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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /x/
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
/x/ Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
INFORMATION RESOURCE ENGINEERING, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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STEVEN N. BRONSON
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
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Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PROXY STATEMENT
IN OPPOSITION TO MANAGEMENT'S SOLICITATION FOR ELECTION OF THE
DIRECTORS OF INFORMATION RESOURCE ENGINEERING, INC.
ANNUAL MEETING OF STOCKHOLDERS OF
INFORMATION RESOURCE ENGINEERING, INC.
TO BE HELD ON JULY 10, 1998
This Proxy Statement and the accompanying BLUE Proxy Card are being
furnished by Steven N. Bronson ('Mr. Bronson'), to the stockholders of
Information Resource Engineering, Inc., a Delaware corporation (the 'Company'),
with its principal executive offices located at 8029 Corporate Drive, Baltimore,
Maryland 21236, to be used at the 1998 annual meeting of the stockholders of the
Company which Mr. Bronson understands will be held on July 10, 1998 (the 'Annual
Meeting').
Mr. Bronson is a stockholder of the Company. His holdings of 150,000 shares
of the Company's $.01 par value common stock (the 'Common Stock') have been
amassed through purchases made in the public market. Mr. Bronson has heretofore
been a long-term supporter of the Company and its management through his
efforts, as a controlling shareholder, officer and director of the investment
banking firm of Barber and Bronson Incorporated ('B&B'), to assist the Company
in its efforts to raise $7,800,000 of capital. See 'Certain Relationships and
Related Transactions.'
However, Mr. Bronson has become increasingly more concerned about the
continuing losses from operations sustained by the Company over the past five
years, the lack of proper focus by the Company's management that such a
sustained record of losses clearly indicates, and the seeming lack of concern
for the well-being of the Company and its owners which management has
demonstrated through the continual annual increases in compensation that it has
awarded to itself. Mr. Bronson understands that the Company (i) has selected May
22, 1998 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 (ii)
plans to hold the Annual Meeting on July 10, 1998, at 10:30 a.m. local time at
the Company's offices located at 8029 Corporate Drive, Baltimore, Maryland
21236. In order to address and correct those concerns, Mr. Bronson has decided
to propose to the Company's owners an alternative slate of knowledgeable and
dedicated candidates for election to the Board of Directors at the Annual
Meeting (the 'Bronson Nominees').
THIS SOLICITATION IS BEING MADE BY MR. BRONSON IN OPPOSITION TO THE
INCUMBENT BOARD OF DIRECTORS AND MANAGEMENT OF THE COMPANY.
This Proxy Statement and the accompanying BLUE Proxy Card are first being
sent or given on or about June [ ], 1998 to the holders of record of the
Company's Common Stock at the close of business on the Record Date. According to
the Company's Notice of Annual Meeting of Stockholders and Proxy Statement (the
'Company Proxy Statement') filed by the Company with the Securities and Exchange
Commission on April 30, 1998, as of the close of business on April 29, 1998,
there were 5,463,727 shares of the Company's Common Stock outstanding and
entitled to vote at the Annual Meeting. Each share of the Company's Common Stock
is entitled to one vote on all matters to come before the Annual Meeting. The
Company has no other class of voting securities outstanding.
On the Record Date, Mr. Bronson was the beneficial owner of 150,000 shares
of the Company's Common Stock. Mr. Bronson believes that he owns approximately
2.75% of the issued and outstanding shares of the Company's Common Stock. Mr.
Bronson intends to vote his shares FOR the election of the Bronson Nominees.
<PAGE>
IMPORTANT
Carefully review this Proxy Statement and the enclosed BLUE Proxy Card. No
matter how many or how few shares of the Company's Common Stock you own, please
vote FOR the election of the Bronson Nominees to the Board of Directors by so
indicating and by signing, dating and mailing the BLUE Proxy Card promptly to
Mr. Bronson.
ONLY STOCKHOLDERS OF RECORD ON THE RECORD DATE ARE ENTITLED TO EXECUTE
PROXIES.
MR. BRONSON REQUESTS THAT YOU DO NOT VOTE ON OR RETURN TO THE COMPANY ANY
PROXY CARD PROVIDED TO YOU BY THE COMPANY OR ANY OTHER STOCKHOLDER OF THE
COMPANY, EVEN TO VOTE AGAINST THE INCUMBENT BOARD'S SLATE OR ANY OTHER SLATE OF
NOMINEES. RETURNING ANY PROXY CARD PROVIDED TO YOU BY THE COMPANY COULD REVOKE
THE BLUE PROXY CARD THAT YOU SIGN, DATE AND SEND TO MR. BRONSON.
If you own shares of the Company's Common Stock, but your stock certificate
is held for you by a brokerage firm, bank or other institution, it is very
likely that the stock certificate is actually in the name of such brokerage
firm, bank or other institution. If so, only such entity can execute a BLUE
Proxy Card and vote your shares of the Company's Common Stock. The brokerage
firm, bank, or other institution holding the shares of the Company's Common
Stock for you is required to forward proxy materials to you and to solicit your
instructions with respect to the granting of proxies; it cannot vote your shares
of the Company's Common Stock unless it receives your instructions. PLEASE
INSTRUCT THE BROKERAGE FIRM, BANK, OR OTHER INSTITUTION HOLDING THE SHARES OF
THE COMPANY'S COMMON STOCK FOR YOU TO VOTE SUCH SHARES FOR THE ELECTION OF THE
BRONSON NOMINEES TO THE BOARD OF DIRECTORS BY SIGNING, DATING AND MAILING TO MR.
BRONSON ON YOUR BEHALF THE BLUE PROXY CARD PROMPTLY.
Any stockholder giving a proxy may revoke it at any time before it is voted
by attending the Annual Meeting and voting his or her shares of the Company's
Common Stock in person, by giving written notice to the Secretary of the Company
at 8029 Corporate Drive, Baltimore, Maryland 21236 stating that the proxy has
been revoked, or by delivery of a proxy bearing a later date.
A VOTE FOR THE BRONSON NOMINEES WILL ENABLE YOU, AS THE OWNERS OF THE
COMPANY, TO SEND A MESSAGE TO THE BOARD OF DIRECTORS THAT YOU ARE IN FAVOR OF A
CHANGE IN THE WAY THAT YOUR COMPANY IS BEING RUN.
If you have any questions about giving your proxy or require assistance in
voting your shares of Common Stock, please call:
THE ALTMAN GROUP, INC.
60 EAST 42ND STREET
NEW YORK, NY 10017
(212) 681-9600 (COLLECT)
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INTRODUCTION
In order to turn the Company around and move it a direction designed to
increase its value to its owners, Mr. Bronson determined that he would cause the
nomination of his designees for election to the Board of Directors at the Annual
Meeting. Accordingly, at the Annual Meeting, Mr. Bronson intends to nominate the
Bronson Nominees, and if afforded the opportunity, Mr. Bronson also intends to
address the stockholders attending the Annual Meeting, and provide answers to
any questions that they may wish to ask
THE SOLICITATION
The Company currently has five directors. The terms of each of those
directors will expire at the Annual Meeting. According to the Company Proxy
Statement, the Company's management is soliciting proxies in favor of the
election of four incumbent directors (Anthony A. Caputo, Ira A. Hunt, Jr.,
Douglas E. Kozlav and Bruce R. Thaw) and one new candidate (Thomas A. Brooke) as
nominees for election as directors to serve until the 1999 annual meeting of the
stockholders of the Company and until their successors are duly elected and
qualified. Mr. Bronson is soliciting your proxy for the election of the nominees
identified below to serve as directors until the 1999 annual meeting of the
stockholders of the Company and until their successors are duly elected and
qualified.
WHY YOU SHOULD VOTE FOR THE BRONSON NOMINEES
The current board of directors and management of the company have
repeatedly failed to recognize and adequately address fundamental business
considerations which have led to a series of problems, including:
1. A loss of value of the Company's shares
Less than two years ago--on June 12, 1996--the Company's shares traded at
price of $29.50 per share. Today, those shares command a price of only about
$8.00. During the great bull market of the past two years, the value of the
Company's Common Stock has dropped by more than 70 percent.
Further, in the year just ended--fiscal 1997--stockholders' equity
decreased by nearly 18% from the previous year end figure. At the same time,
total assets fell by 13 per cent while liabilities rose by nearly 28 per cent.
2. Five years of losses
For the past five years, the Company has lost money each year.
YEAR OPERATING LOSS NET LOSS* PER SHARE
- ---- -------------- --------- ---------
1993..................... 73,000 69,000 2 cents loss
1994..................... 912,585 715,403 25 cents loss
1995..................... 409,397 695,251 20 cents loss
1996..................... 7,812,682 7,084,550 $1.34 loss
1997..................... 4,132,000 3,638,000 67 cents loss
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* Reported as 'net loss attributable to common stock' (that is, after preferred
stock dividends were paid).
3. Loss of major customer
As of June 30, 1996, the Company had a backlog of $9,284,000 (77% of which,
i.e., $7,149,000) was attributable to Company products which MCI had agreed to
purchase pursuant to an agreement which it entered into with the Company in
September 1995. Less than six months later (during the fourth quarter of 1996),
MCI, which accounted for 27% of the Company's revenues in 1996 and 13% of its
revenues in 1995, canceled that contract, virtually wiping out that backlog, and
eliminating $7 million of revenue which the Company would have received during
the 12 month period ending September 30, 1997. The Company has never given its
stockholders any explanation for the loss of such an important customer (other
than to make reference to a new cooperative marketing initiative that did not
obligate MCI to purchase anything from the Company) and such a huge amount of
revenue. In 1997, MCI was no longer counted among the Company's significant
customers. What happened and why did it happen?
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4. Questionable Actions by Management
In August 1996, the Company announced the formation of a joint product
development and marketing agreement with CyberGuard Corporation ('CyberGuard').
In connection therewith, the Company prepaid a refundable $1,000,000 license fee
to CyberGuard which the Company supposedly would recover through purchases of
products from CyberGuard. As of March 31, 1998 (18 months after the $1,000,000
investment in CyberGuard) the Company had purchased a grand total of $42,000 of
products from CyberGuard. Although the Company has the right to recoup any
unearned portion of its $1,000,000 investment, the questions to be answered are:
WAS THIS A SMART USE OF THE COMPANY'S CAPITAL, AND WHY HAS MANAGEMENT ALLOWED
ALMOST $1,000,000 OF THE COMPANY'S CAPITAL TO REMAIN TOTALLY UNPRODUCTIVE FOR
MORE THAN A YEAR AND A HALF?
In September 1996, the Company announced the availability of its new
SafeNet/Smartcard. Eight months later, in May 1997, the Company introduced the
same SafeNet/Smartcard. What happened here? Did it really have a product in
1996? WAS THIS THE RESULT OF A FAILURE OR INABILITY TO MEET PRODUCTION
COMMITMENTS?
In February 1997, the Company announced that it has successfully
demonstrated compliance with new internet standards for public key exchange.
Fifteen months later, the question to be answered is: How has the Company
capitalized on its announced success? Another way of asking the same question
is: WHERE'S THE PRODUCT?
In January 1997, the Company announced that it would deliver by mid-1997 a
low cost, standards-compliant secure communications chip that would provide
organizations with highly secure, inexpensive solutions to conducting business
over computer networks, such as the Internet. It is now mid-1998. WHERE'S THE
PRODUCT?
IS THERE A PATTERN HERE? Does management lack the necessary focus, or
otherwise lack the ability to martial its resources in a concentrated and
efficient manner?
5. Excessive compensation for the chief executive officer
The facts show that Mr. Anthony Caputo, chairman and chief executive
officer, has been extremely well paid despite his apparent continuing inability
to lead the Company to profitable operations.
In 1995, the same year the Company had an operating loss of more than
$409,000, Mr. Caputo was paid $150,486 and given a bonus of $135,000. Then, the
very next year when the Company's operating loss hit nearly $8 million, the
board raised his salary to $225,000 (at least he didn't get a bonus for
achieving a multi-million-dollar loss during the year).
In 1997, despite four consecutive years of losses under Mr. Caputo, the
board gave him another raise--to $250,000, and then added a bonus of $82,500.
The directors also approved a five-year contract guaranteeing Mr. Caputo will
get raises of 10 per cent each year, with yearly bonus payments of as much as
one-half of his annual salary. Here's what Mr. Caputo will get if he stays in
his current position, even if the Company does not earn a profit:
GUARANTEED GUARANTEED
YEAR SALARY 10% INCREASE TOTAL POTENTIAL BONUS
- ---- ------- ------------ ---------- ---------------
1998............... 250,000 25,000 275,000 up to $ 137,500
1999............... 275,000 27,500 302,000 up to $ 151,250
2000............... 302,000 30,200 332,200 up to $ 166,100
2001............... 332,200 33,220 365,420 up to $ 182,710
Plus options to buy 50,000 shares at a favorable price ($8.25 per share),
which he can exercise for five years even if he doesn't serve out the contract
term.
How did the board's compensation committee arrive at the terms of this
generous contract? Could it have been that two of the three members of that
committee are Mr. Caputo and Bruce Thaw, Esq? Although he is not listed as an
officer of the Company, the Company Proxy Statement confirms that Mr. Thaw
serves as the Company's general counsel. By serving on the compensation
committee while also serving as a paid provider of services to the Company, it
would appear that Mr. Thaw has been placed in the position of deciding how much
compensation should be paid to someone who is directly responsible for doling
out hundreds of thousands of
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dollars of fee income to him. Mr. Thaw has collected more than $300,000 in legal
fees from the Company in just the last two years, presumably with the approval
of Mr. Caputo.
Mr. Bronson believes that Mr. Caputo's compensation is excessive,
especially in the light of the poor performance by the Company under Mr.
Caputo's leadership.
6. Management has lost the confidence of the investing public
Only one analyst is publishing earnings estimates regarding the Company,
and, trading volume in the Company's Common Stock has dropped significantly from
monthly volumes ranging between 1,000,000 shares to more than 2,700,000 shares
in 1996, to volumes of less than 400,000 shares per month in three out of the
first four months of 1998.
MR. BRONSON'S PROGRAM
Each of the Bronson Nominees is committed to making certain that the
Company operates in the most efficient manner possible and that all employees
constantly strive to restore the value of every stockholder's investment. Mr.
Bronson believes that he can bring objectivity and independence to the direction
of the Company and that he can put the Company back on the track to prosperity
and growth.
If the Bronson Nominees are elected by the stockholders, their first action
will be to remove Mr. Caputo as chief executive officer, and replace him with
Matthew E. Tutino, a member of Mr. Bronson's slate who has earned a solid
reputation as a turnaround and restructuring expert, and who has in-depth
knowledge of high technology industries as well as a strong background in
finance.(1)
While the Bronson Nominees have no specific plans at this point in time,
they intend to conduct a comprehensive review of all facets of the Company's
organization, products, markets, operations, policies and strategies, with a
view to developing a program to serve the economic interest of all stockholders
and reverse the precipitous fall in the value of the Company. It will be on the
basis of that review that the Bronson Nominees will determine future actions,
which could include reorganization, restructuring, adding capital in the form of
additional equity, joint ventures, mergers, acquisitions or the sale of some or
all of the company's assets.
THE BRONSON NOMINEES
Biographical data on the Bronson Nominees is set forth below:
Jeffery Adduci, age 45, is president of Regional Investment Bankers
Association ('RIBA'), a national association of regional and independent
broker-dealers and investment banking firms seeking to improve conditions
in their industry, strengthen the free enterprise system and enhance a
business environment conducive to meeting the capital formation needs of
small, growth companies. Since 1994, when Mr. Adduci became RIBA's
president, member underwriters have completed some 650 financings totaling
more than $6.4 billion. Between 1990 and 1994, Mr. Adduci was Vice
President of Regional Investment Brokers Syndicate, Inc., a national
organization of small brokerage firms principally engaged in small business
capital formation.
Steven N. Bronson, age 32, has been the president of Barber and
Bronson Incorporated, a full-service brokerage firm, since 1984, the year
in which he co-founded said firm, and he has been the chairman of Catalyst
Financial Corporation ('Catalyst'), a financial services firm which he
co-founded in 1996. Catalyst, which changed its name from BC Capital Corp.,
engages in corporate and transactional financing, public offering, private
placement and workout transactions, as well as venture capital, mezzanine
and conventional financing. Mr. Bronson has more than 15 years' experience
in the financial services industry, with special emphasis on investment
banking.
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(1) No agreement has been made regarding the compensation or other terms which
would apply to Mr. Tutino's employment as the Company's chief executive. In
the event that the Bronson Nominees are elected, a truly independent
compensation committee of the board will negotiate such an agreement at
arm's length with Mr. Tutino.
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James S. Cassel, age 42, has served as president of Catalyst since
1996, and as Executive Vice President of B&B since 1996. He has special
expertise and experience in mergers, acquisitions and corporate and
transactional financing. During the seven year period which preceded his
affiliation with B&B, Mr. Cassel was managing partner of the Miami office
of Broad and Cassel, a law firm with an extensive practice in business,
corporate, finance and securities areas of law. He also has served as
chairman of the board of several hospitals in Florida, and is active in
many community organizations. Mr. Cassel is admitted to the bar in Florida
and New York. Since 1990, Mr. Cassel has been Chairman of the Board of
Goldsel/Anclote, Inc., which served as a general partner of The Anclote
Psychiatric Hospital, Ltd., a Florida limited partnership. On August 26,
1997, the partnership and its general partners commenced proceedings under
Chapter XI of the U.S. Bankruptcy Code in the United States Bankruptcy
Court, Middle District of Florida. A plan of reorganization has been filed
with the Court, but no action has been taken with respect thereto as of the
date of this Proxy Statement.
Stanley L. Newman, age 53, has served since January 1998 as executive
vice president of JCM Capital Corporation, a firm specializing in equipment
leasing and financial consulting. Among the clients of JCM are a number of
Fortune 300 companies and medium-sized companies. During the ten year
period which preceded his employment by JCM, Mr. Newman was President of
Stanley L. Newman & Co., a closely held corporation which engaged in
consulting and other services for various public and privately held
companies. Mr. Newman has in-depth experience in corporate administration,
financial and management reporting, financings and public offerings, and
tax planning. Prior to 1987, Mr. Newman also served as chief operating
officer, chief financial officer and controller of Industrial Lease Corp.,
a public company specializing in equipment leasing and investment banking,
and as a senior auditor at a certified public accounting firm.
Matthew E. Tutino, age 63, has a record of success as a turnaround and
restructuring specialist who has also operated and financially restructured
several troubled major corporations. An electrical engineer with a masters
degree in business administration, Mr. Tutino worked at General Dynamics,
ITT and Lockheed (where he was one of five registered patent holders for an
automated radar terminal system). Following his turnaround of Lockheed's
electronics subsidiary, Mr. Tutino served as executive vice president and
chief operating officer of the Export-Import Bank of the United States
between 1975 and 1977.
From 1977-1984, he served as a Principal and Vice President of Allen &
Company, Inc., an investment banking firm, and as Chairman and Chief
Executive of Whiteman Enterprises, an Allen & Company affiliate. During his
tenure with Allen & Company/Whiteman, Mr. Tutino devoted his time to
restructurings and turnarounds in a variety of fields, ranging from the
manufacturing of heavy construction equipment to high technology. During
that period, Mr. Tutino also was appointed to the board of Symbol
Technology Inc., a troubled enterprise. Mr. Tutino moved quickly to replace
entrenched management, created a new management team, and emerged with a
company that today is selling high-tech equipment throughout the world and
is listed on the New York Stock Exchange.
Between 1985 and 1992, Mr. Tutino served as chief executive officer of
financially troubled Mohawk Data Sciences Corp. (which later changed its
name to Qantel Corp.), a one-half billion dollar computer company which had
recently reported $50 million of losses (subsequently increased by $180
million of additional write-offs) and a monthly negative cash flow of $2
million. At the time that Mr. Tutino took over control of Mohawk's
management, Mohawk was in default of $175 million of senior secured debt to
the company's bank syndicate. In 1991, Qantel commenced Chapter XI
proceedings in the United States Bankruptcy Court for the Northern District
of California. Such proceedings were converted to Chapter VII liquidation
proceedings. In 1992, after five years of settling litigation, tightening
financial controls, strengthening Qantel's dealer network, focusing product
development, and selling off units which could be separated, Qantel and its
new technology were sold. All of the net proceeds derived from that sale
were delivered to Qantel's banks in payment of approximately 85% of its
secured indebtedness.
Since 1992, Mr. Tutino has been president of his own firm specializing
in international financial services, helping Eastern European governments
and financial institutions with debt restructuring and other financial
projects.
Mr. Bronson believes this team of experienced and dedicated business men
will provide the objectivity, independence and solid, prudent direction which
has been sorely lacking under the present directors.
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SECURITY OWNERSHIP OF BRONSON NOMINEES
The following table sets forth as of the Record Date certain information
regarding the shares of Common Stock held by each of the Bronson Nominees, and
by all of the Bronson Nominees as a group.
NUMBER OF SHARES
NAME BENEFICIALLY OWNED PERCENT(1)
- ---- ------------------ ----------
Steven N. Bronson........................ 173,050(2)(3) 3.17%
James S. Cassel.......................... 2,900(4) --
Jeffrey Adduci........................... -- --
Stanley L. Newman........................ -- --
Matthew E. Tutino........................ -- --
All Bronson Nominees as a group (of 5)... 175,950(3) 3.21%
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(1) Based upon 5,463,727 shares of the Company's Common Stock outstanding on
April 29, 1998, as disclosed in the Company Proxy Statement.
(2) Except for 4,824 shares which were acquired as a year-end compensation
distribution from B&B's corporate parent in 1997, Mr. Bronson acquired all
of such shares in open market transactions. The following table sets forth
information with respect to all purchases and sales of shares of the
Company's Common Stock by Mr. Bronson during the past two years. Unless
otherwise noted, the price per share excludes brokerage commissions and
other charges.
NUMBER OF SHARES PURCHASED/SOLD DATE PRICE PER SHARE
- ------------------------------- ---- ---------------
10,000 Purchased............................... 3/31/97 $7.00
10,000 Sold.................................... 4/28/97 $8.50
5,000 Purchased............................... 12/26/97 $6.50
5,000 Purchased............................... 12/31/97 $6.01
4,824 Distribution............................ 12/31/97 $6.03
10,000 Purchased............................... 3/13/98 $6.38
18,500 Purchased............................... 3/17/98 $6.53
12,000 Purchased............................... 3/18/98 $6.69
5,000 Purchased............................... 3/18/98 $6.63
13,000 Purchased............................... 3/20/98 $6.72
7,000 Purchased............................... 3/20/98 $6.94
5,000 Purchased............................... 3/20/98 $7.13
12,000 Purchased............................... 3/24/98 $8.26
12,000 Purchased............................... 3/26/98 $8.28
6,000 Sold.................................... 3/27/98 $8.75
15,000 Purchased............................... 4/15/98 $7.94
7,500 Purchased............................... 4/24/98 $8.13
24,176 Purchased............................... 5/14/98 $8.25
(3) Includes 23,050 shares of Common Stock which Mr. Bronson has the right to
purchase pursuant to warrants which are exercisable by him within 60 days of
the date of this Proxy Statement.
(4) Includes 2,000 shares of Common Stock held together by Mr. Cassel and his
wife, Mindy Cassel, as to which Mr. and Mrs. Cassel share voting power.
Except for 900 shares which were acquired as a year-end compensation
distribution from B&B's corporate parent in 1997, Mr. Cassel acquired all of
such shares in open market transactions. The following table sets forth
information with respect to all purchases and sales of shares of the
Company's Common Stock by Mr. Cassel during the past two years. Unless
otherwise noted, the price per share excludes brokerage commissions and
other charges.
NUMBER OF SHARES PURCHASED DATE PRICE PER SHARE
- -------------------------- ---- ---------------
2,000 Purchased................................. 11/19/97 $8.47
900 Distribution.............................. 12/29/97 $6.13
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Bronson is the President, a director and an indirect (through B&B's
corporate parent) controlling shareholder of B&B, a registered broker-dealer.
B&B does not own any shares of the Company's Common Stock. B&B does not have any
discretion to buy or sell any securities for its customers, and it will not vote
any of the Company's Common Stock held by its customers unless and until it
receives specific instructions from those customers as to how such shares should
be voted. B&B will not make any attempt to communicate with any customer or
potential customer for the purpose of influencing anyone to vote for or against
management's slate of directors at the Annual Meeting. Furthermore, B&B will
not, at least until the Annual Meeting has been concluded and the results of the
election of the Company's Board have been published: (a) solicit any orders to
buy or sell any of the Company's Common Stock from any of its customers or any
potential new customers; or (b) maintain or offer any recommendation as to
whether an investor should buy, sell or hold the Company's Common Stock. B&B has
issued specific written instructions to its registered representatives to
refrain from engaging in any of the foregoing activities with any customer or
potential customer. Although B&B was a market maker in the Company's Common
Stock, it ceased making such a market on May 14, 1998, and will not recommence
such activities, if at all, until the Annual Meeting has been concluded and the
results of the election of the Company's Board have been published.
On February 20, 1997, Catalyst (which was then known as BC Capital Corp.)
entered into a three year consulting agreement with the Company, pursuant to
which Catalyst agreed to provide, on a non-exclusive basis, shareholder and
institutional investor relations and communications services to the Company, and
such financial consulting services as the Company might reasonably request. In
consideration for Catalyst's agreement to render such services, the Company
issued two warrants to Mr. Bronson and two warrants to Mr. Cassel. Each of the
warrants issued to Mr. Bronson entitled him to purchase 14,086 shares of the
Company's Common Stock during the three year term ending on February 20, 2000 at
exercise prices of $9.00 per share and $20.00 per share, respectively. Each of
the warrants issued to Mr. Cassel entitled him to purchase 8,550 shares of the
Company's Common Stock during the three year term ending on February 20, 2000 at
exercise prices of $9.00 per share and $20.00 per share, respectively. In
response to the notice that Mr. Bronson sent to the Company on May 15, 1998
concerning his intention to solicit proxies from the Common Stockholders in
support of the election of the Bronson Nominees, the Company demanded that Mr.
Bronson consent to the cancellation of the consulting agreement and the warrants
issued to him. Mr. Bronson has consented to the cancellation of the consulting
agreement, and has advised the Company that all of the warrants issued by the
Company pursuant to the consulting agreement are being returned for
cancellation.
IF YOU BELIEVE THAT YOU SHOULD HAVE THE OPPORTUNITY TO DECIDE THE FUTURE OF
YOUR COMPANY AND THAT YOU SHOULD HAVE THE CHANCE TO INSTALL A TEAM OF DIRECTORS
DEDICATED TO THE BEST INTERESTS OF THE COMPANY'S OWNERS, MR. BRONSON URGES YOU
TO VOTE YOUR BLUE PROXY CARD FOR EACH OF THE BRONSON NOMINEES.
OTHER MATTERS TO BE CONSIDERED
AT THE ANNUAL MEETING
Except as set forth above, Mr. Bronson is not aware of any proposals to be
brought before the Annual Meeting. Should other proposals be brought before the
Annual Meeting, the attorneys-in-fact named on the BLUE Proxy Card will abstain
from voting on such proposals unless such proposals adversely affect the
nomination or election of the Bronson Nominees, as determined by Mr. Bronson in
his sole discretion, in which event such persons will vote on such proposals in
their discretion.
The BLUE Proxy Card will be voted in accordance with your instructions on
such card. IF YOU SIGN THE BLUE PROXY CARD AND NO MARKING IS MADE, YOU WILL BE
DEEMED TO HAVE GIVEN A DIRECTION TO VOTE THE SHARES OF THE COMPANY'S COMMON
STOCK REPRESENTED BY THE BLUE PROXY CARD IN FAVOR OF THE ELECTION OF THE BRONSON
NOMINEES.
8
<PAGE>
VOTING AND PROXY PROCEDURES
The presence in person or by proxy of a majority of the outstanding shares
of the Company's Common Stock will constitute a quorum at the Annual Meeting.
Each outstanding share of Common Stock is entitled to one vote on each matter
properly presented at that meeting and a majority vote of the shares of Common
Stock present in person or by proxy at that meeting will be required to approve
each matter.
Directors of the Company are elected by a plurality of the votes cast by
the stockholders entitled to vote at a meeting at which a quorum is present. A
plurality means that the nominees with the largest number of votes are elected
as directors. Consequently, election of the Bronson Nominees requires the
affirmative vote of a plurality of the votes cast in the election at the Annual
Meeting, assuming a quorum is present or otherwise represented at the Annual
Meeting. All other matters submitted at the Annual Meeting will be determined by
a majority of the votes cast.
Shares of Common Stock represented by proxies that withhold authority with
respect to the election of one or more nominees for election as director and
proxies which are marked 'abstain' on other proposals, will not be counted in
determining whether a plurality or majority vote was obtained on such matters.
If no directions are given and the signed BLUE Proxy Card is returned, the
attorneys-in-fact appointed in the proxy will vote the shares of Common Stock
represented by that BLUE Proxy Card FOR the election of the Bronson Nominees. In
instances where brokers are prohibited from exercising customary discretionary
authority for beneficial owners who have not returned proxies to the brokers,
those shares of Common Stock will not be counted in the vote total.
Stockholders of record as of the close of business on the Record Date will
be entitled to vote at the Annual Meeting. IF YOU WERE A STOCKHOLDER OF RECORD
ON THE RECORD DATE, YOU WILL RETAIN THE VOTING RIGHTS IN CONNECTION WITH THE
ANNUAL MEETING EVEN IF YOU SELL OR SOLD YOUR SHARES OF THE COMPANY'S COMMON
STOCK AFTER THE RECORD DATE. Accordingly, it is important that you vote the
shares of Common Stock held by you on the Record Date or grant a proxy to vote
such shares whether or not you will own such shares.
At the Annual Meeting, five directors are to be elected to hold office
until the 1999 annual meeting of the stockholders of the Company and until their
successors have been duly elected and qualified. Mr. Bronson is soliciting your
proxy in support of the election of the Bronson Nominees. If you wish to vote
for the Bronson Nominees by proxy, you must submit the BLUE Proxy Card furnished
to you by him and must NOT submit the Board of Directors' White Proxy Card. A
stockholder may not submit a proxy card to vote for both the Bronson Nominees
and the Company's nominees; if a stockholder submits both a BLUE Proxy Card and
the Company's White Proxy Card, only the latest dated proxy will be counted.
MR. BRONSON REQUESTS THAT YOU DO NOT VOTE ON OR RETURN TO THE COMPANY ANY
PROXY CARD PROVIDED TO YOU BY THE COMPANY, EVEN TO VOTE AGAINST THE INCUMBENT
BOARD'S SLATE OF NOMINEES. RETURNING ANY PROXY CARD PROVIDED TO YOU BY THE
COMPANY COULD REVOKE THE BLUE PROXY CARD THAT YOU SIGN, DATE AND SEND TO MR.
BRONSON.
Any stockholder giving a proxy may revoke it at any time before it is voted
by attending the Annual Meeting and voting his or her shares of the Company's
Common Stock in person, by giving written notice to the Secretary of the Company
at 8029 Corporate Drive, Baltimore, Maryland 21236 stating that the proxy has
been revoked, or by delivery of a proxy bearing a later date.
An executed proxy card may be revoked at any time before its expiration by
marking, dating, signing and delivering a written revocation before the time
that the action authorized by the executed proxy becomes effective. A revocation
may be in any written form validly signed by the record holder as long as it
clearly states that the proxy card which is properly completed will constitute a
revocation of an earlier consent. Although a revocation is effective if
delivered to the Company, Mr. Bronson requests that either the original or
photostatic copies of all revocations of proxies be mailed or delivered to The
Altman Group, Inc., at the address set forth below, so that it will be aware of
all revocations and can more accurately determine which proxies that have been
received are valid.
9
<PAGE>
STOCKHOLDERS OF RECORD ON THE RECORD DATE ARE ELIGIBLE TO VOTE ON THE
MATTERS DISCUSSED ABOVE. MR. BRONSON RECOMMENDS THAT ANYONE OWNING SHARES OF THE
COMPANY'S COMMON STOCK BENEFICIALLY (BUT NOT OF RECORD), SUCH AS A PERSON WHOSE
OWNERSHIP OF SHARES IS THROUGH A BROKER, BANK OR OTHER FINANCIAL INSTITUTION,
SHOULD CONTACT THAT BROKER, BANK OR FINANCIAL INSTITUTION WITH INSTRUCTIONS TO
EXECUTE THE BLUE PROXY CARD ON HIS OR HER BEHALF OR TO HAVE THE BROKER, BANK OR
FINANCIAL INSTITUTION'S NOMINEE EXECUTE THE BLUE PROXY CARD.
SOLICITATION OF PROXIES
Proxies may be solicited by Mr. Bronson and by his agents by mail,
telephone, telegraph and personal solicitation. Banks, brokerage houses and
other custodians, nominees and fiduciaries will be requested to forward proxy
solicitation material to the beneficial owners of the Company's Common Stock
that such institutions hold of record.
The entire expense of preparing and mailing this Proxy Statement, and the
total expenditures relating to the solicitation of proxies (including, without
limitation, costs, if any, related to advertising, printing, fees of attorneys,
financial advisors, solicitors, consultants, accountants, public relations,
transportation and litigation) will be borne by Mr. Bronson.
Mr. Bronson has retained The Altman Group, Inc., 60 East 42nd Street, New
York, New York 10017 (the 'Agent') to assist him in the solicitation of proxies
and for related services. Mr. Bronson has agreed to pay the Agent a fee and to
reimburse it for its reasonable out-of-pocket expense. Mr. Bronson estimates
that such fee will be approximately $35,000. The Agent will solicit proxies for
the Annual Meeting from individuals, brokers, banks, nominees and other
institutional holders. The Agent has advised Mr. Bronson that it anticipates
that it will use approximately 15 employees to engage in such solicitation
activities. Mr. Bronson estimates that his total expenditures relating to this
proxy solicitation will be approximately $100,000. Total expenditures to date
relating to this proxy solicitation have been approximately $20,000.
Mr. Bronson intends to seek reimbursement from the Company for its expenses
in connection with this proxy solicitation. Unless the Company submits the
question of such reimbursement to a vote of the Common Stockholders at the
Annual Meeting, such question will not be submitted to a vote of the Company's
security holders.
ADDITIONAL INFORMATION
Stockholders are referred to the Company Proxy Statement with respect to
the compensation and remuneration paid and payable and other information related
to the Company's officers and directors, beneficial ownership of the Company's
securities and the procedures for submitting proposals for consideration at the
1999 annual meeting of the stockholders of the Company.
Mr. Bronson assumes no responsibility for the accuracy or completeness of
any information contained herein which is based on, or incorporated by reference
to, the Company Proxy Statement.
STEVEN N. BRONSON
June [ ], 1998
10
<PAGE>
IMPORTANT
1. If your shares of the Company's Common Stock are registered in your own
name, please sign, date and return the BLUE Proxy Card furnished to you by Mr.
Bronson.
2. If your shares of the Company's Common Stock are held in the name of a
brokerage firm, bank nominee or other institution, only it can sign a BLUE Proxy
Card with respect to your shares.
3. Time is critically short. Only your latest dated Proxy Card will count.
Please sign, date and mail the enclosed BLUE Proxy Card today in the envelope
provided.
If you have any questions about giving your proxy or require assistance in
voting your shares of Common Stock, please call:
THE ALTMAN GROUP, INC.
60 EAST 42ND STREET
NEW YORK, NY 10017
(212) 681-9600 (COLLECT)
11
<PAGE>
THIS PROXY IS SOLICITED BY STEVEN N. BRONSON IN OPPOSITION TO THE
BOARD OF DIRECTORS PROPOSED BY THE MANAGEMENT OF THE COMPANY IN
CONNECTION WITH THE 1998 ANNUAL MEETING OF STOCKHOLDERS
OF
INFORMATION RESOURCE ENGINEERING, INC.
The undersigned stockholder of INFORMATION RESOURCE ENGINEERING, INC. (the
'Company') hereby appoints each of Steven N. Bronson and James S. Cassel as
lawful attorney and proxy, with several power of substitution, for and in the
name of the undersigned to represent and vote, as designated below, all shares
of the common stock, par value $.01 per share, of the Company which the
undersigned is entitled to vote at the 1998 annual meeting of stockholders of
the Company, to be held on July 10, 1998 at 8029 Corporate Drive, Baltimore,
Maryland, commencing at 10:30 a.m., or at any adjournment, postponement or
rescheduling thereof (collectively, the 'Annual Meeting'). The undersigned
hereby revokes any and all previous proxies with respect to the matters covered
by this proxy and the voting of such shares at the Annual Meeting.
A. ELECTION OF DIRECTORS: Nominees of Steven N. Bronson:
[ ] FOR the nominees listed below
[ ] WITHHOLD AUTHORITY for the nominees listed below.
NOMINEES: JEFFERY ADDUCI, MATTHEW E. TUTINO, STANLEY L. NEWMAN, STEVEN N.
BRONSON AND JAMES S. CASSEL
(TO WITHHOLD AUTHORITY TO VOTE FOR ONE OF THE NOMINEES, STRIKE THE NAME OF THE
NOMINEE.)
B. DISCRETIONARY AUTHORITY: In their discretion, the proxies are authorized
to vote upon such other business as may properly come before the Annual
Meeting or any adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
<PAGE>
This Proxy Card, when properly executed, will be voted as directed herein.
IF NO INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
'FOR' THE NOMINEES LISTED ABOVE AND IN THE DISCRETION OF THE PROXIES AS TO ALL
OTHER MATTERS.
PLEASE DATE AND SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS HEREON.
Dated: , 1998
----------------------
Signature:
---------------------------
Signature:
---------------------------
Title:
-------------------------------
If stock is jointly held, each joint
owner should sign. When signing as
attorney in fact, executor,
administrator, trustee, guardian,
corporate officer or partner, please
give full title.
PLEASE SIGN, DATE AND RETURN THIS PROXY
<PAGE>
STEVEN N. BRONSON
201 SOUTH BISCAYNE BOULEVARD
SUITE 2950
MIAMI, FLORIDA 33131
June [ ], 1998
IMPORTANT INFORMATION ABOUT YOUR INVESTMENT IN
INFORMATION RESOURCE ENGINEERING
THERE IS AN ALTERNATIVE TO RE-ELECTING MANAGEMENT'S PROPOSED SLATE OF DIRECTORS
PLEASE DO NOT RETURN THE PROXY CARD YOU WILL BE RECEIVING FROM MANAGEMENT BEFORE
YOU READ THE PROXY MATERIALS I WILL BE SENDING TO YOU SHORTLY
TO MY FELLOW SHAREHOLDERS:
I am the owner of 150,000 shares of the common stock of Information
Resource Engineering, Inc. Today, I filed proxy materials with the Securities
and Exchange Commission. Approximately one week from your receipt of this
letter, I will mail those materials, including a proxy card to all of the
Company's common stockholders. At that time I will seek your support for the
election of five director nominees in opposition to the slate put forward by
management.
It is likely that you will receive an annual report, proxy statement and
proxy card from the Company's management and board before my materials arrive.
I URGE YOU NOT TO SIGN AND RETURN MANAGEMENT'S PROXY CARD UNTIL YOU
RECEIVE AND REVIEW MY PROXY MATERIALS.
Thank you for your consideration and cooperation in this very important
matter.
Sincerely,
Steven N. Bronson
<PAGE>
STEVEN N. BRONSON
201 SOUTH BISCAYNE BOULEVARD
SUITE 2950
MIAMI, FLORIDA 33131
June [ ], 1998
IMPORTANT INFORMATION ABOUT YOUR INVESTMENT IN
INFORMATION RESOURCE ENGINEERING
TO MY FELLOW SHAREHOLDERS:
I am writing to urge you to support the opposition slate for the company's
board of directors, and to reject those currently on the board.
As the owner of 150,000 shares, I have become increasingly concerned about
our company and its repeated failures. I have finally had enough, and I am
joining in an effort to unseat what I can see only as a self-serving,
see-nothing, do-nothing board of directors.
I am asking you to join with me in protecting what's left of our
investment.
The record clearly demonstrates that our company has been badly mismanaged,
and I believe those responsible must be removed before it is too late.
CONSIDER THESE FACTS:
o THE STOCK PRICE HAS PLUMMETED.
On June 12, 1996, shares in our company traded at $29.50. Now, less than 2
years later, the stock is trading at around $8.00. IN THE MIDST OF THE GREAT
BULL MARKET, WE HAVE LOST MORE THAN 70% OF OUR INVESTMENT! And the multiple
which investors are willing to pay is far below those of other companies in
the same business.
o THE COMPANY HAS NOT MADE A PROFIT SINCE 1992.
o MAJOR CUSTOMERS HAVE BEEN LOST BECAUSE THE COMPANY CANNOT DELIVER PRODUCTS OR
MEET DEADLINES.
On June 30, 1996, the company's backlog stood at $9,284,000. However, more
than three-fourths of that backlog, $7,149,000, represented products which
MCI had agreed in September l995 to buy. But less than six months later, MCI
canceled the contract. Losing that contract virtually wiped out the backlog,
and eliminated revenues of $7 million which the company should have received
by September 30, 1997. The company has never explained the loss of this
major customer, which by itself accounted for 27% of the Company's revenue
in 1996 and 13% of revenue in 1995. (There was a reference to a 'cooperative
marketing initiative' that obligates MCI to buy absolutely nothing from the
<PAGE>
Company. That 'initiative' may allow management to claim MCI is still a
customer, but there is no way it replaces the 27% of revenue lost!)
WHAT HAPPENED? AND WHY DID IT HAPPEN? I'VE HEARD NOTHING TO EXPLAIN IT. HAVE
YOU?
o Management has lost credibility with investors.
Not once in the past five years has management delivered on its own stated
revenue and earnings goals.
Only one analyst is publishing earnings estimates for the Company.
And trading volume, which in 1996 ranged from 1,000,000 to 2,700,000 common
shares a month, had fallen significantly. In three of the first four months
of 1998, fewer than 400,000 shares traded.
In the face of all these problems, it was just over a year ago that the
chief executive officer, Mr. Caputo, was rewarded--REWARDED!--by the board with
a five-year contract that gives him:
o A SALARY OF $250,000 A YEAR IN THE FIRST YEAR
o GUARANTEED RAISES OF AT LEAST 10% EACH YEAR FOR THE NEXT FOUR YEARS
o BONUS PAYMENTS OF AS MUCH AS ONE-HALF OF HIS ANNUAL SALARY
o AND OPTIONS ON 50,000 SHARES AT $8.25 PER SHARE!
(How do you suppose the board's compensation committee arrived at the terms
of this generous contract? Could it have been because two of the three
members of that committee are Mr. Caputo himself, and Bruce R. Thaw, Esq?
Although he is not listed as an officer of the company, the Company's proxy
statement confirms that Mr. Thaw serves as the company's general counsel, a
job that, combined with his seat on the compensation committee, puts him in
the position of deciding how much to pay the same man who doles out hundreds
of thousands of dollars in fee income to him. Is it coincidental that Mr.
Thaw has collected more than $300,000 in legal fees in just the last two
years, presumably with the approval of Mr. Caputo?)
AND HOW DOES THIS BOARD RESPOND TO SHAREHOLDER CONCERNS?
I SAY, 'INADEQUATELY, AT BEST.' In late 1996, shareholders quite reasonably
complained when the Company lost the MCI account. These shareholders questioned
the abilities of management and the strength of the board. The company (with
great fanfare) responded with a so-called 'Advisory Board', theoretically to
help the company build shareholder value.
For their participation, two 'Advisory Board' members were issued a total
of 125,000 options: William E. Simon was given 100,000 and Daniel L. Mosley got
25,000.
2
<PAGE>
I am unaware that the 'Advisory Board' has any ability whatsoever to make
operations more efficient or to have any meaningful effect on the company's
decision-making process. Nor have we seen any meaningful effort to 'build
shareholder value.' Have YOU seen any added shareholder value since the
'Advisory Board' was formed in January of 1997?
THE CAVALIER TREATMENT OF SHAREHOLDERS was underlined once again in January
of this year, when I met with Mr. Caputo and Mr. Thaw, the same compensation
committee member who collects substantial fees as the Company's counsel. I
raised concerns about Mr. Caputo's effectiveness and accountability, and
expressed the need for a board with truly outside representation, dedicated to
all shareholders' best interests. Mr. Caputo immediately became extremely
defensive and was clearly irked. (Who was I to raise such issues, or question
his stewardship? I'M ONLY ONE OF THE OWNERS.)
Clearly, neither Mr. Caputo nor the current board sees any problem with
o the current direction of the company,
o its pathetic stock valuation,
o its 5 years without a penny of profit,
o its loss of major customers,
Nor does the board see anything amiss about paying excessive compensation
to a CEO who clearly hasn't delivered.
They don't see these things, BUT I DO. And another thing I see clearly is
that THE TIME HAS COME TO REPLACE THIS SEE-NOTHING, DO-NOTHING BOARD with people
dedicated to serving ALL the shareholders, and committed to building shareholder
value.
The accompanying proxy statement gives more detail about the failures and
mismanagement of the incumbent board and management, as well as about our highly
qualified candidates and how we will work to grow shareholder value.
I ESPECIALLY DIRECT YOUR ATTENTION TO THE INFORMATION ON MATTHEW E. TUTINO.
If our slate is elected, our first order of business will be to name Mr. Tutino
chief executive officer. Matt Tutino has earned a solid reputation as a
turnaround and restructuring specialist, and has in-depth knowledge of the high
technology industries as well as finance and investment banking. In addition to
his successes at such companies as Symbol Technology, Mohawk Data and Lockheed,
Matt served as executive vice president and chief operating officer of the
Export-Import Bank of the United States, and as a senior executive of a major
investment banking firm. Broad experience and special expertise such as Matt's
will certainly be needed to reverse the sorry failures of the current management
and board.
3
<PAGE>
I urge you to read the proxy statement carefully, because
I believe that when you know the facts, you will agree:
IT IS TIME FOR THE CURRENT BOARD AND MANAGEMENT TO GO.
THEY SEE NOTHING
THEY DO NOTHING
WE SAY: THEY HAD THEIR CHANCE, AND THEY HAVEN'T DONE THE JOB!
VOTE THE BLUE PROXY TODAY
Thank you for your time and attention to this extremely important matter.
Sincerely,
Steven N. Bronson
1. If your shares of the Company's common stock are registered in your own
name, please sign, date and return the BLUE Proxy Card furnished to you by
Steven N. Bronson.
2. If your shares of the Company's common shares are held in the name of a
brokerage firm, bank nominee or other institution, only it can sign a BLUE Proxy
Card with respect to your shares.
3. Time is critically short. Only your latest dated Proxy Card will count.
Please sign, date and mail the enclosed BLUE proxy card today in the envelope
provided.
If you have any questions, or need any additional information, please call
our solicitation agent,
THE ALTMAN GROUP
60 EAST 42ND STREET
NEW YORK, NY 10165
(212) 681-9600 (CALL COLLECT)
4
