**Exhibit 10.2**

 

**THESESECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSIONIN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BEOFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDERTHE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN ATRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIESACT.**

 

**THISNOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIALREDEMPTION.  AS A RESULT, FOLLOWING ANYREDEMPTION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNTREPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUEDINTEREST SET FORTH BELOW.**

 

**7% SENIOR SECURED CONVERTIBLE NOTE**

 

**OF**

 

**LIQUIDMETAL TECHNOLOGIES, INC.**

 
| **Note No.: D-       ** | ** ** | **Original Principal Amount:  $                            ** |
|------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Issuance Date:   August 2,  2005**        | ** ** | ** **                                                                                                                                                                                                | **Lake Forest, California** |

 

 

THIS NOTE (this “**Note**”) is oneof a duly authorized issue of Notes issued by **LIQUIDMETALTECHNOLOGIES, INC.**, a corporation duly organized and existing underthe laws of the State of Delaware (the “**Company**”),designated as the Company’s 7% Senior Secured Convertible Note in an aggregateprincipal amount of up to Fifteen Million U.S. Dollars (U.S. $15,000,000.00) (the “**Notes”**).  All principal and unpaid interest under thisNote shall become due and payable on August 2, 2007 (the “**Maturity Date**”).

 

FOR VALUE RECEIVED, the Company hereby promises to pay to the order of                        ,****or its registered assigns or successors-in-interest (**“Holder”**), the principal sum of                                               (U.S. $                     )together with all accrued but unpaid interest thereon, if any, on the MaturityDate, in accordance with the terms hereof. Interest on the unpaid principal balance hereof shall accrue at the rateof 7.0% per annum from the issuance date specified above (the **“Issuance Date”**), until the same becomes due and payable onthe Maturity Date, or such earlier date upon acceleration in accordance withthe terms hereof or of the other Transaction Documents.  Interest on this Note shall accrue dailycommencing on the Issuance Date and shall be computed on the basis of a 360-dayyear, 30-day months and actual days elapsed and shall be payable in accordancewith Section 1 hereof. Notwithstanding anything to the contrary contained herein, this Noteshall bear interest on the due and unpaid Principal Amount from and after theoccurrence and during the continuance of an Event of Default pursuant to Section 3(a),at the rate (the “**Default Rate**”)equal to the lower of fourteen percent (14%) per annum or the highest ratepermitted by law.  Unless otherwiseagreed or required by applicable law, payments will be applied first to anyunpaid collection costs, then to unpaid interest and fees and any remainingamount to principal.

 

Except as otherwise provided herein, all payments of principal andinterest on this Note shall be made in lawful money of the United States ofAmerica by wire transfer of immediately available funds to such account as theHolder may from time to time designate by written notice in accordance with the

 

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provisions of this Note.  This Note may be prepaid in whole or in partat any time without penalty.  Wheneverany amount expressed to be due by the terms of this Note is due on any daywhich is not a Business Day (as defined below), the same shall instead be due onthe next succeeding day which is a Business Day.

 

Capitalized terms used herein and not otherwise defined shall have themeanings set forth in the Securities Purchase Agreement dated on or about theIssuance Date pursuant to which the Note was originally issued (the **“Purchase Agreement”**). For purposes hereof the following terms shall have the meanings ascribedto them below:

 

*“**Business Day**”* shall mean any day otherthan a Saturday, Sunday or a day on which commercial banks in the City of NewYork are authorized or required by law or executive order to remain closed.

 

*“**ConversionPrice**”*shall be $2.00 (U.S.) per share, asadjusted as set forth herein.

 

*“**ConvertibleSecurities**”*means any convertible securities, warrants, options or other rights tosubscribe for or to purchase or exchange for, shares of Common Stock.

 

*“**Debt**”* shall meanindebtedness of any kind.

 

“***Exchange Act***” shall mean theSecurities Exchange Act of 1934, as amended.

 

***“Per Share Selling Price***”shall include the amount actually paid by third parties for each share ofCommon Stock in a sale or issuance by the Company.  A sale of shares of Common Stock shallinclude the sale or issuance of rights, options, warrants or convertible,exchangeable or exercisable securities, issued or sold on or subsequent to theIssuance Date, under which the Company is or may become obligated to issueshares of Common Stock, and in such circumstances the Per Share Selling Priceof the Common Stock covered thereby shall also include the exercise, exchangeor conversion price thereof.  If sharesare issued for a consideration other than cash, the Per Share Selling Priceshall be the fair market value of such consideration as determined in goodfaith by the board of directors of the Company.

 

“***Principal Amount***” shall referto any unpaid principal amounts outstanding under this Note.

 

*“**PrincipalMarket**”*shall mean the principal market, exchange, or quotation service on which theCommon Stock is then listed or quoted for trading.

 

“***Registration Statement***” shallhave the meaning set forth in the Amended and Restated Registration RightsAgreement.

 

“***Securities Act***”shall mean the Securities Act of 1933, as amended.

 

*“**Trading Day”***shall mean a day on which there is trading on the Principal Market.

 

“***Underlying Shares***”  means the shares of Common Stock into whichthis Note is convertible in accordance with the terms hereof.

 

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The following terms and conditions shallapply to this Note:

 

**Section 1.****                                          Paymentsof Principal and Interest.**

 

(a)                                  InterestPayments.  The Company shall pay allaccrued but unpaid interest on the Principal Amount of this Note (the “**Quarterly Amount**”), on the first business day of eachconsecutive calendar quarter (each an “**Interest Payment Date**”)beginning on October 1, 2005.  TheQuarterly Amount shall be paid in cash.

 

(b)                                 Paymentof Principal.  Subject to theprovisions hereof, the PrincipalAmount of this Note and all remaining accrued and unpaid interest shall be dueand payable on the Maturity Date.  Payment of the Principal Amount shall beeffected in cash.

 

(c)                                  Taxes.  The Company may withhold and pay over to therelevant authorities any appropriate tax or other legally required withholdingsfrom any interest payment to be made to the Holder to the extent that suchwithholding is required by the Internal Revenue Code or any other applicablelaw, rule, or regulation.

 

(d)                                 Security.  This Note is secured by a security interestin certain assets of the Company pursuant to that certain Amended and RestatedSecurity Agreement, dated of even date herewith, among the Company, the Holder,and the other “Purchasers” under the Purchase Agreement.

 

**Section 2.****                                          Seniority**.  The obligations of the Company hereundershall rank senior to all other Debt of the Company, whether now or hereinafterexisting, except as and to the extent set forth in Section 3.2 of thePurchase Agreement.

 

**Section 3.****                                          Defaultsand Remedies.**

 

(a)                                  Events of Default.     An“**Event of Default**” is:  (i) a default in payment of thePrincipal Amount, when due, or failure topay any accrued but unpaid interest thereon of the Note within five (5) days after the datesuch interest payment is due; (ii) adefault in the timely issuance of the Underlying Shares upon and in accordancewith the terms hereof (where for purposes of this Note, the term timely shallmean within ten (10) days following the conversion date) (iii) failureby the Company for thirty (30) days after written notice has been received bythe Company to comply with any other material provision of the Note, thePurchase Agreement or the Transaction Documents, (iv) a material breach bythe Company of its representations or warranties in the Purchase Agreement orTransaction Documents that remains uncured for thirty (30) business days afternotice to the Company; (v) any eventor condition shall occur which (x) results in the acceleration of the maturityof any material long-term debt (other than the Note) of the Company or any ofits subsidiaries, or (y) enables (or, with the giving of notice or lapse oftime or both, would enable) the holder of such material long-term debt or anyor person acting on behalf of such holder’s behalf to accelerate the maturitythereof, or (vi) if the Company or any of its subsidiaries issubject to any Bankruptcy Event.  “**Bankruptcy Event**” means any of the following events: (a) theCompany or any subsidiary commences a case or other proceeding under anybankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors,dissolution, insolvency or liquidation or similar law of any jurisdictionrelating to the Company or any subsidiary thereof; (b) there is commencedagainst the Company or any subsidiary any such case or proceeding that is notdismissed within 30 days after commencement; (c) the Company or anysubsidiary is adjudicated

 

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insolvent or bankrupt or any order of relief or other order approvingany such case or proceeding is entered; (d) the Company or any subsidiarysuffers any appointment of any custodian or the like for it or any substantialpart of its property that is not discharged or stayed within 30 days; (e) theCompany or any subsidiary makes a general assignment for the benefit ofcreditors; (f) the Company or any subsidiary, by any act or failure toact, expressly indicates its consent to, approval of or acquiescence in any ofthe foregoing or takes any corporate or other action for the purpose ofeffecting any of the foregoing.

 

(b)                                 Remedies.  If an Event of Default occurs and iscontinuing with respect to this Note, the Holder may declare all of the thenoutstanding Principal Amount of this Note, including any interest due thereon,to be due and payable immediately.  TheCompany shall pay interest on such amount in cash at the Default Rate to theHolder if such amount is not paid within two (2) days of Holder’srequest.  The remedies under this Noteshall be cumulative.

 

**Section 4.****                                          Covenants**.  The Company hereby covenants and agrees that,for so long as any Notes remain outstanding, unless the Purchasers shallotherwise consent in writing, the Company shall not, and shall not permit anysubsidiary to, directly or indirectly after the date hereof (a) create, assume, or otherwise become orremain obligated in respect of, or permit or suffer to exist or to be created,assumed or incurred or to be outstanding any indebtedness, other than aspermitted in Section 3.2 of the Purchase Agreement, (b) assign,transfer, encumber or otherwise dispose of Collateral (as defined in thatcertain Amended and Restated Security Agreement, dated August 2, 2005between the Company, the Agent and the Investors (as defined therein) (the “**Security Agreement**”)), except as permitted under Section 5(a) ofthe Security Agreement; (c) guaranty or become surety for the obligationsof any other person, other than any guaranty or surety with respect to theobligations of a subsidiary of the Company or any guaranty or surety made inthe ordinary course of the Company’s business, provided that such guaranty orsurety does not exceed $500,000 in the aggregate; (d) acquire (whether forcash, property, services, assumption of debt, securities or otherwise) any sharesof capital stock, bonds, notes, debentures, time deposits or other securitiesof any other person, in excess of the aggregate amount of $1.0 million over anyrolling 12-month period; (e) purchase or otherwise acquire (whether forcash, property, services, assumption of debt, securities or otherwise) anyAssets (defined below) in excess of the aggregate amount of $3.0 million overany rolling 12-month period; (f) engage in or consummate any sale,purchase, merger or other transaction or series of transactions that wouldresult in any person (including any syndicate or group deemed to be a “person”under Section 13(d)(3) or 14(d)(2) of the Securities ExchangeAct of 1934, as amended, or any successor provision) having (i) beneficialownership, directly or indirectly, of more than 40% of the equity of theCompany or (ii) the right to appoint or cause to be appointed a majorityof new officers of the Company; or (g) engage in or consummate anyconsolidation of the Company with, or merger of the Company into, any otherperson, any merger of another person into the Company, or any sale, lease orexchange of all or substantially all of the property and assets of the Companyto another person.  For purposes of thisparagraph, the term “Assets” shall mean any capital assets or fixed assets,provided that such term shall not include inventory or other assets purchasedin ordinary course of the Company’s business.

 

**Section 5.**                                          **Conversion.**

 

(a)                                  Conversionby Holder.  From and after theIssuance Date and subject to the terms hereof and restrictions and limitationscontained herein, the Holder shall have the right, at Holder’s

 

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option, at any time and from time to time toconvert, in part orin whole, the outstanding Principal Amount and all accrued and unpaidinterest under this Note into shares of the Company’s common stock, par value$.001 per share (“**Common Stock**”),at the then applicable Conversion Price, by delivering to the Company a fullyexecuted notice of conversion in the form of conversion notice attached heretoas Exhibit A (the **“Conversion Notice”**),which may be transmitted by facsimile (with the original mailed on the samedate by certified or registered mail, postage prepaid and return receiptrequested).  The Conversion Notice shallspecify a date for the conversion to be effective, which date shall be noearlier than the date on which the Conversion Notice is delivered (the “**Conversion Date**”), and the Conversion Notice shall beirrevocable when delivered.

 

(b)                                 ConversionProcedures.  Upon conversion of thisNote pursuant to this Section 5, the outstanding Principal Amounthereunder shall be converted into such number of fully paid, validly issued andnon-assessable shares of Common Stock, free of any liens, claims andencumbrances, as is determined by dividing the outstanding Principal Amountbeing converted by the then applicable Conversion Price and any accrued butunpaid interest shall be paid in cash. The Company will deliver to the Holder not later than three (3) TradingDays after the Conversion Date, a certificate or certificates which shall befree of restrictive legends and trading restrictions (assuming that theRegistration Statement has been declared effective), representing the number ofshares of Common Stock being acquired upon the conversion of this Note.

 

(c)                                  Conversion PriceAdjustments.

 

(i)                                     *Stock Dividends, Splits and Combinations*.  If the Company or any of its subsidiaries, atany time while the Note is outstanding (A) shall pay a stock dividend orotherwise make a distribution or distributions on any equity securities(including instruments or securities convertible into or exchangeable for suchequity securities but excluding any stockholder rights granted pursuant to apoison pill) in shares of Common Stock, (B) subdivide outstanding CommonStock into a larger number of shares, (C) combine outstanding Common Stockinto a smaller number of shares, or (D) issuesnew securities by reclassification of the shares of Common Stock of theCompany, then, and in each suchcase, the Conversion Price ineffect immediately prior to such event or the record date therefor, whicheveris earlier, shall be adjusted so that the Holder shall be entitled to receivethe number of shares of Common Stock or other securities of the Company whichsuch Holder would have owned or have been entitled to receive after theoccurrence of any of the events described above, had such Note been surrenderedfor conversion immediately prior to the occurrence of such event or record datetherefore, whichever is earlier. Any adjustment made pursuant to this Section 5(c) shall becomeeffective (x) in the case of any suchdividend or distribution, immediately after the close of business on the record date for the determination of holdersof shares of Common Stock entitled to receive such dividend or distribution, or(y) in the case of such subdivision, reclassification or combination, at theclose of business on the day upon which such corporate action becomeseffective.

 

(ii)                                  *Distributions*.  If theCompany or any of its subsidiaries, at any time while the Note is outstanding,shall distribute to all holders of Common Stock evidences of its indebtednessor assets or cash or rights or warrants to subscribe for or purchase anysecurity of the Company or any of its subsidiaries (excluding those referred toin Section 5(c)(i) above), then concurrently with such distributionsto holders of Common Stock, the Company shall distribute to the Holder of thisNote the amount of such indebtedness, assets, cash or rights or warrants whichthe Holder of this Note would

 

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have received had this Note been convertedinto Common Stock at the then applicable the Conversion Price immediately priorto the record date for such distribution.

 

(iii)                               *Common Stock Issuances*. In the event that the Company or any of its subsidiaries on orsubsequent to the Closing Date issues or sells any Common Stock or anyConvertible Securities (other than (A) pursuant to warrants, convertiblenotes, or other Convertible Securities issued prior to the Issuance Date, (B) pursuantto warrants or convertible notes granted pursuant to the Purchase Agreement, (C) sharesof Common Stock or options to purchase such shares issued to employees,consultants, officers or directors in accordance with stock plans approved bythe Board of Directors, and shares of Common Stock issuable under options orwarrants that are outstanding as of the date of the Purchase Agreement, (D) sharesof Common Stock issued pursuant to a stock dividend, split or other similartransaction, except as provided for in paragraph 5(c)(i) hereof, and (E) sharesof Common Stock issued at a price not less than the average closing price pershare of Common Stock for the 5 Trading Days immediately preceding the date ofissuance to Growell Metal Co., Ltd. pursuant to the Settlement Agreement, datedon or about January 10, 2004, between Growell Metal Co., Ltd. and theCompany’s South Korean subsidiary), at an effective Per Share Selling Pricewhich is less than the Conversion Price in effect immediately prior to suchissue or sale or record date, as applicable, then the Conversion Price shall bereduced effective concurrently with such issuance or sale to an amountdetermined by multiplying the Conversion Price then in effect by a fraction,(x) the numerator of which shall be the sum of (1) the number of shares ofCommon Stock outstanding immediately prior to such issuance or sale, plus (2) thenumber of shares of Common Stock which the aggregate consideration received bythe Company for such additional shares would purchase at such Conversion Price,and (y) the denominator of which shall be the number of shares of Common Stockof the Company outstanding immediately after such issuance or sale.  For the purposes of the foregoing adjustment,in the case of any Convertible Securities, the maximum number of shares ofCommon Stock issuable upon exercise, exchange or conversion of such ConvertibleSecurities shall be deemed to be outstanding, provided that no furtheradjustment shall be made upon the actual issuance of Common Stock uponexercise, exchange or conversion of such Convertible Securities.

 

(iv)                              *Rounding of Adjustments*.** **All calculations under this Section 5(c) shallbe made to the nearest cent or the nearest 1/100th of a share, as the case maybe.

 

(v)                                 *Notice of Adjustments*.** **Whenever the Conversion Price isadjusted pursuant to this Section 5(c), the Company shall promptly deliverto the Holder of this Note, a notice setting forth the Conversion Price aftersuch adjustment and setting forth a brief statement of the facts requiring suchadjustment, provided that any failure to so provide such notice shall notaffect the automatic adjustment hereunder.

 

(vi)                              *Fundamental Changes*.   Incase any transaction or event (including, without limitation, any merger,consolidation, combination, recapitalization, sale of assets, tender orexchange offer, reclassification, compulsory share exchange or liquidation)shall occur in which all or substantially all outstanding shares of CommonStock are converted into or exchanged or acquired for or constitute the rightto receive stock, or other securities, cash, property or assets (each, “**Fundamental Change**”), the Holder of this Note outstandingimmediately prior to the occurrence of such Fundamental Change shall have theright upon any subsequent conversion to receive the kind and amount of stock,

 

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other securities, cash, property orassets that such holder would have received if such share had been convertedimmediately prior to such Fundamental Change.

 

(vii)                           *Further Adjustment*. In the event that (a) this Note is not paid in full or convertedwithin thirty (30) days after the Maturity Date, or (b) the Companybreaches any of the covenants set forth in Section 4 hereof, theConversion Price shall be recalculated such that for so long as this Noteremains unpaid or such breach is occurring and remains uncured, as applicable,the Conversion Price shall be equal to the lower of the Conversion Price thenin effect and the average closing price per share of Common Stock for the 5Trading Days immediately preceding the date of conversion.

 

(d)                                 Reservationand Issuance of Underlying Securities. The Company covenants that it will at all times reserve and keepavailable out of its authorized and unissued Common Stock solely for thepurpose of issuance upon conversion of this Note, free from preemptive rightsor any other actual contingent purchase rights of persons other than the Holderof this Note, not less than such number of shares of Common Stock as shall beissuable (taking into account the adjustments under this Section 5) uponthe conversion of this Note hereunder in Common Stock.  The Company covenants that all shares ofCommon Stock that shall be so issuable shall, upon issue, be duly authorized,validly issued, fully paid, nonassessable and freely tradeable.

 

(e)                                  NoFractions.  Upon a conversionhereunder the Company shall not be required to issue stock certificatesrepresenting fractions of shares of Common Stock, but may if otherwisepermitted, make a cash payment in respect of any final fraction of a sharebased on the closing price of a share of Common Stock at such time.  If the Company elects not, or is unable, tomake such cash payment, the Holder shall be entitled to receive, in lieu of thefinal fraction of a share, one whole share of Common Stock.

 

(f)                                    Charges,Taxes and Expenses.  Issuance ofcertificates for shares of Common Stock upon the conversion of this Note(including repayment in stock) shall be made without charge to the holderhereof for any issue or transfer tax or other incidental expense in respect ofthe issuance of such certificate, all of which taxes and expenses shall be paidby the Company, and such certificates shall be issued in the name of the Holderor in such name or names as may be directed by the Holder; provided, however,that in the event certificates for shares of Common Stock are to be issued in aname other than the name of the Holder, this Note when surrendered forconversion shall be accompanied by an assignment form; and providedfurther,that the Company shall not be required to pay any tax or taxes which may bepayable in respect of any such transfer.

 

(g)                                 Cancellation.  After all of the Principal Amount (includingaccrued but unpaid interest and default payments at any time owed on this Note)has been paid in full or converted into Common Stock, this Note shallautomatically be deemed canceled and the Holder shall promptly surrender theNote to the Company at the Company’s principal executive offices.

 

(h)                                 MandatoryConversion.

 

(i)                                     Ifat any time after the Issuance Date, the closing per share price of the CommonStock exceeds $5.00 (as such price may be proportionally adjusted for stocksplits, reverse splits, stock dividends and recapitalizations) for 30consecutive Trading Days (the “**Pricing Event**”),and further provided that the Registration Statement has been effective for atleast such 30 Trading Day

 

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period, including the Mandatory ConversionDate (as defined below), the Company shall have the option, exercisable bydelivering an irrevocable notice to the Holder (the “**MandatoryConversion Notice**”) to provide that the Note (including thePrincipal Amount and all accrued and unpaid interest) shall be converted at thethen-applicable Conversion Price on a date (the “**MandatoryConversion Date**”) at least 30 but no more than 60 days from the dateof the Mandatory Conversion Notice.  Theforegoing shall not affect the right of the Holder to convert this Notepursuant to Section 5(a) above at all times up to and including theMandatory Conversion Date.

 

(ii)                                  Notwithstanding thepreceding subsection (h)(i), the Holder of this Note shall not beobligated to convert this Note on a Mandatory Conversion Date unless and untileach of the following conditions has been satisfied at all times from the dateof the Mandatory Conversion Notice up to and including the Mandatory ConversionDate:

 

(A)                              The Registration Statementhas been effective;

 

(B)                                No Event of Default hasoccurred and is continuing; and

 

(C)                                The Holder has receivedunlegended certificates representing shares of Common Stock with respect to allconversions for which Conversion Notices have been given.

 

(iii)                               Amandatory conversion shall be subject to and governed by all the provisionsrelating to voluntary conversion of the Note contained herein.

 

**Section 6.****                                          General.**

 

(a)                                  Paymentof Expenses.  The Company agrees topay all reasonable charges and expenses, including attorneys’ fees andexpenses, which may be incurred by the Holder in successfully enforcing thisNote and/or collecting any amount due under this Note.

 

(b)                                 SavingsClause.  In case any provision ofthis Note is held by a court of competent jurisdiction to be excessive in scopeor otherwise invalid or unenforceable, such provision shall be adjusted ratherthan voided, if possible, so that it is enforceable to the maximum extentpossible, and the validity and enforceability of the remaining provisions ofthis Note will not in any way be affected or impaired thereby.  In no event shall the amount of interest paidhereunder exceed the maximum rate of interest on the unpaid principal balancehereof allowable by applicable law.  Ifany sum is collected in excess of the applicable maximum rate, the excesscollected shall be applied to reduce the principal debt.  If the interest actually collected hereunderis still in excess of the applicable maximum rate, the interest rate shall bereduced so as not to exceed the maximum allowable under law.

 

(c)                                  Amendment.  Neither this Note nor any term hereof may beamended, waived, discharged or terminated other than by a written instrumentsigned by the Company and the Holder.

 

(d)                                 Assignment,Etc.  The Holder may assign ortransfer this Note to any transferee. The Holder shall notify the Company of any such assignment or transferpromptly.  This Note shall be bindingupon the Company and its successors and shall inure to the benefit of theHolder and its successors and permitted assigns.

 

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(e)                                  Amendments andWaivers.

 

A.                                   The provisions ofthis Note, including, but not limited to, any decision to convert the Note, anywaiver of the restrictive covenants or adjustment provision and any change to aconversion price, may from time to time be amended, modified or waived, if suchamendment, modification or waiver is in writing and consented to by the Companyand the Holders of not less than 50% in Principal Amount of the Notes thenoutstanding (the “**Required Holders**”);provided, however, that no such amendment, modification or waiverwhich would (i) modify this Section 6(e), (ii) extend theMaturity Date for more than one year, or (iii) reduce the Principal Amountor any amounts payable hereunder or (iv) not be uniform andnon-discriminatory as to any particular Note, shall be made without the consentof the Holder of each Note so affected.

 

B.                                     Except as providedherein, no failure or delay on the part of the Holder in exercising any poweror right under this Note shall operate as a waiver thereof, nor shall anysingle or partial exercise of any such power or right preclude any other orfurther exercise thereof or the exercise of any other power or right.  No notice to or demand on the Company in anycase shall entitle it to any notice or demand in similar or othercircumstances.  No waiver or approval bythe Holder shall, except as may be otherwise stated in such waiver or approval,be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilarwaiver or approval thereafter to be granted hereunder.

 

(f)                                    Governing Law;Jurisdiction.

 

(i)                                     *Governing Law. *THISNOTE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATEOF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS PROVISIONS THEREOF THATWOULD OTHERWISE REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.

 

(ii)                                  *Jurisdiction*.  TheCompany irrevocably submits to the jurisdiction of any State or Federal Courtsitting in the State of New York, County of New York, over any suit, action, orproceeding arising out of or relating to this Note.  The Company irrevocably waives, to thefullest extent permitted by law, any objection which it may now or hereafterhave to the laying of the venue of any such suit, action, or proceeding broughtin such a court and any claim that suit, action, or proceeding has been broughtin an inconvenient forum.

 

The Company agrees that the service ofprocess upon it mailed by certified or registered mail, postage prepaid andreturn receipt requested (and service so made shall be deemed complete threedays after the same has been posted as aforesaid) or by personal service shallbe deemed in every respect effective service of process upon it in any suchsuit or proceeding.  Nothing herein shallaffect Holder’s right to serve process in any other manner permitted bylaw.  The Company agrees that a finalnon-appealable judgment in any such suit or proceeding shall be conclusive andmay be enforced in other jurisdictions by suit on such judgment or in any otherlawful manner.

 

(iii)                               *No Jury Trial*.  TheCompany hereby knowingly and voluntarily waives any and all rights it may haveto a trial by jury with respect to any litigation based on, or arising out of,under, or in connection with, this Note.

 

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(g)                                 ReplacementNotes.  This Note may be exchanged byHolder at any time and from time to time for a Note or Notes with differentdenominations representing an equal aggregate outstanding Principal Amount, asreasonably requested by Holder, upon surrendering the same.  No service charge will be made for suchregistration or exchange.  In the eventthat Holder notifies the Company that this Note has been lost, stolen ordestroyed, a replacement Note identical in all respects to the original Note(except for registration number and Principal Amount, if different than thatshown on the original Note), shall be issued to the Holder, provided that theHolder executes and delivers to the Company an agreement reasonablysatisfactory to the Company to indemnify the Company from any loss incurred byit in connection with the Note.

 

(h)                                 Cancellation.  After all of the Principal Amount (includingaccrued but unpaid interest and default payments at any time owed on this Note)has been paid in full, this Note shall automatically be deemed canceled and theHolder shall promptly surrender the Note to the Company at the Company’sprincipal executive offices.

 

(i)                                     NoticesProcedures.  Any and all notices orother communications or deliveries to be provided by the Holder hereunder,shall be in writing and delivered personally, by confirmed facsimile, or by anationally recognized overnight courier service to the Company at the facsimiletelephone number or address of the principal place of business of the Companyas set forth in the Purchase Agreement. Any and all notices or other communications or deliveries to be providedby the Company hereunder shall be in writing and delivered personally, byfacsimile, or by a nationally recognized overnight courier service addressed tothe Holder at the facsimile telephone number or address of the Holder appearingon the books of the Company, or if no such facsimile telephone number oraddress appears, at the principal place of business of the Holder.  Any notice or other communication ordeliveries hereunder shall be deemed delivered (i) upon receipt, whendelivered personally, (ii) when sent by facsimile, upon receipt ifreceived on a Business Day prior to 5:00 p.m. (Eastern Time), or on thefirst Business Day following such receipt if received on a Business Day after5:00 p.m. (Eastern Time) or (iii) upon receipt, when deposited with anationally recognized overnight courier service.

 

 

[*signature onfollowing page*]

 

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**IN WITNESS WHEREOF**, the Company has causedthis Note to be duly executed on the date first set forth above.

 
|   | **LIQUIDMETAL TECHNOLOGIES, INC.** |
|--------|------------------------------------|
|   |                               |
|   |                               |
|   | By:                                |   |
|   |                               | John Kang, President and Chief Executive Officer |

 

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**EXHIBIT A**

 

**FORM OFCONVERSION NOTICE**

 

(To be Executed bythe Holder

in order to Converta Note)

 

The undersignedhereby elects to convert the aggregate outstanding Principal Amount (as definedin the Note) indicated below of this Note into shares of Common Stock, $0.001par value per share (the “Common Stock”), of LIQUIDMETAL TECHNOLOGIES, INC. (the “Company”) accordingto the conditions hereof, as of the date written below.  If shares are to be issued in the name of aperson other than the undersigned, the undersigned will pay all transfer taxespayable with respect thereto and is delivering herewith such certificates andopinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for anyconversion, except for such transfer taxes, if any.

 
| Conversion  information: |                                                     |   |
|--------------------------|----------------------------------------------------------|--------|
|                     | Date to Effect  Conversion                               |
|                     |                                                     |
|                     |                                                     |   |
|                     | Aggregate  Principal Amount of Note Being Converted      |
|                     |                                                     |
|                     |                                                     |   |
|                     | Number of shares  of Common Stock to be Issued |
|                     |                                                     |
|                     |                                                     |   |
|                     | Applicable  Conversion Price                             |
|                     |                                                     |
|                     |                                                     |   |
|                     | Signature                                                |
|                     |                                                     |
|                     |                                                     |   |
|                     | Name                                                     |
|                     |                                                     |
|                     |                                                     |   |
|                     | Address                                                  |

 

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