NATURAL ALTERNATIVES INTERNATIONAL, INC. ~~1185 Linda Vista Drive San Marcos, California 92069~~

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS ~~TO BE HELD ON MAY 10, 1996 An Annual Meeting~~

You are cordially invited to attend the annual meeting of ~~Stockholders~~stockholders of Natural Alternatives International, Inc.~~, a Delaware corporation (the "Company"), will be held at the Olympic Resort Hotel, 6111 El Camino Real, Carlsbad, California 92009 on Friday, May 10, 1996, at 3:00 p.m., for~~ to consider and act upon the following ~~purposes: 1. Approval~~matters:

The foregoing matters are more fully described in the ~~number~~proxy statement accompanying this notice.

Stockholders of directors, or resulting from the death, resigna- tion, disqualification, or removal of a director, or other cause shall be filled solely by the vote of the remaining directors then in office; 4. Approval of an amendment to the Company's Certificate of Incor- poration to provide no director of the Company may be removed except for cause as defined, and to require a vote of 70% of the outstanding shares to remove a director; 5. Approval of an amendment to the Company's Certificate of Incor- poration to providerecord at any meeting of stockholders only such business may be acted on as is brought either by stockholders in accordance with cer- tain notice procedures or by the Board of Directors; 6. Approval of an amendment to the Company's Certificate of Incor- poration to provide only persons who are nominated in accordance with certain procedures are eligible for election as directors; 7. Approval of an amendment to the Company's Certificate of Incor- poration to prohibit the Company from making certain stock repurchases ex- cept under certain conditions. 8. Approval of an amendment to the Company's Certificate of Incor- poration to add a "fair price" provision requiring observation of speci- fied minimum price and procedural requirements by defined parties who seek a merger or other business combination unless certain requirements are met. 9. Approval of an amendment to the Company's Certificate of Incor- poration as an election not to be governed by the provisions of Section 203 of the Delaware General Corporation Law. 10. Approval of an amendment to the Company's Certificate of Incor- poration to require a vote of 70% of the outstanding voting shares to amend or repeal the provisions set forth in Proposals 2-11 herein and existing Second, Seventh and Eighth Articles of the Company's Certificate of Incorporation. 11. Approval of the Restated Certificate of Incorporation of the Com- pany in the form attached hereto as Exhibit "A". 12. Ratification and approval of the 1994 Nonqualified Stock Option Plan and the grant of options to purchase 500,000 shares thereunder. 13. Confirmation of KPMG Peat Marwick LLP as the Company's indepen- dent auditors for the fiscal year ending June 30, 1996. 14. Transaction of such other business as may properly come before the Annual Meeting of Stockholders or any adjournment thereof. The Board of Directors has fixed the close of business on ~~March 31, 1996 as~~October 15, 2004, the record date ~~for determination~~fixed by the Board of ~~stockholders~~Directors, are entitled to notice of and to vote at the ~~Annual Meeting of Stockholders~~meeting and at any adjournments thereof.

Your vote is important. Whether or ~~any adjournment. A complete list of such stockholders will be available at the executive offices of the Company for ten days before the meeting.~~ ~~All stockholders are cordially invited to attend the Annual Meeting of Stockholders in person. Regardless of whether~~not you plan to attend the ~~meet- ing, please sign~~meeting, we urge you to vote your shares at your earliest convenience. This will help ensure the presence of a quorum at the meeting. Promptly voting your shares by telephone, via the internet, or by signing, dating, and ~~date~~returning the enclosed ~~Proxy~~proxy card will save us the expense and ~~return it promptly in~~extra work of additional solicitation. Voting your shares by telephone or via the ~~accompanying~~internet will further help us reduce the costs of solicitation. An addressed envelope ~~postage~~ for which ~~has been provided~~no postage is required if mailed in the United ~~States. The prompt return of Proxies~~States is enclosed if you wish to vote by mail. Voting your shares now 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~~not prevent you from attending or voting ~~in person~~your shares at the meeting if you desire to do so.

Only stockholders and persons holding proxies from stockholders may attend the meeting. If you plan to attend, please bring a photo ID. If your shares are held in the name of a broker, trust, bank or ~~by filing with~~other nominee, you will need to bring a recent brokerage statement, proxy or letter from that broker, trust, bank or other nominee that confirms you are the ~~Secretary~~beneficial owner of ~~the Company a written revocation or a duly executed Proxy bearing a later date.~~ those shares.

We are providing this proxy statement in connection with the solicitation of proxies by the Board of Directors of Natural Alternatives International, Inc., a Delaware corporation (the ~~"Company"~~“Company” or “we,” “our,” or “us”), for use at the ~~Annual Meeting~~annual meeting of ~~Stockholders ("Annual Meeting")~~stockholders to be held on Friday, ~~May 10, 1996~~December 3, 2004, at 3:11:00 ~~p.m., local~~a.m. Pacific time, orat La Costa Resort & Club, Costa del Mar Road, Carlsbad, California 92009, and at any ~~adjourn- ment or postponement thereof. The Annual Meeting will be held at the Olympic Resort Hotel, 6111 El Camino Real, Carlsbad, California 92009. This Proxy Statement~~adjournment thereof (the “Annual Meeting”). We expect to mail this proxy statement and the ~~accompanying Proxy and annual report are first being mailed to stockholders~~enclosed proxy card on or about ~~April 10, 1996. VOTING Only~~October 29, 2004 to all stockholders ~~of record at the close of business on March 22, 1996 will be~~ entitled to vote at the Annual Meeting. ~~On March 22, 1996 there~~

You may vote if you were a stockholder of record as of the close of business on October 15, 2004. This date is known as the record date. You are entitled to one vote for each share of common stock you held on that date on each matter presented at the Annual Meeting. As of October 15, 2004, approximately ~~5,297,375~~5,928,766 shares of ~~Common Stock~~our common stock, par value $0.01 per share, were issued and outstanding. ~~The Company is in- corporated in Delaware, and is not required by Delaware corporation law or its Certificate of Incorporation~~

How many votes are needed to ~~permit cumulative voting in~~hold the ~~election of directors. On each or~~Annual Meeting?

To take any ~~other matter properly presented and submitted to a vote~~action at the Annual Meeting, a majority of our outstanding shares of common stock entitled to vote as of October 15, 2004, must be represented, in person or by proxy, at the Annual Meeting. This is called a quorum.

A “proxy” allows someone else to vote your shares on your behalf. Our Board of Directors is asking you to allow the people named on the proxy card (Mark A. LeDoux and Randell Weaver) to vote your shares at the Annual Meeting.

Whether you hold shares directly as a stockholder of record or beneficially in street name, you may vote without attending the Annual Meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your broker or nominee. To vote by proxy, please follow the instructions on the enclosed proxy card. You may vote by telephone, via the internet or by mail. Shares held in street name may be voted by telephone or via the internet only if your broker or nominee makes those methods available. Your broker or nominee will enclose instructions for voting shares held in street name by telephone or via the internet with this proxy statement if your broker or nominee has chosen to make those methods available.

If you vote by proxy, your shares will be voted at the Annual Meeting in the manner you indicate. If you vote by mail and return a signed proxy card with no specific instructions, your shares will be voted as the Board of Directors recommends.

Yes. You can change or revoke your proxy at any time before it is voted by submitting another proxy with a later date. You may also send a written notice of revocation to Natural Alternatives International, Inc., 1185 Linda Vista Drive, San Marcos, California 92078, Attention: Mr. Randell Weaver, Secretary.

Yes. However, we encourage you to vote your shares at your earliest convenience to ensure that your shares are represented and voted. If you vote your shares by proxy and later decided you would like to attend the meeting and vote your shares in person, you will need to provide a written notice of revocation to the secretary of the meeting before your proxy is voted.

Except as noted, all proxies received will be counted in determining whether a quorum exists and whether we have obtained the necessary number of votes on each ~~share~~proposal. An abstention from voting will ~~have one~~be used for the purpose of establishing a quorum, and will be considered a vote “against” a proposal. A broker non-vote will also be used for the purpose of establishing a quorum, but will not otherwise be counted in the voting process. Thus, broker non-votes will not affect the outcome of any of the matters being voted on at the Annual Meeting. Generally, broker non-votes occur when shares held by a broker for a beneficial owner are not voted with respect to a particular proposal because (i) the broker has not received voting instructions from the beneficial owner and an(ii) the broker lacks discretionary voting power to vote such shares.

For the election of the two Class II directors, a plurality of the votes is required. This means that the two candidates who receive the most votes will be elected to the two available Class II positions on the Board of Directors. The 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 represented by ~~Proxy) will be necessary to approve the matter. REVOCABILITY OF PROXIES When the enclosed Proxy is properly executed~~proxy and returned, the shares it represents will be voted at the Annual Meeting in accordance with any direc- tions noted thereon, and if no directions are indicated, the shares it repre- sents will be voted in favor of the proposals set forth in the notice at- tached hereto. Any person giving a Proxy in the form accompanying this statement has the power to revoke it any time before its exercise. It may be revoked by filing with the Secretary of the Company at the Company's principal executive office, 1185 Linda Vista Drive, San Marcos, California 92069, an in- strument of revocation or a duly executed Proxy bearing a later date, or it may be revoked by attending the Annual Meeting and voting in person. SOLICITATION The Company will bear the entire cost of the solicitation of Proxies, in- cluding the preparation, assembly, printing, and mailing of this Proxy State- ment, the Proxy, and any additional material furnished to stockholders. Copies of solicitation material will be furnished to brokerage houses, fiduci- aries, and custodians holding shares in their names that are beneficially owned by others to forward to such beneficial owners. In addition, the Com- pany may reimburse such persons for their cost of forwarding the solicitation material to such beneficial owners. The solicitation of Proxies by mail may be supplemented by telephone, telegram, and/or personal solicitation by direc- tors, 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 AMENDMENT TO PROVIDE FOR A CLASSIFIED BOARD OF DIRECTORS Proposed Article Twelfth, which follows, would provide for the Board to be divided into three classes of directors serving staggered three year terms. As a result, approximately one-third of the Board will be elected each year. Initially, members of Class I are expected to be elected at the May 10, 1996 Annual Meeting of Stockholders. Directors elected to Class I positions will serve for three years until the third subsequent scheduled Annual Meeting of Stockholders. Commencing with the election of Class I directors, each class of directors elected at a subsequent annual meeting will be elected to a three year term. Vacancies occurring in any class (or arising from an increase in the size of the Board) may be filled solely by the affirmative vote of a majority of the remaining Board to serve for the remainder of the term of the class. This pro- posal gives the Board a greater likelihood of continuity and experience since at any one time at least one-third of the Board will be in its second year of service and at least one-third will be in its third year of service. Members elected within the most recent year will comprise approximately one-third of the membership of the Board. Although the Board is not aware of any problems experienced by the Company in the past with respect to continuity and stability of leadership and policy, as the Company grows the Board believes a classified Board will decrease the likelihood of problems of continuity and stability arising in the future. If included in the amended and Restated Certificate of Incorporation ("Certificate"), proposed Article Twelfth would be applicable to every future election of directors. As such, the holders of a majority of the shares of Common Stock would require more time to replace a majority of the directors. A classified Board with staggered three year terms may also make the Company less attractive to tender offerors since, if the Board should be comprised of five members as at present, a majority stockholder would, under the proposed amendment, normally need at least two annual meetings to obtain control of a majority of the Board, as opposed to one meeting. The Board believes the pro- posed amendment will more likely lead a well financed bidder into direct nego- tiation with the Board and therefore discourage potential hostile takeovers of the Company. Although management presently controls approximately 41.84% of the Common Stock, that control may be diluted by future issuances of voting stock. Therefore, management has proposed this and other amendments at this time, in part to encourage future potential interested parties to negotiate with the Board. This proposal is not the result of any specific effort to accumulate the Company's securities or to obtain control of the Company by means of a merger, tender offer, solicitation in opposition to management or otherwise. Further, although this provision may be beneficial to management in a hostile tender offer, it could also have an adverse impact on stockholders who may want to participate in such a tender offer. VOTE REQUIRED FOR ADOPTION OF PROPOSED AMENDMENT Under Delaware corporation law, the affirmative vote of the holders of a majority of the shares of stock of the Company entitled ~~to notice of and~~ to vote at the Annual Meeting is required to ~~adopt~~approve each of the other proposals.

As of October 15, 2004, our executive officers and directors held of record or beneficially approximately 1,468,642 shares, or 24.8%, of our issued and outstanding common stock. Our executive officers and directors have indicated their intention to vote “for” the election of each of the nominees for Class II director and “for” each of the other proposals described in this proxy statement.

We will pay the cost of soliciting proxies for the Annual Meeting, including the costs of preparing, assembling and mailing the proxy materials. We will provide copies of proxy materials to fiduciaries, custodians and brokerage houses to forward to the beneficial owners of shares held in their name. We may reimburse such fiduciaries, custodians and brokers for their costs in forwarding the proxy materials.

In addition to the solicitation of proxies by mail, certain of our officers and other employees may also solicit proxies personally or by telephone, facsimile, telegram or other means. No additional compensation will be paid to these individuals for any such services. We have also retained Mellon Investor Services LLC to help us solicit proxies for an estimated fee of approximately $6,000 to $12,000.

Our Board of Directors is responsible for the overall management of the Company. The Board of Directors is divided into three classes, designated Class I, Class II and Class III. The Board of Directors currently includes two Class I directors, two Class II directors, and one Class III director. The name, age and business experience of each of our directors are shown below.

Mr. LeDoux has been a director and the Chief Executive Officer of the Company since 1986, the Assistant Treasurer since 1998, and the Chairman of the Board since 2001. Mr. LeDoux has also served as a director and the Chairman of the Board of Natural Alternatives International Europe S.A. (NAIE), our wholly-owned subsidiary, since its inception in 1999, and as a director of Transformative Health Products, Inc. (since 1990), CellLife Pharmaceuticals International, Inc. (since 1996), and CellLife International, Inc. (since 1992), each a wholly-owned subsidiary of the Company. Previously, he served as President of the Company (1986-1996, 1999-2001); director, President and Chief Executive Officer of Natural Alternatives, Inc., a predecessor corporation that merged into the Company in 1986 (1980-1986); and Executive Vice President and Chief Operating Officer of Kovac Laboratories, a manufacturer of nutritional supplements (1976-1980). Mr. LeDoux graduated Cum Laude from the University of Oklahoma with a Bachelor of Arts and Letters in 1975. He earned his Juris Doctor degree in 1979 from Western State University College of Law.

Mr. Davis has been a member of the Audit Committee of the Board of Directors since 2000, a member of the Human Resources Committee of the Board of Directors since January 2003, and a member of the Nominating Committee of the Board of Directors since June 2004. He has been a private investor for more than eleven years. He currently serves as a director and a member of the audit committee of two public corporations, American Funds Insurance Series and Anworth Mortgage Securities, Inc. Previously, Mr. Davis served as Chairman of the Board of Linear Corporation (1987-1988); President and Chief Executive Officer of BMC Industries, Inc. (1985); and President and Chief Executive Officer of National Health Enterprises, Inc. (1974-1982). Formerly, Mr. Davis was a director and a member of the audit committee of BMC Industries, Inc. and Wilshire Technologies, Inc., and a director of Freymiller Trucking, Inc. Mr. Davis graduated from the University of Texas with a Bachelor of Science in Chemistry. He holds a Master of Business Administration degree from the Harvard Graduate School of Business Administration.

Mr. Weldon has been a member of both the Human Resources and Audit Committees of the Board of Directors since 1993, and a member of the Nominating Committee of the Board of Directors since June 2004. Mr. Weldon was the President of Natures Apothecary (1997-2000) and the Chairman and Chief Executive Officer of Kal Healthway, Inc., a food supplement distributor (1978-1995). He graduated from the University of California at Los Angeles with a Bachelor of Science in Business Administration in 1963. He became a member of the Young President’s Organization in 1982, and became a graduate member in 1990.

Mr. Dunn was appointed to the Board of Directors in October 2004. Mr. Dunn has been the President of GDI Consulting & Training Company (a manufacturing industry consulting firm focusing on cost and process improvement, productivity improvement and operational transformations) and the Chairman of its parent company, Gerald E. Dunn, Inc., since 1980. He currently serves as a director (since 2000) and the Chairman of the Compensation Committee (since 2003) of Idaho Asphalt Supply Company, a $90 million privately held company. Formerly, he served as a director and a member of the Compensation Committee of TMI Integrated Systems (2000-April 2004), a director of Air Logistics Corporation (1998-2003), and a director of R.W. Lyall Company (1997-2000), each a privately held company, and a director of Tomorrow’s Morning, Inc. (1995-1998), a company that went public in 1998. Mr. Dunn received a Bachelor’s degree from California State University at Fullerton.

Mr. Lane has been a member of the Audit Committee of the Board of Directors since he became a member of the Board of Directors on June 5, 2004, a member of the Nominating Committee of the Board of Directors since June 24, 2004, and a member of the Human Resources Committee of the Board of Directors since August 26, 2004. Mr. Lane is Vice-Chairman and Chief Executive Officer of Financial Data Solutions, Inc. (July 2004 – present). Before joining Financial Data Solutions, Inc., Mr. Lane was a director and the Chief Executive Officer and President of Business Bank of California. Mr. Lane held these positions with Business Bank of California from 1998 until its sale to Union Bank of California in January 2004. At the time of its sale to Union Bank, Business Bank of California was a $700 million commercial bank with fifteen branches in northern and southern California. Before heading Business Bank of California, Mr. Lane was a director, Chief Executive Officer or Chief Financial Officer of several financial institutions and non-financial operating companies. Mr. Lane graduated from San Diego State University with a Bachelor of Arts in Economics in 1984.

The Board of Directors held five regular meetings during the fiscal year ended June 30, 2004. All of the members of the Board of Directors were present at each of the five meetings.

Nasdaq rules require listed companies to have a board of directors with at least a majority of independent directors. Our Board of Directors has determined that three of our five directors are independent under the listing standards of the Nasdaq Stock Market. The members determined to be independent are Messrs. Davis, Lane and Weldon.

The Board of Directors has an Audit Committee, a Nominating Committee and a Human Resources Committee, which functions as a compensation committee. Membership on each committee is limited to independent directors as defined under the listing standards of the Nasdaq Stock Market. In addition, members of the Audit Committee must also meet the independence standards for audit committee members adopted by the Securities and Exchange Commission (SEC).

Messrs. Davis, Lane and Weldon are the current members of each of the committees. During the fiscal year ended June 30, 2004, the Audit Committee held five regular meetings and the Human Resources Committee held four regular meetings. All of the members of each committee were present at each of the meetings during the period in which they served on the committees. The Nominating Committee was formed on June 24, 2004 and did not have any meetings during the fiscal year ended June 30, 2004.

Audit Committee. The Audit Committee operates under a charter originally adopted by the Board of Directors in 2000, and amended and restated in April 2004. A copy of the Amended and Restated Audit Committee Charter effective as of April 30, 2004 is included as Attachment A to this proxy statement. The general function of the Audit Committee is to oversee the accounting and financial reporting processes of the Company and the audits of our financial statements. The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities relating to the accounting, reporting and financial practices of the Company, including the integrity of our financial statements and disclosures; the surveillance of administration and financial controls and our compliance with legal and regulatory requirements; the qualification, independence and performance of our independent auditing firm; and the performance of our internal audit function and control procedures. The Audit Committee is responsible for reviewing and recommending matters to the Board of Directors, but has no

authority to make final decisions except as set forth in the Audit Committee’s charter. The Audit Committee has the sole authority to appoint, determine funding for, and oversee our independent auditing firm. The Board of Directors has determined that Messrs. Davis and Lane are each an “audit committee financial expert” as defined by applicable rules adopted by the SEC.

Human Resources Committee. The Human Resources Committee recommends to the Board of Directors policies under which compensation is paid or awarded to our directors, officers and certain other personnel. Among other things, the Human Resources Committee recommends to the Board of Directors the amount of compensation to be paid or awarded to our directors, officers and certain other personnel including salary, bonuses, stock option grants, other cash or stock awards under our management cash incentive and equity incentive plans, retirement and other compensation.

Nominating Committee. The Nominating Committee operates under a charter adopted by the Board of Directors in August 2004. A copy of the Nominating Committee Charter effective as of August 27, 2004 is not currently available on the Company’s website but is included as Attachment B to this proxy statement. The purpose of the Nominating Committee is to assist the Board of Directors in identifying qualified individuals to become members of the Board of Directors and in determining the composition of the Board of Directors and its various committees. The Nominating Committee periodically reviews the qualifications and independence of directors, selects candidates as nominees for election as directors, recommends directors to serve on the various committees of the Board of Directors, reviews director compensation and benefits, and oversees the self-assessment process of each of the committees of the Board of Directors.

The Nominating Committee considers nominee recommendations from a variety of sources, including nominees recommended by stockholders. Persons recommended by stockholders are evaluated on the same basis as persons suggested by others. Stockholder recommendations may be made in accordance with our Stockholder Communications Policy. See “Stockholder Communications with Directors” below. The Nominating Committee has the authority to retain a search firm to assist in the process of identifying and evaluating candidates.

The Nominating Committee has not established any specific minimum requirements for potential members of our Board of Directors. Instead, the Nominating Committee’s evaluation process includes many factors and considerations including, but not limited to, a determination of whether a candidate meets Nasdaq and/or SEC requirements relating to independence and/or financial expertise, as applicable, and whether the candidate meets the Company’s desired qualifications in the context of the current make-up of the Board of Directors with respect to factors such as business experience, education, intelligence, leadership capabilities, integrity, competence, dedication, diversity, skills, and the overall ability to contribute in a meaningful way to the deliberations of the Board of Directors respecting the Company’s business strategies, financial and operational performance and corporate governance practices. The Nominating Committee will generally select those nominees whose attributes it believes would be most beneficial to the Company in light of all the circumstances.

Our Board of Directors has adopted a Stockholder Communications Policy to provide a process by which our stockholders may communicate with the Board of Directors. Under the policy, stockholders may communicate with the Board of Directors as a whole, with the independent directors, with a committee of the Board, or with a particular director. Stockholders wishing to communicate directly with our Board of Directors may do so by mail addressed to Natural Alternatives International, Inc., 1185 Linda Vista Drive, San Marcos, California, 92078, Attn: Corporate Secretary. The envelope must contain a clear notation indicating that the enclosed letter is a “Stockholder-Board Communication” or “Stockholder-Director Communication.” All such letters must identify the author as a stockholder of the Company and clearly state whether the intended recipients are all members of the Board of Directors, all independent directors, all members of a committee of the Board, or certain specified individual directors. The Corporate Secretary will review the communications received from stockholders at the above designated address on a regular basis and if they are relevant to the Company’s operations and policies,

they will be copied and forwarded to the appropriate director or directors as expeditiously as reasonably practicable. By way of example, communications that are unduly hostile, threatening, obscene, illegal or similarly inappropriate will not be forwarded to any director. Matters deemed to be trivial in the sole discretion of the Corporate Secretary will be delivered to the appropriate director or directors at the next regularly scheduled meeting of the Board of Directors. The Corporate Secretary will periodically provide the Board of Directors with a summary of all communications received that were not forwarded and will make those communications available to any director upon request. The Board of Directors will determine whether any communications sent to the Board of Directors should be properly addressed by the entire Board or a committee thereof and whether a response to the communication is warranted.

The members of the Board of Directors are encouraged, but not required, to attend each of the Company’s annual meetings of stockholders. It may not be possible or practicable, in light of other business commitments of the directors, for all of the members of the Board of Directors to attend all of the Company’s annual meetings of stockholders. At the Company’s last annual meeting of stockholders held on January 30, 2004, each of the members of the Board of Directors who was a director at the time of the meeting attended the annual meeting.

Each of the non-employee directors (Messrs. Davis, Dunn, Lane and Weldon) receives an annual retention fee of $10,000, and a fee of $1,000 for each board and committee meeting such director attends. The annual retention fee is paid in advance at the beginning of each year of a director’s term, which is determined to commence on the date of the annual meeting held to elect any class of directors and to continue until the next annual meeting of stockholders held to elect any class of directors. In addition, under the terms of the Company’s 1999 Omnibus Equity Incentive Plan, each non-employee director receives a one-time grant of a nonqualified stock option covering 10,000 shares of the Company’s common stock on the date when such director first joins the Board of Directors. The option vests in equal annual installments over a three year period, has an exercise price equal to 100% of fair market value of a share of our common stock on the date of grant, and a term of ten years. Effective as of June 24, 2004, non-employee directors no longer receive an automatic, annual option grant during their term as a director of the Company. Any options granted to directors will be on a discretionary basis. Mr. LeDoux receives no additional compensation for serving as a director. Directors are reimbursed for travel and other expenses incurred in attending board and committee meetings.

Members of each class of our Board of Directors are elected to serve for a three-year term. The three-year terms of the members of each class are staggered, so that each year the members of a different class are due to be elected at the annual meeting. The Class II directors are currently serving terms that are due to expire at the Annual Meeting. The Class III director is currently serving a term that is due to expire at our next annual meeting, and the Class I directors are serving a term that is due to expire at the next annual meeting thereafter.

At the Annual Meeting two Class II directors are to be elected to serve until the next annual meeting of stockholders held to elect Class II directors and until their successors are elected and qualified or until their death, resignation or removal. The Board of Directors proposes the election of the nominees named below, each of whom is currently a Class II member of our Board of Directors. Mr. Weldon was elected by stockholders at the annual meeting of stockholders held on January 11, 2002. Mr. Dunn was appointed to the Board of Directors in October 2004 on the recommendation of the Nominating Committee but has not previously been elected by stockholders. Mr. Dunn was recommended to the Nominating Committee by one of the Company’s executive officers.

Unless authorization to do so is withheld, proxies received will be voted “for” the two nominees named below. If any nominee should become unavailable for election before the Annual Meeting, the proxies will be voted for the election of such substitute nominee as the present Board of Directors may propose. Each person nominated for election has agreed to serve if elected, and the Board of Directors has no reason to believe that any nominee will be unable to serve.

Our Board of Directors proposes the election of the following nominees as Class II members of the Board of Directors:

Our Board of Directors unanimously recommends that you vote “FOR” the election of each nominee as a Class II director of the Company.

APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF OUR AUTHORIZED SHARES

Our Board of Directors has adopted, subject to stockholder approval, an amendment and restatement to our Restated Certificate of Incorporation in the form attached to this proxy statement as Attachment C to increase the authorized number of shares of our common stock from 8,000,000 shares to 20,000,000 shares.

The additional shares of common stock to be authorized by approval of the amendment would have rights identical to the currently outstanding common stock of the Company. Adoption of the proposed amendment and any issuance of the additional common stock would not affect the rights of the holders of currently outstanding common stock, except for effects incidental to increasing the outstanding number of shares of common stock, such as dilution of the earnings per share and voting rights of current stockholders.

In addition to the approximately 5,928,766 shares of common stock outstanding at October 15, 2004, we have 61,000 treasury shares and approximately 1,496,209 shares reserved for issuance upon exercise of options and rights granted or to be granted under our 1999 Omnibus Equity Incentive Plan and our 1999 Employee Stock Purchase Plan.

Our Restated Certificate of Incorporation also authorizes 500,000 shares of preferred stock. There are no outstanding shares of preferred stock, and the proposed amendment and restatement would not change the number of authorized shares of preferred stock.

Under our 1999 Omnibus Equity Incentive Plan, the number of shares available and reserved for issuance under the plan automatically increases by the lesser of 2.5% of our common stock outstanding or 100,000 shares each January 1. In addition, under our 1999 Employee Stock Purchase Plan, the number of shares available and reserved for issuance under that plan automatically increases by 25,000 each July 1. Furthermore, we have proposed and are seeking stockholder approval of an amendment to our 1999 Omnibus Equity Incentive Plan to increase the number of shares available under that plan by an additional 500,000 shares (see Proposal 3 below). Without an amendment to our Restated Certificate of Incorporation to increase the authorized number of shares of our common stock, we will not have a sufficient number of authorized but unissued shares of common stock available to issue or reserve for issuance in connection with the proposed amendment to our 1999 Omnibus Equity Incentive Plan, if approved, and the ~~Certificate.~~automatic, annual increases under that plan and our 1999 Employee Stock Purchase Plan.

We believe it is advisable and in the best interest of our stockholders to have available additional authorized but unissued shares of common stock in an amount adequate to provide for our future needs. Other than as described

above, we currently have no specific plans to issue the additional shares of common stock that would be authorized by this proposal. However, these shares will provide additional flexibility to use our common stock for business and financial purposes in the future.

The additional shares may be used for various purposes, including, without limitation, similar increases under our 1999 Omnibus Equity Incentive Plan, our 1999 Employee Stock Purchase Plan or other stock plans that may be authorized and approved in the future to provide equity incentives to our employees, officers and directors; raising capital; establishing strategic relationships with other companies; and expanding the Company’s business or product lines through the acquisition of other businesses and products. The additional shares of common stock could also be used to oppose a hostile takeover attempt or delay or prevent changes in control or management. The Company does not have any current plan to acquire other businesses or products or to enter into a business combination, nor is the Company aware of any threat of any hostile takeover attempt. You should be aware, however, that approval of this proposal could facilitate future efforts to prevent changes in control of the Board of Directors, including transactions in which you might otherwise receive a premium for your shares over their then current market prices.

If the amendment to our Restated Certificate of Incorporation to increase the authorized number of shares of our common stock is approved by our stockholders, it will become effective when we file the Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware.

Our Board of Directors unanimously recommends that you vote “FOR” Proposal 2.

We believe that the availability of stock options and other stock-based incentives under our 1999 Omnibus Equity Incentive Plan (the “Plan”) is important to our ability to attract and retain qualified employees and to provide an incentive for them to exert their best efforts on behalf of the Company. As of October 15, 2004, out of a total of 1,500,000 shares of our common stock reserved for issuance under the Plan, 25,797 shares remained available for grant. The Board of Directors believes additional shares will be needed under the Plan to provide appropriate incentives to key employees. Accordingly, on June 24, 2004, the Board of Directors approved an amendment to the Plan, subject to stockholder approval and subject to stockholder approval of the proposed amendment to our Certificate of Incorporation described under Proposal 2 above, to reserve an additional 500,000 shares of our common stock for issuance under the Plan. This increase in shares would be in addition to the annual increase in shares under the Plan each January 1 of the lesser of (a) 2.5% of the total number of shares of common stock then outstanding or (b) 100,000 shares. If this proposal is approved by stockholders at the Annual Meeting, and if Proposal 2 described above is approved, the total number of shares reserved for issuance under the Plan would increase from 1,500,000 to 2,000,000.

The Board of Directors also approved on June 24, 2004, an amendment to the Plan to eliminate the automatic, annual grant of an option for 10,000 shares on each March 1 to our non-employee directors. While this change does not require stockholder approval, approval of this proposal by stockholders at the Annual Meeting will be considered ratification by our stockholders of this amendment to the Plan to eliminate the annual grants to non-employee directors.

The following is a summary of the principal features of the Plan. It is not a complete description of all of the Plan’s provisions. A copy of the Plan, as proposed to be amended, is included as Attachment D to this proxy statement. We intend to file an amended Form S-8 with the SEC to register the additional shares under the Securities Act of 1933, as amended, as soon as practicable after receiving stockholder approval of the amendment to the Plan.

Eligibility. All employees, non-employee directors and consultants of the Company or its subsidiaries are eligible for the grant of restricted stock, stock units, stock appreciation rights and nonqualified stock options under the Plan. Only employees may be granted incentive stock options. As of October 24, 2004, only incentive and nonqualified stock options have been granted under the Plan. The number of persons who held options granted under the Plan as of October 15, 2004 was approximately 48.

Administration. The Human Resources Committee makes recommendations to the Board of Directors for its approval regarding the grant of awards under the Plan to eligible participants, at such times, under such terms and in such amounts as the committee and the Board of Directors may decide.

Term of Plan. The Plan was initially approved by the Board of Directors on May 10, 1999 and approved by stockholders at the annual meeting of stockholders held on December 6, 1999. An amendment to the Plan to increase the number of shares available under the Plan by 500,000 shares was approved by stockholders at the annual meeting of stockholders held on January 30, 2004. The Plan will remain in effect until it is terminated by the Board of Directors, except that no incentive stock options may be granted on or after the 10th anniversary of the later of (a) the date the Board of Directors adopted the Plan or (b) the date when the Board of Directors adopted the most recent increase in the number of shares available under the Plan that was also approved by our stockholders. The Board of Directors may at any time amend, alter, suspend or terminate the Plan for any reason, subject to applicable laws, rules or regulations requiring stockholder approval of certain amendments to the Plan.

Stock Options. The Human Resources Committee will recommend, and the Board of Directors will approve, the individuals to whom options will be granted, the exercise price of each option, the number of shares underlying each option, the term of each option, the vesting conditions of each option, and whether each option is intended to be an incentive option or a nonqualified option. The exercise price may not be less than 100% of the fair market value of the underlying shares on the date of grant in the case of an incentive stock option, and not less than 85% of such value in the case of a nonqualified stock option. For purposes of determining the exercise price of options granted under the Plan, the fair market value of the underlying shares on the date of grant will be deemed to be the closing sale price of our common stock as reported by Nasdaq on the date of grant. No monetary consideration will be paid to the Company upon the granting of options.

Options may be granted for varying terms established at the time of grant, not to exceed 10 years from the date of grant for incentive stock options. Vesting conditions will be established at the time of grant and will vary, but options granted to non-officer employees must vest at least 20% per year. The option agreement between the Company and the optionee may provide for accelerated exercisability in the event of the optionee’s death, disability or retirement or in the event of a change in control or other events and may provide for expiration before the end of its term in the event of termination of the optionee’s service. Options may be granted in combination with other awards under the Plan. Upon the exercise of an option, the number of shares subject to the option and the number of shares available for issuance under the Plan will be reduced by the number of shares issued upon exercise of the option. Option shares that are not purchased before the expiration, termination or cancellation of the related option will become available for future awards under the Plan.

Stock Appreciation Rights. Stock appreciation rights (“SARs”) may be granted to eligible individuals under the Plan. SARs may, but need not, be granted in connection with an option. A SAR gives the holder the right to payment from the Company of an amount equal to the excess of the fair market value on the date of exercise of one share of our common stock over its fair market value on the date of grant (or, if granted in connection with an option, the exercise price per share under the option to which the SAR relates), multiplied by the number of shares underlying the portion of the SAR or option that is surrendered. Payment may be in the form of cash, shares of common stock or a combination thereof. The fair market value of the underlying shares on the date of exercise or grant will be deemed to be the closing sale price of our common stock as reported by Nasdaq on such date. A SAR holder will not pay the Company any cash consideration upon either the grant or exercise of the SAR, except for tax withholding amounts upon exercise.

SARs may be granted for varying terms established at the time of grant. Any vesting conditions will also be established at the time of grant and will vary. The SAR agreement may provide for accelerated exercisability in the event of the optionee’s death, disability or retirement or in the event of a change in control or other events and may provide for expiration before the end of its term in the event of termination of the holder’s service. If, on the date when a SAR expires, the exercise price of the SAR is less than the fair market value on such date but any portion of the SAR has not been exercised or surrendered, then the SAR will automatically be deemed to be exercised as of such date with respect to such portion.

Restricted Stock. Restricted stock may be sold or awarded to eligible individuals under the Plan for such consideration as the Human Resources Committee and/or the Board of Directors may determine, including cash, cash equivalents, promissory notes, and past or future services. Each award of restricted stock may or may not be subject to vesting. The restricted stock agreement may provide for accelerated vesting in the event of the holder’s death, disability or retirement or in the event of a change in control or other events. Holders of restricted stock awarded under the Plan shall have the same voting, dividend and other rights as our other stockholders. Awards of restricted stock may be subject to a repurchase option in favor of the Company exercisable upon the voluntary or involuntary termination of the holder’s employment with the Company at a price equal to the original purchase price. Any such repurchase option shall lapse at a minimum rate of 20% per year.

Stock Units. Stock units may be granted to eligible individuals under the Plan. A stock unit represents a bookkeeping entry equivalent to one share of our common stock. Each award of stock units may or may not be subject to vesting. The stock unit agreement may provide for accelerated vesting in the event of the holder’s death, disability or retirement or in the event of a change in control or other events. The holders of stock units will have no voting rights but may have a right to dividend equivalents. Settlement of vested stock units may be made in the form of cash, shares of common stock, or a combination thereof. The actual number of stock units eligible for settlement may be larger or smaller than the number included in the original award, based on predetermined performance factors. No monetary consideration will be paid to the Company upon the granting of stock units.

Certain options authorized to be granted under the Plan are intended to qualify as “incentive stock options” for federal income tax purposes. Under federal income tax law in effect as of the date of this proxy statement, an optionee will recognize no regular income upon grant or exercise of an incentive stock option. The amount by which the market value of shares issued upon exercise of an incentive stock option exceeds the exercise price, however, is included in the optionee’s alternative minimum taxable income and may, under certain conditions, be taxed under the alternative minimum tax. If an optionee exercises an incentive stock option and does not dispose of any of the shares thereby acquired within two years following the date of grant and within one year following the date of exercise, then any gain realized upon subsequent disposition of the shares will be treated as income from the sale or exchange of a capital asset. If an optionee disposes of shares acquired upon exercise of an incentive stock option before the expiration of either the one-year holding period or the two-year holding period specified in the foregoing sentence (a “disqualifying disposition”), the optionee will realize ordinary income in an amount equal to the lesser of (i) the excess of the fair market value of the shares on the date of exercise over the option price or (ii) the excess of the fair market value of the shares on the date of disposition over the option price. Any additional gain realized upon the disqualifying disposition will constitute capital gain. We will not be allowed any deduction for federal income tax purposes at either the time of grant or the time of exercise of an incentive stock option. Upon any disqualifying disposition by an optionee, we will generally be entitled to a deduction to the extent the optionee realizes ordinary income.

Certain options authorized to be granted under the Plan will be treated as nonqualified stock options for federal income tax purposes. Under federal income tax law in effect as of the date of this proxy statement, no income is realized by the optionee of a nonqualified stock option until the option is exercised. At the time of exercise of a nonqualified stock option, the optionee will realize ordinary income, and we will generally be entitled to a

deduction, in the amount by which the fair market value of the shares subject to the option at the time of exercise exceeds the exercise price. We are required to withhold income taxes on such income if the optionee is an employee. Upon the sale of shares acquired upon exercise of a nonqualified stock option, the optionee will realize capital gain or loss equal to the difference between the amount realized from the sale and the fair market value of the shares on the date of exercise.

An individual who receives stock under the Plan will generally realize ordinary income at the time of receipt unless the shares are not substantially vested for purposes of Section 83 of the Code. Absent an election under Section 83(b), an individual who receives shares that are not substantially vested will realize ordinary income in each year in which a portion of the shares substantially vests. The amount of ordinary income recognized in any such year will be the fair market value of the shares that substantially vest in that year less any consideration paid for the shares. We will be entitled to a deduction in the amount includable as ordinary income by the recipient at the same time or times as the recipient recognizes ordinary income with respect to the shares. We are required to withhold income taxes on such income if the recipient is an employee.

Section 162(m) of the Code limits to $1 million per person the amount that we may deduct for compensation paid to any of our most highly compensated officers in any year. Under Internal Revenue Service regulations, compensation received through the exercise of an option or SAR will not be subject to the $1 million limit if the option or SAR and the plan pursuant to which it is granted meet certain requirements. One requirement is stockholder approval at least once every five years of a per-employee limit on the number of shares as to which options and SARs may be granted. Approval of this Proposal 3 will constitute approval of the existing per-employee limits set forth in the Plan. Other requirements are that the option or SAR be granted by a committee of at least two non-employee directors and that the exercise price of the option or SAR be not less than fair market value of the common stock on the date of grant. Accordingly, we believe that if this proposal is approved by stockholders, compensation received on exercise of options and SARs granted under the Plan in compliance with all of the above requirements will continue to be exempt from the $1 million deduction limit.

If the increase in the number of shares available under the Plan is approved by stockholders at the Annual Meeting, we may, but are not obligated to, grant awards under the Plan to our employees, officers and directors. As of October 15, 2004, we do not have any plans, proposals or arrangements to award any of the additional shares that would be authorized under the amended Plan to any specific employee, officer or director. Rather, we are seeking approval for the increase at this time to provide us with the flexibility to issue additional shares if necessary or advisable, in the determination of the Human Resources Committee and the Board of Directors, to acquire and/or retain qualified employees and to offer employees a competitive compensation structure.

The following table summarizes equity compensation plans approved by stockholders and equity compensation plans that were not approved by stockholders as of June 30, 2004. It does not include additional options to buy 135,000 shares of our common stock granted to an executive officer and an employee under the Plan on July 1, 2004.

Our Board of Directors unanimously recommends that you vote “FOR” Proposal 3.

Our independent auditors for the fiscal year ended June 30, 2004 were Ernst & Young LLP, certified public accountants. The Audit Committee of the Board of Directors has selected and recommended, and the Board of Directors has approved, Ernst & Young LLP to serve as our auditors for the fiscal year ending June 30, 2005. One or more representatives of Ernst & Young LLP are expected to be present at the Annual Meeting and are expected to be available to respond to appropriate questions and to make a statement if they desire to do so.

The aggregate fees billed to the Company by Ernst & Young LLP for professional services rendered for the audit of our annual financial statements for the fiscal years ended June 30, 2004 and June 30, 2003, the reviews of the financial statements included in our Quarterly Reports on Form 10-Q during the fiscal years ended June 30, 2004 and June 30, 2003, and other services provided in connection with our Form S-8 filed with the SEC on June 30, 2004 were:

The aggregate fees billed to the Company by Ernst & Young LLP for assurance and related services reasonably related to the performance of the audit or review of our financial statements for each of the last two fiscal years ended June 30, and not included under “Audit Fees” above, were:

The aggregate fees billed to the Company by Ernst & Young LLP in each of the last two fiscal years ended June 30 for professional services for tax compliance, tax advice, and tax planning were:

There were no other fees billed to the Company by Ernst & Young LLP for products and services provided during the fiscal years ended June 30, 2004 and June 30, 2003.

On June 23, 2003, the Audit Committee approved certain policies and procedures under which all audit and non-audit services performed by our auditors must be approved in advance by the Audit Committee. Under these

policies and procedures, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by our auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee. In granting both general and specific pre-approval, the Audit Committee will consider whether such services are consistent with the SEC’s rules on auditor independence. The Audit Committee will also consider whether the auditors are best positioned to provide the most effective and efficient service, for reasons such as familiarity with our business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhance our ability to manage or control risk or improve audit quality. The term of any general pre-approval will be 12 months, unless the Audit Committee determines otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by our auditors without obtaining specific pre-approval from the Audit Committee. The amount of audit-related, tax and other services provided to the Company by Ernst & Young LLP described above that were pre-approved by the Audit Committee in accordance with its policies and procedures was $2,200 of the total of $3,700 or 60% for fiscal 2004 and, as these policies and procedures were only adopted at the end of fiscal 2003, 0% for fiscal 2003. The percentage of hours expended on Ernst & Young LLP’s engagement to audit our financial statements for the fiscal year ended June 30, 2004 that was attributed to work performed by persons other than full-time, permanent employees of Ernst & Young LLP was 0%.

Ratification by stockholders of the selection of Ernst & Young LLP as our auditors is not required by applicable law. However, as a matter of policy and sound corporate practice, we are submitting the selection to our stockholders for ratification at the Annual Meeting. If the stockholders fail to ratify the selection of Ernst & Young LLP as our auditors, the Board of Directors will reconsider the matter. Even if the selection is ratified by stockholders, the Board of Directors may select a different firm to serve as our independent auditors at any time during the fiscal year if it believes a change would be in the best interests of the Company and its stockholders.

Our Board of Directors unanimously recommends that you vote ~~FOR~~“FOR” Proposal 4.

The Board of Directors elects the executive officers of the Company who are responsible for administering our day-to-day operations. The name, age, positions with the Company, and business experience of each of our executive officers are shown below.

Mr. Weaver has been the President of the Company since January 2003 and the Secretary of the Company since November 2001. Mr. Weaver has also served as Managing Director of NAIE since 2001, and as a director, President and Secretary of Transformative Health Products, Inc., CellLife Pharmaceuticals International, Inc. and CellLife International, Inc., each a wholly-owned subsidiary of the Company, since April 2003. Previously, he served as Chief Financial Officer and Chief Operating Officer (September 2001-January 2003) and Executive Vice President of the Company (August 2002-January 2003). Before joining the Company, Mr. Weaver was Managing Director of CGM Group, LLC, a management consulting firm (2000-2001); a consultant in the bankruptcy reorganization of Solutioneering (1999-2000); President and Chief Financial Officer of two subsidiaries of Grupo Industrial Bimbo, S.A., a baking company (1995-1998); principal of Randell Weaver Consulting, where he managed operation and financial restructurings of troubled enterprises (1986-1995); and Chief Financial Officer of Microcomputer Memories, Inc. (1984-1986). Before 1984, Mr. Weaver worked for four years in public accounting with Pannell Kerr Forster. Mr. Weaver graduated from California State University, Northridge with a Bachelor of Science in Business Administration and from the University of Santa Monica with a master’s degree in Spiritual Psychology.

Mr. Reaves has been the Chief Financial Officer of the Company since January 2003. Previously, he was Vice President of Finance (May 2002-January 2003). Mr. Reaves has also been the Chief Financial Officer of Transformative Health Products, Inc., CellLife Pharmaceuticals International, Inc. and CellLife International, Inc., each a wholly-owned subsidiary of the Company, since April 2003. Before joining the Company, Mr. Reaves was Chief Financial Officer of Neptune Networks, Inc., an enterprise established to provide internet service kiosks in areas of public accommodation (2000-2001), and Director of Finance and Operations, Southern California market with LSG Sky Chefs, Inc., the world’s largest airline caterer (1998-2000). Before 1998, Mr. Reaves was a Manager with Arthur Andersen LLP.

Before joining the Company in May 2002, Mr. Belanger was Vice President of Marketing and Sales for Overhill Farms, Inc., a frozen food manufacturer (May 2001-February 2002); President of Sales Solutions, Inc. (2000-2001); and Vice President of Marketing and Sales with J.C. Garet, Inc., a detergent manufacturer (1997-2000).

Before joining the Company in January 2002, Mr. Zimmerman was a senior consultant with Gerald E. Dunn, Inc., a management consulting firm (1998-January 2002). Before 1998, he was a principal with Zimmerman & Associates, a management consulting firm.

Dr. Wise has been the Chief Scientific Officer of the Company since 2001. Previously, he served as Vice President of Science and Technology (2000-2001), Vice President—Research and Development (1992-2000), and a consultant to the Company (1987-1992). Before beginning work with the Company in 1987, Dr. Wise was Executive Vice President of Research and Development with United Sciences of America, Inc. (1982-1986). He graduated in 1963 from the University of Washington with a Bachelor of Science degree in Preventative Medicine and a Bachelor of Arts degree in Zoology. He received a Master of Science in Microbiology from the University of Minnesota in 1967, and a Ph.D. in Microbiology from Oregon State University in 1970.

Dr. Kay has nearly fifteen years of experience in the pharmaceutical and nutrition industries. Before joining the Company on March 30, 2004, Dr. Kay was Vice President of Product Development at Anabolic Laboratories (Need dates in position) and Chief Science Officer at Leiner Health Products (Need dates in position). Dr. Kay is a registered dietician and has developed products for major retailers, wholesalers and pharmaceutical companies. He received Doctoral and Master’s degrees in Nutrition from the University of Connecticut.

The following table sets forth information on the beneficial ownership of our common stock by executive officers and directors, as well as stockholders who are known by us to own beneficially more than 5% of our common stock, as of October 15, 2004.

From time to time, the number of our shares held in the “street name” accounts of various securities dealers for the benefit of their clients or in centralized securities depositories may exceed 5% of the total shares of our common stock outstanding.

The following table shows the compensation earned by or paid or awarded to our current executive officers for all services rendered by them in all capacities to the Company and its subsidiaries during each of the last three fiscal years ended June 30.

The following table shows the options granted to our executive officers during the fiscal year ended June 30, 2004. All of the options shown were granted under our 1999 Omnibus Equity Incentive Plan. The vesting of each option shown accelerates in the event of the officer’s termination without cause upon a change in control upon satisfaction of certain conditions.

The following table provides information about option exercises by our executive officers during the fiscal year ended June 30, 2004, and the value of unexercised options held by our executive officers as of June 30, 2004.

We have employment agreements with each of our executive officers, namely Messrs. LeDoux, Weaver, Reaves, Belanger, Zimmerman, Wise and Kay. Under the terms of each agreement, the officer’s employment is at-will and the employment may be terminated at any time, with or without cause, by either the officer or the Company. Each officer receives an annual salary, payable no less frequently than monthly, and may receive certain employee benefits available generally to all employees or specifically to executives, including bonus compensation in a manner and at a level determined from time to time by the Board of Directors. The annual salaries of each executive officer under the employment agreements in effect at June 30, 2004 were:

Effective as of September 11, 2004, the Board of Directors, on the recommendation of the Human Resources Committee, based on a review of executive compensation at other public companies in the San Diego, California area and changes in the Consumer Price Index for the San Diego Urban Area, approved the following salary increases for the Company’s officers: (i) an increase of 3.75% for Messrs. Belanger, LeDoux, Reaves and Zimmerman and Drs. Kay and Wise; (ii) an additional increase of $20,000, after the aforementioned increase, for Messrs. Belanger, Reaves and Zimmerman; and (iii) an increase to $300,000 for Mr. Weaver.

Under the terms of the each of the employment agreements for the above-named officers, each officer is entitled to a severance benefit, including standard employee benefits available to other corporate officers, in the event the officer is terminated by the Company without cause in an amount equal to one year’s compensation (three month’s compensation for Dr. Kay), provided the officer executes and delivers to the Company a general release of claims. If the officer does not execute and deliver a general release of claims, the severance benefit is reduced to one month’s compensation. No officer is entitled to receive a severance benefit if the officer is terminated by the Company for cause, or if the officer voluntarily resigns or retires. If an officer is terminated by the Company without cause upon a change in control, each officer is entitled to receive a severance benefit in an amount equal to two year’s compensation (one year’s compensation for Dr. Kay), provided the officer executes and delivers to the Company a general release of claims. If the officer does not execute and deliver a general release of claims, the severance benefit is reduced to one month’s compensation. In addition, if any officer is terminated by the Company without cause upon a change of control, all then outstanding options held by the officer become fully exercisable and remain so for the term of the option, provided that the officer executes and delivers to the Company a general release of claims.

The Human Resources Committee of the Board of Directors recommends to the Board of Directors policies under which compensation is paid or awarded to our directors, executive officers and other key personnel. Among other things, the Human Resources Committee recommends to the Board of Directors the amount of compensation to be paid or awarded to our directors, executive officers and other key personnel including salary, bonuses, stock option grants, other cash or stock awards under our management cash incentive and equity incentive plans, retirement and other compensation. All of the members of the Human Resources Committee are independent directors.

Our executive compensation programs are designed to attract and retain highly qualified executives and to motivate them to improve long-term stockholder returns by achieving both short- and long-term strategic Company goals. Our compensation programs link a significant portion of each executive’s compensation directly to individual and Company performance and seek to align the financial interests of our executives with those of our stockholders. There are three basic components to our executive compensation program: salary and benefits, annual cash incentive bonuses, and long-term incentive compensation in the form of stock options and other equity-based compensation. Each component is addressed in the context of individual and Company performance, competitive conditions and equity among employees.

Salary and Benefits. We design our executive salary structure to be competitive. We believe a competitive salary structure is important if we are to retain our executives and other key employees and attract highly qualified executives when needed. To determine whether our salary structure is competitive, we periodically review available information about prevailing salaries and compensation programs offered by companies within our geographic area that are similar to us in size and type of business conducted. We take into account not only the amount of our base salary but also our overall benefits package. Our executive benefits include medical, dental, vision, term life, and disability. An individual executive’s salary and benefits package will vary within our framework based on responsibilities, experience, leadership, potential future contribution, and demonstrated individual performance.

Annual Incentive Bonus. Each executive officer is eligible to receive an annual cash bonus under our management cash incentive plan. The plan is designed to reward executive officers and other key personnel for significant contributions to our performance during the fiscal year. Each fiscal year, the Board of Directors, based on recommendations from the Human Resources Committee, establishes various goals related to one or more of the following categories: Company performance, functional/departmental performance and/or individual performance. Each goal is weighted. The successful completion of each goal may be evaluated on a pass/fail basis, or may be designated three performance levels: a threshold, a target and an outstanding level. These levels are intended to motivate our executives by providing substantial bonus payments for the achievement of financial goals. The bonus earned will be directly related to the participant’s performance and determination of achievement, if any, of each performance goal and may be in the form of a percent of salary and/or a flat dollar amount. Any award under the plan must be approved by the Human Resources Committee after our audited financial results for the fiscal year are completed. If a participant is terminated or resigns, the participant forfeits all rights to any award under the plan.

Long-Term Incentive Compensation. Each executive officer is eligible to participate in our 1999 Omnibus Equity Incentive Plan (the “Plan”). Under the Plan, the Board of Directors, based on recommendations from the Human Resources Committee, may grant incentive and nonqualified stock options, restricted stock, stock appreciation rights, and stock units to executive officers and other personnel, non-employee directors and consultants. As of June 30, 2004, only incentive and nonqualified stock options have been granted under the plan.

Options to buy shares of our common stock are awarded with an exercise price equal to or greater than the fair market value of our common stock on the date of grant. Accordingly, the executive is rewarded only if the market price of our common stock appreciates. Since options vest over time, the Board of Directors periodically grants new options to provide continuing incentives for future performance.

Stock options are designed to align the interests of our executive officers with those of our stockholders by encouraging executives to enhance the value of the Company and, thus, the price of our common stock and the stockholders’ return. In addition, through deferred vesting, stock options are designed to create an incentive for individual executives to remain with the Company.

Defined Benefit Plan. We sponsor a defined benefit pension plan that provides retirement benefits to employees based generally on years of service and compensation during the last five years before retirement. Effective June 20, 1999, the Board of Directors amended the plan to freeze the accrued benefit of each plan member at its then current amount and to no longer allow inactive plan members or other employees to become active members of the plan. Mr. LeDoux and Dr. Wise are plan members.

Other Plans. We have a profit sharing plan under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), whereby executive officers and other employees may contribute a percentage of their compensation. Prior to January 1, 2004, we matched 50% of the first 6% of a participant’s compensation contributed to the plan. Effective January 1, 2004, the plan was amended to require that we match 100% of the first 3% of a participant’s compensation contributed to the plan and 50% of the next 2% of a participant’s compensation contributed to the plan. We also have an employee stock purchase plan that allows executive officers and other eligible employees to have a maximum of 15% of their compensation withheld through payroll deductions to buy shares of our common stock at the lower of 85% of (i) the fair market value at the beginning of each offering period, or (ii) the fair market value on predetermined dates.

Chief Executive Officer. Mr. LeDoux, the Chairman of the Board and our Chief Executive Officer, is awarded a base salary and is evaluated substantially in accordance with the foregoing policies. In September 2003, the Human Resources Committee recommended and the Board of Directors approved, a 4% increase in Mr. LeDoux’s salary from $232,875 to $242,190. In August 2004, the Human Resources Committee recommended and the Board of Directors approved, an additional 3.75% increase in Mr. LeDoux’s salary. Each increase was based on an evaluation of Mr. LeDoux’s contributions to the Company, the accomplishments achieved by the

Company, and a review of changes in the Consumer Price Index and executive salaries at public Companies in the San Diego area.

The Human Resources Committee Report on Executive Compensation is not considered proxy-soliciting material and is not deemed to be filed with the SEC or subject to Regulation 14A or the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing with the SEC, except to the extent we specifically incorporate this report by reference.

None of the members of the Human Resources Committee is or has been an officer or employee of the Company or any of its subsidiaries. There are no interlocks between the executive officers and members of the Human Resources Committee of the Company and those of any other entity.

The graph below provides a comparison of cumulative total returns for our common stock, the Nasdaq Stock Market (U.S.), and the Nasdaq Health Services Indices for the five year period ended June 30, 2004. The graph assumes an investment of $100 on June 30, 1999 in each of our common stock, and the stock comprising the Nasdaq Stock Market (U.S.) and the Nasdaq Health Services Indices. Each of the indices assumes that all dividends were reinvested. The graph lines merely connect the prices on the dates indicated and do not reflect fluctuations between those dates.

The performance information above is not considered proxy-soliciting material and is not deemed to be filed with the SEC or subject to Regulation 14A or the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing with the SEC, except to the extent we specifically incorporate this information by reference.

We have adopted a Code of Business Conduct and Ethics that applies to all of our employees and directors, including all of our officers and our non-employee directors. The Audit Committee periodically reviews the policy and the Company’s compliance with the policy. We will furnish a copy of our Code of Business Conduct and Ethics, free of charge, upon written request to the Company at 1185 Linda Vista Drive, San Marcos, California 92078, Attn: Chief Financial Officer. Our Code of Business Conduct and Ethics is not incorporated in, and is not a part of, this proxy statement and is not proxy-soliciting material.

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and any person who owns more than 10% of our common stock, to file with the SEC initial reports of ownership of our common stock within 10 days of becoming a director, executive officer or greater than 10% stockholder, and reports of changes in ownership of our common stock before the end of the second business day following the day on which a transaction resulting in a change of ownership occurs. Directors, executive officers and greater than 10% stockholders are required by SEC regulations to provide us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on our review of the copies of such reports provided to us and written representations that no other reports were required, during the fiscal year ended June 30, 2004, all Section 16(a) filing requirements applicable to our directors, executive officers and greater than 10% stockholders were complied with, except for the following report that was not timely filed: one report was filed on behalf of Dr. Kay on April 30, 2004 to report an option grant on March 30, 2004.

One of our directors and a current Class II nominee, Mr. Alan G. Dunn, is the President of GDI Consulting & Training Company (GDI), a manufacturing industry consulting firm focusing on cost and process improvement, productivity improvement and operational transformations, and the Chairman of its parent company, Gerald E. Dunn, Inc. GDI performs certain consulting work for the Company related to the Company’s operations function, including assisting the Company’s managers in the design of new material handling methods to be used in its manufacturing facilities and providing cost accounting analysis software and consulting assistance to the accounting department. During fiscal 2004, the Company paid GDI approximately $38,000 for its consulting services and certain software maintenance.

The Audit Committee has reviewed and discussed the Company’s audited financial statements for the fiscal year ended June 30, 2004 with the Company’s management, and has discussed with Ernst & Young LLP, the Company’s independent auditors, the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (Communication with Audit Committees). The Audit Committee has received the written disclosures and the letter from Ernst & Young LLP required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and has discussed with Ernst & Young LLP its independence. Based on the Audit Committee’s above described review and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements for the fiscal year ended June 30, 2004, be included in the Company’s Annual Report on Form 10-K for such fiscal year for filing with the SEC.

The Audit Committee Report above is not considered proxy-soliciting material, is not deemed to be filed with the SEC or subject to Regulation 14A or the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing with the SEC, except to the extent we specifically incorporate this information by reference.

Our Annual Report on Form 10-K for the fiscal year ended June 30, 2004 (“2004 Annual Report”), as filed with the SEC, excluding exhibits, is being mailed to stockholders with this proxy statement. We will furnish any exhibit to our 2004 Annual Report free of charge to any stockholder upon written request to the Company at 1185 Linda Vista Drive, San Marcos, California 92078. The 2004 Annual Report is not incorporated in, and is not a part of, this proxy statement and is not proxy-soliciting material. We encourage you to review the 2004 Annual Report together with any later information that we file with the SEC and other publicly available information.

Stockholders who wish to submit a proposal for inclusion in our proxy materials to be distributed in connection with next year’s annual meeting must submit their proposal so that we receive it no later than the close of business on June 30, 2005. Any such proposal must be in accordance with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934, as amended. Pursuant to such rule, simply submitting a proposal does not guarantee that it will be included in our proxy materials.

In accordance with our Restated Certificate of Incorporation, to be properly brought before an annual meeting, a stockholder must deliver timely notice of any matter the stockholder wishes to present. To be timely, we must receive the notice not less than 60 days before the original scheduled meeting date. If we provide less than 70 days’ notice or prior public disclosure of the meeting date, to be timely we must receive the notice not later than the close of business on the 10th day following the earlier of the day on which we mailed notice of the meeting date or the day on which we publicly disclosed the meeting date. To be in proper form, the notice must be in writing and include the specified information set forth in Article Fifteenth of our Restated Certificate of Incorporation.

All proposals and notices should be sent by certified mail, return receipt requested, to Natural Alternatives International, Inc., 1185 Linda Vista Drive, San Marcos, California 92078, Attn: Mr. Randell Weaver, Secretary. We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal or matter that does not comply with these and other applicable requirements.

The Board of Directors does not know of any other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting or any adjournment thereof, the proxy holders named in the accompanying proxy card will have discretionary authority to vote all proxies in accordance with their best judgment with respect to any such matters.

This Audit Committee Charter sets forth the purpose and membership requirements of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Natural Alternatives International, Inc. (the “Company”) and establishes the authority and responsibilities delegated to it by the Board.

The purpose of the Committee is to oversee the accounting and financial reporting processes of the Company and the audits of the Company’s financial statements. The Committee shall:

the accounting, reporting and financial practices of the Company, including the integrity of the Company’s financial statements and disclosures;

the surveillance of administration and financial controls and the Company’s compliance with legal and regulatory requirements;

the qualification, independence and performance of the Company’s independent auditing firm (the “Auditor”); and

the performance of the Company’s internal audit function and control procedures;

In performing its responsibilities, the Committee shall maintain free and open communication between the Committee, the Auditor, and the Company’s management.

The Committee shall have all resources and authority necessary to discharge its duties and responsibilities, including those set forth below.

This Nominating Committee Charter sets forth the purpose and membership requirements of the Nominating Committee (the “Committee”) of the Board of Directors (the “Board”) of Natural Alternatives International, Inc. (the “Company”) and establishes the authority and responsibilities delegated to it by the Board.

The purpose of the Committee is to assist the Board in identifying qualified individuals to become members of the Board and in determining the composition of the Board and its various committees.

The Committee shall have all resources and authority necessary to discharge its duties and responsibilities, including those set forth below.

Review the qualifications and independence of the members of the Board and its various committees on a periodic basis and make any recommendations to the Board that the Committee may deem appropriate concerning any recommended changes in the composition or membership of the Board, or any of its committees;

Identify and recruit individuals qualified to become Board members, including evaluating persons suggested by stockholders or others, and conducting appropriate inquiries into the backgrounds and qualifications of possible nominees. Persons suggested by stockholders shall be evaluated on the same basis as persons suggested by others. Stockholder recommendations shall be made in accordance with the Company’s Stockholder Communications Policy. Evaluations shall include a determination of whether a candidate meets Nasdaq and/or SEC requirements relating to independence and/or financial expertise, as applicable, and whether the candidate meets the Company’s desired qualifications in the context of the current make-up of the Board with respect to factors such as business experience, education, intelligence, leadership capabilities, integrity, competence, dedication, diversity, skills, and the overall ability to contribute in a meaningful way to the Board’s deliberations respecting the Company’s business strategies, financial and operational performance and corporate governance practices.

Select candidates as nominees for election as directors and recommend to the Board the director nominees whenever new directors are to be appointed or elected, whether at the next annual meeting of stockholders or otherwise. The Committee will select those nominees whose attributes it believes would be most beneficial to the Company in light of all the circumstances.

Recommend to the Board for its approval directors to serve as members of each committee. The Committee shall review and recommend committee members to fill vacancies as needed.

Review on an annual basis director compensation and benefits.

Establish the standards for and annually review and evaluate each Board committee’s annual self-assessment and provide a report of such evaluations to the Board.

Perform such other duties set forth in this Charter and as directed from time to time by the Board.

While the responsibilities of the Committee set forth in this Charter are contemplated to be the principal recurring activities of the Committee in carrying out its purpose, these responsibilities are to serve as a guide with the understanding that the Committee may diverge from them as it deems appropriate given the circumstances. Furthermore, from time to time, the Committee may take on additional responsibilities at the request of the Board.

Natural Alternatives International, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

1. The name of the corporation (which is hereinafter referred to as the “Corporation”) is Natural Alternatives International, Inc.

2. The original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on October 26, 1989, a Certificate of Amendment was filed with the Secretary of State of the State of Delaware on April 5, 1991, and a Restated Certificate of Incorporation was filed with the Secretary of the State of Delaware on July 31, 1996 (“Restated Certificate”).

3. This Amended and Restated Certificate of Incorporation has been duly proposed by resolutions adopted and declared advisable by the Board of Directors of the Corporation, duly adopted by the stockholders of the Corporation at a meeting duly called, and duly executed and acknowledged by the officers of the Corporation in accordance with the provisions of Sections 103, 242 and 245 of the General Corporation Law of the State of Delaware and, restates, integrates and further amends the provisions of the Restated Certificate and, upon filing with the Secretary of State in accordance with Section 103, shall thenceforth supersede the Restated Certificate and shall, as it may thereafter be amended in accordance with its terms and applicable law, be the Amended and Restated Certificate of the Corporation.

4. The text of the Restated Certificate is hereby amended and restated to read in its entirety as follows:

FIRST: The name of the Corporation is Natural Alternatives International, Inc.

A. “Affiliate” and “Associate” have the meanings set forth in Rule 12b-2 under the Securities Exchange Act of 1934 as in effect on the date of filing of this Certificate.

B. “Beneficial Owner,” “Beneficial Ownership” and “Beneficially Owns” have the meanings set forth in the Rule 13d-3 under the Securities Exchange Act of 1934 as in effect on the date of filing of this Certificate.

C. “Continuing Director” means, as to any Related Person, a member of the Board of Directors of the Corporation (the “Board”) who (1) is unaffiliated with and is not the Related Person and (2) was a member of the Board of Directors of Natural Alternatives International, Inc., a Colorado corporation, prior to October 22, 1989 or thereafter became a member of the Board prior to the time that the Related Person became a Related Person, and any successor of a Continuing Director who is recommended to succeed a Continuing Director by a majority of Continuing Directors then on the Board.

D. “Disinterested Shares” means, as to any Related Person, shares of Voting Stock held by stockholders other than a Related Person.

E. “Related Person” means and includes any individual, corporation, partnership or other person or entity, or any group of two or more of the foregoing that have agreed to act together, which, together with its Affiliates and Associates, Beneficially Owns, in the aggregate, ten percent (10%) or more of the outstanding Voting Stock, and any Affiliate or Associates of any such individual, corporation, partnership or other person, entity or group.

F. “Voting Stock” means all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors of the Corporation, and each reference to a percentage or portion of shares of Voting Stock shall refer to such percentage or portion of the votes entitled to be cast by such shares.

THIRD: The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.

FOURTH: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may now or hereafter be organized under the General Corporation Law of the State of Delaware (“GCL”).

FIFTH: The total authorized number of shares of the Corporation shall be 20,500,000 shares, consisting of 20,000,000 shares designated as Common Stock, $.01 par value, and 500,000 shares designated as Preferred Stock, $.01 par value.

Shares of the Preferred Stock may be issued from time to time in one or more series. The Board of the Corporation is hereby expressly authorized to establish and designate one or more series of the Preferred Stock, to fix the number of shares constituting each series, and to fix the designations and the powers, rights, preferences, qualifications, limitations, and restrictions of the shares of each series and the variations of the relative powers, rights, preferences, qualifications, limitations and restrictions as between series, and to increase and to decrease (but not below the number of shares of such series then outstanding) the number of shares constituting each series. Such determinations may be fixed by a resolution or resolutions adopted by the Board.

SIXTH: Elections of directors at an annual or special meeting of the stockholders may be by written ballot unless the Bylaws of the Corporation shall otherwise provide.

SEVENTH: Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken only upon the vote of the stockholders at an annual or special meeting duly noticed and called, as provided in the Bylaws of the Corporation, and may not be taken by a written consent of the stockholders pursuant to the GCL.

EIGHTH: Special meetings of stockholders of the Corporation for any purpose or purposes may be called at any time by the Board, or by a majority of members of the Board; provided, however, that where a proposal requiring stockholder approval is made by or on behalf of a Related Person or director affiliated with a Related Person, or where a Related Person otherwise seeks action requiring stockholder approval, then the affirmative vote of a majority of the Continuing Directors shall also be required to call a special meeting of stockholders for the purpose of considering such proposal or obtaining such approval. Special meetings of stockholders of the Corporation may not be called by any other person or persons or in any other manner.

NINTH: A. The Corporation may indemnify, to the full extent authorized or permitted by law, any person made, or threatened to be made, a defendant or witness to any action, suit or proceeding (whether civil or criminal or otherwise) by reason of the fact that he, his testator or intestate, is or was director or officer of the Corporation or by reason of the fact that such director of officer, at the request of the Corporation, is or was serving any other corporation, partnership, joint venture, employee benefit plan or other enterprise, in any capacity. Nothing contained herein shall affect any rights to indemnification to which employees other than directors or officers may be entitled by law. No amendment or repeal of this Section A of Article Ninth shall apply to or have any effect on any right to indemnification provided hereunder with respect to any acts or omissions occurring prior to such amendment or repeal.

B. No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such a director as a director. Notwithstanding the

foregoing sentence, a director shall be liable to the extent provided by applicable law (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (ii) pursuant to Section 174 of the GCL, or (iv) for any transaction from which such director derived an improper personal benefit. No amendment to or repeal of this Section B of this Article Ninth shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

(i) the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is serving at the request of the Corporation as a director, officer, employee or agent of any corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of the law; and

(ii) the Corporation may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of credit, surety bonds and/or other similar arrangements), as well as enter into contracts providing indemnification to the full extent authorized or permitted by law and including as part thereof provisions with respect to any or all of the foregoing to ensure the payment of such amounts as may become necessary to effect indemnification as provided therein, or elsewhere.

TENTH: The provisions set forth in this Article Tenth and in Article Ninth herein may not be repealed or amended in any respect, unless such action is approved by the affirmative vote of the holders of not less than 66.67% of the outstanding shares of Voting Stock of the Corporation.

ELEVENTH: Subject to the provisions in this Certificate, the Corporation reserves the right to repeal, alter, amend, or rescind any provision contained in this Certificate, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation.

TWELFTH:The Board shall be divided as nearly equal in number as possible into three classes, designated Class I, Class II and Class III. The term of office of ~~Directors~~directors of one class shall expire at each regularly scheduled annual meeting of stockholders held for the purpose of electing directors of that class, and in all cases as to each ~~Director~~director until his or her successor shall be elected and shall qualify or until his or her earlier resignation, removal from office, death or incapacity. Additional directorships resulting from an increase in the number of ~~Directors~~directors shall be apportioned among the classes as equally as possible. The initial term of office of ~~Directors~~directors of ~~Class I~~all classes shall begin at the first regularly scheduled meeting of stockholders held on May 10, 1996; that of Class III shall ~~begin~~expire at the first regularly ~~sche- duled~~scheduled meeting of stockholders occurring in 1997 or thereafter; ~~and~~ that of Class ~~III~~II shall ~~begin~~expire at the first regularly scheduled meeting of stockholders occurring in 1998 or thereafter; and that of Class III shall expire at the first regularly scheduled meeting of stockholders occurring in 1999 or thereafter, and in all cases ~~as to~~ each Director shall continue until his or her successor shall be elected and shall qualify, or until his or her earlier resignation, removal from office, death or incapacity. AtAfter the initial term of directors described herein, at each regularly scheduled annual meeting of stockholders held for the purpose of electing directors of that class, the number of ~~Directors~~directors equal to the number of ~~Directors~~directors of the class whose ~~term~~terms expires at the time of such meeting (or, if less, the number of ~~Directors~~directors properly nominated and qualified for election) shall be elected to hold office until the third succeeding annual meeting of stockholders held for the purpose of electing directors of that class, after their election. PROPOSAL 2 NOMINATION AND ELECTION OF DIRECTORS The director to be elected will be elected to one of three classes of directors, to hold office for one, two, or three years respectively, and until the Annual Meetings held in 1997, 1998 and 1999 and until his or her successor is elected and has qualified, or until his or her death, resignation, or re- moval. Five directors are to be elected at the Annual Meeting, two to Class I, one to Class II and two to Class III. All nominees for director were elected by the stockholders at the Company's 1994 annual meeting of stockholders. The five candidates receiving the highest number of affirmative votes cast at the Annual Meeting shall be elected as directors of the Company. Each person nominated for election has agreed to serve if elected. If any of such nominees shall become unavailable or refuse to serve as a director (an event that is not anticipated), the proxy holders will vote for substitute nominees at their discretion. Unless otherwise instructed, the proxy holders will vote the Proxies received by them for the five nominees named below. The Board of Directors recommends that stockholders vote FOR each named nominee. NOMINEES Set forth below is information regarding the nominees, including informa- tion furnished by them as to their principal occupations for the last five years, and their ages as of September 6, 1995. Name Age Director Since ------------------ --- -------------- Class I --------- Mark A. Le Doux 41 1986 Class II --------- Lee G. Weldon 56 1992 Marie A. Le Doux 78 1986 Class III --------- William R. Kellas 44 1988 William P. Spencer 43 1986 MARK A. LE DOUX was a director, the President and Chief Executive Officer of Natural Alternatives, Inc., the predecessor corporation, from its forma- tion in 1981 until the 1986 merger into the Company. Mr. Le Doux has been a director of the Company since the August 1986 merger of the predecessor cor- poration into the Company, which continued the business and operations of the predecessor. Since August 1986, Mr. Le Doux has also been the President and Chief Executive Officer of the Company. From 1976 to 1980, he held the posi- tion of Executive Vice President and Chief Operating Officer of Kovac Labora- tories, a company which was engaged in the business of manufacturing nutri- tional supplements. He attended the University of Oklahoma and graduated Cum Laude with a Bachelor of Arts in Letters in 1975. Mr. Le Doux graduated from the Thomas Jefferson School of Law, San Diego in 1979 with a Juris Doctorate. He is the son of Marie A. Le Doux. WILLIAM P. SPENCER has been a director of the Company since August 1986, and has also been Executive Vice President, Chief Operating Officer and Chief Financial Officer since that time. Prior to August 1986, Mr. Spencer was a di- rector, Vice President, and Chief Financial Officer of Natural Alternatives, Inc., the predecessor corporation. Prior to joining Natural Alternatives, Inc., he was with San Diego Trust and Savings Bank for ten years, the last four as Vice President. Mr. Spencer received a Bachelor of Science in the field of Finance in 1974, and a Masters in Business Administration, also in the area of Finance, in 1979 from San Diego State University. MARIE A. LE DOUX has been a director of the Company since August 1986, and has also been Chairperson and Secretary since that time. Mrs. Le Doux was also the Chairperson/Advisor of the Company's predecessor from its formation until 1986. She has thirty-eight years of experience in the area of nutri- tion. In 1978, Mrs. Le Doux was awarded an Honorary Fellowship from the In- ternational Academy of Preventive Medicine. In 1981, she received an Honor- ary Ph.D. in Humanities from the Heritage Institute. For the last eighteen years, Mrs. Le Doux has been the President of Play N' Talk International, a company which is in the business of preparing instructional materials for chil- dren's reading programs. She is the mother of Company President and CEO, Mark A. Le Doux. WILLIAM R. KELLAS, Ph.D. has been a director of the Company since October 1987. Dr. Kellas graduated from the University of Southern California earning a Bachelor of Science Degree in Business with a Minor in Physics in 1974. He earned his Ph.D. in Health Sciences from the Doctors University of Natural Health Sciences in 1985. Dr. Kellas also graduated from Harvard University's Financial and Management Program. From 1974 to 1984, Dr. Kellas was employed by IBM as the firm's Western Regional Marketing Manager. From 1984 to 1985, Dr. Kellas was a District Manager for Wang Laboratories. Presently, Dr. Kellas is the President of a biochemical firm called Professional Preference, which sells computerized regimens of protocols designed to regenerate an in- dividual's immune system and fight related degenerative diseases. LEE G. WELDON has been a director of the Company since June 1992. He was the Chairman and Chief Executive Officer of Kal Healthway, Inc., a food sup- plement distributor, until it was acquired by another company in 1995. In 1963, Mr. Weldon graduated from UCLA and obtained a Bachelor of Science de- gree in Business Administration. BOARD COMMITTEES AND MEETINGS During the fiscal year ended June 30, 1995, the Board of Directors held four meetings. The Board of Directors has an Audit Committee and a Compen- sation Committee. All members of the Board of Directors hold office until the next annual meeting of stockholders or the election and qualification of their successors. All directors receive $500 for each Board of Director's meeting personally attended. Executive officers serve at the discretion of the Board of Directors. The Audit Committee recommends a firm to be appointed by the Board of Di- rectors, 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 man- agement and the independent auditor's the Company's interim and year-end op- erating 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 audi- tors independence. The Audit Committee was established in February 1993, and consists of Messrs. Kellas, Weldon and Spencer. The Compensation Committee establishes rates of salary, bonuses, retire- ment and other compensation for all directors and officers of the Company and for such other personnel as the Board of Directors may designate. No member of the Compensation Committee may vote upon his or her own compensation except for such items as are applicable to a group that also includes personnel who are not directors or officers of the Company. The Compensation Committee was established in May 1992, and consists of Messrs. Kellas and Weldon. Messrs. Kellas and Weldon are directors and are not officers or employees of the Com- pany or any of its subsidiaries. During the fiscal year ended June 30, 1995, each Board member attended at least 75% of the aggregate of the meetings of the Board of Directors and of the Committees on which he or she served. 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 year ended June 30, 1995, by each of the executive officers and two additional individuals for whom disclosure is required. SUMMARY COMPENSATION 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 for the year ended June 30, 1994. (2) See following table. ~~SUMMARY OF CASH AND OTHER COMPENSATION~~

OPTION GRANTS. The following table contains information concerning the stock option grants to the Company's Chief Executive Officer and each of the other named executive officers and the required additional individuals that were made for the fiscal year ended June 30, 1995: OPTION GRANTS IN LAST FISCAL YEAR

(1) There is no assurance provided to any executive officer or any other holder of the Company's securities that the actual stock price appre- ciation over the five-year option term will be at the assumed five percent and ten percent levels or at any other defined level. Unless the market price of the Company's common stock does in fact appre- ciate over the option term, no value will be realized from the option grants made to the executive officers and required additional indivi- duals. (2) The options granted to the named executives and the required additional individuals were granted under the Company's 1994 Nonqualified Stock Option Plan on January 24, 1995 at the fair market value price of $4.625. The following restrictions apply to the options granted: (a) The recipient must be employed with the Corporation on the date of exercise, (b) Fifty percent of the granted options are exercisable on the date of grant, (c) The remaining fifty percent are exercisable on September 23, 1995. 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 Nonquali- fied Stock Option Plan for the year ended June 30, 1995, with respect to the Company's Chief Executive Officer, the named executive officer, and the required additional individuals: ~~AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES~~

(1) The closing price of the Company's common stock at June 30, 1995, as quoted on the American Stock Exchange was $6.25. EMPLOYMENT AGREEMENTS. Messrs. Le Doux and Spencer each have Employment Agreements ("Agreements") with the Company effective October 1, 1995, through September 30, 1996. Pursuant to the Agreements, Messrs. Le Doux and Spencer receive annual base salaries of $182,000 and $150,800, respectively. The Agreements also provide severance payments in the event of a merger, liquida- tion or sale of all or substantially all of the assets of the Company in an amount equal to 2.99 times the employees' average annualized base salary and performance bonus for the five year period immediately preceding the severance payment. The Agreements also contain restrictive covenants prohibiting Messrs. Le Doux and Spencer, from competing with the Company during the term of their employment and for two years thereafter. 401(K) PLAN The NATURAL ALTERNATIVES Partnership for Profits Plan ("Plan") is considered a qualified plan under Section 401(k) of the Internal Revenue Code. All employees of the Company with twelve months service and at least one thousand hours of service during the twelve month period are eligible for the Plan. The Plan provides for employee contributions of up to 15% of compensation. Employ- er contributions are determined by the Board of Directors at their 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 Plan are 100% vested. Participants become vested in employer contributions at the rate of 34% the first year, 67% the second year and 100% after three years. The Company contributed to the Plan and expensed $50,345, $84,296 and $34,674, in 1995, 1994 and 1993, respectively. STOCK OPTION PLANS The Company maintains three stock option plans: the 1992 Incentive Stock Option Plan ("Incentive Plan") and the 1992 Nonqualified Stock Option Plan ("1992 Nonqualified Plan"), both of which were approved by the stockholders of the Company at its Annual Meeting of Stockholders on June 5, 1992, and the 1994 Nonqualified Stock Option Plan ("1994 Nonqualified Plan") which was approved by the Board of Directors on December 9, 1994. The 1992 Incentive Plan provides for the granting of "incentive stock options" as described in Section 422 of the Internal Revenue Code (Code). The 1992 and 1994 Nonquali- fied Plans provide for the granting of nonqualified stock options which are not intended to qualify under any provision of the Code. On September 9, 1993, all options then authorized under the Incentive Plan and the 1992 Nonqualified Plan were granted at 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. There have been no additional options granted to date under the Incentive Plan. 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. INCENTIVE PLAN PURPOSE 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 and its subsidiaries responsible for the management, growth and financial success of the Company may be offered incentives to encourage them to acquire a pro- prietary 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 is 500,000 shares, sub- ject to certain adjustments. ADMINISTRATION The Incentive Plan is to be administered by either the Board of Directors ("Board") or the Company's Compensation Committee. Subject to the express provisions of the Incentive Plan, the Board or the Compensation 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 Compensation Committee will also have the authority to interpret the provisions in the Incentive Plan and to prescribe rules and regulations for its orderly administration. EXERCISE PRICE 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 for such number of shares as is determined by the Board or the Compensation Committee and set forth in the instrument eviden- cing the option. No option granted under the Incentive Plan shall have a term in excess of ten years from the date of grant. RESTRICTIONS ON TRANSFER 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 exercis- able 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. ADJUSTMENT PROVISIONS 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, appro- priate 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. FEDERAL INCOME TAX CONSEQUENCES Incentive stock options under the Incentive Plan are intended to be eligible for the favorable federal income tax treatment accorded "incentive stock options" under the Code. There generally are no federal income tax consequences to the optionee or the Company by reason of the grant or exercise of an incentive stock option. However, the exercise of an incentive stock option may increase the optionee's alternative minimum tax liability, if any. If an optionee holds options acquired through exercise of an incentive stock option for more than two years from the date on which the option is granted and more than one year from the date on which the shares are transferred to the optionee upon exercise of the option, any gain or loss on a disposition of such stock will be long-term capital gain or loss. Generally, if the optionee disposes of the stock before the expiration of either of these hold- ing periods (a "disqualifying disposition"), at the time of disposition, the optionee will realize ordinary income equal to the lesser of (a) the excess of the stock's fair market value on the date of exercise over the exercise price, or (b) the optionee's actual gain, if any, on the purchase and sale. Slightly different rules may apply to optionees who acquire stock subject to certain repurchase options or who are subject to Section 16(b) of the Ex- change Act. To the extent the optionee recognizes ordinary income by reason of a dis- qualifying disposition, the Company generally will be entitled (subject to the requirement of reasonableness and perhaps, in the future, the satisfac- tion of a withholding obligation) to a corresponding business expense deduction in the tax year in which the disqualifying disposition occurs. 1992 AND 1994 NONQUALIFIED PLAN PURPOSE The purpose of the 1992 and 1994 Nonqualified Plans ("Nonqualified Plans") is to provide an incentive to eligible employees, consultants, officers and directors whose present and potential contributions are important to the con- tinued success of the Company, to afford those individuals the opportunity to acquire a proprietary interest in the Company and to enable the Company to enlist and retain qualified personnel for the successful conduct of its busi- ness. Officers, directors, consultants and 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 Plans. ADMINISTRATION The administrators of the Nonqualified Plans shall be either the Board or a committee designated by the Board. The administrators have full power to se- lect, from among the officers, directors, 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 Plans. EXERCISE PRICE The exercise price for each share covered by the Nonqualified Plans will be determined by the administrators, but will not be less than 60% and 100% of the fair market value of a share of Common Stock of the Company on the date of grant of such option for the 1992 Nonqualified Plan and the 1994 Nonqualified Plan, respectively. The term of each option will be fixed by the administra- tors of the Nonqualified Plans. 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. RESTRICTIONS ON TRANSFER Options granted pursuant to the Nonqualified Plans are nontransferable by their participants, other than by will or by the laws of descent or distribu- tion, 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 con- sulting relationship for any reason other than death or total and permanent disability, an option may be thereafter exercised, to the extent it was exer- cisable at the date of such termination, for such period of time as the admini- strator shall determine at the time of grant, but only to the extent that the term of the option has not expired. ADJUSTMENT PROVISIONS Subject to the Nonqualified Plans' change in control provisions, in the event of the sale of substantially all of the assets of the Company or the mer- ger of the Company with or into another corporation, each outstanding option shall be assumed or substituted by such successor corporation or parent or sub- sidiary of such successor corporation. The Nonqualified Plans also provide 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 Plans and the price per share covered by each outstan- ding option. FEDERAL INCOME TAX CONSEQUENCES Nonqualified stock options granted under the Nonqualified Plans generally have the following federal income tax consequences: There are no tax consequences to the optionee or the Company by reason of the grant of a non-qualified stock option at the fair market value of the op- tion. Upon exercise of a nonqualified stock option, the optionee will recog- nize taxable ordinary income equal to the excess of the stock's fair market value on the date of exercise over the option exercise price. Generally, with respect to employees, the Company is required to withhold taxes in an amount based on the ordinary income recognized. Subject to the requirement of reason- ableness and the satisfaction of any withholding obligation, the Company gener- ally will be entitled to a business expense deduction equal to the taxable or- dinary income realized by the optionee. Upon disposition of the stock, the op- tionee will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such stock plus any amount recognized as ordinary income upon exercise of the option. Such gain or loss will be long or short-term depending on whether the stock was held for more than one year. Slightly different rules may apply to optionees who acquire stock subject to certain repurchase options or who are subject to Section 16(b) of the Exchange Act. REPORT OF THE COMPENSATION COMMITTEE The Compensation Committee is a standing committee of the Board of Directors of the Company. The Compensation Committee is responsible for adopting and evaluating the effectiveness of compensation policies and programs for the Company and for making determinations regarding the compensation of the Com- pany's executive and other officers, subject to review by the full Board of Directors. In fiscal year 1995 the members of the Committee were William R. Kellas and Lee G. Weldon, who are non-employee directors of the Company. The following report is submitted by the Compensation Committee members with respect to the executive compensation policies established by the Compensation Committee and compensation paid or awarded to executive and other officers for fiscal year 1995. In adopting and evaluating the effectiveness of, compensation programs for executive officers, as well as other employees of the Company, the Compen- sation 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 to be able to attract additional well-qualified executives when the need arises, the Company strives to offer salaries, health care and other employee benefit programs to its executives and other key em- ployees which are comparable or better than those offered by competing businesses. In establishing salaries for executive officers, the Compensation Committee reviews (i) the historical performance of the executives; and (ii) 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 in 1994 were generally modest relative to the Company's competitors. Base salary generally increased and potential employee benefits were increased in 1995 as more empha- sis was placed on incentive compensation and stock bonuses to reward employees. PERFORMANCE-BASED COMPENSATION. The Compensation Committee believes that, as a general rule, annual compensation in excess of base salaries should be dependent on the employees performance and the Company's performance, and should be issued if at all based on recommendations of the Committee, and the discretion of the Board. Accordingly, at the beginning of each fiscal year, the Compensation Committee establishes an incentive compensation program ("Bonus Plan") for executive officers and other key management personnel under which executive officers and other key management personnel may earn bonuses, in amounts ranging up to 100% of their annual salaries, provided the Company achieves or exceeds the pre-tax net income goal established for the year. The net income goal is established in part on the basis of an annual operat- ing plan developed by management and approved by the Board of Directors. The annual operating plan and the Company's stock option plans are designed to maximize profitability, within the constraints of economic and competitive conditions, some of which are outside the control of the Company, and are de- veloped on the basis of (i) the Company's performance in the prior year; (ii) estimates of sales revenue for the plan year based upon recent market conditions and trends and other factors which, based on historical experience, are expected to affect the level of sales that can be achieved; (iii) historical operating costs and cost savings that management believes can be realized; and (iv) com- petitive conditions faced by the Company. By taking all of these factors into account, including market conditions, the net income goal in the annual opera- ting plan, which is also a factor on which bonus awards are determined under the Bonus Plan, is fixed at what is believed to be a realistic level so as to make the incentives meaningful to executives and to avoid penalizing executives and other key management personnel for conditions outside of their control. In certain instances, bonuses under the Bonus Plan are awarded not only on the basis of the Company's overall profitability, but also on the achievement by an executive of specific objectives within his or her area of responsibility. For example, a bonus may be awarded for an executive's efforts in achieving greater than anticipated cost savings, or establishing new or expanding existing markets for the Company's products. Typically, the maximum bonus that may be awarded for achievement of specific objectives is determined at the beginning of the year to provide the requisite incentive for such performance. As a result of this performance-based Bonus Plan, executive compensation, and the proportion of each executive's total cash compensation that is represented by incentive or bonus income, increases in those years in which the Company's profitability increases. On the other hand, in years in which the Company experiences less than anticipated profit growth, bonuses, and therefore also total executive compensation, should tend to be lower. The Bonus Plan was ter- minated on July 15, 1995. The Board of Directors may now award bonuses at its discretion. STOCK OPTIONS AND EQUITY-BASED PROGRAMS. In order to align the financial interest of senior executives and other key employees with those of the stock- holders, the Company grants stock options to its senior executives and other key employees on a periodic basis, to purchase Common Stock of the Company. Stock option grants reward senior executives and other key employees for per- formance that results in increases in the market price of the Company's Common Stock, which directly benefits all stockholders. Stock options were granted to executive officers and key employees of the Company in fiscal year 1995. The stock option grants for 1995 were based on the Committee's perception of each executive's contribution to the Company's fiscal performance and achievement of its strategic objectives, the responsibilities associated with his/her position, his/her salary and bonus compensation, and the size of grants by comparable companies. The members of the Committee as- signed no specific weight to any of these specific factors in making option grant determination. OTHER MATTERS. In August 1993, Congress enacted tax legislation that, among other things, places a ceiling of $1 million on the amount of an executive officer's annual compensation that may be deducted for federal income tax pur- poses in any year (the "Deductibility Cap"). The legislation provides compensation paid under certain incentive compensation plans may be excluded from the calculation of compensation subject to the Deductibility Cap, provided the plans meet certain conditions, which are contained in regulations recently adopted by the Internal Revenue Service. The Compensa- tion Committee monitors the potential impact of the Deductibility Cap and does not currently believe, that changes to the Company's compensation plans are needed to preserve the deducti- bility of executive compensation paid by the Company. CHIEF EXECUTIVE OFFICER'S COMPENSATION. Mr. Le Doux, the President and Chief Executive Officer, has an employment contract which establishes his base salary level and evaluation substantially in accordance with the foregoing policies. During fiscal year 1995, Mr. Le Doux's base salary pursuant to his employment agreement was $172,942, and he received an incentive bonus award of $101,203. In determining Mr. Le Doux's base salary and incentive award for fiscal year 1995, the Compensation Committee, at its discretion, considered Mr. Le Doux's role in implementing the Company's stated strategic goals and achievement of record gross revenues and net income. No specific weight was assigned to these factors by the Compensation Committee in determining the amount of Mr. Le Doux's base salary and incentive award. In addition, consis- tent with the Company's policy of linking executive compensation with achieve- ment of long-term strategic goals, Mr. Le Doux was granted options during fis- cal year 1995 to purchase an aggregate of 100,000 shares of the Company's Common Stock. Compensation Committee William R. Kellas Lee G. Weldon The material in this report and the accompanying Stockholder Return Perform- manse Table is not "soliciting material," is not deemed filed with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No current member of the Company's Compensation Committee is a current or former officer or employee of the Company or its subsidiaries. STOCKHOLDER RETURN PERFORMANCE TABLE Set forth below is a table comparing the yearly percentage in the cumulative total stockholder return on the Company's Common Stock with the cumulative total return of the Standard and Poors 500 Index and the AMEX Consumer Goods Index for the period beginning June 30, 1990 and ending June 30, 1995. The table assumes that all dividends have been reinvested. Cumulative Total Return ------------------------------------------------- 6/90 6/91 6/92 6/93 6/94 6/95 ---- ---- ---- ---- ---- ---- Natural Alternatives 100 63 126 133 246 175 International S & P 500 100 107 122 138 140 177 AMEX Consumer Goods 100 117 151 170 160 199 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 February 29, 1996 by: (i) each director and nominee for director; (ii) each of the executive officers named in the Summary Compensation Table in Executive Compensation; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by the Com- pany to be beneficial owners of more than 5% of the Common Stock. ~~DIRECTOR AND OFFICERS~~

(1) Except as indicated in the footnotes to this table and pursuant to appli- cable 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. (2) Shares of common stock which were not outstanding but which could be acquired upon exercise of an option within 60 days from the date of this filing are considered outstanding for the purpose of computing the percentage of out- standing shares beneficially owned. However, such shares are not considered to be outstanding for any other purpose. (3) Includes 183,000 shares held by the Marie Le Doux Charitable Lead Annuity Trust, 550,000 shares held by the Le Doux Family Limited Partnership, 55,000 held by the Marie Le Doux Foundation, 50,000 held by the Marie Le Doux Charit- able Unitrust and 10,000 shares which Mrs. Le Doux has the right to acquire upon exercise of options exercisable within 60 days after the Record Date. Marie Le Doux disclaims beneficial ownership for all of the shares not held in her name. (4) Includes 7,200 shares held as custodian for Marcelle Le Doux, 800 shares held in the name of Mr. Le Doux's wife, and 800 shares held as custodian for Jean-Marc Le Doux. Also includes 160,000 shares which Mr. Le Doux has the right to acquire upon exercise of options exercisable within 60 days after the Record Date. Excludes 550,000 shares held by the Le Doux Family Limited Partnership of which Mr. Le Doux is the General Partner, and also excludes 55,000 held by the Marie Le Doux Foundation of which Mr. Le Doux is the trustee. Mr. Le Doux disclaims benefical ownership for all of the shares held by the partnership, and the foundation. (5) Includes 1,500 shares of common stock held in the name of Dr. Kellas' wife and 15,000 shares which Dr. Kellas has the right to acquire upon exercise of options exercisable within 60 days after the Record Date. (6) Includes 800 shares held by Jennifer Spencer, and 1,600 shares held as custodian for Lauren and Brittany Spencer. Also includes 240,000 shares which Mr. Spencer has the right to acquire upon exercise of options exercisable with- in 60 days after the Record Date. (7) Includes 15,000 shares which Mr. Weldon has the right to acquire upon exer- cise of options exercisable within 60 days after the Record Date. (8) Includes 158,500 shares which Mr. Wise has the right to acquire upon exer- cise of options exercisable within 60 days after the Record Date. (9) Includes 95,000 shares which Mr. Toomey has the right to acquire upon exer- cise of options exercisable within 60 days after the Record Date. There is no arrangement known with Company, the operation of which may at a sub- sequent date, result in a change of control of the Company. COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Section 16(a) of the Securities Exchange Act of 1934 requires the Company's executive officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities, to file reports of owner- ship and changes in ownership with the Securities and Exchange Commission ("SEC") and the American Stock Exchange. 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. Based solely on its review of the copies of reporting forms received by the Company, the Company believes that during its most recent fiscal year ended June 30, 1995, that its officers, directors and greater than 10% stockholders, except as set forth below, complied with the filing requirements under Section 16(a) from the period of June 30, 1994 through June 30, 1995. Director William Kellas, filed late Form 4's for two purchase transactions of Company stock for the period from June 30, 1994 to June 30, 1995. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company leases offices and production facilities from its two principal stockholders, Marie A. Le Doux and Mark A. Le Doux. The lease expires in 2012 and provides for rent payable of $60,000 per year. In the opinion of management and an independent certified appraiser who evaluated the lease at its incep- tion, the lease is on terms no less favorable than could be obtained from un- affiliated parties. The Company has recently entered into an agreement with the Le Douxs' to acquire for $545,000 these leased facilities. The properties have been independently appraised at $580,000. The Company expects to fund the acquisition through conventional mortgage financing and to consummate the transaction during the fourth quarter of fiscal 1996. The Company entered into an agreement with the father-in-law and mother-in- law of the President of the Company in December 1991, which provides commissions on sales to a particular customer. The term of the agreement is ten years and will expire in December 2001. The commission equals 5% of sales, with earnings capped at $25,000 per calendar quarter. Amounts paid under this agreement were $100,000, $95,864 and $105,092 for the years ending June 30, 1995, 1994 and 1993, respectively. There were no accrued and unpaid amounts owed under the agreement at June 30, 1995 or 1994. During fiscal year 1994, the Company wrote-off a $42,000 note plus accrued interest of approximately $9,000 from an unrelated company formerly controlled by John Wise, an executive of the Company. Mr. Wise had controlled the un- related company at the time the note was advanced. Included in notes receivable is a promissory note from the Company's Presi- dent. The balance of the note, including accrued interest, was $91,992 and $86,772 as of June 30, 1995 and 1994, respectively. Additionally, the Company made a noninterest bearing loan in the amount of $100,000 to the Chairman of the Board, which is secured by proceeds from a life insurance policy on the Chairman of the Board's life. During fiscal year 1995, the Company's President paid $26,483 for certain ex- penses on behalf of the Company. Also, during this period, the Company paid commissions in the amount of $10,800 to the Chairman of the Board. PROPOSAL 3 AMENDMENT TO PROVIDE FOR FILLING OF VACANCIES OR NEW POSITIONS ON THE BOARD The Board recommends the Company's Certificate of Incorporation be amended and Restated to add Article Thirteenth, which provides if a new Board seat is created or a vacancy occurs on the Board for any other reason it shall be filled solely by the affirmative vote of a majority of the remaining directors in office, even though less than a quorum, or by the sole remaining director. Directors so elected will hold office for the remainder of the full term of the class of directors in which the new directorship was created, as determined in the same manner or in which the vacancy occurred, and until such director's successor shall have been elected and qualified. Any decrease in the number of directors constituting the Board shall not shorten the term of any incumbent director. The proposed amendment eliminates any stockholder power to fill vacancies or newly created directorships on the Board. The provision is intended to provide stability within the management and organization of the Company by vesting the power to fill vacant positions solely in the elected representatives of the stockholders. It will prevent a third party seeking majority representation on the Board and from obtaining such representation simply by enlarging the Board and then filling the new directorships with its own nominees. The proposed amendment is in accordance with the General Corporation Law of the State of Delaware which provides that vacancies and newly created director- ships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, unless the Certificate of Incorporation or Bylaws provide otherwise. VOTE REQUIRED FOR ADOPTION OF PROPOSED AMENDMENT Under Delaware corporation law, the affirmative vote of the holders of a majority of the shares of stock of the Company entitled to notice of and to vote at the Annual Meeting is required to adopt the proposed amendment to the Certificate. The Board of Directors recommends that stockholders vote FOR the proposed amendment. PROPOSED ARTICLE THIRTEENTH

THIRTEENTH: Newly created directorships resulting from any increase in the number of directors, or vacancies in any existing directorships resulting from death, resignation, disqualification, removal or other cause shall be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though

less then a quorum, or by the sole remaining director. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the Class of Directors in which the new directorship was created as determined in the same manner as the identity of the directors, or the vacancy occurred, and until such ~~director's~~director’s successor shall have been elected and qualified. No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director. PROPOSAL 4 AMENDMENT TO PROVIDE FOR REMOVAL OF DIRECTORS ONLY FOR CAUSE Under the existing terms of the Company's Bylaws, any director of the Company may be removed with or without cause by the affirmative vote of the stockholders having a majority of the voting power of the Company given at a special meeting of the stockholders called for the purpose, or if action is taken without a meeting, by a consent in writing signed by the holders of outstanding stock of the Company having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which the required number of stockholders entitled to vote thereon were present and voted. The Company's Bylaws do not define "cause". If adopted, proposed Article Fourteenth of the amended and Restated Cer- tificate of Incorporation would make it more difficult for the Company's stock- holders to remove a director. First, the proposed amendment would permit removal only upon the vote of the holders of 70% of the outstanding shares of the Company. Second, the proposed amendment defines "cause", limiting it to conviction of a felony or an adjudication by a court of competent jurisdiction that a director was liable for gross negligence or misconduct in the performance of the director's duties to the Company. By making it more difficult for stockholders to remove directors, the pro- posed amendment may discourage outsiders from seeking to acquire control of the Company because they may be delayed in making changes in existing management. In considering the proposed amendment, stockholders should recognize the amend- ment would also make it more difficult to remove a director in circumstances in which a majority of the stockholders believe it is desirable to do so, but which do not constitute a take-over attempt. VOTE REQUIRED FOR ADOPTION OF PROPOSED AMENDMENT Under Delaware corporation law, the affirmative vote of the holders of a majority of the shares of stock of the Company entitled to notice of and to vote at the Annual Meeting is required to adopt the proposed amendment to the Certificate. The Board of Directors recommends that stockholders vote FOR the proposed amendment. PROPOSED ARTICLE FOURTEENTH

FOURTEENTH: No director of the Corporation may be removed except for cause, and the vote of the holders of seventy percent (70%) of the outstanding shares of all classes of capital stock of the Corporation entitled to vote generally in the election of directors, considered for this purpose as one class, shall be required to remove a director for cause. Cause for removal shall be deemed to exist only if the director whose removal is proposed has been convicted in a court of competent jurisdiction of a felony or has been adjudged by a court of competent jurisdiction to be liable for gross negligence, breach of fiduciary duty, or misconduct in the performance of the ~~director's~~director’s obligations to the Corporation, and such conviction or adjudication has become final and non appealable. PROPOSAL 5 AMENDMENT TO PROVIDE NOTICE REQUIREMENT FOR STOCKHOLDERS TO PRESENT PROPOSALS AT A MEETING OF STOCKHOLDERS The Board recommends the Company's Certificate of Incorporation be amended and Restated to add new Article Fifteenth, which provides the only business that may be conducted at any meeting of the stockholders is business that has been brought before the meeting by, or at the direction of, the Board, or by any stockholder of the Company who provides timely notice of the proposal in writing to the Secretary of the Company. To be timely, a stockholder's notice must be delivered to, or mailed to and received at, the principal executive offices of the Company not less than 60 days prior to the scheduled meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date. If, however, less than 70 days notice or prior public disclosure of the date of the scheduled meeting is given or made, notice by the stockholder, to be timely, must be so delivered or received not later than the close of business on the tenth day following the earlier of the day on which such notice of the date of the scheduled meeting was mailed or the day on which such public disclosure was made. The stockholder's notice to the Secretary must set forth in writing each matter the stockholder proposes to bring before the meeting including: a brief description thereof and the reasons for conducting such business at the meeting; the names and addresses, as they appear on the corporate books, of stockholders supporting such proposal; the class and number of shares of the Company's stock which are beneficially owned by the supporting stockholders on the date of the presenting stockholder's notice; and any financial interest of the presenting stockholder in such proposal. The determination as to whether the notice pro- visions have been met will be made by the presiding officer on or before the date of the meeting. This provision applies only to new business and not to other reports of officers, directors, or committees of the Board. At the present time neither the Certificate of Incorporation nor the Bylaws of the Company specify what business may be conducted at a stockholder's meet- ing. The Bylaws currently provide at Section 2.11 thereof for certain pro- cedures and notice requirements for stockholders to present proposals at annual meetings. These Bylaw provisions will conflict with the provisions of this Pro- posal 5 and will be deleted. Pursuant to the authority granted to the Board by Section 8.03 of the Bylaws regarding Amendments, the Board, upon approval of this Proposal 5, shall delete Section 2.11 of the Bylaws and renumber the re- maining sections. Currently any business may be conducted as long as it is specified in the notice of the meeting, or is properly brought before the meet- ing and is in compliance with the Bylaws. A determination as to whether business (other than as specified in the notice of a meeting) is properly brought before a meeting would generally be made by the Chairman of the meeting at the time such business was presented. The proposed amendment provides an orderly procedure for notification to the Board concerning business which is to be presented at stockholders' meetings. This will enable the Board to plan such meetings and also, (to the extent it deems it necessary or desirable), to inform the stockholders, prior to the meeting, of any new business that will be presented at the meeting. The Board will also be able to make a recommendation or statement of its position so as to enable stockholders to better determine whether they desire to attend the meeting or grant a proxy to anyone. The proposed amendment does not give the Board any power to approve or disapprove the business that stockholders desire to be conducted at the meeting, but it does provide for a more orderly procedure for conducting the meeting. The proposed procedure may limit the ability of stockholders to initiate dis- cussion at a stockholders' meeting. It will preclude conducting business at a particular meeting if the proper notice procedures have not been followed. This may also have the effect of discouraging ill-considered, disruptive discussions at stockholders' meetings. Nothing in the proposed amendment precludes dis- cussion by any stockholder of any business properly brought before a meeting. The Board continues to be concerned that a person or group planning to in- fluence the Company's business and affairs for the purpose of securing a short- term profit may initiate extraordinary corporate action by making uninvited presentations at a stockholder's meeting, in an attempt to achieve such a result without offering stockholders or the Board adequate opportunity to consider and act upon the proposal. Although management is not aware that any person or group is presently attempting or contemplating such a proposal, the Board con- siders it desirable to take action to ensure that all business conducted at stockholder's meetings be properly presented to the Board in an adequate amount of time in advance of such meeting for the Board to properly consider the pro- posal, and allow stockholders an opportunity for an open and full consideration of the issues and consequences involved in any such proposal. Thus, the Board is proposing an amendment to the Company's Certificate of Incorporation which is intended to achieve that result. The proposed amendment may make it more difficult and time consuming to initiate control over the Company's business and affairs, and may reduce the viability of the Company to an unsolicited takeover proposal. The proposed amendment will help ensure the Company will have what it considers to be ade- quate time to review and to present to all stockholders the Company's views on any future stockholder proposals. VOTE REQUIRED FOR ADOPTION OF PROPOSED AMENDMENT Under Delaware corporation law, the affirmative vote of the holders of a majority of the shares of stock of the Company entitled to notice of and to vote at the Annual Meeting is required to adopt the proposed amendment to the Certificate. The Board of Directors recommends that stockholders vote FOR the proposed amendment. PROPOSED ARTICLE FIFTEENTH nonappealable.

FIFTEENTH: At any regularly scheduled meeting of stockholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been brought before the meeting (a) by, or at the direction of, the Board, or (b) by any stockholder of the Corporation who complies with the notice procedures set forth in this Article Fifteenth. For a proposal to be properly brought before a meeting by a stockholder, ~~they~~the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a ~~stock- holder's~~stockholder’s notice must be delivered to, or mailed and received at, the principal executive office of the Corporation no less than 60 days prior to the scheduled meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date; provided, however, that if less than 70 ~~days~~days’ notice or prior public disclosure of the date of the scheduled meeting is given or made, notice by the stockholder, to be timely, must be so delivered or received not later than the close of business on the tenth day of the following the earlier of the day on which such notice of the date of the scheduled meeting was mailed, or the day on which such public disclosure was made. A ~~stockholder's~~stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting: (a) a brief description of the proposal desired to be brought before the meeting and the reasons for conducting such business at the meeting; (b) the name and address, as they appear on the ~~Corporation's~~Corporation’s books, of the stockholder proposing such business and any other stockholder known by such stockholder to be supporting such proposal; (c) the class and number of shares of the ~~Corporation's~~Corporation’s stock which are beneficially owned by the stockholder on the date of such ~~stockholder's~~stockholder’s notice and by any other ~~stockholders~~stockholder known by such stockholder to be supporting such proposal, on the date of such ~~stock- holder~~stockholder notice; and (d) any financial interest in any aspect of the proposal of the stockholder making the proposal or any other stockholder known by such stockholder to be supporting the proposal.

The presiding officer of the meeting shall determine and declare at or before the meeting whether the stockholder proposal was made in accordance with the terms of this Article Fifteenth. If the presiding officer determines that a stockholder proposal was not made in accordance with the terms of this Article Fifteenth, he or she shall so declare at the meeting and any such proposal shall not be acted upon at the meeting.

This provision shall not prevent the consideration and approval or ~~dis- approval~~disapproval at the meeting of reports of officers, directors and committees of the Board, but, in connection with such reports, no new business shall be acted upon at such meeting ~~unless stated,~~state, filed and received as herein provided. PROPOSAL 6 AMENDMENT TO PROVIDE NOTICE REQUIREMENTS FOR NOMINATIONS OF DIRECTORS BY STOCKHOLDERS The Board recommends the Company's Certificate of Incorporation be amended and Restated to add Article Sixteenth, which provides that, only persons who are nominated in accordance with the procedures specified in Article Sixteenth shall be eligible for election as directors. Such nominations may be made at a meet- ing of the stockholders, called for the purpose of electing directors, by or at the direction of the Board, by any nominating committee or person appointed by the Board, or by any stockholder of the Company entitled to vote for the election of directors at the meeting, provided such stockholder has complied with certain notice procedures. Written notice of a stockholder nomination must be made to the Secretary of the Company not less than 60 days prior to the scheduled meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date. If, however, less than 70 days notice or prior public disclosure of the date of the scheduled meeting is given, notice by the stockholder must be so delivered or received not later than the close of business on the tenth day following the earlier of the day on which such notice of the date of the scheduled meeting was mailed or the day on which public dis- closure was made. This notice must set forth the name, age, business address and residence address of the person being nominated, that person's principal occupation or employment, the class and number of shares of capital stock of the Company which are beneficially owned by that person, and any other information required to be disclosed under the rules of the Securities and Exchange Commission. The notice must also include the name and the address of the stockholder presenting the nomination, and the class and number of shares of the company's stock which are beneficially owned by that person on the date of the stockholder notice. Other relevant information may also be requested by the Company. The validity of the notice will be determined by the presiding officer at or before the stockholder meeting. Without this amendment, a stockholder could nominate any person for election as a director, without prior notice to the Board or other stockholders, at any meeting called for the purpose of electing directors. The advance notice re- quirement, by preventing stockholder nominations from the floor at a meeting of stockholders, affords the Board a meaningful opportunity to consider the quali- fications of the proposed nominees and, to the extent it deems it necessary or desirable, to inform stockholders about such qualifications. The Board believes this provision will further the objective of identifying candidates who have the character, education, training, experience and proven accomplishments that give promise of significant contribution to the responsible and profitable con- duct of the Company's business. The Board believes it is advantageous to be able to consider in advance the qualification of any proposed nominee, as opposed to being confronted with a surprise nomination at or shortly before a meeting of stockholders. The proposed amendment may make it more difficult and time consuming to initiate control over the Company's business and affairs, and may reduce the viability of an unsolicited takeover proposal. The proposed amendment should help ensure the Company will have what it considers to be adequate time to review, and to present to all stockholders the Company's views on any future nominations to the Board. The proposed amendment may make it more difficult or discourage the assump- tion of control by a holder of a substantial block of the Company's voting shares, a proxy contest, or the removal of the incumbent Board, by limiting the opportunity for such actions to those actions which are properly noticed prior to the stockholder's meetings. This could increase the likelihood incumbent directors and management will retain their positions. The amendment does not take away the stockholder's right to take any of these actions as long as the notice procedures are complied with. The proposed amendment is in part intend- ed to encourage persons seeking to acquire control of the Company to initiate such an acquisition through arms-length negotiations with the Company's manage- ment and its Board of Directors. VOTE REQUIRED FOR ADOPTION OF PROPOSED AMENDMENT Under Delaware corporation law, the affirmative vote of the holders of a majority of the shares of stock of the Company entitled to notice of and to vote at the Annual Meeting is required to adopt the proposed amendment to the Certificate. The Board of Directors recommends that stockholders vote FOR the proposed amendment. PROPOSED ARTICLE SIXTEENTH

SIXTEENTH: Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders called for the purpose of electing directors, by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors, or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting so long as the stockholder complies with the notice procedures set forth in this Article ~~Six- teenth.~~Sixteenth. Such nominations, other than those made by or at the direction of the Board of Directors, or by any nominating committee or person appointed by the Board of

Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to, or mailed and received at, the principal executive office of the Corporation not less than 60 days prior to the scheduled meeting, regard- less of any postponements, deferrals or adjournments of that meeting to a later date; provided, however, that if less than 70 days notice or prior public disclosure of the date of the scheduled meeting is given or made, notice by the stockholder, to be timely, must be delivered or received not later than the close of business on the tenth day following the earlier of the day on which such notice of the date of the scheduled meeting was mailed or the day on which such public disclosure was made. A stockholder's notice to the Secretary shall set forth: (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Corp- oration which are beneficially owned by the person and (iv) any other infor- mation relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Rule 14a under the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving notice (i) the name and address, as they appear on the Corporation's books, of the stockholder and (ii) the class and number of shares of the Corporation's stock which are beneficially owned by the stockholder on the date of such stockholder notice. The Corporation may require any proposed nominee to furnish such other information as may be required by the Corporation in its reasonable discretion, in order to determine the eligibility of such proposed nominee to serve as a director of the Corporation. PROPOSAL 7 AMENDMENT TO PROHIBIT THE PAYMENT OF GREENMAIL The Board recommends that the Company's Certificate of Incorporation be amended to add the following new Article Seventeenth prohibiting "greenmail". The term "greenmail" is used to describe a negotiated stock repurchase by a corporation at a premium above the then current market price, in exchange for an agreement by the seller not to proceed with an acquisition attempt. If the real purpose of a takeover bid were to force the Company to repurchase an accumu- lated stock interest at a premium price, management faces the risk that if it does not repurchase the seller's stock, the Company's business and management will be disrupted. In addition, receipt of greenmail may confer a benefit on one stockholder not available to the stock- holders generally, and result in unequal treatment of stockholders. The pro- posed amendment, by prohibiting the payment of "greenmail", would eliminate the opportunity for such disruption or dissimilar treatment. Under Delaware corporation law, a corporation may enact amendments to its certificate of incorporation that prevent greenmail from being paid. The pro- posed amendment would prevent the repurchase of a substantial block of the Company's stock at a premium price from any person who has owned five percent or more of the outstanding shares of the Company's stock for a period of less than two years, without the prior approval of the holders of a majority of the Company's shares not owned by such person. The proposed amendment also contains terms designed to distinguish transactions that present the risk of greenmail from repurchase transactions that either serve valid corporate purposes, or that do not otherwise present the risk of greenmail. The proposed amendment would not apply to a tender offer or exchange offer by the Company made on the same terms to all holders of its shares, or to an open market stock purchase program approved by the Board. The proposed anti-greenmail amendment prevents a short-term (less than two years) investor holding five percent or more of the Company's stock from receiv- ing different treatment from other stockholders by having its Company stock bought back by the Company at a premium above the market price unless approved by holders of a majority of the other shares. It also discourages the accumu- lation of a block of stock by a person who does not have the resources or the intent to make a bona fide acquisition proposal to the Company. The disruption of the Company's operations that such an accumulation and the accompanying threats would cause would be eliminated. Prohibiting greenmail would also have the effect of restricting the ability of Company management to seek to retain its position by buying off at a premium price a serious potential acquisition offer at a price that would be beneficial to the stockholders. Since the amendment is designed to discourage accumulations of large blocks of the Company's stock by purchasers whose objective is to have such stock repurchased by the Company at a premium, adoption of the amendment could tend to reduce any temporary fluctuations in the market price of the Company's stock which may be caused by accumulations of large blocks of the Company's stock. Accordingly, stockholders could be deprived of certain opportunities to sell their stock at a temporarily higher market price. In addition, greenmail may have the effect of increasing the price of the Company's stock by serving as a credible signal to potential alternative bidders that an opportunity is available that warrants attention, thereby resulting in a takeover of the Company at a favorable price to the stockholders in general. The proposed amendment by eliminating greenmail payments will have the effect of eliminating this signaling function. VOTE REQUIRED FOR ADOPTION OF PROPOSED AMENDMENT Under Delaware corporation law, the affirmative vote of the holders of a majority of the shares of stock of the Company entitled to notice of and to vote at the Annual Meeting is required to adopt the proposed amendment to the Certificate. The Board of Directors recommends that stockholders vote FOR the proposed amendment. PROPOSED ARTICLE SEVENTEENTH SEVENTEENTH: 1. In addition to any affirmative vote required or permitted by law or this Certificate of Incorporation or the Bylaws of the Corporation, and except as otherwise expressly provided in Paragraphs 1(a) and 1(b) of this Article Seventeenth, the Corporation shall not effect, directly or indirectly, any Stock Repurchase from an Interested Stockholder unless said Stock Repurchase is authorized by the affirmative vote of the Voting Stock, voting together as a single class, which shares are beneficially owned by Persons other than such Interested Stockholder. The preceding provisions of this Article Seventeenth shall not be applicable to any Stock Repurchase from an Interested Stockholder if such Stock Repurchase is effected by the Corporation pursuant to: (a) a tender offer or exchange offer by the Corporation for some or all of the outstanding shares of any or all classes of stock of the Corporation made on the same terms to all holders of such shares; or (b) an open market stock purchase program approved by a majority of those members of the Board who were duly elected and acting members of the Board prior to the time such person became an Interested Stockholder. 2. For purposes of this Article Seventeenth: (a) The following terms shall be defined by reference to the Securities Exchange Act of 1934 and the Rules in effect thereunder on the date of this Restated Certificate:"Subsidiary" under Rule 12b-2; (b) An "Interested Stockholder" shall mean a Person (other than any Sub- sidiary of the Corporation, any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary of the Corp- oration, or any trustee of or fiduciary with respect to any such plan when acting in such a capacity) who: (i) has been a Beneficial Owner for a period of less than two years immediately prior to the Determination Date of five percent or more of the issued and outstanding shares of Voting Stock (including any Voting Stock which such Person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or under- standing or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (ii) is an Affiliate of the Corporation who became the Beneficial Owner of five percent or more of the issued and out- standing shares of Voting Stock at any time within the two-year period immed- iately prior to the Determination Date; or (iii) is an assignee of or has other- wise succeeded to any shares of Voting Stock which were beneficially owned by any Interested Stockholder at any time within the two-year period prior to the Determination Date, if such assignment or succession shall have occurred in the course of a transaction or series of transaction not involving a public offering within the meaning of the Securities Act of 1933. (c) The terms "Stock Repurchase" shall mean any direct or indirect pur- chase by the Corporation or any Subsidiary of the Corporation of any shares of the stock of the Corporation at a price greater than the Market Price of such shares, or any direct or indirect purchase of such shares for any consideration other than cash. (d) "Market Price" shall mean the closing sale price on the trading day immediately preceding the Determination Date of a share of the Corporation's stock on the Composite Tape for American Stock Exchange-Listed stocks, or, if such stock is not listed on such Exchange, on the principal United States securities exchange on which stock is listed, or, if such stock is not listed on any such exchange, the closing bid quotation with respect to a share of such stock on the last trading day immediately preceding the Determination Date on the National Association of Securities Dealers, Inc. automated quotations system or any similar system then in use, or if no such quotations are available, the fair market value on the Determination Date of a share of such stock as deter- mined in good faith by a majority of the Board. (e) "Determination Date" shall mean the date upon which the determination of Market Price is made by the Board. (f) The term "Person" shall mean any individual, firm, corporation or other entity and shall include any group comprising any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of stock. 3. Nothing contained in this Article shall be construed to relieve any Inter- ested Stockholder from any fiduciary obligation imposed by law. 4. The Board shall have the power and duty to determine for the purposes of this Article Seventeenth on the basis of information known to its members after reasonable inquiry, (1) whether a Person is, and if so, when such Person be- came, an Interested Stockholder, (2) the number of shares of stock of the Corp- oration or other securities of which any Person is a Beneficial Owner and the number of votes entitled to be cast by such Person, (3) whether a Person is an Affiliate or Associate or another, and (4) whether the price proposed to be paid for any shares of stock of the Corporation is in excess of the Market Price of such shares. Any such determination made in good faith shall be binding on and conclusive for all parties. For the purposes of determining whether a Person is an Interested Stockholder pursuant to Paragraph 2(b) of this Article, the shares of stock of the Corp- oration deemed to be outstanding shall include shares deemed beneficially owned by such Person through application of Paragraph 2(a) of this Article, but shall not include any other shares of stock of the Corporation that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. PROPOSAL 8 AMENDMENT TO PROVIDE A FAIR PRICE PROVISION Proposed Article Eighteenth, which follows, provides certain safeguards for the prevention of coercive and unfair two-part takeovers or other Business Com- bination (as hereinafter defined) which could eliminate or fundamentally change the interests of the remaining stockholders. Proposed Article Eighteenth would require that unless certain minimum price requirements are satisfied, such Bus- iness Combinations must be approved by either the affirmative vote of 75% of the Board and the affirmative vote of the holders of a majority of the outstanding shares of Common Stock (to the extent stockholder approval is required under Delaware law) or the affirmative vote of the holders of two-thirds of the out- standing shares of Common Stock. In order to comply with the minimum price re- quirements, the Acquiring Person (as hereinafter defined) would have to give holders of shares of each class or series of capital stock of the Company a Fair Price, as such term is defined in the proposed Article below. A Business Combination is defined in proposed Article Eighteenth to include (i) mergers or consolidations with an Acquiring Person; (ii) sales or other dis- positions of all or substantially all of the Company's or an Acquiring Person's assets to the other; (iii) the adoption of any plan or proposal for the liquid- ation of the Company proposed by or on behalf of an Acquiring Person; and (iv) reclassifications of securities, recapitalizations and any other transactions which would have the effect, directly or indirectly, of increasing an Acquiring Person's proportionate ownership of the outstanding shares of any class of equity or convertible securities of the Company or a subsidiary of the Company. An Acquiring Person is principally defined as any individual, firm, corp- oration, or other entity (other than the Company, a subsidiary of the Company or any Company employee benefit plan) which is the beneficial owner of 15% or more of the outstanding Common Stock of the Company. Acquisitions of stock by persons attempting to acquire control of the Company through market purchases may cause the market price of the stock to reach levels which are higher than would otherwise be the case. Proposed Article Eighteenth may discourage such purchases, particularly those of less than all of the Company's outstanding shares, and may thereby deprive holders of the Company's stock of an opportunity to sell at least some of their shares at a temporarily higher price. Because of the potentially higher percentage voting requirements for stockholder approval of any subsequent Business Combination and the possi- bility of having to pay a higher price to other stockholders in such a Business Combination, it may become more costly for a purchaser to acquire control of the Company after adoption of this proposal. Proposed Article Eighteenth may there- fore decrease the likelihood that a hostile tender offer will be made and, as a result, may adversely affect those stockholders who would desire to part- icipate in such a tender offer. Another effect of adoption of proposed Article Eighteenth would be to give veto power to the holders of a minority of the voting stock with respect to a Business Combination which is opposed by the Board but which the holders of a majority of the outstanding shares believe to be desirable and beneficial. Nevertheless, the Board believes that the advantages to the Company and its stockholders generally of proposed Article Eighteenth clearly outweigh any potential disadvantages and give greater flexibility to the Board than does Section 203 of the Delaware General Corporation Law. Under the proposed Art- icle, provided at least 75% of the Board approve, only a majority of the out- standing Common Stock will be required to approve a proposed Business Combina- tion, as opposed to the two-thirds stockholder approval required by Section 203. There is no exception to the two-thirds requirement contained in Section 203 based solely on Board approval. The adoption of proposed Article Eighteenth will not preclude the Board's op- position to any future acquisition proposal which it believes not to be in the best interest of the Company and the stockholders, whether or not such a propo- sal purports to satisfy the minimum price criteria of proposed Article Eight- eenth. VOTE REQUIRED FOR ADOPTION OF PROPOSED AMENDMENT Under Delaware corporation law, the affirmative vote of the holders of a ma- jority of the shares of stock of the Company entitled to notice of and to vote at the Annual Meeting is required to adopt the proposed amendment to the Certi- ficate. The Board of Directors recommends that stockholders vote FOR the proposed amendment. PROPOSED ARTICLE EIGHTEENTH EIGHTEENTH: The affirmative vote of the holders of not less than two-thirds of the outstanding shares of the Corporation's common stock (other than the shares beneficially owned by an "Acquiring Person" as hereinafter defined) shall be required for the approval or authorization of any "Business Combination" (as hereinafter defined) of the Corporation or any subsidiary of the Corporation with any Acquiring Person, notwithstanding the fact that no vote may be re- quired, or that a lesser percentage may be specified by law or otherwise; provi- ded, however, that the two-thirds outstanding common stock requirement shall not be applicable and such Business Combination shall require only such affirma- tive vote as is required by law or otherwise if: (i) the Board of Directors of the Corporation by at least a 75% vote has expressly approved such Business Com- bination either in advance of or subsequent to such Acquiring Person becoming an Acquiring Person; or (ii) as of the date of the consummation of a Business Combination, the holders of a particular class or series of capital stock, as the case may be, of the Corporation receive a Fair Price as such term is de- fined in subsection (c) below. For the purpose of this Article Eighteenth: (a) The term "Business Combination" shall mean any (i) merger or consoli- dation of the Corporation or a subsidiary of the Corporation with an Acquiring Person or any other Corporation which is or after such merger or consolidation would be an "Affiliate" or "Associate" (as hereinafter defined) of an Acquiring Person; (ii) sale, lease or transfer (in one transaction or a series of trans- actions) with any Acquiring Person or any Affiliate of any Acquiring Person, of all or substantially all of the assets of the or of a subsidiary of the Corpora- tion to an Acquiring Person or any Affiliate or Associate of any Acquiring Person; (iii) adoption of any plan or proposal for the liquidation or dissolu- tion of the Corporation proposed by or on behalf of an Acquiring Person or any Affiliate or Associate of any Acquiring Person; (iv) reclassification of securi- ties (including any reverse stock split) or recapitalization of the Corporation or any other transaction that would have the effect, either directly or indi- rectly, of increasing the proportionate ownership of any class of equity or con- vertible securities of the Corporation or any subsidiary of the Corporation which is directly or indirectly beneficially owned by an Acquiring Person or any Affiliate or Associate of any Acquiring Person; and (v) an agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Combination. (b) The term "Fair Market Value" shall mean (i) in the case of shares, if such shares are listed on an exchange, the highest closing bid quotation with respect to the shares during the 30-day calendar period preceding the date in question, or the highest closing sale price quoted during the 30-day calendar period immediately preceding the consummation of the Business Combination on the National Association of Securities Dealers, Inc. automated quotations system or any similar system then in general use, or, if no such quotations are avail- able, the fair market value of a share on the date in question as determined by 75% of the Board of Directors; and (ii) in the case of property other than cash or shares, the fair market value of such property on the date in question as determined by 75% of the Board of Directors. (c) The term "Fair Price" shall mean that the aggregate amount of cash and the Fair Market Value of consideration other than cash to be received per share are at least equal to the highest of the following: (i) if applicable, the highest per share price, including any brokerage commissions, transfer taxes, and soliciting dealers' fees, paid by the Acquiring Person for any shares ac- quired by it within the two year period immediately preceding the consummation of the Business Combination or the transaction in which it became an Acquiring Person, whichever is higher; or (ii) the Fair Market Value per share. (d) The term "Person" shall mean any individual, firm, corporation or other entity and shall include any group comprised of any Person and any other Person with whom such person or any Affiliate or Associate of such Person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of voting stock of the Corporation. (e) The term "Acquiring Person" shall mean any Person (other than the Corporation, or any subsidiary or any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capa- city) who or which: (i) is the Beneficial Owner (as hereinafter defined for pur- poses of this Section only) of 15% or more of the outstanding common stock of the Corporation: (ii) is an Affiliate or Associate of the Corporation and at any time within the two year period immediately prior to the date in question was the Beneficial Owner of 15% or more of the outstanding common stock of the Corporation; or (iii) is at such time an assignee of or has otherwise succeeded to the beneficial ownership of any shares of outstanding common stock of the Corporation which were at any time within the two year period immediately prior to such time beneficially owned by any Acquiring Person, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securi- ties Act of 1933. (f) A Person shall be a Beneficial Owner of any common stock: (i) which such Person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or (ii) which such person or any of its Affiliates or Associates has, directly or indirectly, (a) the right to acquire whether such right is exercisable immediately or not, pursuant to any agreement, arrangement or under- standing or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; (g) An Acquiring Person shall be deemed to have acquired a share of the common stock of the Corporation at the time when such Acquiring Person became the beneficial owner thereof. PROPOSAL 9 BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS: ELECTION NOT TO BE GOVERNED BY THE PROVISIONS OF SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW Proposed Article Nineteenth, which follows, would remove the Company from the requirements of Section 203 of the Delaware General Corporation Law. Section 203 of the Delaware General Corporation Law generally provides that certain transactions between a Delaware Corporation and an "interested stockholder" be approved, with certain exceptions, by two-thirds of the Corporation' s out- standing voting stock (excluding from such computation stock owned by the in- terested stockholder). An interested stockholder ("Interested Stockholder") is (i) an owner of 15% or more of the outstanding "voting stock" of the corpora- tion; or (ii) an affiliate or associate of the corporation who was the owner of 15% or more of the outstanding voting stock of the corporation at any time within the three year period prior to the date on which it is sought to be de- termined whether such person is an Interested Stockholder, and the affiliates and associates of such person. The term "owner" includes (i) beneficial owner- ship; (ii) shares held by other persons with whom the Interested Stockholder has an understanding for the purpose of acquiring, holding, voting or disposing of the shares; and (iii) other arrangements, such as options to acquire shares. Section 203 is an attempt to restrict two-part takeovers of corporations. A two-part takeover is designed to put maximum pressure on stockholders to sell their shares in a tender offer in order to avoid receiving a diminished value in a subsequent merger after the tender offer is completed. Tender offers or other non-open market acquisitions of stock are usually made at prices above the prevailing market price of a company's stock. An entity or person who acquires control or even a significant minority position in a company could subsequently, by virtue of such control or position, force minority stockholders to sell or exchange their shares at a price which would not reflect any premium such en- tity or person may have paid in order to acquire its or his controlling in- terest, but would instead effectively be set by such entity or person. Such a price might be lower than the price paid in acquiring its interest, or be paid in a less desirable form (i.e., equity or debt securities instead of cash.) The Board has proposed the adoption of a Fair Price amendment (see Article Eighteenth above) which is more restrictive than Section 203. To avoid con- fusion, the Board recommends electing not to be governed by Section 203 as pro- vided under such section. By law, the election not to be governed by Section 203 will not be effective until 12 months after the adoption of the amendment and will not apply to any Business Combination between the Company and any person who became an Interested Stockholder prior to the amendment. Mark A. Le Doux and Marie A. Le Doux will not be considered Interested Stock- holders, as defined in Section 203, since they either (i) acquired greater than 15% of the outstanding Common Stock prior to December 23, 1987, or (ii) ac- quired their shares of Common Stock by gift from a person falling within (i) above, both of which are exceptions under Section 203 to the definition of In- terested Stockholder. VOTE REQUIRED FOR ADOPTION OF PROPOSED AMENDMENT Under Delaware corporation law, the affirmative vote of the holders of a ma- jority of the shares of stock of the Company entitled to notice of and to vote at the Annual Meeting is required to adopt the proposed amendment to the Certi- ficate. The Board of Directors recommends that stockholders vote FOR the proposed amendment. PROPOSED ARTICLE NINETEENTH NINETEENTH: The Corporation expressly elects not to be governed by Section 203 of the Delaware General Corporation Law, as amended from time to time, which relates to business combinations with interested stockholders. PROPOSAL 10 AMENDMENT TO REQUIRE A 70% VOTE TO AMEND OR REPEAL CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION The Board recommends the Company's Certificate of Incorporation be amended to add Article Twentieth which requires that in order to amend, repeal or adopt any provision inconsistent with Articles Second, Seventh, Eighth, Twelfth, Thir- teenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth, Nineteenth and Twentieth of the amended and Restated Certificate of Incorporation the af- firmative vote of at least 70% of the outstanding shares of voting stock of the Company shall be required. Under the General Corporation Law of the State of Delaware, amendments to the Certificate of Incorporation require the approval of the holders of a majority of the outstanding stock entitled to vote thereon, but the law also permits a corporation to include provisions in its Certificate of Incorporation which require a greater vote than the vote otherwise required by law for any corporate actions. With respect to such supermajority provisions, Delaware law requires that any alteration, amendment or repeal thereof be approved by an equally large stockholder vote. The requirement of an increased stockholder vote is designed to prevent a per- son holding or controlling a majority, but less than 70%, of the shares of the Company from avoiding the requirements of the proposed amendments by simply re- pealing them. Proposed Article Twentieth which follows, would require that in order to amend, repeal or adopt any provision inconsistent with any proposed Articles Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth, Nineteenth and Twentieth herein and existing Articles Second, Seventh and Eighth, the affirmative vote of at least seventy percent (70%) of the outstan- ding shares of voting stock shall be required. VOTE REQUIRED FOR ADOPTION OF PROPOSED AMENDMENT Under Delaware corporation law, the affirmative vote of the holders of a ma- jority of the shares of stock of the Company entitled to notice of and to vote at the Annual Meeting is required to adopt the proposed amendment to the Certi- ficate. The Board of Directors recommends that stockholders vote FOR the proposed amendment. PROPOSED ARTICLE TWENTIETH TWENTIETH: Notwithstanding any other provision of this Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least seventy percent (70%) of the voting power of all of the then outstanding shares of the stock of the Corporation entitled to vote generally in the election of Directors, voting together as a single class, shall be required to amend in any respect or repeal this Article Twentieth, or Articles Second, Third, Eighth, Ninth, Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth, Nineteenth, and Twentieth. PROPOSAL 11 APPROVAL OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION The Board recommends the Restated Certificate of Incorporation in the form attached hereto as Exhibit "A" be approved in its entirety. The significant changes in the Restated Certificate of Incorporation are summarized in Proposals 2-11 as described above. Because of the number of significant changes to the Certificate of Incorporation, the Board determined a Restated Certificate of Incorporation would more clearly set forth both the proposed changes and the resulting complete Certificate of Incorporation, rather than simply an amend- ment to the Certificate of Incorporation. Vote Required for Adoption of Proposed Amendment Under Delaware corporation law, the affirmative vote of the holders of a majority of the shares of stock of the Company entitled to notice of and to vote at the Annual Meeting is required to adopt the proposed Restated Certi- ficate of Incorporation. The Board of Directors recommends that stockholders vote FOR the proposed amendment. PROPOSAL 12: RATIFICATION AND APPROVAL OF THE 1994 NONQUALIFIED STOCK OPTION PLAN AND THE GRANT OF OPTIONS TO PURCHASE 500,000 SHARES The Company is seeking stockholder ratification and approval of the 1994 Nonqualified Stock Option Plan ("1994 Plan"), and the grant of options to pur- chase 500,000 shares pursuant thereto. The 1994 Plan is attached as Exhibit B to this Proxy Statement. The 1994 Plan was approved by the Board of Directors on December 9, 1994. The total number of shares which were reserved for issuance under the 1994 Plan was 500,000 shares. On January 24, 1995, the Board of Directors granted options to purchase all 500,000 shares of Common Stock under the 1994 Plan. As of March 20, 1996, none of these options were exercised. A summary description of the principal terms and conditions of the 1994 Plan is set forth on pages 11-13 of the Proxy Statement. The summary of the 1994 Plan is qualified in its entirety by reference to Exhibit B. The Board of Directors believes the 1994 Plan and the options granted to date are necessary to enable the Company to compete successfully with other companies to attract and retain valuable employees. The Board of Directors further believes that the options granted under the 1994 Plan provide an in- centive for the optionees to continue to promote the best interest and long- term performance of the Company. Vote Required for Ratification of 1994 Plan and the Grant of options to pur- chase 500,000 shares thereunder Under Delaware corporation law, the affirmative vote of the holders of a majority of the shares of stock of the Company entitled to notice of and to vote at the Annual Meeting is required to ratify and approve the 1994 Plan and the grant of options to purchase 500,000 shares thereunder. The Board of Directors recommends that stockholders vote FOR ratification and approval of the 1994 Plan and the options granted thereunder PROPOSAL 13: SELECTION OF AUDITORS Subject to stockholder approval at the Annual Meeting, the Board of Directors has selected KPMG Peat Marwick LLP to continue as the Company's independent au- ditors for the fiscal year ending June 30, 1996. A representative of KPMG Peat Marwick LLP is expected to be present at the Annual Meeting. The representative will have an opportunity to make a statement and will be available to respond to appropriate questions from stockholders. Stockholder ratification of the selection of KPMG Peat Marwick LLP as the Com- pany's independent auditors is not required by the Company's Bylaws or other- wise. However, the Board is submitting the selection of KPMG Peat Marwick 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 KPMG Peat Marwick LLP. The Board of Directors recommends a vote FOR Proposal 13 STOCKHOLDERS' PROPOSALS Stockholders who intend to submit proposals at the 1997 Annual Meeting must submit such proposals to the Company no later than March 1, 1997 in order for them to be included in the Proxy Statement and the form of Proxy to be distri- buted by the Board of Directors in connection with that meeting. Stockholders proposals should be submitted to Natural Alternatives International, Inc., 1185 Linda Vista Drive, Suite D, San Marcos, CA 92069. ANNUAL REPORTS The Company's 1995 Annual Report on Form 10-K which includes audited financial statements for the Company's fiscal year ended June 30, 1995, is being mailed with this Proxy Statement to stockholders of record on or about April 10, 1996. OTHER MATTERS The Board of Directors know of no other matters which will be brought before the Annual Meeting. However, if any other matter properly comes before the An- nual 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. Marie A. Le Doux, Secretary San Marcos, California March 31, 1996 EXHIBIT A: RESTATED CERTIFICATE OF INCORPORATION RESTATED CERTIFICATE OF INCORPORATION OF NATURAL ALTERNATIVES INTERNATIONAL, INC. Natural Alternatives International, Inc., a corporation organized and ex- isting under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the corporation (which is hereinafter referred to as the "Corporation") is Natural Alternatives International, Inc. 2. The original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on October 26, 1989 ("Original Certificate") and a Certificate of Amendment was filed with the Secretary of State of the State of Delaware on April 5, 1991. 3. The Restated Certificate of Incorporation has been duly proposed by resolutions adopted and declared advisable by the Board of Directors of the Cor- poration, duly adopted by the stockholders of the Corporation at a meeting duly called, and duly executed and acknowledged by the officers of the Corporation in accordance with the provisions of Sections 103, 242 and 245 of the General Cor- poration Law of the State of Delaware and, restates, integrates and further amends the provisions of the Original Certificate and, upon filing with the Secretary of State in accordance with Section 103, shall thenceforth supersede the Original Certificate and shall, as it may thereafter be amended in accor- dance with its terms and applicable law, be the Restated Certificate of the Corporation. 4. The text of the Original Certificate is hereby amended and restated to read in its entirety as follows: FIRST: The name of the Corporation is Natural Alternatives International, Inc. SECOND: For the purpose of this Certificate of Incorporation: A. "Affiliate" and "Associate" have the meanings set forth in Rule 12b-2 under the Securities Exchange Act of 1934 as in effect on the date of fi- ling of this Certificate. B. "Beneficial Owner," "Beneficial Ownership" and "Beneficially Owns" have the meanings set forth in the Rule 13d-3 under the Securities Ex- change Act of 1934 as in effect on the date of filing of this Certificate. C. "Continuing Director" means, as to any Related Person, a member of the Board of Directors of the Corporation (the "Board") who (1) is unaffili- ated with and is not the Related Person and (2) was a member of the Board of Di- rectors of Natural Alternatives International, Inc., a Colorado corporation, prior to October 22, 1989 or thereafter became a member of the Board prior to the time that the Related Person became a Related Person, and any successor of a Continuing Director who is recommended to succeed a Continuing Director by a majority of Continuing Directors then on the Board. D. "Disinterested Shares" means, as to any Related Person, shares of Voting Stock held by stockholders other than a Related Person. E. "Related Person" means and includes any individual, corporation, partnership or other person or entity, or any group of two or more of the fore- going that have agreed to act together, which, together with its Affiliates and Associates, Beneficially Owns, in the aggregate, ten percent (10%) or more of the outstanding Voting Stock, and any Affiliate or Associates of any such indi- vidual, corporation, partnership or other person, entity or group. F. "Voting Stock" means all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors of the Corporation, and each reference to a percentage or portion of shares of Voting Stock shall refer to such percentage or portion of the votes entitled to be cast by such shares. THIRD: The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. FOURTH: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may now or hereafter be organized under the General Corporation Law of the State of Delaware ("GCL"). FIFTH: The total authorized number of shares of the Corporation shall be 8,500,000 shares, consisting of shares designated as Common Stock, $.01 par value, and 500,000 shares designated as Preferred Stock, $.01 par value. Shares of the Preferred Stock may be issued from time to time in one or more series. The Board of the Corporation is hereby expressly authorized to establish and designate one or more series of the Preferred Stock, to fix the number of shares constituting each series, and to fix the designations and the powers, rights, preferences, qualifications, limitations, and restrictions of the shares of each series and the variations of the relative powers, rights, preferences, qualifications, limitations and restrictions as between series, and to increase and to decrease (but not below the number of shares of such series then outstanding) the number of shares constituting each series. Such determin- ations may be fixed by a resolution or resolutions adopted by the Board. SIXTH: Elections of directors at an annual or special meeting of the stockholders may be by written ballot unless the Bylaws of the Corporation shall otherwise provide. SEVENTH: Any action required or permitted to be taken at any annual or special meeting of stockholders may be taken only upon the vote of the stock- holders at an annual or special meeting duly noticed and called, as provided in the Bylaws of the Corporation, and may not be taken by a written consent of the stockholders pursuant to the GCL. EIGHTH: Special meetings of stockholders of the Corporation for any pur- pose or purposes may be called at any time by the Board, or by a majority of members of the Board; provided, however, that where a proposal requiring stock- holder approval is made by or on behalf of a Related Person or director affili- ated with a Related Person, or where a Related Person otherwise seeks action requiring stockholder approval, then the affirmative vote of a majority of the Continuing Directors shall also be required to call a special meeting of stock- holders for the purpose of considering such proposal or obtaining such approval. Special meetings of stockholders of the Corporation may not be called by any other person or persons or in any other manner. NINTH: A. The Corporation may indemnify, to the full extent authorized or permitted by law, any person made, or threatened to be made, a defendant or witness to any action, suit or proceeding (whether civil or criminal or other- wise) by reason of the fact that he, his testator or intestate, is or was direc- tor or officer of the Corporation or by reason of the fact that such director of officer, at the request of the Corporation, is or was serving any other corpor- ation, partnership, joint venture, employee benefit plan or other enterprise, in any capacity. Nothing contained herein shall affect any rights to indemni- fication to which employees other than directors or officers may be entitled by law. No amendment or repeal of this Section A of Article Ninth shall apply to or have any effect on any right to indemnification provided hereunder with res- pect to any acts or omissions occurring prior to such amendment or repeal. B. No director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such a director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional mis- conduct or a knowing violation of law, (ii) pursuant to Section 174 of the GCL, or (iv) for any transaction from which such director derived an improper per- sonal benefit. No amendment to or repeal of this Section B of this Article Ninth shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. C. In furtherance and not in limitation of the powers conferred by statute: (i) the Corporation may purchase and maintain insurance on be- half of any person who is or was a director, officer, employee or agent of the Corporation, or is serving at the request of the Corporation as a director, officer, employee or agent of any corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of the law; and (ii) the Corporation may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of cre- dit, surety bonds and/or other similar arrangements), as well as enter into con- tracts providing indemnification to the full extent authorized or permitted by law and including as part thereof provisions with respect to any or all of the foregoing to ensure the payment of such amounts as may become necessary to ef- fect indemnification as provided therein, or elsewhere. TENTH: The provisions set forth in this Article Tenth and in Article Ninth herein may not be repealed or amended in any respect, unless such action is approved by the affirmative vote of the holders of not less than 66.67% of the outstanding shares of Voting Stock of the Corporation. ELEVENTH: Subject to the provisions in this Restated Certificate of In- corporation, the Corporation reserves the right to repeal, alter, amend, or res- cind any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation. TWELFTH: The Board shall be divided as nearly equal in number as possible into three classes, designated Class I, Class II and Class III. The term of of- fice of directors of one class shall expire at each annual meeting of stock- holders, and in all cases as to each director until his or her successor shall be elected and shall qualify or until his or her earlier resignation, removal from office, death or incapacity. Additional directorships resulting from an increase in the number of directors shall be apportioned among the classes as equally as possible. The initial term of office of directors of Class I shall begin at the first regularly scheduled meeting of stockholders held on May 10, 1996; that of Class II shall begin at the first regularly scheduled meeting of stockholders occurring in 1997 or thereafter; and that of Class III shall begin at the first regularly scheduled meeting of stockholders occurring in 1998 or thereafter, and in all cases as to each director until his or her successor shall be elected and shall qualify, or until his or her earlier resignation, removal from office, death or incapacity. At each annual meeting of stock- holders, the number of directors equal to the number of directors of the class whose terms expires at the time of such meeting (or, if less, the number of di- rectors properly nominated and qualified for election) shall be elected to hold office until the third succeeding annual meeting of stockholders after their election. THIRTEENTH: Newly created directorships resulting from any increase in the number of directors, or vacancies in any existing directorships resulting from death, resignation, disqualification, removal or other cause shall be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less then a quorum, or by the sole remaining director. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the Class of Directors in which the new di- rectorship was created, or the vacancy occurred, and until such director's suc- cessor shall have been elected and qualified. No decrease in the number of di- rectors constituting the Board shall shorten the term of any incumbent director. FOURTEENTH: No director of the Corporation may be removed except for cause, and the vote of the holders of seventy percent (70%) of the outstanding shares of all classes of capital stock of the Corporation entitled to vote gen- erally in the election of directors, considered for this purpose as one class, shall be required to remove a director for cause. Cause for removal shall be deemed to exist only if the director whose removal is proposed has been convic- ted in a court of competent jurisdiction of a felony or has been adjudged by a court of competent jurisdiction to be liable for gross negligence, breach of fi- duciary duty, or misconduct in the performance of the director's obligations to the Corporation, and such conviction or adjudication has become final and nonappealable. FIFTEENTH: At any regularly scheduled meeting of stockholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been brought before the meeting (a) by, or at the direction of, the Board, or (b) by any stockholder of the Corporation who complies with the notice procedures set forth in this Article Fifteenth. For a proposal to be properly brought before a meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to, or mailed and received at, the principal executive office of the Corporation no less than 60 days prior to the scheduled meeting, regardless of any postponements, deferrals or adjourn- ments of that meeting to a later date; provided, however, that if less than 70 days notice or prior public disclosure of the date of the scheduled meeting is given or made, notice by the stockholder, to be timely, must be so delivered or received not later than the close of business on the tenth day of the following the earlier of the day on which such notice of the date of the scheduled meeting was mailed, or the day on which such public disclosure was made. A stock- holder's notice to the Secretary shall set forth as to each matter the stock- holder proposes to bring before the meeting: (a) a brief description of the pro- posal desired to be brought before the meeting and the reasons for conducting such business at the meeting; (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business and any other stockholder known by such stockholder to be supporting such proposal; (c) the class and number of shares of the Corporation's stock which are beneficially owned by the stockholder on the date of such stockholder's notice and by any other stockholder known by such stockholder to be supporting such proposal on the date of such stockholder notice; and (d) any financial interest of the stockholder making the proposal or any other stockholder known by such stock- holder to be supporting the proposal. The presiding officer of the meeting shall determine and declare at or be- fore the meeting whether the stockholder proposal was made in accordance with the terms of this Article Fifteenth. If the presiding officer determines that a stockholder proposal was not made in accordance with the terms of this Article Fifteenth, he or she shall so declare at the meeting and any such proposal shall not be acted upon at the meeting. This provision shall not prevent the consideration and approval or dis- approval at the meeting of reports of officers, directors and committees of the Board, but, in connection with such reports, no new business shall be acted upon at such meeting state, filed and received as herein provided. SIXTEENTH: Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of the Corporation may be made at a meeting of stock- holders called for the purpose of electing directors, by or at the direction of the Board, by any nominating committee or person appointed by the Board, or by any stockholder of the Corporation entitled to vote for the election of direc- tors at the meeting so long as the stockholder complies with the notice proce- dures set forth in this Article Sixteenth. Such nominations, other than those made by or at the direction of the Board, or by any nominating committee or per- son appointed by the Board, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder'sstockholder’s notice must be delivered to, or mailed and received at, the principal executive office of the Corporation not less than 60 days prior to the scheduled meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date; provided, however, that if less than 70 ~~days~~days’ notice or prior public disclosure is given or made, notice by the stockholder, to be timely, must be delivered or received not later than the close of business on the tenth day following the earlier of the day on which such notice of the date of the scheduled meeting was mailed or the day on which such public disclosure was made. A ~~stockholder's~~stockholder’s notice to the Secretary shall set forth (a) as to each person whom the ~~stock- holder~~stockholder proposes to nominate for election or reelection as a director (i) the name, age, business address and residence address of the person, (ii) the ~~prin- cipal~~principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Corporation which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Rule 14a under the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder giving notice (i) the name and address, as they appear on the ~~Corporation's~~Corporation’s books, of the stockholder and (ii) the class and number of shares of the ~~Corporation's~~Corporation’s stock which are beneficially owned by the stockholder on the date of such stockholder notice. The Corporation may require any proposed nominee to furnish such other information as may be required by the ~~Corporation. In~~Corporation in its reasonable discretion, in order to determine the eligibility of such ~~pro- posed~~proposed nominee to serve as a director of the Corporation.

SEVENTEENTH: 1. In addition to any affirmative vote required or permitted by law or this ~~Restated~~ Certificate ~~of Incorporation~~ or the Bylaws of the ~~Cor- poration,~~Corporation, and except as otherwise expressly provided in Paragraphs 1(a) and 1(b) of this Article Seventeenth, the Corporation shall not effect, directly or ~~in- directly,~~indirectly, any Stock Repurchase from an Interested Stockholder unless said Stock Repurchase is authorized by the affirmative vote of the Voting Stock, voting ~~to- gether~~together as a single class, which shares are Beneficially Owned by Persons other than such Interested Stockholder.

The Preceding provisions of this Article Seventeenth shall not be ~~ap- plicable~~applicable to any Stock Repurchase from an Interested Stockholder if such Stock . Repurchase is effected by the Corporation pursuant to:

(a) a tender offer or exchange offer by the Corporation for some or all of the outstanding shares of any or all classes of stock of the ~~Cor- poration~~Corporation made on the same terms to all holders of such shares; or

(b) an open market stock purchase program approved by a majority of those members of the Board who were duly elected and acting members of the Board prior to the time such person became an Interested Stockholder.

(a) The following terms shall be defined by reference to the ~~Securi- ties~~Securities Exchange Act of 1934 and the Rules in effect thereunder on the date of this ~~Restated~~ Certificate: ~~"Subsidiary"~~“Subsidiary” under Rule 12b-2;

(b) An ~~"Interested Stockholder"~~“Interested Stockholder” shall mean a Person (other than any Subsidiary of the Corporation, any profit-sharing, employee stock ~~owner- ship~~ownership or other employee benefit plan of the Corporation or any Subsidiary of the Corporation, or any trustee of or a fiduciary with respect to any such plan when acting in such capacity) who: (i) has been a Beneficial Owner for a period of less ~~than~~then two years immediately prior to the ~~Deter- mination~~Determination Date of five percent or more of the issued and outstanding shares of Voting Stock (including any Voting Stock which such Person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), ~~pur- suant~~pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement, or ~~under- standing)~~understanding); or (ii) is an Affiliate of the Corporation who became the Beneficial Owner of five percent or more of the issued and outstanding shares of Voting Stock at any time within the two-year period immediately prior to the Determination Date; or (iii) is an assignee of or has ~~other- wise~~otherwise succeeded to any

shares of Voting Stock which were Beneficially Owned by any Interested Stockholder at any time within the two-year period ~~imme- diately~~immediately prior to the Determination Date, if such assignment or succession shall have occurred in the course of a transaction or series of ~~trans- actions~~transactions not involving a public offering within the meaning of the ~~Securi- ties~~Securities Act of 1933.

(c) The term ~~"Stock Repurchase"~~“Stock Repurchase” shall mean any direct or indirect ~~pur- chase~~purchase by the Corporation or any Subsidiary of the Corporation of any shares of the stock of the Corporation at a price greater than the Market Price of such shares, or any direct or indirect purchase of such shares for any consideration other than cash.

(d) ~~"Market Price"~~“Market Price” shall mean the closing sale price on the trading day immediately preceding the Determination Date of a share of the ~~Cor- poration's~~Corporation’s stock on the Composite Tape for American Stock Exchange-Listed stocks, or, if such stock is not listed on such Exchange, on the principal United States securities exchange on which such stock is listed, or, if such stock is not listed on any such exchange, the closing bid quotation with respect to a share of such stock on the last trading day immediately preceding the Determination Date on the National Association of Securities Dealers, Inc. automated quotations system or any similar system then in use, or if no such quotations are available, the fair market value on the Determination Date of a share of such stock as determined in good faith by a majority of the Board.

(e) ~~"Determination Date"~~“Determination Date” shall mean the date upon which the ~~deter- mination~~determination of Market Price is made by the Board.

(f) The term ~~"Person"~~“Person” shall mean any individual, firm, corporation or other entity and shall include any group comprising any person and any other person with whom such person or any Affiliate or Associate of such person has any agreement, arrangement or understanding, directly or ~~in- directly,~~indirectly, for the purpose of acquiring, holding, voting or disposing of stock.

3. Nothing contained in this Article shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law.

4. The Board shall have the power and duty to determine for the purposes of this Article Seventeenth on the basis of information known to its members after reasonable inquiry, (1) whether a Person is, and if so, when such Person became, an Interested Stockholder, (2) the number of shares of stock of the ~~Cor- poration~~Corporation or other securities of which any Person is a Beneficial Owner and the number of votes entitled to be cast by such person, (3) whether a Person is an Affiliate or Associate or another, and (4) whether the price proposed to be paid for any shares of stock of the Corporation is in excess of the Market Price of such shares. Any such determination made in good faith shall be binding on and conclusive for all parties.

For the purposes of determining whether a Person is an Interested ~~Stock- holder~~Stockholder pursuant to Paragraph 2(b) of this Article, the shares of the stock of the Corporation deemed to be outstanding shall include shares deemed ~~Benefi- cially~~Beneficially Owned by such Person through application of Paragraph 2(a) of this Article, but shall not include any other shares of stock of the Corporation that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

EIGHTEENTH: The affirmative vote of the holders of not less than ~~two- thirds~~two-thirds of the outstanding shares of the ~~Corporation's~~Corporation’s common stock (other than the shares beneficially owned by an ~~"Acquiring Person"~~“Acquiring Person” as hereinafter defined) shall be required for the approval or authorization of any ~~"Business Combi- nation"~~“Business Combination” (as hereinafter defined) of the Corporation or any subsidiary of the Corporation with any Acquiring Person, notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified by law or ~~other- wise;~~otherwise; provided, however, that the two-thirds outstanding common stock ~~require- ment~~requirement shall not be applicable and such Business Combination shall require only such affirmative vote as is required by law or otherwise if: (i) the Board of the Corporation by at least a 75% vote has expressly approved such Business ~~Com- bination~~Combination either in advance of or subsequent to such Acquiring Person becoming an Acquiring Person; or (ii) as of the date of the consummation of a Business Combination, the holders of a particular class or series of capital stock, as the case may be, of the Corporation receive a Fair Price as such term is defined in subsection (c) below.

For the purpose of this Article Eighteenth: (a) The term "Business Combination" shall mean any (i) merger or consoli- dation of the Corporation or a subsidiary of the Corporation with an Acquiring Person or any other Corporation which is or after such merger or consolidation would be an "Affiliate" or "Associate" of an Acquiring Person; (ii) sale, lease or transfer (in one transaction or a series of transactions) with any Acquiring Person or any Affil- iate of any Acquiring Person, of all or substantially all of the assets of the Corporation or a subsidiary of the Corporation to an Acquiring Person or any Affiliate or Associate of any Acquiring Per- son; (iii) adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Ac- quiring Person or any Affiliate or Associate of any Acquiring Person; (iv) reclassification of securities (including any reverse stock split) or recapitalization of the Corporation or any other transaction that would have the effect, either directly or indirectly, of in- creasing the proportionate ownership of any class of equity or con- vertible securities of the Corporation or any subsidiary of the Cor- poration which is directly or indirectly beneficially owned by an Acquiring Person or any Affiliate or Associate of any Acquiring Per- son; and (v) an agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Combination. (b) The term "Fair Market Value" shall mean (i) in the case of shares, if such shares are listed on an exchange, the highest closing bid quota- tion with respect to the shares during the 30-day calendar period pre- ceding the date in question, the highest closing sale price quoted during the 30-day calendar period immediately preceding the consumma- tion of the Business Combination on the National Association of Se- curities Dealers, Inc. automated quotations system or any similar system then in general use, or, if no such quotations are available, the fair market value of a share on the date in question as determined by 75% of the Board; and (ii) in the case of property other than cash or shares, the fair market value of such property on the date in ques- tion as determined by 75% of the Board. The term "Fair Price" shall mean that the aggregate amount of cash and the Fair Market Value of consideration other than cash to be received per share are at least equal to the highest of the following: (i) if applicable, the highest per share price, including any brokerage com- missions, transfer taxes, and soliciting dealers fees, paid by the Acquiring Person for any shares acquired by it within the two year period immediately preceding the consummation of the Business Com- bination or the transaction in which it became an Acquiring Person, whichever is higher; or (ii) the Fair Market Value per share. (d) The term "Person" shall mean any individual, firm, corporation or other entity and shall include any group comprised of any Person and any other Person with whom such person or any Affiliate or Associate of such Person has any agreement, arrangement or understanding, di- rectly or indirectly, for the purpose of acquiring, holding, voting or disposing of voting stock of the Corporation. (e) The term "Acquiring Person" shall mean any Person (other than the Cor- poration, or any subsidiary or any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who or which: (i) is the Bene- ficial Owner (as hereinafter defined for purposes of this section only) of 15% or more of the outstanding common stock of the Cor- poration; (ii) is an Affiliate or Associate of the Corporation and at any time within the two year period immediately prior to the date in question was the Beneficial Owner of 15% or more of the outstanding common stock of the Corporation; or (iii) is at such time an assignee of or has otherwise succeeded to the beneficial ownership of any shares of outstanding common stock of the Corporation which were at any time within the two year period immediately prior to such time beneficially owned by any Acquiring Person, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (f) A Person shall be a Beneficial Owner of any common stock: (i) which such Person or any of its Affiliates or Associates beneficially owns, directly or indirectly, (a) the right to acquire whether such right is exercisable immediately or not, pursuant to any agreement, arrange- ment or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding. (g) An Acquiring Person shall be deemed to have acquired a share of the common stock of the Corporation at the time when such Acquiring Person became the Beneficial Owner thereof.

NINETEENTH: The Corporation expressly elects not to be governed by Section 203 of the Delaware General Corporation Law, as amended from time to time, which relates to business combinations with interested stockholders.

TWENTIETH: Notwithstanding any other provision of this ~~Restated Certi- ficate of Incorporation,~~Certificate, the affirmative vote of the holders of at least seventy percent (70%) of the voting power of all of the then outstanding shares of the stock of the Corporation entitled to vote generally in the election of ~~Direc- tors,~~Directors, voting together as a single class, shall be required to amend in any ~~res- pect~~respect or repeal this Article Twentieth, or Articles Second, Seventh, Eighth, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth, and Nineteenth.

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been signed ~~this day~~as of ~~__________________, 1996.~~ December 3, 2004.

Natural Alternatives International, Inc. By: /s: Mark Le Doux _________________________________ Mark A. Le Doux, President [SEAL] ATTEST By: /s: Marie Le Doux _________________________________ Marie A. Le Doux, Secretary PROXY CARD PROXY NATURAL ALTERNATIVES INTERNATIONAL, INC., a Delaware Corporation ANNUAL MEETING OF STOCKHOLDERS

This Plan was originally adopted by the Board effective May 10, 1996 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Mark A. Le Doux, William P. Spencer, William R. Kellas, Lee G. Weldon and Marie A. Le Doux as proxies, each with the power to appoint his or her substitute, and hereby authorizes them to represent and vote, as designated below, all of the shares of Common Stock of Natural Alternatives International, Inc., held of record by the undersigned on March 22, 1996, at the Annual Meeting of Stockholders to be held on May 10, 1996, or any adjournment thereof. 1. Proposal to amend the Certificate of Incorporation to provide for a classified board of directors. ___ FOR ___ AGAINST ___ ABSTAIN 2. For the election as directors of the nominees listed below, except to the extent that authority is specifically withheld. ___ FOR all nominees listed below ___ WITHHOLD AUTHORITY (except as marked to the to vote for all nominees contrary below) listed below Mark A. Le Doux, William P. Spencer, William R. Kellas, Lee G. Weldon and Marie A. Le Doux (INSTRUCTION: To withhold authority to vote for any individual nominee write that nominee's name on the space provided below.) 3. Proposal to amend the Certificate of Incorporation to provide that newly created directorships shall be filled by the vote of the remaining di- rectors. ___ FOR ___ AGAINST ___ ABSTAIN 4. Proposal to amend the Certificate of Incorporation to provide that no director may be removed except for cause as defined, and to require a vote of 70% of the outstanding shares to remove a director. ___ FOR ___ AGAINST ___ ABSTAIN 5. Proposal to amend the Certificate of Incorporation to provide that at any meeting of the stockholders, only such business may be acted on as is brought by either the Board of Directors or by the stockholders in accordance with certain notice procedures. ___ FOR ___ AGAINST ___ ABSTAIN 6. Proposal to amend the Certificate of Incorporation to provide that only persons who are nominated in accordance with certain procedures are eligi- ble for election as directors. ___ FOR ___ AGAINST ___ ABSTAIN 7. Proposal to amend the Certificate of Incorporation to prohibit the Company from making certain stock repurchases except under certain conditions. ___ FOR ___ AGAINST ___ ABSTAIN 8. Proposal to amend the Certificate of Incorporation to add a fair price provision which requires that certain minimum price and procedural requirements be observed by certain parties who seek to accomplish mergers or other business combinations unless they meet certain requirements. ___ FOR ___ AGAINST ___ ABSTAIN 9. Proposal to amend the Certificate of Incorporation to elect not to be governed by the provisions of Section 203 of the Delaware General Corporation Law. ___ FOR ___ AGAINST ___ ABSTAIN 10. Proposal to amend the Certificate of Incorporation to provide that the vote of 70% of the outstanding shares is required to amend or repeal the pro- posed amendments to the Restated Certificate of Incorporation described in Proposals 2-10 herein, and to existing Articles Second, Seventh, and Eighth. ___ FOR ___ AGAINST ___ ABSTAIN 11. Proposal to approve, in addition to the specific amendments described in Proposals 2-10 above, the Restated Certificate of Incorporation in its en- tirety. ___ FOR ___ AGAINST ___ ABSTAIN 12. Proposal to ratify and approve the 1994 Nonqualified Stock Option Plan and the grant of options to purchase 500,000 shares thereunder. ___ FOR ___ AGAINST ___ ABSTAIN 13. Proposal to confirm KPMG Peat Marwick LLP as the Company's independent auditors for the fiscal year ending June 30, 1996. ___ FOR ___ AGAINST ___ ABSTAIN In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder. If no direction is made, this Proxy will be voted for Proposals 1, 2, 3, 4, 5, 6, 7, 8 9, 10, 11, 12 and 13. DATED: _________________________ ________________________________________ Signature ________________________________________ Signature if Held Jointly ________________________________________ Number of Shares Please sign exactly as your name appears on your stock certificate. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If the shares are owned by a corporation, sign in the full corporate name by the President or other authorized officer. If the shares are owned by a Partner- ship, sign in the name of the Partnership name by an authorized person. Please mark, sign, date and return the Proxy promptly using the enclosed envelope. EXHIBIT B: 1994 NONSTATUTORY STOCK OPTION PLAN NATURAL ALTERNATIVES INTERNATIONAL, INC. 1994 NONQUALIFIED STOCK OPTION PLAN 1. Purpose of the Plan.1999. The purpose of the ~~Natural Alternatives International, Inc. 1994 Nonqualified Stock Option~~ Plan is to ~~enable Natural Alternatives International, Inc. to provide an incentive to eligible employees, consultants, officers and directors, whose present and potential contributions are important to~~promote the ~~continued~~long-term success of the Company and the creation of stockholder value by (a) encouraging Employees, Outside Directors and Consultants to ~~afford these individuals~~focus on critical long-range objectives, (b) encouraging the ~~opportunity~~attraction and retention of Employees, Outside Directors and Consultants with exceptional qualifications, and (c) linking Employees, Outside Directors and Consultants directly to ~~acquire a proprietary interest~~stockholder interests through increased stock ownership. The Plan seeks to achieve this purpose by providing for Awards in the ~~Company,~~form of Restricted Shares, Stock Units, Options (which may constitute incentive stock options or nonstatutory stock options) and ~~to enable~~Stock Appreciation Rights. Terms defined herein shall have the ~~Company to enlist and retain~~meanings set forth in ~~its employment qualified personnel for the successful conduct of its business. It is intended that this purpose will be effected through the granting of stock options. 2.~~“Article 21 — Definitions. ~~As used herein, the following definitions shall apply: (a) "Administrator" means the Board or such of its Committees as~~”

The Plan shall be ~~administering the Plan,~~governed by, and construed in accordance with, ~~Section 5~~the laws of the State of Delaware (except their choice-of-law provisions).

2.1 “Affiliate” means any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity.

2.2 “Award” means any award of an Option, an SAR, a Restricted Share or a Stock Unit under the Plan. ~~(b) "Applicable Laws"~~

2.3 “Board” means the ~~legal requirements relating to the administration of stock option plans under applicable securities laws, Delaware corporate law and the Code. (c) "Board" means the~~Company’s Board of Directors, as constituted from time to time.

(a) The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such merger, consolidation or other reorganization is owned by persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization;

(b) The sale, transfer or other disposition of all or substantially all of the Company’s assets;

(c) A change in the composition of the Board, as a result of which fewer than 50% of the incumbent directors are directors who either (i) had been directors of the Company on the date 24 months prior to the date of the event that may constitute a Change in Control (the “original directors”) or (ii) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the aggregate of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so approved; or

(d) Any transaction as a result of which any person is the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing at least 20% of the total voting power represented by the Company’s then outstanding voting securities. For purposes of this Paragraph (d), the term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude (i) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a Parent or Subsidiary and (ii) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the common stock of the Company. ~~(d) "Code"~~

A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.

2.5 “Code” means the Internal Revenue Code of 1986, as amended. ~~(e) "Committee"~~

2.6 “Committee” means a ~~Committee appointed by~~committee of the Board, as described in ~~accordance with Section 5~~Article 21.

2.7 “Common Share” means one share of the ~~Plan. (f) "Common Stock" means the Common Stock~~common stock of the Company. ~~(g) "Company"~~

2.8 “Company” means Natural Alternatives International, Inc., a Delaware corporation. ~~(h) "Consultant"~~

2.9 “Consultant” means ~~any person, including an advisor, engaged by~~a consultant or adviser who provides bona fide services to the Company, or a Parent, a Subsidiary or Subsidiary to render services and who is compensated for such services, provided that the term "Consultant" shall not include Directors who are paid only a director's fee by the Company or who are not compensated by the Company for their services as Directors. (i) "Continuous Statusan Affiliate as an ~~Employee or Consultant" means that the employment or consulting relationship is not interrupted or terminated by the Company, any parent or Subsidiary. Continuous Status~~independent contractor. Service as ~~an Employee or~~a Consultant shall ~~not~~ be considered ~~interrupted~~employment for all purposes of the Plan, except as provided in ~~the case of: (i) any leave of absence approved by the Board, including sick leave, military leave, or any other personal leave; or (ii) transfers between locations~~Section 4.1.

2.10 “Employee” means a common-law employee of the Company, a Parent, a Subsidiary or between the Company, its Parent, its Subsidiaries or its successor. (j) "Director" means a member of the Board. (k) "Disability" means total and permanent disability as defined in Section 22(e)(3) of the Code. (l) "Employee" means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company. (m) "Exchange Act"an Affiliate.

2.11 “Exchange Act” means the Securities Exchange Act of 1934, as amended. ~~(n) "Fair Market Value"~~

2.12 “Exercise Price,” in the case of an Option, means the amount for which one Common Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement. “Exercise Price,” in the case of ~~any date,~~an SAR, means an amount, as specified in the ~~value of Common Stock determined as follows: (i) If the Common Stock~~applicable SAR Agreement, which is listed on any established stock exchange or a national market system, including without limitation the National Market System of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System,subtracted from the Fair Market Value of one Common Share in determining the amount payable upon exercise of such SAR.

2.13 “Fair Market Value” means with respect to each Common Share the last reported sale price of the Company’s Common Shares sold on the principal national securities exchanges on which the Common Shares are at the time admitted to trading or listed, or, if there have been no sales of any such exchange on such day, the average of the highest bid and lowest ask price on such day as reported by the Nasdaq system, or any similar organization if the Nasdaq is no longer reporting such information, either (i) on the date which the notice of exercise is deemed to have been sent to the Company (the “Notice Date”) or (ii) over a ~~Share~~period of five (5) trading days preceding the Notice Date, whichever of (i) or (ii) is greater. If on the date for which the current fair market value is to be determined, the Common Shares are not listed on any securities exchange or quoted on the Nasdaq system or the over-the-counter market, the current fair market value of Common ~~Stock~~Shares shall be the ~~closing sales~~highest price per share which the Company could then obtain from a willing buyer (not a current employee or director) for ~~such stock (or~~Common Shares sold by the ~~closing bid, if no sales were reported)~~Company, from authorized but unissued shares, as quoted on such system or exchange (or the exchange with the greatest volume of trading in Common Stock) on the last mar- ket trading day prior to the day of determination, as reported in such source as the Administrator deems reliable; (ii) If the Common stock is quoted on the NASDAQ System (but not on the National Market System thereof) or is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in such source as the Administrator deems reliable; (iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator. (o) "Nonqualified Stock Option" means the options granted pursuant to this 1994 Nonqualified Stock Option Plan. (p) "Notice of Grant" means a written notice evidencing certain terms and conditions of an individual Option. The Notice of Grant is part of the Option Agreement. (q) "Officer" means a person who is an officerBoard of the Company, ~~within~~unless prior to such date the ~~meaning of Section 16~~Company has become subject to a binding agreement for a merger, acquisition or other consolidation pursuant to which the Company is not the surviving party, in which case the current fair market value of the ~~Exchange Act~~Common Shares shall be deemed to be the value to be received by the holders of the Company’s Common Shares for each share thereof pursuant to the Company’s acquisition. Such determination shall be conclusive and binding on all persons.

2.14 “ISO” means an incentive stock option described in Section 422(b) of the ~~rules and regulations promulgated thereunder. (r) "Option"~~Code.

2.15 “NSO” means a stock option not described in Sections 422 or 423 of the Code.

2.16 “Option” means an ISO or NSO granted ~~pursuant~~under the Plan and entitling the holder to purchase Common Shares.

2.17 “Optionee” means an individual or estate who holds an Option or SAR.

2.18 “Outside Director” shall mean a member of the Board who is not an Employee. Service as an Outside Director shall be considered employment for all purposes of the Plan, except as provided in Section 4.1.

2.19 “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.

2.21 “Plan” means this Natural Alternatives International, Inc. 1999 Omnibus Equity Incentive Plan, as amended from time to time.

2.22 “Restricted Share” means a Common Share awarded under the Plan. ~~(s) "Option Agreement"~~

2.23 “Restricted Stock Agreement” means the agreement between the Company and the recipient of a Restricted Share which contains the terms, conditions and restrictions pertaining to such Restricted Share.

2.24 “SAR” means a ~~written~~stock appreciation right granted under the Plan.

2.25 “SAR Agreement” means the agreement between the Company and an Optionee ~~evidencing~~which contains the terms, conditions and restrictions pertaining to his or her SAR.

2.26 “Stock Option Agreement” means the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to his or her Option.

2.27 “Stock Unit” means a bookkeeping entry representing the equivalent of one Common Share, as awarded under the Plan.

2.28 “Stock Unit Agreement” means the agreement between the Company and the recipient of a Stock Unit which contains the terms, conditions and restrictions pertaining to such Stock Unit.

2.29 “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

3.1Basic Limitation. Common Shares issued pursuant to the Plan may be authorized but unissued shares or treasury shares. The aggregate number of Options, SARs, Stock Units and Restricted Shares awarded under the Plan shall not exceed (a) 2,000,000 plus (b) the additional Common Shares described in Sections 3.2 and 3.3. The limitation of this Section 3.1 shall be subject to adjustment pursuant to Article 11.

3.2Annual Increase in Shares. As of January 1 of each year, commencing with the year 2005, the aggregate number of Options, SARs, Stock Units and Restricted Shares that may be awarded under the Plan shall automatically increase by a number equal to the lesser of (a) 2.5% of the total number of Common Shares then outstanding or (b) 100,000 Shares.

3.3Additional Shares. If Restricted Shares or Common Shares issued upon the exercise of Options are forfeited, then such Common Shares shall again become available for Awards under the Plan. If Stock Units, Options or

SARs are forfeited or terminate for any other reason before being exercised, then the corresponding Common Shares shall again become available for Awards under the Plan. If Stock Units are settled, then only the number of Common Shares (if any) actually issued in settlement of such Stock Units shall reduce the number available under Section 3.1 and the balance shall again become available for Awards under the Plan. If SARs are exercised, then only the number of Common Shares (if any) actually issued in settlement of such SARs shall reduce the number available under Section 3.1 and the balance shall again become available for Awards under the Plan. The foregoing notwithstanding, the aggregate number of Common Shares that may be issued under the Plan upon the exercise of ISOs shall not be increased when Restricted Shares or other Common Shares are forfeited.

3.4Dividend Equivalents. Any dividend equivalents paid or credited under the Plan shall not be applied against the number of Restricted Shares, Stock Units, Options or SARs available for Awards, whether or not such dividend equivalents are converted into Stock Units.

4.1Incentive Stock Options. Only Employees who are common-law employees of the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. In addition, an Employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company or any of its Parents or Subsidiaries shall not be eligible for the grant of an ISO only when the requirements set forth in section 422(c)(6) of the Code are satisfied.

4.2Other Grants. Only Employees, Outside Directors and Consultants shall be eligible for the grant of Restricted Shares, Stock Units, NSOs or SARs under the Plan.

5.1Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The Stock Option Agreement shall specify whether the Option is an ISO or an NSO. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical. Options may be granted in consideration of a reduction in the Optionee’s other compensation. A Stock Option Agreement may provide that a new Option will be granted automatically to the Optionee when he or she exercises a prior Option and pays the Exercise Price in the form described in Section 6.2.

5.2Number of Shares. Each Stock Option Agreement shall specify the number of Common Shares subject to the Option and shall provide for the adjustment of such number in accordance with Article 11. Options granted to any Optionee in a single fiscal year of the Company shall not cover more than 150,000 Common Shares, except that Options granted to a new Employee in the fiscal year of the Company in which his or her service as an Employee first commences may cover up to 175,000 Common Shares. The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 11.

5.3Exercise Price. Each Stock Option Agreement shall specify the Exercise Price; provided that the Exercise Price under an ISO shall in no event be less than 100% of the Fair Market Value of a Common Share on the date of grant and the Exercise Price under an NSO shall in no event be less than 85% of the Fair Market Value of a Common Share on the date of grant.

5.4Exercisability and Term. Each Stock Option Agreement shall specify the date or event when all or any installment of the Option is to become exercisable, which may include vesting requirements and/or performance criteria with respect to the Company and/or the Optionee, provided, however, that an Option granted to a non-officer Employee shall vest at least 20% of the Common Shares per year. The Stock Option Agreement shall also

specify the term of the Option; provided that the term of an ISO shall in no event exceed 10 years from the date of grant. A Stock Option Agreement may provide for accelerated exercisability in the event of the Optionee’s death, disability or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee’s service. Options may be awarded in combination with SARs, and such an Award may provide that the Options will not be exercisable unless the related SARs are forfeited.

5.5Manner of Exercise. An Option shall be deemed exercised when the Company receives: (i) notice of exercise (in accordance with the Stock Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Common Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Stock Option Agreement. Common Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Common Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Common Shares subject to the Option, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Common Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Common Shares are issued, except as provided in Article 11 of the Plan.

Exercising an Option in any manner shall decrease the number of Common Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Common Shares as to which the Option is exercised.

5.6Effect of Change in Control. The Committee may determine, at the time of granting an Option or thereafter, that such Option shall become exercisable as to all or part of the Common Shares subject to such Option in the event that a Change in Control occurs with respect to the Company, subject to the following limitations:

(a) In the case of an ISO, the acceleration of exercisability shall not occur without the Optionee’s written consent.

(b) If the Company and the other party to the transaction constituting a Change in Control agree that such transaction is to be treated as a “pooling of interests” for financial reporting purposes, and if such transaction in fact is so treated, then the acceleration of exercisability shall not occur to the extent that the Company’s independent accountants and such other party’s independent accountants separately determine in good faith that such acceleration would preclude the use of “pooling of interests” accounting.

5.7Modification or Assumption of Options. Within the limitations of the Plan, the Committee may modify, extend or assume outstanding options or may accept the cancellation of outstanding options (whether granted by the Company or by another issuer) in return for the grant of new options for the same or a different number of shares and at the same or a different exercise price. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, alter or impair his or her rights or obligations determined pursuant to the Option Agreement representing such Option.

5.8Buyout Provisions. The Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents an Option previously granted or (b) authorize an Optionee to elect to cash out an Option previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.

6.1General Rule. The entire Exercise Price of Common Shares issued upon exercise of Options shall be payable in cash or cash equivalents at the time when such Common Shares are purchased, except as follows:

(a) In the case of an ~~individual~~ISO granted under the Plan, payment shall be made only pursuant to the express provisions of the applicable Stock Option ~~grant.~~Agreement. The Stock Option Agreement may specify that payment may be made in any form(s) described in this Article 6.

(b) In the case of an NSO, the Committee may at any time accept payment in any form(s) described in this Article 6.

6.2Surrender of Stock. To the extent that this Section 6.2 is applicable, all or any part of the Exercise Price may be paid by surrendering, or attesting to the ownership of, Common Shares that are already owned by the Optionee. Such Common Shares shall be valued at their Fair Market Value on the date when the new Common Shares are purchased under the Plan. The Optionee shall not surrender, or attest to the ownership of, Common Shares in payment of the Exercise Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting purposes.

6.3Net Exercise. Instead of exercising the Option by paying the Exercise Price in cash, check or other appropriate consideration, the Optionee may elect to exercise the Option in whole or in part by receiving Common Shares equal to the value (as determined below) of the Option, or any part hereof, upon surrender of the Option at the principal office of the Company together with the notice of exercise annexed to the Stock Option Agreement in which event the Company shall issue to the Optionee a number of Common Shares computed using the following formula:

As used herein, current fair market value of Common Share shall mean with respect to each Common Share the last reported sale price of the Company’s Common Shares sold on the principal national securities exchanges on which the Common Shares are at the time admitted to trading or listed, or, if there have been no sales of any such exchange on such day, the average of the highest bid and lowest ask price on such day as reported by the National Association of Securities Dealers Automated Quotation system (“Nasdaq”), or any similar organization if the Nasdaq is no longer reporting such information, either (i) on the date which the notice of exercise is deemed to have been sent to the Company (the “Notice Date”) or (ii) over a period of five (5) trading days preceding the Notice Date, whichever of (i) or (ii) is greater. If on the date for which the current fair market value is to be determined, the Common Shares are not listed on any securities exchange or quoted on the Nasdaq system or the over-the-counter market, the current fair market value of Common Shares shall be the highest price per share which the Company could then obtain from a willing buyer (not a current employee or director) for Common Shares sold by the Company, from authorized but unissued shares, as determined in good faith by the Board of the Company, unless prior to such date the Company has become subject to a binding agreement for a merger, acquisition or other consolidation pursuant to which the Company is not the surviving party, in which case the current fair market value of the Common Shares shall be deemed to be the value to be received by the holders of the Company’s Common Shares for each share thereof pursuant to the Company’s acquisition.

6.4Exercise/Sale. To the extent that this Section 6.4 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) an irrevocable direction to a securities broker approved by the Company to sell all or part of the Common Shares being purchased under the Plan and to deliver all or part of the sales proceeds to the Company.

6.5Exercise/Pledge. To the extent that this Section 6.5 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) an irrevocable direction to pledge all or part of the Common Shares being purchased under the Plan to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company.

6.6Promissory Note. To the extent that this Section 6.6 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid by delivering (on a form prescribed by the Company) a full-recourse promissory note. However, the par value of the Common Shares being purchased under the Plan, if newly issued, shall be paid in cash or cash equivalents.

6.7Other Forms of Payment. To the extent that this Section 6.7 is applicable, all or any part of the Exercise Price and any withholding taxes may be paid in any other form that is consistent with applicable laws, regulations and rules.

7.1Initial Grants. Each Outside Director who first becomes a member of the Board shall receive a one-time grant of an NSO covering 10,000 Common Shares (subject to adjustment under Article 11). Such NSO shall be granted on the date when such Outside Director first joins the Board and shall become exercisable as to one-third of such 10,000 Common Shares at the end of each year’s anniversary date of such Outside Director’s appointment over the 36-month period commencing on the date of grant.

7.2Additional Grants. Each Outside Director who continues serving as a member of the Board may receive additional NSOs in the sole discretion of the Board on such terms as the Board may determine in its discretion.

7.3Accelerated Exercisability. All NSOs granted to an Outside Director under this Article 7 shall also become exercisable in full in the event of:

(a) The termination of such Outside Director’s service because of death, total and permanent disability or retirement at or after age 65; or

(b) A Change in Control with respect to the Company, except as provided in the next following sentence.

If the Company and the other party to the transaction constituting a Change in Control agree that such transaction is to be treated as a “pooling of interests” for financial reporting purposes, and if such transaction in fact is so treated, then the acceleration of exercisability shall not occur to the extent that the Company’s independent accountants and such other party’s independent accountants separately determine in good faith that such acceleration would preclude the use of “pooling of interests” accounting.

7.4Exercise Price. The Exercise Price under all NSOs granted to an Outside Director under this Article 7 shall be equal to 100% of the Fair Market Value of a Common Share on the date of grant, payable in one of the forms described in Sections 6.1, 6.2, 6.3, 6.4 and 6.5.

7.5Term. All NSOs granted to an Outside Director under this Article 7 shall terminate on the earliest of (a) the 10th anniversary of the date of grant, (b) the date three months after the termination of such Outside Director’s service for any reason other than death or total and permanent disability or (c) the date twelve months after the termination of such Outside Director’s service because of death or total and permanent disability, unless otherwise determined by the Board.

7.6Affiliates of Outside Directors. The Committee may provide in its sole discretion that the NSOs that otherwise would be granted to an Outside Director under this Article 7 shall instead be granted to an affiliate of such Outside Director. Such affiliate shall then be deemed to be an Outside Director for purposes of the Plan, provided that the service-related vesting and termination provisions pertaining to the NSOs shall be applied with regard to the service of the Outside Director.

8.1SAR Agreement. Each grant of an SAR under the Plan shall be evidenced by an SAR Agreement between the Optionee and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be subject

to any other terms that are not inconsistent with the Plan. The provisions of the various SAR Agreements entered into under the Plan need not be identical. SARs may be granted in consideration of a reduction in the Optionee’s other compensation.

8.2Number of Shares. Each SAR Agreement shall specify the number of Common Shares to which the SAR pertains and shall provide for the adjustment of such number in accordance with Article 11. SARs granted to any Optionee in a single calendar year shall in no event pertain to more than 50,000 Common Shares, except that SARs granted to a new Employee in the fiscal year of the Company in which his or her service as an Employee first commences shall not pertain to more than 75,000 Common Shares. The limitations set forth in the preceding sentence shall be subject to adjustment in accordance with Article 11.

8.3Exercise Price. Each SAR Agreement shall specify the Exercise Price. An SAR Agreement may specify an Exercise Price that varies in accordance with a predetermined formula while the SAR is outstanding.

8.4Exercisability and Term. Each SAR Agreement shall specify the date when all or any installment of the SAR is to become exercisable. The SAR Agreement shall also specify the term of the SAR. An SAR Agreement may provide for accelerated exercisability in the event of the Optionee’s death, disability or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee’s service. SARs may be awarded in combination with Options, and such an Award may provide that the SARs will not be exercisable unless the related Options are forfeited. An SAR may be included in an ISO only at the time of grant but may be included in an NSO at the time of grant or thereafter. An SAR granted under the Plan may provide that it will be exercisable only in the event of a Change in Control.

8.5Effect of Change in Control. The Committee may determine, at the time of granting an SAR or thereafter, that such SAR shall become fully exercisable as to all Common Shares subject to such SAR in the event that a Change in Control occurs with respect to the Company, subject to the following sentence. If the Company and the other party to the transaction constituting a Change in Control agree that such transaction is to be treated as a “pooling of interests” for financial reporting purposes, and if such transaction in fact is so treated, then the acceleration of exercisability shall not occur to the extent that the Company’s independent accountants and such other party’s independent accountants separately determine in good faith that such acceleration would preclude the use of “pooling of interests” accounting.

8.6Exercise of SARs. Upon exercise of an SAR, the Optionee (or any person having the right to exercise the SAR after his or her death) shall receive from the Company (a) Common Shares, (b) cash or (c) a combination of Common Shares and cash, as the Committee shall determine. The amount of cash and/or the Fair Market Value of Common Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Common Shares subject to the SARs exceeds the Exercise Price. If, on the date when an SAR expires, the Exercise Price under such SAR is less than the Fair Market Value on such date but any portion of such SAR has not been exercised or surrendered, then such SAR shall automatically be deemed to be exercised as of such date with respect to such portion.

8.7Modification or Assumption of SARs. Within the limitations of the Plan, the Committee may modify, extend or assume outstanding SARs or may accept the cancellation of outstanding SARs (whether granted by the Company or by another issuer) in return for the grant of new SARs for the same or a different number of shares and at the same or a different exercise price. The foregoing notwithstanding, no modification of an SAR shall, without the consent of the Optionee, alter or impair his or her rights or obligations under such SAR.

9.1Restricted Stock Agreement. Each grant of Restricted Shares under the Plan shall be evidenced by a Restricted Stock Agreement between the recipient and the Company. Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Restricted Stock Agreements entered into under the Plan need not be identical.

9.2Payment for Awards. Subject to the following sentence, Restricted Shares may be sold or awarded under the Plan for such consideration as the Committee may determine, including (without limitation) cash, cash equivalents, full-recourse promissory notes, past services and future services. To the extent that an Award consists of newly issued Restricted Shares, the Award recipient shall furnish consideration with a value not less than the par value of such Restricted Shares in the form of cash, cash equivalents or past services rendered to the Company (or a Parent or Subsidiary), as the Committee may determine.

9.3Vesting Conditions. Each Award of Restricted Shares may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Stock Agreement. A Restricted Stock Agreement may provide for accelerated vesting in the event of the Participant’s death, disability or retirement or other events. The Committee may determine, at the time of granting Restricted Shares or thereafter, that all or part of such Restricted Shares shall become vested in the event that a Change in Control occurs with respect to the Company, except as provided in the next following sentence. If the Company and the other party to the transaction constituting a Change in Control agree that such transaction is to be treated as a “pooling of interests” for financial reporting purposes, and if such transaction in fact is so treated, then the acceleration of vesting shall not occur to the extent that the Company’s independent accountants and such other party’s independent accountants separately determine in good faith that such acceleration would preclude the use of “pooling of interests” accounting.

9.4Voting and Dividend Rights. The holders of Restricted Shares awarded under the Plan shall have the same voting, dividend and other rights as the Company’s other stockholders. A Restricted Stock Agreement, however, may require that the holders of Restricted Shares invest any cash dividends received in additional Restricted Shares. Such additional Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to which the dividends were paid.

9.5Repurchase Option. Unless the Committee determines otherwise, the Restricted Stock Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser’s employment with the Company for any reason (including death or disability). The purchase price for Common Shares repurchased pursuant to the Restricted Stock Agreement shall be the original purchase price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Committee may determine, but at a minimum rate of 20% per year.

10.1Stock Unit Agreement. Each grant of Stock Units under the Plan shall be evidenced by a Stock Unit Agreement between the recipient and the Company. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Stock Unit Agreements entered into under the Plan need not be identical. Stock Units may be granted in consideration of a reduction in the recipient’s other compensation.

10.2Payment for Awards. To the extent that an Award is granted in the form of Stock Units, no cash consideration shall be required of the Award recipients.

10.3Vesting Conditions. Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Stock Unit Agreement. A Stock Unit Agreement may provide for accelerated vesting in the event of the Participant’s death, disability or retirement or other events. The Committee may determine, at the time of granting Stock Units or thereafter, that all or part of such Stock Units shall become vested in the event that a Change in Control occurs with respect to the Company, except as provided in the next following sentence. If the Company and the other party to the transaction constituting a Change in Control agree that such transaction is to be treated as a “pooling of interests” for financial reporting purposes, and if such transaction in fact is so treated, then the acceleration of vesting shall not

occur to the extent that the Company’s independent accountants and such other party’s independent accountants separately determine in good faith that such acceleration would preclude the use of “pooling of interests” accounting.

10.4Voting and Dividend Rights. The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan may, at the Committee’s discretion, carry with it a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Common Share while the Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock Units. Settlement of dividend equivalents may be made in the form of cash, in the form of Common Shares, or in a combination of both. Prior to distribution, any dividend equivalents which are not paid shall be subject to the same conditions and restrictions as the Stock Units to which they attach.

10.5Form and Time of Settlement of Stock Units. Settlement of vested Stock Units may be made in the form of (a) cash, (b) Common Shares or (c) any combination of both, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award, based on predetermined performance factors. Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair Market Value of Common Shares over a series of trading days. Vested Stock Units may be settled in a lump sum or in installments. The distribution may occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred to any later date. The amount of a deferred distribution may be increased by an interest factor or by dividend equivalents. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Article 11.

10.6Death of Recipient. Any Stock Units Award that becomes payable after the recipient’s death shall be distributed to the recipient’s beneficiary or beneficiaries. Each recipient of a Stock Units Award under the Plan shall designate one or more beneficiaries for this purpose by filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Award recipient’s death. If no beneficiary was designated or if no designated beneficiary survives the Award recipient, then any Stock Units Award that becomes payable after the recipient’s death shall be distributed to the recipient’s estate.

10.7Creditors’ Rights. A holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the ~~Plan. (t) "Option Exchange Program" means~~applicable Stock Unit Agreement.

11.1Adjustments. In the event of a program whereby outstanding options are surrendered in exchange for options with a lower exercise price. (u) "Optioned Stock" means the Common Stock subject to an Option. (v) "Optionee" means an Employee or Consultant who holds an outstanding Option. (w) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(c)subdivision of the ~~Code. (x) "Plan" means this 1994 Nonqualified Stock Option Plan. (y) "Rule 16b-3" means Rule 16b-3~~outstanding Common Shares, a declaration of a dividend payable in Common Shares, a declaration of a dividend payable in a form other than Common Shares in an amount that has a material effect on the price of Common Shares, a combination or consolidation of the ~~Exchange Act~~outstanding Common Shares (by reclassification or ~~any successor rule thereto,~~otherwise) into a lesser number of Common Shares, a recapitalization, a spin-off or a similar occurrence, the Committee shall make such adjustments as it, in ~~effect when~~its sole discretion, ~~is being exercised with respect~~deems appropriate in one or more of:

(a) The number of Options, SARs, Restricted Shares and Stock Units available for future Awards under Article 3;

(c) The number of NSOs to the Plan. (z) "Share" means a share of the Common Stock, as adjusted in accordance with Section 9 of the Plan. (aa) "Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code. 3. Eligibility. Nonqualified Stock Options may be granted to ~~Employees, Consultants and Directors. If otherwise eligible, an Employee, Consultant or Director who has been granted an Option may be granted additional Options.~~ ~~4. Stock Subject to the Plan. Subject to the provisions of Section 9 of the Plan, the total~~Outside Directors under Article 7;

(d) The number of Common Shares ~~reserved~~covered by each outstanding Option and ~~available for distribution~~SAR;

(f) The number of Stock Units included in any prior Award which has not yet been settled.

Except as provided in this Article 11, a Participant shall have no rights by reason of any issue by the ~~Plan is 500,000 Shares. Subject to Section 9~~Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the ~~Plan, if~~payment of any ~~Shares that have been optioned under an Option cease to be subject to such Option (other than through exercise of the Option), or if any Option granted hereunder is forfeited~~stock dividend or any ~~such award otherwise terminates prior to the issuance of Common Stock to the participant, the shares that were subject to such Option shall again be available for distribution~~other increase or decrease in connection with future Option grants under the Plan; provided, however, that Shares that have actually been issued under the Plan, upon exercise of an Option, shall not in any event be returned to the Plan and shall not become available for future distribution under the Plan. 5. Administration. (a) Composition of Administrator. The Plan shall be administered by the Compensation Committee of the Board of Directors or such other committee of the Board of Directors consisting of at least two members, as it shall determine ("Committee"). (b) Authority. The Committee shall have the full authority and discre- tion to determine, consistent with the provisions of the Plan, the persons to be granted an Option, the times at which Option shall be granted, the number of shares of ~~common~~ stock ~~covered~~of any class.

11.2Dissolution or Liquidation. To the extent not previously exercised or settled, Options, SARs and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company.

11.3Reorganizations. In the event that the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreement of merger or reorganization. Such agreement shall provide for:

(a) The continuation of the outstanding Awards by ~~each~~the Company, if the Company is a surviving corporation;

(b) The assumption of the outstanding Awards by the surviving corporation or its parent or subsidiary;

(c) The substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding Awards;

(d) Full exercisability or vesting and accelerated expiration of the outstanding Awards; or

(e) Settlement of the full value of the outstanding Awards in cash or cash equivalents followed by cancellation of such Awards.

(a) Have cash that otherwise would be paid to such Participant as a result of the exercise of an SAR or the settlement of Stock Units credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company’s books;

(b) Have Common Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR converted into an equal number of Stock Units; or

(c) Have Common Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option ~~price,~~or SAR or the ~~method~~settlement of ~~payment~~Stock Units converted into amounts credited to a deferred compensation account established for ~~each Option,~~such Participant by the ~~term~~Committee as an entry on the Company’s books. Such amounts shall be determined by reference to the Fair Market Value of ~~each Option,~~such Common Shares as of the date when they otherwise would have been delivered to such Participant.

A deferred compensation account established under this Article 12 may be credited with interest or other forms of investment return, as determined by the Committee. A Participant for whom such an account is established shall have no rights other than those of a general creditor of the Company. Such an account shall represent an unfunded and ~~all other~~unsecured obligation of the Company and shall be subject to the terms and conditions ~~thereof. (c) Indemnification.~~ of the applicable agreement between such Participant and the Company. If the deferral or conversion of Awards is permitted or required, the Committee (in its sole discretion) may establish rules, procedures and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensation accounts established under this Article 12.

The Company may grant awards under other plans or programs. Such awards may be settled in the form of Common Shares issued under this Plan. Such Common Shares shall be treated for all purposes under the Plan like Common Shares issued in settlement of Stock Units and shall, when issued, reduce the number of Common Shares available under Article 3.

14.1Effective Date. No provision of this Article 14 shall be effective unless and until the Board has determined to implement such provision.

14.2Elections to Receive NSOs, Restricted Shares or Stock Units. An Outside Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash, NSOs, Restricted Shares or Stock Units, or a combination thereof, as determined by the Board. Such NSOs, Restricted Shares and Stock Units shall be issued under the Plan. An election under this Article 14 shall be filed with the Company on the prescribed form.

14.3Number and Terms of NSOs, Restricted Shares or Stock Units. The number of NSOs, Restricted Shares or Stock Units to be granted to Outside Directors in lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board. The terms of such NSOs, Restricted Shares or Stock Units shall also be determined by the Board.

15.1Retention Rights. Neither the Plan nor any Award granted under the Plan shall be deemed to give any individual a right to remain an Employee, Outside Director or Consultant. The Company and its Parents, Subsidiaries and Affiliates reserve the right to terminate the service of any Employee, Outside Director or Consultant at any time, with or without cause, subject to applicable laws, the Company’s certificate of incorporation and by-laws and a written employment agreement (if any).

15.2Stockholders’ Rights. A Participant shall have no dividend rights, voting rights or other rights as a stockholder with respect to any Common Shares covered by his or her Award prior to the time when a stock certificate for such Common Shares is issued or, if applicable, the time when he or she becomes entitled to receive such Common Shares by filing any required notice of exercise and paying any required Exercise Price. No adjustment shall be made for cash dividends or other rights for which the record date is prior to such time, except as expressly provided in the Plan.

(a)Legal Compliance. Common Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Common Shares shall comply with all relevant provisions of law, including, without limitation, the Securities Act, as amended, the Exchange Act, the securities laws of applicable states, the rules and regulations promulgated thereunder, applicable laws, and the requirements of any stock exchange or quotation system upon which the Common Shares may then be listed or quoted, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

(b)Investment Representations Re: Federal Securities Laws. The Common Shares underlying the Awards, as of the date the Plan was approved by the Board, have not been registered under the Securities Act. The Participant shall be required to represent that if Awards are exercised in whole or in part at a time when there isnot in effect, under the Securities Act, a registration statement applicable to the Common Shares issuable upon exercise, then the purchase of such Common Shares shall be subject to obtaining such representation, warranties and covenants from the Participants as the Committee shall determine, including:

(i)Investment Intent. Participant is acquiring the Common Shares for its own account, not as a nominee or agent, and not with a view to their resale or distribution and is prepared to hold the Common Shares for an indefinite period and has no present intention to sell, distribute, or grant any participating interests in the Common Shares. Participant acknowledges the Common Shares have not been registered under the Securities Act or the securities laws of any other state, province or country (collectively, with the 1933 Act, the “Securities Laws”), and that the Company is issuing the Common Shares to it in reliance on such representations.

(ii)Restricted Securities. Participant confirms it has been informed that the Common Shares may not be resold or transferred unless such Common Shares are first registered under the applicable Securities Laws or unless an exemption from such registration is available.

(iii)Investment Experience. In connection with the investment representations made, Participant represents that it is able to fend for itself in the transactions contemplated by the Plan, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, has the ability to bear the economic risks of its investment, and has been furnished with and has had access to such information as is normally made available in the form of a registration statement, together with such additional information as is necessary to verify the accuracy of the information supplied and to have all questions answered by the Company.

(iv)Disposition of Shares. Participant shall make no disposition of the Common Shares, unless and until:

(1) Participant shall have complied with all requirements of the Plan and any stock exchange on which such Common Shares (or any substituted securities) may be listed;

(2) Participant shall have notified the Company of the proposed disposition and furnished it with a written summary of the terms and conditions of the proposed disposition; and

(3) Participant shall have provided an opinion to the Company’s counsel (at its expense), in form and substance reasonably satisfactory to the Company, that (i) the proposed disposition does not require registration of the Common Shares under the applicable Securities Laws or (ii) all appropriate action necessary for compliance with the registration requirements of the applicable Securities Laws or of any exemption from registration available under the applicable Securities Laws has been taken.

16.1General. To the extent required by applicable federal, state, local or foreign law, a Participant or his or her successor shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company shall not be required to issue any Common Shares or make any cash payment under the Plan until such obligations are satisfied.

16.2Share Withholding. The Committee may permit a Participant to satisfy all or part of his or her withholding or income tax obligations by having the Company withhold all or a portion of any Common Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Common Shares that he or she previously acquired. Such Common Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash.

17.1Term of the Plan. The Plan, as set forth herein, shall become effective on May 10, 1999. The Plan shall remain in effect until it is terminated under Section 17.2, except that no ISOs shall be granted on or after the 10th anniversary of the later of (a) the date when the Board adopted the Plan or (b) the date when the Board adopted the most recent increase in the number of Common Shares available under Article 3 which was approved by the Company’s stockholders.

17.2Amendment or Termination. The Board may at any time amend, alter, suspend or terminate the Plan for any reason.

17.3Stockholder Approval. The Company shall obtain stockholder approval of any Plan amendment to the extent requested by applicable law, rule or regulation, including the requirements of any exchange or quotation system on which the Common Shares are listed or quoted. Such stockholder approval, if required shall be obtained in such a manner and to such a degree as is required by the applicable laws, rules or regulations.

17.4Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company unless such amendment, alteration, suspension or termination is required to enable an Option designated as an Incentive Stock Option to qualify as a Nonqualified Stock Option or is necessary to comply with any applicable laws or government regulations.

18.1Scope of Limitation. This Article 18 shall apply to an Award unless the Committee, at the time of making an Award under the Plan or at any time thereafter, specifies in writing that such Award shall not be subject to this Article 18. If this Article 18 applies to an Award, it shall supersede any contrary provision of the Plan or of any Award granted under the Plan.

18.2Basic Rule. In the event that the independent auditors most recently selected by the Board (the “Auditors”) determine that any payment or transfer by the Company under the Plan to or for the benefit of a Participant (a “Payment”) would be nondeductible by the Company for federal income tax purposes because of the provisions concerning “excess parachute payments” in Section 280G of the Code, then the aggregate present value of all Payments shall be reduced (but not below zero) to the Reduced Amount. For purposes of this Article 18, the “Reduced Amount” shall be the amount, expressed as a present value, which maximizes the aggregate present value of the Payments without causing any Payment to be nondeductible by the Company because of Section 280G of the Code.

18.3Reduction of Payments. If the Auditors determine that any Payment would be nondeductible by the Company because of Section 280G of the Code, then the Company shall promptly give the Participant notice to that effect and a copy of the detailed calculation thereof and of the Reduced Amount, and the Participant may then elect, in his or her sole discretion, which and how much of the Payments shall be eliminated or reduced (as long as after such election the aggregate present value of the Payments equals the Reduced Amount) and shall advise the Company in writing of his or her election within 10 days of receipt of notice. If no such election is made by the Participant within such 10-day period, then the Company may elect which and how much of the Payments shall be eliminated or reduced (as long as after such election the aggregate present value of the Payments equals the Reduced Amount) and shall notify the Participant promptly of such election. For purposes of this Article 18, present value shall be determined in accordance with Section 280G(d)(4) of the Code. All determinations made by the Auditors under this Article 18 shall be binding upon the Company and the Participant and shall be made within 60 days of the date when a Payment becomes payable or transferable. As promptly as practicable following such determination and the elections hereunder, the Company shall pay or transfer to or for the benefit of the Participant such amounts as are then due to him or her under the Plan and shall promptly pay or transfer to or for the benefit of the Participant in the future such amounts as become due to him or her under the Plan.

18.4Overpayments and Underpayments. As a result of uncertainty in the application of Section 280G of the Code at the time of an initial determination by the Auditors hereunder, it is possible that Payments will have been made by the Company that should not have been made (an “Overpayment”) or that additional Payments that will not have been made by the Company could have been made (an “Underpayment”), consistent in each case with the calculation of the Reduced Amount hereunder. In the event that the Auditors, based upon the assertion of a deficiency by the Internal Revenue Service against the Company or the Participant that the Auditors believe has a high probability of success, determine that an Overpayment has been made, such Overpayment shall be treated for all purposes as a loan to the Participant which he or she shall repay to the Company, together with interest at the applicable federal rate provided in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Participant to the Company if and to the extent that such payment would not reduce the amount subject to taxation under Section 4999 of the Code. In the event that the Auditors determine that an Underpayment has occurred, such Underpayment shall promptly be paid or transferred by the Company to or for

the benefit of the Participant, together with interest at the applicable federal rate provided in Section 7872(f)(2) of the Code.

18.5Related Corporations. For purposes of this Article 18, the term “Company” shall include affiliated corporations to the extent determined by the Auditors in accordance with Section 280G(d)(5) of the Code.

In addition to such other rights of indemnification as they may have as ~~Directors~~members of the Board or asofficers or employees of the Company and any Parent or Subsidiary, members of the Committee ~~members~~and any officers or employees of the Company and any Parent or Subsidiary to whom authority to act for the Board ~~of Directors and of the Committee~~is delegated shall be indemnified by the Company against all reasonable expenses, including ~~attorneys'~~attorneys’ fees, actually and ~~necessari- ly~~necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they ~~are,~~ or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any ~~option (and/or related right)~~right granted ~~there- under,~~hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company), or paid by them in satisfaction of a judgment ofin any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in ~~his~~ duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same. ~~(d) Effect~~

At least annually, copies of ~~Administrator's Decision. The Administrator's decisions, determinations and interpretations~~the Company’s annual report or Form 10-K for the just-completed fiscal year shall be ~~final~~made available to each Participant and ~~binding on all Optionees and any other holders~~purchaser of ~~Options. (e) Rules.~~Common Shares upon exercise of an Award. The ~~Board~~Company shall ~~fill all vacancies, however caused,~~not be required to provide such information to key employees whose duties in connection with the Company assure them access to equivalent information.

21.1Committee Composition. The Plan shall be administered by the Committee. The ~~Board may, from time to time, appoint additional members to the~~ Committee ~~and may at any time remove one~~shall consist exclusively of two or more ~~Committee members and substitute others. One member~~directors of the Company, who shall be appointed by the Board. In addition, the composition of the Committee shall ~~be selected~~satisfy:

(a) Such requirements as the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act; and

(b) Such requirements as the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption under section 162(m)(4)(C) of the Code.

21.2Powers of the Committee. Subject to the provisions of the Plan, and, subject to the specific duties delegated by the Board ~~as chairman. The~~to such Committee, ~~shall hold its meetings at such times and places as it shall deem advisable. All determinations of~~ the Committee shall be made by a majority of its members, either in person or participating by conference telephone at a meeting, or by written consent. The Committee may appoint a secretary and make such rules and regulations forhave the conduct of its business as it shall deem advisable, and shall keep minutes of its meetings. 6. Duration of the Plan. The Plan shall remain in effect until terminated by the Board under the terms of the Plan. 7. Options. (a) Options. The Administrator,authority, in its ~~discretion, may grant Options~~discretion:

(a) to eligible participants. Each Option shall be evidenced by a Notice of Grant which shall expressly identify the Options as Nonqualified Stock Options, and be in such form and contain such provisions as the Administrator shall from time to time deem appropriate. Without limiting the foregoing, the Admini- strator may at any time authorize the Company, with the consent of the res- pective recipients, to issue new Options in exchange for the surrender and cancellation of outstanding Options. Option agreements shall contain the following terms and conditions: (i) Exercise Price; Number of Shares. The per Share exercise price for the Shares issuable pursuant to an Option shall be such price as is determined by the Administrator, provided however, that it shall not be less than one hundred percent (100%) ofdetermine the Fair Market Value of the Common Stock, ~~on January 24, 1995 the date the Options were granted by action~~in accordance with Section 2 of the ~~Board of~~Plan;

(b) to select the ~~Company. The Notice of Grant shall specify~~Consultants and Employees to whom Awards may be granted hereunder;

(d) to determine the number of Common Shares to ~~which it pertains. (ii) Waiting Period and Exercise Dates. At~~be covered by each Award granted hereunder;

(e) to approve forms of agreement for use under the ~~time an Option is granted, the Administrator will~~Plan;

(f) to determine the terms and conditions to be satisfied before Shares may be purchased, including the dates on which Shares subject to the Option may first be purchased. The Administrator may specify that an Option may not be exercised until the completion of the service period specified at the time of grant; provided, however, no more than 250,000 shares of the Optioned Stock may be exercised prior to September 24, 1995. Any such period is referred to herein as the "waiting period." At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised, which shall not be earlier than the end of the waiting period, if any. (iii) Form of Payment. The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator and may consist entirely of: (1) cash; (2) check; (3) promissory note with such terms and conditions as determined by the Board; (4) other Shares which (1) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and (2) have a Fair Market Value on the date of surrender not greater than the aggregate exercise price of the Shares as to which said Option shall be exercised; (5) delivery of a properly executed exercise notice together with such other documentation as the Administrator and any broker approved by the Company, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price; (6) any combination of the foregoing methods of payment; or (7) such other consideration and method of payment for the issu- ance of Shares to the extent permitted by Applicable Laws. (iv) Other Provisions. Each Option granted under the Plan may contain such other terms, provisions and conditions, not inconsistent with the terms of the Plan, asof any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be ~~determined by~~exercised (which may be based on performance criteria), any vesting, acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Awards or the ~~Administrator. (v) Buy-Out Provisions. The Administrator~~Common Shares relating thereto, based in each case on such factors as the Committee, in its sole discretion, shall determine;

(i) to determine whether and under what circumstances an Award may atbe settled in cash instead of Common Shares or Common Shares instead of cash;

(l) to authorize any person to execute on behalf of the Company any instrument required to ~~buy out, for a payment in cash or Shares,~~effect the grant of an ~~Option~~Award previously granted ~~based on such~~by the Board;

(m) to determine the terms and ~~conditions as~~restrictions applicable to Awards and any Restricted Stock; and

(n) to make all other determinations deemed necessary or advisable for administering the ~~Administrator shall establish and communicate to~~Plan.

21.3Committee for Non-Officer Grants. The Board may also appoint a secondary committee of the Optionee at the time that such offer is made; provided, however, that buy-out offers made to Insiders may only be payable in cash. (b) Method of Exercise. (i) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunderBoard, which shall be ~~exercisable at such times and under such conditions as determined by the Administrator and as shall be permissible under the terms~~composed of one or more directors of the ~~Plan. An Option~~Company who need not satisfy the requirements of Section 21.1. Such secondary committee may ~~not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to~~administer the ~~Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares~~Plan with respect to ~~which the Option is exercised has been received by the Company. Full payment may, as authorized by the Administrator~~Employees and permitted by the Option Agreement consist of any consideration and method of payment allowable under subsection 7(a)(iii) of the Plan. Until the issuance (as evidenced by the appropriate entry on the booksConsultants who are not considered officers or directors of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstan- ding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 9 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter shall be available, both for purposes of the Plan and for sale under ~~the Option, by the number of Shares as to which the Option is exercised. (ii) Rule 16b-3. Options granted to individuals subject to Section~~section 16 of the Exchange Act, ~~("Insiders") shall, to the extent practicable, desirable, or as determined by the Administrator, comply with the applicable provisions of Rule 16b-3 and~~ may contain such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. (iii) Termination of Employment or Consulting Relationship. In the event an Optionee's Continuous Status as an Employee or Consultant terminates (other than upon the Optionee's death or Disability), the Optionee may exercise his or her Option, but only within such period of time as is deter- mined by the Administrator at the time of grant not to exceed five (5) years from the date of such termination, and only to the extent that the Optionee was entitled to exercise it at the date of such termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). To the extent that Optionee was not entitled to exercise an Option at the date of such termination, and to the extent that the Optionee does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate. (iv) Disability of Optionee. In the event an Optionee's Continuous Status as an Employee or Consultant terminates as a result of the Optionee's Disability, the Optionee may exercise his or her Option, but only within such period of time following the date of termination due to Disability not exceed- ing ten (10) years as is determined by the Administrator, and only to the extent that the Optionee was entitled to exercise it at the date of such termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). To the extent that Optionee was not entitled to exercise an Option at the date of such termination, and to the extent that the Optionee does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate. (v) Death of Optionee. In the event of an Optionee's death, the Optionee's estate or a person who acquired the right to exercise the deceased Optionee's Option by bequest or inheritance may exercise the Option, but only within ten (10) years following the date of death, and only to the extent that the Optionee was entitled to exercise it at the date of death (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). To the extent that Optionee was not entitled to exercise an Option at the date of death, and to the extent that the Optionee's estate or a person who acquired the right to exercise such Option does not exercise such Option (to the extent otherwise so entitled) within the time specified herein, the Option shall terminate. 8. Non-Transferability of Options and Rights. Options may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. 9. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset Sale or Change of Control. (a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock which have been authorized for issuanceAwards under the Plan ~~but as~~ to ~~which no Options have yet been granted or which have been returned~~such Employees and Consultants and may determine all features and conditions of such Awards. Within the limitations of this Section 21.3, any reference in the Plan to the ~~Plan upon cancellation or expiration of an Option, as well as~~Committee shall include such secondary committee.

To record the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassificationadoption of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be madePlan by the Board, ~~whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by~~ the Company ~~of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect~~has caused its duly authorized officer to execute this document in the ~~number or price of shares of Common Stock subject to an Option. (b) Dissolution or Liquidation. In the event~~name of the ~~proposed dissolution or liquidation~~Company.

The stockholder whose signature appears on the reverse side hereby revokes all previous proxies, acknowledges receipt of the ~~Company,~~notice of annual meeting of stockholders to be held December 3, 2004 and the ~~extent that an Option has not been previously exercised, it will terminate immediately prior to~~proxy statement, and appoints Mark A. LeDoux and Randell Weaver or either of them the ~~consummation~~proxy of such ~~proposed action. The Board may, in~~stockholder, each with full power of substitution, to vote, as designated on the ~~exercise~~reverse side of its sole discretion in such instances, declare that any Option shall terminate as of a date fixed by the Board and give each Optionee the right to exercise his or her Option as to all or any part of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. (c) Merger or Asset Sale. Subject to the provisions of paragraph (d) hereof, in the event of a merger of the Company with or into another corporation, or the sale of substantiallythis proxy card, all of the ~~assets~~shares of the Company, each outstanding Option shall be assumed or an equivalent Option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation does not agree to assume the Option or to substitute an equivalent option, the Administrator shall, in lieu of such assumption or substitution, provide for the Optionee to have the right to exercise the Option as to all or a portion of the Optioned Stock, including Shares as to which it would not otherwise be exercisable. If the Administrator makes an Option exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee that the Option shall be exercisable for a period of fifteen (15) days from the date of such notice, and the Option will terminate upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, immediately follow- ing the merger or sale of assets, the Option confers the right to purchase, for each share of Optioned Stock subject to the Option immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets was not solely common stock of Natural Alternatives International, Inc. that the ~~successor corporation or its Parent, the Administrator may, with the consent of the successor corporation and the participant, provide for the consideration to~~stockholder would be received upon the exercise of the Option, for each Share of Optioned Stock subject to the Option, to be solely common stock of the successor corporation or its Parent equal in Fair Market Value to the per share consideration received by holders of Common Stock in the merger or sale of assets. (d) Change in Control. In the event of a "Change in Control" of the Company, as defined in paragraph (e) below, then the following acceleration and valuation provisions shall apply: (i) Except as otherwise determined by the Board, in its discretion, prior to the occurrence of a Change in Control, any Options outstanding on the date such Change in Control is determined to have occurred that are not yet exercisable and vested on such date shall become fully exercisable and vested; (ii) Except as otherwise determined by the Board, in its discretion, prior to the occurrence of a Change in Control, all outstanding Options, to the extent they are exercisable and vested (including Options that shall become exercisable and vested pursuant to subparagraph (i) above), shall be terminated in exchange for a cash payment equal to the Change in Control Price, (reduced by the exercise price, if any, applicable to such Options). These cash proceeds shall be paid to the Optionee or, in the event of death of an Optionee prior to payment, to the estate of the Optionee or to a person who acquired the right to exercise the Option by bequest or inheritance. (e) Definition of "Change in Control". For purposes of this Section 9, a "Change in Control" means the happening of any of the following: (i) When any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, a Subsidiary or a Company employee benefit plan, including any trustee of such plan acting as trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company represen- ting fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities entitled to vote, ~~generally in~~if personally present, at the Annual Meeting of Stockholders to be held on Friday, December 3, 2004, at 11:00 a.m. Pacific time, at La Costa Resort & Club, Costa del Mar Road, Carlsbad, California 92009, and at any adjournment or postponement thereof.

This proxy, when properly executed, will be voted as specified. If no choice is specified, then this proxy will be voted for the election of ~~directors; or~~ ~~(ii) The shareholders of~~ the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve an agreementnominees for ~~the sale or disposition by the Company of all or substantially all the Company's assets; or (iii) A change in the composition of~~ the Board of Directors oflisted on the ~~Company, as a result of which fewer than a majority~~reverse side and for each proposal.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED BELOW.

The shares represented by this proxy when properly executed will be voted in the ~~directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date the Plan is approved~~manner directed herein by the ~~directors, or (B) are elected, or nominated for election,~~undersigned stockholder with respect to all shares of common stock of Natural Alternatives International, Inc. that the ~~Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors~~stockholder would be entitled to vote, if personally present, at the ~~time~~Annual Meeting of ~~such election or nomination (but shall not include an individual whose election or nomination~~Stockholders.If no direction is ~~in connection with an actual or threatened~~made, this proxy ~~contest relating to~~will be voted “for” the election of ~~directors~~each of the ~~Company). (f) Change~~nominees for Class II directors and “for” Proposals 2, 3 and 4. If any other matters properly come before the meeting, the persons named will vote in ~~Control Price. For purposes of this Section 9, "Change in Control Price" shall~~their discretion.

This proxy card must be as determined by the Board, (i) the highest Fair Market Value of a Share within the 60-day period immediately preceding the date of determination of the Change in Control Price by the Board (the "60-Day Period"), or (ii) the highest price paid or offered per Share, as determined by the Board, in any bona fide transaction or bona fide offer related to the Change in Control of the Company, at any time within the 60-Day Period, or (iii) such lower price as the Board, in its discretion, determinessigned for your instructions to be a reasonable estimate of the fair market value of a Share. 10. Date of Grant. The date of grant of an Option shall be, for all purposes, the date on which the Administrator makes the determination granting such Option, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant. 11. Amendment and Termination of the Plan. (a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan. (b) Shareholder Approval. The Company may, in the discretion of the Board of Directors, obtain shareholder approval of the Plan, or any Plan amendment to the extent necessary and desirable to comply with Rule 16b-3 (or any successor rule or statute or other applicable law, rule or regulation, including the requirements of any exchange or quotation system on which the Common Stock is listed or quoted). Such shareholder approval, if required, shall be obtained in such a manner and to such a degree as is required by the applicable law, rule or regulation. (c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. 12. Stock Withholding to Satisfy Withholding Tax Obligations. (a) Ability to Use Stock to Satisfy Withholding. At the discretion of the Administrator, Optionees may satisfy withholding obligations as provided in this Section 12. When an Optionee incurs tax liability in connectionexecuted. Each joint owner should sign. Signatures should correspond with the ~~award, vesting~~names printed on this proxy card. Attorneys, executors, administrators, guardians, trustees, corporate officers or exercise of an Option, which tax liability is subject to tax withholding under applicable tax laws (including federal, state and local laws), the Optionee may satisfy the withholding tax obligation (up to an amount calculated by applying such Optionee's maximum marginal tax rate) by electing to have the Company withhold from the Shares to be issued upon award, vesting or exercise of the Option that number of Shares, or by delivering to the Company that number of previously owned Shares, having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld or delivered, as the case may be, shall be determined on the date that the amount of tax to be withheld is determined (the "Tax Date"). (b) Election to Have Stock Withheld. All elections by an Optionee to have Shares withheld or to deliver previously owned Shares pursuant to this Section 12 shall made in writingothers signing in a form acceptable to the Administrator and shall be subject to the following restrictions: (i) the election must be made on or prior to the applicable Tax Date; (ii) all elections shall be subject to the consent or disapproval of the Administrator; and (iii) if the Optionee is an Insider, the election may, at the discretion of the Board, comply with the applicable provisions of Rule 16b-3 and may, at the discretion of the Board, be subject to such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. (c) Section 83(b) Elections. In the event that (i) an election to have Shares withheld is made by an Optionee, (ii) no election is filed under Section 83(b) of the Code by such Optionee and (iii) the Tax Date is deferred under Section 83 of the Code, the Optionee shall receive therepresentative capacity should give full number of Shares with respect to which the Option has been awarded, has vested or has been exercised, as the case may be, but such Optionee shall be unconditionally obligated to tender back to the Company the proper number of Shares on the Tax Date. 13. Conditions Upon Issuance of Shares. (a) Legal Compliance. Shares shall not be issued pursuant to the exer- cise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, Applicable Laws, and the requirements of any stock exchange or quotation system upon which the Shares may then be listed or quoted, and shall be further subject to the approval of counsel for the Company with respect to such compliance. (b) Investment Representations Re: Federal Securities Laws. The shares of Common Stock underlying this Option, as of the date hereof, have not been registered under the 34 Act and the Corporation has no plans to register them. The Optionee represents that if this Option is exercised in whole or in part at a time when there is not in effect, under the 34 Act, a registration statement applicable to the shares issuable upon exercise, then the purchase of such shares is expressly conditioned upon the following representations, warranties and covenants: (i) Any shares purchased upon exercise of this Option shall be acquired for the Optionee's account for investment only, and not with a view to, or for sale in connection with, any distribution of the shares in violation of the 34 Act, or any rule or regulation under the 34 Act. Further, the Optionee either has a pre-existing personal or business relationship with the Corporation or any of its officers, directors or controlling persons, or by reason of Optionee's business or financial experience, or the business or financial experience of their professional advisors who are unaffiliated with and not compensated by the Corporation, they could reasonably be assumed to have the capacity to protect their own interests in connection with the grant, exercise and sale of the Option Shares. (ii) The Optionee has had such opportunity as he or she has deemed adequate to obtain from representatives of the Corporation such information as is necessary to permit the Optionee to evaluate the merits and risks of his or her investment in the Corporation. (iii) The Optionee is able to bear the economic risk of holding shares acquired pursuant to the exercise of the Option for an indefinite period. (iv) The Optionee understands that: (1) the shares acquired pursuant to the exercise of the Option will not be registered under the 34 Act or under any state securities laws and are "restricted securities" within the meaning of Rule 144 under the 34 Act; (2) such shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the 34 Act; (3) in any event, the exemption from registrations under Rule 144 will not be available for at least two (2) years, and even then will not be available unless a public market then exists for the Common Stock, adequate information concerning the Corporation is then available to the public, and other terms and conditions of Rule 144 are complied with; and (4) there is now no registration statement on file with the Securities and Exchange Commission with respect to the 1994 Nonqualified Plan of the Corporation and the Corporation has no obligation or current intention to register any shares acquired pursuant to the exercise of this Option under the 34 Act. By making payment upon exercise of this Option, the Optionee shall be deemed to have reaffirmed, as of the date of such payment, the representations made in this Section 7.2. (c) Legend On Stock Certificates. All stock certificates representing shares of Common Stock issued to the Optionee upon exercise of this Option shall have affixed thereto a legend substantially in the following form, in addition to any other legends required by applicable state law: The shares of stock represented by this certificate have not been registered under the Securities Act of 1933, or under the securities laws of any state, and may not be transferred, sold or otherwise disposed of in the absence of an effective registration statement with respect to the shares evidenced by this certificate, filed and made effective under the Securities Act of 1933, and registration or exemption under state securities laws, or an opinion of counsel satisfactory to the Corporation to the effect that registration under such Act and state securities laws is not required. 14. Liability of Company. (a) Inability to Obtain Authority. The inability of the Company to ob- tain authority form any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. (b) Grants Exceeding Allotted Shares. If the Optioned Stock covered by an Option exceeds, as of the date of grant, the number of Shares which may be issued under the Plan without additional shareholder approval, such Option may be void in the discretion of the Board of Directors, with respect to such excess Optioned Stock, unless if required or determined desirable by the Board, shareholder approval of an amendment sufficiently increasing the number of Shares subject to the Plan is timely obtained in accordance with Section 11(b) of the Plan. 15. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.


	(a)	(b)		(c)
Plan Category	Number of securities to be issued upon exercise of outstanding options and rights	Weighted-average exercise price of outstanding options and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by stockholders	1,269,700	$	4.76	156,297	¹
Equity compensation plans not approved by stockholders	—		—	—

Total	1,269,700	$	4.76	156,297


Name of Beneficial Owner	Number of Shares and Nature of Beneficial Ownership¹		Percent of Common Stock Outstanding²
Dimensional Fund Advisors, Inc.	318,600	³	4.96	%
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401

Carl J. Terranova	299,900	⁴	4.67	%
P.O. Drawer H, Valley Cottage, New York 10989

Mark A. LeDoux	1,377,000	⁵	21.45	%
Chairman of the Board and Chief Executive Officer

Joe E. Davis	31,100	⁶	Less than 1	%
Director

Alan J. Lane	2,500		Less than 1	%
Director

Lee G. Weldon	86,980	⁷	1.35	%
Director

Randell Weaver	105,598	⁸	1.64	%
President and Secretary

John R. Reaves, Jr.	32,112	⁹	Less than 1	%
Chief Financial Officer

Timothy Belanger	39,822	⁹	Less than 1	%
Senior Vice President — Sales and Marketing

Mark E. Zimmerman	32,919	⁹	Less than 1	%
Vice President — Operations

Dr. John A. Wise	99,559	¹⁰	1.55	%
Chief Scientific Officer

All directors and executive officers as a group (nine persons)	1,807,590	¹¹	28.16	%


	Fiscal Year		Annual Compensation				Long-Term Compensation		All Other Compensation ($)³
Name and Principal Position	Fiscal Year		Salary ($)		Bonus ($)¹²	Other Annual Compensation ($)¹	Securities Underlying Options (#)²		All Other Compensation ($)³
Mark A. LeDoux Chief Executive Officer	2004 2003 2002		240,040 217,897 219,807	⁴	134,550 100,000 —	— — —	30,000 25,000 —		10,062 6,449 5,444

Randell Weaver President and Secretary	2004 2003 2002	⁵	240,010 232,572 176,539	⁴	134,550 30,000 —	— — —	150,000 45,000 100,000	⁶	10,155 5,866 445

John R. Reaves, Jr. Chief Financial Officer	2004 2003 2002	⁷	175,231 158,461 17,308		98,222 10,000 —	— — —	90,000 — 30,000		5,195 778 —

Timothy E. Belanger Senior Vice President — Sales and Marketing	2004 2003 2002	⁸	187,385 175,000 20,192		101,111 — —	— — —	90,000 — 30,000		8,668 816 —

Mark E. Zimmerman Vice President — Operations	2004 2003 2002	⁹	169,231 144,231 48,529		97,222 12,500 —	— — —	90,000 — 30,000		8,087 809 95

Dr. John A. Wise Chief Scientific Officer	2004 2003 2002		177,128 184,361 175,856		107,640 15,000 —	— — —	90,000 30,000 —		9,358 3,289 5,164

Dr. Robert A. Kay Vice President — Science and Technology	2004	¹⁰	44,654		27,388	—	30,000		50,000	¹¹


Name	# of Shares of Common Stock Underlying Options Granted		% of Total Options Granted to Employees in Fiscal Year		Exercise Price ($/share)¹	Expiration Date	Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term²
Name	# of Shares of Common Stock Underlying Options Granted		% of Total Options Granted to Employees in Fiscal Year		Exercise Price ($/share)¹	Expiration Date	5%		10%
Mark A. LeDoux	30,000	³	4.11	%	5.588	9/08/08	$	26,700	$	77,700
Randell Weaver	150,000	⁴	20.55	%	5.210	10/23/08	$	216,000	$	477,000
John R. Reaves, Jr.	30,000	³	4.11	%	5.080	9/08/08	$	42,000	$	93,000
John R. Reaves, Jr.	60,000	⁵	8.22	%	6.650	1/29/09	$	110,400	$	243,600
Timothy E. Belanger	30,000	³	4.11	%	5.080	9/08/08	$	42,000	$	93,000
Timothy E. Belanger	60,000	⁵	8.22	%	6.650	1/29/09	$	110,400	$	243,600
Mark E. Zimmerman	30,000	³	4.11	%	5.080	9/08/08	$	42,000	$	93,000
Mark E. Zimmerman	60,000	⁵	8.22	%	6.650	1/29/09	$	110,400	$	243,600
Dr. John A. Wise	30,000	³	4.11	%	5.080	9/08/08	$	42,000	$	93,000
Dr. John A. Wise	60,000	⁵	8.22	%	6.650	1/29/09	$	110,400	$	243,600
Dr. Robert A. Kay	30,000	⁶	4.11	%	8.550	3/29/09	$	70,800	$	156,600


Name	# of Shares of Common Stock Acquired on Exercise	Valued Realized ($)	# of Shares of Common Stock Underlying Unexercised Options		Value of Unexercised In-the-Money Options¹
Name	# of Shares of Common Stock Acquired on Exercise	Valued Realized ($)	Exercisable	Unexercisable	Exercisable		Unexercisable
Mark A. LeDoux	—	—	38,500	46,500	$	241,580	$	177,720
Randell Weaver	—	—	26,421	168,579	$	124,563	$	627,687
John R. Reaves, Jr.	—	—	20,100	99,900	$	129,243	$	277,257
Timothy E. Belanger	—	—	20,100	99,900	$	129,243	$	277,257
Mark E. Zimmerman	—	—	20,100	99,900	$	134,670	$	279,930
Dr. John A. Wise	—	—	50,200	109,800	$	318,650	$	327,450
Dr. Robert A. Kay	—	—	—	30,000		—		—	²


Name	Annual Salary
Mark A. LeDoux	$	242,190
Randell Weaver	$	242,190
John R. Reaves, Jr.	$	176,800
Timothy E. Belanger	$	182,000
Mark E. Zimmerman	$	175,000
Dr. John A. Wise	$	193,752
Dr. Robert A. Kay	$	193,500


NATURAL ALTERNATIVES INTERNATIONAL, INC.

By:
		Mark A. LeDoux, Chief Executive Officer


Where	X =	the number of Common Shares to be issued to the Holder;
	Y =	the number of Common Shares underlying the Option to be exercised;
	A =	the current fair market value of one Common Share; and
	B =	the Exercise Price of the Option.


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You can vote in one of three ways:

Vote via the Internet	Vote by Telephone	Vote by Mail

http://www.eproxy.com/naii	1-800-435-6710
24 hours a day / 7 days a week	24 hours a day / 7 days a week

Instructions: Use the Internet to vote your proxy up until 11:59 p.m. Eastern time on the business day before the annual meeting day. Have your proxy card in hand when you access the web site.	Instructions: Use any touch-tone telephone to vote your proxy up until 11:59 p.m. Eastern time on the business day before the annual meeting day. Have your proxy card in hand when you call.	Instructions: Mark, sign and date your proxy card and return it in the enclosed envelope. No postage is necessary if mailed in the United States.

If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.

Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.


		For All	Withhold All	For All Except	To withhold authority to vote, mark “For All Except” and write the nominee’s number on the line below.
Proposal 1–	To elect as Class II directors the following nominees: (01) Lee G. Weldon, (02) Alan G. Dunn	¨	¨	¨


		For	Against	Abstain
Proposal 2 –	To approve an amendment to our Certificate of Incorporation to increase the number of our authorized shares from 8,500,000 (8,000,000 of common stock and 500,000 of preferred stock) to 20,500,000 (20,000,000 of common stock and 500,000 of preferred stock), as more fully set forth in the accompanying proxy statement.	¨	¨	¨

Proposal 3 –	To approve an amendment to our 1999 Omnibus Equity Incentive Plan, including an increase of 500,000 shares authorized for issuance under the plan, as more fully set forth in the accompanying proxy statement.	¨	¨	¨

Proposal 4 –	To ratify the selection of Ernst and Young LLP as our independent auditors for the fiscal year ending June 30, 2005.	¨	¨	¨

Proposal 5 –	In their discretion, upon such other matters as may properly come before the meeting or any adjournments thereof.


2004	$	144,597
2003	$	118,500


2004	$	3,700
2003	$	7,700