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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
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$125,000 Ridgefield, Connecticut
April 11, 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 thousand dollars
($125,000) in one
installment due on April 11, 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.
<PAGE>
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,
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