EXHIBIT 10.10.BK


 


DEBT CONVERSION AGREEMENT


 


THIS DEBT
CONVERSION AGREEMENT (the “Agreement”) is made and entered into effective as of
the 22nd day of January, 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 December 31, 2003, a total of
$12,000.00 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 December 31, 2003 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 $12,000.00 in interest
accrued on the Term Note into Shares of Electropure, Inc. Common Stock, $0.01
par value, at an effective conversion rate of $0.20 per share, for a total of
60,000 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 December 31, 2003
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 January 22, 2004, respectively, (the “Notes”)
has been satisfied in full by the Company. 
Buyer also acknowledges that pursuant to these Debt Conversion
Agreements any


 


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default by Electropure for
failure to pay interest due on the Notes through December 31, 2003 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


 


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transfer instructions have or
will be placed with respect to the Shares so as to restrict the assignment,
resale or other disposition thereof.


 


(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


 


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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.


 


(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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