THISNOTEANDTHECOMMONSTOCKISSUABLEUPONCONVERSIONOFTHISNOTEHAVENOTBEENANDWILLNOTBEREGISTEREDWITHTHEUNITEDSTATESSECURITIESANDEXCHANGECOMMISSIONORTHESECURITIESCOMMISSIONOFANYSTATEPURSUANTTOAN EXEMPTION FROMREGISTRATIONPROVIDEDUNDER THESECURITIESACT OF1933,ASAMENDED,ANDTHERULES AND REGULATIONSPROMULGATED THEREUNDER(THE"1933 ACT”)
US $110,250.00
MAXSOUND CORPORATION.
8%CONVERTIBLEREDEEMABLENOTEDUE MARCH 17, 2016
BACKEND NOTE
FORVALUERECEIVED,MaxSoundCorporation.(the“Company”)promisestopaytotheorderofADARBAYS,LLCanditsauthorizedsuccessorsandpermittedassigns("Hold-er"),theaggregateprincipalfaceamountofOneHundredTenThousandTwoHundredFiftyDollarsexactly(U.S.$110,250.00)onMarch17,2016("MaturityDate")andtopayinterestontheprincipalamountoutstandinghereunderattherateof8%perannumcommencingonMarch 17,2015.TheCompanyacknowledgesthisNotewasissuedwitha5%originalissuedis-count(OID)andassuchthe issuance pricewas$105,000.00.TheinterestwillbepaidtotheHolderinwhose name thisNote is registered on the records of the Company regardingregistra-tion and transfers ofthisNote. Theprincipalof,andintereston,thisNotearepayableat3411Indian CreekDrive,Suite403,MiamiBeach,FL33140, initially, andifchanged,lastappearing ontherecords of the Company as designated inwriting by theHolder hereof from time to time. The Companywill pay each interest payment and the outstanding principal due upon thisNote before orontheMaturityDate,lessanyamountsrequiredbylawtobedeductedorwithheld,totheHolderof thisNote bycheck orwire transferaddressed tosuchHolder at thelastaddressap- pearing on the records of the Company. The forwarding ofsuch check orwire transfershall con-stitute a payment ofoutstanding principal hereunder andshallsatisfy and discharge the liabilityfor principal on thisNote to the extent of thesum represented bysuch check orwire transfer. In-terestshall be payable in CommonStock (as defined below) pursuant to paragraph 4(b) herein.
ThisNoteissubjecttothefollowingadditionalprovisions:
GH
Initials
1. ThisNoteisexchangeableforanequalaggregateprincipalamountofNotesofdifferentauthorizeddenominations,asrequestedbytheHoldersurrenderingthesame.Noservicechargewillbemadeforsuchregistrationortransferorexchange,exceptthatHoldershallpayanytax orothergovernmentalchargespayablein connectiontherewith.
2. TheCompanyshallbeentitledtowithholdfromallpaymentsanyamountsrequiredtobewithheldunderapplicablelaws.
3. ThisNotemaybetransferredorexchangedonlyincompliancewiththeSecuritiesActof1933,asamended("Act")andapplicablestatesecuritieslaws.Anyattemptedtransfertoanon-qualifyingpartyshallbetreatedbytheCompanyasvoid.Priortoduepresent-mentfortransferofthisNote,theCompanyandanyagentoftheCompanymaytreatthepersoninwhosenamethisNoteisdulyregisteredontheCompany'srecordsastheownerhereofforallotherpurposes,whetherornotthisNotebeoverdue,and neither the Companynoranysuchagentshall be affected or bound by notice to thecontrary.AnyHolder of thisNote electing toexercise the right of conversionset forth inSection 4(a) hereof, in addition to the requirementssetforth inSection 4(a), and anyprospective transfereeof thisNote, also isrequired 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")ataprice("ConversionPrice")foreachshareofCommonStockequalto65%ofthelowestdailyVWAPoftheCommonStockasreportedontheNationalQuotationsBureauOTCQBexchangewhichtheCompany’ssharesaretradedoranyexchangeuponwhich theCommonStockmaybetradedinthefuture("Exchange"),for thetenprior trading days including the dayuponwhichaNoticeof Conversionis receivedby theCompany (providedsuchNotice of Conversion is delivered by fax or other electronic method ofcommunicationtotheCompanyafter4P.M. EasternStandardorDaylightSavingsTimeif theHolderwishesto include thesameday closing price). If theshareshavenot been deliveredwith- in 3 business days, theNotice of Conversion may be rescinded.Such conversionshall beeffec- tuated by the Company delivering theshares of CommonStock to theHolderwithin 3 businessdays ofreceipt bytheCompany oftheNotice ofConversion.Once the Holderhas received suchsharesofCommonStock,theHoldershallsurrenderthisNotetotheCompany,executed bytheHolder evidencingsuchHolder's intentionto convertthisNote or aspecified portion hereof, andaccompanied by proper assignmenthereofin blank.Accrued butunpaid interestshall be subject toconversion.Nofractionalsharesorscriprepresenting fractionsofshareswill beissued on conversion, but the number ofsharesissuable shallbe rounded to the nearest whole share. In theeventthe Companyexperiences aDTC“Chill” on itsshares, theconversion priceshall bede-creased to55%insteadof65% whilethat “Chill”isineffect.In noevent shallthe Holderbe al- lowed to effect a conversion ifsuch conversion,alongwith all othershares of CompanyCom-monStockbeneficiallyownedbytheHolderanditsaffiliateswouldexceed9.9%oftheout-standingshares of the CommonStock of the Company.
(b) InterestonanyunpaidprincipalbalanceofthisNoteshallbepaidattherateof8%perannum.InterestshallbepaidbytheCompanyinCommonStock("InterestShares").Holdermay,atanytime,sendinaNoticeofConversiontotheCompanyforInterestSharesbasedontheformulaprovidedinSection4(a)above.ThedollaramountconvertedintoInterestSharesshallbealloraportionoftheaccruedinterestcalculatedontheunpaidprincipalbalanceofthisNoteto thedateofsuchnotice.
(c) ThisNotemaynotbeprepaid,exceptthatifthe$110,250Rule144con-vertible redeemablenote issued bythe Companyofevendateherewith isredeemedby theCom-panywithin6monthsoftheissuancedateofsuchNote,allobligationsoftheCompanyunderthisNoteandallobligationsoftheHolderundertheHolderissuedBackEndNotewillbeauto-maticallybedeemedsatisfiedandthisNoteandtheHolderissuedBackEndNotewillbeauto- matically be deemed cancelled and of no furtherforce or effect.
(d) Upon(i)atransferofallorsubstantiallyalloftheassetsoftheCompanytoanypersoninasingletransactionorseriesofrelatedtransactions,(ii)areclassification,capitalreorganizationorotherchangeorexchangeofoutstandingsharesoftheCommonStock,otherthanaforward orreversestocksplit orstockdividend,or (iii)anyconsolidation or merger of theCompanywithorintoanotherpersonorentityinwhichtheCompanyisnotthesurvivingentity(otherthanamergerwhichiseffectedsolelytochangethejurisdictionofincorporationoftheCompany 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,orat theelection oftheHolder, such Holder may convertthe un- paidprincipalamount of thisNote(togetherwiththe amount of accrued butunpaidinterest) intosharesofCommonStockimmediately priortosuchSaleEvent atthe ConversionPrice.
(e) In case of anySale Event (not to include asale of all orsubstantially all oftheCompany’sassets)inconnectionwithwhichthisNoteisnotredeemedorconverted,theCompanyshallcauseeffectiveprovisiontobemadesothattheHolderofthisNoteshallhavetherightthereafter,byconvertingthisNote,topurchaseorconvertthisNoteintothekindandnumberofsharesofstockorothersecuritiesorproperty(includingcash)receivableuponsuchreclassification,capitalreorganizationorotherchange,consolidationormergerbyaholderofthenumberofsharesofCommonStockthatcouldhavebeenpurchaseduponexerciseoftheNote 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,anddiligenceintakinganyactiontocollectamountscalledforhereunder andshallbedirectlyandprimarilyliableforthepaymentofallsumsowingandtobeowinghereto.
7. TheCompanyagreestopayallcostsandexpenses,includingreasonable attorneys'feesandexpenses,whichmaybeincurredbytheHolderincollectinganyamountdueunderthisNote.
| 8. | Ifoneormoreofthefollowingdescribed"EventsofDefault"shalloccur: |
(a) TheCompanyshalldefaultinthepaymentofprincipalorinterestonthisNoteoranyothernoteissuedtotheHolderbytheCompany;or
(b) AnyoftherepresentationsorwarrantiesmadebytheCompanyhereinorinanycertificateorfinancialorotherwrittenstatementsheretoforeorhereafterfurnishedbyoronbehalfoftheCompanyinconnectionwiththeexecutionanddeliveryofthisNoteshallbefalseormisleadinginanyrespect;or
(c) TheCompanyshallfailtoperformorobserve,inanyrespect,anycove-nant,term,provision,condition,agreementorobligationoftheCompanyunderthisNoteoranyothernoteissuedtotheHolderandnotcuresuchbreachwithin10days;or
(d) TheCompanyshall(1)becomeinsolvent;(2)admitinwritingitsinabilitytopayitsdebtsgenerallyastheymature;(3)makeanassignmentforthebenefitofcreditorsor commenceproceedingsforitsdissolution;(4)applyfororconsenttotheappointmentofatrus-tee,liquidatororreceiverforitsorforasubstantialpartofitspropertyorbusiness;(5)fileapeti-tionforbankruptcyrelief,consenttothefilingofsuchpetitionorhavefiledagainstitaninvol- untary petition forbankruptcy relief,all under federalorstatelaws as applicable; or
(e) Atrustee,liquidatororreceivershallbeappointedfortheCompanyorfora substantialpart of its property or businesswithout its consentandshall not be dischargedwith-insixty(60)daysaftersuchappointment;or
(f) Any governmental agencyor anycourt ofcompetent jurisdiction at thein-stanceofanygovernmentalagencyshallassumecustodyorcontrolofthewholeoranysubstan-tialportionofthepropertiesorassetsoftheCompany;or
(g) One or more money judgments, writs orwarrantsof attachment,orsimilarprocess,inexcessoffiftythousanddollars($50,000)intheaggregate,shallbeenteredorfiledagainsttheCompanyoranyofitspropertiesorotherassetsandshallremainunpaid,unvacated,unbondedorunstayedforaperiodoffifteen(15)daysorinanyeventlaterthanfive(5)days priortothedateofanyproposedsalethereunder;or
(h) TheCompanyshallhavedefaultedonorbreachedanytermofanyothernoteofsimilardebtinstrumentintowhichtheCompanyhasenteredandfailedtocuresuchde-faultwithintheappropriategraceperiod;or
(i) TheCompanyshallhaveitsCommonStockdelistedfromamarket(in-cludingtheOTCQBmarketplace)or,iftheCommonStocktradesonanexchange,thentradingintheCommonStockshallbesuspendedformorethan10consecutivedays;
(k) TheCompanyshallnotdelivertotheHoldertheCommonStockpursuanttoparagraph4hereinwithoutrestrictivelegendwithin3businessdaysofitsreceiptofaNoticeofConversion;or
(l) Oncecashfunded,theCompany shallnot replenishthereserve setforthinSection12,within5businessdaysoftherequestoftheHolderinwhichcasetheconversiondis-countsetforthinSection4(a)shallbeincreasedfroma35%conversiondiscounttoa50%con-versiondiscountandshallbeincreasedfromthe50%conversiondiscountthenineffecttoan80%conversiondiscountiftheincreaseisnoteffectivewithin10businessdaysofthereplen-ishment request; or
(m) TheCompany’sCommonStockhasaclosingbidpriceoflessthan$0.02pershareforatleast5consecutivetradingdays;or
(n) TheaggregatedollartradingvolumeoftheCompany’sCommonStockislessthanfiftythousanddollars($50,000.00)inany5consecutivetradingdays;or
(o) TheCompanyshallceasetobe“current”initsfilingswiththeSecuritiesandExchangeCommission;or.
(p) TheCompanyshalllosethe“bid”priceforitsstockandamarket(includingtheOTCBBmarketplaceorotherexchange)
Then,oratanytimethereafter,unlesscured(exceptfor8(m)and8(n)whichareincurablede-faults,thesoleremedyofwhichistoallowtheHoldertocancelboththisNoteandtheHolderIssuedNote,andineachandeverysuchcase,unlesssuchEventofDefaultshallhavebeenwaivedinwritingbytheHolder(whichwaivershallnotbedeemedtobeawaiverofanysubse-quent default)attheoptionoftheHolderandintheHolder'ssolediscretion,theHoldermayconsider thisNote immediately due and payable,without presentment, demand, protest or(fur-ther) notice ofany kind (otherthan noticeof acceleration), allofwhich arehereby expresslywaived,anythinghereinorinany noteorotherinstruments containedtothecontrarynotwith-standing,and theHolder may immediately, andwithout expiration of any period of grace,en- forceanyandall ofthe Holder'srights andremediesprovided hereinorany other rightsorreme- diesafforded bylaw.UponanEvent ofDefault,interestshallbeaccrueatadefaultinterest rate of24%perannumor,ifsuchrateisusuriousor notpermittedbycurrentlaw,thenatthehighest
rateofinterestpermittedbylaw.Further,iftheNotebecomesdueandpayable,theHoldermayusetheoutstandingprincipalandinterestdueunderthe Notetooffsetanypayment obligationsitmayhavetotheCompany.Intheeventofabreachof8(k)thepenaltyshallbe$250perdaythesharesarenotissuedbeginningonthe4thdayaftertheconversionnoticewasdeliveredtotheCompany.Thispenaltyshallincreaseto $500perdaybeginningonthe10thday.Oncecash funded, thepenaltyforabreachofSection8(p)shallbeanincreaseoftheoutstanding principal amounts by20%.Oncecash funded,intheeventof abreachofSection 8(i),theoutstanding
principaldueunderthisNoteshallincreaseby50%.IfthisNoteisnotpaidatmaturity, theout-standingprincipaldueunderthisNoteshallincreaseby10%.
IftheHoldershallcommenceanactionorproceedingtoenforceanyprovisionsofthisNote,in-cluding,withoutlimitation,engaginganattorney,then,iftheHolderprevailsinsuchaction,theHoldershallbereimbursedbytheCompanyforitsattorneys’feesandothercostsandexpensesincurredintheinvestigation,preparationandprosecutionofsuchactionorproceeding.
Make-WholeforFailuretoDeliverLoss.AttheHolder’selection,iftheCompanyfailsforanyreasontodelivertotheHoldertheconversionsharesbythebythe3rdbusinessdayfollowingthedeliveryofaNoticeofConversiontotheCompanyandiftheHolderincursaFailuretoDe-liverLoss,thenatanytimetheHoldermayprovidetheCompanywrittennoticeindicatingtheamountspayabletotheHolderinrespectoftheFailuretoDeliverLossandtheCompanymustmake theHolderwhole as follows:
FailuretoDeliverLoss=[(Hightradepriceatanytimeonorafterthedayofexercise)x(Num-berofconversionshares)]
9. In case anyprovision ofthisNoteisheld bya courtof competentjurisdic-tiontobeexcessiveinscopeorotherwiseinvalidorunenforceable,suchprovisionshallbead-justedratherthanvoided,ifpossible,sothatitisenforceabletothemaximumextentpossible,andthevalidityandenforceabilityoftheremainingprovisionsofthisNotewillnotinanywaybeaffectedor impairedthereby.
10. NeitherthisNotenoranytermhereofmaybeamended,waived,dis-chargedorterminatedotherthanbyawritteninstrumentsignedbytheCompanyandtheHolder.
11. TheCompanyrepresentsthatitisnota“shell”issuerandhasneverbeena “shell”issuerorthatifitpreviouslyhasbeena“shell”issuerthatatleast12monthshavepassedsince theCompanyhasreportedform10type information indicating itisnolonger a “shellissu-er.Further.TheCompanywillinstructitscounseltoeither(i)writea“144-3(a)(9)”opiniontoallowforsalabilityoftheconversionsharesor(ii)acceptsuchopinionfromHolder’scounsel.
12. PriortocashfundingofthisNote,TheCompanywillissueirrevocabletransferagentinstructionsreserving2xthenumberofsharesofCommonStocknecessarytoal-lowtheholdertoconvertthisnotebasedonthediscountedconversionpricesetforthinSection4(a)herewith.ThereserveshallbereplenishedasneededtoallowforconversionsofthisNoteusing said 2x reserve, providedan increasenotice maynot bedeliveredmorethan onceevery 30daysfor the first5 months theNote is ineffect.Upon full conversionof thisNote, the reserve
representingthisNoteshallbecancelled.TheCompanywillpayalltransferagentcostsassoci-atedwithissuinganddeliveringtheshares.
13. TheCompanywillgivetheHolderdirectnoticeofanycorporateactionsincludingbutnotlimitedtonamechanges,stocksplits,recapitalizationsetc.ThisnoticeshallbegiventotheHolderassoonaspossibleunderlaw.
14. ThisNoteshallbegoverned byand construedinaccordancewiththelawsofNewYorkapplicabletocontractsmadeandwhollytobeperformedwithintheStateofNewYorkandshallbebindinguponthesuccessorsandassignsofeachpartyhereto.TheHolderandtheCompanyherebymutuallywaivetrialbyjuryandconsenttoexclusivejurisdictionandvenueinthecourtsoftheStateofNewYork.ThisAgreementmaybeexecutedincounterparts,andthe facsimiletransmission ofanexecutedcounterpart to thisAgreementshallbeeffectiveas an original.
INWITNESSWHEREOF,theCompanyhascausedthisNotetobedulyexecutedbyanofficerthereuntodulyauthorized.
Dated:03/17/2015
MAXSOUND CORPORATION
By:
Title: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:
