EXHIBIT 10.10.BQ


 


DEBT CONVERSION AGREEMENT


 


THIS DEBT CONVERSION AGREEMENT (the “Agreement”) is made and entered
into effective as of the 30th day of September, 2004, by and between ANTHONY M.
FRANK KEOGH PLAN UTA CHARLES SCHWAB & CO., INC. (hereinafter referred to as
“Buyer”) and ELECTROPURE, INC., a California corporation (hereinafter referred
to as “Electropure” or the “Company”).


 


R E C I T A L S


 


WHEREAS, Buyer loaned the Company One Million
Dollars ($1,000,000) under the terms of that certain 8% Three-Year Convertible
Term Note dated January 17, 2001 (the “Term Note”).


 


WHEREAS, on or about September 16, 2002, the
Company repaid Four Hundred Thousand Dollars ($400,000) of the principal
balance due on said Term Note to Buyer and issued an 8% Convertible Term Note
to Buyer for the remaining principal sum of Six Hundred Thousand Dollars
($600,000).


 


WHEREAS, as of September 30, 2004, a total of
$24,000.00 in interest accrued on the above loan is due and payable to Buyer by
the Company.


 


WHEREAS, Buyer wishes to convert all of the
interest accrued on the Term Note through Septembe4 30, 2004 into shares of
Electropure, Inc. Common Stock and the Company wishes to issue such shares to
extinguish the debt owed Buyer.


 


NOW, THEREFORE, in consideration of the foregoing and of the mutual
obligations herein contained, it is agreed as follows:


 


1.             CONVERSION


 


(a)           On the effective date
set forth above, Buyer hereby converts all of the $24,000.00 in interest
accrued on the Term Note into Shares of Electropure, Inc. Common Stock, $0.01
par value, at an effective conversion rate of $0.17 per share, for a total of
141,176 Shares (the “Shares”).


 


(b)           The Shares shall have
the rights, preferences, privileges, restrictions and other terms set forth in
the By-laws of the Company.


 


(c)           Upon conversion hereby
and pursuant to the Debt Conversion Agreements previously entered into between
the parties, Buyer acknowledges that all interest accrued and due through
September 30, 2004 pursuant to the terms of the 8% Three-Year Convertible Term
Note and the 8% Convertible Term Note entered into between the parties on
January 17, 2001 and September 16, 2002, as amended on May 20, 2004,
respectively, (the “Notes”) has been satisfied in full by the Company.  Buyer also acknowledges that pursuant to
these Debt Conversion Agreements any default by Electropure for failure to pay
interest due on the Notes through September 30, 2004 has been cured.


 





















 


2.             REPRESENTATIONS
AND WARRANTIES OF BUYER       Buyer
represents and warrants to the Company:


 


(a)           The Shares are being
acquired by Buyer for investment for an indefinite period, for Buyer’s own
account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof, and the Buyer has no present intention of
selling, granting participations in, or otherwise distributing the same except
as may be permitted by the Securities Act of 1933, as amended (the “Act”).


 


(b)           Buyer does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person, with
respect to the Shares.


 


(c)           That Buyer understands
that the Shares have not been registered under the Securities Act of 1933, as
amended (the “Act”), in reliance upon the exemptions from the registration
provisions of the Act contained in Section 4 (2) thereof, and any continued
reliance on such exemption is predicated on the representations of the Buyer
set forth herein.


 


(d)           Buyer understands that
the Shares must be held indefinitely unless the sale or other transfer thereof
is subsequently registered under the Act, as amended, or an exemption from such
registration is available.  Buyer further
understands that the Company is under no obligation to register the Securities
on its behalf or to assist him in complying with any exemption from
registration except as otherwise provided herein.


 


(e)           Buyer (i) has adequate
means of providing for his current needs and possible contingencies, (ii) has
no need for liquidity in this investment, (iii) is able to bear the substantial
economic risks of an investment in the Shares for an indefinite period, (iv) at
the present time, can afford a complete loss of such investment, and (v) does
not have an overall commitment to investments which are not readily marketable
that is disproportionate to Buyer’s net worth, and Buyer’s investment in the
Shares will not cause such overall commitment to become excessive.


 


(f)            Buyer is an “accredited
investor” (as defined in Regulation D promulgated under the Act) and the
undersigned’s total investment in the Shares does not exceed 10% of the Buyer’s
net worth.


 


(g)           Buyer recognizes that
the Company has had only limited revenues to date and that the Shares as an
investment involve significant risks.


 


(h)           Buyer will not transfer
the Shares without registering them under applicable federal and state
securities laws unless the transfer is exempt from registration.  Buyer realizes that the Company may not allow
a transfer of Shares unless the transferee is also an “accredited investor”.  Buyer understands that legends will be placed
on certificates representing the Shares, with respect to the above restrictions
on resale or other disposition of the Shares and that stop transfer
instructions have or will be placed with respect to the Shares so as to
restrict the assignment, resale or other disposition thereof.


 


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(i)            The Company will
direct its transfer agent to, or will itself, place such a stop transfer order
in its books respecting transfer of the Shares, and the certificate or
certificates representing the Shares will bear the following legend or a legend
substantially similar thereto:


 


“THESE SHARES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933.  THEY MAY NOT
BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF: 
(1) AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
ACT, OR (2) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.”


 


(j)            That Buyer understands
that Rule 144, promulgated by the Securities and Exchange Commission under the
Act, may not be currently available for sale of the Shares, and there is no
assurance that it will be available at any particular time in the future.  If and when Rule 144 is available for sale of
the Common Stock underlying the Shares, such sales in reliance upon Rule 144
may only be (i) in limited quantities after the Shares have been held for one
(1) year after being sold by the Company, or (ii) in unlimited quantities by
non-affiliates after the Shares have been held for two (2) years after being
sold by the Company, in each case in accordance with the conditions of the
Rule, all of which must be met (including the requirement, if applicable, that
adequate information concerning the Company is then available to the
public).  The Company and Buyer
acknowledges that the Company has no obligation to supply the
information required for sales under Rule 144.


 


(k)           The Purchase Price to
be paid by Buyer to Company for the Shares has been determined by Buyer as fair
and appropriate based solely upon Buyer’s independent investigation and due
diligence of the Company, and neither Buyer nor the Company nor any of their
agents, including, without limitation, any of their officers, directors,
employees, accountants and attorneys, has made any representations or
warranties whatsoever in connection with the sale of the Shares by the Company
to Buyer.  Buyer has had sufficient
opportunity in connection with the sale of the Shares to review the Company’s business
and affairs (including, without limitation, the Company’s financial statements
and other information).  The Buyer has
had answered to his satisfaction any questions with respect to the Company’s
business and affairs.  Buyer further has
had the opportunity to obtain independent financial, legal, accounting,
business, tax and other appropriate advice with respect to the transactions
contemplated by this Agreement, and is not relying upon the Company or any of
its agents in any manner in connection with same.


 


3.             REGISTRATION
RIGHTS       The
Company agrees to include for registration under the Act all of the Shares
issued hereby in the next Registration Statement filed by the Company with the
Securities and Exchange Commission.


 


4.             REPRESENTATIONS
AND WARRANTIES OF ELECTROPURE


 


(a)           Electropure is a
corporation duly organized and validly existing under the laws of the State of
California without limit as to duration of its existence, and is authorized and
in good standing to do business in no other state; Electropure has the
corporate power and adequate authority, rights and franchise to own its
property and to carry on its business as now conducted; and, subject to
ratification by its Board of Directors, Electropure has the corporate power and
adequate authority to enter into this Agreement.


 


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(b)           The execution and
delivery of this Agreement and subject to (1) ratification by the Board of
Directors of the Company and (2) filing the Certificate with the California
Secretary of State, the performance of the provisions of this Agreement are not
in contravention of or in conflict with any law or regulation or any term or
provision of Electropure’s Articles of Incorporation or By-Laws and are duly
authorized and do not require the consent or approval of any governmental body
or other regulatory authority; and this Agreement is a valid, binding and legal
obligation of Electropure, enforceable in accordance with the terms herein.


 


5.             ENTIRE AGREEMENT       This
Agreement embodies the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings relating to such subject matter.


 


6.             AMENDMENT       This
Agreement may not be amended except by written document executed by the
parties.


 


7.             SUBJECT HEADINGS       Subject
headings are included for convenience only and shall not be deemed part of this
Agreement.


 


8.             SEVERABILITY       If
any provision of this Agreement shall be held unenforceable as applied to any
circumstance, the remainder of this Agreement and the application of such
provision to other circumstances shall be interpreted so as best to effect the
intent of the parties.  The parties
further agree to replace any such unenforceable provision with an enforceable
provision (and to take such other action) which will achieve, to the extent
possible, the purposes of the unenforceable provision.


 


9.             GOVERNING LAW       This
Agreement shall be governed by and construed under the laws of the State of
California in force from time to time.


 


10.          PARTIES
BOUND       This
Agreement is binding on and shall inure to the benefit of the parties and their
respective successors, assign, heirs, and legal representatives.


 


11.          SURVIVAL       The
representations, warranties, covenants, and agreements contained in this
Agreement shall survive the consummation of the transactions contemplated
hereby.


 


12.          COUNTERPARTS       This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.


 


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IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.


 


	
  COMPANY:

  	
   

  	
  BUYER:

  
	
   

  	
   

  	
   

  
	
  ELECTROPURE, INC.

  	
   

  	
  ANTHONY M. FRANK KEOGH PLAN

  UTA CHARLES SCHWAB & CO., INC.

  
	
   

  	
   

  	
   

  
	
  /S/ FLOYD H. PANNING

  	
   

  	
  /S/ ANTHONY M. FRANK

  	
   

  
	
  Floyd H. Panning, President

  	
   

  	
  Anthony M. Frank, Trustee

  
	
  23456 South Pointe Drive

  	
   

  	
  101 Montgomery Street

  
	
  Laguna Hills, CA 92653-1512

  	
   

  	
  San Francisco, CA  94104

  
					



 


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