UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 15, 1996
Gum Tech International, Inc.
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(Exact name of registrant as specified in it charter)
Utah 0-27646 87-0482806
- ---------------------------- ------------ ---------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
4205 North Seventh Avenue
Suite 300
Phoenix, AZ 85013-3080
(Address of principal executive offices)
Registrant's telephone number, including area code (602) 277-0606
Not applicable
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. Other Events
Effective August 21, 1996, Gerald Kern joined Gum Tech International, Inc.
in the capacities of President and Chief Executive Officer of the Company,
pursuant to a 16 month employment agreement ("Agreement"), which calls for an
annual salary of $150,000, options to purchase 50,000 shares of common stock at
$6.00 per share and a one year employment extension (through December 31, 1998)
at the option of the Company.
From 1983 to 1994, Mr. Kern was President and Chief Operating Officer of
Meditech Pharmaceuticals, Inc., a manufacturer of proprietary drugs. Prior to
serving at Meditech, Mr. Kern was the Executive Vice President and Chief
Operating Officer of Max Factor from 1977 to 1980, then the world's fifth
largest cosmetics company. In addition, Mr. Kern was a division President and
corporate Vice President for International Playtex from 1967 to 1977.
Richard Ratcliff and John Epert, formerly the Chief Executive Officer and
President of the Company, respectively, have resigned their positions. Messers.
Ratcliff and Epert will remain with the Company as Senior Vice President and
Executive Vice President, respectively, and will also remain on the Board of
Directors as the Chairman and Vice-Chairman, respectively.
ITEM 7. Financial Statements and Exhibits
(c) Exhibits:
10.19 Employment Agreement dated August 14, 1996 between the
Registrant and Gerald Kern.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GUM TECH INTERNATIONAL, INC.
(Registrant)
By: /s/ Richard A. Ratcliff
-------------------------------------
Richard A. Ratcliff, Chairman of
the Board
Dated: August 26, 1996
SECURITIES AND EXCHANGE COMMISSION
EXHIBITS
TO
FORM 8-K
<PAGE>
EMPLOYMENT AGREEMENT
EFFECTIVE DATE: August 14, 1996
- ---------------
EMPLOYMENT DATE: The date on which Employee devotes full time to the
performance of his duties hereunder, but in no event later
than September 1, 1996
EMPLOYER: GUM TECH INTERNATIONAL, INC.
- --------- a Utah corporation
EMPLOYEE: GERALD KERN
- ---------
PURPOSE:
- --------
Employer is in the business of manufacturing, marketing and selling value
added gum products to wholesalers and distributors and in the retail and private
label markets (collectively, the "Business"). Employer desires to employ
Employee as the President and Chief Executive Officer of Employer and Employee
desires to accept such employment, on the term, covenants and conditions set
forth in this Employment Agreement (this "Agreement").
AGREEMENTS:
- -----------
For the reasons set forth above, and in consideration of the mutual
promises and agreements set forth in this Agreement,Employer and Employee agree
as follows:
1. Employment: Duties.
-------------------
1.1 Subject to and in accordance with this Agreement, Employer employs
Employee as the President and Chief Executive Officer of Employer and Employee
accepts employment with Employer subject to the general supervision and pursuant
to the orders, advice and direction of Employer. In such capacity, Employee
shall, commencing on the Employment Date, be responsible for the overall and
day-to-day operations of the Business.
1.2 Commencing on the Employment Date, Employee shall use his best
efforts and devote his full time to the performance of all the duties that may
be required of and from him pursuant to the express and implicit terms of this
Agreement. Such duties shall be rendered in Phoenix, Arizona, and at such other
places as Employer and Employee shall mutually agree upon.
1.3 Employee represents and warrants that there are no agreements or
arrangements, written or oral, in effect which would prevent Employee from
rendering services to Employer during the term of this Agreement.
<PAGE>
1.4 Nothing herein contained shall be construed to create a
partnership or joint venture between Employer and Employee. Neither party hereto
shall be liable for the debts or obligations of the other unless expressly
assumed in writing, and signed by the parties hereto
2. Term. This Agreement shall become effective on the date first written
above and, unless terminated sooner pursuant to Section 5, continue through
December 31, 1997 (the "Initial Term") Employer shall have the right and option,
but not the obligation, to extend the Initial Term through December 31. 1998
(the "Extension Term"), subject to the termination provisions of Section 5 below
and the other terms and provisions of this Agreement, by giving Employee written
notice of the extension to Employee on or before November 1. 1997.
3. Compensation and Other Benefits
-------------------------------
3.1 Compensation For services rendered to Employer hereunder. in
whatever capacity rendered. Employee shall have and receive subject to
withholding and other applicable taxes, compensation as follows:
3.1.1 A base salary during, the Initial Term of $12,500 per
month. The annual base salary during any Extension Term
shall be $200,000. The base salary will be payable
monthly, commencing on the Employment Date, in arrears in
two equal monthly installments
3.1.2 Stock options to purchase 50,000 shares of no par value,
voting common stock of Employer, to be issued pursuant to
Employer's Stock Option Plan dated March 1, 1995, as
amended, and evidenced by the Grant attached hereto as
Exhibit "A".
3.1.3 Bonuses in accordance with the provisions of Exhibit "B"
attached hereto.
3.2 Business Expenses. Upon submission of proper documentation,
Employer shall pay or reimburse Employee for all reasonable and necessary
office, telephone, travel and other expenses incurred by him in the pursuit of
his duties on behalf of Employer
3.3 Employee Benefits. Employee shall be entitled to participate in
any other bonus, stock option, incentive compensation, deferred compensation,
group medical and dental insurance plans or other plans or programs and to
receive any other benefits for which he is eligible and which Employer may
provide its employees generally or its officers specifically.
3.4 Automobile Allowance. Employer shall pay to Employee, on a monthly
basis, commencing on the Employment Date, an automobile allowance of $800 per
month.
4. Facilities. Employer shall provide and maintain (or cause to be provided
and maintained) such facilities, equipment, offices, secretarial help, and other
services and supplies as it deems necessary for Employee's performance of his
duties under this Agreement, as established from time to time by Employer.
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<PAGE>
5. Termination.
-----------
5.1 This Agreement and Employee's employment hereunder may be
terminated at any time:
(a) Upon mutual agreement in writing.
(b) By Employee upon the material breach by Employer of any of
the material provisions of this Agreement.
(c) By Employer for Cause. For purposes of this Agreement. the
term "Cause" shall mean: (i) conduct on the part of
Employee which is intended to result directly or
indirectly in substantial gain or personal enrichment at
the expense of Employer; (ii) the material breach by
Employee of any of the provisions of this Agreement; or
(iii) the failure by Employee to substantially perform his
duties hereunder.
Further, this Agreement and Employee's employment hereunder shall automatically
terminate upon the death, disability or insanity of Employee or the bankruptcy
of Employer or the discontinuance of Employer's Business.
5.2 Notwithstanding the termination of this Agreement or of Employee's
employment hereunder, the parties hereto shall be required to carry out any
provision hereof which contemplate performance by them subsequent to such
termination, nor shall such termination affect any liability or obligation which
has accrued prior to such termination, including but not limited to, accrued but
unpaid compensation and any liability for loss or damage on account of default.
5.3 Following any termination of employment hereunder, or notice thereof,
Employee shall fully cooperate with Employer in all matters relating to the
winding up of his pending work on behalf of Employer and the orderly transfer of
any such pending work to other employees of Employer as may be designated by
Employer. In consideration thereof. Employer shall pay Employee for any services
rendered post-termination at a rate equivalent to the hourly rate payable to
Employee during the Initial Term or the Extension Term as applicable, during
which the termination occurred.
5.4 Upon termination of this Agreement, or whenever requested by Employer,
Employee shall immediately turn over to Employer all of Employer's property,
including all items used by Employee in rendering, services hereunder, that may
be in Employee's possession or under his control.
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<PAGE>
6. Covenant Not to Compete; Disclosure of Information.
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6.1 Solicitation.
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6.1.1 For a period of six months after the date of termination
of this Agreement, Employee shall not, whether alone or as
a partner, officer, director, employee or shareholder (or
other holder of an equity interest) of, or consultant,
advisor or lender to, any other corporation, partnership
or other entity, or as a trustee, fiduciary or other
representative, solicit Employer's customers with respect
to, engage in or have any interest, including as a
creditor, in any person, partnership, corporation,
association, or other business entity, whether as
employee, officer, director, agent, consultant,
stockholder or holder of any right to any form of equity
ownership, or otherwise, that engages in the Business.
6.1.2 Employee shall not, during or for a period of six (6)
months after the term of this Agreement solicit any
employee, sales representative or independent contractor
of Employer for employment by any person, firm
partnership, corporation, association or other entity for
any reason or purpose allied or related to the Business
whatsoever.
6.2 Non Disclosure.
---------------
6.2.1. Employee hereby recognizes and acknowledges that: (i)
Employee will be making use of, acquiring, and/or adding
to proprietary information of a special and unique nature
and value relating to and including, but not limited to,
such matters Employer's trade secrets systems procedures,
manuals, confidential reports, lists of suppliers,
research and development projects, policies, processes,
formulas, techniques, know-how and facts relating to
sales, advertising, mailing, promotions, financial
matters, customers, customer lists, purchases or
requirements or other methods used and preferred by
Employer in its operations, (ii) the Company will disclose
certain proprietary information to Obligor including, but
not limited to the details of any statistical or financial
data, the operations and structure of the business of
Employer, and manuals, forms, techniques, methods or
procedures of Employer used by or made available to
Employee in the course of Employee's employment (the
information referenced to in paragraphs 6.2.1 (i) and (ii)
above are hereinafter collectively referred to as the
"Proprietary Information").
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<PAGE>
6.2.2 Employee hereby recognizes and acknowledges that the
Proprietary Information is a valuable, special and unique
asset of Employer's business.
6.2.3 Employee will not at any time, directly or indirectly make
use of, divulge or disclose any of the Proprietary
Information or any part thereof for any purpose whatsoever
to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever that has been
obtained by, or disclosed to, him as a result of his
relationship with Employer immediately upon request by
Employer, Employee shall return to Employer any and all
materials relating to Proprietary Information.
6.3 Acknowledgment.
---------------
6.3.1 Employee acknowledges that the covenants contained in this
Section 6 are a material inducement for Employer to enter
into this Agreement and to perform its obligations
hereunder and that the services Employee is to render to
Employer hereunder are of a special and unusual character
with a unique value to Employer. Employee acknowledges
that it would take at least six (6) months for Employer to
retain and train personnel to replace Employee.
Accordingly, Employee acknowledges that the restrictions
contained in this Section 6 are reasonably necessary for
the protection of Employer's business and that a breach of
any such restrictions could not adequately be compensated
by damages in an action at law.
6.3.2 In the event of a breach or threatened breach by Employee
of any provision contained in this Section 6. Employer
shall be entitled to obtain, by posting an appropriate
bond an injunction (preliminary or permanent, or a
temporary restraining order) restraining, Employee from
the activity or threatened activity constituting, or that
would constitute a breach.
6.3.3 In the event of a breach by Employee of any provision
contained under this Section 6, Employer shall be entitled
to an accounting, and repayment of all profits,
compensation, commissions, remunerations or other benefits
that Employee, directly or indirectly, has realized and/or
may realize as a result of, arising out of or in
connection of any such breach.
6.3.4 The remedies provided in this Section 6 shall be in
addition to, and not in lieu of, any and all other
remedies of Employer at law or in equity.
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<PAGE>
7. Miscellaneous.
--------------
7.1 Notice. Notices required or permitted to be given hereunder shall
be sufficient if in writing and delivered or deposited in the mail, postage
prepaid, certified mail, return receipt requested (or the equivalent in a
foreign country), addressed, if to Employer, at its principal place of business
and, if to Employee, at the address set forth in Employer's employee records or
to such other address as may be designated in writing hereafter by either party
hereto. All notices hereunder shall be effective: (a) five (5) days after
deposit in the mail; or (b) upon delivery, if delivered in person or by
commercial express service.
7.2 Burden. Except as otherwise provided herein. this Agreement shall
be binding upon and inure to the benefit of any successor of Employer and any
such successor shall be deemed substituted for Employer under the terms of this
Agreement. As used in this Agreement the term "successor" shall mean any person,
firm, corporation or other business entity which at any time, whether by merger,
purchase or otherwise acquires all or substantially all of the assets or
business of Employer.
7.3 Entire Agreement. This Agreement contains the entire agreement and
understanding by and between Employer and Employee with respect to the
employment of Employee and no representations, promises agreements or
understandings, written or oral, not contained herein shall bc shall be of any
force or effect. No change or modification of this Agreement shall be valid or
binding unless it is in writing and signed by the parties intended to be bound.
No waiver of any provision of his Agreement shall be valid unless it is in
writing and signed by the parties against whom the waiver is sought to be
enforced. No valid waiver of any provision of this Agreement at any time shall
be deemed a waiver of any other provision of this Agreement at such time or any
other time.
7.4 Arbitration. In the event any dispute or controversy arising out
of this Agreement cannot be settled by Employer and Employee, such controversy
or dispute, at the election of either Employer or Employee, by written notice to
the other, may be submitted to arbitration in Phoenix, Arizona, and for this
purpose Employer and Employee each hereby expressly consent to such arbitration
and such place In the event Employer and Employee cannot, within 15 days
following the election to submit the dispute or controversy to arbitration,
mutually agree upon an arbitrator to settle their dispute or controversy, then
Employer and Employee shall each select one arbitrator and the two arbitrators
shall select a third arbitrator. The decision of the majority of said
arbitrators shall be binding upon Employer and Employee for all purposes,and
judgment to enforce any such binding decision may be entered in the Superior
Court, Maricopa County, Arizona (and for this purpose Employer and Employee
hereby irrevocably consent to the jurisdiction of said court). If either
Employer or Employee fails to select an arbitrator within fifteen (15) days
after written demand from the other party to do so, then the Chief Judge in the
United States District Court of the District of Arizona shall select such other
arbitrator. At the election of either Employer or Employee, all arbitrators
shall be selected pursuant to the then existing rules and regulations of the
American Arbitration Association governing commercial transactions. At the
request of either Employer or Employee, arbitration proceedings shall be
conducted in the utmost secrecy. In such case, all documents, testimony and
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<PAGE>
records shall be available for inspection only for purposes of the arbitration
and only by either party and their respective attorneys and experts who shall
agree, in advance and in writing, to receive all such information in secrecy. In
all other respects, the arbitrators shall conduct all proceedings pursuant to
the Uniform Arbitration Act as adopted by the State of Arizona and the then
existing rules and regulations of the American Arbitration Association governing
commercial transactions. The costs of the arbitration and the arbitrators shall
be borne by the non-prevailing party, as determined by the arbitrators, and each
party shall bear their own attorneys' fees.
7.5 Prohibition Against Assignment. This Agreement is personal to
Employee and Employee shall not assign or delegate any of his rights or
obligations hereunder without first obtaining the written consent of Employer.
7.6 Governing Law. This Agreement shall be governed in all respects
whether as to validity, construction, capacity, performance or otherwise by the
laws of the State of Arizona. The section headings used in this Agreement are
included solely for convenience and shall not affect or be used in connection
with the interpretation of this Agreement.
7.7 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity and enforceability of
the other provisions.
IN WITNESS WHEREOF, the parties have executed this document to be effective
the date first above written.
GUM TECH INTERNATIONAL, INC.
a Utah corporation
By: /S/ RICHARD RATCLIFF
---------------------------------------
Richard Ratcliff, Chief Executive Officer
(EMPLOYER)
/S/ GERALD KERN
---------------------------------------
GERALD KERN
(EMPLOYEE)
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<PAGE>
Exhibit "A"
Form of Incentive Stock Option Grant
<PAGE>
Gum Tech International, Inc. Stock Option Plan
Grant of Incentive Stock Option
Date of Grant: August 14, 1996
--
THIS GRANT, dated as of the date of grant first stated above (the "Date of
Grant"), is delivered by Gum Tech International, Inc., a Utah corporation
("Company") to Gerald Kern (the "Grantee'), who is an employee, officer or
director of Company.
WHEREAS, the Board of Directors of Company (the "Board") effective March 1,
1995, adopted the Gum Tech International, Inc. Stock Option Plan, as amended
(the "Plan");
WHEREAS, the Plan provides for the granting of stock options by a committee
to be appointed by the Board (the "Committee") to directors, officers and key
employees of Company to purchase, or to exercise certain rights with respect to,
shares of the Common Stock of Company, par value per share (the "Stock"), in
accordance with the terms and provisions thereof; and
WHEREAS, the Committee considers the Grantee to be a person who is eligible
for a grant of stock options under the Plan, and has determined that it would be
in the best interest of Company to grant the stock options documented herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
Section 1. Grant of Option
- --------------------------
Subject to the terms and conditions hereinafter set forth, Company, with
the approval and at the direction of the Committee, hereby grants to the
Grantee, as of the Date of Grant, an option to purchase up to 50,000 shares of
Stock at a price of $6.00 per share, the fair market value of such shares at the
time of the grant. Such option is hereinafter referred to as the "Option" and
the shares of stock purchasable upon exercise of the Option are hereinafter
sometimes referred to as the "Option Shares."
Section 2. Exercise of Option
- -----------------------------
Subject to such further limitations as are provided herein. the Option
shall become exercisable any time after the date of the Grant, subject to the
limitations set forth in Section 3 below.
1
<PAGE>
Section 3. Termination of Option
- --------------------------------
3.1 The Option and all rights hereunder with respect thereto, to the extent
such rights shall not have been exercised, shall terminate and become null and
void after the expiration of three (3) years from the Date of Grant (the "Option
Term").
3.2 In the event of the death or disability of the Grantee, the Option may
be exercised by the Grantee or the Grantee's legal representative(s) at any time
within the one year anniversary date of the Grantee's death, but only to the
extent that the Option would otherwise have been exercisable by the Grantee.
3.3 In the event that Grantee is no longer a key management employee,
officer or director of the Company, the Option may be exercised by the Grantee
or its legal representative(s) at any time within 90 days after the Grantee is
no longer a key management employee, officer or director if the Option Shares
are subject to an S-8 Registration Statement filed with the Securities Exchange
Commission and at any within one year after the Grantee is no longer a key
management employee, officer or director if the Option Shares are not subject to
an S-8 Registration Statement filed with the Securities Exchange Commission.
3.4 Notwithstanding any other provisions set forth herein or in the Plan,
if the Grantee shall (i) commit any act of malfeasance or wrongdoing affecting
Company, (ii) breach any covenant not to compete, or employment contract, with
Company or any subsidiary of Company, or (iii) engage in conduct that would
warrant the Grantee's discharge for cause (excluding general dissatisfaction
with the performance of the Grantee's duties, but including any act of
disloyalty or any conduct clearly tending to bring discredit upon or any
subsidiary of Company), any unexercised portion of the Option shall immediately
terminate and be void.
Section 4. Exercise of Options
- ------------------------------
4.1 The Grantee may exercise the Option with respect to all or any part of
the number of Option Shares then exercisable hereunder by giving the Secretary
of Company written notice of intent to exercise. The notice of exercise shall
specify the number of Option Shares as to which the Option is to be exercised
and the date of exercise thereof, which date shall be at least five days after
the giving of such notice unless an earlier time shall have been mutually agreed
upon.
4.2 Full payment (in U.S. dollars) by the Grantee of the option price for
the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or. with the prior written consent
of the Committee, in whole or in part through the surrender of previously
acquired shares of Stock at their fair market value on the exercise date.
On the exercise date spe`cified in the Grantee's notice or as soon
thereafter as is practicable, Company shall cause to be delivered to the
Grantee, a certificate or certificates for the Option Shares then being
purchased (out of theretofore unissued Stock or reacquired Stock, as Company may
elect) upon full payment for such Option Shares. The obligations of Company to
deliver Stock shall, however, be subject to the condition that if at any time
2
<PAGE>
the Committee shall determine in its discretion that the listing, registration
or qualification of the Option or the Option Shares upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the Option or the issuance or purchase of Stock thereunder, the
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
4.3 If the Grantee fails to pay for any of the Option Shares specified in
such notice or fails to accept delivery thereof, the Grantee's right to purchase
such Option Shares may be terminated by Company. The date specified in the
Grantee's notice as the date of exercise shall be deemed the date of exercise of
the Option, provided that payment in full for the Option Shares to be purchased
upon such exercise shall have been received by such date.
Section 5. Adjustment of and Changes in Stock of Company
- --------------------------------------------------------
In the event of a reorganization, recapitalization, change of shares, stock
split, spin-off, stock dividend, reclassification, subdivision or combination of
shares, merger, consolidation, rights offering, or any other change in the
corporate structure or shares of capital stock of Company, the Committee shall
make such adjustment as it deems appropriate in the number and kind of shares of
Stock subject to the Option or in the option price; provided, however, that no
such adjustment shall give the Grantee any additional benefits under the Option.
Section 6. Fair Market Value
- ----------------------------
As used herein, the fair market value of a share of Stock shall be the
value determined by the resolution of the Board of Directors of the Company.
Section 7. No Rights of Stockholders
- ------------------------------------
Neither the Grantee nor any personal representative shall be, or shall have
any of the rights and privileges of, a stockholder of Company with respect to
any shares of Stock purchasable or issuable upon the exercise of the Option, in
whole or in part, prior to the date of exercise of the Option.
Section 8. Non-Transferability of Option
- ----------------------------------------
During the Grantee's lifetime, the Option hereunder shall be exercisable
only by the Grantee or any personal representative, guardian, conservator or
legal representative of the Grantee, and the Option shall not be transferable
except, in case of the death of the Grantee, by will or the laws of descent and
distribution, nor shall the Option be subject to attachment, execution or other
similar process. In the event of (a) any attempt by the Grantee to alienate,
assign, pledge, hypothecate or otherwise dispose of the Option, except as
provided for herein, or (b) the levy of any attachment, execution or similar
process upon the rights or interest hereby conferred, Company may terminate the
Option by notice to the Grantee and it shall thereupon become null and void.
2
<PAGE>
Section 9. Employment Not Affected
- ----------------------------------
The granting of the Option nor its exercise shall not be construed as
granting to the Grantee, if he is an employee of the Company, any right with
respect to continuance of employment of the Company. Except as may otherwise be
limited by a written agreement between the Company and the Grantee, the right of
the Company to terminate at will the Grantee's employment with it at any time
(whether by dismissal, discharge. retirement or otherwise) is specifically
reserved by Company, as the Company or on behalf of the Company (whichever the
case may be), and acknowledged by the Grantee.
Section 10. Amendment of Option
- -------------------------------
The Option may be amended by the Board or the Committee at any time (i) if
the Board or the Committee determines, in its sole discretion, that amendment is
necessary or advisable in the light of any addition to or change in the Internal
Revenue Code of 1986 or in the regulations issued thereunder, or any federal or
state securities law or other law or regulation, which change occurs after the
Date of Grant and by its terms applies to the Option: or (ii) other than in the
circumstances described in clause (i), with the consent of the Grantee.
Section 11. Notice
- ------------------
Any notice to Company provided for in this instrument shall be addressed to
it in care of its Secretary at the following address:
Gum Tech International, Inc.
4205 North Seventh Avenue
Suite 300
Phoenix, Arizona 85013
and any notice to the Grantee shall be addressed to the Grantee at the current
address shown on the payroll records of the Company. Any notice shall be deemed
to be duly given if and when properly addressed and posted by registered or
certified mail, postage prepaid.
Section 12. Incorporation of Plan by Reference
- ----------------------------------------------
The Option is granted pursuant to the terms of the Plan, the terms of which
are incorporated herein by reference, and the Option shall in all respects be
interpreted in accordance with the Plan. The Committee shall interpret and
construe the Plan and this instrument, and its interpretations and
determinations shall be conclusive and binding on the parties hereto and any
other person claiming an interest hereunder, with respect to any issue arising
hereunder or thereunder.
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<PAGE>
Section 13. Governing Law
- -------------------------
The validity, construction, interpretation and effect of this instrument
shall exclusively be governed by and determined in accordance with the law of
the State of Arizona.
IN WITNESS WHEREOF, Company has caused its duly authorized officers to
execute and attest this Grant of Incentive Stock Option, and to apply the
corporate seal hereto, and the Grantee has placed his or her signature hereon,
effective as of the Date of Grant.
GUM TECH INTERNATIONAL, INC.,
a Utah corporation
By: /s/RICHARD RATCLIFF
---------------------------------------
Richard Ratcliff, Chief Executive Officer
ACCEPTED AND AGREED TO:
/s/ GERALD KERN
-------------------------------------------
GERALD KERN
5
<PAGE>
Exhibit " B "
Bonus Structure
1. A $25.000 bonus is payable on January 15, 1997, if there is "Income Before
Provision For Income Taxes" attributable to the fourth quarter of 1996, as
determined by Employer's independent public accountant. For purposes of this
Exhibit" B", the term "Income Before Provision For Income Taxes" means the line
item "Income Before Provision of Income Taxes" which is reported in financial
statements attached to Employer's annual report to its shareholders, as approved
by Employer's independent public accountant, but adjusted to omit the effect of
income taxes.
2. During the Initial Term, an annual incentive bonus for the calendar year 1996
and an annual incentive bonus for the calendar year 1997 equal to 5% of the Net
Income for the subject calendar year.
3. During the Extension Term, an annual incentive bonus for the calendar year
1998 equal to 5% of the Net Earnings.
4. The annual incentive bonuses under paragraphs 2 and 3 above shall be
calculated on an annualized basis and 80% of the bonus is paid quarterly within
l5 days after the end of each calendar quarter, with any holdback to be paid
within 45 days following the end of the subject calendar year. In the event that
the annual incentive bonus paid to Employee for a particular calendar year
exceeds that which was payable to Employee. Employee agrees to reimburse
Employer for such excess within 10 business days following Employer's demand for
the same. In the event that this Agreement is terminated at any time other than
the end of a calendar year, quarterly payments will cease and any bonus will be
payable within 45 days following the end of the calendar year, which bonus will
be prorated based upon a fraction, the numerator of which is the number of days
this Agreement was in effect during the subject calendar year and the numerator
of which is 365.
