NEITHERTHE ISSUANCE NOR SALE OF THESECURITIES REPRESENTED BY THISCERTIFICATE NOR THESECURITIES INTO WHICHTHESE SECURITIES ARE CONVERTIBLE HAVEBEEN REGISTERED UNDER THESECURITIES ACT OF 1933, ASAMENDED, ORAPPLICABLE STATE SECURITIES LAWS. THESECURITIES MAY NOT BEOFFERED FOR SALE, SOLD,TRANSFERRED ORASSIGNED (I) IN THEABSENCE OF(A) ANEFFECTIVE REGISTRATION STATEMENT FOR THESECURITIES UNDER THESECURITIES ACT OF 1933, ASAMENDED, OR (B) ANOPINION OF COUNSEL (WHICHCOUNSEL SHALLBE SELECTED BY THEHOLDER), IN AGENERALLY ACCEPTABLE FORM, THATREGISTRATION IS NOTREQUIRED UNDER SAIDACT OR (II)UNLESS SOLDPURSUANT TORULE 144 ORRULE 144AUNDER SAIDACT. NOTWITHSTANDING THEFOREGOING, THESECURITIES MAY BEPLEDGED INCONNECTION WITH A BONAFIDE MARGIN ACCOUNT OR OTHER LOAN ORFINANCING ARRANGEMENT SECURED BY THESECURITIES.
Principal Amount:$400,000.00 IssueDate: September 8, 2016Purchase Price: $368,000.00
Original IssueDiscount: $32,000.00
CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED,MAX SOUNDCORPORATION, aDelaware corporation (hereinafter called the“Borrower”), hereby promises to pay to the order ofCROWN BRIDGE PARTNERS, LLC, aNew York limited liability company, orregistered assigns (the “Holder”) theprincipal sum of $400,000.00 (the“Principal Amount”),together withinterest at therate of sixpercent (6%) per annum,at maturity or uponacceleration orotherwise, as set forth herein (the“Note”). Theconsideration to theBorrower for this Note is up to $368,000.00 (the“Consideration”). TheHolder shall pay $36,800.00 of theConsideration (the“First Tranche”) within areasonable amount of time of the fullexecution of thetransactional documents related to thisNote. At theclosing of theFirst Tranche, theoutstanding principal amount under this Noteshall be $40,000.00,consisting of theFirst Tranche plus theprorated portion of the OID(as defined herein). TheHolder maypay, in their sole discretion,such additional amounts of theConsideration and at such dates as the Holder may choose in itssole discretion.THEPRINCIPAL SUM DUE TOTHE HOLDER SHALLBE PRORATED BASED ONTHE CONSIDERATION ACTUALLY PAID BY THE HOLDER, THEAPPLICABLE PORTION OF THE OID, AS WELL ASTHE APPLICABLE INTEREST,SUCH THAT THE ISSUER ISONLY REQUIRED TOREPAY THEAMOUNT FUNDED (PLUS THE OIDAND APPLICABLE INTEREST) AND THEISSSUER ISNOT REQUIRED TO
REPAY ANY UNFUNDEDPORTIONOF THIS NOTE. The maturity date foreach tranche funded shallbeeighteen (18) monthsfrom theeffective date ofeach payment (each a “Maturity
Date”), and is the date uponwhich theprincipal sum ofeach respective tranche, as wellasanyaccrued and unpaid interest and otherfees relating to thatrespective tranche, shall be dueand payable. This Note may not beprepaid in whole or inpart except as otherwise explicitly setforth herein.Any amount ofprincipal orinterest on this Note,which is notpaidby the MaturityDate, shall bearinterest at therate of twenty twopercent (22%) per annumfrom the duedate thereof until thesame ispaid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paidand shall becomputed on thebasis of a 365-dayyear and theactual number ofdays elapsed. Allpayments duehereunder (to the extent notconverted into theBorrower’s common stock (the“Common Stock”) inaccordance with theterms hereof) shall be made inlawful moneyof the UnitedStates ofAmerica. Allpayments shall be madeat such address as theHolder shallhereafter give to theBorrower bywritten notice made inaccordance with the provisions ofthis Note. Whenever any amountexpressed to bedueby theterms of this Note is due onany daywhich isnot abusiness day, thesame shallinstead be due on the nextsucceedingdaywhichis abusiness dayand, inthe case ofanyinterest paymentdate which isnot thedate onwhich this Note ispaid in full, theextension of the duedate thereof shall not betaken intoaccount forpurposes ofdetermining theamount ofinterest due onsuch date. Asused inthis Note, the term“business day” shallmeanany day other than aSaturday, Sunday or aday onwhich commercial banks in the city of New York,New York are authorized orrequired by law orexecutive order toremain closed.
This Notecarries a proratedoriginal issue discount of $32,000.00 (the“OID”), to cover the Holder’slegal fees,accounting fees, duediligence fees, monitoring,and/or othertransactional costs incurred inconnection with thepurchase and sale of the Note,which isincluded in theprincipal balance of thisNote. Thus, thepurchase price of this Noteshall be
$368,000.00,computed as follows: thePrincipal Amount minus theOID.
This Note isfree from all taxes,liens, claims and encumbrances withrespect to theissue thereof and shall not be subject topreemptive rights or othersimilar rights ofshareholders of theBorrower and will not imposepersonal liability upon theholder thereof.
The followingadditional terms shall apply to thisNote:
ARTICLEI.CONVERSION RIGHTS
Conversion Right. TheHolder shall have the rightatany time toconvert all oranypart of the outstandingand unpaidprincipal amount andaccrued and unpaid interest of this Note into fully paidand non-assessableshares of Common Stock,as such CommonStock exists on the IssueDate, oranyshares ofcapital stock or othersecurities of theBorrower intowhich such Common Stock shallhereafter bechanged orreclassified at theconversion price (the “ConversionPrice”) determined as provided herein (a“Conversion”);provided,however, that in noevent shall theHolder beentitled toconvert any portion of this Note inexcess of that portion of this Note uponconversion ofwhich the sum of (1) the number
ofshares of Common Stock beneficially ownedby the Holderand itsaffiliates (other thanshares of Common Stockwhich may be deemed beneficially ownedthrough theownershipof theunconverted portion of theNotes or the unexercised orunconverted portion ofany other security of theBorrower subject to a limitation onconversion or exerciseanalogous to the limitationscontained herein) and (2) the numberofsharesof Common Stockissuable upon the conversion of the portionof this Note withrespect towhich thedetermination of this proviso is beingmade, wouldresult inbeneficial ownershipby the Holderanditsaffiliates of more than 4.99% of theoutstanding shares of Common Stock.For purposes of the proviso to the immediately precedingsentence, beneficial ownershipshall bedetermined inaccordance withSection 13(d) of theSecurities Exchange Act of 1934,as amended (the “Exchange Act”), andRegulations 13D-Gthereunder, except as otherwise provided in clause (1) ofsuch proviso,provided,further,however, that the limitations onconversionmay bewaivedby the Holder upon,at theelection of theHolder, not less than 61days’ prior notice to theBorrower, and the provisions of theconversion limitationshall continue to apply untilsuch 61st day (orsuch later date, as determinedby the Holder,asmay bespecified insuch notice of waiver). The numberofshares of Common Stock to beissued uponeach conversion of this Noteshall bedeterminedby dividing theConversion Amount(as defined below)by theapplicable Conversion Price then ineffect on thedate specified in thenotice ofconversion, in the formattached hereto as Exhibit A (the “Notice of Conversion”),delivered to theBorrowerby the Holder inaccordance withSection 1.4below; provided that the Notice ofConversion is submittedbyfacsimile ore-mail (orby othermeans resulting in, or reasonablyexpected toresult in,notice) to theBorrower before 6:00 p.m.,New York, New York time onsuch conversiondate (the “ConversionDate”). Theterm “Conversion Amount”means, withrespect toany conversion of thisNote, the sum of (1) theprincipal amount of this Note to beconverted insuch conversionplus (2)at the Holder’s option,accrued and unpaid interest, ifany,onsuch principal amountat theinterest rates provided in this Note tothe Conversion Date,plus (3)at theHolder’s option,Default Interest, ifany, on theamounts referred to in the immediatelypreceding clauses (1) and/or(2)plus(4)at theHolder’s option,any amountsowed to theHolder pursuant toSections 1.3and 1.4(g) hereof.
Conversion Price.
(a) Calculation ofConversion Price. TheConversion Price shall be theVariable Conversion Price (asdefined herein) (subject toequitable adjustments for stock splits, stockdividends orrights offeringsby theBorrower relating to theBorrower’s securities or thesecurities of any subsidiary of theBorrower, combinations,recapitalization, reclassifications, extraordinary distributionsand similar events) (alsosubject toadjustment as further described herein). The"Variable Conversion Price" shall mean 65%multiplied by theMarket Price (as defined herein)(representing a discountrate of35%). “Market Price” means thelowest one (1) TradingPrices (as definedbelow) for the Common Stock during the ten (10) Trading Dayperiod ending on the last complete Trading Day prior to theConversion Date. “Trading Prices” means, for any securityas of anydate, thelowest traded price on theOver-the-Counter PinkMarketplace, OTCQB, orapplicable trading market (the “OTCQB”)as reportedby areliable
reportingservice (“ReportingService”) designatedby theHolder (i.e. www.Nasdaq.com) or, if theOTCQB is not theprincipal trading market forsuch security, on theprincipal securities exchange or tradingmarket wheresuch security is listed ortraded or, if thelowest intradaytrading price ofsuch security is notavailable in any of the foregoing manners, thelowest intraday price ofanymarket makers forsuch security that are quoted on theOTC Markets. If the Trading Prices cannot becalculated for such security onsuch date in the mannerprovided above, the Trading Pricesshall be thefair market value as mutuallydeterminedby theBorrower and theholders of a majority ininterest of the Notesbeing converted for which thecalculation of theTrading Pricesare required inorder to determine theConversion Price ofsuch Notes. “Trading Day” shall mean anyday onwhich the Common Stock istradable forany period on theOTCQB, or on theprincipal securities exchange or other securitiesmarket onwhich the Common Stock is thenbeing traded. Ifatany time while this Note isoutstanding, thelowest TradingPrices on theOTCQBor otherapplicable principal tradingmarket for the Common Stock isequal to orlower than $0.005, thenan additional tenpercent (5%) discountshall befactored into theVariable Conversion Price until this Note is no longer outstanding(resulting in a discountrate of 40%assuming no otheradjustments are triggered hereunder). In theevent thatshares of theBorrower’s Common Stockare not deliverable via DWAC following theconversion ofany amounthereunder, an additional tenpercent (5%) discountshall befactored into theVariable Conversion Price until this Note is nolonger outstanding (resulting in a discountrate of40% assuming no other adjustmentsare triggered hereunder).
Each time, while this Note isoutstanding, theBorrower enters into aSection 3(a)(9) transaction (including but notlimited to theissuance ofnew promissory notes or of areplacement promissorynote), or Section 3(a)(10)transaction, inwhichany 3rd party has theright to convertmonies owed to that 3rd party (orreceive shares pursuant to asettlement orotherwise) at a discount tomarket greater than theVariable Conversion Price ineffect at that time(prior to all otherapplicable adjustments in theNote), then the VariableConversion Priceshall be automaticallyadjusted tosuch greater discountpercentage (prior toall applicable adjustments in thisNote) untilthis Note is nolonger outstanding. Each time,while this Note isoutstanding, theBorrower enters into aSection 3(a)(9) transaction (including but not limited to theissuanceof new promissory notesor of areplacement promissory note), or Section3(a)(10) transaction, inwhich any 3rd partyhas a lookback period greater than the lookback period ineffect under the Noteat that time (currently a ten (10)TradingDay look backperiod as described in thisSection 1.2(a) applies), then theHolder’s lookback period shall automaticallybeadjusted tosuch greater numberofdays until this Note is nolonger outstanding. TheBorrower shall give written noticeto the Holder, with theadjusted Variable ConversionPrice and/or adjusted lookback period (each adjustment that isapplicable due to thetriggering event), within one (1)businessday of an event thatrequiresany adjustmentdescribed in the two immediatelypreceding sentences.
Holder shall beentitled todeduct $300.00from theconversion amount ineach NoticeofConversion tocover Holder’s depositfees associatedwith each Notice ofConversion.
Authorized Shares. TheBorrower covenants that during theperiod the conversionright exists, theBorrower willreserve from its authorizedand unissued Common Stock asufficient number ofshares, free frompreemptive rights, to provide forthe issuance of CommonStock upon the fullconversion of thisNote. TheBorrower isrequired at all times tohave authorized and reserved four times the number ofshares that is actuallyissuable upon fullconversion of the Note(based on theConversion Price of the Notes ineffect from time totime)(the “Reserved Amount”). TheReserved Amountshall beincreased from time to time inaccordance with theBorrower’s obligations hereunder. TheBorrower represents that uponissuance, such shares will be dulyand validly issued, fullypaid and non-assessable. Inaddition, if theBorrower shall issue any securities or make anychange to itscapital structure which wouldchange the number ofshares of Common Stockinto which theNotes shall beconvertible at the thencurrent Conversion Price, theBorrower shall at thesame time makeproper provision so thatthereafter thereshall be asufficient number ofshares of Common Stockauthorized and reserved, free from preemptive rights, forconversion of theoutstanding Notes. TheBorrower (i)acknowledges that it has irrevocably instructed itstransfer agent to issuecertificates for the Common Stockissuable uponconversion of thisNote, and (ii)agrees that itsissuance of this Noteshall constitute full authority to its officersand agents who arecharged with the duty ofexecuting stockcertificates toexecute and issue the necessarycertificates forshares of Common Stock inaccordancewith theterms and conditions of this Note.
If, atany time theBorrower does not maintain theReserved Amount it will beconsidered an Event ofDefault under Section 3.2 of theNote.
Method ofConversion.
(a) Mechanics of Conversion.Subject toSection 1.1, this Note may beconvertedby theHolder in whole or inpart atany timefrom time to timeafter theIssue Date,by
(A) submitting to theBorrower a Notice ofConversion (by facsimile,e-mail or otherreasonable means ofcommunication dispatched on the ConversionDate prior to 6:00 p.m.,New York, New York time)and (B) subject toSection 1.4(b), surrendering this Noteat theprincipal office of theBorrower.
(b) Surrenderof Note Upon Conversion. Notwithstanding anything to the contraryset forth herein, uponconversion of this Note inaccordance with theterms hereof, theHolder shall not berequired to physically surrender this Note to theBorrower unless theentire unpaid principal amount of this Note is soconverted. The Holder and theBorrower shall maintainrecords showing the principalamount soconverted and thedates ofsuch conversions orshall usesuch other method, reasonably satisfactory to theHolder and theBorrower, soas not torequire physical surrender of this Note uponeach such conversion. In theevent ofany dispute ordiscrepancy, such records of theBorrower shall,primafacie, becontrolling and determinative in theabsence ofmanifest error. Notwithstanding theforegoing, ifany portion of this Note isconverted as aforesaid, theHoldermay nottransfer this Note unless theHolder first physically
surrenders this Note tothe Borrower, whereupon theBorrower willforthwith issueand deliver upon theorder of theHolder anew Note of liketenor, registered as theHolder (uponpaymentby theHolderof anyapplicable transfer taxes) mayrequest, representing in theaggregate theremaining unpaid principal amount of thisNote. The Holderandanyassignee,byacceptance of thisNote, acknowledge and agree that,by reason of the provisions of thisparagraph, followingconversionof a portion of thisNote, the unpaidand unconverted principalamount of this Noterepresentedby this Note maybe less than the amountstated on theface hereof.
(c) Paymentof Taxes. TheBorrower shall not berequired topay any taxwhichmay bepayableinrespectof any transferinvolved in the issue anddelivery ofsharesof Common Stock or othersecurities or property onconversion of this Note in a name other than that of the Holder (or instreet name),and theBorrower shall not berequired to issue ordeliver anysuch sharesor othersecurities or property unlessand until the person orpersons (other than theHolder or thecustodian in whosestreet name such shares are to beheld for theHolder’s account) requesting the issuancethereof shall have paid to theBorrower theamount of any such tax orshall have established to thesatisfaction of theBorrower that such taxhas been paid.
(d) Delivery of Common Stock Upon Conversion. Uponreceiptby theBorrower from the Holder of afacsimile transmission ore-mail (or otherreasonable meansofcommunication) of a Notice ofConversion meeting therequirements for conversionas provided in thisSection 1.4, theBorrower shall issueand deliver orcause tobe issuedand delivered to or upon theorderof the Holdercertificates for the Common Stockissuable uponsuchconversion withinthree (3) businessdays after such receipt (the“Deadline”) (and, solely in thecase ofconversion of theentire unpaid principal amount hereof, surrender of thisNote) in accordance with theterms hereof.
(e) Obligation ofBorrower to Deliver CommonStock. Uponreceiptby theBorrower of a Notice ofConversion, theHolder shall bedeemed to be the holder ofrecord of the Common Stockissuable uponsuch conversion, the outstanding principalamount and theamount ofaccrued and unpaidinterest on thisNote shall bereduced toreflect such conversion, and, unless theBorrower defaults on itsobligations under thisArticle I,all rights withrespect to the portion of this Notebeing soconverted shallforthwith terminate except theright to receive the Common Stock or othersecurities, cash or otherassets, as herein provided, onsuch conversion. If the Holdershall havegiven a Notice of Conversion asprovided herein, theBorrower’s obligation to issueand deliver thecertificates for Common Stockshall beabsolute and unconditional, irrespective of theabsence of any actionby theHolder toenforce the same, anywaiver orconsent withrespect toany provisionthereof, the recovery ofanyjudgment againstany personor any action toenforcethe same,anyfailure or delay in theenforcement of any otherobligation of theBorrower to the holder ofrecord, oranysetoff, counterclaim, recoupment, limitation ortermination, or anybreach oralleged breachby theHolder ofanyobligation to the Borrower,and irrespective ofany othercircumstance whichmight otherwise limitsuch obligation of theBorrower to the Holder inconnection with such conversion. The
Conversion Date specified in the Notice ofConversion shall be theConversion Date so longas the Notice of Conversion isreceivedby theBorrower before 6:00 p.m.,New York, NewYork time, onsuch date.
(f) Deliveryof Common Stockby Electronic Transfer.Inlieu ofdelivering physical certificates representing the CommonStock issuable upon conversion,provided theBorrower isparticipating in the Depository Trust Company (“DTC”)Fast Automated Securities Transfer (“FAST”)program, uponrequest of theHolder and itscompliance with the provisionscontained in Section 1.1and in this Section 1.4, theBorrower shall use itsbest efforts tocause itstransfer agent toelectronically transmit theCommon Stock issuable upon conversion to theHolderbycrediting theaccount ofHolder’s PrimeBroker withDTC through itsDeposit Withdrawal Agent Commission(“DWAC”) system.
(g) Failure toDeliver Common Stock Prior to Deadline. Without in anyway limiting theHolder’s right to pursue otherremedies, including actualdamages and/orequitable relief, the partiesagree that if delivery of the Common Stock issuable uponconversion of this Note is notdelivered by theDeadline (other than afailure due to thecircumstances described inSection 1.3above, which failure shall begoverned bysuch Section) theBorrower shall pay to the Holder $2,000perday in cash, foreachdaybeyond theDeadline that theBorrower fails todeliver such CommonStock. Such cash amount shall bepaid toHolderby thefifthday ofthe month following the month inwhich ithas accrued or,at the option of theHolder (bywritten notice to theBorrower by thefirst day of the month following the month inwhich ithas accrued), shall be added to theprincipal amount of thisNote, in whichevent interest shallaccrue thereon inaccordance with theterms of this Noteand such additional principal amount shall beconvertible into Common Stock inaccordance with theterms of thisNote. TheBorrower agrees that theright to convert is a valuableright to theHolder. Thedamages resulting from afailure, attempt tofrustrate, interference withsuch conversion right are difficult if not impossible toqualify. Accordingly the partiesacknowledge that theliquidated damages provisioncontained in thisSection 1.4(g) are justified.
Concerning the Shares. Theshares of Common Stockissuable upon conversion of this Note may notbe sold ortransferred unless (i)such shares are soldpursuant toan effective registration statementunder the Act or (ii) theBorrower or itstransfer agent shall have beenfurnished withan opinion ofcounsel (which opinionshall be inform, substance and scope customary for opinions ofcounsel incomparable transactions) to theeffect that thesharesto be sold ortransferred may be sold ortransferred pursuant toan exemptionfrom such registration or (iii)such shares are sold ortransferred pursuant to Rule144 under theAct (or asuccessor rule) (“Rule 144”) or (iv)such shares are transferred toan “affiliate” (asdefined in Rule 144) of theBorrower whoagrees to sell or otherwise transfer thesharesonly in accordance with this Section 1.5 and who isan Accredited Investor. Except as otherwise provided (and subject to theremoval provisionsset forth below), untilsuch timeas theshares of Common Stockissuable upon conversion of this Notehave beenregistered under the
Act or otherwisemay be soldpursuant to Rule 144 without any restrictionas to the number ofsecurities asof a particulardate thatcan then be immediately sold,each certificate forsharesof Common Stockissuable upon conversion of this Note thathas not been soincluded in aneffective registration statement or thathas notbeen soldpursuant to aneffective registration statement oran exemption thatpermits removal of thelegend, shallbear a legend substantially in thefollowing form,as appropriate:
“NEITHER THEISSUANCE AND SALEOF THESECURITIESREPRESENTED BYTHIS CERTIFICATENORTHE SECURITIES INTO WHICH THESESECURITIES AREEXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIESACT OF1933, AS AMENDED, ORAPPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAYNOT BEOFFERED FORSALE, SOLD,TRANSFERRED ORASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIESUNDER THESECURITIESACTOF 1933,ASAMENDED, OR(B) AN OPINION OFCOUNSEL(WHICHCOUNSELSHALL BESELECTED BY THE HOLDER), IN AGENERALLYACCEPTABLE FORM,THAT REGISTRATION ISNOT REQUIRED UNDER SAIDACT OR (II)UNLESS SOLDPURSUANTTORULE 144 ORRULE 144AUNDERSAIDACT.NOTWITHSTANDING THE FOREGOING,THESECURITIES MAY BEPLEDGED INCONNECTION WITH ABONA FIDEMARGINACCOUNTOR OTHER LOAN ORFINANCING ARRANGEMENTSECURED BYTHE SECURITIES.”
Thelegend set forth aboveshall beremoved and theBorrower shall issue to theHolder a newcertificate therefore free ofany transferlegendif (i) theBorrower or itstransfer agent shall havereceived an opinion of counsel, inform, substance and scope customary for opinions ofcounsel incomparable transactions, to theeffect that a public sale ortransferofsuch Common Stock may be made withoutregistration under the Act,which opinionshall beacceptedby theBorrower so that thesale ortransfer iseffected or (ii) in thecase of the CommonStock issuable upon conversion of thisNote, such security is registered forsaleby the Holder underan effective registration statement filed under the Act orotherwisemay be soldpursuant to Rule 144 withoutany restrictionas to the number of securitiesas of a particulardate that can then be immediately sold. In theevent that theBorrower does notaccept the opinion ofcounsel provided by the Holder withrespect to thetransfer of Securities pursuant toan exemptionfrom registration, such as Rule 144 orRegulation S,at theDeadline, it will beconsidered an EventofDefault pursuant toSection 3.2 of the Note.
TradingMarket Limitations. Unless permittedby theapplicable rules and regulations of theprincipal securitiesmarket onwhich the Common Stock is then listed ortraded, in noevent shall theBorrower issue upon conversion of orotherwise pursuant to this Notemore than the maximum number ofshares of Common Stock that theBorrower can issuepursuant to any rule of theprincipal UnitedStates securities market onwhich
the Common Stock is thentraded (the “MaximumShare Amount”), whichshall be 4.99%of thetotal shares currentlyoutstanding, subject to equitableadjustment from time to time for stock splits, stockdividends, combinations, capital reorganizations and similar events relating to the Common Stockoccurring after the date hereof.Once the MaximumShare Amounthas beenissued, if theBorrower fails toeliminateany prohibitionsunder applicable law or therules orregulations ofany stockexchange, interdealer quotationsystem or other self-regulatoryorganization withjurisdiction over theBorrower orany ofits securities on theBorrower’s ability to issueshares of Common Stock inexcess of the MaximumShare Amount, inlieu ofanyfurther right toconvert thisNote, thiswill beconsidered an Event ofDefault under Section 3.3 of theNote.
Statusas Shareholder. Uponsubmission of a Notice ofConversionby a Holder, (i) theshares covered thereby(other than theshares, ifany, which cannot beissued because their issuance wouldexceed such Holder’s allocated portion of theReserved Amount or MaximumShare Amount)shall bedeemed converted intoshares of CommonStock and (ii) theHolder’s rights as aHolder ofsuch converted portion of this Noteshall cease and terminate,exceptingonly the right to receivecertificates for suchshares of Common Stockand to anyremedies provided herein orotherwise availableat law or in equity tosuch Holder because of afailure by the Borrower to comply with theterms of thisNote. Notwithstanding theforegoing, if a Holder has notreceived certificates forall sharesof Common Stock prior to the tenth (10th)business dayafter theexpiration of theDeadline withrespect to aconversion ofany portion of this Note for any reason, then(unless theHolder otherwiseelects toretain its statusas aholder of CommonStock by so notifying theBorrower) theHolder shall regain therights of a Holder of this Note withrespect tosuch unconverted portions of this Noteand theBorrower shall, as soonas practicable, returnsuch unconverted Note to theHolder or, if the Note has not beensurrendered, adjust itsrecordstoreflect thatsuch portion of this Note has notbeen converted. In allcases, theHolder shall retain allof itsrights and remedies (including, withoutlimitation, (i)the right toreceive ConversionDefault Payments pursuant toSection 1.3 to the extentrequired thereby for such ConversionDefault andany subsequentConversion Default and (ii) theright tohave the ConversionPrice withrespect to subsequent conversionsdetermined in accordance withSection 1.3) for theBorrower’s failure to convert thisNote.
ARTICLEII.CERTAIN COVENANTS
Distributions onCapital Stock. So longas theBorrower shall haveanyobligation under thisNote, theBorrower shall not without theHolder’s written consent
(a) pay, declare orset apart forsuch payment, anydividend or other distribution(whether incash, property or othersecurities) onshares ofcapital stock other thandividends onshares of Common Stock solely in theform ofadditional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any otherpayment or distribution inrespect of itscapital stockexcept for distributionspursuant to any shareholders’rights planwhich isapproved by a majority of theBorrower’s disinterested directors.
Restriction on StockRepurchases. So longas theBorrower shall have anyobligation under thisNote, theBorrower shall notwithout theHolder’s written consent redeem, repurchase orotherwise acquire (whether for cash or inexchange for property or othersecurities orotherwise) inany onetransaction orseries ofrelated transactionsanyshares ofcapital stock of theBorrower oranywarrants, rights or options topurchaseor acquireanysuch shares.
ARTICLEIII.EVENTS OFDEFAULT
Ifany of the following events ofdefault (each,an “Event of Default”) shalloccur:
Failure toPay Principal orInterest. TheBorrower fails topay theprincipal hereoforinterest thereon when due on thisNote, whetherat maturity, uponacceleration or otherwise,and such breach continues for a period of five(5) days.
Conversion and the Shares. TheBorrower fails toreserve asufficient amount ofshares ofcommon stockas required under the terms of this Note (includingSection 1.3 of this Note)(andsuch breach continues for aperiod of five (5)days), fails to issueshares of CommonStock to theHolder (orannounces orthreatens in writing that it willnot honor itsobligation to do so) uponexercise by the Holder of the conversionrights of the Holder inaccordance with theterms of thisNote, fails totransfer or cause itstransfer agent totransfer (issue) (electronically or incertificated form) shares of Common Stock issued to theHolder uponconversion of or otherwisepursuant to this Noteas and when required by thisNote, theBorrower directs itstransfer agent not totransfer ordelays, impairs, and/or hinders itstransfer agent in transferring (orissuing) (electronically or incertificated form)shares of Common Stock to beissued to the Holder uponconversion of orotherwise pursuant to this Noteas and whenrequired by thisNote, orfails toremove (ordirects itstransfer agent not toremove orimpairs, delays, and/or hinders itstransfer agent fromremoving) any restrictive legend (or to withdraw any stop transfer instructions inrespect thereof) on anyshares of Common Stockissued to theHolder upon conversion of or otherwise pursuant to this Noteas and when required by this Note (ormakes any writtenannouncement, statement orthreat that itdoes notintend to honor theobligations described in thisparagraph) and anysuch failure shall continue uncured (or anywritten announcement, statement orthreat not to honor itsobligations shall not berescinded inwriting) for two(2) businessdays after theHolder shall have delivered a Notice ofConversion. It isan obligation of theBorrower toremain current in itsobligations toits transfer agent. Itshall bean event ofdefault of thisNote, if aconversion of this Note isdelayed, hindered orfrustrated due to abalance owed by theBorrower to itstransfer agent. Ifat the option of theHolder, theHolder advances any funds to theBorrower’s transfer agent in order toprocess a conversion,such advanced funds shall bepaid by theBorrower to the Holder within five (5)business days of ademand from the Holder,either incash oras anaddition to thebalance of theNote, and suchchoice ofpayment method is at thediscretion of theBorrower.
Breachof Covenants. TheBorrower breaches any materialcovenant or othermaterial term orcondition contained in this Noteand anycollateral documentsand such breachcontinues for a period of ten (10) daysafter written notice thereof to theBorrower from the Holder.
BreachofRepresentations and Warranties.Anyrepresentation or warranty of theBorrower madeherein or inanyagreement, statement orcertificate given in writingpursuant hereto or inconnection herewith, shall befalse ormisleading in anymaterial respect when made and thebreach ofwhich has (or with thepassage of time willhave) amaterial adverse effect on therights of theHolder with respect to this Note.
Receiver or Trustee. TheBorrower orany subsidiary of theBorrower shall makean assignment for the benefit ofcreditors, or apply foror consent to theappointment of areceiver or trustee for it or for asubstantial part of itspropertyorbusiness, orsuch areceiver or trusteeshall otherwisebe appointed.
Judgments. Any moneyjudgment, writ orsimilar process shall beentered orfiled against theBorrower orany subsidiaryof theBorrower orany of its property or otherassets for more than $50,000,and shall remain unvacated, unbonded orunstayed for a period of twenty (20) days unlessotherwise consented toby the Holder,whichconsent will not beunreasonably withheld.
Bankruptcy. Bankruptcy, insolvency, reorganizationor liquidationproceedings or otherproceedings, voluntary orinvoluntary, forrelief underany bankruptcy law orany law for therelief of debtorsshall be institutedby oragainst theBorrower orany subsidiary of theBorrower.
Delisting of Common Stock. TheBorrower shall fail to maintain the listing or quotation of the Common Stock on theOTCQB oran equivalent replacement exchange, theNasdaq Global Market, theNasdaq Capital Market, theNew York StockExchange, or theNYSE MKT.
Failure to Comply with theExchange Act. TheBorrower shall fail to comply with the reporting requirements of theExchange Act (including but not limited tobecoming delinquent in its filings),and/or theBorrower shallcease to besubject to the reportingrequirements of theExchange Act.
Liquidation. Any dissolution, liquidation, or winding up ofBorrower orany substantial portion of itsbusiness.
Cessation ofOperations. Anycessation ofoperationsbyBorrower orBorrower admits it isotherwise generallyunable topay itsdebts as such debts become due, provided,however, thatany disclosure of theBorrower’s ability to continueas a“going concern” shall not bean admission that theBorrower cannot payitsdebts asthey becomedue, or any disposition orconveyanceofanymaterial asset of the Company.
Financial Statement Restatement. TheBorrower replaces itsauditor, orany restatement ofanyfinancial statementsfiledby theBorrower with the SEC for any date orperiod from twoyears prior to theIssue Date of this Note and until this Note is nolonger outstanding, if theresult ofsuch restatement would,by comparisonto theunrestated financial statement, have constituted amaterial adverse effect on therights of theHolder withrespect to thisNote.
Replacement ofTransfer Agent.In theevent that theBorrower replaces itstransfer agent,and theBorrower fails to provide prior to theeffective date ofsuch replacement, a fullyexecuted Irrevocable Transfer Agent Instructions (including butnot limited to theprovision to irrevocablyreserve shares of Common Stock in theReserved Amount)signed by the successortransfer agent toBorrower and theBorrower.
Cross-Default. Notwithstandinganything to the contrarycontained in this Noteor the otherrelated orcompanion documents, abreach ordefaultby theBorrower ofany covenant or otherterm orcondition contained in any of the otherfinancial instrument, including but not limited toall convertible promissory notes, currentlyissued,orhereafter issued, by theBorrower, to the Holder orany other3rd party (the“Other Agreements”), after the passage ofall applicable notice and cure orgrace periods, shall,at the option of theHolder, beconsidered adefault under thisNote, inwhich event theHolder shall beentitled to applyall rights and remedies of the Holder under the terms of thisNote byreason of adefault under said OtherAgreement orhereunder.
Inside Information. Anyattemptby theBorrower or itsofficers, directors, and/oraffiliates totransmit, convey, disclose, oranyactual transmittal, conveyance, or disclosureby theBorrower or itsofficers, directors, and/or affiliates of,material non-public information concerning theBorrower, to theHolderor itssuccessors and assigns, which is notimmediately curedbyBorrower’s filing of aForm8-K pursuant toRegulation FD on thatsame date.
No bid. Atany time while this Note isoutstanding, thelowest TradingPrices on theOTCQB or otherapplicable principal tradingmarket for the Common Stock isequal to orless than $0.0001.
Upon theoccurrence and during thecontinuation ofanyEvent of Defaultspecified inSection 3.1 (solely withrespect tofailure to pay theprincipal hereof orinterest thereon when due
at the MaturityDate), the Noteshall become immediately dueand payableand the Borrowershallpay to the Holder, in fullsatisfactionof itsobligations hereunder, anamount equal to theDefault Sum(as defined herein). UPONTHE OCCURRENCE AND DURING THECONTINUATION OFANY EVENT OFDEFAULT SPECIFIED INSECTION 3.2,THE NOTE SHALL BECOMEIMMEDIATELY DUEAND PAYABLE ANDTHE BORROWER SHALL PAY TO THEHOLDER, INFULL SATISFACTION OF ITSOBLIGATIONS HEREUNDER, AN AMOUNT EQUALTO: (Y) THEDEFAULT SUM(AS DEFINED
HEREIN); MULTIPLIED BY (Z) TWO (2). Upon theoccurrence and during the continuationof anyEvent ofDefault specified inSections 3.1 (solely withrespect to failure topay the principalhereoforinterest thereon when due on this Noteoruponacceleration), 3.3, 3.4, 3.5, 3.6, 3.8, 3.9,
3.10, 3.11, 3.12, 3.13, 3.14, 3.15,and/or 3.16exercisable through the delivery of writtennotice to theBorrowerbysuchHolders (the“Default Notice”), and upon the occurrence ofan Event ofDefault specified the remainingsections ofArticles III (other than failure to pay the principalhereof orinterest thereon at the MaturityDate specified inSection 3,1hereof), the Noteshall become immediately dueand payable and theBorrower shall pay to theHolder, in fullsatisfaction of itsobligations hereunder, an amountequal to 200%multiplied by the thenoutstanding entire balance of the Note (includingprincipal and accrued andunpaid interest)plusDefault Interest, ifany,plus anyamounts owed to theHolder pursuant toSections 1.4(g) hereof (collectively, in theaggregate ofall of theabove, the“Default Sum”), and all otheramounts payable hereundershall immediately become dueand payable, all withoutdemand, presentment ornotice, all ofwhich hereby are expressly waived,together withall costs,including, without limitation,legal fees and expenses, ofcollection, and theHolder shall beentitled toexercise all otherrights andremedies available at law or inequity.
If theBorrower fails to pay theDefault Amount within ten(10) business daysofwritten notice thatsuch amount is due andpayable, then theHolder shallhave theright atany time, so longas theBorrower remains indefault (and so longand to the extent thatthere are sufficient authorized shares), to require theBorrower, uponwritten notice, to immediatelyissue, inlieu of theDefault Amount, the number ofsharesof Common Stock of theBorrower equal to theDefault Amountdividedby theConversion Price then ineffect, subject toissuance intranches due to thebeneficial ownership limitationscontained in thisNote.
ARTICLEIV.MISCELLANEOUS
Failure orIndulgence Not Waiver. Nofailure or delay on thepart of theHolder in theexercise ofany power,right orprivilege hereundershall operate as awaiver thereof, nor shall anysingle orpartial exercise ofanysuch power,rightorprivilege preclude other orfurther exercise thereof or ofany otherright, power orprivileges. Allrights and remedies existinghereunder arecumulative to,and not exclusive of, anyrights orremedies otherwise available.
Notices. Allnotices, demands, requests, consents,approvals, and othercommunications required orpermitted hereunder shall be inwriting and, unlessotherwise specified herein,shall be (i) personallyserved, (ii)deposited in the mail,registeredorcertified, return receipt requested, postage prepaid, (iii)deliveredby reputableair courier service withcharges prepaid, or (iv)transmittedby handdelivery, telegram, facsimile, orelectronic mailaddressed as set forth below or tosuch otheraddress as such party shallhave specified most recentlybywritten notice. Any notice or othercommunication requiredorpermitted to begiven hereunder shall bedeemed effective (a) uponhand delivery, upon electronic maildelivery, or deliverybyfacsimile, withaccurate confirmationgeneratedby the transmittingfacsimile machine, at theaddress or numberdesignated below (ifdelivered on abusiness day duringnormal business hours wheresuch notice is to bereceived), or thefirst business day followingsuch delivery (ifdelivered other than on abusiness day duringnormal business hourswhere such notice is to bereceived) or (b) on thesecond business day following thedate of mailingbyexpress courier service, fullyprepaid, addressedtosuch address, or uponactual receipt of suchmailing, whichever shall first occur.The addresses forsuch communications shall be:
If to theBorrower, to:
MAXSOUND CORPORATION
8837 VillaLa JollaDrive, Unit 12109La Jolla, CA 92039
e-mail:info@maxsound.com
If to the Holder:
CROWNBRIDGE PARTNERS,LLC
1173a 2ndAvenue, Suite 126New York, NY 10065
e-mail:Info@CrownBridgeCapital.com
with a copy to:
Laura Anthony, Esq.Legal &Compliance, LLC
330Clematis Street, Suite217 West PalmBeach, FL 33401
e-mail:LAnthony@LegalandCompliance.com
Amendments. This Noteandany provision hereofmay only beamendedbyan instrument inwriting signedby theBorrower and theHolder. Theterm “Note” and all reference thereto, as used throughout this instrument,shall mean thisinstrument
as originallyexecuted,or if lateramended orsupplemented, thenas soamended orsupplemented.
Assignability. This Noteshall be binding upon theBorrower and itssuccessors and assigns, and shall inure to be the benefit of theHolder and itssuccessors and assigns. Each transferee of this Note mustbean “accredited investor”(as defined in Rule501(a) of the 1933Act). Notwithstandinganythingin this Note to thecontrary, this Note may bepledged as collateral inconnection with abona fidemargin account or other lendingarrangement.
Cost ofCollection.Ifdefault is made in thepayment of thisNote, theBorrower shall pay theHolder hereof costs ofcollection, includingreasonable attorneys’ fees.
Governing Law. This Noteshall begovernedbyand construed inaccordance with thelawsof the State ofNew York withoutregard toprinciplesofconflicts oflaws. Any actionbroughtby either party against the other concerning thetransactions contemplatedby this Noteshall bebrought only in the stateand/or federal courts ofNew York, NY. The parties to this Note hereby irrevocably waiveany objection tojurisdiction and venue ofany action institutedhereunder and shall notassert anydefense based onlackofjurisdiction orvenueorbased uponforum nonconveniens. TheBorrower andHolder waivetrialbyjury. Theprevailing partyshall beentitled torecover from the other party itsreasonable attorney's fees and costs. In theevent thatany provision of this Noteor any otheragreement delivered inconnection herewith is invalid orunenforceable underanyapplicable statute or rule oflaw, thensuch provision shall bedeemed inoperative to the extent that it mayconflict therewith and shall bedeemed modified toconform withsuch statute orrule oflaw. Anysuch provision whichmay prove invalid orunenforceable underany lawshallnotaffect the validity orenforceability ofany other provisionof any agreement.Eachparty hereby irrevocably waivespersonal service of process andconsents to process beingserved inany suit,actionorproceeding inconnection with thisAgreementor any otherTransaction Document by mailing a copythereof viaregistered orcertified mail orovernight delivery (withevidence ofdelivery) tosuch partyat theaddress ineffect for notices to itunder thisAgreement and agrees thatsuch service shall constitute good and sufficientserviceofprocess and notice thereof. Nothingcontained herein shall bedeemed to limit in anyway anyright toserve process in any othermanner permittedbylaw.
Certain Amounts.Whenever pursuant tothis Note theBorrower isrequired to payan amount inexcess of theoutstanding principal amount (or the portionthereof required to be paidat that time) plusaccrued and unpaidinterest plusDefault Interest onsuch interest, theBorrower and theHolder agree that the actualdamages to theHolder from thereceipt ofcash payment on this Note may be difficult todetermine and theamount to be sopaid by theBorrower represents stipulated damages and not a penaltyand is
intended tocompensate theHolder inpart for loss of the opportunity to convert this Noteand toearn a returnfrom the sale ofshares of Common Stockacquired upon conversion of this Noteat aprice inexcess of theprice paid forsuch sharespursuant to thisNote. TheBorrower and theHolder herebyagreethatsuch amount of stipulateddamages is not plainlydisproportionate to the possible loss to theHolder from thereceipt of a cashpayment without the opportunity to convert this Note intoshares of Common Stock.
Remedies. TheBorrower acknowledges that abreachby it of itsobligations hereunder willcause irreparable harm to theHolder,by vitiating theintent and purpose of the transactioncontemplated hereby. Accordingly, theBorrower acknowledges that the remedyat law for abreach of itsobligations under this Note will beinadequate and agrees, in theeventof a breach orthreatened breachby theBorrower of the provisions of this Note,that theHolder shall beentitled, inaddition toall otheravailable remedies at law or inequity, and inaddition to thepenalties assessable herein, toan injunction orinjunctions restraining, preventing or curinganybreach of this Noteand to enforce specifically the terms and provisionsthereof, without thenecessityof showing economic lossand without any bond or other security beingrequired.
Prepayment. Notwithstandinganything to the contrarycontained in thisNote, theBorrowermay prepayanyamount outstanding under this Note, during theinitial 90 day periodafter the issuance of thisNote,by making apayment to theHolder ofan amount incash equal to 130%multiplied theamount that theBorrowerisprepaying, subject to theHolder’s priorwritten acceptance inHolder’s solediscretion. Further, theBorrowermay prepayanyamount outstanding under thisNote, from the91st daythrough the 180th dayafter the issuance of this Note, by making a payment to the Holder of an amount in cash equal to 145% multiplied the amount that the Borrower is prepaying. The Borrower may not prepay any amount outstanding under this Note after the180th day after the issuance of this Note.
Section 3(a)(10) Transactions.Ifatany time while this Note isoutstanding, theBorrower enters into atransaction structured inaccordance with,based upon, orrelated or pursuant to, in whole or inpart, Section 3(a)(10) of theSecurities Act (a“3(a)(10) Transaction”), then aliquidated damages charge of 25% of theoutstanding principal balanceof this Noteat that time, will beassessed and willbecome immediately dueand payable to theHolder, either in theform ofcash payment oras an addition to thebalance of theNote, as determined bymutual agreement of theBorrower and Holder.
Reverse SplitPenalty.Ifatany time while this Note isoutstanding, theBorrower effectuates a reverse split withrespect to the Common Stock, then aliquidated damages charge of 15%of the outstandingprincipal balance of this Noteat that time, will beassessed and willbecome immediately dueand payable to the Holder,either in theform
ofcash payment oras an addition to the balanceofthe Note,as determinedbymutual agreement of theBorrower and Holder.
Right ofFirst Refusal.Ifatany time while this Note is outstanding, the Borrower has a bona fide offer of capital or financing from any3rd party, pursuant to which a convertible promissory note in the principal amount of $50,000.00 or less is to be issued, that the Borrower intends to act upon, then the Borrower must first offer such opportunity to the Holder to providesuch capital orfinancing to theBorrower on thesame termsas each respective 3rd party’s terms. Should theHolder be unwilling orunable to providesuch capital or financing to theBorrower within 2 tradingdays from Holder’sreceipt ofwritten notice of theoffer (the“Offer Notice”) from theBorrower, then the Borrower may obtain suchcapital orfinancing from that respective 3rd party upon theexact same termsand conditions offered by theBorrower to theHolder, which transaction must becompleted within30days after thedate of theOffer Notice.If theBorrower does notreceive thecapital or financing from therespective 3rd party within 30days after thedate of therespective Offer Notice, then theBorrower mustagain offer thecapital orfinancing opportunity to theHolder as described above,and theprocess detailed above shall berepeated. TheOffer Notice must besent viaelectronic mail toInfo@CrownBridgeCapital.com.
[signature page tofollow]
INWITNESS WHEREOF,Borrower hascaused this Note to besigned in itsnameby its dulyauthorized officer thisSeptember 8, 2016.
MAXSOUNDCORPORATION
By:_Name:JohnBlaisure
Title:ChiefExecutive Officer
EXHIBIT A-- NOTICE OFCONVERSION
Theundersigned hereby elects toconvert $principal amount ofthe Note (defined below)intothat number ofshares ofCommon Stock to beissued pursuant tothe conversionof theNote (“CommonStock”) as setforth below, ofMAXSOUNDCORPORATION, aDelaware corporation (the “Borrower”) according to theconditions ofthe convertible noteofthe Borrower dated asofSeptember 8, 2016(the “Note”), as of thedate written below. No feewill becharged tothe Holder forany conversion,except fortransfer taxes, if any.
Box Checked as toapplicable instructions:
[ ] TheBorrower shall electronically transmit theCommon Stockissuable pursuant tothis Notice ofConversion tothe account ofthe undersigned or itsnominee withDTCthrough itsDeposit Withdrawal Agent Commission system (“DWAC Transfer”).
Name ofDTCPrimeBroker: Account Number:
[ ] Theundersigned hereby requests that theBorrower issue acertificateorcertificates for thenumber ofshares ofCommon Stock set forthbelow (which numbers are based onthe Holder’s calculation attached hereto) inthe name(s) specified immediately below or, ifadditional space isnecessary, on anattachment hereto:
CROWNBRIDGEPARTNERS, LLC
1173a2nd Avenue, Suite 126 New York, NY10065
e-mail:Info@CrownBridgeCapital.com
Date of Conversion:
Applicable ConversionPrice:$Number ofSharesof Common Stock to beIssued
PursuanttoConversionofthe Notes:Amount ofPrincipalBalanceDue remaining
Under theNote after this conversion:
CROWNBRIDGE PARTNERS,LLC
By:_Name:Title:Date: