<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
- --------------------------------------------------------------------------------
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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:
(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:
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INTERACTIVE FLIGHT TECHNOLOGIES, INC.
4041 N. CENTRAL AVENUE, SUITE 2000
PHOENIX, ARIZONA 85012
August 10, 1998
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Interactive Flight Technologies, Inc. (the "Company"), to be held at the
Holiday Inn - Midtown, 4321 Central Avenue, Phoenix, Arizona, on September 30,
at 10:00 a.m., local time.
At the Annual Meeting, in addition to the election of directors and the
appointment of independent auditors, you will be asked to consider and approve
(i) the amendment of the Company's Amended and Restated Certificate of
Incorporation to provide for classification of the Company's Board of Directors,
(ii) a one-for-five reverse stock split of the Company's outstanding shares of
Class A and Class B common stock, and (iii) an amendment to the Company's
Amended and Restated Certificate of Incorporation to change its name to "IFT
Holdings, Inc."
The enclosed proxy statement contains important information concerning
the directors to be elected and the other proposals to be considered at the
Annual Meeting. We hope you will take the time to study it carefully. Your vote
is very important, regardless of how many shares you own. Even if you presently
plan to attend the Annual Meeting, please complete, sign, date and return the
enclosed proxy card promptly in the accompanying self-addressed postage prepaid
envelope. If you do join us at the Annual Meeting and wish to vote in person,
you may revoke your proxy at that time.
Sincerely,
/s/ MICHAIL ITKIS
---------------------------------------------
Michail Itkis
Chairman of the Board and
Chief Executive Officer
YOUR VOTE IS IMPORTANT.
TO VOTE YOUR SHARES, PLEASE COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY CARD, AND RETURN IT IN THE ENVELOPE PROVIDED,
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING.
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INTERACTIVE FLIGHT TECHNOLOGIES, INC.
4041 N. CENTRAL AVENUE, SUITE 2000
PHOENIX, ARIZONA 85012
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 30, 1998
TO THE STOCKHOLDERS OF INTERACTIVE FLIGHT TECHNOLOGIES, INC.:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the
"Annual Meeting") of Interactive Flight Technologies, Inc., a Delaware
corporation (the "Company"), will be held at the Holiday Inn-Midtown, located at
4321 Central Avenue, Phoenix, Arizona, on September 30, 1998, at 10:00 a.m.,
local time, for the following purposes, all as more fully described in the
attached Proxy Statement:
1. To elect five directors who would serve for the coming year or, if
Proposal 2 is adopted, as set forth therein.
2. To approve a proposal to amend the Company's Amended and Restated
Certificate of Incorporation to divide the Board of Directors into three
classes.
3. To approve a proposal to amend the Company's Amended and Restated
Certificate of Incorporation to effect a reverse stock split of the Company's
outstanding shares of Class A and Class B Common Stock, on the basis of one new
share for every five outstanding shares.
4. To approve a proposal to amend the Company's Amended and Restated
Certificate of Incorporation to change the name of the Company to "IFT Holdings,
Inc."
5. To approve the appointment by the Board of Directors of KPMG Peat
Marwick LLP, certified public accountants, as independent auditors of the
Company for the fiscal year ending October 31, 1998.
6. To transact such other business as may properly come before the
meeting and any and all adjournments thereof.
The Board of Directors has fixed the close of business on August 5,
1998 as the record date for the determination of stockholders entitled to notice
of, and to vote at, the Annual Meeting or any adjournment thereof.
A copy of the Company's Annual Report for the fiscal year ended October
31, 1997 is enclosed.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
SHARES CAN BE VOTED AT THE ANNUAL MEETING ONLY IF THE HOLDER IS PRESENT IN
PERSON OR IS REPRESENTED BY PROXY. ACCORDINGLY, THE COMPANY EARNESTLY REQUESTS
THAT YOU DATE, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE ENCLOSED
ENVELOPE PROVIDED FOR THAT PURPOSE (TO WHICH NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES) WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL
MEETING IN PERSON. THE PROXY IS REVOCABLE BY YOU AT ANY TIME PRIOR TO ITS
EXERCISE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE EVENT YOU
ATTEND THE ANNUAL MEETING. THE PROMPT RETURN OF THE PROXY WILL BE OF ASSISTANCE
IN PREPARING FOR THE ANNUAL MEETING AND YOUR COOPERATION IN THIS RESPECT IS
GREATLY APPRECIATED.
August 10, 1998 By Order of the Board of Directors
/s/ JOHN W. ALDERFER
--------------------------------------------
John W. Alderfer
Secretary
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INTERACTIVE FLIGHT TECHNOLOGIES, INC.
4041 N. CENTRAL AVENUE, SUITE 2000
PHOENIX, ARIZONA 85012
-----------------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 30, 1998
-----------------------------------
This Proxy Statement and the accompanying proxy are being furnished to
stockholders of Interactive Flight Technologies, Inc., a Delaware corporation
(the "Company") in connection with the solicitation of proxies by the Board of
Directors of the Company (the "Board") for use in voting at the Annual Meeting
of Stockholders to be held at the Holiday Inn - Midtown, located at 4321 Central
Avenue, Phoenix, Arizona, on September 30, 1998, at 10:00 a.m., local time, and
at any and all adjournments thereof (the "Annual Meeting"). This Proxy Statement
and the accompanying proxy, together with a copy of the Annual Report of the
Company for the fiscal year ended October 31, 1997, including financial
statements, are first being mailed or delivered to stockholders of the Company
on or about August 10, 1998.
At the Annual Meeting, stockholders will be asked to consider and vote
upon the following proposals:
1. To elect five directors who would serve for the coming
year.
2. To approve a proposal to amend the Company's Amended and
Restated Certificate of Incorporation to divide the Board of Directors
into three classes.
3. To approve a proposal to amend the Company's Amended and
Restated Certificate of Incorporation to effect a reverse stock split
of the Company's outstanding shares of Class A and Class B Common
Stock, on the basis of one new share for every five outstanding shares.
4. To approve a proposal to amend the Company's Amended and
Restated Certificate of Incorporation to change the name of the Company
to "IFT Holdings, Inc."
5. To approve the appointment by the Board of Directors of
KPMG Peat Marwick LLP, certified public accountants, as independent
auditors of the Company for the fiscal year ending October 31, 1998.
6. To transact such other business as may properly come before
the meeting and any and all adjournments thereof.
The enclosed proxy provides that each stockholder may specify that his
or her shares be voted "For", "Against" or "Abstain" from voting with respect to
each of the proposals. If the enclosed proxy is properly executed, duly returned
to the Company in time for the Annual Meeting and not revoked, your shares will
be voted in accordance with the instructions contained thereon. Where a signed
proxy is returned, but no specific instructions are indicated, your shares will
be voted FOR each of the proposals. Proxies marked as abstaining will be treated
as present for purposes of determining a quorum for the Annual Meeting, but will
not be counted as voting in respect of any matter as to which abstinence is
indicated.
Any stockholder who executes and returns a proxy may revoke it in
writing at any time before it is voted at the Annual Meeting by: (i) filing with
the Secretary of the Company, at the above address, written notice of such
revocation bearing a later date than the proxy or a subsequent proxy relating to
the same shares; or (ii) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not in and of itself constitute
revocation of a proxy).
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Representatives of KPMG Peat Marwick LLP, independent accountants of
the Company, are expected to be present at the Annual Meeting and available to
respond to appropriate questions. Such representatives also will have the
opportunity, should they so desire, to make any statements to the stockholders
which they deem appropriate.
VOTING RIGHTS AND VOTING SECURITIES
VOTING AT THE ANNUAL MEETING
The Board has fixed the close of business on August 5, 1998 as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Annual Meeting (the "Record Date"). Only stockholders of record at
the close of business on the Record Date will be entitled to vote at the Annual
Meeting or any and all adjournments thereof. On the Record Date, the Company had
(i) ___________ shares of Class A Common Stock, par value $0.01 per share (the
"Class A Common Stock"), and (ii) __________ shares of Class B Common Stock, par
value $0.01 per share (the "Class B Common Stock" and, together with the Class A
Common Stock, the "Common Stock") issued and outstanding. Each holder of Class A
Common Stock will be entitled to one vote per share, and each holder of Class B
Common Stock will be entitled to six votes per share, either in person or by
proxy, on each matter presented to the stockholders of the Company at the Annual
Meeting.
The holders of a majority of the voting power of the outstanding shares
of Common Stock entitled to vote at the Annual Meeting constitute a quorum at
the Annual Meeting. The affirmative vote of the holders of a plurality of the
votes represented in person or by proxy at the Annual Meeting is required for
election of directors. The affirmative vote of the holders of a majority of the
votes represented in person or by proxy at the Annual Meeting is required to
approve Proposals 2, 4 and 5. The affirmative vote of the holders of a majority
of the votes entitled to be cast at the Annual Meeting (whether or not
represented in person or by proxy at the Annual Meeting) is required to approve
Proposal 3.
By virtue of their ownership of shares of Class B Common Stock and
Class A Common Stock, certain officers, directors and affiliates of the Company
effectively controlled approximately 45% of the outstanding voting power of the
Common Stock on the Record Date, after giving effect to certain voting
agreements executed by Messrs. Steven Fieldman and Lance Fieldman. See
"Executive Compensation -- Employment and Severance Agreements" and "Security
Ownership of Certain Beneficial Holders and Management." The Company believes
such officers, directors and affiliates intend to vote "FOR" the election of all
of the director nominees listed in Proposal 1 and to vote "FOR" the approval of
Proposal 2, Proposal 3, Proposal 4 and Proposal 5.
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PROPOSAL 1
ELECTION OF DIRECTORS
GENERAL
On December 17, 1997, the Company's Board of Directors voted to reduce
the number of directors from eight to four, and that number was expanded to five
on July 22, 1998. Accordingly, the Board currently consists of five members. At
the Annual Meeting or any adjournments or postponements thereof, five directors
are to be elected to serve until the next annual meeting of stockholders and
until their respective successors are elected and qualified. Each proxy received
will be voted for the election of the persons named below, unless the
stockholder signing such proxy withholds authority to vote for one or more of
these nominees in the manner described on the proxy. Should any of the listed
persons be unable to accept nomination or election (which the Board does not
anticipate), it is the intention of the persons named in the enclosed proxy to
vote for the election of such persons as the Board may recommend.
INFORMATION REGARDING THE DIRECTORS AND NOMINEES FOR THE BOARD OF DIRECTORS OF
THE COMPANY
Each of the nominees for election as director is now a director of the
Company. Mr. Alderfer was appointed to the Board on December 17, 1997 Mr. Levine
was appointed to the Board on April 22, 1998, and Mr. Hirth was appointed to the
Board on July 22, 1998.
The following table sets forth the names, ages and current positions
with the Company of the nominees for director. It also indicates the class to
which such director will belong if the proposal to amend the Company's amended
and Restated Certificate of Incorporation to provide for a classified Board of
Directors is adopted. See "Proposal 2 - Authorization of a Classified Board of
Directors."
<TABLE>
<CAPTION>
NAME CLASS AGE POSITION
- ---- ----- --- --------
<S> <C> <C> <C>
Michail Itkis 3 34 Chief Executive Officer and Chairman of the Board of
Directors
Thomas M. Metzler 3 53 President and Chief Operating Officer
John W. Alderfer 2 54 Vice President, Chief Financial Officer, Treasurer and
Secretary
Ira S. Levine 1 37 Director
Gary E. Hirth 1 44 Director
</TABLE>
MICHAIL ITKIS has been the Chief Executive Officer and a director of
the Company since October 1994. Prior thereto, from January 1990, Mr. Itkis
served as the director of product development of FortuNet, Inc. ("FortuNet"), a
licensed gaming equipment manufacturer which distributes video gaming networks
to casinos and other gaming establishments. The Company has an exclusive license
from FortuNet for gaming technology for airline use. From May 1989 to November
1989, Mr. Itkis was project engineer for Computer Sciences Corp., a software
development firm, and, from July 1985 to May 1989, was project engineer for TRW,
Inc., a company engaged in defense system design. Mr. Itkis holds a Bachelor of
Science Degree in electrical engineering from the University of Pennsylvania and
a Master of Science Degree in electrical engineering form the University of
Southern California.
THOMAS M. METZLER has been the President and Chief Operating Officer of
the Company since November 1996. Prior thereto, from 1967 to 1996, Mr. Metzler
served in various capacities with AMR Corporation, the parent company of
American Airlines and AMR Services (a $500 million international diversified
airline services company). Mr. Metzler's positions with AMR Corporation
included, most recently, that of President and Chief Executive Officer of AMR
Services. Mr. Metzler holds a Bachelor of Business Administration degree from
the Adelphi University and attended the Advanced Management Program at the
Harvard Business School.
JOHN W. ALDERFER has been a director and Secretary of the Company since
December 17, 1997, and has served as the Company's Chief Financial Officer since
September 1996. Prior to joining the Company, from
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September 1990 through September 1996, Mr. Alderfer served as the Senior Vice
President, Treasurer and Chief Financial Officer of Alliance Gaming Corporation,
a publicly-traded diversified gaming company which operates various casinos and
also engages in gaming equipment manufacturing and distribution. From 1989 to
1990, Mr. Alderfer served as the Chief Financial Officer of The Bicycle Club, a
Los Angeles-based California card club. From 1971 to 1989, Mr. Alderfer served
in various financial capacities with the Summa Corporation, the Howard R. Hughes
Estate Businesses, which operated numerous gaming establishments in Las Vegas
and Reno. From 1966 to 1971, he was employed as a certified public accountant by
Deloitte & Touche (then known as Haskins & Sells). Mr. Alderfer received his
Bachelor of Science in Business Administration with an accounting major from
Texas Tech University in 1966 and is a certified public accountant.
IRA S. LEVINE has been a director of the Company since April 22, 1998.
He is presently managing partner of the law firm of Levine & Garfinkel, in Las
Vegas, Nevada. Prior to joining that firm in March of 1997, Mr. Levine was a
partner at the law firm of Streich Lang, also in Las Vegas, where he specialized
in the areas of gaming, corporate, securities and taxation law. From June 1989
through November 1994, Mr. Levine was the Senior Vice President, Secretary and
General Counsel to Alliance Gaming Corp., formerly known as United Gaming, Inc.
From July 1987 through June 1989, Mr. Levine practiced law at the firm of Gordon
& Silver, Ltd., in Las Vegas, and from July 1986 through July 1987 he practiced
law with the Los Angeles law firm of McKenna Conner & Cuneo. Mr. Levine received
his law degree from the Pepperdine School of Law in 1985, and a Masters of Legal
Letters in Taxation from the New York University School of Law in 1986.
GARY E. HIRTH has been a director of the Company since July 22, 1998.
Since 1986, Mr. Hirth has been self-employed in Phoenix, Arizona at the firm of
Gary E. Hirth, Certified Public Accountant. Mr. Hirth holds a Bachelor of
Science degree in accounting from Arizona State University.
None of these persons has any family relationship to any other.
MEETINGS OF THE BOARD OF DIRECTORS
The business affairs of the Company are managed under the direction of
the Board of Directors. Members of the Board are kept informed through various
reports and documents sent to them, through operating and financial reports
routinely presented at Board and committee meetings by Michail Itkis, as the
Chairman of the Board, and other officers, and through other means. In addition,
directors of the Company discharge their duties throughout the year not only by
attending Board meetings but also through personal meetings and other
communications, including considerable telephone contact, with the Chief
Executive Officer and others regarding matters of interest and concern to the
Company.
During the fiscal year ended October 31, 1997, the Company's Board of
Directors held five meetings. Each person who was a director attended all of the
Board meetings, except as follows: (i) Mr. Haig was unable to attend one
meeting; (ii) Mr. Yuri Itkis was unable to attend two meetings and (iii) Mr.
Barents was unable to attend two meetings.
BOARD COMMITTEES
The Board does not have a nominating committee and, in connection with
the reduction in the number of directors, the Executive Committee and the
Compensation Committee have been suspended and their functions have been assumed
by the entire Board.
The Board does have an Audit Committee whose purpose is to recommend
the auditing firm to be selected each year as independent auditors of the
Company's financial statements and to perform services related to the completion
of such audit. The Audit Committee also has responsibility for (i) reviewing the
scope and results of the audit, (ii) reviewing the Company's financial condition
and results of operations with management, (iii) considering the adequacy of the
internal accounting and control procedures of the Company, and (iv) reviewing
any non-audit services and special engagements to be performed by the
independent auditors and considering the effect of such performance on the
auditors' independence. The Audit Committee during fiscal 1997 consisted of
Messrs. Adam
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Aron and Brian Barents. Messrs. Aron and Barents resigned from the Board of
Directors on November 11, 1997 and October 28, 1997, respectively. The Audit
Committee currently consists of Messrs. Levine and Hirth. There was no Audit
Committee in session during any of the meetings of the Board of Directors during
fiscal 1997.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
The election of directors requires a plurality vote of those votes
represented in person or by proxy at the Annual Meeting. Accordingly, the five
nominees receiving the highest number of votes from holders of shares of the
Common Stock represented and voting at the Annual Meeting will be elected to
serve on the Board. Abstentions and broker non-votes will have no effect on the
election of the directors listed above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF EACH OF THE
NOMINEES LISTED ABOVE.
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PROPOSAL 2
AUTHORIZATION OF A CLASSIFIED BOARD OF DIRECTORS
The Board of Directors of the Company has unanimously approved and
recommended to the stockholders an amendment to the Company's Amended and
Restated Certificate of Incorporation (the "Certificate") to provide that the
Board of Directors be divided into three classes: Class 1, Class 2 and Class 3,
with the directors in each class to hold office for staggered terms of three
years each. Under Delaware law, the amendment would become effective upon
stockholder approval and filing of the amendment to the Certificate. If Proposal
2 is adopted, a new Article Nine will be added to the Certificate, and existing
Article Nine will be redesignated Article Ten.
New Article Nine will read as follows:
"ARTICLE NINE
CLASSIFIED BOARD OF DIRECTORS
4.1 The Board of Directors shall consist of five (5) members.
Such set number of directors may be changed from time to time
by resolution of the Board of Directors, except as otherwise
provided by law or the Certificate of Incorporation. Any
director may resign at any time upon written notice to the
Corporation. Directors need not be stockholders.
4.2 The Board of Directors shall be divided into three
classes, as nearly equal in numbers as the then total number
of directors constituting the entire Board permits with the
term of office of one class expiring each year. At the 1998
Annual Meeting of Stockholders, directors of the first class
shall be elected to hold office for a term expiring at the
next succeeding annual meeting, directors of the second class
shall be elected to hold office for a term expiring at the
second succeeding annual meeting and directors of the third
class shall be elected to hold office for a term expiring at
the third succeeding annual meeting. Subject to the foregoing,
at each Annual Meeting of Stockholders the successors to the
class of directors whose term shall then expire shall be
elected to hold office for a term expiring at the third
succeeding annual meeting."
If Proposal 2 is adopted, all directors will be elected to their
classified terms as described in this Proxy Statement. Initially, the term of
the Class 1 directors would expire at the next annual meeting in 1999, and the
terms of Class 2 and Class 3 directors would expire at the 2000 and 2001 annual
meetings, respectively. Successors to the directors in each class would be
elected for three-year terms. The Proposed Amendment would thus have the effect
of causing only one class of directors per year to be elected, with the
directors in the other two classes remaining in office until the elections held
in later years.
Under Delaware law, a director of a corporation with a classified board
of directors may be removed by the stockholders only for cause unless the
certificate of incorporation provides otherwise. The Certificate does not
provide otherwise, and the contrary provision in the Bylaws will be ineffective
as a matter of law and will be suspended if Proposal 2 is passed. Therefore, if
Proposal 2 is approved, the holders of a majority of the outstanding voting
shares would be able to remove a director during their elected terms only for
"cause." In this context, "cause" is not defined by statute. If a vacancy occurs
during the term of any director, under Delaware law the majority of the Board
may fill the vacancy, and the director so appointed will hold office until the
next election of the class to which he or she was appointed. If Proposal 2 is
passed, the Board will amend the Bylaws to conform to these changes.
Proposal 2 was approved by the Board based on its observation of a
trend towards third parties accumulating substantial stock positions in public
companies as a prelude to proposing a takeover, a restructuring or sale of all
or part of the company, or other similar extraordinary corporate action. Such
actions are often undertaken by the third party without advance notice to, or
consultation with, management of the company involved. In many cases, the
purchaser also seeks representation on the company's board of directors in order
to increase the likelihood that the extraordinary corporate action proposed will
be implemented by the company. If the company resists the efforts of the
purchaser to obtain representation on the board, the purchaser may
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commence a proxy contest to have its nominees elected in place of some or all of
the existing directors. The Board of Directors believes that an imminent threat
of removal in such situations would severely curtail its ability to negotiate
effectively. Under such pressure, the directors could be deprived of the time
and information necessary to evaluate the takeover proposal, to study
alternative proposals and to help ensure that the best price is obtained in any
transaction which may ultimately occur. Moreover, the Board believes that the
longer time required to displace a classified board may help to ensure the
future continuity and stability of the Company's management and policies, since
a majority of the directors at any given time will ordinarily have had prior
experience as directors of the Company.
In considering this Proposal, stockholders should be aware that
Proposal 2, if approved, might have the effect of preventing even a majority
stockholder from electing any directors or taking any other action until the
next annual meeting. Thus, Proposal 2 will, if approved, make any change in the
composition of the Board of Directors more difficult. For example, holders of a
majority of the Company's voting stock might not be able to elect a majority of
the Company's directors until two or more annual meetings have been held. As a
result, some persons who might otherwise seek to take over the Company may
decide not even to attempt such step because of the potential that the Company
might have a Board of Directors not under their control for some period of time.
In addition, changes in management not related to a takeover will become more
difficult.
Takeovers or changes in management of the Company which are proposed
and effected without prior negotiations with the Company's management are not
necessarily detrimental to the Company and its stockholders. Indeed, their
decreased likelihood might discourage certain potential stockholders from
acquiring the Company's stock, thus potentially reducing trading activity to the
possible disadvantage of some or, under certain conditions, all of the Company's
stockholders. However, the Board believes that the benefits of seeking to
protect its ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to take over or restructure the Company outweigh the
disadvantages of discouraging such proposals. Proposal 2 is not being submitted
as the result of, and the Board is unaware of, any specific effort by any
persons to obtain control of the Company or to accumulate large amounts of its
stock.
The affirmative vote of the holders of a majority of the outstanding
shares of the Company's voting stock entitled to vote at the Meeting is required
to adopt Proposal 2.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
PROPOSAL 2.
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PROPOSAL 3
APPROVAL OF REVERSE STOCK SPLIT
REVERSE STOCK SPLIT
The Board of Directors of the Company has unanimously approved and
recommended to the stockholders an amendment to the first paragraph of the
Article Four of the Certificate to provide for a reverse split of the
outstanding Common Stock, $.01 par value, on the basis of one (1) new share of
either Class A Common Stock or Class B Common Stock, as appropriate, for each
five (5) shares of presently outstanding Class A Common Stock and Class B Common
Stock (the "Reverse Stock Split"). There will be no reduction of the authorized
number of shares of Common Stock (40,000,000 shares) or Preferred Stock, $.01
par value (5,000,000 shares). Under Delaware law, the Reverse Stock Split would
become effective upon the filing of a Certificate of Amendment with the Delaware
Secretary of State (the "Effective Date").
If the Reverse Stock Split is approved, the first paragraph of the
Fourth Article will be amended to read as follows:
"4.1 Authorized Shares. The total number of shares of all
classes of stock which the corporation shall have authority to issue is
forty-nine million (49,000,000), consisting of three classes of capital
stock:
(a) 40,000,000 shares of Class A Common Stock, par value
$.01 per share (the "Class A Shares");
(b) 4,000,000 shares of Class B Common Stock, par value
$.01 per share (the "Class B Shares"); and
(c) 5,000,000 shares of Preferred Stock, par value $.01
per share (the "Preferred Shares").
Upon effectiveness of this amendment to the Amended and
Restated Certificate of Incorporation, each five (5) Class A Shares
issued and outstanding immediately prior thereto shall be automatically
combined into one (1) Class A Share and each five (5) Class B Shares
issued and outstanding immediately prior thereto shall be automatically
combined into one (1) Class B Share. No fractional shares shall be
issued to stockholders in connection with such reverse stock split, but
in lieu thereof the Corporation shall pay in cash the fair value of
fractions of a share, if any, as of the effective date of this amendment
to the Amended and Restated Certificate of Incorporation."
GENERAL DESCRIPTION
The Company is presently authorized to issue 44,000,000 shares of
Common Stock, $.01 par value, comprised of 40,000,000 shares of Class A Common
Stock, $.01 par value, 4,000,000 shares of Class B Common Stock, $.01 par value,
and 5,000,000 shares of preferred stock, $.01 par value. The Reverse Stock Split
would not change the number of authorized shares, or the par value, of the
Common Stock and preferred stock.
At the close of business on July 15, 1998, there were 17,324,237 shares
of Class A Common Stock, and 3,733,334 shares of Class B Common Stock
outstanding and no shares of preferred stock outstanding. Subject to stockholder
approval of the Reverse Stock Split, the Board of Directors has authorized the
transfer from the Capital account to the Additional Paid-in Capital account of
the excess funds which will be created by the Reverse Stock Split without a
proportionate increase in par value.
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PRINCIPAL EFFECTS
The principal effects of the Reverse Stock Split will be as follows:
1. Based upon the 21,057,571 shares of Common Stock outstanding on July
15, 1998, the proposed one-for-five reverse stock split would decrease the
number of outstanding shares of Common Stock by eighty percent (80%), and
thereafter approximately 4,211,514 shares of Common Stock would be outstanding.
The Reverse Stock Split will not affect any stockholder's proportionate equity
interest in the Company, subject to the provisions for the elimination of
fractional shares as described below.
2. As of July 15, 1998, there were outstanding options to purchase
2,000,968 shares of Class A Common Stock pursuant to the Company's 1994 and 1997
Stock Option Plans (the "Plans"). Options to purchase 1,765,782 shares of Class
A Common Stock remained available for grant pursuant to the Plans. If the
Reverse Stock Split is approved and effected, the number of shares subject to
such options would be decreased to approximately 400,194 and the shares of Class
A Common Stock remaining available for grant under the Plans would be decreased
to approximately 353,156 shares of Class A Common Stock.
3. As of July 15, 1998, there were outstanding warrants to purchase
530,000 shares of Class A Common Stock. If the Reverse Stock Split is approved
and effected, the number of shares subject to such warrants would be decreased
to approximately 106,000.
The following table illustrates the principal effects of the Reverse
Stock Split described above:
<TABLE>
<CAPTION>
After
Before Reverse Split
Number of Shares of Common Stock Reverse Split ("Post-Split Shares")
- ------------------------------------------------------- ------------------ -----------------------
<S> <C> <C>
Authorized 40,000,000 40,000,000
Outstanding 21,057,571 4,211,514
Reserved for future issuance upon exercise of 2,000,968 400,194
options to be granted pursuant to the Plans
Reserved for future issuance upon exercise of 530,000 106,000
outstanding warrants
Available for future issuance by action of Board of 1,765,782 353,156
Directors (after giving effect to above
reservations)
</TABLE>
REASONS FOR APPROVAL AND RECOMMENDATION BY THE BOARD OF DIRECTORS
The Board of Directors of the Company has unanimously approved the
Reverse Stock Split and has directed that it be submitted to a vote of
stockholders at the Annual Meeting. THE BOARD OF DIRECTORS BELIEVES THAT THE
REVERSE STOCK SPLIT IS IN THE BEST INTERESTS OF, AND FAIR TO, THE COMPANY AND
ALL OF ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS A VOTE FOR THE REVERSE STOCK
SPLIT.
In deciding to approve the Reverse Stock Split, the Board of Directors
considered a variety of factors, including:
- - COMPLIANCE WITH FUTURE NASDAQ REQUIREMENTS.
Under the NASDAQ SmallCap Market Continued Listing Requirements
(the "Requirements"), which became effective as of February 23, 1998,
the low market price of the Common Stock could impair its continued
NASDAQ listing. The Requirements include, among other things, a minimum
bid price of $1.00. Since that time, the closing bid price for the
Company's Common Stock has often been below the
12
<PAGE> 13
minimum bid price, and NASDAQ has notified the Company that its status
is under review. Although there can be no assurance that the price of
the Common Stock after the Reverse Stock Split will actually increase in
an amount proportionate to the decrease in the number of outstanding
shares, the Board of Directors anticipates that the Reverse Stock Split
would enable the Company to satisfy the minimum bid price requirement.
- - ACCEPTANCE BY FINANCIAL COMMUNITY AND INVESTING PUBLIC.
The Company believes that the low market price of the Common
Stock impairs its acceptance by important segments of the financial
community and the investing public. Theoretically, the number of shares
outstanding should not by itself affect the marketability of the stock,
the type of investor who acquires it, or the reputation of the Company
in the financial community, but in practice this is not necessarily the
case, as many investors look upon low-priced stocks as unduly
speculative in nature and, as a matter of policy, avoid investment in
such stocks.
The Company believes that the current low market price of the
Common Stock has reduced the effective marketability of the shares
because of the reluctance of many leading brokerage firms to recommend
low-priced stocks to their clients. Further, a variety of brokerage
house policies and practices tend to discourage individual brokers
within those firms from dealing in low-priced stocks. Some of those
policies and practices pertain to the payment of brokers' commissions
and to time-consuming procedures that function to make the handling of
low-priced stocks unattractive to brokers from an economic standpoint.
In addition, the structure of trading commissions also tends to have an
adverse impact upon holders of low-priced stocks because the brokerage
commission on a sale of low-priced stocks generally represents a higher
percentage of the sales price than the commission on a relatively
higher-priced issue. Finally, the internal guidelines of many
institutional investors prohibit the purchase of stock trading below
certain minimum prices.
Although there can be no assurance that the price of the
Company's Common Stock after the Reverse Stock Split will actually
increase in an amount proportionate to the decrease in the number of
outstanding shares, the Reverse Stock Split is intended to result in a
price level that will increase investor interest and eliminate the
resistance of certain brokerage firms and institutional investors to
investment, or recommending investment, in the Common Stock.
EXCHANGE OF STOCK CERTIFICATES AND ELIMINATION OF FRACTIONAL SHARE INTERESTS
As soon as practicable after the Effective Date, the Company will
provide stockholders with any required instructions for the exchange of their
present Common Stock certificates for new certificates representing the
appropriate number of shares of Common Stock after the Reverse Stock Split.
However, if permitted, the Company may elect to effect such exchange in the
ordinary course of trading as certificates are returned for transfer. In either
event, each current certificate representing shares of Common Stock until so
exchanged will be deemed for all corporate purposes after the Effective Date to
evidence ownership of Common Stock in the proportionately reduced number. The
Company may appoint an exchange agent (the "Exchange Agent") to act for
stockholders in effecting the exchange of their certificates.
Stockholders will not be entitled to receive fractional shares in
connection with the Reverse Stock Split. In lieu thereof, the Company or the
Exchange Agent will pay to each stockholder who is otherwise entitled to a
fractional share upon surrender of the relevant stock certificate(s) the value
of the fractional interest to which such stockholder is entitled, based upon the
fair market value of the Common Stock on the Effective Date.
13
<PAGE> 14
FEDERAL INCOME TAX CONSEQUENCES
1. Except with respect to any cash received for fractional shares, the
Reverse Stock Split will be a tax-free recapitalization for the Company and its
stockholders.
2. The new shares of Common Stock in the hands of a stockholder will
have an aggregate basis for computing gain or loss equal to the aggregate basis
of shares of Common Stock held by that stockholder immediately prior to the
Reverse Stock Split, reduced by the basis allocable to any fractional shares
which such stockholder is treated as having sold for cash (see paragraph 4
below).
3. A stockholder's holding period for the new shares of Common Stock
will be the same as the holding period of the shares of Common Stock exchanged
therefor.
4. Stockholders who receive cash for all of their holdings (as a result
of owning fewer than five (5) shares) will recognize a gain or loss for federal
income tax purposes as a result of the disposition of their shares of Common
Stock. Although the tax consequences to other stockholders who receive cash for
fractional shares are not entirely certain, such stockholders will probably be
treated for federal income tax purposes as having sold their fractional shares
and will recognize gain or loss in an amount equal to the difference between the
cash received and the portion of their basis for the Common Stock allocated to
the fractional shares. Stockholders who do not receive any cash for their
holdings will not recognize any gain or loss for federal income tax purposes as
a result of the Reverse Stock Split.
VOTE REQUIRED
Under Delaware law, the affirmative vote of the holders of a majority
of the outstanding shares of the Common Stock is required to approve the Reverse
Stock Split and amendment of the Company's Restated Certificate of
Incorporation. As a result, abstentions and broker non-votes are effectively
equivalent to votes against the Reverse Stock Split.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
PROPOSAL 3.
14
<PAGE> 15
PROPOSAL 4
APPROVAL OF CORPORATE NAME CHANGE
The Board of Directors of the Company has unanimously approved and
recommended to the stockholders an amendment to the Company's Restated
Certificate of Incorporation to change the Company's name to "IFT Holdings,
Inc." The Company has determined that its current opportunities are limited in
the in-flight entertainment business. As a result, the Company has been
exploring various alternative business ventures that could make use of the
Company's two primary assets: $40 million in cash and significant tax loss carry
forward credits. After analyzing these alternatives, the Company has concluded
that the dry-cleaning business represents an opportunity for utilization of
those assets. Accordingly, the Company is planning to pursue a strategy of
either starting or acquiring a significant number of dry cleaning businesses in
large domestic population centers. The Board believes that the Company's name
should be changed to "IFT Holdings, Inc.", since the Company will not be engaged
primarily in the businesses suggested by its current name.
The affirmative vote of the holders of a majority of the outstanding
shares of the Company's voting stock entitled to vote at the Meeting is required
to adopt Proposal 4.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
PROPOSAL 4.
15
<PAGE> 16
PROPOSAL 5
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
BACKGROUND; PROPOSAL
The Board of Directors has selected KPMG Peat Marwick LLP ("KPMG") to
act as its independent accountants for the fiscal year ending October 31, 1998
and the financial statements relating thereto. KPMG previously acted as the
Company's independent accountants for its 1996 and 1997 fiscal years.
The stockholders are being asked to approve the appointment of KPMG by
the Board of Directors for the fiscal year ending October 31, 1998. In the event
the appointment is not approved, the Board of Directors will reconsider its
selection.
Representatives of KPMG are expected to be present at the Annual
Meeting and available to respond to appropriate questions by stockholders. Such
representatives also will be afforded an opportunity, should they so desire, to
make any statements to the stockholders that they deem appropriate.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
Under Delaware law and the Bylaws of the Company, approval of the
appointment of KPMG, certified public accountants, as independent auditors of
the Company for the fiscal year ending October 31, 1998 requires the affirmative
vote of the holders of a majority of the votes represented in person or by proxy
and cast at the Annual Meeting. For this purpose, abstentions will have the
effect of votes against the proposal. However, broker non-votes, like shares not
represented at the meeting, will neither be counted in favor of or against the
proposal, nor increase or decrease the number of votes required for approval,
and thus will have no effect on the outcome of the proposal.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
PROPOSAL 5.
16
<PAGE> 17
EXECUTIVE OFFICERS
The following table sets forth the names, ages and current positions
with the Company of the Company's current executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michail Itkis 34 Chief Executive Officer
Thomas M. Metzler 53 President and Chief Operating Officer
John W. Alderfer 54 Vice President, Chief Financial Officer, Secretary, and
Treasurer
</TABLE>
Officers serve at the discretion of the Board of Directors, subject to
rights, if any, under contracts of employment. See "Executive Compensation --
Employment and Severance Agreements." Biographical information for Messrs.
Itkis, Metzler, and Alderfer is provided above under "Proposal 1- Election of
Directors."
17
<PAGE> 18
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the aggregate
compensation paid or accrued by the Company for the fiscal years ended October
31, 1997, October 31, 1996 and October 31, 1995 to (i) the Chief Executive
Officer (the "CEO"), and (ii) those executive officers other than the CEO as
well as one other employee whose total annual compensation for the 1997 fiscal
year exceeded $100,000 (the "Named Executives"). The compensation presented
below does not include any perquisites and other personal benefits, securities
or property paid to the individuals in which the aggregate amount was less than
$50,000 or 10% of the total annual salary and bonus reported for the Named
Executive.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL ANNUAL COMPENSATION
FISCAL COMPENSATION COMPENSATION AWARDS STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)
--------------------------- ------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Michail Itkis, Chief Executive Officer(1)............. 1997 263,995 279,075 --
1996 188,933 -- 375,000
1995 125,000 -- 15,000
Thomas M. Metzler, President and Chief Operating 1997 314,000 181,399 250,000
Officer(2)............................................ 1996 -- -- --
1995 -- -- --
John W. Alderfer, Vice President -- Chief Financial 1997 214,000 111,630 --
Officer(3)............................................ 1996 13,846 -- 175,000
1995 -- -- --
Robert C. Hooper, Jr., Vice President -- Sales and 1997 112,499 37,969 30,000
Marketing(4).......................................... 1996 -- -- --
1995 -- -- --
Frank Gomer, Director of Engineering(5)............... 1997 96,058 20,000 27,000
1996 -- -- --
1995 -- -- --
</TABLE>
(1) Excludes relocation expenses of $62,718 and $114,997 paid to Mr. Itkis
during the 1997 and 1996 fiscal years, respectively. The amount for the
annual bonus during the 1997 fiscal year includes 91,575 shares of the
Company's Class A Common Stock valued at a fair market value of $1.00 on
the date of transfer.
(2) Mr. Metzler started employment with the Company on November 25, 1996.
Excludes relocation expenses of $43,555 paid to Mr. Metzler during the
1997 fiscal year. The amount for the annual bonus during the 1997 fiscal
year includes 59,524 shares of the Company's Class A Common Stock valued
at a fair market value of $1.00 on the date of transfer.
(3) Excludes relocation expenses of $28,410 and $7,569 paid to Mr. Alderfer
during the 1997 and 1996 fiscal years, respectively. The amount for the
annual bonus during the 1997 fiscal year includes 36,630 shares of the
Company's Class A Common Stock valued at a fair market value of $1.00 on
the date of transfer.
(4) Mr. Hooper started employment with the Company on January 27, 1997, and
his employment was terminated in May 1998. Excludes relocation expenses
of $38,094 paid to Mr. Hooper during the 1997 fiscal year.
(5) Dr. Gomer started employment with the Company on February 10, 1997. The
amount for the annual bonus during the 1997 fiscal year represents a
signing bonus.
18
<PAGE> 19
OPTION GRANTS IN FISCAL YEAR
The following table sets forth the grant of stock options made during
the 1997 fiscal year to the CEO and the Named Executives:
<TABLE>
<CAPTION>
% TOTAL OPTIONS GRANTED
TO EMPLOYEES IN 1997 EXERCISE EXPIRATION
NAME OPTIONS GRANTED FISCAL YEAR(1) PRICE(2) ($) DATE
---- --------------- ----------------------- ------------ ----------
<S> <C> <C> <C> <C>
Michail Itkis................. -- -- -- --
Thomas M. Metzler............. 250,000 29.53% 8.000 11/26/2006
John W. Alderfer.............. -- -- -- --
Robert C. Hooper, Jr.......... 15,000 7.938 2/03/2007
15,000 4.500 4/22/2007
------
30,000 3.54%
======
Frank Gomer................... 12,000 7.313 3/04/2007
15,000 4.500 4/22/2007
------
27,000 3.19%
======
</TABLE>
- --------------------
(1) Based on a total of 846,700 options granted to employees during the 1997
fiscal year.
(2) Represents 100% of the fair market value of the Class A Common Stock on
the date of grant. However, all stock options under the 1994 Plan with
exercise prices in excess of $8.00 were repriced to $8.00 on January 6,
1997 provided the holder was a current employee, officer, director or
consultant of the Company. On February 10, 1998, the Company's Board of
Directors adopted a plan to reduce the exercise price on the stock
options under the Company's 1994 and 1997 Plans on specified dates to
$0.875 provided the holder is a current employee on the applicable
future dates.
On January 6, 1997, the stock options under the Company's 1994 Plan
held by persons who were then an employee, officer, director, or consultant of
the Company and which had exercise prices in excess of $8.00 were repriced to
$8.00, the current market price at the time. On February 10, 1998, the Company's
Board of Directors adopted a plan to reduce the exercise price on the stock
options under the Company's 1994 and 1997 Plans. The exercise price on one-half
of each outstanding option will be reduced to $0.875 per share (the closing
price for the Company's stock on February 10, 1998), provided that the option
holder is still employed by the Company on the earlier of October 10, 1998 or
the completion of certain additional work for Swissair. A similar reduction in
the exercise price for the remaining half of the options will occur 180 days
following the reduction of the first half, provided the option holder is still
employed by the Company at that time. The plan amendment was approved by the
Board of Directors in recognition of the difficulty the Company was having in
retaining key employees and that the existing options were not providing the
expected incentive for the holders and were in fact lowering employee morale.
The Board of Directors felt that the recent decline in the market price of the
Common Stock had significantly diminished the incentive value of the Company's
outstanding stock options and that the repricing was necessary to retain
appropriate levels of incentive, retain key personnel and maintain competitive
compensation levels. In making its decision, the Board decided to condition any
repricing on the employee continuing to remain with the Company during the next
year.
19
<PAGE> 20
As a result of this plan, 75,000 options and 300,000 options held by
Mr. Itkis with exercise prices of $11.00 and $9.875, respectively, 250,000
options held by Mr. Metzler with an exercise price of $10.50 and 175,000 options
held by Mr. Alderfer with an exercise price of $11.375 were repriced to $8.00
and will be repriced to $0.875, provided the individual remains employed by the
Company on the applicable dates. Additionally, 12,000 options and 15,000 options
held by Dr. Gomer with exercise prices of $7.313 and $4.50, respectively, will
be repriced to $0.875 provided Dr. Gomer remains employed by the Company on the
applicable dates.
AGGREGATED OPTION EXERCISES IN 1997 FISCAL YEAR
AND FY-END OPTION VALUE
The following table provides certain information regarding the number
of exercisable and unexercisable options held by the CEO and the Named
Executives as of October 31, 1997 (none of these persons exercised any options
during the 1997 fiscal year):
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS
AT OCTOBER 31, 1997
NAME (#) EXERCISABLE/UNEXERCISABLE(1)
---- --------------------------------
<S> <C>
Michail Itkis.................... 290,000/100,000
Thomas M. Metzler................ 83,333/166,667
John W. Alderfer................. 58,333/116,667
Robert C. Hooper, Jr............. 7,500/22,500
Frank Gomer...................... 7,500/19,500
</TABLE>
- --------------------
(1) Subject to reduction as described above under "Option Grants in Fiscal
Year," none of these options had an exercise price less than the
closing bid price per share of the Class A Common Stock on the Nasdaq
National Market of $1.156 at October 31, 1997.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company has an employment agreement through August 27, 1999 with
Michail Itkis, the Company's Chief Executive Officer, under which Mr. Itkis
currently receives a per annum base salary of $262,500. Pursuant to the
agreement, if Mr. Itkis is terminated by the Company or if Mr. Itkis terminates
his employment for any reason at least six months following a change of control,
he is entitled to two times the annual base salary and the target bonus. The
agreement also provides that Mr. Itkis will not compete with the Company during
the term of the agreement and for a period of three years thereafter.
The Company has an employment agreement through November 25, 1998 (with
an option to extend the agreement for one additional year) with Thomas M.
Metzler, the Company's President and Chief Operating Officer, under which Mr.
Metzler currently receives a per annum base salary of $341,250, plus a bonus if
the Company meets certain goals established by the Board of Directors. Pursuant
to the agreement, if Mr. Metzler is terminated by the Company or if Mr. Metzler
terminates his employment for any reason at least six months following a change
of control, he is entitled to two times the annual base salary and target bonus.
In connection with the agreement, Mr. Metzler received options to purchase
250,000 shares of Class A Common stock which vest over two years from the grant
date.
The Company has an employment agreement through October 1, 1999 with
John W. Alderfer, the Company's Chief Financial Officer, under which Mr.
Alderfer currently receives a per annum base salary of $210,000, plus a bonus if
the Company meets certain goals established by the Board of Directors. Pursuant
to the agreement, if Mr. Alderfer is terminated by the Company or if Mr.
Alderfer terminates his employment for any reason at least six months following
a change of control, he is entitled to two times the annual base salary and
20
<PAGE> 21
target bonus. In connection with the agreement, Mr. Alderfer received options to
purchase 175,000 shares of Class A Common Stock which vest over three years from
the grant date.
DIRECTOR COMPENSATION
Outside directors receive $2,500 for each meeting attended in person
and $1,000 for each meeting attended telephonically. In addition, all directors
are reimbursed for expenses actually incurred in connection with each meeting of
the Board of Directors or any Committee thereof attended. Each director has also
received grants of options under the Company's 1994 Stock Option Plan. See "--
Stock Options -- Directors' Options."
STOCK OPTIONS
In October 1994, the Board of Directors adopted, and in November 1994
the Company's stockholders approved, the 1994 Stock Option Plan (the "1994
Plan"). In August 1996 the stockholders approved an amendment to the 1994 Plan
which increased the number of shares authorized under the plan to 2,400,000
shares of the Company's Class A Common Stock. The 1994 Plan expires in September
2004.
In June 1997, the Company's stockholders approved the 1997 Stock Option
Plan (the "1997 Plan"). Options exercisable for a total of 1,500,000 shares of
the Company's Class A Common Stock are issuable under the 1997 Plan. The 1997
Plan expires in June 2007.
Under the 1994 Plan and the 1997 Plan, employees, officers and
directors of, and consultants or advisers to, the Company and any subsidiary
corporations are eligible to receive incentive stock options ("incentive
options") within the meaning of Section 422 of the Code and/or options that do
not qualify as incentive options ("non-qualified options"). The 1994 Plan and
the 1997 Plan are administered by the Board of Directors or a committee of the
Board of Directors. The 1994 Plan also provides for automatic grants of options
to certain directors in the manner set forth below under "-- Directors'
Options."
Options granted under the 1994 Plan and the 1997 Plan may be either
incentive options or non-qualified options. Incentive options granted under the
1994 Plan and the 1997 Plan are exercisable for a period of up to 10 years from
the date of grant at an exercise price which is not less than the fair market
value of the Class A Common Stock on the date of the grant, except that the term
of an incentive option granted under the 1994 Plan or the 1997 Plan to a
stockholder owning more than 10% of the outstanding voting power may not exceed
five years and its exercise price may not be less than 110% of the fair market
value of the Class A Common Stock on the date of the grant. To the extent that
the aggregate fair market value, as of the date of grant, of the shares for
which incentive options become exercisable for the first time by an optionee
during the calendar year exceeds $100,000, such options will be treated as
non-qualified options to the extent that the fair market value of the optioned
shares exceeds $100,000. Additionally, the aggregate number of shares of Class A
Common Stock that may be subject to options granted to any person in a calendar
year shall not exceed 25% of the maximum number of shares of Class A Common
Stock which may be issued from time to time under the 1994 Plan. Options granted
under the 1994 Plan and the 1997 Plan to officers, directors or employees of the
Company may be exercised only while the optionee is employed or retained by the
Company or within 90 days of the date of termination of the employment
relationship or directorship, unless otherwise agreed by the Company. However,
under the 1994 Plan, options that are exercisable at the time of termination by
reason of death or permanent disability of the optionee may be exercised within
12 months of the date of termination of the employment relationship or
directorship. Under the 1997 Plan, options that are exercisable at the time of
termination by reason of death or permanent disability of the optionee may be
exercised within 6 months of the date of termination of the employment
relationship or directorship. Upon the exercise of an option, payment may be
made by cash or by any other means that the Board of Directors or the committee
determines.
Options may be granted only to such employees, officers and directors
of, and consultants and advisors to, the Company or any subsidiary of the
Company as the Board of Directors or the committee shall select from time to
time in its sole discretion, provided that only employees of the Company or a
subsidiary of the Company shall be eligible to receive incentive options.
21
<PAGE> 22
As of July 15, 1998, options to purchase an aggregate of 2,519,200
shares had been granted under the 1994 Plan at exercise prices ranging from
$4.40 to $14.375 per share, of which 133,250 had been exercised and 479,032 had
been forfeited. Accordingly, as of July 15, 1998, options to purchase 1,906,918
shares were outstanding under the 1994 Plan. As of July 15, 1998, options to
purchase an aggregate of 162,500 shares had been granted under the 1997 Plan at
exercise prices ranging from $0.7813 to $6.75 per share, of which none had been
exercised and 74,950 had been forfeited. Accordingly, as of July 15, 1998,
options to purchase 87,550 shares were outstanding under the 1997 Plan. The
Company has agreed to reduce the exercise price on stock options under the
Company's 1994 and 1997 Plans provided that the option holder is still employed
by the Company on specified dates as described in "Executive Compensation --
Option Grants in Fiscal Year." The Company has filed registration statements
with the Commission covering the 2,400,000 shares of Class A Common Stock
issuable upon exercise of options granted under the 1994 Plan and 1,500,000
shares of Class A Common Stock issuable upon exercise of options granted under
the 1997 plan.
DIRECTORS' OPTIONS
The provisions of the 1994 Plan provide for the automatic grant of
non-qualified stock options to purchase shares of Common Stock ("Director
Options") to directors of the Company who are not employees or principal
stockholders of the Company ("Eligible Directors"). Eligible Directors of the
Company were granted a Director Option to purchase 10,000 shares of Class A
Common Stock on March 7, 1995 ("Initial Director Option"). Further, commencing
on the day immediately following the date of the annual meeting of stockholders
for the Company's fiscal year ending October 31, 1997, each Eligible Director,
other than directors who received an Initial Director Option since the last
annual meeting, will be granted a Director Option to purchase 1,000 shares of
Common Stock ("Automatic Grant") on the day immediately following the date of
each annual meeting of stockholders, as long as such director is a member of the
Board of Directors. The exercise price for each share subject to a Director
Option shall be equal to the fair market value of the Class A Common Stock on
the date of grant, except for directors who receive incentive options and who
own more than 10% of the voting power, in which case the exercise price shall be
not less than 110% of the fair market value on the date of grant. Director
Options are exercisable in four equal annual installments, commencing one year
from the date of grant. Director Options will expire the earlier of 10 years
after the date of grant or 90 days after the termination of the director's
service on the Board of Directors. The 1994 Plan and the 1997 Plan also allow
grants to any director in addition to or in lieu of the foregoing automatic
grants.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1996, the Company executed a Strategic Alliance Agreement
(the "Alliance Agreement") to form a strategic alliance with Hyatt Ventures,
Inc. ("Hyatt"). The Alliance Agreement was terminated in November 1997 as a
result of changing market conditions. Mr. John Pritzker, a former director of
the Company has an indirect beneficial ownership interest in Hyatt and serves as
its President. Pursuant to the Alliance Agreement, Hyatt, directly and through
certain of its affiliates (collectively, the "Hyatt Group"), agreed to use its
best commercial efforts to assist the Company in advancing the Company's
business with respect to the Entertainment Network. In return, Hyatt was to
receive warrants to purchase Class A Common Stock based on purchase commitments
from airlines. No warrants were earned by Hyatt under the Alliance Agreement
prior to the Agreement's termination. Under the Alliance Agreement, Hyatt also
purchased 141,500 shares of the Company's Class A Common Stock in the open
market for an aggregate of approximately $1,000,000. Hyatt also had the right
under the Alliance Agreement to invest in joint ventures providing financing for
specified projects. No joint ventures were commenced prior to the termination of
the Alliance Agreement.
Hyatt also had the right to designate two nominees to the Board of
Directors of the Company. Hyatt designated John Pritzker, President of Hyatt,
and Adam Aron, Chairman and Chief Executive Officer of Vail Resorts, Inc., to be
its representatives on the Board of Directors. Messrs. Pritzker and Aron
resigned from the Board of Directors on October 20, 1997 and November 11, 1997,
respectively. Under the terms of the Alliance
22
<PAGE> 23
Agreement, these individuals received options to purchase an aggregate of
250,000 shares of Class A Common Stock under the Company's Amended and Restated
1994 Stock Option Plan.
Following execution of the Alliance Agreement, Hyatt agreed to execute
an agreement with Qantas which was necessary in order for the Company to become
a preferred provider in the Qantas bid alignment process, in exchange for which
Hyatt received an additional 60,000 shares of Class A Common Stock.
FORTUNET LICENSE
In October 1994, the Company entered into an Intellectual Property
License and Support Services Agreement with FortuNet, Inc. ("FortuNet"), which
was amended and restated on November 7, 1996 (as amended, the "FortuNet
License"). The FortuNet License grants the Company a worldwide, perpetual
license to FortuNet's current and future patents, copyrights, trade secrets and
related know-how covering a computerized system for use in all fields other than
bingo halls. Further, this license is exclusive to the Company within the
airline industry. As consideration, the Company must pay FortuNet an annual
license fee of $100,000 in monthly installments through November 2002. The
Company was previously also required to compensate FortuNet for certain
development, support and maintenance services, but this obligation has been
terminated effective November 7, 1996. Further, the restated version of the
FortuNet License no longer prohibits the Company from engaging in any gaming
activities outside of airplanes. In exchange for these amendments to the
FortuNet License and certain other modifications, on November 7, 1996, the
Company issued to FortuNet a warrant to purchase fifty thousand shares of Class
A Common Stock at a price of $9.75 per share, which was repriced on January 6,
1997 to $8.00 per share. Under the FortuNet License, an aggregate of $100,000
was paid to FortuNet in fiscal 1997.
Yuri Itkis, a former director and a principal stockholder of the
Company, is the President and sole stockholder of FortuNet and Boris Itkis, a
former director of the Company and a son of Yuri Itkis, is an employee of
FortuNet. Michail Itkis, the Chief Executive Officer and a director of the
Company, is also a son of Yuri Itkis and was an employee of FortuNet until
October 1994. The FortuNet License was entered into after extensive negotiations
between the parties and the Company believes that the terms of the agreement are
no less favorable to the Company than could be obtained from an unaffiliated
third party.
STOCKHOLDERS' AGREEMENT
In October 1994, the Company entered into a stockholders' agreement
with Yuri Itkis, Michail Itkis, Boris Itkis, Steven M. Fieldman, Donald H.
Goldman and Lance Fieldman (the "Stockholders' Agreement"). In connection with
the May 1996 and November 1996 resignations of Messrs. Goldman, Steven Fieldman
and Lance Fieldman, and in connection with the execution of the Strategic
Alliance Agreement with Hyatt, the parties to the Stockholders' Agreement
entered into agreements which terminated the Stockholders' Agreement as to
Messrs. Goldman, Steven Fieldman and Lance Fieldman, added Hyatt as a
Stockholder under the Stockholders' Agreement, and amended certain terms of the
Stockholders' Agreement. On November 10, 1997 with the termination of the
Alliance Agreement with Hyatt, the Stockholders' Agreement was amended again to
terminate Hyatt's rights.
As amended, the Stockholders' Agreement provides that Michail Itkis and
Yuri Itkis shall each be entitled to designate one nominee to the Company's
Board of Directors. No other parties have any continuing right under the
Stockholders' Agreement to nominate a director. Each stockholder who is a party
to the Stockholders' Agreement agreed to vote all the shares of Common Stock
owned by him for the election of the directors so nominated and not to take any
action to remove any director so elected (except for the director(s) nominated
by such stockholder).
EMPLOYMENT MATTERS
The Company has employment agreements with certain of its executive
officers and has granted such officers options to purchase shares of Class A
Common Stock. See "Executive Compensation -- Employment and
23
<PAGE> 24
Severance Agreements." In addition, Michail Itkis's wife, Lauren Snopkowski, was
previously the Secretary of the Company and an employee of the Company until
April 1997. Ms. Snopkowski, who served as Director of Purchasing during fiscal
1997, received compensation in fiscal 1997 of $59,222 and severance of $115,775.
SEVERANCE AGREEMENTS
Donald H. Goldman served as a director of the Company and was employed
by the Company as President until he resigned from such positions as of May 10,
1996. Mr. Goldman left the Company voluntarily to pursue other interests. In
connection with his resignation, the Company and Mr. Goldman agreed that Mr.
Goldman would render such consulting, legal and other services to the Company,
consistent with his experience and background and subject to his other business
commitments, as may be reasonably requested by the Company's then President or
Chief Executive Officer during the 15 month period commencing on May 10, 1996.
The Company agreed to pay Mr. Goldman at the rate of $150,000 per year during
such 15 month period.
Robert J. Aten was employed by the Company as Chief Financial Officer
pursuant to an employment agreement with the Company until he was replaced in
that position as of October 11, 1996. In connection with his termination, the
Company and Mr. Aten agreed that Mr. Aten would render certain limited
consulting and other services to the Company as may be reasonably requested by
the Company. Pursuant to Mr. Aten's employment agreement, he received an
aggregate severance payment of $90,390 upon his termination.
Lance D. Fieldman was employed by the Company as Vice President of
Sales pursuant to an employment agreement with the Company until he resigned
from the position as of November 2, 1996. In connection with his resignation,
the Company and Mr. Fieldman agreed that Mr. Fieldman would render certain
limited consulting and other services to the Company, consistent with his
experience and background and subject to his other business commitments, as may
be reasonably requested by the Company during the one-year period commencing on
November 2, 1996. The Company agreed to pay Mr. Fieldman an aggregate of
$100,000 as compensation for such services and an additional $300,000 as
settlement of certain commissions claimed to be owed to him. Mr. Fieldman has
further agreed that he will vote his stock on all matters in proportion to the
vote of the Company's other stockholders.
Steven M. Fieldman served as a director of the Company and was employed
by the Company as Vice President of Business Development pursuant to an
agreement with the Company until he resigned from the position as of November 2,
1996. In connection with his resignation, the Company and Mr. Fieldman agreed
that Mr. Fieldman will render certain limited consulting and other services to
the Company, consistent with his experience and background and subject to his
other business commitments, as may be reasonably requested by the Company during
the period ending October 27, 1999. Mr. Fieldman will receive a fee of $55,000
per year for such services. In addition, the Company has agreed that,
notwithstanding Mr. Fieldman's resignation, all of his outstanding employee or
director stock options will continue to vest and be exercisable in accordance
with their respective terms, except that vesting of 300,000 options granted
August 27, 1996 will be partially accelerated. Mr. Fieldman has further agreed
that he will vote his stock on all matters in proportion to the vote of the
Company's other stockholders.
CONSULTING AND ADVISORY AGREEMENTS
The Company had consulting arrangements with former director Howard J.
Tytel pursuant to which he received fees of $100,000 for the fiscal year ended
October 31, 1996 and $50,000 for the fiscal year ended October 31, 1995. Mr.
Tytel's services to the Company included assistance in negotiating various
employment agreements, the original FortuNet License, the original Stockholders'
Agreement and certain financing arrangements for the Company, as well as
consulting on various business and financial matters. The Company has no current
consulting arrangements with Mr. Tytel.
Concurrently with the 1994 execution of the FortuNet License, the
Company entered into a Consulting Agreement with Yuri Itkis, which provided for
an annual consulting fee of $100,000 and the grant of stock options to purchase
40,000 shares of Class A Common Stock at an exercise price of $4.40 per share.
Under this consulting agreement, Mr. Itkis received an aggregate of $100,000 in
fiscal 1996. This consulting agreement was
24
<PAGE> 25
terminated effective November 7, 1996.
On April 8, 1996, the Company entered into a consulting agreement (the
"Haig Consulting Agreement") with General Alexander M. Haig, Jr. and Worldwide
Associates, Inc., a corporation controlled by General Haig. The Haig Consulting
Agreement was terminated on October 11, 1997 concurrent with General Haig's
resignation from the Board of Directors. Pursuant to the Haig Consulting
Agreement, General Haig was to provide strategic advisory services to advance
the Company's interests worldwide. In consideration of such services, during the
three-year term of the Haig Consulting Agreement the Company was to pay an
aggregate of $50,000 annually and a fee of one percent (1%) of gross revenues
received by the Company from customers obtained through the significant advice
or assistance provided by General Haig. Under the Haig Consulting Agreement,
General Haig received options to acquire an aggregate of 100,000 shares of Class
A Common Stock vesting over a three-year period. Worldwide Associates, Inc.
received an aggregate of $56,063 and $41,667 during fiscal 1997 and fiscal 1996,
respectively.
By letter agreement dated May 28, 1996, the Company entered into a
financial advisory agreement with Houlihan Lokey Howard & Zukin Capital
("Houlihan Lokey"), pursuant to which Houlihan Lokey provided certain advice and
assistance regarding its strategic posture and alternatives and as to various
financing alternatives. The Company in turn agreed to pay Houlihan Lokey a
one-time retainer fee of $50,000 and a monthly fee thereafter of $20,000. The
Company also agreed to pay Houlihan Lokey a percentage of capital raised in
certain transactions and, pursuant to this provision, the Company paid Houlihan
Lokey $699,377 for its services in connection with the Company's November 1996
Class B Warrant exercise offer. In addition, as compensation for its services in
negotiating the above-described transactions with Hyatt, Houlihan Lokey received
a warrant to purchase one hundred fifty thousand shares of Class A Common Stock
at an exercise price of $9.75 per share, which was repriced on January 6, 1997
to $8.00 per share. By letter dated February 25, 1997, the Company's agreement
with Houlihan Lokey was modified to eliminate the monthly retainer fee as well
as Houlihan Lokey's right to receive a percentage of any capital raised by the
Company, although the Company and Houlihan Lokey may agree from time to time, on
a project-by-project basis, for Houlihan Lokey to provide additional services
for fees to be agreed upon at that time. Mr. James H. Zukin, a former director
of the Company, is a Managing Director of Houlihan Lokey and a member of its
Board of Directors.
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<PAGE> 26
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of July 15, 1998
regarding the ownership of Class A Common Stock and Class B Common Stock by (i)
each person known by the Company to own beneficially more than five percent of
any class of outstanding Common Stock, (ii) each director of the Company, (iii)
each Named Executive and (iv) all current executive officers and directors of
the Company as a group.
<TABLE>
<CAPTION>
CLASS B CLASS A PERCENT
COMMON STOCK(2) COMMON STOCK(2) OF TOTAL
------------------------------- -----------------------------
NAME AND ADDRESS NUMBER PERCENT NUMBER PERCENT VOTING
OF BENEFICIAL OWNER (1) OF SHARES OF CLASS OF SHARES OF CLASS POWER (3)
- -------------------------------- --------------- ------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Michail Itkis.................. 888,889(4) 23.8% 541,575(4)(5) 3.1% 14.7%
Yuri Itkis..................... 888,889(6) 23.8 140,000(5)(6)(7) * 13.8
Boris Itkis.................... 888,889(8) 23.8 --(8) -- 13.4
Donald H. Goldman.............. 453,333 12.1 25,000(5) * 6.9
Steven M. Fieldman............. 453,333(9)(10) 12.1 355,000(5)(9)(10) 2.0 7.7(10)
Thomas M. Metzler.............. -- -- 236,191(5) 1.4 *
John W. Alderfer............... -- -- 104,963(5) * *
Frank Gomer.................... -- -- 14,500(5) * *
All current executive
officers and directors of the
Company as a group (4 persons).. 888,889 23.8% 897,229(5) 5.2% 15.6%
</TABLE>
* Less than 1%.
(1) Except as otherwise indicated below, the address of each beneficial
owner is c/o Interactive Flight Technologies, Inc., 4041 N. Central
Avenue, Phoenix, Arizona 85012. Based on the most recent information
provided to the Company, Steven M. Fieldman's address is 700 Manhattan
Avenue, Manhattan Beach, California 90266, (ii) Donald H. Goldman's
address is 331 W. Broadway, Long Beach, New York, 11561, (iii) Yuri
Itkis's address is 2620 S. Highland Dr., Las Vegas, Nevada 89109, and
(iv) Boris Itkis's address is 2620 S. Highland Dr., Las Vegas, Nevada
89109. 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, subject to the
Stockholders' Agreement described in "Certain Relationships and Related
Transactions."
(2) Shares of Class B Common Stock convert on a share-for-share basis into
shares of Class A Common Stock automatically upon their transfer to any
person other than another holder of Class B Common Stock. Of the
3,733,334 shares of Class B Common Stock outstanding, 3,200,000 shares
are held in escrow and will be released to the holders only if the
Company meets certain earnings or market price criteria. If the
conditions are not met by January 31, 1999, such shares will be canceled
and contributed to the Company's capital. Of the escrow shares,
1,250,000 shares will be released from escrow, on a pro rata basis if,
and only if, the Company's pretax income amounts to at least $10,100,000
for fiscal 1998 or the closing bid price of the Company's Class A common
stock is in excess of $20.00 for a 30-day period in the 18-month period
subsequent to 18 months after the Company's public offering. The
remaining 1,950,000 escrow shares will be released from escrow if, and
only if, the Company's pretax income amounts to at least $14,500,000 for
fiscal 1998 or the closing bid price of the Company's Class A common
stock is in excess of $28.00 for a 30-day period in the 18-month period
subsequent to 18 months after the Company's public offering. If none of
the Class B shares are released from escrow, the voting rights in the
Company would be significantly changed.
(3) Based on 3,733,334 shares of Class B Common Stock outstanding, each of
which has six votes per share, and 17,324,237 shares of Class A Common
Stock outstanding, except that shares underlying options and warrants to
purchase Class A Common Stock exercisable within 60 days are deemed to
be outstanding for purposes of
26
<PAGE> 27
calculating the percentage owned by the holder(s) of such options and
warrants.
(4) Excludes shares owned by Yuri Itkis and Boris Itkis, Michail Itkis'
father and brother, respectively, as to which shares Michail Itkis
disclaims beneficial ownership.
(5) Includes shares issuable upon exercise of options exercisable within 60
days as follows: Michail Itkis -- 390,000 shares; Yuri Itkis -- 90,000
shares; Donald H. Goldman -- 25,000 shares; Steven M. Fieldman --
355,000 shares; Thomas M. Metzler -- 166,667 shares; John W. Alderfer --
58,333 shares; Frank Gomer -- 14,500 shares; All current executive
officers and directors of the Company as a group -- 629,500.
(6) Excludes shares owned by Michail Itkis and Boris Itkis, as to which
shares Yuri Itkis disclaims beneficial ownership.
(7) Includes 50,000 shares issuable upon exercise of a Stock Purchase
Warrant held by FortuNet, Inc.
(8) Excludes shares owned by Michail Itkis and Yuri Itkis, as to which
shares Boris Itkis disclaims beneficial ownership.
(9) Excludes shares owned by Lance Fieldman, Steven Fieldman's son, as to
which shares Steven Fieldman disclaims beneficial ownership.
(10) Steven Fieldman has agreed to vote all shares on all matters in
proportion to the vote of the Company's other stockholders. See "Certain
Relationships and Related Transactions -- Severance Agreements."
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The Securities and Exchange Commission (the "Commission") has
comprehensive rules relating to the reporting of securities transactions by
directors, officers and stockholders who beneficially own more than 10% of the
Company's Common Stock (collectively, the "Reporting Persons"). These rules are
complex and difficult to interpret. Based solely on a review of Section 16
reports received by the Company from Reporting Persons, the Company believes
that no Reporting Person has failed to file a Section 16 report on a timely
basis during the most recent fiscal year except that the Company believes
Mr. Zukin will be filing a late Form 5 with respect to two transactions.
1999 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 1999 Annual Meeting of
Stockholders to be eligible for inclusion in the Company's 1999 Proxy Statement,
they must be received by the Company at its principal executive offices, (Attn:
Secretary), on or prior to June 2, 1999. The Board of Directors will review any
stockholder proposals that are filed as required and will determine whether such
proposals meet applicable criteria for inclusion in the Company's 1999 Proxy
Statement for the Annual Meeting.
OTHER MATTERS
The Board of Directors does not know of any other matters that are to
be presented for consideration at the Annual Meeting. Should any other matters
properly come before the Annual Meeting, it is the intention of the persons
named in the accompanying proxy to vote such proxy on behalf of the stockholders
they represent in accordance with their best judgment.
27
<PAGE> 28
SOLICITATION OF PROXIES
The cost of this solicitation of proxies will be borne by the Company.
Directors, officers and regular employees of the Company may solicit proxies in
person, by telephone, by mail or by other means of communication, but such
persons will not be specially compensated for such services. The Company will
reimburse American Stock Transfer & Trust Company for forwarding proxy materials
to beneficial owners and serving as inspectors of election. The total estimated
cost for this solicitation of proxies is $30,000.
THE COMPANY SHALL PROVIDE TO ANY STOCKHOLDER, WITHOUT CHARGE, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED OCTOBER 31,
1997, UPON THE WRITTEN REQUEST THEREFOR TO INTERACTIVE FLIGHT TECHNOLOGIES,
INC., 4041 N. CENTRAL AVENUE, SUITE 2000, PHOENIX, AZ 85012, ATTENTION: JOHN W.
ALDERFER, CHIEF FINANCIAL OFFICER.
/s/ MICHAIL ITKIS
----------------------------------------
Michail Itkis
Chairman of the Board
and Chief Executive Officer
August 10, 1998
28
<PAGE> 29
PROXY
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michail Itkis and Thomas Metzler (with full
power to act without the other and with power to appoint his substitute) as the
undersigned's proxies to vote all shares of Common Stock of the undersigned in
INTERACTIVE FLIGHT TECHNOLOGIES, INC., a Delaware corporation (the "Company"),
which the undersigned would be entitled to vote at the Annual Meeting of
Stockholders of the Company to be held at the Holiday Inn-Midtown, located at
4321 Central Avenue, Phoenix, Arizona, on September 30, 1998, at 10:00 a.m.,
local time, and at any and all adjournments or postponements thereof, in the
manner indicated below and on the reverse side hereof.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders to be held on September 30, 1998 and the Proxy Statement of the
Company, each dated August 10, 1998, and the Company's Annual Report for the
fiscal year ended October 31, 1997.
The undersigned hereby revokes any proxy to vote shares of Class A Common Stock
and/or Class B Common Stock of the Company heretofore given by the undersigned.
Please complete, sign on the reverse side and return promptly in the enclosed
envelope.
THE SHARES OF CLASS A COMMON STOCK AND/OR CLASS B COMMON STOCK REPRESENTED BY
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH BELOW AND
ON THE REVERSE SIDE HEREOF. IN THE ABSENCE OF ANY INSTRUCTIONS, SUCH SHARES WILL
BE VOTED "FOR" THE ELECTION OF ALL NOMINEES LISTED IN PROPOSAL 1 AND "FOR" THE
APPROVAL OF PROPOSALS 2, 3, 4 AND 5.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as marked to the contrary
below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below:
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
Nominees: Michail Itkis, Class 3; Thomas M. Metzler, Class 3; John W.
Alderfer Class 2; Ira S. Levine, Class 1; Gary E. Hirth, Class
1.
(continued, and to be signed, on other side)
<PAGE> 30
(continued from other side)
2. Proposal to amend the Company's Amended and Restated Certificate of
Incorporation to divide the Board of Directors into three classes, as
described more fully in the Proxy Statement accompanying this Proxy.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to amend the Company's Amended and Restated Certificate of
Incorporation so as to effect a one-for-five reverse stock split of the
Company's outstanding shares of Class A and Class B Common Stock, as
described more fully in the Proxy Statement accompanying this Proxy.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to amend the Company's Amended and Restated Certificate of
Incorporation to change the Company's name to "IFT Holdings, Inc."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Proposal to approve the Board of Directors' appointment of KPMG Peat
Marwick LLP, certified public accountants, as independent auditors of
the Company for the fiscal year ending October 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. In their discretion such other business as may properly come before the
meeting and any and all adjournments thereof.
Dated
-------------------------------------------
-------------------------------------------
Signature
-------------------------------------------
Signatures, if held jointly
-------------------------------------------
Title (if applicable)
Please date and sign exactly as name appears on
this proxy card, and promptly return in the
enclosed envelope. When signing as guardian,
executor, administrator, attorney, trustee,
custodian, or in any other similar capacity,
please give full title. If a corporation, sign
in full corporate name by president or other
authorized officer, giving title, and affix
corporate seal. If a partnership, sign in
partnership name by authorized person. In the
case of joint ownership, each joint owner must
sign.
