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 by Rule 14a-6(e)(2)) |
x |
Definitive Proxy Statement |
¨ |
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: |
NATURAL ALTERNATIVES INTERNATIONAL, INC.
Notice of Annual Meeting of Stockholders
to be Held on January 10, 2003
An Annual Meeting of Stockholders of Natural Alternatives International, Inc., a Delaware corporation (the “Company”), will be held at the La Costa Resort and Spa, Costa del Mar Road, Carlsbad, California 92009 on Friday,
January 10, 2003, at 11:00 a.m. local time, for the following purposes:
1. Election of one (1) director of the Company in Class III to serve until the next Annual Meeting of Stockholders held to elect directors in Class III (and until the election and qualification of their
successors).
2. Confirmation of Ernst & Young LLP as the
Company’s independent auditors for the fiscal year ending June 30, 2003.
3. 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 November 22, 2002 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 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.
If you plan to attend the Annual Meeting of Stockholders, please bring with you a photo ID, as only stockholders of the Company will be admitted. If you own stock through a bank, broker or other holder of record, you will need
proof of ownership to attend the Meeting. A recent brokerage statement or a letter from your broker will be sufficient proof for this purpose.
By Order of the Board of Directors
Mark A. LeDoux
Chairman of the Board and Chief Executive Officer
San Marcos, California
December 9, 2002
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 meeting of Stockholders
(“Annual Meeting”) to be held on January 10, 2003, at 11:00 a.m., local time, or at any adjournment or postponement thereof. The Annual Meeting will be held at the La Costa Resort and Spa, Costa del Mar Road, Carlsbad, California 92009.
This Proxy Statement and the accompanying Proxy and annual report are first being mailed to stockholders on or about December 9, 2002.
Voting
Only stockholders of record at the close of business on November 22, 2002 will be
entitled to vote at the Annual Meeting. On November 22, 2002, there were approximately 5,804,267 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 that
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
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 Mellon 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, employees or agents 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 III DIRECTOR
Directors of the Company are elected to serve three-year terms. The Class III director to be elected at the Annual Meeting of stockholders to be held on January 10, 2003, will serve until his successor is elected and has qualified or
until his death, resignation or removal. The nominee for Class III director, J. Scott Schmidt, is currently a member of the Company’s Board of Directors (the “Board”) in Class III. Mr. Schmidt was elected a Class III director at the
meeting of stockholders held on December 6, 1999. The Class I directors on the Board, Mark A. LeDoux and Joe E. Davis, are serving terms that will expire at the next meeting of stockholders held to elect Class I directors. The sole Class II director
on the Board, Lee G. Weldon, is serving a term that will expire at the next meeting of stockholders held to elect Class II directors. The Board currently has a vacant Class II director seat. This seat was formerly held by Marie A. LeDoux, a founder
of the Company, who passed away in December 2001. The Board intends to fill the vacant Class II directorship but has not yet selected a candidate for the position.
Unless authority to do so is otherwise withheld, it is intended the shares represented by the enclosed Proxy will be voted for the election of J. Scott Schmidt as a Class
III director. Mr. Schmidt has agreed to serve if elected. In the event Mr. Schmidt 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 such other nominee as the Board may select.
Information About Nominee and Directors
Set forth below is information regarding the nominee for election as a director in Class III and the continuing directors in Class I and
Class II, 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 December 9, 2002, and the year in which each became a director of the
Company. There are no family relationships among any of the directors or executive officers of the Company.
| Name |
Age |
CLASS III
| J. Scott Schmidt |
65 |
Mr. Schmidt became a director of the Company in January 1999. Mr.
Schmidt is a management consultant specializing in communications, marketing, and mergers and acquisitions. Mr. Schmidt was Chief Executive Officer of Thompson Newspapers Corporation from 1992 to 1994. From 1991 to 1992, Mr. Schmidt was the
2
President, Publisher and Partner of American Collegiate Network, Inc., which was the publisher of the National College Newspaper. Mr. Schmidt was 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, prior thereto. Mr. Schmidt previously spent 27 years with Tribune Company of Chicago, eventually serving as Vice
President/News and Information for the entire corporation. Mr. Schmidt attended Bradley University and Northwestern University.
The Board of Directors recommends a vote FOR the Class III nominee listed above.
CLASS I
| Mark A. LeDoux |
48 |
Mr. LeDoux is Chairman of the Board of Directors, Chief Executive
Officer and Assistant Treasurer of the Company. Mr. LeDoux relinquished the title of President during 2001. 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 January 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 that 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, receiving a Juris Doctor degree.
| Joe E. Davis |
67 |
Mr. Davis was appointed a director of the Company in February 2000.
Mr. Davis has been a private investor for over ten years, and currently serves as a director of several public and privately held corporations, including BMC Industries, Inc., Wilshire Technologies, Inc., and Freymiller Trucking, Inc. Mr. Davis
previously served as Chairman of the Board of Linear Corporation from 1987 to 1988, and as President and Chief Executive Officer of BMC Industries, Inc. during 1985. From 1974 to 1982 Mr. Davis held the position of President and Chief Executive
Officer of National Health Enterprises, Inc. Mr. Davis graduated from the University of Texas with a B.S. in Chemistry and has an M.B.A. from the Harvard Graduate School of Business Administration.
CLASS II
| Lee G. Weldon |
63 |
Mr. Weldon has been a director of the Company since June of 1992.
He was the Chairman and Chief Executive Officer of Kal Healthway, Inc., a food supplement distributor that was the earliest significant customer of the Company, from 1978 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.
3
Board Committees and Meetings
During the fiscal year ended June 30, 2002, the Board held six (6) regular meetings. All directors then in office 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, 2002.
All
members of the Board hold office until the next meeting of stockholders held for the purpose of election of the directors in their class held on or about the expiration of their respective terms of office and 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, payable in arrears, for service during the prior year on the date of the meeting of stockholders held to elect Directors of their
Class, plus a fee of $1,000 for each Board and Committee meeting personally attended. Upon first becoming a member of the Board of Directors, each outside director receives a nonqualified stock option to purchase 10,000 common shares. Thereafter,
during each year an outside director serves on the Board of Directors, the outside director receives an additional nonqualified stock option covering 10,000 common shares which vests ratably over three years. Executive officers serve at the
discretion of the Board. The Board has an Audit Committee and a Human Resources Committee but does not have a Nominating Committee. The Human Resources Committee functions as the compensation committee.
The Audit Committee is composed of independent directors. The Audit Committee functions pursuant to a written charter adopted by the Board
during 2000. 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 Davis, Weldon and Schmidt. During fiscal year 2002, the Audit Committee met three (3) times.
Among other duties, 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 it determines advisable or as the Board may designate. The Human Resources Committee currently consists of directors Weldon and Schmidt. Messrs. Weldon and Schmidt are not officers or employees of the Company or any of its
subsidiaries. During fiscal year 2002, the Human Resources Committee met once.
4
EXECUTIVE OFFICERS
| Name |
Position |
Age |
First Year of Service | |||
| Mark A. LeDoux (1) |
Chairman of the Board of Directors, Chief Executive Officer and Assistant
Treasurer |
48 |
1986 | |||
| Randell Weaver (2) |
Chief Operating Officer and Chief Financial Officer |
44 |
2001 | |||
| John A. Wise (3) |
Chief Science Officer |
63 |
1987 | |||
| John R. Reaves, Jr. (4) |
Vice President-Finance |
36 |
2002 | |||
| Timothy E. Belanger (5) |
Senior Vice President-Marketing and Sales |
55 |
2002 | |||
| Mark E. Zimmerman (6) |
Vice President-Manufacturing |
44 |
2002 |
(1) |
Mark A. LeDoux. Information concerning Mr. LeDoux’s background and experience is set forth at page 3 above. |
(2) |
Randell Weaver was appointed Chief Financial Officer in September 2001 and Chief Operating Officer in August 2002. After four years in public accounting
with Pannell Kerr Forster, Mr. Weaver served as Chief Financial Officer of Microcomputer Memories, Inc. from 1984 to 1986. From 1986 to 1995, Mr. Weaver was the principal of Randell Weaver Consulting where he managed operational and financial
restructurings of troubled enterprises. From 1995 to 1998, Mr. Weaver was President and Chief Financial Officer, respectively, of two subsidiaries of Grupo Industrial Bimbo, S.A. engaged in the baking business. From 1999 to 2000, Mr. Weaver was
retained by the shareholders of Solutioneering, Inc. to assist in its bankruptcy reorganization. In 2000, Mr. Weaver joined CGM Group, LLC, a management consulting firm, as Managing Director. Mr. Weaver has a Bachelor of Science degree in Business
Administration from California State University, Northridge and a Master’s Degree in Spiritual Psychology from the University of Santa Monica. |
(3) |
John A. Wise joined the Company in 1992 and served as Director of Science and Technology and Vice President of Science and Technology until being
appointed to his current position in September 2001. From 1982 to 1986, Dr. Wise was Executive Vice President of Research and Development for United Sciences of America, Inc. Dr. Wise received a B.S. in Preventative Medicine and a B.A. in Zoology
from the University of Washington in 1963 and an M.S. in Microbiology from the University of Minnesota in 1967. He received his Ph.D. in Microbiology from Oregon State University in 1970. |
(4) |
John R. Reaves, Jr. joined the Company in May 2002. From 2000 to 2001 he was Chief Financial Officer of Neptune Networks, Inc., an enterprise established
to provide Internet service kiosks in areas of public accommodation. From 1998 to 2000 Mr. Reaves held the position Director of Finance and Operations, Southern California Market with LSG Sky Chefs, Inc., the world’s largest airline caterer.
Prior to 1998, Mr. Reaves was a Manager with Arthur Andersen LLP. |
(5) |
Timothy E. Belanger joined the Company in May 2002. Mr. Belanger was Vice President Marketing and Sales for Overhill Farms, Inc. from 2001 until joining
the Company. From 2000 to 2001 he was President of Sales Solutions, Inc. and from 1997 to 2000, he held the position of Vice President of Marketing and Sales with J.C. Garet, Inc. |
(6) |
Mark E. Zimmerman joined the Company in January, 2002. From 1998 to 2002, Mr. Zimmerman was a consultant with Gerald E. Dunn, Inc., a management
consulting firm. Prior thereto, Mr. Zimmerman was a principal with Zimmerman & Associates, a management consulting firm. |
5
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 ending June 30, 2002, 2001 and 2000 by each of
the five most highly compensated executive officers:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
| Name |
Year |
Salary |
Bonus |
Other (1) |
All Other Compensation |
|||||||||||
| Mark A. LeDoux |
2002 2001 2000 |
$ $ $ |
219,807 212,019 253,662 |
$ |
— 203 — |
$ |
— — 17,010 |
|
$ |
— — 28,779 |
| |||||
| Randell Weaver (2) |
2002 2001 2000 |
$ |
176,539 — — |
|
— — — |
|
— — — |
|
|
— — — |
| |||||
| John A. Wise |
2002 2001 2000 |
$ $ $ |
175,846 170,769 143,385 |
$ |
— 203 — |
$ |
— — 19,139 |
|
$ $
|
— 61,216 17,263 |
(3) | |||||
| Robert K. Clausen (4) |
2002 2001 2000 |
$ |
126,391 — — |
|
— — — |
$ |
36,254 — — |
(5) |
|
— — — |
| |||||
| R. David Lough (6) |
2002 2001 2000 |
$ $ $ |
110,597 162,308 150,000 |
$ |
— 203 — |
$ $
|
117,692 — 66,586 |
(7) |
$ |
— — 15,546 |
| |||||
(1) |
Amounts listed for named executive do not exceed the lesser of $50,000, or 10% of salary and bonus combined, except as set forth in the following table.
|
(2) |
Mr. Weaver joined the Company on September 1, 2001. |
(3) |
The amount shown represents forgiveness of indebtedness owed by Dr. Wise to the Company. |
(4) |
Mr. Clausen ceased being employed by the Company in March 2002. |
(5) |
Represents severance paid to Mr. Clausen during the fiscal year ended June 30, 2002. |
(6) |
Mr. Lough ceased being employed by the Company in January 2002. |
(7) |
Represents severance paid to Mr. Lough during the fiscal year ended June 30, 2002. |
6
Option Grants
The following table contains information concerning the stock option grants to the Company’s named executive officers that were made for the fiscal year ended June 30,
2002:
OPTION GRANTS IN FISCAL 2002
| Number of Securities Underlying Options Granted (#) |
Percent of Total Options Granted to Employees
in Fiscal Year |
Exercise or Base
Price ($/Share)(1) |
Expire Date
|
Potential Realizable Value at Assumed Annual Rate of Stock Price Appreciation for Option Term (2) | ||||||||||||
| 5% |
10% | |||||||||||||||
| Mark A. LeDoux |
— |
N/A |
|
|
N/A |
N/A |
|
N/A |
|
N/A | ||||||
| Randell Weaver |
100,000 |
41.2 |
% |
$ |
2.04 |
9/1/2011 |
$ |
126,295 |
$ |
325,123 | ||||||
| John A. Wise |
— |
N/A |
|
|
N/A |
N/A |
|
N/A |
|
N/A | ||||||
| R. David Lough |
— |
N/A |
|
|
N/A |
N/A |
|
N/A |
|
N/A | ||||||
| Robert K.Clausen (3) |
50,000 |
20.6 |
% |
$ |
2.04 |
9/1/2011 |
$ |
64,147 |
$ |
162,562 | ||||||
(1) |
The options granted to the foregoing executive officers were granted under the Company’s 1999 Omnibus Equity Incentive Plan. The Board granted Mr. Weaver
and Mr. Clausen’s options as of September 1, 2001. All options were priced at the fair market value price of the Company’s common stock on the date of grant. The following restrictions (among others) 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; and (b) 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 in excess of the exercise price of the option over the option term,
no value will be realized from option grants made to the executive officers. |
(3) |
These options terminated on June 10, 2002, ninety days following Mr. Clausen’s last day of employment with the Company. |
7
Option Exercises and Holdings
The following table sets forth information concerning option exercises and option holdings by the Company’s named executive officers under the 1992 Incentive Plan, the
1992 Nonqualified Stock Option Plan, the 1994 Nonqualified Stock Option Plan, and the 1999 Omnibus Equity Incentive Plan for the year ended June 30, 2002.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 2002 AND FISCAL YEAR END
OPTION/SAR VALUES
| Name |
Shares Acquired on Exercise
(#) |
Value Realized ($)
|
Number of Securities Underlying
Unexercised Options/SARS at Fiscal Year-End
(#) Exercisable/Unexercisable |
Value of Unexercised In-the-Money Options/SARS at Fiscal Year-End ($)(1) Exercisable/Unexercisable | ||||
| Mark A. LeDoux |
— |
— |
50,100 / 9,900 |
$20,100 / $9,900 | ||||
| Randell Weaver |
— |
— |
— / 100,000 |
— / $96,000 | ||||
| John A. Wise |
— |
— |
71,800 / 13,200 |
$26,800 / $13,200 | ||||
| Robert K. Clausen (2) |
N/A |
N/A | ||||||
| R. David Lough (3) |
— |
— |
N/A |
N/A |
(1) |
The closing price of the Company’s common stock at June 28, 2002, as quoted on the National Market System of the Nasdaq Stock Market, was $3.00.
|
(2) |
Mr. Clausen’s options expired prior to June 30, 2002. |
(3) |
Mr. Lough’s options expired prior to June 30, 2002. |
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 of the participants of the Plan. 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.
Employment Agreements
During the fiscal year ended June 30, 2002, the Company had employment agreements with Mark A. LeDoux, Randell Weaver, John A.
Wise, R. David Lough and Robert K. Clausen.
The employment agreements for Messrs. LeDoux, Weaver, Wise, Lough and
Clausen each had a term ending June 30, 2002. Pursuant to all such agreements, each executive officer remains employed by the Company following the expiration of the stated term, with the salary and benefits prescribed in his employment agreement.
Following June 30, 2002, the Company executed new employment agreements ending June 30, 2003 with Messrs. LeDoux, Weaver, and Wise on substantially the same terms and conditions contained in the employment agreements ending on June 30, 2002. Messrs.
Lough and Clausen left the employ of the Company prior to June 30, 2002.
Mr. LeDoux’s employment agreement
provides for an annual salary of $225,000. 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. Following a Change of Control in the Company, as such
term is defined in his employment agreement, Mr. LeDoux will be entitled to receive an amount equal to one year’s compensation if he voluntarily resigns or is terminated without cause.
8
Mr. Weaver’s employment agreement provides for an annual salary of $195,000
as Chief Financial Officer and for an annual salary of $225,000 while he is serving as both Chief Financial Officer and Acting Chief Operating Officer. In the event Mr. Weaver’s employment is terminated without cause, he will be entitled to
severance pay of one month’s compensation for each full year of employment up to a maximum of six months’ compensation.
Dr. Wise’s employment agreement provides for an annual salary of $180,000. In the event Dr. Wise’s employment is terminated without cause, he would be entitled to severance pay equal to one year’s compensation. Dr.
Wise will be entitled to receive one year’s compensation if he voluntarily resigns or is terminated without cause following a Change of Control in the Company, as such term is defined in his employment agreement.
Mr. Clausen’s employment agreement provided for an annual salary of $170,000 and an award of 5,000 restricted shares of common stock.
Mr. Clausen’s employment agreement provided that he was entitled to receive two months’ compensation if terminated without cause.
Mr. Lough’s employment agreement provided for an annual salary of $127,500 with incentives based on Company sales. Mr. Lough’s employment agreement provided for a severance benefit equal to
one year’s compensation upon termination without cause.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is a standing committee of the Board of Directors of the Company and is composed entirely of the outside
directors. The Audit Committee of the Board of Directors has reviewed and discussed the Company’s audited financial statements for the year ended June 30, 2002 with management and has received the written disclosures and the letter from Ernst
& Young LLP, the Company’s independent auditors, required by Independent Standards Board Standard No. 1 (Independent Discussions with Audit Committee). The Audit Committee has discussed with the independent auditors the Company’s
audited financial statements for the year ended June 30, 2002, the quality of the Company’s accounting principles and underlying estimates in its financial statements and the auditor’s independence as required by Statement on Auditing
Standards No. 61 of the Auditing Standards Board of the American Institute of Certified Public Accountants.
Based on these discussions with Ernst & Young LLP the Audit Committee members recommended unanimously to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form
10-K for the year ended June 30, 2002.
The members of the Audit Committee are Joe E. Davis, J. Scott
Schmidt and Lee G. Weldon.
9
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 Human Resources policies and programs for the Company and for making recommendations regarding the appointment and 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 2002.
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:
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 businesses of similar size and industry
classification in the same geographical area.
The Committee believes the base salary and employee benefits of the
Company in fiscal year 2002 were generally comparable to or lower than those offered by comparable companies in and around San Diego County, 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 and may grant restricted stock and stock units to its senior executives and other key employees on a periodic
basis. Grants of stock options, restricted stock and stock units to 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.
10
Chief Executive Officer’s Compensation
Mr. LeDoux, the Chairman of the Board and Chief Executive Officer, is awarded a base salary and is evaluated substantially in accordance with the foregoing policies.
In May, 2000, Mr. LeDoux voluntarily reduced his salary from $260,000 to $180,000 per annum. Pursuant to his employment agreement dated as of July 1, 2002, Mr. LeDoux’s base salary was set at $225,000 per annum, with no change from his prior
year’s salary. No incentive bonuses were issued to Mr. LeDoux in 2002. In determining Mr. LeDoux’s base salary during fiscal year 2002, the Human Resources Committee considered the results of an ongoing cost containment program at the
Company, as well as the financial performance of the Company and other factors.
The members of the Human
Resources Committee are J. Scott Schmidt and Lee G. Weldon.
Human Resources Committee Interlocks and Insider Participation
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.
The
foregoing reports of the Audit Committee and the Human Resources Committee, respectively, 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.
Intentionally left blank
11
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, Nasdaq Pharmaceutical Companies and the Nasdaq Health Services Companies for the period beginning June 30, 1997, and ending June 30, 2002. The
comparisons in the graph are required by the Securities and Exchange Commission and are not intended to forecast or be indicative of possible future performance of the Company’s common stock.
| 6/30/97 |
6/30/98 |
6/30/99 |
6/30/00 |
6/30/01 |
6/30/02 | |||||||
| NATURAL ALTERNATIVES INTERNATIONAL, INC. |
100.00 |
262.30 |
45.08 |
23.78 |
29.51 |
39.34 | ||||||
| NASDAQ STOCK MARKET (U.S.) |
100.00 |
131.62 |
189.31 |
279.93 |
151.75 |
103.32 | ||||||
| NASDAQ PHARMACEUTICAL |
100.00 |
102.19 |
143.36 |
329.21 |
277.12 |
162.75 | ||||||
| NASDAQ HEALTH SERVICES |
100.00 |
97.42 |
91.69 |
70.76 |
101.00 |
99.19 |
Assumes a $100 investment on June 30, 1997 in each of the Company’s common stock, the
securities comprising the Nasdaq US Index, the securities comprising the Nasdaq Pharmaceutical Index and the securities comprising the Nasdaq Health Services Index.
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the ownership of the Company’s common stock as of September
30, 2002, by (i) each person who is known by the Company to beneficially own more than 5% of the Company’s common stock and (ii) each director and nominee for director; each of the Company’s executive officers named in the Summary
Compensation Table; and all executive officers and directors of the Company as a group. Except as otherwise indicated in the footnotes to the respective tables and subject to applicable community property laws, to the Company’s knowledge, the
persons named in the tables have sole voting and investment power with respect to all shares of common stock beneficially owned.
| Name and Address of Beneficial Owner |
Shares Beneficially Owned |
Percent Beneficially Owned |
|||
| Dimensional Fund Advisors, Inc. (1) 1299 Wilshire Blvd., 11th Floor Santa Monica, California 90401 |
387,000 |
6.6 |
% | ||
| Carl J. Terranova (2) P.O. Drawer H Valley Cottage, New York 10989 |
299,900 |
5.1 |
% |
(1) |
As reported on a Form 13-G filed with the Securities and Exchange Commission on February 12, 2002. |
(2) |
As reported on a Form 13-D filed with the Securities and Exchange Commission on May 7, 2002. |
| Name of Beneficial
Owner |
Shares Beneficially Owned |
Percent Beneficially Owned(1) |
|||
| Mark A. LeDoux (2) |
1,369,618 |
23.6 |
% | ||
| J. Scott Schmidt (3) |
24,790 |
0.4 |
% | ||
| Lee G. Weldon (4) |
64,790 |
1.1 |
% | ||
| Joe E. Davis (5) |
12,790 |
0.2 |
% | ||
| Randell Weaver |
5,000 |
0.1 |
% | ||
| John A. Wise (6) |
101,059 |
1.7 |
% | ||
| |
|
| |||
| All Directors and Officers As a Group (6 Persons) |
1,578,047 |
26.8 |
% | ||
| |
|
|
(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, 2002, 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. |
(2) |
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
50,100 shares, which Mr. LeDoux has the right to acquire upon exercise of options exercisable within 60 days of September 30, 2002. |
(3) |
Includes 22,790 shares Mr. Schmidt has the right to acquire upon exercise of options exercisable within 60 days of September 30, 2002.
|
(4) |
Includes 22,790 shares Mr. Weldon has the right to acquire upon exercise of options exercisable within 60 days of September 30, 2002.
|
(5) |
Represents 12,790 shares Mr. Davis has the right to acquire upon exercise of stock options exercisable within 60 days of September 30, 2002.
|
(6) |
Includes 71,800 shares Dr. Wise has the right to acquire upon exercise of options exercisable within 60 days of September 30, 2002.
|
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.
13
Certain Relationships and Related Transactions
As of June 30, 2002, Mark A. LeDoux, Chairman of the Board and Chief Executive Officer of the Company, was indebted to the Company in the
amount of $76,000. This amount represents the principal and accrued interest on a loan made to Mr. LeDoux for personal purposes.
PROPOSAL 2
SELECTION OF AUDITORS
Subject to stockholder approval at the Annual Meeting, the Board has selected Ernst & Young LLP to continue as the Company’s independent auditors for the fiscal year ending June 30, 2003. A
representative of Ernst & Young LLP is expected to be present at the Annual Meeting.
Stockholder ratification
of the selection of Ernst & Young 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 Ernst & Young 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.
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 Ernst & Young
LLP.
The Board of Directors recommends a vote FOR Proposal 2.
STOCKHOLDERS’ PROPOSALS
Under SEC 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 2004 Annual Meeting must submit such
proposals to the Company no later than August 3, 2003 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 2004 Annual Meeting is held on a date which is
not within 30 days of January 10, 2004, 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 2004 Annual Meeting but
does not utilize the process set forth in Regulation Section 240.14a-8, 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.
14
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, 2002, Randell Weaver, John R. Reaves, Jr., Timothy E. Belanger and Mark E. Zimmerman did not timely file initial reports of beneficial ownership of securities on Form 3 with the SEC pursuant to Section 16(a). Each of such officers has
filed a report on Form 3 with the SEC as of the date of this proxy statement. Except as otherwise provided above, the Company believes that all other reporting obligations under Section 16(a) of the Securities Exchange Act of 1934 were satisfied.
ANNUAL REPORTS
The Company’s 2002 Annual Report, which includes audited financial statements for the Company’s fiscal year ended June 30, 2002, is being mailed on or about December 9, 2002, with this Proxy
Statement to stockholders of record on November 22, 2002.
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
Mark A. LeDoux
Chairman of the Board and Chief Executive Officer
15
NATURAL ALTERNATIVES INTERNATIONAL, INC.
a Delaware Corporation
ANNUAL MEETING OF STOCKHOLDERS
January 10, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
The undersigned hereby appoints Mark A. LeDoux and Randell Weaver 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 of the shares of common stock of Natural Alternatives International, Inc., held of record by the undersigned on November 22,
2002, at the Annual Meeting of Stockholders to be held on January 10, 2003, or any adjournment thereof.
(Please date and
sign on the other side)
FOLD AND DETACH HERE
The Board of Directors recommends a vote FOR the election of the nominee for Class III Director
1. ELECTION OF CLASS III DIRECTOR
| FOR NOMINEE LISTED BELOW |
WITHHOLD AUTHORITY TO VOTE FOR NOMINEE LISTED BELOW | |||
| ¨ |
¨ | |||
| Nominee: J. Scott Schmidt |
||||
| 2. To ratify the appointment of Ernst & Young LLP as the Company’s independent auditors: | ||||
| FOR |
AGAINST |
ABSTAIN | ||
| ¨ |
¨ |
¨ | ||
| 3. In their discretion, upon such other business as may properly come before the meeting: | ||||
| FOR |
AGAINST |
ABSTAIN | ||
| ¨ |
¨ |
¨ | ||
| Please mark your votes as indicated in this sample | ||||
| ¨ |
||||
| PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY, USING THE ENCLOSED ENVELOPE. | ||
| Dated:
,
|
* | |
| SIGNATURE OF
STOCKHOLDER | ||
| SIGNATURE OF JOINT
STOCKHOLDER | ||
| 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. | ||