SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Agreement") is entered into the
10th day of February, 1998, by and between XXXXXX XXXX, a married person
("XXXX"), and GUMTECH INTERNATIONAL INC., ("GUMTECH")
RECITALS
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X. XXXX was an employee of GUMTECH from August 14, 1996 until February 10,
1998, when he resigned from his employment as Chief Executive Officer, Chairman
of the Board, President, and member of the Board.
X. XXXX has been represented by legal counsel throughout the Litigation and
the negotiations that resulted in this Agreement, and he enters into this
Agreement freely, voluntarily and with a full and complete understanding of the
rights that he is forever surrendering, releasing, discharging and settling
under this Agreement.
C. Both parties desire to settle any and all claims that either may have
against the other except as specifically excluded.
AGREEMENT
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NOW, THEREFORE, in consideration of the mutual promises, covenants' and
relinquishment of rights agreed to herein, as well as other consideration, the
receipt and sufficiency of which is hereby acknowledged, XXXX and GUMTECH agree
as follows:
1. Payment to XXXX. Upon the full execution of this Agreement GUMTECH
shall issue a check, payable to XXXX and Xxxxxxxx Law Offices, P.C., in the
amount of ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000). An additional FIFTY
THOUSAND DOLLARS ($50,000) from which all necessary withholdings will be taken
for all amounts attributed to wages will be issued to XXXX. The remainder of the
FIFTY THOUSAND DOLLARS ($50,000) will be deposited in the trust account of Xxxxx
X. XxXxxxxxx, Esq. for 120 days from the date of this agreement to be paid to
XXXX at that time if XXXX has not disparaged GUMTECH, its Directors, officers,
or employees. In the event GUMTECH believes XXXX has disparaged GUMTECH within
the 120 day period from the date of this Agreement, the notification procedures
set forth in paragraph 8 shall be utilized. XXXX shall be paid his full pay and
allowances up to and including February 10, 1998. The parties agree that
two-thirds (2/3) of the total of TWO HUNDRED THOUSAND DOLLARS ($200,000) is
attributable to the settlement of tort claims, including defamation and
intentional interference asserted by XXXX.
XXXX'x stock options shall be Amended and Restated or Reissued for
100,000 shares of GUMTECH International Inc. common stock at the price of $5.81
an option. The option shares shall be exactly like those he now holds. This
option will expire one year from the date of this Agreement. A cancellation
agreement will be executed for the options XXXX now holds above 100,000 and for
the option on shares held by Xxxxxxxx. GUMTECH will act promptly and reasonably
to enable XXXX to exercise his options.
GUMTECH International Inc. shall forgive any salary advances and
interest thereon owed to it by XXXX. The debt owed by XXXX to GUMTECH
International Inc. of SIXTY-SIX THOUSAND ( $66,000.00) DOLLARS plus interest
which will become compensation on November 1, 1999, will be unconditionally
forgiven on November 1, 1999.
2. Release. By executing this Agreement, XXXX, for himself and his
successors, heirs, assigns, agents and representatives, hereby knowingly and
voluntarily forever releases, discharges and forgives GUMTECH and all of its
directors, officers, shareholders, employees, agents, administrators, divisions,
and related corporations and entities, from and against any and all legal and
equitable claims, liabilities, causes of action, debts, damages and rights to
payment or performance of any nature whatsoever, whether known or unknown,
vested or contingent, liquidated or unliquidated asserted or not yet asserted,
arising from or in any way related to or associated with (i) XXXX'x employment
with GUMTECH, (ii) the resignation of said employment, (iii) any aspect of any
other relationship between XXXX and GUMTECH, and (iv) any other event occurring
or transaction entered into at any time up to and including the date of February
10, 1998, including without limitation any matters that were or could have been
alleged by XXXX. Without in any way limiting the generality of the foregoing,
XXXX acknowledges by his execution of this Agreement that he has been paid in
full for all vacation pay, wages, leave, and other benefits to which he was
entitled as an employee of GUMTECH, other than the consideration given to- him
under this Agreement.
3. By executing this Agreement, GUMTECH, hereby knowingly and voluntarily
forever releases, discharges and forgives XXXX for himself and his successors,
heirs, assigns, agents and representatives from and against any and all legal
and equitable claims, liabilities, causes of action, debts, damages and rights
to payment or performance, whether known or unknown, vested or contingent,
liquidated or unliquidated, asserted or not yet asserted, arising from or in any
way related to or associated with (i) XXXX'x employment with GUMTECH, (ii) the
resignation of said employment, (iii) any aspect of any other relationship
between XXXX and GUMTECH, and (iv) any other event occurring or transaction
entered into at any time up to and including February 10, 1998. Notwithstanding
the foregoing, GUMTECH does not for itself, its shareholders, employees, or
agents release XXXX of any actions that violate State or Federal regulatory
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statutes or regulations or any fraudulent action and cannot. Further, XXXX
acknowledges by his execution of this Agreement that he has been paid in full
for all vacation pay, wages, leave, and other benefits to which he was entitled
as an employee of GUMTECH, other than the consideration given to him under this
Agreement.
4. Waiver of Reinstatement. Without in any way limiting the generality of
Section 3 of this Agreement, XXXX hereby knowingly and voluntarily forever
releases, discharges, and forgives GUMTECH from and against any claim he may
have or have had for reinstatement to the position he held before the
resignation of his employment with GUMTECH. XXXX further promises, covenants and
agrees that, from and after the execution of this Agreement, he will never apply
for employment with GUMTECH or any corporation or other entity related to
GUMTECH in any way, and, further, that if he does apply for such employment,
GUMTECH or its related corporation or entity, as the case may be, may refuse to
employ XXXX for any reason or no reason, notwithstanding any contrary provision
of any law, statute, regulation or agreement otherwise applicable to such
application.
5. Employment Status and References. For all purposes, GUMTECH shall treat
the resignation of XXXX'x employment with GUMTECH as a voluntary resignation. If
any third party requests any information regarding such resignation, GUMTECH
shall indicate to such third party that the resignation was a voluntary
resignation. If any third party requests a reference regarding XXXX, GUMTECH
shall provide only the foregoing information, together with XXXX'x name, dates
of employment and last position held, and will indicate to such third party that
the provision of only such information is GUMTECH's normal and standard
reference policy.
6. Life Insurance. XXXX shall be assigned the ownership of life insurance
policy on his life that GUMTECH International Inc. has purchased on him, and the
beneficiary shall be changed to the Xxxxxx Xxxx and Xxxxxxx Xxxx Living Trust.
7. Insurance Indemnification. XXXX will be indemnified by GUMTECH
International Inc. for his deductible on any matter that is covered by the
errors and omissions insurance policy.
8. Non-Disparagement. Both parties, including GUMTECH's officers and
directors, agree not to engage in any conduct or make any statement that would
disparage the other or their respective business interests in any way. GUMTECH
and XXXX agree and understand that non-disparagement of the other party,
including GUMTECH's officers and Directors, is a material term of this Agreement
and that violation of such term would cause great harm to the other part](. If
either party believes that the other party has breached the obligation and
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commitments on non-disparagement, the non-breaching party shall give the alleged
breaching party reasonable notice, in writing, of the alleged breach, the
factual basis for such alleged breach, and an opportunity to respond within 7
days of the receipt of the notice of said alleged breach. After such 7 day time
frame has passed, the non-breaching party may commence arbitration as described
in Paragraph 7.4 of the Employment Agreement previously executed by XXXX and
GUMTECH.
If the existence of a breach is disputed and arbitrated, the
losing party with respect to that issue will pay the prevailing party's
reasonable attorneys' fees and costs incurred in arbitrating the alleged breach.
The parties agree that the losing party shall pay the prevailing party
liquidated damages in the amount of Two Hundred Thousand ($200,000.00) Dollars
as the harm that would be caused by a breach of the non-disparagement obligation
is difficult if not impossible to accurately estimate momentarily. However, the
noted sum is deemed by the parties to be a reasonable forecast of just
compensation for the harm that would be caused by a breach of the obligation of
non-disparagement.
9. Tax Consequences and Indemnification. XXXX will indemnify GUMTECH
International Inc. against all tax consequences that might arise because of the
allocation of the damages.
The parties agree that should any governmental authority
determine that all or any part of the payment under paragraph is taxable income,
XXXX will be solely responsible for the payment of all such taxes. XXXX agrees
to indemnify and hold GUMTECH harmless if any governmental authority seeks
payment of taxes, costs, assessments, penalties, damages, fees interest,
withholding, or other losses, including losses, if a claim or determination is
made that all or part of this damage payment should have been treated as taxable
income. XXXX further agrees that, if the aforementioned sum or any portion
thereof, is treated as taxable income, XXXX will promptly execute and deliver to
GUMTECH the applicable federal and state tax forms stating that he has paid the
taxes, costs, interest, withholding, assessments, penalties, damages or other
losses, if any. In addition, XXXX understand and agrees that GUMTECH has no duty
to defend against any claim or assertion that all or part of this damage payment
should be treated as taxable income, and XXXX agrees to assume responsibility
for contesting any such claim or assertion, and to cooperated fully in the
defense of any such claim or claims regarding the taxability of such sum which
is brought against GUMTECH.
10. Mutual Press Release. XXXX and the GUMTECH International Inc. have
issued a mutual press release.
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11. Return All Company Equipment, Property. and Documents. XXXX has
resigned all positions with GUMTECH International Inc. and will return all
company equipment, property, and documents. He has returned all credit cards he
has in his personal possession. Two phone accounts will be switched to XXXX, to
be his accounts. He will be responsible for all charges on the account as of
February 10, 1998.
12. No Assignment. XXXX represents and warrants to GUMTECH that he has not
sold, assigned, conveyed or otherwise transferred, in whole or in part, any
claim, cause of action, debt, damage, or right to payment or performance against
GUMTECH and that no other person owns or claims any interest in or to any such
claim, cause of action, debt, damage or right to payment or performance of XXXX
against GUMTECH
13. No Admissions. By entering into this Agreement and by performing their
respective obligations hereunder, neither XXXX nor GUMTECH admit any wrongdoing.
14. Voluntary and Knowing Agreement. XXXX and GUMTECH each hereby state
that they have read this Agreement, have consulted with (or have had the
opportunity to consult with) legal counsel of its or his own choosing in
connection with the decision to enter into this Agreement, and have entered into
this Agreement knowingly, freely and voluntarily, with full and complete
knowledge of the meaning and significance of the terms of this Agreement.
15. Settlement Costs. XXXX AND GUMTECH shall bear their own respective
costs, expenses and attorneys' fees incurred in negotiating the terms of the
Agreement.
16. Entire Agreement This Agreement constitutes the entire agreement
between XXXX and GUMTECH pertaining to the subject matter of this Agreement. No
covenants, promises, representations or warranties have been made or are being
relied upon by either party except as expressly set forth herein. Any prior
negotiations, discussions or positions by and between the parties are hereby
merged into this Agreement, and shall not operate or be construed to alter the
terms or affect the interpretation of this Agreement. This Agreement may be
amended only by a writing signed by both XXXX and GUMTECH; no such written
modification exists as of the execution of this Agreement.
17. Severability. If any provision of this Agreement is deemed to be
unenforceable, for whatever reason, by a court of competent jurisdiction, such
court shall have the authority to modify such provisions to the minimum extent
necessary, consistent with the intent of the parties, to make such provision
fully enforceable, or, if such provision cannot be so modified, then such
provision shall be severed from this Agreement and the remainder of this
Agreement shall continue in full force and effect, as if the Agreement had been
executed with the unenforceable provision so modified or severed, as the case
may be.
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18. Counterparts. This Agreement may be executed in counterparts, and when
all required signatures have been obtained on such counterpart pages, this
Agreement will be deemed to have been fully executed and to be fully binding on
all parties hereto as though all parties had signed a single Agreement rather
than counterpart originals thereof.
IN WITNESS WHEREOF, the undersigned have executed this Settlement Agreement
and Release as of the date and year first above written.
GUMTECH INTERNATIONAL INC.
By /s/ XXXXXX XXXX
----------------------------- ---------------------------------
XXXXXX XXXX
Its
----------------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this, the 2nd day of March, 1998, before me, the undersigned Notary
Public, personally appeared XXXXXX XXXX, known to me or proved to be the
individual whose name is subscribed to the foregoing instrument, and
acknowledged that he executed the same for the purposes stated in the
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Xxxx X. Xxxxxxxx
-----------------------------------
My Commission Expires:
(Seal Omitted)
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STATE OF ARIZONA )
) ss.
County of Maricopa )
On this, the ................. day of ................... 1998, before me,
the undersigned Notary Public, personally appeared ............................,
known to me or proved to be the individual whose name is subscribed to the
foregoing instrument, and acknowledged that he executed the same on behalf of
GUMTECH International Inc. for the purposes stated in the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
------------------------------
Notary Public
My Commission Expires:
---------------------
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Cancellation Agreement
This Cancellation Agreement (this "Agreement") is entered into as of February
10, 1998, by and between Gum Tech International, Inc., a Utah corporation ("Gum
Tech"), and Xxxxxx Xxxx (Xxxx").
Whereas, Gum Tech granted to Xxxx incentive stock options pursuant to the Gum
Tech International, Inc. Stock Option Plan, as amended, as follows (the
"Options"): (i) Grant of Incentive Stock Option dated August 14, 1996 for the
right to purchase 50,000 shares of voting, common stock, no par value of Gum
Tech ("Common Stock"); (ii) Grant of Incentive Stock Option dated December 30,
1996 for the right to purchase 250,000 shares Common Stock; (iii) Grant of
Incentive Stock Option dated September 23, 1997 for the right to purchase
156,500 shares of Common Stock;
Whereas, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Gum Tech and Xxxx desire to cancel and terminate
the Options;
Now, therefore, Gum Tech and Xxxx hereby irrevocably cancel and terminate the
Options and any other rights to acquire shares of Common Stock from Gum Tech,
excluding the option to purchase 100,000 shares of Common Stock pursuant to a
Grant of Incentive Stock Option dated February 10, 1998.
This Agreement shall be construed in accordance with and goverened by the laws
of the State of Arizona. The parties agree that any action interpreting the
Agreement shall be brought in the superior Court in and for the County of
Maricopa, Arizona and they consent to the jurisdiction and venue of such a
court. This agreement shall be binding upon the heirs, successors and assigns of
the parties hereto.
Gum Tech International, Inc., a Utah
corporation
By: /s/ Xxxx Xxxxx
-------------------------------- --------------------------------
Xxxx Xxxxx, President XXXXXX XXXX
IN WITNESS WHEREOF, the 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/ Xxxx Xxxxx
--------------------------------------
Xxxx Xxxxx, President
ACCEPTED AND AGREED TO:
-----------------------------------------
XXXXXX XXXX
