Filed with the Securities and Exchange Commission on November 24, 1999.
Securities Act Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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GUM TECH INTERNATIONAL, INC.
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(Exact Name of registrant as specified in its Charter)
UTAH 2067 87-0842806
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State of other jurisdiction of Primary Standard Industrial (IRS Employer
incorporation or organization Classification Code No. I.D. Number)
246 E. WATKINS STREET
PHOENIX, ARIZONA 85004
(602) 252-1617
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(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
GARY KEHOE, PRESIDENT
GUM TECH INTERNATIONAL, INC.
246 E. WATKINS STREET
PHOENIX, ARIZONA 85004
(602) 252-1617
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(Name, address, including zip code, and telephone
number, including area code, of agent for service)
COPIES OF ALL COMMUNICATIONS TO:
RICHARD B. STAGG
SNELL & WILMER L.L.P.
ONE ARIZONA CENTER
PHOENIX, ARIZONA 85004-0001
(602) 382-6363
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of the Offering.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Proposed
maximum maximum
Title of each class of Amount to be offering price aggregate Amount of
securities to be registered registered(2) per unit(2) offering price(1) registration fee
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<S> <C> <C> <C> <C>
Common Stock, no par value 550,000 shares $16.125 $8,868,750 $2,465.51
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</TABLE>
(1) In the event of a stock split, stock dividend, or similar transaction
involving the registrant's common stock, in order to prevent dilution, the
number of shares registered will be automatically increased to cover the
additional shares in accordance with Rule 416(a) under the Securities Act
of 1933.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c).
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until this registration statement shall become
effective on such date as the commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE CANNOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS DECLARED EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED NOVEMBER 24, 1999
PROSPECTUS
GUM TECH INTERNATIONAL, INC.
Common Stock
550,000 Shares
John W. Frasco, Robert Wood, F, G & G Management Group, Inc., Andrew
Lessman, Next Millenium Capital Holdings, LLC, and CJB Consulting, Inc. are
offering to sell up to 550,000 shares of our common stock issuable upon exercise
of warrants and options that we issued to the selling stockholders. The selling
stockholders may sell some or all of the common stock to new purchasers through
ordinary brokerage transactions, directly to market makers of our common stock,
or through any of the other means described in the section entitled "Plan of
Distribution" beginning on page 12.
The selling stockholders will receive all of the proceeds from the sale of
the common stock, less any brokerage or other expenses of sale incurred by them.
We will receive up to $3,181,000 if the selling stockholders fully exercise
their options and warrants. We are paying for the costs of registering the
resale of the shares underlying the options and warrants held by the selling
stockholders.
Our common stock is traded on the Nasdaq National Market under the symbol
"GUMM."
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BEFORE PURCHASING ANY OF THE SHARES COVERED BY THIS PROSPECTUS, CAREFULLY
READ AND CONSIDER THE RISK FACTORS INCLUDED IN THE SECTION ENTITLED "RISK
FACTORS" BEGINNING ON PAGE 5. YOU SHOULD BE PREPARED TO ACCEPT ANY AND ALL OF
THE RISKS ASSOCIATED WITH PURCHASING THE SHARES, INCLUDING A LOSS OF YOUR ENTIRE
INVESTMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE SALE OF THE COMMON STOCK OR DETERMINED THAT THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS ILLEGAL FOR ANY
PERSON TO TELL YOU OTHERWISE.
The date of this prospectus is November 24, 1999.
<PAGE>
TABLE OF CONTENTS
PAGE
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Business.................................................................... 1
Risk Factors................................................................ 5
Use of Proceeds............................................................. 10
Selling Stockholders........................................................ 10
Description of Securities................................................... 11
Plan of Distribution........................................................ 13
Legal Matters............................................................... 14
Experts..................................................................... 14
Where You Can Find More Information......................................... 14
You should rely only on the information contained or incorporated by
reference in this prospectus and in any accompanying prospectus supplement. No
one has been authorized to provide you with different information.
The common stock is not being offered in any jurisdiction where the offer
is not permitted.
You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of the documents.
ii
<PAGE>
BUSINESS
SUMMARY
Gum Tech develops and manufactures specialty chewing gum products for
branded and private label customers, as well as products marketed under its own
brand. Specialty chewing gums include vitamins, herbals, and active
over-the-counter drug ingredients formulated to provide specific health-related
benefits to the user. Gum Tech manufactures and continues to develop specialty
chewing gums that are formulated to:
* promote oral hygiene and breath freshness;
* promote weight management;
* reduce pain;
* relieve indigestion;
* contribute to energy and endurance;
* reduce the risk of osteoporosis;
* reduce tobacco cravings; and
* relieve cold and flu symptoms.
A substantial majority of Gum Tech's sales currently are attributable to
products developed, manufactured and packaged by Gum Tech for marketing and sale
by major branded and private label consumer products companies such as Breath
Asure, Inc., Ranir/DCP, Inc., Heritage Consumer Products, Herbalife
International, Inc., and Pharma-Green Ltd. Gum Tech also is actively involved in
discussions with other major consumer product companies regarding the
development and formulation of a variety of additional specialty chewing gum
products.
In 1998, following a significant management restructuring, Gum Tech changed
its principal strategy from developing, manufacturing, and distributing its own
branded and private label gum products to developing, manufacturing, and
packaging specialty gum products for sale and distribution by major branded and
private label customers that have the capital resources and distribution
capability to promote and market specialty chewing gums on a large national and
international scale. Gum Tech adopted this change in strategy primarily because
it did not have the financial resources, name recognition, and distribution
capability to successfully market and distribute its gums on a wide scale basis.
Gum Tech operates the only stainless steel gum manufacturing facility in
the United States registered with the Food and Drug Administration to produce
over-the-counter (OTC) chewing gum products. Completed in 1996, Gum Tech
believes this facility is the only facility in the United States that currently
is capable of producing over-the-counter drugs in chewing gum form.
Through a joint venture with BioDelivery Technologies, Inc. (formerly Gel
Tech, Inc.), a California corporation, Gum Tech also is engaged in the
manufacture, marketing and distribution of health-related products using a
patent-pending, nasal gel technology. The initial product being developed and
marketed by this joint venture is Zicam(TM), a nasal gel formula that has been
formulated to reduce the severity and duration of the common cold.
<PAGE>
An initial internal study of Zicam(TM) has indicated that use of Zicam(TM)
reduced the duration of the common cold from an average of 10-14 days to 1-3
days. To conduct additional clinical studies and further develop, manufacture,
and market Zicam(TM), Gum Tech and BioDelivery Technologies entered into an
operating agreement under which both parties transferred their respective
interests in the patent rights to the nasal gel technology in exchange for
membership interests in Gel Tech LLC, an Arizona limited liability company. Gum
Tech has a 60% interest in the capital and profits of the joint venture and
parties affiliated with BioDelivery Technologies collectively own a 40% interest
in the capital and profits of the joint venture. In addition, as contemplated by
the operating agreement, Gum Tech contributed $3.5 million dollars to the joint
venture, which will be repaid to Gum Tech prior to any distributions to other
holders if Gel Tech is sold or otherwise liquidated. Because Zicam(TM) is in the
initial stages of production and distribution, there can be no assurance that
this product will be successful.
Gum Tech was incorporated in Utah in 1991. Gum Tech's principal executive
offices are located at 246 E. Watkins Street, Phoenix, Arizona and its telephone
number is (602) 252-1617.
STRATEGY
Gum Tech is pursuing the following business strategies:
* CONTINUE TO RESEARCH AND DEVELOP NEW SPECIALTY GUM PRODUCTS. Gum Tech
possesses considerable gum formulation expertise, and together with
its existing and potential customers, is developing new products in
the specialty chewing gum market. Gum Tech is uniquely positioned to
manufacture over-the-counter gum products because it possesses the
only stainless steel gum making facility in the United States
registered with the FDA to produce over-the-counter chewing gum
products.
* PARTNER WITH MAJOR CONSUMER PRODUCT COMPANIES TO INCREASE SALES. Since
early 1998, Gum Tech has pursued a strategy of partnering with major
consumer products companies that have the financial resources and
distribution capability to market and distribute specialty chewing gum
products on a national scale. Gum Tech expanded these relationships
significantly during 1998 with the addition of Breath Asure,
Ranir/DCP, Heritage Consumer Products, Pharma-Green Ltd. (an Israeli
company), and EcoDenT, among others.
* IMPROVE MANUFACTURING OPERATIONS TO ENHANCE EFFICIENCY AND INCREASE
PROFIT MARGINS. Gum Tech has recently expanded its operations,
including adding personnel and additional packaging and coating
equipment, to meet an expected increase in demand for several
products. Following this expansion of operations, Gum Tech is
continuing to take steps to increase its business and to lower the
costs of manufacturing its gum products.
* CONTINUE TO EFFECTIVELY MARKET GUM TECH BRANDED PRODUCTS. While Gum
Tech has changed its principal strategy to focus on contract
manufacturing for others, Gum Tech continues to support several of its
own branded products and believes that these products and related
marketing efforts provide a showcase for new product concepts and
demonstrate Gum Tech's expertise in developing new gum formulations.
* EFFECTIVELY MANAGE THE DEVELOPMENT AND GROWTH OF THE GEL TECH LLC
JOINT VENTURE AND THE MANUFACTURING AND MARKETING OF ZICAM(TM).
Zicam(TM) is a new product that Gum Tech believes represents an
opportunity for substantial growth in its revenues. In order to
realize this growth in revenues, however, Gum Tech must effectively
manage the development and growth of its joint venture with
BioDelivery Technologies and Zicam(TM) must achieve significant market
acceptance. In addition, Gum Tech has contributed $3.5 million to Gel
Tech LLC to fund its initial capital requirements to develop,
manufacture, and market Zicam(TM), including the costs necessary to
conduct an independent clinical study.
2
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PRODUCT INFORMATION
The table below describes certain information related to specific chewing
gum products currently manufactured by Gum Tech for other consumer products
companies.
<TABLE>
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PRODUCT BENEFITS TO USER MARKET DISTRIBUTED BY
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<S> <C> <C> <C>
Breath Asure Dental Gum(TM) Promotes oral hygiene and breath freshness Oral Care Breath Asure
Private label dental gums Promotes oral hygiene and breath freshness Oral Care Ranir/DCP
AcuTrim(R) Promotes weight management OTC drug Heritage Consumer Products
Aspergum(R) Pain relief OTC drug Heritage Consumer Products
Chooz(R) Antacid and prevents osteoporiasis OTC drug Heritage Consumer Products
Herbalife NRG(R) Improves energy & endurance Dietary supplement Herbalife
Herbalife Chew Slim(R) Promotes weight management Dietary supplement Herbalife
Pharma-Green seven varieties Various Dietary supplement Pharma-Green Ltd.
Brain Gum(R) Improves brain function Dietary supplement KR Research, Inc.
</TABLE>
Gum Tech also markets the following products under the Gum Tech brand: Ginseng,
Chew & Soothe(R), CitrusSlim(R), Chromatrim(R), Calcium, Zone(TM),
DentaHealth(R), and Love Gum(R).
MANUFACTURING AND PACKAGING
The manufacture of specialty chewing gums involves:
* storing bulk raw materials and "fine" raw materials, such as flavor,
colors and active ingredients;
* producing and mixing the gum base in large stainless steel mixers;
* extruding the gum into selected sizes and shapes;
* coating the gum, generally with a sugarless coating solution;
* branding the product if required;
* packaging the gum in blister packages; and
* packaging the blisters, according to customer specifications, for
shipment.
All of Gum Tech's gum products contain one or more active ingredients which
are added either to the gum center in the mixing stage or included in the
coating solution.
Prior to commencing production of the chewing gum, Gum Tech records lot
numbers for all ingredients, examines and files certificates of ingredients,
performs quality control tests, and sanitizes equipment and utensils. Gum Tech
personnel conduct additional quality control tests throughout the manufacturing
process. Gum Tech manufactures its products in compliance with good
manufacturing procedures requiring written standard operating procedures.
Gum Tech manufactures all of its gum products, including those marketed and
distributed by others. In 1998, Gum Tech added significantly to its coating and
packaging capability and secured an additional gum rolling line to meet an
anticipated increase in demand for its gums.
3
<PAGE>
COMPETITION
Although the specialty gum market is emerging as a market category distinct
from the traditional, established chewing gum market, Gum Tech and the companies
to whom it sells face significant competition in each of the four categories in
which they operate. These categories include oral care products, OTC drugs,
smoking cessation products, and dietary supplements. In the oral care products
market, Gum Tech manufactures products for Breath Asure and Ranir/DCP, which
compete directly with Arm & Hammer dental gum, Trident Advantage and V-6 dental
gum. Gum Tech manufactures OTC drug-related gum products, including Aspergum, an
analgesic, Chooz, an antacid/calcium supplement, and AcuTrim, a dietary gum.
Each of these products competes generally with analgesics, antacids, and dietary
products produced and marketed by major consumer products companies. Gum Tech is
evaluating opportunities in the smoking cessation market, which is currently
dominated by the Nicorette product marketed by Pharmacia and Upjohn. In the
dietary supplement market, Gum Tech's various gum products compete with a large
number of non-gum dietary supplement products.
Competitive factors in the chewing gum industry include price, flavor, and
name recognition resulting from media advertising. Gum Tech currently does not
have the capital resources, marketing and distribution networks, product name
recognition, and advertising budget to produce or introduce chewing gum brands
that could compete effectively with the multi-national chewing gum manufacturers
and large specialty chewing gum marketers. Accordingly, Gum Tech has adopted a
strategy of partnering with major branded and private label customers that
possess the resources and capabilities needed to market and distribute gum
products on a wide scale basis.
Gum Tech also faces significant competition from a large number of major
drug companies involved in selling cold and flu products that will compete
directly with Zicam(TM). Most of these competitors have greater name
recognition, more established brands, wider distribution capabilities and
greater financial and marketing resources than Gum Tech.
FDA AND OTHER GOVERNMENT REGULATION
Gum Tech is subject to various Federal, state and local laws affecting its
business. All of Gum Tech's products are subject to regulation by the FDA,
including regulations with respect to labeling of products, approval of
ingredients in products, claims made regarding the products, and disclosure of
product ingredients. In addition, some of Gum Tech's products are considered
"drugs," which require that the manufacture of such products comply with "good
manufacturing practices" mandated by the FDA, which prescribes specific
requirements and procedures for the manufacture of FDA-regulated drug products.
If Gum Tech fails to comply with these requirements and procedures, the FDA has
the right to restrict the sale of or remove such products from the market. Gum
Tech believes that all of its products comply with all regulatory requirements
including the FDA manufacturing standards and practices for drug products.
Advertising claims made by Gum Tech with respect to its products also are
subject to the jurisdiction of the FDA and the Federal Trade Commission. In both
cases, Gum Tech is required to obtain scientific data to support any advertising
or labeling of health claims it makes concerning its products.
In addition, Gum Tech's chewing gum manufacturing facility is subject to
regulation by various governmental agencies including state and local licensing,
zoning, land use, construction and environmental regulations and various health,
sanitation, safety and fire codes and standards. Suspension of certain licenses
or approvals, due to failure to comply with applicable regulations or otherwise,
could interrupt Gum Tech's manufacturing operations. Gum Tech also is subject to
federal and state laws establishing minimum wages and regulating overtime and
working conditions.
4
<PAGE>
TRADEMARKS, TRADE NAMES, AND PROPRIETARY RIGHTS
Gum Tech owns a perpetual non-exclusive license to use Microdent(TM), a
plaque-reducing agent, in its coated chewing gum products. Microdent is the
critical ingredient in the chewing gums manufactured and packaged by Gum Tech
for Breath Asure and Ranir/DCP.
Gum Tech routinely seeks trademark protection from the United States Patent
Office ("USPO") and from similar agencies in foreign countries for chewing gum
brands. Despite these protections, Gum Tech may not be able to successfully
defend any trademarks granted to it against claims from or use by competitors.
In addition, trademark applications may not be approved by the USPO or any
similar foreign agency.
Gum Tech considers some of its chewing gum formulations and processes to be
proprietary in nature and relies upon a combination of nondisclosure agreements,
other contractual restrictions and trade secrecy laws to protect this
proprietary information. Despite these precautions, these steps may not be
adequate to prevent misappropriation of Gum Tech's proprietary information and
Gum Tech's competitors could independently develop chewing gum formulations and
processes that are substantially equivalent or superior to those developed by
Gum Tech.
EMPLOYEES
As of October 31, 1999, Gum Tech's gum operations employed 73 individuals,
including 3 executive officers, 54 manufacturing and warehouse personnel, 4
research and development personnel, and 12 administrative/sales personnel. As of
October 31, 1999 Gel Tech employed 6 executive and administrative personnel.
RISK FACTORS
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS AND FINANCIAL CONDITION
Our future operating results and financial condition depend on a number of
factors that we must successfully manage in order to achieve favorable future
operating results. The following potential risks and uncertainties, together
with those mentioned elsewhere in this report, could affect our future operating
results, financial condition and the market price of our common stock.
WE HAVE INCURRED SIGNIFICANT LOSSES AND MAY NOT BECOME PROFITABLE
We began operations in February 1991 and have a limited operating history
upon which potential investors may evaluate our performance. We reported
significant losses for the last three years and for the first three quarters of
1999. We can give no assurance that future operations will be profitable. The
likelihood of our success must be considered relative to the problems,
difficulties, complications and delays frequently encountered in connection with
the development and operation of a new business, the significant change in
strategy in early 1998, and the development and marketing of Zicam(TM), a new
product.
OUR RELIANCE ON A FEW CUSTOMERS MAY NEGATIVELY IMPACT OUR FINANCIAL RESULTS
The shift in our chewing gum strategy in early 1998 to a focus on contract
manufacturing has made our chewing gum operations dependent for sales and future
growth on a few customers. These customers include Herbalife, Breath Asure,
Ranir, Heritage Consumer Products and PharmaGreen. While the decision to partner
with these firms relieves Gum Tech of the direct responsibility of marketing
products, it does introduce a dependability on these customers to market their
products. Further, we are at risk for their non-payment or late payment for
amounts owed us. While Gum Tech intends to add to this portfolio of customers to
reduce the risk of non-performance by any single customer, there can be no
assurance that we will be successful in that effort.
5
<PAGE>
OUR INABILITY TO PROVIDE SCIENTIFIC PROOF FOR PRODUCT CLAIMS MAY ADVERSELY
AFFECT OUR SALES
The marketing of certain of our chewing gum and nasal gel products,
including Zicam(TM), involves claims that such products assist in weight loss,
promote dental hygiene, and reduce the duration of the common cold, among
others. Under FDA and FTC rules, we are required to obtain scientific data to
support any health claims we make concerning our products. Although we have not
provided nor been requested to provide any scientific data to the FDA, we have
obtained such scientific data for all of our products. There can be no assurance
that the scientific data we have obtained in support of such claims will be
deemed acceptable by the FDA or FTC, should either agency request any such data
in the future. If we are unable to provide support that is acceptable by the FDA
or the FTC, either agency could force us to stop making the claims in question
or restrict us from selling the affected products.
FDA AND OTHER GOVERNMENT REGULATION MAY RESTRICT OUR ABILITY TO SELL OUR
PRODUCTS
We are subject to various federal, state and local laws affecting our
business. Our chewing gum and nasal gel products are subject to regulation by
the FDA, including regulations with respect to labeling of products, approval of
ingredients in products, claims made regarding the products, and disclosure of
product ingredients. If we do not comply with these regulations, the FDA could
force us to stop selling the affected products or incur substantial costs in
adopting measures to maintain compliance with these regulations.
Our advertising claims regarding our products are subject to the
jurisdiction of the FTC as well as the FDA. In both cases we are required to
obtain scientific data to support any advertising or labeling health claims we
make concerning our products, although no pre-clearance or filing is required to
be made with either agency. If we are unable to provide the required support for
such claims, the FTC may stop us from making such claims or require us to stop
selling the related product.
WE CANNOT INSURE THAT ZICAM(TM) WILL BE A SUCCESSFUL PRODUCT
In 1999, Gel Tech LLC, a joint venture in which we hold a 60% interest in
profits and capital, launched a new homeopathic cold remedy known as Zicam(TM).
Although initial internal studies have indicated that Zicam(TM) can
significantly reduce the duration and severity of the common cold, no
independent study has yet been completed supporting this claim. In addition,
even if an independent study is eventually published that supports the efficacy
of Zicam(TM), there is no guarantee that the product will achieve widespread
acceptance by the market. If any unanticipated problem arises concerning the
efficacy of Zicam(TM) or the product fails to achieve widespread market
acceptance for any reason , our prospects for our future operating results would
be adversely affected.
WE MAY BE UNABLE TO MEET DEMAND FOR OUR NEW PRODUCTS
To the extent Zicam(TM) or any other new product we introduce achieves
widespread market acceptance and generates significant demand, we may be unable
to produce and deliver sufficient quantities of the product to meet our
customers' demands on a timely basis. If so, we could lose opportunities to sell
larger quantities of the product and damage relationships with distributors
whose orders could not be timely filled. This problem, if encountered, could be
particularly damaging if we are not able to meet customer demand during the cold
season, when we expect demand for sales of Zicam(TM) to peak.
6
<PAGE>
UNANTICIPATED PROBLEMS ASSOCIATED WITH PRODUCT DEVELOPMENT COULD DELAY OR HINDER
INTRODUCTION OF NEW PRODUCTS
We may experience unanticipated difficulties in developing new products
that could delay or prevent the introduction of those products. We may be
dependent in the near future upon chewing gum products that are currently being
developed. If we are unable to develop new chewing gum products on a timely
basis, our business, operating results, and financial condition could be
materially adversely affected.
WE MAY BE UNABLE TO SUCCESSFULLY EXPAND OUR OPERATIONS
We intend to continue expanding our manufacturing and marketing operations.
Expansion will place substantial strains on our newly retained management and
our operational, accounting, and information systems. Successful management of
growth will require us to improve our financial controls, operating procedures,
and management information systems, and to train, motivate, and manage our
employees.
In addition, to the extent that actual demand for our products in the
future is less than anticipated, we may incur higher than necessary costs in
preparing for an anticipated growth in sales that does not materialize or
materializes more slowly than expected.
Failure to manage growth effectively would have a material adverse effect
on the results of our operations and our ability to execute our business
strategy.
TERMS OF SERIES A PREFERRED STOCK AND SENIOR SECURED NOTES COULD DEPRESS THE
PRICE OF OUR STOCK OR LEAD TO FORECLOSURE
The terms of the Series A Preferred Stock and Senior Secured Notes issued
in June 1999 contain a number of restrictive covenants that we must satisfy and
that require repayment of the Series A Preferred Stock and Senior Secured Notes
at various times during the two year period following the closing of that
offering. We generally have the ability to make these payments in shares of
stock rather than cash, which could depress the price of our common stock if
demand for our shares does not meet the increased number of shares being sold
into the market. In addition, failure to meet any of the restrictive covenants
or failure or inability to pay the required amounts under the Series A Preferred
Stock or the Senior Secured Notes when due will enable the holders of the Notes
to exercise a variety of remedies, including foreclosure of its security
interests in substantially all the assets of Gum Tech. In that event, Gum Tech's
operations and financial results will be severely and adversely affected and the
price of our common stock could decline significantly.
FAILURE TO SATISFY FINANCIAL COVENANTS WOULD TRIGGER ADVANCE REMEDIES
The terms of the Series A Preferred Stock and the Notes issued in June 1999
require us to meet a number of financial covenants on a quarterly basis while
the Notes remain outstanding, including cash, revenue, and EBITDA. If we fail to
satisfy any of these financial covenants, or otherwise breach any of the
negative covenants included in this financing, the applicable interest rate will
increase to 15% and the holders of the Notes may exercise a number of remedies,
including accelerating the principal and interest due on the Notes, or closing
on the collateral pledged to secure the Notes, and forcing conversion of the
Notes into common stock. There can be no assurance that we will be able to
satisfy the financial covenants contained in this agreement on an ongoing basis.
7
<PAGE>
THE LARGE NUMBER OF SHARES ELIGIBLE FOR IMMEDIATE AND FUTURE SALES MAY DEPRESS
THE PRICE OF OUR STOCK
Sales of substantial amounts of common stock in the open market or the
availability of a large number of additional shares for sale could adversely
affect the market price for the common stock. Substantially all of our
outstanding shares of common stock, as well as the shares underlying vested but
unexercised warrants and options, have either been registered for public sale or
may be sold under Rule 144 promulgated under the Securities Act. Therefore, all
of these shares may be immediately sold by the holders. A substantial increase
in the volume of trading in our stock may depress the price of our common stock.
WE MAY BE UNABLE TO PREVENT OTHERS FROM DEVELOPING SIMILAR PRODUCTS
We routinely seek trademark and patent protection from the United States
Patent Office ("USPO") and from similar agencies in foreign countries for
chewing gum brands and have done so for Zicam(TM). There can be no assurance
that we will be able to successfully defend any trademarks, trade names or
patents against claims from or use by competitors or that trademark, trade name
or patent applications will be approved by the USPO or any similar foreign
agency.
We consider some of our chewing gum formulations and processes to be
proprietary in nature and rely upon a combination of non-disclosure agreements,
other contractual restrictions and trade secrecy laws to protect such
proprietary information. There can be no assurance that these steps will be
adequate to prevent misappropriation of our proprietary information or that our
competitors will not independently develop chewing gum formulations and
processes that are substantially equivalent or superior to our own.
THE PRICE OF OUR STOCK MAY CONTINUE TO BE VOLATILE
The market price of our common stock has been highly volatile and may
continue to be volatile in the future. Factors such as our operating results or
public announcements may cause the market price of our stock to decline quickly.
Market prices for securities of many small capitalization companies have
experienced wide fluctuations in response to variations in quarterly operating
results, general economic indicators and other factors beyond our control.
WE MAY INCUR SIGNIFICANT COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS
We are subject to significant liability should use or consumption of our
products cause injury, illness or death. Although we carry product liability
insurance, there can be no assurance that our insurance will be adequate to
protect us against product liability claims or that insurance coverage will
continue to be available on reasonable terms.
WE MAY REQUIRE ADDITIONAL FINANCING, WHICH MAY NOT BE AVAILABLE ON ACCEPTABLE
TERMS
We may be required to seek additional debt or equity financing in the
future in order to fund anticipated expansion of our manufacturing activities.
There can be no assurance that such additional financing will be available on
acceptable terms or at all. Any future equity financing may involve substantial
dilution to the interests of our stockholders.
INABILITY TO RETAIN CURRENT MANAGEMENT COULD NEGATIVELY IMPACT OUR OPERATIONS
Our operations are dependent upon our ability to hire and retain qualified
management personnel and upon the continued services of our executive officers.
The loss of the services of any of our executive officers, whether as a result
of death, disability, or otherwise, could have a material adverse effect upon
our business.
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We experienced significant management and Board changes in 1998, including
the appointment of a new President and a new Chief Financial Officer. We have
entered into employment agreements with our current executive officers and have
applied for key man life insurance upon certain of their lives.
YEAR 2000 PROBLEMS MAY ADVERSELY AFFECT OUR OPERATIONS
We recognize the potential business impacts related to the Year 2000
computer system issue. The Year 2000 issue is one where computer systems may
recognize the designation "00" as 1900 when it means 2000, resulting in system
failure or miscalculations.
In recognition of the Year 2000 issue, we have been conducting a
comprehensive review of all information technology and non-information
technology systems that we use. This review includes testing and analysis, and
inquiries of third parties supplying information technology and non-information
technology systems, computer hardware and software products and components, and
other equipment.
As a result of our review to date, we have made modifications to our
software systems, including upgrades required of our principal
manufacturing/financial software system. In addition, we have identified
modifications that are required of our computer hardware system and other
information technology systems, including telecommunications systems. We expect
the necessary modifications to be completed by the end of 1999. Also, we will
have modifications to our non-information technology equipment, including our
manufacturing equipment, completed by year-end. Finally, we continue to review
our exposure from critical suppliers and customers to ascertain whether those
entities are taking the necessary steps to address their Year 2000 issues.
The cost of modifications to Gum Tech's systems and equipment have not had,
and are not expected to have, a material impact on our financial position or
results of operations.
At this time, we have not developed Year 2000 contingency plans, other than
the review and remedial actions described above, and do not intend to do so
unless we believe such plans are merited by the results of our continuing Year
2000 review.
If we or the third parties with which we have relationships were to cease
or not successfully complete Year 2000 remediation efforts, we could encounter
disruptions to our operations that could have a material adverse effect on our
business, financial condition, and results of operations. We also could be
materially and adversely impacted by widespread economic or financial market
disruption caused by Year 2000 computer system failures.
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USE OF PROCEEDS
The selling stockholders will receive all of the proceeds from the sale of
the common stock offered under this prospectus. If the selling stockholders
exercise all of their warrants and options, Gum Tech will receive gross proceeds
of approximately $3,181,000, which we anticipate would be used for general
corporate purposes. The selling stockholders may or may not exercise any or all
of the warrants and options.
SELLING STOCKHOLDERS
The table below lists the selling stockholders and other information
regarding the beneficial ownership of our common stock by each of the selling
stockholders. The second column lists the number of shares of common stock
beneficially owned by each stockholder or issuable to each selling stockholder
on August 16, 1999, assuming exercise of their warrants and options to acquire
shares of Gum Tech common stock. The selling stockholders are offering only the
shares of common stock that they may acquire upon exercise of all of their
warrants and options to acquire Gum Tech common stock, as indicated in the third
column. As each selling stockholder resells shares of common stock, we will file
prospectus supplements as necessary to update the number of shares of common
stock that each selling stockholder intends to sell, reflecting prior resales.
The fourth column assumes the sale of all of the shares offered by this
prospectus by each selling stockholder.
The information provided in the table below has been obtained from the
selling stockholders. The selling stockholders may sell all, some or none of
their shares in this offering. See "Plan of Distribution."
SHARES OWNED
AFTER OFFERING
NAME OF SELLING SHARES OWNED MAXIMUM NUMBER ------------------
STOCKHOLDER BEFORE OFFERING OF SHARES OFFERED NUMBER PERCENTAGE
----------- --------------- ----------------- ------ ----------
John W. Frasco 75,000 75,000 0 0
Robert Wood 185,000 65,000 120,000 1.53
F, G & G Management Group 150,000 150,000 0 0
Andrew Lessman 300,000 200,000 100,000 1.28
Next Millennium Capital
Holdings, LLC 30,000 30,000 0 0
CJB Consulting, Inc. 30,000 30,000 0 0
We are registering the shares for resale by the selling stockholders in
accordance with registration rights granted or offered to the selling
stockholders. We will pay the registration and filing fees, printing expenses,
listing fees, blue sky fees, if any, and fees and disbursements of our counsel,
but the selling stockholders will pay any underwriting discounts, selling
commissions and similar expenses relating to the sale of the shares. In
addition, we have agreed to indemnify the selling stockholders, and certain
affiliated parties against certain liabilities, including liabilities under the
Securities Act, in connection with this offering. The selling stockholders have
agreed to indemnify Gum Tech and our directors and officers, as well as any
person that controls us, against certain liabilities, including certain
liabilities under the Securities Act.
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DESCRIPTION OF SECURITIES
We are authorized to issue up to 20,000,000 shares of common stock and
1,000,000 preferred shares. As of November 19, 1999, we had 7,826,631 shares of
outstanding common stock and 1,200 shares of outstanding Series A Preferred
Stock.
Our Board of Directors has the authority, without further action by the
shareholders, to issue up to 1,000,000 shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions granted
to or imposed upon any series of unissued shares of preferred stock and to
determine the number of shares constituting any series and the designation of
the series, without any further vote or action by the shareholders.
The following summary of terms of the common stock and Series A Preferred
Stock is not complete and is subject to and qualified by reference to our
amended Articles of Incorporation, Restated Code of Bylaws, and by the
provisions of applicable law.
COMMON STOCK
The holders of our common stock are entitled to one vote per share on all
matters on which shareholders are entitled to vote. Subject to the rights of
holders of any class or series of shares, including preferred stock, having a
preference over the common stock as to dividends or upon liquidation, the
holders of our common stock are also entitled to dividends as may be declared by
our Board of Directors out of funds that are lawfully available, and are
entitled upon liquidation to receive pro rata the assets that are available for
distribution to holders of common stock. Holders of the common stock have no
preemptive, subscription, or conversion rights. The common stock is not subject
to assessment and have no redemption provisions.
SERIES A PREFERRED STOCK
We have authorized, issued, and outstanding 1,200 shares of our Series A
Preferred Stock. These shares have no par value per share and are automatically
convertible on June 2, 2001 into common stock at a conversion price equal to 80%
of the average trading price of the common stock during the 20 trading days
prior to the maturity date. The conversion provisions are subject to adjustment
if there is a stock split, dividend, distribution, reorganization,
reclassification, merger, consolidation, share exchange, or other similar
corporate transaction. Cumulative dividends on the shares accrue at the rate of
14% per annum and are payable in cash on June 30, September 30, December 31, and
March 31 for each period during which the shares are outstanding. We may not pay
dividends on the common stock or other series junior to these preferred shares
unless all accrued dividends have been paid on the preferred shares. On
liquidation, the holder of the preferred shares will be entitled to receive,
before any distribution to holders of our common stock or other series junior to
the preferred shares, liquidation distributions equal to the stated value of
$1,000 per preferred share, accrued and unpaid dividends, and default interest
on these unpaid dividends. We may redeem the Series A Preferred Stock at any
time and must redeem at least 16.7% of the current shares outstanding by March
31, 2000, on at least 2 days written notice, at a redemption price equal to 110%
of the stated value of the preferred shares plus accrued and unpaid dividends
being redeemed. If we choose to effect any redemption in shares of common stock
as opposed to cash, the price of the common stock will be based upon 95% of the
average trading price during the 20 trading days prior to the date of
redemption. The holders of the preferred shares have the right to call for a
mandatory redemption of up to all of the outstanding preferred shares upon an
event of default as described in our Certificate of Designations dated June 2,
1999 at a price of either $1,000 or $1,100 per share, depending on the nature of
the event of default. The preferred shares have no voting rights except as
otherwise provided by law or the Articles of Incorporation. Fisher Capital and
Wingate Capital own all of the Series A Preferred Shares.
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DESCRIPTION OF NOTES
On June 2, 1999, we issued $4,000,000 in aggregate principal amount of 8%
Senior Secured Redeemable Notes to Fisher Capital Ltd. and Wingate Capital Ltd.
Pursuant to the terms of these notes, we must repay the principal amount on June
2, 2001, and pay interest on the unpaid balance at 8% per annum from June 2,
1999, payable quarterly on June 30, September 30, December 31, and March 31 of
each year, commencing June 30, 1999 until the principal becomes due and payable.
To the extent permitted by applicable law, upon the occurrence of an event of
default, for the period from the date of the event of default to the date the
event of default is either cured or waived, the interest on the unpaid balance
of the notes will be increased to a rate of 15% per annum. We may prepay all or
any part of the notes at any time, and must prepay at least 16.7% of the current
outstanding balance of the notes by March 31, 2000 on a pro-rata basis at a
price equal to 110% of the principal amount so prepaid, plus accrued interest to
the date of prepayment. Prepayment may be made in cash or by issuance of a
number of shares of common stock determined by dividing the prepayment amount by
the average of the closing bid prices of the Common Stock for the 20 consecutive
trading days immediately preceding the date of the notice of prepayment. On
September 9, 1999, we redeemed $800,000 in aggregate principal amount of these
notes for Common Stock and on November 16, 1999, we redeemed an additional
$800,000 in aggregate principal amount of these notes for Common Stock.
Consequently, $2,400,000 in aggregate principal amount of these notes remains
outstanding.
OPTIONS
STOCK OPTION PLAN
Pursuant to our stock option plan, we have granted to our employees,
officers, directors, and an outside consultant or reserved for issuance options
to acquire 912,250 shares of our common stock. All of the options granted to
date have exercise prices equal to the market price of the underlying common
stock on the date the respective options were granted.
WHITEHILL ORAL TECHNOLOGIES
Gum Tech has or will grant options to acquire up to 70,000 shares of common
stock to the principals of Whitehill Oral Technologies. We granted options to
acquire 25,000 shares in June 1998 at the then market price of $11.44 per share.
We granted options to acquire an additional 25,000 shares in June 1999 at the
then current market price of $9.75 per share. We will grant options to acquire
an additional 20,000 shares in June 2000 at the then current market price.
LESSMAN OPTIONS
We granted options to purchase 200,000 shares of common stock to Andrew
Lessman on October 30, 1997 in connection with a joint marketing arrangement.
These options have an exercise price of $9.00 per share.
GEL TECH OPTIONS
We granted options to purchase 190,000 shares of common stock to the
officers of Gel Tech, L.L.C. in May 1999 in conjunction with their employment
agreements. These options have an exercise price of $9.61 per share.
WARRANTS
We have issued various warrants, including the following that are still
outstanding:
1995 BRIDGE LOAN FINANCING
In 1995, we issued warrants to acquire 290,000 shares of common stock at a
purchase price of $2.00 per share in connection with our bridge loan financing.
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1996 INITIAL PUBLIC OFFERING
In 1996, in connection with our initial public offering, we issued warrants
to acquire shares of common stock to the underwriters at a purchase price of
$8.0625 per share. Of the initial amount issued, warrants to acquire 75,668
shares of our common stock remain outstanding.
INTERCONTINENTAL CAPITAL CORPORATION
In connection with the financing by the selling stockholders, we issued
warrants to acquire an aggregate of 60,000 shares of our common stock to Next
Millennium Capital Holdings, LLC and CJB Consulting, Inc., (collectively,
"Intercontinental Capital Corporation") as partial payment of a finder's fee.
Pursuant to these warrants, 30,000 shares may be purchased at $11.70 per share
and 30,000 shares may be purchased at $15.00 per share.
1999 FINANCING
On June 2, 1999, we issued Fisher Capital Ltd. and Wingate Capital Ltd.
warrants to acquire a total of 300,000 shares of our common stock at an initial
price of $12.44 per share. The warrant exercise price and the number of shares
of common stock issuable upon exercise of these warrants will be adjusted if we
issue or sell any shares of common stock for a consideration per share less than
the market price of the common stock for the five consecutive trading days
immediately preceding the date of issue or sale. The holders of these warrants
have a right to participate in any pro rata distribution of rights to purchase
stock, warrants, securities, or other property to record holders of any class of
our common stock.
ANTI-DILUTION OF OPTIONS AND WARRANTS
The exercise price and number of shares purchasable upon exercise of our
options and warrants are subject to adjustment upon the occurrence of a stock
split, reverse stock split, or distribution to stockholders.
TRANSFER AGENT AND REGISTRAR
The transfer Agent and Registrar for our common stock is Corporate Stock
Transfer, Inc.
PLAN OF DISTRIBUTION
The selling stockholders (or, subject to applicable law, their pledgees,
donees, distributees, transferees or other successors in interest) may sell
shares from time to time in public transactions, on or off the Nasdaq National
Market, or in private transactions, at prevailing market prices or at privately
negotiated prices, including but not limited to, one or any combination of the
following types of transactions:
* ordinary brokers' transactions;
* transactions involving cross or block trades or otherwise on the
Nasdaq National Market;
* purchases by brokers, dealers or underwriters as principal and resale
by such purchasers for their own accounts pursuant to this prospectus;
* "at the market" to or through market makers or into an existing market
for the common stock;
* in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected
through agents;
* through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise); or
* in privately negotiated transactions.
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In effecting sales, brokers or dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate in the resales. The
selling stockholders may enter into hedging transactions with broker-dealers,
and in connection with those transactions, broker-dealers may engage in short
sales of the shares. The selling stockholders also may sell shares short and
deliver the shares to close out such short positions. The selling stockholders
also may enter into option or other transactions with broker-dealers that
require the delivery to the broker-dealer of the shares, which the broker-dealer
may resell pursuant to this prospectus. The selling stockholders also may pledge
the shares to a broker or dealer, and upon a default, the broker or dealer may
effect sales of the pledged shares pursuant to this prospectus.
Brokers, dealers, or agents may receive compensation in the form of
commissions, discounts, or concessions from selling stockholders in amounts to
be negotiated in connection with the sale. The selling stockholders and any
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales and any such
commission, discount or concession may be deemed to be underwriting
compensation.
Information as to whether any underwriter that the selling stockholders may
select, or any other broker-dealer, is acting as principal or agent for the
selling stockholders, the compensation to be received by any underwriter that
the selling stockholders may select or by any broker-dealer acting as principal
or agent for the selling stockholders, and the compensation to be paid to other
broker-dealers, in the event the compensation of such other broker-dealers is in
excess of usual and customary commissions, will, to the extent required, be set
forth in a supplement to this prospectus. Any dealer or broker participating in
any distribution of the shares may be required to deliver a copy of this
prospectus, including a prospectus supplement, if any, to any person who
purchases any of the shares from or through such dealer or broker.
We have advised the selling stockholders that during such time as they may
be engaged in a distribution of the shares they are required to comply with
Regulation M promulgated under the Securities Exchange Act. With certain
exceptions, Regulation M precludes any selling stockholder, any affiliated
purchasers and any broker-dealer or other person who participates in such
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase any security that is the subject of the distribution
until the entire distribution is complete. Regulation M also prohibits any bids
or purchases made in order to stabilize the price of a security in connection
with the distribution of that security. All of the foregoing may affect the
marketability of the common stock.
We will not receive any of the proceeds from the selling stockholders' sale
of their common stock.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Snell & Wilmer, L.L.P., Salt Lake City, Utah.
EXPERTS
The financial statements included in our Annual Report on Form 10-KSB for
the year ended December 31, 1998 which are incorporated by reference in the
Registration Statement of which this Prospectus forms a part, have been audited
by Angell & Deering, independent auditors, as stated in their report, and have
been included in reliance upon their expertise in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
GOVERNMENT FILINGS: We file annual, quarterly and special reports and other
information with the Securities and Exchange Commission. You may read and copy
any document that we file at the Commission's Public Reference Room at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional offices
located at 7 World Trade Center, 13th Floor, New York, New York 10048, and at
14
<PAGE>
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Please call the Commission at 1-800-SEC-0330 for more
information about the Public Reference Rooms. Most of our filings are also
available to you free of charge at the Commission's web site at
http://www.sec.gov.
STOCK MARKET: Our common stock is listed on the Nasdaq National Market and
similar information can be inspected and copied at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
REGISTRATION STATEMENT: We have filed a registration statement under the
Securities Act with the Commission with respect to the common stock offered
under this prospectus. This prospectus is a part of the registration statement.
However, it does not contain all of the information contained in the
registration statement and its exhibits. You should refer to the registration
statement and its exhibits for further information about Gum Tech and the common
stock offered under this prospectus.
INFORMATION INCORPORATED BY REFERENCE: The Commission allows us to
"incorporate by reference" the information we file with it, which means that we
can disclose important information to you by referring you to those documents.
The information incorporated by reference is an important part of this
prospectus, and information that we file later with the Commission will
automatically update and supersede this information. We have filed the following
documents with the Commission and they are incorporated by reference into this
prospectus:
* Our Annual Report on Form 10-KSB for the fiscal year ended December
31, 1998;
* Our Quarterly Report on Form 10-QSB for the three months ended March
31, 1999;
* Our Quarterly Report on Form 10-QSB for the six months ended June 30,
1999;
* Our Quarterly Report on Form 10-QSB for the nine months ended
September 30, 1999;
* Proxy Statement for our Annual Meeting of Stockholders held on August
11, 1999;
* Description of common stock contained in our Registration Statement on
Form SB-2 declared effective under the Securities Act on November 8,
1996 (File Number 333-14667);
* Description of Series A Preferred Stock contained in our Form 8-K
filed on June 9, 1999; (File Number 000-27646).
* All other documents subsequently filed by Gum Tech International, Inc.
pursuant to Sections 12, 13(a), 13(c), 14 and 15(d) of the Exchange
Act.
Please note that all other documents and reports filed under Sections 13(a),
13(c), and 14 or 15(d) of the Exchange Act following the date of this prospectus
and prior to the termination of this offering will be deemed to be incorporated
by reference into this prospectus and to be made a part of it from the date of
the filing of our reports and
documents.
You may request free copies of these filings by writing or telephoning us
at the following address:
William J. Hemelt
Gum Tech International, Inc.
246 E. Watkins Street
Phoenix, Arizona 85004
(602) 252-1617
15
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====================================== ======================================
We have not authorized any dealer,
sales representative, or other person
to give any information or represent
anything not contained in this
prospectus. You must not rely on any
unauthorized information. This
prospectus does not offer to sell or GUM TECH INTERNATIONAL, INC.
buy any common stock in any
jurisdiction where it would be
unlawful. Neither the delivery of this
prospectus nor any sale made hereunder
implies, under any circumstances, that
the information presented is correct
after the date of this prospectus.
---------------
PROSPECTUS
---------------
-----------------
TABLE OF CONTENTS
Page
----
Business.............................1
Risk Factors.........................5
Use of Proceeds.....................10
Selling Stockholders................10
Description of Securities...........11
Plan of Distribution................13
Legal Matters.......................14
Experts.............................14
Where You Can Find More
Information.......................14 ___________ ___, 1999
====================================== ======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.(1)
SEC Registration Fee............................................. $2,465.51
Printing Expenses................................................ $1,000.00
Legal Fees and Expenses.......................................... $2,500.00
Accounting Fees.................................................. $2,000.00
Miscellaneous Expenses........................................... $ 500.00
TOTAL............................................................ $8,465.51
(1) All expenses are estimated except the SEC Registration fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 5 of the Registrant's Bylaws provides as follows:
"ARTICLE 5. INDEMNIFICATION OF DIRECTORS,
OFFICERS, AGENTS AND EMPLOYEES
5.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation shall
indemnify any individual made a party to a proceeding because the individual is
or was a director or officer of the corporation, against liability incurred in
the proceeding, but only if such indemnification is both (i) determined
permissible and (ii) authorized, as such are defined in subsection (a) of this
section 5.1 (Such indemnification is further subject to the limitation specified
in subsection 5.1(c).)
5.1(a) DETERMINATION AND AUTHORIZATION. The corporation shall not
indemnify a director or officer under this section unless:
(1) a determination has been made in accordance with the procedures
set forth in section 16-10a-906(2) of the Act that the director
or officer met the standard of conduct set forth in subsection
(b) below; and
(2) payment has been authorized in accordance with the procedures set
forth in section 16-10a-906(4) of the Act based on a conclusion
that the expenses are reasonable, the corporation has the
financial ability to make the payment, and the financial
resources of the corporation should be devoted to this use rather
than some other use by the corporation.
5.1(b) STANDARD OF CONDUCT. The individual shall demonstrate that:
(1) his or her conduct was in good faith; and
(2) he or she reasonably believed that his or her conduct was in, or
not opposed to, the corporation's best interests; and
(3) in the case of any criminal proceeding, he or she had no
reasonable cause to believe his or her conduct was unlawful.
5.1(c) NO INDEMNIFICATION IN CERTAIN CIRCUMSTANCES. The corporation
shall not indemnify a director or officer under this Section 5.1 of Article 5:
(1) in connection with a proceeding by or in the right of the
corporation in which the director or officer was adjudged liable
to the corporation; or
(2) in connection with any other proceeding charging that the
director or officer derived an improper personal benefit, whether
or not involving action in his or her official capacity, in which
proceeding he or she was adjudged liable on the basis that he or
she derived an improper personal benefit.
II-1
<PAGE>
5.1(d) INDEMNIFICATION IN DERIVATIVE ACTIONS LIMITED. Indemnification
permitted under this section 5.1 in connection with a proceeding by or in the
right of the corporation is limited to reasonable expenses incurred in
connection with the proceeding.
5.2 ADVANCE OF EXPENSES FOR DIRECTORS AND OFFICER. If a determination is
made, following the procedures of section 16-10a-906(2) of the Act, that the
director or officer has met the following requirements and if an authorization
of payment is made following the procedures and standards set forth in section
16-10a-906(4) of the Act, then the corporation shall pay for or reimburse the
reasonable expenses incurred by a director or officer who is a party to a
proceeding in advance of final disposition of the proceeding, if:
5.2(a) the director or officer furnishes the corporation a written
affirmation of his or her good faith belief that he or she has met the standard
of conduct described in section 5.1;
5.2(b) the director or officer furnishes the corporation a written
undertaking, executed personally or on his or her behalf, to repay the advance
if it is ultimately determined that he or she did not meet the standard of
conduct; and
5.2(c)a determination is made that the facts then known to those
making the determination would not preclude indemnification under section 5.1 of
these bylaws or Part 9 of the Act.
5.3 INDEMNIFICATION OF AGENTS AND EMPLOYEES WHO ARE NOT DIRECTORS OR
OFFICERS. The board of directors may indemnify and advance expenses to any
employee or agent of the corporation who is not a director or officer of the
corporation to any extent consistent with public policy, as determined by the
general or specific actions of the board of directors.
5.4 INSURANCE. By action of the board of directors, notwithstanding any
interest of the directors in such action, the corporation may purchase and
maintain liability insurance on behalf of a person who is or was a director,
officer, employee, fiduciary or agent of the corporation, against any liability
asserted against or incurred by such person in that capacity or arising from
such person's status as a director, officer, employee, fiduciary or agent,
whether or not the corporation would have the power to indemnify such person
under the applicable provisions of the Act."
ITEM 16. EXHIBITS.
(a) Exhibits
Exhibit No. Title
----------- -----
3.1 Certificate of Incorporation of the Registrant and
Amendments thereto (2)
3.2 Certificate of Designations, Preferences and Rights
of Series A Convertible Preferred Stock of Gum Tech
International, Inc. dated June 2, 1999 (1)
3.3 Bylaws of the Registrant (2)
4.1 Form of Warrant granted to John W. Frasco, Robert
Wood, and F, G & G Management Group on July 18,
1995, October 5, 1995, and October 6, 1995
4.2 Form of Option granted to Andrew Lessman on October
30, 1997
II-2
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4.3 Form of Warrant granted to Next Millenium Capital
and CJB Consulting
5.1 Opinion of Snell & Wilmer L.L.P.
23.01 Consent of Angell & Deering
- ----------
(1) Incorporated by reference to the Registrant's Current Report on Form 8-K,
file number 000-27646, filed June 2, 1999.
(2) Incorporated by reference to the Registrant's Quarterly Report on Form
10-QSB filed on May 17, 1999, file number 000-27646.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes:
(a) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) That subject to the terms and conditions of Section 13(a) of the
Securities Exchange Act of 1934, it will file with the Securities and Exchange
Commission such supplementary and periodic information, documents and reports as
may be prescribed by any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred in that section.
(c) That any post-effective amendment filed will comply with the applicable
forms, rules and regulations of the Commission in effect at the time such
post-effective amendment is filed.
(d) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(e) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form S-3 and has caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Phoenix, Arizona, on November 24, 1999.
GUM TECH INTERNATIONAL, INC.
By /s/ Gary S. Kehoe
-------------------------------------
Gary S. Kehoe
President and Director
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ W. Brown Russell, III Chairman of the Board of November 24, 1999
- --------------------------- Directors, Director of Legal
W. Brown Russell, III and Investor Relations
/s/ William D. Boone Director November 24, 1999
- ---------------------------
William D. Boone
/s/ William J. Hemelt Secretary, Chief Financial November 24, 1999
- --------------------------- Officer (Principal Financial
William J. Hemelt Officer), Principal Accounting
Officer
/s/ Bruce A. Jorgensen Director November 24, 1999
- ---------------------------
Bruce A. Jorgensen
/s/ William A. Yuan Director November 24, 1999
- ---------------------------
William A. Yuan
II-4
<PAGE>
EXHIBIT INDEX
Exhibit No. Title
- ----------- -----
3.1 Certificate of Incorporation of the Registrant and Amendments
thereto (2)
3.2 Certificate of Designations, Preferences and Rights of Series A
Convertible Preferred Stock of Gum Tech International, Inc. dated
June 2, 1999 (1)
3.3 Bylaws of the Registrant (2)
4.1 Form of Warrant granted to John W. Frasco, Robert Wood, and F, G
& G Management Group on July 18, 1995, October 5, 1995, and
October 6, 1995
4.2 Form of Option granted to Andrew Lessman on October 30, 1997
4.3 Form of Warrant granted to Next Millenium Capital and CJB
Consulting
5.1 Opinion of Snell & Wilmer L.L.P.
23.01 Consent of Angell & Deering
(1) Incorporated by reference to the Registrant's Current Report on Form 8-K,
file number 000-27646, filed June 2, 1999.
(2) Incorporated by reference to the Registrant's Quarterly Report on Form
10-QSB filed on May 17, 1999, file number 000-27646.
PERPETUAL WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF GUM TECH INTERNATIONAL, INC.
This certifies that, for value received FG&G Management Group or registered
assigns (the "Warrant Holder") is entitled to purchase from Gum Tech
International, Inc. (the "Company"), subject to the terms and conditions hereof,
at any time, 150,000 fully paid and nonassessable shares of voting common stock,
no par value, of the Company (the "Common Stock") at the price of $2.00 per
share of Common Stock by surrendering this Warrant Certificate duly
countersigned by the Warrant Agent referred to below, with the Subscription Form
attached hereto duly executed, at the office of Corporate Stock Transfer,
Republic Plaza, 370 17th Street, Suite 2350, Denver, Colorado 80202 (the
"Warrant Agent") or at the office of its successor as Warrant Agent, and by
paying in full in lawful money of the United States, br by certified check, bank
draft, or postal or express money order payable in United States Dollars, to the
order of the Company, the purchase price for each share of Common Stock as to
which This Warrant Certificate is being exercised and upon compliance with and
subject to this exceptions set forth herein.
In case the Warrant Holder shall exercise this Warrant with respect to less
than all of the shares of Common Stock that may be purchased hereunder, a new
Warrant Certificate for the balance shall he countersigned and delivered to or
upon the order of the Warrant Holder.
This Warrant Certificate will not be valid and may not he transferred or
exercised unless manually countersigned by the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed by its President or Vice-President by manual or facsimile signature,
attested by its Secretary or Assistant Secretary, by manual or facsimile
signature.
Dated: GUM TECH INTERNATIONAL, INC., a
Utah corporation
By:
------------------------------------
Gary Kehoe President
ATTEST:
- ------------------------------
William Hemelt, Secretary
COUNTERSIGNED:
Corporate Stock Transfer, Inc., a Colorado corporation
Warrant Agent
By:
------------------------------
Carylyn Bell, President
<PAGE>
NEITHER THE WARRANTS EVIDENCED BY THIS WARRANT CERTIFICATE NOR THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANTS (THE "SECURITIES") HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE LAWS OF CERTAIN
STATES. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT. THE SECURITIES MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
SUCH STATE LAWS AS MAY BE APPLICABLE, OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
1. PERPETUAL WARRANT EXERCISE. The Warrant or Warrants represented by this
Warrant Certificate (the "Warrant") shall be perpetual and can be exercised in
the manner provided on the face of this Warrant.
2. PURCHASE PRICE. The purchase price for each share of Common Stock
purchasable pursuant to the exercise of the Warrants (hereinafter referred to as
the "Warrant Purchase Price") shall be $2.00 per shares (or shall be such amount
per share if and as adjusted as provided herein), payable as provided on the
face of this Warrant Certificate.
3. FRACTIONAL SHARES. Anything contained herein to the contrary
notwithstanding, the Company shall not be required to issue any faction of a
share of Common Stock in connection with the exercise or conversion of this
Warrant and in any case where the Warrant Holder would, except for the
provisions of this Section 3, be entitled under the terms of this Warrant
Certificate to receive a fraction of a share of Common Stock upon the exercise
of this Warrant, the Company shall, upon the exercise of the Warrant and receipt
of the Warrant Price, issue the largest number of whole shares Common Stock to
which this Warrant Certificate is entitled. The Company shall not be required to
make any cash or other adjustment in respect of such fraction of a share of
Common Stock to which the Warrant Holder would otherwise be entitled. The
Warrant Holder, by the acceptance of this Warrant, expressly waives its right to
receive a certificate for any fraction of a share of Common Stock or a
fractional Warrant upon exercise hereof
4. SUSPENSION OF EXERCISE. If any shares of Common Stock issuable upon the
exercise of this Warrant require registration or approval of any governmental
authority before such shares of Common Stock may be validly issued, then the
Company covenants that it will in good faith and as expeditiously as possible
endeavor to secure such registration or approval or to take such other action,
as the case may be; PROVIDED, HOWEVER, that in no event shall such shares of
Common Stock be issued, and the Company is hereby authorized to suspend the
exercise of all Warrants, for the period during which it is endeavoring to
obtain such registration or approval or to take such other action.
2
<PAGE>
5. TRANSFER. Subject to the restrictions contained in Section 7 below, this
Warrant Certificate may be exchanged and is transferable at the principal
corporate office of the Warrant Agent in the Denver Colorado by the registered
holder hereof or by its duly authorized representative or attorney, upon
surrender of this Warrant Certificate duly endorsed or accompanied (if so
required by the Company or the Warrant Agent) by a written instrument or
instruments of transfer satisfactory to the Company or the Warrant Agent. If the
right to purchase less than all of the shares of Common Stock covered hereby
shall be so transferred, the registered holder hereof shall be entitled to
receive a new Warrant Certificate or Warrant Certificates covering the aggregate
the whole number of shares of Common Stock with respect to which the right to
purchase shall not have been so transferred, and the transferee or transferees
shall be entitled to receive a new Warrant Certificate or Warrant Certificates
covering in the aggregate the remaining whole number of shares of Common Stock.
6. ADJUSTMENT TO SHARES. Except as otherwise herein expressly provided:
(a) STOCK DIVIDEND. In case the Company shall hereafter declare and pay
to the holders of shares of Common Stock a dividend in shares of Common Stock of
the Company, or declare a stock split, Warrant Holder shall, upon exercise of
the Warrant, be entitled to receive (in addition to the shares of Common Stack
purchased upon such exercise and without any payment other than the aggregate
Warrant Purchase Price for such shares assuming that no such stock dividend or
stock split had been declared) such additional shares of Common Stock as Warrant
Holder would have received as a dividend or in a stock split if they had
exercised the Warrant immediately prior to the date such dividend or stock split
was declared.
(b) REORGANIZATION. In case of any reorganization or recapitalization of
the Company (by reclassification of its outstanding shares of Common Stock or
otherwise), or its consolidation or merger with or into another corporation,
Warrant Holder shall, upon exercise of the Warrant, be entitled to receive, in
lieu of the shares of Common Stock which Warrant Holder would otherwise be
entitled to receive upon such exercise and without any payment in addition to
the aggregate Warrant Purchase Price for such shares assuming that no event
specified above had occurred, the shares of stock, cash or other consideration
which Warrant Holder would have received upon such reorganization,
recapitalization, consolidation or merger if immediately prior thereto Warrant
Holder had exercised the Warrant and had exchanged such shares of Common Stock
in accordance with the terms of such reorganization, recapitalization,
consolidation or merger.
7. INVESTMENT REPRESENTATION. Warrant Holder acknowledges that neither the
Warrant nor the shares of Common Stock to be delivered upon exercise of the
Warrant (the "Shares") have been registered under the Securities Act of 1933, as
amended, or applicable state securities laws. Warrant Holder represents that the
Warrants are being, and the Shares will be, acquired and/or purchased for
investment and not with a view to their distribution or resale. Warrant Holder
shall execute and deliver to the Company, as is applicable, on date of the
issuance of this Warrant (in the form attached hereto as EXHIBIT "A") and on the
date of each exercise (in the form attached hereto as EXHIBIT "B") an investment
3
<PAGE>
letter. Each stock certificate evidencing any of the Shares shall, if and when
delivered to Warrant Holder, bear on its face a restrictive legend substantially
in the following form:
"These securities have not been registered under the Securities Act of
1933, as amended. They may not be sold or otherwise disposed of in the
absence of an EFFECTIVE registration statement under that Act or an
opinion of counsel satisfactory to the Company that such registration
is not required."
8. SHAREHOLDER RIGHTS. No Warrant Holder, as such, shall be entitled to
vote or receive dividends or be deemed the holder of shares of Common Stock for
any purpose, nor shall anything contained in this Warrant Certificate be
construed to confer upon any Warrant Holder, as such, any of the rights of a
shareholder of the Company or any right to vote, give or withhold consent to any
action by the Company (whether upon any recapitalization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings or other action affecting shareholders, receive
dividends or subscription rights, or otherwise, until this Warrant shall have
been exercised and the shares of Common Stock purchasable upon the exercise
hereof shall have become deliverable as provided herein; PROVIDED, HOWEVER, that
any exercise of this Warrant on any date when the stock transfer books of the
Company shall be closed shall constitute the person or persons in whose name or
names the certificate or certificates for such shares of Common Stock are to be
issued as the record holder or holders thereof for all purposes at the opening
of business on the next succeeding day on which such stock transfer books are
open and this Warrant shall not be deemed to have been exercised, in whole or in
part as the case may be, until such date for the purpose of determining
entitlement to dividends on such Common Stock, and such exercise shall be at the
actual purchase price in effect at such date.
9. REGISTERED OWNER. The Company and the Warrant Agent may deem and treat
the registered holder hereof as the absolute owner of this Warrant Certificate
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company or the Warrant Agent) for all purposes and shall not be
affected by any notice to the contrary.
10. SUCCESSORS AND ASSIGNS. This terms and provisions of this Warrant shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors, legal representatives, executors and heirs.
11. AMENDMENT MODIFICATION OR WAIVER. No amendment, modification of waiver
of any condition, provision or term of this terms and provisions of this Warrant
shall be valid or of any effect unless made in writing, signed by the party to
be bound and specifying with particularity the nature and extent of such
amendment, modification or waiver.
4
<PAGE>
12. ENTIRE AGREEMENT. This Warrant contains the entire understanding and
agreement of the panics hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
13. COUNTERPARTS. This Warrant Certificate may be executed in two (2) or
more counterparts, each of which shall be considered one in the same agreement
and shall become EFFECTIVE when one or more counterparts have been executed by
each of the parties hereto and delivered to the other parties hereto.
Gum Tech International, Inc.,
a Utah corporation
By:_____________________________________
Name:___________________________________
Title:__________________________________
FG&G Management Group
By:_____________________________________
Name:___________________________________
Title:__________________________________
5
<PAGE>
SUBSCRIPTION FORM
(To Be Executed by the Warrant Holder If Warrant Holder Desires to
Exercise the Warrant in Whole or in Part)
To: Gum Tech International, Inc.
The undersigned (_____________)
Please insert Social Security or
other identifying number of Subscriber
hereby irrevocably elects to exercise the right of purchase represented by the
within Warrant Certificate for, and to purchase thereunder, _____ shares of
Common Stock provided for therein and tenders payment herewith to the order of
Gum Tech International, Inc. in the amount of $___________ The undersigned
requests that certificates for such shares of Common Stock be issued as follows:
Name:____________________________________
Address:_________________________________
Deliver to:______________________________
Address:_________________________________
and if said number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant Certificate for the
balance remaining of the shares of Common Stock purchasable under the within
Warrant Certificate be registered in the name of, and delivered to the
undersigned at the address stated below:
Address:_________________________________
Dated:____________ 19__ Signature
----------------------------------------
Signature must conform in all respects
to the name of Warrant Holder as
specified on the face of this Warrant
Certificate in every particular, without
alteration, enlargement or any change
whatever.
6
<PAGE>
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sell, assigns and transfer unto
_____________________________________________________________________ Warrants
evidenced by the within Warrant Certificate, and appoints Attorney to transfer
said Warrant Certificate and Warrants on the books of Gum Tech International,
Inc. with the full power of substitution in the premises.
Dated: , 19__
In the presence of:
- ----------------------------- ----------------------------------------
(Signature must conform in all respects
to the name of Warrant Holder as
specified on the face of this Warrant
Certificate in every particular, without
alteration, enlargement or any change
whatever, and the signature must be
guaranteed in the usual manner.)
Signature Guaranteed:
7
<PAGE>
EXHIBIT "A"
INVESTMENT LETTER
TO: GUM TECH INTERNATIONAL, INC.
In connection with the undersigned's acquisition of the Warrants to
purchase shares of voting common stock, no par value (the "Shares"), of Gum Tech
International, Inc. (the "Company"), the undersigned acknowledges, represents,
warrants, covenants end agrees as follows:
1. The undersigned represents that:
(a) It is acquiring the Warrant and will acquire the Shares for its own
account, for investment and not with a view to, or for resale in connection
with, the distribution thereof and that it has no present intention of
distributing the Warrants or the Shares;
(b) It personally possesses such knowledge end experience in financial and
business matters pertaining to the type of business conducted by the Company and
otherwise, that it is capable of evaluating the merits and risks of an
investment in the Warrant and the Shares;
(c) It is fully familiar with the Company and its business, operations,
condition (financial and other) assets, liabilities and prospects and has had
access to any aid nil material information it deems necessary or appropriate to
enable it to make an investment decision in connection with the acquisition of
the Warrant and the purchase of the Shares; and
(d) Its financial situation is such that it can afford to bear the economic
risk of holding the Warrant and the Shares for an indefinite period of time and
can afford to suffer a complete loss of its investment in the Warrant or in the
Shares.
2. The undersigned understands and acknowledges that:
(a) Neither the Warrant nor the Shares have been registered pursuant to the
Securities Act of 1933, as amended (the "Act"), or any state securities laws,
that it may not transfer, resell or otherwise dispose of the Warrant or the
Shares except pursuant to a registration statement in compliance with the Act
and any applicable state securities laws, unless exemptions from the
registration requirements of the Act and any applicable state securities laws
are available that it must, therefore, bear the economic risks of an investment
in the Warrant and the Shares for an indefinite period of time;
(b) The Company is under no obligation to register the Warrant or the
Shares pursuant to the Act or any state securities laws or to comply with or
make available any exemption from the registration requirements thereof;
8
<PAGE>
(c) Any certificates representing the Warrant and the Shares (collectively,
the "Securities") will contain a legend to the effect that the Securities cannot
be transferred, resold or otherwise disposed of except in compliance with the
Act and any applicable state securities laws; and
(d) A "stop-transfer" order will be issued with respect to the Securities
to effectuate the foregoing restrictions on transfer of the Securities and the
Company and its transfer agents shall have no obligation to effect any purported
transfer of the Securities except upon demonstration of compliance with the
foregoing restrictions.
(c) It has had the opportunity to ask questions of the Company and its
representatives and receive answers from the Company and its representatives
concerning the Company and its investment in the Warrant and the Shares and to
obtain additional information possessed by the Company, or obtainable without
unreasonable effort or expense, that is necessary to verify the accuracy of the
information furnished to it.
3. The undersigned covenants and agrees that it will not sell, pledge, transfer
or otherwise dispose of the Warrant or the Shares or any interest therein, or
make any offer to attempt to do any of the foregoing, except pursuant to a
registration statement in compliance with the Act and all applicable state
securities laws or in a transaction which, in the opinion of counsel forte
Company, is exempt from the registration requirements thereof.
4. Words used herein, regardless of number and gender specifically used, shall
be deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires.
The undersigned understands and acknowledges that the Company will rely
upon the acknowledgments, representations, warranties, covenants and agreements
contained herein (and any supplemental information provided to the Company) for
the purpose of determining whether this transaction meets the requirements for
an exemption from the registration requirements of the Act and applicable state
securities laws. The undersigned hereby agrees to indemnify and hold harmless
the Company and its directors and officers from and against any cost, expense,
claim, liability or damage arising out of or resulting from any breach of such
covenant and agreement including, without limitation, any liability of the
Company to any third person purchasing the Warrants or any capital stock of the
Company. Further the undersigned covenants and agrees that if there should be
any material change with respect to any of the representations and warranties
contained herein, after the execution of this Investment Letter and prior to the
exercise of the Warrant or the transfer of Shares to the undersigned will
immediately furnish the revised or corrected information to the Company.
9
<PAGE>
EXECUTED this ____ day of _____________, 199_.
FG&G Management Group
By:_____________________________________
Name:___________________________________
Title:__________________________________
10
<PAGE>
EXHIBIT "B"
INVESTMENT LETTER
TO: GUM TECH INTERNATIONAL, INC.
In connection with the undersigned's acquisition of the Warrants to
purchase shares of voting common stock, no par value (the "Shares"), of Gum Tech
International, Inc. (the "Company"), the undersigned acknowledges, represents,
warrants, covenants and agrees as follows:
1. The undersigned represents that:
(a) It is purchasing the Shares for its own account, for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that it has no present intention of distributing any of the Shares;
(b) It personally possesses such knowledge and experience in financial and
business matters pertaining to the type of business conducted by the Company and
otherwise, that it is capable of evaluating the merits and risks of an
investment in the Shares;
(c) It is fully familiar with the Company and its business, operations,
condition (financial and other), assets, liabilities and prospects and has had
access to any and all material information it deems necessary or appropriate to
enable it to make an investment decision in connection with the purchase of the
Shares; and
(d) Its financial situation is such that it can afford to bear the economic
risk of holding the Shares for an indefinite period of time and can afford to
suffer a complete loss of its investment in the Shares.
2. The undersigned understands and acknowledges that:
(a) The Shares have not been registered pursuant to the Securities Act of
1933, as amended (the "Act"), or any state securities laws, that it may not
transfer, resell or otherwise dispose of the Shares except pursuant to a
registration statement in compliance with the Act and any applicable state
securities laws, unless exemptions from the registration requirements of the Act
and any applicable state securities laws are available that it must, therefore,
bear the economic risks of an investment in the Shares for an indefinite period
of time;
(b) The Company is under no obligation to register the Shares pursuant to
the Act or any state securities laws or to comply with or make available any
exemption from the registration requirements thereof;
(c) The certificates representing the Shares will contain a legend to the
effect that the Shares cannot be transferred, resold or otherwise disposed of
except in compliance with the Act and any applicable state securities laws;
11
<PAGE>
(d) A "stop-transfer" order will be issued with respect to the Shares to
effectuate the foregoing restrictions an transfer of the Shares and the Company,
or its transfer agent, shall have no obligation to effect any purported transfer
of the Shares except upon demonstration of compliance with the foregoing
restrictions; and
(e) It has had the opportunity to ask questions of the Company and its
representatives and receive answers from the Company and its representatives
concerning the Company and its investment in the Shares and to obtain additional
information possessed by the Company, or obtainable without unreasonable effort
or expense, that is necessary to verify the accuracy of the information
furnished to it.
3. The undersigned covenants and agrees that it will not sell, pledge, transfer
or otherwise dispose of the Shares or any interest therein, or make any offer to
attempt to do any of the foregoing, except pursuant to a registration statement
in compliance with the Act and all applicable state securities laws or in a
transaction which, in the opinion of counsel for the Company, is exempt from the
registration requirements thereof.
4. Words used herein, regardless of number and gender specifically used, shall
be deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context requires.
The undersigned understands and acknowledges that the Company will rely
upon the acknowledgments, representations, Warranties, covenants and agreements
contained herein (and any supplemental information provided to the Company) for
the purpose of determining whether this transaction meets the requirements for
an exemption from the registration requirements of the Act and applicable state
securities laws. The undersigned hereby agrees to indemnify and hold harmless
the Company and its directors and officers from and against any cost, expense,
claim, liability or damage arising out of or resulting from any breach of such
covenant and agreement including, without limitation, any liability of the
Company to any third person purchasing any capital stock of the Company. Further
the undersigned covenants and agrees that if there should be any material change
with respect to any of the representations and warranties contained herein,
after the execution of this Investment
Letter and prior to the transfer of Shares to the undersigned will immediately
furnish the revised or corrected information to the Company.
12
<PAGE>
EXECUTED this ___ day of ____________,19__.
FG&G Management Group
By:_____________________________________
Name:___________________________________
Title:__________________________________
13
Gum Tech International, Inc.
Grant of Nonqualified Stock Option
Date of Grant: October 30, 1997
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 Andrew Lessman (the "Grantee"), who is a consultant of Company.
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 200,000 shares of Stock
at a price equal to $9.00 per share. 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. VESTING
Subject to the limitations set forth in Section 3, the Option shall become
fully vested and exercisable one year after the Date of Grant.
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 on October 30, 2000 (the "Option Term").
3.2 In the event of the death of the Grantee, the Option may be exercised
by the Grantee's legal representative(s) at any time within the Option Term.
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.
1
<PAGE>
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, certified funds or cashier's check,
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.
No shares of Stock shall be delivered upon exercise of the Option until (i)
the purchase price is paid in full in the manner herein provided or (ii) the
Company receives any approval of any governmental authority required in
connection with the Option, or the issuance of Stock under this Agreement. The
Company is not required to deliver any shares of Stock pursuant to the exercise
of the Option if, in the opinion of counsel for the Company, the issuance would
violate the Securities Act of 1933 or any other applicable federal or state
securities laws or regulations.
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 or reduced benefits under
the Option.
SECTION 6. NO RIGHTS OF STOCKHOLDERS
Neither the Grantee nor any personal representative shall be, or shall have
any of the rights and privileges or, 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 7. 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,
2
<PAGE>
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.
SECTION 8. AMENDMENT OF OPTION
The Option may be amended by the Board or the Committee at any time without
the Optionee's consent 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. Except as provided in the preceding sentence, the Option may be
amended by the Board or the Committee only with the consent of the Grantee.
SECTION 9. 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., 246 East Watkins Street, Phoenix, Arizona 85004, and any notice to the
Grantee shall be addressed to the Grantee at 430 Parkson Road, Henderson, Nevada
89015. Any notice shall be deemed to be duly given if and when properly
addressed and posted by registered or certified mail, postage prepaid.
SECTION 10. GOVERNING LAW
The validity, construction, interpretation and effect of this instrument
shall exclusively be governed by an determined in accordance with the law of the
State of Arizona.
The Company has caused its duly authorized officer to execute this Grant of
Nonqualified Stock Option, 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:
------------------------------------
Gary Kehoe, President
ACCEPTED AND AGREED TO:
----------------------------------------
ANDREW LESSMAN
3
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
THE UTAH SECURITIES ACT. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, MORTGAGED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT.
GUM TECH INTERNATIONAL, INC.
Common Stock Purchase Warrant
To Subscribe for and Purchase
___________ Shares of Common Stock of
Gum Tech International, Inc.
THIS CERTIFIES that Intercontinental Capital Corp. or its registered
assigns (the "Holder") is entitled to subscribe for and purchase from Gum Tech
International, Inc., a Utah corporation (hereinafter called the "Company"), up
to _________ shares (subject to adjustment as hereinafter provided) of fully
paid and non-assessable Common Stock of the Company (the "Common Stock"),
subject to the provisions and upon the terms and conditions hereinafter set
forth at the price of $____ per share (such price as from time to time to be
adjusted as provided herein is called the "Warrant Price"), at or prior to 5:00
p.m. Pacific time on ____________, _____ (the "Exercise Period").
This Warrant and any Warrant subsequently issued upon exchange or transfer
hereof are hereinafter collectively called the "Warrant."
Section 1. EXERCISE OF WARRANT. The rights represented by this Warrant may
be exercised by the Holder, in whole or in part (but not as to fractional
shares) at any time or from time to time during the Exercise Period by the
completion of the purchase form attached hereto and by the surrender of this
Warrant (properly endorsed) at the office of the Company as it may designate by
notice in writing to the Holder hereof at the address of the Holder appearing on
the books of the Company, and by payment to the Company of the Warrant Price in
cash or by certified or official bank check, for each share being purchased. In
the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or its nominee or other party designated in
the purchase form by the Holder hereof, shall be delivered to the Holder within
thirty (30) business days after the date on which the rights represented by this
Warrant shall have been so exercised; and, unless this Warrant has expired or
has been exercised in full, a new Warrant representing the number of shares
(except a remaining fractional share), if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the Holder
within such time. The person in whose name any certificate for shares of Common
Stock is issued upon exercise of this Warrant shall for all purposes be deemed
to have become the holder of record of such shares on the date on which this
Warrant was surrendered and payment of the Warrant is made, except that, if the
date of such surrender and payment is a date on which the stock transfer books
of the Company are closed, such person shall be deemed to have become the holder
of such shares at the close of business on the next succeeding date on which the
stock transfer
<PAGE>
books are open. No fractional shares shall be issued upon exercise of this
Warrant and no payment or adjustment shall be made upon any exercise on account
of any cash dividends on the Common Stock issued upon such exercise.
Section 2. STOCK SPLITS, CONSOLIDATION, MERGER, AND SALE. In the event that
before the issuance of the shares of Common Stock into which this Warrant may be
exercised the outstanding shares of Common Stock shall be split, combined, or
consolidated, by dividend, reclassification or otherwise, into a greater or
lesser number of shares of Common Stock or any other class or classes of stock,
as appropriate, the Warrant Price in effect immediately prior to such
combination or consolidation and the number of shares purchasable under this
Warrant shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately adjusted. If there shall be effected any
consolidation or merger of the Company with another corporation, or a sale of
all or substantially all of the Company's assets to another corporation, and if
the holders of Common Stock shall be entitled pursuant to the terms of any such
transaction to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such consolidation, merger or
sale, lawful and adequate provisions shall be made whereby the Holder of this
Warrant shall thereafter have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the exercise of such Warrant, such
shares of stock, securities or assets as may be issuable or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore so
receivable had such consolidation, merger or sale not taken place, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Holder to the end that the provisions hereof shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise of this Warrant.
(a) STOCK TO BE RESERVED. The Company will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon the exercise of this Warrant as herein provided, such number of shares of
Common Stock as shall then be issuable upon the exercise of this Warrant.
(b) ISSUE TAX. The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Holders of this
Warrant for any issuance tax in respect thereof provided that the Company shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any certificate in a name other than
that of the Holder of this Warrant.
(c) CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of the shares of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely exercise
of this Warrant.
Section 3. NO SHAREHOLDER RIGHTS OR LIABILITIES. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision hereof, in the absence of affirmative action by the
Holder hereof to purchase shares of Common Stock, and no mere enumeration hereon
2
<PAGE>
of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Warrant Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
Section 4. REPRESENTATIONS OF HOLDER. The Holder hereby represents and
acknowledges to the Company that:
(a) this Warrant, the Common Stock issuable upon exercise of this Warrant
and any securities issued with respect to any of them by way of a stock dividend
or stock split or in connection with a recapitalization, merger, consolidation
or other reorganization ("Warrant Shares") will be "restricted securities" as
such term is used in the rules and regulations under the Securities Act and that
such securities have not been and may not be registered under the Securities Act
or any state securities law, and that such securities must be held indefinitely
unless registration is effected or transfer can be made pursuant to appropriate
exemptions;
(b) the Holder has read, and fully understands, the terms of this Warrant
set forth on its face and the attachments hereto, including the restrictions on
transfer contained herein;
(c) the Holder is purchasing for investment for its own account and not
with a view to or for sale in connection with any distribution of this Warrant
or the Warrant Shares of the Company issuable upon exercise of this Warrant and
it has no intention of selling such securities in a public distribution in
violation of the federal securities laws or any applicable state securities
laws; provided that nothing contained herein will prevent Holder from
transferring such securities in compliance with the terms of this Warrant and
the applicable federal and state securities laws;
(d) the Holder is an "accredited investor" within the meaning of paragraph
(a) of Rule 501 of Regulation D promulgated by the Securities and Exchange
Commission; and
(e) the Company may affix the following legend (in addition to any other
legend(s), if any, required by applicable state corporate and/or securities
laws) to certificates for Warrant Shares issued upon exercise of this Warrant:
These securities have not been registered under the Securities Act of 1933
or the Arizona Securities Act. These securities have been acquired for
investment and not with a view to distribution or resale, and may not be
sold, mortgaged, pledged, hypothecated or otherwise transferred without an
effective registration statement for such securities under the Securities
Act of 1933, or an opinion of counsel acceptable to the corporation that
registration is not required under such act.
Section 5. LIMITATIONS ON DISPOSITION.
(a) The Holder of this Warrant, by acceptance hereof, agrees to comply in
all respects with the provisions of this SECTION 5. Without in any way limiting
the representations set forth above, the Holder of this Warrant agrees not to
make any disposition of this Warrant or any Warrant Shares, unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
3
<PAGE>
this SECTION 5 and the other provisions of this Warrant as if such transferee
were the original Holder hereof, provided and to the extent such provisions are
then applicable, and:
(i) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or
(ii)(A) the Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and the Company has
given its prior written consent, and (B) if reasonably requested by the Company,
the Holder shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of the Warrant and/or the Warrant Shares under the Act. It is
agreed that, if other appropriate supporting documentation is provided, the
Company will not require opinions of counsel for transactions made pursuant to
Rule 144 except in unusual circumstances.
(b) Notwithstanding the provisions of paragraph (a) above, (i) no such
Registration Statement, prior consent or opinion of counsel shall be necessary
for a transfer (A) by a Holder which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or to the
transfer by gift, will or intestate succession of any partner to his spouse or
to the siblings, lineal descendants or ancestors of such partner or his spouse,
or (B) to an "affiliate" of the Holder as that term is defined in Rule 405
promulgated by the Securities and Exchange Commission under the Securities Act,
if the transferee agrees in writing to be subject to the terms hereof to the
same extent as if he were an original Holder hereunder, and (ii) no transferee
shall be required, as a condition to any transfer of the Warrant or the Warrant
Shares by the Holder, to agree to be bound by this SECTION 5, if the transferee
is acquiring the Warrant and/or Warrant Shares pursuant to a Registration
Statement under the Securities Act or in a transaction made pursuant to Rule
144. Each new certificate evidencing the Warrant and/or Warrant Shares so
transferred shall bear the appropriate restrictive legends set forth in SECTION
4(e) above, except that such certificate shall not bear such restrictive legend
if, in the opinion of counsel for the Company, such legend is not required in
order to establish or assist in compliance with any provisions of the Securities
Act or any applicable state securities laws.
Section 6. PIGGYBACK REGISTRATION RIGHTS. Whenever the Company proposes to
register any of its equity securities under the Securities Act of 1933 (other
than pursuant to a registration statement on Form S-4 or S-8 or similar form)
and the registration form to be used may be used for the registration of the
Shares underlying this Warrant (a "PIGGYBACK REGISTRATION"), the Company shall
give prompt written notice to the holders of this Warrant or the Shares
underlying this Warrant of its intention to effect such a registration and shall
include in such registration all shares of Common Stock underlying this Warrant
with respect to which the Company has received written requests for inclusion
therein within 20 days after the receipt of the Companys notice.
Section 7. LOST, STOLEN, MUTILATED, OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated, or destroyed, the Company may direct a new Warrant
4
<PAGE>
or Warrants to be issued in place of any Warrant or Warrants theretofore issued
by the Company alleged to have been lost, stolen, or destroyed, upon the making
of an affidavit of that fact by the person claiming the Warrant to be lost,
stolen, or destroyed. When authorizing such issue of a new Warrant or Warrants,
the Board of Directors may, in its discretion, and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, or destroyed
Warrant or Warrants, or his legal representative, to advertise the same in such
manner as it shall require and/or give the corporation a bond in such sum as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the Warrant alleged to have been lost, stolen, or
destroyed.
Section 8. PRESENTMENT. Prior to due presentment of this Warrant, together
with a completed assignment form attached hereto for registration of transfer,
the Company may deem and treat the Holder as the absolute owner of the Warrant,
notwithstanding any notation of ownership or other writing thereon, for the
purpose of any exercise thereof and for all other purposes, and the Company
shall not be affected by any notice to the contrary.
Section 9. NOTICE. Notice or demand pursuant to this Warrant shall be
sufficiently given or made, if sent by first-class mail, postage prepaid,
addressed, if to the Holder of this Warrant, to the Holder at its last known
address as it shall appear in the records of the Company, and if to the Company,
at 246 E. Watkins Street, Phoenix, Arizona 85004, Attention: Chief Financial
Officer. The Company may alter the address to which communications are to be
sent by giving notice of such change of address in conformity with the
provisions of this SECTION 9 for the giving of notice.
Section 10. REDEMPTION. If the market price of the Company's Common Stock
is $20.00 per share or greater for any 10 (ten) consecutive trading days, the
Company shall have the option to call this Warrant for redemption at any time
for one year. The Company shall exercise this call option by written notice to
the Holder. Upon receipt of this notice, the Holder must exercise such portion
of the Warrant as called by Company, following the procedures of SECTION 1,
within 5 (five) trading days.
Section 11. GOVERNING LAW. The validity, interpretation, and performance of
this Warrant shall be governed by the laws of the State of Arizona without
regard to principles of conflicts of laws.
Section 12. SUCCESSORS, ASSIGNS. Subject to the restrictions on transfer by
Holder set forth in SECTION 5 hereof, all the terms and provisions of the
Warrant shall be binding upon and inure to the benefit of and be enforceable by
the respective successors and assigns of the parties hereto.
Section 13. AMENDMENT. This Warrant may be modified, amended, or terminated
by a writing signed by the Company and the Holder.
Section 14. SEVERABILITY. Should any part but not the whole of this Warrant
for any reason be declared invalid, such decision shall not affect the validity
of any remaining portion, which remaining portion shall remain in force and
effect as if this Warrant had been executed with the invalid portion thereof
5
<PAGE>
eliminated, and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Warrant without including
therein any such part which may, for any reason, be hereafter declared invalid.
Gum Tech International, Inc.
a Utah corporation
Dated:
------------------------ -----------------------------------
By:
-------------------------------
Title:
----------------------------
The undersigned Holder agrees and accepts this Warrant and acknowledges
that it has read and confirms each of the representations contained in Section
4.
Intercontinental Capital Corp.
-----------------------------------
By:
-------------------------------
Title:
----------------------------
6
<PAGE>
PURCHASE FORM
(To be executed by the Warrant Holder if he desires to exercise the Warrant in
whole or in part)
To: Gum Tech International, Inc.
The undersigned, whose Social Security or other identifying number is
_______________, hereby irrevocably elects the right of purchase represented by
the within Warrant for, and to purchase thereunder, ______________ shares of
Common Stock provided for therein and tenders payment herewith to the order of
Gum Tech International, Inc. in the amount of $_______________.
The undersigned requests that certificates for such shares be issued as follows:
Name:
-----------------------------------------
Address:
--------------------------------------
Deliver to:
-----------------------------------
Address:
-----------------------------------
-----------------------------------
-----------------------------------
and, if said number of shares shall not be all the shares purchasable hereunder,
that a new Warrant for the balance remaining of the shares purchasable under the
within Warrant be registered in the name of, and delivered to, the undersigned
at the address stated below:
Address:
--------------------------------------
Dated: Signature:
---------------------- -----------------------------------
(Signature must conform in all respects to
the name of the Warrant Holder as specified
on the face of the Warrant, without
alteration, enlargement or any change
whatsoever)
7
<PAGE>
ASSIGNMENT
(To be executed by the Warrant Holder if he desires to effect a transfer of the
Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ____________ ______________________________, whose Social Security or other
identification number is __________________________ [residing/located] at
____________________________ ____________________ the attached Warrant, and
appoints ______________________________________________________ residing at
_____________________________________________ the undersigned's attorney-in-fact
to transfer said Warrant on the books of the Company, with full power of
substitution in the premises.
Dated:
-------------------------
In the presence of:
---------------------------------------------
(Signature must conform in all respects to
the name of the Warrant Holder as specified
on the face of the Warrant, without
alteration, enlargement or any change
whatsoever)
November 24, 1999
GUM TECH INTERNATIONAL, INC.
246 East Watkins Street
Phoenix, Arizona 85004
Re: Issuance of Common Stock
Gentlemen:
We have acted as counsel to Gum Tech International, Inc., a Utah
corporation (the "Company"), in connection with its Registration Statement on
Form S-3 (the "Registration Statement") filed under the Securities Act of 1933,
as amended (the "1933 Act"), relating to the registration of up to 200,000
shares of the Company's common stock, without par value, for resale by Andrew
Lessman, which may be acquired pursuant to the exercise of options dated October
30, 1997 and the registration of up to 350,000 shares of the Company's common
stock, without par value, for resale by John W. Frasco, Robert Wood, F, G & G
Management Group, Next Millenium Capital, and CJB Consulting, (collectively,
with Andrew Lessman, the "Sellers"), which may be acquired pursuant to the
exercise of warrants dated July 18, 1995, October 5, 1995, October 6, 1995, and
June 2, 1999 (collectively, these 550,000 shares of the Company's Common Stock
are referred to hereinafter as the "Shares").
In rendering the opinions set forth herein, we have limited our factual
inquiry to (I) reliance on a certificate of the Secretary of the Company, (ii)
reliance on the facts and representations contained in the Registration
Statement, including without limitation those relating to the number of the
Company's common shares, without par value, which are authorized, issued, or
reserved for issuance upon conversion or exercise of preferred shares, warrants
and options, and (iii) such documents, corporate records and other instruments
as we have deemed necessary or appropriate as a basis for the opinions expressed
below, including without limitation a certificate issued by the Utah Division of
Corporations and Commercial Code dated May 10, 1999, attesting to the corporate
existence of the Company in the State of Utah, and telephonic verification with
such Division of Corporations and Commercial Code with respect to the Company's
continued valid existence as of the date hereof.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
<PAGE>
GUM TECH INTERNATIONAL, INC.
November 24, 1999
Page 2
original documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such copies. In rendering the
opinion expressed below, we have assumed that the Shares (I) will conform in all
material respects to the description thereof set forth in the Registration
Statement, (ii) were issued and delivered in accordance with the terms of the
Agreement, and (iii) were issued pursuant to an exemption from the registration
requirements of the 1933 Act pursuant to Section 4(2) of the 1933 Act.
Based upon the foregoing, and subject to the qualifications set forth
herein, we are of the opinion that the Shares will be, when issued, fully paid
and nonassessable.
The foregoing opinion is limited to the current internal laws of the State
of Utah (without giving effect to any conflict of law principles thereof), and
we have not considered, and express no opinion on, the laws of any other
jurisdiction. This opinion is based on the laws in effect and facts in existence
on the date of this letter, and we assume no obligation to revise or supplement
this letter should the law or facts, or both, change.
This opinion is intended solely for the use of the Company in connection
with the registration of the Shares. It may not be relied upon by any other
person or for any other purpose, or reproduced or filed publicly by any person,
without the written consent of Snell & Wilmer; provided, however, that we hereby
consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and to the references to Snell & Wilmer contained in the Registration
Statement.
Very truly yours,
SNELL & WILMER L.L.P.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 of Gum Tech International, Inc., of our report dated
February 5, 1999, except for the last paragraph of Note 14 as to which the date
is March 30, 1999, which appears on page F-1 of Gum Tech International, Inc.'s
Annual Report on Form 10-KSB for the year ended December 31, 1998, and the
reference to our firm under the caption "Experts" in the Prospectus contained in
said Registration Statement.
Angell & Deering
Certified Public Accountants
Denver, Colorado
November 22, 1999
