Exhibit 10.1

 

LIQUIDMETAL TECHNOLOGIES, INC.

 

SUBSCRIPTION AGREEMENT

 

Gentlemen:

 

1.                                       SUBSCRIPTION.

 

(A)          SUBJECT TO THE CONDITIONS SET FORTH IN THIS SUBSCRIPTION AGREEMENT
(THIS “AGREEMENT”), THE UNDERSIGNED, INTENDING TO BE LEGALLY BOUND, HEREBY
IRREVOCABLY SUBSCRIBES TO PURCHASE FROM LIQUIDMETAL TECHNOLOGIES, INC., A
DELAWARE CORPORATION (THE “COMPANY”), A SUBORDINATED PROMISSORY NOTE IN THE
PRINCIPAL AMOUNT OF TWO MILLION DOLLARS ($2,000,000) (THE “NOTE”), IN
SUBSTANTIALLY THE FORM ATTACHED HERETO AS EXHIBIT A.  FOR PURPOSES OF THIS
AGREEMENT, THE NOTE AND ANY SHARES OF COMMON STOCK, PAR VALUE $0.001 PER SHARE,
OF THE COMPANY (“COMMON STOCK”) WHICH MAY BE ISSUED TO THE UNDERSIGNED BY THE
COMPANY AS PAYMENT FOR THE PRINCIPAL AND/OR INTEREST DUE UNDER THE TERMS OF THE
NOTE (THE “REPAYMENT SHARES”) ARE COLLECTIVELY REFERRED TO AS THE “SECURITIES.” 
THIS SUBSCRIPTION IS SUBMITTED TO YOU IN ACCORDANCE WITH AND SUBJECT TO THE
TERMS AND CONDITIONS DESCRIBED IN THIS AGREEMENT.

 

(B)         THE PURCHASE PRICE FOR THE NOTE SHALL BE MADE PAYABLE TO THE COMPANY
AND SHOULD BE DELIVERED, TOGETHER WITH TWO EXECUTED AND PROPERLY COMPLETED
COPIES OF THIS AGREEMENT, TO THE COMPANY.

 

(C)          THE UNDERSIGNED MAY NOT WITHDRAW THIS SUBSCRIPTION OR ANY AMOUNT
PAID PURSUANT THERETO.  THE UNDERSIGNED UNDERSTANDS THAT HIS OR HER PURCHASE OF
THE NOTE IS CONTINGENT UPON THE ACCEPTANCE IN WRITING OF THIS AGREEMENT BY THE
COMPANY.  THE COMPANY RESERVES THE RIGHT, IN ITS SOLE AND ABSOLUTE DISCRETION,
TO WITHDRAW, CANCEL, MODIFY, OR REJECT ANY SUBSCRIPTION, IN WHOLE OR IN PART,
FOR ANY REASON.

 

2.                                       REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE SUBSCRIBER. THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS TO,
AND AGREES WITH, THE COMPANY AS FOLLOWS:

 

(A)          THE UNDERSIGNED IS AN “ACCREDITED INVESTOR” AS THAT TERM IS DEFINED
IN RULE 501(A) OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”).  SPECIFICALLY: [PLEASE RESPOND BELOW AS
APPROPRIATE]

 

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IF THE SUBSCRIBER IS AN INDIVIDUAL, PLEASE ANSWER THE FOLLOWING QUESTIONS:

 

(1)                                 Did your individual annual income during
each of the two most recent years exceed $200,000 and do you expect your annual
income during the current year to exceed $200,000?

 

Yes o          No o

 

(2)                                  If you are married, did your joint annual
income with your spouse during each of the two most recent years exceed $300,000
and do you expect your joint annual income with your spouse during the current
year to exceed $300,000?

 

Yes o          No o

 

(3)                                 Does your individual or joint (together with
your spouse) net worth (including your home, home furnishings and automobile)
exceed $1,000,000?

 

Yes o          No o

 

IF THE ANSWERS TO ALL OF THE IMMEDIATELY PRECEDING QUESTIONS ARE “NO,” THE
SUBSCRIBER DOES NOT MEET THE REQUISITE FINANCIAL SOPHISTICATION STANDARDS AND
WILL NOT BE ACCEPTED AS A PURCHASER OF THE NOTE.

 

If the subscriber is a CORPORATION, LIMITED LIABILITY COMPANY, PARTNERSHIP, or
TRUST please answer the following questions:

 

(4)                                  Was the corporation, limited liability
company, partnership or trust formed for the specific purpose of investing in
the Company?

 

Yes o          No o

 

(5)                                  Does the corporation, limited liability
company, partnership or trust have total assets in excess of $5,000,000?

 

Yes o          No o

 

If the answer to question (4) is “Yes” or the answer to question (5) is “No,”
please answer the following questions:

 

(6)                                 Please list the names of each shareholder in
the corporation, each member in the limited liability company, each partner in
the partnership, and in the case of a revocable trust, each grantor of the
trust:

 

 

 

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(7)                                  Does each person listed in response to
question (6) either (i) have an individual annual income in excess of $200,000
in each of the two most recent years and expect to have an annual income in
excess of $200,000 during the current year, (ii) if married, have a joint annual
income with his/her spouse in excess of $300,000 in each of the two most recent
years and expect to have an annual income in excess of $300,000 during the
current year, or (iii) have an individual or joint (together with his/her
spouse) net worth (including home, home furnishings and automobiles) in excess
of $1,000,000?

 

Yes o          No o

 

IF THE ANSWER TO QUESTION 7 IS “NO,” THE SUBSCRIBER DOES NOT SATISFY THE
INVESTOR SUITABILITY REQUIREMENTS FOR THIS OFFERING AND WILL NOT BE ACCEPTED AS
A PURCHASER OF THE NOTE.  IN THE CASE OF A TRUST THAT IS NOT A REVOCABLE TRUST,
IF THE ANSWER TO QUESTION 4 IS “YES” OR THE ANSWER TO QUESTION 5 IS “NO”, THE
SUBSCRIBER DOES NOT SATISFY THE INVESTOR SUITABILITY REQUIREMENTS FOR THIS
OFFERING AND WILL NOT BE ACCEPTED AS A PURCHASER OF THE NOTE.

 

(B)         THE UNDERSIGNED HAS A FUNDAMENTAL UNDERSTANDING OF THE COMPANY’S
BUSINESS.

 

(C)          THE UNDERSIGNED HAS HAD ACCESS TO AND HAS RECEIVED ALL MATERIALS
THAT HAVE BEEN REQUESTED BY THE UNDERSIGNED AND HAS HAD A REASONABLE OPPORTUNITY
TO ASK QUESTIONS OF THE COMPANY AND ITS REPRESENTATIVES.  THE COMPANY HAS
ANSWERED ALL INQUIRIES THAT THE UNDERSIGNED OR THE UNDERSIGNED’S REPRESENTATIVES
HAVE ASKED THE COMPANY. THE UNDERSIGNED HAS TAKEN ALL THE STEPS NECESSARY TO
EVALUATE THE MERITS AND RISKS OF AN INVESTMENT IN THE SECURITIES.

 

(D)         THE UNDERSIGNED HAS SUCH KNOWLEDGE AND EXPERIENCE IN FINANCE,
SECURITIES, INVESTMENTS AND OTHER BUSINESS MATTERS SO AS TO BE ABLE TO PROTECT
THE INTERESTS OF THE UNDERSIGNED IN CONNECTION WITH THIS TRANSACTION, AND THE
UNDERSIGNED’S INVESTMENT IN THE COMPANY IS NOT MATERIAL WHEN COMPARED TO THE
UNDERSIGNED’S TOTAL FINANCIAL CAPACITY.

 

(E)          THE UNDERSIGNED UNDERSTANDS THAT THERE ARE SIGNIFICANT RISKS
INCIDENT TO AN INVESTMENT IN THE COMPANY AS PROPOSED HEREIN, AND THE UNDERSIGNED
CAN AFFORD TO BEAR SUCH RISKS, INCLUDING, WITHOUT LIMITATION, THE RISK OF LOSING
THE ENTIRE INVESTMENT.

 

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(F)            THE UNDERSIGNED UNDERSTANDS AND ACKNOWLEDGES THAT NO MARKET FOR
THE NOTES CURRENTLY EXISTS AND NONE MAY DEVELOP IN THE FUTURE AND THAT THE
UNDERSIGNED MAY FIND IT IMPOSSIBLE TO LIQUIDATE THE INVESTMENT.

 

(G)                                 THE UNDERSIGNED UNDERSTANDS THAT THE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, THAT THE
SECURITIES WILL BE ISSUED ON THE BASIS OF THE EXEMPTION PROVIDED BY
SECTION 4(2) OF THE SECURITIES ACT AND REGULATION D PROMULGATED THEREUNDER AND
UNDER EXEMPTIONS UNDER CERTAIN STATE SECURITIES LAWS, THAT THIS TRANSACTION HAS
NOT BEEN REVIEWED BY, PASSED ON OR SUBMITTED TO ANY FEDERAL OR STATE AGENCY OR
SELF-REGULATORY ORGANIZATION WHERE AN EXEMPTION IS BEING RELIED UPON, AND THAT
THE COMPANY’S RELIANCE THEREON IS BASED IN PART UPON THE REPRESENTATIONS MADE BY
THE UNDERSIGNED IN THIS AGREEMENT.

 

(H)                                 THE UNDERSIGNED ACKNOWLEDGES THAT THE
UNDERSIGNED IS FAMILIAR WITH THE LIMITATIONS IMPOSED BY THE SECURITIES ACT AND
THE RULES AND REGULATIONS THEREUNDER ON THE TRANSFER OF THE SECURITIES.  IN
PARTICULAR, THE UNDERSIGNED AGREES THAT THE COMPANY SHALL NOT BE REQUIRED TO
GIVE ANY EFFECT TO A SALE, ASSIGNMENT OR TRANSFER OF THE SECURITIES, UNLESS
(I) THE SALE, ASSIGNMENT OR TRANSFER OF THE SECURITIES IS REGISTERED UNDER THE
SECURITIES ACT, IT BEING UNDERSTOOD THAT THE SECURITIES ARE NOT CURRENTLY
REGISTERED FOR SALE AND THAT THE COMPANY HAS NO OBLIGATION OR INTENTION TO SO
REGISTER THE SECURITIES, OR (II) SUCH SECURITIES ARE SOLD, ASSIGNED OR
TRANSFERRED IN ACCORDANCE WITH ALL THE REQUIREMENTS AND LIMITATIONS OF RULE 144
UNDER THE SECURITIES ACT, IT BEING UNDERSTOOD THAT RULE 144 IS NOT AVAILABLE AT
THE PRESENT TIME FOR THE SALE OF THE SECURITIES, OR (III) SUCH SALE, ASSIGNMENT
OR TRANSFER IS OTHERWISE EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT. THE
UNDERSIGNED FURTHER UNDERSTANDS THAT AN OPINION OF COUNSEL AND OTHER DOCUMENTS
MAY BE REQUIRED TO TRANSFER THE SECURITIES.

 

(I)             IF THE UNDERSIGNED IS AN INDIVIDUAL, THE UNDERSIGNED IS A
BONA-FIDE RESIDENT OF THE STATE SET FORTH IN THE ADDRESS PROVIDED ON THE
UNDERSIGNED’S SIGNATURE PAGE TO THIS AGREEMENT.

 

(J)             IF THE UNDERSIGNED IS A PARTNERSHIP, TRUST, CORPORATION OR OTHER
ENTITY: (A) IT HAS MADE OTHER INVESTMENTS OR ENGAGED IN OTHER SUBSTANTIAL
BUSINESS ACTIVITIES PRIOR TO RECEIVING AN OPPORTUNITY TO PURCHASE THE
SECURITIES; (B) IT WAS NOT ORGANIZED FOR THE PURPOSE OF ACQUIRING THE
SECURITIES; (C) THE PERSON EXECUTING ON BEHALF OF THE PARTNERSHIP, TRUST,
CORPORATION OR OTHER ENTITY HAS THE FULL POWER AND AUTHORITY TO EXECUTE AND
COMPLY WITH THE TERMS OF THIS AGREEMENT ON BEHALF OF SUCH ENTITY AND TO MAKE THE
REPRESENTATIONS AND WARRANTIES MADE HEREIN ON ITS BEHALF; (D) ITS PRINCIPAL
PLACE OF BUSINESS AND PRINCIPAL OFFICE ARE LOCATED IN THE STATE SET FORTH IN ITS
ADDRESS BELOW; AND (E) THE INVESTMENT IN THE SECURITIES HAS BEEN AFFIRMATIVELY
AUTHORIZED, IF REQUIRED, BY THE GOVERNING BOARD OF SUCH ENTITY AND IS NOT
PROHIBITED BY THE GOVERNING DOCUMENTS OF THE ENTITY.

 

(K)          THE UNDERSIGNED WILL ACQUIRE THE SECURITIES FOR THE UNDERSIGNED’S
OWN ACCOUNT FOR INVESTMENT AND NOT WITH A VIEW TO THE SALE OR DISTRIBUTION
THEREOF OR THE GRANTING OF ANY PARTICIPATION THEREIN, AND HAS NO PRESENT
INTENTION OF DISTRIBUTING OR SELLING TO OTHERS ANY OF SUCH INTEREST OR GRANTING
ANY PARTICIPATION THEREIN.

 

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(L)             THE UNDERSIGNED ACKNOWLEDGES THAT THE REPRESENTATIONS,
WARRANTIES AND AGREEMENTS MADE BY THE UNDERSIGNED HEREIN SHALL SURVIVE THE
EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE PURCHASE OF THE NOTE.  THE
INFORMATION STATED HEREIN IS TRUE AND COMPLETE AS OF THE DATE HEREOF AND WILL BE
TRUE AND COMPLETE AS OF THE DATE ON WHICH THE COMPANY SHALL SELL THE NOTE TO THE
UNDERSIGNED.  IF, PRIOR TO THE FINAL CONSUMMATION OF THE OFFER AND SALE OF THE
NOTE, THERE SHOULD BE ANY CHANGE IN SUCH INFORMATION OR ANY OF SUCH INFORMATION
BECOMES INCORRECT OR INCOMPLETE, THE UNDERSIGNED AGREES TO NOTIFY AND SUPPLY
PROMPTLY CORRECTIVE INFORMATION TO THE COMPANY.

 

3.                                       REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.  THE COMPANY HEREBY REPRESENTS AND WARRANTS TO THE UNDERSIGNED THAT:

 

(A)                                  ORGANIZATION AND QUALIFICATION.  THE
COMPANY AND ITS “SUBSIDIARIES” (WHICH FOR PURPOSES OF THIS AGREEMENT MEANS ANY
ENTITY IN WHICH THE COMPANY, DIRECTLY OR INDIRECTLY, OWNS CAPITAL STOCK OR HOLDS
AN EQUITY OR SIMILAR INTEREST) ARE CORPORATIONS OR OTHER LEGAL ENTITIES DULY
ORGANIZED AND VALIDLY EXISTING IN GOOD STANDING UNDER THE LAWS OF THE
JURISDICTIONS IN WHICH THEY ARE ORGANIZED, AS SET FORTH IN THE DISCLOSURE
SCHEDULE ATTACHED HERETO (THE “DISCLOSURE SCHEDULE”), AND HAVE THE REQUISITE
POWER AND AUTHORIZATION TO OWN THEIR PROPERTIES AND TO CARRY ON THEIR BUSINESS
AS NOW BEING CONDUCTED.  THE COMPANY AND EACH SUBSIDIARY IS DULY QUALIFIED AS A
FOREIGN CORPORATION OR OTHER LEGAL ENTITY TO DO BUSINESS AND IS IN GOOD STANDING
IN EVERY JURISDICTION IN WHICH ITS OWNERSHIP OF PROPERTY OR THE NATURE OF THE
BUSINESS CONDUCTED BY IT MAKES SUCH QUALIFICATION NECESSARY, AS SET FORTH IN THE
DISCLOSURE SCHEDULE, EXCEPT TO THE EXTENT THAT THE FAILURE TO BE SO QUALIFIED OR
BE IN GOOD STANDING WOULD NOT HAVE A MATERIAL ADVERSE EFFECT.  AS USED IN THIS
AGREEMENT, “MATERIAL ADVERSE EFFECT” MEANS ANY MATERIAL ADVERSE EFFECT ON THE
BUSINESS, PROPERTIES, ASSETS, OPERATIONS, RESULTS OF OPERATIONS, OR CONDITION
(FINANCIAL OR OTHERWISE) OF THE COMPANY AND ITS SUBSIDIARIES, TAKEN AS A WHOLE. 
THE COMPANY HAS NO SUBSIDIARIES EXCEPT AS SET FORTH IN THE DISCLOSURE SCHEDULE
OR IN THE SEC DOCUMENTS (AS DEFINED BELOW).

 

(B)                                 AUTHORIZATION; ENFORCEMENT; VALIDITY.  THE
COMPANY HAS THE REQUISITE CORPORATE POWER AND AUTHORITY TO ENTER INTO AND
PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE NOTE (COLLECTIVELY, THE
“TRANSACTION DOCUMENTS”) AND TO ISSUE THE SECURITIES IN ACCORDANCE WITH THE
TERMS HEREOF AND THEREOF.  THE EXECUTION AND DELIVERY OF THE TRANSACTION
DOCUMENTS BY THE COMPANY AND THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY, INCLUDING, WITHOUT LIMITATION, THE ISSUANCE OF
THE NOTE AND THE RESERVATION FOR ISSUANCE AND THE ISSUANCE OF THE REPAYMENT
SHARES, HAVE BEEN DULY AUTHORIZED BY THE COMPANY’S BOARD OF DIRECTORS AND NO
FURTHER CONSENT OR AUTHORIZATION IS REQUIRED BY THE COMPANY, ITS BOARD OF
DIRECTORS OR ITS STOCKHOLDERS.  THIS AGREEMENT AND THE NOTE HAVE BEEN DULY
EXECUTED AND DELIVERED BY THE COMPANY, AND CONSTITUTE THE LEGAL, VALID AND
BINDING OBLIGATIONS OF THE COMPANY ENFORCEABLE AGAINST THE COMPANY IN ACCORDANCE
WITH THEIR RESPECTIVE TERMS, EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY
GENERAL PRINCIPLES OF EQUITY OR APPLICABLE BANKRUPTCY, INSOLVENCY,
REORGANIZATION, MORATORIUM, LIQUIDATION OR SIMILAR LAWS RELATING TO, OR
AFFECTING GENERALLY, THE ENFORCEMENT OF APPLICABLE CREDITORS’ RIGHTS AND
REMEDIES, AND EXCEPT THAT ANY RIGHTS TO INDEMNITY OR CONTRIBUTION UNDER THE
TRANSACTION DOCUMENTS MAY BE LIMITED BY FEDERAL AND STATE SECURITIES LAWS AND
PUBLIC POLICY CONSIDERATIONS.

 

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(C)                                  ISSUANCE OF SECURITIES.  THE NOTE IS DULY
AUTHORIZED AND, UPON ISSUANCE IN ACCORDANCE WITH THE TERMS HEREOF, SHALL BE FREE
FROM ALL TAXES, LIENS AND CHARGES WITH RESPECT TO THE ISSUE THEREOF.  A NUMBER
OF SHARES OF COMMON STOCK OF THE COMPANY EQUAL TO THE NUMBER REPAYMENT SHARES
ISSUABLE UNDER THE TERMS OF THE NOTE WILL BE DULY AUTHORIZED AND RESERVED FOR
ISSUANCE.  UPON ISSUANCE IN ACCORDANCE WITH THE TERMS OF THE NOTE, SUCH SHARES
WILL BE VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE AND FREE FROM ALL TAXES,
LIENS AND CHARGES WITH RESPECT TO THE ISSUE THEREOF, WITH THE HOLDER BEING
ENTITLED TO ALL RIGHTS ACCORDED TO A HOLDER OF COMMON STOCK.  ASSUMING THE
ACCURACY OF EACH OF THE REPRESENTATIONS AND WARRANTIES OF THE UNDERSIGNED
CONTAINED IN SECTION 2 OF THIS AGREEMENT, THE ISSUANCE BY THE COMPANY OF THE
SECURITIES IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SECTION 5 OF THE
SECURITIES ACT.

 

(D)                                 NO CONFLICTS.  THE EXECUTION, DELIVERY AND
PERFORMANCE OF THE TRANSACTION DOCUMENTS BY THE COMPANY AND THE CONSUMMATION BY
THE COMPANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY (INCLUDING,
WITHOUT LIMITATION, THE ISSUANCE OF THE NOTE AND THE RESERVATION FOR ISSUANCE
AND ISSUANCE OF THE REPAYMENT SHARES) 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 OR THE BYLAWS OF THE COMPANY
OR ANY OF ITS SUBSIDIARIES, (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 MATERIAL AGREEMENT, INDENTURE OR INSTRUMENT TO WHICH THE
COMPANY OR ANY OF ITS SUBSIDIARIES IS A PARTY, EXCEPT WHICH ARE THE SUBJECT OF
WRITTEN WAIVERS OR CONSENTS WHICH HAVE BEEN OBTAINED OR EFFECTED ON OR PRIOR TO
THE DATE HEREOF OR (III) RESULT IN A VIOLATION OF ANY LAW, RULE, REGULATION,
ORDER, JUDGMENT OR DECREE (INCLUDING FEDERAL AND STATE SECURITIES LAWS AND
REGULATIONS) APPLICABLE TO THE COMPANY OR ANY OF ITS SUBSIDIARIES OR BY WHICH
ANY PROPERTY OR ASSET OF THE COMPANY OR ANY OF ITS SUBSIDIARIES IS BOUND OR
AFFECTED, EXCEPT IN THE CASE OF CLAUSES (II) AND (III), FOR SUCH BREACHES OR
DEFAULTS AS COULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.

 

(E)                                  CONSENTS.  EXCEPT AS DISCLOSED IN THE
DISCLOSURE SCHEDULE OR IN THE SEC DOCUMENTS, THE COMPANY IS NOT REQUIRED TO
OBTAIN ANY CONSENT, AUTHORIZATION OR ORDER OF, OR MAKE ANY FILING OR
REGISTRATION WITH, ANY COURT, GOVERNMENTAL AGENCY OR ANY REGULATORY OR
SELF-REGULATORY AGENCY OR ANY OTHER PERSON IN ORDER FOR IT TO EXECUTE, DELIVER
OR PERFORM ANY OF ITS OBLIGATIONS UNDER OR CONTEMPLATED BY THE TRANSACTION
DOCUMENTS, IN EACH CASE IN ACCORDANCE WITH THE TERMS HEREOF OR THEREOF.  ALL
CONSENTS, AUTHORIZATIONS, ORDERS, FILINGS AND REGISTRATIONS WHICH THE COMPANY IS
REQUIRED TO OBTAIN PURSUANT TO THE PRECEDING SENTENCE HAVE BEEN OBTAINED OR
EFFECTED ON OR PRIOR TO THE DATE HEREOF (OTHER THAN FILINGS AND REPORTS RELATING
TO THE OFFER AND SALE OF THE SECURITIES REQUIRED UNDER REGULATION D OR
APPLICABLE SECURITIES OR “BLUE SKY” LAWS), AND THE COMPANY AND ITS SUBSIDIARIES
ARE UNAWARE OF ANY FACTS OR CIRCUMSTANCES WHICH MIGHT PREVENT THE COMPANY FROM
OBTAINING OR EFFECTING ANY OF THE REGISTRATIONS, APPLICATIONS OR FILINGS
PURSUANT TO THE PRECEDING SENTENCE.

 

(F)                                    ACKNOWLEDGMENT REGARDING THE SUBSCRIBER’S
PURCHASE OF SECURITIES.  THE COMPANY ACKNOWLEDGES AND AGREES THAT THE
UNDERSIGNED IS ACTING SOLELY IN THE CAPACITY OF ARM’S LENGTH PURCHASER WITH
RESPECT TO THE TRANSACTION DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY
AND THEREBY AND THAT, EXCEPT AS SET FORTH IN THE DISCLOSURE SCHEDULE OR IN THE
SEC DOCUMENTS, THE UNDERSIGNED IS NOT (I) AN OFFICER OR DIRECTOR OF THE COMPANY,
(II) AN “AFFILIATE” OF THE COMPANY (AS DEFINED IN RULE 144) OR (III) TO THE
KNOWLEDGE OF THE COMPANY, A “BENEFICIAL OWNER” OF MORE THAN 10% OF THE COMMON
STOCK (AS DEFINED FOR PURPOSES OF RULE 13D-3 OF THE

 

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SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE “EXCHANGE ACT”)).  THE COMPANY
FURTHER ACKNOWLEDGES THAT THE UNDERSIGNED IS NOT ACTING AS A FINANCIAL ADVISOR
OR FIDUCIARY OF THE COMPANY (OR IN ANY SIMILAR CAPACITY) WITH RESPECT TO THE
TRANSACTION DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND
ANY ADVICE GIVEN BY THE UNDERSIGNED OR ANY OF ITS REPRESENTATIVES OR AGENTS IN
CONNECTION WITH THE TRANSACTION DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY IS MERELY INCIDENTAL TO THE UNDERSIGNED’S PURCHASE OF THE
SECURITIES.

 

(G)                                 NO GENERAL SOLICITATION; PLACEMENT AGENT’S
FEES.  NEITHER THE COMPANY, NOR ANY OF ITS AFFILIATES, NOR ANY PERSON ACTING ON
ITS OR THEIR BEHALF, HAS ENGAGED IN ANY FORM OF GENERAL SOLICITATION OR GENERAL
ADVERTISING (WITHIN THE MEANING OF REGULATION D) IN CONNECTION WITH THE OFFER OR
SALE OF THE SECURITIES.  THE COMPANY SHALL BE RESPONSIBLE FOR THE PAYMENT OF ANY
PLACEMENT AGENT’S FEES, FINANCIAL ADVISORY FEES, OR BROKERS’ COMMISSIONS (OTHER
THAN FOR PERSONS ENGAGED BY THE UNDERSIGNED OR ITS INVESTMENT ADVISOR) RELATING
TO OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY.

 

(H)                                 NO INTEGRATED OFFERING.  NONE OF THE
COMPANY, ITS SUBSIDIARIES, ANY OF THEIR AFFILIATES, OR ANY PERSON ACTING ON
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 REQUIRE REGISTRATION OF ANY OF THE SECURITIES UNDER THE SECURITIES ACT OR
CAUSE THIS OFFERING OF THE SECURITIES TO BE INTEGRATED WITH PRIOR OFFERINGS BY
THE COMPANY FOR PURPOSES OF THE SECURITIES ACT OR ANY APPLICABLE STOCKHOLDER
APPROVAL PROVISIONS, INCLUDING, WITHOUT LIMITATION, UNDER THE RULES AND
REGULATIONS OF ANY EXCHANGE OR AUTOMATED QUOTATION SYSTEM ON WHICH ANY OF THE
SECURITIES OF THE COMPANY ARE LISTED OR DESIGNATED.

 

(I)                                     RIGHTS AGREEMENT.  THE COMPANY HAS NOT
ADOPTED A STOCKHOLDER RIGHTS PLAN OR SIMILAR ARRANGEMENT RELATING TO
ACCUMULATIONS OF BENEFICIAL OWNERSHIP OF COMMON STOCK OR A CHANGE IN CONTROL OF
THE COMPANY.

 

(J)                                     SEC DOCUMENTS.  THE COMPANY HAS FILED,
OR INTENDS TO FILE, ALL REPORTS, SCHEDULES, FORMS, STATEMENTS AND OTHER
DOCUMENTS REQUIRED TO BE FILED BY IT WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION (THE “SEC”) PURSUANT TO THE REPORTING REQUIREMENTS OF THE
EXCHANGE ACT (ALL OF THE FOREGOING FILED PRIOR TO THE DATE HEREOF (WHETHER OR
NOT REQUIRED TO BE FILED), THE DRAFT OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K
ATTACHED HERETO, 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”).  AS OF THEIR RESPECTIVE DATES,
THE SEC DOCUMENTS COMPLIED IN ALL MATERIAL RESPECTS WITH THE REQUIREMENTS OF THE
EXCHANGE ACT AND THE RULES AND REGULATIONS OF THE SEC PROMULGATED THEREUNDER
APPLICABLE TO THE SEC DOCUMENTS, AND, TO THE COMPANY’S KNOWLEDGE, NONE OF THE
SEC DOCUMENTS, AT THE TIME THEY WERE FILED WITH THE SEC OR ARE INTENDED TO BE
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 THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY
WERE MADE, NOT MISLEADING.

 

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(K)                                  FINANCIAL STATEMENTS.  AS OF THEIR
RESPECTIVE DATES, THE FINANCIAL STATEMENTS OF THE COMPANY INCLUDED IN THE SEC
DOCUMENTS COMPLIED AS TO FORM IN ALL MATERIAL RESPECTS WITH APPLICABLE
ACCOUNTING REQUIREMENTS AND THE PUBLISHED RULES AND REGULATIONS OF THE SEC WITH
RESPECT THERETO.  SUCH FINANCIAL STATEMENTS HAVE BEEN PREPARED IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, CONSISTENTLY APPLIED, DURING THE
PERIODS INVOLVED (EXCEPT (I) AS MAY BE OTHERWISE INDICATED IN SUCH FINANCIAL
STATEMENTS OR THE NOTES THERETO, OR (II) IN THE CASE OF UNAUDITED INTERIM
STATEMENTS, TO THE EXTENT THEY MAY EXCLUDE FOOTNOTES OR MAY BE CONDENSED OR
SUMMARY STATEMENTS) AND FAIRLY PRESENT IN ALL MATERIAL RESPECTS THE FINANCIAL
POSITION OF THE COMPANY AS OF THE DATES THEREOF AND THE RESULTS OF ITS
OPERATIONS AND CASH FLOWS FOR THE PERIODS THEN ENDED (SUBJECT, IN THE CASE OF
UNAUDITED STATEMENTS, TO NORMAL YEAR-END AUDIT ADJUSTMENTS).

 

(L)                                     CONDUCT OF BUSINESS.  NEITHER THE
COMPANY NOR ANY OF ITS SUBSIDIARIES IS IN VIOLATION OF ANY TERM OF OR IN DEFAULT
UNDER ITS CERTIFICATE OF INCORPORATION OR BYLAWS OR ITS ORGANIZATIONAL CHARTER
OR BYLAWS, RESPECTIVELY.  EXCEPT AS DISCLOSED IN THE DISCLOSURE SCHEDULE OR IN
THE SEC DOCUMENTS, NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES IS IN
VIOLATION OF ANY JUDGMENT, DECREE OR ORDER OR ANY STATUTE, ORDINANCE, RULE OR
REGULATION APPLICABLE TO THE COMPANY OR ITS SUBSIDIARIES, AND NEITHER THE
COMPANY NOR ANY OF ITS SUBSIDIARIES WILL CONDUCT ITS BUSINESS IN VIOLATION OF
ANY OF THE FOREGOING, EXCEPT FOR POSSIBLE VIOLATIONS WHICH WOULD NOT,
INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT.

 

(M)                               REGULATORY PERMITS.  THE COMPANY AND ITS
SUBSIDIARIES POSSESS ALL CERTIFICATES, AUTHORIZATIONS AND PERMITS ISSUED BY THE
APPROPRIATE FEDERAL, STATE OR FOREIGN REGULATORY AUTHORITIES NECESSARY TO
CONDUCT THEIR RESPECTIVE BUSINESSES, EXCEPT WHERE THE FAILURE TO POSSESS SUCH
CERTIFICATES, AUTHORIZATIONS OR PERMITS WOULD NOT HAVE, INDIVIDUALLY OR IN THE
AGGREGATE, A MATERIAL ADVERSE EFFECT, 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.

 

(N)                                 EQUITY CAPITALIZATION.  AS OF THE DATE
HEREOF, THE NUMBER OF SHARES AND TYPE OF ALL AUTHORIZED, ISSUED, AND OUTSTANDING
CAPITAL STOCK OF THE COMPANY, AND ALL SHARES OF COMMON STOCK RESERVED FOR
ISSUANCE UNDER THE PLANS (AS DEFINED BELOW), IS SET FORTH IN THE DISCLOSURE
SCHEDULE.  ALL OF SUCH OUTSTANDING SHARES HAVE BEEN, OR UPON ISSUANCE WILL BE,
VALIDLY ISSUED AND ARE FULLY PAID AND NONASSESSABLE.  ALL OF SUCH OUTSTANDING
SHARES OF CAPITAL STOCK ARE DULY AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND
NONASSESSABLE.  NO SHARES OF CAPITAL STOCK OF THE COMPANY ARE SUBJECT TO
PREEMPTIVE RIGHTS OR ANY OTHER SIMILAR RIGHTS OF THE SHAREHOLDERS OF THE COMPANY
OR ANY LIENS OR ENCUMBRANCES IMPOSED THROUGH THE ACTIONS OR FAILURE TO ACT OF
THE COMPANY.  EXCEPT AS DISCLOSED IN THE DISCLOSURE SCHEDULE OR IN THE SEC
DOCUMENTS AND OTHER THAN PURSUANT TO THIS AGREEMENT AND AS CONTEMPLATED BY THE
COMPANY’S EMPLOYEE AND DIRECTOR BENEFIT, INCENTIVE, OR OPTION PLANS DISCLOSED IN
THE COMPANY’S SEC DOCUMENTS (THE “PLANS”), (I) THERE ARE NO OUTSTANDING OPTIONS,
WARRANTS, SCRIP, RIGHTS TO SUBSCRIBE FOR, PUTS, CALLS, OR RIGHTS OF FIRST
REFUSAL, AND (II) THERE ARE NO AGREEMENTS, UNDERSTANDINGS, CLAIMS, ANTIDILUTION
PROTECTION OR OTHER COMMITMENTS OR RIGHTS OF ANY CHARACTER WHATSOEVER THAT COULD
REQUIRE THE COMPANY TO ISSUE ADDITIONAL SHARES OF CAPITAL STOCK OF THE COMPANY
OR ADJUST THE PURCHASE OR EXERCISE PRICE OF ANY SUCH INSTRUMENT.  EXCEPT AS
DISCLOSED IN THE DISCLOSURE SCHEDULE OR IN THE SEC DOCUMENTS, THERE ARE NO
AGREEMENTS OR ARRANGEMENTS (OTHER THAN THE REGISTRATION RIGHTS AGREEMENT, DATED
AS OF MAY 1, 2009, BETWEEN THE COMPANY AND THE BUYERS SIGNATORY THERETO) UNDER
WHICH THE COMPANY IS OBLIGATED TO REGISTER THE SALE OF ANY OF ITS SECURITIES
UNDER THE SECURITIES ACT.

 

8

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(O)                                 INDEBTEDNESS AND OTHER CONTRACTS.  EXCEPT AS
DISCLOSED IN THE DISCLOSURE SCHEDULE OR IN THE SEC DOCUMENTS, NEITHER THE
COMPANY NOR ANY OF ITS SUBSIDIARIES (I) HAS ANY OUTSTANDING INDEBTEDNESS, OR
(II) IS IN VIOLATION OF ANY TERM OF OR IN DEFAULT UNDER ANY CONTRACT, AGREEMENT
OR INSTRUMENT RELATING TO ANY INDEBTEDNESS.  FOR PURPOSES OF THIS AGREEMENT: 
(X) “INDEBTEDNESS” OF ANY PERSON MEANS, WITHOUT DUPLICATION (A) ALL INDEBTEDNESS
FOR BORROWED MONEY, (B) ALL OBLIGATIONS ISSUED, UNDERTAKEN OR ASSUMED AS THE
DEFERRED PURCHASE PRICE OF PROPERTY OR SERVICES (OTHER THAN TRADE PAYABLES
ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS), (C) ALL REIMBURSEMENT OR
PAYMENT OBLIGATIONS WITH RESPECT TO LETTERS OF CREDIT, SURETY BONDS AND OTHER
SIMILAR INSTRUMENTS, (D) ALL OBLIGATIONS EVIDENCED BY NOTES, BONDS, DEBENTURES
OR SIMILAR INSTRUMENTS, INCLUDING OBLIGATIONS SO EVIDENCED INCURRED IN
CONNECTION WITH THE ACQUISITION OF PROPERTY, ASSETS OR BUSINESSES, (E) ALL
INDEBTEDNESS CREATED OR ARISING UNDER ANY CONDITIONAL SALE OR OTHER TITLE
RETENTION AGREEMENT, OR INCURRED AS FINANCING, IN EITHER CASE WITH RESPECT TO
ANY PROPERTY OR ASSETS ACQUIRED WITH THE PROCEEDS OF SUCH INDEBTEDNESS (EVEN
THOUGH THE RIGHTS AND REMEDIES OF THE SELLER OR BANK UNDER SUCH AGREEMENT IN THE
EVENT OF DEFAULT ARE LIMITED TO REPOSSESSION OR SALE OF SUCH PROPERTY), (F) ALL
MONETARY OBLIGATIONS UNDER ANY LEASING OR SIMILAR ARRANGEMENT WHICH, IN
CONNECTION WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, CONSISTENTLY APPLIED
FOR THE PERIODS COVERED THEREBY, IS CLASSIFIED AS A CAPITAL LEASE, (G) ALL
INDEBTEDNESS REFERRED TO IN CLAUSES (A) THROUGH (F) ABOVE SECURED BY (OR FOR
WHICH THE HOLDER OF SUCH INDEBTEDNESS HAS AN EXISTING RIGHT, CONTINGENT OR
OTHERWISE, TO BE SECURED BY) ANY MORTGAGE, LIEN, PLEDGE, CHARGE, SECURITY
INTEREST OR OTHER ENCUMBRANCE UPON OR IN ANY PROPERTY OR ASSETS (INCLUDING
ACCOUNTS AND CONTRACT RIGHTS) OWNED BY ANY PERSON, EVEN THOUGH THE PERSON WHICH
OWNS SUCH ASSETS OR PROPERTY HAS NOT ASSUMED OR BECOME LIABLE FOR THE PAYMENT OF
SUCH INDEBTEDNESS, AND (H) ALL CONTINGENT OBLIGATIONS (AS DEFINED BELOW) IN
RESPECT OF INDEBTEDNESS OR OBLIGATIONS OF OTHERS OF THE KINDS REFERRED TO IN
CLAUSES (A) THROUGH (G) ABOVE; (Y) “CONTINGENT OBLIGATION” MEANS, AS TO ANY
PERSON, ANY DIRECT OR INDIRECT LIABILITY, CONTINGENT OR OTHERWISE, OF THAT
PERSON WITH RESPECT TO ANY INDEBTEDNESS, LEASE, DIVIDEND OR OTHER OBLIGATION OF
ANOTHER PERSON IF THE PRIMARY PURPOSE OR INTENT OF THE PERSON INCURRING SUCH
LIABILITY, OR THE PRIMARY EFFECT THEREOF, IS TO PROVIDE ASSURANCE TO THE OBLIGEE
OF SUCH LIABILITY THAT SUCH LIABILITY WILL BE PAID OR DISCHARGED, OR THAT ANY
AGREEMENTS RELATING THERETO WILL BE COMPLIED WITH, OR THAT THE HOLDERS OF SUCH
LIABILITY WILL BE PROTECTED (IN WHOLE OR IN PART) AGAINST LOSS WITH RESPECT
THERETO; AND (Z) “PERSON” MEANS AN INDIVIDUAL, A LIMITED LIABILITY COMPANY, A
PARTNERSHIP, A JOINT VENTURE, A CORPORATION, A TRUST, AN UNINCORPORATED
ORGANIZATION AND A GOVERNMENT OR ANY DEPARTMENT OR AGENCY THEREOF.

 

(P)                                 ABSENCE OF LITIGATION.  EXCEPT AS DISCLOSED
IN THE DISCLOSURE SCHEDULE OR IN THE SEC DOCUMENTS, 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, THREATENED AGAINST OR AFFECTING THE COMPANY, THE
COMMON STOCK OR ANY OF THE COMPANY’S SUBSIDIARIES THAT WOULD, INDIVIDUALLY OR IN
THE AGGREGATE, REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.

 

(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
REASONABLY BELIEVES TO BE PRUDENT AND CUSTOMARY IN THE BUSINESSES IN WHICH THE
COMPANY AND ITS SUBSIDIARIES ARE ENGAGED.  NEITHER THE COMPANY NOR ANY SUCH
SUBSIDIARY HAS BEEN REFUSED ANY INSURANCE COVERAGE SOUGHT OR APPLIED FOR AND
NEITHER

 

9

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THE COMPANY NOR ANY SUCH SUBSIDIARY HAS ANY REASON TO BELIEVE THAT IT WILL NOT
BE ABLE TO RENEW ITS EXISTING INSURANCE COVERAGE AS AND WHEN SUCH COVERAGE
EXPIRES OR TO OBTAIN SIMILAR COVERAGE FROM SIMILAR INSURERS AS MAY BE NECESSARY
TO CONTINUE ITS BUSINESS AT A COST THAT WOULD NOT HAVE A MATERIAL ADVERSE
EFFECT.

 

(R)                                    EMPLOYEE RELATIONS.  EXCEPT AS DISCLOSED
IN THE DISCLOSURE SCHEDULE OR IN THE SEC DOCUMENTS, NEITHER THE COMPANY NOR ANY
OF ITS SUBSIDIARIES IS A PARTY TO ANY COLLECTIVE BARGAINING AGREEMENT OR EMPLOYS
ANY MEMBER OF A UNION.  THE COMPANY AND ITS SUBSIDIARIES BELIEVE THAT THEIR
RELATIONS WITH THEIR EMPLOYEES ARE GOOD.  NO EXECUTIVE OFFICER OF THE COMPANY
(AS DEFINED IN RULE 501(F) OF THE SECURITIES ACT) HAS NOTIFIED THE COMPANY THAT
SUCH OFFICER INTENDS TO LEAVE THE COMPANY OR OTHERWISE TERMINATE SUCH OFFICER’S
EMPLOYMENT WITH THE COMPANY.  NO EXECUTIVE OFFICER OF THE COMPANY, TO THE
KNOWLEDGE OF THE COMPANY, IS, OR IS NOW EXPECTED TO BE, IN VIOLATION OF ANY
MATERIAL TERM OF ANY EMPLOYMENT CONTRACT, CONFIDENTIALITY, DISCLOSURE OR
PROPRIETARY INFORMATION AGREEMENT, NON-COMPETITION AGREEMENT, OR ANY OTHER
CONTRACT OR AGREEMENT OR ANY RESTRICTIVE COVENANT.  THE COMPANY AND ITS
SUBSIDIARIES ARE IN COMPLIANCE WITH ALL FEDERAL, STATE, LOCAL AND FOREIGN LAWS
AND REGULATIONS RESPECTING EMPLOYMENT AND EMPLOYMENT PRACTICES, TERMS AND
CONDITIONS OF EMPLOYMENT AND WAGES AND HOURS, EXCEPT WHERE FAILURE TO BE IN
COMPLIANCE WOULD NOT, EITHER INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE
EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.

 

(S)                                  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 THE DISCLOSURE
SCHEDULE OR IN THE SEC DOCUMENTS OR SUCH AS DO NOT MATERIALLY 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 AND ANY OF ITS SUBSIDIARIES.  ANY REAL PROPERTY
AND FACILITIES HELD UNDER LEASE BY THE COMPANY AND 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.

 

(T)                                    INTELLECTUAL PROPERTY RIGHTS.  TO THE
KNOWLEDGE OF THE COMPANY AND EXCEPT AS SET FORTH IN THE DISCLOSURE SCHEDULE OR
IN THE SEC DOCUMENTS, THE COMPANY AND ITS SUBSIDIARIES OWN OR POSSESS ADEQUATE
RIGHTS OR LICENSES TO USE ALL TRADEMARKS, TRADE NAMES, SERVICE MARKS, SERVICE
MARK REGISTRATIONS, SERVICE NAMES, PATENTS, PATENT RIGHTS, COPYRIGHTS,
INVENTIONS, LICENSES, APPROVALS, GOVERNMENTAL AUTHORIZATIONS, TRADE SECRETS AND
OTHER INTELLECTUAL PROPERTY RIGHTS (“INTELLECTUAL PROPERTY RIGHTS”) NECESSARY TO
CONDUCT THEIR RESPECTIVE BUSINESSES AS NOW CONDUCTED.  THE COMPANY DOES NOT HAVE
ANY KNOWLEDGE OF ANY INFRINGEMENT BY THE COMPANY OR ITS SUBSIDIARIES OF
INTELLECTUAL PROPERTY RIGHTS OF OTHERS.  EXCEPT AS SET FORTH IN THE DISCLOSURE
SCHEDULE OR IN THE SEC DOCUMENTS, THERE IS NO CLAIM, ACTION OR PROCEEDING BEING
MADE OR BROUGHT, OR TO THE KNOWLEDGE OF THE COMPANY, BEING THREATENED, AGAINST
THE COMPANY OR ITS SUBSIDIARIES REGARDING ITS INTELLECTUAL PROPERTY RIGHTS WHICH
COULD HAVE A MATERIAL ADVERSE EFFECT.

 

10

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(U)                                 ENVIRONMENTAL LAWS.  THE COMPANY AND ITS
SUBSIDIARIES (I) ARE IN MATERIAL COMPLIANCE WITH ANY AND ALL ENVIRONMENTAL LAWS
(AS HEREINAFTER DEFINED), (II) HAVE RECEIVED ALL MATERIAL PERMITS, LICENSES OR
OTHER APPROVALS REQUIRED OF THEM UNDER APPLICABLE ENVIRONMENTAL LAWS TO CONDUCT
THEIR RESPECTIVE BUSINESSES AND (III) ARE IN MATERIAL COMPLIANCE WITH ALL TERMS
AND CONDITIONS OF ANY SUCH PERMIT, LICENSE OR APPROVAL WHERE, IN EACH OF THE
FOREGOING CLAUSES (I), (II) AND (III), THE FAILURE TO SO COMPLY COULD BE
REASONABLY EXPECTED TO HAVE, INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL
ADVERSE EFFECT.  THE TERM “ENVIRONMENTAL LAWS” MEANS ALL FEDERAL, STATE, LOCAL
OR FOREIGN LAWS RELATING TO POLLUTION OR PROTECTION OF HUMAN HEALTH OR THE
ENVIRONMENT (INCLUDING, WITHOUT LIMITATION, AMBIENT AIR, SURFACE WATER,
GROUNDWATER, LAND SURFACE OR SUBSURFACE STRATA), INCLUDING, WITHOUT LIMITATION,
LAWS RELATING TO EMISSIONS, DISCHARGES, RELEASES OR THREATENED RELEASES OF
CHEMICALS, POLLUTANTS, CONTAMINANTS, OR TOXIC OR HAZARDOUS SUBSTANCES OR WASTES
(COLLECTIVELY, “HAZARDOUS MATERIALS”) INTO THE ENVIRONMENT, OR OTHERWISE
RELATING TO THE MANUFACTURE, PROCESSING, DISTRIBUTION, USE, TREATMENT, STORAGE,
DISPOSAL, TRANSPORT OR HANDLING OF HAZARDOUS MATERIALS, AS WELL AS ALL
AUTHORIZATIONS, CODES, DECREES, DEMANDS OR DEMAND LETTERS, INJUNCTIONS,
JUDGMENTS, LICENSES, NOTICES OR NOTICE LETTERS, ORDERS, PERMITS, PLANS OR
REGULATIONS ISSUED, ENTERED, PROMULGATED OR APPROVED THEREUNDER.

 

(V)                                 TAX STATUS.  THE COMPANY AND EACH OF ITS
SUBSIDIARIES (I) HAS MADE OR FILED ALL FEDERAL AND STATE INCOME AND ALL OTHER
TAX RETURNS, REPORTS AND DECLARATIONS REQUIRED BY ANY JURISDICTION IN WHICH SUCH
FILINGS ARE REQUIRED, (II) HAS PAID ALL TAXES AND OTHER GOVERNMENTAL ASSESSMENTS
AND CHARGES THAT ARE OWED BY IT, INCLUDING ALL TAXES SHOWN OR DETERMINED TO BE
DUE ON SUCH RETURNS, REPORTS AND DECLARATIONS, EXCEPT THOSE BEING CONTESTED IN
GOOD FAITH AND FOR WHICH ADEQUATE RESERVES HAVE BEEN ESTABLISHED ON THE
COMPANY’S BOOKS, AND (III) HAS SET ASIDE ON ITS BOOKS PROVISION REASONABLY
ADEQUATE FOR THE PAYMENT OF ALL TAXES FOR PERIODS SUBSEQUENT TO THE PERIODS TO
WHICH SUCH RETURNS, REPORTS OR DECLARATIONS APPLY.  THERE ARE NO UNPAID TAXES IN
ANY MATERIAL AMOUNT CLAIMED TO BE DUE BY THE TAXING AUTHORITY OF ANY
JURISDICTION.

 

(W)                               WARRANT.  THE COMPANY ACKNOWLEDGES AND AGREES
THAT ON OR ABOUT THE DATE OF THIS AGREEMENT, CARLYLE LIQUID HOLDINGS, LLC (THE
“GRANTOR”) HAS GRANTED OR WILL GRANT A WARRANT TO PURCHASE SHARES OF COMMON
STOCK (THE “WARRANT”) TO THE UNDERSIGNED.  THE COMPANY HEREBY CONFIRMS THAT THE
GRANTOR IS THE RECORD OWNER OF 888,743 SHARES OF THE COMPANY’S SERIES A-2
PREFERRED STOCK, WHICH ARE CONVERTIBLE INTO 20,198,705 SHARES OF THE COMPANY’S
COMMON STOCK.  TO THE BEST OF THE COMPANY’S KNOWLEDGE, THE GRANTOR HAS THE
AUTHORITY TO ENTER INTO THE WARRANT AND PERFORM ITS OBLIGATIONS THEREUNDER AND
THE WARRANT WILL BE ENFORCEABLE AGAINST THE GRANTOR IN ACCORDANCE WITH ITS
TERMS.  THE COMPANY IS NOT AWARE OF ANY RESTRICTION THAT WOULD PREVENT THE
GRANTOR FROM TRANSFERRING SHARES TO THE UNDERSIGNED IN ACCORDANCE WITH THE TERMS
OF THE WARRANT.  THE COMPANY ACKNOWLEDGES AND AGREES THAT THE GRANTOR WILL
APPOINT THE UNDERSIGNED AS THE GRANTOR’S ATTORNEY-IN-FACT PURSUANT TO PARAGRAPH
3.B OF THE WARRANT FOR PURPOSES OF CONVERTING SHARES OF SERIES A-2 PREFERRED
STOCK INTO SHARES OF COMMON STOCK.  THE COMPANY WILL HONOR AND ACCEPT
INSTRUCTIONS THAT ARE GIVEN BY THE UNDERSIGNED IN ITS CAPACITY AS
ATTORNEY-IN-FACT FOR THE GRANTOR IN CONNECTION WITH THE CONVERSION OF SERIES A-2
PREFERRED STOCK INTO COMMON STOCK

 

(X)                                   MANIPULATION OF PRICE.  THE COMPANY HAS
NOT, AND TO ITS KNOWLEDGE NO ONE ACTING ON ITS BEHALF HAS, (I) TAKEN, DIRECTLY
OR INDIRECTLY, ANY ACTION DESIGNED TO CAUSE OR TO RESULT IN, OR THAT HAS
CONSTITUTED OR WHICH MIGHT REASONABLY BE EXPECTED TO CONSTITUTE, THE
STABILIZATION OR MANIPULATION OF THE PRICE OF ANY SECURITY OF THE COMPANY TO
FACILITATE THE SALE OR RESALE OF ANY OF THE SECURITIES, (II) SOLD, BID FOR,
PURCHASED, OR PAID ANYONE ANY COMPENSATION FOR SOLICITING PURCHASES OF, ANY OF
THE SECURITIES, OR (III) PAID OR AGREED TO PAY TO ANY PERSON ANY COMPENSATION
FOR SOLICITING ANOTHER TO PURCHASE ANY OTHER SECURITIES OF THE COMPANY.

 

11

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(Y)                                 INTERNAL ACCOUNTING AND DISCLOSURE
CONTROLS.  THE COMPANY AND EACH OF ITS SUBSIDIARIES MAINTAINS A SYSTEM OF
INTERNAL ACCOUNTING CONTROLS SUFFICIENT TO PROVIDE REASONABLE ASSURANCE THAT
(I) TRANSACTIONS ARE EXECUTED IN ACCORDANCE WITH MANAGEMENT’S GENERAL OR
SPECIFIC AUTHORIZATIONS, (II) TRANSACTIONS ARE RECORDED AS NECESSARY TO PERMIT
PREPARATION OF FINANCIAL STATEMENTS IN CONFORMITY WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES AND TO MAINTAIN ASSET AND LIABILITY ACCOUNTABILITY,
(III) ACCESS TO ASSETS OR INCURRENCE OF LIABILITIES IS PERMITTED ONLY IN
ACCORDANCE WITH MANAGEMENT’S GENERAL OR SPECIFIC AUTHORIZATION AND (IV) THE
RECORDED ACCOUNTABILITY FOR ASSETS AND LIABILITIES IS COMPARED WITH THE EXISTING
ASSETS AND LIABILITIES AT REASONABLE INTERVALS AND APPROPRIATE ACTION IS TAKEN
WITH RESPECT TO ANY DIFFERENCE.  EXCEPT AS SET FORTH IN THE DISCLOSURE SCHEDULE
OR IN THE SEC DOCUMENTS, THE COMPANY MAINTAINS DISCLOSURE CONTROLS AND
PROCEDURES (AS SUCH TERM IS DEFINED IN RULE 13A-14 UNDER THE EXCHANGE ACT) THAT
ARE EFFECTIVE IN ENSURING THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE
COMPANY IN THE REPORTS THAT IT FILES OR SUBMITS UNDER THE EXCHANGE ACT IS
RECORDED, PROCESSED, SUMMARIZED AND REPORTED, WITHIN THE TIME PERIODS SPECIFIED
IN THE RULES AND FORMS OF THE SEC, INCLUDING, WITHOUT LIMITATION, CONTROLS AND
PROCEDURES DESIGNED TO ENSURE THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE
COMPANY IN THE REPORTS THAT IT FILES OR SUBMITS UNDER THE EXCHANGE ACT IS
ACCUMULATED AND COMMUNICATED TO THE COMPANY’S MANAGEMENT, INCLUDING ITS
PRINCIPAL EXECUTIVE OFFICER OR OFFICERS AND ITS PRINCIPAL FINANCIAL OFFICER OR
OFFICERS, AS APPROPRIATE, TO ALLOW TIMELY DECISIONS REGARDING REQUIRED
DISCLOSURE.  EXCEPT AS SET FORTH IN THE DISCLOSURE SCHEDULE OR IN THE SEC
DOCUMENTS, DURING THE TWELVE MONTHS PRIOR TO THE DATE HEREOF NEITHER THE COMPANY
NOR ANY OF ITS SUBSIDIARIES HAVE RECEIVED ANY NOTICE OR CORRESPONDENCE FROM ANY
ACCOUNTANT RELATING TO ANY POTENTIAL MATERIAL WEAKNESS IN ANY PART OF THE SYSTEM
OF INTERNAL ACCOUNTING CONTROLS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES.

 

(Z)                                   INVESTMENT COMPANY STATUS.  THE COMPANY IS
NOT, AND UPON CONSUMMATION OF THE SALE OF THE SECURITIES WILL NOT BE, AN
“INVESTMENT COMPANY,” A COMPANY CONTROLLED BY AN “INVESTMENT COMPANY” OR AN
“AFFILIATED PERSON” OF, OR “PROMOTER” OR “PRINCIPAL UNDERWRITER” FOR, AN
“INVESTMENT COMPANY” AS SUCH TERMS ARE DEFINED IN THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED.

 

(AA)                            U.S. REAL PROPERTY HOLDING CORPORATION.  THE
COMPANY IS NOT, NOR HAS IT EVER BEEN, A U.S. REAL PROPERTY HOLDING CORPORATION
WITHIN THE MEANING OF SECTION 897 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, AND THE COMPANY SHALL SO CERTIFY UPON THE REQUEST OF THE UNDERSIGNED.

 

(BB)                          BANK HOLDING COMPANY ACT.  NEITHER THE COMPANY NOR
ANY OF ITS SUBSIDIARIES IS SUBJECT TO THE BANK HOLDING COMPANY ACT OF 1956, AS
AMENDED (THE “BHCA”) AND TO REGULATION BY THE BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM (THE “FEDERAL RESERVE”).  NEITHER THE COMPANY NOR ANY OF ITS
SUBSIDIARIES OR AFFILIATES OWNS OR CONTROLS, DIRECTLY OR INDIRECTLY, FIVE
PERCENT (5%) OR MORE OF THE OUTSTANDING SHARES OF ANY CLASS OF VOTING SECURITIES
OR TWENTY-FIVE (25%) OR MORE OF THE TOTAL EQUITY OF A BANK OR ANY EQUITY THAT IS
SUBJECT TO THE BHCA AND TO REGULATION BY THE FEDERAL RESERVE.  NEITHER THE
COMPANY NOR ANY OF ITS SUBSIDIARIES OR AFFILIATES EXERCISES A CONTROLLING
INFLUENCE OVER THE MANAGEMENT OR POLICIES OF A BANK OR ANY ENTITY THAT IS
SUBJECT TO THE BHCA AND TO REGULATION BY THE FEDERAL RESERVE.

 

12

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(CC)                            SHELL COMPANY STATUS.  THE COMPANY IS NOT, NOR
HAS IT AT ANY TIME PREVIOUSLY BEEN, CONSIDERED A “SHELL COMPANY” WITHIN THE
MEANING OF RULE 144(I)(1)(I) (OR ANY SUCCESSOR RULE) UNDER THE SECURITIES ACT.

 

(DD)                          USE OF NOTE PROCEEDS.  THE COMPANY AGREES THAT IT
WILL APPLY THE CASH PROCEEDS IT RECEIVES FROM THE NOTE IN ACCORDANCE WITH THE
DISCLOSURE SCHEDULE.  SPECIFICALLY, BUT WITHOUT LIMITATION, THE COMPANY AGREES
THAT IT WILL NOT USE ANY PORTION OF THE NOTE PROCEEDS TO REPAY “SENIOR
INDEBTEDNESS” (AS DEFINED IN THE NOTE).

 

4.                                       INDEMNIFICATION. THE UNDERSIGNED AGREES
TO INDEMNIFY AND HOLD HARMLESS THE COMPANY AND EACH OFFICER, DIRECTOR, EMPLOYEE,
AGENT AND CONTROLLING PERSON OF THE COMPANY FROM AND AGAINST ANY AND ALL LOSS,
DAMAGE OR LIABILITY DUE TO OR ARISING OUT OF A BREACH BY THE UNDERSIGNED OF ANY
OF ITS REPRESENTATIONS OR WARRANTIES IN THIS AGREEMENT.  THE COMPANY AGREES TO
INDEMNIFY AND HOLD HARMLESS THE UNDERSIGNED AND EACH OFFICER, DIRECTOR,
EMPLOYEE, AGENT AND CONTROLLING PERSON OF THE UNDERSIGNED FROM AND AGAINST ANY
AND ALL LOSS, DAMAGE OR LIABILITY DUE TO OR ARISING OUT OF A BREACH BY THE
COMPANY OF ANY OF ITS REPRESENTATIONS OR WARRANTIES IN THIS AGREEMENT.

 

5.                                       MISCELLANEOUS.

 

(A)          THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF
THE PARTIES HERETO, THE SUCCESSORS AND ASSIGNS OF THE COMPANY, AND THE PERMITTED
SUCCESSORS AND ASSIGNS OF THE UNDERSIGNED.

 

(B)         THIS AGREEMENT DOES NOT CREATE, AND SHALL NOT BE CONSTRUED AS
CREATING, ANY RIGHTS ENFORCEABLE BY ANY PERSON NOT A PARTY TO THIS AGREEMENT.

 

(C)          THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION OF THIS
AGREEMENT ARE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA AND THE UNITED
STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

 

(D)         THE UNDERSIGNED HEREBY AGREES THAT THE VENUE OF ANY ACTION,
PROCEEDING, COUNTERCLAIM, CROSSCLAIM, OR OTHER LITIGATION RELATING TO,
INVOLVING, OR RESULTING FROM THIS AGREEMENT SHALL BE THE STATE OR FEDERAL COURTS
LOCATED IN ORANGE COUNTY, CALIFORNIA.

 

(E)          THIS AGREEMENT MAY NOT BE AMENDED EXCEPT IN A WRITING SPECIFICALLY
INTENDED FOR THE PURPOSE AND EXECUTED BY THE PARTY AGAINST WHOM ENFORCEMENT OF
THE AMENDMENT IS SOUGHT.

 

(F)            THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS, BOTH WRITTEN AND ORAL, BETWEEN THE PARTIES WITH
RESPECT TO THE SUBJECT MATTER HEREOF.

 

13

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(G)         THIS AGREEMENT MAY BE EXECUTED IN COUNTERPARTS, EACH OF WHICH SHALL
CONSTITUTE AN ORIGINAL, AND ALL OF WHICH, TOGETHER, SHALL CONSTITUTE THE SAME
INSTRUMENT.

 

[SIGNATURES FOLLOW]

 

14

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year this subscription has been accepted by the Company as set forth
below.

 

 

Principal Amount of Note to be Purchased:  $2,000,000

 

 

 

 

 

Date of Subscription:

 

 

 

 

 

 

 

 

 

 

 

X

 

(Print Name of Subscriber)

 

(Signature of Subscriber or Authorized Person on behalf of Subscriber if
Subscriber is an Entity)

 

 

 

 

 

 

 

 

(Print Name and Title of Authorized Person if Subscriber is an Entity)

 

 

 

 

 

 

 

 

X

 

(Print Name of Joint Subscriber, if any)

 

(Signature of Joint Subscriber, if any)

 

 

 

 

 

 

Address:

 

Social Security Number or other Taxpayer Identification Number:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACCEPTED BY:

 

 

Liquidmetal Technologies, Inc.

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

Date:

 

 

 

 

15

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EXHIBIT A

 

FORM OF SUBORDINATED PROMISSORY NOTE

 

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DISCLOSURE SCHEDULE

 

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