Document:

Exhibit 10.4

 

AMENDED AND RESTATED REGISTRATION RIGHTS
AGREEMENT

 

This Amended
and Restated Registration Rights Agreement (“Agreement”)
is entered into as of August 2, 2005, between Liquidmetal Technologies, Inc.,
a Delaware corporation with offices at 25800 Commercentre Dr., Suite 100,
Lake Forest, California 92630 (the “Company”) and each of the parties listed under “Purchasers”
hereto (collectively and individually, the “Purchaser”).

 

W
I  T  N  E  S  S  E  T  H:

 

WHEREAS,
the Company and the Purchasers have entered into a Securities Purchase
Agreement of even date herewith (the “Purchase Agreement”)
pursuant to which, among other things, the Company has on or about the date
hereof issued 7% Senior Secured Convertible Notes (the “New Notes”)
and Warrants (collectively, the “New Warrants”) to purchase shares of
the Company’s Common Stock, par value $0.001 per share (“Common Stock”), subject to the terms and
conditions set forth therein; and

 

WHEREAS,
the Company has also previously issued the July 2007 Notes, as defined in
the Purchase Agreement (such previously issued notes, together with the New
Notes, are hereafter referred to as the “Notes”) and has
previously issued warrants to purchase Common Stock to certain Purchasers in
connection with the prior issuance of the July 2005 Notes, July 2007
Notes, and June 2006 Notes, all as defined in the Purchase Agreement (such
previously issued warrants, together with the New Warrants, are hereafter
referred to as the “Warrants”); and

 

WHEREAS,
the Notes are convertible into shares of Common Stock under the circumstances
and pursuant to the terms and conditions set forth in the Notes (the “Conversion Shares”), and the Warrants are exercisable into
shares of Common Stock pursuant to the terms and conditions set forth in the Warrants
(the “Warrant Shares”).

 

NOW,
THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Purchase
Agreement and this Agreement, the Company and the Purchaser agree as follows:

 

1.             Certain Definitions.  Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed thereto in the Purchase
Agreement, the Notes, or the Warrants. 
As used in this Agreement, the following terms shall have the following
respective meanings:

 

“Closing” and “Closing Date”
shall have the meanings ascribed to such terms in the Purchase Agreement.

 

“Commission” or “SEC” shall mean
the Securities and Exchange Commission or any other federal agency at the time
administering the Securities Act.

 

“Holder” and “Holders” shall
include the Purchaser and any permitted transferee or transferees of
Registrable Securities (as defined below), the Notes and/or Warrants which have
not been sold to the public to whom the registration rights conferred by this
Agreement have

 

 

been transferred in compliance
with this Agreement and the Purchase Agreement; provided that neither such
person nor any affiliate of such person is registered as a broker or dealer
under Section 15(a) of the Securities Exchange Act of 1934, as
amended, or a member of the National Association of Securities Dealers, Inc.

 

The terms “register,” “registered” and
“registration” shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.

 

“Registrable Securities” shall mean:  (i) the Conversion Shares and Warrant
Shares or other securities issued or issuable to each Holder or its permitted
transferee or designee (a) upon the conversion of the Notes or the
exercise of the Warrants, or (b) upon any distribution with respect to,
any exchange for or any replacement of such Notes or Warrants, or (c) upon
any conversion, exercise or exchange of any securities issued in connection
with any such distribution, exchange or replacement; (ii) securities
issued or issuable upon any stock split, stock dividend, recapitalization or
similar event with respect to the foregoing; and (iii) any other security
issued as a dividend or other distribution with respect to, in exchange for or
in replacement of the securities referred to in the preceding clauses; provided
that all such shares shall cease to be Registrable Securities at such time as
they have been sold under a Registration Statement or pursuant to Rule 144
under the Securities Act or otherwise or at such time as they are eligible to
be sold pursuant to Rule 144(k). 
For purposes of this Agreement, the term “Warrant Shares” shall include
any shares of the Company’s Common Stock that are issued pursuant to that
certain Placement Agent Common Stock Purchase Warrant of even date herewith
between the Company and Commonwealth Associates, L.P.

 

“Registration Expenses” shall mean all expenses to be
incurred by the Company in connection with each Holder’s registration rights
under this Agreement, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel for the Company,
blue sky fees and expenses, and the expense of any special audits incident to
or required by any such registration (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by the Company).

 

“Registration Statement” shall have the meaning set forth in Section 2(a) herein.

 

“Regulation D” shall mean Regulation D as promulgated
pursuant to the Securities Act, and as subsequently amended.

 

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

 

“Selling Expenses” shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for Holders not included within “Registration
Expenses.”

 

2.             Registration Requirements.  The Company shall use its best efforts to
effect the registration of the Registrable Securities (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations

 

2

 

issued under the Securities Act) as would
permit or facilitate the sale or distribution of all the Registrable Securities
in the manner (including manner of sale) and in all states reasonably requested
by the Holder.  Such best efforts by the
Company shall include, without limitation, the following:

 

(a)           The Company shall, as expeditiously
as possible after the Closing Date:

 

(i)            But in any event by the date which
is 90 days after the Closing Date, prepare and file a registration statement
with the Commission pursuant to Rule 415 under the Securities Act on Form S-3
under the Securities Act (or in the event that the Company is ineligible to use
such form, such other form as the Company is eligible to use under the
Securities Act provided that such other form shall be converted into an S-3 as
soon as Form S-3 becomes available to the Company) covering resales by the
Holders as selling stockholders (not underwriters) of the Registrable
Securities (“Registration Statement”), which
Registration Statement, to the extent allowable under the Securities Act and
the rules promulgated thereunder (including Rule 416), shall state
that such Registration Statement also covers such number of additional shares
of Common Stock as may become issuable pursuant to the anti-dilution provisions
of the Notes or Warrants.  The number of
shares of Common Stock initially included in such Registration Statement shall
be no less than the product of 1.2 times the sum of the number of shares of
Common Stock that are issuable upon exercise of the Warrants as of the date of
this Agreement at the then applicable Exercise Price (as defined in the Warrant)
plus the number of shares of Common Stock that would be issuable pursuant to
the conversion of the Notes (assuming that the Notes were to become convertible
on the date before which the Registration Statement is filed).  Thereafter the Company shall use its best
efforts to cause such Registration Statement and other filings to be declared
effective as soon as possible, and in any event no later than the following
date, as appropriate (the “Required Effective
Date”): (A) if the SEC notifies the Company that the SEC will
not review the Registration Statement, the Required Effective Date shall be
five (5) days after the SEC provides such notification, or (B) if the
SEC notifies the Company that it will review the Registration Statement, then
the Required Effective Date shall be sixty (60) days after the Company receives
the first written comments on the Registration Statement from the SEC.  Without limiting the foregoing, the Company
will promptly respond to all SEC comments, inquiries and requests, and shall
request acceleration of effectiveness at the earliest possible date.

 

(ii)           Prepare and file with the SEC such
amendments and supplements to such Registration Statement and the prospectus
used in connection with such Registration Statement as may be necessary to
comply with the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement and notify the Holders of the
filing and effectiveness of such Registration Statement and any amendments or
supplements.

 

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(iii)          Furnish to each Holder that has
Registrable Securities included in the Registration Statement such numbers of
copies of a current prospectus conforming with the requirements of the Act,
copies of the Registration Statement, any amendment or supplement thereto and
any documents incorporated by reference therein and such other documents as
such Holder may reasonably require in order to facilitate the disposition of
Registrable Securities owned by such Holder.

 

(iv)          Register and qualify the securities
covered by such Registration Statement under the securities or “Blue Sky” laws
of all domestic jurisdictions; provided that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.

 

(v)           Notify promptly each Holder that has
Registrable Securities included in the Registration Statement of the happening
of any event (but not the substance or details of any such event) of which the
Company has knowledge as a result of which the prospectus (including any
supplements thereto or thereof) included in such Registration Statement, as
then in effect, includes an untrue statement of material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing
(each an “Event”), and use its best efforts to
promptly update and/or correct such prospectus. Each Holder will hold in
confidence and will not make any disclosure of any such Event and any related
information disclosed by the Company.

 

(vi)          Notify each Holder of the issuance by
the SEC or any state securities commission or agency of any stop order
suspending the effectiveness of the Registration Statement or the threat or
initiation of any proceedings for that purpose. 
The Company shall use its best efforts to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible time.

 

(vii)         List the Registrable Securities covered
by such Registration Statement with all securities exchange(s) and/or markets
on which the Common Stock is then listed and prepare and file any required
filings with the Nasdaq National Market System or any other exchange or market
where the shares of Common Stock are traded.

 

(viii)        Take all steps reasonably necessary to
enable Holders to avail themselves of the prospectus delivery mechanism set
forth in Rule 153 (or successor thereto) under the Act.

 

(b)           Notwithstanding the obligations under
Section 2(a)(v) or any provision of this Agreement, if (i) in
the good faith judgment of the Company, following consultation with legal
counsel, it would be detrimental to the Company and its stockholders for
resales of Registrable Securities to be made pursuant to the Registration
Statement due to the

 

4

 

existence of a material
development or potential material development involving the Company that the
Company would be obligated to disclose in the Registration Statement, which
disclosure would be premature or otherwise inadvisable at such time or would
have a material adverse effect upon the Company and its stockholders, or (ii) in
the good faith judgment of the Company, it would adversely affect or require
premature disclosure of the filing of a Company-initiated registration of any
class of its equity securities, then the Company will have the right to suspend
the use of the Registration Statement for a period of not more than 30
consecutive calendar days, but only if the Company reasonably concludes, after
consultation with outside legal counsel, that the failure to suspend the use of
the Registration Statement as such would create a risk of a material liability
or violation under applicable securities laws or regulations.

 

(c)           Set forth below in this Section 2(c) are
(I) events that may arise that the Purchaser considers will interfere with the
full enjoyment of their rights under this Agreement, the Purchase Agreement,
and the Notes (the “Interfering Events”),
and (II) certain remedies applicable in each of these events.

 

(i)            Payments by the Company.  If (i) at any time after effectiveness
of the Registration Statement, sales thereunder during the registration period
(as described in Section 5) cannot be made for any reason, other than by
reason of the operation of Section 2(b), for a period of more than 10
consecutive business days, (ii) at any time after effectiveness of the
Registration Statement, sales thereunder during the Registration Period cannot
be made for a period of time that exceeds the limitations set forth in Section 2(b),
or (iii) at any time after the Registrable Securities are listed in accordance
with Section 2(a)(vii), the Conversion Shares and Warrant Shares are not
listed or included for quotation on the Nasdaq National Market or other
exchange, market, or the OTC Bulletin Board where shares of the Company’s
Common Stock are then traded or quoted for more than 10 consecutive calendar
days, then the Company will thereafter make a payment to each Holder as set
forth below.  The amount of the payment
made to each Holder will be equal to 1% of (a) the Warrant exercise price
multiplied by the number of then-outstanding and unexercised Warrants held by
the Holder plus (b) the then-outstanding principal amount of the Note held
by the Holder, for each 30 business days that sales cannot be made under the
effective Registration Statement or the Conversion Shares or Warrant Shares are
not listed or included for quotation on the Nasdaq National Market or other
exchange, market, or the OTC Bulletin Board where shares of the Company’s
Common Stock are then traded or quoted (but any day on which both conditions
exist shall count as a single day and no day taken into account for purposes of
determining whether any payment is due under Section 2 (c)(ii) shall
be taken into account for purposes of determining whether any payment is due
under this Section 2(c)(i) or the amount of such payment).  The number of shares not previously sold as
specified in the previous sentence shall be determined as of the end of the
respective 30-business day period.  In no
event shall payment pursuant to this Section for the entire registration
period (as described in Section 5) exceed 10% in the aggregate of (a) the
Warrant exercise price multiplied by the number of then-outstanding and
unexercised Warrants held by the Holder (including such Holder’s predecessors
and successors) for the entire registration period (as

 

5

 

described in Section 5) plus (b) the initial principal amount
of the Note held by the Holder.  These
payments will be prorated on a daily basis during the 30-business day period
and will be paid to each Holder within ten business days following the end of
each 30- business day period as to which payment is due hereunder.  The Holders may make a claim for additional
damages as a remedy for the Company’s failure to comply with the timelines set
forth in this Section, but acknowledgement of such right in this Agreement
shall not constitute an admission by the Company that any such damages exist or
may exist.  Notwithstanding the foregoing,
if the Company has used its best efforts to avoid circumstances as a result of
which sales cannot be made under the Registration Statement during the
registration period or the Conversion Shares or Warrant Shares are not listed
or included for quotation on the Nasdaq National Market or other exchange,
market, or the OTC Bulletin Board where the shares of Common Stock are traded
or quoted, then the damages described above shall be the Holders’ sole and
exclusive remedy for damages arising out of such circumstances.  Nothing contained in the preceding sentence
shall be read to limit the ability of the Holders to seek specific performance
of this Agreement.

 

(ii)           Effect of Late Filing or
Registration.  If the Registration
Statement has not been filed by the Required Filing Date other than by reason
of the operation of Section 2(b), then the Company will make a payment to
each Holder for such delay (each a “Late
Filing Payment”).  Each Late
Filing Payment will be equal to 3% of (a) the Warrant exercise price
multiplied by the number of then-outstanding and unexercised Warrants held by
the Holder plus (b) the then-outstanding principal amount of the Note held
by the Holder, for each period of 30 business days that the filing of the
Registration Statement is made past the Required Filing Date (but no day taken
into account for purposes of determining whether any payment is due under Section 2(c)(i) shall
be taken into account for purposes of determining whether any payment is due
under this Section 2(c)(ii) or the amount of such payment).  If the Registration Statement has not been
declared effective by the Required Effective Date other than by reason of the
operation of Section 2(b), then the Company will make a payment to each
Holder for such delay (each a “Late
Registration Payment”).  Each
Late Registration Payment will be equal to 2% of (a) the Warrant exercise
price multiplied by the number of then-outstanding and unexercised Warrants
held by the Holder plus (b) the then-outstanding principal amount of the
Note held by the Holder, for the first 30 business days after the Required
Effective Date, and 1% of such exercise price for each period of 30 business
days thereafter (but no day taken into account for purposes of determining
whether any payment is due under Section 2(c)(i) shall be taken into account
for purposes of determining whether any payment is due under this Section 2(c)(ii) or
the amount of such payment).  In no event
shall payments pursuant to this Section 2(c)(ii) exceed for the
entire registration period (as described in Section 5) 18% in the
aggregate of (a) the Warrant exercise price multiplied by the number of
then-outstanding and unexercised Warrants held by the Holder (including such
Holder’s predecessors and successors) for the period beginning of the date
hereof and continuing through the expiration of the registration period (as
described in Section 5) plus

 

6

 

(b) the initial principal amount of the Note held by the
Holder.  The Late Filing Payments and
Late Registration Payments will be prorated on a daily basis during the 30-business
day period and will be paid to the Holders in cash within ten (10) business
days following the end of each 30-business day period as to which payment is
due hereunder, provided that the respective Holder delivered to the Company at
least two business days prior thereto information with respect to the number of
Conversion Shares, Warrants and Warrant Shares not previously sold by such
Holder (together with reasonable supporting documentation).  The Holders may make a claim for additional
damages as a remedy for the Company’s failure to comply with the timelines set
forth in this Section, but acknowledgement of such right in this Agreement
shall not constitute an admission by the Company that any such damages exist or
may exist.  Notwithstanding the
foregoing, if the Company has used its reasonable best efforts to avoid
circumstances as a result of which the Registration Statement has not been
filed by the Required Filing Date or declared effective by the Required
Effective Date, then the damages described above shall be the Holders’ sole and
exclusive remedy for damages arising out of such circumstances.  Nothing contained in the preceding sentence
shall be read to limit the ability of the Holders to seek specific performance
of this Agreement.  Notwithstanding the
foregoing, if the Registration Statement has not yet been declared effective
and the Holders are no longer entitled to receive Late Registration Payments as
a result of the above-described percentage limitation on said payments, then
each Holder shall have the right, at any time upon at least thirty (30) days
written notice, to sell all (but not less than all) of its Warrants and Notes
to the Company for a cash purchase price equal to the aggregate amount by which
the Fair Market Value of the Common Stock of the Company on the date of the
delivery of the written notice exceeds the exercise price of the Warrants and
the conversion price of the Notes, calculated separately.  For this purpose, “Fair Market Value” means,
with respect to any determination date, the average per share closing price of
the Common Stock for the 30 Trading Days immediately preceding the
determination date.

 

(d)           During the registration period, the
Company will make available, upon reasonable advance notice during normal
business hours, for inspection by any Holder whose Registrable Securities are
being sold pursuant to a Registration Statement, all pertinent financial and
other records, pertinent corporate documents and properties of the Company
(collectively, the “Records”) as
reasonably necessary to enable each such Holder to exercise its due diligence
responsibility in connection with or related to the contemplated offering. The
Company will cause its officers, directors and employees to supply all
information that any Holder may reasonably request for purposes of performing
such due diligence.

 

(e)           Each Holder will hold in confidence,
use only in connection with the contemplated offering and not make any
disclosure of all Records and other information that the Company determines in
good faith to be confidential, and of which determination the Holders are so
notified, unless (i) the disclosure of such Records is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court or government body of competent

 

7

 

jurisdiction, (iii) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement (to the
knowledge of the relevant Holder), (iv) the Records or other information
was developed independently by the Holder without breach of this Agreement, (v) the
information was known to the Holder before receipt of such information from the
Company, or (vi) the information was disclosed to the Holder by a third
party not under an obligation of confidentiality. However, a Holder may make disclosure
of such Records and other information to any attorney, adviser, or other third
party retained by it that needs to know the information as determined in good
faith by the Holder (the “Holder Representative”),
if the Holder advises the Holder Representative of the confidentiality
provisions of this Section 2(e), but the Holder will be liable for any act
or omission of any of its Holder Representatives relative to such information
as if the act or omission was that of the Holder. The Company is not required
to disclose any confidential information in the Records to any Holder unless
and until such Holder has entered into a confidentiality agreement (in form and
substance satisfactory to the Company) with the Company with respect thereto,
substantially to the effect of this Section 2(e). Unless legally
prohibited from so doing, each Holder will, upon learning that disclosure of
Records containing confidential information is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at the Company’s expense, to
undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. Nothing herein will be
deemed to limit the Holder’s ability to sell Registrable Securities in a manner
that is otherwise consistent with applicable laws and regulations.

 

(f)            The Company shall file a
Registration Statement with respect to any newly authorized and/or reserved
Registrable Securities consisting of Conversion Shares and Warrant Shares
described in clause (i) of the definition of Registrable Securities within
ten (10) business days of any stockholders’ meeting authorizing same and
shall use its best efforts to cause such Registration Statement to become
effective within ninety (90) days of such stockholders’ meeting.  If the Holders become entitled, pursuant to
an event described in clause (ii) and (iii) of the definition of
Registrable Securities, to receive any securities in respect of Registrable
Securities that were already included in a Registration Statement, subsequent
to the date such Registration Statement is declared effective, and the Company
is unable under the securities laws to add such securities to the then effective
Registration Statement, the Company shall promptly file, in accordance with the
procedures set forth herein, an additional Registration Statement with respect
to such newly Registrable Securities. 
The Company shall use its best efforts to (i) cause any such
additional Registration Statement, when filed, to become effective within 30
days of that date that the need to file the Registration Statement arose.  All of the registration rights and remedies
under this Agreement shall apply to the registration of such newly reserved
shares and such new Registrable Securities.

 

3.             Expenses of Registration.   All Registration Expenses in connection with any registration,
qualification or compliance with registration pursuant to this Agreement shall
be borne by the Company, and all Selling Expenses of a Holder shall be borne by
such Holder.

 

4.             Registration on Form S-3.  The Company shall use its reasonable best
efforts to meet the “registrant eligibility” requirements for a secondary
offering set forth in the general instructions to Form S-3 or any
comparable or successor form or forms, or in the event

 

8

 

that the Company is ineligible to use such
form, such form as the Company is eligible to use under the Securities Act,
provided that if such other form is used, the Company shall convert such other
form to a Form S-3 as soon as the Company becomes so eligible.

 

5.             Registration Period.  In the case of the registration effected by
the Company pursuant to this Agreement, the Company shall keep such
registration effective until the later of (a) the date on which all the
Holders have completed the sales or distribution described in the Registration
Statement relating thereto or, if earlier until such Registrable Securities may
be sold by the Holders under Rule 144(k) (provided that the Company’s
transfer agent has accepted an instruction from the Company to such effect) or (b) the
second (2nd) anniversary of the Closing Date.

 

6.             Indemnification.

 

(a)           Company Indemnity.  The Company will indemnify each Holder, each
of its officers, directors, agents and partners, and each person controlling
each of the foregoing, within the meaning of Section 15 of the Securities
Act and the rules and regulations thereunder with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls, within
the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder, any underwriter, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any final prospectus (as amended or supplemented if the Company files any
amendment or supplement thereto with the SEC), Registration Statement filed
pursuant to this Agreement or any post-effective amendment thereof or based on
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, or any violation by the
Company of the Securities Act or any state securities law or in either case,
any rule or regulation thereunder applicable to the Company and relating
to action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each Holder, each
of its officers, directors, agents and partners, and each person controlling
each of the foregoing, for any reasonable legal fees of a single counsel and
any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to a Holder to the extent that any
such claim, loss, damage, liability or expense arises out of or is based on (i) any
untrue statement or omission based upon written information furnished to the
Company by such Holder or underwriter (if any) therefor and stated to be
specifically for use therein, (ii) any failure by any Holder to comply
with prospectus delivery requirements or the Securities Act or Exchange Act or
any other law or legal requirement applicable to them or any covenant or
agreement contained in the Purchase Agreement or this Agreement or (iii) an
offer of sale of Conversion Shares or Warrant Shares occurring during a period
in which sales under the Registration Statement are suspended as permitted by
this Agreement.  The indemnity agreement
contained in this Section 6(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent will
not be unreasonably withheld).

 

(b)           Holder Indemnity.  Each Holder will, severally but not jointly,
if

 

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Registrable Securities
held by it are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors, officers, agents and partners, and any other stockholder selling
securities pursuant to the Registration Statement and any of its directors,
officers, agents, partners, and any person who controls such stockholder within
the meaning of the Securities Act or Exchange Act and each underwriter, if any,
of the Company’s securities covered by such a Registration Statement, each
person who controls the Company or such underwriter within the meaning of Section 15
of the Securities Act and the rules and regulations thereunder, each other
Holder (if any), and each of their officers, directors and partners, and each
person controlling such other Holder(s) against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on (i) any
untrue statement (or alleged untrue statement) of a material fact contained in
any such final prospectus (as amended or supplemented if the Company files any
amendment or supplement thereto with the SEC), Registration Statement filed
pursuant to this Agreement or any post-effective amendment thereof or based on
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statement therein not misleading in
light of the circumstances under which they were made or (ii) failure by
any Holder to comply with prospectus delivery requirements or the Securities
Act, Exchange Act or any other law or legal requirement applicable to them or
any covenant or agreement contained in the Purchase Agreement or this
Agreement, and will reimburse the Company and such other Holder(s) and their
directors, officers and partners, underwriters or control persons for any reasonable
legal fees or any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
final prospectus (as amended or supplemented if the Company files any amendment
or supplement thereto with the SEC), Registration Statement filed pursuant to
this Agreement or any post-effective amendment thereof in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein, and provided that the maximum amount
for which such Holder shall be liable under this indemnity shall not exceed the
net proceeds received by the Holders from the sale of the Registrable
Securities pursuant to the registration statement in question.  The indemnity agreement contained in this Section 6(b) shall
not apply to amounts paid in settlement of any such claims, losses, damages or
liabilities if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld).

 

(c)           Procedure.  Each party entitled to indemnification under
this Section 6 (the “Indemnified Party”)
shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim in
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld), and the Indemnified Party may participate in such
defense at its own expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6 except to the
extent that the Indemnifying Party is materially and adversely affected by such
failure to provide notice.  No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into

 

10

 

any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.  Each
Indemnified Party shall furnish such non-privileged information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense
of such claim and litigation resulting therefrom.

 

7.             Contribution.  If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages
or liabilities as between the Company on the one hand and any Holder(s) on the
other, in such proportion as is appropriate to reflect the relative fault of
the Company and of such Holder(s) in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations.  The relative fault of the Company on the one
hand and of any Holder(s) on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by such Holder(s).

 

In no event
shall the obligation of any Indemnifying Party to contribute under this Section 7
exceed the amount that such Indemnifying Party would have been obligated to pay
by way of indemnification if the indemnification provided for under Section 6(a) or
6(b) hereof had been available under the circumstances.

 

The Company
and the Holders agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraphs.  The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim.  Notwithstanding the
provisions of this Section, no Holder shall be required to contribute any
amount in excess of the amount equal to the net proceeds received by such
Holder from the sale of Registrable Securities pursuant to the registration
statement in question.  No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.

 

8.             Survival.  The indemnity and contribution agreements
contained in Sections 6 and 7 shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement or the Purchase
Agreement, and (ii) the consummation of the sale or successive resales of
the Registrable Securities.

 

11

 

9.             Information by Holders.  As a condition to the obligations of the
Company to complete any registration pursuant to this Agreement with respect to
the Registrable Securities of each Holder, such Holder will furnish to the
Company such information regarding itself, the Registrable Securities held by
it and the intended methods of disposition of the Registrable Securities held
by it as is reasonably required by the Company to effect the registration of
the Registrable Securities.  At least ten
business days prior to the first anticipated filing date of a Registration
Statement for any registration under this Agreement, the Company will notify
each Holder of the information the Company requires from that Holder whether or
not such Holder has elected to have any of its Registrable Securities included
in the Registration Statement. If the Company has not received the requested
information from a Holder by the business day prior to the anticipated filing
date, then the Company may file the Registration Statement without including
Registrable Securities of that Holder.

 

10.           Further Assurances. Each
Holder will cooperate with the Company, as reasonably requested by the Company,
in connection with the preparation and filing of any Registration Statement
hereunder, unless such Holder has notified the Company in writing of such
Holder’s irrevocable election to exclude all of such Holder’s Registrable
Securities from such Registration Statement.

 

11.           Suspension of Sales. Upon
receipt of any notice from the Company under Section 2(a)(v) or 2(b),
each Holder will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until (i) it receives copies of a supplemented or amended prospectus
contemplated by Sections 2(a)(v) or (ii) the Company advises the
Holder that a suspension of sales under Section 2(b) has terminated.
If so directed by the Company, each Holder will deliver to the Company (at the
expense of the Company) or destroy all copies in the Holder’ s possession
(other than a limited number of file copies) of the prospectus covering such
Registrable Securities that is current at the time of receipt of such notice.

 

12.           Replacement Certificates.  The certificate(s) representing the
Registrable Securities held by the Purchaser (or then Holder) may be exchanged
by the Purchaser (or such Holder) at any time and from time to time for
certificates with different denominations representing an equal aggregate
number of shares of Common Stock, as reasonably requested by such Purchaser (or
such Holder) upon surrendering the same. 
No service charge will be made for such registration or transfer or
exchange.  Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of the Note or certificates for the underlying shares of Common Stock
of any of the foregoing, and, in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it, or upon surrender and cancellation of
such certificate if mutilated, the Company will make and deliver a new Note or
certificate of like tenor and dated as of such cancellation at no charge to the
holder.

 

13.           Transfer or Assignment.  Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. 
The rights granted to the Purchaser by the Company under this Agreement
to cause the Company to register Registrable Securities may be transferred or
assigned (in whole or in part) to a transferee or assignee of the Notes,
Warrants or Registrable Securities, and all other rights granted to the Purchaser
by the Company hereunder may be transferred or assigned to any

 

12

 

transferee or assignee of the Notes, Warrants
or Registrable Securities; provided in each case that (i) the Company is
given written notice by the Purchaser at the time of or within a reasonable
time after such transfer or assignment, stating the name and address of said
transferee or assignee and identifying the securities with respect to which
such registration rights are being transferred or assigned; and provided
further that the transferee or assignee of such rights agrees in writing to be
bound by the registration provisions of this Agreement, (ii) such transfer
or assignment is not made under the Registration Statement or Rule 144, (iii) such
transfer is made according to the applicable requirements of the Purchase
Agreement, and (iv) the transferee has provided to the Company an investor
questionnaire (or equivalent document) evidencing that the transferee is a “qualified
institutional buyer” or an “accredited investor” defined in Rule 501(a)(1),(2),(3),
or (7) of Regulation D.

 

14.           Miscellaneous.

 

(a)           Remedies.  The Company and the Purchaser acknowledge and
agree that irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specific terms or
were otherwise breached.  It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.

 

(b)           Jurisdiction.  Each of the Company and the Purchaser (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court, the New York state courts and other courts of the United States sitting
in New York, New York for the purposes of any suit, action or proceeding
arising out of or relating to this Agreement and (ii) hereby waives, and
agrees not to assert in any such suit action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. 
The Company and the Purchaser consent to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof.  Nothing in this paragraph shall
affect or limit any right to serve process in any other manner permitted by
law.

 

(c)           Notices.  Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such
notice.  The addresses for such communications
shall be:

 

13

 

to the Company:

 

Liquidmetal Technologies, Inc.

25800 Commercentre Dr., Suite 100

Lake Forest, California
92630

Telephone:  (949) 206-8002

Fax:  (949) 206-8008

Attention:  John Kang, President

 

with a copy to:

 

Foley & Lardner LLP

100 North Tampa Street, Suite 2700

Tampa, FL 33602-5804

Telephone:  813-229-2300

Facsimile:  813-221-4210

Attention: Curt P. Creely

 

If to the
Purchasers, to the addresses set forth on Schedule I to the Purchase
Agreement:

 

with a copy to:

 

Greenberg Traurig LLP

The MetLife Building

200 Park Avenue

New York, New York 10166

Telephone:  (212) 801-9200

Facsimile:   (212) 801-6400

Attention:  Alan I. Annex

 

Any party
hereto may from time to time change its address for notices by giving at least
five days’ written notice of such changed address to the other parties hereto.

 

(d)           Waivers.  No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. 
The representations and warranties and the agreements and covenants of
the Company and each Purchaser contained herein shall survive the Closing.

 

(e)           Execution in Counterpart.  This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.

 

(f)            Signatures.  Facsimile signatures shall be valid and
binding on each party submitting the same.

 

14

 

(g)           Entire Agreement; Amendment.  This Agreement, together with the Purchase
Agreement, the Notes, the Warrants, and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and
agreement of the parties, and may not be amended, modified or terminated except
by a written agreement signed by the Company and the Holder of the Registrable
Securities seeking registration of such securities.

 

(h)           Governing Law.  This Agreement and the validity and
performance of the terms hereof shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
executed and to be performed entirely within such state, except to the extent
that the law of the State of Delaware regulates the Company’s issuance of
securities.

 

(i)            Jury Trial.  EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL
BY JURY.

 

(j)            Force Majeure.  The Company shall not be deemed in breach of
its commitments under this Agreement and no payments by the Company as set
forth in Section 2 shall be required if the Company is unable to fulfill
its obligations hereunder in a timely fashion if the SEC or the Nasdaq National
Market are closed or operating on a limited basis as a result of the occurrence
of a Force Majeure.  As used herein, “Force Majeure” means war or armed hostilities or other
national or international calamity, or one or more acts of terrorism, which are
having a material adverse effect on the financial markets in the United
States.  Furthermore, any payments owed
as a result of Section 2 shall not accrue during any period during which
the Company’s performance hereunder has been delayed or the Company’s ability
to fulfill its obligations hereunder has been impaired by a Force Majeure.

 

(k)           Titles.  The titles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.

 

(l)            No Strict Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party.

 

(m)          Prior Registration Rights
Agreements.  This Agreement shall
amend and restate, and replace in their entirety, each of the March 2004
Registration Rights Agreement, Winvest Registration Rights Agreement, and June 2005
Registration Rights Agreement (the “Prior Registration Rights
Agreements”).  Each Purchaser
who was a party to one or more of the Prior Registration Rights Agreements
hereby agrees that (i) the Prior Registration Rights Agreements are
terminated as of the date hereof, (ii) such Purchasers have no further
rights under the Prior Registration Rights Agreements, (iii) such
Purchasers hereby forever waive and release the Company from any current or
prior breach of, and any current or prior damages, claims, expenses, or other
entitlements arising from or under, the Prior Registration Rights Agreements
(including without limitation the Accrued Registration Fees thereunder).

 

15

 

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

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  LIQUIDMETAL
  TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/

  	
  John Kang

  	
   

  
	
   

  	
   

  	
  John Kang, President
  and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURCHASERS:

  
	
   

  	
   

  
	
   

  	
  COMMONWEALTH
  ASSOCIATES, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Signature on
  Counterpart Signature Page

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
							

 

16

 

COUNTERPART SIGNATURE
PAGE

TO AMENDED AND
RESTATED REGISTRATION RIGHTS AGREEMENT,

DATED AUGUST 2,
2005,

AMONG LIQUIDMETAL
TECHNOLOGIES, INC. AND

THE “PURCHASERS”
IDENTIFIED THEREIN

 

The
undersigned hereby executes and delivers the Amended and Restated Registration
Rights Agreement to which this Signature Page is attached, which, together
with all counterparts of the Amended and Restated Registration Rights Agreement
and Signature Pages of the Company and other “Purchasers” under the Amended
and Restated Registration Rights Agreement, shall constitute one and the same
document in accordance with the terms of the Amended and Restated Registration
Rights Agreement.

 

	
  PURCHASER:

  	
  Jess S.
  Morgan & Co., Inc.

  	
   

  
	
  By:

  	
  /s/

  	
  Gary Levenstein

  	
   

  
	
  Name:

  	
  Gary Levenstein

  	
   

  
	
  Title:

  	
  President, Investment
  Division Jess S. Morgan & Co., Inc.

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Prana, LLC

  	
   

  
	
  By:

  	
  /s/

  	
  Renee Vallese

  	
   

  
	
  Name:

  	
  Renee Vallese

  	
   

  
	
  Title:

  	
  Managing Director

  	
   

  
	
   

  
	
  PURCHASER:

  	
  DKR Soundshore Oasis
  Holding Fund Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  Bradford Caswell

  	
   

  
	
  Name:

  	
  Bradford Caswell

  	
   

  
	
  Title:

  	
  Director

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Rodd Friedman

  	
   

  
	
  By:

  	
  /s/

  	
  Rodd Friedman

  	
   

  
	
  Name:

  	
  Rodd Friedman

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Bruce Rosen

  	
   

  
	
  By:

  	
  /s/

  	
  Bruce Rosen

  	
   

  
	
  Name:

  	
  Bruce Rosen

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Caydal, LLC

  	
   

  
	
  By:

  	
  /s/

  	
  Kevin Daly

  	
   

  
	
  Name:

  	
  Kevin Daly

  	
   

  
	
  Title:

  	
  Managing Member

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Marlin Fund, LP

  	
   

  
	
  By:

  	
  /s/

  	
  Michael W. Masters

  	
   

  
	
  Name:

  	
  Michael W. Masters

  	
   

  
	
  Title:

  	
  Managing Member of the
  General Partner

  	
   

  
						

 

17

 

	
  PURCHASER:

  	
  Marlin Fund II, LP

  	
   

  
	
  By:

  	
  /s/

  	
  Michael W. Masters

  	
   

  
	
  Name:

  	
  Michael W. Masters

  	
   

  
	
  Title:

  	
  Managing Member of the
  General Partner

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Marlin Fund Offshore,
  Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  Michael W. Masters

  	
   

  
	
  Name:

  	
  Michael W. Masters

  	
   

  
	
  Title:

  	
  Managing Member of the
  Investment Manager

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Larry Bouts

  	
   

  
	
  By:

  	
  /s/

  	
  Larry Bouts

  	
   

  
	
  Name:

  	
  Larry Bouts

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Really Cool Group Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  J. Segal

  	
   

  
	
  Name:

  	
  J. Segal

  	
   

  
	
  Title:

  	
  Director

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Myron Neugeboren

  	
   

  
	
  By:

  	
  /s/

  	
  Myron Neugeboren

  	
   

  
	
  Name:

  	
  Myron Neugeboren

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Jonas Brachfeld

  	
   

  
	
  By:

  	
  /s/

  	
  Jonas Brachfeld

  	
   

  
	
  Name:

  	
  Jonas Brachfeld

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Greg Osborn

  	
   

  
	
  By:

  	
  /s/

  	
  Greg Osborn

  	
   

  
	
  Name:

  	
  Greg Osborn

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Richard Molinsky

  	
   

  
	
  By:

  	
  /s/

  	
  Richard Molinsky

  	
   

  
	
  Name:

  	
  Richard Molinsky

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Richard and Joanne Kane

  	
   

  
	
  By:

  	
  /s/

  	
  Richard Kane and Joanne
  Kane

  	
   

  
	
  Name:

  	
  Richard Kane and Joanne
  Kane

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
						

 

18

 

	
  PURCHASER:

  	
  Ricardo A. Salas

  	
   

  
	
  By:

  	
  /s/

  	
  Ricardo A. Salas

  	
   

  
	
  Name:

  	
  Ricardo A. Salas

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Wry Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  J. Segal

  	
   

  
	
  Name:

  	
  J. Segal

  	
   

  
	
  Title:

  	
  Director

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Keith Barksdale

  	
   

  
	
  By:

  	
  /s/

  	
  Keith Barksdale

  	
   

  
	
  Name:

  	
  Keith Barksdale

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Winvest Venture
  Partners, Inc.

  	
   

  
	
  By:

  	
  /s/

  	
  Chang Ki Cho

  	
   

  
	
  Name:

  	
  Chang Ki Cho

  	
   

  
	
  Title:

  	
  President and CEO

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Eric Brachfeld

  	
   

  
	
  By:

  	
  /s/

  	
  Eric Brachfeld

  	
   

  
	
  Name:

  	
  Eric Brachfeld

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Edward Neugeboren

  	
   

  
	
  By:

  	
  /s/

  	
  Edward Neugeboren

  	
   

  
	
  Name:

  	
  Edward Neugeboren

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Dolphin Offshore
  Partners, LP

  	
   

  
	
  By:

  	
  /s/

  	
  Peter E. Salas

  	
   

  
	
  Name:

  	
  Peter E. Salas

  	
   

  
	
  Title:

  	
  General Partner

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Harvard
  Developments, Inc.

  	
   

  
	
  By:

  	
  /s/

  	
  Arden Giesbrecht and
  Terry Downie

  	
   

  
	
  Name:

  	
  Arden Giesbrecht and
  Terry Downie

  	
   

  
	
  Title:

  	
  Controller and VP,
  Finance (respectively)

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Echo Capital Growth
  Corporation

  	
   

  
	
  By:

  	
  /s/

  	
  Paul J. Hill

  	
   

  
	
  Name:

  	
  Paul J. Hill

  	
   

  
	
  Title:

  	
  President

  	
   

  
						

 

19

 

	
  PURCHASER:

  	
  Terrence L. Mealy

  	
   

  
	
  By:

  	
  /s/

  	
  Terrence L. Mealy

  	
   

  
	
  Name:

  	
  Terrence L. Mealy

  	
   

  
	
  Title:

  	
  Self

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Shinnston Enterprises,
  Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  James K.
  Murray, Jr.

  	
   

  
	
  Name:

  	
  James K.
  Murray, Jr.

  	
   

  
	
  Title:

  	
  Limited Partner

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Shea Diversified
  Investments, Inc.

  	
   

  
	
  By:

  	
  /s/

  	
  Ronald Lakey

  	
   

  
	
  Name:

  	
  Ron Lakey

  	
   

  
	
  Title:

  	
  Assistant Secretary

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Commonwealth
  Associates, LP

  	
   

  
	
  By:

  	
  /s/

  	
  Robert A. O’Sullivan

  	
   

  
	
  Name:

  	
  Robert A. O’Sullivan

  	
   

  
	
  Title:

  	
  CEO and President

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Neal I. Goldman

  	
   

  
	
  By:

  	
  /s/

  	
  Neal I. Goldman

  	
   

  
	
  Name:

  	
  Neal I. Goldman

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  PURCHASER:

  	
  LBJ Holdings, LLC

  	
   

  
	
  By:

  	
  HSP Group, Inc.
  (Its Manager)

  	
   

  
	
  By:

  	
  /s/

  	
  Brian Potiker

  	
   

  
	
  Name:

  	
  Brian Potiker

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  
	
   

  
	
  PURCHASER:

  	
  John D. Stout

  	
   

  
	
  By:

  	
  /s/

  	
  John D. Stout

  	
   

  
	
  Name:

  	
  John D. Stout

  	
   

  
	
  Title:

  	
  Individually

  	
   

  
	
   

  
	
  PURCHASER:

  	
  MicroCapital Fund Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  Christopher P. Swenson

  	
   

  
	
  Name:

  	
  Christopher P. Swenson

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  
	
   

  
	
  PURCHASER:

  	
  MicroCapital Fund LP

  	
   

  
	
  By:

  	
  /s/

  	
  Christopher P. Swenson

  	
   

  
	
  Name:

  	
  Christopher P. Swenson

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  
						

 

20

 

	
  PURCHASER:

  	
  Journeys End Partners,
  LLC

  	
   

  
	
  By:

  	
  /s/

  	
  Gerald B. Cramer

  	
   

  
	
  Name:

  	
  Gerald B. Cramer

  	
   

  
	
  Title:

  	
  Manager

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Wynnefield Partners
  Small Cap Value, LP

  	
   

  
	
  By:

  	
  /s/

  	
  Nelson Obus

  	
   

  
	
  Name:

  	
  Nelson Obus

  	
   

  
	
  Title:

  	
  Managing Member

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Wynnefield Partners
  Small Cap Value, LP I

  	
   

  
	
  By:

  	
  /s/

  	
  Nelson Obus

  	
   

  
	
  Name:

  	
  Nelson Obus

  	
   

  
	
  Title:

  	
  Managing Member

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Wynnefield Small Cap
  Value Offshore Fund, Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  Nelson Obus

  	
   

  
	
  Name:

  	
  Nelson Obus

  	
   

  
	
  Title:

  	
  President

  	
   

  
	
   

  
	
  PURCHASER:

  	
  Min Capital Corp
  Retirement Trust

  	
   

  
	
  By:

  	
  /s/

  	
  Robert Friedman

  	
   

  
	
  Name:

  	
  Robert Friedman

  	
   

  
	
  Title:

  	
  Trustee

  	
   

  
						

 

21Exhibit 10.5

 

AMENDED
AND RESTATED SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED SECURITY
AGREEMENT (this “Agreement”) is made and entered into
as of the August 2, 2005, by and between LIQUIDMETAL TECHNOLOGIES, INC., a
Delaware corporation (“Borrower”), and COMMONWEALTH ASSOCIATES, L.P., a New
York limited partnership (“CA” or “Agent”) and each other person or entity
listed as an “Investor” on Schedule 1 attached to this Agreement (the “Investors”
and together with CA the “Secured Parties”).  Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in that Securities Purchase
Agreement of even date herewith between the Company and the Investors (“Securities
Purchase Agreement”).  

 

Recitals

 

WHEREAS, certain Secured Parties have
agreed to purchase Notes from the Borrower pursuant to the terms of the
Securities Purchase Agreement, and certain Secured Parties continue to hold July 2007
Notes previously issued by the Borrower.

 

WHEREAS, the Secured Parties have required,
as a condition to entering into the Securities Purchase Agreement, that
Borrower grant Secured Parties a first priority security interest in all of
Borrower’s Collateral listed in Exhibit A hereto, and to that end has
required the execution and delivery of this Agreement by Borrower.

 

WHEREAS, this Agreement shall amend and
restate, and supersede in their entirety, the Security Agreements, dated March 1,
2004 and as amended on July 29, 2004, previously entered into among the
Company and the holders of the July 2005 Notes and July 2006 Notes
(the “Prior Security Agreements”).

 

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

 

1.             Incorporation of Recitals, Purchase Agreement, and
Note.  The foregoing
Recitals are hereby incorporated herein in their entirety by this reference.

 

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

 

“Collateral”
shall mean all of the items set forth on Exhibit A hereto.  Notwithstanding the foregoing, the security
interest granted herein shall not extend to, and the term “Collateral” shall
not include,  (i) the Borrower’s
rights under that certain Amended and Restated License Agreement, dated September 1,
2001, between the Borrower and California Institute of Technology, and (ii) the
Borrower’s rights under the Liquidmetal/UVAPF License Agreement, dated May 1,
2002, between the Borrower and the University of Virginia Patent Foundation.

 

 

“Patents”
shall mean, collectively, all of Borrower’s letters patent under the laws of
the United States, all recordings and registrations thereof and applications
therefor, including, without limitation, the inventions described therein, all
reissues, continuations, divisions, renewals, extensions, 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 Parties; (iii) licenses or sublicenses of
Patents, in each instance granted to others not interfering in any material
respect with the business of the Borrower, (iv) liens or security
interests granted by the Borrower pursuant to a Qualified Credit Facility (as
defined in the Securities Purchase Agreement). 

 

“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.

 

“Secured
Obligations” has the meaning given in Section 3(a) below.

 

“Security
Interest” has the meaning given in Section 3(b) below.

 

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. §362(a)) of all obligations and liabilities of every nature of Borrower
now or hereafter existing under or arising out of the Notes, the July 2007
Notes, 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 being the “Secured Obligations”).

 

2

 

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:

 

a.             Financing
Statements.  Except for the financing
statements in favor of Secured Parties, 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 except for
Permitted Liens, 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
Parties as long as any portion of the Secured 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 the Agent.

 

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.

 

3

 

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.

 

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 Secured
Obligations shall have been satisfied in full, Borrower shall not, without the
Agent’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
Patents to unrelated third parties pursuant to its business, (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
Patents with the prior written consent of the Agent, 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 and (iii) sell

 

4

 

Inventory in the ordinary course of business or sell
obsolete equipment or inventory for the reasonable fair value thereof.  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 the Secured Parties 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 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
with respect to patents 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 that consists of
patents 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, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings.

 

d.             Agent’s
Right to Take Action.  If, after ten
days written notice from Agent, Borrower fails to perform or observe any of its
covenants or agreements set forth in this Section 5 or if Borrower
notifies Agent that it intends to abandon all or any part of the Collateral,
the Agent 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 Agent’s
own name) and may (but need not) take any and all other actions that Agent 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 Agent on demand the amount of all moneys expended and all costs and
expenses (including reasonable attorneys’ fees and disbursements) incurred by
Agent or the Secured Parties in connection with or as a result of Agent’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 the Agent
or Secured Parties.

 

5

 

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 as permitted by Section 5(a) above,
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 or as permitted by Section 5(a) above,
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 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

 

6

 

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 Notes or July 2007 Notes, 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 the Agent; 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 4 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, the Agent may, at its option, take any or all of
the following actions:

 

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

 

7

 

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 Agent shall commence any suit for
such enforcement, Borrower shall, at the request of Agent, do any and all
lawful acts and execute any and all proper documents reasonably required by
Agent in aid of such enforcement; or

 

d.             incur
expenses, including attorneys’ fees at the regular hourly rates of the Agent’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

 

8

 

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 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 CA
(and its successors and assigns) as their agent and CA 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 CA (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 the Secured Parties’ rights and remedies under this
Agreement.  None of the Investors may
take any action or exercise any rights under this Agreement except through CA
as their agent.  Each Secured Party
hereby appoints the Agent the attorney-in-fact of such Secured Party 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 or July 2007 Notes outstanding, subject to the last
sentence of Section 2 of the Notes (pro rata as among the Investors in
accordance with the aggregate principal amount of the Notes or July 2007
Notes held by them, subject to the last sentence of Section 2 of the
Notes); 

 

9

 

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 Notes, July 2007 Notes, 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.

 

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 the Agent.  A waiver signed by the Agent 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 any Secured Parties’ or the Agent’s rights or remedies. All rights and
remedies of a Secured Party shall be cumulative and may be exercised singularly
or concurrently, at Agent’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.  The Secured
Parties 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 Parties and their respective participants,
successors, and permitted assigns and shall take effect when signed by Borrower
and Secured Parties, and Borrower waives notice of Secured Parties’ acceptance
hereof; provided, however, that the Secured Parties’ 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 Secured 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

 

10

 

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 THE SECURED PARTIES 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.

 

14.           Prior Security Agreements.  This Agreement shall amend and restate, and
replace in their entirety, each of the Prior Security Agreements.  Each Secured Party who was a party to one or
more of the Prior Security Agreements hereby agrees that (i) the Prior
Security Agreements are terminated as of the date hereof, (ii) such
Secured Parties have no further rights under the Prior Security Agreements, (iii) such
Secured Parties hereby forever waive and release the Company from any current
or prior breach of, and any current or prior damages, claims, expenses, or
other entitlements arising from or under, the Prior Security Agreements.

 

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

 

11

 

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

 

	
   

  	
  AGENT:

  
	
   

  	
   

  
	
   

  	
  COMMONWEALTH
  ASSOCIATES, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/  Robert O’ Sullivan

  	
   

  
	
   

  	
  Name:

  	
   Robert O’ Sullivan

  	
   

  
	
   

  	
  Title:

  	
  President and CEO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  LIQUIDMETAL
  TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
  John Kang

  	
   

  
	
   

  	
   

  	
   

  	
  John
  Kang,

  	
   

  
	
   

  	
   

  	
   

  	
  President
  and Chief Executive Officer

  	
   

  
	
   

  	
   

  
	
   

  	
  PRIOR
  AGENT:

  
	
   

  	
   

  
	
   

  	
  MIDDLEBURY CAPITAL, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Eric Brachfeld

  	
   

  
	
   

  	
  Name:

  	
  Eric Brachfeld

  	
   

  
	
   

  	
  Title:

  	
  Managing Member

  	
   

  
														

 

12

 

COUNTERPART SIGNATURE
PAGE

TO AMENDED AND
RESTATED SECURITY AGREEMENT

DATED AUGUST 2,
2005,

AMONG LIQUIDMETAL
TECHNOLOGIES, INC.,

COMMONWEALTH ASSOCIATES, L.P., AND

THE “INVESTORS”
IDENTIFIED THEREIN

 

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

 

 

	
  INVESTOR:

  	
  Jess S.
  Morgan & Co., Inc.

  	
   

  
	
  By:

  	
  /s/

  	
  Gary Levenstein

  	
   

  
	
  Name:

  	
  Gary Levenstein

  	
   

  
	
  Title:

  	
  President, Investment
  Division Jess S. Morgan & Co., Inc.

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Prana, LLC

  	
   

  
	
  By:

  	
  /s/

  	
  Renee Vallese

  	
   

  
	
  Name:

  	
  Renee Vallese

  	
   

  
	
  Title:

  	
  Managing Director

  	
   

  
	
   

  
	
  INVESTOR:

  	
  DKR Soundshore Oasis
  Holding Fund Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  Bradford Caswell

  	
   

  
	
  Name:

  	
  Bradford Caswell

  	
   

  
	
  Title:

  	
  Director

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Rodd Friedman

  	
   

  
	
  By:

  	
  /s/

  	
  Rodd Friedman

  	
   

  
	
  Name:

  	
  Rodd Friedman

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Bruce Rosen

  	
   

  
	
  By:

  	
  /s/

  	
  Bruce Rosen

  	
   

  
	
  Name:

  	
  Bruce Rosen

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Caydal, LLC

  	
   

  
	
  By:

  	
  /s/

  	
  Kevin Daly

  	
   

  
	
  Name:

  	
  Kevin Daly

  	
   

  
	
  Title:

  	
  Managing Member

  	
   

  
						

 

13

 

	
  INVESTOR:

  	
  Marlin Fund, LP

  	
   

  
	
  By:

  	
  /s/

  	
  Michael W. Masters

  	
   

  
	
  Name:

  	
  Michael W. Masters

  	
   

  
	
  Title:

  	
  Managing Member of the
  General Partner

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Marlin Fund II, LP

  	
   

  
	
  By:

  	
  /s/

  	
  Michael W. Masters

  	
   

  
	
  Name:

  	
  Michael W. Masters

  	
   

  
	
  Title:

  	
  Managing Member of the
  General Partner

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Marlin Fund Offshore,
  Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  Michael W. Masters

  	
   

  
	
  Name:

  	
  Michael W. Masters

  	
   

  
	
  Title:

  	
  Managing Member of the
  Investment Manager

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Larry Bouts

  	
   

  
	
  By:

  	
  /s/

  	
  Larry Bouts

  	
   

  
	
  Name:

  	
  Larry Bouts

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Really Cool Group, Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  J. Segal

  	
   

  
	
  Name:

  	
  J. Segal

  	
   

  
	
  Title:

  	
  Director

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Myron Neugeboren

  	
   

  
	
  By:

  	
  /s/

  	
  Myron Neugeboren

  	
   

  
	
  Name:

  	
  Myron Neugeboren

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Jonas Brachfeld

  	
   

  
	
  By:

  	
  /s/

  	
  Jonas Brachfeld

  	
   

  
	
  Name:

  	
  Jonas Brachfeld

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Greg Osborn

  	
   

  
	
  By:

  	
  /s/

  	
  Greg Osborn

  	
   

  
	
  Name:

  	
  Greg Osborn

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Richard Molinsky

  	
   

  
	
  By:

  	
  /s/

  	
  Richard Molinsky

  	
   

  
	
  Name:

  	
  Richard Molinsky

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
						

 

14

 

	
  INVESTOR:

  	
  Richard and Joanne Kane

  	
   

  
	
  By:

  	
  /s/

  	
  Richard Kane and Joanne
  Kane

  	
   

  
	
  Name:

  	
  Richard Kane and Joanne
  Kane

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Ricardo A. Salas

  	
   

  
	
  By:

  	
  /s/

  	
  Ricardo A. Salas

  	
   

  
	
  Name:

  	
  Ricardo A. Salas

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Wry Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  J. Segal

  	
   

  
	
  Name:

  	
  J. Segal

  	
   

  
	
  Title:

  	
  Director

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Keith Barksdale

  	
   

  
	
  By:

  	
  /s/

  	
  Keith Barksdale

  	
   

  
	
  Name:

  	
  Keith Barksdale

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Winvest Venture
  Partners, Inc.

  	
   

  
	
  By:

  	
  /s/

  	
  Chang Ki Cho

  	
   

  
	
  Name:

  	
  Chang Ki Cho

  	
   

  
	
  Title:

  	
  President and CEO

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Eric Brachfeld

  	
   

  
	
  By:

  	
  /s/

  	
  Eric Brachfeld

  	
   

  
	
  Name:

  	
  Eric Brachfeld

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Edward Neugeboren

  	
   

  
	
  By:

  	
  /s/

  	
  Edward Neugeboren

  	
   

  
	
  Name:

  	
  Edward Neugeboren

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Dolphin Offshore
  Partners, LP

  	
   

  
	
  By:

  	
  /s/

  	
  Peter E. Salas

  	
   

  
	
  Name:

  	
  Peter E. Salas

  	
   

  
	
  Title:

  	
  General Partner

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Harvard
  Developments, Inc.

  	
   

  
	
  By:

  	
  /s/

  	
  Arden Giesbrecht and
  Terry Downie

  	
   

  
	
  Name:

  	
  Arden Giesbrecht and
  Terry Downie

  	
   

  
	
  Title:

  	
  Controller and VP,
  Finance (respectively)

  	
   

  
							

 

15

 

	
  INVESTOR:

  	
  Echo Capital Growth
  Corporation

  	
   

  
	
  By:

  	
  /s/

  	
  Paul J. Hill

  	
   

  
	
  Name:

  	
  Paul J. Hill

  	
   

  
	
  Title:

  	
  President

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Terrence L. Mealy

  	
   

  
	
  By:

  	
  /s/

  	
  Terrence L. Mealy

  	
   

  
	
  Name:

  	
  Terrence L. Mealy

  	
   

  
	
  Title:

  	
  Self

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Shinnston Enterprises,
  Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  James K.
  Murray, Jr.

  	
   

  
	
  Name:

  	
  James K.
  Murray, Jr.

  	
   

  
	
  Title:

  	
  Limited Partner

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Shea Diversified
  Investments, Inc.

  	
   

  
	
  By:

  	
  /s/

  	
  Ronald Lakey

  	
   

  
	
  Name:

  	
  Ron Lakey

  	
   

  
	
  Title:

  	
  Assistant Secretary

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Commonwealth
  Associates, LP

  	
   

  
	
  By:

  	
  /s/

  	
  Robert A. O’Sullivan

  	
   

  
	
  Name:

  	
  Robert A. O’Sullivan

  	
   

  
	
  Title:

  	
  CEO and President

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Neal I. Goldman

  	
   

  
	
  By:

  	
  /s/

  	
  Neal I. Goldman

  	
   

  
	
  Name:

  	
  Neal I. Goldman

  	
   

  
	
  Title:

  	
  N/A

  	
   

  
	
   

  
	
  INVESTOR:

  	
  LBJ Holdings, LLC

  	
   

  
	
  By:

  	
  HSP Group, Inc.
  (Its Manager)

  	
   

  
	
  By:

  	
  /s/

  	
  Brian Potiker

  	
   

  
	
  Name:

  	
  Brian Potiker

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  
	
   

  
	
  INVESTOR:

  	
  John D. Stout

  	
   

  
	
  By:

  	
  /s/

  	
  John D. Stout

  	
   

  
	
  Name:

  	
  John D. Stout

  	
   

  
	
  Title:

  	
  Individually

  	
   

  
						

 

16

 

	
  INVESTOR:

  	
  MicroCapital Fund Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  Christopher P. Swenson

  	
   

  
	
  Name:

  	
  Christopher P. Swenson

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  
	
   

  
	
  INVESTOR:

  	
  MicroCapital Fund LP

  	
   

  
	
  By:

  	
  /s/

  	
  Christopher P. Swenson

  	
   

  
	
  Name:

  	
  Christopher P. Swenson

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Journeys End Partners,
  LLC

  	
   

  
	
  By:

  	
  /s/

  	
  Gerald B. Cramer

  	
   

  
	
  Name:

  	
  Gerald B. Cramer

  	
   

  
	
  Title:

  	
  Manager

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Wynnefield Partners
  Small Cap Value, LP

  	
   

  
	
  By:

  	
  /s/

  	
  Nelson Obus

  	
   

  
	
  Name:

  	
  Nelson Obus

  	
   

  
	
  Title:

  	
  Managing Member

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Wynnefield Partners
  Small Cap Value, LP I

  	
   

  
	
  By:

  	
  /s/

  	
  Nelson Obus

  	
   

  
	
  Name:

  	
  Nelson Obus

  	
   

  
	
  Title:

  	
  Managing Member

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Wynnefield Small Cap
  Value Offshore Fund, Ltd.

  	
   

  
	
  By:

  	
  /s/

  	
  Nelson Obus

  	
   

  
	
  Name:

  	
  Nelson Obus

  	
   

  
	
  Title:

  	
  President

  	
   

  
	
   

  
	
  INVESTOR:

  	
  Min Capital Corp
  Retirement Trust

  	
   

  
	
  By:

  	
  /s/

  	
  Robert Friedman

  	
   

  
	
  Name:

  	
  Robert Friedman

  	
   

  
	
  Title:

  	
  Trustee

  	
   

  
						

 

17

 

SCHEDULE I
TO SECURITY AGREEMENT

 

18

 

SCHEDULE A

 

 

Collateral
Locations

 

25800 Commercentre Dr., Suite 100

Lake Forest, California
92630

(also principal executive
office)

 

Texas office:

12070 FM 3083

Conroe, TX 77301-6104

 

Federal
Employer Identification Number:

 

33-0264467

 

Patents
Described in Section 4(c):

 

	
  Title of Patent

  	
   

  	
  U.S. Patent Number

  	
   

  
	
  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

  	
   

  

 

19

 

EXHIBIT A

 

DESCRIPTION OF COLLATERAL

 

The term “Collateral” shall mean the following assets
of the Company:

 

(a)           All “accounts,”
as that term is defined in Article 9 of the Uniform Commercial Code, as in
effect in the State of New York (“UCC”), including, without limitation,
every right to payment for goods or other property of any kind sold or leased
or for services rendered or for any other transaction, whether or not the right
to payment has been earned by performance, and including without limitation
every account receivable, all purchase orders, all interest in goods the sale
or lease of which gives rise to the right to payment (including returned or
repossessed goods and unpaid seller’s rights), and the rights pertaining to
such goods, including the right to stoppage in transit, every right to
payment under any contract, and every lien, guaranty, or security interest that
secures a right to payment for any of the foregoing (“Accounts”);

 

(b)           All
chattel paper, consisting of a writing or writings evidencing both a monetary
obligation and a security interest in or lease of goods, together with any
guarantees, letters of credit, and other security therefore (“Chattel Paper”);

 

(c)           All “deposit
accounts,” as defined in the UCC (“Deposit Accounts”);

 

(d)           All “inventory”
of whatever kind, as that term is used in the UCC, including without limitation
all goods held by the Company for sale or lease, goods furnished or to be
furnished under a contract for service, and supplies, packaging, raw materials,
goods in transit, work-in-process, and materials used or consumed or to be used
or consumed in the Company’s business, or in the processing, packaging, or
shipping of same, all finished goods, and all property, the sale or lease of
which has given rise to Accounts, Chattel Paper, or Instruments, and that has
been returned to the Company or repossessed by the Company or stopped in
transit, and all warranties and related claims, credits, setoffs, and other
rights of recovery with respect to any of the foregoing (“Inventory”);

 

(e)           All “equipment,”
as that term is used in the UCC, including without limitation all equipment,
machinery, and other property held for use in or purchased for the Company’s
business, together with all increases, parts, fittings, accessories, repair
equipment, and special tools now or later affixed to, or used in connection
with, that property, all transferable rights of the Company to the licenses and
warranties (express and implied) received from the sellers and manufacturers of
the foregoing property, all related claims, credits, setoffs, and other rights
of recovery (“Equipment”);

 

(f)            All “instruments,”
including without limitation every instrument of any kind, as that term is used
in the UCC, and includes every promissory note, negotiable instrument, certificated
security, or other writing that evidences a right to payment of money,

 

20

 

that is not a lease or security agreement, and that is
transferred in the ordinary course of business by delivery with any necessary
assignment or indorsement (“Instruments”);

 

(g)           “Investment
property,” as that term is defined in the UCC (“Investment Property”);

 

(h)           All
documents, including without limitation any paper that is treated in the
regular course of business as adequate evidence that the person in possession
of the paper is entitled to receive, hold, and dispose of the goods the paper
covers, including warehouse receipts, bills of lading, certificates of title,
and applications for certificates of title;

 

(i)            All “general
intangibles” of any kind, as that term is used in the UCC, and includes without
limitation all intangible personal property other than Accounts, Documents,
Instruments, and Chattel Paper, and includes without limitation money, contract
rights, corporate or other business records, deposit accounts, inventions,
designs, formulas, Patents (as defined in Section 2 of this Agreement),
service marks, trademarks, trade names, trade secrets, engineering drawings,
goodwill, rights to prepaid expenses, registrations, franchises, copyrights,
licenses, customer lists, computer programs and other software, source code,
tax refund claims, royalty, licensing and product rights, all claims under
guarantees, security interests or other security held by or granted to Borrower
to secure payment of any of the Accounts by an Account Debtor, all
indemnification rights, and rights to retrieval from third parties of
electronically processed and recorded data pertaining to any Collateral, things
in action, items, checks, drafts, and orders in transit to or from Borrower,
credits or deposits of Borrower (whether general or special) that are held by
Secured Parties (“General Intangibles”)

 

(j)            “Supporting
obligations,” as that term is defined in the UCC (“Supporting Obligations”);
and

 

(k)           To the
extent not listed above in this Exhibit A as original collateral, proceeds
and products of the foregoing.

 

The term “Collateral” shall not include, (i) the
Borrower’s rights under that certain Amended and Restated License Agreement,
dated September 1, 2001, between the Borrower and California Institute of
Technology, and (ii) the Borrower’s rights under the Liquidmetal/UVAPF
License Agreement, dated May 1, 2002, between the Borrower and the
University of Virginia Patent Foundation.

 

21

 

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 COMMONWEALTH ASSOCIATES, L.P., a New York limited
partnership, 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 830 Third Avenue, 8th Floor, New York, NY 10022

 

IN WITNESS WHEREOF, Borrower has caused this
Agreement to be duly executed by its officer thereunto duly authorized as of
the 2nd day of August 2005.

 

	
   

  	
  LIQUIDMETAL
  TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John Kang

  	
   

  
	
   

  	
   

  	
  John
  Kang,

  
	
   

  	
   

  	
  President
  and Chief Executive Officer

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}]]