EXHIBIT 10.7
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.
6% SENIOR CONVERTIBLE NOTE DUE MARCH 1, 2007
OF
LIQUIDMETAL TECHNOLOGIES, INC.
(U.S.-BASED INVESTORS)
NOTE NO.: A-___ ORIGINAL PRINCIPAL AMOUNT: $__________
ORIGINAL ISSUANCE DATE: MARCH 1, 2004 LAKE FOREST, CALIFORNIA
THIS NOTE ("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
6% Senior Convertible Note Due March 1, 2007 ("MATURITY DATE") in an aggregate
principal amount equal to Six Million Nine-Hundred and Twenty-Four Thousand and
One U.S. Dollars (U.S. $6,924,001.00) (the "Notes").
FOR VALUE RECEIVED, the Company hereby promises to pay to the order of
___________, or its registered assigns or successors-in-interest ("HOLDER") the
principal sum of _________________________________ (U.S. $__________) 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 6% per annum from the original date of
issuance, March 1, 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
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Default pursuant to Section 4(a), at the rate (the "DEFAULT RATE") equal to the
lower of ten percent (10%) per annum or the 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 Securities Purchase Agreement dated on or about the
Issuance Date pursuant to which the Note was originally issued (the "PURCHASE
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 $3.00 (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
Purchase 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
addition to the consideration
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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 Nasdaq National Market or such other
principal market or exchange on which the Common Stock is then listed 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 Nasdaq
National Market or such other market or exchange on which the Common Stock is
then principally traded.
"UNDERLYING SHARES" means the shares of Common Stock into which the
Note is convertible (including repayment in Common Stock as set forth herein) in
accordance with the terms hereof and the Purchase 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 the three month anniversary of the date
hereof. The Quarterly Amount shall be paid in cash, although the Company shall
have the option to pay such interest in shares of Common Stock, to be exercised
as set forth in Section 1(d) below, provided that there is an Effective
Registration at the time such shares are delivered.
(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. Notwithstanding anything to the contrary
contained herein, the Holder shall have the right, exercisable by written notice
to the Company delivered at any time during the period commencing ninety (90)
days prior to the second anniversary of the Issuance Date and ending on the date
immediately before the Maturity Date, to have all or a part of the Principal
Amount redeemed by the Company within ninety (90) days after receipt of written
notice from the Holder. 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.
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(d) Payment of Interest in Shares of Common Stock. The
Company's option to pay interest in shares of Common Stock as set forth above
must be exercised by delivery of an irrevocable written notice to Holder not
later than ten (10) Trading Days prior to the due date of such payment, which
notice may be transmitted by facsimile (with the original mailed on the same
date by certified or registered mail, postage prepaid and return receipt
requested). For purposes of calculating the number of shares to be delivered to
the Holder in making such payment, the shares shall be deemed to have a value of
90% of the Market Price on the date payment is due.
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 Purchase Agreement.
SECTION 3. CONVERSION.
(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]
(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
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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.
(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 Purchase 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 Purchase
Agreement, (iii) shares of Common Stock issued pursuant to a stock dividend,
split or other similar transaction, (iv) shares of
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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, and (v) shares of Common Stock that
are issued in lieu of cash in the payment of interest under these Notes) 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, "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
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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 Purchase Agreement) be issuable
(taking into account the 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,
7
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 Purchase
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 Warrants, the
Michigan Notes, the warrants issued in connection with the Michigan Notes, and
the warrants granted to Middlebury Capital LLC as placement agent for the 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
8
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 $8.00 (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
(C) The Holder has received unlegended
certificates representing Common
Shares (as defined in the Purchase
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.
9
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 Purchase
Agreement the Security Agreement or the Registration Rights Agreement, (iv) a
material breach by the Company of its representations or warranties in the
Purchase 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 Purchase 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.
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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 New York, County of New York, 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 XXXXXX 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 March 1, 2004.
LIQUIDMETAL TECHNOLOGIES, INC.
By: _____________________________________
Xxxx Xxxx, President and Chief Executive Officer
Attest:
Sign: __________________
Print Name:
12
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
