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 $250,000.00
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WATER CHEF, INC.
CONVERTIBLE PROMISSORY NOTE DUE MARCH 16, 2006
THIS Note is a duly authorized issuance of $250,000.00 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 two hundred
fifty thousand and 00/100 Dollars (US $250,000.00), plus accrued interest in the
amount of eight percent (8%) per year for all outstanding principal on March 16,
2006 (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.
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, dated
November 16, 2005 between the Guarantor and the Holder whereby the Guarantor has
guaranteed this Note and has granted to Holder a security interest in
Collateral, as defined therein, 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, for the ten (10)
trading days ending on the trading day immediately before 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 upon conversion will be delivered within five (5) 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
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"Converting Holder") purchases, in an arm's-length open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") 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.
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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 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
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c. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition,
agreement or obligation of any 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
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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
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.
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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.
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: November 16, 2005
WATER CHEF, INC.
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
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(Print Name)
President and CEO
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Title:
ATTESTOR
By: /s/
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