EXHIBIT 10.1
THE SECURITIES DESCRIBED HEREIN 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.
NOTE EXCHANGE AGREEMENT
NOTE EXCHANGE AGREEMENT (this "Agreement") dated as of July
29, 2004, by and among Liquidmetal Technologies, Inc., a Delaware corporation
(the "Company"), and each person or entity listed as a Noteholder on Schedule I
attached to this Agreement (collectively and individually, the "Noteholders").
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Exchange Notes (as defined below).
W I T N E S S E T H:
WHEREAS, the Company sold and issued to the Noteholders 6%
Senior Convertible Notes in the aggregate principal amount of approximately
seven million United States dollars ("Dollars") ($7,000,000.00) (the "Original
Notes") pursuant to that certain Securities Purchase Agreement, dated as of
March 1, 2004, by and among the Company and the Noteholders (the "Purchase
Agreement");
WHEREAS, each of the Noteholders owns an Original Note in the
principal amount set forth opposite such Noteholder's name in Column 3 of
Schedule I attached hereto, and such principal amount remains outstanding as of
the date of this Agreement;
WHEREAS, the Original Notes are convertible into shares
("Common Shares") of common stock, par value $.001, of the Company ("Common
Stock"), pursuant to the terms of the Original Notes, and the Noteholders were
granted registration rights with respect to the Common Shares issuable upon
conversion of the Original Notes, pursuant to the terms of that certain
Registration Rights Agreement dated March 1, 2004, entered into by and among the
Company and the Noteholders (the "Registration Rights Agreement" and, together
with this Agreement, the Original Notes, the Warrants (as defined below), the
Security Agreement dated March 1, 2004, between the Company and Middlebury
Capital LLC ("Middlebury") as agent for the Noteholders, and the Placement
Agency Agreement between the Company and Middlebury, the "Original Transaction
Documents");
WHEREAS, in connection with the Purchase Agreement, each of
the Noteholders was also issued a Common Stock Purchase Warrant dated March 1,
2004, to purchase additional shares of Common Stock on the terms and conditions
set forth therein (the "Warrants," with the shares of Common Stock that are
issuable pursuant to the Warrant hereafter referred to as the "Warrant
Shares.").
WHEREAS, the Company and the Noteholders desire to exchange
the Original Notes (the "Exchange") for (A) 6% Senior Secured Notes due 2007 in
the form of Exhibit A attached hereto with an aggregate principal amount equal
to fifty percent (50%) of the aggregate principal of the outstanding Original
Notes (each a "3-Year Note," and collectively, the "3-Year Notes"), and (B) 10%
Senior Secured Notes due 2005 in the form of Exhibit B attached hereto with an
aggregate principal amount equal to fifty percent (50%) of the aggregate
principal of the outstanding Original Notes (each a "1-Year Note," collectively,
the "1-Year Notes" and collectively with the 3-Year Notes, the "Exchange
Notes"), all on the terms and conditions set forth herein;
WHEREAS, in connection with the Exchange, the Company and the
Noteholders desire to amend certain of the Original Transaction Documents, as
more particularly described herein; and
WHEREAS, each Noteholder's entire Original Note must be
exchanged in order to participate in the Exchange.
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 hereby
agree as follows:
ARTICLE I
Exchange of Notes
-----------------
Section 1.1 Exchange of Notes. Subject to the terms and conditions
contained herein, the Company shall issue to the Noteholders the following in
exchange for the Original Notes being exchanged by the Noteholders: (i) a 3-Year
Note with an aggregate principal amount set forth opposite the Noteholder's name
in Column 4 of Schedule I attached hereto, which equals fifty percent (50%) of
the principal of the Original Note being exchanged by such Noteholder, and (ii)
a 1-Year Note with an aggregate principal amount set forth opposite the
Noteholder's name in Column 5 of Schedule I attached hereto, which equals fifty
percent (50%) of the principal of the Original Note being exchanged by such
Noteholder.
Section 1.2 The Closing.
(a) Timing. Subject to the fulfillment or waiver of the
conditions set forth in Article VIII hereof, the purchase and sale of the
Exchange Notes shall take place at a closing (the "Closing"), on or about the
date hereof or such other date as the Noteholders and the Company may agree upon
(the "Closing Date"), provided that the Closing Date shall be no later than
July 29, 2004.
(b) Form of Payment and Closing. On the Closing Date, the
Company shall deliver to each Noteholders the Exchange Notes purchased
hereunder, registered in the name of the Noteholder or its nominee plus a
payment in cash equal to the amount of any accrued and unpaid interest on the
Original Notes. On the Closing Date each Noteholder shall deliver to the Company
the original executed Original Note being exchanged hereunder. In addition, each
party shall deliver all documents, instruments and writings required to be
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delivered by such party pursuant to this Agreement at or prior to the Closing.
The Exchange Notes will be fully owned and fully paid by the Noteholders as of
the Closing Date.
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
Noteholders as of the date hereof and the Closing Date:
(a) Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Exchange Notes, and the Original Transaction Documents as amended
pursuant to this Agreement (the "Transaction Documents") and to issue the
Exchange Notes 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 Exchange Notes, 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 will have been duly executed and delivered by the
Company as of the Closing, (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, as amended, may be limited by applicable federal or state
securities laws and (v) the Exchange Notes and the Common Shares issuable upon
the conversion 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.
(b) Issuance of Shares. Upon issuance in accordance with
this Agreement and the terms of the Exchange Notes, the Exchange Notes will be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof.
(c) No Conflicts. 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 Exchange
Notes and the Common Shares underlying the Exchange Notes will not (i) result in
a violation of the Company's Certificate of Incorporation, as amended and as in
effect on the date hereof (the "Certificate of Incorporation"), any certificate
of designations, preferences and rights of any outstanding series of preferred
stock of the Company or the Company's By-laws, as in effect on the date hereof
(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
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subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws and regulations) 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. "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.
(d) 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.
(e) Issuance of Common Shares. The Common Shares into which
the Exchange Notes are convertible are duly authorized and reserved for issuance
and, upon conversion of the Exchange Notes in accordance with the terms thereof,
such Common Shares will be validly issued, fully paid and non-assessable, free
and clear of any and all liens, claims and encumbrances, and the holders of such
Common Shares shall be entitled to all rights and preferences accorded to a
holder of Common Stock.
(f) Representations and Warranties in Purchase Agreement.
Subject to the Supplemental Disclosure Schedule attached to this Agreement and
incorporated herein by this reference, the representations and warranties set
forth in Article II of the Purchase Agreement shall continue to remain in full
force and effect as though made on the date of this Agreement, and nothing in
this Agreement shall limit or otherwise amend or alter such representations and
warranties.
Section 2.2 Representations and Warranties of the Noteholders. Each
of the Noteholders 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
Noteholder is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D under the Securities Act of 1933, as amended ("Securities Act" or
"1933 Act"). The Noteholder 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 Exchange Notes and the Common Shares. The Noteholder 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 Noteholder 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 Exchange Notes and the Common Shares which have been
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requested by the Noteholder. The Noteholder 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 Exchange Notes, the Noteholder has
relied solely on the written information supplied by Company employees in
response to the written due diligence information request provided by the
Noteholder to the Company, and the Noteholder has not received nor relied upon
any oral representation or warranty relating to the Company, this Agreement, the
Exchange Notes, or any of the transactions or relationships contemplated
thereby. The Noteholder understands that its purchase of the Exchange Notes and
Common Shares involves a high degree of risk. The Noteholder 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 Exchange
Notes and Common Shares.
(c) No Governmental Review. The Noteholder 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 Exchange
Notes or the Common Shares or the fairness or suitability of the investment in
the Exchange Notes and the Common Shares nor have such authorities passed upon
or endorsed the merits thereof.
(d) Legends. The Company shall issue the Exchange Notes and
certificates for the Common Shares to the Noteholder without any legend except
as described in Article IX below. The Noteholder covenants that, in connection
with any transfer of Common Shares by the Noteholder pursuant to the
registration statement contemplated by the Registration Rights Agreement, as
amended, 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 Noteholder.
(e) Authorization; Enforcement. This Agreement has been duly
and validly authorized, executed and delivered on behalf of the Noteholder and
is a valid and binding agreement of the Noteholder enforceable against the
Noteholder 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 Noteholder has the requisite power and authority to enter into and
perform its obligations under this Agreement and each other agreement entered
into by the parties hereto in connection with the transactions contemplated by
this Agreement.
(f) Investment Representation. The Noteholder is purchasing
the Exchange Notes for its own account and not with a view to distribution in
violation of any securities laws. The Noteholder has been advised and
understands that neither the Exchange Notes nor the Common Shares issuable upon
conversion 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 Noteholder has been advised and understands
that the Company, in issuing the Exchange Notes, is relying upon, among other
things, the representations and warranties of the Noteholder 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.
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(g) Rule 144. The Noteholder understands that there is no
public trading market for the Exchange Notes, that none is expected to develop,
and that the Exchange Notes must be held indefinitely unless and until such
Exchange Notes, or if applicable, the Common Shares received upon conversion
thereof are registered under the 1933 Act or an exemption from registration is
available. The Noteholder has been advised or is aware of the provisions of Rule
144 promulgated under the 1933 Act.
(h) Brokers. Other than with respect to fees payable to
Middlebury (if any) in connection with the transaction described herein, the
Noteholder 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 Noteholder relating to this Agreement or the transactions contemplated
hereby.
(i) Reliance by the Company. The Noteholder understands that
the Exchange Notes 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 Noteholder set forth herein in order to determine the applicability of such
exemptions and the suitability of the Noteholder to acquire the Exchange Notes
and the Common Shares issuable upon conversion thereof.
ARTICLE III
Covenants
---------
Section 3.1 Registration and Listing; Effective Registration. Until
such time as the Exchange Notes are not outstanding and the Warrants have
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 Exchange Notes and Warrants are not
outstanding, the Company shall use its best efforts to cause the Common Stock to
be listed or quoted on the Nasdaq National Market System, Nasdaq Small Cap
Market, New York Stock Exchange, American Stock Exchange, or OTC Bulletin Board
(the "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 or quoted. The Company
shall use its best efforts to cause the Common Shares and Warrant Shares to be
listed or quoted on one of the 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) or quotation on one
of the Approved Markets, for so long as the Exchange Notes or Warrants are
outstanding. Notwithstanding the foregoing, the Noteholders acknowledge that the
Company is not as of the date hereof in compliance with its reporting and filing
obligations under the Exchange Act and that the Company shall not be in breach
of this Agreement as a result of this noncompliance so long as the Company
regains compliance with such obligations within ninety (90) days after the date
of Closing.
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Section 3.2 Certificates on Conversion. Upon any conversion by the
Noteholder (or then holder of the Exchange Notes) of the Exchange Notes pursuant
to the terms thereof, the Company shall issue and deliver to the Noteholder (or
holder) within three (3) Trading Days of the conversion date a certificate for
the Common Shares issuable in connection with such conversion and a new Exchange
Note or Exchange Notes for the aggregate principal amount of Exchange Notes
which the Noteholder (or holder) has not yet elected to convert but which are
evidenced in part by the Exchange Notes submitted to the Company in connection
with such conversion (with the denominations of such new Exchange Note(s)
designated by the Noteholder or holder). As used herein, "Trading Day" shall
mean a day on which there is trading on the market, exchange, or quotation
service on which the Common Stock is then principally traded or quoted.
Section 3.3 Replacement Notes. The Exchange Note held by the
Noteholder (or then holder) may be exchanged by the Noteholder (or such holder)
at any time and from time to time for Exchange Note(s) with different
denominations representing an equal aggregate principal amount of Exchange
Note(s), as requested by the Noteholder (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
Securities and Exchange Commission, in accordance with its requirements, of the
transactions contemplated by this Agreement, the Note, the Warrants, and the
Registration Rights Agreement, as amended, 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 Exchange Notes 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
Exchange 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 Exchange Notes, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of the Exchange
Notes.
Section 3.7 Best Efforts. The parties shall use their best efforts
to satisfy timely each of the conditions described in Article VIII of this
Agreement.
Section 3.8 Form D; Blue Sky Laws. The Company agrees to file a Form
D with respect to the Exchange Notes and Common Stock, in accordance with
Regulation D and to provide a copy thereof to the Noteholders 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
Exchange Notes the Common Shares for sale to the Noteholders 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 Noteholders 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
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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
Noteholders for so long as the Exchange Notes are outstanding copies of any
notices and other information made available 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, each Noteholder agrees that such Noteholder 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
Noteholder exceeds the sum of (i) the number of shares of Common Stock owned by
such Noteholder, plus (ii) the number of Common Shares issuable to such
Noteholder.
Section 3.11 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 Exchange Notes already been issued) would
result in an adjustment of the Conversion Price (as defined in the Exchange
Notes).
Section 3.12 Senior Status of Notes. Beginning on the date of this
Agreement and for so long as any Exchange Notes remain outstanding, neither the
Company nor any subsidiary of the Company shall, without the prior written
consent of Noteholders holding a majority of the aggregate outstanding Principal
Amount of the Exchange Notes, incur or otherwise become liable with respect to
any indebtedness that would rank senior or pari passu to the Exchange 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) any new notes (the "New Michigan Notes") issued by the Company
simultaneously herewith or at any time hereafter in exchange for the 6% Senior
Convertible Notes issued by the Company pursuant to that certain Amended and
Restated Securities Purchase Agreement, dated March 1, 2004, among the Company,
Michigan Venture Capital Co., Ltd, and the investors identified as "Purchasers"
therein (the "Old Michigan Notes") which shall be pari passu with the Exchange
Notes.
Section 3.13 Replacement of Purchase Agreement Covenants. The parties
hereto acknowledge and agree that that the covenants set forth in this Article
III shall supplant and replace in their entirety the covenants set forth in
Article III of the Purchase Agreement, which covenants shall no longer have any
force or effect as of the Closing.
Section 3.14 Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Effective Registration" shall mean that all registration
obligations of the Company pursuant to the Registration Rights Agreement, as
amended, 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
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reserved for issuance as required by the terms of the Transaction Documents;
(iv) no Interfering Event (as described in the Registration Rights Agreement, as
amended) 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 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 respective Noteholder or its respective
nominee(s), for the Common Shares in such amounts as specified from time to time
by the Noteholder 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 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 shall be freely
transferable on the books and records of the Company as contemplated by Article
IX below when the legend referred to therein may be removed. Nothing in this
Article IV shall affect in any way the Noteholders' 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. The Company shall
instruct its transfer agent to issue one or more certificates in such name and
in such denominations as specified by the Noteholders and without any
restrictive legends except as contemplated by Article IX.
ARTICLE V
Amendment of Registration Rights Agreement
------------------------------------------
Section 5.1 Amendment.
(a) The first Recital of the Registration Rights Agreement
is hereby amended to reflect that (i) the definition of "Purchase Agreement"
thereunder shall include each of the Purchase Agreement and this Agreement, and
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(ii) the definition of "Note" thereunder shall collectively mean the Exchange
Notes.
(b) Section 2(a)(i) of the Registration Rights Agreement is
hereby deleted in its entirety and replaced with the following:
(i) But in any event by ninety (90) days after the Closing
Date (the "Required Filing 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. The Purchasers acknowledge
that, as of the date hereof, the Company is not eligible to
utilize Form S-3 and does not expect to be eligible to utilize
Form S-3 at the time of the filing of the Registration
Statement, and the inability to utilize Form S-3 shall not
constitute a breach of this Agreement.
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(c) Section 2(c)(i) of the Registration Rights Agreement is
hereby deleted in its entirety and replaced with the following:
(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, market, or the OTC Bulletin
Board where shares of the Company's common stock are then
traded or quoted 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, market, or the OTC Bulletin Board where shares of
the Company's common stock are then traded or quoted (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 Shares not previously sold by such Holder (together
11
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, market, or the
OTC Bulletin Board where the Common Shares are traded or
quoted, 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.
(d) Section 2(c)(ii) of the Registration Rights Agreement is
hereby deleted in its entirety and replaced with the following:
(ii) Effect of Late Filing or Registration. If the
Registration Statement has not been filed by the Required
Filing 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 Filing Payment"). Each Late Filing
Payment will be equal to 3% 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 each
period of 30 business days that the filing of the Registration
Statement is made past the Required Filing Date (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). 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
12
amount of such payment). In no event shall payments pursuant
to this Section 2(c)(ii) exceed 18% in the aggregate of the
purchase price paid for the Notes purchased by the Holder
(including such Holder's predecessors and successors) for the
period beginning of the date hereof and continuing through the
expiration of the registration period (as described in Section
5). The Late Filing Payments and Late Registration Payments
will be prorated on a daily basis during the 30-business day
period and will be paid to the initial Holders in cash or, at
the Company's option, will be added to the outstanding
Principal Amount of the Notes, within ten (10) 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 reasonable best efforts
to avoid circumstances as a result of which the Registration
Statement has not been filed by the Required Filing Date or
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.
Section 5.2 Ratification. Except as specifically amended and
modified by this Article V, the Registration Rights Agreement shall remain in
full force and effect and is hereby reaffirmed and ratified.
13
ARTICLE VI
Amendment of Warrant
--------------------
Section 6.1 Amendment. Each of the Noteholders and the Company
hereby covenants and agrees that each and every Warrant is hereby amended to
provide that the Termination Date (as defined in the Warrants) shall be March 1,
2006.
Section 6.2 Ratification. Except as specifically amended and
modified by this Article VI, the Warrant shall remain in full force and effect
and is hereby reaffirmed and ratified.
Section 6.3 Exchange. At the election of a Noteholder, any existing
Warrant may be exchanged for a new Warrant certificate reflecting the amendment
described in Section 6.1.
ARTICLE VII
Security
--------
The Company shall cause Liquidmetal Korea Co., Ltd., a wholly
owned subsidiary of the Company ("Liquidmetal Korea"), to use its best efforts
to grant to the Noteholders as additional security for the Exchange Notes a lien
upon and security interest in Liquidmetal Korea's manufacturing plant in Korea
(the "Factory Lien"), including without limitation, seeking to obtain the
consent and approval of the Bank of Korea to the granting of such lien and
security interest. Such lien (if granted) shall be in addition to the prior
liens held or to be held by Kookmin Bank (or any financial institution through
which the Company's indebtedness with Kookmin Bank is refinanced) and the lien
held by the holders of the Old Michigan Notes or New Michigan Notes (the
"Michigan Lien" and "Michigan Holders," respectively), provided that the Company
will use its best efforts to obtain an agreement from the Michigan Holders
providing that the Factory Lien is pari passu with the Michigan Lien. In
addition to the foregoing, the parties acknowledge that the Security Agreement
will continue to remain in full force and effect, provided that the following
new definitions shall be added to Section 2 of the Security Agreement: "Note"
means the Exchange Notes, as defined in the Note Exchange Agreement dated July
29, 2004 by and among the Company and the Noteholders listed therein (the
"Exchange Agreement") and "Michigan Note" means the Old Michigan Notes and the
New Michigan Notes as defined in the Exchange Agreement.
The Company represents and warrants that each Noteholder's
security interest in the collateral, described in the Security Agreement, shall
be a perfected first priority security interest.
14
ARTICLE VIII
Conditions to Closings
----------------------
Section 8.1 Conditions Precedent to the Obligation of the Company.
The obligation hereunder of the Company to issue the Exchange Notes and the
other Transaction Documents to the Noteholders 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 Noteholders' Representations and
Warranties. The representations and warranties of each Noteholder 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.
(b) Performance by the Noteholders. The Noteholders shall
have performed all agreements and satisfied all conditions required to be
performed or satisfied by the Noteholders at or prior to the Closing, including
fully delivering to the Company all of the Original Notes owned by the
Noteholders.
(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, as amended,
the Exchange Notes, or the Warrant.
(d) Closing Date. The Closing shall have occurred by July
29, 2004.
Section 8.2 Conditions Precedent to the Obligation of the
Noteholders. The obligation hereunder of the Noteholders to acquire the Exchange
Notes 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 Noteholder's benefit and may be waived by the
Noteholders' at any time in their 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, as amended,
the Exchange Notes or the Warrant.
(c) Officer's Certificates. The Company shall have delivered
to the Noteholders a certificate in form and substance satisfactory to the
Noteholders and the Noteholders' counsel, executed by an officer of the Company,
15
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.
ARTICLE IX
Legend and Stock
----------------
Upon exchange therefor as provided in this Agreement, the
Company will issue the Exchange Notes in the name of the respective Noteholder
or its designees and in such denominations to be specified by the Noteholder
prior to (or from time to time subsequent to) Closing. The Exchange Notes and
any certificate representing Common Shares issued upon conversion thereof, prior
to such Common 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 Exchange Notes and Common
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 Exchange Notes and Common Shares issuable upon conversion thereof
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.
Notwithstanding the removal of such legend, the Noteholders
agrees to sell the Common Shares represented by the new certificates in
accordance with the applicable prospectus delivery requirements (if copies of a
current prospectus are provided to the Noteholders 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.
16
ARTICLE X
Release and Waiver
In exchange for the agreements and covenants of the Company
hereunder, each of the Noteholders, on behalf of himself/herself and his/her
agents, assigns, heirs, devisees, and successors, releases and forever
discharges the Company, its agents, officers, directors, shareholders,
employees, attorneys, and representatives, from any and all claims, causes of
action, suits, debts, liabilities, damages and expenses (including attorneys'
fees and costs) of any type whatsoever (collectively, "Claims"), whether known
or unknown, that any of the Noteholders have or may have or may have at any time
through the date hereof, with respect to any Event of Default under the Original
Notes or the Purchase Agreement or any breach under the Registration Rights
Agreement, provided that such Event of Default or breach arises from any facts
or circumstances (i) detailed in that certain letter dated April 28, 2004 (the
"MC Letter") from Middlebury to the Company, (ii) that have been publicly
disclosed by the Company as of the date hereof, or (iii) that are known to
Middlebury or the Noteholders as of the date of this Agreement. The Noteholders
also hereby agree to irrevocably waive and forego the exercise of the
Noteholders' rights triggered by the Company's default under the Original Notes,
as detailed in the MC Letter, provided that such waiver shall not apply to any
breach or default occurring hereafter under this Agreement, the Purchase
Agreement, the Exchange Notes, the Registration Rights Agreement (as amended
herein), or the Security Agreement (as amended herein).
ARTICLE XI
Termination
-----------
Section 11.1 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 Noteholders.
Section 11.2 Other Termination. This Agreement may be terminated by
action of the Board of Directors of the Company or by the Noteholders 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 XII
Indemnification
---------------
In consideration of the Noteholders' execution and delivery of
the this Agreement and acquiring the Exchange Notes 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 Noteholders and
all of their 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
17
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 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 XII shall be the same as those
set forth in Section 6 (other than Section 6(b)) of the Registration Rights
Agreement, as amended, including, without limitation, those procedures with
respect to the settlement of claims and Company's right to assume the defense of
claims.
ARTICLE XIII
Governing Law; Miscellaneous
----------------------------
Section 13.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK 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 NEW YORK
COUNTY, NEW YORK, 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 13.2 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 13.3 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 13.4 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 13.5 Costs and Expenses. All actual reasonable out-of-pocket
costs and expenses the Noteholders incur with respect to this Agreement and the
transactions contemplated by this Agreement shall be paid by the Company to the
Noteholders at the Closing up to an aggregate maximum of $50,000.00.
Section 13.6 Entire Agreement; Amendments; Waivers.
(a) This Agreement supersedes all other prior oral or
written agreements between the Noteholders, the Company, their affiliates and
persons acting on their behalf with respect to the matters expressly 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
Noteholders 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 Noteholders, and
no provision hereof may be waived other than by an instrument in writing signed
by the party against whom enforcement is sought. Except for the Original Notes
and except as expressly amended herein, the Original Transaction Documents shall
remain in full force and effect.
(b) The Noteholders 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 Noteholders 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
Noteholders in accordance with its terms; provided, however, that the voluntary
waiver contemplated by this sentence may not reduce the Noteholders' obligations
to the Company under the Transaction Documents.
Section 13.7 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, Chairman
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 Noteholders, 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 from a
20
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
Section 13.8 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 Noteholders may assign some or all of their
rights hereunder to any assignee of the Exchange Notes or the Common Shares (in
each case, a "Permitted Assignee"); provided, however, that any such assignment
shall not release such Noteholder from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented to such
assignment and assumption.
Section 13.9 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 13.10 Survival. The representations, warranties and agreements
of the Company and the Noteholders 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 13.11 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 13.12 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 13.13 Remedies. The Noteholders 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 Noteholders 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 13.14 Payment Set Aside. To the extent that the Company makes
a payment or payments to the Noteholders hereunder or under the Registration
Rights Agreement or the Noteholders enforces or exercises their 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 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),
21
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 13.15 Days. Unless the context refers to "business days" or
"Trading Days", all references herein to "days" shall mean calendar days.
Section 13.16 Placement Agent. Each of the Noteholders and the Company
acknowledges and warrants that it has not engaged any placement agent in
connection with the sale of the Exchange Notes, and the Company and the
Noteholders 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) ***
22
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 Noteholders on following page(s)
23
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
XXXX XXXXXX & CO., INC.
/s/ Xxxx Xxxxxxxx
Xxxx Xxxxxxxx
Executive Vice President, Xxxx X. Xxxxxx & Co., Inc.
24
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
PRANA LLC
/s/ Xxxxx X. Apodara
Xxxxx X. Apodara
Chief Executive Officer
25
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
DKR SOUNDSHORE OASIS HOLDING FUND LTD.
/s/ Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxx, Alt. Director
26
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
XXXX XXXXXXXX
/s/ Xxxx Xxxxxxxx
27
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
BEAR XXXXXXX F/B/O ROSEN CAPITAL LP M/P/P PLAN
/s/ Xxxxx Xxxxx
Xxxxx Xxxxx
Trustee
28
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
CAYDAL, LLC
BY SAN ISABAL LIMITED, ITS MANAGING MEMBER
/s/ Xxxxx Xxxx
Xxxxx Xxxx
General Partner
29
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
XXXXXX FUND, LP
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
Managing Member of the General Partner
30
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
XXXXXX FUND II, LP
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
Managing Member of the General Partner
31
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
XXXXXX FUND OFFSHORE, LTD.
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
Managing Member of the Investment Manager
32
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
XXXXX BOUTS
/s/ Xxxxx Bouts
33
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
REALLY COOL GROUP LTD.
/s/ Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxx
Director
34
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
XXXXX XXXXXXXXXX
/s/ Xxxxx Xxxxxxxxxx
35
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
XXXXX XXXXXXXXX
/s/ Xxxxx Xxxxxxxxx
36
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
XXXX XXXXXX
/s/ Xxxx Xxxxxx
37
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
XXXXXXX XXXXXXXX
/s/ Xxxxxxx Xxxxxxxx
38
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
XXXXXXX AND XXXXXX XXXX
/s/ Xxxxxxx Xxxx
/s/ Xxxxxx X. Xxxx
39
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
XXXXXXX X. XXXXX
/s/ Xxxxxxx X. Xxxxx
40
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
WRY LTD.
/s/ Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxx
Director
41
COUNTERPART SIGNATURE PAGE
TO NOTE EXCHANGE AGREEMENT
DATED JULY 29, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.
AND THE "NOTEHOLDERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Note Exchange Agreement to
which this Signature Page is attached, which, together with all counterparts of
the Note Exchange Agreement and Signature Pages of the Company and other
"Noteholders" under the Note Exchange Agreement, shall constitute one and the
same document in accordance with the terms of the Note Exchange Agreement.
XXXXX XXXXXXXXX
/s/ Xxxxx Xxxxxxxxx
42
List of Exhibits
----------------
EXHIBIT A Form of 3-Year Note
EXHIBIT B Form of 1-Year Note
43
EXHIBIT A
Form of 3-Year 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 SECURED NOTE DUE JULY 29, 2007
OF
LIQUIDMETAL TECHNOLOGIES, INC.
(Long-Term Note; U.S.-based investors)
Note No.: A-____ Original Principal Amount: $_______________
Original Issuance Date: July 29, 0000 Xxxx Xxxxxx, Xxxxxxxxxx
THIS NOTE (this "Note") is one of a duly authorized issue of Notes
issued by LIQUIDMETAL TECHNOLOGIES, INC., a corporation duly organized and
existing under the laws of the State of Delaware (the "Company"), designated as
the Company's 6% Senior Secured Long Term Note Due July 29, 2007 ("Maturity
Date") in an aggregate principal amount equal to approximately Two Million Five
Hundred Four Thousand Five Hundred One U.S. Dollars (U.S. $2,504,501) (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. Dollars (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, July 29, 2004 (the "Issuance
Date"), until the same becomes due and payable on the Maturity Date, or such
earlier date upon acceleration or by conversion or redemption in accordance with
the terms hereof or of the other Transaction Documents. Interest on this Note
shall accrue daily commencing on the Issuance Date and shall be computed on the
basis of a 360-day year, 30-day months and actual days elapsed and shall be
payable in accordance with Section 1 hereof. Notwithstanding anything contained
herein, this Note shall bear interest on the due and unpaid Principal Amount
from and after the occurrence and during the continuance of an Event of Default
pursuant to Section 4(a), at the rate (the "Default Rate") equal to the lower of
1
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 Note Exchange Agreement dated on or about the Issuance
Date pursuant to which the Note was originally issued (the "Exchange
Agreement"). Any references herein to the "Registration Rights Agreement,"
"Warrants," and "Security Agreement" shall refer to such agreements as amended
by the Exchange Agreement. For purposes hereof the following terms shall have
the meanings ascribed to them below:
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks in the City of New York are authorized or required
by law or executive order to remain closed.
"Conversion Price" shall be $1.00 (U.S.) per share (which Conversion
Price shall be subject to adjustment as set forth herein).
"Convertible Securities" means any convertible securities, warrants,
options or other rights to subscribe for or to purchase or exchange for, shares
of Common Stock.
"Debt" shall mean indebtedness of any kind.
"Effective Date" means the date on which a Registration Statement
covering all the Underlying Shares and other Registrable Securities (as defined
in the Registration Rights Agreement) is declared effective by the SEC.
"Effective Registration" shall have the meaning set forth in the
Exchange Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Market Price" shall equal the average closing price of the Common
Stock on the Principal Market for the five (5) Trading Days immediately
preceding the date on which such Market Price is being determined.
"Per Share Selling Price" shall include the amount actually paid by
third parties for each share of Common Stock in a sale or issuance by the
Company. A sale of shares of Common Stock shall include the sale or issuance of
rights, options, warrants or convertible, exchangeable or exercisable
securities, issued or sold on or subsequent to the Closing Date, under which the
Company is or may become obligated to issue shares of Common Stock, and in such
2
circumstances the Per Share Selling Price of the Common Stock covered thereby
shall also include the exercise, exchange or conversion price thereof (in
addition to the consideration 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 principal market, exchange, or
quotation service on which the Common Stock is then listed or quoted for
trading.
"Registration Statement" shall have the meaning set forth in the
Registration Rights Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Trading Day" shall mean a day on which there is trading on the
Principal Market.
"Underlying Shares" means the shares of Common Stock into which this
Note is convertible (including repayment in Common Stock as set forth herein) in
accordance with the terms hereof and the Exchange Agreement.
The following terms and conditions shall apply to this Note:
Section 1. Payments of Principal and Interest.
(a) Interest Payments. The Company shall pay all accrued but
unpaid interest on the Principal Amount of this Note (the "Quarterly Amount"),
on the first business day of each consecutive calendar quarter (each an
"Interest Payment Date") beginning on October 1, 2004. The Quarterly Amount
shall be paid in cash, 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, w
hich shall apply only in the event that an effective registration statement is
on file covering the Common Stock to be issued in payment of the Company's
interest obligation, 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.
(e) Redemption Right. This Note and its related Warrants
will be redeemable at the option of the Holder if, on the date that is 180
calendar days of the Original Issuance Date of this Note, the Company is either
(i) not then current in the filing of its periodic reports with the U.S.
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, or (ii) not listed, traded, or quoted on an Approved Market (the
"Redemption Right"). The redemption price of this Note and its related Warrants
under this Redemption Right will be equal to the principal amount of this Note
plus all accrued and unpaid interest thereon. Holder's election to exercise this
Redemption Right must be made in writing (a "Notice of Exercise") within seven
(7) days after the date which is 180 calendar days from the Original Issuance
Date of this Note, and the Company will effect such redemption and pay the
redemption price within 30 days of the delivery to the Company of the Notice of
Exercise, although the Company shall not be required to pay the redemption price
unless and until the Holder tenders to the Company the originally executed
version of this Note and the related Warrants. In the event that the Redemption
Right is properly exercised for this Note, this Note shall be deemed to have
accrued interest at a rate equal to 14% per annum since the Original Issuance
Date (in lieu of and notwithstanding the interest rate otherwise specified
herein), provided that any additional interest above the rate otherwise
specified herein and payable by reason of the operation of this paragraph shall
not be due and payable until the date on which this Note is actually required to
be redeemed by the Company. In the event that Holder elects to exercise the
Redemption Right, then the payment by the Company of the redemption price in
accordance with this paragraph shall constitute the sole and exclusive remedy of
Holder with respect to any breach or Event of Default under this Note, the
Exchange Agreement, and the Original Transaction Documents, and by electing to
exercise the Redemption Right, Holder irrevocably waives any and all provisions.
Section 2. Seniority. The obligations of the Company hereunder
shall rank senior to all other Debt of the Company, whether now or hereinafter
existing, except to the existing debt facility with Kookmin Bank and except as
otherwise provided in Section 3.13 of the Exchange Agreement.
Section 3. Conversion.
(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
4
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 and any accrued and unpaid interest shall be
paid in cash. If a conversion under this Note cannot be effected in full for any
reason (other than pursuant to Section 3(l) below), the Company shall, upon
request by the Holder, promptly pay to the Holder in cash (but no later than
five Trading Days after the Conversion Date) an amount equal to the greater of
(i) such outstanding Principal Amount as has not been converted and (ii) the
Market Price of the Underlying Shares of such outstanding unconverted Principal
Amount as of the Conversion.
(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
5
such case, the Conversion Price (as defined below) in effect immediately prior
to such event or the record date therefor, whichever is earlier, shall be
adjusted so that the Holder shall be entitled to receive the number of shares of
Common Stock or other securities of the Company which such Holder would have
owned or have been entitled to receive after the occurrence of any of the events
described above, had such Note been surrendered for conversion immediately prior
to the occurrence of such event or record date therefore, whichever is earlier.
Any adjustment made pursuant to this Section 3(f) shall become effective (x) in
the case of any such dividend or distribution, immediately after the close of
business on the record date for the determination of holders of shares of Common
Stock entitled to receive such dividend or distribution, or (y) in the case of
such subdivision, reclassification or combination, at the close of business on
the day upon which such corporate action becomes effective.
(ii) Distributions. If the Company or any of its
subsidiaries, at any time while the Note is outstanding, shall distribute to all
holders of Common Stock evidences of its indebtedness or assets or cash or
rights or warrants to subscribe for or purchase any security of the Company or
any of its subsidiaries (excluding those referred to in Section 3(f)(i) above),
then concurrently with such distributions to holders of Common Stock, the
Company shall distribute to the Holder of the Note the amount of such
indebtedness, assets, cash or rights or warrants which the Holder of the Note
would have received had the Note been converted into Common Stock at the then
applicable the Conversion Price immediately prior to the record date for such
distribution.
(iii) Common Stock Issuances. In the event that the
Company or any of its Subsidiaries on or subsequent to the Closing Date issues
or sells any Common Stock or any Convertible Securities (other than (i) as
required under the Securities Purchase Agreement or the Exchange Agreement or
pursuant to exercise of Convertible Securities, (ii) shares of Common Stock or
options to purchase such shares issued to employees, consultants, officers or
directors in accordance with stock plans approved by the Board of Directors, and
shares of Common Stock issuable under options or warrants that are outstanding
as of the date of the Exchange Agreement, (iii) shares of Common Stock issued
pursuant to a stock dividend, split or other similar transaction, (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.
6
(iv) Rounding of Adjustments. All calculations under
this Section 3 shall be made to the nearest cent or the nearest 1/100th of a
share, as the case may be.
(v) Notice of Adjustments. Whenever the Conversion
Price is adjusted pursuant to this Section 3(f), the Company shall promptly
deliver to each holder of the Note, a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment, provided that any failure to so provide such notice shall not
affect the automatic adjustment hereunder.
(vi) Fundamental Changes. In case any transaction or
event (including, without limitation, any merger, consolidation, combination,
recapitalization, sale of assets, tender or exchange offer, reclassification,
compulsory share exchange or liquidation) shall occur in which all or
substantially all outstanding shares of Common Stock are converted into or
exchanged or acquired for or constitute the right to receive stock, or other
securities, cash, property or assets (each, "Fundamental Change"), the Holder of
this Note outstanding immediately prior to the occurrence of such Fundamental
Change shall have the right upon any subsequent conversion to receive the kind
and amount of stock, other securities, cash, property or assets that such holder
would have received if such share had been converted immediately prior to such
Fundamental Change.
(vii) Notice of Certain Events. If:
A. the Company shall declare a dividend
(or any other distribution) on its
Common Stock; or
B. the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
C. the Company shall authorize the
granting to all holders of the Common
Stock rights or warrants to subscribe
for or purchase 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
7
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange.
(g) Reservation and Issuance of Underlying Securities. The
Company covenants that it will at all times reserve and keep available out of
its authorized and unissued Common Stock solely for the purpose of issuance
upon conversion of this Note (including repayments in stock), free from
preemptive rights or any other actual contingent purchase rights of persons
other than the holders of the Note, not less than such number of shares of
Common Stock as shall (subject to any additional requirements of the Company as
to reservation of such shares set forth in the Exchange Agreement) be issuable
(taking into account the 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) has been paid in full or converted into Common Stock, this Note shall
automatically be deemed canceled and the Holder shall promptly surrender the
Note to the Company at the Company's principal executive offices.
(k) Notices Procedures. Any and all notices or other
communications or deliveries to be provided by the Holder hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by confirmed facsimile, or by a nationally recognized overnight
courier service to the Company at the facsimile telephone number or address of
the principal place of business of the Company as set forth in the Exchange
Agreement. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
8
by facsimile, or by a nationally recognized overnight courier service addressed
to the Holder at the facsimile telephone number or address of the Holder
appearing on the books of the Company, or if no such facsimile telephone number
or address appears, at the principal place of business of the Holder. Any
notice or other communication or deliveries hereunder shall be deemed delivered
(i) upon receipt, when delivered personally, (ii) when sent by facsimile, upon
receipt if received on a Business Day prior to 5:00 p.m. (Eastern Time), or on
the first Business Day following such receipt if received on a Business Day
after 5:00 p.m. (Eastern Time) or (iii) upon receipt, when deposited with a
nationally recognized overnight courier service.
(l) Overall Limit on Common Stock Issuable. Notwithstanding
anything contained herein to the contrary, the number of shares of Common Stock
issuable by the Company and acquirable by the Holders of the Notes, together
with the number of shares issuable pursuant to the Warrants, the Old Michigan
Notes or New Michigan Notes, the warrants issued in connection with the Old
Michigan Notes, and the warrants granted to Middlebury Capital LLC as placement
agent for the Original Notes, shall not exceed 19.9% of the number of shares of
Common Stock outstanding on the Closing Date, subject to appropriate adjustment
for stock splits, stock dividends, or other similar recapitalizations affecting
the Common Stock (the "Maximum Common Stock Issuance"), unless the issuance of
shares hereunder in excess of the Maximum Common Stock Issuance shall first be
approved by the Company's shareholders in accordance with applicable law and
the By-laws and Certificate of Incorporation of the Company (a "20% Approval").
If at any point in time and from time to time written notice from the Holders
of the Note to the Company (each a "Trigger Date") the number of Common Shares
issued pursuant to conversion of the Note would exceed the Maximum Common Stock
Issuance but for this Section 3(l), then the Company shall, at the Company's
election, either (A) promptly call a stockholders meeting to obtain a
stockholder vote on the issuance of Common Shares hereunder in excess of the
Maximum Common Stock Issuance, or (B) purchase from the Holder the Principal
Amount of the Note which cannot be converted or exercised due to such Maximum
Common Stock Issuance limitation ("Shortfall") at a redemption price equal to
the greater of (i) such Principal Amount of such Shortfall and (ii) the Market
Price as of the Trigger Date of the Underlying Shares of such Shortfall that
could have been sold by the Holder pursuant to the Registration Statement,
which redemption price shall be paid within three (3) Trading Days after a
Trigger Date if this clause (B) is elected (although for purposes of
clarification, if clause (A) is elected by the Company and the Company's
stockholders do not approve the proposal, the Company will not be required to
comply with clause (B)). The Company may make such election at any time within
thirty (30) days following the Trigger Date by giving written notice to the
Holder of the Note, in which case the Company shall purchase the Shortfall at
the price stated above within three (3) Trading Days of delivery of said
notice.
(m) Mandatory Conversion.
(i) If at any time after the Issuance Date, the
closing per share price of the Common Stock exceeds $4.00 (as such price may be
proportionally adjusted for stock splits, reverse splits, stock dividends and
recapitalizations) for 30 consecutive Trading Days (the "Pricing Event"), and
further provided that there has been Effective Registration for at least such 30
Trading Day period and including the Mandatory Conversion Date (as defined
below) the Company shall have the option, exercisable by delivering an
irrevocable notice to the Holder (the "Mandatory Conversion Notice") to provide
that the Note shall be converted at the Conversion Price on a date (the
"Mandatory Conversion Date") at least 30 but no more than 60 days from the date
9
of the Mandatory Conversion Notice. The foregoing shall not affect the right of
the Holder to convert this Note pursuant to Section 3(a) above at all times up
to and including the Mandatory Conversion Date.
(ii) Notwithstanding the preceding subsection (m)(i),
the Holder of the Note shall not be obligated to convert this Note on a
Mandatory Conversion Date unless and until each of the following conditions has
been satisfied at all times from the date of the Mandatory Conversion Notice up
to and including the Mandatory Conversion Date:
(A) There is Effective Registration;
(B) No Event of Default has occurred and is
continuing; and
(C) The Holder has received unlegended
certificates representing Common Shares
(as defined in the Exchange Agreement)
with respect to all conversions for
which Conversion Notices have been
given.
(iii) In the event that the number of shares of Common
Stock that would be issued to the Holder would result in the Holder exceeding
the limitation set fort in Section 3(l) above, then the Company shall issue to
the Holder upon conversion of the Holder's Note, only the number of shares as
would not cause the Holder to exceed such amount and with respect to the balance
of the Note, an amount in cash equal to the greater of (i) the Principal Amount
of such balance of the Note and (ii) the Market Price of the Underlying Shares
of such balance of the Note as of the date of the Mandatory Conversion Date.
(iv) Such forced conversion shall be subject to and
governed by all the provisions relating to voluntary conversion of the Note
contained herein.
10
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 Exchange 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, the Exchange Agreement or the
Registration Rights Agreement that remains uncured for thirty (30) business days
after notice to the Company; (vi) any event or condition shall occur which (x)
results in the acceleration of the maturity of any material long-term debt
(other than the Note) of the Company or any of its Subsidiaries, or (y) enables
(or, with the giving of notice or lapse of time or both, would enable) the
holder of such material long-term debt or any or person acting on behalf of such
holder's behalf to accelerate the maturity thereof, or (vii) if the Company or
any of its Subsidiaries is subject to any Bankruptcy Event (as defined in the
Exchange Agreement).
(b) Remedies. If an Event of Default occurs and is
continuing with respect to the Note, the Holder may declare all of the then
outstanding Principal Amount of this Note, including any interest due thereon,
to be due and payable immediately. The Company shall pay interest on such amount
in cash at the Default Rate to the Holder if such amount is not paid within two
(2) days of Holder's request. The remedies under this Note shall be cumulative.
Section 5. General.
(a) Payment of Expenses. The Company agrees to pay all
reasonable charges and expenses, including attorneys' fees and expenses, which
may be incurred by the Holder in successfully enforcing this Note and/or
collecting any amount due under this Note.
(b) Savings Clause. In case any provision of this Note is
held by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not in
any way be affected or impaired thereby. In no event shall the amount of
interest paid hereunder exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected in
excess of the applicable maximum rate, the excess collected shall be applied to
reduce the principal debt. If the interest actually collected hereunder is still
in excess of the applicable maximum rate, the interest rate shall be reduced so
as not to exceed the maximum allowable under law.
(c) Amendment. Neither this Note nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the Company and the Holder.
11
(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 NEW YORK WITHOUT REGARD TO
ANY CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE
APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.
(ii) Jurisdiction. The Company irrevocably submits to
the jurisdiction of any State or Federal Court sitting in the State of New York,
County of New York, over any suit, action, or proceeding arising out of or
relating to this Note. The Company irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action, or proceeding brought in such a court and
any claim that suit, action, or proceeding has been brought in an inconvenient
forum.
The Company agrees that the service of process
upon it mailed by certified or registered mail, postage prepaid and return
receipt requested (and service so made shall be deemed complete three days after
the same has been posted as aforesaid) or by personal service shall be deemed in
every respect effective service of process upon it in any such suit or
proceeding. Nothing herein shall affect Holder's right to serve process in any
other manner permitted by law. The Company agrees that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
(iii) No Jury Trial. The COMPANY 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
12
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 July 29, 2004.
LIQUIDMETAL TECHNOLOGIES, Inc.
By:_____________________________________
Xxxx Xxxx, President and Chief
Executive Officer
Attest:
------
Sign:______________________________
Print Name:
13
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 1-Year 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.
10% SENIOR SECURED NOTE DUE JULY 29, 2005
OF
LIQUIDMETAL TECHNOLOGIES, INC.
(Short-term Note; U.S.-based investors)
Note No.: B-___ Original Principal Amount: $______________
Original Issuance Date: July 29, 0000 Xxxx Xxxxxx, Xxxxxxxxxx
THIS NOTE (this "Note") is one of a duly authorized issue of Notes
issued by LIQUIDMETAL TECHNOLOGIES, INC., a corporation duly organized and
existing under the laws of the State of Delaware (the "Company"), designated as
the Company's 10% Senior Secured Short Term Note Due July 29, 2005 ("Maturity
Date") in an aggregate principal amount equal to approximately Two Million Five
Hundred Four Thousand Five Hundred One U.S. Dollars (U.S. $2,504,501) (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 10% per annum from the original date of
issuance, July 29, 2004 (the "Issuance Date"), until the same becomes due and
payable on the Maturity Date, or such earlier date upon acceleration or by
conversion or redemption in accordance with the terms hereof or of the other
Transaction Documents. Interest on this Note shall accrue daily commencing on
the Issuance Date and shall be computed on the basis of a 360-day year, 30-day
months and actual days elapsed and shall be payable in accordance with Section 1
hereof. Notwithstanding anything contained herein, this Note shall bear interest
on the due and unpaid Principal Amount from and after the occurrence and during
the continuance of an Event of Default pursuant to Section 4(a), at the rate
(the "Default Rate") equal to the lower of fourteen percent (14%) per annum or
1
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 Note Exchange Agreement dated on or about the Issuance
Date pursuant to which the Note was originally issued (the "Exchange
Agreement"). Any references herein to the "Registration Rights Agreement,"
"Warrants," and "Security Agreement" shall refer to such agreements as amended
by the Exchange Agreement. For purposes hereof the following terms shall have
the meanings ascribed to them below:
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks in the City of New York are authorized or required
by law or executive order to remain closed.
"Conversion Price" shall be $2.00 (U.S.) per share (which Conversion
Price shall be subject to adjustment as set forth herein).
"Convertible Securities" means any convertible securities, warrants,
options or other rights to subscribe for or to purchase or exchange for, shares
of Common Stock.
"Debt" shall mean indebtedness of any kind.
"Effective Date" means the date on which a Registration Statement
covering all the Underlying Shares and other Registrable Securities (as defined
in the Registration Rights Agreement) is declared effective by the SEC.
"Effective Registration" shall have the meaning set forth in the
Exchange Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Market Price" shall equal the average closing price of the Common
Stock on the Principal Market for the five (5) Trading Days immediately
preceding the date on which such Market Price is being determined.
"Per Share Selling Price" shall include the amount actually paid by
third parties for each share of Common Stock in a sale or issuance by the
Company. A sale of shares of Common Stock shall include the sale or issuance of
rights, options, warrants or convertible, exchangeable or exercisable
securities, issued or sold on or subsequent to the Closing Date, under which the
Company is or may become obligated to issue shares of Common Stock, and in such
circumstances the Per Share Selling Price of the Common Stock covered thereby
2
shall also 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 principal market, exchange, or
quotation service on which the Common Stock is then listed or quoted for
trading.
"Registration Statement" shall have the meaning set forth in the
Registration Rights Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Trading Day" shall mean a day on which there is trading on the
Principal Market.
"Underlying Shares" means the shares of Common Stock into which this
Note is convertible (including repayment in Common Stock as set forth herein) in
accordance with the terms hereof and the Exchange Agreement.
The following terms and conditions shall apply to this Note:
Section 1. Payments of Principal and Interest.
(a) Interest Payments. The Company shall pay all accrued but
unpaid interest on the Principal Amount of this Note (the "Quarterly Amount"),
on the first business day of each consecutive calendar quarter (each an
"Interest Payment Date") beginning on October 1, 2004. The Quarterly Amount
shall be paid in cash.
(b) Payment of Principal. Subject to the provisions hereof,
including, without limitation, the right to obtain prepayment of the Principal
Amount provided herein, the Principal Amount of this Note shall be due and
payable on the Maturity Date. Payment of the Principal Amount shall be effected
in cash.
(c) Taxes. Company may withhold and pay over to the relevant
authorities any appropriate tax or other legally required withholdings from any
interest payment to be made to the Holder to the extent that such withholding is
required by the Internal Revenue Code or any other applicable law, rule, or
regulation.
(d) Redemption Right. This Note and its related Warrants
will be redeemable at the option of the Holder if, on the date that is 180
calendar days of the Original Issuance Date of this Note, the Company is either
(i) not then current in the filing of its periodic reports with the U.S.
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
3
amended, or (ii) not listed, traded, or quoted on an Approved Market (the
"Redemption Right"). The redemption price of this Note and its related Warrants
under this Redemption Right will be equal to the principal amount of this Note
plus all accrued and unpaid interest thereon. Holder's election to exercise this
Redemption Right must be made in writing (a "Notice of Exercise") within seven
(7) days after the date which is 180 calendar days from the Original Issuance
Date of this Note, and the Company will effect such redemption and pay the
redemption price within 30 days of the delivery to the Company of the Notice of
Exercise, although the Company shall not be required to pay the redemption price
unless and until the Holder tenders to the Company the originally executed
version of this Note and the related Warrants. In the event that the Redemption
Right is properly exercised for this Note, this Note shall be deemed to have
accrued interest at a rate equal to 14% per annum since the Original Issuance
Date (in lieu of and notwithstanding the interest rate otherwise specified
herein), provided that any additional interest above the rate otherwise
specified herein and payable by reason of the operation of this paragraph shall
not be due and payable until the date on which this Note is actually required to
be redeemed by the Company. In the event that Holder elects to exercise the
Redemption Right, then the payment by the Company of the redemption price in
accordance with this paragraph shall constitute the sole and exclusive remedy of
Holder with respect to any breach or Event of Default under this Note, the
Exchange Agreement, and the Original Transaction Documents, and by electing to
exercise the Redemption Right, Holder irrevocably waives any and all provisions.
Section 2. Seniority. The obligations of the Company hereunder
shall rank senior to all other Debt of the Company, whether now or hereinafter
existing, except to the existing debt facility with Kookmin Bank and except as
otherwise provided in Section 3.13 of the Exchange Agreement.
Section 3. Conversion.
(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 and any accrued but unpaid interest shall be
paid in cash. If a
4
conversion under this Note cannot be effected in full for any reason (other than
pursuant to Section 3(l) below), the Company shall, upon request by the Holder,
promptly pay to the Holder in cash (but no later than five Trading Days after
the Conversion Date) an amount equal to the greater of (i) such outstanding
Principal Amount as has not been converted and (ii) the Market Price of the
Underlying Shares of such outstanding unconverted Principal Amount as of the
Conversion.
(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
5
converted into Common Stock at the then applicable the Conversion Price
immediately prior to the record date for such distribution.
(iii) Common Stock Issuances. In the event that the
Company or any of its Subsidiaries on or subsequent to the Closing Date issues
or sells any Common Stock or any Convertible Securities (other than (i) as
required under the Securities Purchase Agreement or the Exchange Agreement or
pursuant to exercise of Convertible Securities, (ii) shares of Common Stock or
options to purchase such shares issued to employees, consultants, officers or
directors in accordance with stock plans approved by the Board of Directors, and
shares of Common Stock issuable under options or warrants that are outstanding
as of the date of the Exchange Agreement, (iii) shares of Common Stock issued
pursuant to a stock dividend, split or other similar transaction, and (iv)
shares of Common Stock issued to Growell Metal Co., Ltd. pursuant to the
Settlement Agreement, dated on or about January 10, 2004, between Growell Metal
Co., Ltd. and the Company's South Korean subsidiary) at an effective Per Share
Selling Price which is less than the Conversion Price in effect immediately
prior to such issue or sale or record date, as applicable, then the Conversion
Price shall be reduced effective concurrently with such issuance or sale to an
amount determined by multiplying the Conversion Price then in effect by a
fraction, (x) the numerator of which shall be the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issuance or sale,
plus (2) the number of shares of Common Stock which the aggregate consideration
received by the Company for such additional shares would purchase at such
Conversion Price, and (y) the denominator of which shall be the number of shares
of Common Stock of the Company outstanding immediately after such issuance or
sale. For the purposes of the foregoing adjustment, in the case of any
Convertible Securities, the maximum number of shares of Common Stock issuable
upon exercise, exchange or conversion of such Convertible Securities shall be
deemed to be outstanding, provided that no further adjustment shall be made upon
the actual issuance of Common Stock upon exercise, exchange or conversion of
such Convertible Securities.
(iv) Rounding of Adjustments. All calculations under
this Section 3 shall be made to the nearest cent or the nearest 1/100th of a
share, as the case may be.
(v) Notice of Adjustments. Whenever the Conversion
Price is adjusted pursuant to this Section 3(f), the Company shall promptly
deliver to each holder of the Note, a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment, provided that any failure to so provide such notice shall not
affect the automatic adjustment hereunder.
(vi) Fundamental Changes. In case any transaction or
event (including, without limitation, any merger, consolidation, combination,
recapitalization, sale of assets, tender or exchange offer, reclassification,
compulsory share exchange or liquidation) shall occur in which all or
substantially all outstanding shares of Common Stock are converted into or
exchanged or acquired for or constitute the right to receive stock, or other
securities, cash, property or assets (each, "Fundamental Change"), the Holder of
this Note outstanding immediately prior to the occurrence of such Fundamental
Change shall have the right upon any subsequent conversion to receive the kind
and amount of stock, other securities, cash, property or assets that such holder
would have received if such share had been converted immediately prior to such
Fundamental Change.
6
(vii) Notice of Certain Events. If:
A. the Company shall declare a dividend
(or any other distribution) on its
Common Stock; or
B. the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
C. the Company shall authorize the
granting to all holders of the Common
Stock rights or warrants to subscribe
for or purchase any shares of capital
stock of any class or of any rights;
or
D. the approval of any stockholders of
the Company shall be required in
connection with any reclassification
of the Common Stock of the Company,
any consolidation or merger to which
the Company is a party, any sale or
transfer of all or substantially all
of the assets of the Company, of any
compulsory share of exchange whereby
the Common Stock is converted into
other securities, cash or property;
or
E. the Company shall authorize the
voluntary or involuntary dissolution,
liquidation or winding up of the
affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Note, and shall cause to be mailed to the
Holder at its last address as it shall appear upon the books of the Company, on
or prior to the date notice to the Company's stockholders generally is given, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange.
(g) Reservation and Issuance of Underlying Securities. The
Company covenants that it will at all times reserve and keep available out of
its authorized and unissued Common Stock solely for the purpose of issuance upon
conversion of this Note (including repayments in stock), free from preemptive
rights or any other actual contingent purchase rights of persons other than the
holders of the Note, not less than such number of shares of Common Stock as
shall (subject to any additional requirements of the Company as to reservation
of such shares set forth in the Exchange Agreement) be issuable (taking into
account the 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.
7
(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) has been paid in full or converted into Common Stock, this Note shall
automatically be deemed canceled and the Holder shall promptly surrender the
Note to the Company at the Company's principal executive offices.
(k) Notices Procedures. Any and all notices or other
communications or deliveries to be provided by the Holder hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by confirmed facsimile, or by a nationally recognized overnight
courier service to the Company at the facsimile telephone number or address of
the principal place of business of the Company as set forth in the Exchange
Agreement. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile, or by a nationally recognized overnight courier service addressed
to the Holder at the facsimile telephone number or address of the Holder
appearing on the books of the Company, or if no such facsimile telephone number
or address appears, at the principal place of business of the Holder. Any notice
or other communication or deliveries hereunder shall be deemed delivered (i)
upon receipt, when delivered personally, (ii) when sent by facsimile, upon
receipt if received on a Business Day prior to 5:00 p.m. (Eastern Time), or on
the first Business Day following such receipt if received on a Business Day
after 5:00 p.m. (Eastern Time) or (iii) upon receipt, when deposited with a
nationally recognized overnight courier service.
(l) Overall Limit on Common Stock Issuable. Notwithstanding
anything contained herein to the contrary, the number of shares of Common Stock
issuable by the Company and acquirable by the Holders of the Note, together with
the number of shares issuable pursuant to the Warrants, the Old Michigan Notes
or New Michigan Notes, the warrants issued in connection with the Old Michigan
Notes, and the warrants granted to Middlebury Capital LLC as placement agent for
the Original 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
8
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.
9
Section 4. Defaults and Remedies.
(a) Events of Default. An "Event of Default" is: (i) a
default in payment of the Principal Amount, when due, or failure to pay any
accrued but unpaid interest thereon of the Note within five (5) days the date
such interest payment is due (to the extent such principal and/or amount has not
been converted into Common Stock in accordance with the terms hereof); (ii) a
default in the timely issuance of Underlying Shares upon and in accordance with
the terms hereof (where for purposes of this Note, the term "timely" shall mean
within ten (10) days following the Conversion Date); (iii) failure by the
Company for thirty (30) days after written notice has been received by the
Company to comply with any other material provision of the Note, the Purchase
Agreement, the Exchange 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, Exchange Agreement or the Registration
Rights Agreement that remains uncured for thirty (30) business days after notice
to the Company; (vi) any event or condition shall occur which (x) results in the
acceleration of the maturity of any material long-term debt (other than the
Note) of the Company or any of its Subsidiaries, or (y) enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
material long-term debt or any or person acting on behalf of such holder's
behalf to accelerate the maturity thereof, or (vii) if the Company or any of its
Subsidiaries is subject to any Bankruptcy Event (as defined in the Exchange
Agreement).
(b) Remedies. If an Event of Default occurs and is
continuing with respect to the Note, the Holder may declare all of the then
outstanding Principal Amount of this Note, including any interest due thereon,
to be due and payable immediately. The Company shall pay interest on such amount
in cash at the Default Rate to the Holder if such amount is not paid within two
(2) days of Holder's request. The remedies under this Note shall be cumulative.
Section 5. General.
(a) Payment of Expenses. The Company agrees to pay all
reasonable charges and expenses, including attorneys' fees and expenses, which
may be incurred by the Holder in successfully enforcing this Note and/or
collecting any amount due under this Note.
(b) Savings Clause. In case any provision of this Note is
held by a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Note will not in
any way be affected or impaired thereby. In no event shall the amount of
interest paid hereunder exceed the maximum rate of interest on the unpaid
principal balance hereof allowable by applicable law. If any sum is collected in
excess of the applicable maximum rate, the excess collected shall be applied to
reduce the principal debt. If the interest actually collected hereunder is still
in excess of the applicable maximum rate, the interest rate shall be reduced so
as not to exceed the maximum allowable under law.
(c) Amendment. Neither this Note nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the Company and the Holder.
10
(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 NEW YORK WITHOUT REGARD TO
ANY CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE
APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.
(ii) Jurisdiction. The Company irrevocably submits to
the jurisdiction of any State or Federal Court sitting in the State of New York,
County of New York, over any suit, action, or proceeding arising out of or
relating to this Note. The Company irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such suit, action, or proceeding brought in such a court and
any claim that suit, action, or proceeding has been brought in an inconvenient
forum.
The Company agrees that the service of process
upon it mailed by certified or registered mail, postage prepaid and return
receipt requested (and service so made shall be deemed complete three days after
the same has been posted as aforesaid) or by personal service shall be deemed in
every respect effective service of process upon it in any such suit or
proceeding. Nothing herein shall affect Holder's right to serve process in any
other manner permitted by law. The Company agrees that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.
(iii) No Jury Trial. The COMPANY 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
11
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 July 29, 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
SCHEDULE I
----------
Noteholder Address Principal Amount Principal Amount of Principal Amount
---------- ------- of Original Note 3-Year Note of 1-Year Note
---------------- ----------- --------------
Xxxx Xxxxxx & Co. 0000 Xxxxxxxx Xxxx. $1,267,000.00 $633,500.00 $633,500.00
Xxxxx 000
Xxx Xxxxxxx, XX 00000-0000
Attn: Xxxx Xxxxxxxxxx
Xxxxx 0000 Xxxxxx Xxxx. $250,000.00 $125,000.00 $125,000.00
Xxxxx 000
Xxx Xxxxxxx, XX 00000-0000
DKR Soundshore Oasis 0000 Xxxx Xxxx Xxxxxx $950,000.00 $475,000.00 $475,000.00
Holding Fund Ltd. Xxxxxxxx, XX 00000
Attn: Xxx Xxxx
Xxxx Xxxxxxxx 00 Xxxxxxxxxx Xxxx $201,000.00 $100,500.00 $100,500.00
Xxxxxxxx, XX 00000
Bear Xxxxxxx f/b/o Rosen Capital 0000 Xxxx Xxxxxx $99,000.00 $49,500.00 $49,500.00
LP M/P/P Plan and Xxxxx Xxxxx TTEE Xxx. 00X
Xxx Xxxx, XX 00000
Caydal, LLC Caydal, LLC $100,000.00 $50,000.00 $50,000.00
00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Xxxxxx Fund, LP 0000 Xxxxxxxxx Xxxx, XX $580,501.00 $290,250.50 $290,250.50
Xxxxx 0000
Xxxxxxx, XX 00000
Xxxxxx Fund II, LP 0000 Xxxxxxxxx Xxxx, XX $108,000.00 $54,000.00 $54,000.00
Xxxxx 0000
Xxxxxxx, XX 00000
Xxxxxx Fund Offshore, Ltd. c/o Bison Court $661,501.00 $330,750.50 $330,750.50
Hemisphere Management (B.V.I.) X.X. Xxx 0000
Xxxxxxx Xxxx Xxxx
Xxxxxxx
Xxxxxxx Xxxxxx Xxxxxxx
Xxxxx Bouts 000 Xxxxxxxx Xxxx $50,000.00 $25,000.00 $25,000.00
Xxxxxxxx Xxxxx, XX 00000
Really Cool Group Ltd. The Metropole $200,000.00 $100,000.00 $100,000.00
Xxxxxxxxx Xxxxxx
Xx. Xxxxxx, Xxxxxx, Xxxxxxx
Xxxxxxx, XX
Xxxxx Xxxxxxxxxx 000 Xxxxx Xxxx Xxxx $48,000.00 $24,000.00 $24,000.00
Xxxxxxxxx, XX 00000
13
Noteholder Address Principal Amount Principal Amount of Principal Amount
---------- ------- of Original Note 3-Year Note of 1-Year Note
---------------- ----------- --------------
Xxxxx Xxxxxxxxx 000 Xxxxxxxxx Xxxxx $24,000.00 $12,000.00 $12,000.00
Xxxxxxxxxx, XX 00000
Xxxx Xxxxxx 000 Xxxxxxxx Xxxxxx $30,000.00 $15,000.00 $15,000.00
Xxxxxxxxx, XX 00000
Xxxxxxx Xxxxxxxx 00 Xxxxx Xxxxxxx Xxxx $60,000.00 $30,000.00 $30,000.00
Xxxxxx, XX 00000
Xxxxxxx and Xxxxxx Xxxx 00 Xxxxxxxx Xxxx $40,000.00 $20,000.00 $20,000.00
Xxxxxxxxx, XX 00000
Xxxxxxx Xxxxx 0000 X. Xxxxxxx Xx., $250,000.00 $125,000.00 $125,000.00
Xxxxx 000
Xxxxx, XX 00000
Wry Ltd. The Metropole $60,000.00 $30,000.00 $30,000.00
Xxxxxxxxx Xxxxxx
Xx. Xxxxxx, Xxxxxx, Xxxxxxx
Xxxxxxx, XX
Xxxxx Xxxxxxxxx 00 Xxxxxxxx Xxxx $30,000.00 $15,000.00 $15,000.00
Xxxxxxxxx, XX 00000
Total: $5,009,002
