EXHIBIT 10.6
THESE SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS.
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT ("AGREEMENT") dated as of March 1, 2004,
between Liquidmetal Technologies, Inc., a Delaware corporation (the "COMPANY"),
and each person or entity listed as a Purchaser on Schedule I attached to this
Agreement (collectively and individually, the "PURCHASER"). Capitalized terms
used herein and not otherwise defined shall have the meanings set forth in the
Note.
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Purchaser, and the
Purchaser wishes to purchase from the Company, a 6% Senior Convertible Note in
the principal amount of up to six and a half million United States dollars
("DOLLARS") ($6,500,000) substantially in the form attached hereto as EXHIBIT A
(the "NOTES"), on the terms and conditions set forth herein;
WHEREAS, the Note will be convertible into shares ("COMMON SHARES") of
common stock, par value $.001, of the Company ("COMMON STOCK"), pursuant to the
terms of the Note, and the Purchaser will have registration rights with respect
to the Common Shares issuable upon conversion of the Note, pursuant to the terms
of that certain Registration Rights Agreement to be entered into between the
Company and the Purchaser substantially in the form of EXHIBIT B hereto
("REGISTRATION RIGHTS AGREEMENT" and, together with the Agreement, the Note, the
Warrant, the Security Agreement between the Company and Middlebury Capital LLC
("MIDDLEBURY") as agent for the Purchasers and the Placement Agency Agreement
between the Company and Middlebury, the "TRANSACTION DOCUMENTS"); and
WHEREAS, this Agreement also provides a warrant to the Purchaser to
purchase additional shares of Common Stock on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF NOTE
Section 1.1. Issuance of Note. Upon the following terms and conditions,
the Company shall issue and sell to the Purchaser, and the Purchaser shall
purchase from the Company, the Notes.
Section 1.2. Purchase Price. The purchase price for the Notes to be
acquired by the Purchasers shall be not more than six and a half million Dollars
($6,500,000) (the "PURCHASE PRICE"). The parties hereto agree that for U.S.
federal income tax purposes, the issue price of the Notes shall be not less than
99.50% of the Purchase Price.
Section 1.3. The Closing.
(a) Timing. Subject to the fulfillment or waiver of the conditions
set forth in Article V hereof, the purchase and sale of the Note shall take
place at a closing (the "CLOSING"), on or about the date hereof or such other
date as the Purchaser and the Company may agree upon (the "CLOSING DATE"),
provided that the Closing Date shall be no later than March 1, 2004.
(b) Form of Payment and Closing. On the Closing Date, the Company
shall deliver to the Purchaser the Note purchased hereunder, registered in the
name of the Purchaser or its nominee. On the Closing Date the Purchaser shall
deliver by wire transfer the Purchase Price hereunder to an account designated
in writing by the Company. In addition, each party shall deliver all documents,
instruments and writings required to be delivered by such party pursuant to this
Agreement at or prior to the Closing. The Note will be fully owned and paid for
by the Purchaser as of the Closing Date.
Section 1.4. Warrant. In addition to the Note, at the Closing, the Company
will execute and deliver to Purchaser a warrant, substantially in the form
attached hereto as Exhibit E, to purchase Common Stock at an exercise price of
$3.00 per share for that number of shares having an aggregate exercise price
equal to 25% of the Purchase Price, which warrant will expire one hundred (100)
days from the date that a Company registration statement covering the resale of
the Common Stock underlying the warrant has been declared effective by the U.S.
Securities and Exchange Commission (the "WARRANT"). The shares of Common Stock
that are issuable pursuant to the Warrant are hereafter referred to as the
"WARRANT SHARES." As used herein, "TRADING DAY" shall mean a day on which there
is trading on the Nasdaq National Market System or such other market or exchange
on which the Common Stock is then principally traded.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser as of
the date hereof and the Closing Date:
(a) Organization and Qualification; Material Adverse Effect. The
Company is a corporation duly incorporated and existing in good standing under
the laws of the State of Delaware and has the requisite corporate power to own
its properties and to carry on its business as now being conducted. The Company
does not have any subsidiaries other than the subsidiaries listed on Schedule
2.1(a) attached hereto ("SUBSIDIARIES"). Except where specifically indicated to
the contrary, all references in this Agreement to subsidiaries shall be deemed
to refer to all direct and indirect subsidiaries of the Company. The Company is
duly
2
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "MATERIAL
ADVERSE EFFECT" means any adverse effect on the business, operations,
properties, prospects or financial condition of the Company and its
subsidiaries, if any, and which is (either alone or together with all other
adverse effects) material to the Company and its Subsidiaries, if any, taken as
a whole, and any material adverse effect on the transactions contemplated under
this Agreement, the Note, and the Registration Rights Agreement.
(b) Authorization; Enforcement. (i) The Company has all requisite
corporate power and authority to enter into and perform this Agreement, the
Note, the Registration Rights Agreement, and the Warrant ("TRANSACTION
DOCUMENTS") and to issue the Note and Warrant in accordance with the terms
hereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including the issuance of the Note, have been duly authorized by all
necessary corporate action, and no further consent or authorization of the
Company or its Board of Directors (or any committee or subcommittee thereof) or
stockholders is required, (iii) the Transaction Documents have been duly
executed and delivered by the Company, (iv) the Transaction Documents constitute
valid and binding obligations of the Company enforceable against the Company,
except (A) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application, and (B) to the extent the
indemnification provisions contained in this Agreement and the Registration
Rights Agreement may be limited by applicable federal or state securities laws
and (v) the Note and the Warrant, and the Common Shares and Warrant Shares
issuable upon the conversion and/or exercise thereof, have been duly authorized
and, upon issuance thereof and payment therefor in accordance with the terms of
this Agreement, will be validly issued, fully paid and non-assessable, free and
clear of any and all liens, claims and encumbrances.
(c) Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 110,000,000 shares of Common Stock, of which as
of the date hereof, 41,599,652 shares are issued and outstanding and 7,826,557
shares are issuable and reserved for issuance pursuant to the Company's stock
option plans or securities exercisable or exchangeable for, or convertible into,
shares of Common Stock. All of such outstanding shares have been, or upon
issuance will be, validly issued, fully paid and nonassessable. As of the date
hereof, except as disclosed in Schedule 2.1(c), (i) no shares of the Company's
capital stock are subject to preemptive rights or any other similar rights or
any liens or encumbrances suffered or permitted by the Company, (ii) there are
no outstanding debt securities, (iii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries
3
is obligated to register the sale of any of their securities under the
Securities Act of 1933, as amended ("SECURITIES ACT" or "1933 ACT") (except the
Registration Rights Agreement), (v) there are no outstanding securities of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries, and (vi)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance or exercise of the Note or
Warrant as described in this Agreement. The Company has furnished to the
Purchaser true and correct copies of the Company's Certificate of Incorporation,
as amended and as in effect on the date hereof (the "CERTIFICATE OF
INCORPORATION"), and the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible or exchangeable into or
exercisable for Common Stock and the material rights of the holders thereof in
respect thereto. Schedule 2.1(c) also lists all outstanding debt of the Company
with sufficient detail acceptable to Purchaser.
(d) Issuance of Shares. Upon issuance in accordance with this
Agreement and the terms of the Note, and if applicable, the Warrant, the Note,
the Common Shares, and if applicable, the Warrant Shares and the common shares
underlying the Warrant issued to Middlebury as placement agent, will be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof.
(e) No Conflicts. Except as disclosed in Schedule 2.1(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby and issuance of the Note and Warrant, and the Common Shares and Warrant
Shares underlying any of the foregoing will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations, preferences and
rights of any outstanding series of preferred stock of the Company or the
By-laws; (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) to the Company's knowledge result in a
violation of any law, rule, regulation, order, judgment or decree (including
United States federal and state securities laws and regulations and the rules
and regulations of the Nasdaq National Market System ("PRINCIPAL MARKET") or
other principal securities exchange or trading market on which the Common Stock
is traded or listed) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, except in the case of clause (ii), such conflicts that would not
have a Material Adverse Effect.
(f) SEC Documents. Since June 30, 2003, the Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "1934 ACT") (all of the foregoing filed
prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the "SEC DOCUMENTS"). To the Company's
knowledge, as of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder
4
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(g) INTENTIONALLY LEFT BLANK.
(h) Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
(i) except as set forth in SEC Documents which were filed at least 10 days
before the date hereof, (ii) except as set forth in Schedule 2.1(h), and (iii)
except which individually and in the aggregate, respectively, would not be
reasonably likely to result in liability to the Company in excess of $50,000 and
$100,000, respectively.
(i) INTENTIONALLY LEFT BLANK.
(j) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the Note
and the Warrant to the Purchaser to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Principal Market or other Approved Market, nor will the Company or any of
its Subsidiaries take any action or steps that would cause the offering of the
Note to be integrated with other offerings.
(k) Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened, the effect
of which would be reasonably likely to result in a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement.
(l) Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
Schedule 2.1(l), there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its Subsidiaries regarding trademarks, trade name rights, patents, patent
rights, inventions,
5
copyrights, licenses, service names, service marks, service xxxx registrations,
trade secrets or other infringement.
(m) Compliance with Law. The business of the Company and its
Subsidiaries has been and is presently being conducted so as to comply with all
applicable material federal, state and local governmental laws, rules,
regulations and ordinances.
(n) Environmental Laws. The Company and its Subsidiaries (i) are to
the Company's knowledge in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or approval
where such noncompliance or failure to receive permits, licenses or approvals
referred to in clauses (i), (ii) or (iii) above could have, individually or in
the aggregate, a Material Adverse Effect.
(o) Disclosure. No representation or warranty by the Company in this
Agreement, nor in any certificate, Schedule or Exhibit delivered or to be
delivered pursuant to this Agreement: contains or will contain any untrue
statement of material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading. To
the knowledge of the Company and its Subsidiary at the time of the execution of
this Agreement, there is no information concerning the Company and its
Subsidiaries or their respective businesses which has not heretofore been
disclosed to the Purchasers (or disclosed in the Company's filings made with the
SEC under the 1934 Act) that would have a Material Adverse Effect.
(p) Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 2.1(p) or such as do not
materially and adversely affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or any
of its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(q) Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged.
(r) Regulatory Permits. To the Company's knowledge, the Company and
its Subsidiaries possess all material certificates, authorizations and permits
issued by the appropriate federal, state or foreign regulatory authorities,
necessary to conduct their respective businesses, and neither the Company nor
any such Subsidiary has received any notice of
6
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
(s) Foreign Corrupt Practices Act. To the Company's knowledge,
neither the Company, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any Subsidiary has, in the course of acting
for, or on behalf of, the Company, directly or indirectly used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; directly or indirectly made any direct
or indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any similar
treaties of the United States; or directly or indirectly made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government or party official or employee.
(t) Tax Status. The Company and each of its Subsidiaries has made or
filed all United States federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject and
all such returns, reports and declarations are true, correct and accurate in all
material respects. The Company has paid all taxes and other governmental
assessments and charges, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith, for which adequate
reserves have been established, in accordance with generally accepted accounting
principles ("GAAP").
(u) Issuance of Common Shares and/or Warrant Shares. The Common
Shares and Warrant Shares are duly authorized and reserved for issuance and,
upon conversion of the Note and/or exercise of the Warrant, as applicable, in
accordance with the terms thereof, such Common Shares and/or Warrant Shares will
be validly issued, fully paid and non-assessable, free and clear of any and all
liens, claims and encumbrances, and entitled to be traded on the Principal
Market or the New York Stock Exchange, or the American Stock Exchange
(collectively with the Principal Market, the "APPROVED MARKETS"), and the
holders of such Common Shares and/or Warrant Shares shall be entitled to all
rights and preferences accorded to a holder of Common Stock. As of the date of
this Agreement, the outstanding shares of Common Stock are currently listed on
the Principal Market.
(v) Form S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) for selling
shareholders on Form S-3 (as in effect on the date of this Agreement) under the
1933 Act and rules promulgated thereunder.
(w) Absence of Undisclosed Liabilities. Except as set forth in
Schedule 2.1(w), the Company and its Subsidiaries have no material obligations
or liabilities of any nature (matured, fixed or contingent) other than (i) those
adequately provided for in the Company's financial statements referenced in
Section 2.1(x) and (ii) those obligations incurred in the ordinary course of
business in amounts consistent with prior periods which have not had and will
not have a Material Adverse Effect on the Company.
(x) Financial Statements. Except as set forth in Schedule 2.1(x),
the financial statements of the Company included in the Forms 10-K and the Forms
10-Q of the
7
Company have been prepared from the books and records of the Company, in
accordance with GAAP, and fairly present in all material respects the financial
condition of the Company, as at their respective dates, and the results of its
operations and cash flows for the periods covered thereby.
(y) INTENTIONALLY LEFT BLANK.
(z) Employee Benefit Plans; ERISA.
(i) Schedule 2.1(z) sets forth a true, correct and complete
list of all employee benefit plans, programs, policies and arrangements, whether
written or unwritten (the "Company Plans"), that the Company, any Subsidiary or
any other corporation or business which is now or at the relevant time was a
member of a controlled group of companies or trades or businesses including the
Company or any Subsidiary, within the meaning of section 414 of the Internal
Revenue Code of 1986, as amended (the "Code"), maintain or have maintained on
behalf of current or former members, partners, principals, directors, officers,
managers, employees, consultants or other personnel.
(ii) There has been no prohibited transaction within the
meaning of Section 406 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or Section 4975 of the Code, with respect to any of the
Company Plans; (ii) none of the Company Plans is or was subject to Section 412
of the Code or Section 302 or Title IV of ERISA; and (iv) each of the Company
Plans has been operated and administered in all material respects in accordance
with all applicable laws, including ERISA. There are no actions, suits or claims
pending or threatened (other than routine claims for benefits), whether by
participants, the Internal Revenue Service, the Department of Labor or
otherwise, with respect to any Company Plan and no facts exist under which any
such actions, suits or claims are likely to be brought or under which the
Company or any Subsidiary could incur any liability with respect to a Company
Plan other than in the ordinary course. None of the Company Plans is or was a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(iii) Neither the Company nor any Subsidiary has announced,
proposed or agreed to any change in benefits under any Company Plan or the
establishment of any new Company Plan. There have been no changes in the
operation or interpretation of any Company Plan since the most recent annual
report, which would have any material effect on the cost of operating,
maintaining or providing benefits under such Company Plan.
(iv) Neither the Company nor any Subsidiary has incurred any
liability for the misclassification of employees as leased employees or
independent contractors.
(v) Except as provided for in this Agreement and in the
Transaction Documents, the consummation of the transactions contemplated by this
Agreement, either alone or in combination with another event, will not (i)
result in any individual becoming entitled to any increase in the amount of
compensation or benefits or any additional payment from the Company or any
Subsidiary (including, without limitation, severance, golden parachute or bonus
payments or otherwise), or (ii) accelerate the vesting or timing of payment of
any benefits or compensation payable in respect of any individual.
8
(aa) Restrictions on Business Activities. There is no judgment,
order, decree, writ or injunction binding upon the Company or any Subsidiary or,
to the knowledge of the Company or any Subsidiary, threatened that has or could
prohibit or impair the conduct of their respective businesses as currently
conducted or any business practice of the Company or any Subsidiary, including
the acquisition of property, the provision of services, the hiring of employees
or the solicitation of clients, in each case either individually or in the
aggregate.
Section 2.2. Representations and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company as of the date hereof and the Closing Date:
(a) Accredited Investor Status; Sophisticated Purchaser. The
Purchaser is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D under the 1933 Act. The Purchaser has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of the purchase of the Note, the Warrant, the Common Shares and the
Warrant Shares. The Purchaser is not registered as a broker or dealer under
Section 15(a) of the 1934 Act, affiliated with any broker or dealer registered
under Section 15(a) of the 1934 Act, or a member of the National Association of
Securities Dealers, Inc.
(b) Information. The Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company which have been requested and materials relating to the offer and
sale of the Note, the Warrant, the Common Shares and the Warrant Shares which
have been requested by the Purchaser. The Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. In
determining whether to enter into this Agreement and purchase the Note, the
Purchaser has relied solely on the written information supplied by Company
employees in response to the written due diligence information request provided
by Purchaser to the Company, and the Purchaser has not received nor relied upon
any oral representation or warranty relating to the Company, this Agreement, the
Note, or any of the transactions or relationships contemplated thereby. The
Purchaser understands that its purchase of the Note and Common Shares, and if
applicable, the Warrant Shares involves a high degree of risk. The Purchaser has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the Note
and Common Shares, and if applicable, the Warrant Shares.
(c) No Governmental Review. The Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Note, the
Warrant, the Common Shares and Warrant Shares or the fairness or suitability of
the investment in the Note, the Warrant, the Common Shares and Warrant Shares
nor have such authorities passed upon or endorsed the merits thereof.
(d) Legends. The Company shall issue the Note, and certificates for
the Common Shares, and if applicable, the Warrant Shares, to the Purchaser
without any legend except as described in Article VI below. The Purchaser
covenants that, in connection with any transfer of Common Shares or Warrant
Shares by the Purchaser pursuant to the registration
9
statement contemplated by the Registration Rights Agreement, it will comply with
the applicable prospectus delivery requirements of the 1933 Act, provided that
copies of a current prospectus relating to such effective registration statement
are or have been supplied to the Purchaser.
(e) Authorization; Enforcement. Each of this Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Purchaser and is a valid and binding agreement of
the Purchaser enforceable against the Purchaser in accordance with their terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies. The Purchaser has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement and
the Registration Rights Agreement and each other agreement entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement.
(F) INTENTIONALLY LEFT BLANK.
(g) No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Purchaser and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby will not (i) result in a violation of the certificate of incorporation,
by-laws or other documents of organization of the Purchaser, (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Purchaser is bound, or (iii) result in a violation of
any law, rule, regulation or decree applicable to the Purchaser.
(h) Investment Representation. The Purchaser is purchasing the Note
and the Warrant for its own account and not with a view to distribution in
violation of any securities laws. The Purchaser has been advised and understands
that neither the Note, the Warrant, nor the Common Shares or Warrant Shares
issuable upon conversion or exercise thereof have been registered under the 1933
Act or under the "blue sky" laws of any jurisdiction and may be resold only if
registered pursuant to the provisions of the 1933 Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law. The Purchaser has been
advised and understands that the Company, in issuing the Note and the Warrant,
is relying upon, among other things, the representations and warranties of the
Purchaser contained in this Section 2.2 in concluding that such issuance is a
"private offering" and is exempt from the registration provisions of the 1933
Act.
(i) Rule 144. The Purchaser understands that there is no public
trading market for the Notes or Warrant, that none is expected to develop, and
that the Notes and Warrant must be held indefinitely unless and until such Notes
and the Warrant, or if applicable, the Common Shares or Warrant Shares received
upon conversion or exercise thereof are registered under the 1933 Act or an
exemption from registration is available. The Purchaser has been advised or is
aware of the provisions of Rule 144 promulgated under the 1933 Act.
10
(j) Brokers. Except with respect to the fees owed to Middlebury
under the Placement Agency Agreement, the Purchaser has taken no action which
would give rise to any claim by any person for brokerage commissions, finder's
fees or similar payments by the Company or the Purchaser relating to this
Agreement or the transactions contemplated hereby.
(k) Reliance by the Company. The Purchaser understands that the Note
and the Warrant are being offered and sold in reliance on a transactional
exemption from the registration requirements of Federal and state securities
laws and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the Purchaser set forth herein in order to determine the applicability of such
exemptions and the suitability of the Purchaser to acquire the Note and the
Warrant, and the Common Shares and Warrant Shares issuable upon conversion or
exercise thereof.
(l) Certain Trading Activities. During the thirty (30) calendar days
before the date of this Agreement, the Purchaser has not directly or indirectly,
nor has any person or entity acting on behalf of or pursuant to any
understanding with such Purchaser, engaged in any trading of Common Stock
including Short Sales (as defined below), and no open position or Short Sale
exists on the date hereof in the name or on behalf of, or in conjunction with,
such Purchaser. "SHORT SALES" include, without limitation, all kinds of direct
and indirect stock pledges, forward sale contracts, options, puts, calls, short
sales, swaps and broker-dealers or foreign regulated brokers having the effect
of hedging the securities purchased or investment made under this Agreement.
ARTICLE III
COVENANTS
Section 3.1. Registration and Listing; Effective Registration. Until such
time as the Note is not outstanding and the Warrant has expired the Company will
cause the Common Stock to continue at all times to be registered under Sections
12(b) or (g) of the 1934 Act, will comply in all material respects with its
reporting and filing obligations under the 1934 Act, and will not take any
action or file any document (whether or not permitted by the 1934 Act or the
rules thereunder) to terminate or suspend such reporting and filing obligations.
Until such time as the Notes and Warrant are not outstanding, the Company shall
use its best efforts to continue the listing or trading of the Common Stock on
the Principal Market or one of the other Approved Markets and shall comply in
all material respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the Approved Market on which the Common Stock is
listed. The Company shall use its best efforts to cause the Common Shares and
Warrant Shares to be listed on the Principal Market or one of the other Approved
Markets no later than the effectiveness of the registration of the Common Shares
and Warrant Shares under the 1934 Act, and shall use its best efforts to
continue such listing(s) on one of the Approved Markets, for so long as the Note
or Warrant are outstanding.
Section 3.2. Certificates on Conversion. Upon any conversion by the
Purchaser (or then holder of the Note) of the Note pursuant to the terms
thereof, the Company shall issue and deliver to the Purchaser (or holder) within
three (3) Trading Days of the conversion date a new
11
Note or Notes for the aggregate principal amount of Notes which the Purchaser
(or holder) has not yet elected to convert but which are evidenced in part by
the Notes submitted to the Company in connection with such conversion (with the
denominations of such new Note(s) designated by the Purchaser or holder).
Section 3.3. Replacement Notes. The Note held by the Purchaser (or then
holder) may be exchanged by the Purchaser (or such holder) at any time and from
time to time for Note(s) with different denominations representing an equal
aggregate principal amount of Note(s), as requested by the Purchaser (or such
holder) upon surrendering the same. No service charge will be made for such
registration or transfer or exchange.
Section 3.4. Securities Compliance. The Company shall notify the SEC and
the Principal Market, in accordance with their requirements, of the transactions
contemplated by this Agreement, the Note, the Warrant, and the Registration
Rights Agreement, and shall take all other necessary action and proceedings as
may be required and permitted by applicable law, rule and regulation, for the
legal and valid issuance of the Notes and Warrant hereunder and the Common
Shares and Warrant Shares issuable upon conversion or exercise thereof.
Section 3.5. Notices. The Company agrees to provide all holders of Notes
with copies of all notices and information, including without limitation,
notices and proxy statements in connection with any meetings that are provided
to the holders of shares of Common Stock, contemporaneously with the delivery of
such notices or information to such Common Stock holders.
Section 3.6. Reservation of Shares; Stock Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Note and exercise of the Warrant, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of the Note and exercise of the Warrant.
Section 3.7. Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Article V of this Agreement.
Section 3.8. Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Note, the Warrant, and Common Stock, in accordance with
Regulation D and to provide a copy thereof to the Purchaser promptly after such
filing. The Company shall, on or before the Closing Date, take such action as
the Company shall have reasonably determined is necessary to qualify the Note,
the Warrant, the Common Shares and Warrant Shares for sale to the Purchaser
under applicable securities or "blue sky" laws of the states of the United
States (or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to the Purchaser on or prior to the Closing
Date; provided, however, that the Company shall not be required in connection
therewith to register or qualify as a foreign corporation in any jurisdiction
where it is not now so qualified or to take any action that would subject it to
service of process in suits or taxation, in each case, in any jurisdiction where
it is not now so subject.
Section 3.9. Information. The Company agrees to send to the Purchaser for
so long as the Note or Warrant are outstanding copies of any notices and other
information made available
12
or given to the stockholders of the Company generally, contemporaneously with
the making available or giving thereof to the stockholders.
Section 3.10. Prohibition on Net Short Positions. From and including the
date of this Agreement, the Purchaser agrees that such Purchaser shall not
maintain a Net Short Position. "NET SHORT POSITION" shall mean that the
aggregate number of shares of Common Stock held in a short position by such
Purchaser exceeds the sum of (i) the number of shares of Common Stock owned by
such Purchaser, plus (ii) the number of Common Shares issuable to such
Purchaser.
Section 3.11. Material Changes. On or before the Closing Date, the Company
shall forthwith notify the Purchaser of any material change affecting any of its
representations, warranties, undertakings and indemnity at any time prior to
payment being made to the Company on the Closing Date.
Section 3.12. Prohibition on Certain Actions. The Company shall not,
between the date hereof and the Closing Date (both dates inclusive), take any
action or decision which (had the Note already been issued) would result in an
adjustment of the Conversion Price
Section 3.13. Senior Status of Notes. Beginning on the date of this
Agreement and for so long as any Notes remain outstanding, neither the Company
nor any subsidiary of the Company shall, without the prior written consent of
Purchasers holding a majority of the aggregate outstanding Principal Amount of
the Notes, incur or otherwise become liable with respect to any indebtedness
that would rank senior or pari passu to the Notes in order of payment, other
than (i) indebtedness in existence on the date hereof, (ii) secured indebtedness
used solely to finance the purchase or lease of assets (provided that such debt
may only be secured by the purchased or leased assets and not by any other
assets of the Company), (iii) any indebtedness from any loan that replaces or
refinances the Company's existing credit facility with Kookmin Bank, (iv)
indebtedness to trade creditors in the ordinary course of business, or (v) the
6% Senior Convertible Notes issued by the Company pursuant to that certain
Amended and Restated Securities Purchase Agreement of even date herewith among
the Company, Michigan Venture Capital Co., Ltd, and the investors identified as
"Purchasers" therein (the "MICHIGAN NOTES").
"EFFECTIVE REGISTRATION" shall mean that all registration
obligations of the Company pursuant to the Registration Rights Agreement
have been satisfied and (i) such Registration Statement is not subject to
any suspension or stop orders; (ii) the resale of such Registrable
Securities may be effected pursuant to a current and deliverable
prospectus; (iii) the requisite number of shares of Common Stock shall
have been duly authorized and reserved for issuance as required by the
terms of the Transaction Documents; (iv) no Interfering Event (as
described in the Registration Rights Agreement) then exists; (v) the
Registrable Securities shall have been duly qualified or exempt under all
state "blue sky" laws; and (viii) none of the Company or any direct or
indirect subsidiary of the Company is subject to any Bankruptcy Event (as
defined below).
"BANKRUPTCY EVENT" means any of the following events: (a) the
Company or any subsidiary commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency
13
or liquidation or similar law of any jurisdiction relating to the Company
or any subsidiary thereof; (b) there is commenced against the Company or
any subsidiary any such case or proceeding that is not dismissed within 30
days after commencement; (c) the Company or any subsidiary is adjudicated
insolvent or bankrupt or any order of relief or other order approving any
such case or proceeding is entered; (d) the Company or any subsidiary
suffers any appointment of any custodian or the like for it or any
substantial part of its property that is not discharged or stayed within
30 days; (e) the Company or any subsidiary makes a general assignment for
the benefit of creditors; (f) the Company or any subsidiary, by any act or
failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other
action for the purpose of effecting any of the foregoing.
ARTICLE IV
TRANSFER AGENT INSTRUCTIONS
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of the Purchaser or its respective nominee(s), for the Common Shares or
Warrant Shares in such amounts as specified from time to time by the Purchaser
to the Company upon delivery of a conversion or exercise notice (the
"Irrevocable Transfer Agent Instructions"). The Company warrants that no
instruction relating to the Common Shares or Warrant Shares other than the
Irrevocable Transfer Agent Instructions referred to in this Article IV will be
given by the Company to its transfer agent and that the Common Shares and
Warrant Shares shall be freely transferable on the books and records of the
Company as contemplated by Article VI below when the legend referred to therein
may be removed. Nothing in this Article IV shall affect in any way the
Purchaser's obligations and agreements set forth in Section 2.2(d) to comply
with all applicable prospectus delivery requirements, if any, upon resale of the
Common Shares or Warrant Shares. The Company shall instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by the Purchaser and without any restrictive legends except as
contemplated by Article VI.
ARTICLE V
CONDITIONS TO CLOSINGS
Section 5.1. Conditions Precedent to the Obligation of the Company to
Sell. The obligation hereunder of the Company to issue and/or sell the Note and
the other Transaction Documents to the Purchaser at the applicable Closing is
subject to the satisfaction, at or before the applicable Closing, of each of the
applicable conditions set forth below. These conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) Accuracy of the Purchaser's Representations and Warranties. The
representations and warranties of the Purchaser will be true and correct in all
material respects as of the date when made and as of the Closing Date, as though
made at that time.
14
(b) Performance by the Purchaser. The Purchaser shall have performed
all agreements and satisfied all conditions required to be performed or
satisfied by the Purchaser at or prior to the Closing, including full payment of
the Purchase Price to the Company as provided herein.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement, the Registration Rights Agreement, the Note, or the Warrant.
(d) Certificate. The Purchaser shall have delivered a certificate to
the Company certifying that the representations and warranties of the Purchaser
contained in Section 2.2 are true and correct in all material respects as of the
Closing Date.
(e) Final Board Approval. The Company's Board of Directors, or any
authorized committee thereof, shall have given final approval to this Agreement
and the instruments, documents, and agreements contemplated hereby.
(f) INTENTIONALLY LEFT BLANK.
(g) Closing Date. The Closing shall have occurred by March 1, 2004.
Section 5.2. Conditions Precedent to the Obligation of the Purchaser to
Purchase. The obligation hereunder of the Purchaser to acquire and pay for the
Note at the applicable Closing is subject to the satisfaction, at or before the
applicable Closing, of each of the applicable conditions set forth below. These
conditions are for the Purchaser's benefit and may be waived by the Purchaser at
any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties as of an earlier
date, which shall be true and correct in all material respects as of such date).
(b) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement, the Registration Rights Agreement, the Notes or the Warrant. The
Principal Market shall not have objected or indicated that it may object to the
consummation of any of the transactions contemplated by this Agreement.
(c) Opinion of Counsel. At the Closing, the Purchaser shall have
received an opinion of counsel to the Company substantially in the form attached
hereto as EXHIBIT C.
15
(d) Registration Rights Agreement. The Company and the Purchaser
shall have executed and delivered the Registration Rights Agreement in the form
and substance of EXHIBIT B attached hereto (the "REGISTRATION RIGHTS
AGREEMENT").
(e) Officer's Certificates. The Company shall have delivered to the
Purchaser a certificate in form and substance satisfactory to the Purchaser and
the Purchaser's counsel, executed by an officer of the Company, certifying as to
satisfaction of closing conditions, incumbency of signing officers, and the
true, correct and complete nature of the Certificate of Incorporation, By-Laws,
good standing and authorizing resolutions of the Company.
(f) Security Agreement. A security interest in the owned
intellectual property of the Company (and any proceeds thereof) shall have been
perfected, pursuant to a security agreement in substantially the form attached
hereto as EXHIBIT D (the "SECURITY AGREEMENT")
(g) INTENTIONALLY LEFT BLANK
ARTICLE VI
LEGEND AND STOCK
Upon payment therefor as provided in this Agreement, the Company will
issue the Note in the name the Purchaser or its designees and in such
denominations to be specified by the Purchaser prior to (or from time to time
subsequent to) Closing. The Note and Warrant and any certificate representing
Common Shares or Warrant Shares issued upon conversion or exercise thereof,
prior to such Common Shares or Warrant Shares being registered under the 1933
Act for resale or available for resale under Rule 144 under the 1933 Act, shall
be stamped or otherwise imprinted with a legend in substantially the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue the Note, Common Shares and Warrant Shares
issuable upon conversion or exercise of the foregoing, without the legend set
forth above, at such time as (i) the holder thereof is permitted to dispose of
such Notes, Common Shares and Warrant Shares issuable upon conversion or
exercise of the foregoing pursuant to Rule 144(k) under the 1933 Act, or (ii)
such securities are sold to a purchaser or purchasers who (in the opinion of
counsel to the seller or such purchaser(s), in form and substance reasonably
satisfactory to the Company and its counsel) are able to dispose of such shares
publicly without registration under the 1933 Act, or (iii) such securities have
been registered under the 1933 Act.
Prior to the Registration Statement (as defined in the Registration Rights
Agreement) being declared effective, any Common Shares or Warrant Shares issued
pursuant to conversion of the Note or exercise of the Warrant shall bear a
legend in the same form as the legend
16
indicated above; provided that such legend shall be removed from such shares and
the Company shall issue new certificates without such legend if (i) the holder
has sold or disposed of such shares pursuant to Rule 144(k) under the 1933 Act,
or the holder is permitted to dispose of such shares pursuant to Rule 144(k)
under the 1933 Act, (ii) such shares are registered for resale under the 1933
Act, or (iii) such shares are sold to a purchaser or purchasers who (in the
opinion of counsel to the seller or such purchaser(s), in form and substance
reasonably satisfactory to the Company and its counsel) are able to dispose of
such shares publicly without registration under the 1933 Act. Upon such
Registration Statement becoming effective, the Company agrees to promptly issue
new certificates representing such shares without such legend. Any Common Shares
or Warrant Shares issued after the Registration Statement has become effective
shall be free and clear of any legends, transfer restrictions and stop orders.
Notwithstanding the removal of such legend, the Purchaser agrees to sell the
Common Shares and Warrant Shares represented by the new certificates in
accordance with the applicable prospectus delivery requirements (if copies of a
current prospectus are provided to the Purchaser by the Company) or in
accordance with an exemption from the registration requirements of the 1933 Act.
Nothing herein shall limit the right of any holder to pledge these
securities pursuant to a bona fide margin account or lending arrangement entered
into in compliance with law, including applicable securities laws.
ARTICLE VII
TERMINATION
Section 7.1. Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing by the mutual written consent of the
Company and the Purchaser.
Section 7.2. Other Termination. This Agreement may be terminated by action
of the Board of Directors of the Company or by the Purchaser at any time if the
Closing shall not have been consummated on the Closing Date; provided, however,
that the party (or parties) prepared to close shall retain its (or their) right
to xxx for any breach by the other party (or parties).
ARTICLE VIII
INDEMNIFICATION
In consideration of the Purchaser's execution and delivery of the this
Agreement and the Registration Rights Agreement and acquiring the Note hereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless the
Purchaser and all of its partners, officers, directors, employees, members and
direct or indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by any
17
Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in the Transaction Documents or any other
certificate or document contemplated hereby or thereby. Notwithstanding the
foregoing, Indemnified Liabilities shall not include any liability of any
Indemnitee arising out of such Indemnitee's negligence. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
Except as otherwise set forth herein, the mechanics and procedures with respect
to the rights and obligations under this Article VIII shall be the same as those
set forth in Section 6 (other than Section 6(b)) of the Registration Rights
Agreement, including, without limitation, those procedures with respect to the
settlement of claims and Company's right to assume the defense of claims.
ARTICLE IX
GOVERNING LAW; MISCELLANEOUS
Section 9.1. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN
ORANGE COUNTY, CALIFORNIA, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT
IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF TO SUCH PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER
THIS AGREEMENT BY CERTIFIED OR REGISTERED MAIL (RETURN RECEIPT REQUESTED) AND
AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS
AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY
ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. IF ANY PROVISION OF
THIS AGREEMENT SHALL BE INVALID OR UNENFORCEABLE IN ANY JURISDICTION, SUCH
INVALIDITY OR UNENFORCEABILITY SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY
OF THE REMAINDER OF THIS AGREEMENT IN THAT JURISDICTION OR THE VALIDITY OR
ENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT IN ANY OTHER JURISDICTION.
EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY.
18
Section 9.2. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
Section 9.3. Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
Section 9.4. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
Section 9.5. Costs and Expenses. All reasonable out-of-pocket costs and
expenses the Purchaser incurs with respect to this Agreement and the
transactions contemplated by this Agreement shall be paid by the Company to the
Purchaser at the Closing up to an aggregate maximum of $30,000.00.
Section 9.6. Entire Agreement; Amendments; Waivers.
(a) This Agreement supersedes all other prior oral or written
agreements between the Purchaser, the Company, their affiliates and persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein (including the other Transaction
Documents) contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Purchaser, and no provision hereof may be waived other than
by an instrument in writing signed by the party against whom enforcement is
sought.
(b) The Purchaser may at any time elect, by notice to the Company,
to waive (whether permanently or temporarily, and subject to such conditions, if
any, as the Purchaser may specify in such notice) any of its rights under any of
the Transaction Documents to acquire shares of Common Stock from the Company, in
which event such waiver shall be binding against the Purchaser in accordance
with its terms; provided, however, that the voluntary waiver contemplated by
this sentence may not reduce the Purchaser's obligations to the Company under
the Transaction Documents.
Section 9.7. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing, must be delivered by (i) courier, mail or hand
delivery or (ii) facsimile, and will be deemed to have been delivered upon
receipt. The addresses and facsimile numbers for such communications shall be:
19
If to the Company:
Liquidmetal Technologies, Inc.
00000 Xxxxxxxxxxxx Xx., Xxxxx 000
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxx Xxxx, President
With a copy to:
Xxxxx & Lardner LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx
If to the Transfer Agent:
American Stock Transfer & Trust Company
00 Xxxxxx Xxxx
Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxx Xxxx
If to the Purchasers, to the addresses listed on Schedule I hereto:
With a copy to:
Xxxxxxxx Xxxxx Deutsch LLP
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Deutsch
Each party shall provide five (5) days prior written notice to the
other party of any change in address, telephone number or facsimile
number. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of
such transmission or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service,
receipt by facsimile or receipt
20
from a nationally recognized overnight delivery service in accordance with
clause (i), (ii) or (iii) above, respectively.
Section 9.8. Successors and Assigns. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns, including any Permitted Assignee (as
defined below). The Purchaser may assign some or all of its rights hereunder to
any assignee of the Note, the Common Shares, or Warrant Shares (in each case, a
"PERMITTED ASSIGNEE"); provided, however, that any such assignment shall not
release the Purchaser from its obligations hereunder unless such obligations are
assumed by such assignee and the Company has consented to such assignment and
assumption.
Section 9.9. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 9.10. Survival. The representations, warranties and agreements of
the Company and the Purchaser contained in the Agreement shall survive as long
as the Company is obligated to maintain the effectiveness of the registration
statement and keep a current prospectus thereunder.
Section 9.11. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 9.12. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
Section 9.13. Remedies. The Purchaser and each Permitted Assignee shall
have all rights and remedies set forth in this Agreement and the Registration
Rights Agreement and all rights and remedies which such holders have been
granted at any time under any other agreement or contract and all of the rights
which such holders have under any law. Any person having any rights under any
provision of this Agreement or the Registration Rights Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement or the Registration Rights Agreement and to exercise all other rights
granted by law. The Purchaser and each Permitted Assignee without prejudice may
withdraw, revoke or suspend its pursuit of any remedy at any time prior to its
complete recovery as a result of such remedy.
Section 9.14. Payment Set Aside. To the extent that the Company makes a
payment or payments to the Purchaser hereunder or under the Registration Rights
Agreement or the Purchaser enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or
21
are required to be refunded, repaid or otherwise restored to the Company, a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
Section 9.15. Days. Unless the context refers to "business days" or
"Trading Days", all references herein to "days" shall mean calendar days.
Section 9.16. Placement Agent. Other than the engagement of Middlebury by
the Company, the Purchaser and the Company each acknowledges and warrants that
it has not engaged any placement agent in connection with the sale of the Notes,
and the Company and Purchaser shall indemnify and hold the other harmless
against any liability, loss, or expense (including without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising from any breach
of said warranty.
*** Signatures on following page(s) ***
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed as of the date and year first above
written. COMPANY:
LIQUIDMETAL TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxx
Xxxx Xxxx,
President and Chief Executive Officer
Signatures of Purchasers on following page(s)
22
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXX XXXXXX & CO., INC.
/s/ Xxxx Xxxxxxxx
Xxxx Xxxxxxxx
Executive Vice President, Xxxx X. Xxxxxx & Co., Inc.
23
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
PRANA LLC
/s/ Xxxxx X. Apodara
Xxxxx X. Apodara
Chief Executive Officer
24
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
DKR SOUNDSHORE OASIS HOLDING FUND LTD.
/s/ Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxx, Alt. Director
25
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXX XXXXXXXX
/s/ Xxxx Xxxxxxxx
26
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
BEAR XXXXXXX F/B/O ROSEN CAPITAL LP M/P/P PLAN
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
Trustee
27
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
CAYDAL, LLC
BY SAN ISABAL LIMITED, ITS MANAGING MEMBER
/s/ Xxxxx Xxxx
Xxxxx Xxxx
General Partner
28
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXXXX FUND, LP
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
Managing Member of the General Partner
29
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXXXX FUND II, LP
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
Managing Member of the General Partner
30
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXXXX FUND OFFSHORE, LTD.
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
Managing Member of the Investment Manager
31
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
PROFESSIONAL TRADERS FUND, LLC
/s/ Professional Traders Fund, LLC
32
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXXX BOUTS
/s/ Xxxxx Bouts
33
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
REALLY COOL GROUP LTD.
/s/ Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxx
Director
34
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXXX XXXXXXXXXX
/s/ Xxxxx Xxxxxxxxxx
35
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXXX XXXXXXXXX
/s/ Xxxxx Xxxxxxxxx
36
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXX XXXXXX
/s/ Xxxx Xxxxxx
37
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXXXXX XXXXXXXX
/s/ Xxxxxxx Xxxxxxxx
38
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXX XXXXXXXXX
/s/ Xxxx Xxxxxxxxx
39
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXXXXX AND XXXXXX XXXX
/s/ Xxxxxxx Xxxx
/s/ Xxxxxx X. Xxxx
40
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXXXXX CAPITAL PARTNERS
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
Managing Member of the General Partner, JJP Partners, LLC
41
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXXXXX X. XXXXX
/s/ Xxxxxxx X. Xxxxx
42
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
WRY LTD.
/s/ Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxx
Director
43
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXXX XXXXXXXXX
/s/ Xxxxx Xxxxxxxxx
44
LIST OF SCHEDULES
-----------------
Schedule 2.1(a) Subsidiaries
Schedule 2.1(c) Capitalization
Schedule 2.1(e) No Conflicts
Schedule 2.1(h) Litigation
Schedule 2.1(l) Intellectual Property Rights
Schedule 2.1(p) Title
Schedule 2.1(x) Financial Statements
Schedule 2.1(w) Undisclosed Liabilities
Schedule 2.1(z) Employee Benefit Plans
LIST OF EXHIBITS
----------------
EXHIBIT A Form of Note
EXHIBIT B Registration Rights Agreement
EXHIBIT C Opinion of Counsel
EXHIBIT D Form of Company Security Agreement
EXHIBIT E Form of Warrant to Purchase Common Stock
45
EXHIBIT A
FORM OF NOTE
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, 0000 XXXX XXXXXX, XXXXXXXXXX
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 ______________ U.S. Dollars (U.S. $__________) (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 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
2
include the exercise, exchange or conversion price thereof (in 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 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
3
(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.
(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 Holder. 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
4
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.
(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
5
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 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
6
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
7
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, 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
8
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 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;
9
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.
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.
10
(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. 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.
11
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 Holder, upon surrendering the same. No service charge will be made
for such registration or exchange. In the event that Holder 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.
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
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is entered into as of
March 1, 2004, between Liquidmetal Technologies, Inc., a Delaware corporation
with offices at 00000 Xxxxxxxxxxxx Xx., Xxxxx 000, Xxxx Xxxxxx, Xxxxxxxxxx 00000
(the "Company") and each of the parties listed under "Purchasers" hereto
(collectively and individually, the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Securities Purchase Agreement, dated on
or about the date hereof, by and between the Company and the Purchaser (the
"PURCHASE AGREEMENT"), the Company has agreed to sell and issue to the
Purchaser, and the Purchaser has agreed to purchase from the Company, a 6%
Senior Convertible Note in the principal amount of up to six million five
hundred thousand United States dollars ("DOLLARS") ($6,500,000) (the "NOTE") and
Warrants (the "WARRANTS") to purchase shares of the Company's Common Stock, par
value $0.001 per share, subject to the terms and conditions set forth therein;
and
WHEREAS, the Purchase Agreement contemplates that the Note will be
convertible and exercisable into shares (the "COMMON SHARES") of the Company's
Common Stock, par value $0.001 per share (the "COMMON STOCK") pursuant to the
terms and conditions set forth in the Note, and the Warrant contemplates that
the Warrant will be exercisable into shares of the Company's Common Stock
pursuant to the terms and conditions set forth in the Warrant (the "WARRANT
SHARES").
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Purchase Agreement and
this Agreement, the Company and the Purchaser agree as follows:
1. Certain Definitions. Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed thereto in the Purchase
Agreement or the Note. As used in this Agreement, the following terms shall have
the following respective meanings:
"CLOSING" and "CLOSING DATE" shall have the meanings ascribed to such
terms in the Purchase Agreement.
"COMMISSION" or "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"HOLDER" and "HOLDERS" shall include the Purchaser and any permitted
transferee or transferees of Registrable Securities (as defined below), the Note
and/or Warrant which have not been sold to the public to whom the registration
rights conferred by this Agreement have been transferred in compliance with this
Agreement and the Purchase Agreement; provided that neither such person nor any
affiliate of such person is registered as a broker or dealer under Section 15(a)
of the Securities Exchange Act of 1934, as amended, or a member of the National
Association of Securities Dealers, Inc.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"REGISTRABLE SECURITIES" shall mean: (i) the Common Shares and Warrant
Shares (without regard to any limitations on beneficial ownership contained in
the Note, the Warrant, or the Purchase Agreement) or other securities issued or
issuable to each Holder or its permitted transferee or designee (a) upon
conversion of the Note and exercise of the Warrant, or (b) upon any distribution
with respect to, any exchange for or any replacement of such Note or Warrant,
(c) upon any conversion, exercise or exchange of any securities issued in
connection with any such distribution, exchange or replacement, or (d) as
payment of principal amount or interest in lieu of cash with respect to the
Note; (ii) securities issued or issuable upon any stock split, stock dividend,
recapitalization or similar event with respect to the foregoing; and (iii) any
other security issued as a dividend or other distribution with respect to, in
exchange for or in replacement of the securities referred to in the preceding
clauses; provided that all such shares shall cease to be Registrable Securities
at such time as they have been sold under a Registration Statement or pursuant
to Rule 144 under the Securities Act or otherwise or at such time as they are
eligible to be sold pursuant to Rule 144(k). For purposes of this Agreement, the
term "WARRANT SHARES" shall include any shares of the Company's Common Stock
that are issued pursuant to that certain Placement Agent Common Stock Purchase
Warrant of even date herewith between the Company and Middlebury Capital LLC.
"REGISTRATION EXPENSES" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company).
"REGISTRATION STATEMENT" shall have the meaning set forth in Section 2(a)
herein.
"REGULATION D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"SECURITIES ACT" or "ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holders not included within "Registration
Expenses".
2. Registration Requirements. The Company shall use its best efforts
to effect the registration of the Registrable Securities (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) and in all
states reasonably
2
requested by the Holder. Such best efforts by the Company shall include, without
limitation, the following:
(a) The Company shall, as expeditiously as possible after the
Closing Date:
(i) But in any event by the later (i) of March 5, 2004,
or (ii) twenty-five (25) days after the Closing Date, prepare and
file a registration statement with the Commission pursuant to Rule
415 under the Securities Act on Form S-3 under the Securities Act
(or in the event that the Company is ineligible to use such form,
such other form as the Company is eligible to use under the
Securities Act provided that such other form shall be converted into
an S-3 as soon as Form S-3 becomes available to the Company)
covering resales by the Holders as selling stockholders (not
underwriters) of the Registrable Securities ("Registration
Statement"), which Registration Statement, to the extent allowable
under the Securities Act and the rules promulgated thereunder
(including Rule 416), shall state that such Registration Statement
also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Note. The number
of shares of Common Stock initially included in such Registration
Statement shall be no less than the sum of 1.5 times the sum of the
number of Common Shares that are issuable upon conversion of the
Note as of the date of this Agreement, at the then applicable
Conversion Price (as defined in the Note). Thereafter the Company
shall use its best efforts to cause such Registration Statement and
other filings to be declared effective as soon as possible, and in
any event no later than the following date, as appropriate (the
"Required Effective Date"): (A), if the SEC notifies that the
Company that the SEC will not review the Registration Statement, the
Required Effective Date shall be five (5) days after the SEC
provides such notification, or (B) if the SEC notifies the Company
that it will review the Registration Statement, then the Required
Effective Date shall be sixty (60) days after the Company receives
the first written comments on the Registration Statement from the
SEC. Without limiting the foregoing, the Company will promptly
respond to all SEC comments, inquiries and requests, and shall
request acceleration of effectiveness at the earliest possible date.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used
in connection with such Registration Statement as may be necessary
to comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement
and notify the Holders of the filing and effectiveness of such
Registration Statement and any amendments or supplements.
(iii) Furnish to each Holder that has Common Shares
included in the Registration Statement such numbers of copies of a
current prospectus conforming with the requirements of the Act,
copies of the Registration Statement, any amendment or supplement
thereto and any documents incorporated by reference therein and such
other documents as such Holder may
3
reasonably require in order to facilitate the disposition of
Registrable Securities owned by such Holder.
(iv) Register and qualify the securities covered by such
Registration Statement under the securities or "Blue Sky" laws of
all domestic jurisdictions; provided that the Company shall not be
required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(v) Notify promptly each Holder that has Common Shares
included in the Registration Statement of the happening of any event
(but not the substance or details of any such event) of which the
Company has knowledge as a result of which the prospectus (including
any supplements thereto or thereof) included in such Registration
Statement, as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing (each an
"Event"), and use its best efforts to promptly update and/or correct
such prospectus. Each Holder will hold in confidence and will not
make any disclosure of any such Event and any related information
disclosed by the Company.
(vi) Notify each Holder of the issuance by the
Commission or any state securities commission or agency of any stop
order suspending the effectiveness of the Registration Statement or
the threat or initiation of any proceedings for that purpose. The
Company shall use its best efforts to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting
thereof at the earliest possible time.
(vii) [Intentionally omitted.]
(viii) List the Registrable Securities covered by such
Registration Statement with all securities exchange(s) and/or
markets on which the Common Stock is then listed and prepare and
file any required filings with the Nasdaq National Market System or
any other exchange or market where the Common Shares are traded.
(ix) Take all steps reasonably necessary to enable
Holders to avail themselves of the prospectus delivery mechanism set
forth in Rule 153 (or successor thereto) under the Act.
(b) Notwithstanding the obligations under Section 2(a)(v) or
any provision of this Agreement, if (i) in the good faith judgment of the
Company, following consultation with legal counsel, it would be detrimental to
the Company and its stockholders for resales of Registrable Securities to be
made pursuant to the Registration Statement due to the existence of a material
development or potential material development involving the Company that the
Company would be obligated to disclose in the Registration Statement, which
disclosure would be premature or otherwise inadvisable at such time or would
have a material adverse
4
effect upon the Company and its stockholders, or (ii) in
the good faith judgment of the Company, it would adversely affect or require
premature disclosure of the filing of a Company-initiated registration of any
class of its equity securities, then the Company will have the right to suspend
the use of the Registration Statement for a period of not more than 30
consecutive calendar days, but only if the Company reasonably concludes, after
consultation with outside legal counsel, that the failure to suspend the use of
the Registration Statement as such would create a risk of a material liability
or violation under applicable securities laws or regulations.
(c) Set forth below in this Section 2(c) are (I) events that
may arise that the Purchaser considers will interfere with the full enjoyment of
their rights under this Agreement, the Purchase Agreement, and the Notes (the
"INTERFERING EVENTS"), and (II) certain remedies applicable in each of these
events.
(i) Payments by the Company. If (i) at any time after
effectiveness of the Registration Statement, sales thereunder during
the registration period (as described in Section 5) cannot be made
for any reason, other than by reason of the operation of Section
2(b), for a period of more than 10 consecutive business days, (ii)
at any time after effectiveness of the Registration Statement, sales
thereunder during the Registration Period cannot be made for a
period of time that exceeds the limitations set forth in Section
2(b), or (iii) at any time after the Registrable Securities are
listed in accordance with Section 2(a)(viii), the Common Shares are
not listed or included for quotation on the Nasdaq National Market
or other exchange or market where shares of the Company's common
stock are then traded for more than 10 consecutive calendar days,
then the Company will thereafter make a payment to each Holder as
set forth below. The amount of the payment made to each Holder will
be equal to 1% of the purchase price paid for the Notes purchased by
the Holder and not previously converted into Common Shares and sold
by the Holder for each 30 business days that sales cannot be made
under the effective Registration Statement or the Common Shares are
not listed or included for quotation on the Nasdaq National Market
or other exchange or market where shares of the Company's common
stock are then traded (but any day on which both conditions exist
shall count as a single day and no day taken into account for
purposes of determining whether any payment is due under Section 2
(c)(ii) shall be taken into account for purposes of determining
whether any payment is due under this Section 2(c)(i) or the amount
of such payment). The number of shares not previously sold as
specified in the previous sentence shall be determined as of the end
of the respective 30-business day period. In no event shall payment
pursuant to this Section exceed 10% in the aggregate of the purchase
price paid for the Notes purchased by the Holder (including such
Holder's predecessors and successors) for the entire registration
period (as described in Section 5). These payments will be prorated
on a daily basis during the 30-business day period and will be paid
to each Holder within ten business days following the end of each
30- business day period as to which payment is due hereunder or, at
the Company's option, will be added to the outstanding Principal
Amount of the Notes, provided that the respective Holder delivered
to the Company at least two business days prior thereto information
with respect to the number of Notes and Common
5
Shares not previously sold by such Holder (together with reasonable
supporting documentation). The Holders may make a claim for
additional damages as a remedy for the Company's failure to comply
with the timelines set forth in this Section, but acknowledgement of
such right in this Agreement shall not constitute an admission by
the Company that any such damages exist or may exist.
Notwithstanding the foregoing, if the Company has used its best
efforts to avoid circumstances as a result of which sales cannot be
made under the Registration Statement during the Registration Period
or the Common Shares are not listed or included for quotation on the
Nasdaq National Market or other exchange or market where the Common
Shares are traded, then the damages described above shall be the
Holders' sole and exclusive remedy for damages arising out of such
circumstances. Nothing contained in the preceding sentence shall be
read to limit the ability of the Holders to seek specific
performance of this Agreement.
(ii) Effect of Late Registration. If the Registration
Statement has not been declared effective by the Required Effective
Date other than by reason of the operation of Section 2(b), then the
Company will make a payment to each Holder for such delay (each a
"Late Registration Payment"). Each Late Registration Payment will be
equal to 2% of the purchase price paid for the Notes purchased by
such Holder and not previously sold (or converted into Common Shares
and sold) by such Holder for the first 30 business days after the
Required Effective Date, and 1% of such purchase price for each
period of 30 business days thereafter (but no day taken into account
for purposes of determining whether any payment is due under Section
2(c)(i) shall be taken into account for purposes of determining
whether any payment is due under this Section 2(c)(ii) or the amount
of such payment). In no event shall payment pursuant to this Section
exceed 10% in the aggregate of the purchase price paid for the Notes
purchased by the Holder (including such Holder's predecessors and
successors) for the entire registration period (as described in
Section 5). The Late Registration Payments will be prorated on a
daily basis during the 30-business day period and will be paid to
the initial Holders or, at the Company's option, will be added to
the outstanding Principal Amount of the Notes, within ten business
days following the end of each 30-business day period as to which
payment is due hereunder, provided that the respective Holder
delivered to the Company at least two business days prior thereto
information with respect to the number of Notes and Common Shares
not previously sold by such Holder (together with reasonable
supporting documentation). The Holders may make a claim for
additional damages as a remedy for the Company's failure to comply
with the timelines set forth in this Section, but acknowledgement of
such right in this Agreement shall not constitute an admission by
the Company that any such damages exist or may exist.
Notwithstanding the foregoing, if the Company has used its best
efforts to avoid circumstances as a result of which the Registration
Statement has not been
6
declared effective by the Required Effective Date, then the damages
described above shall be the Holders' sole and exclusive remedy for
damages arising out of such circumstances. Nothing contained in the
preceding sentence shall be read to limit the ability of the Holders
to seek specific performance of this Agreement. Notwithstanding the
foregoing, if the Registration Statement has not yet been declared
effective and the Holders are no longer entitled to receive Late
Registration Payments as a result of the above-described percentage
limitation on said payments, then each Holder shall have the right,
at any time upon at least thirty (30) days written notice, to sell
all (but not less than all) of its Notes to the Company for a cash
purchase price equal to the outstanding Principal Amount of the
Notes plus any accrued but unpaid interest.
(d) During the registration period, the Company will make
available, upon reasonable advance notice during normal business hours, for
inspection by any Holder whose Registrable Securities are being sold pursuant to
a Registration Statement, all pertinent financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "RECORDS")
as reasonably necessary to enable each such Holder to exercise its due diligence
responsibility in connection with or related to the contemplated offering. The
Company will cause its officers, directors and employees to supply all
information that any Holder may reasonably request for purposes of performing
such due diligence.
(e) Each Holder will hold in confidence, use only in
connection with the contemplated offering and not make any disclosure of all
Records and other information that the Company determines in good faith to be
confidential, and of which determination the Holders are so notified, unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in any Registration Statement, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court or government body of
competent jurisdiction, (iii) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement (to the knowledge of the relevant Holder), (iv) the
Records or other information was developed independently by the Holder without
breach of this Agreement, (v) the information was known to the Holder before
receipt of such information from the Company, or (vi) the information was
disclosed to the Holder by a third party not under an obligation of
confidentiality. However, a Holder may make disclosure of such Records and other
information to any attorney, adviser, or other third party retained by it that
needs to know the information as determined in good faith by the Holder (the
"HOLDER REPRESENTATIVE"), if the Holder advises the Holder Representative of the
confidentiality provisions of this Section 2(e), but the Holder will be liable
for any act or omission of any of its Holder Representatives relative to such
information as if the act or omission was that of the Holder. The Company is not
required to disclose any confidential information in the Records to any Holder
unless and until such Holder has entered into a confidentiality agreement (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially to the effect of this Section 2(e). Unless legally
prohibited from so doing, each Holder will, upon learning that disclosure of
Records containing confidential information is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein will be deemed to
limit the Holder's ability to sell Registrable Securities in a manner that is
otherwise consistent with applicable laws and regulations.
(f) The Company shall file a Registration Statement with
respect to any newly authorized and/or reserved Registrable Securities
consisting of Common Shares described in clause (i) of the definition of
Registrable Securities within ten (10) business days of
7
any stockholders' meeting authorizing same and shall use its best efforts to
cause such Registration Statement to become effective within ninety (90) days of
such stockholders' meeting. If the Holders become entitled, pursuant to an event
described in clause (ii) and (iii) of the definition of Registrable Securities,
to receive any securities in respect of Registrable Securities that were already
included in a Registration Statement, subsequent to the date such Registration
Statement is declared effective, and the Company is unable under the securities
laws to add such securities to the then effective Registration Statement, the
Company shall promptly file, in accordance with the procedures set forth herein,
an additional Registration Statement with respect to such newly Registrable
Securities. The Company shall use its best efforts to (i) cause any such
additional Registration Statement, when filed, to become effective within 30
days of that date that the need to file the Registration Statement arose. All of
the registration rights and remedies under this Agreement shall apply to the
registration of such newly reserved shares and such new Registrable Securities.
3. Expenses of Registration. All Registration Expenses in connection
with any registration, qualification or compliance with registration pursuant to
this Agreement shall be borne by the Company, and all Selling Expenses of a
Holder shall be borne by such Holder.
4. Registration on Form S-3. The Company shall use its reasonable
best efforts to continue to meet the "registrant eligibility" requirements for a
secondary offering set forth in the general instructions to Form S-3 or any
comparable or successor form or forms, or in the event that the Company is
ineligible to use such form, such form as the Company is eligible to use under
the Securities Act, provided that if such other form is used, the Company shall
convert such other form to a Form S-3 as soon as the Company becomes so
eligible.
5. Registration Period. In the case of the registration effected by
the Company pursuant to this Agreement, the Company shall keep such registration
effective until the later of (a) the date on which all the Holders have
completed the sales or distribution described in the Registration Statement
relating thereto or, if earlier until such Registrable Securities may be sold by
the Holders under Rule 144(k) (provided that the Company's transfer agent has
accepted an instruction from the Company to such effect) or (b) the second (2nd)
anniversary of the Closing Date.
6. Indemnification.
(a) Company Indemnity. The Company will indemnify each Holder,
each of its officers, directors, agents and partners, and each person
controlling each of the foregoing, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls, within
the meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any final
prospectus (as amended or supplemented if the Company files any amendment or
supplement thereto with the SEC), Registration Statement filed pursuant to this
Agreement or any post-effective amendment thereof or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the
8
statements therein not misleading in light of the circumstances under which they
were made, or any violation by the Company of the Securities Act or any state
securities law or in either case, any rule or regulation thereunder applicable
to the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each Holder, each of its officers, directors, agents and partners, and
each person controlling each of the foregoing, for any reasonable legal fees of
a single counsel and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to a Holder to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on (i) any untrue statement or omission based upon written information
furnished to the Company by such Holder or underwriter (if any) therefor and
stated to be specifically for use therein, (ii) any failure by any Holder to
comply with prospectus delivery requirements or the Securities Act or Exchange
Act or any other law or legal requirement applicable to them or any covenant or
agreement contained in the Purchase Agreement or this Agreement or (iii) an
offer of sale of Common Shares occurring during a period in which sales under
the Registration Statement are suspended as permitted by this Agreement. The
indemnity agreement contained in this Section 6(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent will
not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally but not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, agents and partners, and
any other stockholder selling securities pursuant to the Registration Statement
and any of its directors, officers, agents, partners, and any person who
controls such stockholder within the meaning of the Securities Act or Exchange
Act and each underwriter, if any, of the Company's securities covered by such a
Registration Statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder, each other Holder (if any), and each of their officers,
directors and partners, and each person controlling such other Holder(s) against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any such final prospectus (as amended
or supplemented if the Company files any amendment or supplement thereto with
the SEC), Registration Statement filed pursuant to this Agreement or any
post-effective amendment thereof or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to
make the statement therein not misleading in light of the circumstances under
which they were made or (ii) failure by any Holder to comply with prospectus
delivery requirements or the Securities Act, Exchange Act or any other law or
legal requirement applicable to them or any covenant or agreement contained in
the Purchase Agreement or this Agreement, and will reimburse the Company and
such other Holder(s) and their directors, officers and partners, underwriters or
control persons for any reasonable legal fees or any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such final prospectus (as amended or supplemented if the
Company files any amendment or supplement thereto with the SEC), Registration
Statement filed pursuant to this Agreement or any post-effective amendment
thereof in reliance upon and in conformity
9
with written information furnished to the Company by such Holder and stated to
be specifically for use therein, and provided that the maximum amount for which
such Holder shall be liable under this indemnity shall not exceed the net
proceeds received by the Holders from the sale of the Registrable Securities
pursuant to the registration statement in question. The indemnity agreement
contained in this Section 6(b) shall not apply to amounts paid in settlement of
any such claims, losses, damages or liabilities if such settlement is effected
without the consent of such Holder (which consent shall not be unreasonably
withheld).
(c) Procedure. Each party entitled to indemnification under
this Section 6 (the "INDEMNIFIED PARTY") shall give notice to the party required
to provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at its own expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 6 except to
the extent that the Indemnifying Party is materially and adversely affected by
such failure to provide notice. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
non-privileged information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
7. Contribution. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder(s) on the
other, in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder(s) in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of the Company on
the one hand and of any Holder(s) on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by such Holder(s).
In no event shall the obligation of any Indemnifying Party to contribute
under this Section 7 exceed the amount that such Indemnifying Party would have
been obligated to pay by way of indemnification if the indemnification provided
for under Section 6(a) or 6(b) hereof had been available under the
circumstances.
10
The Company and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraphs. The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraphs
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section, no Holder shall be required to
contribute any amount in excess of the amount by which in the case of any
Holder, the net proceeds received by such Holder from the sale of Registrable
Securities pursuant to the registration statement in question. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
8. Survival. The indemnity and contribution agreements contained in
Sections 6 and 7 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or the Purchase Agreement, and (ii) the
consummation of the sale or successive resales of the Registrable Securities.
9. Information by Holders. As a condition to the obligations of the
Company to complete any registration pursuant to this Agreement with respect to
the Registrable Securities of each Holder, such Holder will furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended methods of disposition of the Registrable Securities held by it
as is reasonably required by the Company to effect the registration of the
Registrable Securities. At least five business days prior to the first
anticipated filing date of a Registration Statement for any registration under
this Agreement, the Company will notify each Holder of the information the
Company requires from that Holder whether or not such Holder has elected to have
any of its Registrable Securities included in the Registration Statement. If the
Company has not received the requested information from a Holder by the business
day prior to the anticipated filing date, then the Company may file the
Registration Statement without including Registrable Securities of that Holder.
10. Further Assurances. Each Holder will cooperate with the Company,
as reasonably requested by the Company, in connection with the preparation and
filing of any Registration Statement hereunder, unless such Holder has notified
the Company in writing of such Holder's irrevocable election to exclude all of
such Holder's Registrable Securities from such Registration Statement.
11. Suspension of Sales. Upon receipt of any notice from the Company
under Section 2(a)(v) or 2(b), each Holder will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until (i) it receives copies of a
supplemented or amended prospectus contemplated by Sections 2(a)(v) or (ii) the
Company advises the Holder that a suspension of sales under Section 2(b) has
terminated. If so directed by the Company, each Holder will deliver to the
Company (at the expense of the Company) or destroy all copies in the Holder' s
possession (other than a limited number of file
11
copies) of the prospectus covering such Registrable Securities that is current
at the time of receipt of such notice.
12. Replacement Certificates. The certificate(s) representing the
Registrable Securities held by the Purchaser (or then Holder) may be exchanged
by the Purchaser (or such Holder) at any time and from time to time for
certificates with different denominations representing an equal aggregate number
of Common Shares, as reasonably requested by such Purchaser (or such Holder)
upon surrendering the same. No service charge will be made for such registration
or transfer or exchange. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of the Note or
certificates for the underlying Common Shares of any of the foregoing, and, in
the case of loss, theft or destruction, of indemnity reasonably satisfactory to
it, or upon surrender and cancellation of such certificate if mutilated, the
Company will make and deliver a new Note or certificate of like tenor and dated
as of such cancellation at no charge to the holder.
13. Transfer or Assignment. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Purchaser by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of the Note or Registrable Securities, and all other rights granted
to the Purchaser by the Company hereunder may be transferred or assigned to any
transferee or assignee of the Note or Registrable Securities; provided in each
case that (i) the Company is given written notice by the Purchaser at the time
of or within a reasonable time after such transfer or assignment, stating the
name and address of said transferee or assignee and identifying the securities
with respect to which such registration rights are being transferred or
assigned; and provided further that the transferee or assignee of such rights
agrees in writing to be bound by the registration provisions of this Agreement,
(ii) such transfer or assignment is not made under the Registration Statement or
Rule 144, (iii) such transfer is made according to the applicable requirements
of the Purchase Agreement, and (iv) the transferee has provided to the Company
an investor questionnaire (or equivalent document) evidencing that the
transferee is a "qualified institutional buyer" or an "accredited investor"
defined in Rule 501(a)(1),(2),(3), or (7) of Regulation D.
14. Miscellaneous.
(a) Remedies. The Company and the Purchaser acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity.
(b) Jurisdiction. Each of the Company and the Purchaser (i)
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court, the New York state courts and other courts of the United States
sitting in New York, New York for the purposes of any suit, action or proceeding
arising out of or relating to this Agreement and (ii)
12
hereby waives, and agrees not to assert in any such suit action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. The Company and the
Purchaser consent to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this paragraph
shall affect or limit any right to serve process in any other manner permitted
by law.
(c) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
to the Company:
Liquidmetal Technologies, Inc.
00000 Xxxxxxxxxxxx Xx., Xxxxx 000
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxx Xxxx, President
with a copy to:
Xxxxx & Lardner LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000-0000
Telephone: 000-000-0000
Facsimile:
Attention: Xxxx X. Xxxxxx
If to the Purchasers, to the addresses set forth on Schedule I to the
Purchase Agreement:
with a copy to:
Xxxxxxxx Xxxxx Deutsch LLP
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Deutsch
Any party hereto may from time to time change its address for notices by giving
at least five days' written notice of such changed address to the other parties
hereto.
13
(d) Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. The representations and warranties and
the agreements and covenants of the Company and each Purchaser contained herein
shall survive the Closing.
(e) Execution in Counterpart. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart.
(f) Signatures. Facsimile signatures shall be valid and
binding on each party submitting the same.
(g) Entire Agreement; Amendment. This Agreement, together with
the Purchase Agreement, the Note, the Warrant, and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and agreement
of the parties, and may not be amended, modified or terminated except by a
written agreement signed by the Company plus the Holders of 75% of the
outstanding Principal Amount of the Notes issued under the Purchase Agreement to
that date; provided that for the purposes of this Section 14(g) the Holders of
Registrable Securities still entitled to registration rights under this
Agreement will be deemed to still be Holders of that amount of Notes which were
converted into such number of Registrable Securities issued upon conversion
which are still held by them.
(h) Governing Law. This Agreement and the validity and
performance of the terms hereof shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts executed and to
be performed entirely within such state, except to the extent that the law of
the State of Delaware regulates the Company's issuance of securities.
(i) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL
BY JURY.
(j) Force Majeure. The Company shall not be deemed in breach
of its commitments under this Agreement and no payments by the Company as set
forth in Section 2 shall be required if the Company is unable to fulfill it
obligations hereunder in a timely fashion if the SEC or the Nasdaq National
Market are closed or operating on a limited basis as a result of the occurrence
of a Force Majeure. As used herein, "FORCE MAJEURE" means war or armed
hostilities or other national or international calamity, or one or more acts of
terrorism, which are having a material adverse effect on the financial markets
in the United States. Furthermore, any payments owed as a result of Section 2
shall not accrue during any period during which the Company's performance
hereunder has been delayed or the Company's ability to fulfill its obligations
hereunder has been impaired by a Force Majeure.
(k) Titles. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
14
(l) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction will be applied against
any party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
COMPANY:
LIQUIDMETAL TECHNOLOGIES, INC.
By: ________________________________________________
Xxxx Xxxx, President and Chief Executive Officer
PURCHASERS:
MIDDLEBURY CAPITAL LLC
By: ________________________________________________
Name: ______________________________________________
Title: _____________________________________________
15
COUNTERPART SIGNATURE PAGE
TO REGISTRATION RIGHTS AGREEMENT,
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC. AND
THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Registration Rights Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Registration Rights Agreement and Signature Pages of the Company and
other "Purchasers" under the Registration Rights Agreement, shall constitute one
and the same document in accordance with the terms of the Registration Rights
Agreement.
PURCHASER: ________________________________
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
16
EXHIBIT C
LEGAL OPINION PROVISIONS
1. Based solely upon recent certificates of the Delaware Secretary
of State, the Company is a corporation duly incorporated and existing in good
standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power and authority to
execute, deliver, and perform its obligations under the Transaction Documents
and to issue the Notes and Warrant.
3. All necessary corporate action has been taken by the Company to
authorize the execution, delivery, and performance by the Company of each of the
Transaction Documents.
4. The Notes have been duly authorized for issuance. When issued in
accordance with the terms of the Transaction Documents against payment of
consideration therefor, the Note will be validly issued, fully paid and
non-assessable, and free of preemptive rights contained in the Certificate of
Incorporation or Bylaws.
5. Each of the Transaction Documents constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with its
respective terms. The enforceability of the Transaction Documents may be limited
or otherwise affected by (i) bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer, or other similar statutes, rules, regulations, or other
laws affecting the enforcement of creditors' rights and remedies generally and
(ii) the unavailability of, or limitation on the availability of, a particular
right or remedy (whether in a proceeding in equity or at law) because of an
equitable principle or a requirement as to commercial reasonableness,
conscionability, or good faith.
6. The Secured Party upon filing of the Financing Statement with the
Delaware Secretary of State, will have a perfected security interest in that
portion of the Collateral in which a security interest is perfected by filing a
financing statement under the Delaware UCC.
EXHIBIT D
FORM OF COMPANY SECURITY AGREEMENT
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made and entered into as of
the 1st day of March, 2004, by and between LIQUIDMETAL TECHNOLOGIES, INC., a
Delaware corporation ("Borrower"), and MIDDLEBURY CAPITAL LLC, a Delaware
limited liability company ("MC" or "Agent") and each other person or entity
listed as a Secured Party on Schedule 1 attached to this Agreement (the
"Investors" and together with MC the "Secured Party"). Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in that
Securities Purchase Agreement, dated March 1, 2004, between the Company and the
parties identified as "Middlebury Investors" on Schedule 1 hereto ("Securities
Purchase Agreement"). Additionally, for purposes of this Agreement, the term
"Michigan Note" shall mean the 6% senior convertible notes issuable under the
Amended and Restated Securities Purchase Agreement, dated March 1, 2004, among
Michigan Venture Capital Co, Ltd. ("Michigan"), the Borrower, and the parties
identified as "Michigan Investors on Schedule 1 hereto (the "Michigan
Agreement").
RECITALS
WHEREAS, Secured Party has agreed to purchase the Note from the Borrower
pursuant to the terms of the Securities Purchase Agreement and the Note, or to
alternatively purchase the Michigan Note from the Borrower pursuant to the terms
of the Michigan Agreement and the Michigan Note.
WHEREAS, Secured Party has required, as a condition to purchasing the Note
or Michigan Note, that Borrower grant Secured Party a first priority security
interest in all of Borrower's patents listed in Exhibit A hereto, and to that
end has required the execution and delivery of this Agreement by Borrower.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in the Note, the Michigan Note, and herein, the parties hereto,
intending to be legally bound, agree as follows:
1. INCORPORATION OF RECITALS, PURCHASE AGREEMENT, AND NOTE. The foregoing
Recitals, the Note, the Securities Purchase Agreement, the Michigan Note, and
the Michigan Agreement, and the terms and provisions thereof, are hereby
incorporated herein in their entirety by this reference.
2. DEFINITIONS. The following terms shall have the meanings set forth
below:
"Collateral" shall mean all Patents and Proceeds.
Notwithstanding the foregoing, the security interest granted herein shall
not extend to and the term "Collateral" shall not include any property,
rights or licenses to the extent the granting of a security interest
therein would be contrary to applicable law.
"Obligations" means each and every debt, liability, and
obligation of every kind and description arising under or in connection
with the Note or Michigan Note which Borrower may now or at any time
hereafter owe to Secured Party.
"Patents" shall mean, collectively, all of Borrower's letters
patent under the laws of the United States listed on Exhibit A hereto, all
recordings and registrations thereof and applications therefor, including,
without limitation, the inventions described therein, all reissues,
continuations, divisions, renewals, extensions, continuations-in-part
thereof, in each case whether now owned or existing or hereafter acquired
or arising.
"Permitted Liens" shall mean, collectively, the following: (i)
liens for current taxes or other governmental or regulatory assessments
which are not delinquent, or which are being contested in good faith by
the appropriate procedures and for which appropriate reserves are
maintained; (ii) liens in favor of Agent and/or the Secured Party; and
(iii) licenses or sublicenses of Patents, in each instance granted to
others not interfering in any material respect with the business of the
Borrower.
"Proceeds" shall mean any consideration received from the
sale, exchange, lease or other disposition of any asset or property which
constitutes Collateral, any other value received as a consequence of the
possession of any Collateral and any payment received from any insurer or
other person or entity as a result of the destruction, loss, theft or
other involuntary conversion of whatever nature of any asset or property
that constitutes Collateral.
"Security Interest" has the meaning given in Section 3(b).
3. SECURITY FOR OBLIGATIONS.
a. This Agreement secures, and the Collateral is collateral security
for, the prompt payment or performance in full when due, whether at stated
maturity, by required prepayment, declaration, acceleration, conversion, demand
or otherwise (including the payment of amounts that would become due but for the
operation of the automatic stay under Section 363(a) of the Bankruptcy Code, 11
U.S.C. Section 362(a)) of all obligations and liabilities of every nature of
Borrower now or hereafter existing under or arising out of or in connection with
the Note and this Agreement and all extensions or renewals thereof, whether for
principal, interest, (including, without limitation, interest that, but for the
filing of a petition in bankruptcy with respect to Borrower, would accrue on
such obligations), fees, expenses, indemnities or otherwise, whether voluntary
or involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Agent or any Secured Party as a preference, fraudulent transfer
or otherwise (all such obligations of Borrower, together with the Obligations,
being the "Secured Obligations").
b. Security Interest. As security for the payment or performance, as
the case may be, of the Secured Obligations, the Borrower hereby creates and
grants to the Agent, its successors and its assigns, for its own benefit and for
the pro rata benefit of the Investors, their successors and their assigns, a
security interest in the Collateral (the "Security Interest"). Without limiting
the foregoing, the Agent is hereby authorized to file one or more financing
statements, continuation statements or other documents for the purpose of
perfecting,
2
confirming, continuing, enforcing or protecting the Security Interest, naming
the Borrower as debtors and the Agent as secured party.
The Borrower agrees at all times to keep in all material respects accurate
and complete accounting records with respect to the Collateral, including, but
not limited to, a record of all payments and Proceeds received.
4. Representations and Warranties. Borrower represents and warrants as
follows:
a. Financing Statements. Except for the financing statements in
favor of Secured Party, at the time of granting the security interest described
herein, no financing statement covering the Collateral or any portion thereof
will be on file in any public office and Borrower agrees not to execute or
authorize the filing of any such additional financing statement in favor of any
person, entity or governmental agency (whether federal, state or local) other
than Secured Party as long as any portion of the Obligations evidenced by the
Note remain unpaid.
b. Legal Name. Borrower's exact legal name is as set forth in the
first paragraph of this Security Agreement. Borrower shall not change its legal
name or its form of organization without 30 days' prior written notice to
Secured Party.
c. Title and Authority. Borrower has (i) rights in and good title to
the Collateral in which it is granting a security interest hereunder and (ii)
the requisite corporate power and authority to grant to the Agent the Security
Interest in such Collateral pursuant hereto and to execute, deliver and perform
its obligations in accordance with the terms of this Agreement, without the
consent or approval of any other person other than any consent or approval which
has been obtained. Borrower has the sole, full and clear title to each of the
Patents shown on Schedule A hereto and the registrations thereof are valid and
subsisting and in full force and effect. None of the Patents has been abandoned
or dedicated, and, except to the extent that the Agent, upon prior written
notice by Borrower, shall consent, Borrower will not do any act, or omit to do
any act, whereby the Patents may become abandoned or dedicated and shall notify
the Agent immediately if it knows of any reason or has reason to know that any
application or registration may become abandoned or dedicated. Borrower hereby
represents and warrants that the Patents shown on Schedule A are the only issued
U.S. patents owned by Borrower as of the date of this Agreement.
d. Filing. Fully executed Uniform Commercial Code financing
statements containing a description of the Collateral shall have been, or shall
be delivered to the Agent in a form such that they can be, filed of record in
every governmental, municipal or other office in every jurisdiction in which any
portion of the Collateral is located necessary to publish notice of and protect
the validity of and to establish a valid, legal and perfected security interest
in favor of the Agent in respect of the Collateral in which a security interest
may be perfected by filing in the United States and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of Uniform Commercial Code continuation statements.
3
e. Validity of Security Interest. The Security Interest constitutes
a valid, legal and perfected first priority security interest in all of the
Collateral for payment and performance of the Secured Obligations subject only
to Permitted Liens.
f. Locations of Collateral; Place of Business. Borrower hereby
represents and warrants that all the Collateral is located at the locations
listed on Schedule A hereto and that its federal employer identification number
is as set forth on said Schedule. The Borrower agrees not to establish, or
permit to be established, any other location for Collateral unless all filings
under the Uniform Commercial Code as in effect in any state or otherwise which
are required by this Agreement or the Note to be made with respect to the
Collateral have been made and the Agent has a valid, legal and perfected first
priority security interest in the Collateral. Borrower confirms that its chief
executive office is located at the office indicated on Schedule A hereto.
Borrower agrees not to change, or permit to be changed, the location of its
chief executive office unless all filings under the Uniform Commercial Code or
otherwise which are required by this Agreement or the Note to be made have been
made and the Agent has a valid, legal and perfected first priority security
interest
5. COVENANTS AND AGREEMENTS. Borrower covenants and agrees as follows:
a. Restrictions. Borrower agrees that until the Obligations shall
have been satisfied in full, Borrower shall not, without Secured Party's
prior written consent, assign, transfer, encumber or otherwise dispose of
the Collateral, or any interest therein, except that Borrower may (i)
license (other than on an exclusive basis for all known fields of use for
the duration of the term of the patent) or grant similar rights and
interests on an arm's length basis consistent with good industry practice
in all or any part of the Collateral to unrelated third parties pursuant
to its business and (ii) sell, license on an exclusive basis for all known
fields of use for the duration of the term of the patent or otherwise
transfer for value all or any part of the Collateral with the prior
written consent of the Secured Party, which consent will not be
unreasonably withheld, provided that the restriction on exclusive licenses
shall terminate beginning on the date that more than one-half of the
principal amount of the Notes secured by the Collateral has been repaid by
the Company or has been converted to Common Stock. Borrower further agrees
that it will not take any action, or permit any action to be taken by
others subject to its control, including licensees, or fail to take any
action, which would affect the validity or enforcement of the rights
transferred to Secured Party under this Agreement.
b. Defense. Borrower shall, at its own cost and expense, take any
and all actions reasonably necessary to defend title to the Collateral
owned by it against all persons and to defend the Security Interest of the
Agent in such Collateral, and the priority thereof, against any adverse
lien of any nature whatsoever (other than Permitted Liens).
c. Maintenance. Borrower shall at all times and at its own expense
maintain and keep, or cause to be maintained and kept, the Collateral.
Borrower shall perform all acts and execute all documents, including,
without limitation, security agreements in form suitable for filing with
the United States Patent and Trademark Office, substantially in the form
of Exhibit B, hereof requested by the Agent at any time to evidence,
perfect,
4
maintain, record and enforce the Agent's interest in the Collateral or
otherwise in furtherance of the provisions of this Agreement, and Borrower
hereby authorizes the Agent to execute and file one or more financing
statements (and similar documents) or copies thereof or of this Agreement
with respect to the Collateral signed only by the Agent. Borrower will
take all necessary steps in any proceeding before the United States Patent
and Trademark Office or any similar office or agency of the United States
or any State thereof to maintain each application and registration of the
Patents, including, without limitation, filing of renewals, affidavits of
use, affidavits of incontestability and opposition, interference and
cancellation proceedings.
d. Secured Party's Right to Take Action. If, after ten days written
notice from Secured Party, Borrower fails to perform or observe any of its
covenants or agreements set forth in this Section 5 or if Borrower
notifies Secured Party that it intends to abandon all or any part of the
Collateral, Secured Party may (but need not) perform or observe such
covenant or agreement or take steps to prevent such intended abandonment
on behalf and in the name, place, and stead of Borrower (or, in the case
of intended abandonment, in Secured Party's own name) and may (but need
not) take any and all other actions that Secured Party may reasonably deem
necessary to cure or correct such failure or prevent such intended
abandonment.
e. Costs and Expenses. Except to the extent that the effect of such
payment would be to render any loan or forbearance of money usurious or
otherwise illegal under any applicable law, Borrower shall pay Secured
Party on demand the amount of all moneys expended and all costs and
expenses (including reasonable attorneys' fees and disbursements) incurred
by Secured Party in connection with or as a result of Secured Party's
taking action under subsection 5(d), except for intended abandonment of
the Collateral by Borrower, or exercising its rights under Section __,
together with interest thereon from the date expended or incurred by
Secured Party.
f. Use and Disposition of Collateral. Borrower shall not make or
permit to be made any assignment, pledge or hypothecation of the
Collateral other than Permitted Liens, or grant any security interest in
the Collateral except for the Security Interest and Permitted Liens.
Borrower shall not make or permit to be made any transfer of any
Collateral, except in the ordinary course of business, and Borrower shall
remain at all times in possession of the Collateral owned by it other than
transfers to the Agent pursuant to the provisions hereof and as otherwise
provided in this Agreement. The Agent shall have the right, as the true
and lawful agent of the Borrower, with power of substitution for the
Borrower and in the Borrower's name, the Agent's name or otherwise, for
the use and benefit of the Agent and the Investors and solely to effect
the purposes of this Agreement, (i) to endorse the Borrower's name upon
any notes, acceptances, checks, drafts, money orders or other evidences of
payment with respect to the Collateral that may come into its possession;
(ii) to sign the name of the Borrower on any invoice relating to any of
the Collateral and (iii) upon the occurrence and during the continuance of
an event of default under this Agreement or under the Note, (A) to
receive, endorse, assign and/or deliver any and all notes, acceptances,
checks, drafts, money orders or other evidences or instruments of payment
relating to the Collateral or any part thereof, and Borrower hereby waives
notice of presentment, protest and non-
5
payment of any instrument so endorsed, (B) to demand, collect, receive
payment of, give receipt for, extend the time of payment of and give
discharges and releases of all or any of the Collateral and/or release the
obligor thereon, (C) to commence and prosecute any and all suits, actions
or proceedings at law or in equity in any court of competent jurisdiction
to collect or otherwise realize on all or any of the Collateral or to
enforce any rights in respect of any Collateral, (D) to settle,
compromise, compound, adjust or defend any actions, suits or proceedings
relating to or pertaining to all or any of the Collateral, and (H) to use,
sell, assign, transfer, pledge, make any agreement with respect to or
otherwise deal with all or any of the Collateral, and to do all other acts
and things necessary to carry out the purposes of this Agreement, as fully
and completely as though the Agent were the absolute owner of the
Collateral for all purposes; provided, however, that nothing herein
contained shall be construed as requiring or obligating the Agent or any
Investor to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Agent or such Investor or to
present or file any claim or notice, or to take any action with respect to
the Collateral or any part thereof or the moneys due or to become due in
respect thereof or any property covered thereby, and no action taken by
the Agent or any Investor or omitted to be taken with respect to the
Collateral or any part thereof shall give rise to any defense,
counterclaim or offset in favor of Borrower or to any claim or action
against the Agent or any Investor in the absence of the gross negligence
or willful misconduct of the Agent or such Investor; and provided further
that, the Agent shall at all times act reasonably and in good faith. It is
understood and agreed that the appointment of the Agent as the agent of
the Borrower for the purposes set forth above in this Section 5(f) is
coupled with an interest and is irrevocable. The provisions of this
Section 5(f) shall in no event relieve Borrower of any of its obligations
hereunder with respect to the Collateral or any part thereof (other than
obligations which are impaired as a result of actions taken by the Agent
pursuant to this Section 5(f)) or impose any obligation on the Agent or
any Investor to proceed in any particular manner with respect to the
Collateral or any part thereof, or in any way limit the exercise by the
Agent or any Investor of any other or further right which it may have on
the date of this Agreement or hereafter, whether hereunder or by law or
otherwise. Anytime action is taken under this Section 5(f), prompt written
notice of such action shall be provided to Borrower by Agent.
g. Further Assurances. Borrower agrees, at its expense, to execute,
acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Agent may from
time to time reasonably request for the assuring and preserving of the
Security Interest and the rights and remedies created hereby, including,
without limitation, the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting
of the Security Interest and the filing of any financing statements or
other documents in connection herewith. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be
promptly pledged and delivered to the Agent, duly endorsed in a manner
satisfactory to the Agent. Borrower agrees to notify promptly the Agent of
any change in its corporate name or in the location of its chief executive
office, its chief place of business or the office where it keeps its
records.
6
6. Events of Default. Each of the following occurrences shall constitute
an event of default under this Agreement (herein called "Event of Default"):
a. an Event of Default, as defined in the Note, shall occur; or
b. Borrower shall fail promptly to observe or perform any covenant
or agreement herein binding on it and such failure is not cured within 20
days after written notice from Secured Party; or
c. there is any levy, seizure, or attachment of all or any material
portion of the Collateral, other than as set forth in this Agreement; or
d. any of the representations or warranties contained in Section 0
shall prove to have been incorrect in any material respect when made.
7. REMEDIES. Upon the occurrence of an Event of Default and at any time
thereafter, Secured Party may, at its option, take any or all of the following
actions:
a. exercise any or all remedies available under this Agreement or
the Note including, without limitation, any and all rights afforded to a
secured party under, and subject to its obligations contained in, the
Uniform Commercial Code as in effect in any state or other applicable law;
or
b. sell, assign, transfer, pledge, encumber, or otherwise dispose of
the Collateral; or
c. enforce the patents comprising the Collateral and if Secured
Party shall commence any suit for such enforcement, Borrower shall, at the
request of Secured Party, do any and all lawful acts and execute any and
all proper documents reasonably required by Secured Party in aid of such
enforcement; or
d. incur expenses, including attorneys' fees at the regular hourly
rates of Secured Party's counsel from time to time in effect, legal
expenses and costs for the exercise of any right or power under this
Security Agreement, which expenses are secured by this Security Agreement.
Any disposition of Collateral by Agent shall be subject to the mandatory
requirements of applicable law and subject to the requirement that Agent act
reasonably and in good faith. Subject to such conditions, Agent may sell or
otherwise dispose of all or any part of the Collateral, at public or private
sale, for cash, upon credit or for future delivery as the Agent shall deem
appropriate. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Borrower, and
Borrower hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which Borrower now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
The Agent shall give the Borrower ten (10) days' written notice (which Borrower
agrees is reasonable notice within the meaning of Section 9 504(3) of the
Uniform Commercial Code) of the Agent's intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time and
place for such sale. Any such public sale shall be held at such time or
7
times within ordinary business hours and at such place or places as the Agent
may fix and state in the notice (if any) of such sale. At any such sale, the
Collateral, or portion thereof, to be sold may be sold in one lot, as an
entirety or in separate parcels, as the Agent may (in its sole and absolute
discretion) determine. The Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Agent may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Agent until the sale price is paid by the purchaser or
purchasers thereof, but the Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public sale made pursuant to this Section 6, any Investor may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay or appraisal on the part of Borrower (all said rights being
also hereby waived and released to the extent permitted by law), with respect to
the Collateral or any part thereof offered for sale and any such Investor may
make payment on account thereof by using any claim then due and payable to any
such Investor from Borrower as a credit against the purchase price, and any such
Investor may, upon compliance with the terms of sale, hold, retain and dispose
of such property without further accountability to Borrower therefor. For
purposes hereof, a written agreement to purchase the Collateral or any portion
thereof shall be treated as a sale thereof; the Agent shall be free to carry out
such sale and purchase pursuant to such agreement, and Borrower shall not be
entitled to the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Agent shall have entered into such an
agreement all events of default shall have been remedied and the Secured
Obligations paid in full. Borrower shall remain liable for any deficiency. As an
alternative to exercising the power of sale herein conferred upon it, the Agent
may proceed by a suit or suits at law or in equity to foreclose this Agreement
and to sell the Collateral or any portion thereof pursuant to a judgment or
decree of a court or courts having competent jurisdiction or pursuant to a
proceeding by a court appointed receiver.
8. DESIGNATION OF AGENT. The Investors hereby irrevocably designate MC
(and its successors and assigns) as their agent and MC hereby accepts such
designation, in order to execute any and all instruments or other documents on
behalf of the Investors and to do any and all other acts or things on behalf of
the Investors that MC (or its successors or assigns) in its sole discretion
deems necessary or advisable or that may be required pursuant to this Agreement
or otherwise, to exercise Secured Party's rights and remedies under this
Agreement. None of the Investors may take any action or exercise any rights
under this Agreement except through MC as their agent. Borrower hereby appoints
the Agent the attorney-in-fact of Borrower solely for the purpose of carrying
out the provisions of this Agreement and taking any action and executing any
instrument which the Agent may reasonably deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable so long as this
Agreement and the Security Interest have not been terminated and coupled with an
interest
9. APPLICATION OF PROCEEDS. The proceeds of any collection or sale of
Collateral, as well as any Collateral consisting of cash, shall be applied by
the Agent as follows:
8
FIRST, to the payment of all reasonable costs and
expenses incurred by the Agent in connection with such collection or
sale or otherwise in connection with this Agreement or any of the
Secured Obligations, including, but not limited to, all court costs
and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Agent hereunder
on behalf of the Borrower and any other reasonable costs or expenses
incurred in connection with the exercise of any right or remedy
hereunder;
SECOND, pro rata to the payment in full of principal and
interest in respect of any amount of the Notes outstanding (pro rata
as among the Investors in accordance with the principal amount of
the Notes held by them);
THIRD, to the Borrower, its successors and assigns, or
as a court of competent jurisdiction may otherwise direct.
10. SECURITY INTEREST ABSOLUTE. All rights of the Agent hereunder, the
Security Interest, and all obligations of the Borrower hereunder, shall be
absolute and unconditional irrespective of (i) any partial invalidity or
unenforceability of the Note, any other agreement with respect to any of the
Secured Obligations or any other agreement or instrument relating to any of the
foregoing, (ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or consent to any departure from the Note or any other agreement or
instrument, (iii) any exchange, release or nonperfection of any other
Collateral, or any release or amendment or waiver of or consent to or departure
from any guarantee, for all or any of the Secured Obligations, or (iv) any other
circumstance which might otherwise constitute a defense available to, or
discharge of the Borrower in respect of the Secured Obligations or in respect of
this Agreement.
11. MISCELLANEOUS. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by Secured Party. A waiver signed by Secured
Party shall be effective only in the specific instance and for the specific
purpose given. Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party's rights or remedies. All rights and
remedies of Secured Party shall be cumulative and may be exercised singularly or
concurrently, at Secured Party's option, and the exercise or enforcement of any
one such right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other. Secured Party shall not be obligated to preserve any
rights Borrower may have against prior parties, to realize on the Collateral at
all or in any particular manner or order, or to apply any cash proceeds of the
Collateral in any particular order of application. This Agreement shall be
binding upon and inure to the benefit of Borrower and Secured Party and their
respective participants, successors, and permitted assigns and shall take effect
when signed by Borrower and Secured Party, and Borrower waives notice of Secured
Party's acceptance hereof; provided, however, that the Secured Party's rights
hereunder may not be transferred or assigned to any third party without the
prior written consent of Borrower. This Agreement shall be governed by the
internal law of the State of New York without regard to conflicts of law
provisions. If any provision or application of this Agreement is held unlawful
or unenforceable in any respect, such illegality or unenforceability shall not
affect other provisions or applications which can be given effect and
9
this Agreement shall be construed as if the unlawful or unenforceable provision
or application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement and the creation and
payment of the Obligations.
12. WAIVER OF JURY TRIAL: BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THE RIGHT BORROWER MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR SECURED PARTY ENTERING INTO THIS AGREEMENT.
13. TERMINATION. This Agreement and the Security Interest shall terminate
when all the Secured Obligations have been fully and indefeasibly paid in full,
at which time the Agent shall execute and deliver to the Borrower all Uniform
Commercial Code termination statements and similar documents which the Borrower
shall reasonably request to evidence such termination; provided, however, that
all indemnities of the Borrower contained in this Agreement shall survive, and
remain operative and in full force and effect regardless of, the termination of
this Agreement for a period of six (6) months following the termination of this
Agreement
*** Signatures on following page(s) ***
10
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Security Agreement as of the date and year first written above.
SECURED PARTY:
MIDDLEBURY CAPITAL LLC
By: _____________________________________
Name: ___________________________________
Title: __________________________________
BORROWER:
LIQUIDMETAL TECHNOLOGIES, INC.
By: _____________________________________
Xxxx Xxxx,
President and Chief Executive Officer
11
COUNTERPART SIGNATURE PAGE
TO SECURITY AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
MIDDLEBURY CAPITAL LLC, AND
THE "INVESTORS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.
INVESTOR: _____________________________
By: ___________________________________
Name: _________________________________
Title: ________________________________
12
SCHEDULE I TO SECURITY AGREEMENT
"MIDDLEBURY INVESTORS"
[INSERT SCHEDULE 1 TO MIDDLEBURY SECURITIES PURCHASE AGREEMENT]
"MICHIGAN INVESTORS"
[INSERT SCHEDULE 1 TO MICHIGAN SECURITIES PURCHASE AGREEMENT]
13
EXHIBIT A
COLLATERAL, EIN AND OFFICE LOCATION
TITLE OF PATENT U.S. PATENT NUMBER
--------------- ------------------
MATERIALS TRANSFORMABLE COATINGS 4,725,512
WC CONTAINING COATING 5,030,519
JOINING USING BULK ALLOYS 5,482,580
DIAMOND COMPOSITES OF BULK ALLOYS 5,567,532
COMPOSITES OF BULK ALLOY (METHOD) 5,567,251
COMPOSITES OF BULK ALLOY (ARTICLE) 5,866,254
TI-CONTAINING HARD-FACING COATING 5,695,825
DIE-CASTING OF BULK ALLOYS 5,711,363
TORSIONAL SPRING OF BULK ALLOYS 5,772,803
APPARATUS FOR HARD-FACING COATING 5,942,289
ZIRCONIA CONTAINING COATING 6,376,091
SHAPED-CHARGE PROJECTILES 6,446,558
VACUUM DIE-CASTING OF BULK ALLOYS 6,021,840
The office location for each of the above Patents is 00000 Xxxxxxxxxxxx Xx.,
Xxxxx 000, Xxxx Xxxxxx, Xxxxxxxxxx 00000. Each of the above Patents is owned by
Liquidmetal Technologies, Inc., a Delaware corporation whose Federal Employer
Identification number is as follows: 00-0000000.
EXHIBIT B
SECURITY AGREEMENT
(PATENTS)
WHEREAS, LIQUIDMETAL TECHNOLOGIES, INC., a Delaware corporation (herein
referred to as "Borrower"), owns the letters patent, and/or applications for
letters patent, of the United States, more particularly described on Schedule
1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Borrower is obligated to MIDDLEBURY CAPITAL LLC, a Delaware
limited liability company, as agent (herein referred to as the "Secured Party")
for the Investors named in those certain Secured Convertible Notes dated as of
the date hereof issued by the Borrower (each such note, as amended, modified or
supplemented from time to time in accordance with its terms, shall collectively
be referred to as the "Note") and Borrower has entered into a Security Agreement
dated the date hereof (the "Agreement") in favor of Secured Party; and
WHEREAS, pursuant to the Agreement, Borrower has assigned to Secured
Party, and granted to Secured Party a security interest in, all right, title and
interest of Borrower in and to the Patents, together with any reissue,
continuation, continuation-in-part or extension thereof, and all proceeds
thereof, including, without limitation, any and all causes of action which may
exist by reason of infringement thereof for the full term of the Patents (the
"Collateral"), to secure the prompt payment, performance and observance of the
Secured Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Borrower does hereby further assign unto Secured Party and
grant to Secured Party a security interest in, the Collateral to secure the
prompt payment, performance and observance of the Secured Obligations.
Borrower does hereby further acknowledge and affirm that the rights and
remedies of Secured Party with respect to the assignment of, security interest
in the Collateral made and granted hereby are more fully set forth in the
Agreement, the terms and provisions of which are hereby incorporated herein by
reference as if fully set forth herein.
Secured Party's address is 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX
00000
IN WITNESS WHEREOF, Borrower has caused this Agreement to be duly executed
by its officer thereunto duly authorized as of the 1st day of March 2004.
LIQUIDMETAL TECHNOLOGIES, INC.
By: _____________________________________
Xxxx Xxxx,
President and Chief Executive Officer
EXHIBIT E
FORM OF WARRANT TO PURCHASE COMMON STOCK
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT
(U.S.-BASED INVESTORS)
To Purchase Shares of $0.001 Par Value Common Stock ("Common Stock") of
LIQUIDMETAL TECHNOLOGIES, INC.
THIS CERTIFIES that, for value received, ___________________________ (the
"PURCHASER" or "HOLDER") is entitled, upon the terms and subject to the
conditions hereinafter set forth, at any time on or after the date hereof and on
or prior to 8:00 p.m. New York City Time on the date that is one hundred (100)
calendar days after the first date that a Company registration statement
covering the resale of the Common Stock underlying this Warrant is declared
effective by the U.S. Securities and Exchange Commission (the "TERMINATION
DATE"), but not thereafter, to subscribe for and purchase from Liquidmetal
Technologies, Inc., a Delaware corporation (the "COMPANY"), [25% of Principal
Amount of Notes purchased divided by $3.00] shares of Common Stock (the "WARRANT
SHARES") at an Exercise Price equal to $3.00 per share (as adjusted from time to
time pursuant to the terms hereof, the "EXERCISE PRICE"). The Exercise Price and
the number of shares for which the Warrant is exercisable shall be subject to
adjustment as provided herein. This Warrant is being issued in connection with
the Securities Purchase Agreement dated March 1, 2004 (the "PURCHASE
AGREEMENT"), entered into between the Company and the Purchaser. Capitalized
terms used herein and not otherwise defined shall have the meaning ascribed
thereto in the Purchase Agreement.
1. Title of Warrant. Prior to the expiration hereof and subject to compliance
with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company
by the Holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant together with (a) the Assignment Form annexed
hereto properly endorsed, and (b) any other documentation reasonably
necessary to satisfy the Company that such transfer is in compliance with
all applicable securities laws. The term "HOLDER" shall refer to the
Purchaser or any subsequent transferee of this Warrant.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant and
payment of the Exercise Price as
set forth herein will be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue or otherwise specified herein).
3. Exercise of Warrant.
(a) The Holder may exercise this Warrant, in whole or in part, at any time and
from time to time, by delivering (which may be by facsimile) to the
offices of the Company or any transfer agent for the Common Stock this
Warrant, together with a Notice of Exercise in the form annexed hereto
specifying the number of Warrant Shares with respect to which this Warrant
is being exercised, together with payment to the Company of the Exercise
Price therefor.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for
which this Warrant is exercised and/or surrendered, and the Company, if
requested by Holder and at its expense, shall within three (3) Trading
Days (as defined below) issue and deliver to the Holder a new Warrant of
like tenor in the name of the Holder or as the Holder (upon payment by
Holder of any applicable transfer taxes) may request, reflecting such
adjusted Warrant Shares. Notwithstanding anything to the contrary set
forth herein, upon exercise of any portion of this Warrant in accordance
with the terms hereof, the Holder shall not be required to physically
surrender this Warrant to the Company unless such Holder is purchasing the
full amount of Warrant Shares represented by this Warrant. The Holder and
the Company shall maintain records showing the number of Warrant Shares so
purchased hereunder and the dates of such purchases or shall use such
other method, reasonably satisfactory to the Holder and the Company, so as
not to require physical surrender of this Warrant upon each such exercise.
The Holder and any assignee, by acceptance of this Warrant or a new
Warrant, acknowledge and agree that, by reason of the provisions of this
Section, following exercise of any portion of this Warrant, the number of
Warrant Shares which may be purchased upon exercise of this Warrant may be
less than the number of Warrant Shares set forth on the face hereof
Certificates for shares of Common Stock purchased hereunder shall be
delivered to the Holder hereof within three (3) Trading Days after the
date on which this Warrant shall have been exercised as aforesaid. The
Holder may withdraw its Notice of Exercise at any time if the Company
fails to timely deliver the relevant certificates to the Holder as
provided in this Agreement. A Notice of Exercise shall be deemed sent on
the date of delivery if delivered before 8:00 p.m. New York Time on such
date, or the day following such date if delivered after 8:00 p.m. New York
Time; provided that the Company is only obligated to deliver Warrant
Shares against delivery of the Exercise Price from the holder hereof and
surrender of this Warrant (or appropriate affidavit and/or indemnity in
lieu thereof).
In lieu of delivering physical certificates representing the Warrant
Shares issuable upon conversion of this Warrant, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC")
Fast Automated Securities Transfer ("FAST")
2
program, upon request of the Holder, the Company shall use its best
efforts to cause its transfer agent to electronically transmit the Warrant
Shares issuable upon exercise to the Holder, by crediting the account of
the Holder's prime broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system. The time periods for delivery described above
shall apply to the electronic transmittals through the DWAC system. The
Company agrees to coordinate with DTC to accomplish this objective.
(b) The term "TRADING DAY" means (x) if the Common Stock is not listed on the
New York or American Stock Exchange but sale prices of the Common Stock
are reported on Nasdaq National Market or another automated quotation
system, a day on which trading is reported on the principal automated
quotation system on which sales of the Common Stock are reported, (y) if
the Common Stock is listed on the New York Stock Exchange or the American
Stock Exchange, a day on which there is trading on such stock exchange, or
(z) if the foregoing provisions are inapplicable, a day on which
quotations are reported by National Quotation Bureau Incorporated.
4. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. In
lieu of issuance of a fractional share upon any exercise hereunder, the
Company will either round up to nearest whole number of shares or pay the
cash value of that fractional share, which cash value shall be calculated
on the basis of the average closing price of the Common Stock during the
five (5) Trading Days immediately preceding the date of exercise.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of Common
Stock upon the exercise of this Warrant 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 of this Warrant or in such name or names
as may be directed by the Holder of this Warrant; 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 of this Warrant, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form
attached hereto duly executed by the Holder hereof; and provided further,
that the Company shall not be required to pay any tax or taxes which may
be payable in respect of any transfer involved in the issuance of any
Warrant certificates or any certificates for the Warrant Shares other than
the issuance of a Warrant Certificate to the Holder in connection with the
Holder's surrender of a Warrant Certificate upon the exercise of all or
less than all of the Warrants evidenced thereby.
6. Closing of Books. The Company will at no time close its shareholder books
or records in any manner which interferes with the timely exercise of this
Warrant.
7. No Rights as Shareholder until Exercise. Subject to Section 12 of this
Warrant and the provisions of any other written agreement between the
Company and the Purchaser, the Purchaser shall not be entitled to vote or
receive dividends or be deemed the holder of Warrant Shares or any other
securities of the Company that may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed
to confer upon the Purchaser, as such, any of the rights of a stockholder
of the Company
3
or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value, or
change of stock to no par value, consolidation, merger, conveyance or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Warrant shall have been
exercised as provided herein. However, at the time of the exercise of this
Warrant pursuant to Section 3 hereof, the Warrant Shares so purchased
hereunder shall be deemed to be issued to such Holder as the record owner
of such shares as of the close of business on the date on which this
Warrant shall have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be assigned by the
surrender of this Warrant and the Assignment Form annexed hereto duly
executed at the office of the Company (or such other office or agency of
the Company or its transfer agent as the Company may designate by notice
in writing to the registered Holder hereof at the address of such Holder
appearing on the books of the Company); provided, however, that this
Warrant may not be resold or otherwise transferred except (i) in a
transaction registered under the Securities Act of 1933, as amended (the
"ACT"), or (ii) in a transaction pursuant to an exemption, if available,
from registration under the Act and whereby, if reasonably requested by
the Company, an opinion of counsel reasonably satisfactory to the Company
is obtained by the Holder of this Warrant to the effect that the
transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant; Exchange. The Company
represents warrants and covenants that (a) upon receipt by the Company of
evidence and/or indemnity reasonably satisfactory to it of the loss,
theft, destruction or mutilation of any Warrant or stock certificate
representing the Warrant Shares, and in case of loss, theft or
destruction, of indemnity reasonably satisfactory to it, and (b) upon
surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of
this Warrant or stock certificate, without any charge therefor. This
Warrant is exchangeable at any time for an equal aggregate number of
Warrants of different denominations, as requested by the holder
surrendering the same, or in such denominations as may be requested by the
Holder following determination of the Exercise Price. No service charge
will be made for such registration or transfer, exchange or reissuance.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day not
a legal holiday.
11. Effect of Certain Events. If at any time while this Warrant or any portion
thereof is outstanding and unexpired there shall be a transaction (by
merger or otherwise) in which more than 50% of the voting power of the
Company is disposed of (collectively, a "SALE OR MERGER TRANSACTION"), the
Holder of this Warrant shall have the right thereafter to purchase, by
exercise of this Warrant and payment of the aggregate Exercise Price in
4
effect immediately prior to such action, the kind and amount of shares and
other securities and property which it would have owned or have been
entitled to receive after the happening of such transaction had this
Warrant been exercised immediately prior thereto, subject to further
adjustment as provided in Section 12.
12. Adjustments of Exercise Price and Number of Warrant Shares.
The number of and kind of securities purchasable upon exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to
time as set forth in this Section 12.
(a) Subdivisions, Combinations, Stock Dividends and other Issuances. If the
Company shall, at any time while this Warrant is outstanding, (A) 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) in shares of Common Stock, (B)
subdivide outstanding shares of Common Stock into a larger number of
shares, or (C) combine outstanding Common Stock into a smaller number of
shares, then the Exercise Price shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 12(a) shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision or combination. The number of shares which may be purchased
hereunder shall be increased proportionately to any reduction in Exercise
Price pursuant to this paragraph 12(a), so that after such adjustments the
aggregate Exercise Price payable hereunder for the increased number of
shares shall be the same as the aggregate Exercise Price in effect just
prior to such adjustments.
(b) Other Distributions. If at any time after the date hereof the Company
distributes to holders of its Common Stock, other than as part of its
dissolution, liquidation or the winding up of its affairs, any shares of
its capital stock, any evidence of indebtedness or any of its assets
(other than Common Stock), then the number of Warrant Shares for which
this Warrant is exercisable shall be increased to equal: (i) the number of
Warrant Shares for which this Warrant is exercisable immediately prior to
such event, (ii) multiplied by a fraction, (A) the numerator of which
shall be the Fair Market Value (as defined below) per share of Common
Stock on the record date for the dividend or distribution, and (B) the
denominator of which shall be the Fair Market Value price per share of
Common Stock on the record date for the dividend or distribution minus the
amount allocable to one share of Common Stock of the value (as jointly
determined in good faith by the Board of Directors of the Company and the
Holder) of any and all such evidences of indebtedness, shares of capital
stock, other securities or property, so distributed. For purposes of this
Warrant, "Fair Market Value" shall equal the average closing trading price
of the Common Stock on the Principal Market (as defined in the Purchase
Agreement) for the 5 Trading Days preceding the date of determination or,
if the Common Stock is not listed or admitted to trading on any Principal
Market, and the average price cannot be determined as contemplated above,
the Fair Market Value of the
5
Common Stock shall be as reasonably determined in good faith by the
Company's Board of Directors and the Holder. The Exercise Price shall be
reduced to equal: (i) the Exercise Price in effect immediately before the
occurrence of any event (ii) multiplied by a fraction, (A) the numerator
of which is the number of Warrant Shares for which this Warrant is
exercisable immediately before the adjustment, and (B) the denominator of
which is the number of Warrant Shares for which this Warrant is
exercisable immediately after the adjustment.
(c) Merger, etc. If at any time after the date hereof there shall be a merger
or consolidation of the Company with or into or a transfer of all or
substantially all of the assets of the Company to another entity, then the
Holder shall be entitled to receive upon or after such transfer, merger or
consolidation becoming effective, and upon payment of the Exercise Price
then in effect, the number of shares or other securities or property of
the Company or of the successor corporation resulting from such merger or
consolidation, which would have been received by the Holder for the shares
of stock subject to this Warrant had this Warrant been exercised just
prior to such transfer, merger or consolidation becoming effective or to
the applicable record date thereof, as the case may be. The Company will
not merge or consolidate with or into any other corporation, or sell or
otherwise transfer its property, assets and business substantially as an
entirety to another corporation, unless the corporation resulting from
such merger or consolidation (if not the Company), or such transferee
corporation, as the case may be, shall expressly assume in writing the due
and punctual performance and observance of each and every covenant and
condition of this Warrant to be performed and observed by the Company.
(d) Reclassification, etc. If at any time after the date hereof there shall be
a reorganization or reclassification of the securities as to which
purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Holder shall
thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Exercise Price then in
effect, the number of shares or other securities or property resulting
from such reorganization or reclassification, which would have been
received by the Holder for the shares of stock subject to this Warrant had
this Warrant at such time been exercised.
(e) Exercise Price Adjustment. In the event that on or subsequent to the
Closing Date, the Company issues or sells any Common Stock, any securities
which are convertible into or exchangeable for its Common Stock or any
convertible securities, or any warrants or other rights to subscribe for
or to purchase or any options for the purchase of its Common Stock or any
such convertible securities (other than (i) shares which are issued
pursuant to the Note, (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 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 the Notes) at an effective price per share which is less
6
than the Exercise Price, then the Exercise Price in effect immediately
prior to such issue or sale shall be reduced effective concurrently with
such issue or sale to an amount determined by multiplying the Exercise
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 issue 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 the Exercise Price then in
effect; and (y) the denominator of which shall be the number of shares of
Common Stock of the Company outstanding immediately after such issue or
sale.
For the purposes of the foregoing adjustments, in the case of the issuance
of any convertible securities, warrants, options or other rights to
subscribe for or to purchase or exchange for, shares of Common Stock
("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.
(f) In the event of any adjustment in the number of Warrant Shares issuable
hereunder upon exercise, the Exercise Price shall be inversely
proportionately increased or decreased as the case may be, such that
aggregate purchase price for Warrant Shares upon full exercise of this
Warrant shall remain the same. Similarly, in the event of any adjustment
in the Exercise Price, the number of Warrant Shares issuable hereunder
upon exercise shall be inversely proportionately increased or decreased as
the case may be, such that aggregate purchase price for Warrant Shares
upon full exercise of this Warrant shall remain the same.
13. Voluntary Adjustment by the Company. The Company may at its option, at any
time during the term of this Warrant, reduce but not increase the then
current Exercise Price to any amount and for any period of time deemed
appropriate by the Board of Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, the Company shall promptly mail
to the Holder of this Warrant a notice setting forth the number of Warrant
Shares (and other securities or property) purchasable upon the exercise of
this Warrant and the Exercise Price of such Warrant Shares after such
adjustment and setting forth the computation of such adjustment and a
brief statement of the facts requiring such adjustment.
15. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding and exercisable, it will reserve from its
authorized and unissued Common Stock a sufficient number of shares to
provide for the issuance of the Warrant Shares upon the exercise of any
and all purchase rights under this Warrant. The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon
the exercise of the purchase rights
7
under this Warrant. The Company will take all such reasonable action as
may be necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law, regulation, or
rule of any applicable market or exchange.
16. 19.9% Limitations.
Notwithstanding anything contained herein to the contrary, the number of
shares of Common Stock issuable by the Company and acquirable by the
Holders of Warrants, together with the number of shares issuable under the
Notes, 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
Articles of Incorporation of the Company.
17. Compliance with Securities Laws. (a) The Holder hereof acknowledges that
the Warrant Shares acquired upon the exercise of this Warrant, if not
registered (or if no exemption from registration exists), will have
restrictions upon resale imposed by state and federal securities laws.
Each certificate representing the Warrant Shares issued to the Holder upon
exercise (if not registered, for resale or otherwise, or if no exemption
from registration exists) will bear substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF 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 AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
(b) Without limiting the Purchaser's right to transfer, assign or otherwise
convey the Warrant or Warrant Shares in compliance with all applicable
securities laws, the Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the Warrant Shares to be issued upon
exercise hereof are being acquired solely for the Purchaser's own account
and not as a nominee for any other party, and that the Purchaser will not
offer, sell or otherwise dispose of this Warrant or any Warrant Shares to
be issued upon exercise hereof except under circumstances that will not
result in a violation of applicable federal and state securities laws.
8
18. Miscellaneous.
(a) Issue Date; Choice of Law; Venue; Jurisdiction. The provisions of this
Warrant shall be construed and shall be given effect in all respects as if
it had been issued and delivered by the Company on the date hereof. This
Warrant shall be binding upon any successors or assigns of the Company.
This Warrant will be construed and enforced in accordance with and
governed by the laws of the State of California, except for matters
arising under the Act, without reference to principles of conflicts of
law. Each of the parties consents to the exclusive jurisdiction of the
Federal and State Courts sitting in the County of New York in the State of
New York in connection with any dispute arising under this Warrant and
hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens or venue, to the
bringing of any such proceeding in such jurisdiction. EACH PARTY HERETO
WAIVES THE RIGHT TO A TRIAL BY JURY.
(b) Modification and Waiver. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought. Any
amendment effected in accordance with this paragraph shall be binding upon
the Purchaser, each future holder of this Warrant and the Company. No
waivers of, or exceptions to, any term, condition or provision of this
Warrant, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such term, condition or
provision.
(c) Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing by facsimile, mail or personal
delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be to the addresses as shown on
the books of the Company or to the Company at the address set forth in the
Purchase Agreement. A party may from time to time change the address to
which notices to it are to be delivered or mailed hereunder by notice in
accordance with the provisions of this Section 18(c).
(d) Severability. Whenever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant is held to be invalid, illegal
or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of any other provision of
this Warrant in such jurisdiction or affect the validity, legality or
enforceability of any provision in any other jurisdiction, but this
Warrant shall be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable provision had never been
contained herein.
(e) Specific Enforcement. The Company and the Holder acknowledge and agree
that irreparable damage would occur in the event that any of the
provisions of this Warrant were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
or cure breaches of the provisions of this Warrant and to enforce
specifically the
9
terms and provisions hereof, this being in addition to any other remedy to
which either of them may be entitled by law or equity.
[Signature Page Follows]
10
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: March 1, 2004
LIQUIDMETAL TECHNOLOGIES, INC.
By: _____________________________________
Xxxx Xxxx,
President and Chief Executive Officer
ATTEST:
________________________
Print Name:
11
NOTICE OF EXERCISE
To: Liquidmetal Technologies, Inc.
(1) The undersigned hereby elects to exercise the attached Warrant for and to
purchase thereunder, ______ shares of Common Stock, and herewith makes payment
therefor of $_______, or elects to use the cashless exercise option of the
Warrant in the event Warrant Shares are not registered as required in the
Registration Rights Agreement.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
(3) Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as is specified
below:
_______________________________
(Name)
____________________ _______________________________
(Date) (Signature)
_______________________________
(Address)
Dated:
_______________________________
Signature
12
ASSIGNMENT FORM
(TO ASSIGN THE FOREGOING WARRANT, EXECUTE
THIS FORM AND SUPPLY REQUIRED INFORMATION.
DO NOT USE THIS FORM TO EXERCISE THE WARRANT.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
_______________________________________________ whose address is
________________________________________________________________.
________________________________________________________________
Dated: ______________,
Holder's Signature: _____________________________
Holder's Address: _____________________________
Signature Guaranteed: _________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
13
SCHEDULE I
PRINCIPAL AMOUNT
PURCHASER ADDRESS OF NOTES PURCHASE PRICE
--------- ------- -------- --------------
Xxxx Xxxxxx & Co. 0000 Xxxxxxxx Xxxx $1,265,000.00 $1,265,000.00
Xxxxx 000
Xxx Xxxxxxx, XX 00000-0000
Attn: Xxxx Xxxxxxxxxx
Prana 0000 Xxxxxx Xxxx $ 250,000.00 $ 250,000.00
Xxxxx 000
Xxx Xxxxxxx, XX 00000-0000
DKR Soundshore Oasis Holding Fund Ltd. 0000 Xxxx Xxxx Xxxxxx $ 950,000.00 $ 950,000.00
Xxxxxxxx, XX 00000
Attn: Xxx Xxxx
Xxxx Xxxxxxxx 00 Xxxxxxxxxx Xxxx $ 201,000.00 $ 201,000.00
Xxxxxxxx, XX 00000
Bear Xxxxxxx f/b/o Rosen Capital LP M/P/P 0000 Xxxx Xxxxxx $ 99,000.00 $ 99,000.00
Plan and Xxxxx Xxxxx TTEE Xxx. 00X
Xxx Xxxx, XX 00000
Caydal, LLC Caydal, LLC $ 100,000.00 $ 100,000.00
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Xxxxxx Fund, LP 0000 Xxxxxxxxx Xxxx, XX $1,182,501.00 $1,182,501.00
Xxxxx 0000
Xxxxxxx, XX 00000
Xxxxxx Fund II, LP 0000 Xxxxxxxxx Xxxx, XX $ 219,999.00 $ 219,999.00
Xxxxx 0000
Xxxxxxx, XX 00000
Xxxxxx Fund Offshore, Ltd. c/o Hemisphere Bison Court $1,347,501.00 $1,347,501.00
Management (B.V.I.) Limited X.X. Xxx 0000
Xxxx Xxxx
Xxxxxxx
Xxxxxxx Xxxxxx Xxxxxxx
Professional Traders Fund, LLC 000 Xxxxxxx Xxxxxx $ 150,000.00 $ 150,000.00
Xxxxx 000
Xxxxxx Xxxx, XX 00000
Xxxxx Bouts 000 Xxxxxxxx Xxxx $ 50,000.00 $ 50,000.00
Xxxxxxxx Xxxxx, XX 00000
Really Cool Group Ltd. The Metropole $ 200,000.00 $ 200,000.00
Xxxxxxxxx Xxxxxx
Xx. Xxxxxx, Xxxxxx, Xxxxxxx
Xxxxxxx, XX
14
PRINCIPAL AMOUNT
PURCHASER ADDRESS OF NOTES PURCHASE PRICE
--------- ------- -------- --------------
Xxxxx Xxxxxxxxxx 000 Xxxxx Xxxx Xxxx $ 48,000.00 $ 48,000.00
Xxxxxxxxx, XX 00000
Xxxxx Xxxxxxxxx 000 Xxxxxxxxx Xxxxx $ 24,000.00 $ 24,000.00
Xxxxxxxxxx, XX 00000
Xxxx Xxxxxx 000 Xxxxxxxx Xxxxxx $ 30,000.00 $ 30,000.00
Xxxxxxxxx, XX 00000
Xxxxxxx Xxxxxxxx 00 Xxxxx Xxxxxxx Xxxx $ 60,000.00 $ 60,000.00
Xxxxxx, XX 00000
Xxxx Xxxxxxxxx 00 Xxxxxxx Xxxxxx $ 15,000.00 $ 15,000.00
Xxx Xxxxxx, XX 00000
Xxxxxxx and Xxxxxx Xxxx 00 Xxxxxxxx Xxxx $ 40,000.00 $ 40,000.00
Xxxxxxxxx, XX 00000
Xxxxxxx Capital Partners, LP 000 Xxxx Xxxxxx $ 150,000.00 $ 150,000.00
00xx Xxxxx
Xxx Xxxx, XX 00000
Xxxxxxx Xxxxx $ 500,000.00 $ 500,000.00
Wry Ltd. The Metropole $ 60,000.00 $ 60,000.00
Xxxxxxxxx Xxxxxx
Xx. Xxxxxx, Xxxxxx, Xxxxxxx
Xxxxxxx, XX
Xxxxx Xxxxxxxxx 00 Xxxxxxxx Xxxx $ 30,000.00 $ 30,000.00
Xxxxxxxxx, XX 00000
15
DISCLOSURE SCHEDULE
TO SECURITIES PURCHASE AGREEMENT
(U.S.-BASED INVESTORS)
In connection with the Securities Purchase Agreement dated as of March 1, 2004,
among Liquidmetal Technologies, Inc., a Delaware corporation (the "COMPANY"),
and the other persons listed as "Purchasers" on Schedule I attached thereto (the
"AGREEMENT"), the Company hereby delivers this Disclosure Schedule to the
Company's representations and warranties given in the Agreement. This Disclosure
Schedule and the information and disclosures contained herein are intended only
to qualify and limit the representations, warranties and covenants of the
Company contained in the Agreement, and shall not be deemed to expand in any way
the scope or effect of any of such representations, warranties or covenants. The
section numbers in this Schedule correspond to the section numbers in the
Agreement; provided, however, that any information disclosed herein under any
section number shall also be deemed to be disclosed and incorporated in any
other section of the Agreement where such disclosure would be relevant.
Capitalized terms used but not defined herein shall have the same meanings given
them in the Agreement.
SCHEDULE 2.1(A)
The following is a list of the Company's direct and indirect subsidiaries:
(a) Liquidmetal Golf: The Company holds 79.19% of the issued and outstanding
common stock of Liquidmetal Golf, a California corporation.
(b) Liquidmetal Korea Co., Ltd.: The Company holds 99.97% of the issued and
outstanding equity securities of Liquidmetal Korea Co., Ltd., a South Korean
limited liability company.
(c) Dongyang Yudoro: The Company holds 51% of the issued andoutstanding equity
securities of Dongyang Yudoru, a South Korean joint stockcompany.
(d) Amorphous Technologies International (Asia) PTE Ltd. The Company holds all
of the issued and outstanding equity securities of Amorphous Technologies
International (Asia) PTE Ltd., a Singapore corporation. However, this subsidiary
is inactive and is in the process of being wound up and liquidated.
Liquidmetal Technologies, Inc. Disclosure Schedule to
Securities Purchase Agreement (U.S. Investors)
Dated March 1, 2004
Page 1 of 6
SCHEDULE 2.1(C)
AUTHORIZED STOCK: The authorized capital stock of the Company is 100,000,000
shares of Common Stock, par value $.001 per share, and 10,000,000 shares of
Preferred Stock, par value $.001 per share. The Preferred Stock is "blank-check"
in nature, although no series of Preferred Stock have been designated or
created.
OUTSTANDING STOCK: As of the date hereof, there are 41,599,652 shares of Common
Stock outstanding, and no shares of Preferred Stock outstanding.
OPTION PLANS AND GRANTS: The following is information regarding stock option
grants:
SHARES SUBJECT TO
SHARES RESERVED CURRENTLY OUTSTANDING
NAME OF PLAN UNDER PLAN OPTIONS
------------ ---------- -------
2002 Equity Incentive Plan 10,000,000 1,883,974
2002 Non-Employee Director Stock
Option Plan 1,000,000 190,000
1996 Stock Option Plan 3,727,016 3,531,075
Awards outside of Plans N/A 2,221,508
There are a total of 7,826,557 shares subject to currently outstanding options.
Also, in addition to the Common Stock warrants that will be issued pursuant to
this Agreement, the Company has agreed to issue, on or about the date hereof,
additional Common Stock warrants to certain investors other than the Purchasers
(as more particularly described under the caption "Simultaneous Private
Placement" below).
Additionally, there are currently outstanding options to purchase a total of
185,000 shares of the common stock of Liquidmetal Golf, a majority owned
subsidiary of the Company.
OUTSTANDING DEBT SECURITIES: The Company's Liquidmetal Korea Co., Ltd.
subsidiary ("Liquidmetal Korea") currently has an outstanding loan with Kookmin
Bank of South Korea with a current outstanding balance of approximately
$4,047,042 (USD). Additionally, as set forth in more detail under the caption
"Simultaneous Private Placement" below, the Company expects to issue, on or
about the date hereof, one or more 6% Senior Convertible Notes to investors
other than the Purchasers.
OUTSTANDING REGISTRATION RIGHTS: In response to Section 2.1(c)(iv), the Company
has granted piggyback registration rights to Xxxx Xxxxxxx, a professional
golfer, for 376,345 shares that are currently issuable pursuant to a stock
option held by Xx. Xxxxxxx. These options have an
Liquidmetal Technologies, Inc. Disclosure Schedule to
Securities Purchase Agreement (U.S. Investors)
Dated March 1, 2004
Page 2 of 6
exercise price of $1.1625 per share, and they were granted to Xx. Xxxxxxx in
connection with a golf endorsement agreement that was terminated as of December
31, 2002. Also, the Company has agreed grant additional registration rights to
certain investors as more particularly described under the caption "Simulatenous
Private Placement" below.
LIST OF OUTSTANDING DEBT: The Company's Liquidmetal Korea subsidiary has a loan
with Kookmin Bank, a South Korean bank, with a remaining balance of
approximately $4,047,042. The parent Company does not guaranty this loan.
Additionally, as set forth in more detail under the caption "Simultaneous
Private Placement" below, the Company expects to issue, on or about the date
hereof, one or more 6% Senior Convertible Notes to investors other than the
Purchasers.
SIMULTANEOUS PRIVATE PLACEMENT. The Company has entered into an Amended and
Restated Securities Purchase Agreement, dated March 1, 2004, with Michigan
Venture Capital Co., Ltd., a Korean corporation, and certain other investors
identified "PURCHASERS" in said agreement (referred to as the "MICHIGAN
AGREEMENT" and "MICHIGAN INVESTORS," respectively). Under the Michigan
Agreement, the Company has agreed to sell, and the Michigan Investors have
agreed to purchase, 6% Senior Convertible Notes of the Company in an aggregate
principal amount of up to $4 million (U.S.) (hereafter referred to as the
"MICHIGAN NOTES").
The Company expects that the sale and issuance of the Michigan Notes will close
on or about the same date as the Notes being sold pursuant to this Agreement,
and the Michigan Notes will rank pari passu with the Notes being sold pursuant
to this Agreement. The Michigan Notes will be convertible into shares of Company
Common Stock at $3.00 per share, and the Michigan Notes will become due and
payable upon the third anniversary of the date of the issuance of the Michigan
Notes (subject to a right of the Michigan Investors to obtain early payment of
the Michigan Notes after the second anniversary thereof by providing 90-days
prior written notice to the Company). In other respects, the Michigan Notes will
contain terms and conditions that are substantially similar to the Notes being
purchased pursuant to this Agreement.
Pursuant to the Michigan Agreement, the Michigan Investors will have
registration rights on substantially similar terms as the Purchasers of the
Notes being sold pursuant to this Agreement. Additionally, Michigan will receive
a warrant to purchase, at an exercise price of $3.00 per share, such number of
shares of Company common stock as shall have an aggregate exercise price of 50%
of the principal amount of the Michigan Notes. The Michigan Notes will be
secured by a security interest in Liquidmetal Korea's plant and equipment
located in Pyoungtaek, South Korea (with such security interest being
subordinate to Kookmin Bank's security interest), and will also be secured by
the Security Agreement described in Section 5.2(f) of this Agreement.
The foregoing disclosure regarding the Michigan Agreement and the transactions
contemplated thereby is made solely for purposes of this Disclosure Schedule,
and such disclosure herein shall not give rise to an obligation by the Company
to consummate said transactions.
Liquidmetal Technologies, Inc. Disclosure Schedule to
Securities Purchase Agreement (U.S. Investors)
Dated March 1, 2004
Page 3 of 6
SCHEDULE 2.1(E)
Nothing to disclose.
SCHEDULE 2.1(H)
In a letter written in September 2003, Xxxx golf company, a former customer in
Korea, claimed that they suffered damages due to the allegedly improper
termination of production under outstanding purchase orders for Xxxx putters
being made by the Company. The letter claimed damages and potential legal action
for an alleged breach of contract. The alleged damages consist of approximately
$325,000 for costs and lost profits associated with the project. The Company
does not believe that there is any merit to Akia's claims, and even if there
was, the Company believes that the claimed damages are grossly exaggerated. Xxxx
made a follow-up demand in October 2003, but the Company rejected the demand,
and the Company has not heard from Xxxx since October 2003.
Effective January 10, 2004, Liquidmetal Korea Co., Ltd., the Company's South
Korean subsidiary ("LIQUIDMETAL KOREA"), and Growell Metal Co., Ltd. ("GROWELL
METAL") entered into a Settlement Agreement (the "SETTLEMENT AGREEMENT") in
settlement of certain claims and obligations between the parties. The material
terms of the Settlement Agreement are set forth on a Form 8-K filed by the
Company with the Securities and Exchange Commission on January 15, 2004, and a
copy of said Form 8-K is hereby incorporated into this Disclosure Schedule and
made a part hereof by this reference.
SCHEDULE 2.1(L)
Nothing to disclose.
SCHEDULE 2.1(P)
In connection with its outstanding loan to Liquidmetal Korea, Kookmin Bank has a
security interest in the building of the Company's plant in Pyongtaek, South
Korea, as well as in certain equipment contained in such building.
SCHEDULE 2.1(W)
The following is an excerpt from the Company's preliminary unaudited balance
sheet as of December 31, 2003:
Trade payables 2,406,277
Trade payables- Adj Dmst 404,717
Goods received/Inventory received 14,090
Down payment- Cust 2,503
Accrued Liabilities- Japan 70,198
Accrued Net Payroll 38,765
Liquidmetal Technologies, Inc. Disclosure Schedule to
Securities Purchase Agreement (U.S. Investors)
Dated March 1, 2004
Page 4 of 6
Accrued Severance 1,866,147
Accrued Sales Commissions 101,602
Accrued Bonuses 33,190
Accrued 401k match 14,596
Accrued Property Tax 18,143
Accrued Utilities 23,708
Accrued Vacation 245,602
Payroll taxes 25,989
Vat payable 4,160
Other Liabilities 1,461,348
Accrued Interest 25,458
Accrued warranty/allowance 302,650
Current- Capital lease 16,482
Total Accounts Payable and Accrued Expenses 7,075,625
In addition to the foregoing, in connection with the settlement with Growell
Metal, as more particularly described in Schedule 2.1(h) above, the Company
expects to book a liability for $2.8 million as a result of this settlement.
This liability, which is not recorded in the above liability schedule, can be
settled in cash or stock of the Company (at the option of the Company).
SCHEDULE 2.1(X)
On February 20, 2004, the Company publicly announced that it expects to restate
revenues for the third and fourth quarters of 2002 and the first quarter of
2003. The revenues relate to sales of alloy melting and casting equipment to
Growell Metal. The sales to Growell Metal were comprised of $1.7 million of
revenue from alloying equipment sales in the third and fourth quarters of 2002
and $2.5 million of revenue from the sale of Liquidmetal die casting machines in
the first quarter of 2003. An ongoing analysis and review by the Company will
determine the full extent of the expected restatement and corresponding impact
on previously reported results of operations.
SCHEDULE 2.1(Z)
The following is a list of Company Plans maintained by the Company and available
to eligible U.S. employees:
1. Liquidmetal Technologies Trustee 401(k) plan
2. Liquidmetal Technologies Paid Time Policy (includes Holidays,
Vacation, Sick, Bereavement, Jury/Civic Duty, and Personal Leave)
3. Tuition Reimbursement
Liquidmetal Technologies, Inc. Disclosure Schedule to
Securities Purchase Agreement (U.S. Investors)
Dated March 1, 2004
Page 5 of 6
The following is a list of employee benefit plans and programs not maintained by
the Company but available to eligible U.S. employees through the Company's
professional employer organization (PEO):
1. AdvanTech Solutions health insurance plans through Aetna (includes
open choice PPO, HMO, and Quality Point of Service)
2. AdvanTech Solutions dental insurance plans through Fortis (includes
indemnity, and DHMO)
3. AdvanTech Solutions vision coverage plans through Xxxx (includes
comprehensive care and exam plus)
4. AdvanTech Solutions basic Life and AD&D coverage through Jefferson
Pilot
5. AdvanTech Solutions Long Term Disability through Jefferson Pilot
6. AdvanTech Solutions voluntary supplemental Life and AD&D through
Jefferson Pilot
7. AdvanTech Solutions voluntary Short Term Disability through
Jefferson Pilot
8. AdvanTech Solutions Flexible Spending Accounts for Health care
reimbursement and dependent care reimbursement
9. AdvanTech Solutions pre-paid legal plan
Liquidmetal Technologies, Inc. Disclosure Schedule to
Securities Purchase Agreement (U.S. Investors)
Dated March 1, 2004
Page 6 of 6
