**Exhibit 10.42**

 

*000000002000209914095510212008*

PROMISSORY NOTE

 
| **Principal** | ** **     | **Loan Date** | ** **     | **Maturity** | ** **     | **Loan No.** | ** **     | **Call / Coll** | ** ** | **Account** | ** ** | **Officer** | ** ** | **Initials** | ** ** |
|---------------|----------------|--------------------|----------------|--------------|----------------|-------------------|----------------|---------------------------|------------|-------------|------------|-------------|------------|--------------|------------|
| **$**         | **104,800.04** | ** **         | **10-21-2008** | ** **   | **11-01-2013** | ** **        | **2000209914** | ** **                | **7100**   | ** **  | **379885** | ** **  | **1106**   | ** **   | ** ** | ** ** |
|               |                |                    |                |              |                |                   |                |                           |            |             |            |             |            |              |            |  |

 

References in the boxes above are for Lender’s use only and do not limitthe applicability of this document to any particular loan or item.

Any item above containing “ ‘ ‘ ‘ “ has been omitted due to text lengthlimitations,

 
| Borrower: |   | LIOUIDMETAL  COATINGS, LLC           |   | Lender: |   | Bank  Midwest N.A.      |
|-----------|--------|--------------------------------------|--------|---------|--------|-------------------------|
|      |   | LIGUIDMETAL  COATINGS SOLUTIONS, LLC |   |    |   | Town  Pavilion Facility |
|      |   | 1525  LAKESVILLE DRIVE, SUITE 114    |   |    |   | 1111  Main Street       |
|      |   | KINGWOOD  , TX 77339                 |   |    |   | Kansas  City, MO 64105  |

 
| **Principal  Amount: $104,800.04** | **Date  of Note. October 21, 2008** |
|------------------------------------|-------------------------------------|

 

PROMISETO PAY. LIOUIDMETAL COATINGS, LLC; and UOUIDMETAL COATINGS SOLUTIONS, LLC (“Borrower”)jointly and severally promise to pay to Bank Midwest N.A. (“Lender”|, or order,In lawful money of the United States of America, the principal amount OneHundred Four Thousand Eight Hundred & 04/100 Dollars ($104,800.04),together with interest on the unpaid principal balance from October 21, 2008,calculated as described in the “INTEREST CALCULATION METHOD” paragraph using aninterest rate of 8.250% per annum based on a year of 360 days, until paid infull. The interest rate may change under the terms and conditions of the “INTERESTAFTER DEFAULT” section.

 

PAYMENT.Borrower will pay this loan in 60 payments of $2,148.51 each payment.Borr0wer`s first payment is due December 1, 2008, and all subsequent paymentsare due on the same day of each month after that. Borrower’s final payment willbe due on November 1, 2013, and will be for all principal and all accruedInterest not yet paid. Payments include principal and Interest. Unlessotherwise agreed or required by applicable law, payments will be applied firstto any accrued unpaid interest; then to principal; then to any late charges;and then to any unpaid collection costs. Borrower will pay Lender at Lender’saddress shown above or at such other place as Lender may designate in writing.

 

INTERESTCALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; thatis, by applying the ratio of the interest rate over a year of 360 days,multiplied by the outstanding principal balance, multiplied by the actualnumber of days the principal balance is outstanding. All interest payable underthis Note is computed using this method.

 

PREPAYMENT.Borrower agrees that all loan fees and other prepaid finance charges arc earnedfully as of the date of the loan and will not be subject to refund upon earlypayment (whether voluntary or as a result of default), except as otherwiserequired by law. Except for the foregoing, Borrower may pay without penalty allor a portion of the amount owed earlier than it is due. Early payments willnot, unless agreed to by Lender in writing, relieve Borrower of Borrower’sobligation to continue to make payments under the payment schedule. Rather,early payments will reduce the principal balance due and may result in Borrower’smaking fewer payments. Borrower agrees not to send Lender payments marked “paidin full”, “without recourse”, or similar language. lf Borrower sends such apayment, Lender may accept it without losing any of Lenders rights under thisNote, and Borrower will remain obligated to pay any further amount owed toLender. All written communications concerning disputed amounts, including anycheck or other payment instrument that indicates that the payment constitutes “paymentin full” of the amount owed or that is tendered with other conditions orlimitations or as full satisfaction of a disputed amount must be mailed ordelivered to: Bank Midwest N.A., Town Pavilion Facility, 1111 Main Street,Kansas City, MO 64105.

 

LATECHARGE. If a payment is more than 10 days late, Borrower will be charged 5.000%of the unpaid portion of the regularly scheduled payment.

 

INTERESTAFTER DEFAULT, Upon default, including failure to pay upon final maturity, theinterest rate on this Note shall be increased by 5.000 percentage points.However, in no event will the interest rate exceed the maximum interest ratelimitations under applicable law.

 

DEFAULT.Each of the following shall constitute an event of default (“Event of Default”)under this Note:

 

PaymentDefault. Borrower fails to make any payment when due under this Note.

 

OtherDefaults. Borrower fails to comply with or to perform any other term,obligation, covenant or condition contained in this Note or in any of therelated documents or to comply with or to perform any term, obligation,covenant or condition contained in any other agreement between Lender andBorrower.

 

Defaultin Favor of Third Parties. Borrower or any Grantor defaults under any loan,extension of credit, security agreement, purchase or sales agreement, or anyother agreement, in favor of any other creditor or person that may materiallyaffect any of Borrower’s property or Borrower’s ability to repay this Note orperform Borrower’s obligations under this Note or any of the related documents.

 

FalseStatements. Any warranty, representation or statement made or furnished toLender by Borrower or on Borrower’s behalf under this Note or the relateddocuments is false or misleading in any material respect, either now or at thetime made or furnished or becomes false or misleading at any time thereafter.

 

Deathor Insolvency. The dissolution of Borrower (regardless of whether election tocontinue is made}, any member withdraws from Borrower, or any other terminationof Borrower’s existence as a going business or the death of any member, theinsolvency of Borrower, the appointment of a receiver for any part of Borrower’sproperty, any assignment for the benefit of creditors, any type of creditorworkout, or the commencement of any proceeding under any bankruptcy orinsolvency laws by or against Borrower.

 

Creditoror Forfeiture Proceedings. Commencement of foreclosure or forfeitureproceedings, whether by judicial proceeding, self-help, repossession or anyother method, by any creditor of Borrower or by any governmental agency againstany collateral securing the loan. This includes a garnishment of any ofBorrower’s accounts, including deposit accounts, with Lender. However, thisEvent of Default shall not apply if there is a good faith dispute by Borroweras to the validity or reasonableness of the claim which is the basis of thecreditor or forfeiture proceeding and if Borrower gives Lender written noticeof the creditor or forfeiture proceeding and deposits with Lender monies or aSurety bond for the creditor or forfeiture proceeding, in an amount determinedby Lender, in its sole discretion, as being an adequate reserve or bond for thedispute.

 

EventsAffecting Guarantor. Any of the preceding events occurs with respect to anyguarantor, endorser, surety, or accommodation party of any of the indebtednessor any guarantor, endorser, surety, or accommodation party dies or becomesincompetent, or revokes or disputes the validity of, or liability under. anyguaranty of the indebtedness evidenced by this Note.

 

AdverseChange. A material adverse change occurs in Borrowers financial condition, orLender believes the prospect of payment or performance of this Note isimpaired.

 

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CureProvisions. If any default, other than a default in payment is curable and ifBorrower has not been given a notice of a breach of the same provision of thisNote within the preceding twelve (12) months, it may be cured if Borrower,alter receiving written notice from Lender demanding cure of such default: (1) curesthe default within ten (10) days; or (2) if the cure requires more than ten (10)days, immediately initiates steps which Lender deems in Lender’s solediscretion to be sufficient to cure the default and thereafter continues andcompletes all reasonable and necessary steps sufficient to produce complianceas soon as reasonably practical.

 

LENDER’SRIGHTS. Upon default, Lender may declare the entire unpaid principal balanceunder this Note and all accrued unpaid interest immediately due, and theirBorrower will pay that amount.

 

ATTORNEYSFEES; EXPENSES. Lender may hire or pay someone else to help collect this Noteif Borrower dues not pay. Borrower will pay Lender that amount. This includes,subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’slegal expenses whether or not there is a lawsuit, including attorneys’ fees andexpenses for bankruptcy proceedings (including efforts to modify or vacate anyautomatic stay or injunction), and appeals. If not prohibited by applicablelaw, Borrower also will pay any court costs, in addition to all other sumsprovided by law.

 

GOVERNINGLAW. This Note will be governed by federal law applicable to Lender and, to theextent not preempted by federal law, the laws of the State of Missouri withoutregard to its conflicts of law provisions. This Note has been accepted byLender in the State of Missouri.

 

CHOICEOF VENUE. It there is a lawsuit, Borrower agrees upon Lender’s request tosubmit to the jurisdiction of the courts of Jackson County, State of Missouri.

 

DISHONOREDITEM FEE. Borrower will pay a lee to Lender of $15.00 if Borrower makes apayment on Borrower’s loan and the check or preauthorized charge with whichBorrower pays is later dishonored.

 

RIGHTOF SETOFF. To the extent permitted by applicable law, Lender reserves a rightof setoff in all Borrower’s accounts with Lender (whether checking, savings, orsome other account). This includes all accounts Borrower holds jointly withsomeone else and all accounts Borrower may open in the future. However, thisdoes not include any IRA or Keogh accounts, or any trust accounts for whichsetoff would be prohibited by law. Borrower authorizes Lender, to the extentpermitted by applicable law, to charge or setoff all sums owing on theindebtedness against any and all such accounts.

 

COLLATERAL.Borrower acknowledges this Note is secured by A COMMERCIAL SECURITY AGREEMENTDATED OCTOBER 21, 2008.

 

LINEOF CREDIT. This Note evidences a straight line of credit. Once the total amountof principal has been advanced, Borrower is not entitled to further loanadvances. Advances under this Note may be requested orally by Borrower or asprovided in this paragraph. All oral requests shall be confirmed in writing onthe day of the request. All communications, instructions, or directions bytelephone or otherwise to Lender are to be directed to Lender’s office shownabove. The following persons currently are authorized, except as provided inthis paragraph, to request advances and authorize payments under the line ofcredit until Lender receives from Borrower, at Lender’s address shown above,written notice of revocation of their authority: LARRY BUFFINGTON, PRESIDENT &CEO of LIOUIDMETAL COATINGS, LLC; and LARRY BUFFINGION, PRESIDENT & CEO ofLIOUIDMETAL COATINGS, LLC, Member of LIOUIDIVIETAL COATINGS SOLUTIONS, LLC.FUNDS ARE TO BE DISEIURSED AT BORROWER’S REQUEST AND LOAN OFFICERS APPROVAL.Borrower agrees to be liable for all sums either: (A) advanced in accordancewith the instructions of an authorized person or (B) credited to any of theBorrower’s accounts with Lender. The unpaid principal balance owing on thisNote at any time may be evidenced by endorsements on this Note or by Lender’sinternal records, including daily computer printouts. Lender will have noobligation to advance funds under this Note if: (AS) Borrower or any guarantoris in default under the terms of this Note or any agreement that Borrower orany guarantor has with Lender, including any agreement made in connection withthe signing of this Note; (B) Borrower or any guarantor ceases doing businessor is insolvent; (C) any guarantor seeks, claims or otherwise attempts tolimit, modify or revoke such guarantor’s guarantee of this Note or any otherloan with Lender; or (D) Borrower has applied funds provided pursuant to thisNote for purposes other than those authorized by Lender.

 

SUCCESSORINTERESTS. The terms of this Note shall be binding upon Borrower, and uponBorrower’s heirs, personal representatives, successors and assigns, and shallinure to the benefit of Lender and its successors and assigns.

 

GENERALPROVISIONS. lf any part of this Note cannot be enforced, this fact will notaffect the rest of the Note. Lender may delay or forgo enforcing any of itsrights or remedies under this Note without losing them. Each Borrowerunderstands and agrees that, with or without notice to Borrower, Lender maywith respect to any other Borrower (a) make one or more additional secured orunsecured loans or otherwise extend additional credit; (b) alter, compromise,renew, extend, accelerate, or otherwise change one or more times the time forpayment or other terms of any indebtedness, including increases and decreasesof the rate of interest on the indebtedness; (c) exchange, enforce, waive,subordinate, fail or decide not to perfect, and release any security. with orwithout the substitution of new collateral; (d) apply such security and directthe order or manner of sale thereof, including without limitation, anynon-judicial sale permitted by the terms of the controlling securityagreements, as Lender in its discretion may determine; (e) release, substitute,agree not to sue, or deal with any one or more of Borrower’s sureties,endorsers, or other guarantors on any terms or in any manner Lender may choose;and (f) determine how, when and what application of payments and credits shallbe made on any other indebtedness owing by such other Borrower. Borrower andany other person who signs, guarantees or endorses this Note, to the extentallowed by law, waive presentment, demand for payment, and notice of dishonor.Upon any change in the terms of this Note, and unless otherwise expresslystated in writing. no party who signs this Note, whether as maker, guarantor,accommodation maker or endorser, shall be released from liability. All suchparties agree that Lender may renew or extend (repeatedly and for any length oftime) this loan or release any party or guarantor or collateral; or impair,fail to realize upon or perfect Lender’s security interest in the collateral;and take any other action deemed necessary by Lender without the consent of ornotice to anyone. All such parties also agree that Lender may modify this loanwithout the consent of or notice to anyone other than the party with whom themodification is made. The obligations under this Note are joint and several.

 

ORALAGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROMENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBTARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THATIS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT YOU (BORROWER(S)) ANDUS (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACHCOVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE ANDEXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREEIN WRITING TO MODIFY IT.

 

2

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JURYWAIVER. Lender and Borrower hereby waive the right to any jury trial in anyaction, proceeding, or counterclaim brought by either Lender or Borroweragainst the other.

 

PRIORTO SIGING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OFTHIS NOTE.  EACH BRRROWER AGREES TO THETERMS OF THE NOTE.

 

BORROWERACKNOWLEDGES RECEIPT OF A COMPLTETED COPY OF THIS PROMISSORY NOTE.

 

 

**BRORROWER:**

 

LIQUIMDETALCOATINGS, LLC

 
| By:                                                                       | /s/  Larry Buffington                    |   |
|---------------------------------------------------------------------------|------------------------------------------|--------|
|                                                                      | LARRY BUFFINGTON, PRESIDENT & CEO of |   |
|                                                                      | LIQUIDMETAL COATINGS, LLC                |   |
|                                                                      |                                     |   |
|                                                                      |                                     |   |
| LIQUIDMETAL  COATINGS SOLUTIONS, LLC                                      |                                     |
|                                                                      |                                     |   |
| LIQUIDMETAL  COATINGS, LLC, Member of LIQUIDMETAL COATINGS SOLUTIONS, LLC |
|                                                                      |
|                                                                      |                                     |   |
| By:                                                                       | /s/  Larry Buffington                    |   |
|                                                                      | LARRY BUFFINGTON, PRESIDENT & CEO of |   |
|                                                                      | LIQUIDMETAL COATINGS, LLC                |   |

 

3

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*000000002000209914095510212008*

BUSINESS LOAN AGREEMENT

 
| **Principal** | ** **     | **Loan Date** | ** **     | **Maturity** | ** **     | **Loan No.** | ** **     | **Call / Coll** | ** ** | **Account** | ** ** | **Officer** | ** ** | **Initials** | ** ** |
|---------------|----------------|--------------------|----------------|--------------|----------------|-------------------|----------------|---------------------------|------------|-------------|------------|-------------|------------|--------------|------------|
| **$**         | **104,800.04** | ** **         | **10-21-2008** | ** **   | **11-01-2013** | ** **        | **2000209914** | ** **                | **7100**   | ** **  | **379885** | ** **  | **1106**   | ** **   | ** ** | ** ** |
|               |                |                    |                |              |                |                   |                |                           |            |             |            |             |            |              |            |  |

 

References in the boxes above are for Lender’s use only and do not limitthe applicability of this document to any particular loan or item.

Any item above containing “ ‘ ‘ ‘ “ has been omitted due to text lengthlimitations,

 
| Borrower: |   | LIOUIDMETAL  COATINGS, LLC           |   | Lender: |   | Bank  Midwest N.A.      |
|-----------|--------|--------------------------------------|--------|---------|--------|-------------------------|
|      |   | LIGUIDMETAL  COATINGS SOLUTIONS, LLC |   |    |   | Town  Pavilion Facility |
|      |   | 1525  LAKESVILLE DRIVE, SUITE 114    |   |    |   | 1111  Main Street       |
|      |   | KINGWOOD  , TX 77339                 |   |    |   | Kansas  City, MO 64105  |

 

THISBUSINESS LOAN AGREEMENT dated October 21, 2008, is made and executed betweenLIQUIDMETAL COATINGS, LLC; and LIOUIDMETAL COATINGS SOLUTIONS, LLC (“Borrower”)land Bank Midwest N.A. (“Lender”) on the following terms and conditions.Borrower has received prior commercial loans from Lender or has applied toLender for a commercial loan or loans or other financial accommodations, includingthose which may be described on any exhibit or schedule attached to thisAgreement. Borrower understands and agrees that; (A) in granting, renewing, orextending any Loan. Lender is relying upon Borrower’s representations,warranties, and agreements as set forth in this Agreement; (B) the granting,renewing, or extending of any Loan by Lender at all times shall be subject toLender’s sole judgment and discretion; and (C) all such Loans shall be andremain subject to the terms and conditions of this Agreement.

 

TERM.This Agreement shall be effective as of October 21, 2008, and shall continue infull force and effect until such time as all of Borrower’s Loans in favor ofLender have been paid in full, including principal, interest, costs, expenses,attorneys’ fees, and other fees and charges, or until November 1, 2013.

 

ADVANCEAUTHORITY. The following person or persons are authorized to request advancesand authorize payments under the loan until Lender receives from Borrower, atLender’s address shown above, written notice of revocation of such authority:LARRY BUFFINGTON, PRESIDENT & CEO of LIOUIDMETAL COATINGS, LLC; and LARRYBUFFINGTON, PRESIDENT & CEO of LIQUIDMETAL COATINGS, LLC, Member ofLIOUIDMETAL COATINGS SOLUTIONS, LLC.

 

CONDITIONSPRECEDENT T0 EACH ADVANCE. Lender’s obligation to make the initial Advance andeach subsequent Advance under this Agreement shall be subject to thefulfillment to Lender’s satisfaction of all of the conditions ser forth in thisAgreement and in the Related Documents.

 

LoanDocuments. Borrower shall provide to Lender the following documents for theLoan: (1) the Note; (2) Security Agreements granting to Lender securityinterests in the Collateral; (3) financing statements and all other documentsperfecting Lender’s Security Interests; (4) evidence of insurance ns requiredbelow; (5) together with all such Related Documents as Lender may require forthe Loan; all in form and substance satisfactory to Lender and Lender’scounsel.

 

Borrower’sAuthorization. Borrower shall have provided in form and substance satisfactoryto Lender properly certified resolutions, duly authorizing the execution anddelivery of this Agreement, the Note and the Relaxed Documents. In addition,Borrower shall have provided such other resolutions, authorizations, documentsand instruments as Lender or its counsel, may require.

 

Paymentof Fans and Expenses. Borrower shall have paid to Lender all fees, charges. andother expenses which are then due and payable as specified in this Agreement orany Related Document.

 

Representationsand Warranties. The representations and warranties set forth in this Agreement,in the Related Documents, and in any document or certificate delivered toLender under this Agreement are true and correct.

 

NoEvent of Default. There shall not exist at the time of any Advance a conditionwhich would constitute an Event of Default under this Agreement or under anyRelated Document.

 

MULTIPLEBORRDWERS. This Agreement has been executed by multiple obligors who arereferred to in this Agreement individually, collectively and interchangeably as“Borrower.” Unless specifically stated to the contrary, {he word “Borrower” asused in this Agreement, including without limitation all representations,warranties and covenants. shall include all Borrowers. Borrower understands andagrees that, with or without notice to any one Borrower, Lender may (A) makeone or more additional secured or unsecured loans or otherwise extendadditional credit with respect to any other Borrower; (B) with respect to anyother Borrower alter. compromise, renew, extend, accelerate, or otherwisechange one or more times the time for payment or other terms of anyindebtedness, including increases and decreases of the rate of interest on theindebtedness; (C) exchange, enforce, waive, subordinate, foil or decide not toperfect, and release any security, with or without the substitution of newcollateral; (D) release, substitute. agree not to sue, or deal with any one ormore of Borrower’s or any other Borrower’s sureties, endorsers. or otherguarantors on any terms or in any manner Lender may choose: (E) determine how,when and what application of payments and credits shall be made on anyindebtedness; (F) apply such security and direct the order or manner of sale ofany Collateral, including without limitation, any non-judicial sale permittedby the terms of the controlling security agreement or deed of trust. as Lenderin its discretion may determine; (G) sell, transfer, assign or grantparticipations in all or any part of the Loan; (H) exercise or refrain fromexercising any rights against Borrower or others, or otherwise act or refrainfrom acting; (I) settle or compromise any indebtedness; and (J) subordinate mepayment of all or any part of any of Borrower’s indebtedness to Lender to thepayment of any liabilities which may be due Lender or others.

 

REPRESENTATIONSAND WARRANTIES. Borrower represents and warrants to Lender. as of the date ofthis Agreement, as of the date of each disbursement of loan proceeds, as of thedate of any renewal, extension or modification of any Loan, and at all timesany Indebtedness exists:

 

Organization.LIQUIDMETAL COATINGS, LLC is a limited liability company which is, and at alltimes shall be, duly organized, validly existing, and in good standing underand by virtue of the laws of the State of Delaware. LIOUIDMETAL COATINGS. LLCis duly authorized to transact business in all other states in whichLIQUIDMETAL COATINGS. LLC is doing business, having obtained all necessaryfilings, governmental licenses and approvals for each state in whichLIOUIDMETAL COATINGS, LLC is doing business. Specifically, LIOUIDMETALCOATINGS, LLC is, and at all times shall be, duly qualified as a foreignlimited liability company in all states in which the failure to so qualifywould have a material adverse effect on its business or financial condition.LIQUIDMETAL COATINGS, LLC has the full power and authority to own itsproperties and to transact the business in which it is presently engaged orpresently proposes to engage. LIOUIDMETAL COATINGS, LLC maintains on office at1525 LAKESVILLE DRIVE, SUITE 114, KINGWOOD , TX 77339. Unless LIOUIDMETALCOATINGS, LLC has designated otherwise in writing, the principal office is theoffice at which LIOUIDMETAL COATINGS, LLC keeps its books and records includingits records concerning the Collateral. LIOUIDMETAL COATINGS, LLC will notifyLender prior to

 

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anychange in the location of LIQUIDMETAL COATINGS, LLC’s state of organization orany change in LIQUIDMETAL COATINGS, LLC’s name. LIQUIDMETAL COATINGS, LLC shalldo all things necessary to preserve and to keep in full force and effect itsexistence, rights and privileges, and shall comply with all regulations, rules,ordinances, statutes, orders and decrees of any governmental orquasi-governmental authority or court applicable to LIQUIDMETAL COATINGS, LLCand LIQUIDMETAL COATINGS, LLC’s business activities.

 

LIGLIIDMETALCOATINGS SOLUTIONS, LLC is a limited liability company which is, and at alltimes shell be, duly organized, validly existing, and in good standing underand by virtue of the laws of the State of Delaware. LIQUIDMETAL COATINGSSOLUTIONS, LLC is duly authorized to transact business in all other states inwhich LIQUIDMETAL COATINGS SOLUTIONS, LLC Is doing business, having obtainedall necessary filings, governmental licenses and approvals for each state inwhich LIQUIDMETAL COATINGS SOLUTIONS, LLC is doing business. Specifically,LIQUIDMETAL COATINGS SOLUTIONS, LLC is, and at all times shall be, duly qualifiedas a foreign limited liability company in all states in which the failure to soqualify would have a material adverse affect on its business or financialcondition. LIOUIDMETAL COATINGS SOLUTIONS, LLC has the full power and authorityto own its properties and to transact the business in which it is presentlyengaged or presently proposes to engage. LIOUIDMETAL COATINGS SOLUTIONS. LLCmaintains an office at 1525 LAKESVILLE DRIVE, SUITE 114, KINGWOOD , TX 77339.Unless LIOUIDMETAL COATINGS SOLUTIONS. LLC has designated otherwise in writing,the principal office is the office at which LIQUIDMETAL COATINGS SOLUTIONS, LLCkeeps its books and records including its records concerning the Collateral.LIGUIDMETAL COATINGS SOLUTIONS, LLC will notify Lender prior to any change inthe location of LIQUIDMETAL COATINGS SOLUTIONS, LLC’s state of organization orany change in LIQUIDMETAL COATINGS SOLUTIONS, LLC’s name. LIQUIDMETAL COATINGSSOLUTIONS, LLC shall do all things necessary to preserve and to keep in fullforce and effect its existence, rights and privileges, and shall comply withall regulations, rules, ordinances, statutes, orders and decrees of anygovernmental or quasigovernmental authority or court applicable to LIQUIDMETALCOATINGS SOLUTIONS, LLC and LIQUIDMETAL COATINGS SOLUTIONS, LLC’s businessactivities.

 

AssumedBusiness Names. Borrower has filed or recorded all documents or filingsrequired by law relating to all assumed business names used by Borrower.Excluding the name of Borrower. the following is u complete list of all assumedbusiness names under which Borrower does business: None.

 

Authorization.Borrower’s execution, delivery, and performance of this Agreement and all theRelated Documents have been duly authorized by all necessary action by Borrowerand do not conflict with, result in a violation of. or constitute a defaultunder (1) any provision of (a) Borrower’s articles of organization ormembership agreements, or (b) any agreement or other instrument binding uponBorrower or (2) any law, governmental regulation, court decree, or orderapplicable to Borrower or to Borrower’s properties.

 

FinancialInformation. Each of Borrower’s financial statements supplied to Lender trulyand completely disclosed Borrower’s financial condition as of the date of thestatement, and there has been no material adverse change in Borrower’sfinancial condition subsequent to the date of the most recent financialstatement supplied to Lender. Borrower has no material contingent obligationsexcept as disclosed in such financial statements.

 

LegalEffect. This Agreement constitutes, and any instrument or agreement Borrower isrequired to give under this Agreement when delivered will constitute legal,valid. and binding obligations of Borrower enforceable against Borrower inaccordance with their respective terms.

 

Properties.Except as contemplated by this Agreement or as previously disclosed inBorrowers financial statements or in writing to Lender and as accepted byLender, and except for property tax liens for taxes not presently due andpayable, Borrower owns and has good title to all of Borrower’s properties freeand clear of all Security Interests, and has not executed any securitydocuments or financing statements relating to such properties. All of Borrower’sproperties are titled in Borrower’s legal name, and Borrower has not used orfiled a financing statement under any other name for at least the last live (5)years.

 

HazardousSubstances. Except as disclosed to and acknowledged by Lender in writing,Borrower represents and warrants that: (1) During the period of Borrower’sownership of the Collateral, there has been no use. generation, manufacture,storage, treatment, disposal, release or threatened release of any HazardousSubstance by any person on, under, about or from any of the Collateral. (2) Borrowerhas no knowledge of, or reason to believe that there has been (a) any breach orviolation of any Environmental Laws; (b) any use. generation, manufacture,storage, treatment, disposal, release or threatened release of any HazardousSubstance on, under, about or from the Collateral by any prior owners oroccupants of any of the Collateral; or (c) any actual or threatened litigationor claims of any kind by any person relating to such matters. (3) Neither Borrowernor any tenant, contractor, agent or other authorized user or any of theCollateral shall use, generate, manufacture, store, treat. dispose of orrelease any Hazardous Substance on, under. about or from any of the Collateral;and any such activity shall be conducted in compliance with all applicablefederal, state, and local laws, regulations, and ordinances, including withoutlimitation all Environmental Laws. Borrower authorizes Lender and its agents toenter upon the Collateral to make such inspections and tests as Lender may deemappropriate to determine compliance of the Collateral with this section of theAgreement. Any inspections or tests made by Lender shall be at Borrower’sexpense and for Lender’s purposes only and shall not be construed to create anyresponsibility or liability on the part of Lender to Borrower or to any otherperson. The representations and warranties contained herein are based anBorrower’s due diligence in investigating the Collateral for hazardous wasteand Hazardous Substances, Borrower hereby (1) releases and waives any futureclaims against Lender for indemnity or contribution in the event Borrowerbecomes liable for cleanup or other costs under any such laws, and (2) agreesto indemnify, defend, and hold harmless Lender against any and all claims,losses. liabilities, damages, penalties, and expenses which Lender may directlyor indirectly sustain or suffer resulting from a breach of this section of theAgreement or as a consequence of any use, generation, manufacture, storage,disposal, release or threatened release of a hazardous waste or substance onthe Collateral. The provisions of this section of the Agreement, including theobligation to indemnify and defend, shall survive the payment of theindebtedness and the termination, expiration or satisfaction of this Agreementand shall not be affected by Lender’s acquisition of any interest in any of theCollateral, whether by foreclosure or otherwise.

 

Litigationand Claims. No litigation, claim, investigation, administrative proceeding orsimilar action {including those for unpaid taxes) against Borrower is pendingor threatened, and no other event has occurred which may materially adverselyaffect Borrower’s financial condition or properties, other than litigation, claims,or other events, if any. that have been disclosed to and acknowledged by Lenderin writing.

 

Taxes.To the best of Borrower’s knowledge, all of Borrower’s tax returns and reportsthat are or were required to be filed, have been filed, and all taxes, assessmentsand other governmental charges have been paid in full, except those presentlybeing or to be contested by Borrower in good faith in the ordinary course ofbusiness and for which adequate reserves have been provided.

 

LienPriority. Unless otherwise previously disclosed to Lender in writing, Borrowerhas not entered into or granted any Security Agreements, or permitted thefiling or attachment of any Security interests on or affecting any of theCollateral directly or indirectly securing repayment of Borrower’s Loan andNote, that would be prior or that may in any way be superior to Lender’sSecurity Interests and rights in and to such Collateral. `

 

BindingEffect. This Agreement, the Note, all Security Agreements (if any). and allRelated Documents are binding upon the signers

 

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thereof,as well as upon their successors, representatives and assigns, and are legallyenforceable in accordance with their respective terms.

 

AFFIRMATIVECOVENANTS. Borrower covenants and agrees with Lender that, so long as thisAgreement remains in effect, Borrower will:

 

Noticesof Claims and Litigation. Promptly inform Lender in writing of (1) all materialadverse changes in Borrower’s financial condition, and (2) all existing and allthreatened litigation, claims, investigations, administrative proceedings orsimilar actions affecting Borrower or any Guarantor which could materiallyaffect the financial condition of Borrower or the financial condition of anyGuarantor.

 

FinancialRecords. Maintain its books and records in accordance with GAAP, applied on aconsistent basis. and permit Lender to examine and audit Borrower’s books andrecords at all reasonable times.

FinancialStatements. Furnish Lender with the following:

 

AnnualStatements. As soon as available after the and of each fiscal year, Borrower’sbalance sheet and income statement for the year ended, prepared by Borrower Inform satisfactory to Lender.

 

TaxReturns. As soon as available after the applicable filing date for the taxreporting period ended, Federal and other governmental tax returns, prepared bya tax professional satisfactory to Lender.

 

Allfinancial reports required to be provided under this Agreement shall beprepared in accordance with GAAP, applied on a consistent basis, and certifiedby Borrower as being true and correct.

 

Additionalinformation. Furnish such additional information and statements. as Lender mayrequest from time to time.

insurance.Maintain fire and other risk insurance. public liability insurance, and suchother insurance as Lender may require with respect to Borrower’s properties andoperations, in form, amounts, coverages and with insurance companies acceptableto Lender. Borrower, upon request of Lender, will deliver to Lender from timeto time the policies or certificates of insurance in form satisfactory toLender, including stipulations that coverages will not be cancelled ordiminished without at least ten (10) days prior written notice to Lender. Eachinsurance policy also shall include an endorsement providing that coverage infavor of Lender will not be impaired in any way by any act, omission or defaultof Borrower or any other person, In connection with all policies coveringassets in which Lender holds or is offered a security interest for the Loans,Borrower will provide Lender with such Iender’s loss payable or otherendorsements as Lender may require.

 

InsuranceReports. Furnish to Lender, upon request of Lender, reports on each existinginsurance policy showing such information asLender may reasonablyrequest. including without limitation the following: (1) the name of theinsurer; (2) the risks insured; I3) theamount of the policy; (4) theproperties insured; i5) the then current property values on the basis of whichinsurance has been obtained,  and the mannerof determining those values; and (6) the expiration date of the policy. Inaddition, upon request of Lender (however notmore often than annually),Borrower will have an Independent appraiser satisfactory to Lender determine,as applicable. the actual cashvalue or replacement cost ofany Collateral. The cost of such appraisal shall be paid by Borrower.

 

OtherAgreements. Comply with all terms and conditions of all other agreements,whether now or hereafter existing, between Borrower and any other party andnotify Lender immediately in writing of any default in connection with anyother such agreements.

 

LoanProceeds, Use all Loan proceeds solely for Borrower’s business operations,unless specifically consented to the contrary by Lender in writing.

 

Taxes.Charges and Liens. Pay and discharge when due all of its indebtedness andobligations, including without limitation all assessments,  taxes, governmental charges,levies and liens, of every kind and nature, imposed upon Borrower or itsproperties, income, or profits, priorto the data on whichpenalties would attach, and all lawful claims that, if unpaid, might become alien or charge upon any of Borrower’sproperties, income. orprofits. Provided however, Borrower will not be required to pay and dischargeany such assessment, tax, charge,  levy, lien or claim so longas (1) the legality of the same shall be contested in good faith by appropriateproceedings, and (2) Borrowershall have established on Borrower’sbooks adequate reserves with respect to such contested assessment, tax, charge,levy, lien, or claimin accordance with GAAP.

 

Performance.Perform and comply, in a timely manner, with all terms, conditions, andprovisions set forth in this Agreement, in the RelatedDocuments. andin all other instruments and agreements between Borrower and Lender. Borrowershall notify Lender immediately inwriting of any default inconnection with any agreement.

 

Operations.Maintain executive and management personnel with substantially the samequalifications and experience as the presentexecutive and managementpersonnel; provide written notice to Lender of any change in executive andmanagement personnel; conduct itsbusiness affairs in areasonable and prudent manner.

 

EnvironmentalStudies. Promptly conduct and complete, at Borrowers expense, all suchinvestigations, studies, samplings and tastings asmay be requested by Lender orany governmental authority relative to any substance. or any waste or by-productof any substance definedas toxic or a hazardous substance underapplicable federal, state, or local law, rule, regulation, order or directive,at or affecting anyproperty or any facility owned, leased or usedby Borrower.

 

Compliancewith Governmental Requirements. Comply with all laws, ordinances, andregulations. now or hereafter in effect, of allgovernmental authoritiesapplicable to the conduct of Borrower’s properties, businesses and operations,and to the use or occupancy of theCollateral, including withoutlimitation, the Americans With Disabilities Act. Borrower may contest in goodfaith any such law, ordinance,  or regulation and withholdcompliance during any proceeding, including appropriate appeals, so long asBorrower has notified Lender inwriting prior lo doing so andso long as, in Lender’s sole opinion, Lenders interests in the Collateral arenot jeopardized. Lender mayrequire Borrower to poetadequate security or a surety bond, reasonably satisfactory to Lender, toprotect Lender’s interest.

 

inspection.Permit employees or agents of Lender at any reasonable time to inspect any andall Collateral for the Loan or Loans andBorrowers other propertiesand to examine or audit Borrowers books. accounts, and records and to makecopies and memoranda ofBorrower’s books, accounts, and records. IfBorrower now or at any time hereafter maintains any records (including withoutlimitationcomputer generated records and computer software programs for thegeneration of such records) in the possession of a third party,  Borrower, upon request ofLender, shall notify such party to permit Lender free access to such records atall reasonable times and toprovide Lender with copies ofany records it may request, all at Borrower’s expense.

 

ComplianceCertificates. Unless waived in writing by Lender. provide Lender et leastannually, with a certificate executed by Borrower’s chief financial officer, orother officer or person acceptable to Lender, certifying that therepresentations and warranties set forth to this Agreement are true and correctas of the date of the certificate and further certifying that, as of the dateof the certificate, no Event of Default exists under this Agreement.

 

EnvironmentalCompliance and Reports. Borrower shall comply in all respects with any and allEnvironmental Laws; not cause or permit to exist, as a result of an intentionalor unintentional action or omission on Borrower’s part

 

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ownedand/or occupied by Borrower, any environmental activity where damage may resultto the environment. unless such environmentalactivity is pursuant to andin compliance with the conditions of a permit issued by the appropriatefederal, state or local governmentalauthorities; shall furnish toLender promptly and in any event within thirty (30) days after receipt thereofa copy of any notice, summons,  lien, citation. directive.letter or other communication from any governmental agency or instrumentalityconcerning any Intentional orunintentional action oromission on Borrower’s pan in connection with any environmental activitywhether or not there is damage to theenvironment and/or othernatural resources.

 

AdditionalAssurances. Make, execute and deliver to Lender such promissory notes, mortgages,deeds of trust. security agreements,  assignments, financingstatements, instruments. documents and other agreements as Lender or itsattorneys may reasonably request toevidence and secure the Loansand to perfect all Security Interests.

 

LENDEFVSEXPENDITURES.· If any action or proceeding is commenced that would materiallyaffect Lender’s interest in the Collateral or ifBorrower tails to comply withany provision of this Agreement or any Related Documents, including but notlimited to Borrower’s failure todischarge or pay when due anyamounts Borrower is required to discharge or pay under this Agreement or anyRelated Documents, Lender onBorrowers behalf may (butshall not be obligated to) take any action that Lender deems appropriate,including but not limited to discharging orpaying all taxes, liens,security interests, encumbrances and other claims, at any time levied or placedon any Collateral and paying all costs forinsuring. maintaining andpreserving any Collateral. All such expenditures incurred or paid by Lender forsuch purposes will then bear interest etthe rate charged under theNote from the date incurred or paid by Lender to the date of repayment byBorrower. All such expenses will becomea part of the Indebtednessand, at Lender’s option, will (A) be payable on demand; (B) be added to thebalance of the Note and beapportioned among and bepayable with any installment payments to become due during either (1) the termof any applicable insurance policy;  or (2) the remaining term ofthe Note; or (C) be treated as a balloon payment which will be due and payableat the Note’s maturity.

 

NEGATIVECOVENANTS. Borrower covenants and agrees with Lender that while this Agreementis in effect, Borrower shall not, without the prior written consent of Lender:

 

Indebtednessand Lions. (1) Except for trade debt incurred in the normal course of businessand indebtedness to Lender contemplated by this Agreement, create, incur orassume indebtedness for borrowed money, including capital leases, (2) sell,transfer, mortgage, assign, pledge, lease, grant a security interest in, orencumber any 01 Borrower’s assets (except as allowed as Permitted Liens), orl3l sell with recourse any of Borrower’s accounts, except to Lender.

 

Continuityof Operations. (1) Engage in any business activities substantially differentthan those in which Borrower is presently engaged, l2) cease operations,liquidate, merge, transfer, acquire or consolidate with any other entity,change its name, dissolve or transfer or sell Collateral out of the ordinarycourse of business, or (3) make any distribution with respect to any capitalaccount, whether by reduction of capital or otherwise.

 

Loans,Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets toany other person, enterprise or entity, (2) purchase, create or acquire anyinterest in any other enterprise or entity, or (3) incur any obligation assurety or guarantor other than in the ordinary course of business.

 

Agreements.Borrower will not enter into any agreement containing any provisions whichwould be violated or breached by the performance of Borrower’s obligationsunder this Agreement or in connection herewith.

 

CESSATIONOF ADVANCES. If Lender has made any commitment to make any Loan to Borrower,whether under this Agreement or under any other agreement, Lender shall have noobligation to make Loan Advances or to disburse Loan proceeds if: (Al Borroweror any Guarantor is in default under the terms of this Agreement or any of theRelated Documents or any other agreement that Borrower or any Guarantor haswith Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomesinsolvent, files a petition in bankruptcy or similar proceedings, or isadjudged a bankrupt; (C) there occurs a materiel adverse change in Borrower’sfinancial condition, in the financial condition of any Guarantor, or in thevalue of any Collateral securing any Loan; or (Di any Guarantor seeks, claimsor otherwise attempts to limit, modify or revoke such Guarantor’s guaranty ofthe Loan or any other loan with Lender.

 

RIGHTOF SETOFF. To the extent permitted by applicable law, Lender reserves a rightof setoff in all Borrower’s accounts with Lender (whetherchecking,savings, or some other account). This includes all accounts Borrower holdsjointly with someone else and all accounts Borrower mayopen in thefuture, However, this does not include any IRA or Keogh accounts, or any trustaccounts for which setoff would be prohibited bylaw Borrower authorizesLender, to the extant permitted by applicable law, to charge or setoff all sumsowing on the indebtedness against anyand all such accounts.

 

DEFAULT.Each of the following shall constitute an Event of Default under thisAgreement:

 

PaymentDefault. Borrower fails to make any payment when due under the Loan.

 

OtherDefaults. Borrower fails to comply with or to perform any other term,obligation, covenant or condition contained in this Agreementor in any of theRelated Documents or to comply with or to perform any term, obligation,covenant or condition contained in any otheragreement between Lender andBorrower.

 

Defaultin Favor of Third Parties. Borrower or any Grantor defaults under any loan.extension of credit, security agreement, purchase orsales agreement, or any otheragreement, in favor of any other creditor or person that may materially affectany of Borrower’s or anyGrantor’s property or Borrower’s or anyGrantor’s ability to repay the Loans or perform their respective obligationsunder this Agreement orany of the Related Documents.

 

FalseStatements. Any warranty, representation or statement made or furnished toLender by Borrower or on Borrower’s behalf under thisAgreement or theRelated Documents is false or misleading in any material respect, either now orat the time made or furnished or becomesfalse or misleading at anytime thereafter.

 

Deathor Insolvency. The dissolution of Borrower (regardless of whether election tocontinue is made), any member withdraws fromBorrower, or any othertermination of Borrower’s existence as a going business or the death of anymember, the insolvency of Borrower,  the appointment of a receiverfor any part of Borrower’s property, any assignment for the benefit ofcreditors. any type of creditor workout,  or the commencement of anyproceeding under any bankruptcy or insolvency laws by or against Borrower.

 

DefectiveCollateralization. This Agreement or any of the Related Documents ceases to bein full force and effect (including failure of any collateral document tocreate e valid and perfected security interest or lien) at any time and for anyreason.

 

Creditoror Forfeiture Proceedings. Commencement of foreclosure or forfeitureproceedings, whether by judicial proceeding. sell-help, repossession or anyother method, by any creditor of Borrower or by any governmental agency againstany collateral securing the Loan, This includes a garnishment of any ofBorrower’s accounts, including deposit accounts, with Lender. However. thisEvent of Default shall not apply it there is a good faith dispute by Borroweras to the validity or reasonableness of the claim which is the basis of thecreditor or forfeiture proceeding and if Borrower gives Lender written noticeof the creditor or forfeiture proceeding and deposits with Lender monies or asurety bond for the creditor or forfeiture proceeding, in an amount determinedby Lender, in its sole discretion, as being an adequate

 

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reserveor bond for the dispute.

 

EventsAffecting Guarantor. Any of the preceding events occurs with respect to anyGuarantor of any of the indebtedness or anyGuarantor dies or becomesincompetent, or revokes or disputes the validity of, or liability under, anyGuaranty of the Indebtedness.

 

AdverseChange. A material adverse change occurs in B0rrower`s financial condition, orLender believes the prospect of payment or performance of the Loan is impaired.

 

Rightto Cure, lf any default, other than a default on Indebtedness. is curable andif Borrower or Grantor, as the case may be, has not been given a notice of asimilar default within the preceding twelve (12) months, it may be cured ifBorrower or Grantor, as the casa may be. after receiving written notice fromLander demanding cure of such default: (1) cure the default within ten l10ldays; or (2) if the cure requires more than tan (10) days, immediately initiatesteps which Lender deems in Lender’s sole discretion to be sufficient to curethe default and thereafter continue and complete all reasonable and necessary stepssufficient to produce compliance as soon as reasonably practical.

 

EFFECTOF AN EVENT OF DEFAULT. lf any Event of Default shall occur, except whereotherwise provided in this Agreement or the RelatedDocuments, all commitmentsand obligations of Lender under this Agreement or the Related Documents or anyother agreement immediately willterminate (including anyobligation to make further Loan Advances or disbursements). and, at Lender’soption, all Indebtedness immediately willbecome due and payable, allwithout notice of any kind to Borrower, except that in the case of an Event ofDefault of the type described in the“Insolvency” subsectionabove, such acceleration shall be automatic and not optional. In addition,Lender shall have all the rights and remediesprovided in the RelatedDocuments or available at law. in equity, or otherwise. Except as may beprohibited by applicable law, all of Lender’srights and remedies shall becumulative and may be exercised singularly or concurrently. Election by Lenderto pursue any remedy shall notexclude pursuit of any otherremedy, and an election to make expenditures or to take action to perform anobligation of Borrower or of anyGrantor shall not affectLender’s right to declare a default and to exercise its rights and remedies.

 

FINANCIALCOVENANTS. Minimum Senior Debt Service Coverage Ratio. Borrower shall have. ona consolidated basis at the end of each fiscal quarter of Borrower, a SeniorDebt Service Coverage Ratio of NOK less than 1.60:1:00.

 

MinimumFixed Charge Coverage Ratio. Borrower shall have, on a consolidated basis atthe end of each fiscal quartet of Borrower, a Fixed Charge Coverage Ratio ofnot less than 1.10:1.00.

 

MaximumSenior Funded Debt to EBITDA. Borrower shall have, on a consolidated basis atthe end of each fiscal quarter of Borrower sat forth below, at ratio of (i) SeniorFunded Debt measured as of the last day of such fiscal quarter of Borrower to (ii)EBITDA for such fiscal quarter of not more than the following:

 

1.50:1.00for the fiscal quarters ending September 30. 2008, December 31, 2008,

March31, 2009, and June 30, 2009; and

 

1.25:1.00for each fiscal quarter ending thereafter,

 

MinimumTangible Net Worth. Borrower shall have, on a consolidated basis at the end ofeach fiscal quarter of Borrower set forth below, a Tangible Net Worth of notless than the following:

 

$7,500,000.00for the fiscal quarters ending December 31, 2008

March31, 2009, and June 30, 2009;

$8,500,000.00for the fiscal quarters ending September 30. 2009, December 31, 2009,

March31, 2010, and June 30, 2010;

$9,000,000.00for the fiscal quarters ending September 30, 20lO, December 31, 2010,

March31, 2011, and June 30, 2011;

$9,500,000.00for each fiscal quarter ending thereafter.

 

ExcessCash Flow Payments to Lender,

Withinninety l90I days after the end of Borrower’s fiscal year ending December 31.2008 and each fiscal year thereafter, Borrower shall pay Lender the lesser of (i)Excess Cash Flow, provided Excess Cash Flow for purposes of this Section shallnut be less than zero, or (ii) $256,000.00.

 

MISCELLANEOUSPROVISIONS. The following miscellaneous provisions are a part of thisAgreement:

 

Amendments.This Agreement, together with any Related Documents, constitutes the entireunderstanding and agreement of the partiesas to the matters set forthin this Agreement. No alteration of or amendment to this Agreement shall beeffective unless given in writingand signed by the party orparties sought to be charged or bound by the alteration or amendment.

 

Attorneys’Fees; Expenses. Borrower agrees to pay upon demand all of Lender’s costs andexpenses, including Lender’s attorneys’ feesand Lender’s legal expenses,incurred in connection with the enforcement of this Agreement. Lender may hireor pay someone else to helpenforce this Agreement, andBorrower shall pay the costs and expenses of such enforcement. Costs endexpenses include Lender’sattorneys fees and legalexpenses whether or not there is a lawsuit, including attorneys’ fees and legalexpenses for bankruptcyproceedings (including efforts to modify orvacate any automatic stay or injunction), and appeals. Borrower also shell payall court costsand such additional fees as may be directed bythe court.

 

CaptionHeadings. Caption headings in this Agreement are for convenience purposes onlyand are not to be used to interpret or define the provisions of this Agreement.

 

Consentto Loan Participation. Borrower agrees and consents to Lender’s sale ortransfer, whether now or later, of one or moreparticipation interests inthe Loan to one or more purchasers, whether related or unrelated to Lender.Lender may provide, without anylimitation whatsoever, to anyone or more purchasers, or potential purchasers, any information or knowledgeLender may have aboutBorrower or about any other matter relating tothe Loan, and Borrower hereby waives any rights to privacy Borrower may havewith respectto such matters. Borrower additionally waivesany and all notices of sale of participation interests, as well as all noticesof any repurchaseof such participation interests. Borrower alsoagrees that the purchasers of any such participation interests will beconsidered as theabsolute owners of such interests in the Loanand will have all the rights granted under the participation agreement oragreementsgoverning the sale of such participation interests. Borrower furtherwaives all rights of offset or counterclaim that it may have now or lateragainst Lenderor against any purchaser of such a participation interest and unconditionallyagrees that either Lender or such purchaser mayenforce Borrower’s obligationunder the Loan irrespective of the failure or insolvency of any holder of anyinterest in the Loan. Borrower

 

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furtheragrees that the purchaser of any such participation interests may enforce itsinterests irrespective of any personal claims or defenses that Borrower mayhave against Lender,

 

GoverningLaw. This Agreement will he governed by federal law applicable to Lender and.to the extent not preempted by federal law. the laws of the State of Missouriwithout regard to its conflicts of law provisions. This Agreement has beenaccepted by Lender in the State of Missouri.

Choiceof Venue. lf there is e lawsuit, Borrower agrees upon Lender’s request tosubmit to the jurisdiction of the courts of Jackson

County.State of Missouri.

 

Jointand Several Liability. All obligations of Borrower under this Agreement shallbe joint and several. and all references to Borrower shall mean each and everyBorrower, This means that each Borrower signing below is responsible for allobligations in this Agreement. Where any one or more of the parties is acorporation. partnership. limited liability company or similar entity, it isnot necessary for Lender to inquire into the powers of any of the officers,directors. partners. members, or other agents acting or purporting to act onthe entity’s behalf. and any obligations made or created in reliance upon theprofessed exercise of such powers shall be guaranteed under this Agreement.

 

NoWaiver by Lender. Lender shall not be deemed to have waived any rights underthis Agreement unless such waiver is given in writingand signed byLender. No delay or omission on the part of Lender in exercising any rightshall operate as a waiver of such right or anyother right. A waiver byLender of a provision of this Agreement shall not prejudice or constitute awaiver of Lender’s right otherwise todemand strict compliance withthat provision or any other provision of this Agreement. No prior waiver byLender. nor any course ofdealing between Lander andBorrower. or between Lender and any Grantor, shell constitute a waiver of anyof Lender’s rights or of any ofBorrower’s or any Grantor’sobligations as to any future transactions. Whenever the consent of Lender isrequired under this Agreement,  the granting of such consentby Lender in any instance shall not constitute continuing consent to subsequentinstances where such consentis required and in all casessuch consent may be granted or withheld in the sole discretion of Lender.

 

Notices,Any notice required to be given under this Agreement shall be given in writing,end shall be effective when actually delivered.  when actually received bytelefacsimile (unless otherwise required by law), when deposited with anationally recognized overnight courier,or, if mailed, when depositedin the United States mail, as first class, certified or registered mail postageprepaid. directed to the addressesshown near the beginning ofthis Agreement. Any party may change its address for notices under thisAgreement by giving formal writtennotice to the other parties,specifying that the purpose of the notice is to change the party’s address. Fornotice purposes, Borroweragrees to keep Lenderinformed at all times of Borrower’s current address. Unless otherwise providedor required by law, if there is morethan one Borrower, any noticegiven by Lender to any Borrower is deemed to be notice given to all Borrowers.  Severability. lf a court ofcompetent jurisdiction finds any provision of this Agreement to be illegal,invalid, or unenforceable as to anyperson or circumstance. thatfinding shall not make the offending provision illegal, invalid, orunenforceable as to any other person orcircumstance. lf feasible,the offending provision shall be considered modified so that it becomes legal.valid and enforceable. lf theoffending provision cannot beso modified, it shall be considered deleted from this Agreement. Unless otherwiserequired by law. theillegality, invalidity, or unenforceability ofany provision of this Agreement shall nut affect the legality, validity orenforceability of any otherprovision of this Agreement.

 

Subsidiariesand Affiliates of Borrower. To the extent the context of any provisions of thisAgreement makes it appropriate, includingwithout limitation anyrepresentation. warranty or covenant. the word “Borrower” as used in thisAgreement shall include all of Borrower’ssubsidiaries and affiliates.Notwithstanding the foregoing however, under no circumstances shall thisAgreement be construed to requireLender to make any Loan orother financial accommodation to any of Borrower’s subsidiaries or affiliates.

 

Successorsand Assigns. All covenants and agreements by or on behalf of Borrower containedin this Agreement or any RelatedDocuments shall bind Borrower’ssuccessors and assigns and shall inure to the benefit of Lender and itssuccessors and assigns. Borrowershall not, however. have theright to assign Borrower’s rights under this Agreement or any interest therein,without the prior writtenconsent of Lender.

 

Survivalof Representations and Warranties. Borrower understands and agrees that inmaking the Loan. Lender is relying on all representations, warranties,and covenants made by Borrower in this Agreement or in any certificate or otherinstrument delivered byBorrower to Lender under this Agreement or theBelated Documents. Borrower further agrees that regardless of any investigationmade byLender. all such representations, warranties and covenants will survivethe making of the Loan and delivery to Lender of the RelatedDocuments, shallbe continuing in nature, and shall remain in full force and effect until suchtime as Borrower’s Indebtedness shall be paidin full, or until thisAgreement shall be terminated in the manner provided above, whichever is thelast to occur.

 

Timeis of the Essence. Time is of the essence in the performance of this Agreement.

 

DEFINITIONS.The following capitalized words and terms shall have the following meaningswhen used in this Agreement. Unless specificallystated to the contrary. allreferences to doll r amounts shall mean amounts in lawful money of the UnitedStates of America, Words and termsused in the singular shallinclude the plural, and the plural shall include the singular. as the contextmay require. Words and terms not otherwisedefined in this Agreementshall have the meanings attributed to such terms in the Uniform CommercialCode. Accounting words and terms nototherwise defined in thisAgreement shall have the meanings assigned to them in accordance with generallyaccepted accounting principles as ineffect on the date of thisAgreement:

 

Advance.The word “Advance” means a disbursement of Loan funds made. or to be made, toBorrower or on Borrower’s behalf on a line of credit or multiple advance basisunder the terms and conditions of this Agreement.

 

Agreement.The word “Agreement” means this Business Loan Agreement. as this Business LoanAgreement may be amended or modified from time to time. together with allexhibits and schedules attached to this Business Loan Agreement from time totime.

 

Borrower.The word “Borrower” means LIQUIDMETAL COATINGS, LLC; and LIQUIDMETAL COATINGSSOLUTIONS, LLC and includes all co—signers and co-makers signing the Note andall their successors and assigns.

 

Collateral.The word “Collateral” means ell property and assets granted as collateralsecurity for a Loan. whether real or personal property, whether granted directlyor indirectly, whether granted now or in the future, and whether granted in theform of a security interest, mortgage. collateral mortgage. deed of trust.assignment. pledge, crop pledge, chattel mortgage. collateral chattel mortgage,chattel trust, factor’s lien. equipment trust. conditional sale, trust receipt,lien, charge, lien or title retention contract. lease or consignment intendedas a security device. or any other security or lien interest whatsoever,whether created by law. contract, or otherwise.

 

EnvironmentalLaws. The words “Environmental Laws” mean any and all state. federal and localstatutes, regulations and ordinances relating to the protection of human healthor the environment. including without limitation the Comprehensive EnvironmentalResponse, Compensation. and Liability Act of IQSO. as amended, 42 U.S.C. Section 9501.et seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1985.Pub. L. No. 99499 (“SARA”), the Hazardous Materials Transportation Act, 49U,5,C, Section 1801, et seq.,

 

6

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theResource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,or other applicable state or federal laws, rules, or regulations adoptedpursuant thereto.

 

Eventof Default. The words “Event of Default” mean any of the events of default setforth in this Agreement in the default section of this Agreement.

 

GAAP.The word “GAAP” means generally accepted accounting principles.

 

Grantor.The word “Grantor” means each and all of the persons or entities granting aSecurity Interest in any Collateral for the Loan. including without limitationall Borrowers granting such a Security Interest,

 

Guarantor.The word “Guarantor” means any guarantor, surety. or accommodation party of anyor all of the Loan.

 

Guaranty.The word “Guaranty” means the guaranty from Guarantor to Lender, includingwithout limitation a guaranty of all or part of the Note.

 

HazardousSubstances. The words “Hazardous Substances” mean materials that, because oftheir quantity, concentration or physical, chemical or infectious characteristics,may cause or pose a present or potential hazard to human health or theenvironment when improperly used, treated, stored, disposed of, generated,manufactured, transported or otherwise handled. The words “Hazardous Substances’are used in their very broadest sense and include without limitation any andall hazardous or toxic substances, materials or waste as defined by or listedunder the Environmental Laws. The term “Hazardous Substances” also includes,without limitation, petroleum and petroleum byproducts or any traction thereofand asbestos.

 

Indebtedness.The word “Indebtedness” means the Indebtedness evidenced by the Note or RelatedDocuments, including all principal and interest together with all otherindebtedness and costs and expenses for which Borrower is responsible underthis Agreement or under any of the Related Documents.

 

Lender.The word “Lender” means Bank Midwest N.A., its successors and assigns.

 

Loan,The word “Loan” means any and all loans and financial accommodations from Lenderto Borrower whether now or hereafterexisting, and howeverevidenced, including without limitation those loans and financialaccommodations described herein or described onany exhibit or scheduleattached to this Agreement from time to time.

 

Note.The word “Note” means the Note executed by LIQUIDMETAL COATINGS, LLC; andLIOUIDMETAL COATINGS SOLUTIONS, LLC in the principal amount of $104,800.04dated October 2’I, 2008. together with all renewals of, extensions of,modifications of, refinancings of, consolidations of, and substitutions for thenote or credit agreement.

 

PermittedLiens. The words “Permitted Liens” mean (1) liens and security interestssecuring Indebtedness owed by Borrower to Lender; (2) liens for taxes,assessments, or similar charges either not yet due or being contested in goodfaith; (3) liens of materialmen, mechanics, warehousemen, or carriers, orother like liens arising in the ordinary course of business and securingobligations which are not yet delinquent; I4) purchase money liens or purchasemoney security interests upon or in any property acquired or held by Borrowerin theordinary course of business to secure indebtedness outstanding on thedate of this Agreement or permitted to be incurred under the paragraph of thisAgreement titled “indebtedness and Liens”; I5) liens and security interestswhich, as of the date of this Agreement, have been disclosed to and approved bythe Lender in writing; and I6) those liens and security interests which in theaggregate constitute an immaterial and insignificant monetary amount withrespect to the net value of Borrower’s assets.

 

RelatedDocuments. The words ‘Related Documents” mean all promissory notes, creditagreements, loan agreements, environmentalagreements, guaranties,security agreements, mortgages, deeds of trust, security deeds, collateralmortgages, and all other instruments,  agreements and documents,whether now or hereafter existing, executed in connection with the Loan.

 

SecurityAgreement. The words “Security Agreement” mean and include without limitationany agreements. promises, covenants,  arrangements, understandingsor other agreements, whether created bylaw, contract, or otherwise. evidencing,governing, representing, orcreating a Security Interest.

 

SecurityInterest. The words ‘Security Interest” mean, without limitation, any and alltypes of collateral security. present and future.  whether in the form of alien, charge, encumbrance, mortgage, deed of trust, security deed, assignment,pledge, crop pledge. chattelmortgage, collateral chattelmortgage, chattel trust, factor’s lien, equipment trust, conditional sale,trust receipt, lien or title retentioncontract, lease orconsignment intended as a security device, or any other security or lieninterest whatsoever whether created by law,  contract, or otherwise,

 

ORALAGREEMENTS OR COMMITMENTS TO LOAN MONEY. EXTEND CREDIT OR T0 FOREBEAR FROMENFORCING REPAYMENT OF A DEBTINCLUDING PROMISES TO EXTENDOR RENEW SUCH DEBT ARE NOT ENFORCEABLE. REGARDLESS OF THE LEGAL THEORY UPONWHICH ITIS BASED THAT I5 IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECTYOU (BORROWER(S)) AND US (CREDITOR) FROMMISUNDERS-LANDING ORDISAPPOINTMENT. ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED INTHISWRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTBETWEEN US. EXCEPT AS WE MAY LATER AGREEIN WRITINGJO MODIFY IT.

 

WAIVEJURY. All parties to this Agreement hereby waive the right to any jury trial inany action, proceeding. or counterclaim brought by any party against any otherparty.

 

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BORROWERACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT ANDBORROWER AGREES TO ITS TERMS.  THISBUSINESS LOAN AGREEMENT IS DATED OCTOBER 21, 2008.

 

 

**BRORROWER:**

 
| LIQUIMDETAL  COATINGS, LLC                                                |                                          |
|---------------------------------------------------------------------------|-----------------------------------------------|
|                                                                      |                                          |   |
| By:                                                                       | /s/  Larry Buffington                         |   |
|                                                                      | LARRY BUFFINGTON, PRESIDENT & CEO of |   |
|                                                                      | LIQUIDMETAL COATINGS, LLC                     |   |
|                                                                      |                                          |   |
|                                                                      |                                          |   |
| LIQUIDMETAL  COATINGS SOLUTIONS, LLC                                      |                                          |
|                                                                      |                                          |   |
| LIQUIDMETAL  COATINGS, LLC, Member of LIQUIDMETAL COATINGS SOLUTIONS, LLC |
|                                                                      |                                          |   |
| By:                                                                       | /s/  Larry Buffington                         |   |
|                                                                      | LARRY BUFFINGTON, PRESIDENT & CEO of |   |
|                                                                      | LIQUIDMETAL COATINGS, LLC                     |   |
|                                                                      |                                          |   |
| **LENDER:**                                                               |                                          |
| ** **                                                                |                                          |
|                                                                      |                                          |   |
| BANK  MIDWEST N.A.                                                        |                                          |
|                                                                      |                                          |   |
| By:                                                                       |                                          |   |
|                                                                      | Authorized Signer                             |   |

 

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*000000002000209914095510212008*

COMMERCIAL SECURITY AGREEMENT

 
| **Principal** | ** **     | **Loan Date** | ** **     | **Maturity** | ** **     | **Loan No.** | ** **     | **Call / Coll** | ** ** | **Account** | ** ** | **Officer** | ** ** | **Initials** | ** ** |
|---------------|----------------|--------------------|----------------|--------------|----------------|-------------------|----------------|---------------------------|------------|-------------|------------|-------------|------------|--------------|------------|
| **$**         | **104,800.04** | ** **         | **10-21-2008** | ** **   | **11-01-2013** | ** **        | **2000209914** | ** **                | **7100**   | ** **  | **379885** | ** **  | **1106**   | ** **   | ** ** | ** ** |
|               |                |                    |                |              |                |                   |                |                           |            |             |            |             |            |              |            |  |

 

References in the boxes above are for Lender’s use only and do not limitthe applicability of this document to any particular loan or item.

Any item above containing “ ‘ ‘ ‘ “ has been omitted due to text lengthlimitations,

 
| Grantor: |   | LIOUIDMETAL  COATINGS, LLC           |   | Lender: |   | Bank  Midwest N.A.      |
|----------|--------|--------------------------------------|--------|---------|--------|-------------------------|
|     |   | LIGUIDMETAL  COATINGS SOLUTIONS, LLC |   |    |   | Town  Pavilion Facility |
|     |   | 1525  LAKESVILLE DRIVE, SUITE 114    |   |    |   | 1111  Main Street       |
|     |   | KINGWOOD  , TX 77339                 |   |    |   | Kansas  City, MO 64105  |

 

THISCOMMERCIAL SECURITY AGREEMENT dated October 21, 2008, is made and executedbetween LIOUIDMETAL COATINGS, LLC; and LIOUIDMETAL COATINGS SOLUTIONS, LLC (“Grantor”)and Bank Midwest N.A. (“Lender”).

 

GRANTOF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender asecurity interest in the Collateral to secure the Indebtedness and agrees thatLender shall have the rights stated in this Agreement with respect to theCollateral. in addition to all other rights which Lender may have by law.

 

COLLATERALDESCRIPTION. The word “Collateral” as used in this Agreement means thefollowing described property whether now owned or hereafter acquired, whethernow existing or hereafter arising, and wherever located, in which Grantor isgiving to Lender a security interest for the payment of the Indebtedness andperformance of all other obligations under the Note and this Agreement:

 

SEEEXHIBIT “A” Together with all additions. replacements, substitutions.attachments, accessions, accessories, fittings, increases. tools, parts,repairs. supplies and commingled goods relating to the foregoing property; allwhether now existing or hereafter arising, whether now owned or hereafteracquired and whether now hereafter subject to any rights in the foregoingproperty; and all products and proceeds (including but not limited to allinsurance payments) of or relating to the foregoing property

 

Inaddition, the word “Collateral” also includes all the following, whether nowowned or hereafter acquired, whether now existing or hereafter arising andwherever located:

(A) Allaccessions, attachments, accessories, replacements of and additions to any ofthe collateral described herein, whether added new or later.

(B) Allproducts und produce of any of the property described in this Collateralsection.

(C) Allaccounts, general intangibles, instruments, rents, monies, payments, and allother rights. arising out of a sale, lease, consignment or other disposition ofany of the property described in this Collateral section.

(D) Allproceeds (including insurance proceeds) from the sale, destruction, loss, orother disposition of any of the property described in this Collateral section,and sums due from a third party who has damaged or destroyed the Collateral orfrom that party’s insurer, whether due to judgment, settlement or otherprocess,

(E) Allrecords and data relating to any of the property described in this Collateralsection, whether in the form of a writing. photograph, microfilm, microfiche,or electronic media, together with all of Grantor’s right, title, and interestin and to all computer software required to utilize, create, maintain, andprocess any such records or data on electronic media.

 

CROSS-COLLATERALIZATION.In addition to the Note, this Agreement secures all obligations, debts andliabilities, plus interest thereon, of Grantor to Lender, or any one or more ofthem, as well as all claims by Lender against Grantor or any one or more ofthem, whether new existing or hereafter arising, whether related or unrelatedto the purpose of the Note, whether voluntary or otherwise, whether due or notdue, direct or indirect, determined or undetermined, absolute or contingent,liquidated or unliquidated, whether Grantor may be liable individually or jointlywith others, whether obligated as guarantor, surety, accommodation party orotherwise, and whether recovery upon such amounts may be or hereafter maybecome barred by any statute of limitations, and whether the obligation torepay such amounts may be or hereafter may become otherwise unenforceable.

 

RIGHTOF SETOFF. To the extent permitted by applicable law, Lender reserves a rightof setoff in all Grant0r’s accounts with Lender (whetherchecking,savings, or some other account). This includes all accounts Grantor holdsjointly with someone else and all accounts Grantor mayopen in thefuture. However, this does not include any IRA or Keogh accounts, or any trustaccounts for which setoff would be prohibited bylaw. Grantor authorizesLender, to the extent permitted by applicable law, to charge or setoff all sumsowing on the Indebtedness against anyand all such accounts

 

GRANTOR’SREPRESENTATIONS AND WARRANTIES WITH RESPECT T0 THE COLLATERAL. With respect tothe Collateral, Grantor representsand promises to Lender that:

 

Perfectionof Security Interest. Grantor agrees to take whatever actions are requested byLender to perfect and continue Lender’s securityinterest in the Collateral.Upon request of Lender, Grantor will deliver to Lender any and ell of thedocuments evidencing or constituting theCollateral, and Grantor willnote Lender’s interest upon any and all chattel paper and instruments if notdelivered to Lender for possessionby Lender. This is acontinuing Security Agreement and will continue in effect even though all nrany part of the Indebtedness is paid in fulland even though for a periodof time Grantor may not be indebted to Lender.

 

Noticesto Lender. Grantor will promptly notify Lender in writing at Lender’s addressshown above for such other addresses as Lender maydesignate from time to time)prior to any (1) change in Grantor’s name; (2) change in Grant0r’sassumed business name(s); (3) changein the management or in themembers or managers of the limited liability company Grantor; (4) changein the authorized signer(s); (5)  change in Grantor’s principaloffice address; (6) change in Grantor’s state of organization; (7) conversionof Grantor to a new or differenttype of business entity; or (8) changemany other aspect of Grantor that directly or indirectly relates to anyagreements between Grantorand Lender. No change inGrantor’s name or state of organization will take effect until after Lender hasreceived notice.

 

NoViolation. The execution and delivery of this Agreement will not violate anylaw or agreement governing Grantor or to which Grantor isan party, andits membership agreement does not prohibit any term or condition of thisAgreement

 

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Enforceabilityof Collateral. To the extent the Collateral consists of accounts, chattelpaper, or general intangibles, as defined by theUniform Commercial Code, theCollateral is enforceable in accordance with its terms, is genuine, and fullycomplies with all applicable lawsand regulations concerningform, content and manner of preparation and execution, and all personsappearing to be obligated on theCollateral have authority andcapacity to contract and are in fact obligated as they appear to be on theCollateral. There shall be no setoffsor counterclaims against anyof the Collateral, and no agreement shall have been made under which anydeductions or discounts may beclaimed concerning the Collateralexcept those disclosed to Lender in writing.

 

Locationof the Collateral. Except in the ordinary course of Grantor’s business, Grantoragrees to keep the Collateral at Grantor’s addressshown above or at such otherlocations as are acceptable to Lender. Upon Lender’s request, Grantor willdeliver to Lender in formsatisfactory to Lender aschedule of real properties and Collateral locations relating to Grantor’soperations, including without limitation thefollowing: (1) all realproperty Grantor owns or is purchasing; (2) all real property Grantor isrenting or leasing; (3) all storage facilitiesGrantor owns, rents. leases,or uses; and MI all other properties where Collateral is or may be located.

 

Removalof the Collateral. Except in the ordinary course of Grantor’s business, Grantorshall not remove the Collateral from its existinglocation without Lender’sprior written consent, Grantor shall, whenever requested, advise Lender ofexact location of the Collateral.

 

TransactionsInvolving Collateral. Except for inventory sold or accounts collected in theordinary course of Grantor’s business, or asotherwise provided for inthis Agreement, Grantor shall not sell, offer to sell, or otherwise transfer ordispose of the Collateral. Grantorshall not pledge, mortgage,encumber or otherwise permit the Collateral to be subject to any lien, securityinterest, encumbrance, orcharge, other than thesecurity interest provided for in this Agreement, without the prior writtenconsent of Lender. This includes securityinterests even if junior inright to the security interests granted under this Agreement. Unless waived byLender, all proceeds from anydisposition of the Collateral(for whatever reason) shall be held in trust for Lender and shall not becommingled with any other funds;  provided however, thisrequirement shall not constitute consent by Lender to any sale or otherdisposition. Upon receipt, Grantor shallimmediately deliver any suchproceeds to Lender.

 

Title.Grantor represents and warrants to Lender that Grantor holds good andmarketable title to the Collateral, free and clear of all liensand encumbrancesexcept for the lien of this Agreement. No financing statement covering any ofthe Collateral is on file in any publicoffice other than those whichreflect the security interest created by this Agreement or to which Lender hasspecifically consented.  Grantor shalldefend Lender’s rights in the Collateral against the claims and demands of allother persons.

 

Repairsand Maintenance. Grantor agrees to keep and maintain, and to cause others tokeep and maintain, the Collateral in good order,  repair mid condition at alltimes while this Agreement remains in effect, Grantor further agrees to paywhen due all claims for work doneon, or services rendered ormaterial furnished in connection with the Collateral so that no lien orencumbrance may ever attach to or betiled against the Collateral.

 

Inspectionof Collateral. Lender and Lender’s designated representatives and agents shallhave the right at all reasonable times to examine rind inspect the Collateralwherever located.

 

Taxes,Assessments and Liens. Grantor will pay when due all taxes, assessments andliens upon the Collateral. its use or operation, uponthis Agreement,upon any promissory note or notes evidencing the Indebtedness, or upon any ofthe other Related Documents. Grantormay withhold any such paymentor may elect to contest any lien it Grantor is in good faith conducting anappropriate proceeding to contestthe obligation to pay and solong as Lenders interest in the Collateral is not jeopardized in Lender’s soleopinion. lf the Collateral issubjected to a lien which isnot discharged within fifteen (15) days, Grantor shall deposit with Lendercash, a sufficient corporate suretybond or other securitysatisfactory to Lender in an amount adequate to provide for the discharge ofthe lien plus any interest. costs,  reasonable attorneys’ tees orother charges that could accrue as a result of foreclosure or sale of theCollateral. In any contest Grantorshall defend itself andLender and shall satisfy any final adverse judgment before enforcement againstthe Collateral. Grantor shall nameLender as an additionalobligee under any surety bond furnished in the contest proceedings. Grantor furtheragrees to furnish Lender withevidence that such taxes,assessments, and governmental and other charges have been paid in lull and in atimely manner. Grantor maywithhold any such payment ormay elect to contest any lien if Grantor is in good faith conducting anappropriate proceeding to contest theobligation to pay and so longas Lender’s interest in the Collateral is not jeopardized.

 

Compliancewith Governmental Requirements. Grantor shall comply promptly with all laws,ordinances, rules and regulations of allgovernmental authorities, nowor hereafter in effect, applicable to the ownership, production, disposition.or use of the Collateral, includingall laws or regulationsrelating to the undue erosion of highly-erodible land or relating to the conversionof wetlands for the production of anagricultural product orcommodity. Grantor may contest in good faith any such law, ordinance orregulation and withhold complianceduring any proceeding,including appropriate appeals, so long as Lender’:: interest in the Collateral,in Lender’s opinion, is not jeopardized.

 

HazardousSubstances. Grantor represents and warrants that the Collateral never has bean,and never will be so long as this Agreementremains a lien on theCollateral, used in violation of any Environmental Laws or for the generation,manufacture, storage, transportation,  treatment, disposal, releaseor threatened release of any Hazardous Substance. The representations andwarranties contained herein arebased on Grantor’s duediligence in investigating the Collateral for Hazardous Substances. Grantorhereby (1) releases and waives anyfuture claims against Lenderfor indemnity or contribution in the event Grantor becomes liable for cleanupor other costs under anyEnvironmental Laws, and (2) agrees toindemnify, defend, and hold harmless Lender against any and all claims andlosses resulting from a breach of this provision of this Agreement. Thisobligation to indemnify and defend shall survive the payment of theindebtedness and thesatisfaction of this Agreement.

 

Maintenanceat Casualty Insurance. Grantor shall procure and maintain all risks insurance,including without limitation fire, theft andliability coverage togetherwith such other insurance as Lender may require with respect to the Collateral,in form, amounts, coverages andbasis reasonably acceptableto Lender and issued by a company or companies reasonably acceptable to Lender,Grantor, upon request ofLender, will deliver to Lender from time totime the policies or certificates of insurance in form satisfactory to Lender,including stipulationsthat coverages will not be cancelled ordiminished without at least ten (TO! days’ prior written notice to Lender andnot including anydisclaimer of the insurer’s liability forfailure to give such a notice. Each insurance policy also shall include anendorsement providing thatcoverage in favor of Lenderwill not be impaired in any way by any act, omission or default of Grantor orany other person. In connection, with all policies coveringassets in which Lender holds or is offered a security interest, Grantor willprovide Lender with such loss payableor other endorsements asLender may require. lf Grantor at any time falls to obtain or maintain anyinsurance as required under thisAgreement, Lender may (butshall not be obligated to) obtain such insurance as Lender deems appropriate,including if Lender so chooses“single interest insurance,”which will cover only Lender’s interest in the Collateral.

 

Applicationof Insurance Proceeds. Grantor shall promptly notify Lender of any loss ordamage to the Collateral. whether or not suchcasualty or loss is coveredby insurance. Lender may make proof of loss if Grantor fails to do so withinfifteen (15) days of the casualty.  All proceeds of any insuranceon the Collateral, including accrued proceeds thereon, shall be held by Lenderas part of the Collateral. IlLender consents to repair orreplacement of the damaged or destroyed Collateral. Lender shall, uponsatisfactory proof of expenditure, payor reimburse Grantor from theproceeds for the reasonable cost of repair or restoration. lf Lender does notconsent to repair or replacementof the Collateral, Lendershall retain a sufficient amount of the proceeds to pay all of theIndebtedness, and shall pay the balance to

 

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Grantor.Any proceeds which have not been disbursed within six (6) months altertheir receipt and which Grantor has not committed tothe repair or restoration ofthe Collateral shall be used to prepay the Indebtedness

 

InsuranceReserves. Lender may require Grantor to maintain with Lender reserves forpayment of insurance premiums, which reserves shall be created by monthlypayments from Grantor of a sum estimated by Lender to be sufficient to produce,at least fifteen (15) days before the premium due date, amounts at least equalto the insurance premiums to be paid. lf fifteen (15) days before payment isdue, the reserve funds are insufficient, Grantor shall upon demand pay anydeficiency to Lender. The reserve funds shall be held by Lender as a general depositand shall constitute a non-interest-bearing account which Lender may satisfy bypayment of the insurance premiums required to be pad by Grantor as they becomedue. Lender does not hold the reserve funds in trust for Grantor, and Lender isnot the agent of Grantor for payment of the insurance premiums required to bepaid by Grantor, The responsibility for the payment of premiums shall remain Grantor’ssole responsibility.

 

InsuranceReports. Grantor, upon request of Lender, shall furnish to Lender reports oneach existing policy of insurance showing suchinformation as Lender mayreasonably request including the following: (1) the name of the insurer; (2) therisks insured; (3) the amountof the policy; (4) theproperty insured; (5) the then current value on the basis of whichinsurance has been obtained and the manner ofdetermining that value; and (6) theexpiration date of the policy. In addition, Grantor shall upon request byLender (however not moreoften than annually) have an independentappraiser satisfactory to Lender determine, as applicable, the cash value orreplacement cost ofthe Collateral.

 

FinancingStatements. Grantor authorizes Lender to file a UCC financing statement, oralternatively, a copy of this Agreement to perfectLenders security interest. AtLender’s request, Grantor additionally agrees to sign all other documents thatare necessary to perfect,  protect, andcontinue Lender’s security interest in the Property, Grantor will pay allfiling fees, title transfer fees, and other fees and costsinvolved unlessprohibited by law or unless Lender is required by law to pay such fees andcosts. Grantor irrevocably appoints Lender toexecute documents necessaryto transfer title if there is a default, Lender may file a copy of thisAgreement as a financing statement. lfGrantor changes Grantor’sname or address, or the name or address of any person granting a securityinterest under this Agreementchanges, Grantor willpromptly notify the Lender of such change.

 

GRANTOR’SRIGHT TO POSSESSION. Until default, Grantor may have possession of the tangiblepersonal property and beneficial use of all theCollateral and may use it inany lawful manner not inconsistent with this Agreement or the RelatedDocuments, provided that Grantor’s right topossession and beneficial useshall not apply to any Collateral where possession of the Collateral by Lenderis required by law to perfectLender’s security interest insuch Collateral. If Lender at any time has possession of any Collateral,whether before or alter an Event of Default,  Lender shall be deemed tohave exercised reasonable care in the custody and preservation of theCollateral if Lender takes such action for thatpurpose as Grantor shallrequest or as Lender, in Lender’s sole discretion, shall deem appropriate underthe circumstances, but failure to honorany request by Grantor shallnot of itself be deemed to be a failure to exercise reasonable care, Lendershall not be required to take any stepsnecessary to preserve anyrights in the Collateral against prior parties, nor to protect, preserve ormaintain any security interest given to secureme Indebtedness.

 

LENDEFTSEXPENDITURES. lf any action or proceeding is commenced that would materiallyaffect Lender’s interest in the Collateral or ifGrantor fails to comply withany provision of this Agreement or any Related Documents, including but notlimited to Grantor’s failure todischarge or pay when due anyamounts Grantor is required to discharge or pay under this Agreement or anyRelated Documents, Lender onGrantor’s behalf may (butshall not be obligated to) take any action that Lender deems appropriate,including but not limited to discharging orpaying all taxes, liens,security interests, encumbrances and other claims, at any time levied or placedon the Collateral and paying all costs forinsuring, maintaining andpreserving the Collateral. All such expenditures incurred or paid by Lender forsuch purposes will then bear interest atthe rate charged under theNota from the date incurred or paid by Lender to the date of repayment byGrantor. All such expenses will become apart of the indebtedness and,at Lender’s option, will (A) be payable on demand; (B) be added tothe balance of the Note and be apportionedamong and be payable with anyinstallment payments to become due during either (1) the term of anyapplicable insurance policy; or (2) theremaining term of the Note;or (C) be treated as a balloon payment which will be due and payable atthe Note’s maturity, The Agreement alsowill secure payment of theseamounts. Such right shall be in addition to all other rights and remedies towhich Lender may be entitled uponDefault.

 

DEFAULT.Each of the following shall constitute an Event of Default under thisAgreement:

 

PaymentDefault. Grantor fails to make any payment when due under the Indebtedness,

 

OtherDefaults. Grantor fails to comply with or to perform any other term,obligation, covenant or condition contained in this Agreement orin any of theRelated Documents or to comply with or to perform any term, obligation,covenant or condition contained in any otheragreement between Lender andGrantor.

 

Defaultin Favor of Third Parties. Grantor defaults under any loan, extension ofcredit, security agreement, purchase or sales agreement, orany otheragreement, in favor of any other creditor or person that may materially affectany of Grantor’s property or ability to performGrantor’s obligations underthis Agreement or any of the Related Documents.

 

FalseStatements. Any warranty, representation or statement made or furnished toLender by Grantor or on Grantor’s behalf under thisAgreement or the RelatedDocuments is false or misleading in any material respect. either now or at thetime made or furnished or becomesfalse or misleading at anytime thereafter.

 

DefectiveCollateralization. This Agreement or any of the Related Documents ceases to bein full force and affect (including failure of anycollateral document to createa valid and perfected security interest or lien) at any time and for anyreason.

 

Insolvency.The dissolution of Grantor (regardless of whether election to continue ismade), any member withdraws from the limitedliability company, or anyother termination of Grantor’s existence as a going business or the death ofany member, the insolvency ofGrantor, the appointment of areceiver for any part of Grantor’s property, any assignment for the benefit ofcreditors, any type of creditorworkout, or the commencementof any proceeding under any bankruptcy or insolvency laws by or againstGrantor.

 

Creditoror Forfeiture Proceedings. Commencement of foreclosure or forfeitureproceedings, whether by judicial proceeding, self-help,  repossession or any othermethod, by any creditor of Grantor or by any governmental agency against anycollateral securing theIndebtedness. This includes a garnishment ofany of Grantor’s accounts, including deposit accounts, with Lender. However,this Event ofDefault shall not apply if there is a goodfaith dispute by Grantor as to the validity or reasonableness of the claimwhich is the basis of thecreditor or forfeitureproceeding and if Grantor gives Lender written notice of the creditor orforfeiture proceeding and deposits with Lendermonies or a surety bond forthe creditor or forfeiture proceeding, in an amount determined by Lender, inits sole discretion, as being anadequate reserve or bond forthe dispute.

 

EventsAffecting Guarantor, Any of the preceding events occurs with respect to anyguarantor, endorser, surety, or accommodation partyor any of the Indebtedness orguarantor, endorser, surety, or accommodation party dies or becomes incompetentor revokes or disputes thevalidity of, or liabilityunder, any Guaranty of the Indebtedness

 

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AdverseChange. A material adverse change occurs in Grant0r’s financial condition, orLender believes the prospect of payment or performance of the Indebtedness isimpaired,

 

CureProvisions. Il any default, other than a default in payment is curable and ifGrantor has not been given a notice of a breach of the same provision of thisAgreement within the preceding twelve (12) months, it may be cured if Grantor,after receiving written notice from Lender demanding cure of such default: (1) curesthe default within ten (10) days; or (2) if the cure requires morethan ten (10) days, immediately initiates steps which Lender deems inLender’s sole discretion to be sufficient to cure the default and thereaftercontinues and completes all reasonable and necessary steps sufficient toproduce compliance as soon as reasonably practical.

 

RIGHTSAND REMEDIES ON DEFAULT. lf an Event of Default occurs under this Agreement, atany time thereafter, Lender shall have all the rights of a secured party underthe Delaware Uniform Commercial Code. In addition and without limitation,Lender may exercise any one or more of the following rights and remedies:

 

Accelerateindebtedness. Lender may declare the entire indebtedness, including anyprepayment penalty which Grantor would be required to pay, immediately due andpayable, without notice of any kind to Grantor,

 

AssembleCollateral. Lender may require Grantor to deliver to Lender all or any portionof the Collateral and any and all certificates of title and other documentsrelating to the Collateral. Lander may require Grantor to assemble theCollateral and make it available to Lender at a place to be designated byLender. Lender also shall have full power to enter upon the property of Grantorto take possession of and remove the Collateral. lf the Collateral containsother goods not covered by this Agreement at the time of repossession, Grantoragrees Lender may take such other goods, provided that Lender makes reasonableefforts to return them to Grantor after repossession.

 

Sellthe Collateral. Lender shall have full power to sell, lease, transfer, orotherwise deal with the Collateral or proceeds thereof in Lender’s own name orthat of Grantor. Lender may sell the Collateral at public auction or privatesale. Unless the Collateral threatens to declinespeedily in value or is of atype customarily sold on a recognized market, Lender will give Grantor, andother persons as required by law,  reasonable notice of the timeand place of any public sale, or the time after which any private sale or anyother disposition of the Collateralis to be made. However, nonotice need be provided to any person who, after Event of Default occurs.enters into and authenticates anagreement waiving that person’sright to notification of sale. The requirements of reasonable notice shall bemet if such notice is given atleast ten (10) daysbefore the time of the sale or disposition. All expenses relating to thedisposition of the Collateral, including withoutlimitation the expenses ofretaking, holding, insuring, preparing for sale and selling the Collateral,shall become a part of the Indebtednesssecured by this Agreement andshall be payable on demand, with interest at the Note rate from date ofexpenditure until repaid.

 

AppointReceiver. Lender shall have the right to have a receiver appointed to takepossession of all or any part of the Collateral, with thepower to protectand preserve the Collateral, to operate the Collateral preceding foreclosure orsale, and to collect the Rents from theCollateral and apply theproceeds, over and above the cost of the receivership, against theIndebtedness. The receiver may serve withoutbond it permitted by law.Lender’s right to the appointment of a receiver shall exist whether or not theapparent value of the Collateralexceeds the indebtedness by asubstantial amount. Employment by Lender shall not disqualify a person fromserving as a receiver.

 

CollectRevenues, Apply Accounts. Lender, either itself or through a receiver, maycollect the payments, rents, income, and revenues fromthe Collateral,Lender may at any time in Lender’s discretion transfer any Collateral intoLender’s own name or that of Lender’s nomineeand receive the payments,rents, income, and revenues therefrom and hold the same as security for theindebtedness or apply it topayment of the Indebtednessin such order of preference as Lender may determine. insofar as the Collateralconsists of accounts, generalintangibles, insurancepolicies, instruments, chattel paper, choses in action, or similar property,Lender may demand. collect, receipt for.  settle, compromise, adjust,sue for, foreclose, or realize on the Collateral as Lender may determine,whether or not Indebtedness orCollateral is then doe. Forthese purposes, Lender may, on behalf of and in the name of Grantor, receive,open and dispose of mailaddressed to Grantor; change any address towhich mail and payments are to be sent; and endorse notes, checks, drafts,money orders,  documents oftitle, instruments and items pertaining to payment, shipment, or storage of anyCollateral. To facilitate collection, Lendermay notify account debtorsand obligors on any Collateral to make payments directly to Lender.

 

ObtainDeficiency. It Lender chooses to sell any or all of the Collateral, Lender mayobtain a judgment against Grantor for any deficiencyremaining on the Indebtednessdue to Lender after application of all amounts received from the exercise ofthe rights provided in thisAgreement. Grantor shall beliable for a deficiency even if the transaction described in this subsection isa sale of accounts or chattelpaper

 

OtherRights and Remedies, Lender shall have all the rights and remedies of a securedcreditor under the provisions of the Uniform Commercial Code, as may be amendedfrom time to time. In addition, Lender shall have and may exercise any or allother rights and remedies it may have available at law, in equity, orotherwise.

 

Electionof Remedies. Except as may be prohibited by applicable law, all of Lender’srights and remedies, whether evidenced by thisAgreement, the RelatedDocuments, or by any other writing, shall be cumulative and may be exercisedsingularly or concurrently. Election by Lender to pursue any remedy shall notexclude pursuit of any other remedy, and an election to make expenditures or totake action to perform an obligation of Grantor under this Agreement, afterGrantor’s failure to perform, shall not affect Lender’s right to declare adefault and exercise its remedies.

 

MISCELLANEOUSPROVISIONS. The following miscellaneous provisions are a part of thisAgreement:

 

Amendments.This Agreement, together with any Related Documents, constitutes the entireunderstanding and agreement of the partiesas to the matters set forthin this Agreement. No alteration of or amendment to this Agreement shall beeffective unless given in writingand signed by the party orparties sought to be charged or bound by the alteration or amendment.

 

Attorneys’Fees; Expenses. Grantor agrees to pay upon demand all of Lender’s costs andexpenses, including Lender’s reasonableattorneys’ fees and Lender’slegal expenses, incurred in connection with the enforcement of this Agreement.Lender may hire or paysomeone else to help enforce this Agreement,and Grantor shall pay the costs and expenses of such enforcement. Costs andexpensesinclude Lender’s reasonable attorneys fees and legal expenses whether ornot there is a lawsuit, including reasonable attorneys’ fees andlegal expensesfor bankruptcy proceedings (including efforts to modify or vacate any automaticstay or injunction), appeals, and anyanticipated post-judgmentcollection services. Lender may also recover from Grantor all court,alternative dispute resolution or othercollection costs (including,without limitation, fees and charges of collection agencies) actually incurredby Lender.

 

CaptionHeadings. Caption headings in this Agreement are for convenience purposes onlyand are not to be used to interpret or define the provisions of this Agreement.

 

GoverningLaw. With respect to procedural matters related to the perfection andenforcement of Lender’s rights against the Collateral, this Agreement will begoverned by federal law applicable to Lender and to the extent not preempted byfederal law, the laws of the State of Delaware. In all other respects, thisAgreement will be governed by federal law applicable to Lender end, to theextent not preempted by federal law, the laws of the State of Missouri withoutregard to its conflicts of law provisions. However, if there ever is a questionabout whether any provision of this Agreement is valid or enforceable, theprovision that is questioned will be governed by whichever state or

 

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federallaw would find the provision to be valid and enforceable. The loan transactionthat is evidenced by the Note and this Agreement has been applied for,considered, approved and made, and all necessary loan documents have been acceptedby Lender in the State of Missouri.

 

Choiceof Venue. It there is a lawsuit, Grantor agrees upon Lender’s request to submitto the jurisdiction of the courts of Jackson County. State of Missouri.

 

Jointand Several Liability. All obligations of Grantor under this Agreement shall bejoint and several, and all references to Grantor shall mean each and everyGrantor. This means that each Grantor signing below is responsible for allobligations in this Agreement. Where any one or more of the parties is acorporation, partnership, limited liability company or similar entity, it isnot necessary for Lender to inquire into the powers of any of the officers,directors, partners, members, or other agents acting or purporting to act onthe entity’s behalf, and any obligations made or created in reliance upon theprofessed exercise of such powers shall be guaranteed under this Agreement.

 

NoWaiver by Lender. Lender shall not be deemed to have waived any rights underthis Agreement unless such waiver is given in writing and signed by Lender. Nodelay or omission on the part of Lender in exercising any right shall operateas a waiver of such right or any other right. A waiver by Lender of a provisionof this Agreement shall not prejudice or constitute a waiver of Lenders rightotherwise to demand strict compliance with that provision or any otherprovision of this Agreement. No prior waiver by Lender, nor any course of dealingbetween Lender and Grantor, shall constitute a waiver of any of Lender’s rightsor of any of Grantor’s obligations as Io any future transactions. Whenever theconsent of Lender is required under this Agreement, the granting of suchconsent by Lender in any instance shall not constitute continuing consent tosubsequent instances where such consent is required and in all cases suchconsent may he granted or withheld in the sole discretion of Lender.

 

Notices.Any notice required to be given under this Agreement shall be given in writing,and shall be effective when actually delivered. when actually received bytelefacsimile (unless otherwise required by law), when deposited with anationally recognized overnight courier, or, if mailed, when deposited in theUnited States mail, as first class, certified or registered mall postageprepaid, directed to the addresses shown near the beginning of this Agreement.Any party may change its address for notices under this Agreement by givingformal written notice to the other parties, specifying that the purpose of thenotice is to change the party’s address. For notice purposes, Grantor agrees tokeep Lender informed at ell times of Grantor’s current address, Unlessotherwise provided or required by law, if there is more than one Grantor, anynotice given by Lender to any Grantor is deemed to be notice given to allGrantors.

 

Powerof Attorney. Grantor hereby appoints Lender as Grantor’s irrevocableattorney-in-fact for the purpose of executing any documentsnecessary toperfect, amend, or to continue the security interest granted in this Agreementor to demand termination of filings of othersecured parties. Lender mayat any time, and without further authorization from Grantor, file a carbon,photographic or other reproductionof any financing statement orof this Agreement for use as a financing statement. Grantor will reimburseLender for all expenses for theperfection and thecontinuation of the perfection of Lender’s security interest in the Collateral.

 

Severability.lf a court of competent jurisdiction finds any provision of this Agreement tobe illegal, invalid, or unenforceable as to anyperson or circumstance, thatfinding shall not make the offending provision illegal, invalid, orunenforceable as to any other person orcircumstance. Il feasible,the offending provision shall be considered modified so that it becomes legal,valid and enforceable. lf theoffending provision cannot beso modified, it shall be considered deleted from this Agreement. Unlessotherwise required by law, theillegality, invalidity. orunenforceability of any provision of this Agreement shall not affect thelegality, validity or enforceability of any otherprovision of this Agreement.

 

Successorsand Assign:. Subject to any limitations stated in this Agreement on transfer ofGrantor’s interest. this Agreement shall bebinding upon and inure to thebenefit of the parties, their successors and assigns. lf ownership of theCollateral becomes vested in a person other than Grantor, Lender, withoutnotice to Grantor, may deal with Grantor’s successors with reference to thisAgreement and theIndebtedness by way of forbearance orextension without releasing Grantor from the obligations of this Agreement orliability under theIndebtedness.

 

Survivalof Representations and Warranties. All representations. warranties, andagreements made by Grantor in this Agreement shall survive the execution anddelivery of this Agreement, shall be continuing in nature, and shall remain inlull force and effect until such time as Grantor’s Indebtedness shall be paidin full.

 

Timeis of the Essence. Time is of the essence in the performance of this Agreement.

 

WaiveJury. All parties to this Agreement hereby waive the right to any jury trial inany action, proceeding, or counterclaim brought by any party against any otherparty.

 

DEFINITIONS,The following capitalized words and terms shall have the following meaningswhen used in this Agreement. Unless specificallyslated to the contrary. allreferences to dollar amounts shall mean amounts in lawful money of the UnitedStates of America. Words and termsused in the singular shallinclude the plural, and the plural shell include the singular, as the contextmay require. Words and terms not otherwisedefined in this Agreementshall have the meanings attributed to such terms in the Uniform CommercialCode:

 

Agreement.The word “Agreement” means this Commercial Security Agreement, as thisCommercial Security Agreement may be amended or modified from time to time,together with all exhibits and schedules attached to this Commercial SecurityAgreement from time to time 

 

Borrower.The word ‘Borrower” means LIOUIDMETAL COATINGS, LLC; and LIOUIDMETAI. COATINGSSOLUTIONS, LLC and includes all co-signers and co-makers signing the Note andall their successors and assigns.

 

Collateral.The word “Collateral” means all of Grantor’s right, title end interest in andto all the Collateral as described in the Collateral Description section ofthis Agreement.

 

Default.The word “Default” means the Default set forth in this Agreement in the sectiontitled “Default’.

 

EnvironmentalLaws. The words “Environmental Laws” mean any and all state. federal and localstatutes, regulations and ordinances relating to the protection of human healthor the environment, including without limitation the ComprehensiveEnvironmental Response. Compensation, and Liability Act of 1980, as amended, 42U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments and ReauthorizationAct of 1986. Pub. L. No, 99499 (“SARA”), the Hazardous Materials TransportationAct, 49 U.S.C. Section 1801, et seq., the Resource Conservation andRecovery Act, 42 U.S.C. Section 6901, et seq., or other applicable stateor federal laws, rules, or regulations adopted pursuant thereto.

 

Eventof Default. The words “Event of Default” mean any of the events of default set forthin this Agreement in the default section of this Agreement.

 

Grantor.The word “Grantor” means LIQUIDMETAL COATINGS, LLC; and LIQUIDMETAL COATINGSSOLUTIONS, LLC.

 

Guaranty.The word “Guaranty” means the guaranty from guarantor, endorser, surety, or accommodationparty to Lender, including without limitation a guaranty of all or part of theNote.

 

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HazardousSubstances. The words “Hazardous Substances” mean materials that, because oftheir quantity, concentration or physical,  chemical or infectiouscharacteristics, may cause or pose a present or potential hazard to humanhealth or the environment whenimproperly used, treated,stored, disposed of, generated, manufactured, transported or otherwise handled.The words “HazardousSubstances’ are used in their very broadestsense and include without limitation any and all hazardous or toxic substances,materials orwaste as defined by or listed under theEnvironmental Laws. The term “Hazardous Substances” also includes, withoutlimitation, petroleumand petroleum byproducts or any tractionthereof and asbestos.

 

Indebtedness.The word “Indebtedness” means the Indebtedness evidenced by the Note or RelatedDocuments, including all principal and interest together with all otherindebtedness and costs and expenses for which Borrower is responsible underthis Agreement or under any of the Related Documents.

 

Lender.The word “Lender” means Bank Midwest N.A., its successors and assigns.

 

Note.The word “Note” means the Note executed by LIQUIDMETAL COATINGS, LLC; andLIOUIDMETAL COATINGS SOLUTIONS, LLC in the principal amount of $104,800.04dated October 2’I, 2008. together with all renewals of, extensions of,modifications of, refinancings of, consolidations of, and substitutions for thenote or credit agreement.

 

Property.The word “Property” means all of Grantor’s right, title and interest in and toall the Property as described in the “Collateral Description” section of thisAgreement.

 

RelatedDocuments. The words ‘Related Documents” mean all promissory notes, creditagreements, loan agreements, environmental agreements, guaranties, securityagreements, mortgages, deeds of trust, security deeds, collateral mortgages,and all other instruments, agreements and documents, whether now or hereafterexisting, executed in connection with the Loan.

 

GRANTERAHS READ AND UNDERSTOOD ALL THE PROVISION OF THIS COMMERCIAL SECURITY AGREEMENTAND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED OCTOBER 21, 2008.

 

THISAGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS AGREEMENT IS ANDSHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

**GRANTOR:**

 
| LIQUIMDETAL  COATINGS, LLC                                                |                                           |
|---------------------------------------------------------------------------|------------------------------------------------|
|                                                                      |                                           |   |
| By:                                                                       |  /s/ Larry Buffington                     |   |
|                                                                      | LARRY  BUFFINGTON, PRESIDENT & CEO of |   |
|                                                                      | LIQUIDMETAL  COATINGS, LLC                     |   |
|                                                                      |                                           |   |
|                                                                      |                                           |   |
| LIQUIDMETAL  COATINGS SOLUTIONS, LLC                                      |                                           |
|                                                                      |                                           |   |
| LIQUIDMETAL  COATINGS, LLC, Member of LIQUIDMETAL COATINGS SOLUTIONS, LLC |
|                                                                      |
|                                                                      |                                           |   |
| By:                                                                       | /s/  Larry Buffington                          |   |
|                                                                      | LARRY  BUFFINGTON, PRESIDENT & CEO of |   |
|                                                                      | LIQUIDMETAL  COATINGS, LLC                     |   |
|                                                                           |                                                |  |  |

 

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