EXHIBIT 10.10.BL


 


DEBT CONVERSION
AGREEMENT


 


THIS DEBT
CONVERSION AGREEMENT (the “Agreement”) is made and entered into effective as of
the 20th day of May, 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 March 31, 2004, 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 March 31, 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 $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 $0.30 per share, for
a total of 40,000 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 March 31, 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 March 31, 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.


 


(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:


 


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“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.


 


(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 


 


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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, CA94104

  
				



 


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