SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant X
Filed by a party other than the Registrant
Check the appropriate box:
X Preliminary proxy statement Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
Definitive proxy statement
Definitive additional materials
Soliciting material under Rule 14a-12
WATER CHEF, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
X No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED [ ], 2003
Water Chef, Inc.
1007 Glen Cove Avenue
Glen Head, NY 11545
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [ , 2003]
Dear Stockholders:
You are cordially invited to attend a special meeting of stockholders
on [ , 2003] at 10:00 a.m. local time at our corporate headquarters, located at
1007 Glen Cove Avenue, Glen Head, NY, 11545.
The purpose of this special meeting is to consider and vote on the
following matters:
1. a proposal to amend our Restated Certificate of Incorporation to
increase the authorized capital stock of Water Chef, Inc. from
100,000,000 shares to 200,000,000 shares, consisting of 190,000,000
shares of common stock and 10,000,000 shares of preferred stock, which
Certificate of Amendment was approved by the Board of Directors on
August 20, 2002; and
2. such other business as may properly come before the special meeting, or
any adjournment thereof.
The board of directors has fixed the close of business on [ , 2003] as
the record time for determining which stockholders are entitled to notice of,
and to vote at, this special meeting, or any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, YOU ARE URGED TO FILL
IN, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT TO US USING THE SELF
ADDRESSED STAMPED ENVELOPE PROVIDED.
By Order of the Board of Directors,
Rudolf W. Schindler
Executive Vice President and Secretary
Glen Head, New York
[ , 2003]
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE MEETING........................................................................1
SECURITY OWNERSHIP.............................................................................................4
PROPOSAL 1: APPROVING THE AMENDMENT TO OUR
RESTATED CERTIFICATE OF INCORPORATION..........................................................................4
Introduction..........................................................................................5
Description of the Common Stock, Warranty and Convertible Securities..................................7
Principal Reasons for Increasing the Number of Authorized Shares of Common Stock .....................8
Vote Required.........................................................................................9
Recommendation of the Board...........................................................................9
OTHER MATTERS..................................................................................................9
ANNUAL AND QUARTERLY REPORT....................................................................................9
EXHIBIT A - Certificate of Amendment to the Water Chef, Inc. Restated
Certificate of Incorporation.
EXHIBIT B - Water Chef, Inc.'s Annual Report on Form 10-KSB for the Fiscal Year
Ended December 31, 2001.
EXHIBIT C - Water Chef, Inc.'s Quarterly Report on Form 10-QSB for the Period
Ended [ ], 2002.
(i)
WATER CHEF, INC.
1007 Glen Cove Avenue
Glen Head, NY 11545
PRELIMINARY PROXY STATEMENT SUBJECT TO COMPLETION
DATED [ ], 2003
This proxy statement is being furnished to you in connection with the
solicitation by the Board of Directors of proxies for use at our special meeting
of stockholders scheduled for [ , 2003] at our corporate headquarters, located
at 1007 Glen Cove Avenue, Glen Head, NY, 11545, at 10:00 a.m. local time, and
any adjournment thereof. This proxy statement, and the accompanying proxy card,
are first being mailed to stockholders on or about [ , 2003.]
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
Q: WHAT IS THE PURPOSE OF THE SPECIAL MEETING?
A: The purpose of the special meeting is to consider and vote upon the
following matters;
o a proposal to amend our Restated Certificate of Incorporation
to increase the authorized capital stock of Water Chef, Inc.
(the "Company") from 100,000,000 shares to 200,000,000 shares,
consisting of 190,000,000 shares of common stock and
10,000,000 shares of preferred stock, which Certificate of
Amendment was approved by the Board of Directors on August 20,
2002 ("Proposal No. 1").
o such other business as may properly come before the special
meeting or any adjournment thereof.
At the special meeting, a representative of Grassi & Co., P.C.
(formerly Feldman, Sherb & Co., P.C.), our independent auditors for
the year ending December 31, 2002, will be available to report on our
current operations and answer stockholder questions.
Q: WHY AM I RECEIVING THIS PROXY STATEMENT AND PROXY CARD?
A: You are receiving this proxy statement and the enclosed proxy card
because the Board of Directors is soliciting your proxy to vote your
shares of common stock or preferred stock, as the case may be, at the
special meeting. To assist you in your decision-making process, this
proxy statement contains pertinent information about us, the special
meeting and the proposal to be considered.
Q: WHEN AND WHERE WILL THE MEETING BE HELD?
A: The special meeting of stockholders will be held at our corporate
headquarters, located at 1007 Glen Cove Avenue, Glen Head, NY 11545
on [ , 2003] at 10:00 a.m. local time.
Q: WHO IS ENTITLED TO NOTICE OF AND TO VOTE AT THE SPECIAL MEETING?
A: All stockholders of record at the close of business on [ , 2003] are
entitled to notice of, and to vote at, the special meeting. Each share
of our common stock and each share of each class of our preferred stock
entitles its holder to one vote on each matter properly submitted to
stockholders. On the record date, there were (i) 89,921,416 outstanding
shares of our common stock, held by a total of [885 stockholders], (ii)
52,500 outstanding shares of our Series A Preferred Stock, held by a
total of 11 stockholders, and (iii) 93,000 outstanding shares of our
Series D Preferred Stock, held by a total of 23 stockholders.
1
Q: HOW DO I VOTE?
A: By properly completing, signing and returning the enclosed
proxy card, your shares will be voted as directed. If no directions
are specified on your properly signed and returned proxy card, your
shares will be voted for the proposals set forth below, and with
regard to any additional matters that come before the special
meeting, in the discretion of the persons named as proxies. If you
are a registered stockholder; that is, if you hold your shares of
stock in certificate form, and you attend the meeting, you may
either mail in your completed proxy card or deliver it to us in
person. If you hold your shares of stock in "street name;" that is,
if you hold your shares of stock through a broker or other nominee,
and you wish to vote in person at the special meeting, you will need
to obtain a proxy card from the institution holding your stock.
Q: CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?
A: No. At the present time we have not established procedures for
telephonic or electronic voting. We may establish such procedures
in the future, should we determine that their added convenience
justifies their additional cost. At this time, you may only vote by
returning a properly executed proxy card, or voting in person at the
special meeting.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
A: It means that you have multiple accounts at the transfer agent and/or
with stockbrokers. Please sign and return all proxy cards to ensure
that all of your shares are voted.
Q: CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
A: Yes. Even after submitting your proxy card, you can revoke it and/or
change your vote prior to the special meeting. To revoke or change your
vote prior to the special meeting, simply (i) file a written notice of
revocation with our secretary, (ii) send us a duly executed proxy card
bearing a later date than the prior one submitted or (iii) attend the
special meeting and vote in person. Please note, however, that while
the giving of a proxy does not affect your right to vote in person at
the special meeting, attendance alone will not revoke a previously
granted proxy.
Q: WHAT IS A "QUORUM"?
A: A quorum is the number of people required to be present before a
meeting can conduct business. Pursuant to our Bylaws, the presence at
the special meeting of at least a majority of the outstanding shares of
our capital stock (45,033,485 shares) as of the record date, whether in
person or by proxy, is necessary for there to be a "quorum." If you
submit a properly executed proxy card, even if you abstain from voting,
you will be considered part of the quorum. Shares represented by
"broker non-votes" will also be considered part of the quorum.
Q: WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
A: Approval of the proposal to amend our Restated Certificate of
Incorporation to increase the authorized capital stock of the Company
from 100,000,000 to 200,000,000, consisting of 190,000,000 shares of
common stock and 10,000,000 shares of preferred stock, as approved by
the Board of Directors on August 20, 2002, requires the affirmative
vote of a majority of the issued and outstanding shares of our common
stock and preferred stock voting together as one class of capital
stock.
Properly executed proxy cards marked "ABSTAIN" and broker "non-votes"
will not be voted. Accordingly, abstentions and broker "non-votes" are
tantamount to negative votes.
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Q: WHAT IS THE BOARD OF DIRECTORS' RECOMMENDATION?
A: The Board of Directors recommends that you vote:
o for the amendment to the Certificate of Amendment to the
Restated Certificate of Incorporation increasing the
authorized capital stock from 100,000,000 shares to
200,000,000 shares, consisting of 190,000,000 shares of common
stock and 10,000,000 shares of preferred stock, which
Certificate of Amendment was approved by the Board of
Directors on August 20, 2002.
If Proposal No. 1 is approved by the stockholders, David A. Conway, the
President and Chief Executive Officer of the Company, will be issued
10,0954,186 of the 24,003,149 shares that are to be reissued (as more
fully discussed below). Because of this potential conflict of interest,
he did not participate in the vote of the Board of Directors to approve
the increase of the authorized capital of the Company, or provide his
opinion to the Board as to whether the Board should recommend Proposal
No. 1 to the stockholders.
Unless otherwise instructed, the shares of stock represented by your
signed and returned proxy card will be voted in accordance with the
recommendations of the Board of Directors. With respect to other
matters that may properly come before the special meeting, the proxy
holder(s) will vote in accordance with the Board of Directors'
recommendations or, if no recommendation is given, at their discretion.
Q: WHO IS PAYING THE COST FOR THIS PROXY SOLICITATION AND HOW IS THE
SOLICITATION PROCESS BEING CONDUCTED?
A: We will pay the costs associated with this proxy solicitation. We do
not anticipate that such costs will exceed those normally associated
with similar proxy solicitations. We will also, upon request, reimburse
brokers, banks and similar organizations for reasonable out-of-pocket
expenses incurred in forwarding these proxy materials to clients.
In addition to soliciting of proxies through the mail, our directors
and employees may solicit proxies in person, by telephone or other
electronic means. None of our directors or employees will receive
additional compensation for any such efforts.
Q: DO I HAVE DISSENTER'S RIGHTS?
A: No. The action proposed to be taken at the special meeting does not
entitle dissenting stockholders to any appraisal rights under the
Delaware General Corporation Law.
Q: WHEN ARE STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING OF
STOCKHOLDERS DUE?
A: For stockholder proposals to be considered for inclusion in the proxy
statement for our next annual meeting, they must be submitted to us in
writing, within a reasonable time before we begin printing and mailing
our annual meeting proxy materials. We have not yet set the date for
our next annual meeting. Please note, however, that all proposals
submitted must comply with applicable laws and regulations and follow
the procedures set forth in Rule 14a-8 of the Securities Exchange Act
of 1934, as amended, to be considered for inclusion in our proxy
materials.
Q: HOW DO I OBTAIN MORE INFORMATION ABOUT US?
A: We file annual, quarterly and special reports and other information
with the Securities and Exchange Commission (the "SEC"). You may read
and copy any of these documents at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
(800)-SEC-0330 for further information. Copies of this material may
also be obtained from the SEC's web site at http://www.sec.gov, by
contacting our chief financial officer at (516) 656-0059 or by writing
to us at 1007 Glen Cove Avenue, Glen Head, NY 11545.
3
SECURITY OWNERSHIP
The following table sets forth information concerning ownership of our
common stock and preferred stock, as of the record date, by (i) each person
known to be the beneficial owner of more than five percent of our outstanding
common stock and preferred stock, (ii) each director and executive officer
required to be named hereunder and (iii) all of our directors and executive
officers as a group. Unless otherwise indicated, we believe that each
stockholder has sole voting power and dispositive power with respect to the
shares of capital stock beneficially owned by him.
Common Stock Beneficially Preferred Stock Beneficially
Owned(1) Owned(1)
David A. Conway (2)(3)
Water Chef, Inc. 14,156,596 15.7% 0 *
1007 Glen Cove Ave.
Glen Head, NY 11545
Martin Clare 499,999 * 0 *
Civilization Communications Inc.
W. Hawthorne
Valley Stream, NY
Rudolf W. Schindler 2,300,000 2.6% 0 *
Water Chef, Inc.
1007 Glen Cove Ave.
Glen Head, NY 11545
Marshall S. Sterman 500,000 * 0 *
The Mayflower Group
68 Phillips Beach Road
Swampscott, MA 1907
All executive officers and 22,501,289 25.6% 0 *
Directors as a Group
* less than 1%
(1) A person is deemed to be the beneficial owner of voting securities that
can be acquired by such person within 60 days after the record date
upon the exercise of options and warrants and the conversion of
convertible securities. Each beneficial owner's percentage ownership is
calculated under the assumption that all options, warrants or
convertible securities held by such person (but not those held by any
other person) that are currently exercisable or convertible (i.e., that
are exercisable or convertible within 60 days after the record date)
have been exercised or converted.
(2) Includes 6,310,464 shares held in an IRA trust.
(3) Does not include 10,954,186 shares to be re-issued to Mr. Conway
and his affiliates if Proposal No. 1 is approved by the stockholders.
PROPOSAL NO. 1 -APPROVING THE AMENDMENT TO OUR RESTATED CERTIFICATE OF
INCORPORATION
Introduction
On February 22, 2002, Board of Directors of the Company approved a
Certificate of Amendment to our Restated Certificate of Incorporation increasing
the authorized capital stock of the Company to 200,000,000, which was filed with
the Secretary of State of the State of Delaware on March 22, 2002. After filing
such Certificate of Amendment, the Company issued 24,003,149 shares of our
common stock in the following transactions:
4
Name Number of Shares Consideration
of Common Stock
D.A. Comway 6,769,583(1) -
D.A. Conway IRA Tr. 4,184,603(2) -
J.S. Conway 1,984,886(2) -
C.S. Conway 1,984,886(2) -
M.S. Sterman 800,000(3) 64,000
R. Hart 225,000(4) 18,000
J.J. Clark 100,000(5) 5,000
R. Breeding 125,000(6) 12,500
E. Roberts 50,000(7) 2,500
R. Monette 29,191(8) 2,043
D.M. Strazzula 500,000(9) -
F.A. Hertzka Trust 250,000(9) -
M.P. Claudette 250,000(9) -
C.L. Gelfand 250,000(9) -
C.C. Griffin 250,000(9) -
J.R. Fichtl 500,000(9) -
K.T. Decoster 300,000(9) -
H.O. Harris 100,000(9) -
A. Harris 100,000(9) -
M.B. Hayden 250,000(9) -
K.T. Decoster 250,000(9) -
J.J. Clark 500,000(10) -
E. Brown 250,000(10) -
G.F. Frank 1,000,000(11) 50,000
P. Brady 500,000(11) 25,000
P.G. Hall 500,000(11) 25,000
E.E. Ellis 2,000,000(11) 100,000
5
(1) Issued pursuant to anti-dilution rights granted to David Conway in
consideration of his $1,500,000 equity investment in the Company made
in June 1997.
(2) Issued pursuant to anti-dilution rights granted to David Conway, an
affiliate and transferor of shares to the holder.
(3) Issued in connection with fund raising services and financial advisory
services rendered to the Company valued at $64,000.
(4) Issued in connection with Scientific Advisory Board services rendered
to the Company valued at $18,000.
(5) Issued in connection with fund raising services rendered to the Company
valued at $3,000.
(6) Issued in connection with marketing services rendered to the Company
valued at $12,500.
(7) Issued in connection with web site design services rendered to the
Company valued at $2,500.
(8) Issued in connection with printing services rendered to the Company
valued at $2,043.
(9) Pursuant to a settlement agreement discussed below with certain
debenture holders who brought an action against the Company, the
Company issued an aggregate of 3,000,000 shares of common stock to such
debenture holders valued at $497,500.
(10) The Company issued an aggregate of 750,000 shares of common stock
valued at [$45,226] to certain debenture holders who were not party
to the litigation settlement agreement discussed below.
(11) Issued in connection with a private placement of common stock at a
price per share equal to $0.05.
Under Delaware General Corporation Law, the March 22, 2002 filing of
the Certificate of Amendment and the issuance of the 24,003,149 shares of common
stock were void acts of the Company since the requisite stockholder approval was
neither solicited nor received. Even though stock certificates representing the
24,003,149 shares have been issued by the Company, the shares represented
thereby are not validly issued and outstanding shares of the Company, and such
certificates will be cancelled.
Since the issuance of the 24,003,149 shares of common stock was void,
the Company breached its settlement agreement with the debenture holders, and
its agreements with the purchasers of 4,000,000 shares of common stock in the
private sale discussed above. However, the Company believes that as long as such
shares are validly issued to such parties, the Company will be in compliance
with those agreements, with respect to such issuances, and the Company and its
stockholders will not be materially adversely impacted by such breaches.
However, if Proposal No.1 is not approved by the stockholders, the Company will
be in material breach of the settlement agreement, the private placement
purchase agreements, as well as the agreements pursuant to which the Company is
required to issue 1,500,000 shares of common stock upon the exercise of
outstanding warrants and 6,000,000 shares of common stock upon the conversion of
outstanding convertible securities of the Company, in which case the Company
will attempt to negotiate settlements with the parties to those agreements. If
the Company is not able to complete such settlements, its financial condition
and operations will be materially adversely effected.
6
In an effort to comply with Delaware General Corporation Law, on August
20, 2002, the Board of Directors approved: (i) a Certificate of Amendment to the
Restated Certificate of Incorporation, a form of which is attached hereto as
Exhibit A, that would increase the number of shares of our capital stock
authorized for issuance from 100,000,000 to 200,000,000; and (ii) the
re-issuance of the 24,003,149 shares of our common stock which were not validly
issued, and which the Company intends to re-issue if Proposal No. 1 is approved.
In connection with the re-issuance of the 24,003,149 shares of our common stock,
the Company accrued a liability of $500,000. This is not an additional
liability. Rather, it reflects the Company's obligation to validly issue common
stock in connection with the settlement agreement between the Company and former
debenture holders. In addition, those shares of common stock which were not
validly issued will not be entitled to vote on this proposal.
The stockholders are being asked to approve this proposed amendment.
The shares of the Company's common stock, including the additional shares
proposed for authorization, do not have preemptive or similar rights. If
approved by the stockholders, Article 4 of the Company's Restated Certificate of
Incorporation would be amended to provide as follows:
4: The total authorized capital stock of the Corporation shall be
two hundred million (200,000,000) shares, each with a par
value of $0.001 per share, as follows:
1. Common Stock: The corporation is authorized to
issue up to one hundred and ninety million
(190,000,000) shares of Common Stock.
2. Preferred Stock: The corporation is further
authorized to issue up to ten million (10,000,000)
shares of preference stock to be known as "Preferred
Stock". Authority is hereby expressly vested in the
Board of Directors of the Corporation to divide said
Preferred Stock into series and fix and determine the
voting powers, designations, preferences and relative
participating, optional or special rights and
qualifications, limitations or restrictions of the
shares of each series so established, as provided by
Section 151 of the Delaware General Corporation Law.
Description of the Common Stock, Warrants and Convertible Debentures
Except as to certain matters discussed below or as proscribed by
applicable law, the holders of shares of the capital stock of the Company vote
together as a single class. The holders of our capital stock do not have
cumulative voting rights, which means that the holders of more than 50% of the
outstanding shares, voting for the election of directors, can elect all of the
directors to be elected, if they so choose, and, in that event, the holders of
the remaining shares will not be able to elect any of our directors.
Description of the Common Stock
Prior to filing the Certificate of Amendment on March 22, 2002
increasing our authorized capital stock to 200,000,000, we were authorized to
issue up to 100,000,000 shares of capital stock, consisting of up to 90,000,000
shares of common stock and up to 10,000,000 shares of preferred stock. Not
including the 24,003,149 shares of common stock which were not validly issued,
there are presently 89,921,416 shares of common stock outstanding, warrants to
purchase 1,500,000 shares of common stock and other securities outstanding, that
are convertible into 4,000,000 shares common stock. The holders of common stock:
(i) have equal ratable rights to dividends from funds legally available if and
when declared by our Board of Directors after all accrued but unpaid dividends
have been paid to the holders of the outstanding capital stock ranking senior to
the common stock as to dividends; (ii) are entitled to share ratably in all of
our assets available for distribution to the holders of common stock upon
liquidation, dissolution or winding up of our affairs; and (iii) do not have
preemptive, subscription or conversion rights, and there are no redemption or
sinking fund provisions or rights.
7
Description of Warrants
There are 1,500,000 Series D Warrants to purchase common stock
outstanding that are exercisable at $0.15 per share at anytime prior to March
27, 2002, which were extended to March 27, 2004 pursuant to the court actions
brought by certain 12% subordinated debenture holders, discussed below. The
holders of the warrants shall have the right, subject to certain limitation, to
have the shares of common stock issuable upon the exercise of such warrants
included in any registration statement requesting the public sale of common
stock of the Company which is to be filed with the SEC prior to May 4, 2004. The
warrants are subject to adjustment in certain circumstances, including stock
splits, dividends, recapitalizations and issuances of common stock or securities
convertible into common stock, for no consideration. The warrants do not confer
upon the holder any voting or other rights of a stockholder.
Description of Subordinated Debentures
There is an aggregate of $350,000 of 12% subordinated debentures
outstanding, which convert into 2,333,334 shares of common stock, and were due
on October 1, 1997. These debentures are presently in default. As more fully
discussed below, the Company has entered into settlement agreements, settling
certain claims of all of the holders of these subordinated debentures. All but
two debenture holders were party to a legal proceeding in connection with these
debentures. However, all holders, including the two holders not party to that
action have agreed to settle their claims and potential claims against the
Company. Pursuant to those settlement agreements, in exchange for 17,787,671
shares of common stock, the holders of the subordinated debentures will tender
the subordinated debentures to the Company. The subordinated debentures do not
confer upon the holders any voting or other rights of a stockholder.
Description of Convertible Notes
There is a 10% convertible note outstanding, the principal amount of
which is $300,000. The note also requires the lender pay up to $100,000 for
certain marketing and legal expenses. The principal plus interest was due on
January 15, 2002. The Company has not re-paid this note.
Principal Reasons for Increasing the Number of Authorized Shares of Common Stock
The Company does not have sufficient liquidity to finance its
operations and has used its common stock to pay for goods, services and to repay
past debts. As a condition to a settlement agreement, dated as of June 20, 2002,
settling certain claims and counterclaims between the Company and certain of its
investors who acquired subordinated debentures (the aggregate principal amount
of which is $300,000) and warrants to purchase an aggregate of 1,500,000 shares
of common stock of the Company which were exercisable at $0.15 per share until
March 27, 2002, (i) the Company is required to (a) issue to such investors a
total of 17,037,671 shares of common stock, and (b) extend the exercise term of
the warrants to purchase common stock for an additional twenty-four (24) months,
until March 27, 2004; and (ii) the investors shall surrender their subordinated
debentures to the Company. The Company has also agreed to apply for listing, and
register the resale of such shares. The Company also issued 750,000 shares to
two debenture holder's principal amount of $50,000 who were not party to the
settlement agreement to settle any potential claims they may have.
The Company is also seeking approval of Proposal No. 1 because as
previously discussed, the Company did not validly issue a total of 24,003,149
shares of common stock as required. Therefore, if Proposal No. 1 is approved,
the Company intends to re-issue those shares of common stock.
The Board of Directors of the Company believes that it is advisable and
in the best interests of the Company to have additional authorized but unissued
shares of common stock available in an amount adequate to provide for the future
needs of the Company. The increase in authorized common stock will not have any
immediate effect on the rights of existing stockholders. However, the additional
shares will be available for issuance from time to time for a stock split or
dividend, raising capital through the sale of common stock and attracting and
retaining valuable employees by issuing additional stock options.
8
Other than the 24,003,149 shares of common stock the Company intends to
re-issue or common stock the Company is required to issue in connection with the
exchange, conversion or exercise of the Company's outstanding options, warrants
and other convertible securities as described above, the Company has no
commitments, undertakings or agreements for the issuance or use of the proposed
additional shares of capital stock. However, to the extent possible, the Company
intends to issue its common stock to fund its operations and continue as a going
concern. The Board of Directors believes that if an increase in the authorized
number of shares of capital stock were to be postponed until specific needs for
such shares arose, the delay and expense incident to obtaining the approval of
the Company's stockholders at that time could significantly impair the Company's
ability to meet financing requirements or other objectives.
The issuance of the additional shares of capital stock could have the
effect of diluting earnings per share and book value per share, which could
adversely affect the Company's existing stockholders. Issuing additional shares
of capital stock may also have the effect of delaying or preventing a change of
control of the Company. The Company's authorized but unissued capital stock
could be issued in one or more transactions that would make more difficult or
costly, and less likely, a takeover of the Company. The ratification of the
Certificate of Amendment to the Company's Restated Certificate of Incorporation
is not being recommended in response to any specific effort of which the Company
is aware to obtain control of the Company, and the Board of Directors has no
current intention to use the additional shares of capital stock in order to
impede a takeover attempt.
Vote Required
The affirmative vote of the holders of a majority of our outstanding
capital stock is required to amend our Restated Certificate of Incorporation.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT.
If Proposal No. 1 is approved by the stockholders, David A. Conway, the
President and Chief Executive Officer of the Company, and his affiliates will be
issued 10,954,186 of the 24,003,149 shares that are to be reissued. Because of
this potential conflict of interest, he did not participate in the vote of the
Board of Directors to approve the increase of the authorized capital of the
Company or provide his opinion as to whether the Board should recommend Proposal
No. 1 to the stockholders.
OTHER MATTERS
The Board of Directors does not know of any matter, other than Proposal
No. 1 described above that may be presented for action at the special meeting.
If any other matter or proposal should be presented and should properly come
before the meeting for action, the persons named in the accompanying proxy will
vote upon such matter or proposal in accordance with their best judgment.
ANNUAL AND QUARTERLY REPORT
All stockholders of record as of the record date, are being sent
herewith a copy of the Company's [(i) Annual Report on Form 10-KSB for the year
ended December 31, 2001, which contains certified financial statements of the
Company for the year then ended and (ii) Quarterly Report on Form 10-QSB for the
quarter ended [ ], 2002]. This Proxy incorporates by reference the Financial
Statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in such reports.
9
APPENDIX 1
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED [ ], 2003
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS OF
WATER CHEF, INC.
Proxy - Special Meeting of Stockholders
[ ] __, 2003
The undersigned, a holder of common stock or preferred stock of Water
Chef, Inc., a Delaware corporation (the "Company"), does hereby appoint [ ] and
[ ], and each of them, the true and lawful attorneys and proxies with full power
of substitution, for and in the name, place and stead of the undersigned, to
vote all of the shares of common stock or preferred stock of the Company that
the undersigned would be entitled to vote if personally present at the Special
Meeting of Stockholders of the Company to be held at 10:00 a.m., local time, [
__, 2003] at the corporate headquarters of the Company, located at 1007 Glen
Cove Avenue, Glen Head, NY, 11545, or at any adjournment or adjournments
thereof.
This proxy will be voted in accordance with any directions given herein. Unless
otherwise specified, this proxy when executed and returned to the Company will
be voted to approve the proposed amendment to the restated certificate of
incorporation.
1. To approve the proposed amendment to the Restated Certificate of
Incorporation.
FOR [___] AGAINST[___] ABSTAIN[___]
NOTE: Your signature should appear the same as your name appears hereon. If
signing as attorney, executor, administrator, trustee or guardian, please
indicate the capacity in which you are signing. When signing as joint tenants,
all parties in the joint tenancy must sign. When a proxy is given by a
corporation, it should be signed by an authorized officer.
Signature:_______________________ Date: __________________, 2003
Signature:_______________________ Date: __________________, 2003