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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HAUSER, INC.
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(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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HAUSER, INC.
5555 Airport Boulevard
Boulder, CO 80301
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held [ ], 1999
To Our Shareholders:
The Annual Meeting of Shareholders of Hauser, Inc. (the "Company") will be
held at [ ] on [ ], 1999 at 10:00 A.M., for the following purposes:
1. To elect the Board of Directors;
2. To consider and vote upon changing the state of incorporation of the
Company from Colorado to Delaware by means of a merger of the Company
into a newly formed, wholly owned subsidiary of the Company
incorporated under the laws of Delaware;
3. To consider and vote upon the Company's 1999 Stock Incentive Plan;
4. To consider and vote upon the Company's 1999 Stock Purchase Plan; and
5. To consider and act upon such other business as may properly come
before the Annual Meeting or any adjournment or postponement thereof.
All shareholders are cordially invited to attend the meeting, although only
shareholders of record at the close of business on November 1, 1999, will be
entitled to notice of, and to vote at, the meeting or any and all adjournments
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
_____________, 1999
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING. YOUR PROMPT RETURN OF THE PROXY WILL HELP TO ASSURE A QUORUM AT THE
ANNUAL MEETING AND AVOID ADDITIONAL COMPANY EXPENSE FOR FURTHER SOLICITATION.
YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED.
<PAGE>
HAUSER, INC.
5555 Airport Boulevard
Boulder, CO 80301
---------------------------------
PROXY STATEMENT
Solicitation and Revocation 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"), to be used at the annual meeting of shareholders of the Company (the
"Annual Meeting") to be held on [ ], 1999 at 10:00 A.M., at [ ] , or at any
adjournment or postponement thereof, for the purposes set forth in the
accompanying notice of Annual Meeting of Shareholders. If the enclosed form of
proxy is executed and returned, it may nevertheless be revoked at any time
before it is exercised, either in person at the Annual Meeting or by written
notice or by a duly executed proxy, bearing a later date, sent to the Secretary
of the Company. The mailing address of principal executive offices of the
Company is 5555 Airport Boulevard, Boulder, CO 80301. The Company anticipates
mailing this proxy statement and the accompanying proxy to Shareholders on or
about [ ], 1999.
The cost of soliciting proxies will be borne by the Company. In addition,
the Company will reimburse its transfer agent for charges and expenses in
connection with the distribution of proxy materials to the beneficial owners.
Solicitations may further be made by officers, directors and regular employees
of the company, without additional compensation, by use of mails, telephone,
telegraph or by personal calls.
PURPOSE OF THE ANNUAL MEETING
At the Annual Meeting, action will be taken: (1) to elect the Board of
Directors to hold office until the next annual meeting of shareholders and until
their successors shall have been elected and qualified; (2) to reincorporate the
Company by changing the state of incorporation of the Company from Colorado to
Delaware by the adoption of an Agreement and Plan of Merger pursuant to which
the Company will be merged into Hauser, Inc., a newly formed, wholly owned
subsidiary of the Company ("Newco"), which was formed for the purpose of
effectuating this merger, (3) to consider and vote upon the Company's 1999 Stock
Incentive Plan, (4) to consider and vote upon the Company's 1999 Employee Stock
Purchase Plan and (5) to transact such other business that may properly come
before the Annual Meeting. The Board of Directors does not know of any other
matter that is to come before the Annual Meeting. If any other matters are
properly presented for consideration, however, the persons authorized by the
enclosed proxy will have discretion to vote on such matters in accordance with
their best judgment.
Outstanding Shares, Quorum and Voting Rights
As of November 1, 1999, there were [ ] shares of the Company's Common
Stock, par value $.001 (the "Common Stock"), outstanding. Each share of Common
Stock is entitled to
<PAGE>
one vote. Only holders of record of Common Stock at the close of business on
November 1, 1999 will be entitled to notice of, and to vote at, the Annual
Meeting.
All proxies received pursuant to this solicitation will be voted, except as
to matters where authority to vote is specifically withheld and, where a choice
is specified as to the proposal, such proxies will be voted in accordance with
such specification. If no instructions are given, the persons named in the
proxies solicited by the Board of Directors of the Company intend to vote for
the nominees for election as directors of the Company set forth herein. If any
other matter should be presented at the Annual Meeting upon which a vote may
properly be taken, the shares represented by the proxy will be voted with
respect thereto at the discretion of the person or persons holding such proxy.
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SECURITY OWNERSHIP AND CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of September 30, 1999, and giving effect
to the Merger, the number of shares of Common Stock owned by any person who is
known by Hauser to be the beneficial owner of more than 5% of Hauser's voting
securities, by all individual Directors, by the Company's Co-Chief Executive
Officers and the three most highly paid executives with annual base salaries of
$100,000 or more (the "Named Executive Officers"), and by all Executive Officers
and Directors as a group:
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) Percent of Class
- ------------------------ ----------------------- ----------------
<S> <C> <C>
Directors:
Dean P. Stull(2) ................................. 113,505 2.2%
William E. Coleman(3) ............................ 19,353 (*)
Robert F. Saydah(4) .............................. 7,938 (*)
Rudolfo C. Bryce(5) .............................. 0 (*)
Herbert Elish(6) ................................. 0 (*)
James R. Mellor(7) ............................... 0 (*)
Harvey L. Sperry(8) .............................. 10,000 (*)
Volker Wypyszyk(9) ............................... 2500 (*)
Peter Zuellig(10) ................................ 0 (*)
Named Executive Officers:
Ralph L. Heimann.................................. 0 (*)
Brian E. Hufford.................................. 0 (*)
Philip H. Katz(11) ............................... 4,511 (*)
All Officers and Directors as a Group: (14 persons) 158,184 3.1%
5% Shareholders: .................................
Fidelity Management & Research Company(12) ....... 288,825 5.6%
T. Rowe Price Associates(13) ..................... 320,525 6.2%
ZBI(14)........................................... 1,383,443 26.7%
ZGNA(15).......................................... 1,131,908 22.0%
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* Indicates less than 1%.
(1) Includes the following number of shares which could be acquired within 60 days through the
exercise of stock options (including options which accelerate as a result of the Merger): Dr.
Stull, 66,011 shares; Mr. Saydah, 5,813 shares and all directors and officers as a group, 84,550
shares.
(2) Their business address is 5555 Airport Boulevard, Boulder, CO 80301.
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(3) Includes 11,090 shares owned by Dr. Coleman directly, 1 share owned by CVM Equity Fund II, Ltd.,
of which Dr. Coleman is a general partner; 1,174 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 7,088 shares held by CVM, Inc. Dr. Coleman's address
is Colorado Venture Management, Inc., 4845 Pearl East Circle, Suite 300, Boulder, CO 80301.
(4) Mr. Saydah's address is Heidrick & Struggles, 2493 Biltmore Dr., Alamo, CA 94507.
(5) Mr. Bryce's address is One Charlotte Hill Drive, Bernardsville, NJ 07924.
(6) Mr. Elish's address is 4400 Forbes Avenue, Pittsburgh, PA 15231.
(7) Mr. Mellor's address is 32161 South Coast Highway, Laguna Beach, CA 92651.
(8) Mr. Sperry's address is 787 Seventh Ave., New York, NY 10019.
(9) Mr. Wypyszyk's address is 2550 El Presidio St., Long Beach, CA 90810.
(10) Mr. Zuellig's address is 18-F, The Hong Kong Club Building, 3A Charter Road, Central, Hong Kong.
(11) Mr. Katz's address is Shuster, Inc., Quincy Research Park, 5 Hayward St., Quincy, MA 02171.
(12) The business address for Fidelity Management & Research Company is 82 Devonshire Street, Boston,
MA 02109.
(13) The business address for T. Rowe Price Associates, Inc., is 100 E. Pratt Street, Baltimore, MD
21202.
(14) ZBI is a wholly-owned subsidiary of ZGNA.
(15) ZGNA is a wholly-owned subsidiary of Zatpack Inc. an international business company organized
under the laws of the British Virgin Islands ("Zatpack"). Zatpack has 100 shares of common stock
issued and outstanding, which is divided into three classes. 49 shares of Zatpack Class A common
stock are held by the Stephen Zuellig Issue Trust for the benefit of Stephen Zuellig's
descendants. 49 shares of Zatpack Class B common stock are held by the Gilbert Zuellig Issue
Trust for the benefit of Gilbert Zuellig's descendants. 2 shares of Zatpack Class C common stock
are held by the Peter Zuellig and Thomas Zuellig Trust for the benefit of Peter Zuellig, the
eldest son of Stephen Zuellig, and Thomas Zuellig, the eldest son of Gilbert Zuellig. The
trustee for each trust is the Bermuda Trust Company.
</TABLE>
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<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
The Company's Board of Directors has nominated the nine persons listed
below for election as directors for the ensuing year, each to hold office until
the 2000 Annual Meeting of Shareholders and until their successors are duly
elected and qualified, or until their death, resignation or removal. Each
nominee, other than Michael C. Davis, is a present member of the Board of
Directors. Peter Zuellig, who is presently a Director, has declined to be
reelected because other business commitments would preclude his attending
meetings on a regular basis. 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 such nominee. 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 their voting power in favor of such other
person or persons as the Board of Directors of the Company may recommend. The
nine persons listed below have been nominated for election as Directors of the
Company:
Rudolfo C. Bryce Age 55 Director since 1999
Mr. Bryce has served as a Director of the Company since June 1999. Mr. Bryce
served as Chairman of Schering-Plough Health Care Products and Executive Vice
President of Schering-Plough Corporation until December 31, 1998. Mr. Bryce has
been a director of Noven Pharmaceuticals since 1998 and is a Trustee of St.
Mary's University, San Antonio, Texas.
William E. Coleman, Ph.D. Age 65 Director since 1988
Dr. Coleman has served as a Director of the Company since February 1988. Dr.
Coleman is Chairman of Colorado Venture Management, Inc., an investment and
project management firm. Dr. Coleman is a Director of B.I., Inc., a company that
designs, manufactures, markets and supports electronic monitoring systems. Dr.
Coleman has a Ph.D. in Organic Chemistry.
Michael C. Davis Age 59
Since 1995, Mr. Davis has served as the Chairman and Chief Executive Officer of
Interpharma Holdings & Management Corporation, a Philippines corporation which
distributes pharmaceutical products in South East Asia, since 1995. Prior
thereto, Mr. Davis was Regional Director of the Australia and South East Asia
region for AB Astra Sweden.
Herbert Elish Age 65 Director since 1999
Mr. Elish has served as a Director of the Company since June 1999. Mr. Elish was
the Chief Executive Officer of Weirton Steel Corporation from 1987 until
December 31, 1995. Currently, Mr. Elish is Director of The Carnegie Library of
Pittsburgh and a Director of Hampshire Group Limited, an apparel manufacturer.
James R. Mellor Age 68 Director since 1999
Mr. Mellor has served as a Director of the Company since June 1999. Mr. Mellor
was Chairman and Chief Executive Officer of General Dynamics Corporation before
retiring in May 1997. Currently, Mr. Mellor is a Director of General Dynamics
Corporation, Bergen Brunswig Corporation, Computer Sciences Corporation and
Howmet International Corporation. Mr. Mellor also serves as a Director and the
Chairman of USEC, Inc.
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<PAGE>
Robert F. Saydah Age 72 Director since 1994
Mr. Saydah has served as a Director of the Company since January 1994. Mr.
Saydah has been a Managing Partner of Heidrick & Struggles, a publicly held
international executive search consulting firm, since May 1992. Previously, Mr.
Saydah held general management positions for the Lederle Laboratories Division
of American Cyanamid Company.
Harvey L. Sperry Age 69 Director since 1999
Mr. Sperry has served as a Director of the Company since June 1999. Mr. Sperry
is a Partner of the law firm of Willkie Farr & Gallagher. Mr. Sperry is a
Director of Hampshire Group Limited, an apparel manufacturer.
Dean P. Stull, Ph.D. Age 49 Director since 1983
Dr. Stull has served as a Director since 1983. He was Chief Executive Officer
from 1983 to June 1999. Since June 1999, Dr. Stull has been Co-Chief Executive
Officer of the Company. Dr. Stull has a Ph.D. in Physical Organic Chemistry.
Volker Wypyszyk Age 53 Director since 1999
Mr. Wypyszyk has been a Director, President and Co-Chief Executive Officer of
the Company since June 1999. Since 1983, Mr. Wypyszyk has been President and
Chief Executive Officer of Zuellig Group N.A., Inc. which owns all of the
capital stock of ZBI (See Security Ownership And Certain Beneficial Owners And
Management).
Vote Requirement and Recommendation
To be elected each nominee must receive a plurality of all votes cast with
respect to such position as Director. Abstentions will not be included in the
vote totals with the result that an abstention will not have an effect on the
vote. In instances where nominee recordholders, such as brokers, are prohibited
from exercising discretionary authority for beneficial owners of shares of
Common Stock who have not returned a proxy ("Broker Non-Votes"), those shares of
Common Stock will not be included in the vote totals and, therefore, will have
no effect on the vote. If a quorum should not be present, the Annual Meeting may
be adjourned from time to time until a quorum is obtained.
The Board of Directors unanimously recommends a vote FOR each of the
persons nominated for election to the Board of Directors.
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<PAGE>
PROPOSAL 2 - REINCORPORATION IN THE STATE OF DELAWARE
Summary
The Board of Directors unanimously recommends that the shareholders approve
a change in the Company's state of incorporation from Colorado to Delaware. This
proposed change will be accomplished by merging the Company into Newco (the
"Reincorporation"). The Reincorporation will not involve a change in the
business, management, location, policies, properties, assets, liabilities or net
worth of the Company. Upon the conclusion of the Reincorporation, all of the
previously outstanding shares of Common Stock will be automatically converted
into the same number of shares of Common Stock of Newco. The proposed
Reincorporation will be accomplished pursuant to the terms of an Agreement and
Plan of Merger (the "Reincorporation Agreement") between the Company and Newco.
At the effective time of the Reincorporation, (a) the legal existence of
the Company as a separate corporation will cease; (b) Newco, as the surviving
corporation, will succeed to the assets and assume the liabilities of the
Company; and (c) each outstanding share of Common Stock will automatically be
converted into one share of Common Stock, $.001 par value, of Newco. Each
outstanding certificate representing a share or shares of Common Stock will
continue to represent the same number of shares of Newco stock. It will not be
necessary for shareholders to exchange the Company's stock certificates for
Newco's stock certificates. Following the Reincorporation, the Company stock
certificates may be delivered in effecting sales through a broker, or otherwise,
of shares of Newco. The Newco stock will be listed on the Nasdaq National Market
("Nasdaq").
If the Reincorporation is approved, the shareholders will become
shareholders of Newco and will be governed by the certificate of incorporation
of Newco (the "Newco Certificate of Incorporation"). Newco will be governed by
Delaware law and Newco Certificate of Incorporation, which will result in
certain changes in the rights of the Company's shareholders. The Newco
Certificate of Incorporation contains provisions which are different from the
Company's present Articles of Incorporation; the Board of Directors believes
that the differences are not significant.
The discussion contained herein is qualified in its entirety by, and should
be read in conjunction with, the Reincorporation Agreement and Newco Certificate
of Incorporation, copies of which are attached hereto as Appendices "A" and "B",
respectively.
Principle Reasons for the Reincorporation
The Board of Directors believes that the best interest of the Company and
its shareholders will be served by changing its place of incorporation from
Colorado to Delaware. The Board of Directors believes that the General
Corporation Law of Delaware will be better suited to the present and future
legal and business needs of the Company.
The State of Delaware has long been considered the leader in adopting,
construing and implementing comprehensive, flexible corporation laws which are
conducive to the operational
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<PAGE>
needs and independence of corporations domiciled in that state. The General
Corporation Law of Delaware is widely regarded as the most extensive and
well-defined body of corporate law in the United States. Both the legislature
and the courts in Delaware have demonstrated an ability and a willingness to act
quickly and effectively to meet the changing needs of the business environment.
The Delaware judiciary has acquired considerable expertise in dealing with
complex corporate and business law issues. It is anticipated that the Delaware
General Corporation Law will continue to be interpreted and construed in
significant court decisions, thus lending predictability to the Company's
corporate legal affairs.
The Board of Directors believes that the proposed Reincorporation would
result in numerous advantages to both management and the Corporation's
shareholders. Paramount among those is the sophistication of Delaware corporate
law and the predictability that this sophistication lends to the Company's
corporate legal affairs. Despite the unanimous belief of the Board of Directors
that the Reincorporation is in the best interest of the Company and its
shareholders, shareholders should be aware that Delaware law has been publicly
criticized by some commentators on the grounds that it does not afford minority
shareholders the same substantive rights and protections as are available in a
number of other states. Shareholders should note that the statutory appraisal
rights of shareholders of a Delaware corporation are more limited than those
under Colorado law. See "Differences Between the Corporation Laws of Colorado
and Delaware - Appraisal Rights".
Differences Between the Company's Articles of Incorporation and the Newco
Certificate of Incorporation
The Company's Articles of Incorporation authorize 50,8000,000 shares of
capital stock. In connection with the reverse stock split which occurred on June
14, 1999 and the Reincorporation, the Newco Certificate of Incorporation
authorizes 20,000,000 shares of capital stock.
Differences Between the Corporation Laws of Colorado and Delaware
As described above, the Board of Directors believes that the Delaware
General Corporation Law is a flexible and more well defined corporation law
which differs in certain respects from the Colorado Business Corporation Act.
Certain material differences between the Delaware and Colorado laws, as such
differences may affect the rights of shareholders, are set forth below.
Although the Board of Directors believes that the following summary is a
fair one, it should be understood that it is a summary only and does not purport
to be complete and is qualified in its entirety by reference to the provisions
of the Delaware General Corporation Law and the Colorado Business Corporation
Act.
Indemnification and Limitation of Liability. Colorado and Delaware have
similar laws respecting indemnification by a corporation of its directors,
employees and other agents. Under both Colorado and Delaware law, corporations
may limit the liability of directors, except in connection with the following
instances: (a) breaches of the director's duty of loyalty to the
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corporation or its shareholders; (b) acts or omissions not in good faith, or
involving intentional misconduct or knowing violation of law; (c) the payment of
unlawful dividends or unlawful stock repurchases or redemptions; or (d)
transactions in which the director received an improper personal benefit. Such
limitation of liability provision does not limit director's liability for
violation of, or otherwise relieve the Company or its directors from the
necessity of complying with, federal or state securities laws or affect the
availability of non-monetary remedies such as injunctive relief or rescission.
The Company's Articles of Incorporation eliminate the liability of
directors to the corporation to the fullest extent permissible under Colorado
law. Similarly, the Newco Certificate of Incorporation also eliminates the
liability of directors to the fullest extent permissible under Delaware law, as
such law currently exists or as it may be amended in the future. Furthermore, a
provision of Delaware law states that the indemnification provided by statute
shall not be deemed exclusive of any other rights under any bylaw, agreement,
vote of shareholders or disinterested directors or otherwise. Although the
provisions of the Colorado Business Corporation Act and the Delaware General
Corporation Law are similar with respect to the ability of directors, officers,
employees and agents of the corporation to seek indemnification from the
corporation, the provisions of the Delaware General Corporation Law contain
fewer limitations on the ability of such parties to seek indemnification from a
corporation and accordingly permit broader indemnification than the Colorado
statute.
Appraisal Rights. Shareholders of Colorado corporations are entitled to
exercise certain appraisal rights in the event of a merger, share exchange,
sale, lease, exchange or any other disposition of all or substantially all of
the property and assets of a corporation. Under Colorado law dissenting
shareholders are entitled to object to the proposed corporate action and obtain
the payment of the fair value of the shares of the corporation owned by the
shareholder. The Colorado statute specifies a procedure whereby the shareholder
must perfect his or her appraisal rights.
A Delaware corporation may, but is not required to, provide in its
Certificate of Incorporation that appraisal rights shall be available to
shareholders in the event of an amendment to the certificate of incorporation,
the sale of all or substantially all of the assets of the corporation or the
occurrence of any merger or consolidation in which the Delaware corporation is a
constituent company. The New Certification of Incorporation does not grant
appraisal rights in addition to those granted by Delaware Law. The Board of
Directors believes that the statutory appraisal rights under Delaware law
sufficiently protect the rights of shareholders.
Business Combinations with Interested Shareholders. The Delaware General
Corporation Law contains a prohibition, subject to certain exceptions, on
business combinations by a Delaware corporation with interested shareholders for
a period of three years following the date that such holder became an interested
shareholder. Interested shareholders are generally defined under the statute as
shareholders owning 15% or more of the outstanding voting stock of the
corporation. This general prohibition was designed to discourage hostile
take-over attempts of Delaware corporations by third parties. Under the Delaware
statute, this prohibition is inapplicable to corporations which do not have a
class of voting stock that is (1) listed on a national securities exchange, (2)
authorized for quotation on an inter-dealer quotation system of a
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registered national securities association or (3) held of record by more than
2,000 shareholders. Following the Reincorporation, Newco stock will be held of
record by more than 2,000 shareholders and Newco's stock will be listed on a
national securities exchange or Nasdaq. Accordingly, this prohibition will be
applicable to Newco. The Colorado Business Corporation Act contains no
corresponding prohibition on business combinations with interested shareholders.
Quorum. Pursuant to the Company's Articles of Incorporation forty percent
of the outstanding shares shall constitute a quorum at any meeting of
shareholders. Pursuant to the Delaware General Corporate Law and the Newco
Certificate of Incorporation a majority of the shares entitled to vote, present
in person or represented by proxy, shall constitute a quorum at any meeting.
Cumulative Voting Rights. A Colorado corporation has cumulative voting for
directors unless expressly prohibited by the articles of incorporation. The
Company has expressly prohibited cumulative voting in its Articles of
Incorporation. Cumulative voting must be expressly provided for in the
certificate of incorporation of a Delaware corporation. The Newco Certificate of
Incorporation does not provide for cumulative voting.
Special Meetings. A special meeting of the shareholders of a Colorado
corporation may be called by the holders of shares entitled to vote not less
than 10% of the votes to be voted at the meeting. Shareholders of Delaware
corporations do not have a right to call a special meeting unless it is
conferred in the corporation's certificate of incorporation or bylaws. The
Bylaws of Newco do not permit shareholders to call special meetings.
Other. The foregoing is an attempt to summarize the more important
differences in the corporation laws of the two states and does not purport to be
a complete listing of differences in the rights and remedies of holders of
shares of Colorado, as opposed to Delaware, corporations. Such differences can
be determined in full by reference to the Colorado Business Corporation Act and
the Delaware General Corporation Law. In addition, both Colorado and Delaware
law provide that some of the statutory provisions as they affect various rights
of holders of shares may be modified by provisions in the articles or
certificate of incorporation or bylaws of a corporation.
Conditions To The Effectiveness Of Reincorporation
The consummation of the Reincorporation is conditioned upon (a) receipt of
all consents of lenders, lessors and other persons deemed necessary by the
officers of the Company to permit the Reincorporation, including the
Reincorporation Agreement; and (b) approval of the Reincorporation by the
requisite holders of a majority of the outstanding shares of Common Stock.
Federal Income Tax Consequences
The Reincorporation of the Company in Delaware is intended to be tax-free
under the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly,
no gain or loss will be recognized as a result of the Reincorporation by the
Company's shareholders who consent to the conversion of their shares in the
Company for shares in Newco. Likewise, no gain or loss will be
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recognized by the Company or Newco a result of the Reincorporation. Each
shareholder of the Company will have the same basis in the Newco stock received
pursuant to the Reincorporation as such shareholder has in the Company's shares
held at the time of the Reincorporation, and the holding period with a stake to
such Newco stock will include the period during which such shareholder held the
corresponding Company shares, provided the latter were held as capital assets at
the time of the Reincorporation.
Amendment or Termination
The Board of Directors reserves the right to terminate the Reincorporation
and to amend the Reincorporation Agreement to the extent permitted by law, at
any time, whether before or after approval by the shareholders at the Annual
Meeting. The Board does not currently anticipate that it will terminate the
Reincorporation or amend the Reincorporation Agreement. However, in the event
that there should be any significant change in the status of the Company, the
provisions of applicable Delaware law or other events materially affecting the
Company's operations, the Board of Directors may determine to terminate the
Reincorporation or amend the Reincorporation Agreement.
Required Vote
In accordance with Colorado law and the Company's Articles of
Incorporation, the affirmative vote of a majority of the outstanding shares of
the Common Stock is required for the approval of the Reincorporation, including
the Reincorporation Agreement. However, the Reincorporation may be abandoned,
even after shareholder approval has been obtained, if circumstances arise which,
in the opinion of the Board of Directors, make it inadvisable to proceed. In
that event, the Company will continue as a Colorado corporation, governed by its
present Articles of Incorporation and Bylaws.
For purposes of determining whether Proposal 2 has received the required
number of votes for approval, abstentions and Broker Non-Votes will be included
in the vote totals with the result that an abstention will have the same effect
as a negative vote.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO REINCORPORATE THE COMPANY
FROM COLORADO TO DELAWARE PURSUANT TO THE REINCORPORATION AGREEMENT.
PROPOSAL 3 -- THE STOCK INCENTIVE PLAN
On July 26, 1999, the Board adopted the Company's 1999 Stock Incentive Plan
(the "Incentive Plan"), with respect to which 850,000 shares of Common Stock
were reserved for issuance under the Incentive Plan.
The Company is seeking shareholder approval of the Incentive Plan in order
to comply with the requirements of Sections 162(m) and 422 of the Code and the
requirements of Nasdaq. The following summary of the Incentive Plan is qualified
in its entirety by express reference to the text of the Incentive Plan, a copy
of which was filed with the Securities and Exchange Commission. Under the
Incentive Plan, options to purchase the Common Stock may be granted
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which are qualified as "incentive stock options" within the meaning of Section
422 of the Code ("ISOs") and which are not so qualified ("NQSOs") (collectively
or individually, ISOs and NQSOs may be referred to as "Options"). In addition,
members of the Board who are not also employees of the Company ("Non-Employee
Directors") may receive Common Stock as fees for serving as Directors.
Purpose and Eligibility
The purpose of the Incentive Plan is to promote the long-term financial
success of the Company by enhancing the ability of the Company to attract,
retain and reward individuals who can and do contribute to such success and to
further align the interests of the Company's key personnel with its
shareholders. Key employees of the Company and its subsidiaries are eligible to
receive Options under, and participate in, the Incentive Plan. The approximate
number of individuals eligible to participate in the Incentive Plan is [____].
Administration
The Incentive Plan is administered by the Board or a Committee (the entity
administering the Incentive Plan hereafter called the "Committee") appointed by
the Board of Directors from among its members. The Committee, in its sole
discretion, determines which individuals may participate in the Incentive Plan
and the type, extent and terms of the Options and Common Stock awards to be
granted. In addition, the Committee interprets the Incentive Plan and makes all
other determinations with respect to the administration of the Incentive Plan.
Options
The Incentive Plan allows for the discretionary grant of Options by the
Committee to eligible individuals. The terms and conditions of Options granted
under the Incentive Plan are set out from time to time in agreements between the
Company and the individuals receiving such Options.
The exercise price of the Options will be determined by the Committee at
the time of grant and will be set forth in a Stock Option Agreement between the
Company and the participant; provided, however, that the exercise price of an
Option will not be less than the fair market value of the Common Stock on the
date of grant. Options will vest and become exercisable within such period or
periods (not to exceed 10 years) as determined by the Committee and set forth in
the Stock Option Agreement. Unless otherwise set forth in the Stock Option
Agreement, all Options expire on the earlier of (i) ten years after grant, (ii)
three months after (A) retirement, (B) termination of employment or service with
the Company or a subsidiary due to complete and permanent disability, (C) any
termination of employment or service with the written approval of the Committee,
(D) termination of employment or service by the Company without cause (each a
"Normal Termination"), or (E) a voluntary termination of employment or service
by the optionee (iii) immediately upon termination of employment or service for
cause, (iv) twelve months after the death of the optionee while still employed
or within three months of a Normal Termination, or (v) the expiration date set
forth in the Stock Option Agreement. Unless otherwise set forth in the Stock
Option Agreement, Options will vest and become exercisable only during the
period of
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employment or service with the Company and its subsidiaries such that upon such
termination of employment or service the unvested portion of any outstanding
Option will expire. Options that have become exercisable may be exercised by
delivery of written notice of exercise to the Committee accompanied by full
payment of the Option exercise price and any applicable withholding. The Option
exercise price may be paid in cash or, in the discretion of the Committee,
either (i) with shares of Common Stock having a value equal to the aggregate
exercise price, (ii) by withholding shares of Common Stock, otherwise
deliverable upon the exercise of Options, having a value equal to the aggregate
exercise price, (iii) in other property having a value equal to the aggregate
exercise price or (iv) through a brokered exercise.
Options granted within the first year after the approval of the Incentive
Plan will not be exercisable until the closing price of the Common Stock on
Nasdaq equals or exceeds $_____ for at least 20 consecutive trading days unless
there has been a change in control. In addition, all of the options granted
within such first year shall vest and be exercisable at the end of the seventh
year after the grant except with respect to those options which shall vest
earlier because (i) the Company has achieved financial objectives established by
the Compensation Committee or (ii) the individual option holder has achieved
personal objectives established by the Compensation Committee from time to time.
Non-Employee Director Stock Issuances
In addition to discretionary issuance of Options, the Committee may, either
at the request of a Non-Employee Director or upon the direction of the
Compensation Committee, issue to Non-Employee Directors shares of Common Stock
under the Incentive Plan in lieu of cash compensation for their service on the
Board.
Adjustments for Recapitalization, Merger, etc. of the Company
Options, and any agreements evidencing such Options, shall be subject to
adjustment or substitution, as determined by the Committee in its sole
discretion, as to the number of shares, exercise price, kind of a share of stock
or other consideration subject to such Options (i) in the event of changes in
the outstanding Common Stock or in the capital structure of the Company by
reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the date
of grant of any such Award or (ii) in the event of any change in applicable laws
or any change in circumstances which results in or would result in any
substantial dilution or enlargement of the rights granted to, or available for,
participants in the Incentive Plan, or (iii) upon the occurrence of any other
event which otherwise warrants equitable adjustment because it interferes with
the intended operation of the Incentive Plan. In the event of any such
adjustments or substitution, the aggregate number of shares of Common Stock
available under the Incentive Plan and the maximum number of shares of Common
Stock with respect to which any one person may be granted in connection with
Options during any year shall be appropriately adjusted by the Committee, whose
determination shall be conclusive. In addition, in the event of (i) the merger
of the Company into or with another corporation, (ii) a sale of all or
substantially all of the assets of the Company to another entity , or (iii) the
reorganization or liquidation of the Company, then the
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Committee may upon 10 days notice to optionees cancel and cash-out any or all
outstanding Options for their fair market value.
Effect of Change in Control
In the event of a Change in Control (as defined in the Incentive Plan),
notwithstanding any vesting schedule provided for in the Plan or by the
Committee, all Options shall become immediately exercisable with respect to all
of the shares subject to such Option. Any shares issued with respect to the
Powders Option (as hereinafter defined) shall not be deemed to be a change in
control. A change in control shall be deemed to occur if Zatpack, together with
its affiliates, own less than 50% of the amount of Common Stock which they own
as of December 31, 1999.
Shares Subject to the Incentive Plan
As noted above, a maximum of 850,000 shares of Common Stock are available
for issuance pursuant to the terms of the Incentive Plan; provided, however,
that no more than 150,000 shares of Common Stock may be issued to any one person
pursuant to awards of Options during any one year.
Market Value
The closing price of the Common Stock on Nasdaq on October __, 1999 was
$_______ per share.
Amendment and Termination
The Board may at any time terminate the Plan. With the express written
consent of an individual participant, the Board or the Committee may cancel or
reduce or otherwise alter the outstanding Awards thereunder. The Board or the
Committee may, at any time, or from time to time, amend or suspend and, if
suspended, reinstate, the Plan in whole or in part, provided, however that (i)
the maximum number of shares available for issuance pursuant to the Incentive
Plan and (ii) the maximum number of shares available for grant to any individual
in any year with respect to Options may not be increased without the approval of
the shareholders of the Company.
Federal Tax Consequences
The following is a brief discussion of the Federal income tax consequences
of transactions with respect to Options under the Incentive Plan based on the
Code, as in effect as of the date of this summary. This discussion is not
intended to be exhaustive and does not describe any state or local tax
consequences.
ISOs. No taxable income is realized by the optionee upon the grant or
exercise of an ISO. If Common Stock is issued to an optionee pursuant to the
exercise of an ISO, and if no disqualifying disposition of such shares is made
by such optionee within two years after the date of grant or within one year
after the transfer of such shares to such optionee, then (1) upon the
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sale of such shares, any amount realized in excess of the Option price will be
taxed to such optionee as a long-term capital gain and any loss sustained will
be a long-term capital loss, and (2) no deduction will be allowed to the Company
for Federal income tax purposes.
If the Common Stock acquired upon the exercise of an ISO is disposed of
prior to the expiration of either holding period described above, generally, (1)
the optionee will realize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the Fair Market Value of such shares at
exercise (or, if less, the amount realized on the disposition of such shares)
over the Option price paid for such shares and (2) the Company will be entitled
to deduct such amount for Federal income tax purposes if the amount represents
an ordinary and necessary business expense. Any further gain (or loss) realized
by the optionee upon the sale of the Common Stock will be taxed as short-term or
long-term capital gain (or loss), depending on how long the shares have been
held, and will not result in any deduction by the Company.
If an ISO is exercised more than three months following termination of
employment (subject to certain exceptions for disability or death), the exercise
of the Option will generally be taxed as the exercise of a NQSO, as described
below.
For purposes of determining whether an optionee is subject to an
alternative minimum tax liability, an optionee who exercises an ISO generally
would be required to increase his or her alternative minimum taxable income, and
compute the tax basis in the stock so acquired, in the same manner as if the
optionee had exercised a NQSO. Each optionee is potentially subject to the
alternative minimum tax. In substance, a taxpayer is required to pay the higher
of his/her alternative minimum tax liability or his/her "regular" income tax
liability. As a result, a taxpayer has to determine his/her potential liability
under the alternative minimum tax.
NQSOs. With respect to NQSOs: (1) no income is realized by the optionee at
the time the Option is granted; (2) generally, at exercise, ordinary income is
realized by the optionee in an amount equal to the excess, if any, of the Fair
Market Value of the shares on such date over the exercise price, and the Company
is generally entitled to a tax deduction in the same amount, subject to
applicable tax withholding requirements; and (3) at sale, appreciation (or
depreciation) after the date of exercise is treated as either short-term or
long-term capital gain (or loss) depending on how long the shares have been
held.
Special Rules Applicable to Corporate Insiders
As a result of the rules under Section 16(b) of the Exchange Act ("Section
16(b)"), and depending upon the particular exemption from the provisions of
Section 16(b) utilized, officers and directors of the Company and persons owning
more than 10 percent of the outstanding shares of stock of the Company
("Insiders") may not receive the same tax treatment as set forth above with
respect to the grant and/or exercise of Options. Generally, Insiders will not be
subject to taxation until the expiration of any period during which they are
subject to the liability provisions of Section 16(b) with respect to any
particular Option. Insiders should check with their own tax advisers to
ascertain the appropriate tax treatment for any particular Option.
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New Plan Benefits
Because the grant of awards under the Incentive Plan is entirely within the
discretion of the Committee, the Company cannot forecast the extent or nature of
awards that will be granted in the future. Therefore, the Company has omitted
the tabular disclosure of the benefits or amounts allocated under the Incentive
Plan. Information with respect to compensation paid and other benefits,
including Options granted in respect of the 1998 fiscal year to the Executive
Officers is set forth in the Summary Compensation Table.
Recommendation and Vote
Approval of the Incentive Plan Proposal requires the affirmative vote of a
majority of the shares of Common Stock present, in person or by proxy, at the
Annual Meeting, and entitled to vote thereon.
For purposes of determining whether Proposal 3 has received the required
number of votes for approval, abstentions and Broker Non-Votes will not be
included in the vote totals with the result that an abstention will not have an
effect on the vote.
The Board unanimously recommends a vote FOR the approval of the Incentive
Plan proposal.
PROPOSAL 4 -- THE EMPLOYEE STOCK PURCHASE PLAN
On July 26, 1999, the Board adopted the Company's 1999 Employee Stock
Purchase Plan (the "Purchase Plan"). The Company has reserved 150,000 shares of
Common Stock for issuance under the Purchase Plan. The primary purpose of the
Purchase Plan is to provide employees of the Company and subsidiaries of the
Company designated by the Board of Directors of the Company ("Designated
Subsidiaries") with an opportunity to purchase Common Stock through accumulated
payroll deductions.
The Company is seeking shareholder approval of the Purchase Plan in order
to comply with the requirements of Section 422 of the Code. The following
summary of the Purchase Plan is qualified in its entirety by express reference
to the text of the Purchase Plan, a copy of which was filed with the Securities
and Exchange Commission.
The Purchase Plan is intended to qualify as an "Employee Stock Purchase
Plan" under Section 423 of Code.
Administration
The Purchase Plan is administered by the Compensation Committee of the
Board of Directors of the Company or such other committee as may be appointed by
the Board of Directors (the "Committee"). The Committee, subject to the
provisions of the Purchase Plan, has the authority to make rules and regulations
for the administration of the Purchase Plan, and its interpretation.
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Eligibility
Employees of the Company and its Designated Subsidiaries are eligible to
participate if they are customarily employed by the Company for at least 20
hours per week and more than five months per year. However, no employee is
eligible to participate who, after the grant of options under the Purchase Plan,
owns (including all shares of Common Stock which may be purchased under any
outstanding options under the Purchase Plan) 5% or more of the total combined
voting power or value of all classes of stock of the Company or of any parent or
subsidiary of the Company. There are approximately __ employees eligible to
participate in the Purchase Plan.
Participation
An eligible employee may become a participant in the Purchase Plan (a
"Participant") for an Offering Period (as defined below) by completing a
subscription agreement ("Subscription Agreement") authorizing payroll
deductions. In general, Offering Period means each calendar quarter, commencing
with the first day of such quarter on which national stock exchanges and Nasdaq
are open for trading (each, an "Enrollment Date" and ending with the last such
day of such calendar quarter (each, an "Exercise Date"); provided, however, that
the first Offering Period shall commence on [July __, 1999 and end on September
30, 1999.]
Payroll Deductions
A Participant may authorize payroll deductions of a specific percentage of
his compensation between 1% and 10%, in increments of 1%, up to a limit of the
amount that will purchase no more than $25,000 of Common Stock (based on the
fair market value of the Common Stock measured as of each Enrollment Date) in
any one calendar year.
Payroll deductions will commence on the first payroll date on or following
the applicable Enrollment Date and will end on the last payroll date in the
Offering Period to which such Subscription Agreement applies, unless terminated
sooner by the Participant as described below. Deductions are accumulated in a
Participant's account ("Account") during the applicable Offering Period.
A Participant may discontinue participation in the Purchase Plan, as
described below, at any time during the Offering Period prior to the Exercise
Date. Once an Offering Period has begun, a Participant may not increase or
decrease the rate of payroll deductions for that Offering Period, but may,
during that Offering Period, increase or decrease the rate of payroll deductions
for the next succeeding Offering Period by filing a new Subscription Agreement
with the Company by the 20th day of the month prior to the end of the current
Offering Period.
In the event that any Participant's payroll deductions exceed the limits
under the Code, such Participant's payroll deductions will automatically be
decreased, until such limits are satisfied.
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Grant of Option
The Company will grant to each Participant an option, effective on each
Enrollment Date, to purchase on the Exercise Date at a price determined as
described below (the "Purchase Price") the number of full shares of Common Stock
which his accumulated payroll deductions on the Exercise Date will purchase at
the Purchase Price. The Purchase Price for each Offering Period will be 85% of
the lesser of (i) the fair market value of the Common Stock on the Enrollment
Date, or (ii) the fair market value of the Common Stock on the Exercise Date.
The maximum number of shares which may be purchased by any Participant during
any Offering Period is the number of shares equal to $25,000 minus the fair
market value of the number of shares of Common Stock previously purchased during
such calendar year, such fair market value determined as of each such prior
Enrollment Date during the calendar year with respect to which the shares were
previously purchased, divided by the fair market value of the Common Stock on
the Enrollment Date for the current Offering Period.
Exercise of Option
Unless a Participant withdraws from the Purchase Plan, his option for the
purchase of shares will be exercised automatically on the Exercise Date, and the
maximum number of full shares subject to the option will be purchased for such
Participant at the applicable Purchase Price with the accumulated payroll
deductions in his Account.
No Participant may, in any calendar year, purchase a number of shares of
Common Stock under this Purchase Plan which, together with all other shares of
stock of the Company which he may be entitled to purchase in such year under all
other employee stock purchase plans of the Company and its subsidiaries which
meet the requirements of Section 423(b) of the Code, have an aggregate fair
market value (measured as of the Enrollment Date of each such Offering Period)
in excess of $25,000.
Delivery
The shares of Common Stock purchased by a Participant will, for all
purposes, be deemed to have been issued and sold at the close of business on the
Exercise Date. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the Company will arrange the delivery to the Account
of each Participant of a Common Stock certificate representing the shares
purchased upon the exercise of such Participant's option. Shares to be delivered
to a Participant under the Purchase Plan will be registered in the name of the
Participant or in the name of the Participant and his spouse, as chosen by the
Participant and held for the Participant until such time as the Participant
requests delivery of such shares of Common Stock. All shares of Common Stock
held in a participant's account by the Company on behalf of a participant shall
be voted by such Participant. Dividends accruing on shares of Common Stock, if
any, held in a participant's account shall be paid to such participant in the
normal course as if such participant held the shares.
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Withdrawal; Termination of Employment
A Participant may withdraw all but not less than all of the payroll
deductions credited to his Account and not yet used to exercise his option under
the Purchase Plan at any time prior to the Exercise Date by giving written
notice to the Company. Once a Participant withdraws from the Purchase Plan
during an Offering Period, he may not resume participation until the next
Offering Period. Upon a Participant's ceasing to be an employee of the Company
for any reason, he will be deemed to have elected to withdraw from the Purchase
Plan, all unused payroll deductions credited to his Account will be returned to
the Participant or, in the case of his death, his designated beneficiary, and
his options will be automatically terminated.
Adjustments Relating to Shares
The aggregate number of shares of Common Stock which may be purchased
pursuant to options granted under the Purchase Plan, the number of shares of
Common Stock covered by each outstanding option, and the purchase price thereof
for each such option will be appropriately adjusted for any increase or decrease
in the number of outstanding shares of Common Stock resulting from a stock split
or other subdivision or consolidation of shares of Common Stock or for other
capital adjustments or payments of stock dividends or distributions or other
increases or decreases in the outstanding shares of Common Stock affected
without receipt of consideration by the Company.
In the event of a proposed sale of all or substantially all of the assets
of the Company, or the merger of the Company with or into another corporation,
each option under the Purchase Plan will be assumed or an equivalent option will
be substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Board of Directors determines, in the exercise
of its sole discretion and in lieu of such assumption or substitution, to
shorten the Offering Period then in progress by setting a new Exercise Date (the
"New Exercise Date"). If the Board of Directors shortens the Offering Period
then in progress in lieu of assumption or substitution in the event of a merger
or sale of assets, the Board of Directors will notify each Participant in
writing, at least ten business days prior to the New Exercise Date, that the
Exercise Date for his option has been changed to the New Exercise Date and that
his option will be exercised automatically on the New Exercise Date unless prior
to such date he has withdrawn from the Offering Period as described above.
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board of Directors.
Amendment and Termination of the Purchase Plan
The Board of Directors may at any time and for any reason terminate or
amend the Purchase Plan. Except as provided in "Adjustments Relating to Shares"
above, no such termination may adversely affect options previously granted;
provided, that an Offering Period may be terminated by the Board of Directors on
any Exercise Date if the Board of Directors
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determines that the termination of the Purchase Plan is in the best interests of
the Company and its shareholders.
Without shareholder consent and without regard to whether any Participant
rights may be considered to have been "adversely affected," the Board of
Directors (or the Committee) may change the Offering Periods, limit the
frequency or number of changes in the amount withheld during an Offering Period,
establish the exchange ratio applicable to amounts withheld in a currency other
than U.S. dollars, permit payroll withholding in excess of the amount designated
by a Participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods or accounting and crediting procedures to ensure
that amounts applied toward the purchase of Common Stock for each Participant
properly correspond with amounts withheld from the Participant's compensation,
and establish such other limitations or procedures as the Board of Directors (or
the Committee) finds, in its sole discretion, advisable and consistent with the
Purchase Plan.
Requirement for Shareholder Approval
In the absence of shareholder approval, the Purchase Plan will not qualify
as an Employee Stock Purchase Plan under Section 423 of the Code.
Term of Purchase Plan
The Purchase Plan became effective upon its adoption by the Board of
Directors on July 26, 1999. It will continue in effect for a term of ten years
thereafter unless terminated sooner.
Market Value
The closing price of the Common Stock on Nasdaq on October __, 1999 was
$____ per share.
Federal Income Tax Consequences
The following is a brief discussion of the Federal income tax consequences
of transactions under the Purchase Plan based on the Code. The Purchase Plan is
not qualified under Section 401(a) of the Code. This discussion does not address
all aspects of Federal income taxation and does not describe state or local tax
consequences.
Under Section 423(a) of the Code, the transfer of a share of Common Stock
to a Participant pursuant to the Purchase Plan is entitled to the benefits of
Section 421(a) of the Code. Under that Section, a Participant will not be
required to recognize income at the time the option is granted (the Enrollment
Date) or at the time the option is exercised (the Exercise Date). Section 423(c)
of the Code requires that, provided the holding periods described below are met,
when the shares of Common Stock acquired during an Offering Period pursuant to
the Purchase Plan are sold or otherwise disposed of in a taxable transaction (or
in the event of the death of the Participant while owning such shares whether or
not the holding period requirements are met), the
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Participant will recognize income subject to Federal income tax as "ordinary
income," for the taxable year in which disposition or death occurs, in an amount
equal to the lesser of (i) the excess of the fair market value of the Common
Stock at the time of such disposition or death over the amount paid for such
shares, and (ii) the excess of the fair market value of the Common Stock on the
Enrollment Date of the applicable Offering Period over the Purchase Price,
determined on the Enrollment Date. Such recognition of income upon disposition
shall have the effect of increasing the taxable basis of the shares in the
Participant's possession by an amount equal to the income subject to Federal
income tax. Any additional gain or loss resulting from the disposition (provided
it is not a disqualifying disposition), measured by the difference between the
amount paid for the shares and the amount realized (less the amount recognized
as income as described above), will be recognized by the Participant as
long-term capital gain or loss. No portion of the amount received pursuant to
such a disposition will be subject to withholding for Federal income taxes, or
be subject to FICA or FUTA taxes.
The Company will not be entitled to any deduction in the determination of
its taxable income with respect to the Purchase Plan, except in connection with
a disqualifying disposition as discussed below.
In order for a Participant to receive the favorable tax treatment provided
in Section 421(a) of the Code, Section 423(a) requires that the Participant make
no disposition of the shares acquired during an Offering Period within two years
from the Enrollment Date nor within one year from the Exercise Date of the
Offering Period.
If a Participant disposes of Common Stock acquired pursuant to the Purchase
Plan before the expiration of the holding period requirements set forth above (a
"disqualifying disposition"), the Participant will realize, at the time of the
disposition, "ordinary income" to the extent the fair market value of the Common
Stock on the Exercise Date exceeds the amount paid for the shares. The
difference between the fair market value of the Common Stock on the Exercise
Date and the amount realized on disposition is treated as long-term or
short-term capital gain or loss, depending on the Participant's holding period
in the Common Stock. The amount treated as "ordinary income" may be subject to
the income tax withholding requirements of the Code and FICA withholding
requirements. At the time of such disqualifying disposition, the Company will be
entitled to deduct an amount in the determination of its taxable income equal to
the amount taken into "ordinary income" by the Participant.
If the shareholders of the Company fail to approve the Purchase Plan within
twelve months of the date of the Purchase Plan's adoption by the Board of
Directors, a Participant will realize, with respect to each option granted under
the Purchase Plan, "ordinary income" in the year of exercise to the extent the
fair market value of the Common Stock on the Exercise Date exceeds the amount
paid for the shares. The difference between the fair market value of the Common
Stock on the Exercise Date and the amount realized on any subsequent disposition
is treated as long-term or short-term capital gain or loss, depending on the
Participant's holding period in the Common Stock. The amount treated as
"ordinary income" will be subject to the income tax withholding requirements of
the Code and FICA withholding requirements. The Company will be entitled to
deduct an amount in the determination of its taxable income equal to the amount
taken into "ordinary income" by the Participant.
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New Plan Benefits
Because participation in the Purchase Plan is entirely within the
discretion of the eligible employees of the Company and any Designated
Subsidiary, the Company cannot forecast the extent participation in the future.
Therefore, the Company has omitted the tabular disclosure of the benefits or
amounts allocated under the Purchase Plan.
Recommendation and Vote
Approval of Proposal 4 requires the affirmative vote of a majority of the
shares of Common Stock present, in person or by proxy, at the Annual Meeting,
and entitled to vote thereon.
For purposes of determining whether Proposal 4 has received the required
number of votes for approval, abstentions and Broker Non-Votes will not be
included in the vote totals with the result that an abstention will not have an
effect on the vote.
The Board of Directors unanimously recommends a vote FOR the approval of
the Proposal 4.
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EXECUTIVE OFFICERS
The following sets forth the names of the executive officers of the Company who
are not Directors of the Company, their respective positions with the Company
and business experience and background.
Ralph L. Heimann became Chief Financial Officer of the Company in June
1999. Since 1987, Mr. Heimann has served as Chief Financial Officer of ZGNA. Mr.
Heimann has also served as President of Zuellig Botanicals, Inc., a subsidiary
of ZGNA, which distributes raw botanical powders to manufacturers of
nutraceutical powders worldwide.
Philip H. Katz has served as President of Shuster Laboratories, Inc., since
January 1996. Since July 1999, he has been President of Hauser Laboratories.
Brian Hufford has served as Executive Vice President of Manufacturing of
the Company since February, 1999. Prior to February 1999, Mr. Hufford served as
Executive Vice-President of Operations at Murdock, Madaus, Schwabe, Inc., a
large dietary supplement consumer products company for the period from 1996 to
1999. Prior thereto Mr. Hufford was Senior Director - Manufacturing of
Schering-Plough Corporation.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held 15 meetings during fiscal 1999, and acted by
unanimous written consent on ______ occasions. During fiscal 1999 Board of
Directors had a Compensation Committee consisting of Stanly Cristol, William
Coleman and Robert Saydah, an Audit Committee, consisting of Beverly Haddon and
Robert Saydah, and a Nominating Committee, consisting of Beverly Haddon, Robert
Saydah and Dean Stull. The Compensation Committee held 5 meetings in fiscal
1999; the Audit Committee held 4 meetings in fiscal 1999; and the Nominating
Committee held 2 meetings in fiscal 1999.
EXECUTIVE COMPENSATION
The following table contains information concerning annual and long-term
compensation of each individual who served as chief executive officer during
Fiscal 1999 and each of the other three most highly compensated executive
officers of the Company who were serving as executive officers at the end of
Fiscal 1999 (the "Named Executive Officers") for services rendered in all
capacities during the fiscal years 1999, 1998 and 1997.
Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation Awards
-----------------------------
Annual Compensation Securities
Name and Fiscal ------------------- Restricted Stock Underlying All Other
Principal Positions Year Salary($) Bonus($) Award(s)($) Options(#) Compensation ($)
- ------------------- ---- --------- -------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Dean P. Stull (1) 1999 $200,000 - - 25,001 (2) -
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Chief Executive Officer 1998 155,500 - - 17,500 (2) -
and Chairman 1997 155,500 - - 6,250 (2) -
Randy J. Daughenbaugh (3) 1999 $145,000 - - 6,351 (4) -
Executive Vice Pres./Chief 1998 138,500 - - 3,575 (4) -
Technical Officer 1997 138,500 - - 2,275 (4) -
Brian Hufford (5) 1999 $ 36,346(6) - - - -
Executive Vice President
Manufacturing
Philip A. Katz 1999 $120,838 61,001 (7) - 2,174 3,495 (8)
President 1998 117,500 29,410 (7) - 1,000 4,212 (8)
Shuster Laboratories, Inc. 1997 117,500 22,057 (7) - 88 38,408 (8)
Martin C. Wehr (9) 1999 $160,000 - - 12,501 (11) -
Chief Operating Officer 1998 140,000 $20,000(10) $ 14,175 (10) 52,500 (11) $ 60,617 (12)
1997 35,000 - 10,350 (10) 50,000 (11) -
(1) As of June 11, 1999, Dr. Stull has served as Co-Chief Executive Officer of the Company and Chairman of the
Board. Additionally, as of June 11, 1999, Volker Wypyszyk has served as Co-Chief Executive Officer and
President of the Company.
(2) Of these shares, 25,001, 12,500 and 6,250 options were performance options based upon operating income
objectives for fiscal 1999, 1998 and 1997.
(3) As of June 11, 1999, Mr. Daughenbaugh became a consultant to the Company.
(4) Of these shares 6,351, 2,575 and 2,275 options were performance options based upon operative income
objectives for fiscal 1999, 1998 and 1997.
(5) Mr. Hufford commenced employed as Executive Vice President of Manufacturing of the Company on February 10,
1999.
(6) As of April 30, 1999, Mr. Hufford received $36,346.21 in compensation.
(7) The bonuses represent earn-out payments in connection with the Company's acquisition of Shuster Laboratories,
Inc. in 1995. The fiscal year 1999 payment is the last payment due to Mr. Katz.
(8) The bonuses represent phantom stock payments made to Mr. Katz for his phantom stock in Shuster. The Shuster
Phantom Stock Plan was a bonus plan through which the individuals earned an equity interest in Shuster. The
payments were made monthly. The individuals are also entitled to share in an earnout which may be paid to
former shareholders of Shuster. No earnout was paid during 1998, 1997, or 1996.
(9) On June 11, 1999, the Company elected, in accordance with the employment agreement of Mr. Wehr, to terminate
Mr. Wehr's employment.
(10) Represents grants of restricted stock based upon the fair market value on the date of grant and cash monies
from original employment agreement.
(11) Of these shares, 12,051 and 9,375 options were performance options based upon operating income objectives for
fiscal 1999 and 1998/1997.
(12) Represents relocation expenses paid to Mr. Wehr.
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year(1)
Potential Realizable
Percentage Value at Assumed
Number of of Total Annual Rates of Stock
Securities Options Market Price Appreciation
Underlying Granted to Exercise Price on for Option Term
Options Employee in Price Date of Expiration -----------------------
Granted(#) Fiscal Year ($/sh) Grant Date 5%($) 10%($)
---------- ----------- ------ ----- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Dean P. Stull (2) 19,966 27.430% $23.380 $23.380 06/24/2008 293,571.21 743,967.08
5,035 6.917% 23.380 23.380 06/24/2008 74,032.41 187,612.65
Randall J. Daughenbaugh(3) 5,528 7.594% $23.380 $23.380 06/24/2008 81,281.26 205,982.67
723 0.993% $23.380 $23.380 06/24/2008 10,630.67 26,940.21
50 0.069% 15.250 15.250 12/30/2008 479.53 1,215.23
50 0.069% 10.750 10.750 04/06/2009 338.03 856.64
Brian E. Hufford(4) -0- -0- -0- -0- -0- -0-
Philip H. Katz 2,174 2.987% $23.380 $23.380 06/24/2008 31,965.53 81,006.93
Martin C. Wehr(5) 8,223 11.297% $23.380 $23.380 06/24/2008 120,907.34 306,402.95
4,278 5.877% 23.380 23.380 06/24/2008 62,901.81 159,405.55
(1) As of June 11, 1999 all outstanding options became vested and exercisable due to a change in control of the
Company in Connection with the Company's acquisition of the Contributed Subsidiaries.
(2) As of June 11, 1999, Dr. Stull has served as Co-Chief Executive Officer of the Company and Chairman of the
Board. Additionally, as of June 11, 1999, Volker Wypyszyk has served as Co-Chief Executive Officer and
President of the Company.
(3) As of June 11, 1999, Mr. Daughenbaugh became consultant to the Company.
(4) Mr. Hufford was employed as Executive Vice President of Manufacturing of the Company on February 10, 1999.
(5) On June 11, 1999, the Company elected, in accordance with the employment agreement of Mr. Wehr, to terminate
Mr. Wehr's employment.
</TABLE>
-25-
<PAGE>
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
---------------------------------
The following table shows with respect to the Company's Named Executive
Officers, (a) the number of shares exercised during the fiscal year, (b) the
dollar value realized upon exercise (c) the total number of unexercised stock
options and (d) the aggregate dollar value of in-the-money, unexercised options
held at the end of the fiscal year.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-
Shares Value Unexercised Options at FY-End(#) Money Options at FY-End ($)
Acquired on Realized -------------------------------- ----------------------------
Exercise # ($) Exercisable Unexercisable(1) Exercisable Unexercisable
---------- --- ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dean P. Stull (2) 0 $ -- 29,235 37,501 $ -- $ --
Randall J. Daughenbaugh(3) 0 $ -- $ -- $ --
Brian E. Hufford(4) 0 $ -- $ -- $ --
Philip H. Katz 0 $ -- 754 2,508 $ -- $ --
Martin C. Wehr(5) 0 $ -- 14,903 23,223 $ -- $ --
(1) As of June 11, 1999 all outstanding options became vested and exercisable due to a change in control of the
Company in Connection with the Company's acquisition of the Contributed Subsidiaries.
(2) As of June 11, 1999, Dr. Stull has served as Co-Chief Executive Officer of the Company and Chairman of the Board.
Additionally, as of June 11, 1999, Volker Wypyszyk has served as Co-Chief Executive Officer and President of the
Company.
(3) As of June 11, 1999, Mr. Daughenbaugh became consultant to the Company.
(4) Mr. Hufford was employed as Executive Vice President of Manufacturing of the Company on February 10, 1999.
(5) On June 11, 1999, the Company elected, in accordance with the employment agreement of Mr. Wehr, to terminate Mr.
Wehr's employment.
</TABLE>
The fair market value of Company Common Stock at April 30, 1999, measured as the
average between the high and low trade of Common Stock on such date, was $3.672
per share.
Director Compensation
During fiscal 1999, the Company's non-employee directors as a group were
granted options to purchase a total of 4,474 shares of Common Stock for services
rendered to the Company at an average price of $22.87 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 and of each committee meeting 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 1999, the
Company's five outside directors received cash compensation of approximately
$50,826.50 in the aggregate pursuant to this plan.
-26-
<PAGE>
Compensation Committee Interlocks and Insider Participation
During fiscal year ended April 30, 1999, Messers. Coleman, Stanley J.
Cristol, Saydah and Bert M. Tolbert comprised the Company's Compensation
Committee. All were non-employee directors. None of the members of the
Compensation Committee have ever been officers of the Company.
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 1999, the Compensation Committee established salaries and bonus
compensation for the Chief Executive Officer, two Vice Presidents, the Chief
Financial Officer and the Corporate Secretary.
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 the
Chief Executive Officer, the committee considered 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
-27-
<PAGE>
changes in net income and earnings per share, were also evaluated. In addition,
extraordinary management and supervisor responsibilities were taken into
consideration. The Compensation Committee then makes a subjective determination
with respect to compensation increases for the executive officers. The
Compensation Committee made no changes to the base salary of the named executive
officers during fiscal 1999.
Discretionary Cash Bonuses Paid in Fiscal 1999. During fiscal 1998, the
Compensation Committee developed a series of specific goal-oriented compensation
awards for fiscal 1999. Fiscal 1999 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, 1999, the Compensation Committee awarded no cash bonuses for
fiscal 1999.
The Compensation Committee instructs the Chief Executive Officer to
complete performance evaluations for each of the executive officers other than
himself. The performance evaluations by the Chief Executive Officer consists of
reports to the Compensation Committee, including recommendations as to stock and
cash bonuses to be awarded. In evaluating these performance, the Chief Executive
Officer measures leadership, strategic planning, financial results, business
development, management skills, external relations and communication skills. 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
potion of the total compensation package for its executive officers will be
derived from stock options.
During any fiscal year, 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 1999, executive officers received stock options to purchase 46,027 shares
at an average price of $23.36.
Discretionary stock option awards granted to the named executives during
fiscal 1999, for fiscal 1998 performance, were determined based upon the Chief
Executive Officer's evaluation report to the Committee of individual
performances, plus the Compensation Committee's knowledge of the performance of
the senior executive officers.
-28-
<PAGE>
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 enhance the Company's stock
value.
Chief Executive Officer Compensation
------------------------------------
As Chief Executive Officer, Dr. Stull was compensated based on a review of
his performance by the Compensation Committee. The increase in Dr. Stull's base
salary and the number of options granted to him was based on a subjective
determination by the Compensation Committee of Dr. Stull's overall performance.
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.
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 competitive executive compensation which will permit the
Company to obtain and retain the services of those individuals requisite to
establishing shareholder value.
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.
Employment Contracts
Stull Employment Agreement. On June 11, 1999, the Company and Dean P. Stull
entered into an employment agreement pursuant to which Mr. Stull receives an
annual base salary of $200,000 and incentive compensation as determined by the
Compensation Committee. Mr. Stull's employment agreement may be terminated by
the Company without cause provided that for a period of 24 months after such
termination Mr. Stull receives an amount equal to his salary, incentive
compensation paid to him for the prior fiscal year and benefits provided at
termination.
Wypyszyk Employment Agreement. On June 11, 1999, the Company and Volker
Wypyszyk entered into an employment agreement pursuant to which Mr. Wypyszyk
receives an annual base salary of $200,000 and incentive compensation as
determined by the Compensation Committee. Mr. Wypyszyk's employment agreement
may be terminated by the Company without cause provided that for a period of 24
months after such termination Mr. Wypyszyk receives an amount equal to his
salary, incentive compensation paid to him for the prior fiscal year and the
benefits provided at termination.
-29-
<PAGE>
Heimann Employment Agreement. On June 11, 1999, the Company and Ralph L.
Heimann entered into an employment agreement pursuant to which Mr. Heimann
receives an annual base salary of $160,000 and incentive compensation as
determined by the Compensation Committee. Mr. Heimann's employment agreement may
be terminated by the Company without cause provided that for a period of 12
months after such termination Mr. Heimann receives an amount equal to his
salary, incentive compensation paid to him for the prior fiscal year and the
benefits provided at termination.
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES AND EXCHANGE ACT
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
Common Stock to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of the Company common stock.
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, 1999, to the best
of the Company's knowledge, the Company's directors, officers and holders of
more than 10% of the Common Stock complied with all Section 16(a) filing
requirements.
SHAREHOLDER RETURN
The following chart compares the cumulative total return to shareholders
over the past five years for a holder of the 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, 1999, of a $100
investment made on April 30, 1994.
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 for the
purchase of paclitaxel extracts from the Company. 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.
[GRAPH OMITTED]
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to an Inventory Purchase Agreement between the Company and Zuellig
Group N.A., Inc., dated December 8, 1998, the Company sold raw materials and
finished goods inventory to Zuellig Group N.A., Inc. for approximately
$3,000,000.
On June 11, 1999, the Company and Zuellig Group N.A., Inc. entered into an
Agreement to Acquire Powders Business from Zuellig Botanicals, Inc. (the
"Powders Option"). The Powders Option grants the Company the right to purchase
the powders business from Zuellig Botanicals, Inc., including without limitation
all assets related thereto and all associated liabilities.
-30-
<PAGE>
On June 11, 1999, the Company and Zuellig Botanicals, Inc. entered into an
Agreement Regarding Employees, pursuant to which certain employees will provide
sales and marketing services to Zuellig Botanicals, Inc. and the Company and be
employed and compensated by the Company and ZBI, respectively, when performing
such services.
OTHER MATTERS
Management of the Company knows of no other matter which may come before
the Annual Meeting. However, if any additional matters are properly presented at
the Annual 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
Shareholder proposals intended for presentation at the Company's 2000
Annual Meeting of Shareholders, other than nominations for Board of Directors,
should be sent to 5555 Airport Boulevard, Boulder, Colorado 80301, Attention:
Secretary, and must be received by the Company not later than February 1, 1999
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED IF YOU DO NOT PLAN TO
ATTEND THE ANNUAL 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.
-31-
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the disclosure and informational requirements of
the Exchange Act and, in accordance therewith, files reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"). The reports, proxy statements and other information filed by the
Company with the Commission may be inspected and copied at the Commission's
public reference room located at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the public reference facilities in the
Commission's regional offices located at 7 World Trade Center, 13th Floor, New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661. Copies of such material may be obtained at prescribed rates
by writing to the Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Certain of such reports, proxy statements and other
information are also available from the Commission over the Internet at
http://www.sec.gov. The shares of Common Stock are traded over the counter on
the Nasdaq. Reports, proxy statements and other information concerning the
Company may also be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
By Order of the Board of Directors of Directors
Dean P. Stull, Chairman
Boulder, Colorado
____________, 1999
-32-
<PAGE>
HAUSER, INC.
THIS PROXY IS SOLICITED ON BEHALF OF HAUSER, INC. IN CONNECTION
WITH ITS ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON December __, 1999.
The undersigned stockholder of Hauser, Inc. (the "Company"), revoking all
previous proxies, hereby constitutes and appoints Dean P. Stull, Volker Wypyszyk
and Ralph L. Heimann, and each of them, as proxies with full power of
substitution to vote on behalf of the undersigned all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Company to be held on December __, 1999, at 10:00 a.m.,
(local time), at [location to be determined], and at any adjournment and
postponements thereof, upon all matters presented before such annual meeting,
and does hereby ratify and confirm all that said proxies or their substitutes
may lawfully do by virtue hereof. The undersigned hereby acknowledges receipt of
the Notice of the Annual Meeting and hereby instructs said proxies to vote or
refrain from voting such shares of Hauser Common Stock as marked on the reverse
side upon the matters listed on the reverse side. In their discretion, such
proxies are authorized to vote such shares upon such other business as may
properly come before the annual meeting.
DO NOT SUBMIT ANY STOCK CERTIFICATES WITH THIS PROXY CARD.
-------------
|SEE REVERSE|
| SIDE |
CONTINUED AND TO BE SIGNED ON REVERSE SIDE -------------
<PAGE>
[LOGO]
ANNUAL MEETING OF STOCKHOLDERS OF HAUSER, INC.
OCTOBER __, 1999, 10:00 A.M. (LOCAL TIME)
[LOCATION TO BE DETERMINED]
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
FOR WITHHOLD FOR ALL EXCEPT
1. To elect the nine nominees [ ] [ ] [ ]
listed below to the Board of
Directors of the Company until
the next Annual Meeting of
Stockholders of Western Beef
or until their successors are
elected and qualified.
Rudolfo C. Bryce
William E. Coleman
Michael C. Davis
Herbert Elish
Jamers R. Mellor
Robert F. Saydah
Harvey L. Sperry
Dean P. Stull
Volker Wypyszyk
If you do not wish your shares
voted "FOR" a particular
nominee, mark the "For All
Except" box and strike a line
through the nominee(s) name.
Your shares will be voted for
the remaining nominee(s).
FOR AGAINST ABSTAIN
2. To approve and adopt the [ ] [ ] [ ]
Reincorporation Agreement
3. To approve and adopt the [ ] [ ] [ ]
Company's 1999 Stock
Incentive Plan
<PAGE>
4. To approve and adopt the [ ] [ ] [ ]
Company's 1999 Stock
Purchase Plan
5. To transact such other business
as may properly come before
the meeting or any adjournment
or postponement thereof.
MARK HERE FOR MARK HERE IF YOU
ADDRESS CHANGE [ ] PLAN TO ATTEND [ ]
AND NOTE AT LEFT THE MEETING
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED IN FAVOR OF THE NOMINEES FOR
DIRECTOR, FOR THE APPROVAL AND ADOPTION OF THE REINCORPORATION AGREEMENT, FOR
THE APPROVAL AND ADOPTION OF THE 1999 Stock Incentive Plan, FOR THE APPROVAL AND
ADOPTION OF THE 1999 Stock Purchase plan, AND IN ACCORDANCE WITH RECOMMENDATIONS
OF HAUSER'S BOARD OF DIRECTORS.
Please mark, date and sign exactly as your name appears hereon and return in the
enclosed envelope. If acting as executor, administrator, trustee, guardian,
etc., you should so indicate when signing. If the signer is a corporation,
please sign the full corporate name, by duly authorized officer. If shares are
held jointly, each stockholder named should sign.
Signature:__________________________________ Date:______________
Signature:__________________________________ Date:______________
<PAGE>
Appendix A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of this ___ day of _____, 1999,
between Hauser, Inc., a Delaware corporation ("HAUSER-DEL"), and Hauser, Inc., a
Colorado corporation ("HAUSER-COL"). HAUSER-DEL and HAUSER-COL are sometimes
hereinafter referred to individually as a "Constituent Corporation" and
collectively as the "Constituent Corporations."
WHEREAS, the Board of Directors of each of the Constituent Corporations has
determined that it is advisable and in the best interests of each such
corporation to merge (the "Merger") HAUSER-COL with and into HAUSER-DEL upon the
terms and subject to the conditions herein provided; and
WHEREAS, the Board of Directors of each of the Constituent Corporations
has, by resolution duly adopted, approved this Agreement and Plan of Merger and
directed that it be executed by the undersigned officers and that it be
submitted to a vote of their respective stockholders.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
provisions set forth herein, each of the Constituent Corporations hereby agrees
as follows:
FIRST: (a) The name of each Constituent Corporation in the Merger is as
follows:
Hauser, Inc.
Hauser, Inc.
(b) HAUSER-DEL shall be the surviving corporation in the Merger (the
"Surviving Corporation"), and following the Merger its name shall continue to be
Hauser, Inc.
SECOND: As to HAUSER-COL and HAUSER-DEL, the designation and number of
outstanding shares of each class and series and the voting rights thereof are as
follows:
<PAGE>
<TABLE>
<CAPTION>
Shares
Designation and number Class or Series entitled to
Name of shares in each class of Shares vote as a
Corporation or series outstanding entitled to Vote class or series
- ----------- --------------------- ---------------- ---------------
<S> <C> <C> <C>
HAUSER-COL Common Stock N/A N/A
[ ] Shares
HAUSER-DEL Common Stock N/A N/A
[ ] Shares
</TABLE>
THIRD: The terms and conditions of the Merger, including the manner and
basis of converting the shares of HAUSER-COL into shares of HAUSER-DEL are as
follows:
(a) At 5:00 p.m. on the date on which the certificate of merger is
filed with the Secretary of State of the State of Delaware (the "Effective
Time"), the separate existence of HAUSER-COL shall cease and HAUSER-COL shall be
merged with and into HAUSER-DEL, and HAUSER-DEL shall be the Surviving
Corporation.
(b) At the Effective Time, each share (each, a "Share") of common
stock, $0.001 par value (the "Common Stock"), of HAUSER-COL that is issued and
outstanding immediately before the Effective Time shall be canceled and
extinguished and shall be converted into one share in HAUSER-DEL.
(c) At the Effective Time, (i) the Certificate of Incorporation of
HAUSER-DEL as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, (ii) the By-laws of
HAUSER-DEL as in effect immediately prior to the Effective Time shall be the By-
-2-
<PAGE>
laws of the Surviving Corporation, (iii) the directors and officers of
HAUSER-DEL holding such positions immediately prior to the Effective Time shall
be the directors and officers, respectively, of the Surviving Corporation; and
(iv) the name of the Surviving Corporation shall be Hauser, Inc.
FOURTH: No amendments or changes will be made to the Certificate of
Incorporation of the Surviving Corporation in the Merger.
FIFTH: The foregoing Agreement and Plan of Merger was duly adopted by the
Board of Directors of each Constituent Corporation on the dates set forth below:
NAME OF CORPORATION DATE OF ADOPTION
- ------------------- ----------------
HAUSER-COL _______, 1999
HAUSER-DEL _______, 1999
-3-
<PAGE>
IN WITNESS WHEREOF, the Constituent Corporations have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
Hauser, Inc.
(a Colorado corporation)
By:
------------------------------
Name:
Title:
Hauser, Inc.
(a Delaware corporation)
By:
------------------------------
Name:
Title:
<PAGE>
CERTIFICATE OF INCORPORATION
OF
HAUSER, INC.
* * * * * * * *
ARTICLE I
The name of the corporation (the "Corporation") is:
Hauser, Inc.
ARTICLE II
The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
The total number of shares of stock which the Corporation shall have
authority to issue is [20,000,000] shares of Common Stock, each of which shall
have a par value of one cent ($0.001) per share.
ARTICLE V
The name and mailing address of the incorporator is as follows:
Mark A. Cognetti, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
ARTICLE VI
In furtherance and not in limitation of the powers conferred by statute,
the by-laws of the Corporation may be made, altered, amended or repealed by the
stockholders or by a majority of the entire board of directors of the
Corporation (the "Board").
<PAGE>
ARTICLE VII
Whenever a compromise or arrangement is proposed between this corporation
and its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing three
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all stockholders or class of
stockholders of this corporation, as the case may be, and also on this
corporation.
ARTICLE VIII
Elections of directors need not be by written ballot.
ARTICLE IX
(a) The Corporation shall indemnify to the fullest extent permitted
under and in accordance with the laws of the State of Delaware any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, trustee, employee or agent of or in any
other capacity with another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
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(b) Expenses incurred in defending a civil or criminal action, suit or
proceeding shall (in the case of any action, suit or proceeding against a
director of the Corporation) or may (in the case of any action, suit or
proceeding against an officer, trustee, employee or agent) be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board upon receipt of an undertaking by or on
behalf of the indemnified person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article.
(c) The indemnification and other rights set forth in this Article IX
shall not be exclusive of any provisions with respect thereto in the by-laws of
the Corporation or any other contract or agreement between the Corporation and
any officer, director, employee or agent of the Corporation.
(d) Neither the amendment nor repeal of this Article IX, nor the
adoption of any provision of this Certificate of Incorporation inconsistent with
Article IX, shall eliminate or reduce the effect of this Article IX in respect
of any matter occurring before such amendment, repeal or adoption of an
inconsistent provision or in respect of any cause of action, suit or claim
relating to any such matter which would have given rise to a right of
indemnification or right to receive expenses pursuant to this Article IX if such
provision had not been so amended or repealed or if a provision inconsistent
therewith had not been so adopted.
No director shall be personally liable to the Corporation or any
stockholder for monetary damages for breach of fiduciary duty as a director;
provided, however, that the foregoing shall not eliminate or limit the liability
of a director:
(i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders;
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
(iii) under Section 174 of the General Corporation Law of the
State of Delaware; or
(iv) for any transaction from which the director derived an
improper personal benefit.
If the General Corporation Law of the State of Delaware is amended
after [ ], 1999 to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
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the General Corporation Law of the State of Delaware, as so amended.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a Corporation pursuant to the General Corporation Law of the State of
Delaware makes this Certificate, hereby declaring and certifying that this is
his act and deed and the facts herein stated are true and, accordingly, has
hereunto set his hand this [ ] day of [ ], 1999.
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Sole Incorporator
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