-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KUkQ4ORqxhGtI5O/y7ZD3ctvmNalYFyE/c0IQldhkwnSTTJQxosUirkZBSVmudmn 15d5+BrE5FWp6f7H1s0E/A== 0000950117-97-000556.txt : 19970509 0000950117-97-000556.hdr.sgml : 19970509 ACCESSION NUMBER: 0000950117-97-000556 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970402 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NAI TECHNOLOGIES INC CENTRAL INDEX KEY: 0000072575 STANDARD INDUSTRIAL CLASSIFICATION: 3575 IRS NUMBER: 111798773 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-03704 FILM NUMBER: 97573777 BUSINESS ADDRESS: STREET 1: 282 NEW YORK AVE CITY: HUNTINGTON STATE: NY ZIP: 11743 BUSINESS PHONE: 3037765674 MAIL ADDRESS: STREET 1: 282 NEW YORK AVE CITY: NEW YORK STATE: NY ZIP: 11743 FORMER COMPANY: FORMER CONFORMED NAME: NORTH ATLANTIC INDUSTRIES INC DATE OF NAME CHANGE: 19920703 DEF 14A 1 NAI TECHNOLOGIES, INC. PROXY STATEMENT Section 240.14a-101 Schedule 14A. Information required in proxy statement. Schedule 14A Information Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12 NAI TECHNOLOGIES, INC. ................................................................. (Name of Registrant as Specified In Its Charter) ................................................................. (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 (1) Title of each class of securities to which transaction applies: ............................................................ (2) Aggregate number of securities to which transaction applies: ....................................................... (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ....................................................... (4) Proposed maximum aggregate value of transaction: ....................................................... (5) Total fee paid: ....................................................... [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ....................................................... (2) Form, Schedule or Registration Statement No.: ....................................................... (3) Filing Party: ....................................................... (4) Date Filed: ....................................................... NAI TECHNOLOGIES, INC. 282 NEW YORK AVENUE HUNTINGTON, NEW YORK 11743 (516) 271-5685 ------------------------ NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 30, 1997 ------------------------ The 1997 annual meeting of shareholders (the 'Annual Meeting') of NAI Technologies, Inc., a New York corporation (the 'Company'), will be held on Wednesday, April 30, 1997 at 11 a.m., at the Chase Manhattan Bank Building, 270 Park Avenue, New York, New York 10022, for the following purposes: 1. to elect four Class II directors as members of the Board of Directors; 2. to vote to ratify and approve the selection of KPMG Peat Marwick LLP as the Company's independent auditors for the fiscal year ending December 31, 1997; and 3. to consider and act upon such other matters as may properly come before the Annual Meeting. All shareholders are cordially invited to attend. Only shareholders of record at the close of business on March 12, 1997 will be entitled to vote at the Annual Meeting or any adjournment thereof. By Order of the Board of Directors, /s/ RICHARD A. SCHNEIDER RICHARD A. SCHNEIDER, Secretary April 2, 1997 WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE READ THE ACCOMPANYING PROXY STATEMENT AND COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED WITHIN THE UNITED STATES OF AMERICA. THE PROXY IS REVOCABLE BY YOU AT ANY TIME PRIOR TO ITS USE. IF YOU RECEIVE MORE THAN ONE PROXY BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH PROXY SHOULD BE SIGNED AND RETURNED TO ASSURE THAT ALL YOUR SHARES WILL BE VOTED AT THE ANNUAL MEETING. NAI TECHNOLOGIES, INC. 282 NEW YORK AVENUE HUNTINGTON, NEW YORK 11743 (516) 271-5685 ------------------------ PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 30, 1997 ------------------------ INTRODUCTION GENERAL This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of NAI Technologies, Inc., a New York corporation (the 'Company'), of proxies for use at the annual meeting of shareholders (the 'Annual Meeting') of the Company to be held at the Chase Manhattan Bank Building, 270 Park Avenue, New York, New York 10022, on Wednesday, April 30, 1997 at 11 a.m., local time, and at any adjournment thereof. This Proxy Statement was first mailed to shareholders of the Company on or about April 2, 1997. At the Annual Meeting, the Company's shareholders will elect four Class II directors as members of the Board of Directors and ratify and approve the selection of KPMG Peat Marwick LLP as the Company's independent auditors. The shareholders may also conduct such other further business as may properly come before the Annual Meeting or any adjournment thereof. RECORD DATE; PROXIES The Board of Directors of the Company has fixed the close of business on March 12, 1997 as the record date for determining holders of common stock, par value $.10 per share (the 'Common Stock'), of the Company entitled to notice of and to vote at the Annual Meeting. Only holders of record of the Common Stock at the close of business on such date will be entitled to vote at the Annual Meeting or at any adjournment thereof. At such date, there were issued and outstanding 9,032,437 shares of Common Stock, each of which is entitled to one vote on each matter presented at the Annual Meeting. Each shareholder of the Company is requested to complete, sign, date and return the enclosed proxy without delay in order to ensure that the shares owned by such shareholder are voted at the Annual Meeting. Any shareholder may revoke a proxy at any time before it is voted by: (i) delivering a written notice to the Secretary of the Company, at the address of the Company set forth above, stating that the proxy is revoked; (ii) executing a subsequent proxy and delivering it to the Secretary of the Company; or (iii) attending the Annual Meeting and voting in person. Each properly executed proxy returned will be voted as directed. If no directions are given or indicated, the persons named in the accompanying proxy intend to vote proxies FOR the election of the nominees for Class II director described herein unless authority to vote for directors is withheld. In the event that any nominee at the time of election shall be unable or unwilling to serve or is otherwise unavailable for election (which contingency is not now contemplated or foreseen), and as a consequence other nominees shall be nominated, the persons named in the proxy shall have the discretion and authority to vote or to refrain from voting in accordance with their judgment on such other nominations. In addition, unless otherwise specified in the proxy, proxies will be voted IN FAVOR OF the ratification and approval of the selection of KPMG Peat Marwick LLP as the Company's independent auditors for the fiscal year ending December 31, 1997. REQUIRED VOTE The holders of a majority of the shares of Common Stock on the Record Date are necessary to constitute a quorum at the Annual Meeting. The affirmative vote of the holders of a plurality of the shares of Common Stock is required to elect directors. Accordingly, votes withheld from director-nominee(s) will not count against the election of such nominee(s). Brokers have discretionary authority to vote on the election of Class II directors. See 'Election of Directors.' The affirmative vote of the holders of a majority of the shares of Common Stock present at the Annual Meeting and voting is required to ratify and approve the selection of auditors. Accordingly, votes 'withheld' will not count against the ratification of the selection of such auditors. Brokers have discretionary authority to vote on the ratification of the selection of auditors. See 'Ratification of the Selection of Independent Auditors.' OTHER ACTION AT ANNUAL MEETING The Company does not know of any other matters to be presented at the Annual Meeting. If any additional matters should be properly presented, proxies will be voted in accordance with the judgment of the proxy holders. COST OF SOLICITATION The Company will bear the cost of soliciting proxies estimated at approximately $15,000. The Company has retained D.F. King & Co., Inc., a professional proxy solicitation firm, to assist in the solicitation of proxies in connection with the Annual Meeting for which it will receive an estimated fee of approximately $5,000 plus reasonable out-of-pocket expenses. Directors, officers and employees of the Company may also solicit proxies personally or by telephone, telegram or mail. Such directors, officers and employees will not be additionally compensated for such solicitation but may be reimbursed for reasonable out-of-pocket expenses incurred in connection therewith. Arrangements will also be made with brokerage houses and other custodians, nominees and fiduciaries for the forwarding of proxy material to the beneficial owners of the Common Stock held of record by such persons and the Company will, upon request, reimburse such custodians, nominees and fiduciaries for reasonable out-of-pocket expenses incurred in connection therewith. 2 ELECTION OF DIRECTORS GENERAL The Restated Certificate of Incorporation of the Company currently provides for a Board of Directors consisting of seven (7) directors containing two classes, one class ('Class I') having three members and one class ('Class II') having four members, each of whom after an interim arrangement will serve for two years with one class being elected each year. The shareholders will elect Class II directors to serve until the annual meeting of shareholders to be held in 1999 and until their respective successors are elected and qualify or until their resignation, removal, disqualification or death as provided in the certificate of incorporation and by-laws of the Company. NOMINEES FOR DIRECTOR The nominees for Class II directors, together with certain information furnished to the Company by each nominee, are set forth below. The nominees are all current members of the Company's Board of Directors. NOMINEES-CLASS II DIRECTORS
YEARS SERVED NAME AND AGE AS A DIRECTOR BIOGRAPHICAL SUMMARY - - ------------ ------------- --------------------- Richard A. Schneider, 44 4 Mr. Schneider is Executive Vice President, Treasurer, Class II Chief Financial Officer and Secretary of the Company. He was elected a director of the Company on February 11, 1993. From October 1988 until December 1992, he served as Vice President -- Finance and Treasurer of the Company. He was elected Secretary of the Company in January 1990. Stephen A. Barre, 56 7 Mr. Barre is Chairman and Chief Executive Officer of Servo Class II Corporation of America, a communications and defect detection company. Edward L. Hennessy, Jr., 68 1 Mr. Hennessy is the retired Chairman and Chief Executive Class II Officer of Allied Signal, Inc., a worldwide technology company. He is also a director of The Bank of New York, a New York state commercial banking company, Lockheed Martin Corp., a designer, manufacturer, integrator and operator of systems and products in leading edge technologies, National Association of Manufacturers, Wackenhut Corporation, an international provider of security-related services and privatized correctional and detention facility management and design services, Walden Real Estate Investment Trust, a self-managed fully integrated REIT focused on middle income multi-family properties, and Fundamental Management Corporation. A designee of Fundamental Management Corporation, he was elected a Director of the Company on March 6, 1996. Dennis McCarthy, 50 1 Mr. McCarthy, a designee of Mr. Holmes, was elected a Class II Director of the Company on March 6, 1996. He has been employed by Asset Associates of New York, Inc., a New York-based firm specializing in acquisitions of manufacturing businesses, since 1988.
3 CLASS I DIRECTORS. The current Class I directors, together with certain information furnished to the Company by each director, are set forth below. CLASS I DIRECTORS
YEARS SERVED NAME AND AGE AS A DIRECTOR BIOGRAPHICAL SUMMARY - - ------------ ------------- -------------------- Robert A. Carlson, 64 9 Mr. Carlson is Chairman and Chief Executive Officer of the Class I Company. Until October 1995, he served as President and Chief Executive Officer of the Company and until December 1989, he was President and Chief Operating Officer of the Company. Charles S. Holmes, 51 1 A director of the Company since October 3, 1995, Mr. Class I Holmes is President and sole stockholder of Asset Management Associates of New York, Inc. ('Asset Management'), a New York-based firm specializing in acquisitions of manufacturing businesses. Mr. Holmes founded and was a partner in Asset Management Associates, a predecessor partnership of Asset Management, from 1978 to 1991. He has served since its formation in 1992 as Vice Chairman of the Board of Directors of Chart Industries Inc., which specializes in the design, manufacture and sale of industrial process equipment used in the hydrocarbon and industrial gas industries for low-temperature and cryogenic applications, and manufactures other industrial equipment such as stainless steel tubing, structural pipe supports and high vacuum systems. C. Shelton James, 55 7 Mr. James is Chairman of the Board and Chief Executive Class I Officer of Elcotel Inc., a public communications company. He also is President and a director of Fundamental Management Corporation, an investment management company which is the general partner of limited partnerships which are substantial investors in the Company, and he is on the board of directors of Harris Computer Systems Inc., a company engaged in the manufacture of real time computers, SK Technologies, a company engaged in development and marketing of point-of-sale software, and CPSI, Inc., a company engaged in high performance computing.
OTHER INFORMATION AS TO DIRECTORS The Board of Directors has standing Audit, Compensation and Executive committees. The Audit Committee members are Messrs. James (Chairman), Barre, McCarthy and Schneider. The Audit Committee held 2 meetings during 1996. The Audit Committee recommends to the Board of Directors the independent auditors to be selected for the Company and reviews the following matters with the independent auditors: scope and results of the independent audits; corporate accounting; internal accounting control procedures; adequacy and appropriateness of financial reporting to shareholders and others; and such other related matters as the Audit Committee considers to be appropriate. The Audit Committee also recommends to the Board of Directors any changes in the independent auditing and accounting practices it determines to be appropriate. The Compensation Committee members are Messrs. Holmes (Chairman), Barre and Hennessy. The Compensation Committee held one meeting during 1996. The Compensation Committee recommends to the Board of Directors the compensation of the Company's officers, directors and certain other employees and any bonuses for officers. The Compensation Committee also determines the key employees and directors to whom, and the time or times at which, grants of options under the Company's stock option plans shall be made and the number of shares of Common Stock to be purchasable upon exercise of options granted under the stock option plans, and to interpret the stock option plans and to prescribe, amend and rescind rules and regulations relating thereto, and to make all other determinations deemed necessary or advisable for the administration of the stock option 4 plans. The Compensation Committee also has authority to select who is eligible for the stock option secured loan program. The Executive Committee members are Messrs. Carlson (Chairman), Holmes and James. The Executive Committee did not meet during 1996. The duties of the Executive Committee include recommending actions to the Board of Directors and acting on behalf of the Board on certain matters when the Board is not in session. The Board of Directors met seven times during 1996 at regular and special meetings in person or by conference telephone. All incumbent members of the Board of Directors who were directors in 1996 attended more than 75% of the total number of meetings of the Board of Directors and all committees of which they were members during 1996, except that Mr. Hennessy attended 50% of the total number of meetings held from the date of his election as a director of the Company on March 6, 1996. The Company indemnifies its executive officers and directors to the extent permitted by applicable law against liabilities incurred as a result of their service to the Company. The Company has one director and officers liability insurance policy underwritten by the Aetna Casualty and Surety Company in the aggregate amount of $5,000,000 renewable annually. The aggregate premium in 1996 was $155,000. Section 16(a) of the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), requires officers, directors and beneficial owners of more than 10% of the Common Stock to file reports of ownership and changes in their ownership of the equity securities of the Company with the Securities and Exchange Commission. Based solely on a review of the reports and representations furnished to the Company during the last fiscal year by such persons, the Company believes that each of these persons is in compliance with all applicable filing requirements. Under Section 16(b) of the Exchange Act, such persons also are required to disgorge to the Company any profit realized by any purchase and sale, or any sale and purchase, of equity securities of the Company within any period of less than six months. The enclosed proxy provides a means for shareholders to vote for the election of Class II directors listed above, to withhold authority to vote for one or more of such directors, or to withhold authority to vote for all of such directors. Unless a shareholder who withholds authority votes for the election of one or more other persons at the meeting or votes by means of another proxy, the withholding of authority will have no effect upon the election of directors. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE 'FOR' THE ELECTION OF THE NOMINEES FOR DIRECTOR SET FORTH ABOVE. 5 EXECUTIVE COMPENSATION AND OTHER INFORMATION EXECUTIVE OFFICERS The current executive officers of the Company are as follows: Robert A. Carlson, 64, is Chairman and Chief Executive Officer of the Company. From December 1987 until December 1989, he served as President and Chief Operating Officer of the Company. From December 1989 until October 1995, he served as President and Chief Executive Officer of the Company. Richard A. Schneider, 44, is the Executive Vice President, Treasurer, Chief Financial Officer and Secretary of the Company. From October 1988 until December 1992, he served as Vice President -- Finance and Treasurer of the Company. He was elected Secretary of the Company in January 1990. EXECUTIVE COMPENSATION The following table sets forth all plan and non-plan compensation awarded to, earned by or paid to the Company's Chief Executive Officer and each of the executive officers of the Company other than the Chief Executive Officer whose total annual salary and bonus exceeded $100,000 (collectively, the 'Named Executives') for each of the Company's last three fiscal years. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ------------------------------------------- ANNUAL COMPENSATION AWARDS PAYOUTS ------------------------------------------ --------------------------- ----------- (A) (B) (C) (D) (E) (G) (H) (F) SECURITIES OTHER ANNUAL RESTRICTED UNDERLYING NAME AND FISCAL COMPENSATION STOCK OPTIONS/ LTIP PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) AWARD(S) ($) SARS (#) PAYOUTS ($) ------------------ ---- ---------- --------- ------ ------------- ---------- ----------- Robert A. Carlson ...... 1996 $196,000 $ 176,000 -- -- -- -- Chairman and Chief 1995 263,000 -- -- -- 250,000(5) -- Executive Officer 1994 275,000 -- -- -- 138,983(4) -- Richard A. Schneider ... 1996 124,000 96,000 -- -- -- -- Executive Vice 1995 152,000 8,500 -- -- 125,000(5) -- President, Treasurer, 1994 149,000 -- -- -- 94,389(4) -- Chief Financial Officer and Secretary (A) (I) NAME AND ALL OTHER PRINCIPAL POSITION COMPENSATION ($) - - ------------------------ ---------------- Robert A. Carlson ...... $ 58,925(2) Chairman and Chief 59,071(2) Executive Officer 66,324(2) Richard A. Schneider ... 7,454(3) Executive Vice 7,630(3) President, Treasurer, 12,426(3) Chief Financial Officer and Secretary
- - ------------ (1) The aggregate amount of all perquisites and other personal benefits paid to any Named Executive is not greater than either $50,000 or 10% of the total of the annual salary and bonus reported for such Named Executive. (2) Includes $59,022, $59,071 and $58,295 of life insurance premiums paid on term life and split dollar policies by the Company on behalf of Mr. Carlson in each of the years 1994, 1995 and 1996, respectively, as well as $7,302, $0 and $0 of matching contributions made by the Company under the 401(k) deferred compensation plan and $0, $0 and $0 of contributions made by the Company under the profit sharing portion of such plan for the benefit of Mr. Carlson for each of the years 1994, 1995 and 1996, respectively. (3) Includes $7,603, $7,630 and $7,454 of life insurance premiums paid on term life and split dollar policies by the Company on behalf of Mr. Schneider in each of the years 1994, 1995 and 1996, respectively, as well as $4,823, $0 and $0 of matching contributions made by the Company under the 401(k) deferred compensation plan and $0, $0 and $0 of contributions made by the Company under the profit sharing portion of such plan for the benefit of Mr. Schneider for each of the years 1994, 1995 and 1996, respectively. (4) Options to acquire shares of the Common Stock that were granted in fiscal year 1994. At the same time, options for Mr. Carlson (102,951) and Mr. Schneider (54,996) were canceled. (5) Options to acquire shares of the Common Stock that were granted in fiscal year 1995. At the same time, options for Mr. Carlson (214,485) and Mr. Schneider (95,327) were canceled. 6 EMPLOYMENT AGREEMENTS The Company entered into an Employment Agreement with Robert A. Carlson as of January 1, 1997. Pursuant to the employment agreement with Mr. Carlson, the term of his employment commenced on January 1, 1997 and will continue until December 31, 1997 unless extended by Mr. Carlson for a period of one year on or within 30 days prior to each of January 1, 1998 and January 1, 1999 (each an 'Extension Date'). Mr. Carlson will be paid salary at a rate of $260,000 per annum which represents a 25% increase in salary from the prior year's level. Assuming that the Company attains certain annual targets, the Company will also pay Mr. Carlson an annual bonus equal to 50% of his salary. The employment agreement with Mr. Carlson also provides that the Company will pay Mr. Carlson $50,000 on each of January 15, 1998 and January 15, 1999 if Mr. Carlson continues to serve as Chairman of the Company on each such Extension Date, and an additional $50,000 if Mr. Carlson continues to serve as Chief Executive Officer of the Company on each such Extension Date (collectively referred to as the 'Executive Bonus'). Mr. Carlson will be eligible to participate in all employee benefit programs. The employment agreement with Mr. Carlson also provides that in the event the Company decides to terminate Mr. Carlson's employment without cause he is entitled to a payment of a pro rata share of unused vacation for the full year plus a pro rata share of his bonus under the Company Bonus Plan, if the Board in its sole discretion so determines, plus a severance payment of the Executive Bonus on the dates he would otherwise be entitled to receive the Executive Bonus. In the event the Company decides to terminate Mr. Carlson's employment without cause prior to November 31, 1997 he is entitled to either his salary for the remainder of the term under the agreement or one year's salary, whichever is greater. If the Company decides to terminate Mr. Carlson's employment for cause, the Company will provide 20 days written notice, and reason for the termination. Mr. Carlson will have those 20 days to effect a cure to the Company's satisfaction. The Company entered into an Employment Agreement with Richard A. Schneider on October 16, 1995 which was amended as of August 8, 1996 and January 2, 1997. Pursuant to the employment agreement with Mr. Schneider, the term of his employment commenced on October 16, 1995 and will continue until October 16, 1997. Mr. Schneider will be paid salary at a rate of $180,000 per annum which represents a 25% increase in salary from the prior year's level. Assuming the Company attains certain annual targets, the Company will also pay Mr. Schneider an annual bonus equal to 40% of his salary. Mr. Schneider will be eligible to participate in all employee benefit programs, and in 1995 was granted options to purchase 125,000 shares of Common Stock at a per share exercise price of $2.50 (such options to replace 100,000 previously issued options which were canceled). The employment agreement with Mr. Schneider also provides that in the event the Company terminates Mr. Schneider's employment without cause, Mr. Schneider will be entitled to a severance payment of either his salary for the remainder of the term under the agreement or one year's salary, whichever is greater, and a severance payment of a pro rata share of unused vacation for the full year plus a pro rata share of his bonus under the Company Bonus Plan, if the Board in its sole discretion so determines. If the Company decides to terminate Mr. Schneider's employment for cause, the Company has agreed to provide 20 days written notice, and reason for the termination. Mr. Schneider will have those 20 days to effect a cure to the Company's satisfaction. 7 STOCK OPTIONS The table below summarizes the options granted to the Named Executives in 1996 and their potential realizable values. OPTION/SAR GRANTS IN 1996
INDIVIDUAL GRANTS - - -------------------------------------------------------------------------------------------------- (A) (B) (C) (D) (E) NUMBER OF % OF TOTAL SECURITIES OPTIONS/SARS UNDERLYING GRANTED TO EXERCISE OR OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION NAME GRANTED (#) FISCAL YEAR ($/SH) DATE ---- ------------- --------------- ----- ---- Robert A. Carlson ............. 0 N/A N/A N/A President and Chief Executive Officer Richard A. Schneider .......... 0 N/A N/A N/A Executive Vice President, Treasurer and Secretary POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION FOR OPTION TERM ---------------------------- (A) (F) (G) NAME 5% ($) 10% ($) ---- ------ ------- Robert A. Carlson ............. N/A N/A President and Chief Executive Officer Richard A. Schneider .......... N/A N/A Executive Vice President, Treasurer and Secretary
SUPPLEMENTAL RETIREMENT PLAN The Company terminated its non-qualified Supplemental Retirement Plan (the 'SERP') on December 19, 1996. On August 7, 1996, the Company and Mr. Schneider agreed on the termination of Mr. Schneider's status as an eligible participant under the SERP and the redemption of his interest in the SERP by the Company at a redemption price of $150,000, which represented a discount of approximately 60% from the actuarial equivalent lump sum value of his accrued benefit under the SERP as of February 29, 1996. On December 19, 1996, the Company and Mr. Carlson agreed on the termination of Mr. Carlson's status as an eligible participant under the SERP and the redemption of Mr. Carlson's interest in the SERP by the Company at a redemption price of $800,000, payable quarterly in four equal installments of $200,000 beginning on February 17, 1997. It is estimated that Messrs. Carlson and Schneider, who have 12 and 8 years of credited service, respectively, would have received each year at normal retirement age annual amounts under the SERP of $131,296 and $65,103, respectively. DIRECTOR COMPENSATION During 1996, each director who was not also an officer of the Company was paid an annual retainer of $15,000 plus $2,500 for each Board and committee that a director serves on, plus a uniform fee of $1,000 for each Board and committee meeting attended in person. During 1996, directors who were also officers of the Company received no remuneration for attendance at Board and committee meetings. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During the fiscal year ended December 31, 1996, the members of the Compensation Committee were Charles S. Holmes (Chairman), Stephen A. Barre and Edward L. Hennessy, Jr. During fiscal year 1996 and formerly, none of such persons was an officer of the Company or any of its subsidiaries or had any relationship with the Company other than serving as a director of the Company. In addition, during the fiscal years ended December 31, 1996, no executive officer of the Company served as a director or a member of the compensation committee of another entity, one of whose executive officers served as a director or on the Compensation Committee of the Company. 8 COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION FOR FISCAL 1996 The Compensation Committee recommends to the Board of Directors the compensation of the Company's officers, directors and certain other employees and any bonuses for officers. The Compensation Committee's recommendations for compensation during 1996 were accepted by the Board of Directors. In October of 1995 the salaries of Robert A. Carlson and Richard A. Schneider were reduced by approximately 25% due to certain cash flow restraints and operating losses of the Company suffered during fiscal years 1994 and 1995. During 1996 the Company's cash position improved which resulted in the restructuring of the employment arrangements with Messrs. Carlson and Schneider. On December 19, 1996, the Company increased Mr. Carlson's salary to its pre-October 1995 level of $260,00 and also reduced his annual bonus to 50% of his salary, based on certain annual targets. The Company has also provided Mr. Carlson with additional incentives to remain with the Company as Chairman and Chief Executive Officer beyond January 1, 1998. On January 2, 1997 the Company increased Mr. Schneider's salary to its pre-October 1995 level of $180,000 and also reduced his annual bonus to 40% of his salary, based on certain annual targets. In amending and restructuring the employment agreements of Messrs. Carlson and Schneider the Compensation Committee has reviewed the recent performance history of the Company and established annual targets which best reflect the Company's circumstances and future outlook. Bonus targets are separately established at the beginning of each year with reference to the Company's performance against preset criteria principally relating to corporate profit and growth, in each case as established by the Compensation Committee. Target bonus amounts which may be earned are established as a percentage of base salary under the employment agreements. The salary of the executive officers is reviewed annually by the Compensation Committee. When setting the salary of the executive officers for 1995, the then-sitting Compensation Committee reviewed the American Electronics Association's 1992 Executive Compensation Survey of the Electronics Industry (the 'AEA Survey') which used data from over 515 companies nationwide, including data for companies in the same general business and of a similar size to the Company. Based on this review, the salaries of the Company's executive officers were set in the 75th percentile of the salaries paid by the companies in the AEA Survey. Mr. Carlson's compensation during 1996 was composed of $196,000 in salary and $176,000 in bonus. The Compensation Committee established his salary in the middle of the range of compensation of chief executive officers of selected companies, as previously described. Mr. Carlson was awarded 89.8% of his target bonus based on the Company's results compared to the criteria established at the beginning of the year related to net earnings. CHARLES S. HOLMES, Chairman STEPHEN A. BARRE EDWARD L. HENNESSY, JR. 9 PERFORMANCE GRAPH The following graph compares the yearly percentage change in the cumulative total shareholder return on the Common Stock for each of the Company's five fiscal years ending December 31, 1996 with the cumulative total return (assuming reinvestment of dividends) of (i) The Nasdaq Stock Market index (U.S. companies) and (ii) the Nasdaq non-financial stocks index. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG NAI TECHNOLOGIES, NASDAQ STOCK MARKET INDEX AND NASDAQ NON-FINANCIAL INDEX [PERFORMANCE GRAPH]
Fiscal Year (Ends Dec. 31st) 1991 1992 1993 1994 1995 1996 The Company $100 $178 $136 $ 59 $ 33 $ 82 Nasdaq SMI 100 116 174 131 185 227 Nasdaq NFI 100 109 126 121 169 206
10 PRINCIPAL AND MANAGEMENT SHAREHOLDINGS The following table sets forth information concerning persons or groups who are known by the Company to be the beneficial owners of more than 5% of the Common Stock as of March 11, 1997. The information in the table below is based upon information furnished to the Company by such persons and statements filed with the Securities and Exchange Commission (the 'Commission').
NUMBER OF SHARES OF COMMON STOCK BENEFICIALLY PERCENT OF NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) COMMON STOCK - - ------------------------------------ -------- ------------ Charles S. Holmes 3,000,000 27.2% P.O. Box 2850 Southampton, NY 11969(2) Pioneering Management Corporation 579,000 6.4% 60 State Street Boston, MA 02114(3) Fundamental Management Corporation 1,150,636 11.8% 4000 Hollywood Boulevard Suite 610N Hollywood, FL 33021(4)
- - ------------ (1) To the knowledge of the Company, beneficial owners named in the above table have sole voting power with respect to the shares listed opposite their names. (2) Mr. Holmes is a director of the Company. These shares are comprised of 1,700,000 shares underlying certain Warrants exercisable at $2.50 per share, 300,000 shares underlying certain Warrants exercisable at $3.00 per share and 1,000,000 shares of Common Stock owned by Mr. Holmes. The ownership percentage is calculated as if such Warrants had been exercised as of March 11, 1997. (3) These shares are reportedly owned by a passive investor. Pioneering Management Corporation is the investment company advisor of such investor and is registered under Section 203 of the Investment Advisers Act of 1940. (4) These shares are reportedly owned by various limited partnerships, of which Fundamental Management Corporation is the general partner. C. Shelton James, a director of the Company, is the President and a director of Fundamental Management Corporation. These shares are composed of 400,636 shares of Common Stock, 250,000 shares underlying certain Warrants exercisable at $2.50 per share and 500,000 shares underlying $1,000,000 of Notes convertible into shares at $2.00 per share. Excludes 14,793 shares of Common Stock owned by Mr. James as to which shares Fundamental Management Corporation disclaims beneficial ownership. The ownership percentage is calculated as if such Warrants and Notes had been converted as of March 11, 1997. 11 Shares of Common Stock beneficially owned as of March 11, 1997 by each director and executive officer of the Company and by all directors and executive officers of the Company as a group are set forth in the following table. This table is based upon information furnished to the Company by such persons and statements filed with the Commission. BENEFICIAL OWNERSHIP OF SHARES(1)
NUMBER OF SHARES OF COMMON STOCK BENEFICIALLY PERCENT OF NAME OWNED(2) COMMON STOCK(3) - - ---- -------- --------------- Robert A. Carlson 100,467 1.11% Stephen A. Barre 17,654 -- Edward L. Hennessy, Jr. -0- -- Charles S. Holmes(4) 1,000,000 11.08% C. Shelton James(5) 14,793 -- Dennis McCarthy -0- -- Richard A. Schneider 16,812 -- All directors and officers as a group (7 persons) 1,149,726 12.74%
- - ------------ - - -- = Less than 1% (1) Directors and executive officers have sole voting power and sole investment power with respect to the shares listed opposite their names. (2) Excludes options exercisable within 60 days of March 11, 1997 for such persons as follows: Mr. Carlson, 125,000; Mr. Barre, 3,120; Mr. Hennessy, -0-; Mr. Holmes, -0-; Mr. James, 7,401; Mr. McCarthy, -0-; Mr. Schneider, 62,500; and all directors and officers as a group, 198,201. (3) The percentages of Common Stock outstanding are based on 9,032,437 shares outstanding on March 11, 1997. (4) Excludes Warrants to purchase 2,000,000 shares of Common Stock owned by Mr. Holmes and 175,000 shares of Common Stock and Warrants to purchase 37,000 shares of Common Stock owned by a friend of Mr. Holmes. (5) Excludes 400,636 shares of Common Stock, Warrants to purchase 250,000 shares of Common Stock and Notes convertible into 500,000 shares of Common Stock owned by various limited partnerships of which Fundamental Management Corporation, an investment company of which Mr. James is President and a director, as to which shares Mr. James shares voting and dispositive power. 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Charles S. Holmes, a director of the Company, purchased $2,000,000 principal amount of the 12% Convertible Subordinated Promissory Notes due 2001 and Warrants (the 'Units') to purchase 500,000 shares of Common Stock issued pursuant to the private placement (the 'Investment Transaction') of the Units of the Company in exchange for the 12% Subordinated Promissory Notes of the Company held by him in the aggregate principal amount of $2,000,000. Mr. Holmes also received an additional 1,200,000 Warrants for advisory services in connection with the Private Placement and the engagement of Commonwealth Associates as the Company's placement agent. Pursuant to an agreement between Mr. Holmes and the Company on May 9, 1996, which provided for the immediate grant to Mr. Holmes of warrants to purchase 300,000 shares of Common Stock at any time and from time to time on or before February 15, 2002 at an exercise price of $3.00 per share, subject to adjustment in certain events, Mr. Holmes converted the Notes held by him in the aggregate principal amount of $2,000,000 into 1,000,000 shares of Common Stock which he currently owns. C. Shelton James, a director of the Company, is the president and a director of Active Investors II, Ltd. ('Active Investors'), a company which, together with certain affiliated limited partnerships, currently owns shares of Common Stock of the Company. In connection with the Investment Transaction, Active Investors purchased 900 Units from the Company in exchange for 12% Subordinated Promissory Notes of the Company held by him in the aggregate principal amount of $900,000. On May 2, 1996, Active Investors purchased additional Notes in the aggregate principal amount of $100,000 and Warrants to purchase 25,000 shares of Common Stock. In connection with the Investment Transaction, the Company agreed to use its best efforts to cause the resignation of two then-current members of the Board of Directors and cause to be elected as directors two individuals acceptable to the Company and who are designated by the investors, including one designated solely by Mr. Holmes and one designated solely by Active Investors. Dennis McCarthy was designated to serve in such capacity by Mr. Holmes, while Edward L. Hennessy, Jr. was designated to serve in such capacity by Active Investors, and each became a director of the Company on March 6, 1996. 13 RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS The Board of Directors has selected KPMG Peat Marwick LLP, Jericho, New York, as the Company's independent auditors for the fiscal year ending December 31, 1997. In accordance with the by-laws of the Company, the Board of Directors is submitting its selection of KPMG Peat Marwick LLP to the shareholders for ratification and approval. If the selection is not ratified and approved, the Board of Directors will reconsider its choice. KPMG Peat Marwick LLP, an international firm of certified public accountants, has been retained as auditors by the Company each year since 1981. A representative of KPMG Peat Marwick LLP is expected to be present at the Annual Meeting to make a statement, should the representative desire to do so, and to answer appropriate questions from shareholders. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE 'FOR' RATIFICATION AND APPROVAL OF THE SELECTION OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997. SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING Shareholder proposals for inclusion in the proxy materials and consideration at the 1998 Annual Meeting of Shareholders, if any, must be received by the Company on or before December 3, 1997 in order to be included in the proxy material of the Company for that meeting. By Order of the Board of Directors, /s/ RICHARD A. SCHNEIDER RICHARD A. SCHNEIDER, Secretary Dated: April 2, 1997 PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION MAY BE OBTAINED WITHOUT CHARGE (EXCEPT FOR EXHIBITS TO SUCH ANNUAL REPORT, WHICH WILL BE FURNISHED UPON PAYMENT OF THE COMPANY'S REASONABLE EXPENSES IN FURNISHING SUCH EXHIBITS) BY ANY SUCH PERSON SOLICITED HEREUNDER BY WRITING TO: RICHARD A. SCHNEIDER, SECRETARY, NAI TECHNOLOGIES, INC., 282 NEW YORK AVENUE, HUNTINGTON, NEW YORK 11743. 14 Appendix 1 Proxy Card NAI TECHNOLOGIES, INC. PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 30, 1997 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Robert A. Carlson or Richard A. Schneider and each of them, proxies of the undersigned, with full power of substitution, to vote all Common Stock of NAI Technologies, Inc., a New York corporation (the "Company"), the undersigned is entitled to vote at the Annual Meeting of Shareholders of the Company to be held at the Chase Manhattan Bank Building, 270 Park Avenue, New York, New York 10022, on Wednesday, April 30, 1997 at 11:00 a.m. (local time), or any adjournment thereof, with all the powers the undersigned would have if personally present on the following matters: 1. ELECTION OF THE FOLLOWING NOMINEES FOR CLASS II DIRECTOR: Nominees: Richard A. Schneider Stephen A. Barre Edward L. Hennessy James McCarthy. FOR all Nominees WITHHOLD AUTHORITY INSTRUCTIONS: to withhold [ ] to vote for all Nominees [ ] authority to vote for any individual Nominee, write that Nominee's name in the space provided below. ----------------------------
2. PROPOSAL TO RATIFY AND APPROVE THE SELECTION OF KPMG AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997. FOR [ ] AGAINST [ ] ABSTAIN [ ] 3. IN THEIR DISCRETION, THE ABOVE-NAMED PROXIES ARE AUTHORIZED TO VOTE IN ACCORDANCE WITH THEIR OWN JUDGMENT 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 SHAREHOLDER. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2 AND THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO ANY MATTERS REFERRED TO IN ITEM 3. The undersigned hereby acknowledges receipt of a copy of the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement and hereby revokes any Proxy or Proxies heretofore given. You may strike out the persons named as proxies and designate a person of your choice, and may send this Proxy directly to such person. SIGNATURES __________________________________________ DATED: ____________ , 1997 NOTE: Please complete, date and sign exactly as your name appears hereon. When signing as attorney, administrator, executor, guardian, trustee or corporate official, please add your title. If shares are held jointly, each holder should sign. -----END PRIVACY-ENHANCED MESSAGE-----