<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 19, 2000 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 19, 2000 for the following purposes:
1. To elect six (6) directors, each to hold office 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 shareholders of record at the
close of business on May 26, 2000 are entitled to notice and to vote at the
meeting or any adjournment thereof. All shareholders are cordially invited to
attend the meeting. Whether or not you expect to attend the meeting, please fill
in, date and sign the accompanying proxy and mail it promptly in the enclosed
envelope. If you decide to attend the meeting and vote in person, you may then
withdraw your proxy.
Enclosed is a copy of the Annual Report on Form 10-K for the year ended
December 31, 1999 along with a proxy statement and a proxy card.
By Order of the Board of Directors,
David A. Skalitzky
Secretary
April 28, 2000
Baltimore, Maryland
1
<PAGE> 3
INFORMATION RESOURCE ENGINEERING, INC.
8029 CORPORATE DRIVE
BALTIMORE, MARYLAND 21236
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 19, 2000
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 19, 2000 and at any postponements or
adjournments thereof. This material is first being mailed to shareholders on or
about June 2, 2000.
The Company's Common Stock, $.01 par value, is the only issued and
outstanding class of stock. Only shareholders of record at the close of business
on May 26, 2000 will be entitled to notice of and to vote at the meeting. At the
close of business on April 27, 2000, the Company had 6,664,796 shares of Common
Stock outstanding.
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
beneficial owners of the Company's Common Stock.
Shareholders are entitled to one vote for each share held. Any proxy
given may be revoked by a shareholder at any time before it is voted by filing a
written revocation notice with the Secretary of the Company or by duly executing
a proxy bearing a latter date. A proxy may also be revoked by any shareholder
present at the meeting who desires to vote his or her shares in person.
Subject to any revocations, all shares represented by properly executed
proxies will be voted in accordance with the directions on the proxy. If no
direction is made, the proxy will be voted "FOR" all proposals contained herein.
Proxies marked "abstain" will be treated as present and entitled to vote for the
purpose of determining a quorum, a majority of the shares entitled to be voted,
is present, but will not be voted with respect to any proposal marked "abstain".
If a proxy returned by a bank, broker, nominee or other fiduciary indicates that
they do not have discretionary authority to vote some or all of the shares
covered thereby with respect to a given proposal and do not otherwise authorize
the voting of such shares, such shares, or "non-votes", will be considered to be
present. Under applicable Delaware law, in determining whether a proposal has
received the requisite number of affirmative votes, abstentions and non-votes
will be counted and will have the same effect as a vote against that proposal.
ELECTION OF DIRECTORS
Six directors are to be elected by the shareholders to serve until the
next annual meeting of shareholders and until their successors have been elected
and qualified. The Board of Directors has no reason to believe that any of the
nominees will not be a candidate or will be unable to serve. However, in the
event that any of the nominees should become unable or unwilling to serve as a
director, the proxy will be voted for the election of such person or persons as
shall be designated by the Board of Directors.
The following information is submitted concerning the nominees for
election as directors based upon information received by the Company from such
persons:
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<PAGE> 4
<TABLE>
<CAPTION>
Name Age Office Director Since
---- --- ------ --------------
<S> <C> <C> <C>
Chairman, Chief Executive Officer
Anthony A. Caputo 58 and President 1986
Thomas A. Brooks 63 Director 1998
Shelley A. Harrison 57 Director 1999
Ira A. Hunt, Jr. 75 Director 1990
Douglas E. Kozlay 60 Director 1983
Bruce R. Thaw 47 Director 1990
</TABLE>
Anthony A. Caputo, the Chairman, Chief Executive Officer and President
of the Company, invested in and became a director of the Company in November
1986. Until 1986, he was CEO of TACT Technology, a network security firm which
he founded in 1982. 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. 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.
He is currently a director of Oleran Network Solutions, Inc.
Thomas A. Brooks has been a director of the Company since July 1998. He
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 Joint Security Commission. In 1995, President Clinton
appointed him as one of three members of the Security Policy Advisory Board.
From 1995 to 1997 he was also a member of the Defense Policy 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
Master's degree from Fairleigh Dickenson University. He has done post Master's
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.
Shelley A. Harrison has been director of the Company since 1999. He has
served as Chief Executive Officer of SPACEHAB, Inc. (provider of space-based
support services) since April 1996, Director since August 1987 and Chairman of
the Board since August 1993. Dr. Harrison co-founded and served as Chairman and
CEO of Symbol Technologies Inc. (provider of bar-code laser scanning
technologies) from 1973 to 1982. Dr. Harrison is a founder and Managing General
Partner of PolyVentures I & II, high-technology venture capital funds organized
in 1987 and 1991 respectively. Dr. Harrison was a Member of Technical Staff at
Bell Telephone Laboratories and a Professor of Electrical Sciences at the State
University of New York at Stony Brook. Dr. Harrison holds a Ph.D. and Master of
Science degree in Electrophysics from Polytechnic University and a Bachelor's
Degree of Electrical Engineering from New York University. He is a member of
numerous honor societies, trade and industry organizations, technology advisor
to governments, author of books and technical publications and holder of
numerous patents. Dr. Harrison is also a member of the Boards of AppliedTheory
Corporation, Inc., cIick2learn.com and NetManage, Inc., as well as several
private technology companies.
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
3
<PAGE> 5
Washington, D.C. Mr. Hunt has a Master of Science degree in civil engineering
from the Massachusetts Institute of Technology; a Master of Business
Administration degree 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
providing guidance and advice on product architecture to the Chief Executive
Officer and performing engineering functions as required. In February 2000, Mr.
Kozlay was appointed acting Managing Director of the Company's European
subsidiary. 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 as a design engineer for IBM Corporation. In
1982 Mr. Kozlay was Director of Industrial Automation for EMC Controls.
Bruce R. Thaw has been a director of the Company since December 1990.
From 1987 to March 31, 2000, Mr. Thaw served as general counsel to the Company.
Mr. Thaw is currently President and Chief Executive Officer of Bulbtronics,
Inc., a national distributor of specialty light sources and related products.
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 an Audit Committee, which is
comprised of Thomas A. Brooks and Ira A. Hunt, Jr. The purpose of this Committee
is to review with the Company's independent auditors 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. Recently adopted rules of the
Securities and Exchange Commission and Nasdaq are expected to affect the scope
of the Audit Committee's responsibilities and frequency of its meetings.
The Company does not have a nomination or similar committee. The Board
of Directors held seven meetings in 1999. Each director attended at least 75% of
the aggregate number of meetings of the Board and any committee of which they
served during the year.
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
18, 1998, the Board of Directors approved the grant of a stock option on January
4, 1999 for 10,000 shares to each director who was not an employee of the
Company (Messrs. Brooks, Hunt and Thaw). The per share option price was $9.188,
the last reported sale on the grant date. The options have a three-year term and
are fully vested.
In April 1999, the Board of Directors approved the grant of a stock
option for 20,000 shares under the Non-Employee Director Stock Option Plan to
Dr. Harrison as an incentive to induce him to join the Board. The per share
option price was $15.313, the last reported sale on the grant date. The option
has a five-year term and vests over a three-year period commencing with the
first anniversary of grant date.
Under the terms of the Non-Employee Director Stock Option Plan, each
director who was not an employee of the Company (Messrs. Brooks, Harrison, Hunt
and Thaw) was granted a stock option for 10,000 shares on January 4, 2000. The
per share option price was $21.313, the last reported sale on the grant date.
The option has a five-year term and vests over a three-year period commencing
with the first anniversary of grant date.
UNLESS AUTHORITY IS WITHHELD, THE PROXIES WILL BE VOTED "FOR" THE ELECTION
OF THE SIX NOMINESS NAMED ABOVE AS DIRECTORS.
4
<PAGE> 6
EXECUTIVE OFFICERS
The executive officers of the Company as of the date of this Proxy
Statement are set forth in the table below. All executive officers are appointed
at the annual meeting or interim meetings of the Board of Directors. Each
executive officer is appointed by the Board to hold office until his or her
successor is duly appointed and qualified:
<TABLE>
<CAPTION>
Name Age Office or Position Held
---- --- -----------------------
<S> <C> <C>
Anthony A. Caputo 58 Chairman, Chief Executive Officer and President
Carole D. Argo 38 Senior Vice President and Chief Financial Officer
Michael M. Kaplan 56 Senior Vice President, Technology
</TABLE>
Certain biographical information regarding the Executive Officers,
except for Mr. Caputo (see Election of Directors), is set forth below:
Carole D. Argo joined the Company in July 1999 as Senior Vice President
and Chief Financial Officer. Prior to joining the Company, Ms. Argo was Chief
Financial Officer of Optelcom, Inc., a public company focusing on providing
fiber optic equipment for video transmission, from August 1998 to July 1999.
Previously, Ms. Argo was for eight years the Vice President of Finance and
Operations for Byk Gardner, a color and appearance instrumentation company. Ms.
Argo has seven years of public accounting experience as an audit professional,
most recently as an Audit Manager at Deloitte and Touche, LLP. She is a
Certified Public Accountant and holds a Masters of Business Administration from
Loyola College of Maryland and a Bachelor of Science in Accounting from the
University of Arizona.
Michael M. Kaplan joined the Company in January 1996 as Senior Vice
President, Technology. Formerly the Director of Secure Communications at Bell
Laboratories ("Bell Labs"), Mr. Kaplan led the design, development and support
of Bell Labs security products for voice, data, fax and video applications. Mr.
Kaplan was employed at Bell Labs for twenty-seven years and holds a Master of
Science in Mathematics degree from Adelphi University and a Bachelor of Arts in
Mathematics degree from Queens College. Mr. Kaplan holds six patents for various
aspects of telephone security devices and associated services.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN OTHER BENEFICIAL OWNERS
The following table sets forth as of April 27, 2000 (unless otherwise
specified) certain information as to persons known to the Company to be
beneficial owners of more than five percent of the outstanding shares of the
Company's Common Stock, by each director and by each of the current executive
officers and by all executive officers and directors of the Company as a group.
5
<PAGE> 7
<TABLE>
<CAPTION>
Number of shares
Name (and Address of 5% owners) beneficially owned (1) Percent
- ------------------------------- ---------------------- -------
<S> <C> <C>
Kern Capital Management LLC (2) 696,800 10.5%
114 West 47th Street
New York, NY 10036
Anthony A. Caputo (3) 624,600 9.4%
8029 Corporate Drive
Baltimore, MD 21236
AWM Investment Company, Inc. (4) 350,000 5.3%
153 East 53rd Street, Floor 55
New York, NY 10166
Barry R. Feirstein (5) 332,500 5.0%
767 Third Ave., 28th Floor
New York, NY 10017
Bruce R. Thaw (3) 240,000 3.6%
Douglas E. Kozlay (3) 98,300 1.5%
Ira A. Hunt, Jr. (3) 34,600 (6)
Michael M. Kaplan (3) 19,333 (6)
Thomas A. Brooks (3) 8,500 (6)
Shelley A. Harrison (3) 6,666 (6)
Carole D. Argo - -
All Current Executive Officers and 1,031,999 15.5%
Directors as a Group (8 persons) (3)
</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 exercisable within 60 days have
been exercised.
(2) Based on information contained in a Form 13G dated December 31, 1999 by
Kern Capital Management, LLC, a registered investment advisor.
(3) Includes shares issuable pursuant to outstanding stock options that may
be exercised within 60 days as follows: 30,000 shares for Mr. Caputo;
20,000 shares for Mr. Thaw; 15,000 shares for Mr. Hunt; 19,333 shares
for Mr. Kaplan; 4,000 shares for Mr. Brooks; 6,666 shares for Dr.
Harrison; and 94,999 shares for all officers and directors as a group.
(4) Based on information contained in a Schedule 13G dated December 31, 1999
filed by AWM Investment Company, Inc., a registered investment advisor
on behalf of itself and its mutual funds.
(5) Based on information contained in a Schedule 13G dated December 31,
1999.
(6) Represents less than 1% of the outstanding shares of Common Stock.
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<PAGE> 8
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) 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, 1999 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 (1) the Company's Chief Executive Officer and (2) the other two most
highly compensated executive officers of the Company whose aggregate cash
compensation in fiscal year 1999 exceeded $100,000 (the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------------------------------------------------------------
Other Annual
Name and Principal Salary Bonus Compensation Options
Position Year ($) ($) ($) (1) (Shares)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Anthony A. Caputo, 1999 302,500 123,750 0 0
Chairman, Chief 1998 275,000 110,000 0 0
Executive Officer 1997 250,000 82,500 0 50,000
And President
Michael M. Kaplan, 1999 180,000 49,500 0 0
Senior Vice President, 1998 154,750 49,500 0 10,000
Technology 1997 150,000 42,500 0 0
John F. Hembrough- 1999 174,967 0 0 50,000
Senior Vice President, 1998
World-Wide Sales (2) 1997
</TABLE>
- ------------------------------------
(1) Perquisites and other personal benefits to the named executive officers
were less than either $50,000 or 10% of the total annual Salary and
Bonus reported for the Named Executive Officers, and therefore,
information has not been included.
(2) Mr. Hembrough was hired as Senior Vice President World-Wide Sales in
January 1999. He resigned as an employee of the Company on January 8,
2000.
The table below sets forth certain information with respect to stock
options granted during fiscal year 1999 to the Named Executive Officers under
the Company's employee stock option plans.
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<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants (1) Term (2)
- ---------------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Anthony A. Caputo 0 N/A N/A N/A N/A N/A
Michael M. Kaplan 0 N/A N/A N/A N/A N/A
John F. Hembrough 50,000 16.2 9.25 1/06/2006 188,300 438,800
</TABLE>
- -----------------------------
(1) The option becomes exercisable in cumulative annual installments of
33 1/3 percent of the shares on each of the first, second and third
anniversaries of the grant date. The Company granted no stock
appreciation rights in 1999.
(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 to the options is possible without stock price
appreciation, which will benefit all shareholders. If the stock price
does not increase above the exercisable price, compensation to the named
executive will be zero.
The table below sets forth certain information with respect to options
exercised by the Named Executive Officers during fiscal year 1999 and with
respect to options held by the Named Executive Officers at the end of fiscal
year 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES (1)
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at Options at
December 31, 1999 (#) December 31, 1999 ($) (2)
--------------------------------------------------------------------
Number of
Securities
Underlying
Options
Exercised Value
Name (1) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Anthony A. Caputo 0 0 20,000 30,000 245,000 367,500
Michael M. Kaplan 14,000 207,250 9,333 36,667 106,538 413,337
John F. Hembrough (3) 0 0 0 50,000 0 565,000
</TABLE>
- -----------------------------
(1) No stock appreciation rights were exercised by any Company employee,
executive officer or director in 1999, and there are no outstanding
stock appreciation rights held by any employee, executive officer or
director of the Company.
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<PAGE> 10
(2) The value of unexercised stock options at December 31, 1999 is based on
the last reported sale price of $20.50 for the Common Stock as reported
by the Nasdaq National Market on that date.
(3) During January 2000, Mr. Hembrough exercised an option for 16,667
shares. The option for 33,333 shares has expired.
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.
If the Company terminates Mr. Caputo's employment against his will and
without Cause, as defined in the agreement, he is entitled to salary and target
incentive compensation accrued through termination date plus the lessor of (i)
$600,000 or (ii) the balance of his compensation under the contract to the end
of the agreement computed using the latest applicable salary rate. In the event
his employment with the Company is terminated within one year following the
occurrence of a change in control, he is entitled to receive, in lieu of the
severance payment otherwise payable, his annual salary multiplied by three and
his then current target incentive compensation multiplied by three.
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 $115,000. In the event of termination of employment, Mr. Kozlay's
agreement provides for a payment of a maximum of six months salary.
Ms. Argo employment offer letter provides for the payment of six months
salary should the Company terminate her employment for any reason. In addition,
if the Company is acquired by another company, any unexercised stock option is
subject to accelerated vesting of 50% of the unexercised shares if the
acquisition occurs before July 17, 2000 and 100% of unexercised shares if the
acquisition occurs after that date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee for fiscal year 1999 was comprised of Thomas
A. Brooks and Ira A. Hunt, Jr. Messrs. Brooks and Hunt were not employed by the
Company during 1999 or before.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (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
9
<PAGE> 11
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 1999
The Committee approved an annual salary for Mr. Caputo of $302,500 for
1999 and a bonus plan that could pay up to a maximum of 50% 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 improvement, customer
satisfaction, financial performance and change in shareholder value. 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. The Committee based its compensation
recommendations for 1999 primarily upon the increase in shareholder value
brought about by the per share price increase of the Company's Common Stock and
the re-orientation of the Company away from the traditional product business
toward the original equipment market with embedded technology (products, chips
and software). The Committee reduced the targeted bonus because the Company's
earnings were short of the 1999 business plan. The Committee granted Mr. Caputo
a bonus of $123,750 for fiscal year 1999.
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.
Thomas A. Brooks and Ira A. Hunt, Jr.
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 WorldCom,
Inc.'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
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usually priced at the last reported sale price on date of issue and vest in
three equal annual installments. In 1999, no options were granted to advisory
board members.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Bruce R. Thaw, a director of the Company, served as general counsel to
the Company through March 31, 2000 and billed the Company $102,808 for legal
fees for representing the Company in connection with legal and regulatory
matters in 1999.
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 $100 was invested in the
Company's Common Stock and in each of the foregoing indices. The graph also
assumes that all dividends were reinvested.
There can be no assurance as to the future trends in the total return of
the Company's Common Stock or of the foregoing indices. The Company does not
make nor does it endorse any predictions as to future stock price performance.
<TABLE>
<CAPTION>
Measurement Information Resource Total Return Index for Nasdaq Computer and Data
Period Engineering, Inc. Nasdaq Stock Market (U.S.) Processing Services Stock
Year Covered ($) ($) Index ($)
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 408.25 141.33 152.28
1996 148.45 173.89 187.95
1997 99.48 213.07 230.90
1998 153.61 300.25 412.23
1999 338.14 542.43 871.27
</TABLE>
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 February 2, 2001 in order to be considered for inclusion in next year's
proxy materials.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report of the Company on Form 10-K for the year ended
December 31, 1999, 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.
INDEPENDENT AUDITORS
KPMG LLP has been selected by the Board of Directors to serve as
independent auditors for the Company. A representative of KPMG LLP is expected
to be present at the meeting to answer appropriate questions and, if the
representative so desires, to make a statement.
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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 28, 2000
Baltimore, Maryland
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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 Shareholders 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 19, 2000 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 Board of Directors favor a vote FOR the following proposals:
1. The election of Directors Nominees: Anthony A. Caputo, Thomas A. Brooks,
Shelley A. Harrison, Ira A. Hunt, Jr., Douglas E. Kozlay and Bruce R. Thaw
<TABLE>
<S> <C>
[ ] FOR all nominees, except as noted [ ] WITHHOLD AUTHORITY to vote for all nominees
</TABLE>
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 Board of
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)
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