THISNOTEANDTHECOMMONSTOCKISSUABLEUPONCONVERSIONOFTHISNOTEHAVENOTBEENANDWILLNOTBEREGISTEREDWITHTHEUNITEDSTATESSECURITIESANDEXCHANGECOMMISSIONORTHESECURITIESCOMMISSIONOFANYSTATEPURSUANTTOAN EXEMPTION FROMREGISTRATIONPROVIDEDUNDER THESECURITIESACT OF1933,ASAMENDED,ANDTHERULES AND REGULATIONSPROMULGATED THEREUNDER(THE"1933 ACT”)
US $1,000,000.00
MAXSOUNDCORPORATION
8%CONVERTIBLEREDEEMABLENOTEDUEOCTOBER7,2016
FORVALUERECEIVED,MaxSoundCorporation.(the“Company”)promisestopaytotheorderofTHEVECHERYFAMILYTRUSTanditsauthorizedsuccessorsandpermittedassigns("Holder"),theaggregateprincipalfaceamountofOneMillionDollarsexactly(U.S.
$1,000,000.00)on October 7,2016("MaturityDate")and topayinterestonthe principalamountoutstandinghereunderattherateof8%perannumcommencingonOctober7,2015.TheinterestwillbepaidtotheHolderinwhosenamethisNoteisregisteredontherecordsoftheCompanyregardingregistrationandtransfersofthisNote.Theprincipalof,andintereston,thisNotearepayabletotheHolder,initially,andifchanged,lastappearingontherecordsoftheCompanyasdesignatedinwriting by the Holder hereoffrom timeto time.TheCompanywill pay each inter- estpayment andthe outstandingprincipal due uponthisNotebefore or ontheMaturityDate,lessanyamountsrequiredbylawtobedeductedorwithheld,totheHolderofthisNotebycheck orwire transfer addressed tosuchHolder at the last address appearing on the records of the Company. Theforwardingof suchcheckor wiretransfer shall constituteapaymentofoutstand- ing principal hereunder andshallsatisfy and discharge the liability for principal onthisNote to the extent of thesum represented bysuch check orwire transfer. Interestshall be payable inCommonStock (as defined below) pursuant to paragraph 4(b) herein.
ThisNoteissubjecttothefollowingadditionalprovisions:
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,whetherornotthisNotebeoverdue,andneithertheCompanynoranysuch agentshallbeaffectedorboundbynoticetothecontrary.AnyHolderofthisNoteelectingto exercisetherightofconversionsetforthinSection4(a)hereof,inadditiontotherequirements setforthinSection4(a),andanyprospectivetransfereeofthisNote,alsoisrequiredtogivethe CompanywrittenconfirmationthatthisNoteisbeingconverted("NoticeofConversion")inthe formannexedheretoasExhibitA.Thedateofreceipt(including receiptbytelecopy)ofsuch Notice of Conversion shall be the Conversion Date.
4. (a)TheHolderofthisNoteisentitled,atitsoption,toconvertallor anyamountoftheprincipalfaceamountofthisNotethenoutstandingintosharesoftheCompa- ny'scommonstock(the"CommonStock")withoutrestrictivelegendofanynature,ataprice ("ConversionPrice")foreachshareofCommonStockequalto65%oftheaverageofthethree
(3) lowestdailyVWAP'switha10daylookbackoftheCommonStockasreportedontheNa- tionalQuotationsBureauOTCQBexchangewhichtheCompany’ssharesaretradedoranyex- changeuponwhichtheCommonStockmaybetradedinthefuture("Exchange"),includingthe dayuponwhichaNoticeofConversionisreceivedbytheCompany(providedsuchNoticeof Conversionisdeliveredbyfax,emailorotherelectronicmethodofcommunicationtotheCom- panyafter4P.M.EasternStandardorDaylightSavingsTimeiftheHolderwishestoincludethe samedayclosingprice).Iftheshareshavenotbeendeliveredwithin3businessdays,theNotice of Conversionmayberescinded.Suchconversionshallbe effectuatedbytheCompanydeliver- ing the shares of Common Stock to the Holder within 3 business days of receipt by the Company oftheNoticeofConversion.OncetheHolderhasreceivedsuchsharesofCommonStock,the HoldershallsurrenderthisNotetotheCompany,executedbytheHolderevidencingsuchHold- er'sintentiontoconvertthisNoteoraspecifiedportionhereof,andaccompaniedbyproperas- signment hereofinblank. Accrued,butunpaidinterest shallbesubjecttoconversion. No frac- tionalshares or scrip representingfractions of shares willbe issued on conversion, butthe num- ber of shares issuable shall be rounded tothe nearest whole share.
(b) InterestonanyunpaidprincipalbalanceofthisNoteshallbepaidatthe rateof8%perannum.InterestshallbepaidbytheCompanyinCommonStock("Interest Shares").Holdermay,atanytime,sendinaNoticeofConversiontotheCompanyforInterest SharesbasedontheformulaprovidedinSection4(a)above.Thedollaramountconvertedinto
InterestSharesshallbealloraportionoftheaccruedinterestcalculatedontheunpaidprincipal balanceofthisNotetothedateofsuchnotice.
(c) DuringthefirstsixmonthsthisNoteisineffect,theCompanyatitsoption mayredeemthisNotebypayingtotheHolderanamountasfollows:(i)iftheredemptionis withinthefirst90daysthisNoteisineffect,thenforanamountequalto130%oftheunpaid
principalamountofthisNotealongwithanyinterestthathasaccruedduringthatperiod,(ii)if theredemptionisafterthe90thdaythisNoteisineffect,butlessthanthe181stdaythisNoteis ineffect,thenforanamountequalto140%oftheunpaidprincipalamountofthisNotealong withanyaccruedinterest.ThisNotemaynotberedeemedbytheCompanyafter180days.The
redemptionmustbeclosedandpaidforwithin3businessdaysoftheCompanysendingthere- demptiondemandortheredemptionwillbeinvalidandtheCompanymaynotredeemthisNote.
(d) Upon(i)atransferofallorsubstantiallyalloftheassetsoftheCompany toanypersoninasingletransactionorseriesofrelatedtransactions,(ii)areclassification,capital reorganizationorotherchangeorexchangeofoutstandingsharesoftheCommonStock,other thanaforwardorreversestocksplitorstockdividend,or(iii)anyconsolidationormergerofthe CompanywithorintoanotherpersonorentityinwhichtheCompanyisnotthesurvivingentity (otherthanamergerwhichiseffectedsolelytochangethejurisdictionofincorporationofthe 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,consolidationormergerbyaholderof 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 (includingtheOTCQBexchange)or,iftheCommonStocktradesonanexchange,thentrading intheCommonStockshallbesuspendedformorethan10consecutivedays;
(j) IfamajorityofthemembersoftheBoardofDirectorsoftheCompanyon thedatehereofarenolongerservingasmembersoftheBoard;
(k) TheCompanyshallnotdelivertotheHoldertheCommonStockpursuant toparagraph4hereinwithoutrestrictivelegendwithin3businessdaysofitsreceiptofaNotice ofConversion;or
Then,oratanytimethereafter,unlesscured,andineachandeverysuchcase,unlesssuchEvent of DefaultshallhavebeenwaivedinwritingbytheHolder(whichwaivershallnotbedeemed to beawaiverofanysubsequentdefault)attheoptionoftheHolderandintheHolder'ssolediscre- tion,theHoldermayconsiderthisNoteimmediatelydueandpayable,withoutpresentment,de- mand,protestor(further)noticeofanykind(otherthannoticeofacceleration),allofwhichare herebyexpresslywaived,anythinghereinorinanynoteorotherinstrumentscontainedtothe contrarynotwithstanding,andtheHoldermayimmediately,andwithoutexpirationofanyperiod ofgrace,enforceanyandalloftheHolder'srightsandremediesprovidedhereinoranyother rightsorremediesaffordedbylaw.UponanEventofDefault,interestshallaccrueatadefault interestrateof 16%perannumor,if suchrateisusuriousornotpermittedbycurrentlaw,thenat thehighestrateofinterestpermittedbylaw.IntheeventofabreachofSection8(k)thepenalty
shallbe$250perdaythesharesarenotissuedbeginningonthe4thdayaftertheconversionno- tice wasdelivered totheCompany.This penaltyshall increaseto$500 perday beginningonthe
10thday.
IftheHoldershallcommenceanactionorproceedingtoenforceanyprovisionsofthisNote,in- cluding,withoutlimitation,engaginganattorney,theniftheHolderprevailsinsuchaction,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. TheCompanywillgivetheHolderdirectnoticeofanycorporateactions, includingbutnotlimitedtonamechanges,stocksplits,recapitalizationsetc.Thisnoticeshallbe giventotheHolderassoonaspossibleunderlaw.
13. ThisNoteshallbegovernedbyandconstruedinaccordancewiththe LawsofDelawareapplicabletocontractsmadeandwhollytobeperformedwithintheStateof CaliforniaCountyofSanDiegoandshallbebindinguponthesuccessorsandassignsofeach partyhereto.TheHolderandtheCompanyherebymutuallywaivetrialbyjuryandconsentto exclusivejurisdictionandvenueinthecourtsoftheStateofCaliforniaCountyofSanDiego. ThisAgreementmaybeexecutedincounterparts,andthefacsimiletransmissionofanexecuted counterparttothisAgreementshallbeeffectiveasanoriginal.
INWITNESSWHEREOF,theCompanyhascausedthisNotetobedulyexecut- edbyanofficerthereuntodulyauthorized.
Dated:October7,2015
MAXSOUNDCORPORATION
| By: | GregHalpern-Chairman&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:
