HAUSER CHEMICAL RESEARCH, INC.
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 14, 1996
The undersigned hereby constitutes, appoints and authorizes
Dean P. Stull or David I. Rosenthal, true and lawful attorney
and Proxy of the undersigned with full power of substitution
and appointment, for and in the name, place and stead of the
undersigned to act for and vote as designated below, all of
the undersigned's shares of the $.001 par value common stock
of Hauser Chemical Research, Inc., a Delaware corporation, at
the Annual Meeting of Shareholders to be held at The Boulder
Broker, 30th & Baseline Rd., Boulder, CO 80303, at 3:00 p.m.
Mountain Time, on November 14, 1996, and at any and all
adjournments thereof, for the following purposes:
1. To consider and act upon a proposal to: a)
reincorporate the Company under the laws of the State of
Colorado so that the expense of the Delaware franchise tax is
eliminated; and b) change the name of the Company to Hauser,
Inc.
_____FOR _____AGAINST _____ABSTAIN
2. To elect nine (9) Directors:
For all nominees listed below (except as marked to the
contrary):
Withhold authority to vote for the nominees listed
below:
Dean P. Stull, Randall J. Daughenbaugh, Stanley J.
Cristol, Ray L. Hauser, Bert M. Tolbert, William E.
Coleman, Christopher W. Roser, Robert F. Saydah and
Willem A. Maas
(INSTRUCTION: To withhold authority to vote for any
individual nominee, draw a line through or otherwise strike
out his name. If authority to vote for the election of any
nominee is not withheld, the execution of this
Proxy shall be deemed to grant such authority.)
3. To transact such other business as may properly come
before the meeting, or any adjournment thereof.
_____FOR _____AGAINST _____ABSTAIN
The undersigned hereby revokes any Proxies as to said
shares heretofore given by the undersigned, and ratifies and
confirms all that said attorneys and Proxies may lawfully do
by virtue hereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS.
THIS PROXY CONFERS DISCRETIONARY AUTHORITY IN RESPECT TO
MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE MAILING OF
THE NOTICE OF THE ANNUAL MEETING OF SHARE HOLDERS TO THE
UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders and Proxy Statement furnished
herewith.
DATED: _____________, 1996.
______________________________
Signature(s) of Shareholder(s)
______________________________
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s) shown hereon.
Executors, administrators, trustees, guardians and attorneys
should indicate their capacity when signing. Attorneys should
submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HAUSER CHEMICAL RESEARCH, INC. PLEASE SIGN AND RETURN THIS
PROXY TO AMERICAN SECURITIES TRANSFER & TRUST, INCORPORATED,
938 QUAIL STREET, SUITE 101, LAKEWOOD, CO 80215. THE GIVING OF
A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU
ATTEND THE MEETING.
<PAGE>
HAUSER CHEMICAL RESEARCH, INC.
5555 Airport Boulevard
Boulder, CO 80301
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held November 14, 1996
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Hauser
Chemical Research, Inc., a Delaware corporation (the
"Company"), for use at the Annual Meeting of Shareholders of
the Company to be held at 3:00 p.m. Mountain Time, on November
14, 1996, at The Boulder Broker, 30th & Baseline Rd., Boulder,
CO 80303, and at any and all adjournments of such meeting.
If the enclosed Proxy Card is properly executed and
returned in time to be voted at the meeting, the shares of
Common Stock represented will be voted in accordance with the
instructions contained therein. Executed proxies that contain
no instructions will be voted for each of the nominees for
director indicated herein and for the proposal to
reincorporate the Company in Colorado (the "Reincorporation
Proposal"). It is anticipated that this Proxy Statement and
the accompanying Proxy Card and Proxy Notice will be mailed to
the Company's shareholders on or about October 3, 1996.
Shareholders who execute proxies for the Annual Meeting may
revoke their proxies at any time prior to their exercise by
delivering written notice of revocation to the Company, by
delivering a duly executed Proxy Card bearing a later date,
or by attending the meeting and voting in person.
The costs of the meeting, including the costs of preparing
and mailing the Proxy Statement, Proxy Notice and Proxy Card,
will be borne by the Company. The Company may, in addition,
use the services of its directors, officers and employees to
solicit proxies, personally or by telephone, but at no
additional salary or compensation. The Company will also
request banks, brokers, and others who hold shares of Common
Stock of the Company in nominee names to distribute annual
reports and proxy soliciting materials to beneficial owners,
and will reimburse such banks and brokers for reasonable
out-of-pocket expenses which they may incur in so doing.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
Only shareholders of record at the close of business on
September 30, 1996, will be entitled to vote at the Annual
Meeting. Each issued share of Common Stock entitles its record
owner to one vote on each matter to be voted upon at the
meeting. As of July 31, 1996, there were 10,327,020 shares of
the Company's $0.001 par value Common Stock outstanding. The
Company has authorized 800,000 shares of Preferred Stock,
$1.00 par value, none of which were outstanding as of the
record date. The presence in person or by proxy of the holders
of forty percent (40%) of the total issued and outstanding
shares of Common Stock of the Company which are entitled to be
voted at the Annual Meeting is necessary in order to
constitute a quorum for the meeting. If a quorum is present,
directors will be elected by a plurality of the votes present
in person or by proxy. APPROVAL OF PROPOSAL 1, THE
REINCORPORATION PROPOSAL, REQUIRES AN AFFIRMATIVE VOTE OF AT
LEAST A MAJORITY OF THE TOTAL SHARES OF COMMON STOCK
OUTSTANDING. The aggregate number of votes cast by all
shareholders present in person or by proxy will be used to
determine whether a proposal will carry. Thus, in the case of
the election of directors, an abstention from voting has no
effect on the item on which the shareholder abstained from
voting. However, an abstention will, pursuant to Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), be counted as a "No" vote on the
Reincorporation Proposal. In addition, although broker
"non-votes" will be counted for purposes of attaining a
quorum, they will be considered "No" votes for purposes of the
Reincorporation Proposal.
Reincorporation Proposal
(Proxy Item #1)
The Company's Board of Directors has unanimously approved
and, for the reasons described below, unanimously recommends
that the Company's shareholders approve a proposal which
provides, among other things, for the change of the Company's
state of incorporation from Delaware to Colorado (the
"Reincorporation Proposal"). Approval of the Reincorporation
Proposal will result in a change in the name of Hauser
Chemical Research, Inc. to Hauser, Inc. It will not result in
any change in the business, management, board of directors,
assets or liabilities of the Company. In particular, persons
elected as directors of the Company at the 1996 Annual Meeting
will serve as directors of Hauser, Inc.
Purposes of the Reincorporation Proposal
Change of State of Domicile
The Company's Board of Directors believes that the best
interests of the Company and its shareholders will be served
by changing the Company's place of incorporation from Delaware
to Colorado. The Company was incorporated in Delaware in 1985
as a result of a merger with Nittany Ventures, Inc.
The Board of Directors believes that the franchise tax
imposed by the state of Delaware in an unnecessary expense for
the Company. During fiscal 1996, the Company paid
approximately $75,000 in corporate franchise tax to the state
of Delaware. There is no corresponding franchise tax in the
state of Colorado. While a large number of public corporations
maintain their domicile in Delaware, the newly enacted changes
to the Colorado Business Corporation Act (the "Colorado law")
provides for favorable business corporation laws in Colorado,
similar to the laws of the state of Delaware. It should be
noted, also, that shareholders in some instances have greater
rights and hence more protection under the Colorado law than
under the Delaware Law. For the foregoing reasons, the Board
of Directors believes that the activities of the Company can
be carried on to better advantage if the Company is able to
operate under the laws of Colorado. See "Comparison of
Shareholders' Rights Under Colorado and Delaware Law."
The following discussion summarizes important aspects of
the Reincorporation Proposal. Demonstrating that there is no
negative impact on shareholder rights from the change. This
summary does not purport to be a complete description of the
Reincorporation Proposal. Copies of the existing Certificate
of Incorporation of the Company, the Articles of Incorporation
of Hauser, Inc., the Bylaws of Hauser, Inc. and the Merger
Agreement are available for inspection at the Company's
offices and copies will be sent to shareholders on request.
General
Hauser, Inc. is a wholly-owned subsidiary of Hauser
Chemical Research, Inc. which was recently organized for the
sole purpose of effecting the reincorporation of the Company
in Colorado. The reincorporation transaction will involve the
merger of Hauser Chemical Research, Inc. with and into Hauser,
Inc. (the "Merger").
Existing stock certificates will remain valid and there is
no need for shareholders to exchange existing stock
certificates for new ones. At the Effective Time (as defined
in the Merger Agreement), the separate existence of Hauser
Chemical Research, Inc. will cease and Hauser, Inc. will
succeed, to the extent permitted by law, to all the business,
properties, assets and liabilities of Hauser Chemical
Research, Inc.. Each common share of Hauser Chemical Research,
Inc., $.001 par value ("Delaware Common Stock" or "Common
Stock") issued immediately prior to the Effective Time will,
by virtue of the Reincorporation Proposal, be converted into
one fully paid share of common stock, par value $.001 per
share, of Hauser, Inc. ("Colorado Common Stock"). At the
Effective Time, certificates which immediately prior to the
Effective Time represented Delaware Common Stock will be
deemed for all corporate purposes to represent the same number
of shares of Colorado Common Stock into which such Delaware
Common Stock has been converted.
It is anticipated that the Merger will become effective on
or about November 15, 1996. However, the Merger Agreement
provides that the Merger may be abandoned by the Board of
Directors of either Hauser, Inc. or Hauser Chemical Research,
Inc. prior to the Effective Time thereof, either before or
after shareholder approval. In addition, the Merger Agreement
may be amended prior to the Effective Time of the Merger,
either before or after shareholder approval thereof; provided,
however, that the Merger Agreement may not be amended after
shareholder approval if such amendment would (1) alter or
change the amount or kind of shares or other consideration to
be received by shareholders in the Merger, (2) alter or change
any term of the Hauser, Inc. Articles of Incorporation, (3)
alter or change any of the terms and conditions of the Merger
Agreement if such alteration or change would adversely affect
the shareholders, or (4) otherwise violate applicable law.
The affirmative vote of the holders of a majority of the
outstanding Delaware Common Stock is required for approval of
the Reincorporation Proposal. A vote for approval of the
Reincorporation Proposal will constitute specific approval of
the Merger as well as other matters included in the
Reincorporation Proposal described in this Proxy Statement,
including the name change. Shareholders of the Company whose
shares are not voted in favor of the Reincorporation Proposal
will not have statutory dissenter's rights under Delaware law
because Hauser Chemical Research, Inc. is listed on the NASDAQ
National Market System.
Other Effects of the Reincorporation
Approval of the Merger Agreement and the Reincorporation
Proposal by the Company's shareholders will also constitute
approval of the provisions of the Hauser, Inc. Articles and
the Hauser, Inc. Bylaw Provisions. For a description of the
differences between the Hauser, Inc. Articles and Hauser, Inc.
Bylaw Provisions and the Hauser Chemical Research, Inc.
Certificate and Bylaws, see "Differences in Charter Document
Provisions." In addition, as shareholders of a Colorado
corporation, the rights of shareholders of Hauser, Inc. will
be governed by Colorado rather than Delaware law. See
"Comparison of Shareholders' Rights Under Colorado and
Delaware Law."
Differences in Charter Document Provisions
There are no differences between the Hauser Chemical
Research, Inc. and Hauser, Inc. Articles and Bylaws. The
Articles of Incorporation of Hauser Chemical Research, Inc.
presently authorize the issuance of 50,000,000 shares of
common stock, $.001 par value and 800,000 shares of Preferred
Stock. Hauser, Inc. has been formed with the same authorized
capital. In addition, terms of the Colorado Common Stock will
be identical to those of the Delaware Common Stock. For
example, neither shares have preemptive rights or cumulative
voting rights. Further, similar to Delaware law, Colorado law
permits the Board of Directors to issue the Preferred Shares
in one or more series, and to fix, among other things, the
designation and number of shares to constitute each series and
the relative rights and preferences of shares of each series.
As permitted by Delaware law and Colorado law, both the
Hauser, Inc. Articles and Bylaws eliminate or limit the
personal liability of a director. Colorado law and Delaware
law contain generally similar provisions for the
indemnification of directors and officers. Insofar as
indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors or officers under
the Hauser, Inc. Articles and Bylaw, it is the position of the
Securities and Exchange Commission that such indemnification
would be against public policy as expressed in the Act and
therefore unenforceable. The Company has not decided whether
to enter into separate indemnity contracts with its directors
and officers.
Comparison of Shareholders' Rights Under Colorado and Delaware
Law
Although it is impracticable to compare all of the aspects
in which the general corporation laws of Colorado and Delaware
differ, the following is a summary of certain significant
differences between the provisions of these laws.
Action by Shareholder Consent. Colorado law provides that
shareholder action may be taken without a meeting if a written
consent is signed by all shareholders entitled to vote.
Delaware also permits consent action by shareholders, but the
action may be taken by shareholders holding the number of
shares necessary to authorize the action at a meeting (usually
a majority of a quorum).
Call of Shareholders Meetings. Special meetings of
shareholders of Colorado corporations may be called at any
time by shareholders entitled to cast at least one-tenth of
the votes entitled to be cast on any issue proposed to be
considered at the particular meeting. Delaware law has no such
provision.
Charter Amendments. Colorado law permits shareholders
holding at least ten percent (10%) of the outstanding shares
to propose an amendment to the Company's Articles of
Incorporation without board of director approval of the
proposed amendment. Delaware has no such provision and
amendments to a Delaware Certificate of Incorporation must be
approved by the board of directors before they are presented
to the shareholders.
Class Voting. Pursuant to Colorado law, holders of a
particular class of shares are entitled to vote as a separate
class if the rights of such class are affected in certain
respects by mergers, consolidations or amendments to the
Articles of Incorporation. The Delaware Law requires voting by
separate classes only with respect to amendments to the
Certificate of Incorporation which adversely affect the
holders of such classes or which increase or decrease the
aggregate number of authorized shares or the par value of the
shares of any such classes.
Appraisal Rights. Under Colorado law, dissenting
shareholders are entitled to appraisal rights in connection
with the lease, sale, exchange, transfer or other disposition
of all or substantially all of the assets of a corporation
made in the usual or regular course of its business. In
addition, share holders of a Colorado corporation being merged
into a surviving corporation or being consolidated into a new
corporation are also entitled to appraisal rights. Under
Delaware Law, appraisal rights are available only in
connection with statutory mergers or consolidations. Even in
such case, unless the Certificate of Incorporation otherwise
provides, (that of Hauser-Delaware does not so provide) the
Delaware Law does not recognize dissenters' rights if the
shares of the merged corporation are listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by NASDAQ or held
of record by more than 2,000 shareholders.
Federal Income Tax Consequences of the Merger
The Company has been advised by its counsel, Chrisman,
Bynum & Johnson, P.C., that for federal income tax purposes
the Merger will constitute a reorganization under Section 368
of the Internal Revenue Code of 1954, as amended, and that
consequently the holders of the Delaware Common Stock will not
recognize any gain or loss as a result of the Merger. For
federal income tax purposes, each shareholder of the Company
will retain the same tax basis in his Colorado Common Stock as
he had in the corresponding Delaware Common Stock held by him
immediately prior to the Effective Time of the Merger, and his
holding period of the Colorado Common Stock will include the
period during which he held the corresponding Delaware Common
Stock, provided that such corresponding Delaware Common Stock
was held by him as a capital asset at the Effective Time of
the Merger.
Although it is not anticipated that state or local income
tax consequences to shareholders will vary from the federal
income tax consequences described above, holders should
consult their own tax advisors as to the effect of the
reorganization under state, local or foreign income tax laws.
The Company further has been advised by counsel that it will
not recognize any gain, loss or income for federal income tax
purposes as a result of the Merger, and that Hauser, Inc. will
succeed, without adjustment, to the tax attributes of Hauser
Chemical Research, Inc.
Vote Required: Board Recommendation
The affirmative vote of a majority of the outstanding
Common Stock of the Company is required for approval of the
Reincorporation Proposal. A vote for the Reincorporation
Proposal will constitute approval of all transactions and
proceedings which are included in the Reincorporation Proposal
described in this Proxy Statement. THE BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE REINCORPORATION PROPOSAL AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE REINCORPORATION
PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
VOTED FOR THE REINCORPORATION PROPOSAL UNLESS A VOTE AGAINST
THE PROPOSAL OR ABSTENTION IS SPECIFICALLY INDICATED.
ELECTION OF DIRECTORS
(Proxy Item #2)
The Company's Board of Directors has nominated the nine
persons listed below for election as directors for the ensuing
year, each to hold office until the 1997 Annual Meeting of
Shareholders and until their successors are duly elected and
qualified, or until their death, resignation or removal. Each
of the nominees is a member of the present Board of Directors
of the Company and has served in that capacity since
originally elected. A shareholder using the enclosed proxy
form can vote for all or any of the nominees of the Board of
Directors or such shareholder may withhold his or her vote
from all or any of such nominees. If the proxy card is
properly executed but not marked, it will be voted for all of
the nominees. Each of the nominees has agreed to serve as a
director if elected; however, should any nominee become unable
or unwilling to accept nomination or election, the persons
named in the proxy will exercise his voting power in favor of
such other person or persons as the Board of Directors of the
Company may recommend. There are no family relationships among
these nominees. The following table sets forth the directors
of the Company, their ages as of April 30, 1996, all positions
and offices held with the Company and the period from which
served:
<TABLE>
All Positions and Offices First Elected
Name Age Held with the Company As a Director
<S> <C> <S> <C>
Dean P. Stull, Ph.D. 46 Chairman, Chief Executive 1983
Officer, President and Director
Randall J. Daughenbaugh, Ph.D. 48 Chief Technical Officer and Director 1983
William E. Coleman, Ph.D.<F1><F3> 62 Director 1988
Stanley J. Cristol, Ph.D.<F1> 80 Director 1983
Ray L. Hauser, Ph.D.<F2> 68 Director 1983
Willem A. Maas 65 Director 1995
Christopher W. Roser<F2><F3> 38 Director 1990
Robert F. Saydah<F1><F2><F3> 69 Director 1994
Bert M. Tolbert, Ph.D.<F1> 75 Director 1983
<FN>
<F1> Member of Compensation Committee.
<F2> Member of Audit Committee.
<F3> Member of Nominating Committee.
</FN>
</TABLE>
The principal occupation and business experience of each
Director is set forth below:
Dean P. Stull, Ph.D. is one of the founders of the Company.
He has been a Director, Chairman of the Board of Directors and
Chief Executive Officer since November 1983 and President
since May 1995. He is a Director of the Boulder Chamber of
Commerce and a past founder and board member of the Boulder
Valley Rotary Club and Foundation. Dr. Stull is also a member
of the Colorado Institute for Research in Biotechnology. In
1992, Dr. Stull and Dr. Daughenbaugh received the Entrepreneur
of the Year award for the Rocky Mountain Region and the
national Emerging Entrepreneur of the Year award from Inc.
Magazine, Ernst & Young, and Merrill Lynch. Dr. Stull received
a Bachelor of Science Degree in Chemistry from Colorado State
University in 1972, and a Master of Science and Ph.D. in
Physical Organic Chemistry from the University of Colorado,
Boulder, in 1974 and 1976, respectively.
Randall J. Daughenbaugh, Ph.D. is one of the founders of
the Company. He has been a Director of the Company since
November 1983, and served as President until November 1992,
when he became Executive Vice President and Chief Technical
Officer. Prior to forming the Company, Dr. Daughenbaugh served
as Research Chemist for Chemical Exchange Industries, Inc., a
chemical company, from November 1980 to August 1983 and
Research Director from August 1983 to October 1983. Dr.
Daughenbaugh received a Bachelor of Science Degree from South
Dakota School of Mines and Technology in 1970 and a Ph.D. in
Physical Organic Chemistry from the University of Colorado in
1975.
William E. Coleman, Ph.D. has served as a Director of the
Company since February 1988. Dr. Coleman served as President
of Colorado Venture Management, Inc., Boulder, Colorado, an
investment and project management firm from 1980 to 1990 and
as Chairman since 1990. He also serves as President of Cogen
Technology, Inc., a privately held company developing
cogeneration projects; Chairman of Econalytic Systems, Inc., a
privately held company which markets fuel additive products;
Director of B.I., Inc., a publicly-held company which designs,
manufactures, markets and supports electronic monitoring
systems; Chairman of Colorado Greenhouse, LLC, a privately
held company producing and marketing hydroponically grown
produce on a national scale; and Director of Telemark
Industries, Inc., a privately-held company that manufactures
and sells a photoprinter for color digital photography and
short-run printing applications. Dr. Coleman received a
Bachelor of Science Degree in Chemistry from the University of
Illinois in 1956, and a Ph.D. in Organic Chemistry from the
University of California, Berkeley in 1960.
Stanley J. Cristol, Ph.D. is one of the founders of the
Company and has been a Director of the Company since November
1983. Dr. Cristol has been on the faculty of the University of
Colorado since 1946 and was appointed the Joseph Sewell
Distinguished Professor of Chemistry in 1979. Dr. Cristol has
held the administrative positions of Chairman of the
Department of Chemistry, Acting Dean of the Graduate School
and Acting Associate Vice Chancellor for Graduate Affairs at
the University of Colorado. Dr. Cristol has acted as
consultant to many large U.S. government and industrial
organizations and companies. Dr. Cristol received a Bachelor
of Science Degree in Chemistry from Northwestern University in
1937, and Master of Arts and Ph.D. Degrees in Organic
Chemistry from the University of California at Los Angeles in
1939 and 1943, respectively.
Ray L. Hauser, Ph.D. is one of the founders of the Company
and has been a Director of the Company since November 1983.
Dr. Hauser was the owner and sole shareholder of Hauser
Laboratories, Inc. prior to its acquisition by the Company in
1990. Dr. Hauser is an internationally recognized expert in
materials science and technology and, as an individual or
through the performance of his laboratories, has supplied
consulting and contract services to a large number of U.S. and
international organizations and companies. Dr. Hauser is a
director of Image Guided Technologies, Inc., Avalon Imaging
Corp. and Surface Solutions, Inc., three technology firms in
Boulder, CO. Dr. Hauser received a Bachelor of Science Degree
in Chemical Engineering from the University of Illinois in
1950, a Master of Science Degree in Chemical Engineering from
Yale University in 1952, and a Ph.D. in Chemical Engineering
from the University of Colorado in 1957.
Willem A. Maas has served as a Director of the Company
since November 1995 and Mr. Maas has served as President and a
Director of Hauser Northwest, Inc., since May 1994. From
February 1990 to May 1994, he was President of Ironwood
Evergreens, Inc., an Oregon corporation engaged in the floral
greens business. From August 1980 until July 1989, he was the
Chief Executive Officer and Executive Vice President for
Florist Transworld Delivery Association ("FTD"). He is a
director and Chairman of Toll Free Cellular Inc., an emerging
communications company and a director of Floral Communications
Inc., a telemarketing company with an intercity floral trade.
Mr. Maas serves as a National Trustee of the Leukemia Society
of America.
Christopher W. Roser has served as a Director of the
Company since December 1990. Mr. Roser is a general partner of
The Roser Partnership, Ltd., and The Roser Partnership II,
Ltd., privately held venture capital funds, and is a Director
on the Board of Directors of North America Technology Group,
Inc., a public company, and various privately-held companies.
From 1984 to 1987, Mr. Roser was employed as a technology
research analyst and an associate in corporate finance for
Ladenburg Thalmann & Co., Inc., an investment banking firm.
Mr. Roser received a Bachelor of Arts Degree in Economics from
The University of Colorado in 1981 and an M.B.A. in Finance
from New York University Graduate School of Business
Administration in 1985.
Robert F. Saydah has served as a Director of the Company
since January 1994. Mr. Saydah has been Managing Partner and a
Director of Heidrick & Struggles, a privately-held
international executive search consulting firm, since May
1992. Before joining Heidrick & Struggles in 1988, Mr. Saydah
worked for the Lederle Laboratories Division of American
Cyanamid Company for 39 years, where he held general
management positions, including responsibility for strategic
planning and marketing and sales, culminating as Vice
President in charge of branded pharmaceuticals, generic, and
consumer health products businesses in the United States. He
also had operational responsibility for pharmaceutical
divisions in Latin America and Europe. Mr. Saydah received a
Bachelor of Arts Degree in Biology from Lehigh University in
1948, and a Master of Science Degree in Bacteriology from
Lehigh University in 1949.
Bert M. Tolbert, Ph.D. is one of the founders of the
Company and has been a Director of the Company since November
1983. Dr. Tolbert serves as managing partner of a ranching
complex in Idaho. He has served as an expert witness in
pharmaceutical litigation and has served as Project Manager in
Biology and Medicine for the Department of Energy. From 1957
to 1989, Dr. Tolbert served as Professor, Department of
Chemistry and Biochemistry at the University of Colorado at
Boulder. Dr. Tolbert received a Bachelor of Science (cum
laude) Degree from the University of California at Berkeley in
1942 and a Ph.D. in Physical-Organic Chemistry from the
University of California at Berkeley in 1945.
Compensation Committee Interlocks and Insider Participation
Directors Coleman, Cristol, Saydah and Tolbert comprise the
Company's Compensation Committee. All are nonemployee
directors. None of the members of the Compensation Committee
have ever been officers of the Company.
Director Compensation
During fiscal 1996, the Company's non-employee directors
were granted options to purchase a total of 17,400 shares of
Common Stock for services rendered to the Company at an
average price of $5.44 per share (100% of fair market value on
the date of grant). Directors receive an option to purchase
300 shares for Board service and options to purchase 150
shares for attendance at each meeting of the Board or each
committee thereof. The options are exercisable for a five-year
period.
In May 1992, the Board of Directors approved a two-step
plan to compensate outside Directors. The plan includes
options for Board and committee service as discussed above,
and an annual cash payment of $10,000 per outside Director
plus an annual payment of $2,500 for committee chairman. This
cash payment was reduced by 10% by the Compensation Committee
in 1994. During fiscal 1996, the Company's six outside
directors received cash compensation of approximately $55,650
in the aggregate pursuant to this plan, plus reimbursement of
travel expenses.
During the fiscal year ended April 30, 1996, the Company's
Board of Directors held ten meetings. The Compensation
Committee, consisting of directors Coleman, Cristol, Saydah
and Tolbert held ten meetings during the fiscal year. The
function of the Compensation Committee is to recommend raises
and bonuses, if any, for the Company's officers and to grant
stock option awards to Company employees. The Audit Committee
consisting of Directors Roser, Hauser, and Saydah held three
meetings during the fiscal year. The function of the Audit
Committee is to oversee management's internal audit controls,
review periodic filings with the Securities and Exchange
Commission, and review any transactions between the Company
and its officers, directors or affiliated entities. The
Nominating Committee consisting of Directors Saydah, Coleman
and Roser held three meetings during the fiscal year. The
function of the Nominating Committee is to investigate
succession planning for the Company's executives and review
nominations to the Board of Directors. The Nominating
Committee will not consider shareholder nominations.
Compliance With Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's directors, executive officers
and holders of more than 10% of the Company's Common Stock to
file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of
Common Stock of the Company. Based solely upon a review of
Forms 3 and 4 and amendments thereto furnished to the Company
during the fiscal year ended April 30, 1996 and Forms 5 and
amendments thereto furnished to the Company with respect to
the fiscal year ended April 30, 1996, to the best of the
Company's knowledge, the Company's directors, officers and
holders of more than 10% of its Common Stock complied with all
Section 16(a) filing requirements, except as follows: Drs.
Cristol and Tolbert filed one late Form 4 report reporting an
exercise of warrants during the fiscal year ended April 30,
1996.
EXECUTIVE OFFICERS
The following sets forth the names of the executive
officers of the Company not named previously, their respective
positions with the Company and business experience and
background.
David I. Rosenthal was named Chief Financial Officer and
Treasurer of the Company in May 1996. He also serves as
Corporate Treasurer for the Company's wholly-owned
subsidiaries, Hauser Northwest, Inc. d/b/a Ironwood, and
Shuster Laboratories, Inc. From the time of his employment at
the Company in June 1994 until April 1996, Mr. Rosenthal
served as the Company's Corporate Controller. Mr. Rosenthal
has over fifteen years experience in senior level financial
positions in both private and public high technology
companies, including Tandem Computers, Inc., and Octel
Communications Corporation, and three years employment at
Arthur Andersen & Company. Mr. Rosenthal earned his Bachelor
of Sciences Degree in Business Administration from the
University of California at Berkeley in 1976 and his M.B.A. in
Finance from California State University in 1977.
Patricia A. Roberts is Corporate Secretary for the Company.
She has been employed by Hauser since its inception and is
currently serving as Manager of Corporate Affairs and
Secretary to the Board of Directors. She also serves as
Corporate Secretary for the Company's wholly-owned
subsidiaries, Hauser Northwest, Inc. d/b/a Ironwood, and
Shuster Laboratories, Inc. Ms. Roberts attended the University
of Colorado at Boulder.
Neil A. Jans is currently Vice President and General
Manager of the Company's Natural Ingredients division. He
joined the Company as Director of Business Development in May
1988. From 1985 to May 1988, Mr. Jans was a consultant and
project manager for Western Consulting Corporation, The Meyer
Group, a management consulting group specializing in business
planning and strategy. Mr. Jans received a Bachelor of Science
Degree in Chemistry from Rutgers University in 1973 and an
M.B.A. from the University of Colorado in 1984.
Timothy D. Ziebarth, Ph.D. is Senior Vice
President/Director of Technical Services of the Company. From
July 1995 to January 1996, he was President and a director of
Shuster Laboratories, Inc., a wholly-owned subsidiary of the
Company. Prior to joining the Company, he served as Chief
Chemist, General Manager and President of Hauser Laboratories,
Inc. from 1974 to 1978 and again from 1987 to 1990. Dr.
Ziebarth received a Bachelor of Science Degree in Chemistry
from Montana State University in 1969 and a Ph.D. in Organic
Chemistry from Oregon State University in 1973.
Simon G. Maas has served as Executive Vice President and
General Manager of Hauser Northwest, Inc., since May 1994.
From February 1990 to May 1994, he was the Vice President and
General Manager of Ironwood Evergreens, Inc. From June 1987 to
February 1990, he was a partner in Pyramid Construction. From
1992 to the present, he has also been President of Nahanni
River Trading Co., Inc. Mr. Maas received a Bachelors of Arts
Degree in Art History from Trent University in 1985 and
attended Oxford University in 1986.
Philip H. Katz has served as President of Shuster
Laboratories, Inc., where he is responsible for the day-to-day
operations of the subsidiary, development of strategic
business plans, client service initiatives and coordination of
services with the Company's Technical Services division. Prior
to joining Shuster in 1973, Mr. Katz held the position of
Plant Manager for Brilliant Seafood, after serving as the
company's Quality Control Manager. Previously, he worked in
the Best Foods division of CPC International, handling new
product conceptualization and development through plant
start-up. Mr. Katz received his Bachelor of Science degree in
Food Science and Food Technology from the University of
Massachusetts in 1964.
Eugene W. Damon is Senior Vice President of Shuster
Laboratories, Inc., where he is responsible for the
development and growth of Shuster's business groups, which
include foods, pharmaceuticals, consumer goods, chemical
specialties and retail. Mr. Damon joined Shuster in July 1966.
Mr. Damon is a member of the Private Label Manufacturers
Association, Council for Responsible Nutrition, National
Association of Chain Drug Stores, Chemical Specialties
Manufacturers Association and Regulatory Affairs Professional
Society. Mr. Damon receive a Bachelor of Science degree in
Chemistry and Biology from St. Anselm's College in 1964.
Kenneth P. Gordon is Senior Vice President of Shuster
Laboratories, Inc., where he manages Shuster's manufacturing
and distribution accounts; handles technical consultations,
product composition analyses and product quality attributes;
oversees Shuster's planning, research and development
functions; and serves as a regulatory liaison on behalf of
clients. Prior to joining Shuster in l967, Mr. Gordon was a
food technologist for General Foods and earlier was a food
technologist with the Nestle Company. Mr. Gordon is a member
of the Institute of Food Technologists. Mr. Gordon received
his Bachelor of Science degree in Food Technology and his
Master of Science in Food Technology from the University of
Massachusetts at Amherst in 1963 and 1966, respectively.
The following table sets forth as of April 30, 1996, the
number of shares of the Company's Common Stock owned by any
person who is known by the Company to be the beneficial owner
of more than 5% of the Company's voting securities, by all
individual Directors, by all Named Executive Officers and by
all Officers and Directors as a group:
<TABLE>
Title of Amount and Nature of Percent of
Name Class Beneficial Ownership<F1><F2> Class
Directors:
<S> <S> <C> <C>
Dean P. Stull<F2> Common 284,400 2.7
Randall J. Daughenbaugh<F2> Common 149,862 1.5
William E. Coleman<F3> Common 36,455 *
Stanley J. Cristol<F4> Common 121,393 1.2
Ray L. Hauser<F2> Common 342,437 3.3
Bert M. Tolbert<F5> Common 94,877 *
Christopher W. Roser<F6> Common 70,170 *
Robert F. Saydah<F7> Common 13,800 *
Willem A. Maas<F8> Common 3,200 *
Named Executive Officers:
Philip H. Katz<F9> Common 1,000 *
Kenneth P. Gordon<F9> Common 0 *
Eugene W. Damon<F9> Common 0 *
All Officers and Directors
as a Group: (20 persons)<F1> Common 1,254,402 12.1
5% Shareholders:
Fidelity Management &
Research Company<F10> Common 919,500 8.9
T. Rowe Price Associates,
Inc.<F11> Common 1,055,000 10.2
* Less than one percent.
<FN>
<F1> Includes the following number of shares which could be acquired within 60 days through the exercise
of stock options: Dr. Stull, 99,653 shares; Dr. Daughenbaugh, 67,434 shares; Dr. Cristol, 11,400 shares;
Dr. Hauser, 3,000 shares; Mr. Saydah, 9,300 shares; Dr. Tolbert, 11,700 shares; Mr. Maas 1,200 shares;
and all directors and officers as a group, 245,926 shares.
<F2> Their business address is 5555 Airport Boulevard, Boulder, CO 80301.
<F3> Includes 14,359 shares owned by Dr. Coleman directly, 1 share owned by CVM Equity Fund II, Ltd., of
which Dr. Coleman is a general partner; 4,695 shares owned by Colorado Venture Management, Inc., of which
Dr. Coleman is Chairman; and shares which could be acquired within 60 days through the exercise of
options to purchase 17,400 shares held by CVM, Inc.
<F4> Dr. Cristol's address is University of Colorado, Department of Chemistry and Biochemistry, Campus
Box 215, Boulder, CO 80309.
<F5> Dr. Tolbert's address is 444 Kalmia Avenue, Boulder, CO 80304.
<F6> Mr. Roser's address is Roser Ventures, 1105 Spruce Street, Boulder, CO 80302.
<F7> Mr. Saydah's address is Heidrick & Struggles, Four Embarcadero Center, Suite 3570, San Francisco, CA
94111.
<F8> Mr. Maas' address is 2896 29th Avenue SW, Tumwater, WA 98512.
<F9> The business address for Messrs. Katz, Gordon and Damon is Shuster Laboratories, Inc., Quincy
Research Park, 5 Hayward St., Quincy, MA 02171.
<F10> The business address for Fidelity Management & Research Company is P.O. Box 1182, Boston, MA 02103.
<F11> The business address for T. Rowe Price Associates, Inc., is Financial Center, 10080 Red Run Blvd.,
Owings Mills, MD 21117.
</FN>
</TABLE>
Arrangements Affecting Control of the Company
As of April 30, 1996, the Officers and Directors of the
Company beneficially owned 1,254,402 shares of Common Stock
(approximately 12.1%) of the Company's Common Stock (assuming
exercise of all warrants and options deemed to be beneficially
owned by these persons).
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON COMPENSATION OF EXECUTIVE
OFFICERS OF THE COMPANY
The Compensation Committee of the Board of Directors and
the Company's Chief Executive Officer have furnished the
following joint report on executive compensation. The specific
responsibility of the Chief Executive Officer to furnish
information to the Compensation Committee has been outlined
below. During fiscal 1996, the Compensation Committee set the
salaries and bonus compensation for the Chief Executive
Officer, three Vice Presidents, the Chief Financial Officer
and the Corporate Secretary. The salaries and bonus plans for
three Named Executives, Messrs. Katz, Damon and Gordon are set
by contracts which the Company assumed as a result of the
acquisition of Shuster Laboratories, Inc., in July 1995. See
"Certain Transactions".
Executive Officer Compensation
The Committee has responsibility for making recommendations
for compensation and compensation policy. In carrying out this
responsibility, the Committee's first objective is to provide
a strong and direct link among shareholder value, Company
performance and executive compensation. The second objective
is to structure compensation programs that will promote
long-term stable growth and development within the Company.
The Committee believes that corporate development at Hauser,
an innovative technology company, is dependent on its ability
to attract and retain high quality people and operates to
ensure that goal. The Chief Executive Officer's responsibility
is to evaluate for the Compensation Committee the individual
performance of the executive officers, other than himself, and
their contribution to the Company's business goals and
objectives. He is also asked to report on the performance
reviews of these officers to the Compensation Committee and
make suggestions of the percentage of discretionary cash and
discretionary stock bonuses to be awarded.
The Company's compensation program for executive officers
consists of four key elements: base salary, short term
discretionary bonuses and profit sharing, long term
discretionary incentive and annual stock option awards and
annual grants of non- qualified stock options. The Committee
believes that this approach serves the interests of
shareholders by ensuring that executive officers are
compensated in a manner that advances both the short- and
long-term interests of the shareholders. Thus, compensation
for the Company's executive officers involves a high
proportion of pay which is at risk, a variable bonus based on
individual performance, and stock options, which directly
relate a portion of the officer's compensation to the
long-term stock price appreciation realized by the Company's
shareholders. To further these objectives, the Committee
regularly meets to evaluate the Company's compensation and
benefits programs. The executive officers also participate in
a 401(k) retirement plan, a medical plan, and the
non-qualified stock option plan available to employees
generally.
Base Salary. The Compensation Committee's policy is to
provide compensation for executive officers competitive within
the Denver/Boulder metropolitan area while giving
consideration to national compensation paid by technology
companies. Salaries paid to the Company's executive officers
are based upon an assessment of the nature of the position,
and the contribution, experience and Company tenure of the
executive officer and salary survey results. The Committee
also considers the recommendations for pay treatment and
performance reviews submitted by the Chief Executive Officer
as well as giving consideration to the needs of the Company
for product line expansion. In evaluating the performance of
the executive officers other than himself, the Chief Executive
Officer measured individual leadership skills, business
development skills, management skills, external relations and
communication skills. The executive officers' individual
contribution to corporate financial results for the fiscal
year, including revenue growth and changes in net income and
earnings per share, were also evaluated. In addition,
extraordinary management and supervisory responsibilities
assumed during the fiscal year were taken into consideration.
During fiscal 1993, base salaries were adjusted based upon
Wyatt Data Service's national survey of executive salaries in
Chemical Group Services companies with less than $200 million
in sales and a Company survey of local high technology
companies in the Boulder-Denver area with less than $100
million in sales which are most likely to compete with the
Company for the services of its executive officers. At that
time, the Company's executive base salaries were adjusted to
the 10th to 20th percentile of the salaries represented by the
Wyatt Data Service's survey. During fiscal 1994, the Committee
reviewed the base salaries of the Chief Executive Officer,
President, Executive Vice President, Secretary and Treasurer
and made no adjustments. During fiscal 1995, the base salaries
of the Chief Executive Officer, President, Executive Vice
President, Senior Vice President, Vice President, and
Treasurer were adjusted down by ten percent (10%), and the
Secretary by five percent (5%) because of financial exigencies
within the Company and were not based on inadequate
performance. During fiscal 1996 about half of this decrease
was restored. No changes in base salaries are planned for the
first half of fiscal 1997. At the end of the second quarter,
financial progress of the Company will be reviewed for
possible increases. A special increase for Vice President Neil
Jans was made effective May 1, 1996, corresponding to a
significant promotion and increase in responsibility.
During fiscal 1995, the Compensation Committee developed a
series of specific goal oriented compensation awards for
fiscal 1996. Fiscal 1996 awards for these executives were
based on achieving budgeted sales goals which were not met.
During fiscal 1996, the Compensation Committee developed a
series of specific goal oriented compensation awards for the
named executives for fiscal 1997. On June 26, 1996 the
Committee approved the plan for these executives for fiscal
1997. Fiscal 1997 awards for these executives are based on
achieving budgeted operating income goals. The Committee
expects that for fiscal 1997 and future years, award goals for
these executives will be directed toward a combination of
operating income goals for the Company as a whole and specific
divisions. In addition, base compensation of these executives
will be restored to competitive levels when the Company
returns to a profitable status.
Discretionary Cash Bonuses Paid in Fiscal 1996. After
reviewing the Company's annual report and audited financial
statements for the fiscal year ended April 30, 1996, the
Compensation Committee awarded no cash bonuses for fiscal
1996, because budgeted sales goals were not met.
The Compensation Committee conducts an annual performance
review of the Company's executive officers. To satisfy this
objective, the Compensation Committee instructs the Chief
Executive Officer to complete performance evaluations for each
of the executive officers. The Chief Executive Officer's
evaluation is an informal oral report to the Compensation
Committee along with informal suggestions of the percentage
stock and cash bonuses to be awarded. There were no individual
bonuses awarded to named executives during fiscal 1996. In
evaluating the performance of the executive officers other
than himself, the Chief Executive Officer measures leadership,
strategic planning, financial results, business development,
management skills, external relations and communication
skills. The Compensation Committee does not adopt the
suggestions of the Chief Executive Officer but rather adjusts
those suggestions to fit the parameters of their overall
knowledge and experience with the executive officers. The
Compensation Committee evaluates these performance reviews.
Factors, other than the report of the Chief Executive Officer,
reviewed by the Compensation Committee include increased
management or supervisory responsibilities and the direct
impact of the departments supervised by those executive
officers on the net sales, income and earnings per share of
the Company.
Stock Options. It is the Compensation Committee's policy
that a significant portion of the total compensation package
for its executive officers will be derived from stock options
and other forms of compensation that are directly related to
the performance of the Company and the value of shareholder
investments. This motivation is extended to all employees and
the Board of Directors through the Company's Non-Qualified
Stock Option Plan approved by shareholders in 1987 and the
1992 Plan approved by shareholders in 1992. In addition, a
system of stock option awards for patentees has been developed
for technical achievement.
During any fiscal year, the named executive officers of the
Company may receive the following types of stock option
awards: 1) along with all employees of the Company,
non-qualified stock options awarded on the employee's
anniversary date and based upon a percentage of the employee's
salary; 2) incentive stock options awarded by the Compensation
Committee for technical achievement, usually related to the
filing and/or award of a patent invented by the individual;
and 3) incentive stock options awarded by the Compensation
Committee based on performance. Discretionary stock options
distributed to the named executive officers were determined by
the Compensation Committee and were based upon the same
performance review criteria previously stated. The number of
options granted were based upon the individual executive's
performance during the fiscal year, anticipated future
contributions based on that performance, and the officer's
ability to impact corporate financial results. Additional
factors considered by the Committee included increased
management or supervisory responsibilities and the direct
impact of the departments supervised by those executive
officers on the net sales, income and earnings per share of
the Company.
In addition, stock options and share grants may be part of
hiring packages for key executives and professional personnel.
Options typically are granted at market value at the time of
award, vest over three to five years and are exercisable for a
five-year period. During fiscal 1996, executive officers
received incentive stock options to purchase 123,200 shares at
an average price of $5.27 and non-qualified options to
purchase 10,028 shares at an average price of $4.12. Of the
123,200 options granted to executive officers during fiscal
1996, 37,500 shares never vested as performance goals for
fiscal 1996 were not met. Discretionary stock option awards
granted to the named executives during fiscal 1996, for fiscal
1995 performance, were determined based upon the Chief
Executive Officer's evaluation report to the Committee of
individual performances plus the Compensation Committee's own
knowledge and experience with these same senior executive
officers. The Committee observes that the executive officers
continue to own a relatively low percentage of total
outstanding stock and deems it beneficial to shareholders as a
whole to increase the equity ownership of the executive
officers.
The Compensation Committee regularly reviews other possible
forms of incentive compensation and modifies or supplements
the existing programs when appropriate. The stock awards
continue the Committee's policy that officers of the Company
should have a strong motivation to develop performance of the
Company and enhance the Company's stock value. At present and
in future years, successful development of current and
diversified projects and further growth will be important
considerations in discretionary bonuses, both cash and stock.
Chief Executive Officer Compensation
As Chief Executive Officer, Dr. Stull is compensated based
on a review of his performance by the Compensation Committee.
The key factors measured by the Committee in determining Dr.
Stull's compensation package was its assessment of his ability
and dedication to enhancing the long-term value of the Company
by continuing to provide the leadership and vision that he has
provided throughout his tenure as Chief Executive Officer. The
base salary paid to the Chief Executive Officer is based upon
an assessment of the nature of the position, the leadership
exercised by, and the contribution, experience and Company
tenure of, Dr. Stull.
During fiscal 1993, Dr. Stull's base salary was reviewed
and compared with Wyatt Data Service's national survey of
executive salaries in Chemical Group Services companies with
less than $200 million in sales and a Company survey of local
high technology companies in the Boulder-Denver area with less
than $100 million in sales which are most likely to compete
with the Company for the services of Dr. Stull. At that time,
Dr. Stull's base salary was adjusted to the 10th to 20th
percentile of the salaries represented by the Wyatt Data
Service's survey. During fiscal 1994, the Committee reviewed
the base salary of the Chief Executive Officer and made no
adjustment. During fiscal 1995, the Committee reviewed the
base salary of the Chief Executive Officer and adjusted the
base salary downward by ten percent (10%). During fiscal 1996,
his base salary was increased by 5%, but restoration of a
competitive salary awaits improvement in the financial
condition of the Company. As stated previously, decreases in
salaries were made by the Committee because of financial
exigencies within the Company and were not based on inadequate
performance.
Dr. Stull's compensation is substantially related to the
Company's performance because his compensation package
includes a discretionary cash bonus determination and
discretionary incentive stock options which are granted at
100% of fair market value, based upon the Committee's review
of Dr. Stull's individual performance during the prior year in
the following areas: leadership, strategic planning, business
development, management skills, external relations and
communication skills. During fiscal 1996, Dr. Stull received
incentive stock options to purchase 70,000 shares and
non-qualified options to purchase 2,365 shares. Of the 70,000
incentive stock options, options to purchase 60,000 shares
never vested because performance goals for fiscal 1996 were
not met.
During fiscal 1995, the Compensation Committee developed a
series of specific goal oriented compensation awards for Dr.
Stull for fiscal 1996. Fiscal 1996 awards for Dr. Stull were
based on achieving budgeted sales goals which were not met. On
June 26, 1996 the Committee approved the plan for the Chief
Executive for fiscal 1997. Fiscal 1997 awards for the Chief
Executive Officer are based on achieving budgeted sales goals
and to a lesser extent achieving a positive corporate income.
The Committee expects that for fiscal 1997 and future years,
award goals will be directed toward a combination of increased
sales and profitability. In addition, the base compensation of
the Chief Executive Officer will be restored to competitive
levels.
SUMMARY
The Compensation Committee will continue to review the
Company's executive compensation programs to assure that such
programs are consistent with the objective of providing a
strong and direct link among shareholder value, Company
performance, and executive compensation.
By the Compensation Committee
Dr. Bert M. Tolbert, Chairman
Dr. William E. Coleman, Director
Dr. Stanley J. Cristol, Director
Mr. Robert F. Saydah, Director
and by Dr. Dean P. Stull, Chief Executive Officer
for the limited purposes stated above
Shareholder Return
The chart on page 14 compares the cumulative total return
to shareholders over the past five years for a holder of the
Company's Common Stock against the cumulative total return of
the NASDAQ Stock Market-US Index and the S & P Chemicals
(Specialty) Index. The chart depicts the value on April 30,
1996, of a $100 investment made on April 30, 1991.
The value of a stock over time is affected by many factors,
including the Company's earnings. From April 1991 to April
1993, the growth in the Company's earnings was substantially
due to the Supply Agreement with Bristol-Myers Squibb Company
for the production of paclitaxel. The decline in the stock
price in August 1993 occurred after Bristol failed to renew
the Company's contract. A primary objective of the Company
since August 1993 has been to diversify into specialty natural
products, including natural food ingredients. Although the
Company's sales have been heavily concentrated in the
paclitaxel pharmaceuticals market, Management intends to
diversify and evolve into a more balanced mix, including
pharmaceuticals, natural ingredients products, technical
services and secondary forest products.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Among Hauser Chemical Research, Inc., NASDAQ Stock Market -
US, and S & P Chemicals (Specialty)
[Caption]
<TABLE>
Measurement Period Hauser NASDAQ - US S&P Specialty
<C> <C> <C> <C>
4/31/91 100 100 100
4/31/92 257 121 117
4/31/93 267 139 129
4/31/94 155 155 131
4/31/95 83 180 144
4/31/96 121 257 176
</TABLE>
Compensation Table
The following table sets forth the cash compensation paid
by the Company for services to the Chief Executive Officer and
to each of the four most highly compensated executive officers
of the Company whose cash compensation exceeded $100,000
during the fiscal year ended April 30, 1996 (the "Named
Executive Officers"):
<TABLE>
Long Term Compensation
Annual Compensation Awards
Restricted
Stock Securities All Other
Name and Principal Fiscal Award(s) Underlying Compensation
Positions Year Salary ($)<F1> Bonus ($) Options (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Dean P. Stull 1996 $152,000 - - 72,365<F2> 0
Chief Executive Officer 1995 156,000 - - 74,566 4,125<F3>
1994 165,000 50,000 - 13,298 6,738<F3>
Randy J. Daughenbaugh 1996 $136,000 - - 10,206<F1> 0
Executive Vice Pres./ 1995 140,000 - - 53,228 4,440<F3>
Chief Technical Officer 1994 149,000 30,000 - 9,164 7,099<F3>
Philip A. Katz 1996 $111,000<F4> 32,356<F5> - - 18,891<F6>
President 1995 - - - - -
Shuster Laboratories, Inc. 1994 - - - - -
Kenneth A. Gordon 1996 $111,000<F4> 32,356<F5> - - 15,883<F6>
Senior Vice President 1995 - - - - -
Shuster Laboratories, Inc. 1994 - - - - -
Eugene W. Damon 1996 $111,000<F4> 32,356<F5> - - 18,079<F6>
Senior Vice President 1995 - - - - -
Shuster Laboratories, Inc. 1994 - - - - -
_________________________
<FN>
<F1> During fiscal 1995, the base salaries of Drs. Stull and Daughenbaugh were adjusted down by ten
percent (10%) due to financial exigencies.
<F2> Of these shares, 60,000 and 6,000 never vested since the Company sales objectives for fiscal 1996
were not met.
<F3> The amounts included in All Other Compensation for Drs. Stull and Daughenbaugh represent the cash
and stock contribution made by the Company on behalf of those persons to the Company's 401(k) Plan. The
Company's Board of Directors may elect to match an employee's contribution in stock or cash. During
fiscal 1996, no discretionary match was made by the Company. During fiscal 1995, the Company contributed
an aggregate of 1,671 shares of the Company's Common Stock on behalf of those persons, as a result of an
80% discretionary Company match in Common Stock. The fair market value of the shares of Common Stock
contributed was $4.315 per share as of April 30, 1995. Accordingly, the value received by Drs. Stull
and Daughenbaugh was $3,316 and $3,897, respectively. During fiscal 1994, the Company contributed an
aggregate of 1,231 shares of the Company's Common Stock on behalf of those persons, as a result of the
Company's 80% match in Common Stock. The fair market value of the shares of Common Stock contributed
was $8.50 per share as of April 30, 1994. Accordingly, the value received by Messrs. Stull and
Daughenbaugh $5,138 and $5,323, respectively.
<F4> Messrs. Katz, Gordon and Damon became employees of the Company's wholly-owned subsidiary, Shuster
Laboratories, Inc., on July 20, 1995, pursuant to existing employment agreements which were in effect
when the acquisition took place. The employment agreements provide for the annual salaries set forth
above and expire on July 20, 1998.
<F5> The bonuses represent phantom stock payments made to Messrs. Katz, Gordon and Damon for their
phantom stock in Shuster Laboratories, Inc. The Shuster Phantom Stock Plan was a bonus plan through
which the individuals earned an equity interest in Shuster. The payments were made in July and October
1996 as part of the acquisition of Shuster. The individuals are also entitled to receive additional
phantom stock payments in future years and share in an earnout which may be paid to shareholders of
Shuster. See "Certain Transactions."
<F6> The amounts represent distributions from Shuster's Employee Stock Ownership Plan as a result of
the acquisition by the Company and matching contributions from Shuster's 401(k) Plan. See "Certain
Transactions".
</FN>
</TABLE>
Stock Option Plans
1987 Non-Statutory Stock Option Plan
In 1987, the Company adopted a non-statutory stock option
plan (the "Non-Statutory Plan") under which 718,720 shares of
its Common Stock have been reserved for issuance. As of April
30, 1996, there were 672,682 shares of Common Stock committed
under the Non-Statutory Plan. The Non-Statutory Plan provides
for the grant of non-statutory stock options to officers,
directors and key employees of the Company, or to independent
contractors providing services to the Company, as determined
by the Board. The Non-Statutory Plan is administered by the
Compensation Committee of the Board. Subject to the
limitations set forth in the Non-Statutory Plan, the
Compensation Committee of the Board has the authority to
select the persons to whom grants are to be made, to designate
the number of shares to be covered by and the terms of each
option, including exercise price and vesting, and to determine
the terms of option agreements and other agreements relating
to each option granted. Options granted under the Non-
Statutory Plan are generally non-transferable and expire upon
the termination of an optionee's employment relationship with
the Company. In general, if an optionee is permanently
disabled during his or her employment by or service to the
Company, such person's option may be exercised up to one year
following the date of termination of employment. The
Non-Statutory Plan will terminate in November 1997, unless
terminated sooner by the Board.
During fiscal 1996, the Compensation Committee of the Board
of Directors (consisting of Drs. Tolbert, Coleman, Cristol and
Saydah) recommended the distribution of 83,655 stock options
pursuant to the Non-Statutory Plan to employees and directors
who had been employed over one-half time for one full year.
The options are exercisable for periods ranging from one to
five years after grant, at an exercise price ranging from 80%
- - 100% of market price on the date of grant. The amount of the
award was determined by using a percentage of that employee's
annual salary as of the employee's anniversary date with the
Company. During fiscal 1996, options to purchase 32,566 shares
were exercised and options to purchase 13,920 shares expired.
1992 Incentive Stock Option Plan
The 1992 Plan provides for the granting of incentive stock
options to Executive Officers and key employees of the Company
and its subsidiaries to purchase a maximum of 700,000 shares
of the Company's Common Stock. As of April 30, 1996, 269,263
shares were committed under the 1992 Plan. The 1992 Plan
provides for the grant of incentive stock options intended to
qualify as such under Section 422 of the Internal Revenue Code
of 1986, as amended. The exercise price of options granted
under the 1992 Plan may not be less than 100% of the fair
market value of the Common Stock at the time of the grant.
Options are not transferable and may not be exercised more
than 10 years from the date of grant. The aggregate fair
market value of the stock with respect to which incentive
stock options are first exercisable in any calendar year may
not exceed $100,000. The 1992 Plan is administered by the
Compensation Committee of the Company's Board of Directors,
which has the authority to determine the persons to whom
options will be granted, the number of shares to be covered by
each option, the time or times at which options will be
granted or exercised, and the term and provisions of the
options. During fiscal 1996, options to purchase 145,600
shares were granted, options to purchase 4,634 shares were
exercised and options to purchase 127,369 shares expired.
The following table shows with respect to the Company's
Non-Statutory Plan and the 1992 Plan, for each of the Named
Executive Officers: (a) the number of shares subject to
options granted from May 1, 1995 to April 30, 1996, (b) the
percentage of total options granted to employees during the
same period, (c) the exercise price per share, (d) the
expiration date of the options, and (e) the potential
realizable value of the options.
<TABLE>
Option Grants in Last Fiscal Year
Potential
Percentage Realizable
of Total Value at Assumed
Number of Options Annual Rates
Securities Granted to Market of Stock Price
Underlying Employees Exercise Price on Appreciation for
Options in Fiscal Price Date of Expiration Option Term
Granted (#) Year ($/sh) Grant Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Dean P. Stull 10,000(2) 5% $5.22 $5.22 06/14/06 37,059 96,672
60,000(2)(4) 3% 5.22 5.22 07/28/96 196,856 498,833
2,365(3) 1% 4.14 4.87 11/30/00 4,971 8,908
Randall J. Daughenbaugh 2,000<F2> 1% 5.34 5.34 06/30/05 6,721 17,033
6,000<F2><F4> 3% 5.34 5.34 07/28/96 20,157 51,078
100<F2> 1% 5.34 5.34 07/19/00 150 332
2,106<F3> 4.14 4.87 11/30/00 4,427 7,933
<FN>
<F1> No gain to an executive officer is possible without an appreciation in stock value, which will
benefit all shareholders commensurately.
<F2> Incentive Stock Option grants.
<F3> Non-Statutory Stock Option grants which are granted at 80% of the fair market value on the date of
grant.
<F4> These performance options never vested since Company performance goals for fiscal 1996 were not met.
</FN>
</TABLE>
The following table shows with respect to the Company's
Named Executive Officers, (a) the number of shares exercised
during the fiscal year, (b) the dollar value realized upon
exercise (c) the total number of unexercised stock options and
(d) the aggregate dollar value of in-the-money, unexercised
options held at the end of the fiscal year.
<TABLE>
Aggregated Option Exercised in Last Fiscal Year and Fiscal Year End Value Table
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Acquired Value Options at FY End(#) Options at FY End ($)<F1>
Exercise (#) Realized ($)<F1> Excercisable Unexcercisable Excercisable Unexcercisable
<S> <C> <C> <C> <C> <C> <C>
Dean P. Stull 10,000 35,025 80,910 76,021 60,217 73,869
__________________________
<FN>
<F1> Represents the difference between the price paid and the fair market value of the shares underlying
options on the exercise date with respect to options exercised during the fiscal year or the fair market
value of the shares underlying options on April 30, 1996, ($6.25 per share) with respect to unexercised
options.
<F2> Of these shares, 60,000 shares never vested since Company performance goals for fiscal 1996 were
not met.
</FN>
</TABLE>
Employee Benefit Plan
Effective July 1992, the Company established a 401(k) plan
(the "401(k) Plan") for all employees who have completed six
months of service. Participants may contribute up to 15% of
their annual compensation subject to dollar limitations of
Section 402(g) of the Internal Revenue Code. The 401(k) Plan
is subject to the provisions of the Employee Retirement Income
Security Act of 1974.
Certain Transactions
There were no transactions with officers, directors and
their affiliates and the Company other than the acquisition of
Shuster Laboratories, Inc. Effective July 21, 1995, the
Company acquired all of the stock of Shuster for approximately
$4,700,000 in cash and notes plus a performance based earnout
for meeting certain milestones over the next five years. Mr.
Philip Katz, President of Shuster, was a shareholder of
Shuster and as such received $121,472 for his shares as part
of the acquisition. Mr. Katz, together with Messrs. Gordon and
Damon, are entitled to phantom stock payments as part of the
acquisition. The phantom payments made in fiscal 1996 are
included in the Compensation Table. Messrs. Katz, Gordon and
Damon are entitled to share in the performance based earnout
in future years.
OTHER MATTERS
Management of the Company knows of no other matter which
may come before the meeting. However, if any additional
matters are properly presented at the meeting, it is intended
that the per sons named in the enclosed Proxy, or their
substitutes, will vote such Proxy in accordance with their
judgment on such matters.
Shareholder proposals intended for presentation at the
Company's 1996 Annual Meeting of Shareholders must be received
by the Company at its principal offices in Boulder, Colorado,
not later than July 31, 1996.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report of the Company for the fiscal year ended
April 30, 1996, including audited Financial Statements for the
year then ended, was mailed to Shareholders on October 3,
1996, and is not incorporated into these proxy materials.
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED IF YOU DO NOT
PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR
PROXY PROMPTLY. IN THE EVENT YOU ARE ABLE TO ATTEND, WE WILL,
IF YOU REQUEST, CANCEL THE PROXY.
SIGNATURE
By Order of the Board of Directors
/s/Dean P. Stull, Chairman
Boulder, Colorado
October 3, 1996
