Document:

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                                                                   EXHIBIT 10.11

                               SECURITY AGREEMENT

         THIS SECURITY AGREEMENT (this "Agreement") is made and entered into as
of the 1st day of March, 2004, by and between LIQUIDMETAL TECHNOLOGIES, INC., a
Delaware corporation ("Borrower"), and MIDDLEBURY CAPITAL LLC, a Delaware
limited liability company ("MC" or "Agent") and each other person or entity
listed as a Secured Party on Schedule 1 attached to this Agreement (the
"Investors" and together with MC the "Secured Party"). Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in that
Securities Purchase Agreement, dated March 1, 2004, between the Company and the
parties identified as "Middlebury Investors" on Schedule 1 hereto ("Securities
Purchase Agreement"). Additionally, for purposes of this Agreement, the term
"Michigan Note" shall mean the 6% senior convertible notes issuable under the
Amended and Restated Securities Purchase Agreement, dated March 1, 2004, among
Michigan Venture Capital Co, Ltd. ("Michigan"), the Borrower, and the parties
identified as "Michigan Investors on Schedule 1 hereto (the "Michigan
Agreement").

                                    Recitals

                  WHEREAS, Secured Party has agreed to purchase the Note from
the Borrower pursuant to the terms of the Securities Purchase Agreement and the
Note, or to alternatively purchase the Michigan Note from the Borrower pursuant
to the terms of the Michigan Agreement and the Michigan Note.

                  WHEREAS, Secured Party has required, as a condition to
purchasing the Note or Michigan Note, that Borrower grant Secured Party a first
priority security interest in all of Borrower's patents listed in Exhibit A
hereto, and to that end has required the execution and delivery of this
Agreement by Borrower.

                  NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in the Note, the Michigan Note, and herein, the parties
hereto, intending to be legally bound, agree as follows:

         1.       INCORPORATION OF RECITALS, PURCHASE AGREEMENT, AND NOTE. The
foregoing Recitals, the Note, the Securities Purchase Agreement, the Michigan
Note, and the Michigan Agreement, and the terms and provisions thereof, are
hereby incorporated herein in their entirety by this reference.

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         2.       DEFINITIONS. The following terms shall have the meanings set
forth below:

                           "Collateral" shall mean all Patents and Proceeds.
         Notwithstanding the foregoing, the security interest granted herein
         shall not extend to and the term "Collateral" shall not include any
         property, rights or licenses to the extent the granting of a security
         interest therein would be contrary to applicable law.

                           "Obligations" means each and every debt, liability,
         and obligation of every kind and description arising under or in
         connection with the Note or Michigan Note which Borrower may now or at
         any time hereafter owe to Secured Party.

                           "Patents" shall mean, collectively, all of Borrower's
         letters patent under the laws of the United States listed on Exhibit A
         hereto, all recordings and registrations thereof and applications
         therefor, including, without limitation, the inventions described
         therein, all reissues, continuations, divisions, renewals, extensions,

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         continuations-in-part thereof, in each case whether now owned or
         existing or hereafter acquired or arising.

                           "Permitted Liens" shall mean, collectively, the
         following: (i) liens for current taxes or other governmental or
         regulatory assessments which are not delinquent, or which are being
         contested in good faith by the appropriate procedures and for which
         appropriate reserves are maintained; (ii) liens in favor of Agent
         and/or the Secured Party; and (iii) licenses or sublicenses of Patents,
         in each instance granted to others not interfering in any material
         respect with the business of the Borrower.

                           "Proceeds" shall mean any consideration received from
         the sale, exchange, lease or other disposition of any asset or property
         which constitutes Collateral, any other value received as a consequence
         of the possession of any Collateral and any payment received from any
         insurer or other person or entity as a result of the destruction, loss,
         theft or other involuntary conversion of whatever nature of any asset
         or property that constitutes Collateral.

                           "Security Interest" has the meaning given in Section
         3(b).

         3.       SECURITY FOR OBLIGATIONS.

                  a.       This Agreement secures, and the Collateral is
collateral security for, the prompt payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
conversion, demand or otherwise (including the payment of amounts that would
become due but for the operation of the automatic stay under Section 363(a) of
the Bankruptcy Code, 11 U.S.C. Section 362(a)) of all obligations and
liabilities of every nature of Borrower now or hereafter existing under or
arising out of or in connection with the Note and this Agreement and all
extensions or renewals thereof, whether for principal, interest, (including,
without limitation, interest that, but for the filing of a petition in
bankruptcy with respect to Borrower, would accrue on such obligations), fees,
expenses, indemnities or otherwise, whether voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later increased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Agent or any
Secured Party as a preference, fraudulent transfer or otherwise (all such
obligations of Borrower, together with the Obligations, being the "Secured
Obligations").

                  b.       Security Interest. As security for the payment or
performance, as the case may be, of the Secured Obligations, the Borrower hereby
creates and grants to the Agent, its successors and its assigns, for its own
benefit and for the pro rata benefit of the Investors, their successors and
their assigns, a security interest in the Collateral (the "Security Interest").
Without limiting the foregoing, the Agent is hereby authorized to file one or
more financing statements, continuation statements or other documents for the
purpose of perfecting, confirming, continuing, enforcing or protecting the
Security Interest, naming the Borrower as debtors and the Agent as secured
party.

         The Borrower agrees at all times to keep in all material respects
accurate and complete accounting records with respect to the Collateral,
including, but not limited to, a record of all payments and Proceeds received.

         4.       REPRESENTATIONS AND WARRANTIES. Borrower represents and
         warrants as follows:

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                  a.       Financing Statements. Except for the financing
         statements in favor of Secured Party, at the time of granting the
         security interest described herein, no financing statement covering the
         Collateral or any portion thereof will be on file in any public office
         and Borrower agrees not to execute or authorize the filing of any such
         additional financing statement in favor of any person, entity or
         governmental agency (whether federal, state or local) other than
         Secured Party as long as any portion of the Obligations evidenced by
         the Note remain unpaid.

                  b.       Legal Name. Borrower's exact legal name is as set
         forth in the first paragraph of this Security Agreement. Borrower shall
         not change its legal name or its form of organization without 30 days'
         prior written notice to Secured Party.

                  c.       Title and Authority. Borrower has (i) rights in and
         good title to the Collateral in which it is granting a security
         interest hereunder and (ii) the requisite corporate power and authority
         to grant to the Agent the Security Interest in such Collateral pursuant
         hereto and to execute, deliver and perform its obligations in
         accordance with the terms of this Agreement, without the consent or
         approval of any other person other than any consent or approval which
         has been obtained. Borrower has the sole, full and clear title to each
         of the Patents shown on Schedule A hereto and the registrations thereof
         are valid and subsisting and in full force and effect. None of the
         Patents has been abandoned or dedicated, and, except to the extent that
         the Agent, upon prior written notice by Borrower, shall consent,
         Borrower will not do any act, or omit to do any act, whereby the
         Patents may become abandoned or dedicated and shall notify the Agent
         immediately if it knows of any reason or has reason to know that any
         application or registration may become abandoned or dedicated. Borrower
         hereby represents and warrants that the Patents shown on Schedule A are
         the only issued U.S. patents owned by Borrower as of the date of this
         Agreement.

                  d.       Filing. Fully executed Uniform Commercial Code
         financing statements containing a description of the Collateral shall
         have been, or shall be delivered to the Agent in a form such that they
         can be, filed of record in every governmental, municipal or other
         office in every jurisdiction in which any portion of the Collateral is
         located necessary to publish notice of and protect the validity of and
         to establish a valid, legal and perfected security interest in favor of
         the Agent in respect of the Collateral in which a security interest may
         be perfected by filing in the United States and its territories and
         possessions, and no further or subsequent filing, refiling, recording,
         rerecording, registration or reregistration is necessary in any such
         jurisdiction, except as provided under applicable law with respect to
         the filing of Uniform Commercial Code continuation statements.

                  e.       Validity of Security Interest. The Security Interest
         constitutes a valid, legal and perfected first priority security
         interest in all of the Collateral for payment and performance of the
         Secured Obligations subject only to Permitted Liens.

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                  f.       Locations of Collateral; Place of Business. Borrower
         hereby represents and warrants that all the Collateral is located at
         the locations listed on Schedule A hereto and that its federal employer
         identification number is as set forth on said Schedule. The Borrower
         agrees not to establish, or permit to be established, any other
         location for Collateral unless all filings under the Uniform Commercial
         Code as in effect in any state or otherwise which are required by this
         Agreement or the Note to be made with respect to the Collateral have
         been made and the Agent has a valid, legal and perfected first priority
         security interest in the Collateral. Borrower confirms that its chief
         executive office is located at the office indicated on Schedule A
         hereto. Borrower agrees not to change, or permit to be changed, the
         location of its chief executive office unless all filings under the
         Uniform Commercial Code or otherwise which are required by this
         Agreement or the Note to be made have been made and the Agent has a
         valid, legal and perfected first priority security interest

         5.       COVENANTS AND AGREEMENTS. Borrower covenants and agrees as
                  follows:

                  a.       Restrictions. Borrower agrees that until the
         Obligations shall have been satisfied in full, Borrower shall not,
         without Secured Party's prior written consent, assign, transfer,
         encumber or otherwise dispose of the Collateral, or any interest
         therein, except that Borrower may (i) license (other than on an
         exclusive basis for all known fields of use for the duration of the
         term of the patent) or grant similar rights and interests on an arm's
         length basis consistent with good industry practice in all or any part
         of the Collateral to unrelated third parties pursuant to its business
         and (ii) sell, license on an exclusive basis for all known fields of
         use for the duration of the term of the patent or otherwise transfer
         for value all or any part of the Collateral with the prior written
         consent of the Secured Party, which consent will not be unreasonably
         withheld, provided that the restriction on exclusive licenses shall
         terminate beginning on the date that more than one-half of the
         principal amount of the Notes secured by the Collateral has been repaid
         by the Company or has been converted to Common Stock. Borrower further
         agrees that it will not take any action, or permit any action to be
         taken by others subject to its control, including licensees, or fail to
         take any action, which would affect the validity or enforcement of the
         rights transferred to Secured Party under this Agreement.

                  b.       Defense. Borrower shall, at its own cost and expense,
         take any and all actions reasonably necessary to defend title to the
         Collateral owned by it against all persons and to defend the Security
         Interest of the Agent in such Collateral, and the priority thereof,
         against any adverse lien of any nature whatsoever (other than Permitted
         Liens).

                  c.       Maintenance. Borrower shall at all times and at its
         own expense maintain and keep, or cause to be maintained and kept, the
         Collateral. Borrower shall perform all acts and execute all documents,
         including, without limitation, security agreements in form suitable for
         filing with the United States Patent and Trademark Office,
         substantially in the form of Exhibit B, hereof requested by the Agent
         at any time to evidence, perfect, maintain, record and enforce the
         Agent's interest in the Collateral or otherwise in furtherance of the
         provisions of this Agreement, and Borrower hereby authorizes the Agent
         to execute and file one or more financing statements (and similar
         documents) or copies thereof or of this Agreement with respect to the
         Collateral signed only by the Agent. Borrower will take all necessary
         steps in any proceeding before the United States Patent and Trademark
         Office or any similar office or agency of the United States or any
         State thereof to maintain each application and registration of the
         Patents, including, without limitation, filing of renewals,

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         affidavits of use, affidavits of incontestability and opposition,
         interference and cancellation proceedings.

                  d.       Secured Party's Right to Take Action. If, after ten
         days written notice from Secured Party, Borrower fails to perform or
         observe any of its covenants or agreements set forth in this Section 5
         or if Borrower notifies Secured Party that it intends to abandon all or
         any part of the Collateral, Secured Party may (but need not) perform or
         observe such covenant or agreement or take steps to prevent such
         intended abandonment on behalf and in the name, place, and stead of
         Borrower (or, in the case of intended abandonment, in Secured Party's
         own name) and may (but need not) take any and all other actions that
         Secured Party may reasonably deem necessary to cure or correct such
         failure or prevent such intended abandonment.

                  e.       Costs and Expenses. Except to the extent that the
         effect of such payment would be to render any loan or forbearance of
         money usurious or otherwise illegal under any applicable law, Borrower
         shall pay Secured Party on demand the amount of all moneys expended and
         all costs and expenses (including reasonable attorneys' fees and
         disbursements) incurred by Secured Party in connection with or as a
         result of Secured Party's taking action under subsection 5(d), except
         for intended abandonment of the Collateral by Borrower, or exercising
         its rights under Section 7, together with interest thereon from the
         date expended or incurred by Secured Party.

                  f.       Use and Disposition of Collateral. Borrower shall not
         make or permit to be made any assignment, pledge or hypothecation of
         the Collateral other than Permitted Liens, or grant any security
         interest in the Collateral except for the Security Interest and
         Permitted Liens. Borrower shall not make or permit to be made any
         transfer of any Collateral, except in the ordinary course of business,
         and Borrower shall remain at all times in possession of the Collateral
         owned by it other than transfers to the Agent pursuant to the
         provisions hereof and as otherwise provided in this Agreement. The
         Agent shall have the right, as the true and lawful agent of the
         Borrower, with power of substitution for the Borrower and in the
         Borrower's name, the Agent's name or otherwise, for the use and benefit
         of the Agent and the Investors and solely to effect the purposes of
         this Agreement, (i) to endorse the Borrower's name upon any notes,
         acceptances, checks, drafts, money orders or other evidences of payment
         with respect to the Collateral that may come into its possession; (ii)
         to sign the name of the Borrower on any invoice relating to any of the
         Collateral and (iii) upon the occurrence and during the continuance of
         an event of default under this Agreement or under the Note, (A) to
         receive, endorse, assign and/or deliver any and all notes, acceptances,
         checks, drafts, money orders or other evidences or instruments of
         payment relating to the Collateral or any part thereof, and Borrower
         hereby waives notice of presentment, protest and non-payment of any
         instrument so endorsed, (B) to demand, collect, receive payment of,
         give receipt for, extend the time of payment of and give discharges and
         releases of all or any of the Collateral and/or release the obligor
         thereon, (C) to commence and prosecute any and all suits, actions or
         proceedings at law or in equity in any court of competent jurisdiction
         to collect or otherwise realize on all or any of the Collateral or to
         enforce any rights in respect of any Collateral, (D) to settle,
         compromise, compound, adjust or defend any actions, suits or
         proceedings relating to or pertaining to all or any of the Collateral,
         and (H) to use, sell, assign, transfer, pledge, make any agreement with
         respect to or otherwise deal with all or any of the Collateral, and to
         do all other acts and things necessary to carry out the purposes of
         this Agreement, as fully and completely as though the Agent were the
         absolute owner of the Collateral for all purposes; provided, however,
         that nothing herein contained shall be construed as requiring or
         obligating the Agent or any Investor to make any

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         commitment or to make any inquiry as to the nature or sufficiency of
         any payment received by the Agent or such Investor or to present or
         file any claim or notice, or to take any action with respect to the
         Collateral or any part thereof or the moneys due or to become due in
         respect thereof or any property covered thereby, and no action taken by
         the Agent or any Investor or omitted to be taken with respect to the
         Collateral or any part thereof shall give rise to any defense,
         counterclaim or offset in favor of Borrower or to any claim or action
         against the Agent or any Investor in the absence of the gross
         negligence or willful misconduct of the Agent or such Investor; and
         provided further that, the Agent shall at all times act reasonably and
         in good faith. It is understood and agreed that the appointment of the
         Agent as the agent of the Borrower for the purposes set forth above in
         this Section 5(f) is coupled with an interest and is irrevocable. The
         provisions of this Section 5(f) shall in no event relieve Borrower of
         any of its obligations hereunder with respect to the Collateral or any
         part thereof (other than obligations which are impaired as a result of
         actions taken by the Agent pursuant to this Section 5(f)) or impose any
         obligation on the Agent or any Investor to proceed in any particular
         manner with respect to the Collateral or any part thereof, or in any
         way limit the exercise by the Agent or any Investor of any other or
         further right which it may have on the date of this Agreement or
         hereafter, whether hereunder or by law or otherwise. Anytime action is
         taken under this Section 5(f), prompt written notice of such action
         shall be provided to Borrower by Agent.

                  g.       Further Assurances. Borrower agrees, at its expense,
         to execute, acknowledge, deliver and cause to be duly filed all such
         further instruments and documents and take all such actions as the
         Agent may from time to time reasonably request for the assuring and
         preserving of the Security Interest and the rights and remedies created
         hereby, including, without limitation, the payment of any fees and
         taxes required in connection with the execution and delivery of this
         Agreement, the granting of the Security Interest and the filing of any
         financing statements or other documents in connection herewith. If any
         amount payable under or in connection with any of the Collateral shall
         be or become evidenced by any promissory note or other instrument, such
         note or instrument shall be promptly pledged and delivered to the
         Agent, duly endorsed in a manner satisfactory to the Agent. Borrower
         agrees to notify promptly the Agent of any change in its corporate name
         or in the location of its chief executive office, its chief place of
         business or the office where it keeps its records.

         6.       EVENTS OF DEFAULT. Each of the following occurrences shall
constitute an event of default under this Agreement (herein called "Event of
Default"):

                  a.       an Event of Default, as defined in the Note, shall
         occur; or

                  b.       Borrower shall fail promptly to observe or perform
         any covenant or agreement herein binding on it and such failure is not
         cured within 20 days after written notice from Secured Party; or

                  c.       there is any levy, seizure, or attachment of all or
         any material portion of the Collateral, other than as set forth in this
         Agreement; or

                  d.       any of the representations or warranties contained in
         Section 0 shall prove to have been incorrect in any material respect
         when made.

         7.       REMEDIES. Upon the occurrence of an Event of Default and at
any time thereafter, Secured Party may, at its option, take any or all of the
following actions:

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                  a.       exercise any or all remedies available under this
         Agreement or the Note including, without limitation, any and all rights
         afforded to a secured party under, and subject to its obligations
         contained in, the Uniform Commercial Code as in effect in any state or
         other applicable law; or

                  b.       sell, assign, transfer, pledge, encumber, or
         otherwise dispose of the Collateral; or

                  c.       enforce the patents comprising the Collateral and if
         Secured Party shall commence any suit for such enforcement, Borrower
         shall, at the request of Secured Party, do any and all lawful acts and
         execute any and all proper documents reasonably required by Secured
         Party in aid of such enforcement; or

                  d.       incur expenses, including attorneys' fees at the
         regular hourly rates of Secured Party's counsel from time to time in
         effect, legal expenses and costs for the exercise of any right or power
         under this Security Agreement, which expenses are secured by this
         Security Agreement.

Any disposition of Collateral by Agent shall be subject to the mandatory
requirements of applicable law and subject to the requirement that Agent act
reasonably and in good faith. Subject to such conditions, Agent may sell or
otherwise dispose of all or any part of the Collateral, at public or private
sale, for cash, upon credit or for future delivery as the Agent shall deem
appropriate. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Borrower, and
Borrower hereby waives (to the extent permitted by law) all rights of
redemption, stay and appraisal which Borrower now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
The Agent shall give the Borrower ten (10) days' written notice (which Borrower
agrees is reasonable notice within the meaning of Section 9-504(3) of the
Uniform Commercial Code) of the Agent's intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time and
place for such sale. Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Agent may fix
and state in the notice (if any) of such sale. At any such sale, the Collateral,
or portion thereof, to be sold may be sold in one lot, as an entirety or in
separate parcels, as the Agent may (in its sole and absolute discretion)
determine. The Agent shall not be obligated to make any sale of any Collateral
if it shall determine not to do so, regardless of the fact that notice of sale
of such Collateral shall have been given. The Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Agent until the sale price is paid by the purchaser or
purchasers thereof, but the Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public sale made pursuant to this Section 6, any Investor may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay or appraisal on the part of Borrower (all said rights being
also hereby waived and released to the extent permitted by law), with respect to
the Collateral or any part thereof offered for sale and any such Investor may
make payment on account thereof by using any claim then due and payable to any
such Investor from Borrower as a credit against the purchase price, and any such
Investor may, upon compliance with the terms of sale, hold, retain and dispose
of such property without further accountability to Borrower therefor. For
purposes hereof, a written agreement to purchase the Collateral or any portion
thereof shall be treated as a sale thereof; the Agent shall be free to carry out
such

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sale and purchase pursuant to such agreement, and Borrower shall not be entitled
to the return of the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Agent shall have entered into such an
agreement all events of default shall have been remedied and the Secured
Obligations paid in full. Borrower shall remain liable for any deficiency. As an
alternative to exercising the power of sale herein conferred upon it, the Agent
may proceed by a suit or suits at law or in equity to foreclose this Agreement
and to sell the Collateral or any portion thereof pursuant to a judgment or
decree of a court or courts having competent jurisdiction or pursuant to a
proceeding by a court appointed receiver.

         8.       DESIGNATION OF AGENT. The Investors hereby irrevocably
designate MC (and its successors and assigns) as their agent and MC hereby
accepts such designation, in order to execute any and all instruments or other
documents on behalf of the Investors and to do any and all other acts or things
on behalf of the Investors that MC (or its successors or assigns) in its sole
discretion deems necessary or advisable or that may be required pursuant to this
Agreement or otherwise, to exercise Secured Party's rights and remedies under
this Agreement. None of the Investors may take any action or exercise any rights
under this Agreement except through MC as their agent. Borrower hereby appoints
the Agent the attorney-in-fact of Borrower solely for the purpose of carrying
out the provisions of this Agreement and taking any action and executing any
instrument which the Agent may reasonably deem necessary or advisable to
accomplish the purposes hereof, which appointment is irrevocable so long as this
Agreement and the Security Interest have not been terminated and coupled with an
interest

         9.       APPLICATION OF PROCEEDS. The proceeds of any collection or
sale of Collateral, as well as any Collateral consisting of cash, shall be
applied by the Agent as follows:

                           FIRST, to the payment of all reasonable costs and
         expenses incurred by the Agent in connection with such collection or
         sale or otherwise in connection with this Agreement or any of the
         Secured Obligations, including, but not limited to, all court costs and
         the reasonable fees and expenses of its agents and legal counsel, the
         repayment of all advances made by the Agent hereunder on behalf of the
         Borrower and any other reasonable costs or expenses incurred in
         connection with the exercise of any right or remedy hereunder;

                           SECOND, pro rata to the payment in full of principal
         and interest in respect of any amount of the Notes outstanding (pro
         rata as among the Investors in accordance with the principal amount of
         the Notes held by them);

                           THIRD, to the Borrower, its successors and assigns,
         or as a court of competent jurisdiction may otherwise direct.

         10.      SECURITY INTEREST ABSOLUTE. All rights of the Agent hereunder,
the Security Interest, and all obligations of the Borrower hereunder, shall be
absolute and unconditional irrespective of (i) any partial invalidity or
unenforceability of the Note, any other agreement with respect to any of the
Secured Obligations or any other agreement or instrument relating to any of the
foregoing, (ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or consent to any departure from the Note or any other agreement or
instrument, (iii) any exchange, release or nonperfection of any other
Collateral, or any release or amendment or waiver of or consent to or departure
from any guarantee, for all or any of the Secured Obligations, or (iv) any other
circumstance which might otherwise constitute a defense available to, or
discharge of the Borrower in respect of the Secured Obligations or in respect of
this Agreement.

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         11.      MISCELLANEOUS. This Agreement can be waived, modified,
amended, terminated or discharged, and the Security Interest can be released,
only explicitly in a writing signed by Secured Party. A waiver signed by Secured
Party shall be effective only in the specific instance and for the specific
purpose given. Mere delay or failure to act shall not preclude the exercise or
enforcement of any of Secured Party's rights or remedies. All rights and
remedies of Secured Party shall be cumulative and may be exercised singularly or
concurrently, at Secured Party's option, and the exercise or enforcement of any
one such right or remedy shall neither be a condition to nor bar the exercise or
enforcement of any other. Secured Party shall not be obligated to preserve any
rights Borrower may have against prior parties, to realize on the Collateral at
all or in any particular manner or order, or to apply any cash proceeds of the
Collateral in any particular order of application. This Agreement shall be
binding upon and inure to the benefit of Borrower and Secured Party and their
respective participants, successors, and permitted assigns and shall take effect
when signed by Borrower and Secured Party, and Borrower waives notice of Secured
Party's acceptance hereof; provided, however, that the Secured Party's rights
hereunder may not be transferred or assigned to any third party without the
prior written consent of Borrower. This Agreement shall be governed by the
internal law of the State of New York without regard to conflicts of law
provisions. If any provision or application of this Agreement is held unlawful
or unenforceable in any respect, such illegality or unenforceability shall not
affect other provisions or applications which can be given effect and this
Agreement shall be construed as if the unlawful or unenforceable provision or
application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement and the creation and
payment of the Obligations.

         12.      WAIVER OF JURY TRIAL: BORROWER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES THE RIGHT BORROWER MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR SECURED PARTY ENTERING INTO THIS AGREEMENT.

         13.      TERMINATION. This Agreement and the Security Interest shall
terminate when all the Secured Obligations have been fully and indefeasibly paid
in full, at which time the Agent shall execute and deliver to the Borrower all
Uniform Commercial Code termination statements and similar documents which the
Borrower shall reasonably request to evidence such termination; provided,
however, that all indemnities of the Borrower contained in this Agreement shall
survive, and remain operative and in full force and effect regardless of, the
termination of this Agreement for a period of six (6) months following the
termination of this Agreement

                     *** Signatures on following page(s) ***

                                       9

<PAGE>

         IN WITNESS WHEREOF, the parties have duly executed and delivered this
Security Agreement as of the date and year first written above.

                                   SECURED PARTY:

                                   MIDDLEBURY CAPITAL LLC

                                   By: /s/ Eric Brachfeld
                                   Name: Eric Brachfeld
                                   Title: Managing Member

                                   BORROWER:

                                   LIQUIDMETAL TECHNOLOGIES, INC.

                                   By: /s/ John Kang
                                           John Kang,
                                           President and Chief Executive Officer

                                       10

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

JESS MORGAN & CO., INC.
/s/ Gary Levenson
Gary Levenson
Executive Vice President, Jess S. Morgan & Co., Inc.

                                       11

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

PRANA LLC
/s/ Jerry C. Apodara
Jerry C. Apodara
Chief Executive Officer

                                       12

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

DKR SOUNDSHORE OASIS HOLDING FUND LTD.
/s/ Barbara Burger
Barbara Burger, Alt. Director

                                       13

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

RODD FRIEDMAN
/s/ Rodd Friedman

                                       14

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

BEAR STEARNS F/B/O ROSEN CAPITAL LP M/P/P PLAN
/s/ Bruce Rosen
Bruce Rosen
Trustee

                                       15

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

CAYDAL, LLC
BY SAN ISABAL LIMITED, ITS MANAGING MEMBER
/s/ Kevin Daly
Kevin Daly
General Partner

                                       16

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

MARLIN FUND, LP
/s/ Michael W. Masters
Michael W. Masters
Managing Member of the General Partner

                                       17

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

MARLIN FUND II, LP
/s/ Michael W. Masters
Michael W. Masters
Managing Member of the General Partner

                                       18

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

MARLIN FUND OFFSHORE, LTD.
/s/ Michael W. Masters
Michael W. Masters
Managing Member of the Investment Manager

                                       19

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

PROFESSIONAL TRADERS FUND, LLC
/s/ Professional Traders Fund, LLC

                                       20

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

LARRY BOUTS
/s/ Larry Bouts

                                       21

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

REALLY COOL GROUP LTD.
/s/ Jonathan Segal
Jonathan Segal
Director

                                       22

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

MYRON NEUGEBOREN
/s/ Myron Neugeboren

                                       23

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

JONAS BRACHFELD
/s/ Jonas Brachfeld

                                       24

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

GREG OSBORN
/s/ Greg Osborn

                                       25

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

RICHARD MOLINSKY
/s/ Richard Molinsky

                                       26

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

VITO CAPOTORTO
/s/ Vito Capotorto

                                       27

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

RICHARD AND JOANNE KANE
/s/ Richard Kane
/s/ Joanne S. Kane

                                       28

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

PUGLISI CAPITAL PARTNERS
/s/ Jeffrey J. Puglisi
Jeffrey J. Puglisi
Managing Member of the General Partner, JJP Partners, LLC

                                       29

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

RICARDO A. SALAS
/s/ Ricardo A. Salas

                                       30

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

WRY LTD.
/s/ Jonathan Segal
Jonathan Segal
Director

                                       31

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

KEITH BARKSDALE
/s/ Keith Barksdale

                                       32

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

eIPO Co., Ltd.
/s/ Yangkwon Moon
Yangkwon Moon
Chief Executive Officer

                                       33

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

WINVEST VENTURE PARTNERS, INC.
/s/ Chang Ki Cho
Chang Ki Cho
President and CEO

                                       34

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

DONG WON KIM
/s/ Dong Won Kim

                                       35

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

SIMON SUK-JUN YOON
/s/ Simon Yoon

                                       36

<PAGE>

                           COUNTERPART SIGNATURE PAGE
                              TO SECURITY AGREEMENT
                              DATED MARCH 1, 2004,
                      AMONG LIQUIDMETAL TECHNOLOGIES, INC.,
                           MIDDLEBURY CAPITAL LLC, AND
                       THE "INVESTORS" IDENTIFIED THEREIN

The undersigned hereby executes and delivers the Security Agreement to which
this Signature Page is attached, which, together with all counterparts of the
Security Agreement and Signature Pages of the Company, Agent, and other
"Investors" under the Security Agreement, shall constitute one and the same
document in accordance with the terms of the Security Agreement.

MOONCHEOL YANG
/s/ Mooncheol Yang

                                       37

<PAGE>

                        SCHEDULE I TO SECURITY AGREEMENT

"MIDDLEBURY INVESTORS"

<TABLE>
<CAPTION>
                                                                                         PRINCIPAL
                                                                                         AMOUNT OF
             PURCHASER                                ADDRESS                              NOTES            PURCHASE PRICE
--------------------------------------       ---------------------------               -------------        --------------
<S>                                          <C>                                       <C>                  <C>
Jess Morgan & Co.                            5750 Wilshire Blvd.                       $1,265,000.00        $1,265,000.00
                                             Suite 590
                                             Los Angeles, CA 90036-3697
                                             Attn: Gary Levenstein

Prana                                        8491 Sunset Blvd.                         $  250,000.00        $  250,000.00
                                             Suite 415
                                             Los Angeles, CA 90069-1911

DKR Soundshore Oasis Holding Fund Ltd.       1281 East Main Street                     $  950,000.00        $  950,000.00
                                             Stamford, CT 06902
                                             Attn: Dan Saks

Rodd Friedman                                93 Hillspoint Road                        $  201,000.00        $  201,000.00
                                             Westport, CT 06880

Bear Stearns f/b/o Rosen Capital             1365 York Avenue                          $   99,000.00        $   99,000.00
LP M/P/P Plan and Bruce Rosen                Apt. 34B
TTEE                                         New York, NY 10021

Caydal, LLC                                  Caydal, LLC                               $  100,000.00        $  100,000.00
                                             410 Marion Street
                                             Denver, CO 80218

Marlin Fund, LP                              3060 Peachtree Road, NW                   $1,182,501.00        $1,182,501.00
                                             Suite 1815
                                             Atlanta, GA 30305

Marlin Fund II, LP                           3060 Peachtree Road, NW                   $  219,999.00        $  219,999.00
                                             Suite 1815
                                             Atlanta, GA 30305

Marlin Fund Offshore, Ltd. c/o               Bison Court                               $1,347,501.00        $1,347,501.00
Hemisphere Management (B.V.I.)               P.O. Box 3460
Limited                                      Road Town
                                             Tortola
                                             British Virgin Islands

Professional Traders Fund, LLC               990 Stewart Avenue                        $  150,000.00        $  150,000.00
                                             Suite 420
                                             Garden City, NY 11530

Larry Bouts                                  140 Delaware Lane                         $   50,000.00        $   50,000.00
                                             Franklin Lakes, NJ 07417

Really Cool Group Ltd.                       The Metropole                             $  200,000.00        $  200,000.00
                                             Roseville Street
                                             St. Helier, Jersey, Channel
                                             Islands, UK
</TABLE>

                                       38

<PAGE>

"MICHIGAN INVESTORS"

<TABLE>
<CAPTION>
                                                               PRINCIPAL
                                                               AMOUNT OF
     PURCHASER                   ADDRESS                         NOTES               PURCHASE PRICE
------------------     ----------------------------     --------------------     --------------------
<S>                    <C>                              <C>                      <C>
eIPO Co., Ltd.         Union Steel Building, 15F        $1,000,000.00 (U.S.)     $1,000,000.00 (U.S.)
                       890 Daechidong, Kangnamku
                       Seoul, Korea
                       Telephone: 82-2-555-9377
                       Facsimile: 82-2-554-7916
                       Attention: Jason Ahn

Winvest Venture        Cambridge B/D 2F, 1461-15        $  500,000.00 (U.S.)     $  500,000.00 (U.S.)
Partners Inc.          Seochodong, Seochogu,
                       Seoul Korea 137-720
                       Telephone: 82-2-525-2129
                       Facsimile: 82-2-525-2130
                       Attention: Mr. Chang-Ki, Cho
                       101-205 Oksoo Apt.               $  500,000.00 (U.S.)     $  500,000.00 (U.S.)
                       Oksoodong, Seongdonggu,

Dong Won Kim           Seoul, Korea
                       Telephone: 82-2-2298-9420

                       22957 Estoril Drive #1           $  500,000.00 (U.S.)     $  500,000.00 (U.S.)

Simon Suk-Jun Yoon     Diamond Bar, CA 91765
                       Telephone: 909-861-9489

Moon Cheol Yang        4-902 Asia Seonsoochon Apt.      $  500,000.00 (U.S.)     $  500,000.00 (U.S.)
                       Jamsildong, Songpagu,
                       Seoul, Korea
                       Telephone: 82-11-472-4580
</TABLE>

                                       39

<PAGE>

                                    EXHIBIT A

                       Collateral, EIN and Office Location

<TABLE>
<CAPTION>
---------------------------------------------------------------
TITLE OF PATENT                              U.S. PATENT NUMBER
---------------------------------------------------------------
<S>                                          <C>
MATERIALS TRANSFORMABLE COATINGS                 4,725,512
---------------------------------------------------------------
WC CONTAINING COATING                            5,030,519
---------------------------------------------------------------
JOINING USING BULK ALLOYS                        5 482 580
---------------------------------------------------------------
DIAMOND COMPOSITES OF BULK ALLOYS                5,567,532
---------------------------------------------------------------
COMPOSITES OF BULK ALLOY (METHOD)                5 567 251
---------------------------------------------------------------
COMPOSITES OF BULK ALLOY (ARTICLE)               5 866 254
---------------------------------------------------------------
TI-CONTAINING HARD-FACING COATING                5 695 825
---------------------------------------------------------------
DIE-CASTING OF BULK ALLOYS                       5 711 363
---------------------------------------------------------------
TORSIONAL SPRING OF BULK ALLOYS                  5 772 803
---------------------------------------------------------------
APPARATUS FOR HARD-FACING COATING                5 942 289
---------------------------------------------------------------
ZIRCONIA CONTAINING COATING                      6,376,091
---------------------------------------------------------------
SHAPED-CHARGE PROJECTILES                        6,446,558
---------------------------------------------------------------
VACUUM DIE-CASTING OF BULK ALLOYS                6,021,840
---------------------------------------------------------------
</TABLE>

The office location for each of the above Patents is 25800 Commercentre Dr.,
Suite 100, Lake Forest, California 92630. Each of the above Patents is owned by
Liquidmetal Technologies, Inc., a Delaware corporation whose Federal Employer
Identification number is as follows: 20-0121262.

<PAGE>

                                    EXHIBIT B

                               SECURITY AGREEMENT

                                    (PATENTS)

                  WHEREAS, LIQUIDMETAL TECHNOLOGIES, INC., a Delaware
corporation (herein referred to as "Borrower"), owns the letters patent, and/or
applications for letters patent, of the United States, more particularly
described on Schedule 1-A annexed hereto as part hereof (the "Patents");

                  WHEREAS, Borrower is obligated to MIDDLEBURY CAPITAL LLC, a
Delaware limited liability company, as agent (herein referred to as the "Secured
Party") for the Investors named in those certain Secured Convertible Notes dated
as of the date hereof issued by the Borrower (each such note, as amended,
modified or supplemented from time to time in accordance with its terms, shall
collectively be referred to as the "Note") and Borrower has entered into a
Security Agreement dated the date hereof (the "Agreement") in favor of Secured
Party; and

                  WHEREAS, pursuant to the Agreement, Borrower has assigned to
Secured Party, and granted to Secured Party a security interest in, all right,
title and interest of Borrower in and to the Patents, together with any reissue,
continuation, continuation-in-part or extension thereof, and all proceeds
thereof, including, without limitation, any and all causes of action which may
exist by reason of infringement thereof for the full term of the Patents (the
"Collateral"), to secure the prompt payment, performance and observance of the
Secured Obligations, as defined in the Agreement;

                           NOW, THEREFORE, for good and valuable consideration,
                  receipt of which is hereby acknowledged, Borrower does hereby
                  further assign unto Secured Party and grant to Secured Party a
                  security interest in, the Collateral to secure the prompt
                  payment, performance and observance of the Secured
                  Obligations.

                           Borrower does hereby further acknowledge and affirm
                  that the rights and remedies of Secured Party with respect to
                  the assignment of, security interest in the Collateral made
                  and granted hereby are more fully set forth in the Agreement,
                  the terms and provisions of which are hereby incorporated
                  herein by reference as if fully set forth herein.

                           Secured Party's address is 780 Third Avenue, Suite
                  2302, New York, NY 10017

                           IN WITNESS WHEREOF, Borrower has caused this
                  Agreement to be duly executed by its officer thereunto duly
                  authorized as of the 1st day of March 2004.

                                     LIQUIDMETAL TECHNOLOGIES, INC.

                                     By:______________________________
                                        John Kang,
                                           President and Chief Executive Officer<PAGE>

                      [Form of Fixed Rate Medium-Term Note]

                               (FACE OF SECURITY)

                  [IF A GLOBAL SECURITY, INSERT - THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY
NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER
OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]

                  [IF DTC IS THE DEPOSITARY, INSERT - UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO POPULAR, INC. OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]

                  [INSERT ANY LEGEND REQUIRED BY THE INTERNAL REVENUE CODE AND
THE REGULATIONS THEREUNDER.]

<PAGE>

REGISTERED NO. FXR ______                                     CUSIP NO. _______

                                  POPULAR, INC.

                           MEDIUM-TERM NOTES, SERIES 5
                                  (Fixed Rate)

            The following terms apply to this Security, as and to the
extent shown below:

PRINCIPAL AMOUNT:

STATED MATURITY DATE:

SPECIFIED CURRENCY: U.S. dollars for all payments unless otherwise specified
below:

-        payments of principal and any premium:

-        payments of interest:

-        Exchange Rate Agent:

INTEREST RATE:  _____% per annum

INTEREST PAYMENT DATE(S):

ORIGINAL ISSUE DATE*:

REGULAR RECORD DATE(S):

ORIGINAL ISSUE DISCOUNT SECURITY:

-        Total Amount of OID:
-        Yield to Maturity:
-        Initial Accrual Period OID:
-        OID Default Amount:
-        Default Rate:

REDEMPTION COMMENCEMENT DATE:

REPAYMENT DATE(S):

REDEMPTION OR REPAYMENT PRICE(S):

OTHER TERMS:

                  Terms left blank or marked "N/A", "No", "None" or in a similar
manner do not apply to this Security except as otherwise may be specified.

                  Whenever used in this Security, the terms specified above that
apply to this Security have the meanings specified above, unless the context
requires otherwise. Other terms used in this Security that are not defined
herein but that are defined in the Indenture referred to in Section 1 on the
reverse of this Security are used herein as defined therein.

                  Popular, Inc., a corporation duly organized and existing under
the laws of the Commonwealth of Puerto Rico (hereinafter called the "Company",
which term

----------

*        This date shall be the issue date of this Security, unless there is
         Predecessor Security, in which case this date shall be the issue date
         of the first Predecessor Security.

                    (Face of Security continued on next page)

                                      -2-
<PAGE>

includes any successor Person under the Indenture), for value received, hereby
promises to pay to _____________, or registered assigns, as principal the
Principal Amount on the Stated Maturity Date and to pay interest thereon, from
the Original Issue Date or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, on the Interest Payment Date(s) in
each year, commencing on the first such date that is at least 15 calendar days
after the Original Issue Date, and at the Maturity of the principal hereof, at
the rate per annum equal to the Interest Rate specified on the face hereof,
until the principal hereof is paid or made available for payment.
Notwithstanding the foregoing, interest on any principal that is overdue shall
be payable on demand.

                  The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture, be paid to
the Person in whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on the 15th calendar day (whether or not
a Business Day, as such term is defined in Section 3 on the reverse hereof) next
preceding such Interest Payment Date, unless otherwise provided on the face
hereof (a "Regular Record Date"). Any interest so payable, but not punctually
paid or duly provided for, on any Interest Payment Date will forthwith cease to
be payable to the Holder on such Regular Record Date and such Defaulted Interest
either may be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of this Security not less
than 10 days prior to such Special Record Date, or may be paid in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which this Security may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture.

                  If this Security is issued with an original issue discount,
(i) if an Event of Default with respect to the Securities of this series shall
have occurred and be continuing, the amount of principal of this Security which
may be declared due and payable in the manner, with the effect and subject to
the conditions provided in the Indenture, shall be determined in the manner set
forth under "OID Default Amount" on the face hereof, and (ii) in the case of a
default in payment of principal upon acceleration, redemption, repayment at the
option of the Holder or at the Stated Maturity Date hereof, in lieu of any
interest otherwise payable, the overdue principal of this Security shall bear
interest at a rate of interest per annum equal to the Default Rate stated on the
face hereof (to the extent that the payment of such interest shall be legally
enforceable), which shall accrue from the date of such acceleration, redemption,
repayment at the option of the Holder or Stated Maturity Date, as the case may
be, to the date payment has been made or duly provided for or such default has
been waived in accordance with the terms of the Indenture.

                    (Face of Security continued on next page)

                                      -3-
<PAGE>

         CURRENCY OF PAYMENT

                  Payment of principal of (and premium, if any) and interest on
this Security will be made in the Specified Currency for such payment, except as
provided in this and the next three paragraphs. The Specified Currency for any
payment shall be the currency specified as such on the face of this Security
unless, at the time of such payment, such currency is not legal tender for the
payment of public and private debts in the country issuing such currency on the
Original Issue Date, in which case the Specified Currency for such payment shall
be such coin or currency as at the time of such payment is legal tender for the
payment of public and private debts in such country.

                  Except as provided in the next paragraph, any payment to be
made on this Security in a Specified Currency other than U.S. dollars will be
made in U.S. dollars if the Person entitled to receive such payment transmits a
written request for such payment to be made in U.S. dollars to the Trustee at
its Corporate Trust Office, Attention: Securities Processing Division, on or
before the fifth Business Day before the payment is to be made. Such written
request may be mailed, hand delivered, telecopied or delivered in any other
manner approved by the Trustee. Any such request made with respect to any
payment on this Security payable to a particular Holder will remain in effect
for all later payments on this Security payable to such Holder, unless such
request is revoked on or before the fifth Business Day before a payment is to be
made, in which case such revocation shall be effective for such and all later
payments. In the case of any payment of interest payable on an Interest Payment
Date, such written request must be made by the Person who is the registered
Holder of this Security on the relevant Regular Record Date.

                  The U.S. dollar amount of any payment made pursuant to the
immediately preceding paragraph will be determined by the Exchange Rate Agent
based upon the highest bid quotation received by the Exchange Rate Agent as of
11:00 A.M., New York City time, on the second Business Day preceding the
applicable payment date, from three (or, if three are not available, then two)
recognized foreign exchange dealers selected by the Exchange Rate Agent in The
City of New York, in each case for the purchase by the quoting dealer, for U.S.
dollars and for settlement on such payment date of an amount of the Specified
Currency for such payment equal to the aggregate amount of such Specified
Currency payable on such payment date to all Holders of Securities of this or
any other series who elect to receive U.S. dollar payments on such payment date,
and at which the applicable dealer commits to execute a contract. If the
Exchange Rate Agent determines that two such bid quotations are not available on
such second Business Day, such payment will be made in the Specified Currency
for such payment. All currency exchange costs associated with any payment in
U.S. dollars on this Security will be borne by the Holder entitled to receive
such payment, by deduction from such payment.

                  Notwithstanding the foregoing, if any amount payable on this
Security is payable on any day (including at Maturity) in a Specified Currency
other than U.S. dollars, and if such Specified Currency is not available to the
Company on the two

                    (Face of Security continued on next page)

                                      -4-
<PAGE>

Business Days before such day, due to the imposition of exchange controls,
disruption in a currency market or any other circumstances beyond the control of
the Company, the Company will be entitled to satisfy its obligation to pay such
amount in such Specified Currency by making such payment in U.S. dollars. The
amount of such payment in U.S. dollars shall be determined by the Exchange Rate
Agent on the basis of the noon buying rate for cable transfers in The City of
New York for such Specified Currency (the "Exchange Rate") as of the latest day
before the day on which such payment is to be made. Any payment made under such
circumstances in U.S. dollars where the required payment is in other than U.S.
dollars will not constitute an Event of Default under the Indenture or this
Security.

         MANNER OF PAYMENT - U.S. DOLLARS

                  Except as provided in the next paragraph, payment of any
amount payable on this Security in U.S. dollars will be made at the office or
agency of the Company maintained for that purpose in The City of New York (or at
any other office or agency maintained by the Company for that purpose), against
surrender of this Security in the case of any payment due at the Maturity of the
principal hereof (other than any payment of interest that first becomes due on
an Interest Payment Date); provided, however, that, at the option of the Company
and subject to the next paragraph, payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.

                  Payment of any amount payable on this Security in U.S. dollars
will be made by wire transfer of immediately available funds to an account
maintained by the payee with a bank located in the Borough of Manhattan, The
City of New York, if (i) the principal of this Security is at least $10,000,000
and (ii) the Holder entitled to receive such payment transmits a written request
for such payment to be made in such manner to the Paying Agent at its Corporate
Trust Office, Attention: Securities Processing Division, on or before the
Regular Record Date preceding the day on which such payment is to be made;
provided that, in the case of any such payment due at the Maturity of the
principal hereof (other than any payment of interest that first becomes due on
an Interest Payment Date), this Security must be surrendered at the office or
agency of the Company maintained for that purpose in The City of New York (or at
any other office or agency maintained by the Company for that purpose) in time
for the Paying Agent to make such payment in such funds in accordance with its
normal procedures. Any such request made with respect to any payment on this
Security payable to a particular Holder will remain in effect for all later
payments on this Security payable to such Holder, unless such request is revoked
on or before the Regular Record Date preceding the day on which such payment is
to be made, in which case such revocation shall be effective for such payment
and all later payments; provided that in the case of any payment due at Maturity
of the principal of this Security to be effective any request for revocation
must be made no later than the 15th day prior to the Maturity of the principal
of this Security. In the case of any payment of interest payable on an Interest
Payment Date, such written request must be made by the Person who is the
registered Holder of this Security on the relevant Regular

                    (Face of Security continued on next page)

                                      -5-
<PAGE>

Record Date. The Company will pay any administrative costs imposed by banks in
connection with making payments by wire transfer with respect to this Security,
but any tax, assessment or other governmental charge imposed upon any payment
will be borne by the Holder of this Security and may be deducted from the
payment by the Company or the Paying Agent.

         MANNER OF PAYMENT - OTHER SPECIFIED CURRENCIES

                  Payment of any amount payable on this Security in a Specified
Currency other than U.S. dollars will be made by wire transfer of immediately
available funds to such account as is maintained in such Specified Currency at a
bank or other financial institution acceptable to the Company and the Trustee
and as shall have been designated at least five Business Days prior to the
applicable payment date by the Person entitled to receive such payment; provided
that, in the case of any such payment due at the Maturity of the principal
hereof (other than any payment of interest that first becomes due on an Interest
Payment Date), this Security must be surrendered at the office or agency of the
Company maintained for that purpose in The City of New York (or at any other
office or agency maintained by the Company for that purpose) in time for the
Paying Agent to make such payment in such funds in accordance with its normal
procedures. Such account designation shall be made by transmitting the
appropriate information to the Trustee at its Corporate Trust Office in the
Borough of Manhattan, The City of New York, by mail, hand delivery, telecopier
or in any other manner approved by the Trustee. Unless revoked, any such account
designation made with respect to this Security by the Holder hereof will remain
in effect with respect to any further payments with respect to this Security
payable to such Holder. If a payment in a Specified Currency other than U.S.
dollars with respect to this Security cannot be made by wire transfer because
the required account designation has not been received by the Trustee on or
before the requisite date or for any other reason, the Company will cause a
notice to be given to the Holder of this Security at its registered address
requesting an account designation pursuant to which such wire transfer can be
made and such payment will be made within five Business Days after the Trustee's
receipt of such a designation meeting the requirements specified above, with the
same force and effect as if made on the due date. The Company will pay any
administrative costs imposed by banks in connection with making payments by wire
transfer with respect to this Security, but any tax, assessment or other
governmental charge imposed upon any payment will be borne by the Holder of this
Security and may be deducted from the payment by the Company or the Paying
Agent.

         MANNER OF PAYMENT - GLOBAL SECURITIES

                  Notwithstanding any provision of this Security or the
Indenture, if this Security is a Global Security, the Company may make any and
all payments of principal, premium and interest on this Security pursuant to the
Applicable Procedures of the Depositary for this Security as permitted in the
Indenture.

                    (Face of Security continued on next page)

                                      -6-
<PAGE>

         PAYMENTS DUE ON A BUSINESS DAY

                  Unless otherwise specified on the face of this Security, the
following sentence shall apply to this Security. Notwithstanding any provision
of this Security or the Indenture, if any amount of principal, premium or
interest would otherwise be due on this Security on a day (the "Specified Day")
that is not a Business Day, such amount may be paid or made available for
payment on the next succeeding Business Day with the same force and effect as if
such amount were paid on the Specified Day. The provisions of this paragraph
shall apply to the Security in lieu of the provisions of Section 113 of the
Indenture.

                              ---------------------

                  Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.

                  Unless the certificate of authentication hereon has been
executed by the Trustee by manual signature, this Security shall not be entitled
to any benefit under the Indenture or be valid or obligatory for any purpose.

                    (Face of Security continued on next page)

                                      -7-
<PAGE>

                  IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.

Dated:
                                         POPULAR, INC.

                                         By:____________________________
                                              Name:
                                              Title:

                                         By:____________________________
                                              Name:
                                              Title:

                                         Attest: ______________________

                  This Security is one of the Securities of the series
designated herein and referred to in the within-mentioned Indenture.

                                         J.P. MORGAN TRUST COMPANY,
                                         NATIONAL ASSOCIATION
                                         as Trustee

                                         By:_______________________________
                                              Authorized Officer

                                      -8-
<PAGE>

                              (Reverse of Security)

                  1. SECURITIES AND INDENTURE

                  This Security is one of a duly authorized issue of securities
of the Company (herein called the "Securities") issued and to be issued in one
or more series under an Indenture, dated as of February 15, 1995, as
supplemented by the First Supplemental Indenture, dated as of May 8, 1997, and
the Second Supplemental Indenture, dated as of August 5, 1999 (together herein
called the "Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and J.P. Morgan Trust Company, National
Association (successor in interest to Bank One, N.A.), as Trustee (herein called
the "Trustee", which term includes any successor trustee under the Indenture),
and reference is hereby made to the Indenture for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered.

                  2. SERIES AND DENOMINATIONS

                  This Security is one of the series designated on the face
hereof, limited to an aggregate initial offering price not to exceed
$2,500,000,000 (or the equivalent thereof in any other currency or currencies or
currency units) less the aggregate initial offering price of "Securities" (as
defined in the Prospectus dated December 29, 2003 relating to debt securities
and preferred stock of the Company, Popular International Bank, Inc. and Popular
North America, Inc.) authenticated and delivered upon initial issuance, other
than the Securities of this series, which amount may be increased at the option
of the Company if in the future it determines that it may wish to sell
additional Securities of this series. References herein to "this series" mean
the series of securities designated on the face hereof.

                  The Securities of this series are issuable only in registered
form without coupons in "Authorized Denominations", which term shall have the
following meaning. For each Security of this series having a principal amount
payable in U.S. dollars, the Authorized Denominations shall be $1,000 and any
integral multiples of $1,000. For each Security of this series having a
principal amount payable in a Specified Currency other than U.S. dollars, the
Authorized Denominations shall be the amount of such Specified Currency
equivalent, at the Exchange Rate on the first Business Day next preceding the
date on which the Company accepts the offer to purchase such Security, to $1,000
and any integral multiples of $1,000.

                  3. EXCHANGE RATE AGENT AND RELATED TERMS

                  If the principal of or interest on this Security is payable in
a Specified Currency other than U.S. dollars, the Company has initially
appointed the institution named on the face of this Security as Exchange Rate
Agent to act as such agent with respect to this Security, but the Company may,
in its sole discretion, appoint any other institution (including any Affiliate
of the Company) to serve as any such agent from time

                  (Reverse of Security continued on next page)

                                      -9-
<PAGE>

to time. The Company will give the Trustee prompt written notice of any change
in any such appointment. Insofar as this Security provides for any such agent to
obtain rates, quotes or other data from a bank, dealer or other institution for
use in making any determination hereunder, such agent may do so from any
institution or institutions of the kind contemplated hereby notwithstanding that
any one or more of such institutions are such agent, Affiliates of such agent,
any of the agents named on the cover of the Company's Prospectus Supplement
dated June 30, 2004 relating to the Company's Medium-Term Notes, Series 5 or any
Affiliate of any such agent or Affiliates of the Company.

                  All determinations made by the Exchange Rate Agent may be made
by such agent in its sole discretion and, absent manifest error, shall be
conclusive for all purposes and binding on the Holder of this Security and the
Company. The Exchange Rate Agent shall not have any liability therefor.

                  Unless otherwise specified on the face hereof, for all
purposes of this Security, the term "Business Day" means (i) a Monday, Tuesday,
Wednesday, Thursday or Friday that is neither a legal holiday nor a day on which
commercial banking institutions in New York City generally are authorized or
required by law, regulation or executive order to close and (ii) if the
Specified Currency for payment of principal of or interest on this Security is
other than U.S. dollars, is also a day on which banking institutions are not
authorized or required by law, regulation or executive order to close in the
principal financial center of the country issuing such Specified Currency. With
respect to any particular location, the close of business on any day on which
business is not being conducted shall be deemed to mean 5:00 P.M., New York City
time, on that day.

                  References in this Security to U.S. dollars shall mean, as of
any time, the coin or currency that is then legal tender for the payment of
public and private debts in the United States of America.

                  References in this Security to a particular currency other
than U.S. dollars shall mean, as of any time, the coin or currency that is then
legal tender for the payment of public and private debts in the country issuing
such currency on the Original Issue Date.

                  4. REDEMPTION AT THE COMPANY'S OPTION

                  Unless a Redemption Commencement Date is specified on the face
hereof, except as provided below, this Security shall not be redeemable at the
option of the Company before the Stated Maturity Date. If a Redemption
Commencement Date is so specified, and unless otherwise specified on the face
hereof, this Security is subject to redemption upon not less than 30 days' nor
more than 60 days' notice at any time and from time to time on or after the
Redemption Commencement Date, in each case as a whole or in part, at the
election of the Company and at the applicable Redemption Price

                  (Reverse of Security continued on next page)

                                      -10-
<PAGE>

specified on the face hereof (expressed as a percentage of the principal amount
of this Security to be redeemed), together with accrued interest to the
Redemption Date, but interest installments due on or prior to such Redemption
Date will be payable to the Holder of this Security, or one or more Predecessor
Securities, of record at the close of business on the relevant record date, all
as provided in the Indenture; provided, however, that the first two paragraphs
of Section 1103 of the Indenture shall not apply to this Security, and if less
than all of the Securities of this series are to be redeemed, the Company may
select, from Securities of this series that are subject to redemption pursuant
to the terms thereof, the Security or Securities, or portion or portions
thereof, to be redeemed.

                  In the event that the Company shall be obligated to pay any
Additional Amounts due to a change in law, regulation or interpretation, the
Company may, at its option, redeem this Security as a whole at a redemption
price of 100% of the principal amount thereof (or, if this Security is issued
with an original issue discount, 100% of the OID Default Amount) together with
accrued interest to the date fixed for redemption.

                  5. REPAYMENT AT THE HOLDER'S OPTION

                  Except as otherwise may be provided on the face hereof, if one
or more Repayment Dates are specified on the face hereof, this Security will be
repayable in whole or in part in an amount equal to any Authorized Denomination
(provided that the remaining principal amount of any Security surrendered for
partial repayment shall at least equal an Authorized Denomination), on any such
Repayment Date, in each case at the option of the Holder and at the applicable
Repayment Price specified on the face hereof (expressed as a percentage of the
principal amount to be repaid), together with accrued interest to the applicable
Repayment Date (but interest installments due on or prior to such Repayment Date
will be payable to the Holder of this Security, or one or more Predecessor
Securities, of record at the close of business on the relevant record date as
provided in the Indenture). If this Security provides for more than one
Repayment Date and the Holder exercises its option to elect repayment, the
Holder shall be deemed to have elected repayment on the earliest Repayment Date
after all conditions to such exercise have been satisfied, and references herein
to the "applicable Repayment Date" shall mean such earliest Repayment Date.

                  In order for the exercise of such option to be effective and
this Security to be repaid, the Company must receive at the applicable address
of the Paying Agent set forth below (or at such other place or places of which
the Company shall from time to time notify the Holder of this Security), on any
Business Day not later than the 30th, and not earlier than the 60th, calendar
day prior to the applicable Repayment Date (or, if either such calendar day is
not a Business Day, the next succeeding Business Day), either (i) this Security,
with the form below entitled "Option to Elect Repayment" duly completed and
signed, or (ii) a telegram, telex, facsimile transmission or letter from a
member of a national securities exchange or the National Association of
Securities Dealers, Inc., a commercial bank or a trust company in the United
States of America

                  (Reverse of Security continued on next page)

                                      -11-
<PAGE>

setting forth (a) the name, address and telephone number of the Holder of this
Security, (b) the principal amount of this Security and the amount of this
Security to be repaid, (c) a statement that the option to elect repayment is
being exercised thereby and (d) a guarantee stating that the Company will
receive this Security, with the form below entitled "Option to Elect Repayment"
duly completed and signed, not later than five Business Days after the date of
such telegram, telex, facsimile transmission or letter (provided that this
Security and form duly completed and signed are received by the Company by such
fifth Business Day). Any such election shall be irrevocable. The address to
which such deliveries are to be made is Bank One, NA, Attention: Securities
Processing Division, 55 Water Street, 1st Floor, Jeanette Park Entrance, New
York, New York 10041 (or at such other places as the Company or the Paying Agent
shall notify the Holder of this Security). All questions as to the validity,
eligibility (including time of receipt) and acceptance of any Security for
repayment will be determined by the Company, whose determination will be final
and binding. Notwithstanding the foregoing, (x) if this Security is a Global
Security, the option of the Holder to elect repayment may be exercised in
accordance with the Applicable Procedures of the Depositary for this Security at
least 30 calendar days prior to the applicable Repayment Date and (y) whether or
not this Security is a Global Security, the option of the Holder to elect
repayment may be exercised in any such manner as the Company may approve.

                  6. TRANSFER AND EXCHANGE

                  As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable in
the Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company in any place where the principal
of and any premium and interest on this Security are payable, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his or
her attorney duly authorized in writing, and thereupon one or more new
Securities of this series and of like tenor, of Authorized Denominations and for
the same aggregate principal amount, will be issued to the designated transferee
or transferees.

                  As provided in the Indenture and subject to certain
limitations therein set forth, Securities of this series are exchangeable for a
like aggregate principal amount of Securities of this series and of like tenor
of a different Authorized Denomination, as requested by the Holder surrendering
the same.

                  No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.

                  Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or

                  (Reverse of Security continued on next page)

                                      -12-
<PAGE>

not this Security be overdue, and neither the Company nor the Trustee nor any
such agent shall be affected by notice to the contrary.

                  If this Security is a Global Security, this Security shall be
subject to the provisions of the Indenture relating to Global Securities,
including the limitations in Section 305 thereof on transfers and exchanges of
Global Securities.

                  7. [RESERVED].

                  8. REMEDIES.

                  If an Event of Default with respect to Securities of this
series shall occur and be continuing, the principal of the Securities of this
series may be declared due and payable in the manner and with the effect
provided in the Indenture.

                  As provided in and subject to the provisions of the Indenture,
the Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee indemnity reasonably satisfactory to
it, and the Trustee shall not have received from the Holders of a majority in
principal amount of Securities of this series at the time Outstanding a
direction inconsistent with such request, and shall have failed to institute any
such proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of
this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.

                  No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Security at the times, place and rate, and
in the coin or currency, herein prescribed.

                  9. MODIFICATION AND WAIVER.

                  The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of a majority in principal amount of
the Securities at the time Outstanding of all series to be affected (considered
together as one class for this purpose). The Indenture also contains provisions
(i) permitting the Holders of a majority in principal amount of the Securities
at

                  (Reverse of Security continued on next page)

                                      -13-
<PAGE>

the time Outstanding of all series to be affected under the Indenture
(considered together as one class for this purpose), on behalf of the Holders of
all Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture (ii) and permitting the Holders of a majority in
principal amount of the Securities at the time Outstanding of any series to be
affected under the Indenture (with each such series considered separately for
this purpose), on behalf of the Holders of all Securities of such series, to
waive certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.

                  10. GOVERNING LAW.

                  THIS SECURITY AND THE INDENTURE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                  (Reverse of Security continued on next page)

                                      -14-
<PAGE>

                              (Reverse of Security)

                                              REGISTERED NO. FXR __________

                                                       CUSIP NO. __________

                                            ORIGINAL ISSUE DATE: __________

                                  POPULAR, INC.
                           MEDIUM-TERM NOTE, SERIES 5

                            OPTION TO ELECT REPAYMENT

               TO BE COMPLETED ONLY IF THIS SECURITY IS REPAYABLE
                   AT THE OPTION OF THE HOLDER AND THE HOLDER
                          ELECTS TO EXERCISE SUCH RIGHT

                  The undersigned hereby irrevocably requests and instructs the
Company to repay the Security referred to in this notice (or the portion thereof
specified below) at the applicable Repayment Price, together with interest to
the Repayment Date, all as provided for in such Security, to the undersigned,
whose name, address and telephone number are as follows:

-------------------------------------------------------------------------------
                     (please print name of the undersigned)

-------------------------------------------------------------------------------
                    (please print address of the undersigned)

-------------------------------------------------------------------------------
               (please print telephone number of the undersigned)

                  If such Security provides for more than one Repayment Date,
the undersigned requests repayment on the earliest Repayment Date after the
requirements for exercising this option have been satisfied, and references in
this notice to the Repayment Date mean such earliest Repayment Date. Terms used
in this notice that are defined in such Security are used herein as defined
therein.

                  For such Security to be repaid the Company must receive at the
applicable address of the Trustee set forth below or at such other place or
places of which the Company or the Trustee shall from time to time notify the
Holder of such Security, on any Business Day not later than the 30th or earlier
than the 60th calendar day prior to the Repayment Date (or, if either such
calendar day is not a Business Day, the next succeeding Business Day), either
(i) such Security, with this "Option to Elect Repayment" form duly completed and
signed, or (ii) a telegram, telex, facsimile transmission or letter from a
member of a national securities exchange or the National Association of
Securities Dealers, Inc., a commercial bank or a trust company in the

                                      -15-
<PAGE>

United States of America setting forth (a) the name, address and telephone
number of the Holder of such Security, (b) the principal amount of such Security
and the amount of such Security to be repaid, (c) a statement that the option to
elect repayment is being exercised thereby and (d) a guarantee stating that such
Security to be repaid with the form entitled "Option to Elect Repayment" on the
addendum to the Security duly completed and signed will be received by the
Company not later than five Business Days after the date of such telegram,
telex, facsimile transmission or letter (provided that such Security and form
duly completed and signed are received by the Company by such fifth Business
Day). The address to which such deliveries are to be made is:

                  J.P. Morgan Trust Company, National Association
                  Attention:  Institutional Trust Services/George N. Reaves
                  227 W. Monroe Street/Suite 2600
                  Chicago, IL  60607

or at such other place as the Company or the Paying Agent shall notify the
Holder of such Security.

                  If less than the entire principal amount of such Security is
to be repaid, specify the portion thereof (which shall equal any Authorized
Denomination) that the Holder elects to have repaid:

                          ----------------------------

and specify the denomination or denominations (which shall equal any Authorized
Denomination) of the Security or Securities to be issued to the Holder in
respect of the portion of such Security not being repaid (in the absence of any
specification, one Security will be issued in respect of the portion not being
repaid):

                          ----------------------------

Date: ______________________    ______________________________________________
                                Notice:  The signature to this Option to Elect
                                Repayment must correspond with the name of the
                                Holder as written on the face  of such
                                Security in every particular without
                                alteration or enlargement or any other change
                                whatsoever.

                                      -16-
<PAGE>

                                  ABBREVIATIONS

                  The following abbreviations, when used in the inscription on
the face of this Security, shall be construed as though they were written out in
full according to applicable laws or regulations.

                  TEN COM -        as tenants in common

                  TEN ENT -        as tenants by the entireties

                  JT TEN -     as joint tenants with the right of
                               survivorship and not as tenants in
                               common

                  UNIF GIFT MIN ACT - ________________ Custodian _______________
                                           (Cust)                    (Minor)
                               under Uniform Gifts to Minors Act

                      ____________________________________

                                     (State)

                    Additional abbreviations may also be used
                         though not in the above list.

                      ____________________________________

                                      -17-
<PAGE>

                                   ASSIGNMENT

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

__________________________________________
/_________________________________________/

_______________________________________________________________________________

_______________________________________________________________________________
                   (Please Print or Typewrite Name and Address
                     Including Postal Zip Code of Assignee)

the attached Security and all rights thereunder, and hereby irrevocably

constitutes and appoints ______________________________________________________

_______________________________________________________________________________

to transfer said Security on the books of the Company, with full power of

substitution in the premises.

Dated:______________

Signature Guaranteed

                                         ______________________________________
NOTICE: Signature must be guaranteed.    NOTICE:  The signature to this
                                         assignment must correspond with the
                                         name of the Holder as written upon the
                                         face of the attached Security in every
                                         particular, without alteration or
                                         enlargement or any change whatever.

                                      -18-

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