THISNOTEANDTHECOMMONSTOCKISSUABLEUPONCONVERSIONOFTHISNOTEHAVENOTBEENANDWILLNOTBEREGISTEREDWITHTHEUNITEDSTATESSECURITIESANDEXCHANGE COMMISSION OR THESECURITIESCOMMISSIONOF ANY STATEPURSUANTTOANEXEMPTIONFROMREGISTRATIONPROVIDEDUNDER THESECURITIESACTOF 1933,ASAMENDED,ANDTHERULES AND REGULATIONSPROMULGATEDTHEREUNDER(THE "1933ACT”)
US $36,864.58
PARTIALREPLACEMENTNOTE-ORIGINALLYISSUEDAUGUST19,2015INTHEAMOUNT OF$55,750.00
MAX SOUND CORPORATION
10% CONVERTIBLEREDEEMABLENOTEDUE NOVEMBER 23, 2016
FORVALUERECEIVED,MaxSoundCorporation(the“Company”)promisestopaytotheorderofROCKCAPITAL,LLCanditsauthorizedsuccessorsandpermittedassigns("Hold-er"),theaggregateprincipalfaceamountofThirtySixThousandEightHundredSixtyFourdol-lars58/100centsexactly(U.S.$36,864.58)onNovember23,2016("MaturityDate")andtopayinterest on theprincipalamount outstandinghereunderat therate of 10%perannumcommenc- ing onFebruary 23,2016.Theinterestwillbe paidtotheHolder inwhosename thisNote isreg-istered on therecords of the Companyregardingregistrationandtransfers of thisNote.Theprincipalof,andintereston,thisNotearepayableat3820EastMercerWay,MercerIslandWA98040,initially,and ifchanged, last appearing on therecords of the Companyas designated inwriting by the Holderhereoffrom time to time. The Company will payeachinterestpaymentand the outstanding principal dueupon this Notebeforeor on the MaturityDate, less anyamountsrequiredbylawtobedeductedorwithheld,totheHolderofthisNotebycheckorwiretransferaddressed to suchHolderat the last address appearing on the records of the Company. Theforwardingof suchcheckor wiretransfer shallconstitute apaymentofoutstandingprincipalhereunderand shall satisfyanddischarge the liabilityfor principal on this Note to theextent of thesumrepresentedbysuchcheckorwiretransfer.InterestshallbepayableinCommonStock(asdefined below)pursuant toparagraph4(b)herein.
This Note issubject to thefollowing additional provisions:
GH
Initials
1. ThisNoteisexchangeableforanequalaggregateprincipalamountofNotesofdifferentauthorizeddenominations,asrequestedbytheHoldersurrenderingthesame.Noservicechargewill bemadeforsuchregistration ortransferorexchange,except thatHolder shall payany taxorothergovernmentalchargespayable inconnectiontherewith.
2. TheCompanyshallbeentitled to withholdfrom allpaymentsanyamountsrequired to bewithheldunderapplicable laws.
3. ThisNotemaybetransferredorexchangedonlyincompliancewiththeSecuritiesActof1933,asamended("Act")andapplicablestatesecuritieslaws.Anyattemptedtransfertoanon-qualifying party shall betreatedby theCompanyas void. Priorto duepresent- mentfor transferof thisNote,theCompanyandany agent ofthe Companymaytreat theperson in whose namethis Note is dulyregisteredontheCompany'srecordsas theownerhereofforallother purposes, whether or not this Notebeoverdue, and neither the Company norany suchagent shall beaffectedor boundbynotice to thecontrary.AnyHolder of this Noteelectingtoexercise theright of conversionsetforth in Section4(a)hereof, inaddition to therequirementssetforthinSection4(a),andanyprospective transferee ofthisNote,alsoisrequiredtogivethe Company writtenconfirmationthatthisNote isbeingconverted("Notice of Conversion") intheformannexedheretoasExhibit A.Thedateofreceipt(includingreceiptbytelecopy)ofsuch Notice ofConversion shall betheConversionDate.
4. (a)TheHolderofthisNoteisentitled,atitsoption,atanytimeonorafterMarch14,2016,toconvertalloranyamountoftheprincipalfaceamountofthisNotethenoutstandingintosharesoftheCompany'scommon stock(the "CommonStock")ataprice("ConversionPrice")foreachshareofCommonStockequalto 65%oftheaverageof thetwolowesttradingpricesof the Common Stockasreported on theNationalQuotationsBureau OTCQBexchange which theCompany’ssharesaretradedor any exchange uponwhich the CommonStock may betraded in thefuture("Exchange") for thetwelvepriortradingdays in-cluding the day upon which a Notice of Conversion isreceivedbythe Company or its transferagent(provided such Notice ofConversion isdeliveredby fax or otherelectronic method ofcommunication to theCompany or itstransferagentafter 4 P.M.EasternStandard orDaylightSavings Time if the Holderwishes to include thesame dayclosingprice).If theshareshave notbeendeliveredwithin3businessdays,theNoticeofConversionmayberescinded.Suchconver- sionshallbeeffectuated by theCompany delivering thesharesofCommonStocktotheHolder within 3businessdays ofreceiptbythe Company of the Notice of Conversion.Accrued butun-paidinterest shall be subject toconversion. Nofractionalshares or scrip representingfractions ofshares will be issued onconversion, but the numberofsharesissuable shall berounded to thenearest wholeshare.The Companyagrees to honorallconversions submittedpending thisin-crease.In theevent the Companyexperiences aDTC“Chill”on its shares, theconversion price shall bedecreased to 55%instead of 65% while that“Chill” is ineffect.In noevent shall theHolder beallowed toeffect a conversion if suchconversion, alongwith all othershares of Com- panyCommon Stock beneficiallyownedbytheHolderand itsaffiliateswouldexceed 9.9% of theoutstandingshares of the Common Stock ofthe Company.
(b) InterestonanyunpaidprincipalbalanceofthisNoteshallbepaidatthe
rateof10%perannum.InterestshallbepaidbytheCompanyinCommonStock("InterestShares").Holdermay,atanytime,sendin aNotice ofConversionto theCompany forInterestShares based on theformulaprovidedin Section4(a) above.Thedollaramountconverted intoInterestShares shallbe all or a portionof theaccruedinterestcalculatedon theunpaid principalbalanceof this Note to thedate of suchnotice.
| (c) | This notemaynot be prepaid. |
(d) Upon(i)atransferofallorsubstantiallyalloftheassetsoftheCompanyto anypersonin asingletransaction orseriesofrelatedtransactions, (ii) areclassification,capitalreorganizationorotherchangeorexchangeofoutstandingsharesofthe CommonStock,other than aforwardorreverse stock splitorstockdividend, or(iii) anyconsolidation ormergerofthe Company with or intoanotherperson or entity inwhich the Company is not the surviving entity(otherthanamergerwhichiseffectedsolely tochangethejurisdictionofincorporationofthe Companyandresults in areclassification, conversion orexchange ofoutstandingshares of CommonStocksolely intosharesofCommonStock)(eachofitems(i),(ii)and(iii)beingre-ferredtoasa"SaleEvent"),then, ineachcase,theCompany shall,uponrequestof theHolder,redeem this Note in cash for 150% of the principalamount, plusaccrued butunpaidinterestthroughthedateofredemption,orattheelectionoftheHolder,suchHolder may converttheun-paidprincipalamount of this Note(togetherwith theamountofaccrued butunpaidinterest) intoshares of Common Stock immediately priorto suchSaleEvent at the Conversion Price.
(e) Incase of any SaleEvent(nottoincludeasaleofallorsubstantially alloftheCompany’sassets)inconnectionwithwhichthisNoteisnotredeemedorconverted,theCompany shall causeeffectiveprovision to be made so that the Holderof this Note shallhave therightthereafter,by converting thisNote, topurchase or convert this Note into the kindand number ofshares of stock or othersecurities or property (including cash)receivable upon suchreclassification,capitalreorganization or otherchange,consolidation ormergerby a holder of the number ofshares of CommonStock thatcouldhavebeen purchased uponexercise ofthe Noteandat thesame ConversionPrice,as defined in thisNote, immediatelyprior to suchSaleEvent.The foregoingprovisionsshallsimilarly apply tosuccessiveSaleEvents.Iftheconsidera- tionreceivedby theholders of Common Stock is other than cash, the value shallbeas deter-minedby theBoardofDirectors of the Companyorsuccessor person or entity acting ingoodfaith.
5. NoprovisionofthisNoteshallalterorimpairtheobligationoftheCom-pany,whichisabsoluteandunconditional,topaytheprincipalof,andintereston,thisNoteatthetime,place,andrate,and in the form,hereinprescribed.
6. TheCompanyherebyexpresslywaivesdemandandpresentmentforpay-ment,noticeofnon-payment,protest,noticeofprotest,noticeofdishonor,noticeofaccelerationorintenttoaccelerate,anddiligenceintakinganyactiontocollectamountscalledforhereunderandshallbedirectly andprimarily liablefor thepaymentofallsumsowingandtobeowinghereto.
| 7. | TheCompanyagreestopayallcostsandexpenses,includingreasonable |
attorneys'feesandexpenses,whichmaybeincurredbytheHolderincollectinganyamountdueunder this Note.
| 8. | Ifoneor moreof the followingdescribed"Events ofDefault"shalloccur: |
(a) TheCompanyshalldefaultinthepaymentofprincipalorinterestonthisNoteor anyother noteissued to the HolderbytheCompany; or
(b) AnyoftherepresentationsorwarrantiesmadebytheCompanyhereinorinanycertificateorfinancialorotherwrittenstatementsheretoforeorhereafterfurnishedbyoronbehalfoftheCompanyinconnectionwiththeexecutionanddeliveryofthisNote,ortheSe-curitiesPurchaseAgreementunderwhichthisnotewasissuedshallbefalseormisleading inanyrespect; or
(c) TheCompanyshallfailtoperformorobserve,inanyrespect,anycove-nant,term,provision,condition,agreementorobligationoftheCompanyunderthisNoteoranyothernote issued to theHolder; or
(d) TheCompanyshall(1)becomeinsolvent(whichdoesnotincludea“go-ingconcernopinion);(2)admitinwritingitsinabilitytopayitsdebtsgenerallyastheymature;
(3) makeanassignmentforthebenefitofcreditorsorcommenceproceedingsforitsdissolution;
(4) applyfororconsenttotheappointmentofatrustee,liquidatororreceiverforitsorforasub-stantialpartofitspropertyorbusiness;(5) fileapetitionforbankruptcyrelief,consenttothefil-ing ofsuchpetitionorhavefiledagainstitaninvoluntarypetitionfor bankruptcyrelief,allunderfederal or statelawsasapplicable; or
(e) Atrustee,liquidatororreceivershallbeappointedfortheCompanyorforasubstantialpartofitspropertyorbusinesswithoutitsconsentandshallnotbedischargedwith-in sixty(60)daysafter suchappointment; or
(f) Anygovernmentalagencyoranycourtofcompetentjurisdictionatthein-stanceofanygovernmentalagencyshallassumecustodyorcontrolofthewholeoranysubstan-tial portion oftheproperties orassets of the Company; or
(g) Oneormoremoneyjudgments,writsorwarrantsofattachment,orsimilarprocess,inexcessoffiftythousanddollars($50,000)intheaggregate,shallbeenteredorfiledagainsttheCompanyoranyofits propertiesorotherassetsand shallremainunpaid,unvacated,unbonded orunstayed for aperiod offifteen (15)daysor inanyevent later than five (5)daysprior to the date ofany proposed salethereunder; or
(h) Defaultedonorbreachedanytermofanyothernoteofsimilardebtin-strumentintowhichtheCompanyhasenteredandfailedtocuresuchdefaultwithintheappro-priategraceperiod; or
(i) TheCompanyshallhaveitsCommonStockdelistedfromanexchange(includingtheOTCMarketsexchange)or,iftheCommonStocktradesonanexchange,then
tradingintheCommonStockshallbesuspendedformorethan10consecutivedaysorceasestofile its 1934actreports with the SEC;
(j) IfamajorityofthemembersoftheBoardofDirectorsoftheCompanyonthedate hereofareno longerservingasmembersof theBoard;
(k) TheCompanyshallnotdelivertotheHoldertheCommonStockpursuanttoparagraph4hereinwithoutrestrictivelegendwithin3businessdaysofitsreceiptofaNoticeofConversionwhichincludesanOpinionofCounselexpressinganopinionwhichsupportstheremoval ofarestrictive legend; or
(l) TheCompanyshallnotreplenishthereservesetforthinSection12,with-in 3 businessdays of therequest of theHolder.
(m) TheCompanyshallbedelinquentinitsperiodicreportfilingswiththeSe-curitiesandExchangeCommission; or
(n) TheCompanyshallcausetolosethe“bid”priceforitsstockinamarket(includingthe OTCQBmarketplaceorotherexchange).
Then,oratanytimethereafter,unlesscuredwithin5days,andineachandeverysuchcase,un-lesssuchEventofDefaultshallhavebeenwaivedinwritingbytheHolder(whichwaivershallnotbedeemedtobeawaiver ofany subsequentdefault)attheoptionof theHolderandintheHolder'ssolediscretion,theHoldermayconsider thisNoteimmediatelydueandpayable,with- outpresentment, demand,protest or(further) notice ofany kind(other thannotice of accelera- tion),all ofwhich areherebyexpressly waived,anythingherein or in anynoteor other instru- mentscontained to thecontrarynotwithstanding,and theHolder mayimmediately,and withoutexpirationof anyperiodofgrace,enforceany andall of theHolder'srightsandremediesprovid-edherein oranyotherrights orremediesaffordedby law. Uponan Event ofDefault,interest shallaccrueatadefaultinterestrateof24%perannumor,ifsuchrateisusuriousornotpermit-tedbycurrentlaw,thenatthehighestrateofinterestpermittedbylaw. Intheeventof abreach
ofSection8(k)thepenaltyshallbe$250perdaythesharesarenotissuedbeginningonthe4thdayaftertheconversionnoticewasdeliveredto theCompany. This penalty shallincreaseto
$500perdaybeginningonthe10thday.ThepenaltyforabreachofSection8(n)shallbeanin-creaseoftheoutstandingprincipalamountsby20%.IncaseofabreachofSection8(i),theout- standingprincipaldueunderthisNoteshallincreaseby50%.IfthisNoteisnotpaidatmaturity, theoutstandingprincipal dueunderthisNoteshallincreaseby10%.Further,ifabreachofSec-
tion8(m)occursoriscontinuingafterthe6monthanniversaryoftheNote,thentheHoldershallbeentitledtousethelowestclosingbidpriceduringthedelinquencyperiodasabasepricefortheconversion.Forexample,ifthelowestclosing bidprice during thedelinquencyperiodis
$0.01pershareandtheconversiondiscountis50%theHoldermayelecttoconvertfuturecon-versionsat$0.005pershare.IfthisNote isnotpaidatmaturity,theoutstanding principaldueunder this Noteshallincreaseby10%.
IftheHoldershallcommenceanactionorproceedingtoenforceanyprovisionsofthisNote,in-
cluding,withoutlimitation,engaginganattorney,theniftheHolderprevailsinsuchaction,theHoldershallbereimbursedbytheCompanyforitsattorneys’feesandothercostsandexpensesincurred in theinvestigation,preparationandprosecution ofsuchaction orproceeding.
Make-WholeforFailuretoDeliverLoss.AttheHolder’selection,iftheCompanyfailsforanyreasontodelivertotheHoldertheconversionsharesbythebythe3rdbusiness dayfollowing the deliveryof a Notice ofConversion to theCompanyand if theHolderincurs aFailure toDeliverLoss, thenatany time theHoldermayprovide the Companywrittennoticeindicating the amountspayable to theHolder inrespect of theFailure toDeliverLossand the Company must make theHolder wholeas follows:
FailuretoDeliverLoss=[(Hightradepriceatanytimeonorafterthedayofexercise)x(Num-ber ofconversion shares)]
TheCompanymustpaythe Failureto DeliverLossbycash payment,andanysuch cashpaymentmustbemadebythethirdbusinessdayfromthetimeoftheHolder’swrittennoticetotheCom-pany.
9. Incaseany provisionofthisNoteisheldbyacourtofcompetentjurisdic-tiontobeexcessiveinscopeorotherwiseinvalidorunenforceable,suchprovisionshallbead-justedratherthan voided,ifpossible, sothatitisenforceable tothe maximumextentpossible,andthevalidityandenforceabilityoftheremaining provisionsofthisNotewillnot inanyway be affected orimpairedthereby.
10. NeitherthisNotenoranytermhereofmaybeamended,waived,dis-chargedorterminated otherthanbyawritteninstrumentsignedbytheCompanyand theHolder.
11. The Companyrepresentsthatitisnota“shell”issuerandhasneverbeena“shell”issuerorthatifitpreviouslyhasbeena“shell”issuerthatatleast12monthshavepassedsincetheCompany hasreportedform10typeinformationindicatingitisnolongera“shellissu-er.TheCompanywill instruct itscounsel to either(i)write a Rule 144orsimilar opinion to al- low for salability of theconversionsharesor (ii)accept such opinion fromHolder’s counsel,provided such legal opinion is, in the reasonabledetermination of Companycounsel, factuallyand legallycorrect.
12. TheCompanyshallissueirrevocabletransferagentinstructionsreserving78,000,000sharesofitsCommonStockforconversionsunderthisNoteanda$46,316.00noteofevendateherewith(the“ShareReserve”).UponfullconversionofthisNote,anysharesre-mainingin the ShareReserveshallbecancelled. The Company shall payallcostsassociated with issuinganddeliveringtheshares.If such amountsare to bepaid bythe Holder, it may de-duct suchamountsfrom theConversion Price.ConversionNotices may besent to the Company or itstransferagent viaelectric mail. The company shouldatall timesreserve a minimum ofthree times theamount ofsharesrequired if thenote would be fullyconverted. TheHoldermay reasonablyrequestincreasesfromtime totimetoreserve suchamounts. TheCompany willin-struct itstransferagenttoprovide the outstanding shareinformation to the Holder inconnection with itsconversions.
13. TheCompanywillgivetheHolderdirectnoticeofanycorporateactions,including butnotlimitedtonamechanges,stocksplits,recapitalizationsetc.Thisnoticeshallbegiven to the Holderas soonas possible underlaw.
14. ThisNoteshallbegovernedbyandconstruedinaccordancewiththelawsofNewYorkapplicabletocontractsmadeandwhollytobeperformedwithintheStateofNewYorkandshallbebindinguponthesuccessorsandassignsofeachparty hereto.TheHolderand the Company hereby mutuallywaivetrialbyjuryand consent to exclusivejurisdictionand venue in thecourts of the StateofNewYork. ThisAgreementmaybe executed incounterparts,and thefacsimiletransmissionofanexecutedcounterparttothisAgreementshallbeeffectiveasanoriginal.
INWITNESSWHEREOF,theCompanyhascausedthisNotetobedulyexecut-edbyanofficer thereunto dulyauthorized.
Dated:2/24/16
MAX SOUND CORPORATION
By:_GregHalpern_Title:_Chairman and CFO
EXHIBIT A
NOTICE OFCONVERSION
(To be ExecutedbytheRegisteredHolder in order toConvert theNote)
Theundersignedherebyirrevocablyelectstoconvert$oftheaboveNoteintoSharesof Common Stock of MaxSoundCorporation(“Shares”) accordingto the conditionssetforth insuchNote,as of thedatewrittenbelow.
IfSharesaretobeissuedinthenameofapersonotherthantheundersigned,theundersigned willpayall transferand othertaxes and chargespayablewithrespectthereto.
DateofConversion:ApplicableConversionPrice:Signature:
[PrintName ofHolder and TitleofSigner]
Address:
SSN or EIN:
Shares areto beregistered in the followingname:
Name:Address:Tel:Fax:SSN orEIN:
Shares areto besent ordelivered to thefollowingaccount:
Account Name:Address:
