REGISTRATION RIGHTS AGREEMENT
Issuer: GK Intelligent Systems, Inc. (the "Company" or "GKIS")
Address: 0000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Date: May 30, 2003
This Registration Rights Agreement (the "Agreement") is entered into
effective as of the above date by and between Benchmark Consulting Inc., a New
York Corporation located at 000 Xxxxxxx Xxxx, Xxxxx 000 Xxxx, Xxxxxxxxx Xxxxxx,
Xxx Xxxx 00000, (hereinafter referred to as "Benchmark") and the above Company,
whose address is set forth above.
RECITALS
A. Whereas, concurrently with the execution of this Agreement, BENCHMARK
and the Company have executed a Client Services Agreement (the "CSA") under
which BENCHMARK shall received shares of the Company's common stock and has
acquired Warrants (the "Warrants") pursuant to which BENCHMARK has the right to
acquire from the Company the 5200,000 shares of common stock (as defined in the
Warrant), with pricing per share calculated as set forth in the CSA.
B. Whereas, by this Agreement, BENCHMARK and the Company desire to set
forth the registration rights of the shares issued pursuant to the CSA and
shares issuable upon exercise of the Warrants, all as provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
1.1.1 The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended
(the "Securities Act"), and the declaration or ordering of effectiveness of
such registration statement or document;
1.1.2 The term "Registrable Securities" means (i) the Shares of Common
Stock of the Company issued pursuant to the CSA and shares issuable or
issued upon exercise of the Warrants, or conversion of said Warrants; and
(ii) any Common Stock of the Company issued (or issuable upon the
conversion or exercise of any Warrant, right or other security which is
issued) as a dividend or other distribution with respect to, or in exchange
for or in replacement of, any stock referred to in this subsection
1.1.1(i).
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1.1.3 The term "SEC" means the Securities and Exchange Commission.
1.2 Company Registration.
1.2.1 Piggyback Registration. If at any time or from time to time, the
Company shall determine to register any of its securities, for its own
account or the account of any of its shareholders, other than a
registration on S-8 relating solely to employee stock option or purchase
plans, or a registration on Form S-4 relating solely to an SEC Rule 145
transaction, or any successor to such forms, which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the
Company will:
(i) promptly give to BENCHMARK written notice thereof (which
shall include a list of the jurisdictions in which the Company intends
to attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(ii) include in such registration (and compliance), and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made within 20 days after
receipt of such written notice from the Company, by BENCHMARK , except
as set forth in subsection 1.3 below.
Notwithstanding the above, if the Company shall determine to complete
a registration on Form S-4 relating solely to an SEC Rule 145 transaction,
or a successor form, and the Company in its sole discretion determines that
the concurrent registration of the Registrable Securities will not material
effect or delay the registration of the underlying transaction which is the
subject of the Form S-4 registration, then the Company will include in the
Form S-4 registration statement the registration of the Registrable
Securities.
1.3 Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise BENCHMARK as a part of the written notice given pursuant to section 1.2.
In such event the right of BENCHMARK to registration pursuant to section 1.2
shall be conditioned upon participation in such underwriting and the inclusion
of such Registrable Securities in the underwriting to the extent provided
herein. All shareholders, including BENCHMARK , proposing to distribute their
securities through such underwriting shall (together with the Company and the
other shareholders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. *
* Notwithstanding any other provision of this Agreement, if the
managing underwriter advises the Company that marketing factors
require a limitation of the number of shares to be underwritten, then
the Company shall so advise all holders of Registrable Securities and
the number of shares of Registrable Securities that may be included in
the registration and underwriting shall be allocated among all holders
of Registrable Securities in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities held by such holders
at the time of filing the registration statement.
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If such offering is other than the first registered offering of GKIS
securities to the public, the underwriter may not limit the Registrable
Securities to be included in such offering to less than 20% of the securities
included therein (based on aggregate market values.) GKIS shall advise BENCHMARK
and all shareholders of Registrable Securities which would otherwise be
registered and underwritten pursuant hereto of any such limitations, and the
number of shares of Registrable Securities that may be included in the
registration. If BENCHMARK disapproves of the terms of any such underwriting,
they may elect to withdraw there from by written notice to GKIS and the
underwriter. Any securities excluded or withdrawn from such underwriting shall
not be transferred prior to 90 days after the effective date of the registration
statement for such underwriting, or such shorter period as the underwriter may
require.
1.4 Expenses of Registration. All expenses incurred in connection with any
registration, qualification or compliance pursuant to this Section 1 including
without limitation, all registration, filing and qualification fees, printing
expenses, fees and disbursements of counsel for the Company and expenses of any
special audits incidental to or required by such registration, shall be borne by
the Company except the Company shall not be required to pay underwriters' fees,
discounts or commissions relating to Registrable Securities. All expenses of any
registered offering not otherwise borne by the Company shall be borne pro rata
among BENCHMARK and the shareholders participating in the offering and the
Company.
Further, the Company shall not be required to pay for expenses of any
registration proceeding begun pursuant to this Section, the request of which has
been subsequently withdrawn by BENCHMARK , in which case, such expenses shall be
borne by the BENCHMARK (including Registrable Securities) requesting or causing
such withdrawal.
1.5 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Registration Rights Agreement, the Company will keep BENCHMARK advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. Except as otherwise provided in subsection
1.3, at its expense the Company will:
1.5.1 Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of
BENCHMARK , keep such registration statement effective for up to 90 days or
until BENCHMARK has completed the distribution described in the
registration statement relating thereto, whichever first occurs; and.
1.5.2 Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such registration statement.
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1.5.3 Furnish to BENCHMARK copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in
order to facilitate the disposition of Registrable Securities owned by
them.
1.5.4 Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or, Blue
Sky laws of such jurisdictions as shall be reasonably requested by
BENCHMARK , provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
1.5.5 In the event of any underwritten public offering enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. BENCHMARK
shall also enter into and perform its obligations under such an agreement.
1.5.6 Notify BENCHMARK and each shareholder of Registrable Securities
covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act or
the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
1.6 Indemnification.
1.6.1 The Company will indemnify BENCHMARK and each of its officers,
directors and partners, and each person controlling such, with respect to
which such registration, qualification or compliance has been effected
pursuant to this Rights Agreement, and each underwriter, if any, and each
person who controls any underwriter of the Registrable Securities held by
or issuable to BENCHMARK , against all claims, losses, expenses, damages
and liabilities (or actions in respect thereto) arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular or other document (including
any related registration statement, notification or the like) incident to
any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statement therein not
misleading, or any violation or alleged violation by the Company of the
Securities Act, the Securities Exchange Act of 1934, as amended ("Exchange
Act"), or any state securities law applicable to the Company or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any
such state law and relating to action or inaction required of the Company
in connection with any such registration, qualification of compliance, and
will reimburse BENCHMARK , each of its officers, directors and partners,
and each person controlling such, each such underwriter and each person who
controls any such underwriter, within a reasonable amount of time after
incurred for any reasonable legal and any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action; provided, however, that the indemnity
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agreement contained in this subsection 1.6.1 shall not apply to amounts
paid in settlement of any such claim, loss, damage, liability, or action if
such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld); and provided further, that the
Company will not be liable in any such case to the extent that any such
claim, loss, damage or liability arises out of or is based on any untrue
statement or omission based upon written information furnished to the
Company by an instrument duly executed by BENCHMARK or underwriter
specifically for use therein.
1.6.2 BENCHMARK will, if Registrable Securities held by or issuable
are included in the securities as to which such registration, qualification
or compliance is being effected, indemnify the Company, each of its
directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who
controls the Company within the meaning of the Securities Act, and each
other such shareholder, each of its officers, directors and partners and
each person controlling such shareholder, against all claims, losses,
expenses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse the
Company, such shareholders, such directors, officers, partners, persons or
underwriters for any reasonable legal or any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an
instrument duly executed by BENCHMARK specifically for use therein;
provided, however, that the indemnity agreement contained in this
subsection 1.6.2 shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability or action if such settlement is effected
without the consent of BENCHMARK (which consent shall not be unreasonably-
withheld); and provided further, that the total amount for which BENCHMARK
shall be liable under this subsection 1.6.2 shall not in any event exceed
the aggregate proceeds received by such from the sale of Registrable
Securities held by same in such registration.
1.6.3 Each party entitled to indemnification under this subsection 1.5
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom; provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or litigation, shall be approved, by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified
Party may participate in such defense at such party's expense; and provided
further, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
hereunder, unless such failure resulted in prejudice to the Indemnifying
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Party; and provided further, that an Indemnified Party (together with all
other Indemnified Parties which may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees
and expenses to be paid by the Indemnifying Party, if representation of
such Indemnified Party by the counsel retained by the Indemnifying Party
would be inappropriate due to actual or potential differing interests
between such Indemnified Party and any other party represented by such
counsel in such proceeding. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation.
1.7 Information by BENCHMARK . BENCHMARK shall promptly furnish to the
Company such information regarding themselves and the distribution proposed by
such as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to
herein.
1.8 Rule 144 Reporting. With a view to making available to shareholders and
BENCHMARK , the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees at all times to:
1.8.1 Make and keep public information available, as those terms are
understood and defined in SEC Rule 144, after 90 days after the effective
date of the first registration filed by the Company for an offering of its
securities to the general public;
1.8.2 File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting
requirements); and
1.8.3 So long as BENCHMARK owns any Registrable Securities, to furnish
to such upon request with a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time
after 90 days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after
it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports
and documents so filed by the Company as BENCHMARK may reasonably request
in complying with any rule or regulation of the SEC allowing BENCHMARK to
sell any such securities without registration.
1.9 Transfer of Registration Rights. BENCHMARK 's rights to cause the
Company to register their securities and keep information available, granted to
them by the Company under subsections 1.2 and 1.7 may not be assigned to a
transferee or assignee of BENCHMARK 's Registrable Securities not sold to the
public. The Company prohibits the transfer of any BENCHMARK 's rights under this
subsection 1.8.
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2. General.
2.1 Waivers and Amendments. With the written consent of BENCHMARK the
obligations of the Company and the rights of BENCHMARK under this agreement may
be waived (either generally or in a particular instance, either retroactively or
prospectively, and either for a specified period of time or indefinitely), and
with the same consent the Company, when authorized by resolution of its Board of
Directors, may enter into a supplementary agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement; provided, however, that no such modification, amendment or
waiver shall reduce the aforesaid percentage of Registrable Securities. Upon the
effectuation of each such waiver, consent, agreement of amendment or
modification, the Company shall promptly give written notice thereof to
BENCHMARK and the record shareholders of the Registrable Securities who have not
previously consented thereto in writing. This Agreement or any provision hereof
may be changed, waived, discharged or terminated only by a statement in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, except to the extent provided in this subsection 2.1.
2.2 Governing Law. This Agreement shall be governed in all respects by the
laws of the State of Texas as such laws are applied to agreements between Texas
residents entered into and to be performed entirely within Texas.
2.3 Attorneys Fees. The parties agree that if any legal action is necessary
to enforce the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys' fees in addition to any other relief to which that
party may be entitled.
2.4 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
2.5 Entire Agreement. Except as set forth below, this Agreement and the
other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
2.6 Notices. etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first class mail,
postage prepaid, certified or registered mail, return receipt requested,
addressed (a) if to BENCHMARK , at such address as set forth in the heading to
this Agreement, or at such other address as furnished to the Company in writing,
or (b) if to the Company, at the Company's, address set forth in the heading to
this Agreement, or at such other address as the Company shall have furnished to
BENCHMARK in writing.
2.7 Severability. In case any provision of this Agreement shall be invalid,
illegal, or unenforceable, the validity, legality and enforceability of the
remaining provisions of this Agreement or any provision of the other Agreements
shall not in any way be affected or impaired thereby.
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2.8 Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
2.9 Counterparts and/or Facsimile Signature. This Agreement may be executed
in any number of counterparts, including counterparts transmitted by telecopier
or FAX, any one of which shall constitute an original of this Agreement. When
counterparts of facsimile copies have been executed by all parties, they shall
have the same effect as if the signatures to each counterpart or copy were upon
the same document and copies of such documents shall be deemed valid as
originals. The parties agree that all such signatures may be transferred to a
single document upon the request of any party.
AGREED AND ACCEPTED, effective as of the date first above written.
GK Intelligent Systems, Inc.
Dated: May 30, 2003 /S/ Xxxx X. Xxxxxxx
-------------------------------
By: Xxxx X. Xxxxxxx
Its: President and CEO
Benchmark Consulting, Inc.
Dated: June 2, 2003 /S/ Xxxx X. Xxxxx
-------------------------------
By: Xxxx X. Xxxxx
Its: President
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