THISNOTEANDTHECOMMONSTOCKISSUABLEUPONCONVERSIONOFTHISNOTEHAVENOTBEENANDWILLNOTBEREGISTEREDWITHTHEUNITEDSTATESSECURITIESANDEXCHANGECOMMISSIONORTHESECURITIESCOMMISSIONOFANYSTATEPURSUANTTOAN EXEMPTION FROMREGISTRATIONPROVIDEDUNDER THESECURITIESACT OF1933,ASAMENDED,ANDTHERULES AND REGULATIONSPROMULGATED THEREUNDER(THE"1933 ACT”)
US $50,000.00
MAXSOUND CORPORATION
8%CONVERTIBLEREDEEMABLENOTEDUE MARCH 10, 2016
FORVALUERECEIVED,MaxSoundCorporation.(the“Company”)promisestopaytotheorderofTheVecheryGrandchildren’sTrustDTD12/26/12,HarveyTVechery,Trustee,LindaVechery,FBOScarlettWynnVecheryU.S.$25,000.00andTheVecheryGrandchildren’sTrustDTD12/26/12,HarveyTVechery,Trustee,LindaVechery,FBOMaxwellBardoVecheryU.S. $25,000.00and its authorizedsuccessors and permitted assigns ("Holder"), the aggregate principal face amount of Fifty ThousandDollarsexactly (U.S.
$50,000.00)onMarch10,2017("MaturityDate")andtopayinterestontheprincipalamountoutstandinghereunderattherateof8% perannumcommencingonMarch10, 2016.TheinterestwillbepaidtotheHolderinwhosenamethisNoteisregisteredontherecordsoftheCompanyregardingregistrationandtransfersofthisNote.Theprincipalof,andintereston,thisNotearepayabletotheHolder,initially,andifchanged,lastappearingontherecords oftheCompanyasdesignatedinwriting bytheHolder hereoffrom timetotime. TheCompanywill payeachinter-estpaymentandtheoutstandingprincipaldueuponthisNotebeforeorontheMaturityDate,less any amountsrequiredbylaw tobedeductedor withheld,totheHolderofthisNotebycheckorwire transfer addressed tosuchHolder at the last address appearing on the records of theCompany. Theforwardingofsuch checkor wiretransfer shallconstituteapaymentofoutstand-ing principal hereunder andshallsatisfy and discharge the liability for principal on thisNote totheextentofthesumrepresentedbysuchcheckorwiretransfer. InterestshallbepayableinCommonStock (as defined below) pursuant to paragraph 4(b) herein.
ThisNoteissubjecttothefollowingadditionalprovisions:
1. ThisNoteisexchangeableforanequalaggregateprincipalamountofNotesofdifferentauthorizeddenominations,asrequestedbytheHoldersurrenderingthesame.Noservicechargewillbemadeforsuchregistrationortransferorexchange,exceptthatHoldershallpayanytaxorothergovernmentalchargespayableinconnectiontherewith.
2. TheCompanyshallbeentitledtowithholdfromallpaymentsanyamountsrequiredtobewithheldunderapplicablelaws.
3. ThisNotemaybetransferredorexchangedonlyincompliancewiththeSecuritiesActof1933,asamended("Act")andapplicablestatesecuritieslaws.Anyattemptedtransfertoanon-qualifyingpartyshallbetreatedbytheCompanyasvoid.Priortoduepresent-mentfortransferofthisNote,theCompanyandanyagentoftheCompanymaytreatthepersoninwhosenamethisNoteisdulyregisteredontheCompany'srecordsastheownerhereofforallotherpurposes,whetherornotthisNotebeoverdue,andneithertheCompanynoranysuch agentshall be affected or bound by notice to the contrary.AnyHolder of thisNote electing to exercise the right of conversionset forth inSection 4(a) hereof, in addition to the requirementssetforth inSection4(a),and any prospective transfereeof thisNote, alsois required to givethe CompanywrittenconfirmationthatthisNoteisbeingconverted("NoticeofConversion")inthe formannexedheretoasExhibitA.Thedateofreceipt(includingreceiptbytelecopy)ofsuchNotice of Conversionshall be the ConversionDate.
4. (a)TheHolderofthisNoteisentitled,atitsoption,toconvertallorany amount oftheprincipalfaceamount ofthisNotethen outstandingintosharesof theCompa-ny'scommonstock(the"CommonStock")withoutrestrictivelegendofanynature,ataprice("ConversionPrice")foreachshareofCommonStockequalto65%oftheaverageofthethree
(3) lowestdailyVWAP'switha10daylookbackoftheCommonStockasreportedontheNa-tionalQuotationsBureauOTCQBexchangewhichtheCompany’ssharesaretradedoranyex-changeuponwhichtheCommonStockmaybetradedinthefuture("Exchange"),includingthedayuponwhichaNoticeofConversionisreceivedbytheCompany(providedsuchNoticeofConversion is delivered by fax, email or other electronic method of communication to theCom-pany after 4P.M. EasternStandard orDaylightSavings Time if theHolderwishes to include thesame day closing price). If theshares have not been deliveredwithin 3 business days, theNoticeof Conversionmayberescinded.Suchconversionshallbeeffectuated bytheCompanydeliver- ingthe shares ofCommon Stock tothe Holderwithin 3businessdaysofreceipt bytheCompanyoftheNoticeofConversion.OncetheHolder hasreceivedsuchshares ofCommonStock, theHoldershallsurrender thisNote to the Company, executed by theHolder evidencingsuchHold- er'sintentiontoconvertthisNoteoraspecifiedportionhereof,andaccompaniedbyproperas-signment hereof in blank.Accrued, but unpaidinterestshall besubject to conversion.No frac- tionalsharesorscriprepresentingfractionsofshareswillbeissued onconversion,but thenum- ber ofshares issuableshall be rounded to the nearestwholeshare.
(b) InterestonanyunpaidprincipalbalanceofthisNoteshallbepaidattherateof8%perannum.InterestshallbepaidbytheCompanyinCommonStock("InterestShares").Holdermay,atanytime,sendinaNoticeofConversiontotheCompanyforInterestSharesbasedontheformulaprovidedinSection4(a)above.Thedollaramountconvertedinto
InterestSharesshallbealloraportionoftheaccruedinterestcalculatedontheunpaidprincipalbalanceofthisNotetothedateofsuchnotice.
(c) DuringthefirstsixmonthsthisNoteisineffect,theCompanyatitsoptionmayredeemthisNotebypayingtotheHolderanamountasfollows:(i)iftheredemptioniswithinthefirst90daysthisNoteisineffect,thenforanamountequalto130%oftheunpaid
principalamountofthisNotealongwithanyinterestthathasaccruedduringthatperiod,(ii)iftheredemptionisafterthe90thdaythisNoteisineffect,butlessthanthe181stdaythisNoteisineffect,thenforanamountequalto140%oftheunpaidprincipalamountofthisNotealongwith any accrued interest.ThisNote may not be redeemed by the Company after 180 days. The
redemptionmustbeclosedandpaidforwithin3businessdaysoftheCompanysendingthere-demptiondemandortheredemptionwillbeinvalidandtheCompanymaynotredeemthisNote.
(d) Upon(i)atransferofallorsubstantiallyalloftheassetsoftheCompanytoanypersoninasingletransactionorseriesofrelatedtransactions,(ii)areclassification,capitalreorganizationorotherchangeorexchangeofoutstandingsharesoftheCommonStock,otherthanaforward orreversestocksplit orstockdividend,or (iii)anyconsolidation or merger of theCompanywithorintoanotherpersonorentityinwhichtheCompanyisnotthesurvivingentity(otherthanamergerwhichiseffectedsolelytochangethejurisdictionofincorporation oftheCompany and results in a reclassification, conversion or exchange of outstandingshares of CommonStocksolelyintosharesofCommonStock)(eachofitems(i),(ii)and(iii)beingre- ferredtoasa"SaleEvent"),then,ineachcase,theCompanyshall,uponrequest oftheHolder, redeem thisNote in cash for 150% of the principal amount, plus accrued but unpaid interest through thedateofredemption, or attheelection oftheHolder,suchHoldermayconverttheun- paidprincipalamount of thisNote(togetherwiththe amount of accrued butunpaidinterest) intosharesofCommonStockimmediatelypriortosuchSaleEventattheConversionPrice.
(e) In case of anySale Event (not to include asale of all orsubstantiallyall oftheCompany’sassets)inconnectionwithwhichthisNoteisnotredeemedorconverted,theCompanyshallcauseeffectiveprovisiontobemadesothattheHolderofthisNoteshallhavetherightthereafter,byconvertingthisNote,topurchaseorconvertthisNoteintothekindandnumberofsharesofstockorothersecuritiesorproperty(includingcash)receivableuponsuchreclassification,capitalreorganizationorotherchange,consolidationormergerbyaholderof thenumberofsharesofCommonStockthatcouldhavebeenpurchaseduponexerciseoftheNote and at thesame ConversionPrice, as defined in thisNote, immediately prior tosuchSale Event. The foregoing provisionsshallsimilarly apply tosuccessiveSale Events. If theconsidera- tionreceivedbytheholdersofCommonStockisotherthancash,thevalueshallbeasdeter- minedbytheBoardofDirectorsoftheCompanyorsuccessorpersonorentityactingingoodfaith.
5. NoprovisionofthisNoteshallalterorimpairtheobligationoftheCom-pany,whichisabsoluteandunconditional,topaytheprincipalof,andintereston,thisNoteatthetime,place,andrate,andintheform,hereinprescribed.
6. TheCompanyherebyexpresslywaivesdemandandpresentmentforpay-ment,noticeofnon-payment,protest,noticeofprotest,noticeofdishonor,noticeofacceleration
orintenttoaccelerate,anddiligenceintakinganyactiontocollectamountscalledforhereunderandshallbedirectlyandprimarilyliableforthepaymentofallsumsowingandtobeowinghereto.
7. TheCompanyagreestopayallcostsandexpenses,includingreasonable attorneys'feesandexpenses,whichmaybeincurredbytheHolderincollectinganyamountdueunderthisNote.
| 8. | Ifoneormoreofthefollowingdescribed"EventsofDefault"shalloccur: |
(a) TheCompanyshalldefaultinthepaymentofprincipalorinterestonthisNoteoranyothernoteissuedtotheHolderbytheCompany;or
(b) AnyoftherepresentationsorwarrantiesmadebytheCompanyhereinorinanycertificateorfinancialorotherwrittenstatementsheretoforeorhereafterfurnishedbyoronbehalfoftheCompanyinconnectionwiththeexecutionanddeliveryofthisNote,ortheSe-curitiesPurchaseAgreementunderwhichthisnotewasissuedshallbefalseormisleadinginanyrespect;or
(c) TheCompanyshallfailtoperformorobserve,inanyrespect,anycove-nant,term,provision,condition,agreementorobligationoftheCompanyunderthisNoteoranyothernoteissuedtotheHolder;or
(d) TheCompanyshall(1)becomeinsolvent;(2)admitinwritingitsinabilitytopayitsdebtsgenerallyastheymature;(3)makeanassignmentforthebenefitofcreditorsor commenceproceedingsforitsdissolution;(4)applyfororconsenttotheappointmentofatrus-tee,liquidatororreceiverforitsorforasubstantialpartofitspropertyorbusiness;(5)fileapeti-tionforbankruptcyrelief,consenttothefilingofsuchpetitionorhavefiledagainstitaninvol- untary petitionfor bankruptcyrelief,all underfederal orstatelaws as applicable; or
(e) Atrustee,liquidatororreceivershallbeappointedfortheCompanyorforasubstantialpart of its property or businesswithout its consentandshall not bedischargedwith-insixty(60)daysaftersuchappointment;or
(f) Any governmental agencyor anycourt ofcompetent jurisdiction at thein-stanceofanygovernmentalagencyshallassumecustodyorcontrolofthewholeoranysubstan-tialportionofthepropertiesorassetsoftheCompany;or
(g) Oneor more money judgments, writs orwarrantsofattachment,orsimilarprocess,inexcessoffiftythousanddollars($50,000)intheaggregate,shallbeenteredorfiledagainsttheCompanyoranyofitspropertiesorotherassetsandshallremainunpaid,unvacated,unbondedorunstayedforaperiodoffifteen(15)daysorinanyeventlaterthanfive(5)days priortothedateofanyproposedsalethereunder;or
(h) TheCompanyshallhavedefaultedonorbreachedanytermofanyothernoteofsimilardebtinstrumentintowhichtheCompanyhasenteredandfailedtocuresuchde-
faultwithintheappropriategraceperiod;or
(i) TheCompanyshallhaveitsCommonStockdelistedfromanexchange(includingtheOTCQBexchange)or,iftheCommonStocktradesonanexchange,thentradingintheCommonStockshallbesuspendedformorethan10consecutivedays;
(j) If amajorityof themembersof theBoard ofDirectorsof theCompanyonthedatehereofarenolongerservingasmembersoftheBoard;
(k) TheCompanyshallnotdelivertotheHoldertheCommonStockpursuanttoparagraph4hereinwithoutrestrictivelegendwithin3businessdaysofitsreceiptofaNoticeofConversion;or
Then,oratanytimethereafter,unlesscured,andineachandeverysuchcase,unlesssuchEventofDefault shallhavebeenwaivedinwritingbytheHolder(whichwaiver shallnotbedeemedtobeawaiverofanysubsequentdefault)attheoptionoftheHolderandintheHolder'ssolediscre-tion,theHoldermayconsiderthisNoteimmediatelydueandpayable,withoutpresentment,de-mand,protestor(further)noticeofanykind(otherthannoticeofacceleration),allofwhichareherebyexpresslywaived,anythinghereinorinanynoteorotherinstrumentscontainedtothecontrarynotwithstanding,andtheHoldermayimmediately,andwithoutexpirationofanyperiodofgrace,enforceanyandalloftheHolder'srightsandremediesprovidedhereinoranyotherrights or remedies afforded by law.Upon an Event ofDefault, interestshall accrue at a default interestrateof16%perannumor,ifsuch rateisusuriousornotpermittedbycurrent law,thenatthehighestrateofinterestpermittedbylaw. IntheeventofabreachofSection8(k)thepenalty
shallbe$250perdaythesharesarenotissuedbeginningonthe4thdayaftertheconversionno-ticewas delivered to theCompany. Thispenalty shallincreaseto $500 perday beginning on the
10thday.
IftheHoldershallcommenceanactionorproceedingtoenforceanyprovisionsofthisNote,in-cluding,withoutlimitation,engaginganattorney,theniftheHolderprevailsinsuchaction,theHoldershallbereimbursedbytheCompanyforitsattorneys’feesandothercostsandexpensesincurredintheinvestigation,preparationandprosecutionofsuchactionorproceeding.
9. In case anyprovision ofthisNoteisheld bya courtof competentjurisdic-tiontobeexcessiveinscopeorotherwiseinvalidorunenforceable,suchprovisionshallbead-justedratherthanvoided,ifpossible,sothatitisenforceabletothemaximumextentpossible,andthevalidityandenforceabilityoftheremainingprovisionsofthisNotewillnotinanywaybeaffected or impaired thereby.
10. NeitherthisNotenoranytermhereofmaybeamended,waived,dis-chargedorterminatedotherthanbyawritteninstrumentsignedbytheCompanyandtheHolder.
11. TheCompanyrepresentsthatitisnota“shell”issuerandhasneverbeena “shell”issuerorthatifitpreviouslyhasbeena“shell”issuerthatatleast12monthshavepassedsince theCompanyhasreportedform10type information indicating itisnolonger a“shellissu-er.Further.TheCompanywillinstructitscounseltoeither(i)writea144-3(a(9)opiniontoal-
lowforsalabilityoftheconversionsharesor(ii)acceptsuchopinionfromHolder’scounsel.
12. TheCompanywillgivetheHolderdirectnoticeofanycorporateactions,includingbutnotlimitedtonamechanges,stocksplits,recapitalizationsetc.ThisnoticeshallbegiventotheHolderassoonaspossibleunderlaw.
13. ThisNoteshallbegovernedbyandconstruedinaccordancewiththeLawsofDelawareapplicabletocontractsmadeandwhollytobeperformedwithintheStateofCaliforniaCountyofSanDiegoandshallbebindinguponthesuccessorsandassignsofeachpartyhereto.TheHolderandtheCompanyherebymutuallywaivetrialbyjuryandconsenttoexclusivejurisdictionandvenueinthecourtsoftheStateofCaliforniaCountyofSanDiego.ThisAgreementmaybeexecutedincounterparts,andthefacsimiletransmissionofanexecutedcounterparttothisAgreementshallbeeffectiveasanoriginal.
INWITNESSWHEREOF,theCompanyhascausedthisNotetobedulyexecut-edbyanofficerthereuntodulyauthorized.
Dated:March10,2016
MAXSOUND CORPORATION
| By: | GregHalpern-Chairman&CFO |
EXHIBITA
NOTICEOF CONVERSION
(TobeExecutedbytheRegisteredHolderinordertoConverttheNote)
Theundersigned hereby irrevocablyelects toconvert$oftheaboveNoteintoSharesofCommonStockofMaxSoundCorporation.(“Shares”)accord-ingtotheconditionssetforthinsuchNote,asofthedatewrittenbelow.
IfSharesaretobeissuedinthenameofapersonotherthantheundersigned,theundersignedwillpayalltransferandothertaxesandchargespayablewithrespectthereto.
DateofConversion:ApplicableConversionPrice:Signature:
[PrintNameofHolderandTitleofSigner]
Address:
SSNorEIN:
Sharesaretoberegisteredinthefollowingname:
Name:Address:Tel:Fax:SSN orEIN:
Sharesaretobesentordeliveredtothefollowingaccount:
AccountName:Address:
