Document:

Exhibit
10.5

MERS MIN:  8000101-0000004159-9

INDEMNITY
AGREEMENT - BH

INDEMNITY
AGREEMENT (the “Agreement”)
made as of the 18th day of October, 2006 by BEHRINGER HARVARD 1325 G
STREET, LLC, a
Delaware limited liability company (“Initial Borrower”),
having its principal place of business c/o Behringer Harvard Funds, 15601
Dallas Parkway, Suite 600, Addison, Texas 75001, and BEHRINGER HARVARD REIT I, INC., a Maryland corporation having
an address c/o Behringer Harvard Funds, 15601 Dallas Parkway, Suite 600, Addison,
Texas 75001 (“Principal”;
Principal and Initial Borrower collectively “Indemnitor”), in favor of BEAR STEARNS COMMERCIAL MORTGAGE, INC., a New  York
corporation, having an address at 383 Madison Avenue, New  York, New
 York  10179 (“Lender”).

RECITALS:

A.            Lender and Initial Borrower are parties to that certain
Amended and Restated Loan Agreement of even date herewith (the “Loan Agreement”).  Capitalized terms not defined herein shall
have the meaning attributed to such term in the Loan Agreement.

B.            Borrower has requested that Lender modify the Loan in the
manner set forth in the Loan Agreement and Lender is unwilling to so modify the
Loan unless Borrower and Principal agree to provide the indemnification,
representations and warranties and other matters described in this Agreement
for the benefit of Lender.

C.            Principal has a direct or indirect ownership interest in
Initial Borrower and thus will derive substantial benefit from the modification
of the Loan.  Initial Borrower and
Principal enter into this Agreement to induce Lender to modify the Loan.

D.            Initial Borrower may transfer, pursuant to Section 5.2.13
of the Loan Agreement, some or all of its ownership interest in the Property to
one or more tenants in common, each of whom will assume the Loan on a joint and
several basis to the extent set forth in the Loan Documents.  Initial Borrower and/or any such tenants in
common that assume the Loan hereinafter referred to collectively as the “Borrower.”

AGREEMENT

NOW THEREFORE, in consideration of the premises
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Indemnitor hereby represents, warrants, covenants and
agrees for the benefit of Lender as follows:

1.             Indemnification. 
Indemnitor covenants and agrees at its sole cost and expense, to
protect, defend, indemnify, release and hold Lender harmless from and against
any and all Losses (defined below) imposed upon or incurred by or asserted
against Lender and directly or indirectly arising out of or in any way relating
to any one or more of the following: (i) fraud or

 

 

intentional misrepresentation by Initial
Borrower or any affiliate of Initial Borrower in connection with the Loan; (ii)
the removal or disposal of any portion of the Property after an Event of
Default by Initial Borrower or any affiliate; (iii) the failure of Initial
Borrower to obtain Lender’s prior written consent to any subordinate financing
or other voluntary lien encumbering the Property that is placed on the Property
by Initial Borrower; (iv) the failure of Initial Borrower to obtain Lender’s
prior written consent to any assignment, transfer, or conveyance of the
Property or any portion thereof by Initial Borrower as required by the Loan
Agreement; (v) Initial Borrower’s violation of any of the Special Purpose
Entity covenants and requirements contained in the Loan Agreement or other Loan
Documents other than sections (xii) and (xxii) in the definition of Special
Purpose Entity; (vi) the breach by Initial Borrower of any representation,
warranty, covenant or indemnification provision in the Loan Agreement or the
Mortgage concerning environmental laws, hazardous substances and asbestos and
any indemnification of Lender with respect thereto in either document; (vii)
the filing by Initial Borrower of any action for partition of the Property;
(vii) any election by Initial Borrower to terminate or not to renew the
Property Management Agreement in a manner not permitted under the Loan
Agreement; (viii) the gross negligence or willful misconduct of Initial
Borrower; (ix) the misapplication or conversion by Initial Borrower of (A)
any insurance proceeds paid by reason of any loss, damage or destruction to the
Property, (B) any awards or other amounts received in connection with the condemnation
of all or a portion of the Property, or (C) any Rents following an Event of
Default; and (x) any election by Initial Borrower to terminate any
Tenants-In-Common Agreement without Lender’s consent.  As used herein, the term “Losses” includes
any and all claims, suits, liabilities, actions, proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value, fines,
penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement, punitive damages, foreseeable and unforeseeable consequential
damages, of whatever kind or nature (including but not limited to reasonable
attorneys’ fees and other costs of defense).

2.             Guaranty. 
(a)  Principal absolutely and unconditionally guarantees to Lender
the prompt and full payment of the Debt (as defined in the Loan Agreement) in
the event that (1) Initial Borrower files a voluntary petition under the
Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or
(2) an involuntary case is commenced against Initial Borrower under the
Bankruptcy Code or any other Federal or state bankruptcy or insolvency law with
the collusion of Initial Borrower or any of its Affiliates.

(b)           Principal
absolutely and unconditionally guarantees to Lender the prompt and full payment
of any Taxes and Insurance Premiums.

(c)           Principal
absolutely and unconditionally guarantees to Lender the prompt and full payment
of any Replacement Reserve Shortfall payable pursuant Section 7.3 of the Loan
Agreement.

(d)           Principal
absolutely and unconditionally guarantees to Lender the prompt and full payment
of any recordation, mortgage or other similar taxes payable in connection with

 

 

the Mortgage or the Assignment of Leases or
the assignment of the Mortgage or the Assignment of Leases to Lender.

(e)           Principal
absolutely and unconditionally guarantees to Lender the prompt and full payment
of any Lease Obligations Shortfall payable pursuant Section 7.4 of the Loan
Agreement.

(f)            This
is a guaranty of payment and not of collection. 
The obligations of Principal hereunder are and shall be absolute under
any and all circumstances, without regard to the validity, regularity or
enforceability of the Note, the Loan Agreement, the Mortgage or the other Loan
Documents.  This Agreement shall remain
in full force and effect as to any modification, extension or renewal of the
Note, the Loan Agreement, the Mortgage or any of the other Loan Documents, and
notwithstanding any release or forbearance granted by Lender with respect
thereto, all of which may be made, done or suffered without notice to or
further consent of Principal.

3.             Unimpaired Liability.  The liability of Indemnitor under this
Agreement shall in no way be limited or impaired by, and Indemnitor hereby
consents to and agrees to be bound by, any amendment or modification of the
provisions of the Note, the Loan Agreement, the Mortgage or any of the other
Loan Documents.  In addition, the
liability of Indemnitor under this Agreement shall in no way be limited or
impaired by (i)  any extensions of time for performance required by the
Note, the Loan Agreement, the Mortgage or any of the other Loan Documents, (ii)
 any sale or transfer of all or part of the Property, (iii)  any
exculpatory provision in the Note, the Loan Agreement, the Mortgage, or any of
the other Loan Documents limiting Lender’s recourse to the Property or to any
other security for the Note, or limiting Lender’s rights to a deficiency
judgment against Indemnitor, (iv)  the accuracy or inaccuracy of the
representations and warranties made by Indemnitor under the Note, the Loan
Agreement, the Mortgage or any of the other Loan Documents or herein, (v)
 the release of Indemnitor or any other person from performance or
observance of any of the agreements, covenants, terms or condition contained in
the Loan Agreement, the Mortgage, the Note or the other Loan Documents by
operation of law, Lender’s voluntary act, or otherwise, (vi)  the release
or substitution in whole or in part of any security for the Note, or (vii)
 Lender’s failure to record the Loan Agreement, the Mortgage or file any
UCC financing statements (or Lender’s improper recording or filing of any
thereof) or to otherwise perfect, protect, secure or insure any security
interest or lien given as security for the Note; and, in any such case, whether
with or without notice to Indemnitors and with or without consideration.

4.             Enforcement. 
Lender may enforce the obligations of Indemnitor under this Agreement
without first resorting to or exhausting any security or collateral or without
first having recourse to the Note, the Loan Agreement, the Mortgage, or any
other Loan Documents or the Property, through foreclosure proceedings or
otherwise; provided, however, that nothing herein shall inhibit or prevent
Lender from suing on the Note, foreclosing, or exercising any power of sale
under the Loan Agreement, the Mortgage, or exercising any other rights and
remedies thereunder or under the Loan Agreement.  It is not necessary for an Event of Default
to

 

 

have occurred for Lender to exercise its
rights pursuant to this Agreement. 
Notwithstanding any provision of the Note, the Loan Agreement, the
Mortgage, or any of the other Loan Documents, the obligations pursuant to this
Agreement are exceptions to any non-recourse or exculpation provision contained
therein.  Indemnitor is fully and
personally liable for such obligations, and its liability is not limited to the
original or amortized principal balance of the Loan or the value of the
Property.

5.             Survival. 
Subject to Section  19 below, the obligations and liabilities of
Indemnitor under this Agreement shall fully survive indefinitely
notwithstanding any termination, satisfaction, assignment, entry of a judgment
of foreclosure, exercise of any power of sale, or delivery of a deed in lieu of
foreclosure of the Mortgage.

6.             Interest. 
Any amounts payable to any Lender under this Agreement shall become
immediately due and payable on demand and, if not paid within thirty (30) days
of such demand therefor, shall bear interest at a per annum rate equal to the
lesser of (a)  5% plus the Interest Rate or (b)  the maximum interest
rate which Indemnitor may by law pay or Lender may charge and collect, from the
date payment was due.

7.             Waivers. 
(a)  Indemnitor hereby waives (i)  any right or claim of right
to cause a marshalling of any Indemnitor’s assets or to cause Lender to proceed
against any of the security for the Loan before proceeding under this Agreement
against Indemnitor; (ii)  and relinquishes all rights and remedies
accorded by applicable law to Indemnitor, except any rights of subrogation,
reimbursement or contribution which Indemnitor may have, provided that the
indemnity provided for hereunder shall neither be contingent upon the existence
of any such rights of subrogation nor subject to any claims or defenses
whatsoever which may be asserted in connection with the enforcement or
attempted enforcement of such subrogation rights including, without limitation,
any claim that such subrogation, reimbursement or contribution rights were
abrogated by any acts of Lender; (iii)  the right to assert a
counterclaim, other than a mandatory or compulsory counterclaim, in any action
or proceeding brought against or by Lender; (iv)  notice of acceptance
hereof and of any action taken or omitted in reliance hereon; (v)  presentment
for payment, demand of payment, protest or notice of nonpayment or failure to
perform or observe, or other proof, or notice or demand; and (vi)  all
homestead exemption rights against the obligations hereunder and the benefits
of any statutes of limitations or repose; and (vii)  any rights to require
Lender to proceed against an Indemnitor, or to require Lender to pursue any
other remedy or enforce any other right. 
Notwithstanding anything to the contrary contained herein, Indemnitor
hereby agrees to postpone the exercise of any rights of subrogation,
reimbursement or contribution with respect to any collateral securing the Loan
until the Loan shall have been paid in full.

(b)           INDEMNITOR
AND LENDER HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT,
TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE APPLICATION
FOR THE LOAN, THE COMMITMENT FOR THE LOAN, THE LOAN

 

 

AGREEMENT, THE MORTGAGE, THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR ANY ACTS OR OMISSIONS OF ANY LENDER IN
CONNECTION THEREWITH.

(c)           Indemnitor
hereby waives and agrees not to assert or take advantage of any defense based
upon failure of Lender to commence an action against Borrower.  In addition, Indemnitor expressly waives all
rights it may have now or in the future under any statute, or at common law, or
at law or in equity, or otherwise, to compel Lender to proceed in respect of the
obligations guaranteed hereunder against Borrower, or any other party or
against any security for the payment of the obligations guaranteed hereunder
before proceeding against, or as a condition to proceeding against
Indemnitor.  It is agreed between Indemnitor
and Lender that the foregoing waivers are of the essence of this transaction
and that, but for this Agreement and such waivers, Lender would decline to
enter into the loan evidenced and secured by the Loan Documents.

8.             Indemnitor’s Representations and Warranties.  Indemnitor represents and warrants that:

(a)           if
Indemnitor is a corporation, partnership or limited liability company, it has
the full corporate/partnership/limited liability company power and authority to
execute and deliver this Agreement and to perform its obligations hereunder;
the execution, delivery and performance of this Agreement by Indemnitor has
been duly and validly authorized; and all requisite
corporate/partnership/limited liability company action has been taken by
Indemnitor to make this Agreement valid and binding upon Indemnitor,
enforceable in accordance with its terms;

(b)           if
Indemnitor is an individual, he/she is acting in an individual capacity and has
full power and authority to make this Agreement valid and binding upon
Indemnitor, enforceable in accordance with its terms;

(c)           if
Indemnitor is a corporation, partnership, limited liability company or trust
its execution of, and compliance with, this Agreement is in the ordinary course
of business of that Indemnitor and will not result in the breach of any term or
provision of the charter, by-laws, partnership or trust agreement, articles of
organization, operating agreement, limited liability company agreement, or
other governing instrument of that Indemnitor or result in the breach of any
term or provision of, or conflict with or constitute a default under or result
in the acceleration of any obligation under any agreement, indenture or loan or
credit agreement or other instrument to which the Indemnitor or the Property
are subject, or result in the violation of any law, rule, regulation, order,
judgment or decree to which the Indemnitor or the Property are subject;

(d)           if
Indemnitor is an individual, his/her execution of, and compliance with, this
Agreement will not result in the breach of any term or provision of, or
conflict with or constitute a default under or result in the acceleration of
any obligation under any agreement, indenture or loan or credit agreement or
other instrument to which Indemnitor or the Property are

 

 

subject, or result in the violation of any
law, rule, regulation, order, judgment or decree to which the Indemnitor or the
Property are subject;

(e)           to
the Indemnitor’s knowledge, there is no action, suit, proceeding or
investigation pending or threatened against it which, either in any one
instance or in the aggregate, may result in any material adverse change in the
business, operations, financial condition, properties or assets of Indemnitor,
or in any material impairment of the right or ability of Indemnitor to carry on
its business substantially as now conducted, or in any material liability on
the part of Indemnitor, or which would draw into question the validity of this
Agreement or of any action taken or to be taken in connection with the
obligations of Indemnitor contemplated herein, or which would be likely to
impair materially the ability of Indemnitor to perform under the terms of this
Agreement;

(f)            it
does not believe, nor does it have any reason or cause to believe, that it
cannot perform each and every covenant contained in this Agreement;

(g)           no
approval, authorization, order, license or consent of, or registration or
filing with, any governmental authority or other person, and no approval,
authorization or consent of any other party is required in connection with this
Agreement;

(h)           this
Agreement constitutes a valid, legal and binding obligation of Indemnitor,
enforceable against it in accordance with the terms hereof; and

(i)            Indemnitor
has filed all federal, state, county, municipal, and city income and other tax
returns required to have been filed by it and has paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by it; Indemnitor does not know of any basis for any
additional assessment in respect of any such taxes and related liabilities for
prior years.

9.             No Waiver. 
No delay by any Indemnified Party in exercising any right, power or
privilege under this Agreement shall operate as a waiver of any such privilege,
power or right.

10.           Transfer of Loan.  (a)  Lender may, at any time, sell,
transfer or assign the Note, the Mortgage, this Agreement and the other Loan
Documents, and any or all servicing rights with respect thereto, or grant
participations therein or issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (the “Securities”).  Lender may forward to each purchaser,
transferee, assignee, servicer, participant or investor in such Securities or
any credit rating agency rating such Securities (the foregoing entities
hereinafter collectively referred to as the “Investor”) and each prospective Investor, all documents
and information (including financial information) but not limited to, which
Lender now has or may hereafter acquire relating to Indemnitor and the
Property, whether furnished by Indemnitor, any guarantor, or otherwise, as
Lender determines necessary or desirable.

 

 

(b)           Upon
any transfer or proposed transfer contemplated above and by the Mortgage, at
Lender’s request, Indemnitor shall provide an estoppel certificate to the
Investor or any prospective Investor in such form, substance and detail as
Lender, such Investor or prospective Investor may reasonably require.

11.           Notices.  All
notices or other written communications hereunder shall be given in accordance
with Section  10.6 of the Loan Agreement, provided that notices to
Indemnitor shall be addressed as set forth on the first page hereof.

12.           Submission to Jurisdiction.  With respect to any claim or action arising
hereunder, Indemnitor (a)  irrevocably submits to the nonexclusive
jurisdiction of the courts of the State of New  York and the United States
District Court for the Southern District of New  York, and appellate
courts from any thereof, and (b)  irrevocably waives any objection which
it may have at any time to the laying on venue of any suit, action or
proceeding arising out of or relating to this Agreement brought in any such
court, and (c)  irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.

13.           No Third-party Beneficiary.  The terms of this Agreement are for the sole
and exclusive protection and use of Lender. 
No party shall be a third-party beneficiary hereunder, and no provision
hereof shall operate or inure to the use and benefit of any such third party.

14.           Duplicate Originals; Counterparts.  This Agreement may be executed in any number
of duplicate originals and each duplicate original shall be deemed to be an
original.  This Agreement may be executed
in several counterparts, each of which counterparts shall be deemed an original
instrument and all of which together shall constitute a single Agreement.  The failure of any party hereto to execute
this Agreement, or any counterpart hereof, shall not relieve the other
signatories from their obligations hereunder.

15.           No Oral Change. 
This Agreement, and any provisions hereof, may not be modified, amended,
waived, extended, changed, discharged or terminated orally or by any act or
failure to act on the part of any Indemnitor or Lender, but only by an
agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.

16.           Headings, etc. 
The headings and captions of various paragraphs  of this Agreement
are for convenience of reference only and are not to be construed as defining
or limiting, in any way, the scope or intent of the provisions hereof.

17.           Number and Gender/Successors and Assigns.  All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as
the identity of the person or persons referred to may require.  Without limiting the effect of specific
references in any provision of this Agreement, the term “Indemnitor” shall be deemed to refer to
each and every person or entity comprising an Indemnitor from time to time, as
the sense of a particular provision may require, and to include the heirs,
executors, administrators, legal representatives, successors and assigns of
Indemnitor, all of whom shall be bound by the

 

 

provisions of this Agreement, provided that
no obligation of any Indemnitor may be assigned except with the written consent
of Lender.  Each reference herein to
Lender shall be deemed to include its successors and assigns.  This Agreement shall inure to the benefit of
Lender and its respective successors and assigns forever.

18.           Joint and Several Liability.  If Indemnitor consists of more than one
person or entity, the obligations and liabilities of each such person hereunder
are joint and several.

19.           Release of Liability.  Any one or more parties liable upon or in
respect of this Agreement may be released without affecting the liability of
any party not so released. In addition, if Initial Borrower, with Lender’s
consent, no longer owns any interest in the Property, Indemnitor shall have no
further liability for acts or omissions first arising after the date on which
Initial Borrower conveyed all of its right, title and interest in the Property
to an unaffiliated third party transferee, provided, however, Indemnitor shall
remain liable under this Agreement with respect to acts or omissions first
arising on or prior to such date.

20.           Rights Cumulative. 
The rights and remedies herein provided are cumulative and not exclusive
of any rights or remedies which Lender has under the Note, the Mortgage, or the
other Loan Documents or would otherwise have at law or in equity.

21.           Inapplicable Provisions.  If any term, condition or covenant of this
Agreement shall be held to be invalid, illegal or unenforceable in any respect,
this Agreement shall be construed without such provision.

22.           Governing Law. 
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK AND THE APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA.  ANY LEGAL SUIT, ACTION OR
PROCEEDING AGAINST LENDER OR INDEMNITOR ARISING OUT OF OR RELATING TO THIS
GUARANTY MAY AT LENDER’S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN
THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF
THE NEW YORK GENERAL OBLIGATIONS LAW, AND INDEMNITOR WAIVES ANY OBJECTIONS
WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS
OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND INDEMNITOR AND HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR
PROCEEDING.  INDEMNITOR DOES HEREBY
DESIGNATE AND APPOINT:

CT Corporation System

111 Eighth Avenue

New York, New York 10011

AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON
ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT,

 

 

ACTION OR
PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT
SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID
SERVICE MAILED OR DELIVERED TO INDEMNITOR IN THE MANNER PROVIDED HEREIN SHALL
BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON INDEMNITOR IN ANY
SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.

23.           Miscellaneous. 
Wherever pursuant to this Agreement (i)  Lender exercises any right
given to it to approve or disapprove, (ii)  any arrangement or term is to
be satisfactory to Lender, or (iii)  any other decision or determination
is to be made by Lender, the decision of Lender to approve or disapprove, all
decisions that arrangements or terms are satisfactory or not satisfactory and
all other decisions and determinations made by Lender, shall be in the sole and
absolute discretion of Lender and shall be final and conclusive, except as may
be otherwise expressly and specifically provided herein.

 

 

IN WITNESS WHEREOF, this Agreement
has been executed by Indemnitor and is effective as of the day and year first
above written.

	
  

  	
  INITIAL BORROWER:

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD 1325 G STREET,

  LLC, a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Gerald J. Reihsen, III

  
	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PRINCIPAL:

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD REIT I, INC., a

  Maryland corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Gerald J. Reihsen, III

  
	
   

  	
  Title:

  	
  Vice PresidentExhibit 10.1

CONSULTING
AGREEMENT

THIS
CONSULTING AGREEMENT (this “Agreement”) is made and
entered into effective as of October 20, 2006 (the “Effective Date”), by
and between LIQUIDMETAL TECHNOLOGIES, Inc., a Delaware corporation (the “Company”),
and James Kang, an individual (the “Consultant”).

RECITALS

WHEREAS,
upon the terms and conditions set forth in this Agreement, the Company desires
to engage the Consultant to provide consulting services to the Company; and

WHEREAS,
the Consultant desires to provide consulting services to the Company upon the
terms and conditions set forth in this Agreement.

NOW,
THEREFORE, in consideration of the foregoing recitals and for
other good and valuable consideration, the parties hereto covenant and agree as
follows:

1.                                       Consulting Engagement.  The Company hereby engages the Consultant to
provide consulting services to the Company, and the Consultant hereby accepts
such engagement, upon the terms and conditions set forth in this Agreement.  The consulting services to be provided by the
Consultant hereunder will be provided on an as-needed basis (as requested by
the Company, in its discretion), and such consulting services will consist of
the provision of advice, information, and
consultation regarding the development, manufacture, fabrication, marketing,
distribution, and sale of amorphous metal alloys  (collectively, the “Consulting Services”).  Under this Agreement, Consultant will be
required to provide on an as needed basis up to 40 hours per month of
Consulting Services, and such Consulting Services will be provided at such
times and on such days as shall be determined by Consultant in his reasonable
discretion consistent with the timely provision of his services.  To the extent that the Company shall have any
parent company, subsidiaries, affiliated corporations, partnerships, or joint
ventures (collectively “Related Entities”), the Consultant shall,
without additional compensation, perform the Consulting Services for these
entities, during the term of this agreement, to the same extent as for the
Company.

2.                                       Term. Subject to the terms and
conditions of this Agreement, including, but not limited to, the provisions for
early termination set forth in Section 5 hereof, the consulting engagement of
the Consultant under this Agreement shall commence on the Effective Date and
shall continue through December 31, 2009 (the
“Consulting Term”).

3.                                       Independent Contractor.  At all times during the Consultant’s
engagement, the Consultant will act as an independent contractor. The
Consultant will not be considered an employee of the Company for any purpose
and will not be entitled to any of the benefits that the Company may provide
for its employees.  Moreover, it is
expressly agreed by the parties that no

 

agency relationship is, or will be deemed to have been, created by this
Agreement, and no party will by reason of this Agreement have the power or
authority to bind any other party contractually or otherwise.  The
Consultant will be solely responsible for the payment and reporting of any and
all federal and state taxes and withholdings due on amounts paid hereunder, and
Company will not withhold any amounts for federal, state or local income taxes
or taxes, assessments or withholding liabilities, and the Consultant will indemnify
and hold Company harmless from and against any costs, damages or liabilities
relating to any such taxes, assessments or withholdings.  In addition to the foregoing, nothing set
forth in this Agreement shall be construed as creating a partnership or joint
venture between the Consultant and the Company.

4.                                       Consulting Fees and Expenses.

(a) Fee.  As compensation for Consultant’s services and
in consideration for the Consultant’s covenants contained in this Agreement,
the Company shall pay the Consultant a consulting fee of Two Hundred
Thousand Dollars ($200,000.00) per annum for the provision of
Consulting Services hereunder.  The
Consulting Fee shall be payable in equal monthly installments.

(b) Reimbursement
of Expenses.  The Consultant shall be
reimbursed for standard travel expenses (coach airfare, moderate lodging,
standard rental car, etc.), plus other reasonable and customary business
expenses incurred by the Consultant and approved by the Company in connection
with the performance of Consulting Services hereunder, provided that such
reimbursement shall be subject to, and in accordance with, any travel policies,
expense reimbursement policies and/or expense documentation requirements of the
Company that may be in effect from time to time.  Such reimbursement of expenses shall not
include corporate housing, personal expenses and other “ex-pat” type of
expenses.

5.                                       Termination.

(a)                                  Death.  The Consulting Term shall terminate early
immediately upon Consultant’s death.  In
the event of a termination pursuant to this Section 5(a), the Consultant’s
estate shall be entitled to receive any unpaid Consulting Fees owing to
Consultant up through and including the date of the Consultant’s death.

(b)                                 Termination
By Consultant. Consultant may, prior to the scheduled expiration of the
Consulting Term, terminate the Consulting Term at any time without cause and
without penalty, provided that at least 30 days’ prior written notice of
termination is provided by the Consultant to the Company. In the event of a
termination pursuant to this Section 5(b), the Consultant shall be entitled to
receive any unpaid Consulting Fees owing to Consultant up through and including
the effective date of the termination of the Consulting Term.

(c)                                  Termination
By Company With Cause.  The Company
may terminate the Consulting Term at any time with Cause.  As used in this Agreement, “Cause” shall
include the following: (1) the Consultant’s failure or inability to perform
Consultant’s duties under this Agreement; (2) dishonesty or other serious
misconduct, (3) the commission of an unlawful act material to Consultant’s
engagement hereunder, (4) a material violation of the Company’s policies or
practices which reasonably justifies immediate termination; (5) committing,
pleading

 2
 

 

guilty, nolo contendre or no
contest (or their equivalent) to, entering into a pretrial intervention or
diversion program regarding, or conviction of, a felony or any crime or act
involving moral turpitude, fraud, dishonesty, or misrepresentation; (6) the
commission by the Consultant of any act which could reasonably affect or impact
to a material degree the interests of the Company or Related Entities or in
some manner injure the reputation, business, or business relationships of the
Company or Related Entities; or (7) any material breach by the Consultant of
this Agreement.  The Company may
terminate the Consulting Term for Cause at any time without notice.  In the event of a termination for Cause, the
Company shall be relieved of all its obligations to the Consultant provided for
by this Agreement as of the effective date of termination, and all payments to
the Consultant hereunder shall immediately cease and terminate as of such date,
except that Consultant shall be entitled to the Consulting Fee hereunder up to
and including the effective date of termination.

(d)                                 Termination
Without Cause.  The Company shall
have the right to terminate Consultant’s engagement pursuant to this Agreement
at any time without Cause.  In the event
of a termination of the Consultant’s engagement by the Company pursuant to this
paragraph (d), the Consultant shall continue to be entitled to the Consulting
Fees to which Consultant would have otherwise been entitled hereunder during
the Consulting Term in the absence of such termination.

(e)                                  Survival
of Certain Provisions.  The
provisions set forth in Sections 6 through 13 of this Agreement shall survive
the expiration or termination of the Consulting Term, regardless of the reason
for termination and regardless of which party causes the termination.

6.                                       Nonsolicitation and Nondisclosure Covenants.

(a)                                  Rationale for
Restrictions.  Consultant
acknowledges that the Consulting Services to be provided hereunder are of a
special, unique, and extraordinary character, and Consultant’s engagement by
the Company places Consultant in a position of confidence and trust with
customers, suppliers, and other persons and entities with whom the Company and
its Related Entities have a business relationship.   The Consultant further acknowledges that the
rendering of services under this Agreement will likely require the disclosure
to Consultant of Confidential Information (as defined below) relating to the
Company and/or Related Entities.  As a
consequence, the Consultant agrees that it is reasonable and necessary for the protection
of the goodwill and legitimate business interests of the Company and Related
Entities that the Consultant make the covenants contained in this Section 6,
that such covenants are a material inducement for the Company to engage the
Consultant and to enter into this Agreement, and that the covenants are given
as an integral part of and incident to this Agreement.

(b)                                 Nonsolicitation
Covenants.  As used herein, the term “Restrictive
Period” means the time period commencing on the Effective Date of this
Agreement and ending on the second (2nd)
anniversary of the date on which the Consulting Term expires or is
terminated.  In addition, the term “Covered
Business” means any business which is the same as, or similar to, any
business conducted by the Company or any of the Related Entities at any time
during the Restrictive Period.  The
Consultant agrees that the Consultant will not engage in any of the following
acts anywhere in the world during the Restrictive Period:

 3
 

 

(i)                                     directly
or indirectly assist, promote or encourage any existing or potential employees,
customers, clients, or vendors of the Company or any Related Entity, as well as
any other parties which have a business relationship with the Company or a
Related Entity, to terminate, discontinue, or reduce the extent of their
relationship with the Company or a Related Entity;

(ii)                                  directly
or indirectly solicit business of the same or similar type as a Covered
Business, from any person or entity known by the Consultant to be a customer or
client of the Company, whether or not the Consultant had contact with such
person or entity during the Consultant’s engagement by the Company;

(iii)                               disparage
the Company, any Related Entities, and/or any shareholder, director, officer,
employee, or agent of the Company or any Related Entity; and/or

(iv)                              engage
in any practice the purpose of which is to evade the provisions of this Section
6 or commit any act which adversely affects the Company, any Related Entity, or
their respective businesses.

The Consultant
acknowledges and agrees that, in light of the unique nature of the Company’s
business, the Company will market its products on a worldwide basis and will
compete with various companies and businesses across and world.  Accordingly, the Consultant agrees that the
geographic scope of the above covenants is a reasonable means of protecting the
Company’s (and the Related Entities’) legitimate business interests.

(c)                                  Disclosure
of Confidential Information.  The
Consultant acknowledges that the inventions, innovations, software, trade
secrets, business plans, financial strategies, finances, and all other
confidential or proprietary information with respect to the business and
operations of the Company and Related Entities are valuable, special, and
unique assets of the Company. 
Accordingly, the Consultant agrees not to, at any time whatsoever either
during or after the Consulting Term, disclose, directly or indirectly, to any
person or entity, or use or authorize any person or entity to use, any
confidential or proprietary information with respect to the Company or Related
Entities without the prior written consent of the Company, including, without
limitation, information as to the financial condition, results of operations,
identities of clients or prospective clients, products under development,
acquisition strategies or acquisitions under consideration, pricing or cost
information, marketing strategies or any other information relating to the
Company or any of the Related Entities which could be reasonably regarded as
confidential (collectively referred to as “Confidential Information”).  However, the term “Confidential Information”
does not include any information which is or shall become generally available
to the public other than as a result of disclosure by the Consultant or by any
person or entity which the Consultant knows (or which the Consultant reasonably
should know) has a duty of confidentiality to the Company or a Related Entity
with respect to such information.  In addition
to the foregoing, Company will be fully entitled to all of the protections and
benefits afforded by the Florida Uniform Trade Secrets Act and other applicable
law.

 4
 

 

(d)                                 Prevention
of Premature Disclosure of Information. 
The Consultant agrees and acknowledges that, because the success of the
Company is heavily dependent upon maintaining the secrecy of the Company’s
Confidential Information and preventing the premature public disclosure of the
Company’s proprietary information and technology, the Consultant agrees to use
the Consultant’s best efforts and his highest degree of care, diligence, and
prudence to ensure that no Confidential Information prematurely leaks or
otherwise prematurely makes its way into the public domain or any public forum,
including, without limitation, into any trade publications, internet chat
rooms, or other similar forums.  In the
event that the Consultant becomes aware of any premature leak of Confidential
Information or becomes aware of any circumstances creating a risk of such a
leak, the Consultant shall immediately inform the Company of such leak or of
such circumstances.

(e)                                  Removal
and Return of Proprietary Items.  The
Consultant will not remove from the Company’s premises (except to the extent
such removal is for purposes of the performance of the Consulting Services at
home or while traveling, or except as otherwise specifically authorized by the
Company) any document, record, notebook, plan, model, component, device, or
computer software or code, whether embodied in a disk or in any other form
(collectively, the “Proprietary Items”). 
The Consultant recognizes that, as between the Company and the
Consultant, all of the Proprietary Items, whether or not developed by the
Consultant, are the exclusive property of the Company.  Upon expiration or termination of the
Consulting Term, or upon the request of the Company during the Consulting Term,
the Consultant will return to the Company all of the Proprietary Items in the
Consultant’s possession or subject to the Consultant’s control, and the
Consultant shall not retain any copies, abstracts, sketches, or other physical
embodiment of any of the Proprietary Items.

(f)                                    Enforcement
and Remedies.  In the event of any
breach of any of the covenants set forth in this Section 6, the Consultant
recognizes that the remedies at law will be inadequate and that in addition to
any relief at law which may be available to the Company for such violation or
breach and regardless of any other provision contained in this Agreement, the
Company shall be entitled to equitable remedies (including an injunction) and
such other relief as a court may grant after considering the intent of this
Section 6.  Additionally, the period of
time applicable to any covenant set forth in this Section 6 will be extended by
the duration of any violation by the Consultant of such covenant.  In the event a court of competent
jurisdiction determines that any of the covenants set forth in this Section 6
are excessively broad as to duration, geographic scope, prohibited activities
or otherwise, the parties agree that this covenant shall be reduced or
curtailed to the extent, but only to the extent, necessary to render it
enforceable.

 5
 

 

7.                                       Work Product.

(a)                                  Definition.
For purposes of this Agreement, “Work Product” means any idea,
invention, technique, modification, process, or improvement (whether patentable
or not), any industrial design (whether registerable or not), any mask work,
however fixed or encoded, that is suitable to be fixed, embedded or programmed
in a semiconductor product (whether recordable or not), and any work of
authorship (whether or not copyright protection may be obtained for it)
created, conceived, or developed by the Consultant, either solely or in
conjunction with others, during the Consulting Term or during the six (6) month
period following the Consulting Term, that relates in any way to amorphous
alloys or composite materials containing amorphous alloys (including, but not
limited to, the composition, processing, manufacturing properties, or
application of amorphous alloys or composites thereof, except that innovations
in the preparation of titanium, zirconium, hafnium, vanadium, niobium,
tantalum, and any of their alloys with any element(s) by the so-called Fray,
FFC, or Cambridge Process are specifically excluded.

(b)                                 Ownership
of Work Product.  Consultant agrees
and acknowledges that all Work Product will belong exclusively to the Company
and that all items of Work Product are works made for hire and the property of
the Company, including any copyrights, patents, semiconductor mask protection,
or other intellectual property rights pertaining thereto.  If it is determined that any such works are
not works made for hire, the Consultant hereby assigns to the Company all of
the Consultant’s right, title, and interest, including all rights of copyright,
patent, semiconductor mask protection, and other intellectual property rights,
to or in such Work Product. The Consultant covenants that the Consultant will
promptly:

(i)                                     disclose
to the Company in writing any Work Product;

(ii)                                  assign to the Company
or to a party designated by the Company, at the Company’s request and without
additional compensation, all of the Consultant’s right to the Work Product for
the United States and all foreign jurisdictions;

(iii)                               
execute and deliver to the Company such applications, assignments, and other
documents as the Company may request in order to apply for and obtain patents
or other registrations with respect to any Work Product in the United States
and any foreign jurisdictions;

(iv)                              sign
all other papers necessary to carry out the above obligations; and

(v)                                 give
testimony and render any other assistance in support of the Company’s rights to
any Work Product.

8.                                       Essential and Independent Covenants.  The Consultant’s covenants in Sections 6 and
7 of this Agreement are independent covenants, and the existence of any claim
by the Consultant against the Company under this Agreement or otherwise will
not excuse the Consultant’s breach of any covenant in Section 6 or 7.

 6
 

 

9.                                       Representations and Warranties by The Consultant.
The Consultant represents and warrants to the Company that the execution and
delivery by the Consultant of this Agreement do not, and the performance by the
Consultant of the Consultant’s obligations hereunder will not, with or without
the giving of notice or the passage of time, or both: (a) violate any
judgment, writ, injunction, or order of any court, arbitrator, or governmental
agency applicable to the Consultant, or (b) conflict with, result in the
breach of any provisions of or the termination of, or constitute a default
under, any agreement to which the Consultant is a party or by which the
Consultant is or may be bound, including, without limitation, any
noncompetition agreement or similar agreement.

10.                                 Notices.  For purposes of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given when hand-delivered, sent by facsimile
transmission (as long as receipt is acknowledged), or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the address or facsimile number for each party set forth on the
signature page hereto, or to such other address or facsimile number as either
party may have furnished to the other in writing in accordance herewith, except
that a notice of change of address shall be effective only upon receipt.

11.                                 Miscellaneous.  No provision of this Agreement may be
modified or waived unless such waiver or modification is agreed to in writing
signed by both of the parties hereto.  No
waiver by any party hereto of any breach by any other party hereto shall be
deemed a waiver of any similar or dissimilar term or condition at the same or
at any prior or subsequent time.  This
Agreement is the entire agreement between the parties hereto with respect to
the Consultant’s engagement by the Company, and there are no agreements or
representations, oral or otherwise, expressed or implied, with respect to or
related to the engagement of the Consultant which are not set forth in this
Agreement.  This Agreement shall be
binding upon, and inure to the benefit of, the Company, its respective
successors and assigns, and the Consultant and Consultant’s heirs, executors,
administrators and legal representatives. 
The duties and covenants of the Consultant under this Agreement, being
personal, may not be delegated or assigned by the Consultant without the prior
written consent of the Company, and any attempted delegation or assignment
without such prior written consent shall be null and void and without legal
effect.  The parties agree that if any
provision of this Agreement shall under any circumstances be deemed invalid or
inoperative, the Agreement shall be construed with the invalid or inoperative
provision deleted and the rights and obligations of the parties shall be
construed and enforced accordingly.

12.                                 Governing Law; Resolution of Disputes.
The validity, interpretation, construction, and performance of this Agreement
shall be governed by the laws of the State of California without regard to
principles of choice of law or conflicts of law thereunder.  Any action or proceeding seeking to enforce
any provision of, or based on any right arising out of, this Agreement may be
brought against either of the parties in the courts of the State of California,
County of Orange, or, if it has or can acquire jurisdiction, in the United
States District Court located in Orange County, California, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection to
venue laid therein. Process in any action or proceeding referred to in the
preceding

 7
 

 

sentence may be served on either party anywhere in the world.  THE PARTIES HEREBY WAIVE A JURY TRIAL IN ANY
LITIGATION ARISING UNDER OR RELATING TO THIS AGREEMENT.

13.                                 Acknowledgment of Termination of Employment
Agreement.  Reference is
hereby made to that certain Employment Agreement, dated May 1, 2002, between
the Company and Consultant, as amended by Amendment No. 1 thereto dated June
28, 2001 and Amendment No. 2 thereto dated September 1, 2003 (the “Employment
Agreement”).  Consultant hereby
acknowledges and agrees that the Employment Agreement is terminated effective
as of the Effective Date and that no further compensation or other payments are
due to Consultant pursuant to the Employment Agreement other than accrued but
unpaid salary through the Effective Date.

14.                                 Counterparts; Facsimile Signatures.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  This Agreement may be effective upon the
execution and delivery by any party hereto of facsimile copies of signature
pages hereto duly executed by such party; provided, however, that
any party delivering a facsimile signature page covenants and agrees to deliver
promptly after the date hereof two (2) original copies to the other party
hereto.

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IN WITNESS WHEREOF,
the parties have executed this Agreement as of the day and year first above
written.

	
   

  	
  LIQUIDMETAL TECHNOLOGIES

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Larry
  Buffington

  	
   

  
	
   

  	
  Larry
  Buffington, President and CEO

  
	
   

  	
   

  
	
   

  	
  Liquidmetal
  Technologies

  
	
   

  	
  25800
  Commercentre Drive, Suite 100

  
	
   

  	
  Lake Forest, CA
  92630

  
	
   

  	
  Facsimile
  Number: (949) 206-8008

  
	
   

  	
   

  
	
   

  	
  CONSULTANT

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ James Kang

  	
   

  
	
   

  	
  James Kang,
  individual

  
	
   

  	
   

  
	
   

  	
  Hyundai Hyperiod

  
	
   

  	
  Youngsan-Gu,
  Hannam-Dong

  
	
   

  	
  Seoul, Korea

  

 

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