CLIENT SERVICE AGREEMENT
THIS AGREEMENT is made and entered into this 30th day of May, 2003, 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 GK Intelligent Systems, Inc., a Delaware Corporation, located
at 0000 Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxx 00000 (hereinafter referred to as the
"Corporation").
WITNESSETH:
A. Whereas, BENCHMARK is a financial relations and direct marketing
advertising firm specializing in the dissemination of information about publicly
traded companies, and
B. Whereas, the Corporation is publicly held with its common stock trading
on the Pink Sheets under the symbol "GKIG"; and
C. Whereas, the Corporation through Midas Securities, Inc., has submitted
an application on Form 211 with the NASD for quotation of the Corporation's
common stock on the NASD OTC Bulletin Board, which application is pending.
D. Whereas, the Corporation desires to publicize itself with the intention
of making its name and business better known to shareholders, investors,
brokerage houses, institutional investors, analysts and other industry
professionals, and
E. Whereas, BENCHMARK is willing to accept the Corporation as a client.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
it is agreed:
1. ENGAGEMENT. The Corporation hereby engages BENCHMARK to publicize the
Corporation to brokers, prospective investors, institutional investors,
analysts, other industry professionals and shareholders described in Section 2
of this Agreement, and subject to the further provisions of this Agreement.
BENCHMARK hereby accepts the Corporation as a client and agrees to publicize it
as described in Section 2 of this Agreement, but subject to the further
provisions of this Agreement.
2. MARKETING PROGRAM. Consists of the following components:
(A) BENCHMARK will review and analyze various aspects of the
Corporation's goals and make recommendations on feasibility and achievement
of desired goals.
(B) BENCHMARK will provide exposure to its network of firms and
brokers that may be interested in participating with the Corporation and
schedule and conduct the necessary due diligence and obtain the required
approvals necessary for those firms to participate. BENCHMARK will also
interview and make determinations on any firms or brokers referred by the
Corporation with regard to their participation.
1
(C) BENCHMARK will use its best efforts in consulting, referrals and
through investment banking, corporate and negotiations.
3. TIME OF PERFORMANCE. Services to be performed under this Agreement shall
commence upon execution of this Agreement and shall continue for a period of ten
(10) months.
4. COMPENSATION AND EXPENSES. In consideration of the services to be
performed by BENCHMARK, the Corporation agrees to pay compensation to BENCHMARK
as follows:
(A) Share Compensation. Five Hundred Thousand (500,000) restricted
shares of Common Stock deliverable as follows:
(i) 100,000 restricted shares as an initial retainer delivered
within ten (10) days of execution of this Agreement by both
parties.
(ii) 100,000 restricted shares due on June 30, 2003;
(iii) 100,000 restricted shares due on July 30, 2003;
(iv) 100,000 restricted shares due on August 30, 2003;
(v) 100,000 restricted shares due on September 30, 2003;
(B) Warrants. Warrants entitling BENCHMARK to purchase five hundred
thousand (500,000) shares of the Corporation's common stock with the
exercise price based on the Closing Bid of the Common Stock of the
Corporation as reported on the Pink Sheets or NASD Over the Counter
Bulletin Board, as of the date of execution of this Agreement (the "Closing
Bid"), and calculated as follows:
(i) Round 1. BENCHMARK shall have the right to purchase 125,000
shares of the Common Stock of the Corporation, at an Exercise Price
equal to one hundred twenty-five percent (125%) of the Closing Bid;
(ii) Round 2. BENCHMARK shall have the right to purchase 125,000
shares of the Common Stock of the Corporation, at an Exercise Price
equal to one hundred fifty percent (150%) of the Closing Bid;
(iii) Round 3. BENCHMARK shall have the right to purchase 125,000
shares of the Common Stock of the Corporation, at an Exercise Price
equal to one hundred seventy-five percent (175%) of the Closing Bid;
and
(iv) Round 4. BENCHMARK shall have the right to purchase 125,000
shares of the Common Stock of the Corporation, at an Exercise Price
equal to two hundred percent (200%) of the Closing Bid.
(C) Terms of Warrant. The terms and conditions of the Warrant are set
forth in the Warrant attached hereto as Exhibit 1, and incorporated herein
by this reference.
(d) Registration Rights for Shares and Warrant Shares. The shares
issuable under this Agreement and upon exercise of the Warrant shall be
subject to certain piggyback registration rights as set forth in that
certain Registration Rights Agreement, a copy of which is attached hereto
as Exhibit 2.
2
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Corporation
represents and warrants to BENCHMARK, each such representation and warranty
being deemed to be material that:
(A) The Corporation will cooperate fully and timely with BENCHMARK to
enable BENCHMARK to perform its obligations under this Agreement.
(B) The execution and performance of this Agreement by the Corporation
has been duly authorized by the Board of Directors of the Corporation in
accordance with applicable law, and, to the extent required, by the
requisite number of shareholders of the Corporation;
(C) The performance by the Corporation of this Agreement will not
violate any applicable court decree, law or regulation, nor will it violate
any provisions of the organizational documents of the Corporation or any
contractual obligation by which the Corporation may be bound.
(D) The Corporation will promptly deliver to BENCHMARK a complete due
diligence package to include the most recent annual report to Shareholders,
and the most recent quarterly report of the Corporation on Form 10-QSB, and
all other relevant materials, including but not limited to corporate
reports, brochures, etc.
(E) The Corporation will promptly deliver to BENCHMARK a list of
brokers and market makers of the Corporation's securities which have been
following the Corporation.
(F) Because BENCHMARK will rely on such information to be supplied it
by the Corporation, all such information shall be true, accurate, complete
and not misleading, in all respects.
(G) The Corporation will act diligently and promptly in reviewing
materials submitted to it by BENCHMARK to enhance timely distribution of
the materials and will inform BENCHMARK of any inaccuracies contained
therein prior to the projected publication date.
6. DISCLAIMER BY BENCHMARK. BENCHMARK WILL BE THE PREPARER OF CERTAIN
PROMOTIONAL MATERIALS. BENCHMARK MAKES NO REPRESENTATION THAT (A) ITS SERVICE
WILL RESULT IN ANY ENHANCEMENT TO THE COMPANY (B) THE PRICE OF THE COMPANY'S
PUBLICLY TRADED SECURITIES WILL INCREASE, (C) ANY PERSON WILL PURCHASE
SECURITIES IN THE COMPANY, OR (D) ANY INVESTOR WILL LEND MONEY TO OR INVEST IN
OR WITH THE COMPANY.
3
7. EARLY TERMINATION. Either party reserves the right to cancel this
agreement by providing fifteen (15) day written notice to the other party. In
the event of termination and cancellation by either party Benchmark shall be
entitled to receive and retain (a) the prorated shares due through the end of
the month in which notice of termination is provided, and (b) the right to
exercise any vested and unexercised Warrants for a period of ninety (90) days
from the effective date of termination, as liquidated damages, and not as a
penalty, in lieu of all other remedies, the parties acknowledging and agreeing
that it would be too difficult currently to determine the exact extent of
BENCHMARK's damage, but that the receipt and retention of such compensation is
reasonable present estimate of such damage.
8. LIMITATION OF BENCHMARK LIABILITY. If BENCHMARK fails to perform its
services hereunder, its entire liability to the Corporation shall not exceed the
lesser of (a) the amount of shares and warrants shares BENCHMARK has received
from the Corporation under Section 4 of this Agreement and the gain on any sale
of shares issuable upon exercise of the Warrants, or (b) the actual damage to
the Corporation as a result of such non-performance. IN NO EVENT WILL BENCHMARK
BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES NOR FOR ANY CLAIM
AGAINST THE COMPANY BY ANY PERSON OR ENTITY ARISING FROM OR IN ANY WAY RELATED
TO THIS AGREEMENT, UNLESS SUCH DAMAGES RESULT DIRECTLY OR INDIRECTLY FROM
MISSTATEMENTS, MISREPRESENTATIONS, OMISSIONS BY BENCHMARK OR FROM THE USE OR
PUBLICATION, BY BENCHMARK, OF INFORMATION NOT AUTHORIZED IN WRITING BY THE
COMPANY, FOR USE OR PUBLICATION.
9. OWNERSHIP OF MATERIALS. Upon the initial payment by the Corporation to
BENCHMARK as set forth in section 4(A) above, all right, title and interest in
and to materials to be produced by BENCHMARK in connection with this contract
and other services to be rendered under this Agreement shall be the sole and
exclusive property of the Corporation.
10. CONFIDENTIALITY. Until such time as the same may become publicly known,
BENCHMARK agrees that any information of a confidential nature will not be
revealed or disclosed to any person or entity, except in the performance of this
Agreement, and upon completion of its services and upon written request of the
Corporation all materials and original documentation provided by the Corporation
will be returned to it. BENCHMARK will, however, require Confidentiality
Agreements from its own employees and from contractors BENCHMARK reasonably
believes will come in contact with confidential material.
11. NOTICES. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given, or on the third (3rd) business day after mailing if mailed to the party
to whom notice is to be given, by first class mail, registered or certified,
postage prepaid, and properly addressed as follows:
If to the Corporation, addressed to: If to BENCHMARK, addressed to:
----------------------------------- -----------------------------
Xx. Xxxx X. Xxxxxxx, President Xx. Xxxx X. Xxxxx, President
GK Intelligent Systems, Inc. Benchmark Consulting Inc.
0000 Xxxxxxxx Xxxxx 000 Xxxxxxx Xxxx, Xxxxx 000 Xxxx
Xxxxxxx, Xxxxx 00000 Xxxxxxxxx Xxxxxx, Xxx Xxxx 00000
4
12. 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.
13. ARBITRATION. Any controversy or claim arising out of or relating to the
Client Service Agreement, or the breach thereof, shall be settled by arbitration
in accordance with the commercial arbitration rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof.
14. MISCELLANEOUS.
(A) Governing Law; Choice of Forum. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas
applicable to agreements made and to be performed entirely within such
State and without regard to its choice of law principles. All parties
hereto (i) consents to submit itself to the personal jurisdiction of any
federal court located in the State of Texas or any Texas state court in the
event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that Venue for any such dispute
arises out of this Agreement or any of the transactions contemplated by
this Agreement shall be any federal court located in the State of Texas or
any Texas state court, (iii) agrees that they will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from
any such court and (iv) agrees that it will not bring any action relating
to this Agreement or any of the transactions contemplated by this Agreement
in any court other than a federal court sitting in the State of Texas or a
Texas state court.
(B) Currency. In all instances, references to dollars shall be deemed
to be United States Dollars.
(C) Assignment. No Party may assign its rights under this Agreement
without the prior written consent of the other Parties hereto.
(D) 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.
5
Executed as of the date and year 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
6
