholderof thenumberofsharesofCommonStockthatcouldhavebeenpurchaseduponexerciseofthe NoteandatthesameConversionPrice,asdefinedinthisNote,immediatelypriortosuchSale Event.TheforegoingprovisionsshallsimilarlyapplytosuccessiveSaleEvents.Iftheconsidera- tionreceivedbytheholdersofCommonStockisotherthancash,thevalueshallbeasdeter- mined bythe Boardof Directorsof theCompany orsuccessor personor entityacting ingood faith.
| 5. | NoprovisionofthisNoteshallalterorimpairtheobligationoftheCom- |
pany,whichisabsoluteandunconditional,topaytheprincipalof,andintereston,thisNoteat thetime,place,andrate,andintheform,hereinprescribed.
6. TheCompanyherebyexpresslywaivesdemandandpresentmentforpay- ment,noticeofnon-payment,protest,noticeofprotest,noticeofdishonor,noticeofacceleration orintenttoaccelerate,anddiligenceintakinganyactiontocollectamountscalledforhereunder andshallbedirectlyandprimarilyliableforthepaymentofallsumsowingandtobeowing hereto.
7. TheCompanyagreestopayallcostsandexpenses,includingreasonable attorneys'feesandexpenses,whichmaybeincurredbytheHolderincollectinganyamountdue underthisNote.
| 8. | Ifoneormoreofthefollowingdescribed"EventsofDefault"shalloccur: |
(a) TheCompanyshalldefaultinthepaymentofprincipalorinterestonthis NoteoranyothernoteissuedtotheHolderbytheCompany;or
(b) AnyoftherepresentationsorwarrantiesmadebytheCompanyhereinor inanycertificateorfinancialorotherwrittenstatementsheretoforeorhereafterfurnishedbyor onbehalfoftheCompanyinconnectionwiththeexecutionanddeliveryofthisNote,ortheSe- curitiesPurchaseAgreementunderwhichthisnotewasissuedshallbefalseormisleadinginany respect;or
(c) TheCompanyshallfailtoperformorobserve,inanyrespect,anycove- nant,term,provision,condition,agreementorobligationoftheCompanyunderthisNoteorany othernoteissuedtotheHolder;or
(d) TheCompanyshall(1)becomeinsolvent;(2)admitinwritingitsinability topayitsdebtsgenerallyastheymature;(3)makeanassignmentforthebenefitofcreditorsor commenceproceedingsforitsdissolution;(4)applyfororconsenttotheappointmentofatrus- tee,liquidatororreceiverforitsorforasubstantialpartofitspropertyorbusiness;(5)fileapeti- tionforbankruptcyrelief,consenttothefilingofsuchpetitionorhavefiledagainstitaninvol- untarypetitionforbankruptcyrelief,allunderfederalorstatelawsasapplicable;or
(e) Atrustee,liquidatororreceivershallbeappointedfortheCompanyorfor a substantialpartofitspropertyorbusinesswithoutits consentandshallnotbedischargedwith- insixty(60)daysaftersuchappointment;or
(f) Any governmentalagencyoranycourtofcompetentjurisdictionatthein- stanceofanygovernmentalagencyshallassumecustodyorcontrolofthewholeoranysubstan- tialportionofthepropertiesorassetsoftheCompany;or
(g) One or more money judgments, writsor warrants of attachment, orsimilar process,inexcessoffiftythousanddollars($50,000)intheaggregate,shallbeenteredorfiledagainsttheCompanyoranyofitspropertiesorotherassetsandshallremainunpaid,unvacated,
unbondedorunstayedforaperiodoffifteen(15)daysorinanyeventlaterthanfive(5)days priortothedateofanyproposedsalethereunder;or
(h) TheCompanyshallhavedefaultedonorbreachedanytermofanyother noteofsimilardebtinstrumentintowhichtheCompanyhasenteredandfailedtocuresuchde- faultwithintheappropriategraceperiod;or
(i) TheCompanyshallhaveitsCommonStockdelistedfromanexchange (includingtheOTCBBexchange)or,iftheCommonStocktradesonanexchange,thentrading intheCommonStockshallbesuspendedformorethan10consecutivedays;
(j) IfamajorityofthemembersoftheBoardofDirectorsoftheCompanyon thedatehereofarenolongerservingasmembersoftheBoard;
(k) TheCompanyshallnotdelivertotheHoldertheCommonStockpursuant toparagraph4hereinwithoutrestrictivelegendwithin3businessdaysofitsreceiptofaNotice ofConversion;or
(l) TheCompanyshallnotreplenishthereservesetforthinSection12,with- in3businessdaysoftherequestoftheHolder.
(m) TheCompany’sCommonStockhasaclosingbidpriceoflessthan$0.04 pershareforatleast5consecutivetradingdays;or
(n) TheaggregatedollartradingvolumeoftheCompany’sCommonStockis lessthanfiftythousanddollars($50,000.00)inany5consecutivetradingdays;or
(o) TheCompanyshallceasetobe“current”initsfilingswiththeSecurities andExchangeCommission.
(p) TheCompanyshalllosethe“bid”priceforitsstockandamarket(including theOTCBBmarketplaceorotherexchange)
Then,oratanytimethereafter,unlesscured(exceptfor8(m)and8(n)whichareincurablede- faults,thesoleremedyofwhichistoallowtheHoldertocancelboththisNoteandtheHolder IssuedNote,andineachandeverysuchcase,unlesssuchEventofDefaultshallhavebeen waivedinwritingbytheHolder(whichwaivershallnotbedeemedtobeawaiverofanysubse- quentdefault)attheoptionoftheHolderandintheHolder'ssolediscretion,theHolder may considerthisNoteimmediatelydueandpayable,withoutpresentment,demand,protestor(fur- ther)noticeofanykind(otherthannoticeofacceleration),allofwhichareherebyexpressly waived,anythinghereinorinanynoteorotherinstrumentscontainedtothecontrarynotwith- standing, and theHolder mayimmediately, andwithout expirationof anyperiod ofgrace, en- force any and all of the Holder's rights and remedies provided herein or any other rights or reme- dies affordedbylaw. UponanEventofDefault,interestshallbeaccrueata defaultinterestrate of24%perannumor,ifsuchrateisusuriousornotpermittedbycurrentlaw,thenatthehighest rateofinterestpermittedbylaw. Further,iftheNotebecomesdueandpayable,theHoldermay
5
use the outstanding principal and interest due underthe Note to offset any payment obligations it mayhavetotheCompany.Intheeventofabreachof8(k)thepenaltyshallbe$250perdaythe sharesarenotissuedbeginningonthe4thdayaftertheconversionnoticewasdeliveredtothe Company.Thispenaltyshallincreaseto$500perdaybeginningonthe10thday.Oncecash funded,thepenaltyforabreachofSection8(p)shallbeanincreaseoftheoutstandingprincipal amountsby20%.Oncecashfunded,intheeventofabreachofSection8(i),theoutstanding principaldueunderthisNoteshallincreaseby50%.IfthisNoteisnotpaidatmaturity,theout- standingprincipaldueunderthisNoteshallincreaseby10%.
IftheHoldershallcommenceanactionorproceedingtoenforceanyprovisionsofthisNote,in- cluding,withoutlimitation,engaginganattorney,then,iftheHolderprevailsinsuchaction,the HoldershallbereimbursedbytheCompanyforitsattorneys’feesandothercostsandexpenses incurredintheinvestigation,preparationandprosecutionofsuchactionorproceeding.
9. IncaseanyprovisionofthisNoteisheldbyacourtofcompetentjurisdic- tiontobeexcessiveinscopeorotherwiseinvalidorunenforceable,suchprovisionshallbead- justedratherthanvoided,ifpossible,sothatitisenforceabletothemaximumextentpossible, andthevalidityandenforceabilityoftheremainingprovisionsofthisNotewillnotinanyway beaffectedorimpairedthereby.
10. NeitherthisNotenoranytermhereofmaybeamended,waived,dis- chargedorterminatedotherthanbyawritteninstrumentsignedbytheCompanyandtheHolder.
11. TheCompanyrepresentsthatitisnota“shell”issuerandhasneverbeena “shell”issuerorthatifitpreviouslyhasbeena“shell”issuerthatatleast12monthshavepassed sincetheCompanyhasreportedform10typeinformationindicatingitisnolongera“shellissu- er.Further.TheCompanywillinstructitscounseltoeither(i)writea144-3(a(9)opiniontoal- lowforsalabilityoftheconversionsharesor(ii)acceptsuchopinionfromHolder’scounsel.
12. PriortocashfundingofthisNote,TheCompanywillissueirrevocable transferagentinstructionsreserving2xthenumberofsharesofCommonStocknecessarytoal- lowtheholdertoconvertthisnotebasedonthediscountedconversionpricesetforthinSection 4(a) herewith and inaccordance with Section12 of the $110,000144 note ofeven date herewith. ThereserveshallbereplenishedasneededtoallowforconversionsofthisNote.Uponfullcon- versionofthisNote,thereserverepresentingthisNoteshallbecancelled.TheCompanywill payalltransferagentcostsassociatedwithissuinganddeliveringtheshares.
13. TheCompanywillgivetheHolderdirectnoticeofanycorporateactions, includingbutnotlimitedtonamechanges,stocksplits,recapitalizationsetc.Thisnoticeshallbe giventotheHolderassoonaspossibleunderlaw.
14. ThisNoteshallbegovernedbyandconstruedinaccordancewiththelaws ofNewYorkapplicabletocontractsmadeandwhollytobeperformedwithintheStateofNewYorkandshallbebindinguponthesuccessorsandassignsofeachpartyhereto.TheHolderand theCompanyherebymutuallywaivetrialbyjuryandconsenttoexclusivejurisdictionandvenue inthecourtsoftheStateofNewYork.ThisAgreementmaybeexecutedincounterparts,and
thefacsimiletransmissionofanexecutedcounterparttothisAgreementshallbeeffectiveasan original.
INWITNESSWHEREOF,theCompanyhascausedthisNotetobedulyexecutedbyan officerthereuntodulyauthorized.
Dated:November4,2014
MAXSOUNDCORPORATION
By:
Title:CFO
EXHIBITA
NOTICEOFCONVERSION
(TobeExecutedbytheRegisteredHolderinordertoConverttheNote)
The undersigned herebyirrevocably electsto convert$oftheabove NoteintoSharesofCommonStockofMaxSoundCorporation.(“Shares”)accord-ingtotheconditionssetforthinsuchNote,asofthedatewrittenbelow.
IfSharesaretobeissuedinthenameofapersonotherthantheundersigned,the undersignedwillpayalltransferandothertaxesandchargespayablewithrespectthereto.
DateofConversion: ApplicableConversionPrice: Signature:
[PrintNameofHolderandTitleofSigner]
Address:
SSNorEIN:
Sharesaretoberegisteredinthefollowingname:
Name:Address: Tel:Fax: SSN or EIN:
Sharesaretobesentordeliveredtothefollowingaccount:
AccountName: Address:
