EXHIBIT 10.8
CONSULTING AGREEMENT
THIS AGREEMENT is entered into effective the 17th day of March, 1998, at
Houston, Texas, between GK INTELLIGENT SYSTEMS, INC., a Delaware corporation
("Corporation" or "GKIS") and XXXXXX XXXXXX XXXXXX ("XXXXXX").
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 XXXXXX consult with GKIS on the establishment
of retail distribution for the Company's products in the domestic and
international 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 XXXXXX become an advisor and mentor to the
management of GKIS in all phases of retail product development and distribution
as well as technological developments which could effect GKIS's business; and
WHEREAS, XXXXXX desires to acquire an equity interest in the
Corporation's common stock; and
WHEREAS, GKIS considers it to be in its best interest that XXXXXX assume a
position as Chairman 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 consent of
the holders of a majority the shares of GKIS, XXXXXX agrees to assume a position
on the GKIS Board of Directors as its Chairman for the term of this agreement.
In this capacity, XXXXXX 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 developments as XXXXXX in his sole discretion
shall deem appropriate. In addition, XXXXXX 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, half-day per week basis as the parties
mutually agree.
2. POSITION ON GKIS BOARD OF DIRECTORS. The Corporation, acting through
its existing Board of Directors, will appoint XXXXXX as Chairman 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 XXXXXX One Hundred Fifty Thousand Dollars ($150,000)on
or before April 1,1998. In the event of early termination of this Agreement
except for breach by GKIS, XXXXXX 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 XXXXXX.
4. PURCHASE OF RESTRICTED SHARES.
a. INITIAL PURCHASE OF SHARES. As a condition of his employment,
XXXXXX has previously agreed to purchase Three Million (3,000,000) 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 March 17, 1998, the date of
the subscription agreement between the parties. The agreed purchase price
of the Initial Shares was $.05 per share, and the market value was .31250,
which was the closing price for the previous day. As soon as practicable
after receipt of payment from XXXXXX, GKIS shall tender the Initial Shares
to XXXXXX, 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 XXXXXX'x
failure of performance or early termination of this agreement as set out
herein, XXXXXX agrees to sell and GKIS agrees to repurchase unvested
Initial Shares as defined herein. 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 XXXXXX, and shall no longer be subject to repurchase.
5. RIGHTS PRIOR TO ISSUE. XXXXXX 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.
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7. AMENDMENT IN WRITING. No amendment, modification or change to this
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 XXXXXX. XXXXXX
represents, warrants and agrees as follows:
a. NO REGISTRATION. XXXXXX 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. XXXXXX 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. XXXXXX 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. GKIS has filed all tax returns required to be
filed and paid all taxes and assessments due, including interest and
penalties (the "Taxes"). There are no unpaid Taxes that are or could
become a lien on the property or assets of GKIS, except for current Taxes
not yet due and payable or accrued
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payroll taxes which will be paid not later than April 30, 1998.
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 XXXXXX.
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 XXXXXX 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 XXXXXX 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 November 30,
1997, 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 XXXXXX'X FIDUCIARY OBLIGATIONS TO THIRD
PARTIES. GKIS understands, acknowledges and agrees that XXXXXX was a high
level employee of COMPAQ COMPUTER CORPORATION and is an officer or
director of other corporations, and thus may have a fiduciary relationship
towards one or more third parties, including his former employer and that,
in such capacity, XXXXXX 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 XXXXXX. GKIS
acknowledges and agrees that it will not constitute a breach of this
agreement for XXXXXX to comply with these obligations to their full legal,
moral and ethical limitations in XXXXXX'x sole discretion. GKIS further
understands and agrees that nothing contained in this Agreement shall
require XXXXXX 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 XXXXXX 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
immediately procure DOL insurance coverage in the minimum amount of
$1,000,000.00, specifically covering all acts of XXXXXX 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 April
1, 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 XXXXXX, 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 XXXXXX, 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 XXXXXX shall willfully violate any law; embezzle or
otherwise steal from the Corporation; use liquor or drugs to an extent
which has a
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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 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 XXXXXX under this agreement, and
XXXXXX shall sell to GKIS and GKIS shall repurchase all unvested Initial
Shares at their issue price.
c. UNILATERAL TERMINATION, IF ANY, BY XXXXXX. XXXXXX 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 XXXXXX
under this agreement, and XXXXXX 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 XXXXXX 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 XXXXXX has failed to perform his duties hereunder for a period of at
least six 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 XXXXXX 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 XXXXXX shall be
terminated for cause, and all vesting of Initial Shares shall cease as of
such date and XXXXXX 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 XXXXXX, in care of Xxx
Xxxxxx, 0 Xxxx Xxx Xxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000.
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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.
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. XXXXXX 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 XXXXXX during XXXXXX'x employment
by GKIS or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by XXXXXX or representatives of XXXXXX in
violation of this Agreement). After termination of XXXXXX'x employment with
GKIS, XXXXXX 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.
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.
--------------------------------
XXXXXX XXXXXX XXXXXX
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