Exhibit 99.3
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL
OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
No. 07-01-A-1 US $200,000.00
--------- -----------
WATER CHEF, INC.
10% CONVERTIBLE PROMISSORY NOTES SERIES 07-01
THIS NOTE is one of a duly authorized issue of up to $400,000 in Notes of
WATER CHEF, INC., a corporation organized and existing under the laws of the
State of Delaware (the "Company") designated as its 10% Convertible Promissory
Notes Series 07-01.
FOR VALUE RECEIVED, the Company promises to pay to SOUTHRIDGE PARTNERS LP,
the registered holder hereof (the "Holder"), the principal sum of Two Hundred
Thousand and 00/100 Dollars (US $200,000.00) on March 5, 2008 (the "Maturity
Date") and to pay interest on the principal sum outstanding from time to time in
arrears at the rate of 10% per annum, accruing from September 7, 2007, the date
of initial issuance of this Note (the "Issue Date"), on the date (each, an
"Interest Payment Date") which is the earliest of (i) the next Conversion Date
(as defined below), or (ii) the Maturity Date, as the case may be. Interest
shall accrue on a daily basis, based on a 365-day year, from the later of the
Issue Date or the previous Interest Payment Date and shall be payable in cash
or, at the Company's option but subject to the other provisions of this Note, in
Common Stock. If not paid in full on an Interest Payment Date, interest shall be
fully cumulative and shall accrue on a daily basis, based on a 365-day year,
monthly or until paid, whichever is earlier. Additional provisions regarding the
payment of interest are provided in Section 4(D) below (in the event of a
conflict between the terms of said Section 4(D) and any other terms of this
Note, the terms of Section 4(D) shall prevail).
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This Note is being issued pursuant to the terms of the Securities Purchase
Agreement, dated as of August 27, 2007 (the "Securities Purchase Agreement"), to
which the Company and the Holder (or the Holder's predecessor in interest) are
parties. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Securities Purchase Agreement.
This Note is subject to the following additional provisions:
1. The Notes will initially be issued in denominations determined by
the Company, but are exchangeable for an equal aggregate principal amount of
Notes of different denominations, as requested by the Holder surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, 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.
3. 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 and the terms of the Securities
Purchase Agreement. 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 that is sufficient to
evidence that such proposed transfer complies with the Act and other applicable
state and foreign securities laws and the terms of the Securities Purchase
Agreement. 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.
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4. A. (i) At any time on or after the Commencement Date (as
defined below) and prior to the time this Note is paid in full in accordance
with its terms (including, without limitation, after the occurrence of an Event
of Default, as defined below, or, if the Note is not fully paid or converted
after the Maturity Date), the Holder of this Note is entitled, at its option,
subject to the following provisions of this Section 4, to convert this Note at
any time into shares of Common Stock, $0.001 par value ("Common Stock"), of the
Company at the Conversion Price (as defined below).
(ii) On the Maturity Date the Company shall pay the principal
and accrued interest (through the actual date of payment) of any portion of this
Note which is then outstanding.
(iii) For purposes of this Note, the following terms shall
have the meanings indicated below:
"Commencement Date" means the Issue Date.
"Conversion Price" means, for the relevant Conversion Date, the lowest of
(x) the Fixed Conversion Price, (y) the Alternative Conversion Price
(which amount is subject to adjustment as provided herein), or (z) the
Lowest New Transaction Price, if any.
"Fixed Conversion Price" means the amount equal to $0.12 (such amount is
subject to adjustment as provided herein).
"Alternative Conversion Price" means the amount equal to (x) eighty-two
and one-half percent (82.5%) of (y) the average the three (3) lowest
Closing Prices for the ten (10) Trading Days ending on the Trading Day
immediately preceding the relevant Conversion Date (which amount is
subject to subsequent adjustment as provided herein).
"Lowest New Transaction Price" means the lowest New Transaction Price from
any New Transaction (which amount is subject to subsequent adjustment as
provided herein).
"Conversion Shares" has the meaning ascribed to in Section 4 hereof.
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B. (i) A conversion shall be effectuated by the Holder by
faxing a notice of conversion ("Notice of Conversion") to the Company as
provided in this paragraph. The Notice of Conversion shall be executed by the
Holder of this Note and shall evidence such Holder's intention to convert this
Note or a specified portion hereof in the form annexed hereto as Exhibit A.
Delivery of the Notice of Conversion shall be accepted by the Company by hand,
mail or courier delivery at the address specified in said Exhibit A or at the
facsimile number specified in said Exhibit A (each of such address or facsimile
number may be changed by notice given to the Holder in the manner provided in
the Securities Purchase Agreement).
(ii) The date on which the Holder faxes or otherwise delivers
a Notice of Conversion to the Company so that it is received by the Company on
or before such specified date shall be a "Conversion Date" for all purposes of
this Note and the other Transaction Agreements.
(iii) 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.
(iv) All shares issuable with respect to a Conversion Date
shall be deemed "Conversion Shares" for all purposes of this Note and the other
Transaction Agreements. Certificates representing the relevant Conversion Shares
("Conversion Certificates") will be delivered to the Holder at the address
specified in the relevant Notice of Conversion (and if none, the Holder's the
Holder's address for notices as contemplated by the Securities Purchase
Agreement, which address the Holder may change from time to time in the manner
provided therein), via express courier, by electronic transfer or otherwise,
within three (3) Trading Days (such third Trading Day, the "Delivery Date")
after the relevant Conversion Date. The Holder shall be deemed to be the holder
of the shares issuable to it in accordance with the relevant provisions of this
Note on the Conversion Date.
C. Notwithstanding any other provision hereof or of any of the
other Transaction Agreements, in no event (except (i) as specifically provided
herein as an exception to this provision, or (ii) while there is outstanding a
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tender offer for any or all of the shares of the Company's Common Stock) shall
the Holder be entitled to convert any portion of this Note, or shall the Company
have the obligation to convert such Note (and the Company shall not have the
right to pay interest hereon in shares of Common Stock) to the extent that,
after such conversion or issuance of stock in payment of interest, the sum of
(1) the number of shares of Common Stock beneficially owned by the Holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the Notes
or other convertible securities or of the unexercised portion of warrants or
other rights to purchase Common Stock), and (2) the number of shares of Common
Stock issuable upon the conversion of the Notes with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock (after taking into account the shares to be issued to the
Holder upon such conversion). For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, except as
otherwise provided in clause (1) of such sentence. Nothing herein shall preclude
the Holder from disposing of a sufficient number of other shares of Common Stock
beneficially owned by the Holder so as to thereafter permit the continued
conversion of this Note.
D. (i) Subject to the terms of Section 4(C) and to the other
terms of this Section 4(D), interest on the principal amount of this Note
converted pursuant to a Notice of Conversion shall be due and payable, at the
option of the Company, in cash or, subject to the conditions of the next
sentence, in shares of Common Stock on the Interest Payment Date. Anything
herein to the contrary notwithstanding, the Company may elect to pay interest in
shares of Common Stock if, but only if, the shares of Common Stock issuable to
the Holder as such payment are covered by an effective Registration Statement.
(ii) If the interest payable in connection with a Notice of
Conversion is to be paid in cash, the Company shall make such payment within
three (3) Trading Days after the Interest Payment Date. If the interest is not
paid by such third Trading Day, the interest must be paid in Common Stock in
accordance with the provisions of this Section 4(D), unless the Holder consents
otherwise in each specific instance.
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(iii) Additional provisions regarding the payment of interest
on the principal amount of this Note are set forth in the following provisions
of this Section 4.
(iv) If interest is to be paid in Common Stock (whether at
the election of the Company or as required hereunder), the number of shares of
Common Stock to be received shall be determined by dividing the dollar amount of
the interest by the Conversion Price in effect on the relevant Interest Payment
Date.
E. Any payments made by the Company to the Holder shall be
applied in the following order of priority: (i) first to amounts (other than
accrued interest and principal hereunder) or to any damages or reimbursements
due from the Company to the Holder under or with respect to any of the
Transaction Agreements, in such order and priority as the Holder may, in the
Holder's sole and absolute discretion, determine, (ii) then, to accrued interest
hereunder, and (iii) then, to principal in the inverse order of maturity.
5. Subject to the terms of the Securities Purchase Agreement, no
provision of this Note shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and interest on,
this Note at the time, place, and rate, and in the coin or currency or where
contemplated herein in shares of its Common Stock, as applicable, as herein
prescribed. This Note and all other Notes now or hereafter issued of similar
terms are direct obligations of the Company.
6. No recourse shall be had for the payment of the principal of, or the
interest on, this Note, or for any claim based hereon, or otherwise in respect
hereof, against any incorporator, shareholder, officer or director, as such,
past, present or future, of the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
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7. All payments contemplated hereby to be made "in cash" shall be made
in immediately available good funds of United States of America currency by wire
transfer to an account designated in writing by the Holder to the Company (which
account may be changed by notice similarly given). All payments of cash and each
delivery of shares of Common Stock issuable to the Holder as contemplated hereby
shall be made to the Holder at the address last appearing on the Note Register
of the Company as designated in writing by the Holder from time to time; except
that the Holder can designate, by notice to the Company, a different delivery
address for any one or more specific payments or deliveries.
8. If, for as long as this Note remains outstanding, the Company enters
into a merger (other than where the Company is the surviving entity) or
consolidation with another corporation or other entity or a sale or transfer of
all or substantially all of the assets of the Company to another person
(collectively, a "Sale"), the Company will require, in the agreements reflecting
such transaction, that the surviving entity expressly assume the obligations of
the Company hereunder. Notwithstanding the foregoing, if the Company enters into
a Sale and the holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for Common Stock, then as a
condition of such Sale, the Company and any such successor, purchaser or
transferee will agree that the Note may thereafter be converted on the terms and
subject to the conditions set forth above into the kind and amount of stock,
securities or property receivable upon such merger, consolidation, sale or
transfer by a holder of the number of shares of Common Stock into which this
Note might have been converted immediately before such merger, consolidation,
sale or transfer, subject to adjustments which shall be as nearly equivalent as
may be practicable. In the event of any such proposed Sale, (i) the Holder
hereof shall have the right to convert by delivering a Notice of Conversion to
the Company within fifteen (15) days of receipt of notice of such Sale from the
Company, except that Section 4(C) shall not apply to such conversion.
9. If, at any time while any portion of this Note remains outstanding,
the Company spins off or otherwise divests itself of a part of its business or
operations or disposes of all or of a part of its assets in a transaction (the
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"Spin Off") in which the Company, in addition to or in lieu of any other
compensation received and retained by the Company for such business, operations
or assets, causes securities of another entity (the "Spin Off Securities") to be
issued to security holders of the Company, the Company shall cause (i) to be
reserved Spin Off Securities equal to the number thereof which would have been
issued to the Holder had all of the Holder's Notes outstanding on the record
date (the "Record Date") for determining the amount and number of Spin Off
Securities to be issued to security holders of the Company (the "Outstanding
Notes") been converted as of the close of business on the Trading Day
immediately before the Record Date (the "Reserved Spin Off Shares"), and (ii) to
be issued to the Holder on the conversion of all or any of the Outstanding
Notes, such amount of the Reserved Spin Off Shares equal to (x) the Reserved
Spin Off Shares multiplied by (y) a fraction, of which (I) the numerator is the
principal amount of the Outstanding Notes then being converted, and (II) the
denominator is the principal amount of the Outstanding Notes.
10. If, at any time while any portion of this Note remains outstanding,
the Company effectuates a stock split or reverse stock split of its Common Stock
or issues a dividend on its Common Stock consisting of shares of Common Stock,
the Fixed Conversion Price, all or, if relevant, any price used in determining
either or both of the Alternative Conversion Price or the Lowest New Transaction
Price which is applicable to a date prior to such split, and any other fixed
amounts calculated as contemplated hereby or by any of the other Transaction
Agreements shall be equitably adjusted to reflect such action. By way of
illustration, and not in limitation, of the foregoing, (i) if the Company
effectuates a 2:1 split of its Common Stock, thereafter, with respect to any
conversion for which the Company issues shares after the record date of such
split, the Fixed Conversion Price, if any, shall be deemed to be one-half of
what it had been immediately prior to such split; (ii) if the Company
effectuates a 1:10 reverse split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues shares after the record date of
such reverse split, the Fixed Conversion Price shall be deemed to be ten times
what it had been calculated to be immediately prior to such split; and (iii) if
the Company declares a stock dividend of one share of Common Stock for every 10
shares outstanding, thereafter, with respect to any conversion for which the
8
Company issues shares after the record date of such dividend, the Conversion
Price shall be deemed to be such amount multiplied by a fraction, of which the
numerator is the number of shares (10 in the example) for which a dividend share
will be issued and the denominator is such number of shares plus the dividend
share(s) issuable or issued thereon (11 in the example).
11. 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.
12. This Note shall be governed by and construed in accordance with the
laws of the State of New York for contracts to be wholly performed in such state
and without giving effect to the principles thereof regarding the conflict of
laws. Each of the parties consents to the exclusive jurisdiction of the federal
courts whose districts encompass any part of the County of New York or the state
courts of the State of New York sitting in the County 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. To
the extent determined by such court, the Company shall reimburse the Holder for
any reasonable legal fees and disbursements incurred by the Holder in
enforcement of or protection of any of its rights under any of this Note.
13. JURY TRIAL WAIVER. The Company and the Holder 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 Note.
14. The following shall constitute an "Event of Default":
9
a. The Company shall default in the payment of principal or
interest on this Note or any other Note in this Series or any
other amount due hereunder or thereunder (including payment of
a Redemption Amount, as defined below), and, (i) with respect
to a payment of interest due in connection with an Interest
Payment Date or, unless the relevant Redemption Notice, as
defined below, provides otherwise, the payment of a Redemption
Amount on a Redemption Due Date, as defined below, such
default shall continue for a period of five (5) Trading Days
after the Holder gives the Company's written notice thereof,
and (ii) in all other instances, such default shall continue
for a period of five (5) Trading Days; or
b. Any of the representations or warranties made by the Company
herein, in the Securities Purchase Agreement or any of the
other Transaction Agreements or 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 or the Securities Purchase Agreement
shall be false or misleading in any material respect at the
time made; or
c. Subject to the terms of the Securities Purchase Agreement, 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 (provided, however, that for purposes of
this provision, such failure to cause the Transfer Agent to
issue such shares shall not be deemed to occur until two (2)
Trading Days after the Delivery Date), 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 or any other
Transaction Agreement, and such transfer is otherwise lawful,
or fails to remove any restrictive legend on any certificate
10
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, or any other Transaction Agreement, and
any such failure shall continue uncured for ten (10) Trading
Days; or
d. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition,
agreement or obligation of any Note in this series and such
failure shall continue uncured for a period of thirty (30)
days after the Company's receipt written notice from the
Holder of such failure; or
e. The Company shall fail to perform or observe, in any material
respect, any covenant, term, provision, condition, agreement
or obligation of the Company under any of the Transaction
Agreements and such failure, if capable of being cured, shall
continue uncured for a period of thirty (30) days after the
Holder gives the Company written notice thereof (but if not
capable of being cured, such thirty day period shall be deemed
expired immediately upon the giving of such notice); or
f. 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
g. 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
11
h. 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
i. Any money judgment, writ or warrant of attachment, or similar
process in excess of Five Hundred Thousand ($500,000) 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
j. 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
k. The Company shall have its Common Stock suspended from trading
on, or delisted from, the Principal Trading Market for in
excess of fifteen (15) Trading Days.
(iii) If an Event of Default shall have occurred and is continuing,
then,
(x) unless and until such Event of Default shall have been cured or 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, but without further notice from the Holder, the
12
unpaid amount of this Note, computed as of such date, will bear interest
at the rate (the "Default Rate") equal to eighteen percent (18%) per annum
or the highest rate allowed by law, whichever is lower, from the date of
the Event of Default to until and including the date actually paid; and
any partial payments shall be applied first to all accrued interest and
then to principal; and
(y) at any time thereafter, and in each and every such case, unless such
Event of Default shall have been cured or 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 elect to redeem all or part of the Unconverted Note (as
defined below) on the terms provided in Section 15 hereof.
15. A. The Company acknowledges that if there is an Event of Default,
the Holder may require the Company to immediately redeem all or any part of the
outstanding portion of this Note for an amount equal to the Redemption Amount
(as defined below). The Redemption Amount shall be paid in cash by the Company
to the Holder.
B. For purposes of this Note, the following terms shall have the
meanings indicated below:
"Unconverted Note" means the principal amount of this Note which has not
been converted as of the relevant date.
"Redemption Payment Date" means the date on which the Company actually
pays the Redemption Amount.
"Redemption Amount" means the amount equal to:
V
----------------- x
M
CP
where:
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"V" means the principal of an Unconverted Note plus any
accrued but unpaid interest thereon;
"CP" means the Conversion Price in effect on the date
(the "Redemption Notice Date") of the Redemption Notice (as
defined below); provided, however, if the Redemption Amount is
not paid in full on or before the Redemption Due Date, "CP"
means the lower of (x) the Conversion Price in effect on the
Redemption Notice Date or (y) the lowest Conversion Price in
effect during the period commencing on the Redemption Due Date
and ending on the Redemption Payment Date; and
"M" means the highest closing price per share of the
Common Stock during the period beginning on the Redemption
Notice Date and ending on the Redemption Payment Date.
C. The Holder of an Unconverted Note may elect to redeem a
portion of such Unconverted Note without electing to redeem the balance of the
Unconverted Note. The Holder's option to redeem all or part of the Unconverted
Note shall be exercised by the Holder giving written notice of the exercise of
this provision by the Holder (a "Redemption Notice") at any time after a
relevant Event of Default has occurred but before such Event of Default is
cured.. The Redemption Notice shall specify (a) the date (the "Redemption Due
Date") on which the Redemption Amount shall be paid, which date shall be at
least five (5) Trading Days after the date (a "Redemption Notice Date") on which
the Holder Redemption Notice is given, and (b) the wire instructions for the
account to which the Redemption Amount is to be paid; provided, however, that
the Company shall have the right to accelerate the date of such payment.
D. If all of the Unconverted Notes are being redeemed pursuant to
this Section 5, then, upon payment in full of the Redemption Amount for all of
the Unconverted Notes in accordance with the provisions of this Section 5, the
Holder shall deliver the Note to the Company marked "paid in full".
E. If the Redemption Amount is not timely paid by the Company,
the Redemption Amount shall accrue interest at the Default Rate and the Holder
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may declare the Redemption Amount, together with such interest, due 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, including, but
not necessarily limited to, the equitable remedy of specific performance and
injunctive relief.
16. 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.
17. Any notice required or permitted hereunder shall be given in manner
provided in the Section headed "NOTICES" in the Securities Purchase Agreement,
the terms of which are incorporated herein by reference.
[Balance of page intentionally left blank]
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18. In the event for any reason, any payment by or act of the Company or
the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Note, then IPSO FACTO the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Note. If any part of such excess remains after the principal has been paid in
full, whether by the provisions of the preceding sentences of this Section or
otherwise, such excess shall be deemed to be an interest-free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section shall control every other provision
of this Note.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: September 7, 2007
WATER CHEF, INC.
By: /s/ Leslie J. Kessler
------------------------------------
Leslie J. Kessler
----------------------------------------
(Print Name)
President and Chief Executive Officer
----------------------------------------
(Title)
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EXHIBIT A
WATER CHEF, INC.
NOTICE OF CONVERSION
OF
10% CONVERTIBLE PROMISSORY NOTE SERIES 07-01
(To be Executed by the Registered Holder in Order to Convert the Note)
TO: WATER CHEF, INC. VIA FAX: (631) 577-7918
68 South Service Road, Suite 100
Melville, NY 11747
Attn: President
FROM:
--------------------------------------------------------------------------
("Holder")
DATE:
--------------------------------------------------------------------------
(the "Conversion Date")
RE: Conversion of $_________________ principal amount (the "Converted Note")
of the 10% Secured Convertible Promissory Note Series 07-01 Due
__________, 2008, No. 07-01-_-_ (the "Note") of WATER CHEF, INC. (the
"Company") into ______________________ shares (the "Conversion Shares") of
Common Stock (defined below)
- --------------------------------------------------------------------------------
CALCULATION OF NOTE BALANCE AFTER GIVING EFFECT TO THIS NOTICE OF CONVERSION
Original Principal of this Note $
---------------
Cumulative Amount of Principal Converted Prior to this $
Notice of Conversion ---------------
Principal Balance Prior to this Notice of Conversion $
---------------
Principal Converted by this Notice of Conversion $
---------------
Adjusted Principal Balance of this Note after $
Giving Effect to this Notice of Conversion ---------------
IF THIS NOTICE OF CONVERSION REPRESENTS THE FULL CONVERSION OF THE OUTSTANDING
BALANCE OF THE CONVERTED NOTE, THE HOLDER EITHER (1) HAS PREVIOUSLY SURRENDERED
THE CONVERTED NOTE TO THE COMPANY OR (2) WILL SURRENDER (OR CAUSE TO BE
SURRENDERED) THE CONVERTED NOTE TO THE COMPANY AT THE ADDRESS INDICATED ABOVE BY
EXPRESS COURIER WITHIN FIVE (5) TRADING DAYS AFTER DELIVERY OR FACSIMILE
TRANSMISSION OF THIS NOTICE OF CONVERSION.
- --------------------------------------------------------------------------------
The captioned Holder hereby gives notice to the Company, pursuant to the
Note of WATER CHEF, INC. that the Holder elects to convert the Converted Note
into fully paid and non-assessable shares of Common Stock, $0.001 par value (the
"Common Stock"), of the Company as of the Conversion Date specified above. Said
conversion shall be based on the following Conversion Price (CHECK AND FILL IN
ONE):
/ / $________________, representing the Fixed Conversion Price (as defined
in the Note)
/ / adjusted in accordance with the provisions of the Note
/ / $________________, representing the Alternative Conversion Price
/ / adjusted in accordance with the provisions of the Note
2
/ / $________________, representing the Lowest New Transaction Price
/ / adjusted in accordance with the provisions of the Note
Based on this Conversion Price, the number of Conversion Shares indicated above
should be issued in the following name(s):
Name and Record Address Conversion Shares
------------------------------- ---------------
------------------------------- ---------------
------------------------------- ---------------
It is the intention of the Holder to comply with the provisions of Section
4(C) of the Note regarding certain limits on the Holder's right to convert
thereunder. The Holder believe this conversion complies with the provisions of
said Section 4(C). Nonetheless, to the extent that, pursuant to the conversion
effected hereby, the Holder would have more shares than permitted under said
Section, this notice should be amended and revised, ab initio, to refer to the
conversion which would result in the issuance of shares consistent with such
provision. Any conversion above such amount is hereby deemed void and revoked.
As contemplated by the Note, this Notice of Conversion is being sent by
facsimile to the telecopier number and officer indicated above.
3
The certificates representing the Conversion Shares should be
transmitted by the Company to the Holder
/ / via express courier, or
/ / by electronic transfer
within the time contemplated by the Note after receipt of this Notice of
Conversion (by facsimile transmission or otherwise) to:
-------------------------------------
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4
As contemplated by the Note, the Company should also pay all accrued but
unpaid interest on the Converted Note to the Holder.
--If the Company elects to pay such interest in Common Stock,
as contemplated by and subject to the provisions of the Note,(1)
such shares should be issued in the name of the Holder and delivered
in the same manner as, and together with, the Conversion Shares.
--If the Company elects or is required to pay the dividends in
cash, such payment should be made by wire transfer as follows:(2)
-----------------------------------
-----------------------------------
-----------------------------------
-------------------------------------
(Print name of Holder)
By:
---------------------------------
(Signature of Authorized Person)
-------------------------------------
(Printed Name and Title)
- ------------
(1) Number of shares based on applicable Payment Conversion Price (as defined
in the Note).
(2) Information should include the following:
All Wires:
(1) Bank Name
(2) Bank Address (including street, city, state)
(3) ABA or Wire Routing No.
(4) Account Name
(5) Account Number
If Wire is going to International (Non-US) Bank, all of the above PLUS:
(6) SWIFT Number
5
