EXHIBIT 10.1
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.
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT ("AGREEMENT") dated as of March 1,
2004, between Liquidmetal Technologies, Inc., a Delaware corporation (the
"COMPANY"), and Michigan Venture Capital Co., Ltd., a Korean corporation
("MICHIGAN"), and each other person or entity approved by the Company that is
added by Michigan prior to the Closing as a Purchaser on Schedule I attached to
this Agreement (collectively and individually, the "PURCHASER"). This Agreement
amends and restates, and supersedes and replaces in its entirety, that certain
Securities Purchase Agreement, dated January 15, 2004, between the parties
hereto. Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Note.
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Purchaser, and
the Purchaser wishes to purchase from the Company, a 6% Senior Convertible Note
in the principal amount of up to four million United States dollars ("Dollars")
($ 4,000,000) substantially in the form attached hereto as EXHIBIT A (the
"NOTE"), on the terms and conditions set forth herein;
WHEREAS, the Note will be convertible into shares ("COMMON SHARES")
of common stock, par value $.001, of the Company ("COMMON STOCK"), pursuant to
the terms of the Note, and the Purchaser will have registration rights with
respect to the Common Shares issuable upon conversion of the Note, pursuant to
the terms of that certain Registration Rights Agreement to be entered into
between the Company and the Purchaser substantially in the form of EXHIBIT B
hereto ("REGISTRATION RIGHTS Agreement"); and
WHEREAS, this Agreement also provides a warrant to the Purchaser to
purchase additional shares of Common Stock on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF NOTE
Section 1.1. Issuance of Note. Upon the following terms and
conditions, the Company shall issue and sell to the Purchaser, and the Purchaser
shall purchase from the Company, the Note.
Section 1.2. Purchase Price. The purchase price for the Note to be
acquired by the Purchaser shall be up to four million Dollars ($4,000,000) (the
"PURCHASE PRICE").
Section 1.3. The Closing.
(a) Timing. Subject to the fulfillment or waiver of the
conditions set forth in Article V hereof, the purchase and sale of the Note
shall take place at a closing (the "CLOSING"), on or about the date hereof or
such other date as the Purchaser and the Company may agree upon (the "CLOSING
DATE"), provided that the Closing Date shall be no later than March 1, 2004. At
the Closing and upon the consent of the Company, Michigan may substitute an
affiliate of Michigan to be the purchaser of Michigan Note(s) under this
Agreement.
(b) Form of Payment and Closing. On the Closing Date, the
Company shall deliver to the Purchaser the Note purchased hereunder, registered
in the name of the Purchaser or its nominee. On the Closing Date the Purchaser
shall deliver by wire transfer the Purchase Price hereunder to an account
designated in writing by the Company. In addition, each party shall deliver all
documents, instruments and writings required to be delivered by such party
pursuant to this Agreement at or prior to the Closing. The Note will be fully
owned and paid for by the Purchaser as of the Closing Date.
Section 1.4. Warrant. In addition to the Note, at the Closing, the
Company will execute and deliver to Michigan a warrant to purchase, at an
exercise price of $3.00 per share, such number of shares of Common Stock as
shall have an aggregate exercise price equal to fifty percent (50%) of the
Purchase Price actually paid (the "WARRANT"). The Warrant will be substantially
in the form attached hereto as Exhibit D and will expire one hundred (100) days
from the Closing Date"". The shares of Common Stock that are issuable pursuant
to the Warrant are hereafter referred to as the "WARRANT SHARES." As used
herein, "TRADING DAY" shall mean a day on which there is trading on the Nasdaq
National Market System or such other market or exchange on which the Common
Stock is then principally traded.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties of the Company. The
Company hereby makes the following representations and warranties to the
Purchaser as of the date hereof and the Closing Date:
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(a) Organization and Qualification; Material Adverse Effect.
The Company is a corporation duly incorporated and existing in good standing
under the laws of the State of Delaware and has the requisite corporate power to
own its properties and to carry on its business as now being conducted. The
Company does not have any subsidiaries other than the subsidiaries listed on
Schedule 2.1(a) attached hereto ("SUBSIDIARIES"). Except where specifically
indicated to the contrary, all references in this Agreement to subsidiaries
shall be deemed to refer to all direct and indirect subsidiaries of the Company.
The Company is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary other than
those in which the failure so to qualify would not have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any adverse effect on the business,
operations, properties, prospects or financial condition of the Company and its
subsidiaries, if any, and which is (either alone or together with all other
adverse effects) material to the Company and its Subsidiaries, if any, taken as
a whole, and any material adverse effect on the transactions contemplated under
this Agreement, the Note, and the Registration Rights Agreement.
(b) Authorization; Enforcement. (i) The Company has all
requisite corporate power and authority to enter into and perform this
Agreement, the Note, the Registration Rights Agreement, and the Warrant
("TRANSACTION DOCUMENTS") and to issue the Note and Warrant in accordance with
the terms hereof, (ii) the execution and delivery of the Transaction Documents
by the Company and the consummation by it of the transactions contemplated
hereby and thereby, including the issuance of the Note, have been duly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors (or any committee or
subcommittee thereof) or stockholders is required, (iii) the Transaction
Documents have been duly executed and delivered by the Company, (iv) the
Transaction Documents constitute valid and binding obligations of the Company
enforceable against the Company, except (A) as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of creditors' rights and remedies or by other equitable principles of general
application, and (B) to the extent the indemnification provisions contained in
this Agreement and the Registration Rights Agreement may be limited by
applicable federal or state securities laws and (v) the Note and the Warrant,
and the Common Shares and Warrant Shares issuable upon the conversion and/or
exercise thereof, have been duly authorized and, upon issuance thereof and
payment therefor in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, free and clear of any and all liens,
claims and encumbrances.
(c) Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 110,000,000 shares of Common Stock, of
which as of the date hereof, 41,599,652 shares are issued and outstanding and
7,826,557 shares are issuable and reserved for issuance pursuant to the
Company's stock option plans or securities exercisable or exchangeable for, or
convertible into, shares of Common Stock. All of such outstanding shares have
been, or upon issuance will be, validly issued, fully paid and nonassessable. As
of the date hereof, except as disclosed in Schedule 2.1(c), (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company, (ii)
there are no outstanding debt securities, (iii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character
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whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the Securities Act of 1933, as amended
("SECURITIES ACT" or "1933 ACT") (except the Registration Rights Agreement), (v)
there are no outstanding securities of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, and (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance or
exercise of the Note or Warrant as described in this Agreement. The Company has
furnished to the Purchaser true and correct copies of the Company's Certificate
of Incorporation, as amended and as in effect on the date hereof (the
"CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as in effect on the
date hereof (the "BY-LAWS"), and the terms of all securities convertible or
exchangeable into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto. Schedule 2.1(c) also lists all outstanding
debt of the Company with sufficient detail acceptable to Purchaser.
(d) Issuance of Shares. Upon issuance in accordance with this
Agreement and the terms of the Note, and if applicable, the Warrant, the Note,
the Common Shares, and if applicable, the Warrant Shares, will be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof.
(e) No Conflicts. Except as disclosed in Schedule 2.1(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby and issuance of the Note and Warrant, and the Common Shares and Warrant
Shares underlying any of the foregoing will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations, preferences and
rights of any outstanding series of preferred stock of the Company or the
By-laws; (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or (iii) to the Company's knowledge result in a
violation of any law, rule, regulation, order, judgment or decree (including
United States federal and state securities laws and regulations and the rules
and regulations of the Nasdaq National Market System ("PRINCIPAL MARKET") or
other principal securities exchange or trading market on which the Common Stock
is traded or listed) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, except in the case of clause (ii), such conflicts that would not
have a Material Adverse Effect.
(f) SEC Documents. Since June 30, 2003, the Company has filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC
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pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "1934 ACT") (all of the foregoing filed prior to the date hereof
and all exhibits included therein and financial statements and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the "SEC DOCUMENTS"). Except as provided in Schedule 2.1(f), to the Company's
knowledge, as of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(g) INTENTIONALLY LEFT BLANK.
(h) Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, (i) except as set forth in SEC Documents which were
filed at least 10 days before the date hereof, (ii) except as set forth in
Schedule 2.1(h), and (iii) except which individually and in the aggregate,
respectively, would not be reasonably likely to result in liability to the
Company in excess of $50,000 and $100,000, respectively.
(i) INTENTIONALLY LEFT BLANK.
(j) No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the Note
and the Warrant to the Purchaser to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Principal Market or other Approved Market, nor will the Company or any of
its Subsidiaries take any action or steps that would cause the offering of the
Note to be integrated with other offerings.
(k) Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened, the effect
of which would be reasonably likely to result in a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement.
(l) Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks,
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service xxxx registrations, trade secret or other similar rights of others, or
of any such development of similar or identical trade secrets or technical
information by others and, except as set forth on Schedule 2.1(l), there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its Subsidiaries regarding
trademarks, trade name rights, patents, patent rights, inventions, copyrights,
licenses, service names, service marks, service xxxx registrations, trade
secrets or other infringement.
(m) Compliance with Law. The business of the Company and its
Subsidiaries has been and is presently being conducted so as to comply with all
applicable material federal, state and local governmental laws, rules,
regulations and ordinances.
(n) Environmental Laws. The Company and its Subsidiaries (i)
are to the Company's knowledge in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where such noncompliance or failure to receive permits, licenses or
approvals referred to in clauses (i), (ii) or (iii) above could have,
individually or in the aggregate, a Material Adverse Effect.
(o) Disclosure. Neither this Agreement or the Schedules
hereto, nor any other document, certificate or instrument furnished to the
Purchaser by or on behalf of the Company in connection with the transactions
contemplated by this Agreement, contains untrue statement or a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
(p) Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 2.1(p) or such
as do not materially and adversely affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company or any of its Subsidiaries. Any real property and facilities held under
lease by the Company or any of its Subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.
(q) Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged.
(r) Regulatory Permits. To the Company's knowledge, the
Company and its Subsidiaries possess all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities, necessary to conduct their respective
6
businesses, and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
(s) Foreign Corrupt Practices Act. To the Company's knowledge,
neither the Company, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any Subsidiary has, in the course of acting
for, or on behalf of, the Company, directly or indirectly used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; directly or indirectly made any direct
or indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any similar
treaties of the United States; or directly or indirectly made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government or party official or employee.
(t) Tax Status. The Company and each of its Subsidiaries has
made or filed all United States federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject and has paid all taxes and other governmental assessments and charges,
shown or determined to be due on such returns, reports and declarations, except
those being contested in good faith.
(u) Issuance of Common Shares and/or Warrant Shares. The
Common Shares and Warrant Shares are duly authorized and reserved for issuance
and, upon conversion of the Note and/or exercise of the Warrant, as applicable,
in accordance with the terms thereof, such Common Shares and/or Warrant Shares
will be validly issued, fully paid and non-assessable, free and clear of any and
all liens, claims and encumbrances, and entitled to be traded on the Principal
Market or the New York Stock Exchange, or the American Stock Exchange
(collectively with the Principal Market, the "APPROVED MARKETS"), and the
holders of such Common Shares and/or Warrant Shares shall be entitled to all
rights and preferences accorded to a holder of Common Stock. As of the date of
this Agreement, the outstanding shares of Common Stock are currently listed on
the Principal Market.
(v) Form S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) for selling
shareholders on Form S-3 (as in effect on the date of this Agreement) under the
1933 Act and rules promulgated thereunder.
SECTION 2.2. Representations and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company as of the date hereof and the Closing Date:
(a) Accredited Investor Status; Sophisticated Purchaser. The
Purchaser is an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D under the 1933 Act. The Purchaser has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of the purchase of the Note, the Warrant, the Common Shares and the
Warrant Shares. The Purchaser is not registered as a broker or dealer under
Section 15(a) of the 1934 Act, affiliated with any broker or dealer
7
registered under Section 15(a) of the 1934 Act, or a member of the National
Association of Securities Dealers, Inc.
(b) Information. The Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company which have been requested and materials relating to
the offer and sale of the Note, the Warrant, the Common Shares and the Warrant
Shares which have been requested by the Purchaser. The Purchaser and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. In determining whether to enter into this Agreement and purchase the
Note, the Purchaser has relied solely on the written information supplied by
Company employees in response to the written due diligence information request
provided by Purchaser to the Company, and the Purchaser has not received nor
relied upon any oral representation or warranty relating to the Company, this
Agreement, the Note, or any of the transactions or relationships contemplated
thereby. The Purchaser understands that its purchase of the Note and Common
Shares, and if applicable, the Warrant Shares involves a high degree of risk.
The Purchaser has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Note and Common Shares, and if applicable, the Warrant
Shares.
(c) No Governmental Review. The Purchaser understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Note, the
Warrant, the Common Shares and Warrant Shares or the fairness or suitability of
the investment in the Note, the Warrant, the Common Shares and Warrant Shares
nor have such authorities passed upon or endorsed the merits thereof.
(d) Legends. The Company shall issue the Note, and
certificates for the Common Shares, and if applicable, the Warrant Shares, to
the Purchaser without any legend except as described in Article VI below. The
Purchaser covenants that, in connection with any transfer of Common Shares or
Warrant Shares by the Purchaser pursuant to the registration statement
contemplated by the Registration Rights Agreement, it will comply with the
applicable prospectus delivery requirements of the 1933 Act, provided that
copies of a current prospectus relating to such effective registration statement
are or have been supplied to the Purchaser.
(e) Authorization; Enforcement. Each of this Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Purchaser and is a valid and binding agreement of
the Purchaser enforceable against the Purchaser in accordance with their terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies. The Purchaser has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement and
the Registration Rights Agreement and each other agreement entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement.
(f) Residency. Michigan is a resident of the Republic of
Korea.
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(g) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Purchaser and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby will not (i) result in a violation of the certificate of incorporation,
by-laws or other documents of organization of the Purchaser, (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Purchaser is bound, or (iii) result in a violation of
any law, rule, regulation or decree applicable to the Purchaser.
(h) Investment Representation. The Purchaser is purchasing the
Note and the Warrant for its own account and not with a view to distribution in
violation of any securities laws. The Purchaser has been advised and understands
that neither the Note, the Warrant, nor the Common Shares or Warrant Shares
issuable upon conversion or exercise thereof have been registered under the 1933
Act or under the "blue sky" laws of any jurisdiction and may be resold only if
registered pursuant to the provisions of the 1933 Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law. The Purchaser has been
advised and understands that the Company, in issuing the Note and the Warrant,
is relying upon, among other things, the representations and warranties of the
Purchaser contained in this Section 2.2 in concluding that such issuance is a
"private offering" and is exempt from the registration provisions of the 1933
Act.
(i) Rule 144. The Purchaser understands that there is no
public trading market for the Notes or Warrant, that none is expected to
develop, and that the Notes and Warrant must be held indefinitely unless and
until such Notes and the Warrant, or if applicable, the Common Shares or Warrant
Shares received upon conversion or exercise thereof are registered under the
1933 Act or an exemption from registration is available. The Purchaser has been
advised or is aware of the provisions of Rule 144 promulgated under the 1933
Act.
(j) Brokers. The Purchaser has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company or the Purchaser relating to this Agreement or
the transactions contemplated hereby.
(k) Reliance by the Company. The Purchaser understands that
the Note and the Warrant are being offered and sold in reliance on a
transactional exemption from the registration requirements of Federal and state
securities laws and that the Company is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of the Purchaser set forth herein in order to determine the applicability of
such exemptions and the suitability of the Purchaser to acquire the Note and the
Warrant, and the Common Shares and Warrant Shares issuable upon conversion or
exercise thereof.
(l) Certain Trading Activities. During the thirty (30)
calendar days before the date of this Agreement, the Purchaser has not directly
or indirectly, nor has any person or entity acting on behalf of or pursuant to
any understanding with such Purchaser, engaged in any trading of Common Stock
including Short Sales (as defined below), and no open position or Short Sale
exists on the date hereof in the name or on behalf of, or in conjunction with,
such
9
Purchaser. "SHORT SALES" include, without limitation, all kinds of direct
and indirect stock pledges, forward sale contracts, options, puts, calls, short
sales, swaps and broker-dealers or foreign regulated brokers having the effect
of hedging the securities purchased or investment made under this Agreement.
ARTICLE III
COVENANTS
Section 3.1. Registration and Listing; Effective Registration. Until
such time as the Note is not outstanding and the Warrant has expired the Company
will cause the Common Stock to continue at all times to be registered under
Sections 12(b) or (g) of the 1934 Act, will comply in all material respects with
its reporting and filing obligations under the 1934 Act, and will not take any
action or file any document (whether or not permitted by the 1934 Act or the
rules thereunder) to terminate or suspend such reporting and filing obligations.
Until such time as the Notes and Warrant are not outstanding, the Company shall
use its best efforts to continue the listing or trading of the Common Stock on
the Principal Market or one of the other Approved Markets and shall comply in
all material respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the Approved Market on which the Common Stock is
listed. The Company shall use its best efforts to cause the Common Shares and
Warrant Shares to be listed on the Principal Market or one of the other Approved
Markets no later than the effectiveness of the registration of the Common Shares
and Warrant Shares under the 1934 Act, and shall use its best efforts to
continue such listing(s) on one of the Approved Markets, for so long as the Note
or Warrant are outstanding.
Section 3.2. Certificates on Conversion. Upon any conversion by the
Purchaser (or then holder of the Note) of the Note pursuant to the terms
thereof, the Company shall issue and deliver to the Purchaser (or holder) within
three (3) Trading Days of the conversion date a new Note or Notes for the
aggregate principal amount of Notes which the Purchaser (or holder) has not yet
elected to convert but which are evidenced in part by the Notes submitted to the
Company in connection with such conversion (with the denominations of such new
Note(s) designated by the Purchaser or holder).
Section 3.3. Replacement Notes. The Note held by the Purchaser (or
then holder) may be exchanged by the Purchaser (or such holder) at any time and
from time to time for Note(s) with different denominations representing an equal
aggregate principal amount of Note(s), as requested by the Purchaser (or such
holder) upon surrendering the same. No service charge will be made for such
registration or transfer or exchange.
Section 3.4. Securities Compliance. The Company shall notify the SEC
and the Principal Market, in accordance with their requirements, of the
transactions contemplated by this Agreement, the Note, the Warrant, and the
Registration Rights Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Notes and Warrant hereunder
and the Common Shares and Warrant Shares issuable upon conversion or exercise
thereof.
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Section 3.5. Notices. The Company agrees to provide all holders of
Notes with copies of all notices and information, including without limitation,
notices and proxy statements in connection with any meetings, that are provided
to the holders of shares of Common Stock, contemporaneously with the delivery of
such notices or information to such Common Stock holders.
Section 3.6. Reservation of Shares; Stock Issuable Upon Conversion.
The Company shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Note and exercise of the Warrant, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of the Note and exercise of the Warrant.
Section 3.7. Best Efforts. The parties shall use their best efforts
to satisfy timely each of the conditions described in Article V of this
Agreement.
Section 3.8. Form D; Blue Sky Laws. The Company agrees to file a
Form D with respect to the Note, the Warrant, and Common Stock, in accordance
with Regulation D and to provide a copy thereof to the Purchaser promptly after
such filing. The Company shall, on or before the Closing Date, take such action
as the Company shall have reasonably determined is necessary to qualify the
Note, the Warrant, the Common Shares and Warrant Shares for sale to the
Purchaser under applicable securities or "blue sky" laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Purchaser on or prior to the
Closing Date; provided, however, that the Company shall not be required in
connection therewith to register or qualify as a foreign corporation in any
jurisdiction where it is not now so qualified or to take any action that would
subject it to service of process in suits or taxation, in each case, in any
jurisdiction where it is not now so subject.
Section 3.9. Information. The Company agrees to send to the
Purchaser for so long as the Note or Warrant are outstanding copies of any
notices and other information made available or given to the stockholders of the
Company generally, contemporaneously with the making available or giving thereof
to the stockholders.
Section 3.10. Prohibition on Net Short Positions. From and including
the date of this Agreement, the Purchaser agrees that such Purchaser shall not
maintain a Net Short Position. "NET SHORT POSITION" shall mean that the
aggregate number of shares of Common Stock held in a short position by such
Purchaser exceeds the sum of (i) the number of shares of Common Stock owned by
such Purchaser, plus (ii) the number of Common Shares issuable to such
Purchaser.
Section 3.11. Material Changes. On or before the Closing Date, the
Company shall forthwith notify the Purchaser of any material change affecting
any of its representations, warranties, undertakings and indemnity at any time
prior to payment being made to the Company on the Closing Date. Section 3.12.
Prohibition on Certain Actions. The Company shall not, between the date hereof
and the Closing Date (both dates inclusive), take any action or decision which
(had the Note already been issued) would result in an adjustment of the
Conversion Price.
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Section 3.13. Senior Status of Notes. Beginning on the date of this
Agreement and for so long as any Notes remain outstanding, neither the Company
nor any subsidiary of the Company shall, without the prior written consent of
Purchasers holding a majority of the aggregate outstanding Principal Amount of
the Notes, incur or otherwise become liable with respect to any indebtedness
that would rank senior or pari passu to the Notes in order of payment, other
than (i) indebtedness in existence on the date hereof, (ii) indebtedness to
trade creditors in the ordinary course of business, (iii) 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), (iv) any indebtedness from any loan that replaces or
refinances the Company's existing credit facility with Kookmin Bank, or (v) the
6% Senior Convertible Notes, in the aggregate principal amount of up to $6.5
million, for which Middlebury Capital LLC acted as placement agent and which
were issued by the Company pursuant to that certain Securities Purchase
Agreement of even date herewith among the Company and the U.S.-based investors
identified as "Purchasers" therein (the "MIDDLEBURY NOTES"). The Purchasers
agree that, in the event that the demand for the Middlebury Notes exceeds $6.5
million, the Company may issue up to an additional $500,000 in Middlebury Notes
(for an aggregate principal amount of up to $7.0 million in Middlebury Notes),
in which case all such issued Middlebury Notes will be covered by the exception
set forth in clause (v) of this paragraph.""
"EFFECTIVE REGISTRATION" shall mean that all registration
obligations of the Company pursuant to the Registration Rights Agreement have
been satisfied and (i) such Registration Statement is not subject to any
suspension or stop orders; (ii) the resale of such Registrable Securities may be
effected pursuant to a current and deliverable prospectus; (iii) the requisite
number of shares of Common Stock shall have been duly authorized and reserved
for issuance as required by the terms of the Transaction Documents; (iv) no
Interfering Event (as described in the Registration Rights Agreement) then
exists; (v) the Registrable Securities shall have been duly qualified or exempt
under all state "blue sky" laws; and (viii) none of the Company or any direct or
indirect subsidiary of the Company is subject to any Bankruptcy Event (as
defined below).
"BANKRUPTCY EVENT" means any of the following events: (a) the
Company or any subsidiary commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency 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.
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ARTICLE IV
TRANSFER AGENT INSTRUCTIONS
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of the Purchaser or its respective nominee(s), for the Common Shares or
Warrant Shares in such amounts as specified from time to time by the Purchaser
to the Company upon delivery of a conversion or exercise notice (the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company warrants that no
instruction relating to the Common Shares or Warrant Shares other than the
Irrevocable Transfer Agent Instructions referred to in this Article IV will be
given by the Company to its transfer agent and that the Common Shares and
Warrant Shares shall be freely transferable on the books and records of the
Company as contemplated by Article VI below when the legend referred to therein
may be removed. Nothing in this Article IV shall affect in any way the
Purchaser's obligations and agreements set forth in Section 2.2(d) to comply
with all applicable prospectus delivery requirements, if any, upon resale of the
Common Shares or Warrant Shares. The Company shall instruct its transfer agent
to issue one or more certificates in such name and in such denominations as
specified by the Purchaser and without any restrictive legends except as
contemplated by Article VI.
ARTICLE V
Conditions to Closings
Section 5.1. Conditions Precedent to the Obligation of the Company
to Sell. The obligation hereunder of the Company to issue and/or sell the Note
and the other Transaction Documents to the Purchaser at the applicable Closing
is subject to the satisfaction, at or before the applicable Closing, of each of
the applicable conditions set forth below. These conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) Accuracy of the Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser will be true and
correct in all material respects as of the date when made and as of the Closing
Date, as though made at that time.
(b) Performance by the Purchaser. The Purchaser shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by the Purchaser at or prior to the Closing, including full payment
of the Purchase Price to the Company as provided herein.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement, the Registration Rights Agreement, the Note, or
the Warrant.
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(d) Certificate. The Purchaser shall have delivered a
certificate to the Company certifying that the representations and warranties of
the Purchaser contained in Section 2.2 are true and correct in all material
respects as of the Closing Date.
(e) Final Board Approval. The Company's Board of Directors, or
any authorized committee thereof, shall have given final approval to this
Agreement and the instruments, documents, and agreements contemplated hereby.
(f) Approval of Bank of Korea. The Purchaser shall have
delivered to Company such documentation as is reasonably acceptable to the
Company to demonstrate that the Purchaser has obtained all approvals and/or
consents of the Korean government or the Bank of Korea necessary to consummate
the transactions contemplated by this Agreement.
(g) Closing Date. The Closing shall have occurred by March 1,
2004.
Section 5.2. Conditions Precedent to the Obligation of the Purchaser
to Purchase. The obligation hereunder of the Purchaser to acquire and pay for
the Note at the applicable Closing is subject to the satisfaction, at or before
the applicable Closing, of each of the applicable conditions set forth below.
These conditions are for the Purchaser's benefit and may be waived by the
Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties as of an
earlier date, which shall be true and correct in all material respects as of
such date).
(b) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement, the Registration Rights Agreement, the Notes or
the Warrant. The Principal Market shall not have objected or indicated that it
may object to the consummation of any of the transactions contemplated by this
Agreement.
(c) Opinion of Counsel. At the Closing, the Purchaser shall
have received an opinion of counsel to the Company substantially in the form
attached hereto as EXHIBIT C.
(d) Registration Rights Agreement. The Company and the
Purchaser shall have executed and delivered the Registration Rights Agreement in
the form and substance of EXHIBIT B attached hereto.
(e) Officer's Certificates. The Company shall have delivered
to the Purchaser a certificate in form and substance satisfactory to the
Purchaser and the Purchaser's counsel, executed by an officer of the Company,
certifying as to satisfaction of closing conditions, incumbency of signing
officers, and the true, correct and complete nature of the Certificate of
Incorporation, By-Laws, good standing and authorizing resolutions of the
Company.
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(f) Mortgage. A mortgage and security interest on the building
and equipment of the Pyoungtaek, South Korea manufacturing facilities (and any
proceeds thereof) of Liquidmetal Korea Co., Ltd. ("LMK") shall have been
perfected in favor of the Purchaser in order to secure the Company's obligations
under this Agreement and the Note, provided that (i) such mortgage and security
interest shall be subordinate to the security interest held by Kookmin Bank as
of the date hereof, and (ii) LMK shall be permitted to sell such equipment, free
and clear of such security interest, to a unrelated third-party in an arm's
length transaction for a valid business purpose. This mortgage and security
interest will be evidenced by a security agreement in a form that is mutually
agreed upon by the parties, and said security interest shall terminate upon the
conversion or payment in full of the Notes. If it is determined that applicable
Korean law will not permit the foregoing mortgage and security interest, or if
obtaining any necessary approvals from the Korean government will delay the
Closing, then this condition shall be automatically waived, although Borrower
will, following the Closing, continue to use reasonable efforts to obtain any
necessary governmental approvals for the grant of such mortgage and security
interest.
(g) Security Interest in Patents. A security interest in the
owned United States patents of the Company (and any proceeds thereof) shall have
been perfected, pursuant to a security agreement in substantially the form
attached hereto as EXHIBIT D (the "SECURITY AGREEMENT").
(h) Bank of Korea Approval. Purchaser shall have obtained any
necessary approvals from the Bank of Korea for the consummation of the
transactions contemplated by this Agreement, provided that Purchaser will use
its best efforts to obtain such approval
ARTICLE VI
LEGEND AND STOCK
Upon payment therefor as provided in this Agreement, the Company
will issue the Note in the name the Purchaser or its designees and in such
denominations to be specified by the Purchaser prior to (or from time to time
subsequent to) Closing. The Note and Warrant and any certificate representing
Common Shares or Warrant Shares issued upon conversion or exercise thereof,
prior to such Common Shares or Warrant Shares being registered under the 1933
Act for resale or available for resale under Rule 144 under the 1933 Act, shall
be stamped or otherwise imprinted with a legend in substantially the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE UNDER
THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue the Note, Common Shares and Warrant
Shares issuable upon conversion or exercise of the foregoing, without the legend
set forth above, at such time as (i) the holder thereof is permitted to dispose
of such Notes, Common Shares and Warrant
15
Shares issuable upon conversion or exercise of the foregoing pursuant to Rule
144(k) under the 1933 Act, or (ii) such securities are sold to a purchaser or
purchasers who (in the opinion of counsel to the seller or such purchaser(s), in
form and substance reasonably satisfactory to the Company and its counsel) are
able to dispose of such shares publicly without registration under the 1933 Act,
or (iii) such securities have been registered under the 1933 Act.
Prior to the Registration Statement (as defined in the Registration
Rights Agreement) being declared effective, any Common Shares or Warrant Shares
issued pursuant to conversion of the Note or exercise of the Warrant shall bear
a legend in the same form as the legend indicated above; provided that such
legend shall be removed from such shares and the Company shall issue new
certificates without such legend if (i) the holder has sold or disposed of such
shares pursuant to Rule 144(k) under the 1933 Act, or the holder is permitted to
dispose of such shares pursuant to Rule 144(k) under the 1933 Act, (ii) such
shares are registered for resale under the 1933 Act, or (iii) such shares are
sold to a purchaser or purchasers who (in the opinion of counsel to the seller
or such purchaser(s), in form and substance reasonably satisfactory to the
Company and its counsel) are able to dispose of such shares publicly without
registration under the 1933 Act. Upon such Registration Statement becoming
effective, the Company agrees to promptly issue new certificates representing
such shares without such legend. Any Common Shares or Warrant Shares issued
after the Registration Statement has become effective shall be free and clear of
any legends, transfer restrictions and stop orders. Notwithstanding the removal
of such legend, the Purchaser agrees to sell the Common Shares and Warrant
Shares represented by the new certificates in accordance with the applicable
prospectus delivery requirements (if copies of a current prospectus are provided
to the Purchaser by the Company) or in accordance with an exemption from the
registration requirements of the 1933 Act.
Nothing herein shall limit the right of any holder to pledge these
securities pursuant to a bona fide margin account or lending arrangement entered
into in compliance with law, including applicable securities laws.
ARTICLE VII
TERMINATION
Section 7.1. Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing by the mutual written consent of the
Company and the Purchaser.
Section 7.2. Other Termination. This Agreement may be terminated by
action of the Board of Directors of the Company or by the Purchaser at any time
if the Closing shall not have been consummated on the Closing Date; provided,
however, that the party (or parties) prepared to close shall retain its (or
their) right to xxx for any breach by the other party (or parties).
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ARTICLE VIII
INDEMNIFICATION
In consideration of the Purchaser's execution and delivery of the
this Agreement and the Registration Rights Agreement and acquiring the Note
hereunder and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless the Purchaser and all of its partners, officers, directors, employees,
members and direct or indirect investors and any of the foregoing person's
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "INDEMNITEES") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate or document contemplated hereby or thereby, (b) any breach
of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate or document contemplated hereby
or thereby. Notwithstanding the foregoing, Indemnified Liabilities shall not
include any liability of any Indemnitee arising out of such Indemnitee's
negligence. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under this
Article VIII shall be the same as those set forth in Section 6 (other than
Section 6(b)) of the Registration Rights Agreement, including, without
limitation, those procedures with respect to the settlement of claims and
Company's right to assume the defense of claims.
ARTICLE IX
Governing Law; Miscellaneous
Section 9.1. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN
ORANGE COUNTY, CALIFORNIA, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT
IN AN INCONVENIENT FORUM OR THAT THE VENUE OF SUCH SUIT, ACTION OR
17
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.
Section 9.2. Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
Section 9.3. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
Section 9.4. Severability. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
Section 9.5. Costs and Expenses. All reasonable out-of-pocket costs
and expenses the Purchaser incurs with respect to this Agreement and the
transactions contemplated by this Agreement shall be paid by the Company to the
Purchaser at the Closing up to an aggregate maximum of $30,000.00.
Section 9.6. Entire Agreement; Amendments; Waivers.
(a) This Agreement supersedes all other prior oral or written
agreements between the Purchaser, the Company, their affiliates and persons
acting on their behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein (including the other Transaction
Documents) contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the
18
Purchaser, and no provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought.
(b) The Purchaser may at any time elect, by notice to the
Company, to waive (whether permanently or temporarily, and subject to such
conditions, if any, as the Purchaser may specify in such notice) any of its
rights under any of the Transaction Documents to acquire shares of Common Stock
from the Company, in which event such waiver shall be binding against the
Purchaser in accordance with its terms; provided, however, that the voluntary
waiver contemplated by this sentence may not reduce the Purchaser's obligations
to the Company under the Transaction Documents.
Section 9.7. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing, must be delivered by (i) courier, mail or hand
delivery or (ii) facsimile, and will be deemed to have been delivered upon
receipt. The addresses and facsimile numbers for such communications shall be:
If to the Company:
Liquidmetal Technologies, Inc.
00000 Xxxxxxxxxxxx Xx., Xxxxx 000
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxx Xxxx, President
With a copy to:
Xxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx
If to the Transfer Agent:
American Stock Transfer & Trust Company
00 Xxxxxx Xxxx
Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxx Xxxx
If to the Purchasers, to the addresses listed on Schedule I hereto:
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With a copy to:
Horizon Law Group
Xxxxxx Xxxxx Xxxx., 000-00 Xxxxxx-xxxx
Xxxxxxx-xx, Xxxxx, Xxxxx
Telephone: 000-0000-0000
Facsimile: 000-0000-0000
Attention: Xxxxxx-Ki Xxx, Esq.
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
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
Section 9.8. Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns, including any Permitted
Assignee (as defined below). The Purchaser may assign some or all of its rights
hereunder to any assignee of the Note, the Common Shares, or Warrant Shares (in
each case, a "PERMITTED ASSIGNEE"); provided, however, that any such assignment
shall not release the Purchaser from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented to such
assignment and assumption.
Section 9.9. No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
Section 9.10. Survival. The representations, warranties and
agreements of the Company and the Purchaser contained in the Agreement shall
survive as long as the Company is obligated to maintain the effectiveness of the
registration statement and keep a current prospectus thereunder.
Section 9.11. Further Assurances. Each party shall do and perform,
or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 9.12. Placement Agent. The Purchaser and the Company each
acknowledges and warrants that it has not engaged any placement agent in
connection with the sale of the Note. The Company and the Purchaser shall each
be responsible for the payment of any other fees or commissions of placement
agents or brokers engaged, directly or indirectly, by the Company or the
Purchaser, respectively, in connection with the purchase of the Note by the
Purchaser. The Company and the Purchaser shall pay, and hold the other party
harmless against,
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any liability, loss or expense (including, without limitation, reasonable
attorneys' fees and out-of-pocket expenses) arising in connection with any such
claim.
Section 9.13. No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
Section 9.14. Remedies. The Purchaser and each Permitted Assignee
shall have all rights and remedies set forth in this Agreement and the
Registration Rights Agreement and all rights and remedies which such holders
have been granted at any time under any other agreement or contract and all of
the rights which such holders have under any law. Any person having any rights
under any provision of this Agreement or the Registration Rights Agreement shall
be entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement or the Registration Rights Agreement and to exercise all other rights
granted by law. The Purchaser and each Permitted Assignee without prejudice may
withdraw, revoke or suspend its pursuit of any remedy at any time prior to its
complete recovery as a result of such remedy.
Section 9.15. Payment Set Aside. To the extent that the Company
makes a payment or payments to the Purchaser hereunder or under the Registration
Rights Agreement or the Purchaser enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
Section 9.16. Days. Unless the context refers to "business days" or
"Trading Days", all references herein to "days" shall mean calendar days.
* * * * *
[Signature Page Follows]
21
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: PURCHASER(S):
LIQUIDMETAL TECHNOLOGIES, INC. MICHIGAN VENTURE CAPITAL CO., LTD.
By: /s/ Xxxx Xxxx By: /s/ Michigan Venture Capital Co., Ltd.
Xxxx Xxxx, Name:
President and Chief Executive Officer Title:
Signature of Additional Purchasers on following page(s).
22
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
MICHIGAN VENTURE CAPITAL CO., LTD.,
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
eIPO Co., Ltd.
/s/ Yangkwon Moon
Yangkwon Moon
Chief Executive Officer
23
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
MICHIGAN VENTURE CAPITAL CO., LTD.,
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
WINVEST VENTURE PARTNERS, INC.
/s/ Xxxxx Ki Xxx
Xxxxx Ki Xxx
President and CEO
24
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
MICHIGAN VENTURE CAPITAL CO., LTD.,
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
DONG XXX XXX
/s/ Dong Xxx Xxx
25
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
MICHIGAN VENTURE CAPITAL CO., LTD.,
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
XXXXX XXX-JUN YOON
/s/ Xxxxx Xxxx
26
COUNTERPART SIGNATURE PAGE
TO SECURITIES PURCHASE AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
MICHIGAN VENTURE CAPITAL CO., LTD.,
AND THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Securities Purchase Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Securities Purchase Agreement and Signature Pages of the Company and
other "Purchasers" under the Securities Purchase Agreement, shall constitute one
and the same document in accordance with the terms of the Securities Purchase
Agreement.
MOONCHEOL YANG
/s/ Mooncheol Yang
27
LIST OF SCHEDULES
Schedule 2.1(a) Subsidiaries
Schedule 2.1(c) Capitalization
Schedule 2.1(e) No Conflicts
Schedule 2.1(h) Litigation
Schedule 2.1(l) Intellectual Property Rights
Schedule 2.1(p) Title
LIST OF EXHIBITS
EXHIBIT A Form of Note
EXHIBIT B Registration Rights Agreement
EXHIBIT C Opinion of Counsel
EXHIBIT D Form of Company Security Agreement
EXHIBIT E Form of Warrant to Purchase Common Stock
28
EXHIBIT A
FORM OF NOTE
29
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A
PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION OR
CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED
INTEREST SET FORTH BELOW.
6% SENIOR CONVERTIBLE NOTE DUE MARCH 1, 2007
OF
LIQUIDMETAL TECHNOLOGIES, INC.
(Korea-based Investors)
NOTE NO.: B-______ ORIGINAL PRINCIPAL AMOUNT: $_________
ORIGINAL ISSUANCE DATE: MARCH 1, 0000 XXXX XXXXXX, XXXXXXXXXX
THIS NOTE ("NOTE") is one of a duly authorized issue of Notes issued by
LIQUIDMETAL TECHNOLOGIES, INC., a corporation duly organized and existing under
the laws of the State of Delaware (the "COMPANY"), designated as the Company's
6% Senior Convertible Note Due March 1, 2007 ("MATURITY DATE") in an aggregate
principal amount equal to ______________ U.S. Dollars (U.S. $__________) (the
"NOTES").
FOR VALUE RECEIVED, the Company hereby promises to pay to the order of MICHIGAN
VENTURE CAPITAL, a Korean Corporation with offices at 15th Floor, Star Tower,
737 Yeoksam-dong, Kangnam-ku, Seoul, Korea, or its registered assigns or
successors-in-interest ("HOLDER") the principal sum of _________________________
(U.S. $__________) together with all accrued but unpaid interest thereon, if
any, on the Maturity Date, to the extent such principal amount and interest has
not been converted into the Company's Common Stock, $0.001 par value per share
(the "COMMON STOCK"), in accordance with the terms hereof. Interest on the
unpaid principal balance hereof shall accrue at the rate of 6% per annum from
the original date of issuance, March 1, 2004 (the "ISSUANCE DATE"), until the
same becomes due and payable on the Maturity Date, or such earlier date upon
acceleration or by conversion or redemption in accordance with the terms hereof
or of the other Transaction Documents. Interest on this Note shall accrue daily
commencing on the Issuance Date and shall be computed on the basis of a 360-day
year, 30-day months and actual days elapsed and shall be payable in accordance
with Section 1 hereof. Notwithstanding anything contained herein, this Note
shall bear interest on the due and unpaid Principal Amount from and after the
occurrence and during
the continuance of an Event of Default pursuant to Section 4(a), at the rate
(the "DEFAULT RATE") equal to the lower of ten percent (10%) per annum or the
highest rate permitted by law. Unless otherwise agreed or required by applicable
law, payments will be applied first to any unpaid collection costs, then to
unpaid interest and fees and any remaining amount to principal.
Except as otherwise provided herein, all payments of principal and interest on
this Note shall be made in lawful money of the United States of America by wire
transfer of immediately available funds to such account as the Holder may from
time to time designate by written notice in accordance with the provisions of
this Note. This Note may not be prepaid in whole or in part except as otherwise
provided herein or in the Transaction Documents. Whenever any amount expressed
to be due by the terms of this Note is due on any day which is not a Business
Day (as defined below), the same shall instead be due on the next succeeding day
which is a Business Day.
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Amended and Restated Securities Purchase Agreement dated on or
about the Issuance Date pursuant to which the Note was originally issued (the
"PURCHASE Agreement"). For purposes hereof the following terms shall have the
meanings ascribed to them below:
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in the City of New York are authorized or required by law
or executive order to remain closed.
"CONVERSION PRICE" shall be $3.00 (U.S.) per share (which Conversion Price shall
be subject to adjustment as set forth herein).
"CONVERTIBLE SECURITIES" means any convertible securities, warrants, options or
other rights to subscribe for or to purchase or exchange for, shares of Common
Stock.
"DEBT" shall mean indebtedness of any kind.
"EFFECTIVE DATE" means the date on which a Registration Statement covering all
the Underlying Shares and other Registrable Securities (as defined in the
Registration Rights Agreement) is declared effective by the SEC.
"EFFECTIVE REGISTRATION" shall have the meaning set forth in the Purchase
Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"MARKET PRICE" shall equal the average closing price of the Common Stock on the
Principal Market for the five (5) Trading Days immediately preceding the date on
which such Market Price is being determined.
"PER SHARE SELLING PRICE" shall include the amount actually paid by third
parties for each share of Common Stock in a sale or issuance by the Company. A
sale of shares of Common Stock shall include the sale or issuance of rights,
options, warrants or convertible, exchangeable or exercisable securities, issued
or sold on or subsequent to the Closing Date, under which the Company is or may
become obligated to issue shares of Common Stock, and in such circumstances the
Per Share Selling Price of the Common Stock covered thereby shall also include
the exercise, exchange or conversion price thereof (in addition to the
consideration 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.
2
"PRINCIPAL MARKET" shall mean the Nasdaq National Market or such other principal
market or exchange on which the Common Stock is then listed for trading.
"REGISTRATION STATEMENT" shall have the meaning set forth in the Registration
Rights Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"TRADING DAY" shall mean a day on which there is trading on the Nasdaq National
Market or such other market or exchange on which the Common Stock is then
principally traded.
"UNDERLYING SHARES" means the shares of Common Stock into which the Note is
convertible (including repayment in Common Stock as set forth herein) in
accordance with the terms hereof and the Purchase Agreement.
The following terms and conditions shall apply to this Note:
SECTION 1. Payments of Principal and Interest.
(a) Interest Payments. The Company shall pay all accrued but unpaid
interest on the Principal Amount of this Note (the "QUARTERLY AMOUNT"), on the
first business day of each consecutive calendar quarter (each an "INTEREST
PAYMENT DATE") beginning on the three month anniversary of the date hereof. The
Quarterly Amount shall be paid in cash.
(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 tothe second anniversary of the Issuance Date and ending on the date
immediately before the Maturity Date, to have all or a part of the Principal
Amount redeemed by the Company within ninety (90) days after receipt of written
notice from the Holder. Payment of the Principal Amount shall be effected in
cash.
(c) Taxes. Company may withhold and pay over to the relevant
authorities any appropriate tax or other legally required withholdings from any
interest payment to be made to the Holder to the extent that such withholding is
required by the Internal Revenue Code or any other applicable law, rule, or
regulation. If Holder believes that such payments may qualify for one of the
exceptions from withholding under the Internal Revenue Code, or for a reduced
withholding rate under the U.S./Korean tax treaty, then the Holder shall submit,
30 days prior to the first interest payment, properly executed certification
(e.g. Form W-8) to the Company showing that it is exempt from withholding
responsibilities. If Holder provides such certification to the Company, and it
is later determined that that certification was inaccurate and the Company
should have withheld tax, the Holder agrees to indemnify the Company for all
related tax, penalties, and interest.
SECTION 2. SENIORITY. The obligations of the Company hereunder shall rank
senior to all other unsecured Debt of the Company, whether now or hereinafter
existing, except to the existing debt facility with Kookmin Bank and except as
otherwise provided in Section 3.13 of the Purchase Agreement.
SECTION 3. CONVERSION.
3
(a) Conversion by Holder. Subject to the terms hereof and
restrictions and limitations contained herein, the Holder shall have the right,
at Holder's option, at any time and from time to time to convert, in part or in
whole, the outstanding Principal Amount under this Note by delivering to the
Company a fully executed notice of conversion in the form of conversion notice
attached hereto as Exhibit A (the "CONVERSION NOTICE"), which may be transmitted
by facsimile (with the original mailed on the same date by certified or
registered mail, postage prepaid and return receipt requested) on the date of
conversion (the "CONVERSION DATE"). Notwithstanding anything to the contrary
herein, this Note and the outstanding Principal Amount hereunder shall not be
convertible into Common Stock to the extent that such conversion would result in
the Holder hereof exceeding the limitations contained in, or otherwise violating
the provisions of Section 3(l) below.
(b) [Intentionally omitted]
(c) [Intentionally omitted]
(d) Conversion Date Procedures. Upon conversion of this Note
pursuant to this Section 3, the outstanding Principal Amount hereunder shall be
converted into such number of fully paid, validly issued and non-assessable
shares of Common Stock, free of any liens, claims and encumbrances, as is
determined by dividing the outstanding Principal Amount being converted by the
then applicable Conversion Price. If a conversion under this Note cannot be
effected in full for any reason, the Company shall, upon request by the Holder,
promptly pay to the Holder in cash (but no later than five Trading Days after
the Conversion Date) an amount equal to the greater of (i) such outstanding
Principal Amount as has not been converted and (ii) the Market Price of the
Underlying Shares of such outstanding unconverted Principal Amount as of the
Conversion Date that could have been sold by the Holder pursuant to the
Registration Statement on the Conversion Date.
(e) Stock Certificates or DWAC. The Company will deliver to the
Holder not later than three (3) Trading Days after the Conversion Date, a
certificate or certificates which shall be free of restrictive legends and
trading restrictions(assuming that the Registration Statement has been declared
effective), representing the number of shares of Common Stock being acquired
upon the conversion of this Note. In lieu of delivering physical certificates
representing the shares of Common Stock issuable upon conversion of this Note,
provided the Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon
request of the Holder, the Company shall use commercially reasonable efforts to
cause its transfer agent to electronically transmit such shares issuable upon
conversion to the Holder (or its designee), by crediting the account of the
Holder's (or such designee's) prime broker with DTC through its Deposit
Withdrawal Agent Commission system (provided that the same time periods herein
as for stock certificates shall apply).
(f) Conversion Price Adjustments.
(i) Stock Dividends, Splits and Combinations. If the Company
or any of its subsidiaries, at any time while the Note is outstanding (A) shall
pay a stock dividend or otherwise make a distribution or distributions on any
equity securities (including instruments or
4
securities convertible into or exchangeable for such equity securities but
excluding any stockholder rights granted pursuant to a poison pill) in shares of
Common Stock, (B) subdivide outstanding Common Stock into a larger number of
shares, (C) combine outstanding Common Stock into a smaller number of shares, or
(D) issues new securities by reclassification of the shares of Common Stock of
the Company, then, and in each such case, the Conversion Price (as defined
below) in effect immediately prior to such event or the record date therefor,
whichever is earlier, shall be adjusted so that the Holder shall be entitled to
receive the number of shares of Common Stock or other securities of the Company
which such Holder would have owned or have been entitled to receive after the
occurrence of any of the events described above, had such Note been surrendered
for conversion immediately prior to the occurrence of such event or record date
therefore, whichever is earlier. Any adjustment made pursuant to this Section
3(f) shall become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of such subdivision,
reclassification or combination, at the close of business on the day upon which
such corporate action becomes effective.
(ii) Distributions. If the Company or any of its subsidiaries,
at any time while the Note is outstanding, shall distribute to all holders of
Common Stock evidences of its indebtedness or assets or cash or rights or
warrants to subscribe for or purchase any security of the Company or any of its
subsidiaries (excluding those referred to in Section 3(f)(i) above), then
concurrently with such distributions to holders of Common Stock, the Company
shall distribute to the Holder of the Note the amount of such indebtedness,
assets, cash or rights or warrants which the Holder of the Note would have
received had the Note been converted into Common Stock at the then applicable
the Conversion Price immediately prior to the record date for such distribution.
(iii) Common Stock Issuances. In the event that the Company or
any of its Subsidiaries on or subsequent to the Closing Date issues or sells any
Common Stock (other than (i) as required under the Purchase Agreement or
pursuant to exercise of Convertible Securities, (ii) shares of Common Stock or
options to purchase such shares issued to employees, consultants, officers or
directors in accordance with stock plans approved by the Board of Directors, and
shares of Common Stock issuable under options or warrants that are outstanding
as of the date of the Purchase Agreement, (iii) shares of Common Stock issued
pursuant to a stock dividend, split or other similar transaction, (iv) shares of
Common Stock issued to Growell Metal Co., Ltd. pursuant to the Settlement
Agreement, dated on or about January 10, 2004, between Growell Metal Co., Ltd.
and the Company's South Korean subsidiary, and (v) shares of Common Stock that
are issued in lieu of cash in the payment of interest under the Middlebury
Notes, as defined in the Purchase Agreement) 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.
5
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 Section 3(f) above, 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 thereto.
(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
6
E. the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of
the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Note, and shall cause to be mailed to the
Holder at its last address as it shall appear upon the books of the Company, on
or prior to the date notice to the Company's stockholders generally is given, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange.
(g) Reservation and Issuance of Underlying Securities. The Company
covenants that it will at all times reserve and keep available out of its
authorized and unissued Common Stock solely for the purpose of issuance upon
conversion of this Note (including repayments in stock), free from preemptive
rights or any other actual contingent purchase rights of persons other than the
holders of the Note, not less than such number of shares of Common Stock as
shall (subject to any additional requirements of the Company as to reservation
of such shares set forth in the Purchase Agreement) be issuable (taking into
account the adjustments under this Section 3 but without regard to any ownership
limitations contained herein) upon the conversion of this Note hereunder in
Common Stock (including repayments in stock). The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly
authorized, validly issued, fully paid, nonassessable and freely tradeable.
(h) No Fractions. Upon a conversion hereunder the Company shall not
be required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the closing price of a share of Common
Stock at such time. If the Company elects not, or is unable, to make such cash
payment, the Holder shall be entitled to receive, in lieu of the final fraction
of a share, one whole share of Common Stock.
(i) Charges, Taxes and Expenses. Issuance of certificates for shares
of Common Stock upon the conversion of this Note (including repayment in stock)
shall be made without charge to the holder hereof for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate, all
of which taxes and expenses shall be paid by the Company, 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.
7
(j) Cancellation. After all of the Principal Amount (including
accrued but unpaid interest and default payments at any time owed on this Note)
have been paid in full or converted into Common Stock, this Note shall
automatically be deemed canceled and the Holder shall promptly surrender the
Note to the Company at the Company's principal executive offices.
(k) Notices Procedures. Any and all notices or other communications
or deliveries to be provided by the Holder hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by confirmed facsimile, or by a nationally recognized overnight courier service
to the Company at the facsimile telephone number or address of the principal
place of business of the Company as set forth in the Purchase Agreement. Any and
all notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, or by a
nationally recognized overnight courier service addressed to the Holder at the
facsimile telephone number or address of the Holder appearing on the books of
the Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed delivered (i) upon receipt, when delivered
personally, (ii) when sent by facsimile, upon receipt if received on a Business
Day prior to 5:00 p.m. (Eastern Time), or on the first Business Day following
such receipt if received on a Business Day after 5:00 p.m. (Eastern Time) or
(iii) upon receipt, when deposited with a nationally recognized overnight
courier service.
(l) Overall Limit on Common Stock Issuable. Notwithstanding anything
contained herein to the contrary, the number of shares of Common Stock issuable
by the Company pursuant to the Notes, together with the number of shares of
Common Stock issuable pursuant to the Middlebury Notes (as defined in the
Purchase Agreement) and pursuant to warrants granted in connection with the
Notes and Middlebury Notes, shall not exceed 19.9% of the number of shares of
Common Stock outstanding on the Closing Date, subject to appropriate adjustment
for stock splits, stock dividends, or other similar recapitalizations affecting
the Common Stock (the "MAXIMUM COMMON STOCK ISSUANCE"), unless the issuance of
shares hereunder in excess of the Maximum Common Stock Issuance shall first be
approved by the Company's shareholders in accordance with applicable law and the
By-laws and Certificate of Incorporation of the Company (a "20% APPROVAL"). If
at any point in time and from time to time written notice from the Holders of
the Note to the Company (each a "TRIGGER DATE") the number of Common Shares
issued pursuant to conversion of the Note would exceed the Maximum Common Stock
Issuance but for this Section 3(l), then the Company shall, at the Company's
election, either (A) promptly call a stockholders meeting to obtain a
stockholder vote on the issuance of Common Shares hereunder in excess of the
Maximum Common Stock Issuance, or (B) purchase from the Holder the Principal
Amount of the Note which cannot be converted or exercised due to such Maximum
Common Stock Issuance limitation ("SHORTFALL") at a redemption price equal to
the greater of (i) such Principal Amount of such Shortfall and (ii) the Market
Price as of the Trigger Date of the Underlying Shares of such Shortfall that
could have been sold by the Holder pursuant to the Registration Statement, which
redemption price shall be paid within three (3) Trading Days after a Trigger
Date if this clause (B) is elected (although for purposes of clarification, if
clause (A) is elected by the Company and the Company's stockholders do not
approve the proposal, the Company will not be required to comply with clause
(B)). The Company may make such election at any time within thirty (30) days
following the Trigger Date by giving written notice to the Holder of the Note,
in which case
8
the Company shall purchase the Shortfall at the price stated above within three
(3) Trading Days of delivery of said notice.
(m) Mandatory Conversion.
(i) If at any time after the Issuance Date, the closing per
share price of the Common Stock exceeds $8.00 (as such price may be
proportionally adjusted for stock splits, reverse splits, stock dividends and
recapitalizations) for 30 consecutive Trading Days (the "PRICING EVENT"), and
further provided that there has been Effective Registration for at least such 30
Trading Day period and including the Mandatory Conversion Date (as defined
below) the Company shall have the option, exercisable by delivering an
irrevocable notice to the Holder (the "MANDATORY CONVERSION NOTICE") to provide
that the Note shall be converted at the Conversion Price on a date (the
"MANDATORY CONVERSION DATE") at least 30 but no more than 60 days from the date
of the Mandatory Conversion Notice. The foregoing shall not affect the right of
the Holder to convert this Note pursuant to Section 3(a) above at all times up
to and including the Mandatory Conversion Date.
(ii) Notwithstanding the preceding subsection (m)(i), the
Holder of the Note shall not be obligated to convert this Note on a Mandatory
Conversion Date unless and until each of the following conditions has been
satisfied at all times from the date of the Mandatory Conversion Notice up to
and including the Mandatory Conversion Date:
A. There is Effective Registration;
B. No Event of Default has occurred and is continuing; and
C. The Holder has received unlegended certificates
representing Common Shares (as defined in the Purchase
Agreement) with respect to all conversions for which
Conversion Notices have been given.
(iii) In the event that the number of shares of Common Stock
that would be issued to the Holder would result in the Holder exceeding the
limitation set fort in Section 3(l) above, then the Company shall issue to the
Holder upon conversion of the Holder's Note, only the number of shares as would
not cause the Holder to exceed such amount and with respect to the balance of
the Note, an amount in cash equal to the greater of (i) the Principal Amount of
such balance of the Note and (ii) the Market Price of the Underlying Shares of
such balance of the Note as of the date of the Mandatory Conversion Date.
(iv) Such forced conversion shall be subject to and governed
by all the provisions relating to voluntary conversion of the Note contained
herein.
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);
9
(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 or the Registration Rights Agreement, (iv) a material
breach by the Company of its representations or warranties in the Purchase
Agreement or the Registration Rights Agreement that remains uncured for thirty
(30) business days after notice to the Company; (vi) any event or condition
shall occur which (x) results in the acceleration of the maturity of any
material long-term debt (other than the Note) of the Company or any of its
Subsidiaries, or (y) enables (or, with the giving of notice or lapse of time or
both, would enable) the holder of such material long-term debt or any or person
acting on behalf of such holder's behalf to accelerate the maturity thereof, or
(vii) if the Company or any of its Subsidiaries is subject to any Bankruptcy
Event (as defined in the Purchase Agreement).
(b) Remedies. If an Event of Default occurs and is continuing with
respect to the Note, the Holder may declare all of the then outstanding
Principal Amount of this Note, including any interest due thereon, to be due and
payable immediately. The Company shall pay interest on such amount in cash at
the Default Rate to the Holder if such amount is not paid within two (2) days of
Holder's request. The remedies under this Note shall be cumulative.
SECTION 5. GENERAL.
(a) Payment of Expenses. The Company agrees to pay all reasonable
charges and expenses, including attorneys' fees and expenses, which may be
incurred by the Holder in successfully enforcing this Note and/or collecting any
amount due under this Note.
(b) Savings Clause. In case any provision of this Note is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Note will not in any way be
affected or impaired thereby. In no event shall the amount of interest paid
hereunder exceed the maximum rate of interest on the unpaid principal balance
hereof allowable by applicable law. If any sum is collected in excess of the
applicable maximum rate, the excess collected shall be applied to reduce the
principal debt. If the interest actually collected hereunder is still in excess
of the applicable maximum rate, the interest rate shall be reduced so as not to
exceed the maximum allowable under law.
(c) Amendment. Neither this Note nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
the Company and the Holder.
(d) Assignment, Etc. The Holder may assign or transfer this Note to
any transferee. The Holder shall notify the Company of any such assignment or
transfer at least ten (10) calendar days prior to the date of assignment or
transfer. 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.
10
(e) No Waiver. No failure on the part of the Holder to exercise, and
no delay in exercising any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.
(f) Governing Law; Jurisdiction.
(i) Governing Law. THIS NOTE WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO ANY
CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE
APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.
(ii) Jurisdiction. The Company irrevocably submits to the
exclusive jurisdiction of any State or Federal Court sitting in the State of
California, County of Orange, over any suit, action, or proceeding arising out
of or relating to this Note. The Company irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action, or proceeding brought in such a
court and any claim that suit, action, or proceeding has been brought in an
inconvenient forum.
The Company agrees that the service of process upon it mailed
by certified or registered mail, postage prepaid and return receipt requested
(and service so made shall be deemed complete three days after the same has been
posted as aforesaid) or by personal service shall be deemed in every respect
effective service of process upon it in any such suit or proceeding. Nothing
herein shall affect Holder's right to serve process in any other manner
permitted by law. The Company agrees that a final non-appealable judgment in any
such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
(iii) NO JURY TRIAL. THE COMPANY HEREBY KNOWINGLY AND
VOLUNTARILY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS NOTE.
(g) Replacement Notes. This Note may be exchanged by Holder at any
time and from time to time for a Note or Notes with different denominations
representing an equal aggregate outstanding Principal Amount, as reasonably
requested by Holder, upon surrendering the same. No service charge will be made
for such registration or exchange. In the event that Holder notifies the Company
that this Note has been lost, stolen or destroyed, a replacement Note identical
in all respects to the original Note (except for registration number and
Principal Amount, if different than that shown on the original Note), shall be
issued to the Holder, provided that the Holder executes and delivers to the
Company an agreement reasonably satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with the Note.
11
*** Signature on following page ***
12
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed on March 1, 2004.
LIQUIDMETAL TECHNOLOGIES, Inc.
By:
----------------------------------------------------
Xxxx Xxxx, President and Chief Executive Officer
Attest:
Sign:
--------------------------
Print Name:
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
14
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("AGREEMENT") is entered into as of
March 1, 2004, between Liquidmetal Technologies, Inc., a Delaware corporation
with offices at 00000 Xxxxxxxxxxxx Xx., Xxxxx 000, Xxxx Xxxxxx, Xxxxxxxxxx 00000
(the "COMPANY") and Michigan Venture Capital Co, Ltd., a Korean corporation with
offices at 15th Floor, Star Tower, 737 Yeoksam-dong, Kangnam-ku, Seoul, Korea,
and each of the parties listed under "Purchasers" hereto (collectively and
individually, the "PURCHASER").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Amended and Restated Securities Purchase
Agreement, dated on or about the date hereof, by and between the Company and the
Purchaser (the "PURCHASE AGREEMENT"), the Company has agreed to sell and issue
to the Purchaser, and the Purchaser has agreed to purchase from the Company, a
6% Senior Convertible Note in the principal amount of up to four million United
States dollars ("Dollars") ($4,000,000) (the "NOTE") and Warrants (the
"WARRANTS") to purchase shares of the Company's Common Stock, par value $0.001
per share, subject to the terms and conditions set forth therein; and
WHEREAS, the Purchase Agreement contemplates that the Note will be
convertible and exercisable into shares (the "COMMON SHARES") of the Company's
Common Stock, par value $0.001 per share (the "COMMON STOCK") pursuant to the
terms and conditions set forth in the Note, and the Warrant contemplates that
the Warrant will be exercisable into shares of the Company's Common Stock
pursuant to the terms and conditions set forth in the Warrant (the "WARRANT
SHARES").
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Purchase Agreement and
this Agreement, the Company and the Purchaser agree as follows:
1. Certain Definitions. Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed thereto in the Purchase
Agreement or the Note. As used in this Agreement, the following terms shall have
the following respective meanings:
"CLOSING" and "CLOSING DATE" shall have the meanings ascribed to such
terms in the Purchase Agreement.
"COMMISSION" or "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"HOLDER" and "HOLDERS" shall include the Purchaser and any permitted
transferee or transferees of Registrable Securities (as defined below), the Note
and/or Warrant which have not been sold to the public to whom the registration
rights conferred by this Agreement have been transferred in compliance with this
Agreement and the Purchase Agreement; provided that neither such person nor any
affiliate of such person is registered as a broker or dealer under
Section 15(a) of the Securities Exchange Act of 1934, as amended, or a member of
the National Association of Securities Dealers, Inc.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"REGISTRABLE SECURITIES" shall mean: (i) the Common Shares and Warrant
Shares (without regard to any limitations on beneficial ownership contained in
the Note, the Warrant, or the Purchase Agreement) or other securities issued or
issuable to each Holder or its permitted transferee or designee (a) upon
conversion of the Note and exercise of the Warrant=, or (b) upon any
distribution with respect to, any exchange for or any replacement of such Note
or Warrant, (c) upon any conversion, exercise or exchange of any securities
issued in connection with any such distribution, exchange or replacement, or (d)
as payment of principal amount or interest in lieu of cash with respect to the
Note; (ii) securities issued or issuable upon any stock split, stock dividend,
recapitalization or similar event with respect to the foregoing; and (iii) any
other security issued as a dividend or other distribution with respect to, in
exchange for or in replacement of the securities referred to in the preceding
clauses; provided that all such shares shall cease to be Registrable Securities
at such time as they have been sold under a Registration Statement or pursuant
to Rule 144 under the Securities Act or otherwise or at such time as they are
eligible to be sold pursuant to Rule 144(k).
"REGISTRATION EXPENSES" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company).
"REGISTRATION STATEMENT" shall have the meaning set forth in Section 2(a)
herein.
"REGULATION D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"SECURITIES ACT" or "ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holders not included within "Registration
Expenses".
2. Registration Requirements. The Company shall use its best efforts
to effect the registration of the Registrable Securities (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) and in all
states reasonably
2
requested by the Holder. Such best efforts by the Company shall include, without
limitation, the following:
(a) The Company shall, as expeditiously as possible after the
Closing Date:
(i) But in any event by the later (i) of March 5, 2004,
or (ii) twenty-five (25) days after the Closing Date, prepare
and file a registration statement with the Commission pursuant
to Rule 415 under the Securities Act on Form S-3 under the
Securities Act (or in the event that the Company is ineligible
to use such form, such other form as the Company is eligible
to use under the Securities Act provided that such other form
shall be converted into an S-3 as soon as Form S-3 becomes
available to the Company) covering resales by the Holders as
selling stockholders (not underwriters) of the Registrable
Securities ("REGISTRATION STATEMENT"), which Registration
Statement, to the extent allowable under the Securities Act
and the rules promulgated thereunder (including Rule 416),
shall state that such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of the Note. The number of
shares of Common Stock initially included in such Registration
Statement shall be no less than the sum of 1.5 times the sum
of the number of Common Shares that are issuable upon
conversion of the Note as of the date of this Agreement, at
the then applicable Conversion Price (as defined in the Note).
Thereafter the Company shall use its best efforts to cause
such Registration Statement and other filings to be declared
effective as soon as possible, and in any event no later than
the following date, as appropriate (the "REQUIRED EFFECTIVE
DATE"): (A), if the SEC notifies that the Company that the SEC
will not review the Registration Statement, the Required
Effective Date shall be five (5) days after the SEC provides
such notification, or (B) if the SEC notifies the Company that
it will review the Registration Statement, then the Required
Effective Date shall be sixty (60) days after the Company
receives the first written comments on the Registration
Statement from the SEC. Without limiting the foregoing, the
Company will promptly respond to all SEC comments, inquiries
and requests, and shall request acceleration of effectiveness
at the earliest possible date.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus
used in connection with such Registration Statement as may be
necessary to comply with the provisions of the Act with
respect to the disposition of all securities covered by such
Registration Statement and notify the Holders of the filing
and effectiveness of such Registration Statement and any
amendments or supplements.
(iii) Furnish to each Holder that has Common Shares
included in the Registration Statement such numbers of copies
of a current prospectus conforming with the requirements of
the Act, copies of the Registration Statement, any amendment
or supplement thereto and any documents incorporated by
reference therein and such other documents as such Holder may
3
reasonably require in order to facilitate the disposition of
Registrable Securities owned by such Holder.
(iv) Register and qualify the securities covered by such
Registration Statement under the securities or "Blue Sky" laws
of all domestic jurisdictions; provided that the Company shall
not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(v) Notify promptly each Holder that has Common Shares
included in the Registration Statement of the happening of any
event (but not the substance or details of any such event) of
which the Company has knowledge as a result of which the
prospectus (including any supplements thereto or thereof)
included in such Registration Statement, as then in effect,
includes an untrue statement of material fact or omits to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances then existing (each an "EVENT"),
and use its best efforts to promptly update and/or correct
such prospectus. Each Holder will hold in confidence and will
not make any disclosure of any such Event and any related
information disclosed by the Company.
(vi) Notify each Holder of the issuance by the
Commission or any state securities commission or agency of any
stop order suspending the effectiveness of the Registration
Statement or the threat or initiation of any proceedings for
that purpose. The Company shall use its best efforts to
prevent the issuance of any stop order and, if any stop order
is issued, to obtain the lifting thereof at the earliest
possible time.
(vii) [Intentionally omitted.]
(viii) List the Registrable Securities covered by such
Registration Statement with all securities exchange(s) and/or
markets on which the Common Stock is then listed and prepare
and file any required filings with the Nasdaq National Market
System or any other exchange or market where the Common Shares
are traded.
(ix) Take all steps reasonably necessary to enable
Holders to avail themselves of the prospectus delivery
mechanism set forth in Rule 153 (or successor thereto) under
the Act.
(b) Notwithstanding the obligations under Section 2(a)(v) or
any provision of this Agreement, if (i) in the good faith judgment of the
Company, following consultation with legal counsel, it would be detrimental to
the Company and its stockholders for resales of Registrable Securities to be
made pursuant to the Registration Statement due to the existence of a material
development or potential material development involving the Company that the
Company would be obligated to disclose in the Registration Statement, which
disclosure would be premature or otherwise inadvisable at such time or would
have a material adverse
4
effect upon the Company and its stockholders, or (ii) in the good faith judgment
of the Company, it would adversely affect or require premature disclosure of the
filing of a Company-initiated registration of any class of its equity
securities, then the Company will have the right to suspend the use of the
Registration Statement for a period of not more than 30 consecutive calendar
days, but only if the Company reasonably concludes, after consultation with
outside legal counsel, that the failure to suspend the use of the Registration
Statement as such would create a risk of a material liability or violation under
applicable securities laws or regulations.
(c) Set forth below in this Section 2(c) are (I) events that
may arise that the Purchaser considers will interfere with the full enjoyment of
their rights under this Agreement, the Purchase Agreement, and the Notes (the
"INTERFERING EVENTS"), and (II) certain remedies applicable in each of these
events.
(i) Payments by the Company. If (i) at any time after
effectiveness of the Registration Statement, sales thereunder
during the registration period (as described in Section 5)
cannot be made for any reason, other than by reason of the
operation of Section 2(b), for a period of more than 10
consecutive business days, (ii) at any time after
effectiveness of the Registration Statement, sales thereunder
during the Registration Period cannot be made for a period of
time that exceeds the limitations set forth in Section 2(b),
or (iii) at any time after the Registrable Securities are
listed in accordance with Section 2(a)(viii), the Common
Shares are not listed or included for quotation on the Nasdaq
National Market or other exchange or market where shares of
the Company's common stock are then traded for more than 10
consecutive calendar days, then the Company will thereafter
make a payment to each Holder as set forth below. The amount
of the payment made to each Holder will be equal to 1% of the
purchase price paid for the Notes purchased by the Holder and
not previously converted into Common Shares and sold by the
Holder for each 30 business days that sales cannot be made
under the effective Registration Statement or the Common
Shares are not listed or included for quotation on the Nasdaq
National Market or other exchange or market where shares of
the Company's common stock are then traded (but any day on
which both conditions exist shall count as a single day and no
day taken into account for purposes of determining whether any
payment is due under Section 2 (c)(ii) shall be taken into
account for purposes of determining whether any payment is due
under this Section 2(c)(i) or the amount of such payment). The
number of shares not previously sold as specified in the
previous sentence shall be determined as of the end of the
respective 30-business day period. In no event shall payment
pursuant to this Section exceed 10% in the aggregate of the
purchase price paid for the Notes purchased by the Holder
(including such Holder's predecessors and successors) for the
entire registration period (as described in Section 5). These
payments will be prorated on a daily basis during the
30-business day period and will be paid to each Holder within
ten business days following the end of each 30- business day
period as to which payment is due hereunder or, at the
Company's option, will be added to the outstanding Principal
Amount of the Notes, provided that the respective Holder
delivered to the Company at least two business days prior
thereto information with respect to the number of Notes and
Common
5
Shares not previously sold by such Holder (together
with reasonable supporting documentation). The Holders may
make a claim for additional damages as a remedy for the
Company's failure to comply with the timelines set forth in
this Section, but acknowledgement of such right in this
Agreement shall not constitute an admission by the Company
that any such damages exist or may exist. Notwithstanding the
foregoing, if the Company has used its reasonable best efforts
to avoid circumstances as a result of which sales cannot be
made under the Registration Statement during the Registration
Period or the Common Shares are not listed or included for
quotation on the Nasdaq National Market or other exchange or
market where the Common Shares are traded, then the damages
described above shall be the Holders' sole and exclusive
remedy for damages arising out of such circumstances. Nothing
contained in the preceding sentence shall be read to limit the
ability of the Holders to seek specific performance of this
Agreement.
(ii) Effect of Late Registration. If the Registration
Statement has not been declared effective by the Required
Effective Date other than by reason of the operation of
Section 2(b), then the Company will make a payment to each
Holder for such delay (each a "LATE REGISTRATION PAYMENT").
Each Late Registration Payment will be equal to 2% of the
purchase price paid for the Notes purchased by such Holder and
not previously sold (or converted into Common Shares and sold)
by such Holder for the first 30 business days after the
Required Effective Date, and 1% of such purchase price for
each period of 30 business days thereafter (but no day taken
into account for purposes of determining whether any payment
is due under Section 2(c)(i) shall be taken into account for
purposes of determining whether any payment is due under this
Section 2(c)(ii) or the amount of such payment). In no event
shall payment pursuant to this Section exceed 10% in the
aggregate of the purchase price paid for the Notes purchased
by the Holder (including such Holder's predecessors and
successors) for the entire registration period (as described
in Section 5). The Late Registration Payments will be prorated
on a daily basis during the 30-business day period and will be
paid to the initial Holders or, at the Company's option, will
be added to the outstanding Principal Amount of the Notes,
within ten business days following the end of each 30-business
day period as to which payment is due hereunder, provided that
the respective Holder delivered to the Company at least two
business days prior thereto information with respect to the
number of Notes and Common Shares not previously sold by such
Holder (together with reasonable supporting documentation).
The Holders may make a claim for additional damages as a
remedy for the Company's failure to comply with the timelines
set forth in this Section, but acknowledgement of such right
in this Agreement shall not constitute an admission by the
Company that any such damages exist or may exist.
Notwithstanding the foregoing, if the Company has used its
reasonable best efforts to avoid circumstances as a result of
which the Registration Statement has not been 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
6
Agreement. Notwithstanding the foregoing, if the Registration
Statement has not yet been declared effective and the Holders
are no longer entitled to receive Late Registration Payments
as a result of the above-described percentage limitation on
said payments, then each Holder shall have the right, at any
time upon at least thirty (30) days written notice, to sell
all (but not less than all) of its Notes to the Company for a
cash purchase price equal to the outstanding Principal Amount
of the Notes plus any accrued but unpaid interest.
(d) During the registration period, the Company will make
available, upon reasonable advance notice during normal business hours, for
inspection by any Holder whose Registrable Securities are being sold pursuant to
a Registration Statement, all pertinent financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "RECORDS")
as reasonably necessary to enable each such Holder to exercise its due diligence
responsibility in connection with or related to the contemplated offering. The
Company will cause its officers, directors and employees to supply all
information that any Holder may reasonably request for purposes of performing
such due diligence.
(e) Each Holder will hold in confidence, use only in
connection with the contemplated offering and not make any disclosure of all
Records and other information that the Company determines in good faith to be
confidential, and of which determination the Holders are so notified, unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in any Registration Statement, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court or government body of
competent jurisdiction, (iii) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement (to the knowledge of the relevant Holder), (iv) the
Records or other information was developed independently by the Holder without
breach of this Agreement, (v) the information was known to the Holder before
receipt of such information from the Company, or (vi) the information was
disclosed to the Holder by a third party not under an obligation of
confidentiality. However, a Holder may make disclosure of such Records and other
information to any attorney, adviser, or other third party retained by it that
needs to know the information as determined in good faith by the Holder (the
"HOLDER REPRESENTATIVE"), if the Holder advises the Holder Representative of the
confidentiality provisions of this Section 2(e), but the Holder will be liable
for any act or omission of any of its Holder Representatives relative to such
information as if the act or omission was that of the Holder. The Company is not
required to disclose any confidential information in the Records to any Holder
unless and until such Holder has entered into a confidentiality agreement (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially to the effect of this Section 2(e). Unless legally
prohibited from so doing, each Holder will, upon learning that disclosure of
Records containing confidential information is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein will be deemed to
limit the Holder's ability to sell Registrable Securities in a manner that is
otherwise consistent with applicable laws and regulations.
(f) The Company shall file a Registration Statement with
respect to any newly authorized and/or reserved Registrable Securities
consisting of Common Shares
7
described in clause (i) of the definition of Registrable Securities within ten
(10) business days of any stockholders' meeting authorizing same and shall use
its best efforts to cause such Registration Statement to become effective within
ninety (90) days of such stockholders' meeting. If the Holders become entitled,
pursuant to an event described in clause (ii) and (iii) of the definition of
Registrable Securities, to receive any securities in respect of Registrable
Securities that were already included in a Registration Statement, subsequent to
the date such Registration Statement is declared effective, and the Company is
unable under the securities laws to add such securities to the then effective
Registration Statement, the Company shall promptly file, in accordance with the
procedures set forth herein, an additional Registration Statement with respect
to such newly Registrable Securities. The Company shall use its best efforts to
(i) cause any such additional Registration Statement, when filed, to become
effective within 30 days of that date that the need to file the Registration
Statement arose. All of the registration rights and remedies under this
Agreement shall apply to the registration of such newly reserved shares and such
new Registrable Securities.
3. Expenses of Registration. All Registration Expenses in connection
with any registration, qualification or compliance with registration pursuant to
this Agreement shall be borne by the Company, and all Selling Expenses of a
Holder shall be borne by such Holder.
4. Registration on Form S-3. The Company shall use its reasonable
best efforts to continue to meet the "registrant eligibility" requirements for a
secondary offering set forth in the general instructions to Form S-3 or any
comparable or successor form or forms, or in the event that the Company is
ineligible to use such form, such form as the Company is eligible to use under
the Securities Act, provided that if such other form is used, the Company shall
convert such other form to a Form S-3 as soon as the Company becomes so
eligible.
5. Registration Period. In the case of the registration effected by
the Company pursuant to this Agreement, the Company shall keep such registration
effective until the later of (a) the date on which all the Holders have
completed the sales or distribution described in the Registration Statement
relating thereto or, if earlier until such Registrable Securities may be sold by
the Holders under Rule 144(k) (provided that the Company's transfer agent has
accepted an instruction from the Company to such effect) or (b) the second (2nd)
anniversary of the Closing Date.
6. Indemnification.
(a) Company Indemnity. The Company will indemnify each Holder,
each of its officers, directors, agents and partners, and each person
controlling each of the foregoing, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls, within
the meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any final
prospectus (as amended or supplemented if the Company files any amendment or
supplement thereto with the SEC), Registration Statement filed pursuant to this
8
Agreement or any post-effective amendment thereof or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they were made, or any violation by the Company of the
Securities Act or any state securities law or in either case, any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each Holder, each of its
officers, directors, agents and partners, and each person controlling each of
the foregoing, for any reasonable legal fees of a single counsel and any other
expenses reasonably incurred in connection with investigating and defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to a Holder to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on (i) any untrue
statement or omission based upon written information furnished to the Company by
such Holder or underwriter (if any) therefor and stated to be specifically for
use therein, (ii) any failure by any Holder to comply with prospectus delivery
requirements or the Securities Act or Exchange Act or any other law or legal
requirement applicable to them or any covenant or agreement contained in the
Purchase Agreement or this Agreement or (iii) an offer of sale of Common Shares
occurring during a period in which sales under the Registration Statement are
suspended as permitted by this Agreement. The indemnity agreement contained in
this Section 6(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, jointly and severally,
if Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, agents and partners, and any other
stockholder selling securities pursuant to the Registration Statement and any of
its directors, officers, agents, partners, and any person who controls such
stockholder within the meaning of the Securities Act or Exchange Act and each
underwriter, if any, of the Company's securities covered by such a Registration
Statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, each other Holder (if any), and each of their officers, directors
and partners, and each person controlling such other Holder(s) against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on (i) any untrue statement (or alleged untrue statement) of a
material fact contained in any such final prospectus (as amended or supplemented
if the Company
9
files any amendment or supplement thereto with the SEC), Registration Statement
filed pursuant to this Agreement or any post-effective amendment thereof or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein not
misleading in light of the circumstances under which they were made or (ii)
failure by any Holder to comply with prospectus delivery requirements or the
Securities Act, Exchange Act or any other law or legal requirement applicable to
them or any covenant or agreement contained in the Purchase Agreement or this
Agreement, and will reimburse the Company and such other Holder(s) and their
directors, officers and partners, underwriters or control persons for any
reasonable legal fees or any other expenses reasonably incurred in connection
with investigating and defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such final prospectus (as amended or supplemented if the Company files
any amendment or supplement thereto with the SEC), Registration Statement filed
pursuant to this Agreement or any post-effective amendment thereof in reliance
upon and in conformity with written information furnished to the Company by such
Holder and stated to be specifically for use therein, and provided that the
maximum amount for which such Holder shall be liable under this indemnity shall
not exceed the net proceeds received by the Holders from the sale of the
Registrable Securities pursuant to the registration statement in question. The
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any such claims, losses, damages or liabilities if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under
this Section 6 (the "INDEMNIFIED PARTY") shall give notice to the party required
to provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at its own expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 6 except to
the extent that the Indemnifying Party is materially and adversely affected by
such failure to provide notice. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
non-privileged information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
7. Contribution. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder(s) on the
other, in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder(s) in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of the Company on
the one hand and of any Holder(s) on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by such Holder(s).
In no event shall the obligation of any Indemnifying Party to contribute
under this Section 7 exceed the amount that such Indemnifying Party would have
been obligated to pay by
10
way of indemnification if the indemnification provided for under Section 6(a) or
6(b) hereof had been available under the circumstances.
The Company and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraphs. The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraphs
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section, no Holder shall be required to
contribute any amount in excess of the amount by which in the case of any
Holder, the net proceeds received by such Holder from the sale of Registrable
Securities pursuant to the registration statement in question. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
8. Survival. The indemnity and contribution agreements contained in
Sections 6 and 7 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or the Purchase Agreement, and (ii) the
consummation of the sale or successive resales of the Registrable Securities.
9. Information by Holders. As a condition to the obligations of the
Company to complete any registration pursuant to this Agreement with respect to
the Registrable Securities of each Holder, such Holder will furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended methods of disposition of the Registrable Securities held by it
as is reasonably required by the Company to effect the registration of the
Registrable Securities. At least five business days prior to the first
anticipated filing date of a Registration Statement for any registration under
this Agreement, the Company will notify each Holder of the information the
Company requires from that Holder whether or not such Holder has elected to have
any of its Registrable Securities included in the Registration Statement. If the
Company has not received the requested information from a Holder by the business
day prior to the anticipated filing date, then the Company may file the
Registration Statement without including Registrable Securities of that Holder.
10. Further Assurances. Each Holder will cooperate with the Company,
as reasonably requested by the Company, in connection with the preparation and
filing of any Registration Statement hereunder, unless such Holder has notified
the Company in writing of such Holder's irrevocable election to exclude all of
such Holder's Registrable Securities from such Registration Statement.
11. Suspension of Sales. Upon receipt of any notice from the Company
under Section 2(a)(v) or 2(b), each Holder will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until (i) it receives copies of a
supplemented or amended prospectus contemplated by Sections 2(a)(v) or (ii) the
Company advises the Holder that a suspension of sales under Section 2(b) has
terminated.
11
If so directed by the Company, each Holder will deliver to the Company (at the
expense of the Company) or destroy all copies in the Holder' s possession (other
than a limited number of file copies) of the prospectus covering such
Registrable Securities that is current at the time of receipt of such notice.
12. Replacement Certificates. The certificate(s) representing the
Registrable Securities held by the Purchaser (or then Holder) may be exchanged
by the Purchaser (or such Holder) at any time and from time to time for
certificates with different denominations representing an equal aggregate number
of Common Shares, as reasonably requested by such Purchaser (or such Holder)
upon surrendering the same. No service charge will be made for such registration
or transfer or exchange. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of the Note or
certificates for the underlying Common Shares of any of the foregoing, and, in
the case of loss, theft or destruction, of indemnity reasonably satisfactory to
it, or upon surrender and cancellation of such certificate if mutilated, the
Company will make and deliver a new Note or certificate of like tenor and dated
as of such cancellation at no charge to the holder.
13. Transfer or Assignment. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Purchaser by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of the Note or Registrable Securities, and all other rights granted
to the Purchaser by the Company hereunder may be transferred or assigned to any
transferee or assignee of the Note or Registrable Securities; provided in each
case that (i) the Company is given written notice by the Purchaser at the time
of or within a reasonable time after such transfer or assignment, stating the
name and address of said transferee or assignee and identifying the securities
with respect to which such registration rights are being transferred or
assigned; and provided further that the transferee or assignee of such rights
agrees in writing to be bound by the registration provisions of this Agreement,
(ii) such transfer or assignment is not made under the Registration Statement or
Rule 144, (iii) such transfer is made according to the applicable requirements
of the Purchase Agreement, and (iv) the transferee has provided to the Company
an investor questionnaire (or equivalent document) evidencing that the
transferee is a "qualified institutional buyer" or an "accredited investor"
defined in Rule 501(a)(1),(2),(3), or (7) of Regulation D.
14. Miscellaneous.
(a) Remedies. The Company and the Purchaser acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity.
(b) Jurisdiction. Each of the Company and the Purchaser (i)
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court, the
12
California state courts and other courts of the United States sitting in Orange
County, California for the purposes of any suit, action or proceeding arising
out of or relating to this Agreement and (ii) hereby waives, and agrees not to
assert in any such suit action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. The Company and the Purchaser consent to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
(c) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
to the Company:
Liquidmetal Technologies, Inc.
00000 Xxxxxxxxxxxx Xx., Xxxxx 000
Xxxx Xxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxx Xxxx, President
with a copy to:
Xxxxx & Lardner LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxx, XX 00000-0000
Telephone: 000-000-0000
Facsimile:
Attention: Xxxx X. Xxxxxx
If to the Purchasers, to the addresses set forth on Schedule I to the
Purchase Agreement:
with a copy to:
Horizon Law Group
Xxxxxx Xxxxx Xxxx., 000-00 Xxxxxx-xxxx,
Xxxxxxx-xx, Xxxxx, Xxxxx
Telephone: 000-0000-0000
Facsimile: 000-0000-0000
Attention: Xxxxxx-Ki Xxx, Esq.
13
Any party hereto may from time to time change its address for notices by giving
at least five days' written notice of such changed address to the other parties
hereto.
(d) Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. The representations and warranties and
the agreements and covenants of the Company and each Purchaser contained herein
shall survive the Closing.
(e) Execution in Counterpart. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart.
(f) Signatures. Facsimile signatures shall be valid and
binding on each party submitting the same.
(g) Entire Agreement; Amendment. This Agreement, together with
the Purchase Agreement, the Note, the Warrant, and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and agreement
of the parties, and may not be amended, modified or terminated except by a
written agreement signed by the Company plus the Holders of 75% of the
outstanding Principal Amount of the Notes issued under the Purchase Agreement to
that date; provided that for the purposes of this Section 14(g) the Holders of
Registrable Securities still entitled to registration rights under this
Agreement will be deemed to still be Holders of that amount of Notes which were
converted into such number of Registrable Securities issued upon conversion
which are still held by them.
(h) Governing Law. This Agreement and the validity and
performance of the terms hereof shall be governed by and construed in accordance
with the laws of the State of California applicable to contracts executed and to
be performed entirely within such state, except to the extent that the law of
the State of Delaware regulates the Company's issuance of securities.
(i) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL
BY JURY.
(j) Force Majeure. The Company shall not be deemed in breach
of its commitments under this Agreement and no payments by the Company as set
forth in Section 2 shall be required if the Company is unable to fulfill it
obligations hereunder in a timely fashion if the SEC or the Nasdaq National
Market are closed or operating on a limited basis as a result of the occurrence
of a Force Majeure. As used herein, "FORCE MAJEURE" means war or armed
hostilities or other national or international calamity, or one or more acts of
terrorism, which are having a material adverse effect on the financial markets
in the United States. Furthermore, any payments owed as a result of Section 2
shall not accrue during any period during which the Company's performance
hereunder has been delayed or the Company's ability to fulfill its obligations
hereunder has been impaired by a Force Majeure.
14
(k) Titles. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
(l) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction will be applied against
any party.
*** Signatures on following page(s) ***
15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
COMPANY:
LIQUIDMETAL TECHNOLOGIES, INC.
By:
----------------------------------------------------
Xxxx Xxxx, President and Chief Executive Officer
PURCHASERS:
MICHIGAN VENTURE CAPITAL CO, LTD.
By:
----------------------------------------------------
Name:
Title:
Signature(s) of additional Purchasers set forth on following page(s).
16
COUNTERPART SIGNATURE PAGE
TO REGISTRATION RIGHTS AGREEMENT,
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
MICHIGAN VENTURE CAPITAL CO., LTD., AND
THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Registration Rights Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Registration Rights Agreement and Signature Pages of the Company and
other "Purchasers" under the Registration Rights Agreement, shall constitute one
and the same document in accordance with the terms of the Registration Rights
Agreement.
PURCHASER:
------------------------------------------------
By:
-------------------------------------------------------
Name:
-----------------------------------------------------
Title:
----------------------------------------------------
17
EXHIBIT C
LEGAL OPINION PROVISIONS
1. Based solely upon recent certificates of the Delaware Secretary
of State, the Company is a corporation duly incorporated and existing in good
standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power and authority to
execute, deliver, and perform its obligations under the Transaction Documents
and to issue the Notes and Warrant.
3. All necessary corporate action has been taken by the Company to
authorize the execution, delivery, and performance by the Company of each of the
Transaction Documents.
4. The Note has been duly authorized for issuance. When issued in
accordance with the terms of the Transaction Documents against payment of
consideration therefor, the Note will be validly issued, fully paid and
non-assessable, and free of preemptive rights contained in the Certificate of
Incorporation or Bylaws.
5. Each of the Transaction Documents constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with its
respective terms. Our opinion in this paragraph 5 regarding the validity,
binding effect, and enforceability of each Transaction Document means only that
(a) such Transaction Document is not invalid in its entirety because of a
specific statutory prohibition or public policy and is not subject in its
entirety to a contractual defense and (b) subject to the last two sentences of
this paragraph, a remedy will be available to the applicable party if the
Company is in material default under the relevant Transaction Document to obtain
the practical realization of benefits contemplated by such Transaction Document.
This opinion does not mean that (i) any particular right or remedy is available
upon a material default or (ii) every provision of the Transaction Documents
will be upheld or enforced in any or each circumstance by a court. Furthermore,
the enforceability of the Transaction Documents may be limited or otherwise
affected by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer, or other similar statutes, rules, regulations, or other laws affecting
the enforcement of creditors' rights and remedies generally and (ii) the
unavailability of, or limitation on the availability of, a particular right or
remedy (whether in a proceeding in equity or at law) because of an equitable
principle or a requirement as to commercial reasonableness, conscionability, or
good faith.
6. The Secured Party upon filing of the Financing Statement with the
Delaware Secretary of State, will have a perfected security interest in that
portion of the Collateral in which a security interest is perfected by filing a
financing statement under the Delaware UCC.
1
EXHIBIT D
FORM OF COMPANY SECURITY AGREEMENT
2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made and entered into as of
the 1st day of March, 2004, by and between LIQUIDMETAL TECHNOLOGIES, INC., a
Delaware corporation ("Borrower"), and MIDDLEBURY CAPITAL LLC, a Delaware
limited liability company ("MC" or "Agent") and each other person or entity
listed as a Secured Party on Schedule 1 attached to this Agreement (the
"Investors" and together with MC the "Secured Party"). Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in that
Securities Purchase Agreement, dated March 1, 2004, between the Company and the
parties identified as "Middlebury Investors" on Schedule 1 hereto ("Securities
Purchase Agreement"). Additionally, for purposes of this Agreement, the term
"Michigan Note" shall mean the 6% senior convertible notes issuable under the
Amended and Restated Securities Purchase Agreement, dated March 1, 2004, among
Michigan Venture Capital Co, Ltd. ("Michigan"), the Borrower, and the parties
identified as "Michigan Investors on Schedule 1 hereto (the "Michigan
Agreement").
RECITALS
WHEREAS, Secured Party has agreed to purchase the Note from the Borrower
pursuant to the terms of the Securities Purchase Agreement and the Note, or to
alternatively purchase the Michigan Note from the Borrower pursuant to the terms
of the Michigan Agreement and the Michigan Note.
WHEREAS, Secured Party has required, as a condition to purchasing the Note
or Michigan Note, that Borrower grant Secured Party a first priority security
interest in all of Borrower's patents listed in Exhibit A hereto, and to that
end has required the execution and delivery of this Agreement by Borrower.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in the Note, the Michigan Note, and herein, the parties hereto,
intending to be legally bound, agree as follows:
1. INCORPORATION OF RECITALS, PURCHASE AGREEMENT, AND NOTE. The foregoing
Recitals, the Note, the Securities Purchase Agreement, the Michigan Note, and
the Michigan Agreement, and the terms and provisions thereof, are hereby
incorporated herein in their entirety by this reference.
2. DEFINITIONS. The following terms shall have the meanings set forth
below:
"Collateral" shall mean all Patents and Proceeds. Notwithstanding
the foregoing, the security interest granted herein shall not extend to
and the term "Collateral" shall not include any property, rights or
licenses to the extent the granting of a security interest therein would
be contrary to applicable law.
"Obligations" means each and every debt, liability, and obligation
of every kind and description arising under or in connection with the Note
or Michigan Note which Borrower may now or at any time hereafter owe to
Secured Party.
"Patents" shall mean, collectively, all of Borrower's letters patent
under the laws of the United States listed on Exhibit A hereto, all
recordings and registrations thereof and applications therefor, including,
without limitation, the inventions described therein, all reissues,
continuations, divisions, renewals, extensions, continuations-in-part
thereof, in each case whether now owned or existing or hereafter acquired
or arising.
"Permitted Liens" shall mean, collectively, the following: (i) liens
for current taxes or other governmental or regulatory assessments which
are not delinquent, or which are being contested in good faith by the
appropriate procedures and for which appropriate reserves are maintained;
(ii) liens in favor of Agent and/or the Secured Party; and (iii) licenses
or sublicenses of Patents, in each instance granted to others not
interfering in any material respect with the business of the Borrower.
"Proceeds" shall mean any consideration received from the sale,
exchange, lease or other disposition of any asset or property which
constitutes Collateral, any other value received as a consequence of the
possession of any Collateral and any payment received from any insurer or
other person or entity as a result of the destruction, loss, theft or
other involuntary conversion of whatever nature of any asset or property
that constitutes Collateral.
"Security Interest" has the meaning given in Section 3(b).
3. SECURITY FOR OBLIGATIONS.
a. This Agreement secures, and the Collateral is collateral security
for, the prompt payment or performance in full when due, whether at stated
maturity, by required prepayment, declaration, acceleration, conversion, demand
or otherwise (including the payment of amounts that would become due but for the
operation of the automatic stay under Section 363(a) of the Bankruptcy Code, 11
U.S.C. ss.362(a)) of all obligations and liabilities of every nature of Borrower
now or hereafter existing under or arising out of or in connection with the Note
and this Agreement and all extensions or renewals thereof, whether for
principal, interest, (including, without limitation, interest that, but for the
filing of a petition in bankruptcy with respect to Borrower, would accrue on
such obligations), fees, expenses, indemnities or otherwise, whether voluntary
or involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Agent or any Secured Party as a preference, fraudulent transfer
or otherwise (all such obligations of Borrower, together with the Obligations,
being the "Secured Obligations").
b. Security Interest. As security for the payment or performance, as
the case may be, of the Secured Obligations, the Borrower hereby creates and
grants to the Agent, its successors and its assigns, for its own benefit and for
the pro rata benefit of the Investors, their successors and their assigns, a
security interest in the Collateral (the "Security Interest"). Without limiting
the foregoing, the Agent is hereby authorized to file one or more financing
statements, continuation statements or other documents for the purpose of
perfecting,
2
confirming, continuing, enforcing or protecting the Security Interest, naming
the Borrower as debtors and the Agent as secured party.
The Borrower agrees at all times to keep in all material respects accurate
and complete accounting records with respect to the Collateral, including, but
not limited to, a record of all payments and Proceeds received.
4. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants as
follows:
a. Financing Statements. Except for the financing statements in
favor of Secured Party, at the time of granting the security interest described
herein, no financing statement covering the Collateral or any portion thereof
will be on file in any public office and Borrower agrees not to execute or
authorize the filing of any such additional financing statement in favor of any
person, entity or governmental agency (whether federal, state or local) other
than Secured Party as long as any portion of the Obligations evidenced by the
Note remain unpaid.
b. Legal Name. Borrower's exact legal name is as set forth in the
first paragraph of this Security Agreement. Borrower shall not change its legal
name or its form of organization without 30 days' prior written notice to
Secured Party.
c. Title and Authority. Borrower has (i) rights in and good title to
the Collateral in which it is granting a security interest hereunder and (ii)
the requisite corporate power and authority to grant to the Agent the Security
Interest in such Collateral pursuant hereto and to execute, deliver and perform
its obligations in accordance with the terms of this Agreement, without the
consent or approval of any other person other than any consent or approval which
has been obtained. Borrower has the sole, full and clear title to each of the
Patents shown on Schedule A hereto and the registrations thereof are valid and
subsisting and in full force and effect. None of the Patents has been abandoned
or dedicated, and, except to the extent that the Agent, upon prior written
notice by Borrower, shall consent, Borrower will not do any act, or omit to do
any act, whereby the Patents may become abandoned or dedicated and shall notify
the Agent immediately if it knows of any reason or has reason to know that any
application or registration may become abandoned or dedicated. Borrower hereby
represents and warrants that the Patents shown on Schedule A are the only issued
U.S. patents owned by Borrower as of the date of this Agreement.
d. Filing. Fully executed Uniform Commercial Code financing
statements containing a description of the Collateral shall have been, or shall
be delivered to the Agent in a form such that they can be, filed of record in
every governmental, municipal or other office in every jurisdiction in which any
portion of the Collateral is located necessary to publish notice of and protect
the validity of and to establish a valid, legal and perfected security interest
in favor of the Agent in respect of the Collateral in which a security interest
may be perfected by filing in the United States and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of Uniform Commercial Code continuation statements.
3
e. Validity of Security Interest. The Security Interest constitutes
a valid, legal and perfected first priority security interest in all of the
Collateral for payment and performance of the Secured Obligations subject only
to Permitted Liens.
f. Locations of Collateral; Place of Business. Borrower hereby
represents and warrants that all the Collateral is located at the locations
listed on Schedule A hereto and that its federal employer identification number
is as set forth on said Schedule. The Borrower agrees not to establish, or
permit to be established, any other location for Collateral unless all filings
under the Uniform Commercial Code as in effect in any state or otherwise which
are required by this Agreement or the Note to be made with respect to the
Collateral have been made and the Agent has a valid, legal and perfected first
priority security interest in the Collateral. Borrower confirms that its chief
executive office is located at the office indicated on Schedule A hereto.
Borrower agrees not to change, or permit to be changed, the location of its
chief executive office unless all filings under the Uniform Commercial Code or
otherwise which are required by this Agreement or the Note to be made have been
made and the Agent has a valid, legal and perfected first priority security
interest
5. COVENANTS AND AGREEMENTS. Borrower covenants and agrees as follows:
a. Restrictions. Borrower agrees that until the Obligations shall
have been satisfied in full, Borrower shall not, without Secured Party's prior
written consent, assign, transfer, encumber or otherwise dispose of the
Collateral, or any interest therein, except that Borrower may (i) license (other
than on an exclusive basis for all known fields of use for the duration of the
term of the patent) or grant similar rights and interests on an arm's length
basis consistent with good industry practice in all or any part of the
Collateral to unrelated third parties pursuant to its business and (ii) sell,
license on an exclusive basis for all known fields of use for the duration of
the term of the patent or otherwise transfer for value all or any part of the
Collateral with the prior written consent of the Secured Party, which consent
will not be unreasonably withheld, provided that the restriction on exclusive
licenses shall terminate beginning on the date that more than one-half of the
principal amount of the Notes secured by the Collateral has been repaid by the
Company or has been converted to Common Stock. Borrower further agrees that it
will not take any action, or permit any action to be taken by others subject to
its control, including licensees, or fail to take any action, which would affect
the validity or enforcement of the rights transferred to Secured Party under
this Agreement.
b. Defense. Borrower shall, at its own cost and expense, take any
and all actions reasonably necessary to defend title to the Collateral owned by
it against all persons and to defend the Security Interest of the Agent in such
Collateral, and the priority thereof, against any adverse lien of any nature
whatsoever (other than Permitted Liens).
c. Maintenance. Borrower shall at all times and at its own expense
maintain and keep, or cause to be maintained and kept, the Collateral. Borrower
shall perform all acts and execute all documents, including, without limitation,
security agreements in form suitable for filing with the United States Patent
and Trademark Office, substantially in the form of Exhibit B, hereof requested
by the Agent at any time to evidence, perfect, maintain, record and enforce the
Agent's interest in the Collateral or otherwise in furtherance of the provisions
of this Agreement, and Borrower hereby authorizes the Agent to execute and file
one or more financing statements
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(and similar documents) or copies thereof or of this Agreement with respect to
the Collateral signed only by the Agent. Borrower will take all necessary steps
in any proceeding before the United States Patent and Trademark Office or any
similar office or agency of the United States or any State thereof to maintain
each application and registration of the Patents, including, without limitation,
filing of renewals, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings.
d. Secured Party's Right to Take Action. If, after ten days written
notice from Secured Party, Borrower fails to perform or observe any of its
covenants or agreements set forth in this Section 5 or if Borrower notifies
Secured Party that it intends to abandon all or any part of the Collateral,
Secured Party may (but need not) perform or observe such covenant or agreement
or take steps to prevent such intended abandonment on behalf and in the name,
place, and stead of Borrower (or, in the case of intended abandonment, in
Secured Party's own name) and may (but need not) take any and all other actions
that Secured Party may reasonably deem necessary to cure or correct such failure
or prevent such intended abandonment.
e. Costs and Expenses. Except to the extent that the effect of such
payment would be to render any loan or forbearance of money usurious or
otherwise illegal under any applicable law, Borrower shall pay Secured Party on
demand the amount of all moneys expended and all costs and expenses (including
reasonable attorneys' fees and disbursements) incurred by Secured Party in
connection with or as a result of Secured Party's taking action under subsection
5(d), except for intended abandonment of the Collateral by Borrower, or
exercising its rights under Section 7, together with interest thereon from the
date expended or incurred by Secured Party.
f. Use and Disposition of Collateral. Borrower shall not make or
permit to be made any assignment, pledge or hypothecation of the Collateral
other than Permitted Liens, or grant any security interest in the Collateral
except for the Security Interest and Permitted Liens. Borrower shall not make or
permit to be made any transfer of any Collateral, except in the ordinary course
of business, and Borrower shall remain at all times in possession of the
Collateral owned by it other than transfers to the Agent pursuant to the
provisions hereof and as otherwise provided in this Agreement. The Agent shall
have the right, as the true and lawful agent of the Borrower, with power of
substitution for the Borrower and in the Borrower's name, the Agent's name or
otherwise, for the use and benefit of the Agent and the Investors and solely to
effect the purposes of this Agreement, (i) to endorse the Borrower's name upon
any notes, acceptances, checks, drafts, money orders or other evidences of
payment with respect to the Collateral that may come into its possession; (ii)
to sign the name of the Borrower on any invoice relating to any of the
Collateral and (iii) upon the occurrence and during the continuance of an event
of default under this Agreement or under the Note, (A) to receive, endorse,
assign and/or deliver any and all notes, acceptances, checks, drafts, money
orders or other evidences or instruments of payment relating to the Collateral
or any part thereof, and Borrower hereby waives notice of presentment, protest
and non-payment of any instrument so endorsed, (B) to demand, collect, receive
payment of, give receipt for, extend the time of payment of and give discharges
and releases of all or any of the Collateral and/or release the obligor thereon,
(C) to commence and prosecute any and all suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect or otherwise
realize on all or any of the Collateral or to enforce any rights in respect of
any Collateral, (D) to settle, compromise, compound, adjust or
5
defend any actions, suits or proceedings relating to or pertaining to all or any
of the Collateral, and (H) to use, sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with all or any of the Collateral,
and to do all other acts and things necessary to carry out the purposes of this
Agreement, as fully and completely as though the Agent were the absolute owner
of the Collateral for all purposes; provided, however, that nothing herein
contained shall be construed as requiring or obligating the Agent or any
Investor to make any commitment or to make any inquiry as to the nature or
sufficiency of any payment received by the Agent or such Investor or to present
or file any claim or notice, or to take any action with respect to the
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby, and no action taken by the Agent or any
Investor or omitted to be taken with respect to the Collateral or any part
thereof shall give rise to any defense, counterclaim or offset in favor of
Borrower or to any claim or action against the Agent or any Investor in the
absence of the gross negligence or willful misconduct of the Agent or such
Investor; and provided further that, the Agent shall at all times act reasonably
and in good faith. It is understood and agreed that the appointment of the Agent
as the agent of the Borrower for the purposes set forth above in this Section
5(f) is coupled with an interest and is irrevocable. The provisions of this
Section 5(f) shall in no event relieve Borrower of any of its obligations
hereunder with respect to the Collateral or any part thereof (other than
obligations which are impaired as a result of actions taken by the Agent
pursuant to this Section 5(f)) or impose any obligation on the Agent or any
Investor to proceed in any particular manner with respect to the Collateral or
any part thereof, or in any way limit the exercise by the Agent or any Investor
of any other or further right which it may have on the date of this Agreement or
hereafter, whether hereunder or by law or otherwise. Anytime action is taken
under this Section 5(f), prompt written notice of such action shall be provided
to Borrower by Agent.
g. Further Assurances. Borrower agrees, at its expense, to execute,
acknowledge, deliver and cause to be duly filed all such further instruments and
documents and take all such actions as the Agent may from time to time
reasonably request for the assuring and preserving of the Security Interest and
the rights and remedies created hereby, including, without limitation, the
payment of any fees and taxes required in connection with the execution and
delivery of this Agreement, the granting of the Security Interest and the filing
of any financing statements or other documents in connection herewith. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note or other instrument, such note or
instrument shall be promptly pledged and delivered to the Agent, duly endorsed
in a manner satisfactory to the Agent. Borrower agrees to notify promptly the
Agent of any change in its corporate name or in the location of its chief
executive office, its chief place of business or the office where it keeps its
records.
6. EVENTS OF DEFAULT. Each of the following occurrences shall constitute
an event of default under this Agreement (herein called "Event of Default"):
a. an Event of Default, as defined in the Note, shall occur; or
b. Borrower shall fail promptly to observe or perform any covenant
or agreement herein binding on it and such failure is not cured within 20 days
after written notice from Secured Party; or
6
c. there is any levy, seizure, or attachment of all or any material
portion of the Collateral, other than as set forth in this Agreement; or
d. any of the representations or warranties contained in Section ___
shall prove to have been incorrect in any material respect when made.
7. REMEDIES. Upon the occurrence of an Event of Default and at any time
thereafter, Secured Party may, at its option, take any or all of the following
actions:
a. exercise any or all remedies available under this Agreement or
the Note including, without limitation, any and all rights afforded to a secured
party under, and subject to its obligations contained in, the Uniform Commercial
Code as in effect in any state or other applicable law; or
b. sell, assign, transfer, pledge, encumber, or otherwise dispose of
the Collateral; or
c. enforce the patents comprising the Collateral and if Secured
Party shall commence any suit for such enforcement, Borrower shall, at the
request of Secured Party, do any and all lawful acts and execute any and all
proper documents reasonably required by Secured Party in aid of such
enforcement; or
d. incur expenses, including attorneys' fees at the regular hourly
rates of Secured Party's counsel from time to time in effect, legal expenses and
costs for the exercise of any right or power under this Security Agreement,
which expenses are secured by this Security Agreement.
Any disposition of Collateral by Agent shall be subject to the mandatory
requirements of applicable law and subject to the requirement that Agent act
reasonably and in good faith. Subject to such conditions, Agent may sell or
otherwise dispose of all or any part of the Collateral, at public or private
sale, for cash, upon credit or for future delivery as the Agent shall deem
appropriate. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Borrower, and
Borrower hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which Borrower now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
The Agent shall give the Borrower ten (10) days' written notice (which Borrower
agrees is reasonable notice within the meaning of Section 9-504(3) of the
Uniform Commercial Code) of the Agent's intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time and
place for such sale. Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Agent may fix
and state in the notice (if any) of such sale. At any such sale, the Collateral,
or portion thereof, to be sold may be sold in one lot, as an entirety or in
separate parcels, as the Agent may (in its sole and absolute discretion)
determine. The Agent shall not be obligated to make any sale of any Collateral
if it shall determine not to do so, regardless of the fact that notice of sale
of such Collateral shall have been given. The Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time
7
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Agent until the sale price is paid by the
purchaser or purchasers thereof, but the Agent shall not incur any liability in
case any such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be sold
again upon like notice. At any public sale made pursuant to this Section 6, any
Investor may bid for or purchase, free (to the extent permitted by law) from any
right of redemption, stay or appraisal on the part of Borrower (all said rights
being also hereby waived and released to the extent permitted by law), with
respect to the Collateral or any part thereof offered for sale and any such
Investor may make payment on account thereof by using any claim then due and
payable to any such Investor from Borrower as a credit against the purchase
price, and any such Investor may, upon compliance with the terms of sale, hold,
retain and dispose of such property without further accountability to Borrower
therefor. For purposes hereof, a written agreement to purchase the Collateral or
any portion thereof shall be treated as a sale thereof; the Agent shall be free
to carry out such sale and purchase pursuant to such agreement, and Borrower
shall not be entitled to the return of the Collateral or any portion thereof
subject thereto, notwithstanding the fact that after the Agent shall have
entered into such an agreement all events of default shall have been remedied
and the Secured Obligations paid in full. Borrower shall remain liable for any
deficiency. As an alternative to exercising the power of sale herein conferred
upon it, the Agent may proceed by a suit or suits at law or in equity to
foreclose this Agreement and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court appointed receiver.
8. DESIGNATION OF AGENT. The Investors hereby irrevocably designate MC
(and its successors and assigns) as their agent and MC hereby accepts such
designation, in order to execute any and all instruments or other documents on
behalf of the Investors and to do any and all other acts or things on behalf of
the Investors that MC (or its successors or assigns) in its sole discretion
deems necessary or advisable or that may be required pursuant to this Agreement
or otherwise, to exercise Secured Party's rights and remedies under this
Agreement. None of the Investors may take any action or exercise any rights
under this Agreement except through MC as their agent. Borrower hereby appoints
the Agent the attorney-in-fact of Borrower solely for the purpose of carrying
out the provisions of this Agreement and taking any action and executing any
instrument which the Agent may reasonably deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable so long as this
Agreement and the Security Interest have not been terminated and coupled with an
interest
9. APPLICATION OF PROCEEDS. The proceeds of any collection or sale of
Collateral, as well as any Collateral consisting of cash, shall be applied by
the Agent as follows:
FIRST, to the payment of all reasonable costs and expenses incurred
by the Agent in connection with such collection or sale or otherwise in
connection with this Agreement or any of the Secured Obligations,
including, but not limited to, all court costs and the reasonable fees and
expenses of its agents and legal counsel, the repayment of all advances
made by the Agent hereunder on behalf of the Borrower and any other
reasonable costs or expenses incurred in connection with the exercise of
any right or remedy hereunder;
8
SECOND, pro rata to the payment in full of principal and interest in
respect of any amount of the Notes outstanding (pro rata as among the
Investors in accordance with the principal amount of the Notes held by
them);
THIRD, to the Borrower, its successors and assigns, or as a court of
competent jurisdiction may otherwise direct.
10. SECURITY INTEREST ABSOLUTE. All rights of the Agent hereunder, the
Security Interest, and all obligations of the Borrower hereunder, shall be
absolute and unconditional irrespective of (i) any partial invalidity or
unenforceability of the Note, any other agreement with respect to any of the
Secured Obligations or any other agreement or instrument relating to any of the
foregoing, (ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or consent to any departure from the Note or any other agreement or
instrument, (iii) any exchange, release or nonperfection of any other
Collateral, or any release or amendment or waiver of or consent to or departure
from any guarantee, for all or any of the Secured Obligations, or (iv) any other
circumstance which might otherwise constitute a defense available to, or
discharge of the Borrower in respect of the Secured Obligations or in respect of
this Agreement.
11. MISCELLANEOUS. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by Secured Party. A waiver signed by Secured
Party shall be effective only in the specific instance and for the specific
purpose given. Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party's rights or remedies. All rights and
remedies of Secured Party shall be cumulative and may be exercised singularly or
concurrently, at Secured Party's option, and the exercise or enforcement of any
one such right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other. Secured Party shall not be obligated to preserve any
rights Borrower may have against prior parties, to realize on the Collateral at
all or in any particular manner or order, or to apply any cash proceeds of the
Collateral in any particular order of application. This Agreement shall be
binding upon and inure to the benefit of Borrower and Secured Party and their
respective participants, successors, and permitted assigns and shall take effect
when signed by Borrower and Secured Party, and Borrower waives notice of Secured
Party's acceptance hereof; provided, however, that the Secured Party's rights
hereunder may not be transferred or assigned to any third party without the
prior written consent of Borrower. This Agreement shall be governed by the
internal law of the State of New York without regard to conflicts of law
provisions. If any provision or application of this Agreement is held unlawful
or unenforceable in any respect, such illegality or unenforceability shall not
affect other provisions or applications which can be given effect and this
Agreement shall be construed as if the unlawful or unenforceable provision or
application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement and the creation and
payment of the Obligations.
12. WAIVER OF JURY TRIAL: BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES THE RIGHT BORROWER MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT
9
AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR SECURED
PARTY ENTERING INTO THIS AGREEMENT.
13. TERMINATION. This Agreement and the Security Interest shall terminate
when all the Secured Obligations have been fully and indefeasibly paid in full,
at which time the Agent shall execute and deliver to the Borrower all Uniform
Commercial Code termination statements and similar documents which the Borrower
shall reasonably request to evidence such termination; provided, however, that
all indemnities of the Borrower contained in this Agreement shall survive, and
remain operative and in full force and effect regardless of, the termination of
this Agreement for a period of six (6) months following the termination of this
Agreement
*** Signatures on following page(s) ***
10
IN WITNESS WHEREOF, the parties have duly executed and delivered
this Security Agreement as of the date and year first written above.
SECURED PARTY:
MIDDLEBURY CAPITAL LLC
By:_________________________________
Name:_______________________________
Title:______________________________
BORROWER:
LIQUIDMETAL TECHNOLOGIES, INC.
By:_________________________________
Xxxx Xxxx,
President and Chief Executive Officer
11
COUNTERPART SIGNATURE PAGE
TO SECURITY AGREEMENT
DATED MARCH 1, 2004,
AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
MIDDLEBURY CAPITAL LLC, AND
THE "INVESTORS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.
INVESTOR:
-------------------------------------------------
By:
--------------------------------------------------------
Name:
------------------------------------------------------
Title:
-----------------------------------------------------
12
SCHEDULE I TO SECURITY AGREEMENT
"MIDDLEBURY INVESTORS"
[INSERT SCHEDULE 1 TO MIDDLEBURY SECURITIES PURCHASE AGREEMENT]
"MICHIGAN INVESTORS"
[INSERT SCHEDULE 1 TO MICHIGAN SECURITIES PURCHASE AGREEMENT]
13
EXHIBIT A
Collateral, EIN and Office Location
TITLE OF PATENT U.S. PATENT NUMBER
--------------- ------------------
MATERIALS TRANSFORMABLE COATINGS 4,725,512
WC CONTAINING COATING 5,030,519
JOINING USING BULK ALLOYS 5 482 580
DIAMOND COMPOSITES OF BULK ALLOYS 5,567,532
COMPOSITES OF BULK ALLOY (METHOD) 5 567 251
COMPOSITES OF BULK ALLOY (ARTICLE) 5 866 254
TI-CONTAINING HARD-FACING COATING 5 695 825
DIE-CASTING OF BULK ALLOYS 5 711 363
TORSIONAL SPRING OF BULK ALLOYS 5 772 803
APPARATUS FOR HARD-FACING COATING 5 942 289
ZIRCONIA CONTAINING COATING 6,376,091
SHAPED-CHARGE PROJECTILES 6,446,558
VACUUM DIE-CASTING OF BULK ALLOYS 6,021,840
The office location for each of the above Patents is 00000 Xxxxxxxxxxxx Xx.,
Xxxxx 000, Xxxx Xxxxxx, Xxxxxxxxxx 00000. Each of the above Patents is owned by
Liquidmetal Technologies, Inc., a Delaware corporation whose Federal Employer
Identification number is as follows: 00-0000000.
EXHIBIT B
SECURITY AGREEMENT
(PATENTS)
WHEREAS, LIQUIDMETAL TECHNOLOGIES, INC., a Delaware corporation (herein
referred to as "Borrower"), owns the letters patent, and/or applications for
letters patent, of the United States, more particularly described on Schedule
1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Borrower is obligated to MIDDLEBURY CAPITAL LLC, a Delaware
limited liability company, as agent (herein referred to as the "Secured Party")
for the Investors named in those certain Secured Convertible Notes dated as of
the date hereof issued by the Borrower (each such note, as amended, modified or
supplemented from time to time in accordance with its terms, shall collectively
be referred to as the "Note") and Borrower has entered into a Security Agreement
dated the date hereof (the "Agreement") in favor of Secured Party; and
WHEREAS, pursuant to the Agreement, Borrower has assigned to Secured
Party, and granted to Secured Party a security interest in, all right, title and
interest of Borrower in and to the Patents, together with any reissue,
continuation, continuation-in-part or extension thereof, and all proceeds
thereof, including, without limitation, any and all causes of action which may
exist by reason of infringement thereof for the full term of the Patents (the
"Collateral"), to secure the prompt payment, performance and observance of the
Secured Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Borrower does hereby further assign unto Secured Party and
grant to Secured Party a security interest in, the Collateral to secure the
prompt payment, performance and observance of the Secured Obligations.
Borrower does hereby further acknowledge and affirm that the rights and
remedies of Secured Party with respect to the assignment of, security interest
in the Collateral made and granted hereby are more fully set forth in the
Agreement, the terms and provisions of which are hereby incorporated herein by
reference as if fully set forth herein.
Secured Party's address is 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX
00000
IN WITNESS WHEREOF, Borrower has caused this Agreement to be duly executed
by its officer thereunto duly authorized as of the 1st day of March 2004.
LIQUIDMETAL TECHNOLOGIES, INC.
By:______________________________
Xxxx Xxxx,
President and Chief Executive Officer
EXHIBIT E
FORM OF WARRANT TO PURCHASE COMMON STOCK
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
COMMON STOCK PURCHASE WARRANT
(KOREA-BASED INVESTORS)
To Purchase Shares of $0.001 Par Value Common Stock ("Common Stock") of
LIQUIDMETAL TECHNOLOGIES, INC.
THIS CERTIFIES that, for value received, MICHIGAN VENTURE CAPITAL (the
"PURCHASER" or "HOLDER") is entitled, upon the terms and subject to the
conditions hereinafter set forth, at any time on or after the date hereof and on
or prior to 8:00 p.m. New York City Time on the date that is one hundred (100)
calendar days after the Closing Date under the Purchase Agreement (the
"TERMINATION DATE"), but not thereafter, to subscribe for and purchase from
Liquidmetal Technologies, Inc., a Delaware corporation (the "COMPANY"),
[________] (________________) shares of Common Stock (the "WARRANT SHARES") at
an Exercise Price equal to $3.00 per share (as adjusted from time to time
pursuant to the terms hereof, the "EXERCISE PRICE"). The Exercise Price and the
number of shares for which the Warrant is exercisable shall be subject to
adjustment as provided herein. This Warrant is being issued in connection with
the Amended and Restated Securities Purchase Agreement dated March 1, 2004 (the
"PURCHASE AGREEMENT"), entered into between the Company and the Purchaser.
Capitalized terms used herein and not otherwise defined shall have the meaning
ascribed thereto in the Purchase Agreement.
1. Title of Warrant. Prior to the expiration hereof and subject to compliance
with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company
by the Holder hereof in person or by duly authorized attorney, upon
surrender of this Warrant together with (a) the Assignment Form annexed
hereto properly endorsed, and (b) any other documentation reasonably
necessary to satisfy the Company that such transfer is in compliance with
all applicable securities laws. The term "HOLDER" shall refer to the
Purchaser or any subsequent transferee of this Warrant.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant and
payment of the Exercise Price as set forth herein will be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes,
liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue or
otherwise specified herein).
Page 2
3. Exercise of Warrant.
(a) The Holder may exercise this Warrant, in whole or in part, at any time and
from time to time, by delivering (which may be by facsimile) to the
offices of the Company or any transfer agent for the Common Stock this
Warrant, together with a Notice of Exercise in the form annexed hereto
specifying the number of Warrant Shares with respect to which this Warrant
is being exercised, together with payment to the Company of the Exercise
Price therefor.
In the event that the Warrant is not exercised in full, the number of
Warrant Shares shall be reduced by the number of such Warrant Shares for
which this Warrant is exercised and/or surrendered, and the Company, if
requested by Holder and at its expense, shall within three (3) Trading
Days (as defined below) issue and deliver to the Holder a new Warrant of
like tenor in the name of the Holder or as the Holder (upon payment by
Holder of any applicable transfer taxes) may request, reflecting such
adjusted Warrant Shares. Notwithstanding anything to the contrary set
forth herein, upon exercise of any portion of this Warrant in accordance
with the terms hereof, the Holder shall not be required to physically
surrender this Warrant to the Company unless such Holder is purchasing the
full amount of Warrant Shares represented by this Warrant. The Holder and
the Company shall maintain records showing the number of Warrant Shares so
purchased hereunder and the dates of such purchases or shall use such
other method, reasonably satisfactory to the Holder and the Company, so as
not to require physical surrender of this Warrant upon each such exercise.
The Holder and any assignee, by acceptance of this Warrant or a new
Warrant, acknowledge and agree that, by reason of the provisions of this
Section, following exercise of any portion of this Warrant, the number of
Warrant Shares which may be purchased upon exercise of this Warrant may be
less than the number of Warrant Shares set forth on the face hereof
Certificates for shares of Common Stock purchased hereunder shall be
delivered to the Holder hereof within three (3) Trading Days after the
date on which this Warrant shall have been exercised as aforesaid. The
Holder may withdraw its Notice of Exercise at any time if the Company
fails to timely deliver the relevant certificates to the Holder as
provided in this Agreement. A Notice of Exercise shall be deemed sent on
the date of delivery if delivered before 8:00 p.m. New York Time on such
date, or the day following such date if delivered after 8:00 p.m. New York
Time; provided that the Company is only obligated to deliver Warrant
Shares against delivery of the Exercise Price from the holder hereof and
surrender of this Warrant (or appropriate affidavit and/or indemnity in
lieu thereof).
In lieu of delivering physical certificates representing the Warrant
Shares issuable upon conversion of this Warrant, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC")
Fast Automated Securities Transfer ("FAST") program, upon request of the
Holder, the Company shall use its best efforts to cause its transfer agent
to electronically transmit the Warrant Shares issuable upon exercise to
the Holder, by crediting the account of the Holder's prime broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system. The time
periods for
Page 3
delivery described above shall apply to the electronic transmittals
through the DWAC system. The Company agrees to coordinate with DTC to
accomplish this objective.
(b) The term "TRADING DAY" means (x) if the Common Stock is not listed on the
New York or American Stock Exchange but sale prices of the Common Stock
are reported on Nasdaq National Market or another automated quotation
system, a day on which trading is reported on the principal automated
quotation system on which sales of the Common Stock are reported, (y) if
the Common Stock is listed on the New York Stock Exchange or the American
Stock Exchange, a day on which there is trading on such stock exchange, or
(z) if the foregoing provisions are inapplicable, a day on which
quotations are reported by National Quotation Bureau Incorporated.
4. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. In
lieu of issuance of a fractional share upon any exercise hereunder, the
Company will either round up to nearest whole number of shares or pay the
cash value of that fractional share, which cash value shall be calculated
on the basis of the average closing price of the Common Stock during the
five (5) Trading Days immediately preceding the date of exercise.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of Common
Stock upon the exercise of this Warrant shall be made without charge to
the Holder hereof for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes
and expenses shall be paid by the Company, and such certificates shall be
issued in the name of the Holder of this Warrant or in such name or names
as may be directed by the Holder of this Warrant; provided, however, that
in the event certificates for shares of Common Stock are to be issued in a
name other than the name of the Holder of this Warrant, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form
attached hereto duly executed by the Holder hereof; and provided further,
that the Company shall not be required to pay any tax or taxes which may
be payable in respect of any transfer involved in the issuance of any
Warrant certificates or any certificates for the Warrant Shares other than
the issuance of a Warrant Certificate to the Holder in connection with the
Holder's surrender of a Warrant Certificate upon the exercise of all or
less than all of the Warrants evidenced thereby.
6. Closing of Books. The Company will at no time close its shareholder books
or records in any manner which interferes with the timely exercise of this
Warrant.
7. No Rights as Shareholder until Exercise. Subject to Section 12 of this
Warrant and the provisions of any other written agreement between the
Company and the Purchaser, the Purchaser shall not be entitled to vote or
receive dividends or be deemed the holder of Warrant Shares or any other
securities of the Company that may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed
to confer upon the Purchaser, as such, any of the rights of a stockholder
of the Company or any right to vote for the election of directors or upon
any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of
par value, or change of stock to no par value, consolidation, merger,
Page 4
conveyance or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have
been exercised as provided herein. However, at the time of the exercise of
this Warrant pursuant to Section 3 hereof, the Warrant Shares so purchased
hereunder shall be deemed to be issued to such Holder as the record owner
of such shares as of the close of business on the date on which this
Warrant shall have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be assigned by the
surrender of this Warrant and the Assignment Form annexed hereto duly
executed at the office of the Company (or such other office or agency of
the Company or its transfer agent as the Company may designate by notice
in writing to the registered Holder hereof at the address of such Holder
appearing on the books of the Company); provided, however, that this
Warrant may not be resold or otherwise transferred except (i) in a
transaction registered under the Securities Act of 1933, as amended (the
"ACT"), or (ii) in a transaction pursuant to an exemption, if available,
from registration under the Act and whereby, if reasonably requested by
the Company, an opinion of counsel reasonably satisfactory to the Company
is obtained by the Holder of this Warrant to the effect that the
transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant; Exchange. The Company
represents warrants and covenants that (a) upon receipt by the Company of
evidence and/or indemnity reasonably satisfactory to it of the loss,
theft, destruction or mutilation of any Warrant or stock certificate
representing the Warrant Shares, and in case of loss, theft or
destruction, of indemnity reasonably satisfactory to it, and (b) upon
surrender and cancellation of such Warrant or stock certificate, if
mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of
this Warrant or stock certificate, without any charge therefor. This
Warrant is exchangeable at any time for an equal aggregate number of
Warrants of different denominations, as requested by the holder
surrendering the same, or in such denominations as may be requested by the
Holder following determination of the Exercise Price. No service charge
will be made for such registration or transfer, exchange or reissuance.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day not
a legal holiday.
11. Effect of Certain Events. If at any time while this Warrant or any portion
thereof is outstanding and unexpired there shall be a transaction (by
merger or otherwise) in which more than 50% of the voting power of the
Company is disposed of (collectively, a "SALE OR MERGER TRANSACTION"), the
Holder of this Warrant shall have the right thereafter to purchase, by
exercise of this Warrant and payment of the aggregate Exercise Price in
effect immediately prior to such action, the kind and amount of shares and
other securities and property which it would have owned or have been
entitled to receive after the happening of such transaction had this
Warrant been exercised immediately prior thereto, subject to further
adjustment as provided in Section 12.
Page 5
12. Adjustments of Exercise Price and Number of Warrant Shares.
The number of and kind of securities purchasable upon exercise of this
Warrant and the Exercise Price shall be subject to adjustment from time to
time as set forth in this Section 12.
(a) Subdivisions, Combinations, Stock Dividends and other Issuances. If the
Company shall, at any time while this Warrant is outstanding, (A) pay a
stock dividend or otherwise make a distribution or distributions on any
equity securities (including instruments or securities convertible into or
exchangeable for such equity securities) in shares of Common Stock, (B)
subdivide outstanding shares of Common Stock into a larger number of
shares, or (C) combine outstanding Common Stock into a smaller number of
shares, then the Exercise Price shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 12(a) shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision or combination. The number of shares which may be purchased
hereunder shall be increased proportionately to any reduction in Exercise
Price pursuant to this paragraph 12(a), so that after such adjustments the
aggregate Exercise Price payable hereunder for the increased number of
shares shall be the same as the aggregate Exercise Price in effect just
prior to such adjustments.
(b) Other Distributions. If at any time after the date hereof the Company
distributes to holders of its Common Stock, other than as part of its
dissolution, liquidation or the winding up of its affairs, any shares of
its capital stock, any evidence of indebtedness or any of its assets
(other than Common Stock), then the number of Warrant Shares for which
this Warrant is exercisable shall be increased to equal: (i) the number of
Warrant Shares for which this Warrant is exercisable immediately prior to
such event, (ii) multiplied by a fraction, (A) the numerator of which
shall be the Fair Market Value (as defined below) per share of Common
Stock on the record date for the dividend or distribution, and (B) the
denominator of which shall be the Fair Market Value price per share of
Common Stock on the record date for the dividend or distribution minus the
amount allocable to one share of Common Stock of the value (as jointly
determined in good faith by the Board of Directors of the Company and the
Holder) of any and all such evidences of indebtedness, shares of capital
stock, other securities or property, so distributed. For purposes of this
Warrant, "FAIR MARKET VALUE" shall equal the average closing trading price
of the Common Stock on the Principal Market (as defined in the Purchase
Agreement) for the 5 Trading Days preceding the date of determination or,
if the Common Stock is not listed or admitted to trading on any Principal
Market, and the average price cannot be determined as contemplated above,
the Fair Market Value of the Common Stock shall be as reasonably
determined in good faith by the Company's Board of Directors and the
Holder. The Exercise Price shall be reduced to equal: (i) the Exercise
Price in effect immediately before the occurrence of any event (ii)
multiplied by a fraction, (A) the numerator of which is the number of
Warrant Shares for which this Warrant is exercisable immediately before
the adjustment, and (B) the denominator of
Page 6
which is the number of Warrant Shares for which this Warrant is
exercisable immediately after the adjustment.
(c) Merger, etc. If at any time after the date hereof there shall be a merger
or consolidation of the Company with or into or a transfer of all or
substantially all of the assets of the Company to another entity, then the
Holder shall be entitled to receive upon or after such transfer, merger or
consolidation becoming effective, and upon payment of the Exercise Price
then in effect, the number of shares or other securities or property of
the Company or of the successor corporation resulting from such merger or
consolidation, which would have been received by the Holder for the shares
of stock subject to this Warrant had this Warrant been exercised just
prior to such transfer, merger or consolidation becoming effective or to
the applicable record date thereof, as the case may be. The Company will
not merge or consolidate with or into any other corporation, or sell or
otherwise transfer its property, assets and business substantially as an
entirety to another corporation, unless the corporation resulting from
such merger or consolidation (if not the Company), or such transferee
corporation, as the case may be, shall expressly assume in writing the due
and punctual performance and observance of each and every covenant and
condition of this Warrant to be performed and observed by the Company.
(d) Reclassification, etc. If at any time after the date hereof there shall be
a reorganization or reclassification of the securities as to which
purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Holder shall
thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Exercise Price then in
effect, the number of shares or other securities or property resulting
from such reorganization or reclassification, which would have been
received by the Holder for the shares of stock subject to this Warrant had
this Warrant at such time been exercised.
(e) Exercise Price Adjustment. In the event that on or subsequent to the
Closing Date, the Company issues or sells any securities which are
convertible into or exchangeable for its Common Stock or any convertible
securities, or any warrants or other rights to subscribe for or to
purchase or any options for the purchase of its Common Stock or any such
convertible securities (other than (i) shares which are issued pursuant to
the Note, (ii) shares of Common Stock or options to purchase such shares
issued to employees, consultants, officers or directors in accordance with
stock plans approved by the Board of Directors, and shares of Common Stock
issuable under options or warrants that are outstanding as of the date of
the Purchase Agreement, (iii) shares of Common Stock issued pursuant to a
stock dividend, split or other similar transaction, (iv) shares of Common
Stock issued to Growell Metal Co., Ltd. pursuant to the Settlement
Agreement, dated on or about January 10, 2004, between Growell Metal Co.,
Ltd. and the Company's South Korean subsidiary, and (v) shares of Common
Stock that are issued in lieu of cash in the payment of interest under the
Middlebury Notes, as defined in the Purchase Agreement) at an effective
price per share which is less than the Exercise Price, then the Exercise
Price in effect immediately prior to such issue or sale shall be reduced
effective concurrently with such issue or sale to an amount determined by
multiplying the Exercise Price then in effect by a fraction, (x) the
numerator of which shall be the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issue or sale,
Page 7
plus (2) the number of shares of Common Stock which the aggregate
consideration received by the Company for such additional shares would
purchase at the Exercise Price then in effect; and (y) the denominator of
which shall be the number of shares of Common Stock of the Company
outstanding immediately after such issue or sale. In the event that the
Company issues or sells any Common Stock (other than (i) shares issued or
which may be issued pursuant to the Purchase Agreement or pursuant to
Convertible Securities (as defined below), (ii) shares of Common Stock or
options to purchase such shares issued to employees, consultants, officers
or directors in accordance with stock plans approved by the Board of
Directors, and shares of Common Stock issuable under options or warrants
that are outstanding as of the date of the Purchase Agreement, (iii)
shares of Common Stock issued pursuant to a stock dividend, split or other
similar transaction, (iv) shares of Common Stock issued to Growell Metal
Co., Ltd. pursuant to the Settlement Agreement, dated on or about January
10, 2004, between Growell Metal Co., Ltd. and the Company's South Korean
subsidiary, and (v) shares of Common Stock that are issued in lieu of cash
in the payment of interest under the Middlebury Notes, as defined in the
Purchase Agreement) at an effective price per share which is less than the
Exercise Price, then in each such case, the Exercise Price in effect
immediately prior to such issue or sale shall be reduced effective
concurrently with such issue or sale to an amount determined by
multiplying the Exercise Price then in effect by a fraction, (x) the
numerator of which shall be the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issue or sale, plus (2) the
number of shares of Common Stock which the aggregate consideration
received by the Company for such additional shares would purchase at the
Exercise Price then in effect; and (y) the denominator of which shall be
the number of shares of Common Stock of the Company outstanding
immediately after such issue or sale.
For the purposes of the foregoing adjustments, in the case of the issuance
of any convertible securities, warrants, options or other rights to
subscribe for or to purchase or exchange for, shares of Common Stock
("CONVERTIBLE Securities"), the maximum number of shares of Common Stock
issuable upon exercise, exchange or conversion of such Convertible
Securities shall be deemed to be outstanding, provided that no further
adjustment shall be made upon the actual issuance of Common Stock upon
exercise, exchange or conversion of such Convertible Securities.
(f) In the event of any adjustment in the number of Warrant Shares issuable
hereunder upon exercise, the Exercise Price shall be inversely
proportionately increased or decreased as the case may be, such that
aggregate purchase price for Warrant Shares upon full exercise of this
Warrant shall remain the same. Similarly, in the event of any adjustment
in the Exercise Price, the number of Warrant Shares issuable hereunder
upon exercise shall be inversely proportionately increased or decreased as
the case may be, such that aggregate purchase price for Warrant Shares
upon full exercise of this Warrant shall remain the same.
13. Voluntary Adjustment by the Company. The Company may at its option, at any
time during the term of this Warrant, reduce but not increase the then
current Exercise Price to any amount and for any period of time deemed
appropriate by the Board of Directors of the Company.
Page 8
14. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, the Company shall promptly mail
to the Holder of this Warrant a notice setting forth the number of Warrant
Shares (and other securities or property) purchasable upon the exercise of
this Warrant and the Exercise Price of such Warrant Shares after such
adjustment and setting forth the computation of such adjustment and a
brief statement of the facts requiring such adjustment.
15. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding and exercisable, it will reserve from its
authorized and unissued Common Stock a sufficient number of shares to
provide for the issuance of the Warrant Shares upon the exercise of any
and all purchase rights under this Warrant. The Company further covenants
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon
the exercise of the purchase rights under this Warrant. The Company will
take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law, regulation, or rule of any applicable market or exchange.
16. 19.9% Limitations.
Notwithstanding anything contained herein to the contrary, the number of
shares of Common Stock issuable by the Company and acquirable by the
Holders of Warrants, together with the number of shares issued under the
Notes, the Middlebury Notes, and the warrants issued in connection with
the Middlebury Notes, shall not exceed 19.9% of the number of shares of
Common Stock outstanding on the Closing Date, subject to appropriate
adjustment for stock splits, stock dividends, or other similar
recapitalizations affecting the Common Stock (the "MAXIMUM COMMON STOCK
ISSUANCE"), unless the issuance of shares hereunder in excess of the
Maximum Common Stock Issuance shall first be approved by the Company's
shareholders in accordance with applicable law and the By-laws and
Articles of Incorporation of the Company.
17. Compliance with Securities Laws. (a) The Holder hereof acknowledges that
the Warrant Shares acquired upon the exercise of this Warrant, if not
registered (or if no exemption from registration exists), will have
restrictions upon resale imposed by state and federal securities laws.
Each certificate representing the Warrant Shares issued to the Holder upon
exercise (if not registered, for resale or otherwise, or if no exemption
from registration exists) will bear substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR
Page 9
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
(b) Without limiting the Purchaser's right to transfer, assign or otherwise
convey the Warrant or Warrant Shares in compliance with all applicable
securities laws, the Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the Warrant Shares to be issued upon
exercise hereof are being acquired solely for the Purchaser's own account
and not as a nominee for any other party, and that the Purchaser will not
offer, sell or otherwise dispose of this Warrant or any Warrant Shares to
be issued upon exercise hereof except under circumstances that will not
result in a violation of applicable federal and state securities laws.
18. Miscellaneous.
(a) Issue Date; Choice of Law; Venue; Jurisdiction. The provisions of this
Warrant shall be construed and shall be given effect in all respects as if
it had been issued and delivered by the Company on the date hereof. This
Warrant shall be binding upon any successors or assigns of the Company.
This Warrant will be construed and enforced in accordance with and
governed by the laws of the State of California, except for matters
arising under the Act, without reference to principles of conflicts of
law. Each of the parties consents to the exclusive jurisdiction of the
Federal and State Courts sitting in the County of Orange in the State of
California in connection with any dispute arising under this Warrant and
hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens or venue, to the
bringing of any such proceeding in such jurisdiction. EACH PARTY HERETO
WAIVES THE RIGHT TO A TRIAL BY JURY.
(b) Modification and Waiver. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought. Any
amendment effected in accordance with this paragraph shall be binding upon
the Purchaser, each future holder of this Warrant and the Company. No
waivers of, or exceptions to, any term, condition or provision of this
Warrant, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such term, condition or
provision.
(c) Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing by facsimile, mail or personal
delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be to the addresses as shown on
the books of the Company or to the Company at the address set forth in the
Purchase Agreement. A party may from time to time change the address to
which notices to it are to be delivered or mailed hereunder by notice in
accordance with the provisions of this Section 18(c).
(d) Severability. Whenever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant is held to be invalid, illegal
or unenforceable in any respect under any applicable
Page 10
law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability
of any other provision of this Warrant in such jurisdiction or affect the
validity, legality or enforceability of any provision in any other
jurisdiction, but this Warrant shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
(f) Specific Enforcement. The Company and the Holder acknowledge and agree
that irreparable damage would occur in the event that any of the
provisions of this Warrant were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
or cure breaches of the provisions of this Warrant and to enforce
specifically the terms and provisions hereof, this being in addition to
any other remedy to which either of them may be entitled by law or equity.
[Signature Page Follows]
Page 11
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated: March 1, 2004
LIQUIDMETAL TECHNOLOGIES, Inc.
By: ______________________________
Xxxx Xxxx,
President and Chief Executive Officer
ATTEST:
------------------------
Print Name:
NOTICE OF EXERCISE
To: Liquidmetal Technologies, Inc.
(1) The undersigned hereby elects to exercise the attached Warrant for and to
purchase thereunder, ______ shares of Common Stock, and herewith makes payment
therefor of $_______, or elects to use the cashless exercise option of the
Warrant in the event Warrant Shares are not registered as required in the
Registration Rights Agreement.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
-------------------------------
(Name)
-------------------------------
(Address)
-------------------------------
(3) Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as is specified
below:
-----------------------------------
(Name)
-------------------- -----------------------------------
(Date) (Signature)
-----------------------------------
(Address)
Dated:
------------------------------
Signature
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
---------------------------------------------------------------.
---------------------------------------------------------------
Dated: ______________,
Holder's Signature: __________________________
Holder's Address:_____________________________
-----------------------------
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
SCHEDULE I
PRINCIPAL AMOUNT
PURCHASER ADDRESS OF NOTES PURCHASE PRICE
--------- ------- -------- --------------
eIPO Co., Ltd. Xxxxx Xxxxx Xxxxxxxx, 00X $1,000,000.00 (U.S.) $1,000,000.00 (U.S.)
000 Xxxxxxxxxx, Xxxxxxxxx
Xxxxx, Xxxxx
Telephone: 00-0-000-0000
Facsimile: 00-0-000-0000
Attention: Xxxxx Xxx
Winvest Venture Partners Xxxxxxxxx X/X 0X, 0000-00 Xxxxxxxxxx, $500,000.00 (U.S.) $500,000.00 (U.S.)
Inc. Seochogu,
Xxxxx Xxxxx 000-000
Telephone: 00-0-000-0000
Facsimile: 00-0-000-0000
Attention: Xx. Xxxxx-Ki, Xxx
101-205 Oksoo Apt. $500,000.00 (U.S.) $500,000.00 (U.S.)
Oksoodong, Seongdonggu,
Dong Xxx Xxx Seoul, Korea
Telephone: 00-0-0000-0000
00000 Xxxxxxx Xxxxx #0 $500,000.00 (U.S.) $500,000.00 (U.S.)
Xxxxx Xxx-Jun Xxxx Xxxxxxx Xxx, XX 00000
Telephone: 000-000-0000
Moon Xxxxx Xxxx 0-000 Xxxx Seonsoochon Apt. $500,000.00 (U.S.) $500,000.00 (U.S.)
Jamsildong, Songpagu,
Seoul, Korea
Telephone: 00-00-000-0000
DISCLOSURE SCHEDULE
TO AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT
In connection with the Amended and Restated Securities Purchase Agreement dated
as of March 1, 2004, among Liquidmetal Technologies, Inc., a Delaware
corporation (the "COMPANY"), and Michigan Venture Capital Co., Ltd., a Korean
corporation, and the other persons listed as "Purchasers" on Schedule I attached
thereto (the "AGREEMENT"), the Company hereby delivers this Disclosure Schedule
to the Company's representations and warranties given in the Agreement. The
information and disclosures contained herein are intended only to qualify and
limit the representations, warranties and covenants of the Company contained in
the Agreement, and shall not be deemed to expand in any way the scope or effect
of any of such representations, warranties or covenants. The section numbers in
this Schedule correspond to the section numbers in the Agreement; provided,
however, that any information disclosed herein under any section number shall
also be deemed to be disclosed and incorporated in any other section of the
Agreement where such disclosure would be relevant. Capitalized terms used but
not defined herein shall have the same meanings given them in the Agreement.
ARTICLE X SCHEDULE 2.1(A)
The following is a list of the Company's direct and indirect subsidiaries:
a) Liquidmetal Golf: The Company holds 79.19% of the issued and outstanding
common stock of Liquidmetal Golf, a California corporation.
(b) Liquidmetal Korea Co., Ltd.: The Company holds 99.97% of the issued and
outstanding equity securities of Liquidmetal Korea Co., Ltd., a South Korean
limited liability company.
(c) Dongyang Yudoro: The Company holds 51% of the issued and outstanding equity
securities of Dongyang Yudoru, a South Korean joint stock company.
(d) Amorphous Technologies International (Asia) PTE Ltd. The Company holds all
of the issued and outstanding equity securities of Amorphous Technologies
International (Asia) PTE Ltd., a Singapore corporation. However, this subsidiary
is inactive and is in the process of being wound up and liquidated.
Page 2
SCHEDULE 2.1(C)
AUTHORIZED STOCK: The authorized capital stock of the Company is 100,000,000
shares of Common Stock, par value $.001 per share, and 10,000,000 shares of
Preferred Stock, par value $.001 per share. The Preferred Stock is "blank-check"
in nature, although no series of Preferred Stock have been designated or
created.
OUTSTANDING STOCK: As of the date hereof, there are 41,599,652 shares of Common
Stock outstanding, and no shares of Preferred Stock outstanding.
OPTION PLANS AND GRANTS: The following is information regarding stock option
grants:
SHARES SUBJECT TO CURRENTLY
NAME OF PLAN SHARES RESERVED UNDER PLAN OUTSTANDING OPTIONS
------------ -------------------------- -------------------
2002 Equity Incentive Plan 10,000,000 1,883,974
2002 Non-Employee Director Stock 1,000,000 190,000
Option Plan
1996 Stock Option Plan 3,727,016 3,531,075
Awards outside of Plans N/A 2,221,508
There are a total of 7,826,557 shares subject to currently outstanding options.
Also, in addition to the Common Stock warrants that will be issued pursuant to
this Agreement, the Company has agreed to issue, on or about the date hereof,
additional Common Stock warrants to certain investors other than the Purchasers
(as more particularly described under the caption "Simultaneous Private
Placement" below).
Additionally, there are currently outstanding options to purchase a total of
185,000 shares of the common stock of Liquidmetal Golf, a majority owned
subsidiary of the Company.
OUTSTANDING DEBT SECURITIES: In response to Section 2.1(c)(ii) of the Agreement,
other than intercompany debt securities, there are no outstanding debt
securities, although the Company's Liquidmetal Korea Co., Ltd. subsidiary
("Liquidmetal Korea") currently has an outstanding loan with Kookmin Bank of
South Korea with a current outstanding balance of approximately $4,047,042
(USD). Additionally, as set forth in more detail under the caption "Simultaneous
Private Placement" below, the Company expects to issue, on or about the date
hereof, one or more 6% Senior Convertible Notes to investors other than the
Purchasers.
OUTSTANDING REGISTRATION RIGHTS: In response to Section 2.1(c)(iv), the Company
has granted piggyback registration rights to Xxxx Xxxxxxx, a professional
golfer, for 376,345 shares that are currently issuable pursuant to a stock
option held by Xx. Xxxxxxx. These options have an exercise price of $1.1625 per
share, and they were granted to Xx. Xxxxxxx in connection with a golf
endorsement agreement that was terminated as of December 31, 2002. Additionally,
as set forth in more detail under the caption "Simultaneous Private Placement"
below, the Company
Page 3
expects to issue, on or about the date hereof, one or more 6% Senior Convertible
Notes to investors other than the Purchasers.
SIMULTANEOUS PRIVATE PLACEMENT. The Company has entered into a Securities
Purchase Agreement, dated March 1, 2004, with certain U.S.-based investors
identified "Purchasers" in said agreement and in connection with which
Middlebury Capital LLC ("MIDDLEBURY") has acted as placement agent (such
agreement is referred to as the "MIDDLEBURY AGREEMENT" and said investors are
referred to as the "MIDDLEBURY INVESTORS"). Under the Middlebury Agreement, the
Company has agreed to sell, and the Middlebury Investors have agreed to
purchase, 6% Senior Convertible Notes of the Company in an aggregate principal
amount of up to $6.5 million (U.S.) (hereafter referred to as the "MIDDLEBURY
NOTES"). However, in the event that the demand for the Middlebury Notes exceeds
$6.5 million, the Company may issue up to an additional $500,000 in Middlebury
Notes (for an aggregate principal amount of up to $7.0 million in Middlebury
Notes).
The Company expects that the sale and issuance of the Middlebury Notes will
close on or about the same date as the Notes being sold pursuant to this
Agreement, and the Middlebury Notes will rank pari passu with the Notes being
sold pursuant to this Agreement. The Middlebury Notes will be convertible into
shares of Company Common Stock at $3.00 per share, and the Middlebury Notes will
become due and payable upon the third anniversary of the date of the issuance of
the Middlebury Notes (subject to a right of the Middlebury Investors to obtain
early payment of the Middlebury Notes after the second anniversary thereof by
providing 90-days prior written notice to the Company). In other respects, the
Middlebury Notes will contain terms and conditions that are substantially
similar to the Notes being purchased pursuant to this Agreement.
Pursuant to the Middlebury Agreement, the Middlebury Investors will have
registration rights on substantially similar terms as the Purchasers of the
Notes being sold pursuant to this Agreement.
Additionally, the Middelbury Investors will receive warrants to purchase (at an
exercise price of $3.00 per share) such number of shares of Company common stock
as shall have an aggregate exercise price equal to 25% of the principal amount
of the Middlebury Notes, and Middlebury will receive a placement agent warrant
to purchase (at an exercise price of $3.00 per share) such number of shares as
shall have an aggregate exercise price equal to 7% of the principal amount of
the Middlebury Notes. The Middlebury Notes will be secured by the Security
Agreement described in Section 5.2(g) of this Agreement.
The foregoing disclosure regarding the Middlebury Agreement and the transactions
contemplated thereby is made solely for purposes of this Disclosure Schedule,
and such disclosure herein shall not give rise to an obligation by the Company
to consummate said transactions.
LIST OF OUTSTANDING DEBT:
Page 4
The Company's Liquidmetal Korea subsidiary has a loan with Kookmin Bank, a South
Korean bank, with a remaining balance of approximately $4,047,042. The parent
Company does not guaranty this loan.
SCHEDULE 2.1(E)
Nothing to disclose.
SCHEDULE 2.1(F)
On February 20, 2004, the Company publicly announced that it
expects to restate revenues for the third and fourth quarters of 2002 and the
first quarter of 2003. The revenues relate to sales of alloy melting and casting
equipment to Growell Metal. The sales to Growell Metal were comprised of $1.7
million of revenue from alloying equipment sales in the third and fourth
quarters of 2002 and $2.5 million of revenue from the sale of Liquidmetal die
casting machines in the first quarter of 2003. An ongoing analysis and review by
the Company will determine the full extent of the expected restatement and
corresponding impact on previously reported results of operations.
SCHEDULE 2.1(H)
In a letter written in September 2003, Xxxx golf company, a
former customer in Korea, claimed that they suffered damages due to the
allegedly improper termination of production under outstanding purchase orders
for Xxxx putters being made by the Company. The letter claimed damages and
potential legal action for an alleged breach of contract. The alleged damages
consist of approximately $325,000 for costs and lost profits associated with the
project. The Company does not believe that there is any merit to Akia's claims,
and even if there was, the Company believes that the claimed damages are grossly
exaggerated. Xxxx made a follow-up demand in October 2003, but the Company
rejected the demand, and the Company has not heard from Xxxx since October 2003.
Effective January 10, 2004, Liquidmetal Korea Co., Ltd., the Company's South
Korean subsidiary ("LIQUIDMETAL KOREA"), and Growell Metal Co., Ltd. ("GROWELL
METAL") entered into a Settlement Agreement (the "Settlement Agreement") in
settlement of certain claims and obligations between the parties. The material
terms of the Settlement Agreement are set forth on a Form 8-K filed by the
Company with the Securities and Exchange Commission on January 15, 2004, and a
copy of said Form 8-K is hereby incorporated into this Disclosure Schedule and
made a part hereof by this reference.
Page 5
SCHEDULE 2.1(P)
IN CONNECTION WITH ITS OUTSTANDING LOAN TO LIQUIDMETAL KOREA, KOOKMIN BANK HAS A
SECURITY INTEREST IN THE BUILDING OF THE COMPANY'S PLANT IN PYONGTAEK, SOUTH
KOREA, AS WELL AS IN CERTAIN EQUIPMENT CONTAINED IN SUCH BUILDING.
