EXHIBIT 4.2
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NEITHER THIS NOTE NOR THE SECURITIES
ISSUABLE UPON CONVERSION HEREOF HAVE BEEN
THE SUBJECT OF REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE SECURITIES LAWS OF ANY STATE, AND
THE SAME HAVE BEEN (OR WILL BE, WITH
RESPECT TO THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF) ISSUED IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT AND SUCH LAWS. NEITHER
THIS NOTE NOR THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF MAY BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT AS PERMITTED
UNDER SUCH SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM.
NONNEGOTIABLE 2% SECURED CONVERTIBLE PROMISSORY NOTE
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$170,000
Ridgefield, Connecticut
August 1, 2005
FOR VALUE
RECEIVED, the undersigned, Global Matrechs, Inc., a Delaware
corporation (the "Maker"), hereby promises
to pay to MacNab LLC (the "Payee")
the principal sum of one hundred seventy
thousand dollars ($170,000) in one
installment due on August 1, 2007 (the
"Maturity Date") together with interest
from and after the date hereof at the rate
of two percent (2%) per annum
computed on the unpaid principal balance on
the basis of a 360-day year. All
payments made hereunder shall be made in
immediately available funds. By
acceptance of this Note, the Payee
represents, warrants, covenants and agrees
that it will abide by and be bound by its
terms. Capitalized terms not otherwise
defined herein shall have the meaning set
forth in that certain Securities
Purchase Agreement dated August 1, 2005 by
and between the Maker and the Payee.
1. Conversion. The Payee shall
have the option at any time to convert all
or a portion of the outstanding principal
and interest on this Note into a
number of shares of common stock, $0.001
par value per share (the "Common
Stock") equal to a fraction, the numerator
of which shall be the amount of
principal and interest being so converted
and the denominator of which shall be
equal to the Conversion Price (the
"Conversion Shares"). The "Conversion Price"
shall be $0.02.
2. Restrictions on Conversion.
Notwithstanding anything to the contrary
contained herein, the number of Conversion
Shares that may be acquired by the
Payee upon any conversion of this Note (or
otherwise in respect hereof) shall be
limited to the extent necessary to insure
that, following such conversion, the
total number of shares of Common Stock then
beneficially owned by such Payee and
its affiliates and any other persons whose
beneficial ownership of Common Stock
would be aggregated with the Payee's for
purposes of Section 13(d) of the
Securities Exchange Act of 1934, as amended
(the "Exchange Act"), does not
exceed 4.999% of the total number of issued
and outstanding shares of Common
Stock (including for such purpose the
shares of Common Stock issuable upon such
conversion). For such purposes, beneficial
ownership shall be determined in
accordance with Section 13(d) of the
Exchange Act and the rules and regulations
promulgated thereunder.
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3. Prepayment. If at any time
the Market Price (as defined below) of the
Maker's Common Stock remains less than
$0.03 cents for ten (10) consecutive
trading days, then at the written election
of the Payee provided not later than
the 10th calendar day following the last
day of such 10 trading day period, the
Maker shall within 60 days of the receipt
of such election prepay the principal
amount outstanding at the time of such
prepayment plus a premium (a "Prepayment
Premium") equal to 40% of the principal
amount being prepaid plus accrued
interest. For the purposes of this Section
3, the "Market Price" shall equal the
closing price per share of the Common Stock
on such date as reported by a
nationally recognized stock exchange price
determined by the first of the
following clauses that applies: (a) if the
Common Stock is then listed or quoted
on the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National
Market, the Nasdaq SmallCap Market or the
OTC Bulletin Board, the bid price per
share of the Common Stock on the primary
market or exchange on which the Common
Stock is then listed or quoted; (b) if
prices for the Common Stock are then
reported in the "Pink Sheets" published by
the National Quotation Bureau
Incorporated (or a similar organization or
agency succeeding to its functions of
reporting prices), the most recent bid
price per share of the Common Stock so
reported; or (c) in all other cases, the
fair market value of a share of Common
Stock as determined by an independent
qualified appraiser selected in good faith
and paid for by the Payee.
4. Adjustment for Dividends,
Distributions, Subdivisions, Combinations,
Mergers, Consolidations or Sale of
Assets.
(a) Manner of
Adjustment.
(i) Stock Dividends, Distributions or Subdivisions. In the
event
the Maker shall issue shares of Common
Stock in a stock dividend, stock
distribution or subdivision, the Conversion
Price in effect immediately before
such stock dividend, stock distribution or
subdivision shall, concurrently with
the effectiveness of such stock dividend,
stock distribution or subdivision, be
proportionately decreased and the number of
shares of Common Stock issuable upon
conversion of this Note shall be
proportionately increased.
(ii)
Combinations or Consolidations. In the event the outstanding
shares of Common Stock shall be combined or
consolidated, by reclassification or
otherwise, into a lesser number of shares
of Common Stock, the Conversion Price
in effect immediately prior to such
combination or consolidation shall,
concurrently with the effectiveness of such
combination or consolidation, be
proportionately increased and the number of
shares of Common Stock issuable upon
conversion of this Note shall be
proportionately decreased.
(iii) Adjustment for Reclassification, Exchange or
Substitution.
In the event that the class of securities
issuable upon the conversion of this
Note shall be changed into the same or a
different number of shares of any class
or classes of stock, whether by capital
reorganization, reclassification or
otherwise, then and in each such event the
Payee shall have the right thereafter
to convert this Note for the kind and
amount of shares of stock and other
securities and property receivable upon
such reorganization, reclassification,
or other change, by Payees of the number of
shares of the class of securities
into which such Note might have been
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convertible for immediately prior to such
reorganization, reclassific
