Exhibit 99.3
NEITHER THIS SECURITY NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE OR
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SECURITIES ARE
RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED
EXCEPT AS
PERMITTED
UNDER THE ACT PURSUANT TO
REGISTRATION
OR
EXEMPTION OR SAFE HARBOR THEREFROM.
No.
US $250,000.00
----------------
WATER CHEF, INC.
CONVERTIBLE PROMISSORY NOTE DUE MARCH 16, 2006
THIS Note is a duly
authorized
issuance of $250,000.00 of WATER CHEF,
INC., a
Delaware
corporation and located at 1007 Glen Cove Avenue,
Suite 1, Glen Head,
New York 11545 (the "Company") designated as its Convertible Note
(the "Note").
FOR VALUE RECEIVED,
the Company promises to pay to SOUTHRIDGE PARTNERS LP,
the registered
holder hereof (the
"Holder"),
the principal sum of two hundred
fifty thousand and 00/100 Dollars (US $250,000.00), plus accrued
interest in the
amount of eight percent (8%) per year for all outstanding principal
on March 16,
2006 (the "Maturity Date").
The principal plus accrued interest of this Note is
payable
at the option of the Holder at any time
after the
Maturity
Date,
in
shares of the
Company's
common stock,
par value of $0.001 per share
("Common
Stock") as set forth below,
or in United
States
dollars,
at the address last
appearing on the Note
Register of the Company as
designated
in writing by the
Holder. The Company will pay the outstanding principal amount of
this Note, plus
accrued
interest,
in cash on or before the
Maturity
Date,
less any
amounts
required
by law to be
deducted,
to the
registered
holder of this Note.
The
forwarding of such wire transfer shall constitute a payment
hereunder and shall
satisfy and
discharge the liability for principal on this Note to the extent of
the sum represented by such wire transfer plus any amounts so
deducted.
This Note is subject to the following additional provisions:
1.
The
Note
is
issuable
in
denominations
of
Ten
Thousand
Dollars
(US$10,000) and integral multiples
thereof,
provided that the number of shares
to be issued
upon
conversion
is a minimum of 3,000
(unless if at the time of
election
to
convert
the
number
of
shares of
Common
Stock
issuable
upon
conversion is less than 3,000).
The Note is exchangeable for an equal aggregate
principal amount of Note of different authorized denominations,
as requested by
the
Holder
surrendering
the same.
No
service
charge
will be made for such
registration or transfer or exchange.
1
1.A
The
Company
shall have the right to redeem
this Note at any time by
providing written notice to the Holder by making a cash payment to
the Holder of
the outstanding
principal amount of the Note multiplied by a premium
according
to the following
schedule,
plus all accrued interest:
105% of the outstanding
principal
amount if redeemed
within 120 days after the issuance date;
110% of
the outstanding principal amount if redeemed between 121 days and
180 days after
the issuance date; 112% of the outstanding
principal amount if redeemed between
181 days and 365 days after the issuance date; 115% of the
outstanding principal
amount if redeemed after 365 days after the issuance date. Written
notice to the
Holder
shall
be
received
at
least 5
business
days
prior
to the
date of
redemption payment ("Redemption Date"). If the redemption payment
is not made on
or before the Redemption Date, the redemption
notice shall be rendered null and
void and the Holder
thereafter
shall have the right to convert
any portion of
the outstanding principal of the Note.
1.B
This Note is further
secured
pursuant to a Pledge
Agreement,
dated
November 16, 2005 between the Guarantor and the Holder whereby the
Guarantor has
guaranteed
this
Note
and
has
granted
to
Holder
a
security
interest
in
Collateral,
as
defined
therein,
to secure the
payment
of this
Note.
Such
security
interest
may
be
perfected
by the
filing
of
the
applicable
UCC
statements in the appropriate recording offices.
2.
The Holder of this Note is
entitled
at any time
after the
Maturity
Date, at its option,
subject to the following
provisions,
to convert all or a
portion of the principal
amount of this Note plus accrued
interest into shares
of Common
Stock at a
conversion
price for each share of Common Stock equal to
the
Current
Market
Price
multiplied
by
eighty
five
percent
(85%)
(the
"Conversion
Price").
"Current Market Price" means the average of the three (3)
lowest closing bid prices for the Common Stock as reported by
Bloomberg,
LP or,
if not so reported, as reported on the over-the-counter market, for
the ten (10)
trading
days
ending
on
the
trading
day
immediately
before
the
relevant
Conversion Date (as defined below).
The amount of shares issuable pursuant to a
conversion
shall equal the principal amount (or portion thereof) of the Note
to
be converted, plus accrued interest, divided by the Conversion
Price.
Conversion
shall be effectuated by
surrendering
the Note to the Company,
accompanied
by or preceded by facsimile or other delivery to the Company of the
form of conversion
notice
attached hereto as Exhibit A, executed by the Holder
evidencing such Holder's
intention to convert a specified
portion
hereof.
No
fractional shares of Common Stock or scrip representing fractions
of shares will
be issued on conversion,
but the number of shares
issuable shall be rounded to
the nearest
whole share.
The date on which notice of
conversion is given (the
"Conversion
Date")
shall be deemed to be the date on which the Holder faxes or
otherwise delivers the conversion notice ("Notice of Conversion"),
substantially
in the form
annexed
hereto
as
Exhibit
A,
duly
executed,
to the
Company.
Facsimile
delivery of the Notice of Conversion shall be accepted by the
Company
at facsimile number
516-656-9095
ATTN:
PRESIDENT.
Certificates
representing
Common Stock upon
conversion
will be delivered
within five (5) business
days
from the Conversion Date. ("Delivery Date").
2
The
Company
understands
that a delay in the
issuance
of the
Shares of
Common Stock beyond the Delivery Date (as defined in this Section)
could result
in economic loss to the Holder. As compensation to the Holder for
such loss, the
Company
agrees to pay late
payments to the Holder for late
issuance of Shares
upon Conversion, unless the delay is due to causes beyond the
reasonable control
of the Company or the Transfer Agent, in accordance with the
following
schedule
(where "No.
Business
Days Late" refers to the number of business days which is
beyond three (3) business days after the Delivery Date):(1)
Late Payment For Each $10,000
of Note Principal or Interest
No. Business Days Late
Amount Being Converted
-----------------------------------------------------------
1
$100
2
$200
3
$300
4
$400
5
$500
6
$600
7
$700
8
$800
9
$900
10
$1,000
>10
$1,000 +$200 for each Business Day
Late beyond 10 days
The Company shall pay any payments
incurred
under this Section in
immediately
available funds upon demand as the Holder's remedy for such delay.
Furthermore,
in addition to any other remedies
which may be available to the Holder,
in the
event that the Company fails for any reason to effect delivery of
such shares of
Common Stock by close of business on the Delivery
Date,
unless such failure is
due to causes
beyond the Company's
reasonable
control or that of its Transfer
Agent,
the Holder will be entitled to revoke the relevant
Notice of Conversion
by delivering a notice to such effect to the Company,
whereupon the Company and
the Holder
shall each be restored
to their
respective
positions
immediately
prior to delivery
of such
Notice of
Conversion;
provided,
however,
that an
amount equal to any
payments
contemplated
by this Section
which have accrued
through the date of such
revocation
notice
shall
remain due and owing to the
Converting Holder notwithstanding such revocation.
If, by the relevant
Delivery Date, the Company fails,
unless such failure
is due to causes beyond the Company's reasonable control or that of
its Transfer
Agent,
for any reason to deliver the Shares to be issued upon conversion
of the
Note and after such
Delivery
Date,
the Holder of the Note being
converted (a
3
"Converting
Holder")
purchases,
in an arm's-length open market transaction or
otherwise,
shares of Common
Stock
(the
"Covering
Shares")
in order to make
delivery in satisfaction of a sale of Common Stock by the
Converting Holder (the
"Sold Shares"),
which delivery such Converting Holder anticipated to make using
the Shares to be issued upon such conversion (a "Buy-In"), the
Converting Holder
shall have the right, to require the Company to pay to the
Converting Holder, in
addition to and not in lieu of the amounts due hereunder (but in
addition to all
other amounts
contemplated in other
provisions of the Transaction
Agreements,
and not in lieu of any such other
amounts),
the Buy-In
Adjustment
Amount (as
