THE SECURITIES EVIDENCED HAVE NOT BEEN
REGISTERED UNDER "FlIE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAW AND
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF 11\1 THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, ANY APPLICABLE STATE SECURITIES LAWS. OR AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION
STATEMENT IS NOT REQUIRED UNDER THE SECURITIES ACT AND THE RULES
AND REGULATIONS PROMULGATED THEREUNDER OR UNDER ANY APPLICABLE
STATE SECURITIES LAWS.
SWAP-A-DEBT, INC.
12% CONVERTIBLE PROMISSORY NOTE
Amount $250,000.00
Issuance
Date August
29, 2008
SWAP-A-DEBT. INC., a Delaware corporation (the
"Company") for value received, hereby promises to pay to
Robert S. Pearson or its registered assigns (the
"Holder"). on April 18, 2008_(the "Maturity Date") at the
principal offices of the Company. the principal sum of
$250,000.00 in such coin or currency of the
United States of America as at the time of payment
shall be legal tender for the payment of public
and private debts and to pay interest on the outstanding principal
balance at the Maturity Date as hereinafter provided.
I) Interest
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i)
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Interest accrued during the term of this
Note in its entirety on or Within five (5) calendar days oldie
Maturity Date. The Note will bear interest at the rate
of twelve percent (12%) per annum on the principal balance
until this Note shall be paid in full.
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2) Conversion
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Conversion.
The Holder shall have the right from
time to time, and at any time on or prior to the Maturity Date to
convert all or any part of the outstanding and unpaid principal
amount of this Note into fully paid and non-assessable shares of
Common Stock, $.00l par value per share. The number of shares of
Common Stock to be issued upon each conversion of this Note shall
be determined by dividing the amount of principal and accrued
interest to be converted (Conversion Amount) by the applicable
Conversion Price then in effect on the date specified in the notice
of conversion, in the form attached hereto as Exhibit A (the
"Notice-of Conversion"). The Conversion Price shall be equal to the
average closing bid price of the Common Stock (as reported by
Bloomberg L.P.) on the Pinksheets OTC market for the ten ( 10)
trading days prior to the date of the Conversion Notice (the
"Conversion Date") multiplied by .80 provided that the Notice of
Conversion is submitted by facsimile (or by other means resulting
in. or reasonably expected to result in. notice) to the Company
before 6:00 p.m.. New York, New York time on such Conversion
Date.
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Conversion Price
Limit .
Notwithstanding the provisions in Section 2(a),
the Conversion Price shall not exceed $.25,
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i)
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Mechanics of
Conversion . This Note may be converted by
the holder in whole or in part any time from time to
time after the Note is issued to the Holder, by (A) submitting to
the Company a Notice of Conversion (by facsimile or other
reasonable means of communication dispatched on the Conversion Date
prior to 6:00 p.m., New York, New York time) and (B) surrendering
this Note at the principal office of the Company.
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ii)
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Delivery
of Common Stock Upon
Conversion . Upon
receipt by the Company from the Holder of a facsimile transmission
(or other reasonable means of communication) of a Notice of
Conversion, the Company shall issue and deliver or cause to be
issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion
within five (5) business days after such receipt (and, solely in
the case of conversion of the entire unpaid principal amount
hereof, surrender of this Note).
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3)
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Concerning the
Shares . The
shares of Common Stock issuable upon conversion of this Note may
not be sold or transferred unless (i) such shares are sold pursuant
to an effective registration statement under the Act or (ii) the
Borrower or its transfer agent shall have been furnished with an
opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions)
to the effect that the shares to be sold or transferred may be sold
or transferred pursuant to an exemption from such registration or
(iii) such shares are sold or transferred pursuant to Rule 144
under the Act (or a successor rule) (" Rule 144 "). Until such time
as the shares of Common Stock issuable upon conversion of this
Debenture have been registered under the Act or otherwise may be
sold pursuant to Rule 144 without any restriction as to the number
of securities as of a particular date that can then be immediately
sold, each certificate for shares of Common Stock issuable upon
conversion of this Debenture that has not been so included in an
effective registration statement or that has not been sold pursuant
to an effective registration statement or an exemption that permits
removal of the legend, shall bear a legend substantially in the
following form, as appropriate:
"THE SECURITIES REPRESENTED,BY THIS CERTIFICATE
HAVENOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
TRANSACTIONS, THAT REGISTRATION IS NOT REQUI
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