NEITHER THE ISSUANCE AND SALE OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
(WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
Principal Amount:
$240,000
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Issue Date: May ___,
2009
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CONVERTIBLE PROMISSORY
NOTE
FOR VALUE RECEIVED, AirtimeDSL, a
Nevada corporation (hereinafter called “Borrower”),
hereby promises to pay to ALPHA CAPITAL ANSTALT, Pradafant 7, 9490
Furstentums, Vaduz, Lichtenstein, Fax: 011-42-32323196 (the
“Holder”) or order, without demand, the sum of Two
Hundred and Forty Thousand Dollars ($240,000) (“Principal
Amount”) on May ___ 2011 (the
“Maturity Date”), if not sooner paid.
The Principal Amount of this Note
represents a 16.67% original issue discount (the “OID”)
and this Note does not bear any additional interest.
This Note has been entered into
pursuant to the terms of a subscription agreement between the
Borrower and the Holder dated at or about the date hereof (the
“Subscription Agreement”), and shall be governed by the
terms of such Subscription Agreement. Unless otherwise
separately defined herein, all capitalized terms used in this Note
shall have the same meaning as is set forth in the Subscription
Agreement. The following terms shall apply to this
Note:
ARTICLE I
GENERAL PROVISIONS
1.1
Payment Grace Period . The Borrower shall have a
five (5) day grace period to pay any monetary amounts due under
this Note, after which grace period a default interest rate of
fourteen percent (14%) per annum shall apply.
1.2
Conversion Privileges . The Conversion Privileges
set forth in Article II shall remain in full force and effect
immediately from the date hereof and until the Note is paid in full
regardless of the occurrence of an Event of Default. The
Note shall be payable in full on the Maturity Date, unless
previously converted into Common Stock in accordance with Article
II hereof.
ARTICLE II
CONVERSION RIGHTS
The Holder shall have the right to
convert the principal and any interest due under this Note into
Shares of the Borrower's Common Stock, $.001 par value per share
(“Common Stock”) as set forth below.
2.1.
Conversion into the Borrower's Common Stock .
(a) The
Holder shall have the right from and after the date of the issuance
of this Note and then at any time until this Note is fully paid, to
convert any outstanding and unpaid principal portion of this Note,
and accrued interest, at the election of the Holder (the date of
giving of such notice of conversion being a “Conversion
Date”) into fully paid and nonassessable shares of Common
Stock as such stock exists on the date of issuance of this Note, or
any shares of capital stock of Borrower into which such Common
Stock shall hereafter be changed or reclassified, at the Conversion
Price as defined in Section 2.1(b) hereof,determined as provided
herein. Upon delivery to the Borrower of a completed
Notice of Conversion, a form of which is annexed hereto as Exhibit
A, Borrower shall issue and deliver to the Holder within four (4)
business days after the Conversion Date (such fourth day being the
“Delivery Date”) that number of shares of Common Stock
for the portion of the Note converted in accordance with the
foregoing. At the election of the Holder, the Borrower
will deliver accrued but unpaid interest on the Note, if any,
through the Conversion Date directly to the Holder on or before the
Delivery Date. The number of shares of Common Stock to
be issued upon each conversion of this Note shall be determined by
dividing that portion of the outstanding principal amount of the
Note and accrued but unpaid interest, if any, to be converted, by
the Conversion Price.
(b) Subject to
adjustment as provided in Section 2.1(c) hereof, the conversion
price per share shall be equal to $0.30 (“Conversion
Price”).
(c)
The Conversion Price and number and kind of shares or other
securities to be issued upon conversion determined pursuant to
Section 2.1(a), shall be subject to adjustment from time to time
upon the happening of certain events while this conversion right
remains outstanding, as follows:
A.
Merger, Sale of Assets, etc . If (A) the Borrower
effects any merger or consolidation of the Borrower with
or into another entity, (B) the Borrower effects any sale of all or
substantially all of its assets in one or a series of related
transactions, (C) any tender offer or exchange offer
(whether by the Borrower or another entity) is completed pursuant
to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, (D)
the Borrower consummates a stock purchase agreement or other
business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with one or more persons or entities whereby such
other persons or entities acquire more than the 50% of the
outstanding shares of Common Stock (not including any shares of
Common Stock held by such other persons or entities making or party
to, or associated or affiliated with the other persons or entities
making or party to, such stock purchase agreement or other business
combination), (E) any “person” or “group”
(as these terms are used for purposes of Sections 13(d) and 14(d)
of the 1934 Act) is or shall become the “beneficial
owner” (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of 50% of the aggregate Common Stock of the
Borrower, or (F) the Borrower effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a
“Fundamental Transaction”), this Note,
as to the unpaid principal portion thereof and accrued interest
thereon, shall thereafter be deemed to evidence the right to
convert into such number and kind of shares or other securities and
property as would have been issuable or distributable on account of
such Fundamental Transaction, upon or with respect to the
securities subject to the conversion right immediately prior to
such Fundamental Transaction. The foregoing provision
shall similarly apply to successive Fundamental Transactions of a
similar nature by any such successor or
purchaser. Without limiting the generality of the
foregoing, the anti-dilution provisions of this Section shall apply
to such securities of such successor or purchaser after any such
Fundamental Transaction.
B.
Reclassification, etc. If the Borrower at any
time shall, by reclassification or otherwise, change the Common
Stock into the same or a different number of securities of any
class or classes that may be issued or outstanding, this Note, as
to the unpaid principal portion thereof and accrued interest
thereon, shall thereafter be deemed to evidence the right to
purchase an adjusted number of such securities and kind of
securities as would have been issuable as the result of such change
with respect to the Common Stock immediately prior to such
reclassification or other change.
C.
Stock Splits, Combinations and Dividends . If the
shares of Common Stock are subdivided or combined into a greater or
smaller number of shares of Common Stock, or if a dividend is paid
on the Common Stock in shares of Common Stock, the Conversion Price
shall be proportionately reduced in case of subdivision of shares
or stock dividend or proportionately increased in the case of
combination of shares, in each such case by the ratio which the
total number of shares of Common Stock outstanding immediately
after such event bears to the total number of shares of Common
Stock outstanding immediately prior to such event.
D.
Share Issuance . So long as this Note is
outstanding, if the Borrower shall issue any Common Stock except
for the Excepted Issuances, prior to the complete conversion or
payment of this Note, for a consideration per share that is less
than the Conversion Price that would be in effect at the time of
such issuance, then, and thereafter successively upon each such
issuance, the Conversion Price shall be reduced to such other lower
issue price. For purposes of this adjustment, the
issuance of any security or debt instrument of the Borrower
carrying the right to convert such security or debt instrument into
Common Stock or of any warrant, right or option to purchase Common
Stock shall result in an adjustment to the Conversion Price upon
the issuance of the above-described security, debt instrument,
warrant, right, or option and again upon the issuance of shares of
Common Stock upon exercise of such conversion or purchase rights if
such issuance is at a price lower than the then applicable
Conversion Price. The reduction of the Conversion Price
described in this paragraph is in addition to the other rights of
the Holder described in the Subscription
Agreement. Common Stock issued or issuable by the
Borrower for no consideration will be deemed issuable or to have
been issued for $0.001 per share of Common Stock. The
reduction of the Conversion Price described in this paragraph is in
addition to the other rights of the Holder described in the
Subscription Agreement.
(d) Whenever
the Conversion Price is adjusted pursuant to Section 2.1(c) above,
the Borrower shall promptly mail to the Holder a notice setting
forth the Conversion Price after such adjustment and setting forth
a statement of the facts requiring such adjustment.
(e) During
the period the conversion right exists, Borrower will reserve from
its authorized and unissued Common Stock not less than an amount of
Common Stock equal to 120% of the amount of shares of Common Stock
issuable upon the full conversion of this Note. Borrower
represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable. Borrower agrees
that its issuance of this Note shall constitute full authority to
its officers, agents, and transfer agents who are charged with the
duty of executing and issuing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon
the conversion of this Note.
2.2
Method of Conversion . This Note may be converted
by the Holder in whole or in part as described in Section 2.1(a)
hereof and the Subscription Agreement. Upon partial
conversion of this Note, a new Note containing the same date and
provisions of this Note shall, at the request of the Holder, be
issued by the Borrower to the Holder for the principal balance of
this Note and interest which shall not have been converted or
paid.
2.3.
Maximum Conversion . The Holder shall not be
entitled to convert on a Conversion Date that amount of the Note in
connection with that number of shares of Common Stock which would
be in excess of the sum of (i) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates on a Conversion
Date, (ii) any Common Stock issuabl
