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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
$175,000 Ridgefield, Connecticut
March 2, 2005
FOR VALUE RECEIVED, the undersigned, Global Matrechs, Inc., a
Delaware
corporation (the "Maker"), hereby promises to pay to Southridge
Partners LP (the
"Payee") the principal sum of one hundred seventy five thousand
dollars
($175,000) in one installment due on March 2, 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 January 31, 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
2
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convertible for immediately prior to such reorganization,
reclassification, or
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