-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TOep+JBs3q1GL8wr16Ms/jBF5O23I9fL5hwOzSSfw5O9nqGec1hzJ3pmcXdkXHS7 YSPM3bLUvtqY53DoOqHKtQ== 0001095811-01-001156.txt : 20010214 0001095811-01-001156.hdr.sgml : 20010214 ACCESSION NUMBER: 0001095811-01-001156 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20010213 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ELECTROPURE INC CENTRAL INDEX KEY: 0000808015 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 330056212 STATE OF INCORPORATION: CA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-40223 FILM NUMBER: 1536803 BUSINESS ADDRESS: STREET 1: 23456 S POINTE DR CITY: LAGUNA HILLS STATE: CA ZIP: 92653-1512 BUSINESS PHONE: 9497709347 MAIL ADDRESS: STREET 1: 23456 S POINTE DR STREET 2: SUITE A CITY: LAGUNA HILLS STATE: CA ZIP: 92653 FORMER COMPANY: FORMER CONFORMED NAME: HOH WATER TECHNOLOGY CORP DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FRANK ANTHONY M CENTRAL INDEX KEY: 0000904422 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 320 MEADOWOOD CT CITY: PLEASANT HILL STATE: CA ZIP: 94523 BUSINESS PHONE: 4159746245 SC 13D/A 1 a69543aosc13da.txt AMENDMENT NO. 10 TO SCHEDULE 13D 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ----------------- AMENDMENT NO. 10 TO SCHEDULE 13D (RULE 13d-101) UNDER THE SECURITIES EXCHANGE ACT OF 1934 ELECTROPURE, INC. (Name of Issuer) Common Stock, $0.01 par value per share (Title of Class of Securities) 286133 (CUSIP Number) Catherine Patterson Electropure, Inc. 23456 South Pointe Drive Laguna Hills, CA 92653 (949) 770-9347 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) January 17, 2001 (Date of Event Which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1 (b) (3) or (4), check the following box [ ]. (Continued on following pages) (Page 1 of 8 pages) The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 13D - AMENDMENT NO. 10 CUSIP NO. 286133 PAGE 2 OF 8 PAGES - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON ANTHONY M. FRANK - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS PF - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OR ORGANIZATION CALIFORNIA, USA - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 6,187,551 NUMBER OF ------------------------------------------------ SHARES 8 SHARED VOTING POWER BENEFICIALLY OWNED BY NONE EACH ------------------------------------------------ REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH 6,187,551 ------------------------------------------------ 10 SHARED DISPOSITIVE POWER NONE - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 6,187,551, INCLUDING 250,000 SHARES OF SERIES C CONVERTIBLE PREFERRED STOCK AND 250,000 SHARES OF SERIES D CONVERTIBLE PREFERRED STOCK - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 55.2% OF THE COMMON STOCK 100% OF THE SERIES C CONVERTIBLE PREFERRED STOCK 100% OF THE SERIES D CONVERTIBLE PREFERRED STOCK 43.0% OF VOTING POWER - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - 6,204,948 EP - 80,000 - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT! 3 Page 3 of 8 This Amendment No. 10 amends, in relevant part as follows, the Schedule 13D, filed August 2, 2000, of Anthony M. Frank (the "Reporting Person") with respect to the common stock, $0.01 par value per share ("Common stock") of Electropure, Inc., a California corporation. ITEM 1. SECURITY AND ISSUER Common Stock, $0.01 par value, of Electropure, Inc., a California corporation ("Electropure"). Electropure's principal executive office is located at 23456 South Pointe Drive, Laguna Hills, California 92653. ITEM 2. IDENTITY AND BACKGROUND (a) Anthony M. Frank (b) 320 Meadowood Court, Pleasant Hill, CA 94523 (c) Retired - former Postmaster General (d) Not applicable (e) Not applicable (f) U.S.A. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The $500,000 utilized to purchase 250,000 shares of Electropure, Inc. Series D convertible preferred stock, as described below, was from Mr. Frank's personal funds. ITEM 4. PURPOSE OF THE TRANSACTION On January 17, 2001, Mr. Frank exchanged 1,000,000 shares of Electropure, Inc. Series B convertible preferred stock, $0.01 par value, for 250,000 shares of Electropure, Inc. Series C convertible preferred stock, $0.01 par value. Each share of the Series C preferred stock is convertible at the option of the holder into four shares of common stock. The Series C preferred stock has no voting rights and has a preference in liquidation equal to $4.00 per share. On January 17, 2001, Mr. Frank also purchased 250,000 shares of Electropure, Inc. Series D convertible preferred stock, $0.01 par value, for $500,000, payable in equal monthly installments of $100,000 commencing on January 26, 2001. The Series D preferred stock has no voting rights; has a liquidation preference equal to $2.00 per share; and is convertible at the option of the holder into two shares of common stock for each Series D preferred share converted. Mr. Frank may in the future acquire, hold and dispose of shares of common stock or warrants or options for such common stock or other securities of Electropure and such transactions may be in the open market, privately or directly from Electropure. 4 Page 4 of 8 Except as set forth above, Mr. Frank does not have any plans or proposals which may have, which relate to or which would result in: (a) The acquisition by any person of additional securities of Electropure, or the disposition of securities of Electropure; (b) An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving Electropure or any of its subsidiaries; (c) A sale or transfer of a material amount of assets of Electropure or any of its subsidiaries; (d) Any change in the present Board of Directors or management of Electropure, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the Board; (e) Any material change in the present capitalization or dividend policy of Electropure; (f) Any other material change in Electropure's business or corporate structure; (g) Changes in Electropure's charter, bylaws or instruments, correspondence thereto or other actions which may impede the acquisition or control of Electropure by any person; (h) Causing a class of securities of Electropure to be delisted from a national securities exchange or to cease to be quoted in an inter-dealer quotation system of a registered national securities association; (i) A class of equity securities of Electropure becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) Any action similar to any of those enumerated above. ITEM 5. INTEREST IN SECURITIES OF ISSUER (a) Mr. Frank owns the following shares of Electropure: 6,187,551 shares of common stock with one vote per share1. 250,000 shares of Series C convertible preferred stock with no voting rights. 250,000 shares of Series D convertible preferred stock with no voting rights. Mr. Frank owns beneficially 52.4% of the Common stock (55.2% if all of the warrants described below are exercised); 100% of the Series C Convertible preferred stock; and 100% of the Series D convertible preferred stock of Electropure. Mr. Frank owns 43.0% of the voting power of all classes of stock of Electropure. - -------- (1) Includes warrants for 300,000 shares of common stock exercisable at $2.25 per share; 300,000 shares exercisable at $1.25 per share; and 902,603 shares exercisable at $2.00 per share. 5 Page 5 of 8 (b) Mr. Frank has the sole voting and dispositive power over the shares he owns. (c) Since August 2, 2000, Mr. Frank has entered into the following transactions with regard to Electropure's common stock and/or preferred stock: On January 17, 2001, Mr. Frank converted 1,000,000 shares of Series B convertible preferred stock each with four (4) votes per share into 250,000 shares of Series C convertible preferred stock which carry no voting rights. Each series of preferred stock have an aggregate liquidation value equal to the $1,000,000 price Mr. Frank paid in January 1999 for the Series B shares. Each one share of Series C preferred stock is convertible into two (2) shares of common stock at the option of the holder. Also on January 17, 2001, Mr. Frank agreed to purchase up to 250,000 shares of Series D convertible preferred stock for $2.00 per share in 50,000 monthly increments beginning on January 26, 2001. Each share of Series D preferred stock has a liquidation value of $2.00 per share and is convertible, at the option of Mr. Frank, into two (2) shares of common stock. The following Warrants are currently exercisable by Mr. Frank: DATE GRANTED PURCHASE PRICE NO. OF SHARES ------------ -------------- ------------- 12/17/92 $1.25 50,000 12/17/96 $1.25 50,000 08/02/00 $1.25 250,000 02/22/96 $2.25 300,000 07/29/99 $2.00 450,000 02/25/00 $2.00 202,603 03/06/00 $2.00 250,000 01/11/01 $0.47 250,000 ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SECURITIES OF THE ISSUER Mr. Frank has the right, until December 17, 2002 to purchase 50,000 shares of Electropure's common stock at $1.25 per share. Additionally, Mr. Frank has the right, until February 22, 2001 to purchase 300,000 shares of common stock at $2.25 per share. Mr. Frank also has the right, until August 31, 2002, to purchase 450,000 shares of Electropure common stock at $2.00 per share. Such right is subject to earlier redemption by Electropure at $0.05 per warrant if the common stock shall equal or exceed $3.00 per share for thirty consecutive trading days. Pursuant to his subscription of Units in February and March, 2000, Mr. Frank has the right until May 23, 2003 to purchase 452,603 shares of Electropure common stock at $2.00 per share. Such right is subject to earlier redemption by Electropure at $0.05 per warrant if the common stock shall equal or exceed $4.00 per share for thirty consecutive trading days. 6 Page 6 of 8 Mr. Frank has the right, pursuant to his August 2000 subscription of securities, to purchase 250,000 shares of Electropure common stock at $1.25 per share. The warrants are exercisable commencing on July 31, 2001 and expire on June 20, 2005. As described in Item 4, Mr. Frank also received the right to purchase 250,000 shares of Micro Imaging Technology, the private-held, wholly-owned subsidiary of Electropure, Inc. Mr. Frank has the right to purchase 250,000 shares of common Stock at $0.47 per share through January 11, 2006. Such warrants were granted in recognition for Mr. Frank's assistance to Electropure over the years. Pursuant to an August, 1997 License Termination Agreement between the Company and its former licensee, EDI Components, the Company is obligated to issue shares to the investors of EDI Components upon the Common stock of the Company first having a per share market value for thirty consecutive trading days equal to or in excess each of $3.00, $4.00 and $5.50 per share (each a "Trigger Value"). Of such shares, if and when issued by the Company, as an investor in EDI Components, Mr. Frank is to receive 16,667, 12,501 and 9,090 shares valued at $3.00, $4.00 and $5.50, respectively. On January 17, 2001, Mr. Frank loaned Electropure $1,000,000 for three years at 8% annual interest as the down payment to purchase the building occupied by Electropure. Interest on the loan is payable each calendar quarter beginning on June 30, 2001, with the principal balance due on January 18, 2004. ITEM 7. EXHIBITS 10.10.A Subscription Agreement, December 6, 1989 * 10.10.B Subscription Agreement, October 10, 1990 * 10.10.C Subscription Agreement, March 1, 1991 * 10.10.D Warrants for 4,444 shares (Warrant No. 219 - 11/17/89) * 10.10.E Warrants for 2,222 shares (Warrant No. 278 - 10/18/90) * 10.10.F Warrants for 6,250 shares (Warrant No. 299 - 03/27/91) * 10.10.G Warrants for 2,500 shares (Warrant No. 324 - 08/06/92) * 10.10.H Warrants for 3,125 shares (Warrant No. 332 - 08/06/92) * 10.10.I Warrants for 25,000 shares (Warrant No. 361 - 12/18/92) * 10.10.J Warrants for 50,000 shares (Warrant No. 360 - 12/17/92) * 10.10.K Warrants for 20,000 shares (Warrant No. E-1003 - 07/29/92) * 7 Page 7 of 8 10.10.L Warrants for 2,500 shares (Warrant No. E-1024 - 06/24/93) ** 10.10.M Warrants for 5,000 shares (Warrant No. E-1029 - 05/25/94) ** 10.10.N Warrants for 5,000 shares (Warrant No. E-1030 - 06/17/94) ** 10.10.O Warrants for 4,000 shares (Warrant No. E-1034 - 03/27/95) ** 10.10.P Warrants for 300,000 shares (Warrant No. 388 - 02/22/96) ** 10.10.Q Stock Right Agreement No. E-1034 ** 10.10.R 10% Two-Year Convertible Term Note - 12/31/96 ** 10.10.S 10% Two-Year Convertible Term Note - 02/25/97 ** 10.10.T 10% Two-Year Convertible Term Note - 04/10/97 ** 10.10.U 10% Two-Year Convertible Term Note - 01/26/98 **** 10.10.V 10% Two-Year Convertible Term Note - 02/04/98 (face sheet only) **** 10.10.W Stock Purchase Agreement - 01/15/99 ***** 10.10.X 10% Two-Year Convertible Term Note - 12/13/99 ****** 10.10.Y 10% Two-Year Convertible Term Note - 01/25/00 ****** 10.10.Z 10% Two-Year Convertible Term Note - 02/10/00 ****** 10.10.AA Warrants for 250,000 shares (Warrant No. A-3128- 01/11/01) 10.10.AB 8% Three-Year Convertible Term Note - 01/17/01 10.10.AC Stock Conversion Agreement - 01/17/01 10.10.AD Stock Purchase Agreement - 01/17/01 10.47.8 License Termination Agreement dated August 14, 1997 (effective 08/05/97) *** - -------------- * Previously filed in connection with Schedule 13D filed on December 18, 1992 by the Reporting Person. ** Previously filed in connection with Amendment No. 1 to Schedule 13D filed on June 2, 1997 by the Reporting Person. *** Previously filed in connection with Issuer's Form 10-QSB for the fiscal quarter ended July 31, 1997. **** Previously filed in connection with Issuer's Form 10-KSB for the fiscal year ended October 31, 1998. ***** Previously filed in connection with Amendment No. 6 to Schedule 13D filed on February 16, 1999 by the Reporting Person. ****** Previously filed in connection with Amendment No. 8 to Schedule 13D filed on March 15, 2000 by the Reporting Person. 8 Page 8 of 8 SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Amendment No. 10 to Schedule 13D is true, complete and correct. Dated: February 9, 2001 /s/ ANTHONY M. FRANK -------------------------- Anthony M. Frank 9 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.10.A Subscription Agreement, December 6, 1989 * 10.10.B Subscription Agreement, October 10, 1990 * 10.10.C Subscription Agreement, March 1, 1991 * 10.10.D Warrants for 4,444 shares (Warrant No. 219 - 11/17/89) * 10.10.E Warrants for 2,222 shares (Warrant No. 278 - 10/18/90) * 10.10.F Warrants for 6,250 shares (Warrant No. 299 - 03/27/91) * 10.10.G Warrants for 2,500 shares (Warrant No. 324 - 08/06/92) * 10.10.H Warrants for 3,125 shares (Warrant No. 332 - 08/06/92) * 10.10.I Warrants for 25,000 shares (Warrant No. 361 - 12/18/92) * 10.10.J Warrants for 50,000 shares (Warrant No. 360 - 12/17/92) * 10.10.K Warrants for 20,000 shares (Warrant No. E-1003 - 07/29/92) * 10.10.L Warrants for 2,500 shares (Warrant No. E-1024 - 06/24/93) ** 10.10.M Warrants for 5,000 shares (Warrant No. E-1029 - 05/25/94) ** 10.10.N Warrants for 5,000 shares (Warrant No. E-1030 - 06/17/94) ** 10.10.O Warrants for 4,000 shares (Warrant No. E-1034 - 03/27/95) ** 10.10.P Warrants for 300,000 shares (Warrant No. 388 - 02/22/96) ** 10.10.Q Stock Right Agreement No. E-1034 ** 10.10.R 10% Two-Year Convertible Term Note - 12/31/96 ** 10.10.S 10% Two-Year Convertible Term Note - 02/25/97 ** 10.10.T 10% Two-Year Convertible Term Note - 04/10/97 ** 10.10.U 10% Two-Year Convertible Term Note - 01/26/98 **** 10.10.V 10% Two-Year Convertible Term Note - 02/04/98 (face sheet only) **** 10.10.W Stock Purchase Agreement - 01/15/99 ***** 10.10.X 10% Two-Year Convertible Term Note - 12/13/99 ****** 10.10.Y 10% Two-Year Convertible Term Note - 01/25/00 ****** 10.10.Z 10% Two-Year Convertible Term Note - 02/10/00 ****** 10.10.AA Warrants for 250,000 shares (Warrant No. A-3128- 01/11/01) 10.10.AB 8% Three-Year Convertible Term Note - 01/17/01 10.10.AC Stock Conversion Agreement - 01/17/01 10.10.AD Stock Purchase Agreement - 01/17/01 10.47.8 License Termination Agreement dated August 14, 1997 (effective 08/05/97) *** - -------------- * Previously filed in connection with Schedule 13D filed on December 18, 1992 by the Reporting Person. ** Previously filed in connection with Amendment No. 1 to Schedule 13D filed on June 2, 1997 by the Reporting Person. *** Previously filed in connection with Issuer's Form 10-QSB for the fiscal quarter ended July 31, 1997. **** Previously filed in connection with Issuer's Form 10-KSB for the fiscal year ended October 31, 1998. ***** Previously filed in connection with Amendment No. 6 to Schedule 13D filed on February 16, 1999 by the Reporting Person. ****** Previously filed in connection with Amendment No. 8 to Schedule 13D filed on March 15, 2000 by the Reporting Person. EX-10.10.AA 2 a69543aoex10-10_aa.txt EXHIBIT 10.10.AA 1 EXHIBIT 10.10.AA; PAGE 1 23456 South Pointe Drive Laguna Hills, California 92653 949-770-9347 Fax 949-770-9209 ELECTROPURE, INC. ================================================================================ WARRANT NO. A-3128 DATED JANUARY 11, 2001 Void after 5:00 P.M. Los Angeles City Time, on January 11, 2006 Warrant to Purchase 250,000 Shares of Common Stock THIS WARRANT, AND THE COMMON STOCK ISSUABLE UPON ITS EXERCISE, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED, DISPOSED OF OR OFFERED FOR SALE, IN WHOLE OR IN PART,, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THAT ACT COVERING THIS WARRANT AND/OR THE COMMON STOCK ISSUABLE UPON ITS EXERCISE, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ELECTROPURE, INC. THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE. - -------------------------------------------------------------------------------- WARRANT TO PURCHASE COMMON STOCK OF ELECTROPURE, INC. - -------------------------------------------------------------------------------- This is to certify that, for value received, ANTHONY M. FRANK, or assigns, ("Holder"), is entitled to purchase, subject to the provisions of this Warrant, from ELECTROPURE, INC., a California corporation ("Company"), Two Hundred Fifty Thousand (250,000 ) fully paid, validly issued and nonassessable shares of Common Stock, $0.01 par value, of the Company ("Common Stock") at any time or from time to time during the period from the date hereof until 5:00 P.M. Los Angeles City Time on January 11, 2006 (the "Exercise Period") at an initial exercise price equal to $0.47 per share. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Common Stock may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time are hereinafter sometimes referred to as "Warrant Shares" and the exercise price of a share of Common Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price." 2 EXHIBIT 10.10.AA; PAGE 2 A. EXERCISE OF WARRANT. During and subject to the Exercise Period, this Warrant may be exercised in whole or in part at any time and the Holder shall have the right to exercise this Warrant into the kind and amount of shares of stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which this Warrant might have been exercisable immediately prior thereto. This Warrant may be exercised by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form. As soon as practicable after each such exercise of the Warrants, but not later than fourteen (14) days from the date of such exercise, the Company shall issue and deliver to the Holder a certificate or certificates for the Warrant Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the Warrant Shares purchasable thereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be physically delivered to the Holder. B. RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance and delivery upon exercise of the Warrants. C. FRACTIONAL SHARES. No fractional shares or script representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the current market value of a share, determined as follows: (1) If the Common Stock is listed on a National Securities Exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the NASDAQ system, the current market value shall be the last reported sale price of the Common Stock on such exchange or system on the last business day prior to the date of exercise of this Warrant or if no such sale is made on such day, the average closing bid and asked prices for such day on such exchange or system; or (2) If the Common Stock is not so listed or admitted to unlisted trading privileges, the current market value shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or (3) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market value shall be an amount, not less than book value thereof as at the end of the most recent fiscal year of the Company ending prior to the date of the exercise of the Warrant, determined in such reasonable manner as may be prescribed by the Board of Directors of the Company or, if higher, $0.01 per share. 3 EXHIBIT 10.10.AA; PAGE 3 D. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other warrants of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder. Upon surrender of this Warrant to the Company at its principal office or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant I the name of the assignee named in such instrument of assignment and this Warrant shall promptly be canceled. This Warrant may be divided or combined with other warrants which carry the same rights upon presentation hereof at the principal office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term "Warrant" as used herein includes any Warrants into which this Warrant may be divided or exchanged. Upon receipt of the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. E. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at low or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. F. ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrants shall be subject to adjustment from time to time upon the happening of certain events as follows: (1) In case the Company shall (i) declare a dividend or make a contribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivisions, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. Such adjustment shall be made successively whenever any event listed above shall occur. (2) Whenever the Exercise Price payable upon exercise of each Warrant is adjusted pursuant to Subsection (1) above, the number of shares purchasable upon exercise of this Warrant shall simultaneously be adjusted by multiplying the number of shares initially issuable upon exercise of this Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise Price, as adjusted. 4 EXHIBIT 10.10.AA; PAGE 4 (3) Whenever the Exercise Price is adjusted, as herein provided, the Company shall promptly cause a notice setting forth the adjusted Exercise Price and adjusted number of shares issuable upon exercise of each Warrant to be mailed to the Holders, at their last addresses appearing in the Warrant Register, and shall cause a certified copy thereof to be mailed to its transfer agent, if any. The Company may retain a firm of independent certificate public accountants selected by the Board of Directors (who may be the regular accountants employed by the Company) to make any computation required by this Section F and a certificate signed by such firms shall be conclusive evidence of the correctness of such adjustment. (4) In the event that at any time, as a result of an adjustment made pursuant to Subsection (1) above, the Holder of this Warrant thereafter shall become entitled to receive any shares of the Company, other than Common Stock, thereafter the number of such other shares so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsection (1) above. (5) Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Agreement. G. OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the provisions of the foregoing Section, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the holder or any holder of a Warrant executed and delivered pursuant to Section A and the Company shall, forthwith after each such adjustment, mail a copy by certified mail of such certificate to the Holder or any such holder. H. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon the Common Stock or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights or (iii) if the capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company 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 shall be effected, 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, distribution or rights, 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. 5 EXHIBIT 10.10.AA; PAGE 5 I. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant at any time prior to the expiration of the Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which might have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section J shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Subsection (1) of Section F hereof. IN WITNESS THEREOF, the Company has caused this Warrant to be signed and attested by the Undersigned, being duly authorized, as of the date set forth on the first part hereof. ELECTROPURE, INC. By: /s/ CATHERINE PATTERSON ----------------------------- CATHERINE PATTERSON CORPORATE SECRETARY 6 EXHIBIT 10.10.AA; PAGE 6 23456 South Pointe Drive Laguna Hills, California 92653 949-770-9347 Fax 949-770-9209 ELECTROPURE, INC. ================================================================================ PURCHASE FORM WARRANT NO. A-3128 DATED JANUARY 11, 2001 Dated:____________________, _____ The undersigned hereby irrevocably elects to exercise the within Warrant to the extent of purchasing _________________ shares of Common Stock and hereby makes payment of $____________________ in payment of the actual exercise price thereof. ================================================================================ INSTRUCTIONS FOR REGISTRATION OF STOCK Name ___________________________________________________________________________ (Please typewrite or print in block letters) Address ________________________________________________________________________ ------------------------------ Signature of Warrant Holder 7 EXHIBIT 10.10.AA; PAGE 7 23456 South Pointe Drive Laguna Hills, California 92653 949-770-9347 Fax 949-770-9209 ELECTROPURE, INC. ================================================================================ ASSIGNMENT FORM WARRANT NO. A-3128 DATED JANUARY 11, 2001 FOR VALUE RECEIVED, the undersigned Warrant Holder hereby sells, assigns and transfers unto: Name __________________________________________________________________ (Please typewrite or print in block letters) Address _______________________________________________________________ the right to purchase Common Stock represented by this Warrant to the extent of ____________ shares as to which such right is exercisable and does hereby irrevocably constitute and appoint ________________________________ Attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Dated:_________________, _____ By: ___________________________ Signature of Warrant Holder EX-10.10.AB 3 a69543aoex10-10_ab.txt EXHIBIT 10.10.AB 1 EXHIBIT 10.10.AB; PAGE 1 8% THREE-YEAR CONVERTIBLE TERM NOTE $1,000,000 JANUARY 17, 2001 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 KEOGH PLAN UTA CHARLES SCHWAB & CO., INC., 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 ONE MILLION DOLLARS ($1,000,000), in lawful money of the United States, on January 17, 2004, or if such day is not a regular business day, then on the next business day thereafter (the "Maturity Date"). Accrued interest shall be paid quarterly in accordance with the terms set forth in Section 2 hereof. 1. CONVERSION. (a) 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 January 17, 2004 (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 an instrument which provides Holder with a security interest in and to the real property located at 23456 South Pointe Drive, Laguna Hills, California 92653 (the "Property"). (b) As promptly as practicable after the surrender, as herein provided, of this Note for conversion, the Company shall deliver or cause to be delivered, to or upon the written order of the Holder of this Note so surrendered, an instrument which provides Holder with, to the extent possible, all of the rights, preferences and privileges of a second mortgage lender on the Property (the "Conversion Instrument"). The provisions of the Conversion Instrument shall be subject to mutual approval by the parties hereto. (c) Such conversion shall be deemed to have been made at the close of business on the date that this Note shall have been received by the Company for conversion, with a written Notice of Conversion duly executed, in satisfactory form for conversion, so that the rights of the Holder of this Note as a Noteholder, to the extent of that portion of the Note 2 EXHIBIT 10.10.AB; PAGE 2 so converted, shall cease at such time and, subject to the following provisions of this Section 1(b). If this Note shall be converted in part only, the Company. shall, upon surrender of this Note for cancellation, execute and deliver a new Note evidencing the rights of the Holder thereof with regard to that portion of the Note not converted. The person or persons entitled to receive the Conversion Instrument upon conversion of this Note shall be treated for all purposes as having become the record holder or holders of rights ascribed thereto. 2. PAYMENTS AND PREPAYMENTS. (a) All payment and prepayments of principal and interest shall be made in immediately available funds to the Holder at 101 Montgomery, San Francisco, California 94104. (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. Accrued interest shall be paid quarterly on the last day of March, June, September and December each year; provided, however, that the first interest payment hereunder shall be due on June 30, 2001. 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 all or any part of this Note by notifying the Holder in writing at least fifteen (15) days in advance of the proposed date for prepayment (the "Repayment Date"). The notice shall state: (1) the Repayment Date; (2) that the portion of the Note to be repaid may be converted at any time before 5:00 P.M. Los Angeles time on the fifth (5th) day immediately prior to the Repayment Date; (3) that Holders who want to convert any portion of this Note must satisfy the requirements of Section (1) hereof; (4) the Note called for repayment must be surrendered to the Company to collect the amount being prepaid, and if less than the entire principal amount is being repaid, to receive a new Note for the remaining balance; and (5) that interest on the portion of the Note called for repayment ceases to accrue on and after the Repayment Date. 3 EXHIBIT 10.10.AB; PAGE 3 (d) Once notice of prepayment is mailed, the part of this Note called for prepayment, unless converted, becomes due and payable on the Repayment Date. Upon surrender to the Company, such part of this Note shall be paid at the Repayment Date, plus accrued interest on the portion of the principal being prepaid to the Prepayment Date. (e) Upon surrender of this Note to be prepaid in part, the Company shall issue to the Holder a new Note equal in principal amount to the nonprepaid portion of this Note surrendered. 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 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 4 EXHIBIT 10.10.AB; PAGE 4 (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 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 4(d) hereof, the entire unpaid principal amount of the Note, all interest accrued and 5 EXHIBIT 10.10.AB; PAGE 5 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 4, 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 4(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. 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. 6 EXHIBIT 10.10.AB; PAGE 6 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 2 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. ANTHONY M. FRANK KEOGH PLAN UTA CHARLES SCHWAB & CO., INC. By: /s/ FLOYD H. PANNING By: /s/ ANTHONY M. FRANK ----------------------------------- -------------------------------- FLOYD PANNING, PRESIDENT ANTHONY M. FRANK 23456 South Pointe Drive 320 Meadowood Court Laguna Hills, CA 92653 Pleasant Hill, CA 94523-3176 EX-10.10.AC 4 a69543aoex10-10_ac.txt EXHIBIT 10.10.AC 1 EXHIBIT 10.10.AC; PAGE 1 STOCK CONVERSION AGREEMENT THIS STOCK EXCHANGE AGREEMENT (the "Agreement") is made and entered into as of the 17th day of January, 2001, by and between ANTHONY M. FRANK KEOGH PLAN UTA CHARLES SCHWAB & CO., INC. (hereinafter referred to as "Holder") and ELECTROPURE, INC., a California corporation (hereinafter referred to as "Electropure" or the "Company"). R E C I T A L S WHEREAS, on or about January 15, 1999, Holder purchased One Million (1,000,000) shares of Electropure, Inc. Series B Preferred Stock ("Series B Preferred"), par value $1.00, for the sum of One Million Dollars ($1,000,000). WHEREAS, Holder wishes to convert all of the Series B Preferred into Series C Convertible Preferred Shares of Electropure ("Series C Preferred"), $1.00 par value. NOW, THEREFORE, in consideration of the foregoing and of the mutual obligations herein contained, it is agreed as follows: 1. CONVERSION (a) Effective on the date hereof, Holder hereby converts One Million (1,000,000) Shares of Electropure, Inc. Series B Convertible Preferred Stock, $1.00 par value, into Two Hundred Fifty Thousand (250,000) Shares of Electropure, Inc. Series C Convertible Preferred Stock, $1.00 par value. (b) The Series C Preferred shall have the rights, preferences, privileges, restrictions and other terms set forth in Exhibit "A" hereto, the Certificate of Determination for the Series C Convertible Preferred Shares (the "Certificate"). (c) Upon conversion hereby, Holder surrenders all right, title and interest in and to the Series B Preferred Shares of Electropure. 2. REPRESENTATIONS AND WARRANTIES OF HOLDER Holder represents and warrants to the Company: (a) The Series C Preferred are being acquired by Holder for investment for an indefinite period, for Holder'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 Holder 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) Holder 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 Series C. (c) That Holder understands that the Series C Preferred 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 Holder set forth herein. 2 EXHIBIT 10.10.AC; PAGE 2 (d) Holder understands that the Series C Preferred 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. Holder 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) Holder (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 Series C Preferred 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 Holder's net worth, and Holder's investment in the Series C Preferred will not cause such overall commitment to become excessive. (f) Holder is an "accredited investor" (as defined in Regulation D promulgated under the Act) and the undersigned's total investment in the Series C Preferred does not exceed 10% of the Holder's net worth. (g) Holder recognizes that the Company has had only limited revenues to date and that the Series C Preferred as an investment involve significant risks. (h) Holder will not transfer the Series C Preferred without registering them under applicable federal and state securities laws unless the transfer is exempt from registration. Holder realizes that the Company may not allow a transfer of Series C Preferred unless the transferee is also an "accredited investor". Holder understands that legends will be placed on certificates representing the Series C Preferred, with respect to the above restrictions on resale or other disposition of the Series C Preferred and that stop transfer instructions have or will be placed with respect to the Series C Preferred 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 Series C Preferred, and the certificate or certificates representing the Series C Preferred 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 ACT, OR (2) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED." 3 EXHIBIT 10.10.AC; PAGE 3 (j) That Holder understands that Rule 144, promulgated by the Securities and Exchange Commission under the Act, may not be currently available for sale of the Series C Preferred, 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 Series C Preferred, 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 Holder acknowledges that the Company has no obligation to supply the information required for sales under Rule 144. (k) The conversion value for the Series C Preferred has been determined by Holder as fair and appropriate based solely upon Holder's independent investigation and due diligence of the Company, and neither Holder 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 issuance of the Series C Preferred by the Company to Holder. Holder has had sufficient opportunity in connection with the exchange of the Series C Preferred to review the Company's business and affairs (including, without limitation, the Company's financial statements and other information). The Holder has had answered to his satisfaction any questions with respect to the Company's business and affairs. Holder 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 register under the Act all of the Common Stock issuable upon conversion of the Series C Preferred by the Holder in connection with 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. 4 EXHIBIT 10.10.AC; 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 as of the date first above written. COMPANY: ELECTROPURE, INC. By: /s/ FLOYD H. PANNING --------------------------------- Floyd H. Panning, President 23456 South Pointe Drive Laguna Hills, CA 92653-1512 HOLDER: By: /s/ ANTHONY M. FRANK --------------------------------- ANTHONY M. FRANK 320 Meadowood Court Pleasant Hill, CA 94523-3176 5 EXHIBIT 10.10.AC; PAGE 5 CERTIFICATE OF DETERMINATION OF SERIES C CONVERTIBLE PREFERRED SHARES OF ELECTROPURE, INC. -------------------- The undersigned, Floyd H. Panning and Catherine Patterson, do hereby certify: 1. That said Floyd H. Panning is, and at all times herein mentioned was, the duly elected and acting President of Electropure, Inc., a California corporation, and that said Catherine Patterson is, and at all times herein mentioned was, the duly elected and acting Secretary of said Corporation; 2. That at a meeting of the Board of Directors of said Corporation the 11th day of January, 2001, at which meeting there were at all times present and acting a quorum of the members of the Board of Directors of said Corporation, the following resolutions were duly adopted: WHEREAS, the Articles of Incorporation of this Corporation provide for a class of its authorized shares known as Preferred Stock, comprising one million (1,000,000) shares of $1.00 par value each, issuable from time to time in one or more series; and WHEREAS, the Board of Directors of this Corporation is authorized to fix or alter the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, and the liquidation preferences of any wholly unissued series of preferred shares, and the number of shares constituting any such series and the designation thereof, or any of them; and WHEREAS, it is the desire of the Board of Directors of this Corporation, pursuant to its authority as aforesaid, to fix the rights, preferences, privileges, restrictions and other matters relating to a series of said preferred shares; NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issue of a series of preferred stock of the Corporation and does hereby fix and determine the rights, preferences, privileges, restrictions and other matters relating to said series of preferred shares as follows: (a) The preferred shares provided for herein shall be designated and known as "Series C Convertible Preferred Shares" (hereinafter referred to as the "Series C Preferred Shares"). (b) The number of shares constituting the Series C Preferred Shares, shall be two hundred fifty thousand (250,000) shares. (c) Upon the voluntary or involuntary liquidation, winding up or dissolution of the Corporation, out of the assets available for distribution to shareholders the Series C Preferred Shares shall be entitled to receive, in preference to any payment on the Common Stock, Class B Common Stock and Convertible Preferred Stock, only, an amount equal to Four Dollars ($4.00) per share and no more. After the full preferential liquidation amount has been paid to, or determined and set apart for, the Series C Preferred Shares, the remaining assets shall be payable to the Common Stock, Class B Common Stock and Convertible Preferred Stock. In the event the assets of the Corporation are insufficient to pay the full preferential liquidation amount required to be paid to the Series C Preferred Shares, the Common Stock, Class B Common Stock and Convertible Preferred Stock shall receive nothing. A reorganization shall not be considered to be a liquidation, winding up or dissolution within the meaning of this subdivision (c) and the Series C Preferred Shares shall be entitled only to the rights provided in the plan of reorganization and Chapters 12 and 13 of the California General Corporation Law and elsewhere herein. 6 EXHIBIT 10.10.AC; PAGE 6 (d) The Series C Preferred Shares shall have no voting rights. (e) At the option of the respective holders of Series C Preferred Shares, each one (1) of the Series C Preferred Shares shall be convertible into four (4) shares of Common Stock (the "conversion ratio") at any time. (f) The Corporation shall reserve and keep reserved out of its authorized but unissued shares of Common Stock sufficient shares to effect the conversion of all shares of Series C Preferred Shares outstanding from time to time. A holder of Series C Preferred Shares subject to conversion shall deliver the share certificate to the Corporation at its principal executive office accompanied, if appropriate, by a written request to convert, specifying the number of shares to be converted. The endorsement of the share certificate and the request to convert shall be in form satisfactory to the Corporation. Upon the date of such delivery, the conversion is deemed to have occurred and the person entitled to receive share certificates for Common Stock shall be regarded for all corporate purposes from and after such date as the holder of the number of shares of Common Stock to which he is entitled upon the conversion. In the event of a stock split, reverse stock split, stock dividend, reorganization or recapitalization affecting the number of shares of Common Stock outstanding, the conversion ratio set forth in this subdivision (e) shall be proportionately revised so as to fairly and equitably preserve the conversion rights of the Series C Preferred Shares. (g) Except as provided in subdivision (f) hereof, no holder of the Series C Preferred Shares shall be entitled as of right to subscribe for, purchase, or receive any part of any new or additional shares of any class, whether now or hereafter authorized, or of bonds, debentures, or other evidences of indebtedness convertible into or exchangeable for shares of any class, but all such new or additional shares of any class, or bond, debentures, or other evidences of indebtedness convertible into or exchangeable for shares, may be issued and disposed of by the Board of Directors on such terms and for such consideration (to the extent permitted by law), and to such person or persons as the Board of Directors in their absolute discretion may deem advisable. 7 EXHIBIT 10.10.AC; PAGE 7 RESOLVED, FURTHER, that the President and the Secretary of this Corporation be, and they hereby are, authorized and directed to prepare and file a certificate of determination of preferences in accordance with the foregoing resolution and the provisions of California law. 3. That the authorized number of preferred shares of said Corporation is one million (1,000,000), and that the number of preferred shares constituting Series C Preferred Shares, none of which has been issued, is two hundred fifty thousand (250,000). IN WITNESS WHEREOF, the undersigned have executed this certificate this 16th day of January, 2001. /s/ FLOYD H. PANNING ---------------------------------- FLOYD H. PANNING, President of ELECTROPURE, INC. /s/ CATHERINE PATTERSON ---------------------------------- CATHERINE PATTERSON, Secretary of ELECTROPURE, INC. The undersigned, Floyd H. Panning, President, and Catherine Patterson, Secretary, of Electropure, Inc., a California corporation, each certifies under penalty of perjury that the matters set out in the foregoing Certificate of Determination are true and correct. Executed at Laguna Hills, California, on January 16, 2001. /s/ FLOYD H. PANNING ---------------------------------- FLOYD H. PANNING /s/ CATHERINE PATTERSON ---------------------------------- CATHERINE PATTERSON EX-10.10.AD 5 a69543aoex10-10_ad.txt EXHIBIT 10.10.AD 1 EXHIBIT 10.10.AD; PAGE 1 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as of the 17th day of January, 2001, by and between ANTHONY M. FRANK KEOGH PLAN UTA CHARLES SCHWAB & CO., INC. (hereinafter referred to as "Buyer") and ELECTROPURE, INC., a California corporation (hereinafter referred to as "Electropure" or the "Company"). 1. PURCHASE AND SALE OF SHARES (a) Effective on the date hereof, the Company hereby sells to Buyer and Buyer hereby purchases up to Two Hundred Fifty Thousand (250,000) Shares of Electropure, Inc. Series D Convertible Preferred Stock (the "Shares") with an aggregate value equal to Five Hundred Thousand Dollars ($500,000). (b) Buyer shall have the right, but not the obligation, to purchase the Shares in 50,000 increments each month commencing on the date of this Agreement. (c) The Shares shall have the rights, preferences, privileges, restrictions and other terms set forth in Exhibit "A" hereto, the Certificate of Determination for the Series D Convertible Preferred Shares (the "Certificate"). 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. 2 EXHIBIT 10.10.AD; PAGE 2 (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 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 EXHIBIT 10.10.AD; PAGE 3 3. REGISTRATION RIGHTS The Company agrees to register under the Act all of the Common Stock issuable upon conversion of the Shares by the Buyer in connection with 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. 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. 4 EXHIBIT 10.10.AD; PAGE 4 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 as of the date first above written. COMPANY: ELECTROPURE, INC. By: /s/ FLOYD H. PANNING --------------------------------- Floyd H. Panning, President 23456 South Pointe Drive Laguna Hills, CA 92653-1512 BUYER: By: /s/ ANTHONY M. FRANK --------------------------------- ANTHONY M. FRANK 320 Meadowood Court Pleasant Hill, CA 94523-3176 5 EXHIBIT 10.10.AD; PAGE 5 CERTIFICATE OF DETERMINATION OF SERIES D CONVERTIBLE PREFERRED SHARES OF ELECTROPURE, INC. -------------------- The undersigned, Floyd H. Panning and Catherine Patterson, do hereby certify: 1. That said Floyd H. Panning is, and at all times herein mentioned was, the duly elected and acting President of Electropure, Inc., a California corporation, and that said Catherine Patterson is, and at all times herein mentioned was, the duly elected and acting Secretary of said Corporation; 2. That at a meeting of the Board of Directors of said Corporation the 11th day of January, 2001, at which meeting there were at all times present and acting a quorum of the members of the Board of Directors of said Corporation, the following resolutions were duly adopted: WHEREAS, the Articles of Incorporation of this Corporation provide for a class of its authorized shares known as Preferred Stock, comprising one million (1,000,000) shares of $1.00 par value each, issuable from time to time in one or more series; and WHEREAS, the Board of Directors of this Corporation is authorized to fix or alter the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, and the liquidation preferences of any wholly unissued series of preferred shares, and the number of shares constituting any such series and the designation thereof, or any of them; and WHEREAS, it is the desire of the Board of Directors of this Corporation, pursuant to its authority as aforesaid, to fix the rights, preferences, privileges, restrictions and other matters relating to a series of said preferred shares; 6 EXHIBIT 10.10.AD; PAGE 6 NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issue of a series of preferred stock of the Corporation and does hereby fix and determine the rights, preferences, privileges, restrictions and other matters relating to said series of preferred shares as follows: (a) The preferred shares provided for herein shall be designated and known as "Series D Convertible Preferred Shares" (hereinafter referred to as the "Series D Preferred Shares"). (b) The number of shares constituting the Series D Preferred Shares, shall be two hundred fifty thousand (250,000) shares. (c) Upon the voluntary or involuntary liquidation, winding up or dissolution of the Corporation, out of the assets available for distribution to shareholders the Series D Preferred Shares shall be entitled to receive, in preference to any payment on the Common Stock, Class B Common Stock and Convertible Preferred Stock, only, an amount equal to Two Dollars ($2.00) per share and no more. After the full preferential liquidation amount has been paid to, or determined and set apart for, the Series D Preferred Shares, the remaining assets shall be payable to the Common Stock, Class B Common Stock and Convertible Preferred Stock. In the event the assets of the Corporation are insufficient to pay the full preferential liquidation amount required to be paid to the Series D Preferred Shares, the Common Stock, Class B Common Stock and Convertible Preferred Stock shall receive nothing. A reorganization shall not be considered to be a liquidation, winding up or dissolution within the meaning of this subdivision (c) and the Series D Preferred Shares shall be entitled only to the rights provided in the plan of reorganization and Chapters 12 and 13 of the California General Corporation Law and elsewhere herein. (d) The Series D Preferred Shares shall have no voting rights. (e) At the option of the respective holders of Series D Preferred Shares, each one (1) of the Series D Preferred Shares shall be convertible into three and one-third (3-1/3) shares of Common Stock (the "conversion ratio") at any time. Upon any such conversion, fractional shares shall be rounded up to a whole share of Common Stock. (f) The Corporation shall reserve and keep reserved out of its authorized but unissued shares of Common Stock sufficient shares to effect the conversion of all shares of Series D Preferred Shares outstanding from time to time. A holder of Series D Preferred Shares subject to conversion shall deliver the share certificate to the Corporation at its principal executive office accompanied, if appropriate, by a written request to convert, specifying the number of shares to be converted. The endorsement of the share certificate and the request to convert shall be in form satisfactory to the Corporation. Upon the date of such delivery, the conversion is deemed to have occurred and the person entitled to receive share certificates for Common Stock shall be regarded for all corporate purposes from and after such date as the holder of the number of shares of Common Stock to which he is entitled upon the conversion. In the event of a stock split, reverse stock split, stock dividend, reorganization or recapitalization affecting the number of shares of Common Stock outstanding, the conversion ratio set forth in this subdivision (e) shall be proportionately revised so as to fairly and equitably preserve the conversion rights of the Series D Preferred Shares. 7 EXHIBIT 10.10.AD; PAGE 7 (g) Except as provided in subdivision (f) hereof, no holder of the Series D Preferred Shares shall be entitled as of right to subscribe for, purchase, or receive any part of any new or additional shares of any class, whether now or hereafter authorized, or of bonds, debentures, or other evidences of indebtedness convertible into or exchangeable for shares of any class, but all such new or additional shares of any class, or bond, debentures, or other evidences of indebtedness convertible into or exchangeable for shares, may be issued and disposed of by the Board of Directors on such terms and for such consideration (to the extent permitted by law), and to such person or persons as the Board of Directors in their absolute discretion may deem advisable. RESOLVED, FURTHER, that the President and the Secretary of this Corporation be, and they hereby are, authorized and directed to prepare and file a certificate of determination of preferences in accordance with the foregoing resolution and the provisions of California law. 3. That the authorized number of preferred shares of said Corporation is one million (1,000,000), and that the number of preferred shares constituting Series D Preferred Shares, none of which has been issued, is two hundred fifty thousand (250,000). IN WITNESS WHEREOF, the undersigned have executed this certificate this 16th day of January, 2001. /s/ FLOYD H. PANNING ---------------------------------- FLOYD H. PANNING, President of ELECTROPURE, INC. /s/ CATHERINE PATTERSON ---------------------------------- CATHERINE PATTERSON, Secretary of ELECTROPURE, INC. The undersigned, Floyd H. Panning, President, and Catherine Patterson, Secretary, of Electropure, Inc., a California corporation, each certifies under penalty of perjury that the matters set out in the foregoing Certificate of Determination are true and correct. Executed at Laguna Hills, California, on January 16, 2001. /s/ FLOYD H. PANNING ---------------------------------- FLOYD H. PANNING /s/ CATHERINE PATTERSON ---------------------------------- CATHERINE PATTERSON -----END PRIVACY-ENHANCED MESSAGE-----