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.
2% SECURED CONVERTIBLE PROMISSORY NOTE
|
$50,000
|
Ridgefield,
Connecticut
|
September
13, 2006
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 fifty thousand dollars ($50,000) in one
installment due on March 31, 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.
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 equal to eighty percent (80%) of the average of the five
lowest closing bid prices for the ten (10) trading days immediately
preceding the Conversion Date. The “Conversion Date”
shall be defined as the date in which the Issuer receives written
notice by Holder of its election to convert all or a portion of the
Note pursuant to this Section 1.
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.
3.
Prepayment The
Maker shall have the right to redeem this Note at any time by
providing written notice to the Payee by making a cash payment to
the Payee of the outstanding principal amount of the Note
multiplied by 120%, plus all accrued interest: Written notice to
the Payee shall be received at least 5 business days prior to the
date of redemption payment (“Redemption Date”). If the
redemption payment is not made on or before the Redemption Date,
the redemption notice shall be rendered null and void and the Payee
thereafter shall have the right to convert any portion of the
outstanding principal of the Note .
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 convertible for immediately prior to such
reorganization, reclassification, or change, all subject to further
adjustment as provided herein.
(iv)
Adjustment for Merger, Consolidation or Sale of Assets
.
In the event that the Maker shall merge or consolidate with or into
another entity or sell all or substantially all of its assets, this
Note shall thereafter be convertible for the kind and amount of
shares of stock or other securities or property to which a Payee of
the number of shares of Common Stock of the Maker deliverable upon
conversion of this Note would have been entitled upon such
consolidation, me
