SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule l4a-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 B-200
PHOENIX, ARIZONA 85012
January 20, 1999
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
Metropolitan Club, located at One East 60th Street, New York, New York, on
February 4, 1999 at 10:00 a.m., local time.
At the Annual Meeting, in addition to the election of two directors, an
amendment to the Company's 1997 Stock Option Plan, and the appointment of
independent auditors, you will be asked, among other things, to consider and
approve the Company's reincorporation by means of a merger with New IFT
Corporation, a Delaware corporation ("New IFT"), for purposes of electing not to
be governed by Section 203 of the General Corporation Law of Delaware ("Delaware
Law"), thereby permitting the Company to engage in business transactions with
Ocean Castle Partners, LLC ("Ocean Partners") without requiring the approval of
66 2/3% of all stockholders as excluding Ocean Castle and its affiliates and
associates.
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/ IRWIN L. GROSS
-------------------------
Irwin L. Gross
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 B-200
PHOENIX, ARIZONA 85012
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 4, 1999
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 Metropolitan Club, located at One East 60th
Street, New York, New York, on February 4, 1999, at 10:00 a.m., local time, for
the following purposes, all as more fully described in the attached Proxy
Statement:
1. To elect two directors who would serve until the 2002 Annual
Meeting of Stockholders and until their respective successors have been
duly elected and qualified.
2. To approve the Company's reincorporation by means of a merger with
New IFT Corporation, a Delaware corporation ("New IFT"), for purposes of
electing not to be governed by Section 203 of the General Corporation Law
of Delaware ("Delaware Law"), thereby permitting the Company to engage in
business transactions with Ocean Castle Partners, LLC ("Ocean Partners")
without requiring the approval of 66 2/3% of all stockholders excluding
Ocean Partners and its affiliates and associates (the "Reincorporation
Proposal").
3. To approve the grant of options to purchase shares of the Company's
Class A Common Stock by Irwin L. Gross, Chief Executive Officer of the
Company.
4. To approve an amendment to the Company's 1997 Stock Option Plan to
increase the number of shares of the Company's Class A Common Stock for
which options may be granted under such Plan.
5. To approve the appointment by the Board of Directors of KPMG LLP,
certified public accountants, as independent auditors of the Company for
the fiscal year ending October 31, 1999.
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 January 11, 1999
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,
1998 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.
January 20, 1999 By Order of the Board of Directors
/s/ DAVID N. SHEVRIN
--------------------
David N. Shevrin
Secretary
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INTERACTIVE FLIGHT TECHNOLOGIES, INC.
4041 N. CENTRAL AVENUE, SUITE B-200
PHOENIX, ARIZONA 85012
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 4, 1999
------------------------
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 Metropolitan Club, located at One East 60th
Street, New York, New York, on February 4, 1999, 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, 1998, including financial
statements, are first being mailed or delivered to stockholders of the Company
on or about January 20, 1999.
At the Annual Meeting, stockholders will be asked to consider and vote upon
the following proposals:
1. To elect two directors who would serve until the 2002 Annual
Meeting of Stockholders and until their respective successors have been
duly elected and qualified.
2. To approve the Company's reincorporation by means of a merger with
New IFT Corporation, a Delaware corporation ("New IFT"), for purposes of
electing not to be governed by Section 203 of the General Corporation Law
of Delaware ("Delaware Law"), thereby permitting the Company to engage in
business transactions with Ocean Castle Partners, LLC ("Ocean Partners")
without requiring the approval of 66 2/3% of all stockholders excluding
Ocean Partners and its affiliates and associates (the "Reincorporation
Proposal").
3. To approve the grant of options to purchase shares of the Company's
Class A Common Stock by Irwin L. Gross, Chief Executive Officer of the
Company.
4. To approve an amendment to the Company's 1997 Stock Option Plan to
increase the number of shares of the Company's Class A Common Stock for
which options may be granted under such Plan.
5. To approve the appointment by the Board of Directors of KPMG LLP,
certified public accountants, as independent auditors of the Company for
the fiscal year ending October 31, 1999.
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).
Representatives of KPMG 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.
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VOTING RIGHTS AND VOTING SECURITIES
VOTING AT THE ANNUAL MEETING
The Board has fixed the close of business on January 11, 1999 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) 5,317,900 shares of Class A Common Stock, par value $0.01 per share (the
"Class A Common Stock"), and (ii) 1,185,186 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 shares of Class B Common Stock held in escrow pursuant to the Stock
Escrow Agreement (1,066,667 shares) will be cancelled and contributed to the
Company's capital on January 31, 1999, and therefore such shares will not be
entitled to vote 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 4 and 5. The affirmative vote of the holders of 66 2/3% of the votes
entitled to be cast at the Annual Meeting (whether or not represented in person
or by proxy at the Annual Meeting), excluding shares owned by Ocean Partners or
its affiliates or associates, is required to approve Proposals 2 and 3.
PROPOSAL 1
ELECTION OF DIRECTORS
GENERAL
The Board currently consists of five members. The Company's Amended and
Restated Certificate of Incorporation provides for the classification of the
Board of Directors into three classes (Class I, Class II and Class III). At the
Annual Meeting or any adjournments or postponements thereof, two Class I
directors are to be elected to serve for a three year term 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. Each was elected to the Board at the Annual Meeting held on October 30,
1998 and were initially elected to the Board on September 15, 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 which such
director belongs.
NAME CLASS AGE POSITION
- ---- ----- --- --------
M. Moshe Porat............... I 51 Director
James W. Fox................. I 48 President, Chief Operating Officer
and Director
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M. MOSHE PORAT, is currently the Dean of the School of Business and
Management at Temple University. He is the Chairholder of the Joseph E. Boettner
Professorship in Risk Management and Insurance. From 1988 to 1996 he was
Chairman of the Risk Management, Insurance and Actuarial Science Department at
Temple University. He received his undergraduate degree in economics and
statistics (with distinction) from Tel Aviv University. His M.B.A. (Magna Cum
Laude) is from the Recanati Graduate School of Management at Tel Aviv
University. He completed his doctoral work at Temple University. Prior to his
academic work, Dr. Porat served as deputy general manager of a large
international insurance brokerage firm and insurance company as an economic and
financial consultant. Dr. Porat has authored several monographs on captive
insurance companies and their use in risk management, has published numerous
articles on captive insurance companies, self insurance and other financial and
risk topics, has served as an expert witness and has won several awards. Dr.
Porat holds the CPCU professional designation and is a member of ARIA (American
Risk and Insurance Association), IIS (International Insurance Society), RIMS
(Risk and Insurance Management Society) and Society of CPCU.
JAMES W. FOX, is presently the President and Chief Operating Officer of the
Company. He was formerly the Managing Partner of First Lawrence Capital Corp.,
located in New York City, and was responsible for the firm's management and the
growth of its mergers and acquisitions advisory and principal investment
activities. From 1989 to 1996, Mr. Fox was a director with national practice
development and management responsibility with Coopers & Lybrand in New York,
with primary responsibility for mergers and acquisitions activities. He has held
senior mergers and acquisitions positions with General Foods Corp., Arthur Young
and W.R. Grace Co. Mr. Fox has a Bachelor of Arts degree in Mathematics and
History from Amherst College and an M.B.A. in Finance from the University of
Pennsylvania's Wharton School.
None of these persons has any family relationship to any other.
The continuing directors are as follows:
IRWIN L. GROSS, 55, is the Chief Executive Officer and Chairman of the
Board of Directors of the Company. He is a founder of ICC Technologies, Inc., a
publicly held company listed on NASDAQ National Market, which is currently
engaged in internet related technology, and was the chairman and a director
since the Company's inception in May 1984. Since 1988, ICC has been engaged in
the design, manufacturing and marketing of innovative climate control systems.
Mr. Gross retired from that company in July 1998 to pursue an array of
investment strategies. Mr. Gross currently is a shareholder in ICC. In addition,
Mr. Gross had served as the chief executive officer of Engelhard/ICC, a joint
venture between ICC and Engelhard which was the successor to ICC's business and
which ICC Technologies, Inc. from its formation in February 1994 to its
restructuring in February 1998, was a fifty percent (50%) parent with Engelhard
Corporation. In February 1998 Engelhard/ICC was restructured. In April 1998, ICC
acquired by merger Rare Medium, Inc. which is an Internet service provider. Mr.
Gross was also a founder of Interdigital Company (AMEX) and served as a director
and executive vice president until April 1984. Mr. Gross has served as a
consultant to, investor in and director of, numerous publicly held and private
companies. Mr. Gross also serves on the board of directors of several charitable
organizations. Mr. Gross has a Bachelor of Science degree in Accounting from
Temple University and a Juris Doctor degree from Villanova University.
CHARLES T. CONDY, 59, had been a director of ICC Technologies, Inc. since
June 1996. Mr. Condy is the founder, chairman and chief executive officer of
Next Century Restaurants, Inc., a private company which is the owner of Aqua,
and Charles of Nob Hill, both of which are in San Francisco, and Aqua of Las
Vegas. He is founder and has been chairman and chief executive officer of Proven
Alternatives, Inc., a privately held international energy management company,
since 1991. Mr. Condy was chairman and chief executive officer of California
Energy Company, Inc., a geothermal energy company which he founded in 1971, and
which become the largest geothermal energy company in the world. Prior to
founding California Energy Company, Mr. Condy was executive vice president --
Western region of John Nuveen and Company, members of the New York Stock
Exchange. In the public policy area, Mr. Condy helped found and has served as a
board member of the Business Council for a Sustainable Energy Future and the
Coalition for Energy Efficiency and Renewable Technologies. Mr. Condy currently
advises the U.S. Department of Energy, the U.S. Agency for International
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Development, and the U.S. Asian Environmental Partnership on energy efficiency
technology transfer and related funding to developing economies.
STEPHEN SCHACHMAN, 55, is presently a private consultant and is the owner
of his own consulting firm, Public Affairs Management, located in the suburban
Philadelphia area. From 1992 to 1995 Mr. Schachman was an executive officer and
consultant to Penn Fuel Gas Company, a supplier of natural gas products. Prior
thereto, he was an attorney with the Philadelphia law firm of Dilworth, Paxson,
Kalish & Kaufman. Mr. Schachman was also executive vice president of Bell
Atlantic Mobile System and prior thereto president of the Philadelphia Gas
Works, the largest municipally owned gas company in the United States. Mr.
Schachman has a Bachelor of Arts degree from the University of Pennsylvania and
a Juris Doctor degree from the Georgetown University Law School.
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 Irwin L. Gross, 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, 1998, the Company's Board of
Directors held seven (7) meetings. Each person who was then a director attended
all of the Board 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 has been suspended
and its function has 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 currently consists of Messrs. Condy
and Schachman. There was no Audit Committee in session during any of the
meetings of the Board of Directors during fiscal 1998. The Board also has a
Compensation Committee which currently consists of Messrs. Condy and Porat. The
Compensation Committee is responsible for approving the compensation
arrangements of senior management and recommending approval by the Board of
Directors of amendments to the Company's benefit plans. There was no
Compensation Committee in session during any of the meetings of the Board of
Directors during fiscal 1998.
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 two
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 M. MOSHE
PORAT AND JAMES W. FOX AS CLASS I DIRECTORS.
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PROPOSAL 2
THE REINCORPORATION PROPOSAL
Stockholders of the Company are being asked to approve the Reincorporation
Proposal so that the Company will not be governed by Section 203 of Delaware
Law. Pursuant to the Reincorporation Merger, stockholders will exchange their
shares of Common Stock for an equal number of shares of common stock of NEW IFT,
a Delaware corporation. Pursuant to an Agreement and Plan of Merger, dated as of
January 19, 1999, between the Company and NEW IFT (the "Merger Agreement"), the
Company will be merged into NEW IFT and NEW IFT will change its name to
"Interactive Flight Technologies, Inc." (the "Merger").
NEW IFT is currently a non-operating, wholly owned subsidiary of the
Company formed for the purpose of completing the Merger. Upon the completion of
the Merger, NEW IFT will own all assets presently owned by the Company and will
conduct the business operations presently conducted by the Company. No material
change in the business, management, operations or financial statements of the
Company will result from the Merger. All of the Company's contracts and other
assets will vest in NEW IFT. The officers and directors of the Company
immediately prior to the transaction will continue to be the officers and
directors of NEW IFT.
The following discussion summarizes certain aspects of the reincorporation.
This summary is qualified in its entirety by the Merger Agreement attached as
Appendix A to this Proxy Statement.
BACKGROUND OF THE MERGER; SECTION 203
On August 25, 1998, Ocean Castle Partners, LLC ("Ocean Partners") filed
preliminary consent solicitation materials with the Securities and Exchange
Commission requesting other stockholders to join with Ocean Partners to remove
the Company's existing Board and select a slate of directors proposed by Ocean
Partners. At that time, Ocean Partners was a 35.9% beneficial owner of the
voting power of the Company pursuant to the Voting Agreement as described below.
On September 2, 1998, Ocean Partners filed preliminary consent
solicitation/proxy material with the Securities and Exchange Commission to elect
its slate and to support and oppose certain proposals set forth by the Company.
On September 15, 1998, the former Board of Directors resigned and elected the
current directors (who were the Ocean Partners nominees) as the Board of the
Company. In connection with such resignations, the new Board has undertaken the
following: (i) to have at least one independent director, (ii) that at least one
independent director has to approve certain transactions with the Company and
(iii) the Company will get an outside valuation opinion if it undertakes certain
transactions. At the Annual Meeting of Stockholders on October 30, 1998, the
current Board was elected to staggered terms.
Section 203 defines any person that owns, or has the right to acquire, 15%
or more of a corporation's voting stock as an "interested stockholder."
Accordingly, Ocean Partners became an interested stockholder pursuant to the
Proxy Agreement on August 13, 1998. Subject to certain exceptions, Section 203
prohibits business combinations between corporations and interested stockholders
for a three-year period following the date of the transaction in which such
stockholder becomes an "interested stockholder," unless the Board gives prior
approval to such transaction or unless the business combination is approved by
the holders of 66 2/3% of the outstanding voting stock of the corporation not
owned by the interested stockholder. The Proxy Agreement was not approved in
advance by the then Board. Accordingly, pursuant to Section 203, Ocean Partners
is prohibited, for a three-year period ending on August 14, 2001, from engaging
in any "business combination" with the Company, unless such business combination
is approved by the affirmative vote of the holders of 66 2/3% of the outstanding
shares of voting stock of the Company not owned by Ocean Partners. Section 203
broadly defines business combinations to include certain mergers of the Company
(including the Merger); certain transfers of assets to the interested
stockholder by the Company; certain issuances or transfers by the Company or any
subsidiary of the Company to an interested stockholder of shares of stock of the
Company or of any subsidiary; certain other transactions resulting in an
increase in the
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proportionate share of stock of the Company owned by the interested stockholder;
and the receipt by an interested stockholder of certain financial benefits
provided by or through the Company or a direct or indirect majority-owned
subsidiary of the Company.
The Reincorporation Proposal is submitted in this Proxy Statement for such
approval by the Company's stockholders. While Section 203 is intended to provide
anti-takeover protection for Delaware corporations by imposing supermajority
disinterested stockholder voting requirements for certain self-dealing
transactions with large stockholders, the Board believes that potential
transactions between Ocean Partners and the Company could be beneficial to both
the Company and its stockholders (without regard to Ocean Partners) and that the
need to meet the supermajority disinterested stockholder approval requirements
under Section 203 for each such transaction makes it more difficult to pursue
potentially attractive opportunities and more time consuming and expensive to
effect them. In that connection, the Board notes that Delaware Law will continue
to require that directors satisfy their fiduciary duties to all of the
stockholders of the Company when considering transactions with interested
stockholders. Moreover, the Board has a policy that calls for approval of
certain transactions between the Company and others by at least one independent
director. Directors and officers of Ocean Partners comprise only one of the five
members of the Company's Board. Irwin L. Gross, Chairman of the Board and Chief
Executive Officer of the Company, is the sole member of Ocean Partners. Such
director may be deemed to have a conflict of interest with respect to
transactions between the Company and Ocean Partners.
The Reincorporation Proposal provides for the merger of the Company into
NEW IFT. NEW IFT's certificate of incorporation contains a provision
specifically electing not to be governed by Section 203. Accordingly, if the
Reincorporation Proposal is approved, NEW IFT, as successor to the Company, will
be able to enter into transactions with Ocean Partners without obtaining the
stockholder approval required by Section 203. Except for eliminating the
requirement that certain transactions be subject to the supermajority
stockholder vote requirement imposed by Section 203, the Merger will have no
effect on the rights of stockholders to vote generally under other provisions of
Delaware Law or the requirement that the Company obtain approval of stockholders
pursuant to the rules of NASDAQ.
Since Ocean Partners will no longer beneficially own approximately 35.9% of
the voting power of the Company after January 31, 1999, and no longer control
the Company pursuant to such voting power, and with certain fiduciary safeguards
in place, the Board believes that the Reincorporation Proposal will now allow
certain transactions between Ocean Partners and the Company which may be
beneficial to the Company.
REASONS FOR THE REINCORPORATION PROPOSAL; RECOMMENDATION OF THE BOARD
The entire Board (with Mr. Gross abstaining) determined the Reincorporation
Proposal to be in the best interests of the Company and its stockholders
(without regard to Ocean Partners). This determination was based on the
following considerations:
(i) Given the Company's current development objectives and business
strategy, the Board believes that any anti-takeover benefits that might arise
under Section 203 are outweighed by the Company's need for the support of Ocean
Partners and its experience in developing and implementing business strategies.
(ii) The number and importance of proposed transactions with Ocean
Partners illustrate the need for avoiding unnecessary impediments (i.e., the
uncertainty, cost and delay associated with obtaining the supermajority
disinterested stockholder vote) to such transactions.
(iii) The undesirability of repeatedly seeking stockholder approval under
Section 203, particularly where the Company is a party to continuing
arrangements with Ocean Partners and Mr. Gross with respect to the numerous
business opportunities to which Mr. Gross may be privy.
(iv) Even after Section 203 no longer applies to the Company, certain
transactions involving the Company will continue to require the approval of at
least one independent director.
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(v) The supermajority disinterested voting requirement of Section 203
will expire automatically with respect to transactions with Ocean Partners in
August, 2001, and because of the onerous burdens of complying with Section 203,
the Board concluded that early termination of these requirements with respect to
Ocean Partners would be beneficial.
(vi) In evaluating whether to eliminate Section 203 with respect to Ocean
Partners only or with respect to Ocean Partners and any other stockholder that
might become an interested stockholder in the future, the Board considered it
beneficial to eliminate this potential hurdle in connection with a change of
control transaction involving the Company. The Board believes it has or could
implement adequate means to assure that stockholders are treated fairly in such
a transaction.
THE BOARD (WITH MR. GROSS ABSTAINING) HAS APPROVED AND RECOMMENDS THAT
STOCKHOLDERS APPROVE THE REINCORPORATION PROPOSAL.
REINCORPORATION
The Reincorporation will be effected by means of a merger by the Company
with and into NEW IFT, a wholly owned subsidiary of the Company. The Certificate
of Incorporation of NEW IFT is identical to the Amended and Restated Certificate
of Incorporation of the Company, except that the Certificate of Incorporation of
NEW IFT contains a provision electing not to be governed by Section 203. All
benefit plans of the Company will be adopted by NEW IFT. The Merger will become
effective upon the filing of a certificate of merger with the Secretary of State
of Delaware. The Merger Agreement provides that, upon the filing of the
certificate of merger, the name of NEW IFT will be changed to "Interactive
Flight Technologies, Inc." It is anticipated that such filing will be effected
immediately following the approval of the Merger by the stockholders of the
Company. Except as discussed below, the Merger will have no effect on the rights
of the stockholders of the Company.
EFFECT OF THE REINCORPORATION PROPOSAL ON THE RIGHTS OF THE COMPANY'S
STOCKHOLDERS
The Certificate of Incorporation of NEW IFT will be identical to the
Amended and Restated Certificate of Incorporation of the Company, except that
the Certificate of Incorporation contains a provision electing not to be
governed by Section 203. As a result, stockholders of the Company will not have
the right to a vote in connection with transactions between Ocean Partners and
NEW IFT unless the requirement of stockholder approval is imposed by another
provision of Delaware Law or the rules of NASDAQ. In addition, if any other
person or entity acquires 15% or more of NEW IFT, such person or entity will not
be subject to Section 203.
The Reincorporation Proposal, if approved, would allow the Company to enter
into "business combinations" (including financing arrangements involving the
issuance of Common Stock) without requiring the approval of 66 2/3% of the
holders of Common Stock excluding Ocean Partners.
VOTE REQUIRED
Under Delaware Law, the affirmative vote of the holders of 66 2/3% of the
outstanding shares of the Common Stock, excluding shares beneficially owned by
Ocean Partners and its affiliates and associates, is required to approve the
Reincorporation Proposal. As a result, abstentions and broker non-votes are
effectively equivalent to votes against the Reincorporation Proposal.
THE COMPANY'S BOARD OF DIRECTORS BELIEVES THAT PROPOSAL 2 IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" APPROVAL OF PROPOSAL 2.
7
<PAGE>
PROPOSAL 3
GRANT OF OPTIONS TO IRWIN L. GROSS
The holders of Common Stock are being asked to approve the grant by the
Board of Directors on December 11, 1998, with Irwin L. Gross abstaining, of
options to Irwin L. Gross, Chief Executive Officer of the Company to purchase
600,000 shares of Class A Common Stock at fair market value on the date of
grant, pursuant to a separate option agreement with Mr. Gross. The right to
purchase such shares vests at 120,000 shares per year over a five-year period.
As discussed above, Section 203 of the Delaware Law prevents the Company from
granting options to Mr. Gross without the approval of 66 2/3% of the holders of
Common Stock excluding Ocean Partners. The Board of Directors of the Company has
determined that Mr. Gross has halted the downward spiral of the Company and is
implementing a strategy to increase value for all of the holders of the
Company's Common Stock and that he should, subject to stockholder approval, be
able to participate in such enhancement of shareholder value. Therefore, the
Board, with Mr. Gross abstaining, has approved such grant, subject to
stockholder approval.
VOTE REQUIRED
Under Delaware Law, the affirmative vote of the holders of 66 2/3% of the
outstanding shares of the Common Stock, excluding shares beneficially owned by
Ocean Partners and its affiliates and associates, is required to approve the
grant of options to Mr. Gross. As a result, abstentions and broker non-votes are
effectively equivalent to votes against the grant of options to Mr. Gross.
THE COMPANY'S BOARD OF DIRECTORS BELIEVES THAT PROPOSAL 3 IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" APPROVAL OF PROPOSAL 3.
PROPOSAL 4
APPROVAL OF AMENDMENT TO THE 1997 STOCK OPTION PLAN
The Board of Directors proposes that the Plan be amended to increase the
aggregate number of shares of Class A Common Stock subject to issuance under the
Plan by 275,000 shares from 500,000 shares to 775,000 shares. The proposed
increase is intended to serve the purposes of the Plan, which are to ensure the
retention of existing executive personnel, key employees, directors, consultants
and advisors and to provide additional incentive by permitting such individuals
to participate in the ownership of the Company.
For a detailed description of the principle features of the Plan, see
"Executive Compensation -- Stock Options."
REQUIRED AFFIRMATIVE VOTE
Under Delaware law and the Bylaws of the Company, approval of the amendment
to the Plan requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock represented in person or by proxy at the
Annual Meeting. For this purpose abstentions will have or the effect of a vote
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 BOARD OF DIRECTORS BELIEVES THAT PROPOSAL 4 IS IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
APPROVAL OF PROPOSAL 4.
8
<PAGE>
PROPOSAL 5
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
BACKGROUND; PROPOSAL
The Board of Directors has selected KPMG LLP ("KPMG") to act as its
independent accountants for the fiscal year ending October 31, 1999 and the
financial statements relating thereto. KPMG previously acted as the Company's
independent accountants for its 1996, 1997 and 1998 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, 1999. 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, 1999 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.
PROXY AGREEMENT AND VOTING AGREEMENT
Pursuant to an agreement dated August 13, 1998 (the "Proxy Agreement"),
Ocean Partners entered into an arrangement with Yuri Itkis, Donald H. Goldman
and Boris Itkis, whereby Ocean Partners has been granted an irrevocable proxy
("Ocean Proxies") to vote all of the shares of Class A Common Stock and Class B
Common Stock beneficially owned by Messrs. Yuri Itkis, Goldman and Boris Itkis.
Yuri Itkis is the father of, and Boris Itkis is the brother of Michail Itkis.
The Proxy Agreement also provides for consulting agreements between Ocean
Partners and Messrs. Yuri Itkis and Donald Goldman, whereby, among other things,
Ocean Partners or its nominees, upon the election of the Ocean Nominees which
will constitute a majority of the Board of Directors of the Company, will pay
Yuri Itkis and Donald Goldman each, $200,000 a year for 5 years, for services in
connection with current or future business strategies of the Company. Yuri Itkis
and Donald Goldman are currently receiving such payments from the Company and
providing consulting services to the Company.
By virtue of its status as the holder of the Ocean Proxies, Ocean Partners
may be deemed to beneficially own all of the 743,704 (35.9% of the outstanding
voting power) shares of Class B Common Stock owned by Messrs. Yuri Itkis, Donald
Goldman and Boris Itkis as set forth below under "Security Ownership Of Certain
Beneficial Owners And Management." Irwin L. Gross also beneficially owns 116,875
shares of Class A Common Stock. The shares of Class B Common Stock that are
currently in escrow (1,066,667 shares), which includes all but 118,519 shares
subject to the Proxy Agreement, will be cancelled on January 31, 1999.
On August 11, 1998, Mr. Gross entered into an agreement (the "Voting
Agreement") with Steven Fieldman and Lance Fieldman, whereby Messrs. Fieldman
and Fieldman agreed to continue to vote the shares of Class B Common Stock and
Class A Common Stock beneficially owned by them in proportion to the vote of
other stockholders on matters submitted to stockholders. According to
9
<PAGE>
publicly available information concerning the Company, Steven Fieldman
beneficially owns 151,112 shares of Class B Common Stock and 118,333 shares of
Class A Common Stock (together representing 8.0% of the outstanding voting
power) and Lance Fieldman beneficially owns 53,333 shares of Class B Common
Stock and 15,000 shares of Class A Common Stock (together representing 2.63% of
the outstanding voting power). See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT." Messrs. Fieldman and Fieldman have previously agreed,
pursuant to their severance agreements with the Company, to vote all shares on
all matters in proportion to the vote of the Company's other stockholders. The
Voting Agreement provided that if the Ocean Partners nominees constitute a
majority of the Board of Directors of the Company, Irwin Gross will use his best
efforts to cause the Company to enter into a consulting agreement with Steven
Fieldman pursuant to which he would be engaged to advise the Company, at $55,000
a year for 1 year, concerning current or future business strategies of the
Company. The Company has entered into a consulting agreement with Mr. Fieldman.
The shares of Class B Common Stock held in escrow (1,066,667 shares), which
includes all of the shares of Class B Common Stock beneficially owned by the
Fieldmans, will be cancelled on January 31, 1999.
EXECUTIVE OFFICERS
The following table sets forth the names, ages and current positions with
the Company of the Company's current executive officers:
NAME AGE POSITION
- ---- --- --------
Irwin L. Gross.................... 54 Chief Executive Officer
James W. Fox...................... 48 President and Chief Operating Officer
Morris C. Aaron................... 34 Vice President and Chief Financial
Officer
David N. Shevrin.................. 36 Secretary
Officers serve at the discretion of the Board of Directors, subject to
rights, if any, under contracts of employment.
10
<PAGE>
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, 1998, October 31, 1997 and October 31, 1996 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 1998 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
$50,000 or 10% of the total annual salary and bonus reported for the Named
Executive.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
FISCAL ANNUAL COMPENSATION STOCK OPTION
NAME AND PRINCIPAL POSITION YEAR COMPENSATION($) BONUS($) SEVERANCE($) AWARDS(#)
- --------------------------- ------ --------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Irwin L. Gross, 1998 -- -- -- --
Chief Executive Officer(1) 1997 -- -- -- --
1996 -- -- -- --
Michail Itkis, 1998 233,990 -- 1,539,881 --
Chief Executive Officer (2) 1997 263,995 279,075 -- --
1996 188,933 -- -- 125,000
Thomas M. Metzler, 1998 304,189 -- 1,009,761 --
President and Chief Operating 1997 314,000 181,399 -- 83,333
Officer (3) 1996 -- -- -- --
John W. Alderfer, 1998 187,194 -- 504,000 --
Chief Financial Officer (4) 1997 214,000 111,630 -- --
1996 13,846 -- -- 58,333
Frank Gomer, 1998 153,686 54,445 -- 7,667
President -- Interactive 1997 96,058 20,000 -- 9,000
Entertainment Division (5) 1996 -- -- -- --
</TABLE>
- ------------------
(1) Mr. Gross started employment with the Company on September 15, 1998.
(2) Mr. Itkis's employment was terminated with the Company on September 15,
1998. Excludes relocation and temporary living 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 30,525 shares of the Company's Class A Common Stock valued at a
fair market value of $3.00 on the date of transfer. Mr. Itkis received
$65,625 for unused accrued vacation upon his termination.
(3) Mr. Metzler started employment with the Company on November 23, 1996, and
his employment was terminated on September 15, 1998. Excludes relocation and
temporary living expenses of $16,662 and $43,555 paid to Mr. Metzler during
the 1998 and 1997 fiscal years. The amount for the annual bonus during the
1997 fiscal year includes 19,841 shares of the Company's Class A Common
Stock valued at a fair market value of $3.00 on the date of transfer. Mr.
Metzler received $23,625 for unused accrued vacation upon his termination.
(4) Mr. Alderfer started employment with the Company on October 2, 1996, and his
employment was terminated on September 15, 1998. Excludes relocation and
temporary living expenses of $22,719, $28,410 and $7,569 paid to Mr.
Alderfer during the 1998, 1997 and 1996 fiscal years, respectively. The
amount for the annual bonus during the 1997 fiscal year includes 12,210
shares of the Company's Class A Common Stock valued at a fair market value
of $3.00 on the date of transfer. Mr. Alderfer received $20,192 for unused
accrued vacation upon his termination.
(5) Dr. Gomer started employment with the Company on February 10, 1997. The
amount for the annual bonus during the 1997 fiscal year represents a signing
bonus.
11
<PAGE>
OPTION GRANTS IN FISCAL YEAR
The following table sets forth the grant of stock options made during the
1998 fiscal year to the CEO and the Named Executives:
<TABLE>
<CAPTION>
% TOTAL OPTIONS
GRANTED TO
OPTIONS EMPLOYEES IN 1998 EXERCISE EXPIRATION
NAME GRANTED FISCAL YEAR(1) PRICE($) DATE
- ---- ------- ----------------- -------- ----------
<S> <C> <C> <C> <C>
Irwin L. Gross............................. -- -- --
Michail Itkis.............................. -- -- --
Thomas M. Metzler.......................... -- -- --
John W. Alderfer........................... -- -- --
Frank Gomer................................ 2,667 2.625 02/19/2008
5,000 1.875 10/30/2008
-----
7,667 44.7%
=====
</TABLE>
- ------------------
(1) Based on a total of 17,167 options granted to employees during the 1998
fiscal year.
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 was reduced to
$2.625 per share (the closing price for the Company's stock on February 10,
1998), provided that the option holder was still employed by the Company on
October 10, 1998. A similar reduction in the exercise price for the remaining
half of the options will occur April 10, 1999, 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.
As a result of this plan, 2,000 options and 2,500 options held by Dr. Gomer
with exercise prices of $21.939 and $13.50, respectively, were repriced to
$2.625 on October 10, 1998. Additionally, 2,000 options and 2,500 options held
by Dr. Gomer with exercise prices of $21.939 and $13.50, respectively, will be
repriced to $2.625 provided Dr. Gomer remains employed by the Company on April
10, 1999.
AGGREGATED OPTION EXERCISES IN 1998 FISCAL YEAR
AND FISCAL YEAR-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, 1998 (none of these persons exercised any options during the
1998 fiscal year):
NUMBER OF UNEXERCISABLE
OPTIONS
AT OCTOBER 31, 1998
NAME (#) EXERCISABLE/UNEXERCISABLE (1)
- ---- ---------------------------------
Irwin L. Gross --/--
Michail Itkis 130,000/--
Thomas M. Metzler 55,556/--
John W. Alderfer 38,889/19,444
Frank Gomer 4,844/11,323
- ------------------
(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
$1.688 at October 31, 1998.
12
<PAGE>
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company had an employment agreement through August 27, 1999 with
Michail Itkis, the Company's former Chief Executive Officer, under which Mr.
Itkis received a per annum base salary of $262,500. Pursuant to the agreement,
if Mr. Itkis was terminated by the Company or if Mr. Itkis terminated his
employment for any reason at least six months following a change of control, he
was entitled to two times the annual base salary and two times the target bonus.
The agreement also provided that Mr. Itkis would not compete with the Company
during the term of the agreement and for a period of three years thereafter. Mr.
Itkis resigned as an officer and director of the Company on September 15, 1998,
and the terms of his employment agreement with respect to a change in control
were effected, whereby Mr. Itkis received two times his annual base salary and
two times his 1997 bonus. The Company is currently in the process of determining
whether the bonus that Mr. Itkis received was proper.
The Company had 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 former President and Chief Operating Officer, under which Mr.
Metzler received a per annum base salary of $341,250, plus a bonus if the
Company met certain goals established by the Board of Directors. Pursuant to the
agreement, if Mr. Metzler was terminated by the Company or if Mr. Metzler
terminated his employment for any reason at least six months following a change
of control, he was entitled to two times the annual base salary and two times
the target bonus. In connection with the employment agreement, Mr. Metzler
received options to purchase 83,333 shares of Class A Common stock which vest
over two years from the grant date. Mr. Metzler resigned as an officer and
director of the Company on September 15, 1998, and the terms of his employment
agreement with respect to a change in control were effected, whereby Mr. Metzler
received two times his annual base salary and two times the target bonus.
The Company had an employment agreement through October 1, 1999 with John
W. Alderfer, the Company's former Chief Financial Officer, under which Mr.
Alderfer received a per annum base salary of $210,000, plus a bonus if the
Company met certain goals established by the Board of Directors. Pursuant to the
agreement, if Mr. Alderfer was terminated by the Company or if Mr. Alderfer
terminated his employment for any reason at least six months following a change
of control, he was entitled to two times the annual base salary and target
bonus. In connection with the employment agreement, Mr. Alderfer received
options to purchase 58,333 shares of Class A Common Stock which vest over three
years from the grant date. Mr. Alderfer resigned as an officer and director of
the Company on September 15, 1998, and the terms of his employment agreement
with respect to a change in control were effected, whereby Mr. Alderfer received
two times his annual base salary and a target bonus.
DIRECTOR COMPENSATION
Outside directors receive $1,000 for each meeting attended, whether
attended in person or telephonically and $500 for each committee meeting. 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
1997 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 800,000 shares of
the Company's Class A Common Stock. The 1994 Plan expires in September 2004.
13
<PAGE>
In June 1997, the Company's stockholders approved the 1997 Stock Option
Plan (the "1997 Plan"). Options exercisable for a total of 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.
As of October 31, 1998, options to purchase an aggregate of 839,733 shares
had been granted under the 1994 Plan at exercise prices ranging from $2.625 to
$43.125 per share, of which 44,417 had been exercised and 351,150 had been
forfeited. Accordingly, as of October 31, 1998, options to purchase 444,167
shares were outstanding under the 1994 Plan. No further options will be granted
under the 1994 Plan. As of October 31, 1998, options to purchase an aggregate of
279,166 shares had been granted under the 1997 Plan at exercise prices ranging
from $1.875 to $13.50 per share, of which none had been exercised and 37,723 had
been forfeited. Accordingly, as of October 31, 1998, options to purchase 241,443
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
800,000 shares of Class A Common Stock issuable upon exercise of options granted
under the 1994 Plan and 500,000 shares of Class A Common Stock issuable upon
exercise of options granted under the 1997 plan.
14
<PAGE>
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
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 16,667 shares of Class A Common Stock at a price of $29.25
per share, which was repriced on January 6, 1997 to $24.00 per share. Under the
FortuNet License, an aggregate of $100,000 was paid to FortuNet in fiscal 1998.
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 former Chief Executive Officer and a former director of the
Company, is also a son of Yuri Itkis and was an employee of FortuNet until
October 1994.
15
<PAGE>
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 provided that Michail Itkis and
Yuri Itkis shall each be entitled to designate one nominee to the Company's
Board of Directors. No other parties had any continuing right under the
Stockholders' Agreement to nominate a director. Each stockholder who was 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). The Stockholders' Agreement was terminated on September
15, 1998.
PURCHASE OF SHARES
Pursuant to the settlement of various lawsuits and other claims instituted
by Barington Capital Group, L.P. ("Barington") against the Company, Ocean
Partners and others, Ocean Partners purchased from Barington 99,542 shares of
Class A Common Stock of the Company at $4.50 per share on October 21, 1998. The
Company temporarily loaned the funds to Ocean Partners to effectuate such
purchase and Ocean Partners has subsequently repaid such loan.
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 Severance
Agreements."
SEVERANCE AGREEMENTS
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 100,000 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
On September 15, 1998, the Company entered into consulting agreements with
Messrs. Michail Itkis, Thomas M. Metzler and John W. Alderfer in connection with
the Company's agreements with Swissair. In consideration for such services, the
Company has agreed to pay Mr. Itkis $200,000 through September 15, 1999, Mr.
Metzler $300,000 through June 15, 1999 and Mr. Alderfer $235,000 through March
15, 1999.
16
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 31, 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 OF TOTAL(3)
-------------------------- ---------------------------- ------------
NUMBER PERCENT NUMBER PERCENT VOTING
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OF SHARES OF CLASS OF SHARES OF CLASS POWER
- --------------------------------------- --------- -------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Irwin L. Gross 743,704 59.8% 116,875 2.2% 35.9%
Ocean Castle Partners, LLC.
Charles T. Condy -- -- -- -- --
Stephen Schachman -- -- -- -- --
M. Moshe Porat -- -- -- -- --
James W. Fox -- -- -- -- --
Michail Itkis 296,296(4) 23.8% 202,367(4)(5) 3.7% 15.4%
Steven M. Fieldman 151,112(6)(7) 12.1% 118,333(5)(6)(7) 2.2% 8.0%(7)
Thomas M. Metzler -- -- 85,344(5) 1.6% *
John W. Alderfer -- -- 58,502(5) 1.1% *
Frank Gomer -- -- 4,844(5) * *
All then current executive officers and 743,704 59.8% 121,719 2.3% 35.9%
directors of the Company as a group (6
persons)
</TABLE>
- ------------------
* Less than 1%.
(1) Unless otherwise noted, all persons named in the table have sole voting and
investment power with respect to all shares of Class A Common Stock and
Class B Common Stock beneficially owned by them, subject to the Proxy
Agreement between Ocean Partners, Yuri Itkis, Donald H. Goldman and Boris
Itkis and are subject to the Stock Escrow Agreement. Ocean Partners only
has voting power with respect to the shares of Class B Common Stock subject
to the Proxy Agreement; it does not have investment power with respect to
such shares. 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 public
information about the Company, (i) Ocean Castle Partners' address is 1811
Chestnut Street, Philadelphia, Pennsylvania, 19103, and (ii) Steven M.
Fieldman's address is 700 Manhattan Avenue, Manhattan Beach, California
90266. Unless otherwise noted, all persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
beneficially owned by them.
17
<PAGE>
(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 1,244,445
shares of Class B Common Stock outstanding, 1,066,667 shares are held in
escrow (the "Stock Escrow Agreement") 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, 416,667
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 $60.00 for a 30-day period in the 18-month period subsequent to 18
months after the Company's public offering. The remaining 650,000 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 $84.00 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 1,244,445 shares of Class B Common Stock outstanding, 5,281,241
shares of Class A Common Stock outstanding, except that shares underlying
options and warrants to purchase Class A Common Stock exercisable within
sixty (60) days are deemed to be outstanding for purposes of 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 -- 130,000 shares; Steven M. Fieldman --
118,333 shares; Thomas M. Metzler -- 55,556 shares; John W. Alderfer --
38,889 shares; Frank Gomer -- 4,844 shares; and all then executive officers
and directors of the Company as a group -- 4,844 shares.
(6) Excludes shares owned by Lance Fieldman, Steven Fieldman's son, as to which
shares Steven Fieldman disclaims beneficial ownership.
(7) Steven Fieldman has agreed to vote all shares on all matters in proportion
to the vote of the Company's other stockholders. Steven Fieldman and Lance
Fieldman have entered into an agreement on August 11, 1998, with Irwin L.
Gross, whereby they both agreed to continue to vote all shares on all
matters in proportion to the vote of the Company's other stockholders.
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
Class A 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.
2000 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 2000 Annual Meeting of
Stockholders to be eligible for inclusion in the Company's 2000 Proxy Statement,
they must be received by the Company at its principal executive offices, (Attn:
Secretary), on or prior to December 31, 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 2000
Proxy Statement for the Annual Meeting.
18
<PAGE>
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.
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. In addition, the
Company has retained D.F. King & Co., Inc. to assist in the solicitation of
proxies, to which it will pay a fee of at least $6,000 and has agreed to
reimburse it for its reasonable expenses. The Company has additionally agreed to
indemnify D.F. King & Co., Inc. under certain circumstances. 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 $20,000.
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,
1998, UPON THE WRITTEN REQUEST THEREFOR TO INTERACTIVE FLIGHT TECHNOLOGIES,
INC., 4041 N. CENTRAL AVENUE, SUITE B-200, PHOENIX, AZ 85012, ATTENTION: DAVID
N. SHEVRIN, SECRETARY.
/S/ IRWIN L. GROSS
-------------------------------
Irwin L. Gross
Chairman of the Board and Chief
Executive Officer
January 20, 1999
19
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (hereinafter called the "Merger
Agreement") is made as of January 20, 1999, by and between Interactive Flight
Technologies, Inc., a Delaware corporation ("Oldco"), and New IFT Corporation, a
Delaware corporation ("Newco"). Oldco and Newco are sometimes referred to herein
as the "Constituent Corporations." The Boards of Directors of each of the
Constituent Corporations deem it advisable and to the advantage of each
Constituent Corporation that Oldco merge into Newco upon the terms and
conditions herein provided.
NOW, THEREFORE, the parties do hereby adopt the plan encompassed by this
Merger Agreement and do hereby agree that Oldco shall merge into Newco on the
following terms, conditions and other provisions:
I. TERMS AND CONDITIONS
1.1 Merger. Oldco shall be merged with and into Newco, and Newco shall be
the surviving corporation (the "Surviving Corporation") effective upon the date
and time when this Merger Agreement, or a certificate of merger in lieu thereof,
is filed with the Secretary of State of the State of Delaware (the "Effective
Date").
1.2 Succession. On the Effective Date, Newco shall succeed to all of the
rights, privileges, powers and property, including without limitation all
rights, privileges, franchises, patents, trademarks, licenses, registrations and
other assets of every kind and description, of Oldco in the manner of and as
more fully set forth in Section 259 of the General Corporation Law of the State
of Delaware (the "DGCL").
1.3 Common Stock of Oldco and Newco. Upon the Effective Date, by virtue of
the merger and without any further action on the part of the Constituent
Corporations or their stockholders, (i) each share of Common Stock of Oldco, par
value $.01 per share ("Oldco Common Stock"), issued and outstanding immediately
prior thereto shall be changed and converted into one fully paid and
nonassessable share of Common Stock of Newco, par value $.01 per share ("Newco
Common Stock"), (ii) each share of Newco Common Stock issued and outstanding
immediately prior thereto shall be cancelled and returned to the status of
authorized but unissued shares and (iii) each share of Oldco Common Stock issued
but held in the treasury of Oldco shall be cancelled.
1.4 Preferred Stock of Oldco. Upon the Effective Date, by virtue of the
merger and without any further action on the part of the Constituent
Corporations or their stockholders, each share Preferred Stock ("Oldco Preferred
Stock," and together with the Oldco Common Stock, "Oldco Stock"), issued and
outstanding immediately prior thereto shall be changed and converted into one
fully paid and nonassessable share of Newco Preferred Stock ("Newco Preferred
Stock," and, together with the Newco Common Stock, "Newco Stock").
1.5 Stock Certificates. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of Oldco
Stock shall be deemed for all purposes to evidence ownership of and to represent
the shares of Newco Stock into which the shares of Oldco Stock represented by
such certificates have been converted as herein provided and shall be so
registered on the books and records of Newco or its transfer agents. The
registered owner of any such outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or otherwise accounted for
to Newco or its transfer agent, have and be entitled to exercise any voting or
other right with respect to and to receive any dividend or other distribution
upon the shares of Newco Stock evidenced by such outstanding certificate as
above provided.
1.6 Options. Upon the Effective Date, Newco will assume and continue all
of Oldco's stock option plans, including but not limited to the Interactive
Flight Technologies, Inc. 1994 Stock Option Plan and 1997 Stock Option Plan, and
any other options, warrants or rights to acquire Oldco Stock and the outstanding
and unexercised portions of all options, warrants or rights to acquire Oldco
Stock shall become options for, warrants or rights to acquire the same number of
shares of Newco Stock with no other changes in the terms and conditions of such
options, warrants or rights to acquire, including
A-1
<PAGE>
exercise prices, and effective upon the Effective Date, Newco hereby assumes the
outstanding and unexercised portions of such options, warrants or rights to
acquire and the obligations of Oldco with respect thereto.
II. CERTIFICATE OF INCORPORATION AND BY-LAWS
2.1 Certificate of Incorporation. The certificate of incorporation of
Newco shall be the certificate of incorporation of the Surviving Corporation
(the "Newco Charter"), provided, however, that Article FIRST of the Newco
Charter shall be amended to read in its entirety as follows:
The name of the corporation is Interactive Flight Technologies, Inc.
2.2 By-laws. The By-laws of Newco in effect on the Effective Date shall
continue to be the By-laws of the Surviving Corporation without change or
amendment until further amended in accordance with the provisions thereof and
applicable law.
III. DIRECTORS AND OFFICERS
3.1 Directors. The directors of Newco shall continue as directors of the
Surviving Corporation.
3.2 Officers. The officers of Oldco shall become the officers of the
Surviving Corporation to serve at the pleasure of its Board of Directors.
IV. MISCELLANEOUS
4.1 Further Assurances. From time to time, as and when required by Newco
or by its successors and assigns, there shall be executed and delivered on
behalf of Oldco such deeds and other instruments, and there shall be taken or
caused to be taken by it such further and other action, as shall be appropriate
or necessary in order to vest or perfect in or to conform of record or
otherwise, in Newco the title to and possession of all the property, interests,
assets, rights, privileges, immunities powers, franchises, and authority of
Oldco and otherwise to carry out the purposes of this Merger Agreement, and the
officers and directors of Newco are fully authorized in the name and on behalf
of Oldco or otherwise to take any and all such action and to execute and deliver
any and all such deeds and other instruments.
4.2 Amendment. At any time before or after approval by the stockholders of
the Constituent Corporations, this Merger Agreement may be amended in any manner
(except as otherwise provided by the DGCL) as may be determined in the judgment
of the respective Boards of Directors of Newco and Oldco to be necessary,
desirable or expedient.
4.3 Termination. At any time before the Effective Date, this Merger
Agreement may be terminated and the merger may be terminated by the Board of
Directors of either Oldco or Newco or both, notwithstanding the approval of this
Merger Agreement by the stockholders of Oldco and Newco.
4.4 Counterparts. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
IN WITNESS WHEREOF, this merger Agreement, having first been duly approved
by the Board of Directors of Oldco and Newco, is hereby executed on behalf of
each Constituent Corporation by its duly authorized officer.
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
By: /s/ IRWIN L. GROSS
----------------------------------
NEW IFT CORPORATION
By: /s/ IRWIN L. GROSS
----------------------------------
A-2
<PAGE>
PROXY
INTERACTIVE FLIGHT TECHNOLOGIES, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Irwin L. Gross and Charles T. Condy (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 Metropolitan Club,
located at One East 60th Street, New York, New York, on February 4, 1999, 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 February 4, 1999 and the Proxy Statement of the
Company, each dated January 19, 1999, and the Company's Annual Report for the
fiscal year ended October 31, 1998.
The undersigned hereby revokes any proxy to vote shares of 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 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: M. Moshe Porat, Class I; James W. Fox, Class I.
2. Reincorporation, pursuant to which the Company will elect not to be
governed by Section 203 of the Delaware Law, thereby permitting the
Company to engage in business transactions with Ocean Partners (or any
interested stockholder) without requiring the approval of 66 2/3% of all
stockholders excluding Ocean Partners (or the interested stockholder) and
its affiliates and associates, as described more fully in the Proxy
Statement accompanying this Proxy.
/ / FOR / / AGAINST / / ABSTAIN
(PLEASE DATE AND SIGN ON REVERSE SIDE.)
<PAGE>
3. Proposal to approve the grant to Irwin L. Gross, Chief Executive Officer
of the Company, options to purchase 600,000 shares of the Company's Class
A Common Stock at fair market value on the date of grant, as described
more fully in the Proxy Statement accompanying this Proxy.
/ / FOR / / AGAINST / / ABSTAIN
4. Proposal to approve an amendment to the Company's 1997 Stock Option Plan
(the "Plan") to increase the number of shares of the Company's Class A
Common Stock for which options may be granted under the Plan to 775,000,
as described more fully in the Proxy Statement accompanying this Proxy.
/ / FOR / / AGAINST / / ABSTAIN
5. Proposal to approve the Board of Directors' appointment of KPMG LLP,
certified public accountants, as independent auditors of the Company for
the fiscal year ending October 31, 1999.
/ / 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.
