SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 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 Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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1) Title of each class of securities to which transaction applies:
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to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
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paid previously. Identify the previous filing by registration statement
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4) Date Filed:
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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 August 11, 1999
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To the Holders of Our Common Stock:
The Annual Meeting of Shareholders (the "Annual Meeting") of Gum Tech
International, Inc. will be held at the Phoenix Airport Marriott, 1101 N. 44th
Street, Phoenix, Arizona, on August 11, 1999 at 10:00 AM, local time, to
consider and act upon the following proposals:
1. To elect five directors to Gum Tech's Board of Directors to serve
for the next year or until their successors are elected; and
2. 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 July 14, 1999
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 our 1998 Annual
Report to Shareholders which includes our financial statements was mailed with
this Notice and Proxy Statement on or about July 19, 1999 to all Shareholders of
record as of the record date. We cordially invite you to attend the Meeting.
Your attention is directed to the attached Proxy Statement.
By Order of the Board of Directors,
William J. Hemelt
Secretary
Phoenix, Arizona
July 15, 1999
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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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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 ("Gum Tech"), for use at our
1999 Annual Meeting of Shareholders (the "Annual Meeting") to be held on August
11, 1999. The proxy materials were mailed on or about July 19, 1999 to
shareholders of record as of the close of business on July 14, 1999 (the "Record
Date").
VOTING SECURITIES OUTSTANDING
As of July 8, 1999, there were 7,508,345 outstanding shares of our
common stock. Each share of our 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
At the Annual Meeting, five directors will be elected, each to hold
office until our 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 our director nominees. 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 our Board of Directors 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.
REVOCATION OF PROXIES
Should you submit the enclosed proxy, you have 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.
SOLICITING PROXIES
We 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. Our solicitation will be by mail, except for any
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incidental personal solicitation made by our directors, officers and employees,
who will receive no additional compensation for such solicitations.
The information contained in this Proxy Statement should be reviewed in
conjunction with the financial statements, notes to financial statements,
independent auditors' reports and other information included in our 1998 Annual
Report to stockholders that was mailed with this Proxy Statement to all
stockholders of record on the Record Date.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
At the Annual Meeting, we 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 our 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.
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 Gum Tech.
NAME AGE POSITION WITH COMPANY AND TENURE
---- --- --------------------------------
Bruce A. Jorgenson, M.D. 55 Chairman of the Board of Directors since
1998, Director since 1997
Gary S. Kehoe 40 President since 1998 and Chief Operating
Officer and Director since 1995
William D. Boone 51 Director since 1998
William J. Hemelt 45 Secretary, Treasurer, Chief Financial Officer
since June 1998 (Principal Financial Officer)
W. Brown Russell, III 43 Director of Investor Relations and Legal and
Director since 1998
William A. Yuan 38 Director since 1998
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BRUCE A. JORGENSON, M.D. joined the Board of Directors in 1997 and was
elected Chairman in 1998. Dr. Jorgenson is a pediatrician in Layton, Utah for
Wee Care Pediatrics, one of the largest pediatric care centers in 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.
GARY S. KEHOE joined Gum Tech in 1995 as a Director and Chief Operating
Officer. He was responsible for construction and start-up of Gum Tech's
manufacturing facility and research and development of gum products. In February
1998, the Board of Directors elected Mr. Kehoe President of Gum Tech. Prior to
joining us in 1995, Mr. Kehoe was employed by Planters/LifeSavers, a division of
Nabisco Food Group in various capacities, including Senior Food Technologist,
where he was responsible for functional and nutriceutical products in the
confectionery division. He developed or co-developed several new technologies,
processes, and products involving CareFree, Bubble Yum, Fruit Stripe, and Beech
Nut chewing gums and is listed as inventor or co-inventor on 22 U.S. patents
filed by Nabisco and Gum Tech.
WILLIAM D. BOONE was elected to the Board of Directors in February
1998, and served as a manufacturing consultant to Gum Tech in early 1998. Mr.
Boone has 30 years experience in small business management and sales growth,
including co-founding and co-managing Trade Printers, Inc., a Phoenix-based
wholesale printing manufacturer which he subsequently sold.
WILLIAM J. HEMELT joined us in June 1998 as our Chief Financial
Officer, Treasurer, and Secretary. From 1980 to 1997, Mr. Hemelt held a variety
of financial positions with 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 and a Bachelor of Science in
Electrical Engineering from Lehigh University.
W. BROWN RUSSELL, III was elected to the Board of Directors in February
1998. Subsequently, he joined us as Special Advisor to the President before
assuming his current position as Director of Investor Relations and Legal.
Before joining us, Mr. Russell operated Brown Russell Investment Services, Inc.,
a private money management firm. 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. Mr. Russell earned a Juris
Doctorate and Bachelor of Arts from the University of Georgia.
WILLIAM A. YUAN has been a Director of Gum Tech since 1998. Mr. Yuan is
President and Chief Executive Officer of Reliance Management, LLC. From 1985
until 1996, Mr. Yuan was employed by Merrill Lynch and Salomon Smith Barney in
various positions. Mr. Yuan earned a Bachelor of Science in Economics from
Cornell University.
All Directors' terms are on an annual basis. In February 1998, Messrs.
Gerald N. Kern, Robert J. Kwait, Jack Kessler, and Paul Peckman resigned as
directors. In March 1998, William G. Meris resigned as a director. In May 1998,
Mr. Richard Ratcliff resigned as a director. Jeffrey L. Bouchy resigned as
Principal Financial Officer in June 1998.
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MEETINGS OF THE BOARD OF DIRECTORS
AND ITS COMMITTEES
During the fiscal year ended December 31, 1998, our Board of Directors
held 11 meetings, either in person or by consent resolution. All Directors
attended or participated in at least 75% of those meetings and the total number
of meetings held by all committees of the board on which they served.
AUDIT COMMITTEE
In 1998, our Board of Directors elected Dr. Bruce A. Jorgenson, William
Boone, William A. Yuan, and W. Brown Russell 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 our employee plans; recommend to our
Board of Directors the selection, retention, and termination of the our
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 1998.
COMPENSATION COMMITTEE
In 1998 our Board of Directors elected Dr. Bruce A. Jorgenson and
William Boone to the Compensation Committee. The functions of the Compensation
Committee are to review annually the performance of the President and other
principal officers whose compensation is subject to the review and
recommendation by the Compensation Committee to our Board of Directors.
Additionally, the Compensation Committee is to review compensation of outside
directors for service on our Board of Directors and on committees of our Board
of Directors, and to review the level and extent of applicable benefits we
provided 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 1998.
DIRECTOR COMPENSATION
Our nonemployee directors receive reimbursement for out-of-pocket
expenses incurred in attending Board of Directors' meetings and have been
granted stock options under our 1995 Stock Option Plan.
EXECUTIVE COMPENSATION
The following table discloses certain compensation paid to our Chief
Executive Officers for the years ended December 31, 1996, 1997, and 1998. Mr.
Gerald N. Kern, our former Chief Executive Officer, resigned in February 1998
and was replaced by Mr. Gary S. Kehoe. No other Gum Tech executive officer, as
of December 31, 1998, earned more than $100,000 in annual compensation during
the fiscal year ended December 31, 1998.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
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ANNUAL COMPENSATION AWARDS PAYOUTS
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SECURITIES
RESTRICTED UNDERLYING
NAME AND OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS(S) SARS PAYOUTS COMPENSATION(1)
- ------------------ ---- --------- ------- ------------ ---------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary S. Kehoe 1998 $ 95,000 $30,000(2) 0 0 188,000(3) 0 $ 2,847
President, Chief 1997 $ 84,333 $20,000(4) 0 0 88,000(5) 0 $ 880
Operating Officer 1996 $ 75,417 $20,000 0 0 100,000(5) 0 0
Gerald N. Kern (6) 1998 $ 25,000(6) 0 $1,200(7) 0 100,000(8) 0 $200,500(9)
Former Chief 1997 $160,483 $36,080 $8,800(7) 0 156,500(10) 0 $ 1,750
Executive Officer 1996 $ 56,250 0 0 0 300,000(10)(11) 0 0
</TABLE>
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(1) Includes Gum Tech matching contributions under our SRA/IRA defined
contribution program.
(2) Includes $10,000 that was accrued in 1998 but paid in 1999.
(3) Represents options originally granted in prior years that were repriced in
1998. (See footnote 5 below). In accordance with SEC rules, these options
are reported as options granted during the fiscal year 1998 as a result of
the repricing of these options in April 1998. See "Repricing of Options"
for additional information regarding this repricing.
(4) Includes $10,000 that was accrued in 1997 but paid in 1998.
(5) Each option was repriced to $5.625 per share in April 1998, equal to the
fair market value on the date of repricing.
(6) Mr. Kern resigned in February 1998.
(7) Automobile allowance paid to Mr. Kern.
(8) Represents options granted pursuant to Mr. Kern's termination agreement
(See "Related Transactions").
(9) Includes $200,000 severance payment pursuant to Mr. Kern's termination
agreement (See "Related Transactions").
(10) These options were subsequently canceled pursuant to Mr. Kern's termination
agreement.
(11) Excludes option to purchase 50,000 shares acquired from Mr. Ratcliff,
former Board Chairman and Chief Executive Officer.
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants during the
year ended December 31, 1998 to the named executive officers:
INDIVIDUAL GRANTS
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NUMBER OF
SECURITIES PERCENT OF
UNDERLYING TOTAL OPTIONS/ EXERCISE
OPTIONS/SARS SARS GRANTED PRICE
TO EMPLOYEES IN (PER EXPIRATION
NAME GRANTED FISCAL YEAR (1) SHARE) DATE
----- ------- --------------- -------- ----------
100,000(1) 11.0% $5.625 12/30/99
Gary S. Kehoe 88,000(1) 9.7% $5.625 9/23/00
Gerald N. Kern 100,000(2) 11.0% $5.81 2/10/99
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(1) Represents options originally granted in prior years that were repriced in
1998. In accordance with SEC rules, these options are reported as options
granted during the fiscal year 1998 as a result of the repricing of these
options in April 1998. See "Repricing of Options" for additional
information regarding this repricing.
(2) Represents options granted pursuant to Mr. Kern's termination agreement
(See "Related Transactions").
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
The following table provides information on the value realized by the
exercise of options by the named executive officers during 1998 and the value of
the named executive officer's unexercised options at December 31, 1998.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN-THE-MONEY OPTIONS/
ACQUIRED FISCAL YEAR-END SARS AT FISCAL YEAR-END
ON --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary S. Kehoe 50,000 $175,000 144,000 44,000 $297,000 $90,750
Gerald N. Kern 100,000 $142,501 0 0 0 0
</TABLE>
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REPRICING OF OPTIONS
In April 1998, our Board of Directors approved a repricing of all
outstanding options held by employees, including officers, of Gum Tech. In
connection with this repricing, the Board of Directors determined that the
imbalance between the original exercise price of the options held by the
employees and the lower market price of the common stock that prevailed in early
1998 was not an appropriate incentive to achieve our long-term goals. The
repriced options have exercise prices of $5.625 per share, equal to the fair
market value on the date of repricing. Except for the new exercise price, the
terms of the options remain the same.
Bruce Jorgenson, Chairman
Gary S. Kehoe
William Yuan
William Boone
W. Brown Russell
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires our officers and directors, and persons who own more than ten
percent of a registered class of our 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 us 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, we believe that during the fiscal year ended December
31, 1998, all filing requirements applicable to its officers, directors, and
greater than ten percent beneficial owners were complied with except as set
forth below.
In connection with the 1998 repricing of his options, Gary S. Kehoe
filed his 1998 Form 5 in April, 1999.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of July 6, 1999, with
respect to the number of shares of our common stock beneficially owned by the
named executive officers, by individual directors, by all directors and officers
of Gum Tech as a group, and by persons known by Gum Tech to own more than 5% of
our 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 Gum
Tech at 246 E. Watkins Street, Phoenix, Arizona 85004.
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NAME OF BENEFICIAL NUMBER OF PERCENT OF COMMON
OWNER AND ADDRESS SHARES STOCK OWNED
- ------------------ --------- -----------------
Gary S. Kehoe(1) 234,000 3.1%
William D. Boone(2) 60,200 0.8%
William A. Yuan(3) 10,071 0.1%
W. Brown Russell, III(4) 63,500 0.8%
Bruce A. Jorgenson(5) 190,700 2.5%
William J. Hemelt (6) 31,000 0.4%
All directors and 589,471 7.5%
officers as a group(7)
(6 persons)
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(1) Includes options to purchase 144,000 shares at $5.625 per share.
(2) Includes options to purchase 10,000 shares at $6.88 per share and 50,000
shares at $5.625 per share.
(3) Includes options to purchase 10,000 shares at $5.81 per share.
(4) Includes options to purchase 10,000 shares at $6.88 per share and 50,000
shares at $5.625.
(5) Includes options to purchase 20,000 shares at $11.44 per share.
(6) Includes options to purchase 25,000 shares at $5.50 per share.
(7) Does not include shares beneficially owned by Gerald Kern, a former Chief
Executive Officer.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since 1994, we have purchased an ingredient used in our ChromaTrim gum
product from Interhealth Nutritionals, Inc., ("Interhealth"), a company in which
Mr. Ratcliff was formerly a member of the Board of Directors. Mr. Ratcliff was a
member of our Board until April 1998. We did not pay a different price for the
ingredient during the time Mr. Ratcliff was a member of Interhealth's Board of
Directors and we believes that the price we have paid and currently pay for the
ingredient is fair, reasonable, and consistent with prices charged by
unaffiliated suppliers.
On February 10, 1998, we 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 Gum Tech, and
options to acquire 100,000 shares of our common stock, which are exercisable by
Mr. Kern for up to one year at $5.81 per share. In addition, in connection with
the severance, all of Mr. Kern's existing options were canceled.
We believe that the terms of the agreements described above which
involve our officers, directors, principal shareholders or affiliates are fair,
reasonable, and consistent with terms that we could obtain from unaffiliated
third parties. All future agreements with officers, directors, principal
shareholders, and affiliates will be approved by a majority of our disinterested
directors.
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RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The principal independent public accounting firm utilized by Gum Tech
during the fiscal year ended December 31, 1998, was Angell & Deering,
independent certified public accountants (the "Auditors"). We presently
contemplate that the Auditors will be retained as our principal accounting firm
throughout the fiscal year ending December 31, 1999. We anticipate 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.
PROPOSALS BY SHAREHOLDERS
Any shareholder desiring to have a proposal included in our proxy
statement for our 2000 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 our principal executive offices not later than February
28, 2000.
OTHER MATTERS
Our 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 our 1998 Annual Report to Shareholders which includes our
financial statements for the fiscal year ended December 31, 1998, was mailed
with this Notice and Proxy Statement on or about July 19, 1999 to all
shareholders of record on July 14, 1999. We will provide our complete Annual
Report on Form 10-KSB at no charge to any requesting person.
GUM TECH INTERNATIONAL, INC.
William J. Hemelt
Secretary
Phoenix, Arizona
July 15, 1999
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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. to be held at Phoenix Airport Marriott, 1101 N.
44th Street, Phoenix, Arizona, on August 11, 1999 at 10:00 a.m., local time, and
any adjournments thereof, and to vote the shares of Gum Tech common stock
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 Gum Tech'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. BROWN 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.
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:_______________, 1999
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(Signature)
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(Signature)
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