SOFTWARE DISTRIBUTION AGREEMENT

Source: http://www.sec.gov/Archives/edgar/data/1024095/000109309403000124/npagree.txt

 

 

                         SOFTWARE DISTRIBUTION AGREEMENT

 

     This software distribution agreement ("Agreement") is entered into this

10th day of October 2003 is by and between GK Intelligent Systems, Inc., a

Delaware corporation located at 2602 Yorktown Place, Houston, TX 77056 ("GKIS")

and NPI Management Group, Inc., corporation located at 6836 Bee Caves Road,

Suite 242, Austin, TX 78746 ("NPI").

 

                                    Recitals

 

A.   GKIS desires to appoint NPI to sell, market and distribute on an exclusive

     worldwide basis, for a period of forty-eight (48) months, the GKIS

     software, known as "Around the Web in 80 Minutes," and as further described

     in Exhibit A ("Software").

 

B.   NPI desires to sell, market and distribute the Software under the terms and

     conditions of this Agreement.

 

                                    Agreement

 

     NOW, THEREFORE, for and in consideration of the mutual promises and

covenants contained herein and for good and valuable consideration, the receipt

and sufficiency of which are hereby acknowledged, the parties hereby agree as

follows:

 

                                    ARTICLE 1

 

                                   DEFINITIONS

 

     1.1 "Authorized Users" shall mean any user of the Software to whom NPI

sells a copy of the software or a license to use.

 

     1.2 "Effective Date" shall mean October 10, 2003.

 

     1.3 "Software" shall mean the shrink wrapped boxed software program known

as "Around the Web in 80 Minutes," its source code, object code and concepts

embodied therein, manuals and applications as set forth in Exhibit A hereto.

 

     1.4 "Source Code" shall mean a human readable list of computer instruction

sequences readily comprehended by an individual having skill in assembly level

computer programming and from which such individual can readily "paraphrase" or

modify the Software without undue difficulty.

 

     1.5 "Software Copy" or "Software Copies" shall mean an object code copy of

any of the Software, together with the copy or copies of any user manual or

other documentation necessary for distribution and use of the Software.

 

                                       1

                                    ARTICLE 2

 

                              APPOINTMENT AND FEES

 

     2.1 Exclusive Appointment. GKIS hereby appoints NPI as its exclusive

worldwide distributor and reseller of the Software for a period of forty-eight

(48) months from the effective date.

 

     2.2 Fees and Royalties.

 

          (a) Product Upgrade Fee. Within ninety (90) days of the execution of

     this Agreement NPI shall invest into GKIS a minimum of fifty thousand

     dollars ($50,000) to be used solely for the upgrading of the product for

     market readiness. Additional investments of cash from NPI to GKIS, up to a

     maximum of one hundred and fifty thousand dollars ($150,000) may be

     necessary and will be determined by mutual consent of the parties to this

     agreement based on the expert opinions of the contractors performing the

     product upgrades. This Product Upgrade Fee is to be used in GKIS's sole

     discretion in conjunction with the upgrade to the software.

 

          (b) Royalties. In addition to the Product Upgrade Fee, NPI shall pay

     to GKIS a royalty of fifteen percent (15%) of all gross revenues for the

     Software sold, licensed, delivered or otherwise transferred pursuant to

     this Agreement by NPI or anyone acting on its behalf, for its benefit or

     through a grant of rights from it.

 

          The Royalties shall be payable quarterly within ten (10) days

     following the close of the quarter during which the royalties accrued with

     adjustments following a year-end audit. Additionally, NPI agrees to pay an

     additional charge of 5% of the gross revenue relating to the sale of the

     software for which any royalties were not paid when due.

 

          (c) FAILURE TO PAY ANY FEE DESCRIBED IN THIS SECTION 2.2 CONSTITUTES

     BREACH OF THIS AGREEMENT AND SHALL BE THE BASIS FOR THE IMMEDIATE

     TERMINATION OF ALL RIGHTS GRANTED UNDER THIS AGREEMENT.

 

     2.3 Taxes. NPI shall, in addition to other amounts payable under this

Agreement, pay all local, state, and federal taxes (but excluding taxes imposed

on GKIS's income) levied or imposed by reason of the transactions contemplated

in this Agreement. NPI shall promptly pay to GKIS an amount equal to any such

taxes actually paid or required to be collected or paid by GKIS.

 

                                       2

                                    ARTICLE 3

 

                              TERMS AND CONDITIONS

 

     3.1 Software and Packaging. GKIS shall deliver the Software to NPI on or

before November 10, 2003, or such other date as the parties shall mutually

agree, with user manual as more fully set forth in Exhibit A.

 

     3.2 Order Size, Pricing & Terms. NPI will be solely responsible for

determining resale terms such as: minimum order size, price and applicable

payment terms.

 

     3.3 Returns.

 

          (a) End Users. All undertakings to end-users respecting replacement of

     defective or damaged Software are as fully set forth in the Software

     end-user license included in the Software text files, manual or packaging

     ("End-User License").

 

          (b) NPI. NPI shall return to GKIS all software not complying with the

     End-User License or returned to NPI due to customer rejection of the

     End-User License. NPI at its costs shall replace any such non-complying

     units.

 

     3.4 Service & Support. NPI shall provide any necessary end-user service and

support.

 

     3.5 Advertising & Trademark Usage. NPI shall obtain GKIS's advance written

consent to any use of GKIS's trademarks or tradenames in any advertising or

promotion.

 

                                    ARTICLE 4

 

                              TERM AND TERMINATION

 

     4.1 Term. This Agreement shall take effect on the Effective Date and

continue in effect for a period of forty-eight months ("Initial Term") unless

terminated earlier by either party because of the default of the other party in

any obligation under this Agreement.

 

     Thereafter, the Agreement shall be automatically renewed for one (1) year

terms upon the continued payment of the royalties by NPI unless either party

notifies the other in writing of its intent to terminate at least sixty (60)

days prior to the expiration of the then current term.

 

     4.2 Termination. If either party is in default of any of its obligations

under this Agreement, the other party may give written notice of such default,

and if the defaulting party has not cured the default within thirty (30) days of

such notice, the other party shall have the right to terminate this Agreement.

                                       3

 

     4.3 Effect of Termination. Upon termination of this Agreement for whatever

reason, the rights granted under this Agreement to distribute, market and sell

the Software are immediately revoked. Within five (5) days after the expiration

or termination of this Agreement for any reason, NPI shall return to GKIS all

copies of the Software, updates and user manuals in NPI's possession.

 

TERMINATION SHALL NOT RELIEVE NPI AND AUTHORIZED USERS OF THEIR OBLIGATIONS

REGARDING THE CONFIDENTIALITY OF THE SOFTWARE AND UPDATES.

 

     4.4 Payments Not Excused. Notwithstanding any of the foregoing, in the

event of termination as a result of the NPI's failure to comply with any of its

obligations under this Agreement, NPI shall continue to be obligated for any

payments due as of the date of termination.

 

                                    ARTICLE 5

 

                    REPRESENTATIONS, WARRANTIES & DISCLAIMER

 

     5.1 GKIS hereby represents and warrants to NPI as follows:

 

          (a) Authorization. GKIS has full legal authority to enter into this

     Agreement, to consummate the transactions contemplated hereby and to

     perform its obligations hereunder.

 

          (b) Consents and Approvals. No consent, approval or authorization or

     declaration, filing or registration with any governmental or regulatory

     authority, or any other person or entity, is required to be made or

     obtained by GKIS in connection with the execution, delivery and performance

     of this Agreement and consummation of the transactions contemplated hereby.

 

          (c) Disclosure. To the best of GKIS's knowledge no representation or

     warranty of GKIS contained in this Agreement, and no statement contained in

     any exhibit furnished to NPI pursuant hereto, contains any untrue statement

     of a material fact or omits to state a material fact.

 

     5.2 NPI hereby represents and warrants to GKIS as follows:

 

          (a) Authorization. NPI has full legal authority to enter into this

     Agreement, to consummate the transactions contemplated hereby and to

     perform its obligations hereunder.

 

          (b) Consents and Approvals. No consent, approval or authorization or

     declaration, filing or registration with any governmental or regulatory

     authority, or any other person or entity, is required to be made or

     obtained by NPI in connection with the execution, delivery and performance

     of this Agreement and consummation of the transactions contemplated hereby.

 

          (c) Disclosure. To the best of NPI's knowledge no representation or

     warranty of NPI contained in this Agreement, and no statement contained in

     any exhibit furnished to GKIS pursuant hereto, contains any untrue

     statement of a material fact or omits to state a material fact.

 

                                       4

 

     5.3 Non-infringement. GKIS represents and warrants to the best of its

knowledge that during the term of this Agreement the Software does not infringe

the proprietary rights of any third party.

 

     5.4 Disclaimer. NPI acknowledges that the only warranties applicable to the

Software are those set forth in this Agreement or the End-User license.

 

     5.5 Indemnity. GKIS shall defend, indemnify and hold NPI harmless against

all liability, loss, damage, cost and expense, including attorney fees, paid or

incurred by NPI by reason of GKIS's breach of any of the foregoing

representations and warranties.

 

     5.6 Limitation of Liability. Notwithstanding any other provision of this

Agreement, the parties' aggregate liability to each other under this Agreement

shall be limited to a sum equal to the total payments made by NPI to GKIS under

this Agreement in the most recent calendar year preceding imposition of such

liability.

 

     5.7 Consequential Damages. The parties shall under no circumstances be

liable to each other for any loss of use, interruption of business, or any

indirect, special, incidental or consequential damages of any kind, including

lost profits, regardless of the form of action, be it in contract, tort

(including negligence) or otherwise.

 

     5.8 Confidentiality. NPI and GKIS shall each respect and strictly preserve

the confidentiality of all information of consequence obtained in the course of

performance of this Agreement ("Confidential Information"). Confidential

Information shall include, among others, the technologies, trade secrets,

business plans and activities, customers, and finances of either party.

 

     5.9 Covenant Not To Compete. For the period of this Agreement, GKIG

covenants that it will not directly or indirectly compete, with NPI in regard to

the sales, marketing and distribution of the Software.

 

                                    ARTICLE 6

 

                                TITLE IN SOFTWARE

 

     6.1 Proprietary Rights. All applicable common law and statutory rights and

title in and to the Software and updates of the Software, including, but not

limited to, rights in confidential and trade secret material, source code,

object code, trademarks, service marks, patents, and copyrights, are and will

remain the property of GKIS. NPI shall have no right, title, or interest in such

proprietary rights.

 

     6.2 Restrictions. NPI is prohibited (i) from distributing, transferring

possession of, or otherwise making available copies of the Software to any

person, other than the Authorized Users pursuant to the terms of this Agreement.

NPI shall advise all Authorized Users that they are prohibited from reproducing,

distributing, transferring possession of, or otherwise making available copies

of the Software to any person other than an Authorized User. NPI and Authorized

Users are prohibited from making any modifications, adaptations, enhancements,

changes or derivative works of the Software without the prior written consent of

GKIS, and NPI shall advise all Authorized Users that they are prohibited from

making any modifications, adaptations, enhancements, changes, or derivative

works of the Software.

 

                                       5

 

     6.3 Further Documentation. To protect the GKIS's rights in the Software,

NPI shall, at the reasonable request of GKIS, promptly execute and assign any

and all applications, including, but not limited to, copyright applications, any

and all assignments, and any other instruments which GKIS deems necessary to

protect or maintain GKIS's rights in the Software. NPI hereby irrevocably

appoints GKIS as attorney-in-fact for NPI with full power and authority to

execute and deliver in the name of NPI any such instrument or instruments.

 

                                    ARTICLE 7

 

                                  MISCELLANEOUS

 

     7.1 Assignability. Unless otherwise agreed to in writing by both parties

hereto, the rights, obligations and benefits established by this Agreement shall

be non-assignable by either of the parties hereto and any attempt of assignment

shall be null and void and of no effect whatsoever.

 

     7.2 Relationship of the Parties. The management and employees of NPI shall

not be considered employees of the GKIS. Furthermore, the parties agree that NPI

shall not be deemed to be an employee, servant, partner or joint venturer of the

GKIS.

 

     7.3 Entire Agreement. This Agreement contains the entire agreement of the

parties with respect to the subject matter hereof, and may not be changed except

by a writing signed by the party against whom enforcement or discharge is

sought.

 

     7.4 Waiver of Breach. The waiver by either party of a breach of any

provision of this Agreement by the other party shall not operate or be construed

as a waiver of any subsequent breach by the other party.

 

     7.5 Construction of Language. The language used in this Agreement shall be

construed as a whole according to its fair meaning, and not strictly for nor

against either party.

 

     7.6 Captions and Headings. The paragraph headings throughout this Agreement

are for convenience and reference only, and shall in no way be deemed to define,

limit or add to the meaning of any provision of this Agreement.

 

     7.7 State Law. The laws of the State of Texas shall govern this Agreement,

its interpretation and its application.

 

     7.8 Counterparts. This Agreement may be executed in multiple counterparts,

each of which shall be deemed an original, and all of which together shall

constitute one and the same instrument. Execution and delivery of this Agreement

by exchange of facsimile copies bearing facsimile signature of a party shall

constitute a valid and binding execution and delivery of this Agreement by such

party. Such facsimile copies shall constitute enforceable original documents.

 

                                       6

 

     7.9 Costs. If this Agreement gives rise to a lawsuit or other legal

proceeding between any of the parties hereto, the prevailing party shall be

entitled to recover court costs, necessary disbursements (including expert

witnesses' fees) and reasonable attorneys' fees, in addition to any other relief

such party may be entitled.

 

     7.10 Notices and Waivers. Any notice or waiver required or permitted to be

given by the parties hereto shall be in writing and shall be deemed to have been

given, when delivered, three (3) business days after being mailed by certified

or registered mail return receipt requested, when faxed during regular business

hours of the recipient and there is confirmation of receipt with hard copy by

regular mail, or when sent by prepaid full rate telegram to the following

addresses:

 

         NPI:                               GKIS:

         ---                                ----

         NPI Management Group, Inc.         GK Intelligent Systems, Inc.

         6836 Bee Caves Road                2602 Yorktown Place

         Austin, TX 78746                   Houston, Texas 77056

 

     7.11 Public Statements. Other than any requisite regulatory filing or

disclosure, NPI will not issue any press release, or make or authorize any other

public statement, oral or written, that includes GKIS's name without prior

written approval, which will not be unreasonably withheld if NPI is advised such

disclosure is required under applicable laws.

 

     IN WITNESS WHERE OF, the parties have executed this Agreement to be

effective as of the day and year first above written notwithstanding the actual

date of signatures.

 

 

 

NPI                                         GKIS

 

NPI Management Group, Inc                   GK Intelligent Systems, Inc.

 

 

/S/ Kurt Spenkoch                           /Gary F. Kimmons

--------------------------                  --------------------------

By: Kurt Spenkoch                           By: Gary F. Kimmons

Title:                                      Its: President

 

                                       7

                                    Exhibit A

 

1.       Software:  Around the Web in 80 Minutes, version ____ and its updates.

 

2.       Software Packaging:

 

         2.1    GKIS Deliverables:        ___________ with label

                English language user manual

 

         2.2    NPI Deliverables:any additional packaging, including box

                End-User License

                user registration cards

 

3.       Pricing:  $____/unit

 

4.       Approval Cycle: GKIS to promptly submit

         manual text and Software for review by NPI

         GKIS to promptly implement reasonable edits/fixes proposed by NPI

 

                                       8