EXHIBIT 10.2
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, 2004 LAKE FOREST, CALIFORNIA
THIS NOTE ("NOTE") is one of a duly authorized issue of Notes issued by
LIQUIDMETAL TECHNOLOGIES, INC., a corporation duly organized and existing under
the laws of the State of Delaware (the "COMPANY"), designated as the Company's
6% Senior Convertible Note Due March 1, 2007 ("MATURITY DATE") in an aggregate
principal amount equal to Three Million U.S. Dollars (U.S. $3,000,000) (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, 000 Xxxxxxx-xxxx, Xxxxxxx-xx, Xxxxx, Xxxxx, 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
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received by the Company upon such sale or issuance less the fee amount as
provided above). If shares are issued for a consideration other than cash, the
Per Share Selling Price shall be the fair value of such consideration as
determined in good faith by the board of directors of the Company.
"PRINCIPAL AMOUNT" shall refer to the sum of (i) the original principal
amount of this Note, (ii) all accrued but unpaid interest hereunder, and (iii)
any default payments owing under the Transaction Documents but not previously
paid or added to the Principal Amount.
"PRINCIPAL MARKET" shall mean the Nasdaq National Market or such other
principal market or exchange on which the Common Stock is then listed for
trading.
"REGISTRATION STATEMENT" shall have the meaning set forth in the
Registration Rights Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"TRADING DAY" shall mean a day on which there is trading on the Nasdaq
National Market or such other market or exchange on which the Common Stock is
then principally traded.
"UNDERLYING SHARES" means the shares of Common Stock into which the
Note is convertible (including repayment in Common Stock as set forth herein) in
accordance with the terms hereof and the Purchase Agreement.
The following terms and conditions shall apply to this Note:
SECTION 1. PAYMENTS OF PRINCIPAL AND INTEREST.
(a) Interest Payments. The Company shall pay all accrued but
unpaid interest on the Principal Amount of this Note (the "QUARTERLY AMOUNT"),
on the first business day of each consecutive calendar quarter (each an
"INTEREST PAYMENT DATE") beginning on the three month anniversary of the date
hereof. The Quarterly Amount shall be paid in cash.
(b) Payment of Principal. Subject to the provisions hereof,
including, without limitation, the right to obtain prepayment of the Principal
Amount provided herein, the Principal Amount of this Note shall be due and
payable on the Maturity Date. Notwithstanding anything to the contrary contained
herein, the Holder shall have the right, exercisable by written notice to the
Company delivered at any time during the period commencing ninety (90) days
prior to the second anniversary of the Issuance Date and ending on the date
immediately before the Maturity Date, to have all or a part of the Principal
Amount redeemed by the Company within ninety (90) days after receipt of written
notice from the Holder. Payment of the Principal Amount shall be effected in
cash.
(c) Taxes. Company may withhold and pay over to the relevant
authorities any appropriate tax or other legally required withholdings from any
interest payment to be made to the Holder to the extent that such withholding is
required by the Internal Revenue Code or any other applicable law, rule, or
regulation. If Xxxxxx believes that such payments may qualify for one of the
exceptions from withholding under the Internal Revenue Code, or for a reduced
withholding rate under the U.S./Korean tax treaty, then the Holder shall submit,
30 days prior to the first interest payment, properly executed certification
(e.g. Form W-8) to the Company
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showing that it is exempt from withholding responsibilities. If Holder provides
such certification to the Company, and it is later determined 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.
(a) Conversion by Xxxxxx. Subject to the terms hereof and
restrictions and limitations contained herein, the Holder shall have the right,
at Holder's option, at any time and from time to time to convert, in part or in
whole, the outstanding Principal Amount under this Note by delivering to the
Company a fully executed notice of conversion in the form of conversion notice
attached hereto as Exhibit A (the "CONVERSION NOTICE"), which may be transmitted
by facsimile (with the original mailed on the same date by certified or
registered mail, postage prepaid and return receipt requested) on the date of
conversion (the "CONVERSION DATE"). Notwithstanding anything to the contrary
herein, this Note and the outstanding Principal Amount hereunder shall not be
convertible into Common Stock to the extent that such conversion would result in
the Holder hereof exceeding the limitations contained in, or otherwise violating
the provisions of Section 3(l) below.
(b) [INTENTIONALLY OMITTED]
(c) [INTENTIONALLY OMITTED]
(d) Conversion Date Procedures. Upon conversion of this Note
pursuant to this Section 3, the outstanding Principal Amount hereunder shall be
converted into such number of fully paid, validly issued and non-assessable
shares of Common Stock, free of any liens, claims and encumbrances, as is
determined by dividing the outstanding Principal Amount being converted by the
then applicable Conversion Price. If a conversion under this Note cannot be
effected in full for any reason, the Company shall, upon request by the Holder,
promptly pay to the Holder in cash (but no later than five Trading Days after
the Conversion Date) an amount equal to the greater of (i) such outstanding
Principal Amount as has not been converted and (ii) the Market Price of the
Underlying Shares of such outstanding unconverted Principal Amount as of the
Conversion Date that could have been sold by the Holder pursuant to the
Registration Statement on the Conversion Date.
(e) Stock Certificates or DWAC. The Company will deliver to
the Holder not later than three (3) Trading Days after the Conversion Date, a
certificate or certificates which shall be free of restrictive legends and
trading restrictions(assuming that the Registration Statement has been declared
effective), representing the number of shares of Common Stock being acquired
upon the conversion of this Note. In lieu of delivering physical certificates
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
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such shares issuable upon conversion to the Holder (or its designee), by
crediting the account of the Holder's (or such designee's) prime broker with DTC
through its Deposit Withdrawal Agent Commission system (provided that the same
time periods herein as for stock certificates shall apply).
(f) Conversion Price Adjustments.
(i) Stock Dividends, Splits and Combinations. If
the Company or any of its subsidiaries, at any time while the Note is
outstanding (A) shall pay a stock dividend or otherwise make a distribution or
distributions on any equity securities (including instruments or securities
convertible into or exchangeable for such equity securities but excluding any
stockholder rights granted pursuant to a poison pill) in shares of Common Stock,
(B) subdivide outstanding Common Stock into a larger number of shares, (C)
combine outstanding Common Stock into a smaller number of shares, or (D) issues
new securities by reclassification of the shares of Common Stock of the Company,
then, and in each such case, the Conversion Price (as defined below) in effect
immediately prior to such event or the record date therefor, whichever is
earlier, shall be adjusted so that the Holder shall be entitled to receive the
number of shares of Common Stock or other securities of the Company which such
Holder would have owned or have been entitled to receive after the occurrence of
any of the events described above, had such Note been surrendered for conversion
immediately prior to the occurrence of such event or record date therefore,
whichever is earlier. Any adjustment made pursuant to this Section 3(f) shall
become effective (x) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of such subdivision, reclassification or
combination, at the close of business on the day upon which such corporate
action becomes effective.
(ii) Distributions. If the Company or any of its
subsidiaries, at any time while the Note is outstanding, shall distribute to all
holders of Common Stock evidences of its indebtedness or assets or cash or
rights or warrants to subscribe for or purchase any security of the Company or
any of its subsidiaries (excluding those referred to in Section 3(f)(i) above),
then concurrently with such distributions to holders of Common Stock, the
Company shall distribute to the Holder of the Note the amount of such
indebtedness, assets, cash or rights or warrants which the Holder of the Note
would have received had the Note been converted into Common Stock at the then
applicable the Conversion Price immediately prior to the record date for such
distribution.
(iii) Common Stock Issuances. In the event that
the Company or any of its Subsidiaries on or subsequent to the Closing Date
issues or sells any Common Stock (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
5
less than the Conversion Price in effect immediately prior to such issue or sale
or record date, as applicable, then the Conversion Price shall be reduced
effective concurrently with such issuance or sale to an amount determined by
multiplying the Conversion Price then in effect by a fraction, (x) the numerator
of which shall be the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale, plus (2) the number of
shares of Common Stock which the aggregate consideration received by the Company
for such additional shares would purchase at such Conversion Price, and (y) the
denominator of which shall be the number of shares of Common Stock of the
Company outstanding immediately after such issuance or sale. For the purposes of
the foregoing adjustment, in the case of any Convertible Securities, the maximum
number of shares of Common Stock issuable upon exercise, exchange or conversion
of such Convertible Securities shall be deemed to be outstanding, provided that
no further adjustment shall be made upon the actual issuance of Common Stock
upon exercise, exchange or conversion of such Convertible Securities.
(iv) Rounding of Adjustments. All calculations
under this Section 3 shall be made to the nearest cent or the nearest 1/100th of
a share, as the case may be.
(v) Notice of Adjustments. Whenever the
Conversion Price is adjusted pursuant to 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
6
Common Stock of the Company, any
consolidation or merger to which
the Company is a party, any sale or
transfer of all or substantially
all of the assets of the Company,
of any compulsory share of exchange
whereby the Common Stock is
converted into other securities,
cash or property; or
E. the Company shall authorize the
voluntary or involuntary
dissolution, liquidation or winding
up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of this Note, and shall cause to be mailed to the
Holder at its last address as it shall appear upon the books of the Company, on
or prior to the date notice to the Company's stockholders generally is given, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, redemption, rights or warrants, or if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange.
(g) Reservation and Issuance of Underlying Securities. The
Company covenants that it will at all times reserve and keep available out of
its authorized and unissued Common Stock solely for the purpose of issuance upon
conversion of this Note (including repayments in stock), free from preemptive
rights or any other actual contingent purchase rights of persons other than the
holders of the Note, not less than such number of shares of Common Stock as
shall (subject to any additional requirements of the Company as to reservation
of such shares set forth in the Purchase Agreement) be issuable (taking into
account the adjustments under this Section 3 but without regard to any ownership
limitations contained herein) upon the conversion of this Note hereunder in
Common Stock (including repayments in stock). The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly
authorized, validly issued, fully paid, nonassessable and freely tradeable.
(h) No Fractions. Upon a conversion hereunder the Company
shall not be required to issue stock certificates representing fractions of
shares of Common Stock, but may if otherwise permitted, make a cash payment in
respect of any final fraction of a share based on the closing price of a share
of Common Stock at such time. If the Company elects not, or is unable, to make
such cash payment, the Holder shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
(i) Charges, Taxes and Expenses. Issuance of certificates for
shares of Common Stock upon the conversion of this Note (including repayment in
stock) shall be made without charge to the holder hereof for any issue or
transfer tax or other incidental expense in respect of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, 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
7
Company shall not be required to pay any tax or taxes which may be payable in
respect of any such transfer.
(j) Cancellation. After all of the Principal Amount (including
accrued but unpaid interest and default payments at any time owed on this Note)
have been paid in full or converted into Common Stock, this Note shall
automatically be deemed canceled and the Holder shall promptly surrender the
Note to the Company at the Company's principal executive offices.
(k) Notices Procedures. Any and all notices or other
communications or deliveries to be provided by the Holder hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by confirmed facsimile, or by a nationally recognized overnight
courier service to the Company at the facsimile telephone number or address of
the principal place of business of the Company as set forth in the Purchase
Agreement. Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered personally,
by facsimile, or by a nationally recognized overnight courier service addressed
to the Holder at the facsimile telephone number or address of the Holder
appearing on the books of the Company, or if no such facsimile telephone number
or address appears, at the principal place of business of the Holder. Any notice
or other communication or deliveries hereunder shall be deemed delivered (i)
upon receipt, when delivered personally, (ii) when sent by facsimile, upon
receipt if received on a Business Day prior to 5:00 p.m. (Eastern Time), or on
the first Business Day following such receipt if received on a Business Day
after 5:00 p.m. (Eastern Time) or (iii) upon receipt, when deposited with a
nationally recognized overnight courier service.
(l) Overall Limit on Common Stock Issuable. Notwithstanding
anything contained herein to the contrary, the number of shares of Common Stock
issuable by the Company 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)
8
days following the Trigger Date by giving written notice to the Holder of the
Note, in which case the Company shall purchase the Shortfall at the price stated
above within three (3) Trading Days of delivery of said notice.
(m) Mandatory Conversion.
(i) If at any time after the Issuance Date, the
closing per share price of the Common Stock exceeds $8.00 (as such price may be
proportionally adjusted for stock splits, reverse splits, stock dividends and
recapitalizations) for 30 consecutive Trading Days (the "PRICING EVENT"), and
further provided that there has been Effective Registration for at least such 30
Trading Day period and including the Mandatory Conversion Date (as defined
below) the Company shall have the option, exercisable by delivering an
irrevocable notice to the Holder (the "MANDATORY CONVERSION NOTICE") to provide
that the Note shall be converted at the Conversion Price on a date (the
"MANDATORY CONVERSION DATE") at least 30 but no more than 60 days from the date
of the Mandatory Conversion Notice. The foregoing shall not affect the right of
the Holder to convert this Note pursuant to Section 3(a) above at all times up
to and including the Mandatory Conversion Date.
(ii) Notwithstanding the preceding subsection
(m)(i), the Holder of the Note shall not be obligated to convert this Note on a
Mandatory Conversion Date unless and until each of the following conditions has
been satisfied at all times from the date of the Mandatory Conversion Notice up
to and including the Mandatory Conversion Date:
(A) There is Effective Registration;
(B) No Event of Default has occurred
and is continuing; and
(C) The Holder has received unlegended
certificates representing Common
Shares (as defined in the Purchase
Agreement) with respect to all
conversions for which Conversion
Notices have been given.
(iii) In the event that the number of shares of
Common Stock that would be issued to the Holder would result in the Holder
exceeding the limitation set fort in Section 3(l) above, then the Company shall
issue to the Holder upon conversion of the Holder's Note, only the number of
shares as would not cause the Holder to exceed such amount and with respect to
the balance of the Note, an amount in cash equal to the greater of (i) the
Principal Amount of such balance of the Note and (ii) the Market Price of the
Underlying Shares of such balance of the Note as of the date of the Mandatory
Conversion Date.
(iv) Such forced conversion shall be subject to
and governed by all the provisions relating to voluntary conversion of the Note
contained herein.
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.
(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
10
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 XXXXXX KNOWINGLY
AND VOLUNTARILY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS NOTE.
(g) Replacement Notes. This Note may be exchanged by Holder at
any time and from time to time for a Note or Notes with different denominations
representing an equal aggregate outstanding Principal Amount, as reasonably
requested by Xxxxxx, upon surrendering the same. No service charge will be made
for such registration or exchange. In the event that Xxxxxx notifies the Company
that this Note has been lost, stolen or destroyed, a replacement Note identical
in all respects to the original Note (except for registration number and
Principal Amount, if different than that shown on the original Note), shall be
issued to the Holder, provided that the Holder executes and delivers to the
Company an agreement reasonably satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with the Note.
*** Signature on following page ***
11
IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed on March 1, 2004.
LIQUIDMETAL TECHNOLOGIES, INC.
By: ____________________________________________
Xxxx Xxxx, President and Chief Executive Officer
Attest:
Sign: ______________________
Print Name:
12
EXHIBIT A
FORM OF CONVERSION NOTICE
(To be Executed by the Holder
in order to Convert a Note)
The undersigned hereby elects to convert the aggregate outstanding Principal
Amount (as defined in the Note) indicated below of this Note into shares of
Common Stock, $0.001 par value per share (the "Common Stock"), of LIQUIDMETAL
TECHNOLOGIES, Inc. (the "Company") according to the conditions hereof, as of the
date written below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.
Conversion information:
__________________________________________________
Date to Effect Conversion
__________________________________________________
Aggregate Principal Amount of Note Being Converted
__________________________________________________
Number of shares of Common Stock to be Issued
__________________________________________________
Applicable Conversion Price
__________________________________________________
Signature
__________________________________________________
Name
__________________________________________________
Address
