EXHIBIT 10.5
EXECUTION
March 1, 2004
FACTORY MORTGAGE AGREEMENT
by and among
Liquidmetal Korea Co., Ltd.
eIPO Co., Ltd.
and
Other parties named herein
[LOGO]
THIS FACTORY MORTGAGE AGREEMENT (the "Agreement") is entered into as of this 1st
day of March, 2004 by and among:
(i) Liquidmetal Korea Co., Ltd., a company duly incorporated and existing
under the laws of Korea and having its principal place of business at
▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ Industrial Complex, Uhyun-ri, Chungbook-myun,
Pyungtaek, Kyunggi-do, Korea (the "Mortgagor"); and
(ii) eIPO Co., Ltd., a company duly incorporated and existing under the law
of Korea and having a place of business at at 15th Floor, Union Steel
Bldg., ▇▇▇, ▇▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇▇-▇▇, ▇▇▇▇▇, ▇▇▇▇▇ and each other person
or entity listed on Schedule I attached to this Agreement (collectively
and individually, the "Mortgagee").
RECITALS
WHEREAS:
A. By the Securities Purchase Agreement dated as of January 15, 2004 (the
"Securities Purchase Agreement") made by and among Liquidmetal
Technologies, Inc. ("Liquidmetal") and the Mortgagee, Liquidmetal has
agreed to issue and sell to the Mortgagee, and the Mortgagee agreed to
purchase, the Note (as defined therein), subject to and upon the terms
and conditions contained therein;
B For the purposes of securing the Secured Obligations (as defined
below), the Mortgagor grants to the Mortgagee, inter alia, a second
priority maximum amount factory mortgage on the properties described in
the Schedule hereto pursuant to the terms and conditions contained
herein.
NOW, THEREFORE, it is agreed as follows:
1. Interpretation
Words and expressions defined in the Securities Purchase Agreement
shall, unless otherwise defined herein or the context otherwise
requires, have the same meaning when used in this Agreement. References
to any agreement or document shall be construed as references to such
agreement or document as varied, amended, novated or supplemented from
time to time. In addition thereto, as used in this Agreement:
1.1 "Mortgaged Properties" shall mean the properties as described in the
Schedule II (as
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amended from time to time pursuant to this Agreement).
1.2. "Secured Obligations" shall mean (i) any and all obligations,
liabilities and indebtedness of Liquidmetal owing to the Mortgagee,
presently existing or to be incurred hereinafter under or with respect
to the Securities Purchase Agreement and the Note, and (ii) moneys,
obligations and liabilities owing and payable by the Mortgagor to the
Mortgagee under this Agreement.
2. Establishment of Factory Mortgage
2.1 The Mortgagor does hereby grant to the Mortgagee a second priority
maximum amount mortgage (the "Factory Mortgage") on the Mortgaged
Property to secure the Secured Obligations pursuant to the Factory
Mortgage Act of Korea. The Mortgagee understands and acknowledged that
there is a first priority mortgage over the Mortgaged Property for the
benefit of Kookmin Bank ("Priority Mortgage").
2.2 The maximum mortgage amount to be secured by the Factory Mortgage over
the Mortgaged Property shall be the Purchase Price (as defined in the
Securities Purchase Agreement) up to United States Dollars Three
Million Only (USD 3,000,000.00), provided, that the Mortgagee shall,
upon demand from the Mortgagor, allow this maximum mortgage amount to
be reduced from time to time to the extent of the value of the Note
that is either repaid or converted into Common Share (as defined in the
Securities Purchase Agreement) of Liquidmetal. All costs and expenses
incurred as a result of reducing the maximum mortgage amount shall be
borne by the Mortgagor.
2.3. Immediately upon the execution of this Agreement, the Mortgagor shall
cause the Factory Mortgage in the maximum amount of United States
Dollars Three Million in favor of the Mortgagee to be registered in the
real estate registry for the Mortgaged Property with the relevant
registry office. Upon completion of the registration of the Factory
Mortgage, the Mortgager shall deliver to the Mortgagee a certified copy
of relevant real estate registry extract and list of equipment.
3. Representations, Warranties and Covenants
The Mortgagor hereby represents, warrants and covenants to the
Mortgagee that as of the date hereof:
(a) the execution, delivery and performance by the Mortgagor of
this Agreement has been duly authorized by the Mortgagor, and
are not in conflict with any provision of any applicable laws
or regulations or the articles of incorporation of the
Mortgagor;
(b) the execution, delivery and performance by the Mortgagor of
this Agreement does
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not violate or cause any default under any indenture,
agreement or undertaking by which the Mortgagor is bound;
(c) all authorizations required from any government or
governmental agency in connection with this Agreement have
been obtained and are in full force and effect except for the
report to the Bank of Korea under the Korean Foreign Exchange
Transaction Law and the regulations, which will be submitted
by the Mortgagee immediately after the execution of this
Agreement;
(d) this Agreement constitutes valid obligations of the Mortgagor,
legally binding upon it and enforceable in accordance with its
terms, subject, as to enforceability, to laws relating to
bankruptcy, insolvency, liquidation, reorganization, court
schemes, moratoria, administration and other laws generally
affecting the rights of creditors;
(e) all property forming part of the Mortgaged Property is owned
legally by the Mortgagor by good and marketable title free
from all security, interest, lien or other encumbrance other
than the Priority Mortgage, and shall at all times be and
remain free from any security, interest, lien or other
encumbrance, except for the Priority Mortgage and the mortgage
created hereunder;
(f) the Mortgagor has not agreed, and will not agree to sell,
assign, transfer or create any security, interest, lien or
other encumbrance in or over all or any part of the Mortgaged
Property other than the Priority Mortgage; provided, that the
Mortgagor shall be permitted to sell all or any part of the
Mortgaged Property free and clear of the mortgage created
hereunder to an unrelated third-party in an arm's length
transaction for a valid business purpose (in which case, the
Mortgagee shall, at the request of the Mortgagor and at the
Mortgagor's cost and expense, deregister the Factory Mortgage
from the relevant registry office and take such other action
as may be reasonably requested by the Mortgagor to effectuate
the release of the Factory Mortgage); and
(g) the Mortgagor has not taken any corporate action nor have any
other steps been taken or legal proceedings been started by it
or any third party for its winding up, dissolution,
reorganization or bankruptcy or for the appointment of a
receiver, trustee or similar officer over the Mortgagor or its
assets or revenues, and there occurs or continues no
cause/event that may lead to such action or steps.
4. Scope of Factory Mortgage
4.1 The Factory Mortgage created hereunder shall be effective as a matter
of course with respect to not only doors, walls, terraces, garden
trees, garden stones, structures, appurtenant buildings, facilities for
water supply and sewage, electrical facilities
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including the facilities for supply and transformation of electric
power, air-conditioning and heating facilities, elevator facilities,
facilities for gas supply, and all other facilities in or outside the
buildings but also attached machinery and tools, which are united with
or attached to the Mortgaged Property and goods to be attached to or
united from time to time with the Mortgaged Property by extension,
reconstruction, repair or rebuilding. For the avoidance of any doubt,
the Mortgagor and the Mortgagee agree and acknowledge that the Factory
Mortgage created hereunder does not include the land on which the
Mortgaged Property is situated.
4.2 If any building located on the land which is subject to this Factory
Mortgage is not registered on the official register or if a new
building is built on such land, the Mortgagor shall promptly register
the unregistered existing or new buildings (including the buildings
which are owned by a third party) and cause to be granted to the
Mortgagee a Factory Mortgage on such buildings pursuant to Section 2
hereof, upon the Mortgagee's request for purposes of protecting the
rights of the Mortgagee hereunder and submit an amended registry
showing the establishment of a Factory Mortgage on such previously
unregistered or new buildings.
4.3 The Factory Mortgage created hereunder shall also extend as to any
actual part of the Mortgaged Property not actually shown in the
registry to the extent that such part is deemed to fall within the
scope of the property described in the registry thereof. If the
Mortgagee, in its reasonable judgment, deems it necessary to file for
an amendment or addition to the Factory Mortgage for the preservation
of the Mortgagee's rights, the Mortgagor shall immediately take all
such actions as the Mortgagees may request.
5. Preservation of the Mortgaged Property
5.1 The Mortgagor shall not transfer the Mortgaged Property or materially
change the nature or condition of the Mortgaged Property (other than in
the ordinary course of business of the Mortgagor or as a consequence of
normal wear and tear), without the prior consent of the Mortgagee, nor
do any act (legal or otherwise) which may cause damage or losses to the
Mortgagee.
5.2 The Mortgagor shall give prompt notice to the Mortgagee in the event
there is any material damage, destruction or expropriation, or there
occurs any event that may cause material impairment in the value of the
Mortgaged Property.
5.3 In the event any party (other than the Mortgagee) attaches (including
provisional attachment), seizes or otherwise creates, asserts, claims
or otherwise acquires any lien or security interest over the Mortgaged
Property, the Mortgagor shall promptly notify the Mortgagee thereof and
take all necessary actions to dismiss, discharge and release such
attachment, seizure, lien or other security interest.
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6. Enforcement of Factory Mortgage
6.1 If any of the Secured Obligations becomes due and payable and is not
paid within thirty (30) days after the date on which payment is due,
the Mortgagee shall become forthwith entitled, as and when it may see
fit, to put into force and to exercise all or any of the power
possessed by it as mortgagees, chargees and assignees of the Mortgaged
Property, including without limitation, the power to:
(a) exercise their rights to any of the Mortgaged Property,
regardless of whether such Mortgaged Property is in its own
name, in the name of the Mortgagor or otherwise;
(b) assign, sell or other dispose of the Mortgaged Property to
such person, at a public or a private sale, and upon such
terms and in such manner as the Mortgagee may reasonably
determine, and the Mortgagee or anyone else may be the
purchaser, assignee or recipient of any or all of the
Mortgaged Property and thereafter hold the same absolutely
free from any claims or rights of the Mortgagor whatsoever;
(c) take over or institute (by using the name of the Mortgagor, if
necessary) all such proceedings in connection with the
Mortgaged Property as the Mortgagee may in its sole discretion
think fit (but shall be under no obligation to do so); and
(d) make any reasonable compromise or settlement deemed desirable
with respect to any of the Mortgaged Property.
Notwithstanding the foregoing, if the holder of the Priority Mortgages
enforces its rights against the Mortgaged Property, the Mortgagee shall
be entitled to participate in the distribution of the proceeds from
such enforcement to the extent permitted by applicable laws.
6.2 If the proceeds of the sale, collection or other collection upon or
realization of the Mortgaged Property pursuant to Section 6.1 hereof,
which will be applied to the Secured Obligations, are insufficient to
cover the costs and expenses of such realization and the payment in
full of the Secured Obligations, the Mortgagor shall remain liable for
any such deficiency.
6.3 The Mortgagee shall incur no liability as a result of the sale of the
Mortgaged Property or any part thereof, at any private sale pursuant to
Section 6.1 hereof conducted in a commercially reasonable manner. The
Mortgagor hereby waives any claims against the Mortgagee arising by
reason of the fact that the price at which the Mortgaged Property has
been sold at such private sale may be less than the price at which it
could have been sold if the Mortgagee had not accepted the first offer
received or had offered the Mortgaged Property to more than one
offeree.
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6.4 The Mortgagor hereby irrevocably appoints the Mortgagee as its
attorneys-in-fact, for and on behalf of the Mortgagor and in its name,
to: (i) execute, seal and deliver and otherwise perfect any such
documents as mentioned in Section 8; (ii) execute, seal and deliver to
any purchaser of the Mortgaged Property from the Mortgagee in the
exercise of the Mortgagee's power under Section 6, a ▇▇▇▇ of sale or
other assurance of title; and (iii) execute all such documents as the
Mortgagor could do in respect of the Factory Mortgage, registration or
deregistration of the Mortgaged Property or Factory Mortgage with the
relevant registry office in connection with the exercise of the
Mortgagees' powers under Section 6; provided, that the Mortgagee shall
not exercise the authority conferred in sub-clause (ii) and (iii) above
unless a Bankruptcy Event (as defined in the Securities Purchase
Agreement) has occurred and is continuing and/or Liquidmetal breaches
any part of the Securities Purchase Agreement or the Note.
7. Assignment
This Agreement and the Factory Mortgage created hereunder shall be
binding upon and inure to the benefit of the Mortgagor and the
Mortgagee and their respective heirs, successors and assigns. The
Mortgagee may, in the ordinary course of business and in accordance
with the applicable law, at any time assign all or any part of its
rights or obligations hereunder to any party (each an "Assignee")
without the consent of the Mortgagor. The parties hereto agree that to
the extent of any assignment, the Assignee shall be deemed to have the
same rights and benefits under this Agreement as it would have had if
it were a Mortgagee hereunder. The Mortgagor may not assign any of its
rights or obligations hereunder without the prior written consent of
the Mortgagee.
8. Further Assurances
8.1 The Mortgagor covenants that it will promptly from time to time at the
reasonable request of the Mortgagee do all such things and execute all
such documents as Mortgagee may reasonably consider necessary or
desirable for giving full effect to this Agreement or for securing the
rights of the Mortgagees hereunder.
8.2 Upon the request of the Mortgagee and at the Mortgagor's expense, the
Mortgagor hereby agrees to take any and all necessary actions for the
registration, recordation or any other procedures that may be required
for the creation, amendment, refiling or deregistration of the Factory
Mortgage.
9. Termination and Release of Mortgage
The term of this Agreement shall begin on the date of this Agreement
and end on the date on which all of the Secured Obligations have been
unconditionally and irrevocably paid and discharged in full. This
Agreement shall also terminate in case the Mortgagor sells
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all or any part of the Mortgaged Property to an unrelated third party
in an arm's length transaction for a valid business purpose. Upon
termination of this Agreement, the Mortgagee shall, at the request of
the Mortgagor and at the Mortgagor's cost and expense, deregister the
Factory Mortgage from the relevant registry office and take such other
action as may be reasonably requested by the Mortgagor to effectuate
the release of the Factory Mortgage.
10. Governing Law and Jurisdiction
This Agreement and the grant of mortgage pursuant hereto shall be
governed by the laws of Korea in all respects. The parties hereto agree
that any legal action or proceeding arising out of or relating to this
Agreement may be brought in the Seoul District Court in Korea and
irrevocably submit to the non-exclusive jurisdiction of such court.
11. Miscellaneous
11.1 Notices. All notices, requests and demands to or upon the respective
parties hereto to be effective, shall be in writing and shall be
personally delivered or sent by facsimile (with subsequent written
confirmation) or by registered or certified first class mail, postage
prepaid, return receipt requested, or by overnight (or next business
day) courier service shall be deemed to have been duly given or made
when delivered by hand, on the day that such facsimile is transmitted,
or, if by first class mail, five days following the date on which such
writing is deposited with the postal service, or the day after the date
when deposited with an overnight (or next business day) courier
service, addressed as follows, or to such other address as either party
hereto may hereafter specify in writing to the other party:
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If to the Mortgagor: Liquidmetal Korea Co., Ltd.
▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Uhyun-ri, Chungbook- myun
Pyungtaek, Kyunggi-do
Korea
Attention: ▇. ▇. ▇▇▇
Telephone: ▇▇▇ ▇▇-▇▇▇ ▇▇▇▇
Fax: ▇▇▇ ▇▇-▇▇▇ ▇▇▇▇
If to the Mortgagee: eIPO Co., Ltd.
15th Floor, Union Steel ▇▇▇▇.
▇▇▇, ▇▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇▇▇
Telephone: ▇▇▇ ▇-▇▇▇ ▇▇▇▇
Fax: ▇▇▇ ▇-▇▇▇ ▇▇▇▇
11.2 Severability. If any of the provisions of this Agreement shall
contravene any law or regulation or be held invalid, this Agreement
shall be construed as if not containing those provisions, and the
rights and obligations of the parties hereto shall be construed and
enforced accordingly.
11.3 Amendments, Changes and Modifications. This Agreement shall not be
amended, changed, modified, altered or terminated unless the prior
written approval of each of the Mortgagor and the Mortgagee is
obtained. This Agreement shall not be amended by an oral agreement.
11.4 Counterparts. This Agreement may be executed in multiple counterparts,
each of which, when executed, shall constitute an original but all of
which together shall constitute one and the same instrument.
11.5 Heading. Headings and titles herein are for convenience only and shall
not affect the construction or interpretation of this Agreement.
11.6 Entire Agreement. This Agreement is intended by the parties as the
written final expression of each party's obligations and rights in
connection with the Mortgaged Property and supersedes all prior and
contemporaneous understandings or agreements concerning the subject
matter hereof.
11.7 No Waiver. Neither the Security Agent nor any Mortgagee shall, by any
act, delay, indulgence, omission or otherwise, except by an express
written instrument clearly indicating an intention to waive, be deemed
to have waived any right or remedy
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hereunder or to have acquiesced in any Event of Default. No failure to
exercise, nor any delay in exercising on the part of the Mortgagee, any
rights, power or privilege hereunder shall operate as a waiver thereof.
No single or partial exercise of any right, power, privilege hereunder
shall preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.
11.8 Remedies Cumulative. The rights and remedies provided herein are
cumulative and may be exercised individually or concurrently, and are
not exclusive of any other rights or remedies provided by law.
[signature page to follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date and year first above written.
MORTGAGOR
LIQUIDMETAL KOREA CO., LTD.
By: /S/ Young ▇▇ ▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇
Representative Director
MORTGAGEE
eIPO CO., LTD.
/s/ Yangkwon Moon
Yangkwon Moon
Chief Executive Officer
eIPO CO., LTD.
on behalf of the Additional Mortgagee listed in Schedule II
eIPO Co., Ltd.
/s/ Yangkwon Moon
Yangkwon Moon
Chief Executive Officer
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SCHEDULE I
ADDITIONAL MORTGAGEE
eIPO Co., Ltd.
WINVEST VENTURE PARTNERS, INC.
DONG ▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇-JUN ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇
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SCHEDULE II
DESCRIPTION OF MORTGAGED PROPERTY
BUILDING
---------------------------------------------------------------------------------------------------------------------
Name of Building Type Description of Building Area(m(2))
---------------------------------------------------------------------------------------------------------------------
Alloy Compound Factory general steel structure, concrete flat slab and inclined 1,202.2
lightweight panel roof - one storey
---------------------------------------------------------------------------------------------------------------------
Main Building Factory general steel structure, concrete flat slab roof- three storeys 14,041.8
---------------------------------------------------------------------------------------------------------------------
Security Post Factory reinforced concrete structure, concrete flat slab roof - one storey 55.1
---------------------------------------------------------------------------------------------------------------------
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MACHINERY, TOOLS AND FACILITIES
---------------------------------------------------------------------------------------------------------------------
Items Type of machinery Name Quantity
---------------------------------------------------------------------------------------------------------------------
1 alloy Vacuum Induction Melting 100KG 1
---------------------------------------------------------------------------------------------------------------------
2 alloy Vacuum Induction Melting 50 KG 24
---------------------------------------------------------------------------------------------------------------------
3 alloy Vacuum Induction Melting 200KG 3
---------------------------------------------------------------------------------------------------------------------
4 alloy Supersonic Waves 3
---------------------------------------------------------------------------------------------------------------------
5 alloy Dry Furnace 1
---------------------------------------------------------------------------------------------------------------------
6 alloy Mold Chamber 1
---------------------------------------------------------------------------------------------------------------------
7 alloy Component Anlysis 2
---------------------------------------------------------------------------------------------------------------------
8 alloy Hellium Leak Detector 1
---------------------------------------------------------------------------------------------------------------------
9 alloy Dust Collector 4
---------------------------------------------------------------------------------------------------------------------
11 alloy Vacuum Induction Melting 15KG 1
---------------------------------------------------------------------------------------------------------------------
12 alloy Vacuum Induction Melting 25KG 4
---------------------------------------------------------------------------------------------------------------------
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13 alloy Arc.Melting 1
---------------------------------------------------------------------------------------------------------------------
14 alloy Freon type cooler 1
---------------------------------------------------------------------------------------------------------------------
15 casting Die Casting Machine 150 Ton(Clamping Force) 16
---------------------------------------------------------------------------------------------------------------------
16 post-manufacturing Polishing Booth 40
---------------------------------------------------------------------------------------------------------------------
17 post-manufacturing Polishing Machine 1
---------------------------------------------------------------------------------------------------------------------
18 post-manufacturing Buffing Booth 1
---------------------------------------------------------------------------------------------------------------------
19 post-manufacturing Belt Grinding 1
---------------------------------------------------------------------------------------------------------------------
20 post-manufacturing Cut-off Machine 14
---------------------------------------------------------------------------------------------------------------------
21 post-manufacturing CNC Milling 1
---------------------------------------------------------------------------------------------------------------------
22 post-manufacturing Water Jet Machine 12
---------------------------------------------------------------------------------------------------------------------
23 post-manufacturing Auto Blasting M/C 4
---------------------------------------------------------------------------------------------------------------------
24 post-manufacturing Drill M/C 2
---------------------------------------------------------------------------------------------------------------------
25 post-manufacturing Hairline M/C 1
---------------------------------------------------------------------------------------------------------------------
26 post-manufacturing ultrasonic washer 1
---------------------------------------------------------------------------------------------------------------------
27 post-manufacturing Working Table(Suction) 19
---------------------------------------------------------------------------------------------------------------------
28 post-manufacturing Working Table 12
---------------------------------------------------------------------------------------------------------------------
29 post-manufacturing Laser Marking 1
---------------------------------------------------------------------------------------------------------------------
30 metal Milling M/C 1
---------------------------------------------------------------------------------------------------------------------
31 metal LATHE 1
---------------------------------------------------------------------------------------------------------------------
32 metal Forming grinder 1
---------------------------------------------------------------------------------------------------------------------
33 metal discharge processing machine 1
---------------------------------------------------------------------------------------------------------------------
34 metal Super Drill M/C 1
---------------------------------------------------------------------------------------------------------------------
35 metal Flatening grinder 1
---------------------------------------------------------------------------------------------------------------------
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36 metal Screw Compressor 3
---------------------------------------------------------------------------------------------------------------------
37 building facility Dust Collector 1
---------------------------------------------------------------------------------------------------------------------
38 building facility Transformation facility 1
---------------------------------------------------------------------------------------------------------------------
Total Number of machinery, tools and facilities 184
---------------------------------------------------------------------------------------------------------------------
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