EX-99.1 2 ex991to8k04993_10172006.htm sec document


                                                                    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.


                                      -1-


         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,


                                      -2-


                     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


                                      -3-


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:


                                      -4-


                  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.


                                      -5-


                  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


                                      -6-


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:

                                            1007 Glen Cove Avenue
                                            Suite 1
                                            Glen Head, NY 11545
                                            Attention: President
                                            Facsimile: (516)-656-9095



                                    If to Lender:

                                            Southridge Partners LP
                                            90 Grove Street, Suite 204
                                            Ridgefield, CT 06877
                                            Facsimile: (203) 431-8301

         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.


                                      -7-


                  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/ David A. Conway
      ------------------------------
Title: President & CEO


SOUTHRIDGE PARTNERS LP

By:  /s/ Steven Hicks
    --------------------------------


                                      -8-