NEITHER THE ISSUANCE ANDSALE OFTHE SECURITIES REPRESENTED BY THISCERTIFICATE NOR THESECURITIES INTOWHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THESECURITIES ACT OF 1933, ASAMENDED, ORAPPLICABLE STATESECURITIES LAWS. THESECURITIES MAY NOT BEOFFERED FORSALE, SOLD, TRANSFERRED ORASSIGNEDINTHE ABSENCE OF (A) ANEFFECTIVE REGISTRATION STATEMENT FORTHE SECURITIES UNDER THESECURITIES ACT OF 1933, ASAMENDED, OR(B) ANOPINION OFCOUNSEL (WHICH COUNSELSHALL BESELECTED BY THEHOLDER), IN AGENERALLY ACCEPTABLE FORM, THATREGISTRATION IS NOTREQUIRED UNDER SAID ACT.NOTWITHSTANDING THE FOREGOING, THESECURITIES MAY BEPLEDGED INCONNECTION WITH A BONAFIDE MARGINACCOUNT OROTHER LOAN OR FINANCINGARRANGEMENT SECURED BY THESECURITIES.
Principal Amount: $103,500.00Issue Date: February 10, 2017Purchase Price: $103,500.00
CONVERTIBLE PROMISSORY NOTE
FORVALUE RECEIVED,MAXSOUND CORPORATION,aDelaware corporation (hereinafter called the “Borrower”), hereby promises to pay to the order ofPOWERUP LENDING GROUP LTD., aVirginia corporation, orregistered assigns (the “Holder”) thesum of$103,500.00 together with any interest asset forth herein, onNovember 20, 2017(the “Maturity Date”), and to pay interest onthe unpaidprincipal balance hereof at therate ofeight percent (8%) (the “Interest Rate”) per annum fromthe datehereof (the “Issue Date”)until thesame becomes due and payable, whether atmaturity orupon acceleration orby prepayment orotherwise. This Note may not beprepaid inwhole or inpart except asotherwise explicitly set forth herein. Any amount ofprincipal orinterest onthis Note which isnot paid when dueshall bear interest atthe rate oftwenty two percent (22%) per annum from the duedate thereof until thesame ispaid (“Default Interest”). Interest shall commence accruing onthe date that the Note isfully paidand shall be computed onthe basis of a365-day year andthe actual number of dayselapsed. Allpayments due hereunder (to the extent not converted into common stock, $0.00001 par value pershare (the“Common Stock”) inaccordance withthe terms hereof)shall be made in lawfulmoney of theUnited States ofAmerica. Allpayments shall bemade at suchaddress asthe Holder shall hereafter give to theBorrower by written notice made inaccordance withthe provisions ofthis Note. Each capitalized term used herein, and not otherwise defined, shall have themeaning ascribed thereto in that certain Securities Purchase Agreement dated thedate hereof, pursuant to whichthis Note wasoriginally issued (the “Purchase Agreement”).
This Note is free fromall taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rightsorother similar rights ofshareholdersof theBorrower and will not impose personal liability uponthe holder thereof.
The following terms shall apply to this Note:
ARTICLE I.CONVERSION RIGHTS
Conversion Right. The Holder shall havethe right from timeto time, and at anytime during the period beginning on thedate which isone hundred eighty (180)days following the date ofthis Note and ending onthe later of:(i) theMaturity Date and (ii)the date ofpayment ofthe Default Amount (as defined in ArticleIII), each inrespect ofthe remaining outstanding principal amount ofthis
Note to convert all orany part of theoutstanding and unpaid principal amount ofthis Note intofully paid and non-assessable shares ofCommon Stock, assuch Common Stock exists onthe Issue Date, orany shares ofcapital stock orother securities of theBorrower into which such CommonStock shall hereafter be changed orreclassified at theconversion price (the “Conversion Price”) determined asprovided herein(a “Conversion”);provided,however, thatin no eventshall the Holder beentitled to convert any portion ofthis Note inexcess of thatportion ofthis Note upon conversion ofwhich the sum of(1) thenumber ofshares ofCommon Stock beneficially owned by the Holder andits affiliates (other than shares ofCommon Stock whichmay be deemedbeneficially owned through the ownership of theunconverted portion ofthe Notes orthe unexercised orunconverted portion ofany other security ofthe Borrower subject to alimitation onconversion orexercise analogous to the limitations contained herein) and (2) thenumber ofshares ofCommon Stock issuable upon the conversion ofthe portion ofthis Note withrespect to which the determination ofthis proviso isbeing made, wouldresult inbeneficial ownership by theHolder and its affiliates ofmore than 4.99% ofthe outstanding shares of Common Stock. Forpurposes of theproviso to the immediately preceding sentence, beneficial ownership shallbe determined in accordance with Section 13(d) ofthe Securities Exchange Act of 1934, asamended (the “Exchange Act”), andRegulations 13D-G thereunder, except asotherwise provided inclause (1) of suchproviso,provided,further,however, that thelimitations onconversion may be waivedby the Holder upon, atthe election ofthe Holder, not less than 61days’ prior notice to the Borrower, and the provisions ofthe conversion limitation shallcontinue to apply until such 61stday (or such later date, asdetermined by the Holder, asmay be specified insuch noticeofwaiver). The number ofshares ofCommon Stock to be issuedupon each conversion ofthis Note shallbe determined by dividing the ConversionAmount (as defined below) by theapplicable Conversion Price then in effect onthe date specified in the notice ofconversion, inthe formattached hereto asExhibit A(the “Notice ofConversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice ofConversion is submitted byfacsimileore-mail (or by other means resulting in, orreasonably expected toresult in,notice) to the Borrower before 6:00p.m., New York, NewYork time onsuch conversion date (the “Conversion Date”); however, if the Notice ofConversion issent after 6:00pm, New York,New York time theConversion Dateshall be the next business day. The term “Conversion Amount” means, with respect to any conversion ofthis Note, thesum of(1) the principal amount of thisNote to be converted insuch conversionplus (2) atthe Holder’s option, accrued and unpaid interest, ifany, onsuch principal amount atthe interest rates provided inthis Note to the ConversionDate,plus (3) atthe Holder’s option, Default Interest, if any, onthe amounts referred to in the immediately preceding clauses (1) and/or (2)plus (4) atthe Holder’s option, any amounts owedto the Holder pursuant to Sections 1.4 hereof.
Conversion Price. Theconversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments by the Borrower relating to the Borrower’s securities orthe securities ofany subsidiary ofthe Borrower, combinations, recapitalization, reclassifications, extraordinary distributions andsimilar events). The"Variable Conversion Price" shall mean 65%multiplied by theMarket Price(as defined herein) (representing adiscount rate of35%). “Market Price” means the average ofthe lowest three (3)Trading Prices (as defined below) for theCommon Stock during the ten(10) Trading Day periodending on thelatest complete Trading Dayprior to the Conversion Date. “Trading Price” means, forany security as ofany date, theclosing bid price onthe OTCQB, OTCQX, Pink Sheets electronic quotation system orapplicable trading market (the “OTC”) asreported by areliable reporting service (“Reporting Service”) designated by theHolder (i.e. Bloomberg) or, ifthe OTC isnot theprincipal trading market forsuch security, theclosing bidprice ofsuch securityonthe principal securities exchange ortrading market where suchsecurity islisted ortraded or, ifno closing bid price ofsuch security isavailable inany ofthe foregoing manners, the average of theclosing bidprices ofany market makers forsuch security that arelisted inthe “pink sheets”. If the Trading Price cannot be calculated forsuch security onsuch date inthe manner provided above, the
Trading Price shall be the fairmarket value asmutually determined by the Borrower and the holders of amajority in interest ofthe Notes being converted forwhich the calculation of theTrading Price is required inorder to determine the Conversion Price ofsuch Notes. “Trading Day”shall meanany day onwhich theCommon Stock istradable forany period onthe OTC, or onthe principal securities exchange or othersecurities market onwhich the Common Stock isthen being traded.
Authorized Shares. The Borrower covenants thatduring theperiod theconversion right exists, theBorrower will reserve fromits authorized andunissued CommonStock asufficient number ofshares, free frompreemptive rights, to provide for theissuance ofCommon Stock upon the fullconversion ofthis Note issued pursuant to the Purchase Agreement. The Borrower isrequired at alltimes to haveauthorized andreserved three times thenumber ofshares that is actually issuable upon full conversionofthe Note (based onthe Conversion Price of theNote ineffectfrom timeto time initially64,845,110)(the “Reserved Amount”). TheReserved Amount shallbe increased fromtime to time inaccordance withthe Borrower’s obligations hereunder. The Borrower represents that uponissuance, such shares will be duly and validly issued, fully paid andnon-assessable. Inaddition, ifthe Borrower shall issue any securities ormake any change to itscapital structure which wouldchange the number ofshares ofCommon Stock into whichthe Notes shallbe convertible atthe then current Conversion Price, the Borrower shall atthe same time make proper provision sothat thereafter there shall be asufficient number ofshares ofCommon Stock authorized and reserved, free frompreemptive rights, forconversion ofthe outstanding Note. TheBorrower (i)acknowledges that ithas irrevocably instructed itstransfer agent to issue certificates forthe Common Stock issuable upon conversion ofthis Note, and (ii) agrees that itsissuanceofthis Note shall constitute full authority toits officers and agents who arecharged with theduty ofexecuting stock certificates to execute and issue thenecessary certificates forshares ofCommon Stock inaccordance with theterms and conditions ofthis Note.
If, atany time the Borrower does not maintain the Reserved Amount it will be considered anEvent ofDefault under Section 3.2 ofthe Note.
Method ofConversion.
(a) Mechanics ofConversion. Asset forth inSection 1.1 hereof, fromtime to time, and atany time duringthe period beginning onthe date which isone hundred eighty (180)days following the date ofthis Note andending onthe later of: (i) theMaturity Date and (ii)the date ofpayment ofthe Default Amount, this Note may beconverted by the Holder inwhole or inpart at anytime fromtime to time after the Issue Date,by (A)submitting tothe Borrower aNotice ofConversion (by facsimile, e-mail or otherreasonable means ofcommunication dispatched onthe Conversion Date prior to 6:00p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principaloffice ofthe Borrower (upon payment infull ofany amounts owedhereunder).
(b) Surrender ofNote Upon Conversion. Notwithstanding anything tothe contrary set forthherein, upon conversion ofthis Note in accordance withthe terms hereof, the Holder shall not be required to physicallysurrender this Note to the Borrower unless the entire unpaid principal amount ofthis Note is soconverted. TheHolder and theBorrower shall maintain records showing theprincipal amount soconverted and the dates ofsuch conversions orshall use such other method, reasonably satisfactory to the Holder andthe Borrower, so asnot to require physical surrender ofthis Note uponeach suchconversion.
(c) Delivery ofCommon Stock Upon Conversion. Upon receiptby theBorrower from theHolder of afacsimile transmission ore-mail (or other reasonable means of
communication) of aNotice ofConversion meeting therequirements forconversion asprovided in thisSection 1.4, the Borrower shall issue anddeliver orcause to be issued anddelivered to or uponthe order ofthe Holder certificates forthe Common Stock issuable uponsuchconversion withinthree (3)business days after such receipt (the “Deadline”) (and, solely in the case ofconversion of theentire unpaid principal amount hereof, surrender ofthis Note) inaccordance with the termshereof and the Purchase Agreement. Upon receipt bytheBorrowerof aNotice ofConversion, the Holdershall bedeemed to be the holder ofrecord ofthe Common Stock issuable upon suchconversion, the outstanding principal amount and theamount ofaccrued and unpaidinterest onthis Note shall be reduced to reflect suchconversion, and, unless the Borrowerdefaults onits obligations hereunder, allrights withrespect to theportion ofthis Note being soconverted shall forthwith terminate except theright to receive theCommon Stock orother securities, cash orother assets, asherein provided, onsuch conversion. If the Holder shall have given aNotice ofConversion asprovided herein, the Borrower’s obligation to issue and deliver the certificates forCommon Stock shall beabsolute and unconditional, irrespective ofthe absence ofany action by the Holder to enforce the same,any waiver orconsent with respect to any provision thereof, therecovery ofany judgmentagainst anyperson orany action toenforce thesame, any failure or delay inthe enforcement ofany other obligation ofthe Borrower to the holder ofrecord, or anysetoff, counterclaim, recoupment, limitation ortermination, orany breach oralleged breach by the Holder ofany obligation to the Borrower, and irrespective of anyother circumstance which might otherwise limit such obligationofthe Borrower to the Holder inconnection with suchconversion.
(d) Delivery ofCommon Stock by Electronic Transfer. Inlieu ofdelivering physical certificates representing the Common Stock issuable uponconversion, provided the Borrower is participating inthe Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request ofthe Holder andits compliance withthe provisions set forth herein, the Borrower shall use its bestefforts to cause its transfer agent to electronically transmit the Common Stockissuable upon conversion to the Holder by crediting the account ofHolder’s Prime Broker withDTC through its Deposit WithdrawalAgent Commission (“DWAC”) system.
(e) Failure to DeliverCommon Stock Prior toDeadline. Without in any waylimiting theHolder’s right topursue other remedies, including actualdamages and/or equitable relief, the parties agreethat if delivery ofthe Common Stock issuable upon conversion ofthis Note is notdelivered by the Deadline due to action and/or inaction ofthe Borrower, the Borrowershall pay to theHolder
$2,000per day incash, foreach day beyond the Deadline that the Borrower fails to deliver such CommonStock (the “Failto Deliver Fee”); provided; however that the Failto Deliver Feeshall not be due if the failure is aresult of athird party (i.e., transfer agent; and not theresult ofany failure to pay such transfer agent) despite the best efforts of theBorrower to effect delivery of suchCommon Stock. Such cash amount shall be paidto Holder by the fifthday ofthe month following the month inwhich ithas accrued or, atthe option ofthe Holder (by writtennotice totheBorrower by the firstday ofthe month following the month inwhich ithas accrued), shall beadded tothe principal amount ofthis Note, inwhich event interest shall accrue thereon inaccordance withthe terms ofthis Note andsuch additional principal amount shall be convertible into CommonStock inaccordance withthe terms ofthis Note. TheBorrower agrees that the right to convert is avaluable right tothe Holder. Thedamages resulting from afailure, attempt to frustrate, interference withsuch conversion right aredifficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained inthis Section 1.4(e) arejustified.
Concerning the Shares. Theshares ofCommon Stock issuable uponconversion ofthis Note may not be sold ortransferred unless: (i) suchshares are soldpursuant to aneffective registration statement underthe Act or(ii) the Borrower or itstransfer agent shall have been furnished
with an opinion ofcounsel (which opinionshall be inform, substance and scopecustomaryforopinions ofcounsel incomparable transactions) tothe effect that the sharesto be sold ortransferred may be sold ortransferred pursuant to anexemption fromsuch registration (such asRule 144 or asuccessor rule) (“Rule 144”); or(iii)suchshares aretransferred to an“affiliate” (asdefined inRule 144) ofthe Borrower who agrees tosell orotherwise transfer the shares only in accordance with thisSection 1.5and who is anAccredited Investor(as defined inthe Purchase Agreement).
Any restrictive legend oncertificates representing shares of CommonStock issuable upon conversion ofthis Note shall be removed and the Borrowershall issue to the Holderanew certificate therefore free ofany transfer legend if the Borrower orits transfer agentshall havereceived anopinion ofcounsel fromHolder’s counsel, in form,substance and scopecustomary foropinions ofcounsel incomparable transactions, to the effect that (i) a public sale ortransfer ofsuch Common Stock may be made withoutregistration under theAct, which opinion shall beaccepted by theCompany sothat the sale ortransfer iseffected; or (ii) inthe case ofthe CommonStock issuable uponconversion ofthis Note, suchsecurity isregistered forsale by theHolder under aneffective registration statement filed under the Act; orotherwise may be soldpursuant to anexemption fromregistration. In the event that the Company does not reasonably accept theopinion ofcounsel provided by the Holder withrespect to thetransfer ofSecurities pursuant to anexemption fromregistration (such asRule 144), atthe Deadline, it willbe considered anEvent of Default pursuantto Section 3.2 of theNote.
Effect ofCertain Events.
(a) Effect ofMerger, Consolidation, Etc. Atthe option ofthe Holder, thesale, conveyance ordisposition of all orsubstantially all ofthe assets ofthe Borrower, theeffectuation by the Borrower of atransaction orseries ofrelated transactions inwhich more than 50% ofthe voting power ofthe Borrower isdisposed of, or theconsolidation, merger orother business combination ofthe Borrower with orinto any other Person(as defined below) orPersons when theBorrower is not thesurvivor shall be deemed to be anEvent ofDefault (as defined inArticle III) pursuant to which the Borrower shall be requiredto pay to theHolder upon the consummation of and as acondition to such transaction anamount equal to the DefaultAmount (as defined inArticle III). “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust orother entity ororganization.
(b) Adjustment Due to Merger, Consolidation, Etc.If, atany timewhen this Note is issued andoutstanding and priorto conversion of all ofthe Note, thereshall beany merger, consolidation, exchange ofshares, recapitalization, reorganization, orother similar event, as aresult ofwhich sharesofCommon Stock ofthe Borrower shall be changed into the sameor a differentnumberofshares ofanother class orclasses ofstock orsecurities ofthe Borrower oranother entity, or incase of any sale orconveyance of all orsubstantially all ofthe assets ofthe Borrower other than inconnection with aplan ofcomplete liquidation ofthe Borrower, then theHolder ofthis Note shall thereafter havethe rightto receive uponconversion ofthis Note, upon the basis and upon theterms and conditions specified herein and in lieu of the shares ofCommon Stock immediately theretofore issuable upon conversion, suchstock, securities orassets which the Holder would havebeen entitled to receivein such transaction hadthis Note been converted in fullimmediately prior to such transaction (without regard to any limitations onconversion set forth herein), and in any such caseappropriate provisions shall be made with respect to the rights and interests ofthe Holder ofthis Note to the end that the provisions hereof (including, without limitation, provisions foradjustment of theConversion Price and ofthe number of sharesissuable upon conversion ofthe Note) shall thereafter be applicable, as nearly asmay bepracticable in relation to any securities orassets thereafter deliverable upon theconversion hereof. TheBorrower shall not affect
any transaction described inthis Section 1.6(b) unless(a)it first gives,to theextent practicable, ten(10) days prior written notice (but inany event atleast five(5) days priorwritten notice) ofthe recorddate ofthe special meeting ofshareholders to approve, orif there is no such record date, theconsummation of,such merger, consolidation, exchange ofshares, recapitalization, reorganization orother similar event orsale ofassets (during which time the Holder shall be entitled to convert this Note) and(b) the resulting successor oracquiring entity (if not the Borrower) assumes by written instrument the obligations ofthis Note. The aboveprovisions shall similarly apply to successive consolidations, mergers, sales, transfers orshare exchanges.
(c) Adjustment Due to Distribution. If theBorrower shall declare ormake any distribution ofits assets (or rights toacquire itsassets) to holders ofCommon Stock as adividend, stock repurchase, by way ofreturn ofcapital or otherwise(including any dividend ordistribution to the Borrower’s shareholders incash orshares (or rights to acquire shares) ofcapital stock of asubsidiary (i.e., aspin-off)) (a “Distribution”), then theHolder ofthis Note shall beentitled, uponany conversion ofthis Note after thedate of record fordetermining shareholders entitled to such Distribution, to receive the amount ofsuch assets which would havebeen payable to the Holder withrespect to theshares ofCommon Stockissuable uponsuch conversion had suchHolder beenthe holder ofsuch shares of CommonStock onthe record date forthe determination ofshareholders entitled to suchDistribution.
Prepayment. Notwithstanding anything to the contrary contained inthis Note, atany time during the periods set forth onthe table immediately followingthis paragraph (the “Prepayment Periods”), the Borrower shall have the right, exercisable onnot more than three (3) Trading Daysprior written notice tothe Holder ofthe Note toprepay the outstanding Note (principaland accrued interest), infull,inaccordance with thisSection 1.7. Anynotice ofprepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to theHolder ofthe Note atits registered addresses and shall state: (1) that the Borrower isexercising its right toprepay the Note, and (2)the date ofprepayment which shall benot more than three (3)Trading Days fromthe date ofthe Optional Prepayment Notice. On the date fixed forprepayment (the “Optional Prepayment Date”), theBorrower shall makepayment ofthe OptionalPrepayment Amount (as defined below) to Holder, orupon the direction of theHolder asspecified by the Holder in awriting to the Borrower (which shall direction to besent to Borrower by the Holder at leastone (1)business day prior to the Optional Prepayment Date). If the Borrower exercises itsright to prepay the Note, the Borrower shall make payment to the Holder of anamount incash equal to the percentage (“Prepayment Percentage”) asset forth in the tableimmediately following this paragraph opposite the applicable Prepayment Period,multiplied bythe sum of:(w)thethen outstanding principal amount of thisNoteplus (x) accrued andunpaid interest onthe unpaid principal amount ofthis Note to the Optional Prepayment Dateplus (y) Default Interest, ifany, on theamounts referred to inclauses (w) and (x)plus (z)any amounts owed to the Holder pursuant to Section 1.4 hereof (the “Optional Prepayment Amount”). Ifthe Borrower delivers anOptional Prepayment Notice and failsto pay the Optional Prepayment Amount dueto the Holder ofthe Note within two (2)business daysfollowing the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.7.
| Prepayment Period | Prepayment Percentage |
| 1. Theperiod beginning on theIssue Date and ending onthe date which isthirty (30)days followingthe Issue Date. | 120% |
2. Theperiod beginning onthe date which isthirty-one (31) days followingthe Issue Date andending on thedate which issixty (60) daysfollowing theIssue Date. | 125% |
3. The period beginning onthe date which issixty-one (61) days followingthe Issue Date andending on thedate which isninety (90) daysfollowing the Issue Date. | 130% |
4. The period beginning onthe date that isninety-one (91) day from theIssue Dateand endingone hundred twenty (120)days following theIssue Date. | 135% |
| 5. The periodbeginning onthe date that isone hundred twenty-one (121)day fromthe Issue Dateand endingone hundred fifty (150) daysfollowing the Issue Date. | 140% |
| 6. The periodbeginning onthe date that isone hundred fifty-one (151)day fromthe Issue Dateand endingone hundred eighty (180)days following theIssue Date. | 150% |
After theexpiration ofone hundred eighty (180) days following the Issue Date, theBorrower shall have no right ofprepayment.
ARTICLE II.CERTAIN COVENANTS
2.1Sale of Assets.So long asthe Borrower shall have anyobligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease orotherwise dispose ofany significant portion ofits assets outside the ordinary course ofbusiness. Any consent to thedisposition ofany assets maybe conditioned on aspecified use ofthe proceeds ofdisposition.
ARTICLE III.EVENTS OFDEFAULT
If any ofthe followingevents ofdefault (each, an“Event ofDefault”) shall occur:
Failure to PayPrincipal andInterest. The Borrower fails to paythe principal hereof orinterest thereon when due onthis Note, whether atmaturity or uponacceleration and suchbreach continues for a period of five(5) days after written notice fromthe Holder.
Conversion and theShares. The Borrower fails to issue shares ofCommon Stock to the Holder (or announces orthreatens inwriting that it will nothonor its obligation to do so)upon exercise by the Holder ofthe conversion rights of theHolder in accordance withthe terms ofthis Note, failsto transfer orcause itstransfer agent to transfer (issue) (electronically or incertificated form)any certificate forshares ofCommon Stock issued to the Holder upon conversion of orotherwise pursuant to this Note asand whenrequired by thisNote, the Borrowerdirects itstransfer agent not totransfer ordelays, impairs, and/or hinders itstransfer agent intransferring (or issuing) (electronically or incertificated form)any certificate forshares ofCommon Stock to beissued to theHolder uponconversion of orotherwise pursuant tothis Note asand when required by this Note, or failsto remove (ordirects its transfer agent not to remove orimpairs, delays, and/or hinders its transfer agent fromremoving) anyrestrictive legend (or to withdraw any stoptransfer instructionsinrespect thereof) on anycertificate forany shares ofCommon Stock issuedto the Holder uponconversion of orotherwise pursuant to this Note asand whenrequired by this Note (or makes any written announcement, statement or threatthat it doesnot intend tohonor the obligations described inthis paragraph) and any such failure shallcontinue uncured (or any written announcement, statement orthreat notto honor itsobligations shall not be rescinded in writing) forthree (3)business days after the Holder shall havedelivered aNotice ofConversion. It is anobligation ofthe Borrowerto remain current inits obligations to its transfer agent. Itshall be anevent ofdefault ofthis Note, if aconversion ofthis Note isdelayed, hindered orfrustrated due
to abalance owedby the Borrowerto its transfer agent. If atthe option ofthe Holder, the Holder advances any funds to the Borrower’s transfer agent in orderto process aconversion, such advanced funds shall be paid by the Borrowerto theHolder within forty-eight (48) hours of ademand fromthe Holder.
Breach ofCovenants. TheBorrower breaches any material covenant orother material term orcondition contained inthis Note and any collateral documents including but not limitedto thePurchase Agreement and suchbreach continues for a period oftwenty (20)days after written notice thereof to theBorrower from the Holder.
Breach ofRepresentations and Warranties. Any representation orwarranty ofthe Borrower made herein or inany agreement, statement orcertificate given inwriting pursuant hereto orin connection herewith (including, without limitation, the Purchase Agreement), shall be false ormisleading inany material respect when made andthe breach ofwhich has (or with the passage of timewill have) amaterial adverse effect on therights ofthe Holder with respect to this Note orthe Purchase Agreement.
Receiver orTrustee. The Borrower orany subsidiary ofthe Borrower shallmake anassignment forthe benefit ofcreditors, orapply for orconsent to the appointment of areceiver ortrustee for it or for asubstantial part ofits property orbusiness, orsuch areceiver ortrustee shall otherwise beappointed.
Bankruptcy. Bankruptcy, insolvency, reorganization orliquidation proceedings orother proceedings, voluntaryorinvoluntary,forrelief under any bankruptcylaw oranylaw forthe relief ofdebtors shallbe instituted by oragainst the Borrower orany subsidiary of theBorrower.
Delisting ofCommon Stock. The Borrower shall fail to maintain the listing ofthe Common Stock on atleast one ofthe OTC(which specifically includes thequotation platforms maintained by the OTC Markets Group) or anequivalent replacement exchange, the NasdaqNational Market, theNasdaq SmallCap Market, the NewYork Stock Exchange, or the AmericanStock Exchange.
Failure to Comply with theExchange Act. TheBorrower shallfailto comply with the reporting requirements of theExchange Act; and/orthe Borrower shall ceaseto besubject to thereporting requirements ofthe Exchange Act.
Liquidation. Any dissolution, liquidation, or windingup ofBorrower or anysubstantial portion ofits business.
Cessation ofOperations. Any cessation ofoperations by Borrower orBorrower admits it isotherwise generally unable topay its debts assuch debts become due, provided, however, that any disclosure of theBorrower’s ability to continue as a“going concern” shallnot be anadmission that theBorrower cannot payits debts asthey become due.
Financial Statement Restatement. The restatement ofany financial statements filed bytheBorrower with the SEC at any timeafter180days after the Issuance Date forany date orperiod until thisNote isno longer outstanding, if theresult of suchrestatement would, by comparison tothe un-restated financial statement, have constituted amaterial adverse effect onthe rights ofthe Holder with respect to this Note or thePurchase Agreement.
Replacement ofTransfer Agent. In theevent that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of suchreplacement, afully executed Irrevocable Transfer Agent Instructions in a form asinitially delivered pursuantto thePurchase Agreement (including but notlimited to theprovision to irrevocably reserve shares ofCommon Stock inthe Reserved Amount) signed bythe successor transfer agent to Borrower and the Borrower.
Cross-Default. Notwithstanding anything to the contrary contained inthis Note orthe other related orcompanion documents, abreach ordefault by theBorrower ofany covenant orother term orcondition contained inany ofthe Other Agreements, after the passage of allapplicable notice and cure orgrace periods, shall, atthe option ofthe Holder, be considered adefault under thisNote andthe Other Agreements, in whichevent the Holder shall beentitled (but inno event required) to apply all rightsand remedies ofthe Holder under theterms of thisNote andthe Other Agreements by reasonof adefault under said Other Agreement orhereunder. “Other Agreements” means, collectively, allagreements and instruments between,among or by: (1)the Borrower, and, or forthe benefit of,(2) the Holder and anyaffiliate ofthe Holder, including, withoutlimitation, promissory notes; provided, however, the term “Other Agreements” shall not include therelated orcompanion documents to this Note. Each ofthe loantransactions willbe cross-defaulted with eachother loantransaction and with allother existing and future debt ofBorrower to the Holder.
Upon the occurrence and during thecontinuation ofany Event ofDefault specified inSection 3.1 (solely with respect tofailure to paythe principal hereof orinterest thereonwhen due at theMaturity Date), theNote shall become immediately due and payable and the Borrower shall payto theHolder, in full satisfaction ofits obligations hereunder, anamount equal to the Default Sum (asdefined herein). UPONTHE OCCURRENCEANDDURING THE CONTINUATION OF ANYEVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTESHALL BECOME IMMEDIATELY DUE ANDPAYABLE AND THE BORROWER SHALL PAYTO THEHOLDER, IN FULL SATISFACTION OF ITSOBLIGATIONS HEREUNDER, AN AMOUNT EQUALTO: (Y) THE
DEFAULT SUM(AS DEFINED HEREIN); MULTIPLIED BY(Z) TWO (2). Upon the occurrence and during the continuation ofany Event ofDefault specified in Sections 3.1 (solely with respect to failure to pay the principal hereof orinterest thereon when due onthis Note upon aTrading Market Prepayment Eventpursuant to Section 1.7 orupon acceleration), 3.3,3.4, 3.7, 3.8, 3.10, 3.11,3.12, 3.13,and/or 3.14exercisable through the delivery ofwritten notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of anEvent ofDefault specified theremaining sections ofArticles III(other thanfailure to pay the principal hereof orinterest thereon at theMaturity Date specified inSection 3,1hereof), the Note shall become immediately dueand payable and the Borrowershall pay to theHolder, in full satisfaction ofits obligations hereunder, anamount equal to thegreater of(i) 150%times thesum of (w)the then outstanding principal amount ofthis Noteplus (x) accrued and unpaidinterest onthe unpaid principal amount ofthis Note to the date ofpayment (the “Mandatory Prepayment Date”)plus (y) Default Interest, if any, onthe amounts referred to inclauses (w) and/or(x)plus (z) anyamounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount ofthis Note to the date ofpaymentplus the amounts referred to in clauses (x), (y) and (z) shall collectively beknown asthe “Default Sum”)or (ii)the “parity value” ofthe Default Sumto be prepaid, where parity value means
(a) the highest number ofshares ofCommon Stock issuable upon conversion of orotherwise pursuant to such Default Sum inaccordance withArticle I, treating the Trading Dayimmediately preceding theMandatory Prepayment Date asthe “Conversion Date” forpurposes ofdetermining the lowest applicable Conversion Price, unless the Default Event arises as aresult of abreach inrespect of aspecific Conversion Date in whichcase such Conversion Date shall be the Conversion Date),multiplied by (b) the highest Closing Price forthe CommonStock during the period beginning onthe date of firstoccurrence ofthe Event ofDefault andending oneday priorto the Mandatory Prepayment Date(the “Default Amount”) and allother amounts payablehereunder shall immediately become dueand payable, all without
demand, presentment ornotice, all ofwhich hereby areexpressly waived, together with all costs, including, without limitation, legal fees and expenses, ofcollection, and the Holder shall beentitled to exercise all other rights andremedies available at law orin equity.
If the Borrower fails to pay the Default Amount within five (5)business days ofwritten notice that suchamount is dueand payable, then the Holder shall havethe right atany time, solong asthe Borrower remains in default (and solong and to the extent that there aresufficient authorized shares), to require the Borrower, upon writtennotice, to immediately issue, in lieu ofthe DefaultAmount, thenumber ofshares ofCommon Stock ofthe Borrower equal to the Default Amount divided by the ConversionPrice then in effect.
ARTICLE IV.MISCELLANEOUS
Failure orIndulgence Not Waiver. No failure ordelay onthe part of theHolder in the exercise ofany power, right orprivilege hereunder shall operate as awaiver thereof, nor shall any single orpartial exercise ofany such power, right orprivilege preclude other orfurther exercise thereof or ofany other right, power orprivileges. Allrights and remedies existing hereunder arecumulative to, and not exclusive of,any rights orremedies otherwise available.
Notices. Allnotices, demands, requests, consents, approvals, and othercommunications required orpermitted hereunder shall be inwriting and,unless otherwise specified herein, shall be (i)personally served, (ii) deposited in the mail, registered orcertified, returnreceipt requested, postage prepaid, (iii) delivered by reputable aircourier service withcharges prepaid, or(iv) transmitted byhand delivery,telegram, orfacsimile, addressed asset forth below orto such other address assuch party shall have specified most recently by written notice. Any notice orother communication required orpermitted to begiven hereunder shall be deemed effective (a) uponhand delivery ordelivery by facsimile, with accurate confirmation generated bythe transmitting facsimilemachine, atthe address ornumber designated below (if delivered on abusiness day during normal businesshours where such notice is to bereceived), orthe firstbusiness day following suchdelivery (if delivered other than on abusiness day during normalbusiness hourswhere such notice isto be received) or(b) on thesecond business day following thedate ofmailing by express courier service, fully prepaid, addressed to such address, orupon actual receipt of suchmailing, whichever shall firstoccur. The addresses forsuch communications shall be:
If to the Borrower,to:
MAX SOUND CORPORATION
8837 Villa LaJolla Drive, Unit 12109 LaJolla, California 92039
Attn: GregHalpern, Chief Financial Officer and Chairman Fax:
Email:
greg@maxsound.com
If to the Holder:
POWER UP LENDING GROUP LTD.
111Great Neck Road, Suite 214Great Neck, NY 11021
Attn: Curt Kramer, Chief Executive Officer
e-mail: info@poweruplending.com
With acopy by faxonly to (which copy shall notconstitute notice): Naidich Wurman LLP
111Great Neck Road, Suite 216Great Neck, NY 11021
Attn: Allison Naidich facsimile: 516-466-3555
e-mail: allison@nwlaw.com
Amendments. This Note and anyprovision hereof mayonly be amended by aninstrument inwriting signed by the Borrowerand the Holder. The term “Note” and allreference thereto, asused throughout this instrument, shallmean this instrument (andthe other Notes issued pursuant to the Purchase Agreement) asoriginally executed, orif later amended orsupplemented, then as soamended orsupplemented.
Assignability. This Note shallbe binding upon theBorrower and its successors and assigns, andshall inure to bethe benefit ofthe Holder and its successors and assigns. Each transferee ofthis Note must be an“accredited investor” (as defined in Rule 501(a) ofthe Securities and Exchange Commission). Notwithstanding anything inthis Noteto the contrary, this Note may be pledged ascollateral in connection with abona fide marginaccount orother lending arrangement; and may be assigned by the Holder without the consent ofthe Borrower.
Cost ofCollection. If default is made inthe payment ofthis Note, the Borrower shall pay the Holder hereof costs ofcollection, including reasonable attorneys’ fees.
Governing Law.This Note shall be governed by and construed inaccordance withthe laws ofthe State ofVirginia without regard to principles ofconflicts of laws.Any action brought byeither party against the other concerning the transactions contemplated by this Note shallbe brought only inthe state courts ofNew York or in thefederal courts located inthe state and county of Nassau.The parties tothis Note hereby irrevocably waive any objection to jurisdiction and venue ofany action instituted hereunder and shallnot assertany defense based on lack ofjurisdiction orvenue orbased uponforumnon conveniens. TheBorrower and Holder waivetrial by jury. Theprevailing party shall be entitled to recover fromthe other party its reasonable attorney's fees and costs. In the event that anyprovision ofthis Note orany other agreement delivered in connection herewith is invalid orunenforceable underany applicable statute orrule of law,then such provision shall be deemed inoperative to theextent that itmay conflict therewith andshall bedeemed modified to conform withsuch statute orrule of law.Any such provision which may prove invalid orunenforceable under any law shallnot affectthe validity orenforceability ofany otherprovision ofany agreement. Each party hereby irrevocably waivespersonal service ofprocess and consents to process being served inany suit, action orproceeding inconnection with this Note, any agreement orany other document delivered in connection with this Noteby mailing acopy thereof via registered orcertified mail orovernight delivery (with evidence ofdelivery) to such party at theaddress ineffect fornotices to itunder thisNote and agrees that suchservice shallconstitute good and sufficient service ofprocess and notice thereof. Nothing contained herein shall bedeemed to limit inany wayany right toserve process inany othermanner permitted by law.
Purchase Agreement. Byits acceptance ofthis Note, each party agrees to bebound by the applicable terms of thePurchase Agreement.
Remedies. TheBorrower acknowledges that abreach by it of itsobligations hereunder willcause irreparable harm to the Holder, byvitiating the intent and purpose ofthe transaction contemplated hereby. Accordingly, theBorrower acknowledges that the remedy at law for abreach ofits obligations under this Note will be inadequate and agrees, inthe event of abreach orthreatened breach by theBorrowerof theprovisionsofthis Note, that the Holder shall be entitled,inaddition to allother available remedies atlaw or inequity, and inaddition to the penalties assessable herein, to aninjunction orinjunctions restraining, preventing orcuring any breach ofthis Note andto enforce specifically theterms and provisions thereof, without the necessity ofshowing economic loss andwithout any bond orother security being required.
IN WITNESS WHEREOF, Borrowerhas caused this Note to be signed inits name by itsduly authorized officer this onFebruary 10, 2017
MAXSOUND CORPORATION
Chief Financial Officer and Chairman
EXHIBIT A -- NOTICE OFCONVERSION
The undersigned hereby elects to convert $principal amount ofthe Note (defined below) into that numberofshares ofCommon Stock tobeissued pursuant to theconversion ofthe Note (“Common Stock”) asset forthbelow, ofMAX SOUND CORPORATION, aDelaware corporation (the “Borrower”) according to the conditions ofthe convertible note ofthe Borrowerdated as ofFebruary 10, 2017(the “Note”), as ofthe date written below. No fee will be charged to the Holder for anyconversion, except fortransfer taxes, ifany.
BoxChecked asto applicable instructions:
[ ]The Borrower shall electronically transmit the CommonStock issuable pursuant to this Notice of Conversionto theaccount ofthe undersigned orits nominee with DTCthrough its Deposit Withdrawal Agent Commissionsystem (“DWACTransfer”).
Name ofDTC Prime Broker: Account Number:
[ ]The undersigned hereby requests that the Borrower issue acertificate orcertificates forthe number ofshares ofCommon Stock set forth below(which numbers arebased on theHolder’s calculation attached hereto) inthe name(s) specified immediately below or, ifadditional space isnecessary, on anattachment hereto:
POWER UP LENDING GROUP LTD.
111Great Neck Road, Suite 214Great Neck, NY 11021Attention: Certificate Delivery
e-mail: info@poweruplendinggroup.com
Date ofconversion:
Applicable Conversion Price:$Number of shares ofcommon stock to beissued
pursuant toconversion ofthe Notes: Amount ofPrincipal Balance dueremaining under the Note after this conversion:
POWER UP LENDING GROUPLTD.
By:Name: Curt Kramer
Title: Chief Executive Officer
Date:
