Exhibit 99.1
LOAN AGREEMENT
LOAN AGREEMENT (the "AGREEMENT"), dated as of November 16th, 2005, between
WATER CHEF, INC., a corporation organized under the laws of the State of
Delaware ("WTER"), and SOUTHRIDGE PARTNERS LP, a Delaware limited liability
company ("LENDER").
WHEREAS, Lender and WTER are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 ACT");
WHEREAS, Lender desires to purchase and WTER desires to issue, upon the
terms and conditions set forth in this Agreement, a convertible promissory note
and a stock warrant of WTER in consideration for a loan by Lender to WTER in the
amount of $250,000.00 in cash; and
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. ISSUANCE OF CONVERTIBLE PROMISSORY NOTE.
a. PURCHASE OF CONVERTIBLE PROMISSORY NOTE. On the Closing Date (as
defined below), WTER shall issue and deliver to Lender (1) a duly executed 8%
secured convertible promissory note in the principal amount of $250,000.00 (the
"NOTE") and (2) a stock warrant for 430,000 shares of WTER common stock (the
"WARRANT") in consideration for a loan in the amount of $250,000.00 cash, less
transaction fees and costs (the "LOAN AMOUNT") This Agreement, the Note, the
Warrant, and all ancillary documents associated with this Agreement shall be
referred to as the Transaction Documents.
b. CLOSING DATE. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 5 and Section 6 below, the closing of
the loan pursuant to this Agreement (the "CLOSING DATE") shall be 12:00 noon New
York City Time as of November 16, 2005 or such other mutually agreed upon time.
The closing of the transactions contemplated by this Agreement (the "CLOSING")
shall occur on the Closing Date at such location as may be agreed to by the
parties.
c. LOAN. On the Closing Date, (i) Lender shall make the loan in
United States dollars by wire transfer of immediately available funds to an
account designated in writing by WTER for such purpose, against delivery of the
Note and the Warrant, and (ii) WTER shall deliver to Lender the Note and Warrant
duly executed on behalf of WTER, against delivery of the loan.
d. PLEDGE. The Note is further secured pursuant to a Pledge
Agreement dated as of November 16, 2005 between the Pledgor and Lender whereby
the Pledgor has pledged certain Collateral and has granted to Lender a security
interest in Collateral, as defined therein, to secure the payment of the Note.
Such security interest may be perfected by the filing of the applicable UCC
statements in the appropriate recording offices.
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2. REPRESENTATIONS AND WARRANTIES OF LENDER. Lender represents and
warrants to WTER that:
a. ACCREDITED INVESTOR; INVESTMENT PURPOSE. Lender represents that
it is an "Accredited Investor" as defined in Regulation D under the Securities
Act of 1933. Lender is acquiring the Note for its own account for investment
purposes only and not with a view toward, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act and applicable state securities laws; PROVIDED,
HOWEVER, that by making the representations herein, Lender does not agree to
hold the Note for any minimum or other specific term and reserves the right to
dispose of the Note at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act and applicable state securities
laws.
b. RELIANCE ON EXEMPTIONS. Lender understands that the Note is being
issued to it in reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws and that WTER is
relying upon the truth and accuracy of, and Lender's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
Lender set forth herein in order to determine the availability of such
exemptions and the eligibility of the Lender to acquire the Note.
c. INFORMATION. Lender and its advisors, if any, have been furnished
with materials relating to the business, finances and operations of WTER and
materials relating to the issuance of the Note which have been requested by
Lender or its advisors. Neither such inquiries nor any other due diligence
investigation conducted by Lender or any of its advisors or representatives
shall modify, amend or affect Lender's right to rely on WTER's representations
and warranties contained in Section 3 below. Lender understands that entering
into the loan and acceptance of the Note involves a significant degree of risk.
d. GOVERNMENTAL REVIEW. Lender understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Note.
e. TRANSFER OR RESALE. Lender understands that (i) the sale or
resale of the Note and the Warrant and any underlying conversion shares of
common stock has not been and is not being registered under the 1933 Act or any
applicable state securities laws, and the Note and the Warrant may not be
transferred unless (a) the Note, the Warrant and Common Stock issuable upon
conversion of the Note ("Conversion Shares") are sold pursuant to an effective
registration statement under the 1933 Act, (b) the Note, the Warrant and the
Conversion Shares are sold or transferred pursuant to an exemption from such
registration, (c) the Note, the Warrant and the Conversion Shares are sold or
transferred to an "affiliate" (as defined in Rule 144 promulgated under the 1933
Act (or a successor rule) ("RULE 144")) of Lender who agrees to sell or
otherwise transfer the Note or the Warrant only in accordance with this Section
2(e) and who is an Accredited Investor, or (d) (i) the Note, the Warrant and the
Conversion Shares are sold pursuant to Rule 144, if such Rule is available; (ii)
any sale of such Note, the Warrant and the Conversion Shares made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and further,
if said Rule is not applicable, any resale of such Note, the Warrant and the
Conversion Shares under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 0000 Xxx) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither WTER nor any other person is under any obligation to comply with the
terms and conditions of any exemption under the 1933 Act.
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f. LEGENDS. Lender understands that the Note, the Warrant, and the
conversion shares shall bear a restrictive legend in the following form:
"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."
g. AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and
validly authorized by Lender. This Agreement has been duly executed and
delivered on behalf of Lender, and this Agreement constitutes a valid and
binding agreement of Lender enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
i. NO BROKERS. Lender has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transactions contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES OF WTER. WTER represents and warrants
to Lender that:
a. AUTHORIZATION; ENFORCEMENT. (i) WTER has all requisite corporate
power and authority to enter into and perform this Agreement and to consummate
the transactions contemplated hereby and issue the Note and the Warrant, in
accordance with the terms hereof, (ii) the execution and delivery of this
Agreement by WTER and the consummation by it of the transactions contemplated
hereby (including without limitation, the sale of the Note to Lender) have been
duly authorized by WTER and no further consent or authorization of WTER or its
shareholders is required, (iii) this Agreement has been duly executed and
delivered by WTER, and (iv) this Agreement constitutes a legal, valid and
binding obligation of WTER enforceable against WTER in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application
b. [LEFT BLANK]
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c. NO CONFLICTS. The execution, delivery and performance of this
Agreement by WTER and the consummation by WTER of the transactions contemplated
hereby (including, without limitation, the issuance of the Note and Warrant to
Lender) will not (i) conflict with or result in a violation of any provision of
its certificate of formation or other organizational documents, or (ii) violate
or conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, note, bond, indenture or other
instrument to which WTER is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory
organizations to which WTER is subject) applicable to WTER or by which any
property of WTER are bound or affected. Except as specifically contemplated by
this Agreement and as required under the 1933 Act and any applicable federal and
state securities laws, WTER is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court, governmental
agency, regulatory agency, self regulatory organization or stock market or any
third party in order for it to execute, deliver or perform any of its
obligations under this Agreement in accordance with the terms hereof. Except for
filings that may be required under applicable federal and state securities laws
in connection with the issuance and sale of the Note and the Warrant, all
consents, authorizations, orders, filings and registrations which WTER is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof.
d. NO BROKERS. WTER has taken no action which would give rise to any
claim by any person for brokerage commissions, finder's fees or similar payments
relating to this Agreement or the transactions contemplated hereby.
e. NO OTHER REPRESENTATIONS. Except as specifically set forth
herein, WTER makes no representations or warranties with respect its financial
status, earnings, assets, liabilities, corporate status or any other matter.
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best efforts to satisfy
timely each of the conditions described in Section 5 and Section 6 of this
Agreement.
b. FINANCIAL REPORTING. WTER shall make and keep public information
available, as those terms are understood and defined in Rule 144 and shall file
with the SEC in a timely manner all reports and other documents required of WTER
under the Securities Act and the Exchange Act. Furthermore, WTER shall have its
counsel timely provide a Rule 144 opinion to Lender with respect to the sale of
any common stock issued or transferred to Lender in connection with the
transactions associated with this Agreement.
c. REGISTRATION. WTER shall file a registration statement to
register common shares underlying conversions of the Note and the exercise of
the warrants within sixty (60) days after Closing and shall use its best efforts
to have such registration statement declared effective within 120 days following
the Closing, as further outlined in a registration rights agreement between the
parties, of even date.
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d. SALES AND PURCHASES OF WTER COMMON STOCK. Prior to the Maturity
Date of the Note, the Lender, together with any affiliate, shall not engage in
purchases or sales of the common stock of WTER. Notwithstanding the preceding
sentence, prior to the Maturity Date the Lender or its affiliate may sell shares
of WTER common stock pursuant to an effective registration statement listing the
Lender or affiliate as a selling shareholder in connection with a documented
transaction between Lender and WTER, if any, separate from the loan transaction
associated with this Agreement.
5. CONDITIONS TO WTER'S OBLIGATION TO ISSUE. The obligation of WTER
hereunder to issue and deliver the Note and the Warrant to Lender at the Closing
is subject to the satisfaction, at or before the Closing Date of each of the
following conditions thereto, provided that these conditions are for WTER's sole
benefit and may be waived by WTER at any time in its sole discretion:
a. Lender shall have executed this Agreement and delivered the same
to WTER.
b. Lender shall have delivered the Loan Amount in accordance with
Section 1(b) above.
c. The representations and warranties of Lender shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and Lender shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by Lender
at or prior to the Closing Date.
d. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
6. CONDITIONS TO LENDER'S OBLIGATION TO LEND. The obligation of Lender
hereunder to transfer the Loan Amount at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the following conditions,
provided that these conditions are for Lender's sole benefit and may be waived
by Lender at any time in its sole discretion.
a. WTER shall have executed this Agreement and the other Transaction
Documents and delivered the same to Lender.
b. WTER shall have delivered to Lender the original duly executed
Note and Warrant (in such denominations as Lender shall reasonably request) in
accordance with Section 1(b) above.
c. Pledgor shall have delivered to Lender the duly executed Pledge
Agreement and has delivered the Collateral to Lender in accordance with the
Pledge Agreement.
d. The representations and warranties of WTER and Pledgor shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and WTER shall have performed,
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satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by WTER at or prior to the Closing Date.
e. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
7. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE ENFORCED,
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITH SUCH STATE,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED
IN THE CITY OF NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS
AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.
BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST
CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT ANY
PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. THE PARTIES
AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL
BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH
JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTIES HEREBY WAIVE A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES
HERETO AGAINST THE OTHER IN RESPECT OF ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT.
b. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.
c. HEADINGS. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.
d. SEVERABILITY. In the event that any provision of this Agreement
is invalid or enforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
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e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither WTER nor Lender makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
f. NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:
If to WTER:
0000 Xxxx Xxxx Xxxxxx
Xxxxx 0
Xxxx Xxxx, XX 00000
Attention: President
Facsimile: (000)-000-0000
If to Lender:
Southridge Partners LP
00 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Each party shall provide notice to the other party of any change in
address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
WTER nor Lender shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other. Notwithstanding the
foregoing, subject to Section 2(e), Lender may assign its rights hereunder to
any person that purchases the Note, the Warrant or any Conversion Shares in a
private transaction from Lender or to any of its "affiliates," as that term is
defined under the 1934 Act, without the consent of WTER.
h. THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
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i. FURTHER ASSURANCES. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
j. NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
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IN WITNESS WHEREOF, Lender and WTER have caused this Loan Agreement to
be duly executed as of the date first above written.
WATER CHEF, INC.
Name: /s/ Xxxxx X. Xxxxxx
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Title: President and CEO
SOUTHRIDGE PARTNERS LP
By: /s/ Xxxxxx Xxxxx
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