Exhibit 99.1
LOAN AGREEMENT
LOAN AGREEMENT (the "AGREEMENT"), dated October 11th, 2006, between
WATER CHEF, INC., a corporation organized under the laws of the State of
Delaware ("WTER"), and SOUTHRIDGE PARTNERS LP, a Delaware limited liability
company ("LENDER").
WHEREAS, Lender and WTER are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 ACT");
WHEREAS, Lender desires to purchase and WTER desires to issue, upon the
terms and conditions set forth in this Agreement, a convertible promissory note
and a stock warrant in consideration for a loan by Lender to WTER in the amount
of $300,000.00 in cash; and
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. ISSUANCE OF CONVERTIBLE PROMISSORY NOTE.
a. PURCHASE OF CONVERTIBLE PROMISSORY NOTE. On the Closing
Date (as defined below), WTER shall issue and deliver to Lender (1) a duly
executed 8% secured convertible promissory note in the principal amount of
$300,000.00 (the "NOTE") and (2) a warrant for 882,352 shares of WTER common
stock (the "WARRANT") in consideration for a loan in the amount of $300,000.00
cash, less transaction fees and costs (the "LOAN AMOUNT") This Agreement, the
Note, the Warrant, and all ancillary documents associated with this Agreement
shall be referred to as the Transaction Documents.
b. CLOSING DATE. Subject to the satisfaction (or waiver) of
the conditions thereto set forth in Section 5 and Section 6 below, the closing
of the loan pursuant to this Agreement (the "CLOSING DATE") shall be 12:00 noon
New York City Time as of October __, 2006 or such other mutually agreed upon
time. The closing of the transactions contemplated by this Agreement (the
"CLOSING") shall occur on the Closing Date at such location as may be agreed to
by the parties.
c. LOAN. On the Closing Date, (i) Lender shall make the loan
in United States dollars by wire transfer of immediately available funds to an
account designated in writing by WTER for such purpose, against delivery of the
Note and the Warrant, and (ii) WTER shall deliver to Lender the Note and Warrant
duly executed on behalf of WTER, against delivery of the loan.
d. PLEDGE. The Note is further secured pursuant to a Pledge
Agreement and a Guarantee, each dated as of October 11, 2006 between the Pledgor
and Lender whereby the Pledgor has pledged certain Collateral and has granted to
Lender a security interest in Collateral, as defined therein, to secure the
payment of the Note. Such security interest may be perfected by the filing of
the applicable UCC statements in the appropriate recording offices.
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2. REPRESENTATIONS AND WARRANTIES OF LENDER. Lender represents and
warrants to WTER that:
a. ACCREDITED INVESTOR; INVESTMENT PURPOSE. Lender represents
that it is an "Accredited Investor" as defined in Regulation D under the 1933
Act. Lender is acquiring the Note for its own account for investment purposes
only and not with a view toward, or for resale in connection with, the public
sale or distribution thereof, except pursuant to sales registered or exempted
under the 1933 Act and applicable state securities laws; PROVIDED, HOWEVER, that
by making the representations herein, Lender does not agree to hold the Note for
any minimum or other specific term and reserves the right to dispose of the Note
at any time in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act and applicable state securities laws.
b. RELIANCE ON EXEMPTIONS. Lender understands that the Note is
being issued to it in reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws and that WTER is
relying upon the truth and accuracy of, and Lender's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
Lender set forth herein in order to determine the availability of such
exemptions and the eligibility of the Lender to acquire the Note.
c. INFORMATION. Lender and its advisors, if any, have been
furnished with materials relating to the business, finances and operations of
WTER and materials relating to the issuance of the Note which have been
requested by Lender or its advisors. Neither such inquiries nor any other due
diligence investigation conducted by Lender or any of its advisors or
representatives shall modify, amend or affect Lender's right to rely on WTER's
representations and warranties contained in Section 3 below. Lender understands
that entering into the loan and acceptance of the Note involves a significant
degree of risk.
d. GOVERNMENTAL REVIEW. Lender understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Note.
e. TRANSFER OR RESALE. Lender understands that (i) the sale or
resale of the Note and the Warrant and any underlying shares of common stock
issued upon the conversion or exercise of such instruments ("Conversion Shares")
has not been and is not being registered under the 1933 Act or any applicable
state securities laws, and the Note, the Warrant and the Conversion Shares may
not be transferred unless they are (a) sold pursuant to an effective
registration statement under the 1933 Act, or (b) sold or transferred pursuant
to an exemption from such registration.
f. LEGENDS. Lender understands that the Note, the Warrant, and
the Conversion Shares shall bear the follow restrictive (or similar) legend in
the following form:
"NEITHER THIS SECURITY NOR THE SECURITIES
ISSUABLE UPON CONVERSION (OR EXERCISE) 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,
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RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION
OR EXEMPTION OR SAFE HARBOR THEREFROM."
g. AUTHORIZATION; ENFORCEMENT. This Agreement has been duly
and validly authorized by Lender. This Agreement has been duly executed and
delivered on behalf of Lender, and this Agreement constitutes a valid and
binding agreement of Lender enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
i. NO BROKERS. Lender has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby.
3. REPRESENTATIONS AND WARRANTIES OF WTER. WTER represents and warrants
to Lender that:
a. AUTHORIZATION; ENFORCEMENT. (i) WTER has all requisite
corporate power and authority to enter into and perform this Agreement and to
consummate the transactions contemplated hereby and issue the Note and the
Warrant, in accordance with the terms hereof, (ii) the execution and delivery of
this Agreement by WTER and the consummation by it of the transactions
contemplated hereby have been duly authorized by WTER and no further consent or
authorization of WTER or its shareholders is required, (iii) this Agreement has
been duly executed and delivered by WTER, and (iv) this Agreement constitutes a
legal, valid and binding obligation of WTER enforceable against WTER in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies or by other equitable principles of general application
b. [LEFT BLANK]
c. NO CONFLICTS. The execution, delivery and performance of
this Agreement by WTER and the consummation by WTER of the transactions
contemplated hereby will not (i) conflict with or result in a violation of any
provision of its certificate of formation or other organizational documents, or
(ii) violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, note, bond, indenture
or other instrument to which WTER is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and regulations of any self-regulatory
organizations to which WTER is subject) applicable to WTER or by which any
property of WTER are bound or affected. Except as specifically contemplated by
this Agreement and as required under the 1933 Act and any applicable federal and
state securities laws, WTER is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court, governmental
agency, regulatory agency, self regulatory organization or stock market or any
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third party in order for it to execute, deliver or perform any of its
obligations under this Agreement in accordance with the terms hereof. Except for
filings that may be required under applicable federal and state securities laws
in connection with the issuance and sale of the Note and the Warrant, all
consents, authorizations, orders, filings and registrations which WTER is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof.
d. NO BROKERS. WTER has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transactions contemplated hereby.
e.
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best efforts to
satisfy timely each of the conditions described in Section 5 and Section 6 of
this Agreement.
b. FINANCIAL REPORTING. WTER shall make and keep public
information available, as those terms are understood and defined in Rule 144 and
shall file with the SEC in a timely manner all reports and other documents
required of WTER under the Securities Exchange Act of 1934 ("1934 Act").
Furthermore, WTER shall have its counsel timely provide a Rule 144 opinion to
Lender with respect to the sale of any common stock issued or transferred to
Lender pursuant to the Transaction Documents.
c. REGISTRATION AND SHARE DELIVERY. WTER shall file a
registration statement to register common shares underlying conversions of the
Note and the exercise of the warrants within thirty (30) days after Closing and
shall use its best efforts to have such registration statement declared
effective within 120 days following the Closing, as further outlined in a
registration rights agreement between the parties, of even date. Upon the
conversion of the Note, in whole or in part, or the exercise of the Warrant, in
whole or in part, WTER shall issue certificates representing the Conversion
Shares and deliver such certificates to Lender or its agent within four (4)
business days from the date of such conversion or such exercise.
d. SALES AND PURCHASES OF WTER COMMON STOCK. Prior to the
Maturity Date of the Note, the Lender, together with any affiliate, shall not
engage in purchases or sales of the common stock of WTER. Notwithstanding the
preceding sentence, prior to the Maturity Date, the Lender, together with any
affiliate, may sell any and all shares of WTER common stock beneficially owned
as of the date of this Agreement, either pursuant to an effective registration
statement or Rule 144.
5. CONDITIONS TO WTER'S OBLIGATION TO ISSUE. The obligation of WTER
hereunder to issue and deliver the Note and the Warrant to Lender at the Closing
is subject to the satisfaction, at or before the Closing Date of each of the
following conditions thereto, provided that these conditions are for WTER's sole
benefit and may be waived by WTER at any time in its sole discretion:
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a. Lender shall have executed this Agreement and delivered the
same to WTER.
b. Lender shall have delivered the Loan Amount in accordance
with Section 1(b) above.
c. The representations and warranties of Lender shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and Lender shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by Lender at or prior to the Closing Date.
d. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
6. CONDITIONS TO LENDER'S OBLIGATION TO LEND. The obligation of Lender
hereunder to transfer the Loan Amount at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the following conditions,
provided that these conditions are for Lender's sole benefit and may be waived
by Lender at any time in its sole discretion.
a. WTER shall have executed this Agreement and the other
Transaction Documents and delivered the same to Lender.
b. WTER shall have delivered to Lender the original duly
executed Note and Warrant (in such denominations as Lender shall reasonably
request) in accordance with Section 1(b) above.
c. Pledgor and Guarantor shall have delivered to Lender the
duly executed Pledge Agreement and the Guarantee, and shall have delivered the
Collateral to Lender in accordance with the Pledge Agreement.
d. The representations and warranties of WTER, Pledgor and
Guarantor shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date) and WTER shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by WTER at or prior to the Closing Date.
e. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
7. GOVERNING LAW; MISCELLANEOUS.
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a. GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE
ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITH SUCH
STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO
HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS
LOCATED IN THE CITY OF NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING
UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.
BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST
CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT ANY
PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. THE PARTIES
AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL
BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH
JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTIES HEREBY WAIVE A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES
HERETO AGAINST THE OTHER IN RESPECT OF ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTION DOCUMENTS.
b. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
c. HEADINGS. The headings of this Agreement are for
convenience of reference only and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. In the event that any provision of this
Agreement is invalid or enforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither WTER nor Lender makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived or amended other than by an
instrument in writing signed by the party to be charged with enforcement.
f. NOTICES. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
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five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to WTER:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile: (▇▇▇)-▇▇▇-▇▇▇▇
If to Lender:
Southridge Partners LP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Each party shall provide notice to the other party of any change in
address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither WTER nor Lender shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other. Notwithstanding the
foregoing, subject to Section 2(e), Lender may assign its rights hereunder to
any person that purchases the Note, the Warrant or any Conversion Shares in a
private transaction from Lender or to any of its "affiliates," as that term is
defined under the 1934 Act, without the consent of WTER.
h. THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
j. NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
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IN WITNESS WHEREOF, Lender and WTER have caused this Loan
Agreement to be duly executed as of the date first above written.
WATER CHEF, INC.
Name: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: President & CEO
SOUTHRIDGE PARTNERS LP
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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