Edgar Filing: HAUSER INC

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934

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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)
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HAUSER, INC.
20710 South Alameda Street
Long Beach, CA 90810

----------------------

Notice of Annual Meeting of Stockholders
to be held on December 5, 2002

To Our Stockholders:

You are cordially invited to attend the annual meeting of stockholders (the
"Annual Meeting") of Hauser, Inc., a Delaware corporation (the "Company"), which
will be held at the Sheraton New York Hotel and Towers, 811 Seventh Avenue, New
York, New York on December 5, 2002 at 9:30 a.m. Eastern Standard Time, for the
following purposes:

1. To elect the Board of Directors to hold office until the next annual
meeting of stockholders and until their successors shall have been elected
and qualified; and

2. To consider and act upon such other business as may properly come before
the Annual Meeting or any adjournment or postponement thereof.

All stockholders are invited to attend the meeting, although only
stockholders of record at the close of business on November 6, 2002, will be
entitled to notice of, and to vote at, the Annual Meeting or any and all
adjournments or postponements thereof.

By Order of the Board of Directors,

Kenneth C. Cleveland
President and Chief Executive Officer

November 11, 2002

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PREPAID
ENVELOPE. 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.

HAUSER, INC.
20710 SOUTH ALAMEDA STREET
LONG BEACH, CA 90810

---------------------------------

PROXY STATEMENT

---------------------------------

The Company is providing these proxy materials in connection with the
solicitation by the Board of Directors of Hauser, Inc., a Delaware corporation
(the "Company"), of proxies to be voted at the Company's 2002 Annual Meeting of
Stockholders (the "Annual Meeting") and at any meeting following postponement or
adjournment thereof for the purposes set forth in the accompanying notice of
Annual Meeting.

You are cordially invited to attend the Annual Meeting of the Company on
December 5, 2002, to be held at the Sheraton New York Hotel and Towers, 811
Seventh Avenue, New York, New York, at 9:30 a.m. Eastern Standard Time, and any
adjournment or postponement thereof.

The Company's fiscal year begins on April 1 and ends on March 31.
References in this Proxy Statement to fiscal year 2002 refer to the 12-month
period from April 1, 2001 through March 31, 2002.

The Company's Annual Report on Form 10-K, as amended ("Annual Report"),
this Proxy Statement and accompanying proxy are first being mailed to
stockholders on or about November 14, 2002, to holders of the Company's common
stock on November 6, 2002, the record date for the Annual Meeting.

RECENT DEVELOPMENTS

On August 27, 2002, Hauser Technical Services, Inc., a Delaware corporation
("HTS") and a wholly owned subsidiary of the Company, sold the assets relating
to its Shuster Laboratories division to STR Acquisition Sub, Inc., a Delaware
corporation ("STR Acquisition Sub") and a wholly owned subsidiary of Specialized
Technology Resources, Inc. ("STR"), a Delaware corporation (the "Transaction").
In connection with the Transaction, STR Acquisition Sub assumed certain
liabilities related to the Shuster Laboratories division. The total
consideration received for the Transaction was $7,732,907 (the "Purchase
Price"). The Purchase Price was paid to Wells Fargo to reduce the indebtedness
of the Company to Wells Fargo.

PROXY INFORMATION

PROXIES AND VOTING PROCEDURES

YOUR VOTE IS IMPORTANT. Because many stockholders cannot personally attend
the Annual Meeting, it is necessary that a large number of stockholders be
represented by proxy. Stockholders may sign, date and mail their proxies in the
postage-paid envelope provided. Proxies may be revoked at any time before they
are exercised by written notice to the Secretary

of the Company, by timely notice of a properly executed later dated proxy or by
voting in person at the Annual Meeting.

All shares of Common Stock, par value $0.001 per share, of the Company (the
"Common Stock") entitled to vote and represented by properly executed proxies
received prior to the Annual Meeting and not revoked will be voted at the Annual
Meeting in accordance with the instructions indicated on those proxies. If no
instructions are indicated on a properly executed proxy, the Common Stock
represented by that proxy will be voted as the Board of Directors recommends.

If any other matters are properly presented at the Annual Meeting for
consideration, including, among other things, consideration of a motion to
adjourn the Annual Meeting to another time or place, the persons named in the
enclosed form of proxy and acting thereunder will have discretion to vote on
those matters to the same extent as the person signing the proxy would be
entitled to vote. The Company does not currently anticipate that any other
matters will be raised 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 indicated on a properly executed proxy, 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.

STOCKHOLDERS ENTITLED TO VOTE

Stockholders of record of the Company's Common Stock at the close of
business on November 6, 2002 (the "Record Date") are entitled to notice of and
to vote at the Annual Meeting. Each share of Common Stock is entitled to one
vote on each matter properly brought before the Annual Meeting. On November 7,
2002, there were 6,527,935 shares of Common Stock outstanding.

In accordance with Delaware law, a list of stockholders entitled to vote at
the meeting will be available at the location of the Annual Meeting on December
5, 2002, and for 10 days prior to the Annual Meeting at our headquarters located
at 20710 South Alameda Street, Long Beach, California 90810, between the hours
of 9:00 a.m. and 4:00 p.m. Pacific Time.

REQUIRED VOTE

The presence in person or by proxy of the holders of a majority of the
issued and outstanding Common Stock entitled to vote generally for the election
of directors is necessary to constitute a quorum. If a quorum should not be
present, the Annual Meeting may be adjourned from time to time until a quorum is
obtained.

Abstentions and "broker non-votes" are counted as present and entitled to
vote for purposes of determining whether a quorum exists. A broker "non-vote"
occurs when a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee

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does not have discretionary voting power with respect to that item and has not
received voting instructions from the beneficial owner.

The affirmative vote of a plurality of the votes duly cast is required for
the election of each nominee as director (that is, the nominees receiving the
greatest number of votes will be elected). Abstentions and "broker non-votes"
are not included in the vote totals for purposes of the election of directors.

COST OF PROXY SOLICITATION

The cost of soliciting proxies will be borne by the Company. Solicitations
may further be made by officers, directors and other employees of the company,
without additional compensation, by use of mails, telephone, telegraph or by
personal calls. The Company has engaged Computershare Trust Company to assist in
the distribution and solicitation of proxies. The Company estimates that the
expenses for Computershare Trust Company and the printing of the Annual Report
and this Proxy Statement will be approximately $10,000. In accordance with the
regulations of the Securities and Exchange Commission, upon request the Company
will also reimburse brokerage firms and other custodians, nominees and
fiduciaries for their reasonable expenses incurred in sending proxies and proxy
materials to beneficial owners of Common Stock as of the Record Date.

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 stockholders and until
their successors shall have been elected and qualified, or until their death,
resignation or removal and (2) to transact such other business that may properly
come before the Annual Meeting or any adjournment or postponement thereof.

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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS, EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth, as of November 7, 2002, information
regarding the beneficial ownership of Common Stock by (i) each stockholder who
the Company knows owns more than 5% of the outstanding shares of Common Stock,
(ii) each director, (iii) each executive officer named in the Summary
Compensation Table and (iv) all directors and executive officers as a group.

Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership(1) Percent of Class
------------------------------------ ------------------------ ----------------

Directors:
---------
Kenneth C. Cleveland (2)(3) .................................. 307,500 4.6%
Robert F. Saydah (4) ......................................... 128,461 2.0%
Herbert Elish (5) ............................................ 246,272 3.8%
James R. Mellor (6) .......................................... 125,419 1.9%
Harvey L. Sperry (7) ......................................... 222,920 3.4%

Named Executive Officers:
------------------------
Thomas W. Hanlon (8) ......................................... 58,000 *
Peter Hafermann (9 ).......................................... 50,000 *
Dieter W. Luelsdorf (10)...................................... 50,000 *
Philip H. Katz (11) .......................................... 4,424 *

Directors and Executive
Officers as a Group: 12 persons.............................. 1,294,657 19.5%
-------------------

5% Shareholders:
---------------
Zatpack, Inc. (12)(13)........................................ 3,186,215 42.4%
Zuellig Group N.A., Inc. (14)(15)............................. 2,193,426 33.6%
Zuellig Botanicals, Inc. (16)................................. 1,204,955 18.5%

----------------------

* Indicates less than 1%

(1) Includes the following number of shares which could be acquired within
60 days through the exercise of stock options and rights to acquire
shares: Mr. Cleveland, 100,000; Mr. Saydah, 3,042; and all directors
and officers as a group, 107,877.

(2) Includes 100,000 shares of Common Stock as to which the Board of
Directors of the Company, in February 2001, approved for sale to
Mr. Cleveland at $0.37 per share. As of November 7, 2002,
Mr. Cleveland had not purchased these shares.

(3) Mr. Cleveland's address is 20710 South Alameda Street, Long Beach, CA
90810.

(4) Mr. Saydah's address is 2493 Biltmore Drive, Alamo, CA 94507.

(5) Mr. Elish's address is 4400 Forbes Avenue, Pittsburgh, PA 15231.

(6) Mr. Mellor's address is 32161 South Coast Highway, Laguna Beach, CA
92651.

(7) Mr. Sperry's address is 787 Seventh Avenue, New York, NY 10019.

(8) Mr. Hanlon's address is 20710 South Alameda Street, Long Beach, CA
90810.

(9) Mr. Hafermann's address is 20710 South Alameda Street, Long Beach, CA
90810.

(10) Mr. Luelsdorf's address is 28 Inningwood Road, Ossining, NY 10562.

(11) Mr. Katz's address is 85 John Road, Canton, MA 02021. Effective August
27, 2002, Mr. Katz ceased to be employed by the Company and its wholly
owned subsidiary Hauser Technical Services, Inc.

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(12) Includes immediately exercisable five-year warrants to purchase
992,789 shares, 988,471 shares owned by Zuellig Group N.A., Inc., a
Delaware corporation ("ZGNA"), and 1,204,955 shares owned by Zuellig
Botanicals, Inc., a Delaware corporation ("ZBI"). Zatpack, Inc., an
international business company organized under the laws of the British
Virgin Islands ("Zatpack") has 100 shares of common stock issued and
outstanding, which is divided into the following 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; and 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.

(13) Zatpack's address is Craig Muir Chambers, P.O. Box 71, Road Town,
Tortola, British Virgin Islands.

(14) Includes 988,471 shares owned by ZGNA and 1,204,955 shares owned by
ZBI, a wholly owned subsidiary of ZGNA. ZGNA is a wholly owned
subsidiary of Zatpack.

(15) ZGNA's address is 2550 El Presidio Street, Long Beach, California
90810.

(16) ZBI's address is 2550 El Presidio Street, Long Beach, California
90810.

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PROPOSAL 1 - ELECTION OF DIRECTORS

The Company's Board of Directors has nominated the five persons listed
below for election as directors for the ensuing year, each to hold office until
the 2003 Annual Meeting of Stockholders and until their successors are duly
elected and qualified, or until their death, resignation or removal. Each
nominee is a present member of the Board of Directors. A stockholder using the
enclosed proxy form can vote for all or any of the nominees of the Board of
Directors or such stockholder 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. Currently, the Company is authorized to have nine members on the
Board of Directors. Accordingly, there shall be four vacancies in the event that
all persons nominated by the Board of Directors are approved. These vacancies
are the result of the resignation of certain directors in 2000, 2001 and 2002.
The current directors have not nominated persons to fill these vacancies.
Proxies cannot be voted for a greater number of persons than the number of
nominees named. The five persons listed below have been nominated for election
as directors of the Company:

Kenneth C. Cleveland, 69, has served as Director, President and Chief Executive
Officer of the Company since October 2000. Mr. Cleveland served as Chief
Financial Officer of the Company from July 2000 to October 2000. Mr. Cleveland
is Executive Managing Director of Ballenger Cleveland & Issa, LLC, a firm that
specializes in financial and operational restructuring for businesses.
Mr. Cleveland has served as President and Chief Executive Officer of Zuellig
Group N.A., Inc. and Zuellig Botanicals, Inc. since October 2000. He also is
Chairman of Gel Pak, LLC, a manufacturer of material for the semiconductor
industry. He currently serves as a Director for Clothestime, Inc., a retailer of
women's apparel, as well as Zuellig Group N.A., Inc. and Zuellig
Botanicals, Inc. During 1999, Mr. Cleveland served as President of American
Security Distribution, a distributor of door hardware. From April 1995 through
November 1997, Mr. Cleveland served as President of Kroy, Inc., a manufacturer
of labeling equipment.

Herbert Elish, 69, has served as a Director of the Company since June 1999. Mr.
Elish was the Chief Executive Officer of Weirton Steel Corporation from 1987 to
December 31, 1995. Currently, Mr. Elish is Director of The Carnegie Library of
Pittsburgh.

James R. Mellor, 72, 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, Computer Sciences Corporation and
AmerisourceBergen. Mr. Mellor also serves as a Director and the Chairman of
USEC, Inc.

Robert F. Saydah, 75, has served as a Director of the Company since January
1994. Mr. Saydah retired as a Partner of Heidrick & Struggles, a publicly held
international executive search consulting firm, in March 2000 where he had been
employed since May 1988. Mr. Saydah also has held general management positions
for the Lederle Laboratories Division of American Cyanamid Company.

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Harvey L. Sperry, 72, has served as a Director of the Company since June 1999.
Mr. Sperry is a retired Partner of the law firm of Willkie Farr & Gallagher.
Currently, Mr. Sperry is a Director of Hampshire Group Limited, an apparel
manufacturer, as well as Zatpack, Inc., Zuellig Group N.A., Inc. and Zuellig
Botanicals, Inc.

RECOMMENDATION

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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EXECUTIVE OFFICERS

Executive officers are elected by the Board of Directors and hold office
until their successors have been duly elected and qualified or until their
earlier resignation or removal from office. The executive officers of the
Company as of November 11, 2002 are set forth below. A brief biography of each
executive officer follows (other than Kenneth C. Cleveland whose biography is
set forth above).

Name Age Position
---- --- --------

Kenneth C. Cleveland 69 Director, President and Chief Executive Officer
Thomas W. Hanlon 54 Chief Financial Officer, Treasurer and Secretary
Dieter W. Luelsdorf 57 President and Chief Executive Officer of ZetaPharm, Inc.
David Bailey, PhD. 60 Vice President, Research and Development
Anthony F. Del Vicario 37 Vice President, New Products and Business Development
Peter Hafermann 41 Vice President, Sales and Marketing
Rodney B. McKeever 50 Vice President, General Manager, Hauser Contract Research
Organization division of Hauser Technical Services, Inc.

Thomas W. Hanlon has served as the Chief Financial Officer, Treasurer and
Secretary of the Company since July 2001. Mr. Hanlon has also served as
Secretary and Treasurer of Zuellig Group N.A., Inc. and Zuellig Botanicals, Inc.
since July 2001. Mr. Hanlon is responsible for the finance and administration
operations at the Company. Mr. Hanlon has served in several interim financial
management roles through Thomas Hanlon Associates, a firm that he founded in
1993 which specializes in financial restructuring, management consulting and
interim financial management. From 1999 to 2000, Mr. Hanlon served as Vice
President of Finance at American Security Distribution. From 1998 to 1999,
Mr. Hanlon served as Managing Director for Irvine Associates, Inc.

Dieter W. Luelsdorf has served as President and Chief Executive Officer of
ZetaPharm, Inc., a wholly owned subsidiary of the Company ("ZetaPharm"), since
July 1989. Prior to joining ZetaPharm, Mr. Luelsdorf served as General Manager
of Fine Chemicals for EM, the U.S. affiliate of E. Merck, Darmstadt.

David Bailey, PhD., joined the Company in 1988 and currently serves as Vice
President of Research and Development. He has led numerous nutraceutical and
pharmaceutical development programs that include new compound isolation and
purification, new product identification and development, manufacturing and
customer support, and clinical verification. Dr. Bailey holds a doctorate in
Chemistry from Iowa State University and spent 20 years in university-level
academics including Professor of Chemistry at California State University,
Fullerton.

Anthony F. Del Vicario joined the Company in 2002 and currently serves as Vice
President, New Products and Business Development. For the period from 1996 to
2002, Mr. Del Vicario was employed by Geneva Pharmaceuticals. While at Geneva
Pharmaceuticals, Mr. Del Vicario served in various positions, including Vice
President, Strategy, Vice President, Marketing and Director of National
Marketing. Mr. Del Vicario has a M.S. in Management from the Graduate School of
Business at Stanford University where he was a Sloan Fellow.

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Peter Hafermann has served as Vice President of Sales and Marketing since June
1999. For the period of May 1997 to June 1999, he served as Vice President of
Sales and Marketing for Botanicals International. Prior to joining Botanicals
International, Mr. Hafermann spent 11 years with FMC Corporation's ("FMC") Food
and Pharmaceutical Division. While at FMC, Mr. Hafermann held several management
positions in sales, marketing and business development in Canada, Belgium and
the United States.

Rodney B. McKeever, P.E., has served as the Vice President, General Manager,
Hauser Contract Research Organization division of the Company's wholly owned
subsidiary Hauser Technical Services, Inc. since January of 2001 ("Hauser CRO").
Mr. McKeever is currently responsible for the guidance, administration and
divisional management of Hauser CRO. Prior to becoming Managing Director of
Hauser CRO, Mr. McKeever was the Director of the CPS division, and prior to that
Mr. McKeever was the Chief Engineer, and Manager of the Process Engineering
Services group. Mr. McKeever has a BS in Chemical Engineering from the
University of Colorado.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors held nine meetings during fiscal 2002. Each of the
directors who served during such period attended at least 75% of the aggregate
number of meetings of the Board of Directors and any committee of which they
were members during such period. The Board of Directors has two committees, the
Compensation Committee and the Audit Committee. The Board of Directors does not
have a Nominating Committee. A summary of each committee is described below.

Compensation Committee. The Board of Directors has established a
Compensation Committee, currently comprised of James R. Mellor and Harvey L.
Sperry (the "Compensation Committee"). The Compensation Committee held one
meeting in fiscal 2002. Additional information regarding the Compensation
Committee and its functions and responsibilities is included in this Proxy
Statement under the caption "Compensation Committee Report on Executive
Compensation."

Audit Committee. The Board of Directors has established an Audit Committee,
currently comprised of Herbert Elish, Robert F. Saydah and Harvey L. Sperry (the
"Audit Committee"). The Audit Committee held five meetings in fiscal 2002.
Additional information regarding the Audit Committee and its functions and
responsibilities is included in this Proxy Statement under the caption "Report
of the Audit Committee of the Board of Directors."

The Audit Committee has reviewed and discussed the audited financials with
management and with Arthur Andersen LLP, the Company's former independent
auditors. The Board of Directors has adopted a written charter for the Audit
Committee which is attached as Appendix A hereto. The members of the Audit
Committee are independent (as defined in the NASD's listing standards).

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EXECUTIVE COMPENSATION

The following table provides certain summary information concerning
compensation of the Company's Chief Executive Officer and the four other most
highly compensated executive officers of the Company (the "Named Executive
Officers") for each of the last three fiscal years.

SUMMARY COMPENSATION TABLE

Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards
------
Other
Annual Restricted Securities All Other
Fiscal Compen- Stock Underlying Compen-
Name and Principal Position Year Salary ($) Bonus ($) sation($) Award(s)($) Options (#) sation ($)(7)
--------------------------- ---- ---------- --------- ------ ----------- ------------ -------------

Kenneth C. Cleveland (1) 2002 291,000 70,000 - - - -
President and Chief 2001 215,000 - - - 100,000 -
Executive Officer 2000 - - - - - -

Thomas W. Hanlon (2) 2002 119,000 (3) 59,000 20,000 (4) 25,000 (5) - -
Chief Financial Officer, 2001 - - - - - -
Treasurer and Secretary 2000 - - - - - -

Peter Hafermann 2002 98,000 133,000 28,000 (4) 42,000 (5) 8,000
Vice President, 2001 103,000 73,000 - - 3,000
Sales and Marketing 2000 79,000 15,000 - - 5,000

Dieter W. Luelsdorf 2002 188,000 50,000 35,000 (4) 42,000 (5) - 3,000
President and Chief 2001 150,000 56,000 - - - -
Executive Officer, 2000 106,000 97,000 - - - 3,000
ZetaPharm, Inc.

Philip H. Katz (6) 2002 168,000 18,000 - - - 2,000
Former President of 2001 149,000 - - - - -
Hauser Technical 2000 130,000 - - - 62,500 -
Services, Inc.

------------------------------

(1) In August 2000, Kenneth Cleveland Associates, Inc. was hired to provide
management services to the Company. In October 2000, Mr. Cleveland was
appointed by the Board as President and Chief Executive Officer of the
Company. Mr. Cleveland is the Executive Managing Director of Ballenger
Cleveland & Issa, LLC. Mr. Cleveland is a party to an agreement to provide
services to the Company. See "Certain Relationships and Related
Transactions" for a summary of this agreement.

(2) In July 2001, Thomas Hanlon Associates was hired to provide financial and
administrative management services to the Company. Mr. Hanlon is the sole
proprietor of Thomas Hanlon Associates. Mr. Hanlon is a party to an
agreement to provide services to the Company. See "Certain Relationships
and Related Transactions" for a summary of this agreement.

(3) Mr. Hanlon's salary includes $4,000 compensation for consulting services
rendered prior to his becoming employed by the Company.

(4) Represents cash payments made by the Company to pay tax liabilities
resulting from 83(b) Election's made by these individuals with the Internal
Revenue Service as a result of a grant of restricted stock in June 2001.

(5) As of March 31, 2002, each of Messrs. Hanlon, Hafermann and Luelsdorf held
30,000, 50,000 and 50,000 shares of restricted stock, respectively. On
March 28, 2002, the last trading day of the fiscal year ended March 31,
2002, Messrs. Hanlon, Hafermann and Luelsdorf's shares of restricted stock
were valued at $12,000, $20,000 and $20,000, respectively. Each of Messrs.
Hanlon, Hafermann and Luelsdorf's shares of restricted stock vest on March
31, 2004. No dividends will be paid on these shares of restricted stock.

(6) Effective August 27, 2002, Mr. Katz ceased to be employed by the Company
and its wholly owned subsidiary Hauser Technical Services, Inc.

(7) Represents amounts paid by the Company in accordance with its practice of
matching contributions to its employee's 401(k) program.

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STOCK OPTION GRANTS IN FISCAL YEAR ENDED MARCH 31, 2002

During the fiscal year ended March 31, 2002, the Company did not grant any
options to purchase its Common Stock.

AGGREGATED 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 total number of unexercised stock options and (b) the
aggregate dollar value of in-the-money, unexercised options held at the end of
the fiscal year. None of the Named Executive Officers exercised any options
during the last fiscal year.

Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Options at FY-End (#) Money Options at FY-End ($)
--------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------

Kenneth C. Cleveland................... 100,000 - 3,000 --
Thomas W. Hanlon....................... - - -- --
Peter Hafermann........................ - - -- --
Dieter W. Luelsdorf (1) ............... - - -- --
Philip H. Katz (2)..................... 3,174 62,500 -- --

-------------------------------------------

(1) Effective June 22, 2001, Mr. Luelsdorf agreed to cancel options to purchase
62,500 shares of common stock.

(2) Effective August 27, 2002, Mr. Katz ceased to be employed by the Company
and its wholly owned subsidiary Hauser Technical Services, Inc.

The fair market value of the Company's Common Stock at March 31, 2002, measured
as the average between the high and low trade of Common Stock on March 28, 2002,
the then most recent date on which the Common Stock traded, was $0.40 per share.

EQUITY COMPENSATION PLAN INFORMATION
------------------------------------

The following table provides certain information as of March 31, 2002 with
respect to the Company's equity compensation plans under which equity securities
of the Company are authorized for issuance.

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+-------------------------------+-----------------------------+----------------------------+-----------------------------+
| Equity compensation plans not | 100,000(2) | $0.37 | 0 |
| approved by security holders | | | |
+-------------------------------+-----------------------------+----------------------------+-----------------------------+
| Total | 221,832 | $5.97 | 287,824 |
+-------------------------------+-----------------------------+----------------------------+-----------------------------+

---------------------

(1) Includes 151,239 shares of common stock available as of March 31, 2002
under the Company's 1999 Stock Incentive Plan which may be granted to
members of the Board of Directors who are not also employees of the Company
or a subsidiary in lieu of cash compensation for their services as members
of the Board of Directors.

(2) In February 2001, the Board of Directors of the Company approved the sale
of 100,000 shares of its Common Stock to Kenneth C. Cleveland for $0.37 per
share. As of March 31, 2002, Mr. Cleveland had not purchased these shares.

DIRECTOR COMPENSATION

In fiscal 2002, non-employee directors of the Company received annual
compensation of $25,000, which was payable quarterly in Common Stock of the
Company. The number of shares to which each non-employee director was entitled
each quarter was determined by dividing $6,250 by the closing price of the
Common Stock on the last trading day of the calendar quarter. Mr. Elish, as the
Chairman of the Board, received additional compensation of $25,000, which was
also payable quarterly in Common Stock of the Company. In fiscal 2002, the
Company's non-employee directors purchased a total of 302,936 shares of Common
Stock from the Company at an average price of $0.49 per share (100% of fair
market value on the date of grant). See "Certain Relationships and Related
Transactions" herein for a summary of certain consulting services Mr. Sperry
provides to the Company.

In the second quarter of fiscal 2003, the Board of Directors determined
that there would be insufficient reserved shares under the Company's 1999 Stock
Incentive Plan to permit the non-employee directors to continue to receive
compensation payable in Common Stock of the Company. In lieu of adopting a new
equity compensation plan, the Board of Directors approved the payment of
non-employee directors compensation in cash.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the fiscal year ended March 31, 2002, James R. Mellor and Harvey L.
Sperry comprised the Company's Compensation Committee. During fiscal 2002, each
of Messrs. Mellor and Sperry were non-employee directors. None of the members of
the Compensation Committee have ever been officers of the Company. See "Certain
Relationships and Related Transactions" herein for a summary of certain
consulting services Mr. Sperry provides to the Company.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Overview

The Compensation Committee is responsible for establishing the compensation
policies and evaluating the compensation programs for the Company's executive
officers and other key employees.

-12-

Executive Officer Compensation

The Company's compensation program for fiscal 2002 consists of base salary
and bonuses paid in cash. 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 regarding base salary is
to provide compensation for its executive officers that is competitive with
similarly positioned executives working for competitors of the Company. In
making such compensation decisions for fiscal 2002, the Compensation Committee
did not conduct a formal survey of compensation practices of its competitors but
rather relied on its general knowledge of the compensation practices of the
industry. In considering an individual's base salary, the Compensation Committee
makes subjective determinations based on factors such as individual performance,
retention, the level of responsibility and the scope and complexity of the
position. The base salaries for Messrs. Cleveland and Hanlon are set by
separately negotiated agreements as more fully described below in "Certain
Relationships and Related Transactions."

Discretionary Cash Bonuses Awarded in Fiscal 2002. In fiscal 2002, the
Company paid discretionary cash bonuses to its executive officers based on a
subjective determination by the Compensation Committee of each officers
individual performance and contribution to the Company during fiscal 2002.
Discretionary cash bonuses for future fiscal years will be based on achieving
operating goals as determined by the Compensation Committee.

Restricted Stock. In fiscal 2002, the Company granted shares of its Common
Stock to certain of its key employees. Pursuant to this grant, these employees
will forfeit the shares granted to them if they cease to be employed by the
Company prior to May 31, 2005. The Company may elect to waive such forfeitures
in certain circumstances.

Stock Options. In fiscal 2002, the Company did not grant stock options to
its executive officers.

Chief Executive Officer Compensation

As Chief Executive Officer, Mr. Cleveland's base salary is determined
pursuant to his agreement to provide services to the Company. Mr. Cleveland's
bonus for fiscal 2002 was based on a subjective determination by the
Compensation Committee of Mr. Cleveland's overall performance and paid to
Mr. Cleveland in accordance with his agreement to provide services.

Section 162(m) of the International Revenue Code of 1986, as amended (the
"Code") limits to $1 million the amount of compensation deductible by a public
company paid to any of its Named Executive Officers. Because none of the Named
Executive Officers has compensation from the Company in excess of $1 million,
the Company has not yet formulated a policy with respect to the deduction
limitations of Section 162(m) of the Code.

By the Compensation Committee

James R. Mellor
Harvey L. Sperry

-13-

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

The Audit Committee is responsible for overseeing the Company's accounting
functions and internal controls and for recommending to the Board of Directors
the selection of the Company's independent accountants. The Audit Committee is
composed of independent directors of the Company, as defined by the NASD's
listing standards, and acts pursuant to a written charter adopted by the Board
of Directors.

The Audit Committee has reviewed and discussed with management and Arthur
Andersen LLP, the Company's former independent accountants ("Arthur Andersen"),
the audited financial statements for the fiscal year ended March 31, 2002. In
addition, the Audit Committee has discussed with Arthur Andersen the matters
required to be discussed by the Statement on Auditing Standards No. 61,
Communications with Audit Committees, as amended, by the Auditing Standards
Board of the American Institute of Certified Public Accountants.

Prior to the replacement of Arthur Andersen on July 30, 2002, the Audit
Committee reviewed and discussed with Arthur Andersen the firm's independence
and considered the compatibility of non-audit services with the auditors'
independence. Prior to Arthur Andersen's replacement, however, Arthur Andersen
did not provide to the Audit Committee the written disclosures and the letter
from the independent accountants required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, as amended.

Based on its review of the audited financial statements and the various
discussions referred to above, the Audit Committee has recommended to the Board
of Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 2002.

The Audit Committee

Herbert Elish
Robert F. Saydah
Harvey L. Sperry

EMPLOYMENT CONTRACTS

Kenneth C. Cleveland is a party to an agreement to provide services to the
Company. See "Certain Relationships and Related Transactions" for a summary of
this agreement.

Thomas W. Hanlon is a party to an agreement to provide services to the Company.
See "Certain Relationships and Related Transactions" for a summary of this
agreement.

Peter Hafermann has a severance arrangement with the Company whereby upon
termination of his employment, with or without cause, he will be entitled to
receive up to one year of his total compensation.

-14-

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section
16(a)"), requires the Company's directors, executive officers and persons who
beneficially own more than 10% of the Common Stock of the Company to file with
the Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of the Company's Common Stock. Directors,
executive officers and beneficial owners of more than 10% of the Common Stock of
the Company are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.

Based solely on the Company's review of the copies of such forms furnished
to the Company and written representations from the directors, executive
officers and more than 10% beneficial owners, the Company believes that all
Section 16(a) filing requirements applicable to the Company's directors,
executive officers and more than 10% beneficial owners were complied with during
fiscal year ended March 31, 2002, except Mr. Cleveland was not timely in filing
a Form 4 for changes in beneficial ownership that occurred on February 22, 2001
and except that Zatpack was not timely in filing a Form 4 for changes in
beneficial ownership that occurred on October 11, 2000. The changes in
beneficial ownership for Mr. Cleveland were reported on a Form 5 filing on June
17, 2002 and the changes in beneficial ownership for Zatpack were reported on a
Form 4 filing on December 19, 2001.

-15-

STOCKHOLDER RETURN PERFORMANCE GRAPH

The following graph compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total stockholder return on the
NASDAQ Stock Market (U.S.) Index and the S&P Specialty Chemicals Index for the
59 month period beginning April 30, 1997 and ending March 31, 2002. The graph
assumes that $100 was invested on April 30, 1997 in the Company's Common Stock,
the NASDAQ Stock Market (U.S.) Index and the S&P Specialty Chemicals Index and
that all dividends were reinvested. The S&P Chemicals (Specialty) Index, which
was previously used by the Company for comparison purposes, changed its name to
the S&P Specialty Chemicals Index.

COMPARISON OF 59 MONTH CUMULATIVE TOTAL RETURN*
AMONG HAUSER, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S&P SPECIALTY CHEMICALS INDEX

[GRAPHIC OMITTED] [PLOT POINTS]

Cumulative Total Return
-------------------------------------------------------------------
4/97 4/98 4/99 3/00 3/01 3/02

HAUSER, INC. 100.00 121.57 38.24 9.31 2.47 1.57
NASDAQ STOCK MARKET (U.S.) 100.00 149.48 204.98 369.42 147.74 148.72
S & P SPECIALTY CHEMICALS 100.00 132.23 135.06 118.71 101.96 129.11

------------------

* In fiscal 2000, the Company changed its fiscal year from April 30th to
March 31st. As a result, the Company has reported the cumulative total
return as a comparison of the 59 months from April 30, 1997 through
March 31, 2002.

-16-

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company and ZBI are parties to an agreement regarding employees dated
June 11, 1999 pursuant to which ZBI, a seller of bulk raw materials in the form
of powders or similar processed products, shares approximately one-third of the
personnel costs of the Company. Pursuant to this agreement, ZBI purchases
certain inventory, disburses all amounts for shared services and receives
reimbursement from the Company for the amounts disbursed on its behalf.

On June 11, 1999, the Company, ZGNA and ZBI entered into a Governance
Agreement, pursuant to which each party agreed to take all action within their
power to cause the Board of Directors to consist of nine directors, three of
which are to be designated by the directors who served on the Board of Directors
immediately prior to the Company's merger in June 1999 (the "Continuing
Directors"), three of which are to designated by ZGNA (the "ZGNA Directors") and
three of which shall be independent (the "Independent Directors"). In addition,
pursuant to the Governance Agreement, ZGNA and ZBI are required to vote shares
of Common Stock beneficially owned by them to elect any successors designated by
a majority of the remaining Continuing Directors if a Continuing Director
resigns and to elect any successors designated by a majority of the remaining
Independent Directors if an Independent Director resigns. The Governance
Agreement terminates on the earlier of June 11, 2004 and the date on which ZGNA
and ZBI cease to own at least 20% of the outstanding Common Stock. William E.
Coleman and Dean P. Stull, former Continuing Directors, resigned from the Board
of Directors in July 2000 and October 2001, respectively. As of May 31, 2002,
the remaining Continuing Director had not nominated replacement directors. Peter
Zuellig and Volker Wypyszyk, former ZGNA Directors, resigned from the Board of
Directors in July 1999 and October 2001, respectively. Michael C. Davis replaced
Mr. Zuellig in July 1999 as a ZGNA Director. In March 2002, Mr. Davis resigned
from the Board of Directors. As of May 31, 2002, the remaining ZGNA Director had
not nominated replacement directors. In June 2000, Rudolfo C. Bryce, an
Independent Director, resigned from the Board of Directors. As of May 31, 2002,
the remaining Independent Directors had not nominated a replacement director.

In December 2001, the Company entered into an Amended and Restated Credit
Facility (the "Amended Credit Facility") with Wells Fargo which required that a
fee be paid to Wells Fargo in the amount of $779,000 (the "Fee"). Initially,
Wells Fargo had stated that as further consideration for entering into the
Amended Credit Facility, the Company must issue to Wells Fargo a warrant to
purchase 865,630 shares of the Company's Common Stock, representing
approximately 12.5% of the Company's Common Stock on a fully diluted basis, at
an exercise price of $0.01 per share, which would expire eight years after
issuance (the "Warrant"). Wells Fargo subsequently stated that it would accept
the Fee in lieu of the Warrant, provided that the Fee was paid by a party other
than the Company. Wells Fargo would not permit the Company to reduce its working
capital by paying the Fee. Zatpack, a significant shareholder of the Company,
agreed to pay the Fee. The Company, as consideration for such payment, issued
the Warrant to Zatpack. The terms of the Warrant were negotiated solely between
the Company and Wells Fargo. Pursuant to the terms of the Warrant, unless waived
by the Company, the holder thereof may only exercise the Warrant upon 61 days
from the date that written notice of such exercise is received by the Company.
On January 31, 2002, Zatpack sold the Warrant. The Company has not waived the
61-day notice provision. In connection with the payment of the Fee, Zatpack

-17-

caused ZBI to forgive $247,000 of trade payables due from the Company for its
share of the debt issuance costs.

Zatpack holds a $3 million Note of the Company, which is subordinate to the
Company's Amended Credit Facility with Wells Fargo (the "Zatpack Note"). The
Zatpack Note accrues interest at 6.5%, is payable in three years and has
five-year warrants attached. The warrants permit Zatpack to purchase 992,789
shares of Common Stock at a price of $0.5855 per share.

The Company sells inventory to ZBI. During the fiscal years ended March 31,
2002 and 2001, sales to ZBI totaled $589,000 and $3,219,000, respectively. The
related trade accounts receivable due from ZBI totaled $4,000 and $138,000 at
March 31, 2002 and 2001, respectively.

The Company has agreements under which certain personnel and facilities
costs of the Company are shared approximately one-third by ZBI, which sells bulk
botanical raw materials in the form of powders or similar processed product. ZBI
purchases certain inventory, disburses all amounts for shared services, and
receives reimbursement from the Company for amounts disbursed on its behalf. The
amounts owed to ZBI under these agreements totaled $2,946,000 and $2,988,000 at
March 31, 2002 and 2001, respectively. For the fiscal years ended March 31, 2002
and 2001, the amounts recorded as costs and expenses for inventory, personnel
and facilities by the Company under this arrangement totaled $8,653,000 and
$7,067,000, respectively. These amounts are included with cost of sales and
operating expenses in the accompanying statements of operations.

The Company, Kenneth Cleveland Associates, Inc. (currently known as
Ballenger Cleveland & Issa, LLC), a firm that specializes in advising businesses
with respect to both financial and operational restructuring (the "Contractor"),
and Kenneth C. Cleveland have entered into an agreement to provide services to
the Company. Pursuant to this agreement, the Contractor has agreed to provide
services to the Company, which services consist of Mr. Cleveland serving as an
officer of the Company, in exchange for a fee of $8,000 per week. Of the $8,000
paid to Mr. Cleveland per week, the Company is reimbursed by an affiliate to
whom Mr. Cleveland provides services, in the amount of $2,400 per week. The
agreement terminates automatically on August 1, 2004 or upon six months prior
notice by either the Contractor or the Company. Mr. Cleveland is the President
of the Contractor.

The Company, Thomas Hanlon Associates, a sole proprietorship that
specializes in advising businesses with respect to both financial and
operational restructuring ("Hanlon Associates"), and Thomas W. Hanlon have
entered into an agreement to provide services to the Company. Pursuant to this
agreement, Hanlon Associates has agreed to provide services to the Company,
which services consist of Mr. Hanlon serving as an officer of the Company, in
exchange for a fee of $4,327 per week. Of the $4,327 paid to Mr. Hanlon per
week, the Company is reimbursed by an affiliate to whom Mr. Hanlon provides
services, in the amount of $1,298 per week.

Harvey L. Sperry, a Director, is a retired Partner in the law firm of
Willkie Farr & Gallagher, which acts as counsel to the Company. Mr. Sperry
provides consulting services to the Company in exchange for a fee of $5,000 per
month.

-18-

OTHER MATTERS

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.

STOCKHOLDERS PROPOSALS

Stockholders who wish to have their proposals included in the Company's
Proxy Statement for the 2003 Annual Meeting of Stockholders must ensure that
such proposals are received by the Secretary of the Company at 20710 South
Alameda Street, Long Beach, CA 90810, not later than July 10, 2003. If you
notify the Company after April 26, 2003 of an intent to present a proposal at
the Company's 2003 Annual Meeting of Stockholders, we will have the right to
exercise discretionary voting authority with respect to such proposal, if
presented at the meeting, without including information regarding such proposal
in our proxy materials. Such proposals must meet the requirements set forth in
the rules and regulations of the Securities and Exchange Commission in order to
be eligible for inclusion in the Company's Proxy Statement for the 2003 Annual
Meeting of Stockholders.

INDEPENDENT AUDITORS

CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS

Arthur Andersen served as the Company's independent auditors for the fiscal
year ended March 31, 2002. On July 30, 2002, the Company determined that it will
no longer engage Arthur Andersen as the Company's independent public
accountants. The decision to replace Arthur Andersen was recommended by the
Audit Committee. On August 7, 2002, the Company engaged BDO Seidman, LLP ("BDO")
to serve as its independent auditors for fiscal year 2003. Neither
representatives of Arthur Andersen nor representatives of BDO will be present at
the Annual Meeting.

Arthur Andersen's reports on the financial statements for each of the
fiscal years ended March 31, 2002 and March 31, 2001 did not contain a
disclaimer of opinion nor were they qualified or modified as to uncertainty,
audit scope and accounting principles, except that in each report, Arthur
Andersen included an explanatory paragraph relating to certain factors which
raise substantial doubt about the ability of the Company to continue as a going
concern. During the fiscal years ended March 31, 2002 and March 31, 2001, and in
the subsequent period through the date hereof, there were no disagreements with
Arthur Andersen on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope and procedures which, if not resolved to
the satisfaction of Arthur Andersen, would have caused it to make reference to
the matter in connection with their report on the financial statements.
Additionally, during such periods there were no reportable events as defined in
Item 304(a)(1)(v) of Regulation S-K.

During the fiscal years ended March 31, 2002 and March 31, 2001, and in the
subsequent period prior to the engagement of BDO, the Company did not consult
BDO with respect to the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's consolidated financial

-19-

statements, or any other matters or reportable events as set forth in Items
304(a)(2)(i) and (ii) of Regulation S-K.

AUDIT FEES

The aggregate fees billed by Arthur Andersen for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended March 31, 2002 and for reviews of the financial statements
included in the Company's quarterly reports on Form 10-Q for the 2002 fiscal
year totaled $88,000.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

No fees were billed by Arthur Andersen for professional services rendered
for information technology services relating to financial information systems
design and implementation for the fiscal year ended March 31, 2002.

ALL OTHER FEES

Arthur Andersen has billed the Company $56,000, in the aggregate, for all
professional services rendered to the Company, other than the services described
above under "Audit Fees" and "Financial Information Systems Design and
Implementation Fees" for the Company's 2002 fiscal year. These other services
included (i) $41,000 for preparation of the Company's federal and state tax
returns and (ii) $15,000 for audits of the Company's employee benefit plans.

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.

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 Company's common stock is traded in the over-the-counter
market and quoted on the Over the Counter Bulletin Board ("OTCBB") under the
symbol "HAUS.OB." The OTCBB is a regulated quotation service that displays
real-time quotes and last-sale price and volume information in over-the-counter
equity securities. Reports, proxy

-20-

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

Kenneth C. Cleveland,
President and Chief Executive Officer

Long Beach, California

November 11, 2002

-21-

APPENDIX A

HAUSER AUDIT COMMITTEE CHARTER
--------------------------------------------------------------------------------

I. PURPOSE

The purpose of the Hauser Audit Committee is to oversee the financial
reporting process, the Companies internal controls, and the audit
process.

II. STRUCTURE

The Hauser Audit Committee is composed of three (3) active Hauser Board
of Director members who meet the SEC's requirements for independence.
Each member of the committee must be financially literate and at least
one member must have accounting or related financial management
experience. The committee and chairperson will be appointed by the
Hauser Board of Directors.

III. SCOPE OF ACTIVITIES

Review the adequacy of the Company's internal control structure.

Review the activities, organizational structure and qualifications of
the financial staff.

Conduct a review of the financial statements including Management's
Discussion and Analysis.

Review significant accounting and reporting issues, including recent
professional and regulatory pronouncements, and understand their impact
on the financial statements.

Review interim financial reports.

Review the findings of any examinations by regulatory agencies such as
the SEC, FDA, etc.

If necessary, institute special investigations and, if appropriate,
hire special counsel experts to assist.

Perform other oversight functions as requested by the full board.

IV. EXTERNAL AUDITOR OVERSIGHT

External auditors report and are accountable to the Board of Directors
and the Audit Committee of the Company.

Select, evaluate and if necessary, replace the external auditors.

Review the external auditors' proposed audit scope and approach.

Require that external auditors submit a formal written statement
regarding relationships and services which may impact independence.

V. REPORTING RESPONSIBILITIES

The Audit Committee reports to the Board of Directors on a regular
basis about the Committee activities.

HAUSER, INC.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HAUSER, INC. IN CONNECTION WITH ITS ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON DECEMBER 5, 2002.

The undersigned stockholder(s) of Hauser, Inc. (the "Company"),
revoking all previous proxies, hereby constitutes and appoints Kenneth C.
Cleveland, Thomas W. Hanlon and Harvey L. Sperry, and each of them, as proxies
with full power of substitution to vote on behalf of the undersigned all shares
of the Company's common stock, par value $0.001 per share (the "Common Stock"),
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of the Company to be held at the Sheraton New York Hotel and Towers, 811 Seventh
Avenue, New York, New York, 9:30 a.m. Eastern Standard Time, 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 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.

[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.

1. To elect the five nominees listed below FOR WITHHOLD FOR ALL EXCEPT
to the Board of Directors of the
Company until the next Annual Meeting [ ] [ ] [ ]
of Stockholders of Hauser, Inc. or
until their successors are elected and
qualified.

Kenneth C. Cleveland, Herbert Elish, James R. Mellor, Robert F. Saydah,
Harvey L. Sperry

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).

DO NOT SUBMIT ANY STOCK CERTIFICATES WITH THIS PROXY CARD.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE

DETACH HERE

2. 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 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:____________