Document:

Exhibit 10.66

 

THESE
SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.

 

SECURITIES PURCHASE AGREEMENT

 

SECURITIES
PURCHASE AGREEMENT (“Agreement”)
dated as of May 17, 2006, between Liquidmetal Technologies, Inc., a
Delaware corporation (the “Company”),
and each person or entity listed as a Purchaser on Schedule I
attached to this Agreement (individually a “Purchaser”
and collectively the “Purchasers”).
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Note (as defined below).

 

W I  T  N  E
S  S  E  T  H:

 

WHEREAS,
the Company desires to sell, and the Purchasers desire
to purchase, 8% Unsecured Subordinated Notes of the Company, which notes shall
be in the aggregate principal amount of up to Four Million Dollars ($4,000,000)
and shall be in substantially the form of Exhibit A hereto
(collectively referred to as the “Notes”
and individually referred to as a “Note”);
and

 

WHEREAS,
in connection with the purchase of the Notes, this Agreement also provides for
the grant to the Purchasers of warrants to purchase additional shares of common
stock, par value $0.001 per share, of the Company (“Common Stock”).

 

NOW,
THEREFORE, in consideration of the foregoing premises
and the covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:

 

ARTICLE I

 

Purchase and Sale of Note

 

Section 1.1                                      Purchase of
Notes. At the Closing (as hereinafter defined) and subject to the terms and
conditions hereof and in reliance upon the representations, warranties and
agreements contained herein, the Company will issue and sell to the Purchasers,
and the Purchasers will buy from the Company, the Notes for an aggregate purchase
price of up to Four Million Dollars ($4,000,000) (the “Purchase Price”). The amount of Notes to be
purchased by each Purchaser is set forth on Schedule I hereto.

 

Section 1.2                                      The Closing.
The purchase and sale of the Note shall take place at a closing (the “Closing”) on the date hereof or such other
date as the Purchaser and the Company may agree upon (the “Closing Date”). At the Closing, the Company
shall deliver to the Purchasers the Notes purchased hereunder, registered in
the name of the Purchasers or their respective nominees. On the Closing Date
the Purchaser shall deliver by wire transfer the Purchase Price hereunder to an
account designated in writing by the Company. In addition, each party shall
deliver all documents, instruments and writings required to be delivered by
such party pursuant to this Agreement at or prior to the Closing.

 

 

Section 1.3                                      Warrants. In
addition to the Note, at the Closing, the Company will execute and deliver to
each Purchaser a warrant, substantially in the form attached hereto as Exhibit B,
to purchase a number of shares equal to fifty percent (50%) of the initial principal
amount of the Notes divided by the $2.58 per share exercise price of the
warrants (the “Warrants”). The
shares of Common Stock that are issuable pursuant to the Warrants are hereafter
referred to as the “Warrant Shares.”

 

Section 1.4                                      Registration
Rights Agreement. At the Closing, the Company and the Purchasers will enter
into a Registration Rights Agreement in substantially the form set forth
as Exhibit C hereto (the “Registration
Rights Agreement”).

 

Section 1.5                                      Definitions. In
addition to the terms defined elsewhere in this Agreement: the following terms
have the meanings indicated in this Section 1.5:

 

“Transaction Documents” may be used to collectively refer
to this Agreement, the Notes, the Warrants, the Registration Rights Agreement
and any other agreements, documents, certificates or instruments delivered by
the Company at the Closing.

 

“Securities” may be used to collectively refer to the Notes,
the Warrants, and the Warrant Shares.

 

“SEC Documents” shall have the meaning set forth in Section 2.1(t)
hereof.

 

“Recent SEC Documents” shall mean the Form 10-K filed by
the Company on March 16, 2006 (as amended on March 31, 2006 and April 25,
2006) and the Form 8-Ks filed by the Company on March 22, April 25,
and May 2, 2006.

 

ARTICLE II

 

Representations and Warranties

 

Section 2.1                                      Representations
and Warranties of the Company. The Company hereby makes the following
representations and warranties to the Purchasers as of the date hereof and the
Closing Date:

 

(a)                                  This
Agreement and each of the Transaction Documents have been duly and validly
authorized by the Company and are valid and binding agreements of the Company,
enforceable in accordance with their terms. The Notes, Warrants, and Warrant
Shares to be issued and sold by the Company pursuant to this Agreement and the
Transaction Documents have been duly authorized and, when issued and paid for
in accordance with the Transaction Documents and this Agreement will be validly
issued, fully paid and non-assessable; the holders thereof are not and will not
be subject to personal liability solely by reason of being such holders; the
Securities are not and will not be subject to any preemptive rights of any
stockholder of the Company; and all corporate action required to be taken for
the authorization, issuance and sale of the Securities has been duly and
validly taken by the Company.

 

 

(b)                                 All
issued and outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; the holders thereof have
no rights of rescission with respect thereto; the holders thereof have no
preemptive rights and are not subject to personal liability solely by reason of
being such holders; and none of such securities were issued in violation of any
preemptive rights of any holders of any security of the Company.

 

(c)                                  The
Company has good and marketable title to, or valid and enforceable leasehold
interests in, all material items of real and personal property stated in its most
recent Form 10-K or 10-Q (as amended) as, or to be, owned or leased by it,
free and clear of all liens, encumbrances, claims, security interests and
defects of any nature whatsoever, other than those set forth in the SEC
Documents and liens for taxes not yet due and payable.

 

(d)                                 There
is no litigation or governmental proceeding ongoing, pending or, to the actual
knowledge of the executive officers of the Company, threatened against or
involving the properties or business of the Company, except as set forth in the
Company’s Recent SEC Documents.

 

(e)                                  The
Company’s financial statements included in its Recent SEC Documents fairly
represent the financial position and the results of operations of the Company
at the dates and for the periods to which they apply.

 

(f)                                    The
Company is duly organized and validly existing as a corporation in good
standing under the laws of the state of Delaware. The Company is duly qualified
or licensed and in good standing as a foreign corporation in each jurisdiction
in which its ownership or leasing of any properties or the character of its
operations requires such qualification or licensing and where failure to so
qualify would have a material adverse effect on the Company. The Company has
all requisite corporate power and authority, and all material and necessary
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental regulatory officials and bodies, to own or lease its
properties and conduct its businesses as described in Recent SEC Documents and
the Company is doing business in compliance with all such authorizations,
approvals, orders, licenses, certificates and permits and all Federal, state,
local and applicable foreign laws, rules and regulations concerning the
business in which it is engaged except where the failure so to do business in
compliance would not have a materially adverse impact on the business of the
Company. The disclosures in the Company’s Recent SEC Filings concerning the
effects of federal, state, local and applicable foreign regulation on the
business of the Company as currently conducted and as contemplated are correct
in all material respects and do not omit to state a material fact. The Company
has all corporate power and authority to enter into this Agreement and to carry
out the provisions and conditions hereof, and all consents, authorizations,
approvals and orders required in connection herewith have been obtained or will
have been obtained prior to the Closing

 

 

Date. No
consent, authorization or order of, and no filing with, any domestic court,
government agency or other body is required by the Company for the issuance of
the Notes pursuant to the Transaction Documents or this Agreement except with
respect to applicable federal and state securities laws. Since its inception,
the Company has not incurred any liability arising under or as a result of the
application of the provisions of the Act, the Exchange Act or the Rules and
Regulations thereunder, except as set forth in the Company’s SEC Documents.

 

(g)                                 There
has been no material adverse change in the condition or prospects for
commercialization of the Company, financial or otherwise, from that on the
latest dates as of which such condition or prospects, respectively, are described
in the Recent SEC Documents and the outstanding debt, the property and the
business of the Company conforms in all material respects to the descriptions
thereof contained in the Transaction Documents.

 

(h)                                 The
Company is not in violation of its Certificate of Incorporation or By-Laws. Neither
the execution and delivery of this Agreement nor the issue and sale of the
Securities, nor the consummation of any of the transactions contemplated
herein, nor the compliance by the Company with the terms and provisions hereof,
conflicts with, or has resulted in or will result in a breach of, any of the
terms and provisions of, or has constituted or will constitute a default under,
or has resulted in or will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to
the terms of any indenture, mortgage, deed of trust, note, loan or credit
agreement or any other agreement or instrument evidencing an obligation for
borrowed money or any other agreement or instrument to which the Company may be
bound or in which any of the property or assets of the Company is subject
except where such lien, charge or encumbrance, singly or in the aggregate,
would not have a material adverse effect on the financial condition or business
of the Company and such lien, charge or encumbrance would have no effect on
ability the Company has to perform its obligations under this Agreement or
to consummate the transactions contemplated hereby; nor will such action result
in any violation of the provisions of the Certificate of Incorporation or the
By-Laws of the Company, assuming due performance by the Placement Agent of its
obligations hereunder, any statute or any order, rule or regulation
applicable to the Company of any court or of any federal, state or other
regulatory authority or other government body (domestic or foreign) having
jurisdiction over the Company.

 

(i)                                     The
Securities and the Transaction Documents conform in all material respects
to all statements in relation thereto contained herein.

 

(j)                                     Subsequent
to the dates as of which information is given in the Transaction Documents,
amendment or supplement thereto, and except as may otherwise be indicated
or contemplated therein or in the SEC Documents, the Company has not (i) issued
any securities (other than as specifically disclosed in its SEC Documents) or
incurred any material liability or obligation, direct or contingent, for
borrowed money, or (ii) entered into any material transaction other than in
the ordinary course of business, or (iii) declared or paid any dividend or
made any other distribution on or in respect their capital stock.

 

 

(k)                                  Except
as set forth in the Company’s SEC Documents or in this subparagraph (k), there
are no claims for services in the nature of a finder’s or origination fee with
respect to the sale of the Securities hereunder. Indigo Securities, LLC, the placement
agent to the Company in connection with the transactions contemplated by this
Agreement (the “Placement Agent”
and such transaction, the “Note Placement”)
shall receive the following as fees for placement agent services rendered on
behalf of the Company (subject to and in accordance with the terms of the
Placement Agency Agreement between the Company and the Placement Agent): (i) at
each closing in connection with the Note Placement, the Placement Agent will
receive a cash fee equal to 7% of the aggregate purchase price of the Notes
sold at such closing (“Note Cash Fee”);
and (ii) at the final closing of the Note Placement, the Company shall
deliver to the Placement Agent or its designees a five (5) year warrant
agreement granting the right to purchase a number of shares of the Company’s
equity securities equal to the Note Cash Fee divided by the exercise price of the
Warrants.

 

(l)                                     The
Company owns or possesses, free and clear of all liens or encumbrances and
rights thereto or therein by third parties, the requisite licenses or other
rights to use all trademarks, service marks, copyrights, service names, trade
names, patents, patent applications and licenses necessary to conduct its
business (including, without limitation, any such licenses or rights described
in the Transaction Documents as being owned or possessed by the Company), and
there is no claim or action by any person pertaining to, or proceeding, pending
or threatened, which challenges the exclusive rights of the Company with
respect to any trademarks, service marks, copyrights, service names, trade
names, patents, patent applications and licenses used in the conduct of the
business of the Company (including, without limitation, any such licenses or
rights described in the Transaction Documents as being owned or possessed by
the Company, but only to the extent that such licenses or rights purport to be
exclusive to the Company). The Company’s current products, services and
processes do not infringe on the patents or other intellectual property rights
of third parties.

 

(m)                               Except
as otherwise set forth in the Company’s Recent SEC Documents, the Company is not
under any material obligation to pay royalties or fees of any kind whatsoever
to any third party with respect to technology it has developed, uses, licenses,
employs or intends to use, license or employ, except where the default of any
such obligation would not have a material adverse effect on the financial
condition or business of the Company.

 

(n)                                 Subject
to the performance by the Placement Agent of its obligations under the
Placement Agency Agreement, the offer and sale of the Securities comply, and will
continue to comply, up to the final closing in all material respects with the
requirements of Rule 506 of Regulation D of the Act and any other
applicable Federal laws, rules, regulations and executive orders. Neither the
Transaction Documents nor any amendment or supplement thereto will contain any
untrue statement of a material fact

 

 

or omit to
state any material fact required to be stated therein, in light of the
circumstances under which they were made, not misleading. All statements of
material facts in the Company’s Recent SEC Filings (as amended) are true and
correct as of the date of such filings and the statements in the Company’s most
recent Form 10-K or 10-Q (as amended) filing will be true and correct on
each closing date.

 

(o)                                 All
taxes which are due and payable from the Company have been paid in full (except
for those tax liabilities which are being contested in good faith and for which
appropriate reserves have been made in the Company’s financial statements) and
the Company does not have any material tax deficiency or claim outstanding
assessed or proposed against it. For purposes of this subsection, the term “material”
shall mean in an aggregate amount of $50,000 or more.

 

(p)                                 Neither
the Company nor any of its respective officers, employees or agents, nor any
other person acting on behalf of the Company has, directly or indirectly, given
or agreed to give any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official or employee
of any governmental agency or instrumentality of any government (domestic or
foreign) or other person who is or may be in a position to help or hinder
the business of the Company (or assist it in connection with any actual or
proposed transaction) which might subject the Company to any damage or penalty
in any civil, criminal or governmental litigation or proceeding which would
have a materially adverse effect on the financial condition and business of the
Company.

 

(q)                                 Prior
to the initial closing, the Company will have an authorized capitalization as
follows: 100,000,000 shares of Common Stock, par value $.001 of which no more
than 44,056,058 shares will be issued and outstanding (the “Common Stock”),
excluding shares of Common Stock exercised pursuant to outstanding options or
warrants or received upon the conversion of outstanding convertible notes, and
10,000,000 shares of preferred stock, of which no shares will be issued and
outstanding. All shares of Common Stock currently outstanding are, and all
shares issued pursuant to this Agreement will be upon issuance, validly issued,
fully paid and non-assessable.

 

(r)                                    At
the initial closing, the Company will not have outstanding any options, stock
subscription agreements or warrants to purchase shares of the Company or any
other obligation to issue shares of the Company, other than those as set forth
in the Transaction Documents or SEC Documents, those issued pursuant to the exercise
or options or warrants, and other than agreed to by the Company and the
Placement Agent. There will be outstanding immediately following the final
closing no other classes or series of capital stock or convertible
securities of the Company except as set forth herein or in the Transaction
Documents or SEC Documents.

 

(s)                                  Since
June 30, 2003, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as
amended (the “1934

 

 

Act”)
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the “SEC Documents”). Except as disclosed in the
SEC Documents (including without limitation the disclosure relating to the
Company’s obligations under Section 404 of the Sarbanes-Oxley Act of 2002,
as amended, and the SEC’s rules and regulations thereunder), the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.

 

Section 2.2                                      Representations
and Warranties of the Purchasers. Each Purchaser (severally and not
jointly) hereby makes the following representations and warranties to the
Company as of the date hereof and the Closing Date:

 

(a)                                  Accredited Investor Status; Sophisticated Purchaser.
The Purchaser is an “accredited investor” as that term is defined in Rule 501(a) of
Regulation D under the Securities Act of 1933, as amended (the “1933 Act”). The Purchaser has such
knowledge and experience in financial and business matters that the Purchaser
is capable of evaluating the merits and risks of the purchase of the Note, the
Warrant, and the Warrant Shares. The Purchaser is not registered as a broker or
dealer under Section 15(a) of the 1934 Act, affiliated with any
broker or dealer registered under Section 15(a) of the 1934 Act, or a
member of the National Association of Securities Dealers, Inc.

 

(b)                                 Information. The Purchaser and its
advisors, if any, have been furnished with all materials relating to the
business, finances and operations of the Company which have been requested and
materials relating to the offer and sale of the Note, the Warrant, and the
Warrant Shares which have been requested by the Purchaser. The Purchaser and
its advisors, if any, have been afforded the opportunity to ask questions of
the Company. The Purchaser acknowledges that (i) Purchaser has been
provided with and has reviewed copies of the following filings made by the
Company with the Securities and Exchange Commission: the Form 10-K filed
on March 16, 2006 (as amended on March 31, 2006 and April 25,
2006) and the Form 8-K’s filed on March 22, 2006, April 25, 2006,
and May 2, 2006; (ii) Purchaser’s purchase of the Note, Warrant, and
(if applicable) the Warrant Shares involves a high degree of risk and that
Purchaser may never recover Purchaser’s investment in these securities; and
(iii) the Notes are unsecured, and they are subordinate to the Senior
Notes (as defined below) in order of payment and otherwise.

 

(c)                                  Investment Representation. The Purchaser
is purchasing the Note and the Warrant for the Purchaser’s own account and not
with a view to distribution in violation of any securities laws. The Purchaser
has been advised and understands that neither the Note, the Warrant, nor the
Warrant Shares issuable upon exercise of the Warrant have been registered under
the 1933 Act or under the “blue sky” laws of any jurisdiction and may be
resold only if registered pursuant to the provisions of the 1933 Act or if an
exemption from registration is

 

 

available,
except under circumstances where neither such registration nor such an
exemption is required by law. The Purchaser has been advised and understands
that the Company, in issuing the Note and the Warrant, is relying upon, among
other things, the representations and warranties of the Purchaser contained in
this Section 2.2 in concluding that such issuance is a “private offering”
and is exempt from the registration provisions of the 1933 Act.

 

(d)                                 Rule 144. The Purchaser understands
that there is no public trading market for the Note or Warrant, that none is
expected to develop, and that the Note and Warrant must be held indefinitely
unless and until such Note and the Warrant, or if applicable, the Warrant
Shares received upon exercise of the Warrant are registered under the 1933 Act
or an exemption from registration is available. The Purchaser has been advised
or is aware of the provisions of Rule 144 promulgated under the 1933 Act.

 

ARTICLE III

 

Covenants

 

Section 3.1                                      Prohibition on
Net Short Positions. From and including the date of this Agreement, each
Purchaser agrees that such Purchaser shall not maintain a Net Short Position at
any time while such Purchaser’s Note remains outstanding. “Net Short Position” shall mean that the
aggregate number of shares of Common Stock held in a short position by such
Purchaser exceeds the sum of (i) the number of shares of Common Stock
owned by such Purchaser, plus (ii) the number of Warrant Shares issuable
to such Purchaser.

 

Section 3.2                                      Subordinated
Status of Notes. Each Purchaser hereby intentionally and unconditionally subordinates
the Note to all of the Company’s previously issued 6% Senior Secured Notes Due July 29,
2007 (the “July 2007 Notes”),
the 7% Senior Secured Convertible Notes Due August 2007 (the “August 2007 Notes”), and any other
notes that may be issued by the Company after the date hereof in exchange
for or in satisfaction of any July 2007 Notes or August 2007 Notes
(collectively referred to as the “Senior
Notes”). The Purchaser further acknowledges and agrees that its
right to payment under the Note is hereby subordinated to the Senior Notes in
all respects and the right to payment of the holders of the Senior Notes. Until
the Senior Notes are satisfied in full through payment or conversion, the
Company may not and will not make any payments of principal, interest, or
other amounts to the Purchaser under the Notes. The Purchaser hereby agrees not
to collect, accept or receive payments (whether in cash or otherwise) from the
Company, or otherwise take any actions to collect any amounts under, prior to
the date that all obligations of Company under the Senior Notes are satisfied
in full.

 

ARTICLE IV

 

Legend and Stock

 

Upon payment
therefor as provided in this Agreement, the Company will issue the Notes in the
name of each Purchaser or its designees and in such denominations to be
specified by the Purchaser prior to (or from time to time subsequent to)
Closing. The Note and Warrant and any certificate representing Warrant Shares
issued upon conversion or exercise thereof, prior to such Warrant Shares being
registered under the 1933 Act for resale or available

 

 

for resale under Rule 144 under the 1933 Act, shall be stamped or
otherwise imprinted with a legend in substantially the following form:

 

THESE
SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.

 

The Company
agrees to reissue the Note and Warrant Shares without the legend set forth
above, at such time as (i) the holder thereof is permitted to dispose of securities
pursuant to Rule 144(k) under the 1933 Act, or (ii) such securities
are sold to a purchaser or purchasers who (in the opinion of counsel to the
seller or such purchaser(s), in form and substance reasonably satisfactory
to the Company and its counsel) are able to dispose of such shares publicly
without registration under the 1933 Act, or (iii) such securities have
been registered under the 1933 Act.

 

ARTICLE V

 

Governing Law; Miscellaneous

 

Section 5.1                                      Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS.

 

Section 5.2                                      Counterparts.
This Agreement may be executed in two or more identical counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party; provided that a facsimile signature (including delivery of
documents in Adobe PDF format) shall be considered due execution and shall be
binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.

 

Section 5.3                                      Headings. The
headings of this Agreement are for convenience of reference and shall not form part of,
or affect the interpretation of, this Agreement.

 

Section 5.4                                      Severability.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction.

 

Section 5.5                                      Entire
Agreement; Amendments; Waivers. This Agreement supersedes all other prior
oral or written agreements between the Purchaser, the Company, their affiliates
and persons acting on their behalf with respect to the matters discussed
herein, and this Agreement and the instruments referenced herein (including the
other Transaction Documents) contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchaser
makes any representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be amended other than by
an instrument in writing signed by the Company and the Purchaser, and no
provision hereof may be waived other than by an instrument in writing
signed by the party against whom enforcement is sought.

 

 

Section 5.6                                      Notices. Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing, must be delivered
by (i) courier, mail or hand delivery or (ii) facsimile, and
will be deemed to have been delivered upon receipt. The addresses and facsimile
numbers for such communications shall be:

 

If to the
Company:

 

Liquidmetal
Technologies, Inc.

25800
Commercentre Dr., Suite 100

Lake Forest, California  92630

Telephone:  (949) 206-8002

Fax:  (949) 206-8008

Attention:  Ricardo Salas, President

 

With a copy to
(for information purposes only and not as notice):

 

Foley &
Lardner LLP

100 North
Tampa Street, Suite 2700

Tampa,
Florida  33602

Telephone:  (813) 229-2300

Facsimile:  (813) 221-4210

Attention:  Curt P. Creely

 

If to the
Transfer Agent:

 

American Stock
Transfer & Trust Company

59 Maiden Lane

Plaza Level

New York, New
York  10039

Telephone:  (718) 921-8124

Facsimile:  (718) 236-2641

Attention:  Joe Wolf

 

If to the
Purchasers, to the addresses listed on Schedule I hereto:

 

Each party
shall provide five (5) days prior written notice to the other party of any
change in address, telephone number or facsimile number. Written confirmation
of receipt (A) given by the recipient of such notice, consent, waiver or
other communication, (B) mechanically or electronically generated by the
sender’s facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by a nationally recognized overnight delivery service, shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.

 

 

Section 5.7                                      Successors and
Assigns. Except as otherwise provided herein, this Agreement, including the
subordination provisions contained in Section 3.2 hereof, shall be binding
upon and inure to the benefit of the parties and their respective successors
and assigns, including any Permitted Assignee (as defined below). The Purchaser
may assign some or all of its rights hereunder to any permitted assignee
of the Note or Warrant (a “Permitted Assignee”);
provided, however, that any such assignment shall not release the
Purchaser from its obligations hereunder, such obligations must have been
expressly assumed by such assignee, and the Company must have consented to such
assignment and assumption in writing (which consent shall not be unreasonably
withheld).

 

Section 5.8                                      Further
Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

Section 5.9                                      Other Matters.
Each Purchaser has been advised that, by a letter dated May 3, 2006, a
holder of Senior Notes has demanded that the Company immediately pay all “Late
Filing Payments” and “Late Registration Payments” due under the Registration
Rights Agreement, dated 2, 2005, among the Company and the holders of the
Senior Notes, and such demand is in the amount of $818,400, which amount may not
represent that entire amount of such payments potentially payable by the
Company (the “Demand Letter”). In addition, the Demand Letter states that the
letter constitutes notice of an Event of Default (as defined in the Senior
Notes) under the Senior Notes. In the event the Demand Letter has not been
disclosed in the Company’s filings with the SEC on or prior to the date of this
Agreement, the Purchasers acknowledge that the Demand Letter may constitute
material nonpublic information and that the representations and warranties set
forth in Article II of this Agreement are hereby qualified by the
information set forth in this paragraph.

 

[SIGNATURE
PAGE TO FOLLOW]

 

 

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

 

 

COMPANY:

 

 

	
  LIQUIDMETAL TECHNOLOGIES, INC. 

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/
  Ricardo A. Salas

  	
   

  	
   

  
	
   

  	
  Ricardo A.
  Salas,

  	
   

  
	
   

  	
  President
  and Chief Executive Officer

  	
   

  
				

 

 

Signatures of Purchasers on following page(s)

 

 

 

COUNTERPART SIGNATURE PAGE

TO SECURITIES PURCHASE
AGREEMENT

DATED MAY 17, 2006,

AMONG LIQUIDMETAL TECHNOLOGIES, INC.

AND THE “PURCHASERS” IDENTIFIED
THEREIN

 

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

 

 

	
  PURCHASER:

  	
    Gryphon
  Master Fund, L.P.

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Edwin
  B. Lyon, IV

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
    Edwin
  B. Lyon, IV

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
    Authorized
  Agent

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PURCHASER:

  	
    GSSF
  Master Fund, LP

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Edwin
  B. Lyon, IV

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
    Edwin
  B. Lyon, IV

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
    Authorized
  Agent

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PURCHASER:

  	
    Triage
  Capital Management L.P.

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Leon
  Frenkel

  	
   

  
	
   

  	
   

  
	
  Name:

  	
    Leon
  Frenkel

  	
   

  
	
   

  	
   

  
	
  Title:

  	
    Sr.
  Manager

  	
   

  
							

 

 

	
  PURCHASER:

  	
    Triage
  Capital Management B, L.P.

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Leon
  Frenkel

  	
   

  
	
   

  	
   

  
	
  Name:

  	
    Leon
  Frenkel

  	
   

  
	
   

  	
   

  
	
  Title:

  	
    Sr.
  Manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  PURCHASER:

  	
    Leon
  Frenkel

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Leon
  Frenkel

  	
   

  
	
   

  	
   

  
	
  Name:

  	
    Leon
  Frenkel

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PURCHASER:

  	
    Stratford
  Partners, LP

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Chad
  Comiteau

  	
   

  
	
   

  	
   

  
	
  Name:

  	
    Chad
  Comiteau

  	
   

  
	
   

  	
   

  
	
  Title:

  	
    GP

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PURCHASER:

  	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Kenneth
  P. Lisiak

  	
   

  
	
   

  	
   

  
	
  Name:

  	
    Kenneth
  P. Lisiak

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PURCHASER:

  	
    Vestal
  Venture Capital

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Allan
  R. Lyons

  	
   

  
	
   

  	
   

  
	
  Name:

  	
    Allan
  R. Lyons

  	
   

  
	
   

  	
   

  
	
  Title:

  	
     Managing
  Member of the GP of Vestal Venture Capital,

  	
   

  
	
   

  	
  21st
  Century Strategic Investment Planning, LC

  	
   

  
							

 

 

	
  PURCHASER:

  	
    James
  Kang

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/
  James Kang

  	
   

  
	
   

  	
   

  
	
  Name:

  	
    James
  Kang

  	
   

  
	
   

  	
   

  
	
  Title:

  	
    Founder

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PURCHASER:

  	
    Ricardo
  A. Salas

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Ricardo
  A. Salas

  	
   

  
	
   

  	
   

  
	
  Name:

  	
    Ricardo
  A. Salas

  	
   

  
	
   

  	
   

  
	
  Title:

  	
    CEO/President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PURCHASER:

  	
    Kurtis
  Jang

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Kurtis
  Jang

  	
   

  
	
   

  	
   

  
	
  Name:

  	
     Kurtis
  Jang

  	
   

  
	
   

  	
   

  
	
  Title:

  	
    Individual

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PURCHASER:

  	
    Charles
  Kim

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Charles
  Kim

  	
   

  
	
   

  	
   

  
	
  Name:

  	
     Charles
  Kim

  	
   

  
	
   

  	
   

  
	
  Title:

  	
    Self/Individual

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PURCHASER:

  	
    Chuck
  Myong

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Chuck
  Myong

  	
   

  
	
   

  	
   

  
	
  Name:

  	
     Chuck
  Myong

  	
   

  
	
   

  	
   

  
	
  Title:

  	
    Individual

  	
   

  
						

 

 

EXHIBIT A

 

Form of
Note

(See Exhibit 10.67)

 

 

EXHIBIT B

 

Form of
Warrant

(See Exhibit 10.68)

 

 

SCHEDULE I

 

	
  Purchaser

  	
   

  	
  Address

  	
   

  	
  Principal Amount of

  Notes

  	
   

  
	
  Gryphon
  Master Fund, L.P.

  	
   

  	
  100 Crescent
  Court, Suite 490

  	
   

  	
   

  	
   

  
	
   

  	
  Dallas,
  Texas 75201

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GSSF Master
  Fund, LP

  	
   

  	
  100 Crescent
  Court, Suite 475

  	
   

  	
   

  	
   

  
	
   

  	
  Dallas,
  Texas 75201

  	
   

  	
  $

  	
  500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Triage
  Capital Management L.P.

  	
   

  	
  401 City
  Ave., Suite 800

  	
   

  	
   

  	
   

  
	
   

  	
  Bala Cynwyd,
  PA 19004

  	
   

  	
  $

  	
  120,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Triage
  Capital Management B, L.P.

  	
   

  	
  401 City
  Ave., Suite 800

  	
   

  	
  $

  	
  130,000

  	
   

  
	
   

  	
  Bala Cynwyd,
  PA 19004

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Leon Frenkel

  	
   

  	
  1600 Flat
  Rock Rd.

  	
   

  	
   

  	
   

  
	
   

  	
  Penn Valley,
  PA 19072

  	
   

  	
  $

  	
  250,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Stratford
  Partners, LP

  	
   

  	
  237 Park
  Avenue, Suite 900

  	
   

  	
   

  	
   

  
	
   

  	
  New York, NY
  10017

  	
   

  	
  $

  	
  300,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kenneth Lisiak

  	
   

  	
  8 Haskell
  Road

  	
   

  	
   

  	
   

  
	
   

  	
  Andover, MA 01810

  	
   

  	
  $

  	
  100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Vestal
  Venture Capital

  	
   

  	
  6471 Enclave
  Way,

  	
   

  	
   

  	
   

  
	
   

  	
  Boca Raton,
  FL 33496

  	
   

  	
  $

  	
  325,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  James Kang

  	
   

  	
  Hyundai
  Hyperiod Apt. 101-1403

  	
   

  	
   

  	
   

  
	
   

  	
  Youngsan-Gu,
  Hannam-Dong

  	
   

  	
   

  	
   

  
	
   

  	
  Seoul, Korea

  	
   

  	
  $

  	
  350,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ricardo A.
  Salas

  	
   

  	
  64 Ritz Cove
  Drive

  	
   

  	
   

  	
   

  
	
   

  	
  Monarch
  Beach, CA 92629

  	
   

  	
  $

  	
  100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kurtis Jang

  	
   

  	
  Hyundai
  Hyperion Apt. 101-403

  	
   

  	
   

  	
   

  
	
   

  	
  Youngsan-Gu,
  Hannam-Dong

  	
   

  	
   

  	
   

  
	
   

  	
  Seoul, Korea

  	
   

  	
   

  	
   

  
	
   

  	
  82 10 6395
  6296

  	
   

  	
  $

  	
  100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Charles
  (Hyun Ju) Kim

  	
   

  	
  Dream County
  Villa 101

  	
   

  	
   

  	
   

  
	
   

  	
  Yeonhee-dong,
  91-10 Seodaemun-ku

  	
   

  	
   

  	
   

  
	
   

  	
  02-3143-2501

  	
   

  	
   

  	
   

  
	
   

  	
  010-7164-4877

  	
   

  	
  $

  	
  200,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Chuck Myong

  	
   

  	
  Hilltop
  Treasure 206A, UN Village

  	
   

  	
   

  	
   

  
	
   

  	
  1-44
  Hannam-dong, Yongsan-gu

  	
   

  	
   

  	
   

  
	
   

  	
  Seoul, Korea
  140-884

  	
   

  	
   

  	
   

  
	
   

  	
  02-793-7319

  	
   

  	
   

  	
   

  
	
   

  	
  010-6218-2869

  	
   

  	
  $

  	
  150,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  $

  	
  3,625,000Exhibit 10.67

 

THESE SECURITIES
HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT 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.

 

8%
UNSECURED SUBORDINATED NOTE

OF

LIQUIDMETAL
TECHNOLOGIES, INC.

 

 

	
  Note
  No.:    

  	
   

  	
  Original
  Principal Amount: $              

  
	
  Issuance
  Date: May 17, 2006

  	
   

  	
   

  	
  Lake
  Forest, California

  

 

THIS NOTE (this “Note”) is one of a duly authorized issue of Notes issued by LIQUIDMETAL TECHNOLOGIES, INC., a
corporation duly organized and existing under the laws of the State of Delaware
(the “Company”), designated as the
Company’s 8% Unsecured Subordinated Note in an aggregate principal amount equal
to approximately Four Million U.S. Dollars (U.S. $4,000,000) (the “Notes”). All principal and
interest under this Note shall become due and payable on the first to occur of
(i) August 17, 2007 or (ii) the closing after the date hereof of a public or
private equity or debt offering pursuant to which the Company receives gross
proceeds of at least $6,000,000 to be used for working capital purposes and
repayment of debt, but excluding financings for the purpose of purchasing
capital assets (a “Follow-On Financing”),
subject to Section 2 and the last sentence of Section 4(b) below (the “Maturity Date”). In calculating the gross
proceeds of an offering to determine whether it constitutes a Follow-On
Financing for purposes of this Note, any proceeds used to satisfy Senior Notes
will be excluded.

 

FOR VALUE RECEIVED, the Company hereby
promises to pay to the order of                        , or its registered assigns or
successors-in-interest (“Holder”),
the principal sum of                                                                                   
(U.S. $                      )
together with all accrued but unpaid interest thereon, if any, on the Maturity
Date, in accordance with the terms hereof. Interest on the unpaid principal
balance hereof shall accrue at the rate of 8% per annum from the Issuance Date
stated above, until the same becomes due and payable on the Maturity Date. Interest
on this Note shall accrue daily commencing on the Issuance Date and shall be
computed on the basis of a 360-day year, 30-day months and actual days elapsed
and shall be payable in accordance with Section 1 hereof. Unless otherwise
agreed or required by applicable law, payments will be applied first to any
unpaid collection costs, then to unpaid interest and fees and any remaining
amount to principal. Notwithstanding anything contained herein, this Note shall
bear interest on the due and unpaid Original Principal Amount (stated above)
from and after the occurrence and during the continuance of an Event of Default
pursuant to Section 4, at the rate (the “Default Rate”)
equal to the lower of fourteen percent (14%) per annum or the highest rate
permitted by law.

 

 

Except as otherwise provided herein, all
payments of principal and interest on this Note shall be made in lawful money
of the United States of America by wire transfer of immediately available funds
to such account as the Holder may from time to time designate by written notice
in accordance with the provisions of this Note. Notwithstanding anything to the
contrary herein, this Note may be prepaid in whole or in part at any time
without penalty. Whenever any amount expressed to be due by the terms of this
Note is due on any day which is not a Business Day (as defined below), the same
shall instead be due on the next succeeding day which is a Business Day.

 

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

 

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

 

“Debt” shall mean indebtedness of any kind.

 

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

 

The following terms and conditions shall
apply to this Note:

 

Section
1.      Payments
of Principal and Interest.

 

(a)   Interest Payment. All accrued interest
shall be payable in cash on the Maturity Date.

 

(b)   Payment of Principal. Subject to the
provisions hereof, the principal amount of this Note shall be due
and payable on the Maturity Date. Payment of the principal amount shall be
effected in cash.

 

(c)   Taxes. The Company may withhold
and pay over to the relevant authorities any appropriate tax or other legally
required withholdings from any interest payment to be made to the Holder to the
extent that such withholding is required by the Internal Revenue Code or any
other applicable law, rule, or regulation.

 

Section 2.      Subordination. This Note is subordinate in
right of payment and in all other respects to the 6% Senior Secured
Notes Due July 29, 2007 (the “July 2007 Notes”),
the 7% Senior Secured Convertible Notes Due August 2007 (the “August 2007 Notes”), and any other notes
that may be issued by the Company after the date hereof in exchange for or in
satisfaction of any July 2007 Notes or August 2007 Notes (collectively, the “Senior Notes”). Notwithstanding the
Maturity Date of this Note, the Company will not make any payments of
principal, interest, or otherwise under this Note unless and until all amounts
due and payable under the Senior Notes have been satisfied in full (whether
through cash payment or conversion).

 

Section 3.      Unsecured
Status of Note. This Note is unsecured and shall
not be deemed secured under the Amended and Restated Security Agreement, dated
August 2, 2005, between the Company and the holders of the Senior Notes.

 

2

 

Section 4.      Defaults
and Remedies.

 

(a)  Events of Default. An “Event of Default” is:  (i) a default in payment of the principal amount under this Note when due, or failure to pay
any accrued but unpaid interest thereon of the Note within five (5) days the date such interest payment is due; (ii) failure by
the Company for thirty (30) days after written notice has been received by the
Company to comply with any other material provision of the Note, the Purchase
Agreement or the Transaction Documents, (iii) a material breach by the Company
of its representations or warranties in the Purchase Agreement or Transaction
Documents that remains uncured for thirty (30) business days after notice to
the Company; or (iv) if the Company or any of its subsidiaries is subject to
any Bankruptcy Event. “Bankruptcy Event”
means any of the following events: (a) the Company or any subsidiary commences
a case or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
or similar law of any jurisdiction relating to the Company or any subsidiary
thereof; (b) there is commenced against the Company or any subsidiary any such
case or proceeding that is not dismissed within 30 days after commencement; (c)
the Company or any subsidiary is adjudicated insolvent or bankrupt or any order
of relief or other order approving any such case or proceeding is entered; (d)
the Company or any subsidiary suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not discharged or
stayed within 30 days; (e) the Company or any subsidiary makes a general
assignment for the benefit of creditors; (f) the Company or any subsidiary, by
any act or failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other action for
the purpose of effecting any of the foregoing. Notwithstanding the foregoing, it
will not constitute an Event of Default if the Company cannot pay the principal
amount or any interest or other amounts due under this Note when due if such
inability is due to the subordination provisions set forth in Section 3.2 of
the Purchase Agreement (and Section 2 hereof).

 

(b)   Remedies. If an Event of
Default occurs and is continuing with respect to the Note, the Holder may
declare all of the then outstanding principal amount of this Note, including
any interest due thereon, to be due and payable immediately. The remedies under
this Note shall be cumulative.

 

Section 5.      Covenants.
The Company covenants and agrees that for so long as
any portion of the indebtedness evidenced by this Note, whether principal,
accrued and unpaid interest or any other amount at any time due hereunder,
remains unpaid, the Company shall present the Holder an opportunity to
participate in any Follow-On Financing after the date hereof, but only if the
Follow-On Financing is primarily an offering of Company common stock or
securities exchangeable, convertible, or exercisable for Company common stock. If
Holder elects to participate in such a Follow-On Financing, then Holder will be
entitled to purchase the securities being offered in such Follow-On Financing
at a discount of 7% of the gross per share purchase price in the transaction
(in the case of an offering of common stock or preferred stock) or 7% of the
face amount of the security being sold in such transaction (in the case of an
offering of debt securities). However, in the case of an offering of
convertible securities (whether equity or debt), such discount will only be
applied to the purchase price or face amount thereof, as the case may be, and
will not be applied to the conversion price of such security. Furthermore, such
discount shall not be applied to the exercise price of any warrants or similar
securities issued in the Follow-On Financing.

 

3

 

Section
6.      General.

 

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

 

(b)   Savings Clause. In case any provision
of this Note is held by a court of competent jurisdiction to be excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, so that it is enforceable to the maximum
extent possible, and the validity and enforceability of the remaining
provisions of this Note will not in any way be affected or impaired thereby. In
no event shall the amount of interest paid hereunder exceed the maximum rate of
interest on the unpaid principal balance hereof allowable by applicable law. If
any sum is collected in excess of the applicable maximum rate, the excess
collected shall be applied to reduce the principal debt. If the interest
actually collected hereunder is still in excess of the applicable maximum rate,
the interest rate shall be reduced so as not to exceed the maximum allowable
under law.

 

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

 

(d)   Assignment, Etc. The Holder may assign
or transfer this Note to any transferee provided that the transferee
acknowledges and agrees to the subordination provisions set forth in Section
3.2 of the Purchase Agreement. Such acknowledgement and agreement shall be in
writing and in a form reasonably acceptable to the Company. The Holder shall
notify the Company of any such assignment or transfer promptly. This Note shall
be binding upon the Company and its successors and shall inure to the benefit
of the Holder and its successors and permitted assigns.

 

(e)   No Waiver. No failure on the part of
the Holder to exercise, and no delay in exercising any right, remedy or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise by the Holder of any right, remedy or power hereunder preclude any
other or future exercise of any other right, remedy or power. Each and every
right, remedy or power hereby granted to the Holder or allowed it by law or
other agreement shall be cumulative and not exclusive of any other, and may be
exercised by the Holder from time to time.

 

(f)    Governing Law; Jurisdiction.

 

(i)    Governing
Law. THIS NOTE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS
PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE APPLICATION OF THE LAW OF
ANY OTHER JURISDICTION.

 

(ii)   Jurisdiction. The Company irrevocably submits to the
jurisdiction of any State or Federal Court sitting in the State of New York,
County of New York, over any suit, action, or proceeding arising out of or
relating to this Note. The Company irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action, or proceeding brought in such a
court and any claim that suit, action, or proceeding has been brought in an
inconvenient forum. The Company agrees that the service of process upon it
mailed by certified or registered mail, postage prepaid and return receipt
requested (and service so made shall be deemed complete three days after the
same has been posted as aforesaid) or by personal service shall be deemed in
every respect effective service of process upon it in any such suit or
proceeding. Nothing herein shall affect Holder’s right to serve process in any
other manner permitted by law. The Company agrees that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on such judgment or in any other lawful manner.

 

4

 

(iii)  NO JURY
TRIAL. THE COMPANY HEREBY KNOWINGLY AND VOLUNTARILY WAIVES ANY AND
ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED
ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE.

 

(g)   Replacement Notes. This Note may be
exchanged by Holder at any time and from time to time for a Note or Notes with
different denominations representing an equal aggregate then-outstanding principal
amount of this Note, as reasonably requested by Holder, upon surrendering the
same. No service charge will be made for such registration or exchange. In the
event that Holder notifies the Company that this Note has been lost, stolen or
destroyed, a replacement Note identical in all respects to the original Note
(except for registration number and principal amount, if different than that
shown on the original Note), shall be issued to the Holder, provided that the
Holder executes and delivers to the Company an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with the Note.

 

(h)   Cancellation. After all of the principal
amount including accrued but unpaid interest and default payments at any time
owed on this Note have been paid in full, this Note shall automatically be
deemed canceled and the Holder shall promptly surrender the Note to the Company
at the Company’s principal executive offices.

 

(i)    Notices Procedures. Any and all
notices or other communications or deliveries to be provided by the Holder
hereunder, shall be in writing and delivered personally, by confirmed
facsimile, or by a nationally recognized overnight courier service to the
Company at the facsimile telephone number or address of the principal place of
business of the Company as set forth in the Purchase Agreement. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, or by a
nationally recognized overnight courier service addressed to the Holder at the
facsimile telephone number or address of the Holder appearing on the books of
the Company, or if no such facsimile telephone number or address appears, at
the principal place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed delivered (i) upon
receipt, when delivered personally, (ii) when sent by facsimile, upon receipt
if received on a Business Day prior to 5:00 p.m. (Eastern Time), or on the
first Business Day following such receipt if received on a Business Day after
5:00 p.m. (Eastern Time) or (iii) upon receipt, when deposited with a
nationally recognized overnight courier service.

 

[Signature Page Follows]

 

5

 

IN WITNESS WHEREOF, the Company has caused
this Note to be duly executed on May 17, 2006.

 

 

	
   

  	
  LIQUIDMETAL
  TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:  Ricardo
  A. Salas

  
	
   

  	
  Title:    President
  and Chief Executive Officer

  

 

6

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