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As filed with the Securities and Exchange Commission on October 16, 1998
Registration no. 333-__________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
Registration Statement
Under the Securities Act of 1933
-------------------------------------
GK INTELLIGENT SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 76-0513297
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
5555 San Felipe, Suite 625 Gary F. Kimmons
Houston, Texas 77056 5555 San Felipe, Suite 625
(713)840-7722 Houston, Texas 77056
(Address, including zip code, and (713) 840-7722
telephone number, including (Name, address, including zip code,
area code, of registrant's and telephone number, including
principal executive offices) area code, of agent for service)
TINA ALEXANDER EMPLOYMENT AGREEMENT
RENEE ETHRIDGE EMPLOYMENT AGREEMENT
RANDALL HABEL EMPLOYMENT AGREEMENT
CYNTHINA HEINSOHN EMPLOYMENT AGREEMENT
ROCKNE HORVATH EMPLOYMENT AGREEMENT
KARL PERRON EMPLOYMENT AGREEMENT
GK INTELLIGENT SYSTEMS, INC. 1995 EMPLOYEE STOCK OPTION PLAN
(Full Title of the Plans)
_________________
copy to:
Thomas C. Pritchard
Brewer & Pritchard, P.C.
1111 Bagby, 24th Floor
Houston, Texas 77002
Phone (713) 209-2950
_________________
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
TITLE OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT BEING OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED/(1)/ PER SHARE/(2)/ OFFERING PRICE/(2)/ FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.001 per share................. 5,460,000 $3.9375 $21,498,750 $6,342
- -----------------------------------------------------------------------------------------------------------
TOTAL $6,342
===========================================================================================================
</TABLE>
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(1) Pursuant to Rule 416 under the Securities Act of 1933, as amended, the
number of shares of the issuer's Common Stock registered hereunder will be
adjusted in the event of stock splits, stock dividends or similar
transactions.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(h), on the basis of the high and low
prices of the Common Stock as reported by the American Stock Exchange on
October 15, 1998.
<PAGE>
PART I
PROSPECTUS
GK INTELLIGENT SYSTEMS, INC.
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This prospectus provides information regarding:
. The resale of 460,000 shares of company common stock held by certain of its
employees; and
. the registration of up to 5,000,000 shares of company common stock issuable
upon the exercise of options granted under the 1995 Employee Stock Option Plan.
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The company will pay all costs and expenses incurred by it in connection
with the registration of the aggregate 5,460,000 shares. The selling
stockholders will pay the costs associated with any subsequent sales of the
registered shares, including any concessions, commissions, fees and applicable
transfer taxes.
The company's common stock is quoted on the American Stock Exchange under
the symbol "GKI." On October 15, 1998 the last reported sales price of the
common stock was $4.00.
______________________________
AN INVESTMENT IN THE SECURITIES OFFERED BY THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK. CONSIDER CAREFULLY THE RISK FACTORS APPEARING ON PAGE 4.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS DETERMINED THAT
THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ABOUT THE COMPANY THAT DIFFERS FROM, OR ADDS TO, THE INFORMATION
IN THIS PROSPECTUS OR IN OUR DOCUMENTS THAT ARE PUBLICLY FILED WITH THE SEC.
ACCORDINGLY, IF ANYONE DOES GIVE YOU DIFFERENT OR ADDITIONAL INFORMATION YOU
SHOULD NOT RELY ON IT.
IF YOU ARE IN A JURISDICTION WHERE IT IS UNLAWFUL TO BUY THE SECURITIES
OFFERED BY THE PROSPECTUS, OR IF YOU ARE A PERSON TO WHOM IT IS UNLAWFUL TO
DIRECT SUCH ACTIVITIES, THEN THE OFFER PRESENTED BY THIS PROSPECTUS DOES NOT
EXTEND TO YOU.
THE INFORMATION IN THIS PROSPECTUS SPEAKS ONLY AS OF ITS DATE UNLESS THE
INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES.
___________________
The date of this prospectus is October 16, 1998
ii
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TABLE OF CONTENTS
PAGE
----
Incorporation of Certain Documents by Reference............ 2
Available Information...................................... 2
The Company................................................ 3
Risk Factors............................................... 4
Use of Proceeds............................................ 8
Selling Stockholders....................................... 8
Plan of Distribution....................................... 8
Resale of Shares by Affiliates............................. 9
Legal Matters.............................................. 9
Experts.................................................... 9
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the company with the SEC,
are incorporated herein by reference:
1. The company's annual report on Form 10-KSB for the fiscal year ended May
31, 1998.
2. The description of the company's common stock contained in the company's
registration statement on Form 10-SB, dated January 24, 1997.
All documents filed by the company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus and before the
termination of the offering covered hereby will be deemed to be incorporated by
reference in this prospectus and to be a part hereof from the date of filing
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference in this prospectus shall be deemed to be modified
or superceded for purposes of this prospectus to the extent that a statement
contained in this prospectus or any subsequently filed document that also is or
is deemed to be incorporated by reference modifies or replaces such statement.
You may obtain, without charge, a copy of any or all of the documents
incorporated by reference, other than exhibits to such documents not
specifically incorporated by reference above, by making an oral or written
request to the company. Requests for such documents may be directed to the
company at 5555 San Felipe, Suite 625, Houston, Texas 77056, attention: Gary F.
Kimmons.
AVAILABLE INFORMATION
The company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the SEC. The reports, proxy statements and other information
are available for inspection and copying at the Public Reference Room of the
SEC, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549; and at the
Regional Offices of the SEC located at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and at 7 World Trade Center, New York, New York 10048.
Copies of the material may be obtained from the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, for a fee. The SEC
maintains a Web site on the Internet that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the SEC. The address of the site is http://www.sec.gov.
You may access such information by searching the EDGAR data base on the site.
The company has filed with the SEC a registration statement on Form S-8
with respect to the securities offered by this prospectus. Certain information
contained in the registration statement is omitted from this prospectus. You may
refer to the registration statement, its exhibits and schedules for further
information with respect to the company and the securities offered by this
prospectus. You may obtain copies of the registration statement, its exhibits
and schedules in the above captioned locations.
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THE COMPANY
The company is a development stage enterprise currently developing
"intelligent" computer software training and performance support products and
applications. Management anticipates that only one product; "Around the Web in
80 Minutes," with two versions will be introduced in fiscal 1999. The Netscape
Navigator version of "Around the Web in 80 Minutes" is expected to be released
in late November 1998.
The company's efforts to date have centered primarily on: 1) the acquisition
and development of its core software technologies from which management's goal
is to create future products and applications, and 2) securing the services of
competent individuals capable of carrying out the company's strategy. During
the period from inception (October 4, 1993) through May 31, 1998, the company
has realized no revenues and has accumulated a deficit of $18,216,000.
The company's long term strategy is to develop products and applications
that incorporate several new software technologies such as artificial
intelligence, intelligent semantic agents, conceptual querying, adaptive dynamic
interfaces, intelligent tutoring, object-oriented programming and active and
visible graphical interfaces and databases. These technologies, which management
refers to as its Smart Support family of technologies, consist of:
. Smart Perform (using intelligent agent technology and the heterogeneous
access of information in disparate databases and multimedia database
authoring tools to present the information),
. Smart Enterprise (a strategic resource model manager using
intelligent agent technology and the heterogeneous access capability of Smart
Perform), and
. Smart One(TM) (a computer based training system utilizing multimedia
technology, artificial intelligence, an adaptive dynamic interface and
advanced training methodologies to deliver a training experience).
The company's principal place of business is located at 5555 San Felipe,
Suite 625, Houston, Texas 77056 and its telephone number is (713) 840-7722.
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RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS
INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION IN THIS
PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE
MAKING A DECISION TO PURCHASE THE COMMON STOCK OFFERED HEREBY.
FORWARD LOOKING STATEMENTS
This prospectus contains certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Forward-looking statements can be identified by the
use of forward-looking terminology such as "believes," "expects," "may,"
"estimates," "will," "should," "plans" or "anticipates" or the negative thereof
or other variations thereon or comparable terminology or by discussions of
strategy. Such statements include, but are not limited to, the discussions of
the company's operations, liquidity and capital resources. Forward-looking
statements are included in the "Risk Factors," "Use of Proceeds," and "The
Company" sections of this prospectus. Although the company believes that the
expectations reflected in forward-looking statements are reasonable, there can
be no assurances that such expectations will prove to be accurate. Generally,
these statements relate to business plans, strategies, anticipated strategies,
levels of capital expenditures, liquidity and anticipated capital financing
needed to effect the business plan. All phases of the company's operations are
subject to a number of uncertainties, risks and other influences, many of which
are outside the control of the company and cannot be predicted with any degree
of accuracy. In light of the significant uncertainties inherent in the forward-
looking statements made in this prospectus, the inclusion of such statements
should not be regarded as a representation by the company or any other person
that the objectives and plans of the company will be achieved. You are cautioned
that such forward-looking statements involve risks and uncertainties, including,
without limitation, the risks set forth in "Risk Factors." The forward-looking
statements contained in this prospectus speak only as of the date of this
prospectus and the company expressly disclaims any obligation or undertaking to
release any updates or revisions to any such statement to reflect any change in
the company's expectations or any change in events, conditions or circumstance
on which any such statement is based.
LIMITED OPERATING HISTORY OF THE COMPANY; OPERATING LOSSES
During the period from inception (October 4, 1993) through May 31, 1998, the
company realized no revenues and has an accumulated deficit of $18,216,000. The
company recorded losses of $5,881,798 and $9,528,473 for the 1998 and 1997
fiscal years, respectively. At May 31, 1998, the company had working capital of
$5,082,614 and shareholders' equity of $7,476,902. As a development stage
company, it is subject to all the substantial risks inherent in the development
of a business enterprise with no products. There can be no assurance that the
company will be able to successfully market its initial product or operate
profitably. The company has a limited business history that investors can
analyze to aid them in making an informed judgement as to the merits of an
investment in the company. Any investment in the company should be considered a
high risk investment because the investor will be placing funds at risk in an
unseasoned company with unforeseen costs, expenses, competition and other
problems to which development stage ventures are often subject. The company's
prospects must be considered in light of the risks, expenses and difficulties
encountered in establishing a business in a highly competitive industry.
CAPITAL REQUIREMENTS; LIMITED SOURCES OF LIQUIDITY; CONTINUED EXISTENCE
The company requires substantial capital to pursue its operating strategy
and at May 31, 1998 had cash of $5,241,449. Until the company can obtain sales
levels sufficient to fund working capital needs, the company will be dependent
upon external sources of financing. To date, the company has no internal
sources of liquidity and it should be assumed that there will be no internal
sources of liquidity for the foreseeable future. The company has
4
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suffered recurring operating losses since its inception that raise substantial
doubt about its ability to meet future expected expenditures necessary to fully
develop its software products and applications. The company's independent
certified public accountants qualified their report for the May 31, 1998
financial statements regarding the company's ability to continue as a going
concern. The current cash forecast indicates that there will be negative cash
flow from operations through the first three quarters of the 1999 calendar year.
Based on the company's current plan of operations, it is anticipated that its
current cash balance will provide sufficient working capital through November
1998; however, this period may be extended or reduced depending upon actual
expenses incurred in marketing its initial product. The company is currently
seeking short and long term debt or equity financing sufficient to fund
projected working capital necessary to market the Company's initial product as
well as to fund additional software product development. Any equity sales by the
company would be on a best efforts basis. To date, the company has no commitment
for any external sources of financing, there can be no assurance that such
financing will be available or, if it is available, that it will be available on
acceptable terms. Accordingly, no assurance can be given that the company will
be successful in obtaining financing sufficient to fund the company's working
capital, software development and marketing expenditure requirements for the
remainder of the 1999 fiscal year or thereafter. Failure to obtain sufficient
funding will adversely impact the company's financial position, and could cause
the company to curtail operations, sell assets, or take other actions as
necessary in order to meet cash flow requirements.
FACTORS AFFECTING FUTURE OPERATING RESULTS AND FINANCIAL CONDITION
The company's future operating results and financial condition are
dependent upon the company's ability to successfully develop, manufacture, and
market its initial product. Inherent in this process are a number of factors
that the company must successfully manage in order to achieve favorable future
operating results and a favorable financial condition. Potential risks and
uncertainties that could affect the company's future operating results and
financial condition include, without limitation, the need for additional
financing to fund marketing expenses of the initial product, competitive
pressures in the marketplace, the company's ability to successfully manufacture
and market its initial product, the company's ability to develop and market new
products, the company's ability to supply products free of latent defects or
other faults, the company's ability to make timely delivery to the marketplace
of technological innovations and the company's ability to attract, motivate and
retain employees. Failure by the company to adequately address these factors
could adversely affect the company's future operating results and financial
condition.
LACK OF PRODUCTS; LACK OF MARKETING PLAN
To date, the company has no products in the marketplace, nor has it
attempted to market any products in the marketplace. Management anticipates
that only one product, "Around the Web in 80 Minutes," with two versions will be
introduced in fiscal 1999. The anticipated release date for the Netscape
Navigator version of "Around the Web in 80 Minutes" is late November 1998. The
company intends to market "Around the Web in 80 Minutes" to the consumer market
through the Internet and retail outlets. To date, the company does not have any
agreements or contracts in place with any Internet companies or retail outlets
for the distribution and sale of its products. As the company has not marketed
any products to date, management may encounter unforeseen difficulties which
could delay the product's anticipated release. The company may not be able to
enter into distribution agreements on terms favorable to the company, if at all.
Any changes in the company's marketing strategy or the sales process could
result in greater than anticipated marketing expenses, delays in the marketing
the product, and other increased costs, any or all of which could have a
material adverse effect on the Company's financial condition.
5
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RAPID TECHNOLOGICAL CHANGE
Due to the highly volatile nature of the software industry, the success of
the company will be dependent on its ability to introduce its initial product.
The success of new product introduction is dependent on a number of factors,
including market acceptance, the effective management of inventory levels in
line with anticipated product demand, the availability of the product in
appropriate quantities to meet anticipated demand, and the risk that the new
product may have quality or other defects in the early stages of introduction.
Additionally, due to the rapid technological changes in the software industry,
products may become obsolete quickly. The ability of the company to enhance its
initial product to overcome obsolescence, and to develop and introduce new
products will be a factor in the success of the business. Accordingly, the
company cannot determine the ultimate effect that the initial product will have
on its financial condition or results of operations.
UNCERTAINTIES ASSOCIATED WITH THE INTERNET
The Internet market is rapidly evolving and is characterized by an
increasing number of market entrants who have introduced or developed products
addressing access to, authoring for, communications over and training on the
Internet. Many of these competitors have a significant lead over the company in
developing products for the Internet, and have significantly greater financial,
marketing, manufacturing and technological resources than the company. Critical
issues concerning the commercial use of the Internet (including security,
reliability, cost, ease of use and access, and quality of service) remain
unresolved and may affect the future growth of Internet use, together with the
hardware and software standards and electronic media employed in such markets.
COMPETITION
The computer software industry is highly competitive and is characterized
by aggressive pricing practices, downward pressure on gross margins, frequent
introduction of new products, short product life cycles, continual improvement
in product price/performance characteristics, price sensitivity on the part of
consumers, and a large number of competitors. The company's results of
operations and financial condition may be adversely affected by industry-wide
pricing pressures and downward pressures on gross margins. The industry has also
been characterized by rapid technological advances in software functionality and
hardware performance and features based on existing or emerging industry
standards. There are several large well capitalized companies that produce
educational software, the company's target market, including The Learning
Company, Expert Software, Inc., Borderbund, and Scholastic, which have
established brand names and could introduce and widely distribute an Internet-
oriented educational CD. Many of the company's competitors have greater
financial, marketing, manufacturing, and technological resources and larger
installed customer bases than the company. There can be no assurances that the
company will be able to compete successfully in this environment.
INTELLECTUAL PROPERTY RIGHTS
The company regards its initial product, "Around the Web in 80 Minutes," as
proprietary and intends to rely on contractual provisions to establish and
protect its proprietary rights. This step may not be sufficient to prevent or
deter others from copying or stealing the company's proprietary rights and does
not prevent competitors from independently developing technology that is
equivalent or superior to the company's technology. The software market has
traditionally experienced widespread unauthorized reproduction of products in
violation of intellectual property rights. Such activity is difficult to detect
and legal proceedings to enforce intellectual property rights are often
burdensome and involve a high degree of uncertainty and costs. From time to
time, other companies and individuals assert exclusive patent, copyright,
trademark and other intellectual property rights to technologies or marks that
are important to the computer industry or the company's business. The company
evaluates each such
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claim relating to its potential products and, if appropriate, seeks a license to
use the protected technology. There can be no assurance that the company will be
able to obtain licenses on protected technology of third parties on commercially
reasonable terms, if at all. In addition, the company could be at a disadvantage
if competitors obtain licenses for protected technologies with more favorable
terms than does the company. If the company's potential products should be found
to infringe on protected technology, the company could be enjoined from further
infringement and required to pay damages to the infringed party. Any of the
foregoing could have a material adverse effect on the results of operations and
financial position of the company.
DEPENDENCE ON KEY PERSONNEL
The success of the company is dependent upon, among other things, the
services of Gary F. Kimmons. Mr. Kimmons currently serves as chairman of the
board of directors, chief executive officer and acting chief financial officer.
The company has an employment agreement with Mr. Kimmons, and maintains key-man
life insurance on his life. The loss of the services of Mr. Kimmons, for any
reason, could have a material adverse effect on the prospects of the company.
The company currently does not have permanent staff in the positions of chief
financial officer, chief information officer, or marketing director. The
company expects to hire personnel in these key positions; however, there can be
no assurance that the company will be able to attract and retain qualified
employees to fill the openings. Failure to find qualified individuals for these
key positions may hamper the company's ability to implement its business plan.
SHARES RESERVED FOR ISSUANCE
The company has reserved 5,000,000 shares of its common stock to be issued
pursuant to the 1995 Employee Stock Option Plan, of which options to purchase
1,516,109 shares are outstanding at exercise prices ranging from $0.31250 to
$13.3750 with exercise periods extending to October 2008. Additionally, there
are options and warrants outstanding to purchase an aggregate of 8,148,591
shares at prices ranging from $0.31250 to $13.3750 with exercise periods
extending to October 2008. The exercise and subsequent sale of the shares of
common stock underlying these options will have a dilutive effect and could
adversely affect the prevailing market price of the common stock.
YEAR 2000 COMPLIANCE ISSUES
The year 2000 poses certain issues for business and consumer computing,
particularly the functionality of software for two-digit storage of dates and
special meanings for certain dates such as 9/9/99. The year 2000 is a leap
year, which may also lead to incorrect calculations, functions or system
failure. The problem exists for many kinds of software, including software for
mainframes, PCs and embedded systems. The company intends to initiate the
process of gathering, testing, and producing information about the company's
technologies impacted by the Year 2000 transition. The company's board of
directors is currently developing a Year 2000 strategy for its initial product
and future products. The company believes its initial product is Year 2000
compliant. However, variability of definitions of "compliance" with the Year
2000 and of different combinations of software, firmware, and hardware may lead
to lawsuits against the company. The outcomes of any such lawsuits and the
impact of the company are not estimable at this time. The Year 2000 may affect
the company's internal systems, however management believes the effect will be
minimal as the company purchased the majority of its hardware systems within the
last year and a half. The company intends to assess the readiness of its
systems and those of its vendors for handling the Year 2000. Although the
assessment has not been initiated, management currently believes that resolving
these matters will not have a material adverse impact on the company's financial
position or its results of operations.
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USE OF PROCEEDS
The company may receive up to $1,385,694 in proceeds from the exercise of
outstanding options under the 1995 Employee Stock Option Plan which will be
utilized for working capital purposes. There can be no assurance that the
option holders will exercise any or all of the options which are presently
outstanding or which may be issued under the 1995 Employee Stock Option Plan.
The company will not receive any proceeds from the sale of any shares offered
hereby. The selling shareholders will receive all of the net proceeds from the
sale of such shares.
SELLING STOCKHOLDERS
Shares of the company's common stock which are presently eligible for sale
pursuant to this prospectus or which may become eligible for sale pursuant to
this prospectus, whether or not the holders thereof have any present intent to
do so, are shares which (1) have been acquired by certain employees and
consultants of the company pursuant to certain employment agreements, or (2)
shares which have been and may be acquired by key employees, officers and
directors of the company from time to time upon exercise of options granted
pursuant to the company's 1995 Employee Stock Option Plan (collectively the
"Shares"). The names of such persons, and the number of Shares or options owned
and the amount of options currently vested and exercisable and other relevant
information are set forth on appendices A and B hereto.
PLAN OF DISTRIBUTION
Pursuant to this prospectus, the selling stockholders, or by certain
pledgees, donees, transferees or other successors in interest to the selling
stockholders, may sell Shares from time to time in transactions on the American
Stock Exchange, in privately-negotiated transactions or by a combination of such
methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The selling stockholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal, or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions).
Other methods by which the Shares may be sold include, without limitation:
(1) transactions which involve cross or block trades or any other transaction
permitted by the American Stock Exchange, (2) "at the market" to or through
market makers or into an existing market for the common stock, (3) in other ways
not involving market makers or established trading markets, including direct
sales to purchasers or sales effected through agents, (4) through transactions
in options or swaps or other derivatives (whether exchange-listed or otherwise),
(5) through short sales, or (6) any combination of any other such methods of
sale. The selling stockholders may also enter into option or other transactions
with broker-dealers which require the delivery to such broker-dealers of the
Shares offered hereby which Shares such broker-dealer may resell pursuant to
this prospectus.
The selling stockholders and any broker-dealers who act in connection with
the sale of Shares hereunder may be deemed to be "underwriters" as that term is
defined under the Securities Act, and any commissions received by them and
profit on any resale of the Shares as principal may be deemed to be underwriting
discounts and commissions under the Securities Act.
There is no assurance that the selling stockholders will sell all or any of
the Shares which may be offered hereby.
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RESALE OF SHARES BY AFFILIATES
The Shares offered hereby may be resold freely, except that any selling
stockholder deemed to be an "affiliate" of the company within the meaning of
those terms under the Securities Act and the rules and regulations promulgated
thereunder, may only sell the Shares limited to the amount specified in Rule
144(e) of the Securities Act which allows them to sell, within any three-month
period, up to the number of shares that does not exceed the greater of: (1) one
percent of the then outstanding shares of common stock of the company, or (2)
the average weekly trading volume during the four calendar weeks preceding the
date of receipt of the order to execute the transaction by the broker or the
date of execution of the transaction directly with the broker.
An employee who is not an executive officer or director of the company
generally will not be deemed to be an "affiliate" of the company. In addition,
the acquisition of shares of common stock by officers and directors of the
company through the exercise of options will generally not be considered a
"purchase," but the sale thereof will generally be considered a "sale" for
Section 16(b) of the Exchange Act.
LEGAL MATTERS
The legality of the securities offered hereby will be passed on for the
company by Brewer & Pritchard, P.C., Houston, Texas. Principals of Brewer &
Pritchard, P.C. own 26,000 shares of company common stock.
EXPERTS
The consolidated financial statements of the company and its subsidiaries
incorporated by reference in this prospectus have been audited by BDO Seidman
LLP, independent certified public accountants, to the extent and for the periods
set forth in their report, which contains an explanatory paragraph regarding the
company's ability to continue as a going concern, incorporated herein by
reference and are incorporated herein in reliance upon such report given upon
the authority of said firm as experts in accounting and auditing, in giving said
reports.
APPENDIX A
Holders of Shares of GK Intelligent Systems, Inc.'s common stock acquired
pursuant to certain employment agreements, the resale of which is being
registered hereby, are as follows:
SHARES
ELIGIBLE FOR
STOCKHOLDER RESALE
----------- ------------
Tina Alexander 200,000
Renee Ethridge 50,000
Randall Habel 100,000
Cynthina Heinsohn 80,000
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Rockne Horvath 20,000
Karl Perron 10,000
Whether or not the above persons have a present intent to do so, all of the
above persons are eligible to resell the number of shares owned by them pursuant
to the reoffer prospectus.
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APPENDIX B
1995 EMPLOYEE STOCK OPTION PLAN
The following is a summary of the company's 1995 Employee Stock Option Plan
for the full terms and condition of the plan see Exhibit 10.7. The company has
reserved 5,000,000 shares of company common stock to be issued pursuant to the
plan. The shares of common stock to be issued upon exercise of options granted
under the plan are being registered hereby.
SUMMARY
The plan was adopted, pursuant to approval by the company's board of
directors and stockholders, in order to foster and promote the financial success
of the company. The plan is intended to provide "incentive stock options"
within the meaning of that term under Section 422 of the Internal Revenue Code.
In addition, the company intends to administer the plan to meet the requirements
of Rule 16b-3(c) promulgated under the Exchange Act. The company intends to
utilize any cash proceeds received from the sale of company common stock
pursuant to options granted under the plan for working capital purposes.
The plan is administered by a committee appointed by the board, and
composed of at least two members of the board. Under the plan, the committee
may only grant options to plan participants who include: key employees,
executive officers, and directors of the company. The committee has the sole
and complete authority to determine such persons to whom options shall be
granted and to interpret and implement the plan, including such items as the
duration of each option and the exercise price of each option.
Each option granted under the plan is convertible into one share of common
stock, unless adjusted pursuant to the provisions of plan. The total number of
options available for grant under the plan may not exceed 5,000,000, however, in
the event an option granted expires unexercised or is cancelled or surrendered
for any reason, new options may be granted in place of the former options.
Finally, the aggregate "fair market value" of common stock subject to options
granted under the plan to any sole participant in any calendar year may not
exceed $100,000. Fair market value is defined as the closing price of company
common stock as last reported on the principal national securities exchange on
which the common stock is listed or admitted to trade.
The committee may grant options to any participant at any time, provided
that the option price per share of common stock deliverable upon exercise of the
option is 100% of the fair market value of a share of common stock on the date
the option is granted. Each option is fully exercisable six months from the
date of grant, unless the committee provides for a shorter period, and each
option must be exercised within ten years from the date of grant.
Notwithstanding the above pricing information, if the committee grants options
to any person holding 10% or more of the total voting power of the company, the
option price per share of common stock deliverable upon exercise of the option
must be at least 110% of the fair market value. In addition, each option
granted to any person holding 10% or more of the total voting power of the
company must be exercised within five years from the date of grant.
In case of dissolution of the company, every option outstanding will
terminate, provided that every option holder will have thirty days prior written
notice of such event, during which time he has the right to exercise any of his
unexercised options. In the case of a merger, consolidation, or sale of
substantially all of the assets of the company, any option granted will pertain
to and apply to the securities to which a holder of common stock would be
entitled to as a result of such transaction, provided that all unexercised
options may be cancelled by the company with notice to the option holders after
which every option holder will have thirty days during which time he has the
right to exercise any of his unexercised options.
11
<PAGE>
The grant of any options does not obligate the company to continue the
employment of any employee for any particular period. The board may alter,
amend, suspend, or terminate the plan or any option at any time, provided that
the board may not change the total number of shares of common stock available
for options, extend the duration of the options, increase the maximum term of
the options, decrease the option price, or materially modify the eligibility
requirements of the plan.
The following table shows each participant and their vested and unvested
options as of October 16, 1998.
Participants Vested Options Unvested Options
- ---------------------------- -------------- ----------------
Alexander, Tina 25,000 75,000
Cabello, David 12,500 0
Cirrone, Helen 125 14,875
Collins, Donna 83 1,917
Crosscope, Jack 0 75,000
Davis, James C. 0 40,000
Edwards, Sarah 146 6,854
Ethridge, Renee 0 30,000
Fahy, Charles L. 0 30,000
Finley, Jonathan 104 4,896
Haney, Debra 83 3,917
Heinsohn, Cynthina 0 100,000
Horvath, Rockne 0 100,000
Jarvis, Eric 0 7,200
Kimmons, Gary F.* 290,909 0
Lutkus, Linda 0 10,000
McAleer, Hugh 0 20,000
McEntire, Maria 208 12,292
Norville, Rodney** 320,000 0
Scarpate, Alisa 83 1,917
Scoggin, Christopher*** 73,000 0
Starratt, Andy 10,000 0
Whaley, Chris 0 75,000
Wiederholt, Brad 0 150,000
Wright, Denise 0 25,000
Total 732,241 783,868
======= =======
Whether or not the above persons have a present intent to do so, all of the
above persons will be eligible to sell pursuant to the re-offer prospectus the
number of shares acquired by them upon exercise of the options.
*This person is currently deemed to be an "affiliate" of the company and
the amount of shares to be sold pursuant to the re-offer prospectus is limited
to the amount specified in Rule 144(e) of the Securities Act. See "Resale of
Shares by Affiliates."
**This person will be deemed to be an "affiliate" of the company for a
ninety (90) day period from September 14, 1998, and the amount of shares to be
sold pursuant to the re-offer prospectus is limited to the amount specified in
Rule 144(e) of the Securities Act for that period. See "Resale of Shares by
Affiliates."
***Mr. Scoggin exercised his option to purchase 73,000 shares of company
common stock on October 2, 1998. Accordingly, the resale of those shares is
being registered hereby.
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed by the company with the SEC are
incorporated herein by reference:
1. The company's latest annual report filed pursuant to Section 13(a) or
15(d) of the Exchange Act of 1934, or, either (1) the company's latest
prospectus filed pursuant to Rule 424(b) under the Securities Act that contains
audited financial statements for the company's latest fiscal year for which such
statements have been filed, or (2) the company's effective registration
statement on Form 10-SB filed under the Exchange Act containing audited
financial statements for the company's latest fiscal year;
2. All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the document referred
to in (1) above; and
3. The description of the common stock that is contained in a
registration statement or amendment thereto filed under Section 12 of the
Exchange Act, including any amendment or report filed for the purpose of
updating such description.
All documents subsequently filed by the registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a post-
effective amendment to the registration statement which indicates that all
shares of common stock offered have been sold or which deregisters all of such
shares then remaining unsold, shall be deemed to be incorporated by reference in
the registration statement and to be a part thereof from the date of filing of
such documents.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable
ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL
Brewer & Pritchard, P.C., counsel to the company, has passed upon the
legality under the law of the State of Delaware, the state in which the company
is incorporated, of the common stock of the company being offered hereby.
Principals of Brewer & Pritchard, P.C. own 26,000 shares of the company's common
stock.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article XI of the Certificate of Incorporation of the company provides
for indemnification of officers, directors, agents and employees of the company
as follows:
(a) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal
13
<PAGE>
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner in which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
Article, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this Article
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
Article. Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized by this Article. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under this Article.
14
<PAGE>
(h) For purposes of this Article references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had the power
and authority to indemnify its directors, officers, and employees or agents, so
that any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this Article with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
The foregoing discussion of the company's Certificate of Incorporation,
and of the Delaware General Corporation Law is not intended to be exhaustive and
is qualified in its entirety by such Certificate of Incorporation and statutes,
respectively.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED
Any restricted securities to be offered or resold pursuant to this
registration statement were issued pursuant to an exemption under Section 4(2)
of the Securities Act, as a non-public offering of securities.
ITEM 8. EXHIBITS
The following exhibits are filed as part of this registration statement:
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
- ----------- ------------------------------------------------------
4.1/(1)/ -- Common Stock Specimen
5.1/(1)/ -- Opinion Regarding Legality
10.1/(1)/ -- Tina Alexander Employment Agreement
10.2/(1)/ -- Renee Ethridge Employment Agreement
10.3/(1)/ -- Randall Habel Employment Agreement
10.4/(1)/ -- Cynthina Heinsohn Employment Agreement
10.5/(1)/ -- Rockne Horvath Employment Agreement
10.6/(1)/ -- Karl Perron Employment Agreement
10.7/(2)/ -- 1995 Employee Stock Option Plan
23.1/(1)/ -- Consent of Counsel (included in Exhibit 5.1)
23.2/(1)/ -- Consent of BDO Seidman, independent public accountants
_____________________
(1) Filed herewith.
(2) Filed as an exhibit to the company's Form 10-SB, which was filed with the
SEC on January 27, 1997.
ITEM 9. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
i. To include any prospectus required by Section 10(a)(3) of
the Securities Act;
15
<PAGE>
ii. To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC
pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the
effective registration statement; and
iii. To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (ii) do
not apply if the registration statement is on Form S-3 or
Form S-8, and the information required to be included in a
post-effective amendment by those paragraphs is contained
in periodic reports filed with or furnished to the SEC by
the registrant pursuant to Section 13 or 15(d) of the
Exchange Act that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining liability under the Securities Act, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described in Item 6 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on the 16th day of October,
1998.
GK INTELLIGENT SYSTEMS, INC.
By /s/ GARY F. KIMMONS
-------------------
GARY F. KIMMONS, Chief Executive Officer
____________________________
Pursuant to the requirements of the Securities Act, this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ GARY F. KIMMONS Chief Executive Officer October 16, 1998
- ---------------------
GARY F. KIMMONS Chief Financial Officer
(Principal Financial
and Accounting Officer)
and Director
/s/ GERALD ALLEN Director October 16, 1998
- ------------------
GERALD ALLEN
/s/ JOHN PAUL DEJORIA Director October 16, 1998
- ---------------------
JOHN PAUL DEJORIA
17
<PAGE>
EXHIBIT 4.1
<TABLE>
<S> <C> <C>
COMMON STOCK PAR VALUE $.001
GK INTELLIGENT SYSTEMS, INC.
THIS CERTIFICATE IS TRANSFERABLE INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SEE REVERSE FOR CERTAIN DEFINITIONS
IN HOUSTON, TX OR NEW YORK, NY
CUSIP ____________
THIS CERTIFIES THAT
*********
********
*******
******
0*****
IS THE OWNER OF *** ***
------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
GK INTELLIGENT SYSTEMS, INC.
Transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid until countersigned and registered by the Transfer Agent and
Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Dated: ____________________
/s/ Gary F. Kimmons
PRESIDENT
[GK INTELLIGENT SYSTEMS, INC.
/s/ Kathryn T. Kimmons CORPORATE SEAL APPEARS HERE]
SECRETARY
</TABLE>
<PAGE>
Exhibit 5.1
October 16, 1998
GK Intelligent Systems, Inc.
Marathon Oil Tower
5555 San Felipe, Suite 625
Houston, Texas 77056
Re: GK Intelligent Systems, Inc.
Registration Statement on Form S-8
Gentlemen:
We have represented GK Intelligent Systems, Inc., a Delaware corporation
("Company"), in connection with the preparation of a registration statement
filed with the Securities and Exchange Commission on Form S-8 ("Registration
Statement") relating to the proposed issuance of up to 5,000,000 shares of the
Company's common stock, par value $.001 per share ("Common Stock") upon exercise
of options issued pursuant to the terms of the Company's 1995 Stock Option Plan
and the resale of 460,000 shares of Common Stock issued pursuant to the
following plans:
Tina Alexander Employment Agreement dated March 13, 1998
Renee Ethridge Employment Agreement dated March 13, 1998
Randall Habel Employment Agreement dated March 13, 1998
Cynthina Heinsohn Employment Agreement dated March 13, 1998
Rockne Horvath Employment Agreement dated March 13, 1998
Karl Perron Employment Agreement dated March 13, 1998
The foregoing Employment Agreements and the Company's 1995 Stock Option
Plan shall be collectively referred to as the "Plans."
In this connection, we have examined originals or copies identified to our
satisfaction of such documents, corporate and other records, certificates, and
other papers as we deemed necessary to examine for purposes of this opinion,
including but not limited to the Plans, the Certificate of Incorporation of the
Company, the Bylaws of the Company, and resolutions of the Board of Directors of
the Company.
<PAGE>
We are of the opinion that the Shares will be, when issued pursuant to the
Plans, legally issued, fully paid and nonassessable.
We hereby consent to the filing of this Opinion as an Exhibit to the
Registration Statement.
Very truly yours,
BREWER & PRITCHARD
[SIGNATURE OF BREWER & PRITCHARD, P.C.
APPEARS HERE]
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, made and executed by and between GK Intelligent Systems,
Inc., a Delaware Corporation, with its principal place of business in Houston,
Harris County, Texas (hereinafter called the "Corporation" or "GKIS"), and Tina
S. Alexander, of Houston, Texas (hereinafter called "Alexander" or
"Professional"). Collectively, the Corporation and Alexander shall be referred
to as "the parties."
W I T N E S S E T H:
WHEREAS, Alexander desires to perform software design and management
services on behalf of the Corporation and act as Director of Financial Services,
Sales Division as an employee of the Corporation, including the performance
personally of such services as she and/or the Corporation's Board of Directors
deem necessary; and
WHEREAS, the Board of Directors of the Corporation desires to employ
Alexander in such capacities under the terms of this Agreement;
THEREFORE, the parties mutually agree as follows:
ARTICLE I
EMPLOYMENT
1.1 CONDITIONS OF EMPLOYMENT. The Corporation hereby employs Alexander
and Alexander accepts such employment, as Director of Financial Services, Sales
Division, to render professional services on behalf of the Corporation, subject
to the supervision and direction of the Corporation's officers and Board of
Directors and subject to the law of the Corporation as given in the Articles of
Incorporation and the Bylaws.
1.2 TERM OF EMPLOYMENT. The term of employment shall commence on or after
the execution of this Agreement but not later than May 1, 1998 and shall
continue until termination by either party as provided in Article IV.
ARTICLE II
DUTIES
2.1 DEVOTION OF EFFORT. Alexander agrees to devote sufficient time,
attention, and skill to the performance of her duties as an employee of the
Corporation as set out and authorized by the Board of Directors. During the
term of this Agreement, she shall not render services on her own or on behalf of
any party other than the Corporation unless otherwise authorized by the Board of
Directors.
1
<PAGE>
ARTICLE III
COMPENSATION
3.1 COMPENSATION AND BENEFITS.
a. MONTHLY SALARY. As compensation for the services to be rendered
hereunder, GKIS will pay to Alexander a monthly salary in an amount equal
to Eleven Thousand Two Hundred Fifty Dollars ($11,250.00). The monthly
salary shall be paid in semi-monthly payments of one-half the monthly
amount each on the first and fifteenth day of each month with respect to
the immediately preceding month, commencing on the first day of the first
month after the month in which this agreement is executed.
b. BONUS OPTIONS FOR SHARES OF CORPORATION COMMON STOCK. In addition
to the monthly salary and any other benefits available to all employees,
including standard incentive qualified stock options, GKIS will grant to
Alexander incentive stock options for One Hundred Thousand (100,000) shares
of GKIS common stock (the "Bonus Options"). Contingent upon the Agreement
remaining in force, options for Twenty-Five Thousand (25,000) shares will
vest and be exercisable on the thirtieth day following the close of each of
the third, six, ninth and twelfth months following the month in which this
agreement is executed. Except for the delayed vesting of their
exercisability, this grant of stock options shall be governed by and
subject to the GK INTELLIGENT SYSTEMS, INC. 1995 INCENTIVE STOCK OPTION
PLAN, as set out in a separate Incentive Stock Option Agreement executed by
the parties concurrently with the execution of this Employment Agreement.
The number of shares shall also be adjusted as provided in Section 7.1 of
such Plan. For all purposes related to the Grant of these options, the
Board of Directors of GKIS has determined that the date of such grant is
March 13, 1998 and the Fair Market Value per share as of the date of such
grant is Thirty-One and 25/100 Cents ($.3125). Except as set out in
paragraph 4.2 below, termination of this agreement will not cause the
forfeiture of the Bonus Options for those months prior to termination in
which the vesting requirements were met. In the event of Alexander's death,
termination upon disability as described in paragraph 4.1 below or other
involuntary termination other than as set out in paragraph 4.2 below, all
unvested options shall immediately vest and be exercisable by Alexander,
her representative or her executor, as applicable.
c. BONUS SHARES. In addition to the monthly salary and Bonus Options
granted above, and effective with the date of this agreement, GKIS will
issue to Alexander Two Hundred Thousand (200,000) shares of the
Corporation's restricted Common Stock (the "Shares"). Alexander 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
2
<PAGE>
opinion of counsel for the Corporation, a sale or transfer may be made
without registration thereunder. Alexander acknowledges and agrees that she
has no preemptive rights with respect to the Shares to be conveyed
hereunder and further 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. As soon as practicable after the date of this agreement, GKIS
shall tender the Shares to Alexander, provided that if any law or
regulation requires the Corporation to take any action with respect to the
Shares before the issuance thereof, then the date of delivery for such
shares shall be extended for the period necessary to take such action.
d. EMPLOYEE BENEFIT PLANS. Alexander shall be entitled to
participate in all employee benefit plans to be established by the Board of
Directors on the same terms and conditions as all other employees similarly
situated.
3.2 DISALLOWED COMPENSATION. If the Internal Revenue Service shall find
that Alexander's salary constitutes unreasonable or excessive compensation,
Alexander agrees to repay to GKIS any amount disallowed to it as deductions that
results in an increase in its tax liability for such year.
ARTICLE IV
TERMINATION OF AGREEMENT
4.1 ILLNESS OR OTHER INCAPACITY. If Alexander, during the term of this
Agreement, shall fail to perform her duties hereunder as a result of illness or
other incapacity shall continue for a period of more than six months, 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 Alexander, such date to be not less than thirty (30) days following receipt
of said notice.
4.2 CONDUCT. If Alexander 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 her or her services; conduct herself publicly or
privately in a manner which offends against decency or causes her 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 4.1. In the event of termination under this Article 4.2,
Alexander shall not be eligible to receive unexercised stock option compensation
for the year in which termination occurs, nor shall she be entitled to receive
any deferred compensation credited to her account but not yet paid.
4.3 UNILATERAL TERMINATION. Either party hereto 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.
3
<PAGE>
ARTICLE V
DEATH OF EMPLOYEE
5.1 DEATH. If Alexander shall die during the term of this Agreement, her
legal representative shall be entitled to receive her compensation as provided
in Article III hereof.
ARTICLE VI
ILLNESS OR INCAPACITY
6.1 INABILITY TO PERFORM DUTIES. If Alexander is unable to perform her
duties hereunder by reason of illness or incapacity of any kind for a period of
more than six months, her salary payments may be reduced or terminated by the
Corporation at its absolute discretion. Alexander's full salary shall be
reinstated upon her return to full-time employment and the full discharge of her
duties hereunder. This section shall in no way limit the rights of the
Corporation under Article IV hereof.
ARTICLE VII
LEAVES OF ABSENCE
7.1 PAID LEAVE. Leaves of absence with full payment of salary may be
granted to Alexander for attendance at professional conventions, continuing
education institutes in her profession and other professional or business
activities, as approved by the Corporation, with full or partial payment of
expenses at its sole discretion.
7.2 UNPAID LEAVE. Unpaid leave of absence may be granted at the sole
discretion of the Corporation for any other reasons upon request by Alexander.
ARTICLE VIII
VACATIONS
8.1 PAID VACATION. Alexander shall be entitled to a vacation, the length
of which as determined by the Board of Directors or the President of the
Corporation, during which time her salary shall be paid in full. Alexander
shall take her vacation at such time or times as shall be approved by the
corporation.
ARTICLE IX
EXPENSES
9.1 EXPENSES REIMBURSED. During the period of her employment, Alexander
will be reimbursed for her reasonable expenses in accordance with general policy
of the Corporation as adopted by the Board of Directors from time to time. In
addition to such reimbursement expenses, Alexander shall incur and pay in the
course of her employment by the Corporation
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certain other necessary expenses as Director of Financial Services, Sales
Division, for which she will be required personally to pay but for which the
Corporation shall reimburse or otherwise compensate her, including, but not
limited to the following: automobile and transportation expenses; educational
expenses incurred for the purpose of maintaining or improving Alexander's
professional skills, club dues, and the expenses of membership in civic groups,
professional societies, and fraternal organizations, and all other items of
reasonable and necessary professional expenses incurred by Alexander in the
performance of the services in which Alexander has been engaged on behalf of the
Corporation.
ARTICLE X
SUCCESSION
10.1 ASSUMPTION BY SUCCESSOR TO CORPORATION. The Corporation will not
consolidate or merge into or with another corporation, or transfer all or
substantially all of its assets to another corporation, unless such corporation
(hereinafter referred to as "Successor Corporation") shall assume this
Agreement. Upon such assumption Alexander and the Successor Corporation shall
become obligated to perform the terms and conditions hereof, and the term
"Corporation" as used in this Agreement shall be deemed to refer to such
Successor Corporation; provided, however, Alexander's duties shall be such as
prescribed by the Board of Directors of the Successor Corporation.
ARTICLE XI
PROPERTY RIGHTS OF PARTIES
11.1 TRADE SECRETS. During the term of employment, Alexander will have
access to and become familiar with various trade secrets, consisting of
formulas, devices, secret inventions, processes, and compilation of information,
records, and specifications, owned by the Corporation and regularly used in the
operation of the business of the Corporation. Alexander shall not disclose any
such trade secrets, directly or indirectly, nor use them in any way, either
during the term of this Agreement or at any time thereafter, except as required
in the course of her or her employment. All files, records, documents,
drawings, specifications, equipment, and similar times relating to the business
of the Corporation, whether or not prepared by Alexander shall remain the
exclusive property of the Corporation and shall not be removed from the premises
of the Corporation under any circumstances without the prior written consent of
the Corporation.
11.2 RETURN OF CORPORATION'S PROPERTY. On the termination of employment
or whenever requested by the Corporation, Alexander shall immediately deliver to
the Corporation all property in Alexander's possession or under Alexander's
control belonging to the Corporation in good condition, ordinary wear and tear
excepted.
11.3 OWNERSHIP OF WORK PRODUCT. Alexander agrees that:
(a) all intellectual property including but not limited to all ideas and
concepts contained in computer programs and software, documentation or other
literature or illustrations that are
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conceived, developed, written, or contributed by Alexander pursuant to this
Agreement, either individually or in collaboration with others, shall belong to
and be the sole property of GKIS.
(b) Alexander agrees that all rights in all works prepared or performed by
Alexander pursuant to this Agreement, including patent rights and copyrights
applicable to any of the intellectual property described in Subparagraph (a)
above, shall belong exclusively to GKIS and shall constitute "works made for
hire" for purposes of copyright law.
(c) The provisions of this Paragraph XI shall not be construed to assign to
GKIS any of Alexander's rights in any invention for which no equipment,
supplies, facilities, or trade secret information of GKIS was used, or that was
developed entirely prior to this Agreement, or that does not result from any
work performed by Alexander for GKIS.
ARTICLE XII
NO COMPETITION BY PROFESSIONAL
12.1 NO COMPETING ACTIVITIES. During the term of this Agreement and for
a period of three years following termination of same Alexander shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
Principal, Partner, Stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business
whatsoever that is in direct competition in any manner whatsoever with the core
products and technologies (Smart One Trainer, Smart Enterprise, Doorways, Smart
Support, Smart Perform or other Carnot derived products, and their successors
and any other subsequent core businesses) of this Corporation within North
America, unless a Court of competent Jurisdiction shall determine that the scope
and/or time of this agreement renders it unenforceable, in which case the scope
and/or time shall be reduced to that which the Court deems reasonable and
enforceable. This provision shall not be construed to prevent Alexander from
accepting employment in the area of Microsoft Access programming, system
analysis and administration or information technology functions considered
generic to the industry, not utilizing any of the Corporation's core
technologies or products.
ARTICLE XIII
NOTICES
13.1 NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by mail to her residence,
in the case of Alexander, or to its principal office, in the case of the
Corporation.
ARTICLE XIV
WAIVER OF BREACH
14.1 NONWAIVER OF SUBSEQUENT BREACH. The waiver by any party hereto of a
breach of any provision of this agreement shall not operate or be construed as a
waiver of any subsequent breach by an party.
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ARTICLE XV
AMENDMENT
15.1 WRITTEN AMENDMENT. No amendment or modification of this Agreement
shall be deemed effective unless or until executed in writing by the parties
hereto with the same formality attending execution of this Agreement.
ARTICLE XVI
CHOICE OF LAW
16.1 TEXAS LAW. This Agreement, having been executed and delivered in the
State of Texas, its validity, interpretation, performance and enforcement will
be governed by the laws of that state.
EXECUTED in counterparts, each of which shall be deemed an original,
effective the 13th day of March, 1998.
/s/ Tina S. Alexander
______________________________________
Tina S. Alexander
GK INTELLIGENT SYSTEMS, INC.:
By: /s/ Gary F. Kimmons
___________________________________
Gary F. Kimmons, CEO and Chairman
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, made and executed by and between GK Intelligent Systems,
Inc., a Delaware Corporation, with its principal place of business in Houston,
Harris County, Texas (hereinafter called the "Corporation"), and Renee Ethridge,
of Houston, Texas (hereinafter called "Ethridge"). Collectively, the
Corporation and Ethridge shall be referred to as "the parties." This Agreement
modifies and supersedes the previous agreements between the parties.
W I T N E S S E T H:
WHEREAS, Ethridge desires to continue to perform clerical personnel
management, project support, sales and marketing support and professional
executive support services on behalf of the Corporation and act as
administrative assistant to the CEO as an employee of the Corporation, including
the performance personally of such services as she and/or the Corporation's
Board of Directors deem necessary; and
WHEREAS, the Board of Directors of the Corporation desires to employ
Ethridge in such capacities under the terms of this Agreement;
THEREFORE, the parties mutually agree as follows:
ARTICLE I
EMPLOYMENT
1.1 CONDITIONS OF EMPLOYMENT. The Corporation hereby continues the
employment of Ethridge and Ethridge accepts such employment, as Administrative
Assistant to the CEO, to continue to render professional services on behalf of
the Corporation, subject to the supervision and direction of the Corporation's
officers and Board of Directors and subject to the law of the Corporation as
given in the Articles of Incorporation and the Bylaws.
1.2 TERM OF EMPLOYMENT. This term of employment shall commence with the
date of this Agreement and shall continue until termination by either party as
provided in Article IV.
ARTICLE II
DUTIES
2.1 DEVOTION OF EFFORT. Ethridge agrees to devote sufficient time,
attention, and skill to
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the performance of her duties as an employee of the Corporation as set out and
authorized by the Board of Directors. Unless and until changed by the Board, the
time for performance of such duties shall average approximately thirty (30)
hours per week. During the term of this Agreement, she shall not render services
on her own or on behalf of any party other than the Corporation unless otherwise
authorized by the Board of Directors.
ARTICLE III
COMPENSATION
3.1 COMPENSATION AND BENEFITS.
a. MONTHLY SALARY. As compensation for the services to be rendered
hereunder, GKIS will pay to Ethridge a monthly salary in an amount equal to
Three Thousand, Three Hundred Thirty-Three Dollars and thirty-three cents
($3,333.33). The monthly salary shall be paid in semi-monthly payments of
one-half the monthly amount each on the first and fifteenth day of each
month ("payday") with respect to the immediately preceding month,
commencing on the first month after the month in which this agreement
is executed.
b. BONUS OPTIONS FOR SHARES OF CORPORATION COMMON STOCK. In addition
to the monthly salary and any other benefits available to all employees,
including standard incentive qualified stock options, GKIS will grant to
Ethridge incentive stock options for Thirty Thousand (30,000) shares of
GKIS common stock (the "Bonus Options"). Contingent upon the Agreement
remaining in force, options for SevenThousand Five Hundred (7,500) shares
will vest and be exercisable on the thirtieth day following the close of
first, second, third and fourth years following the month in which this
agreement is executed. Except for the delayed vesting of their
exercisability, this grant of stock options shall be governed by and
subject to the GK INTELLIGENT SYSTEMS, INC. 1995 INCENTIVE STOCK OPTION
PLAN, as set out in a separate Incentive Stock Option Agreement executed by
the parties concurrently with the execution of this Employment Agreement.
The number of shares shall also be adjusted as provided in Section 7.1 of
such Plan. For all purposes related to the Grant of these options, the
Board of Directors of GKIS has determined that the date of such grant is
March 13, 1998 and the Fair Market Value per share as of the date of such
grant is Thirty-One and 25/100 Cents ($.3125). Except as set out in
paragraph 4.2 below, termination of this agreement will not cause the
forfeiture of the Bonus Options for those months prior to termination in
which the vesting requirements were met.
c. BONUS SHARES. In addition to the monthly salary and Bonus Options
granted above, and effective with the date of this agreement, GKIS will
issue to Ethridge Fifty Thousand (50,000) shares of the Corporation's
restricted Common Stock (the "Shares"). Ethridge is aware that the Shares
have not been registered nor is registration contemplated
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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. Ethridge acknowledges and
agrees that she has no preemptive rights with respect to the Shares to be
conveyed hereunder and further 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. As soon as practicable after the date of this
agreement, GKIS shall tender the Shares to Ethridge, provided that if any
law or regulation requires the Corporation to take any action with respect
to the Shares before the issuance thereof, then the date of delivery for
such shares shall be extended for the period necessary to take such action.
d. EMPLOYEE BENEFIT PLANS. Ethridge shall be entitled to participate
in all employee benefit plans to be established by the Board of Directors
on the same terms and conditions as all other employees similarly situated.
ARTICLE IV
TERMINATION OF AGREEMENT
4.1 ILLNESS OR OTHER INCAPACITY. If Ethridge, during the term of this
Agreement, shall fail to perform her duties hereunder as a result of illness or
other incapacity which shall continue for a period of more than six months, 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 Ethridge, such date to be not less than thirty (30) days following receipt of
said notice.
4.2 CONDUCT. If Ethridge 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 her or her services; conduct herself publicly or
privately in a manner which offends against decency or causes her 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 4.1. In the event of termination under this Article 4.1,
Ethridge shall not be eligible to receive bonus compensation for the year in
which termination occurs, nor shall she be entitled to receive any deferred
compensation credited to her account but not yet paid.
4.3 UNILATERAL TERMINATION. Either party hereto 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.
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ARTICLE V
DEATH OF EMPLOYEE
5.1 DEATH. If Ethridge shall die during the term of this Agreement, her
legal representative shall be entitled to receive her compensation as provided
in Article III hereof.
ARTICLE VI
ILLNESS OR INCAPACITY
6.1 INABILITY TO PERFORM DUTIES. If Ethridge is unable to perform her
duties hereunder by reason of illness or incapacity of any kind for a period of
more than six months, her salary payments may be reduced or terminated by the
Corporation at its absolute discretion. Ethridge's full salary shall be
reinstated upon her return to full-time employment and the full discharge of her
duties hereunder. This section shall in no way limit the rights of the
Corporation under Article IV hereof.
ARTICLE VII
LEAVES OF ABSENCE
7.1 PAID LEAVE. Leaves of absence with full payment of salary may be
granted to Ethridge for attendance at professional conventions, continuing
education institutes in her profession and other professional or business
activities, as approved by the Corporation, with full or partial payment of
expenses at its sole discretion.
7.2 UNPAID LEAVE. Unpaid leave of absence may be granted at the sole
discretion of the Corporation for any other reasons upon request by Ethridge.
ARTICLE VIII
VACATIONS
8.1 PAID VACATION. Ethridge shall be entitled to a vacation, the length
of which as determined by the Board of Directors or the President of the
Corporation, during which time her salary shall be paid in full. Ethridge shall
take her vacation at such time or times as shall be approved by the corporation.
ARTICLE IX
EXPENSES
9.1 EXPENSES REIMBURSED. During the period of her employment, Ethridge
will be
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reimbursed for her reasonable expenses in accordance with general policy of the
Corporation as adopted by the Board of Directors from time to time. In addition
to such reimbursement expenses, Ethridge shall incur and pay in the course of
her employment by the Corporation certain other necessary expenses as
Administrative Assistant to the CEO for which she will be required personally to
pay but for which the Corporation shall reimburse or otherwise compensate her,
including, but not limited to the following: automobile and transportation
expenses; educational expenses incurred for the purpose of maintaining or
improving Ethridge's professional skills, club dues, and the expenses of
membership in civic groups, professional societies, and fraternal organizations,
and all other items of reasonable and necessary professional expenses incurred
by Ethridge in the performance of the services in which Ethridge has been
engaged on behalf of the Corporation.
ARTICLE X
SUCCESSION
10.1 ASSUMPTION BY SUCCESSOR TO CORPORATION. The Corporation will not
consolidate or merge into or with another corporation, or transfer all or
substantially all of its assets to another corporation, unless such corporation
(hereinafter referred to as "Successor Corporation") shall assume this
Agreement. Upon such assumption Ethridge and the Successor Corporation shall
become obligated to perform the terms and conditions hereof, and the term
"Corporation" as used in this Agreement shall be deemed to refer to such
Successor Corporation; provided, however, Ethridge's duties shall be such as
prescribed by the Board of Directors of the Successor Corporation.
ARTICLE XI
PROPERTY RIGHTS OF PARTIES
11.1 TRADE SECRETS. During the term of employment, Ethridge will have
access to and become familiar with various trade secrets, consisting of
formulas, devices, secret inventions, processes, and compilation of information,
records, and specifications, owned by the Corporation and regularly used in the
operation of the business of the Corporation. Ethridge shall not disclose any
such trade secrets, directly or indirectly, nor use them in any way, either
during the term of this Agreement or at any time thereafter, except as required
in the course of her or her employment. All files, records, documents,
drawings, specifications, equipment, and similar times relating to the business
of the Corporation, whether or not prepared by Ethridge shall remain the
exclusive property of the Corporation and shall not be removed from the premises
of the Corporation under any circumstances without the prior written consent of
the Corporation.
11.2 RETURN OF CORPORATION'S PROPERTY. On the termination of employment
or whenever requested by the Corporation, Ethridge shall immediately deliver to
the Corporation all property in Ethridge's possession or under Ethridge's
control belonging to the Corporation in good condition, ordinary wear and tear
excepted.
11.3 OWNERSHIP OF WORK PRODUCT. Ethridge agrees that:
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(a) all intellectual property including but not limited to all ideas and
concepts contained in computer programs and software, documentation or other
literature or illustrations that are conceived, developed, written, or
contributed by Ethridge pursuant to this Agreement, either individually or in
collaboration with others, shall belong to and be the sole property of GKIS.
(b) Ethridge agrees that all rights in all works prepared or performed by
Ethridge pursuant to this Agreement, including patent rights and copyrights
applicable to any of the intellectual property described in Subparagraph (a)
above, shall belong exclusively to GKIS and shall constitute "works made for
hire" for purposes of copyright law.
(c) The provisions of this Paragraph XI shall not be construed to assign to
GKIS any of Ethridge's rights in any invention for which no equipment, supplies,
facilities, or trade secret information of GKIS was used, or that was developed
entirely prior to this Agreement, or that does not result from any work
performed by Ethridge for GKIS.
ARTICLE XII
NO COMPETITION BY PROFESSIONAL
12.1 NO COMPETING ACTIVITIES. During the term of this Agreement and for
a period of three years following termination of same Ethridge shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
Principal, Partner, Stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business
whatsoever that is in direct competition in any manner whatsoever with the core
products and technologies (Smart One Trainer, Smart Enterprise, Smart Agent,
Smart Support, Smart Perform or other Carnot derived products, and their
successors and any other subsequent core businesses) of this Corporation within
North America, unless a Court of Competent Jurisdiction shall determine that the
scope and/or time of this agreement renders it unenforceable, in which case the
scope and/or time shall be reduced to that which the Court deems reasonable and
enforceable. This provision shall not be construed to prevent Ethridge from
accepting employment in the general areas of administrative assistance,
clerical, secretarial, project support or other administration or information
technology functions considered generic to the industry, not utilizing any of
the Corporation's core technologies or products.
ARTICLE XIII
NOTICES
13.1 NOTICES: Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by mail to her residence,
in the case of Ethridge, or to its principal office, in the case of the
Corporation.
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ARTICLE XIV
WAIVER OF BREACH
14.1 NONWAIVER OF SUBSEQUENT BREACH. The waiver by any party hereto of a
breach of any provision of this agreement shall not operate or be construed as a
waiver of any subsequent breach by an party.
ARTICLE XV
AMENDMENT
15.1 WRITTEN AMENDMENT. No amendment or modification of this Agreement
shall be deemed effective unless or until executed in writing by the parties
hereto with the same formality attending execution of this Agreement.
ARTICLE XVI
CHOICE OF LAW
16.1 TEXAS LAW. This Agreement, having been executed and delivered in the
State of Texas, its validity, interpretation, performance and enforcement will
be governed by the laws of that state.
EXECUTED in counterparts, each of which shall be deemed an original,
effective this the 13th day of March, 1998.
/s/ Renee Ethridge
______________________________________
Renee Ethridge
GK INTELLIGENT SYSTEMS, INC.:
By: /s/ Gary F. Kimmons
___________________________________
Gary F. Kimmons, CEO and Chairman
7
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, made and executed by and between GK Intelligent Systems,
Inc., a Delaware Corporation, with its principal place of business in Houston,
Harris County, Texas (hereinafter called the "Corporation"), and Randall Habel,
of Houston, Texas (hereinafter called "HABEL"). Collectively, the Corporation
and HABEL shall be referred to as "the parties."
W I T N E S S E T H:
WHEREAS, HABEL desires to be the Director of and be responsible for the
marketing of Smart One trainer financial services products as an employee of the
Corporation, including the performance personally of such services as he and/or
the Corporation's Board of Directors deem necessary; and
WHEREAS, the Board of Directors of the Corporation desires to employ
HABEL in such capacities under the terms of this Agreement;
THEREFORE, the parties mutually agree as follows:
ARTICLE I
EMPLOYMENT
1.1 CONDITIONS OF EMPLOYMENT. The Corporation hereby employs HABEL and
HABEL accepts such employment as DIRECTOR OF FINANCIAL SERVICES MARKETING,
ENHANCED LEARNING DIVISION, to render professional services on behalf of the
Corporation, subject to the supervision and direction of the Corporation's
officers and Board of Directors and subject to the law of the Corporation as
given in the Articles of Incorporation and the Bylaws.
1.2 TERM OF EMPLOYMENT. The term of employment shall commence January 1,
1998 and shall continue until termination by either party as provided in Article
IV.
ARTICLE II
DUTIES
2.1 DEVOTION OF EFFORT. HABEL agrees to devote sufficient time,
attention, and skill to the performance of his duties as DIRECTOR OF FINANCIAL
SERVICES MARKETING, ENHANCED LEARNING DIVISION of the Corporation as set out and
authorized by the Board of Directors. During the term of this Agreement, he
shall not render services on his own or on behalf of any party other than
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the Corporation unless otherwise authorized by the Board of Directors.
ARTICLE III
COMPENSATION
3.1 COMPENSATION AND BENEFITS.
a. MONTHLY SALARY. As compensation for the services to be rendered
hereunder, GKIS will pay to HABEL a monthly salary in an amount equal to
FIFTEEN THOUSAND DOLLARS ($15,000.00). The monthly salary shall be paid in
semi-monthly payments of one-half the monthly amount each on the first and
fifteenth day of each month ("payday") with respect to the immediately
preceding month. Salary hereunder will commence on the first month after
the month this agreement is executed.
b. BONUS SHARES. In addition to the monthly salary and effective
with the date of this agreement, GKIS will issue to HABEL One Hundred
Thousand (100,000) Shares of the Corporation's restricted Common Stock (the
"Shares"). HABEL 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. HABEL acknowledges and agrees that he has no preemptive rights
with respect to the Shares to be conveyed hereunder and further 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. As soon as practicable
after the date of this agreement, GKIS shall tender the Shares to HABEL,
provided that if any law or regulation requires the Corporation to take any
action with respect to the Shares before the issuance thereof, then the
date of delivery for such shares shall be extended for the period necessary
to take such action.
c. EMPLOYEE BENEFIT PLANS. HABEL shall be entitled to participate
in all employee benefit plans to be established by the Board of Directors
on the same terms and conditions as all other employees similarly situated.
3.2 DISALLOWED COMPENSATION. If the Internal Revenue Service shall find
that HABEL's salary constitutes unreasonable or excessive compensation, HABEL
agrees to repay to the Corporation any amount disallowed to the Corporation as
deductions that results in an increase in its tax liability for any tax year.
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ARTICLE IV
TERMINATION OF AGREEMENT
4.1 ILLNESS OR OTHER INCAPACITY. If HABEL, during the term of this
Agreement, shall fail to perform his duties hereunder as a result of illness or
other incapacity shall continue for a period of more than six months, 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 HABEL, such date to be not less than thirty (30) days following receipt of
said notice.
4.2 CONDUCT. If HABEL 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 him or 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 4.1. In the event of termination under this Article 4.1,
HABEL shall not be eligible to receive bonus compensation for the year in which
termination occurs, nor shall he be entitled to receive any deferred
compensation credited to his account but not yet paid.
4.3 UNILATERAL TERMINATION. Either party hereto 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.
ARTICLE V
DEATH OF EMPLOYEE
5.1 DEATH. If HABEL shall die during the term of this Agreement, his
legal representative shall be entitled to receive his compensation as provided
in Article III hereof.
ARTICLE VI
ILLNESS OR INCAPACITY
6.1 INABILITY TO PERFORM DUTIES. If HABEL is unable to perform his duties
hereunder by reason of illness or incapacity of any kind for a period of more
than six months, his salary payments may be reduced or terminated by the
Corporation at its absolute discretion. HABEL's full salary shall be reinstated
upon his return to full-time employment and the full discharge of his duties
hereunder. This section shall in no way limit the rights of the Corporation
under Article IV hereof.
ARTICLE VII
LEAVES OF ABSENCE
7.1 PAID LEAVE. Leaves of absence with full payment of salary may be
granted to HABEL for attendance at professional conventions, continuing
education institutes in his profession and other professional or business
activities, as approved by the Corporation, with
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full or partial payment of expenses at its sole discretion.
7.2 UNPAID LEAVE. Unpaid leave of absence may be granted at the sole
discretion of the Corporation for any other reasons upon request by HABEL.
ARTICLE VIII
VACATIONS
8.1 PAID VACATION. HABEL shall be entitled to a vacation, the length of
which as determined by the Board of Directors or the President of the
Corporation, during which time his salary shall be paid in full. HABEL shall
take his vacation at such time or times as shall be approved by the corporation.
ARTICLE IX
EXPENSES
9.1 EXPENSES REIMBURSED. During the period of his employment, HABEL will
be reimbursed for his reasonable expenses in accordance with general policy of
the Corporation as adopted by the Board of Directors from time to time. In
addition to such reimbursement expenses, HABEL shall incur and pay in the course
of his employment by the Corporation certain other necessary expenses as
Director of Financial Services Marketing, Enhanced Learning Division for which
he will be required personally to pay but for which the Corporation shall
reimburse or otherwise compensate him, including, but not limited to the
following: automobile and transportation expenses; educational expenses
incurred for the purpose of maintaining or improving HABEL's professional
skills, club dues, and the expenses of membership in civic groups, professional
societies, and fraternal organizations, and all other items of reasonable and
necessary professional expenses incurred by HABEL in the performance of the
services in which HABEL has been engaged on behalf of the Corporation.
ARTICLE X
SUCCESSION
10.1 ASSUMPTION BY SUCCESSOR TO CORPORATION. The Corporation will not
consolidate or merge into or with another corporation, or transfer all or
substantially all of its assets to another corporation, unless such corporation
(hereinafter referred to as "Successor Corporation") shall assume this
Agreement. Upon such assumption HABEL and the Successor Corporation shall
become obligated to perform the terms and conditions hereof, and the term
"Corporation" as used in this Agreement shall be deemed to refer to such
Successor Corporation; provided, however, HABEL's duties shall be such as
prescribed by the Board of Directors of the Successor Corporation.
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ARTICLE XI
PROPERTY RIGHTS OF PARTIES
11.1 TRADE SECRETS. During the term of employment, HABEL will have access
to and become familiar with various trade secrets, consisting of formulas,
devices, secret inventions, processes, and compilation of information, records,
and specifications, owned by the Corporation and regularly used in the operation
of the business of the Corporation. HABEL shall not disclose any such trade
secrets, directly or indirectly, nor use them in any way, either during the term
of this Agreement or at any time thereafter, except as required in the course of
his or her employment. All files, records, documents, drawings, specifications,
equipment, and similar times relating to the business of the Corporation,
whether or not prepared by HABEL shall remain the exclusive property of the
Corporation and shall not be removed from the premises of the Corporation under
any circumstances without the prior written consent of the Corporation.
11.2 RETURN OF CORPORATION'S PROPERTY. On the termination of employment
or whenever requested by the Corporation, HABEL shall immediately deliver to the
Corporation all property in HABEL's possession or under HABEL's control
belonging to the Corporation in good condition, ordinary wear and tear excepted.
11.3 OWNERSHIP OF WORK PRODUCT. HABEL agrees that:
(a) all intellectual property including but not limited to all ideas and
concepts contained in computer programs and software, documentation or other
literature or illustrations that are conceived, developed, written, or
contributed by HABEL pursuant to this Agreement, either individually or in
collaboration with others, shall belong to and be the sole property of GKIS.
(b) HABEL agrees that all rights in all works prepared or performed by
HABEL pursuant to this Agreement, including patent rights and copyrights
applicable to any of the intellectual property described in Subparagraph (a)
above, shall belong exclusively to GKIS and shall constitute "works made for
hire" for purposes of copyright law.
(c) The provisions of this Paragraph shall not be construed to assign to
GKIS any of HABEL's rights in any invention for which no equipment, supplies,
facilities, or trade secret information of GKIS was used, or that was developed
entirely prior to this Agreement, or that does not result from any work
performed by HABEL for GKIS.
ARTICLE XII
NO COMPETITION BY PROFESSIONAL
12.1 NO COMPETING ACTIVITIES. During the term of this Agreement and for
a period of three years following termination of same HABEL shall not, directly
or indirectly, either as an employee, employer, consultant, agent, Principal,
Partner, Stockholder, corporate officer,
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director, or in any other individual or representative capacity, engage or
participate in any business whatsoever that is in direct competition in any
manner whatsoever with the core products and technologies (Smart One Trainer,
Carnot and InfoSleuth and their successors and any other subsequent core
businesses) of this Corporation within North America, unless a Court of
competent Jurisdiction shall determine that the scope and/or time of this
agreement renders it unenforceable, in which case the scope and/or time shall be
reduced to that which the Court deems reasonable and enforceable. This provision
shall not be construed to prevent Starrat form accepting employment in the area
of network and enterprise connectivity, Internet service provider, system
analysis and administration or information technology functions considered
generic to the industry, not utilizing any of the Corporations core technologies
or products.
ARTICLE XIII
NOTICES
13.1 NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by mail to his residence,
in the case of HABEL, or to its principal office, in the case of the
Corporation.
ARTICLE XIV
WAIVER OF BREACH
14.1 NONWAIVER OF SUBSEQUENT BREACH. The waiver by any party hereto of a
breach of any provision of this agreement shall not operate or be construed as a
waiver of any subsequent breach by an party.
ARTICLE XV
AMENDMENT
15.1 WRITTEN AMENDMENT. Amendment or modification of this Agreement shall
be deemed effective unless or until executed in writing by the parties hereto
with the same formality attending execution of this Agreement.
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ARTICLE XVI
CHOICE OF LAW
16.1 TEXAS LAW. This Agreement, having been executed and delivered in the
State of Texas, its validity, interpretation, performance and enforcement will
be governed by the laws of that state.
EXECUTED in counterparts, each of which shall be deemed an original,
effective the 13th day of March, 1998.
/s/ RANDALL HABEL
--------------------------------------
RANDALL HABEL
GK INTELLIGENT SYSTEMS, INC.:
By: /s/ Gary F. Kimmons
------------------------------------
Gary F. Kimmons, CEO and Chairman
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, made and executed by and between GK Intelligent Systems,
Inc., a Delaware Corporation, with its principal place of business in Houston,
Harris County, Texas (hereinafter called the "Corporation"), and Cynthina
Heinsohn, of Houston, Texas (hereinafter called "Heinsohn"). Collectively, the
Corporation and Heinsohn shall be referred to as "the parties." This Agreement
modifies and supersedes the previous agreements between the parties.
W I T N E S S E T H:
WHEREAS, Heinsohn desires to perform software design and programming
services on behalf of the Corporation and act as Product Manager, Smart
Enterprise for related software support and necessary research and development
services as an employee of the Corporation, including the performance personally
of such services as she and/or the Corporation's Board of Directors deem
necessary; and
WHEREAS, the Board of Directors of the Corporation desires to employ
Heinsohn in such capacities under the terms of this Agreement;
THEREFORE, the parties mutually agree as follows:
ARTICLE I
EMPLOYMENT
1.1 CONDITIONS OF EMPLOYMENT. The Corporation hereby employs Heinsohn and
Heinsohn accepts such employment, as Product Manager, Smart Enterprise, to
render professional services on behalf of the Corporation, subject to the
supervision and direction of the Corporation's officers and Board of Directors
and subject to the law of the Corporation as given in the Articles of
Incorporation and the Bylaws.
1.2 TERM OF EMPLOYMENT. The term of employment shall commence with the
date of this Agreement and shall continue until termination by either party as
provided in Article IV.
ARTICLE II
DUTIES
2.1 DEVOTION OF EFFORT. Heinsohn agrees to devote sufficient time,
attention, and skill to the performance of her duties as an employee of the
Corporation as set out and authorized by the Board of Directors. During the
term of this Agreement, she shall not render services on her own
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or on behalf of any party other than the Corporation unless otherwise authorized
by the Board of Directors.
ARTICLE III
COMPENSATION
3.1 COMPENSATION AND BENEFITS.
a. MONTHLY SALARY. As compensation for the services to be rendered
hereunder, GKIS will pay to Heinsohn a monthly salary in an amount equal to
Eight Thousand Three Hundred Thirty-Three Dollars and Thirty-Three Cents
($8,333.33). The monthly salary shall be paid in semi-monthly payments of
one-half the monthly amount each on the first and fifteenth day of each
month with respect to the immediately preceding month, commencing on the
first day of the first month after the month in which this agreement is
executed. Effective with the seventh full month of her employment, GKIS
will increase Heinsohn's monthly salary, contingent on the satisfactory
performance of her duties as determined by the President or Board of
Directors in their sole discretion.
b. BONUS OPTIONS FOR SHARES OF CORPORATION COMMON STOCK. In addition
to the monthly salary and any other benefits available to all employees,
including standard incentive qualified stock options, GKIS will grant to
Heinsohn incentive stock options for One Hundred Thousand (100,000) shares
of GKIS common stock (the "Bonus Options"). Contingent upon the Agreement
remaining in force, options for Twenty-Five Thousand (25,000) shares will
vest and be exercisable on the thirtieth day following the close of each of
the first, second, third and fourth years following the month in which this
agreement is executed. Except for the delayed vesting of their
exercisability, this grant of stock options shall be governed by and
subject to the GK INTELLIGENT SYSTEMS, INC. 1995 INCENTIVE STOCK OPTION
PLAN, as set out in a separate Incentive Stock Option Agreement executed by
the parties concurrently with the execution of this Employment Agreement.
The number of shares shall also be adjusted as provided in Section 7.1 of
such Plan. For all purposes related to the Grant of these options, the
Board of Directors of GKIS has determined that the date of such grant is
March 13, 1998 and the Fair Market Value per share as of the date of such
grant is Thirty One and 25/100 Cents ($.3125). Except as set out in
paragraph 4.2 below, termination of this agreement will not cause the
forfeiture of the bonus Options for those years prior to termination in
which the vesting requirements were met.
c. BONUS SHARES. In addition to the monthly salary and Bonus Options
granted above, and effective with the date of this agreement, GKIS will
issue to Heinsohn Eighty Thousand Shares of the Corporation's restricted
Common Stock (the "Shares"). Heinsohn 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. Heinsohn acknowledges and agrees that she has no
preemptive rights with respect to the Shares to be conveyed hereunder and
further 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. As
soon as practicable after the date of this agreement, GKIS shall tender the
Shares to Heinsohn, provided that if any law or regulation requires the
Corporation to take any action with respect to the Shares before the
issuance thereof, then the date of delivery for such shares shall be
extended for the period necessary to take such action.
d. EMPLOYEE BENEFIT PLANS. Heinsohn shall be entitled to participate
in all employee benefit plans to be established by the Board of Directors
on the same terms and conditions as all other employees similarly situated.
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3.2 DISALLOWED COMPENSATION. If the Internal Revenue Service shall find
that Heinsohn's salary constitutes unreasonable or excessive compensation,
Heinsohn agrees to repay to the Corporation any amount disallowed to the
Corporation as deductions that results in an increase in its tax liability for
any tax year.
ARTICLE IV
TERMINATION OF AGREEMENT
4.1 ILLNESS OR OTHER INCAPACITY. If Heinsohn, during the term of this
Agreement, shall fail to perform her duties hereunder as a result of illness or
other incapacity shall continue for a period of more than six months, 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 Heinsohn, such date to be not less than thirty (30) days following receipt of
said notice.
4.2 CONDUCT. If Heinsohn 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 her or her services; conduct herself publicly or
privately in a manner which offends against decency or causes her 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 4.1. In the event of termination under this Article 4.1,
Heinsohn shall not be eligible to receive bonus compensation for the year in
which termination occurs, nor shall she be entitled to receive any deferred
compensation credited to her account but not yet paid.
4.3 UNILATERAL TERMINATION. Either party hereto 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.
ARTICLE V
DEATH OF EMPLOYEE
5.1 DEATH. If Heinsohn shall die during the term of this Agreement, her
legal representative shall be entitled to receive her compensation as provided
in Article III hereof.
ARTICLE VI
ILLNESS OR INCAPACITY
6.1 INABILITY TO PERFORM DUTIES. If Heinsohn is unable to perform her
duties hereunder by reason of illness or incapacity of any kind for a period of
more than six months, her salary payments may be reduced or terminated by the
Corporation at its absolute discretion. Heinsohn's full salary shall be
reinstated upon her return to full-time employment and the full discharge of her
duties hereunder. This section shall in no way limit the rights of the
Corporation under Article IV hereof.
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ARTICLE VII
LEAVES OF ABSENCE
7.1 PAID LEAVE. Leaves of absence with full payment of salary may be
granted to Heinsohn for attendance at professional conventions, continuing
education institutes in her profession and other professional or business
activities, as approved by the Corporation, with full or partial payment of
expenses at its sole discretion.
7.2 UNPAID LEAVE. Unpaid leave of absence may be granted at the sole
discretion of the Corporation for any other reasons upon request by Heinsohn.
ARTICLE VIII
VACATIONS
8.1 PAID VACATION. Heinsohn shall be entitled to a vacation, the length
of which as determined by the Board of Directors or the President of the
Corporation, during which time her salary shall be paid in full. Heinsohn shall
take her vacation at such time or times as shall be approved by the corporation.
ARTICLE IX
EXPENSES
9.1 EXPENSES REIMBURSED. During the period of her employment, Heinsohn
will be reimbursed for her reasonable expenses in accordance with general policy
of the Corporation as adopted by the Board of Directors from time to time. In
addition to such reimbursement expenses, Heinsohn shall incur and pay in the
course of her employment by the Corporation certain other necessary expenses as
Senior Systems Analyst for which she will be required personally to pay but for
which the Corporation shall reimburse or otherwise compensate her, including,
but not limited to the following: automobile and transportation expenses;
educational expenses incurred for the purpose of maintaining or improving
Heinsohn's professional skills, club dues, and the expenses of membership in
civic groups, professional societies, and fraternal organizations, and all other
items of reasonable and necessary professional expenses incurred by Heinsohn in
the performance of the services in which Heinsohn has been engaged on behalf of
the Corporation.
ARTICLE X
SUCCESSION
10.1 ASSUMPTION BY SUCCESSOR TO CORPORATION. The Corporation will not
consolidate or merge into or with another corporation, or transfer all or
substantially all of its assets to
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another corporation, unless such corporation (hereinafter referred to as
"Successor Corporation") shall assume this Agreement. Upon such assumption
Heinsohn and the Successor Corporation shall become obligated to perform the
terms and conditions hereof, and the term "Corporation" as used in this
Agreement shall be deemed to refer to such Successor Corporation; provided,
however, Heinsohn's duties shall be such as prescribed by the Board of Directors
of the Successor Corporation.
ARTICLE XI
PROPERTY RIGHTS OF PARTIES
11.1 TRADE SECRETS. During the term of employment, Heinsohn will have
access to and become familiar with various trade secrets, consisting of
formulas, devices, secret inventions, processes, and compilation of information,
records, and specifications, owned by the Corporation and regularly used in the
operation of the business of the Corporation. Heinsohn shall not disclose any
such trade secrets, directly or indirectly, nor use them in any way, either
during the term of this Agreement or at any time thereafter, except as required
in the course of her or her employment. All files, records, documents,
drawings, specifications, equipment, and similar times relating to the business
of the Corporation, whether or not prepared by Heinsohn shall remain the
exclusive property of the Corporation and shall not be removed from the premises
of the Corporation under any circumstances without the prior written consent of
the Corporation.
11.2 RETURN OF CORPORATION'S PROPERTY. On the termination of employment
or whenever requested by the Corporation, Heinsohn shall immediately deliver to
the Corporation all property in Heinsohn's possession or under Heinsohn's
control belonging to the Corporation in good condition, ordinary wear and tear
excepted.
11.3 OWNERSHIP OF WORK PRODUCT. Heinsohn agrees that:
(a) all intellectual property including but not limited to all ideas
and concepts contained in computer programs and software, documentation or
other literature or illustrations that are conceived, developed, written,
or contributed by Heinsohn pursuant to this Agreement, either individually
or in collaboration with others, shall belong to and be the sole property
of GKIS.
(b) Heinsohn agrees that all rights in all works prepared or
performed by Heinsohn pursuant to this Agreement, including patent rights
and copyrights applicable to any of the intellectual property described in
Subparagraph (a) above, shall belong exclusively to GKIS and shall
constitute "works made for hire" for purposes of copyright law.
(c) The provisions of this Paragraph shall not be construed to assign
to GKIS any of Heinsohn's rights in any invention for which no equipment,
supplies, facilities, or trade secret information of GKIS was used, or that
was developed entirely prior to this Agreement, or that does not result
from any work performed by Heinsohn for GKIS.
ARTICLE XII
NO COMPETITION BY PROFESSIONAL
12.1 NO COMPETING ACTIVITIES. During the term of this Agreement and for
a period of three years following termination of same Heinsohn shall not,
directly or indirectly, either as an employee, employer, consultant, agent,
Principal, Partner, Stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business
whatsoever that is in direct competition in any manner whatsoever with the core
products and technologies (Smart One Trainer, Smart Enterprise, Smart Agent,
Smart Support, Smart Perform or other Carnot derived products, and their
successors and any other subsequent core businesses) of this Corporation within
North America, unless a Court of competent Jurisdiction shall determine that the
scope and/or time of this agreement renders it unenforceable, in which case the
scope and/or time shall be reduced to that which the Court deems reasonable and
enforceable. This provision shall not be construed to prevent Heinsohn from
accepting employment in the area of Microsoft Access programming, system
analysis and administration or information technology functions considered
generic to the industry, not utilizing any of the Corporation's core
technologies or products.
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ARTICLE XIII
NOTICES
13.1 NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by mail to her residence,
in the case of Heinsohn, or to its principal office, in the case of the
Corporation.
ARTICLE XIV
WAIVER OF BREACH
14.1 NONWAIVER OF SUBSEQUENT BREACH. The waiver by any party hereto of a
breach of any provision of this agreement shall not operate or be construed as a
waiver of any subsequent breach by an party.
ARTICLE XV
AMENDMENT
15.1 WRITTEN AMENDMENT. No amendment or modification of this Agreement
shall be deemed effective unless or until executed in writing by the parties
hereto with the same formality attending execution of this Agreement.
ARTICLE XVI
CHOICE OF LAW
16.1 TEXAS LAW. This Agreement, having been executed and delivered in the
State of Texas, its validity, interpretation, performance and enforcement will
be governed by the laws of that state.
EXECUTED in counterparts, each of which shall be deemed an original, this
the 13th day of March, 1998.
/s/ Cynthina Heinsohn
______________________________________
Cynthina Heinsohn
GK INTELLIGENT SYSTEMS, INC.:
By: /s/ Gary F. Kimmons
___________________________________
Gary F. Kimmons, CEO and Chairman
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, made and executed by and between GK Intelligent Systems,
Inc., a Delaware Corporation, with its principal place of business in Houston,
Harris County, Texas (hereinafter called the "Corporation" or "GKIS"), and
ROCKNE J. HORVATH, of Sugar Land, Texas (hereinafter called "HORVATH" or
"Professional"). Collectively, the Corporation and HORVATH shall be referred to
as "the parties."
W I T N E S S E T H:
WHEREAS, HORVATH desires to perform accounting and related management
services on behalf of the Corporation and act as Accounting Manager as an
employee of the Corporation, including the performance personally of such
services as he and/or the Corporation's Board of Directors deem necessary; and
WHEREAS, the Board of Directors of the Corporation desires to employ
HORVATH in such capacities under the terms of this Agreement;
THEREFORE, the parties mutually agree as follows:
ARTICLE I
EMPLOYMENT
1.1 CONDITIONS OF EMPLOYMENT. The Corporation hereby employs HORVATH and
HORVATH accepts such employment as Accounting Manager, to render professional
services on behalf of the Corporation, subject to the supervision and direction
of the Corporation's officers and Board of Directors and subject to the law of
the Corporation as given in the Articles of Incorporation and the Bylaws.
1.2 TERM OF EMPLOYMENT. The term of employment shall commence on or after
the execution of this Agreement but not later than May 1, 1998, to be set out in
HORVATH's notice to the Board, and shall continue until termination by either
party as provided in Article IV.
ARTICLE II
DUTIES
2.1 DEVOTION OF EFFORT. HORVATH agrees to devote sufficient time,
attention, and skill to the performance of his duties as an employee of the
Corporation as set out and authorized by the Board of Directors. During the
term of this Agreement, he shall not render services on his own or on behalf of
any party other than the Corporation unless otherwise authorized by the Board of
Directors. For purposes of this Article II the Board specifically authorizes
HORVATH to continue working on behalf of the existing clients of his CPA
practice on a limited basis at such time or times as will not interfere with his
duties to GKIS , and such work is deemed not to
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be in competition with GKIS for purposes of Article XII of this Agreement.
2.2 DESCRIPTION OF DUTIES. HORVATH will provide accounting services
related to the filing of Forms 10Q and 10K, as well as preparation and
maintenance of related working papers, assistance in preparation of audit
working papers for use by the Corporation's independent auditors, and assistance
to GKIS management in the formulation, implementation and ongoing administration
of the Corporation's accounting system, books and records, including the
management of the personnel engaged in the various accounting and related
clerical functions of such record keeping tasks, all as directed by the
management of GKIS. Horvath shall also perform such duties on a part-time basis
from the date of this agreement until May 1, 1998 on an hourly basis, and shall
be compensated at the rate of $40.00 per hour upon presentation of an invoice
therefor, unless Horvath notifies the Board and commences full-time employment
sooner than such date.
ARTICLE III
COMPENSATION
3.1 COMPENSATION AND BENEFITS.
a. MONTHLY SALARY. As compensation for the services to be rendered
hereunder, GKIS will pay to HORVATH a monthly salary in an amount equal to
Eight Thousand Three Hundred Thirty-Three and 33/100 Dollars ($8,333.33).
The monthly salary, shall be paid in semi-monthly payments of one-half the
monthly amount each on the first and fifteenth day of each month with
respect to the immediately preceding month, commencing on the fifteenth day
of, or the first day of the first month after, the month in which
employment commences hereunder, whichever comes first after the employment
date
b. BONUS OPTIONS FOR SHARES OF CORPORATION COMMON STOCK. In addition
to the monthly salary and any other benefits available to all employees,
including standard incentive qualified stock options, GKIS will grant to
HORVATH incentive stock options for one hundred thousand (100,000) shares
of GKIS restricted common stock (the "Bonus Options"), with one-fourth of
such grant vesting annually for four years so long as HORVATH remains an
employee of the Corporation, an affiliate or subsidiary. Contingent upon
the Agreement remaining in force as a result of such continued employment,
Bonus Options for twenty-five thousand (25,000) restricted shares will vest
and be exercisable on the thirtieth day following the close of each of the
first, second, third and fourth years following the month in which this
agreement is executed. Except for the delayed vesting of their
exercisability, this grant of stock options shall be governed by and
subject to the GK INTELLIGENT SYSTEMS, INC. 1995 INCENTIVE STOCK OPTION
PLAN, as set out in a separate incentive stock option agreement executed
concurrently with this agreement by the parties. The number of shares
shall also be adjusted as provided in Section 7.1 of such Plan. For all
purposes related to the Grant of these options, the Board of Directors of
GKIS has determined that
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the date of such grant is March 13, 1998 and the Fair Market Value per
share as of the date of such grant is Thirty One and 25/100 Cents ($.3125).
Except as set out in paragraph 4.2 below, termination of this agreement
will not cause the forfeiture of the Bonus Options for those months prior
to termination in which the vesting requirements were met.
c. EMPLOYEE BENEFIT PLANS. HORVATH shall be entitled to participate
in all employee benefit plans to be established by the Board of Directors
on the same terms and conditions as all other employees similarly situated.
d. INITIAL GRANT OF SHARES. As additional compensation for the
services to be rendered hereunder, GKIS will grant to HORVATH Twenty
Thousand (20,000) shares of GKIS common restricted stock (the "Initial
Shares"), issued immediately upon execution of this agreement or as soon
thereafter as is practicable. The effective date of this grant will be
March 13, 1998, the date of the agreement between the parties as to
employment and compensation. The agreed value of the Initial Shares shall
be $.3125 per share, the closing price for freely trading shares as of that
date.
3.2 DISALLOWED COMPENSATION. If the Internal Revenue Service shall find
that HORVATH's salary constitutes unreasonable or excessive compensation,
HORVATH agrees to repay to GKIS any amount disallowed to it as deductions that
results in an increase in its tax liability for such year.
ARTICLE IV
TERMINATION OF AGREEMENT
4.1 ILLNESS OR OTHER INCAPACITY. If HORVATH, during the term of this
Agreement, shall fail to perform his duties hereunder as a result of illness or
other incapacity shall continue for a period of more than six months, 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 HORVATH, such date to be not less than thirty (30) days following receipt of
said notice.
4.2 CONDUCT. If HORVATH 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 or her services; conduct herself 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 4.1. In the event of termination under this Article 4.2,
HORVATH shall not be eligible to receive unexercised stock option compensation
for the year in which termination occurs, nor shall he be entitled to receive
any deferred compensation credited to his account but not yet paid.
4.3 UNILATERAL TERMINATION. Either party hereto may terminate this
Agreement and employment hereunder effective as of a date to be specified in a
written notice of
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termination, such date to be not less than thirty (30) days after delivery of
the notice.
ARTICLE V
DEATH OF EMPLOYEE
5.1 DEATH. If HORVATH shall die during the term of this Agreement, his
legal representative shall be entitled to receive his compensation as provided
in Article III hereof.
ARTICLE VI
ILLNESS OR INCAPACITY
6.1 INABILITY TO PERFORM DUTIES. If HORVATH is unable to perform his duties
hereunder by reason of illness or incapacity of any kind for a period of more
than six months, his salary payments may be reduced or terminated by the
Corporation at its absolute discretion. HORVATH's full salary shall be
reinstated upon his return to full-time employment and the full discharge of his
duties hereunder. This section shall in no way limit the rights of the
Corporation under Article IV hereof.
ARTICLE VII
LEAVES OF ABSENCE
7.1 PAID LEAVE. Leaves of absence with full payment of salary may be
granted to HORVATH for attendance at professional conventions, continuing
education institutes in his profession and other professional or business
activities, as approved by the Corporation, with full or partial payment of
expenses at its sole discretion.
7.2 UNPAID LEAVE. Unpaid leave of absence may be granted at the sole
discretion of the Corporation for any other reasons upon request by HORVATH.
ARTICLE VIII
VACATIONS
8.1 PAID VACATION. HORVATH shall be entitled to a vacation, the length of
which as determined by the Board of Directors or the President of the
Corporation, during which time his salary shall be paid in full. HORVATH shall
take his vacation at such time or times as shall be approved by the corporation.
ARTICLE IX
EXPENSES
9.1 EXPENSES REIMBURSED. During the period of his employment, HORVATH will
be reimbursed for his reasonable expenses in accordance with general policy of
the Corporation as adopted by the Board of Directors from time to time. In
addition to such reimbursement expenses, HORVATH shall incur and pay in the
course of his
4
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employment by the Corporation certain other necessary expenses as Director of
Research and Development, for which he will be required personally to pay but
for which the Corporation shall reimburse or otherwise compensate him,
including, but not limited to the following: automobile and transportation
expenses; educational expenses incurred for the purpose of maintaining or
improving HORVATH's professional skills, club dues, and the expenses of
membership in civic groups, professional societies, and fraternal organizations,
and all other items of reasonable and necessary professional expenses incurred
by HORVATH in the performance of the services in which HORVATH has been engaged
on behalf of the Corporation.
ARTICLE X
SUCCESSION
10.1 ASSUMPTION BY SUCCESSOR TO CORPORATION. The Corporation will not
consolidate or merge into or with another corporation, or transfer all or
substantially all of its assets to another corporation, unless such corporation
(hereinafter referred to as "Successor Corporation") shall assume this
Agreement. Upon such assumption HORVATH and the Successor Corporation shall
become obligated to perform the terms and conditions hereof, and the term
"Corporation" as used in this Agreement shall be deemed to refer to such
Successor Corporation; provided, however, HORVATH's duties shall be such as
prescribed by the Board of Directors of the Successor Corporation.
ARTICLE XI
PROPERTY RIGHTS OF PARTIES
11.1 TRADE SECRETS. During the term of employment, HORVATH will have access
to and become familiar with various trade secrets, consisting of formulas,
devices, secret inventions, processes, and compilation of information, records,
and specifications, owned by the Corporation and regularly used in the operation
of the business of the Corporation. HORVATH shall not disclose any such trade
secrets, directly or indirectly, nor use them in any way, either during the term
of this Agreement or at any time thereafter, except as required in the course of
his or her employment. All files, records, documents, drawings, specifications,
equipment, and similar times relating to the business of the Corporation,
whether or not prepared by HORVATH shall remain the exclusive property of the
Corporation and shall not be removed from the premises of the Corporation under
any circumstances without the prior written consent of the Corporation.
11.2 RETURN OF CORPORATION'S PROPERTY. On the termination of employment or
whenever requested by the Corporation, HORVATH shall immediately deliver to the
Corporation all property in HORVATH's possession or under HORVATH's control
belonging to the Corporation in good condition, ordinary wear and tear excepted.
11.3 OWNERSHIP OF WORK PRODUCT. The parties agree as follows:
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A. PROPERTY OF GKIS. HORVATH agrees that all intellectual property
including but not limited to all ideas and concepts contained in computer
programs and software, documentation or other literature or illustrations
that are conceived, developed, written, or contributed by HORVATH pursuant
to this Agreement, either individually or in collaboration with others,
shall belong to and be the sole property of GKIS.
B. WORKS MADE FOR HIRE. HORVATH agrees that all rights in all works
prepared or performed by HORVATH pursuant to this Agreement, including
patent rights and copyrights applicable to any of the intellectual property
described in Subparagraph (a) above, shall belong exclusively to GKIS and
shall constitute "works made for hire" for purposes of copyright law.
C. PROPERTY OF HORVATH. The provisions of this Paragraph XI shall not
be construed to assign to GKIS any of HORVATH's rights in any invention for
which no equipment, supplies, facilities, or trade secret information of
GKIS was used, or that was developed entirely prior to this Agreement, or
that does not result from any work performed by HORVATH for GKIS.
ARTICLE XII
NO COMPETITION BY PROFESSIONAL
12.1 NO COMPETING ACTIVITIES. During the term of this Agreement and for a
period of three years (six months if following termination by GKIS for any cause
other than as set out in 4.2 above) following termination of same, HORVATH shall
not, directly or indirectly, either as an employee, employer, consultant, agent,
Principal, Partner, Stockholder, corporate officer, director, or in any other
individual or representative capacity, engage or participate in any business
whatsoever that is in direct competition in any manner whatsoever with the core
products and technologies (Smart One Trainer and its derivatives, Smart
Enterprise, Doorways, Smart Support, Smart Perform or other Carnot derived
products, and their successors and any other subsequent core businesses) of this
Corporation within North America, unless a Court of competent Jurisdiction shall
determine that the scope and/or time of this agreement renders it unenforceable,
in which case the scope and/or time shall be reduced to that which the Court
deems reasonable and enforceable. This provision shall not be construed to
prevent HORVATH from accepting employment in the areas of public accounting or
private accounting, administrative or information technology functions
considered generic to industry, and which do not utilize any of the
Corporation's core technologies or products.
ARTICLE XIII
NOTICES
13.1 NOTICES. Any notice required or permitted to be given under this
Agreement
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shall be sufficient if in writing and sent by mail to his residence, in the case
of HORVATH, or to its principal office, in the case of the Corporation.
ARTICLE XIV
WAIVER OF BREACH
14.1 NONWAIVER OF SUBSEQUENT BREACH. The waiver by any party hereto of a
breach of any provision of this agreement shall not operate or be construed as a
waiver of any subsequent breach by an party.
ARTICLE XV
AMENDMENT
15.1 WRITTEN AMENDMENT. No amendment or modification of this Agreement
shall be deemed effective unless or until executed in writing by the parties
hereto with the same formality attending execution of this Agreement.
ARTICLE XVI
CHOICE OF LAW
16.1 TEXAS LAW. This Agreement, having been executed and delivered in the
State of Texas, its validity, interpretation, performance and enforcement will
be governed by the laws of that state.
EXECUTED in counterparts, each of which shall be deemed an original,
effective the 13th day of March, 1998.
/s/ ROCKNE J. HORVATH
___________________________________
ROCKNE J. HORVATH
GK INTELLIGENT SYSTEMS, INC.:
By: /s/ Gary F. Kimmons
________________________________
Gary F. Kimmons, CEO and Chairman
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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, made and executed by and between GK Intelligent Systems,
Inc., a Delaware Corporation, with its principal place of business in Houston,
Harris County, Texas (hereinafter called the "Corporation" or "GKIS"), and Karl
L. Perron, of Houston, Texas (hereinafter called "Perron" or "Professional").
Collectively, the Corporation and Perron shall be referred to as "the parties."
W I T N E S S E T H:
WHEREAS, Perron desires to perform training services, develop training
products and provide SAP and Microsoft product implementation and network
development services on behalf of the Corporation and act as Technical Manager,
Smart One and Smart Enterprise, as an employee of the Corporation, including the
performance personally of such services as he and/or the Corporation's Board of
Directors deem necessary; and
WHEREAS, the Board of Directors of the Corporation desires to employ Perron
in such capacities under the terms of this Agreement;
THEREFORE, the parties mutually agree as follows:
ARTICLE I
EMPLOYMENT
1.1 CONDITIONS OF EMPLOYMENT: The Corporation hereby employs Perron and
Perron accepts such employment as Technical Manager, Smart One and Smart
Enterprise, to render professional services on behalf of the Corporation,
subject to the supervision and direction of the Corporation's officers and Board
of Directors and subject to the law of the Corporation as given in the Articles
of Incorporation and the Bylaws.
1.2 TERM OF EMPLOYMENT: The term of employment shall commence on or after
the execution of this Agreement but not later than June 1, 1998, to be set out
in Perron's notice to the Board, and shall continue until termination by either
party as provided in Article IV.
ARTICLE II
DUTIES
2.1 DEVOTION OF EFFORT: Perron agrees to devote sufficient time,
attention, and skill to the performance of his duties as an employee of the
Corporation as set out and authorized by the Board of Directors. During the
term of this Agreement, he shall not render services on his own or on behalf of
any party other than the Corporation unless otherwise authorized by the Board of
Directors. For purposes of this Article II the Board specifically authorizes
Perron to conclude working on behalf of his existing consulting clients on a
limited basis prior to commencement of
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employment hereunder or at such time or times as will not interfere with his
duties to GKIS, and such work is deemed not to be in competition with GKIS for
purposes of Article XII of this Agreement.
2.2 DESCRIPTION OF DUTIES. Perron will provide training services, develop
training products and provide SAP and Microsoft product implementation and
network development services and provide assistance to GKIS management in the
implementation of SAP R3 software in the ongoing administration of the
Corporation's accounting system, books and records, and infrastructure including
the personnel engaged in the various accounting and related clerical functions
of such record keeping tasks, all as directed by the management of GKIS.
ARTICLE III
COMPENSATION
3.1 COMPENSATION AND BENEFITS.
a. MONTHLY SALARY. As compensation for the services to be rendered
hereunder, GKIS will pay to Perron a monthly salary in an amount equal to
Twelve Thousand Dollars ($12,000.00). The monthly salary shall be paid in
semi-monthly payments of one-half the monthly amount each on the first and
fifteenth day of each month with respect to the immediately preceding
month, commencing on the fifteenth day of, or the first day of the first
month after, the month in which employment commences hereunder, whichever
comes first after the employment date.
b. BONUS OPTIONS FOR SHARES OF CORPORATION COMMON STOCK. In addition
to the monthly salary and any other benefits available to all employees,
including standard incentive qualified stock options, GKIS will grant to
Perron incentive stock options for one hundred thousand (100,000) shares of
GKIS restricted common stock (the "Bonus Options"), with one-fourth of such
grant vesting annually for four years so long as Perron remains an employee
of the Corporation, an affiliate or subsidiary. Contingent upon the
Agreement remaining in force as a result of such continued employment,
Bonus Options for twenty-five thousand (25,000) restricted shares will vest
and be exercisable on the thirtieth day following the close of each of the
first, second, third and fourth years following the month in which this
agreement is executed. Except for the delayed vesting of their
exercisability, this grant of stock options shall be governed by and
subject to the GK INTELLIGENT SYSTEMS, INC. 1995 INCENTIVE STOCK OPTION
PLAN, as set out in a separate incentive stock option agreement executed
concurrently with this agreement by the parties . The number of shares
shall also be adjusted as provided in Section 7.1 of such Plan. For all
purposes related to the Grant of these options, the Board of Directors of
GKIS has determined that the date of such grant is March 13, 1998 and the
Fair Market Value per share as of the date of such grant is Thirty One and
25/100 Cents ($.3125). Except as set out in paragraph 4.2 below,
termination of this agreement will not cause the forfeiture of the Bonus
Options for those months prior to termination in which the vesting
requirements were met.
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c. INITIAL GRANT OF SHARES. As additional compensation for the
services to be rendered hereunder, GKIS will Grant to Perron Ten Thousand
(10,000) shares of GKIS common restricted stock (the "Initial Shares"),
issued immediately upon execution of this agreement or as soon thereafter
as is practicable. The effective date of this grant will be March 13,
1998, the date of the agreement between the parties as to compensation.
The agreed value of the Initial Shares shall be $.3125 per share, the
closing price for freely trading shares as of that date.
d. EMPLOYEE BENEFIT PLANS. Perron shall be entitled to participate
in all employee benefit plans to be established by the Board of Directors
on the same terms and conditions as all other employees similarly situated,
including reimbursement of reasonable moving expenses as approved by GKIS
management.
3.2 DISALLOWED COMPENSATION. If the Internal Revenue Service shall
find that Perron's salary constitutes unreasonable or excessive
compensation, Perron agrees to repay to GKIS any amount disallowed to it as
deductions that results in an increase in its tax liability for such year.
ARTICLE IV
TERMINATION OF AGREEMENT
4.1 ILLNESS OR OTHER INCAPACITY. If Perron, during the term of this
Agreement, shall fail to perform his duties hereunder as a result of
illness or other incapacity shall continue for a period of more than six
months, 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 Perron, such date to be not less than thirty
(30) days following receipt of said notice.
4.2 CONDUCT: If Perron 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 or her services; conduct
herself 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 4.1. In the event
of termination under this Article 4.2, Perron shall not be eligible to
receive unexercised stock option compensation for the year in which
termination occurs, nor shall he be entitled to receive any deferred
compensation credited to his account but not yet paid.
4.3 UNILATERAL TERMINATION: Either party hereto 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.
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ARTICLE V
DEATH OF EMPLOYEE
5.1 DEATH. If Perron shall die during the term of this Agreement,
his legal representative shall be entitled to receive his compensation as
provided in Article III hereof.
ARTICLE VI
ILLNESS OR INCAPACITY
6.1 INABILITY TO PERFORM DUTIES. If Perron is unable to perform his
duties hereunder by reason of illness or incapacity of any kind for a
period of more than six months, his salary payments may be reduced or
terminated by the Corporation at its absolute discretion. Perron's full
salary shall be reinstated upon his return to full-time employment and the
full discharge of his duties hereunder. This section shall in no way limit
the rights of the Corporation under Article IV hereof.
ARTICLE VII
LEAVES OF ABSENCE
7.1 PAID LEAVE. Leaves of absence with full payment of salary may be
granted to Perron for attendance at professional conventions, continuing
education institutes in his profession and other professional or business
activities, as approved by the Corporation, with full or partial payment
of expenses at its sole discretion.
7.2 UNPAID LEAVE. Unpaid leave of absence may be granted at the sole
discretion of the Corporation for any other reasons upon request by Perron.
ARTICLE VIII
VACATIONS
8.1 PAID VACATION. Perron shall be entitled to a vacation, the
length of which as determined by the Board of Directors or the President of
the Corporation, during which time his salary shall be paid in full.
Perron shall take his vacation at such time or times as shall be approved
by the corporation.
ARTICLE IX
EXPENSES
9.1 EXPENSES REIMBURSED. During the period of his employment, Perron
will be reimbursed for his reasonable expenses in accordance with general
policy of the Corporation as adopted by the Board of Directors from time to
time. In addition to such reimbursement expenses, Perron shall incur and
pay in the course of his employment by the Corporation certain other
necessary expenses as Technical Manager, Smart One and Smart Enterprise,
for which he will be required personally to pay but for which the
Corporation shall reimburse or otherwise compensate him, including, but not
limited to
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the following: automobile and transportation expenses; educational expenses
incurred for the purpose of maintaining or improving Perron's professional
skills, club dues, and the expenses of membership in civic groups,
professional societies, and fraternal organizations, and all other items of
reasonable and necessary professional expenses incurred by Perron in the
performance of the services in which Perron has been engaged on behalf of
the Corporation.
ARTICLE X
SUCCESSION
10.1 ASSUMPTION BY SUCCESSOR TO CORPORATION. The Corporation will
not consolidate or merge into or with another corporation, or transfer all
or substantially all of its assets to another corporation, unless such
corporation (hereinafter referred to as "Successor Corporation") shall
assume this Agreement. Upon such assumption Perron and the Successor
Corporation shall become obligated to perform the terms and conditions
hereof, and the term "Corporation" as used in this Agreement shall be
deemed to refer to such Successor Corporation; provided, however, Perron's
duties shall be such as prescribed by the Board of Directors of the
Successor Corporation.
ARTICLE XI
PROPERTY RIGHTS OF PARTIES
11.1 TRADE SECRETS. During the term of employment, Perron will have
access to and become familiar with various trade secrets, consisting of
formulas, devices, secret inventions, processes, and compilation of
information, records, and specifications, owned by the Corporation and
regularly used in the operation of the business of the Corporation. Perron
shall not disclose any such trade secrets, directly or indirectly, nor use
them in any way, either during the term of this Agreement or at any time
thereafter, except as required in the course of his or her employment. All
files, records, documents, drawings, specifications, equipment, and similar
times relating to the business of the Corporation, whether or not prepared
by Perron shall remain the exclusive property of the Corporation and shall
not be removed from the premises of the Corporation under any circumstances
without the prior written consent of the Corporation.
11.2 RETURN OF CORPORATION'S PROPERTY. On the termination of
employment or whenever requested by the Corporation, Perron shall
immediately deliver to the Corporation all property in Perron's possession
or under Perron's control belonging to the Corporation in good condition,
ordinary wear and tear excepted.
11.3 OWNERSHIP OF WORK PRODUCT. The parties agree as follows:
A. PROPERTY OF GKIS. Perron agrees that all intellectual
property including but not limited to all ideas and concepts
contained in computer programs and software, documentation or other
literature or illustrations that are
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conceived, developed, written, or contributed by Perron pursuant to
this Agreement, either individually or in collaboration with others,
shall belong to and be the sole property of GKIS.
B. WORKS MADE FOR HIRE. Perron agrees that all rights in all
works prepared or performed by Perron pursuant to this Agreement,
including patent rights and copyrights applicable to any of the
intellectual property described in Subparagraph (a) above, shall
belong exclusively to GKIS and shall constitute "works made for hire"
for purposes of copyright law.
C. PROPERTY OF PERRON. The provisions of this Paragraph XI
shall not be construed to assign to GKIS any of Perron's rights in any
invention for which no equipment, supplies, facilities, or trade
secret information of GKIS was used, or that was developed entirely
prior to this Agreement, or that does not result from any work
performed by Perron for GKIS.
ARTICLE XII
NO COMPETITION BY PROFESSIONAL
12.1 NO COMPETING ACTIVITIES. During the term of this Agreement and
for a period of three years (six months if following termination by GKIS
for any cause other than as set out in 4.2 above) following termination of
same, Perron shall not, directly or indirectly, either as an employee,
employer, consultant, agent, Principal, Partner, Stockholder, corporate
officer, director, or in any other individual or representative capacity,
engage or participate in any business whatsoever that is in direct
competition in any manner whatsoever with the core products and
technologies (Smart One Trainer and its derivatives, Smart Enterprise,
Doorways, Smart Support, Smart Perform or other Carnot derived products,
and their successors and any other subsequent core businesses) of this
Corporation within North America, unless a Court of competent Jurisdiction
shall determine that the scope and/or time of this agreement renders it
unenforceable, in which case the scope and/or time shall be reduced to that
which the Court deems reasonable and enforceable. This provision shall not
be construed to prevent Perron from accepting employment in the areas of
SAP consulting, administrative or information technology functions which do
not utilize any of the Corporation's core technologies or products.
ARTICLE XIII
NOTICES
13.1 NOTICES: Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and sent by mail to his
residence, in the case of Perron, or to its principal office, in the case
of the Corporation.
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ARTICLE XIV
WAIVER OF BREACH
14.1 NONWAIVER OF SUBSEQUENT BREACH. The waiver by any party hereto
of a breach of any provision of this agreement shall not operate or be
construed as a waiver of any subsequent breach by an party.
ARTICLE XV
AMENDMENT
15.1 WRITTEN AMENDMENT. No amendment or modification of this
Agreement shall be deemed effective unless or until executed in writing by
the parties hereto with the same formality attending execution of this
Agreement.
ARTICLE XVI
CHOICE OF LAW
16.1 TEXAS LAW. This Agreement, having been executed and delivered
in the State of Texas, its validity, interpretation, performance and
enforcement will be governed by the laws of that state.
EXECUTED in counterparts, each of which shall be deemed an original,
effective the 13th day of March, 1998.
/s/ Karl L. Perron
___________________________________
Karl L. Perron
GK INTELLIGENT SYSTEMS, INC.:
By: /s/ Gary F. Kimmons
________________________________
Gary F. Kimmons, CEO and Chairman
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EXHIBIT 23.2
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
GK Intelligent Systems, Inc.
Houston, Texas
We hereby consent to the incorporation by reference in the Registration
Statement of our report dated July 24, 1998, except as to Note 9, which is as of
September 2, 1998, relating to the financial statements of GK Intelligent
Systems, Inc. appearing in the Company's Annual Report on Form 10-K for the year
ended May 31, 1998. Our report contains an explanatory paragraph regarding the
Company's ability to continue as a going concern.
We also consent to the reference to us under the caption "Experts" in the
Registration Statement.
[SIGNATURE OF BDO SEIDMAN, LLP APPEARS HERE]
Houston, Texas
October 16, 1998
