EXHIBIT 10.5
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A
PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR
CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED
INTEREST SET FORTH BELOW.
10% SENIOR SECURED NOTE DUE JULY_29, 2005
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OF
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LIQUIDMETAL TECHNOLOGIES, INC.
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(Short-term Note; Korea-based investors)
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Note No.: D-___ Original Principal Amount: $500,000.00
Original Issuance Date: July 29, 2004 Lake Forest, California
THIS NOTE (this "Note") is one of a duly authorized issue of Notes
issued by LIQUIDMETAL TECHNOLOGIES, INC., a corporation duly organized and
existing under the laws of the State of Delaware (the "Company"), designated as
the Company's 10% Senior Secured Short Term Note Due July 29, 2005 ("Maturity
Date") in an aggregate principal amount equal to Five Hundred Thousand U.S.
Dollars (U.S. $500,000) (the "Notes").
FOR VALUE RECEIVED, the Company hereby promises to pay to the order of
Winvest Capital Partners, or its registered assigns or successors-in-interest
("Holder") the principal sum of Five Hundred Thousand Dollars (U.S. $500,000)
together with all accrued but unpaid interest thereon, if any, on the Maturity
Date, to the extent such principal amount and interest has not been converted
into the Company's Common Stock, $0.001 par value per share (the "Common
Stock"), in accordance with the terms hereof. Interest on the unpaid principal
balance hereof shall accrue at the rate of 10% per annum from the original date
of issuance, July 29, 2004 (the "Issuance Date"), until the same becomes due and
payable on the Maturity Date, or such earlier date upon acceleration or by
conversion or redemption in accordance with the terms hereof or of the other
Transaction Documents. Interest on this Note shall accrue daily commencing on
the Issuance Date and shall be computed on the basis of a 360-day year, 30-day
months and actual days elapsed and shall be payable in accordance with Section 1
hereof. Notwithstanding anything contained herein, this Note shall bear interest
on the due and unpaid Principal Amount from and after the occurrence and during
the continuance of an Event of Default pursuant to Section 4(a), at the rate
(the "Default Rate") equal to the lower of ten percent (10%) per annum or the
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highest rate permitted by law. Unless otherwise agreed or required by applicable
law, payments will be applied first to any unpaid collection costs, then to
unpaid interest and fees and any remaining amount to principal.
Except as otherwise provided herein, all payments of principal and
interest on this Note shall be made in lawful money of the United States of
America by wire transfer of immediately available funds to such account as the
Holder may from time to time designate by written notice in accordance with the
provisions of this Note. This Note may not be prepaid in whole or in part except
as otherwise provided herein or in the Transaction Documents. Whenever any
amount expressed to be due by the terms of this Note is due on any day which is
not a Business Day (as defined below), the same shall instead be due on the next
succeeding day which is a Business Day.
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Note Exchange Agreement dated on or about the Issuance
Date pursuant to which the Note was originally issued (the "Exchange
Agreement"). Any references herein to the "Registration Rights Agreement" and
"Security Agreement" shall refer to such agreements as amended by the Exchange
Agreement. For purposes hereof the following terms shall have the meanings
ascribed to them below:
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks in the City of New York are authorized or required
by law or executive order to remain closed.
"Conversion Price" shall be $2.00 (U.S.) per share (which Conversion
Price shall be subject to adjustment as set forth herein).
"Convertible Securities" means any convertible securities, warrants,
options or other rights to subscribe for or to purchase or exchange for, shares
of Common Stock.
"Debt" shall mean indebtedness of any kind.
"Effective Date" means the date on which a Registration Statement
covering all the Underlying Shares and other Registrable Securities (as defined
in the Registration Rights Agreement) is declared effective by the SEC.
"Effective Registration" shall have the meaning set forth in the
Exchange Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Market Price" shall equal the average closing price of the Common
Stock on the Principal Market for the five (5) Trading Days immediately
preceding the date on which such Market Price is being determined.
"Per Share Selling Price" shall include the amount actually paid by
third parties for each share of Common Stock in a sale or issuance by the
Company. A sale of shares of Common Stock shall include the sale or issuance of
rights, options, warrants or convertible, exchangeable or exercisable
securities, issued or sold on or subsequent to the Closing Date, under which the
Company is or may become obligated to issue shares of Common Stock, and in such
circumstances the Per Share Selling Price of the Common Stock covered thereby
shall also include the exercise, exchange or conversion price thereof (in
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addition to the consideration received by the Company upon such sale or issuance
less the fee amount as provided above). If shares are issued for a consideration
other than cash, the Per Share Selling Price shall be the fair value of such
consideration as determined in good faith by the board of directors of the
Company.
"Principal Amount" shall refer to the sum of (i) the original principal
amount of this Note, (ii) all accrued but unpaid interest hereunder, and (iii)
any default payments owing under the Transaction Documents but not previously
paid or added to the Principal Amount.
"Principal Market" shall mean the market, exchange, or quotation
service on which the Common Stock is then listed or quoted for trading.
"Registration Statement" shall have the meaning set forth in the
Registration Rights Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Trading Day" shall mean a day on which there is trading on the
Principal Market.
"Underlying Shares" means the shares of Common Stock into which this
Note is convertible (including repayment in Common Stock as set forth herein) in
accordance with the terms hereof and the Exchange Agreement.
The following terms and conditions shall apply to this Note:
Section 1. Payments of Principal and Interest.
(a) Interest Payments. The Company shall pay all accrued but unpaid interest on
the Principal Amount of this Note (the "Quarterly Amount"), on the first
business day of each consecutive calendar quarter (each an "Interest Payment
Date") beginning on October 1, 2004. The Quarterly Amount shall be paid in cash.
(b) Payment of Principal. Subject to the provisions hereof, including, without
limitation, the right to obtain prepayment of the Principal Amount provided
herein, the Principal Amount of this Note shall be due and payable on the
Maturity Date. Payment of the Principal Amount shall be effected in cash.
(c) Taxes. Company may withhold and pay over to the relevant authorities any
appropriate tax or other legally required withholdings from any interest payment
to be made to the Holder to the extent that such withholding is required by the
Internal Revenue Code or any other applicable law, rule, or regulation. If
Xxxxxx believes that such payments may qualify for one of the exceptions from
withholding under the Internal Revenue Code, or for a reduced withholding rate
under the U.S./Korean tax treaty, then the Holder shall submit, 30 days prior to
the first interest payment, properly executed certification (e.g. Form W-8) to
the Company showing that it is exempt from withholding responsibilities. If
Holder provides such certification to the Company, and it is later determined
that that certification was inaccurate and the Company should have withheld tax,
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the Holder agrees to indemnify the Company for all related tax, penalties, and
interest.
(d) Redemption Right. This Note will be redeemable at the option of the Holder
if, on the date that is 180 calendar days of the Original Issuance Date of this
Note, the Company is either (i) not then current in the filing of its periodic
reports with the U.S. Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, or (ii) not listed, traded, or quoted on an
Approved Market (the "Redemption Right"). The redemption price of this Note
under this Redemption Right will be equal to the principal amount of this Note
plus all accrued and unpaid interest thereon. Xxxxxx's election to exercise this
Redemption Right must be made in writing (a "Notice of Exercise") within seven
(7) days after the date which is 180 calendar days from the Original Issuance
Date of this Note, and the Company will effect such redemption and pay the
redemption price within 30 days of the delivery to the Company of the Notice of
Exercise, although the Company shall not be required to pay the redemption price
unless and until the Holder tenders to the Company the originally executed
version of this Note. In the event that the Redemption Right is properly
exercised for this Note, this Note shall be deemed to have accrued interest at a
rate equal to 14% per annum since the Original Issuance Date (in lieu of and
notwithstanding the interest rate otherwise specified herein), provided that any
additional interest above the rate otherwise specified herein and payable by
reason of the operation of this paragraph shall not be due and payable until the
date on which this Note is actually required to be redeemed by the Company. In
the event that Holder elects to exercise the Redemption Right, then the payment
by the Company of the redemption price in accordance with this paragraph shall
constitute the sole and exclusive remedy of Holder with respect to any breach or
Event of Default under this Note, the Exchange Agreement, and the Original
Transaction Documents, and by electing to exercise the Redemption Right, Holder
irrevocably waives any and all provisions.
Section 2. Seniority. The obligations of the Company hereunder shall rank senior
to all other Debt of the Company, whether now or hereinafter existing, except to
the existing debt facility with Kookmin Bank and except as otherwise provided in
Section 3.13 of the Exchange Agreement.
Section 3. Conversion.
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(a) Conversion by Xxxxxx. Subject to the terms hereof and restrictions and
limitations contained herein, the Holder shall have the right, at Holder's
option, at any time and from time to time to convert, in part or in whole, the
outstanding Principal Amount under this Note by delivering to the Company a
fully executed notice of conversion in the form of conversion notice attached
hereto as Exhibit A (the "Conversion Notice"), which may be transmitted by
facsimile (with the original mailed on the same date by certified or registered
mail, postage prepaid and return receipt requested) on the date of conversion
(the "Conversion Date"). Notwithstanding anything to the contrary herein, this
Note and the outstanding Principal Amount hereunder shall not be convertible
into Common Stock to the extent that such conversion would result in the Holder
hereof exceeding the limitations contained in, or otherwise violating the
provisions of Section 3(l) below.
(b) [Intentionally omitted]
(c) [Intentionally omitted]
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(d) Conversion Date Procedures. Upon conversion of this Note pursuant to this
Section 3, the outstanding Principal Amount hereunder shall be converted into
such number of fully paid, validly issued and non-assessable shares of Common
Stock, free of any liens, claims and encumbrances, as is determined by dividing
the outstanding Principal Amount being converted by the then applicable
Conversion Price. If a conversion under this Note cannot be effected in full for
any reason, the Company shall, upon request by the Holder, promptly pay to the
Holder in cash (but no later than five Trading Days after the Conversion Date)
an amount equal to the greater of (i) such outstanding Principal Amount as has
not been converted and (ii) the Market Price of the Underlying Shares of such
outstanding unconverted Principal Amount as of the Conversion Date that could
have been sold by the Holder pursuant to the Registration Statement on the
Conversion Date.
(e) Stock Certificates or DWAC. The Company will deliver to the Holder not later
than three (3) Trading Days after the Conversion Date, a certificate or
certificates which shall be free of restrictive legends and trading
restrictions(assuming that the Registration Statement has been declared
effective), representing the number of shares of Common Stock being acquired
upon the conversion of this Note. In lieu of delivering physical certificates
representing the shares of Common Stock issuable upon conversion of this Note,
provided the Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon
request of the Holder, the Company shall use commercially reasonable efforts to
cause its transfer agent to electronically transmit such shares issuable upon
conversion to the Holder (or its designee), by crediting the account of the
Holder's (or such designee's) prime broker with DTC through its Deposit
Withdrawal Agent Commission system (provided that the same time periods herein
as for stock certificates shall apply).
(f) Conversion Price Adjustments.
(i) Stock Dividends, Splits and Combinations. If the Company or any of its
subsidiaries, at any time while the Note is outstanding (A) shall pay a stock
dividend or otherwise make a distribution or distributions on any equity
securities (including instruments or securities convertible into or exchangeable
for such equity securities but excluding any stockholder rights granted pursuant
to a poison pill) in shares of Common Stock, (B) subdivide outstanding Common
Stock into a larger number of shares, (C) combine outstanding Common Stock into
a smaller number of shares, or (D) issues new securities by reclassification of
the shares of Common Stock of the Company, then, and in each such case, the
Conversion Price (as defined below) in effect immediately prior to such event or
the record date therefor, whichever is earlier, shall be adjusted so that the
Holder shall be entitled to receive the number of shares of Common Stock or
other securities of the Company which such Holder would have owned or have been
entitled to receive after the occurrence of any of the events described above,
had such Note been surrendered for conversion immediately prior to the
occurrence of such event or record date therefore, whichever is earlier. Any
adjustment made pursuant to this Section 3(f) shall become effective (x) in the
case of any such dividend or distribution, immediately after the close of
business on the record date for the determination of holders of shares of Common
Stock entitled to receive such dividend or distribution, or (y) in the case of
such subdivision, reclassification or combination, at the close of business on
the day upon which such corporate action becomes effective.
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(ii) Distributions. If the Company or any of its subsidiaries, at any time while
the Note is outstanding, shall distribute to all holders of Common Stock
evidences of its indebtedness or assets or cash or rights or warrants to
subscribe for or purchase any security of the Company or any of its subsidiaries
(excluding those referred to in Section 3(f)(i) above), then concurrently with
such distributions to holders of Common Stock, the Company shall distribute to
the Holder of the Note the amount of such indebtedness, assets, cash or rights
or warrants which the Holder of the Note would have received had the Note been
converted into Common Stock at the then applicable the Conversion Price
immediately prior to the record date for such distribution.
(iii) Common Stock Issuances. In the event that the Company or any of its
Subsidiaries on or subsequent to the Closing Date issues or sells any Common
Stock or any Convertible Securities (other than (i) as required under the
Securities Purchase Agreement or the Exchange Agreement or pursuant to exercise
of Convertible Securities, (ii) shares of Common Stock or options to purchase
such shares issued to employees, consultants, officers or directors in
accordance with stock plans approved by the Board of Directors, and shares of
Common Stock issuable under options or warrants that are outstanding as of the
date of the Exchange Agreement, (iii) shares of Common Stock issued pursuant to
a stock dividend, split or other similar transaction, and (iv) shares of Common
Stock issued to Growell Metal Co., Ltd. pursuant to the Settlement Agreement,
dated on or about January 10, 2004, between Growell Metal Co., Ltd. and the
Company's South Korean subsidiary) at an effective Per Share Selling Price which
is less than the Conversion Price in effect immediately prior to such issue or
sale or record date, as applicable, then the Conversion Price shall be reduced
effective concurrently with such issuance or sale to an amount determined by
multiplying the Conversion Price then in effect by a fraction, (x) the numerator
of which shall be the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale, plus (2) the number of
shares of Common Stock which the aggregate consideration received by the Company
for such additional shares would purchase at such Conversion Price, and (y) the
denominator of which shall be the number of shares of Common Stock of the
Company outstanding immediately after such issuance or sale. For the purposes of
the foregoing adjustment, in the case of any Convertible Securities, the maximum
number of shares of Common Stock issuable upon exercise, exchange or conversion
of such Convertible Securities shall be deemed to be outstanding, provided that
no further adjustment shall be made upon the actual issuance of Common Stock
upon exercise, exchange or conversion of such Convertible Securities.
(iv) Rounding of Adjustments. All calculations under this Section 3 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
(v) Notice of Adjustments. Whenever the Conversion Price is adjusted pursuant to
this Section 3(f), the Company shall promptly deliver to each holder of the
Note, a notice setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment, provided
that any failure to so provide such notice shall not affect the automatic
adjustment hereunder.
(vi) Fundamental Changes. In case any transaction or event (including, without
limitation, any merger, consolidation, combination, recapitalization, sale of
assets, tender or exchange offer, reclassification, compulsory share exchange or
liquidation) shall occur in which all or substantially all outstanding shares of
Common Stock are converted into or exchanged or acquired for or constitute the
right to receive stock, or other securities, cash, property or assets (each,
6
"Fundamental Change"), the Holder of this Note outstanding immediately prior to
the occurrence of such Fundamental Change shall have the right upon any
subsequent conversion to receive the kind and amount of stock, other securities,
cash, property or assets that such holder would have received if such share had
been converted immediately prior to such Fundamental Change.
(vii) Notice of Certain Events. If:
A. the Company shall declare a dividend
(or any other distribution) on its
Common Stock; or
B. the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
C. the Company shall authorize the
granting to all holders of the Common
Stock rights or warrants to subscribe
for or purchase any shares of capital
stock of any class or of any rights;
or
D. the approval of any stockholders of
the Company shall be required in
connection with any reclassification
of the Common Stock of the Company,
any consolidation or merger to which
the Company is a party, any sale or
transfer of all or substantially all
of the assets of the Company, of any
compulsory share of exchange whereby
the Common Stock is converted into
other securities, cash or property;
or
E. the Company shall authorize the
voluntary or involuntary dissolution,
liquidation or winding up of the
affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Note, and shall cause to be mailed to the
Holder at its last address as it shall appear upon the books of the Company, on
or prior to the date notice to the Company's stockholders generally is given, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange.
(g) Reservation and Issuance of Underlying Securities. The Company covenants
that it will at all times reserve and keep available out of its authorized and
unissued Common Stock solely for the purpose of issuance upon conversion of this
Note (including repayments in stock), free from preemptive rights or any other
actual contingent purchase rights of persons other than the holders of the Note,
not less than such number of shares of Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such shares set
forth in the Exchange Agreement) be issuable (taking into account the
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adjustments under this Section 3 but without regard to any ownership limitations
contained herein) upon the conversion of this Note hereunder in Common Stock
(including repayments in stock). The Company covenants that all shares of Common
Stock that shall be so issuable shall, upon issue, be duly authorized, validly
issued, fully paid, nonassessable and freely tradeable.
(h) No Fractions. Upon a conversion hereunder the Company shall not be required
to issue stock certificates representing fractions of shares of Common Stock,
but may if otherwise permitted, make a cash payment in respect of any final
fraction of a share based on the closing price of a share of Common Stock at
such time. If the Company elects not, or is unable, to make such cash payment,
the Holder shall be entitled to receive, in lieu of the final fraction of a
share, one whole share of Common Stock.
(i) Charges, Taxes and Expenses. Issuance of certificates for shares of Common
Stock upon the conversion of this Note (including repayment in stock) shall be
made without charge to the holder hereof for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the Holder or in such name or names as may be directed by
the Holder; provided, however, that in the event certificates for shares of
Common Stock are to be issued in a name other than the name of the Holder, this
Note when surrendered for conversion shall be accompanied by an assignment form;
and provided further, that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any such transfer.
(j) Cancellation. After all of the Principal Amount (including accrued but
unpaid interest and default payments at any time owed on this Note) have been
paid in full or converted into Common Stock, this Note shall automatically be
deemed canceled and the Holder shall promptly surrender the Note to the Company
at the Company's principal executive offices.
(k) Notices Procedures. Any and all notices or other communications or
deliveries to be provided by the Holder hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by confirmed facsimile, or by a nationally recognized overnight courier service
to the Company at the facsimile telephone number or address of the principal
place of business of the Company as set forth in the Exchange Agreement. Any and
all notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, or by a
nationally recognized overnight courier service addressed to the Holder at the
facsimile telephone number or address of the Holder appearing on the books of
the Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed delivered (i) upon receipt, when delivered
personally, (ii) when sent by facsimile, upon receipt if received on a Business
Day prior to 5:00 p.m. (Eastern Time), or on the first Business Day following
such receipt if received on a Business Day after 5:00 p.m. (Eastern Time) or
(iii) upon receipt, when deposited with a nationally recognized overnight
courier service.
(l) Overall Limit on Common Stock Issuable. Notwithstanding anything contained
herein to the contrary, the number of shares of Common Stock issuable by the
Company and acquirable by the Holders of the Note, together with the number of
shares issuable pursuant to the Old Middlebury Notes or New Middlebury Notes,
the warrants issued in connection with the Old Middlebury Notes, and the
warrants granted to Middlebury Capital LLC as placement agent for the Old
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Middlebury Notes, shall not exceed 19.9% of the number of shares of Common Stock
outstanding on the Closing Date, subject to appropriate adjustment for stock
splits, stock dividends, or other similar recapitalizations affecting the Common
Stock (the "Maximum Common Stock Issuance"), unless the issuance of shares
hereunder in excess of the Maximum Common Stock Issuance shall first be approved
by the Company's shareholders in accordance with applicable law and the By-laws
and Certificate of Incorporation of the Company (a "20% Approval"). If at any
point in time and from time to time written notice from the Holders of the Note
to the Company (each a "Trigger Date") the number of Common Shares issued
pursuant to conversion of the Note would exceed the Maximum Common Stock
Issuance but for this Section 3(l), then the Company shall, at the Company's
election, either (A) promptly call a stockholders meeting to obtain a
stockholder vote on the issuance of Common Shares hereunder in excess of the
Maximum Common Stock Issuance, or (B) purchase from the Holder the Principal
Amount of the Note which cannot be converted or exercised due to such Maximum
Common Stock Issuance limitation ("Shortfall") at a redemption price equal to
the greater of (i) such Principal Amount of such Shortfall and (ii) the Market
Price as of the Trigger Date of the Underlying Shares of such Shortfall that
could have been sold by the Holder pursuant to the Registration Statement, which
redemption price shall be paid within three (3) Trading Days after a Trigger
Date if this clause (B) is elected (although for purposes of clarification, if
clause (A) is elected by the Company and the Company's stockholders do not
approve the proposal, the Company will not be required to comply with clause
(B)). The Company may make such election at any time within thirty (30) days
following the Trigger Date by giving written notice to the Holder of the Note,
in which case the Company shall purchase the Shortfall at the price stated above
within three (3) Trading Days of delivery of said notice.
(m) Mandatory Conversion.
(i) If at any time after the Issuance Date, the closing per share price of the
Common Stock exceeds $4.00 (as such price may be proportionally adjusted for
stock splits, reverse splits, stock dividends and recapitalizations) for 30
consecutive Trading Days (the "Pricing Event"), and further provided that there
has been Effective Registration for at least such 30 Trading Day period and
including the Mandatory Conversion Date (as defined below) the Company shall
have the option, exercisable by delivering an irrevocable notice to the Holder
(the "Mandatory Conversion Notice") to provide that the Note shall be converted
at the Conversion Price on a date (the "Mandatory Conversion Date") at least 30
but no more than 60 days from the date of the Mandatory Conversion Notice. The
foregoing shall not affect the right of the Holder to convert this Note pursuant
to Section 3(a) above at all times up to and including the Mandatory Conversion
Date.
(ii) Notwithstanding the preceding subsection (m)(i), the Holder of the Note
shall not be obligated to convert this Note on a Mandatory Conversion Date
unless and until each of the following conditions has been satisfied at all
times from the date of the Mandatory Conversion Notice up to and including the
Mandatory Conversion Date:
(A) There is Effective Registration;
(B) No Event of Default has occurred and is continuing; and
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(C) The Holder has received unlegended certificates representing Common Shares
(as defined in the Exchange Agreement) with respect to all conversions for which
Conversion Notices have been given.
(iii) In the event that the number of shares of Common Stock that would be
issued to the Holder would result in the Holder exceeding the limitation set
fort in Section 3(l) above, then the Company shall issue to the Holder upon
conversion of the Holder's Note, only the number of shares as would not cause
the Holder to exceed such amount and with respect to the balance of the Note, an
amount in cash equal to the greater of (i) the Principal Amount of such balance
of the Note and (ii) the Market Price of the Underlying Shares of such balance
of the Note as of the date of the Mandatory Conversion Date.
(iv) Such forced conversion shall be subject to and governed by all the
provisions relating to voluntary conversion of the Note contained herein.
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Section 4. Defaults and Remedies.
(a) Events of Default. An "Event of Default" is: (i) a default in payment of the
Principal Amount, when due, or failure to pay any accrued but unpaid interest
thereon of the Note within five (5) days the date such interest payment is due
(to the extent such principal and/or amount has not been converted into Common
Stock in accordance with the terms hereof); (ii) a default in the timely
issuance of Underlying Shares upon and in accordance with the terms hereof
(where for purposes of this Note, the term "timely" shall mean within ten (10)
days following the Conversion Date); (iii) failure by the Company for thirty
(30) days after written notice has been received by the Company to comply with
any other material provision of the Note, the Exchange Agreement the Security
Agreement or the Registration Rights Agreement, (iv) a material breach by the
Company of its representations or warranties in the Exchange Agreement or the
Registration Rights Agreement that remains uncured for thirty (30) business days
after notice to the Company; (vi) any event or condition shall occur which (x)
results in the acceleration of the maturity of any material long-term debt
(other than the Note) of the Company or any of its Subsidiaries, or (y) enables
(or, with the giving of notice or lapse of time or both, would enable) the
holder of such material long-term debt or any or person acting on behalf of such
holder's behalf to accelerate the maturity thereof, or (vii) if the Company or
any of its Subsidiaries is subject to any Bankruptcy Event (as defined in the
Exchange Agreement).
(b) Remedies. If an Event of Default occurs and is continuing with respect to
the Note, the Holder may declare all of the then outstanding Principal Amount of
this Note, including any interest due thereon, to be due and payable
immediately. The Company shall pay interest on such amount in cash at the
Default Rate to the Holder if such amount is not paid within two (2) days of
Holder's request. The remedies under this Note shall be cumulative.
Section 5. General.
(a) Payment of Expenses. The Company agrees to pay all reasonable charges and
expenses, including attorneys' fees and expenses, which may be incurred by the
Holder in successfully enforcing this Note and/or collecting any amount due
under this Note.
(b) Savings Clause. In case any provision of this Note is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Note will not in any way be
affected or impaired thereby. In no event shall the amount of interest paid
hereunder exceed the maximum rate of interest on the unpaid principal balance
hereof allowable by applicable law. If any sum is collected in excess of the
applicable maximum rate, the excess collected shall be applied to reduce the
principal debt. If the interest actually collected hereunder is still in excess
of the applicable maximum rate, the interest rate shall be reduced so as not to
exceed the maximum allowable under law.
(c) Amendment. Neither this Note nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the
Company and the Holder.
(d) Assignment, Etc. The Holder may assign or transfer this Note to any
transferee. The Holder shall notify the Company of any such assignment or
transfer promptly.
11
This Note shall be binding upon the Company and its
successors and shall inure to the benefit of the Holder and its successors and
permitted assigns.
(e) No Waiver. No failure on the part of the Holder to exercise, and no delay in
exercising any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the Holder of any right,
remedy or power hereunder preclude any other or future exercise of any other
right, remedy or power. Each and every right, remedy or power hereby granted to
the Holder or allowed it by law or other agreement shall be cumulative and not
exclusive of any other, and may be exercised by the Holder from time to time.
(f) Governing Law; Jurisdiction.
(i) Governing Law. THIS NOTE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO ANY CONFLICTS OF LAWS
PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE APPLICATION OF THE LAW OF
ANY OTHER JURISDICTION.
(ii) Jurisdiction. The Company irrevocably submits to the jurisdiction of any
State or Federal Court sitting in the State of California, County of Orange over
any suit, action, or proceeding arising out of or relating to this Note. The
Company irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action, or proceeding brought in such a court and any claim that
suit, action, or proceeding has been brought in an inconvenient forum.
The Company agrees that the service of process
upon it mailed by certified or
registered mail, postage prepaid and return receipt requested (and service so
made shall be deemed complete three days after the same has been posted as
aforesaid) or by personal service shall be deemed in every respect effective
service of process upon it in any such suit or proceeding. Nothing herein shall
affect Holder's right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
(iii) No Jury Trial. The COMPANY hereBY knowingly and voluntarily waives any and
all rights it may have to a trial by jury with respect to any litigation based
on, or arising out of, under, or in connection with, this Note.
(g) Replacement Notes. This Note may be exchanged by Holder at any time and from
time to time for a Note or Notes with different denominations representing an
equal aggregate outstanding Principal Amount, as reasonably requested by Xxxxxx,
upon surrendering the same. No service charge will be made for such registration
or exchange. In the event that Xxxxxx notifies the Company that this Note has
been lost, stolen or destroyed, a replacement Note identical in all respects to
the original Note (except for registration number and Principal Amount, if
different than that shown on the original Note), shall be issued to the Holder,
provided that the Holder executes and delivers to the Company an agreement
reasonably satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection with the Note.
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IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed on July 29, 2004.
LIQUIDMETAL TECHNOLOGIES, Inc.
By: /s/ Xxxx Xxxx
Xxxx Xxxx, President and Chief
Executive Officer
Attest:
------
Sign: _______________________________________
Print Name:
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EXHIBIT A
---------
FORM OF CONVERSION NOTICE
(To be Executed by the Holder
in order to Convert a Note)
The undersigned hereby elects to convert the aggregate outstanding Principal
Amount (as defined in the Note) indicated below of this Note into shares of
Common Stock, $0.001 par value per share (the "Common Stock"), of LIQUIDMETAL
TECHNOLOGIES, Inc. (the "Company") according to the conditions hereof, as of the
date written below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.
Conversion information:
________________________________________________
Date to Effect Conversion
________________________________________________
Aggregate Principal Amount of Note Being
Converted
________________________________________________
Number of shares of Common Stock to be Issued
________________________________________________
Applicable Conversion Price
________________________________________________
Signature
________________________________________________
Name
________________________________________________
Address
