EXHIBIT 10.56


 


PROMISSORY NOTE

(California)


 


	
  US $2,425,000.00

  	
   

  	
   

  	
  April 27, 2004

  



 


FOR VALUE
RECEIVED, the undersigned, ELECTROPURE
HOLDINGS, L.L.C., a California limited liability company (“Borrower”) jointly
and severally (if more than one) promise(s) to pay to the order of FARMERS INSURANCE GROUP FEDERAL CREDIT UNION, a
federally chartered credit union, the principal sum of TWO MILLION FOUR HUNDRED TWENTY-FIVE THOUSAND AND
00/100 DOLLARS (US $2,425,000.00), with interest on the unpaid
principal balance at the annual rate of 5.75
percent (5.75%).


 


1.             Defined
Terms.  As used
in this Note, (i) the term “Lender”
means the holder of this Note, and (ii) the term “Indebtedness” means the principal of, interest on, or any
other amounts due at any time under, this Note, the Security Instrument or any
other Loan Document, including late charges, default interest, and advances to
protect the security of the Security Instrument under Section 12 of the
Security Instrument.  “Event of Default”
and other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.


 


2.             Address
for Payment. 
All payments due under this Note shall be payable at c/o Business Partners, LLC, 9301 Winnetka Avenue,
Chatsworth, CA 91311, Attn: Commercial Loan Department, or such
other place as may be designated by written notice to Borrower from or on
behalf of Lender.  By separate document
entitled “ACH Payment Authorization” Borrower may authorize Lender to deduct
all payments due under this Note from Borrower’s checking account.


 


3.             Payment
of Principal and Interest.  Principal and interest shall be paid as follows:


 


(a)           Unless disbursement of principal is
made by Lender to Borrower on the first day of the month, interest for the
period beginning on the date of disbursement and ending on and including the
last day of the month in which such disbursement is made shall be payable upon
the initial funding of the loan evidenced by this Note.  Interest under this Note shall be computed
on the basis of a 360-day year consisting of twelve 30-day months.  In the event any check given by Borrower to
Lender as a payment on this Note is dishonored, or in the event there are
insufficient funds in Borrower’s designated account to cover any preauthorized
monthly debit pursuant to the separate “ACH Payment Authorization,” then,
without limiting any other charges or remedies, Borrower shall pay to Lender a
processing fee of $25.00 (but not
more than the maximum amount allowed by law) for each such event.


 


(b)           Consecutive monthly installments of
principal and interest, each in the amount of FIFTEEN
THOUSAND TWO HUNDRED FIFTY-FIVE AND 83/100 DOLLARS (US $15,255.83),
shall be payable on the first day of each month beginning on June 1, 2004, until the entire unpaid
principal balance evidenced by this Note is fully paid.  Any accrued interest remaining past due for
30 days or more shall be added to and become part of the unpaid principal
balance and shall bear interest at the rate or rates specified in this Note,
and any reference below to “accrued interest” shall refer to accrued interest
which has not become part of the unpaid principal balance.  Any remaining principal and interest shall
be due and payable on May 1, 2009
or on any earlier date on which the unpaid principal balance of this Note
becomes due and payable, by acceleration or otherwise (the “Maturity Date”).  The unpaid principal balance shall continue to bear interest
after the Maturity Date at the Default Rate set forth in this Note until and
including the date on which it is paid in full.


 


(c)           Any regularly scheduled monthly
installment of principal and interest that is received by Lender before the
date it is due shall be deemed to have been received on the due date solely for
the purpose of calculating interest due.


 


4.             Application
of Payments. 
If at any time Lender receives, from Borrower or otherwise, any amount
applicable to the Indebtedness which is less than all amounts due and payable
at such time.  Lender may apply that
payment to amounts then due and payable in any manner and in any order
determined by Lender, in Lender’s discretion. 
Borrower agrees that neither Lender’s acceptance of a payment from
Borrower in an amount that is less than all amounts then due and payable nor
Lender’s application of such payment shall constitute or be deemed to
constitute either a waiver of the unpaid amounts or an accord and
satisfaction.  If Lender accepts a
guaranty of only a portion of the Indebtedness, Borrower hereby waives its
right under California Civil Code Section 2822(a) to designate the portion
of the Indebtedness which shall be satisfied by any guarantor’s partial
payment.


 


5.             Security.  The Indebtedness is secured, among other
things, by that certain deed of trust, mortgage or security deed dated as of
the date of this Note and executed by Borrower in favor of Lender (the “Security Instrument”), and reference is
made to the Security Instrument for other rights of Lender as to collateral for
the Indebtedness.


 


6.             Acceleration.  If an Event of Default has occurred and is
continuing, the entire unpaid principal balance, any accrued interest, and all
other amounts payable under this Note and any other Loan Document shall at once
become due and payable, at the option of Lender, without any prior notice to
Borrower.  Lender may exercise this
option to accelerate regardless of any prior forbearance.


 


7.             Late
Charge.  If any
monthly amount payable under this Note or under the Security Instrument or any
other Loan Document is not received by Lender within ten (10) days after the amount is due, Borrower shall pay to
Lender,


 


 


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California
Promissory Note


Loan
No. 59468830-82


 

















 


immediately and without demand
by Lender, a late charge equal to five
percent (5%) of such amount. 
Borrower acknowledges that its failure to make timely payments will
cause Lender to incur additional expenses in servicing and processing the loan
evidenced by this Note (the “Loan”),
and that it is extremely difficult and impractical to determine those
additional expenses.  Borrower agrees
that the late charge payable pursuant to this Paragraph represents a fair and
reasonable estimate, taking into account all circumstances existing on the date
of this Note, of the additional expenses Lender will incur by reason of such
late payment.  The late charge is
payable in addition to, and not in lieu of, any interest payable at the Default
Rate pursuant to Paragraph 8.


 


8.             Default
Rate.  So long
as (a) any monthly installment under this Note remains past due for 30 days or more,
or (b) any other Event of Default has occurred and is continuing, interest
under this Note shall accrue on the unpaid principal balance from the earlier
of the due date of the first unpaid monthly installment or the occurrence of
such other Event of Default, as applicable, at a rate (the “Default Rate”) equal to the lesser of four (4) percentage points above the rate
stated in the first paragraph of this Note or the maximum interest rate which
may be collected from Borrower under applicable law.  If the unpaid principal balance and all accrued interest are not
paid in full on the Maturity Date, the unpaid principal balance and all accrued
interest shall bear interest from the Maturity Date at the Default Rate.  Borrower also acknowledges that its failure
to make timely payments will cause Lender to incur additional expenses in
servicing and processing the Loan, that, during the time that any monthly
installment under this Note is delinquent for more than 30 days.  Lender will incur additional costs and expenses
arising from its loss of the use of the money due and from the adverse impact
on Lender’s ability to meet its other obligations and to take advantage of
other investment opportunities, and that it is extremely difficult and
impractical to determine those additional costs and expenses.  Borrower also acknowledges that, during the
time that any monthly installment under this Note is delinquent for more than
30 days or any other Event of Default has occurred and is continuing, Lender’s
risk of nonpayment of this Note will be materially increased and Lender is
entitled to be compensated for such increased risk.  Borrower agrees that the increase in the rate of interest payable
under this Note to the Default Rate represents a fair and reasonable estimate,
taking into account all circumstances existing on the date of this Note, of the
additional costs and expenses Lender will incur by reason of the Borrower’s
delinquent payment and the additional compensation Lender is entitled to
receive for the increased risks of nonpayment associated with a delinquent
loan.  During any period that the
Default Rate is in effect the additional interest accruing over and above the
rate stated in the first paragraph of this Note shall be immediately due and
payable in addition to the regularly scheduled principal and interest payments.


 


9.             Full
Recourse Personal Liability.  Borrower shall have full recourse personal liability under this
Note, the Security Instrument and any and all other Loan Documents for the
repayment of the Indebtedness and for the performance of any and all other
obligations of Borrower under the Loan Documents.


 


10.          Voluntary
Prepayments. 
Borrower may voluntarily prepay all or part of the unpaid principal
balance of this Note at any time without payment of penalty or premium.  Any prepayment of less than the unpaid
principal balance of this Note shall not extend or postpone the due date of any
subsequent monthly installments or change the amount of such installments,
unless Lender agrees otherwise in writing.


 


11.          Costs
and Expenses. 
To the fullest extent allowed by applicable law, Borrower shall pay all
expenses and costs, including fees and out-of-pocket expenses of attorneys
(including Lender’s in-house attorneys) and expert witnesses and costs of investigation,
incurred by Lender as a result of any default under this Note or in connection
with efforts to collect any amount due under this Note, or to enforce the
provisions of any of the other Loan Documents, including those incurred in
post-judgment collection efforts and in any bankruptcy proceeding (including
any action for relief from the automatic stay of any bankruptcy proceeding) or
judicial or non-judicial foreclosure proceeding


 


12.          Forbearance.  Any forbearance by Lender in exercising any
right or remedy under this Note, the Security Instrument, or any other Loan
Document or otherwise afforded by applicable law, shall not be a waiver of or
preclude the exercise of that or any other right or remedy.  The acceptance by Lender of any payment
after the due date of such payment, or in an amount which is less than the
required payment, shall not be a waiver of Lender’s right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. 
Enforcement by Lender of any security for Borrower’s obligations under
this Note shall not constitute an election by Lender of remedies so as to
preclude the exercise of any other right or remedy available to Lender.


 


13.          Waivers.  Presentment, demand, notice of dishonor,
protest, notice of acceleration, notice of intent to demand or accelerate
payment or maturity, presentment for payment, notice of nonpayment, grace, and
diligence in collecting the Indebtedness are waived by Borrower and all
endorsers and guarantors of this Note and all other third party obligors.


 


14.          Loan
Charges. 
Neither this Note nor any of the other Loan Documents shall be construed
to create a contract for the use, forbearance or detention of money requiring
payment of interest at a rate greater than the maximum interest rate permitted
to be charged under applicable law.  If
any applicable law limiting the amount of interest or other charges permitted
to be collected from Borrower in connection with the Loan is interpreted so
that any interest or other charge provided for in any Loan Document, whether
considered separately or together with other charges provided for in any other
Loan Document, violates that law, and Borrower is entitled to the benefit of
that law, that interest or charge is hereby reduced to the


 


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extent necessary to eliminate
that violation.  The amounts, if any,
previously paid to Lender in excess of the permitted amounts shall be applied
by Lender to reduce the unpaid principal balance of this Note.  For the purpose of determining whether any
applicable law limiting the amount of interest or other charges permitted to be
collected from Borrower has been violated, all Indebtedness that constitutes
interest, as well as all other charges made in connection with the Indebtedness
that constitute interest, shall be deemed to be allocated and spread ratably
over the stated term of the Note. 
Unless otherwise required by applicable law, such allocation and spreading
shall be effected in such a manner that the rate of interest so computed is
uniform throughout the stated term of the Note


 


15.          Purpose
of Indebtedness. 
Borrower represents that the Indebtedness is not being incurred by
Borrower for personal, family or household purposes.


 


16.          Counting
of Days. 
Except where otherwise specifically provided, any reference in this Note
to a period of “days” means calendar days, not Business Days.


 


17.          Governing
Law.  This Note
shall be governed by the laws of the jurisdiction in which the Land is located.


 


18.          Captions.  The captions of the paragraphs of this Note
are for convenience only and shall be disregarded in construing this Note.


 


19.          Notices.  All notices, demands and other
communications required or permitted to be given by Lender to Borrower pursuant
to this Note shall be given in accordance with Section 31 of the Security
Instrument.


 


20.          Consent
to Jurisdiction and Venue.  Borrower agrees that any controversy arising under or in relation
to this Note shall be litigated exclusively in the jurisdiction in which the
Land is located (the “Property Jurisdiction”
).  The state and federal courts and
authorities with jurisdiction in the Property Jurisdiction shall have exclusive
jurisdiction over all controversies which shall arise under or in relation to
this Note.  Borrower irrevocably
consents to service, jurisdiction, and venue of such courts for any such
litigation and waives any other venue to which it might be entitled by virtue
of domicile, habitual residence or otherwise.


 


21.          Counterparts.  This Note may be executed in any number of
counterparts each of which shall be deemed an original, but all such
counterparts together shall constitute but one Note.


 


22.          WAIVER
OF TRIAL BY JURY.  BORROWER AND LENDER
EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING
OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER
THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY
WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN
THE FUTURE.  THIS WAIVER OF RIGHT TO
TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH
THE BENEFIT OF COMPETENT LEGAL COUNSEL.


 


IN WITNESS WHEREOF,
and in consideration of the Lender’s agreement to lend Borrower the principal
amount set forth above, Borrower has signed and delivered this Note under seal
or has caused this Note to be signed and delivered under seal by its duly
authorized representative.


 


	
  BORROWER:

  
	
   

  
	
  ELECTROPURE HOLDINGS, L.L.C., a California

  
	
  limited liability company

  
	
   

  
	
  By:

  	
  ELECTROPURE, INC., a California

  
	
   

  	
  corporation, Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Floyd H. Panning

  	
   

  
	
   

  	
   

  	
  FLOYD H. PANNING, President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ Catherine Patterson

  	
   

  
	
   

  	
   

  	
  CATHERINE PATTERSON, Secretary

  	
   

  



 


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