NEITHERTHEISSUANCEANDSALEOFTHESECURITIESREPRESENTEDBYTHISCERTIFICATENORTHESECURITIESINTOWHICHTHESESECURITIESAREEXERCISABLEHAVEBEENREGISTEREDUNDER THE SECURITIESACT OF 1933, ASAMENDED, ORAPPLICABLE STATE SECURITIES LAWS.THE SECURITIESMAYNOTBEOFFERED FORSALE, SOLD,TRANSFERRED OR ASSIGNED(I)INTHEABSENCEOF(A)ANEFFECTIVEREGISTRATIONSTATEMENTFORTHE SECURITIES UNDER THE SECURITIESACT OF 1933,ASAMENDED, OR (B)AN OPINION OF COUNSEL (WHICH COUNSELSHALL BE SELECTED BYTHE HOLDER), INA GENERALLY ACCEPTABLEFORM,THATREGISTRATIONISNOTREQUIREDUNDERSAIDACTOR(II)UNLESS SOLDPURSUANTTORULE 144,RULE144AUNDERSAIDACT ORSUCHOTHERAPPLICABLE EXEMPTION FROMREGISTRATION.NOTWITHSTANDING THE FOREGOING, THE SECURITIESMAYBEPLEDGED IN CONNECTION WITH ABONAFIDEMARGINACCOUNT OROTHERLOAN OR FINANCINGARRANGEMENT SECURED BY THE SECURITIES.
UNLESSPERMITTEDUNDERSECURITIESLEGISLATION,THEHOLDEROF THISSECURITYMUSTNOTTRADETHESECURITYINCANADABEFORETHEDATETHATIS4MONTHSANDADAYAFTERTHELATEROF(I)OCTOBER30,2015,AND(II)THEDATETHEISSUERBECAMEAREPORTING ISSUER IN ANY PROVINCE OR TERRITORY IN CANADA.
US$218,325.00
MAXSOUNDCORPORATION.
8%CONVERTIBLEREDEEMABLENOTE DUEOCTOBER31,2016
FORVALUERECEIVED,MaxSoundCorporation.(the“Company”)promisestopaytotheorderofBayPrivateEquity Inc.andits authorized successorsand permittedassigns(“Holder”),theaggregateprincipalfaceamountofTwoHundredEighteenThousandThreeHundredandTwentyFiveDollarsexactly (US$218,325.00) on October31, 2016(“Maturity Date”) and topay interest on the principal amountoutstanding hereunder at the rate of 8% per annum commencing on October 31, 2015. ThisNote contains a $13,325.00 original issue discount suchthatthe purchase price oftheNoteshall be
$200,000.00afterdeductionofexpensesof$5,000.00.TheinterestwillbepaidtotheHolderinwhosenamethisNoteisregisteredontherecordsoftheCompanyregardingregistrationandtransfersofthisNote.Theprincipalof,andintereston,thisNotearepayableatSuite403-2727SteelesAve.W., Toronto, Ontario M3J 3G9, initially, and if changed, lastappearingon the records ofthe Companyasdesignated in writing by the Holder hereof from time to time. The Company will pay each interestpaymentandtheoutstandingprincipaldueuponthisNotebeforeorontheMaturityDate,lessanyamounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressedto such Holderat thelast address appearing on the recordsof the Company. Interest shallbe payable in Common Stock (as defined below) at the election of the Holder pursuant to paragraph 4(b) herein.
ThisNoteissubjecttothefollowingadditionalprovisions:
1. ThisNoteisexchangeableforanequalaggregateprincipalamountofNotesofdifferentauthorized denominations,asrequestedbytheHoldersurrenderingthesame.Noservicechargewillbemadeforsuchregistrationortransferorexchange,exceptthatHoldershallpayanytaxorothergovernmental chargespayable inconnection therewith.
2. TheCompanyshallbeentitledtowithholdfromallpaymentsanyamountsrequiredtobewithheldunderapplicablelaws.
3. ThisNotemaybetransferredorexchangedonlyincompliancewiththeSecuritiesActof1933,asamended(“Act”)andapplicablestatesecuritieslaws.Anyattemptedtransfertoanon-qualifyingpartyshallbetreatedby theCompanyasvoid.Priortodue presentmentfortransferofthisNote,the Companyandanyagent ofthe Companymaytreat thepersonin whose namethisNoteis dulyregisteredontheCompany’s records astheowner hereofforallother purposes, whether or
notthisNotebeoverdue,andneithertheCompanynoranysuchagentshallbeaffectedorboundbynoticetothe contrary. AnyHolder of thisNoteelecting to exercisetherightofconversionsetforthinSection4(a)hereof,inadditiontotherequirementssetforthinSection 4(a), andanyprospective transferee ofthis Note, also is required to give the Companywritten confirmation that this Note is being converted (“Notice of Conversion”)in the form annexed hereto as ExhibitA. The date of receipt (including receiptbytelecopy or email) of such Notice of Conversion shall be the Conversion Date.
4. (a)TheHolderofthisNoteisentitled,atitsoptionatanytimeandfromtimetotime,toconvertalloranyamountoftheprincipalfaceamountofthisNotethenoutstandingintosharesoftheCompany’scommonstock(the“CommonStock”)ataprice(“ConversionPrice”)foreachshare of Common Stockequalto65% ofthe lowest price forany trade ofthe Common Stockduringtheten(10) tradingdayperiod prior to conversion. Such trading price shall be determinedbasedon trades ofthe Common Stock asreported on the National Quotations Bureau OTCQB exchangewhich the Company’s shares aretradedorany exchange uponwhichthe Common Stock maybe tradedin thefuture(“Exchange”),forthe ten(10)prior tradingdaysincludingthedayupon which a Notice of Conversion is received bythe Companyor its transfer agent (providedsuch Notice ofConversionis deliveredby fax orotherelectronic method of communicationto the Companyor its transfer agent after 4 P.M. Eastern Standard or DaylightSavings Timeifthe Holder wishesto includethe sameday trading prices). Iftheshares have notbeendeliveredwithin 3businessdays, theNoticeof Conversionmay berescindedby theHolder.Suchconversionshall be effectuated bythe Company deliveringtheshares of Common Stocktothe Holderwithin 3 businessdays ofreceipt bytheCompany ofthe Notice of Conversion. Accrued but unpaid interestshallbe payablein cash, subjectto conversion atthe Conversion Price in the same manner as the principal face amount at the election of the Holder. Nofractional sharesorscriprepresentingfractionsof shareswillbe issuedonconversion, butthenumberofshares issuable shallbe rounded to the nearest whole share. To the extent the Conversion Price of theCompany’sCommonStockclosesbelowtheparvaluepershare,theCompanywilltakeall steps necessaryto solicit the consentofthe stockholdersto reduce the parvalue to the lowest value possible under law.The Company agrees to honor allconversions submittedpendingthisincrease.Inthe eventthe Companyexperiencesa DTC“Chill” onits shares,theconversion price shall be decreasedto 55% insteadof65% whilethat“Chill”isineffect.In noeventshallthe Holderbe allowedto effect aconversion if such conversion, alongwith allother shares of CompanyCommonStock beneficiallyownedbytheHolderanditsaffiliateswouldexceed9.9% of theoutstandingsharesofthe CommonStockoftheCompany.
| (b) | InterestonanyunpaidprincipalbalanceofthisNoteshallaccrueandbepaidattherateof8%perannumwithoutcompoundingbasedona365dayyear.InterestshallbepaidbytheCompanyincashon the Maturity Date (as defined below) unless earlier convertedbythe Holder into Common Stock(“Interest Shares”). Holder may,atanytimeandfrom timetotime,sendinaNotice ofConversiontotheCompanytoconvertaccrued interestinto Interest Shares basedonthe formula providedin Section 4(a) above. The dollar amount converted into Interest Shares mayat the election of the Holder be all or aportion of the accrued interest calculated on the unpaid principalbalanceofthisNote tothe date of such notice. |
| (c) | DuringthefirstsixmonthsthisNoteisineffect,theCompanymayredeemthisNotebypayingtotheHolderanamountasfollows:(i)iftheredemptionispriortothe30thdaythisNoteisin effect(including the 30thday),then foran amountequal to 105%of theunpaid principal amount of this Note along with any interest that has accrued during that period; |
(ii)iftheredemptionisonthe31stdaythisNoteisineffect,uptoandincludingthe60thdaythisNoteisineffect,thenforanamountequalto115%oftheunpaidprincipalamountofthisNotealongwithanyaccruedinterest;(iii)iftheredemptionisonthe61stday thisNoteisineffect,uptoandincluding the120thday thisNote is in effect,thenforan amount equal to135% ofthe unpaid principalamount ofthisNotealongwithany
accruedinterest;(iv)iftheredemptionisonthe121stdaythisNoteisineffect,uptoandincludingthe180thdaythisNoteisineffect,thenforanamountequalto150%oftheunpaidprincipalamountofthisNotealongwithanyaccrued interest.ThisNotemaynotberedeemed afterthe 180thday thisNoteisin effect.The redemptionmustbe closed
andpaidforwithin3businessdaysoftheCompanysendingtheredemptiondemandortheredemptionwillbeinvalidandtheCompanymaynotredeemthisNote.IntheeventtheHolderhasdeliveredaNoticeofConversiontotheCompanypriortothereceiptofaredemption notice from the Company, the Notice of Conversion shall prevail.
| (d) | Upon(i)atransferofallorsubstantiallyalloftheassetsoftheCompanytoanypersonin asingletransactionorseriesofrelatedtransactions,(ii)areclassification,capital reorganizationorotherchangeorexchangeofoutstandingsharesoftheCommonStock,otherthanaforwardorreversestocksplitorstockdividend,or(iii)anyconsolidationormergeroftheCompanywithorintoanotherperson orentityin whichtheCompanyisnotthesurvivingentity(otherthanamergerwhichiseffectedsolely tochangethejurisdiction ofincorporationoftheCompanyandresultsinareclassification,conversionorexchange of outstanding shares of Common Stocksolelyinto shares of Common Stock)(each of items(i),(ii) and (iii)being referredto asa“Reorganization Event”),then,in eachcase, theCompanyshall,uponrequestoftheHolder,redeemthisNoteincashfor150%ofthe principalamount,plusaccruedbutunpaidinterestthroughthedateofredemption,orattheelection ofthe Holder, such Holder mayconvert the unpaid principal amount of thisNote (togetherwiththe amount of accruedbut unpaid interest) into shares of CommonStockat the Conversion Price determined in accordancewith Section 4(a)atany timeprior to the Reorganization Event. Theforegoing provisions shall similarlyapply to successive Reorganization Events. |
| (e) | IncaseofanyReorganizationEvent(nottoincludeasaleofallorsubstantiallyalloftheCompany’sassets)inconnectionwithwhichthisNoteisnotredeemedorconverted,theCompanyshallcauseeffectiveprovisiontobemadesothattheHolderofthisNoteshallhavetherightthereafter,byconvertingthisNote(togetherwiththeamountofaccruedbutunpaidinterest),to purchaseorconvertthisNoteintothekindand numberof sharesof stock orother securities orproperty (including cash)receivable upon suchreclassification, capital reorganization orother change, consolidation or mergerby aholderofthenumberofsharesofCommonStockthatcouldhavebeenpurchaseduponconversion oftheNote (togetherwith the amountofaccruedbut unpaid interest)andatthe same Conversion Price, as defined in thisNote, immediately prior to such Reorganization Event. Theforegoing provisions shallsimilarly applyto successiveReorganizationEvents.IftheconsiderationreceivedbytheholdersofCommonStockisother than cash, the value shallbe as determinedbythe Board of Directors of theCompany orsuccessorperson orentityacting ingoodfaith. |
5. NoprovisionofthisNoteshallalterorimpairtheobligationoftheCompany,whichisabsoluteandunconditional,topaytheprincipalof,andintereston,thisNoteatthetime,place,andrate,andinthe form,herein prescribed.
6. TheCompanyherebyexpresslywaivesdemandandpresentmentforpayment,noticeofnon-payment,protest,noticeofprotest,noticeofdishonor,noticeofaccelerationorintenttoaccelerate,anddiligenceintakinganyactiontocollectamountscalledforhereunderandshallbe directlyandprimarilyliableforthepaymentofallsumsowingandtobeowinghereto.
7. TheCompanyagreestopayallcostsandexpenses,includingreasonableattorneys’feesandexpensesonasolicitor-clientbasis,whichmaybeincurredbytheHolderincollectinganyamountdueunderthis Note.
| 8. | Ifoneormoreofthefollowingdescribed“EventsofDefault”shalloccur: |
| (a) | TheCompanyshalldefaultinthepaymentofprincipalorinterestonthisNoteoranyothernoteissuedtotheHolderbytheCompany;or |
| (b) | AnyoftherepresentationsorwarrantiesmadebytheCompanyhereinorinanycertificateorfinancialorotherwrittenstatementsheretoforeorhereafterfurnishedbyoronbehalfoftheCompanyinconnectionwiththeexecutionanddeliveryofthisNote,orthe securitiespurchaseagreementunderwhich thisNote wasissuedshall be falseor misleading in any respect; or |
| (c) | TheCompanyshallfailtoperformorobserve,inanyrespect,anycovenant,term,provision,condition,agreementorobligationoftheCompanyunderthisNoteoranyothernoteissuedtotheHolderorthesecuritiespurchaseagreementunderwhichthisNote was issued; or |
| (d) | TheCompanyshall(1)becomeinsolvent;(2)admitinwritingitsinabilitytopayitsdebtsgenerallyastheymature;(3)makeanassignmentforthebenefitofcreditorsorcommenceproceedingsforitsdissolution;(4)applyfororconsenttotheappointmentofatrustee,liquidatororreceiverforitsorforasubstantialpartofitspropertyorbusiness; |
(5)fileapetitionforbankruptcyrelief,consenttothefilingofsuchpetitionorhavefiledagainstitaninvoluntarypetitionforbankruptcyrelief,allunderfederalorstatelawsasapplicable;or(6)theboardofdirectorsoftheCompanyshallresolvetoundertakeany actionswhichcouldleadtoortoconfirmanyoftheforegoing;or
| (e) | Atrustee,liquidatororreceivershallbeappointedfortheCompanyorforasubstantialpartofitspropertyorbusinesswithoutitsconsentandshallnotbedischargedwithinsixty |
(60)daysaftersuchappointment;or
| (f) | AnygovernmentalagencyoranycourtofcompetentjurisdictionattheinstanceofanygovernmentalagencyshallassumecustodyorcontrolofthewholeoranysubstantialportionofthepropertiesorassetsoftheCompany;or |
| (g) | Oneormoremoneyjudgments,writsorwarrantsofattachment,orsimilarprocess,inexcessoffiftythousanddollars($50,000)intheaggregate,shallbeenteredorfiledagainsttheCompanyoranyof itspropertiesorotherassetsandshallremainunpaid,unvacated, unbonded or unstayed for aperiod offifteen (15)days or inanyevent later than five (5) days prior to the date of any proposed sale thereunder; or |
| (h) | TheCompanyshallhavedefaultedonorbreachedanyterm,covenantorconditionofanyotherdebtinstrumentordebtobligationbywhichitisbound,orif,inthereasonableopinionoftheHolder,anadversematerialchangeoccursinthefinancialconditionofanyof the Company; or |
| (i) | TheCompanyshallhaveitsCommonStockdelistedfromanexchange(includingtheOTCBBexchange)or,iftheCommonStocktradesonanexchange,thentradingintheCommonStockshallbesuspendedformorethan10consecutivedays; |
| (j) | Ifamajorityofthe membersoftheBoardofDirectorsoftheCompanyonthe datehereofarenolongerservingasmembersoftheBoard; |
| (k) | TheCompanyshallnotdelivertotheHoldertheCommonStockpursuanttoparagraph4hereinwithoutrestrictivelegendwithin3businessdaysofitsreceiptofaNoticeof Conversion;or |
| (l) | TheCompanyshallnotreplenishthereservesetforthinSection13,within3businessdaysoftherequestoftheHolder. |
| (m) | TheCompanyshallnotbe“current”initsfilingswiththeSecuritiesandExchangeCommission;or |
| (n) | TheCompanyshalllosethe“bid”priceforitsstockandamarket(includingtheOTCBBmarketplaceorotherexchange). |
Then,oratanytimethereafter,unlesscuredwithin5days,andineachandeverysuchcase,un-lesssuchEventofDefaultshallhavebeenwaivedinwritingbytheHolder(whichwaivershallnotbedeemedtobeawaiverofanysubsequentdefault)attheoptionoftheHolderandintheHolder’ssole discretion,the Holdermay consider thisNote immediately due and payable,with-outpresentment,demand,protestor(further)noticeofany kind(otherthannoticeofacceleration), all ofwhich are hereby expressly waived, anything herein orin any note or other instruments contained to the contrary notwithstanding, and the Holder mayimmediately, andwithout expiration ofany period of grace, enforce anyand all ofthe Holder’s rightsand remedies provided herein or any other rights or remedies afforded by law.
9. UponanEventofDefault,inadditiontoanyotherrightsorremediesoftheHolder:
| (a) | interestshallaccrueatadefaultinterestrateof24%perannumor,ifsuchrateisusuriousornotpermittedbycurrentlaw,thenatthehighestrateofinterestpermittedbylaw; |
| (b) | intheeventofabreachofSection8(k),theCompanyshallpay theHolder$250perdaythesharesarenotissuedbeginningonthe4thdayaftertheconversionnoticewas delivered tothe Company. Thispenaltyshall increaseto $500 per daybeginningonthe10thday(providedthatineithercaseifsuchrateisusuriousornot permittedbycurrentlaw, thenat aper diempenalty that is equalto the highest rate ofinterestpermittedby law). Amounts payable hereundershall be convertible at the election of the Holder in the same manner as the principal amount; |
| (c) | intheeventofabreachofSection8(n)theoutstandingprincipalamountshallbedeemedtobeincreasedby20%withoutfurtheractionbytheCompanyortheHolderandtheCompanyshallissueareplacementcertificate reflecting such increaseatthe requestofthe Holder; |
| (d) | intheeventofabreachofSection8(i),theoutstandingprincipaldueunderthisNoteshallincreaseby50%withoutfurtheractionbytheCompanyortheHolderandtheCompany shall issue a replacement certificate reflecting such increaseat the request ofthe Holder; |
| (e) | ifthisNoteisnotpaidwhendue,theoutstandingprincipaldueunderthisNoteshallincreaseby10%withoutfurtheractionbytheCompanyortheHolderandtheCompanyshallissueareplacementcertificatereflectingsuchincreaseattherequestofthe Holder; |
| (f) | iftheHoldershallcommenceanactionorproceedingtoenforceanyprovisionsofthisNote,including,withoutlimitation,engaginganattorney,theniftheHolderprevailsinsuchaction,theHoldershallbereimbursedbytheCompany forits attorneys’feesandother costsand expenses incurredin the investigation, preparationand prosecution of such action or proceeding on a solicitor-client basis; |
| (g) | attheHolder’selection,iftheCompanyfailsforanyreasontodelivertotheHoldertheCommonStockissuableuponconversionofthisNote(oranyinterestasapplicable)bythe 3rdbusinessdayfollowingthedeliveryofaNotice ofConversiontothe Company and iftheHolderincursaFailureto Deliver Loss(asdefined below),thenatanytimethe |
HoldermayprovidetheCompanywrittennoticeindicatingtheamountspayabletothe
HolderinrespectoftheFailuretoDeliverLossandtheCompany mustmaketheHolderwholeasfollows:
“FailuretoDeliverLoss”=(HighesttradepriceatanytimeonoraftertheConversionDate)x(NumberofsharessubjecttotheNoticeofConversion)
TheCompanymustpaytheFailureto DeliverLossbycashpayment,and anysuchcashpaymentmustbemadebythe3rdbusinessdayfromthetime ofthe Holder’s writtennotice totheCompany.
10. IncaseanyprovisionofthisNoteisheldbyacourtofcompetentjurisdictiontobeexcessiveinscopeorotherwiseinvalidorunenforceable,suchprovisionshallbeadjustedratherthanvoided,ifpossible, sothatit is enforceabletothe maximum extent possible, andthe validityand enforceability oftheremainingprovisionsofthisNotewillnotinanywaybe affectedor impaired thereby.
11. NeitherthisNotenoranytermhereofmaybeamended,waived,dischargedorterminatedotherthanbyawritteninstrumentsignedbytheCompanyandtheHolder.
12. TheCompanyrepresentsthatitisnota“shell”issuerandhasneverbeena“shell”issuerorthatifitpreviouslyhasbeena“shell”issuerthatatleast12monthshavepassedsincetheCompanyhasreportedform10typeinformationindicatingitisnolongera“shellissuer.Further.TheCompanywill instruct its counselto either (i)write a144 opinionto allow for salability oftheconversion shares or (ii) accept such opinion from Holder’s counsel.
13. TheCompanyshallissueirrevocabletransferagentinstructionsreserving22,000,000sharesof itsCommonStockforconversionsunderthisNote(the“ShareReserve”).UponfullconversionofthisNote,anysharesremainingintheShareReserveshallbecancelled.TheCompanyshallpayallcostsassociatedwithissuingand delivering the shares. Ifsuch amountsaretobe paidbythe Holder,itmay deductsuchamountsfromtheConversionPrice.ConversionNotices may besenttotheCompanyorits transferagentviaelectronic mail.The companyshallatall times reserve a minimumofthree times the amount of shares required if the Note weretobe fullyconverted.The Holdermay reasonablyrequestincreasesfromtimetotimetoreservesuchamounts.
14. TheCompanywillgivetheHolderdirectnoticeofanycorporateactions,includingbutnotlimitedtonamechanges,stocksplits,recapitalizationsetc.ThisnoticeshallbegiventotheHolderassoonaspossibleunderlaw.
15. ThisNoteshallbegovernedbyandconstruedinaccordancewiththelawsoftheProvinceofOntarioandshallbebindinguponthesuccessorsandassignsofeachpartyhereto.TheHolderandtheCompanyherebymutuallyconsenttoexclusivejurisdictionandvenueinthecourtsoftheProvinceofOntario.ThisAgreementmay beexecutedincounterparts,andthefacsimileor email transmission of an executed counterpart to this Agreement shall be effective as an original.
INWITNESSWHEREOF,theCompanyhascausedthisNotetobedulyexecutedbyanofficerthereuntodulyauthorized.
Dated:10/30/15
MAXSOUNDCORPORATION
By:
Title:Chairman&CFO
EXHIBITA
NOTICEOFCONVERSION
(TobeExecutedbytheRegisteredHolderinordertoConverttheNote)
Theundersignedherebyirrevocablyelectstoconvert$ofthe[principalamount][accruedinterest]oftheNoteintoSharesofCommonStockofMaxSoundCorporation.(“Shares”)accordingtotheconditionssetforthinsuchNote,asofthedatewrittenbelow.
IfSharesaretobeissuedinthenameofapersonotherthantheundersigned,theundersignedwillpayalltransferandothertaxesandchargespayablewithrespectthereto.
DateofConversion:
ApplicableConversionPrice:
Signature:
[PrintNameofHolderandTitleofSigner]
Address:
SSNorEIN:
Sharesaretoberegisteredinthefollowingname:
Name:
Address:
Tel:
Fax:
SSNorEIN:
Sharesaretobesentordeliveredtothefollowingaccount:
AccountName:
Address:
