THISNOTEANDTHECOMMONSTOCK ISSUABLEUPONCONVERSIONOFTHISNOTE HAVENOTBEENANDWILLNOTBE REGISTEREDWITHTHEUNITEDSTATES SECURITIESANDEXCHANGECOMMISSIONOR THESECURITIESCOMMISSIONOFANYSTATE PURSUANTTOANEXEMPTIONFROM REGISTRATIONPROVIDEDUNDERTHE SECURITIESACTOF1933,ASAMENDED,AND THE RULES AND REGULATIONS PROMULGATEDTHEREUNDER(THE"1933 ACT”)
US$32,000.00
PARTIALREPLACEMENTNOTE-ORIGINALLYISSUEDJULY28,2015INTHEAMOUNTOF$32,000.00
MAXSOUNDCORPORATION
10%CONVERTIBLEREDEEMABLENOTEDUE MARCH 7, 2017
FOR VALUERECEIVED, MaxSoundCorporation (the “Company”)promises to pay totheorderofROCKCAPITAL,LLCanditsauthorizedsuccessorsandpermittedassigns("Hold-er"),theaggregateprincipalfaceamountofThirtyTwoThousanddollarsexactly(U.S.
$32,000.00) on March7, 2017 ("MaturityDate") andto pay intereston the principalamount out- standinghereunderattherateof10%perannumcommencingonMarch7,2016.Theinterest willbepaidtotheHolderinwhosenamethisNoteisregisteredontherecordsoftheCompany regardingregistrationandtransfersofthisNote.Theprincipalof,andintereston,thisNoteare payableat3820EastMercerWay,MercerIslandWA98040,initially,andifchanged,lastap- pearingontherecordsoftheCompanyasdesignatedinwritingbytheHolderhereoffromtime totime.TheCompanywillpayeachinterestpaymentandtheoutstandingprincipaldueupon thisNotebeforeorontheMaturityDate,lessanyamountsrequiredbylawtobedeductedor withheld,totheHolderofthisNotebycheckorwiretransferaddressedtosuchHolderatthelast addressappearingontherecordsoftheCompany.Theforwardingofsuchcheckorwiretransfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liabilityfor principalon this Noteto theextentof thesumrepresented by such check or wire transfer. InterestshallbepayableinCommonStock(asdefinedbelow)pursuanttoparagraph 4(b) herein.
GH
Initials
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,atanytimeonorafterMay1,2016(butnotbeforeMay1,2016,exceptasprovidedinSection13),toconvertalloranyamountoftheprincipalfaceamountofthisNotethenoutstandingintosharesofthe Company'scommonstock(the"CommonStock")ataprice("ConversionPrice")foreachshare ofCommonStockequalto52%oftheaverageofthetwolowesttradingpricesoftheCom- monStockasreportedontheNationalQuotationsBureauOTCQBexchangewhichtheCompa- ny’ssharesaretradedoranyexchange uponwhichtheCommonStockmay betradedinthefu- ture ("Exchange") for thetwelveprior trading days including the day upon which a Notice ofConversionisreceivedbytheCompanyoritstransferagent(providedsuchNoticeofConver- sion is delivered by fax or other electronic method of communication to the Company or its transfer agent after 4 P.M. EasternStandard or Daylight Savings Timeif the Holder wishes toin- clude the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuatedby the Compa- ny delivering the shares ofCommon Stock to theHolder within 3 businessdays of receipt bythe Company of theNotice of Conversion. Accrued but unpaid interest shall be subject to conver- sion. Nofractionalsharesorscriprepresentingfractionsofshareswillbeissuedonconversion, but the number of shares issuable shall be rounded to the nearest whole share.The Company agreestohonorallconversionssubmittedpendingthisincrease.IntheeventtheCompanyexpe- riences a DTC “Chill” on its shares,the conversion price shall be decreased to 55% instead of 65% while that “Chill” is in effect.In no event shall the Holderbe allowed to effect a conversion ifsuchconversion,alongwithallothersharesofCompanyCommonStockbeneficiallyowned by the Holder and its affiliates would exceed 9.9% of the outstanding shares of the Common Stock of the Company.If the Company is able to maintain the reserve requirements set forth in
Section 12 (1x the discounted value ofthe Note), then the Conversion Price shall be 62% insteadof52%atthetimeofeachconversioninwhichtheCompanyhasprovidedtheHoldersufficientsharestomaintainthe3xreserve.
(b) InterestonanyunpaidprincipalbalanceofthisNoteshallbepaidatthe rateof10%perannum.InterestshallbepaidbytheCompanyinCommonStock("Interest Shares").Holdermay,atanytime,sendinaNoticeofConversiontotheCompanyforInterest SharesbasedontheformulaprovidedinSection4(a)above.Thedollaramountconvertedinto InterestSharesshallbealloraportionoftheaccruedinterestcalculatedontheunpaidprincipal balanceofthisNotetothedateofsuchnotice.
| (c) | ThisNotemaynotbeprepaid. |
(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(togetherwiththeamountofaccruedbutunpaidinterest)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(whichdoesnotincludea“go- ingconcernopinion);(2)admitinwritingitsinabilitytopayitsdebtsgenerallyastheymature;
(3) makeanassignmentforthebenefitofcreditorsorcommenceproceedingsforitsdissolution;
(4) applyfororconsenttotheappointmentofatrustee,liquidatororreceiverforitsorforasub- stantialpartofitspropertyorbusiness;(5)fileapetitionforbankruptcyrelief,consenttothefil- ingofsuchpetitionorhavefiledagainstitaninvoluntarypetitionforbankruptcyrelief,allunder federalorstatelawsasapplicable;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,shallbeenteredorfiled againsttheCompanyoranyofitspropertiesorotherassetsandshallremainunpaid,unvacated, unbondedorunstayedforaperiodoffifteen(15)daysorinanyeventlaterthanfive(5)days priortothedateofanyproposedsalethereunder;or
(h) Defaultedonorbreachedanytermofanyothernoteofsimilardebtin- strumentintowhichtheCompanyhasenteredandfailedtocuresuchdefaultwithintheappro- priategraceperiod;or
(i) TheCompanyshallhaveitsCommonStockdelistedfromanexchange (includingtheOTCMarketsexchange)or,iftheCommonStocktradesonanexchange,then tradingintheCommonStockshallbesuspendedformorethan10consecutivedaysorceasesto fileits1934actreportswiththeSEC;
(j) IfamajorityofthemembersoftheBoardofDirectorsoftheCompanyon thedatehereofarenolongerservingasmembersoftheBoard;
(k) TheCompanyshallnotdelivertotheHoldertheCommonStockpursuant toparagraph4hereinwithoutrestrictivelegendwithin3businessdaysofitsreceiptofaNotice ofConversionwhichincludesanOpinionofCounselexpressinganopinionwhichsupportsthe removalofarestrictivelegend;or
(l) TheCompanyshallnotreplenishthereservesetforthinSection12,with- in3businessdaysoftherequestoftheHolder.
(m) The Company shall be delinquent in its periodic report filings withthe Se- curitiesandExchangeCommission;or
(n) TheCompanyshallcausetolosethe“bid”priceforitsstockinamarket (includingtheOTCQBmarketplaceorotherexchange).
Then,oratanytimethereafter,unlesscuredwithin5days,andineachandeverysuchcase,un- lesssuchEventofDefaultshallhavebeenwaivedinwritingbytheHolder(whichwaivershall notbedeemedtobeawaiverofanysubsequentdefault)attheoptionoftheHolderandinthe Holder'ssolediscretion,theHoldermayconsiderthisNoteimmediatelydueandpayable,with- outpresentment,demand,protestor(further)noticeofanykind(otherthannoticeofaccelera- tion),allofwhichareherebyexpresslywaived,anythinghereinorinanynoteorotherinstru- mentscontainedtothecontrarynotwithstanding,andtheHoldermayimmediately,andwithout expiration ofanyperiodofgrace,enforceanyandallof theHolder'srightsandremediesprovid- edhereinoranyotherrightsorremediesaffordedbylaw.UponanEventofDefault,interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permit-
tedbycurrentlaw,thenatthehighestrateofinterestpermittedbylaw.Intheeventofabreach ofSection8(k)thepenaltyshallbe$250perdaythesharesarenotissuedbeginningonthe4thdayaftertheconversionnoticewasdeliveredtotheCompany.Thispenaltyshallincreaseto
$500perdaybeginningonthe10thday.ThepenaltyforabreachofSection8(n)shallbeanin- creaseoftheoutstandingprincipalamountsby20%.IncaseofabreachofSection8(i),theout-
standingprincipaldueunderthisNoteshallincreaseby50%.IfthisNoteisnotpaidatmaturity, theoutstandingprincipaldueunderthisNoteshallincreaseby10%.Further,ifabreachofSec- tion8(m) occurs or is continuing after the 6 month anniversaryof the Note, then the Holder shall
beentitledtousethelowestclosingbidpriceduringthedelinquencyperiodasabasepricefor theconversion.Forexample,ifthelowestclosingbidpriceduringthedelinquencyperiodis
$0.01pershareandtheconversiondiscountis50%theHoldermayelecttoconvertfuturecon- versionsat$0.005pershare.IfthisNoteisnotpaidatmaturity,theoutstandingprincipaldue underthisNoteshallincreaseby10%.
IftheHoldershallcommenceanactionorproceedingtoenforceanyprovisionsofthisNote,in- cluding,withoutlimitation,engaginganattorney,theniftheHolderprevailsinsuchaction,the HoldershallbereimbursedbytheCompanyforitsattorneys’feesandothercostsandexpenses incurredintheinvestigation,preparationandprosecutionofsuchactionorproceeding.
Make-WholeforFailuretoDeliverLoss.AttheHolder’selection,ifthe CompanyfailsforanyreasontodelivertotheHoldertheconversionsharesbythebythe3rd businessdayfollowingthedeliveryofaNoticeofConversiontotheCompanyandiftheHolder incursaFailuretoDeliverLoss,thenatanytimetheHoldermayprovidetheCompanywritten noticeindicatingtheamountspayabletotheHolderinrespectoftheFailuretoDeliverLossand theCompanymustmaketheHolderwholeasfollows:
FailuretoDeliverLoss=[(Hightradepriceatanytimeonorafterthedayofexercise)x(Num- berofconversionshares)]
TheCompanymustpaytheFailuretoDeliverLossbycashpayment,andanysuchcashpayment mustbemadebythethirdbusinessdayfromthetimeoftheHolder’swrittennoticetotheCom- pany.
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.TheCompanywillinstructitscounseltoeither(i)writeaRule144orsimilaropiniontoal- lowforsalabilityoftheconversionsharesor(ii)acceptsuchopinionfromHolder’scounsel, providedsuchlegalopinionis,inthereasonabledeterminationofCompanycounsel,factually andlegallycorrect.
12. TheCompanyshallissueirrevocabletransferagentinstructionsreserving 50,000,000sharesofitsCommonStockforconversionsunderthisNote(the“ShareReserve”). UponfullconversionofthisNote,anysharesremainingintheShareReserveshallbecancelled.
TheCompanyshallpayallcostsassociatedwithissuinganddeliveringtheshares.Ifsuch amountsaretobepaidbytheHolder,itmaydeductsuchamountsfromtheConversionPrice. ConversionNoticesmaybesenttotheCompanyoritstransferagentviaelectricmail.Begin- ningMay1,2016,theCompanywillatalltimesreserveaminimumofonetimetheamountof sharesrequiredifthenotewouldbefullyconverted.TheHoldermayreasonablyrequestin- creasesfromtimetotimetoreserve suchamounts.TheCompanywillinstructitstransferagent toprovidetheoutstandingshareinformationtotheHolderinconnectionwithitsconversions.
13. TheCompanywillgivetheHolderdirectnoticeofanycorporateactions, includingbutnotlimitedtonamechanges,stocksplits,recapitalizationsetc.Thisnoticeshallbe givento the Holderas soon aspossible under law.In addition,if the Companyallows for theas-signmentofanythirdpartydebtwithaconvertibilitydateonorpriortoMay1,2016(an“EarlyTransaction”),thenitshallprovidetheHolderimmediatenoticeofsuchassignmentpriortotheassignmentandtheconversionrestrictionofMay1,2016setforthinSection4(a)shallbeelimi-natedandreplacedwiththeearlierdatewhichisthedateonwhichsuchassignednotewouldbeconvertibleintosharesofCommonStock.IfsuchnoticeisnotprovidedpriortotheclosingofsuchEarlyTransaction,thenthediscountsetforthinSection4(a)shallbeincreasedsuchthattheeffectiveConversionPriceresultsina48%discount.
14. ThisNoteshallbegovernedbyandconstruedinaccordancewiththelaws ofNewYorkapplicabletocontractsmadeandwhollytobeperformedwithintheStateofNewYorkandshallbebindinguponthesuccessorsandassignsofeachpartyhereto.TheHolderand theCompanyherebymutuallywaivetrialbyjuryandconsenttoexclusivejurisdictionandvenue inthecourtsoftheStateofNewYork.ThisAgreementmaybeexecutedincounterparts,and thefacsimiletransmissionofanexecutedcounterparttothisAgreementshallbeeffectiveasan original.
INWITNESSWHEREOF,theCompanyhascausedthisNotetobedulyexecut- edbyanofficerthereuntodulyauthorized.
Dated:3/7/16
MAXSOUNDCORPORATION
By:
Title:Chairman&CFO
EXHIBITA
NOTICEOFCONVERSION
(TobeExecutedbytheRegisteredHolderinordertoConverttheNote)
The undersigned herebyirrevocably electsto convert$oftheabove NoteintoSharesofCommonStockofMaxSoundCorporation(“Shares”)accordingtotheconditionssetforthinsuchNote,asofthedatewrittenbelow.
IfSharesaretobeissuedinthenameofapersonotherthantheundersigned,the undersignedwillpayalltransferandothertaxesandchargespayablewithrespectthereto.
DateofConversion: ApplicableConversionPrice: Signature:
[PrintNameofHolderandTitleofSigner]
Address:
SSNorEIN:
Sharesaretoberegisteredinthefollowingname:
Name:Address: Tel:Fax: SSN or EIN:
Sharesaretobesentordeliveredtothefollowingaccount:
AccountName: Address:
