NEITHERTHE ISSUANCEAND SALE OFTHESECURITIESREPRESENTED BYTHIS CERTIFICATE NORTHE SECURITIES INTO WHICH THESE SECURITIESARE EXERCISABLE HAVEBEEN REGISTERED UNDERTHE SECURITIESACT OF 1933, ASAMENDED,ORAPPLICABLE STATE SECURITIES LAWS.THE SECURITIESMAYNOT BE OFFEREDFOR SALE,SOLD,TRANSFERRED ORASSIGNED (I)INTHE ABSENCEOF(A)AN EFFECTIVE REGISTRATION STATEMENT FORTHE SECURITIES UNDERTHE SECURITIESACT OF 1933,ASAMENDED,OR (B)AN OPINION OF COUNSEL (WHICHCOUNSEL SHALL BE SELECTED BYTHE HOLDER), IN A GENERALLY ACCEPTABLEFORM,THAT REGISTRATIONIS NOT REQUIRED UNDERSAIDACT OR (II)UNLESSSOLD PURSUANT TORULE 144, RULE144A UNDERSAIDACT OR SUCH OTHER APPLICABLE EXEMPTION FROM REGISTRATION. NOTWITHSTANDINGTHE FOREGOING, THE SECURITIESMAY BE PLEDGEDINCONNECTION WITH ABONAFIDE MARGINACCOUNT OR OTHERLOAN OR FINANCING ARRANGEMENT SECURED BYTHE SECURITIES.
UNLESS PERMITTED UNDER SECURITIES LEGISLATION,THE HOLDER OF THIS SECURITY MUST NOT TRADETHE SECURITYIN CANADA BEFORETHEDATETHATIS 4MONTHS AND A DAY AFTERTHELATER OF(I) OCTOBER13, 2016, AND (II)THE DATE THE ISSUERBECAME A REPORTING ISSUERIN ANY PROVINCE ORTERRITORY INCANADA.
US$120,000.00
MAX SOUND CORPORATION
8% CONVERTIBLE REDEEMABLENOTE DUEOCTOBER13,2017
FOR VALUE RECEIVED,Max Sound Corporation.(the“Company”) promisestopayto the orderofBayPrivate Equity Inc. o/aBellridge Capital andits authorizedsuccessorsand permitted assigns
(“Holder”),the aggregate principalface amountofOne HundredThousand Dollars exactly (US$120,000.00)on October13, 2017(“Maturity Date”) andtopay intereston the principal amount outstanding hereunderatthe rateof 8% per annum commencingon October13, 2017. This Note contains aUS$9,600 original issuediscountsuch that the purchase priceof theNote shallbe US105,400.00 after deductionof expenses ofUS$5,000.00. The interestwill be paidto the Holderinwhose namethis Noteis registeredon the recordsof theCompany regarding registration and transfersof this Note.The principal of, and interest on, this Note are payableat Suite403 - 2727 Steeles Ave. W ., Toronto, OntarioM3J 3G9,initially, andif changed, last appearingon the recordsof theCompany asdesignated in writingby the Holder hereof from timeto time. The Company willpay each interest paymentand the outstanding principal due upon this Note beforeor on the Maturity Date,lessany amountsrequired by law tobe deductedor withheld,to the Holderof this Notebycheckor wire transfer addressedto suchHolder at the last address appearingontherecords ofthe Company. Interestshallbe payable in Common Stock (asdefined below) at the election of the Holderpursuant to paragraph 4(b)herein.
This Noteis subjectto the following additional provisions:
| 1. | This Noteis exchangeable foran equal aggregate principal amountof Notes of differentauthorized denominations,as requested by the Holder surrendering the same. No service charge willbe made for such registrationor transferor exchange, except that Holder shall payany tax orother governmental charges payable in connection therewith. |
| 2. | TheCompany shallbe entitledto withholdfromall paymentsany amountsrequired tobewithheld under applicable laws. |
| 3. | ThisNotemaybe transferredorexchanged onlyincompliance with theSecurities Actof 1933, as amended (“Act”) andapplicablestate securities laws.Any attempted transferto a non-qualifying party shallbe treatedbythe Companyas void. Priortodue presentment for transferofthis Note, theCompany andany agentof theCompanymay treat the personin whosenamethis Noteisduly registeredon the Company’s recordsas the ownerhereof forall other purposes,whether or |
not this Notebe overdue,and neither theCompanynor anysuch agent shallbe affected or boundby noticeto the contrary.Any Holderof this Note electingto exercise the rightof conversion set forthin Section 4(a) hereof,in additionto therequirements set forth in Section 4(a), andany prospective transfereeof this Note, alsois requiredto give theCompanywritten confirmationthat this Noteis being converted (“Notice of Conversion”)in the form annexed heretoas Exhibit A. The dateof receipt (includingreceiptby telecopyor email)of suchNotice of Conversion shallbe the Conversion Date.
4.
(a) The Holderof this Noteis entitled, at its optionatanytimeandfrom timetotimeafter thedate which is 180days after the of issuance of this Note,to convert all orany amountof theprincipal face amountof this Note then outstanding into shares of the Company’scommon stock (the “Common Stock”)at a price (“ConversionPrice”) for each shareofCommon Stockequal to 65% of the lowest pricefor any tradeof theCommonStock during the ten (10) trading day period priortoconversion. Such trading price shallbe determined basedontradesof theCommon Stockas reportedon theOTCPink markets (the “OTCP”)which the Company’s shares are traded on or, at the election of the Holder, any other exchange uponwhich theCommonStock may be tradedin the future (“Exchange”), for theten (10)prior tradingdays includingthe day uponwhich a Noticeof Conversionisreceived by theCompany orits transferagent (provided such Noticeof Conversionis delivered byfaxor other electronic method of communication totheCompany orits transferagent after 4 P.M. EasternStandard or Daylight SavingsTimeif the Holderwishesto includethesame day trading prices).If the shares havenot been delivered within 3 business days, theNoticeofConversionmayberescindedby the Holder.Such conversion shallbe effectuated by theCompany delivering the sharesofCommonStock to the Holderwithin 3businessdays of receipt by the Companyof theNoticeof Conversion. Accruedbut unpaid interest shallbe payable incash, subjectto conversionat theConversion Price in thesame mannerastheprincipal face amountat theelectionof the Holder. Nofractional sharesor scriprepresenting fractions of shareswill be issuedon conversion,but the number of sharesissuableshall be roundedto the nearest whole share.To the extent theConversion Priceofthe Company’sCommon Stock closes below the par valuepershare, theCompany willtake all steps necessaryto solicitthe consentof thestockholders toreduce the parvalue to thelowest value possible underlaw. The Company agreesto honorall conversions submitted pending this increase.Inthe eventtheCompany experiences a DTC“Chill”on its shares, theconversion price shallbe decreasedto45% insteadof 55% whilethat “Chill”is in effect. In no eventshall theHolder be allowedto effect a conversionif such conversion,along with all other shares ofCompany Common Stock beneficiallyownedby the Holder andits affiliateswould exceed 9.9% ofthe outstanding sharesof the CommonStock of the Company.
(b) Interestonany unpaid principal balanceof this Note shall accrue andbe paidattherateof 8% per annumwithoutcompounding basedon a365 dayyear. Interest shallbe paid by theCompanyin cashon theMaturity Date(asdefined below) unless earlier converted by the Holder intoCommon Stock(“Interest Shares”). Holdermay, at any timeand fromtimeto time, sendin a Noticeof Conversiontothe Companyto convert accrued interestinto Interest Shares basedon theformula providedinSection 4(a)above. The dollar amount converted into Interest Sharesmayat theelection of the Holderbe all or aportion of the accrued interest calculatedon the unpaid principal balance of this Note tothe date of such notice.
(c) Duringthefirst six monthsthis Noteis in effect, theCompanymay redeem this Noteby payingto the Holderan amountas follows: (i)if theredemptionis priorto the 30thdaythis Noteis ineffect (includingthe30th day), then foran amount equalto 110%of the unpaid principal amountof this Notealong withany interest thathas accrued during thatperiod; (ii)if theredemptionison the 31st day this Noteis in effect,up to and includingthe 60th day this Noteis in effect, then foran amount equalto 115%of the unpaid principal amountof this Notealong with any accrued interest;(iii) if the redemptionisonthe 61st day this Noteis in effect,up to and includingthe 120th day this Noteis in effect,thenforan amount equalto 135%of the unpaid principal amountof this Note alongwith any
accrued interest;(iv) if the redemptionis on the 121st day this Noteis in effect,upto andincluding the180th daythis Noteis in effect, thenforan amount equalto 150%of the unpaidprincipalamountof this Note alongwith any accrued interest. This Note may not be redeemed afterthe180th day this Noteis in effect. The redemption mustbe closed and paid forwithin 3 business daysof the Company sendingthe redemption demand orthe redemption willbe invalid and theCompany maynot redeemthis Note.In the event the Holderhas delivered a Noticeof Conversionto the Companypriorto the receiptof a redemption notice fromthe Company, the Noticeof Conversion shallprevail.
(d) Upon (i) a transferof allorsubstantially allof the assetsof theCompanytoany person in a single transactionor seriesof related transactions, (ii) areclassification, capital reorganizationor otherchangeor exchangeof outstanding sharesof the CommonStock,other than a forwardor reversestocksplit or stockdividend, or (iii)any consolidation or mergerof theCompany withor into another personor entity in which theCompanyis not thesurviving entity (other than amerger whichis effectedsolelytochange thejurisdictionofincorporationof theCompany and resultsin areclassification, conversionor exchangeof outstanding sharesofCommon Stocksolely into sharesofCommon Stock) (each ofitems(i), (ii) and(iii) being referredto as a “Reorganization Event”), then,in each case, theCompany shall, upon requestof the Holder, redeem this Noteincash for 150%ofthe principal amount, plus accruedbut unpaid interest throughthe date of redemption, or atthe electionof the Holder, such Holder may convertthe unpaid principal amountof this Note (together withthe amountof accrued but unpaid interest) into sharesofCommon Stockat theConversionPrice determinedin accordancewith Section 4(a)atany timeprior to the Reorganization Event.The foregoingprovisions shall similarly applyto successive ReorganizationEvents.
(e) In caseofany ReorganizationEvent (notto include asale of allor substantiallyall of the Company’s assets)in connectionwith which thisNoteis notredeemedor converted, theCompanyshall cause effective provisiontobemade sothat the Holderof this Note shall havethe right thereafter,by converting this Note (togetherwith the amountof accruedbut unpaid interest), to purchase or convert this Note into the kind and numberof sharesof stock or other securities or property(including cash) receivable upon such reclassification, capital reorganizationor other change, consolidationormerger by aholder of thenumber of sharesof CommonStock that could have been purchasedupon conversionof the Note (togetherwith the amountof accruedbut unpaid interest)andatthesame Conversion Price,asdefinedin thisNote, immediatelyprior to such Reorganization Event.The foregoing provisions shall similarlyapplyto successive Reorganization Events.If the consideration receivedby the holdersofCommon Stock isother than cash, thevalue shall be as determinedby the BoardofDirectorsof the Companyor successor personor entity acting in good faith.
| 5. | No provisionof this Note shall alteror impairthe obligationof the Company,which is absoluteand unconditional, topaythe principal of,andintereston, this Noteat thetime, place, andrate, and in theform,herein prescribed. |
| 6. | The Companyhereby expresslywaives demandand presentment for payment, noticeof non- payment, protest, noticeof protest, noticeof dishonor, noticeof acceleration orintent to accelerate, and diligence intaking anyactiontocollectamountscalledfor hereunder and shall be directly and primarily liable for thepayment of allsumsowing and tobeowing hereto. |
| 7. | The Company agreestopay all costsandexpenses, including reasonable attorneys’ feesand expenses on a solicitor-client basis,whichmaybe incurredbythe Holder in collectingany amount due underthis Note. |
| 8. | If one ormoreof thefollowing described “Events of Default” shall occur: |
| (a) | The Company shall defaultin the paymentof principalor intereston thisNoteoranyother note issuedto the Holderby the Company;or |
(b) Anyof therepresentations orwarrantiesmade bytheCompany hereinor inany certificateor financialor other written statements heretoforeor hereafter furnishedby or on behalfof the Companyin connectionwith the execution anddeliveryof this Note, or thesecurities purchaseagreement underwhich this Note was issuedshallbe false or misleadinginany respect;or
(c) The Company shallfail to performor observe, in any respect,any covenant, term, provision,condition,agreementor obligationof theCompany under thisNoteor anyother note issuedtothe Holderor the securities purchase agreement underwhich this Notewas issued;or
(d) The Company shall (1)becomeinsolvent;(2) admitin writing its inabilitytopay itsdebts generallyastheymature; (3)makean assignment forthe benefit ofcreditors orcommenceproceedings forits dissolution; (4)applyforor consentto theappointment of atrustee, liquidatoror receiver forits or for a substantial partof its propertyor business; (5) file a petition for bankruptcy relief, consentto the filingof such petitionor have filedagainst it an involuntary petition forbankruptcy relief,all under federalorstatelaws asapplicable; or (6)the boardof directorsof theCompany shallresolveto undertakeanyactions which could leadto orto confirm anyof the foregoing;or
| (e) | A trustee,liquidator or receiver shallbe appointed for theCompanyor for a substantialpart of its propertyor businesswithout its consentand shall notbe dischargedwithinsixty |
(60)days aftersuch appointment;or
(f) Any governmentalagencyor any courtof competentjurisdiction at the instanceof any governmentalagency shall assume custodyor controlof the wholeor any substantialportion of the propertiesor assetsof the Company;or
(g) Oneormoremoney judgments,writs or warrantsof attachment,or similar process,in excessoffifty thousand dollars ($50,000)in the aggregate, shallbe enteredor filedagainst the Companyoranyof its propertiesor other assetsand shallremain unpaid, unvacated, unbondedor unstayed for a periodof fifteen (15) days or inany event later thanfive (5) daysprior tothe dateof any proposed salethereunder; or
(h) The Company shallhave defaultedon or breached anyterm, covenantor condition of anyother debt instrument ordebt obligation by whichit is bound,or if,in the reasonable opinionof the Holder,an adversematerial change occursin thefinancial conditionofanyof the Company;or
| (i) | The Companyshall have itsCommon Stock delisted froman exchange (including the OTCP) or,if theCommon Stocktrades on an exchange, then trading in theCommon Stock shall be suspended formorethan 10 consecutive days; |
| (j) | If amajorityofthe membersof the BoardofDirectorsof theCompanyon the date hereof areno longer servingas membersof the Board; |
| (k) | TheCompany shall not deliverto the Holderthe Common Stock pursuantto paragraph 4herein without restrictive legendwithin 3 businessdays of its receipt of a Notice of Conversion;or |
| (l) | TheCompany shall notreplenish the reserve setforth inSection 13,within 3 businessdays of the requestof the Holder. |
| (m) | The Companyshall notbe “current”in its filingswith theSecurities and Exchange Commission;or |
| (n) | The Company shalllose the “bid” priceforits stockand amarket (including theOTCBB marketplaceor other exchange). |
Then,or atany time thereafter, unlesscured within 5 days, and in each andevery such case, un- lesssuch Eventof Default shall have been waivedin writingby the Holder(whichwaivershall notbe deemedtobe a waiverofany subsequent default)at the optionof theHolder andin theHolder’s sole discretion, the Holdermay consider this Note immediatelydue and payable,with- out presentment,demand, protest or (further) noticeofanykind (otherthan notice ofacceleration), allof which are hereby expressly waived, anythingherein or inany noteor other instrumentscontained to the contrary notwithstanding,and the Holdermayimmediately, and without expirationof any periodof grace, enforce anyand allof the Holder’s rights andremedies provided hereinorany otherrights or remedies affordedbylaw.
| 9. | Uponan Event of Default, in additiontoany other rightsor remediesof the Holder: |
(a) interest shall accrueat a default interestrateof 24% per annum or,if such rateis usurious or not permittedby current law,then at the highest rateof interest permitted bylaw;
(b) in the eventof a breachof Section8(k),the Company shallpaythe Holder $250perdaythe sharesare not issued beginningon the 4th day afterthe conversion notice was deliveredto the Company. This penalty shallincrease to $500perday beginningon the10thday (provided thatin either caseif such rateis usurious or not permitted by currentlaw, thenat aperdiem penaltythat is equalto thehighest rateof interest permitted by law). Amounts payable hereunder shallbe convertibleat the electionof the Holderin thesame manneras the principal amount;
(c) in the eventof a breachof Section 8(n)the outstanding principal amount shallbe deemedtobe increasedby 20%without furtheractionbythe Companyor the Holderand the Companyshall issue a replacement certificate reflectingsuch increaseatthe requestof the Holder;
(d) in theevent of a breachofSection 8(i),the outstanding principaldueunder this Noteshall increaseby50% without furtheraction bythe Company or theHolderand the Companyshall issue a replacement certificate reflectingsuch increaseatthe requestof the Holder;
| (e) | if this Noteis not paid when due,the outstanding principaldue under this Note shallincreaseby 50%without further actionby the Companyor the Holderand the Companyshall issue a replacement certificate reflecting such increaseat the requestof the Holder; |
(f) if the Holder shallcommencean actionor proceedingto enforceany provisionsof this Note, including,without limitation, engaginganattorney, thenif the Holderprevails in suchaction, the Holder shallbe reimbursed by theCompany for its attorneys’feesand othercosts and expenses incurredin theinvestigation, preparation and prosecution of suchaction or proceedingon a solicitor-client basis;
(g) at the Holder’s election,if theCompanyfails forany reasonto deliverto the HoldertheCommon Stockissuable uponconversionof thisNote (or any interestas applicable) bythe 3rd business day following thedeliveryof aNoticeof Conversionto the Company andif the Holderincurs a Failureto Deliver Loss(as definedbelow), thenat anytime theHolder may provide theCompany written noticeindicating the amounts payableto theHolder in respectof the Failure to Deliver Lossandthe Company mustmakethe Holder wholeas follows:
“Failure to Deliver Loss” = (Highesttrade priceatanytimeon or after the ConversionDate) x (Numberof shares subjectto the Noticeof Conversion)
TheCompanymustpay the Failureto DeliverLossby cashpayment, andanysuch cashpaymentmustbemadeby the3rd businessday fromthetimeof the Holder’s writtennotice to the Company.
| 10. | In caseany provisionof this Noteis heldby acourt ofcompetent jurisdictionto be excessivein scopeor otherwise invalidor unenforceable, such provision shallbe adjusted ratherthan voided, if possible, so thatit is enforceable to the maximumextent possible, andthe validity and enforceabilityof the remaining provisionsof this Notewill not inanywaybe affectedor impairedthereby. |
| 11. | Neither this Note nor any termhereofmaybe amended,waived, dischargedor terminatedother thanby a written instrumentsignedby the Companyand the Holder. |
| 12. | TheCompany represents thatit is not a “shell” issuerand has never been a “shell” issueror thatif it previously has been a “shell” issuer thatat least 12 monthshave passedsince theCompanyhasreported form10type information indicatingit is no longer a “shell” issuer. Further, the Companywill instruct its counselto either(i) write a144 opinionto allow for salabilityof the |
ConversionShares or (ii) accept such opinion fromHolder’s counsel.
| 13. | The Companyshall issueirrevocable transfer agentinstructionsreserving 20,000,000 shares ofits CommonStock forconversions underthis Note (the“Share Reserve”). Upon full conversionof this Note, anyshares remainingin the ShareReserve shallbecancelled. TheCompany shall payall costs associatedwith issuingand delivering theshares.If such amounts aretobe paid bytheHolder,theHolder may deduct such amountsfrom the ConversionPrice. ConversionNotices maybesentto theCompany orits transfer agentvia electronic mail. TheCompany shallat all timesreserve a minimumof threetimestheamountof shares requiredif the Notewere to befully converted.The Holdermay reasonably request increasesfrom timeto timeto reserve such amounts. |
| 14. | The Companywill give theHolder direct noticeof any corporateactions, includingbut not limitedtoname changes, stock splits,recapitalizations etc. This noticeshallbe givento the Holder as soonas possible under law. |
| 15. | This Note shallbe governedbyand construed in accordancewith the lawsofthe Province ofOntario and shallbe binding upon thesuccessors and assignsof each party hereto. The Holderand theCompany hereby mutually consent to exclusivejurisdiction and venue in the courtsoftheProvince of Ontario. This Agreement maybeexecutedincounterparts,and thefacsimileoremail transmissionof an executed counterpartto this Agreementshall be effective as an original. All references to “$”, “US$” or “dollars”herein are to UnitedStates dollars unless otherwise indicated. |
INWITNESS W HEREOF, theCompany has caused thisNoteto beduly executedbyan officerthereunto duly authorized.
Dated:Oct. 14, 2017
MAXSOUNDCORPORATION.
By:
Title:
Chairman & CFO
EXHIBIT ANOTICE OFCONVERSION
(Tobe Executedby the Registered Holderin ordertoConvert theNote)
The undersigned hereby irrevocably electsto convert$of the [principal amount][accruedinterest] of the Note intoSharesofCommonStock of Max Sound Corporation. (“Shares”) accordingtothe conditions set forthin such Note,as of the datewritten below.
If Shares aretobe issuedin thenameof a person other than the undersigned, the undersigned willpayall transfer and other taxesand chargespayable with respect thereto.
Date of Conversion:
Applicable Conversion Price:
| Signature: | [Print Nameof Holder and Titleof Signer] |
Address:
SSN or EIN:
Shares are to be registeredin the following name:
Name:
Address:
Tel:
Fax:
SSN or EIN:
Shares are to be sent or deliveredto the following account:
AccountName:
Address: