EXHIBIT 10.11
CONSULTING AGREEMENT
THIS AGREEMENT is entered into effective the 20th day of August, 1998, at
Houston, Texas, between GK INTELLIGENT SYSTEMS, INC., a Delaware corporation
("Corporation" or "GKIS") and XXXX XXXX XXXXXXX ("DeJoria").
WHEREAS, GKIS is in the business of providing artificial intelligence
based education, training and performance support and is based in Houston,
Texas; and
WHEREAS, GKIS desires that DeJoria consult with GKIS on the establishment
of retail distribution for the Company's products in the global marketplace
and/or introduce GKIS to parties who may be interested in GKIS's products and,
when appropriate and time permits, make himself reasonably available to mentor
and advise the directors, officers and management of GKIS; and
WHEREAS, GKIS desires that DeJoria become an advisor and mentor to the
management of GKIS in all phases of retail product distribution as well as
global marketing developments which could effect GKIS's business; and
WHEREAS, DeJoria desires to acquire an equity interest in the
Corporation's common stock; and
WHEREAS, GKIS considers it to be in its best interest that DeJoria assume
a position as a member of the GKIS Board of Directors;
NOW, THEREFORE, in consideration of the premises, the parties agree as
follows:
1. AGREEMENT TO PROVIDE CONSULTING SERVICES. Upon election by the Board of
Directors of GKIS, DeJoria agrees to assume a position on the GKIS Board of
Directors as a member for the term of this agreement. In this capacity, DeJoria
agrees to act as an adviser to GKIS and mentor to its management, and subject to
any confidentiality obligations incumbent upon him, to apprise GKIS of
technological and global marketing developments as DeJoria in his sole
discretion shall deem appropriate. In addition, DeJoria agrees to help GKIS
establish market opportunities and retail distribution for its products/services
in the domestic and international marketplace, making himself reasonably
available to mentor and advise GKIS directors, officers and management
periodically during the term of this agreement, all on a part-time basis as the
parties mutually agree.
2. POSITION ON GKIS BOARD OF DIRECTORS. The Corporation, acting through
its existing Board of Directors, will appoint DeJoria as a member of the Board
of Directors for the
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term of this agreement.
3. COMPENSATION. As compensation for the services to be rendered
hereunder, GKIS will pay DeJoria Fifty Thousand Dollars ($50,000) on or before
September 1,1998. In the event of early termination of this Agreement except for
breach by GKIS, DeJoria agrees to repay to GKIS that portion of the Compensation
attributable to the period from date of termination to the date of normal
termination. The compensation shall immediately and automatically vest upon
material breach by GKIS of this agreement or any of its warranties and
representations, without notice or action by DeJoria.
4. PURCHASE OF RESTRICTED SHARES.
a. INITIAL PURCHASE OF SHARES. As a condition of his employment,
DeJoria has agreed to purchase One Million (1,000,000) shares of GKIS
common restricted stock (the "Initial Shares"), to be issued immediately
upon receipt of funds or as soon thereafter as is practicable. The
effective date of this purchase will be the date of this agreement, August
20, 1998. The agreed purchase price of the Initial Shares is $.05 per
share. As soon as practicable after receipt of payment from DeJoria, GKIS
shall tender the Initial Shares to DeJoria, provided that if any law or
regulation requires the Corporation to take any action with respect to the
Initial Shares before the issuance thereof, then the date of delivery for
such shares shall be extended for the period necessary to take such
action.
b. AGREEMENT TO SELL AND REPURCHASE. In the event of DeJoria's
failure of performance or early termination of this agreement as set out
herein, DeJoria agrees to sell and GKIS agrees to repurchase unvested
Initial Shares as defined herein at the original purchase price of $.05
per share. Each month during the term of this agreement, one-twelfth of
the Initial Shares shall no longer be subject to such required repurchase
by GKIS, or in other words, such shares shall vest. The shares remaining
after the previous months' fractions of shares have vested shall be
considered unvested. The Initial Shares shall immediately and
automatically vest upon material breach by GKIS of this agreement or any
of its warranties and representations, without notice or action by
DeJoria, and shall no longer be subject to repurchase.
5. RIGHTS PRIOR TO ISSUE. DeJoria shall have no rights as a stockholder
with respect to the Initial Shares until such shares are issued.
6. PRIOR AGREEMENTS. Except as set out herein, this Agreement supersedes
and is in lieu of any and all prior or contemporaneous agreements,
communications or understandings, whether written or unwritten, verbal or tacit,
or implied by prior dealings, between and among any of the parties, their
predecessors or affiliates with respect to the matters set out herein and
therein, respectively.
7. AMENDMENT IN WRITING. No amendment, modification or change to this
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agreement shall be binding unless in writing, signed by all the parties hereto.
8. AGREEMENT BINDING. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, legatees,
administrators, executors, legal representatives, successors, and assigns
(including remote, as well as immediate, successors to and assignees of said
parties).
9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF DEJORIA. DeJoria
represents, warrants and agrees as follows:
a. NO REGISTRATION. DeJoria is aware that the Shares have not been
registered nor is registration contemplated under the Securities Act of
1933, and accordingly, that the Shares must be held indefinitely unless
they are subsequently registered under said Act or unless, in the opinion
of counsel for the Corporation, a sale or transfer may be made without
registration thereunder. DeJoria agrees that any certificates evidencing
the Shares may bear a legend restricting the transfer thereof consistent
with the foregoing and that a notation may be made in the records of the
Corporation restricting the transfer of the Shares in a manner consistent
with the foregoing.
b. NO PREEMPTIVE RIGHTS. DeJoria acknowledges and agrees
that he has no preemptive rights with respect to the Shares to be
conveyed hereunder.
10. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF GKIS. GKIS represents,
warrants and agrees as follows:
a. AUTHORITY. GKIS is a corporation duly organized, validly
existing, and in good standing under the laws of Delaware, with full
corporate power and authority to carry on its business as it is now being
conducted, to own or hold under lease the properties and assets it now
owns or holds under lease, and to enter into and perform its obligations
under this Agreement. The execution and delivery of this Agreement and the
consummation of all the transactions contemplated thereby have been duly
authorized by all necessary corporate action on behalf of GKIS. The
persons signing on behalf of GKIS are duly authorized to do so and this
Agreement will be binding upon GKIS. GKIS is not subject to any lien or
encumbrance of any kind nor subject to any agreement, instrument, order,
or decree of any court or government body which would prevent consummation
of the transaction contemplated by this agreement.
b. TAX OBLIGATIONS. There are no unfiled tax returns required to be
filed or taxes and assessments due, including interest and penalties (the
"Taxes") or that could become a lien on the property or assets of GKIS,
except as otherwiase disclosed to DeJoria.
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c. NO SUITS PENDING. There are no actions, suits, or proceedings
pending, outstanding or threatened, against or affecting GKIS or any of
the assets, properties or business of GKIS at law or in equity, or before
or by any governmental authority, except as set out in its filings with
the SEC or otherwise disclosed to DeJoria.
d. NO VIOLATIONS OF LAWS. To the best of its knowledge, GKIS is not
in default or violation under any law, ordinance or regulation, or with
respect to any order, writ, injunction, decree, or demand of any court or
any governmental authority, or in the payment of any indebtedness for
borrowed money or under the terms or provisions of any agreement or
instrument evidencing or security any such indebtedness.
e. GOVERNMENTAL AGENCIES. GKIS will comply with the
requirements of all applicable laws, regulations, and
requirements pertaining to GKIS.
f. INFORMATION PROVIDED. To the best of its knowledge, all
information provided by GKIS to DeJoria was and is accurate in all
material respects and did not or does not, to the best of GKIS's
knowledge, omit any information necessary to make such information and
documentation not misleading.
g. FINANCIAL STATEMENTS. GKIS has delivered to DeJoria its audited
annual report for the fiscal year ended May 31, 1997, as set out in its
Form 10K-SB, and its latest unaudited quarterly financial statements, as
set out in its Form 10Q-SB. The financial statements present fairly the
financial position and results of operations of GKIS.
h. LICENSES AND PERMITS. GKIS has all licenses, permits, approvals,
consents, orders, rights and other authorizations which are necessary in
order to enable it to conduct its business as currently conducted.
i. NO UNDISCLOSED LIABILITIES. Except as set out in its audited
annual report or quarterly unaudited financial statements, GKIS has no
liabilities or obligations other than those incurred since February 28,
1998, in the ordinary course of business, consistent with prior practice
and not in the aggregate materially adverse.
j. NO CONFLICT WITH OTHER DOCUMENTS. Neither the execution and
delivery of this agreement nor the carrying out of this transaction will
result in any violation, termination or modification of, or be in conflict
with GKIS's charter documents or bylaws, any contract or agreement to
which GKIS is a party or is bound, or result in the creation of any lien
or encumbrance upon any of the properties or assets of GKIS.
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k. ACKNOWLEDGMENT OF DEJORIA'S FIDUCIARY OBLIGATIONS TO THIRD
PARTIES. GKIS understands, acknowledges and agrees that DeJoria is an
officer or director of other corporations, and thus may have a fiduciary
relationship towards one or more third parties, including his own
businesses and that, in such capacity, DeJoria is subject to certain
ethical and business constraints with respect to certain materials or
information of third parties which may be confidential, trade secret,
proprietary or otherwise subject to restrictions on its use or
dissemination by DeJoria. GKIS acknowledges and agrees that it will not
constitute a breach of this agreement for DeJoria to comply with these
obligations to their full legal, moral and ethical limitations in
DeJoria's sole discretion. GKIS further understands and agrees that
nothing contained in this Agreement shall require DeJoria to take any
action in violation of any of the obligations described above.
l. STATUS OF SHARES TO BE ISSUED. All issued shares of capital stock
of GKIS are, and upon issuance to DeJoria in accordance with the terms of
this Agreement, the Shares will also be, duly authorized, validly issued
and fully-paid and non-assessable. The Shares to be issued by GKIS
hereunder are, and will be when issued, free and clear of all
encumbrances, except as set out in this agreement.
m. DIRECTORS' AND OFFICERS' LIABILITY (DOL) INSURANCE. GKIS shall
maintain DOL insurance coverage in the minimum amount of $5,000,000.00,
specifically covering all acts of DeJoria to be performed under this
agreement and all liabilities for which coverage is normally obtained by a
corporation for its directors.
11. TERM OF AGREEMENT. This agreement shall be for one (1) year from
August __, 1998, unless terminated by either party pursuant to the provisions
contained herein.
12. TERMINATION OF AGREEMENT. This agreement may be terminated as follows:
a. ILLNESS OR OTHER INCAPACITY. If DeJoria, during the term of this
Agreement, shall fail to perform his duties hereunder as a result of
illness or other incapacity which shall continue for a period of more than
twelve weeks, the Corporation shall have the right to terminate this
Agreement and the employment hereunder as of a date to be specified in a
written notice of termination sent to DeJoria, such date to be not less
than thirty (30) days following receipt of said notice. The Initial Shares
shall be fully vested as of the date of termination and not be subject to
repurchase by GKIS.
b. CONDUCT. If DeJoria shall willfully violate any law; embezzle or
otherwise steal from the Corporation; use liquor or drugs to an extent
which has a visible detrimental effect on his services; conduct himself
publicly or privately in a manner which offends against decency or causes
him to be held in public ridicule or causes public scandal, the
Corporation shall have the right to terminate this
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contract and employment hereunder upon notice given in the manner
specified in 12.a. In the event of termination under this Subparagraph
12.b., vesting of the Initial Shares shall cease, GKIS shall have no
further obligation to DeJoria under this agreement, and DeJoria shall sell
to GKIS and GKIS shall repurchase all unvested Initial Shares at their
issue price.
c. UNILATERAL TERMINATION, IF ANY, BY DEJORIA. DeJoria may terminate
this Agreement and employment hereunder effective as of a date to be
specified in a written notice of termination, such date to be not less
than thirty (30) days after delivery of the notice, and all vesting of the
Initial Shares shall cease as of the end of the month during which
termination is effective, GKIS shall have no further obligation to DeJoria
under this agreement, and DeJoria shall sell to GKIS and GKIS shall
repurchase all unvested Initial Shares at their issue price, unless
termination is the result of material breach by GKIS of the provisions of
this Agreement.
d. VESTING OF INITIAL SHARES AFTER TERMINATION FOR DEATH OR
DISABILITY. If DeJoria shall die during the term of this Agreement, his
legal representative or executor shall be entitled to receive any
compensation which is unpaid and accrued from the date of his last payment
until the date of his death, and this agreement shall terminate. All
unvested Initial Shares shall immediately vest and not be subject to
repurchase by GKIS.
e. TERMINATION FOR CAUSE OTHER THAN CONDUCT. GKIS may terminate this
agreement during the initial term if the Board of Directors determines
that DeJoria has failed to perform his duties hereunder for a period of at
least two months, and such failure is not due to illness or disability.
Such termination shall be effective as of a date to be specified in a
written notice of termination, such date to be the end of a month not less
than thirty (30) days after delivery of the notice, provided that during
such 30-day (or greater) period DeJoria shall have opportunity to contest
such termination to a meeting of the entire Board of Directors and the
Board shall agree by a majority vote of its members that DeJoria shall be
terminated for cause, and all vesting of Initial Shares shall cease as of
such date and DeJoria shall sell to GKIS and GKIS shall repurchase all
unvested Initial Shares at their issue price.
13. NOTICES. All notices required hereunder shall be sent via certified
mail, postage prepaid, if to GKIS, in care of Xxx Xxxxxxxx, Esq., 0000 Xxx
Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx, 00000, and if to DeJoria, in care of Xxxx
Xxxx XxXxxxx, 0000 Xxxxxxxx Xxxx., #0000, Xxxxxxx Xxxxx, XX 00000.
14. CHOICE OF LAW. The parties agree that this agreement shall be governed
by and interpreted in accordance with the laws of the State of Texas, excluding
any principle or provision thereof that would require application of the laws of
any other jurisdiction.
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15. ARBITRATION. If the parties have any disagreement or dispute arising
in connection with this agreement or the subject matter of this agreement that
cannot be resolved amicably among the parties, such dispute shall, on the
written request of either party, be submitted to arbitration, which will comply
with and be governed by the provisions of the Texas Civil Practice and Remedies
Code, Section 171.000, ET SEQ., and the American Arbitration Association.
Pursuant to Section 171.026(a) of the Texas Civil Practice and Remedies Code,
arbitration shall be conducted under the Commercial Arbitration Rules of the
American Arbitration Association in existence at the time of arbitration. The
cost and expenses, including attorney's fees and the fees of the arbitrators,
shall be borne by the losing party or in such proportions as the arbitrators
shall determine.
16. CONFIDENTIAL INFORMATION. DeJoria shall hold in fiduciary capacity for
the benefit of GKIS all secret or confidential information, knowledge or data
relating to GKIS or any of its affiliated companies, and their respective
businesses, which shall have been obtained by DeJoria during DeJoria's
employment by GKIS or any of its affiliated companies and which shall not be or
become public knowledge (other than by acts by DeJoria or representatives of
DeJoria in violation of this Agreement). After termination of DeJoria's
employment with GKIS, DeJoria shall not, without the prior written consent of
GKIS or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than GKIS and
those designated by it, unless such information is already in the public domain.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year set forth above.
GK INTELLIGENT SYSTEMS, INC
By:_____________________________
XXXX XXXXXXX, C.E.O.
--------------------------------
XXXX XXXX XXXXXXX
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