DEBT CONVERSION AGREEMENT
EXHIBIT
00.00.XX
THIS
DEBT
CONVERSION AGREEMENT (the “Agreement”) is made and entered into effective as of
the 26th day of January, 2006, by and between XXXXXXX X. XXXXX (hereinafter
referred to as “Buyer”) and ELECTROPURE, INC., a California corporation
(hereinafter referred to as “Electropure” or the “Company”).
RECITALS
WHEREAS,
Buyer loaned the Company Three Hundred Thirty Five Thousand Dollars ($335,000)
all pursuant to an 8% Convertible Term Note on the dates and in the amounts
reflected in the table below (collectively, the “Term Notes”).
WHEREAS,
as of October 31, 2005, a total of $43,220.82 in interest accrued on the above
loans is due and payable to Buyer by the Company.
WHEREAS,
Buyer wishes to convert all of the interest accrued on the Term Note through
October 31, 2005 into shares of Electropure, Inc. Common Stock and the Company
wishes to issue such shares to extinguish the debt owed Buyer.
NOW,
THEREFORE, in consideration of the foregoing and of the mutual obligations
herein contained, it is agreed as follows:
1. CONVERSION
(a) On
the
date set forth above, Buyer hereby converts all of the $43,220.82 in interest
accrued on the Term Notes into Shares of Electropure, Inc. Common Stock, $0.01
par value, at an effective conversion rate of $0.14 per share, for a total
of
308,721 Shares (the “Shares”).
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LOAN
DATE
|
LOAN
AMOUNT
|
INTEREST
AT
10/31/05
|
CONVERSION
SHARES
|
|
11/21/03
|
100,000
|
15,561.64
|
111,155
|
|
12/19/03
|
100,000
|
14,947.95
|
106,771
|
|
07/04/04
|
65,000
|
6,938.08
|
49,558
|
|
09/16/04
|
50,000
|
4,493.15
|
32,094
|
|
01/12/05
|
20,000
|
1,280.00
|
9,143
|
|
335,000
|
43,220.82
|
308,721
|
(b)
The Shares shall have the rights, preferences, privileges, restrictions and
other terms set forth in the By-laws of the Company.
(c)
Upon conversion, Buyer acknowledges that all interest accrued and due through
October 31, 2005 pursuant to the terms of the 8% Three-Year Convertible Term
Notes referenced above has been satisfied in full by the Company. Buyer
also acknowledges that pursuant to this Debt Conversion Agreement any default
by
Electropure for failure to pay interest due on the Notes through October 31,
2005 has been cured.
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EXHIBIT
00.00.XX
2. REPRESENTATIONS
AND WARRANTIES OF BUYER Buyer
represents and warrants to the Company:
(a) The
Shares are being acquired by Buyer for investment for an indefinite period,
for
Buyer’s own account, not as a nominee or agent, and not with a view to the sale
or distribution of any part thereof, and the Buyer has no present intention
of
selling, granting participations in, or otherwise distributing the same except
as may be permitted by the Securities Act of 1933, as amended (the
“Act”).
(b) Buyer
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer, or grant participation to such person or to any third
person, with respect to the Shares.
(c) That
Buyer understands that the Shares have not been registered under the Securities
Act of 1933, as amended (the “Act”), in reliance upon the exemptions from the
registration provisions of the Act contained in Section 4 (2) thereof, and
any
continued reliance on such exemption is predicated on the representations of
the
Buyer set forth herein.
(d) Buyer
understands that the Shares must be held indefinitely unless the sale or other
transfer thereof is subsequently registered under the Act, as amended, or an
exemption from such registration is available. Buyer further understands
that the Company is under no obligation to register the Securities on its behalf
or to assist him in complying with any exemption from registration except as
otherwise provided herein.
(e)
Buyer (i) has adequate means of providing for his current needs and possible
contingencies, (ii) has no need for liquidity in this investment, (iii) is
able
to bear the substantial economic risks of an investment in the Shares for an
indefinite period, (iv) at the present time, can afford a complete loss of
such
investment, and (v) does not have an overall commitment to investments which
are
not readily marketable that is disproportionate to Buyer’s net worth, and
Buyer’s investment in the Shares will not cause such overall commitment to
become excessive.
(f)
Buyer is an “accredited investor” (as defined in Regulation D promulgated under
the Act) and
the
undersigned’s total investment in the Shares does not exceed 10% of the Buyer’s
net worth.
(g)
Buyer recognizes that the Company has had only limited revenues to date and
that
the Shares as an investment involve significant risks.
(h)
Buyer will not transfer the Shares without registering them under applicable
federal and state securities laws unless the transfer is exempt from
registration. Buyer realizes that the Company may not allow a transfer of
Shares unless the transferee is also an “accredited investor”. Buyer
understands that legends will be placed on certificates representing the Shares,
with respect to the above restrictions on resale or other disposition of the
Shares and that stop transfer instructions have or will be placed with respect
to the Shares so as to restrict the assignment, resale or other disposition
thereof.
(i)
The Company will direct its transfer agent to, or will itself, place such a
stop
transfer order in its books respecting transfer of the Shares, and the
certificate or certificates representing the Shares will bear the following
legend or a legend substantially similar thereto:
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EXHIBIT
00.00.XX
“THESE
SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY
NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF: (1) AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT, OR (2) AN OPINION
OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.”
(j)
That Buyer understands that Rule 144, promulgated by the Securities and Exchange
Commission under the Act, may not be currently available for sale of the Shares,
and there is no assurance that it will be available at any particular time
in
the future. If and when Rule 144 is available for sale of the Common Stock
underlying the Shares, such sales in reliance upon Rule 144 may only be (i)
in
limited quantities after the Shares have been held for one (1) year after being
sold by the Company, or (ii) in unlimited quantities by non-affiliates after
the
Shares have been held for two (2) years after being sold by the Company, in
each
case in accordance with the conditions of the Rule, all of which must be met
(including the requirement, if applicable, that adequate information concerning
the Company is then available to the public). The Company and Buyer
acknowledges that the Company has no
obligation to supply the information required for sales under Rule
144.
(k)
The Purchase Price to be paid by Buyer to Company for the Shares has been
determined by Buyer as fair and appropriate based solely upon Buyer’s
independent investigation and due diligence of the Company, and neither Buyer
nor the Company nor any of their agents, including, without limitation, any
of
their officers, directors, employees, accountants and attorneys, has made any
representations or warranties whatsoever in connection with the sale of the
Shares by the Company to Buyer. Buyer has had sufficient opportunity in
connection with the sale of the Shares to review the Company’s business and
affairs (including, without limitation, the Company’s financial statements and
other information). The Buyer has had answered to his satisfaction any
questions with respect to the Company’s business and affairs. Buyer
further has had the opportunity to obtain independent financial, legal,
accounting, business, tax and other appropriate advice with respect to the
transactions contemplated by this Agreement, and is not relying upon the Company
or any of its agents in any manner in connection with same.
3. REGISTRATION
RIGHTS. The Company agrees to include
for registration under the Act all of the Shares issued hereby in the next
Registration Statement filed by the Company with the Securities and Exchange
Commission.
4. REPRESENTATIONS
AND
WARRANTIES OF ELECTROPURE
(a)
Electropure is a corporation duly organized and validly existing under the
laws
of the State of California without limit as to duration of its existence, and
is
authorized and in good standing to do business in no other state; Electropure
has the corporate power and adequate authority, rights and franchise to own
its
property and to carry on its business as now conducted; and, subject to
ratification by its Board of Directors, Electropure has the corporate power
and
adequate authority to enter into this Agreement.
(b)
The execution and delivery of this Agreement and subject to (1) ratification
by
the Board of Directors of the Company and (2) filing the Certificate with the
California Secretary of State, the performance of the provisions of this
Agreement are not in contravention of or in conflict with any law or regulation
or any term or provision of Electropure’s Articles of Incorporation or By-Laws
and are duly authorized and do not require the consent or approval of any
governmental body or other regulatory authority; and this Agreement is a valid,
binding and legal obligation of Electropure, enforceable in accordance with
the
terms herein.
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EXHIBIT
00.00.XX
5. ENTIRE
AGREEMENT This Agreement embodies the
entire agreement and understanding between the parties hereto with respect
to
the subject matter hereof and supersedes all prior and contemporaneous
agreements and understandings relating to such subject matter.
6. AMENDMENT This
Agreement may not be amended except by written document executed by the
parties.
7. SUBJECT
HEADINGS Subject headings are included
for convenience only and shall not be deemed part of this
Agreement.
8. SEVERABILITY If
any provision of this Agreement shall be held unenforceable as applied to any
circumstance, the remainder of this Agreement and the application of such
provision to other circumstances shall be interpreted so as best to effect
the
intent of the parties. The parties further agree to replace any such
unenforceable provision with an enforceable provision (and to take such other
action) which will achieve, to the extent possible, the purposes of the
unenforceable provision.
9.
GOVERNING LAW This Agreement shall be
governed by and construed under the laws of the State of California in force
from time to time.
10.
PARTIES BOUND This Agreement is binding
on and shall inure to the benefit of the parties and their respective
successors, assign, heirs, and legal representatives.
11.
SURVIVAL The representations,
warranties, covenants, and agreements contained in this Agreement shall survive
the consummation of the transactions contemplated hereby.
12.
COUNTERPARTS This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same
instrument.
IN
WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first above written.
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COMPANY:
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BUYER:
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ELECTROPURE,
INC.
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/S/
XXXXXXXXX XXXXXXXXX
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/S/
XXXXXXX X. XXXXX
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|
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Xxxxxxxxx
Xxxxxxxxx, CFO
|
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Xxxxxxx
X. Xxxxx
|
||
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00000
Xxxxx Xxxxxx Xxxxx
|
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0
Xxxxxxxx Xxxxx, Xxxxx 000
|
||
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Xxxxxx
Xxxxx, XX 00000-0000
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Xxx
Xxxxxxxxx, XX 00000
|
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