NEITHERTHEISSUANCEANDSALEOFTHESECURITIESREPRESENTEDBYTHISCERTIFICATENORTHESECURITIESINTOWHICHTHESESECURITIESARECONVERTIBLEHAVEBEENREGISTEREDUNDERTHESECURITIESACTOF1933,ASAMENDED,ORAPPLICABLESTATESECURITIESLAWS.THESECURITIESMAYNOTBEOFFEREDFORSALE,SOLD,TRANSFERREDORASSIGNED(I)INTHEABSENCEOF(A)ANEFFECTIVEREGISTRATIONSTATEMENTFORTHESECURITIESUNDERTHESECURITIESACT OF 1933,ASAMENDED,OR(B)ANOPINIONOFCOUNSEL(WHICHCOUNSELSHALLBESELECTEDBYTHE HOLDER), IN AGENERALLY ACCEPTABLEFORM,THATREGISTRATIONIS NOTREQUIREDUNDERSAIDACTOR(II)UNLESSSOLDPURSUANTTORULE 144 OR RULE144AUNDERSAIDACT.NOTWITHSTANDINGTHEFOREGOING,THESECURITIESMAYBEPLEDGEDINCONNECTIONWITH A BONAFIDEMARGINACCOUNTOROTHERLOANORFINANCINGARRANGEMENTSECUREDBYTHESECURITIES.

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**Principal Amount:$105,500.00	Issue Date:December 11th,2014**

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**8%CONVERTIBLENOTE**

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**FOR****VALUERECEIVED**,**MAXSOUNDCORPORATION.,**aDelawarecorporation(“Borrower”or“Company”),herebypromisestopaytotheorderof**EMA****FINANCIAL,LLC,**aDelawarelimitedliabilitycompany,oritsregisteredassigns(the“Holder”),onDecember10th,2015(subjecttoextensionassetforthbelow,the“MaturityDate”),thesumof$105,500.00assetforthherein,andtopayinterestontheunpaidprincipalbalancehereofattherate of eightpercent (8%) per annum (the “InterestRate”) from the date of issuancehereof until thisNote plus any andall accruedinterestispaid in full.Interestshall be computed on the basis of a 365-dayyear and the actualnumberofdayselapsed.AnyamountofprincipalorinterestonthisNotewhichisnotpaidwhendueshallbearinterestattherateoftwenty-four(24%)perannumfromtheduedatethereof untilthe sameis paid (“Default Interest”). Allpayments due hereunder shall be madein lawfulmoneyoftheUnitedStatesofAmerica.AllpaymentsshallbemadeatsuchaddressastheHoldershall hereafter give to the Borrower by written notice made in accordancewiththe provisionsof this Note. Wheneverany amount expressed to be due by the termsof this Note is due on any day which is not a businessday, thesame shall instead bedue on thenextsucceedingday which is a businessdayand,inthecaseofanyinterestpaymentdatewhichisnotthe date on which thisNote is paid infull,theextensionoftheduedatethereofshallnotbetaken intoaccountforpurposesof determining the amount of interestdue on such date. As used in this Note,the term “business day” shall mean any day other than a Saturday,Sunday or a day on which commercial banks in the cityofNewYork,NewYorkareauthorizedorrequiredby law or executive order to remainclosed. Each capitalized term used herein, and not otherwisedefined,shallhavethe meaningascribedtheretoin thatcertainSecuritiesPurchase Agreement entered into by andbetween the Company and Holder dated on or about the date hereof, pursuant to whichthisNotewasoriginally issued(the“PurchaseAgreement”).TheHoldermay,bywrittennoticetotheBorroweratleastfive(5)daysbefore the Maturity Date (asmay have been previously extended),extendthe MaturityDate to uptoone (1) year following the date ofthe original Maturity Date hereunder.

ThisNoteisfreefromalltaxes,liens,claimsandencumbranceswithrespecttotheissuethereofandshallnotbesubjecttopreemptiverightsorothersimilarrightsofshareholdersoftheBorrower and will not impose personalliability upon the holder thereof.

 

The following termsshall apply to this Note:

 

ARTICLE I.CONVERSION RIGHTS

 

1.1.              ConversionRight.TheHoldershallhavetheright,initssoleandabsolutediscretion,atanytimeandfromtimetotimetoconvertalloranypartoftheoutstandingamountdueunderthisNoteintofullypaidandnon-assessablesharesofCommonStock,assuchCommonStockexistsontheIssueDate,oranysharesofcapitalstockorother securitiesofthe BorrowerintowhichsuchCommonStockshallhereafterbechangedorreclassifiedattheconversionprice(the“Conversion Price”) determined as provided herein (a “Conversion”);provided, however, that in no eventshalltheHolderbeentitledtoconvertany portionofthisNoteinexcessofthatportionofthisNote upon conversion of which the sumof (1) the number of shares of CommonStock beneficially owned by the Holder and its affiliates(otherthan shares ofCommon Stock which may be deemedbeneficiallyownedthroughtheownershipoftheunconvertedportionoftheNotesor the unexercised or unconverted portion of any other security of the Borrowersubjectto alimitation on conversion or exercise analogous tothe limitations contained herein) and(2) the number of shares of CommonStockissuable upon the conversion of the portion of this Note with respectto which the determinationofthisprovisoisbeingmade,wouldresult in beneficial ownership bythe Holder anditsaffiliatesof morethan4.9%oftheoutstandingsharesofCommon Stock.Forpurposesofthe provisoto theimmediatelyprecedingsentence,beneficialownershipshallbedeterminedin accordance with Section 13(d)of the Securities Exchange Act of 1934, as amended(the “Exchange Act”), and Regulation 13D-Gthereunder, exceptasotherwiseprovidedinclause(1)ofsuchproviso, provided, further, however, that the limitationson conversionmay be waived by the Holderupon, at the election of the Holder, not less than 61 days’ priornotice to the Borrower, and the provisionsoftheconversionlimitation shall continue to apply untilsuch61stday(orsuchlaterdate, as determined by the Holder, asmaybe specified in such notice of waiver).Thenumber of shares of CommonStock to be issued upon each conversion of this Note shall be determinedby dividing the Conversion Amount (as defined below)by the applicableConversionPricethen in effectonthedatespecifiedinthenoticeofconversion,in the form attachedheretoasExhibitA(the“Notice of Conversion”),deliveredto the Borrower by theHolder in accordancewithSection1.4 below; providedthattheNoticeof Conversion is submitted by facsimileore-mail (or by othermeansresultingin,orreasonablyexpectedtoresultin,notice)totheBorrowerbefore11:59p.m.,NewYork,NewYorktimeonsuchconversiondate(the“ConversionDate”).Theterm“Conversion Amount”means,with respect to any conversion of thisNote, the sum of (1) the principal amount of this Noteto be converted in such conversion, plus (2)accruedandunpaidinterest, if any, on such principal amount being converted atthe interest rates provided in this Noteto the Conversion Date, plus (3) at the Holder’s option, DefaultInterest, if any, on the amountsreferredto intheimmediatelyprecedingclauses(1)and/or(2)plus (4) attheHolder’soption,anyamounts owed to the Holder pursuant to Sections1.3 and 1.4(g)hereof.

 

 

a)                 CalculationofConversionPrice. Theconversionpricehereunder(the“ConversionPrice”)shallequalthelowerofeither(i)theclosingsalepriceoftheCommonStock

onthePrincipalMarketontheTradingDayimmediatelyprecedingtheClosingDate,and(ii)65%ofthelowestdailyVWAPofCommonStockonthePrincipalMarketduringtheten(10)consecutiveTradingDaysimmediatelyprecedingtheConversionDate.However,ifCompany’ssharepriceatanytimelosesthebid(ex:0.0001ontheaskwithzeromarketmakersonthebidonlevel2),thentheConversionPricemay,intheHolder’ssoleandabsolutediscretion,bereducedtoafixedconversionpriceof0.00001(iflowerthantheconversionpriceotherwise).IfsuchCommonStock is not tradedon theOTCBB,OTCQB,Nasdaqor NYSE,thensuchsale price shall be the salepriceofsuchsecurityontheprincipalsecuritiesexchangeortradingmarketwheresuchsecurityis listed or tradedor, if no sale price of such security is available in anyoftheforegoingmanners,theaverageoftheclosingbidpricesofanymarketmakersforsuchsecuritythatarelistedinthe“pink sheets”by theNationalQuotation Bureau,Inc. Ifsuch salepricecannot be calculated forsuch securityon suchdate inthemannerprovidedabove,suchprice shallbethefairmarketvalueas mutuallydeterminedbytheBorrowerand theHolder. IftheBorrower’sCommonstockischilledfordepositatDTC,becomeschilledatanypointwhilethisNote remainsoutstandingordepositor other additional feesare payable due to a Yield Sign, Stop Signorothertradingrestrictions,or ifthe closing sale price at any time falls below 0.01, then such 65% figurespecified in clause 1.2(a)(ii)aboveshallbereducedto50%.Additionally,theBorroweracknowledgesthatitwilltakeallreasonablestepsnecessaryorappropriate, includingprovidingaboardofdirectorsresolutionauthorizing the issuanceof common stockandanopinion of counselconfirmingthe rights ofHolder tosellsharesof CommonStock issuableorissued toHolderonconversionofthisNotepursuanttoRule144aspromulgatedbytheSEC(“Rule144"),assuchRulemaybe ineffect from timeto time. If the Borrower does not promptlyprovide a board of directors’resolutionandan opinion from Companycounsel, and so long as the requested sale may be madepursuant to Rule144, the Company agreesto accept an opinion of counsel to the Holder which opinion will be issued attheCompany’sexpenseandtheconversiondollaramountwill bereducedby$750.00tocover thecostofsuchlegalopinion. “TradingDay”shallmeananydayonwhichtheCommonStockistradableforanyperiod ontheOTCQB,or on theprincipal securitiesexchangeorothersecuritiesmarket on which the CommonStockis then being traded. Additionally,if the Company ceases to be a reporting companypursuant to the 1934 Act or if the Note cannot be convertedintofreetradingshares after 181 days from the issuancedate,anadditional15%discountwill beattributed to the Conversion Price.

 

b)                 WithoutinanywaylimitingtheHolder’srighttopursueotherremedies,includingactualdamagesand/orequitablerelief,thepartiesagreethatifdeliveryoftheCommonStockissuableuponconversionofthisNoteisnotdeliveredbytheDeadline(asdefinedbelow)theBorrowershallpaytotheHolder$1,000.00perdayincash,foreachdaybeyondtheDeadlinethattheBorrowerfailstodeliversuchCommonStock.Suchcashamountshallbepaidto Holder by the fifth day of the month following the monthin which it has accrued or, at the option oftheHolder,shallbeaddedtotheprincipalamountofthisNote,inwhicheventinterestshallaccruethereon in accordancewiththe terms of this Note and suchadditionalprincipalamountshallbe convertible into Common Stockin accordancewith the termsof this Note. The Borrower agrees thatthe right to convertthis Note isa valuable right to the Holder. The damagesresulting froma failure,attempttofrustrate,orinterferencewithsuchconversion right are difficult if not impossibleto quantify. Accordingly the parties acknowledge that the liquidateddamagesprovision contained inthis Section arejustified.

 

1.3.              AuthorizedShares.TheBorrowercovenantsthattheBorrowerwillatalltimeswhilethisNoteisoutstandingreservefromitsauthorizedandunissuedCommonStocka

sufficientnumberofshares,freefrompreemptiverights,toprovidefortheissuanceofCommonStock upon the full conversion ofthis Note. The Borrower is requiredat all timesto have authorizedand reserved two (2) times the numberof shares that is actually issuable upon full conversion of thisNote(basedontheConversionPriceoftheNotesineffectfromtimetotime)(the“ReservedAmount”).Initially,theCompanywillinstructtheTransferAgenttoreservefivemillion(5,000,000) shares of common stock in the nameof the Holder for issuance upon conversion hereof.The Borrower represents that upon issuance, such shares will be dulyandvalidlyissued,fullypaidand non-assessable.In addition, if theBorrower shall issueany securities or make any change to its capital structurewhichwould change the numberof shares of Common Stock into whichthis Note shall be convertible at the then current ConversionPrice, the Borrower shall at the sametimemakeproperprovisionsothatthereafterthereshallbeasufficientnumberofsharesofCommonStock authorized and reserved,free from preemptive rights, forconversionofthisNotein full.The Borrower (i) acknowledgesthat ithasirrevocablyinstructedits transfer agent to issuecertificatesfortheCommonStockissuableuponconversionofthisNote, and(ii)agrees thatitsissuanceofthisNote shallconstitute fullauthorityto its officers and agentswhoare charged with the dutyofexecutingstock certificates to execute and issue the necessarycertificatesforsharesof CommonStock in accordance with the termsand conditions of this Note.

 

If,atanytimetheBorrowerdoesnotmaintaintheReservedAmountitwillbe considered an Event of Defaultunder Section 3.2 of the Note.

 

 

a)                 MechanicsofConversion.SubjecttoSection1.1,thisNotemaybeconvertedbytheHolderinwholeorinpartatanytimeandfromtimetotimeaftertheIssueDate,bysubmittingtotheBorroweraNoticeofConversion(byfacsimile,e-mailorotherreasonablemeansofcommunicationdispatchedontheConversionDateprior to11:59p.m., NewYork, New York time).

 

b)                 BookEntryuponConversion.Notwithstandinganythingtothecontrarysetforthherein,uponconversionofthisNoteinaccordancewiththetermshereof,theHoldershallnotberequiredtophysicallysurrenderthisNotetotheBorrowerunlesstheentireunpaidprincipalamountofthisNoteissoconverted.TheHolderandtheBorrowershallmaintainrecordsshowingtheprincipalamountsoconvertedandthedatesofsuchconversionsorshallusesuchothermethod,reasonablysatisfactorytotheHolderandtheBorrower,soas not torequirephysical surrender of this Note upon each such conversion. In the event of any disputeor discrepancy, such records of the Borrower shall, *prima facie,*be controllingand determinative in the absence of manifesterror. Notwithstanding the foregoing, if anyportion of this Note is converted as aforesaid,theHolder may nottransferthisNoteunlesstheHolder first physicallysurrendersthis NotetotheBorrower,whereupontheBorrowerwillforthwithissueanddeliverupontheorderoftheHolderanewNote ofliketenor,registeredastheHolder(uponpaymentbytheHolderofanyapplicable transfer taxes)may request, representing in the aggregatethe remaining unpaid principal amountofthisNote.TheHolderandanyassignee,byacceptanceof thisNote,acknowledgeand agreethat,byreasonoftheprovisionsofthisparagraph,followingconversionofa portionofthis Note,theunpaidandunconverted principal amountofthis Noterepresentedby thisNotemaybeless than the amount stated on the face hereof.

c)                 PaymentofTaxes.TheBorrowershallnotberequiredtopayanytaxwhichmaybepayableinrespectofanytransferinvolvedintheissueanddeliveryofsharesofCommonStockorothersecuritiesorpropertyonconversionofthisNoteinanameotherthanthatoftheHolder(orinstreetname),andtheBorrowershallnot berequiredtoissue ordeliverany suchshares or other securitiesor property unless and until the personor persons (other than the Holder orthecustodianinwhose streetname suchshares aretobeheldfortheHolder’saccount)requesting the issuance thereof shall have paid to the Borrower the amountof any such tax or shall have established to the satisfaction of the Borrower thatsuch tax has been paid.

 

d)                DeliveryofCommonStockuponConversion.UponreceiptbytheBorrowerfromtheHolderofafacsimiletransmissionore-mail(orotherreasonablemeansofcommunication)ofaNoticeofConversionmeetingtherequirementsforconversionasprovidedinthisSection1.4,theBorrowershallissueanddeliverorcausetobeissuedanddeliveredtoorupon theorderoftheHoldercertificatesfortheCommon Stockissuableuponsuchconversionwithinthree (3) business days after such receipt (the“Deadline”)(and,solelyinthecaseofconversionof the entire unpaid principal amounthereof, surrender of this Note) in accordancewith the terms hereof and the Purchase Agreement.

 

e)                 ObligationofBorrowertoDeliverCommonStock.UponreceiptbytheBorrowerofadulyandproperlyexecutedNoticeofConversion,theHoldershallbedeemedtobetheholderofrecordoftheCommonStockissuableuponsuchconversion,theoutstanding principalamountandtheamountofaccruedandunpaidinterestonthisNoteshallbereducedtoreflectsuchconversion,and,unlesstheBorrowerdefaultsonitsobligationsunderthisArticleI,allrightswithrespecttotheportionofthisNotebeingsoconvertedshallforthwithterminateexceptthe right to receive the Common Stock or other securities, cashor other assets, as herein provided, on such conversion. If theHolder shall have given a Notice of Conversionas provided herein, theBorrower’s obligation to issue and deliver the certificatesforCommon Stock shall be absolute andunconditional,irrespectiveoftheabsenceofanyactionbythe Holdertoenforcethesame,anywaiverorconsentwithrespectto anyprovisionthereof,therecovery of any judgmentagainst any person or any action to enforce the same,any failure or delay in the enforcementof any otherobligation of the Borrowerto the holder of record, or anysetoff,counterclaim,recoupment,limitationortermination,or anybreachorallegedbreachbytheHolderofanyobligationtothe Borrower, and irrespectiveof any other circumstance which mightotherwise limitsuchobligationof the Borrower to the Holder in connectionwith such conversion.TheConversionDatespecified intheNoticeofConversionshallbetheConversionDatesolongastheNoticeofConversionis received by the Borrower before 11:59 p.m.,NewYork, NewYork time,on such date.

f)                  DeliveryofCommonStockbyElectronicTransfer.InlieuofdeliveringphysicalcertificatesrepresentingtheCommonStockissuableuponconversion,providedtheBorrowerisparticipatingintheDepositoryTrustCompany(“DTC”)FastAutomatedSecuritiesTransfer(“FAST”)program,uponrequestoftheHolderanditscompliancewiththeprovisionscontainedinSection1.1andinthisSection1.4,theBorrower shalluseitsbesteffortstocauseitstransfer agent to electronicallytransmittheCommonStockissuable upon conversion to the Holderby crediting the account of Holder’sPrimeBroker with DTCthroughits Deposit WithdrawalAgentCommission(“DWAC”)system.

 

g)                 FailuretoDeliverCommonStockPriortoDeadline.WithoutinanywaylimitingtheHolder’srighttopursueotherremedies,includingactualdamagesand/orequitable

relief,thepartiesagreethatifdeliveryoftheCommonStockissuableuponconversionofthisNoteis not delivered by the Deadline,the Borrower shall pay to theHolder $1,000.00 perday in cash, foreachdaybeyondtheDeadlinethattheBorrowerfailstodeliversuchCommonStocktotheHolder.SuchcashamountshallbepaidtoHolderbythefifthdayofthemonthfollowingthemonthinwhichithasaccruedor,attheoptionoftheHolder,shallbeaddedtotheprincipalamountofthisNote,inwhichevent interestshall accrue thereoninaccordancewith thetermsofthisNoteand such additional principal amountshall be convertibleintoCommon Stock inaccordance with thetermsofthisNote.TheBorroweragreesthattherighttoconvertisavaluablerighttotheHolder. The damagesresultingfrom a failure,attemptto frustrate, or interference with suchconversionright aredifficultif notimpossible to qualify. Accordinglythe partiesacknowledgethattheliquidateddamagesprovision contained in this Section 1.4(g) are justified.

 

h)                 TheBorroweracknowledgesthatitwilltakeallreasonablestepsnecessaryorappropriate,includingprovidinganopinionofcounselconfirmingtherightsofHoldertosellsharesofCommonStockissuedtoHolderonconversionoftheNotepursuanttoRule144aspromulgatedbytheSEC(“Rule144"),assuchRulemaybeineffectfromtimetotime.IftheBorrowerdoesnotpromptlyprovideanopinionfromBorrowercounsel,andsolongastherequestedsalemaybemadepursuanttoRule144,theBorroweragreestoacceptanopinionofcounselto theHolder which opinionwill beissued at the Borrower’s expense.

 

1.5.              RestrictedSecurities.ThesharesofCommonStockissuableuponconversionofthisNotemaynotbesoldortransferredunless(i)suchsharesaresoldpursuanttoaneffectiveregistrationstatementundertheActor(ii)theBorroweroritstransferagentshallhavebeenfurnishedwithanopinionofcounsel(whichopinionshallbeinform,substanceand scopecustomaryfor opinions of counsel incomparabletransactions) to the effect that theshares to be sold or transferred maybe sold or transferredpursuant to anexemption from such registration or (iii)such shares are sold or transferred pursuant to Rule 144 under the Act (or a successorrule) (“Rule 144”)or(iv)suchsharesaretransferredtoan“affiliate”(asdefinedinRule144)oftheBorrowerwhoagrees tosellorotherwisetransferthesharesonlyin accordancewiththisSection1.5andwhois an Accredited Investor (as defined in the PurchaseAgreement).Any legend set forth on anystockcertificateevidencinganyConversionSharesshallberemovedandtheBorrowershallissue to the Holder a newcertificate therefore free of any transfer legend if (i) theBorroweror its transfer agent shall have received an opinion of counsel form, substanceand scope customary for opinions of counsel in comparabletransactions, to the effect that a public sale or transfer of such Common Stock maybe made without registration undertheAct, whichopinion shall bereasonably acceptabletotheCompany,or(ii)inthecaseoftheCommonStock issued orissuableuponconversionof this Note, such security is registered forsaleby theHolder under an effective registration statement filed underthe Act or otherwisemay be soldpursuanttoRule144withoutanyrestrictionas to thenumber of securities as ofa particular date that can thenbe immediatelysold.

 

 

a)                 EffectofMerger,Consolidation,Etc.AttheoptionoftheHolder,thesale,conveyanceordispositionofallorsubstantiallyalloftheassetsoftheBorrower,the effectuationbytheBorrowerofatransactionorseriesofrelatedtransactionsinwhichmorethan50%ofthevotingpoweroftheBorrowerisdisposedof,ortheconsolidation,mergerorotherbusinesscombinationoftheBorrowerwithorintoanyother Person(asdefinedbelow)orPersons

 

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whentheBorrowerisnotthesurvivorshalleither:(i)bedeemedtobeanEventofDefault(asdefinedinArticleIII)pursuanttowhichtheBorrowershallberequiredtopaytotheHolderupontheconsummationofandasaconditiontosuchtransactionanamountequaltotheDefaultAmount(asdefinedinArticleIII)or(ii)betreatedpursuanttoSection1.6(b)hereof.“Person”shallmeanany individual,corporation,limited liability company,partnership, association, trust or other entity or organization.

 

b)                 AdjustmentDuetoMerger,Consolidation,Etc.If,atanytimewhenthisNoteisissuedandoutstandingandpriortoconversionofalloftheNotes,thereshallbeanymerger, consolidation, exchange ofshares,recapitalization, reorganization, or other similarevent, asaresultofwhichsharesofCommonStockoftheBorrowershallbechangedintothesameoradifferentnumberofsharesofanotherclassorclassesofstockorsecuritiesoftheBorroweroranotherentity,orincaseofanysaleorconveyanceofallorsubstantiallyalloftheassetsoftheBorrowerotherthaninconnectionwithaplanofcompleteliquidationoftheBorrower,thenthe Holder of thisNoteshall thereafter have the right to receiveuponconversionofthisNote,uponthe basis and upon the terms and conditionsspecified herein and in lieu of the shares of CommonStock immediately theretofore issuable upon conversion, such stock, securitiesor assetswhich the Holderwould have been entitled to receive in suchtransaction had thisNote beenconvertedin fullimmediatelypriortosuchtransaction(withoutregardtoanylimitationsonconversionsetforth herein),andinanysuchcaseappropriateprovisionsshallbemadewithrespecttotherightsandinterests of the Holder of this Note to the end that the provisionshereof (including, withoutlimitation,provisions for adjustment of the Conversion Price andof the number of shares issuable upon conversion of the Note)shall thereafter be applicable, as nearly as may be practicable inrelation to any securities or assets thereafter deliverable uponthe conversion hereof. The Borrowershall not affect any transaction described in thisSection 1.6(b) unless (a) it first gives, to the extent practicable,thirty(30)dayspriorwrittennotice(butinanyeventatleastfifteen(15)daysprior written notice) of therecord dateofthespecialmeetingofshareholders to approve, or if there is nosuchrecorddate,theconsummationof,suchmerger,consolidation,exchangeof shares,recapitalization,reorganization or othersimilarevent or sale of assets (during whichtime, for clarification, the Holder shallbe entitled to convert this Note) and (b)the resultingsuccessor oracquiringentityassumesby written instrumenttheobligationsof this Section 1.6(b). The above provisionsshallsimilarly apply to successiveconsolidations,mergers, sales, transfersor share exchanges.

 

c)                 Adjustment Due to Distribution. If the Borrower shall declareormakeanydistributionofitsassets(orrightstoacquireitsassets)toholdersofCommonStockasadividend,stockrepurchase,bywayofreturnofcapitalorotherwise(includinganydividendor distributiontotheBorrower’sshareholdersincashorshares(orrightstoacquireshares)ofcapitalstockofasubsidiary(i.e.,aspin-off))(a“Distribution”),thentheHolderofthisNote shallbeentitled,uponanyconversionofthisNoteafterthedateofrecordfordeterminingshareholdersentitled to such Distribution, to receivethe amount of such assets which wouldhave been payable to the Holder withrespectto the shares of Common Stock issuable uponsuchconversionhadsuchHolder been the holder of such shares of Common Stock on the recorddatefor the determination ofshareholders entitled to such Distribution.Suchassetsshall be held in escrow by theCompanypending any such conversion

 

d)                PurchaseRights.If,atanytimewhenanyNotesareissuedandoutstanding,theBorrowerissuesanyconvertiblesecuritiesorrightstopurchasestock,warrants,

 

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securitiesorotherproperty(the“PurchaseRights”)proratatotherecordholdersofanyclassofCommonStock,thentheHolderofthisNotewillbeentitledtoacquire,uponthetermsapplicabletosuchPurchaseRights,theaggregatePurchaseRightswhichsuchHoldercouldhaveacquiredifsuchHolderhadheldthenumberofsharesofCommonStockacquirableuponcompleteconversionofthisNote(withoutregardtoanylimitationsonconversioncontainedherein)immediatelybeforethedateonwhicharecordistakenforthegrant,issuanceorsaleofsuchPurchaseRightsor,ifnosuch record is taken, the dateas of which the recordholders of Common Stock are to be determinedfor the grant, issue or sale of such Purchase Rights.

 

e)                 StockDividendsandStockSplits.IftheCompany,atanytimewhilethis Note is outstanding: (A) paysa stock dividend or otherwisemakesa distribution or distributionspayableinsharesofCommonStockonsharesofCommonStockoranysecuritiesconvertibleintoorexercisableforCommonStock;(B)subdividesoutstandingsharesofCommonStockintoalarger number of shares; (C) combines(including by way of a reverse stock split) outstanding sharesof CommonStock into a smallernumberof shares; or (D) issues, in the eventof a reclassification ofshares of the CommonStock, any shares of capital stock of the Company,then the Conversion Price(andeachsaleorbidpriceusedin determiningtheConversion Price)shallbe multipliedbyafraction, of which the numeratorshall be the number of shares ofCommonStockoutstandingimmediatelybefore such event and of which the denominatorshall be the number of shares of Common Stock outstanding immediatelyaftersuch event. Anyadjustmentmade pursuant tothis Section shallbecomeeffective immediatelyafter the recorddateforthe determination of stockholdersentitled to receive such dividend or distribution and shall becomeeffectiveimmediately after the effectivedate in the case of a subdivision,combinationor re-classification.

 

f)                  NoticeofAdjustments.UpontheoccurrenceofeachadjustmentorreadjustmentoftheConversionPriceasaresultoftheeventsdescribedinthisSection1.6,theBorrower,atitsexpense,shallpromptlycomputesuchadjustmentorreadjustmentandprepareandfurnishtotheHolderacertificatesettingforthsuchadjustmentorreadjustmentandshowingindetailthefactsuponwhichsuchadjustmentorreadjustmentisbased.TheBorrowershall,uponthewritten requestatanytime ofthe Holder,furnish tosuch Holder alikecertificate setting forth (i) such adjustmentor readjustment, (ii) the Conversion Priceatthetimeineffect and (iii)the number of shares of Common Stockand the amount, if any, of other securitiesor propertywhichatthetime would be received upon conversionof the Note.

 

1.7.              Revocation.IfanyConversionSharesarenotreceivedbytheDeadline,theHoldermayrevoketheapplicableConversionpursuanttowhichsuchConversionShareswereissuable.ThisNoteshallremainconvertibleaftertheMaturityDatehereofuntilthisNoteisrepaidor converted in full.

 

1.8.              Prepayment.NotwithstandinganythingtothecontrarycontainedinthisNote,subjecttothetermsofthisSection,atanytimeduringtheperiodbeginningontheIssueDateandendingonthedatewhichissix(6)monthsfollowingtheIssueDate(“PrepaymentTerminationDate”),Borrowershallhavetheright,exercisableonnotlessthanfive(5)TradingDayspriorwrittennoticetotheHolderofthis Note,toprepaytheoutstandingbalanceonthis Note(principaland accrued interest),in full,inaccordancewith this Section.Anynoticeofprepaymenthereunder (an“OptionalPrepaymentNotice”)shallbedeliveredtotheHolderof theNoteat itsregistered addresses andshall state: (1) thattheBorrower isexercisingits right to prepay theNote, and(2) the date of prepaymentwhichshall be not more than ten (10) TradingDays from the date of the

 

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OptionalPrepaymentNotice.Onthedatefixedforprepayment(the“OptionalPrepaymentDate”),theBorrowershallmakepaymentoftheOptionalPrepaymentAmount(asdefinedbelow)toorupontheorderoftheHolderasspecifiedbytheHolderinwritingtotheBorroweratleastone(1)businessdaypriortotheOptionalPrepaymentDate.IftheBorrowerexercisesitsrighttoprepaytheNote,theBorrowershallmakepaymenttotheHolder ofanamountincash(the“Optional PrepaymentAmount”)equal to the Prepayment Factor (as defined below),multiplied by the sum of:

(w)thethenoutstandingprincipalamountofthisNoteplus (x)accruedandunpaidinterestontheunpaidprincipalamountofthisNotetotheOptionalPrepaymentDateplus (y)DefaultInterest,ifany,ontheamountsreferredtoinclauses(w)and(x) plus (z)anyamountsowedtotheHolderpursuant to Sections1.3and1.4(g) hereof.IftheBorrower deliversan OptionalPrepaymentNoticeandfailstopaytheOptionalPrepaymentAmountduetotheHolderoftheNotewithintwo(2)business days following theOptional Prepayment Date, the Borrowershallforever forfeit its rightto prepay theNote pursuant to this Section.After the PrepaymentTermination Date,the Borrower shall have no right to prepay thisNote.Forpurposeshereof, the “PrepaymentFactor”shall equal150%,providedthatsuchPrepaymentFactorshallequal125%iftheOptionalPrepaymentDateoccurs on or before the date which is three (3) monthsfollowing the Issue Date hereof.

 

ARTICLE II.CERTAIN COVENANTS

 

2.1.              DistributionsonCapitalStock.SolongastheBorrowershallhaveanyobligationunderthisNote,theBorrowershallnotwithouttheHolder’swrittenconsent(a)pay,declareorsetapartforsuchpayment,anydividendorotherdistribution(whetherincash,propertyorothersecurities)onsharesofcapitalstockotherthandividendsonsharesofCommonStocksolelyintheformof additionalsharesof CommonStockor(b)directly or indirectlyor throughany subsidiary makeanyotherpaymentordistributioninrespectofitscapitalstockexceptfordistributionspursuanttoanyshareholders’rightsplanwhichis approvedby a majorityof the Borrower’s disinterested directors.

 

2.2.              RestrictiononStockRepurchases.SolongastheBorrowershallhaveanyobligationunderthisNote,theBorrowershallnotwithouttheHolder’swrittenconsentredeem,repurchaseorotherwiseacquire(whetherforcashorinexchangeforpropertyorothersecuritiesorotherwise)inanyonetransactionorseriesofrelatedtransactionsanysharesofcapitalstockoftheBorrower or any warrants, rights or options to purchase or acquire any suchshares.

 

2.3.              Borrowings;Liens. Notwithstandingsection4(m)ofthePurchaseAgreement,solongastheBorrowershallhaveanyobligationunderthisNote,theBorrowershallnot (i) create, incur, assumeguarantee,endorse, contingentlyagree to purchase or otherwise becomeliableupontheobligationofanyperson,firm,partnership,jointventureorcorporation,exceptbytheendorsementofnegotiableinstrumentsfordepositorcollection,orsuffertoexistanyliabilityforborrowed money,except(a)borrowingsin existenceorcommitted onthedate hereofandofwhich the Borrower has informedHolder in writing prior to the date hereof, or (b) indebtedness to trade creditorsor financialinstitutionsincurredin the ordinary course of business, or(ii) enter into, create or incur any liens, claimsor encumbrances of any kind, onorwithrespect to anyofitspropertyorassetsnowowned or hereafteracquiredoranyinteresttherein or any income or profits therefrom,securing any indebtedness occurringafterthe datehereof.

 

2.4.              SaleofAssets.SolongastheBorrowershallhaveanyobligationunderthisNote,theBorrowershallnot,withouttheHolder’swrittenconsent,sell,leaseorotherwisedispose

ofanysignificantportionofitsassetsoutsidetheordinarycourseofbusiness.Anyconsenttothedispositionof any assets may beconditioned ona specified useof the proceeds of disposition.

 

2.5.              AdvancesandLoans.SolongastheBorrowershallhaveanyobligationunderthisNote,theBorrowershallnot,withouttheHolder’swrittenconsent,lendmoney,givecreditormakeadvancestoanyperson,firm,jointventureorcorporation,including,withoutlimitation,officers,directors,employees,subsidiariesandaffiliatesoftheBorrower,exceptloans,creditsoradvances in existenceorcommittedonthedatehereofandwhichtheBorrowerhasinformedHolder in writing prior to the date hereof.

 

2.6.              Charter.SolongastheBorrowershallhaveanyobligationsunderthisNote,theBorrowershallnotamenditscharterdocuments,includingwithoutlimitationitscertificateofincorporationandbylaws,inanymannerthatmateriallyandadverselyaffectsanyrightsoftheHolder.

 

ARTICLE III.EVENTSOF DEFAULT

 

Anyoneormoreofthefollowingeventswhichshalloccurand/orbecontinuingshallconstitute an eventof default(each, an “Event of Default”):

 

3.1.              FailuretoPayPrincipalorInterest. TheBorrowerfailstopaytheprincipalhereoforinterestthereonwhendueonthisNote,whetheratmaturity,uponaccelerationorotherwise.

 

3.2.              ConversionandtheShares. TheBorrowerfailstoissuesharesofCommonStock to theHolder(or announces orthreatens inwritingthatit will not honor its obligationto do soatanytimefollowingtheexecutionhereofor)uponexercisebytheHolderoftheconversionrightsof the Holder in accordancewith theterms of this Note, failstotransferorcauseitstransferagent totransfer(issue)(electronicallyorincertificatedform)anycertificateforsharesofCommonStock issued to the Holder upon conversion of or otherwise pursuant to this Noteas and when required by this Note, the Borrowerdirects its transfer agent not to transfer or delays,impairs, and/or hinders its transferagentintransferring(orissuing)(electronicallyorincertificatedform)anycertificateforshares of Common Stock to be issued to the Holder upon conversion of or otherwisepursuant to this Note as and when required by this Note, or fails to remove(or directs its transfer agent notto removeorimpairs,delays,and/orhindersitstransferagentfromremoving)anyrestrictivelegend (ortowithdrawanystoptransferinstructionsinrespect thereof)onanycertificateforanyshares of Common Stock issuedto the Holderuponconversion of orotherwisepursuant to this Note as and whenrequired bythisNote(ormakesanywrittenannouncement,statement or threat that it does not intend to honor the obligations describedin this paragraph) and any suchfailureshallcontinueuncured (or any written announcement,statementor threat nottohonoritsobligationsshallnotberescindedinwriting)forfive(5)businessdaysaftertheHoldershallhavedelivered a NoticeofConversion. It is an obligation of the Borrower to remaincurrentin its obligationsto its transfer agent. It shall be anevent of default ofthis Note, if a conversion of this Note isdelayed, hindered orfrustrated due toa balance owed by the Borrower to its transferagent. If attheoptionoftheHolder,the Holder advances any fundsto the Borrower’s transfer agent in order to process a conversion, such advanced fundsshall be paid by the Borrower to the Holderwithinforty eight (48) hours of a demandfrom the Holder.

3.3.              BreachofCovenants.TheBorrowerbreachesanymaterialcovenantorothermaterialtermorconditioncontainedinthisNoteandanycollateraldocumentsincludingbutnotlimitedtothePurchaseAgreementandsuchbreachcontinuesforaperiodofseven(7)daysafterwritten notice thereof to the Borrower fromthe Holder.

 

3.4.              BreachofRepresentationsandWarranties.AnyrepresentationorwarrantyoftheBorrowermadehereinorinanyagreement,statementorcertificategiveninwritingpursuantheretoorinconnectionherewith(including,withoutlimitation,thePurchaseAgreement),shallbefalseormisleadinginanymaterialrespectwhenmadeandthebreachofwhichhas(orwiththepassage of timewillhave) a materialadverse effect on therightsof the Holder with respect to this Note or the PurchaseAgreement.

3.5.              ReceiverorTrustee.TheBorroweroranysubsidiaryoftheBorrowershallmakeanassignmentforthebenefitofcreditors,orapplyfororconsenttotheappointmentofareceiverortrusteeforitorforasubstantialpartofitspropertyorbusiness,orsuchareceiverortrustee shall otherwise be appointed.

3.6.              Judgments.Anymoneyjudgment,writorsimilarprocessshallbeenteredorfiledagainsttheBorroweroranysubsidiaryoftheBorroweroranyofitspropertyorotherassets formorethan$50,000.00,andshallremainunvacated,unbondedorunstayedforaperiodoftwenty

(20)daysunlessotherwiseconsentedtobytheHolder,whichconsentwillnotbeunreasonablywithheld.

3.7.              Bankruptcy.Bankruptcy,insolvency,reorganizationorliquidationproceedingsorotherproceedings,voluntaryorinvoluntary,forreliefunderanybankruptcylaworanylawforthereliefofdebtorsshallbeinstitutedbyoragainsttheBorroweroranysubsidiaryofthe Borrower.

3.8.              Delisting of Common Stock. The Borrower shall fail to maintainthe listing oftheCommonStockonatleastoneoftheOTCQBoranequivalentreplacementexchange,Nasdaq,theNYSE or AMEX.

3.9.              FailuretoComplywiththeExchangeAct.TheBorrowershallfailtocomplyinanymaterialrespectwiththereportingrequirementsoftheExchangeAct;and/ortheBorrowershallceaseto be subjectto thereporting requirements oftheExchangeAct.

3.10.          Liquidation.Anydissolution,liquidation,orwindingupofBorroweroranysubstantial portion of its business.

3.11.          CessationofOperations.AnycessationofoperationsbyBorrowerorBorroweradmitsitisotherwisegenerallyunabletopayitsdebtsassuchdebtsbecomedue,provided,however,thatanydisclosureoftheBorrower’sabilitytocontinueasa“goingconcern”shall not be an admissionthatthe Borrower cannot pay its debts as they becomedue.

3.12.          MaintenanceofAssets.ThefailurebyBorrower,duringthetermofthisNote,tomaintainanymaterialintellectualpropertyrights,personal,realpropertyorotherassetswhich are necessary to conduct its business (whether now or in the future).

3.13.          FinancialStatementRestatement. TherestatementofanyfinancialstatementsfiledbytheBorrowerwiththeSECforanydateorperiodfromtwoyearspriortotheIssueDateofthisNoteanduntilthisNoteisnolongeroutstanding,iftheresultofsuchrestatementwould,bycomparisontotheunrestatedfinancialstatement,haveconstitutedamaterialadverseeffect on the rights of the Holderwith respect to this Note or the Purchase Agreement.

3.14.          ReverseSplits.TheBorrowereffectuatesareversesplitofitsCommonStockwithout twenty (20)days prior written notice to the Holder.

3.15.          ReplacementofTransferAgent.IntheeventthattheBorrowerproposestoreplaceitstransferagent,theBorrowerfailstoprovide,priortotheeffectivedateofsuchreplacement,afullyexecutedIrrevocableTransferAgentInstructionsinaformasinitiallydeliveredpursuanttothePurchaseAgreement(includingbutnotlimitedtotheprovisiontoirrevocablyreserveshares of CommonStockintheReservedAmount)signedbythesuccessor transfer agent to Borrowerand the Borrower.

3.16.          Cross-Default.NotwithstandinganythingtothecontrarycontainedinthisNoteortheotherrelatedorcompaniondocuments,abreachordefaultbytheBorrowerofanycovenantorothertermorconditioncontainedinanyoftheOtherAgreements,afterthepassageofallapplicablenoticeandcureorgraceperiods,shall,atthe optionoftheHolder,beconsidereda default under this Noteand the Other Agreements, in whicheventthe Holdershallbeentitled (but in no event required) to apply all rights and remediesof the Holder under the terms of thisNote and the Other Agreements by reasonof a default under said OtherAgreementor hereunder. “Other Agreements”means,collectively, all agreements and instrumentsbetween, among or by: (1) the Borrower, and, or forthe benefit of, (2) the Holder and any affiliate of the Holder, including,without limitation, promissory notes;provided, however, the term “Other Agreements”shallnot include the related or companiondocuments to this Note.Eachof the loan transactionswillbe cross-defaultedwitheachotherloantransactionandwithallotherexistingandfuturedebtofBorrower to the Holder.

UpontheoccurrenceandduringthecontinuationofanyEventofDefaultspecifiedinSection3.1(solelywithrespecttofailuretopaytheprincipalhereoforinterestthereonwhendueattheMaturityDate),theNoteshallbecomeimmediatelydueandpayableandtheBorrowershallpaytotheHolder,infullsatisfactionofitsobligationshereunder,anamountequaltotheDefaultSum(asdefinedherein).UPONTHEOCCURRENCEANDDURINGTHECONTINUATION OF ANYEVENTOFDEFAULTSPECIFIED IN SECTION3.2,THENOTESHALLBECOMEIMMEDIATELYDUEANDPAYABLEANDTHEBORROWERSHALLPAYTOTHEHOLDER, IN FULLSATISFACTIONOFITSOBLIGATIONSHEREUNDER,AN AMOUNT EQUALTO:(Y)THEDEFAULTSUM(ASDEFINEDHEREIN);MULTIPLIEDBY(Z)TWO

(2).UpontheoccurrenceandduringthecontinuationofanyEventofDefaultspecifiedinSections

3.1(solelywithrespecttofailuretopaytheprincipalhereoforinterestthereonwhendueonthisNoteuponaTradingMarketPrepaymentEventpursuanttoSection1.7oruponacceleration),3.3,3.4,3.6,3.8,3.9,3.11,3.12,3.13,3.14,and/or3.15exercisablethroughthedeliveryofwrittennotice to the Borrower by suchHolders(the“DefaultNotice”), and upon the occurrenceof an EventofDefaultspecifiedintheremainingsectionsofArticlesIII(otherthanfailuretopaytheprincipal hereof or interestthereon at the MaturityDatespecified in Section 3,1 hereof), theNoteshallbecomeimmediatelydueandpayableandtheBorrowershallpaytotheHolder,infullsatisfaction ofitsobligationshereunder,anamountequaltothegreater of (i)150% timesthesumof(w)thethen outstanding principal amount of thisNote plus (x)accrued and unpaidintereston the unpaid principalamountofthisNotetothe dateof payment(the“MandatoryPrepaymentDate”)plus(y)DefaultInterest,if any,on theamountsreferred toinclauses (w)and/or(x) plus (z)anyamounts owed to theHolderpursuanttoSections1.3and1.4(g)hereof (the then outstanding principalamountof this Note tothe date of paymentplus the amountsreferredto in clauses (x), (y)and(z)shall collectively be known as the“Default Sum”) or (ii) the“parity value” of the DefaultSum to be prepaid,where parity valuemeans(a) the highestnumber of shares of Common Stock issuableupon

 

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conversionoforotherwisepursuanttosuchDefaultSuminaccordancewithArticleI,treatingtheTradingDayimmediatelyprecedingtheMandatoryPrepaymentDateasthe“ConversionDate”forpurposes of determining the lowestapplicable Conversion Price,unless the Default Event arises as aresultofabreach inrespectofaspecificConversionDatein whichcasesuchConversionDateshallbetheConversionDate), multipliedby (b)thehighestClosingPricefortheCommonStockduringtheperiodbeginningonthedateoffirstoccurrenceofthe EventofDefaultand endingonedayprior to the Mandatory PrepaymentDate (the “Default Amount”) and all other amountspayable hereunder shall immediately become due and payable, allwithout demand,presentment or notice,all of which hereby are expressly waived, together with all costs,including, without limitation, legal fees and expenses, of collection,and the Holder shall be entitled toexerciseall other rights andremedies availableat law or in equity.

IftheBorrowerfailstopaytheDefaultAmountwithinfive(5)businessdaysofwrittennoticethatsuchamountisdueandpayable,thentheHoldershallhavetherightatanytime,solongastheBorrowerremainsindefault(andsolongandtotheextentthattherearesufficientauthorizedshares),torequiretheBorrower,uponwrittennotice,toimmediatelyissue,inlieuoftheDefaultAmount,thenumberofsharesofCommonStockoftheBorrowerequaltotheDefaultAmountdivided by theConversionPrice then in effect. TheHoldermaystill convert any amounts due hereunder, includingwithout limitation the Default Sum, untilsuch timeas this Notehas been repaid in full.

ARTICLE IV.MISCELLANEOUS

4.1.              FailureorIndulgenceNotWaiver.NofailureordelayonthepartoftheHolderintheexerciseofanypower,rightorprivilegehereundershalloperateasawaiverthereof,nor shall any single or partialexercise of any such power, right or privilege precludeotheror furtherexercisethereoforofanyotherright,powerorprivileges.Allrightsandremediesexistinghereunder are cumulativeto, and not exclusive of, any rights orremediesotherwise available.

4.2.              Notices.Allnotices,demands,requests,consents,approvals,andothercommunicationsrequiredorpermittedhereundershallbeinwritingand,unlessotherwisespecifiedherein,shallbe(i)personallyserved,(ii)depositedinthemail,registeredorcertified,returnreceiptrequested,postageprepaid,(iii)deliveredbyreputableaircourierservicewithchargesprepaid,or

(iv)transmittedbyhanddelivery,telegram,emailorfacsimile,addressedassetforthbelowortosuchotheraddressassuchpartyshallhavespecifiedmostrecentlybywrittennotice.Anynoticeorothercommunicationrequiredorpermittedtobegivenhereundershallbedeemedeffective(a)uponhanddeliveryordeliverybyfacsimileoremail,withaccurateconfirmationgeneratedbythe transmittingfacsimilemachine or computer, at the address,email or number designated in the PurchaseAgreement (if delivered on a business day during normalbusiness hours where such notice is to be received), or the firstbusiness day following such delivery (if delivered other than on a businessday duringnormal business hourswhere suchnoticeis to be received) or (b) on thesecondbusinessdayfollowingthedateofmailingbyexpresscourierservice,fullyprepaid,addressed to such address,or upon actual receipt of such mailing, whichever shall first occur.

 

4.3.              Amendments.ThisNoteandanyprovisionhereofmayonlybeamendedbyaninstrumentinwritingsignedbytheBorrowerandtheHolder.Theterm“Note”andallreferencethereto,asusedthroughoutthisinstrument,shallmeanthisinstrument(andtheotherNotesissuedpursuanttothePurchaseAgreement)asoriginallyexecuted,oriflateramendedorsupplemented,then as so amended or supplemented.

4.4.              Assignability.ThisNoteshallbebindingupontheBorroweranditssuccessors and assigns, andshall inure to be the benefit of the Holder and its successors and assigns.EachtransfereeofthisNotemustbean“accreditedinvestor”(asdefinedinRule501(a)ofthe1933Act).NotwithstandinganythinginthisNotetothecontrary,thisNotemaybepledgedascollateralin connectionwith a bona fide margin account orotherlendingarrangement.

 

4.5.              CostofCollection.IfdefaultismadeinthepaymentofthisNote,theBorrower shall pay the Holderhereof costs of collection,including reasonableattorneys’ fees.

 

4.6.              GoverningLaw.ThisNoteshallbegovernedbyandconstruedinaccordancewiththelawsoftheStateofNewYorkwithoutregardtoconflictsoflawsprinciplesthatwouldresultintheapplicationofthesubstantivelawsofanotherjurisdiction. Anyactionbroughtbyeitherpartyagainsttheotherconcerningthe transactionscontemplatedbythisAgreementmustbebroughtonlyinthecivilorstatecourtsofNewYorkorinthefederalcourtslocatedintheStateand county of NewYork.Both parties and the individual signing thisAgreement on behalf of the Borroweragreetosubmittothejurisdictionofsuchcourts.Theprevailingpartyshallbeentitledto recoverfrom theotherpartyitsreasonableattorney’sfeesandcosts.Intheeventthatanyprovision of this Note is invalidorunenforceable under any applicable statuteor rule of law, then such provision shall be deemedinoperative tothe extentthat it mayconflicttherewithand shallbe deemedmodifiedtoconformwithsuchstatuteorruleoflaw.Anysuchprovisionwhichmayproveinvalid or unenforceable under any law shall notaffect thevalidityorunenforceability of any other provisionof this Note. Nothing contained herein shall be deemed or operate to preclude theHolder from bringing suit or taking otherlegal action against the Borrower in any other jurisdictionto collectontheBorrower’sobligationstoHolder,torealizeonanycollateraloranyothersecurityforsuchobligations,ortoenforceajudgmentorotherdecisionin favoroftheHolder. **ThisNoteshall be deemedan unconditional obligation of Borrowerfor the payment of moneyand,withoutlimitation to any other remedies of Holder,may be enforced againstBorrowerby summary proceeding pursuanttoNewYorkCivilProcedureLaw andRulesSection3213 oranysimilar ruleorstatuteinthejurisdictionwhereenforcementissought. Forpurposesofsuchruleor statute, anyother documentor agreement to which Holder and Borrower are parties or whichBorrower delivered to Holder, which maybe convenient or necessary to determineHolder’s rightshereunderorBorrower’sobligationstoHolderaredeemedapart of thisNote,whether or notsuch other document or agreementwasdelivered together herewith or was executedapart from this Note.**

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4.7.              Certain Amounts. Wheneverpursuantto this Note the Borrower isrequired topayanamountinexcessoftheoutstandingprincipalamount(ortheportionthereofrequiredtobepaidatthattime)plusaccruedandunpaidinterestplusDefaultInterestonsuchinterest,theBorrowerandtheHolderagreethattheactualdamagestotheHolderfromthereceiptofcashpaymentonthisNotemaybedifficulttodetermineandthe amounttobesopaidbytheBorrowerrepresentsstipulateddamagesand not a penalty and is intendedto compensatetheHolderin partforlossoftheopportunitytoconvertthisNoteandtoearn a returnfromthe sale of shares of Common Stock acquiredupon conversion of this Note at a price in excessof the price paidfor such sharespursuant to this Note. The Borrower and the Holder herebyagree that such amount of stipulated damagesis not plainly disproportionate to the possible loss to the Holder from the receiptof a cash payment without the opportunityto convert this Note into shares of Common Stock.

4.8.              Disclosure.UponreceiptordeliverybytheCompanyofanynoticeinaccordancewiththetermsofthisNote,unlesstheCompanyhasingoodfaithdeterminedthatthemattersrelatingtosuchnoticedonotconstitutematerial,non-publicinformationrelatingtotheCompanyoranyofitsSubsidiaries,theCompanyshallwithinone(1)TradingDayafteranysuchreceipt or delivery, publicly disclosesuchmaterial,non-publicinformationon a Current Reporton Form 8-K or otherwise. Inthe event that the Company believes thata notice contains material, non- public informationrelating to the Company or any of its Subsidiaries,the Company so shall indicateto suchHolder contemporaneouslywith deliveryof such notice, andintheabsenceofanysuchindication,theHoldershallbeallowed to presume that all mattersrelatingtosuchnoticedonotconstitute material, non-public informationrelating to the Company or its Subsidiaries.

 

4.9.              NoticeofCorporateEvents.Exceptasotherwiseprovidedbelow,theHolderofthisNoteshallhavenorightsasaHolderofCommonStockunlessandonlytotheextentthatitconvertsthisNoteintoCommonStock.TheBorrowershallprovidetheHolderwithpriornotificationofanymeetingoftheBorrower’sshareholders(andcopiesof proxymaterialsandother information sent to shareholders).In the event of any taking by the Borrowerof a record of its shareholders for the purposeof determining shareholders who are entitledto receivepayment of any dividendorotherdistribution,anyrighttosubscribefor,purchaseorotherwiseacquire(including bywayofmerger,consolidation, reclassificationorrecapitalization)anyshareof anyclassorany othersecuritiesorproperty,orto receiveanyother right,or forthepurposeof determiningshareholderswhoareentitledtovoteinconnectionwithany proposedsale,leaseor conveyanceofall orsubstantially all of theassets of the Borrower oranyproposed liquidation,dissolutionorwindingupoftheBorrower,theBorrowershallmailanotice to the Holder,at leasttwenty(20)dayspriortotherecord datespecifiedtherein(orthirty(30)dayspriortotheconsummationofthe transactionorevent,whicheverisearlier),ofthedateonwhichanysuchrecordistobetakenfor the purpose of such dividend,distribution, right or other event, and a brief statementregarding the amount andcharacter ofsuch dividend, distribution, right orother event to the extent known at suchtime.TheBorrowershallmake a public announcement of any eventrequiring notification to the Holder hereunder substantially simultaneously with thenotificationtotheHolderinaccordancewith the terms of this Section 4.9.

 

4.10.          Remedies.TheBorroweracknowledgesthatabreachbyitofitsobligationshereunderwillcauseirreparableharmtotheHolder,byvitiatingtheintentandpurposeofthetransactioncontemplatedhereby.Accordingly,theBorroweracknowledgesthattheremedyatlawfor a breach of its obligationsunder this Note will be inadequate and agrees,in the event of a breachorthreatenedbreachbytheBorroweroftheprovisionsofthisNote,thattheHoldershallbeentitled, in additionto allotheravailableremediesatlawor inequity,and inadditiontothe penaltiesassessableherein,to an injunctionorinjunctionsrestraining,preventingorcuringany breach of this Noteandto enforce specifically the terms and provisions thereof,withoutthe necessity of showing economicloss and without any bond or other security being required.

 

4.11.          Usury.ThisNoteshallbesubjecttotheanti-usurylimitationscontainedinthe PurchaseAgreement.

 

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INWITNESSWHEREOF,Borrowerhascausedthis Noteto be signed in itsnamebyits dulyauthorizedofficeras of theIssue Date first set forth above.

MAX SOUNDCORPORATION.

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By: