HAUSER, INC.
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 22, 1998
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 (located behind the Raintree Hotel), 1900 Ken Pratt
Boulevard, Longmont, Colorado 80501, at 3:00 p.m. Mountain
Time, on October 22, 1998, 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,
William E. Coleman, Beverly J. Haddon, Robert F. Saydah and
Bert M. Tolbert.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, draw a line through or otherwise strike out his/her
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 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 22, 1998
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 22, 1998, at the Raintree
Plaza Conference Center (located behind the Raintree Hotel),
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. 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 22, 1998.
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 4, 1998 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, 1998, there were 10,668,619 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. 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.
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 1999 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. 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, 1998, all positions
and offices held with the Company and the period from which
served:
<TABLE>
All Positions and Offices Held First Elected
Name Age with the Company as a Director
<S> <C> <S> <C>
Dean P. Stull, Ph.D. 48 Chairman, Chief Executive Officer, 1983
President and Director
Randall J. Daughenbaugh, Ph.D. 50 Chief Technical Officer and Director 1983
William E. Coleman, Ph.D.<F1><F3> 64 Director 1988
Stanley J. Cristol, Ph.D.<F1> 82 Director 1983
Beverly J. Haddon<F2> 56 Director 1998
Robert F. Saydah<F1><F2><F3> 71 Director 1994
Bert M. Tolbert, Ph.D.<F1> 77 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.
Beverly J. Haddon has served as a Director of the Company
since March 1998. Ms. Haddon is a general partner of CRL
Associates, Inc., a business consulting and
government-lobbying firm. Prior to joining CRL in 1993, Ms.
Haddon worked in banking for 28 years with Colorado's largest
banking company, United Bank of Colorado, Norwest Bank. Active
in the community, Ms. Haddon now serves as vice chair and
member of the Stapleton Redevelopment Foundation, a member of
the Board for the Denver Foundation, a member of the Rotary
Club of Denver, and Past President and current member of the
Colorado Women's Forum. She is also a former president and
board member of the State Board of Agriculture (governing
board of C.S.U., University of Southern Colorado and Fort
Lewis College), and a former member of the Colorado Supreme
Court's Advisory Council. In addition to community boards, she
is a Director of B.I., Inc., a publicly held company which
designs, manufactures, markets and supports electronic
monitoring systems. Ms. Haddon received a B.S. degree in
Business and Journalism from Iowa State University in 1962.
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 non-employee
directors. None of the members of the Compensation Committee
have ever been officers of the Company.
Director Compensation
During fiscal 1998, the Company's non-employee directors were
granted options to purchase a total of 17,250 shares of Common
Stock for services rendered to the Company at an average price
of $6.54 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
1998, the Company's five outside directors received cash
compensation of approximately $45,375 in the aggregate
pursuant to this plan, excluding reimbursement of travel
expenses.
During the fiscal year ended April 30, 1998, the Company's
Board of Directors held nine meetings. The Compensation
Committee, consisting of directors Coleman, Cristol, Saydah
and Tolbert, held seven 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 Haddon and Saydah held five
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 and
Coleman 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 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, 4 and 5 and amendments thereto furnished to the
Company with respect to the fiscal year ended April 30, 1998,
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.
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. He 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 Science 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 business unit.
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 received a Bachelor of Science degree in
Chemistry and Biology from St. Anselm's College in 1964.
The following table sets forth as of April 30, 1998, 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 of
Beneficial Percent of
Name of Beneficial Owner Ownership<F1> Class
Directors:
<S> <C> <C>
Dean P. Stull <F2> 287,905 2.70%
Randall J. Daughenbaugh <F2> 171,742 1.60%
William E. Coleman <F3> 43,955 (*)
Stanley J. Cristol <F4> 118,243 1.10%
Bert M. Tolbert <F5> 101,117 (*)
Beverly J. Haddon <F6> 450 (*)
Robert F. Saydah <F7> 24,400 (*)
Named Executive Officers:
Philip H. Katz <F8> 2,685 (*)
Kenneth P. Gordon <F8> 350 (*)
Eugene W. Damon <F8> 684 (*)
Martin C. Wehr <F2> 32,000 (*)
All Officers and Directors as a Group: 810,512 7.40%
(14 persons)
5% Shareholders:
Fidelity Management & Research Company <F9> 1,231,600 11.50%
T. Rowe Price Associates <F10> 1,059,800 9.90%
______________________
* (Less than 1%)
<FN>
<F1> Includes the following number of shares which could be acquired within 60 days through the exercise
of stock options: Dr. Stull, 102,931 shares; Dr. Daughenbaugh, 63,634 shares; Dr. Cristol, 17,250 shares;
Mr. Saydah, 18,900 shares; Dr. Tolbert, 18,000 shares; and all directors and officers as a group, 295,865
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 24,900 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> Ms. Haddon's address is CRL Associates, Inc., 1625 Broadway, Suite 2450, Denver, CO 80202.
<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, 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, 1998, the Officers and Directors of the
Company beneficially owned 810,512 shares of Common Stock
(approximately 7.4%) 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 1998, the Compensation Committee set the
salaries and bonus compensation for the Chief Executive
Officer, two 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. These
contracts expired in July 1998. See "Certain Transactions".
Executive Officer Compensation
The Committee has responsibility for making recommendations
for compensation and compensation policy. 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 promote long-term,
stable growth and development. The Committee believes that the
Company's corporate development is dependent on its ability to
attract and retain high quality people. The Chief Executive
Officer's responsibility is to evaluate for the Compensation
Committee the individual performance of the executive
officers, other than himself. 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 consists of three key
elements: base salary, short term discretionary bonuses and
profit sharing, plus long term discretionary incentive stock
option awards. 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. 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 competitive within the Denver/Boulder
metropolitan area while giving consideration to national
compensation. The Committee also considers the salary
recommendations and performance reviews submitted by the Chief
Executive Officer.
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 were taken into consideration.
The Compensation Committee made no changes to the base salary
of the named executive officers during fiscal 1998.
Discretionary Cash Bonuses Paid in Fiscal 1998. During fiscal
1997, the Compensation Committee developed a series of
specific goal-oriented compensation awards for fiscal 1998.
Fiscal 1998 awards for these executives were based on
achieving operating income goals which were not met. After
reviewing the Company's annual report and audited financial
statements for the fiscal year ended April 30, 1998, the
Compensation Committee awarded no cash bonuses for fiscal
1998. Mr. Wehr received a $20,000 cash bonus during fiscal
1998, as part of his original employment agreement.
The Compensation Committee awarded phantom stock bonuses to
Messrs. Katz, Gordon and Damon, employees of the Company's
wholly-owned subsidiary, Shuster Laboratories. The bonuses
represent phantom stock payments made to Messrs. Katz, Damon
and Gordon for their phantom stock in Shuster, Inc. The
Shuster Phantom Stock Plan was a bonus plan through which the
individuals earned an equity interest in Shuster, Inc. The
payments were made monthly and terminated in July 1998.
The Compensation Committee instructs the Chief Executive
Officer to complete performance evaluations for each of the
executive officers other than himself. The Chief Executive
Officer's evaluation is an informal report to the Compensation
Committee along with informal suggestions of the percentage
stock and cash bonuses to be awarded. In evaluating these
performances, 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. The
Board of Directors adopted the Non-Qualified Stock Option Plan
approved by shareholders in 1987, and the 1992 Incentive Stock
Option Plan approved by shareholders in 1992.
During any fiscal year, the named executive officers of the
Company may receive incentive stock options or non-qualified
stock options 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. During fiscal 1998, executive officers
received stock options to purchase 141,800 shares at an
average price of $5.90.
Discretionary stock option awards granted to the named
executives during fiscal 1998, for fiscal 1997 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 1998, Dr. Stull's base
salary remained the same. The Committee's failure to increase
his base salary was because of financial exigencies within the
Company and was 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 1998, Dr. Stull received
incentive stock options to purchase 20,000 shares of Common
Stock which options vested on the date of grant.
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 following chart 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,
1998, of a $100 investment made on April 30, 1993.
The value of a stock over time is affected by many factors,
including the Company's earnings. The decline in the stock
price in August 1993, occurred after Bristol-Myers Squibb
Company failed to renew the Company's contract. A primary
objective of the Company since August 1993 has been to
diversify into natural ingredients markets. The Company's
revenue mix is currently made up of sales of natural
ingredients, technical services and pharmaceuticals.
Comparision of Five-Year Cumulative Total Return
Among Huaser, 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>
4/93 100 100 100
4/94 58 111 101
4/95 31 129 112
4/96 46 184 137
4/97 46 195 125
4/98 55 292 162
</TABLE>
* $100 invested on 4/30/93 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 $100,000 during
the fiscal year ended April 30, 1998 (the "Named Executive
Officers"):
<TABLE>
SUMMARY COMPENSATION TABLE
Long Term Compensation Awards
Securities
Name and Fiscal Annual Compensation Restricted Stock Underlying All Other
Principal Positions Year Salary ($) Bonus ($) Award(s) ($) Options(#) Compensation ($)
<S> <C> <C> <C> <C> <C> <C>
Dean P. Stull 1998 $155,500 - - 70,000 <F1> -
Chief Executive Officer 1997 155,500 - - 25,000 <F1> -
and Chairman 1996 152,212 - - 70,000 <F1> -
Randy J. Daughenbaugh 1998 $138,500 - - 14,300 <F2> -
Executive Vice Pres./ Chief 1997 138,500 - - 9,100 <F2> -
Technical Officer 1996 136,530 - - 10,206 <F2> -
Martin C. Wehr 1998 $140,000 $20,000 <F3> $14,175 <F3> 52,500 <F4> $60,617 <F5>
Chief Operating Officer 1997 35,000 - 10,350 <F3> 50,000 -
1996 N/A N/A N/A N/A N/A
Philip A. Katz 1998 $117,000 <F6> 29,410 <F7> - 4,000 4,212 <F8>
President 1997 117,500 <F6> 22,057 <F7> - 350 38,408 <F8>
Shuster Laboratories, Inc. 1996 111,000 <F6> 32,356 <F7> - - 18,596 <F8>
Kenneth A. Gordon 1998 $117,000 <F6> 29,410 <F7> - - 2,161 <F8>
Senior Vice President 1997 117,500 <F6> 22,057 <F7> - 350 32,196 <F8>
Shuster Laboratories, Inc. 1996 111,000 <F6> 32,356 <F7> - - 15,589 <F8>
Eugene W. Damon 1998 $117,000 <F7> 29,410 <F7> - 2,000 2,161 <F8>
Senior Vice President 1997 117,500 <F7> 22,057 <F7> - 350 36,732 <F8>
Shuster Laboratories, Inc. 1996 111,000 <F7> 32,356 <F7> - - 17,785 <F8>
<FN>
<F1> Of these shares, 50,000, 15,000 and 60,000 options were performance options based upon operating income objectives for
fiscal 1998, 1997 and 1996.
<F2> Of these shares 4,000, 6,000 and 6,000 options were performance options based upon operative income objectives for fiscal
1998, 1997 and 1996.
<F3> Represents grants of restricted stock based upon the fair market value on the date of grant and cash monies from original
employment agreement.
<F4> Of these shares, 37,500 options were performance options based upon operating income objectives for fiscal 1998 and 1997.
<F5> Represents relocation expenses paid to Mr. Wehr.
<F6> Messrs. Katz, Gordon and Damon became employees of the Company's wholly owned subsidiary, Shuster, 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 expired on July 20, 1998.
<F7> The bonuses represent phantom stock payments made to Messrs. Katz, Damon and Gordon for their phantom stock in Shuster.
The Shuster Phantom Stock Plan was a bonus plan through which the individuals earned an equity interest in Shuster. The
payments were made monthly. The individuals are also entitled to share in an earnout which may be paid to former shareholders
of Shuster. No earnout was paid during 1998, 1997, or 1996.
<F8> 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 1,218,720 shares of its
Common Stock have been reserved for issuance. As of April 30,
1998, there were 813,237 shares of Common Stock committed
under the Non-Statutory Plan. The Non-Statutory Plan was
amended in 1997 to add 500,000 shares and extend the term to
2007.
During fiscal 1998, the Compensation Committee of the Board of
Directors recommended the distribution of 154,849 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 ten years after grant, at an exercise price of
100% of market price on the date of grant. During fiscal 1998,
options to purchase 16,594 shares were exercised and options
to purchase 26,856 shares expired.
1992 Incentive Stock Option Plan
The 1992 Plan, as amended, 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, 1998, 439,162 shares were committed under the 1992
Plan.
During fiscal 1998, the Compensation Committee of the Board of
Directors recommended the distribution of 130,300 stock
options pursuant to the Incentive Stock Option Plan to
employees. The options are exercisable for periods one to ten
years after grant, at an exercise price of 100% of market
price on the date of grant. During fiscal 1998, options to
purchase 28,836 shares were exercised and options to purchase
52,169 shares expired.
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 $100,000. The 1992 Plan is administered by
the Compensation Committee of the Company's Board of
Directors, which has the authority to determine the persons to
whom options will be granted, the number of shares to be
covered by each option, the time or times at which options
will be granted or exercised, and the term and provisions of
the options.
The following table shows with respect to the Company's
Non-Statutory Plan and the 1992 Plan, for each of the Named
Executive Officers: (a) the number of shares subject to
options granted from May 1, 1997 to April 30, 1998, (b) the
percentage of total options granted to employees during the
same period, (c) the exercise price per share, (d) the
expiration date of the options, and (e) the potential
realizable value of the options.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Percentage of Value at Assumed
Number of Total Options Annual Rates of Stock
Securities Granted to Market Price Price Appreciation
Underlying Employee Exercise on Date of Expiration for Option Term
Options Granted(#) in Fiscal Year Price ($/sh) Grant Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Dean P. Stull 20,000 7.553% $ 5.938 $ 5.938 02/17/2008 74,681.24 189,256.92
50,000 18.882% 5.813 5.813 04/30/2008 200,958.02 520,784.19
Randall J. Daughenbaugh 100 0.378% $ 6.125 $ 6.125 05/21/2007 385.20 976.17
100 0.038% 6.469 6.469 05/13/2007 406.81 1,030.95
10,000 3.776% 5.813 5.813 04/30/2008 40,191.60 104,156.84
4,000 1.511% 5.938 5.938 02/17/2008 14,936.25 37,851.38
100 0.038% 6.469 6.469 05/13/2007 406.81 1,030.95
Martin C. Wehr 15,000 5.665% $ 5.938 $ 5.938 02/17/2008 56,010.93 141,942.69
37,500 14.162% 5.813 5.813 04/30/2008 150,718.51 390,588.14
Philip H. Katz 4,000 1.511% $ 5.938 $ 5.938 02/17/2008 14,936.25 37,851.38
Eugene W. Damon 1,000 0.378% $ 5.938 $ 5.938 02/17/2008 3,734.06 9,462.85
</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
Shares Number of Securities Underlying Value of Unexercised In-the-Money
Acquired on Value Unexercised Options at FY End (#) Options at FY End ($)
Exercise # Realized ($) Exercisable Unexercsiable Exercisable Unexercsiable
<S> <C> <C> <C> <C> <C> <C>
Dean P. Stull 0 0 102,931 64,000 $173,440.33 $114,374.60
Randall J. Daughenbaugh 0 0 63,634 11,200 $107,646.44 $ 20,862.44
Martin C. Wehr 0 0 25,000 77,500 $ 44,062.50 $142,968.75
Philip H. Katz 0 0 1,684 2,666 $ 2,907.37 $ 4,498.87
Kenneth P. Gordon 0 0 350 - $ 656.25 $ -
Eugene W. Damon 0 0 684 666 $ 1,219.87 $ 1,123.87
</TABLE>
The fair market value of Company Common Stock at April 30,
1998, measured as the average between the high and low trade
of Common Stock on such date, was $7.625 per share.
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 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 Gordon in connection with
the acquisition of Shuster in July 1995. The phantom payments
made in fiscal 1998 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 1999 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, 1998.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report of the Company for the fiscal year ended
April 30, 1998, 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 22, 1998
