As filed, via EDGAR, with the Securities and Exchange Commission on October 16,
1998.
File No.:________
ICA No.: _________
SCHEDULE 14A
(Rule 14a-101)
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 [ ]
Filed by a party other than the registrant [X]
Check the appropriate box:
[X] Preliminary proxy statement
[ ]Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ]Definitive Additional Materials
[ ]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
(Name of Registrant as Specified in Its Charter)
MERCURY SHAREHOLDER ASSOCIATES LLC, BARINGTON CAPITAL GROUP, L.P.,
and BANNER AEROSPACE, INC.
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
Payment of Filing Fee (Check the appropriate box):
[X]No fee required
[ ]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check 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.
<PAGE>
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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<PAGE>
REVISED PRELIMINARY COPIES, DATED OCTOBER 16, 1998
1998 ANNUAL MEETING OF STOCKHOLDERS
of
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
4041 N. Central Avenue, Suite 2000
Phoenix, Arizona 85012
-----------------------------------------------------
PROXY STATEMENT
of
MERCURY SHAREHOLDER ASSOCIATES LLC
-----------------------------------------------------
This Proxy Statement and the accompanying Letter to Stockholders and
[BLUE] Annual Meeting proxy card are furnished in connection with the
solicitation of proxies by Mercury Shareholder Associates LLC ("Mercury") to be
used at the 1998 Annual Meeting of Stockholders of Interactive Flight
Technologies, Inc., a Delaware corporation (the "Company"), to be held at the
Metropolitan Club, located at One East 60th Street, New York, New York, on
October 30, at 10:00 a.m., local time and at any adjournments or postponements
thereof (the "Annual Meeting").
Management's Proposals
At the Annual Meeting, management of the Company will seek approval:
1. To elect a slate of five Directors, consisting of the
Company's current five Directors, who would serve for the
coming year;
2. To amend the Company's Amended and Restated Certificate of
Incorporation to divide the Board of Directors into three
classes (the "Board Classification");
3. 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 three outstanding shares (the
"Reverse Stock Split");
4. 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 ("the Appointment of Auditors").
<PAGE>
Mercury's Proposals
Mercury, an affiliate of Barington Capital Group L.P. ("Barington"), is
soliciting your proxy in support of the election of its five nominees named
below (the "Mercury Nominees") and in opposition to the Company's proposal to
divide and stagger the Company's Board of Directors.
ALL MERCURY NOMINEES ARE COMMITTED TO EXITING THE COMPANY'S EXISTING
BUSINESS AND REDIRECTING THE COMPANY'S ASSETS TO INVESTMENTS IN OPERATING
BUSINESSES THAT WILL CREATE STOCKHOLDER VALUE.
Mercury favors the Reverse Stock Split and the Appointment of Auditors.
MERCURY URGES YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY THE
COMPANY. IF YOU HAVE ALREADY DONE SO, YOU MAY REVOKE YOUR PROXY BY DELIVERING A
WRITTEN NOTICE OF REVOCATION OR A LATER DATED PROXY FOR THE ANNUAL MEETING TO
D.F. KING & CO., INC., OR TO THE SECRETARY OF THE COMPANY, OR BY VOTING IN
PERSON AT THE ANNUAL MEETING. SEE "PROXY PROCEDURES" BELOW.
Mercury is a Delaware limited liability company formed for the purpose
of this proxy solicitation. The members of Mercury include Barington, Banner
Aerospace Inc., an 83% subsidiary of The Fairchild Corporation ("Banner"), and
the Mercury Nominees. Barington is a full service investment banking firm
focused on providing capital and advisory services to small and emerging growth
companies. Banner is an international supplier to the aerospace industry,
distributing a wide range of aircraft parts and related support services. The
address of Mercury and Barington is 888 Seventh Avenue, 17th Floor, New York,
New York 10019, and their telephone number is (212) 974-5700. The address of
Banner is 300 West Service Road, Dulles International Airport 20041, and its
telephone number is (703) 478-5790.
In reliance upon Rule 14a-5(c) of the Securities and Exchange Act of
1934,/1/ reference is made to the Company's definitive proxy statement dated
October 15, 1998 (the "Company Proxy Statement") for a full description of
management's proposals, as well as information with respect to the record date,
the number of shares of Company stock outstanding and eligible to vote at the
Annual Meeting, the number of votes per share of each class of Company stock,
the quorum, the securities ownership of the Company, information about the
Company's officers and directors, including compensation, information about the
approval of the appointment of KPMG Peat Marwick LLP, and the date by which
stockholders must submit proposals for inclusion in the next annual meeting.
This Proxy Statement, the accompanying Letter to Stockholders and the
[BLUE] Annual Meeting proxy card are first being furnished to the Company
stockholders on or about October ___, 1998.
------------
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/1/ Rule 14a-5(c) provides that "any information contained in any other
proxy soliciting material which has been furnished to each person solicited in
connection with the same meeting or subject matter may be omitted from the proxy
statement, if a clear reference is made to the particular document containing
such information."
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<PAGE>
IMPORTANT
Mercury urges you to mark, sign, date and return the enclosed [BLUE]
Annual Meeting proxy card to vote FOR the Mercury Nominees; AGAINST the Board
Classification; FOR the Reverse Stock Split; and FOR the Appointment of
Auditors.
PROPOSAL 1
ELECTION OF DIRECTORS
According to the Company Proxy Statement, the Company currently has
five directors, all of whose terms will expire at the Annual Meeting.
Mercury proposes that the Company's stockholders elect the Mercury
Nominees as the directors of the Company at the Annual Meeting. If all Mercury
Nominees are elected, the Mercury Nominees would constitute the entire Board of
Directors of the Company. The Mercury Nominees are listed below and have
furnished the following information concerning their principal occupations or
employment and certain other matters. Each Mercury Nominee, if elected, would
hold office until the 1999 Annual Meeting of Stockholders and until a successor
has been elected and qualified or until his earlier death, resignation or
removal. Although Mercury has no reason to believe that any of the Mercury
Nominees will be unable to serve as directors, if any one or more of the Mercury
Nominees is not available for election, the persons named on the [BLUE] Annual
Meeting proxy card will vote for the election of such other nominees as may be
proposed by Mercury.
Mercury Nominees for Directors
Richard N. Daniel, age 63, was Chairman and Chief Executive Officer of
Handy & Harman until April 1998. He was appointed President and Chief Operating
Officer in 1979. He became President and Chief Executive Officer in 1983, and on
January 1, 1988 became Chairman of the Board. Handy & Harman, a diversified
manufacturer providing engineered products, system components and precious metal
fabrication was founded in 1867. Mr. Daniel first joined Handy & Harman in 1971
as Vice President and Corporate Controller with responsibility for Corporate
Planning & Development. He was a member of the Board of Directors since 1974.
Mr. Daniel joined Handy & Harman with the primary mandate of aggressively
acquiring manufacturing facilities to accelerate the Company's diversification
program into non-precious metals. His career has primarily included associations
with manufacturing division of industry companies, including Texas Instruments,
Nabisco and Wheelabrator-Frye Corp. He also served nine-year years in Corporate
Planning at Mobil Oil, as well as two years with Laird & Co. on Wall Street. Mr.
Daniel is on the Board of Directors of the Treasurer's Fund, Inc., a member of
the Gabelli Asset Management group of funds, and is a member of the Board of
Directors of MarketSpan Corporation. Mr. Daniel's business address is 555
Madison Avenue, New York, New York 10022.
Seymour Holtzman, age 63, is the founder and Chief Executive Officer of
Jewelcor, Inc. and Gruen Marketing Corporation and has managed public companies
for over 25 years. He has a total of more than 35 years of management experience
and has been featured in Forbes, Business Week, The Wall Street Journal, The New
York Times and other national business publications. In 1990, Mr. Holtzman
pioneered by leading a group of internationally prominent western businessmen to
invest in
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<PAGE>
eastern and central Europe. This group purchased the General Banking & Trust
Co., Ltd., in Budapest, Hungary, which was the first bank in eastern Europe to
be privatized. Since 1990, Mr. Holtzman has served as Chairman and Chief
Executive Officer of Jewelcor Management & Consulting, Inc., located in
Wilkes-Barre, Pennsylvania; C.D. Peacock, Inc., a Chicago, Illinois retail
jewelry establishment founded in 1837; Central European Capital Investors, Inc.,
an investment company operating in eastern Europe; and S.A. Peck & Company, a
retail and mail order jewelry company based in Chicago, Illinois. Mr. Holtzman
is the President and founder of the Financial Thrift Value Fund. Mr. Holtzman
served as the National Finance Co-Chairman for the 1980 Reagan-Bush Campaign. In
1981 he was appointed by President Reagan to the United States Department of
Commerce's Industry Policy Advisory Committee for trade policy matters. Mr.
Holtzman's business address is 100 North Wilkes-Barre Boulevard, Wilkes Barre,
PA 18702.
Michael A. McManus, Jr., age 55, served as President and Chief
Executive Officer New York Bancorp, Inc., a bank holding company operating in
Long Island, New York until March 1998, and is currently serving as a
consultant. Previously, he was Vice President - Business Planning and
Development, Consumer Division, of Pfizer, Inc., where he was responsible for
strategic planning, new products, licensing, market research, clinical, and
scientific affairs. In 1985 and 1986, he was an Executive Vice President of
Revlon Group (formerly Pantry Pride) responsible for day-to-day operations of
the Company's Florida headquarters. He was actively involved in several
acquisitions, including the one billion dollar acquisition of Revlon by Pantry
Pride. From 1982 through 1985, he was an assistant to the President of the
United States responsible for managing five White House functions and special
projects. He was a member of all senior policy and planning groups. From 1977 to
1982, he was corporate counsel at Pfizer, Inc., responsible for corporate
acquisitions and financings while also serving as General Counsel to the
Chemical Division. Prior thereto, he served as a Special Assistant to the
Secretary of Commerce of the United States Department of Commerce where he was
responsible for working on economic problems of the Northeastern United States
and managing the $70,000,000 funding for the 1980 Lake Placid Olympics and has
recently been appointed to the Board of Directors of the United States Olympic
Committee. Previously, he served as Executive Vice President and Chief Operating
Officer of the American Freedom Train Foundation, a bicentennial project
sponsored by General Motors, Kraft, Prudential, and Pepsi. Mr. McManus' business
address is 100 White Plains Road, Bronxville, NY 10108.
Donald E. Miller, age 51, has been Executive Vice President of The
Fairchild Corporation since September 1998 and is continuing to serve as its
General Counsel, a position he has held since 1991. Mr. Miller had served as
Senior Vice President of The Fairchild Corporation since 1991, and its Corporate
Secretary since 1995. He was Vice President and General Counsel of Fairchild
Industries, Inc. from 1991 to 1996, and has also served as a Director of Shared
Technologies Fairchild Inc. Prior to 1991, he was a principal of the law firm of
Temkin & Miller, Ltd., of Providence, Rhode Island, where he practiced law from
1974 through 1991. He was also a former law clerk to the Honorable Alfred H.
Joslin, Supreme Court of Rhode Island. Mr. Miller's business address is 45025
Aviation Drive, Dulles, VA 20166.
Joseph R. Wright, Jr., age 59, is Chairman, Chief Executive Officer,
and President of AmTec, Inc., a U.S. public company focused on developing,
marketing, and financing telecommunications projects in the People's Republic of
China, founded in 1995. He currently serves as Chairman and Director of GRC
International, Inc., a knowledge-based information technology company primarily
servicing the U.S. Department of Defense. He also serves as Co-Chairman of Baker
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& Taylor Holdings Inc., an international book and video distribution company,
and Vice Chairman of The Jefferson Group, a consulting firm in Washington, D.C.
From 1989 to 1994, Mr. Wright served in various executive capacities for W.R.
Grace & Co., an international specialty chemicals and health care company, and
its associated companies, including Executive Vice President and Vice Chairman
of W.R. Grace & Co., President of Grace Energy Corporation and Chairman of Grace
Environmental Inc. From 1982 to 1989, Mr. Wright held the position of Director
and Deputy Director of the Office of Management and Budget, The White House, and
was a member of President Reagan's Cabinet. Prior to 1982, Mr. Wright served as
Deputy Secretary, United States Department of Commerce, President of Citicorp
Retail Services and Retail Consumer Services, held posts in the Department of
Agriculture, the United States Census Bureau and Department of Commerce, and was
Vice President of Booz, Allen & Hamilton, a management consulting firm. Mr.
Wright currently serves on the Board of Directors of GRC International, Inc.,
Travelers Group, Inc., Baker & Taylor Holdings, Inc., Netmatics, Inc., and the
Washington Scholarship Fund. He is a member of the Board of Advisors of Great
Lakes Pulp and Fiber Corporation; trustee of Hampton University and chairman of
its Investment Committee; a director of Citizens for a Sound Economy and The
Freedom Foundation; and a member of the Chief Executives Organization and Young
President's Organization. Mr. Wright's business address is 599 Lexington Avenue,
New York, New York 10022.
It is anticipated that each of the Mercury Nominees, upon his election
as a director of the Company, will receive director's fees consistent with the
Company's practices as set forth in the Company Proxy Statement.
If Mercury's proxy solicitation is successful, it is possible that
Barington may in the future provide investment banking services to the Company.
However, there are no current arrangements or understandings between Barington
and the Mercury Nominees with respect to such services.
Except as set forth above, or under "Background of the Solicitation"
below, none of Mercury, the Mercury Nominees or any of their respective
associates (i) has any arrangements or understandings with any person or persons
with respect to any future employment by the Company or its affiliates, or with
respect to any future transactions to which the Company or any of its affiliates
may be a party; (ii) has carried on any occupation or employment with the
Company or any corporation or organization which is or was a parent, subsidiary
or other affiliate of the Company; (iii) has received any cash compensation,
cash bonuses, deferred compensation, compensation pursuant to plans, or other
compensation, from, or in respect of, services rendered to or on behalf of the
Company; (iv) since November 1, 1997, has engaged in or has a direct or indirect
material interest in any transaction or series of similar transactions to which
the Company or any of its subsidiaries was or is to be a party in which the
dollar amount involved exceeded, or is expected to exceed, $60,000 in the
aggregate; (v) since November 1, 1997, has been indebted to the Company or any
of its subsidiaries in an amount in excess of $60,000; or (vi) is a party
adverse to the Company or any of its subsidiaries in any material proceedings or
has a material interest adverse to the interest of the Company or any of its
subsidiaries in any such proceedings. No family relationships exist among the
Mercury Nominees or between any of the Mercury Nominees and any director or
executive officer of the Company.
Certain additional information relating to, among other things, the
ownership, purchase and sale of securities of the Company by Mercury, the
Mercury Nominees and their respective associates,
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<PAGE>
or arrangements with respect thereto, is set forth in "Security Ownership of
Mercury and its Affiliates" below and in Schedule II.
Each of the outstanding shares of the Company's Class A Common Stock,
par value $.01 per share (the "Class A Common Stock"), is entitled to one vote
per share on all matters to be voted upon at the Annual Meeting, and each
outstanding share of the Company's Class B Common Stock, par value $.01 per
share (the "Class B Common Stock" and together with the Class A Common Stock,
the "Company Stock"), is entitled to six votes per share on all matters to voted
upon at the Annual Meeting (except as otherwise discussed under "Background of
the Solicitation" below). 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 of the
Company 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 accompanying [BLUE] Annual Meeting proxy card will be voted at the
Annual Meeting in accordance with your instructions on such card. You may vote
FOR the election of each of the Mercury Nominees or withhold authority to vote
for the election of all the Mercury Nominees by marking the proper box on the
[BLUE] Annual Meeting proxy card. You may also withhold your vote from any one
or more of the Mercury Nominees by writing the name of such nominee(s) in the
space provided on the [BLUE] Annual Meeting proxy card. IF NO MARKING IS MADE,
YOU WILL BE DEEMED TO HAVE GIVEN A DIRECTION TO VOTE THE SHARES REPRESENTED BY
THE [BLUE] ANNUAL MEETING PROXY CARD FOR THE ELECTION OF ALL THE MERCURY
NOMINEES PROVIDED THAT YOU HAVE SIGNED THE PROXY CARD. Mercury and its
affiliates, which in the aggregate own 390,126 shares of Class A Common Stock
(not including shares issuable upon exercise of warrants), will vote those
shares FOR the election of the Mercury Nominees and as otherwise recommended in
this Proxy Statement.
Mercury believes that it is in your best interest to elect the Company
Nominees at the Annual Meeting. All Mercury nominees are committed to exiting
the Company's existing business and redirecting the Company's assets to
investments in operating businesses that will create stockholder value.
MERCURY STRONGLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE MERCURY
NOMINEES AS LISTED ABOVE.
PROPOSAL 2
OPPOSITION TO THE BOARD CLASSIFICATION
Management has proposed that Company's Amended and Restated Certificate
of Incorporation be amended to provide that the Board of Directors be divided
into three classes, with the directors to hold office for staggered terms of
three years each. Mercury opposes this proposal and recommends that stockholders
vote against it.
If the proposal for classification of the Board is approved,
stockholders will be prevented from electing a majority of the directors for at
least two annual meetings. Mercury believes that the Company's existing system
in which all Board members stand for election at each annual meeting of the
Company's stockholders is in the best interests of the Company and its
stockholders. The election of directors is the primary avenue for stockholders
to influence corporate governance policies and to hold
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management accountable for implementation of those policies. Requiring each
director to stand for election annually allows stockholders an opportunity to
register their views on the performance of the Board collectively and each
director individually.
Classifying the Board of Directors would maintain the incumbency of the
current Board and therefore of current management, which in turn limits
management's accountability to the Company's stockholders. In addition, under
Delaware law, directors on a staggered board cannot be removed without cause,
even if a majority of the Company's stockholders is in favor of such removal. A
staggered board may also prevent consummation of a business combination
transaction that offers stockholders premium value for their shares, and is
therefore favored by a majority of stockholders, but which is opposed by the
Board of Directors.
Mercury also believes that implementation of a staggered board is
particularly inappropriate for the Company at this time. The Company does not
have a Board that has been in office for any length of time, whose prior
performance might justify entrusting the directors with the powers of a
staggered board notwithstanding its disadvantages.
Under Delaware law, the affirmative vote of the holders of a majority
of the votes entitled to be cast by all outstanding shares of Company Stock is
required to adopt the Board Classification proposal. Abstentions and broker
non-votes will therefore count as if they were votes against the proposal. If
less than a majority of such votes are affirmatively voted in favor of the
proposal, the proposal will be defeated.
MERCURY RECOMMENDS A VOTE "AGAINST" THE APPROVAL OF THE CLASSIFICATION
BOARD PROPOSAL.
PROPOSAL 3
REVERSE STOCK SPLIT
Management has proposed a reverse stock split of the outstanding
Company Stock on the basis of one (1) new share of Class A Common Stock or Class
B Common Stock, as the case may be, for each three (3) shares of presently
outstanding Class A Common Stock and Class B Common Stock. Mercury agrees that
this reverse stock split is advisable to avert possible delisting of the
Company's Class A Common Stock from the NASDAQ Stock Market and to enhance the
marketability of the Class A Common Stock. Reference is made to the Company
Proxy Statement for additional information about the Reverse Stock Split
Proposal.
Under Delaware law, the affirmative vote of the holders of a majority
of the votes entitled to be cast by all outstanding shares of Company Stock is
required to approve the Reverse Stock Split. Abstentions and broker non-votes
will therefore count as if they were votes against the Reverse Stock Split.
MERCURY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE REVERSE STOCK SPLIT
PROPOSAL.
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PROPOSAL 4
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has proposed the appointment of KPMG Peat Marwick LLP to
act as the Company's independent accountants for the fiscal year ending October
31, 1998 and the financial statements relating thereto. Reference is made to the
Company Proxy Statement for information about this proposal.
Under Delaware law and the Company's Bylaws, approval of the
Appointment of Accountants proposal 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 therefore
will not affect on the outcome of the proposal.
MERCURY RECOMMENDS A VOTE "FOR" FOR THE APPOINTMENT OF ACCOUNTANTS
PROPOSAL.
OTHER MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
Mercury is not aware of any proposals other than the election of
directors, the Board Classification, the Reverse Stock Split, and Appointment of
Accountants to be brought before the Annual Meeting. Should any other proposal
be brought before the Annual Meeting, the vote required for approval of such
proposal would be as prescribed by the Company's charter or bylaws or by
applicable law. Generally, approval of a proposal would require a majority of
the votes represented at the Annual Meeting and entitled to vote on the matter.
Shares voted as abstentions would have the same effect as a negative vote.
Shares with respect to which a broker submits a "broker non-vote" on a matter
would not be counted in calculating the number of shares entitled to vote on a
matter.
Should other proposals be brought before the Annual Meeting, the
persons named on the [BLUE] Annual Meeting proxy card will abstain from voting
on such proposals unless such proposals adversely affect the interests of
Mercury as determined by Mercury in its sole discretion, in which event such
persons will vote on such proposals at their discretion.
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PROXY PROCEDURES
Stockholders are urged to mark, sign and date the enclosed [BLUE]
Annual Meeting proxy card and return it to Mercury c/o D.F. King & Co., Inc., 77
Water Street, New York, NY 10005-4495 in the enclosed envelope in time to be
voted at the Annual Meeting. Execution of the [BLUE] Annual Meeting proxy card
will not affect your right to attend the Annual Meeting and to vote in person.
Any proxy may be revoked at any time prior to the Annual Meeting by delivering a
written notice of revocation or a later dated proxy at the particular meeting.
Only your latest dated proxy for the Annual Meeting will count.
Only holders of record as of the close of business on the Record Date
will be entitled to vote. If you were a shareholder of record on the Record
Date, you may vote your Shares at the Annual Meeting even if you have sold your
Shares before or after the Record Date. Accordingly, please vote the shares held
by you on the Record Date, or grant a proxy to vote such Shares, on the [BLUE]
Annual Meeting proxy card, even if you have sold your shares before or after the
Record Date.
If any of your shares are held in the name of a brokerage firm, bank,
bank nominee or other institution on the Record Date, only it can vote such
shares and only upon receipt of your specific instructions. Accordingly, please
contact the person responsible for your account and instruct that person to
execute on your behalf the [BLUE] Annual Meeting proxy card.
Where you indicate a choice on your [Blue] Annual Meeting] proxy card,
your shares will be voted as specified. If you indicate no choice, your shares
will be voted FOR the Mercury Nominees, the Reverse Stock Split, and the
Appointment of Accountants and AGAINST the Board Classification, provided that
you have signed and dated the [Blue] Annual Meeting] proxy card.
MERCURY'S PLAN FOR ENHANCING STOCKHOLDER VALUE
Affiliates of Mercury have repeatedly expressed the view to management
that pursuit of the Company's inflight entertainment business, which has been
consistently unprofitable and has depleted the Company's capital, is not viable
in the current market climate. The Company has belatedly acknowledged this view,
and, in recent public filings, has disclosed that it has curtailed its sales and
marketing efforts for the inflight entertainment business.
Mercury believes that the Company should exit the inflight
entertainment business as promptly as practicable and devote its resources to
the acquisition of businesses with strong profit potential. According to the
Company's public filings, as of July 31, 1998, the Company had on hand
approximately $40,000,000 in cash and short term investment securities. As of
October 31, 1998, the Company had net operating loss carryforwards of
approximately $38,000,000 (the utilization of which may be limited by applicable
provisions of federal tax law). These resources can be used for investments in
operating businesses that will create stockholder value. In light of recent
developments in the public markets, valuation of many operating entities have
declined. Accordingly, there are likely to be attractive acquisition
opportunities for the Company at this time.
Stockholders need to decide which slate of nominees is best suited to
implementing an acquisition program geared towards creating stockholder value.
Mercury believes that its nominees have the experience and the track record that
justify your vote and confidence.
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All five Mercury Nominees are or have been senior executives of
substantial publicly held companies. Michael McManus, as the chief executive
officer of New York Bancorp increased total bank assets from $900 million in
1991 to $3.2 billion in 1998 and, during the same period, increased stockholder
value twentyfold. Richard Daniel, during his tenure as chief operating officer
and later chief executive officer of Handy & Harman, implemented a successful
diversification program involving in excess of 30 acquisitions. In addition to
senior management positions with a variety of financial, manufacturing and
consulting firms, Joseph Wright has served as Director of the Office of
Management and Budget and Deputy Secretary of the Department of Commerce. Donald
Miller is Executive Vice President and General Counsel of The Fairchild
Corporation, a leading aerospace manufacturer with 1997 revenues in excess of
$700 million. Seymour Holtzman has over 35 years of management experience,
including 25 years in public company management. Collectively, the Mercury
Nominees bring to the Company seasoned expertise in a wide variety of business
environments and market climates.
In contrast to the Company's incumbent management, the Mercury Nominees
do not advocate a staggered board for the Company. The Mercury Nominees will
stand on the value they achieve without depriving stockholders of their
corporate democracy rights.
BACKGROUND OF THE SOLICITATION
In mid-1997, in the ordinary course of its brokerage business,
Barington obtained certain non-discretionary customer accounts holding Company
Stock. After reviewing the Company's public filings and in order to gain a
better understanding of the Company's business and prospects, James Mitarotonda,
Barington's Chairman, met with the Company's management. Barington expressed the
view that, although the Company had a state-of-the-art inflight entertainment
product, the Company was unlikely to experience significant demand because of
the high product cost and high airline passenger loads obviating the need for
expensive travel inducements. Mr. Mitarotonda suggested that the Company exit
the inflight entertainment business and apply its capital to the acquisition of
other businesses. The Company did not at the time adopt Barington's suggestions.
As a result of a decline in the Company's share price and in
consideration of the substantial cash balances maintained by the Company,
Barington began to acquire shares for its own account. Barington continued to
monitor the Company's public filings and announcements. Barington noted that the
Company's Annual Report on Form 10-KSB for the fiscal year ended October 31,
1997 reported that the Company experienced a $50 million loss on sales of
approximately $11 million, that management had been awarded bonuses totaling
$572,000 and that management's stock options had been repriced in response to a
steep drop in the Company's stock price.
On March 6, 1998, Barington filed a derivative action in the Supreme
Court of the State of New York against the Company's officers and directors
alleging various breaches of fiduciary duties. In its earnings release of June
5, 1998, the Company stated that "because of the lack of prospects for success
in obtaining additional orders, and in order to reduce expenses further, the
company has terminated almost all sales and marketing efforts as of May 29th."
On August 12, 1998, representatives of Barington met with the Company's
management. Barington indicated that, as a stockholder with a meaningful stake
in the Company, it was prepared to take an active role in developing and
implementing plans to enhance stockholder value. Barington also requested
representation on the Company's Board. The Company did not accede to Barington's
request.
-10-
<PAGE>
On August 11, 1998, Ocean Castle Partners, LLC ("Ocean Partners"), an
entity controlled by Irwin Gross, the Company's current Chief Executive Officer
and Chairman of its Board, entered into a voting agreement (the "Voting
Agreement") with certain holders of the Company's Class B Common Stock. On
August 25, 1998, Ocean Partners filed a lawsuit in the Chancery Court of the
State of Delaware seeking to compel a meeting of the Company's stockholders.
Ocean Partners also filed preliminary materials with the United States
Securities and Exchange Commission in respect of a proposed consent solicitation
to replace the Company's Board of Directors. On September 15, 1998, the then
current Board of Directors of the Company resigned after electing the nominees
of Ocean Partners as the Company's Board.
On September 9, 1998, Barington filed an action in the Superior Court
of the State of Arizona against the Company's then current and former officers
and directors, repeating the allegations made in Barington's New York lawsuit.
The Arizona action added Ocean Partners as a defendant and sought a declaration
that the shares of Class B Common Stock whose vote was controlled by Ocean
Partners pursuant to the Voting Agreement had been converted into Class A Common
Stock. On September 25, 1998, the court in the Arizona action issued a
preliminary injunction, the effect of which was to provide that the 2,231,111
shares of Class B Common Stock subject to the Voting Agreement had been
converted into Class A Common Stock having one vote per share rather than six
votes per share. Ocean Partners has appealed the issuance of the preliminary
injunction, and a hearing on the appeal has been scheduled for October 27, 1998.
Subsequent to the public disclosure of Ocean Partners' interest in the
Company and the election of Ocean Partners' nominees to the Company's Board,
representatives of Barington have met or otherwise communicated with Mr. Gross.
Barington reiterated its proposals to take an active role in formulating and
implementing a business plan for the Company. Among other things, Barington
suggested that the Company implement a one-for-three reverse stock split instead
of a one-for-two split originally proposed by the Company, a suggestion
subsequently adopted by the Company. Barington further suggested that the
Company increase its stock buy-back program. Barington also proposed providing
investment banking services to the Company. Barington and the Company have
continued to engage as well in discussions regarding the pending litigation in
Arizona and New York. Among other things, counsel for Ocean Partners discussed
with counsel for Barington a proposal to acquire shares of Company Stock held by
Barington and/or its customers. However, the parties have not reached or entered
into any arrangements or understandings in regard to this or any other matters.
SOLICITATION OF PROXIES
Proxies may be solicited by mail, advertisement, telephone or
telecopier or in person. Solicitations may be made by officers and employees of
Barington, none of whom will receive additional compensation for such
solicitations. Mercury has requested banks, brokerage houses and other
custodians, nominees and fiduciaries to forward all its solicitation materials
to the beneficial owners of the Company Stock they hold of record. Mercury will
cause these record holders to be reimbursed for customary clerical and mailing
expenses incurred by them in forwarding these materials to their customers.
Mercury has retained D.F. King & Co., Inc. ("D.F. King") for
solicitation and advisory services in connection with the solicitation, for
which D.F. King is to receive a fee of up to $50,000, together with
reimbursement for its reasonable out-of-pocket expenses. Mercury and Barington
have also agreed to indemnify D.F. King against certain liabilities and
expenses, including liabilities and expenses under the federal securities laws.
D.F. King will solicit proxies for the Annual Meeting from individuals, brokers,
-11-
<PAGE>
banks, bank nominees and other institutional holders. It is anticipated that
D.F. King will employ approximately 30 persons to solicit stockholders for the
Annual Meeting.
The entire expense of soliciting proxies for the Annual Meeting is
being borne by Barington. Mercury, on behalf of Barington, intends to seek
reimbursement for such expenses from the Company, but does not expect that the
question of such reimbursement will be submitted to a vote of stockholders.
Costs incidental to this solicitation of proxies include expenditures for
printing, postage, legal, accounting, public relations, advertising and related
expenses and are expected to be approximately $________; costs incurred to the
date of this Proxy Statement are approximately $________.
Certain information about associates of Barington who may be deemed to
be participants in this proxy solicitation is set forth in the attached Schedule
I.
If the Mercury Nominees are elected, Mercury will seek to cause the
Mercury Nominees to have Barington reimbursed by the Company for all expenses
incurred in connection with this proxy solicitation.
If Mercury should withdraw, or materially change the terms of, this
solicitation of proxies prior to the Annual Meeting, Mercury will supplement
this Proxy Statement or otherwise publicly disseminate information regarding
such withdrawal or change and, in appropriate circumstances, will provide
stockholders with a reasonable opportunity to revoke their proxies prior to the
Annual Meeting.
SECURITY OWNERSHIP OF MERCURY AND ITS AFFILIATES
Mercury owns no securities of the Company. The shares of the Company's
Class A Common Stock that Mercury's affiliates beneficially own as of the Record
Date are set forth in the following table:
<TABLE>
<CAPTION>
=================================================================================================================
CLASS A COMMON STOCK PERCENT OF
NAME AND ADDRESS OF TOTAL/1/
BENEFICIAL OWNER
-------------------------------------------------------------------------------
NUMBER OF PERCENT OF VOTING
SHARES CLASS POWER
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Barington Capital Group, L.P. 298,626/2/ 1.9% 1.1%
888 Seventh Avenue
17th Floor
New York, New York 10019
- --------
/1/ Based on 3,733,334 shares of Class B Common Stock outstanding and 16,082,637
shares of Class A Common Stock outstanding, except that shares underlying
exercisable warrants to purchase Class A Common Stock are deemed to be
outstanding for purposes of calculating the percentage owned by the holder(s) of
such warrants.
/2/ Does not include shares of Class A Common Stock held in accounts that
Barington, in the course of its broker-dealer business, maintains on behalf of
its customers. Barington does not have or share the right to vote or dispose of
such shares and disclaims any beneficial ownership of such shares.
-12-
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------
Banner Aerospace, Inc. 229,000/3/ 1.4% *
45026 Aviation Drive
Dulles, VA 20166
- ----------------------------------------------------------------------------------------------------------------------------
Michael A. McManus, Jr. 5,000 * *
100 White Plains Road
Bronxville, NY 10108
- ----------------------------------------------------------------------------------------------------------------------------
Donald E. Miller 20,500 * *
45026 Aviation Drive
Dulles, VA 20166
- ----------------------------------------------------------------------------------------------------------------------------
James Mitarotonda/4/ 46,000 * *
888 Seventh Avenue
17th Floor
New York, New York 10019
- ----------------------------------------------------------------------------------------------------------------------------
Marc Cooper/5/ 16,000 * *
888 Seventh Avenue
17th Floor
New York, New York 10019
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL 615,126 3.8% 2.2%
============================================================================================================================
</TABLE>
Except as set forth above, none of Mercury, any of the Mercury Nominees
or any of their respective associates owns beneficially or of record any
securities of the Company or any of its subsidiaries.
OTHER INFORMATION
Security Ownership of Certain Beneficial Owners
Certain information regarding Shares held by the Company'
directors, nominees, management and other 5% stockholders is contained in the
Company Proxy Statement and is incorporated herein by reference.
- --------
/3/ Includes 112,500 Class C Warrants and 112,500 Class D Warrants, all of which
are currently exercisable for one share of Class A Common Stock for each such
warrant.
/4/ Mr. Mitarotonda is Chairman and Chief Executive Officer of Barington.
/5/ Mr. Cooper is Vice Chairman of Barington.
* Less than 1%
-13-
<PAGE>
Proposals of Security Holders
Information concerning the date by which proposals of security holders
intended to be presented at the next annual meeting of stockholders of the
Company must be received by the Company for inclusion in the Company Proxy
Statement and form of proxy for that meeting is contained in the Company Proxy
Statement and is incorporated herein by reference.
Mercury assumes no responsibility for the accuracy or completeness of
any information contained herein which is based on, or incorporated by reference
to, the Company Proxy Statement or the Company's public filings.
-----------------------------------------------------
-14-
<PAGE>
PLEASE INDICATE YOUR SUPPORT OF THE ABOVE RECOMMENDATIONS OF MERCURY BY
COMPLETING, SIGNING AND DATING THE ENCLOSED [BLUE] ANNUAL MEETING PROXY CARD AND
RETURN IT PROMPTLY TO D.F. KING & CO., INC. IN THE ENCLOSED ENVELOPE. NO POSTAGE
IS NECESSARY IF THE ENVELOPE IS MAILED IN THE UNITED STATES.
MERCURY SHAREHOLDER ASSOCIATES LLC
October ____, 1998
-15-
<PAGE>
SCHEDULE I
INFORMATION CONCERNING CERTAIN OFFICERS AND EMPLOYEES OF BARINGTON
The following table sets forth the name and the present principal
occupation or employment, and the name, principal business and address of the
officers and employees of Barington who, may also solicit proxies from the
Company stockholders. The principal business address of each of the such
officers and employees is c/o Barington, 888 Seventh Avenue, 17th Floor, New
York, NY 10019.
Name and Position Principal Occupation or Employment
James Mitarotonda Chairman and Chief
Chairman and Chief Executive Officer of
Executive Officer Barington
Marc Cooper Vice Chairman of
Vice Chairman Barington
Edwin Kantor Vice Chairman of
Vice Chairman Barington
Kenneth Baronoff Managing Director
Managing Director of Barington
Carl Kleidman Managing Director of
Managing Director Barington
Gary Simon Senior Vice President
Senior Vice President of Barington
S-I-1
<PAGE>
SCHEDULE II
SHARES OF A CLASS A COMMON STOCK HELD BY MERCURY, ITS MEMBERS,
DIRECTORS AND OFFICERS, AND THE MERCURY NOMINEES
Except as disclosed in this Schedule or in the accompanying Proxy
Statement, none of Mercury or the Mercury Nominees, or any of their respective
associates, owns any securities of the Company or any subsidiary of the Company,
beneficially or of record, has purchased or sold any of such securities within
the past two years or is or was within the past year a party to any contract,
arrangement or understanding with any person with respect to any such
securities.
Barington Capital Group, L.P.
- --------------------------------------------
Date Number of
Shares
Purchased
- --------------------------------------------
10/20/97 5,000
10/21/97 2,000
10/22/97 4,300
10/23/97 13,291
10/24/97 1,000
11/18/97 31,175
11/21/97 6,500
11/24/97 1,000
11/25/97 15,000
12/2/97 4,000
12/10/97 14,000
12/11/97 5,000
12/12/97 5,500
12/15/97 3,000
12/17/97 500
12/19/97 9,350
12/22/97 13,000
12/23/97 3,700
12/29/97 18,000
4/29/98 12,895
S-II-1
<PAGE>
5/4/98 15,000
5/4/98 4,000
5/19/98 13,000
6/16/98 31,418
6/17/98 9,000
6/22/98 25,080
7/27/98 11,217
7/30/98 7,850
9/29/98 11,850
9/30/98 2,000
============================================
Banner Aerospace, Inc.
- -------------------------------------------------------------
Date Number of Shares
Purchased Sold
- -------------------------------------------------------------
12/24/96 187,500/1/
5/14/97 500
5/22/97 3,000
6/26/98 180,000
=============================================================
Michael A. McManus, Jr.
- --------------------------------------------
Date Number of
Shares
Purchased
- --------------------------------------------
9/16/98 5,000
============================================
Donald E. Miller
- --------------------------------------------
Date Number of
Shares
Purchased
- --------------------------------------------
11/6/96 1,000
9/22/98 5,000
- --------
/1/Shares acquired by exercise of 187,500 Class B Warrants.
S-II-2
<PAGE>
9/22/98 1,000
9/22/98 3,000
============================================
James Mitarotonda
- --------------------------------------------
Date Number of
Shares
Purchased
- --------------------------------------------
7/29/98 14,000
8/14/98 15,000
9/8/98 9,000
9/29/98 6,000
10/13/98 2,000
============================================
Marc Cooper
- --------------------------------------------
Date Number of
Shares
Purchased
- --------------------------------------------
8/19/98 10,000
9/29/98 6,000
============================================
S-II-3
<PAGE>
IMPORTANT
Your proxy is important. No matter how many shares you own, please give
Mercury your proxy FOR the election of the Mercury Nominees, the Reverse Stock
Split and the Appointment of Accountants and AGAINST the Board Classification
by:
MARKING the enclosed [BLUE] Annual Meeting proxy card,
SIGNING the enclosed [BLUE] Annual Meeting proxy card,
DATING the enclosed [BLUE] Annual Meeting proxy card and
MAILING the enclosed [BLUE] Annual Meeting proxy card TODAY in the
envelope provided (no postage is required if mailed in the United
States).
If you have already submitted a proxy to the Company for the Annual
Meeting, you may change your vote to a vote FOR the election of the Mercury
Nominees and AGAINST the Board Classification Proposal by marking, signing,
dating and returning the enclosed [BLUE] proxy card for the Annual Meeting,
which must be dated after any proxy you may have submitted to the Company. Only
your latest dated proxy for the Annual Meeting will count at such meeting.
If you have any questions or require any additional information
concerning this Proxy Statement or the proposals by Mercury contained herein,
please contact D.F. King & Co., Inc. at the address set forth below. IF ANY OF
YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK NOMINEE OR OTHER SUCH
INSTITUTION, ONLY IT CAN VOTE SUCH SHARES AND ONLY UPON RECEIPT OF YOUR SPECIFIC
INSTRUCTIONS. ACCORDINGLY, PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR
ACCOUNT AND INSTRUCT THAT PERSON TO EXECUTE THE [BLUE] ANNUAL MEETING PROXY
CARD.
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005-4495
S-II-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY MERCURY SHAREHOLDER ASSOCIATES LLC.,
The undersigned stockholder of Interactive Flight Technologies, Inc.
(the "Company") hereby appoints each of James Mitarotonda and Gary Simon, and
each of them with full power of substitution, for and in the name of the
undersigned, to represent and to vote, as designated below, all shares of Class
A Common Stock and Class B Common Stock of the Company that the undersigned is
entitled to vote if personally present at the 1998 Annual Meeting of
Stockholders of the Company, and at any adjournment or postponement thereof. The
undersigned hereby revokes any previous proxies with respect to the matters
covered by this Proxy.
WHERE A CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED AS SPECIFIED. IF NO CHOICE IS INDICATED, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 3, AND 4 AND AGAINST PROPOSAL 2.
(Please mark each proposal with an "X" in the appropriate box)
MERCURY RECOMMENDS A VOTE FOR THE MERCURY NOMINEES.
1. ELECTION OF DIRECTORS:
Election of Richard N. Daniel, Seymour Holtzman, Michael A. McManus, Jr., Donald
E. Miller, and Joseph R. Wright, Jr.
[ ] FOR all nominees except as marked below [ ] WITHHOLD AUTHORITY for all nominees
(INSTRUCTION: To withhold authority to vote for one or more nominees, mark FOR
above and print the name(s) of the person(s) with respect to whom you wish to
withhold authority in the space provided below.)
- -------------------------------------------------------------------------------------------------------------------
MERCURY RECOMMENDS A VOTE AGAINST PROPOSAL 2.
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 Company Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MERCURY RECOMMENDS A VOTE FOR PROPOSAL 3.
3. Proposal to amend the Company's Amended and Restated Certificate of
Incorporation so as to effect a one-for- three reverse stock split of the
Company's outstanding shares of Class A and Class B Common Stock, as
described more fully in the Company Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
S-II-5
<PAGE>
MERCURY RECOMMENDS A VOTE FOR PROPOSAL 4.
4. Proposal to approve the Board of Directors' appointment of KPMG Peat
Marwick LLP, certified accountants, as independent auditors of the Company
for the fiscal year ending October 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE PROVIDED.
Please date and sign this
proxy exactly as your name
appears hereon.
--------------------------------------------------------------
(Signature)
--------------------------------------------------------------
(Signature, if held jointly)
--------------------------------------------------------------
(Title)
Dated:
-----------------------------------------------------
When shares are held by
joint tenants, both should
sign. When signing as
attorney-in-fact, executor,
administrator, trustee,
guardian, corporate officer
or partner, please give
full title as such. If a
corporation, please sign in
corporate name by President
or other authorized
officer. If a partnership,
please sign in partnership
name by authorized person.
To vote in accordance with the Mercury recommendations, just sign and date this
proxy; no boxes need to be checked.
S-II-6
</TABLE>
