Document:

Exhibit 10.2

 

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.

 

THIS
NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL
REDEMPTION.  AS A RESULT, FOLLOWING ANY
REDEMPTION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT
REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED
INTEREST SET FORTH BELOW.

 

7% SENIOR SECURED CONVERTIBLE NOTE

 

OF

 

LIQUIDMETAL TECHNOLOGIES, INC.

 

	
  Note No.: D-       

  	
   

  	
  Original Principal Amount:
  $                            

  
	
  Issuance Date:   August 2,
  2005

  	
   

  	
   

  	
  Lake Forest, California

  

 

 

THIS NOTE (this “Note”) is 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 7% Senior Secured Convertible Note in an aggregate
principal amount of up to Fifteen Million U.S. Dollars (U.S. $15,000,000.00) (the “Notes”).  All principal and unpaid interest under this
Note shall become due and payable on August 2, 2007 (the “Maturity Date”).

 

FOR VALUE RECEIVED, the Company hereby promises to pay to the order of                        , or its registered assigns or successors-in-interest (“Holder”), the principal sum of                                               
(U.S. $                     )
together with all accrued but unpaid interest thereon, if any, on the Maturity
Date, in accordance with the terms hereof. 
Interest on the unpaid principal balance hereof shall accrue at the rate
of 7.0% per annum from the issuance date specified above (the “Issuance Date”), until the same becomes due and payable on
the Maturity Date, or such earlier date upon acceleration in accordance with
the terms hereof or of the other Transaction Documents.  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. 
Notwithstanding anything to the contrary contained herein, this Note
shall bear interest on the due and unpaid Principal Amount from and after the
occurrence and during the continuance of an Event of Default pursuant to Section 3(a),
at the rate (the “Default Rate”)
equal to the lower of fourteen percent (14%) per annum or the highest rate
permitted by law.  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.

 

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.  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.

 

“Conversion
Price”
shall be $2.00 (U.S.) per share, as
adjusted as set forth herein.

 

“Convertible
Securities”
means any convertible securities, warrants, options or other rights to
subscribe for or to purchase or exchange for, shares of Common Stock.

 

“Debt” shall mean
indebtedness of any kind.

 

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

 

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

 

“Principal Amount” shall refer
to any unpaid principal amounts outstanding under this Note.

 

“Principal
Market”
shall mean the principal market, exchange, or quotation service on which the
Common Stock is then listed or quoted for trading.

 

“Registration Statement” shall
have the meaning set forth in the Amended and Restated Registration Rights
Agreement.

 

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

 

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

 

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

 

 

The following terms and conditions shall
apply to this Note:

 

Section 1.                                          Payments
of Principal and Interest.

 

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

 

(b)                                 Payment
of Principal.  Subject to the
provisions hereof, the Principal
Amount of this Note and all remaining accrued and unpaid interest 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.

 

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

 

Section 2.                                          Seniority.  The obligations of the Company hereunder
shall rank senior to all other Debt of the Company, whether now or hereinafter
existing, except as and to the extent set forth in Section 3.2 of the
Purchase Agreement.

 

Section 3.                                          Defaults
and Remedies.

 

(a)                                  Events of Default.     An
“Event of Default” is:  (i) a default in payment of the
Principal Amount, when due, or failure to
pay any accrued but unpaid interest thereon of the Note within five (5) days after the date
such interest payment is due; (ii) a
default in the timely issuance of the Underlying Shares upon and in accordance
with the terms hereof (where for purposes of this Note, the term timely shall
mean within ten (10) days following the conversion date) (iii) 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, (iv) 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; (v) any event
or condition shall occur which (x) results in the acceleration of the maturity
of any material long-term debt (other than the Note) of the Company or any of
its subsidiaries, or (y) enables (or, with the giving of notice or lapse of
time or both, would enable) the holder of such material long-term debt or any
or person acting on behalf of such holder’s behalf to accelerate the maturity
thereof, or (vi) 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.

 

(b)                                 Remedies.  If an Event of Default occurs and is
continuing with respect to this 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
Company shall pay interest on such amount in cash at the Default Rate to the
Holder if such amount is not paid within two (2) days of Holder’s
request.  The remedies under this Note
shall be cumulative.

 

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

 

Section 5.                                          Conversion.

 

(a)                                  Conversion
by Holder.  From and after the
Issuance Date and subject to the terms hereof and restrictions and limitations
contained herein, the Holder shall have the right, at Holder’s

 

 

option, at any time and from time to time to
convert, in part or
in whole, the outstanding Principal Amount and all accrued and unpaid
interest under this Note into shares of the Company’s common stock, par value
$.001 per share (“Common Stock”),
at the then applicable Conversion Price, by delivering to the Company a fully
executed notice of conversion in the form of conversion notice attached hereto
as Exhibit A (the “Conversion Notice”),
which may be transmitted by facsimile (with the original mailed on the same
date by certified or registered mail, postage prepaid and return receipt
requested).  The Conversion Notice shall
specify a date for the conversion to be effective, which date shall be no
earlier than the date on which the Conversion Notice is delivered (the “Conversion Date”), and the Conversion Notice shall be
irrevocable when delivered.

 

(b)                                 Conversion
Procedures.  Upon conversion of this
Note pursuant to this Section 5, the outstanding Principal Amount
hereunder shall be converted into such number of fully paid, validly issued and
non-assessable shares of Common Stock, free of any liens, claims and
encumbrances, as is determined by dividing the outstanding Principal Amount
being converted by the then applicable Conversion Price and any accrued but
unpaid interest shall be paid in cash. 
The Company will deliver to the Holder not later than three (3) Trading
Days after the Conversion Date, a certificate or certificates which shall be
free of restrictive legends and trading restrictions (assuming that the
Registration Statement has been declared effective), representing the number of
shares of Common Stock being acquired upon the conversion of this Note.

 

(c)                                  Conversion Price
Adjustments.

 

(i)                                     Stock Dividends, Splits and Combinations.  If the Company or any of its subsidiaries, at
any time while the Note is outstanding (A) shall pay a stock dividend or
otherwise make a distribution or distributions on any equity securities
(including instruments or securities convertible into or exchangeable for such
equity securities but excluding any stockholder rights granted pursuant to a
poison pill) in shares of Common Stock, (B) subdivide outstanding Common
Stock into a larger number of shares, (C) combine outstanding Common Stock
into a smaller number of shares, or (D) issues
new securities by reclassification of the shares of Common Stock of the
Company, then, and in each such
case, the Conversion Price in
effect immediately prior to such event or the record date therefor, whichever
is earlier, shall be adjusted so that the Holder shall be entitled to receive
the number of shares of Common Stock or other securities of the Company which
such Holder would have owned or have been entitled to receive after the
occurrence of any of the events described above, had such Note been surrendered
for conversion immediately prior to the occurrence of such event or record date
therefore, whichever is earlier. 
Any adjustment made pursuant to this Section 5(c) shall become
effective (x) in the case of any such
dividend or distribution, immediately after the close of business on the record date for the determination of holders
of shares of Common Stock entitled to receive such dividend or distribution, or
(y) in the case of such subdivision, reclassification or combination, at the
close of business on the day upon which such corporate action becomes
effective.

 

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

 

 

have received had this Note been converted
into Common Stock at the then applicable the Conversion Price immediately prior
to the record date for such distribution.

 

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

 

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

 

(v)                                 Notice of Adjustments.  Whenever the Conversion Price is
adjusted pursuant to this Section 5(c), the Company shall promptly deliver
to the Holder of this Note, a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment, provided that any failure to so provide such notice shall not
affect the automatic adjustment hereunder.

 

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

 

 

other securities, cash, property or
assets that such holder would have received if such share had been converted
immediately prior to such Fundamental Change.

 

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

 

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

 

(e)                                  No
Fractions.  Upon a conversion
hereunder the Company shall not be required to issue stock certificates
representing fractions of shares of Common Stock, but may if otherwise
permitted, make a cash payment in respect of any final fraction of a share
based on the closing price of a share of Common Stock at such time.  If the Company elects not, or is unable, to
make such cash payment, the Holder shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.

 

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

 

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

 

(h)                                 Mandatory
Conversion.

 

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

 

 

period, including the Mandatory Conversion
Date (as defined below), the Company shall have the option, exercisable by
delivering an irrevocable notice to the Holder (the “Mandatory
Conversion Notice”) to provide that the Note (including the
Principal Amount and all accrued and unpaid interest) shall be converted at the
then-applicable Conversion Price on a date (the “Mandatory
Conversion Date”) at least 30 but no more than 60 days from the date
of the Mandatory Conversion Notice.  The
foregoing shall not affect the right of the Holder to convert this Note
pursuant to Section 5(a) above at all times up to and including the
Mandatory Conversion Date.

 

(ii)                                  Notwithstanding the
preceding subsection (h)(i), the Holder of this Note shall not be
obligated to convert this Note on a Mandatory Conversion Date unless and until
each of the following conditions has been satisfied at all times from the date
of the Mandatory Conversion Notice up to and including the Mandatory Conversion
Date:

 

(A)                              The Registration Statement
has been effective;

 

(B)                                No Event of Default has
occurred and is continuing; and

 

(C)                                The Holder has received
unlegended certificates representing shares of Common Stock with respect to all
conversions for which Conversion Notices have been given.

 

(iii)                               A
mandatory conversion shall be subject to and governed by all the provisions
relating to voluntary conversion of the Note contained herein.

 

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. 
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)                                  Amendments and
Waivers.

 

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

 

B.                                     Except as provided
herein, no failure or delay on the part of the Holder in exercising any power
or right under this Note shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right.  No notice to or demand on the Company in any
case shall entitle it to any notice or demand in similar or other
circumstances.  No waiver or approval by
the Holder shall, except as may be otherwise stated in such waiver or approval,
be applicable to subsequent transactions. 
No waiver or approval hereunder shall require any similar or dissimilar
waiver or approval thereafter to be granted hereunder.

 

(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.

 

(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 outstanding Principal Amount, 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)
has 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 on
following page]

 

 

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

 

	
   

  	
  LIQUIDMETAL TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  John Kang, President and Chief Executive Officer

  

 

 

EXHIBIT A

 

FORM OF
CONVERSION NOTICE

 

(To be Executed by
the Holder

in order to Convert
a Note)

 

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

 

	
  Conversion
  information:

  	
   

  	
   

  
	
   

  	
  Date to Effect
  Conversion

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Aggregate
  Principal Amount of Note Being Converted

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Number of shares
  of Common Stock to be Issued

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Applicable
  Conversion Price

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AddressExhibit 10.3

 

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  THIS WARRANT SHALL NOT CONSTITUTE AN OFFER TO
SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.  THE SECURITIES ARE “RESTRICTED” AND MAY NOT
BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM.

 

COMMON STOCK PURCHASE WARRANT

 

To Purchase Shares of $0.001 Par Value Common Stock (“Common Stock”) of

 

LIQUIDMETAL TECHNOLOGIES, INC.

 

THIS CERTIFIES that, for value received,                                                           
(the “Purchaser” or “Holder”)
is entitled, upon the terms and subject to the conditions hereinafter set
forth, at any time on or after the date hereof and on or prior to 8:00 p.m.
New York City Time on August 2, 2010 (the “Termination
Date”), but not thereafter, to subscribe for and purchase from
Liquidmetal Technologies, Inc., a Delaware corporation (the “Company”), up to                
shares of Common Stock (the “Warrant  Shares”) at an Exercise Price equal to $2.00 per share (as
adjusted from time to time pursuant to the terms hereof, the “Exercise  Price”).  The Exercise Price and the number of shares
for which the Warrant is exercisable shall be subject to adjustment as provided
herein.

 

This Warrant is being issued in connection with a private placement
offering (the “Private Placement”) by the Company
of 7% Senior Secured Convertible Notes (the “Notes”)
being sold only to accredited investors. 
This Warrant is identical to all other Warrants issued in the Private
Placement, except for the number of Warrant Shares issuable hereunder.  This Warrant is specifically being issued in
connection with the Securities Purchase Agreement dated August 2, 2005
(the “Purchase Agreement”), entered into
between the Company and the Purchaser. 
Capitalized terms used herein and not otherwise defined shall have the
meaning ascribed thereto in the Purchase Agreement.

 

1.                                       Title
of Warrant.  Prior to the expiration
hereof and subject to compliance with applicable laws, this Warrant and all
rights hereunder are transferable, in whole or in part, at the office or agency
of the Company by the Holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant together with (a) the Assignment Form annexed
hereto properly endorsed, and (b) any other documentation reasonably
necessary to satisfy the Company that such transfer is in compliance with all
applicable securities laws.  The term “Holder” shall refer to the Purchaser or any subsequent
transferee of this Warrant.

 

2.                                       Authorization
of Shares.  The Company covenants
that all shares of Common Stock which may be issued upon the exercise of rights
represented by this Warrant will, upon exercise of the rights represented by this
Warrant and payment of the Exercise Price as set forth herein (unless the
Holder exercises this Warrant through a cashless exercise, as

 

 

provided
in Section 3(b) hereof), be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges in respect of
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue or otherwise specified herein).

 

3.                                       Exercise
of Warrant.

 

(a)                                  The
Holder may exercise this Warrant, in whole or in part, at any time and from
time to time, by delivering (which may be by facsimile) to the offices of the
Company or any transfer agent for the Common Stock this Warrant, together with
a Notice of Exercise in the form annexed hereto specifying the number of
Warrant Shares with respect to which this Warrant is being exercised, together
with payment to the Company of the Exercise Price therefor (unless the Holder
exercises this Warrant through a cashless exercise, as provided in Section 3(b) hereof).

 

(b)                                 This
Warrant may also be exercised by the Holder through a cashless exercise, as
described in this Section 3(b). 
This Warrant may be exercised, in whole or in part, by (i) the
delivery to the Company of a duly executed Notice of Exercise specifying the
number of Warrant Shares to be applied to such exercise, and (ii) the
surrender to a common carrier for overnight delivery to the Company, or as soon
as practicable following the date the Holder delivers the Notice of Exercise to
the Company, of this Warrant (or an indemnification undertaking with respect to
this Warrant in the case of its loss, theft or destruction).  The number of shares of Common Stock to be
issued upon exercise of this Warrant pursuant to this Section 3(b) shall
equal the value of this Warrant (or the portion thereof being canceled)
computed as of the date of delivery of this Warrant to the Company using the
following formula:

 

X = Y(A-B)/A

 

where:

 

X =
the number of shares of Common Stock to be issued to the Holder under this Section 3(b);

Y =
the number of Warrant Shares identified in the Notice of Exercise as being
applied to the subject exercise;

A =
the Fair Market Value price per share on such date; and

B =
the Exercise Price on such delivery date

 

The Company acknowledges and agrees that this Warrant was issued for
consideration received on the date on which this Warrant was granted.  Consequently, the Company acknowledges and
agrees that, if the Holder conducts a cashless exercise pursuant to this Section 3(b),
the period during which the Holder held this Warrant may, for purposes of Rule 144
promulgated under the Securities Act of 1933, as amended (the “Act”), be “tacked” to the period during
which the Holder holds the Warrant Shares received upon such cashless exercise.

 

2

 

Notwithstanding the foregoing, the Holder may conduct a cashless
exercise pursuant to this Section 3(b) only in the event that a
registration statement covering the resale of the Warrant Shares is not then effective
at the time that the Holder wishes to conduct such cashless exercise.

 

(c)                                  In
the event that the Warrant is not exercised in full, the number of Warrant
Shares shall be reduced by the number of such Warrant Shares for which this
Warrant is exercised and/or surrendered, and the Company, if requested by
Holder and at its expense, shall within three (3) Trading Days (as defined
below) issue and deliver to the Holder a new Warrant of like tenor in the name
of the Holder or as the Holder (upon payment by Holder of any applicable
transfer taxes) may request, reflecting such adjusted Warrant Shares.  Notwithstanding anything to the contrary set
forth herein, upon exercise of any portion of this Warrant in accordance with
the terms hereof, the Holder shall not be required to physically surrender this
Warrant to the Company unless such Holder is purchasing the full amount of
Warrant Shares represented by this Warrant. 
The Holder and the Company shall maintain records showing the number of
Warrant Shares so purchased hereunder and the dates of such purchases or shall
use such other method, reasonably satisfactory to the Holder and the Company,
so as not to require physical surrender of this Warrant upon each such
exercise.  The Holder and any assignee,
by acceptance of this Warrant or a new Warrant, acknowledge and agree that, by
reason of the provisions of this Section, following exercise of any portion of
this Warrant, the number of Warrant Shares which may be purchased upon exercise
of this Warrant may be less than the number of Warrant Shares set forth on the
face hereof.

 

Certificates for shares of Common Stock purchased hereunder shall be
delivered to the Holder hereof within three (3) Trading Days after the
date on which this Warrant shall have been exercised as aforesaid.  The Holder may withdraw its Notice of
Exercise at any time if the Company fails to timely deliver the relevant
certificates to the Holder as provided in this Agreement.  A Notice of Exercise shall be deemed sent on
the date of delivery if delivered before 8:00 p.m. New York Time on such
date, or the day following such date if delivered after 8:00 p.m. New York
Time; provided that the Company is only obligated to deliver Warrant Shares
against delivery of the Exercise Price from the holder hereof (unless the
Holder exercises this Warrant through a cashless exercise, as provided in Section 3(b) hereof)
and surrender of this Warrant (or appropriate affidavit and/or indemnity in
lieu thereof).

 

In lieu of delivering physical certificates representing the Warrant
Shares issuable upon exercise of this Warrant, provided the Company’s transfer
agent is participating in the Depository Trust Company (“DTC”)
Fast Automated Securities Transfer (“FAST”) program,
upon request of the Holder, the Company shall use its best efforts to cause its
transfer agent to electronically transmit the Warrant Shares issuable upon
exercise to the Holder, by crediting the account of the Holder’s prime broker
with DTC through its Deposit Withdrawal Agent Commission (“DWAC”)
system. The time periods for delivery described above shall apply to the
electronic transmittals through the DWAC system. The Company agrees to
coordinate with DTC to accomplish this objective.

 

3

 

(d)                                 The
term “Trading Day” means (x) if the Common
Stock is not listed on the New York or American Stock Exchange but sale prices
of the Common Stock are reported on Nasdaq National Market or another automated
quotation system, a day on which trading is reported on the principal automated
quotation system on which sales of the Common Stock are reported, (y) if the
Common Stock is listed on the New York Stock Exchange or the American Stock
Exchange, a day on which there is trading on such stock exchange, or (z) if the
foregoing provisions are inapplicable, a day on which quotations are reported
by National Quotation Bureau Incorporated.

 

4.                                       No
Fractional Shares or Scrip.  No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant.  In lieu of
issuance of a fractional share upon any exercise hereunder, the Company will
either round up to nearest whole number of shares or pay the cash value of that
fractional share, which cash value shall be calculated on the basis of the
average closing price of the Common Stock during the five (5) Trading Days
immediately preceding the date of exercise.

 

5.                                       Charges,
Taxes and Expenses.  Issuance of
certificates for shares of Common Stock upon the exercise of this Warrant shall
be made without charge to the Holder hereof for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder of this Warrant or in such name or
names as may be directed by the Holder of this Warrant; provided, however,
that in the event certificates for shares of Common Stock are to be issued in a
name other than the name of the Holder of this Warrant, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder hereof; and provided  further,
that the Company shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in the issuance of any Warrant
certificates or any certificates for the Warrant Shares other than the issuance
of a Warrant Certificate to the Holder in connection with the Holder’s
surrender of a Warrant Certificate upon the exercise of all or less than all of
the Warrants evidenced thereby.

 

6.                                       Closing
of Books.  The Company will at no
time close its shareholder books or records in any manner which interferes with
the timely exercise of this Warrant.

 

7.                                       No
Rights as Shareholder until Exercise. 
Subject to Section 12 of this Warrant and the provisions of any
other written agreement between the Company and the Purchaser, the Purchaser
shall not be entitled to vote or receive dividends or be deemed the holder of
Warrant Shares or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the Purchaser, as such, any of the rights of
a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value, or change of
stock to no par value, consolidation, merger, conveyance or otherwise) or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise until the Warrant shall have been exercised as provided

 

4

 

herein.  However, at the time of the exercise of this
Warrant pursuant to Section 3 hereof, the Warrant Shares so purchased
hereunder shall be deemed to be issued to such Holder as the record owner of
such shares as of the close of business on the date on which this Warrant shall
have been exercised.

 

8.                                       Assignment
and Transfer of Warrant.  This
Warrant may be assigned by the surrender of this Warrant and the Assignment Form annexed
hereto duly executed at the office of the Company (or such other office or
agency of the Company or its transfer agent as the Company may designate by
notice in writing to the registered Holder hereof at the address of such Holder
appearing on the books of the Company); provided, however, that
this Warrant may not be resold or otherwise transferred except (i) in a
transaction registered under the Act, or (ii) in a transaction pursuant to
an exemption, if available, from registration under the Act and whereby, if
reasonably requested by the Company, an opinion of counsel reasonably
satisfactory to the Company is obtained by the Holder of this Warrant to the
effect that the transaction is so exempt.

 

9.                                       Loss,
Theft, Destruction or Mutilation of Warrant; Exchange.  The Company represents, warrants and
covenants that (a) upon receipt by the Company of evidence and/or
indemnity reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any Warrant or stock certificate representing the Warrant Shares,
and in case of loss, theft or destruction, of indemnity reasonably satisfactory
to it, and (b) upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or
stock certificate of like tenor and dated as of such cancellation, in lieu of
this Warrant or stock certificate, without any charge therefor.  This Warrant is exchangeable at any time for
an equal aggregate number of Warrants of different denominations, as requested
by the holder surrendering the same, or in such denominations as may be
requested by the Holder following determination of the Exercise Price.  No service charge will be made for such
registration or transfer, exchange or reissuance.

 

10.                                 Saturdays,
Sundays, Holidays, etc.  If the last
or appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a legal holiday.

 

11.                                 Effect
of Certain Events. If at any time while this Warrant or any portion thereof
is outstanding and unexpired there shall be a transaction (by merger or
otherwise) in which more than 50% of the voting power of the Company is
disposed of (collectively, a “Sale or Merger Transaction”),
the Holder of this Warrant shall have the right thereafter to purchase, by
exercise of this Warrant and payment of the aggregate Exercise Price in effect
immediately prior to such action (unless the Holder exercises this Warrant
through a cashless exercise, as provided in Section 3(b) hereof), the
kind and amount of shares and other securities and property which it would have
owned or have been entitled to receive after the happening of such transaction
had this Warrant been exercised immediately prior thereto, subject to further
adjustment as provided in Section 12.

 

5

 

12.                                 Adjustments
of Exercise Price and Number of Warrant Shares.

 

The number of and kind of securities purchasable upon exercise of this
Warrant and the Exercise Price (as well as the maximum exercise price) shall be
subject to adjustment from time to time as set forth in this Section 12.

 

(a)                                  Subdivisions,
Combinations, Stock Dividends and other Issuances.   If the Company shall, at any time while this
Warrant is outstanding, (A) pay a stock dividend or otherwise make a
distribution or distributions on any equity securities (including instruments
or securities convertible into or exchangeable for such equity securities) in
shares of Common Stock, (B) subdivide outstanding shares of Common Stock
into a larger number of shares, or (C) combine outstanding Common Stock
into a smaller number of shares, then the Exercise Price (and maximum exercise
price) shall be adjusted such that the Exercise Price, as adjusted, will be
equal to the Exercise Price then in effect multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
before such event and the denominator of which shall be the number of shares of
Common Stock outstanding after such event. 
Any adjustment made pursuant to this Section 12(a) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision or
combination.  The number of shares which
may be purchased hereunder shall be increased proportionately to any reduction
in Exercise Price pursuant to this paragraph 12(a), so that after such
adjustments the aggregate Exercise Price payable hereunder for the increased
number of shares shall be the same as the aggregate Exercise Price in effect
just prior to such adjustments.

 

(b)                                 Other
Distributions. If at any time after the date hereof the Company distributes
to holders of its Common Stock, other than as part of its dissolution,
liquidation or the winding up of its affairs, any shares of its capital stock,
any evidence of indebtedness or any of its assets (other than Common Stock),
then the number of Warrant Shares for which this Warrant is exercisable shall
be increased to equal: (i) the number of Warrant Shares for which this
Warrant is exercisable immediately prior to such event, (ii) multiplied by
a fraction, (A) the numerator of which shall be the Fair Market Value (as
defined below) per share of Common Stock on the record date for the dividend or
distribution, and (B) the denominator of which shall be the Fair Market
Value price per share of Common Stock on the record date for the dividend or
distribution minus the amount allocable to one share of Common Stock of the
value (as jointly determined in good faith by the Board of Directors of the
Company and the Holder) of any and all such evidences of indebtedness, shares
of capital stock, other securities or property, so distributed.  For purposes of this Warrant, “Fair Market Value” shall equal the average closing trading price of the Common Stock on the Principal Market
(as defined in the Purchase Agreement) for the 5 Trading Days preceding the
date of determination or, if the Common Stock is not listed or admitted to
trading on any Principal Market, and the average price cannot be determined as
contemplated above, the Fair Market Value of the Common Stock shall be as
reasonably determined in good faith by the Company’s Board

 

6

 

of Directors and the Holder.  In the event of any adjustment pursuant to
this Section, the Exercise Price shall be reduced to equal: (i) the
Exercise Price in effect immediately before the occurrence of any such event (ii) multiplied
by a fraction, (A) the numerator of which is the number of Warrant Shares
for which this Warrant is exercisable immediately before the adjustment, and (B) the
denominator of which is the number of Warrant Shares for which this Warrant is
exercisable immediately after the adjustment.

 

(c)                                  Merger,
etc. If at any time after the date hereof there shall be a merger or
consolidation of the Company with or into or a transfer of all or substantially
all of the assets of the Company to another entity, then the Holder shall be
entitled to receive upon or after such transfer, merger or consolidation
becoming effective, and upon payment of the Exercise Price then in effect, the
number of shares or other securities or property of the Company or of the
successor corporation resulting from such merger or consolidation, which would
have been received by the Holder for the shares of stock subject to this
Warrant had this Warrant been exercised just prior to such transfer, merger or
consolidation becoming effective or to the applicable record date thereof, as
the case may be.  The Company will not
merge or consolidate with or into any other corporation, or sell or otherwise
transfer its property, assets and business substantially as an entirety to
another corporation, unless the corporation resulting from such merger or
consolidation (if not the Company), or such transferee corporation, as the case
may be, shall expressly assume in writing the due and punctual performance and
observance of each and every covenant and condition of this Warrant to be
performed and observed by the Company.

 

(d)                                 Reclassification,
etc.  If at any time after the date
hereof there shall be a reorganization or reclassification of the securities as
to which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, then the Holder shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified herein and upon payment of the Exercise Price then in effect,
the number of shares or other securities or property resulting from such
reorganization or reclassification, which would have been received by the
Holder for the shares of stock subject to this Warrant had this Warrant at such
time been exercised.

 

(e)                                  Exercise
Price Adjustment.  In the event that
on or subsequent to the Closing Date, the Company issues or sells any Common
Stock, any securities which are convertible into or exchangeable for its Common
Stock or any convertible securities, or any warrants or other rights to
subscribe for or to purchase or any options for the purchase of its Common
Stock or any such convertible securities (other than (A) pursuant to warrants, convertible
notes, or other Convertible Securities (as defined herein) issued prior to the
grant date of this Warrant, (B) pursuant to warrants or convertible notes
granted pursuant to the Purchase Agreement, (C) shares of Common Stock or
options to purchase such shares issued to employees, consultants, officers or
directors in accordance with stock plans approved by the Board of Directors,
and shares of Common Stock issuable under options or warrants that are
outstanding as of the date of the Purchase Agreement, (D) shares of Common
Stock issued pursuant to a stock dividend, split or other similar transaction,
and (E) shares of Common Stock issued at a price not less than the average
closing price per

 

7

 

share of Common Stock for the 5
Trading Days immediately preceding the date of issuance, to Growell Metal Co.,
Ltd. pursuant to the Settlement Agreement, dated on or about January 10,
2004, between Growell Metal Co., Ltd. and the Company’s South Korean subsidiary)
at an effective price per share which is less than the Exercise Price, then the
Exercise Price in effect immediately prior to such issue or sale shall be
reduced effective concurrently with such issue or sale to an amount determined
by multiplying the Exercise Price then in effect by a fraction, (x) the
numerator of which shall be the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issue or sale, plus (2) the
number of shares of Common Stock which the aggregate consideration received by
the Company for such additional shares would purchase at the Exercise Price
then in effect; and (y) the denominator of which shall be the number of shares
of Common Stock of the Company outstanding immediately after such issue or
sale.

 

For the purposes of the foregoing adjustments, in the case of the
issuance of any convertible securities, warrants, options or other rights to
subscribe for or to purchase or exchange for, shares of Common Stock (“Convertible Securities”), the maximum number of shares of
Common Stock issuable upon exercise, exchange or conversion of such Convertible
Securities shall be deemed to be outstanding, provided that no further
adjustment shall be made upon the actual issuance of Common Stock upon
exercise, exchange or conversion of such Convertible Securities.

 

(f)                                    In
the event of any adjustment in the number of Warrant Shares issuable hereunder
upon exercise, the Exercise Price shall be inversely proportionately increased
or decreased as the case may be, such that aggregate purchase price for Warrant
Shares upon full exercise of this Warrant shall remain the same.  Similarly, in the event of any adjustment in
the Exercise Price, the number of Warrant Shares issuable hereunder upon
exercise shall be inversely proportionately increased or decreased as the case
may be, such that aggregate purchase price for Warrant Shares upon full
exercise of this Warrant shall remain the same.

 

 13.                              Voluntary
Adjustment by the Company.  The
Company may at its option, at any time during the term of this Warrant, reduce
but not increase the then current Exercise Price to any amount and for any
period of time deemed appropriate by the Board of Directors of the Company.

 

14.                                 Notice
of Adjustment.  Whenever the number
of Warrant Shares or number or kind of securities or other property purchasable
upon the exercise of this Warrant or the Exercise Price (or maximum exercise
price) is adjusted, the Company shall promptly mail to the Holder of this
Warrant a notice setting forth the number of Warrant Shares (and other
securities or property) purchasable upon the exercise of this Warrant and the
Exercise Price of such Warrant Shares after such adjustment and setting forth
the computation of such adjustment and a brief statement of the facts requiring
such adjustment.

 

15.                                 Authorized
Shares.  The Company covenants that
during the period the Warrant is outstanding and exercisable, it will reserve
from its authorized and unissued Common

 

8

 

Stock
a sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any and all purchase rights under this Warrant.  The Company further covenants that its
issuance of this Warrant shall constitute full authority to its officers who
are charged with the duty of executing stock certificates to execute and issue
the necessary certificates for the Warrant Shares upon the exercise of the
purchase rights under this Warrant.  The
Company will take all such reasonable action as may be necessary to assure that
such Warrant Shares may be issued as provided herein without violation of any
applicable law, regulation, or rule of any applicable market or exchange.

 

16.                                 Compliance
with Securities Laws.

 

(a)                                  The
Holder hereof acknowledges that the Warrant Shares acquired upon the exercise
of this Warrant, if not registered (or if no exemption from registration
exists), will have restrictions upon resale imposed by state and federal
securities laws.  Each certificate
representing the Warrant Shares issued to the Holder upon exercise (if not
registered, for resale or otherwise, or if no exemption from registration
exists) will bear substantially the following legend:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION 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
OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF 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.

 

(b)                                 Without
limiting the Purchaser’s right to transfer, assign or otherwise convey the
Warrant or Warrant Shares in compliance with all applicable securities laws,
the Holder of this Warrant, by acceptance hereof, acknowledges that this
Warrant and the Warrant Shares to be issued upon exercise hereof are being
acquired solely for the Purchaser’s own account and not as a nominee for any
other party, and that the Purchaser will not offer, sell or otherwise dispose of
this Warrant or any Warrant Shares to be issued upon exercise hereof except
under circumstances that will not result in a violation of applicable federal
and state securities laws.

 

17.                                 Miscellaneous.

 

(a)                                  Issue
Date; Choice of Law; Venue; Jurisdiction. 
The provisions of this Warrant shall be construed and shall be given
effect in all respects as if it had been issued and delivered by the Company on
the date hereof.  This Warrant shall be
binding upon any successors or assigns of the Company.  This Warrant will be construed and enforced
in accordance with and governed by the laws of the State of New York, except
for matters arising under the

 

9

 

Act,
without reference to principles of conflicts of law.  Each of the parties consents to the exclusive
jurisdiction of the Federal and State Courts sitting in the County of New York
in the State of New York in connection with any dispute arising under this
Warrant and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum  non  conveniens
or venue, to the bringing of any such proceeding in such jurisdiction.  EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL
BY JURY.

 

(b)                                 Modification
and Waiver.  This Warrant and any provisions
hereof may be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of the same is
sought.  Any amendment effected in
accordance with this paragraph shall be binding upon the Purchaser, each future
holder of this Warrant and the Company. 
No waivers of, or exceptions to, any term, condition or provision of
this Warrant, in any one or more instances, shall be deemed to be, or construed
as, a further or continuing waiver of any such term, condition or provision.

 

(c)                                  Notices.  Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice.  The addresses for such communications shall
be to the addresses as shown on the books of the Company or to the Company at
the address set forth in the Purchase Agreement.  A party may from time to time change the
address to which notices to it are to be delivered or mailed hereunder by
notice in accordance with the provisions of this Section 17(c).

 

(d)                                 Severability.  Whenever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in
any jurisdiction, such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of any other provision of this
Warrant in such jurisdiction or affect the validity, legality or enforceability
of any provision in any other jurisdiction, but this Warrant shall be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.

 

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

 

10

 

(f)                                    Registration.  The Warrant Shares underlying this Warrant
will be subject to a Registration Rights Agreement to be entered into between
the Company and the Holder, in such form as shall be reasonably satisfactory to
the Company and the Holder.

 

[Signature Page Follows]

 

11

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officers thereunto duly authorized.

 

Dated:  August 2, 2005

 

	
   

  	
  LIQUIDMETAL
  TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  John Kang

  
	
   

  	
   

  	
  President and
  Chief Executive Officer

  

 

12

 

NOTICE OF EXERCISE

 

To:                              Liquidmetal
Technologies, Inc.

 

(1)                                  The
undersigned hereby elects to exercise the attached Warrant for and to purchase
thereunder,               
shares of Common Stock, and herewith makes payment therefor of $              ,
or elects to use the cashless exercise option of the Warrant.

 

(2)                                  Please
issue a certificate or certificates representing said shares of Common Stock in
the name of the undersigned or in such other name as is specified below:

 

	
   

  	
   

  
	
  (Name)

  
	
   

  
	
   

  	
   

  
	
  (Address)

  
	
   

  	
   

  

 

(3)                                  Please
issue a new Warrant for the unexercised portion of the attached Warrant in the
name of the undersigned or in such other name as is specified below:

 

	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Date)  (Signature)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

  
	
   

  
	
  Dated:

  
	
   

  	
   

  
	
  Signature

  
									

 

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required
information.

Do not use this form to exercise the warrant.)

 

FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are
hereby assigned to

 

                                                                                                                                    
whose address is

 

                                                                                                                                                                        .

 

 

	
   

  	
   

  	
  Dated:                         ,

  

 

	
   

  	
  Holder’s
  Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Holder’s
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  
	
   

  
	
  Signature
  Guaranteed:

  	
   

  	
   

  
						

 

 

NOTE:  The signature to this Assignment Form must
correspond with the name as it appears on the face of the Warrant, without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank or trust company.  Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

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