EXHIBIT 10.10.AH
Page 1
DEBT CONVERSION AGREEMENT
THIS DEBT CONVERSION AGREEMENT (the "Agreement") is made and entered
into effective as of the 2nd day of January, 2002, by and between XXXXXXX X.
XXXXX XXXXX PLAN XXX XXXXXXX XXXXXX & CO., INC. (hereinafter referred to as
"Buyer") and ELECTROPURE, INC., a California corporation (hereinafter referred
to as "Electropure" or the "Company").
R E C I T A L S
WHEREAS, Buyer loaned the Company One Million Dollars
($1,000,000) under the terms of that certain 8% Three-Year Convertible
Term Note dated January 17, 2001 (the "Term Note").
WHEREAS, as of December 31, 2001, a total of $20,000.00 in
interest accrued under the above Term Note is due and payable to Buyer
by the Company.
WHEREAS, Buyer wishes to convert all of the interest accrued on
the Term Note through December 31, 2001 into shares of Electropure, Inc.
Common Stock and the Company wishes to issue such shares to extinguish
the debt owed Buyer.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
obligations herein contained, it is agreed as follows:
1. CONVERSION
(a) On the effective date set forth above, Buyer hereby
converts all of the $20,000.00 in interest accrued on the Term Note into Forty
Seven Thousand Six Hundred Nineteen (47,619) Shares of Electropure, Inc. Common
Stock, $0.01 par value, at an effective conversation rate of $0.42 per share
(the "Shares").
(b) The Shares shall have the rights, preferences, privileges,
restrictions and other terms set forth in the By-laws of the Company.
(c) Upon conversion hereby and pursuant to the Debt Conversion
Agreement entered into on November 1, 2001 whereby $56,444.44 in interest
accrued on said note on was converted to 161,270 shares of Common Stock, Buyer
acknowledges that all interest accrued and due through December 31, 2001
pursuant to the terms of the 8% Three-Year Convertible Term Note entered into
between the parties on January 17, 2001 has been satisfied in full by the
Company. Buyer also acknowledges that pursuant to these Debt Conversion
Agreements any default by Electropure for failure to pay of interest due on the
Term Note through December 31, 2001 has been cured.
2. REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and
warrants to the Company:
(a) The Shares are being acquired by Buyer for investment for
an indefinite period, for Buyer's own account, not as a nominee or agent, and
not with a view to the sale or distribution of any part thereof, and the Buyer
has no present intention of selling, granting participations in, or
EXHIBIT 10.10.AH
Page 2
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:
"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
EXHIBIT 10.10.AH
Page 3
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.
EXHIBIT 10.10.AH
Page 4
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.
COMPANY: BUYER:
ELECTROPURE, INC. XXXXXXX X. XXXXX XXXXX PLAN
XXX XXXXXXX XXXXXX & CO., INC.
/S/ XXXXXXXXX XXXXXXXXX /S/ XXXXXXX X. XXXXX
-------------------------------- --------------------------------------
Xxxxxxxxx Xxxxxxxxx, Xxxxxxx X. Xxxxx, Trustee
Chief Financial Officer 000 Xxxxxxxxxx Xxxxxx
00000 Xxxxx Xxxxxx Xxxxx Xxx Xxxxxxxxx, XX 00000
Xxxxxx Xxxxx, XX 00000-0000
