<PAGE>
<PAGE>
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:
.......................................................
<PAGE>
<PAGE>
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.
<PAGE>
<PAGE>
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.
<PAGE>
<PAGE>
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
<PAGE>
<PAGE>
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
<TABLE>
<CAPTION>
YEARS SERVED
NAME AND AGE AS A DIRECTOR BIOGRAPHICAL SUMMARY
- - ------------ ------------- ---------------------
<S> <C> <C>
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.
</TABLE>
3
<PAGE>
<PAGE>
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
<TABLE>
<CAPTION>
YEARS SERVED
NAME AND AGE AS A DIRECTOR BIOGRAPHICAL SUMMARY
- - ------------ ------------- --------------------
<S> <C> <C>
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.
</TABLE>
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
<PAGE>
<PAGE>
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
<PAGE>
<PAGE>
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 $100,000 (collectively, the 'Named
Executives') for each of the Company's last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------ --------------------------- -----------
(A) (B) (C) (D) (E) (G) (H)
(F) SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING
NAME AND FISCAL COMPENSATION STOCK OPTIONS/ LTIP
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) AWARD(S) ($) SARS (#) PAYOUTS ($)
------------------ ---- ---------- --------- ------ ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
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
<CAPTION>
(A) (I)
NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION ($)
- - ------------------------ ----------------
<S> <C>
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
</TABLE>
- - ------------
(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
<PAGE>
<PAGE>
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 $2.50
(such options to replace 100,000 previously issued options which were canceled).
The employment agreement with Mr. Schneider also provides that in the event the
Company terminates Mr. Schneider's employment without cause, Mr. Schneider will
be entitled to a severance payment of either his salary for the remainder of the
term under the agreement or one year's salary, whichever is greater, and a
severance payment of a pro rata share of unused vacation for the full year plus
a pro rata share of his bonus under the Company Bonus Plan, if the Board in its
sole discretion so determines. If the Company decides to terminate Mr.
Schneider's employment for cause, the Company has agreed to provide 20 days
written notice, and reason for the termination. Mr. Schneider will have those 20
days to effect a cure to the Company's satisfaction.
7
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<PAGE>
STOCK OPTIONS
The table below summarizes the options granted to the Named Executives in
1996 and their potential realizable values.
OPTION/SAR GRANTS IN 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- - --------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE
---- ------------- --------------- ----- ----
<S> <C> <C> <C> <C>
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
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
OPTION TERM
----------------------------
(A) (F) (G)
NAME 5% ($) 10% ($)
---- ------ -------
<S> <C> <C>
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
</TABLE>
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
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<PAGE>
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
<PAGE>
<PAGE>
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]
<TABLE>
<CAPTION>
Fiscal Year (Ends Dec. 31st)
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
The Company $100 $178 $136 $ 59 $ 33 $ 82
Nasdaq SMI 100 116 174 131 185 227
Nasdaq NFI 100 109 126 121 169 206
</TABLE>
10
<PAGE>
<PAGE>
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').
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON STOCK
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) COMMON STOCK
- - ------------------------------------ -------- ------------
<S> <C> <C>
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)
</TABLE>
- - ------------
(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
<PAGE>
<PAGE>
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)
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON STOCK
BENEFICIALLY PERCENT OF
NAME OWNED(2) COMMON STOCK(3)
- - ---- -------- ---------------
<S> <C> <C>
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%
</TABLE>
- - ------------
- - -- = 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
<PAGE>
<PAGE>
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
<PAGE>
<PAGE>
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
<PAGE>
<PAGE>
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.
<TABLE>
<S> <C> <C>
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.
----------------------------
</TABLE>
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.
<PAGE>
<PAGE>
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.
