$500,000CONVERTIBLENOTE
FORVALUERECEIVED,MaxSoundCorporation,aDelawarecorporation(the“Issuer”ofthisSecurity)withatleast363,904,570commonsharesissuedandoutstanding,issuesthisSecurityandpromisestopaytoJMJFinancial,aNevadasoleproprietorship,oritsAssignees(the“Investor”)thePrincipalSumalongwiththeInterestRateandanyotherfeesaccordingtothetermsherein.ThisNotewillbecomeeffectiveonly upon execution by both partiesand delivery ofthefirstpaymentofConsideration by the Investor (the “Effective Date”).
ThePrincipalSumis$500,000(fivehundredthousand)plusaccruedandunpaidinterestandanyotherfees.TheConsiderationis
$450,000(fourhundredfiftythousand)payablebywire(thereexistsa$50,000originalissuediscount(the“OID”)).TheInvestorshallpay$150,000ofConsiderationuponclosingofthisNote.TheInvestormaypayadditionalConsiderationtotheIssuerinsuchamountsandatsuchdatesasmutuallyagreed.THEPRINCIPALSUMDUETOTHEINVESTORSHALLBEPRORATEDBASEDONTHECONSIDERATIONACTUALLYPAIDBYINVESTOR(PLUSANAPPROXIMATE 10%ORIGINAL ISSUEDISCOUNTTHAT ISPRORATEDBASEDONTHECONSIDERATIONACTUALLYPAIDBYTHEINVESTORASWELLASANYOTHERINTERESTORFEES)SUCHTHATTHEISSUERISONLYREQUIREDTOREPAYTHEAMOUNTFUNDEDANDTHEISSUER IS NOTREQUIREDTOREPAYANYUNFUNDEDPORTIONOFTHISNOTE.
TheMaturityDateistwoyearsfromtheEffectiveDateofeachpayment(the“MaturityDate”)andisthedateuponwhichthePrincipalSumofthisNote,aswellasanyunpaidinterestandotherfees,shallbedueandpayable.TheConversionPriceis70%oftheaverageofthe3lowesttradepricesinthe15tradingdaysprevioustotheconversion(InthecasethatconversionsharesarenotdeliverablebyDWACanadditional10% discount willapply; and ifthe sharesareineligible fordepositintotheDTC systemandonly eligible for Xclearingdepositanadditional 5%discountshall apply; inthe caseof both anadditional cumulative15%discount shall apply). Unlessotherwise agreedinwriting bybothparties, atnotimewill theInvestorconvert any amountof theNoteinto common stock that would result in the Investor owningmore than 4.99% of thecommon stock outstanding.
| 1. | ZEROPercentInterestfortheFirstThree Months.TheIssuer mayrepaythisNoteatanytimeonorbefore180daysfromtheEffectiveDate,afterwhichtheIssuermaynotmakefurtherpaymentsonthisNotepriortotheMaturityDatewithoutwrittenapprovalfromtheInvestor.IftheIssuerrepaysapaymentofConsiderationonorbefore90daysfromtheEffectiveDateofthatpayment,theInterestRateonthatpaymentofConsiderationshallbeZEROPERCENT(0%).IftheIssuerdoesnotrepayapayment of Consideration on or before 90 days from its EffectiveDate, a one-time Interest charge of 5% shall be applied to the PrincipalSum.Any interest payable is in addition to theOID, and thatOID (or proratedOID, if applicable) remains payable regardless of timeandmanner ofpayment bythe Issuer. |
2. Conversion.TheInvestorhastheright,atanytimeaftertheEffectiveDate,atitselection,toconvertallorpartoftheoutstandingandunpaidPrincipalSumandaccruedinterest(andanyotherfees)intosharesoffullypaidandnon-assessablesharesofcommonstockoftheIssuerasperthisconversionformula:NumberofsharesreceivableuponconversionequalsthedollarconversionamountdividedbytheConversionPrice.ConversionsmaybedeliveredtotheIssuerbymethodoftheInvestor’schoice(includingbutnotlimited to email, facsimile,mail, overnightcourier, or personal delivery),and all conversions shall be cashless and notrequire furtherpayment fromtheInvestor. IfnoobjectionisdeliveredfromtheIssuer totheInvestor regardinganyvariableorcalculationofthe conversion notice within 24 hours of delivery of the conversion notice, the Issuer shall have been thereafterdeemed to have irrevocably confirmedandirrevocablyratifiedsuchnoticeof conversionandwaivedanyobjectionthereto.The Issuershall deliver thesharesfromanyconversiontotheInvestor(inanynamedirectedbytheInvestor)within3(three)businessdaysofconversion notice delivery.
| 3. | ConversionDelays.IftheIssuerfailstodeliversharesinaccordancewiththetimeframestatedinSection2,theInvestor,atanytimepriortosellingallofthoseshares,mayrescindanyportion,inwholeorinpart,ofthatparticularconversionattributabletotheunsold shares andhavetherescindedconversion amount returnedtothePrincipal Sumwiththe rescindedconversionshares returnedtotheIssuer(undertheInvestor’sandtheIssuer’sexpectationsthatanyreturnedconversionamountswilltackbacktotheoriginaldateoftheNote).Inaddition,foreachconversion,intheeventthatsharesarenotdeliveredbythefourthbusinessday(inclusiveofthedayofconversion),apenaltyof$2,000perdaywillbeassessedforeachdayafterthethirdbusinessday(inclusiveofthedayofthe conversion) until share delivery ismade; and such penalty will be added to the Principal Sum of the Note (under the Investor’s and the Issuer’s expectations that any penalty amounts will tack back to the original date of theNote). |
4. ReservationofShares.AtalltimesduringwhichthisNoteisconvertible,theIssuerwillreservefromitsauthorizedandunissuedCommonStocktoprovidefortheissuanceofCommonStockuponthefullconversionofthisNote.TheIssuerwillatalltimesreserveatleast10,000,000sharesofCommonStockforconversion.
5. PiggybackRegistrationRights.TheIssuershallincludeonthenextregistrationstatementtheIssuerfileswithSEC(oronthesubsequentregistrationstatementifsuchregistrationstatementiswithdrawn)allsharesissuableuponconversionofthisNote.Failuretodosowillresultinliquidateddamagesof25%oftheoutstandingprincipalbalanceofthisNote,butnotlessthan$25,000,beingimmediatelydueandpayabletotheInvestoratitselectionintheformofcashpaymentoradditiontothebalanceofthisNote.
| 6. | ThisSection6intentionallyleftblank |
7. Default.ThefollowingareeventsofdefaultunderthisNote:(i)theIssuershallfailtopayanyprincipalundertheNotewhendueand payable(orpayablebyconversion) thereunder;or(ii)theIssuershallfailtopay anyinterestoranyotheramountundertheNote
whendueandpayable(orpayablebyconversion)thereunder;or(iii)areceiver,trusteeorothersimilarofficialshallbeappointedovertheIssueroramaterialpartofitsassetsandsuchappointmentshallremainuncontestedfortwenty(20)daysorshallnotbedismissedordischargedwithinsixty(60)days;or(iv)theIssuershallbecomeinsolventorgenerallyfailstopay,oradmitsinwritingitsinabilitytopay,itsdebtsastheybecomedue,subjecttoapplicablegraceperiods,ifany;or(v)theIssuershallmakeageneralassignmentforthebenefitofcreditors;or(vi)theIssuershallfileapetitionforreliefunderanybankruptcy,insolvencyorsimilarlaw(domesticor foreign);or(vii)aninvoluntaryproceedingshallbecommencedorfiledagainstthe Issuer;or(viii)theIssuershallloseitsstatusas“DTC Eligible” or the Issuer’s shareholders shall lose the ability to deposit (either electronically or by physical certificates, or otherwise)sharesintotheDTC System;or(ix)theIssuershallbecomedelinquentinitsfilingrequirementsasafully-reportingissuerregisteredwiththeSEC;or(x)the Issuershallfailtomeetallrequirementstosatisfythe availabilityofRule144 totheInvestororits assigns including but not limited to timely fulfillment of its filing requirements as a fully-reporting issuer registered with theSEC, requirements forXBRL filings, and requirements for disclosure of financial statements on its website.
8. Remedies.In theeventofany default,theoutstanding principalamountofthisNote,plusaccrued butunpaid interest,liquidateddamages,feesandotheramountsowinginrespectthereofthroughthedateofacceleration,shallbecome,attheInvestor’selection,immediatelydueandpayableincashattheMandatoryDefaultAmount.TheMandatoryDefaultAmountmeansthegreaterof(i)theoutstandingprincipalamountofthisNote,plusallaccruedandunpaidinterest,liquidateddamages,feesandotheramountshereon,dividedbytheConversion Priceonthe datetheMandatory DefaultAmountiseitherdemanded orpaidinfull,whicheverhas alowerConversionPrice,multipliedbythe VWAPonthedatetheMandatoryDefault Amount iseither demandedorpaidinfull,whicheverhasa higherVWAP,or (ii) 150% of theoutstanding principalamountofthis Note,plus100% of accruedand unpaid interest, liquidateddamages, fees and other amounts hereon.Commencing five (5) days after the occurrence of any event of defaultthat results in the eventual acceleration of thisNote, the interest rate on thisNote shallaccrue at an interest rate equalto thelesser of 18% perannum orthemaximum rate permitted under applicable law. In connection with such acceleration described herein,the Investor neednotprovide,and theIssuerherebywaives,anypresentment,demand,protestorothernoticeofanykind,andtheInvestormay immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies availabletoitunderapplicablelaw. SuchaccelerationmayberescindedandannulledbytheInvestoratanytimepriortopaymenthereunderand the Investorshallhave allrights as a holder of the note untilsuch time,if any,as theInvestorreceives fullpayment pursuant to this Section 8.No such rescission or annulment shall affect any subsequent event of default or impair any right consequent thereon. Nothing herein shall limit the Investor’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specificperformance and/or injunctive relief with respect to the Issuer’s failure to timely deliver certificates representing shares ofCommon Stock upon conversion of the Note asrequired pursuant to the terms hereof.
| 9. | NoShorting.TheInvestoragreesthatsolongasthisNotefromtheIssuertotheInvestorremainsoutstanding,theInvestorwillnotenterintooreffect“shortsales”oftheCommonStockorhedgingtransactionwhichestablishesanetshortpositionwithrespecttotheCommonStockoftheIssuer.TheIssueracknowledgesandagreesthatupondeliveryofaconversionnoticebytheInvestor,theInvestorimmediatelyownsthesharesofCommonStockdescribedintheconversionnoticeandanysaleofthosesharesissuableunder such conversion notice would not be considered short sales. |
10. Assignability.TheIssuermaynotassignthisNote.ThisNotewillbebindingupontheIssueranditssuccessorsandwillinuretothebenefitoftheInvestoranditssuccessorsandassignsandmaybeassignedbytheInvestortoanyonewithouttheIssuer’sapproval.
11. GoverningLaw.ThisNotewillbegovernedby,andconstruedandenforcedinaccordancewith,thelawsoftheStateofNevada,withoutregardtotheconflictoflawsprinciplesthereof.AnyactionbroughtbyeitherpartyagainsttheotherconcerningthetransactionscontemplatedbythisAgreementshallbebroughtonlyinthestatecourtsofFloridaorinthefederalcourtslocatedinMiami-DadeCounty,inthe StateofFlorida.Bothparties andtheindividuals signingthisAgreementagree tosubmitto the jurisdiction of such courts.
12. DeliveryofProcessbytheInvestorto theIssuer.IntheeventofanyactionorproceedingbytheInvestoragainsttheIssuer,andonlybytheInvestoragainsttheIssuer,serviceofcopiesofsummonsand/orcomplaintand/oranyotherprocesswhichmaybeservedinanysuchactionorproceedingmaybemadebytheInvestorviaU.S.Mail,overnightdeliveryservicesuchasFedExorUPS,email,fax,orprocess server, orby mailing or otherwise delivering a copyofsuch process totheIssueratitslastknown attorney assetforthinitsmostrecentSECfiling.
13. AttorneyFees.Ifanyattorneyisemployedbyeitherpartywithregardtoanylegalorequitableaction,arbitrationorotherproceedingbroughtbysuchpartyforenforcementofthisNoteorbecauseofanallegeddispute,breach,defaultormisrepresentationinconnectionwithanyoftheprovisionsofthisNote,theprevailingpartywillbeentitledtorecoverfromtheotherpartyreasonableattorneys'feesandothercostsandexpensesincurred,inadditiontoanyotherrelieftowhichtheprevailingpartymaybeentitled.
| 14. | OpinionofCounsel.IntheeventthatanopinionofcounselisneededforanymatterrelatedtothisNote,theInvestorhastherighttohaveanysuchopinionprovidedbyitscounsel.InvestoralsohastherighttohaveanysuchopinionprovidedbyIssuer’scounsel. |
15. Notices.Anynoticerequiredorpermittedhereunder(includingConversionNotices)mustbeinwritingandeitherpersonallyserved,sentbyfacsimileoremailtransmission,orsentbyovernightcourier.Noticeswillbedeemedeffectivelydeliveredatthetimeoftransmissionifbyfacsimileoremail,andifbyovernightcourierthebusinessdayaftersuchnoticeisdepositedwiththecourierservice for delivery.
[SignaturePagetoFollow]
Issuer: Investor:
GregHalpern
MaxSoundCorporationChiefFinancialOfficer
Date:03/10/15
JMJFinancial
ItsPrincipal
Date:
[SignaturePageto$500,000ConvertibleNote]
