NEITHERTHEISSUANCEANDSALEOFTHESECURITIESREPRESENTEDBYTIDSCONVERTIBLEPROMISSORYNOTE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACTOF 1933,AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED ORASSIGNED
(I) INTHEABSENCEOF(A)ANEFFECTIVEREGISTRATIONSTATEMENTFORTHESECURITIESUNDERTHESECURITIESACTOF1933, AS AMENDED, OR(B)AN OPINION OFCOUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), INA GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIREDUNDER SAIDACT OR(II)UNLESS SOLD PURSUANT TORULE 144OR RULE 144AUNDER SAID ACT.
OriginalPrincipalAmount:$143,888.89PurchasePrice:$125,000.00
IssueDate:Februacy24,2016
CONVERTIBLEPROMISSORYNOTE
FORVALUERECEIVED,MAXSOUNDCORPORATION,aDelawarecorporation(the"Borrower"),herebypromisestopayto theorderof ILIADRESEARCHANDTRADING,L.P., a Utah limited partnership, or registered assigns (the"Holder"), the sum of $143,888.89 (the "Original Principal Amounf '} togetherwith any additional charges providedforherein, on the datethat is12 months after theIssueDate(the"Maturity Date"),andtopay interest on theOutstanding Balance (as defined below)at the rate of eight percent(8%) per annum from the date hereof(the"Issue Date") until the sameis paid in full;provided thatupontheoccurrence ofan Event of Default (as definedbelow), interest shall thereafter accrue on the Outstanding Balance both before and afterjudgmentat the rate of fourteenpercent (14%) perannum("Default luteresf '}.Allinterest calculations hereunder shall be computed onthe basis of a 360-day yearcomprised of twelve(12) thirty (30) day months, shall compounddailyand shall be payable in accordance with the terms ofthis Note. The Borrower acknowledges that the Original Principal Amount exceeds the purchase price of this Note and that such excessconsistsof theOID (as defined inthe PurchaseAgreement (defined below))intheamount of
$13,888.89,theCarriedTransactionExpenseAmount(asdefinedinthePurchaseAgreement)inthe amountof$5,000.00tocovertheHolder's legal andotherexpensesincurred inthepreparation of this Note, the PurchaseAgreement, theIrrevocableTransfer Agent Instructions,and allothercertificates, documents, agreements, resolutionsand instrumentsdelivered to any party under or in connectionwith this Note,as the same maybe amended from time to time(collectively,the "Transaction Documents"), which sum shall be fully earned and charged to the Borrower upon the execution of this Note and paid to the Holderaspartof the outstanding principalbalance asset forth in thisNote.This Note maynotbe prepaidin wholeor in part except as otherwise providedin Section 1.8. All paymentsdue hereunder(to the extent not converted into common stock, $0.0001 par value per share, of the Borrower (the "CommonStock") inaccordance with the termshereof) shall bemadeinlawful money of theUnited Statesof America. All paymentsshall be made at such address as the Holdershall designate from time to time by written notice made in accordance with the provisions of this Note. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto inthat certain Securities Purchase Agreementdated the date hereof between the Borrower and the Holder, pursuant to which this Note was originally issued (the''Purchase Agreement"). For purposes hereof, theterm "Outstanding Balance" means the Original Principal Amount,as reducedor increased, as the case may be, pursuant to the terms hereoffor conversion,breachhereof or otherwise, plus any accruedbut unpaid interest (includingwith limitationDefaultInterest),collectionandenforcements costs,and anyotherfeesorcharges incurred under this Note or under the Purchase Agreement.
ThisNoteis freefromalltaxes,liens,claimsandencumbranceswithrespect totheissue thereof andshallnotbesubject topreemptiverightsorothersimilar rightsofstockholders of theBorrower and will not impose personalliability upon the holder thereof.
Thefollowing additionaltermsshallapplytothisNote:
ConversionRight.SubjecttoSection!.7,duringtheperiodbeginning ontheIssueDateandending when the Outstanding Balance is paid or convertedin full, the Holder shall, at its option, have the right from time to time, to convertall or any partof the Outstanding Balance of this Note into fullypaidand non-assessable shares of Common Stock, as suchCommonStockexists on the Issue Date,oranyshares ofcapital stock orother securities of theBorrowerinto which such Common Stock shallhereafter be changed or reclassified at theConversion Price (asdefinedbelow) determined as provided herein (a"Conversion").Thenumber ofsharesof Common Stock tobe issued upon each conversion of thisNote (the"Conversion Shares")shall be determinedby dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on thedate specified in the notice of conversion, in the formattached heretoasExhibit A(the"Noticeof Conversion"),delivered to the Borrower by the Holderin accordancewith Section l.4(a) below; provided that the Notice of Conversionis submitted by facsimile or e-mail(or by other means resulting in,orreasonablyexpected to result in, notice) to theBorrowerbefore6:00p.m., New York,New York time on such conversion date (the"Conversion Date").The term"ConversionAmounf'means, with respectto anyconversion ofthis Note, the portion of the Outstanding Balanceto be converted.
ConversionPrice.
{a)CalculationofConversionPrice.Theconversionprice(asthesamemay beadjustedfrom timetotimepursuanttothetermshereof, the"ConversionPrice")shallmean 65% (the"Conversion Factor'')multiplied bythe Market Price(as defined herein)."Market Price"means the average ofthetwo (2) lowest TradingPrices (as defined below) for the Common Stock during the ten
(10)TradingDay(asdefinedbelow)periodendingonthelatestcompleteTradingDaypriortothe ConversionDate.Ifan Event of Default (as defined below)other than an Event of Default pursuantto Section3.l(i) occurs, then the Conversion Factor will be reduced to 55%. If an Event of Default pursuant to Section 3.l(i) occurs,then the ConversionFactor will be reduced to 40%."Trading Price"means, for the Common Stock asof any date, the closingbid price on the Principal Market asreported by a reliable reporting service designated by the Holder (e.g. Bloomberg) or, if the Principal Marketis not the principal trading marketfor such security,the closing bid price of such security on the principal securities exchangeor tradingmarketwhere suchsecurity islisted or tradedor,if no closingbid priceofsuch security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are quoted in "OTC Pink" by Pink OTCMarkets Inc. (formerly Pink Sheets LLC),or any successor entityor other publisher thereof.Ifthe Trading Price cannot be calculatedfor such securityon such datein the manner providedabove, the TradingPriceshall be the fair market value as mutuallydeterminedby the Borrower and the Holder."Trading Day''shall meanany day on which theCommon Stockis traded ortradablefor anyperiod onthePrincipal Market,orontheprincipal securities exchange or other securities market on which the Common Stock is then being traded.
{b)ConversionPriceDuringMajorAnnouncements.NotwithstandinganythingcontainedinSectionl.2{a)tothecontrary, inthe event theBorrower (i) makes a public announcement that it intends to consolidate or mergewith any othercorporation (other than a merger in whichtheBorroweris the survivingor continuingcorporation and itscapital stock is unchanged)or sell or transferall or substantiallyall of the assetsofthe Borroweror (ii) any person, group or entity
(includingtheBorrower)publiclyannouncesatenderoffertopurchase50%ormoreoftheBorrower's CommonStock (or anyother takeover scheme) (the date of theannouncementreferredtoinclause(i) or
(ii)ishereinafterreferredtoasthe"AnnonncementDate"),thentheConversionPrice shall,effective uponthe AnnouncementDateand continuing through the AdjustedConversion Price Termination Date (as defined below), be equal to the lower of(I)theConversion Price which would have beenapplicable for a Conversion occurring on the Announcement Date, and (2) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determinedas set forth in this Section l.2(b). For purposes hereof,"Adjusted Conversion Price TerminationDate" shall mean, with respecttoany proposed transaction or tender offer (or takeover scheme)forwhich a public announcement ascontemplated by thisSection l.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above)or the person,group or entity (in the case of clause (ii) above) consummates or publicly announces the terminationor abandonment of the proposedtransaction or tender offer(or takeoverscheme) which caused thisSection l.2(b) to become operative.
AuthorizedShares.TheBorrowercovenantsthatduringtheperiodthe conversionrightexists,theBorrower willreservefromitsauthorizedandunissuedCommonStock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note. The Borroweris requiredat all times to have authorized and reserved three times the number of shares that is actually issuable upon full conversion of this Note (based on the Conversion Price in effect from time to time) (the "Reserved Amount''). The Reserved Amount shall be increased from time to time as required to insure compliance with this Section 1.3. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non- assessable.Inaddition, if the Borrower shall issue any securitiesor make any change to its capital structure which would change the number of shares of Common Stock into which this Note shall be convertible at the thencurrent ConversionPrice, the Borrowershall at thesame time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of this Note. The Borrower (i) acknowledges that it has irrevocably instructedits transfer agent toissue sharesoftheCommon Stockissuableupon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged withtheduty of issuing the necessary shares of CommonStock in accordance with the terms and conditionsof this Note.If,at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.l(c).
MethodofConversion.
(a) MechanicsofConversion.SubjecttoSection1.7hereof,beginningonthe datespecifiedinSectionI.I,this Note may be converted by the Holder inwhole orin partatanytime from time to time after the Issue Date, by submitting to the Borrower a Notice of Conversion (by facsimile, e-mail orotherreasonable means ofcommunication dispatchedon the Conversion Date priorto 6:00p.m.,NewYork, New York time), otherwise the Conversion Date willbe the next Trading Day.
(b) SurrenderofNoteUponConversion.Notwithstandinganythingtothecontrarysetforthherein,uponconversionofthisNotein accordancewith theterms hereof,theHolder shallnot berequired tophysically surrenderthis Note totheBorrower unless theentire Outstanding Balance of this Noteisso converted. The Holder andtheBorrowershall maintain records showing the amount of the OutstandingBalanceso converted and the dates of suchconversionsor shall use such other method, reasonably satisfactory to the Holder andthe Borrower,soas not to require physical surrender ofthisNoteuponeachsuch conversion.In the event of any disputeor discrepancy, such records of theHolder shall,primafacie,becontrollingand determinative in the absence of manifest error. Notwithstanding the foregoing,ifany portion of this Note isconverted as aforesaid,the Holdermay not
transfer thisNoteunlesstheHolderfirstphysicallysurrenders thisNotetothe Borrower,whereuponthe Borrowerwillforthwithissueanddeliverupon the order of the Holdera new Noteoflike tenor, registered as the Holder may request,representing in the aggregate the remainingOutstandingBalance of this Note. The Holderand any assignee, by acceptance of this Note, acknowledge and agree that, by reason ofthe provisions of this paragraph, followingconversionofa portion of this Note,the unpaid and unconverted Outstanding Balance of thisNote represented by thisNote may be less than the amount statedon theface hereof.
(c) PaymentofTaxes.Borrowerisresponsibleforthepaymentofallcharges,fees,andtaxesrequiredtodeliver Conversion Shares toHolder;provider,however,that Borrowershall notberequired to payany tax which may bepayable in respect of any transferinvolvedin theissueand deliveryof Conversion Shares or other securitiesor property onconversion of this Note in a name other thanthat oftheHolder (or in streetname), and the Borrower shall not be requiredto issue or deliver any such shares or other securitiesor property unlessand untiltheperson or persons (other than the Holder orthe custodianin whose street namesuch shares are to be held for the Holder's account) requestingtheissuancethereof shall havepaidtotheBorrowerthe amount of any suchtax orshallhave establishedto the satisfaction of the Borrower that such tax has been paid.
(d) DeliveryofCommonStockUponConversion.Onorbeforethecloseofbusinessonthethird (3'd)Trading Dayfollowing thedate ofreceipt ofa NoticeofConversionfromtheHolder viafacsimile transmissionor e-mail(or otherreasonablemeansofcommunication)(the"DeliveryDate"),the Borrowershall, provided thatall DWAC Eligible Conditions (as definedbelow) arethen satisfied, creditthe aggregatenumber of Conversion Sharestowhichthe Holdershallbeentitled to the account specified on the Conversion Notice via the DWAC (as defined below) system.IfallDWAC Eligible Conditions arenot then satisfied, the Borrower shall instead issueand deliver or cause to be issued and delivered (via reputable overnight courier) to the address as specified intheNotice of Conversion, a certificate, registered in the name of the Holder or its designee, for the number ofConversion Shares towhich theHolder shall beentitled;provided, however,that,inaddition toany other rightsor remedies that the Holder may have under this Note,thentheNon-DWAC Eligible Adjustment Amount(asdefined below)shallbe added to theOutstanding Balanceof this Noteasset forth in Section1.6(f)below. Fortheavoidance of doubt,the Borrowerhas not metitsobligationtodeliverConversion Shares by the Delivery Date unless the Holderor its broker, as applicable, has actually received the shares electronicallyinto the applicable account, or if the DWAC Eligible Conditions are not then satisfied, has actually received the certificate representing the applicable Conversion Shares no later than thecloseofbusiness on therelevant DeliveryDate pursuant tothetermsset forthabove. For purposes hereof, the term"DWAC Eligible Conditions"means that (i) theCommon Stock is eligible at DTC (as defined below) for full servicespursuanttoDTC's operational arrangements, including without limitation transfer throughDTC's DWAC system, (ii) the Borrower has been approved(withoutrevocation) by theDTC's underwritingdepartment,(iii)the Borrower'stransfer agent is approved as an agent in the DTC/FASTProgram(as defined below), (iv)the ConversionShares are otherwise eligible for delivery via DWAC,and (v) the Borrower's transfer agent does nothave a policy prohibiting or limiting delivery oftheConversion Shares via DWAC. Forpurposes ofthis Note,theterm"DWAC"means Deposit Withdrawal at Custodianas defined by the DTC; the term"DTC"meanstheDepositoryTrustCompany;andthe term"DTC/FASTProgram"meansthe DTC's FastAutomated Securities Transfer Program.
(e) ObligationofBorrowertoDeliverCommonStock.IftheHoldershallhavegivenaNoticeofConversionas provided herein,the Borrower'sobligation to issue and deliverthe shares of CommonStock shall be absoluteandunconditional,irrespectiveofthe absenceof any action by the Holder to enforce the same, any waiveror consent with respecttoanyprovision thereof, therecovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcementof any other obligationof the Borrowerto theholderof record, or anysetoff, counterclaim,
recoupment,limitationortermination,oranybreachorallegedbreachbytheHolderofanyobligation to theBorrower,andirrespectiveofanyothercircumstance which mightotherwiselimitsuch obligationof theBorrower to theHolder in connection with such conversion. The Conversion Date specified inthe Noticeof Conversionshall be theConversionDate so long as the Notice of Conversionis delivered to the Borrower before6:00p.m., New York,New York time, on such date; otherwise, the Conversion Date shall be the next Trading Day. Once the Holder may freely trade the Common Stock issuable upon a conversion of this Note pursuant to and in accordance with the terms hereof (and in the case of any certificates delivered to Holderbecause not all of the DWACEligible Conditions are thensatisfied, once such certificates have been deposited into Holder'sbrokerage account, all legends have been removed therefrom, andthe Common Stock represented by such certificates isfreelytradeable), all rights with respectto the portionof the Outstanding Balancebeingso converted shallforthwithterminate;provided, however,thattheHoldershallbe deemed to bethe holderof record ofthe Common Stock issuable upon such conversion as of the date Borrowerreceivesthe corresponding Notice of Conversion.
(f)DeliveryofCommonStockviatheDWACSystem.Notwithstanding anyotherprovisioncontainedherein,failuretodeliver via the DWAC systemanyCommon Stock to be delivered to the Holder under this Section 1.4 shall constitutea breach of this Agreementand an Event of Default under Section 3 hereof, including without limitation under Sections 3.l(c) and 3.l(p).
(g)FailuretoDeliverCommon StockPriortoDeliveryDate.Withoutin any waylimitingtheHolder'srighttopursueotherremedies,includingactualdamagesand/or equitable relief, the parties agree that if delivery of theCommon Stock issuable upon conversion of this Note is not delivered as required bySection 1.4(d) by the Delivery Date (a"Conversion Default"),the Borrower shall pay in cashtotheHolderfor eachcalendar day beyond the Delivery Date thattheBorrowerfails to deliver such Common Stock an amount equal to $500 per day (the"ConversionDefault Payment'').Such cashamountshallbe paid to theHolder bythefifthday of themonth followingthemonth in which it has accrued (the"Conversion Default Payment Due Date").In the eventsuch cash amount is not received bytheHolderby the ConversionDefaultPayment Due Date,at the option of the Holder(without notice to the Borrower), the ConversionDefault Payment shall be added to the Outstanding Balance of thisNote, inwhich eventinterestshallaccrue thereon inaccordancewiththeterms of this Noteandsuch additional principal amount shall beconvertible intoCommon Stock inaccordancewiththe terms ofthis Note. The Borrower agrees that the right to convert is a valuable right to the Holder.The damages resulting from afailure,attempttofrustrate,orinterference with suchconversion right aredifficult if not impossible to quantify.Accordingly the parties acknowledge that the liquidated damages provisions contained inthisSection l.4(g)arejustified.
ConcerningtheShares.TransferofthesharesofCommonStockissuableupon conversionofthisNoteisrestrictedandcertificatesrepresentingsuchsharesmaybeara legendas set forthin Sections 4.14 of the Purchase Agreement.
EffectofCertainEvents.
(a) FundamentalTransactionConsentRight.TheBorrowershallnotenterintoorbepartytoaFundamentalTransaction(asdefinedbelow),unless the Borrower obtains theprior written consent of the Holder toenterinto such FundamentalTransaction. For purposesof this Note,"Fundamental Transaction"means that (i) any "person"or "group"(as thesetermsare used forpurposesof Sections13(d) and14(d)of the 1934 Act and the rules and regulationspromulgated thereunder) isor shallbecomethe"beneficial owner''(asdefined in Rule13d-3 under the 1934 Act),directly or indirectly, of50%of theaggregate ordinary voting power represented by issued and outstanding voting stock ofthe Borrower, or(ii)(!) the Borrower oranyofitssubsidiaries shall, directly or indirectly, inone ormore related transactions, consolidate or merge withor into(whether or not the
Borrower oranyofitssubsidiariesisthe surviving corporation)anyotherindividual,corporation,limited liabilitycompany,partnership,association,trustorotherentityororganization(collectively,"Person"),or (2) the Borrower or any ofits subsidiariesshall, directlyor indirectly, in one or more related transactions, sell,lease,license,assign, transfer,conveyor otherwise disposeofall or substantially allof its respective properties or assets to any other Person,or (3) theBorroweror anyof itssubsidiariesshall, directly or indirectly, in oneormore relatedtransactions, allow any other Person tomake apurchase, tenderor exchangeofferthat isaccepted by the holders of morethan 50% of theoutstanding shares of voting stock of the Borrower (not includinganyshares of voting stockof the Borrower held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) the Borrower or any of its subsidiaries shall, directly or indirectly,in oneor morerelatedtransactions,consummateastockor share purchase agreementorother businesscombination(including, without limitation,a reorganization, recapitalization,spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of voting stock of the Borrower (not including any shares of voting stock of the Borrower heldby the other Person or other Persons making or partyto, or associated or affiliated with the other Persons makingor partyto,such stock or share purchase agreement or other businesscombination), or (5) the Borroweror any ofitssubsidiariesshall, directlyor indirectly, inone or more related transactions, reorganize, recapitalizeor reclassify the CommonStock, other than an increase in the numberof authorized shares of the Borrower's Common Stock. Theprovisionsof this Sectionl.6(a)shall applysimilarlyand equallytosuccessiveFundamental Transactions and shall be applied withoutregard to any limitations on the conversion of this Note. As a condition topre-approving any Fundamental Transaction inwriting, which approval may be withheld inthe Holder's sole discretion, Holder may require theresulting successororacquiring entity(ifnot theBorrower) to assumebywritten instrument allof theobligations of theBorrower underthis Note and alltheotherTransaction Documentswiththe same effectasifsuchsuccessor or acquirer hadbeennamed as the Borrowerhereto and thereto.
(b) AdjustmentDuetoFundamentalTransactions.If,atanytimewhenthisNoteis issuedandoutstandingandpriorto conversion of all ofthis Note, there shall beany Fundamental Transactionthatis pre-approved in writing by the Holder pursuant toSection 1.6(a) above, as a result of whichshares ofCommon Stockof the Borrower shallbe changed into thesameoradifferentnumber of shares of anotherclassor classes of stock or securities of the Borroweror anotherentity, or in case of any sale orconveyanceofallor substantiallyall of the assetsof theBorrower otherthan in connectionwith a plan of complete liquidation of the Borrower,thentheHolder of this Note shall thereafter havetheright to receive upon conversion of this Note, upon the basis andupon the terms and conditions specified hereinand in lieu of the shares of CommonStock immediatelytheretofore issuable upon conversion,such stock,securities orassets which theHolder would have been entitled toreceive in suchtransaction had this Note been convertedinfullimmediately priortosuchtransaction (withoutregardtoanylimitations on conversionset forthherein),andin any such caseappropriate provisions shall bemade withrespecttothe rights andinterests of the Holder of this Noteto the endthat the provisionshereof(including, without limitation,provisions for adjustment of theConversion Priceand of thenumber ofshares issuable upon conversion of this Note) shall thereafter be applicable, asnearlyas maybepracticableinrelation to any securitiesor assets thereafterdeliverable uponthe conversion hereof. The above provisionsshall similarly apply to successive Fundamental Transactions.
(c) AdjustmentDuetoDistribution.IftheBorrowershalldeclareormake anydistributionofitsassets(orrightsto acquireitsassets) to holders of Common Stockas a dividend, stock repurchase, bywayofreturnofcapital orotherwise (including anydividendor distribution to the Borrower's stockholdersin cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e.,a spin-off)) (a''Distribution"),then the Holder of this Note shall be entitled, upon any conversionof this Note after the dateof record for determining stockholders entitled tosuchDistribution,toreceive the amount of such assetswhich would have been payable to the Holder with respect to the shares of
CommonStockissuableuponsuchconversionhadsuchHolderbeentheholderofsuchsharesof CommonStockontherecord date for thedetermination of stockholders entitled to such Distribution.
(d) AdjustmentDuetoDilutiveIssuance.If,atanytimewhenthisNoteisissuedandoutstanding,theBorrowerissuesor sells, or in accordancewith thisSection 1.6(d) hereof isdeemedto haveissued or sold, any shares of CommonStockfor noconsideration or for a consideration per share (before deduction of reasonableexpenses or commissions underwriting discounts orallowances in connection therewith) less than theConversionPriceineffect on the date of such issuance(or deemed issuance)of suchshares of Common Stock (a"Dilutive Issuance"),then immediatelyupontheDilutive Issuance, the Conversion Price will be reduced to the amount of theconsideration pershare receivedby the Borrower in such Dilutive Issuance.
TheBorrowershallbedeemedto haveissuedorsoldsharesofCommonStockiftheBorrowerinanymannerissuesor grantsany warrants,rights or options (not including employeestock optionplans),whether ornot immediately exercisable, tosubscribe for or topurchase Common Stockor other securities convertible into or exchangeable for Common Stock("ConvertibleSecurities")(such warrants, rights andoptions topurchaseCommonStock or Convertible Securitiesare hereinafterreferred to as"Options")andtheprice per share for which Common Stockis issuable upontheexercise ofsuch Optionsisless thanthe Conversion Pricethen in effect, then theConversion Price shallbeequal tosuch price per share.Forpurposes ofthepreceding sentence,the"price persharefor which Common Stock is issuable upon the exercise of such Options" is determinedby dividing (i) the total amount,if any, received or receivableby the Borrower as consideration for the issuanceor grantingofall such Options, plus the minimum aggregate amountof additionalconsideration,ifany,payable to the Borroweruponthe exerciseofallsuch Options, plus, inthecaseofConvertibleSecuritiesissuableuponthe exerciseofsuch Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the timesuch ConvertibleSecurities firstbecome convertibleor exchangeable,by (ii) themaximum total number ofsharesof Common Stock issuable upon the exercise of all such Options (assumingfullconversion of Convertible Securities, if applicable). No further adjustment to the ConversionPrice will bemade upontheactualissuanceofsuch CommonStock upon the exercise ofsuch Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.
Additionally,theBorrowershallbedeemedtohaveissuedorsoldsharesof CommonStockif theBorrowerinanymanner issues or sells anyConvertible Securities, whetheror not immediately convertible, and the price per shareforwhich Common Stockisissuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal tosuch price pershare. For the purposes of the preceding sentence, the "price per sharefor which CommonStockis issuable upon such conversion or exchange" is determinedby dividing (1) the total amount,ifany, receivedor receivableby the Borroweras consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to theBorrower upon theconversion or exchangethereof at the time suchConvertible Securities first become convertible or exchangeable, by (2)the maximum total numberof shares ofCommonStock issuableupon the conversion or exchangeof all such Convertible Securities. No furtheradjustment to the ConversionPrice will be made upon the actual issuance of such Common Stock uponconversion or exchange of such Convertible Securities.
(e) PurchaseRights.lf,atanytimewhenthisNoteisissuedandoutstanding, theBorrowerissuesanyconvertiblesecuritiesorrights to purchase stock, warrants, securities orother property(the''PurchaseRights")pro rata totherecordholders of any class ofCommon Stock,then the Holder of this Note will be entitledtoacquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which suchHolder couldhave acquired if suchHolder had held thenumber of
sharesofCommonStockacquirableuponcompleteconversion ofthisNote(withoutregardtoany limitations onconversioncontainedherein)immediatelybefore the date on whicha recordis taken for the grant, issuance or sale of such Purchase Rights or,ifno such recordis taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of suchPurchase Rights.
(f) AdjustmentDuetoNon-DWACEligibility.If,atanytimewhenthisNoteisissuedandoutstanding, theHolder delivers a Notice of Conversion and atsuch timeall DWAC Eligible Conditions are not then satisfied, the Borrower shall deliver certificated Conversion Shares to the Holder pursuant to Section 1.4(d) and the Non-OWAC Eligible Adjustment Amount shall be added to the Outstanding Balance of this Note, without limiting any other rights of the Holder underthis Noteor the other TransactionDocuments. The"Non-DWAC EligibleAdjustment Amount"is the amount equal to the number of applicable Conversion Shares multiplied bytheexcess,ifany, of(i) theTradingPrice ofthe Common Stock on the Conversion Date, over(ii)the Trading Price of the Common Stock on the datethe certificated Conversion Shares are freelytradable, clear of any restrictive legend anddepositedin the Holder's brokerageaccount.Inanysuch case,Holderwill use reasonable efforts totimely deposit such certificatesin its brokerageaccount afterit receives them and causesuch restrictive legends tobe removed, and, without limitinganyother provision hereof, Borrower agrees to fully cooperate with Holder in accomplishing the same.
(g) AdjustmentDuetoLateClearingofDWACEligibleShares.If,atany timewhenthisNoteisissuedandoutstanding,the Holder deliversa Notice ofConversion andat such timethe Common Stock is DWAC Eligible andthe applicable DWACEligibleConversion SharesaredeliveredtoHolder orits broker,but it takeslongerthan five (5) business daysaftersuch delivery for such Conversion Shares tobeelectronically clearedfor trading inHolder'sbrokerageaccount, then the Late Clearing AdjustmentAmount (as defined below)shall be addedto the Outstanding Balanceof this Note, without limiting any other rights of the Holderunder this Note or the other Transaction Documents. The"Late ClearingAdjustment Amount"is the amountequal to the number ofapplicableConversion Shares multipliedby the excess, if any, of (1) the Trading Price of the CommonStock on the Conversion Date, over (2) the Trading Price of the Common Stock on the datethe certificatedDWAC EligibleConversionSharesareelectronically cleared for tradingintheHolder's brokerageaccount.In any such case, and withoutlimiting any otherprovision hereof, each of Holder and the Borrower agreestotake all action reasonably necessary onits partto help ensure that theapplicable Conversion Shares are electronicallyclearedfor trading in the Holder'sbrokerage account within the five-day perioddescribed above.
(h) NoticeofAdjustments.UpontheoccurrenceofeachadjustmentorreadjustmentoftheConversionPriceortheadditionoftheNon-OWAC Eligible Adjustment Amount or Late Clearing Adjustment Amount to the Outstanding Balance asa result oftheevents described inthis Section1.6, the Borrower, atits expense, shall promptly compute suchadjustment or readjustment andprepare andfurnish to the Holder a certificatesetting forth such adjustmentorreadjustment and showing indetail thefactsupon which such adjustment or readjustment is based.TheBorrower shall, upon the written request at anytime oftheHolder, furnish to such Holder alike certificate setting forth (i) such adjustment orreadjustment,(ii)the Conversion Price at the time ineffect and(iii)the number of sharesof Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of this Note.
(i) AdjustmentsforStockSplit.Notwithstandinganythinghereintothecontrary,anyreferencestosharenumbersorshareprices shall be appropriately adjusted for any stock dividend, stock split, stock combinationor other similar transaction.
OwnershipLimitation.Notwithstandinganythingtothecontrarycontainedinthis NoteortheotherTransactionDocuments,ifatanytime theHolder shall orwould be issued sharesof Common Stock under any of the Transaction Documents, but such issuance would causethe Holder (together with itsAffiliates) to beneficially own a numberofsharesexceeding 4.99% of thenumber of sharesofCommon Stock outstanding on such date (includingfor such purpose the shares of Common Stockissuable upon suchissuance) (the"Maximum Percentage"),then theCompany must not issue to the Holdershares of the Common Stockwhichwould exceedthe MaximumPercentage. For purposes of this Section, beneficial ownership of Common Stock will be determined under the 1934 Act. The shares of CommonStock issuable to the Holderthat would cause the Maximum Percentage tobe exceeded are referred to herein asthe "Ownership Limitation Shares". The Company will reserve the Ownership Limitation Sharesfor the exclusive benefit of the Holder. From timeto time,theHolder maynotifythe Company in writingof thenumber of the Ownership Limitation Shares thatmaybeissuedtothe Holder without causing the Holder to exceed the Maximum Percentage.Upon receiptof such notice, the Company shall be unconditionally obligated to immediately issue such designated shares to the Holder, with a corresponding reduction in the number of the Ownership Limitation Shares. Notwithstanding the forgoing, the term "4.99%" above shallbe replaced with "9.99%" at such timeas the Market Capitalization of the Common Stock is less than $5,000,000.00. Notwithstanding any other provision contained herein, if the term "4.99%"is replaced with"9.99%"pursuant to the preceding sentence, such increaseto "9.99%" shallremainat9.99% untilincreased, decreased orwaived by the Holder as set forth below. For purposes of this Note, the term "Market Capitalization of the Common Stock" shall mean the product equal to (A) theaverage VWAP of the Common Stock for the immediately preceding fifteen
(15)TradingDays,multipliedby(B)theaggregatenumberofoutstandingsharesofCommonStockas reportedouthe Company's most recently filed Form 10-Q or Form10-K. By written notice tothe Company,the Holder may increase,decreaseor waivethe MaximumPercentageas toitselfbutanysuch waiver will not be effective until the 6lst day after delivery thereof. The foregoing61-day notice requirement is enforceable,unconditional and non-waivable and shallapplytoallAffiliatesandassigns of the Holder.
Prepayment.SolongastheBorrower hasnotreceivedaNoticeofConversion fromtheHolder,thenatanytimeduringtheperiod beginning ontheIssueDateandendingonthedate whichisonehundred eighty(180) calendardaysfollowingtheIssueDate,the Borrower shallhave the right, exercisable on not less than thirty (30) Trading Days prior written notice to the Holder to prepay the Outstanding Balanceof this Note, in full,in accordance with this Section 1.8. Any noticeof prepayment hereunder(an "Optional Prepayment Notice") shall be deliveredto the Holderat its registeredaddresses and shall state: (a)that the Borrower is exercising its right to prepay this Note, and (b) the date of prepayment, which shall be not more than three (3) Trading Days from the date of the Optional PrepaymentNotice. On the datefixedfor prepayment(the"Optional Prepayment Date"), theBorrower shall makepaymentof theOptionalPrepaymentAmount (asdefinedbelow)toorupontheorderofthe Holder as specified bytheHolderinwriting tothe Borrower atleast one (1) Trading Daypriortothe Optional Prepayment Date.IftheBorrowerexercises itsrighttoprepaythis Note, the Borrowershall makepaymentto theHolder of anamountincash(the "OptionalPrepayment Amonnf') equal to115%, multipliedby the then Outstanding Balance of this Note.Ifthe Borrower delivers an Optional Prepayment Noticeandfails to pay theOptional PrepaymentAmountdue to theHolder within two(2) Trading Days followingthe OptionalPrepaymentDate, theBorrowershall foreverforfeitits righttoprepaythis Note pursuant to this Section1.8.
DistributionsonCapitalStock.SolongastheBorrowershallhave anyobligation underthisNote,the Borrowershallnotwithoutthe Holder'swritten consent (a)pay, declare orsetapart forsuchpayment, any dividend orother distribution (whether in cash,property orother securities) on sharesofcapital stock otherthan dividends onsharesof Common Stock solely inthe form of additional shares of Common Stock, or (b)directly or indirectlyor through any subsidiarymake any other payment ordistributioninrespect ofits capital stock exceptfor distributions pursuant to anystockholders' rights planwhich is approvedbya majorityof the Borrower's disinteresteddirectors.
RestrictiononStockRepurchases.SolongastheBorrowershallhaveanyobligationunderthis Note,theBorrowershallnot without the Holder's written consent redeem, repurchase orotherwise acquire (whether for cash or in exchange for propertyor other securities or otherwise)in any one transaction or series of related transactions any sharesof capital stock of the Borrower or any warrants, rights or options to purchaseor acquire any such shares.
Borrowings.So longastheBorrowershallhaveanyobligationunderthisNote, theBorrowershallnot,withouttheHolder'sprior writtenconsent, create, incur, assume guarantee, endorse, contingently agree topurchase or otherwisebecome liable upon theobligation of any person, firm, partnership, joint venture or corporation, except by theendorsement of negotiable instruments for deposit or collection, or suffertoexistany liability for borrowed money, except(a)borrowings in existenceor committed on the date hereof and of which the Borrower has informedthe Holderin writing prior to the date hereof,(b) indebtednessto trade creditorsor financialinstitutions incurredin theordinary courseofbusiness, (c) borrowings,the proceeds ofwhich shall be usedtorepaythis Note or (d) as permittedby the Purchase Agreement.
SaleofAssets.SolongastheBorrowershallhaveanyobligationunderthisNote,theBorrower shall not, without the Holder'spriorwritten consent, sell, leaseor otherwise dispose of any significant portion of the Borrower'sassets outside the ordinary courseof business. Anyconsent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
AdvancesandLoans.SolongastheBorrowershallhaveanyobligationunderthisNote,theBorrowershallnot, withoutthe Holder's written consent, lend money, give credit ormake advances toany person, firm, joint venture or corporation, including, without limitation,officers, directors,employees, subsidiariesand Affiliates of the Borrower, exceptloans, credits or advances (a) in existence or committed on the date hereof and which the Borrowerhas informed Holder in writing prior to the date hereof,(b)made in the ordinary course of business,or (c) not in excess of$100,000.
EventsofDefault.Theoccurrenceofanyofthefollowingeventsofdefault(each,an"Eventof Default")shall be anevent of default hereunder:
(a) FailuretoPayAmountsDue.TheBorrowerfailstopayanyamountwhendueonthisNote, whether at maturity, upon acceleration or otherwise.
(b) ConversionandtheShares.TheBorrower(i)failstoissueConversionSharestotheHolderortheHolder'sbroker(assetforthintheapplicable Conversion Notice) by the Delivery Date, (ii) fails to transferorcause its transferagent to transfer(issue)anyshares of Common Stock issued to the Holder upon conversion ofor otherwise pursuant to this Note as and when requiredbythis Note oranyof the other Transaction Documents,(iii)the Borrower directs its
transferagent notto
transferordelays,impairs,and/orhindersitstransferagentintransferring(orissuing)anysharesof CommonStocktobeissuedtothe Holder upon conversionof or otherwise pursuant tothis Note as and when required by this Note orany of the other Transaction Documents, or (iv) fails to remove (or directs its transfer agent notto remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (orto withdraw anystop transferinstructions in respect thereof)onanysharesof CommonStock issued tothe Holder uponconversion of or otherwise pursuant to this Noteas andwhen required by this Note or any of the other Transaction Documents.
(c) BreachofCovenantsandObligations.TheBorrowerbreachesanycovenantorobligationorothertermorconditioncontainedin this Note and anycollateral documents including butnot limited to the other Transaction Documents.
(d) BreachofRepresentationsandWarranties.AnyrepresentationorwarrantyoftheBorrowermadehereinorinanyagreement,statementorcertificategiven in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement and any other Transaction Documents), shall be false or misleading in any material respect when made.
(e) ReceiverorTrustee.TheBorroweroranysubsidiaryoftheBorrower shallmakeanassignmentforthebenefitofcreditors,orapplyforor consentto the appointment of a receiver or trustee forit or for a substantialpart ofits property or business,or snch a receiveror trustee shall otherwise be appointed.
(f) Judgments.Anymoneyjudgment,writorsimilarprocessshallbe enteredorfiledagainsttheBorroweroranysubsidiaryof theBorroweroranyofits propertyorother assets for more than $100,000, and shall remainunvacated, unbonded or unstayed for a periodof twenty
(20)calendardaysunlessotherwiseconsentedtobytheHolder,whichconsentwillnotbeunreasonably withheld.
(g) Bankruptcy. Bankruptcy,insolvency,reorganizationorliquidation proceedingsorotherproceedings,voluntaryorinvoluntary,forreliefunderanybankruptcyJaworany Jawforthereliefof debtors shallbe instituted by or against theBorroweror any subsidiary ofthe Borrower.
(h) DelistingofCommonStock.TheBorrowershallfailtomaintainthelistingand/orquotation, asapplicable,oftheCommonStockonthe Principal Market.
(i) FailuretoComplywiththe1934Act.TheBorrowershallfailtocomply withthereportingrequirementsofthe1934Act; and/or the Borrower shall ceaseto be subject to the reporting requirements of the 1934 Act.
G)Liquidation.Anydissolution,liquidation,orwindingupofBorroweror anysubstantialportionofitsbusiness.
(k) CessationofOperations.AnycessationofoperationsbytheBorroweror theBorroweradmitsitisotherwisegenerallyunable topayitsdebts assuchdebtsbecomedue;provided, however,that any disclosure ofthe Borrower's ability to continue as a"going concern" shallnot be an admission that the Borrower cannotpayits debts as they become due.
(I) MaintenanceofAssets.ThefailurebytheBorrowertomaintainanymaterialintellectualpropertyrights,personal,realpropertyor other assets which are necessatytoconductits business (whether now or in the future).
(m) FinancialStatementRestatement.TherestatementofanyfinancialstatementsfiledbytheBorrowerwiththeSECforanydateor period from two years priortotheIssue Date of this Note and until this Note is nolongeroutstanding, if the resultof such restatement would, by comparison to the unrestated financialstatement, haveconstituteda materialadverse effectontherights of the Holder with respect to this Note or any other Transaction Documents.
(n) ReverseSplits.TheBorrowereffectuatesareversesplitofitsCommon Stockwithouttwenty(20)calendardayspriorwritten notice tothe Holder.
(o) ReplacementofTransferAgent.IntheeventthattheBorrowerproposestoreplaceitstransferagent,theBorrower fails toprovide,prior to theeffective dateof suchreplacement, a fully executed Irrevocable Transfer Agent Instructions in aform asinitially delivered pursuant tothe PurchaseAgreement (includingbut notlimited to the provision toirrevocably reservesharesof Common Stock in the ReservedAmount)signed by the successor transferagent to the Holder and the Borrower.
(p) DWACEligibility.ThefailureofanyoftheDWACEligibleConditionstobesatisfiedatanytimeduring whichthe Borrowerhas obligations underthis Note.
DefaultEffects:AutomaticAcceleration.UpontheoccurrenceofanyEventofDefault,(a)theOutstandingBalanceshallimmediatelyincreaseto105% of the Outstanding Balance immediatelyprior to theoccurrence of theEvent of Default (the "BalanceIncrease"), and (b) this Note shall then accrue interest atthe Default Interest rate (collectively, the "Default Effects");provided, however,that(x)innoevent shallthe Balance Increasebe applied more thanonce,and(y)notwithstanding any provision to the contrary herein, inno event shall the applicableinterest rate at any time exceed the maximum interest rate allowedunder applicable Jaw. The DefaultEffectsshall automaticallyapply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action. Further, uponthe occurrence and during the continuationof any Event of Default, the Holder may by written notice tothe Borrower declare the entire Outstanding Balance immediately due and payable without presentment, demand, protest or any other notice of any kind, all of whichare hereby expressly waived, anything containedherein or in the other TransactionDocuments to the contrarynotwithstanding;provided, however,that upontheoccurrence or existenceof any Event of Default described inSections 3.l(e), 3.l(g), 3.IG),or 3.l(k), immediately andwithoutnotice,all outstanding obligations payable by the Borrowerhereunder shall automatically become immediately due and payable, without presentment, demand,protest orany othernoticeofany kind, all ofwhich are hereby expressly waived, anything containedhereinorin the Transaction Documents tothe contrary ("Automatic Acceleration"). For avoidance of doubt, except in thecaseof Automatic Acceleration resulting froman Eventof Defaultunder Sections3.l(e), 3.l(g), 3.lG), or 3.l(k), the Holder shall retain all rights under thisNote and the Transaction Documents, including theability to convert the then Outstanding Balanceofthis Note pursuant to Section 1 hereof, at all times following the occurrence of an Automatic Acceleration until the entire Outstanding Balance at that time has been paid in full.
FailureorIndulgenceNotWaiver.NofailureordelayonthepartoftheHolder intheexerciseofanypower,rightorprivilegehereundershalloperateas a waiverthereof,norshallany single or partialexercise of any suchpower, right or privilegeprecludeother or further exercise thereof or ofany otherright, poweror privileges.All rightsand remedies existinghereunderare cumulative to,and not exclusive of, any rights or remedies otherwiseavailable.
Notices.WhenevernoticeisrequiredtobegivenunderthisNote,unless otherwiseprovidedherein,suchnoticeshallbegivenin accordancewiththe subsection of thePurchase Agreementtitled "Notices. "
Amendments.This Noteandanyprovisionhereofmayonlybeamendedbyan instrumentinwritingsignedbytheBorrowerandtheHolder. The term"Note"and all reference thereto, as used throughout thisinstrument,shallmeanthisinstrument (and theother Notes issued pursuantto the Purchase Agreement)asoriginallyexecuted, oriflater amendedor supplemented, then asso amendedor supplemented.
Assignabilitv.ThisNoteshallbebindingupontheBorroweranditssuccessors andassigns,andshallinuretobethe benefit of the Holder anditssuccessorsand assigns;provided, however,that this Notemay not be transferred,assigned or conveyedby the Borrower without the prior writtenconsent of the Holder. Each transferee of this Note must be an "accredited investor"(as defined in Rule 50l(a)ofthe SecuritiesActof 1933 (asamended, the"1933 Act")).Notwithstanding anythingin this Note to the contrary,this Note maybe pledgedas collateralinconnection with abona fidemargin account or other lending arrangement.
CostofCollection;Attorneys'Fees.UpontheoccurrenceofanyEventofDefault,theBorrowershallpaytotheHolderhereofallcostsandreasonableattorneys' feesincurred by the Holder in connection with such Event of Default.Inthe event ofany action at law orinequity to enforce orinterpret theterms ofthisNote or anyofthe otherTransaction Documents, theparties agree thattheparty whoisawarded themostmoney shallbe deemedtheprevailing party for all purposes and shalltherefore beentitledtoan additional award ofthefull amount of the attorneys'feesand expenses paidbysuchprevailing party inconnection withthelitigation and/or disputewithoutreduction orapportionmentbased upon the individualclaims or defenses giving rise to the fees and expenses. Nothing hereinshall restrict orimpair a court'spowertoawardfeesandexpenses for frivolous or bad faith pleading.
GoverningLaw.ThisNoteshallbegovernedbyandconstruedinaccordance withthelawsoftheStateof Utah without regard to principlesof conflictsof laws. Anyaction brought by eitherparty against the other concerningthe transactionscontemplated by thisNote shallbe brought only in the state courts of Utahor in the federal courtslocated in Salt Lake County, Utah. The parties to this Note hereby irrevocablywaive any objectionto jurisdictionandvenue of any action institutedhereunder andshall not assert any defense basedon lack of jurisdictionorvenue or based uponforumnon conveniens.In the event that any provisionofthisNote or anyother agreementdelivered in connection herewith is invalidor unenforceable under any applicable statuteor rule of law, then suchprovision shall be deemed inoperative to theextentthat it may conflict therewith and shallbe deemed modified to conformwith suchstatuteor rule of law. Any suchprovision which may prove invalid or unenforceable under anylaw shall not affect the validity or enforceability ofany otherprovision ofanyagreement. Each partyhereby irrevocably waives personal serviceof process and consents toprocess being served in any suit, action or proceedingin connection with this Agreement or anyotherrelated orcompanion documents by mailing acopy thereof via registered or certified mailor overnight delivery (with evidence of delivery) to such party at theaddress in effect for notices to it under thisAgreementand agrees that such service shall constitute good andsufficientservice of process andnotice thereof. Nothing contained herein shallbe deemed to limit in any way anyright to serve process in anyother manner permittedby law. THEBORROWER HEREBY IRREVOCABLY WAIVESANY RIGHT IT MAYHAVETO, AND AGREES NOT TOREQUEST, AJURY TRIAL FOR THEADJUDICATION OFANY DISPUTE HEREUNDEROR INCONNECTION WITHOR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONCONTEMPLATED HEREBY.
FeesandCharges.ThepartiesacknowledgeandagreethatupontheBorrower's failuretocomplywiththeprovisionsof this Note, theHolder's damageswouldbeuncertainand difficult(ifnot impossible) to accurately estimate because ofthe parties' inability to predict future interestrates, the Holder's increased risk, and the uncertainty of the availability of a suitable substitute investment opportunityfortheHolder,among otherreasons. Accordingly,any fees, charges, andinterest dueunder this Note are intended by theparties to be, andshallbe deemed, a reasonable estimate oftheHolder's actual loss of its investmentopportunity andnotapenalty, andshall notbe deemed inanyway tolimit any other rightor remedy Holder may have hereunder,at law or in equity.
Remedies.TheBorroweracknowledgesthatabreachbyitofitsobligations hereunderwillcauseirreparableharmtotheHolder,byvitiatingthe intentand purposeofthe transaction contemplated hereby.Accordingly, the Borroweracknowledgesthat the remedy at law for a breach of its obligations underthis Note will beinadequateand agrees,in the event of a breachor threatened breachby the Borrower of the provisions of this Note, thatthe Holder shall beentitled, in addition toall other availableremedies at laworinequity,and in addition to the charges assessable herein, to an injunctionor injunctions restraining, preventing or curing anybreach of this Note andtoenforcespecifically the terms and provisions thereof, without the necessity of showing economic loss and without anybond or other security being required.
PurchaseAgreement.ByitsacceptanceofthisNote,eachpartyagreestobe boundbytheapplicableterms of thePurchase Agreement and the other Transaction Documents.
NoticeofCornorateEvents.Exceptasotherwiseprovidedherein,theHolderof thisNoteshallhavenorightsasaHolderofCommon Stock unlessand only to the extentthatit converts thisNote into Common Stock. The Borrower shall provide theHolder with prior notification of any meeting of the Borrower's stockholders (and copies of proxy materials and other information sentto stockholders).Intheeventof anytakingby theBorrowerof a record of its stockholders forthe purpose of determiningstockholders who areentitledto receivepayment of any dividend or otherdistribution, any righttosubscribefor, purchaseorotherwiseacquire (including byway of merger,consolidation, reclassification or recapitalization)any share of any classor any othersecurities or property, or to receive anyotherright,or forthe purpose of determiningstockholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolutionor windingupof the Borrower,the Borrower shallmail a noticetothe Holder,atleast twenty(20)calendar days prior tothe recorddate specified therein(or thirty(30)calendar days prior to the consummationof the transaction or event,whicheverisearlier), of thedate onwhich any such record istobe taken for the purposeof suchdividend, distribution,right or otherevent,anda brief statementregarding theamountand character ofsuch dividend, distribution, right or othereventtothe extent known atsuchtime. The Borrower shall make a public announcement of any event requiring notification totheHolder hereunder substantially simultaneously withthenotification totheHolder in accordance with the terms of thisSection4.10.
Pronouns.Allpronounsandany variationsthereofrefertothemasculine, feminineorneuter,singularorplural,asthecontextmaypermitor require.
TimeoftheEssence.Timeisexpresslymadeoftheessenceofeachandevery provisionofthisNote.
[Remainderofpageintentionallyleftblank;signaturepagetofollow}
INWITNESSWHEREOF,theBorrowerhascausedthisNoteto besignedinitsnamebyitsduly authorizedofficerasoftheIssueDatesetforth above.
MAXSOUNDCORPORATION
EXHIBITA
ILIADRESEARCHANDTRADING,L.P. 303EASTWACKERDRIVE,SUITE!040
CHICAGO,ILLINOIS6060I
Date:---------- MAXSOUNDCORPORATION
I0685-BHazelhurstDrive#6572 Houston,TX77043
Attn:GregHalpern,ChiefFinancial Officer
CONVERSIONNOTICE
Theabove-captionedHolderherebygivesnoticetoMAXSOUNDCORPORATION,a Delawarecorporation(the"Company"), pursuant tothatcertain Convertible Promissory Notemadebythe Company in favor ofthe Holder on February 24,2016 (the"Note"), that the Holderelectsto convert the portion of the Outstanding Balance of theNote setforth below into fully paid and non- assessable shares of CommonStock of the Company as of the date of conversion specifiedbelow. Such conversion shall be based onthe ConversionPrice setforth below.In the event of a conflict betweenthisConversionNotice and the Note, theNote shall govern, or, in the alternative,at the election of theHolder in itssole discretion, the Holder mayprovide a new formof Conversion Notice to conform to the Note.
Conversion#:
c.ConversionAmount:_
| D. MarketPrice | (Averageof2lowestTradePricesoflast10TradingDaysasperExhibitA-I) |
| E. | Conversion Factor:65%[asmayadjusted uponcertainEventsofDefault] |
| F. | ConversionPrice: | (DmultipliedbyE) |
G. H. | ConversionShares: (CdividedbyF) RemainingOutstandingBalanceofNote: * |
*Subjecttoadjustmentsforcorrections,defaults,andotheradjustmentspermittedbytheTransactionDocuments.
PleasetransfertlteConversion Shareselectronically(viaDWAC)totltefollowingaccount:
Broker:---------- DTC#:_
Account#:--------- AccountName:_
Address:
TotheextenttheConversionSharesarenotabletobedeliveredtotheHolderelectronicallyviatheDWAC system, pleasedeliveracertificate representing all such sharestothe Holder viareputable overnightcourier after receiptof this Conversion Notice(by facsimile transmission or otherwise)to:
(SignaturePageFollows)
Sincerely,
ILIADRESEARCHANDTRADING,L.P.
By:IliadManagement,LLC,itsGeneralPartner By:FifeTrading,Inc.,itsManager
By: -
JohnM.Fife,President
EXHIBITA-1CONVERSIONWORKSHEET
