SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No.__)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the commission Only (as permitted by rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
GUM TECH INTERNATIONAL, INC.
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(Name of Registrant As Specified In Its Charter)
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(Name of Person(s) Filing the Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)0 and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing:
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
GUM TECH INTERNATIONAL, INC.
246 East Watkins Street
Phoenix, Arizona 85004
(602) 252-1617
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NOTICE AND PROXY STATEMENT
For Annual Meeting of Shareholders
To Be Held on July 17, 1998
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To the Holders of Our Common Stock:
The Annual Meeting of Shareholders (the "Annual Meeting") of Gum Tech
International, Inc. (the "Company") will be held at the Company's headquarters,
246 East Watkins Street, Phoenix, Arizona 85004, on July 17, 1998 at 10:00 AM,
local time, to consider and act upon the following proposals:
1. To elect five directors to the Company's Board of Directors to serve
for the next year or until their successors are elected.
2. To approve an amendment to the Articles of Incorporation of the
Company increasing the number of authorized shares of the Company's
Common Stock from 10 million shares to 20 million shares.
3. To transact such other business as may properly come before the Annual
Meeting. Management is presently aware of no other business to be
considered at the Annual Meeting.
The Board of Directors has fixed the close of business on May 27, 1998 as
the record date for the determination of Shareholders entitled to receive notice
of and to vote at the Annual Meeting or any adjournment thereof. Shares of
Common Stock can be voted at the Annual Meeting only if the holder is present at
the Annual Meeting in person or by valid proxy. A copy of the Company's 1997
Annual Report to Shareholders which includes the Company's financial statements
was mailed with this Notice and Proxy Statement on or about June 8, 1998 to all
Shareholders of record as of the record date. The officers and directors of the
Company cordially invite you to attend the Meeting.
Your attention is directed to the attached Proxy Statement.
By Order of the Board of Directors,
/s/ William J. Hemelt
--------------------------------------
William J. Hemelt
Secretary
Phoenix, Arizona
June 8, 1998
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IMPORTANT
Shareholders are earnestly requested to DATE, SIGN and MAIL the enclosed proxy.
A postage paid envelope is provided for mailing.
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<PAGE>
GUM TECH INTERNATIONAL, INC.
246 East Watkins Street
Phoenix, Arizona 85004
(602) 252-1617
PROXY STATEMENT
Proxies in the form enclosed are solicited by the Board of Directors of Gum
Tech International, Inc., a Utah corporation (the "Company"), for use at the
1998 Annual Meeting of Shareholders of the Company ("Annual Meeting") to be held
on July 17, 1998, and any adjournment thereof. The proxy materials were mailed
on or about June 8, 1998 to shareholders (the "Shareholders") of record as of
the close of business on May 27, 1998 (the "Record Date").
A person soliciting the enclosed proxy has the power to revoke it at any
time before it is exercised by either: (i) attending the Annual Meeting and
voting in person; (ii) duly executing and delivering a proxy bearing a later
date; or (iii) sending written notice of revocation to the Secretary of the
Company at 246 East Watkins Street, Phoenix, Arizona 85004.
The Company will bear the cost of solicitation of proxies, including the
charges and expenses of brokerage firms and others who forward proxy materials
to beneficial owners of stock. Solicitation by the Company will be by mail,
except for any incidental personal solicitation made by directors, officers and
employees of the Company, who will receive no additional compensation therefor.
VOTING SECURITIES OUTSTANDING
As of May 27, 1998, the record date for shareholders entitled to vote at
the meeting, there were 6,136,460 outstanding shares of the Company's Common
Stock. Each share of Common Stock is entitled to one vote on each matter of
business to be considered at the Annual Meeting. Cumulative voting for directors
is not permitted. A majority of the issued and outstanding shares entitled to
vote, represented at the meeting in person or by proxy, will constitute a
quorum.
BOARD OF DIRECTORS
In General
At the Annual Meeting, five directors will be elected, each to hold office
until the Company's next annual meeting of Shareholders or until his successor
is elected and qualified. Cumulative voting is not permitted for the election of
directors. In the absence of instructions to the contrary, the person named in
the accompanying proxy will vote in favor of the election of each of the persons
named below as the Company's nominees for directors of the Company. All of the
nominees are presently members of the Board of Directors. Each of the nominees
has consented to be named herein and to serve if elected. It is not anticipated
that any nominee will become unable or unwilling to accept nomination or
election, but if such should occur, the person named in the proxy intends to
vote for the election in his stead of such person as the Board of Directors of
the Company may recommend.
For information regarding the nominees proposed for election at the Annual
Meeting, see "Information Concerning Directors, Nominees and Executive Officers"
in the following section.
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Information Concerning Directors, Nominees and Executive Officers
The following sets forth certain information with respect to directors,
nominees to the Board of Directors and executive officers of the Company with
the year in which each of the director's term expires in parentheses.
Name Age Position With Company and Tenure
---- --- --------------------------------
Bruce A. Jorgenson, M.D. 54 Chairman of the Board of Directors
since 1998 (1998)
Gary S. Kehoe 39 President since 1998, Chief Operating
Officer since 1995, Director (1998)
William D. Boone 50 Director since 1998 (1998)
William J. Hemelt 44 Secretary, Treasurer, Chief Financial
Officer since June, 1998 (Principal
Financial Officer)
W. Brown Russell, III 42 Director since 1998 (1998)
William A. Yuan 37 Director since 1998 (1998)
In February of 1998, Messrs. Kern, Kwait, Kessler, and Peckman resigned as
directors, in March 1998, William G. Meris resigned as a director, and in May
1998, Mr. Ratcliff resigned as a director. Jeffrey L. Bouchy resigned as
Principal Financial Officer in June 1998.
Bruce A. Jorgenson, M.D. is a pediatrician in Layton, Utah for Wee Care
Pediatrics, one of the largest pediatric care centers in the state of Utah. In
1986, Dr. Jorgenson founded Wee Care Pediatrics and was the sole proprietor
until April 1998, when he sold the practice to Kelson Physician Partners. Dr.
Jorgenson earned his Doctor of Medicine from Temple University in 1970 and
completed his residency in 1973. From 1973-1986, Dr. Jorgenson had a pediatric
practice in Philadelphia, Pennsylvania.
Gary S. Kehoe was employed by Planters/LifeSavers, a division of Nabisco
Food Group in various capacities, including Senior Food Technologist,
responsible for functional and nutriceutical products in the confectionery
division. He developed or co-developed several new technologies, processes, and
products, including CareFree, Bubble Yum, Fruit Stripe, and Beech Nut. Mr. Kehoe
currently is listed as inventor or co-inventor on 22 U.S. Patents filed by
Nabisco and Gum Tech. Mr. Kehoe left Nabisco in 1995 to join Gum Tech as a
director and Chief Operating Officer. He was responsible for the construction of
the manufacturing facility and for the research and development of gum products.
In February 1998 the board of directors appointed Mr. Kehoe as President on an
interim basis to reorganize and restructure the Company.
William D. Boone joined the Company in March 1998 as a Manufacturing
Process Engineer. Mr. Boone has 30 years experience in small business management
and sales growth. In 1976, Mr. Boone co-founded Trade Printers, Inc., a
Phoenix-based wholesale printing manufacturer. Mr. Boone was responsible for
increasing sales from start-up to $6 million annually.
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<PAGE>
William J. Hemelt joined the Company in June 1998 as it Chief Financial
Officer, Treasurer, and Secretary. From 1980 to 1997 Mr. Hemelt held a variety
of financial positions with the Arizona Public Service Company, Arizona's
largest utility, including 6 years as Treasurer and 4 years as Controller. Mr.
Hemelt earned a Master of Business Administration degree in 1976 and a Bachelor
of Science in Electrical Engineering from Lehigh University in 1974.
W. Brown Russell, III joined the Company in March 1998 as the Special
Advisor to the President. As a registered investment advisor, Mr. Russell has
operated Brown Russell Investment Services, Inc., a private money management
firm, since 1994. From 1987 to 1994, Mr. Russell was the President of Capital
Investment Properties, a real estate and property management firm based in
Athens, Georgia. During this time, Mr. Russell was also a partner in the law
firm of Russell & Russell. After graduating from the University of Georgia
School of Law in 1985, Mr. Russell clerked for Judge Thomas Reavley in the
United States 5th Circuit Court of Appeals. In 1980, Mr. Russell earned a Juris
Doctorate and Bachelor of Arts from the University of Georgia.
William A. Yuan is President and Chief Executive Officer of Reliance
Management, LLC, and Managing Director of Redwood Communications, an
entertainment, production, financing and distribution company of motion picture
films. From 1985 until 1996, Mr. Yuan was employed by Merrill Lynch and Salomon
Smith Barney in various positions, the last being Senior Vice President, Head of
Equity at Merrill Lynch. Mr. Yuan earned a Bachelor of Science in Economics from
Cornell University in 1983.
Significant Employees
Cecile E. Kehoe, age 45, began as a consultant to the Company in April
1996. In January 1997, Ms. Kehoe joined the Company as its Regulatory/Quality
Assurance Director. Ms. Kehoe is responsible for new product development,
regulatory compliance (FDA/OTC), clinical testing and quality assurance of the
products. From 1981 until joining the Company, she was employed by Pepsi- Cola
Research and Technical Services, lastly as their Senior Manager of the
Analytical Department. She earned Bachelor of Science and Master of Science
degrees from St. John's University in 1974 and 1979, respectively. Cecil is the
wife of Gary S. Kehoe.
Richard Sigtermans, age 29, is the Production Manager of the Company. From
October 1995 to September 1996 he was Manager of Quality Control and Information
Systems for the Company. Mr. Sigtermans is responsible for all aspects of
chewing gum production, including purchasing and planning. He also administers
the Company's management information systems. From 1991 to 1993, he was employed
by LifeSavers Company, a division of Nabisco Food Group, Inc., in its new
product development group. From 1993 until he joined the Company in October
1995, he was employed by Compac Corporation, a division of TriMas Corporation,
first as its Quality Project Coordinator and then as its Computer Operations
Supervisor. Mr. Sigtermans graduated from GMI Engineering and Management
Institute with a Bachelor of Science degree in 1991.
Shanna L. Gallo, age 35, was promoted to Controller for the Company in July
of 1996. Ms. Gallo is responsible for all aspects of the day-to-day accounting,
customer service and office management of the Company. From 1992 to 1996, Ms.
Gallo was employed by Food For Health, Inc., a Phoenix-based health food
distributor, as their Accounts Payable Manager. From 1987 to 1992, she was
employed at the University of California, Los Angeles as an accountant.
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<PAGE>
James A. Marini, age 37, started with the Company in September of 1997 as
the National Sales Manager. Mr. Marini's primary responsibilities are management
of the retail sales of the Company. From 1978 to 1997, Mr. Marini held several
positions with Taylor Supermarkets, an east coast supermarket chain, his last
being Vice President of Operations.
Mark B. Klein, age 48, started with the Company in September of 1997 as its
Marketing Manager. Mr. Klein's responsibilities include the development of
private label business and the marketing of the Company's branded products. From
1994 to 1997, he was President of Pay-Ezz Financial Group, a personal bill
paying franchisor. From 1986 to 1993, Mr. Klein was employed by Carter-Wallace
as its Vice President of Marketing in charge of OTC consumer products. He has
held other senior management position with major companies such as
Colgate-Palmolive, Inc., RJR Nabisco, Avis and London International (Schmidt
Laboratories). Mr. Klein earned his Bachelor of Arts degree in Economics from
Concordia University in Montreal, Canada in 1970.
Arthur Harding, age 56, started with the Company in November of 1995 as its
Human Resources Manager. Mr. Harding's responsibilities include all aspects of
human resources and governmental compliance matters. From 1984 to 1995, Mr.
Harding was employed by Food For Health, Inc., a Phoenix-based health food
distributor, as Vice President of Human Resources. From 1969 to 1984, Mr.
Harding held several positions with Greyhound/Dial, the last being Director of
National Safety and Security. Mr. Harding earned his Bachelor of Science degree
in Natural Sciences from San Francisco State in 1971.
Brenda Lum, age 37, returned to the Company in April 1998 as its
International Sales Manager. From 1992 until 1995, Ms. Lum was employed by
Proctor and Gamble as a Sales and Merchandising Account Executive for the
Cosmetics and Fragrance Division. From 1995 until 1997, Ms. Lum worked for the
Company as an International Sales Account Executive. In 1997 she was employed by
Irwin Naturals, Inc. as International Sales Manager. Ms. Lum earned her Bachelor
Arts in Communications from California State-Northridge in 1982.
Business of the Board of Directors
During the fiscal year ended December 31, 1997, the Company's Board of
Directors held seven meetings, either in person or by consent resolution. All
directors attended or participated in all of these meetings.
Audit Committee
In 1997 the Company's Board of Directors elected Dr. Bruce A. Jorgenson and
William A. Yuan to the Audit Committee. The functions of the Audit Committee are
to receive reports with respect to loss contingencies, the public disclosure or
financial statement notation of which may be legally required; annually review
and examine those matters that relate to a financial and performance audit of
the Company's employee plans; recommend to the Company's Board of Directors the
selection, retention and termination of the Company's independent accountants;
review the professional services, proposed fees and independence of such
accountants; and provide for the periodic review and examination of management
performance in selected aspects of corporate responsibility. The Audit Committee
held one meeting during fiscal 1997.
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<PAGE>
Compensation Committee
In 1997 the Company's Board of Directors elected Dr. Bruce A. Jorgenson and
William A. Yuan to the Compensation Committee. The functions of the Compensation
Committee are to review annually the performance of the chairman and president
and of the other principal officers whose compensation is subject to the review
and recommendation by the Committee to the Company's Board of Directors.
Additionally, the Compensation Committee is to review compensation of outside
directors for service on the Company's Board of Directors and for service on
committees of the Company's Board of Directors, and to review the level and
extent of applicable benefits provided by the Company with respect to
automobiles, travel, insurance, health and medical coverage, stock options and
other stock plans and benefits. The Compensation Committee held one meeting
during fiscal 1997.
Director Compensation
The Company's nonsalaried directors receive reimbursement for out-of-pocket
expenses incurred in attending Board of Directors' meetings and have been
granted stock options under the Company's 1995 Stock Option Plan.
Executive Compensation
The following table discloses certain compensation paid to the Company's
executive officers for the years ended December 31, 1995, 1996, 1997.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
------------------------------------- ------------------------ ----------
Other
Annual Restrict- All Other
Name and Compen- ed Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus sation Awards SARs Payouts sation
- ----------------------------------- ------------- ------------ ---------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary S. Kehoe President 1997 $84,333 $20,000(1) -0- -0- 88,000 -0- -0-
Chief Operating Officer
Jeffrey L. Bouchy (2) 1997 $78,000(3) -0- -0- -0- 9,000 -0- $56,408(4)
Former Chief Financial
Officer
Gerald N. Kern (5) Former 1997 $160,483(6) $36,080 -0- -0- 156,500(7) -0- -0-
Chief Executive Officer 1996 $56,250 -0- -0- -0- 300,000(8) -0- -0-
(1) Includes $10,000 that was accrued in 1997, but paid in 1998.
(2) Mr. Bouchy resigned in June 1998.
(3) Includes $6,000 automobile allowance paid by the Company.
(4) Represents proceeds from the sale of shares of the Company's stock Mr.
Bouchy received from exercise of options.
(5) Mr. Kern resigned in February 1998.
(6) Includes $9,600 automobile allowance paid by the Company.
(7) These options were subsequently canceled pursuant to Mr. Kern's termination
agreement (See "Related Transactions").
(8) Does not include an option to purchase 50,000 shares from Mr. Ratcliff at a
price of $2.00 per share.
</TABLE>
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<PAGE>
Option Grants in Last Fiscal Year
The following table provides information on option grants during the year
ended December 31, 1997 to the named executive officers:
Percentage of
Total Options
Granted to
No. of Employees in Exercise Expiration
Name Options Granted Fiscal Year(1) Price Date
- ----------------- --------------- -------------- -------- ----------
Gerald N. Kern 156,500 27.7% $10.75 9/22/2000
Gary S. Kehoe 88,000 15.6% $10.75 9/22/2000
Jeffrey L. Bouchy 9,000 1.6% $10.75 9/22/2000
(1) Percentage figure aggregates all stock options granted to respective
individuals during fiscal year 1997.
Aggregate Option Exercises in 1997 Fiscal Year And Year End Option Values
The following table provides information on the value of the named
executive officer's unexercised options at December 31, 1997. An aggregate of
144,000 shares of Common Stock were acquired upon exercise of options during the
year ended December 31, 1997.
Number of Unexercised Value of Unexercised
--------------------- --------------------
Options at Year End In-the-Money Options at Year End
------------------- --------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Richard Ratcliff 364,000 0 $1,911,000 0
Gerald N. Kern 100,000 0 $ 94,000 0
Gary S. Kehoe 238,000 0 $ 300,000 0
Jeffrey L. Bouchy 69,000 0 $ 43,125 0
Stock Option and Restricted Stock Plans
1995 Stock Option Plan. In March 1995, the Company adopted a stock option
plan (the "Plan") which provides for the grant of options intended to qualify as
"incentive stock options" and "nonqualified stock options" within the meaning of
Section 422 of the United States Internal Revenue Code of 1986 (the "Code").
Incentive stock options are issuable only to eligible officers, directors, key
employees and consultants of the Company.
The Plan is administered by the Compensation Committee of the Board of
Directors which is comprised of a majority of nonemployee directors. At December
31, 1997, the Company had reserved 2,000,000 shares of Common Stock for issuance
under the Plan. Under the Plan, the Board of Directors determines which
individuals shall receive options, the time period during which the options may
be partially or fully exercised, the number of shares of Common Stock that may
be purchased under each option, and the option price.
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The per share exercise price of the Common Stock may not be less than the
fair market value of the Common Stock on the date the option is granted. No
person who owns, directly or indirectly, at the time of the granting of an
incentive stock option, more than 10% of the total combined voting power of all
classes of stock of the Company is eligible to receive incentive stock options
under the Plan unless the option price is at least 110% of the fair market value
of the Common Stock subject to the option on the date of grant.
No options may be transferred by an optionee other than by will or the laws
of descent and distribution, and during the lifetime of an optionee, the option
may only be exercisable by the optionee. Options may be exercised only during
the time the option holder is an employee of the Company or within 90 days of
termination of such employment if a Registration Statement on Form S-8 ("S-8")
covering the underlying shares was effective as of the date of termination of
employment. If an S-8 covering the underlying shares was not effective on the
date of termination, then the employee has one year following termination to
exercise the options. If an employee is terminated for cause, any unexercised
options will be canceled as of the date of such termination. Options under the
Plan must be granted within three years from the effective date of the Plan and
the exercise date of an option cannot be later than three years from the date of
grant. Any options that expire unexercised or that terminate upon an optionee's
ceasing to be employed by the Company become available once again for issuance.
Shares issued upon exercise of an option will rank equally with other shares
then outstanding.
As of April 21, 1998, 1,428,500 unexercised options had been granted under
the Plan to executive officers and directors and were currently outstanding. The
per share exercise prices represented the fair market value of the Company's
Common Stock at the date such options were granted, based on prior sales of the
Company's Common Stock. The table below sets forth the total number of options
issued to each executive officer and director of the Company and the exercise
price. Mr. Kehoe's options are exercisable until April 2000. Mr. Bouchy's
options are exercisable until June 25, 2001. All other options are exercisable
at various times through June 2001. To date, a total of 750,000 stock options
have been exercised. All of the options set forth in the table below, except
those exercisable by Mr. Boone and Mr. Russell at $6.88, and those exercisable
by Dr. Jorgenson at $11.44, have been revalued.
Total Number of
Name of Executive Options Outstanding Exercise Price
----------------- ------------------- --------------
Gary S. Kehoe 188,000 5.63
Jeffrey L. Bouchy 70,000 5.85
William J. Hemelt 50,000 5.50
William A. Yuan 20,000 5.81
William D. Boone 70,000 5.63 to 6.88
W. Brown Russell, III 70,000 5.63 to 6.88
Bruce A. Jorgenson 20,000 11.44
---------
TOTAL 438,000
===========
In addition to the above options issued to executive officers and
directors, 247,500 options have been issued to employees ranging in exercise
price from $5.625 to $6.125 per share.
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<PAGE>
The Company issued 100,000 options outside the Plan to two persons (50,000
options exercisable at $4.50 per share and 50,000 options exercisable at $5.00
per share) for investment banking consulting services.
Ownership of Common Stock by Nominees For Directors, Executive Officers and
Certain Shareholders
The following table sets forth information, as of the date of this report,
with respect to the number of shares of Common Stock of the Company beneficially
owned by individual directors, by all directors and officers of the Company as a
group, and by persons known by the Company to own more than 5% of the Company's
Common Stock. All shares are owned beneficially and of record. The address of
all persons (unless otherwise noted in the footnotes below) is in care of the
Company at 246 E. Watkins Street, Phoenix, Arizona 85004.
Percent of
Name of Beneficial Owner Number of Common Stock
and Address Shares Owned
- ------------------------ ------------ --------------
Gerald Kern(1) 100,000 1.6%
Richard Ratcliff(2) 423,000 6.8%
Gary S. Kehoe(3) 278,000 4.4%
Jeffrey L. Bouchy(4) 70,000 1.1%
William D. Boone(5) 101,630 1.7%
William A. Yuan(6) 20,070 *
W. Brown Russell, III(7) 73,500 1.2%
Bruce A. Jorgenson(8) 190,700 3.1%
William J. Hemelt (9) 50,000 *
All directors and
officers as a group
(nine persons) 1,306,900 19.44%
- ----------
* Less than 1%.
(1) Includes options to purchase 100,000 shares at $5.81 per share until
February 1999.
(2) Includes 62,400 shares owned by Members of the Ratcliff's immediate family.
(3) Includes options to purchase 188,000 shares at $5.625 per share until April
2001.
(4) Includes options to purchase 70,000 shares at $5.85 per share until June
24, 2001.
(5) Includes options to purchase 20,000 shares at $6.88 per share until
February 2001 and 50,000 shares at $5.625 per share until April 2001.
(6) Includes options to purchase 20,000 shares at $5.81 per share until
February 2001. Mr. Yuan's address is 228 Main Street, Venice, California
90291.
(7) Includes options to purchase 20,000 shares at $6.88 per share until
February 2001 and 50,000 shares at $5.625 per share until April 2001.
(8) Includes options to purchase 20,000 shares at $11.44 per share until June
2000. Dr. Jorgenson's address is 1580 Antelope Drive, #100, Layton, Utah
84041.
(9) Includes options to purchase 50,000 shares at $5.50 per share until June
2001.
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<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act") requires the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC"). Such officers, directors and shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms were
required for such persons, the Company believes that during the fiscal year
ended December 31, 1997, all filing requirements applicable to its officers,
directors, and greater than ten percent beneficial owners were complied with
except as set forth below. Three of the Company's officers and directors
(Messrs. Kehoe, Kern and Bouchy) inadvertently failed to file one Form 4 each
during the calendar year ended December 31, 1997. Messrs. Kehoe, Kern and Bouchy
subsequently filed a Form 5 reporting the Form 4 transactions.
CERTAIN TRANSACTIONS
In October 1995, the Company borrowed $1,550,000 from a group of four
lenders (the "1995 Bridge Loan"). As additional compensation for the 1995 Bridge
Loan, the Company issued an aggregate of 465,000 common stock purchase warrants
to the lenders, each such warrant exercisable to purchase one share of the
Company's Common Stock at $2.00 per share exercisable in perpetuity. The Bridge
Loan bore interest at 8% per annum and was repaid in April 1996 using proceeds
from a public offering in April, 1996, which is further described below. The
Bridge Loan lenders included Brett Bouchy, a former principal shareholder of the
Company, who received 165,000 warrants, and Robert H. Wood, a former director of
the Company, who received 75,000 warrants.
In March 1996, Brett Bouchy sold the 165,000 warrants acquired pursuant to
the Bridge Loan for $5.00 per warrant. 100,000 warrants were sold to Gary S.
Kehoe and 65,000 to Robert H. Wood, both of whom are officers and directors of
the Company. Messrs. Kehoe and Wood paid the purchase price by issuing
promissory notes to Mr. Bouchy bearing interest at 9% per annum. The warrants
were not collateral for the promissory notes. The promissory notes are due the
earlier of (i) six months after the warrants are exercised, or (ii) if during
the period from April 24, 1997 until April 24, 2000 the closing price of the
Company's Common Stock on NASDAQ is $10.00 or more per share for five
consecutive trading days, then the promissory notes are due six months from the
last such trading day. If neither event occurs, the promissory notes become void
and of no value on April 24, 1999 and the warrants remain the property of
Messrs. Kehoe and Wood. Under no circumstances will the warrants become
returnable to Mr. Bouchy. In July, 1997, Mr. Kehoe sold the 100,000 warrants
acquired from Mr. Bouchy to Andrew Lessman for $6.88 per warrant and used the
proceeds to satisfy the promissory note to Mr. Bouchy. Mr. Lessman has not
exercised the warrants.
In December 1995, Dale Holdings, Inc. ("Dale"), a principal shareholder of
the Company owned by Riverlux Trust REG and Mr. Brett Bouchy, dissolved and
transferred 51% and 49%, respectively, of its Common Stock in the Company and
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<PAGE>
its loans receivable due from the Company to Riverlux Trust REG and Brett
Bouchy. Riverlux Trust REG and Brett Bouchy received 665,265 shares and 639,175
shares, respectively, of Dale's stockholdings in the Company and $433,500 and
$416,500, respectively, of Dale's loans receivable from the Company. The loans
were repaid out of proceeds of the 1996 Public Offering, which is further
described below. Subsequently, Riverlux Trust REG and Mr. Bouchy each sold
20,000 shares of the Company's Common Stock to Mr. Kehoe for $2.00 per share.
Through a private equity placement in January 1996, the Company raised
$3,095,875 to repurchase and retire 619,175 shares of the Company's Common Stock
held by a former principal shareholder.
In January 1996, Earl K. Manhold III, a former director of the Company,
exercised options to purchase 60,000 shares of the Company's Common Stock at
$2.00 per share and sold such shares to John E. Epert, who was the Company's
Chairman at that point for the same price per share.
Since 1994, the Company has purchase an ingredient in its ChromaTrim gum
product from Interhealth Nutritionals, Inc., ("Interhealth"), a company in which
Mr. Ratcliff was formerly a member of the Board of Directors. The Company did
not pay a different price for the ingredient during the time Mr. Ratcliff was a
member of Interhealth's Board of Directors and the Company believes that the
price it has paid and currently pays for the ingredient is fair, reasonable and
consistent with prices charged by unaffiliated suppliers.
In January 1996, the Company loaned Mr. Epert, who is a former officer and
director, $150,000 bearing interest at 8% per annum due January 29, 1998. The
loan was extended until April 15, 1998, and was repaid in full on that date.
On February 10, 1998, the Company entered into a Settlement Agreement and
Release with Mr. Kern pursuant to his resignation as Chief Executive Officer.
The Agreement includes a severance package including payment of $200,000, the
forgiveness of $116,000 of debt and officer's advances owed to the Company, and
100,000 Company stock options which are exercisable by Mr. Kern for up to one
year at $5.81 per share upon cancellation of all of his existing options.
$50,000 of the cash payment to Mr. Kern is being held in trust for 120 days
subject to a mutual non-disparagement clause.
The Company believes that the terms of all agreements described above which
involve the Company's officers, directors, principal shareholders or affiliates
are fair, reasonable and consistent with terms that the Company could obtain
from unaffiliated third parties. All future agreements with officers, directors,
principal shareholders and affiliates will be approved by a majority of the
Company's disinterested directors.
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Company's Articles of Incorporation currently authorize the Company to
issue ten million shares of Common Stock. The Board of Directors has approved,
subject to Shareholder ratification, an amendment to Article IV of the Company's
Articles of Incorporation, to increase the number of authorized shares of Common
Stock from ten million shares to twenty million shares.
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The text of Article IV, if amended, will read as follows:
The total number of shares of capital stock that may be issued by the
Corporation is Twenty One Million (21,000,000) shares. Of these
21,000,000 shares, Twenty Million (20,000,000) shall be designated
"Common Stock" and One Million (1,000,000) shares shall be designated
"Preferred Stock."
The text of the remainder of Article IV of the Company's Articles of
Incorporation will not be changed if the proposed amendment is approved.
The proposed increase in the number of shares of authorized Common Stock
will ensure that shares can be issued if needed in connection with future equity
financings, acquisitions, stock splits, stock dividends, and other corporate
purposes. The Board of Directors believes that it is beneficial to the Company
to have the additional shares available for such purposes without delay or the
necessity of an additional special Shareholders' meeting. The Company has no
immediate plans, arrangements, commitments, or understandings with respect to
the issuance of any of the additional shares of Common Stock which would be
authorized by the proposed amendment.
No further action by the Company's Shareholders would be necessary to issue
the additional shares of Common Stock unless required by applicable law or
regulatory agencies or by the rules of any stock exchange on which the Company's
securities may then be listed.
The holders of any of the additional shares of Common Stock issued in the
future would have the same rights and privileges as the holders of the shares of
Common Stock currently authorized and outstanding.
As stated above, the Company has no immediate plans, arrangements,
commitments, or understandings with respect to the issuance of any additional
shares of Common Stock which would be authorized by the proposed amendment.
However, the increased authorized shares could be used to make a takeover
attempt more difficult such as by using the shares to make a counteroffer for
the shares of the bidder or by selling shares to dilute the voting power of the
bidder. As of this date, the Board is unaware of any effort to accumulate the
Company's shares or to obtain control of the Company by means of a merger,
tender offer, solicitation in opposition to management or otherwise.
Characteristics of Common Stock
The holders of Common Stock elect all directors and are entitled to one
vote per share on all matters submitted to a vote of the Shareholders.
Shareholders are entitled to receive dividends when, as and if declared by the
Board out of funds legally available for that purpose. Upon any liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share pro-rata in any distribution to Shareholders. Holders of Common Stock
have no preemptive, subscription or conversion rights.
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Shareholders of the Company do not have preemptive rights to subscribe for
or purchase any shares of Common Stock that may be issued in the future. Shares
of Common Stock generally may be issued by the Board for any proper corporate
purpose without further Shareholder action, unless required by applicable laws,
rules or regulations.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The principal independent public accounting firm utilized by the Company
during the fiscal years ended December 31, 1997, was Angell & Deering,
independent certified public accountants (the "Auditors"). It is presently
contemplated that the Auditors will be retained as the principal accounting firm
to be used by the Company throughout the fiscal year ending December 31, 1998.
The Company anticipates that a representative of the Auditors will attend the
Annual Meeting for the purpose of responding to appropriate questions. At the
Annual Meeting, a representative of the Auditors will be afforded an opportunity
to make a statement if the Auditors so desire.
ELECTION OF DIRECTORS
(Proposal No. 1)
At the Annual Meeting, the Company will seek the election of Bruce A.
Jorgenson, M.D., Gary S. Kehoe, William D. Boone, W. Brown Russell, III, and
William Yuan as directors, each to hold office until the Company's next annual
meeting of Shareholders or until his successor is elected and qualified.
Required Vote
The five nominees receiving the highest number of votes cast at the Annual
Meeting will be elected.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF BRUCE A.
JORGENSON, M.D., GARY S. KEHOE, WILLIAM D. BOONE, W. BROWN RUSSELL,
III, AND WILLIAM YUAN.
AMENDMENT TO THE ARTICLES OF INCORPORATION INCREASING THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK
(Proposal No. 2)
The Board of Directors will seek the approval of an amendment to the
Company's Articles of Incorporation increasing the number of authorized shares
of the Company's Common Stock from 10 million shares to 20 million shares.
Required Vote
The affirmative vote of a majority of the outstanding Common Stock is
required for the approval of the amendment to the Company's Articles of
Incorporation.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT TO THE ARTICLES
OF INCORPORATION.
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PROPOSALS BY SHAREHOLDERS
Any shareholder desiring to have a proposal included in the Company's proxy
statement for its 1999 Annual Meeting must deliver such proposal (which must
comply with the requirements of Rule 14a-8 promulgated under the Securities
Exchange Act of 1934) to the Company's principal executive offices not later
than March 19, 1999.
OTHER MATTERS
The Company's Board of Directors is not presently aware of any matters to
be presented at the meeting other than those described above. However, if other
matters properly come before the meeting, it is the intention of the persons
named in the accompanying proxy to vote said proxy on such matters in accordance
with their judgment.
ANNUAL REPORT
A copy of the Company's 1997 Annual Report to Shareholders which includes
the Company's financial statements for the fiscal year ended December 31, 1997,
was mailed with this Notice and Proxy Statement on or about June 8, 1998 to all
shareholders of record on May 27, 1998. The Company will provide the Company's
complete Annual Report on Form 10-KSB at no charge to any requesting person who
sets forth a good faith representation that he or she was a beneficial owner of
the Company's Common Stock on May 27, 1998.
By Order of the Board of Directors,
/s/ William J. Hemelt
-------------------------------------
William J. Hemelt
Secretary
Phoenix, Arizona
June 8, 1998
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GUM TECH INTERNATIONAL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints GARY S. KEHOE and WILLIAM
J. HEMELT with full power of substitution, the true and lawful attorney and
proxy of the undersigned, to attend the Annual Meeting of the Shareholders of
GUM TECH INTERNATIONAL, INC. (the "Company") to be held at the Company's
headquarters located at 246 E. Watkins Street, Phoenix, Arizona 85004, on July
17, 1998 at 10:00 a.m., local time., and any adjournments thereof, and to vote
the shares of Common Stock of the Company standing in the name of the
undersigned, as directed below, with all the powers the undersigned would
possess if personally present at the meeting.
Proposal No. 1: To elect five directors to the Company's Board to serve for
the next year or until their successors are elected.
Nominees: BRUCE A. JORGENSON, M.D., GARY S. KEHOE, WILLIAM D. BOONE,
W. CROWN RUSSELL, III, AND WILLIAM A. YUAN
____ VOTE for all nominees except those whose names are written on the
line provided below (if any).
__________________________
____ VOTE WITHHELD on all nominees
PLEASE PROMPTLY DATE, SIGN AND RETURN IN THE ENCLOSED ENVELOPE.
Proposal No. 2: To authorize an amendment to the Company's Articles of
Incorporation to increase the number of authorized shares of Common Stock
from 10 million shares to 20 million shares.
____ VOTE for the amendment to the Articles of Incorporation.
____ VOTE against the amendment to the Articles of Incorporation.
____ VOTE WITHHELD on proposal.
This proxy will be voted in accordance with the directions indicated herein. If
no specific directions are given, this proxy will be voted for approval of all
nominees listed herein, for approval of the proposals listed herein and, with
respect to any other business as may properly come before the meeting, in
accordance with the discretion of the proxies.
DATED:_______________, 1998
-----------------------------------
(Signature)
-----------------------------------
(Signature)
When signing as executor,
administrator, attorney, trustee or
guardian, please give full title as
such. If a corporation, please sign
in full corporate name by president
or other authorized officer. If a
partnership, please sign in
partnership name by authorized
person. If a joint tenancy, please
have both joint tenants sign.
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