THISNOTEANDTHECOMMONSTOCKISSUABLEUPONCONVERSIONOFTHISNOTEHAVENOTBEENANDWILLNOTBEREGISTEREDWITHTHEUNITEDSTATESSECURITIESANDEXCHANGECOMMISSIONORTHESECURITIESCOMMISSIONOFANYSTATEPURSUANTTOANEXEMPTIONFROMREGISTRATION PROVIDEDUNDER THESECURITIESACT OF1933,ASAMENDED,ANDTHE RULES AND REGULATIONSPROMULGATED THEREUNDER (THE"1933 ACT”)
$2,000,000.00
MAXSOUNDCORPORATION
8%CONVERTIBLEREDEEMABLENOTEDUEMARCH25, 2017
FORVALUERECEIVED,MaxSoundCorporation.(the“Company”)promisestopaytotheorderofTheVecheryFamilyTrustanditsauthorizedsuccessorsandpermittedassigns("Holder"), the aggregateprincipalface amount of up to twomillion dollars (U.S. $2,000,000.00) onMarch 25,2017 ("MaturityDate") andto payinterest on theprincipalamountoutstanding hereunder at therate of 8% per annum commencingonMarch 25,
2016.Holderwillfund$870,000on3-25-16,butbynomeanslaterthan3-30-16,whichalong withthe$130,000alreadyfunded,willtotal$1,000,000.AtHolder’soption,hemayfundthe2nd
$1,000,000andaddittothisNote.TheinterestwillbepaidtotheHolderinwhosenamethisNoteisregisteredontherecordsoftheCompanyregardingregistrationandtransfersofthisNote.Theprincipalof,andintereston,thisNotearepayabletotheHolder,initially,andifchanged, last appearing on the records of the Company asdesignatedinwritingbytheHolderhereof from time to time. The Company will pay each interest payment and the outstandingprincipaldueuponthisNote beforeorontheMaturityDate, less any amounts required by lawtobededucted orwithheld,to theHolder of thisNoteby check orwire transfer addressed tosuchHolderatthelastaddressappearingontherecordsofthe Company. The forwarding ofsuch check orwire transfer shall constitute a payment of outstanding principal hereunder andshallsatisfy and discharge the liability for principal on thisNote to the extentof thesumrepresentedbysuch check orwire transfer. Interestshall be payable in CommonStock (as defined below) pursuant to paragraph 4(b) herein.
ThisNoteissubjecttothefollowingadditionalprovisions:
1. ThisNoteisexchangeableforanequalaggregateprincipalamountofNotesofdifferentauthorizeddenominations,asrequestedbytheHoldersurrenderingthesame.Noservicechargewillbemadeforsuchregistrationortransferorexchange,exceptthatHoldershallpayanytaxorothergovernmentalchargespayableinconnection therewith.
2. TheCompanyshallbeentitledtowithholdfromallpaymentsanyamountsrequiredtobewithheldunderapplicablelaws.
3. ThisNotemaybetransferredorexchangedonlyincompliancewiththeSecuritiesActof1933,asamended("Act")andapplicablestatesecuritieslaws.Anyattemptedtransfertoanon-qualifyingpartyshallbetreatedbytheCompanyasvoid.PriortoduepresentmentfortransferofthisNote,theCompanyandanyagentoftheCompanymaytreatthepersoninwhose name thisNote is duly registered on the Company's records as the owner hereoffor all other purposes,whether or not thisNote be overdue, andneither the Company noranysuch agentshall beaffectedor bound bynoticeto the contrary.AnyHolder of thisNoteelectingto exercisethe right of conversionsetforth inSection4(a) hereof, in addition totherequirementsset forth inSection 4(a), and any prospective transferee of thisNote, also isrequired togivetheCompanywrittenconfirmationthatthisNoteisbeingconverted("NoticeofConversion")inthe form annexed hereto asExhibitA. The date of receipt (including receiptby telecopy) ofsuchNotice of Conversionshall be the ConversionDate.
4. (a)TheHolderofthisNoteisentitled,atitsoption,toconvertalloranyamountoftheprincipalfaceamountofthisNotethenoutstandingintosharesoftheCompany'scommonstock(the"CommonStock")withoutrestrictivelegendofanynature,ataprice("ConversionPrice")for eachshare of CommonStockequalto65% of theaverage of the three lowest dailyVWAP'swith a 10 day lookback ofthe CommonStockasreported on theNational QuotationsBureauOTCQBexchangewhichthe Company’sshares are traded oranyexchange uponwhich the CommonStock may be traded in the future ("Exchange"), includingtheday uponwhich aNotice of Conversion is receivedby the Company (providedsuchNotice of Conversion is delivered by fax, email or other electronic method ofcommunication totheCompany after 4P.M. EasternStandard orDaylightSavings Time if theHolderwishes to include thesame day closing price). If theshares have not been deliveredwithin 3business days, theNotice of Conversion may berescinded.Such conversionshall beeffectuated by the Companydelivering theshares of CommonStock to theHolderwithin 3business days of receipt by the Company of theNotice of Conversion.Once theHolder has receivedsuchshares ofCommonStock, theHoldershallsurrender thisNote to theCompany,executed bytheHolderevidencingsuchHolder'sintentiontoconvertthisNoteor aspecified portion hereof, and accompanied by properassignmenthereof in blank.Accrued, but unpaidinterestshall besubject to conversion.No fractionalshares orscrip representing fractions ofshareswillbe issued on conversion, but thenumber ofshares issuableshall be rounded to thenearestwholeshare.
(b) InterestonanyunpaidprincipalbalanceofthisNoteshallbepaidattherateof8%perannum.InterestshallbepaidbytheCompanyinCommonStock("InterestShares").Holdermay,atanytime,sendinaNoticeofConversiontotheCompanyforInterestSharesbasedontheformulaprovidedinSection 4(a)above. The dollar amountconverted into
2
InterestSharesshallbealloraportionoftheaccruedinterestcalculatedontheunpaidprincipalbalanceofthisNotetothedateofsuchnotice.
(c) DuringthefirstsixmonthsthisNoteisineffect,theCompanyatitsoptionmayredeemthisNotebypayingtotheHolderanamountasfollows:(i)iftheredemptioniswithinthefirst90daysthisNoteisineffect,thenforanamountequalto130%oftheunpaidprincipalamountofthisNotealongwithanyinterestthathasaccruedduringthatperiod,(ii)iftheredemption is after the90thday thisNoteis in effect, but lessthan the181stday thisNoteisin effect, then foran amount equal to2,0% ofthe unpaidprincipalamount ofthisNote alongwithany accrued interest. This Notemay not be redeemedby the Company after180 days. Theredemption must be closed and paid forwithin 3 business days of the Companysending theredemption demand or the redemptionwill be invalid and the Company may not redeem thisNote.
(d) Upon(i)atransferofallorsubstantiallyalloftheassetsoftheCompanytoanypersonina singletransactionor seriesofrelatedtransactions,(ii)a reclassification,capitalreorganizationorotherchangeorexchangeofoutstandingsharesoftheCommonStock,otherthanaforwardorreversestocksplitorstockdividend,or(iii)anyconsolidationormergeroftheCompanywith or into another person or entity inwhich the Company is not thesurviving entity(otherthanamergerwhichiseffectedsolelytochangethejurisdictionofincorporationoftheCompany and results in a reclassification, conversion or exchange of outstandingshares ofCommonStocksolely intoshares of CommonStock) (each of items (i), (ii) and (iii) beingreferred to as a"Sale Event"), then, in each case, the Companyshall, upon request of theHolder,redeem thisNote in cash for 150% of the principal amount, plus accrued but unpaidinterest through thedateofredemption,or attheelectionoftheHolder,suchHoldermayconverttheunpaid principal amount of thisNote (togetherwith the amount of accrued but unpaid interest)intoshares of CommonStock immediately prior tosuchSale Event at the ConversionPrice.
(e) IncaseofanySaleEvent(nottoincludeasale ofallorsubstantiallyalloftheCompany’sassets)inconnectionwithwhichthisNoteisnotredeemedorconverted,theCompanyshallcauseeffectiveprovisiontobemadesothattheHolderofthisNoteshallhavetherightthereafter,byconvertingthisNote,topurchaseorconvertthisNoteintothekindandnumberofsharesofstockorothersecuritiesorproperty(includingcash)receivableuponsuchreclassification,capitalreorganizationorotherchange, consolidationormergerbyaholderof the number ofshares of CommonStock that could have been purchased upon exercise of theNote andatthesame ConversionPrice, asdefinedinthisNote,immediately priortosuchSaleEvent. The foregoing provisionsshallsimilarly apply tosuccessiveSale Events. If theconsiderationreceivedbytheholdersofCommonStockisotherthan cash,thevalueshallbeasdetermined by the Board ofDirectors of the Company orsuccessor person or entity acting ingood faith.
5. NoprovisionofthisNoteshallalterorimpairtheobligationoftheCompany,whichisabsoluteandunconditional,topaytheprincipalof,andintereston,thisNoteatthetime,place,andrate,andintheform,hereinprescribed.
TheCompanyherebyexpresslywaivesdemandandpresentmentforpayment,noticeofnon-payment,protest,noticeofprotest,noticeofdishonor,noticeofaccelerationorintentto accelerate,anddiligence in taking any action tocollectamounts calledfor hereunderandshallbedirectlyandprimarilyliableforthepaymentofallsumsowingandtobeowinghereto.
6. TheCompanyagreestopayallcostsandexpenses,includingreasonable attorneys'feesandexpenses,whichmaybeincurredbytheHolderincollectinganyamountdueunderthisNote.
| 7. | Ifoneormoreofthefollowingdescribed"EventsofDefault"shalloccur: |
(a) TheCompanyshalldefaultinthepaymentofprincipalorinterestonthisNoteoranyothernoteissuedtotheHolderbytheCompany;or
(b) AnyoftherepresentationsorwarrantiesmadebytheCompanyhereinorinanycertificateorfinancialorotherwrittenstatementsheretoforeorhereafterfurnishedbyoronbehalfoftheCompanyinconnectionwiththeexecutionanddeliveryofthisNote,ortheSecuritiesPurchaseAgreementunderwhichthisnotewasissuedshallbefalseormisleadinginanyrespect;or
(c) TheCompanyshallfailtoperformorobserve,inanyrespect,anycovenant,term, provision,condition, agreementor obligationof theCompany underthisNoteoranyothernoteissuedtotheHolder;or
(d) TheCompanyshall(1)becomeinsolvent;(2)admitinwritingitsinabilitytopayitsdebtsgenerallyastheymature;(3)makeanassignmentforthebenefitofcreditorsor commenceproceedingsforitsdissolution;(4)applyfororconsenttotheappointmentofatrustee,liquidatororreceiver foritsorfor asubstantialpartof itspropertyor business;(5)file a petition for bankruptcy relief, consent to the filing ofsuch petition or havefiled against it aninvoluntary petition for bankruptcy relief, all under federal orstate laws as applicable; or
(e) Atrustee,liquidatororreceivershallbeappointedfortheCompanyorforasubstantialpartofitspropertyorbusinesswithoutitsconsentandshallnotbedischargedwithinsixty(60)daysaftersuchappointment;or
(f) AnygovernmentalagencyoranycourtofcompetentjurisdictionattheinstanceofanygovernmentalagencyshallassumecustodyorcontrolofthewholeoranysubstantialportionofthepropertiesorassetsoftheCompany;or
(g) Oneormoremoneyjudgments,writsorwarrantsofattachment,orsimilarprocess,inexcessoffiftythousanddollars($50,000)intheaggregate,shallbeenteredorfiledagainsttheCompanyoranyofitspropertiesorotherassetsandshallremainunpaid,unvacated,unbonded orunstayed foraperiod offifteen (15)daysor inany eventlaterthanfive(5)days prior to the date of any proposedsalethereunder; or
(h) TheCompanyshallhavedefaultedonorbreachedanytermofanyothernoteofsimilardebtinstrumentintowhichtheCompanyhasenteredandfailedtocuresuchde
faultwithintheappropriategraceperiod;or
(i) TheCompanyshallhaveitsCommonStockdelistedfromanexchange(includingtheOTCQBexchange)or,iftheCommonStocktradesonanexchange,thentradingintheCommonStockshallbesuspendedformorethan10consecutivedays;
(j) IfamajorityofthemembersoftheBoardofDirectorsoftheCompanyonthedatehereofarenolongerservingasmembersoftheBoard;
(k) TheCompanyshallnotdelivertotheHoldertheCommonStockpursuanttoparagraph4hereinwithoutrestrictivelegendwithin3businessdaysofitsreceiptofaNoticeofConversion;or
Then,oratanytimethereafter,unlesscured,andineachandeverysuchcase,unlesssuchEventofDefaultshallhavebeenwaivedinwritingby theHolder(whichwaivershallnotbedeemedtobeawaiverofanysubsequentdefault)attheoptionoftheHolderandintheHolder'ssolediscretion,theHolder may considerthisNoteimmediatelydueandpayable,without presentment,demand, protest or (further) notice of any kind (other than notice of acceleration), all ofwhich are hereby expresslywaived, anythinghereinorinany noteorotherinstrumentscontained tothe contrarynotwithstanding,andtheHoldermayimmediately,andwithout expiration of any period of grace, enforce any and all of theHolder's rights and remedies provided herein or any other rights or remedies afforded by law.Upon an Event ofDefault, interestshall accrue at a defaultinterestrateof 16%perannum or,ifsuchrateis usurious ornotpermitted by current law, then at the highest rate of interest permitted by law. In the event of a breach ofSection 8(k) the penaltyshall be $250 per day theshares are not issued beginning onthe4thdayaftertheconversionnoticewas delivered to the Company. This penaltyshall increase to $500 per day beginningon the
10thday.
IftheHoldershallcommenceanactionorproceedingtoenforceanyprovisionsofthisNote,including,withoutlimitation,engaginganattorney,theniftheHolderprevailsinsuchaction,theHoldershallbereimbursedbytheCompanyforitsattorneys’feesandothercostsandexpensesincurredintheinvestigation,preparationandprosecutionofsuchactionorproceeding.
8. IncaseanyprovisionofthisNoteisheldbyacourtofcompetentjurisdictiontobeexcessiveinscopeorotherwiseinvalidorunenforceable,suchprovisionshallbeadjustedratherthanvoided,ifpossible,sothatitisenforceabletothemaximumextentpossible,andthevalidityandenforceabilityoftheremainingprovisionsofthisNotewillnotin anyway be affected or impaired thereby.
9. NeitherthisNotenoranytermhereofmaybeamended,waived,dischargedorterminatedotherthanbyawritteninstrumentsignedbytheCompanyandtheHolder.
TheCompanyrepresentsthatitisnota“shell”issuerandhasneverbeena“shell”issuerorthatif itpreviouslyhasbeena“shell”issuerthatatleast12monthshavepassedsincetheCompanyhas
reportedform10typeinformationindicatingitisnolongera“shellissuer.Further.TheCompanywillinstructitscounseltoeither(i)writea144-3(a(9)opiniontoallowforsalabilityoftheconversionsharesor(ii)acceptsuchopinionfromHolder’scounsel.
1. TheCompanywillgivetheHolderdirectnoticeofanycorporateactions,includingbutnotlimitedtonamechanges,stocksplits,recapitalizationsetc.ThisnoticeshallbegiventotheHolderassoonaspossibleunderlaw.
2. ThisNoteshallbegovernedbyandconstruedinaccordancewiththeLawsofDelawareapplicabletocontractsmadeandwhollytobeperformedwithintheStateofCaliforniaCountyofSanDiegoandshallbebindinguponthesuccessorsandassignsofeachpartyhereto.TheHolderandtheCompanyherebymutuallywaivetrialbyjuryandconsenttoexclusive jurisdiction and venueinthe courts of theState of CaliforniaCounty ofSan Diego.This Agreement may be executed in counterparts, andthefacsimile transmissionof an executedcounterpart to thisAgreementshall be effective as an original.
INWITNESSWHEREOF,theCompanyhascausedthisNotetobedulyexecutedbyanofficerthereuntodulyauthorized.
Dated:March25,2016
MAXSOUNDCORPORATION
| By: | GregHalpern-Chairman&CFO |
EXHIBITA
NOTICEOFCONVERSION
(TobeExecutedbytheRegisteredHolderinordertoConverttheNote)
Theundersignedherebyirrevocablyelectstoconvert$oftheaboveNoteintoSharesofCommonStockofMaxSoundCorporation.(“Shares”)accordingtotheconditionssetforthinsuchNote,asofthedatewrittenbelow.
IfSharesaretobeissuedinthenameofapersonotherthantheundersigned,theundersignedwillpayalltransferandothertaxesandchargespayablewithrespectthereto.
Dateof Conversion:ApplicableConversionPrice:
| Signature: | [PrintNameofHolderandTitleofSigner] |
Address:
SSNorEIN:
Sharesaretoberegisteredinthefollowingname:
Name:Address:Tel:Fax:SSNorEIN:
Sharesaretobesentordeliveredtothefollowingaccount:
AccountName:Address:
