MAXSOUNDCORPORATION
8%CONVERTIBLEREDEEMABLEPROMISSORYNOTE
EffectiveDateSeptember11,2015US$35,000.00DueSeptember11,2016
THISNOTEANDTHECOMMONSTOCKISSUABLEUPONCONVERSIONOFTHISNOTEHAVENOTBEENANDWILLNOTBEREGISTEREDWITHTHEUNITEDSTATESSECURITIESANDEXCHANGECOMMISSIONORTHESECURITIESCOMMISSIONOFANYSTATEPURSUANTTOANEXEMPTIONFROMREGISTRATIONPROVIDEDUNDERTHESECURITIESACTOF1933,ASAMENDED,ANDTHERULESANDREGULATIONSPROMULGATEDTHEREUNDER(THE"1933ACT”)
FORVALUERECEIVED,MaxSoundCorporation(the“Company”)promisestopaytotheorderofGWHoldingsGroup,LLC.,anditsauthorizedsuccessorsandpermittedassigns("Holder"),theaggregateprincipalfaceamountofThirty-fiveThousandFiveHundredDol-larsexactly(U.S.35,000.00)onSeptember11,2016("MaturityDate").TheCompanywillpayinterestontheprincipalamountoutstandingattherateof8%perannum,whichwillcommenceonSeptember11,2015.TheCompanyacknowledgestheissuancepriceofthisNotewas$33,000.00,asitwasissuedwitha$2,000.00originalissuediscount(“OID”).TheinterestwillbepaidtotheHolderinwhosenamethisNoteisregisteredontherecordsoftheCompanyregardingregistrationandtransfersofthisNote.Theprincipalof,andinter-eston,thisNotearepayableat 137Montague Street,Suite291,Brooklyn,NY11201,initial-ly,andifchanged,lastappearingontherecordsoftheCompanyasdesignatedin writingbytheHolderhereoffromtimetotime.TheCompanywillpayeachinterestpaymentandtheoutstandingprincipaldueuponthisNotebeforeorontheMaturityDate,lessanyamountsrequiredbylawtobedeductedorwithheld,totheHolderofthisNotebycheckorwiretransferaddressedtosuchHolderatthelastaddressappearingontherecordsoftheCom-pany.Theforwardingofsuchcheckorwiretransfershallconstituteapaymentofout-standingprincipalhereunderandshallsatisfyanddischargetheliabilityforprincipalonthisNotetotheextentofthesumrepresentedbysuchcheckorwiretransfer.InterestshallbepayableinCommonStock(asdefinedbelow)pursuanttoparagraph4(b)herein.
ThisNoteissubjecttothefollowingadditionalprovisions:
1. ThisNoteisexchangeableforanequalaggregateprincipalamountofNotesofdifferentauthorizeddenominations,asrequestedbytheHoldersurrenderingthesame.Noservicechargewillbemadeforsuchregistrationortransferorexchange,exceptthatHoldershallpayanytaxorothergovernmentalchargespayableinconnectionthere-with.
GH
Initials
2. Underallapplicablelaws,theCompanyshallbeentitledtowithholdanyamountsfromallpaymentsitisentitledto.
3. ThisNotemayonlybetransferredorexchangedincompliancewiththeSecuritiesActof1933,asamended("Act")andanyapplicablestatesecuritieslaws.Allattemptstransfertoanon-qualifyingpartyshallbetreatedbytheCompanyasvoid.PriortoduepresentmentfortransferofthisNote,theCompanyandanyagentoftheCompanymaytreatthepersoninwhosenamethisNote isdulyregisteredontheCompany'srecordsastheownerhereofforallotherpurposes,whetherornotthisNotebeoverdue,andnei-thertheCompanynoranysuchagentshallbeaffectedorboundbynoticetothecontrary.AnyHolderofthisNoteelectingtoexercisetherightofconversionsetforthinSection4(a)hereof,inadditiontotherequirementssetforth inSection4(a),and anyprospectivetrans-fereeofthisNote,alsoisrequiredtogivetheCompanywrittenconfirmationthatthisNoteisbeingconverted("NoticeofConversion")intheformannexedheretoasExhibitA.Thedateofreceipt(includingreceiptbytelecopy)ofsuchNoticeofConversionshallbetheConversionDate.
4. (a)TheHolderofthisNotehastheoption,atanytime,toconvertalloranyamountoftheprincipalfaceamountofthisNotethenoutstandingintosharesoftheCompany'scommonstock(the"Common Stock")ataprice("ConversionPrice")whichwillbe thelesserof theMarketPriceontheInitialFundingDateortimeofconversion.Themarketprice(“MarketPrice”)foreachshareofCommonStockwillbeequalto60%ofthelowestclosingbidpriceoftheCommonStockasreportedontheNationalQuotationsBureauOTCQBexchangewhichtheCompany’ssharesaretradedoranyexchangeuponwhichtheCommonStockmaybetradedinthefuture("Exchange"),forthe(i)fifteenpriortradingdaysincludingthedayuponwhichaNoticeofConversionisreceivedbytheCom-pany(providedsuchNoticeofConversionisdeliveredbyfaxorotherelectronicmethodofcommunicationtotheCompanyafter4P.M.EasternStandardorDaylightSavingsTimeiftheHolderwishestoincludethesamedayclosingprice)or(ii)fifteentradingdayspriortoSeptember11,2015.TheNoticeofConversionmayberescindediftheshareshavenotbeendeliveredwithin3businessdays.TheCompanyshalldeliverthesharesofCommonStock tothe Holderwithin 3businessdays ofreceiptbytheCompanyoftheNoticeof Con-version.TheHoldershallsurrenderthisNotetotheCompanyuponreceiptofthesharesofCommonStock,executedbytheHolder.ThiswillmakecleartheHolder'sintentiontoconvertthisNoteoraspecifiedportionhereof,andaccompaniedbyproperassignmenthereofinblank.Accruedbutunpaidinterestshallbesubjecttoconversion.Thenumberofissuableshareswillberoundedtothenearestwholeshare,andnofractionalsharesorscriprepresentingfractionsofshareswillbeissuedonconversion.IntheeventtheCom-panyexperiencesaDTC“Chill”onitsshares,theconversionpriceshallbedecreasedto55%insteadof60%whilethat“Chill” isineffect.Notwithstandinganythingtothecontrarycon-tainedin the Note (except as set forthbelowinthis Section),the Note shall notbeconvert-iblebyInvestor,andCompanyshallnoteffectanyconversionoftheNoteorotherwiseis-sueanysharesofCommonStocktotheextent(butonlytotheextent)thatInvestorto-
getherwithanyofitsaffiliateswouldbeneficiallyowninexcessof9.99%(the“Maximum
Percentage”)oftheCommonStockoutstanding.Totheextenttheforegoinglimitationapplies,thedeterminationofwhetheraNoteshallbeconvertible(vis-à-visotherconvert-ible,exercisableorexchangeablesecuritiesownedbyInvestororanyofitsaffiliates)andofwhichsuchsecuritiesshallbeconvertible,exercisableorexchangeable(asamongallsuchsecuritiesownedbyInvestoranditsaffiliates)shall,subjecttosuchMaximumPer-centagelimitation,bedeterminedonthebasis of thefirstsubmissiontoCompanyforcon-version,exerciseorexchange(asthecasemaybe).Nopriorinabilitytoconvert aNote,ortoissuesharesofCommonStock,pursuanttothisSectionshallhaveanyeffectontheap-plicabilityoftheprovisionsofthisSectionwithrespecttoanysubsequentdeterminationofconvertibility. Forpurposesof this Section,beneficialownershipand alldeterminationsandcalculations(including,withoutlimitation,withrespecttocalculationsofpercentageownership)shallbedeterminedinaccordancewithSection13(e)ofthe1934Act(asde-finedbelow)andtherulesandregulationspromulgatedthereunder.TheprovisionsofthisSectionshallbeimplementedinamannerotherwisethan instrictconformitywiththetermsofthisSectiontocorrectthisSection(oranyportionhereof)whichmaybedefectiveorinconsistentwiththeintendedMaximumPercentagebeneficialownershiplimitationhereincontainedortomakechangesorsupplementsnecessaryordesirabletoproperlygiveeffecttosuchMaximumPercentagelimitation.ThelimitationscontainedinthisSec-tionshallapplytoasuccessorholderofthisNoteandshallbeunconditional,irrevocableandnon-waivable.Foranyreasonatanytime,uponthewrittenororalrequestofInves-tor,Companyshallwithinone(1) businessdayconfirmorallyandinwritingtoInvestorthenumberofsharesofCommonStockthenoutstanding,includingbyvirtueofanypriorconversionor exerciseofconvertibleor exercisablesecuritiesintoCommonStock,includ-ing,withoutlimitation,pursuanttothisNote.
(b) InterestonanyunpaidprincipalbalanceofthisNoteshallbepaidattherateof8%perannum.InterestshallbepaidbytheCompanyinCommonStock("InterestShares").Holdermay,atanytime,sendinaNoticeofConversiontotheCompa-nyforInterestSharesbasedontheformulaprovidedinSection4(a)above.ThedollaramountconvertedintoInterestSharesshallbealloraportionoftheaccruedinterestcal-culatedontheunpaidprincipalbalanceofthisNotetothedateofsuchnotice.
(c) DuringthefirstsixmonthsthisNoteisineffect,theCompanymayredeemthisNotebypayingtotheHolderanamountequalto130%oftheunpaidprincipalamountofthisNotealongwithanyprepaidandearnedinterest.ThisNotemaynotberedeemedafter180days.Theredemptionmustbeclosedandpaidforwithin3businessdaysoftheCompanysendingtheredemptiondemandortheredemptionwillbeinvalidandtheCompanymaynotredeemthisNote.
(d) Upon(i)atransferofallorsubstantiallyalloftheassetsoftheCompanytoanypersoninasingletransactionorseriesofrelatedtransactions,(ii)are-classification,capitalreorganizationorotherchangeorexchangeofoutstandingsharesoftheCommonStock,otherthanaforwardorreversestocksplitorstockdividend,or(iii)any consolidationor mergeroftheCompanywithor intoanotherperson orentityinwhichtheCompanyisnotthesurvivingentity(
changethejurisdictionofincorporationoftheCompanyandresultsinareclassification,conversionorexchangeofoutstandingsharesofCommonStocksolelyintosharesofCom-monStock)(eachofitems(i),(ii)and (iii)beingreferredtoasa"SaleEvent"),then,ineachcase,theCompanyshall,uponrequestoftheHolder,redeemthisNoteincashfor150%oftheprincipalamount,plusaccruedbutunpaidinterestthroughthedateofredemption,orattheelectionoftheHolder,suchHoldermayconverttheunpaidprincipalamountofthisNote(togetherwiththeamountofaccruedbutunpaidinterest)intosharesofCommonStockimmediatelypriortosuchSaleEventattheConversionPrice.
(e) In caseof anySaleEvent(nottoincludeasaleofallor substan-tiallyalloftheCompany’sassets)inconnectionwithwhichthisNoteisnotredeemedorconverted,theCompanyshallcauseeffectiveprovisiontobemadesothattheHolderofthisNoteshallhavetherightthereafter,byconvertingthisNote,topurchaseorconvertthisNoteintothekindandnumberofsharesofstockorothersecuritiesorproperty(in-cludingcash)receivableuponsuchreclassification,capitalreorganizationorotherchange,consolidationormergerbyaholderofthenumberofsharesofCommonStockthatcouldhavebeenpurchaseduponexerciseoftheNoteandatthesameConversionPrice,asde-finedinthisNote,immediatelypriorto suchSaleEvent. The foregoingprovisionsshallsim-ilarlyapplytosuccessiveSaleEvents.IftheconsiderationreceivedbytheholdersofCom-monStockisotherthancash,thevalueshallbeasdeterminedbytheBoardofDirectorsoftheCompanyorsuccessorpersonorentityactingingoodfaith.
5. NoprovisionofthisNoteshallalterorimpairtheobligationoftheCompany,whichisabsoluteandunconditional,topaytheprincipalof,andintereston,thisNoteatthetime,place,andrate,andintheform,hereinprescribed.
6. TheCompanyherebyexpresslywaivesdemandandpresentmentforpayment,noticeofnon-payment,protest,noticeofprotest,noticeofdishonor,noticeofac-celerationorintenttoaccelerate,anddiligenceintakinganyactiontocollectamountscalledforhereunderandshallbedirectlyandprimarilyliableforthepaymentofallsumsowingandtobeowinghereto.
7. TheCompanyagreestopayallcostsandexpenses,includingreasona-bleattorneys'feesandexpenses,whichmaybeincurredbytheHolderincollectinganyamountdueunderthisNote.
cur:
| 8. | Ifoneormoreofthefollowingdescribed"EventsofDefault"shalloc- |
(a) TheCompanyshalldefaultinthepaymentofprincipalorin-terestonthisNoteoranyothernoteissuedtotheHolderbytheCompany;or
(b) AnyoftherepresentationsorwarrantiesmadebytheCompa-nyhereinorin anycertificateorfinancialorotherwritten statementsheretoforeorhereaf-terfurnishedbyoron behalfofthe Companyinconnection withthe executionanddelivery
ofthisNote,ortheSecuritiesPurchaseAgreementunderwhichthisnotewasissuedshallbefalseormisleadinginanyrespect;or
(c) TheCompanyshallfailtoperformorobserve,inanyrespect,anycovenant,term,provision,condition,agreementorobligationoftheCompanyunderthisNoteoranyothernoteissuedtotheHolder;or
(d) TheCompanyshall(1)becomeinsolvent;(2)admitinwritingitsinabilitytopayitsdebtsgenerallyastheymature;(3)makeanassignmentforthebene-fitofcreditorsorcommenceproceedingsfor itsdissolution;(4)applyfororconsenttotheappointmentofatrustee,liquidatororreceiverforitsorforasubstantialpartofitsproper-tyorbusiness;(5)fileapetitionforbankruptcyrelief,consenttothefiling ofsuch petitionorhavefiledagainstitaninvoluntarypetitionforbankruptcyrelief,allunderfederalorstatelawsas applicable;or
(e) Atrustee,liquidatororreceivershallbeappointedfortheCompanyorforasubstantialpartofitspropertyorbusinesswithoutitsconsentandshallnotbedischargedwithinsixty(60)daysaftersuchappointment;or
(f) Anygovernmentalagencyoranycourtofcompetentjurisdic-tionattheinstanceofanygovernmentalagencyshallassumecustodyorcontrolofthewholeoranysubstantialportionofthepropertiesorassetsoftheCompany;or
(g) Oneormoremoneyjudgments,writsorwarrantsofattach-ment,orsimilarprocess,inexcessofthirty-fivethousanddollars($35,000)intheaggre-gate,shallbeenteredorfiledagainsttheCompanyoranyofitspropertiesorotherassetsand shallremainunpaid,unvacated,unbondedorunstayedfor aperiod offifteen(15)daysorinanyeventlaterthanfive(5)dayspriortothedateofanyproposedsalethereunder;or
(h) TheCompanyshallhavedefaultedonorbreachedanytermofanyothernoteofsimilardebtinstrumentintowhichtheCompanyhas enteredandfailedtocuresuchdefaultwithintheappropriategraceperiod;or
(i) TheCompanyshallhaveitsCommonStockdelistedfromanexchange(includingtheOTCBBexchange)or,iftheCommonStocktradesonanexchange,thentradingintheCommonStockshallbesuspendedformorethan10consecutivedays;
(j) IfamajorityofthemembersoftheBoardofDirectorsoftheCompanyonthedatehereofarenolongerservingasmembersoftheBoard;
(k) TheCompanyshallnotdelivertotheHoldertheCommonStockpursuanttoparagraph4hereinwithoutrestrictivelegendwithin3businessdaysofitsreceiptofaNoticeofConversion;or
(l) TheCompanyshallnotreplenishthereservesetforthinSec-
tion12,within3businessdaysoftherequestoftheHolder.IftheCompanydoesnotre-plenishthereservesetforthinSection12,within5businessdaysoftherequestoftheHolderthen the conversion discountsetforthinSection4(a)shallbeincreasedfroma60%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(otherthannoticeofacceleration),allofwhichareherebyexpresslywaived,anythinghereinorinanynoteorotherinstrumentscontainedtothecontrarynotwithstanding,andtheHoldermayimmediately,andwithoutexpirationofanyperiodofgrace,enforceanyand all of theHolder'srightsand remediesprovided hereinoranyother rightsor remediesaffordedbylaw.UponanEventofDefault,interestshallaccrueatadefaultinterestrateof24%perannumor,ifsuchrateisusuriousornotpermittedbycurrentlaw,thenatthehighest rateof interestpermittedbylaw.In theeventofa breachof Section 8(k) thepenal-tyshallbe $250perdaytheshares arenot issuedbeginningon the4thdayaftertheconver-sionnoticewasdeliveredtotheCompany.Thispenaltyshallincreaseto$500perdaybe-ginningonthe10thday.Thepenaltyfor abreachof Section8(n)shallbeanincreaseoftheoutstandingprincipalamountsby20%.IncaseofabreachofSection8(i),theoutstandingprincipaldueunderthisNoteshallincreaseby50%.IfthisNoteis notpaidatmaturity,theoutstandingprincipaldueunderthisNoteshallincreaseby10%.
IftheHoldershallcommenceanactionorproceedingtoenforceanyprovisionsofthisNote, including, without limitation,engagingan attorney, theniftheHolderprevailsin suchaction,theHoldershallbereimbursedbytheCompanyforitsattorneys’feesandothercostsandexpensesincurredintheinvestigation,preparationandprosecutionofsuchac-tionorproceeding.
AttheHolder’selection,iftheCompanyfailsforanyreasontodelivertotheHoldertheconversionsharesbythebythe3rdbusinessdayfollowingthedeliveryofaNoticeofCon-versiontotheCompanyandiftheHolderincursaFailuretoDeliverLoss,thenatanytimetheHoldermayprovidetheCompanywrittennoticeindicatingtheamountspayabletotheHolderinrespectoftheFailuretoDeliverLossandtheCompanymustmaketheHolderwholeasfollows:
FailuretoDeliverLoss=[(Hightradepriceatanytimeonorafterthedayofexercise)x(Numberofconversionshares)]
TheCompanymustpaytheFailuretoDeliverLossbycashpayment,andanysuchcashpaymentmustbemadebythethirdbusinessdayfromthetimeoftheHolder’swrittenno-ticetotheCompany.
9. IncaseanyprovisionofthisNoteisheldbyacourtofcompetentju-risdictiontobeexcessiveinscopeorotherwiseinvalidorunenforceable,suchprovisionshallbeadjustedratherthanvoided,ifpossible,sothatitisenforceabletothemaximumextentpossible,andthevalidityandenforceabilityoftheremainingprovisionsofthisNotewillnotinanywaybeaffectedorimpairedthereby.
10. NeitherthisNotenoranytermhereofmaybeamended,waived,dis-chargedorterminatedotherthanbyawritteninstrumentsignedbytheCompanyandtheHolder.
11. TheCompanyrepresentsthatitisnota“shell”issuerandhasneverbeena“shell”issuerorthatifitpreviouslyhasbeena“shell”issuerthatatleast12monthshavepassedsincetheCompanyhasreportedform10typeinformationindicatingitisnolongera“shellissuer.Further.TheCompanywillinstructitscounseltoeither(i)writea144-3(a)(9)opiniontoallowforsalabilityoftheconversionsharesor(ii)acceptsuchopinionfromHolder’scounsel.
12. TheCompanyshallprovideanincreaseinthereservesharesontheNoteexecutedinMayof2015of8,000,000shares.TheCompanyshallissueirrevocabletransferagentinstructionsreserving7,000,000sharesofitsCommonStockforconversionsunderthisNote(the“ShareReserve”).UponfullconversionofthisNote,anysharesre-mainingintheShareReserveshallbecancelled.TheCompanyshallpayallcostsassociat-edwithissuinganddeliveringtheshares.Atalltimes,thereserveshallbemaintainedwiththeTransferAgentatfourtimestheamountofsharesrequirediftheNotewouldbefullyconverted.
13. TheCompanywillgivetheHolderdirectnoticeofanycorporateac-tions,including but notlimitedtoname changes,stocksplits,recapitalizationsetc.Thisno-ticeshallbegiventotheHolderassoonaspossibleunderlaw.
14. ThisNoteshallbegovernedbyandconstruedinaccordancewiththelawsofNew YorkapplicabletocontractsmadeandwhollytobeperformedwithintheStateofNewYorkandshallbebindinguponthesuccessorsandassignsofeachpartyhereto.TheHolderandtheCompanyherebymutuallywaivetrialbyjuryandconsenttoexclusivejurisdictionandvenueinthecourtsoftheStateofNewYork.ThisAgreementmaybeexe-cutedincounterparts,andthefacsimiletransmissionofanexecutedcounterparttothisAgreementshallbeeffectiveasanoriginal.
INWITNESSWHEREOF,theCompanyhascausedthisNotetobedulyexecutedbyanof-
ficerthereuntodulyauthorized.Dated:9/11/2015
MAXSOUNDCORPORATION
By:
Title:Chairman&CFO
EXHIBITA
NOTICEOFCONVERSION
(TobeExecutedbytheRegisteredHolderinordertoConverttheNote)
Theundersignedherebyirrevocablyelectstoconvert$oftheaboveNote intoSharesofCommonStock ofMaxSoundCorporation(“Shares”)ac-cordingtotheconditionssetforthinsuchNote,asofthedatewrittenbelow.
IfShares are to be issuedin thenameofapersonotherthantheundersigned,theundersignedwillpayalltransferandothertaxesandchargespayablewithrespectthereto.
Date ofConversion:ApplicableConversionPrice:Signature:
[PrintNameofHolderandTitleofSigner]
Address:
SSNorEIN:
Sharesaretoberegisteredinthefollowingname:
Name:Address:Tel:Fax:SSN orEIN:
Sharesaretobesentordeliveredtothefollowing account:
AccountName:Address:
