HAUSER, INC.
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 30, 1997
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, Inc., a Colorado corporation, at the Annual Meeting
of Shareholders to be held at The Raintree Plaza Conference
Center, 1900 Ken Pratt Boulevard, Longmont, Colorado 80501, at
3:00 p.m. Mountain Time, on October 30, 1997 and at any and
all adjournments thereof, for the following purposes:
1. To elect seven (7) 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,
Bert M. Tolbert, William E. Coleman, Christopher W. Roser and
Robert F. Saydah.
(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.)
2. To consider and act upon a proposal to: a) amend and extend
the term of the 1987 Non-Qualified Stock Option Plan and b)
increase the number of shares of Common Stock available for
reissue thereunder by 500,000 shares from 718,720 to
1,218,720.
___ FOR ___ AGAINST ___ ABSTAIN
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 SHAREHOLDERS TO THE
UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders and Proxy Statement furnished
herewith.
DATED: ___________________________________________
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, 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, INC.
5555 Airport Boulevard
Boulder, CO 80301
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 30, 1997
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Hauser,
Inc., a Colorado 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 October 30, 1997 at the Raintree
Plaza Conference Center, 1900 Ken Pratt Boulevard, Longmont,
Colorado 80501 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 amend and
extend the Company's 1987 Non-Qualified Stock Option Plan (the
"Stock Option Plan 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 September 30, 1997.
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 15, 1997, 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, 1997, there were 10,623,021 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 2, THE STOCK
OPTION PLAN PROPOSAL, REQUIRES AN AFFIRMATIVE VOTE OF AT LEAST
A MAJORITY OF THE QUORUM. 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 Stock Option
Plan 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 Stock Option Plan
Proposal.
ELECTION OF DIRECTORS
(Proxy Item #1)
The Company's Board of Directors has nominated the seven
persons listed below for election as directors for the ensuing
year, each to hold office until the 1998 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, 1997, 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> <C> <C>
Dean P. Stull, Ph.D. 47 Chairman, Chief Executive 1983
Officer, President and Director
Randall J. Daughenbaugh, Ph.D. 49 Chief Technical Officer 1983
and Director
William E. Coleman, Ph.D.<F1><F3> 63 Director 1988
Stanley J. Cristol, Ph.D.<F1> 81 Director 1983
Christopher W. Roser<F1><F3> 39 Director 1990
Robert F. Saydah<F1><F2><F3> 70 Director 1994
Bert M. Tolbert, Ph.D.<F1> 76 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 founder and past board member of the Boulder
Valley Rotary Club and Foundation. Dr. Stull has been 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. 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 Sewall
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.
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 as a consultant in many areas, but especially
in the vitamin, nutrition and metabolism fields. He has served
as Project Manager in Biology and Medicine for the Department
of Energy. From 1945 to 1957, he served as Associate Director
of the Bio-Organic Group of the Lawrence Radiation Laboratory.
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 1997, the Company's non-employee directors were
granted options to purchase a total of 19,350 shares of Common
Stock for services rendered to the Company at an average price
of $6.49 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 a committee chairman. During fiscal
1997, the Company's six outside directors received cash
compensation of approximately $71,400 in the aggregate
pursuant to this plan, including reimbursement of travel
expenses.
During the fiscal year ended April 30, 1997, the Company's
Board of Directors held 11 meetings. The Compensation
Committee, consisting of directors Coleman, Cristol, Saydah
and Tolbert, held 8 meetings during the fiscal year. The
primary 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 and Saydah held 7
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 5 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
consider shareholder recommendations for nominations to the
Board of Directors if presented in writing at least 90 days
prior to the end of the Company's fiscal year.
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, 1997 and Forms 5 and
amendments thereto furnished to the Company with respect to
the fiscal year ended April 30, 1997, 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.
Stock Option Plan Proposal
(Proxy Item #2)
Vote Required: Board Recommendation
The affirmative vote of a majority of the quorum is required
for approval of the Stock Option Plan Proposal. The Board of
Directors has unanimously approved the Stock Option Plan
Proposal and unanimously recommends that you vote for the
Stock Option Plan Proposal. Proxies solicited by the Board of
Directors will be voted for the Stock Option Plan Proposal
unless a vote against the Proposal or abstention is
specifically indicated.
On August 27, 1997, the Compensation Committee of the Board of
Directors (the "Committee") amended and extended, subject to
shareholder approval, the Hauser, Inc. 1987 Non-Qualified
Stock Option Plan (the "Plan). The Board of Directors and
shareholders of the Company adopted the Plan on November 12,
1987. The number of shares of Common Stock available for
issuance under the Plan was increased by 500,000 shares to
1,218,720 from 718,720 shares of Common Stock subject to
adjustment for dividend, stock split or other relevant changes
in the Company's capitalization and the term was extended ten
years. In addition, certain changes were made to comply with
Rule 16b promulgated by the SEC. Without approval of this
amendment, as of July 31, 1997, there were 33,476 shares
available for issuance under the Plan. The Plan, as proposed
to be amended, is set forth as Exhibit A to this Proxy
Statement.
The purpose of the Plan is to promote the interests of the
Company and its shareholders by helping the Company and its
subsidiaries attract, retain and motivate key employees,
outside directors, consultants, and independent contractors,
including officers and directors who are employees of, or
consultants to, the Company or any of its subsidiaries and
non-employee directors of the Company.
As of July 31, 1997, options to purchase an aggregate of
685,244 shares of Common Stock (net of options canceled) had
been granted pursuant to the Plan and 520,573 options were
exercised. In addition to options outstanding under the Plan,
as of July 31, 1997, options to purchase an aggregate of
364,831 shares of Common Stock (net of options canceled) had
been granted pursuant to the 1992 Incentive Stock Option Plan,
and 29,817 options were exercised. The fair market value of
all 1,050,075 shares of Common Stock subject to outstanding
options under the Plan and the 1992 Plan was $6,694,228 (based
upon the last sale of $6.375 per share on such date as
reported on the NASDAQ National Market System).
The amendment to the Plan will be approved if the number of
votes cast favoring the action exceed the number of votes cast
opposing the action. Unless otherwise specified, proxies
solicited by the Board of Directors will be voted FOR the
adoption of the amendment to increase the number of shares
reserved by 500,000 for issuance thereunder. The following
summary of the Plan, as amended, is qualified in its entirety
by reference to the Plan included herewith, as Exhibit A.
Summary of the Plan
Administration. The Compensation Committee of the Board of
Directors is responsible for administering the Plan. The
Committee has full authority, subject to the terms of the
Plan, to make all determinations under the Plan. The committee
is comprised of two or more directors, each of whom is a
"non-employee director" as such term is defined in Rule 16b-3
under the Securities Exchange Act of 1934 (the "Exchange
Act"). The Company will indemnify each member of the Committee
for actions taken under the Plan.
Eligibility. Employees of the Company and its subsidiaries,
including officers and directors who are employees of the
Company or any subsidiary of the Company, will be eligible to
receive non-statutory stock options under the Plan. As of
April 30, 1997, the Company had approximately 314 regular
full-time employees. Members of the Company's Board of
Directors who are not employees of the Company or any of its
subsidiaries will be eligible to receive non-statutory stock
options under the Plan. There are currently five (5)
non-employee directors of the Company. The benefits or amounts
that will be received by, or allocated to, eligible to receive
options under the Plan are not determinable. The non-employee
directors are compensated by a formula plan. See "Director
Compensation".
Exercise Price and Term. The Plan provides that the exercise
price under each non-statutory stock option shall be no less
than 100% of the fair market value of the Common Stock on the
day the option is granted. The exercise price of an option is
to be paid in cash or in such other consideration as the
Committee deems acceptable, including the optionee's
promissory note. The Committee may also permit a participant
to surrender previously owned shares to the Company, the fair
market value of which would be applied to the option exercise
price. The duration of each option will be as specified by the
Committee but will not exceed ten (10) years from the date of
grant. The Committee, at its discretion, may establish a
vesting schedule for any option granted under the Plan.
Non-Transferability. All options granted under the Plan may
be exercised during the optionee's lifetime only by the
optionee and are non-transferable except by will or the laws
of descent and distribution. Notwithstanding the above, the
Committee may, at its discretion, permit the transfer of a
non-statutory option.
Effect of Termination of Services. If an optionee's
employment is terminated because of the optionee's death or
for a reason other than disability or death, exercisable
options held by the optionee may be exercised no later than
three (3) months following the optionee's termination. If the
optionee is an employee of the Company or a subsidiary of the
Company and the termination is due to the optionee's death or
permanent and total disability, exercisable options held by
the optionee may be exercised for a period of twelve (12)
months following the termination. In each case, the options
may be exercised only to the extent exercisable on the date of
termination of employment.
Stock Dividends and Stock Splits. The number, kind and price
of the shares subject to each outstanding option will be
proportionately and appropriately adjusted in the event of any
stock dividend, stock split, re-capitalization,
re-classification, or other similar change in the Company's
outstanding securities. The number of the shares of Common
Stock of the Company reserved for issuance pursuant to options
granted under the Plan will be adjusted by the Board of
Directors for any such changes.
Term of Plan: Amendment. The Plan will terminate on August
27, 2007, ten (10) years from the date the amended Plan was
adopted by the Committee, or, if earlier, upon the purchase of
all Common Stock subject to the amended Plan pursuant to the
exercise of options granted under the amended Plan. Any
options outstanding after the termination of the Plan will
remain in effect in accordance with their terms. The Committee
may terminate or amend the Plan, except that the Committee may
not, without shareholder approval, increase the number of
shares of Common Stock as to which options may be granted,
materially increase the benefits accruing to participants or
materially modify the eligibility requirements. While the
benefits to be awarded to executive officers and employees are
not yet determined, the following table sets forth the options
granted to non-employee directors for the fiscal year ended
April 30, 1997 as an example of Directors' options to be paid
in the future.
<TABLE>
NEW PLAN BENEFITS
Plan Name
Name and Position Dollar Value Number of Units
<S> <C> <C> <S>
Non-Executive Director Group $126,318 19,350<F1> options
<FN>
<F1> the options were granted at fair market value
</FN>
</TABLE>
Federal Income Tax Consequences.
An optionee generally will not realize taxable income upon the
grant of a non-statutory stock option. When an optionee
exercises a non-statutory stock option, the optionee will
realize taxable ordinary income at that time equal to the
difference between the option price and the fair market value
of the stock on the date of the exercise.
An optionee will generally have a basis in stock acquired
through the exercise of a non-statutory stock option under the
Plan equal to the fair market value of the stock on the date
of the exercise. If the optionee subsequently sells the stock,
the gain which is the difference between the sale price and
the basis will be taxed as capital gain.
Any ordinary income realized by an optionee upon exercise of a
non-statutory stock option will be allowable to the Company as
a deduction at the time it is realized by the optionee.
Participants in the Plan should consult their own tax advisors
to determine the specific tax consequences of the Plan for
them.
Vote Required: Board Recommendation
The affirmative vote of a majority of the quorum is required
for approval of the Stock Option Plan Proposal. The Board of
Directors has unanimously approved the Stock Option Plan
Proposal and unanimously recommends that you vote for the
Stock Option Plan Proposal. Proxies solicited by the Board of
Directors will be voted for the Stock Option Plan Proposal
unless a vote against the Proposal or abstention is
specifically indicated.
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.
Martin C. Wehr joined the Company in January 1997 as an
Executive Vice President, and was named Chief Operating
Officer of the Company in June 1997. Prior to joining the
Company, Mr. Wehr served as Vice President of Marketing and
Sales for Guernsey Bel, Inc., a premier food ingredient
supplier to the Frozen Dessert, Confectionary and Baking
industries, from November 1994 to December 1996. From January
1992 to October 1994, Mr. Wehr was Managing Director,
Professional Products Division, for Dreyer's and Edy's Grand
Ice Cream, a leading ice cream company with $800 million in
sales. Prior to 1992, Mr. Wehr served as an Executive Officer
for Heublein, Inc., Minibar America, Inc., and Cruvinet, Inc.
where he was involved in sales and marketing, strategic
planning, management of operations and acquisitions. Mr. Wehr
is a member of the Corporation Board, Culinary Institute of
America. Mr. Wehr received a Bachelor of Science Degree in
Marketing from the University of San Francisco in 1970.
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 subsidiary,
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 subsidiary,
Shuster Laboratories, Inc. Ms. Roberts attended the University
of Colorado at Boulder.
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, 1997, 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>
Amount and Nature
Title of of Beneficial Percent
Name Class Ownership<F1><F2> of Class
Directors:
<S> <C> <C> <C>
Dean P. Stull<F2> Common 298,339 2.8%
Randall J. Daughenbaugh<F2> Common 162,692 1.6%
William E. Coleman<F3> Common 40,355 *
Stanley J. Cristol<F4> Common 115,393 1.1%
Bert M. Tolbert<F5> Common 98,177 *
Christopher W. Roser<F6> Common 73,920 *
Robert F. Saydah<F7> Common 19,900 *
Named Executive Officers:
Philip H. Katz<F8> Common 1,350 *
Kenneth P. Gordon<F8> Common 350 *
Eugene W. Damon<F8> Common 350 *
All Officers and Directors as a Group: (14 persons)<F1> Common 853,648 8.0%
5% Shareholders:
Fidelity Management & Research Company<F9> Common 979,200 9.23%
T. Rowe Price Associates, Inc.<F10> Common 1,055,000 9.9%
* 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, 89,653 shares; Dr. Daughenbaugh, 53,934 shares; Dr. Cristol, 14,400
shares; Mr. Saydah, 14,400 shares; Dr. Tolbert, 15,000 shares; and all directors and officers as a group,
233,598 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 21,300 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> Includes 57,120 shares owned by Mr. Roser directly, 1,050 shares owned by Roser Partnership and
shares which could be acquired within 60 days through the exercise of options to purchase 15,750 shares,
3,900 of which are held by Roser Partnership.
<F7> Mr. Saydah's address is Heidrick & Struggles, Four Embarcadero Center, Suite 3570, San Francisco,
CA 94111.
<F8> The business address for Messrs. Katz, Gordon and Damon is Shuster Laboratories, Inc., Quincy
Research Park, 5 Hayward St., Quincy, MA 02171.
<F9> The business address for Fidelity Management & Research Company is 82 Devonshire Street, Boston,
MA 02109.
<F10> The business address for T. Rowe Price Associates, Inc., is 100 E. Pratt Street, Baltimore, MD
21202.
</FN>
</TABLE>
Arrangements Affecting Control of the Company
As of April 30, 1997, the Officers and Directors of the
Company beneficially owned 853,648 shares of Common Stock
(approximately 8%) 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 1997, 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 three key elements: base salary, short term
discretionary bonuses and profit sharing and long term
discretionary incentive and annual stock option awards. 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 and a medical insurance plan with
other employees.
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. During fiscal 1997, the Compensation Committee
increased the salary of the Chief Financial Officer to market
levels in two parts, effective May 1, 1996 and May 1, 1997,
and increased the salary of the Corporate Secretary who
assumed additional responsibilities as Pension Plan
Administrator. No changes in base salaries are planned for the
first half of fiscal 1998. At the end of the second quarter,
financial progress of the Company will be reviewed for
possible salary increases or bonuses.
During fiscal 1996, the Compensation Committee developed a
series of specific goal oriented compensation awards for
fiscal 1997. Fiscal 1997 awards for these executives were
based on achieving budgeted sales goals which were not met.
During fiscal 1997, the Compensation Committee developed a
series of specific goal oriented compensation awards for the
named executives for fiscal 1998. On June 23, 1997 the
Committee approved the plan for these executives for fiscal
1998. Fiscal 1998 awards for these executives are based on
achieving budgeted operating income goals. The Committee
expects that for fiscal 1998 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 and appropriate
increases for these executives will be restored to more
competitive levels, as the Company returns to a profitable
status.
Discretionary Cash Bonuses Paid in Fiscal 1997. After
reviewing the Company's annual report and audited financial
statements for the fiscal year ended April 30, 1997, the
Compensation Committee awarded no cash bonuses for fiscal
1997, because budgeted operating income 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 1997. 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, operating 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 Incentive Stock Option 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) 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; 2)
incentive stock options or non-qualified 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,
operating 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.
For example, during fiscal 1997, the Company hired Martin Wehr
as Executive Vice President. Mr. Wehr was awarded stock grants
for 11,000 shares over a three-year period, and incentive
stock options to purchase 50,000 shares which vest over five
years. 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 1997,
executive officers received incentive stock options to
purchase 70,400 shares at an average price of $6.80. Of the
70,400 options granted to executive officers during fiscal
1997, 43,000 shares never vested as performance goals for
fiscal 1997 were not met. Discretionary stock option awards
granted to the named executives during fiscal 1997, for fiscal
1996 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. During fiscal 1997, Dr. Stull's base salary
remained the same.
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 1997, Dr. Stull received
incentive stock options to purchase 25,000 shares. Of the
25,000 incentive stock options, options to purchase 15,000
shares never vested because Company performance goals for
fiscal 1997 were not met.
During fiscal 1997, the Compensation Committee developed a
series of specific goal oriented compensation awards for Dr.
Stull for fiscal 1998. On June 26, 1997 the Committee approved
the plan for the Chief Executive Officer for fiscal 1998.
Fiscal 1998 option grants for the Chief Executive Officer vest
over five years but are accelerated if certain operating
income goals are achieved. The Committee expects that for
fiscal 1998 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 this page 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,
1997, of a $100 investment made on April 30, 1992.
The value of a stock over time is affected by many factors,
including the Company's earnings. From April 1992 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
ingredients markets. The Company's revenue mix is currently
made up of sales of pharmaceuticals, natural ingredients and
technical services.
Comparison of Five-Year Cumulative Total Return
Among Hauser, Inc., NASDAQ Stock Market - U.S. and S&P
Chemicals (Specialty).
[Caption]
<TABLE>
Measurement period Hauser NASDAQ - U.S. S&P Specialty
<C> <C> <C> <C>
4/31/92 100 100 100
4/31/93 104 115 110
4/31/94 60 128 112
4/31/95 32 149 124
4/31/96 47 212 151
4/31/97 47 225 138
</TABLE>
* $100 INVESTED ON 4/30/92 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING APRIL 30.
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 $100,000 during
the fiscal year ended April 30, 1997 (the "Named Executive
Officers"):
<TABLE>
Long Term Compensation
Awards
Annual Compensation Restricted Securities
Name and Fiscal Stock Awards(s) Underlying All Other
Principal Positions Year Salary ($)<F1> Bonus ($) ($) Options(#) Compensation($)
<S> <C> <C> <C> <C> <C> <C>
Dean P. Stull 1997 $155,500 - - 25,000<F2> 0
Chief Executive Officer 1996 152,212 - - 70,000<F2> 0
1995 156,750<F1> - - 74,566 4,125<F3>
Randy J. Daughenbaugh 1997 $138,500 - - 9,100<F2> 0
Executive Vice Pres./ 1996 136,530 - - 10,206<F2> 0
Chief Technical Officer 1995 140,600 - - 53,228 4,440
Philip A. Katz 1997 $117,576<F4> 22,057<F5> - 350 38,408<F6>
President 1996 111,000<F4> 32,356<F5> - - 18,596<F6>
Shuster Laboratories, Inc. 1995 - - - - -
Kenneth A. Gordon 1997 $117,576<F4> 22,057<F5> - 350 32,196<F6>
Senior Vice President 1996 111,000<F4> 32,356<F5> - - 15,589<F6>
Shuster Laboratories, Inc. 1995 - - - - -
Eugene W. Damon 1997 $117,576<F4> 22,057<F5> - 350 36,732<F6>
Senior Vice President 1996 111,000<F4> 32,356<F5> - - 17,785<F6>
Shuster Laboratories, Inc. 1995 - - - - -
_________________________
<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, 15,000 and 6,000 never vested since the Company operating income objectives for
fiscal 1997 were not met; and 60,000 and 6,000 never vested since the Company's 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 1997 and 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.
<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,
1997, there were 685,244 shares of Common Stock committed
under the Non-Statutory Plan.
During fiscal 1997, the Compensation Committee of the Board of
Directors (consisting of Drs. Tolbert, Coleman, Cristol and
Saydah) recommended the distribution of 20,023 stock options
pursuant to the Non-Statutory Plan to directors and to
employees 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 1997, options
to purchase 44,012 shares were exercised and options to
purchase 7,650 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, 1997, 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 ten (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 $100,000. The 1992 Plan is administered by the
Compensation Committee of the Company's Board of Directors,
which has the authority to determine the persons to whom
options will be granted, the number of shares to be covered by
each option, the time or times at which options will be
granted or exercised, and the term and provisions of the
options.
The following table shows with respect to the Company's
Non-Statutory Plan and the 1992 Plan, for each of the Named
Executive Officers: (a) the number of shares subject to
options granted from May 1, 1996 to April 30, 1997, (b) the
percentage of total options granted to employees during the
same period, (c) the exercise price per share, (d) the
expiration date of the options, and (e) the potential
realizable value of the options.
<TABLE>
Option Grants in Last Fiscal Year
Percentage Potential Realizable
of Total Value at Assumed
Number of Options Annual Rates of
Securities Granted to Market Stock Price
Underlying Employees Exercise Price on Appreciation for
Options in Fiscal Price Date of Expiration Option Term <F1>
Granted (#) Year ($/sh) Grant Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Dean P. Stull 10,000<F2> 6.8% $6.875 $6.875 06/28/2001 3,438 6,875
15,000<F2><F3> 10.2% 6.875 6.875 06/28/2001
Randall J. Daughenbaugh 3,100<F2> 2% $6.875 $6.875 06/28/2001 1,066 2,131
6,000<F2><F3> 4% 6.875 6.875 06/28/2001
<FN>
<F1> No gain to an executive officer is possible without an appreciation in stock value, which will
benefit all shareholders commensurately.
<F2> Incentive Stock Option grants.
<F3> These performance options never vested since Company performance goals for fiscal 1997 were not
met.
</FN>
</TABLE>
The following table shows with respect to the Company's Named
Executive Officers, (a) the number of shares exercised during
the fiscal year, (b) the dollar value realized upon exercise
(c) the total number of unexercised stock options and (d) the
aggregate dollar value of in-the-money, unexercised options
held at the end of the fiscal year.
<TABLE>
Aggregated Option Exercised in Last Fiscal Year and Fiscal Year End Value Table
Shares
Acquired on Value Number of Securities Underlying Value of Unexercised In-the-
Exercise Realized Unexercised Options at FY End (#) Money Options at FY End ($)<F1>
(#) ($)<F1> Exercisable<F2> Unexercisable<F2> Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Dean P. Stull 10,000 35,025 88,931 23,000 47,892 10,250
Randall J. Daughenbaugh 10,000 35,025 53,934 12,600 31,926 4,350
__________________________
<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, 1997, ($6.50 per share) with respect to unexercised options.
<F2> Of these shares, 15,000 shares never vested since Company performance goals for fiscal 1997 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 one
year of service. Participants may contribute up to 20% 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 payment of phantom
payments to Messrs. Katz, Damon and Gorden in connection with
the acquisition of Shuster in July 1995. The phantom payments
made in fiscal 1997 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
persons 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 1998 Annual Meeting of Shareholders, other than
nominations for Board of Directors, must be received by the
Company at its principal offices in Boulder, Colorado, not
later than July 31, 1997.
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, 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
September 30, 1997
EXHIBIT 1
HAUSER, INC.
1987 NON-STATUTORY STOCK OPTION PLAN AS AMENDED (8/27/97)
Article 1 - Purpose
The purpose of this 1987 Non-Statutory Stock Option Plan (the
"Plan") is to promote the growth and general prosperity of
Hauser, Inc. (Hauser) by permitting Hauser to attract and
retain the services of its Directors, key employees and
independent contractors through the grant of options to
purchase Hauser's Common Stock.
Article 2 - Administration of the Plan
The Plan shall be administered by the Board of Directors (the
"Board") of Hauser. At any time, the Board may delegate any,
or all, of its responsibilities for administration of the Plan
to a committee of its members. Subject to the terms of the
Plan, the Board shall have the authority to determine when and
upon what terms options may be granted under the Plan, the
persons to whom options shall be granted, the number of option
shares to be granted to each person, and the provisions of the
option agreements and other instruments relating to the option
granted. All those agreements and instruments shall be
consistent with the Plan. The reasonable interpretation by
the Board of any provision of the Plan, or of any instruments
relating to the options granted, shall be final. From time to
time, the Board may adopt any rules and regulations for
carrying out the Plan that it deems appropriate. No member of
the Board shall be liable with respect to any action taken, or
determination made, in good faith regarding the Plan or any
options granted pursuant to it.
Article 3 - Eligible Persons
Options may be granted to officers, directors, and key
employees of Hauser or its subsidiaries, or to independent
contractors or consultants providing services to Hauser as may
be determined by the Board. The granting of any option to a
person shall neither entitle that person to, nor disqualify
him from, participation in any other grant of options pursuant
to this Plan or any other plan.
Article 4 - Stock
The stock subject to the options granted under this Plan shall
be either shares of Hauser's authorized but unissued shares of
Common Stock, .001 par value, or shares of Common Stock
reacquired by Hauser ("Common Stock"). The maximum number of
shares that are hereby reserved for issuance, and may be
issued pursuant to this Plan, is 1,218,720, subject to
adjustment as provided in Article 14. In the event that any
option granted under the Plan shall expire, terminate or be
canceled for any reason without having been exercised in full,
or shall cease for any reason to be exercisable in whole or in
part, the unpurchased shares shall be available again under
the Plan.
Article 5 - Grant of Options
Options may be granted to eligible persons for any number of
shares and at any time during the term of the Plan, as the
Board shall determine.
Article 6 - Option
The price-per-share specified in each option granted under the
Plan shall be no less than 100% of the fair market value of
the Common Stock or the date the option is granted.
Article 7 - Duration of Options
Subject to termination earlier as provided in Articles 9 and
10, each option shall expire on the date specified by the
Board, but not more than ten (10) years from its date of
grant. The Board may extend the term of any previously
granted option if that option, as extended, expires less than
ten (10) years from its original date of grant as provided
above.
Article 8 - Exercise of Options
Subject to the provisions of Articles 9 through 12, each
option granted under the Plan shall be exercisable as follows:
(a) The option either shall be exercisable fully at the time
of grant or shall become exercisable in installments, as the
Board determines. Installments may be cumulative or
noncumulative, as the Board determines.
(b) Once an installment becomes exercisable, it shall remain
exercisable until expiration or termination of the option,
unless specified otherwise by the Board.
(c) Each option may be exercised from time to time, in whole
or in part, for no more than the total number of shares
available for exercise.
(d) The Board may accelerate the date of exercise of any
installment for any reason.
Article 9 - Termination of Option for Employees
Whenever an optionee ceases to be an employee of Hauser or
ceases to be employed by Hauser or any subsidiary, for any
reason other than death or disability (within the meaning of
Section 22(e)(3) of the Internal Revenue Code), his options
shall terminate on the date he ceased to be so employed, and
no further installments of those options will become
exercisable. The Board may, in its sole discretion, allow the
exercise of options, but only to the extent they were
exercisable at the time of termination of employment, for a
period of up to three (3) months after the termination of
employment (but conclusively whether authorized leaves of
absence or absence on military or governmental service) may
constitute employment for the purposes of the Plan. Nothing
in the Plan, or in any option granted under the Plan, shall be
deemed to give any optionee the right to continue in the
employ of Hauser or any of its subsidiaries or shall be deemed
to interfere in any way with the right of Hauser to terminate
any optionee's employment at any time and for any reason.
Options granted under the Plan shall not be affected by any
change of employment among Hauser and its subsidiaries so long
as the optionee continues to be an employee of Hauser or one
of its subsidiaries.
Article 10 - Termination of Options for Non-Employees.
Options granted to directors, independent contractors, or
other non-employees, will remain in effect until the
expiration of the option.
Article 11 - Disability; Death
(a) If an optionee who is an employee of Hauser becomes
disabled (within the meaning of Section 22(e)(3) of the
Internal Revenue Code), his options may be exercised to the
extent that they were exercisable on the date he ceased to be
employed by Hauser or any subsidiary for a period of one (1)
year from the date of termination of employment (but not later
than its specified expiration date).
(b) If an optionee who is an employee of Hauser dies while
employed by Hauser or during the three-month period referred
to in Article 11, his options may be exercised to the extent
that they were exercisable on the date of his death or
cessation of his employment, whichever occurred first, by his
estate, or duly appointed representative, or beneficiary who
acquires the options by will or by the laws of descent and
distribution, but no further installments of his options will
become exercisable and each of his options shall terminate on
the first anniversary of the date of his death (but not later
than the specified expiration dates).
Article 12 - Assignability
No option shall be assignable or transferable by the optionee
except by will or by the laws of descent and distribution and,
during the lifetime of the optionee, each option shall be
exercisable only by him.
Article 13 - Terms and Conditions of Options
Options shall be evidenced by instruments, which need not be
identical, in such form as the Board approves. Those
instruments shall conform to the terms and conditions set
forth in Articles 6 through 11 and may contain any other
provisions not inconsistent with the Plan, including
restrictions applicable to shares of Common Stock issuable
upon exercise of options granted under the Plan, as the Board
deems advisable. Hauser shall not be obligated to deliver any
shares unless and until, in the opinion of Hauser's counsel,
all applicable federal, state, and other laws and regulations
have been complied with. Without limiting the generality of
the foregoing, Hauser may require from the optionee any
investment representation, restrictive legend on any stock
certificate or other agreement that counsel for Hauser
considers necessary in order to comply with the Securities Act
of 1933.
Article 14 - Adjustments
(a) Upon the happening of any of the following described
events (the "Events of Adjustment"), an optionee's rights
under options granted under this Plan shall be adjusted as
provided below.
(1) If Hauser shall, at any time prior to the termination date
of the Plan, change its Common Stock into a greater number of
shares of stock through a stock dividend or split-up of
shares, the number of shares of Common Stock deliverable with
respect to each payment of the specified option price per
share in connection with each exercise of an option after the
record or effective date of such stock dividend or split-up of
shares shall be proportionately increased. Conversely, if the
Common Stock shall, at any time within such period, be
combined into a smaller number of shares of stock through a
reverse stock split, the number of shares of Common Stock
deliverable with respect to each payment of the specified
option price per share in connection with the exercise of an
option after the record or effective date of such combination
of shares shall be proportionately reduced.
(2) If within the duration of an option there shall be a
corporate merger, consolidation, acquisition of assets, or
other reorganization and if such transaction shall affect the
optioned stock, the employee shall thereafter be entitled to
receive upon exercise of his option those shares or securities
that he would have received had the option been exercised
prior to such transaction and the employee had been a
stockholder of Hauser with respect to such shares.
(b) Upon the happening of any of the Events of Adjustment, the
class and aggregate number of shares set forth in Article 4 of
this Plan that are reserved for issuance pursuant to the Plan,
or are subject to options that previously have been or
hereafter may be granted under the Plan, also shall be
adjusted appropriately to reflect the Events of Adjustment.
(c) The Board shall determine the adjustments to be made under
this Article 14, and its determination shall be conclusive and
binding on all interested parties.
(d) Notwithstanding anything in this Plan to the contrary, in
connection with any corporate transaction to which Section
425(a) of the Code is applicable, there may be a substitution
of a new option for an old option granted under this Plan or
any assumption of an old option granted under this Plan. Any
optionee who has a new option substituted for an old option
granted under this Plan shall, in connection with the
corporate transaction, lose his rights under the old option.
Nothing in the terms of the assumed or substituted option
shall confer on the optionee more or less favorable benefits
than he had under the old option.
Article 15 - Exercise of Option
An option (or any part or installment of an option) shall be
exercised by giving written notice to Hauser at its principal
office address, identifying the option being exercised,
specifying the number of shares of which it is being
exercised, and accompanied by full payment of the purchase
price, at the option of the Board of Directors or their
delegate, payment will be made (1) in United States Dollars,
(in cash or by certified or bank check); or (2) in shares of
Common Stock of Hauser owned by the optionee having a fair
market value (as determined by the Board as of the business
day immediately preceding the day on which the option is
exercised) equal to, or a fraction of a share less than, the
purchase price; or (3) in a combination of Common Stock and
Dollars. Unless the Board determines otherwise, the holder of
an option shall not have any rights of a shareholder with
respect to the shares covered by his option until the issuance
of a stock certificate to him for his shares. Unless the
Board determines otherwise, no adjustment will be made for
dividends or similar rights when the record date occurs after
the exercise of the option but prior to the date the stock
certificate is issued. In no case may a fraction of a share
by purchased, or issued under the Plan.
Article 16 - Termination and Amendments to Plan
The Plan as amended was adopted by the Board on August 27,
1997 and by the shareholders on October 30, 1997, and will
expire August 27, 2007, ten (10) years after Board adoption
(except as to options outstanding on that date). The Board
may terminate, or amend, the Plan in any respect at any time,
except that, without the approval of the shareholders, no
amendment shall be approved if such amendment would (a)
materially increase the benefits accruing to participants
under the Plan; (b) materially increase the number of
securities which may be issued under the Plan; or (c)
materially modify the requirements as to eligibility for
participation in the Plan. However, no action of the Board or
shareholders may, without the consent of an optionee, impair
substantially his rights under any option previously granted
to him.
Article 17 - Governmental Regulation
The Plan and the grant and exercise of options under it, and
Hauser's obligation to sell and deliver shares of Hauser's
Common Stock under those options, shall be subject to all
applicable laws (including tax laws), rules and regulations.
