THISNOTEANDTHECOMMONSTOCKISSUABLEUPONCONVERSIONOFTHISNOTEHAVENOTBEENANDWILLNOTBEREGISTEREDWITHTHEUNITEDSTATESSECURITIESANDEXCHANGECOMMISSIONORTHESECURITIESCOMMISSIONOFANYSTATEPURSUANTTOANEXEMPTIONFROMREGISTRATION PROVIDEDUNDER THESECURITIESACT OF1933,ASAMENDED,ANDTHE RULES AND REGULATIONSPROMULGATED THEREUNDER (THE"1933 ACT”)
US$2,000,000.00
MAXSOUNDCORPORATION
8%CONVERTIBLEREDEEMABLENOTE
April8,2016
FORVALUERECEIVED,MaxSoundCorporation.(the“Company”)promisestopaytotheorderofTheVecheryFamilyTrustanditsauthorizedsuccessorsandpermittedassigns("Holder"), the aggregate principalface amount of two million dollars exactly (U.S.$2,000,000.00)onApril8, 2017("MaturityDate")andtopay interestonthe principal amount outstanding hereunder at the rate of 8% per annum commencingon April 8, 2016.Holderwillfund $600,000 by 4-11-16, ofwhich along with the$1,000,000already funded, will total$1,600,000. Holder at its sole option, can fund the remaining $400,000 upon any oneof these three 3 events. (1) LicensePO from LunaMobilorSantokorany otherLicensee, or (2) Stock dividend from IMHC deal being signed, or (3) MaxSound’s agreement withVSLbeingupheldincourt.The interestwill be paid to theHolder inwhose name thisNote is registered on the records of the Company regarding registration and transfers ofthisNote. The principalof,andintereston, thisNote are payable to theHolder, initially, and if changed,last appearing on therecordsoftheCompanyas designated inwritingbytheHolder hereof from time to time.The Company will payeach interest payment and the outstandingprincipaldueupon thisNote beforeorontheMaturityDate,less any amounts required by law to be deducted orwithheld, to the Holder of thisNote by check orwire transfer addressed tosuchHolder at the last address appearing on the records of theCompany. The forwarding ofsuch check orwire transfer shall constitute a payment of outstanding principal hereunder andshallsatisfy and discharge the liability for principal on thisNote to the extentof thesumrepresented bysuch check orwire transfer. Interestshall bepayable inCommonStock (as defined below) pursuant to paragraph 4(b) herein.
1. ThisNoteisexchangeableforanequalaggregateprincipalamountofNotesofdifferentauthorizeddenominations,asrequestedbytheHoldersurrenderingthesame.Noservicechargewillbemadeforsuchregistrationortransferorexchange,exceptthatHoldershallpayanytaxorothergovernmentalchargespayableinconnection therewith.
2. TheCompanyshallbeentitledtowithholdfromallpaymentsanyamountsrequiredtobewithheldunderapplicablelaws.
3. ThisNotemaybetransferredorexchangedonlyincompliancewiththeSecuritiesActof1933,asamended("Act")andapplicablestatesecuritieslaws.Anyattemptedtransfertoanon-qualifyingpartyshallbetreatedbytheCompanyasvoid.PriortoduepresentmentfortransferofthisNote,theCompanyandanyagentoftheCompanymaytreatthepersoninwhose name thisNote is duly registered on the Company's records as the owner hereoffor all other purposes,whether or not thisNote be overdue, andneither the Company noranysuch agentshall beaffectedor bound bynoticeto the contrary.AnyHolder of thisNoteelectingto exercisethe right of conversionsetforth inSection4(a) hereof, in addition totherequirementsset forth inSection 4(a), and any prospective transferee of thisNote, also isrequired togivetheCompanywrittenconfirmationthatthisNoteisbeingconverted("NoticeofConversion")inthe form annexed hereto asExhibitA. The date of receipt (including receiptby telecopy) ofsuchNotice of Conversionshall be the ConversionDate.
4. (a)TheHolderofthisNoteisentitled,atitsoption,toconvertalloranyamountoftheprincipalfaceamountofthisNotethenoutstandingintosharesoftheCompany'scommonstock(the"CommonStock")withoutrestrictivelegendofanynature,ataprice("ConversionPrice")for eachshare of CommonStockequalto65% of theaverage of the three lowest dailyVWAP'swith a 10 day lookback ofthe CommonStockasreported on theNational QuotationsBureauOTCQBexchangewhichthe Company’sshares are traded oranyexchange uponwhich the CommonStock may be traded in the future ("Exchange"), includingtheday uponwhich aNotice of Conversion is receivedby the Company (providedsuchNotice of Conversion is delivered by fax, email or other electronic method ofcommunication totheCompany after 4P.M. EasternStandard orDaylightSavings Time if theHolderwishes to include thesame day closing price). If theshares have not been deliveredwithin 3business days, theNotice of Conversion may berescinded.Such conversionshall beeffectuated by the Companydelivering theshares of CommonStock to theHolderwithin 3business days of receipt by the Company of theNotice of Conversion.Once theHolder has receivedsuchshares ofCommonStock, theHoldershallsurrender thisNote to theCompany,executed bytheHolderevidencingsuchHolder'sintentiontoconvertthisNoteor aspecified portion hereof, and accompanied by properassignmenthereof in blank.Accrued, but unpaidinterestshall besubject to conversion.No fractionalshares orscrip representing fractions ofshareswillbe issued on conversion, but thenumber ofshares issuableshall be rounded to thenearestwholeshare.
(b) 
InterestonanyunpaidprincipalbalanceofthisNoteshallbepaidattherateof8%perannum.InterestshallbepaidbytheCompanyinCommonStock("InterestShares").Holdermay,atanytime,sendinaNoticeofConversiontotheCompanyforInterestSharesbased on the formula provided inSection 4(a) above. The dollar amount converted into
2
InterestSharesshallbealloraportionoftheaccruedinterestcalculatedontheunpaidprincipalbalanceofthisNotetothedateofsuchnotice.
(c) DuringthefirstsixmonthsthisNoteisineffect,theCompanyatitsoptionmayredeemthisNotebypayingtotheHolderanamountasfollows:(i)iftheredemptioniswithinthefirst90daysthisNoteisineffect,thenforanamountequalto130%oftheunpaidprincipalamountofthisNotealongwithanyinterestthathasaccruedduringthatperiod,(ii)iftheredemption is after the90thday thisNoteis in effect, but lessthan the181stday thisNoteisin effect, then for an amount equal to 140% of the unpaid principal amount of thisNote alongwith any accrued interest. ThisNote may not be redeemed by the Company after 180 days withtheexceptionofrepaymentterms(SeeExhibitBAttached). The
redemptionmustbeclosedandpaidforwithin3businessdaysoftheCompanysendingtheredemptiondemandortheredemptionwillbeinvalidandtheCompanymaynotredeemthisNote.
(d) Upon(i)atransferofallorsubstantiallyalloftheassetsoftheCompanytoanypersonina singletransactionor seriesofrelatedtransactions,(ii)a reclassification,capitalreorganizationorotherchangeorexchangeofoutstandingsharesoftheCommonStock,otherthanaforwardorreversestocksplitorstockdividend,or(iii)anyconsolidationormergeroftheCompanywith or into another person or entity inwhich the Company is not thesurviving entity(otherthanamergerwhichiseffectedsolelytochangethejurisdictionofincorporationoftheCompany and results in a reclassification, conversion or exchange of outstandingshares ofCommonStocksolely intoshares of CommonStock) (each of items (i), (ii) and (iii) beingreferred to as a"Sale Event"), then, in each case, the Companyshall, upon request of theHolder,redeem thisNote in cash for 150% of the principal amount, plus accrued but unpaidinterest through thedateofredemption,or attheelectionoftheHolder,suchHoldermayconverttheunpaid principal amount of thisNote (togetherwith the amount of accrued but unpaid interest)intoshares of CommonStock immediately prior tosuchSale Event at the ConversionPrice.
(e) IncaseofanySaleEvent(nottoincludeasale ofallorsubstantiallyalloftheCompany’sassets)inconnectionwithwhichthisNoteisnotredeemedorconverted,theCompanyshallcauseeffectiveprovisiontobemadesothattheHolderofthisNoteshallhavetherightthereafter,byconvertingthisNote,topurchaseorconvertthisNoteintothekindandnumberofsharesofstockorothersecuritiesorproperty(includingcash)receivableuponsuchreclassification,capitalreorganizationorotherchange, consolidationormergerbyaholderof the number ofshares of CommonStock that could have been purchased upon exercise of theNote andatthesame ConversionPrice, asdefinedinthisNote,immediately priortosuchSaleEvent. The foregoing provisionsshallsimilarly apply tosuccessiveSale Events. If theconsiderationreceivedbytheholdersofCommonStockisotherthan cash,thevalueshallbeasdetermined by the Board ofDirectors of the Company orsuccessor person or entity acting ingood faith.
5. NoprovisionofthisNoteshallalterorimpairtheobligationoftheCompany,whichisabsoluteandunconditional,topaytheprincipalof,andintereston,thisNoteatthetime,place,andrate,andintheform,hereinprescribed.
TheCompanyherebyexpresslywaivesdemandandpresentmentforpayment,noticeofnon-payment,protest,noticeofprotest,noticeofdishonor,noticeofaccelerationorintentto accelerate,anddiligence in taking any action tocollectamounts calledfor hereunderandshallbedirectlyandprimarilyliableforthepaymentofallsumsowingandtobeowinghereto.
6. TheCompanyagreestopayallcostsandexpenses,includingreasonable attorneys'feesandexpenses,whichmaybeincurredbytheHolderincollectinganyamountdueunderthisNote.
| 7. | Ifoneormoreofthefollowingdescribed"EventsofDefault"shalloccur: |
(a) TheCompanyshalldefaultinthepaymentofprincipalorinterestonthisNoteoranyothernoteissuedtotheHolderbytheCompany;or
(b) AnyoftherepresentationsorwarrantiesmadebytheCompanyhereinorinanycertificateorfinancialorotherwrittenstatementsheretoforeorhereafterfurnishedbyoronbehalfoftheCompanyinconnectionwiththeexecutionanddeliveryofthisNote,ortheSecuritiesPurchaseAgreementunderwhichthisnotewasissuedshallbefalseormisleadinginanyrespect;or
(c) TheCompanyshallfailtoperformorobserve,inanyrespect,anycovenant,term, provision,condition, agreementor obligationof theCompany underthisNoteoranyothernoteissuedtotheHolder;or
(d) TheCompanyshall(1)becomeinsolvent;(2)admitinwritingitsinabilitytopayitsdebtsgenerallyastheymature;(3)makeanassignmentforthebenefitofcreditorsor commenceproceedingsforitsdissolution;(4)applyfororconsenttotheappointmentofatrustee,liquidatororreceiver foritsorfor asubstantialpartof itspropertyor business;(5)file a petition for bankruptcy relief, consent to the filing ofsuch petition or havefiled against it aninvoluntary petition for bankruptcy relief, all under federal orstate laws as applicable; or
(e) Atrustee,liquidatororreceivershallbeappointedfortheCompanyorforasubstantialpartofitspropertyorbusinesswithoutitsconsentandshallnotbedischargedwithinsixty(60)daysaftersuchappointment;or
(f) AnygovernmentalagencyoranycourtofcompetentjurisdictionattheinstanceofanygovernmentalagencyshallassumecustodyorcontrolofthewholeoranysubstantialportionofthepropertiesorassetsoftheCompany;or
(g) Oneormoremoneyjudgments,writsorwarrantsofattachment,orsimilarprocess,inexcessoffiftythousanddollars($50,000)intheaggregate,shallbeenteredorfiledagainsttheCompanyoranyofitspropertiesorotherassetsandshallremainunpaid,unvacated,unbonded orunstayed foraperiod offifteen (15)daysor inany eventlaterthanfive(5)days prior to the date of any proposedsalethereunder; or
(h) TheCompanyshallhavedefaultedonorbreachedanytermofanyothernoteofsimilardebtinstrumentintowhichtheCompanyhasenteredandfailedtocuresuchde
faultwithintheappropriategraceperiod;or
(i) TheCompanyshallhaveitsCommonStockdelistedfromanexchange(includingtheOTCQBexchange)or,iftheCommonStocktradesonanexchange,thentradingintheCommonStockshallbesuspendedformorethan10consecutivedays;
(j) IfamajorityofthemembersoftheBoardofDirectorsoftheCompanyonthedatehereofarenolongerservingasmembersoftheBoard;
(k) TheCompanyshallnotdelivertotheHoldertheCommonStockpursuanttoparagraph4hereinwithoutrestrictivelegendwithin3businessdaysofitsreceiptofaNoticeofConversion;or
Then,oratanytimethereafter,unlesscured,andineachandeverysuchcase,unlesssuchEventofDefaultshallhavebeenwaivedinwritingby theHolder(whichwaivershallnotbedeemedtobeawaiverofanysubsequentdefault)attheoptionoftheHolderandintheHolder'ssolediscretion,theHolder may considerthisNoteimmediatelydueandpayable,without presentment,demand, protest or (further) notice of any kind (other than notice of acceleration), all ofwhich are hereby expresslywaived, anythinghereinorinany noteorotherinstrumentscontained tothe contrarynotwithstanding,andtheHoldermayimmediately,andwithout expiration of any period of grace, enforce any and all of theHolder's rights and remedies provided herein or any other rights or remedies afforded by law.Upon an Event ofDefault, interestshall accrue at a defaultinterestrateof 16%perannum or,ifsuchrateis usurious ornotpermitted by current law, then at the highest rate of interest permitted by law. In the event of a breach ofSection 8(k) the penaltyshall be $250 per day theshares are not issued beginning onthe4thdayaftertheconversionnoticewas delivered to the Company. This penaltyshall increase to $500 per day beginningon the10thday.
IftheHoldershallcommenceanactionorproceedingtoenforceanyprovisionsofthisNote,including,withoutlimitation,engaginganattorney,theniftheHolderprevailsinsuchaction,theHoldershallbereimbursedbytheCompanyforitsattorneys’feesandothercostsandexpensesincurredintheinvestigation,preparationandprosecutionofsuchactionorproceeding.
8. IncaseanyprovisionofthisNoteisheldbyacourtofcompetentjurisdictiontobeexcessiveinscopeorotherwiseinvalidorunenforceable,suchprovisionshallbeadjustedratherthanvoided,ifpossible,sothatitisenforceabletothemaximumextentpossible,andthevalidityandenforceabilityoftheremainingprovisionsofthisNotewillnotin anyway be affected or impaired thereby.
9. NeitherthisNotenoranytermhereofmaybeamended,waived,dischargedorterminatedotherthanbyawritteninstrumentsignedbytheCompanyandtheHolder.
TheCompanyrepresentsthatitisnota“shell”issuerandhasneverbeena“shell”issuerorthatif itpreviouslyhasbeena“shell”issuerthatatleast12monthshavepassedsincetheCompanyhasreportedform10typeinformationindicatingitisnolongera“shellissuer.Further.The
Companywillinstructitscounseltoeither(i)writea144-3(a(9)opiniontoallowforsalabilityoftheconversionsharesor(ii)acceptsuchopinionfromHolder’scounsel.
1. TheCompanywillgivetheHolderdirectnoticeofanycorporateactions,includingbutnotlimitedtonamechanges,stocksplits,recapitalizationsetc.ThisnoticeshallbegiventotheHolderassoonaspossibleunderlaw.
2. ThisNoteshallbegovernedbyandconstruedinaccordancewiththeLawsofDelawareapplicabletocontractsmadeandwhollytobeperformedwithintheStateofCaliforniaCountyofSanDiegoandshallbebindinguponthesuccessorsandassignsofeachpartyhereto.TheHolderandtheCompanyherebymutuallywaivetrialbyjuryandconsenttoexclusive jurisdiction and venueinthe courtsof theStateof CaliforniaCounty ofSan Diego.This Agreement may be executed in counterparts, andthefacsimile transmissionof an executedcounterpart to thisAgreementshall be effective as an original.
INWITNESSWHEREOF,theCompanyhascausedthisNotetobedulyexecutedbyanofficerthereuntodulyauthorized.
Dated:April8,2016
MAXSOUNDCORPORATION
| By: | GregHalpern-Chairman&CFO |
EXHIBITA
NOTICEOFCONVERSION
(TobeExecutedbytheRegisteredHolderinordertoConverttheNote)
Theundersignedherebyirrevocablyelectstoconvert$oftheaboveNoteintoSharesofCommonStockofMaxSoundCorporation.(“Shares”)accordingtotheconditionssetforthinsuchNote,asofthedatewrittenbelow.
IfSharesaretobeissuedinthenameofapersonotherthantheundersigned,theundersignedwillpayalltransferandothertaxesandchargespayablewithrespectthereto.
Dateof Conversion:ApplicableConversionPrice:
| Signature: | [PrintNameofHolderandTitleofSigner] |
Address:
SSNorEIN:
Sharesaretoberegisteredinthefollowingname:
Name:Address:Tel:Fax:SSNorEIN:
Sharesaretobesentordeliveredtothefollowingaccount:
AccountName:Address:
EXHIBITB
