Exhibit 10.1


 


SECURITIES
PURCHASE AND EXCHANGE AGREEMENT


 


SECURITIES
PURCHASE AND EXCHANGE AGREEMENT (the “Agreement”), dated as of May 1, 2009,
among Liquidmetal Technologies, Inc., a Delaware corporation  (the “Company”), and the investors listed on the
Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).


 


WHEREAS:


 


A.            The Company and each Buyer are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Rule 144A (“Rule 144A”)
of the Securities Act of 1933, as amended (the “1933 Act”), by Section 4(2) of the 1933 Act, and/or
by Rule 506 of Regulation D (“Regulation
D”) as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the 1933
Act.


 


B.            The Company currently has outstanding: (i) a series
of 8% Convertible Subordinated Notes in the aggregate principal amount of $20,624,933.33  that were issued in a January 2007
private placement by the Company and were also issued as interest on such notes
(the “Existing Notes”), and (ii) common
stock purchase warrants to purchase up to an aggregate of 8,138,352 shares of the
Company’s common stock, par value $.001 per share (the “Common Stock”),
which warrants were issued in connection with the Existing Notes and which have
(a) an original exercise price of $1.93 per share and an expiration date
of January 3, 2012 or (b) an original exercise price of $1.55 per
share and an expiration date of December 28, 2012 (the “Existing Warrants”).


 


C.            The Company and Buyers desire to enter into a transaction
under which, subject to the terms and conditions of this Agreement: (i) each
holder of the Existing Notes will exchange such holder’s Existing Notes and
Existing Warrants for a new series of convertible notes, shares of a new class
of preferred stock, or a combination of such new notes and new shares of
preferred stock, together with new warrants issued thereon and (ii) certain
investors will purchase for cash consideration shares of a new class of preferred
stock of the Company (collectively, the “Transactions”
or the “Offering”).


 


D.            In order to effectuate the Transactions, the Company has
authorized and/or approved:  (1) a new series of convertible preferred stock of
the Company to be designated as the Company’s “Series A-1 Preferred Stock,”
par value $0.001 per share (the “Series A-1 Preferred”);
(2) a new series of preferred stock of the Company to be designated as the
Company’s “Series A-2 Preferred Stock,” par value $0.001 per share (the “Series A-2 Preferred”); 
(3) a series of 8% Senior Secured Convertible Notes of the Company
in the form attached hereto as Exhibit A (the “Exchange
Notes”); (4) a series of Common Stock Purchase Warrants in the
form attached hereto as Exhibit B to be issued in connection with
the issuance of shares of Series A-1 Preferred and Series A-2
Preferred (the “Preferred Warrants”); and (5) a series of Common Stock Purchase
Warrants in the form attached hereto as Exhibit C to be issued in
connection with the issuance of the Exchange Notes (the “Exchange
Warrants”).


 

















 


E.             Contemporaneously with the
execution and delivery of this Agreement, the parties hereto are executing and
delivering a Registration Rights Agreement, in substantially the form attached
hereto as Exhibit D (the “Registration
Rights Agreement”), pursuant to which the Company has agreed to
provide certain registration rights with respect to the Conversion Shares and
the Warrant Shares (each as defined below) under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.


 


NOW, THEREFORE, the Company and each Buyer
hereby agree as follows:


 


1.                                       PURCHASE OF
SERIES A-1 SHARES, SERIES A-2 SHARES, EXCHANGE NOTES, AND WARRANTS; OPTION TO
PURCHASE ADDITIONAL SERIES A-1 SHARES.


 


(a)           Purchase of Series A-1 Shares and Preferred
Warrants.  Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to each Buyer, and each such Buyer severally,
but not jointly, agrees to purchase and acquire from the Company on the First
Closing Date (as defined below), the number of Series A-1 Shares set forth
opposite such Buyer’s name in Column (3) on the Schedule of Buyers and the
Preferred Warrants set forth opposite such Buyer’s name in Column (4) on
the Schedule of Buyers.  This paragraph
shall not apply to any Buyer for which the number of shares of Series A-1
Shares set forth next to the Buyer’s name on the Schedule of Buyers is zero
(0).


 


(b)           Purchase of Series A-2 Shares and Preferred
Warrants.  Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to each Buyer, and each such Buyer severally,
but not jointly, agrees to purchase and acquire from the Company on the First
Closing Date (as defined below), the number of Series A-2 Shares set forth
opposite such Buyer’s name in Column (5) on the Schedule of Buyers and the
Preferred Warrants set forth opposite such Buyer’s name in Column (6) on
the Schedule of Buyers.  This paragraph
shall not apply to any Buyer for which the number of shares of Series A-2
Shares set forth next to the Buyer’s name on the Schedule of Buyers is zero
(0).


 


(c)           Purchase of Exchange Notes and Exchange Warrants.  Subject to the satisfaction (or waiver) of
the conditions set forth in Sections 6 and 7 below, on the First Closing Date
(as defined below), the Company shall issue to each Buyer, and each Buyer
severally, but not jointly, agrees to purchase and acquire from the Company an
Exchange Note in the aggregate principal amount set forth opposite the Buyer’s
name in Column (7) on the Schedule of Buyers and the Exchange Warrants set
forth opposite the Buyer’s name in Column (8) on the Schedule of
Buyers.  This paragraph shall not apply
to any Buyer for which the amount of Exchange Notes set forth next to the Buyer’s
name on the Schedule of Buyers is zero (0). 
The Company
agrees and acknowledges that the Exchange Notes, Exchange Warrants, and Series A-2
Shares are being issued hereunder to the Buyers thereof solely in exchange for
other securities of the Company for purposes of Rule 144(d)(3)(ii) under
the 1933 Act.


 


(d)           Purchase Price. 
The purchase price for the Series A-1 Shares (together with the
related Preferred Warrants described in Section 1(a) above) shall be
$5.00 per Series A-1 Share.  The
purchase price for the Series A-2 Shares (including the related Preferred
Warrants described in Section 1(b) above) shall be $5.00 principal
amount of Existing Notes per Series A-2


 


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Share.  The
purchase price for the Exchange Notes (including the related Exchange Warrants
described in Section 1(c) above) shall be equal to $1.00 for each
$1.00 of principal amount under the Exchange Notes.


 


(e)           Payment of Purchase Price.  On the First Closing Date (as defined below),
the aggregate purchase price to be paid by each Buyer for all of the Preferred
Shares, Exchange Notes, and Warrants being purchased hereunder (referred to as
the “Investment Amount”) shall be paid in
the form of:  (i) cash, in the
amount set forth opposite the Buyer’s name in Column (2) on the Schedule
of Buyers, by wire transfer of immediately available funds in accordance with
the Company’s written wire instructions and (ii) the surrender and
exchange of all rights under the Existing Notes, with the total remaining
value, including unpaid principal and accrued but unpaid interest, set forth
opposite the Buyer’s name in Column (1) on the Schedule of Buyers, and the
surrender and exchange of all rights under and with respect to the Existing
Warrants.  Upon the First Closing and
receipt of the Investment Amounts described above, the Company shall deliver to
each Buyer the Series A-1 Shares, the Series A-2 Shares, the Exchange
Notes, and the Warrants which such Buyer is then purchasing, duly executed on
behalf of the Company and registered in the name of such Buyer or its designee.


 


(f)            Option to Purchase Series A-1 Shares.


 


(i)            The Company hereby grants to the Buyers of Preferred Stock
(as defined below) an option (the “Series A-1 Option”),
upon the terms and subject to the conditions herein contained, to purchase up
to an aggregate of one million (1,000,000) Series A-1 Shares (the “Option Shares”) for a purchase price of $5.00 per Series A-1
Share.  Notwithstanding the foregoing and
subject to the terms and conditions set forth below in this Section 1(f), (A) the
Buyers of Series A-1 Shares (the “A-1 Buyers”)
shall have the first right to purchase the first three hundred fifty thousand
(350,000) Option Shares (the “Initial Option Shares”)
pursuant to this Series A-1 Option and (B) the Buyers of Series A-2
Shares (the “A-2 Buyers”) shall have the first
right to purchase the remaining six hundred fifty thousand (650,000) Option
Shares plus the Initial Option Shares, if any, not purchased by the A-1 Buyers
(the “Remaining Shares”).  The right of the A-2 Buyers to purchase the
Remaining Shares shall be contingent upon (1) the purchase by the A-1
Buyers of all, but not less than all, of the Initial Option Shares or (2) the
failure of the A-1 Buyers to purchase all of the Initial Option Shares on or
before the date that is five (5) months from the date of the First Closing
(the “Remaining Share Condition”).


 


(ii)           With regard to the purchase of the Initial Option Shares,
each A-1 Buyer shall be entitled to purchase a maximum number of Initial Option
Shares pursuant to the Series A-1 Option in the same proportion as its
purchase obligation set forth in Column (3) on the Schedule of Buyers;
provided that any A-1 Buyer may assign its rights to purchase Initial Option
Shares under this Section 1(f)(ii) to any other Buyer.  The Series A-1 Option may be exercised
by the A-1 Buyers for the purchase of Initial Option Shares by delivering an
Exercise Notice (as defined below) to the Company at any time and from time to
time after the date hereof up until 5:00 p.m., New York City time, on the
date that is five (5) months from the date of the First Closing.  Any A-1 Buyer who elects to purchase Initial
Option Shares in accordance with this Section 1(f)(ii) must provide
the Company with written notice (an “Exercise Notice”)
stating that such Buyer is exercising its Series A-1 Option and setting
forth the number of Initial


 


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Option Shares such Buyer intends to purchase.


 


(iii)          Upon the occurrence of the Remaining Share Condition, each
A-2 Buyer shall be entitled to purchase a maximum number of Remaining Shares
pursuant to the Series A-1 Option in the same proportion as its purchase
obligation set forth in Column (5) on the Schedule of Buyers; provided
that any A-2 Buyer may assign its rights to purchase Remaining Shares under
this Section 1(f)(iii) to any other Buyer.  The Series A-1 Option may be exercised
by the A-2 Buyers for the purchase of Remaining Shares by delivering an
Exercise Notice to the Company at any time after the Remaining Share Condition
occurs and from time to time thereafter until 5:00 p.m., New York City
time, on the date that is six (6) months from the date of the First
Closing (the “Option Expiration Date”).


 


(iv)          In addition to any other limitation provided herein, in no
event shall any part of the Series A-1 Option be exercisable unless the
applicable Exercise Notice is delivered to the Company on or before the Option
Expiration Date, provided that in the event that the A-1 Buyers purchased all
of the Initial Option Shares pursuant to the Series A-1 Option and the A-2
Buyers did not purchase all of the Remaining Shares pursuant hereto, then the
A-1 Buyers shall have the right to purchase any Remaining Shares not purchased
by the A-2 Buyers (the “Remaining Unpurchased
Shares”) by delivering to the Company an Exercise Notice with
respect thereto no later than thirty (30) days after the Option Expiration
Date.  Each A-1 Buyer shall have the
right to purchase the Remaining Unpurchased Shares in the same proportion as
its purchase obligation set forth in Column (3) on the Schedule of Buyers;
provided that any A-1 Buyer may assign its rights to purchase the Remaining
Unpurchased Shares under this Section 1(f)(iv) to any other Buyer.


 


(v)           Notwithstanding
anything in this Agreement to the contrary, upon the Company’s receipt of an
Exercise Notice, if the Board of Directors of the Company determines in good
faith that the Company’s anticipated capital resources (including access to
borrowing availability under credit facilities) will be sufficient to fund the
Company’s operations for a period of at least twelve (12) months after the
Company’s receipt of the Exercise Notice, then the Company shall have the right
to refuse the exercise of the Series A-1 Option by delivering, prior to
the Option Closing Date (as defined below), a written notice to the exercising
Buyers stating that the Board of Directors has made such determination, in
which event the Buyers will not have the right to exercise the Series A-1
Option (a “Refusal Notice”).  After any such Refusal Notice, the Buyers
will have the right to deliver a subsequent Exercise Notice at any time after
the thirtieth (30th) day after
receipt of the Refusal Notice, subject to the Company’s right to issue a
Refusal Notice again at such time. 
Notwithstanding the foregoing, in the event that a Refusal Notice is
delivered in response to an Exercise Notice properly delivered by the A-1
Buyers on or before the date that is five (5) months from the date of the
First Closing, then the A-2 Buyers shall not have a right to purchase any
Remaining Shares unless the A-1 Buyers are first provided with an opportunity
to purchase the Initial Option Shares covered by such Exercise Notice.  In addition, in the event that a Refusal
Notice is delivered in response to an Exercise Notice properly delivered by the
A-2 Buyers prior to the Option Expiration Date, then the A-1 Buyers shall not
have the right to purchase any Remaining Unpurchased Shares unless the A-2
Buyers are first provided with an opportunity to purchase the Remaining Shares
covered by such Exercise Notice.


 


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(g)           Closing.  The
purchase and sale of the Series A-1 Shares, the Series A-2 Shares,
the Exchange Notes, and the Warrants (the “First Closing”)
shall occur on the First Closing Date at the offices of Foley &
Lardner LLP, 100 North Tampa Street, Suite 2700, Tampa, Florida
33602.  The date and time of the First
Closing (the “First  Closing Date”) shall be 10:00 a.m., New York, NY Time, on
the date hereof, subject to notification of satisfaction (or waiver) of the
conditions to the First Closing set forth in Sections 6 and 7 below (or such
later date as is mutually agreed to by the Company and each Buyer).  The closing with respect to each exercise of
the Series A-1 Option shall occur on a date (each such date, an “Option Closing Date”) specified by the exercising Buyer that
is not less than fifteen (15) business days nor more than twenty (20) business
days following the date upon which such Buyer provides the Company with an
Exercise Notice.  The First Closing Date
and each Option Closing Date are herein referred to as a “Closing Date”
and each closing hereunder is referred to as a “Closing.”


 


(h)           Certain Definitions.  For purposes of this Agreement, the following
capitalized terms shall have the following meanings:


 


(i)            “Conversion Shares”
means shares of Common Stock issuable upon the conversion of the Preferred
Shares or Exchange Notes.


 


(ii)           “Preferred Shares”
means shares of Series A-1 Shares and/or Series A-2 Shares, as
applicable.


 


(iii)          “Schedule of Buyers”
means the Schedule of Buyers attached to this Agreement.


 


(iv)          “Securities”
means the Exchange Notes, Preferred Shares, Conversion Shares, and Warrant
Shares.


 


(v)           “Series A-1 Shares”
means shares of Series A-1 Preferred (including any shares issued as
dividends on the Series A-1 Preferred), and “Series A-2
Shares” means shares of Series A-2 Preferred (including any
shares issued as dividends on the Series A-2 Preferred).


 


(vi)          “Warrants” means
the Preferred Warrants and Exchange Warrants.


 


(vii)         “Warrant Shares”
means the shares of Common Stock issuable upon the exercise of the Warrants.


 


2.             BUYER’S
REPRESENTATIONS AND WARRANTIES.


 


Each Buyer represents and
warrants with respect to only itself that:


 


(a)           No Public Sale or Distribution.  Such Buyer is acquiring the Preferred Shares,
the Exchange Notes, and the Warrants, as applicable, for its own account and
not with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations
herein, such Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at
any time in


 


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accordance with or pursuant to a registration
statement or an exemption from the registration requirements of the 1933 Act
and applicable state securities laws. 
Such Buyer presently does not have any agreement or understanding,
directly or indirectly, with any person to distribute any of the Securities.


 


(b)           Qualified Institutional Buyer; Accredited Investor
Status.  Such Buyer is a “qualified institutional buyer” as
defined in Rule 144A under the 1933 Act (a “QIB”) and/or such Buyer is an “accredited investor” as that term is defined
in Rule 501(a) of Regulation D.


 


(c)           Transfer
or Resale.  In connection with such Buyer’s subsequent
offers to sell, such Buyer (i) will offer the Securities for resale only
upon the terms and conditions set forth in this Agreement (the “Exempt Resales”), and (ii) will
solicit offers to buy the Securities only from, and will offer and sell the
Securities only to, (A) persons reasonably believed by such Buyer to be
QIBs or (B) persons reasonably believed by such Buyer to be an “accredited
investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”) or (C) persons reasonably
believed by such Buyer to be non-U.S. persons referred to in Regulation S under
the 1933 Act (“Non-U.S. Persons”), and in
connection with each such sale, it will take reasonable steps to ensure that
the purchaser of such Securities is aware that such sale is being made in
reliance on Rule 144A, Regulation D or Regulation S, as applicable.


 


(d)           General
Solicitation.  No form of general
solicitation or general advertising in violation of the 1933 Act has been or
will be used nor will any offers in any manner involving a public offering
within the meaning of Section 4(2) of the 1933 Act or, with respect
to any Securities to be sold in reliance on Regulation S, by means of any
directed selling efforts be made by such Buyer or any of its representatives in
connection with the offer and sale of any of the Securities.


 


(e)           Reliance on Exemptions.  Such Buyer understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws
and that the Company is relying in part upon the truth and accuracy of, and
such Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments, and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.


 


(f)            Information. 
Such Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by such Buyer.  Such Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of
the Company and have received what such Buyer and its advisors, if any, believe
to be satisfactory answers to any such inquiries.  Such Buyer understands that its investment in
the Securities involves a high degree of risk. 
Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to
its acquisition of the Securities.


 


(g)           No Governmental Review.  Such Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made


 


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any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have
such authorities passed upon or endorsed the merits of the offering of the
Securities.


 


(h)           Restrictions. 
Such Buyer understands that except as provided in this Agreement and the
Registration Rights Agreement: (i) the Securities have not been and are
not being registered under the 1933 Act or any state securities laws, and may
not be offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company
an opinion of counsel, in a form reasonably acceptable to the Company, to the
effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, such
as Rule 144 or Rule 144A promulgated under the 1933 Act (or a
successor rule thereto) (collectively, “Rule 144”);
(ii) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144 and further, if Rule 144
is not applicable, any resale of the Securities under circumstances in which
the seller (or the Person (as defined in Section 3(p)) through whom the
sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) except
as set forth in the Registration Rights Agreement, neither the Company nor any
other Person is under any obligation to register the Securities under the 1933
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder.  The Securities may be pledged in
connection with a bona fide margin account or other loan secured by the
Securities and such pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Buyer effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document (as defined below), including, without limitation,
this Section 2(h); provided, that in order to make any sale,
transfer or assignment of Securities, such Buyer and its pledgee makes such
disposition in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act.


 


(i)            Legends. 
Buyer understands that the certificates or other instruments
representing the Preferred Shares, the Exchange Notes and the Warrants and,
until such time as the resale of the Conversion Shares and the Warrant Shares
have been registered under the 1933 Act as contemplated by the Registration
Rights Agreement, the certificates representing the Securities, except as set
forth below, shall bear any legend as required by the “blue sky” laws of any
state and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock certificates):


 


NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN/THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED,


 


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OR
(B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.


 


The legend set forth above shall be removed and the
Company shall issue a certificate without such legend to the holder of the
Securities upon which it is stamped, if, unless otherwise required by state
securities laws, (i) such Securities are registered for resale under the
1933 Act or (ii) in connection with a sale, assignment or other transfer,
such holder provides the Company with an opinion of counsel, in a form
reasonably acceptable to the Company, to the effect that such sale, assignment
or transfer of the Securities may be made without registration under the
applicable requirements of the 1933 Act.


 


(j)            Validity; Enforcement.  This Agreement and the Registration Rights
Agreement have been duly and validly authorized, executed and delivered on
behalf of such Buyer and shall constitute the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and remedies, and
except that any rights to indemnity or contribution under the Transaction
Documents (as defined below) may be limited by federal and state securities
laws and public policy considerations.


 


(k)           No Conflicts. 
The execution, delivery and performance by such Buyer of this Agreement
and the Registration Rights Agreement and the consummation by such Buyer of the
transactions contemplated hereby and thereby will not (i) result in a
violation of the organizational documents of such Buyer, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which such Buyer is a party, or (iii) result in
a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to such Buyer, except in the case
of clauses (ii) and (iii) above, for such conflicts, defaults, rights
or violations which would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of such Buyer to
perform its obligations hereunder.


 


(l)            Residency. 
Such Buyer is a resident of that jurisdiction specified below its address
on the Schedule of Buyers.  Such Buyer
represents that it was not organized solely for purposes of making an
investment in the Company.


 


(m)          Certain Trading Activities.  Such Buyer has not directly or indirectly,
nor has any Person acting on behalf of or pursuant to any understanding with
such Buyer, engaged in any transactions in the securities of the Company
(including, without limitation, any Short Sales (as defined in Regulation SHO
promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) involving the Company’s
securities) since the time that such Buyer was first contacted by the Company
or any other Person regarding an investment in the


 


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Company.  Such
Buyer covenants that neither it nor any Person acting on its behalf or pursuant
to any understanding with it will engage in any transactions in the securities
of the Company (including Short Sales) prior to the time that the transactions
contemplated by this Agreement are publicly disclosed by the Company.  Such Buyer has maintained, and covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company pursuant to Section 4(e) such Buyer will
maintain, the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction) and
any information other than the terms of this transaction that the Company
provided to such Buyer on a confidential basis.


 


(n)           No Group. 
Other than affiliates of such Buyer who are also Buyers under this
Agreement, such Buyer is not under common control with or acting in concert
with any other Buyer and is not part of a “group.”  Other than Carlyle Liquid, LLC, Carlyle
Holdings, LLC, Abdi Mahamedi, Atlantic Realty, and Ricardo Salas (the “Affiliated Investors”), no Buyer, together with its
affiliates, will, following any Closing, beneficially own more than 10% of the
voting power of the Company’s then-outstanding capital stock.


 


(o)           Buyer Due Diligence.  Such Buyer acknowledges that, except for the
matters that are expressly covered by the provisions of this Agreement,
including the exhibits and schedules hereto, such Buyer is relying on its own
investigation and analysis in entering into this Agreement and consummating the
transactions contemplated hereby.  Such
Buyer is informed and sophisticated in the transactions contemplated by this
Agreement and has undertaken such investigation, and has been provided with and
has evaluated such documents and information, as it has deemed necessary in
connection with the execution, delivery and performance of this Agreement.  Such Buyer is consummating the transactions
contemplated by this Agreement without any representation or warranty, expressed
or implied, by the Company except as expressly set forth in this Agreement and
the exhibits and schedules hereto.  Such Buyer acknowledges and agrees that
the Company does not make and has not made any representations or warranties
with respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.


 


3.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.


 


The Company represents and
warrants to each of the Buyers that:


 


(a)           Organization and Qualification.  The Company and its “Subsidiaries” (which
for purposes of this Agreement means any entity in which the Company, directly
or indirectly, owns capital stock or holds an equity or similar interest) are
corporations or other legal entities duly organized and validly existing in
good standing under the laws of the jurisdictions in which they are organized,
as set forth on Schedule 3(a), and have the requisite power and
authorization to own their properties and to carry on their business as now
being conducted.  The Company and each
Subsidiary is duly qualified as a foreign corporation or other legal entity to
do business and is in good standing in every jurisdiction in which its
ownership of property or the nature of the business conducted by it makes such
qualification necessary, as set forth on Schedule 3(a), except to the
extent that the failure to be so qualified or be in good standing would not
have a Material Adverse Effect.  As used
in this Agreement, “Material Adverse Effect”
means any material adverse effect on the business, properties, assets,


 


9
















 


operations,
results of operations, or condition (financial or otherwise) of the Company and
its Subsidiaries, taken as a whole.  The
Company has no Subsidiaries except as set forth on Schedule 3(a).


 


(b)           Authorization; Enforcement;
Validity.  The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Securities, the Registration Rights
Agreement, the Security Agreement, the Irrevocable Transfer Agent Instructions
(as defined in Section 5) and each of the other agreements entered into by
the parties hereto in connection with the Transactions contemplated by this
Agreement (collectively, the “Transaction
Documents”) and to issue the Securities in accordance with the terms
hereof and thereof.  The execution and
delivery of the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated hereby and thereby, including,
without limitation, the issuance of the Preferred Shares, the Exchange Notes
and the Warrants and the reservation for issuance and the issuance of the
Conversion Shares and the Warrant Shares issuable upon conversion, issuance or
exercise thereof, as the case may be, have been duly authorized by the Company’s
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders.  This Agreement and the other Transaction
Documents of even date herewith have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies, and except that any rights to indemnity or
contribution under the Transaction Documents may be limited by federal and state
securities laws and public policy considerations.


 


(c)           Issuance of Securities.  The Preferred Shares, the Exchange Notes and
the Warrants are duly authorized and, upon issuance in accordance with the
terms hereof, shall be free from all taxes, liens and charges with respect to
the issue thereof.  Upon the filing of
the Charter Amendment (as defined in Section 4(m) hereof) with the
Delaware Secretary of State, the number of shares of Common Stock which equals
the sum of 100% of the number of shares of Common Stock issuable upon
conversion of the Preferred Shares and the Exchange Notes and exercise of the
Warrants to be issued at the First Closing will be duly authorized and reserved
for issuance.  Upon conversion, exercise
or issuance in accordance with the terms of the Preferred Shares, the Exchange
Notes and the Warrants, the Conversion Shares and the Warrant Shares, as the
case may be, will be validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock.  Assuming the accuracy of each of the
representations and warranties of the Buyers contained in Section 2, the
issuance by the Company of the Securities is exempt from the registration
requirements of Section 5 of the 1933 Act.


 


(d)           No Conflicts.  The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Preferred Shares, the Exchange Notes and the
Warrants and the reservation for issuance and issuance of the Conversion Shares
and the Warrant Shares) will not (i) result in a violation of the
certificate of incorporation, any certificate of designations, preferences and
rights of any outstanding series 


 


10

















 


of
preferred stock or the bylaws of the Company or any of its Subsidiaries, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, except which are the subject of written waivers or
consents which have been obtained or effected on or prior to the applicable
Closing Date or (iii) result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market (as
defined below)) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, except in the case of clauses (ii) and (iii), for such
breaches or defaults as could not reasonably be expected to have a Material
Adverse Effect.


 


(e)           Consents.  Except as disclosed in Schedule 3(e),
the Company is not required to obtain any consent, authorization or order of,
or make any filing or registration with, any court, governmental agency or any
regulatory or self-regulatory agency or any other Person in order for it to
execute, deliver or perform any of its obligations under or contemplated by the
Transaction Documents, in each case in accordance with the terms hereof or
thereof.  All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior
to the First Closing Date (other than filings and reports relating to the offer
and sale of the Securities required under Regulation D or applicable securities
or “Blue Sky” laws as contemplated under Section 4(b) of this
Agreement), and the Company and its Subsidiaries are unaware of any facts or
circumstances which might prevent the Company from obtaining or effecting any
of the registration, application or filings pursuant to the preceding
sentence.  The Company is not in
violation of the listing requirements of the Principal Market (as defined
below) and has no knowledge of any facts which would reasonably lead to
delisting or suspension of the Common Stock in the foreseeable future.


 


(f)            Acknowledgment Regarding Buyer’s
Purchase of Securities.  The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of arm’s
length purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and that, except as set forth on Schedule
3(f), no Buyer is (i) an officer or director of the Company, (ii) an
“affiliate” of the Company (as defined in Rule 144) or (iii) to the
knowledge of the Company, a “beneficial owner” of more than 10% of the Common
Stock (as defined for purposes of Rule 13d-3 of the Exchange Act).  The Company further acknowledges that no
Buyer is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to the Transaction Documents and the
Transactions contemplated hereby and thereby, and any advice given by a Buyer
or any of its representatives or agents in connection with the Transaction
Documents and the Transactions contemplated hereby and thereby is merely
incidental to such Buyer’s purchase of the Securities.


 


(g)           No General Solicitation; Placement
Agent’s Fees.  Neither the Company,
nor any of its affiliates, nor any Person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offer or sale of the
Securities.  The Company shall be
responsible for the payment of any placement agent’s fees, financial advisory
fees, or brokers’ commissions (other than for 


 


11

















 


persons
engaged by any Buyer or its investment advisor) relating to or arising out of
the transactions contemplated hereby.


 


(h)           No Integrated Offering.  None of the Company, its Subsidiaries, any of
their affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the 1933 Act
or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated quotation
system on which any of the securities of the Company are listed or designated.


 


(i)            Rights Agreement.  The Company has not adopted a
stockholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the Company.


 


(j)            SEC Documents.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act (all of the foregoing
filed prior to the date hereof (whether or not required to be filed), and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as
the “SEC Documents”).  As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and, to the Company’s knowledge,
none of the SEC Documents, at the time they were filed with the SEC, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.


 


(k)           Financial Statements.  As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared
in accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).


 


(l)            Absence of Certain Changes.  Except as disclosed in Schedule 3(l) or
in the SEC Documents, since December 31, 2008 (i) there has been no
Material Adverse Effect, and (ii) the Company has not (A) declared or paid any dividends, (B) sold
any assets, individually or in the aggregate, in excess of $100,000 outside of the ordinary course of business,
or (C) had capital expenditures, individually or in the aggregate, in
excess of $250,000.  The Company has not
taken any steps to seek protection pursuant to any bankruptcy law nor does the
Company have any knowledge or reason to believe that its creditors intend to
initiate involuntary 


 


12

















 


bankruptcy
proceedings or any actual knowledge of any fact which would reasonably lead a creditor
to do so.  The Company is not as of the
date hereof, and after giving effect to the transactions contemplated hereby to
occur at the First Closing, will not be Insolvent (as defined below).  For purposes of this Section 3(l), “Insolvent” means (i) the Company is
unable to pay its debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured, or (ii) the
Company intends to incur or believes that it will incur debts that would be
beyond its ability to pay as such debts mature.


 


(m)          Conduct of Business.  Neither the Company nor its Subsidiaries is
in violation of any term of or in default under its Certificate of
Incorporation or Bylaws or their organizational charter or bylaws,
respectively.  Except as disclosed in Schedule
3(m), neither the Company nor any of its Subsidiaries is in violation of
any judgment, decree or order or any statute, ordinance, rule or
regulation applicable to the Company or its Subsidiaries, and neither the
Company nor any of its Subsidiaries will conduct its business in violation of
any of the foregoing, except for possible violations which would not,
individually or in the aggregate, have a Material Adverse Effect.  Without limiting the generality of the
foregoing, the Company is not in violation of any of the rules, regulations or
requirements of the OTC Bulletin Board (the “Principal
Market”) other than violations which could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect
and has no knowledge of any facts or circumstances which would reasonably lead
to delisting or suspension of the Common Stock by the Principal Market in the
foreseeable future.  Except as disclosed
on Schedule 3(m), since January 1, 2006, (i) the Common Stock
has been designated for quotation on the Principal Market, (ii) trading in
the Common Stock has not been suspended by the SEC or the Principal Market and (iii) the
Company has received no communication, written or oral, from the SEC or the
Principal Market regarding the suspension or delisting of the Common Stock from
the Principal Market.


 


(n)           Regulatory
Permits.  The Company and its
Subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, except where the failure to possess such
certificates, authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.


 


(o)           Equity Capitalization.  As of the date hereof, the number of shares
and type of all authorized, issued, and outstanding capital stock of the
Company, and all shares of Common Stock reserved for issuance under the Plans
(as defined below), is set forth in Schedule 3(o).  All of such outstanding shares have been, or
upon issuance will be, validly issued and are fully paid and
nonassessable.  All of such outstanding
shares of capital stock are duly authorized, validly issued, fully paid and
nonassessable.  No shares of capital stock
of the Company are subject to preemptive rights or any other similar rights of
the shareholders of the Company or any liens or encumbrances imposed through
the actions or failure to act of the Company. 
Except as disclosed in the SEC Documents and other than pursuant to this
Agreement and as contemplated by the Company’s employee and director benefit,
incentive, or option plans disclosed in the Company’s SEC Documents (the “Plans”), (i) there are no outstanding options,
warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal,
and (ii) there are no 


 


13

















 


agreements,
understandings, claims, antidilution protection or other commitments or rights
of any character whatsoever that could require the Company to issue additional
shares of capital stock of the Company or adjust the purchase or exercise price
of any such instrument.  Except as
disclosed in the SEC Documents, there are no agreements or arrangements (other
than the Registration Rights Agreement) under which the Company is obligated to
register the sale of any of its securities under the 1933 Act.


 


(p)           Indebtedness and Other Contracts.  Except as disclosed in Schedule 3(p) or
in the SEC Documents, neither the Company nor any of its Subsidiaries (i) has
any outstanding Indebtedness, or (ii) is in violation of any term of or in
default under any contract, agreement or instrument relating to any
Indebtedness.  For purposes of this
Agreement:  (x) “Indebtedness” of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising
under any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under
any leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses
(A) through (F) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any mortgage, lien, pledge, charge, security interest or other encumbrance upon
or in any property or assets (including accounts and contract rights) owned by
any Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations (as defined below) in respect of indebtedness or
obligations of others of the kinds referred to in clauses (A) through (G) above;
(y) “Contingent Obligation” means, as to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect
thereto; and (z) “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.


 


(q)           Absence of Litigation.  Except as disclosed in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by the
Principal Market, any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, the Common Stock or any of the Company’s
Subsidiaries that would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.


 


14

















 


(r)            Insurance.  The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company reasonably believes
to be prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged.  Neither the
Company nor any such Subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such Subsidiary has any reason
to believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not have
a Material Adverse Effect.


 


(s)           Employee Relations.  Except as disclosed in Schedule 3(s),
neither the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement or employs any member of a union.  The Company and its Subsidiaries believe that
their relations with their employees are good. 
No executive officer of the Company (as defined in Rule 501(f) of
the 1933 Act) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer’s employment with the Company.  No executive officer of the Company, to the
knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant.  The Company and its Subsidiaries are in
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where failure to be in compliance would
not, either individually or in the aggregate, reasonably be expected to result
in a Material Adverse Effect.


 


(t)            Title.  The Company and its Subsidiaries have good
and marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(t) or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries.  Any
real property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.


 


(u)           Intellectual Property Rights.  To the knowledge of the Company and except as
set forth in the SEC Documents, the Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
other intellectual property rights (“Intellectual
Property Rights”) necessary to conduct their respective businesses
as now conducted.  The Company does not
have any knowledge of any infringement by the Company or its Subsidiaries of
Intellectual Property Rights of others. 
Except as set forth in Schedule 3(u), there is no claim, action
or proceeding being made or brought, or to the knowledge of the Company, being
threatened, against the Company or its Subsidiaries regarding its Intellectual
Property Rights which could have a Material Adverse Effect.


 


15

















 


(v)           Environmental Laws.  The Company and its Subsidiaries (i) are
in material compliance with any and all Environmental Laws (as hereinafter
defined), (ii) have received all material permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in material compliance with all terms
and conditions of any such permit, license or approval where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect.  The term “Environmental Laws” means all federal,
state, local or foreign laws relating to pollution or protection of human
health or the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), including, without
limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous
Materials”)  into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.


 


(w)          Tax Status.  The Company and each of its Subsidiaries (i) has
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction in which such filings are
required, (ii) has paid all taxes and other governmental assessments and
charges that are owed by it, including all taxes shown or determined to be due
on such returns, reports and declarations, except those being contested in good
faith and for which adequate reserves have been established on the Company’s
books, and (iii) has set aside on its books provision reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. 
There are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction.


 


(x)            Disclosure.  The Company confirms that it has not provided
any of the Buyers or their respective agents or counsel with any information
that will constitute material,
nonpublic information on the First Closing Date, other than information and
documentation regarding the transactions contemplated by this Agreement, which
information shall be included on the 8-K Filing (as defined in Section 4(e) below).  The Company understands and confirms that
each of the Buyers will rely on the foregoing representations in effecting
transactions in securities of the Company. 
The Company acknowledges and agrees that no Buyer makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.


 


(y)           Manipulation of Price.  The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result in, or that has constituted or which
might reasonably be expected to constitute, the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, any of the Securities, or (iii) paid
or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.


 


16

















 


(z)            Internal Accounting and
Disclosure Controls.  The Company and
each of its Subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management’s general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any difference.  Except as set forth in the SEC Documents, the
Company maintains disclosure controls and procedures (as such term is defined
in Rule 13a-14 under the Exchange Act) that are effective in ensuring that
information required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the rules and forms of the
SEC, including, without limitation, controls and procedures designed to ensure
that information required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is accumulated and communicated to the
Company’s management, including its principal executive officer or officers and
its principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure. 
Except as set forth in the SEC Documents, during the twelve months prior
to the date hereof neither the Company nor any of its Subsidiaries have
received any notice or correspondence from any accountant relating to any
potential material weakness in any part of the system of internal accounting
controls of the Company or any of its Subsidiaries.


 


(aa)         Investment Company Status. 
The Company is not, and upon consummation of the sale of the Securities will
not be, an “investment company,” a company controlled by an “investment company”
or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment
company” as such terms are defined in the Investment Company Act of  1940,
as amended.


 


(bb)         U.S. Real Property Holding
Corporation.  The Company is not, nor has ever been, a U.S. real
property holding corporation within the meaning of Section 897 of the
Internal Revenue Code of 1986, as amended, and the Company shall so certify
upon Buyer’s request.


 


(cc)         Bank Holding Company Act. 
Neither the Company nor any of its Subsidiaries is subject to the Bank Holding
Company Act of 1956, as amended (the “BHCA”) and to
regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”).  Neither the Company nor any of its
Subsidiaries or affiliates owns or controls, directly or indirectly, five
percent (5%) or more of the outstanding shares of any class of voting
securities or twenty-five (25%) or more of the total equity of a bank or
any  equity that is subject to the BHCA and to regulation by the Federal
Reserve.  Neither the Company nor any of its Subsidiaries or affiliates
exercises a controlling influence over the management or policies of a bank or
any entity that is subject to the BHCA and to regulation by the Federal
Reserve.


 


(dd)         Trading Activities.  It is understood and acknowledged by the
Company that, except as set forth in Section 4(l) of this Agreement
(which contains certain covenants by the Buyers):  (i) none of the
Buyers have been asked to agree, nor has any Buyer agreed, to desist 


 


17

















 


from
purchasing or selling, long and/or short, securities of the Company, or “derivative”
securities based on securities issued by the Company or to hold the Securities
for any specified term; (ii) any Buyer, and counter parties in “derivative”
transactions to which any such Buyer is a party, directly or indirectly,
presently may have a “short” position in the Common Stock, and (iii) each
Buyer shall not be deemed to have any affiliation with or control over any arm’s
length counter-party in any “derivative” transaction.  The Company further
understands and acknowledges that one or more Buyers may engage in hedging
and/or trading activities at various times during the period that the
Securities are outstanding, including, without limitation, during the periods that
the value of the Conversion Shares and the Warrant Shares are being determined
and (b) such hedging and/or trading activities, if any, can reduce the
value of the existing stockholders’ equity interest in the Company both at and
after the time the hedging and/or trading activities are being conducted. 
The Company acknowledges that such aforementioned hedging and/or trading
activities do not constitute a breach of this Agreement, the Notes, the
Warrants or any of the documents executed in connection herewith, except to the
extent such hedging and/trading activities violate the provisions of Section 4(l) of
this Agreement.


 


(ee)         Shell Company Status.  The Company is not, nor has it at any time
previously been, considered a “shell company” within the meaning of Rule 144(i)(1)(i) (or
any successor rule) under the 1933 Act.


 


4.             COVENANTS.


 


(a)           Best Efforts. 
Each party shall use its best efforts timely to satisfy each of the
conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.


 


(b)           Form D and Blue Sky.  The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing.  The Company shall, on or before any
applicable Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or “Blue Sky” laws of the states of the United
States (or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to the Buyers on or prior to the Closing
Date.  The Company shall make all filings
and reports relating to the offer and sale of the Securities required under
applicable securities or “Blue Sky” laws of the states of the United States
following any Closing Date.


 


(c)           Reporting Status.  With a view to making available to the
Buyers the benefits of Rule 144 promulgated under the 1933 Act or any
similar rule or regulation of the Commission that may at any time permit
the Buyers to sell securities of the Company to the public without
registration, the Company shall use its commercially reasonable efforts to: (i) make
and keep public information available, as those terms are understood and
defined in Rule 144; (ii) file with the Commission in a timely manner
all reports and other documents required of the Company under the 1933 Act and
the Exchange Act; and (iii) furnish to each Buyer, so long as such Buyer
owns Registrable Securities (as defined in the Registration Rights Agreement)
(the “Reporting Period”), promptly
upon request, (A) a written statement by the Company, if true, that it has
complied with the applicable reporting requirements of Rule 144, the 1933
Act and the 


 


18

















 


Exchange Act, (B) a
copy of the most recent annual or quarterly report of the Company and copies of
such other reports and documents so filed by the Company, (C) the
information required by Rule 144A(d)(4) (or any successor rule) under
the 1933 Act, and (D) such other information as may be reasonably
requested to permit the Buyers to sell such securities pursuant to Rule 144
without registration.


 


(d)           Fees.  The Company shall be responsible for the
payment of any placement agent’s fees, transfer taxes or stamp duties,
financial advisory fees, or broker’s commissions (other than for Persons
engaged by any Buyer) relating to or arising out of the transactions
contemplated hereby.  Except as otherwise
set forth in this Agreement or in the Transaction Documents, each party to this
Agreement shall bear its own expenses in connection with the sale of the
Securities to the Buyers.


 


(e)           Disclosure of Transactions and
Other Material Information.  On or
before 8:30 a.m., New York, NY Time, on  the
fourth Business Day following the date hereof, the Company shall file a Current
Report on Form 8-K describing the terms of the transactions contemplated
by the Transaction Documents in the form required by the Exchange Act, and
attaching the material Transaction Documents (including, without limitation,
this Agreement (and all schedules to this Agreement), the form of Exchange
Note, the Security Agreement, and the Registration Rights Agreement) as
exhibits to such filing (including all attachments, the “8-K Filing”).  Neither the Company nor any Buyer shall issue
any press releases or any other public statements with respect to the
Transactions; provided, however, that the Company shall be
entitled, without the prior approval of any Buyer, to make any press release or
other public disclosure with respect to such Transactions (i) in
substantial conformity with the 8-K Filing and (ii) as is required by
applicable law and regulations.


 


(f)            Reservation of Shares.  From and after the filing of the Charter
Amendment with the Delaware Secretary of State, the Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, 100% of the Conversion
Shares and the Warrant Shares.


 


(g)           Sales by Buyers.  Each Buyer will sell any Securities sold by
it in compliance with applicable prospectus delivery requirements, if any, or
otherwise in compliance with the requirements for an exemption from registration
under the 1933 Act and the rules and regulations promulgated
thereunder.  No Buyer will make any sale,
transfer or other disposition of the Securities in violation of the federal or
state securities laws.


 


(h)           Like Treatment of Noteholders.  The terms of the Exchange Note(s) issued to each Buyer pursuant to
the terms of this Agreement and the Transaction Documents shall be identical in
all material respects.  In addition,
neither the Company nor any of its affiliates shall, directly or indirectly, pay
or cause to be paid any consideration (immediate or contingent), whether by way
of interest, fee, payment for the redemption or conversion of the Exchange
Notes, or otherwise, to any Buyer of Exchange Notes or holder of Exchange
Notes, for or as an inducement to, or in connection with the solicitation of,
any consent, waiver or amendment of any terms or provisions of the Transaction
Documents, unless such consideration is required to be paid to all Buyers of
Exchange Notes or holders of Exchange Notes bound by such consent, waiver or
amendment.  The Company shall not,
directly or indirectly, redeem any Exchange


 


19
















 


Notes unless such offer of redemption is made pro
rata to all Buyers of Exchange Notes or holders of Exchange Notes, as the case
may be, on identical terms.  For
clarification purposes, this provision constitutes a separate right granted by
the Company to each Buyer of Exchange Notes and negotiated separately by each
Buyer of Exchange Notes, is intended for the Company to treat the Buyers of
Exchange Notes as a class, and shall not in any way be construed as the Buyers
of Exchange Notes acting in concert or as a group with respect to the purchase,
disposition or voting of Exchange Notes or otherwise.


 


(i)            Indemnification.  In consideration of each Buyer’s execution
and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company’s other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless each Buyer and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing Persons’ agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’ fees and
disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any
material misrepresentation or breach of any material representation or warranty
made by the Company in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of
any material covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim
brought or made against such Indemnitee by a third party (including for these
purposes a derivative action brought on behalf of the Company) and arising out
of or resulting from (i) the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, (ii) any transaction financed
or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Securities, or (iii) any disclosure made
by such Buyer pursuant to Section 4(e). 
To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities that is
permissible under applicable law.  Except
as otherwise set forth herein, the mechanics and procedures with respect to the
rights and obligations under this Section 4(i) shall be the same as
those set forth in Section 5 of the Registration Rights Agreement.  Notwithstanding anything herein to the
contrary, the Company shall have no indemnification obligations to any Buyer
hereunder to the extent that an Indemnified Liability is attributable to the
gross negligence or willful misconduct of such Buyer.


 


(j)            Tax Matters. 
The Buyers and the Company agree that each of (i) the Series A-1
Shares and the Preferred Warrants issued thereon, (ii) the Series A-2
Shares and the Preferred Warrants issued thereon, and (iii) the Exchange
Notes and the Exchange Warrants constitute an “investment unit” for purposes of
Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended
(the “Code”).  The Buyers shall notify the Company of their
determination of the allocation of the issue price of such investment unit
among the Series A-1 Shares and the Preferred Warrants, the Series A-2
Shares and the Preferred Warrants, and the Exchange Notes 


 


20

















 


and the Exchange Warrants in accordance with Section 1273(c)(2) of
the Code and Treasury Regulation Section 1.1273-2(h), and neither the
Buyers nor the Company shall take any position inconsistent with such
allocation in any tax return or in any judicial or administrative proceeding in
respect of taxes so long as the same allocation is made by all Buyers.


 


(k)           RESERVED.


 


(l)            No Transactions Pending Announcement of Transaction.  Each Buyer covenants that neither it nor any
Person acting on its behalf or pursuant to any understanding with it has
engaged or will engage in any transactions in the securities of the Company
(including short sales within the meaning of SEC Regulation SHO) from the time
that it has first learned of the transactions contemplated by this Agreement
until the time that the transactions contemplated by this Agreement are
publicly disclosed by the Company.  Such
Buyer has maintained, and covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company pursuant
to Section 4(e) hereof, such Buyer will maintain, the confidentiality
of all disclosures made to it in connection with this transaction (including
the existence and terms of this transaction) and any information other than the
terms of this transaction that the Company provided to Buyer on a confidential
basis.


 


(m)          Shareholder
Approval of Charter Amendment.  The Buyers have
been informed by the Company that the Company does not have sufficient shares
of Common Stock authorized to enable the Buyers to fully convert the Exchange
Notes and the Preferred Shares and to fully exercise the purchase rights
represented by the Warrants.  The Company shall hold a special meeting
of shareholders (which may also be at the annual meeting of shareholders) at
the earliest practical date, and in any event on or before July 31, 2009,
for the purpose of obtaining shareholder approval of an amendment to the Company’s
Certificate of Incorporation (“Shareholder Approval”)
in substantially the form attached as Exhibit I hereto (the “Charter Amendment”), with the recommendation of the Company’s
Board of Directors that such proposal be approved, and the Company shall solicit
proxies from its shareholders in connection therewith in the same manner as all
other management proposals in such proxy statement, and shall otherwise use
commercially reasonable efforts to solicit from its shareholders proxies in
favor of such matters and to obtain Shareholder Approval.  All management-appointed proxy holders shall
vote their proxies in favor of such proposal. 
If the Company does not obtain Shareholder Approval at the first
meeting, the Company shall call a meeting every four months thereafter to seek
Shareholder Approval until the earlier of (i) the date Shareholder
Approval is obtained or (ii) the date that there are no Exchange Notes or
Preferred Shares outstanding.  Upon
obtaining Shareholder Approval, the Company will, as soon as practicable
thereafter, file the Charter Amendment with the Delaware Secretary of State.


 


(n)           Approval
of Charter Amendment by Buyers of Series A-1 Shares and Series A-2
Shares.  Each Buyer of Series A-1
Shares and each Buyer of Series A-2 Shares agrees to vote all shares of
capital stock of the Company, including, without limitation, shares of the
Company’s Common Stock, shares of the Company’s Series A-1 Preferred, and
shares of the Company’s Series A-2 Preferred, registered in his, her or
its name, beneficially owned by him, her or it, or for which he, she or it
holds a proxy (including those shares identified in the Voting Proxy Agreements
described in Section 7(j) hereof) as of the date of this Agreement
and any and all other shares of capital stock or other voting securities of the
Company legally or beneficially 


 


21

















 


owned
by him, her or it or for which he, she or it holds a proxy (including those
shares identified in the Voting Proxy Agreements described in Section 7(j) hereof)  after the date of this Agreement or acquired by him, her or
it after the date of this Agreement (including, without limitation, through new
issuances, exercises of stock options or warrants, conversion or exchange of
convertible or exchangeable securities, stock splits, stock dividends,
recapitalizations and similar events) in favor of the Charter Amendment to
increase the number of authorized shares of Common Stock to 300,000,000.


 


(o)           Information Rights. 
The holders of the Exchange Notes shall have the right to receive
unaudited monthly financial statements of the Company (consisting of a balance
sheet and income statement in a form ordinarily prepared by the Company) upon
written request to the Company and upon entering into a mutually agreeable
nondisclosure agreement with the Company acknowledging that such financial
statements constitute “material nonpublic information” of the Company.


 


(p)           Board Observation Rights. The Buyers of
Exchange Notes hereunder hereby appoint Dwight Mamanteo (the “Observer”)
as their representative to serve as an observer to the Board of Directors of
the Company (the “Board”).  The Company agrees that, beginning on the
date of the First Closing and continuing for so long as fifty percent (50%) of
the original principal amount of the Exchange Notes issued on the date of the
First Closing remain outstanding, the Observer:


 


(i)            will have the right to attend all
regular and special meetings of the Board or any committees thereof, provided
that the Board or any such committee may excuse the Observer from portions of
the meeting for any discussions that they reasonably believe to be appropriate
only for members of the Board;


 


(ii)           will be copied on all Board-wide or
committee-wide communications made by the Company and/or Board members and will
be provided with all Board-wide or committee-wide distributed materials,
including Board books, unless the Observer requests in writing not to be copied
on such communications and materials;


 


(iii)          will treat all information received in
connection with its Board observation rights hereunder (“Board
Information”) confidentially and not disclose it to any other third
party and will not use the Board Information for any purposes other than
representing the interests of the holders of the Exchange Notes with respect to
their rights under the Exchange Notes; notwithstanding the foregoing, the
Observer may share Board Information with any holder of Exchange Notes that
enters into a confidentiality agreement with the Company in a form reasonably
acceptable to the Company;


 


Observer agrees that much of
the Board Information will be “material nonpublic information” and that
Observer will at all times comply with SEC Regulation FD and applicable insider
trading laws with respect thereto. 
Observer also agrees that its rights under this Section 3(p) are
being granted to Observer personally and that Observer may not designate any
other person to attend Board or committee meetings in lieu of Observer, unless
otherwise consented to in writing by the Company.  The Company agrees to reimburse Observer for
any reasonable out-of-pocket 


 


22

















 


travel expenses incurred by
the Observer in attending any Board or committee meeting pursuant to this Section 4(p).


 


(q)           Sale of South Korean Manufacturing Facility.  In the event that Liquidmetal Korea Co. Ltd.,
a subsidiary of the Company organized under the laws of the Republic of Korea (“LMK”), sells its manufacturing facility in the Republic of
Korea (the “Facility”), the Company will cause
LMK to use its best efforts to transfer and distribute the proceeds of sale
(net of transaction expenses and the payoff of obligations encumbering the
Facility), or as much thereof as shall be permitted to be transferred under the
laws and procedures of the Republic of Korea, to the Company.  The Company will use any such proceeds
received by it solely to pay the outstanding principal of the Exchange Notes
pursuant to Section 1(i) of the Exchange Notes as promptly as
practicable after the Company’s receipt of such proceeds.


 


5.             TRANSFER AGENT INSTRUCTIONS.  Within three (3) business days after the
First Closing Date, the Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates or
credit shares to the applicable balance accounts at The Depository Trust
Company (“DTC”), registered in the
name of each Buyer or its respective nominee(s), for the Conversion Shares  and
the Warrant Shares in such amounts as specified from time to time by
each Buyer to the Company upon conversion of the Series A-1 Shares, the Series A-2
Shares, and the Exchange Notes or exercise of the Warrants in the form of Exhibit E
attached hereto (the “Irrevocable Transfer
Agent Instructions”).  No
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(h) hereof,
will be given by the Company to its transfer agent with respect to the Warrant
Shares and Conversion Shares, and that the Conversion Shares and the Warrant
Shares shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the other
Transaction Documents.  If a Buyer
effects a sale, assignment or transfer of the Securities in accordance with
Sections 2(c), (h), and (i) hereof, the Company shall permit the transfer
and shall promptly instruct its transfer agent to issue one or more
certificates or credit notes or shares to the applicable balance accounts at
DTC in such name and in such denominations as specified by such Buyer to effect
such sale, transfer or assignment.  In
the event that such sale, assignment or transfer involves Securities sold,
assigned or transferred pursuant to an effective registration statement or
pursuant to Rule 144, the transfer agent shall issue such Securities to
the Buyer, assignee or transferee, as the case may be, without any restrictive
legend so long as the Buyer complies with the terms of Section 2(h) and
Section 2(i).  The Company
acknowledges that a breach by it of its obligations under this Section 5
will cause irreparable harm to a Buyer. 
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 5, that a Buyer shall be entitled, in addition
to all other available remedies, to an order and/or injunction restraining any
breach and requiring immediate issuance and transfer.  Nothing in this Section 5 will affect in
any way the Buyer’s obligations and agreements set forth in Section 4
hereof to comply with all applicable prospectus delivery requirements, upon
resale of the Securities.


 


6.             CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
COMPANY.  The obligation of the
Company hereunder to issue the Series A-1 Shares, the Series A-2
Shares, 


 


23

















 


the Exchange Notes and the Warrants to each respective Buyer at the First Closing is
subject to the satisfaction, at or before the First Closing Date, of each of
the following conditions, provided that these conditions are for the Company’s
sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:


 


(a)           Such Buyer shall have executed each of the
Transaction Documents to which it is a party and delivered the same to the
Company.


 


(b)           Such Buyer and each other Buyer shall have delivered to
the Company the Investment Amount for the Series A-1 Shares, the Series A-2
Shares, the Exchange Notes, and the Warrants being purchased by such Buyer and
each other Buyer at the First Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company and/or by
surrender of such Buyer’s and each other Buyers’ Existing Notes.  Such Buyer and each other Buyer surrendering
Existing Notes shall also surrender his, her, or its Existing Warrants.


 


(c)           The representations and warranties of such Buyer shall be
true and correct in all material respects as of the First Closing Date (except
for representations and warranties that speak as of a different date), and such
Buyer shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Buyer at or prior to the First
Closing Date.


 


(d)           The Company shall have received written resignations of
all members of the Company’s Board of Directors, other than John Kang and
Robert Biehl, resigning their positions as directors of the Company.


 


7.             CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYERS.  The obligation of each Buyer hereunder to
purchase the Series A-1 Shares, the Series A-2 Shares, the Exchange
Notes and the Warrants at the
First Closing is subject to the satisfaction, at or before the First Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer’s sole benefit and may be waived by such Buyer at any time in
its sole discretion by providing the Company with prior written notice thereof:


 


(a)           The Company shall have executed and delivered to such
Buyer (i) each of the Transaction Documents and (ii) the Exchange
Notes and the Warrants being purchased by such Buyer at the First Closing
pursuant to this Agreement.  In addition,
the Company shall have issued to such Buyer the Series A-1 Shares and the Series A-2
Shares being purchased by such Buyer at the First Closing pursuant to this
Agreement.


 


(b)           All of the Buyers shall have executed their respective
Transaction Documents and paid the respective purchase price for their
Securities hereunder (including the wiring of the cash purchase price for the Series A-1
Shares).


 


(c)           The Company shall have filed with the Delaware Secretary
of State a Certificate of Designation for the Preferred Stock in substantially
the form attached hereto as Exhibit F.


 


(d)           The Company shall have delivered to such Buyer a copy of
the Irrevocable 


 


24

















 


Transfer Agent Instructions, in the form of Exhibit E
attached hereto, which instructions shall have been delivered to and
acknowledged in writing by the Company’s transfer agent.


 


(e)           The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company
issued by the Secretary of State of Delaware, as of a date within 10 days of
the First Closing Date and a bring-down good standing certificate issued by the
Secretary of State of Delaware dated as of the First Closing Date.


 


(f)            The Company shall have delivered to such Buyer a
certificate, executed by the Secretary of the Company and dated as of the First
Closing Date, as to (i) the resolutions consistent with Sections 3(b) and
4(k) as adopted by the Company’s Board of Directors (the “Resolutions”), (ii) the Certificate of
Incorporation and (iii) the Bylaws, each as in effect at the First Closing.


 


(g)           Each Buyer shall have received the opinion of Foley &
Lardner LLP, the Company’s counsel, dated
as of the First Closing Date, in substantially the form of Exhibit G
attached hereto.


 


(h)           The representations and warranties of the Company shall be
true and correct as of the First Closing Date (except for representations and
warranties that speak as of a different date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the First
Closing Date.


 


(i)            The Company shall have received the written resignations
of all of the members of the Company’s Board of Directors, other than John Kang
and Robert Biehl, resigning their positions as directors of the Company.  Following the receipt of such resignations, John Kang
and Robert Biehl, as the only remaining directors, shall (i) set the size
of the Company’s Board of Directors at five (5) members, (ii) appoint
Abdi Mahamedi, Bill Scott, and Iraj Azarm to fill the vacancies on the Company’s
Board of Directors (provided, however, that Bill Scott shall not take office as
a director prior to the next regularly scheduled meeting of the stockholders
unless and until the Company first complies with Rule 14f-1 of the Exchange Act
with respect to his appointment), (iii) approve the Charter Amendment, and
(iv) approve the calling of a meeting of the shareholders for the purpose
of obtaining Shareholder Approval of the Charter Amendment.


 


(j)            The following shareholders of the Company shall have
entered into a Voting Proxy Agreement in substantially the form attached hereto
as Exhibit H:  John Kang,
Abdi Mahamedi,  Jack Chitayat, and Ricardo
Salas.


 


8.             RELEASE AND WAIVER.  In exchange for the agreements and covenants
of the Company hereunder and effective upon the First Closing, each of the
Buyers, on behalf of himself, herself, or itself and his, her, or its agents,
assigns, heirs, devisees, and successors, releases, waives, and forever
discharges the Company, its agents, officers, directors, shareholders,
employees, attorneys, and representatives, from any and all claims, causes of
action, suits, debts, liabilities, damages and expenses (including attorneys’
fees and costs) of any type whatsoever (collectively, “Claims”),
whether known or unknown, that any of the Buyers have or may have or may have
at any time through the date hereof as a result of any breach or default under
the Existing Notes, the Existing Warrants, or the related Securities Purchase
Agreement dated January 3, 2007, or under the related Registration Rights
Agreement dated 


 


25

















 


January 3, 2007.  Upon the First Closing and the issuance of
the Securities in accordance with this Agreement, each of the Existing Notes
will be deemed satisfied and paid in full and the Existing Warrants will be
deemed to be terminated.


 


9.             MISCELLANEOUS.


 


(a)           Governing Law; Jurisdiction; Jury Trial.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdictions) that would cause the application of the laws
of any jurisdictions other than the State of New York.  Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the City
of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
to such party at the address for such notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of
process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.


 


(b)           Counterparts. 
This Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other parties; provided that a facsimile signature (including electronic copies
of documents in Adobe PDF format) shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.


 


(c)           Headings.  The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.


 


(d)           Severability. 
If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.


 


(e)           Entire Agreement; Amendments.  This Agreement supersedes all other prior
oral or written agreements between the Buyers, the Company, their affiliates
and Persons acting on their behalf with respect to the matters discussed
herein, and this Agreement and the instruments referenced herein contain the
entire understanding of the parties with respect to the matters covered herein
and therein and, except as specifically set forth herein or therein, neither
the Company nor any Buyer makes any representation, warranty, covenant or undertaking
with respect to such matters.  No
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company, the holders of more than one-half of the 


 


26

















 


outstanding Preferred Shares, and the holders of
Exchange Notes representing more than one-half of the aggregate principal
amount of the outstanding Exchange Notes, and any amendment to this Agreement
made in conformity with the provisions of this Section 9(e) shall be binding
on all Buyers and holders of Series A-1 Shares, Series A-2 Shares,
Exchange Notes, and Warrants, as applicable. 
No provision hereof may be waived other than by an instrument in writing
signed by the party against whom enforcement of the waiver is sought.  The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.


 


(f)            Notices. 
Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered:  (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by
electronic mail or facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending
party); or (iii) one business day after deposit with an overnight courier
service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such
communications shall be:


If to the Company:


 


Liquidmetal Technologies, Inc.

30452 Esperanza

Rancho Santa Margarita, California  92688

Facsimile: (949)
635-2188

Attention:  Tony Chung, CFO

Email:  Tony.Chung@Liquidmetal.com


 


with a copy (which shall not constitute notice) to:


 


Foley & Lardner LLP

100 North Tampa Street, Suite 2700

Tampa, Florida  33602

Facsimile:                                            (813)
221-4210

Attention:                                         Curt Creely, Esq.

Email:                                                                 ccreely@foley.com


 


If to a Buyer, to its address, electronic mail
address, and facsimile number set forth on the Schedule of Buyers, with copies
to such Buyer’s representatives as set forth on the Schedule of Buyers, or to
such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such
change.  Written confirmation of receipt (A) given
by the recipient of such notice, consent, waiver or other communication, (B) mechanically
or electronically generated by the sender’s facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of
such transmission or (C) provided by an overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from
an overnight courier service in accordance with clause (i), (ii) or (iii) above,



 


27

















 


respectively.


 


(g)           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares, the Exchange Notes,
and the Warrants.  The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of at least a majority of the outstanding Preferred Shares and
the holders of Exchange Notes representing at least a majority of the aggregate
principal amount of the Exchange Notes then outstanding, except pursuant to a
sale of all or substantially all of the business and assets of the Company
whether by means of merger, consolidation, asset sale, stock sale, or
otherwise.


 


(h)           No Third Party Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.


(i)            Survival. 
The representations and warranties of the Company and the Buyers
contained in Sections 2 and 3 and the agreements and covenants set forth in
Sections 4, 5, and 9 shall survive the First Closing.  Each Buyer shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.


 


(j)            Further Assurances.  Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.


 


(k)           Payment Set Aside. 
To the extent that the Company makes a payment or payments to the Buyers
hereunder or pursuant to any of the other Transaction Documents or the Buyers
enforce or exercise their rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of
any such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.


 


(l)            Independent Nature of Buyers’ Obligations and Rights. 
The obligations of each Buyer under any Transaction Document are several
and not joint with the obligations of any other Buyer, and no Buyer shall be
responsible in any way for the performance of the obligations of any other
Buyer under any Transaction Document. 
Nothing contained herein or in any other Transaction Document, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents.  Each Buyer confirms that it has independently
participated in the negotiation of the transaction 


 


28

















 


contemplated
hereby with the advice of its own counsel and advisors.  Each Buyer shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights
arising out of this Agreement or out of any other Transaction Documents, and it
shall not be necessary for any other Buyer to be joined as an additional party
in any proceeding for such purpose.


 


(m)          Reimbursement
of Counsel Expenses.  The Company
shall reimburse the holders of the Existing Notes for the reasonable legal fees
of one joint legal counsel to represent them in connection with the
transactions contemplated by this Agreement, provided that such reimbursement
shall not exceed $10,000 in total for such counsel’s fees.


 


29
















 


IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase and Exchange
Agreement to be duly executed as of the date first written above.


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  LIQUIDMETAL TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/
  Tony Chung

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Tony
  Chung

  
	
   

  	
   

  	
  Title:   Chief
  Financial Officer

  



 


[Counterpart Signature Page to Securities Purchase and
Exchange Agreement]


 

















 


IN WITNESS
WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase and Exchange
Agreement to be duly executed as of the date first written above.


 


 


	
   

  	
  BUYERS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Carlyle Liquid Holdings, LLC

  
	
   

  	
   

  
	
   

  	
  /s/ Fort Mason Master, LP

  
	
   

  	
   

  
	
   

  	
  /s/ Fort Mason Partners, LP

  
	
   

  	
   

  
	
   

  	
  /s/ The Tail Wind Fund Ltd.

  
	
   

  	
   

  
	
   

  	
  /s/ Solomon Strategic Holdings, Inc.

  
	
   

  	
   

  
	
   

  	
  /s/ Carlyle Liquid, LLC

  
	
   

  	
   

  
	
   

  	
  /s/ Carlyle Holdings, LLC

  
	
   

  	
   

  
	
   

  	
  /s/ Castlerigg Master Investments Ltd.

  
	
   

  	
   

  
	
   

  	
  /s/ Diamond Opportunity Fund, LLC

  
	
   

  	
   

  
	
   

  	
  /s/ Rockmore Investment Master Fund Ltd.

  
	
   

  	
   

  
	
   

  	
  /s/ Abdi Mahamedi

  
	
   

  	
   

  
	
   

  	
  /s/ BridgePointe Master Fund Ltd.

  
	
   

  	
   

  
	
   

  	
  /s/ Iroquois Master Fund

  
	
   

  	
   

  
	
   

  	
  /s/ Rodd Friedman

  
	
   

  	
   

  
	
   

  	
  /s/ Myron Neugeboren

  
	
   

  	
   

  
	
   

  	
  /s/ Ricardo Salas

  
	
   

  	
   

  
	
   

  	
  /s/ Chang Ki Cho

  
	
   

  	
   

  
	
   

  	
  /s/ Eric Brachfeld

  
	
   

  	
   

  
	
   

  	
  /s/ Ed Neugeboren

  
	
   

  	
   

  
	
   

  	
  /s/ Wynnefield Partners Small Cap Value LP

  



 


[Counterpart Signature Page to Securities Purchase and
Exchange Agreement]


 

















 


	
   

  	
  /s/ Wynnefield Partners Small Cap Value LP I

  
	
   

  	
   

  
	
   

  	
  /s/ Wynnefield Small Cap Value Offshore Fund, Ltd.

  
	
   

  	
   

  
	
   

  	
  /s/ Kenneth Lisiak

  
	
   

  	
   

  
	
   

  	
  /s/ Vestal Venture Capital

  
	
   

  	
   

  
	
   

  	
  /s/ Mermelstein Development

  
	
   

  	
   

  
	
   

  	
  /s/ Atlantic Realty

  



 


[Counterpart Signature
Page to Securities Purchase and Exchange Agreement]

















 


SCHEDULE OF
BUYERS


 


	
   

  	
   

  	
   

  	
   

  	
  (1)

  	
   

  	
  (2)

  	
   

  	
  (3)

  	
   

  	
  (4)

  	
   

  	
  (5)

  	
   

  	
  (6)

  	
   

  	
  (7)

  	
   

  	
  (8)

  	
   

  	
   

  	
   

  
	
  Buyer

  	
   

  	
  Address, E-Mail and

  Facsimile Number

  	
   

  	
  Value of Existing

  Notes to be

  Exchanged

  	
   

  	
  Cash Investment

  	
   

  	
  Series A-1

  Shares to be

  Purchased

  	
   

  	
  Preferred

  Warrants to be

  Issued in

  Connection with

  Series A-1

  Shares

  	
   

  	
  Series A-2

  Shares to be

  Purchased

  	
   

  	
  Preferred

  Warrants to be

  Issued in

  Connection with

  Series A-2

  Shares

  	
   

  	
  Aggregate

  Principal Amount

  of Exchange Notes

  to be Purchased

  	
   

  	
  Exchange

  Warrants to be

  Issued in

  Connection with

  Exchange Notes

  	
   

  	
  Legal Representative’s

  Address and Facsimile

  Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Carlyle Liquid Holdings,
  LLC

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  2,500,000.00

  	
   

  	
  500,000

  	
   

  	
  12,500,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Carlyle Liquid Holdings,
  LLC

  	
   

  	
   

  	
   

  	
  $

  	
  4,443,710.48

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  888,743

  	
   

  	
  10,099,343

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fort Mason Master, LP

  	
   

  	
  580 California
  Street

  Suite 1925

  San Francisco, CA 94104

  (415) 288-8113

  	
   

  	
  $

  	
  1,334,979.22

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  84,928

  	
   

  	
  965,087

  	
   

  	
  $

  	
  910,341.27

  	
   

  	
  379,309

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fort Mason Partners, LP

  	
   

  	
  580 California
  Street

  Suite 1925

  San Francisco, CA 94104

  (415) 288-8113

  	
   

  	
  $

  	
  86,572.51

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  5,508

  	
   

  	
  62,586

  	
   

  	
  $

  	
  59,035.02

  	
   

  	
  24,598

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tail Wind Fund Ltd.

  	
   

  	
  c/o Tail Wind
  Advisory and Management Ltd

  767 Third Avenue, 6th Floor

  New York, NY 10017

  (212) 676-5665

  	
   

  	
  $

  	
  1,554,670.05

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  98,904

  	
   

  	
  1,123,906

  	
   

  	
  $

  	
  1,060,151.56

  	
   

  	
  441,730

  	
   

  	
  Peter J. Weisman,
  PC

  767 Third Avenue, 6th Floor

  New York, NY 10017

  (212) 676-5665

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Solomon Strategic Holdings
  Inc.

  	
   

  	
  c/o Tail Wind
  Advisory and Management Ltd

  767 Third Avenue, 6th Floor

  New York, NY 10017

  (212) 676-5665

  	
   

  	
  $

  	
  310,933.98

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  19,781

  	
   

  	
  224,782

  	
   

  	
  $

  	
  212,030.29

  	
   

  	
  88,346

  	
   

  	
  Peter J. Weisman,
  PC

  767 Third Avenue, 6th Floor

  New York, NY 10017

  (212) 676-5665

  	
   

  
																									



 






 













 


SCHEDULE OF
BUYERS


(Continued)


 


	
   

  	
   

  	
   

  	
   

  	
  (1)

  	
   

  	
  (2)

  	
   

  	
  (3)

  	
   

  	
  (4)

  	
   

  	
  (5)

  	
   

  	
  (6)

  	
   

  	
  (7)

  	
   

  	
  (8)

  	
   

  	
   

  	
   

  
	
  Buyer

  	
   

  	
  Address, E-Mail and

  Facsimile Number

  	
   

  	
  Value of Existing

  Notes to be

  Exchanged

  	
   

  	
  Cash Investment

  	
   

  	
  Series A-1

  Shares to be

  Purchased

  	
   

  	
  Preferred

  Warrants to be

  Issued in

  Connection with

  Series A-1

  Shares

  	
   

  	
  Series A-2

  Shares to be

  Purchased

  	
   

  	
  Preferred

  Warrants to be

  Issued in

  Connection with

  Series A-2

  Shares

  	
   

  	
  Aggregate

  Principal Amount

  of Exchange Notes

  to be Purchased

  	
   

  	
  Exchange

  Warrants to be

  Issued in

  Connection with

  Exchange Notes

  	
   

  	
  Legal Representative’s

  Address and Facsimile

  Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Carlyle
  Liquid, LLC

  	
   

  	
  2
  Gannett Drive

  Suite 201

  White Plains, NY 10604

  (914) 694-6789

  	
   

  	
  $

  	
  2,338,056.05

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  467,612

  	
   

  	
  5,313,764

  	
   

  	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Carlyle
  Holdings, LLC

  	
   

  	
  2
  Gannett Drive

  Suite 201

  White Plains, NY 10604

  (914) 694-6789

  	
   

  	
  $

  	
  290,535.70

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  58,108

  	
   

  	
  660,309

  	
   

  	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Castlerigg
  Master Investments Ltd.

  	
   

  	
  c/o
  Sandell Asset Management Corporation

  40 West 57th Street

  26th Floor

  New York, NY 10019

  (212) 603-5710

  	
   

  	
  $

  	
  2,487,472.04

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  158,246

  	
   

  	
  1,798,250

  	
   

  	
  $

  	
  1,696,242.47

  	
   

  	
  706,768

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Diamond
  Opportunity Fund

  	
   

  	
  500
  Skokie Blvd, Suite 310

  Northbrook, IL 60062

  (847) 919-4410

  	
   

  	
  $

  	
  406,750.00

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  25,877

  	
   

  	
  294,049

  	
   

  	
  $

  	
  277,368.60

  	
   

  	
  115,571

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rockmore
  Investment Master Fund Ltd.

  	
   

  	
  150
  East 58th Street, 28th Floor

  New York, NY 10155

  (212) 258-2315

  	
   

  	
  $

  	
  1,243,736.02

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  79,123

  	
   

  	
  899,125

  	
   

  	
  $

  	
  848,121.24

  	
   

  	
  353,384

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Abdi
  Mahamedi

  	
   

  	
  c/o
  Carlyle Development Group

  2 Gannett Drive, Suite 201

  White Plains, NY 10604

  (914) 694-6789

  	
   

  	
  $

  	
  581,071.42

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  116,215

  	
   

  	
  1,320,617

  	
   

  	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
   

  	
   

  



 

















 


SCHEDULE OF
BUYERS


(Continued)


 


	
   

  	
   

  	
   

  	
   

  	
  (1)

  	
   

  	
  (2)

  	
   

  	
  (3)

  	
   

  	
  (4)

  	
   

  	
  (5)

  	
   

  	
  (6)

  	
   

  	
  (7)

  	
   

  	
  (8)

  	
   

  	
   

  	
   

  
	
  Buyer

  	
   

  	
  Address, E-Mail and

  Facsimile Number

  	
   

  	
  Value of Existing

  Notes to be

  Exchanged

  	
   

  	
  Cash Investment

  	
   

  	
  Series A-1

  Shares to be

  Purchased

  	
   

  	
  Preferred

  Warrants to be

  Issued in

  Connection with

  Series A-1

  Shares

  	
   

  	
  Series A-2

  Shares to be

  Purchased

  	
   

  	
  Preferred

  Warrants to be

  Issued in

  Connection with

  Series A-2

  Shares

  	
   

  	
  Aggregate

  Principal Amount

  of Exchange Notes

  to be Purchased

  	
   

  	
  Exchange

  Warrants to be

  Issued in

  Connection with

  Exchange Notes

  	
   

  	
  Legal Representative’s

  Address and Facsimile

  Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BridgePointe
  Master Fund Ltd.

  	
   

  	
  c/o
  Roswell Capital Partners

  1120 Sanctuary Parkway

  Suite 325

  Alpharetta, GA 30004

  (770) 777-5844

  	
   

  	
  $

  	
  903,242.73

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  57,462

  	
   

  	
  652,975

  	
   

  	
  $

  	
  615,934.03

  	
   

  	
  256,640

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Iroquois
  Master Fund

  	
   

  	
  641
  Lexington Avenue 

  26th Floor

  New York, NY 10022

  (212) 207-3452

  	
   

  	
  $

  	
  236,925.29

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  15,073

  	
   

  	
  171,279

  	
   

  	
  $

  	
  161,562.72

  	
   

  	
  67,318

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rodd
  Friedman

  	
   

  	
  93
  Hillspoint Road

  Westport, CT 06880

  (203) 663-1303

  	
   

  	
  $

  	
  70,544.03

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  4,488

  	
   

  	
  50,998

  	
   

  	
  $

  	
  48,104.98

  	
   

  	
  20,044

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Myron
  Neugeboren

  	
   

  	
  P.O. Box 1410

  Lakeville, Ct 06309

  (860) 435-2603

  	
   

  	
  $

  	
  13,696.33

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  872

  	
   

  	
  9,902

  	
   

  	
  $

  	
  9,339.72

  	
   

  	
  3,892

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ricardo
  Salas

  	
   

  	
  64
  Ritz Cove Drive

  Monarch Beach, CA 92629

  (949) 315-3096

  	
   

  	
  $

  	
  411,664.31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  82,333

  	
   

  	
  935,601

  	
   

  	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Chang
  Ki Cho

  	
   

  	
   

  	
   

  	
  $

  	
  542,485.01

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  108,498

  	
   

  	
  1,232,921

  	
   

  	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eric
  Brachfeld

  	
   

  	
  890
  West End Avenue

  Suite 160

  New York, NY 10025

  (212) 298-9933

  	
   

  	
  $

  	
  67,810.63

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  13,563

  	
   

  	
  154,116

  	
   

  	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ed
  Neugeboren

  	
   

  	
  282
  New Norwalk Road

  New Canaan, CT 06840

  (212) 618-0202

  	
   

  	
  $

  	
  9,522.11

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  606

  	
   

  	
  6,884

  	
   

  	
  $

  	
  6,493.26

  	
   

  	
  2,706

  	
   

  	
   

  	
   

  



 

















 


SCHEDULE OF
BUYERS


(Continued)


 


	
   

  	
   

  	
   

  	
   

  	
  (1)

  	
   

  	
  (2)

  	
   

  	
  (3)

  	
   

  	
  (4)

  	
   

  	
  (5)

  	
   

  	
  (6)

  	
   

  	
  (7)

  	
   

  	
  (8)

  	
   

  	
   

  	
   

  
	
  Buyer

  	
   

  	
  Address, E-Mail and

  Facsimile Number

  	
   

  	
  Value of Existing

  Notes to be

  Exchanged

  	
   

  	
  Cash Investment

  	
   

  	
  Series A-1

  Shares to be

  Purchased

  	
   

  	
  Preferred

  Warrants to be

  Issued in

  Connection with

  Series A-1

  Shares

  	
   

  	
  Series A-2

  Shares to be

  Purchased

  	
   

  	
  Preferred

  Warrants to be

  Issued in

  Connection with

  Series A-2

  Shares

  	
   

  	
  Aggregate

  Principal Amount

  of Exchange Notes

  to be Purchased

  	
   

  	
  Exchange

  Warrants to be

  Issued in

  Connection with

  Exchange Notes

  	
   

  	
  Legal Representative’s

  Address and Facsimile

  Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wynnefield
  Partners Small Cap Value LP

  	
   

  	
  450
  Seventh Avenue

  Suiite 509

  New York, NY 10123

  (212) 760-0824

  	
   

  	
  $

  	
  527,250.09

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  33,543

  	
   

  	
  381,161

  	
   

  	
  $

  	
  359,539.32

  	
   

  	
  149,809

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wynnefield
  Partners Small Cap Value LP I

  	
   

  	
  450
  Seventh Avenue

  Suiite 509

  New York, NY 10123

  (212) 760-0824

  	
   

  	
  $

  	
  690,446.62

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  43,925

  	
   

  	
  499,140

  	
   

  	
  $

  	
  470,825.34

  	
   

  	
  196,178

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wynnefield
  Small Cap Value Offshore

  	
   

  	
  450
  Seventh Avenue

  Suiite 509

  New York, NY 10123

  (212) 760-0824

  	
   

  	
  $

  	
  665,339.46

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  42,328

  	
   

  	
  480,989

  	
   

  	
  $

  	
  453,704.41

  	
   

  	
  189,044

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kenneth
  Lisiak

  	
   

  	
  17
  Ross Lane

  Middleton, MA 01949

  (978) 774-3778

  	
   

  	
  $

  	
  79,541.24

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  15,909

  	
   

  	
  180,776

  	
   

  	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Vestal
  Venture Capital

  	
   

  	
  6471
  Enclave Way

  Boca Raton, FL 33496

  (561) 912-9979

  	
   

  	
  $

  	
  456,370.88

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  29,034

  	
   

  	
  329,921

  	
   

  	
  $

  	
  311,205.78

  	
   

  	
  129,670

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mermelstein
  Development

  	
   

  	
  302
  Fifth Avenue, 8th Floor

  New York, NY 10001

  	
   

  	
  $

  	
  581,071.42

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  116,215

  	
   

  	
  1,320,617

  	
   

  	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Atlantic
  Realty

  	
   

  	
  c/o
  Jack Chitayat

  1836 El Camino Del Teatro

  La Jolla, CA 92037

  	
   

  	
  $

  	
  290,535.70

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  58,108

  	
   

  	
  660,309

  	
   

  	
  $

  	
  —

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  $

  	
  20,624,936.33

  	
   

  	
  $

  	
  2,500,006.00

  	
   

  	
  500,009

  	
   

  	
  12,500,012

  	
   

  	
  2,625,017

  	
   

  	
  29,829,425

  	
   

  	
  $

  	
  7,500,021.00

  	
   

  	
  3,125,031

  	
   

  	
   

  	
   

  
																									



 
















 


Schedule 3(a)


 


Subsidiaries


 


	
  Name of
  Subsidiary

  	
   

  	
  Jurisdiction of 

  Incorporation or 

  Organization

  	
   

  	
  Jurisdictions in which 

  Qualified to Do Business as a 

  Foreign Corporation or Entity

  
	
  Liquidmetal Golf

  	
   

  	
  California Corporation

  	
   

  	
  None

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Liquidmetal Korea Co., Ltd.

  	
   

  	
  South Korean organized entity

  	
   

  	
  South Korea

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Amorphous Technologies International (Asia) PTE Ltd.

  	
   

  	
  Singapore organized entity 

  (inactive, dissolution in progress)

  	
   

  	
  Singapore

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Liquidmetal Coatings, LLC

  	
   

  	
  Delaware Limited Liability Company

  	
   

  	
  None

  



 

















 


Schedule 3(e)


 


None.


 

















 


Schedule 3(f)


 


None other than that disclosed in SEC Documents.


 

















 


Schedule 3(l)


 


None other than that disclosed in SEC Documents.


 

















 


Schedule 3(m)


 


None.


 

















 


Schedule 3(o)


 


	
  Shares of Common Stock
  outstanding

  	
   

  	
  44,825,402

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Options to purchase Common
  Stock outstanding:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1996 Stock Option Plan

  	
   

  	
  3,039,198

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2002 Equity Incentive Plan

  	
   

  	
  2,621,421

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2002 Non-employee Director Stock Option Plan

  	
   

  	
  540,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Options Not Under a Plan

  	
   

  	
  1,845,163

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Options Outstanding

  	
   

  	
  8,045,782

  	
   

  



 

















 


Schedule 3(p)


 


None other than (i) that disclosed in SEC
Documents, and (ii)  the default by Liquidmetal Korea Co. Ltd., the
Company’s subsidiary organized under the laws of the Republic of Korea under
its loan from Kookmin Bank.


 

















 


Schedule 3(s)


 


None.


 

















 


Schedule 3(t)


 


None other than that disclosed in SEC Documents.


 

















 


Schedule 3(u)


 


None.


 
















 


EXHIBITS


 


	
  Exhibit A

  	
   

  	
  Form of Exchange Note

  
	
  Exhibit B

  	
   

  	
  Form of Preferred Warrant

  
	
  Exhibit C

  	
   

  	
  Form of Exchange Warrant

  
	
  Exhibit D

  	
   

  	
  Form of Registration Rights Agreement

  
	
  Exhibit E

  	
   

  	
  Form of Irrevocable Transfer Agent
  Instructions

  
	
  Exhibit F

  	
   

  	
  Form of Certificate of Designation

  
	
  Exhibit G

  	
   

  	
  Form of Opinion of Foley & Lardner
  LLP

  
	
  Exhibit H

  	
   

  	
  Form of Voting Proxy Agreement

  
	
  Exhibit I

  	
   

  	
  Form of Charter Amendment

  



 

















 


Exhibit A


 


Filed separately,
therefore omitted.


 

















 


Exhibit B


 


Filed separately,
therefore omitted.


 

















 


Exhibit C


 


Filed separately,
therefore omitted.


 

















 


Exhibit D


 


Filed separately,
therefore omitted.


 

















 


Exhibit E


 


Form of Irrevocable
Transfer Agent Instructions 


 
















 


TRANSFER AGENT INSTRUCTIONS


 


LIQUIDMETAL TECHNOLOGIES, INC.


 


May 1, 2009


 


American Stock Transfer &
Trust Company


Attn:  Mr. Joe Wolf


59 Maiden Lane


New York, NY 10038


 


Re:          Private Placement of 8 % Senior
Secured Convertible Notes,  Series A
Preferred Shares and Warrants


 


Ladies and Gentlemen:


 


This letter refers to that
certain Securities Purchase and Exchange Agreement, dated as of May 1,
2009 (the “Securities Purchase Agreement”), by and among Liquidmetal
Technologies, Inc., a Delaware corporation (the “Company”), and the
investors listed on the Schedule of Buyers attached thereto (collectively, the “Buyers”)
pursuant to which the Company has issued the following to certain of the
Buyers: (i) 8 % Senior Secured Convertible Notes (the “Exchange Notes”), which
are convertible into shares of common stock of the Company, par value $0.001
per share (the “Common Stock”), (ii) shares of the Company’s Series A-1
Preferred Stock, par value $0.001 per share (the “Series A-1 Shares”),
which are convertible into shares of Common Stock, (iii) shares of the
Company’s Series A-2 Preferred Stock, par value $0.001 per share (the “Series A-2
Shares,” and together with the Series A-1 Shares, the “Series A
Shares”), which are convertible into shares of Common Stock; (iv) Common
Stock Purchase Warrants issued in connection with the issuance of Series A
Shares (the “Preferred Warrants”); and (v) Common Stock Purchase Warrants
issued in connection with the issuance of the Exchange Notes (the “Exchange
Warrants”, and together with the Preferred Warrants, the “Warrants”).


 


The Company hereby
authorizes and instructs you (provided that you are the transfer agent of the
Company at such time):


 


(i)            to establish as of the date of this letter a reserve of
32,985,406 shares of Common Stock for issuance to holders of Exchange Notes
upon conversion of their Exchange Notes, conversion of the Series A
Shares, and exercise of the Warrants (the “Conversion Share Reserve”).  Upon the Company’s notification to you that
the Company has filed with the Delaware Secretary of State a Certificate of
Amendment to the Company’s Certificate of Incorporation increasing the number
of the Shares of the Company’s Common Stock to 300,000,000 (a “Charter
Amendment Notification”), the Conversion Share Reserve will be increased to
217,613,202.  The Conversion Share
Reserve shall be adjusted to appropriately reflect the effect of any stock
split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Common Stock), reorganization,
recapitalization, reclassification, exchange or other like change with respect
to Common Stock occurring on or after the date hereof; and


 


(ii)           to issue shares of Common Stock upon conversion of the
Exchange Notes (the “Note Conversion Shares”) to or upon the order of a Buyer
from time to time upon delivery to you of a properly completed and duly
executed Notice, in the form attached hereto as Exhibit I, which
has been acknowledged by the Company as indicated by the signature of a duly
authorized officer of the Company thereon; and


 

















 


(iii)          to issue shares of Common Stock upon conversion of the Series A
Shares (the “Series A Conversion Shares”, and together with the Note
Conversion Shares, the “Conversion Shares”) to or upon the order of a Buyer
from time to time upon delivery to you of a properly completed and duly
executed Notice, in the form attached hereto as Exhibit II, which
has been acknowledged by the Company as indicated by the signature of a duly
authorized officer of the Company thereon; and


 


(iv)          to issue shares of Common Stock upon exercise of the
Warrants (the “Warrant Shares”) to or upon the order of a Buyer from time to
time upon delivery to you of a properly completed and duly executed Notice, in
the form attached hereto as Exhibit III, which has been
acknowledged by the Company as indicated by the signature of a duly authorized
officer of the Company thereon.


 


Notwithstanding the
foregoing, until you have received the Charter Amendment Notification, you will
not issue any Conversion Shares or Warrant Shares to any Buyer as aforesaid to
the extent that the aggregate number of such shares would exceed the number of
shares set forth next to the Buyer’s name on Exhibit V hereto.


 


You acknowledge and agree
that so long as you have previously received (a) written confirmation from
the Company’s outside legal counsel that either (1) a registration
statement covering resales of all or some of the Conversion Shares and Warrant
Shares (the “Securities”) has been declared effective by the Securities and
Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended
(the “Securities Act”), or (2) that sales of all or some of the Securities
may be made in conformity with Rule 144 under the Securities Act and (b) if
applicable, a copy of such registration statement identifying the Securities
covered thereby, then within two (2) business days of your receipt of any
Notice described in (ii)-(iv) above, you shall issue the certificates
representing the Conversion Shares or the Warrant Shares, as applicable, and to
the extent that the Notice identifies Securities that are covered by foregoing
either of clause (1) or (2) above, such certificates shall not bear
any legend restricting transfer of the Conversion Shares or Warrant Shares and
should not be subject to any stop-transfer restriction; provided, however,
that if such Conversion Shares or Warrant Shares are not registered for resale
under the Securities Act or able to be sold under Rule 144, then, the
certificates for such Conversion Shares or Warrant Shares shall bear the
following legend:


 


NEITHER THE ISSUANCE AND
SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN/THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. 
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT. 
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.


 


A form of written
confirmation from the Company’s legal counsel that a registration statement
covering resales of the Conversion Shares or the Warrant Shares has been
declared effective by the SEC under the Securities Act is attached hereto as Exhibit IV.


 

















 


In furtherance of the
foregoing, with respect to any Conversion Shares issuable pursuant to the
conversion of the Exchange Notes or Series A-2 Preferred Stock in the
manner set forth above to a Buyer who represents in writing that such Buyer is
not, and has not been for a period of at least ninety (90) days thereto, an “affiliate”
within the meaning of Rule 144 and that such Buyer has a holding period of
at least six months with respect to such Conversion Shares for purposes of Rule 144,
such Conversion Shares shall be issued without any restrictive legend thereon
based on the Buyer’s compliance with Rule 144.


 


These instructions may not
be rescinded or revoked other than by means of a communication signed by the
Company.


 


Please execute this letter
in the space indicated to acknowledge your agreement to act in accordance with
these instructions.  Should you have any
questions concerning this matter, please contact Curt Creely of Foley &
Lardner LLP, our outside legal counsel, at (813) 225-4122.


 

















 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  THE COMPANY:

  
	
   

  	
   

  
	
   

  	
  LIQUIDMETAL TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Tony Chung

  
	
   

  	
   

  	
  Chief Financial Officer

  



 


 


THE FOREGOING INSTRUCTIONS ARE


ACKNOWLEDGED AND AGREED TO


 


this
       day of
                      ,
2009


 


	
  AMERICAN
  STOCK TRANSFER & TRUST COMPANY

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					



 


Enclosures


 

















 


EXHIBIT I


LIQUIDMETAL TECHNOLOGIES, INC.


NOTICE


 


Reference is made to the 8%
Senior Secured Convertible Note (the “Note”)
issued to the undersigned by Liquidmetal Technologies, Inc. (the “Company”). 
In accordance with and pursuant to the Note, the undersigned hereby
elects to convert the Conversion Amount (as defined in the Note) of the Note
indicated below into shares of Common Stock, par value $0.001 per share (the “Common Stock”), of the Company as of the
date specified below.


 


Date
of Conversion:


 


Aggregate
Conversion Amount to be converted:


 


The undersigned  hereby certifies to the Company that the
undersigned’s conversion of the amount set forth above in accordance with Section 3(a) of
the Note will not directly result in the undersigned (together with the
undersigned’s affiliates) beneficially owning in excess of 4.99% of the number
of shares of Common Stock outstanding immediately after giving effect to such
conversion, calculated in accordance with Section 3(d)(i) of the
Note; provided that if the undersigned has previously waived the 4.99%
beneficial ownership limitation upon no less than sixty one (61) days prior
written notice, the undersigned certifies to the Company that the undersigned’s
conversion of the amount set forth above will not directly result in the
undersigned (together with the undersigned’s affiliates) beneficially owning in
excess of 9.99% of the number of shares of Common Stock outstanding immediately
after giving effect to such conversion, calculated in accordance with Section 3(d)(i) of
the Note.  Notwithstanding the foregoing,
the certification set forth in this paragraph shall not apply to, and shall not
be deemed to be made by, any Affiliated Investor (as that term is defined in
the Purchase Agreement referred to in the Note).


 


Please confirm the following
information:


 


Conversion
Price:


 


Number
of shares of Common Stock to be issued:


 


Please issue the Common
Stock into which the Note is being converted in the following name and to the
following address:


 


Issue
to:


 


 


Facsimile
Number:


Authorization:


 


	
  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
   

  	
   

  
							



 


Account
Number:


(if electronic book entry
transfer)


 


Transaction
Code Number:


(if electronic book entry
transfer)


 


6

















 


ACKNOWLEDGMENT


 


The Company hereby
acknowledges this Notice and hereby directs American Stock Transfer &
Trust Co. to issue the above indicated number of shares of Common Stock in
accordance with the Transfer Agent Instructions dated May 1, 2009, from
the Company.


 


	
   

  	
  LIQUIDMETAL
  TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


7
















 


EXHIBIT II


 


NOTICE


 


To Liquidmetal Technologies, Inc.


 


In accordance with and
pursuant to the Certificate of Designation of Liquidmetal Technologies, Inc.
(the “Company”), the undersigned
hereby elects to convert shares of Series A-1 Preferred Stock, par value
$0.001 per share (the “Series A-1 Shares”)
and/or shares of Series A-2 Preferred Stock, par value $0.001 per share
(the “Series A-2 Shares”, and
together with the Series A-1 Shares, the “Series A Shares”) into shares of Common Stock, par value
$0.001 per share (the “Common Stock”),
of the Company as of the date specified below.


 


Date
of Conversion:


 


Amount
of Series A-1 Shares to be converted:


 


Amount
of Series A-2 Shares to be converted:


 


Liquidation
Preference:


 


Conversion
Price for Series A-1 Shares:


 


Conversion
Price for Series A-2 Shares:


 


Number
of shares of Common Stock to be issued upon conversion of Series A-1
Shares:


 


Number of shares of Common
Stock to be issued upon conversion of Series A-2 Shares:


 


Total number of shares of
Common Stock to be issued upon conversion of Series A Shares:


 


The undersigned requests
that certificates for the shares of Common Stock issuable upon conversion of
the Series A Shares be issued in the name of


 


 


	
   

  	
  Print Name of Holder:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOLDER’S SOCIAL SECURITY
  OR

  
	
   

  	
  TAX IDENTIFICATION NUMBER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Holder’s Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
				



 


8

















 


ACKNOWLEDGMENT


 


                The Company hereby acknowledges this Notice and
hereby directs American Stock Transfer & Trust Co. to issue the above
indicated number of shares of Common Stock in accordance with the Transfer
Agent Instructions dated May 1, 2009, from the Company.


 


	
   

  	
  LIQUIDMETAL
  TECHNOLOGIES, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
				



 


9

















 


EXHIBIT III


 


NOTICE


 


To Liquidmetal Technologies, Inc.


 


The undersigned hereby
irrevocably elects to purchase 
                          
shares of common stock, par value $0.001 per share, of Liquidmetal Technologies, Inc.
(“Common Stock”), pursuant to
Warrant No. [  ], originally issued May 1,
2009 (the “Warrant”), and, if not
a Cashless Exercise in accordance with Section 4, encloses herewith
$                
in cash, federal funds or other immediately available funds, which sum
represents the aggregate Exercise Price (as defined in the Warrant) for the
number of shares of Common Stock to which this Exercise Notice relates,
together with any applicable taxes payable by the undersigned pursuant to the
Warrant.


 


The undersigned  hereby certifies to the Company that the
undersigned’s exercise of the amount set forth above will not directly result
in the undersigned (together with the undersigned’s affiliates) beneficially
owning in excess of 4.99% of the number of shares of Common Stock outstanding
immediately after giving effect to such exercise, calculated in accordance with
Section 4(b) of the Warrant; provided that if the undersigned has
waived the 4.99% beneficial ownership requirement  by providing the Company with notice at least
61 days prior to the date hereof, the undersigned hereby certifies to the
Company that the undersigned’s exercise of the amount set forth above will not
directly result in the undersigned (together with the undersigned’s affiliates)
beneficially owning in excess of 9.99% of the number of shares of Common Stock
outstanding immediately after giving effect to such conversion, calculated in
accordance with Section 4(b) of the Warrant.  Notwithstanding the foregoing, the
certification set forth in this paragraph shall not apply to, and shall not be
deemed to be made by, any Affiliated Investor (as that term is defined in the
Purchase Agreement referred to in the Warrant).


 


The undersigned requests
that certificates for the shares of Common Stock issuable upon this exercise be
issued in the name of


 


 


	
   

  	
  Print Name of Holder:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOLDER’S SOCIAL SECURITY
  OR

  
	
   

  	
  TAX IDENTIFICATION NUMBER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Holder’s Address:

  
	
   

  	
   

  
	
   

  	
   

  
				



 


10

















 


ACKNOWLEDGMENT


 


                The Company hereby acknowledges this Notice and
hereby directs American Stock Transfer & Trust Co. to issue the above
indicated number of shares of Common Stock in accordance with the Transfer
Agent Instructions dated May 1, 2009, from the Company.


 


	
   

  	
  LIQUIDMETAL
  TECHNOLOGIES, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
				



 


11

















 


EXHIBIT IV


 


FORM OF NOTICE OF
EFFECTIVENESS

OF REGISTRATION STATEMENT


 


American Stock Transfer &
Trust Company


Attn:  Mr. Joe Wolf


59 Maiden Lane


New York, NY 10038


 


Re:          Liquidmetal Technologies, Inc.


 


Ladies and Gentlemen:


 


We are counsel to
Liquidmetal Technologies, Inc., a Delaware corporation (the “Company”),
and have represented the Company in connection with the negotiation and
execution of that certain Securities Purchase and Exchange Agreement, dated as
of May 1,, 2009, by and among the investors named on the Schedule of
Buyers attached thereto (the “Buyers”) and the Company (the “Purchase Agreement”).  Upon the terms and subject to the conditions
of the Purchase Agreement, the Company has issued the following to certain of
the Buyers: (i) 8 % Senior Secured Convertible Notes (the “Exchange Notes”),
which are convertible into shares of common stock of the Company, par value
$0.001 per share (the “Common Stock”), (ii) shares of the Company’s Series A-1
Preferred Stock, par value $0.001 per share (the “Series A-1 Shares”),
which are convertible into shares of Common Stock, (iii) shares of the
Company’s Series A-2 Preferred Stock, par value $0.001 per share (the “Series A-2
Shares,” and together with the Series A-1 Shares, the “Series A
Shares”), which are convertible into shares of Common Stock; (iv) Common
Stock Purchase Warrants issued in connection with the issuance of Series A
Shares (the “Preferred Warrants”); and (v) Common Stock Purchase Warrants
issued in connection with the issuance of the Exchange Notes (the “Exchange
Warrants”, and together with the Preferred Warrants, the “Warrants”).   Pursuant to the Purchase Agreement, the
Company entered into a Registration Rights Agreement with the Buyers, dated as
of May 1, 2009 (the “Registration Rights Agreement”), pursuant to which
the Company agreed, among other things, to register the resale of the Registrable
Securities (as defined in the Registration Rights Agreement).  In connection with the Company’s obligations
under the Registration Rights Agreement, on
              
      , 2009, the Company filed the Registration
Statement on Form S-1 (File No. 333-                  )
(the “Registration Statement”) with the Securities and Exchange Commission (the
“SEC”) relating to the Registrable Securities which names each of the Buyers as
a selling stockholder thereunder.


 


In connection with the
Registration Statement, we advise you that a member of the SEC’s staff has
advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the Securities Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS], and we have no knowledge,
after telephonic inquiry of a member of the SEC’s staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the Securities Act of 1933, as
amended, pursuant to the Registration Statement.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [COMPANY’S COUNSEL]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  



CC:          [LIST NAMES OF BUYERS]


 


12

















 


EXHIBIT V

Allocation of Conversion Cap


 


	
  Buyer

  	
   

  	
  Allocation of Conversion Cap 

  (Based on Investment Amount)

  	
   

  
	
  Carlyle Liquid Holdings, LLC

  	
   

  	
  3,566,000

  	
   

  
	
  Carlyle Liquid Holdings, LLC

  	
   

  	
  6,338,509

  	
   

  
	
  Fort Mason Master, LP

  	
   

  	
  1,904,214

  	
   

  
	
  Fort Mason Partners, LP

  	
   

  	
  123,487

  	
   

  
	
  Tail Wind Fund Ltd.

  	
   

  	
  2,217,581

  	
   

  
	
  Solomon Strategic Holdings Inc.

  	
   

  	
  443,516

  	
   

  
	
  Carlyle Liquid, LLC

  	
   

  	
  3,335,003

  	
   

  
	
  Carlyle Holdings, LLC

  	
   

  	
  414,420

  	
   

  
	
  Castlerigg Master Investments Ltd.

  	
   

  	
  3,548,130

  	
   

  
	
  Diamond Opportunity Fund

  	
   

  	
  580,188

  	
   

  
	
  Rockmore Investment Master Fund Ltd.

  	
   

  	
  1,774,065

  	
   

  
	
  Abdi Mahamedi

  	
   

  	
  828,840

  	
   

  
	
  BridgePointe Master Fund Ltd.

  	
   

  	
  1,288,385

  	
   

  
	
  Iroquois Master Fund

  	
   

  	
  337,950

  	
   

  
	
  Rodd Friedman

  	
   

  	
  100,624

  	
   

  
	
  Myron Neugeboren

  	
   

  	
  19,536

  	
   

  
	
  Ricardo Salas

  	
   

  	
  587,198

  	
   

  
	
  Chang Ki Cho

  	
   

  	
  773,801

  	
   

  
	
  Eric Brachfeld

  	
   

  	
  96,725

  	
   

  
	
  Ed Neugeboren

  	
   

  	
  13,582

  	
   

  
	
  Wynnefield Partners Small Cap Value LP

  	
   

  	
  752,070

  	
   

  
	
  Wynnefield Partners Small Cap Value LP I

  	
   

  	
  984,853

  	
   

  
	
  Wynnefield Small Cap Value Offshore

  	
   

  	
  949,040

  	
   

  
	
  Kenneth Lisiak

  	
   

  	
  113,458

  	
   

  
	
  Vestal Venture Capital

  	
   

  	
  650,967

  	
   

  
	
  Mermelstein Development

  	
   

  	
  828,840

  	
   

  
	
  Atlantic Realty

  	
   

  	
  414,420

  	
   

  
	
  Total

  	
   

  	
  32,985,406

  	
   

  



 


13

















 


Exhibit F


 


Filed separately, therefore omitted.


 
















 


Exhibit G


 


Form of Opinion of Foley &
Lardner LLP


 

















 


 


	
  May 1, 2009

  	
   

  	
  ATTORNEYS AT LAW
  

  100 NORTH TAMPA STREET, SUITE 2700
  

  TAMPA, FL 33602-5810  

  P.O. BOX 3391  

  TAMPA, FL 33601-3391  

  813.229.2300 TEL  

  813.221.4210 FAX 

  www.foley.com 



   

  CLIENT/MATTER
  NUMBER 

  078489-0130

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


To the Addressees
Set Forth on 


Attached Schedule A


Re:                               Liquidmetal
Technologies, Inc.


 


Ladies and Gentlemen:


 


We have acted as counsel to Liquidmetal Technologies, Inc., a
Delaware corporation (the “Company”), in connection with the
transactions contemplated by the Securities Purchase and Exchange Agreement,
dated as of the date hereof (the “Purchase Agreement”), among the
Company and the persons and entities set forth in Schedule A hereto (the
“Buyers”).  This letter is being
delivered to you pursuant to Section 7(g) of the Purchase
Agreement.  Capitalized terms not
otherwise defined in this letter shall have the respective meanings ascribed to
them in the Purchase Agreement.  The
Uniform Commercial Code as currently in effect in the State of New York is
referred to herein as the “New York UCC”, and the Uniform Commercial
Code as currently in effect in the State of Delaware is referred to herein as
the “Delaware UCC”.


 


In rendering this opinion, we have examined (i) the Purchase Agreement,
the Exchange Notes, the Warrants, the Registration Rights Agreement, the Voting
Proxy Agreement, the Security Agreement, the Account Control Agreement, and the
Certificate of Designations, Preferences and Rights of Series A Preferred
Stock of the Company (collectively, the “Transaction Documents”), (ii) a
copy of the Certificate of Incorporation of the Company certified by the
Secretary of the State of Delaware on April 21, 2009 (the “Certificate”),
(iii) a certificate of good standing with respect to the Company issued by
the Delaware Secretary of State dated April 21, 2009, (iv) a copy of
the Bylaws of the Company certified by the Secretary of the Company on or about
the date of this letter (the “Bylaws”), (v) a copy of the
resolutions of the Board of Directors of the Company adopted on April 30,
2009, as certified by the Secretary of the Company on the date of this letter,
and (vi) an unfiled copy of the financing statement attached hereto as Exhibit A
(the “UCC Financing Statement”) naming the Company as debtor and WC
Collateral Agent LLC (“Agent”), as secured party and agent for the
persons or entities listed as a Secured Party on Schedule 1 to the Security
Agreement (the “Investors”), which we understand will be filed in the
office of the Secretary of State of 
Delaware (the “Filing Office”). 
We have also considered such matters of law and of fact, including the
examination of originals or copies, certified or otherwise identified to our
satisfaction, of such records and documents of the Company, certificates of
officers, directors and representatives of the Company, certificates of public
officials and such other documents as we have deemed appropriate as a basis for
the opinions set forth below.  We also
have relied upon the factual representations made by the Company in the
Transaction Documents.  We have made no
attempt to independently verify the factual statements and representations
contained in certificates or in the Transaction Documents.


 


	
  BOSTON 

  BRUSSELS 

  CHICAGO 

  DETROIT 

  JACKSONVILLE

  	
   

  	
  LOS ANGELES 

  MADISON 

  MILWAUKEE 

  NEW YORK 

  ORLANDO

  	
   

  	
  SACRAMENTO 

  SAN DIEGO 

  SAN DIEGO/DEL MAR 

  SAN FRANCISCO 

  SILICON VALLEY

  	
   

  	
  TALLAHASSEE 

  TAMPA 

  TOKYO 

  WASHINGTON, D.C.

  



 

















 


As to the incorporation and good standing of the Company under the laws
of the State of Delaware, we have relied solely on certificates from the
Delaware Secretary of State dated April 21, 2009, which we assume remain
accurate as of the date of this letter.


 


The opinions set forth in this letter are limited to the federal laws
of the United States of America, the laws of the State of New York, and, with
respect to our opinions in paragraphs 1, 2 and 3, the Delaware General
Corporation Law as set forth in the Aspen Publishers Guide, Volume 3, and, we
express no opinion as to the laws of any other jurisdiction.  In addition, we express no opinion relating
to usury laws, Federal Reserve Board margin regulations, and local laws
(including statutes, administrative decisions, and rules and regulations
of county, municipal and political subdivisions), as well as any choice-of-law
provisions in the Transaction Documents.


 


Our opinion in paragraph 4 concerning the validity, binding effect, and
enforceability of the Transaction Documents means that (i) the Transaction
Documents constitute effective contracts under applicable law, and (ii) subject
to the remainder of this paragraph, a remedy will be available to the
applicable party if the Company is in material default under the Transaction
Documents to obtain the practical realization of benefits contemplated by the
Purchase Agreement.  This opinion does
not mean that (a) any particular remedy is available upon a material
default, or (b) every provision of the Transaction Documents will be
upheld or enforced in any or each circumstance by a court. Furthermore, the
validity, binding effect and enforceability of the Transaction Documents may be
limited or otherwise affected by (y) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar statutes,
rules, regulations or other laws affecting the enforcement of creditors’ rights
and remedies generally and (z) the unavailability of, or limitation on the
availability of, specific performance or injunctive relief or a particular
right or remedy (whether in a proceeding in equity or at law) because of an
equitable principle or a requirement as to commercial reasonableness,
conscionability, or good faith.


 


For purposes of our opinion set forth in opinion paragraph 11 herein as
it relates to the laws of the State of Delaware, we have reviewed standard
compilations of the version of the UCC as enacted in such state, as set forth
in the Commerce Clearing House Secured Transactions Guide, Volume 2 and 5, and
our opinion is based solely on such review. 
We are not licensed to practice law in the State of Delaware, do not
purport to be experts on the laws of Delaware, and did not consult local
counsel in such state.


 


Our security interest opinion in paragraph 11 is limited to Article 9
of the Delaware UCC, and therefore this opinion paragraph does not address (i) laws
of any jurisdiction other than Article 9 of the Delaware UCC, (ii) collateral
of a type not subject to Article 9 of the Delaware UCC, or (iii) under
§§ 9-301 through 9-307 of the Delaware UCC, what law governs perfection, the effect
of perfection or non-perfection, or priority of security interests granted in
the collateral covered by this opinion letter.


 


In rendering the opinions set forth below, we have made the following
assumptions, in addition to the other assumptions set forth in this letter: (i) the
genuineness of all signatures other than those on behalf of the Company; (ii) the
authenticity and completeness of all documents submitted to us as originals; (iii) the
conformity to originals of all documents and instruments submitted to us as
photostatic copies, and the authenticity and completeness of the originals of
such latter 


 


2

















 


documents;  (iv) the legal
capacity of each natural person; (v) the legal existence of all parties to
the Transaction Documents other than the Company; (vi) the power and
authority of each person other than the Company to execute, deliver and perform
each document executed and delivered and to do each other act done or to be
done by such person; (vii) the authorization, execution, and delivery by
each person other than the Company of each document executed and delivered or
to be executed and delivered by such person; (viii) the legality,
validity, binding effect, and enforceability as to each person other than the
Company of each document executed and delivered or to be executed and delivered
and of each other act done or to be done by such person; (ix) the payment
of all required documentary stamps, taxes and fees imposed upon the execution,
filing or recording of documents; (x) that there have been no undisclosed
modifications of any documents reviewed by us in connection with the rendering
of the opinion and no undisclosed prior waiver of any right or remedy contained
in any of the documents; (xi) the truthfulness of each statement as to all
factual matters contained in any document reviewed by us in connection with
this opinion; (xii) the accuracy on the date of the opinion as well as on the
date stated in all governmental certifications of each statement as to each
factual matter contained in such governmental certifications;  (xiii) that with respect to the Transaction
Documents, there has been no mutual mistake of fact and there exists no fraud
or duress; (xiv) the constitutionality and validity of all relevant laws,
regulations and agency actions; (xv) that the UCC Financing Statement contains
the correct name of the Company and all other information which is contained in
the UCC Financing Statement and required for filing by Section 9-516 of the
Delaware UCC is true and correct; and (xvi) that the Company has the power to
transfer rights in the Article 9 Collateral (as hereinafter defined) and
value (as described in Section 9-203(2) of the New York UCC) has been
given.


 


For purposes of this opinion, “to our knowledge” or “known to us” means
the actual current conscious awareness of those attorneys in our firm who have
given substantive attention to the transactions contemplated by the Transaction
Documents, without independent investigation to determine the existence or
absence of any facts or circumstances.


 


Based on the foregoing, and subject to the qualifications, assumptions
and limitations set forth herein, we are of the opinion that:


 


1.                                       The
Company is a corporation incorporated and in good standing under the laws of
the State of Delaware.


 


2.                                       Except
for any obligations, rights, or other matters that are contingent upon or
dependent on the completion of the Charter Amendment Approval/Filing (as that
term is defined below), the Company has all requisite corporate power and
authority to execute, deliver and perform the Transaction Documents, to issue,
sell and deliver the Exchange Notes, the Preferred Shares, and the Warrants
pursuant to the Transaction Documents, and to carry out and perform its
obligations under, and to consummate the transactions contemplated by, the
Transaction Documents. Upon the completion of the Charter Amendment
Approval/Filing, the Company will have the requisite corporate power and
authority to issue, sell and deliver the Conversion Shares and the Warrant
Shares pursuant to the Transaction Documents. 
For purposes of this opinion, the term “Charter Amendment
Approval/Filing” shall mean the process of obtaining Shareholder Approval
(as defined in the 


 


3

















 


Purchase
Agreement), filing the Charter Amendment (as defined in the Purchase Agreement)
with the Delaware Secretary of State, and the acceptance of the Charter
Amendment for filing by the Delaware Secretary of State.


 


3.                                       Except
for the Charter Amendment Approval/Filing, all corporate action on the part of
the Company necessary for the authorization, execution and delivery by the
Company of the Transaction Documents, the authorization, issuance, sale and
delivery of the Exchange Notes, the Preferred Shares and the Warrants pursuant
to the Purchase Agreement, the issuance and delivery of Conversion Shares and
Warrant Shares, and the consummation by the Company of the transactions
contemplated by the Transaction Documents has been duly taken.


 


4.                                       The
Transaction Documents have been duly and validly executed and delivered by the
Company and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except (a) that
such enforceability may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors’ rights in general and (b) that
the remedies of specific performance and injunctive and other forms of
injunctive relief may be subject to equitable defenses.  Notwithstanding the foregoing, we render no
opinion as to the validity, attachment, perfection, or enforceability of any
security interest in the Collateral (as defined in the Security Agreement).


 


5.                                       The
authorized capital stock of the Company as of the date hereof is 100,000,000
shares of common stock, par value $.001 per share (the “Common Stock”), and
10,000,000 shares of preferred stock, par value $.001 per share. The issuance
of the Exchange Notes, the Preferred Shares, and the Warrants has been duly
authorized, and when issued and paid for in accordance with the terms of the
Transaction Documents, such securities will be validly issued, and in the case
of the Preferred Shares, fully paid and non-assessable.  Upon the completion of the Charter Amendment
Approval/Filing, the shares of Common Stock issuable upon conversion of the
Exchange Notes, conversion of the Preferred Shares and exercise of the Warrants
will be duly reserved, and when issued in accordance with the terms of the
Preferred Shares, the Exchange Notes and the Warrants, as applicable, will be
validly issued, fully paid and nonassessable.


 


6.                                       Assuming
(i) the accuracy of the information provided by the purchasers in the
Transaction Documents including the relevant information with respect to the
status of each Buyer as an “accredited investor” within the meaning of
Regulation D under the Securities Act of 1933, as amended (the “Securities
Act”), (ii) the absence of any form of general solicitation or general
advertising with respect to the offer or sale of the Securities, (iii) the
observance of all limitations on resale of the Securities, and (iv) the
timely filing of a Form D with respect to the offer or sale of the
Securities, the issuance and sale of the Securities by the Company to the
Buyers is exempt from registration under the Securities Act by virtue of  Regulation D promulgated thereunder.


 


7.                                       The
execution, delivery and performance by the Company of, and the compliance by
the Company with the terms of, the Transaction Documents and the issuance, sale
and delivery of the Exchange Notes, Preferred Shares, Conversion Shares,
Warrants, and Warrant Shares pursuant to the Purchase Agreement do not, after
giving effect to the Charter Amendment Approval/Filing: (a) conflict with
or result in a violation of any 


 


4

















 


provision of
the Certificate or Bylaws, (b) conflict with or result in a violation of
any provision of law, rule, or regulation known to us to be applicable to the
Company,  or (c) to our knowledge,
conflict with, result in a breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or result
in or permit the termination or modification of, any agreement, instrument,
order, writ, judgment or decree known to us to which the Company is a party or
is subject.


 


8.                                       To
our knowledge, no consent, license, permit, waiver, approval or authorization
of, or designation, declaration, registration or filing with, any court,
governmental or regulatory authority, or self-regulatory organization, is
required in connection with the valid execution, delivery and performance by
the Company of the Transaction Documents, or the offer, sale, issuance or
delivery of the Exchange Notes, the Preferred Shares, Conversion Shares,
Warrants, or Warrant Shares or the consummation of the transactions
contemplated thereby.


 


9.                                       Based
solely on (i) our review of Rule 144 under the Securities Act of
1933, as amended (“Rule 144”), and applicable “no-action” letters
issued by the Securities and Exchange Commission, and (ii) the veracity of
the assumptions set forth in the following sentence, the Conversion Shares
issuable to a Buyer pursuant to the conversion of the Exchange Notes and Series A-2
Preferred Stock will be deemed to have been acquired, for purposes of Rule 144(d)(3)(ii),
on the date on which the Buyer acquired and paid the full purchase price for
the Existing Notes which were surrendered in exchange for the Exchange Notes.  The opinion in the preceding sentence is
based on the following assumptions:  (a) that
any conversion of the Exchange Notes and Series A-2 Preferred Stock will
be made in accordance with the terms and provisions of the Exchange Notes and Series A-2
Preferred Stock, as applicable, and (b) no other consideration was paid
for the Exchange Notes and Series A-2 Preferred Stock other than the Buyer’s
surrender of the Existing Notes.


 


10.                                 The
Security Agreement creates a valid security interest in favor of Agent, as
agent for the Investors, as security for the payment of the Obligations (as
defined in the Security Agreement) in the right, title, and interest of the
Company in the collateral described in the Security Agreement to the extent
such a security interest can be created under article 9 of the New York UCC
(the “Article 9 Collateral”).


 


11.                                 The
UCC Financing Statement is in appropriate form for filing in the Filing
Office.  Upon the filing of the UCC
Financing Statement with the Filing Office, the security interests in the Article 9
Collateral granted by the Company to Agent pursuant to the Security Agreement
will be perfected to the extent that such security interest may be perfected
under the Delaware UCC by filing said UCC Financing Statement in the Filing
Office.  We have not been asked to file
continuation statements with respect to the UCC Financing Statement.


 


The foregoing opinions are subject to the following additional
assumptions and qualifications:


 


a.             Our opinion is
limited by:


 


5

















 


i.              The requirement
that the enforcing party act in a commercially reasonable manner and in good
faith in exercising its rights under the Security Agreement and comply with the
provisions of part 6 of article 9 of the 
New York UCC; and


 


ii              The possible
rights of third parties to the extent that (a) any of the collateral
described in the Security Agreement prohibits, restricts or requires the
consent of the obligor to the assignment or transfer of, or the creation of a security
interest in such collateral, or provides that any such action constitutes a
default or gives rise to any right or remedy of such obligor; (b) such
collateral is not an account, chattel paper, promissory note, or general
intangible subject to and within the meaning of the New York UCC; and (c) the
consent of such obligor has not been obtained; provided, however, that to the
extent such collateral is a general intangible which is not a payment
intangible, or the transaction is the sale of a payment intangible or
promissory note, the security interest in such collateral may be subject to the
provisions of section 9-408(c) of the New York UCC.


 


b.             We have not
examined the records of Agent or the Investors, and except as set forth herein,
the Company, or any court or any public, quasi-public, private, or other office
in any jurisdiction, and our opinions are subject to matters that an
examination of such records would reveal.


 


c.             In the case of
proceeds, continuation of perfection of Agent’s security interest therein is
limited to the degree set forth in section 9-315 of the Delaware UCC.


 


d.             We express no
opinion as to any actions that may be required to be taken under the New York
UCC or the Delaware UCC, or other applicable law in order for the effectiveness
of the UCC Financing Statement, or the validity or perfection of any security
interest, to be maintained.


 


e.             We express no
opinion with respect to consumer goods, investment property in a consumer
transaction, as-extracted collateral, timber to be cut, commercial tort claims,
or goods represented by a certificate of title.


 


f.              We  call to your attention that in the case of
property which becomes collateral after the date hereof, section 547 of the
United States Bankruptcy Code (the “Code”) provides that a transfer is
not made until the debtor has rights in the property transferred, so a security
interest in after-acquired property may be treated as a voidable preference
under the conditions (and subject to the exceptions) provided by section 547,
and section 552 of the Code limits the extent to which property acquired by a
debtor after the commencement of a case under the Code may be subject to a
security interest arising from a security agreement entered into by the debtor
before the commencement of such case.


 


g.             We have made no
examination of, and express no opinion as to, (a) the adequacy of any
description of collateral, (b) title to the real property, fixtures,
personal property, or other collateral described in the Security Agreement or
the existence of any liens, charges, or encumbrances thereon, or (c) the
priority of the security interests created or evidenced by the Security
Agreement.


 


6

















 


h.             We express no
opinion as to the effect on the opinions expressed herein of (i) the
compliance or non-compliance of any party to the Transaction Documents (other
than the Company to the extent set forth herein) with any state, federal or
other laws or regulations applicable to it or (ii) the legal or regulatory
status or the nature of the business of any party (other than the Company to
the extent expressly set forth herein).


 


This opinion letter is provided to you for your exclusive use solely in
connection with the Transaction Documents and the transactions contemplated
thereby and may not be relied upon by any person other than you or for any
other purpose without our prior written consent. This opinion letter may not be
used, quoted, referred to, copied, published, or relied upon by, or furnished
to, any other person without our prior written consent.  This opinion letter speaks only as of the
date hereof and to its addressees and we have no responsibility or obligation
to update this opinion, to consider its applicability or correctness to other
than its addressees, or to take into account changes in law, facts or any other
developments of which we may later become aware.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Foley &
  Lardner LLP

  



 


7

















 


SCHEDULE A


 


	
  Carlyle Liquid Holdings, LLC

  	
   

  	
  2 Gannett Drive 

  Suite 201 

  White Plains, NY 10604 

  (914) 694-6789

  
	
   

  	
   

  	
   

  
	
  Fort Mason Master, LP

  	
   

  	
  580 California Street 

  Suite 1925 

  San Francisco, CA 94104 

  (415) 288-8113

  
	
   

  	
   

  	
   

  
	
  Fort Mason Partners, LP

  	
   

  	
  580 California Street 

  Suite 1925 

  San Francisco, CA 94104 

  (415) 288-8113

  
	
   

  	
   

  	
   

  
	
  Tail Wind Fund Ltd.

  	
   

  	
  c/o Tail Wind Advisory and 

  Management Ltd 

  767 Third Avenue, 6th Floor 

  New York, NY 10017 

  (212) 676-5665

  
	
   

  	
   

  	
   

  
	
  Solomon Strategic Holdings Inc.

  	
   

  	
  c/o Tail Wind Advisory and 

  Management Ltd 

  767 Third Avenue, 6th Floor 

  New York, NY 10017 

  (212) 676-5665

  
	
   

  	
   

  	
   

  
	
  Carlyle Liquid, LLC

  	
   

  	
  2 Gannett Drive 

  Suite 201 

  White Plains, NY 10604 

  (914) 694-6789

  
	
   

  	
   

  	
   

  
	
  Carlyle Holdings, LLC

  	
   

  	
  2 Gannett Drive 

  Suite 201 

  White Plains, NY 10604 

  (914) 694-6789

  
	
   

  	
   

  	
   

  
	
  Castlerigg Master Investments Ltd.

  	
   

  	
  c/o Sandell Asset Management 

  Corporation 

  40 West 57th Street 

  26th Floor 

  New York, NY 10019 

  (212) 603-5710

  
	
   

  	
   

  	
   

  
	
  Diamond Opportunity Fund

  	
   

  	
  500 Skokie Blvd, Suite 310 

  Northbrook, IL 60062 

  (847) 919-4410

  
	
   

  	
   

  	
   

  
	
  Rockmore Investment Master Fund Ltd.

  	
   

  	
  150 East 58th Street, 28th Floor 

  New York, NY 10155 

  (212) 258-2315

  



 


8

















 


	
  Abdi Mahamedi

  	
   

  	
  c/o Carlyle Development Group 

  2 Gannett Drive, Suite 201 

  White Plains, NY 10604 

  (914) 694-6789

  
	
   

  	
   

  	
   

  
	
  BridgePointe Master Fund Ltd.

  	
   

  	
  c/o Roswell Capital Partners 

  1120 Sanctuary Parkway 

  Suite 325 

  Alpharetta, GA 30004 

  (770) 777-5844

  
	
   

  	
   

  	
   

  
	
  Iroquois Master Fund

  	
   

  	
  641 Lexington Avenue 

  26th Floor 

  New York, NY 10022 

  (212) 207-3452

  
	
   

  	
   

  	
   

  
	
  Rodd Friedman

  	
   

  	
  93 Hillspoint Road 

  Westport, CT 06880 

  (203) 663-1303

  
	
   

  	
   

  	
   

  
	
  Myron Neugeboren

  	
   

  	
  P.O. Box 1410 

  Lakeville, Ct 06309 

  (860) 435-2603

  
	
   

  	
   

  	
   

  
	
  Ricardo Salas

  	
   

  	
  64 Ritz Cove Drive 

  Monarch Beach, CA 92629 

  (949) 315-3096

  
	
   

  	
   

  	
   

  
	
  Chang Ki Cho

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Eric Brachfeld

  	
   

  	
  890 West End Avenue 

  Suite 160 

  New York, NY 10025 

  (212) 298-9933

  
	
   

  	
   

  	
   

  
	
  Ed Neugeboren

  	
   

  	
  282 New Norwalk Road 

  New Canaan, CT 06840 

  (212) 618-0202

  
	
   

  	
   

  	
   

  
	
  Wynnefield Partners Small Cap Value LP

  	
   

  	
  450 Seventh Avenue 

  Suite 509 

  New York, NY 10123 

  (212) 760-0824

  
	
   

  	
   

  	
   

  
	
  Wynnefield Partners Small Cap Value LP I

  	
   

  	
  450 Seventh Avenue 

  Suite 509 

  New York, NY 10123 

  (212) 760-0824

  
	
   

  	
   

  	
   

  
	
  Wynnefield Small Cap Value Offshore

  	
   

  	
  450 Seventh Avenue 

  Suite 509 

  New York, NY 10123 

  (212) 760-0824

  
	
   

  	
   

  	
   

  
	
  Kenneth Lisiak

  	
   

  	
  17 Ross Lane 

  Middleton, MA 01949 

  (978)774-3778

  



 


9

















 


	
  Vestal Venture Capital

  	
   

  	
  6471 Enclave Way 

  Boca Raton, FL 33496 

  (561) 912-9979

  
	
   

  	
   

  	
   

  
	
  Mermelstein Development

  	
   

  	
  302 Fifth Avenue, 8th Floor 

  New York, NY 10001

  
	
   

  	
   

  	
   

  
	
  Atlantic Realty

  	
   

  	
  c/o Jack Chitayat 

  1836 El Camino Del Teatro 

  La Jolla, CA 92037

  



 


10

















 


EXHIBIT
A


 


Financing Statement


 


11














 


Exhibit H


 


Form of Voting Proxy Agreement
 















 
VOTING PROXY AGREEMENT
 


THIS
VOTING PROXY AGREEMENT (this “Agreement”), dated as of May 1, 2009,
by and among the shareholders listed on Schedule A hereto (each a “Holder”
and collectively, the “Holders”) and Carlyle Liquid Holdings LLC, a New
York limited liability company (the “Carlyle” or, the “Proxyholder”).  Capitalized terms used but not defined herein
shall have the meaning ascribed to such terms in the Exchange Agreement (as
defined below).


 


WHEREAS, each Holder owns a number of shares of common stock of Liquidmetal Technologies, Inc., a Delaware corporation (the “Company”), as set forth next to each Holder’s name on Schedule A hereto (such shares of common stock, the “Shares”); and
 
WHEREAS, the Securities Purchase and Exchange Agreement (the “Exchange Agreement”), dated as of May 1, 2009, among the Company and the Holders, provides in Section 7(j) that, as a condition to closing, the Company must provide Carlyle with an executed Voting Proxy Agreement signed by a sufficient number of Holders to give Carlyle the power to vote a majority of the Company’s shares of common stock for the purposes of approving an amendment (the “Charter Amendment”) to the Company’s Certificate of Incorporation to increase the number of authorized shares of common stock to 300,000,000 to meet the Company’s obligation under the Exchange Agreement to reserve for issuance a number of shares of common stock equal to the sum of 100% of the number of shares of common stock issuable upon conversion of the Preferred Shares and the Exchange Notes and exercise of the Warrants to be issued at such Closing (such rights, the “Voting Rights”); and
 
WHEREAS, the parties hereto desire to provide for certain rights and obligations relating to the Voting Rights of the Holder and certain other matters.
 
NOW, THEREFORE, in consideration of the mutual promises set forth below (the mutuality, adequacy and sufficiency of which are hereby acknowledged), the parties hereto agree as follows:
 
ARTICLE 1
 
PROXY
 
SECTION 1.01. Voting Rights; Irrevocable Proxy. (a) The Holders hereby irrevocably constitute and appoint the Proxyholder, its true and lawful attorney, agent and proxy for and in their name, place and stead, with the exclusive right to exercise the Voting Rights on the Charter Amendment attributable to Holders’ Shares, in such Proxyholder’s sole and absolute discretion, at any annual or special meeting of stockholders of the Company, at any and all adjournments thereof, and on any other occasion in respect of which the consent of Holders relating to the Voting Rights on the Charter Amendment may be given or may be requested or solicited by the Company or any other Person, whether at a meeting, pursuant to the execution of a written consent or otherwise, and Holder hereby ratifies and confirms all that the Proxyholder may do by virtue hereof. The Holders agree with the Proxyholder that, without the prior written consent of 
 















 
the Proxyholder, they will not, so long as this Agreement shall be in effect, take any action with respect to the Voting Rights on the Charter Amendment, appoint any person other than the Proxyholder as their attorney, agent or proxy with respect to such Shares, or take any action inconsistent with the appointment of the Proxyholder as their lawful attorney, agent and proxy, or the exercise by the Proxyholder of the powers granted to it, hereunder.
 
(b)   The powers granted pursuant to this Section 1.01, and the proxy granted pursuant hereto, are coupled with an interest and shall be irrevocable during the term of this Agreement.
 
SECTION 1.02. Acceptance of Appointment. Carlyle accepts its appointment as the Proxyholder and agrees to serve in such capacity pursuant to the terms hereof.
 
ARTICLE 2
 
MISCELLANEOUS
 
SECTION 2.01. Lock-Up. John Kang and Ricardo Salas agree that, until the Shareholder Approval, they will not, directly or indirectly, sell, assign, transfer or dispose of any of their Shares.
 
SECTION 2.02. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.
 
SECTION 2.03. Reasonable Best Efforts. Each party hereto will use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable laws and regulations to consummate the transactions contemplated by this Agreement.
 
SECTION 2.04. Remedies. Each party hereto acknowledges that the remedies at law of the other parties for a breach or threatened breach of this Agreement would be inadequate and, in recognition of this fact, any party to this Agreement, without posting any bond, and in addition to all other remedies which may be available, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
 
SECTION 2.05. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including telecopier) and shall be deemed to have been duly given or made if sent by telecopy, delivered personally, sent by electronic mail (provided confirmation of transmission is electronically generated and kept on file by the sending party) or sent by registered or certified mail (postage prepaid, return receipt requested) to such party at its address  or telecopier number set forth on Schedule A hereto or the signature pages hereof, or such other address or telecopier number as such party may hereinafter specify for the purpose to the party giving such notice. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place 
 
2















 
of receipt and such day is a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding business day in the place of receipt.
 
SECTION 2.06. Waivers; Amendments. (a) No failure or delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
 
(b) Any provision of this Agreement may be waived if, but only if, such waiver is in writing and is signed, by the party or parties against whom the waiver is to be effective. No provision of this Agreement may be amended or otherwise modified except by an instrument in writing executed by each of the parties hereto.
 
SECTION 2.07. Termination. This Agreement shall terminate and be of no further force and effect on the earlier to occur of (i) the second anniversary of the date hereof and (ii) the date on which the Charter Amendment is duly approved by the Company’s stockholders.
 
SECTION 2.08. Successors and Assigns; Third Party Rights. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer on any entity other than the parties hereto and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
 
SECTION 2.09. Applicable Law; Submission to Jurisdiction. This Agreement shall be construed in accordance with and governed by the laws of the State of New York, without regard to the conflicts of law rules of such state. Each of the parties hereto hereby consents to the non-exclusive jurisdiction of the United States District Court for the Southern District of New York, or any other New York State court sitting in New York County, New York (and of the appropriate appellate courts therefrom) over any suit, action or proceeding arising out of or relating to this Agreement. Each party hereto irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue in any such court or that any such proceeding which is brought in accordance with this Section has been brought in an inconvenient forum. Subject to applicable law, process in any such proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing and subject to applicable law, each party agrees that service of process on such party as provided in Section 2.05 shall be deemed effective service of process on such party. Nothing herein shall affect the right of any party to serve legal process in any other manner permitted by law or at equity or to enforce in any lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
 
WITH RESPECT TO A PROCEEDING IN ANY SUCH COURT, EACH OF THE PARTIES IRREVOCABLY WAIVES AND RELEASES TO THE OTHER ITS RIGHT TO A TRIAL BY JURY, AND AGREES THAT IT WILL NOT SEEK A TRIAL BY JURY IN ANY SUCH PROCEEDING.
 
3















 
SECTION 2.10. Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.
 
SECTION 2.11. Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein, and there are no restrictions, promises, representations, warranties, covenants, or undertakings with respect to the subject matter hereof, other than those expressly set forth or referred to herein.
 


SECTION 2.12. Counterparts. This Agreement may be executed
in two or more identical counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other parties; provided that a
facsimile signature (including documents in Adobe PDF format) shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.


 


SECTION 2.13. Headings. The headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of any provisions hereof.
 
4















 
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
 
 


	PROXYHOLDER:
	 

	 
	 

	CARLYLE LIQUID HOLDINGS LLC
	 

	 
	 

	By:
	 
	 

	Name:
	 

	Title:
	 

	 
	 

	 
	 

	HOLDERS:
	 

	 
	 

	 
	 

	By:
	 
	 

	Name: John Kang
	 

	Title:
	 

	 
	 

	 
	 

	By:
	 
	 

	Name: Ricardo Salas
	 

	Title:
	 

	 
	 

	 
	 

	By:
	 
	 

	Name: Jack Chitayat
	 

	Title:
	 

	 
	 

	 
	 

	By:
	 
	 

	Name: Abdi Mahamedi
	 

	Title:
	 




 

















 


 


SCHEDULE
A


 


	
  1.

  	
   

  	
  John Kang

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Ricardo Salas

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Jack Chitayat

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Abdi Mahamedi

  



 






 












 


Exhibit I


 


FORM OF CHARTER AMENDMENT


 

















 


CERTIFICATE OF AMENDMENT


TO
THE CERTIFICATE OF INCORPORATION OF


LIQUIDMETAL
TECHNOLOGIES, INC.


 


Liquidmetal Technologies, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the “General Corporation Law”), does hereby certify as follows:


 


FIRST:  That the original Certificate of
Incorporation of Liquidmetal Technologies, Inc. (the “Corporation”) was
filed with the Secretary of State of the State of Delaware on May 15,
2003, and that a Certificate of Ownership and Merger of Liquidmetal
Technologies (a California corporation) with and into the Corporation was filed
with the Secretary of State of the State of Delaware on May 21, 2003.


 


SECOND:  That,
at a meeting of the Board of Directors of the Corporation, resolutions were
duly adopted setting forth proposed amendments to the Certificate of
Incorporation of the Corporation, declaring said amendments to be advisable,
and calling a meeting of the stockholders of the Corporation for consideration
thereof.  The resolution setting forth
the proposed amendments is as follows:


 


RESOLVED, that the
Certificate of Incorporation of this Corporation be amended by changing Article IV
thereof so that, as amended, Article IV shall be and read as follows:


 


“The Corporation shall
have authority to issue Three Hundred Ten Million (310,000,000) shares of
capital stock, consisting of Three Hundred Million (300,000,000) shares of
common stock, $0.001 par value per share 
(the “Common Stock”), and Ten Million (10,000,000) shares of preferred
stock, $0.001 par value per share (the “Preferred Stock”), of which One Million
Eight Hundred Seventy-Five Thousand (1,875,000) shares are hereby designated as
“Series A-1 Preferred Stock” and Three Million Two Hundred Eighty-One
Thousand Two Hundred Fifty-Three (3,281,253) shares are hereby designated as “Series A-2
Preferred Stock.”  The Preferred Stock
authorized by the Certificate of Incorporation, as amended, may be issued from
time to time in one or more series.  The
Board of Directors is hereby authorized to fix or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any series
of Preferred Stock, and the number of shares constituting any such series and
the designation thereof, or any of them. 
The voting powers, designations, preferences and other special rights,
and qualifications, limitations and restrictions  of the Series A-1 Preferred Stock and Series A-2
Preferred Stock (collectively, the “Series A Preferred Stock”) are set
forth in a Certificate of Designation, Preferences, and Rights previously filed
by the Corporation with the Secretary of State of Delaware on May 1, 2009
(the “Series A Certificate of Designation”).”


 

















 


RESOLVED, that the Certificate of Incorporation
of this Corporation be amended by changing Article VIII thereof so that,
as amended, Article VIII shall be and read as follows:


 


“(a)         Directors — General.  Subject to Section (b) below, the
number of directors of the Corporation shall be determined by resolution of the
Board of Directors.  Elections of
directors need not be by written ballot, unless the Bylaws of the Corporation
shall so provide.


 


(b)           Series A Directors and Common
Directors.     Notwithstanding the
foregoing, for as long as at least 25% of the number of shares of Series A
Preferred Stock issued on May 1, 2009 (the initial issuance date of the Series A
Preferred Stock) are outstanding, the Board of Directors of the Company shall
consist of five (5) members.  In any
election of directors taking place after May 1, 2009, as long as at least
25% of the number of shares of Series A Preferred Stock issued on May 1,
2009 are outstanding, (i) the holders of the Series A Preferred
Stock, voting as a separate class, shall have the right to elect two of the members
of the Corporation’s Board of Directors, (ii) the holders of the Common
Stock, voting as a separate class, shall have the right to elect two of the members
of Company’s Board of Directors (the “Common Directors”), and (iii) the
holders of the Common Stock and the holders of the Series A Preferred
Stock, voting together as a single class (with the holders of Preferred Stock
voting on an as converted to Common Stock basis as described in the last
sentence of this Section (b)), shall have the right to elect one of the members
of the Company’s Board of Directors.


 


In
addition to any class voting rights provided by law and the Certificate of
Incorporation, and subject to the first paragraph of this Section (b), the
holders of Series A Preferred Stock shall have the right to vote together
with the holders of Common Stock as a single class on any matter on which the
holders of Common Stock are entitled to vote, at any annual or special meeting
of the stockholders and not as a separate class, and may act by written consent
in the same manner of the holders of the Common Stock; provided, however,
that the holders of Series A Preferred Stock shall not have the right to
vote on the election of the Common Directors. With respect to the voting rights
of the holders of the Series A Preferred Stock pursuant to the preceding
sentence, each holder of Series A Preferred Stock shall be entitled to one
vote for each share of Common Stock that would be issuable to such holder upon
the conversion of all the shares of Series A Preferred Stock held by such
holder on the record date for the determination of shareholders entitled to
vote at such meeting or the effective date of such written consent (after
taking into account the conversion limitation set forth in Section 4M(1) of
the Series A Certificate of Designation but disregarding the conversion
limitation set forth in Section 4M(2) of the Series A
Certificate of Designation), and shall have 


 


2

















 


voting
rights and powers equal to the voting rights and powers of the Common Stock,
and shall be entitled to notice of any stockholders’ meeting in accordance with
the Bylaws of the Company.”


 


THIRD:  That
thereafter, pursuant to a resolution of the Board of Directors of the
Corporation, a special  meeting of the
stockholders of the Corporation was duly called and held upon notice in
accordance with Section 222 of the General Corporation Law at which
meeting the necessary number of shares as required by statute were voted in
favor of the amendments.


 


FOURTH:  That said amendments were duly adopted in
accordance with the provisions of Section 242 of the General Corporation
Law.


 


FIFTH:  That said amendments shall be effective upon
filing in the Office of the Secretary of State of the State of Delaware.


 


IN WITNESS WHEREOF, the Corporation
has caused this Certificate of Amendment to be signed by a duly authorized
officer this          day of                       ,
2009.


 


	
   

  	
  LIQUIDMETAL TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					



 


3