NEITHERTHEISSUANCEANDSALEOFTHESECURITIESREPRESENTEDBYTHISCONVERTIBLEPROMISSORYNOTENORTHESECURITIESINTOWHICHTHESESECURITIESARECONVERTIBLEHAVEBEENREGISTEREDUNDERTHESECURITIESACTOF1933,ASAMENDED, ORAPPLICABLESTATESECURITIESLAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) INTHEABSENCEOF(A)ANEFFECTIVEREGISTRATIONSTATEMENTFORTHESECURITIESUNDERTHESECURITIESACTOF1933,ASAMENDED,OR(B)ANOPINIONOFCOUNSEL(WHICHCOUNSELSHALLBESELECTEDBYTHEHOLDER),INA GENERALLY ACCEPTABLEFORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
OriginalPrincipalAmount:$171,665.00 IssueDate:May18,2016PurchasePrice:$150,000.00
CONVERTIBLEPROMISSORY NOTE
FORVALUERECEIVED,MAXSOUNDCORPORATION,aDelawarecorporation(the“Borrower”),herebypromisestopaytotheorderofILIADRESEARCHANDTRADING,L.P.,aUtahlimitedpartnership,orregisteredassigns(the“Holder”),thesumof$171,665.00(the“OriginalPrincipalAmount”)togetherwithany additionalcharges provided forherein,on the datethatis 12 months after the Issue Date (the “Maturity Date”), and to pay interest on the Outstanding Balance (as defined below) at the rate of eight percent (8%) per annum from the date hereof (the “Issue Date”) untilthesameispaidinfull;provided thatupon theoccurrenceofanEvent ofDefault (asdefinedbelow), interest shall thereafter accrue on the Outstanding Balance both before and after judgment at the rate of fourteen percent (14%) per annum (“Default Interest”). All interest calculations hereunder shall be computed onthe basis of a 360-dayyear comprisedof twelve(12) thirty(30)daymonths, shallcompounddaily andshall be payablein accordance with the terms ofthis Note. The Borrower acknowledges thattheOriginal PrincipalAmountexceedsthe purchasepriceof thisNoteandthat such excessconsistsoftheOID(asdefinedinthePurchaseAgreement (definedbelow)) intheamount of
$16,665.00,theCarriedTransactionExpenseAmount(asdefinedinthePurchaseAgreement)intheamountof$5,000.00tocovertheHolder’slegalandotherexpensesincurredinthepreparationofthisNote,thePurchaseAgreement,theIrrevocableTransferAgentInstructions,andallothercertificates,documents,agreements,resolutionsandinstrumentsdeliveredtoanypartyunderorinconnectionwith this Note, as the same may be 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 theHolderaspartoftheoutstandingprincipalbalanceassetforthinthisNote.ThisNotemaynotbe prepaid in whole or in part except as otherwise provided in Section 1.8. All payments due hereunder (tothe extent not converted into common stock, $0.00001 par value per share, of the Borrower (the “Common Stock”) in accordance with the terms hereof)shall be made in lawfulmoney of the United States of America. All payments shall be made at such address as the Holder shall designate from time to time by written notice made in accordance with theprovisions of this Note. Eachcapitalizedtermused herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain SecuritiesPurchase Agreement dated the date hereof between the Borrower and the Holder, pursuant to which thisNotewasoriginally issued(the “Purchase Agreement”).Forpurposeshereof,the term “Outstanding Balance” means the Original Principal Amount, as reduced or increased, as the case may be, pursuant to the terms hereof for conversion, breach hereof or otherwise, plus any accrued but unpaid interest (including with limitation Default Interest), collection and enforcements costs,and any other fees or charges incurred under this Note or under the Purchase Agreement.
ThisNoteisfreefromalltaxes,liens,claimsandencumbranceswithrespecttotheissuethereofandshallnotbesubjecttopreemptiverightsorothersimilarrightsofstockholdersoftheBorrowerandwillnotimposepersonalliabilityupontheholderthereof.
ThefollowingadditionaltermsshallapplytothisNote:
ConversionRight.SubjecttoSection1.7,duringtheperiodbeginningontheIssueDateandendingwhentheOutstandingBalanceispaidorconvertedinfull,theHoldershall,atitsoption,havetherightfromtimetotime,toconvertalloranypartoftheOutstandingBalanceofthisNoteintofullypaidandnon-assessablesharesofCommonStock,assuchCommonStockexistsontheIssue Date, or any shares of capital stock or other securities of theBorrower into which such Common Stock shall hereafter be changedor reclassified at the ConversionPrice (as definedbelow) determined as provided herein (a “Conversion”). The number of shares of Common Stock to be issued upon each conversion of this Note (the “Conversion Shares”)shall be determined by dividing the Conversion Amount (as definedbelow)bythe applicable ConversionPrice thenineffect onthe date specifiedinthe noticeofconversion,intheformattachedheretoasExhibitA(the“NoticeofConversion”),deliveredto the Borrower by the Holder in accordance with Section 1.4(a) below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected toresultin,notice)to the Borrower before6:00 p.m.,New York,New York timeon such conversion date(the“Conversion Date”).Theterm “Conversion Amount”means,with respectto any conversion ofthis Note,the portion ofthe Outstanding Balance to be converted.
ConversionPrice.
(a) CalculationofConversionPrice.Theconversionprice(asthesamemaybeadjustedfromtimetotimepursuanttothetermshereof,the“ConversionPrice”)shallmean65%(the“ConversionFactor”)multipliedbytheMarketPrice(asdefinedherein).“MarketPrice”meanstheaverageofthetwo(2)lowestTrading Prices(asdefinedbelow)fortheCommonStock during theten
(10)TradingDay(asdefinedbelow)periodendingonthelatestcompleteTradingDaypriortotheConversionDate.IfanEventofDefault(asdefinedbelow)otherthananEventofDefaultpursuanttoSection3.1(i)occurs,thentheConversionFactorwillbereducedto55%.IfanEventofDefaultpursuanttoSection3.1(i)occurs,thentheConversionFactorwillbereducedto40%.“TradingPrice”means,fortheCommonStockasofanydate,theclosingbidpriceonthePrincipal Marketasreportedbyareliablereporting service designated by the Holder (e.g. Bloomberg) or, if the Principal Market is not the principal tradingmarket for suchsecurity, theclosingbidpriceofsuchsecurityontheprincipal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makersforsuchsecuritythatarequotedin“OTCPink”byPinkOTCMarketsInc.(formerlyPinkSheets LLC), or any successor entity or other publisher thereof.If the Trading Price cannot be calculated for suchsecurityonsuchdateinthemannerprovidedabove,theTradingPriceshallbethefairmarketvalue asmutuallydeterminedbytheBorrowerandtheHolder.“TradingDay”shallmeananydayonwhich the Common Stock is traded or tradable for any period on the Principal Market, or on the principal securitiesexchangeorothersecuritiesmarketonwhichtheCommonStockisthenbeingtraded.
(b) ConversionPriceDuringMajor Announcements.NotwithstandinganythingcontainedinSection1.2(a)tothecontrary,intheeventtheBorrower(i)makesapublicannouncementthatitintendstoconsolidateormergewithanyothercorporation(otherthanamergerinwhichtheBorroweristhesurvivingorcontinuingcorporationanditscapitalstockisunchanged)orsellortransferallorsubstantiallyalloftheassetsoftheBorroweror(ii)anyperson,grouporentity
(includingtheBorrower)publiclyannouncesatenderoffertopurchase50%ormoreoftheBorrower’sCommonStock(oranyothertakeoverscheme)(thedateoftheannouncementreferredtoinclause(i)or
(ii)ishereinafterreferredtoasthe“AnnouncementDate”),thentheConversionPriceshall,effectiveupontheAnnouncementDateandcontinuingthroughtheAdjustedConversionPriceTerminationDate(asdefinedbelow),beequaltothelowerof(1)theConversionPricewhichwouldhavebeenapplicableforaConversionoccurringontheAnnouncementDate,and(2)theConversionPricethatwouldotherwisebein effect.From and aftertheAdjusted ConversionPriceTermination Date,theConversion PriceshallbedeterminedassetforthinthisSection1.2(b).Forpurposeshereof,“AdjustedConversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(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 termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.
AuthorizedShares.TheBorrowercovenantsthatduringtheperiodtheconversionrightexists,theBorrowerwillreservefromitsauthorizedandunissuedCommonStockasufficientnumberofshares,freefrompreemptiverights,toprovidefortheissuanceofCommonStockuponthefullconversionofthisNote.TheBorrowerisrequiredatalltimestohaveauthorizedand reserved three times the numberof shares that isactually issuable upon fullconversion of this Note (based on the Conversion Price in effect from time to time) (the “Reserved Amount”). The ReservedAmount shallbeincreasedfromtimetotimeasrequiredtoinsurecompliancewiththisSection 1.3. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non- assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which wouldchange thenumber of sharesofCommonStock into whichthis Noteshall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free frompreemptiverights, for conversion of thisNote. The Borrower (i) acknowledgesthat ithas irrevocably instructed its transfer agent to issue shares of the Common Stock issuableupon conversionofthisNote,and(ii)agreesthatitsissuanceofthisNoteshallconstitutefullauthoritytoits officers and agents who are charged with the duty of issuing the necessary shares ofCommon Stock inaccordance with the terms and conditions of this Note. If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.1(c).
MethodofConversion.
(a) Mechanics ofConversion. Subject toSection 1.7hereof,beginning onthedatespecifiedinSection1.1,thisNotemaybeconvertedbytheHolderinwholeorinpartatanytimefromtimetotimeaftertheIssueDate,bysubmittingtotheBorroweraNoticeofConversion(byfacsimile,e-mailorotherreasonablemeansofcommunicationdispatchedontheConversionDatepriorto6:00p.m.,New York,New Yorktime),otherwisetheConversionDatewillbethenextTradingDay.
(b) SurrenderofNoteUponConversion.Notwithstandinganythingtothecontrarysetforthherein,uponconversionofthisNoteinaccordancewiththetermshereof,theHoldershallnotberequiredtophysicallysurrenderthisNotetotheBorrowerunlesstheentireOutstandingBalanceofthisNoteissoconverted.TheHolderandtheBorrowershallmaintainrecordsshowingtheamount of the Outstanding Balance so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Holder shall,prima facie,be controlling and determinative in the absence of manifest error. Notwithstandingtheforegoing, if anyportionof this Noteis convertedas aforesaid, theHolder maynot
transferthisNoteunlesstheHolderfirstphysicallysurrendersthisNotetotheBorrower,whereupontheBorrowerwillforthwithissueanddeliverupontheorderoftheHolderanewNoteofliketenor,registeredastheHoldermayrequest,representingintheaggregatetheremainingOutstandingBalanceofthisNote.TheHolderandanyassignee,byacceptanceofthisNote,acknowledgeandagreethat,byreasonoftheprovisionsofthisparagraph,followingconversionofaportionofthisNote,theunpaidand unconverted Outstanding Balance of this Note represented by this Note may be less than the amount statedonthefacehereof.
(c) PaymentofTaxes.Borrowerisresponsibleforthepaymentofallcharges,fees,andtaxesrequiredtodeliverConversionSharestoHolder;provider,however,thatBorrowershallnotberequiredtopayanytaxwhichmaybepayableinrespectofanytransferinvolvedintheissueanddeliveryofConversionSharesorothersecuritiesorpropertyonconversionofthisNoteinanameotherthanthatoftheHolder(orinstreetname), andtheBorrowershallnotberequiredtoissueor deliver any such shares or other securities or propertyunless and until the person or persons (other thanthe Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(d) DeliveryofCommonStockUponConversion.Onorbeforethecloseofbusinessonthethird(3rd)TradingDayfollowingthedateofreceiptofaNoticeofConversionfromtheHolderviafacsimiletransmissionore-mail(orotherreasonablemeansofcommunication)(the“DeliveryDate”),theBorrowershall, providedthat allDWACEligibleConditions(asdefinedbelow)arethen
satisfied,credittheaggregatenumberofConversionSharestowhichtheHoldershallbeentitledtotheaccountspecifiedontheConversionNoticeviatheDWAC (asdefinedbelow)system.IfallDWACEligibleConditionsarenotthensatisfied,theBorrowershallinsteadissueanddeliverorcausetobeissuedanddelivered(viareputableovernightcourier)totheaddressasspecifiedintheNoticeofConversion,a certificate,registered in the name ofthe Holder orits designee,forthe number of Conversion Shares to which the Holder shall be entitled;provided, however, that, in addition to any other rightsorremediesthat theHoldermayhaveunderthisNote, then theNon-DWACEligibleAdjustmentAmount (as defined below) shall be added to the Outstanding Balance of this Note as set forth in Section 1.6(f) below. Fortheavoidance ofdoubt, theBorrower hasnot met its obligationto deliverConversionSharesbytheDeliveryDateunlesstheHolderoritsbroker, asapplicable,hasactuallyreceivedtheshares electronically into the applicable account, or if the DWAC Eligible Conditions are not then satisfied, has actuallyreceived the certificaterepresenting the applicableConversionSharesno later than the closeof business on the relevant Delivery Date pursuant to the terms set forth above. For purposes hereof, the term“DWACEligible Conditions” means that (i) the CommonStockis eligible at DTC(as defined below) for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’sDWACsystem, (ii)the Borrowerhas beenapproved(without revocation)by theDTC’s underwriting department, (iii) the Borrower’s transfer agent is approved as an agent in the DTC/FAST Program (as defined below), (iv) the Conversion Shares are otherwise eligible for delivery via DWAC, and (v) the Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC. For purposes of this Note, the term “DWAC” means Deposit Withdrawal at Custodianas definedbytheDTC; theterm“DTC”means theDepositoryTrust Company; andthe term “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer Program.
(e) ObligationofBorrowertoDeliverCommonStock.IftheHoldershallhavegivenaNoticeofConversionasprovidedherein,theBorrower’sobligationtoissueanddeliverthesharesofCommonStockshallbeabsoluteandunconditional,irrespectiveoftheabsenceofanyactionbytheHoldertoenforcethesame,anywaiverorconsentwithrespecttoanyprovisionthereof,therecoveryofanyjudgmentagainstany personoranyaction toenforce thesame,anyfailure ordelayin theenforcement ofanyotherobligationoftheBorrowertotheholderofrecord, oranysetoff,counterclaim,
recoupment,limitationortermination,oranybreachorallegedbreachbytheHolderofanyobligationtotheBorrower,andirrespectiveofanyothercircumstancewhichmightotherwiselimitsuchobligationoftheBorrowertotheHolderinconnectionwithsuchconversion.TheConversionDatespecifiedintheNoticeofConversionshallbetheConversionDatesolongastheNoticeofConversionisdeliveredtothe Borrowerbefore6:00p.m.,New York,New Yorktime,onsuchdate;otherwise,theConversionDate shallbethenextTrading Day.OncetheHoldermayfreely tradetheCommonStockissuable uponaconversion of this Note pursuant to and in accordance with the terms hereof (and in the case of any certificates deliveredtoHolderbecausenotall oftheDWACEligibleConditions arethensatisfied,once such certificates have been deposited into Holder’s brokerage account, all legends have been removed therefrom, and the Common Stock represented by such certificates is freely tradeable), all rights with respectto theportion of the OutstandingBalance being so convertedshallforthwithterminate;provided, however,thattheHoldershallbedeemedtobetheholderofrecordoftheCommonStockissuableuponsuch conversion as of the date Borrower receives the corresponding Notice of Conversion.
(f) DeliveryofCommonStockviatheDWACSystem.Notwithstandinganyotherprovisioncontainedherein,failuretodeliverviatheDWACsystemanyCommonStocktobedeliveredtotheHolderunderthisSection1.4shallconstituteabreachofthisAgreementandanEventof DefaultunderSection 3 hereof,including withoutlimitation underSections3.1(c)and 3.1(p).
(g) FailuretoDeliverCommonStockPriortoDeliveryDate.WithoutinanywaylimitingtheHolder’srighttopursueotherremedies,includingactualdamagesand/orequitablerelief,thepartiesagreethatifdeliveryoftheCommonStockissuableuponconversionofthisNoteisnotdeliveredasrequiredbySection1.4(d)bytheDeliveryDate(a“ConversionDefault”),theBorrower shallpay incash to theHolder foreach calendar daybeyond the DeliveryDate thatthe Borrower failstodeliver suchCommon Stock an amount equal to $500 per day (the “Conversion Default Payment”). SuchcashamountshallbepaidtotheHolderbythefifthdayofthemonthfollowingthemonthinwhich it has accrued(the “ConversionDefault Payment DueDate”). Inthe event suchcashamount is not received bytheHolder bytheConversionDefault Payment DueDate, at theoption of the Holder (withoutnotice to theBorrower), the ConversionDefault Payment shall beadded tothe Outstanding Balanceof thisNote,inwhicheventinterestshallaccruethereoninaccordancewiththetermsofthisNoteandsuch additionalprincipal amount shallbe convertible intoCommon Stock in accordancewith the termsof this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damagesresulting from a failure, attempt to frustrate, or interference with such conversion right are difficult if not impossible toquantify. Accordinglythe partiesacknowledge thatthe liquidateddamagesprovisions contained inthis Section1.4(g) arejustified.
ConcerningtheShares.TransferofthesharesofCommonStockissuableuponconversionofthisNoteisrestrictedandcertificatesrepresentingsuchsharesmaybearalegendassetforthinSections4.14ofthePurchaseAgreement.
EffectofCertainEvents.
(a) FundamentalTransactionConsentRight.TheBorrowershallnotenterintoorbepartytoaFundamentalTransaction(asdefinedbelow),unlesstheBorrowerobtainsthepriorwrittenconsentof theHolderto enterintosuchFundamentalTransaction.For purposesofthisNote,“FundamentalTransaction”meansthat(i)any“person”or“group”(asthesetermsareused for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgatedthereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregateordinary voting power representedby issued andoutstanding voting stock of the Borrower, or (ii) (1) the Borrower or any of itssubsidiaries shall, directly or indirectly, inone ormorerelatedtransactions, consolidateormerge withorinto(whether ornotthe
Borroweroranyofitssubsidiariesisthesurvivingcorporation)anyotherindividual,corporation,limitedliabilitycompany,partnership,association,trustorotherentityororganization(collectively,“Person”),or(2)theBorroweroranyofitssubsidiariesshall,directlyorindirectly,inoneormorerelatedtransactions,sell,lease,license,assign,transfer,conveyorotherwisedisposeofallorsubstantiallyallofitsrespectivepropertiesorassetstoanyotherPerson,or(3) theBorroweroranyofitssubsidiariesshall, directly or indirectly, in one or more related transactions, allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of the Borrower (not including any shares of voting stock of the Borrower held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, suchpurchase, tender or exchange offer), or (4) the Borrower or any of its subsidiaries shall, directly or indirectly,inoneormorerelatedtransactions,consummateastockorsharepurchaseagreementorotherbusiness combination (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 sharesof votingstock oftheBorrower (not including anyshares ofvotingstock ofthe Borrower held by the other Person or other Persons making or party to, or associated or affiliated with theotherPersonsmakingorpartyto,suchstockorsharepurchaseagreementorotherbusinesscombination),or(5) theBorrowerorany ofitssubsidiariesshall,directly orindirectly,in oneormore related transactions, reorganize, recapitalize or reclassify the Common Stock, other than an increase in the number ofauthorizedsharesof theBorrower’sCommonStock. Theprovisionsof thisSection 1.6(a) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard toanylimitationsontheconversionofthisNote. Asaconditiontopre-approvinganyFundamental Transaction in writing, which approval may be withheld in the Holder’s sole discretion, Holder mayrequire the resulting successor or acquiring entity (if not the Borrower) to assume by written instrument all of the obligations of the Borrower under this Note and all the other Transaction Documents with thesame effect as if such successor or acquirer had been named as the Borrower hereto and thereto.
(b) AdjustmentDuetoFundamentalTransactions.If,atanytimewhenthisNoteisissuedandoutstandingandpriortoconversionofallofthisNote,thereshallbeanyFundamentalTransactionthatispre-approvedinwritingbytheHolderpursuanttoSection1.6(a)above,asaresultofwhichsharesofCommonStockoftheBorrowershallbechangedintothesameoradifferentnumberofsharesofanotherclassorclassesofstockorsecuritiesofthe Borrower oranotherentity,orin caseofany saleorconveyanceofall orsubstantiallyalloftheassetsoftheBorrowerotherthaninconnectionwitha plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the rightto receive upon conversion of this Note, upon the basis and upon the terms and conditions specified hereinandinlieuoftheshares ofCommonStockimmediatelytheretoforeissuableuponconversion, suchstock,securitiesorassetswhichtheHolderwouldhavebeenentitledtoreceiveinsuchtransactionhad this Note been converted in full immediately prior to such transaction (without regard to any limitations onconversionsetforthherein),andinanysuchcaseappropriateprovisionsshallbemadewithrespecttotherightsandinterestsoftheHolderofthisNotetotheendthattheprovisionshereof(including,without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of this Note)shall thereafter be applicable, as nearly asmay be practicable in relation to any securitiesorassetsthereafterdeliverableupontheconversionhereof.Theaboveprovisionsshallsimilarly apply to successive FundamentalTransactions.
(c) AdjustmentDuetoDistribution.IftheBorrowershalldeclareormakeanydistributionofitsassets(orrightstoacquireitsassets)toholdersofCommonStockasadividend,stockrepurchase,bywayofreturnofcapitalorotherwise(includinganydividendordistributiontotheBorrower’sstockholdersincashorshares(orrightstoacquireshares)ofcapitalstockofasubsidiary(i.e.,a spin-off))(a“Distribution”), thentheHolderof thisNoteshall beentitled, upon anyconversionofthis Note after the date of record for determining stockholders entitled to such Distribution,to receive theamount of such assets which would have been payable to the Holder with respect to the shares of
CommonStockissuableuponsuchconversionhadsuchHolderbeentheholderofsuchsharesofCommonStockontherecorddateforthedeterminationofstockholdersentitledtosuchDistribution.
(d) AdjustmentDuetoDilutiveIssuance.If,atanytimewhenthisNoteisissuedandoutstanding,theBorrowerissuesorsells,orinaccordancewiththisSection1.6(d)hereofisdeemedtohaveissuedorsold,anysharesofCommonStockfornoconsiderationorforaconsiderationpershare(beforedeductionofreasonableexpensesorcommissionsunderwritingdiscountsorallowancesinconnection therewith)less than theConversion Price ineffectonthe dateof such issuance(or deemed issuance)ofsuchsharesofCommonStock(a “DilutiveIssuance”),thenimmediatelyupontheDilutive Issuance,theConversionPricewillbereducedtotheamountof theconsideration per sharereceivedbythe Borrower in such Dilutive Issuance.
TheBorrowershallbedeemedtohaveissuedorsoldsharesofCommonStockiftheBorrowerinanymannerissuesorgrantsanywarrants,rightsoroptions(notincludingemployeestockoptionplans),whetherornotimmediatelyexercisable,tosubscribeforortopurchaseCommonStockorother securitiesconvertibleintoorexchangeablefor CommonStock(“ConvertibleSecurities”)(such warrants, rights andoptions to purchaseCommon Stockor Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for whichCommon Stock isissuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, receivedorreceivablebytheBorrowerasconsideration fortheissuanceorgranting ofallsuch Options, plustheminimum aggregate amountofadditionalconsideration,ifany,payable tothe Borroweruponthe exerciseofallsuchOptions,plus,inthecaseofConvertibleSecuritiesissuableupontheexerciseofsuch Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchangethereofatthetimesuchConvertibleSecuritiesfirstbecomeconvertibleorexchangeable,by(ii) the maximum total number of sharesofCommonStockissuable upontheexerciseofall suchOptions (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the ConversionPricewillbemadeupontheactualissuanceofsuchCommonStockupontheexerciseofsuch Options oruponthe conversionorexchangeof ConvertibleSecuritiesissuable uponexerciseof suchOptions.
Additionally,theBorrowershallbedeemedtohaveissuedorsoldsharesofCommonStockiftheBorrowerinanymannerissuesorsellsanyConvertibleSecurities,whetherornotimmediatelyconvertible,andthepricepershareforwhichCommonStockisissuableuponsuchconversionorexchangeisless than theConversion Pricethen in effect, then theConversion Price shall be equaltosuchpricepershare.Forthepurposesoftheprecedingsentence,the “pricepershareforwhichCommon Stock is issuable upon such conversion or exchange” is determined by dividing (1) the total amount, if any, received or receivableby theBorrower as consideration for the issuanceor sale of all such Convertible Securities, plus the minimumaggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (2) the maximum total number of shares ofCommon Stock issuable upon the conversionor exchange of all suchConvertible Securities. No further adjustment tothe Conversion Price will be made upon the actual issuance of suchCommon Stock upon conversion orexchangeofsuchConvertibleSecurities.
(e) PurchaseRights.If,atanytimewhenthisNoteisissuedandoutstanding,theBorrowerissuesanyconvertiblesecuritiesorrightstopurchasestock,warrants,securitiesorotherproperty(the“PurchaseRights”)proratatotherecordholdersofanyclassofCommonStock,thentheHolderofthisNotewillbeentitledtoacquire,uponthetermsapplicabletosuchPurchaseRights,theaggregatePurchaseRightswhich such Holdercould haveacquired ifsuch Holder had held thenumberof
sharesofCommonStockacquirableuponcompleteconversionofthisNote(withoutregardtoanylimitationsonconversioncontainedherein)immediatelybeforethedateonwhicharecordistakenforthegrant,issuanceorsaleofsuchPurchaseRightsor,ifnosuchrecordistaken,thedateasofwhichtherecordholdersofCommonStockaretobedeterminedforthegrant,issueorsaleofsuchPurchaseRights.
(f) AdjustmentDuetoNon-DWACEligibility.If,atanytimewhenthisNoteisissuedandoutstanding,theHolderdeliversaNoticeofConversionandatsuchtimeallDWACEligibleConditionsarenotthensatisfied,theBorrowershalldelivercertificatedConversionSharestothe HolderpursuanttoSection1.4(d)andtheNon-DWAC EligibleAdjustmentAmountshallbeaddedtothe Outstanding Balance of this Note, without limiting any other rights of the Holder under this Note or the other Transaction Documents. The “Non-DWACEligible Adjustment Amount” is the amount equal to the number of applicable Conversion Shares multiplied by the excess, if any, of (i) the Trading Price of theCommonStockontheConversionDate,over(ii)theTradingPriceoftheCommonStockonthedate the certificated Conversion Shares are freely tradable, clear of any restrictive legend and deposited in the Holder’s brokerage account.In any suchcase, Holder will usereasonable efforts to timely deposit such certificates in its brokerage account after it receives them and cause such restrictive legends to be removed, and, without limiting any other provision hereof, Borrower agrees to fully cooperate with Holder in accomplishing the same.
(g) AdjustmentDuetoLateClearingofDWACEligibleShares.If,atanytimewhenthisNoteisissuedandoutstanding,theHolderdeliversaNoticeofConversionandatsuchtimetheCommonStockisDWACEligibleandtheapplicableDWACEligibleConversionSharesaredeliveredtoHolderoritsbroker,butittakeslongerthanfive(5)businessdaysaftersuchdeliveryforsuchConversionSharestobeelectronicallyclearedfortradinginHolder’sbrokerageaccount,thenthe Late Clearing Adjustment Amount (as defined below) shall beadded to theOutstanding Balance of thisNote, without limiting any other rights of the Holder under this Note or the other Transaction Documents.The “Late Clearing Adjustment Amount” is the amount equal to the number of applicable Conversion Shares multiplied by the excess, if any, of (1) the Trading Price of theCommon Stock on the Conversion Date, over (2) the Trading Price of theCommon Stock on the date the certificated DWAC EligibleConversionShares areelectronicallyclearedfor tradingintheHolder’s brokerageaccount.Inanysuch case, and without limiting any other provision hereof, each of Holder and the Borrower agrees to take all action reasonably necessary on its part to help ensure that the applicable Conversion Shares are electronically cleared for trading in the Holder’s brokerage account within the five-day period described above.
(h) NoticeofAdjustments.UpontheoccurrenceofeachadjustmentorreadjustmentoftheConversionPriceortheadditionoftheNon-DWACEligibleAdjustmentAmountorLateClearingAdjustmentAmounttotheOutstandingBalanceasaresultoftheeventsdescribedinthisSection1.6,theBorrower,atitsexpense,shallpromptlycomputesuchadjustmentorreadjustmentandprepareandfurnishtotheHolderacertificatesettingforthsuchadjustmentorreadjustmentandshowingindetailthefactsuponwhichsuchadjustmentorreadjustmentisbased.TheBorrowershall,upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) suchadjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of sharesofCommon Stock and the amount, if any, of other securities or property which at the time would bereceived upon conversion of this Note.
(i) AdjustmentsforStockSplit.Notwithstandinganythinghereintothecontrary,anyreferencestosharenumbersorsharepricesshallbeappropriatelyadjustedforanystockdividend,stocksplit,stockcombinationorothersimilartransaction.
OwnershipLimitation.NotwithstandinganythingtothecontrarycontainedinthisNoteortheotherTransactionDocuments,ifatanytimetheHoldershallorwouldbeissuedsharesofCommonStockunderanyoftheTransactionDocuments,butsuchissuancewouldcausetheHolder(togetherwithitsAffiliates)tobeneficiallyownanumberofsharesexceeding4.99%ofthenumberofshares ofCommon Stock outstanding on such date (including for such purpose the shares ofCommonStock issuable upon such issuance) (the “MaximumPercentage”),then the Company mustnotissue tothe Holder shares of the Common Stock which would exceed the Maximum Percentage. For purposes of this Section, beneficial ownership of Common Stock will be determined under the 1934 Act. The shares ofCommonStock issuable tothe Holder that wouldcause the Maximum Percentage tobe exceededare referred to herein asthe "Ownership Limitation Shares".The Company willreserve theOwnership Limitation Shares for the exclusive benefit of the Holder. Fromtime to time, the Holdermay notify the Company in writing of the number of the Ownership Limitation Shares that may be issued to the Holder without causing the Holder to exceed the Maximum Percentage. Upon receipt of such notice, the Company shall be unconditionally obligated to immediately issue such designated shares to the Holder, witha corresponding reduction inthe numberofthe Ownership LimitationShares.Notwithstanding the forgoing, the term “4.99%” above shall be replaced with “9.99%” at such time as the Market CapitalizationoftheCommonStockislessthan$5,000,000.00. Notwithstandinganyotherprovision contained herein, if the term “4.99%” is replaced with “9.99%” pursuant to the preceding sentence, such increase to “9.99%” shall remain at 9.99% until increased, decreased or waived by the Holder as set forth below.For purposes of this Note, the term “Market Capitalization of theCommon Stock” shall mean the product equal to (A) the averageVWAP of the Common Stock forthe immediately preceding fifteen
(15)TradingDays,multipliedby(B)theaggregatenumberofoutstandingsharesofCommonStockasreportedontheCompany’smostrecentlyfiledForm10-QorForm10-K.BywrittennoticetotheCompany,theHoldermayincrease,decreaseorwaivetheMaximumPercentageastoitselfbutanysuchwaiverwillnotbeeffectiveuntilthe61stdayafterdeliverythereof.Theforegoing 61-daynotice requirement isenforceable, unconditionalandnon-waivableandshallapplytoallAffiliatesandassigns of theHolder.
Prepayment.SolongastheBorrowerhasnotreceivedaNoticeofConversionfromtheHolder,thenatanytimeduringtheperiodbeginningontheIssueDateandendingonthedatewhichisonehundredeighty(180)calendardaysfollowingtheIssueDate,theBorrowershallhavetheright,exercisableonnotlessthanthirty(30)TradingDayspriorwrittennoticetotheHoldertoprepaytheOutstanding Balance of this Note, in full, in accordance with this Section 1.8. Anynotice of prepayment hereunder (an“OptionalPrepayment Notice”)shallbedeliveredtotheHolderat itsregisteredaddresses 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 Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shallmakepaymentofthe OptionalPrepaymentAmount(asdefined below)toor upontheorder ofthe Holder as specified by the Holder in writing to the Borrower at least one (1) Trading Day prior to theOptional Prepayment Date. If the Borrower exercises its right to prepay this Note, the Borrower shallmake payment to the Holderof an amount incash (the “Optional PrepaymentAmount”) equal to 120%, multipliedby thethen OutstandingBalance ofthisNote.Ifthe Borrowerdeliversan OptionalPrepayment Noticeandfailstopay theOptional Prepayment Amount dueto theHolderwithintwo (2)TradingDaysfollowingtheOptionalPrepaymentDate,theBorrowershallforeverforfeititsrighttoprepaythisNotepursuantto this Section 1.8.
DistributionsonCapitalStock.SolongastheBorrowershallhaveanyobligationunderthisNote,theBorrowershallnotwithouttheHolder’swrittenconsent(a)pay,declareorsetapartforsuchpayment,anydividendorotherdistribution(whetherincash,propertyorothersecurities)onsharesofcapitalstockotherthandividendsonsharesofCommonStocksolelyintheformofadditionalshares ofCommonStock,or (b)directlyorindirectlyor throughanysubsidiarymakeanyotherpaymentor distribution in respect ofits capitalstockexceptfordistributions pursuant to any stockholders’rights plan whichisapproved by a majority ofthe Borrower’sdisinterested directors.
RestrictiononStockRepurchases.SolongastheBorrowershallhaveanyobligationunderthisNote,theBorrowershallnotwithouttheHolder’swrittenconsentredeem,repurchaseorotherwiseacquire(whetherforcashorinexchangeforpropertyorothersecuritiesorotherwise)inanyonetransactionorseriesofrelatedtransactionsanysharesofcapitalstockoftheBorrowerorany warrants,rightsoroptionsto purchase oracquire any such shares.
Borrowings.SolongastheBorrowershallhaveanyobligationunderthisNote,theBorrowershallnot,withouttheHolder’spriorwrittenconsent,create,incur,assumeguarantee,endorse,contingentlyagreetopurchaseorotherwisebecomeliableupontheobligationofanyperson,firm,partnership,jointventureorcorporation,exceptbytheendorsementofnegotiableinstrumentsfordepositorcollection,orsuffertoexistanyliabilityforborrowedmoney, except(a)borrowingsin existence or committed on the date hereof and of which the Borrower has informed the Holder in writing prior to the date hereof, (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business, (c) borrowings, the proceeds of which shall be used to repay this Note or (d) as permitted by the Purchase Agreement.
SaleofAssets.SolongastheBorrowershallhaveanyobligationunderthisNote,theBorrowershallnot,withouttheHolder’spriorwrittenconsent,sell,leaseorotherwisedisposeofanysignificantportionoftheBorrower’sassetsoutsidetheordinarycourseofbusiness.Anyconsenttothedispositionofanyassetsmaybeconditionedonaspecifieduseoftheproceedsofdisposition.
AdvancesandLoans.SolongastheBorrowershallhaveanyobligationunderthisNote,theBorrowershallnot,withouttheHolder’swrittenconsent,lendmoney,givecreditormakeadvancestoanyperson,firm,jointventureorcorporation,including,withoutlimitation,officers,directors,employees,subsidiariesandAffiliatesoftheBorrower,exceptloans,creditsoradvances(a)inexistenceorcommittedonthedatehereofandwhichtheBorrowerhasinformedHolderinwritingprior to the date hereof, (b) made in the ordinary course of business, or (c) not in excess of $100,000.
EventsofDefault.Theoccurrenceofanyofthefollowingeventsofdefault(each,an“EventofDefault”)shallbeaneventofdefaulthereunder:
(a) FailuretoPayAmountsDue.TheBorrowerfailstopayanyamountwhendueonthisNote,whetheratmaturity,uponaccelerationorotherwise.
(b) ConversionandtheShares.TheBorrower(i)failstoissueConversionSharestotheHolderortheHolder’sbroker(assetforthintheapplicableConversionNotice)bytheDeliveryDate,(ii)failstotransferorcauseitstransferagenttotransfer(issue)anysharesofCommonStockissuedtotheHolderuponconversionoforotherwisepursuanttothisNoteasandwhenrequiredbythisNoteor anyoftheother TransactionDocuments, (iii) theBorrower directsitstransfer agent not to
transferordelays,impairs,and/orhindersitstransferagentintransferring(orissuing)anysharesofCommonStocktobeissuedtotheHolderuponconversionoforotherwisepursuanttothisNoteasandwhenrequiredbythisNoteoranyoftheotherTransactionDocuments,or(iv)failstoremove(ordirectsitstransferagentnottoremoveorimpairs,delays,and/orhindersitstransferagentfromremoving)any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any shares ofCommonStockissuedtotheHolderuponconversion oforotherwisepursuant tothisNoteasandwhenrequired by this Note or any of the other Transaction Documents.
(c) BreachofCovenantsandObligations.TheBorrowerbreachesanycovenantorobligationorothertermorconditioncontainedinthisNoteandanycollateraldocumentsincludingbutnotlimitedtotheotherTransactionDocuments.
(d) BreachofRepresentationsandWarranties.AnyrepresentationorwarrantyoftheBorrowermadehereinorinanyagreement,statementorcertificategiveninwritingpursuantheretoorinconnectionherewith(including,withoutlimitation,thePurchaseAgreementandanyotherTransactionDocuments),shallbefalseormisleadinginanymaterialrespectwhenmade.
(e) ReceiverorTrustee.TheBorroweroranysubsidiaryoftheBorrowershallmakeanassignmentforthebenefitofcreditors,orapplyfororconsenttotheappointmentofareceiverortrusteeforitorforasubstantialpartofitspropertyorbusiness,orsuchareceiverortrusteeshallotherwisebeappointed.
(f) Judgments.Anymoneyjudgment,writorsimilarprocessshallbeenteredorfiledagainsttheBorroweroranysubsidiaryoftheBorroweroranyofitspropertyorotherassetsformorethan$100,000,andshallremainunvacated,unbondedorunstayedforaperiodoftwenty
(20)calendardaysunlessotherwiseconsentedtobytheHolder,whichconsentwillnotbeunreasonablywithheld.
(g) Bankruptcy.Bankruptcy,insolvency,reorganizationorliquidationproceedingsorotherproceedings,voluntaryorinvoluntary,forreliefunderanybankruptcylaworanylawforthereliefofdebtorsshallbeinstitutedbyoragainsttheBorroweroranysubsidiaryoftheBorrower.
(h) DelistingofCommonStock.TheBorrowershallfailtomaintainthelistingand/orquotation,asapplicable,oftheCommonStockonthePrincipalMarket.
(i) FailuretoComplywiththe1934Act.TheBorrowershallfailtocomplywiththereportingrequirementsofthe1934Act;and/ortheBorrowershallceasetobesubjecttothereportingrequirementsofthe1934Act.
(j) Liquidation.Anydissolution,liquidation,orwindingupofBorroweroranysubstantialportionofitsbusiness.
(k) CessationofOperations.AnycessationofoperationsbytheBorrowerortheBorroweradmitsitisotherwisegenerallyunabletopayitsdebtsassuchdebtsbecomedue;provided,however,thatanydisclosureoftheBorrower’sabilitytocontinueasa“goingconcern”shallnotbeanadmissionthattheBorrowercannotpayitsdebtsastheybecomedue.
(l) MaintenanceofAssets.ThefailurebytheBorrowertomaintainanymaterialintellectualpropertyrights,personal,realpropertyorotherassetswhicharenecessarytoconductitsbusiness(whethernoworinthefuture).
(m) FinancialStatementRestatement.TherestatementofanyfinancialstatementsfiledbytheBorrowerwiththeSECforanydateorperiodfromtwoyearspriortotheIssueDateofthisNoteanduntilthisNoteisnolongeroutstanding,iftheresultofsuchrestatementwould,bycomparisontotheunrestatedfinancialstatement,haveconstitutedamaterialadverseeffectontherightsof the Holder with respect to this Note or any other Transaction Documents.
(n) ReverseSplits.TheBorrowereffectuatesareversesplitofitsCommonStockwithouttwenty(20)calendardayspriorwrittennoticetotheHolder.
(o) ReplacementofTransferAgent.IntheeventthattheBorrowerproposestoreplaceitstransferagent,theBorrowerfailstoprovide,priortotheeffectivedateofsuchreplacement,afullyexecutedIrrevocableTransferAgentInstructionsinaformasinitiallydeliveredpursuanttothePurchaseAgreement(includingbutnotlimitedtotheprovisiontoirrevocablyreservesharesofCommonStockintheReservedAmount) signedbythesuccessor transferagent totheHolder andtheBorrower.
(p) DWACEligibility.ThefailureofanyoftheDWACEligibleConditionstobesatisfiedatanytimeduringwhichtheBorrowerhasobligationsunderthisNote.
DefaultEffects;AutomaticAcceleration.UpontheoccurrenceofanyEventofDefault,(a)theOutstandingBalanceshallimmediatelyincreaseto105%oftheOutstandingBalanceimmediatelypriortotheoccurrenceoftheEventofDefault(the“BalanceIncrease”),and(b)thisNoteshallthenaccrueinterestatthe DefaultInterestrate(collectively,the “DefaultEffects”);provided,however, that (x) in no event shall the Balance Increase be applied more than once, and (y)notwithstanding any provision to the contrary herein, in no event shall the applicable interest rate at any timeexceed themaximum interestrateallowed underapplicable law.The DefaultEffects shall automaticallyapplyupontheoccurrenceof anEvent of Default without theneedfor anyparty togiveany noticeortakeanyotheraction.Further,upontheoccurrenceandduringthecontinuationof anyEventof Default, the Holder may by written notice to the Borrower declare the entire Outstanding Balanceimmediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Transaction Documents to thecontrarynotwithstanding;provided,however, that upontheoccurrenceorexistenceofanyEvent of Default described in Sections 3.1(e), 3.1(g), 3.1(j), or 3.1(k), immediately and without notice, all outstanding obligations payable by the Borrower hereunder shall automatically become immediately due and payable, withoutpresentment, demand, protest or any othernotice of any kind, all of which are hereby expressly waived, anything contained herein or in the Transaction Documents to the contrary(“Automatic Acceleration”). For avoidance of doubt, except in the case of Automatic Acceleration resulting from an Event of Default under Sections3.1(e), 3.1(g),3.1(j), or 3.1(k), the Holder shall retainall rights under this Note and the Transaction Documents, including the ability to convert the then Outstanding Balance of this 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.NofailureordelayonthepartoftheHolderintheexerciseofanypower,rightorprivilegehereundershalloperateasawaiverthereof,norshallanysingleorpartialexerciseofanysuchpower,rightorprivilegeprecludeotherorfurtherexercisethereoforofanyotherright,powerorprivileges.Allrightsandremediesexistinghereunderarecumulativeto,and not exclusiveof, anyrightsor remedies otherwiseavailable.
Notices.WhenevernoticeisrequiredtobegivenunderthisNote,unlessotherwiseprovidedherein,suchnoticeshallbegiveninaccordancewiththesubsectionofthePurchaseAgreementtitled“Notices.”
�� Amendments.ThisNoteandanyprovisionhereofmayonlybeamendedbyaninstrumentinwritingsignedbytheBorrowerandtheHolder.Theterm“Note”andallreferencethereto,asusedthroughoutthisinstrument,shallmeanthisinstrument(andtheotherNotesissuedpursuanttothePurchaseAgreement)asoriginallyexecuted,oriflateramendedorsupplemented,thenassoamendedor supplemented.
Assignability.ThisNoteshallbebindingupontheBorroweranditssuccessorsandassigns,andshallinuretobethebenefitoftheHolderanditssuccessorsandassigns;provided,however,thatthisNotemaynotbetransferred,assignedorconveyedbytheBorrowerwithoutthepriorwrittenconsentoftheHolder.EachtransfereeofthisNotemustbean“accreditedinvestor”(asdefinedin Rule501(a) of theSecuritiesAct of 1933(as amended, the“1933Act”)). Notwithstandinganythingin thisNote tothe contrary,thisNote maybe pledged ascollateral in connectionwith abona fidemargin account or other lending arrangement.
CostofCollection;Attorneys’Fees.UpontheoccurrenceofanyEventofDefault,theBorrowershallpaytotheHolderhereofallcostsandreasonableattorneys’feesincurredbytheHolderinconnectionwithsuchEventofDefault.IntheeventofanyactionatlaworinequitytoenforceorinterpretthetermsofthisNoteoranyoftheotherTransactionDocuments,thepartiesagree that thepartywhoisawardedthemostmoneyshall bedeemedtheprevailingpartyforallpurposesand shall thereforebe entitledtoanadditionalawardofthe fullamountof theattorneys’ feesandexpenses paidbysuchprevailingpartyinconnectionwiththelitigationand/ordisputewithoutreduction orapportionmentbasedupontheindividualclaimsordefenses givingrisetothefeesandexpenses. Nothing herein shall restrict or impair a court’s power to award fees and expenses for frivolous or bad faith pleading.
GoverningLaw.ThisNoteshall begovernedbyandconstruedinaccordancewiththelawsoftheStateofUtahwithoutregardtoprinciplesofconflictsoflaws.AnyactionbroughtbyeitherpartyagainsttheotherconcerningthetransactionscontemplatedbythisNoteshallbebroughtonlyinthestatecourtsofUtahorinthefederalcourtslocatedinSaltLakeCounty,Utah.ThepartiestothisNoteherebyirrevocablywaiveanyobjectiontojurisdictionandvenueofanyactioninstitutedhereunder and shall not assert any defense based on lack of jurisdiction or venue or based uponforum non conveniens. In the event that any provision of this Note or any other agreement delivered in connection herewith isinvalidorunenforceableunderanyapplicablestatuteorruleoflaw,thensuchprovisionshall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conformwithsuchstatuteorruleoflaw. Anysuchprovisionwhichmayproveinvalidorunenforceable underanylaw shallnotaffectthevalidityorenforceabilityofanyotherprovisionofanyagreement.Each party hereby irrevocably waivespersonal serviceof processand consentsto processbeing served in any suit, action or proceeding in connection with this Agreement or any other related or companion documents by mailing a copy thereofvia registered orcertified mailorovernightdelivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that suchserviceshallconstitutegoodandsufficientserviceofprocessandnoticethereof.Nothingcontained herein shallbe deemed to limitin any way any rightto serve process in any othermannerpermittedby law.THEBORROWER HEREBYIRREVOCABLY WAIVESANY RIGHT ITMAY HAVE TO,AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDERORINCONNECTIONWITHORARISINGOUTOFTHISNOTEOR ANY TRANSACTION CONTEMPLATED HEREBY.
FeesandCharges.ThepartiesacknowledgeandagreethatupontheBorrower’sfailuretocomplywiththeprovisionsofthisNote,theHolder’sdamageswouldbeuncertainanddifficult(ifnotimpossible)toaccuratelyestimatebecauseoftheparties’inabilitytopredictfutureinterestrates,theHolder’sincreasedrisk,andtheuncertaintyoftheavailabilityofasuitablesubstituteinvestmentopportunityfortheHolder,amongotherreasons.Accordingly,anyfees,charges,andinterestdueunderthisNote areintendedbytheparties tobe,andshall bedeemed,a reasonableestimate ofthe Holder’s actuallossofits investmentopportunity and nota penalty, and shallnotbe deemed in any way to limit any other right or remedy Holder may have hereunder, at law or in equity.
Remedies.TheBorroweracknowledgesthatabreachbyitofitsobligationshereunderwillcauseirreparableharmtotheHolder,byvitiatingtheintentandpurposeofthetransactioncontemplatedhereby.Accordingly,theBorroweracknowledgesthattheremedyatlawforabreachofitsobligationsunderthisNotewillbeinadequateandagrees,intheeventofabreachorthreatenedbreachbythe Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at lawor in equity, and in addition to the charges assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
PurchaseAgreement.ByitsacceptanceofthisNote,eachpartyagreestobeboundbytheapplicabletermsofthePurchaseAgreementandtheotherTransactionDocuments.
NoticeofCorporateEvents.Exceptasotherwiseprovidedherein,theHolderofthisNoteshallhavenorightsasaHolderofCommonStockunlessandonlytotheextentthatitconvertsthisNoteintoCommonStock.TheBorrowershallprovidetheHolderwithpriornotificationofanymeetingoftheBorrower’sstockholders(andcopiesofproxymaterialsandotherinformationsentto stockholders). In the event of any taking by the Borrower of a record of its stockholders for the purpose of determining stockholders who are entitled to receive paymentofany dividend orotherdistribution, any right tosubscribefor,purchaseorotherwiseacquire(includingbywayofmerger,consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining stockholders 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, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, atleast twenty(20)calendardayspriortotherecorddatespecifiedtherein(orthirty(30)calendar days prior to the consummation of the transaction or event, whichever is earlier), of the date onwhichany such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extentknown atsuchtime.TheBorrowershallmakeapublicannouncementofanyeventrequiringnotification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section4.10.
Pronouns.Allpronounsandanyvariationsthereofrefertothemasculine,feminineorneuter,singularorplural,asthecontextmaypermitorrequire.
TimeoftheEssence.TimeisexpresslymadeoftheessenceofeachandeveryprovisionofthisNote.
[Remainderofpageintentionallyleftblank;signaturepagetofollow]
INWITNESSWHEREOF,theBorrowerhascausedthisNotetobesignedinitsnamebyitsdulyauthorizedofficerasoftheIssueDatesetforthabove.
MAXSOUNDCORPORATION
| By: | GregHalpern,ChiefFinancialOfficer |
EXHIBITA
ILIADRESEARCHANDTRADING,L.P.
303EASTWACKERDRIVE,SUITE1040
CHICAGO,ILLINOIS60601
Date: MAXSOUNDCORPORATION
HazelhurstDrive#6572Houston,TX77043
Attn:GregHalpern,ChiefFinancialOfficer
CONVERSIONNOTICE
Theabove-captionedHolderherebygivesnoticetoMAXSOUNDCORPORATION,aDelawarecorporation(the“Company”),pursuanttothatcertainConvertiblePromissoryNotemadebytheCompanyinfavoroftheHolderonMay18,2016(the“Note”),thattheHolderelectstoconverttheportionoftheOutstandingBalanceoftheNotesetforthbelowintofullypaidandnon- assessable shares of Common Stock of the Company as of the date of conversion specified below.Such conversion shall be based on the Conversion Price set forth below. In the event of a conflict betweenthisConversionNoticeandtheNote, theNoteshallgovern, or, inthealternative, at the election of the Holder in its sole discretion, the Holder may provide a newformof Conversion Notice to conform to the Note.
| D. MarketPrice | (Averageof2lowestTradePricesoflast10TradingDaysasperExhibitA-1) |
| E. | ConversionFactor:65%[asmayadjusteduponcertainEventsofDefault] |
| F. ConversionPrice: | (DmultipliedbyE) |
| G. ConversionShares: | (CdividedbyF) |
| H. RemainingOutstandingBalanceofNote: | * |
*Subjecttoadjustmentsforcorrections,defaults,andotheradjustmentspermittedbytheTransactionDocuments.
PleasetransfertheConversionShareselectronically(viaDWAC)tothefollowingaccount:
| Broker: | Address: | |
DTC#: Account#: | | |
| AccountName: | | |
TotheextenttheConversionSharesarenotabletobedeliveredtotheHolderelectronicallyviatheDWACsystem,pleasedeliveracertificaterepresentingallsuchsharestotheHolderviareputableovernightcourierafterreceiptofthisConversionNotice(byfacsimiletransmissionorotherwise)to:
_____________________________________
_____________________________________
_____________________________________
(SignaturePageFollows)
Sincerely,
ILIADRESEARCHANDTRADING,L.P.
By:IliadManagement,LLC,itsGeneralPartnerBy:FifeTrading,Inc.,itsManager
EXHIBITA-1
CONVERSIONWORKSHEET
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