Document:

EXHIBIT 10.55

 

INSTALLMENT
NOTE
INSTALLMENT INTEREST INCLUDED

 

Escrow No:
            

 

	
  $300,000.00

  	
  Mission Viejo, California 

  
	
   

  	
  March 12, 2004

  

 

1.             PROMISE TO PAY: In installments as herein
stated, for value received, ELECTROPURE HOLDINGS, LLC, a California limited
liability company, a wholly owned subsidiary of ELECTROPURE, INC., a California
corporation, (hereinafter referred to as Debtor)  promises to pay to Holder/Payee,
PUROVIDA, LLC, a California limited liability company, or order, at
a place designated by the beneficiary as 969-G Edgewater Blvd., #177, Foster
City, California 94404, the sum of $300,000.00 U.S. Dollars OR SUCH SUM AS MAY
BE ADVANCED BY HOLDER UP TO AN ADDITIONAL $100,000.00, with interest thereon
from March 18, 2004, on the unpaid principal, at the rate of twelve
(12%) per cent  per annum in quarterly installments of
                
Dollars ($42,736.92)  OR MORE
on the 18th day of each and every quarter, beginning on June 18, and continuing
until March 18, 2006 at which time the entire balance of unpaid principal and
accrued interest shall become all due and payable.

 

2.             ADVANCES OF FUNDS:   The sum of up to $400,000.00 shall be
advanced to Debtor in two installments as follows: (a) the first installment of
$300,000.00 upon the date of close of escrow of this transaction and (b) the
second installment of up to $100,000.00 no later than 60 days from the date of
close of escrow of this transaction. 
Interest shall accrue upon the principal balance from the date such
principal is advanced to the Debtor.

 

3.             MORTGAGE BROKERAGE FEE: At close of escrow
Debtor hereby irrevocably assigns to Mortgage Brokers (William F. Garlock &
Company, Inc. and Pacific First Group) the following fees from the loan
proceeds advanced to Debtor:

(a) $55,000.00 to be paid to William F. Garlock & Company, Inc.
(one-half of which shall be paid to Andrew Litton as a Finder’s Fee) ;

(b) $5,000.00 to Pacific First Group.

(c)  Warrants for Common Stock
in Electropure, Inc. to purchase up to 80,000 shares at $0.20 per share
(one-half of which will be in the name of Andrew Litton and one-half of which
will be in the name of William F. Garlock & Company, Inc.)

 

4.             GUARANTY: ELECTROPURE, INC. and ANTHONY FRANK,
(hereinafter referred to as Guarantors) herein promise unconditionally to
jointly and severally personally guaranty the performances due hereunder.  Guarantors jointly and severally agree that
the financial statements and credit reports of each of them have been provided
to the Holder for the purposes of inducing the Holder to enter into this
transaction, and each does hereby agree and acknowledge that the Holder is
entitled to rely and does rely on such financial statements and credit reports
as have been provided to Holder as of the date of execution of this Note.  Guarantors hereby irrevocably waive
his/her/their rights and defenses against this obligation under the law,
including without limitation the following: the provisions of

 

 

Cal. Civ. Code §2845 (requiring the creditor to proceed against the
principal); §2850 (requiring the creditor to proceed against the property of
the principal first); §2849 (surety entitled to benefits of securities held by
creditor); any rights he/she/they may have by reason of an election of remedies
by the Holder even though that election of remedies, such as nonjudicial
foreclosure with respect to security for a guaranteed obligation has destroyed
the guarantor’s rights of subrogation and reimbursement against the principal
by the operation of law including without limitation C.C.P. §580d; any
disability or defense of Debtor; any modification or change in the terms of the
indebtedness whatsoever, including without limitation, the renewal, extension,
acceleration, or other change in the time payment of the indebtedness is due
and any change in the interest rate; and any rights or defenses he/she/they may
have because the obligations herein are secured by real property of the
Guarantors.  Guarantors understand and
agree that the foregoing waivers are unconditional and irrevocable waivers of
substantive rights and defenses to which Guarantors might otherwise be entitled
under state and federal law.  Guarantors
acknowledge that he/she/they have provided these waivers of rights and defenses
with the intention that they be fully relied upon by Holder.  Until all indebtedness is paid in full,
Guarantors waive any right to enforce any remedy Guarantors may have against
Debtor or any other guarantor, surety, or other person, and further Guarantors
waive any right to participate in any collateral for the indebtedness now or
hereafter held by Holder.  Guarantors
agree that Holder may proceed against the Guarantors without first proceeding
against the Borrower, and may proceed against the Guarantors personally without
first resorting to the security for the Second Note, Assignment of Rents, or
UCC-1 Financing Statement.  The
obligations under this Note and its related documents shall survive termination
of the Note.

 

5.             WARRANTIES AND REPRESENTATIONS: Debtor
warrants and represents that at the time of closing this transaction there
shall be no other debt outstanding which shall have priority over this Note
other than the First Note and deed of trust in the amount of $2,000,000.00 owed
to Universal Bank.  Debtor understands
and acknowledges that these representations and warranties are a material
consideration without which Holder would not have advanced funds for this Note,
and that Debtor has provided these representations and warranties with the
intention that they be fully relied upon by Holder.  Debtor shall fully indemnify and hold harmless Holder against any
claims of third parties that such third parties have priority rights as against
Holder.  Guarantor does hereby agree
that Guarantor’s guaranty of the Debtor’s obligations under this Note shall apply
to the obligations set forth in this paragraph, as well as to the other
obligations set forth in this agreement.

 

6.             INDEMNITY BY DEBTOR AND GUARANTORS: Debtor
and Guarantors, jointly and severally, shall indemnify and hold harmless the
Holder against any and all third party claims or demands arising out of those
certain exceptions to title as described in the Declaration of Covenants,
Conditions, Restrictions and Reservation of Easements for Plaza Pointe”
recorded August 9, 1978, in Book 12791, Page #1893, and that certain Third
Revised Laguna Hills Business Center Planned Community Development Plan”
recorded May 15, 1992 as document #92-324522 in the official records of Orange
County, California This obligation shall survive termination of this Note.

 

 

7.             HOLDER SUBORDINATION: Holder agrees that
this Note and deed of trust may be subordinated to a new First Note and Deed of
Trust not to exceed $2,340,000.00 (the Replacement First Note) provided that
the Subordination Agreement attached hereto and incorporated herein by
reference has been executed by Holder and Debtor, and provided that the sums
advanced above $2,275,000.00, up to the sum of $65,000.00 from such Replacement
First Note (“Excess Fund”), shall be reserved in an escrow account to be converted
to an irrevocable Letter of Credit within 30 days of close of escrow of the
Replacement First Note, which shall be drawn upon each quarter by Holder to be
applied to the payments to be made on this Second Note as such payments become
due.  Debtor shall pay for all costs and
expenses associated with the said escrow account and with the purchase of the
Letter of Credit.  Notwithstanding the
foregoing, in the event that the amount in the said Excess Fund is not sufficient
to pay the payments due under this Note, Debtor promises to pay timely all of
such sums due under this Note, and Guarantor acknowledges such promise.

 

8.             PRE-PAYMENT PRIVILEGE: Privilege is
reserved to pay more than the sum due at any time by pre-paying principal and
accrued interest during the term of the Note.

 

9.             LATE CHARGE: In the event that any
payment, or portion thereof, due hereunder is not received by the Payee within
10 days after the due date thereof, the parties hereto agree that it would be
difficult to fix the actual damages for such breach and therefore the
undersigned agrees to pay to Payee, in addition to the regular quarterly
payment, a late charge of 10% of the payment due the first time such payment is
late, a late charge of 12% of the payment due the second time such payment is
late, a late charge of 15% of the payment due each successive time the payment
is late.

 

10.           ANNUAL OPERATING STATEMENT: Debtor will
provide Beneficiary (Holder) at the address set forth herein with a copy of
his/her/its Annual Operating Statement within 45 days of close of business
(December 31st) of each year.

 

11.           MONTHLY PROOF OF PAYMENT OF FIRST LOAN:
Guarantor shall provide Beneficiary (Holder) at the address set forth herein
monthly copies of the check or other instrument issued to the Holder of the
First Note or the replacement First Note showing proof of payment of the First
Note.

 

12.           PAYMENTS OF AMOUNTS DUE: Each payment shall
be credited on interest then due, and the remainder on principal, and interest
shall thereupon cease upon the principal so credited.  Should default be made in payment of any installment when due the
whole sum of principal and interest shall be due at the option of the holder of
this Note.  Principal and interest shall
be paid in lawful money of the United States of America.  In any action to enforce this Note, or the
obligations set forth in its related documents, Debtor and Guarantor jointly
and severally promise to pay the Holder of this Note all attorneys fees and
costs incurred in such action.

 

13.           DEED OF TRUST AND OTHER SECURITY: This Note
is secured by a Deed of Trust in which the Holder is the Beneficiary and First
American Title Company is the Trustee, and

 

 

Debtor is the Trustor, which Deed of Trust shall be recorded at close
of escrow of this transaction..  This
Note is also secured by said Second Assignment of Rents and a Second UCC-1
Financing Statement (together with the Second Deed of Trust, collectively
hereinafter referred to as the Second Note Documents), all of which shall be
incorporated herein by reference, which shall be recorded at close of
escrow.  Guarantors agree and
acknowledge that all of the security instruments referred to herein shall be
construed to have been perfected as of the date of execution of this Second
Note.  Guarantors agree to indemnify and
hold harmless Holder against any third party claims of priority interests in
and to the secured collateral, other than those claims of the First Note Holder
arising under the First Note and the First Note Documents.

 

14.           CONVERSION OF DEBT TO STOCK: At the sole
discretion of the Holder, at any time during the term of this Note, Holder may
convert all or part of this Debt obligation to equity in the Debtor by purchase
of the Debtor’s common stock of any series then authorized but as yet not issued,
at the purchase price then prevailing at the time of said conversion..

 

15.           WARRANTS EXERCISABLE BY HOLDER FOR PURCHASE
OF STOCK:   In addition to the security
referenced in this Second Note, Debtor shall issue to Holder Stock Warrants, in
substantially the form attached hereto as Exhibit B, for 160,000 shares of
Common Stock to be exercised at $0.20 per share to be purchased by the Holder.

 

16.           HOLDER’S RIGHT TO APPROVE ONE DIRECTOR:
Holder shall have the right to approve one member of the Board of Directors of
Electropure, Inc., a California corporation

 

17.           WAIVER OF RIGHT TO NOTICE OF BALLOON
PAYMENT:   Debtor and Guarantors do
hereby waive any rights it/he/she/they may have under Cal. Civ. Code §2924i
and/or §2966 or any successor statute to notice of final payment of a balloon
payment of the outstanding principal due.

 

18.           SEVERABILITY: If a court of competent
jurisdiction finds any provision of this agreement to be illegal, invalid, or
unenforceable as to any person, entity or circumstance, that finding shall not
make the offending provision illegal, invalid or unenforceable as to any other
person, entity or circumstance.  If
feasible, the offending provision shall be considered modified so that it
becomes legal, valid, and enforceable. 
If the offending provision cannot be so modified it shall be considered
deleted from this agreement.  Unless
otherwise required by law, the illegality, invalidity or enforceability of any
provision of this agreement shall not affect the legality, validity or enforceability
of any other provision of this agreement.

 

19.           SUCCESSORS AND ASSIGNS: Subject to any
limitations on transfers of interest of any party or Guarantor of this Note,
this agreement shall be binding upon and inure to the benefit of the parties,
their successors and assigns.

 

20.           SURVIVAL OF REPRESENTATIONS AND WARRANTIES:
All representations, warranties, and agreements made by Debtor and/or by
Guarantors in this agreement shall survive the execution and delivery of this
Second Note and its related Second Note

 

 

Documents, shall be continuing in nature, and shall remain in full
force and effect until Debtor’s indebtedness shall be paid in full.

 

21.           DEBTOR TO PAY HOLDER’S EXPENSES: Debtor
shall pay Holder’s expenses, including all escrow and title insurance fees, and
Holder’s attorneys fees and costs, pursuant to that certain Retainer Agreement
executed by Electropure, LLC on February 3, 2004 in which Electropure, LLC
acknowledged that Holder’s attorney is representing Holder in this transaction.  Mortgage Brokers shall reimburse Debtor for
up to $5,000.00 in said attorneys fees and costs at close of escrow.

 

22.           MISCELLANEOUS:

 

22.1  Time is on the essence in
the performance of this agreement.

 

22.2   Holder shall not be
deemed to have waived any rights under this agreement unless such waiver is
given in a writing and signed by Holder. 
No delay or omission on the part of Holder in enforcing any right shall
operate as a waiver of such right or any other right.  A waiver of any provision or right shall not constitute a waiver
of the Holder’s right otherwise to demand strict compliance with that provision
or any provision of this agreement.  No
prior waiver by Holder, nor any course of dealing between Holder and Debtor
shall constitute a waiver of any of Holder’s rights or Debtor’s obligations as
to any future transactions.

 

22.3   This agreement shall be
governed by, construed and enforced in accordance with the laws of the State of
California.  Debtor and Guarantors each
agree that the Superior Court of San Mateo County shall have jurisdiction over
any matter arising out of this agreement, and that venue shall be proper in
Superior Court of San Mateo County, California.  In any dispute arising out of this agreement the prevailing
party, whether by judgment, arbitration award or settlement, shall be entitled
to an award of its costs and attorneys fees.

 

22.4   This agreement together
with the related Second Note Documents all of which are incorporated herein by
reference, constitute the entire understanding and agreement of the parties as
to the matters set forth in this agreement. 
No alteration of or amendment to this agreement shall be effective
unless given in writing and signed by the party or parties sought to be charged
or bound by the alteration or amendment.

 

22.5   The parties executing
this document covenant and warrant that the person executing this document is
fully authorized to do so, and that this agreement shall be construed as a
fully binding contract between the parties referenced herein.  The signatories hereto warrant on behalf of
the entity for which he/she is authorized to act that execution of this
agreement does not and shall not with the passage of time violate any
provisions of law, of their respective corporate documents or of their
respective trust documents.

 

 

The foregoing is hereby acknowledged and agreed to as of the date first
written above:

 

	
   

  	
  DEBTOR:

  
	
   

  	
  BY: ELECTROPURE HOLDINGS, LLC., a California limited liability
  company

  
	
   

  	
  By :

  	
  /S/ CATHERINE PATTERSON

  	
   

  
	
   

  	
  Its:

  	
    CFO of Managing Member

  	
   

  
	
   

  	
   

  	
  ELECTROPURE, INC., a California corporation its sole Member

  
	
   

  	
   

  	
  BY:

  	
    /s/  CATHERINE
  PATTERSON

  	
   

  
	
   

  	
   

  	
  Its:

  	
    Chief Financial Officer

  	
   

  
											

 

	
   

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  BY: ELECTROPURE, INC., a California corporation

  
	
   

  	
  BY:

  	
  /s/ 
  CATHERINE PATTERSON

  	
   

  
	
   

  	
  Its:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  /s/ 
  ANTHONY M. FRANK

  	
   

  
	
   

  	
  ANTHONY FRANK

  
								

 

HOLDER:  DO NOT DESTROY THIS
NOTE: When paid, this Note and its related Deed of Trust must be surrendered to
Trustee for cancellation before reconveyance will be made.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,

 

 

Prepared
by RoboDocs®

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

 

2

 

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

  	
   

  

 

3

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