<PAGE> 1
SCHEDULE 14A--INFORMATION REQUIRED IN PROXY STATEMENT
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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
INFORMATION RESOURCE ENGINEERING, INC.
(Name of Registrant as Specified in its Charter)
------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
INFORMATION RESOURCE ENGINEERING, INC.
8029 CORPORATE DRIVE
BALTIMORE, MARYLAND 21236
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 10, 1998 AT 10:30 A.M.
TO THE SHAREHOLDERS OF INFORMATION RESOURCE ENGINEERING, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
INFORMATION RESOURCE ENGINEERING, INC. (the "Company") will be held at the
Company's offices located at 8029 Corporate Drive, Baltimore, Maryland 21236 at
10:30 a.m. on July 10, 1998 for the following purposes:
1. To elect five (5) directors, each to hold office for a term of one (1)
year or until their respective successors shall have been duly elected
or appointed; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Company's Common Stock, $.01 par value (the "Common Stock") is the
only issued and outstanding class of stock. Only holders of shares of Common
Stock of record on the Company's books at the close of business on May 22, 1998
will be entitled to vote at the meeting. All such shareholders are requested to
be represented at the meeting either in person or by proxy. The stock transfer
books will not be closed.
Enclosed is a copy of the Annual Report on Form 10-K for the year
ended December 31, 1997 along with a proxy statement and a proxy card.
It is desirable that all holders of Common Stock of the Company be
represented at the meeting either in person or by proxy.
SUCH SHAREHOLDERS WHO CANNOT ATTEND THE MEETING IN PERSON ARE
REQUESTED TO DATE AND EXECUTE THEIR PROXIES AND RETURN THEM TO THE COMPANY IN
THE ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE.
By Order of the Board of Directors,
David A. Skalitzky
Secretary
April 30, 1998
Baltimore, Maryland
<PAGE> 3
INFORMATION RESOURCE ENGINEERING, INC.
8029 CORPORATE DRIVE
BALTIMORE, MARYLAND 21236
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 10, 1998
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies by the management of INFORMATION RESOURCE ENGINEERING, INC. (the
"Company"), a Delaware corporation, for use at the Annual Meeting of
Shareholders to be held on July 10, 1998 and at any postponements or
adjournments thereof. This material is first being mailed to shareholders on or
about May 29, 1998.
The cost of such solicitation will be borne by the Company. The
Company may also agree to pay banks, brokers, nominees and other fiduciaries
their reasonable charges and expenses incurred in forwarding the proxy material
to their principles.
A form of proxy is enclosed for use at the meeting. The issuance of a
proxy by a shareholder will not affect his right to vote his shares if he
attends the meeting and desires to vote in person. A proxy may be revoked at
any time prior to the voting thereof, but a revocation will not be effective
unless notice thereof is received, in writing, by the Secretary of the Company
prior to such voting. All such shares represented by effective proxies on the
enclosed form received by the Company will be voted at the meeting or any
adjourned session thereof in accordance with the terms of such proxies. If no
direction is indicated, all shares represented by valid proxies received
pursuant to this solicitation will be voted FOR all directors and the proposal
contained therein. Proxies marked "abstain" will be treated as present for the
purpose of determining a quorum but will not be voted with respect to any
proposal marked "abstain".
Shares of common stock, of which 5,463,727 shares were issued and
outstanding as of April 29, 1998, are the only voting securities of the
Company. Each share is entitled to one vote and a vote of a majority of the
shares present, or represented, and entitled to vote at the meeting is required
to approve each proposal to be acted upon at the meeting. Only holders of
shares of Common Stock of the Company of record on its books at the close of
business on May 22, 1998 will be entitled to notice of, and to vote at the
meeting. Any such shareholder may vote his shares either in person or by his
duly authorized proxy.
ELECTION OF DIRECTORS
Five directors are to be elected by the holders of the Common Stock to
serve until the next annual meeting of shareholders and until their successors
have been elected and qualify. Certain information concerning the nominees for
election at the annual meeting, each of whom is presently a director, except
for Mr. Brooks, who is being nominated for election for the first time, is set
forth below. While the Board of Directors has no reason to believe that any of
those named will not be available as a candidate, should such a situation
arise, the proxy may be voted for the election of the other nominees in the
discretion of the persons acting pursuant to the proxy.
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<PAGE> 4
The following information is submitted concerning the nominees for
election as directors based upon information received by the Company from such
persons:
<TABLE>
<CAPTION>
NOMINEE AGE Office Director Since
------- --- ------ --------------
<S> <C> <C> <C>
Anthony A. Caputo 56 Chairman, Chief Executive Officer 1986
and President
Thomas A. Brooks 61 Director -
Ira A. Hunt, Jr. 73 Director 1990
Douglas E. Kozlay 58 Director 1983
Bruce R. Thaw 45 Director 1990
</TABLE>
Anthony A. Caputo, the Chairman, Chief Executive Officer and President
of the Company, invested in the Company in 1986, and became a director in
November 1986. In 1982, Mr. Caputo founded another computer security firm TACT
Technology, as a division of a public company, and after securing outside
funding through a $3.0 million limited partnership in 1984, managed TACT as a
separate company. Mr. Caputo resigned from TACT Technology in November 1986 to
join the Company. Mr. Caputo has over 20 years' experience in the computer
industry, in marketing and management capacities. In June 1993, Mr. Caputo was
named Maryland's High Tech Entrepreneur of the Year, an annual award sponsored
by organizations including Inc. Magazine, Ernst and Young LLP and Merrill
Lynch. He has served as an officer of several publicly traded companies
including International Mobile Machines Inc., Comshare, Inc. and Value
Software, now part of Computer Associates, Inc. Currently, Mr. Caputo is also a
director of CardGuard International , Inc., a privately held company focused on
developing fingerprint identification technology.
Thomas A. Brooks held various executive positions with AT&T from 1991
through 1998. In 1992 he was appointed Director of the Special Accounts
Business Unit of Federal Systems Advanced Technologies ("FSAT"). In 1993 he
became acting Vice President, Information Systems within FSAT. In January 1994
he became Senior Vice President, AT&T Paradyne, and General Manager of AT&T
Secure Products Business Unit. In January 1996 he was appointed Vice President
of AT&T Government Markets and President of AT&T Technical Services Company. He
served 32 years as an U.S. Navy Intelligence officer, retiring from active
military service as a Rear Admiral and Director of Naval Intelligence in 1991.
He is a member of the Federal Government Defense Policy Board. In 1995,
President Clinton appointed him as one of three members of the Security Policy
Advisory Board. He also serves on advisory boards for the Defense Intelligence
Agency and the Office of Naval Intelligence. Mr. Brooks is a graduate of
Fordham University, with. a Masters degree from Fairleigh Dickenson University.
He has done post Masters studies at George Washington University and the
University of California and has published several articles in various
publications. He serves on the Board of Directors of Navy Mutual Aid
Association and several Intelligence professional associations.
Ira A. Hunt, Jr. has been a director of the Company since December
1990. Mr. Hunt is a graduate of the U.S. Military Academy, West Point, New
York. He served 33 years in various command and staff positions in the U.S.
Army, retiring from active military service as a Major General in 1978.
Subsequently he was President of Pacific Architects and Engineers in Los
Angeles, California and a Vice President of Frank E. Basil, Inc. in Washington,
D.C. Mr. Hunt has a Masters of Science degree in civil engineering from the
Massachusetts Institute of Technology; an MBA from the University of Detroit; a
Doctor of the University degree from the University of Grenoble, France; and a
Doctor of Business Administration degree from George Washington University.
Douglas E. Kozlay is the co-founder, and was President, of the Company
from 1983 until March 1993. Mr. Kozlay's principal responsibilities include
serving as the Company's chief technical officer providing guidance and advice
on product architecture to the Chief Executive Officer and performing
engineering functions as required. Mr. Kozlay has been a director of the
Company since its inception. From 1979 to 1982 Mr. Kozlay served as President
of EMAX, Inc., a company which designed and marketed data acquisition and
control systems. Previously, Mr. Kozlay has served as a manager of a research
and development laboratory for the U.S. National Security Agency and design
engineer for IBM Corporation. In 1982 Mr. Kozlay was Director of Industrial
Automation for EMC Controls. He currently teaches graduate level courses in
robotics at Loyola College of Baltimore.
2
<PAGE> 5
Bruce R. Thaw has been a director of the Company since December 1990.
From 1987 to the present, Mr. Thaw has served as general counsel to the
Company. Mr. Thaw was admitted to the bar of the State of New York in 1978 and
the California State Bar in 1983. Mr. Thaw is also a director of Amtech
Systems, Inc., a publicly traded company engaged in the semiconductor industry,
and Nastech Pharmaceutical Company, Inc., a publicly traded company engaged in
drug delivery technology.
The Company's Board of Directors has established an Audit Committee,
which is comprised of Ira A. Hunt, Jr. and Bruce R. Thaw. The purpose of this
Committee is to review with the Company's independent auditor KPMG Peat
Marwick, and the Chief Financial Officer of the Company, the financial controls
and practices of the Company and the plans for and results of the audit
engagement.
The Company does not have a nomination or similar committee. The total
number of board meetings held during the fiscal year ended December 31, 1997
was four. Each director attended at least 75% of the aggregate number of
meetings of the Board and any committee of which they served during the fiscal
year.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN OTHER BENEFICIAL OWNERS
The following table sets forth as of April 29, 1998 certain
information as to persons known to the Company who may be deemed to be
beneficial owners of more than five percent of the outstanding shares of the
Company's Common Stock, by each director and nominee for director, by each of
the current executive officers named in the Summary Compensation Table and by
all executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Numer of shares
Name (and Address of 5% owners) beneficially owned (1) Percent
- ------------------------------- ---------------------- -------
<S> <C> <C>
Anthony A. Caputo (2) 609,600 11.2%
8029 Corporate Drive
Baltimore, MD
Bruce R. Thaw (3) 256,000 4.7%
Gary L. McGreal (2) 164,686 3.0%
Douglas E. Kozlay (2) 131,800 2.4%
Ira A. Hunt, Jr. (2) 33,000 (4)
Dubhe Beinhorn (2) 11,666 (4)
Michael M. Kaplan (2) 10,000 (4)
Thomas A. Brooks 1,000 (4)
All Executive Officers and Directors 1,300,738 23.8%
as a Group (12 persons) (2)
</TABLE>
- ---------------------
(1) Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them. A person is deemed
to be the beneficial owner of securities that can be acquired by such
person within 60 days from the date hereof upon the exercise of
warrants or options. Each beneficial owner's percentage ownership is
determined by assuming that options or warrants held by such person
(but not those held by any other person) and which are execrable
within 60 days have been exercised.
(2) Includes shares issuable pursuant to outstanding stock options that
may be exercised within 60 days as follows: 15,000 shares for Mr.
Caputo; 4,000 shares for Mr. McGreal; 11,000 shares for Mr. Kozlay;
30,000 shares for Mr. Hunt;
3
<PAGE> 6
11,666 shares for Ms Beinhorn; 10,000 shares for Mr. Kaplan; and
142,966 shares for all officers and directors as a group.
(3) Includes 30,000 shares issuable pursuant to outstanding stock options
with the Company that may be exercised within 60 days and 6,000 shares
owned by Mr. Thaw's spouse, as to which Mr. Thaw disclaims beneficial
ownership.
(4) Represents less than 1% of the outstanding shares of Common Stock.
Section 16 of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Based solely
on a review of the copies of such reports furnished to the Company and written
representations from the executive officers and directors, the Company is
unaware of any instances of noncompliance or late compliance with such filings
during the fiscal year ended December 31, 1997 by its executive officers and
directors.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding
compensation paid by the Company during each of the Company's last three fiscal
years to (I) the Company's Chief Executive Officer and (2) the other four most
highly compensated executive officers of the Company whose aggregate cash
compensation in fiscal year 1997 exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------------------- -------------
Other Annual
Name and Principal Salary Bonus Compensation Options
Position Year ($) ($) ($) (1) (Shares)
- --------------------- ------ ---------- --------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Anthony A. Caputo, 1997 250,000 82,500 0 50,000
Chairman, Chief 1996 225,000 0 0 0
Executive Officer 1995 150,486 135,000 0 5,000
and President
Michael M. Kaplan, 1997 150,000 42,500 0 0
Senior Vice President, 1996 131,827 138,291(2) 0 50,000
Technology
Dubhe Beinhorn, 1997 141,562 50,000(3) 0 10,000
Vice President, 1996 17,187 0 0 35,000
International Sales
Gary L. McGreal, 1997 95,333 35,703 10,000
Vice President, 1996 80,000 37,692 10,000
Marketing 1995 80,000 27,598 10,000
Charles D. Brown, 1997 120,000 25,481 0 40,000
Former Senior Vice 1996 115,384 37,692 0 20,000
President, Sales (4) 1995 100,000 27,538 0 20,000
</TABLE>
- ---------------------------
(1) Perquisites and other personal benefits to the named executive
officers were less than either $50,000 or 10% of the total annual
Salary and Bonus reported for the named executive officers, and
therefore, information has not been included.
(2) Includes a one-time sign on bonus of $125,000. Mr. Kaplan became an
employee of the Company in January 1996.
(3) Represents a one-time sign on bonus. Ms Beinhorn became an employee
of the Company in November 1996.
(4) Mr. Brown resigned as employee of the Company on January 6, 1998.
4
<PAGE> 7
INCENTIVE STOCK OPTION PLAN
Under the Company's Incentive Stock Option Plan (the "Plan") options
to purchase a maximum of 1,496,000 shares of Common Stock of the Company
(subject to adjustment in the event of stock splits, stock dividends,
recapitalizations and other capital adjustments) may be granted to employees,
officers and directors of the Company and other persons who provide services to
the Company. Currently, there are 994,599 such options granted and outstanding,
47,700 options have been exercised and 453,701 options are available for future
grants The options to be granted under the Plan are designated as incentive
stock options or non-incentive stock options by the Board of Directors, which
also has discretion as to the persons to be granted options, the number of
shares subject to the options and terms of the option agreements. Only
employees, including officers and part-time employees of the Company may be
granted incentive stock options. The options are intended to receive incentive
stock option tax treatment pursuant to Section 422A of the Internal Revenue
Code of 1986, as amended.
The Plan provides that options granted thereunder shall be exercisable
during a period of no more than ten years (five years in the case of 10%
shareholders) from the date of grant, depending upon the specific stock option
agreement, and that, with respect to incentive stock options, the option
exercise price shall be at least equal to 100% of the fair market value of the
Common Stock at the time of grant (110% in the case of 10% shareholders).
Pursuant to the provisions of the Plan, the aggregate fair market value
(determined on the date of grant) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by an employee
during any calendar year shall not exceed $100,000.
401(k) PENSION PLAN
The Company established a defined contribution pension plan effective
January 1, 1991 (the "Plan") for employees who have completed three months of
service with the Company. The Plan is administered by the Company and permits
pre-tax contributions to the Plan by participants pursuant to Section 401(k) of
the Internal Revenue Code (the "Code") of 3% to 10% of base compensation up to
the maximum allowable contribution as determined by the Code. The Company
matches participants' contributions on a discretionary basis. The Company may
also make additional discretionary contributions. To date, the Company has made
no matching contributions to the Plan.
OPTION GRANTS IN LAST FISCAL YEAR (1)
During 1997, the Company granted stock options for 600,250 shares to
sixty four persons. The following table provides information related to the
number of stock options granted to the named executive officers.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term (2)
- ---------------------------------------------------------------------------------- -------------------------
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ------------------- ------------- -------------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Anthony A. Caputo 50,000 8.3 8.25 3/27/02 113,966 251,835
Dubhe Beinhorn 10,000 1.7 6.375 12/23/04 25,953 60,481
Gary L. McGreal 10,000 1.7 10.125 10/24/04 41,219 96,058
Charles D. Brown 20,000 3.3 8.50 5/02/04 69,207 161,282
20,000 3.3 10.125 10/24/04 82,438 192,115
</TABLE>
- -----------------------------
(1) No Stock Appreciation Rights were granted by the Company in 1997.
(2) The potential realizable value has been calculated in conformity with
Security and Exchange Commission proxy statement disclosure rules and
is not intended to forecast possible future appreciation of the Common
Stock. No gain
5
<PAGE> 8
to the options is possible without stock price appreciation, which
will benefit all stockholders. A zero percent gain in stock price
appreciation will result in zero dollars for the optionee.
On February 4, 1998, in order to stimulate employee efforts in
promoting the growth, efficiency and profitability of the Company, it offered
66 employees who had received stock options during 1996 and 1997, the
opportunity to exchange their options for a new option for the same number of
shares and option term, but with a new vesting schedule and a per share
exercise price of $6.50, the last reported sale price on that date. The offer
was accepted by 58 employees who held options aggregating 235,750 shares at per
share exercise prices ranging from $8.50 to $13.875. The directors and the
executive officers of the Company were not eligible to participate in this
offering.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES (1)
There were no stock options exercised during 1997 by any director or
executive officer of the Company. The following table provides information with
respect to the number and value of stock options held at fiscal year-end by the
named executive officers:
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-
Unexercised Options at Money Options at
December 31, 1997 (#) December 31, 1997 ($) (2)
--------------------------------- -----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------ -------------- ---------------- --------------- ------------------
<S> <C> <C> <C> <C>
Anthony A. Caputo 15,000 40,000 0 0
Michael M. Kaplan 10,000 40,000 0 0
Dubhe Beinhorn 11,666 33,334 0 0
Gary L. McGreal 4,000 26,000 0 0
Charles D. Brown 12,000 68,000 0 0
</TABLE>
- -----------------------------
(1) No Stock Appreciation Rights ("SARs") were exercised by any Company
employee, executive officer or director in 1997, and there are no
outstanding SARs held by any employee, executive officer or director
of the Company.
(2) The value of unexercised stock options at December 31, 1997 is based
on the last reported sale price of $6.031 for the Common Stock as
reported by the NASDAQ National Market on that date.
COMPENSATION OF DIRECTORS
The Company has not paid and does not presently propose to pay cash
compensation to any director for acting in such capacity, except for
reimbursement for reasonable expenses in attending those meetings. On December
23, 1997, the Board approved the grant of a stock option on January 2, 1998 for
15,000 shares at a per share price of $6.125, the last reported sales price on
that date, to each of the directors who are not employees of the company
(Messrs. Hunt and Thaw). The options have a three year term and are fully
vested. In addition, a director who is not an employee of the Company will
receive an annual stock option grant for a minimum of 5,000 shares which will
be priced at the last reported sale price on the date of the grant.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
In March 1997, the Company and Mr. Caputo entered into a five year
employment agreement. Pursuant to the terms of the agreement, Mr. Caputo is to
receive an annual salary of $250,000 adjusted annually based on a review by the
Compensation Committee with a minimum annual increase of ten percent. Mr.
Caputo is also entitled to incentive compensation of up to one-half his base
salary upon attainment of the Company's business objectives as set forth in the
Company's annual business plan. As further compensation, Mr. Caputo was issued
on March 27, 1997, a five year stock option to purchase 50,000 shares of the
Company's Common Stock at a per share price of $8.25 which was 110% of the last
reported sales price on that date. The option vests at 20% per full year of
service.
6
<PAGE> 9
In November 1986, the Company and Mr. Kozlay entered into a five year
employment agreement, which was renewable and has been renewed for successive
one year periods. Mr. Kozlay's current annual compensation pursuant to the
agreement is $105,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee (the "Committee") is composed of
a majority of independent outside directors. The Committee for fiscal year 1997
consisted of Anthony A. Caputo, the Company's Chairman, Chief Executive Officer
and President and Directors Ira A. Hunt, Jr. and Bruce R. Thaw. Bruce R. Thaw
is general counsel to the Company. See "Certain Relationships and Related
Transactions".
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Committee establishes the general compensation policies of the
Company, specific compensation for each executive officer of the Company and
administers the Company's Stock Option Plan. The Company's intent as
administered through the Committee is to make the compensation packages of the
executive officers of the Company sufficient to attract and retain persons of
exceptional quality, and to provide effective incentives to motivate and reward
such executives for achieving the scientific, financial and strategic goals of
the Company essential to the Company's long-term success and to growth in
shareholder value. The Company's typical executive compensation package
consists of three components: (1) base salary; (2) incentive cash bonuses; and
(3) stock options.
Base Compensation
The Committee's approach is to offer executive salaries competitive
with those of other executives in the industry in which the Company operates.
To that end, the Committee evaluates the competitiveness of its base salaries
based upon information drawn from various sources, including published and
proprietary survey data, consultants' reports and the Company's own experience
recruiting and training executives and professionals. The Company's base salary
levels are intended to be consistent with competitive practice and level of
responsibility, with salary increases reflecting competitive trends, the
overall financial performance of the Company and the performance of the
individual executive.
Bonuses
In addition to base salary, executives are eligible to receive
discretionary bonuses, from time to time, upon the achievement of certain
scientific, financial and marketing milestones. In addition, at the beginning
of each year, the Committee and the Company's Chairman and Chief Executive
Officer review each executive's job responsibilities and goals for the upcoming
year. The amount of the bonus and any performance criteria vary with the
position and role of the executive within the Company. In addition, for all
executives, the Committee with the assistance of the Company's Chief Financial
Officer, reviews the Company's actual financial performance against its
internally budgeted performance in determining year-end bonuses, if any.
However, the Committee does not set objective performance targets for employees
other than executive officers.
Stock Option Grants
The Company, from time to time, grants stock options in order to
provide certain executives with a competitive total compensation package and to
reward them for their contribution to the long-term price performance of the
Company's Common Stock. Grants of stock options are designed to align the
executive's interest with that of the shareholders of the Company. In awarding
option grants, the Committee will consider, among other things, the amount of
stock and options presently held by the executive, the executive's past
performance and contributions, and the executive's anticipated future
contributions and responsibilities.
Compensation for the Chief Executive Officer in 1997
The Committee based its compensation recommendations for 1997
primarily upon the operating results for 1996. The Committee approved an annual
salary for Mr. Caputo of $250,000 for 1997 and a bonus plan that could pay up
to a maximum of 100% of that annual salary at the discretion of the Committee.
In determining the total bonus to be paid to Mr. Caputo, quantitative criteria
included business strategy, growth of the Company, development of new products,
productivity
7
<PAGE> 10
improvement, customer satisfaction and financial performance. In making
compensation decisions based on the quantitative criteria set forth above, the
Committee believes that the compensation paid to Mr. Caputo is closely tied to
the performance of the Company. Since the Company made significant progress in
achieving its financial and new product development plans, the Company paid a
bonus of $135,000 to Mr. Caputo in 1997.
Summary
The Committee believes that the executive compensation aligns the
interests of Management with that of shareholders and focuses Management's
attention on the long-term successful operation of the Company. Each executive
officer and the directors have received stock options to purchase shares of
Common Stock. In addition, Mr. Caputo is a significant shareholder of the
Company. Consequently, a significant portion of their compensation is at risk
based on the Common Stock price performance and maintenance of value in the
marketplace.
Anthony A. Caputo, Ira A. Hunt, Jr. and Bruce R. Thaw
ADVISORY BOARD
In January 1997, the Company announced the formation of an advisory
board aimed at assisting the Company in building shareholder value by
facilitating growth. Established as part of an overall strategy to manage and
maintain Company expansion, the advisory board will work as an integral part of
the Company's planning team in conjunction with the Company's executive
officers and directors. The advisory board is chaired by former United States
Treasury Secretary William E. Simon. Other members are Dr. Vinton G. Cerf, MCI
Telecommunications Corporation's Senior Vice President of Internet Architecture
and Daniel L. Mosley, a partner in the law firm of Cravath, Swaine & Moore.
While no member receives cash compensation for acting in such capacity, the
members are eligible to receive stock options which are usually priced at the
last reported sale price on date of issue and vest in three equal annual
installments. Mr. Simon has received an option for 50,000 shares at a share
price of $9.25 and an option for 50,000 shares at a per share price of $20.00.
Mr. Mosley has received an option for 25,000 shares at a per share price of
$9.375.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Bruce R. Thaw, a director of the Company, serves as general counsel to
the Company and billed the Company $84,547 for legal fees for representing the
Company in connection with legal and regulatory matters in 1997. Mr. Thaw
continues to represent the Company for which he will be paid customary legal
fees.
STOCK PERFORMANCE GRAPH
The graph below compares the total return (change in year end stock
price plus reinvested dividends) of the Company's Common Stock, the Total
Return Index for the Nasdaq Stock Market (U.S.) and the Nasdaq Computer and
Data Processing Services Stock Index. The graph assumes that $100 was invested
in the Company's Common Stock and in each of the foregoing indices. The graph
also assumes that all dividends were reinvested.
There can be no assurance as to the future trends in the total return
of the Company's Common Stock or of the foregoing indices. The Company does not
make nor does it endorse any predictions as to future stock price performance.
<TABLE>
<CAPTION>
Measurement Information Resource Total Return Index for Nasdaq Nasdaq Computer and Data
Period Engineering, Inc. Stock Market (U.S.) Processing Services Stock Index
Year Covered ($) ($) ($)
- ------------- ---------------------- --------------------------------- -----------------------------------
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 120.61 114.79 105.83
1994 132.96 112.21 128.53
1995 542.76 158.69 195.74
1996 197.37 195.18 241.54
1997 132.26 239.57 296.27
</TABLE>
8
<PAGE> 11
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company's Board of Directors has selected KPMG Peat Marwick LLP as
independent public accountants for the Company for the year ending December 31,
1998. KPMG Peat Marwick LLP has served the Company in the capacity of
independent public accountants since the Company's initial public offering in
1989. A representative of KPMG Peat Marwick LLP is expected to be present at
the Annual Meeting to respond to appropriate questions, and will be afforded
the opportunity to make a statement if requested.
SHAREHOLDER PROPOSALS
Shareholders who wish to present proposals for action at the next
Annual Meeting of Shareholders should submit their proposals in writing to the
Secretary of the Company at the address of the Company set forth on the first
page of this Proxy Statement. Proposals must be received by the Secretary on or
before January 30, 1999 in order to be considered for inclusion in next year's
proxy materials.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report of the Company for the year ended December 31, 1997,
including audited financial statements, has been mailed to the shareholders
concurrently herewith, but such report is not incorporated in this Proxy
Statement and is not deemed to be part of the proxy solicitation material.
OTHER MATTERS
The Board of Directors of the Company does not know of any other
matters that are to be presented for action at the Annual Meeting of
Shareholders. If any other matters are properly brought before the meeting or
any adjournments thereof, the persons named in the enclosed proxy will have the
discretionary authority to vote all proxies received with respect to such
matters in accordance with their best judgment.
By order of the Board of Directors,
David A. Skalitzky
Secretary
April 30, 1998
Baltimore, Maryland
9
<PAGE> 12
INFORMATION RESOURCE ENGINEERING, INC.
8029 CORPORATE DRIVE
BALTIMORE, MD 21236
PROXY CARD, SOLICITED BY MANAGEMENT OF THE COMPANY
The undersigned hereby constitutes and appoints Anthony A. Caputo or
Bruce R. Thaw, or either one of them acting in the absence of the other, with
full power of substitution, to be the true and lawful attorneys and proxies for
the undersigned to vote at the Annual Meeting of Stockholders of Information
Resource Engineering, Inc. (the "Company") to be held at the Company's offices
located at 8029 Corporate Drive, Baltimore, Maryland 21236 on July 10, 1998 at
10:30 A.M. or at any adjournment thereof. Notice of which meeting together with
a Proxy Statement has been received.
Said proxies are directed to vote the shares the undersigned would be
entitled to vote if personally present upon the following matters, all more
fully described in the proxy statement.
The directors favor a vote for the following proposals:
1. The election of directors
[ ] FOR all nominees, except as noted [ ] WITHHOLD AUTHORITY to
vote for all nominees nominees: Anthony A. Caputo, Thomas A. Brooks,
Ira A. Hunt, Jr., Douglas E. Kozlay and Bruce R. Thaw. Instructions:
to withhold your vote from an individual nominee, write that nominee's
name on the space provided below.
------------------------------------------------------------------
IF YOU DO NOT WITHHOLD AUTHORITY TO VOTE FOR THE ELECTION OF ANY NOMINEE AS
PROVIDED HEREIN, YOU SHALL BE DEEMED TO HAVE GRANTED SUCH AUTHORITY.
2. In accordance with their best judgment with respect to any
other business that may properly come before the meeting.
The shares represented by this Proxy will be voted and in the event
instructions are given in the space provided, they will be voted in accordance
therewith; if instructions are not given, they will be voted as recommended by
the Directors with regard to the proposals.
The undersigned hereby acknowledges receipt of a copy of the accompanying
Notice of Meeting and Proxy Statement.
DATED:
--------------------------
---------------------------------
---------------------------------
SIGNATURE (MUST CORRESPOND WITH NAME AS
PRINTED IN THE SPACE BESIDE)
10
