Exhibit 99.3
NEITHER THIS SECURITY NOR THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE
OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED
UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE
HARBOR THEREFROM.
No. US $300,000.00
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WATER CHEF, INC.
CONVERTIBLE PROMISSORY NOTE DUE FEBRUARY 17, 2007
THIS Note is a duly authorized issuance of $300,000.00 of WATER CHEF, INC., a
Delaware corporation and located at 0000 Xxxx Xxxx Xxxxxx, Xxxxx 0, Xxxx Xxxx,
Xxx Xxxx 00000 (the "Company") designated as its Convertible Note (the "Note").
FOR VALUE RECEIVED, the Company promises to pay to SOUTHRIDGE PARTNERS
LP, the registered holder hereof (the "Holder"), the principal sum of three
hundred thousand and 00/100 Dollars (US $300,000.00), plus accrued interest in
the amount of eight percent (8%) per year for all outstanding principal on
February 11, 2007 (the "Maturity Date"). The principal plus accrued interest of
this Note is payable at the option of the Holder at any time after the Maturity
Date, in shares of the Company's common stock, par value of $0.001 per share
("Common Stock") as set forth below, or in United States dollars, at the address
last appearing on the Note Register of the Company as designated in writing by
the Holder. The Company will pay the outstanding principal amount of this Note,
plus accrued interest, in cash on or before the Maturity Date, less any amounts
required by law to be deducted, to the registered holder of this Note. The
forwarding of such wire transfer shall constitute a payment hereunder and shall
satisfy and discharge the liability for principal on this Note to the extent of
the sum represented by such wire transfer plus any amounts so deducted.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Loan Agreement and the Transaction
Documents of even date.
This Note is subject to the following additional provisions:
1. The Note is issuable in denominations of Ten Thousand Dollars
(US$10,000) and integral multiples thereof, provided that the number of shares
to be issued upon conversion is a minimum of 3,000 (unless if at the time of
election to convert the number of shares of Common Stock issuable upon
conversion is less than 3,000). The Note is exchangeable for an equal aggregate
principal amount of Note of different authorized denominations, as requested by
the Holder surrendering the same. No service charge will be made for such
registration or transfer or exchange.
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1.A The Company shall have the right to redeem this Note at any
time by providing written notice to the Holder by making a cash payment to the
Holder of the outstanding principal amount of the Note multiplied by a premium
according to the following schedule, plus all accrued interest: 105% of the
outstanding principal amount if redeemed within 120 days after the issuance
date; 110% of the outstanding principal amount if redeemed between 121 days and
180 days after the issuance date; 112% of the outstanding principal amount if
redeemed between 181 days and 365 days after the issuance date; 115% of the
outstanding principal amount if redeemed after 365 days after the issuance date.
Written notice to the Holder 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 Holder thereafter shall have the right to convert
any portion of the outstanding principal of the Note.
1.B This Note is further secured pursuant to a Pledge Agreement
and a Guarantee, each dated October 11, 2006 between the Pledgor/Guarantor, and
the Holder whereby the Pledgor/Guarantor has guaranteed this Note and has
granted to Holder a security interest in Collateral to secure the payment of
this Note. Such security interest may be perfected by the filing of the
applicable UCC statements in the appropriate recording offices.
2. The Holder of this Note is entitled at any time after the
Maturity Date, at its option, subject to the following provisions, to convert
all or a portion of the principal amount of this Note plus accrued interest into
shares of Common Stock at a conversion price for each share of Common Stock
equal to the Current Market Price multiplied by eighty five percent (85%) (the
"Conversion Price"). "Current Market Price" means the average of the three (3)
lowest closing bid prices for the Common Stock as reported by Bloomberg, LP or,
if not so reported, as reported on the over-the-counter market, during the ten
(10) trading days ending on the trading day immediately prior to the relevant
Conversion Date (as defined below). The amount of shares issuable pursuant to a
conversion shall equal the principal amount (or portion thereof) of the Note to
be converted, plus accrued interest, divided by the Conversion Price.
Conversion shall be effectuated by surrendering the Note to the
Company, accompanied by or preceded by facsimile or other delivery to the
Company of the form of conversion notice attached hereto as Exhibit A, executed
by the Holder evidencing such Holder's intention to convert a specified portion
hereof. No fractional shares of Common Stock or scrip representing fractions of
shares will be issued on conversion, but the number of shares issuable shall be
rounded to the nearest whole share. The date on which notice of conversion is
given (the "Conversion Date") shall be deemed to be the date on which the Holder
faxes or otherwise delivers the conversion notice ("Notice of Conversion"),
substantially in the form annexed hereto as Exhibit A, duly executed, to the
Company. Facsimile delivery of the Notice of Conversion shall be accepted by the
Company at facsimile number 000-000-0000 ATTN: PRESIDENT. Certificates
representing Common Stock issuable upon conversion shall be delivered within
four (4) business days from the Conversion Date. ("Delivery Date").
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The Company understands that a delay in the issuance of the Shares of
Common Stock beyond the Delivery Date (as defined in this Section) could result
in economic loss to the Holder. As compensation to the Holder for such loss, the
Company agrees to pay late payments to the Holder for late issuance of Shares
upon Conversion, unless the delay is due to causes beyond the reasonable control
of the Company or the Transfer Agent, in accordance with the following schedule
(where "No. Business Days Late" refers to the number of business days which is
beyond three (3) business days after the Delivery Date):(1)
Late Payment For Each $10,000
of Note Principal or Interest
No. Business Days Late Amount Being Converted
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1 $ 100
2 $ 200
3 $ 300
4 $ 400
5 $ 500
6 $ 600
7 $ 700
8 $ 800
9 $ 900
10 $1,000
>10 $1,000 +$200 for each Business Day
Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand as the Holder's remedy for such delay. Furthermore,
in addition to any other remedies which may be available to the Holder, in the
event that the Company fails for any reason to effect delivery of such shares of
Common Stock by close of business on the Delivery Date, unless such failure is
due to causes beyond the Company's reasonable control or that of its Transfer
Agent, the Holder will be entitled to revoke the relevant Notice of Conversion
by delivering a notice to such effect to the Company, whereupon the Company and
the Holder shall each be restored to their respective positions immediately
prior to delivery of such Notice of Conversion; provided, however, that an
amount equal to any payments contemplated by this Section which have accrued
through the date of such revocation notice shall remain due and owing to the
Converting Holder notwithstanding such revocation.
If, by the relevant Delivery Date, the Company fails, unless such
failure is due to causes beyond the Company's reasonable control or that of its
Transfer Agent, for any reason to deliver the Shares to be issued upon
conversion of the Note and after such Delivery Date, the Holder of the Note
being converted (a "Converting Holder") purchases, in an arm's-length open
market transaction or otherwise, shares of Common Stock (the "Covering Shares")
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in order to make delivery in satisfaction of a sale of Common Stock by the
Converting Holder (the "Sold Shares"), which delivery such Converting Holder
anticipated to make using the Shares to be issued upon such conversion (a
"Buy-In"), the Converting Holder shall have the right, to require the Company to
pay to the Converting Holder, in addition to and not in lieu of the amounts due
hereunder (but in addition to all other amounts contemplated in other provisions
of the Transaction Agreements, and not in lieu of any such other amounts), the
Buy-In Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is
the amount equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by the
Converting Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Company in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000.
In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Company's Transfer Agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Holder and its compliance with the
provisions contained in this paragraph, so long as the certificates therefore do
not bear a legend and the Holder thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system.
The Holder of the Note shall be entitled to exercise its conversion
privilege with respect to the Note notwithstanding the commencement of any case
under 11 U.S.C. ss.101 ET SEQ. (the "Bankruptcy Code"). In the event the Company
is a debtor under the Bankruptcy Code, the Company hereby waives, to the fullest
extent permitted, any rights to relief it may have under 11 U.S.C. ss.362 in
respect of such holder's conversion privilege. The Company hereby waives, to the
fullest extent permitted, any rights to relief it may have under 11 U.S.C.
ss.362 in respect of the conversion of the Note.
3. The Company shall be entitled to withhold from all payments of
principal of this Note any amounts required to be withheld under the applicable
provisions of the United States income tax laws or other applicable laws at the
time of such payments, and Holder shall execute and deliver all required
documentation in connection therewith.
4. This Note has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged only in compliance with the Securities Act of 1933, as amended (the
"Act"), and other applicable state and foreign securities laws. In the event of
any proposed
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transfer of this Note, the Company may require, prior to issuance of a new Note
in the name of such other person, that it receive reasonable transfer
documentation including legal opinions that the issuance of the Note in such
other name does not and will not cause a violation of the Act or any applicable
state or foreign securities laws. Prior to due presentment for transfer of this
Note, the Company and any agent of the Company may treat the person in whose
name this Note is duly registered on the Company's Note Register as the owner
hereof for the purpose of receiving payment as herein provided and for all other
purposes, whether or not this Note be overdue, and neither the Company nor any
such agent shall be affected by notice to the contrary.
5. No provision of this Note shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of
this Note at the time, place, and rate, and in the coin or currency, herein
prescribed. This Note is a direct obligation of the Company.
6. [INTENTIONALLY OMITTED].
7. The Holder of the Note, by acceptance hereof, agrees that this
Note is being acquired for investment and that such Holder will not offer, sell
or otherwise dispose of this Note or the shares of Common Stock issuable upon
conversion thereof except under circumstances which will not result in a
violation of the Act or any applicable state Blue Sky or foreign laws or similar
laws relating to the sale of securities.
8. This Note shall be governed by and construed in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Note and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on FORUM NON COVENIENS, to the bringing of any such
proceeding in such jurisdictions. Each of the parties hereby waives the right to
a trial by jury in connection with any dispute arising under this Note.
9. The following shall constitute an "Event of Default":
a. The Company shall default in the payment of principal
and interest on this Note when due; or
b. Any of the representations or warranties made by the
Company herein, in any certificate or financial or
other written statements heretofore or hereafter
furnished by the Company in connection with the
execution and delivery of this Note shall be false or
misleading in any material respect at the time made;
or
c. The Company shall fail to perform or observe, in any
material respect, any other covenant, term,
provision, condition, agreement or obligation of any
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Note and such failure shall continue uncured for a
period of thirty (30) days after written notice from
the Holder of such failure; or
d. The Company fails to authorize or to cause its
Transfer Agent to issue shares of Common Stock upon
exercise by the Holder of the conversion rights of
the Holder in accordance with the terms of this Note,
fails to transfer or to cause its Transfer Agent to
transfer any certificate for shares of Common Stock
issued to the Holder upon conversion of this Note and
when required by this Note, and such transfer is
otherwise lawful, or fails to remove any restrictive
legend on any certificate or fails to cause its
Transfer Agent to remove such restricted legend, in
each case where such removal is lawful, as and when
required by this Note, the Agreement, and any such
failure shall continue uncured for ten (10) business
days; or
e. The Company shall (1) admit in writing its inability
to pay its debts generally as they mature; (2) make
an assignment for the benefit of creditors or
commence proceedings for its dissolution; or (3)
apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial
part of its property or business; or
f. A trustee, liquidator or receiver shall be appointed
for the Company or for a substantial part of its
property or business without its consent and shall
not be discharged within sixty (60) days after such
appointment; or
g. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the whole
or any substantial portion of the properties or
assets of the Company and shall not be dismissed
within sixty (60) days thereafter; or
h. Any money judgment, writ or warrant of attachment, or
similar process in excess of One Hundred Thousand
($100,000) Dollars in the aggregate shall be entered
or filed against the Company or any of its properties
or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of sixty (60) days
or in any event later than five (5) days prior to the
date of any proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors
shall be instituted by or against the Company and, if
instituted against the Company, shall not be
dismissed within sixty (60) days after such
institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any
such proceedings or admit the material allegations
of, or default in answering a petition filed in any
such proceeding; or
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j. The Company shall have its Common Stock suspended or
delisted from an exchange or over-the-counter market
from trading for in excess of five trading days.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider all
obligations under this Note immediately due and payable, without presentment,
demand, protest or notice of any kinds, all of which are hereby expressly
waived, anything herein or in any note or other instruments contained to the
contrary notwithstanding, and the Holder may immediately enforce any and all of
the Holder's rights and remedies provided herein or any other rights or remedies
afforded by law.
10. The Holder may not convert this Note to the extent such
conversion would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 4.999% of the
then issued and outstanding shares of Common Stock held by such Holder after
application of this Section. Since the Holder will not be obligated to report to
the Company the number of shares of Common Stock it may hold at the time of a
conversion hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 4.999% of the then outstanding
shares of Common Stock without regard to any other shares which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the principal amount of Note are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for a principal amount of Note that
would result in the issuance of in excess of the permitted amount hereunder,
without regard to any other shares that the Holder or its affiliates may
beneficially own, the Company shall notify the Holder of this fact and shall
honor the conversion for the maximum principal amount permitted to be converted
on such Conversion Date and, at the option of the Holder, either retain any
principal amount tendered for conversion in excess of the permitted amount
hereunder for future conversions or return such excess principal amount to the
Holder. The provisions of this Section may be waived by a Holder (but only as to
itself and not to any other Holder) upon not less than 65 days prior notice to
the Company. Other Holders shall be unaffected by any such waiver.
11. Nothing contained in this Note shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
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12. All agreements herein made are expressly limited so that in no
event whatsoever, whether by reason of advancement of proceeds hereof,
acceleration of maturity of the unpaid balance hereof or otherwise, shall the
amount paid or agreed to be paid to Holder for the use of the money advanced or
to be advanced hereunder exceed the maximum rate of interest allowed to be
charged under applicable law (the "Maximum Rate"), regardless of whether or not
there has been an acceleration of the payment of principal as set forth herein.
If, from any circumstances whatsoever, the fulfillment of any provision of this
Note or any other agreement or instrument now or hereafter evidencing, securing
or in any way relating to the indebtedness evidenced hereby shall involve the
payment of interest in excess of the Maximum Rate, then, IPSO FACTO, the
obligation to pay interest hereunder shall be reduced to the Maximum Rate; and
if from any circumstance whatsoever, Holder shall ever receive interest, the
amount of which would exceed the amount collectible at the Maximum Rate, such
amount as would be excessive interest shall be applied to the reduction of the
principal balance remaining unpaid hereunder and not to the payment of interest.
This provision shall control every other provision in any and all other
agreements and instruments existing or hereafter arising between the Company and
Holder with respect to the indebtedness evidenced hereby.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by an officer thereunto duly authorized.
Dated: October 11, 2006
WATER CHEF, INC.
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
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(Print Name)
President & CEO
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Title:
ATTESTOR
By:
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