Document:

Exhibit 10.3

 

NEITHER THESE SECURITIES NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES REGULATORS OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE, NOR
MAY ANY INTEREST THEREIN BE, OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY, SUBJECT TO CERTAIN EXCEPTIONS, A LEGAL OPINION
OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, IN FORM AND SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES IN
ACCORDANCE WITH APPLICABLE LAWS.

 

LIQUIDMETAL
TECHNOLOGIES, INC.

 

COMMON STOCK
PURCHASE WARRANT

 

	
  Warrant No. [  ]

  	
   

  	
  Date of
  Original Issuance: January 3, 2007

  

 

Liquidmetal Technologies, Inc., a
Delaware corporation (together with any entity that shall succeed to or assume
the obligations of Liquidmetal Technologies, Inc. hereunder, the “Company”), hereby certifies that, for
value received, [ ] or its registered assigns (the “Holder”), is entitled to purchase from the Company up to a
total of [ ] shares of common stock, par value $0.001 per share (the “Common Stock”), of the Company (each such
share, a “Warrant Share” and all
such shares, the “Warrant Shares”)
at an exercise price equal to $1.93 per share (as adjusted from time to time as
provided in Section 9, the “Exercise
Price”), at any time and from time to time from and after the date
hereof and through and including January 3, 2012; provided that with respect to
any Warrant Shares that are not covered by an effective registration statement
by the date which is one hundred twenty (120) calendars days after the Date of
Original Issuance of this Warrant (the “Extension
Date”), the expiration date of this Warrant as to such Warrant
Shares shall be extended, but not beyond the seventh (7th)
anniversary of the Date of Original Issuance, by an additional thirty (30)
calendar days for every thirty (30) day period following the Extension Date
that such Warrant Shares are not covered by an effective registration statement
(the “Expiration Date”), and
subject to the following terms and conditions:

 

1.             Definitions. In
addition to the terms defined elsewhere in this Warrant, capitalized terms that
are not otherwise defined herein shall have the meanings given to such

 

 

terms in the
Securities Purchase Agreement dated January 3, 2007 to which the Company and
the original Holder are parties (the “Purchase
Agreement”) and the 8% Subordinated Convertible Unsecured Notes of
the Company (the “Notes”) issued
in connection therewith. The term “Common
Stock” shall include the Company’s common stock, par value $0.001
per share as authorized on the date of the Purchase Agreement and any other
securities or property of the Company or of any other person (corporate or
otherwise) which the Holder at any time shall be entitled to receive on the
exercise hereof in lieu of or in addition to such common stock, or which at any
time shall be issuable in exchange for or in replacement of such common stock. The
term “Affiliate” shall mean any
Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144 promulgated by the SEC pursuant
to the Securities Act of 1933, as amended.

 

2.             Holder of Warrant. The
Company shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to
time. The Company may deem and treat the registered Holder of this Warrant as
the absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent actual notice to
the contrary from the transferee and transferor.

 

3.             Recording of Transfers. Subject to Section 6, the Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed,
to the Company at its address specified herein. As a condition to the transfer,
the Company may request a legal opinion as contemplated by the legend above and
related terms of the Purchase Agreement. Upon any such registration or
transfer, a new Warrant to purchase Common Stock, in substantially the form of
this Warrant (any such new Warrant, a “New
Warrant”), evidencing the portion of this Warrant so transferred
shall be issued to the transferee and a New Warrant evidencing the remaining
portion of this Warrant not so transferred, if any, shall be issued to the transferring
Holder. The acceptance of the New Warrant by the transferee thereof shall be
deemed the acceptance by such transferee of all of the rights and obligations
of a holder of a Warrant.

 

4.             Exercise and Duration of Warrants.

 

(a)           This
Warrant shall be exercisable by the registered Holder in whole or in part at
any time and from time to time on or after the date hereof to and including the
Expiration Date by delivery to the Company of a duly executed facsimile copy of
the Exercise Notice form annexed hereto (or such other office or agency of the
Company as it may designate by notice in writing to the registered Holder at
the address of such Holder appearing on the books of the Company). At 6:30
p.m., New York City time on the Expiration Date, the portion of this Warrant
not exercised prior thereto shall be and become void and of no value. The
Company may not call or redeem all or any portion of this Warrant without the
prior written consent of the Holder. If at any time (i) this Warrant is
exercised after one year from the date of issuance of this Warrant but before
the Expiration Date and (ii) during the Trading Day period immediately
preceding the holder’s delivery of an Exercise Notice in respect of such
exercise, a Registration Statement (as defined in the Registration Rights
Agreement) covering the Warrant Shares that

 

2

 

are the subject
of the Exercise Notice (the “Unavailable
Warrant Shares”) is not available for the resale of such Unavailable
Warrant Shares, the holder of this Warrant also may exercise this Warrant as to
any or all of such Unavailable Warrant Shares and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the aggregate Exercise Price, elect instead to receive upon such
exercise a reduced number of shares of Common Stock (the “Net Number”) determined according to the
following formula (a “Cashless Exercise”):

 

	
   

  	
  Net Number =

  	
  (A x B) - (A x C)

  	
   

  
	
   

  	
   

  	
  B

  	
   

  

 

For purposes of the foregoing
formula:

 

A= the total number of shares with
respect to which this Warrant is then being exercised in a Cashless Exercise.

 

B= the VWAP on the Trading Day
immediately preceding the date of the Exercise Notice.

 

C= the Exercise Price then in
effect for the applicable Warrant Shares at the time of such exercise.

 

VWAP = For any date, the price determined by
the first of the following clauses that applies: (a) if the Common Stock is
then listed or quoted on a Trading Market, the daily volume weighted average
price per share of the Common Stock for such date (or the nearest preceding
date) on the Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m.
Eastern Time to 4:02 p.m. Eastern Time); (b) if the Common Stock is not
then listed or quoted on a Trading Market and if prices for the Common Stock
are then quoted on the OTC Bulletin Board, the volume weighted average price
per share of the Common Stock for such date (or the nearest preceding date) on
the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted on
the OTC Bulletin Board and if prices for the Common Stock are then reported in
the “Pink Sheets” published by the Pink Sheets, LLC (or a similar organization
or agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (d) in all other
cases, the fair market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the Holder and reasonably
acceptable to the Company.

 

There cannot be a Cashless Exercise
unless “B” exceeds “C”.

 

(b)           The
Company shall not effect any exercise of this Warrant, and a Holder shall not
have the right to exercise any portion of this Warrant, pursuant to Section
4(a) or otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise, such Holder
(together with such Holder’s Affiliates, and any other person or entity acting
as a group together with such Holder or any of such Holder’s Affiliates),

 

3

 

as set forth on
the applicable Notice of Exercise, would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by
such Holder and its Affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (A) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by such Holder or any of its
Affiliates and (B) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without limitation,
any other Warrants or Notes) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by such Holder
or any of its affiliates. Except as set forth in the preceding sentence, for
purposes of this Section 4(b), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and
the rules and regulations promulgated thereunder, it being acknowledged by a
Holder that the Company is not representing to such Holder that such
calculation is in compliance with Section 13(d) of the Exchange Act and such
Holder is solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained in this
Section 4(b) applies, the determination of whether this Warrant is exercisable
(in relation to other securities owned by such Holder together with any
Affiliates) and of which a portion of this Warrant is exercisable shall be in
the sole discretion of a Holder, and the submission of a Notice of Exercise
shall be deemed to be each Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder together with
any Affiliates) and of which portion of this Warrant is exercisable, in each
case subject to such aggregate percentage limitation, and the Company shall
have no obligation to verify or confirm the accuracy of such determination. In
addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Section 4(b), in
determining the number of outstanding shares of Common Stock, a Holder may rely
on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more
recent public announcement by the Company or (z) any other notice by the
Company or the Company’s transfer agent setting forth the number of shares of
Common Stock outstanding. Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing to such
Holder the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including
this Warrant, by such Holder or its Affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares of
Common Stock issuable upon exercise of this Warrant. The Beneficial Ownership
Limitation provisions of this Section 4(b) may be waived by such Holder, at the
election of such Holder, upon not less than 61 days’ prior notice to the
Company to change the Beneficial Ownership Limitation to 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant, and the
provisions of this Section 4(b) shall continue to apply. Upon such a change by
a Holder of the Beneficial Ownership Limitation from such 4.99% limitation to
such 9.99% limitation, the Beneficial Ownership Limitation may not be further
waived by such

 

4

 

Holder. The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 4(b)) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained
or to make changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this paragraph shall
apply to a successor holder of this Warrant.

 

5.             Delivery of Warrant Shares.

 

(a)           To
effect exercises hereunder, the Holder shall not be required to physically surrender
this Warrant upon exercise unless this Warrant ceases to be further exercisable
for additional Warrant Shares. Upon delivery of the Exercise Notice to the
Company (with the attached Warrant Shares Exercise Log) at its address for
notice set forth herein and upon payment of the Exercise Price multiplied by
the number of Warrant Shares that the Holder intends to purchase hereunder, the
Company shall promptly (but in no event later than three Trading Days after the
Date of Exercise (as defined herein)) issue and deliver to the Holder, a
certificate for the Warrant Shares issuable upon such exercise, which, unless
otherwise required by the Purchase Agreement, shall be free of restrictive
legends. A “Date of Exercise”
means the date on which the Holder shall have delivered to Company: (i) the
Exercise Notice (with the Warrant Exercise Log attached to it), appropriately
completed and duly signed and (ii) except in the case of a Cashless Exercise,
payment in full of the Exercise Price in immediately available funds or federal
funds for the number of Warrant Shares so indicated by the Holder to be
purchased.

 

(b)           If
by the third Trading Day after a Date of Exercise the Company fails to deliver
the required number of Warrant Shares in the manner required pursuant to
Section 5(a), then the Holder will have the right to rescind such exercise.

 

(c)           If
by the third Trading Day after a Date of Exercise the Company fails to deliver
the required number of Warrant Shares in the manner required pursuant to
Section 5(a), and if after such third Trading Day and prior to the receipt of
such Warrant Shares, the Holder purchases in a bona fide arm’s length
transaction for fair market value (in an open market transaction or otherwise)
the number of shares of Common Stock necessary to deliver in satisfaction of a
bona fide arm’s length sale for fair market value by the Holder of the Warrant
Shares which the Holder was entitled to receive upon such exercise (a “Buy-In”), then the Company shall (1) pay in
cash to the Holder the amount by which (x) the Holder’s total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the Holder’s total sales price (including brokerage
commissions, if any) for the shares of Common Stock so sold and (2) at the
option of the Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and delivery
obligations hereunder. The Holder shall provide the Company written notice and
reasonably detailed documentation indicating the amounts requested by the
Holder in respect of the Buy-In.

 

(d)           The
Company’s obligations to issue and deliver Warrant Shares in accordance with
the terms hereof are absolute and unconditional, irrespective of any action or

 

5

 

inaction by the
Holder to enforce the same, any waiver or consent with respect to any provision
hereof, the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other Person
of any obligation to the Company or any violation or alleged violation of law
by the Holder or any other Person, and irrespective of any other circumstance
which might otherwise limit such obligation of the Company to the Holder in
connection with the issuance of Warrant Shares. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law
or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Company’s failure to timely
deliver certificates representing shares of Common Stock upon exercise of the
Warrant as required pursuant to the terms hereof.

 

6.             Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant
Shares or Warrants in a name other than that of the Holder. The Holder shall be
responsible for all other tax liability that may arise as a result of holding
or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

 

7.             Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for this Warrant, a New
Warrant, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and ownership thereof and customary
and reasonable indemnity. Applicants for a New Warrant under such circumstances
shall also comply with such other reasonable regulations and procedures and pay
such other reasonable third-party costs as the Company may prescribe. If a New
Warrant is requested as a result of a mutilation of this Warrant, then the
Holder shall deliver such mutilated Warrant to the Company as a condition
precedent to the Company’s obligation to issue the New Warrant.

 

8.             Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep
available out of the aggregate of its authorized but unissued and otherwise
unreserved Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other contingent purchase rights of
persons other than the Holder (taking into account the adjustments and
restrictions of Section 9). The Company covenants that all Warrant
Shares so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.

 

9.             Certain Adjustments. The
Exercise Price and number of Warrant Shares issuable upon exercise of this
Warrant are subject to adjustment from time to time as set forth in this Section
9.

 

6

 

(a)           Stock Dividends and Splits, Recapitalizations, Etc. If the Company, at any time while this Warrant
is outstanding, (i) pays a stock dividend on its Common Stock or otherwise
makes a distribution on any class of capital stock that is payable in shares of
Common Stock or subdivides the outstanding shares of Common Stock into a larger
number of shares (by any stock split, recapitalization or otherwise), then in
each such case the Exercise Price shall be proportionately reduced and the
number of Warrant Shares shall be proportionately increased, and (ii) combines
outstanding shares of Common Stock into a smaller number of shares (by reverse
stock split, recapitalization, or otherwise), then in each such case the
Exercise Price shall be proportionately increased and the number of Warrant
Shares shall be proportionately decreased. Any adjustment made pursuant to
clauses (i) and (ii) of this paragraph shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
dividend or distribution or immediately after the effective date of such
subdivision or combination (as the case may be). If any event requiring an adjustment
under this paragraph occurs during the period that an Exercise Price is
calculated hereunder, then the calculation of such Exercise Price shall be
adjusted appropriately to reflect such event.

 

(b)           Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding,
distributes to all holders of Common Stock (i) evidences of its indebtedness,
(ii) any security (other than a distribution of Common Stock covered by
the preceding paragraph), (iii) rights or warrants to subscribe for or
purchase any security, or (iv) any other asset (in each case, “Distributed Property”), then in each such
case the Exercise Price shall be appropriately adjusted. Any adjustment made
pursuant to this paragraph shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
distribution. If any event requiring an adjustment under this paragraph occurs
during the period that an Exercise Price is calculated hereunder, then the
calculation of such Exercise Price shall be adjusted appropriately to reflect
such event.

 

(c)           Adjustment of Exercise Price upon Issuance of Common Stock. If and whenever on or after the Issuance
Date, the Company issues or sells, or in accordance with this Section 7(a) is
deemed to have issued or sold, any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for the account
of the Company, but excluding shares of Common Stock deemed to have been issued
or sold by the Company in connection with any Excluded Security) for a
consideration per share (the “New Securities
Issuance Price”) less than a price (the “Applicable Price”) equal to the Conversion Price in effect
immediately prior to such issue or sale (the foregoing a “Dilutive Issuance”), then immediately
after such Dilutive Issuance, the Exercise Price then in effect shall be
reduced to the New Securities Issuance Price. For purposes of determining the
adjusted Exercise Price under this Section 9(c), the following shall be applicable:

 

(i)            Issuance of Options. If
the Company in any manner grants or sells any Options and the lowest price per
share for which one share of Common Stock is issuable upon the exercise of any
such Option or upon conversion or exchange or exercise of any Convertible
Securities issuable upon exercise of such Option is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and to
have been issued and sold by the Company at the time of the granting or sale of
such Option for such price per share. For purposes of this Section 9(c)(i), the
“lowest price per share for which one share of Common Stock is issuable upon
the exercise of any such Option or upon conversion or exchange

 

7

 

or exercise of
any Convertible Securities issuable upon exercise of such Option” shall be
equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock upon
granting or sale of the Option, upon exercise of the Option and upon conversion
or exchange or exercise of any Convertible Security issuable upon exercise of
such Option. No further adjustment of the Exercise Price shall be made upon the
actual issuance of such Common Stock or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance of such Common Stock upon
conversion or exchange or exercise of such Convertible Securities.

 

(ii)           Issuance of Convertible Securities. If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one share of
Common Stock is issuable upon such conversion or exchange or exercise thereof
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the issuance of sale of such Convertible Securities for such price per
share. For the purposes of this Section 9(c)(ii), the “price per share for
which one share of Common Stock is issuable upon such conversion or exchange or
exercise” shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to any one share of
Common Stock upon the issuance or sale of the Convertible Security and upon the
conversion or exchange or exercise of such Convertible Security. No further
adjustment of the Exercise Price shall be made upon the actual issuance of such
Common Stock upon conversion or exchange or exercise of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is
made upon exercise of any Options for which adjustment of the Exercise Price
had been or are to be made pursuant to other provisions of this Section 9(c), no
further adjustment of the Exercise Price shall be made by reason of such issue
or sale.

 

(iii)          Change in Option Price or Rate of Conversion. If the purchase price provided for in any Options,
the additional consideration, if any, payable upon the issue, conversion,
exchange or exercise of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable or exercisable for
Common Stock changes at any time, the Exercise Price in effect at the time of
such change shall be adjusted to the Exercise Price which would have been in
effect at such time had such Options or Convertible Securities provided for
such changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold. Notwithstanding
anything in this Warrant to the contrary, in the event that the Company agrees
to decrease the conversion price of any of its 7% Convertible Secured
Promissory Notes due August 2007 in connection with an agreement by the holder
of any such notes to convert the same, such decrease in the conversion price
will not result in any adjustment to the Exercise Price pursuant to this
Section 9(c) of this Warrant.

 

(iv)          Calculation of Consideration Received. In case any Option is issued in connection with
the issue or sale of other securities of the Company, together comprising one
integrated transaction in which no specific consideration is allocated to such
Options by the parties thereto, the Options will be deemed to have been issued
for a consideration of $.01. If any Common Stock, Options or Convertible
Securities are issued or sold or deemed to have been issued or sold for cash,
the consideration received therefor will be deemed to be the net amount
received by the Company therefor. If any Common Stock, Options

 

8

 

or Convertible
Securities are issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Company will be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the Closing Sale Price of such securities on the date of receipt. If
any Common Stock, Options or Convertible Securities are issued to the owners of
the non-surviving entity in connection with any merger in which the Company is
the surviving entity, the amount of consideration therefor will be deemed to be
the fair value of such portion of the net assets and business of the
non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash or securities will be determined by the Company.

 

(v)           Record Date. If the
Company takes a record of the holders of Common Stock for the purpose of
entitling them (A) to receive a dividend or other distribution payable in
Common Stock, Options or in Convertible Securities or (B) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such record date
will be deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such dividend
or the making of such other distribution or the date of the granting of such
right of subscription or purchase, as the case may be.

 

(d)           Fundamental Transactions. If, at any time while this Warrant is outstanding, (1) the Company
effects any merger or consolidation of the Company with or into another Person,
(2) the Company effects any sale of all or substantially all of its assets in
one or a series of related transactions, (3) any tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (4) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental Transaction”), then the Holder shall have the
right thereafter to receive, upon exercise of this Warrant, the same amount and
kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant
Shares then issuable upon exercise in full of this Warrant (the “Alternate Consideration”). For purposes of
any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. At the Holder’s option and request, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a
new warrant substantially in the form of this Warrant and consistent with the
foregoing provisions and evidencing the Holder’s right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise thereof.
Any such successor or surviving entity shall be deemed to be required to comply
with the provisions of this paragraph (d) and shall insure that the Warrant (or
any such replacement security) will be similarly adjusted upon any subsequent

 

9

 

transaction
analogous to a Fundamental Transaction. Notwithstanding the foregoing, in the
event of a Fundamental Transaction that constitutes a Change in Control (as
defined in the Notes), at the request of the Holder delivered before the 90th
day after such Fundamental Transaction is consummated, the Company (or the
successor to the Company) shall purchase this Warrant from the Holder by paying
to the Holder, within five Business Days after such request (or, if later, on
the effective date of the Fundamental Transaction), cash in an amount equal to the
Black Scholes Value of the remaining unexercised portion of this Warrant on the
date such Fundamental Transaction is consummated. For the purpose of this
Warrant, “Black Scholes Value”
means the value, as reasonably calculated by the Company, of this Warrant based
on the Black-Scholes Option Pricing Model, provided that the Black Sholes Value
of this Warrant shall not for this purpose exceed an amount equal to $5.00
multiplied by the number of shares of Common Stock for which this Warrant is
exercisable at the time the Fundamental Transaction is consummated (with such
$5.00 cap being subject to adjustment for stock dividends, stock splits,
reverse stock splits, and the like).

 

(e)           Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to
paragraph (a) of this Section, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same
as the aggregate Exercise Price in effect immediately prior to such adjustment.

 

(f)            Calculations. All
calculations under this Section 9 shall be made to the nearest cent or the
nearest 1/100th of a share, as applicable. The number of shares of
Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.

 

(g)           Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9,
the Company at its expense will promptly compute such adjustment in accordance
with the terms of this Warrant and prepare a certificate setting forth such
adjustment, including a statement of the adjusted Exercise Price and adjusted
number or type of Warrant Shares or other securities issuable upon exercise of
this Warrant (as applicable), describing the transactions giving rise to such
adjustments and showing in detail the facts upon which such adjustment is based.
Upon written request, the Company will promptly deliver a copy of each such
certificate to the Holder and to the Company’s Transfer Agent. No adjustment in
the Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in such rate; provided, however,
that any adjustments which by reason of this Section 9(g) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment.

 

(h)           Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash,
securities or other property in respect of its Common Stock, including without
limitation any granting of rights or warrants to subscribe for or purchase any
capital stock of the Company or any Subsidiary, (ii) authorizes or approves,
enters into any agreement contemplating or solicits stockholder approval for
any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation
or winding up of the affairs of the Company,

 

10

 

then the Company
shall deliver to the Holder a notice describing the material terms and
conditions of such transaction, at least five calendar days prior to the
applicable record or effective date on which a Person would need to hold Common
Stock in order to participate in or vote with respect to such transaction, and
the Company will take all steps reasonably necessary in order to insure that
the Holder is given the practical opportunity to exercise this Warrant prior to
such time so as to participate in or vote with respect to such transaction;
provided, however, that the failure to deliver such notice or any defect
therein shall not affect the validity of the corporate action required to be
described in such notice.

 

10.           Payment of Exercise Price. Upon exercise of this Warrant the Holder shall pay the Exercise Price in
immediately available funds unless it is a Cashless Exercise in accordance with
Section 4 hereof.

 

11.           No Fractional Shares.
No fractional shares of Warrant Shares will be issued in connection with any
exercise of this Warrant. In lieu of any fractional shares which would
otherwise be issuable, the Company shall pay cash equal to the product of such
fraction multiplied by the closing price of one Warrant Share as reported by
Bloomberg L.P. (or the successor to its function of reporting share prices) on
the date of exercise.

 

12.           Notices. Any and all
notices or other communications or deliveries hereunder (including, without
limitation, any Exercise Notice) shall be in writing and shall be deemed given
and effective on the earliest of (i) the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number specified
in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii)
the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (iii) the Trading Day following the date of
mailing, if sent and delivered by nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be:  (i) if to the Company, to Liquidmetal
Technologies, Inc., 25800 Commercentre Drive, Suite 100, Lake Forest,
California  92630. Attn: Chief Executive
Officer, Facsimile No.: (949) 206-8008, or (ii) if to the Holder, to the
address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section.

 

13.           Warrant Agent. The
Company shall serve as warrant agent under this Warrant. Upon 30 days’ notice
to the Holder, the Company may appoint a new warrant agent. Any corporation
into which the Company or any new warrant agent may be merged or any
corporation resulting from any consolidation to which the Company or any new
warrant agent shall be a party or any corporation to which the Company or any
new warrant agent transfers substantially all of its corporate trust or
shareholders services business shall be a successor warrant agent under this
Warrant without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by first
class mail, postage prepaid) to the Holder at the Holder’s last address as
shown on the Warrant Register.

 

11

 

14.           Miscellaneous.

 

(a)           This
Warrant shall be binding on and inure to the benefit of the parties hereto and
the respective successors and assigns of the Holder it being understood that
transfers of this Warrant by the Holder are subject to the legend set forth of
the face hereof. Subject to the preceding sentence, nothing in this Warrant
shall be construed to give to any Person other than the Company and the Holder
any legal or equitable right, remedy or cause of action under this Warrant. This
Warrant may be amended only in writing signed by the Company and the Holder and
their successors and assigns.

 

(b)           All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal
proceedings to resolve any dispute concerning the interpretations, enforcement
and defense of this Warrant and the transactions herein contemplated (“Proceedings”) (whether brought against a
party hereto or its respective Affiliates, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”),
although depositions may be taken in other locations. Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any New York Court, or that such
Proceeding has been commenced in an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Warrant and
agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Warrant or the transactions contemplated
hereby. If either party shall commence a Proceeding to enforce any provisions
of this Warrant, then the prevailing party in such Proceeding shall be
reimbursed by the other party for its attorney’s fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
Proceeding.

 

(c)           The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

 

(d)           In
case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Warrant.

 

(e)           The
Company will not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of

 

12

 

any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant
against such impairment.

 

(f)            This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise hereof. In
connection with an exercise of this Warrant in accordance with the terms
hereof, upon the surrender of this Warrant and the payment of the aggregate
Exercise Price (or by means of a Cashless Exercise if permitted hereunder), the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder
as the record owner of such shares as of the close of business on the later of
the date of such surrender or payment.

 

[REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK,

SIGNATURE PAGE FOLLOWS]

 

13

 

IN WITNESS WHEREOF, the Company has
caused this Warrant to be duly executed by its authorized officer as of the
date first indicated above.

 

	
   

  	
  LIQUIDMETAL
  TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Young Ham

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
					

 

14

 

EXERCISE NOTICE

 

To Liquidmetal Technologies, Inc.

 

The undersigned hereby irrevocably elects to
purchase               
shares of common stock, par value $0.001 per share, of Liquidmetal
Technologies, Inc. (“Common Stock”),
pursuant to Warrant No. [  ], originally
issued January 3, 2007 (the “Warrant”),
and, if not a Cashless Exercise in accordance with Section 4, encloses herewith
$         in cash, federal funds or
other immediately available funds, which sum represents the aggregate Exercise
Price (as defined in the Warrant) for the number of shares of Common Stock to
which this Exercise Notice relates, together with any applicable taxes payable
by the undersigned pursuant to the Warrant.

 

The undersigned hereby certifies to the Company
that the undersigned’s exercise of the amount set forth above will not directly
result in the undersigned (together with the undersigned’s affiliates)
beneficially owning in excess of 4.99% of the number of shares of Common Stock
outstanding immediately after giving effect to such exercise, calculated in
accordance with Section 4(b) of the Warrant; provided that if the undersigned
has waived the 4.99% beneficial ownership requirement by providing the Company
with notice at least 61 days prior to the date hereof, the undersigned hereby
certifies to the Company that the undersigned’s exercise of the amount set
forth above will not directly result in the undersigned (together with the
undersigned’s affiliates) beneficially owning in excess of 9.99% of the number
of shares of Common Stock outstanding immediately after giving effect to such
conversion, calculated in accordance with Section 4(b) of the Warrant.

 

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

 

 

	
   

  	
  Print Name of Holder:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOLDER’S SOCIAL SECURITY OR

  
	
   

  	
  TAX IDENTIFICATION NUMBER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Holder’s Address:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
				

 

 

Warrant Shares Exercise Log

 

	
  Date

  	
   

  	
  Number of Warrant

  Shares Available to be

  Exercised

  	
   

  	
  Number of Warrant Shares

  Exercised

  	
   

  	
  Number of

  Warrant Shares

  Remaining to

  be Exercised

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

FORM OF ASSIGNMENT

 

[To be completed and signed only
upon transfer of Warrant]

 

FOR VALUE RECEIVED, the undersigned
hereby sells, assigns and transfers unto                                          
the right represented by the within Warrant to purchase                    
shares of Common Stock of Liquidmetal Technologies, Inc. to which the within
Warrant relates and appoints                         
attorney to transfer said right on the books of the Company with full power of
substitution in the premises.

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature must conform in all
  respects to name of

  holder as specified on the face of the Warrant)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address of Transferee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax Identification Number or
  Social Security

  Number of Transferee

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  In the presence of:Exhibit 10.4

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of January 3, 2007,
by and among Liquidmetal Technologies, Inc., a Delaware corporation (the “Company”), and the investors signatory hereto (each an “Investor” and collectively, the “Investors”).

 

BACKGROUND

 

This Agreement is made pursuant to the Securities
Purchase Agreement, dated as of January 3, 2007, among the Company and the
Investors (the “Purchase Agreement”). In
connection with the Purchase Agreement, the Company has agreed, upon the terms
and subject to the conditions of the Purchase Agreement, (i) to issue and sell
on the date hereof to each Investor 8% Subordinated Convertible Unsecured Notes
of the Company (the “Notes”),
which are convertible into shares of Common Stock in accordance with the terms
of the Notes (the “Conversion Shares”)
and (ii) to issue and sell on the date hereof to the Investors warrants (the “Warrants”) to purchase shares of Common Stock  (the “Warrant Shares”).

 

AGREEMENT

 

The Company and the Investors hereby agree as
follows:

 

1.             Definitions. Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the respective meanings set forth in this Section 1:

 

“Advice” shall
have the meaning set forth in Section 6(d).

 

“Common Stock” means
the common stock of the Company, $0.001 par value per share.

 

“Conversion
Shares” shall have the meaning set forth in the Background section.

 

“Effective Date”
means the date that the Registration Statement filed pursuant to Section 2(a)
is first declared effective by the SEC.

 

“Effectiveness Date”
means the earlier of: (i) the 90th calendar day following the
Closing Date; provided, that, if the SEC reviews and has written
comments to the filed Registration Statement that would require the filing of a
pre-effective amendment thereto with the SEC, then the Effectiveness Date under
this clause (i) shall be the 120th calendar day following the
Closing Date, and (ii) the fifth Trading Day following the date on which the
Company is notified by the SEC that the Registration Statement will not be
reviewed or is no longer subject to further review and comments.

 

 

“Event” shall
have the meaning set forth in Section 2(b).

 

“Event Date” shall have the meaning set forth in Section 2(b).

 

“Exchange Act”
means the Securities Exchange Act of 1934, as amended.

 

“Filing Date” means
the 45th day following the date of this Agreement.

 

“Holder” or “Holders” means the holder or holders, as the case may be,
from time to time of Registrable Securities.

 

“Indemnified Party”
shall have the meaning set forth in Section 5(c).

 

“Indemnifying Party”
shall have the meaning set forth in Section 5(c).

 

“Losses” shall
have the meaning set forth in Section 5(a).

 

“Notes”
shall have the meaning set forth in the Background section.

 

“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.

 

“Prospectus”
means the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.

 

“Registrable
Securities” means (i) the Warrant Shares, (ii) the Conversion Shares,
(iii) any other securities into which the Warrant Shares and the Conversion
Shares may be reclassified after the date hereof, and (iv) any shares of Common
Stock issued as payment of principal amount or interest in lieu of cash with
respect to the Notes; provided however, that any shares of Common Stock will
cease to be Registrable Securities at such time as they have been sold under a
Registration Statement or pursuant to Rule 144, or otherwise or such time as
they are eligible to be sold without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act; and provided further that any
shares of Common Stock referred to in clause (iv) of this paragraph shall not
be deemed Registrable Securities until (A) in the case of shares of Common
Stock to be issued in satisfaction of the Amortization Redemption Amount
pursuant to Section 1(c) of the Notes, the Amortization Conversion Notice Date
(as defined in the Notes), (B) in the case of shares of Common Stock underlying
any additional Notes issued pursuant to Section 2 of the Notes, the date on
which the additional Notes are issued pursuant to said Section 2, and (C) in
the case of shares of Common Stock issuable pursuant to Section 9 of the Notes,
upon the Mandatory Conversion Notice Date.

 

2

 

“Registration Expenses” means all registration and filing
fees, printing expenses, and fees and disbursements of counsel for the Company
to be incurred by the Company in connection with each Holder’ s registration
rights under this Agreement.

 

“Registration Period”
means the period commencing on any applicable Effectiveness Date and the
earliest of (i) the fifth anniversary of such Effectiveness Date, (ii) the date
on which the Holders are able to resell all of their respective Registrable
Securities without volume restrictions pursuant to Rule 144(k) promulgated
under the Securities Act, or (iii) the date on which all of the Registrable
Securities have been sold by the Investors under a Registration Statement or
pursuant to Rule 144.

 

“Registration Statement”
means the registration statement required to be filed in accordance with
Section 2(a) including the Prospectus, amendments and supplements to such
registration statements or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statements.

 

“Rule 144” means
Rule 144 promulgated by the SEC pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC having substantially the same effect as such Rule.

 

“Rule 415” means
Rule 415 promulgated by the SEC pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC having substantially the same effect as such Rule.

 

“Rule 424” means
Rule 424 promulgated by the SEC pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC having substantially the same effect as such Rule.

 

“Securities Act”
means the Securities Act of 1933, as amended.

 

“SEC” means the Securities and Exchange
Commission.

 

“Selling Expenses” means all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for Holders.

 

“Selling Shareholder Questionnaire” shall have the meaning set forth in Section 3(j).

 

“Trading Day”
means (i) a day on which the Common Stock is traded on a Trading Market, or
(ii) if the Common Stock is not listed on a Trading Market, a day on which the
Common Stock is traded in the over-the-counter market or quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i) or (ii) hereof, then Trading Day shall
mean a Business Day.

 

3

 

“Trading Market” means whichever of the New York Stock Exchange, the American Stock
Exchange, the NASDAQ Global Market or Global Select Market, the NASDAQ Capital
Market or OTC Bulletin Board on which the Common Stock is listed or quoted for
trading on the date in question.

 

“Warrants”
shall have the meaning set forth in the Background section.

 

“Warrant
Shares” shall have the meaning set forth in the Background section.

 

2.             Registration.

 

(a)           On or prior to the Filing Date
for the Warrant Shares, the Company shall use its commercially reasonable
efforts to prepare and file with the SEC a Registration Statement covering the
resale of 100% of the number of Conversion Shares and Warrant Shares underlying
the Notes and Warrants issued to the Holders on the date of this Agreement for
an offering to be made on a continuous basis pursuant to Rule 415 (which number
of shares is deemed by
the parties to be a reasonable, good faith estimate of the maximum number of
shares issuable pursuant to the Notes and Warrants through conversion or
exercise by the Holders or through the payment by the Company of principal,
interest, or redemption thereunder). The Registration
Statement shall be on Form S-1 (or on such other form appropriate for such
purpose) and shall contain (unless otherwise directed by the Holders and except
if otherwise required pursuant to comments received from the SEC upon a review
of such Registration Statement or pursuant to judicial and SEC interpretations)
substantially the “Plan of Distribution” attached hereto as Annex A. The
Company shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act as soon as
reasonably possible but, in any event, no later than the applicable
Effectiveness Date, and shall use its commercially reasonable efforts to keep
the Registration Statement effective under the Securities Act during the
balance of the applicable Registration Period.

 

(b)           Subject to the last sentence
of this Section 2(b), if: (i) a Registration Statement under subsection (a)
above is not filed on or prior to its Filing Date, or (ii) a Registration
Statement under subsection (a) above is not declared effective by the SEC on or
prior to its required Effectiveness Date, (iii) after its Effective Date, such
Registration Statement under subsection (a) above ceases for any reason to be
effective and available to the Holders as to all Registrable Securities to
which it is required to cover at any time prior to the expiration of the
Registration Period for more than an aggregate of thirty (30) Trading Days during
any 12-month period (which need not be consecutive), or (iv) beginning on the
date on which the first Registration Statement required by this Agreement is
declared effective by the SEC, there are Excluded Securities (as defined in
Section 2(c) below) not included for resale in a Registration Statement (any
such failure or breach being referred to as an “Event,”
and for purposes of clauses (i) or (ii) the date on which such Event occurs, or
for purposes of clause (iii) the date which such thirty (30) Trading Day-period
is exceeded, being referred to as an “Event Date”), then,
in addition to any other rights available to the Holders under this Agreement
or under applicable law: on the last day of each 30-day period after each such
Event Date (if the applicable Event shall not have been cured by such date)
until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as liquidated damages and not as a penalty, equal to 1.0% of
the then-outstanding principal amount of the Notes purchased by such

 

4

 

Holder pursuant to the Purchase Agreement (the “Note Amount”). Notwithstanding anything to the contrary in
this Section 2(b), the
parties agree that (A) the Company will not be liable for liquidated damages
under this Agreement with respect to any Warrants or Warrant Shares, (B) in no
event will the Company be liable for liquidated damages under this Agreement in
excess of 1.0% of the aggregate Note Amount of the Holders for any 30-day
period (even if there are multiple Events during the same 30-day period), (C)
the maximum aggregate liquidated damages payable to a Holder under this
Agreement shall be eighteen percent (18%) of the aggregate original Note Amount
of such Holder’s Notes, and (D) in the case of an Event described in clause
(iv) of this paragraph, liquidated damages will not begin to accrue until the
first Registration Statement filed under this Agreement is declared effective
by the SEC and will cease to accrue on any Conversion Shares that are Excluded
Securities as of the date on which an Additional Registration Statement is
declared effective by the SEC for the resale of such Conversion Shares or, if
earlier, on the date on which such Conversion Shares can first be sold by the
Holder under Rule 144. The liquidated damages pursuant to
the preceding sentence shall apply and be payable on a pro rata basis for any
portion of a 30-day period prior to the cure of an Event and shall cease to accrue
(unless earlier ceased) upon expiration of the Registration Period.

 

(c)           Notwithstanding anything to
the contrary contained in this Agreement, the Company shall not be required
under this Agreement to file or amend a Registration Statement for any offering
that would be deemed by the SEC to constitute a primary offering of securities
by the Company. In the event that, as a result of the operation of the
preceding sentence, the Company cannot include all of the Registrable
Securities in the Registration Statement, then the Company shall include in the
Registration Statement the maximum number of Registrable Securities that can be
included therein without causing the Registration Statement to be deemed to
register a primary offering by the Company, with the number of Registrable
Securities included in the Registration Statement to be allocated among the
Holders in proportion to the total Warrant Shares and Conversion Shares held by
each Holder (or issuable upon conversion or exercise of such Holder’s Notes and
Warrants) on the date that the Registration Statement is filed. With respect to
any Registrable Securities that are not included in the Registration Statement
(the “Excluded Securities”), the Company
shall include the Excluded Securities in a subsequently filed second
Registration Statement (the “Additional Registration
Statement”) that is filed on the earliest possible date on which
Excluded Securities can be included in the Additional Registration Statement
without the Additional Registration Statement being deemed to register a
primary offering of securities by the Company (the “Additional
Filing Date”); provided that if the Company is advised by the SEC
that the inclusion of all Excluded Securities in the Additional Registration
Statement would cause the Additional Registration Statement to be deemed a
registration of a primary offering by the Company, then such Additional
Registration Statement shall include only the maximum number of Excluded
Securities that could be included in such Registration Statement without it
being deemed to be a registration for a primary offering by the Company. If all
Excluded Securities cannot be registered on the Additional Registration
Statement, then the Company will be obligated to file a second Additional
Registration Statement as soon as is permitted by the SEC to cover as many
additional Excluded Securities as possible, although the Company will not be
obligated to file any more than two (2) Additional Registration Statements for
Excluded Securities. The Company’s obligations under this Agreement with
respect to the first Additional Registration Statement and second Additional
Registration Statement shall be the same as its obligations for the original
Registration Statement, provided that the “Filing Date” for the first
Additional Registration Statement shall be

 

5

 

the Additional Filing Date, and the “Effectiveness
Date” for the Additional Registration Statement shall be delayed by the number
of days that elapses between the Filing Date and Additional Filing Date; and
further provided that the “Filing Date” for the second Additional Registration
Statement (if applicable) shall be the earliest possible date on which Excluded
Securities can be included in the second Additional Registration Statement
without the second Additional Registration Statement being deemed to register a
primary offering of securities by the Company (the “Second
Additional Filing Date”), and the “Effectiveness Date” for such
second Additional Registration Statement shall be delayed by the number of days
that elapses between the Filing Date for the original Registration Statement
and the Second Additional Filing Date. In the event that a Holder sells or
otherwise transfers any of such Holder’s Registrable Securities, each
transferee shall be allocated a pro rata portion of the then-remaining number
of Registrable Securities included in any Registration Statement for such
transferor. To the extent permitted under applicable SEC rules, procedures, or
practices, any shares of Common Stock included in a Registration Statement and
which remain allocated to any Person which ceases to hold any Registrable
Securities covered by such Registration Statement shall be allocated to the
remaining Holders pro rata based on the number of Registrable Securities then
held by such Holders which are covered by such Registration Statement.

 

3.             Registration
Procedures.

 

In connection with the Company’s registration
obligations hereunder, the Company shall:

 

(a)           Not less than three (3)
Trading Days prior to the filing of a Registration Statement or any pre-effective
amendment thereto, furnish to the Holders by e-mail copies of all such
documents proposed to be filed, which documents (other than those incorporated
or deemed to be incorporated by reference) will be subject to the review of
such Holders (and changes (if any) to correct appropriate information about the
Holder). The Company shall not file a Registration Statement or any
pre-effective amendments thereto to which the Holders of a majority of the
Registrable Securities shall reasonably object in good faith, provided that,
the Company is notified of such objection in writing no later than three (3)
Trading Days after the Holders have been so furnished copies of such documents.

 

(b)           (i)  Prepare and file with the SEC such
amendments, including post-effective amendments, to each Registration Statement
and the Prospectus used in connection therewith as may be necessary to keep
such Registration Statement continuously effective as to the applicable
Registrable Securities for the applicable Registration Period; (ii) cause the
related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) comply in all material respects with the provisions of the Securities Act
and the Exchange Act with respect to the Registration Statements and the
disposition of all Registrable Securities covered by each Registration
Statement.

 

(c)           Notify the Holders of
Registrable Securities to be sold (which notice shall, pursuant to clauses (ii)
through (v) hereof, be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made) as promptly as reasonably
possible (i) with respect to each Registration Statement or any post-effective
amendment, when the same

 

6

 

has become effective; (ii) of any request by the SEC
or any other Federal or state governmental authority for amendments or
supplements to a Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) of the
receipt by the Company of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of
any Proceeding for such purpose; and (v) of the occurrence of any event or
passage of time that makes the financial statements included in a Registration
Statement stale or otherwise ineligible for inclusion therein or any statement
made in such Registration Statement or Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or that requires any revisions to such Registration Statement,
Prospectus or other documents so that, in the case of such Registration
Statement or the Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

 

(d)           Use its commercially
reasonable efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of a Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.

 

(e)           Furnish to each Holder by e-mail,
without charge, at least one conformed copy of each Registration Statement and
each amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated herein by reference (to the
extent requested by such Holder), and all exhibits to the extent requested by
such Holder (including those previously furnished) promptly after the filing of
such documents with the SEC.

 

(f)            Comply with Rule 172,
promptly advise each Holder at any time the Company has not satisfied the
requirements of Rule 172 and promptly deliver to each Holder, without charge,
as many copies of each Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request in connection with resales by the Holder of Registrable
Securities. Subject to the terms of this Agreement, the Company hereby consents
to the use of such Prospectus and each amendment or supplement thereto by each
of the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto.

 

(g)           Prior to any public offering
of Registrable Securities by a Holder, use its commercially reasonable efforts to
register or qualify or cooperate with the selling Holders in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of all jurisdictions within the United States as
any Holder reasonably requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Registration Period
and to do any and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by each Registration Statement; provided, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is
not then so qualified, subject the Company to any material tax in any such
jurisdiction where it is not then so subject or file a general consent to
service of process in any such jurisdiction.

 

7

 

(h)           If requested by the Holders, cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a
transferee pursuant to the Registration Statements, which certificates shall be
free, to the extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Holders may request.

 

(i)            Upon the occurrence of any
event contemplated by Sections 3(c)(ii) through (v), as promptly as reasonably
possible under the circumstances, and in the case of Section 3(c)(v) taking
into account the Company’s good faith assessment of any adverse consequences to
the Company and its stockholders of the premature disclosure of such event,
prepare a supplement or amendment, including a post-effective amendment, to the
affected Registration Statements or a supplement to the related Prospectus or
any document incorporated or deemed to be incorporated therein by reference,
and file any other required document so that, as thereafter delivered, neither
a Registration Statement nor such Prospectus will contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and that the event
that resulted in the suspension of such Prospectus is otherwise cured. If the
Company notifies the Holders in accordance with Sections 3(c)(ii) through (v)
to suspend the use of any Prospectus until the requisite changes to such
Prospectus have been made, then the Holders shall suspend use of such
Prospectus. The Company will use its commercially reasonable efforts to ensure
that the use of the Prospectus may be resumed as promptly as is practicable.

 

(j)            Each Holder agrees to furnish
to the Company a completed Questionnaire in the form attached to this Agreement
as Annex B (a “Selling
Shareholder Questionnaire”) not less than five (5)
Trading Days prior to the date on which a Registration Statement under this
Agreement is to be filed or (if earlier) by the end of the fourth Trading Day
following the date on which such Holder receives draft materials in accordance
with this Section. The Company shall not be required to include the Registrable
Securities of a Holder in a Registration Statement and shall not be required to
pay any liquidated or other damages under Section 2(b) hereof to such Holder
who fails to furnish to the Company a fully completed Selling Shareholder
Questionnaire as required by this Section or other information reasonably
requested by the Company for compliance with applicable registration and
disclosure requirements.

 

4.             Registration
Expenses. 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.

 

5.             Indemnification.

 

(a)           Indemnification by the
Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, investment advisors, partners, members and
employees of each of them, each

 

8

 

Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”) arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in any Registration Statement,
any Prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein (in the case of any Prospectus or
form of prospectus or supplement thereto, in light of the circumstances under
which they were made) not misleading, except to the extent, but only to the
extent, that (1) such untrue statements or omissions are based solely upon
information regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, or to the extent that such information
relates to such Holder or such Holder’s proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Holder expressly for use in the Registration Statement, such Prospectus or
such form of Prospectus or in any amendment or supplement thereto (it being
understood that the Holder has approved Annex A hereto for this purpose)
or (2) in the case of an occurrence of an event of the type specified in
Section 3(c)(ii) through (v), the use by such Holder of an outdated or
defective Prospectus after the Company has notified such Holder in writing that
the Prospectus is outdated or defective. The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which the
Company is aware arising from or in connection with the transactions
contemplated by this Agreement.

 

(b)           Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold
harmless the Company, its directors, officers, agents and employees, each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest
extent permitted by applicable law, from and against all Losses to the extent
arising out of or relating to: (i) such Holder’s failure to comply with the
prospectus delivery requirements of the Securities Act after being advised by
the Company that it has not satisfied the conditions of Rule 172 and that such
Holder is, as a consequence, required to deliver a prospectus in connection
with any disposition of Registrable Securities and has provided the Holder with
a current prospectus to be used in connection with any such dispositions, (ii)
an offer or sale of shares of Common Stock by such Holder occurring during a
period in which sales under the Registration Statement are suspended as
permitted by this Agreement, or (iii) any untrue statement of a material fact
contained in any Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading to
the extent, but only to the extent that, such untrue statements or omissions
are based upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement (it
being understood that the Holder has approved Annex A hereto for this
purpose). In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.

 

9

 

(c)           Conduct of Indemnification
Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly
notify the Person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall have the right
to participate in, and, to the extent the Indemnifying Party so desires, assume
the defense thereof, including the employment of counsel (one law firm)
reasonably satisfactory to the Indemnified Party and the payment of all fees
and expenses incurred in connection with defense thereof; provided, that the
failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except to the extent that the Indemnifying Party is prejudiced by
such failure, including impairment in its ability to defend such action.

 

An Indemnified Party shall have the right to
employ separate counsel in any such Proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless:  (1) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (2)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel (one law firm) shall be at the expense of the Indemnifying Party).
The Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect
of which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding. The Indemnified Party shall
cooperate fully with the Indemnifying Party in connection with any negotiation
or defense of any such Proceeding by the Indemnifying Party and shall furnish
to the Indemnifying Party all information reasonably available to the
Indemnified Party that relates to such Proceeding.

 

Subject to the terms of this Agreement, all reasonable
fees and expenses of the Indemnified Party subject to indemnification under
Section 5(a) (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend such Proceeding in a
manner not inconsistent with these Sections) shall be paid to the Indemnified
Party, as incurred, within ten (10) Trading Days of written notice thereof to
the Indemnifying Party (provided, that the Indemnifying Party may require such
Indemnified Party to undertake to reimburse all such fees and expenses to the
extent it is finally judicially determined that such Indemnified Party is not
entitled to indemnification hereunder).

 

10

 

(d)           Contribution. In the event that indemnification under Section 5(a) or 5(b) is unavailable
to or insufficient to hold harmless an Indemnified Party for any Losses (by
reason of unenforceability due to public policy or otherwise), then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates
to information supplied by, such Indemnifying Party or Indemnified Party, and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in Section 5(c), any reasonable attorneys’
or other reasonable fees or expenses incurred by such party in connection with
any Proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in this Section was
available to such party in accordance with its terms.

 

The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section 5(d) were
determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section
5(d), no Holder shall be required to contribute, in the aggregate, any amount
in excess of the amount by which the proceeds actually received by such Holder
from the sale of the Registrable Securities subject to the Proceeding exceeds
the amount of any damages that such Holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission or other event under 5(a) or 5(b), as the case may be, to which such
contribution applies.

 

The indemnity and contribution agreements
contained in this Section are in addition to any liability that the
Indemnifying Parties may have to the Indemnified Parties.

 

6.             Miscellaneous.

 

(a)           Remedies. In the event of a breach by the Company or by a Holder, of any of
their obligations under this Agreement, each Holder or the Company, as the case
may be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agree that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

 

(b)           No Piggyback on
Registrations. Except as and to the extent specified
in Schedule 6(b) hereto, neither the Company nor any of its security
holders (other than the Holders

 

11

 

in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities and any shares of Common Stock issued upon conversion of
the Notes in accordance with the terms of the Notes, and the Company shall not
after the date hereof enter into any agreement providing any such right to any
of its security holders.

 

(c)           Compliance. Each Holder covenants and agrees that (i) it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement; and (ii) it has no present plan, intention or understanding and has
made no arrangement to sell the Registrable Securities at any predetermined
time or for any predetermined price (other than such Holder’s right to sell the
Registrable Securities pursuant to a Registration Statement filed pursuant
hereto).

 

(d)           Discontinued Disposition. Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(c), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration Statement
until such Holder’s receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement or until it is advised in writing (the “Advice”) by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company will use its commercially reasonable efforts to ensure that the use of
the Prospectus may be resumed as promptly as practicable. The Company may
provide appropriate stop orders to enforce the provisions of this paragraph.

 

(e)           Piggy-Back
Registrations. If at any time during the Effectiveness
Period  there is not an effective
Registration Statement covering all of the Registrable Securities then required
hereunder to be registered at such time and the Company shall determine to
prepare and file with the SEC a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any of
its equity securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans, then the Company shall send to each Holder
written notice of such determination and, if within fifteen days after receipt
of such notice, any such Holder shall so request in writing, the Company shall
include in such registration statement all or any part of such Registrable
Securities (not already covered by an effective Registration Statement) such Holder
requests to be registered, subject to customary underwriter cutbacks applicable
to holders of registration rights and subject to restrictions in prior
registration rights agreements. Notwithstanding anything to the contrary
contained herein, this Section 6(e) shall not apply with respect to any
Excluded Securities. In
connection with any offering involving an underwriting of shares of Common
Stock being issued by the Company for its own account or for the account of
others pursuant to a registration statement, the Company shall not be required
to include in such registration statement, the Registrable Securities held by
any Holder that does not accept and agree to the terms of the underwriters
selected by the Company.

 

12

 

(f)            Amendments and Waivers. No provision of this Agreement may be waived or amended and waivers
or consents to departures from the provisions hereof may not be given except in
a written instrument signed by the Company and the Holders who hold (or have
the right to acquire upon exercise of the Warrants) majority of the shares of
Common Stock issued or issuable upon exercise of the Warrants. No waiver 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 subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right. Notwithstanding
the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of one or more Holders
and that does not directly or indirectly affect the rights of other Holders may
be given by Holders to which such waiver or consent relates; provided, however,
that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.

 

(g)           Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be delivered as set forth in the
Purchase Agreement.

 

(h)           Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties and shall inure to the
benefit of each Holder. The Company may not assign its rights or obligations
hereunder without the prior written consent of each Holder of then-outstanding
Registrable Securities. Each Holder may assign their respective rights
hereunder in the manner and to the Persons as permitted under the Purchase
Agreement.

 

(i)            Execution and Counterparts. This Agreement may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

 

(j)            Governing Law. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Each party agrees that
all Proceedings to resolve any dispute concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement
(whether brought against a party hereto or its respective Affiliates, employees
or agents) shall be commenced exclusively in the state and federal courts
sitting in the City of New York, Borough of Manhattan (the “New York Courts”) although depositions may be taken in other
places. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any Proceeding, any claim that it is not personally subject to the jurisdiction
of any New York Court, or that such Proceeding has been commenced in an
improper or inconvenient forum. Each party hereto hereby irrevocably waives
personal service

 

13

 

of process and consents to process being served in any
such Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) 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
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any Proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence a Proceeding
to enforce any provisions of this Agreement, then the prevailing party in such
Proceeding shall be reimbursed by the other party for its attorney’s fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.

 

(k)           Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any
remedies provided by law.

 

(l)            Severability. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions
set forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.

 

(m)          Headings. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.

 

(n)           Independent Nature of
Holders’ Obligations and Rights. The obligations of
each Holder hereunder are several and not joint with the obligations of any
other Holder hereunder, and no Holder shall be responsible in any way for the
performance of the obligations of any other Holder hereunder. The decision of
each Holder to acquire Registrable Securities pursuant to the Transaction
Documents has been made independently of any other Holder. Nothing contained
herein or in any other agreement or document delivered at any closing, and no
action taken by any Holder pursuant hereto or thereto, shall be deemed to
constitute the Holders as a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Holders are in any way
acting in concert with respect to such obligations or the transactions
contemplated by this Agreement. Each Holder acknowledges that no other Holder
has acted as agent for such Holder in connection with making its investment
hereunder and that no Holder will be acting as agent of such Holder in
connection with monitoring its investment in the Securities or enforcing its
rights under the Transaction Documents. Each Holder shall be entitled to
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary (but may be permissible)
for any other Holder to be joined as an additional party in any Proceeding for
such purpose.

 

14

 

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

 

	
   

  	
   

  	
  LIQUIDMETAL TECHNOLOGIES, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   /s/ Larry E. Buffington

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:  Larry
  E. Buffington

  	
   

  	
   

  
	
   

  	
   

  	
  Title:  CEO/President

  	
   

  	
   

  
							

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES OF INVESTORS TO FOLLOW]

 

 

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

 

	
   

  	
  INVESTOR

  
	
   

  	
   

  
	
   

  	
  /s/ Diamond Opportunity Fund,
  LLC

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Fort Mason Master, LP

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Fort Mason Partners, LP

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Solomon Strategic Holdings,
  Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ The Tail Wind Fund Ltd.

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Abdi Mahamedi

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Whitebox Intermarket
  Partners LP

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ BridgePointe Master Fund
  Ltd.

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Rockmore Investment Master
  Fund Ltd.

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Castlerigg Master
  Investments Ltd.

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Iroquois Master Fund

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Wynnefield Partners Small
  Cap Value, LP

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Wynnefield Partners Small
  Cap Value, LP I

  	
   

  
	
   

  	
   

  
	
   

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

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Rodd Friedman

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Eric Brachfeld

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Myron Neugeboren

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Ricardo Salas

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Winvest Venture Partners
  Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Ed Neugeboren

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Gryphon Master Fund, L.P.

  	
   

  
																							

 

 

	
   

  	
  /s/ GSSF Master Fund, LP

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Leon Frenkel

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Triage Capital Management
  L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Triage Capital Management B,
  L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Stratford Partners, LP

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Kenneth Lisiak

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Vestal Venture Capital

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James Kang

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Kurtis Jang

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Charles Kim

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Chuck Myong

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Hamilton Investment
  Partners, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Rockport Funding, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Jay Deahna

  	
   

  
														

 

2

 

SCHEDULE 6(b)

 

The holders of
the warrants issued in connection with the Company 8% Unsecured Subordinated
Notes have piggyback registration rights with respect to any registration
statement filed pursuant to this Agreement.

 

 

Annex A

 

Plan of Distribution

 

The Selling Stockholders and any of their
pledgees, donees, assignees and successors-in-interest may, from time to time,
sell any or all of their shares of Common Stock registered hereunder on any
stock exchange, market or trading facility on which the shares are traded or in
private transactions. These sales may be at fixed or negotiated prices. The
Selling Stockholders may use any one or more of the following methods when
selling shares:

 

•      ordinary
brokerage transactions and transactions in which the broker-dealer solicits
investors;

 

•      block trades
in which the broker-dealer will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction;

 

•      purchases by a
broker-dealer as principal and resale by the broker-dealer for its account;

 

•      an exchange
distribution in accordance with the rules of the applicable exchange;

 

•      pledge,
hypothecation, or assignment of shares;

 

•      privately
negotiated transactions;

 

•      settlement of
short sales (other than short sales established prior to the effectiveness of
the Registration Statement to which this Prospectus is a part);

 

•      broker-dealers
may agree with the Selling Stockholders to sell a specified number of such
shares at a stipulated price per share;

 

•      a combination
of any such methods of sale; and

 

•      any other
method permitted pursuant to applicable law.

 

The Selling Stockholders may also sell shares
under Rule 144 under the Securities Act, if available, rather than under this
prospectus.

 

Broker-dealers engaged by the Selling
Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers
may receive commissions or discounts from the Selling Stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated. The Selling Stockholders do not expect these commissions
and discounts to exceed what is customary in the types of transactions
involved.

 

The Selling Stockholders may from time to time
pledge or grant a security interest in some or all of their shares of Common
Stock that are covered by this prospectus and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell such shares of Common Stock from time to time under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.

 

 

Upon the Company being notified in writing by
a Selling Stockholder that any material arrangement has been entered into with
a broker-dealer for the sale of Common Stock through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer, a supplement to this prospectus will be filed, if required,
pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of
each such Selling Stockholder and of the participating broker-dealer(s), (ii)
the number of shares involved, (iii) the price at which such the shares of
Common Stock were sold, (iv) the commissions paid or discounts or concessions
allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information
set out or incorporated by reference in this prospectus, and (vi) other facts
material to the transaction. In addition, upon the Company being notified in
writing by a Selling Stockholder that a donee or pledgee intends to sell more
than 500 shares of Common Stock, a supplement to this prospectus will be filed
if then required in accordance with applicable securities law.

 

The Selling Stockholders also may transfer the
shares of Common Stock in other circumstances, in which case the transferees,
pledgees or other successors in interest may be the selling beneficial owners
for purposes of this prospectus.

 

The Selling Stockholders and any
broker-dealers or agents that are involved in selling the shares may be deemed
to be “underwriters” within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers
or agents and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act. Discounts,
concessions, commissions and similar selling expenses, if any, that can be
attributed to the sale of securities will be paid by the Selling Stockholder
and/or the purchasers. Each Selling Stockholder has represented and warranted
to the Company that it acquired the securities subject to this Registration
Statement in the ordinary course of such Selling Stockholder’s business and, at
the time of its purchase of such securities such Selling Stockholder had no
agreements or understandings, directly or indirectly, with any person to
distribute any such securities.

 

The Company is required to pay the Company’s
fees and expenses incident to the registration of the shares. The Company has
agreed to indemnify the Selling Stockholders against certain losses, claims,
damages and liabilities, including liabilities under the Securities Act.

 

The Company has advised each Selling
Stockholder that it may not use shares registered on this Registration
Statement to cover short sales of Common Stock made prior to the date on which
this Registration Statement shall have been declared effective by the SEC. If a
Selling Stockholder uses this prospectus for any sale of the Common Stock, it
will be subject to the prospectus delivery requirements of the Securities Act. The
Selling Stockholders will be responsible to comply with the applicable
provisions of the Securities Act and Exchange Act, and the rules and
regulations thereunder promulgated, including, without limitation, Regulation
M, as applicable to such Selling Stockholders in connection with resales of
their respective shares under this Registration Statement.

 

 

Annex B

 

Selling
Shareholder Questionnaire

 

The undersigned beneficial
owner of common stock, par value $0.001 per share (the “Common Stock”),
of Liquidmetal Technologies, Inc., a Delaware corporation (the “Company”),
(the “Registrable Securities”) understands that the Company has filed or
intends to file with the Securities and Exchange Commission (the “SEC”)
a registration statement on Form S-1 (the “Registration Statement”) for
the registration and resale under Rule 415 of the Securities Act of 1933, as
amended (the “Securities Act”), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of January
3, 2007 (the “Registration Rights Agreement”), among the Company and the
Investors named therein. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.

 

Certain legal consequences
arise from being named as a selling shareholder in the Registration Statement
and the related prospectus. Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel
regarding the consequences of being named or not being named as a selling
shareholder in the Registration Statement and the related prospectus.

 

NOTICE

 

The undersigned beneficial
owner (the “Selling Shareholder”) of Registrable Securities hereby
elects to include the Registrable Securities owned by it and listed below in
Item 3 (unless otherwise specified under such Item 3) in the Registration
Statement.

 

 

The undersigned hereby provides the following
information to the Company and represents and warrants that such information is
accurate:

 

QUESTIONNAIRE

 

1. Name.

 

(a)           Full Legal Name of
Selling Shareholder

 

 

 

(b)           Full Legal Name of
Registered Holder (if not the same as (a) above) through which Registrable
Securities Listed in Item 3 below are held:

 

 

 

(c)           Full Legal Name of
Natural Control Person (which means a natural person who directly or indirectly
alone or with others has power to vote or dispose of the securities covered by
the questionnaire):

 

 

 

2. Address
for Notices to Selling Shareholder:

 

 

 

Telephone:

Fax:

Contact Person:

 

3. Beneficial
Ownership of Registrable Securities:

 

(a)           Type and Number of
Registrable Securities beneficially owned:

 

 

 

 

4. Broker-Dealer
Status:

 

(a)           Are you a
broker-dealer?

 

	
   

  	
  Yes   o

  	
  No   o

  

 

(b)           If “yes” to Section
4(a), did you receive your Registrable Securities as compensation for
investment banking services to the Company.

 

	
   

  	
  Yes   o

  	
  No   o

  

 

Note:      If no, the SEC staff has
indicated that you should be identified as an underwriter in the Registration
Statement.

 

(c)           Are you an affiliate
of a broker-dealer?

 

	
   

  	
  Yes   o

  	
  No   o

  

 

(d)           If you are an
affiliate of a broker-dealer, do you certify that you bought the Registrable
Securities in the ordinary course of business, and at the time of the purchase
of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the
Registrable Securities?

 

	
   

  	
  Yes   o

  	
  No   o

  

 

Note:      If no, the SEC staff has
indicated that you should be identified as an underwriter in the Registration
Statement.

 

5. Beneficial
Ownership of Other Securities of the Company Owned by the Selling Shareholder.

 

Except as set forth below in this Item 5, the
undersigned is not the beneficial or registered owner of any securities of the
Company other than the Registrable Securities listed above in Item 3.

 

(a)           Type and Amount of
Other Securities beneficially owned by the Selling Shareholder:

 

 

 

 

6. Relationships
with the Company:

 

Except as set forth below, neither the undersigned
nor any of its affiliates, officers, directors or principal equity holders
(owners of 5% of more of the equity securities of the undersigned) has held any
position or office or has had any other material relationship with the Company
(or its predecessors or affiliates) during the past three years.

 

State any exceptions
here:

 

 

 

 

By signing below, the
undersigned consents to the disclosure of the information contained herein in
its answers to Items 1 through 6 and the inclusion of such information in the
Registration Statement and the related prospectus and any amendments or
supplements thereto. The undersigned understands that such information will be
relied upon by the Company in connection with the preparation or amendment of
the Registration Statement and the related prospectus.

 

IN WITNESS WHEREOF the
undersigned, by authority duly given, has caused this Questionnaire to be
executed and delivered either in person or by its duly authorized agent.

 

	
  Dated:

  	
   

  	
   

  	
  Beneficial Owner:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
							

 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE
AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

 

Curt Creely

Foley & Lardner LLP

100 North Tampa St., Suite 2700

Tampa, Florida 33602

ccreely@foley.com

Fax No.: 
813.221.4210

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}]]