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.
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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
reorganiz
