Document:

EXHIBIT
10.64

 

8%
CONVERTIBLE TERM NOTE

 

	
  $50,000

  	
   

  	
  May 24,
  2005

  

 

ELECTROPURE, INC., a
California corporation, (the “Company”), for
the value received, hereby unconditionally and absolutely promises to pay to
the order of ANTHONY M. FRANK, or holder
(collectively, the “Holder”), upon
presentation and surrender of this Note at its office at 23456 South Pointe
Drive, Laguna Hills, California 92653, or such other place as the Company may,
from time to time, designate, the sum of Fifty Thousand ($50,000)
Dollars, in lawful money of the United States, on or before August 18,
2005 (the “Maturity Date”).

 

1.                                      CONVERSION.

 

The Holder of this Note shall have the right,
at its option, at any time up until 5:00 P.M. Los Angeles time on the fifth
(5th) day immediately before the Maturity Date (except that, with respect to
any portion of this Note which shall be called for prepayment, such right shall
as to such portion terminate at 5:00 P.M. Los Angeles time on the fifth (5th)
day immediately prior to the Prepayment Date (as defined in Section 2
hereof)), to convert all or any portion of the principal amount of this Note,
including interest accrued thereon, subject to the terms and provisions of this
Section 1, into common stock of Electropure, Inc. at the then fair market value
(closing bid price) on the date of such conversion.

 

2.                                      PAYMENTS
AND PREPAYMENTS.

 

(a)                                  All payments and
prepayments of principal and interest shall be made in immediately available
funds on or before the Maturity Date to the Holder at 1 Maritime Plaza, Suite
825, San Francisco, California  94111.

 

(b)                                 The unpaid principal
amount of the Note from time to time outstanding shall bear interest from the
date of this Note at the rate of Eight Percent (8%) per annum until paid.  Interest shall be computed for the actual
number of days elapsed on the basis of a year consisting of 360 days.

 

(c)                                  The Company may
prepay at any time in advance of the Maturity Date all or any part of this
Note, plus accrued interest on the portion of the principal being prepaid.  Interest on the portion of the Note prepaid
shall cease to accrue on and after the date of such prepayment.

 

3.                                      NOTICES
TO NOTEHOLDER.

 

So long as this Note shall be outstanding, if
the Company (i) shall pay any dividend or make any distribution upon the Company
Stock or (ii) shall effect a capital

 

1

 

reorganization, reclassification of capital stock, consolidation or
merger with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of  the Company, then in any such case,
the Company shall cause to be mailed by certified mail to the Holder, at least
fifteen days prior to the date specified in (x) or (y) below, as the case may
be, a notice containing a brief description of the proposed action and stating
the date on which (x) a record is to be taken for the purpose of such dividend
or distribution, or (y) such reclassification, reorganization, consolidation,
merger, conveyance, lease, dissolution, liquidation or winding up is to take
place and the date, if any is to be fixed, as of which the holders of Common
Stock or other securities shall receive cash or other property deliverable upon
such reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.

 

4.                                      EVENTS
OF DEFAULT.  If one or more of
the following described events shall occur (each an “Event of Default”):

 

(a)                                  The Company shall
fail to pay the principal of, or interest on, this Note within five (5) days
after the Holder has given written notice to the Company that the same has
become due; or

 

(b)                                 The Company shall fail
to perform or observe any of the provisions contained in any Section of
this Note and such failure shall continue for more than thirty (30) days after
the Holder has given written notice to the Company; or

 

(c)                                  Any material
representation or warranty made in writing by or on behalf of the Company in
this Note shall prove to have been false or incorrect in any material respect,
or omits to state a material fact required to be stated therein in order to
make the statements contained therein, in the light of the circumstances under
which made, not misleading, on the date as of which made, and the Company shall
have failed to cure such false or incorrect statement within thirty (30) days
after the Holder has given written notice to Borrower; or

 

(d)                                 The Company shall be
adjudicated a bankrupt or insolvent, or admit in writing its inability to pay
its debts as they mature, or make an assignment for the benefit of creditors;
or the Company shall apply for or consent to the appointment of a receiver,
trustee, or similar officer for it or for all or any substantial part of its
property; or such receiver, trustee or similar officer shall be appointed
without the application or consent of the Company and such appointment shall
continue undischarged for a period of thirty (30) days; or the Company shall
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it under the laws of
any jurisdiction; or any such proceeding shall be instituted (by petition,
application or otherwise) against the Company and shall remain undismissed for
a period of ninety (90) days; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a substantial
part of the property

 

2

 

of the Company and such judgment, writ, or similar process shall not be
released, vacated or fully bonded within ninety (90) days after its issue or
levy; or

 

(e)                                  The Company shall be
enjoined, restrained or in any way prevented by a court order from continuing
to conduct all or any material part of its business affairs;

 

(f)                                    Any suit, action or
other proceeding (judicial or administrative) commenced against the Company, or
with respect to any assets of the Company, shall threaten to have a material
adverse effect on their future operations, including, without limitation a
final judgment or settlement in excess of $25,000 in excess of insurance shall
be entered in, or agreed to in respect of any such suit, action or proceeding.

 

THEN, or at any time thereafter, and in each
and every case:

 

(1)                                  Where the Company is
in default under the provisions of Section 3(d) hereof, the entire unpaid
principal amount of the Note, all interest accrued and unpaid thereon, and all
other amounts payable to the Holder hereunder shall automatically become and be
forthwith due and payable without offset or counterclaim of any kind and
without presentment, demand, protest or notice of any kind, and without regard
to the running of the statute of limitations, all of which are hereby expressly
waived by the Company; and

 

(2)                                  In any other case
referred to in this Section 3, the Holder may, by written notice to the
Company, as the case may be, declare the entire unpaid principal amount of this
Note, all interest accrued and unpaid hereon, and all other amounts payable
hereunder to be forthwith due and payable, whereupon the same shall become
immediately due and payable, without offset or counterclaim of any kind and
without presentment, demand, or protest, and without regard to the running of
any statutes of limitation, all of which are hereby expressly waived by the
Company.

 

Any declaration made pursuant to Section 3(2)
hereof is subject to the condition that, if at any time after the principal of
this Note shall have become due and payable, and before any judgment or decree
for the payment of the moneys so due, or any thereof, shall have been entered,
all arrears of principal and interest upon this Note (except that principal of
this Note which by such declaration shall have become payable) shall have been
duly paid, and every Event of Default shall have been made good, waived or
cured, then and in every such case the Holder shall be deemed to have rescinded
and annulled such declaration and its consequences; but no such rescission or
annulment shall extend to or affect any subsequent Event of Default or impair
any right consequent thereon.

 

5.                                      CORPORATE
OBLIGATION.  It is expressly
understood that this Note is solely a corporate obligation of the Company and
that any and all personal liability, either at common law or in equity, or by
constitution or statute, of, and any and all rights and claims against, every
stockholder, officer, or director, as such, past, present or future, are
expressly waived and released by the Holder as a part of the consideration for
the issuance hereof.

 

3

 

6.                                      AUTHORIZATION;
NO CONFLICT.  The borrowings
hereunder, the execution and delivery of the Note and the performance by the
Company of its obligations under this Agreement and the Note are within the
corporate powers of the Company, have been authorized by all necessary
corporate action, have received all necessary governmental approval (if any
shall be required) and do not and will not contravene or conflict with any
provision of law or of the charter or by-laws of the Company or of any
agreement binding upon the Company.

 

7.                                      TRANSFER.  Subject to the appropriate provisions hereof,
this Note or any portion of the principal amount hereof (or any remaining
balance if any pre-payments have occurred pursuant to Section 1 hereof) is
transferable on the records of the Company upon presentation of this Note,
properly endorsed, at its principal office; upon such presentation and transfer
a new Note or Notes will be issued.  For
the purposes of payment and all other purposes, the Company shall deem and
treat the person in whose name this Note is registered as the absolute owner
hereof and the Company shall not be affected by any notice to the contrary.

 

8.                                      MISCELLANEOUS.

 

(a)                                  Notwithstanding the
foregoing, the Company promises to pay interest after maturity (whether by
acceleration or otherwise, and before as well as after judgment) at the same
rate as above provided prior to maturity on balances, if any, then outstanding.

 

(b)                                 Interest under this
Note shall be computed on the basis of a thirty (30) day month and a year of
360 days for the actual number of days elapsed.

 

IN WITNESS WHEREOF, the Company has caused
this Note to be executed in Laguna Hills, California as of the day and year
first above written.

 

	
  COMPANY:

  	
   

  	
  HOLDER:

  
	
   

  	
   

  	
   

  
	
  ELECTROPURE, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
     /S/ Floyd H. Panning

  	
   

  	
   

  	
  By

  	
    
  /s/ Anthony M. Frank

  	
   

  
	
   

  	
  Floyd H. Panning, President

  	
   

  	
   

  	
  Anthony M. Frank

  
	
   

  	
  23456 South Pointe Drive

  	
   

  	
   

  	
  1 Maritime Plaza, Suite 825

  
	
   

  	
  Laguna Hills, CA 92653

  	
   

  	
   

  	
  San Francisco, CA 94111

  
									

 

4EXHIBIT
10.65

 

SECOND
DEED OF TRUST AND SECURITY AGREEMENT

 

THIS SECOND DEED OF TRUST AND SECURITY
AGREEMENT (“Security Instrument”) is made as of the 24th day of May, 2005, by ELECTROPURE, INC., a California corporation (“ELTP”), ELECTROPURE
HOLDINGS, LLC, a California limited liability company ( “LLC”), to and for the benefit of ANTHONY M.
FRANK (“Lender”).

 

As used herein, the term “Borrower” shall
mean Electropure, Inc. and its wholly-owned subsidiary, Electropure Holdings,
LLC, jointly and severally.

 

ELTP owes Lender the principal sum of Fifty
Thousand Dollars ($50,000.00), evidenced by that certain 8% Convertible Term
Note dated May 24, 2005 (the “Note”), a copy of which is attached hereto as
Exhibit “A”.  The Note provides that the
full debt, if not paid earlier, shall be due and payable on August 18,
2005, the “Maturity Date” of the Note.

 

LLC obtained a Two Million Dollar
($2,425,000) deed of trust loan (the “First Deed of Trust Loan”) from Farmers
Insurance Group Federal Credit Union c/o Business Partners, LLC (the “Senior
Lien Holder”) on or about May 5, 2004, which loan is secured by a first deed of
trust lien on the Property (the “First Deed of Trust”) and is also guaranteed
by ELTP.  The documents evidencing or
securing the First Deed of Trust Loan are collectively referred to herein as
the First Deed of Trust Loan Documents.

 

This Security Instrument secures to Lender:

 

(a)             the repayment of the
debt evidenced by the Note, with interest as provided in the Note, and all
renewals, extensions and modifications of the Note;

 

(b)            the payment of all
other sums, with interest as provided in the Note, advanced under paragraph 6
hereof to protect the security of this Security Instrument; and

 

(c)             the performance of
Borrower’s covenants and agreements under this Security Instrument and the
Note.

 

For these purposes, Borrower irrevocably grants and conveys to Lender,
with power of sale, subject to the rights of the Senior Lien Holder under the
First Deed of Trust, the property located in Orange County, California which
has the address of 23456 South Pointe Drive, Laguna Hills, California 92653 and
is further described below (“Property Address”):

 

ALL THAT CERTAIN REAL PROPERTY SITUATED IN
THE COUNTY OF ORANGE, STATE OF CALIFORNIA, AND DESCRIBED AS:  PARCEL 12, IN THE CITY OF LAGUNA HILLS,
COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 120, PAGES
17 TO 21 OF PARCEL MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA.

 

EXCEPTING ALL OIL, GAS AND OTHER MINERALS
THAT MAY BE WITHIN OR UNDER THE LAND ABOVE DESCRIBED AND ALL DRILLING AND OTHER
RIGHTS WITH RESPECT THERETO EXCEPT THE RIGHT TO DRILL, MINE, OF SAID LAND, AS

 

1

 

RESERVED IN DEEDS RECORDED NOVEMBER 20,
1961 IN BOOK 5917, PAGE 12 AND MAY 9, 1962 IN BOOK 6102, PAGE 647 OF OFFICIAL
RECORDS.

 

together with all the improvements now or hereafter erected on the
property, and all easements, appurtenances, and fixtures now or hereafter a
part of the property.  All replacements
and additions shall also be covered by this Security Instrument.  All of the foregoing is referred to in this
Security Instrument as the “Property.”

 

BORROWER COVENANTS that Borrower is lawfully
possessed of the estate hereby conveyed and has the right to grant and convey
the Property and, except for the First Deed of Trust and other encumbrances of
record acceptable to the Senior Lien Holder, the Property is unencumbered.  Borrower warrants and will defend generally
the title to the Property against all claims and demands, subject to such
encumbrances of record.

 

THIS SECURITY INSTRUMENT combines uniform
covenants for national use and non-uniform covenants with limited variations by
jurisdiction to constitute a uniform security instrument covering real
property.

 

UNIFORM COVENANTS.  Borrower and Lender covenant and agree as
follows:

 

1.                                       Payment of Principal and Interest; Prepayment.  Borrower shall promptly pay when due the
principal of and interest on the debt evidenced by the Note.

 

2.                                       Prior Deed of Trust; Charges; Liens.  The Borrower shall perform all of the
Borrower’s obligations under the First Deed of Trust, including Borrower’s
covenants to make payments when due. 
Borrower shall pay all taxes, assessments, charges, fines and
impositions attributable to the Property which may attain priority over this
Security Instrument, and leasehold payments or ground rents, if any.

 

Except for the lien of the First Deed of
Trust, Borrower shall promptly discharge any other lien which shall have
attained priority over this Security Instrument unless Borrower: (a) agrees in
writing to the payment of the obligation secured by the lien in a manner
acceptable to Lender; (b) contests in good faith the lien by, or defends
against enforcement of the lien in, legal proceedings which in the Lender’s
opinion operate to prevent the enforcement of the lien; or (c) secures from the
holder of the lien an agreement satisfactory to Lender subordinating the lien
to this Security Instrument.  Except for
the lien of the First Deed of Trust, if Lender determines that any part of the
Property is subject to a lien which may attain priority over this Security
Instrument, Lender may give Borrower a notice identifying the lien.  Borrower shall satisfy such lien or take one
or more of the actions set forth above within 10 days of the giving of notice.

 

3.                                       Subordination.  Lender
and Borrower acknowledge and agree that this Security Instrument is subject and
subordinate in all respects to the liens, terms, covenants and conditions of
the First Deed of Trust and to all advances heretofore made or which may
hereafter be made pursuant to the First Deed of Trust including all sums
advanced for the purpose of (a) protecting or further securing the lien of the
First Deed of Trust, curing defaults by the Borrower under the First Deed of Trust
or for any other purpose expressly permitted by the First Deed of Trust or (b)
constructing, renovating, repairing, furnishing, fixturing or equipping the
Property.  The terms and provisions of
the First Deed of Trust are paramount and controlling, and they supersede any
other terms and provisions hereof in conflict therewith.  In the event of a foreclosure or deed in lieu
of foreclosure of the First Deed of Trust, any provisions herein or any
provisions in any other collateral agreement restricting the use of the
Property or otherwise restricting the Borrower’s

 

2

 

ability to sell the Property shall have no further force or effect on
subsequent owners or purchasers of the Property.  Any person, including his successors or
assigns (other than the Borrower or a related entity of the Borrower),
receiving title to the Property through a foreclosure or deed in lieu of
foreclosure of the First Deed of Trust shall receive title to the Property free
and clear from such restrictions.

 

Further, if the Senior Lien Holder acquires
title to the Property pursuant to a deed in lieu of foreclosure, the lien of
this Security Instrument shall automatically terminate upon the Senior Lien
Holder’s acquisition of title, provided that (i) the Lender has been given
written notice of a default under the First Deed of Trust and (ii) the Lender
shall not have cured the default under the First Deed of Trust, or diligently
pursued curing the default as determined by the Senior Lien Holder, within the
period provided in such notice sent to the Lender.

 

4.                                       Hazard or Property Insurance.  Borrower shall keep the improvements now
existing or hereafter erected on the Property insured against loss by fire,
hazards included within the term “extended coverage” and any other hazards,
including floods or flooding, for which Lender requires insurance.  This insurance shall be maintained in the
amounts and for the periods that Lender requires.  The insurance carrier providing the insurance
shall be chosen by Borrower.  If Borrower
fails to maintain coverage described above, Lender may, at Lender’s option,
obtain coverage to protect Lender’s rights in the Property in accordance with
paragraph 6.

 

All insurance policies and renewals shall be
acceptable to Lender and shall include a standard mortgagee clause.  All requirements hereof pertaining to
insurance shall be deemed satisfied if the Borrower complies with the insurance
requirements under the First Deed of Trust. 
All original policies of insurance required pursuant to the First Deed
of Trust shall be held by the Senior Lien Holder; provided, however, Lender may
be named as a loss payee as its interest may appear and may be named as an
additional insured.  If Lender requires,
Borrower shall promptly give to Lender copies of all receipts of paid premiums
and renewal notices.  In the event of
loss, Borrower shall give prompt notice to the insurance carrier, the Senior
Lien Holder and Lender.  Lender may make
proof of loss if not made promptly by the Senior Lien Holder or the Borrower.

 

Unless Lender and Borrower otherwise agree in
writing, insurance proceeds shall be applied to restoration or repair of the
Property damaged, if the restoration or repair is economically feasible and
Lender’s security is not lessened.  If
the restoration or repair is not economically feasible or Lender’s security
would be lessened, the insurance proceeds shall be applied to the sums secured
by this Security Instrument, whether or not then due, with any excess paid to
Borrower.  If Borrower abandons the
Property, or does not answer within 30 days a notice from Lender that the
insurance carrier has offered to settle a claim, then Lender may collect the
insurance proceeds.  Lender may use the
proceeds to repair or restore the Property or to pay sums secured by this
Security Instrument, whether or not then due. 
The 30-day period will begin when the notice is given.

 

Unless Lender and Borrower otherwise agree in
writing, any application of proceeds to principal shall not extend or postpone
the due date of the payments referred to in paragraph 1 or change the amount of
the payments.  If under paragraph 17 the
Property is acquired by Lender, Borrower’s right to any insurance policies and
proceeds resulting from damage to the Property prior to the acquisition shall
pass to Lender to the extent of the sums secured by this Security Instrument
immediately prior to the acquisition.

 

Notwithstanding the above, the Lender’s
rights to collect and apply the insurance proceeds hereunder shall be subject
and subordinate to the rights of the Senior Lien Holder to collect and apply
such proceeds in accordance with the First Deed of Trust.

 

3

 

5.                                       Maintenance and Protection of the Property.  Borrower shall not destroy, damage
or impair the Property, allow the Property to deteriorate, or commit waste on
the Property.  Borrower shall be in
default if any forfeiture action or proceeding, whether civil or criminal, is
begun that in Lender’s good faith judgment could result in forfeiture of the
Property or otherwise materially impair the lien created by this Security
Instrument or Lender’s security interest. 
Borrower may cure such a default and reinstate, as provided in paragraph
14, by causing the action or proceeding to be dismissed with a ruling that, in
Lender’s good faith determination, precludes forfeiture of the Borrower’s
interest in the Property or other material impairment of the lien created by
this Security Instrument or Lender’s security interest.

 

6.                                       Protection of Lender’s Rights in the Property.  If Borrower fails to perform the
covenants and agreements contained in this Security Instrument, or there is a
legal proceeding that may significantly affect Lender’s rights in the Property
(such as a proceeding in bankruptcy, for condemnation or forfeiture or to
enforce laws or regulations), then Lender may do and pay for whatever is
necessary to protect the value of the Property and Lender’s rights in the
Property.  Lender’s actions may include
paying any sums secured by a lien, which has priority over this Security
Instrument (including sums secured by the First Deed of Trust), appearing in
court, paying reasonable attorneys’ fees and entering on the Property to make
repairs.  Although Lender may take action
under this paragraph 6, Lender does not have to do so.

 

Any amounts disbursed by Lender under this
paragraph 6 shall become additional debt of Borrower secured by this Security
Instrument.  Unless Borrower and Lender
agree to other terms of payment, these amounts shall bear interest from the
date of disbursement at the Note rate and shall be payable, with interest, upon
notice from Lender to Borrower requesting payment.

 

Prior to taking any actions under this Section 6,
however, Lender shall notify the Senior Lien Holder of such default in the
manner provided in Section 17 of this Security Instrument, and shall
provide the Senior Lien Holder with the opportunity to cure any such default
under this Security Instrument.  All
amounts advanced by the Senior Lien Holder to cure a default hereunder shall be
deemed advanced by the Senior Lien Holder and shall be secured by the First
Deed of Trust.  In addition, the Lender
agrees that it will not commence foreclosure proceedings or accept a deed in
lieu of foreclosure, or exercise any other rights or remedies hereunder until
it has given the Senior Lien Holder at least 60 days’ prior written
notice.  Any action by Lender hereunder
to foreclosure or accept a deed in lieu of foreclosure shall be subject to the “due
on sale” provisions of the First Deed of Trust.

 

Lender and Borrower further agree that a
default hereunder shall constitute a default under the First Deed of
Trust.  In the event of a default
hereunder, the Senior Lien Holder shall have the right to exercise all rights
and remedies under the First Deed of Trust.

 

7.                                       Inspection.  Lender or
its agent may make reasonable entries upon and inspection of the Property.  Lender shall give Borrower notice at the time
of or prior to an inspection specifying reasonable cause for the inspection.

 

8.                                       Condemnation.  The
proceeds of any award or claim for damages, direct or consequential, in
connection with any condemnation or other taking of any part of the Property,
or for conveyance in lieu of condemnation, are hereby assigned and shall be
paid to Lender, subject to the terms of the First Deed of Trust.

 

In the event of a total taking of the
Property, the proceeds shall be applied to the sums secured by this Security
Instrument, whether or not then due, with any excess paid to Borrower.  In the event of a partial taking of the
Property in which the fair market value of the Property immediately before the
taking is equal to or greater than the amount of the sums secured by this Security
Instrument immediately before

 

4

 

the taking, unless Borrower and Lender otherwise agree in writing, the
sums secured by this Security Instrument shall be reduced by the amount of the
proceeds multiplied by the following fraction: 
(a) the total amount of the sums secured immediately before the taking,
divided by (b) the fair market value of the Property immediately before the
taking.  Any balance shall be paid to
Borrower.  In the event of a partial
taking of the Property in which the fair market value of the Property
immediately before the taking is less than the amount of the sums secured
immediately before the taking, unless Borrower and Lender otherwise agree in
writing or unless applicable law otherwise provides, the proceeds shall be applied
to the sums secured by this Security Instrument whether or not the sums are
then due.

 

If the Property is abandoned by Borrower, or
if, after notice by Lender to Borrower that the condemnor offers to make an
award or settle a claim for damages, Borrower fails to respond to Lender within
30 days after the date the notice is given, Lender is authorized to collect and
apply the proceeds, at its option, either to restoration or repair of the
Property or to the sums secured by this Security Instrument, whether or not
then due.

 

Unless Lender and Borrower otherwise agree in
writing, any application of proceeds to principal shall not extend or postpone
the due date of the payments referred to in paragraph 1 or change the amount of
such payments.

 

9.                                       Borrower Not Released; Forbearance By Lender Not a Waiver.  Extension of the time for payment
or modification of amortization of the sums secured by this Security Instrument
granted by Lender to any successor in interest of Borrower shall not operate to
release the liability of the original Borrower or Borrower’s successors in
interest.  Lender shall not be required
to commence proceedings against any successor in interest or refuse to extend
time for payment or otherwise modify amortization of the sums secured by this
Security Instrument by reason of any demand made by the original Borrower or
Borrower’s successor in interest.  Any
forbearance by Lender in exercising any right or remedy shall not be a waiver
of or preclude the exercise of any right or remedy.

 

10.                                 Successors
and Assigns Bound; Joint and Several Liability; Co-signers.  The covenants and agreements of
this Security Instrument shall bind and benefit the successors and assigns of
Lender and Borrower, subject to the provisions of paragraph 13.  Borrower’s covenants and agreements shall be
joint and several.  Any Borrower who
co-signs this Security Instrument but does not execute the Note: (a) is
co-signing this Security Instrument only to mortgage, grant and convey the
Borrower’s interest in the Property under the terms of this Security
Instrument; (b) is not personally obligated to pay the sums secured by this
Security Instrument; and (c) agrees that Lender and any other Borrower may
agree to extend, modify, forbear or make any accommodations with regard to the
terms of this Security Instrument or the Note without that Borrower’s consent;
provided, however, that such modification or accommodation shall not be made
without the prior written consent of the Senior Lien Holder.

 

11.                                 Notices.  Any notice to Borrower provided
for in this Security Instrument shall be given by delivering it or by mailing
it by first class mail unless applicable law requires use of another
method.  The notice shall be directed to
the Property Address or any other address Borrower designates by notice to
Lender.  Any notice to Lender shall be
given by first class mail to Lender’s address stated herein or any other
address Lender designates by notice to Borrower.  Any notice required to be given to the Senior
Lien Holder shall be given by first class mail to the following address:

 

Farmers
Insurance Group Federal Credit Union

c/o Business
Partners, LLC

9301 Winnetka
Avenue

Chatsworth, CA
91311

 

5

 

or such other address the Senior Lien Holder designated by notice to
the Borrower.  Any notice provided for in
this Security Instrument shall be deemed to have been given to Borrower or
Lender when given as provided in this paragraph.

 

12.                                 Governing
Law; Severability.  This
Security Instrument shall be governed by federal law and the law of the
jurisdiction in which the Property is located. 
In the event that any provision or clause of this Security Instrument or
the Note conflicts with applicable law, such conflict shall not affect other
provisions of this Security Instrument or the Note which can be given effect
without the conflicting provision.  To
this end the provisions of this Security Instrument and the Note are declared
to be severable.

 

13.                                 Transfer of
the Property or a Beneficial Interest in Borrower.  Except for a conveyance to the
trustee under the First Deed of Trust, if all or any part of the Property or
any interest in it is sold or transferred without Lender’s prior written
consent, Lender may, at its option, require immediate payment in full of all
sums secured by this Security Instrument. 
However, this option shall not be exercised by Lender if exercise is
prohibited by federal law as of the date of this Security Instrument.

 

If Lender exercises this option, Lender shall
give Borrower and the Senior Lien Holder prior written notice of
acceleration.  The notice shall provide a
period of not less than 30 days from the date the notice is delivered or mailed
within which Borrower must pay all sums secured by this Security
Instrument.  If Borrower fails to pay
these sums prior to the expiration of this period, Lender may invoke any
remedies permitted by this Security Instrument without further notice or demand
on Borrower.

 

Notwithstanding Lender’s right to invoke any
remedies hereunder, as provided in Section 6 above, Lender agrees that it
will not commence foreclosure proceedings or accept a deed in lieu of
foreclosure, or exercise any other rights or remedies hereunder until it has
given the Senior Lien Holder at least 60 days’ prior written notice.

 

The Borrower and the Lender agree that
whenever the Note or this Security Instrument gives the Lender the right to
approve or consent with respect to any matter affecting the Property (or the
construction of any improvements thereon) or otherwise (including the exercise
of any “due on sale” clause), and a right of approval or consent with regard to
the same matter is also granted to the Senior Lien Holder pursuant to the First
Deed of Trust, the senior Lien Holder’s approval or consent or failure to
approve or consent, as the case may be, shall be binding on the Borrower and
the Lender.

 

14.                                 Borrower’s
Right to Reinstate.  If
Borrower meets certain conditions, Borrower shall have the right to have
enforcement of this Security Instrument discontinued at any time prior to the
earlier of: (a) 5 days (or such other period as applicable law may specify for
reinstatement) before sale of the Property pursuant to any power of sale
contained in this Security Instrument, or (b) entry of a judgment enforcing
this Security Instrument.  Those
conditions are that Borrower: (a) pays Lender all sums which then would be due
under this Security Instrument and the Note as if no acceleration had occurred;
(b) cures any default of any other covenants or agreements; (c) pays all
expenses incurred in enforcing this Security Instrument, including, but not
limited to, reasonable attorneys’ fees; and (d) takes such action as Lender may
reasonably require to assure that the lien of this Security Instrument, Lender’s
rights in the Property and Borrower’s obligation to pay the sums secured by
this Security Instrument shall continue unchanged.  Upon reinstatement by Borrower, this Security
Instrument and the obligations secured hereby shall remain fully effective as if
no acceleration had occurred.  However,
this right to reinstate shall not apply in the case of acceleration under
paragraph 13.

 

6

 

15.                                 Sale of
Note; Change of Loan Servicer.  The
Note or a partial interest in the Note (together with this Security Instrument)
may be sold one or more times without prior notice to Borrower.  A sale may result in a change in the entity
(known as the “Loan Servicer”) that collects payments due under the Note and
this Security Instrument.  There also may
be one or more changes of the Loan Servicer unrelated to a sale of the
Note.  If there is a change of the Loan
Servicer, Borrower will be given written notice of the change in accordance
with paragraph 11 above and applicable law. 
The notice will state the name and address of the new Loan Servicer and
the address to which payments should be made. 
The notice will also contain any other information required by
applicable law.

 

16.                                 No
Assignment.  Until the loan
secured by the First Deed of Trust has been satisfied in full, the Lender and
the Borrower agree that the Note and the Security Instrument will not be
assigned without the Senior Lien Holder’s prior written consent.

 

NON-UNIFORM COVENANTS.  Borrower and Lender
further covenant and agree as follows:

 

17.                                 Acceleration;
Remedies.  Lender shall give
notice to Borrower and the Senior Lien Holder prior to acceleration following
Borrower’s breach of any covenant or agreement in this Security
Instrument.  The notice shall specify:
(a) the default; (b) the action required to cure the default; (c) a date, not
less than 30 days from the date the notice is given to Borrower (and with
respect to the Senior Lien Holder, 60 days from the date the notice is given to
the Senior Lien Holder), by which the default must be cured; and (d) that
failure to cure the default on or before the date specified in the notice may
result in acceleration of the sums secured by this Security Instrument and sale
of the Property.  The notice shall
further inform Borrower of the right to reinstate after acceleration and the
right to bring a court action to assert the non-existence of a default or any
other defense of Borrower to acceleration and sale.  If the default is not cured by the Borrower
on or before the date specified in the notice, and the Senior Lien Holder has
not exercised its right to cure the default, then Lender at its option may
require immediate payment in full of all sums secured by this Security
Instrument without further demand and may invoke the power of sale and any
other remedies permitted by applicable law. 
Notwithstanding Lender’s right to invoke any remedies hereunder, as
provided in Section 6 above, the Lender agrees that it will not commence
foreclosure proceedings or accept a deed in lieu of foreclosure, or exercise
any other rights or remedies hereunder until it has given the Senior Lien
Holder at least 60 days’ prior written notice. 
Lender shall be entitled to collect all expenses incurred in pursuing
the remedies provided in this paragraph 17, including, but not limited to,
reasonable attorneys’ fees and costs of title evidence.

 

If Lender invokes the power of sale, Lender
shall mail copies of a notice of sale in the manner prescribed by applicable
law to Borrower, the Senior Lien Holder and to the other persons prescribed by
applicable law.  Lender shall give notice
of sale by public advertisement for the time and in the manner prescribed by
applicable law.  Lender, without demand
on Borrower, shall sell the Property, at public auction to the highest bidder
for cash at the time and place and under the terms designated in the notice of
sale in one or more parcels and in any order Lender determines.  Lender may postpone sale of all or any parcel
of the Property to any later time on the same date by public announcement at
the time and place of any previously scheduled sale.  Lender or its designee may purchase the
Property at any sale.

 

Lender shall deliver to the purchaser Lender’s
deed conveying the Property without any covenant or warranty, expressed or
implied.  The recitals in the Lender’s
deed shall be prima facie evidence of the truth of the statements made
therein.  Lender shall apply the proceeds
of the sale in the following order: (a) to all expenses of the sale, including,
but not limited to, reasonable Lender’s and attorneys’ fees; (b) to all sums
secured by this Security Instrument; and (c) any excess to the person or
persons legally entitled to it.

 

7

 

18.                                 Release.  Upon payment of all sums secured
by this Security Instrument, Lender shall release this Security Instrument
without charge to Borrower.  Borrower
shall pay any recordation costs.

 

19.                                 Trustee.  Lender, at its option, may from
time to time appoint a Trustee by an instrument recorded in the county in which
this Security Instrument is recorded. 
Without conveyance of the Property, the trustee shall succeed to all the
title, power and duties conferred upon Lender herein and by applicable law.

 

20.                                 Modification
of First Deed of Trust Loan Documents.  The
Lender consents to any agreement or arrangement in which the Senior Lien Holder
waives, postpones, extends, reduces or modifies any provisions of the First
Deed of Trust Loan Documents, including any provisions requiring the payment of
money.

 

BY SIGNING BELOW, the Borrower and the Lender
accept and agree to the terms and covenants contained in this Security
Instrument.

 

	
  ELTP:

  	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  
	
  ELECTROPURE, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
     /S/ Floyd H. Panning

  	
   

  	
   

  	
  By

  	
    
  /s/ Anthony M. Frank

  	
   

  
	
   

  	
  Floyd H. Panning, President

  	
   

  	
   

  	
  Anthony M. Frank

  
	
   

  	
  23456 South Pointe Drive

  	
   

  	
   

  	
  1 Maritime Plaza, Suite 825

  
	
   

  	
  Laguna Hills, CA 92653

  	
   

  	
   

  	
  San Francisco, CA 94111

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  LLC:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
     /s/ Floyd H. Panning

  	
   

  	
   

  	
   

  
	
   

  	
  Floyd H. Panning, President

  	
   

  	
   

  
	
   

  	
  23456 South Pointe Drive

  	
   

  	
   

  
	
   

  	
  Laguna Hills, CA 92653

  	
   

  	
   

  
									

 

8

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