<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Materials Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
IRVINE SENSORS CORPORATION
(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:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check the 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>
IRVINE SENSORS CORPORATION
3001 REDHILL AVENUE, BUILDING III
COSTA MESA, CALIFORNIA 92626
JANUARY 24, 1997
To the Stockholders of Irvine Sensors Corporation:
The Annual Meeting of Stockholders of Irvine Sensors Corporation will be
held at The Center Club, 650 Town Center Drive, Costa Mesa, California, on
Friday, February 28, 1997, at 2:00 p.m., California time.
The Annual Report for fiscal 1996 is enclosed herewith. At the
stockholders' meeting, we will discuss in more detail the subjects covered in
the Annual Report as well as other matters of interest to stockholders.
The enclosed proxy statement explains the items of business to come
formally before the Annual Meeting. As a stockholder, it is in your best
interest to express your views regarding these matters by signing and returning
your proxy. This will ensure the voting of your shares if you do not attend the
Annual Meeting.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES OF THE COMPANY'S
STOCK YOU OWN, AND ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL
MEETING. TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN,
DATE AND MAIL THE ENCLOSED PROXY PROMPTLY IN THE RETURN ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE GIVING OF A PROXY WILL
NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE ANNUAL MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE ANNUAL MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
Sincerely yours,
/s/ JAMES ALEXIOU
James Alexiou
Chairman of the Board
<PAGE>
IRVINE SENSORS CORPORATION
Notice of Annual Meeting of Stockholders - February 28, 1997
TO THE STOCKHOLDERS OF IRVINE SENSORS CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Irvine
Sensors Corporation, a Delaware corporation (the "Company"), will be held on
Friday, February 28, 1997 at 2:00 p.m., California time, at The Center Club, 650
Town Center Drive, Costa Mesa, California for the following purposes:
1. To elect directors to serve for the ensuing year.
2. To authorize a possible amendment to the Company's Certificate of
Incorporation to effect a reverse stock split of the Common Stock of
between 2-to-1 and 5-to-1, in the discretion of the Board of Directors.
3. To ratify the appointment of Price Waterhouse LLP as independent
accountants of the Company for the fiscal year ending September 28,
1997.
4. To transact such other business as may properly come before the Meeting
or any postponement(s) or adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on December 20,
1996 as the record date for the determination of stockholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournment or postponement
thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. Whether or not you expect to attend the Annual Meeting in person, in
order to ensure your representation at the Annual Meeting, you are urged to
mark, sign, date and return the enclosed Proxy card as promptly as possible in
the postage-prepaid envelope enclosed for that purpose. Any stockholder
attending the Annual Meeting may vote in person even if he or she returned a
proxy.
By Order of The Board of Directors
/s/ JOANNE S. CARSON
Joanne S. Carson,
Secretary
Costa Mesa, California
January 24, 1997
<PAGE>
IRVINE SENSORS CORPORATION
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
SOLICITATION AND VOTING RIGHTS
GENERAL
The enclosed proxy is solicited by and on behalf of Irvine Sensors
Corporation (the "Company") for use at the Annual Meeting of Stockholders to be
held on Friday, February 28, 1997 at 2:00 p.m., California time, or at any
postponements or adjournments thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting
will be held at The Center Club, 650 Town Center Drive, Costa Mesa, California.
All expenses incurred in connection with this solicitation, including postage,
printing, handling and the actual expenses incurred by brokerage houses,
custodians, nominees and fiduciaries in forwarding proxy material to beneficial
owners, will be paid by the Company. In addition to solicitation by mail,
certain officers, directors and regular employees of the Company, who will
receive no additional compensation for their services, may solicit proxies by
telephone, telegram or personal call. These proxy solicitation materials were
mailed on or about January 24, 1997, together with the Company's 1996 Annual
Report to Stockholders, to all stockholders entitled to vote at the Annual
Meeting.
The Company's principal executive offices are located at 3001 Redhill
Avenue, Building III, Costa Mesa, California 92626 and its telephone number is
(714) 549-8211.
VOTING OF SECURITIES
Irvine Sensors Corporation is a corporation existing and organized under
the laws of the State of Delaware. The Company's Board of Directors has fixed
the close of business on December 20, 1996 as the record date (the "Record
Date") for determining the stockholders of the Company entitled to notice of and
to vote at the Annual Meeting and at any adjournments or postponements thereof.
The Company has authorized two classes of voting securities: Common Stock
(40,000,000 shares authorized) and Preferred Stock (500,000 shares authorized).
As of the Record Date, there are 19,583,800 shares of Common Stock outstanding,
8,832 shares of Series B Preferred Stock outstanding and 5,179 shares of Series
C Preferred Stock outstanding. The presence in person or by proxy of the
holders of a majority of the outstanding shares of Common Stock and Preferred
Stock entitled to vote at the Annual Meeting will constitute a quorum for the
purpose of transacting business at the Annual Meeting.
On each matter that may come before the Annual Meeting, each stockholder is
entitled to one vote for each share of Common Stock and that number of shares of
Common Stock into which the Series B Preferred Stock and Series C Preferred
Stock, as the case may be, are currently convertible. The Series B and Series C
Preferred Stock presently convert into 50 shares of Common Stock for each share
of Preferred Stock, and therefore, as a class, the Preferred Stock is entitled
to 700,566 votes on each matter to come before the Annual Meeting; however, in
all matters to come before the Annual Meeting, the Common Stock and Preferred
Stock will vote together as a single class. Abstentions and broker-non-votes
are counted for purposes of determining the presence or absence of a quorum for
the transaction of business. Abstentions are counted in tabulations of the
votes cast on proposals presented to stockholders and therefore will have the
effect of a negative vote. Broker-non-votes are not counted for purposes of
determining whether a proposal has been approved.
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<PAGE>
Under the Company's Certificate of Incorporation, cumulative voting is
permitted in the election of directors. Under cumulative voting rules, every
stockholder voting in the election of directors may cumulate such stockholder's
votes and give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of votes to which the stockholder's
shares are entitled, or distribute the stockholder's votes on the same principle
among as many candidates as the stockholder thinks fit, provided that votes
cannot be cast for more candidates than are provided for by the By-laws at the
time of voting. However, no stockholder will be entitled to cumulate votes
unless the name of the candidate or candidates for whom such votes would be cast
has been placed in nomination prior to the voting and any stockholder has given
notice, at the Annual Meeting and prior to the commencement of voting, of such
stockholder's intention to cumulate his votes. The candidates receiving the
highest number of votes, up to the number of directors to be elected, shall be
elected.
All votes will be tabulated by the inspector of election appointed for the
Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker "non-votes."
REVOCABILITY OF PROXIES
At the Annual Meeting, valid proxies will be voted as specified by the
stockholder. Any stockholder giving a proxy in the accompanying form retains
the power to revoke it at any time prior to the exercise of the powers conferred
in the proxy and may do so by taking any of the following actions: (i)
delivering written notice to the Secretary of the Company, (ii) delivering to
the Secretary of the Company a duly executed proxy bearing a later date or (iii)
personally attending the Annual Meeting and revoking the proxy. A stockholder's
attendance at the Annual Meeting will not revoke the stockholder's proxy unless
the stockholder affirmatively indicates at the Annual Meeting the intention to
vote the stockholder's shares in person. Please note, however, that if a
stockholders' shares are held of record by a broker, bank or other nominee and
he wishes to vote in person at the Annual Meeting, he must obtain from the
record holder a proxy issued in his name.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's Annual Meeting to be held in 1998 must be
received by the Company no later than September 26, 1997, in order for them to
be considered for inclusion in the Company's Proxy Statement and form of Proxy
relating to that meeting. It is recommended that stockholders submitting
proposals direct them to the Secretary of the Company and utilize certified
mail-return receipt requested in order to provide proof of timely receipt. No
such proposals were received with respect to the Annual Meeting scheduled for
February 28, 1997.
PROPOSAL NO. 1
NOMINATION AND ELECTION OF DIRECTORS
NOMINEES
Although the By-laws provide for a board of ten directors, the Company
proposes that a board of seven directors be elected at the Annual Meeting. Each
director to be elected will hold office until the next annual meeting of
stockholders and until his or her successor is elected and has qualified, or
until such director's earlier death, resignation or removal. The Board has the
power between meetings of stockholders to elect directors to fill vacancies thus
created and the Board is presently pursuing candidates to fill one or more of
these vacancies. Unless otherwise instructed, the Proxy holders will vote the
Proxies received by them FOR the Company's seven nominees named below, six of
whom are presently directors of the Company elected by the stockholders and one
former retired director of the Company who is standing for election. Proxies
cannot be voted for a greater number of persons than the number of nominees
named. In the event that any nominee of the Company is unable or declines to
serve as a
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director at the time of the Annual Meeting or any postponements or adjournments
thereof, the Proxies will be voted for any substitute nominee who shall be
designated by the Proxy holders or Board of Directors to fill the vacancy. In
the event that additional persons are nominated for election as directors, the
Proxy holders intend to vote all Proxies received by them in such a manner in
accordance with cumulative voting as will assure the election of as many of the
nominees listed below as possible, and, in such event, the specific nominees to
be voted for will be determined by the Proxy holders. Accordingly, the Company
seeks discretionary authority to cumulate votes. It is not expected that any
nominee will be unable or will decline to serve as director.
REQUIRED VOTE
Directors are elected by a plurality of the votes present and in person or
represented by proxy and entitled to vote on the proposal. Votes may be cast in
favor or withheld; votes that are withheld will be excluded entirely from the
vote and will have no effect. A broker-non-vote will not be treated as entitled
to vote on this matter.
THE BOARD RECOMMENDS VOTING "FOR" THE SEVEN NOMINEES LISTED BELOW.
The names of the Company's nominees for director, their ages as of February
28, 1997 and certain information about them, are set forth below:
<TABLE>
<CAPTION>
Name Age Position with Company/Principal Occupation
- ---- --- ------------------------------------------
<S> <C> <C>
James Alexiou(1)(2) 64 Chairman of the Board, President and
Chief Executive Officer
John C. Carson 58 Senior Vice President and
a Director
Joanne S. Carson 58 Director and Secretary
Marc Dumont(1) 53 Director
Walter Garrigan 70 Director
Thomas H. Lenagh(2) 78 Director
Frank P. Ragano(1) 68 Director
- --------------------
</TABLE>
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Mr. Alexiou is a co-founder of the Company and has served as Chairman of
the Board and a director since its inception in 1974. He also served as the
Company's President from 1974 until September 1992 and its Chief Executive
Officer from 1974 until he retired from this position in September 1994. He was
subsequently re-elected to the positions of President and Chief Executive
Officer in October 1996. Since 1968, he has been a director of, and since 1970,
the President of, Carson Alexiou Corporation ("CAC"), the former parent and
present subsidiary of the Company. Mr. Alexiou holds a B.S. in business
management and an M.A. in economics from Boston University.
Mr. Carson is a co-founder of the Company and has served as a Senior Vice
President since the Company's inception in 1974 and a director since April 1982.
In 1968 he founded, and is presently Vice President and a director of CAC. Mr.
Carson holds a B.S. in Physics from the Massachusetts Institute of Technology.
3
<PAGE>
Mrs. Carson has been a director of the Company since its inception and
became the Company's Secretary in December 1981. Since 1968 she has also been a
director of CAC.
Mr. Dumont became a director of the Company in April 1994. Mr. Dumont has
been an international consultant and investment banker for more than five years.
From January 1981 to March 1995, Mr. Dumont was President of PSA International
S.A., a PSA Peugeot Citroen Group company. Mr. Dumont is a graduate of the
University of Louvain, Belgium with degrees in Electrical Engineering and
Applied Economics and holds an MBA from the University of Chicago.
Mr. Garrigan served as a director of the Company from February 1989 until
he retired in 1994. For more than five years, Mr. Garrigan has been an
independent financial consultant and venture capitalist, primarily with respect
to high technology ventures. Mr. Garrigan holds AB and Juris Doctor degrees
from Rutgers University and is a member of the Bar of the District of Columbia.
Mr. Lenagh became a director of the Company in December 1981. Mr. Lenagh
has been an independent financial advisor for more than five years. Mr. Lenagh
is also a director of Adams Express Company, CML, Inc., ICN Pharmaceutical,
Inc., Clemente Global Growth Fund, Gintel Funds, U.S. Life Corporation, Styles
on Video, V-Band Cap and Franklin Quest. Mr. Lenagh holds a B.A. from Williams
College and a J.D. from Columbia University Law School.
General Ragano became a director of the Company in June 1985. Since
December 1988, General Ragano has been Chairman and Chief Executive Officer of
CMS, Inc., a manufacturer of defense munitions. General Ragano holds a B.S.
degree from Duquesne University and an MBA from Syracuse University.
Directors and officers are elected on an annual basis. The term of each
director expires at the Company's next annual meeting of stockholders or at such
time as his or her successor is duly elected and qualified. Officers serve at
the discretion of the Board of Directors.
There are no family relationships between any director, executive officer
or other key personnel and any other director, executive officer or other key
personnel of the Company, other than between John C. Carson and Joanne S.
Carson, who are husband and wife.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company are not separately compensated
for their services as directors or as members of committees of the Board of
Directors. During fiscal 1996, directors who were not employees of the Company
received $1,600 for each board meeting attended and were reimbursed for
reasonable travel and other expenses. No compensation is paid for attendance at
meetings of the committees of the Board of Directors.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of seven meetings during the fiscal
year ended September 29, 1996 and took five actions by unanimous written
consent. No director attended fewer than 75% of the meetings of the Board of
Directors or committees of which he or she was a member during the fiscal year
ended September 29, 1996.
The Audit Committee of the Board of Directors, consisting of Messrs.
Alexiou and Lenagh, met once during the fiscal year ended September 29, 1996.
This Committee reviews the independence of the Company's independent certified
public accountants, recommends the engagement and discharge of independent
accountants and reviews accounting policies, internal accounting controls and
results of audit engagements. During fiscal 1996, neither the Board of
Directors nor the Company's independent certified public accountants raised any
issues with respect to matters which required formal review.
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The Compensation Committee of the Board of Directors, consisting of Messrs.
Alexiou, Dumont and Ragano, met four times during the fiscal year ended
September 29, 1996. This Committee makes recommendations to the Board of
Directors as to the salaries of officers, administers the Company's executive
bonus programs and recommends to the Board the award of stock options to key
employees, officers and directors.
The Company does not have a nominating committee or any committee
performing the functions of a nominating committee.
EXECUTIVE OFFICERS
The names of the Company's executive officers who are not also directors of
the Company and certain information about each of them are set forth below:
Mr. John J. Stuart, age 57, joined the Company in January 1983 as its
Manager of Special Projects and Communications, became the Company's Chief
Financial Officer and Treasurer in July 1985, and a Vice President in June 1995.
He relinquished the Treasurer position in February 1995. Mr. Stuart holds a
B.S. in Industrial Management from the Massachusetts Institute of Technology.
Dr. Kenneth T Lian, age 66, joined the Company in September 1982 as its
Director of Engineering and Manufacturing and became a Vice President of the
Company in March 1983, Chief Operating Officer in February 1986, Senior Vice
President in September 1988, President in September 1992, and Chief Executive
Officer and Director in September 1994. In October 1996, he resigned as Chief
Executive Officer, President and Director, but remains as Senior Vice President
and Chief Operating Officer. Dr. Lian holds a B.E.E., M.E.E. and Ph.D. from the
Polytechnic Institute of New York.
Mr. Joseph W. Yanus, age 57, joined the Company in February 1996 as a
Senior Vice President and General Manager of its Vermont computer products
operation. Before joining the Company, Mr. Yanus was a Vice President of an AMP
subsidiary from May 1994 to February 1996, President of E-Systems Management
from March 1992 to May 1994, and a Senior Vice President of Alcoa Electronics
Packaging Company from January 1989 to February 1992. Mr. Yanus holds a B.S.
from the Northeastern University.
Mr. David Pinto, age 64, joined the Company in October 1984 as Controller
and was named the Treasurer in February 1995. Mr. Pinto is a graduate of St.
George's College in Jamaica.
PROPOSAL NO. 2
POSSIBLE AMENDMENT TO THE
COMPANY'S CERTIFICATE, OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT
Because of pending new listing requirements being considered by Nasdaq, the
Company's Board of Directors authorized management to obtain stockholder
approval of an amendment to the Company's Certificate of Incorporation in the
event it becomes necessary or advisable, at the discretion of the Board, to
effect a reverse stock split of the Company's Common Stock. Although the Board
is not presently proposing such a reverse stock split, it is concerned about the
unknown timing of any response required should new Nasdaq listing requirements
be implemented. Accordingly, the Company is seeking stockholder approval of
such a reverse stock split in advance of a decision by the Board to make any
change in the Company's outstanding capital. The stockholders. are being
requested to grant management the authority to effect a reverse stock split of
between 2-to-1 and 5-to-1, the exact size of the share combination to be
determined by the Board of Directors at any time within twelve months of the
date of this meeting. Approval of this Proposal No. 2 also includes
authorization to amend the Company's Certificate of Incorporation in order to
effect the reverse stock split so approved. The language of the amendment to
the Certificate of Incorporation would not change any
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portion of the text of the existing Certificate of Incorporation, except to add
one sentence to the first paragraph of Article IV, which sentence would have the
effect of combining the outstanding shares in the proportion so determined by
the Board. No further authority by the stockholders would be required in order
to complete the reverse split.
The Board believes that the proposal to give the Board the authority to
effect a reverse stock split within the range to be approved is desirable so
that, if the need arises, management will be able to promptly effect a reverse
stock split without the delay and expense of calling a special meeting of
stockholders. The Board believes this flexibility is important and in the best
interests of the stockholders because it will enable management to ensure that
the stock price of the Company's Common Stock will continue to meet the minimum
level required by The Nasdaq SmallCap Market(R) for continued inclusion on
Nasdaq.
As of December 20, 1996, the closing bid price of the Company's Common
Stock on Nasdaq was $15/16. Under current Nasdaq rules, a listed company must
either maintain a stock price of at least $1 per share or the market value of
the public float must be at least $1.0 million and capital and surplus must be
at least $2.0 million. Because of this alternative, the Company has been able
to continue its inclusion on Nasdaq even though its bid stock price has closed
below $1 nine times between November 1, 1996 and January 10, 1997.
In November 1996, the board of directors of The Nasdaq Stock Market,
Inc./SM/approved proposed changes to the listing and maintenance requirements
applicable to companies that desire to trade on Nasdaq. Included in the
proposed changes is the elimination of the alternative to the $1 minimum bid
price. The proposals have not been finalized, and the Company cannot speculate
whether the proposals will be adopted, or if so, when they will become
effective. Management believes, however, that there is a strong likelihood that
Nasdaq will toughen its maintenance requirements, and accordingly, the Company's
status as a Nasdaq-traded company could be jeopardized.
A reverse stock split of the outstanding Common Stock, if consummated,
would have the effect of reducing the number of shares owned by each
stockholder, while proportionately increasing the per share price. By way of
example, if the Company effects a 5-for-1 reverse stock split, a stockholder who
owned 500 shares (at $1.00 per share) prior to the combination would own 100
shares (at $5.00 per share) upon completion of the reverse split. Accordingly,
each stockholder's proportionate share ownership in the Company remains
undiluted by the reverse stock split. However, the Company can give no
assurance that, upon completion of the reverse split, the adjusted stock price
will not drift down immediately or shortly thereafter. It is not unusual to see
some downward movement in a stock's price following a reverse stock-split. The
Company nevertheless believes that the stockholders should approve the Proposal
so that management has the ability to protect the Company's listing on Nasdaq.
REQUIRED VOTE
The approval of the possible future amendment to the Certificate of
Incorporation to effect a reverse stock split, requires the affirmative vote of
a majority of the outstanding shares entitled to vote thereon. Abstentions and
broker non-votes are not affirmative votes, and therefore, will have the same
effect as a vote against the proposal.
The Board of Directors recommends a vote "FOR" approval of a possible
reverse stock split of any proportion between 2-to-1 and 5-to-1, in the Board's
discretion, at any time on or before February 23, 1998, and the amendment of the
Certificate of Incorporation to effect such reverse split.
6
<PAGE>
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the accounting firm of Price Waterhouse
LLP to continue to serve as the Company's independent accountants for the fiscal
year ending September 28, 1997. A representative of Price Waterhouse LLP is
expected to attend the Annual Meeting and will be available to respond to
stockholders' questions or make a statement if he desires to do so.
Accounting services provided by Price Waterhouse in fiscal 1996 included
the examination of the Company's consolidated financial statements for the
fiscal year ended September 29, 1996 and the review of various filings with the
Securities and Exchange Commission. During fiscal 1996, the Company paid Price
Waterhouse LLP the sum of $55,700 for their services.
OTHER INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 20, 1996, the number and
percentage of Common and Preferred Stock owned by (i) persons known by the
Company to beneficially own more than 5% of an outstanding class of voting
securities, (ii) each director and nominee for director, (iii) each executive
officer named in the Summary Compensation Table, and (iv) all directors and
executive officers as a group. The Company knows of no arrangements that will
result in a change in control subsequent to the date hereof. Except as
otherwise indicated, each person has sole investment and voting power with
respect to the shares shown, subject to community property laws, where
applicable.
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<PAGE>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
Sole Voting Shared Voting Percent
Title of or Investment or Investment Aggregate of
Name Class Power Power(1) Amount Class(2)
- ---- ------------- ----------------- -------------- ------------- --------
<S> <C> <C> <C> <C> <C>
James Alexiou Common 647,969(3) 2,132,934(4) 2,780,903 13.47%
3001 Redhill Ave., Bldg III Preferred - 14,011 14,011 100.00%
Costa Mesa, California
John C. Carson (5) Common 452,989(3) 2,132,934(4) 2,585,923 12.53%
3001 Redhill Ave., Bldg III Preferred - 14,011 14,011 100.00%
Costa Mesa, California
Joanne S. Carson (5) Common 316,210 - 316,210 1.61%
Marc Dumont Common 29,666(6) - 29,666 (7)
Walter Garrigan Common - - -
Thomas H. Lenagh Common 77,935 - 77,935 (7)
Frank P. Ragano Common 42,035 - 42,035 (7)
Kenneth T. Lian Common 155,644 - 155,644 (7)
John J. Stuart, Jr. Common 303,200 2,132,934(4) 2,436,134 12.01%
3001 Redhill Ave., Bldg III Preferred - 14,011 14,011 100.00%
Costa Mesa, California
All directors and
executive officers Common 1,669,948(3)(6) 2,132,934(4) 3,802,882 18.42%
as a group (11 persons) Preferred - 14,011 14,011 100.00%
</TABLE>
- ----------------------
(1) Such shares of Common and Series B and Series C Preferred Stock are held by
the Company's Stock Bonus Plan; the named individual shares the power to
vote and dispose of such shares.
(2) Percentages have been calculated based upon the number of outstanding shares
on December 20, 1996 plus Common Stock deemed outstanding at such date
pursuant to Rule 13d-3(d)(1) under the Securities Exchange Act of 1934.
(3) Includes 355,700 shares issuable to R & D Leasing Ltd. ("RDL") upon exercise
of common stock warrants, all of which are currently exercisable, as to
which the named individual, a general partner of RDL, may be deemed to be
the beneficial owner.
(4) Includes 1,432,368 shares of Common Stock and 700,566 shares issuable upon
conversion of Series B and Series C Preferred Stock, all of which are held
by the Company's Stock Bonus Plan, by virtue of the named individual's
shared power to vote and dispose of such shares.
(5) The amounts and percentages for each of John C. Carson and Joanne S. Carson,
who are husband and wife, exclude amounts held by the other spouse as
separate property.
(6) Includes 6,666 shares issuable upon exercise of currently exercisable common
stock options.
(7) Less than 1%.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors and
persons who own more than ten percent of a registered class of the Company's
equity securities registered under the Exchange Act, to file with the Commission
reports of ownership and changes in ownership of Common Stock and other equity
securities of the Company. Executive officers, directors and greater than ten
percent stockholders are
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<PAGE>
required by Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on review of this information,
including written representations that no other reports were required, the
Company believes that during the fiscal year ended September 29, 1996, each of
the Company's executive officers, directors and holders of ten percent or more
of the Company's Common Stock timely filed all reports required to be filed
pursuant to Section 16(a) of the Exchange Act.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
For fiscal years ended September 29, 1996, October 1, 1995 and October 2,
1994, the compensation awarded or paid to, or earned by the Chief Executive
Officer and each of the four other executive officers of the Company whose
annual compensation exceeded $100,000 in fiscal 1996 (the "Named Executive
Officers"), is shown in the following table:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Other
Name Annual Restricted
and Compen- Stock Options/ LTIP All Other
Principal Fiscal sation Awards SARs Payouts Compensa-
Position(s) Year Salary($) Bonus($) ($)(1) ($) (#) ($) tion($)(2)
- --------------------------- ------ --------- ------- ------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James Alexiou(3) 1996 135,553 - 1,309 - - - -
Chairman of the Board, 1995 149,968 - 13,152 - - - 16,823
1994 125,840 - 18,016 - - - 13,961
Kenneth T. Lian(4) 1996 134,992 - 5,993 - 100,000 - 16,691
President and Chief 1995 134,992 - 9,075 - - - 15,155
Executive Officer 1994 116,064 - 4,619 - - - 12,877
John C. Carson 1996 146,500 - 1,080 - - - 18,033
Senior Vice President 1995 130,000 - 11,686 - - - 14,656
1994 125,840 - 12,401 - - - 13,961
John J. Stuart, Jr. 1996 120,000 - 1,044 - - - 16,050
Vice President and 1995 110,032 10,000 4,415 - - - 12,352
Chief Financial Officer 1994 94,328 - 6,505 - - - 10,465
</TABLE>
- ------------------------
(1) As permitted by the rules promulgated by the SEC, no amounts are shown for
"perquisites," where such amounts for the Named Executive Officers do not
exceed the lesser of 10% of the sum of such executive bonus salary or
$50,000.
(2) Amounts in this column represent the value of shares contributed to the
named individual's account in the Employee Stock Bonus Plan. See "Employee
Stock Bonus Plan."
(3) Effective October 14, 1996, Mr. Alexiou was appointed President and Chief
Executive Officer.
(4) Effective October 14, 1996, Mr. Lian was appointed Senior Vice-President and
Chief Operating Officer.
9
<PAGE>
EMPLOYMENT AGREEMENTS
The Company had no employment agreements with any of its executive officers
during the fiscal year ended September 29, 1996 and has not entered into any
such agreements in the current fiscal year.
OPTION GRANTS
The following table sets forth certain information regarding grants of
stock options made during the fiscal ended September 29, 1996 to the named
executive officers. No stock appreciation rights ("SARs") were granted during
fiscal 1996.
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------- Potential Realizable
Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options Price Appreciation for
Underlying Granted to Exercise or Option Term(3)
Options Employees in Base Price Expiration ----------------------
Name Granted(1) Fiscal Year(2) ($/Share) Date 5% ($) 10% ($)
- ---- ------------ -------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
James Alexiou - - - - - -
Kenneth T. Lian 100,000 29.1% $8.50 12/07/99 - -
John J. Stuart, Jr. - - - - - -
</TABLE>
- --------------------
(1) Options granted become exercisable at the rate of 33% annually over a three
year period from the date of grant.
(2) Based on an aggregate of 343,500 options granted under the Company's option
plans in the fiscal year ended September 29, 1996.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date and are not intended to forecast possible future
appreciation, if any, in the price of the Common Stock. The gains shown are
net of the option exercise price, but do not include deductions for taxes or
other expenses associated with the exercise of the options or the sale of
the underlying shares. The actual gains, if any, on the stock option
exercises will depend on the future performance of the Common Stock, the
optionholder's continued employment through the option vesting period and
the date on which the options are exercised.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table contains information relating to the exercise of stock
options granted under the 1991 and 1995 Stock Option Plans by the Named
Executive Officers in fiscal 1996, as well as the number and value of their
unexercised options as of September 29, 1996.
10
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Shares Value at Fiscal Year End(#)(2) at Fiscal Year End($)(3)
Acquired on Realized --------------------------- ---------------------------
Name Exercise(#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James Alexiou 75,000 $270,700 - - - -
Kenneth T. Lian 75,000 270,700 - 100,000 - -
John J. Stuart, Jr. 75,000 270,700 - - - -
- -----------------------
</TABLE>
(1) Represents the fair market value of the Company's Common Stock on the date
of exercise (based on the closing sales price reported on the Nasdaq
SmallCap Market or the actual sales price if the shares were sold by the
optionee), less the exercise price, and does not necessarily indicate that
the shares were sold by the optionee.
(2) Includes both in-the-money and out-of-the money options.
(3) Fair market value of the Company's Common Stock on the last trading day of
fiscal 1996 ($2.34 per share), less the applicable exercise prices,
multiplied by the number of options.
EMPLOYEE STOCK BONUS PLAN
All of the Company's employees are eligible to participate in the Employee
Stock Bonus Plan, which has been established by the Company in lieu of a
retirement plan. Employees are enrolled in the plan as of the day following the
date on which the employee completes at least one hour of work. In order to
share in the Company's contribution to the Plan in any Plan year, an employee
must have worked a minimum of 1,000 hours during the Plan year, and be employed
by the Company at the end of the Plan year. To date, the Plan has been funded
only with previously unissued shares of the Company's Common and Preferred
stock; thus the Company has not incurred any cash expense in connection
therewith. The Plan's assets are allocated annually to the participating
employees' accounts in the respective ratios that each participating employee's
compensation bears to the total compensation of participating employees. An
employee's participation in the Plan terminates on his retirement, disability or
death, at which time the employee will receive that portion of his account which
has vested. Generally, an employee's account vests at a rate of 20% per year
after completing three years of employment and is 100% vested after seven years
of employment. All executive officers named in the Summary Compensation Table
participate in the Company's Employee Stock Bonus Plan. In the fiscal years
ended September 29, 1996, October 1, 1995 and October 2, 1994, the Company
contributed 172,900, 68,000 and 43,200 shares of Common Stock, respectively, to
the Plan, valued at $687,400, $472,300 and $357,300, respectively, as of the
date of contribution.
The value of contributions to the accounts of the Named Executive Officers
for the fiscal year ended September 29, 1996 has been included in "All Other
Compensation" in the table.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended September 29, 1996, Messrs. Alexiou, Dumont
and Ragano served as members of the Compensation Committee. Except for Mr.
Alexiou, during fiscal 1996, all of the members of the Compensation Committee
were non-employee directors. Mr. Alexiou did not participate in any decisions
regarding his own compensation. None of the Company's executive officers has,
during
11
<PAGE>
fiscal 1996, served on the Board of directors or the compensation committee of
any other entity, any of whose officers served either on the Board of Directors
or the Compensation Committee of the Company.
COMPENSATION COMMITTEE REPORT/1/
The Company's executive compensation philosophy is to attract and retain
executive officers capable of leading the Company to fulfillment of its business
objectives by offering competitive compensation opportunities that in large part
reward individual contributions as well as including a component that recognizes
overall corporate performance. In addition, long-term equity compensation is
awarded to align the interests of management and stockholders. The Company
provides executive officers (and key employees) of the Company with a
substantial economic interest in the long-term appreciation of the Company's
stock through the grant of stock options and participation in the Employee Stock
Bonus Plan, subject to vesting restrictions.
To further these objectives, the compensation program for executive
officers generally consists of four components: (i) base cash salaries, (ii)
annual cash bonus plans (iii) stock options, and (iv) employee retirement plan.
Total compensation paid by the Company to its executive officers is designed to
be competitive with the compensation packages paid to the management of
comparable companies in the electronic manufacturing industry. The Committee
generally evaluates corporate and individual performance based on factors such
as achieving profitability, increasing stockholders' value and continued growth.
As a result, a significant component of the evaluation involves a subjective
assessment of qualitative factors. Moreover, the Committee does not base its
considerations on any single performance factor, nor does it specifically assign
relative weight to factors, but rather considers a mix of factors and evaluates
the Company and individual performance against that mix.
Base Salaries
The Committee approves salary changes for executive officers in accordance
with the salary administrative policy. Salary adjustments are generally made
following the end of the fiscal year. The salary administrative policy is a
long-standing one that is periodically reviewed by the Committee. The policy
sets ranges for various positions, based on job evaluation and competitive
salary data of other companies. Within the ranges, adjustments are recommended
on the basis of position within the range, individual performance and an overall
corporate merit salary percentage factor, which is established by the Committee.
Annual Cash Bonuses
Cash bonuses are awarded on a discretionary basis, usually following the
Company's fiscal year-end, and are based on the achievement of corporate and
individual goals set by the Committee, as well as the financial condition and
prospects for the Company. Under the bonus plan applicable to executive
officers, award levels range from zero to 50% of base salaries. No bonuses were
awarded for the fiscal 1996 year, which ended September 29, 1996.
Stock Options
Long-term equity incentives are granted to executive officers and other
selected employees from time to time on a discretionary basis. All options
granted to date have been for three-year terms, with an
- ----------------------------
/1/ This Report 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 Exchange Act,
whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
12
<PAGE>
exercise price equal to the Common Stock's market value on the date of grant,
and generally become incrementally exercisable after one year of continued
employment following the grant date. Options are granted based upon
recommendations of management as to the grantees, number of options that should
be granted and other terms. Options are granted to key employees, including the
executive officers, based on current performance, anticipated future
contribution based on that performance and ability to impact corporate and/or
business results. During fiscal 1996, options to purchase 100,000 shares of
common stock were granted to executive officers.
Employee Retirement Plan
The Company maintains an employee retirement plan which provides for annual
contributions to the Company's Stock Bonus Trust on behalf of the employees,
including executives. At the discretion of the Compensation Committee,
contributions not to exceed 15% of total payroll are made in the Company's
Common Stock at market value. Individual employees gain a vested interest over
a seven year period of service.
Chief Executive Officer Compensation
The Company's policy is to compensate its officers, including the Chief
Executive Officer, with salary commensurate with the base compensation paid by
competitive employers, supplemented by compensation in recognition of
performance. Dr. Lian was named Chief Executive Officer effective September 16,
1994, and the Committee set Dr. Lian's base salary at $135,000, which reflected
a reduction of approximately 10% from the base salary paid to Mr. Alexiou, who
had served as the Company's Chief Executive Officer for the prior 20 years. For
the fiscal year ended September 29, 1996, Dr. Lian base salary was unchanged
from fiscal 1995, he did not receive a bonus under the annual bonus plan, but
was awarded options to purchase 100,000 shares of common stock under the 1995
Stock Option Plan. The Committee based this compensation package on an
assessment of various factors related to the Company and specifically to Dr.
Lian. As in previous years, in making its compensation decisions, the Committee
also took into consideration executive compensation information from other
companies in the industry, including industry surveys, publicly available
information and reports from compensation consulting firms. During October
1996, Mr. Alexiou returned as Chief Executive Officer with a base salary
approved by the Committee of $149,968.
Section 162(m) of the Internal Revenue Code (the "Code") limits the Company
to a deduction for federal income tax purposes of no more than $1,000,000 of
compensation paid to certain Named Executive Officers in a taxable year.
Compensation above $1,000,000 may be deducted if it is "performance-based
compensation" within the meaning of the Code. The statute containing this law
and the applicable proposed Treasury regulations offer a number of transitional
exceptions to this deduction limit for pre-existing compensation plans,
arrangements and binding contracts. As a result, the Compensation Committee
believes that at the present time it is quite unlikely that the compensation
paid to any Named Executive Officer in a taxable year which is subject to the
deduction limit will exceed $1,000,000. Therefore, the Compensation Committee
has not yet established a policy for determining which forms of incentive
compensation awarded to its Named Executive Officers shall be designed to
qualify as "performance-based compensation." The Compensation Committee intends
to continue to evaluate the effects of the statute and any final Treasury
regulations and to comply with Code Section 162(m) in the future to the extent
consistent with the best interests of the Company.
Compensation Committee of the Board of Directors
James Alexiou
Marc Dumont
General Frank Ragano
13
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative stockholder returns on the
Company's Common Stock, Nasdaq and the Electronic Equipment Manufacturers Group
Index. The graph covers the five-year period from September 29, 1991 through
September 29, 1996, the end of the Company's last completed fiscal year, and
assumes a $100 investment was made on September 29, 1991. Each of the three
measures of cumulative total return assumes reinvestment of dividends. The
stock performance shown on the graph below is not necessarily indicative of
future performance.
[Performance Graph Here]
Assumes $100 invested on September 29, 1991 in Irvine Sensors Corporation Common
Stock, Nasdaq index and Electronic Equipment Manufacturers Group. Total return
assumes reinvestment of dividends.
<TABLE>
<CAPTION>
9/29/91 9/27/92 10/3/93 10/2/94 10/1/95 9/29/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Irvine Sensors Group $ 100 $ 539 $ 835 $ 1,009 $ 1,269 $ 348
Nasdaq $ 100 $ 116 $ 212 $ 217 $ 367 $ 347
Peer Group(1) $ 100 $ 98 $ 128 $ 135 $ 164 $ 192
</TABLE>
(1) The Peer Group Index is based on the Electronic Equipment
Manufacturers Group.
14
<PAGE>
CERTAIN TRANSACTIONS
In April 1980, the Company entered into an agreement with R & D Leasing
Ltd., ("RDL"), a limited partnership in which James Alexiou, the Company's
Chairman of the Board and John C. Carson, a Senior Vice President, are general
partners with beneficial interests, to design an electronic circuit, to develop
certain fabrication processes and to build equipment for testing electronic
integrated circuits. In connection with the development of the electronic test
equipment under the RDL agreement, certain other proprietary fabrication
processes were developed to which RDL retained ownership. Upon the occurrence
of certain specified events, such as the use of patented fabrication processes
in connection with contracts, the agreement with RDL provides that the Company
will pay RDL a royalty fee of 3.5% of revenues from sales of the basic devices
using the processes created during the development of this equipment.
In October 1989, the Board of Directors approved an amendment to the RDL
agreement. Under the amendment the Company will pay RDL a royalty of 3.5% of
all sales of the basic devices sold by the Company. In addition, RDL is
entitled to receive an amount equal to 7% of all royalties earned by the Company
from sales by the Company's sublicensees. The Company's exclusive rights to the
technology extend to all uses, both government and commercial. RDL agreed to
defer its royalty claims and subordinate them with respect to all other
creditors in exchange for options to purchase up to 1,000,000 shares of the
Company's Common Stock, which are exercisable by applying the deferred royalties
to the purchase. The initial 500,000 options vested immediately at the time of
the initial five year deferral period in October 1989. In October 1994, the
remaining 500,000 options vested upon RDL's extended deferral. The 1,000,000
options are exercisable at $1.00 until October 1999. If RDL exercises its
option in whole or in part, title to RDL's technology will transfer to the
Company and all further royalty obligations will cease. If the option expires
unexercised, the subordination provisions will terminate and the accrued
royalties will be due and payable in the same manner as any other corporate
obligation.
As of September 29, 1996, the Company had accrued $355,700 in deferred
royalties. During fiscal year 1996, no royalties were paid by the Company. The
Company believes that the terms of the foregoing transactions were no less
favorable to the Company than would have been obtained from a nonaffiliated
third party for similar services.
15
<PAGE>
OTHER MATTERS
The Company currently knows of no other matters to be submitted at the
Annual Meeting other than those described herein. If any other matters properly
come before the Annual Meeting, it is the intention of the persons named in the
enclosed Proxy card to vote the shares they represent in accordance with their
respective best judgments.
By Order of The Board of Directors
/s/ JOANNE S. CARSON
Joanne S. Carson
Secretary
Costa Mesa, California
January 24, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED SEPTEMBER 29, 1996 IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO
INVESTOR RELATIONS, IRVINE SENSORS CORPORATION, 3001 REDHILL AVENUE, BUILDING
III, COSTA MESA, CALIFORNIA 92626. THE COMPANY'S ANNUAL REPORT ON FORM 10-K,
AS WELL AS CERTAIN OTHER REPORTS, PROXY STATEMENTS AND OTHER INFORMATION
REGARDING THE COMPANY, IS AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S
WEB SITE (HTTP://WWW.SEC.GOV)
16
<PAGE>
This Proxy is Solicited on Behalf of the Board of Directors of
IRVINE SENSORS CORPORATION
ANNUAL MEETING OF STOCKHOLDERS--FEBRUARY 28, 1997
The undersigned stockholder of Irvine Sensors Corporation, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement each dated January 24, 1997 and Annual Report
to Stockholders for the fiscal year ended September 29, 1996, and hereby
appoints James Alexiou and John C. Carson, and each of them, proxies and
attorneys-in-fact with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the Annual Meeting of
Stockholders of Irvine Sensors Corporation (the "Company") to be held on
February 28, 1997 at 2:00 p.m., California time, at The Center Club, 650 Town
Center Drive, Costa Mesa, California, and at any adjournment or adjournments
thereof, and to vote all shares of Common and Preferred Stock to which the
undersigned would be entitled, if then and there personally present, on the
matters set forth:
- -------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on other side)
<PAGE>
[X] Please mark
your votes
as indicated
This proxy will be voted as directed, or, if no contrary direction is indicated,
will be voted for proposals 1,2 and 3. Additionally, the Company is granted
discretionary authority to cumulate votes.
WITHHELD
1. Election of Directors: James Alexiou, FOR FOR ALL
Marc Dumont, John C. Carson, Thomas H. Lenagh, [ ] [ ]
Joanne S. Carson, Frank P. Ragano, Walter Garrigan
WITHHELD FOR: (Write that nominee's name in the
space provided below).
- --------------------------------------------------
2. To authorize a possible amendment to the FOR AGAINST ABSTAIN
Company's Certificate of Incorporation to effect a [ ] [ ] [ ]
reverse stock split in the discretion of the Board
of Directors.
3. To ratify the appointment of Price Waterhouse FOR AGAINST ABSTAIN
as the Company's Independent Accountants: [ ] [ ] [ ]
Any one of such attorneys-in-fact or substitutes
as shall be present and shall act at said Meeting
or any adjournment(s) thereof shall have and may
exercise all powers of said attorneys-in-fact
hereunder.
4. In their discretion, the Proxies are authorized FOR AGAINST ABSTAIN
to vote upon such other business as may properly [ ] [ ] [ ]
come before the meeting.
I PLAN TO ATTEND MEETING [ ]
COMMENTS/ADDRESS CHANGE [ ]
Please mark this box if
you have written comments/
address change on the
reverse side.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature(s) Dated
------------------------------------------------------ ------
NOTE: Please sign exactly as name appears above. 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 a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
