<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
NATURAL ALTERNATIVES INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Limited Partnership Interests
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NATURAL ALTERNATIVES INTERNATIONAL, INC.
1185 Linda Vista Drive
San Marcos, California 92069
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 6, 1999
An Annual Meeting of Stockholders of Natural Alternatives International,
Inc., a Delaware corporation (the "Company"), will be held at the Quails Inn,
1035 La Bonita Drive, San Marcos, California 92069 on Monday, December 6, 1999,
at 1:00 p.m., local time, for the following purposes:
1. Election of two (2) directors of the Company in Class II to serve
until the next meeting of stockholders held to elect directors in Class II and
the election of one (1) director of the Company in Class III to serve until the
next meeting of stockholders held to elect directors in Class III (and until the
election and qualification of their successors).
2. Stockholders' approval of the adoption of the Natural Alternatives
International, Inc. 1999 Omnibus Equity Incentive Plan, and the reservation of
500,000 shares of common stock of the Company for issuance pursuant to the
Natural Alternatives International, Inc. 1999 Omnibus Equity Incentive Plan.
3. Stockholders' approval of the adoption of the Natural Alternatives
International, Inc. 1999 Employee Stock Purchase Plan, and the reservation of
150,000 shares of common stock of the Company for issuance pursuant to the
Natural Alternatives International, Inc. 1999 Employee Stock Purchase Plan.
4. Confirmation of KPMG LLP as the Company's independent auditors for the
fiscal year ending June 30, 2000.
5. Transaction of such other business as may properly come before the
Annual Meeting of Stockholders or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on October 20,
1999 as the record date for determination of stockholders entitled to notice of
and to vote at the Annual Meeting of Stockholders or any adjournment or
postponement thereof.
All stockholders are cordially invited to attend the Annual Meeting of
Stockholders in person. REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING,
PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ACCOMPANYING ENVELOPE, POSTAGE FOR WHICH HAS BEEN PROVIDED IF MAILED IN THE
UNITED STATES. The prompt return of Proxies will ensure a quorum and save the
Company the expense of further solicitation. Any stockholder returning the
enclosed Proxy may revoke it prior to its exercise by
<PAGE> 3
voting in person at the meeting or by filing with the Secretary of the Company a
written revocation or a duly executed Proxy bearing a later date.
By Order of the Board of Directors
Marie A. LeDoux
Secretary
San Marcos, California
October 29, 1999
<PAGE> 4
NATURAL ALTERNATIVES INTERNATIONAL, INC.
1185 Linda Vista Drive
San Marcos, California 92069
---------------
PROXY STATEMENT
---------------
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Natural Alternatives International, Inc., a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders ("Annual Meeting") to
be held on Monday, December 6, 1999 at 1:00 p.m., local time, or at any
adjournment or postponement thereof. The Annual Meeting will be held at the
Quails Inn, 1035 La Bonita Drive, San Marcos, California 92069. This Proxy
Statement and the accompanying Proxy and annual report are first being mailed to
stockholders on or about October 29, 1999.
VOTING
Only stockholders of record at the close of business on October 20, 1999
will be entitled to vote at the Annual Meeting. On September 22, 1999, there
were approximately 5,759,875 shares of Common Stock outstanding. The Company is
incorporated in Delaware and is not required by Delaware corporation law or its
Certificate of Incorporation to permit cumulative voting in the election of
directors.
Each share of Common Stock will have one vote on each matter properly
presented and submitted to a vote at the Annual Meeting. An affirmative vote of
a majority of the shares represented at the Annual Meeting and entitled to vote
thereon (where the holders of a majority of the shares entitled to vote are
present in person or by Proxy) will be necessary to approve each matter, except
for the election of directors, who are elected by a plurality of the votes of
the shares present in person or by Proxy. There are no rights which will accrue
to stockholders dissenting in any matter known to the Company to be raised at
the Annual Meeting. Abstentions with respect to any matter are treated as shares
present or represented and entitled to vote on that matter and thus have the
same effect as negative votes. If shares are not voted by the broker who is the
record holder of the shares, or if shares are not voted in other circumstances
in which Proxy authority is defective or has been withheld with respect to any
matter, these non-voted shares are not deemed to be present or represented for
purposes of determining whether stockholder approval of that matter has been
obtained.
REVOCABILITY OF PROXIES
When the enclosed Proxy is properly executed and returned, the shares it
represents will be voted at the Annual Meeting in accordance with any directions
noted thereon, and if no such directions are indicated, the shares it represents
will be voted in favor of the proposals set forth in the notice attached hereto.
Any person giving a Proxy in the form accompanying this statement has the power
to revoke it any time before its exercise by filing with the Secretary of the
Company at the Company's principal executive office, 1185 Linda Vista Drive, San
Marcos, California 92069, an instrument of revocation or a duly executed Proxy
bearing a later date, or by attending the Annual Meeting and voting in person.
1
<PAGE> 5
SOLICITATION
The Company is soliciting the enclosed Proxy and will bear the entire
cost of the solicitation of Proxies, including the preparation, assembly,
printing and mailing of this Proxy Statement, the Proxy and any additional
material furnished to stockholders. Copies of solicitation material will be
furnished to brokerage houses, fiduciaries and custodians holding shares in
their names that are beneficially owned by others to forward to such beneficial
owners. In addition, the Company may reimburse such persons for their cost of
forwarding the solicitation material to such beneficial owners. The Company has
retained ChaseMellon Shareholder Services to assist in the solicitation of
Proxies. The solicitation of Proxies by mail may be supplemented by telephone,
telegram and/or personal solicitation by directors, officers or employees of the
Company. No additional compensation will be paid for any such services. Except
as described above, the Company does not intend to solicit Proxies other than by
mail.
PROPOSAL 1
ELECTION OF CLASS II DIRECTORS
The two Class II directors to be elected at the Annual Meeting will be
elected, to hold office for the remaining two (2) years until the next meeting
of stockholders held to elect directors in Class II, and until his or her
successor is elected and has qualified, or until his or her death, resignation
or removal. The nominees for director are members of the present Board of
Directors (the "Board") in Class II thereof, and were elected by the
stockholders at the Company's 1996 annual meeting of stockholders. The nominees
are serving a term of office scheduled to expire with the 1998 annual meeting
and the election and qualification of their successors. No annual meeting was
held in 1998. Therefore, the nominees are being elected for the remaining two
(2) years of the three (3) year term which was to have commenced in 1998. Class
III directors are also being elected pursuant to Proposal 1. Class I directors
of the Company will continue in office for their existing terms, which will
expire with the 2000 annual meeting and the election and qualification of their
successors.
The two (2) candidates receiving the highest number of affirmative votes
cast at the Annual Meeting shall be elected as directors of the Company in Class
II. Unless authority to do so is otherwise withheld, it is intended that the
shares represented by the enclosed Proxy will be voted for the election of Marie
A. LeDoux and Lee G. Weldon as Class II directors. The nominees for election
have agreed to serve if elected. In the event any of such nominees becomes
unavailable or refuses to serve as a director (an event that is not
anticipated), the shares represented by the enclosed Proxy will be voted for the
election of the balance of those named and such other nominee as the Board may
select.
ELECTION OF CLASS III DIRECTOR
The one (1) Class III director to be elected at the Annual Meeting will
be elected to hold office until the Annual Meeting held in 2002 and until his
successor is elected and has qualified, or until death, resignation or removal.
The nominee for director is a member of the Board, appointed to a vacant seat by
the Board during fiscal 1999. The one (1) candidate who receives the highest
number of affirmative votes cast at the Annual Meeting shall be elected as a
director of the Company in Class III. Class I directors will continue in office
for their existing terms, which will expire with the 2000 annual meeting and the
election and qualification of their successors. Class II and Class III directors
are being elected pursuant to Proposal 1 herein.
2
<PAGE> 6
INFORMATION ABOUT NOMINEES AND DIRECTORS
Set forth below is information regarding the two nominees for election as
a director in Class II, the one nominee for election as a director in Class III,
and the continuing directors for Class I, including information furnished by
them as to their principal occupations at present and for the last five years,
certain directorships held by each, their age as of October 20, 1999, and the
year in which each became a director of the Company. Except for Marie A. LeDoux
and Mark A. LeDoux, who are mother and son, respectively, there are no family
relationships among any of the directors or executive officers of the Company.
Name Age
- ---- ---
CLASS II
Marie A. LeDoux..............................................................83
Mrs. LeDoux is Secretary and Chairperson of the Board of the Company. She
has been a director of the Company since August 1986, and has also been
Chairperson and Secretary since that time. Mrs. LeDoux was also the
Chairperson/Advisor of the Company's predecessor from its formation until 1986.
She has forty years of experience in the area of nutrition. In 1978, Mrs. LeDoux
was awarded an Honorary Fellowship in the International Academy of Preventive
Medicine. In 1981, she received an Honorary Ph.D. in Humanities from the
Heritage Institute. Mrs. LeDoux is the mother of Mark A. LeDoux, who is the
Chief Executive Officer, President, Assistant Treasurer and a Director of the
Company. For the last eighteen years, Mrs. LeDoux has been the President of Play
N' Talk International, a company which is in the business of preparing
instructional materials for children's reading programs.
Lee G. Weldon.................................................................60
Mr. Weldon has been a director of the Company since June of 1992. He was
the Chief Executive Officer of Kal Healthway, Inc., a food supplement
distributor, from 1978 to 1995, and was also the Chairman from 1985 to 1995. Mr.
Weldon graduated from UCLA and obtained a Bachelor of Science in Business
Administration in 1963. Mr. Weldon became a member of Young President's
Organization ("YPO") in 1982, and since 1990 he has been a graduate member of
YPO.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
CLASS II NOMINEES LISTED ABOVE.
CLASS III
J. Scott Schmidt..............................................................62
Mr. Schmidt became a director of the Company in January 1999. Mr. Schmidt
has been a Management Consultant since 1995, specializing in communications,
marketing, and mergers and acquisitions. He spent 27 years with Tribune Company
of Chicago, eventually serving as Vice President/News and Information for the
entire corporation. From 1992 to 1994, he was Chief Executive Officer of
Thompson Newspapers Corporation. From 1991 to 1992 Mr. Schmidt was the
President, Publisher and Partner of American Collegiate Network, Inc. which was
the publisher of the National College Newspaper. Mr. Schmidt was also the
President and Chief Executive Officer of Hilton/Schmidt, Inc. which specialized
in consulting for media companies in the areas of editorial, sales, marketing
and acquisitions. Mr. Schmidt attended Bradley University and Northwestern
University.
3
<PAGE> 7
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
CLASS III NOMINEE LISTED ABOVE.
CLASS I
Mark A. LeDoux................................................................45
Mr. LeDoux is Chief Executive Officer, President, Assistant Treasurer and
a Director of the Company. He was a director, the President and Chief Executive
Officer of Natural Alternatives, Inc., the predecessor corporation, from its
formation in 1981 until the 1986 merger into the Company. Mr. LeDoux has been a
director and Chief Executive Officer of the Company since the August 1986 merger
of the predecessor corporation into the Company, which continued the business
and operations of Natural Alternatives, Inc. He was appointed President of the
Company in 1999, an office he previously held from August 1986 to December 1996.
From 1976 to 1980, Mr. LeDoux held the position of Executive Vice President and
Chief Operating Officer of Kovac Laboratories, a company which was engaged in
the business of manufacturing nutritional supplements. He attended the
University of Oklahoma and graduated Cum Laude with a Bachelor of Arts and
Letters in 1975. Mr. LeDoux graduated from Western State University, College of
Law in 1979, with a Juris Doctorate. Mr. LeDoux is the son of Marie A. LeDoux,
who is the Secretary and Chairperson of the Board of Directors.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended June 30, 1999, the Board held five (5)
regular meetings and six (6) special meetings. All directors then in office,
excluding William P. Spencer, attended at least 75% of the aggregate number of
meetings of the Board and of the Committees on which such directors served
during the fiscal year ended June 30, 1999. Mr. Spencer attended one of the
meetings of the Board.
All members of the Board hold office until the next Annual Meeting of
stockholders following expiration of their respective terms of office or the
election and qualification of their successors. All directors who are not also
employees or officers of the Company receive a minimum annual fee of $5,000 for
agreeing to act as a director of the Company, plus a fee of $1,000 for each
Board meeting personally attended. Executive officers serve at the discretion of
the Board. The Board has an Audit Committee and a Human Resources Committee. The
Board formerly had a Compensation Committee and does not have a Nominating
Committee. On June 9, 1999, the Compensation Committee was renamed the Human
Resources Committee by resolution of the Board of Directors of the Company.
References herein to the Human Resources Committee are intended to include the
Compensation Committee to the extent such reference encompasses any period prior
to June 9, 1999.
The Audit Committee is composed of directors who are not also employees
or officers of the Company. The Audit Committee recommends a firm of certified
public accountants to be appointed by the Board, subject to ratification by the
stockholders, as independent auditors to audit the Company's financial
statements and to perform services related to the audit. The Audit Committee
also has the responsibility to review the scope and results of the audit with
the independent auditors, review with management and the independent auditors
the Company's interim and year-end operating results, consider the adequacy of
the internal accounting and control procedures of the Company, review any
non-audit services to be performed by the independent auditors and consider the
effect of such performance on the independence of the auditors. The Audit
Committee currently consists of directors Kellas, Weldon and Schmidt. Mr.
Schmidt was appointed to the Audit Committee by the Board of Directors of the
Company on March 11, 1999 and has served since that date. During fiscal year
1999, the Audit Committee met one time.
4
<PAGE> 8
The Human Resources Committee establishes and recommends to the Board
rates of salary, bonuses, retirement and other compensation for all directors
and officers of the Company and for such other personnel as the Board may
designate. The Human Resources Committee currently consists of directors Kellas,
Weldon and Schmidt. Dr. Kellas, Mr. Weldon and Mr. Schmidt are directors and are
not officers or employees of the Company or any of its subsidiaries. Mr. Schmidt
was appointed to the Human Resources Committee by the Board of Directors of the
Company on March 11, 1999 and has served since that time. During the fiscal year
1999, the Human Resources Committee met five times.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table sets forth compensation for services rendered in all
capacities to the Company during the fiscal years June 30, by each of the named
executive officers:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
All Other
Name and Principal Position Year Salary Bonus Other(1) Compensation(2)
- --------------------------- ---- ------ ----- -------- ---------------
<S> <C> <C> <C> <C> <C>
Mark A. LeDoux 1999 $208,000 $ 609 $345,781 $27,756
President, Chief Executive 1998 208,000 304 40,270 27,842
Officer, Assistant Treasurer 1997 201,579 50,345 28,422 18,703
and Director
William P. Spencer(3) 1999 161,700 609 282,422 22,907
President, Chief Financial 1998 182,000 304 779,409 39,838
Officer and Director 1997 178,830 72,304 166,178 37,438
R. David Lough(4) 1999 75,000 -- 9,246 2,739
Executive Vice President 1998 -- -- -- --
1997 -- -- -- --
Douglas E. Flaker(4) 1999 50,000 -- 9,339 2,588
Vice President of Marketing, 1998 -- -- -- --
Business Development and 1997 -- -- -- --
Strategic Planning
David K. Shunick(4) 1999 42,308 -- 3,000 690
Vice President of Operations 1998 -- -- -- --
1997 -- -- -- --
John A. Wise(4) 1999 110,000 629 46,905 21,433
Vice President of Science and 1998 -- -- -- --
Technology 1997 -- -- -- --
</TABLE>
(1) Amounts do not exceed the lesser of $50,000 or 10% of salary and bonus
combined for named executive, except as set forth in the following table.
(2) See following table.
(3) In January 1999, Mr. Spencer ceased acting as an executive officer of the
Company. On June 29, 1999, Mr. Spencer resigned as a director of the
Company.
(4) Messrs. Lough, Flaker and Shunick joined the Company and Mr. Wise was
appointed an executive officer of the Company in fiscal 1999.
5
<PAGE> 9
OTHER COMPENSATION TABLE
<TABLE>
<CAPTION>
Mark A. William P. R. David Douglas David K. John A.
LeDoux Spencer Lough E. Flaker Shunick Wise
-------- ---------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Other Annual Compensation-1999
Gain from exercise and sale of stock options $325,030 $265,707 $ -- $ -- $ -- $26,353
Personal Transportation 18,000 13,500 9,000 9,000 3,000 18,000
Other Personal Expenses 2,751 3,215 246 339 -- 2,552
-------- -------- ------ ------ ------ -------
Totals $345,781 $282,422 $9,246 $9,339 $3,000 $46,905
======== ======== ====== ====== ====== =======
Other Annual Compensation-1998
Gain from exercise and sale of stock options $ -- $730,084 $ -- $ -- $ -- --
Personal Transportation 18,000 18,000 -- -- -- --
Other Personal Expenses 22,270 31,325 -- -- -- --
-------- -------- ------ ------ ------ -------
Totals $ 40,270 $779,409 $ -- $ -- $ -- $ --
======== ======== ====== ====== ====== =======
Other Annual Compensation-1997
Gain from exercise and sale of stock options $ -- $ 92,799 $ -- $ -- $ -- $ --
Personal Transportation 18,600 13,800 -- -- -- --
Other Personal Expenses 9,822 59,579 -- -- -- --
-------- -------- ------ ------ ------ -------
Totals $ 28,422 $166,178 $ -- $ -- $ -- $ --
======== ======== ====== ====== ====== =======
All Other Compensation-1999
401(k) Employer Contributions $ 8,075 $ 4,200 $ -- $ -- $ -- $ 6,400
Life Insurance and Disability Premiums 4,972 4,624 268 117 89 3,452
Medical, Dental and Vision 14,709 14,083 2,471 2,471 601 11,581
-------- -------- ------ ------ ------ -------
Totals $ 27,756 $ 22,907 $2,739 $2,588 $ 690 $21,433
======== ======== ====== ====== ====== =======
All Other Compensation-1998
401(k) Employer Contributions $ 5,675 $ 7,647 $ -- $ -- $ -- $ --
Life Insurance and Disability Premiums 4,621 15,446 -- -- -- --
Medical, Dental and Vision 15,046 14,245 -- -- -- --
Board of Directors Meetings 2,500 2,500 -- -- -- --
-------- -------- ------ ------ ------ -------
Totals $ 27,842 $ 39,838 $ -- $ -- $ -- $ --
======== ======== ====== ====== ====== =======
All Other Compensation-1997
401(k) Employer Contributions $ 5,550 $ 6,698 $ -- $ -- $ -- $ --
Life Insurance Premiums 1,920 13,990 -- -- -- --
Medical, Dental and Vision 10,233 15,750 -- -- -- --
Board of Directors Meetings 1,000 1,000 -- -- -- --
-------- -------- ------ ------ ------ -------
Totals $ 18,703 $ 37,438 $ -- $ -- $ -- $ --
======== ======== ====== ====== ====== =======
</TABLE>
OPTION GRANTS
The following table contains information concerning the stock option
grants to the Company's named executive officers that were made for the fiscal
year ended June 30, 1999:
6
<PAGE> 10
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
Potential Realizable
Value at
Assumed Annual Rate
Number of Percent of of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Exercise or Option Term(2)
Options Employees in Base Price Expire -------------------
Granted(#) Fiscal Year ($/Share)(1) Date 5%($) 10%($)
----------- ------------- ------------ ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
R. David Lough 30,000 42.86% $3.78 May 10, 2004 $31,330 $69,232
Douglas E. Flaker 20,000 28.57% $3.78 May 10, 2004 $20,887 $46,155
David K. Shunick 20,000 28.57% $3.78 May 10, 2004 $20,887 $46,155
------ ------
Total 70,000 100.00%
</TABLE>
(1) The options granted to the named officers were granted under the Company's
1992 Incentive Stock Option Plan on May 10, 1999 at the fair market value
price on that date of $3.78. The following restrictions apply to the
options granted: (a) the recipient must be employed with the Company on a
full time basis on the date of exercise; (b) the recipient may not be in
default of any condition of any written employment agreement; (c) the
recipient must be an officer of the Company on the date of exercise; and
(d) one-third of the options granted are exercisable on each of the three
(3) anniversaries of the date of grant of the option.
(2) The potential realizable value of each grant of options has been
calculated, pursuant to the regulations promulgated by the Securities and
Exchange Commission (the "SEC"), assuming the market price of the Common
Stock appreciates in value from the date of grant to the end of the option
term at the annualized rates of 5% and 10%, respectively. These numbers are
calculated based on the requirements promulgated by the SEC and do not
reflect the Company's estimates of future stock price growth. Unless the
market price of the Common Stock does in fact appreciate over the option
term, no value will be realized from the option grants made to the
executive officers.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning option exercises
and option holdings under the 1992 Incentive Stock Option Plan, the 1992
Nonqualified Stock Option Plan and the 1994 Nonqualified Stock Option Plan for
the year ended June 30, 1999, with respect to the Company's named executive
officers:
7
<PAGE> 11
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1999 AND FISCAL YEAR END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Securities Underlying In-the-Money
Shares Unexercised Options/SARs Options/SARs at Fiscal
Acquired on Value at Fiscal Year-End(#) Year-End($)(1)
Name Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
1992 PLANS
Mark A. LeDoux 60,000 $325,030 22,500 / 7,500 -- / --
William P. Spencer 24,000 265,707 -- / -- -- / --
R. David Lough -- -- -- / 30,000 -- / --
Douglas E. Flaker -- -- -- / 20,000 -- / --
David K. Shunick -- -- -- / 20,000 -- / --
John A. Wise 2,888 26,353 33,750 / 11,250 -- / --
1994 PLAN
Mark A. LeDoux -- -- 100,000 / -- -- / --
John A. Wise -- -- 60,000 / -- -- / --
</TABLE>
(1) The closing price of the Company's common stock at June 30, 1999, as quoted
on the National Market System of the Nasdaq Stock Market, was $3.438.
EMPLOYMENT AGREEMENTS
During 1999, the Company had employment agreements with Mark A. LeDoux,
R. David Lough, Douglas E. Flaker, David K. Shunick and John A. Wise. In
addition, Marie A. LeDoux acts as Secretary of the Company. Her employment as
Secretary is not reflected in a written employment agreement. In her capacity as
Secretary of the Company, Mrs. LeDoux receives compensation in the amount of
$24,000 per year.
Mr. LeDoux's 1999 employment agreement provided for an annual salary of
$208,000. The agreement was effective October 1, 1998 and had a term of 12
months. The agreement also provided for automobile expense reimbursement of
$1,500 per month. On July 6, 1999, the Board of Directors of the Company
increased Mr. LeDoux's base annual salary to $260,000. The Company has entered
into a new employment agreement with Mr. LeDoux for the period October 1, 1999
through September 30, 2000. In the event Mr. LeDoux's employment is terminated
without cause, he would be entitled to severance pay equal to one (1) year's
compensation.
Mr. Lough's 1999 employment agreement provided for a monthly salary of
$12,500. The agreement was effective December 14, 1998 and expired September 30,
1999. The agreement also provided for automobile expense reimbursement of $1,500
per month and a one-time obligation to pay direct expenses of moving personal
property and reimbursing additional relocation expenses in the amount of
$20,000. The Company has entered into a new employment agreement with Mr. Lough
for the period October 1, 1999 through September 30, 2000. The new agreement
provides for an annual salary of $150,000 and automobile expense reimbursement
of $1,500 per month. In the event Mr. Lough's employment is terminated without
8
<PAGE> 12
cause, he would be entitled to severance pay of between two and 12 month's
compensation, depending upon the length of time elapsed since commencement of
his employment.
Mr. Flaker's 1999 employment agreement provided for a monthly salary
equal to $8,333 in 1999. The agreement was effective December 14, 1998 and
expired September 30, 1999. The agreement also provided for automobile expense
reimbursement of $1,500 per month. The Company has entered into a new employment
agreement with Mr. Flaker for the period October 1, 1999 through September 30,
2000. The new agreement provides for an annual salary of $115,000 and a monthly
automobile expense reimbursement of $1,500. In the event Mr. Flaker's employment
is terminated without cause, he would be entitled to severance pay of between
two and 12 month's compensation, depending upon the length of time elapsed since
commencement of his employment.
Mr. Shunick's 1999 employment agreement provided for a monthly salary of
$10,417. The agreement was effective February 15, 1999 and expired September 30,
1999. The agreement also provided for automobile expense reimbursement of $750
per month and a one-time obligation to pay direct expenses of moving personal
property and reimbursing additional relocation expenses in the amount of
$15,000. The Company has entered into a new employment agreement with Mr.
Shunick for the period October 1, 1999 through September 30, 2000. The new
agreement provided for an annual salary of $125,000 and a monthly automobile
expense reimbursement of $750. In the event Mr. Shunick's employment is
terminated without cause, he would be entitled to severance pay of between two
and 12 month's compensation, depending upon the length of time elapsed since
commencement of his employment.
Mr. Wise's 1999 employment agreement provided for an annual salary of
$110,000. The agreement is effective October 1, 1998 and had a term of 12
months. The agreement also provided for automobile expense reimbursement of
$1,500 per month. The Company has entered into a new employment agreement for
the period October 1, 1999 through September 30, 2000. The new agreement
provides for an annual salary of $140,000 and a monthly automobile expense
reimbursement of $1,500. In the event Mr. Wise's employment is terminated
without cause, he would be entitled to severance pay equal to one year's
compensation.
BONUS PLAN
The Human Resources Committee is working on the creation of an Executive
Performance Bonus Plan for certain employees of the Company, and anticipates
such plan may be established during the fiscal year 2000. There were no bonus
plans in effect at June 30, 1999.
401(k) PLAN
The Natural Alternatives Partnership for Profits Plan (the "401(k)
Plan") is considered a qualified plan under Section 401(k) of the Internal
Revenue Code (the "Code"). All employees of the Company with twelve months and
at least one thousand hours of service during such twelve month period are
eligible to participate in the 401(k) Plan. The 401(k) Plan provides for
employee contributions of up to 15% of compensation. Employer contributions are
determined by the Board in its discretion. The Company may match up to 100% of
each employee's contribution which does not exceed 5% of the employee's total
compensation. Employee contributions in the 401(k) Plan are 100% vested.
Participants become vested in employer contributions at the rate of 331/3% per
year until fully vested. The Company contributed to the 401(k) Plan and expensed
$167,218, $146,277 and $114,206, in 1999, 1998 and 1997, respectively.
9
<PAGE> 13
STOCK OPTION PLANS
The Company maintains two stock option plans: the 1992 Incentive Stock
Option Plan (the "Incentive Plan"), which was approved by the stockholders of
the Company at its Annual Meeting of Stockholders on June 5, 1992, and the 1994
Nonqualified Stock Option Plan (the "1994 Nonqualified Plan"), which was
approved by the Board of Directors on December 9, 1994 and by the stockholders
of the Company at its Annual Meeting of Stockholders on May 10, 1996. The
Incentive Plan provides for the granting of "incentive stock options" as
described in Section 422 of the Internal Revenue Code of 1986 (the "Code"). The
1994 Nonqualified Plan provides for the granting of nonqualified stock options
which are not intended to qualify under any provision of the Code. The Company
previously maintained a third stock option plan, the 1992 Nonqualified Stock
Option Plan, which was approved by the Stockholders of the Company at its Annual
Meeting of Stockholders on June 5, 1992. The 1992 Nonqualified Stock Option Plan
had all remaining outstanding options exercised during fiscal 1999.
On September 9, 1993, all options then authorized under the Incentive
Plan were granted with exercise price equal to the fair market value price of
$4.875 per share. On December 9, 1994, the Stockholders approved an amendment to
the Incentive Plan, increasing the number of common shares that may be granted
from 200,000 to 500,000.
On January 24, 1995, options for 500,000 shares under the 1994 Plan were
granted at the fair market value of $4.625 per share. On January 21, 1998,
options for 300,000 shares under the Incentive Plan were granted at the fair
market value of $10.50 per share. During fiscal 1999, 125,000 shares underlying
those options were forfeited by terminated employees. On May 10, 1999, options
for 70,000 shares under the Incentive Plan were granted at the fair market value
of $3.78 per share. During fiscal 1999, 188,250 shares under the Incentive Plan
were forfeited by terminated employees.
INCENTIVE PLAN
The purpose of the Incentive Plan is to promote the interests of the
Company by providing a method whereby key management personnel of the Company
responsible for the management, growth and financial success of the Company may
be offered incentives to encourage them to acquire a proprietary interest or to
increase their proprietary interest in the Company, and to remain in the employ
of the Company and its subsidiaries. The total number of shares issuable under
the Incentive Plan may not exceed 500,000 shares, subject to certain
adjustments.
The Incentive Plan is to be administered by either the Board of
Directors ("Board") or the Company's Human Resources Committee. Subject to the
express provisions of the Incentive Plan, the Board or the Human Resources
Committee will have complete authority to determine the employees to whom, and
the times at which options are to be granted, the number of shares to be subject
to each option, the option term and all other terms and conditions of an option.
The Board or the Human Resources Committee will also have the authority to
interpret the provisions in the Incentive Plan and to prescribe rules and
regulations for its orderly administration.
The exercise price of incentive stock options granted under the
Incentive Plan may not be less than 100% of the fair market value of the Common
Stock on the date of the option grant. With respect to any key employee who owns
stock representing more than 10% of the voting power of the outstanding capital
stock of the Company, the exercise price of any incentive stock option may not
be less than 110% of the fair market value of such shares at the time of grant
and the term of such option may not exceed five years. Each option granted under
the Incentive Plan will be exercisable at such time or times, during such
period, and
10
<PAGE> 14
for such number of share as is determined by the Board or the Human Resources
Committee and set forth in the instrument evidencing the option. No option
granted under the Incentive Plan shall have a term in excess of ten years from
the date of grant.
During the lifetime of the optionee, the option will be exercisable only
by the optionee and may not be assigned or transferred by the optionee other
than by will or the laws of descent or distribution. Should an optionee cease to
be an employee of the Company or its subsidiaries for any reason other than
death, then any outstanding option granted under the Incentive Plan will be
exercisable by the optionee only during the three month period following
cessation of employee status, and only to the extent of the number of shares for
which the option is exercisable at the time of such cessation of employee
status.
If the Company or its stockholders enter into an agreement to dispose of
all or substantially all of the assets or outstanding capital stock of the
Company by sale, merger, reorganization or liquidation, each option outstanding
will become exercisable during the 15 days immediately prior to the scheduled
consummation of such sale, merger, reorganization or liquidation with respect to
the full number of shares of the Company's Common Stock purchasable under such
option, unless the successor corporation or parent assumes or replaces the
outstanding options.
In the event any change is made to the outstanding shares of the
Company's Common Stock without the receipt of consideration by the Company, then
unless such change results in the termination of all outstanding options,
appropriate adjustments will be made to the maximum number of shares issuable
under the Incentive Plan and to the number of shares and the option price per
share of the stock subject to each outstanding option.
1994 NONQUALIFIED PLANS
The purpose of the 1994 Nonqualified Plan (the "Nonqualified Plan") is
to provide an incentive to eligible employees, consultants and officers, whose
present and potential contributions are important to the continued success of
the Company, the opportunity to acquire a proprietary interest in the Company.
The Nonqualified Plan also enables the Company to enlist and retain in its
employment qualified personnel for the successful conduct of its business.
Officers, consultants and other employees of the Company and its subsidiaries
whom the administrators deem to have the potential to contribute to the success
of the Company shall be eligible to receive options under the Nonqualified Plan.
The administrators of the Nonqualified Plan shall be either the Board of
the Company or a committee designated by the Board. The administrators have full
power to select, from among the officers, employees and consultants of the
Company eligible for options, the individuals to whom options will be granted,
and to determine the specific terms of each grant, subject to the provisions of
the Nonqualified Plan.
The exercise price for each share covered by the Nonqualified Plan will
be determined by the administrators, but will not be less than 100% of the fair
market value of a share of Common Stock of the Company on the date of grant of
such option. The term of each option will be fixed by the administrators of the
Nonqualified Plan. In addition, the administrators will determine the time or
times each option may be exercised. Options may be exercisable in installments,
and the exercisability of options may be accelerated by the administrators.
Options granted pursuant to the Nonqualified Plan are nontransferable by
their participants, other than by will or by the laws of descent or
distribution, and may be exercised during the lifetime of the participant only
by the participant. In the event of an optionee's termination of employment or
consulting
11
<PAGE> 15
relationship for any reason other than death or total and permanent disability,
an option may be thereafter exercised, to the extent it was exercisable at the
date of such termination, for such period of time as the administrator shall
determine at the time of grant, but only to the extent that the term of the
option has not expired.
Subject to the Nonqualified Plan's change in control provisions, in the
event of the sale of substantially all of the assets of the Company or the
merger of the Company with or into another corporation, each outstanding option
shall be assumed or substituted by such successor corporation or parent or
subsidiary of such successor corporation. The Nonqualified Plan also provides
that in the event of a change of control of the Company, certain acceleration
and valuation provisions shall apply, except as otherwise determined by the
Board at its discretion prior to the change of control.
In the event of any change in capitalization in the Company which
results in an increase or decrease in the number of outstanding shares of Common
Stock without receipt of consideration by the Company, an appropriate adjustment
shall be made in the number of shares which have been reserved for issuance
under the Nonqualified Plan and the price per share covered by each outstanding
option.
DEFINED BENEFIT PENSION PLAN
The Company sponsors a defined benefit pension plan (the "Plan"), which
provides retirement benefits to employees based generally on years of service
and compensation during the last five years before retirement. Effective June
21, 1999, the Company adopted an amendment to freeze benefit accruals and
admission of new participants into the Plan, resulting in the recognition of
$97,606 of net curtailment gains in 1999. The gains resulted from the net
decrease of the Company's benefit obligation. For the year ended June 30, 1999,
the estimated amortized portion of the unfunded estimated accrued liability for
prior service cost, using a 30-year funding period, amounted to $410,048. This
amount has been accrued in the current period. The Company's policy is to fund
the net pension cost accrued. However, the Company would not contribute an
amount less than the minimum funding requirements of the Employee Retirement
Income Security Act of 1974 or more than the maximum tax-deductible amount.
REPORT OF THE HUMAN RESOURCES COMMITTEE
The Human Resources Committee is a standing committee of the Board of
Directors of the Company and is composed entirely of outside directors. The
Human Resources Committee is responsible for adopting and evaluating the
effectiveness of compensation policies and programs for the Company and for
making recommendations regarding the appointment and the compensation of the
Company's executive and other officers to the full Board of Directors of the
Company.
The following report is submitted by the Human Resources Committee
members with respect to the executive compensation policies established by the
Human Resources Committee and compensation paid or awarded to executive and
other officers for fiscal year 1999.
COMPENSATION PHILOSOPHY AND OBJECTIVES
In adopting and evaluating the effectiveness of compensation programs
for executive officers, as well as other employees of the Company, the Human
Resources Committee is guided by three basic principles:
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<PAGE> 16
1. The Company must offer competitive salaries to be able to attract and
retain highly-qualified and experienced executives and other management
personnel.
2. Annual executive compensation in excess of base salaries should be
tied to the Company's performance.
3. The financial interest of the Company's senior executives should be
aligned with the financial interest of the stockholders, primarily through stock
option grants and other equity-based compensation programs which reward
executives for improvements in the long term value of the Company's Common
Stock.
SALARIES AND EMPLOYEE BENEFIT PROGRAMS
In order to retain executives and other key employees, and attract
well-qualified executives when the need arises, the Company strives to offer
salaries, health care and other employee benefit programs to its employees
comparable to those offered by competing businesses. In establishing salaries
for executive officers, the Human Resources Committee reviews the historical
performance of the executives and available information regarding prevailing
salaries and compensation programs offered by competing businesses. Another
factor which is considered in establishing salaries of executive officers is the
cost of living in Southern California where the Company is headquartered, as
such cost generally is higher than in other parts of the country.
The Committee believes the base salary and employee benefits of the
Company in 1999 were generally comparable to or lower than those offered by
comparable companies in Southern California.
STOCK OPTIONS AND EQUITY-BASED PROGRAMS
In order to align the financial interest of senior executives and other
key employees with those of the stockholders, the Company grants stock options
to purchase Common Stock of the Company to its senior executives and other key
employees on a periodic basis. Stock option grants reward senior executives and
other key employees for performance, which results in increases in the market
price of the Company's Common Stock, which directly benefits all stockholders.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
Mr. LeDoux, the Chief Executive Officer, is awarded a base salary and is
evaluated substantially in accordance with the foregoing policies. During fiscal
1999, Mr. LeDoux's base salary was $208,000. No incentive bonuses were issued in
1999. In determining Mr. LeDoux's base salary for fiscal year 1999, the Human
Resources Committee, in its discretion, made no change from the prior period. In
making the determination to increase Mr. LeDoux's base salary to $260,000
annually for the period October 1, 1999 through September 30, 2000, the
committee considered the base salary of CEO's in comparable companies, the
lesser number of recent and proposed option grants to Mr. LeDoux compared to
other executives, and Mr. LeDoux's role in implementing the Company's stated
strategic goals in the past twelve months, including but not limited to a
reorganization of management, reorganization of employee benefits and executive
compensation plan, creation of a new strategic plan, new marketing programs,
implementation of a new accounting system, and successful establishment of a
foreign subsidiary. No specific weight was
13
<PAGE> 17
assigned to these factors by the Human Resources Committee in determining the
amount of Mr. LeDoux's base salary.
Human Resources Committee
William R. Kellas
J. Scott Schmidt
Lee G. Weldon
The foregoing report and the Stockholder Return Performance Graph
hereinbelow are not "soliciting material," are not deemed filed with the SEC and
shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent the Company specifically incorporates this report by reference and
shall not otherwise be deemed filed under such Acts.
HUMAN RESOURCES COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Human Resources Committee for fiscal 1999
were William R. Kellas, Lee G. Weldon and J. Scott Schmidt There were no
interlocks or other relationships among the Company's executive officers and
directors that are required to be disclosed under applicable executive
compensation disclosure regulations.
14
<PAGE> 18
STOCKHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly performance of the
cumulative total stockholder return (change in stock price plus reinvested
dividends) on the Company's Common Stock with the total return of the Nasdaq US
Index and Nasdaq Pharmaceutical Companies for the period beginning June 30, 1994
and ending June 30, 1999. The comparisons in the graph are required by the SEC
and are not intended to forecast or be indicative of possible future performance
of the Company's Common Stock.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
6/30/94 6/30/95 6/30/96 6/30/97 6/30/98 6/30/99
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Natural Alternatives International, Inc. 100 71 109 87 229 39
Nasdaq US 100 133 171 209 275 392
Nasdaq Pharmaceuticals 100 133 196 1994 205 285
</TABLE>
Assumes a $100 investment on June 30, 1994 in each of the Company's
Common Stock, the securities comprising the Nasdaq US Index, and the securities
comprising the Nasdaq Pharmaceutical Companies.
15
<PAGE> 19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of September 30, 1999 by (i) each
director and nominee for director; (ii) each of the Company's executive officers
named in the Summary Compensation Table; (iii) all executive officers and
directors of the Company as a group; and (iv) each person who is known by the
Company to beneficially own more than 5% of the Company's Common Stock. Except
as otherwise indicated in the footnotes and subject to applicable community
property laws, to the Company's knowledge, the persons named in the table have
sole voting and investment power with respect to all shares of Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENT BENEFICIALLY
OWNED OWNED(1)
------------------- --------------------
<S> <C> <C>
Wellington Management Co. LLP(2) 582,800 9.9%
75 State Street
Boston, MA 02109
FMR Corp.(3) 346,400 5.98%
82 Devonshire Street
Boston, MA 02109
Kennedy Capital Management, Inc.(4) 335,800 5.7%
10829 Olive Blvd.
St. Louis, MO 63141
Wasatch Advisors, Inc.(5) 315,025 5.4%
150 Social Hall Avenue
Salt Lake City, UT 84111
Marie A. LeDoux(6) 1,017,301 16.99%
Mark A. LeDoux(7) 404,917 6.76%
John A. Wise(9) 118,250 1.99%
William R. Kellas(8) 29,500 .49%
Lee G. Weldon 43,880 .73%
R. David Lough 10,200 .17%
Douglas E. Flaker 5,900 .10%
David K. Shunick 4,000 .07%
All Directors and Officers 1,633,948 27.30%
as a Group (8 Persons)(5)
</TABLE>
(1) Shares of Common Stock which were not outstanding but which could be
acquired upon exercise of an option within 60 days from September 30, 1999
are considered outstanding for the purpose of computing the percentage of
outstanding shares beneficially owned. However, such shares are not
considered to be outstanding for any other purpose.
16
<PAGE> 20
(2) Based on its Schedule 13G dated February 8, 1999, wherein Wellington
Management Co. LLP ("Wellington") reported the beneficial ownership of
582,800 shares of the Company's Common Stock. Wellington reports that it
has shared voting power as to 507,800 of such shares, does not have sole
voting power as to any of such shares, and has shared dispositive power as
to all of such shares.
(3) Based on its Schedule 13G dated February 12, 1999 wherein FMR Corp. ("FMR")
reported the beneficial ownership of 346,400 shares of the Company's Common
Stock. FMR reports it has sole power to direct the vote of 230,800 of such
shares, does not have shared authority to vote any of such shares, and has
sole dispositive powers as to all of such shares.
(4) Based on its Schedule 13G dated February 9, 1999 wherein Kennedy Capital
Management, Inc. ("Kennedy") reported beneficial ownership of 335,800
shares of the Company's Common Stock. Kennedy reports it has sole voting
power as to 316,050 of such shares, does not have shared voting power as to
any of such shares and has sole dispositive power as to all of such shares.
(5) Based on its Schedule 13G/A dated February 12, 1999.
(6) Includes 10,000 shares which Mrs. LeDoux has the right to acquire upon
exercise of options exercisable within 60 days of September 30, 1999.
(7) Includes 800 shares held in the name of Mr. LeDoux's wife, Julie LeDoux and
8,000 shares held as custodian for his children and a niece. Also includes
122,500 shares which Mr. LeDoux has the right to acquire upon exercise of
options exercisable within 60 days of September 30, 1999.
(8) Includes 1,500 shares of common stock held in the name of Dr. Kellas' wife.
(9) Includes 93,750 shares which Mr. Wise has the right to acquire upon
exercise of options exercisable within 60 days of September 30, 1999.
There is no arrangement known by the Company, the operation of which may
at a subsequent date, result in a change of control of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997, the Company had sales of $14,812, in which the former
President and stockholder, William A. Toomey, was at that time a key employee
and beneficial owner of 1% of the stock of the Company. At June 30, 1997, the
amount receivable from Perfect Equation, Inc. was $775,302, which amount was
fully reserved because the Company had determined the account to be doubtful of
collection. The Company recovered $263,400 in the year ended June 30, 1998, and
$511,902 was written off in the year ended June 30, 1999.
The Company entered into an agreement with the father-in-law and
mother-in-law of the Chief Executive Officer of the Company in December, 1991,
which provides commissions on sales to a particular customer. The agreement will
expire in December, 2001. The commission equals 5% of sales, and is capped at
$25,000 per calendar quarter, effective January 1, 1993. Amounts paid under this
agreement were $100,000 for each of the years ended June 30, 1999, 1998 and
1997. There were no amounts remaining due and unpaid under the agreement at June
30, 1999 or 1998.
Included in notes receivable are notes with the Chief Executive Officer,
the Vice President of Science and Technology, the Vice President of Marketing,
and the Vice President of Operations. During fiscal 1999, the Company made 6%
interest-bearing loans, secured by Company Stock, for $20,000 each to
17
<PAGE> 21
the Vice President of Science and Technology, the Vice President of Marketing,
and the Vice President of Operations. The balances of these notes as of June 30,
including accrued interest, are shown below:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Chief Executive Officer $63,208 $84,685
Vice President of Science and Technology 79,036 52,538
Vice President of Marketing 20,143 --
Vice President of Operations 20,143 --
</TABLE>
In addition, during December, 1998, the Company made a 5 1/2%
interest-bearing loan to the Executive Vice President in the amount of $250,000.
The loan, including accrued interest, was repaid in February 1999.
During the year ended June 30, 1999, the Company made
non-interest-bearing loans to the Chairman of the Board and the former President
in the amount of $50,000 and $6,901, respectively. Amounts owed on these loans,
which are secured by proceeds from life insurance policies on their respective
lives, were $250,000 and $200,000 for the Chairman of the Board and $0 and
$82,815 for the former President at June 30, 1999 and 1998, respectively.
PROPOSAL 2
APPROVAL OF THE ADOPTION OF THE
NATURAL ALTERNATIVES INTERNATIONAL, INC.
1999 OMNIBUS EQUITY INCENTIVE PLAN (THE "1999 PLAN")
AND THE RESERVATION OF 500,000 SHARES
OF COMMON STOCK THEREUNDER
The 1999 Plan was adopted by the Board of Directors of the Company
effective May 10, 1999 subject to approval by the stockholders. The purpose of
the 1999 Plan is to promote the long-term success of the Company and the
creation of stockholder value by (a) encouraging Employees, Outside Directors
and Consultants to focus on critical long-range objectives, (b) encouraging the
attraction and retention of Employees, Outside Directors and Consultants with
exceptional qualifications and (c) linking Employees, Outside Directors and
Consultants directly to stockholder interests through increased stock ownership.
The Plan seeks to achieve this purpose by providing for awards in the form of
restricted shares, stock units, options (which may constitute incentive stock
options or nonstatutory stock options) and stock appreciation rights ("SAR").
The primary features of the 1999 Plan are summarized below. This summary
is qualified in its entirety by reference to the specific provisions of the 1999
Plan, the full text of which is set forth as Exhibit A to this Proxy Statement.
SHARES AVAILABLE FOR GRANTS
The shares of the Company's common stock issued pursuant to the 1999
Plan may be authorized but unissued shares or treasury shares. The aggregate
number of options, SARs, stock units and restricted shares awarded under the
1999 Plan shall not exceed (a) the shares reserved to the 1999 Plan by the Board
of Directors and approved by the stockholders plus (b) additional common shares
added by an annual increase
18
<PAGE> 22
provision contained in the 1999 Plan and by common shares again becoming subject
to the 1999 Plan through forfeitures, option expiration and similar events.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
Options may be granted under the 1999 Plan by the Board of Directors as
incentive stock options ("ISOs") intended to qualify for favorable tax treatment
under U.S. tax law, or as nonqualified stock options ("NSOs"). Stock
appreciation rights ("SARs") may be granted with respect to any options granted
under the 1999 Plan and may be exercised only when the underlying option is
exercisable. A SAR permits the holder to surrender an option or any portion
thereof and receive in exchange shares of common stock, cash or a combination
thereof, with an aggregate value equal to the excess of the fair market value of
one share of common stock over the exercise price specified in such option
multiplied by the number of shares covered by such option or portion thereof
which is to be exercised. The 1999 Plan requires that the exercise price of all
ISOs be equal or greater than the fair market value of the Company's common
stock on the date of grant of that option and that the exercise price of all
NSOs and SARs be equal or greater than eighty-five percent of the fair market
value of the Company's common stock on the date of grant of that option or SAR.
The term of any ISO or related SAR cannot exceed ten years from date of grant,
and the term of any NSO cannot exceed ten years and one month from date of
grant. Subject to the terms of the 1999 Plan and any additional restrictions
imposed at the time of grant, options and any related SARs will become
exercisable commencing as specified in the agreement evidencing the option or
SAR.
Subject to such rules as the Human Resources Committee of the Board of
Directors of the Company (the "Committee") may impose, the exercise price of an
option may be paid in cash, in shares of the Company's common stock already
owned by the optionee, with a combination of cash and shares, by effecting a
"cashless exercise" if so approved by the Board of Directors of the Company, or
with such other consideration as shall be approved by the Board of Directors of
the Company. A "cashless exercise" is one or more techniques which allow the
optionee to exercise stock options without cash either through the assistance of
a broker by either a simultaneous exercise and sale, or a broker loan, or by
surrendering shares underlying the option with a fair market value equal to the
exercise price of the shares purchased upon exercise. The "cashless exercise"
technique does not increase the compensation the option provides, and the
optionee receives the same economic benefit as he or she would upon exercise of
a stock appreciation right issued in tandem with the option.
The 1999 Plan provides for the automatic grant of NSOs to outside
Directors. Upon first becoming a member of the Board of Directors of the
Company, each outside Director receives a NSO to purchase 10,000 common shares.
Thereafter, each outside Director receives an additional NSO covering 10,000
common shares each year he or she continues serving on the Board of Directors of
the Company.
In the case of a Change in Control of the Company, as defined in the
1999 Plan, options granted pursuant to the 1999 Plan may become fully
exercisable as to all optioned shares from and after the date of such Change in
Control, in the discretion of the Committee or as may otherwise be provided in
the grantee's option agreement.
RESTRICTED STOCK AWARDS TO EMPLOYEES
The Committee or the Board of Directors may grant shares of common stock
to 1999 Plan participants in such amounts, and subject to such restrictions
("Restricted Stock") and additional terms and conditions, if any, as the
Committee, in its sole discretion, shall determine, consistent with the
provisions of the 1999 Plan. As a condition to any award of Restricted Stock,
the Committee may require a participant
19
<PAGE> 23
to pay an amount equal to, or in excess of, the par value of the shares of
Restricted Stock or common stock awarded to him or her.
Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered during a "Restricted Period," which in the case of grants
to employees shall not be less than one year from the date of grant. The
Restricted Period with respect to any outstanding shares of Restricted Stock
awarded to employees may be reduced by the Committee at any time, but in no
event shall the Restricted Period be less than one year. Except for such
restrictions, the employee as the owner of such stock, shall have all of the
rights of a stockholder including, but not limited to, the right to vote such
stock and to receive dividends thereon as and when paid.
In the event an employee's employment is terminated for any reason, an
employee's Restricted Stock will be subject to repurchase by the Company at the
original purchase price; provided, however, that the Committee or the Board of
Directors may limit such repurchase right in its sole discretion. At the end of
the Restricted Period all shares of Restricted Stock shall be transferred free
and clear of all restrictions to the employee. In the case of a Change in
Control of the Company as defined in the 1999 Plan, an employee may receive his
or her Restricted Stock free and clear of all restrictions in the discretion of
the Committee or as may otherwise be provided pursuant to the employee's
Restricted Stock award.
STOCK UNIT AWARDS
The Committee or the Board of Directors may grant stock unit awards
("Stock Units") consisting of bookkeeping entries equivalent to the ownership of
shares of common stock, at such times and in such amounts as it may determine.
Such Stock Units shall be subject to all applicable terms of the 1999 Plan and
such additional terms and conditions, if any, as the Committee or the Board of
Directors may determine from time to time. The provisions of the various
agreements governing Stock Units need not be identical. No cash payment is
required of any recipient of an award of Stock Units.
Stock Units have no voting rights associated with them. Stock Units may
be entitled to dividend equivalent rights, in the discretion of the Committee or
the Board of Directors. Dividend equivalents may be converted into additional
Stock Units, may be settled in cash or may be settled in common stock or a
combination of cash and common stock. Settlement of the Stock Units themselves
may also be made in the form of cash, common stock or a combination of both. The
method for converting Stock Units to cash shall be determined by the Committee
or the Board of Directors, in its discretion.
Any Stock Units which are settled or become payable following the death
of the recipient shall be paid or distributed to the recipient's designated
beneficiary. If no beneficiary has been designated payment or distribution shall
be made to the recipient's estate. The recipient of any Stock Units shall have
no rights, except those of a general, unsecured creditor of the Company. All
such rights shall also be subject to the terms of any applicable Stock Unit
agreement.
PLAN ADMINISTRATION
The 1999 Plan will be administered by the Committee or the Board of
Directors. The Board of Directors of the Company will have the authority to
amend the 1999 Plan as it deems advisable; however no such amendment will,
without authorization and approval of stockholders: (i) increase the aggregate
number of shares available for the granting of awards under the 1999 Plan except
in the event of any stock split, reverse stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination or exchange
of shares, split-up, split-off, spin-off, liquidation or other similar corporate
change; (ii) change
20
<PAGE> 24
the manner of determining the minimum exercise prices other than to change the
manner of determining the fair market value of the common stock; and (iii)
extend the period during which awards may be granted or exercised.
Subject to the terms of the 1999 Plan, the Committee or the Board of
Directors will select the individuals to whom options, SARs, Restricted Stock
and Stock Unit awards will be granted, determining the number of shares subject
to each option award and SAR, prescribe the terms and conditions of each option
award, SAR and Stock Unit award granted under the 1999 Plan, and make any other
determination necessary or advisable for administration of the 1999 Plan.
Shares subject to options, related SARs or Stock Units which lapse
without having been exercised become available for new grants under the 1999
Plan. Any Restricted Stock or common stock issued upon exercise of the options
which is subsequently forfeited shall be available again for such new grants. To
the extent SARs are exercised or Stock Units settled, only the shares actually
issued will be charged against the maximum number of shares authorized under the
1999 Plan.
FEDERAL TAX CONSEQUENCES
The following is a general description of the federal income tax
consequences of Awards made under the Plan. State and local tax treatment, which
is not discussed below, may vary from the federal income tax treatment.
INCENTIVE STOCK OPTIONS. The recipient will not recognize taxable income
at the time an ISO is either granted or exercised. However, the amount by which
the fair market value at the time of exercise of the purchased shares exceeds
the exercise price paid for those shares will constitute an adjustment to the
recipient's income for purposes of the alternative minimum tax. Generally,
recipients will recognize income in the year in which they make a disposition of
the shares purchased under an ISO. A disposition of shares purchased under an
ISO will occur when the recipient transfers legal title to those shares, whether
by sale, exchange or gift, or delivers such shares in payment of the exercise
price of any other ISO prior to the satisfaction of the ISO holding periods.
However, a disposition will not occur as a result of any of the following
transactions: a transfer to spouse, a transfer into joint ownership with right
of survivorship, a pledge of the shares as collateral for a loan, a transfer by
bequest or inheritance upon death, or certain tax-free exchanges of the shares
permitted under the Code.
The federal income tax liability resulting from disposition of shares
purchased under an ISO will depend upon whether the holder makes a qualifying or
disqualifying disposition of the shares. A qualifying disposition will occur if
the sale or other disposition of the shares takes place more than two years
after the date the Incentive Option was granted and more than one year after the
date the option was exercised. A disqualifying disposition is any sale or other
disposition made before both of these minimum holding periods are satisfied.
A qualifying disposition results in recognition of a capital gain equal
to the excess of (a) the amount realized upon the sale or disposition over (b)
the exercise price paid for the shares. The capital gain will be "long-term" if
the recipient held the shares more than 18 months and "mid-term" if the
recipient held the shares more than one year but not more than 18 months. In
general, the maximum federal income tax rate on long-term capital gains is 20%,
and the maximum rate on mid-term capital gains is 28%. The recipient will
recognize a capital loss if the amount realized is lower than the exercise price
paid for the shares. No deduction is allowable to the Company in the event of a
qualifying disposition.
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Normally, when shares purchased under an Incentive Option are made the
subject of a disqualifying disposition, the optionee will recognize ordinary
income at the time of the disposition in an amount equal to the excess of (a)
the fair market value of the shares on the exercise date over (b) the exercise
price paid for those shares. If the disqualifying disposition is effected by
means of an arm's length sale or exchange with an unrelated party, the ordinary
income will be limited to the amount by which the amount realized upon the
disposition of the shares exceeds the exercise price paid for the shares.
The amount of the optionee's disqualifying disposition income will be
reported by the Company on the optionee's W-2 wage statement for the year of
disposition, and any applicable withholding taxes that arise in connection with
the disqualifying disposition will be deducted from the optionee's wages or
otherwise collected from the optionee. The disqualifying disposition income is
deductible by the Company.
Any additional gain recognized upon the disqualifying disposition will
be capital gain. The capital gain will be long-term if the holder held the
shares more than 12 months, and short-term if held not more than one year. The
maximum federal income tax rate on long-term capital gains generally is 20%.
Short-term capital gains generally are taxed at the same rate as ordinary
income.
NONQUALIFIED STOCK OPTIONS. The recipient of a nonqualified stock option
under the 1999 Plan will not recognize any taxable income at the time the option
is granted.
Upon exercise, the option holder will generally recognize ordinary
taxable income in an amount equal to the excess of the fair market value of the
shares of Common Stock received on the date of exercise over the option exercise
price. Upon a subsequent sale of the shares of Common Stock, long-term, mid-term
or short-term capital gain or loss (depending upon the holding period) will
generally be recognized equal to the excess of the difference between the amount
realized over the fair market value of the shares on the date of exercise.
The Company will generally be entitled to a compensation deduction for
Federal income tax purposes in an amount equal to the taxable income recognized
by the option holder, provided the Company reports the income on a timely
provided and filed Form W-2 or 1099, whichever is applicable.
CASHLESS EXERCISE. An option holder who pays the option exercise price,
in whole or in part, delivering shares of Common Stock already owned by him or
her will generally recognize no gain or loss for Federal income tax purposes on
the shares surrendered, but otherwise will be taxed according to the rules
described above. As noted above, if shares received on the exercise of an
incentive stock option are used within the time periods that apply to a
disqualifying disposition, then the rules for disqualifying dispositions,
described above, will apply. To the extent the shares acquired upon exercises
are equal in number to the shares surrendered, the basis and holding period for
capital gains purposes will be the same as the shares surrendered. The basis of
such shares shall be increased by the income, if any, recognized in the case of
any applicable disqualifying disposition. The basis of the shares received in
excess of the shares surrendered upon exercise will be equal to the fair market
value of the shares on the date of exercise, and the holding period for the
shares received will commence on that date.
The Board of Directors elected to reserve for the 1999 Plan for issuance
thereunder, 500,000 shares of the Company's Common Stock, subject to the
approval of the stockholders. The reservation of such Common Stock will enable
the 1999 Plan to promote the long-term success of the Company and the creation
of stockholder value as intended by the Board of Directors and the stockholders,
assuming stockholder ratification of the adoption of the 1999 Plan.
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<PAGE> 26
REQUIRED VOTE
The affirmative vote of a majority of the holders of Common Stock voting
on the proposal is required for adoption of this Proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
PROPOSAL 3
APPROVAL OF THE ADOPTION OF THE
NATURAL ALTERNATIVES INTERNATIONAL, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN AND
THE RESERVATION OF 150,000 SHARES OF
COMMON STOCK THEREUNDER
The Company's 1999 Employee Stock Purchase Plan (the "Purchase Plan"),
which was adopted by the Board in October, 1999, provides employees of the
Company with the opportunity to purchase shares of Common Stock through payroll
deductions. A total of 150,000 shares of Common Stock have been reserved for
issuance under the Purchase Plan, plus an annual increase to be added on the
first day of the Company's fiscal year beginning July 1, 2000 equal to the
lesser of: (i) 150,000 shares; (ii) 2% of the total number of outstanding shares
of stock on the last trading day of the prior fiscal year; or (iii) such amount
as determined by the Board. The Company is requesting shareholder approval of
the Purchase Plan in this Proxy Statement.
The principal features of the Purchase Plan are summarized below. This
summary is qualified in its entirety by reference to the provisions of the
Purchase Plan, the full text of which is set forth as Exhibit B to this Proxy
Statement.
PURPOSE
The purpose of the Purchase Plan is to assist the Company in retaining
the services of its employees, to secure and retain the services of the new
employees, and to provide incentives for such persons to exert maximum efforts
for the success of the Company.
The rights to purchase Common Stock granted under the Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan" as
that term is defined in Section 423(b) of the Code.
ADMINISTRATION
The Purchase Plan is administered by the Board, which has the final
power to construe and interpret the Purchase Plan and the rights granted under
it. The Board has the power, subject to the provisions of the Purchase Plan, to
determine when and how rights to purchase Common Stock of the Company will be
granted, the provisions of each offering of such rights (which need not be
identical), and whether any parent or subsidiary of the Company shall be
eligible to participate in such plan. The Board is authorized to delegate
administration of the Purchase Plan to a committee composed of one or more
non-employee members of the Board. The Board has delegated administration of the
Purchase Plan to the Human Resources Committee of the Board. As used herein with
respect to the Purchase Plan, the term "Board" refers to the Human Resources
Committee as well as to the Board of Directors.
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ELIGIBILITY
Any person who is customarily employed at least 20 hours per week and
five months per calendar year by the Company (or by any parent or subsidiary of
the Company designated from time to time by the Board) on the first day of an
offering period is eligible to participate in that offering under the Purchase
Plan, provided such employee has been in the continuous employ of the Company
for three months.
Notwithstanding the foregoing, no employee is eligible for the grant of
any rights under the Purchase Plan if, immediately after such grant, the
employee would own, directly or indirectly, stock possessing 5% or more of the
total combined voting power or value of all classes of stock of the Company or
any affiliate of the Company (including any stock which such employee may
purchase under all outstanding rights and options), nor will any employee be
granted rights that would permit him to buy more than $25,000 worth of stock
(determined at the fair market value of the shares at the time such rights are
granted) under all employee stock purchase plans of the Company in any calendar
year.
OFFERING DATES
The Purchase Plan is implemented by accumulating payroll deductions of
participating employees generally during a six-month offering period, offering
periods thereunder to commence January 1 and July 1 of each year, provided,
however, the first two offering periods shall consist of three-month periods,
with the first offering period commencing on January 1, 2000 and ending on March
31, 2000, and the second offering period commencing on April 1, 2000 and ending
on June 30, 2000. The Board has the power to alter the duration of the offering
periods without stockholder approval, if such change is announced at least 5
days prior to the scheduled beginning of the first offering period to be
affected.
PURCHASE PRICE
The purchase price per share at which shares are sold in an offering
under the Purchase Plan is the lower of 85% of the fair market value of a share
of Common Stock on the date of commencement of the offering period or 85% of the
fair market value of a share of stock on the last day of the offering period.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions
over the offering period. The deductions may not exceed 15% of a participant's
compensation. A participant may discontinue his or her participation in the
Purchase Plan, and may decrease or increase the rate of payroll deductions
during an offering period, subject to the minimum and maximum percentage payroll
deduction requirements.
PURCHASE OF STOCK
By executing an agreement to participate in the Purchase Plan, the
employee is entitled to purchase shares under such plan. In connection with
offerings made under the Purchase Plan, the Board specifies a maximum number of
shares any employee may be granted the right to purchase and the maximum
aggregate number of shares which may be purchased pursuant to such offering by
all participants. If the aggregate number of shares to be purchased upon
exercise of rights granted in the offering exceeds the maximum aggregate number
of shares available for purchase, the Board will make a pro rata allocation of
shares available in a uniform and equitable manner. Unless the employee's
participation is discontinued, shares automatically are purchased upon the
designated purchase date or dates during the offering at the applicable price.
See "Withdrawal" below.
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DURATION AND AMENDMENT
The Board may suspend, terminate or amend the Purchase Plan at any time.
Any amendment of the Purchase Plan must be approved by the stockholders within
12 months before or after its adoption by the Board if the amendment would (i)
increase the number of shares of Common Stock reserved for issuance under the
Purchase Plan except as provided for, (ii) modify the requirements relating to
eligibility for participation in the Purchase Plan, or (iii) modify any other
provision of the Purchase Plan if such modification requires stockholder
approval.
WITHDRAWAL; TERMINATION OF EMPLOYMENT
A participant's interest in a given offering period may be terminated by
signing and delivering to the Company a notice of withdrawal from the Purchase
Plan. Such withdrawal may be elected at any time prior to the end of the
applicable offering period. A participant's withdrawal from one offering period
does not have any effect upon such participant's eligibility to participate in
subsequent offerings. Upon withdrawal from an offering period, all payroll
deductions which have been credited to the participant's account prior to the
notice of withdrawal will be returned to the participant without interest.
Termination of a participant's employment for any reason, including
retirement or death, or the failure of the participant to remain in the
continuous employ of the Company for at least 20 hours per week during the
applicable offering period, cancels the participant's participation in the
Purchase Plan. In such event, the payroll deductions credited to the
participant's account will be returned to such participant or to his or her
beneficiaries without interest.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain federal income tax consequences of the
purchase of shares of Common Stock under the Purchase Plan is based on the laws
and regulations in effect as of the date of this Proxy Statement and does not
purport to be a complete statement of the law in this area. Furthermore, the
discussion below does not address the tax consequences under state and/or local
tax laws, and such tax laws may not correspond to the federal tax treatment
described herein.
The Purchase Plan is intended to qualify as an employee stock purchase
plan under Section 423 of the Code. If certain employee requirements are
satisfied, an employee who is granted a right, or "option," to purchase stock
under a plan meeting the requirements of Code Section 423 will not be subject to
federal income tax, and the Company will not be entitled to any deduction on
either the grant or the exercise of such right.
If the employee makes no disposition of the stock acquired pursuant to
the exercise of such right within two years after the date of the grant of such
stock purchase right (generally, the commencement date of the six-month offering
period, hereinafter referred to as the "Offering Date") or within one year after
the transfer of the stock to the employee pursuant to the exercise of such
right, any gain or loss on the subsequent disposition of the stock generally
will be treated as long-term capital gain or loss, except to the extent that the
employee's purchase price was less than 100% of the fair market value of the
stock on the Offering Date, and no deduction will be available to the Company at
the time of such disposition. If the employee's purchase price for the stock was
less than 100% of the fair market value of the stock on the Offering Date, the
employee will be required to include in his or her gross income as ordinary
income for the year of the disposition (or, if earlier, at the time of his or
her death) an amount equal to the lesser of (i) the excess of the fair market
value of the stock on the Offering Date over the purchase price that the
employee would have
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<PAGE> 29
been required to pay if the purchase price had been determined as of the
Offering Date, or (ii) the excess of the fair market value of the stock at the
time of the disposition or death over the amount paid for the stock. No
deduction will be available to the Company with respect to any such ordinary
income recognized by the employee.
Any sale or other disposition of stock acquired under a right granted
under the Purchase Plan at any time within (i) two years after the Offering Date
or (ii) one year after the transfer of the shares to the employee pursuant to
the exercise of such right (other than a disposition by reason of death of the
employee or certain dispositions pursuant to insolvency proceedings) generally
will be treated as a "disqualifying disposition." Upon a disqualifying
disposition, the employee generally will recognize ordinary compensation income
in an amount equal to the difference between the purchase price and the fair
market value of the stock at the date the option is exercised. Any gain in
excess of such ordinary income amount generally will be short-term or long-term
capital gain, depending on the employee's holding period. The Company generally
will be entitled to a deduction in an amount equal to the amount of ordinary
income recognized by the employee by reason of a disqualifying disposition.
The Board elected to reserve to the 1999 Purchase Plan for issuance
thereunder, 150,000 shares of the Company's Common Stock, subject to the
approval of the stockholders. The reservation of such Common Stock will enable
the 1999 Purchase Plan to promote the long-term success of the Company and the
creation of stockholder value as intended by the Board and the stockholders,
assuming stockholder ratification of the adoption of the 1999 Purchase Plan.
REQUIRED VOTE
The affirmative vote of a majority of the holders of Common Stock voting
on the proposal is required for adoption of this Proposal 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3.
PROPOSAL 4
SELECTION OF AUDITORS
Subject to stockholder approval at the Annual Meeting, the Board has
selected KPMG LLP to continue as the Company's independent auditors for the
fiscal year ending June 30, 2000. A representative of KPMG LLP is expected to be
present at the Annual Meeting.
Stockholder ratification of the selection of KPMG LLP as the Company's
independent auditors is not required by the Company's Bylaws or otherwise.
However, the Board is submitting the selection of KPMG LLP to the stockholders
for ratification as a matter of good corporate practice. If the stockholders
fail to ratify the selection, the Board will reconsider whether or not to retain
that firm. Even if the selection is ratified, the Board in its discretion may
direct the appointment of a different independent accounting firm at any time
during the year if the Board determines that such a change would be in the best
interests of the Company and its stockholders.
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REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares
represented and voting at the meeting will be required to ratify the selection
of KPMG LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 4.
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STOCKHOLDERS' PROPOSALS
Under Regulation Section 240.14a-5 adopted pursuant to Section 14(a) of
the Securities Exchange Act of 1934, stockholders who intend to submit proposals
at the 2000 Annual Meeting must submit such proposals to the Company no later
than July 1, 2000 in order for them to be included in the Proxy Statement and
the form of Proxy to be distributed by the Board in connection with that
meeting. If the 2000 Annual Meeting is held on a date which is not within 30
days of December 6, then such proposals must be submitted a reasonable time
before the Company begins to print and mail its proxy materials. If a
stockholder wishes to have a proposal considered at the 2000 Annual Meeting but
does not utilize the process set forth in Regulation Section 240.14a-5, the
Company's bylaws control the timely filing of such proposals. Under the
Company's bylaws, a stockholder proposal is not timely unless delivered to or
mailed to the Secretary of the Company and received at the executive offices of
the Company not less than thirty (30) days nor more than sixty (60) days prior
to the meeting as originally scheduled. In the event less than forty (40) days
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be made timely must be received by
the Company not later than the close of business on the tenth day following the
day on which notice of the date of the annual meeting was made or publicly
disclosed. It is recommended that stockholders submitting proposals or notices
of proposals direct them to the Secretary and to the Chief Financial Officer of
the Company and utilize Certified Mail-Return Receipt Requested. Stockholders'
proposals should be submitted to Natural Alternatives International, Inc., 1185
Linda Vista Drive, Suite D, San Marcos, CA 92069, Attn: Chief Financial Officer.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and any persons holding more than 10% of the
Company's Common Stock, to file reports of ownership and changes in ownership
with the SEC. Executive officers, directors and greater than 10% stockholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. Specific due dates for these reports have been
established and the Company is required to identify in this Proxy Statement
those persons who failed to timely file these reports.
Based solely on its review of the copies of reporting forms received by
the Company, the Company believes that during the fiscal year ended June 30,
1999, all filing requirements under Section 16(a) were satisfied.
ANNUAL REPORTS
The Company's 1998 and 1999 Annual Reports which include audited
financial statements for the Company's fiscal years ended June 30, 1997, June
30, 1998 and June 30, 1999, respectively, are being mailed with this Proxy
Statement to stockholders of record on or about October 29, 1999.
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OTHER MATTERS
The Board knows of no other matters which will be brought before the
Annual Meeting. If any other matter is properly brought before the Annual
Meeting or any adjournment thereof, it is intended that the persons named in the
enclosed form of Proxy will vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
Marie A. LeDoux
Secretary
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<PAGE> 33
PROXY
NATURAL ALTERNATIVES INTERNATIONAL, INC.
A DELAWARE CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 6, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mark A. LeDoux and R. David Lough as proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and vote, as designated on the reverse hereof, all the shares of
Common Stock of Natural Alternatives International, Inc., held of record by the
undersigned on October 20, 1999, at the Annual Meeting of Stockholders to be
held on December 6, 1999, or any adjournment thereof.
(PLEASE DATE AND SIGN ON THE OTHER SIDE)
- FOLD AND DETACH HERE -
<PAGE> 34
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE TWO NOMINEES
FOR CLASS II DIRECTOR, AND FOR THE ELECTION OF THE ONE NOMINEE FOR CLASS III
DIRECTOR, AND FOR PROPOSALS 2, 3 AND 4.
Please mark your votes as indicated in this example. [X]
FOR WITHHOLD AUTHORITY
all nominees to vote for all nominees
listed below listed below
1. ELECTION OF DIRECTORS [ ] [ ]
CLASS II DIRECTORS
Nominees: Marie A. LeDoux
Lee G. Weldon
CLASS III DIRECTOR
Nominee: J. Scott Schmidt
FOR AGAINST ABSTAIN
2. To approve the adoption of the Natural Alternatives [ ] [ ] [ ]
International, Inc. 1999 Omnibus Equity Incentive
Plan, and to reserve 500,000 shares of common
stock of the Company to the Natural Alternatives
International, Inc. 1999 Omnibus Equity Incentive
Plan:
FOR AGAINST ABSTAIN
3. To approve the adoption of the Natural Alternatives [ ] [ ] [ ]
International, Inc. 1999 Employee Stock Purchase
Plan, and to reserve 150,000 shares of common stock
of the Company to the Natural Alternatives
International, Inc. 1999 Employee Stock Purchase
Plan:
FOR AGAINST ABSTAIN
4. To ratify the appointment of KPMG LLP as the [ ] [ ] [ ]
Company's independent auditors:
FOR AGAINST ABSTAIN
5. In their discretion, upon such other business [ ] [ ] [ ]
as may properly come before the meeting:
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY, USING
THE ENCLOSED ENVELOPE.
THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED AND FOR PROPOSALS 2, 3, 4 AND 5
IF NO DIRECTIONS ARE SPECIFIED.
Signature of Stockholder Signature of Joint Stockholder
------------- ------------
Dated: 1999
----------------
NOTE: If signing as attorney, executor, administrator, trustee or guardian,
please give full title as such, and, if signing for a corporation, give
your title. When shares are in the names of more than one person, each
should sign.
FOLD AND DETACH HERE
